Opinion
DOCKET NO. A-1108-13T2 DOCKET NO. A-1456-13T2
06-24-2015
JOHN BUCHLER and NANCY BUCHLER, Plaintiffs, v. CLUB REGATTA CONDO ASSOCIATION, and SCOTTSDALE INDEMNITY COMPANY, Defendants-Respondents, and WHITE RODGERS, A DIVISION OF EMERSON ELECTRIC CO., Defendant-Appellant. JOHN BUCHLER and NANCY BUCHLER, Plaintiffs-Appellants, v. CLUB REGATTA CONDO ASSOCIATION, and SCOTTSDALE INDEMNITY COMPANY, Defendants-Respondents, and WHITE RODGERS, A DIVISION OF EMERSON ELECTRIC CO., Defendant.
Joseph DiRienzo argued the cause for appellant White Rodgers (DiRienzo, DiRienzo & Dulinski, P.A., attorneys; Mr. DiRienzo, on the brief). Jonathan Wheeler argued the cause for appellants John Buchler and Nancy Buchler (Law Offices of Jonathan Wheeler, P.C., attorneys; Mr. Wheeler and Lynda R. O'Brien, on the brief). Dorothy Incarvito-Garrabrant argued the cause for respondent Club Regatta Condo Association (Marcus H. Karavan, P.C., attorney; Ms. Incarvito-Garrabrant, on the brief). Nicole P. Showers argued the cause for respondent Scottsdale Indemnity Company (Prutting & Lombardi, attorneys; George A. Prutting, Jr., on the brief).
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION Before Judges Lihotz, Espinosa and St. John. On appeal from Superior Court of New Jersey, Law Division, Atlantic County, Docket No. L-1582-10. Joseph DiRienzo argued the cause for appellant White Rodgers (DiRienzo, DiRienzo & Dulinski, P.A., attorneys; Mr. DiRienzo, on the brief). Jonathan Wheeler argued the cause for appellants John Buchler and Nancy Buchler (Law Offices of Jonathan Wheeler, P.C., attorneys; Mr. Wheeler and Lynda R. O'Brien, on the brief). Dorothy Incarvito-Garrabrant argued the cause for respondent Club Regatta Condo Association (Marcus H. Karavan, P.C., attorney; Ms. Incarvito-Garrabrant, on the brief). Nicole P. Showers argued the cause for respondent Scottsdale Indemnity Company (Prutting & Lombardi, attorneys; George A. Prutting, Jr., on the brief). PER CURIAM
In these back-to-back consolidated appeals, we consider multiple orders of the Law Division regarding liability and coverage for damage to a condominium unit caused by alleged defects in a thermostat. Plaintiffs John and Nancy Buchler appeal from the motion judge's grant of summary judgment dismissing their complaint as to defendants Club Regatta Condominium Association (the Association) and Scottsdale Indemnity Company (Scottsdale), its insurer. Additionally, plaintiffs and defendant White Rodgers, a Division of Emerson Electric Co. (White Rodgers), appeal from a June 24, 2011 order awarding legal fees and costs to the Association.
Having reviewed the arguments advanced on appeal in light of the record and governing law, we affirm.
I.
We recite the facts found in the summary judgment record, viewed in the light most favorable to the non-moving parties. Robinson v. Vivirito, 217 N.J. 199, 203 (2014). Plaintiffs, husband and wife, own a condominium unit at Club Regatta in Wildwood. On May 23, 2009, plaintiffs discovered physical damage to their unit. One of the two thermostats within the unit malfunctioned and failed to register a temperature beyond fifty-five degrees. This caused the heat to run constantly at a high temperature for approximately one month. The continuous heat resulted in "cracks in the dry wall, damage to the ceilings and woodwork, and damage to the furniture and floors." The second thermostat, located upstairs, was damaged by the consistently high temperatures in the unit.
Additionally, plaintiffs informed the Association by email on July 1, 2009, of additional damage to their ceiling caused by a leaking sprinkler head above their washing machine. The Association repaired the minor damage and the parties concede the leak was unrelated to the thermostat's alleged malfunction.
