The opinion
NOT FOR PUBLICATION WITHOUT THE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-1563-21
LAURA RUCCOLO,
Plaintiff-Appellant,
v.
ARDSLEY WEST COMMUNITY
ASSOCIATION, INC., BARBARA
CIANCI-MURRAY, LES ZEIFMAN,
MICHAEL GUERRA, and
BEVERLY MILLER,
Defendants-Respondents.
Submitted January 18, 2024 - Decided March 28, 2024
Before Judges Currier and Vanek.
On appeal from the Superior Court of New Jersey, Law
Division, Burlington County, Docket No. L-0741-19.
Capehart & Scatchard, PA, attorneys for appellant
(Alan Paul Fox, on the briefs).
Cutolo Barros, LLC, attorneys for respondents (Karyn
Ann Branco and Jennifer M. Kurtz, on the brief).
PER CURIAM
Plaintiff Laura Ruccolo is the owner of a townhouse in the Ardsley West
townhouse community. In this lawsuit against defendant Ardsley West
Community Association, Inc. (the HOA), and several individual members of the
HOA's elected board of directors (the Board), plaintiff alleged the HOA and its
Board members violated the community's Declaration of Restrictive Covenants,
Conditions, and Restrictions (the Declaration), its own by-laws, and a variety of
laws and regulations related to the operation of a common interest community.
All but one count of the complaint was dismissed on summary judgment. The
remaining count was dismissed after a bench trial. Plaintiff appeals from the
orders granting defendants summary judgment and denying reconsideration, and
the order dismissing the remaining count with prejudice after the bench trial.
We affirm.
I.
Plaintiff has lived in Ardsley West since 1996. When she purchased the
townhouse, plaintiff was provided with the HOA by-laws and the Declaration.
Plaintiff sued the HOA for the first time in 2017. The matter was resolved by
the parties' entry of a consent order.
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In 2018, plaintiff filed the complaint that is the subject of this appeal. In
her second amended complaint, plaintiff alleged that defendants retaliated
against her and violated her rights by: taking actions with an improperly
constituted Board (count one); misrepresenting that the Planned Real Estate
Development Full Disclosure Act (PREDFDA), N.J.S.A. 45:22A-21 to -56,
applied to the HOA and improperly seeking to amend the by-laws (count two);
violating N.J.S.A. 15A:5-24 by failing to produce requested records (count
three); violating the HOA by-laws with respect to capital expenditures (count
four); corporate waste (count five); violating the by-laws and founding
declarations of the community by adopting a "Homeowner's Manual" without
proper notice (count six); creating vague rules and regulations regarding
insurance, leases, service animals, and satellite dishes (count seven); breaching
its fiduciary duty (count eight); breaching the HOA by-laws (count nine); and
violating PREDFDA by failing to provide her notice or an opportunity to engage
in alternative dispute resolution before filing a counterclaim (count ten).
The allegations generally arose from plaintiff's challenges to Board
actions. She also contested the constitution of the Board and its ratification of
its own prior actions.
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In addition, plaintiff challenged the following Board initiatives. In 2019,
the Board passed a resolution allowing the HOA to borrow from its "reserves
fund" to pay for attorney's fees incurred in defense of plaintiff's lawsuit. The
reserves fund is established and regulated under Section 9.5 of the by-laws,
which reads:
The Board shall not be obligated to expend all of the
Common Expenses collected in any accounting period,
and shall maintain reasonable reserves for, among other
things, repairs, replacements, emergencies,
contingencies of bad weather or uncollected accounts.
Notwithstanding anything herein to the contrary, the
Board in its determination of the Common Expenses
and the preparation of a budget shall specifically
designate and identify that portion of the Common
Expenses which is to be assessed against the Unit
Owners as a capital contribution and is allocable to
reserves for each separate item of capital improvement
of and to said property. The amounts assessed and
collected for the reserves shall be kept in one or more
interest-bearing savings accounts, or certificates of
deposit and shall not be utilized for any purpose other
than that which was contemplated at the time of the
assessment.
In November 2019, the Board proposed an amendment to the Declaration
addressing disputes between Ardsley West residents and the HOA. In January
2020, the Board wrote a letter to the community's residents stating that "[a]t the
November 14, 2019, Board meeting, the Board adopted a Resolution proposing
two amendments to the Declaration . . . ." The letter explained that "[t]he most
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4
important of the two is an amendment to Section 15.02 of the Declaration. The
amendment establishes a procedure that Unit Owners must follow before filing
a lawsuit against the [HOA]." The letter further informed the residents a vote
on the amendments would take place during the "annual Unit Owners meeting
on February 18, 2020."
