LAKE SHAWNEE CLUB, INC v. MUHAMMED AKHTAR

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-5681-08T35681-08T3

LAKE SHAWNEE CLUB, INC.,

Plaintiff-Appellant,

v.

MUHAMMED AKHTAR,

Defendant,

and

ARCHIBALD CLARK, GUY DEWEY

and SALVATORE PASCHITTI,

Defendants-Respondents.

____________________________________

 

Argued January 26, 2010 - Decided

Before Judges Grall and LeWinn.

On appeal from Superior Court of New

Jersey, Law Division, Morris County,

Docket No. L-1899-08.

Eileen McCarthy Born argued the cause for

appellant (Dolan & Dolan, attorneys; Ms.

Born, on the brief).

Judith A. Fallat argued the cause for

respondents.

PER CURIAM

Plaintiff Lake Shawnee Club, Inc., (Club) appeals following a bench trial conducted after this court reversed a grant of summary judgment in favor of defendants. Lake Shawnee Club, Inc. v. Akhtar, No. A-4717-06 (App. Div. March 14, 2008). The defendants in these consolidated actions to collect unpaid dues for Club membership Archibald Clark, Guy Dewey and Salvatore Paschitti are owners of property located in the Lake Shawnee Reservation (Reservation). None of them opted to belong to the Club during the period for which the dues were assessed.

On a prior appeal, we held that covenants in the deed from the developer to the purchaser of the Reservation, Schneider, and documents referenced in and recorded with the deed required subsequent purchasers of lots to pay a $1.50 monthly maintenance fee and to become members of the Club and pay annual dues. Id. at 4, 13-15. Accordingly, we reversed orders granting defendants summary judgment on the ground that membership was not required. Noting, however, the undisputed evidence of the Club's forty-plus-year practice of treating membership as optional, we remanded for further proceedings to address whether the Club's conduct, changed circumstances or the relevant equities barred enforcement of the restrictive covenants. Id. at 16.

On remand, the judge found that Clark, Dewey and Paschitti relied upon the Club's long-standing and announced policy of optional membership when they purchased property in the Reservation. The judge concluded that because the Club treated membership as optional and defendants relied upon the practice adopted by the Club, the Club was not entitled to collect the dues it billed these defendants. We affirm.

The Reservation is located in Morris County and was established in the 1940s. It is comprised of approximately 550 residential lots owned by individuals and of areas owned by the Club. The Club's property includes the eighty-three acre Lake Shawnee, its dam and three docks, and five additional acres used for three beaches, playing fields and a clubhouse.

Expenses paid from the annual dues and monthly maintenance fee include real estate taxes, insurance, wages for an office manager, a security officer and lifeguards, as well as the costs of maintaining the lake, dam and grounds. The Club's social events are self-funded. There are two flat rates for dues "Membership Dues" and "Senior Membership Dues," the latter being a discounted rate charged owners over the age of sixty-five.

Club membership is limited to residents of the Reservation. The membership dues permit the owner, persons residing with the owner and their guests to use the Club's facilities. The rate does not vary with the number of persons or the size or location of the owner's property.

For a period of about twenty years after the Schneider deed, membership in the Club was deemed mandatory. Thereafter, membership was treated as optional for a period of more than forty years. During that time, property owners were given the option to pay dues and join the Club on a year-to-year basis. The $1.50 monthly maintenance fee, however, was treated differently; the Club consistently enforced that obligation without regard to Club membership.

Dewey purchased his home in November 1980. He was not specifically looking for a lake property and purchased the home because it was "a good value." He was aware that the deed required membership in the Club, but the seller told him membership was voluntary. The Secretary of the Club confirmed that information and gave Dewey a welcome letter stating that "membership is not mandatory" and encouraging new residents to join. Relying on those representations, Dewey went forward with the purchase, which he would not have done if he had known dues were mandatory.

Clark purchased his home in December 1978 because he could afford it. Prior to closing, he too was advised by the seller that Club membership was not mandatory. He would not have purchased the home if membership was mandatory out of concern that the dues would be an unpredictable expense. Although Clark had no conversations about membership with anyone representing the Club prior to making the purchase, he received solicitations from the Club describing membership as voluntary and encouraging him to join.

Paschitti acquired his Lake Shawnee home in July 1984. He selected it because its location was convenient for commuting to work and the price was "good," not because it was near a lake. He too was told that membership in the Club was voluntary and received information encouraging him to join. He said he would not have purchased the home if he knew membership would be mandated.

Each of the defendants had belonged to the Club for a time. Clark belonged for only one or two years after moving into the community. Paschitti was a member of the Club for approximately thirteen years, and Dewey was a member from April 1981 through 2003.

Eric Wilsusen, President of the Club's Board of Governors (Board), and Marc Sanderson, a Certified Public Accountant who has served as Treasurer for fourteen years and is a member of the Board, testified on behalf of the Club. They provided information about the expenditure of the Club's funds set forth above and also about the circumstances that led the Board to resume enforcement of mandatory membership and Club membership.

In 2001, dams in other lake communities failed during a heavy rainfall resulting in flooding. Subsequent to that storm, the New Jersey Department of Environmental Protection (NJDEP) ordered regular inspections of the dam. The first inspection cost the Club $2500. At the time of trial, the Club had submitted an "inundation mapping" to NJDEP, but NJDEP had not yet determined what it would require the Club to do. Wilsusen acknowledged that the members of the Club's Board have no reason to believe that the dam is unsafe and explained that their biggest concern is what NJDEP will order them to do to maintain it. NJDEP had mentioned, but not mandated, measures such as dredging, auxiliary spillways, and general maintenance. The Board expected to spend about $20,000 per year on hydro-raking.

The Board had considered but rejected the idea of raising the rate of the annual dues out of fear that members would drop out. The members began to explore the possibility of making membership mandatory.

In November 2005, the Board passed a resolution reinstating mandatory membership and imposing a new obligation for payment of a $500 initiation fee upon transfer of title. Prior to that resolution, about sixty percent of the approximately 550 property owners were members. After the resolution was adopted, about ninety-five percent of the owners paid dues, and the cost of regular membership was reduced from $350 to $300 for the year commencing on April 1, 2006. From each payment, the Club planned to reserve $60.00 for dam repair and lake preservation, $10.00 for maintenance and repairs, and $10.00 for capital improvements. It is not clear whether the funds reserved for capital improvement are for Club facilities or projects related to preservation of the lake.

Clark, Dewey and Paschitti each testified as to his belief that a mandatory initiation fee and mandatory membership would make it more difficult to sell his property. At least one of them referenced the Club's uncertainty about the work that NJDEP would mandate and its cost.

For reasons stated in the oral opinion delivered on June 18, 2009, the trial judge determined that due to the Club's forty-plus-year policy of treating membership as optional, the Club had abandoned and was estopped from enforcing covenants in defendants' respective chains of title. We affirm on the ground that the facts the judge deemed sufficient to establish abandonment and estoppel amount to a waiver of the Club's right to the relief it sought against the defendants in these consolidated actions.

The judge credited the testimony of Clark, Dewey and Paschitti about the Club's long-standing, well-established and self-proclaimed position that membership was "not mandatory" but "encouraged." That testimony was supported by documentary evidence and the Club's mailing describing membership as voluntary. The testimony was not disputed, and it was also consistent with the evidence showing that these defendants joined the Club during some years of their residency, making the choice, as the Club permitted, on a year-to-year basis.

The judge determined that the Club was the party benefiting from a deed restriction and had abandoned the right to enforce it by adopting a contrary position for an unreasonable and unexplained period of time. That determination rested upon these findings of fact: the Club had, for more than forty-four years, treated membership as optional; defendants relied upon the Club's position on voluntary membership when they purchased their respective properties; and the defendants were reasonably and justifiably concerned that it would be more difficult for them to sell their respective properties if the new owner would be obligated to pay an initiation fee to join the Club and annual dues thereafter. In contrast, the judge found no justification for a shift in the Club's long-standing position on membership. He determined that the evidence did not establish that the lake's dam is unsafe or that the Club's inability to maintain the lake or the dam was attributable to anything other than poor planning.

For all of those reasons, the judge concluded that these defendants would be unfairly burdened if the Club were permitted to change its long-standing position on membership. Accordingly, the judge entered judgments prohibiting the Club "from imposing mandatory membership . . . [and] any membership fee or other assessment, cost, or fee arising out of mandatory membership in the Club" on these defendants.

On appeal the Club argues:

I. THE TRIAL COURT ERRED IN FAILING TO

FOLLOW THE MANDATE OF [THE] APPELLATE DIVISION ON REMAND.

II. THE FACTUAL FINDINGS AND LEGAL

CONCLUSIONS OF THE TRIAL COURT WERE IN ERROR, AS THERE WAS A LACK OF SUFFICIENT CREDIBLE EVIDENCE TO SUPPORT THE TRIAL JUDGE'S DECISION, AND THE LEGAL CONCLUSIONS REACHED RESULTED IN A DENIAL OF JUSTICE TO THE [CLUB].

The Club's first argument lacks sufficient merit to warrant more than brief comment. On the prior appeal, our reversal of the grant of summary judgment to defendants, quite obviously, did not end the litigation. Given the need for a remand, we observed that the evidence submitted on the summary judgment motions raised "questions . . . as to whether the Club's conduct over the years, changed circumstances or the relevant equities preclude imposition of this 'membership fee.'" Lake Shawnee Club, Inc., supra, slip op. at 16. The trial judge addressed those issues based on the evidence the parties presented at trial.

We also directed the "parties' attention to principles governing common interest communities and their operation and decisions addressing issues related to servitudes in such communities." Id. at 16-17. The Club did not amend its pleadings to raise these issues or present evidence that would justify imposition of dues structured as these dues are under those principles. See Citizens Voices Ass'n v. Collings Lakes Civic Ass'n, 396 N.J. Super. 432, 446 (App. Div. 2007); Lake Lookover Property Owner's Ass'n v. Olsen, 348 N.J. Super. 53, 54 (App. Div. 2002); see generally Restatement (Third) of Property: Servitudes 1.8, 6.2, 6.5, 6.10, 6.12; id. at 6.12 comment b and illustration 2; Evergreen Highlands Ass'n v. West, 73 P.3d 1, 7 (Colo. 2003), cert. denied, 540 U.S. 1106, 124 S. Ct. 1059, 157 L. Ed. 2d 892 (2004).

Judges cannot address issues that are not raised by the evidence or the pleadings submitted by the parties. We cannot conclude that the judge ignored a mandate from this court.

We also reject the Club's objections to the judge's determination on the merits. Although the Club's complaints characterize the actions as presenting a simple issue of money owed on a book account or for services rendered and goods delivered, in reality the claims depended upon the Club's right to enforce a servitude a restrictive covenant in the defendants' respective chains of title. See Restatement (Third) of Property: Servitudes 1.1. In such an action, "[t]he conduct of the claimant may be considered in determining both the availability and choice of remedy." Restatement (Third) of Property: Servitudes 8.3 comment f. A servitude will be enforced by "any appropriate remedy or combination of remedies." Id. at 8.3. Conduct that amounts to a complete defense to enforcement, such as abandonment or estoppel, warrants a denial of all relief. Id. at 8.3 comment a.

"[V]iolations of restrictive

covenants can constitute an abandonment

of a neighborhood scheme in whole or in

part . . . ." City of Paterson v. Schneider, 31 N.J. Super. 598, 604 (App. Div. 1954). Such violations, however, must be such as

to indicate an abandonment or modification of the original general plan which makes an enforcement of the plan inequitable because of changed conditions. The violations must be so pervasive as to indicate either a change in the neighborhood or a clear intent on the part of the property owners generally to abandon or modify the original plan.

[Citizens Voices Ass'n, supra, 396 N.J. Super. at 442 (quoting Murphy v. Trapani, 255 N.J. Super. 65, 74, (App. Div. 1992)).]

The principle of abandonment of a restrictive covenant and other servitudes is well-established. "A servitude benefit is extinguished by abandonment when the beneficiary relinquishes the rights created by a servitude." Restatement (Third) of Property: Servitudes 7.4. "Abandonment is normally used to describe a situation in which a servitude has terminated because all beneficiaries have relinquished their rights . . . to enforce a particular covenant . . . ." Id. at comment b. Abandonment is based on the conduct of the person or persons benefited by the covenant; in that aspect abandonment is like conduct that gives rise to claims of estoppel, laches and waiver. Ibid. It requires proof of intent to abandon, which can be established by circumstantial evidence. Id. at comment a.

The beneficiary of a servitude may also be estopped from enforcing a servitude. "Estoppel . . . applies when the servitude beneficiary misleads the servient owner into believing that the beneficiary no longer intends to use or enforce the servitude and the servient owner reasonably and detrimentally relies on that representation." Id. at comment b.

Other principles apply to limit the remedy available in an action to enforce a servitude in a particular case. "Waiver is closely related to both abandonment and estoppel and the facts [establishing] waive[r of] the right to enforce a servitude often fall somewhere between, involving elements both of voluntary relinquishment and justifiable reliance by the burdened party on an implied representation that the beneficiary will not enforce the servitude." Ibid. The facts that lead to a finding of waiver differ from those required for abandonment because they establish a failure to enforce the covenant in specific instances. Ibid. The proofs required for waiver differ from those required for estoppel because waiver does not require a showing of culpability on the part of the party seeking enforcement. Ibid.

While the trial judge cast his decision in terms of abandonment and estoppel, he fashioned a remedy limited to the defendants before him, which is characteristic of a finding of waiver. The judge's decision to limit the judgments to the parties before him was entirely appropriate in this circumstance. "If it is not appropriate to enforce the servitude with a coercive remedy in the particular case, but it is not clear that the circumstances warrant termination" based on abandonment or estoppel, then it is appropriate to deny the relief requested or fashion relief that is appropriate. Id. at 8.3 comment a.

The judge's factual findings and legal conclusions fully support a denial of the Club's request to enforce defendants' obligations to pay dues and fees associated with Club membership. While a finding of waiver relevant to enforcement generally requires a court to consider the relative costs and benefits of the remedy it fashions, the Club took the position that it was entitled to full payment of assessed membership dues and did not present evidence that would permit the judge to fashion a lesser remedy based upon the scope of the waiver and the relative benefits and burdens. We also note that neither the Club nor defendants presented any argument based upon the monthly maintenance fee, which the Club has continually enforced.

The judgments are affirmed.

 

Judgments were entered under original docket numbers L-1925-08, L-1927-08 and L-1928-08.

(continued)

(continued)

14

A-5681-08T3

July 15, 2010