Opinion
DOCKET NO. A-4544-13T1
07-06-2015
MILL CREEK ISLAND BERKELEY CONDOMINIUM ASSOCIATION, INC., Plaintiff-Appellant, v. HOLLY NITTO, Defendant-Respondent.
Karen B. Miller argued the cause for appellant (McGovern Legal Services, LLC, attorneys; Ms. Miller, on the briefs). Holly Nitto, appellant, argued the cause pro se.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION Before Judges Alvarez, Waugh, and Maven. On appeal from the Superior Court of New Jersey, Law Division, Special Civil Part, Ocean County, Docket No. DC-1492-13. Karen B. Miller argued the cause for appellant (McGovern Legal Services, LLC, attorneys; Ms. Miller, on the briefs). Holly Nitto, appellant, argued the cause pro se. PER CURIAM
Plaintiff Mill Creek Island Berkeley Condominium Association, Inc. (Association), appeals the Special Civil Part's April 22, 2014 order dismissing its claim against defendant Holly Nitto for unpaid condominium fees. We reverse and remand for further proceedings consistent with this opinion.
I.
We discern the following facts and procedural history from the record on appeal.
The Association is the non-profit homeowners' association for the Mill Creek Island Berkeley (Mill Creek) condominium complex in Bayville. Nitto purchased a condominium unit in Mill Creek in June 2007.
According to Nitto, on October 9, 2011, she was assaulted by a woman who rented a room in the unit below hers. Nitto contends that the rental was prohibited by the Association's by-laws. Nitto reported the assault to the police. The responding officer's report stated that Nitto "had three scratches on her left temple, consistent with scratches from fingernails."
On October 25, Debra Nitto, Nitto's mother, wrote to the Association. She reported that the woman had been following her daughter and her "around the common grounds, parking lot[,] and dog walk yelling at [them]." Debra Nitto described other acts of harassment by the woman. She also reported that the unit owner who rented the room refused to intervene. Debra Nitto requested that the Association take appropriate action.
On November 5, Nitto again contacted the police, alleging that the same woman harassed her as she walked from her car to her condominium unit. On November 10, Nitto filed a formal complaint with the police concerning the ongoing incidents of harassment.
Debra Nitto sent another letter to the Association on November 27, reiterating that her calls to the Association's property manager had been unproductive. She also reported that there was drug activity in the nearby parking lot. Noting that she had been sleeping at her daughter's home because of the unsafe environment, Debra Nitto again requested assistance from the Association.
On November 30, Nitto sent a letter to the Association advising that the woman who was harassing her was an illegal tenant in violation of the Association's by-laws. According to Nitto, the Association responded that it could "not become involved in a homeowner/homeowner dispute."
After the tenant's harassment continued, Nitto concluded that it was impossible for her to continue living at Mill Creek. As a result, she moved out and subsequently stopped paying the condominium fees.
Nitto filed for Chapter 7 bankruptcy in June 2012, listing the unpaid condominium fees as a debt. The Bankruptcy Court granted her a discharge in September. The Association filed this action on February 6, 2013, seeking to enforce its contractual right to collect the condominium fees. On February 8, the Association filed an assessment lien with the Ocean County Clerk, reflecting unpaid condominium fees in the amount of $5,435.68.
Nitto answered on June 27, asserting that she did not owe the Association any money because "[a]s per [Association] by-laws . . . [the Association] failed to provide services covered by fees, forcing vacancy." The complaint was subsequently dismissed when the Association's attorney failed to appear for trial.
The Association filed a second complaint on January 16, 2014. However, it was never properly served.
On February 10, 2014, the Association moved to reinstate the first complaint. It argued that its attorney's failure to appear on the trial date amounted to "excusable neglect, pursuant to R. 4:50-1(a)." The motion was granted. On February 26, the Association filed a second assessment lien with the Ocean County Clerk, reflecting additional unpaid condominium fees in the amount of $3,427.36.
The trial was held on April 22, 2014, following an unsuccessful mediation session between the parties. Nitto appeared pro se. The Association presented the testimony of Alice Tuohy, its property manager. Tuohy testified that, as of the trial date, Nitto owed $7,876.27. Tuohy testified that the Association had no reason to dispute Nitto's assertion that she had abandoned her unit or that she was no longer living there.
Nitto testified and was questioned by the trial judge. She testified to the incidents with the illegal tenant and explained that they had caused her to vacate her unit. The judge observed that it was too late for Nitto to file a timely suit against the Association based on its alleged violation of the by-laws and master deed.
Nitto also testified concerning her bankruptcy and the September 21, 2012 discharge. She asserted that her bankruptcy attorneys had advised her that there would be a four-month grace period following her discharge, and that the Association could not assess additional condominium fees until February 2013. Nitto provided the judge with a copy of her bankruptcy petition, which listed the Association as a creditor.
Nitto told the judge that her mortgage lender, Wells Fargo, had "changed the locks and put a notice on the door that they have winterized the unit and taken ownership in March of 2012." Wells Fargo subsequently filed a foreclosure action against her, but refused to take a deed in lieu of foreclosure and instead sought a short sale of the unit.
The trial judge asked the Association's witness and attorney whether they had any information about Wells Fargo's foreclosure action. Both responded that they did not know anything about the foreclosure. They were, however, aware that the unit had notices on the door indicating that it had been "winterized."
