CHERYL M. GANDY v. PARK HUDSON TENANTS CORP.

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

 

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-0

CHERYL M. GANDY,

Plaintiff-Appellant,

v.

PARK HUDSON TENANTS CORP., A

CORPORATION OF THE STATE OF

NEW JERSEY a/k/a PARK HUDSON

CONDOMINIUM ASSOCIATION, INC.,

A CORPORATION OF THE STATE OF

NEW JERSEY; THE BOARD OF

DIRECTORS OF THE PARK HUDSON

TENANTS CORP. a/k/a THE BOARD

OF DIRECTORS OF THE PARK HUDSON

CONDOMINUM ASSOCIATION, INC.;

ROA HUTTON, LLC, A LIMITED

LIABILITY COMPANY OF THE STATE

OF NEW JERSEY,

Defendants-Respondents.

_______________________________

PARK HUDSON TENANTS CORP., A

CORPORATION OF THE STATE OF

NEW JERSEY,

Plaintiff-Respondent,

v.

CHERYL M. GANDY,

Defendant-Appellant,

and

J.P. MORGAN CHASE BANK, N.A.,

Defendant.

_______________________________

January 10, 2014

 

Before Judges Simonelli, Fasciale and Haas.

 

On appeal from the Superior Court of New Jersey, Chancery Division, General Equity Part, Essex County, Docket No. C-0169-11 and Law Division, Essex County, Docket No. L-5468-11.

 

Joyce W. Murray argued the cause for appellant.

 

Joseph A. Pojanowski, III, argued the cause for defendants-respondents Park Hudson Tenants Corp., a/k/a Park Hudson Condominium Association, Inc. (Bertone Piccini LLP, attorneys; Mr. Pojanowski, III, on the brief).

 

Tricia A. Swann argued the cause for respondents Park Hudson Condominium Association Inc. and the Board of Directors (Obermayer Rebmann Maxwell & Hippel LLP, attorneys; Eric J. Phillips, on the brief).

 

William J. Rush argued the cause for respondent ROA Hutton.

 

Joel R. Bellush argued the cause for plaintiff-respondent Park Hudson Tenants Corp. (Law Offices of Joseph Carolan, attorneys, Mr. Bellush, on the brief).

PER CURIAM

In this consolidated case involving the conversion of a cooperative residence to a condominium, Cheryl M. Gandy appeals from the June 13, 2012 order of judgment, which granted a motion pursuant to Rule 4:37-2(b) to involuntarily dismiss her complaint against defendants Park Hudson Tenants Corporation and Park Hudson Condominium Association (Park Hudson), Members of the Board of Directors of Park Hudson (Board), and ROA Hutton, LLC (ROA). The judgment also awarded $258,426.35 to Park Hudson and other relief.1 We affirm substantially for the reasons Judge Harriet Farber Klein expressed in her thorough oral opinions rendered on May 22 and 29, 2012.

In 2001, Gandy purchased shares in the cooperative housing corporation and obtained a long-term proprietary lease for one apartment in the cooperative residence. Thereafter, the Board voted to convert the cooperative into a condominium and sought the shareholders' approval to do so. In January 2008, the Board informed the shareholders of its decision and that ROA would "handle the conversion."

ROA distributed literature to the shareholders, conducted informational meetings, and advised shareholders to seek legal counsel and financial advice.2 Regarding shareholders who were unable to convert their units immediately, the literature stated that:

If you do not participate in the initial conversion phase, you will be able to do so for at least two (2) years, thereafter, but at a higher cost that will be determined once all deferred shareholders are identified. In fact, you will be able to sell your condominium and pay for your conversion obligations with the money you receive at closing. . . . After the two (2) year wind-up period, the cooperative will be dissolved and any remaining shareholders will receive the deed to their condominium unit, subject to certain financial obligations that are not too different than your current status as a shareholder in a co-op. One important point to keep in mind: No resident shareholder has ever lost their unit as a result of a conversion completed by ROA Hutton. You will be afforded every opportunity to enhance and protect the value of your unit.

