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Waldstein v. Highview at Hawthorne Association


June 12, 2007


On appeal from the Superior Court of New Jersey, Law Division, Passaic County, Docket No. PAS-L-834-04.

Per curiam.


Argued May 23, 2007

Before Judges Wefing, Yannotti and Messano.

Plaintiffs Jay B. Waldstein and Kathleen A. Waldstein appeal from an order entered on September 23, 2005, which granted summary judgment to defendants Highview at Hawthorne Association, Inc. (Association); LV&H Consulting Group, Inc. (which had been improperly pleaded as LV&H Management Co., Inc.) (LV&H); and the members of the Association's Board of Trustees (Trustees), specifically, Neil Westerduin, Jesse Sklar, Beth Krueger, Dan Saverese, and Steve Whelan.*fn1 Plaintiffs additionally appeal from an order filed on December 22, 2005, which awarded defendants attorneys' fees and costs in the amount of $24,767.08 incurred by them in this litigation. For the reasons that follow, we affirm.

We briefly summarize the relevant facts, based on the evidentiary materials submitted to the trial court. Highview at Hawthorne (Highview) is a planned residential development consisting of 123 townhouse residences, and 86 single-family dwellings, along with certain common lands and facilities for the use of the unit owners. Gold Square constructed the development sometime in or about 1985, and later turned over control of the Association to the unit owners. The Association governs and manages Highview pursuant to an Amended Declaration of Covenants and Restrictions (Declaration) and its by-laws. In the Declaration, the single-family homes in Highview are classified as "Type I" units, and the townhouses as "Type II" units. The record owners in fee simple of any unit in Highview are members of the Association and have the privilege to use the common areas and facilities.

Plaintiffs purchased a townhouse in the development in January 2003. Plaintiffs allege that in April 2003, they discovered that "a sewer pipe broke as a result of a slab failure causing water and sewage to collect beneath [the] concrete slabs of [their] townhouse." An investigation was conducted and, according to plaintiffs, it "revealed that the ground floor slab failed causing the pipe to break." It appears that the failure of the slab was due to a defect in the initial construction of the unit; an interior foundation of plaintiffs' unit had not been built. In August 2003, plaintiffs submitted a claim to the Association and LV&H, the Association's managing agent, seeking damages for the cost to repair and reconstruct the floor slab and the sewer pipe. The Association denied the claim.

Plaintiffs thereafter commenced this action in which they sought a declaratory judgment that the Association was required to pay the cost to repair the damage resulting from the failure of the floor slab in their townhouse; compensatory damages; attorneys' fees; and costs of suit. Defendants moved for summary judgment. Plaintiffs opposed the motion, and filed a cross-motion for summary judgment. The motions were heard on September 9, 2005. The judge placed his decision on the record on that date, and entered an order on September 23, 2005, granting defendants' motion.

The judge found that the Association had no obligation under the Declaration to pay for the cost to repair the damage resulting from the failure of the floor slab. The judge granted defendants' motion for summary judgment. Plaintiffs thereafter moved for reconsideration. That motion was denied by order entered on November 4, 2005. The judge subsequently granted defendants' motion for an award of attorneys' fees and costs incurred in this litigation, and awarded defendants $24,767.08. This appeal followed.

We turn first to plaintiffs' contention that they are entitled to reimbursement for the cost of repairing the damage that resulted when the floor slab failed. In support of this argument, plaintiffs rely upon Article IX, Section 5 of the Declaration, which states:

Each townhouse Owner, by acceptance of ownership, agrees and covenants that if his townhouse, including any party walls, shall be fully or partially destroyed by fire or otherwise, the Association shall reconstruct said townhouse expeditiously, pursuant to plans approved by the Board of Trustees. Any reconstruction shall be subject to all other applicable provisions of this Declaration and applicable governmental regulations.