The HOA also sent the residents a "Notice of Proposed Amendments to
the [HOA Declaration]" explaining the proposed changes to Section 15.02 as
follows:
The Amendment to Article 15.02 modifies the
procedure for Alternative Dispute Resolution and
provides that a unit owner must follow the procedure
before filing a lawsuit against the [HOA]. It requires a
unit owner to advise the [HOA] in writing of a dispute.
The Notice must state what it is that the Unit Owner
objects to and what it is that the Association should be
doing. The Unit owner will then meet with the Board,
or members of the Board or a representative of the
Board to discuss the problem and try to resolve the
dispute.
If the meeting between the Unit Owner and the
Board does not resolve the dispute, then the dispute will
be submitted to mediation. Mediation is a procedure
where an independent third party attempts to assist the
parties to a dispute [to] come to a compromise. If the
mediation is unsuccessful, the dispute will be referred
to non-binding arbitration. Arbitration is a proceeding
where the parties present their side of the dispute to an
independent third party – the "Arbitrator[.]" After
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hearing the facts and the arguments of the parties the
Arbitrator issues a decision.
Any party can reject the Arbitrator's legal
decision and file a lawsuit. However, if the owner unit
[sic] rejects the Arbitrator's decision and files suit,
he/she must obtain a judicial determination/judgment
more favorable than the award by the Arbitrator. If the
unit owner does not receive such a better award, then
the unit owner will be responsible to the [HOA] for all
attorney's fees and costs incurred by the [HOA]. On the
other hand if the [HOA] rejects the arbitrator's award,
and does not get a better result th[a]n the arbitrator's
award, it will be responsible to the unit owner for
attorney's fees, if the Court finds that the [HOA] acted
in bad faith.
During the HOA's annual meeting on February 18, 2020, the amendment to
Section 15.02 passed, with more than seventy-five percent of the residents who
were "in good standing" voting in favor of it.
II.
Defendants moved for partial summary judgment on counts one, two,
three, and five of the second amended complaint. Thereafter, plaintiff filed a
third amended complaint and cross-moved for partial summary judgment on
counts one through five.1 Plaintiff also moved to amend the complaint to add
counts eleven, twelve, and thirteen.
1
The third amended complaint incorporated all ten counts of the second
amended complaint.
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On March 24, 2020, the court issued an order and written statement of
reasons dismissing all of plaintiff's claims against the individual defendants,
granting summary judgment to the HOA on counts one and three, denying
plaintiff's motion for summary judgment, and granting plaintiff leave to amend
the complaint "to add counts eleven, twelve, and thirteen." In its written
decision, the court thoroughly considered the parties' arguments and addressed
each in turn.
In count one, plaintiff alleged the Board was not properly constituted
during certain periods of time and therefore any actions it took were invalid.
The court granted defendants summary judgment, finding there was no issue of
fact and "the actions taken by the Board were infra vires due to a failure to follow
formal procedural formalities, and those actions can be ratified after the fact."
(italicization removed). The court concluded "the validly elected Board ratified
all the previous actions of the Board." In addition, the court found the Board
was authorized to increase maintenance fees under the HOA by-laws.
Furthermore, the determination of monthly maintenance fees was "insulated
from judicial review" under the business judgment rule.
Under count three, plaintiff alleged the Board failed to comply with her
request to produce all its books and records. The court dismissed the count as
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moot since plaintiff was provided all of the documents during discovery and a
prior order held she was not entitled to review the unredacted proxy ballots.
On April 24, 2020, the court issued an amended order and written
statement of reasons, granting defendants summary judgment on counts two and
five.
III.
Thereafter, plaintiff filed her fourth amended complaint. The ten counts
set forth in the amended second and third complaints remained the same. The
new counts in plaintiff's fourth amended complaint alleged that defendants
retaliated against plaintiff and violated her rights by: violating N.J.S.A. 15A:5-
24 and Section 9.9 of the by-laws in restricting plaintiff's ability to inspect or
review defendants' documents (count eleven, part one); 2 improperly amending
the Declaration's Section 15.02 with flawed voting procedures (count eleven,
part two); and depriving plaintiff of her rights under N.J.S.A. 2A:16-52 in
creating an arbitration policy (count twelve). Plaintiff sought declaratory relief
establishing that the amendment to the Declaration was not a "'fair and efficient'
means to resolve disputes" under PREDFDA (count thirteen).