 

[(Emphasis omitted).]

 

In July 2008, 74.1% of the shareholders voted in favor of the conversion, including Gandy who voted by proxy.

The shareholder resolution authorized the Board to apply to the Department of Community Affairs (DCA) for an exemption from registration requirements under the Planned Real Estate Development Full Disclosure Act, (PREDFDA) N.J.S.A. 45:22A-21 to -56, and to enter into a plan of corporate dissolution. It also provided that the current members of the cooperative Board would remain in office until the corporation was fully dissolved, thus amending a by-law provision that cooperative board members who ceased to own shares in the cooperative would be deemed to have resigned.

The resolution provided that "deferred shareholders," those who did not elect to convert their shares during the "Initial Conversion Closings" when the majority of shareholders converted, "shall have a period of up to two (2) years from the date of recordation of the Master Deed and other governing documents . . . to redeem their shares." The resolution also authorized the corporation, if any shareholder did not convert within two years, to:

either (a)(i) reimburse itself by borrowing or assess for such shareholder's original conversion obligation plus its proportionate share of accrued and unpaid fees and expenses associated with the shareholder's deferral of the redemption of his/her unit ("Deferral Costs"), (ii) cancel the shares of such shareholder, and (iii) distribute the remaining interest of the Corporation in the Unit to the shareholder, subject to a mortgage or, (b) in the event that the prior option is not available, sell the unit as a condominium unit and remit all of the net proceeds to the Deferred Shareholder after payoff of any encumbrances affecting such unit, recovery of Deferral Costs and the payment of reasonable closing costs.

 

[(Emphasis omitted.)]

Park Hudson filed the master deed in January 2009, and thereafter obtained an exemption from the DCA.

Gandy applied unsuccessfully for a loan in the amount of $261,589. The lender denied Gandy's mortgage application because Gandy was unable to verify her income. In July 2009, ROA informed Gandy that if she was unable to convert her unit by August 12, 2009, then she would be deemed a deferred shareholder. ROA explained that Gandy would then have the right to convert her unit for two years from the recording of the master deed, but that she would have different conversion obligations and a higher co-op monthly maintenance fee until she converted. ROA indicated that the higher monthly fee was based on a budget for a "mini co-op" composed of forty-three units that did not convert.

In May 2010, Park Hudson filed a complaint against Gandy seeking unpaid maintenance fees, cancellation of Gandy's shares, and possession of her unit. In May 2011, Gandy filed a complaint against defendants.3 The court then consolidated the cases and the judge tried the actions together on seven days in May 2012.

Gandy testified on her own behalf that she never expected to pay deferral costs because she thought "the shares would be redeemed" and that she would get a mortgage. She also testified that she was supposed to be guaranteed a mortgage regardless of her income level and indebtedness, but that this guarantee was made orally at a February 2007 meeting and was not recorded in the meeting minutes. She stated that she believed the cooperative dissolved as soon as the master deed was filed, but was unable to find a certificate of dissolution.

On cross-examination, Gandy admitted that the State of New Jersey listed Park Hudson as an ongoing entity and that she had never seen a unit deed transferring the unit she occupied from Park Hudson to anyone else. Gandy also testified that her maintenance fees increased from approximately $1400 per month to almost $3000 per month, and that she did not believe her proprietary lease was still in effect.

At the end of Gandy's case-in-chief, defendants moved for involuntary dismissal pursuant to Rule 4:37-2(b). On May 22, 2012, the judge issued an oral opinion finding that Gandy failed to establish a prima facie case of violations of the CFA or fiduciary duties, and that Gandy did not introduce any evidence that she sustained damages. Also, the judge found that Gandy's testimony was disingenuous, contradictory, and illogical. In particular, the judge stated that Gandy "maintained that the conversion occurred upon the filing of the master deed and that she is no longer a shareholder, yet she acknowledged that her shares are still outstanding, and [others' shares] as well." Judge Klein noted that Gandy was aware of the possibility of a conversion in 2007, voted in the initial shareholder vote authorizing the Board to pursue the conversion, attended a one-on-one informational meeting with an ROA representative, read the proposed resolution, and was aware that she could seek counsel but failed to do so. The judge stated that Gandy advanced the "lynchpins" of her argument, that she was a holdover tenant and therefore was required to pay only fair market value rent on her unit, just five days before the trial.