However, "'[i]ndividual clauses and particular words must be considered in connection with the rest of the agreement, and all parts of the writing and every word of it, will, if possible, be given effect.'" Krosnowski v. Krosnowski, 22 N.J. 376, 387 (1956) (quoting 9 Williston on Contracts § 46 (rev. ed. 1945)). A contract "must be read as a whole without focus on an isolated phrase." AXA Assurance, Inc. v. Chase Manhattan Bank, 339 N.J. Super. 22, 26 (App. Div. 2001) (citing Wheatly v. Sook Suh, 217 N.J. Super. 233, 239 (App. Div. 1987)). Therefore, in order to determine the meaning of Section 5 of Article IX, we must consider other sections of the Declaration.

Article IX is entitled, "Insurance." Section 1 of that Article requires the Association to provide public liability insurance covering the common areas and recreational facilities in the development. Section 1 also requires the Association to provide workers' compensation insurance, and coverage to indemnify its officers and employees.

Section 2 of Article IX provides that owners of Type I dwellings must carry "such full broad form fire, casualty and extended coverage on their property as they shall deem in their best interests." Owners of Type I units also must carry public liability coverage and name the Association as an additional insured under the policy.

Insurance for Type II townhouse owners is addressed in Section 3 of Article IX, which states:

The Association shall provide fire and casualty insurance and insurance against perils of extended coverage, and such other coverages as the Board of Trustees shall deem advisable, and this insurance shall cover all of the exteriors and structures of the townhouses. This insurance shall be in accordance with the "bare walls concept" as understood in the current insurance marketplace. Basically, this means that the insurance will return the structures to the standard under which they were built with all the items included in the original construction of the unit, such as bathroom fixtures, kitchen cabinets, appliances, etc. This insurance shall not cover special finishes which the Owner may have added to his unit after purchasing same. Type II Owners are advised that they should obtain additional insurance to cover their special finishes and the contents of the townhouse. This is generally covered by a HO-6 basic insurance policy and should be addressed in the "Improvements and Betterments Coverage" section of said policy. Type II owners shall carry dwelling insurance for inside coverage of their townhouse unit and any owner leaving their unit must see to it that their tenants carry such insurance and the unit owner shall provide the Association with proof showing such insurance coverage.

It is clear from a review of Article IX that while Section 5 requires the Association to reconstruct a townhouse, that duty only arises in the event the townhouse is fully or partially destroyed by fire or other similar casualty. In other words, the Association's duty to reconstruct a townhouse is limited to the sort of damage for which the Association is required to obtain fire and casualty insurance.

Thus, contrary to plaintiffs' assertions, Article IX, Section 5 does not require the Association to bear the cost to repair the damage due to the failure of the floor slab in plaintiffs' townhouse. The slab failed because of a defect in the initial construction of the unit. The damage was not due to fire or other similar casualty.

Plaintiffs alternately rely upon Article IV, Section 2, of the Declaration as support for their claim. Article IV is entitled, "Covenant for Association Maintenance Assessments."

Section 1 of the Article provides that each unit owner is obligated to pay: a) general assessments or charges; b) special assessments; and c) special annual assessments "for decks, patios and/or townhouse driveways, aprons and sidewalks within the lot, or for any other area [the Trustees] deem appropriate, . . . for the upkeep, repairs and/or replacement of these items."

Section 2 of the Article provides that: The Owners, who hold Type II ownership in the Association, shall be responsible for the care, maintenance, repair and improvements of the exteriors of all townhouses, all townhouse driveways and sidewalks, within the fee simple lots, including decks and patios as set forth in Section 1 of this Article. Such maintenance shall be funded by assessments, whether general or special in accordance with Section 1 hereof, against the townhouse Owners, and such responsibility of maintenance shall be with and accomplished by the Association. [Emphasis added.]

Section 2 also provides that:

The Board of Trustees shall include in the general assessment, for both Type I [and] Type II Owners, a charge to establish a reserve fund:

(a) for repairs and replacement of common areas, parking areas, equipment and improvements, and the other common facilities, and

(b) . . . the Board of Trustees shall, for Type II owners, include a charge to establish a separate reserve fund for repairs, maintenance and replacement of common areas, structures, parking areas, and improvements of the Townhouse Properties held by the Type II owners hereof, as defined in Article 4, Section 2.

A review of Article IV as a whole makes clear that the purpose of the "separate reserve fund" created by Section 2(b) is to pay for "the care, maintenance, repair and improvements" to the exteriors of the townhouses, not to pay for the repair and reconstruction of an interior structural flaw in a unit resulting from deficient construction. The "improvements" that are referred to in Section 2(b) are the "improvements" mentioned in Article IV, Section 2. Those are "improvements" to the exteriors of the townhouses.

Article V, Section 3 of the Declaration also provides no support for plaintiffs' claim. That Article is entitled, "Breakage of Water or Sewer or Sprinkler System," and states as follows:

In the event that there is a breakage or leakage in the water system, sprinkler system or sewer system or because of any other condition upon any lot which has caused or will cause damage to common areas, the Association reserves the right, on notice to the unit Owner or without notice if notice is impractical, to enter upon the lot or unit for the purpose of repairing the water system, sprinkler system or sewer system or condition. Any repairs so made shall, in the discretion of the Board of Trustees, be charged to the Owner of that unit.

In this case, there is no evidence that the breakage in the sewer system beneath plaintiffs' townhouse has caused or will cause damage to any common area of the development. Even if that were the case, Article V, Section 3 makes clear that the owner of the unit would be responsible to pay for the cost of repairing the system.

Plaintiffs additionally argue that, although they read the Declaration as clearly requiring the Association to pay the costs to repair the damage resulting from the failure of the floor slab, if there is any doubt or ambiguity about the meaning of the Declaration, the doctrine of contra proferentem requires that any ambiguity be construed against the Association. We disagree.

The doctrine of contra proferentem allows an ambiguous contract term to be interpreted against the party who drafted the agreement. Pacifico v. Pacifico, 190 N.J. 258, 267 (2007). Here, the Association did not draft the Declaration; it was drafted by the sponsor. Furthermore, the doctrine of contra proferentem is only employed as a "last resort," if the court is unable to determine the meaning of a contract provision, after review of the relevant contract language, "in light of the common usage and custom, and [consideration of] the circumstances surrounding its execution." Id. at 267-68. However, we have determined the meaning of the Declaration by considering the relevant provisions and their plain language. The Declaration unambiguously indicates that the Asssociation has no responsibility to pay the costs at issue. Therefore, we are convinced that there is no need to resort to the doctrine of contra proferentem in this case.

Accordingly, we conclude that the judge correctly granted summary judgment to defendants, and properly denied plaintiffs' motion for reconsideration. We therefore affirm the orders entered on September 23, 2005, and November 4, 2005.

We turn to plaintiffs' appeal from the order entered on December 22, 2005, which awarded defendant attorneys' fees and costs in the amount of $24,767.08. Plaintiffs argue that the award was not permitted by the Declaration. Again, we disagree. Article XI, Section 4 of the Declaration states:

The prevailing party to any dispute arising out of this Declaration or between the Sponsor and any unit Owner or the Association shall be entitled to recover from the other party all costs and expenses of such dispute including professional fees.

This dispute arose "out of [the] Declaration" and defendants are the prevailing parties. Defendants therefore are entitled to "all costs and expenses" arising from this dispute, including attorneys' fees and costs.

Plaintiffs argue, however, that attorneys' fees and costs should not have been awarded here because this is an action for declaratory relief. In support of this argument, plaintiffs rely upon Verna v. The Links at Valley Brook Neighborhood Ass'n, Inc., 371 N.J. Super. 77 (App. Div. 2004). In Verna, we affirmed the denial of attorneys' fees in an action by a townhouse owner against the homeowners' association, even though the association had prevailed on the plaintiff's claim for declaratory relief. Id. at 101. We noted that the association's by-laws allowed the award of attorneys' fees on a claim for monetary or injunctive relief, but did "not permit an award of fees relating to claims for declaratory relief." Ibid.

Plaintiffs' reliance on Verna is misplaced. In this matter, the fee-shifting provision in the Declaration does not preclude the award of attorneys' fees and costs for an action seeking declaratory relief. Furthermore, this action was not simply a demand for declaratory relief. Although plaintiffs sought a declaratory judgment, the primary relief sought in this case was compensatory damages.

Plaintiffs additionally argue that the attorneys' fees awarded here are excessive. We are convinced that this contention is entirely without merit. R. 2:11-3(e)(1)(E).


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