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Dep't of Community Affairs v. Fox Development Corporation


June 19, 2008


On appeal from a Final Agency Decision of the Department of Community Affairs, Division of Codes and Standards, Docket No. BHP-559-06-5.

Per curiam.


Argued April 14, 2008

Before Judges Lintner, Graves and Sabatino.

This matter arises from a dispute between the respondent, a condominium developer, and the present leaders of the condominium's association, relating to the construction of eighty-four additional units in the project. The intervenor, the Fox Hills at Rockaway Condominium Association, Inc. ("the intervenor") appeals a final agency decision of the Department of Community Affairs ("DCA") dated January 26, 2007. The DCA's final decision adopted the recommendations of an administrative law judge ("ALJ"), who presided over six days of hearings.

As a central focus of its appeal, the intervenor challenges the validity of a December 2002 vote by the Association members, approving an amendment to the condominium's Master Deed to allow the proposed construction. The intervenor contends that there were irregularities in the voting process, and that the votes counted in favor of the plan amendment were insufficient. The intervenor also accuses the developer of filing misleading statements with the DCA regarding the amendment after the votes were counted.

We affirm the DCA's final decision, mainly because the challenge to the December 2002 election was not brought until over three years later. Apart from the untimeliness of the challenge, we also join the DCA Commissioner in sustaining the ALJ's finding that there were no irregularities in the voting process. We further sustain the ALJ's separate finding that the developer had not intentionally misrepresented or concealed material facts in its submissions to the DCA. Consequently, we affirm the DCA's discretionary decision to not revoke the developer's registration.


In March 1998, the developer registered with the DCA its plan to construct and sell 600 age-restricted condominium units in Rockaway Township, Morris County. This condominium project became known as Fox Hills at Rockaway ("Fox Hills"). By December 2002, the developer had sold 458 units in the project.

At the times relevant to this appeal, the development company was wholly owned by Carol Salkind. Her husband, Morton Salkind, served as the company's CEO. The Salkinds personally owned a condo unit at Fox Hills during that time frame. Morton Salkind*fn1 served as the first president of the unit owners' Association, which was formed on January 1, 2002.

The original Public Offering Statement ("POS") for Fox Hills, prepared in 1998, included plans to construct an assisted-living facility on the land adjacent to Fox Hills, to be known as Leben Care. That facility was never built, as the developer eventually concluded that such a facility would be unprofitable. The developer sought instead to build eighty-four additional condo units on that adjacent land ("the addition"). The plans for the addition called for two new buildings, each containing forty-two units.

According to the developer, it began discussing its proposal for the addition at several meetings with Fox Hills residents in early 2002. The addition required an amendment to the Master Deed, duly ratified by the Association. The addition also required approval from the Rockaway Township Planning Board. To that latter end, numerous residents of Fox Hills signed a petition in support of the addition. Residents also attended a series of Planning Board and Township Council meetings in September and October 2002 to show their support for the proposal.

The proposal for the addition was also discussed in the August 2002 edition of the Fox Hills monthly newsletter, in which Salkind predicted that the addition would "save all of us almost $300,000 and freeze the maintenance for those additional two years." Subsequent editions of the newsletter also referred to the pending proposal.

The annual regular meeting of the Association for calendar year 2002 took place on December 10, 2002. The primary purpose of that meeting was to the elect members of the Association's Board of Directors. That same night, the proposal to amend the Master Deed to authorize the proposed addition was also scheduled for a vote.

About two months prior to that annual meeting, Salkind, as president of the Association, sent all unit owners a letter on October 28, 2002, explaining in detail the proposed amendment to the Master Deed. The four changes to the Master Deed covered by the proposed amendment were to (1) approve the proposed addition; (2) extend the rights reserved to the developer, as the grantor of the property, from five years to seven years; (3) increase the minimum rental period from 180 days to 365 days; and (4) change the requirements for the resale of condo units.

