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Lake Lookover Property Owner's Association v. Olsen

February 14, 2002


On appeal from Superior Court of New Jersey, Chancery Division, Equity Part, Passaic County, PAS-C-65-94.

Before Judges Wefing, Lesemann and Parrillo.

The opinion of the court was delivered by: Lesemann, J.A.D.


Argued October 16, 2001

Defendants, the owners of property surrounding an artificially constructed lake known as Lake Lookover, appeal from an order of the Passaic County Chancery Division which determined that defendants and other similarly situated property owners are responsible for the cost of repairing and reconstructing a dam on the lake. Defendants own approximately thirty-four of the 100 lots which were created at the time the developers of the land also created Lake Lookover by constructing the dam in question. The chain of deeds from the original developer to the present owners — approximately 100 in all — includes the grant of easement rights to use the lake.*fn1

The trial court held that the holders of the easements bore responsibility for required maintenance and reconstruction of the dam, and for that purpose were required to comply with an assessment fixed by the plaintiff, Lake Lookover Property Owners Association (the Association), the present owner of the land encompassing the lake and its beaches, as well as the dam and some other common facilities.

Defendants challenge the authority of the Association to levy such assessments and also maintain that they may abandon their easement rights and thus be exonerated from any obligation to contribute to the repair or maintenance of the dam. We are satisfied, however, that under all of the facts in this matter, including the judicial proceedings which predate the present complaint, the Association was and is empowered to levy such assessments; that the trial court was correct in concluding that the holders of the easements are responsible for those costs; and that they cannot avoid that obligation by a purported abandonment of their easement rights. Accordingly, we affirm the decision of the Chancery Division, substantially for the reasons set out by Judge Susan L. Reisner in her written opinion dated June 22, 2000, together with the additional reasons set out below.

Lake Lookover came into existence in the 1920s when two developers, Alfred Hansen and Elias Lee, created the lake by damming a water course known as Longhouse Brook. Either before or soon after that construction, the property was apparently owned by a corporation, and thereafter it became held by a partnership known as Lake Lookover Development Company (the Development Company). The development started by Hansen and Lee included a division of property surrounding the lake into something over 100 home sites, and conveyances of those individual plots included the easement rights summarized above.*fn2

Beginning in or around 1980, the New Jersey Department of Environmental Protection (DEP) issued repeated directives to the Development Company and the Association, aimed at effecting repair and reconstruction of the dam, which the DEP said was unsafe. When there was no compliance with those directives, the DEP instituted suit in April 1994, against both the Development Company and the Association. In its complaint, the DEP referred to its earlier communications to both parties, contending that while the Development Company "as owner, had primary responsibility for the dam, . . . that the Association through its unauthorized modifications to and exercise of control over the dam, was also a responsible party." In the complaint, the DEP described the Association as "an organization comprised of property owners who live adjacent to and possess lake rights to Lake Lookover." It also traced a pattern of what it claimed was the Association's exertion of "control over the dam by making repairs to the dam without a permit or approval from the DEP." The complaint also referred to various representations by the Association, dating from in or about 1990, that it intended to undertake necessary engineering studies and repairs to the dam in order to address the DEP's concerns.

Both the Development Company and the Association filed answers to the complaint. In addition, the Development Company filed a cross-claim against the Association, asserting that the Association is composed of holders of a "dominant easement" over the Development Company's property, that the Association "exercises exclusive control over the lake waters and its beaches and also controls access to the dam establishing the same and limits and restricts exclusive use of Lake Lookover to its members," and that the Association "even bars access to the beach area and lake" to the partners of the Development Company. It concluded that, as the holder of the dominant easement, the Association (and not the Development Company) is responsible for the maintenance and safety of the dam and all aspects of the lake, and it demanded that the Association "indemnify, and hold harmless" the Development Company from any claims of the DEP. In its brief in opposition to the DEP's request for summary relief, the Development Company cited the same principles and case authority as were relied on by the trial court here, in reaching its conclusion that the holders of the easements are primarily responsible for maintenance and repair of the dam: Island Improvement Assoc. v. Ford, 155 N.J. Super. 571 (App. Div. 1978) and Ingling v. Public Serv. Elec. & Gas Co., 10 N.J. Super. 1 (App. Div. 1950). In that same brief, the Development Company identified its partners as Leo Solomon "a retired attorney aged ninety-one years; his wife and two daughters." It also stated that, "The primary purpose of the partnership was to retain title to approximately four buildable lots for the family's use, which lots remain after a succession of conveyances by predecessors in title, as far back at 1926. The partnership also holds title to the land on which a dam is located and which forms the basis of this proceeding. The partnership is not presently engaged in any development."