The court then heard testimony from the President of Park Hudson's property management company, Accella Smith, who testified about the provisions in Gandy's proprietary lease providing for monthly maintenance payments and authorizing the cooperative to seek possession of the apartment upon Gandy's default. She also testified regarding the various fees the cooperative billed Gandy and the amount Gandy paid. Gandy stated that she believed the condominium association now owned her apartment and therefore she owed only fair market value rent as a holdover tenant.

The judge held that the cooperative did not automatically cease to exist upon the filing of the master deed, but still existed and owned the apartments that did not convert. Judge Klein stated that the fair market value rent theory "springs solely from the mind of Ms. Gandy, and is not supported by the plain language of the documents, or any competent expert testimony" and that Gandy did not provide any case law to support her theory. The judge also noted that, unlike a tenant, Gandy still had shares in the cooperative, and held that the vote in favor of conversion did not automatically terminate her proprietary lease or dissolve the cooperative. The judge then entered the order under review.

On appeal, Gandy argues primarily that (1) dismissal was unwarranted because she established a prima facie case of consumer fraud and breach of fiduciary duties; (2) the court erred in awarding damages and possession to Park Hudson pursuant to her proprietary lease because the lease was void under the Condominium Act (the "Act"), N.J.S.A. 46:8B-1 to -38; (3) the court erred in barring Gandy from arguing that the Tenant Protection Act of 1992 applied; and (4) defendants violated a requirement to register the conversion under the PREDFDA.

I.

We begin by addressing Gandy's contention that the judge erred by granting defendants' motion for an involuntary dismissal. Under Rule 4:37-2(b), a defendant may move for involuntary dismissal of a plaintiff's claims "on the ground that upon the facts and upon the law the plaintiff has shown no right to relief." Dismissal is not appropriate where the plaintiff established a prima facie case, meaning "'any evidence including any favorable inference to be drawn therefrom which could sustain a judgment in plaintiff's favor.'" Perez v. Professionally Green, LLC, 215 N.J. 388, 404 (2013) (citation omitted). The court may grant the motion if, when viewing the evidence in the light most favorable to the plaintiff, "no rational jury could conclude from the evidence that an essential element of the plaintiff's case is present." Id. at 407 (citation omitted). An appellate court must review a trial judge's decision to grant involuntary dismissal de novo, applying the same standard as the trial court. Epperson v. Wal-Mart Stores, Inc., 373 N.J. Super. 522, 527 (2004). Using this standard, we see no error.

 

A.

We reject Gandy's contention that she established a prima facie case of ROA's violations under the CFA. To prevail on a CFA claim, a consumer must establish (1) that the defendant engaged in an unlawful practice; (2) that the consumer suffered an "ascertainable loss"; and (3) "'a causal relationship between the unlawful conduct and the ascertainable loss.'" Lee v. Carter-Reed Co., LLC, 203 N.J. 496, 521 (2010) (quoting Bosland v. Warnock Dodge, Inc., 197 N.J. 543, 557 (2009)).

An unlawful practice is:

any unconscionable commercial practice, deception, fraud, false pretense, false promise, misrepresentation, or the knowing, concealment, suppression, or omission of any material fact with intent that others rely upon such concealment, suppression or omission, in connection with the sale or advertisement of any merchandise or real estate, or with the subsequent performance of such person as aforesaid, whether or not any person has in fact been misled, deceived or damaged thereby.

 

[N.J.S.A. 56:8-2.]

