Opinion
DOCKET NO. A-2971-14T3
05-05-2016
CHANGMIN NA, individually and d/b/a LEE'S DRY CLEANERS and LEE DRY CLEANERS, Plaintiff-Appellant/Cross-Respondent, v. 369 FIRST STREET CONDOMINIUM ASSOCIATION, Defendant-Respondent/Cross-Appellant.
Steven D. Byoun argued the cause for appellant/cross-respondent (Law Offices of Michael E. Pressman, attorneys; Arthur G. Torkiver, on the briefs). Gerald Kaplan argued the cause for respondent/cross-appellant (Methfessel & Werbel, attorneys; Mr. Kaplan, of counsel and on the brief; Lindsay Spero, on the brief).
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION Before Judges Sabatino, Accurso and Suter. On appeal from the Superior Court of New Jersey, Law Division, Hudson County, Docket No. L-1566-13. Steven D. Byoun argued the cause for appellant/cross-respondent (Law Offices of Michael E. Pressman, attorneys; Arthur G. Torkiver, on the briefs). Gerald Kaplan argued the cause for respondent/cross-appellant (Methfessel & Werbel, attorneys; Mr. Kaplan, of counsel and on the brief; Lindsay Spero, on the brief). PER CURIAM
This appeal and cross-appeal concern whether a condominium association is obligated to indemnify a first-floor commercial unit owner in the building for sums that the commercial entity paid to settle claims brought by a pedestrian who tripped on an uneven portion of the adjacent public sidewalk. A trial judge initially determined that the association owed a duty to so indemnify the commercial unit owner, and accordingly scheduled a hearing at which that owner's damages could be proven. However, at the ensuing hearing, a different judge reached a contrary legal conclusion and denied indemnification.
Our review of the record reveals there are critical disputed facts regarding whether the commercial owner had the authority to dig up the sidewalk and correct the dangerous condition, and also as to whether the sidewalk was a "common element" within the intended meaning of the condominium's master deed and by-laws. Subject to potential waiver arguments, there also appear to be unresolved questions about whether an anti-subrogation provision within the by-laws affects the commercial owner's claims. Consequently, we vacate the trial court's series of orders adjudicating the indemnification issues and remand for fact-finding and other further necessary proceedings.
I.
The plaintiff in this indemnification action, Changmin Na, owns and operates a commercial dry cleaning establishment at 369 First Street in Hoboken. The dry cleaner is on the first floor of the building, with three separately-owned residential units located on the upper floors. The four units are the sole members of defendant 369 First Street Condominium Association ("the association"). The property is situated on a corner lot at the intersection of First Street and Grand Street. A public sidewalk abuts both sides of the building.
To avoid confusing him with the plaintiff in the related personal injury action, we refer to appellant as "Na" or "the dry cleaner."
On March 16, 2010, a pedestrian named Enrique Perez tripped and fell on the sidewalk outside of the building. Although the details of the accident in the record supplied to us are sparse, it appears that Perez tripped because of a raised portion of the sidewalk, possibly due to a tree root.
Perez filed a personal injury action against Na, the association, and the City of Hoboken. The association and the City both moved for summary judgment, which Judge Maureen Mantineo granted after hearing oral argument in October 2012.
The City was dismissed by Judge Mantineo under the Tort Claims Act for reasons that have no bearing on the indemnification issues before us. Judge Mantineo granted summary judgment to the association upon finding that the building was dominantly occupied by residential owners and concluding that, accordingly, the association owed no legal duty to maintain a safe condition on the adjacent public sidewalk. Lastly, Judge Mantineo denied Na's motion to amend his answer to assert a cross-claim for indemnification against the association, without foreclosing Na from bringing a separate future action for such indemnification.
Following this dismissal of his co-defendants in the personal injury case, Na entered into a settlement with Perez for the sum of $42,500, a sum substantially below the non-binding arbitration award. Na then filed the present indemnification action against the association, seeking reimbursement for the sums he or his insurer paid to settle with Perez.
The dry cleaner's indemnification claim is mainly based upon a common-law theory that the association was the primarily responsible party for the dangerous physical condition of the sidewalk. In support of this argument, he argues that the sidewalk is a common element of the property and that both the condominium by-laws and N.J.S.A. 46:8B-18 prohibited him from unilaterally performing repairs that would physically alter the sidewalk. Alternatively, Na contends that the association breached its alleged obligation to him under Article VIII of the by-laws by failing to maintain liability insurance that would have covered him in Perez's lawsuit.
