PATHWAY CONDOMINIUM ASSOCIATION INC. v. OCEAN GROVE CAMP MEETING ASSOCIATION OF THE UNITED METHODIST CHURCH
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SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-3842-16T2
PATHWAY CONDOMINIUM ASSOCIATION,
INC., a New Jersey Nonprofit
Corporation and DARDANELLE
CONDOMINIUM ASSOCIATION, INC., a
New Jersey Nonprofit Corporation,
Plaintiffs-Appellants,
v.
OCEAN GROVE CAMP MEETING
ASSOCIATION OF THE UNITED
METHODIST CHURCH, a New Jersey
Nonprofit Corporation,
Defendant-Respondent.
________________________________
Argued May 24, 2018 – Decided June 28, 2018
Before Judges Reisner, Gilson, and Mitterhoff.
On appeal from Superior Court of New Jersey,
Law Division, Monmouth County, Docket No.
L-0313-17.
James T. Hundley argued the cause for
appellants (Hundley and Bradley, LLC,
attorneys; James T. Hundley, of counsel and
on the brief).
Edward C. Eastman argued the cause for
respondent (Davidson, Eastman, Muñoz,
Lederman & Paone PA, attorneys; Michael J.
Fasano, on the brief).
PER CURIAM
Plaintiffs Pathway Condominium Association, Inc. (Pathway)
and Dardanelle Condominium Association, Inc. (Dardanelle)
(collectively, plaintiffs) appeal from a March 31, 2017 order
dismissing their complaint with prejudice. In their complaint,
plaintiffs sought to void two ground leases for the land on which
their condominiums are located and to recover all rents paid under
the leases. We affirm because plaintiffs' claims are time-barred
by the applicable six-year statute of limitations,
N.J.S.A.
2A:14-1, and their claim that condominiums cannot be held as
leasehold interests lacks merit.
I.
Ocean Grove is a locality consisting of approximately 260
acres of land in Neptune Township. The land is owned by the Ocean
Grove Camp Meeting Association of the United Methodist Church (OG
Association).
Pathway and Dardanelle are two condominium associations
located in Ocean Grove. Pathway has twenty-two units and is
located on land that is 11,431 square feet. Dardanelle has six
units and is located on a 0.08 acre parcel of land.
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In 1870, OG Association acquired the approximate 260 acres
that constitute Ocean Grove. Thereafter, the OG Association
subdivided the land and leased those lots. The developers of
Pathway and Dardanelle acquired assignments of ground leases to
the land on which they planned to build the condominiums. The
developer for Pathway was assigned the leases for the land in
2004, and thereafter it consolidated those lots in 2005 and 2006.
The lease for Dardanelle was acquired by assignment in 2006.
On November 27, 2006, the developer of Dardanelle signed a
lease agreement with OG Association (Dardanelle Lease Agreement).
Under the Dardanelle Lease Agreement, OG Association consented to
the property's conversion to a condominium form of ownership under
the Condominium Act,
N.J.S.A. 46:8B-1 to -38. The Lease Agreement
also required each unit owner, as a sublessee, to pay an annual
land rental fee to OG Association.
The terms of the Dardanelle Lease Agreement were thereafter
incorporated into the Master Deed for Dardanelle and its by-laws.
In November 2007, the land for Dardanelle was converted into a
condominium form of ownership when the Master Deed, dated December
1, 2006, was recorded.
On September 1, 2010, the developer of Pathway signed a lease
agreement with OG Association (Pathway Lease Agreement). Under
that agreement, OG Association consented to the conversion of the
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Pathway property to a condominium form of ownership under the
Condominium Act. The Pathway Lease Agreement also required each
unit owner, as a sublessee, to pay an annual land rental fee to
OG Association.
The terms of the Pathway Lease Agreement were, thereafter,
incorporated into the Master Assignment of Lease for Pathway and
its by-laws. On September 9, 2010, the land for Pathway was
converted into a condominium form of ownership when the Master
Assignment of Lease was recorded.
Beginning in 2007, the unit owners of Dardanelle paid the
annual land rent to OG Association. The unit owners of Pathway
have paid the annual land rent to OG Association since 2010.
