KATHY MOORE v. THE RADBURN ASSOCIATION, INC.Annotate this Case
NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
SUPERIOR COURT OF NEW JERSEY
DOCKET NO. A-4284-07T24284-07T2
KATHY MOORE, ZDENA NEMECKOVA,
MAUREEN MORIARTY, ROBERT GULACK,
MICHAEL RONEY, RITA YELISEYEV,
IGOR YELISEYEV, STAN HAYDEN, MAY
HAYDEN, SUZANNE DIGERONIMO, LOUIS
DIGERONIMO, WOLF TERNER, EUGENE
GERLANTS, RACHEL BOYLAN, JANNA
GERLANTS, and JUNE MEYERSON,
THE RADBURN ASSOCIATION, INC.,
DONALD F. MORRIS, in his capacity
as President of the Radburn Association,
and LOUISE ORLANDO, in her capacity as
Manager and Secretary of the Radburn
Argued November 17, 2009 - Decided
Before Judges Carchman, Parrillo and
On appeal from the Superior Court of New
Jersey, Chancery Division, Bergen County,
Docket No. C-394-06.
Renee Steinhagen and Frank Askin argued the
cause for appellants/cross-respondents (New
Jersey Appleseed Public Interest Law Center and Rutgers School of Law - Newark Constitutional
Law Clinic, attorneys; Ms. Steinhagen and Mr.
Askin, on the brief).
Arthur P. Zucker argued the cause for respondents/
cross-appellants (Ferro, Labella & Zucker
and Jeffrey, Samel & Partners, attorneys;
Mr. Zucker and Gary Matano, of counsel;
Mr. Zucker and Russell T. Brown, on the
American Civil Liberties Union of New Jersey
Foundation, amicus curiae pro se (Jeanne LoCicero
and Edward Barocas, on the brief).
Samuil Buschkin, attorneys for amicus curiae
Hartmann, Doherty, Rosa, Berman & Bulbulia, L.L.C.,
attorneys for amicus curiae Group of 18 Radburn Residents (Mark A. Berman, on the brief).
This appeal and cross-appeal require us to consider the application of the New Jersey Planned Real Estate Development Full Disclosure Act (PREDFDA), N.J.S.A. 45:22A-1 to -56, and the New Jersey Nonprofit Corporation Act (Title 15A), N.J.S.A. 15A:1-1 to 16-2, as well as the principles ennunciated by the Supreme Court in Comm. for a Better Twin Rivers v. Twin Rivers Homeowners' Assoc., 192 N.J. 344 (2007), to Radburn, a common interest community. The trial judge concluded that (1) all Radburn residents are not entitled to membership in defendant Radburn Association (Association); (2) residents are not statutorily entitled to nominate candidates for the Association's board of trustees (the Board); and (3) the Association's open meetings policy complied with PREDFDA. Defendants Donald F. Morris, Louise Orlando and the Association cross-appeal from the trial court's finding that the 1993 Amendments to PREDFDA are retroactive and apply to Radburn, and from its grant of partial summary judgment to plaintiffs on concluding that the Association is legally required to disclose financial documents to residents in accordance with generally accepted accounting principles (GAAP). We affirm.
These are the relevant facts that emerged on the parties' cross-motions for summary judgment. Radburn, the "Town for the Motor Age," was created in Fair Lawn in 1929 by architects Henry Wright and Clarence Stein in order "to provide more housing and to protect people from the horseless carriage." Radburn utilized the "superblock" in order to "do away with the traditional grid-iron street pattern" and maintain the separation of pedestrians and automobiles. Superblocks consist of:
large block[s] of land surrounded by main roads. The houses are grouped around small cul-de-sacs, each of which has an access road coming from the main roads. The remaining land inside the superblock is park area, the backbone of the neighborhood. The living and sleeping sections of the houses face toward the garden and park areas, while the service rooms face the access road.
Radburn was developed so that pedestrians could leave their homes and access all necessary services without crossing streets used by automobiles.
Although Radburn was originally intended to house 25,000 residents, during the Great Depression, the original builder, City Housing Corporation (CHC), declared bankruptcy. This limited the community to "its present size of 149 acres which includes 430 single family homes, 90 row houses, 54 semi-attached houses and a 93 [unit] apartment [complex], as well as a shopping center, parks and amenities."
Radburn's historical and social significance is widely acknowledged; it has been called "the first major advance in city planning since Venice." The "Radburn Idea" has been replicated in communities the world over, including England, Sweden, India and Japan. Radburn was designated a National Historic Landmark on April 5, 2005, and it is listed on the National Register of Historic Places as well as the New Jersey Register of Historic Places. See Nat'l Park Serv., http://www.nps.gov/nhl/designations/Lists/NJ01.pdf (last visited Jan. 6, 2010); Nat'l Register of Historic Places, http://www.nationalregisterofhistoricplaces.com/NJ/Bergen/state4.html (last visited Jan. 6, 2010); NJ DEP - Historic Preservation Office, New Jersey and Nat'l Registers of Historic Places, http://www.state.nj.us/dep/hpo/1identify/lists/bergen.pdf (last visited Jan. 6, 2010).
The Association "is a non-profit corporation charged with fixing, collecting and disbursing charges; maintaining services, parks and facilities; and interpreting and applying the Declaration of Restrictions, which are restrictive covenants running with the land[,]" governing "[e]ach property within the Association boundaries[.]" In 1929, CHC transferred to the Association the property for which it was responsible, expressing its desire that Radburn property owners and inhabitants be assured "the use and benefit" of the common elements of Radburn and that the Association serve to acquire, improve and maintain those elements.
According to Raburn's website, as cited by plaintiffs, the Association's responsibilities include:
manag[ing] a park network of 23 acres, two swimming pools, four tennis courts, four baseball fields, three playground areas, five outdoor basketball courts, an archery plaza, two summer houses, and a community center called the Grange, which includes offices, a library, clubroom kitchen, maintenance shop and garage, a recreation room and a gymnasium equipped with a stage. On this stage, the Radburn Players, the
oldest active amateur theatre group in the state, produce several shows each year. The physical properties allow the Association to provide a comprehensive recreation program for its residents all year long.
[Radburn, The Town for the Moter Age, http://www.radburn.org/geninfo/history.html.]
Regarding governance of the community, the website states:
The affairs of the Association are handled much like the council-manager form of government. The nine member Board of Trustees sets policies and approves the budget, while the administration lies in the hands of a full time paid manager. Every resident is automatically a member of the Citizen's Association, whose President sits as a full time member of the Board of Trustees during his term of office. This group gives the citizens a forum for voicing opinions and addressing concerns directly to the Board of Trustees through its President.
In a March 17, 2005 letter to the Radburn community, the Association explained that it is "not a 'homeowners association'. Residential properties are owned in fee simple by individual residents. . . . [A]nd the residential property owners do not have any ownership interest in the common elements, which are owned solely by The Radburn Association."
The Association's bylaws define its members as those persons: (1) specifically named in the Certificate of Incorporation; (2) elected to serve as trustees; or (3) elected to membership by current members. The president of the Radburn Citizens' Association (RCA) is also considered a member but only during the time he or she serves as president. The Association's Board consists of nine individuals, six of whom are elected by all Radburn residents from a list of candidates nominated by the sitting trustees. Those six positions are filled two at a time, for staggered three-year terms. The remaining three trustees are two individuals elected by Association members for one-year terms and the president of the RCA. Only residents are permitted to be trustees, and any resident who is at least twenty-one-years-old may apply to be considered for nomination by the Board.
On July 16, 2006, the Board adopted a resolution permitting resident attendance at Board meetings during which binding votes would be taken. The resolution continued to exclude residents from working sessions of the Board and, at the Board's discretion, from certain confidential discussions that occurred during voting meetings. The policy allowed residents to comment on matters that were open for vote and provided for the posting of meeting minutes at the Grange for resident review.
A sample deed included in defendants' appendix includes one clause relating to Radburn, which states that property ownership is:
Subject to the "Declaration of Restrictions No[.] 1 affecting Radburn Property of City Housing Corporation in the Borough of Fair Lawn, Bergen County, New Jersey, dated March 15, 1929 and recorded April 8, 1929 in the Bergen County Clerk's Office in Book 1643 at pages 177, etc. of DEEDS.", and Amendments thereto.
The stated purpose of the Declaration of Restrictions, an agreement between CHC, the Association and any present or future purchasers of property in the community, was to create a planned community and a related association with the authority to maintain and administer the community amenities, administer and enforce any restrictions and collect and disburse all relevant charges. The Declaration further notes the intention of CHC "that membership in and control of [the] Association shall ultimately be vested in the inhabitants and/or property owners of the community of RADBURN . . ., or in representatives of such inhabitants and/or property owners."
Restrictions in the Declaration include: (1) requirements for design approval for any structures sought to be added to the property, including both common areas of Radburn and individually owned property; (2) the right of the Association to supervise any construction; and (3) the right of the Association to maintain any improved or unimproved property at the owner's expense. The restrictions are intended to maintain the community in harmony with the original design plan and "provid[e] the greatest possible degree of health, safety, architectural beauty and amenity for the property owners and inhabitants thereof[.]" To that end, the Association also created "Guidelines of Architectural Control," which set forth the architectural and landscaping criteria relevant to all property subject to the Declaration.
With respect to assessments, the Declaration provides that each parcel of property, "whether owned by [CHC] or others" through a deed, must pay an annual assessment or charge to the Association. It calls for the Association's Board to fix the amount and provides a method of valuation that allows for property classifications and varying rates. The Declaration establishes that the Association may use the collected funds
in such manner and to such extent as the Board . . . may determine to be for the benefit of the residents of The Property and for the promotion of the health, safety and welfare of its residents within The Property and for the enhancement of education, recreation, social life, and community welfare within The Property; but the specific application of such moneys shall remain wholly in the absolute discretion of the said Board[.]
Unlike the Association, the RCA is open for membership to all adult Radburn residents. According to its constitution, its purposes are:
(a) To serve as an open forum to give opportunity for the consideration and discussion of matters of public interest[;] (b) To act as an agency for the presentation to the Radburn Association and to other public or private bodies, of community opinion arrived at through public discussion and other appropriate means[;] (c) To provide a common meeting place for the members[;] (d) To foster the development of community life and a realization of its benefits and responsibilities[; and] (e) To cooperate with other organizations in the furtherance of the above purposes for the welfare of Radburn and the entire community of Fair Lawn.
The RCA's nominating procedure for officers allows any member to nominate a candidate, and all nominees are permitted to stand for election by the membership.
In 2004, the Association decided to sell a remediated 5.7 acre portion of Radburn's parkland, known as Daly Field, for at least $4 million for construction of a condominium complex. The decision was based in part on the increasing property taxes and maintenance burdens for Daly Field, which had fallen into disuse following a period of environmental remediation. The new units would be subject to the Declaration and would pay fees to the Association.
On June 2, 2005, June Meyerson, then-president of the RCA, wrote to Edward Hannaman, an attorney in the Association Regulation Unit of the Department of Community Affairs (DCA), which has jurisdiction over communities like Radburn created prior to the enactment of PREDFDA, and requested that Radburn be brought into compliance with the statute. On November 21, 2005, Robert Matule, then-president of the Association, wrote to Charles Richman, acting commissioner of the DCA, informing him of the Association's opinion that it is not a "homeowners association" because it:
is the sole owner of the parklands, pools, tennis courts, playgrounds and Grange Hall. The residents of Radburn have no ownership interest in the Radburn Association's properties, but own their individual properties in fee simple.
The residential property owners, by acceptance of a deed of conveyance which subjects the property to a covenant which
runs with the land, therefore enter into a contract with The Radburn Association.
Matule emphasized that, despite the DCA's position to the contrary, the Association did not believe it was subject to PREDFDA.
On January 10, 2006, following a request for clarification from the Association, Hannaman sent a letter to Matule asserting the DCA's opinion that "Radburn must comply with PREDFDA regarding open meeting requirements, access to financial documents and dispute resolution." Nonetheless, the DCA noted that it did not believe Radburn was in violation of N.J.S.A. 45:22A-47, the provision of PREDFDA dealing with the surrender of control from the developer to owners. Although, in August 2005, the DCA instructed the Association to allow all residents to run for the Board whether or not nominated by the current trustees, in the January letter Hannaman claimed that the DCA was not authorized to determine whether the Association's election procedures were in compliance with PREDFDA. In an April 13, 2006 letter, the DCA again informed the Association that it does not have the authority to intervene in election issues but noted that it was awaiting the enactment of proposed legislation which could alter its position.
On August 5, 2006, a group of residents referring to themselves as the Concerned Citizens Reclaiming Fair Lawn (CCRF) petitioned Fair lawn for a ballot referendum for "Planned Community Democracy." On August 10, the Board responded, urging residents to continue to work with it and the RCA to address any concerns, such as the election process and the Association's financial expenditures, and to vote against a referendum intended to alter Radburn's longstanding form of governance.
Plaintiffs, a group of citizens residing in the Radburn Community, filed a complaint for injunctive and declaratory relief challenging the governance of the Association. Defendants filed an answer and counterclaims, alleging numerous breaches of fiduciary duty and the duty of loyalty as well as asserting a claim of tortious interference by plaintiff Myerson. The parties cross-moved for summary judgment. They stipulated that there were no issues of material fact in dispute and that the issues regarding the Association's methods of governance were to be decided only under PREDFDA and Title 15A.
In a written opinion, Judge Contillo concluded that: (1) the 1993 amendments to PREDFDA, N.J.S.A. 45:22A-43 to -48, are retroactive and apply to Radburn; (2) PREDFDA does not require that all residents of Radburn be members of the Association; (3) PREDFDA does not require a specific nomination procedure, and the Association's procedure is fair and reasonable under Title 15A; (4) the Association's open meetings policy "substantially complies with PREDFDA"; and (5) PREDFDA's general welfare clause requires the Association to disclose financial documents to residents in accordance with the guidelines established in the Condominium Act, N.J.S.A. 46:8B-1 to -38, at N.J.S.A. 46:8B-14(g). The judge also instructed the Association to amend its bylaws to reflect its open meetings policy and his finding with respect to disclosure of financial documents. With respect to defendants' counterclaims, the judge found that the breach of duty claims were unsupported, and the tort claims were barred by the entire controversy doctrine. The judge granted plaintiffs' summary judgment motion as to count IV of their complaint (financial disclosure) and dismissed the balance of the complaint. This appeal and cross-appeal followed.
We first address, as a threshold issue, the application of the 1993 amendments to PREDFDA to Radburn. In this regard, defendants' assert that we erred in Comm. for a Better Twin Rivers v. Twin Rivers Homeowners' Assoc., 383 N.J. Super. 22, 54-55 (App. Div. 2006), rev'd on other grounds, 192 N.J. 344 (2007) in concluding that these amendments were retroactive while at the same time holding that the original statute was prospective only.
In Twin Rivers, supra, we agreed with the motion judge that, unlike the original act, the 1993 amendments to PREDFDA "do not relate to the creation or sale of units within a [planned real estate development] [(PRED)]. Rather, they address the administration and management of [PREDs]." 383 N.J. Super. at 54. In finding that the amendments applied to the association in Twin Rivers, which was established in 1973, prior to enactment of the original statute, we noted that "[i]t would be unreasonable to assume that the protections granted to" residents of post-1977 PREDs "were not [also] intended to apply to residents of portions of PREDS constructed prior to 1977." Id. at 53, 55. Although reversing on other grounds, the Supreme Court impliedly accepted our consideration of this issue when it noted that common interest residents were protected by a provision in the 1993 amendments. Twin Rivers, supra, 192 N.J. at 369.
Defendants contend, however, that our Twin Rivers holding should not be followed because we "declined" to conduct a proper retroactivity analysis in accordance with Gibbons v. Gibbons, 86 N.J. 515 (1981). In Gibbons, the Court noted that although "prospective application of statutes" is favored by the courts, it does not necessarily apply to every case. Id. at 521-22. There are three circumstances under which, if the Legislature fails to specifically mandate prospective application only, retroactive application may be appropriate. Id. at 522.
The first circumstance arises where the Legislature intends for retroactive application, in which case "the court should . . . 'apply the statute in effect at the time of its decision.'" Ibid. (quoting Kruvant v. Mayor of Cedar Grove, 82 N.J. 435, 440 (1980)). Such legislative intent may be either express, as when stated in the statute or legislative history, or implied, as where "retroactive application may be necessary to make the statute workable or to give it the most sensible interpretation." Ibid. Second, where "the statute is ameliorative or curative[,]" it may be applied retroactively. Id. at 523. Finally, if legislative intent is unclear, "such considerations as the expectations of the parties may warrant retroactive application of a statute." Ibid.
In any of these circumstances, prior to applying the statute retroactively, a court must inquire whether it will result in "manifest injustice" to a party. Ibid.
The essence of this inquiry is whether the affected party relied, to his or her prejudice, on the law that is now to be changed as a result of the retroactive application of the statute, and whether the consequences of this reliance are so deleterious and irrevocable that it would be unfair to apply the statute retroactively.
[Id. at 523-24.]
Applying this analysis to PREDFDA, its original provisions were not intended to apply to "any portion of a [PRED] which has on the effective date of this act [(1978)]: a. [i]ts building permit or permits; or b. [f]inal municipal approval of (1) its site plan or (2) . . . its subdivision plat[.]" N.J.S.A. 45:22A-42. However, although the original statute clearly calls for prospective application, the 1993 amendments, which are supplemental rather than curative, are not as clear.
Ultimately, when interpreting a statute, our "goal is to interpret the statute consistent with the intent of the Legislature." Oberhand v. Dir., Div. of Taxation, 193 N.J. 558, 568 (2008). Interpretation begins with consideration of the plain language of the statute. Ibid. Each word of the statute should be given its proper effect, and the court "should not assume that the Legislature used meaningless language." Med. Soc'y of N.J. v. N.J. Dep't of Law & Pub. Safety, 120 N.J. 18, 26 (1990). Where the statute's language is clear, we must utilize its plain meaning; however, in the event the language is unclear, we must "look to the legislative history to aid in determining the legislative intent of the statute." Oberhand, supra, 193 N.J. at 568. We avoid interpreting statutes in ways that would "render any part . . . inoperative, superfluous or meaningless[.]" Hoffman v. Hock, 8 N.J. 397, 406 (1952). We conclude that the amendments are retroactive.
