RUDOLPH MAZUROSKY et al. v. ATLANTIC PALACE CONDOMINIUM ASSOCIATION, INC., et al.

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-0133-05T10133-05T1

RUDOLPH MAZUROSKY and JAGAT

SUBUDHI,

Plaintiffs-Appellants,

v.

ATLANTIC PALACE CONDOMINIUM

ASSOCIATION, INC., SUSAN TUNNEY,

ALAN ROSEFIELDE, JACK KWITCHOFF

and ATLANTIC PALACE CONDOMINIUM

ASSOCIATION, INC. BOARD OF TRUSTEES,

Defendants-Respondents,

and

ATLANTIC PALACE INTERVAL OWNERS

ASSOCIATION, INC. and ATLANTIC

PALACE DEVELOPMENT, LLC,

Defendants/Intervenors-

Respondents.

________________________________________________________________

 

Argued October 11, 2006 - Decided November 14, 2006

Before Judges Skillman and Lisa.

On appeal from the Superior Court of New Jersey, Chancery Division, General Equity, Atlantic County, C-179-04.

Cecilia M.E. Lindenfelser argued the cause for appellants (Charles A. Rosen, attorney; Ms. Lindenfelser, on the brief).

Daniel E. Orr and Samuel J. McNulty argued the cause for respondents Atlantic Palace Condominium Association, Inc., Atlantic Palace Condominium Association, Inc. Board of Trustees and Atlantic Palace Interval Owners Association, Inc. (Morgan, Lewis & Bockius, attorneys for Atlantic Palace Condominium Association, Inc., Atlantic Palace Condominium Association, Inc. Board of Trustees; Hueston, McNulty, Mueller & DeGonge, attorneys for Atlantic Palace Interval Owners Association, Inc.; Robert A. White, Mr. Orr and Mr. McNulty, on the joint brief).

Fredric L. Shenkman argued the cause for respondents Atlantic Palace Development, LLC, Susan Tunney and Alan Rosefielde (Cooper, Levenson, April, Niedelman & Wagenheim, attorneys; Mr. Shenkman and D. Rebecca Higbee, on the brief).

Respondent, Jack Kwitchoff, did not file a brief.

PER CURIAM

Plaintiffs, Rudolph Mazurosky and Jagat Subudhi, are owners of condominium units at the Atlantic Palace Condominium in Atlantic City. The condominium is governed by the Atlantic Palace Condominium Association, Inc. (Association), a New Jersey non-profit corporation. The condominium is comprised of 293 residential and 12 commercial units. Atlantic Palace Development, LLC (APD), owned 151 of the residential units and five commercial units. APD instituted an interval ownership program, commonly known as timeshares, for many of the residential units.

The Association conducted an election on August 15, 2004 for the election of three members of its five-member board of trustees. Plaintiffs' names were submitted to the Association Board in nomination for the seats up for election. The other candidates vying for the seats were defendants, Susan Tunney, Alan Rosefielde, and Jack Kwitchoff. The election was held, and in tallying the votes, the Association counted irrevocable proxies from interval owners that were cast by APD on behalf of Tunney, Rosefielde, and Kwitchoff. Each condominium unit was accorded one vote. The vote for any unit held under interval ownership was cast for the candidate selected by a majority of the interval owners for that unit. Tunney, Rosefielde, and Kwitchoff received the most votes and were declared the winners.

On September 21, 2004, plaintiffs filed this action challenging the election results. They claimed the Association wrongfully counted irrevocable proxies cast on behalf of Tunney, Rosefielde, and Kwitchoff and that the board members breached their fiduciary duty to plaintiffs by failing to adopt fair and proper election rules and procedures, particularly with respect to proxy votes.

On December 1, 2004, plaintiffs filed a motion for an order declaring the use of irrevocable proxies void as contrary to law. Defendants filed cross-motions for summary judgment dismissing the complaint and for confirmation of the election. In support of the cross-motions, defendants filed the certification of Michael Valenti, a member of the Association board, who held one of the two seats that were not up for election on August 15, 2004. Valenti was also the chief financial officer of APD. Valenti certified as follows:

2. A part of my duties as Chief Financial Officer is to oversee the timeshare program sponsored by Atlantic Palace Development Corporation ("APD"). More than half of the disputed proxies at issue in the matter were obtained by APD through the condominium unit owner's participation in this program.

3. As a part of this program, APD provides mortgages to unit purchasers that enable them to purchase their units. The majority of condominium units in the Atlantic Palace Condominium development were financed through mortgages by APD.

4. As a standard practice. APD obtains a proxy to vote the mortgaged unit's share in the Atlantic Palace Condominium Association as a condition of the mortgage. This is a common practice within the condominium industry as a means to protect the mortgagee's economic interest in the mortgaged unit. The proxy is obtained at the mortgage closing. More than 90 percent of unit purchasers in the Atlantic Palace obtain a mortgage from APD on the day of closing.

5. Due to an agreement between the parties restricting access to the disputed proxies, I am unable to provide an exact number as to how many of the proxies were coupled with a mortgage interest. However, because as a standard practice, APD maintains a mortgage interest on at least 50 percent of the timeshares that it owns, I am certain that APD held a mortgage interest coupled with at least 50 percent of the proxies that it cast in the election.

