Opinion
CIVIL ACTION NO. 96-1883 (JBS).
March 15, 1999
Dennis La Fiura, Esq., Pitney, Hardin, Kipp Szuch, Morristown, N.J., Attorney for Plaintiffs/Counter-defendants.
George B. Henkel, Esq., Soriano, Henkel, Biehl Matthews, Esqs., Roseland, N.J., Attorney for Defendant/Counterclaimant/Third-Party Plaintiff/Cross-Defendant Atlantic Palace Rental Corp., Fourth- Party Defendant Atlantic Palace Condominium Assn., and the individual Fourth-Party Defendants.
Kevin J. Thornton, Esq., Horn, Goldberg, Gorny, Daniels, Paarz, Placketer Weiss, PC, Atlantic City, N.J., Attorney for Defendant/Cross-Claimant Atlantic Palace Condominium Assn.
Anthony Paul Pasquarelli, Esq., Methfessel Werbel, Rahway, N.J., Attorney for Third-Party Defendants/Fourth-Party Plaintiffs.
Ira Trocki and Michael Di Francesco, Fredric L. Shenkman, Esq., Goldenberg, Mackler, Sayegh Mintz, P.C., Atlantic City, N.J. Attorney for Third-Party Defendants/Fourth-Party Plaintiffs/ Counter-Defendants.
Charles H. Nugent, Jr., Esq., Hartman, Nugent Zamost, Moorestown, N.J., Attorneys for Fourth-Party Defendant Atlantic Palace Condominium Assn.
OPINION
Fourth-party defendants, who consist of the Atlantic Palace Condominium Association ("Condo Association") and individuals Dr. Vasfi Uyar, Angelo DiMauro, Paul Mensh, Rudy Mazurosky, Subal Sukar, Carolyn Turco, Don Wright, Angela Bianco, and John Roes 1- 100 (collectively "Individual Fourth-Party Defendants"), brought a counterclaim against fourth-party plaintiffs Ira Trocki, Michael DiFrancesco, IMT Management, Inc., Trocki Hotels, and IS Associates, LLC. (collectively "Trocki"), seeking judgment against Trocki on Count II of the Fourth Party Defendants' Counterclaim for all amounts due and outstanding related to Trocki's share of security costs of the condominium property. This matter comes before the court upon Condo Association's motion for summary judgment. For the reasons stated herein, Condo Association's summary judgment motion shall be denied without prejudice.
I. BACKGROUND
A. Facts
Trocki is a member of the Condo Association, a New Jersey non-profit corporation responsible for the administration, operation, and management of the Atlantic Palace Condominium (the "Property"), a building consisting of 293 residential units, 12 commercial units, and a six-story parking garage. (Fourth-party Def's Br. ¶¶ 1, 6; Ver. Compl. ¶ 15.) Trocki currently owns 45 residential and commercial units engaged in a hotel operation at the Property, although until February 1996 Trocki owned a total of 90 units. (Cert. of Ramendra Pandit ¶ 5.) The Condo Association is governed by the By-laws of the Condo Association, the Master Deed, and the New Jersey Condominium Act. Under the Master Deed, the Condo Association has various powers, including: (1) to maintain, repair, and clean the common grounds, (2) to assess and collect funds from the members for common expenses, and (3) to fix charges, assessments, fees, and rents. (Master Deed Art. V.) The Property is administered and managed by a Board of Trustees. (Fourth-party Def's Br. ¶ 5.) The Board of Trustees has the power to perform all lawful acts which are not precluded by the Master Deed, By-laws, or the Condominium Act. (Id.)
Prior to September of 1996, the Atlantic Palace Rental Corporation ("Atlantic Palace"), also involved in the hotel operation at the Property, had been paying the entire security bill for the Property. (Id. ¶ 6.) On September 21, 1996, the Board of Trustees, in a special assessment, determined that the security costs of $19,954.08 per month should be apportioned between Atlantic Palace, the Condo Association, and Trocki. (Id.)
The Board of Trustees determined that the Condo Association (of which Atlantic Palace and Trocki are members) would pay for the security costs associated with a single security guard, or $6,651.36 per month. (Id. ¶ 8.) The security costs of the two additional security guards, which the Board reasoned were necessary because of the hotel operations on the Property, were apportioned between Trocki and Atlantic Palace based on the respective shares of the hotel units. (Id.) The Board found that Trocki must pay 90/264 of the additional security costs per month. (Id.) The Condo Association and Atlantic Palace have paid their share each month. (Id. ¶ 10.) Trocki, however, refused to pay. (Id.) As of March 1, 1998, Trocki allegedly owed $79,945.88. (Id.)