 

Unlawful practices generally include affirmative acts, knowing omissions, and regulatory violations. Bosland, supra, 197 N.J. at 556. A plaintiff need not establish intent for affirmative acts or regulatory violations. Ibid. An ascertainable loss is one that is "'quantifiable or measurable'; it is not 'hypothetical or illusory.'" Lee, supra, 203 N.J. at 522 (quoting Thiedemann v. Mercedes-Benz USA, LLC, 183 N.J. 234, 248 (2005)). To establish causation, a plaintiff must show that the ascertainable loss occurred "'as a result of' the unlawful practice" but need not establish reliance. Ibid.

Gandy alleges that defendants committed knowing omissions and affirmative misrepresentations regarding the risks of conversion, and failed to make required disclosures in violation of the PREDFDA. Viewing the evidence in the light most favorable to Gandy, as we must on a motion for an involuntary dismissal, we agree with the judge that Gandy failed to establish a prima facie case that defendants made knowing omissions or affirmative misrepresentations, that the DCA exemption eliminated any alleged PREDFDA violation, and that Gandy did not establish an ascertainable loss.

B.

Gandy argues that she established a prima facie case that the Board violated its fiduciary duties by permitting ROA to make most of the communications with Gandy regarding conversion. Corporate law governs the internal management of cooperative associations. Plaza Rd. Cooperative, Inc. v. Finn, 201 N.J. Super. 174, 180 (1985). Therefore, the members of the governing board owe fiduciary duties to the shareholders. See Comm. for a Better Twin Rivers v. Twin Rivers Homeowners Ass'n, 192 N.J. 344, 369 (2007). Under the business judgment rule, however, there is a rebuttable presumption that "protects a board of directors from being questioned or second-guessed on conduct of corporate affairs except in instances of fraud, self-dealing, or unconscionable conduct." In re PSE&G Shareholder Litigation, 173 N.J. 258, 276-77 (2002) (quoting Maul v. Kirkman, 270 N.J. Super. 596, 614 (App. Div. 1994)).

Here, the Board entered into an agreement with ROA, under which ROA exclusively would facilitate the conversion, subject to the Board's review and approval. This decision was not an abdication of authority since ROA could not act without the Board s approval. Finally, as the judge stated, Gandy "presented absolutely no expert testimony as to what defendant's duty was, or how it was breached, or what damages flowed therefrom" and her testimony "rested on her own legal conclusions." Therefore, we agree with Judge Klein that Gandy did not establish a prima facie case of violation of fiduciary duties.

II.

Gandy contends that the court erred by awarding damages and possession to Park Hudson because, under the Act, Gandy's proprietary lease was terminated and therefore Park Hudson could not invoke its provisions. An appellate court must accord deference to a trial court's factual findings when such findings are "supported by adequate, substantial and credible evidence." Rova Farms Resort, Inc. v. Investors Ins. Co., 65 N.J. 474, 484 (1974). But "[a] trial court's interpretation of the law and the legal consequences that flow from established facts are not entitled to any special deference." Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995). Applying this standard, we conclude that there was no error.

A.

Gandy maintains that under the Act, her proprietary lease and the cooperative corporation were terminated as soon as Park Hudson filed the master deed, rendering her a holdover tenant required to pay only reasonable rent. She argues that the condominium association became the owner of the unit, the condominium association exercised exclusive jurisdiction over the entire building, and the Act governed all activities related to the building.

A condominium is created by recording a master deed executed and acknowledged by all owners. N.J.S.A. 46:8B-8. Under the Act, "condominium property" includes "the land covered by the master deed . . . ." N.J.S.A. 46:8B-3i. The Act permits the master deed to contain provisions related to the disposition of units as long as the provisions are not inconsistent with the Act. N.J.S.A. 46:8B-9. N.J.S.A. 46:8B-7 provides that "[a]ny agreement contrary to the provisions of [the Act] shall be void."

Here, the master deed provided that the entire building was part of the condominium property and that the cooperative corporation would be the owner of every unit, as it had been before the conversion. The master deed also provided that as the owner/sponsor, Park Hudson "shall have the right to sell and convey, lease, or otherwise dispose of each such Unit as it may deem appropriate in its sole discretion and in accordance with the plan of conversion which has been approved by a requisite number of shareholders of the Sponsor." The shareholder resolution amended the by-laws to provide that the corporation would be dissolved after it distributed all of its property to the shareholders, shareholders' assigns, or the condominium association.