The election was hotly contested. Three residents ran for two open seats on the Board: J. Richard Grey, Nunzio Di Donna, and James Dunn. Grey and Di Donna were endorsed as an "official slate" by the nominating committee. Dunn was nominated by petition. Dunn had filed an unsuccessful lawsuit in the Superior Court earlier on December 10 to enjoin the vote.*fn2 Grey and Di Donna won the election.

In the administrative hearings before the ALJ, the parties offered two competing narratives of what took place at the December 10 meeting. John Quinn, the community manager at Fox Hills, was the intervenor's principal witness.*fn3 Quinn did not live at Fox Hills and was not an Association member. Quinn served as the election official for the December 2002 vote. He had the responsibility of printing, disseminating, collecting, and counting the ballots, although he did not actually create those ballots.

Quinn recalled that there were several perceived irregularities in the voting and vote counting procedures that night. Specifically, Quinn believed that the ballots that were used to vote for the Board of Directors did not mention anything about the amendment to the Master Deed. He testified that the ballots were six inches by eight inches, and, as he recalled it, contained only the names of the Board candidates.

Quinn claimed that only the proxy ballot sheets, those submitted by unit owners who did not attend the meeting, mentioned the amendment. A sample copy of that proxy ballot is contained in the record. The first sentence on the proxy ballot stated: "I(we) the undersigned do hereby appoint Morton Salkind . . . to cast an affirmative vote for the proposed changes to the Master Deed . . . ."

The proxy ballot did not contain any affirmative method for a condo owner to vote against the proposed amendment, as there were no boxes to check or items to circle. Rather, if a voter took no other action than to sign the proxy ballot, by the language of the proxy, the signature would count as an affirmative vote for the amendment.

According to Quinn, the proxy ballots were counted by a Board director and Fox Hills resident, John Flynn. Flynn announced at the December 10 meeting that he had counted eighty-three proxy votes in favor of the Master Deed amendment.

As to those condo owners who did not vote by proxy but who attended the meeting, Quinn claimed that the only vote on the amendment was by a show of hands, and that no one actually counted those hands. Quinn further alleged that no one verified that only one person per each unit had voted, a restriction required by the Association's bylaws. Quinn conceded, however, that the show of hands displayed at the meeting greatly favored approval of the amendment.

The developer's witnesses in the OAL presented a markedly different account of the voting procedures at the December 10 meeting. According to Peter Rosen,*fn4 who was the attorney at the time for both the developer and the Association, the voting for the amendment was conducted by written ballot. Rosen attended the meeting that night, and he used a hand-held microcassette recorder to tape the meeting.

Rosen created the ballot that was used at the meeting. He recalled that it was the size of a full sheet of paper and specifically included the amendment proposal. In its top portion, the ballot contained two "ballot questions": "I. Proposed changes to Master Deed" and "II. Installation of a traffic signal."*fn5 The bottom portion contained the names of the three candidates running for the Board of Directors, as well as spaces for floor nominees.

Rosen testified that Salkind personally addressed the Association members prior to the voting, explaining each item on the ballot and holding up a sample ballot. After the residents voted, Rosen sat in a room with other Association members and participated in tallying the votes. While another person read each ballot aloud, Rosen and the Board's Secretary, John Harris, kept a written tally. This tally included the votes on the amendment, the traffic signal, and the two Board of Directors positions. Rosen described the vote on the amendment as "overwhelmingly[] in favor."

Pursuant to the Master Deed, any proposed amendment had to be approved by "a vote of at least sixty[-]seven (67%) percent of all Unit Owners, at any meeting of the Association." As tabulated by Harris, the Board Secretary, a total of 360 votes were cast in the December 10 election, 277 in person and 83 by proxy. The vote on the amendment to the Master Deed was 306 in favor, and 54 against. The 306 "yes" votes represented 84.8% of the votes cast. The developer and its counsel deemed this margin of victory sufficient to approve the deed amendment, even though the 306 affirmative votes amounted only 66.81% of the 458 possible unit votes. No one raised any immediate challenge to the sufficiency of the vote.