Thereafter, Judge Amos Saunders of the Passaic County Chancery Division, entered an order dated June 27, 1994, dismissing the DEP action as against the Association and requiring the Development Company to submit plans and details for proposed repairs to the dam within forty-five days. On October 25, 1994, after the court found that the Development Company had not complied with its June 27, 1994 order, the court directed that the four partners of the Development Company appear for an examination by the Attorney General to determine "the personal assets of each and their ability to comply with" the earlier order respecting plans and repairs for the dam. It also set a return date to determine the partners' ability to comply with those obligations. On March 16, 1995, still another order was entered, this one determining that the Development Company and its partners (who had not complied with the directive to appear for examination) "have the ability to comply" with the court's earlier orders, and directing that a bank account of approximately $120,000 belonging to the Development Company be posted "as security for the engineering plans and repairs to the dam." That account was "frozen," with a directive that the funds could not be transferred without prior approval of the court. The order further provided that if the Development Company and the Association could not reach an agreement by April 3, 1995, concerning funding of the engineering plans and reports, the proceeds of the bank account could be used for those purposes.

At least as early as March 2, 1995 — and probably earlier than that — the parties undertook discussions among themselves and with the court concerning possible resolution of the dispute. In a letter to Judge Saunders dated March 2, 1995, counsel for the Association referred to preliminary attempts to estimate the cost of repairs to the dam. The letter noted that, "If the repair costs were learned to be totally beyond the reasonable reach of the homeowners, we would all need to reconsider the matter. But if the repair costs were manageable for the homeowners, we could establish a time frame and other mechanisms for undertaking the repairs." The letter went on to note that the Association "would initially undertake the role of a management organization on behalf of the homeowners," and it added:

Your Honor indicated that the Association's efforts to do so would be favored by the Court to the extent that the Association could bring consolidated summary proceedings or other expedited procedure before the court for collection of assessments under the Island Improvement doctrine. The Association's board is gratified to hear of this opportunity.

The letter then noted the proposal for the Development Company to convey the "lake bed and related lands" to the Association, with the Association empowered "to receive dues and assessments and preclude, to the extent possible, use of the lake by those failing to contribute to its maintenance and management." Counsel concluded that, "It would appear that the board will be able to obtain membership approval for such an agreement."

Throughout 1995 and 1996, and continuing into 1997, there were ongoing discussions and correspondence among the parties and with the court, all aimed at resolving the impasse concerning repairs to the dam. In an effort to relieve pressure on the dam and alleviate the DEP's concern as to the safety of the dam, the court, on July 16, 1997, and again on August 8, 1997, entered orders directing that the water level of the lake be reduced by three feet and the repairs and rebuilding of the dam commence as soon as possible. The Association responded by asking the court to reconsider its directive for lowering the water level, pointing out that such an action had been taken on a prior occasion with near disastrous results: a number of homes found their wells inoperable, and the local fire department claimed the lower water level constituted a fire hazard. Eventually, in November 1997, the court stayed its directive.

Finally on February 5, 1998, the matter was settled by a seventeen page "Agreement and Consent Order of Settlement" executed by the DEP, the Development Company and the Association, and approved by Judge Saunders. It provided for the Development Company to convey the lake and beach property to the Association. It noted that the Association had already collected approximately $56,000 which it was holding in escrow, and it provided that the $56,000 should be available for use in effecting repairs of the dam. It also said that a $10,000 fine levied on the Development Company would be available for that purpose, but it provided for reimbursement to the Development Company of other funds it had expended in connection with the anticipated repairs and plans. It further provided that the repairs were to be undertaken in two phases; phase one to commence on or about April 1, 1998, and be completed by June 1, 1998; and phase two to begin one year later, on April 1, 1999, and be completed by June 1, 1999.

The settlement agreement had a provision entitled "Sharing of Costs and Fees" which said, in essence, that the costs of the project would be "borne on a pro rata basis" by all the Lake Lookover property owners who had "lake rights." It also said that, "The Association shall have the right and responsibility to bill each benefitted property owner on a monthly, quarterly or other regular schedule for all such fees and costs, and the failure by any such property owner to make timely payment in accordance therewith shall constitute good cause for the Association to notify the ...

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