July 29, 2011
HARBOR VIEW CONDOMINIUM ASSOCIATION, INC., PLAINTIFF-APPELLANT,
MANHATTAN SKYLINE III, LIMITED PARTNERSHIP, B & A PROPERTIES A/K/A BARRY L. COHEN AND ALAN SACKMAN, CITY VIEW REALTY CO., L.P., A NEW YORK LIMITED PARTNERSHIP, DEFENDANTS-RESPONDENTS, AND BJC SERVICE CO., A NEW YORK GENERAL PARTNERSHIP, DEFENDANT/THIRD-PARTY PLAINTIFF,
JOSEPH A. POJANOWSKI, III, THIRD-PARTY DEFENDANT-RESPONDENT.
On appeal from the Superior Court of New Jersey, Chancery Division, Hudson County, Docket No. C-118-08.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued May 10, 2011
Before Judges Parrillo, Yannotti and Skillman.
Plaintiff Harbor View Condominium Association (Association) appeals from an order entered by the trial court on March 12, 2010, which dismissed its claims against defendants Manhattan Skyline III, L.P. (Manhattan Skyline); B & A Properties (B & A); and City View Realty Co., L.P. (City View). We affirm.
In the late 1980s, Manhattan Skyline purchased an apartment building in Union City, New Jersey, which it renovated and converted into condominium units, pursuant to the Condominium Act, N.J.S.A. 46:8B-1 to -38. In accordance with that Act, Manhattan Skyline executed a Master Deed and recorded it on November 24, 1987, along with a certificate of incorporation and bylaws for the Association.
The Master Deed described the condominium as a "five-story[,] multi-family" structure with 125 residential units, along with general common elements. The Master Deed included a schedule of each unit's percentage interest in the common elements of the building, as required by N.J.S.A. 46:8B-9. It also included the architect's floor plans, which provided for a "public laundry room" on the basement level.
On June 15, 1989, Manhattan Skyline sent to the unit owners an amended public offering statement, in which it advised that the Master Deed had "inadvertently omitted" an interest in the common elements for the "commercial unit (laundry facility)." Manhattan Skyline asked the unit owners to provide written consent to amend the Master Deed "to allow for this correction" and to reallocate their percentage interests in the common elements.
On January 3, 1990, Manhattan Skyline recorded an amendment to the Master Deed, which created Unit L, a commercial laundry unit, thereby increasing the total number of units to 126. Unit L was granted a 0.8609 percentage interest in the common elements, which decreased the percentage interests held by the other unit owners. On February 1, 1990, Manhattan Skyline executed a deed transferring Unit L to B & A for $105,000.
Alan Sackman (Alan) was the owner of Sackman Enterprises, which was the principal owner and limited partner of Manhattan Skyline. B & A was a general partnership of Alan and Barry Cohen (Cohen), a New Jersey realtor. Cohen managed the condominium for Manhattan Skyline. Cohen marketed the units and collected the maintenance charges. Sackman Enterprises employed Alan's son, Carter Sackman (Sackman).
The Association's bylaws provided, among other things, that Manhattan Skyline would have control of the board of directors until sixty days after it sold seventy-five percent of the units. In 1990 or 1991, Manhattan Skyline filed for bankruptcy protection. At the time, seventy units remained unsold. In the bankruptcy proceedings, Manhattan Skyline transferred the unsold units to City View, which gave City View control of the Association's board of directors.
City View is owned by twelve investors. Its general partner is a company owned by Sackman, called Union City Development Co. At some point in the early 1990s, City View appointed Sackman as president of the Association's board of directors. Sackman signed the deed transferring Unit L to B & A.