2
The fourth amended complaint named two counts as "count eleven," which we
refer to as count eleven, part one and count eleven, part two.
A-1563-21
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A.
In late 2020, the parties filed cross-motions for partial summary judgment
regarding the fourth amended complaint. Plaintiff also moved for
reconsideration of the March and April 2020 orders.
On April 15, 2021, the court denied the reconsideration motion, finding
plaintiff did not present any "new or overriding circumstances" to reconsider the
rulings. The court granted defendants summary judgment on counts one, four,
six, seven, eleven, part one, twelve and thirteen of the fourth amended
complaint. As to count one, the court found "[d]efendants' decision to file a
[c]ounterclaim [was] protected by the [b]usiness [j]udgment [r]ule."3
The court denied plaintiff's motion for reconsideration on count three.
Therefore, the court did not address it again specifically in the summary
judgment written statement of reasons.
In addressing count four, the court noted that Section 9.5 of the by-laws
permitted the Board "to keep money in a checking account for the necessary
3
Plaintiff did not address count two in her summary judgment papers. She did
not appeal the dismissal of that count.
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9
discharge of its functions, which is a part of the reasonable reserves that may be
used 'among other things.'" The court stated it had already determined there was
no error in dismissing count five in its decision denying the reconsideration
motion. Therefore, it did not address it again.
In considering count six, the court found "the broad language of the
Declaration and the [b]y[l]aws" permitted the Board to adopt a homeowner's
manual that "regulat[ed] the exterior maintenance and usage of a [u]nit." In
count seven, plaintiff challenged defendants' rules and regulations, particularly
regarding the maintenance of the exterior of a unit and the number of permitted
pets. The court considered the factors articulated in Davidson Bros. v. D. Katz
& Sons, Inc., 121 N.J. 196, 211-12 (1990), regarding the reasonableness and
enforceability of restrictive covenants. The court concluded that the covenants
in the Declaration to which plaintiff objected were not "unclear, arbitrary,
capricious, illegal, unauthorized or otherwise unreasonable as a matter of law." 4
As to count eleven, part one, the court found N.J.S.A. 15A:5-24(a)
authorized defendants to adopt a policy regarding plaintiff's right to inspect the
4
Plaintiff does not present any arguments in her brief regarding the grant of
summary judgment to defendant on counts eight, nine, and ten. Therefore, any
appeal of those issues has been waived. See Green Knight Cap., LLC v.
Calderon, 469 N.J. Super. 390, 396 (App. Div. 2021).
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HOA's books and records within a specific timeframe. The court dismissed that
count.
The court denied both parties summary judgment on count eleven, part
two, finding there was an issue of fact regarding the voting procedure on the
amendment during the February 2020 annual meeting.
Under count twelve, plaintiff sought a declaration that the amendment to
the Declaration requiring the arbitration of claims prior to the filing of a lawsuit
was unenforceable. The court found the amendment was substantively
reasonable. The court stated:
The circumstances here do not suggest that the
arbitration process is unreasonable. There is no
question that arbitration is a favored means of resolving
disputes in New Jersey; thus, the amendment requiring
arbitration accomplishes a worthwhile purpose. It is
limited in duration, given that trial can be sought
following arbitration. It protects the parties with an
interest in the land from time and expenses of lengthy
litigation. Moreover, there is no evidence that the
arbitration requirement is imposed out of spite or
malice.
The court concluded, "Because the amendment is substantively valid, the
fact that the arbitration amendment was not part of the original Declaration at
the time of [p]laintiff's purchase is of no consequence." Summary judgment was
granted to defendants on count twelve.
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As to count thirteen, the court found plaintiff had not substantiated her
allegations that defendants had "violated their duty to provide a fair and efficient
means to resolve disputes under PREDFDA." Summary judgment was granted
on this count.
B.
In December 2021, the court conducted a bench trial on the sole remaining
issue—count eleven, part two—whether the Board improperly amended
Declaration Section 15.02 through the use of proxy voting forms during the
February 18, 2020 annual meeting. Plaintiff relied on Section 5.8 of the by-laws
which stated that proxy ballots should be received twenty-four hours prior to the
meeting. Because twelve proxy ballots were dated February 18, 2020, plaintiff
contends they should not have been counted and the amendment would not have
passed.
The court heard testimony from several witnesses. Plaintiff testified she
received notice of the election, and that the notice included a proxy voting form
but not an in-person ballot. Plaintiff said she attended the annual meeting and
asked about the ballots. She was told to fill out the proxy ballot if she wanted
to vote on the amendment. However, she decided not to submit a proxy ballot.
