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Lustig v. Regency Co-Op, Inc.

Superior Court of New Jersey, Appellate Division

August 19, 2013

KAREN C. LUSTIG, Plaintiff-Appellant,
REGENCY CO-OP, INC., Defendant-Respondent.


Submitted April 23, 2013

On appeal from Superior Court of New Jersey, Chancery Division, Bergen County, Docket No. C-167-10.

Law Offices of Ian J. Hirsch & Associates, LLC, attorneys for appellant in A-5432-10 (Ian J. Hirsch, on the briefs).

Bolan Jahnsen Dacey, attorneys for respondent in A-5432-10 (Vicki Shea Connolly, of counsel; Elizabeth A. Wilson, on the brief). Karen C. Lustig, appellant pro se in A-0645-11.

Verde, Steinberg & Pontell, LLC, attorneys for respondent in A-0645-11 (Siobhan McGowan, on the brief).

Before Judges Fisher, St. John and Leone.


Plaintiff Karen C. Lustig appeals from a decision of the Chancery Division, dismissing her complaint against defendant Regency Co-Op, Inc., and a second decision awarding defendant attorneys' fees. Following our review of the arguments advanced on appeal, in light of the record and applicable law, we affirm.


The record reflects the following facts and procedural history.

Plaintiff, a shareholder in the defendant corporation, leases apartment "7A" in a complex known as Regency Towers from defendant pursuant to a proprietary lease agreement. Two disputes arose between the parties that resulted in the decisions under review.

A. The Balcony

In 2007 and 2008 defendant hired an engineering company to inspect the balconies of Regency Towers. In keeping with the engineering company's recommendations, defendant authorized and performed extensive repairs to the balconies.

On June 26, 2009, plaintiff submitted a form seeking defendant's permission to enclose her balcony, which was denied by defendant. On July 10, 2009, plaintiff requested that defendant reconsider its determination. On August 19, 2009, defendant suspended consideration of all requests for balcony enclosures while it evaluated the impact of that type of construction on the building's structural integrity, utility costs, and exterior aesthetics. Plaintiff claimed that her young child was in danger of falling off the balcony and she believed defendant's refusal to authorize the enclosure was harassment.

In 2010, defendant retained an architectural firm to evaluate the balconies and they recommended that defendant prohibit any new balcony enclosures because the enclosures prevent full examination of the balconies and comprehensive repairs.

B. The Bedbug Infestation

In May 2009, defendant became aware of an infestation of bedbugs in Regency Towers, and it hired a pest control company to inspect. Bedbugs were discovered and the company determined it was necessary to inspect all units which abutted the infested unit, which included 7A. On July 2, 2009, and again on July 6, 2009, the pest control company attempted to enter 7A, but according to defendant and representatives of the pest control company, plaintiff's husband, Ron Giladi, did not cooperate. Eventually, Giladi permitted the pest control technicians to enter 7A, and, according to defendant, the unit was severely infested with bedbugs.

The technicians told Giladi that the unit would need to be exterminated three to five times within the next seven to ten days. Giladi wanted to know which chemicals would be used by the exterminators. According to defendant, Giladi resisted the treatment and the inspection and he threatened a lawsuit against defendant and the pest control company. Plaintiff, however, claims that she and her husband attempted to cooperate with the pest control company by purchasing materials necessary for the extermination, but the pest control company never returned. All other units in Regency Towers that required extermination were treated by early July 2009. On July 12, 2009, Giladi left for an extended trip out of the country.

On July 16, 2009, Siobhan McGowan, defendant's counsel, sent plaintiff a letter by certified mail, ordinary mail and facsimile demanding that she exterminate her unit no later than July 20, 2009. Giladi acknowledged that he received this letter by fax. Nevertheless, plaintiff did not respond, and McGowan informed plaintiff that her lease would be terminated within five days if she failed to exterminate her unit. On July 22, 2009, McGowan filed an order to show cause (OTSC) (L-6353-09) and verified complaint asking the court to compel plaintiff to exterminate her unit (the Law Division action). The OTSC judge required that defendant serve plaintiff with the OTSC by overnight mail within three days.

McGowan served plaintiff with the OTSC and complaint via certified mail and ordinary mail. The certified mail was unclaimed and was returned to McGowan on August 9, 2009. On July 27, 2009, McGowan also sent a FEDEX package to plaintiff and it was accepted by the Regency Towers' security guard and signed by "Y. Perez." Plaintiff later claimed that she was never properly served with defendant's verified complaint.