In October 1996, certain unit owners filed an action in the Chancery Division against the Association, City View and Sackman. Souffront v. Harbor View Condo. Ass'n, Inc., Docket No. C-129-96. The plaintiffs in that case alleged that the Association did not have a duly-elected board of directors; City View failed to collect $62,000 from Manhattan Skyline for "common area charges" for unsold units; and Sackman unlawfully assessed certain charges against unit owners and breached his fiduciary duty to them. The plaintiffs sought an order compelling the election of three unit owners to a seven-member board of directors and an audit and accounting of the Association. It appears that, at some point, the matter was transferred to the Law Division.
In May 1997, the plaintiffs filed an amended complaint in Souffront in the Law Division. They alleged that City View, Sackman and the Association breached fiduciary duties owed to them. They claimed that Association property had been used to benefit City View and/or Sackman. They further claimed that Association funds had been diverted to own and operate a laundry room in the building.
In February 1998, the Association, City View and Sackman provided answers to the unit owners' interrogatories, in which they stated that the Association "does not own the Laundry room." At a deposition held in September 1999, Sackman testified that Unit L was owned by BJC Service Co. (BJC), an entity owned by Sackman, his mother and another investor.
In February 2000, the court in Souffront entered an order granting summary judgment to the Association, City View and Sackman. The order states that the motion for summary judgment was unopposed and that, in any event, the unit owners had not established that they had sustained compensable damages.
Sackman was president of the Association's board until 2005. By that time, City View had sold seventy-five percent of the units and surrendered control of the board to the unit owners, as required by N.J.S.A. 46:8B-12.1(d). The unit owners elected Ricardo Negron (Negron) as president of the board. Negron had purchased a unit in the building in 1997, and was a member of the board since 1999. In 2003, Negron found the 1990 deed transferring Unit L from Manhattan Skyline to B & A in a title search. According to Negron, the deed was not recorded until 1999.
In July 2008, the Association filed this action against Manhattan Skyline, B & A and BJC. They challenged the 1990 amendment to the Master Deed that converted the laundry room to a unit, and sought an order voiding the 1990 deed transferring the unit to B & A and the 2004 deed transferring the unit from B & A to BJC. The Association also sought to reform the Master Deed to state that the laundry unit was part of the building's common elements.
In February 2009, the Association amended the complaint to add City View as a defendant. In the amended complaint, the Association asserted claims of breach of fiduciary duty, fraud, conspiracy to commit fraud and violations of the Condominium Act, the Planned Real Estate Development Full Disclosure Act, N.J.S.A. 45:22A-21 to -56 (PREDFDA), and the Condominium and Cooperative Conversion Protection and Abuse Relief Act, 15 U.S.C.A. §§ 3601-3516. BJC filed a third party complaint against Joseph A. Pojanowski, III (Pojanowski), who was the attorney for Manhattan Skyline and City View from 1987 to 1995.
Thereafter, defendants filed a motion for partial summary judgment dismissing certain counts of the amended complaint based on the doctrines of laches and res judicata and the statute of limitations. The Association opposed the motion and filed a cross-motion for summary judgment, arguing that there was no genuine issue as to the fact that the developers had not obtained the unanimous consent of the unit owners for the 1990 amendment to the Master Deed, as allegedly required by the Condominium Act. Pojanowski filed a cross-motion for summary judgment on the claims asserted against him.
The motions were argued on December 4, 2009. The court rendered an oral decision on February 8, 2010. The court found that the Association's claims were barred by the entire controversy doctrine and laches. The court entered an order dated March 12, 2010, granting the motions for summary judgment by defendants and Pojanowski, and denying the Association's cross-motion for summary judgment. This appeal followed.
We first consider whether the trial court erred by finding that the Association's claims were barred by the entire controversy doctrine.
Here, the trial court found that the Association's claims were barred by the entire controversy doctrine because the unit owners failed to raise claims in Souffront regarding the 1990 amendment to the Master Deed and ownership of the laundry unit. The court found that these claims should have been raised in Souffront. The court additionally found that the failure of the unit owners to raise these claims in Souffront "severely prejudiced" defendants.