On January 24, 2017, Pathway and Dardanelle filed suit against
OG Association seeking to declare the Pathway Lease Agreement and
the Dardanelle Lease Agreement void. Plaintiffs contended that
those lease agreements violated the Condominium Act because they
constituted leasehold interests and, under the Act, condominiums
can only be owned in fee simple. Plaintiffs also sought to recover
all rents paid to OG Association under the leases.
In response, OG Association filed a motion to dismiss
plaintiffs' complaint for failure to state a claim under Rule
4:6-2(e). OG Association also argued that the claims were barred
by the applicable statute of limitations.
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The trial court heard oral arguments on March 31, 2017. That
same day, the court granted the motion and entered an order
dismissing plaintiffs' complaint with prejudice. The court
identified two grounds for its ruling. First, the court reasoned
that the Condominium Act allowed condominiums to be held as
leasehold interests. Accordingly, the court ruled that the lease
agreements were valid. Second, the court reasoned that plaintiffs'
claims were barred by the six-year statute of limitations under
N.J.S.A. 2A:14-1. Pathway and Dardanelle appeal from the March
31, 2017 order.
II.
On appeal, plaintiffs make two arguments. First, they contend
that the lease agreements with OG Association are contrary to the
Condominium Act and, therefore, are void under the Act. Second,
they argue that the six-year statute of limitations does not apply
to their claims; rather, their claims are governed by either the
twenty-year statute of limitations under
N.J.S.A. 2A:14-7, or the
sixteen-year statute of limitations under
N.J.S.A. 2A:14-4. We
are not persuaded by either of these arguments and, therefore, we
affirm.
We first will address the applicable statute of limitations
and then analyze plaintiffs' arguments under the Condominium Act.
Initially, we set forth our standard of review. Both questions
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presented on this appeal are questions of law, which we review de
novo. See, e.g., Smith v. Datla,
451 N.J. Super. 82, 88 (App.
Div. 2017) (stating that "when analyzing pure questions of law
raised in a dismissal motion, such as the application of a statute
of limitations, we undertake a de novo review."); see also Cashin
v. Bello,
223 N.J. 328, 335 (2015) (stating that an appellate
court's review of statutory construction is de novo).
We also review de novo an order dismissing a complaint for
failure to state a claim. State ex rel. Campagna v. Post
Integrations, Inc.,
451 N.J. Super. 276, 279 (App. Div. 2017).
"When reviewing a motion to dismiss under Rule 4:6-2(e), we assume
that the allegations in the pleadings are true and afford the
pleader all reasonable inferences." Sparroween, LLC v. Twp. of
W. Caldwell,
452 N.J. Super. 329, 339 (App. Div. 2017) (citation
omitted). "Where, however, it is clear that the complaint states
no basis for relief and that discovery would not provide one,
dismissal of the complaint is appropriate." Ibid. (quoting J.D.
ex. rel. Scipio-Derrick v. Davy,
415 N.J. Super. 375, 397 (App.
Div. 2010)).
A. The Statute of Limitations
In counts one and three of their complaint, plaintiffs sought
to void the Pathway Lease Agreement and the Dardanelle Lease
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Agreement. In counts two and four of their complaint, plaintiffs
sought to recover the rents paid under the lease agreements.
The statute of limitations applicable to all of those claims
is set forth in
N.J.S.A. 2A:14-1. That statute provides, in
relevant part, "[e]very action at law . . . for recovery upon a
contractual claim or liability, express or implied, not under
seal, . . . shall be commenced within 6 years next after the cause
of action shall have accrued." That statute is applicable to
claims for alleged breaches of lease agreements or to void such
agreements. See Fox v. Millman,
210 N.J. 401, 414-15 (2012)
(explaining the general applicability of the six-year statute of
limitations under
N.J.S.A. 2A:14-1); see also In re Estate of
Balk,
445 N.J. Super. 395, 398 (App. Div. 2016) ("New Jersey
applies a six-year statute of limitations to contract claims.").