The Association is incorporated pursuant to the New Jersey Condominium Act (the Act), N.J.S.A. 46:8B-1 to -38. The Association's Master Deed, the organizing document setting forth the rights and responsibilities of the Association and unit owners, differentiates between common elements, over which the Association has responsibility, and units, which are the property and responsibility of individual unit owners. The Master Deed defines "unit" as "[t]he elements of the [condominium] not owned in common with the UNIT OWNERS of the other UNITS," up to and including the boundaries of "the interior surfaces of its perimeter walls, floors, ceilings, doors[ and] door frames." It further specifies that "units" include: "all appliances, fixtures, interior partitions, and other improvements located within or appurtenant to the UNIT on the interior side of all walls within the unit." Contrarily, the Master Deed defines "common element" as "[a]ll land and all portions of the property not located within any UNIT," such as "roofs, foundations, bearing walls, perimeter walls, partition walls, curbs, sidewalks, common stairs and elevators."
Paragraph nineteen of the Master Deed requires the Association to maintain "complete comprehensive [insurance] coverage, including both personal liability and casualty, and such coverage will extend to all areas of the building not owned by UNIT OWNERS." Under the terms of the Master Deed, unit owners "may obtain additional insurance at [their] own expense to cover personal liability and casualty which may occur in or about the premises described in the UNIT DEED." Pursuant to the Master Deed, the Association purchased a commercial property policy with Scottsdale, covering only the common elements of the condominium. Endorsement B, attached thereto, modified the policy "to include as an insured each individual unit owner of the insured condominium, but only with respect to the liability arising out of the ownership, maintenance or repair of that portion of the premises which is not reserved for that unit owner's exclusive use or occupancy."
N.J.S.A. 46:8B-14(d) mandates that condominium associations must maintain coverage for "all common elements and all structural portions of the condominium property."
After plaintiffs discovered the damage to their unit, they promptly notified the Association. Ultimately, however, the Association informed plaintiffs it was not submitting a claim under its policy with Scottsdale. Plaintiffs had not procured individual coverage for their unit.
In April 2010, plaintiffs filed suit against the Association, Scottsdale and White Rodgers, the manufacturer of the thermostat. The complaint demanded coverage for the damage to plaintiffs' unit under the Association's policy with Scottsdale, arguing the damage occurred to common elements within the meaning of the Act and Master Deed. Additionally, the complaint alleged White Rodgers was strictly liable for any damages due to its manufacture of the defective thermostat. The Association and Scottsdale denied liability. In its answer, White Rodgers also denied liability and asserted cross-claims for contribution and indemnification against the Association and Scottsdale. The Association first moved for summary judgment on August 11, 2010, which the court denied without prejudice. Following additional discovery, the Association and Scottsdale filed companion motions for summary judgment, which were opposed by plaintiffs and White Rodgers. Shortly thereafter, on February 24, 2011, the Association served plaintiffs and White Rodgers with a notice and demand to withdraw all claims and cross-claims against it as frivolous, pursuant to the Frivolous Litigation Statute (FLS), N.J.S.A. 2A:15-59.1, and Rule 1:4-8.
The motion judge heard oral argument over three days from October 2010 to April 2011, twice denying summary judgment without prejudice to permit plaintiffs and White Rodgers the opportunity to provide a basis for their claims. Ultimately, on May 3, the judge issued his companion orders and accompanying written opinion granting summary judgment in favor of the Association and Scottsdale, thereby dismissing them from the case. The judge stated:
The definition of a common element does not include the interior wall "surfaces" of a condominium unit. To permit the same would undo thousands of relationships between condominium unit owners and their Associations through the State. Plaintiffs' claim would force the other Association members, and possibly Scottsdale, to compensate them for losses resulting from damaged dry wall, kitchen cabinets, and carpeting. Such items are not "common elements."
The [c]ourt can find no intention on the part of the Legislature nor in the language of the Association's Master Deed which would give such an expansive interpretation of common elements. Finally, there is nothing in the law nor the Master Deed supporting [p]laintiffs' assertion that the Association has a duty to obtain insurance coverage for the "individual units of the condominium."
After we denied plaintiffs' motion for leave to file an interlocutory appeal, plaintiffs and White Rodgers proceeded with litigation. An arbitration award was subsequently entered in favor of White Rodgers on plaintiffs' strict liability claim.
Following its dismissal from the case, on May 23, 2011, the Association moved for an award of attorneys' fees and costs against plaintiffs and White Rodgers under the FLS and Rule 1:4-8. On June 24, the motion judge granted the Association's motion by written opinion, concluding the claims and cross-claims against the Association were frivolous. The judge ordered plaintiffs and White Rodgers to each pay $2,195 to the Association, representing the Association's legal fees accrued subsequent to its service of the notice and demand on plaintiffs and White Rodgers on February 24. Plaintiffs and White Rodgers timely filed appeals, which were consolidated for the purpose of this opinion.
II.