Assuming that the special assessment was appropriate, it is evident from the Certification of Ramendra Pandit that the Board of Trustees did not correctly apportion the additional security costs. Although there were a total of approximately 250 units involved in the hotel operations between Atlantic Palace and Trocki (Cert. of Ramendra Pandit ¶ 5), the Condo Association based its calculations on a total of 264 units ( Id . ¶ 8), apparently failing to exclude the 14 residential units from the totals for Atlantic Palace and/or Trocki.
B. Procedural History
The present action was initiated by Ramada Franchise Systems against Atlantic Palace, the Condo Association, and John Does 1- 100 for alleged violations of a license agreement. The Condo Association and Individual Fourth-Party defendants, in response to Trocki's fourth-party complaint, sought damages in Count II of their Counterclaim for Trocki's failure to pay security costs pursuant to the Master Deed and By-laws. (Fourth-Party Counterclaim ¶ 16 at 25.)
Before the Court is Condo Association's motion for summary judgment pursuant to Federal Rule of Civil Procedure 56 and Local Civil Rule 56.1 as to Count II of its Fourth-Party Counterclaim on July 29, 1998. For the reasons set forth herein, fourth-party defendant Condo Association's motion is denied.
I. DISCUSSION
A. Summary Judgment Standard of Review
Summary judgment is appropriate when the materials of record "show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c);see also Hersh v. Allen Prods. Co., 789 F.2d 230, 232 (3d Cir. 1986);Lang v. New York Life Ins. Co., 721 F.2d 118, 119 (3d Cir. 1983). A dispute is "genuine" if "the evidence is such that a reasonable jury could return a verdict for the non-moving party." See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A fact is "material" only if it might affect the outcome of the suit under the applicable rule of law.Id. Disputes over irrelevant or unnecessary facts will not preclude a grant of summary judgment. Id.
In deciding whether there is a disputed issue of material fact, the court must view the evidence in favor of the non-moving party by extending any reasonable favorable inference to that party. See Aman v. Cort Furniture Rental Corp., 85 F.3d 1074, 1080-81 (3d Cir. 1996);Kowalski v. L F Prods., 82 F.3d 1283, 1288 (3d Cir. 1996). The threshold inquiry is whether there are "any genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party." Liberty Lobby, 477 U.S. at 250; Brewer v. Quaker State Oil Refining Corp., 72 F.3d 326, 329-330 (3d Cir. 1995) (citing Anderson, 477 U.S. at 248) ("[T]he nonmoving party creates a genuine issue of material fact if it provides sufficient evidence to allow a reasonable jury to find for him at trial.").
The moving party always bears the initial burden of showing that no genuine issue of material fact exists, regardless of which party ultimately would have the burden of persuasion at trial. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986); Jalil v. Avdel Corp., 873 F.2d 701, 706 (3d Cir. 1989), cert. denied, 493 U.S. 1023 (1990).
B. Analysis
The crux of the present dispute is whether Condo Association appropriately charged Trocki with a certain percentage of security costs at the Property. Condo Association and the Individual Fourth-Party Defendants allege, in support of their Motion for Summary Judgment as to Count II of their Counterclaim, and based on the Certification of Ramendra Pandit, that two security guards were added due solely to the existence of hotel operations at the Property. (Cert. of Ramendra Pandit ¶ 8.)
The Condo Association claims that the special assessment was appropriate under the "broad" powers accorded the Board of Trustees under the Master Deed to conduct the affairs of the Property. (Fourth-party Def's Br. at 9-11.) It admits that "the liability of unit owners for common expenses is limited to the amount equal to their proportionate share of the ownership in the common elements . . . ." (Id. at 10.) The Condo Association, however, claims that the Board of Trustees, pursuant to its broad powers, may also assess "other charges and expenses" which are other than common expenses — in essence a special assessment. (Id.)
Trocki disputes that the Condo Association's powers are so broad. (Fourth-party Plaintiff's Br. ¶ 4.) According to Trocki, the Board's powers are limited by the Master Deed, By-laws, and the New Jersey Condominium Act. (Id.) Trocki asserts that the special assessment was unreasonable and part of a series of wrongful acts in breach of the Condo Association's fiduciary duty to Trocki. (Id. at 4-5.) Furthermore, Trocki contends that the special assessment for security costs was unauthorized by the By- laws and the Master Deed and was thus invalid. (Id. at 7.) Trocki claims that the security costs were a "common expense" under the Master Deed, to be included in the monthly assessments and charged to the unit owners according to their respective interests in the common elements, rather than disproportionately a part of a special assessment. (Id. at 5-6, 9.)
In response, the Condo Association reiterates its claim that the Master Deed permits it to impose special charges and assessments upon a specific unit. (Fourth-party Def's Reply Br. at 4.)
The Court concludes, based on the By-laws, the Master Deed, and the New Jersey Condominium Act, that a genuine issue of material fact exists as to whether Trocki must pay a disproportionate share of the security costs under the special assessment. The Condo Association as movant possesses the burden of proof that there is no genuine issue as to any material fact. As this discussion will illustrate, the Condo Association has failed to satisfy its burden because it did not present extrinsic evidence to support its claims. The Court finds that there is no controversy over the fact that Trocki owes at least its proportionate share of the costs of the security guards, but, upon the evidence presented to the Court, it is unclear what that proper proportionate share is.
The New Jersey Condominium Act provides that "the liability of a unit owner for common expenses shall be limited to amounts duly assessed in accordance with this act, the master deed and by-laws." N.J.S.A. 46:8B-17. Article I of the Master Deed here defines common expenses as "an expense for which the Unit Owners are proportionately liable . . . ." (Master Deed Article I(e).) The examples of common expenses in the Master Deed include, but are not limited to,
(i) all expenses of administration, maintenance, repair and replacement of the Common Elements;
(ii) expenses agreed upon as common by all Unit Owners; and
(iii) expenses declared common by provisions of the Master Deed or by the By-laws." (Id.)
(Master Deed Article I(e).)
It is true that no provision of the Master Deed or the By- Laws uses the magic words "security guards" in defining a common expense or Common Element, and no evidence has been presented that all Unit Owners have agreed upon this expense as common. However, it is this Court's province to interpret, as a matter of law, the words of this Master Deed, which are unambiguous and thus factually not in dispute. The Master Deed defines "common elements" in Article I as "all other elements of any improvement necessary or convenient to the existence, management, operation, maintenance and safety of the Condominium Property or normally in common use." (Master Deed Art. I(d)(viii) (emphasis added).) Upon review of these words of the Master Deed, it is clear that paying for the security guards is a common expense. As such, these security costs, under Article I(e)(i) of the Master Deed, are common expenses for which the Unit Owners are proportionately liable.
Given that it is not truly controversial that Trocki owes at least its proportionate share of the security costs, this Court might have been inclined to grant partial summary judgment to Condo Association for that amount under Fed.R.Civ.P. 56(d). However, it is impossible for the Court to decide, based upon the facts presented to it, what that proportionate share is. The evidence presented shows only that since September, 1996, when the Board of Trustees determined that the $19,954.08 per month in security costs should be apportioned between Atlantic Palace, the Condo Association, and Trocki, Trocki has owned 45 residential and commercial units in the Property, which has 293 residential units, 12 commercial units, and a six-story parking garage. No evidence has been presented as to whether the commercial units are also charged for security costs, nor has evidence been presented as to how many of Trocki's 45 units are commercial and how many are residential. Thus, this Court is unaware of how many of Trocki's units and how many total units should be included in the proportion.
Pursuant to Fed.R.Civ.P. 56(d), the Court
[a]fter examining the pleadings and the evidence before it . . . shall if practicable ascertain what material facts exist without substantial controversy and what material facts are actually and in good faith controverted. It shall thereupon make an order specifying the facts that appear without substantial controversy, including the extent to which the amount of damages or other relief is not in controversy, and directing such further proceedings in the action as are just.Id .
If the parties can agree as to the proper proportionate amount, they may submit a form of order to this Court granting partial summary judgment in that amount, pursuant to Fed.R.Civ.P. 56(d). Though this Court might enter such partial summary judgment now because it is clear that Trocki owes at least its proportionate share, this Court cannot do so because of the absence of record evidence as to the proper proportion.
In any case, this Court denies summary judgment to the Condo Association on its claim that this was a proper special assessment for which Trocki could be disproportionately charged, for genuine issues of material fact remain disputed.
Under Article III of the Master Deed, the Condo Association has "the right to make or cause to be made such alterations and improvements to the Common Elements which in its opinion may be beneficial, necessary or which is requested in writing by a Unit Owner . . . ." (Id. Art. III(3)(a).) When the Condo Association determines that an improvement is general in nature, then it can assess the costs proportionately as common expenses. (Id.) However, "when, in the sole opinion of the [Condo] Association, the alteration or improvement is exclusively or substantially for the benefit of one or more Unit Owners that requested it, the cost shall be assessed against such Unit Owner . . . in such proportion as the Association shall determine is fair or equitable." (Id. (emphasis added).)
These provisions are in compliance with the explicit terms of the New Jersey Condominium Act. See N.J.S.A. 46:8B-14, 46:8B-15 468:B-17.
Thus, if Trocki requested additional security, perhaps out of fear for the safety of its own occupants, and the Condo Association believed, as it asserts, that additional security was primarily for Trocki's own benefit, it was permissible for the Condo Association determine that it would be "fair and equitable" for Trocki to pay an increased proportion of these expenses. However, it is unclear from the evidence presented whether Trocki did request additional security guards or security measures. Thus, genuine issues of material fact exist.