The association opposed these contentions. It argued that, under both the law governing sidewalk liability in tort cases and the terms of the master deed and by-laws, it neither owed nor breached any duties to the dry cleaner in these circumstances.
The association and Na each filed competing motions for summary judgment in the indemnification case. The judge who heard argument on those motions ("the first judge") concluded that, as a matter of law, the association owed a duty to indemnify Na in these circumstances. The first judge consequently granted partial summary judgment to Na on the common-law indemnification claim and denied the association's opposing cross-motion on August 12, 2014. The judge denied Na's application for summary judgment on his separate contract claim under Article VIII, perceiving genuine issues of material fact existed as to whether the association had breached a fiduciary duty by not providing him with insurance that would have covered the Perez claim. The judge thus ordered a further proceeding to determine "the extent of damages for the indemnification claim" and also to try the breach of contract claim.
Judge Mantineo's involvement with these parties apparently ended when the Perez case concluded.
A different judge ("the second judge") presided over the subsequent proceeding to ascertain the extent of Na's indemnification damages and to resolve the fact-dependent Article VIII breach of contract claim. The second judge disagreed with the first judge's legal analysis of the merits of the indemnification claim. Noting that he was not bound by the first judge's interlocutory order, the second judge concluded that no "special relationship" existed between the association and the dry cleaner that would require the former to indemnify the latter. Consequently, the second judge awarded zero damages, given his finding of no duty to indemnify, even though he agreed with Na that the amount of the settlement that had been reached with Perez was reasonable. The second judge further concluded that the dry cleaner had waived his breach of contract claim under Article VIII of the by-laws.
Consistent with these rulings, the second judge dismissed with prejudice Na's complaint against the association in its entirety in an order dated December 11, 2014. The judge thereafter denied Na's motion for reconsideration in a separate order issued on January 9, 2015.
Na now appeals both the December 2014 and January 2015 orders, seeking to reinstate the first judge's determination that the association is obligated to indemnify him. Na requests that we remand the matter to ascertain his damages and also to adjudicate the breach of contract claim. The association opposes these requests and also, in a provisional cross-appeal, seeks to vacate the first judge's August 2014 partial summary judgment order.
II.
A.
Before we proceed with a discussion of the merits, we briefly must note that it would have been preferable if the second judge had alerted counsel before the proceeding on damages and the contract breach claim that the court intended to reconsider the first judge's partial summary judgment decision. To be sure, the second judge was correct that he was not bound by the first judge's interlocutory decision, which was not fixed in stone as the "law of the case." Lombardi v. Masso, 207 N.J. 517, 538-39 (2011). Even so, the dry cleaner's counsel appeared to have been legitimately surprised when what essentially was expected to be in the nature of a damages-only trial or proof hearing was transformed, sua sponte, into an unscheduled oral argument on reconsideration of a prior order issued by the first judge. Cf. Seoung Ouk Cho v. Trinitas Reg'l Med. Ctr., 443 N.J. Super. 461 (App. Div. 2015) (reversing the dismissal of an action in which the trial court, sua sponte, conducted an unanticipated summary procedure on the day of trial).
In any event, we discern no ultimate procedural prejudice to Na because he was thereafter provided with another opportunity on the reconsideration motion to persuade the second judge that the August 2014 ruling should have been left undisturbed. Moreover, as it turns out from our own examination of the issues, infra, there is a need to remand this matter to resolve, among other things, critical factual questions concerning whether the sidewalk was a "common element" of the premises and whether the dry cleaner had the authority to repair the sidewalk unilaterally before Perez's accident.
B.
We now turn to the merits. As a general matter, the right to common-law indemnification in a tort context "rests upon a difference between the primary and secondary liability of two [parties] each of whom is made responsible by the law to an injury to an injured party." Adler's Quality Bakery, Inc. v. Gaseteria, Inc., 32 N.J. 55, 80 (1960) (quoting Builders Supply Co. v. McCabe, 77 A.2d 368, 370 (Pa. 1951)); see also T & E Indus. v. Safety Light Corp., 123 N.J. 371, 397-98 (1991) (finding that an "unsuspecting purchaser" of a commercial property who was liable for clean-up costs was entitled to indemnification by the prior owner who polluted it). Common-law indemnification is "a right which ensures to a [party] who, without active fault on his own part, has been compelled, by reason of some other legal obligation, to pay damages occasioned by the initial negligence of another, and for which he himself is only secondarily liable." Adler's, supra, 32 N.J. at 80 (emphasis added) (quoting Builders, supra, 77 A.2d at 370).
The pivotal difference in this indemnification context between primary and secondary liability "is not based on difference in degrees of negligence or on any doctrine of comparative negligence," but instead "depends on a difference in the character or kind of wrongs which cause the injury and in the nature of the legal obligation owed by each of the wrongdoers to the injured person." Ibid. (quoting Builders, supra, 77 A.2d at 370). Hence, a party might be entitled to indemnity for a liability "arising from some positive rule of common or statutory law[,]" as due to "a failure to discover or correct a defect or remedy a dangerous condition caused by the act of the one primarily responsible." Ibid. (quoting Builders, supra, 77 A.2d at 371).
This "primary actor" principle of indemnification is implicated here in a setting in which the proposed indemnitee, i.e., the dry cleaner, seeks reimbursement from the proposed indemnitor, i.e., the association, for sums that the indemnitee paid to settle a pedestrian's personal injury lawsuit. When indemnification is appropriate, the indemnitee is entitled to be reimbursed not only for the costs of any third-party judgment or reasonable settlement, but also the costs of defending the claim occasioned by the indemnitor's fault. Cent. Motor Parts Corp. v. E. I. duPont deNemours, 251 N.J. Super. 5, 9-10 (App. Div. 1991).
In Serpa v. New Jersey Transit, 401 N.J. Super. 371, 379-80 (App. Div. 2008), we summarized the three-part test the case law has applied for determining whether such settlement payments should be indemnified. Under that test, the court must examine if:
(a) the indemnitee's claims are based on a valid, pre-existing indemnitor/indemnitee relationship;As to the first of these three elements, courts have tended, in the absence of a contractual promise to indemnify, to consider whether a "special relationship" existed between the proposed indemnitor and proposed indemnitee that would justify reimbursement. See, e.g., Ramos v. Browning Ferris Indus., Inc., 103 N.J. 177, 189 (1986). In this vein, implied identification in the absence of a voluntary agreement is a matter of fairness, imposed "by operation of law to prevent a result which is regarded as unjust or unsatisfactory." Harley Davidson Motor Co. v. Advance Die Casting, Inc., 150 N.J. 489, 497 (1997) (quoting Promaulayko v. John Manville Sales Corp., 116 N.J. 505, 511 (1989)).
(b) the indemnitee faced potential liability for the claims underlying the settlement; and
(c) the settlement amount was reasonable.
The second judge reasoned that the requirements for indemnification cannot be met by the dry cleaner in these circumstances. The judge found that this condominium is a predominantly residential facility, so it is generally not liable, as a commercial owner would normally be, for injuries caused to pedestrians on public sidewalks abutting its building. See, e.g., Stewart v. 104 Wallace Street, Inc., 87 N.J. 146, 157 (1981). As the second judge noted, the Supreme Court has applied such residential sidewalk immunity to a condominium project that was overwhelmingly residential and owner-occupied. See Luchejko v. City of Hoboken, 207 N.J. 191, 211 (2011).
Under this reasoning, and as Judge Mantineo recognized in granting the association summary judgment in Perez's case, the association had no liability to Perez as a pedestrian for a dangerous condition on the abutting public sidewalk. As the Supreme Court has since clarified, that immunity would not, however, extend to an accident occurring on a private sidewalk within the interior of a condominium complex that an association in its by-laws agreed to maintain as a common area or element. See Qian v. Toll Bros., Inc., 223 N.J. 124, 127 (2015).
Hence, under the second judge's logic, the association could never be deemed "primarily" responsible for the dangerous condition of this sidewalk because, given the dominantly residential character of the building, the association has no duty to maintain the adjacent public sidewalk. Instead, in keeping with such reasoning, a commercial owner who is in "exclusive possession of the premises abutting the sidewalk" bears the liability to maintain it. Antenucci v. Mr. Nick's Men's Sportswear, 212 N.J. Super. 124, 130 (App. Div. 1986).