She recalled seeing several people hand in proxy ballots.
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Plaintiff stated she could not remember whether she read the portion of
the notice that delineated the purpose of the arbitration amendment . She also
said she did not inform any residents or the HOA that she thought the proxy was
"false, misleading and inaccurate." In fact, plaintiff testified she did not speak
to any residents during the meeting, because she thought it would be
inappropriate because of the pending litigation. Plaintiff admitted she had
spoken to residents at an earlier meeting in November 2019 when she addressed
the HOA's contention that her litigation had increased the cost of the HOA's
insurance policy premium.
Melissa Greene is the HOA's property manager. She testified she had
worked with Ardsley West since 2016, and her duties included correspondence,
inspections, processing violations, and billing collections. In short, she was
responsible for the day-to-day management of the community. Greene testified
that she attends the community meetings and recalled being at the November
2019 meeting. She advised that one of the agenda items for that meeting was
the notice of non-renewal of an insurance policy issued by the HOA's insurance
company.
Greene also testified regarding the two notices—one issued to residents
on December 17, 2019, describing the issues discussed at the November meeting
A-1563-21
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and the second sent to residents in January 2020 to inform them of the "annual
election meeting." In addition to the second notice, Greene also sent the
residents several documents prepared by the HOA's attorney, Gary Zangerle,
which described the proposed amendments to the Declaration. Greene testified
she sent the additional set of notices and supporting attachments on February
11, 2020. She did not receive any questions from any residents about the notices
or documents.
Greene was present at the February 18, 2020 annual meeting and for the
amendment vote. She testified that she received proxy voting forms on the day
of the election but could not remember how many. She and another community
member counted the ballots, the amendment was passed, and she announced the
results to the community. Greene conceded the February 18, 2020 meeting was
"[n]ot noticed . . . as a special meeting."
Zangerle testified that he has served as counsel for Ardsley West since
2018, and he was hired in part to ensure the HOA complied with the consent
order that resolved plaintiff's first litigation against the HOA. He stated he
attended the November 2019 HOA meeting, and in December 2019 and January
2020 he submitted three resolutions to Greene to reproduce for residents,
including one describing an amendment to the Declaration which would require
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mediation and non-binding arbitration of disputes before a resident could file a
lawsuit against the HOA.
Zangerle explained the Declaration already had provisions for mediation,
but the proposed amendment added the requirement of non-binding arbitration
and fee-shifting provisions that applied to both residents and the HOA, should
either choose to pursue litigation. Zangerle further testified that, by limiting
litigation, the HOA might be able to reduce its rising insurance costs .
Zangerle described the proxy ballot as "akin to an absentee ballot." He
testified the HOA did not strictly follow the by-law requiring proxies to be
submitted more than twenty-four hours before a meeting because the HOA
wanted "to encourage as many votes as" possible and, therefore, it accepted
proxies at the meeting. Zangerle noted the proxy did not contain the twenty-
four-hour language. Because Ardsley West was a small community, Zangerle
said he was "not going to restrict [the residents'] vote in any way." Zangerle
confirmed he had a brief discussion with plaintiff on the day of the election,
during which he told her she could cross out the word "proxy" on the voting
form and it would be handled as a same-day ballot.
On December 17, 2021, the court issued an oral decision finding plaintiff
did not meet her burden to establish the election regarding the Declaration
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amendment was improper. Therefore, the court dismissed count eleven, part
two of the fourth amended complaint with prejudice.
The court found that plaintiff attended the November 2019 meeting during
which the HOA raised the subject of amending the Declaration's arbitration
procedures. It also found there were subsequent communications from Greene
on behalf of the Board in December 2019, and the January and February 2020
notices expressly announced that alternative dispute resolution would be
discussed at the February 18, 2020 annual meeting. Greene also provided a copy
of the voting form. The court concluded that plaintiff had notice of the annual
meeting.
The court found that on the day of the meeting and election, there were no
traditional ballots available for the amendment election, only proxy forms, and
a review of the redacted forms reflected twelve of the proxy forms were filled
out on the day of the election in violation of the HOA's by-laws, which restrict
proxy designations within twenty-four hours of an election. However, plaintiff
was informed at the meeting that a proxy filled out by a resident of the HOA
during the meeting would be treated as a ballot. Although plaintiff declined to
fill out the proxy form, the court found that plaintiff "in fact understood her
rights and options," that some residents successfully voted in person at that
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meeting, and that plaintiff did not demonstrate any of the other residents were
confused about the content or consequences of the vote. The court concluded
the proxy forms, overall communications, and "totality of the circumstances"
demonstrated that the topic of the amendment election was clear, and that the
portion of the form where the residents voted was sufficient to put the m on
notice that they were voting on an amendment to the arbitration provision .