Plaintiffs first argue the motion judge erred in granting summary judgment in favor of the Association and Scottsdale. They contend the damage to their unit was covered under the Association's policy with Scottsdale and, therefore, the Association was obligated to submit a claim thereunder on plaintiffs' behalf.
When reviewing an order granting summary judgment, we "'employ the same standard [of review] that governs the trial court.'" W.J.A. v. D.A., 210 N.J. 229, 237 (2012) (alteration in original) (quoting Henry v. N.J. Dep't of Human Servs., 204 N.J. 320, 330 (2010)). Viewing the evidence in the light most favorable to the non-moving party, see Robinson, supra, 217 N.J. at 203, we must determine "whether there was a genuine issue of material fact, and if none exists, then decide whether the trial court's ruling on the law was correct." Henry, supra, 204 N.J. at 330. We accord no deference to the trial court's legal conclusions, which are subject to plenary review. W.J.A., supra, 210 N.J. at 238.
Here, there is no genuine factual dispute. Rather, the parties disagree as to whether the damage to plaintiffs' unit affects common elements within the meaning of the Act and Master Deed. If so, plaintiffs' case should survive summary judgment. If not, the motion judge properly concluded the damage was not covered and dismissed all claims against the Association and Scottsdale. We therefore focus our inquiry on the meaning of "common element."
It is well-established that "[t]he rights and responsibilities of a condominium unit owner and a governing association are controlled both by [the Act] and the particular master deed and bylaws in effect." Davis v. Metuchen Gardens Condo. Ass'n, 347 N.J. Super. 345, 347 (App. Div. 2002). The Act expressly provides that "the foundations, structural and bearing parts, supports, main walls, roofs, basements, halls, corridors, lobbies, stairways, elevators, entrances, exits and other means of access" constitute common elements. N.J.S.A. 46:8B-3(d)(ii). Also included are any areas so designated in the governing master deed. N.J.S.A. 46:8B-3(d)(i); see also Soc'y Hill Condo. Ass'n v. Soc'y Hill Assocs., 347 N.J. Super. 163, 170 (App. Div. 2002) (stating that the Act defines common elements as "those elements existing or intended for common use"). The Master Deed is equally unambiguous in limiting common elements to the "portions of the property not located within any UNIT." As such, "the interior surfaces of its perimeter walls, floors, [and] ceilings" all form part of the unit and are, consequently, excluded from the common elements of the condominium.
The damage to plaintiffs' unit consisted of "cracks in the dry wall, damage to the ceilings and woodwork, and damage to the furniture and floors." Nothing in the language of either the Act or Master Deed suggests the affected areas fall within the definition of common elements under the control of the Association. Nor have plaintiffs offered any authority to contradict our plain reading of the statutory and contractual text. We therefore agree with the motion judge that plaintiffs were not entitled to coverage under the Scottsdale policy and the Association did not err in refusing to submit a claim on plaintiffs' behalf. Consequently, we conclude the judge properly granted summary judgment in favor of the Association and Scottsdale.
III.
Plaintiffs and White Rodgers both appeal from the motion judge's award of attorneys' fees and costs to the Association pursuant to the FLS and Rule 1:4-8. We review such awards for an abuse of discretion. Ferolito v. Park Hill Ass'n, 408 N.J. Super. 401, 407 (App. Div.), certif. denied, 200 N.J. 502 (2009). "Reversal is warranted when 'the discretionary act was not premised upon consideration of all relevant factors, was based upon consideration of irrelevant or inappropriate factors, or amounts to a clear error in judgment.'" Ibid. (quoting Masone v. Levine, 382 N.J. Super. 181, 193 (App. Div. 2005)).
The FLS permits an award of reasonable counsel fees and litigation costs to a prevailing party in a civil action if it is determined "that a complaint, counterclaim, cross-claim or defense of the nonprevailing [party] was frivolous." N.J.S.A. 2A:15-59.1(a)(1). There are two bases on which a claim or defense can be considered frivolous:
(1) The complaint, counterclaim, cross-claim or defense was commenced, used or continued in bad faith, solely for the purpose of harassment, delay or malicious injury; or
(2) The nonprevailing party knew, or should have known, that the complaint, counterclaim, cross-claim or defense was without any reasonable basis in law or equity and could not be supported by a good faith argument for an extension, modification or reversal of existing law.
[N. J.S.A. 2A:15-59.1(b).]
