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Mara Court Association v. Giannini

January 2, 2008


On appeal from the Superior Court of New Jersey, Law Division-Special Civil Part, Camden County, Docket No. DC-3889-06.

Per curiam.


Argued: December 5, 2007

Before Judges Cuff and Simonelli.

Defendant Phyllis Giannini, a resident and former president of plaintiff Mara Court Association (the Association), appeals from a $10,250 judgment entered against her following a bench trial. We affirm the judgment as modified in this opinion.

Mara Court is a fourteen house townhouse community in Cherry Hill formed in 1982. The current president of the community, Donna Davis, testified that Mara Court is governed by a set of by-laws (the By-laws) and declaration of covenants (the Declaration) recorded with the Camden County Clerk on September 21, 1982. The Declaration provides that Mara Court is "subject to the covenants, restrictions, easements, charges and liens (sometimes referred to as 'covenants and restrictions')" contained within the Declaration. Pursuant to the Declaration, every owner is a member of the Association and the common areas are to be "maintained in good repair and condition and shall be operated in accordance with high standards."

Article VIII, Section 1 of the Declaration provides that each owner shall pay annual and special assessments. The Association is responsible for using the assessments for the maintenance of the landscaping, paved areas, lighting, water service for fire hydrants, and trash removal in the common area. The Association fixes the actual assessment for each budget year, and the assessment may be increased or decreased upon the assent of sixty percent of the votes of the Class A Members and Class B Members. These assessments, as well as interest and the cost of collection, are a personal obligation of the homeowner. The Association may take legal action to enforce this obligation. Prior to December 31, 2030, the Declaration may be amended by an instrument signed by owners holding not less than ninety percent of the votes of the membership and the amendment must be properly recorded to be effective.

The By-laws of the Association provide that the Association is to be administered and managed by a Board of Trustees (the Board) which "shall have and exercise all lawful powers and duties necessary for the proper conduct and administration of the Common Areas." The officers of the Association shall be president, vice-president, secretary and treasurer, and the president and vice-president are also members of the Board. Article VI, paragraph 7 provides, "The officers of the Association shall serve without compensation, except that they shall be entitled to reimbursement for all expenses reasonably incurred in the discharge of their duties." This By-law has never been amended.

Upon assuming the presidency, Davis testified that she discovered that defendant and Christine Bulger, another former president, had paid themselves compensation during their presidencies. Davis testified that she accepted no compensation for her position; she spent approximately forty hours a month on Association matters. She testified that Board members owed a fiduciary duty to the Association, which Davis believed meant that "you do the work, that you take no compensation for it." She added that such work should be done in a reasonable, businesslike fashion, using good business judgment.

When Davis became president in 2005, the Association's financial situation was strained. There was only $3.14 in the checking account and approximately $1,200 or $1,300 in the capital account, and the Association had several bills outstanding for landscaping and electricity.

Davis conducted an audit and discovered that prior officers of the Association, including defendant, were in arrears for payment of their dues. Davis also discovered that defendant had received cash payments from the Association for services performed during her presidency. The parties stipulated that the arrears in dues and compensation totaled $7,250. Specifically, in 1999, defendant received $500 in compensation and failed to pay $250 in condo fees. During 2000 through 2002, defendant received $1,200 in compensation and failed to pay $600 in monthly condo fees annually. In 2003, defendant received $400 in compensation and failed to pay $200 in condo fees. She also received a $500 stipend in 2003, which was to be paid by the waiver of ten months of Association dues.

Davis found no evidence in the Board minutes that the Board authorized these payments to defendant. Davis further testified that Article VI, paragraph 7 of the Association's By-laws prohibits the payment of compensation to Association officers. Davis sought and received an opinion from an attorney who opined that no officer is allowed to receive compensation, and the Bylaws allow recovery of legal fees attendant to legal action to recover fees due to the Association. The Association commenced suit against every past president who had taken such compensation.

Defendant testified that the custom of providing compensation to the Association's president began in 1992, when the outside management company quit and the president assumed the management duties. Defendant stated that the prior management company was paid approximately $300 a month. Defendant opined that the Association paid the president rather than the management company in order to save money.

Defendant testified that she did not want the position of president. Nevertheless, she was elected and agreed to assume the office on the condition that she receive $150 monthly. The Association agreed. Defendant testified that she spent approximately twenty-five to thirty hours a month working for the Association and she was not reimbursed for her phone, ...

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