The court also found "[p]laintiff, a sophisticated attorney," lacked
credibility in stating "she was unable to understand the nature of the proxy or
. . . the purpose of the February 18 meeting." The court described plaintiff's
testimony as "evasive, defensive and accusatory." Conversely, the court found
Greene and Zangerle were persuasive, stating "their testimony had the ring of
truth." The court found it significant that, when asked about the February 18,
2020, amendment election and the associated annual meeting, Greene
acknowledged that proxies were collected but admitted a lack of recollection
about the exact numbers. The court also noted Zangerle's admission of drafting
mistakes, describing his explanation as "candid."
The court characterized plaintiff's arguments as "form over substance" and
held that there was "[n]o evidence of any confusion . . . other than plaintiff's
self[-]serving testimony." The court found the HOA made "good faith efforts to
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provide notice in compliance with the by[-]laws." In addition, the court agreed
with the previous ruling regarding the validity of the proxy forms submitted on
the day of the annual meeting, stating "that nothing in the by[-]laws would
prevent votes in person by individuals at the meeting." The court conceded that
the HOA election was not "the height of best practice," but there were no
objections to the procedures, and therefore, the court found the "imperfections"
did not invalidate the results of the election.
The court memorialized its decision in a February 8, 2022 order,
dismissing count eleven, part two of the fourth amended complaint with
prejudice.
IV.
On appeal, plaintiff challenges the dismissal of the individual defendants
and the dismissal of counts one, three, four, six, seven, eleven (both parts),
twelve and thirteen of the fourth amended complaint. As stated, these counts
were all dismissed on summary judgment or after trial. In addition, the court
denied reconsideration of its summary judgment rulings.
Our review of a ruling on summary judgment is "de novo, applying the
same legal standard as the trial court." Samolyk v. Berthe, 251 N.J. 73, 78
(2022). Thus, we "consider whether the competent evidential materials
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presented, when viewed in the light most favorable to the non-moving party in
consideration of the applicable evidentiary standard, 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, 523 (1995).
"If there is no genuine issue of material fact, we must then 'decide whether
the trial court correctly interpreted the law.'" DepoLink Ct. Reporting & Litig.
Support Servs. v. Rochman, 430 N.J. Super. 325, 333 (App. Div. 2013) (quoting
Massachi v. AHL Servs., Inc., 396 N.J. Super. 486, 494 (App. Div. 2007)). We
review issues of law de novo and accord no deference to the trial judge's
conclusions on issues of law. Nicholas v. Mynster, 213 N.J. 463, 478 (2013).
A motion for reconsideration is "an opportunity to seek to convince the
court that either 1) it has expressed its decision based upon a palpably incorrect
or irrational basis, or 2) it is obvious that the court either did not consider, or
failed to appreciate the significance of probative, competent evidence."
Kornbleuth v. Westover, 241 N.J. 289, 301 (2020) (quoting Guido v. Duane
Morris LLP, 202 N.J. 79, 87-88 (2010) (internal quotation marks omitted)). The
moving party must "state with specificity the basis on which [the motion] is
made" and supply "a statement of the matters or controlling decisions that
counsel believes the court has overlooked or as to which it has erred." R. 4:49:2.
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We will not overturn a trial court's ruling on a motion for reconsideration absent
"a clear abuse of discretion." Kornbleuth, 241 N.J. at 301 (quoting Hous. Auth.
of Morristown v. Little, 135 N.J. 274, 283 (1994)).
Rule 4:49-2 governs reconsideration of final orders. However, the "denial
of summary judgment is always interlocutory." Hart v. City of Jersey City, 308
N.J. Super. 487, 498 (App. Div. 1998). Rule 4:42-2(b) permits reconsideration
of summary judgment decisions "at any time before the entry of final judgment
in the sound discretion of the court in the interest of justice." Both Rules give
the trial court similar discretion in the consideration of the issues here.
We begin with plaintiff's contentions regarding the court's grant of
summary judgment to the individual defendants who served as members of the
Board. Plaintiff asserts the trial court erred in applying the business judgment
rule because the individual Board members were acting "outside the scope of
their powers" and "the business judgment rule only applies if . . . [d]efendants[']
actions are authorized by law and the governing documents." Plaintiff further
alleges the Board members breached their fiduciary duty to her.