Following the December 10 meeting, the developer began the process of registering the Master Deed amendment (the so-called "fourth amendment") with the DCA in February 2003. Among the documents submitted in support of the registration was a certification by Harris stating, in pertinent part, that:

3. At [the December 2002] meeting, two hundred seventy seven (277) votes were cast in person and eighty three (83) by proxy.

4. The proposed amendments to the Master Deed passed by a total of three hundred and six (306) in favor and fifty four (54) against for a favorable vote of 84.8%.

5. These votes were more than required by the by-laws to pass an amendment to the Master Deed.

Harris calculated the percentage of affirmative votes based on the number of votes cast, 360, and not the total number of possible unit votes, 458.

After a mandatory three-month period under N.J.S.A. 45:22A-30 had passed, the DCA sent Rosen, as the developer's attorney, a letter on May 23, 2003, informing him that the fourth amendment was validly registered. The developer promptly began marketing the addition. The developer did not actually record the fourth amendment in the County's Registrar Office until November 2005, because it had to wait for approval from the Rockaway Township Planning Board, which it received in October 2005.*fn6 Thereafter, the developer substantially completed one building for the addition and performed extensive site work and laid the foundation for the second.

Neither the Association, nor anyone else, took any action to challenge the addition and the vote by which it was approved until over three years later. By this time, Dunn had succeeded in being elected to the Association's Board of Directors. Dunn was also named its president. Rosen, meanwhile, was replaced as the Association's attorney.

On January 17, 2006, the Association's new counsel sent a letter to the DCA's Bureau of Homeowner Protection ("BHP"), claiming improprieties in the developer's registration of the fourth amendment. As part of those allegations, counsel alleged that the amendment's approval by the unit owners was based on voting irregularities, and that the vote fell short of the 67% threshold prescribed by the Master Deed. This was the first time that the BHP was alerted to any possible problems with the fourth amendment's registration.

In response to that letter, BHP officers met with the developer's representatives, including Salkind, to discuss the Association's allegations. The BHP then requested that the developer voluntarily discontinue the construction and marketing of the new units while it reviewed the matter further.

In response, the developer filed a complaint in the Chancery Division. Its complaint sought a declaratory judgment that the vote on the addition was valid, and an injunction compelling the agency to accept the registration of the amendment. After the Association intervened, the Chancery Division dismissed the complaint without prejudice in August 2006, finding that the administrative agency was the proper venue to resolve the dispute.

Upon remand to the agency, the BHP issued an order on September 26, 2006, requiring that the developer temporarily cease and desist in its efforts to market and sell the new condos, and revoking the registration of the fourth amendment. In so doing, the BHP accepted the Association's claim that the registration of the fourth amendment, and Harris's supporting certification, were flawed because of alleged problems with the December 2002 vote.

The developer thereafter requested a hearing in the OAL to contest the BHP's determinations. The Association, now controlled by new leadership, intervened in the proceedings, advocating that the December 2002 vote was both irregular and numerically inadequate. Because of those claimed deficiencies, the intervenor took the position that Harris's certification about the vote was misleading, and that the registration was therefore a nullity. As a remedy, the intervenor argued that alternative uses should be made of the new structures that had already been built in reliance upon the fourth amendment's registration.

The ALJ conducted six days of hearings on the dispute in October and November 2006. The ALJ heard testimony from several witnesses, including Salkind, Harris and Rosen on behalf of the developer; Dunn, Quinn and five other unit owners on behalf of the intervenor; and a BHP representative.