6. All of the proxies cast by APD in the August 15, 2004 election were obtained by APD within the last three-years.

Judge Seltzer heard oral argument on the motions on January 14, 2005. He determined that each proxy voted by APD states that it is coupled with an interest and that it is "Irrevocable until the date that is the latter of (A) three years from the date of this agreement or (B) such longer period as may be legally permitted." The judge then quoted from the applicable portion of the section of the Non-Profit Corporation Act, N.J.S.A. 15A:1-1 to 15A:16-2, dealing with proxy voting:

Unless otherwise provided in the certificate of incorporation or bylaws, every member entitled to vote at a meeting of members or to express consent without a meeting may authorize another person or persons to act for the member by proxy. Every proxy shall be executed in writing by the member or the member's agent, except that a proxy may be given by a member or the agent by telegram or cable or its equivalent. A proxy shall not be valid for more than 11 months unless a longer time is expressly provided therein, but in no event shall a proxy be valid after 3 years from the date of execution. Unless it is coupled with an interest, a proxy shall be revocable at will.

[N.J.S.A. 15A:5-18a.]

The judge rejected plaintiffs' arguments that irrevocable proxies are not permitted in condominium elections because they are not expressly provided for in the Condominium Act, N.J.S.A. 46:8B-1 to -38. The Condominium Act provides that a condominium association may be a non-profit corporation. N.J.S.A. 46:8B-12. The Association is a non-profit corporation, and the judge concluded that N.J.S.A. 15A:5-18 therefore applies. The judge further found that the proxies, by their terms, satisfied the criteria for irrevocability because they were coupled with an interest, namely APD's mortgage interest. Assuming the proxies were not more than three years old at the time of the election and more than 50% of them were indeed coupled with a mortgage interest, they would be valid.

Judge Seltzer determined that, notwithstanding Valenti's certification that was framed in conclusory terms, the proxies and related documents had not actually been examined, as a result of which the record was not sufficient to establish the criteria for irrevocability. He therefore set a discovery schedule and directed the scope of discovery to enable plaintiffs to examine all of the proxies and mortgages in order to confirm or refute that more than half of the proxies were coupled with a mortgage interest held by APD, and were less than three years old at the time of the election. Accordingly, the judge denied all of the motions without prejudice, subject to being renewed after completion of that focused discovery. He entered an order to that effect on January 18, 2005.

The judge directed that discovery be completed by March 1, 2005. At plaintiffs' request, the deadline was extended to May 2, 2005. Plaintiffs conducted a partial examination of relevant documents, but they abandoned their efforts. Instead of completing the discovery, plaintiffs changed course and on May 9, 2005, filed a motion seeking leave to file an amended complaint alleging a new theory and adding new defendants. The proposed amended complaint alleged that APD transferred timeshare units to Tunney, Rosefielde, Valenti, and Jason Kaye, the other member of the board whose seat was not up for election on August 15, 2004, for $1, thus constituting "sham transactions," as a result of which those individuals were not bona fide owners, which disqualified them from eligibility for membership on the Association board because only owners of condominium units (including timeshare owners) are eligible under the bylaws.

The matter came before Judge William C. Todd, III on June 8, 2005. The judge denied plaintiffs' motion. He determined that it would be inappropriate to expand the claims in the pending litigation, particularly when the new proposed claims "appear to be fairly weak." Further, the means by which plaintiffs' counsel obtained the information to support the new theory may have resulted in further complications and delays because of possible attorney disqualification issues. Thus, the judge deemed it advisable to bring the longstanding litigation regarding the proxy dispute to a conclusion. The proposed new claim could be asserted in a separate action.

Judge Todd again extended the deadline for plaintiffs to complete discovery regarding the proxies. In his June 8, 2005 order, he extended the discovery deadline to July 8, 2005 and required plaintiffs to file a report of the results of their review by July 22, 2005, in default of which the complaint would be dismissed with prejudice. Plaintiffs did not complete the discovery and did not file a report. On July 28, 2005, Judge Todd entered an order dismissing the complaint with prejudice.

Plaintiffs appeal the portion of Judge Seltzer's January 18, 2005 order denying their motion to declare the APD proxies invalid as a matter of law, and the portion of Judge Todd's July 8, 2005 order denying their motion to file an amended complaint.

With respect to the substantive issues regarding the validity of the proxies addressed by Judge Seltzer, on the record on January 14, 2005 and in his order of January 18, 2005, we accept as undisputed the material facts set forth in Valenti's certification, namely that more than half of the proxies were coupled with an APD mortgage interest and were less than three years old at the time of the election. Plaintiffs were given the opportunity to conduct the discovery necessary to attempt to refute Valenti's certification, and they failed to do so. We have carefully reviewed the record and considered the arguments raised on appeal. Our review of Judge Seltzer's analysis of the law is de novo. Manalapan Realty, L.P. v. Manalapan Twp. Comm., 140 N.J. 366, 378 (1995). We agree with Judge Seltzer's legal analysis and affirm the provision in his January 18, 2005 order denying plaintiffs' motion for an order declaring the APD proxies invalid substantially for the reasons he expressed in his comprehensive oral decision on January 14, 2005.

We review Judge Todd's denial of plaintiffs' motion to file an amended complaint under the abuse of discretion standard. Fisher v. Yates, 270 N.J. Super. 458, 467 (App. Div. 1994). We are satisfied from our review of the record that Judge Todd did not mistakenly exercise his discretion and affirm his denial of the motion to amend substantially for the reasons set forth in his comprehensive oral decision of June 8, 2005.

Affirmed.

 

During the pendency of the trial court proceedings, Jagat Subudhi died.

Defendants' motion for summary judgment dismissing the complaint, which Judge Seltzer had denied without prejudice, was deemed renewed.

(continued)

(continued)

10

A-0133-05T1

November 14, 2006