"'"The business judgment rule bars judicial inquiry into the decisions of
the board of directors made in good faith"' and within '"the limits of the by-
laws."'" Alloco v. Ocean Beach & Bay Club, 456 N.J. Super. 124, 140 (App.
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Div. 2018) (quoting Reilly v. Riviera Towers Corp., 310 N.J. Super. 265, 270
n.4 (App. Div. 1998) (citation omitted)). Thus, overturning a homeowners
association's board of directors' decision requires a plaintiff to show that such
board acted in "bad faith," not just "[b]ad judgment." Ibid. (quoting Maul v.
Kirkman, 270 N.J. Super. 596, 614 (App. Div. 1994)). As we stated in Alloco,
the members of a homeowners association board "are an elected group of
residents tasked with maintaining, through enforcement and adaptation, a
community scheme established by the founders." Id. at 141. Board members
are not required to form an expertise in the discharge of their duties and will be
protected from individual liability "if they make their decision '"in good faith
based on reasonable business knowledge."'" Ibid. (quoting Seidman v. Clifton
Sav. Bank, S.L.A., 205 N.J. 150, 175 (2011) (quoting Green Party of N.J. v.
Hartz Mountain Indus., Inc., 164 N.J. 127, 147 (2000))).
When the court dismissed the individual defendants in March 2020, it
relied on Maul. The court found there was no "evidence of fraud, self-dealing,
or unconscionable conduct," and therefore the individual Board members were
protected "from being questioned or second-guessed on [their] conduct" under
the business judgment rule. Maul, 270 N.J. Super. at 614.
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In ruling on the reconsideration motion, the court found plaintiff had not
presented any new evidence or information to warrant reversal of the prior
ruling. We agree.
Plaintiff's allegations do not factually demonstrate the individual Board
members were acting in bad faith or that the decisions made by the Board were
outside the law. In reading the allegations in the light most favorable to plaintiff,
she asserts the HOA targeted her in enforcing aesthetic standards and sought to
implement a new arbitration provision in response to her lawsuits against the
HOA. That conduct is not unconscionable. It is activity within the scope of the
Board's province and protected under the business judgment rule. Plaintiff has
not countered the "rebuttable presumption" that the actions of a Board are valid.
Ibid. The court did not err in granting summary judgment to the individual
defendants.
In count three of the fourth amended complaint, plaintiff alleged
defendants did not allow her to review documents, including the unredacted
proxy ballots from the HOA amendment election. In dismissing the count, the
court determined plaintiff was not entitled to the unredacted ballots.
N.J.A.C. 5:26-8.9(h) governs the review of ballots in common interest
community elections. It states:
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The association shall verify the eligibility of the voters
and count the ballots in a non-fraudulent and verifiable
way.
1. Any depository for physical ballots shall be
secured.
2. All ballot tallying shall occur publicly, and
the ballots shall be open to inspection by any
member of the association for a period of [ninety]
days from the date of the election.
....
3. All ballots shall be cast in an anonymous
manner.
4. If the by[-]laws permit, and the association
member consents, a ballot may be cast
electronically if it is administered by a neutral
third party and anonymity is maintained.
In her appellate appendix, plaintiff included fifty completed proxy ballots
submitted in the amendment election. The forms are titled "ARDSLEY WEST
COMMUNITY ASSOCIATION, INC PROXY" and have spaces for marking
the unit owner's vote. At the bottom of the form, there are blank spaces for the
completion of "Unit," "Dated," and "Unit Owner Signature." Defendants
redacted the entries listed for "Unit" and "Unit Owner Signature" prior to
producing the proxy forms in discovery. If the forms were not redacted, the vote
of the unit owner would be disclosed.
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Plaintiff contends she was entitled to review unredacted ballots under
N.J.A.C. 5:26-8.9(h). She asserts the trial court erred in relying on N.J.A.C.
5:26-8.9(h)(3) and a reading in pari materia of the entire regulation in
determining the residents' votes should remain anonymous.
The interpretation of a regulation is governed by the "classic standards"
of statutory interpretation. Bedford v. Riello, 195 N.J. 210, 221 (2008).
"Generally, under those standards, the intent of the drafters is to be found in the
plain language of the enactment." Id. at 221-22 (citing DiProspero v. Penn, 183
N.J. 477, 492 (2005)). "Statutes in pari materia are to be construed together
when helpful in resolving doubts or uncertainties and the ascertainment of
legislative intent." State v. Green, 62 N.J. 547, 554-55 (1973). "Moreover,
'regulations within the same regulatory scheme should, where feasible, be read
as consistent with each other.'" Czar, Inc. v. Heath, 398 N.J. Super. 133, 139
(App. Div. 2008), aff'd as modified, 198 N.J. 195 (2009).