Rule 4:30A provides that the "[n]on-joinder of claims required to be joined by the entire controversy doctrine shall result in the preclusion of the omitted claims to the extent required" by the doctrine. The doctrine is an equitable principle that requires the "adjudication of a legal controversy . . in one litigation in only one court[,]" and precludes the parties involved from later raising claims that should have been raised in the earlier case. Cogdell v. Hosp. Ctr. at Orange, 116 N.J. 7, 15 (1989). The purpose of the entire controversy doctrine is to eliminate delay and waste, and to advance judicial efficiency, overall fairness and "the need for complete and final disposition" by avoiding piecemeal decisions. Ibid.
The doctrine may not be applied, however, unless the party whose claim is being barred had "had a fair and reasonable opportunity to have fully litigated [its] claim in the prior action." Oliver v. Ambrose, 152 N.J. 383, 396 (1998). The doctrine "applies to constituent claims that arise during the pendency of the first action that were known to the litigant." Mystic Isle Dev. Corp. v. Perskie & Nehmad, 142 N.J. 310, 323 (1995). Furthermore, "it is the factual circumstances giving rise to the controversy itself rather than a commonality of claims, issues or parties, that triggers the requirement of joinder to create a cohesive and complete litigation." Ibid.
In our view, the trial court erred by applying the entire controversy doctrine to the Association's claims. Although the plaintiffs in Souffront had sufficient facts to assert claims regarding the validity of the 1990 amendment to the Master Deed and the transfer of title to the laundry unit, the factual basis for those claims is substantially different from the facts that formed the basis for the claims in Souffront.
As we have explained, in Souffront, the plaintiffs claimed that the Association's board had not been lawfully constituted. They alleged that the developer-controlled Association had engaged in fraud, self-dealing and unconscionable conduct. They further alleged that the Association's funds had been wrongfully used to own and operate a laundry in the building.
The claim that Association funds had been improperly diverted to the ownership and operation of the laundry does not turn, however, upon whether the laundry was part of the common element or a separate unit of the building. The claim also does not turn upon whether the Master Deed was lawfully amended in 1990.
Because the facts giving rise to the claims in Souffront are different from the facts that form the basis for the claims asserted in this action, the trial court erroneously held that the entire controversy doctrine barred the Association's claims.
We next consider whether the trial court erred by finding that the Association's claims are barred by the doctrine of laches.
Laches is an equitable doctrine that may bar the assertion of claims "in the absence of the statute of limitations." Lavin v. Bd. of Educ. of Hackensack, 90 N.J. 145, 151 (1982). "The time constraints of laches, unlike the periods prescribed by the statute of limitations, are not fixed but are characteristically flexible." Ibid.
The laches doctrine bars a party from enforcing a known right after inexcusably and unexplainably delaying the exercise of that right, thereby resulting in prejudice to the other party. Knorr v. Smeal, 178 N.J. 169, 181 (2003). The doctrine may be invoked if the delaying party had a reasonable opportunity to assert the right in a proper forum, and after failing to do so, the adverse party believed in good faith that the right had been abandoned. Ibid.
Initially, we note that defendants did not plead the statute of limitations as a separate defense, although Pojanowski raised this defense in his answer to the third party complaint. It appears, however, from the transcript of the December 4, 2009, argument that defendants did raise this issue in their motion for summary judgment.
The trial court made no determination as to whether the Association's claims had been filed beyond the time prescribed by any particular statute of limitations. Even assuming that no statute of limitations barred the claims being asserted in this case, it is clear that the Association's failure to bring them earlier is inexcusable.
As we stated previously, Manhattan Skyline sent a letter dated June 15, 1989, to the unit owners stating that "the original offering plan" inadvertently omitted the allocation of a portion of the common elements to the laundry room, thereby requiring an amendment to the Master Deed and a reallocation of the ownership interests of the unit owners in the common elements. The letter sought the unit owners' consent to the amendment.
