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Aqua Beach Condominium Association v. Dep't of Community Affairs

January 18, 2006

AQUA BEACH CONDOMINIUM ASSOCIATION, A NOT-FOR-PROFIT CORPORATION OF THE STATE OF NEW JERSEY, PETITIONER-APPELLANT,
v.
DEPARTMENT OF COMMUNITY AFFAIRS, BUREAU OF HOMEOWNER PROTECTION, NEW HOME WARRANTY PROGRAM, RESPONDENT-RESPONDENT.



On certification to the Superior Court, Appellate Division.

SYLLABUS BY THE COURT

(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).

In this appeal, the Court addresses two issues: 1. whether under the circumstances presented, the processing and ultimate denial of certain home warranty claims by the Bureau of Homeowner Protection (Bureau) of the Department of Community Affairs (DCA) was arbitrary, capricious or unreasonable and 2. whether legally competent evidence exists to support the claimant's assertion that it had received oral authorization from a Bureau representative to proceed with repairs and, hence, the Bureau is equitably estopped from asserting a failure to comply with the Bureau's repair pre-authorization requirements.

In 1978, the Legislature adopted the New Home and Warranty Builders' Registration Act (Act). The Act establishes the Home Warranty Security Fund (Fund), whose source is payments from the builders of new homes. In the event the builder fails to make repairs within a reasonable time or are not satisfactory to the owner, homeowners are permitted to make claims against the Fund. The Commissioner of DCA has adopted regulations governing claims procedures. The procedures require a five-step process when there has been a default by the builder: 1. the owner may file a request for payment in which event the DCA inspects the house to determine if the defect is covered by the warranty; 2. if the DCA determines the defect is covered, the owner is obligated to submit two or more bona fide estimates for the work intended to be covered; 3. the DCA must then select the lower or lowest of the estimates and 4. certify the amount of the award to the Treasurer; 5. payment from the Fund is permitted only for work authorized in writing by the DCA and upon completion to the DCA's satisfaction.

Aqua Beach Condominium Association (Aqua Beach) is a condominium association in North Wildwood. The condominium complex was constructed in 1989. At that time, Aqua Beach applied for and was certified as eligible to participate in the Fund. In 1998, Aqua Beach requested that DCA pay, through the Fund, sums needed to effect repairs in the condominium complex. The Bureau inspected the complex and determined that the covered repairs would be reimbursed by the Fund in the same proportion as the warranty units bore to the total number of units affected. The Bureau requested that Aqua Beach present the required minimum of two repair estimates. Aqua Beach did nothing. Despite repeated requests and the setting of a deadline in August 1999, Aqua Beach continued to do nothing. The Bureau closed its file after Aqua Beach failed to complete the claim submission process by the August deadline.

Aqua Beach requested a hearing on the denial of the claims. Aqua Beach also hired a contractor, and, at some time during the first half of 2001, completed the repair work. In August 2001, Aqua Beach notified the Bureau that the repair work had been completed. The Bureau moved before the Administrative Law Judge (ALJ) to dismiss Aqua Beach's claims. Aqua Beach's counsel asserted, in reply, that, in a conversation he had with the Bureau's engineer in February of 2001, the engineer authorized the work. In July of 2002, the ALJ granted the Bureau's motion to dismiss. With two minor modifications, the Commissioner of DCA adopted the ALJ's decision.

Aqua Beach appealed. While the appeal was pending, the ALJ held, on temporary remand, that Aqua Beach failed to demonstrate authorization from the Bureau to proceed with emergency repairs. The Appellate Division also rejected as meritless Aqua Beach's assertion that the record established that it obtained authorization to proceed with repairs. The panel affirmed the Commissioner's decision.

This Court granted Aqua Beach's petition for certification.

HELD: The Bureau's regulations requiring that a claimant under the Home Warranty Program submit to the Bureau two or more bona fide estimates for the work intended to be covered as a condition precedent to certification by the Director to the State Treasurer for payment from the Fund are neither arbitrary, nor capricious, nor unreasonable, either as written or applied here; under the circumstances presented in this appeal, there was no legally competent evidence on which to base any equitable estoppel claim against the Bureau.

1. When considering the actions of administrative agencies, our scope of review is narrow. Ordinarily, we will not upset a determination by an administrative agency in the absence of a showing that it was arbitrary, capricious or unreasonable, or that it lacked fair support in the evidence, or that it violated legislative policies expressed or implicit in the enabling legislation. Thus, we grant administrative agency action a strong presumption of reasonableness. It is through this prism that the Commissioner's denial of Aqua Beach's claim for reimbursement must be gauged. (pp. 13-15)

2. There is nothing arbitrary, capricious or unreasonable in the procedures outlined in the DCA regulations requiring that a claimant against the Fund make a claim , submit to an inspection, submit at least two estimates of the repair work to be performed, and await the DCA's approval before barging ahead. In the absence of any claim of untoward behavior by the DCA, a homeowner's informed decision to contract for repairs without the Bureau's pre-authorization voided any obligation on the part of the Fund to reimburse the homeowner. (pp. 18-19)

3. We reach Aqua Beach's last argument: that it had received oral authorization from the Bureau's engineer to proceed with the repairs and, hence, the Bureau is equitably estopped from asserting a failure to comply with the repair pre-authorization requirements of the regulations. Although the doctrine of equitable estoppel is rarely invoked against a governmental entity, this Court has long held that the prevention of manifold injustice provides an exception to the general rule. Assuming that Aqua Beach can demonstrate a manifest injustice, in order to assert the defense of estoppel, Aqua Beach must show that the DCA engaged in conduct, either intentionally or under circumstances that induced reliance, and that Aqua Beach acted or changed its position to its detriment. Aqua Beach can vault neither obstacle. (pp. 19-20)

4. Clearly, the even-handed application of fairly adopted and clear regulations debunks any claim of manifest injustice. Furthermore, as the ALJ held, Aqua Beach presented no competent proofs to support its equitable estoppel allegations. The facts supporting Aqua Beach's assertion of the doctrine of equitable estoppel simply do not rise to the level of a manifest injustice. (pp. 20-21)

5. The Bureau's regulations requiring that a claimant under the Home Warranty Program submit to the Bureau two or more bona fide estimates for the work intended to be covered as a condition precedent to certification by the Director to the State Treasurer for payment from the Fund are neither arbitrary, capricious, nor unreasonable, either as written or applied here. Under the circumstances presented in this appeal, there was no legally competent evidence on which to base any equitable estoppel claim against the Bureau. (p. 21)

The judgment of the Appellate Division is AFFIRMED.

The opinion of the court was delivered by: Justice Rivera-soto

Argued September 28, 2005

CHIEF JUSTICE PORITZ and JUSTICES LONG, LaVECCHIA, ZAZZALI, ALBIN, and WALLACE join in JUSTICE RIVERA-SOTO's opinion.

This appeal requires that we address two related issues that arise out of the operation of the New Home Warranty Program administered by the Bureau of Homeowner Protection (Bureau) of the Department of Community Affairs (DCA). First, we must address whether, under the circumstances presented, the Bureau's processing and ultimate denial of certain home warranty claims was arbitrary, capricious or unreasonable and, second, whether there is legally competent evidence in this record to support the claimant's assertion that it had received oral authorization from a representative of the Bureau to proceed with the repairs ...


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