JERRY ALLOCO, EDWARD SHALVEY and JOHN O'GRADY, Plaintiffs-Appellants,
OCEAN BEACH AND BAY CLUB, a New Jersey Corporation, Defendant-Respondent, and OCEAN BEACH PEARL, LLC, a New Jersey Limited Liability Company, Defendant.
January 30, 2018
appeal from Superior Court of New Jersey, Chancery Division,
Ocean County, Docket No. C-000015-14.
M. Flora argued the cause for appellants (Giblin &
Gannaio, attorneys; Louis M. Flora and Brian T. Giblin, on
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).
Judges Yannotti, Leone, and Mawla.
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
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.
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.
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.
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.
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.
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.
claims in count one and most of the claims in count two were
resolved. 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
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.
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).
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.
argue that the decisions of the Board should not be protected
from judicial scrutiny by the business judgment rule. We
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