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Alloco v. Ocean Beach and Bay Club

Superior Court of New Jersey, Appellate Division

August 22, 2018

OCEAN BEACH AND BAY CLUB, a New Jersey Corporation, Defendant-Respondent, and OCEAN BEACH PEARL, LLC, a New Jersey Limited Liability Company, Defendant.

          Argued January 30, 2018

          On appeal from Superior Court of New Jersey, Chancery Division, Ocean County, Docket No. C-000015-14.

          Louis M. Flora argued the cause for appellants (Giblin & Gannaio, attorneys; Louis M. Flora and Brian T. Giblin, on the briefs).

          Gregg S. Sodini argued the cause for respondent (Cutolo Barros, LLC, and Law Office of Steven J. Tegrar, attorneys; Gregg S. Sodini and Andrew Stein, of counsel and on the brief; Patricia M. Greeley, on the brief).

          Before Judges Yannotti, Leone, and Mawla.

          LEONE, J.A.D.

         Plaintiffs Jerry Alloco, Edward Shalvey, and John O'Grady challenge the trial court's September 16, 2016 order denying their motion for summary judgment and granting summary judgment to defendant Ocean Beach and Bay Club ("Club"). We affirm.


         The following facts are undisputed. The Club, a New Jersey not-for-profit corporation, was established to operate a community consisting of approximately 986 lots individually owned by members, with common areas including a clubhouse. The Club leases a bay beach and an ocean beach from the original developer, defendant Ocean Beach Pearl, LLC. Plaintiffs own homes in the Club's community.

         The Club was established in the 1950s, with the filing of a map and deed by the Ocean Beach Corporation. The Club's certificate of incorporation gave the Club the broad mandate "[t]o promote and protect the general welfare and property rights of the property owner members in the use and enjoyment of their property at" the Club. The deed established a community scheme through building restrictions which, among other things, provided that "no[] more than one residence nor more than [a] one-story one-family dwelling shall be allowed on any lot," and imposed setback requirements. The deed allowed the Club to adopt rules and regulations concerning the construction and modification of homes in the community.

         The deed and bylaws require every resident to be a member of the Club. The members elect the Board of Trustees (Board). The Board manages the Club and is empowered to establish and change the rules and the regulations as needed.

         Superstorm Sandy damaged or destroyed many homes in the Club's community, including plaintiffs' homes. As a result, in October 2 014, March 2015, and November 2015, the Board enacted rule changes and clarified and expanded building requirements connected with flood zone compliance. Although these post-Sandy rule changes allowed members to elevate their homes, Alloco was denied permission to elevate his home even higher to allow the space beneath the elevated structure to be used for parking.

         In January 2014, plaintiffs filed a complaint in the trial court. The second amended complaint contains four counts. In count one, plaintiffs sought a declaratory judgment regarding the obligation to reconstruct damaged properties. In count two, plaintiffs sought declaratory and injunctive relief regarding the enforcement and scope of the Club's restrictions and regulations, and the approvals of applications for development.

         Count three alleged that the Board violated the business judgment rule by adopting and enforcing its rules and regulations. In particular, plaintiffs alleged the "Club acted incompetently in devising regulations limiting the height of structures." They also claimed the Club engaged in self-dealing and breached its fiduciary duties to the members. Count four alleged the Club failed to comply with the Club's certificate of incorporation, violated public policy, and violated the New Jersey Nonprofit Corporation Act, N.J.S.A. 15A:1-1 to 16-2. Plaintiffs sought declaratory and injunctive relief, counsel fees, and costs.

         The claims in count one and most of the claims in count two were resolved.[1] Plaintiffs filed a motion for summary judgment with respect to counts three and four of their complaint. The Club filed a cross-motion for summary judgment.

         On September 16, 2016, the trial court, citing the business judgment rule, denied plaintiffs' motion for summary judgment, granted the Club's motion for summary judgment, and dismissed the complaint. Plaintiffs appeal.


         Summary judgment must be granted if "the pleadings, depositions, answers to interrogatories and admissions on file, together with 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). The court must "consider whether the competent evidential materials presented, when viewed in the light most favorable to the non-moving party, are sufficient to permit a rational factfinder to resolve the alleged disputed issue in favor of the non-moving party." Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995). "[T]he court must accept as true all the evidence which supports the position of the party defending against the motion and must accord [that party] the benefit of all legitimate inferences which can be deduced therefrom[.]" Id. at 535 (citation omitted).

         Appellate courts "review the trial court's grant of summary judgment de novo under the same standard as the trial court." Templo Fuente De Vida Corp. v. Nat'l Union Fire Ins. Co. of Pittsburgh, 224 N.J. 189, 199 (2016). We must hew to that standard of review.


         Plaintiffs argue that the decisions of the Board should not be protected from judicial scrutiny by the business judgment rule. We disagree.

         The business judgment rule applies to "common interest communities" such as the Club. Comm. for a Better Twin Rivers v. Twin Rivers Homeowners' Ass'n, 192 N.J. 344, 369 (2007). Courts have "uniformly invoked the business judgment rule in cases involving homeowners' associations," because "a homeowners' association's governing body has 'a fiduciary relationship to the unit owners, comparable to the obligation that a board of directors of a corporation owes to its stockholders.'" Ibid, (quoting Siller v. Hartz Mountain Assocs., 93 N.J. 370, 382 (1983)). Similarly, "decisions made by a condominium association board should be reviewed by a court using the same business ...

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