We first note that the language of N.J.S.A. 45:22A-48 suggests retroactive application of the amendments by obligating even those associations that failed or refused "to make proper amendment or supplementation of [their] bylaws prior to the effective date of" the amendments to comply from that point forward. The Legislature alluded to the issue when it said that the 1993 amendments were intended to "address the transition of control over the common elements and facilities in [PREDs] from a developer to an association composed of unit owners." Assembly Local Gov't Comm. Statement to Senate, No. 217, L. 1993, c. 30 (1993). However, the amendments also were intended to deal with additional issues not addressed in the original statute by "incorporat[ing] into PRED law certain provisions - relating to the bylaws of unit owners' associations, the establishment of members' voting rights, the allocation and collection of common expenses, the amendment of association by-laws and the adoption, amendment and enforcement of rules concerning the common elements" that were previously only found in the Condominium Act. Ibid. The legislation was designed to "prescribe a consistency of management methods" and "safeguard the interests of the individual owners or occupants." Ibid.
Applying the amendments prospectively would deny such protections to any residents in PREDs created prior to the effective date of either the amendments or the original statute. Additionally, as we noted in Twin Rivers, supra, although retroactive application of the original PREDFDA provisions would result in permit amendments and fines where sales had occurred prior to enactment of the statute, similar constraints are not present with respect to the 1993 amendments, particularly in light of the Legislature's mandate in N.J.S.A. 45:22A-48 that all non-compliant association by-laws should be remedied as of the effective date of the amendments. 383 N.J. Super. at 55.
We reject any suggestion that the expectation of the parties mandate prospective application only. Defendants contend that retroactive application would be unjust, noting, for example, that resident Ahearn decided to purchase in Radburn specifically because he wanted the benefits of a PRED without membership in an association. This contention, however, runs contrary to our analysis that the Legislature intended the 1993 amendments to apply retroactively, Gibbons, supra, 86 N.J. at 523, and to the Legislature's stated intention that the 1993 amendments would "prescribe a consistency of management methods in all types of PREDs, and . . . safeguard the interests of the individual owners or occupants." Assembly Local Gov't Comm. Statement to Senate, No. 217, L. 1993, c. 30 (1993).
Defendants next assert that, even if the 1993 amendments are retroactive, they do not apply to Radburn because it is not a PRED. In accordance with N.J.S.A. 45:22A-23h, a PRED is:
any real property situated within the State, whether contiguous or not, which consists of or will consist of, separately owned areas, irrespective of form, be it lots, parcels, units, or interest, and which are offered or disposed of pursuant to a common promotional plan, and providing for common or shared elements or interests in real property.
Within this definition, PREDFDA specifically includes "any form of homeowners' association," but notes that the definition "shall be construed liberally to effectuate" PREDFDA's purposes. Ibid.
A "common promotional plan" is defined as "any offer for the disposition of lots, parcels, units or interests of real property by a single person or group of persons acting in concert, where such lots, parcels, units or interests are contiguous, or are known, designated or advertised as a common entity or by a common name." N.J.S.A. 45:22A-23i. Defendants contend this definition does not apply to Radburn because its original developer went bankrupt during the Great Depression and sold its interests to multiple developers who did not then "act in concert with each other[.]"
However, although these subsequent developers partially abandoned the original Radburn plan (homes were constructed in different styles and some lack the unique Radburn orientation), the homes they constructed and sold were subject to the Declaration executed between the Association and City Housing and were part of the Radburn community. Even after the bankruptcy, the Radburn property was disposed of pursuant to a common promotional plan.
Although Radburn residents who are not members of the Association do not have an ownership interest in the common parks, buildings and other amenities, they do have a shared interest in them. The Declaration expressly provides that the recreational and communal facilities should benefit and provide enjoyment for Radburn residents. Furthermore, all Radburn residents pay an annual assessment to the Association to be used at its discretion within Radburn "for the benefit of the residents" and "for the enhancement of education, recreation, social life, and community welfare . . . ." These assessments are at least partially used for maintenance and upkeep of the common areas, and the interest in the common areas shared by all Radburn residents is sufficient to satisfy PREDFDA's requirement that a PRED "provid[e] for common or shared elements or interests in real property." N.J.S.A. 45:22A-23h.
The Court has long noted that the "universal character" of a "common neighborhood plan" is based on the existence of "reciprocal or mutual burdens and benefits shared by each lot owner . . . ." Weinstein v. Swartz, 3 N.J. 80, 86 (1949). In such cases, "[t]here must be a clear intent to establish a neighborhood scheme of restrictions[,]" which, in order to be enforceable, must be universal, reciprocal and reasonably uniform although not necessarily identical. Olson v. Jantausch, 44 N.J. Super. 380, 386 (App. Div. 1957). Radburn's Declaration of Restrictions, to which each property in the community is subject, establishes the existence of a common neighborhood plan.
The Restatement (Third) of Property: Servitudes (Restatement) 1.8 (2000), defines a "common-interest community" as:
[A] real estate development or neighborhood in which individually owned lots or units are burdened by a servitude that imposes an obligation that cannot be avoided by nonuse or withdrawal
(1) to pay for the use of, or contribute to the maintenance of, property held or enjoyed in common by the individual owners, or
(2) to pay dues or assessments to an association that provides services or facilities to the common property or to the individually owned property, or that enforces other servitudes burdening the property in the development or neighborhood.
One of the comments following this section further explains the requirements for a common-interest community:
Most common-interest communities have both commonly held property and mandatory-membership associations, but the existence of either is sufficient to constitute the property bound by the servitude requiring payment to a common-interest community. The distinctive feature of a common-interest community is the obligation that binds the owners of individual lots or units to contribute to the support of common property, or other facilities, or to support the activities of an association, whether or not the owner uses the common property or facilities, or agrees to join the association. Most common-interest communities are created by a declaration, which not only imposes the servitudes, but also provides automatic and mandatory membership in an association of property owners. Such a provision is not a prerequisite for inclusion in the definition of a common-interest community as used in this Restatement, however. If the property owners are obligated by virtue of a servitude to contribute to maintenance of common property, to the provision of services or facilities, or to pay for enforcement of covenants, or other activity, whether or not they use the common property or facility, or receive any benefit from the enforcement effort or other activity, they are part of a common-interest community. Property subject to such obligations is part of a common-interest community even though no association has been created, or membership in the association is voluntary.
[Ibid. at comment c. (emphasis added).]
The Restatement supports the conclusion that Radburn, which contains commonly enjoyed property and requires payment of assessments by residents for care of this property, is a common- interest community. All of the attributes described in the Restatement are present here. Judge Contillo correctly concluded that Radburn is a PRED in the context of PREDFDA.
We now address plaintiffs' contentions. The critical assertion by plaintiffs is that PREDFDA requires that all unit owners in Radburn must be members of the Association. Not only, according to plaintiffs, is this required by statute, but it reflects the homeowners' view that many residents want equal membership, especially given that they are compelled to support the community.
Judge Contillo noted that PREDFDA "provides no direct guidance on the" issue of membership and found that substituting the definition of "member" into the statute could allow for the Association to be comprised of "a subset of total unit owners" rather than all owners. He expressed his unwillingness to impose a required membership structure where none was expressly mandated by statute, noting that interpretation of the statute in the manner requested by plaintiffs would "bring the Court into a realm of 'what-ifs'" that it "decline[d] to enter."
When interpreting statutes, we give the words used in the provisions "their ordinary meaning and significance." DiProspero v. Penn, 183 N.J. 477, 492 (2005). Considering our objective of "interpret[ing]  statute[s] consistent with the intent of the Legislature[,]" Oberhand, supra, 193 N.J. at 568, we consider "not only the particular statute in question, but also the entire legislative scheme of which it is a part." Kimmelman v. Henkels & McCoy, Inc., 108 N.J. 123, 129 (1987). In discerning legislative intent, we may consult sources other than the statute's language, including "the policy behind a statute, concepts of reasonableness and legislative history." Coletti v. Union County Freeholders, 217 N.J. Super. 31, 35 (App. Div. 1987) (citing Shapiro v. Essex County Freeholder Bd., 177 N.J. Super. 87 (Law Div. 1980), aff'd, 183 N.J. Super. 24 (App. Div.), aff'd, 91 N.J. 430 (1982)).
Plaintiffs contend, however, that use of the term "members" in N.J.S.A. 45:22A-45a, considered with the other provisions of the 1993 PREDFDA amendments, mandates that all Radburn owners be members of the Association. N.J.S.A. 45:22A-45a states in pertinent part that "[t]he form of administration of an association . . . shall provide for the election of an executive board, elected by and responsible to the members of the association . . . ." (Emphasis added).
"Member," a term left undefined in both the original PREDFDA provisions and the 1993 amendments, is defined as "[o]ne that belongs to a group or an organization." The American Heritage Dictionary of the English Language 1095 (4th Ed. 2000). Plaintiffs' argue, based on this definition, that the statute mandates "election of an executive board, elected by and responsible to the individuals comp[o]sing the association[,]" while the trial judge determined that the statute mandates election by "the individuals comp[o]sing a group of the association." This group, the judge reasoned, "could logically be a subset of the total unit owners."
Plaintiffs support their interpretation by insisting that distinguishing between members and unit owners would create a conflict with N.J.S.A. 45:22A-47, as well as with other provisions allowing owners to attend voting meetings of the Board. We reject this argument.
N.J.S.A. 45:22A-47 establishes the method by which a developer must relinquish control of the executive board to the owners. Plaintiffs argue, in light of N.J.S.A. 45:22A-45a, requiring that the board be elected by and responsible to association members, that the Legislature's use of the term "owner" mandates a finding that all owners must be members of the association. However, a closer reading of N.J.S.A. 45:22A-47 reveals that it requires that owners, rather than the developer, elect the executive board, a requirement Radburn satisfies. Furthermore, the statute makes reference to the percentage of the board that must be elected by the owners, from the time the first unit is sold until seventy-five percent of the units are sold, as being based on "the whole number of units entitled to membership in the association." N.J.S.A. 45:22A-47b. This suggests that all unit owners are not necessarily entitled to membership.
Nonetheless, because the statute is unclear on this question, it is necessary to consider the legislative history of the 1993 amendments, which is more instructive. See Kimmelman, supra, 108 N.J. at 129 (noting that statutory interpretation requires consideration of "the entire legislative scheme").
The Assembly Local Government Committee's statement, as well as the Legislative Fiscal Estimate, observed that the amendments "introduce the requirement that meetings of an association's executive board be open to all members of the association[.]" Assembly Local Gov't Comm. Statement to Senate, No. 217, L. 1993, c. 30 (1993); Legislative Fiscal Estimate to Senate, No. 217, L. 1993, c. 30 (1992). The relevant statutory provision uses similar language, but substitutes "all unit owners" for "members": "[A]ll meetings of the executive board . . . shall be open to attendance by all unit owners[.]" N.J.S.A. 45:22A-46a.
Use of the two terms interchangeably suggests that the Legislature may have intended that all unit owners within a common-interest community be members of its association. However, the Legislature used the word "owner" in other sections of the statute and even defined it in N.J.S.A. 45:22A-23d as "any person or persons who acquires a legal or equitable interest in a unit, lot, or parcel in a [PRED][.]" It could have used "owner" rather than "member" in N.J.S.A. 45:22A-45a, but chose not to do so; "where the Legislature has carefully employed a term in one place and excluded it in another, it should not be implied where excluded." GE Solid State, Inc. v. Dir., Div. of Taxation, 132 N.J. 298, 308 (1993). Applying this rule of statutory interpretation leads us to conclude that PREDFDA does not require that all unit owners be members in the association. We note that although the Legislature could have included a membership provision in either the original statute or the 1993 amendments, it failed to do so.
Again we look to the Restatement, supra, 6.2, comment a., which we previously quoted in full, infra, and emphasize that:
Most common-interest communities have both commonly held property and mandatory membership associations, but the existence of either is sufficient to constitute the property bound by the servitude requiring payment to a common-interest community.
. . . .
Property subject to such obligations is part of a common-interest community even though no association has been created, or membership in the association is voluntary.
Radburn residents are bound by a provision in their deed subjecting them to Radburn's Declaration of Restrictions and its amendments. The Declaration does not require that all Radburn property owners be members of the Association; rather it provides that "membership in and control of [the] Association . . . be vested in the inhabitants and/or property owners . . . or in representatives of such inhabitants and/or property owners." (Emphasis added).
The Association's by-laws, which are available for review by residents, define "members" as the nine original board members named in the Articles of Incorporation; current and former trustees; persons elected by members; and the President of the RCA during his or her presidency. These persons are "representatives" of the non-member residents, thereby meeting the requirements imposed by the Declaration.
Under Radburn's existing Declaration, membership is not synonymous with unit owners. We will not impose the interpretation suggested by plaintiffs that the Legislature equated "owner" and "member" absent legislative intervention, especially in a subject area that has generated active legislative interest and initiative.
Plaintiffs next claim that that PREDFDA and the principles of representative democracy require the Association to allow all Radburn homeowners to nominate candidates to serve on the Board. They further contend that Radburn's nominating procedure does not meet the "fair and reasonable" requirement imposed by Title 15A. The Radburn homeowners agree, submitting that the movement for democracy in Radburn is well supported by residents. Amicus American Civil Liberties Union of New Jersey (ACLU) contends that "[i]t is essential to the well-being and democratic rights of the New Jersey residents who live in common interest communities that this Court repudiate the trial court's holding that electoral procedures that 'offend pure democratic sensibilities' are acceptable under" the law.
The trial judge did "not discern any authority in PREDFDA to impose" on Radburn the write-in or petition requirements of public election law. He noted that "[t]here is no doubt that the current nomination procedure offends pure democratic sensibilities." However, both parties agreed that Title 15A applied to Radburn, and the judge pointed out that neither PREDFDA nor Title 15A "mandate pure democratic procedures within planned residential communities[,]" as evidenced by our decision in Twin Rivers, supra, where we sustained weighted voting because no legislative authority required otherwise. 383 N.J. Super. at 68.
The trial judge concluded that, absent any specific legislative authority, he could not impose a strictly democratic nominating procedure. He said:
Characterizing Radburn's current system of nomination as oligarchic or paternalistic or elitist or being out of step with the times does not, in my view, render it illegal. The system at Radburn has not been shown to be unfair or unreasonable or otherwise illegal, notwithstanding that it doesn't allow for nomination by petition or write-in. It is not for the Court to say whether the system is wise. Had the legislature intended to impose open petition and nomination, under Title 15A or via PREDFDA, it could easily have done so. I can divine no legislative warrant for the mandatory restructuring of Radburn and therefore decline to impose it by judicial order. If the unit owners want reform, they must petition their elected representatives in Trenton.
We restate the composition of Radburn's Board. It is composed of nine members, one of whom is the current RCA president and two of whom are elected by Association members for one-year terms. The remaining six trustees are elected by all Radburn residents from a list of candidates nominated by the current trustees. Each of those six trustees serve staggered three-year terms. Any Radburn resident who is at least twenty-one years of age may apply to be considered for nomination by the Board.
Plaintiffs first contend that the Association's nominating procedure violates PREDFDA. N.J.S.A. 45:22A-47a(3) requires that the owners "elect the entire executive board[.]" The statute does not require that all owners must elect each trustee. It allows for Radburn's system wherein the entire board is elected by owners, but certain trustees are elected by only subsets of owners.
Similarly, N.J.S.A. 45:22A-45a requires that the board be "elected by and responsible to the members of the association[,]" a requirement that is echoed by the Restatement, supra, 6.16 ("Except as otherwise provided by statute or the governing documents, an association in a common-interest community is governed by a board elected by its members."). As we previously determined, PREDFDA does not require that all unit owners be members of the association. Undoubtedly, all members of Radburn's Association are, or can be, involved in the election of each of the nine trustees (as Association members, owners or members of the RCA). Radburn's process does not violate this requirement, even though all owners do not participate in electing all trustees. Although the trustees are "liable as fiduciaries to the owners[,]" N.J.S.A. 45:22A-45c, nothing in PREDFDA mandates that all owners play a role in nominating and electing trustees.
Plaintiffs also contend that the Association's nomination procedure violates New Jersey's Nonprofit Corporation Statute, Title 15A, and, consequently, the principles of democratic governance. See also Restatement, supra, 6.16, comment c. (noting that where "the association is a corporation, the corporation statute will generally establish the parameters within which an election of the governing board must be held").
N.J.S.A. 15A:5-20e provides that "[i]f a bylaw adopted by the members provides a fair and reasonable procedure for the nomination of candidates for any office (including election of a trustee), only candidates who have been duly nominated in accordance therewith shall be eligible for election." Similarly, the Restatement provides that an association's "election procedures must provide a reasonable opportunity for eligible members to become candidates for election and to make their views known to the electorate, and a reasonable opportunity for eligible voters to cast their votes." Restatement, supra, 6.16, comment c.
In Twin Rivers, supra, the plaintiffs objected to the association's practice of weighing votes "according to the value of the member's holdings." 383 N.J. Super. at 65. Like plaintiffs here, they compared the importance of their voting rights within the community to their "voting rights in any public elections" and contended that "constitutional provisions regarding voting should be expanded to include . . . homeowner's associations." Id. at 65-66. The plaintiffs attempted to equate their situation with cases in which the right of freedom of expression was extended to private property. However, we observed that, unlike those cases, "which dealt with a private property owner's rights versus the public, this case concerns an incorporated non-profit association and its members. . . . [T]he voting rights of members of an association such as [Twin Rivers] are governed by contract law and by the relevant statutes for non-profit associations." Id. at 66.
Just as here, plaintiffs in Twin Rivers argued that the Association's nomination process should comport with Supreme Court precedent pertaining to nomination procedures in public elections. See Anderson v. Celebrezze, 460 U.S. 780, 787-88, 103 S. Ct. 1564, 1569, 75 L. Ed. 2d 547, 557 (1983). We have, however, already rejected plaintiffs prior attempt to "import to elections in community associations the standards heretofore applied only in public sector elections." Twin Rivers, supra, 383 N.J. Super. at 68. We conclude, as we did then, that "[w]ithout a basis in legislation, it is beyond our authority to effect such a change in the relationships between community associations and their members." Ibid.
The Court similarly declined to extend such constitutional protections, although noting that any restrictions on constitutional rights "must be reasonable as to time, place, and manner[,]" and that its holding did not mean residents could "never successfully seek constitutional redress against a governing association . . . ." Twin Rivers, supra, 192 N.J. at 368-69. The Court also pointed out that residents in common-interest communities are protected by the business judgment rule, PREDFDA and principles of property law that prohibit restrictive covenants from violating public policy. Id. at 369-70.
Here, while plaintiffs' arguments have surface allure, we are mindful that all Radburn owners agreed to be bound by the Declaration of Restrictions, which neither guarantees membership in the Association nor references any rights with respect to the nomination and election of trustees. The Board, because it makes decisions affecting the entire Radburn community, including member and non-member owners alike, has a fiduciary responsibility to all owners.
As agreed to by the parties, Radburn's nominating procedure is governed by Title 15A, which imposes no restrictions on the procedure other than that it must be fair and reasonable. Although the Association's procedure may not satisfy democratic principles, we cannot deem it unfair or unreasonable. The RCA, to which all owners belong, is represented on the Board by its president. Any Radburn resident may submit his or her name for consideration for nomination for the six seats elected by all residents. Despite the Board's pre-election vetting of candidates for those six seats and selection of the two remaining trustees solely by the member owners, as the trial judge pointed out, "[t]he history and duration and vitality of Radburn seem to indicate that the nomination system has worked, at least from a functional standpoint of governance." We cannot accept plaintiffs' arguments that the nature of the nominating process may inhibit their choices from being nominated. As a matter of law, we conclude that Radburn's nominating procedure meets the "fair and reasonable" requirement imposed by N.J.S.A. 15A:5-20. No current legislative authority exists that suggests that we impose a different system.
Plaintiffs assert that the Association's open meetings policy violates PREDFDA. They further contend that the statute must be interpreted to allow Radburn owners to attend all regularly scheduled and special board meetings, and that any other interpretation violates the Open Public Meetings Act, N.J.S.A. 10:4-6 to -21.
The trial judge noted that plaintiffs failed to "cite any decisions that were made in working sessions that should have been subject to a public voting session." He found that the Association's policy "substantially complie[d] with PREDFDA," and that the only defect was that the "meetings policy [wa]s not recorded in the bylaws[;]" he directed the Association to amend its bylaws accordingly.
PREDFDA, in accordance with N.J.S.A. 45:22A-46a, requires an association's bylaws to include:
A requirement that all meetings of the executive board, except conference or working sessions at which no binding votes are to be taken, shall be open to attendance by all unit owners, and adequate notice of any such meeting shall be given to all unit owners in such manner as the bylaws shall prescribe[.]
The provision allows the board to exclude owners from attendance at meetings involving discussions of matters concerning: (1) individual privacy; (2) litigation or contract negotiations; (3) issues covered by attorney-client privilege; and (4) the "employment, promotion, discipline or dismissal of a specific officer or employee of the association." Ibid.
PREDFDA further permits the board, at its discretion, to determine the level of owners' participation and whether to allow public comments. Ibid. The provision requires the board to make copies of the meeting minutes available to all owners prior to the subsequent open meeting. Ibid.
On July 17, 2006, at the urging of the DCA, the Association adopted a "Policy for Certain Procedures Concerning Meetings of the Board at Which Binding Votes are Taken." The policy permits the Board "to conduct non-public working sessions . . . at which no binding vote shall be taken." However, it also requires the Board to conduct voting meetings, where binding votes are taken, and to permit all residents to attend those meetings, with the exception of the parts of the meeting involving those matters listed in PREDFDA or discussions of appeals from applications related to the architectural guidelines. The policy further provides for posting of scheduled open meetings in the community meeting hall and online, as well as posting of the agenda prior to each meeting. It also allows for the Board, in its discretion, to decide whether to accept public comment. Finally, it requires the Board to post draft and final minutes, as well as an audio recording of the meeting, for public use.
As noted by Judge Contillo, the Association's policy mirrors PREDFDA's requirements and actually expands on the statute by allowing all residents, including tenants, to attend open meetings, rather than only owners. Plaintiffs' argument that PREDFDA requires that all regular meetings be open to owners is without merit. The statute clearly permits boards to exclude "conference or working sessions at which no binding votes are to be taken[.]" N.J.S.A. 45:22A-46a. Furthermore, contrary to plaintiffs' contentions, nothing in PREDFDA requires that any meetings where there is a quorum and association affairs are discussed must be considered open meetings rather than conference or working sessions to which residents are not invited.
Plaintiffs also submit that the Association's policy is subject to the Open Public Meetings Act. This Act, however, is intended to apply to "meetings of public bodies" so as to maintain the public's faith in government and its "effectiveness in fulfilling its role in a democratic society[.]" N.J.S.A. 10:4-7. The same policy considerations do not apply here where the body meeting is the executive board of a private non-profit corporation. See N.J.S.A. 10:4-8a (defining "public body" as a "group of two or more persons . . . collectively empowered as a voting body to perform a public governmental function affecting the rights, duties, obligations, privileges, benefits, or other legal relations of any person, or collectively authorized to spend public funds"). Plaintiffs' argument is unavailing. The judge correctly granted summary judgment dismissing this claim.
Plaintiffs appeal the judge's ruling on financial disclosures to the extent that he failed to specify the GAAP Radburn was to use in determining which financial documents were to be available to owners, and they seek an order compelling use of standards set by the American Institute of Certified Public Accountants (AICPA). Amicus Homeowners contend that the Association is not following the trial court's order because the amendment to its disclosure provision is inadequate and imposes a restriction that residents may not obtain any documents created before January 1, 2008.