We see no reason to disturb the trial court's interpretation of N.J.A.C.
5:26-8.9(h) that preserving the anonymity of voting residents is the most
important of the competing values concerning elections in common interest
communities. N.J.A.C. 5:26-8.9(h)(1) permits the use of a drop off box (a
"depository for physical ballots") to collect votes in advance of an election date
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but requires the physical security of the collections. N.J.A.C. 5:26-8.9(h)(3)
states that "[a]ll ballots shall be cast in an anonymous manner." N.J.A.C. 5:26 -
8.9(h)(4) allows for electronic voting, but only in circumstances where
"anonymity is maintained." Three of the four provisions of N.J.A.C. 5:26-8.9(h)
expressly or intrinsically address and require the anonymity of voters in these
elections.
Nevertheless, plaintiff asserts that under N.J.A.C. 5:26-8.9(h)(2), she is
entitled to review the unredacted forms executed by proxies and cast as ballots
in the election. We disagree. A reading of the regulatory scheme as a whole
indicates that all materials prepared for a common interest community
election—and the results of that election—should be available for review by
residents of that community. Here, a copy of the ballot, in the form of a sample
proxy voting form, was available to plaintiff a month prior to the annual
meeting.
However, no reading of the regulation leads to the conclusion that a
resident is entitled to review the ultimate votes of their fellow common interest
community residents. To draw such a conclusion would eviscerate the
remaining provisions of the regulation.
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The court interpreted N.J.A.C. 5:26-8.9(h) correctly. The HOA provided
plaintiff with the sample proxy voting form in advance of the election and
produced the minimally redacted ballots from the election during discovery.
This comports with N.J.A.C. 5:26-8.9(h)(2). Plaintiff was permitted to inspect
the actual proxy ballots, only nominally redacted to protect the voter's
anonymity. The trial court did not err in granting defendants summary judgment
on count three.
Under count four, plaintiff alleged the individual Board members
breached their fiduciary duty in using the community's capital reserves to pay
the HOA's attorney's fees incurred in litigation. Plaintiff contends the reserve
fund under Section 9.5 of the by-laws was solely for capital improvements. The
court granted the individual defendants summary judgment on this count, noting
there was no "express language" in the by-laws prohibiting the use of capital
reserves to fund litigation.
In addition, the court noted
the [b]y-[l]aws address common expenses and also set
forth language specifically addressing capital
assessments and improvements. There is no question
that funding litigation is a non-capital expense, thereby
falling under the common expense language of the
provision. As set forth in this common expense
language, non-capital improvements do not have the
same restrictions as the pre-designated capital reserves.
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The [b]y-[l]aws specifically allow the Board to keep
money in a checking account for the necessary
discharge of its functions, which is a part of the
reasonable reserves that may be used "among other
things."
For the reasons stated by the trial court as well as our prior determination that
the business judgment rule protected the individual Board members from
liability, we are satisfied there was no error in granting defendants summary
judgment on count four.
We turn to count six in which plaintiff sought declaratory judgment stating
that the HOA's promulgation of a handbook with rules and regulations was
invalid. Plaintiff asserts "[t]he Declaration does not give . . . [d]efendants the
authority to determine the 'responsibilities of the residents.'" In addition, she
contends certain handbook provisions are ultra vires, specifically those related
to the installation of antennas and satellite dishes and the leasing of units.
The court noted that under "the [b]y-[l]aws, the [HOA] is permitted to
'establish rules and regulations governing the Property and the Use of the
Community Facilities' and the Board . . . is permitted to 'do anything and
everything necessary for the sound management of Ardsley West.'" Under §
5.01 of the Declaration, all unit owners and residents were subject to the
Declaration, the by-laws and any rules and regulations promulgated by the
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Board. In addition, "[o]wnership . . . or occupancy of any Units in the property
shall be conclusively deemed to mean that said [o]wner, . . . or occupant has
accepted and ratified th[e] Declaration, the [b]y-[l]aws, and the rules and
regulations of the [HOA] and will comply with them."
The trial court concluded "it is apparent that adopting a Homeowner's
Manual regulating the exterior maintenance and usage of a Unit is well within
the Board['s] . . . and [HOA's] rights." We agree. The Declaration expressly
granted the HOA and the Board authority to make regulations regarding the
exterior presentation of homes in the community. Summary judgment was
properly granted on count six.