Finally, the cases cited by the Condo Association in support of its argument are not on point. Those cases do not address the specific issue of whether a condominium association may increase a unit owner's share of common expenses without the owner's approval. The Condo Association cites to a number of cases for the propositions that: (1) the decisions of a condominium association should be reviewed by a court under the business judgment rule and (2) a condominium association has a fiduciary duty to unit owners. See Courts at Beachgate v. Bird, 226 N.J. Super. 631 (Ch.Div. 1988); Walker v. Briarwood Condo. Assoc., 274 N.J. Super. 422 (App.Div. 1994); Siller v. Hartz Mountain Assoc., 93 N.J. 370 (1983);Billig v. Buckingham Towers Condo. Assoc., 287 N.J. Super. 551 (App. Div. 199 6). Irrespective, the decisions of a condominium association must comport with the New Jersey Condominium Act and the master deed.See Thanasoulis v. Winston Towers 200 Association, 110 N.J. 650, 658 (1988) (finding that court need not consider principles such as "fiduciary relationship" in determining validity of decision by condominium association when validity depended on New Jersey Condominium Act and master deed).
In Chin v. Coventry Square Condominiums, 270 N.J. Super. 551, [ 270 N.J. Super. 323] 563 (App.Div. 1996), for instance, the court concluded that costs attendant to the review and inspection of a rental unit upon change of tenancy were not common expenses under N.J.S.A. 46:8B-3e 46:8B-17. Id. at 199.
The court reasoned in Chin that the expenses were not incurred for a beneficial object common to all of the owners within the complex: the expenses were incurred because the owner chose to rent the unit rather than to occupy it. Id. at 199-200. Thus, the court concluded that the statutory language strongly suggested that the reasonable costs of rental review and inspection could be assessed to unit owners beyond the general assessment for common expenses. Id. at 200.
However, the court still found that on remand, the trial court must consider whether the costs imposed under the assessment were reasonably related to the review and inspection of the unit under Thanasoulis v. Winston Towers 200 Association, 110 N.J. 650 (1988). Chin, 270 N.J. Super. at 200. The court noted, "We do not believe that the `business judgment rule' sustains the . . . fee. Regardless of what standard of review is applied, a bylaw amendment `should not create invidious classifications or unfairly diminish the rights of some unit owners for the benefit of others.'" Id. (citations omitted).
In the instant action, although security likely was increased in response to the hotel operations at the Property, it is fairly inferred that the other unit owners certainly benefit from the increased security as well. The expenses in Chin, by contrast, were incurred for a single unit and were peculiarly incident to that unit. Thus, it must be determined in the instant case whether the security costs are truly common expenses. Furthermore, the burden imposed on Trocki under the special assessment, whether the burden is reasonably related to the hotel operations, is called into question pursuant to the provisions of the Master Deed as discussed above.
Accordingly, genuine issues of material fact exist as to whether the security guard costs are reasonably related to the hotel operations and whether Trocki specifically requested additional security guards, so that the special assessment of the Condo Association was appropriate under Article III(3)(a) of the Master Deed. Without a clearer exposition of the underlying material facts, this Court cannot perform its function under the "business judgment rule" in this summary judgment motion.
III. CONCLUSION
Having found that fourth-party defendant Condo Association failed to meet its burden, this court finds that a genuine issue of material fact exists, and fourth party defendant Condo Association's motion for summary judgment is denied without prejudice. The accompanying Order is entered.
As stated in the text accompanying n. 3, supra , however, the Court would be prepared to grant partial summary judgment under Rule 56(d) for the sum of money representing Trocki's proportionate share of the enhanced security costs under the "common element" analysis, provided that the parties at interest agree upon the mathematical proportion to be used. Such an order would determine that it cannot be disputed that Trocki owes this indebtedness, without prejudice to the Condo Association's right to seek to prove a greater amount at trial under its "special assessment" theory of Count II of the Fourth Party Defendants' Counterclaim.
O R D E R
This matter having come before the court upon the motion for summary judgment of fourth party defendants Atlantic Palace Condominium Association, Dr. Vasfi Uyar, Angelo DiMauro, Paul Mensh, Rudy Mazurosky, Subal Sukar, Carolyn Turco, Don Wright, Angela Bianco, and John Roes 1-100; and the court having considered the submissions of the parties; and for the reasons stated in the Opinion of today's date;
IT IS, this day of March, 1999, hereby ORDERED
that fourth party defendants' motion for summary judgment on Fourth Party Defendants' Counterclaim Count II is DENIED WITHOUT PREJUDICE.
___________________ Date
______________________ JEROME B. SIMANDLE U.S. District Judge