Meanwhile, on July 24, 2009, Attorney Daniel Needle, a friend of plaintiff, contacted McGowan and offered to help facilitate a resolution because plaintiff's attorney was on vacation. Needle maintained that he did not represent plaintiff but was helping her as a favor, and he refused to accept service on her behalf. On July 27, 2009, McGowan emailed Needle a copy of the verified complaint and the OTSC, but Needle later claimed that he had never informed plaintiff of the litigation. Plaintiff filed no opposition to the OTSC and did not appear in court.

On August 12, 2009, a second judge determined that plaintiff had received proper notice of the OTSC. The judge ordered plaintiff to exterminate her unit no later than August 17, 2009, and to provide defendant with a report from a pest control company. Plaintiff later claimed that she did not become aware of the court's order until August 28, 2009, after she and her husband returned home. Nevertheless, on August 18, 2009, Needle sent a letter to McGowan enclosing a receipt, but no report from a pest control company that it had exterminated plaintiff's unit. Needle insisted that he was not representing plaintiff and did not want to receive any further correspondence from McGowan. Nonetheless, on September 14, 2009, Needle sent a copy of an exterminator's report to McGowan.

On September 29, 2009, defendant requested that plaintiff pay its attorney's fees in the amount of $6737 in connection with the bedbug matter. On December 28, 2009, defendant requested that the court enter a default judgment against plaintiff.

On June 3, 2010, plaintiff filed a verified complaint and OTSC (C-167-10) alleging oppression of a minority shareholder, breach of a fiduciary duty, and civil conspiracy in connection with the bedbug infestation and defendant's refusal to permit plaintiff to erect the balcony enclosure (the Chancery action).

On June 23, 2010, the court enjoined defendant from collecting attorney fees, and ordered defendant to show why plaintiff's balcony should not be enclosed. Defendant filed an answer and counterclaim on July 20, 2010, seeking compensatory damages, costs and attorney fees, and essentially repeating the claims that defendant had alleged in the Law Division action.

On September 17, 2010, defendant agreed to dismiss the Law Division action, and instead to proceed with the counterclaim for attorney fees in the Chancery action. However, the Law Division action was not dismissed. Instead, on January 10, 2011, defendant moved in the Law Division for a default judgment for $10, 545 in attorney fees and costs. On February 24, 2011, plaintiff cross-moved to dismiss defendant's verified complaint because she had never been properly served, to set aside the default judgment, and to vacate the court's order of August 12, 2009.

On March 9, 2011, defendant agreed to withdraw its motion for attorney fees and dismiss the Law Division action because defendant was pursuing attorney fees via a counterclaim in the Chancery action. Plaintiff also agreed to withdraw without prejudice her motion that she had not been properly served.

On March 24, 2011, defendant moved for summary judgment and to dismiss in its entirety plaintiff's complaint in the Chancery action. On May 4, 2011, defendant moved for summary judgment on its counterclaim for attorney fees in the Chancery action. By this point, defendant's attorney fees amounted to $29, 574, including $13, 890 for prosecuting the Law Division action and $15, 683 for prosecuting the counterclaim in the Chancery action. Plaintiff opposed summary judgment alleging she had never been served with the complaint or the default judgment from December 28, 2009, and because she believed that she and her husband had cooperated with the exterminators. On May 23, 2011, plaintiff's counsel filed a motion for sanctions on the ground that defendant's Chancery counterclaim was frivolous.

The court heard oral argument and on May 31, 2011, entered an order dismissing with prejudice plaintiff's complaint in the Chancery action (C-167-10). The order was accompanied by Judge Peter E. Doyne's cogent and comprehensive written opinion.

On June 17, 2011, Judge Doyne denied summary judgment on the Chancery action counterclaim because there were too many material facts in dispute, in particular whether Giladi had refused to cooperate with the exterminators. However, the judge found that the counterclaim was not frivolous, and therefore denied plaintiff's motion for sanctions. Judge Doyne acknowledged that the second judge had ruled that defendant was properly served with the verified complaint and OTSC.

A bench trial took place on June 28, and 29, 2011. The judge heard testimony including a representative of the pest control company, defendant's superintendent, McGowan, Giladi, and Needle, and rendered a thorough oral opinion on June 30, 2011. The judge found that defendant had acted appropriately in taking action to resolve the bedbug issue, that plaintiff and her husband had notice of the lawsuit and purposely ignored the extermination deadlines, that plaintiff violated the lease by failing to contract with an exterminator by July 20, 2009, and by failing to provide defendant with a treatment report by July 27, 2009, and that defendant was entitled to attorney fees. Plaintiff appeals from the May 31, 2011 order and the June 30, 2011 final judgment.

On July 18, 2011, the judge awarded defendant legal fees in the amount of $54, 448. Plaintiff appeals that determination.

On appeal, plaintiff argues that Judge Doyne erred by granting summary judgment and dismissing her complaint because there were material issues in dispute that required a full trial. For example, plaintiff claims that there were factual disputes regarding whether the enclosures damaged the balconies, whether defendant breached its fiduciary duty to plaintiff by forbidding her to enclose her balcony, and whether defendant's decision to forbid the balcony enclosure was arbitrary and capricious. Plaintiff claims that the expert reports were not sufficient and a full trial was necessary. Plaintiff states that the "business judgment rule" only protects a board of directors from court scrutiny of its decisions so long as there is no fraud, self-dealing or unconscionable conduct. In re PSE&G Shareholder Litigation, 173 N.J. 258, 277 (2002). Here, according to plaintiff, defendant's decision should not be protected by the business judgment rule because it was arbitrary and unconscionable.


A trial court will grant summary judgment to the moving party "if the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact challenged and that the moving party is entitled to a judgment or order as a matter of law." R. 4:46-2(c); see also Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 523 (1995). "An issue of fact is genuine only if, considering the burden of persuasion at trial, the evidence submitted by the parties on the motion, together with all legitimate inferences therefrom favoring the non-moving party, would require submission of the issue to the trier of fact." R. 4:46-2(c).

"On appeal from an order granting summary judgment, we apply the same standard that governs the analysis by the motion judge." Atl. Mut. Ins. Co. v. Hillside Bottling Co., 387 N.J.Super. 224, 230 (App. Div.) (citing Prudential Prop. & Cas. Ins. Co. v. Boylan, 307 N.J.Super. 162, 167 (App. Div.), certif. denied, 154 N.J. 608 (1998)), certif. denied, 189 N.J. 104 (2006). "We therefore must first determine whether, giving the non-moving party the benefit of all reasonable inferences, the movant has demonstrated that there are no genuine issues of material fact." Id. at 230-31 (citing Brill, supra, 142 N.J. at 540). We next analyze whether the motion judge's application of the law was correct. Id . at 231; see also Prudential, supra, 307 N.J.Super. at 167. In carrying out our review, however, we owe no deference to the interpretation of the motion judge on matters of law. Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995).

In an appeal from a bench trial, "[t]he scope of appellate review of a trial court's fact-finding function is limited." Seidman v. Clifton Sav. Bank, S.L.A., 205 N.J. 150, 169 (2011) (quoting Cesare v. Cesare, 154 N.J. 394, 411 (1998)) (internal quotation marks omitted). "[W]e do not disturb the factual findings and legal conclusions of the trial judge unless we are convinced that they are so manifestly unsupported by or inconsistent with the competent, relevant[, ] and reasonably credible evidence as to offend the interests of justice." Ibid. (quoting In re Trust Created By Agreement Dated Dec. 20, 1961, 194 N.J. 276, 284 (2008)) (internal quotation marks omitted). "Deference is especially appropriate when the evidence is largely testimonial and involves questions of credibility." Ibid. (quoting Cesare, supra, 154 N.J. at 412). "Because a trial court hears the case, sees and observes the witnesses, and hears them testify, it has a better perspective than a reviewing court in evaluating the veracity of witnesses." Ibid. (quoting Cesare, supra, 154 N.J. at 412). However, we owe no deference to a trial court's interpretation of the law, and review issues of law de novo. State v. Parker, 212 N.J. 269, 278 (2012); Mountain Hill, L.L.C. v. Twp. Comm. of Middletown, 403 N.J.Super. 146, 193 (App. Div. 2008), certif. denied, 199 N.J. 129 (2009).

We disagree with plaintiff's claims of error. Applying these well-established standards of review, we discern no basis to set aside the final judgment or the order dismissing with prejudice plaintiff's complaint in the Chancery action. We affirm the order dismissing plaintiff's complaint for the reasons set forth in Judge Doyne's written opinion. We also affirm the judgment for attorneys' fees to defendant for the reasons set forth in Judge Doyne's thorough oral opinion of June 30, 2011. We add the following brief comments.

Judge Doyne made the following findings of fact regarding defendant's attempt to inspect plaintiff's unit for bedbugs: defendant's representative went to plaintiff's unit on July 2, and was purposely denied access to the unit; plaintiff's husband, Giladi, heard and knew the defendant and its representative were to do an inspection and improperly denied access to the unit; Giladi again improperly denied access to the unit on July 3; and that on July 6, Giladi purposely attempted to allude defendant and its representatives and avert the inspection that rightfully was to have been conducted. These facts amply support the award of attorneys' fees to defendant.


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