Defendants cross-appeal and argue that the trial judge erred in ordering disclosure of the Association's financial documents because PREDFDA's general welfare clause does not require that it allow owners to have access to them. In the event that disclosure of financials is required, they argue that PREDFDA does not require that the recommendations of the AICPA should control access, as plaintiffs contend.
The trial judge, citing to Mulligan v. Panther Valley Prop. Owners Ass'n, 337 N.J. Super. 293, 301 (App. Div. 2001), applied the Condominium Act to the question of how much financial information Radburn was required to disclose. He found that interpretation of PREDFDA's general welfare clause, N.J.S.A. 45:22A-44b, was based on state public policy that was established in the Condominium Act's requirement that "associations must maintain records in accordance with [GAAP]." He determined that members of a PRED were not entitled to anything less than members of condominium associations in accordance with N.J.S.A. 46:8B-14(g) and concluded that Radburn was required to:
use this portion of the Condominium Act as its guideline for determining what and when it must disclose to the residents of the community. And Radburn shall amend its bylaws to comply with this statute. As to the specific content of the disclosures, the Court will go no further in this litigation than to note that the Condominium Act requires Radburn to apply [GAAP].
Although Radburn, as a PRED, is not governed by the Condominium Act, "[i]n certain contexts, . . . the [Act] may be considered 'instructive' and looked to for guidance." Mulligan, supra, 337 N.J. Super. at 301 (citation omitted). In Mulligan, we were confronted with a common-interest community similar to Radburn - a residential community consisting of a variety of home types, including condominiums and single-family homes. In response to the plaintiff's argument regarding an amendment made by the board with respect to inspection of the association's books, the court stated that "[t]he members of the Association's board occupy a fiduciary position vis-a-vis the Association and the membership. Any response to a request for inspection of books and records must be made in good faith and cannot be structured with an eye to self-protection." Id. at 309.
Although PREDFDA does not include a specific provision relating to the inspection of documents, and the Legislature could have included such a provision, its general welfare provision imposes a duty on associations that could be interpreted to include the disclosure of relevant financial documents. The provision requires that an association "exercise its powers and discharge its functions in a manner that protects and furthers the health, safety and general welfare of the residents of the community." N.J.S.A. 45:22A-44b. Given that the statute is unclear on the specific question of disclosure but is clear that associations have a responsibility to protect the welfare of their residents, the Condominium Act provides a guide as to the level of disclosure required. Mulligan, supra, 337 N.J. Super. at 301.
Under the Condominium Act, in accordance with N.J.S.A. 46:8B-14(g), an association is responsible for:
The maintenance of accounting records, in accordance with [GAAP], open to inspection at reasonable times by unit owners. Such records shall include:
(i) A record of all receipts and expenditures.
(ii) An account for each unit setting forth any shares of common expenses or other charges due, the due dates thereof, the
present balance due, and any interest in common surplus.
Currently, Radburn provides residents with an end-of-year balance sheet, "a statement of income and expenses for that year and the tax returns . . . ." The judge correctly concluded that the residents are entitled to more detailed financial disclosures, especially given that they are responsible for paying yearly assessments for the care and upkeep of the common interest property. The Condominium Act provides sufficient guidance for such disclosure, requiring the Association to abide by GAAP.
The DCA's Bureau of Homeowner Protection's "Association Regulation Initiative," referring to N.J.S.A. 46:8B-14(g), noted that "the law does not establish specific records as GAAP records." It instructed associations to consult with their accountants in order to identify which financial records qualify as GAAP records subject to inspection by owners. According to the DCA, in the event the owners disagreed with the classifications, the dispute should be referred to alternative dispute resolution.
Judge Contillo properly instructed the Association to amend its bylaws to require disclosure of any GAAP records.
Plaintiffs contend that the court also should have specified that the GAAP to be used in determining which records must be disclosed are those standards set forth by the AICPA for common-interest realty associations. We decline to address this issue. First, plaintiffs prevailed on their claim for financial disclosures, see Ellison v. Evergreen Cemetary, 266 N.J. Super. 74, 78 (App. Div. 1993), and they did not seek application of the AICPA standards in the trial court. We do note, however, that nothing in either PREDFDA or the Condominium Act requires application of the AICPA guidelines.
Unlike PREDFDA, proposed Senate Bill 308 entitled "Common Interest Community and Homeowners' Association Act," which was introduced in early 2008 and is currently pending before the Senate Judiciary Committee, includes a provision requiring an association's articles of incorporation to state that its members "are the unit owners," but also provides for division of the members into classes. S.308, 213th Legislature (2008). Similarly, proposed Senate Bill 805, introduced in 2006 and entitled "New Jersey Uniform Common Interest Ownership Act," calls for creation of a "unit owners' association" to "consist exclusively of all of the unit owners[.]" S.805, 212th Legislature (2006).
The eighteen Radburn residents who support the present structure counter that neither plaintiffs nor amicus can point to a time when the Board acted against the residents' best interests or harmed Radburn's welfare.
We reach this conclusion notwithstanding DCA's statement in an August 2005 letter to the Board that PREDFDA requires the Association to allow all residents to run for the Board, "whether or not the sitting Radburn Trustees are willing to nominate them[.]" No such provision exists in PREDFDA. In a letter dated January 10, 2006, the DCA appears to contradict its earlier statement, noting "[w]e are not authorized to determine whether an association's elections comply with its governing documents or any other applicable standards regarding elections" and referring any election disputes to alternative dispute resolution or the courts. This latter position is confirmed in an April 3, 2006 letter, in which the DCA referenced the fact that our decision in Twin Rivers confirmed its jurisdiction over common-interest communities created prior to PREDFDA but did not expand its authority to intervene in election issues. Ultimately, the DCA noted that any intervention on its part would have to await the enactment of proposed legislation to that end.
According to defendants' brief, the Association's bylaws have been amended consistent with the trial court's instructions.
We also note that plaintiffs failed to note their intention to appeal this point in their notice of appeal. See R. 2:5-1(f)(3)(A).
March 18, 2010