Under count seven, plaintiff sought declaratory relief that the Declaration
and the HOA rules and regulations were ambiguous. In addition, she contended
the HOA rules and regulations were unenforceable restrictive covenants. As
examples, plaintiff cited the regulations requiring the unit be kept "in a safe,
clean and sanitary manner and condition," prohibiting the installation of satellite
dishes, and restricting the types and number of allowable pets.
The trial court considered the restrictive covenants under the eight factors
enumerated in Davidson Bros., 121 N.J. at 211-12, and applied in Committee
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for a Better Twin Rivers v. Twin Rivers Homeowners' Ass'n., 192 N.J. 344, 370-
71 (2007), and found the language was not vague or arbitrary. We agree.
First, plaintiff has not demonstrated the regulations caused her any
damage. Therefore, her complaints remain speculative. In addition, the
covenants were clearly expressed, recorded, reasonable as applicable only to the
residents' homes, there was no restraint on trade, and there were no changed
circumstances that made them unreasonable. See Twin Rivers, 192 N.J. at 370-
71. The court properly granted summary judgment on count seven.
We consider next the court's summary judgment ruling on count eleven ,
part one. In that count, plaintiff alleged defendants lacked the authority to adopt
a policy regarding the inspection of HOA records that conflicted with Section
9.9 of the by-laws and N.J.S.A. 15A:5-24. This policy was adopted by
resolution during the November 2019 meeting. After plaintiff objected to the
new policy, the Board amended the provisions of the policy that were
"objectionable" to plaintiff. That amended policy resolution became effective
February 18, 2020.
A reading of the February 2020 policy reflects it does not conflict with
the HOA by-laws or the statutory law regarding the ability of a person to review
the corporate documents. Count eleven, part one was properly dismissed.
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Count eleven, part two was the subject of the bench trial. As stated above,
the trial court concluded the amendment election in February 2020 was properly
conducted. Our review of the court's well-reasoned oral decision presents no
reason for this court to disturb the judgment.
We turn to a consideration of the grant of summary judgment on counts
twelve and thirteen, in which plaintiff alleges the modified arbitration provision
was an unconscionable contract of adhesion and noncompliant with PREDFDA.
The trial court found the reasonableness rule applied and the amendment was
reasonable and valid.
"[A]mendments passed by the membership rather than the Board" are
evaluated under the "reasonableness rule, because the 'analytical framework
which provides the justification for the business judgment rule is absent.'" Cape
May Harbor Vill. & Yacht Club Ass'n v. Sbraga, 421 N.J. Super. 56, 65 n.5
(App. Div. 2011) (quoting Mulligan v. Panther Valley Prop. Owners Ass'n, 337
N.J. Super. 293, 303 (App. Div. 2001) (citation omitted)). To determine
reasonableness, a court weighs factors such as: the extent of any restraints on
alienation; whether restrictions are borne equally among the residents; the nature
of restrictions on the use of a resident's home or common areas; the fairness of
dispute procedures and Board elections; and issues of notice inherent to every
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community controlled by a restrictive covenant or other similar instrument. See
Mulligan, 337 N.J. Super. at 310-11 (finding an amendment that allowed the
homeowners association to collect attorney's fees from an unsuccessful litigant
or unit-owner in a dispute with the association was reasonable because the
community was "compelled to shoulder higher legal expenses [due to] the
intransigence of a small number").
The amendment of the arbitration provision was approved by the
residents. As to the PREDFDA argument, the statutory language belies
plaintiff's unsupported assertion.
Under PREDFDA, one of the powers and duties of a homeowners
association is to "provide a fair and efficient procedure for the resolution of
disputes between individual unit owners and the association, and between unit
owners, which shall be readily available as an alternative to litigation." N.J.S.A.
45:22A-44(c). "It is well-settled that New Jersey's strong public policy favors
settlement of disputes through arbitration." Minkowitz v. Israeli, 433 N.J.
Super. 111, 131 (App. Div. 2013) (citing Hojnowski v. Vans Skate Park, 187
N.J. 323, 343 (2006)).
The trial court correctly determined that the arbitration provision was
reasonable. The Board's goal in requiring arbitration and permitting fee shifting
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was to avoid the expense of litigation pursued in the Superior Court. The
amended provision applied equally to all residents of the community including
the Board members and represented a rational response to increasing insurance
costs. The grant of summary judgment on counts twelve and thirteen was
supported by the evidence in the record and applicable principles of law.
Affirmed.
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