The unit owners who testified for the intervenor maintained that the vote on the fourth amendment at the December 2002 meeting was conducted solely by a show of hands, and that it was not listed on the ballot. Four of those five unit owners admitted that they had actually voted in favor of the amendment. The fifth owner testified that he had voted "no," although he had signed an earlier certification in an unrelated lawsuit attesting that he had actually voted in favor of the amendment.*fn7

The developer's witnesses testified that the vote was, in fact, conducted properly. To corroborate its position, the developer offered into evidence a full-sized sample ballot containing the proposed amendment. Rosen testified that this was the ballot used during the election.*fn8

Additionally, the developer produced the tape recording of the December 2002 meeting made by Rosen, as well as two separate transcriptions of that tape. Rosen explained he had been directed by Salkind to tape record all Association meetings. Rosen first sought to transcribe the tape utilizing Butler Transcription Service in May 2006, after learning of the challenge to the vote. The Butler transcript contained many gaps and portions where the transcriber deemed the spoken words on the tape "indiscernible."

In preparation for the OAL hearing, Rosen had the tape re-transcribed by Schulman, Wiegmann & Associates, who, in Rosen's words, utilized "more sophisticated recording equipment." In this second transcription (the "Schulman transcript"), Rosen supplied Schulman with the names of some of the speakers. Consequently, the transcript contains less gaps. The ALJ admitted the audiotape and both versions of the transcript into evidence, over the intervenor's objection.

As the ALJ ultimately found, it is plainly evident from both transcripts that, in fact, the December 2002 vote on the fourth amendment was done by ballot and not by a show of hands. Both transcripts reveal that the only vote that was cast by hand during the entire meeting was a vote on whether or not to include a sub-issue, concerning the method and manner of reselling condo units, within the scope of the proposed fourth amendment.

In a forty-one page decision filed on December 7, 2006, the ALJ reversed the BHP's revocation order and reinstated the fourth amendment. The ALJ also vacated the BHP's cease and desist order.

After summarizing the relevant testimony of the various witnesses, the ALJ found that the intervenor's witnesses were not credible, as the bulk of their testimony was "contrary to the Schulman transcription of the events occuring at the December meeting." The ALJ noted, in particular, that one of the intervenor's witnesses had in fact admitted to lying about his vote in a sworn certification. By contrast, the ALJ determined that the testimony of Salkind and Harris on behalf of the developer was "extremely credible."

After reviewing the Association's Master Deed, bylaws, and the relevant statutory and regulatory language, the ALJ found that the voting procedures for amending the Master Deed were not "clearly articulated." With respect to whether the minimum 67% approval margin refers only to the voting members present at the meeting or to all unit owners, the ALJ found that the Master Deed allows for "two distinctly different interpretations." The ALJ thus concluded that the interpretations of both the developer and the intervenor regarding the 67% requirement were "entirely feasible." Hence, the ALJ concluded that the developer's filed representation to the DCA, attesting that it had achieved the necessary amount of votes to approve the amendment, was not "an intentional misrepresentation."

Furthermore, as an equitable consideration, the ALJ found that, even if the 67% requirement were read to apply to all unit owners, the developer was entitled to round up the vote total of 66.81% to the nearest whole number. The ALJ observed in this regard:

While it may be argued that, under ordinary circumstances, a specified percentage of votes must be met, nevertheless, in this fact sensitive case, such an interpretation would lead to an unjust result. For over three years, the unit owners, who had approved the amendment to the [M]aster [D]eed, or even the Association itself, never challenged the vote or contacted [the DCA] about any purported deficiencies in that vote. To its peril, [the developer], in reliance, not only upon the vote, but also upon the continued acquiescence of the unit owners, commenced construction, completing a substantial portion of the [a]ddition. In view of the foregoing, a just result, in this fact sensitive case, would allow for rounding off. [Emphasis added.]

The intervenor filed exceptions to the ALJ's decision. Thereafter, on January 26, 2007, the DCA Commissioner issued her own final decision, ratifying, without further comment, the ALJ's determinations.

The intervenor now appeals the DCA's final agency decision. Although the intervenor accepts for purposes of the appeal the ALJ's factual finding that a vote on the fourth amendment was indeed listed on a written ballot supplied to the unit owners at the December 2002 meeting, it nonetheless maintains that the votes cast were insufficient to carry the proposition. The intervenor also criticizes the form of the ballot in various respects. The intervenor therefore asserts that the developer misrepresented to the DCA in its registration filing that the amendment had been properly approved.

More specifically, the intervenor argues that (1) the developer's supposed misrepresentation about the vote warrants revocation of the fourth amendment, even in the absence of a proven intent to deceive; (2) the Master Deed clearly requires approval of at least 67% of all unit owners to be amended; (3) the proxy and ballot were unfairly worded; (4) the ALJ's alternative justification of "rounding up" the vote contravenes the Master Deed; and (5) the ALJ should have granted summary decision in its favor because the fourth amendment was improperly recorded. In a reply brief, the intervenor adds that (6) the ALJ's credibility findings are irrelevant; (7) the developer's contention that the intervenor lacks standing is incorrect and not timely asserted; (8) the common-law fraud principles invoked by the developer are irrelevant; (9) estoppel principles should not apply here, because the delay in challenging the vote was not undue and the developer was not prejudiced; (10) the election procedure was unfair because the ballot was drafted in a skewed manner; and (11) its appendix did not, as the developer alleged, improperly include materials outside the record.

Shortly before the scheduled oral argument on appeal, the intervenor moved to stay further construction and sales of units in the new addition. The developer opposed the motion. We denied the application.


We begin by considering the timeliness of the intervenor's challenge to the propriety and sufficiency of the December 2002 vote, and the ALJ's related observation that the three-year delay in presenting that challenge raises significant equitable concerns.

In general, the results of any sort of election should be challenged expeditiously. See, e.g., Verna v. Links at Valleybrook Neighborhood Ass'n, 371 N.J. Super. 77, 94 (App. Div. 2004) (holding that a challenge to an election "should be commenced and adjudicated as soon as practicable after the election"). After the votes have been tallied and the results have been announced, the persons affected by an election have a right to rely upon the declared outcome, if no one steps forward promptly to contest it.

By analogy, with respect to elections for public office, anyone wishing to challenge the outcome must do so no later than thirty days after the election, or within thirty days after discovering the grounds for such a challenge from the documents on file. N.J.S.A. 19:29-3. See Davis v. City of Plainfield, 389 N.J. Super. 424, 434-35 (Ch. Div. 2006) (challenge to mayor's eligibility for position made five months after the election was time-barred); Jones v. Mitchell, 194 N.J. Super. 387, 391-92 (Law Div. 1983) (rejecting as untimely a challenge to a candidate's legal residency filed about five months after the election), aff'd, 194 N.J. Super. 337 (App. Div. 1984).

The ALJ rightly took these expediency principles into account when he underscored the delay of over three years between the December 2002 election and the January 2006 letter to the BHP raising, for the first time, concerns about the validity of the unit owners' vote in favor of the fourth amendment. The ALJ also correctly recognized the reliance interests associated with an election result that has been left uncontested for several years. Here, one of the two project units authorized by the election had already been built by the time the vote was contested before the BHP, and site work on the second building had already been performed.

The intervenor attempts to justify the delay in raising the challenge because control of the Association did not change hands until January 2005, when its Board of Directors reorganized and Dunn became the new president. Even so, nothing prevented any individual unit owner from lodging a complaint with the BHP, filing a lawsuit in the Superior Court, or otherwise challenging the amendment vote in the meantime.

Indeed, the record shows that Dunn continued his own lawsuit specifically contesting the vote on the Board of Directors until about a year after the December 2002 election. During that year, Dunn did not amend his complaint to include a challenge to the vote on the fourth amendment, even though he admittedly told Salkind at the end of the December 2002 meeting that he would "see [Salkind] in court."

Although we do not necessarily engraft upon this condominium matter the strict thirty-day statutory deadline for bringing challenges to political elections, we share the ALJ's concern that the voting procedures and results in this case should have been contested much sooner. We are mindful that the developer did not actually record the fourth amendment until November 2005. Nevertheless, nothing prevented the election results from being contested before that time. The contents of the developer's earlier filings, including Harris's February 2003 certification, were matters of public record that could have been reasonably discovered. Despite that, no complaints were brought to the agency's attention until over three years after the election took place. That is simply too long.

Furthermore, the intervenor has been inconsistent in its position concerning the legality of the December 2002 vote on the amendment. Specifically, the intervenor accepts the validity of two other aspects of the Master Deed that were amended by the very same voting procedures and vote tally connected with the authorization for the new addition. The intervenor's selective approach, picking and choosing different aspects of the same vote, reinforces the equity of sustaining the ALJ's decision and the DCA's ratification of that decision.

The intervenor further argues that the delay in challenging the election results ought not trigger principles of equitable estoppel here, because the administrative proceedings were the result of regulatory action by a governmental agency, the BHP. We are well aware that the government is rarely estopped from taking regulatory action. See, e.g., County of Morris v. Fauver, 153 N.J. 80, 104 (1998). In the present appeal, however, the government is not challenging the ALJ's determination. In fact, the DCA's final agency decision adopted the ALJ's ruling, even though a sub-agency of the DCA, the BHP, had initially favored revocation of the fourth amendment.

The intervenor, a private association, does not stand in the shoes of the government. Had the unit owners complained to the agency or the courts sooner about the election procedures, the whole timeliness problem could have been averted. Under these circumstances, the DCA and the ALJ had ample grounds to refrain from rewarding the challengers for their years of inaction while land for the new addition was being bulldozed, concrete poured, and girders erected.

Even putting aside the untimeliness of the electoral challenge, we further agree with the ALJ that the developer's registration filing was not deceptive, but instead was based upon a reasonable interpretation of the Master Deed. We concur with the ALJ that the wording of the Master Deed is not entirely clear as to whether a vote of 67% of all unit owners, as the intervenor now advocates, or whether only 67% of those owners who actually cast votes, as the developer contends, was required.*fn9 In sum, the text of the Master Deed was susceptible to two reasonable and competing interpretations. Given that ambiguity, there are substantial grounds to uphold the ALJ's finding that the developer's registration filing did not constitute an actionable misrepresentation.*fn10

As a matter of regulatory enforcement, we defer to the DCA's final agency decision which, in effect, ultimately declined to take any further steps to revoke the plan amendment. The operative statute recites that "[a] registration may be revoked" upon certain administrative findings. N.J.S.A. 45:22A-34(a) (emphasis added); see also N.J.A.C. 5:26-2.11(a)(7) ("[t]he [a]gency may revoke a registration" upon a finding of intentional misrepresentation or concealment of a material fact (emphasis added)). The statute plainly gives the agency discretion to revoke a registration, a measure that amounts to a remedy of last resort.

Although we recognize the expansive nature of the DCA's statutory power to protect the public, we discern no reason here to second-guess its ultimate prerogative to adopt the ALJ's ruling, after the facts and circumstances had been more fully developed in the extensive OAL proceedings. The agency surely was entitled to take a fresh look at the merits of this matter in light of what emerged at the lengthy hearings in the OAL and the ALJ's detailed opinion. The agency was by no means bound to adhere rigidly to the position initially advanced by its sub- agency, the BHP. Indeed, such dogmatic inflexibility in the face of additional fact-finding would be inimical to basic notions of fairness and enforcement discretion. See In re Grand Jury Appearance Request by Loigman, 183 N.J. 133, 146 (2005) (noting that the executive branch of government reserves the discretion to decide not to press a charge); Prunetti v. Mercer County Bd. of Chosen Freeholders, 350 N.J. Super. 72, 98 (Law Div. 2001) ("[T]he manner of enforcement clearly involves an exercise of [an] agency's discretion."). The agency's final decision is neither arbitrary nor capricious. Aqua Beach Condo. Ass'n v. Dep't of Cmty. Affairs, 186 N.J. 5, 16 (2006).

We have fully considered all of the remaining points on appeal raised by the intervenor, and conclude that they lack sufficient merit to discuss in this opinion. R. 2:11-3(e)(1)(E).


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