At trial, the Association's attorney explained "winterization" as a "common practice by banks to avoid a pipe bursting and damaging other units and then being held responsible because they failed to abate the nuisance . . . [so the bank will] come in and [] change locks and winterize pipes."
The trial judge expressed concern regarding the Association's position that, although Wells Fargo had winterized the unit, Nitto would nevertheless continue to bear responsibility for the condominium fees pursuant to N.J.S.A. 46:8B-17. The judge explained:
Walk me through this, Counselor. A unit owner has a condominium unit, files bankruptcy and discharges the underlying obligation on the Note, wants to transfer the Deed to the mortgage holder. The mortgage holder refuses to take the Deed in lieu of foreclosure and elects to proceed to a foreclosure proceeding. The unit owner — not Ms. Nitto — but a unit owner in that position decides, "I don't owe the bank any money. I bought this unit for $190,000. The bank lent me a hundred and fifty. I don't owe the bank the money. There's no longer any obligation. I can sell the unit to my cousin for fifty. I can put fifty in my pocket, my cousin gets the unit worth
190." Wells Fargo is on the outside, looking in. Why wouldn't that happen?The judge concluded that, because of the foreclosure, Wells Fargo was in control of the property and questioned whether the Association should have sought to recover the unpaid fees from the bank rather than Nitto.
Nitto drew the judge's attention to Alexandria at Hillsborough Condominiums Ass'n v. Cichowicz, 262 N.J. Super. 65 (Law Div. 1992), a case with facts similar to her case. After reading that opinion and giving the parties the opportunity to reach an agreement, the judge delivered an oral decision.
The judge determined that Tuohy was credible, and adopted her testimony that the total amount due the Association of $7,876.27 consisted of all post-petition fees. However, relying on Alexandria, the judge concluded that the Association could not collect the outstanding condominium fees from Nitto because she no longer had possession of the unit. Instead, the liens would remain on the property and could be enforced when the title was transferred to a new owner. The judge noted that neither party disputed that Nitto had in fact vacated the property and no longer had access to the condominium unit. This appeal followed.
Nitto argues that the notice of appeal was not properly served. We conclude that any defects in service were waived when Nitto filed her brief rather than moving to dismiss the appeal.
II.
On appeal, the Association argues that the trial judge's reliance on Alexandria was misplaced because that case has been superseded by subsequent amendments to the United States Bankruptcy Code. It also maintains that N.J.S.A. 46:8B-17 and the Association's governing documents require Nitto to pay post-petition condominium fees.
Alexandria was decided in 1992. The applicable provision of the Bankruptcy Code, 11 U.S.C.A. § 523(a)(16), has been amended several times since then, as the result of which it would no longer support the relief granted to the unit owner in Alexandria. See Tiffany by the Sea Condo. Ass'n v. Zengel, 306 N.J. Super. 249, 253-255 (Law Div. 1997) (outlining the circumstances surrounding the 1994 amendments). Following the enactment of the 1994 amendments, 11 U.S.C.A. § 523(a)(16)(A) provided that post-petition condominium fees were owed when "the debtor physically occupied a dwelling unit in the condominium or cooperative project." See Glen v. June, 344 N.J. Super. 371, 374 n.1 (App. Div. 2001).
However, the section was amended in 2005 to expand the rights of a condominium association to collect fees from a unit owner who has filed for bankruptcy. 11 U.S.C.A. § 523(a)(16) (2005); H.R. Rep. No. 109-31(I), at 88 (2005), reprinted in 2005 U.S.C.C.A.N. 88, 154. Since 2005, 11 U.S.C.A. § 523(a)(16) has provided that post-petition condominium fees are not excluded from discharge when the debtor physically occupies or receives rental income from the unit or "as long as the debtor or the trustee has a legal, equitable, or possessory ownership interest" in the property. 11 U.S.C.A. § 523(a)(16).
Because the trial judge based his decision on Alexandria, which relies on an outdated version of 11 U.S.C.A. § 523(a)(16), we reverse the order on appeal and remand to the trial court for further proceedings consistent with this opinion. There appears to be no dispute that Nitto no longer has a possessory interest in the condominium unit. The judge must determine whether, in light of the foreclosure and Wells Fargo's apparently inordinate delay in accepting a deed or arranging for a sheriff's sale, Nitto still has a legal or equitable interest in the unit. The judge should also determine whether Wells Fargo should be compelled either to take title to the unit or schedule a prompt sheriff's sale, and whether it acted so inequitably by refusing to do so that it should be compelled to pay the condominium fees instead of Nitto as a matter of equity.
It may be necessary to transfer this action to the General Equity Division so that Wells Fargo can be joined as a party. We express no views on the merits of the issues we have outlined. We similarly express no opinion on the merits of the judge's view that it was too late for Nitto to file a counterclaim against the Association, other than to note that it would depend on whether the applicable statute of limitations was two years, N.J.S.A. 2A:14-2, or six years, N.J.S.A. 2A:14-1, which in turn would depend on the nature of the damages sought. If the judge determines that the limitations period has not run, leave to amend should be liberally granted. See R. 4:9-1. --------
Reversed and remanded for further proceedings consistent with this opinion. I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION