May 30, 2008
GREGORY RUGGIERO, PLAINTIFF-APPELLANT,
VALLEYBROOK HOMEOWNERS' ASSOCIATION, INC.; BOARD OF DIRECTORS OF VALLEYBROOK HOMEOWNERS' ASSOCIATION INC.; JOHN J. QUINESSO, JR.; BETH WEST-REISS; PLAYERS PLACE I CONDOMINIUM ASSOCIATION, INC.; AND PLAYERS PLACE II CONDOMINIUM ASSOCIATION, INC., DEFENDANTS-RESPONDENTS.
On appeal from Superior Court of New Jersey, Chancery Division, Camden County, Docket No. C-139-06.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued May 6, 2008
Before Judges Skillman, Winkelstein and Yannotti.
Valleybrook is a six-community, 1038-unit planned real estate development in Gloucester Township, Camden County. Each of the six Valleybrook communities is governed by its own condominium or homeowners' association. Those communities include defendants Players Place I and Players Place II, both condominiums, St. Andrews, also a condominium, and Links I, Links II and Glen Eagles, where properties are owned in fee simple. Defendant Valleybrook Homeowners' Association (VBHOA) is the association for the entire development, which owns and operates a recreation center for use by members of the six communities.
Residents of the six communities pay charges both to their respective association and to the VBHOA. This appeal involves the method of collection of the VBHOA charges, which were $170 per year at the time the case was brought before the trial court.
The VBHOA annual charges are governed by Section 5.07 of its Declaration of Covenants, which provides in pertinent part:
A. Annual Charges payable by each Residential Owner shall be the same charges as are paid by any other Residential Owner. . . .
C. Annual charges shall be assessed on an annual basis but shall be payable in monthly installments of one-twelfth (1/12) of the annual charge. . . . The Board of Directors shall also have the power to assess annual charges other than on a monthly basis.
D. The Board of Directors shall have the power to alter the annual charges as is set forth in this Section 5.07, provided that such alternate method is fair and equitable to the Owners.
Under the system now in effect at Valleybrook, the owners of properties in the Glen Eagles, Links I and II and St. Andrews communities are required to pay their entire annual $170 VBHOA charges directly to VBHOA by February 1 of each year. However, the owners of properties in the Players Place communities are permitted to pay their VBHOA charges through monthly payments to their condominium associations, which then make monthly payments to the VBHOA.
These arrangements for the payment of the VBHOA charges by the property owners in the Players Place communities have been in effect for nearly twenty years. In fact, the public offering statements for the condominiums in those communities indicated that the VBHOA charges would be paid by the condominium associations out of condominium common expense funds.
Plaintiff Gregory Ruggiero is the owner of a condominium in the St. Andrews community and a past president of the VBHOA. After expressing objections to the method of collection of the VBHOA annual charges from the owners of the properties in the Players Place communities and unsuccessfully seeking arbitration of the matter, plaintiff brought this action against the VBHOA, its Board of Directors and two individual Board members, John J. Quinesso, Jr. and Beth West-Reiss. His complaint alleged that the defendants had breached a "fiduciary duty to the members of VBHOA to enforce the provisions of the Declaration and By-Laws pertaining to collection of annual charges, penalties and late fees[.]" He sought an order requiring uniform enforcement of the "provisions pertaining to collection of annual charges, penalties and late fees." The Players Place condominium associations intervened in the action as defendants.
The case was brought before the trial court by cross-motions for summary judgment. The court denied plaintiff's motion and granted defendants' motions to dismiss the complaint.
On appeal, plaintiff argues that the VBHOA's different method of collection of the annual charges of property owners in the Players Place communities is not authorized by its Declaration of Covenants. Plaintiff also argues that this method of collection violates the Condominium Act, N.J.S.A. 46:8-1 to -38, and the Planned Real Estate Development Full Disclosure Act (PREDFDA), N.J.S.A. 45:22A-21 to -56. We reject these arguments and affirm the dismissal of plaintiff's complaint.
The previously quoted section 5.07 of the VBHOA's Declaration of Covenants governs the VBHOA Board's assessment and collection of the annual charges imposed upon its members. Subsection 5.07(A) requires the annual charges imposed on each property owner to be the "same" as the charges imposed on every other property owner; subsection 5.07(C) requires those charges to be paid in monthly installments, but confers authority upon the Board to assess those charges on another basis; and subsection 5.07(D) confers authority upon the Board "to alter the annual charges" so long as the "alternate method is fair and equitable to the Owners."
We are satisfied that the VBHOA Board's current method of assessment and collection of the annual charges for the recreation center is consistent with these covenants. There is nothing in the Declaration of Covenants that requires a uniform method of collection of the annual charges from all property owners. Therefore, the $170 annual charge upon each property owner is the "same" for all Valleybrook homeowners within the intent of subsection 5.07(A), even though the Players Place condominium associations are allowed to pay their members' charges monthly and the owners of properties in the other four communities are required to pay their charges in a single lump sum at the beginning of the year.
