On appeal from the Superior Court of New Jersey, Law Division, Essex County, Docket No. L-3578-11.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Graves and Guadagno.
Claridge House One Condominium (Claridge House) is a twelve-story, 274-unit condominium in Verona. When Claridge House was constructed in 1965, it originally contained rental units and was converted to condominiums in 1980. Plaintiff, Claridge House One Condominium Association, Inc. (Association), is a New Jersey not-for-profit corporation provided for in the Claridge House master deed, and is responsible for the "maintenance, repair, replacement, administration and operation" of Claridge House. Master Deed p. 7, ¶ 5(a); see also N.J.S.A. 46:8B-3; N.J.S.A. 46:8B-12. Each Claridge House unit owner is a member of the Association, whose affairs are managed by the board of trustees (Board). Members of the Board are elected by vote of the unit owners at the regular annual meeting of the Association.
In the early 1990s, the Association learned that Claridge House was experiencing water infiltration problems. Gordon Smith Engineering (GSE) was retained to assess the problem and make recommendations. While some repairs were made in 1996, the problem persisted. In 2010, the Board retained the Falcon Group engineering firm (Falcon), to perform an evaluation of the building's facade, including all exterior walls, windows, and exterior doors. In July 2010, Falcon submitted a detailed report noting several "deficiencies" with recommendations for repairs and maintenance.
On October 19, 2010, the Association held a meeting with the unit owners to discuss the Falcon report. Falcon estimated the cost of the remediation to be in excess of $7.6 million. Although the Board was divided as to how to address the remediation, a majority voted to proceed with the project following Falcon's recommendations. In March 2011, the Association obtained a loan commitment from Banco Popular for $7.7 million. On April 11, 2011, the Board voted to adopt a resolution to permit the Association to execute the Banco Popular loan commitment and borrow $7.7 million to be used "solely in connection with the facade renovations, window replacement work and other related water mitigation work as outlined in the Falcon reports."
Several unit owners opposed borrowing the money. They retained counsel and formed Claridge House Owners for Justice (CHOJ). Counsel for CHOJ sent a letter to the Association claiming that Association by-laws require approval of two-thirds of the unit owners before a loan of this size could be obtained, and that, if the loan closed without that approval, "the Board of Trustees and any Board members who vote in favor of the loan may be sued for damages, bad faith and breach of fiduciary duty."
Claiming that the threatened litigation was preventing the Board from proceeding with the repairs, the Board filed a complaint in the Law Division, seeking a declaratory judgment acknowledging the Association's authority to borrow money pursuant to the loan commitment. Named as defendants in the action were CHOJ, and six individual unit owners thought to be members of CHOJ.
On June 22, 2011, the motion judge held a hearing on plaintiff's application. Plaintiff called Anthony Volpe, an engineer employed by Falcon. Volpe testified that he performed a complete inspection of all units as well as the exterior of the building. He recommended that the facade work and all of the windows be replaced but conceded that the work could be done in phases, over several years. When asked if the conditions constituted an "emergency," Volpe responded, "I don't see an imminent danger at the building."
The motion judge heard oral argument on June 24, 2011, and entered an order denying declaratory relief on July 6, 2011. The order was accompanied by a thorough written opinion, finding that the Association's by-laws "do not provide plaintiff with the specific authority to undertake the repairs described by the Falcon Group."
In July 2011, the Association held its annual election and the composition of the Board changed significantly. Several unit owners associated with CHOJ, who were named defendants in the complaint, were elected as trustees to serve on the Board (New Board), and assumed the position of plaintiff in the litigation.
The New Board showed no inclination to appeal the July 6, 2011 order. Therefore, on July 21, 2011, several former Board members and other unit owners, who sought to appeal the July 6, 2011 order, moved to intervene. In an affidavit supporting the motion, the former president of the Board described the effect of the elections as, "the Defendants are now the Plaintiffs."
Plaintiff filed a notice of dismissal with prejudice and a stipulation of dismissal with prejudice, then claimed the intervenors' motion was moot based on the dismissal. Without addressing the mootness issue, the judge ...