Here, plaintiffs seek to void contracts; that is, the lease
agreements. Thus, their action needed to be brought within six
years of the accrual of that cause of action. The Dardanelle
Lease Agreement was signed on November 27, 2006, and the Pathway
Lease Agreement was signed on September 1, 2010. The obligations
to pay a land rental fee to OG Association were established by
those lease agreements. Consequently, all of plaintiffs' causes
of action accrued by September 2010. Plaintiffs filed their
complaint on January 21, 2017. Because the complaint was filed
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more than six years after the causes of action accrued, all the
claims were time-barred.
Plaintiffs argue that the statute of limitations applicable
to their claims to void the lease agreements is the twenty-year
period under
N.J.S.A. 2A:14-7. They also contend that the statute
of limitations applicable to their claim to recover the rent
payments is the sixteen-year period under
N.J.S.A. 2A:14-4. We
disagree.
N.J.S.A. 2A:14-7 states: "Every action at law for real estate
shall be commenced within 20 years next after the right or title
thereto, or cause of action shall have accrued." Our Supreme
Court has explained that that statute is applicable to claims for
damages resulting from the adverse possession of real property or
for ejectment. J&M Land Co. v. First Union Nat'l Bank,
166 N.J.
493, 505, 515, 521 (2001). Accordingly,
N.J.S.A. 2A:14-7 is not
applicable to plaintiffs' claims to void the lease agreements.
N.J.S.A. 2A:14-4 applies to "a lease under seal."
Specifically, that statute provides, in relevant part: "Every
action at law for rent or arrears of rent, founded upon a lease
under seal, . . . shall be commenced within 16 years next after
the cause of any such action shall have accrued."
The term "seal" has a specific and defined meaning.
N.J.S.A.
1:1-2.1. Accordingly, that statute explains:
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Every instrument, to which it is required or
permitted by law that a seal be attached,
shall be deemed to be sealed when there is
affixed thereto, or printed, impressed or
marked thereon a scroll or other device by way
of a seal, and no such instrument shall be
impeached or questioned for lack of a wax
seal.
"Words in the body of the instrument such as 'sealed with our
seals,' which are not accompanied by a scroll or device, are not
sufficient. A scroll, not accompanied by words indicating the
sealing of the instrument by the maker thereof, is insufficient."
Fid. Union Tr. Co. v. Fitzpatrick,
134 N.J.L. 250, 251-52 (1946).
Accordingly, to create a sealed instrument, there must be both a
statement of sealing and a device, such as a seal, scroll,
impression, mark, or other device.
Here, the lease agreements were not sealed. There was no
seal, scroll, impression, mark, or other device on the Pathway or
Dardanelle Lease Agreements. Instead, each lease agreement was
signed by a representative of the condominiums' developers and by
the OG Association. Preceding the signatures of the
representatives, the Lease Agreements stated that those
representatives were setting "their hand and seal." Those words
alone, however, did not create a sealed lease within the meaning
of
N.J.S.A. 1:1-2.1 and
N.J.S.A. 2A:14-4.
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Finally, we reject plaintiffs' argument that even if their
claims are subject to a six-year statute of limitations, the annual
land rental fees created a continuing obligation and, therefore,
they are entitled to recover rental payments for the six years
prior to January 24, 2017. Plaintiffs' argument is that the rental
fees are not allowed because the lease agreements were void under
the Condominium Act. In other words, if the lease agreements are
lawful, there is no continuing violation from the collection of
annual rents. Thus, plaintiffs' continuing obligation argument
fails. Instead, to the extent that the cause of action accrued,
it accrued when the lease agreements were signed in 2006 and 2010.
B. The Condominium Act
Although plaintiffs' claims are barred by the statute of
limitations, we nonetheless address the substance of their claim
that the lease agreements are not allowed under the Condominium
Act. Plaintiffs contend that the Condominium Act does not
authorize a condominium to be developed on land that is acquired
as a leasehold interest and in which unit owners are required to
pay an annual land rental fee to the lessor. We disagree because
the Act expressly allows leasehold condominiums, and the unit
owners were informed of the annual land rent obligation prior to
acquiring their leasehold ownership interests.
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Section 8 of the Condominium Act states:
A condominium may be created or established
by recording in the office of the county
recording officer of the county wherein the
land is located a master deed executed and
acknowledged by all owners or the lessees
setting forth the matters required by
[N.J.S.A. 46:8B-9] and [N.J.S.A. 46:23-9.11].
The provisions of the "Condominium Act,"
[
N.J.S.A. 46:8B-1 to -38] shall apply solely
to real property of interests therein which
have been subjected to the terms of [the
Condominium Act] as provided in this section.
[N.J.S.A. 46:8B-8.]
Section 8.1 of the Condominium Act then clarifies:
Nothing in the act to which this act is a
supplement shall be construed to prevent the
creation and establishment of a condominium
as defined in this act, upon land held under
a lease by the lessee or creator of the
condominium, provided that the master deed
required under this act shall be signed, not
only by the lessee, but also by the lessor of
the land who holds the legal title to the land
in fee simple.
[N.J.S.A. 46:8B-8.1.]
The Act also explains that "[a]ny unit may be held and owned
by one or more persons in any form of ownership, real estate
tenancy or relationship recognized under the laws of this State."
N.J.S.A. 46:8B-5.
Read in conjunction, those provisions expressly allow the
land to be held under a lease,
N.J.S.A. 46:8B-8.1, and the units
to be held as a "real estate tenancy."
N.J.S.A. 46:8B-5. A real
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estate tenancy includes a tenancy established by a lease. See
Black's Law Dictionary 1477 (7th ed. 1999) (defining "tenancy" as
"[t]he possession or occupancy of land by right or title, esp.
under a lease; a leasehold interest in real estate.").
Plaintiffs rely on a separate statute and a statutory
provisions to contend that ground leases are not permitted under
the Condominium Act. First, they cite to and make arguments
concerning the Horizontal Property Act,
N.J.S.A. 46:8A-1 to -28.
The short and simple answer to that argument is that the
condominiums here were created expressly under the Condominium Act
and not the Horizontal Property Act.
Second, plaintiffs cite to
N.J.S.A. 46:8B-3(q), which defines
a "[u]nit [o]wner" as "the person or persons owning a unit in fee
simple." That definition, however, was part of the original
Condominium Act passed in 1969. In 1973, the Legislature amended
the Condominium Act to add Section 8.1, which expressly authorizes
condominiums on lands held under a lease.
N.J.S.A. 46:8B-8.1.
Accordingly, Section 8.1 expressly controls both by its language
and by the fact that it is a clarifying amendment. See McGovern
v. Rutgers,
211 N.J. 94, 107-08 (2012) (holding that the court's
role in interpreting a statute "is to determine and effectuate the
Legislature's intent," starting with the statute's plain
language); see also In re D.C.,
146 N.J. 31, 51 (1996) ("The
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purpose of a curative amendment is . . . to 'remedy a perceived
imperfection in or misapplication of a statute.' . . . The
amendment explains or clarifies existing law and brings it into
'harmony with what the Legislature originally intended.'"
(citations omitted)).
We also note that plaintiffs' argument is premised on the
concept that units must be held in fee simple. The lease
agreements here relate to the ground on which the condominiums
were developed. Even if units were held in fee simple, there is
nothing in the Condominium Act that prevents Pathway's Master
Lease Agreement or Dardanelle's Master Deed from requiring unit
owners to pay an annual rental fee on the ground lease.
Here, both the Pathway Master Lease Agreement and the
Dardanelle Master Deed expressly informed all unit owners that the
ground on which the condominiums were developed are held under
lease agreements. The Pathway Master Lease Agreement and the
Dardanelle Master Deed also expressly informed the unit owners
that they will have to pay an annual rental fee to OG Association
as the lessor of the land.1
1
Plaintiffs also made a third argument contending that they did
not waive their claims that the Lease Agreements were
unconscionable under section 8 of the Act.
N.J.S.A. 46:8B-32.
Plaintiffs did not raise that argument in their merits brief and
defendant accordingly moved to strike the argument when it was
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In summary, we affirm the dismissal of plaintiffs' complaint,
because the claims are barred by the applicable six-year statute
of limitations and otherwise lack merit.
Affirmed.
raised in plaintiffs' reply brief. We reserved on that motion.
We note that the trial court did not address this argument in its
March 31, 2017 decision. Further, because we are holding that the
claims are barred by the applicable statute of limitations, we
need not reach the unconscionability argument. Accordingly, the
reserved motion is moot.
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