We reject plaintiff's argument that the property owners who are required to pay their annual charge in a single lump sum at the beginning of the year pay more than the owners of the Players Place condominiums because they lose the benefit of the interest they could earn if their payments were made in monthly installments over the course of the year. The posited additional amount paid by the property owners in the four other communities is de minimis. Furthermore, the requirement of subsection 5.07(A) that the annual charges be the "same" must be read in light of subsection 5.07(D), which authorizes the VBHOA Board to establish a "fair and equitable" alternative method of annual charges. It is obviously less expensive for the VBHOA Board to collect the annual charges imposed upon the owners of the Players Place I and II condominiums by a single monthly payment from their condominium association rather than by separate payments by each individual property owner. This savings inures to the benefit of all VBHOA members. Therefore, we conclude that VBHOA method of collection of the annual charges of its members residing in the Players Place communities is "fair and equitable." Finally, we note that the VBHOA Board presumably would allow any other constituent community, including the St. Andrews community in which plaintiff resides, to undertake the collection of its members VBHOA charges in the same manner as the Players Place condominium associations.
Plaintiff did not argue before the trial court that the VBHOA's method of collection of the annual charges upon property owners in the Players Place communities violates the Condominium Act and PREDFDA. Therefore, we ordinarily would decline to address the argument. See Nieder v. Royal Indem. Ins. Co., 62 N.J. 229, 234 (1973). However, in the interest of completeness, we have elected to address the point.
Initially, we note that the VBHOA is not a condominium association. Consequently, it is not subject to the Condominium Act. See Fox v. Kings Grant Maint. Ass'n, 167 N.J. 208, 223 (2001). The only issue, therefore, is whether the payment by the Players Place condominium associations of their members' VBHOA annual charges is authorized by the Condominium Act.
The Act requires a condominium association's bylaws to include "[t]he manner of collecting from unit owners their respective shares of common expenses[.]" N.J.S.A. 46:8B-13(c). The definition of "common expenses" includes:
(i) all expenses of administration, maintenance, repair and replacement of the common elements;
(ii) expenses agreed upon as common by all unit owners; and
(iii) expenses declared common by provisions of this act or by the master deed or by the bylaws. [N.J.S.A. 46:8B-3(e).]
The Master Deed of Players Place II defines "common expense" as including "those assessments levied against the Condominium Unit Owners by the Community Association[,]" and it defines "Community Association" as "the Valleybrook Community Association, Inc." Therefore, the VBHOA annual charge upon its members is "declared common" by the Players Place II "master deed." N.J.S.A. 56:8b-3(e)(iii).
Although the Master Deed of Players Place I does not contain a similar provision, the offering statement for condominiums in that community indicated that the VBHOA assessments would be paid by the condominium association out of the condominium common expense funds, and Players Place I has paid such charges on behalf of its members for nearly twenty years. Therefore, this is an "expense agreed upon as common by all unit owners" in the Players Place I community. N.J.S.A. 46:8B-3(e)(ii).
The willingness of the Players Place condominium associations to collect the VBHOA annual charges from its members and be responsible for payment of those charges distinguishes this case from Brandon Farms Property Owners Ass'n, Inc. v. Brandon Farms Condominium Ass'n, Inc., 180 N.J. 361 (2004), which invalidated a declaration of covenants of an umbrella homeowners' association that included a provision requiring the constituent condominium association to be responsible for collecting the umbrella organization's annual assessment. In this case, unlike in Brandon Farms, the VBHOA is not forcing the Players Place condominium association to collect the VBHOA annual charges of their members. Instead, it is the Players Place condominium associations that have chosen to include the VBHOA charges in their assessments of unit owners and are defending this practice in the present appeal. In Brandon Farms, the Court stated: "Clearly, [a] [c]ondominium [a]ssociation has the authority to enter into an agreement to collect common expenses owed by individual unit owners." Id. at 373. The Players Place condominium associations' voluntary collection and payment of its members VBHOA charges constitutes such an agreement.
Plaintiff's argument that the VBHOA's method of collection of its annual charges violates PREDFDA, specifically N.J.S.A. 45:22A-44(b), which states that a homeowners' association "shall exercise its powers and discharge its functions in a manner that protects and furthers the health, safety and general welfare of the residents of the community[,]" is clearly without merit and does not warrant extended discussion. R. 2:11-3(e)(1)(E). Review of a homeowners' association business decision is governed by the business judgment rule. See Thanasoulis v. Winston Towers 200 Assoc., Inc., 110 N.J. 650, 666-68 (1988). The business judgment rule is designed to prevent courts from "second-guessing" internal business decisions "made in good faith based on reasonable business knowledge[.]" Green Party of N.J. v. Hartz Mountain Indus., Inc., 164 N.J. 127, 147 (2000). There is no basis for concluding that the decision of VBHOA Board to collect the annual charges imposed on the Players Place condominium owners by monthly payment from their condominium associations is inconsistent with the "health, safety and general welfare of the residents of the [other four constituent communities]." N.J.S.A. 45:22A-44(b). As previously discussed, any interest income the VBHOA may lose as a result of collecting the charges imposed on the Players Place condominium owners on a monthly rather than annual basis is offset by the added convenience and cost-saving the VBHOA realizes from collecting those charges from the condominium associations rather than each individual owner. Therefore, the VBHOA's method of collection of those charges does not violate the PREDFDA.
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