A claim or defense is considered frivolous "when no rational argument can be advanced in its support, [] it is not supported by any credible evidence, [] a reasonable person could not have expected its success, or [] it is completely untenable." Belfer v. Merling, 322 N.J. Super. 124, 144 (App. Div.), certif. denied, 162 N.J. 196 (1999). "[F]alse allegations of fact [will] not justify [an] award . . . unless they are made in bad faith, 'for the purpose of harassment, delay or malicious injury.'" McKeown-Brand v. Trump Castle Hotel & Casino, 132 N.J. 546, 561 (1993) (quoting N.J.S.A. 2A:15-59.1(b)(1)). An honest attempt to pursue a perceived, though ill-founded, claim or defense is not considered to be frivolous. Id. at 563.
"That some of the allegations made at the outset of litigation later prove[] to be unfounded does not render frivolous a complaint that also contains some non-frivolous claims." First Atl. Fed. Credit Union v. Perez, 391 N.J. Super. 419, 432 (App. Div. 2007) (citation and internal quotation marks omitted). However, "'[c]ontinued prosecution of a claim or defense may, based on facts coming to be known to the party after the filing of the initial pleading, be sanctionable as baseless or frivolous even if the initial assertion of the claim or defense was not.'" United Hearts, L.L.C. v. Zahabian, 407 N.J. Super. 379, 390 (App. Div.) (quoting Iannone v. McHale, 245 N.J. Super. 17, 31 (App. Div. 1990)), certif. denied, 200 N.J. 367 (2009). Ultimately, the burden of proving bad faith is on the party who seeks the fees and costs. McKeown-Brand, supra, 132 N.J. at 559.
Rule 1:4-8 expands upon the application of the FLS. See Trocki Plastic Surgery Ctr. v. Bartkowski, 344 N.J. Super. 399, 404-05 (App. Div. 2001) (citing McKeown-Brand, supra, 132 N.J. at 549)), certif. denied, 171 N.J. 338 (2002); see also Perez, supra, 391 N.J. Super. at 432 ("An assertion is deemed frivolous [for purposes of Rule 1:4-8] when no rational argument can be advanced in its support, or it is not supported by any credible evidence, or it is completely untenable." (citation and internal quotation marks omitted)). A party moving for fees and costs under either the FLS or Rule 1:4-8 must comply with the latter's procedural requirements "'[t]o the extent practicable.'" Toll Bros., Inc. v. Twp. of W. Windsor, 190 N.J. 61, 64-65 (2007) (alteration in original) (quoting R. 1:4-8(f)). Specifically, the party must serve a notice and demand to withdraw the objected-to claims at least twenty-eight days before filing the motion, which in turn must "be filed with the court no later than 20 days following the entry of final judgment." R. 1:4-8(b)(1), (2). Both procedural dictates were satisfied here.
Notwithstanding White Rodgers' assertion to the contrary, nothing in the record before us suggests it objected to the Association's motion on timeliness grounds before the motion judge. See R. 2:10-2. Moreover, that the Association's motion included in the parties' appendices lacks an official "filed" stamp is not controlling. The Association's counsel executed a sworn certification showing the motion was filed on May 23, 2011, within the twenty-day window. Given the facts in the record and the absence of any certification or evidence demonstrating the Association's motion was not timely filed, we decline to invalidate the award of fees on this basis. See Toll Bros., supra, 190 N.J. at 69. --------
In twice denying summary judgment without prejudice, the motion judge repeatedly pressed counsel for plaintiffs and White Rodgers to provide "facts or law supporting their position." Despite having ample time over more than nine months following the initial summary judgment motion, neither party was able to muster any persuasive legal authority or factual support for their highly implausible theories for shifting liability to the Association. In fact, the judge found neither had provided any new information supporting their positions.
Although their claims and cross-claims may not have been frivolous when first asserted, the absence of any support as discovery progressed rendered those claims entirely baseless, and plaintiffs and White Rodgers were "obligated at that time to withdraw [those claims] . . . because [their] contentions lacked sufficient evidentiary support." DeBrango v. Summit Bancorp., 328 N.J. Super. 219, 228 (App. Div. 2000); see also United Hearts, supra, 407 N.J. Super. at 390 ("[C]ontinued prosecution of a claim or defense may, based on facts coming to be known to the party after the filing of the initial pleading, be sanctionable as baseless or frivolous even if the initial assertion of the claim or defense was not." (alteration in original) (citation and internal quotation marks omitted)).
As such, we discern no error in the motion judge's decision and hold he did not abuse his discretion in granting the Association's motion for fees and costs against plaintiffs and White Rodgers. See Ferolito, supra, 408 N.J. Super. at 407.
Affirmed. I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION