GREENBRIAR OCEANAIRE COMMUNITY ASSOCIATION, INC. v. U.S. HOME CORPORATION

 

(NOTE: The status of this decision is Published.)

                NOT FOR PUBLICATION WITHOUT THE
               APPROVAL OF THE APPELLATE DIVISION

                             SUPERIOR COURT OF NEW JERSEY
                             APPELLATE DIVISION
                             DOCKET NO. A-2653-16T1

GREENBRIAR OCEANAIRE COMMUNITY
ASSOCIATION, INC., a New
Jersey Non-Profit Corporation,         APPROVED FOR PUBLICATION

         Plaintiff-Appellant,             November 16, 2017

    v.                                   APPELLATE DIVISION


U.S. HOME CORPORATION, a Delaware
Corporation d/b/a Lennar, DONALD
R. BOMPENSA, SCOTT FARRY, GEOFF
POTTER, ANTHONY CALICCHIO, PAUL
SHERMAN, MICHAEL TINSMAN, ROBERT
NOCENTINO, ROBERT PISCIOTTA, GLEN
McDONALD, and ANTHONY MIGNONE,

          Defendants-Respondents.
______________________________________________________

         Argued October 3, 2017 – Decided November 16, 2017

         Before Judges Fisher, Sumners and Moynihan.

         On appeal from the Superior Court of New
         Jersey, Law Division, Ocean County, Docket No.
         L-2105-15.

         Samuel J. McNulty argued the cause for
         appellant (Hueston McNulty, PC, attorneys; Mr.
         McNulty, of counsel and on the brief).

         Justin W. Oravetz argued the cause for
         respondents (Archer & Greiner, PC, attorneys;
         William L. Ryan and Mr. Oravetz, of counsel
         and on the brief).

    The opinion of the court was delivered by

FISHER, P.J.A.D.
       The plaintiff homeowner association's complaint alleges that

the defendant-developer violated various statutory, regulatory and

common-law duties that caused injuries to both the association

itself and the homeowners. The association argues in this appeal

that the motion judge, in compelling arbitration of all disputes,

mistakenly enforced an arbitration agreement found in contracts

that memorialized the homeowners' purchase of their properties

from the developer; the association contends the motion should

have    been     denied      because   the       document       memorializing      the

developer's conveyance to the association contains no arbitration

agreement. To the extent the association's pleadings assert claims

on behalf of the association's homeowners, we agree they must be

arbitrated.      But   the    pleadings        also   include    claims   allegedly

possessed solely by the association. To better distinguish between

what is and isn't arbitrable, we remand for the filing of an

amended complaint that separates claims the association asserted

on   its   own   behalf      and   those   it     asserted      on   behalf   of   the

homeowners.

       We start with the fact that the association – plaintiff

Greenbriar Oceanaire Community Association, Inc. – is responsible

for the common areas and the administration and management of a

1425-unit residential community in Waretown. The sponsor of the


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association and the developer of the project – defendant U.S. Home

Corporation,     alleged    to     have      been   doing    business     as       Lennar

Corporation      –   ultimately         transferred         management         to      the

association. In its June 2015 complaint, which was twice amended,

the association on behalf of itself and its members – its members

being   the    homeowners       bound   to    arbitration      clauses1      in     their

purchase      agreements    –     asserted      numerous     causes     of     action,

including: design and manufacturing defects that the association

claims constituted violations of applicable building codes and

warranties;      various    violations        of    the     Planned   Real         Estate

Development Full Disclosure Act (PREDFDA), 
N.J.S.A. 45:22A-21 to

-56, and PREDFDA's underlying regulations; and violations of the

developer's fiduciary duties.

     In light of the arbitration agreement in its contracts with

homeowners, the developer moved to compel arbitration. By the time



1
   These contracts include the homeowners' and developer's
agreements that "any dispute (whether contract, warranty, tort,
statutory or otherwise), including, but not limited to, (a) any
and all controversies, disputes or claims arising under, or related
to, this [a]greement, the property or any dealings between [the
homeowner and the developer] . . . [and] (b) any controversy,
dispute or claim arising by virtue of any representations, promises
or warranties alleged to have been made by [the developer or its
representative] . . . shall first be submitted to mediation and,
if not settled during mediation, shall thereafter be submitted to
binding arbitration as provided by the Federal Arbitration Act (9
U.S.C. § 1 [to § 16]) or, if inapplicable, by similar state
statute, and not by or in a court of law."

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the motion was considered, the parties settled the design and

construction claims. As a result, the question for the motion

judge was whether the remaining claims – the PREDFDA and fiduciary

duty claims – were asserted on behalf of the homeowners and

therefore subject to the homeowners' promise to arbitrate with the

developer, or whether the claims should be viewed as belonging

only to the association, which never agreed to arbitrate any

disputes with the developer. By way of his oral decision, the

motion judge agreed with the developer's view and entered an order

compelling arbitration; he later denied a motion to vacate the

order compelling arbitration.

     In appealing those orders, the association argues: (1) it

could not be compelled to arbitrate because (a) "no valid board

action [occurred]" to confirm such an obligation and (b) the clause

"is a restrictive covenant that should properly be considered void

as to the association"; (2) the developer-homeowner arbitration

clause is "unenforceable"; (3) the arbitration clause is "woefully

inadequate to constitute a waiver of the association's statutory

claims or right to a trial by jury in a court of law"; and (4) a

"Monmouth County trial court" denied a developer's motion to compel

arbitration "in a similar litigation." We reject the association's

first point because those arguments were not raised in the trial

court.   We   also   reject   the   third   point;   the   language   of   the

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arbitration    provision    more   than     adequately     memorializes   the

homeowners'    promise     to   arbitrate    their   claims     against    the

developer. And we find insufficient merit in the fourth point to

warrant discussion in a written opinion. R. 2:11-3(e)(1)(E). We,

thus, focus on the pivotal question: are the association's pleaded

claims subject to the homeowners' agreements to arbitrate?

      That question would ordinarily turn on what is alleged in the

pleadings. But the original complaint and its later amendments

conflate the claims asserted by the association on its own behalf

and those asserted by the association on behalf of the homeowners;

consequently, we find it necessary to remand for clarification

through the filing of an amended complaint.

      To explain, we note that the complaint announces at its outset

that the association has brought "the claims asserted herein for

itself and on behalf of its [m]embers" (emphasis added),2 an

assertion incorporated in all the pleaded counts. Additionally,

in claiming the developer misrepresented or omitted material facts

contrary to PREDFDA's requirements, the association alleged the

developer intended that "[p]laintiff and its [m]embers" would rely

on   its   misstatements    and    omissions    of   material    facts    and,

consequently, "[p]laintiff and the [a]ssociation [m]embers . . .


2
  There is no doubt that by           "members,"     the    association   was
referring to the homeowners.

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have suffered damages" (emphasis added). In a count asserting

violations of PREDFDA's regulations, the association alleged the

developer's failure to "fully fund the reserves and deferred

maintenance annually resulting in a material underfunding that

will financially materially affect the [a]ssociation and [h]ome

[o]wners," and among those allegations the association claimed the

developer's alleged violations of the regulations caused injury

to   "the   [a]ssociation   and   [m]embers   of   the   [a]ssociation"

(emphasis added). The rest of the allegations in the pleadings are

similarly phrased as having been asserted on behalf of both the

association and its members. In short, a close and thorough

examination of the complaint and its subsequent amendments offers

no clear delineation between the claims asserted on behalf of the

association itself and those asserted by the association for the

homeowners.

     Does the conflation of these claims relegate the court with

a decision to either compel arbitration of all the claims or none

of them? Arbitration, as has often been observed, is a "favored

form of relief." See, e.g., Marchak v. Claridge Commons, Inc., 
134 N.J. 275, 281 (1993). By the same token, arbitration should not

be compelled when it cannot be shown the plaintiff consented to

arbitrate its claims. When faced with such a quandary as presented

by the association's complaint here, a court need not be left lost

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in the confusion created, intentionally or otherwise, by the

pleadings. A court should ensure a correct resolution of the

arbitrability controversy by compelling the pleader to express its

claims with greater specificity.

      For this reason, we temporarily set aside the order compelling

arbitration and remand the matter so the motion judge may compel

the association to file a pleading which separates the claims it

has asserted on its own behalf from those it has asserted for the

homeowners. Upon the filing of a third amended complaint that

adequately   responds   to   these   concerns,   the   judge   may    compel

arbitration of those claims expressly asserted by the association

on behalf of its homeowners; the judge may also consider whether

the claims the association asserts on its own behalf should in

fact be construed as claims asserted on behalf of the homeowners.

If, after the completion of those proceedings, the motion judge

determines there are not only arbitrable claims but nonarbitrable

claims as well, he should determine whether both the arbitrable

and   nonarbitrable   claims   may   simultaneously    proceed   in    their

separate forums, or whether arbitration should precede any further

litigation in the trial court, or vice versa. See Hirsch v. Amper

Financial Servs., LLC, 
215 N.J. 174, 196 n.5 (2013).




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    The order under review is vacated and the matter remanded for

further proceedings in conformity with this opinion. We do not

retain jurisdiction.




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