Even though the Act applied to the entire building, including Gandy's apartment, it does not automatically follow that the proprietary lease was a conflicting agreement. Although those who converted their units owned those units and proportionate shares of the common property, Park Hudson owned the remainder of the property and was still Gandy's lessor under the proprietary lease. Nothing in the master deed or shareholder resolution terminated the lease.

B.

The proprietary lease requires the lessee to pay rent in the amount of the lessee's proportionate share of the lessor's "cash requirements" for the year. "Cash requirements" means

the estimated amount in cash which the Board shall from time to time in its judgment determine to be necessary or proper for (1) the operation, maintenance, care, alteration and improvement of the corporate property during the year or portion of the year for which such determination is made; (2) the creation of such reserve for replacement of common facilities and contingencies as it may deem proper; (3) the payment of, or the establishment of a reserve for, any rentals and other sums payable under any ground leases covering the property of the Lessor; and (4) the payment of any obligations, liabilities or expenses incurred (even though incurred during a prior period) or to be incurred, after giving consideration to (i) income expected to be received during such period (other than rent from proprietary lessees) and (ii) cash on hand which the Board in its discretion may choose to apply. The Board may from time to time modify its prior determination and increase or diminish the amount previously determined as cash requirements of the Lessor for a year or portion thereof. . . . All determinations of cash requirements shall be conclusive as to all lessees.

 

[(Emphasis added).]

Here, the fees imposed included member charged fees; cable television; real estate taxes; and Gandy's proportionate share of conversion costs, which included payment of her share of the original mortgage on the building, prepayment costs, a special rebuilding fund to rebuild a garage and for other capital projects, costs for a bridge loan, ROA's fee, and anticipated closing costs. These all involved costs for the "operation, maintenance, care, alteration and improvement of the corporate property" or for obligations the cooperative incurred. In bringing its action against Gandy, Park Hudson acted not under the authority of case law or statutes, but under the provisions of Gandy's proprietary lease, which provided for the termination of her lease and dispossession upon default, surrender of Gandy's shares upon termination of her lease, and liability to pay "all rent, additional rent and other charges due or accrued . . . up to the date of termination" in the event that the lease was terminated due to default.

After a thorough review of the record and consideration of the controlling legal principles, we conclude that Gandy's remaining arguments are without sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E). We affirm substantially for the reasons that Judge Klein expressed in her well-reasoned oral opinions.

Affirmed.

1 Gandy also appealed from the April 11, 2012 order, which denied her motion to amend the complaint to assert a claim against the Board pursuant to the Consumer Fraud Act, (CFA), N.J.S.A. 56:8-1 to -195. Her failure to provide the record of the motion renders our review on the merits impossible, leaving us no alternative but to affirm on this issue. R. 2:5-4(a); R. 2:6-1(a)(1)(I); Soc'y Hill Condo. Ass'n. v. Soc'y Hill Assocs., 347 N.J. Super. 163, 177-78 (App. Div. 2002). Gandy also appealed from the July 27, 2012 order, which denied her motion for reconsideration. Because she did not address this issue in her merits brief, it is deemed waived. Sklodowsky v. Lushis, 417 N.J. Super. 648, 657 (App. Div. 2011); Pressler & Verniero, Current N.J. Court Rules, cmt. 4 on R. 2:6-2 (2014).

2 Gandy is an attorney admitted to practice law in the State of New York.

3 Gandy's complaint contains the following counts: a request for declaratory relief regarding required approvals (Count One); "fraudulently obtaining an exemption from registration in order to preclude shareholder access and rights to redress from the DCA through PREDFDA" (Count Two); breach of fiduciary duties by the cooperative board of directors (Count Three); unfair sales practices by ROA in violation of the CFA (Count Four); and a request for preliminary injunctive relief (Count Five).