The June 15, 1989, letter therefore placed the unit owners on notice of the proposed amendment to the Master Deed, the allocation of a percentage of the common elements to the laundry and the change to their respective ownership interests in the common elements. The unit owners could have determined within a reasonable time whether Manhattan Skyline had obtained the consent of the required number of unit owners for the amendment to the Master Deed.
Furthermore, in the Souffront litigation, counsel for the unit owners was informed that Manhattan Skyline was no longer the owner of the laundry unit. Sackman was deposed on September 8, 1999, and he testified that BJC was the owner of "the laundry room," having purchased the unit from B & A several years before that date. Sackman further testified that BJC collected the income from the laundry and paid maintenance charges like the other unit owners in the building.
Nevertheless, the plaintiffs in Souffront raised no claims regarding the amendment to the Master Deed or ownership of the laundry unit. If such claims had been asserted after Sackman's 1999 deposition, they might already have been barred by the statute of limitations.
In any event, the Association did not assert these claims until July 2008, when it filed its complaint in this case. Thus, the claims were asserted eighteen years after the Master Deed was amended, eleven years after Souffront was filed, and nine years after Sackman's deposition. In our view, this delay was inexcusable.
We reject the Association's contention that it should not be charged with any delay on the part of the unit owners in asserting the claims. We recognize that the developer-controlled Association would not be expected to bring a lawsuit challenging its own amendment to the Master Deed or its ownership of the laundry unit. However, nothing prevented the unit owners from instituting a timely lawsuit on the Association's behalf challenging the Amendment and the designation of the laundry as a separate unit rather than part of the common area of the building.
Although a condominium association has the primary right to sue in order to protect the interests of the unit owners in the common areas, the unit owners may initiate claims related to those areas if the association is unwilling to do so. Siller v. Hartz Mountain Assocs., 93 N.J. 370, 381-82, cert. denied, 464 U.S. 961, 104 S. Ct. 395, 78 L. Ed. 2d 337 (1983). Furthermore, the unit owners may sue the developer on the association's behalf when the association is under the developer's control. Ibid.
In our view, a condominium association may not assert claims after the unit owners assume control of the association where, as here, the unit owners had all of the facts necessary to assert claims on the association's behalf but failed to do so in a timely manner. Therefore, the Association may be charged with the unit owners' delay in bringing the claims.
In addition, the unit owners' delay in assessing the claims has substantially prejudiced defendants, as the trial court found. Counsel for the plaintiffs in Souffront did not retain his file, which apparently included a copy of the developer's file he had obtained from the Department of Community Affairs (DCA), which approved the amendment to the Master Deed. The DCA no longer has any records concerning the amendment, and it cannot produce anyone with personal knowledge of the matter. Moreover, Pojanowski did not retain any of the records of his representation of Manhattan Skyline and City View.
The Association argues, however, that any prejudice to defendants from the loss of records is due to Manhattan Skyline's and City View's failure to comply with N.J.S.A. 46:8B-12.1(d). The statute provides that a developer must maintain all books and records pertaining to the association and turn over those records to the association not more than sixty days after the unit owners take control of the board. According to the Association, defendants would have had all of the records necessary to address its claims had Manhattan Skyline and City View complied with this statute.
The record does not reveal whether Manhattan Skyline or City View disposed of the records, or whether either entity discarded the records purposely or inadvertently. Since the DCA apparently approved the 1990 amendment to the Master Deed, and no one questioned its validity, Manhattan Skyline or City View might reasonably have believed there was no need to retain these records. Even if Manhattan Skyline or City View erred by discarding the records, the delay in bringing the claims precluded defendants from obtaining relevant records from other sources. Moreover, memories concerning the disputed amendment have undoubtedly faded with the passage of time.
We therefore conclude that the trial court correctly found that the Association's claims were barred by laches. Accordingly, we affirm the order granting summary judgment to defendants and denying the Association's motion for summary judgment.
© 1992-2011 VersusLaw Inc.