RENEE BENNETT VS. BOB MALONE (L-3443-17, BERGEN COUNTY AND STATEWIDE)

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the

internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-4090-18

RENEE BENNETT, ANDREA

CAPUANO, ARTHUR

CUMMING, MARY ANN

CUMMING, CATHERINE

FORINO, RONNIE

LICHTENSTEIN, HAL

LICHTENSTEIN, EDITH

MICALE, JOSEPH MICALE,

M.D., PETER NOONAN,

SUSANA SANCHEZ, ALICE

STOLER, CANDICE

TIMMERMAN, MARIE

TUTTLE and ALAN TUTTLE,

Individually and as members of

the Northgate Condominium

Association, Inc., and on behalf

of all other unit owners similarly

situated,

Plaintiffs-Appellants,

and

EDWARD BRERETON, JANET

BRERETON, CLARISSA

VALANTASSIS, MICHAEL

VALANTASSIS, and MARY E.

BRESLIN,

Plaintiffs,

v.

BOB MALONE, HENRY CENICOLA,

BOB DELGRANDE, PAUL GORDON,

DENNIS BRITO, BEN PEDATA, DON

OTTERSTEDT, in their capacity as

former members of the Board of

Directors and Officers of Northgate

Condominium Association, Inc., and

WILKIN MANAGEMENT GROUP,

INC.,

Defendants-Respondents.

_____________________________

Argued February 3, 2021 – Decided August 10, 2021

Before Judges Sumners, Geiger and Mitterhoff.

On appeal from the Superior Court of New Jersey, Law

Division, Bergen County, Docket No. L-3443-17.

Michael J. Breslin, Jr. argued the cause for appellants.

Charity A. Heidenthal argued the cause for respondent

Wilkin Management Group, Inc., (Zarwin Baum

DeVito Kaplan Schaer Toddy PC, attorneys; Charity A.

Heidenthal, on the brief).

Joao M. Sapata argued the cause for respondents the

Directors (Tango, Dickinson, Lorenzo, McDermott &

McGee, LLP, attorneys; Joao M. Sapata, on the brief).

PER CURIAM

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Plaintiffs, who are unit owners in the Northgate Condominium complex,

appeal from two orders: a March 5, 2019 order granting summary judgment in

favor of defendants Bob Malone, Henry Cenicola, Bob Delgrande, Paul Gordon,

Dennis Brito, Ben Pedata, and Don Otterstedt, the former Board of Directors

(the Directors) of Northgate Condominium Association, Inc. (the Association);

and an April 8, 2019 order granting summary judgment to defendant Wilkin

Management Group, Inc. (WMG), the former property manager. On appeal,

plaintiffs raise the following arguments with respect to the Directors:

POINT I

THE TRIAL COURT ERRED BY HOLDING

BECAUSE THERE WAS NO FRAUD, SELF-

DEALING, OR UNCONSCIONABILITY SHOWN

BY PLAINTIFFS, THE BUSINESS JUDGMENT

RULE WAS APPLICABLE IN THIS MATTER AND

INSULATED THE DIRECTOR DEFENDANTS

FROM LIABILITY.

POINT II

THE TRIAL COURT COMMITTED ERROR IN

RULING THAT PLAINTIFFS' MAY 16, 201[7],

COMPLAINT WAS FILED OUTSIDE THE

STATUTE OF LIMITATIONS AND HOLDING

THAT THE DISCOVERY RULE IS INAPPLICABLE

TO THIS CASE.

POINT III

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THE TRIAL COURT ERRED BY HOLDING THAT

DEFENDANTS ARE IMMUNE FROM SUIT BY

NORTHGATE'S EXCULPATORY CLAUSE IN ITS

BY-LAWS.

Plaintiffs raise the following arguments as to WMG:

POINT I

THE TRIAL COURT ERRED IN RULING

PLAINTIFFS' COMPLAINT MUST BE DISMISSED

WITH PREJUDICE ON THE DOCTRINE OF

MOOTNESS.

POINT II

THE TRIAL COURT ERRED IN HOLDING

PLAINTIFFS PRESENTED NO PROOFS FOR ANY

DAMAGES SUSTAINED BY NORTHGATE IN ITS

DERIVATIVE LAWSUIT.

POINT III

THE TRIAL COURT ERRED IN GRANTING

DEFENDANT [WMG] SUMMARY JUDGMENT ON

THE DOCTRINE OF UNCLEAN HANDS.

POINT IV

THE TRIAL COURT ERRED IN FINDING AS A

MATTER OF LAW THAT . . . PLAINTIFFS FAILED

TO DEMONSTRATE A BREACH OF DUTY ON THE

PART OF [WMG].

We agree that the motion judge may have erred in finding that the statute

of limitations barred plaintiffs' complaint. Notwithstanding, we affirm both

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orders substantially for the other reasons set forth in the judge's thoughtful and

thorough written opinions. We add only the following brief remarks.

In lieu of restating the record, we incorporate by reference the facts

described in our unpublished opinion, Breslin v. Northgate Condo. Ass'n, No.

A-3464-16 (App. Div. Nov. 30, 2018) (slip op. at 2-6), and state only the facts

that are of relevance to the issues now on appeal. Northgate is a condominium

complex located in Washington Township that was "established in 1984 by the

recording of the Master Deed in the Bergen County Clerk's Office in accordance

with the New Jersey Condominium Act, N.J.S.A. 46:8B-1 to -28." Id. at 2. The

Association "is the entity responsible for the administration of the

condominiums and is governed by its bylaws." Ibid. Each unit owner is a

member of the Association, which is managed by the Directors.

The bylaws provided the Directors with the following powers:

Section 3. GENERAL POWERS: The Board shall

have the powers granted to it by law, the Certificate of

Incorporation, the Master Deed, and these By-laws, in

addition to and not by way of limitation, it shall have

the following powers, herein granted or necessarily

implied, which it shall exercise in its sole discretion:

(a) Providing for operation, care, maintenance, repair,

alteration, replacement, cleaning, and sanitation of the

Common Elements.

....

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(i) The Board may employ, by contract or otherwise, a

manager, managing agent, superintendent, or

independent contractor to perform such duties and

services as the Board shall authorize, including but not

limited to the duties granted to the Board as set forth

herein. The Board may delegate to the manager,

managing agent, superintendent or independent

contractor such powers as may be necessary to carry out

the function of the Board. Said manager, managing

agent, superintendent, or independent contractor shall

be compensated upon such terms as the Board deems

necessary and proper.

....

(m) Employ professional counsel and to obtain advice

from persons, such as but not limited to landscape

architects, recreation experts, architects, planners,

biologists, lawyers and accountants.

The bylaws also included an exculpatory clause:

(a) Neither the Board as a body, nor any director

thereof, nor any officer of the Association, or any

delegees of them, shall be personally liable to any Unit

Owner in any respect for any action or lack of action

arising out of the execution of his office. Each Unit

Owner shall be bound by good faith actions of the

Board and officers of the Association, or their

[delegees], in the execution of the duties of said

directors and officers. Unless acting in bad faith,

neither the Board as a body, nor any director or officer

of the Association, nor any delegees of them[,] shall be

liable to any Unit Owner or other person for

misfeasance or malfeasance.

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(b) Each director and officer of the Association, and

their delegees[,] shall be indemnified by the

Association against the actual amount of net loss

including counsel fees, reasonably incurred by or

imposed upon him in connection with any action, suit

or proceeding to which he may be made a party by

reason of his being or having been a director or officer

of the Association . . . except as to matters as to which

he shall be finally found in such action to be liable for

gross negligence or willful misconduct.

WMG was the Association's former property manager, and its

responsibilities were set forth in a management agreement which provided in

part:

1.3 Governing Documents. WMG shall use its best

efforts to manage the affairs of the Association

based on requirements articulated by the Board of

Directors and as written in the Association's

governing documents. In the event of a conflict

between the direction of the Board of Directors and

the requirements of the Association's governing

documents, the Association's governing

documents shall control unless the Board of

Directors provides specific written instructions to

WMG superseding the terms and conditions of the

governing documents.

....

1.7 Significant Actions. Where the Board of Directors

determines that an action will require significant

Association funds or that an action will be a

significant impact to the common property of the

Association, including but not limited to seasonal

contracts, capital improvements and repairs, WMG

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shall make recommendations, including alternative

approaches, to the Board of Directors. The Board

of Directors shall make a determination on its

desired approach and WMG will carry out the

Board's decision.

....

2.4 Reserve Accounts. WMG shall assist the Board of

Directors in depositing, maintaining and

accounting for the Association's reserve funds, if

any. The Board of Directors may designate a

financial institution for the deposit of the

Association's reserve funds.

2.5 Disbursements. WMG shall examine invoice and

billing statements received by the Association for

services and supplies and other costs incurred by

the Association and cause such invoices and

statements to be paid from the funds of the

Association. WMG shall pay, from the funds of

the Association, all reasonable charges and

obligations incurred by WMG in the course of

providing services to the Association under this

Agreement. WMG is authorized to pay any

amounts owed to WMG by the Association under

this Agreement without prior notice.

....

2.7 Annual Budget. Prior to the end of each fiscal

year, WMG shall assist the Board of Directors in

the preparation of a budget showing anticipated

receipts and expenditures for the following fiscal

year. The Board of Directors acknowledge and

agree that the annual budget is the sole

responsibility of the Board of Directors.

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....

3.2 Agreements with Third Parties. The Board of

Directors in the name of the Association pursuant

to the Association's governing documents shall

execute all service and professional agreements for

the routine affairs of the Association. The Board

of Directors may request WMG's assistance in

preparing and negotiating the terms of such service

agreements with third party vendors. . . .

....

3.7 Support to Association's Counsel. When requested

by the Board of Directors and at a mutually agreed-

upon fee, WMG shall support the Association's

legal counsel in litigation, including appearances

at depositions and court proceedings.

On May 16, 2017, plaintiffs filed the present action in the Law Division.

Plaintiffs alleged that the Directors were negligent in depleting the Association's

reserved funds by incurring fees and costs to litigate a land use application

against a neighboring development, the Caliber project. Plaintiffs claimed that

WMG negligently and carelessly failed to exercise its duties under the

management agreement, which also resulted in the depletion of the Association's

reserve accounts. In July 2018, plaintiffs filed a verified amended complaint as

a derivative action, R. 4:32-3, and included several additional plaintiffs.

In February 2019, the Directors moved for summary judgment, which

plaintiffs opposed. Following oral argument, the motion judge granted the

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Directors' motion. He determined that plaintiffs' complaint was barred by the

two-year statute of limitations. The judge also found the Directors were

protected under both the business judgment rule and the exculpatory clause in

the bylaws. In concluding that the business judgment rule was applicable, he

explained:

In this matter, there is no evidence of fraud or

self-dealing. The funds raised through the assessments

imposed on the unit owners were used only for

litigation costs. At the same time, the unit owners

approved the opposition to the Caliber project, and

were aware of the assessments and the litigation.

Moreover, at the conclusion of the bench trial in the

Chancery Matter, Judge Toskos determined that

Northgate had the power to challenge the Caliber

project, and also had the option to pay for the litigation

fees and costs through a common assessment.

Plaintiffs claim that the [business judgment rule]

is inapplicable in the instance, despite admitting the

absence of fraud or self-dealing by [d]efendants.

Instead, [p]laintiffs argue that the [business judgment

rule] is inapplicable because Northgate failed to comply

with various provisions of the New Jersey

Condominium Act, the Real Property Full Disclosure

Act, and the [r]ules and [r]egulations of the Department

of Community Affairs. However, these arguments

were already made in the Chancery Matter before Judge

Toskos, who ultimately found them unconvincing in his

findings of fact and conclusions of law.

Therefore, as there was no fraud, self-dealing, or

unconscionability shown by [p]laintiffs, the [business

judgment rule] is applicable in this matter and insulates

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the individual Board members named as [d]efendants

from liability.

Thereafter, WMG moved for summary judgment, which plaintiffs

opposed. In granting WMG's motion, the motion judge determined that the

September 2018 resolution and vote approving the old Board's assessment and

to fund the legal settlement rendered plaintiffs' complaint moot. He also

concluded that there was no basis to conclude that WMG breached any duty to

plaintiffs. The judge found that "the financial affairs in terms of budgeting,

management, and the reserve funds were the sole and exclusive responsibility

of the Board," and that there was no evidence to controvert the "clear language

of the by-laws and the management agreement." He also noted that plaintiffs

presented no proofs regarding the damages resulting from WMG's conduct, and

that the allegation that the units at Northgate were depreciating was

"unsubstantiated." This appeal ensued.

We apply the same standard as the trial court in our review of appeals

from summary judgment determinations. Lee v. Brown, 232 N.J. 114, 126

(2018). "Summary judgment is appropriate 'when no genuine issue of material

fact is at issue and the moving party is entitled to a judgment as a matter of law.'"

Ibid. (quoting Steinberg v. Sahara Sam's Oasis, LLC, 226 N.J. 344, 366 (2016)).

We conduct a de novo review of the court's determination of legal issues, Ross

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v. Lowitz, 222 N.J. 494, 504 (2015), and "its 'application of legal principles to

such factual findings.'" Lee, 232 N.J. at 127 (quoting State v. Nantambu, 221

N.J. 390, 404 (2015)).

Under Rule 4:46-2(c), summary judgment is granted "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." In applying the standard to our review of a summary judgment

determination, we "must view the facts in the light most favorable to the non -

moving party." Bauer v. Nesbitt, 198 N.J. 601, 604-05 n.1 (2009); see also Brill

v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995).

Notwithstanding plaintiffs' arguments to the contrary, we agree with the

motion judge that the exculpation clause insulates the Directors from liability

under these circumstances. Although "[e]xculpatory agreements have long been

disfavored in the law because they encourage a lack of care," Hojnowski v. Vans

Skate Park, 187 N.J. 323, 333 (2006), it is well-established that "a promise not

to sue for future damage caused by simple negligence may be valid." Kuzmiak

v. Brookchester, Inc., 33 N.J. Super. 575, 580 (App. Div. 1955). "Courts,

however, will not enforce an exculpatory clause if the party benefiting from

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exculpation is subject to a positive duty imposed by law or is imbued with a

public trust, or if exculpation of the party would adversely affect the public

interest." Chem. Bank of N.J. Nat'l Ass'n v. Bailey, 296 N.J. Super. 515, 527

(App. Div. 1997).

Here, the association's bylaws contain an exculpatory clause, authorized

by N.J.S.A. 17:12B-38.1, which reads in part that:

Neither the Board as a body, nor any director thereof,

nor any officer of the Association, or any delegees of

them, shall be personally liable to any Unit Owner in

any respect for any action or lack of action arising out

of the execution of his office. . . . Unless acting in bad

faith, neither the Board as a body, nor any director or

officer of the Association, nor any delegees of them

shall be liable to any Unit Owner or other person for

misfeasance or malfeasance.

The motion judge determined, and we agree, that

When considering the relevant sections of

Northgate's By-Laws . . . , it is clear that the terms are

unambiguous – the individual Board members and the

Board as a whole are not to be held liable in negligence

actions. Furthermore, [p]laintiffs set forth no

cognizable facts in their opposition papers alleging that

any of the unit owners agreed to the By-Laws

involuntarily, unintelligently, or without full

knowledge of the legal consequences of those sections.

Accordingly, [d]efendants are immune to a negligence

cause of action under the [exculpatory] cause of

Northgate's By-Laws.

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Plaintiff's claim against the Directors for breach of a fiduciary duty is

tantamount to a cause of action for negligence. See Triarsi v. BSC Grp. Servs.,

LLC, 422 N.J. Super. 104, 115 (App. Div. 2011). Therefore, and in the absence

of any basis to find that the exculpatory clause was unenforceable, 1 we conclude

that summary judgment was properly granted to the Directors.

In that same vein, we also agree with the motion judge that the Directors

were protected under the business judgment rule. It is well-established that

"decisions made by a condominium association board should be reviewed by a

court using the . . . business judgment rule." Alloco v. Ocean Beach & Bay Club,

456 N.J. Super. 124, 134 (App. Div. 2018) (quoting Walker v. Briarwood Condo

Ass'n, 274 N.J. Super. 422, 426 (App. Div. 1994)). Courts have adopted a "two-

prong test" under the business judgment rule: "(1) whether the Associations'

actions were authorized by statute or by its own bylaws or master deed, and if

so, (2) whether the action is fraudulent, self-dealing or unconscionable."

Owners of the Manor Homes of Whittingham v. Whittingham Homeowners

1

We discern nothing in the record to suggest that the exculpation clause at issue

is unenforceable. The provision does not adversely affect the public interest,

the unit owners are under no affirmative legal duty to act as board members, and

the case does not involve a public utility company or common carrier. Chem.

Bank of N.J. Nat'l Ass'n, 296 N.J. Super. at 527.

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Ass'n, Inc., 367 N.J. Super. 314, 322 (App. Div. 2004) (citing Chin v. Coventry

Square Condo., 270 N.J. Super. 323, 328-29 (App. Div. 1994)).

Here, it is undisputed that the association's by-laws authorized the Board

to retain engineers and legal counsel, N.J.S.A. 46:8B-14, as well as sue on behalf

of the association. N.J.S.A. 46:8B-15; see also Port Liberte II Condo. Ass'n v.

New Liberty Residential Urb. Renewal Co., LLC, 435 N.J. Super. 51, 62 (App.

Div. 2014) (citing Siller v. Hartz Mountain Assocs., 93 N.J. 370, 377-78 (1983)).

Thus, the Directors, with unit owner approval, had the express authority to retain

an engineer and legal counsel to challenge the Caliber project.

Furthermore, the record is bereft of evidence showing any basis to

conclude that the Directors' conduct was founded on fraud or self-dealing or is

otherwise unconscionable. 2 Because plaintiffs failed to overcome this

"rebuttable presumption," Maul v. Kirkman, 270 N.J. Super. 596, 614 (App.

Div. 1994), the complaint against the Directors was properly dismissed.

We likewise discern no basis to conclude that the motion judge erred in

granting summary judgment to WMG. There is no evidence in the record to

2

Plaintiffs contend that, because the Directors allegedly failed to comply with

the statutory notice requirements, there was no proper unit owner approval. We

conclude that this argument lacks sufficient merit to warrant discussion in a

written opinion. R. 2:11-3(e)(1)(E).

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suggest that WMG breached any duty as set forth in the management agreement.

As the motion judge correctly noted, the "financial affairs in terms of budgeting,

management, and the reserve funds were the sole and exclusive responsibility

of the Board members, not WMG." In any event, we also agree that the new

Board's approval of the special assessments to pay for the professionals' fees and

costs, as well as replenish the reserve account, renders their claims against

WMG moot. See Deutsche Bank Nat'l Tr. Co. v. Mitchell, 422 N.J. Super. 214,

221-22 (App. Div. 2011) ("We consider an issue moot when 'our decision sought

in a matter, when rendered, can have no practical effect on the existing

controversy.'" (quoting Greenfield v. N.J. Dep't of Corr., 382 N.J. Super. 254,

257-58 (App. Div. 2006))).

Affirmed.

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