The dry cleaner asserts, however, that it is fundamentally unfair for him to bear the brunt of financial responsibility to pedestrians such as Perez who trip on a structural hazard of the adjoining sidewalk. He stresses in this regard that under the association's master deed and by-laws, and also under N.J.S.A. 46:8B-16(c), only the association has the authority to make physical repairs or alterations of "common elements" on the premises. Specifically, Na contends that under Paragraph 5 of the master deed, the adjoining sidewalk to the premises falls within the definition of a "common element":
5. All appurtenances and facilities and other items which are not part of the units or individual appurtenances as hereinbefore described in paragraph 3 shall comprise the common elements as graphically shown on Exhibits "B" and "C" aforesaid. The common elements shall also include by way of description but not by way of limitation:
. . . .
(b) All curbs and sidewalks subject to the easements and provisions set forth in Paragraph 7 of this Master Deed.
[(Emphasis added).]
Na further emphasizes that under Article VII, Sections 2 and 3 of the association's by-laws, the association itself is responsible for the maintenance and repairs of common elements, subject to the association's ability to charge back the unit owners an assessment to allocate among them the costs of such repairs:
SECTION 2. All maintenance, repairs and replacements to the common elements and facilities, whether located inside or outside of the dwelling units (unless necessitated by the negligence, misuse or neglect of a dwelling unit owner, in which case such expense shall be charged to such dwelling unit owner), shall be made by the Board and charged to all dwelling unit owners as a common expense. All payments
vouchers are to be approved by either the president or Treasurer.
SECTION 3. Dwelling unit owners shall not have any right to paint or otherwise decorate or change the appearance of any portion of the exterior of the building in which a unit is located. The unit owner is responsible to promptly report to the Board any defect or need for repairs, the responsibility for which is that of the Association. Except as herein provided, no member or group of members shall build, plant, or maintain any matter or thing upon, over or under the common elements, except with the express permission of the Board in writing first had and obtained, nor shall any member place trash, garbage, excess materials or any kind, on or about the common elements, nor burn, chop or cut anything on, over or above the common elements.
[(Emphasis added).]
If, as Na contends, the public sidewalk adjacent to his dry cleaning establishment is a common element or common area of the condominium, he is also precluded by statute from repairing it as materially altering its physical condition. In particular, Na points to N.J.S.A. 46:8B-18, which provides, in pertinent part, as follows:
There shall be no material alteration of or substantial addition to common elements except as authorized by the master deed. No unit owner shall contract for or perform any maintenance, repair, replacement, removal, alteration or modification of the common elements or any additions thereto, except through the association and its officers. No unit owner
shall take or cause to be taken any action within his unit which would jeopardize the soundness or safety of any part of the condominium property or impair any easement or right appurtenant thereto or affect the common elements without the unanimous consent of all unit owners who might be affected thereby.A related provision in the Condominium Act, N.J.S.A. 46:8B-16(c), further declares that a unit owner may not be held personally liable for damages "caused by the association or in connection with the use of the common element":
[(Emphasis added).]
(c) A unit owner shall have no personal liability for any damages caused by the association or in connection with the use of the common elements. A unit owner shall be liable for injuries or damages resulting from an accident in his own unit in the same manner and to the same extent as the owner of any other real estate.
[(Emphasis added).]
Beyond this, the dry cleaner emphasizes that after Perez's accident, the association received a citation from the City of Hoboken to correct the sidewalk's condition. Thereafter, the association repaired the sidewalk and proportionately charged each of the unit owners for those costs, including Na. Na contends this conduct is admissible proof of the association's "control" of the sidewalk's structural condition, as is permitted under the exception to the "subsequent remedial measure" rule set forth in N.J.R.E. 407. See Manieri v. Volkswagenwerk, 151 N.J. Super. 422, 431-35 (App. Div. 1977), certif. denied, 75 N.J. 594 (1978); Reid v. Monmouth Oil Co., 42 N.J. Super. 355, 362 (App. Div. 1956), certif. denied, 23 N.J. 141 (1957).
The association disputes that the public sidewalk adjacent to this building is a "common element" within the intendment of the statutes, the master deed, and the by-laws. It further disputes whether its remedial action in response to a city summons should be treated in this tort and indemnification context as conclusive proof of the association's control of the sidewalk. The association contends that under Stewart and its progeny, the dry cleaner — as the only commercial establishment in the building — was solely responsible for the hazardous condition of the adjacent sidewalk.
Having considered these competing arguments, we are troubled by the inequity and skewed incentives that would exist here if it is true that the dry cleaner had no right to dig up and repair the sidewalk unilaterally. Assuming that is so, it would be unfair and illogical for the dry cleaner to be the only party potentially liable in tort for an accident caused by a structural condition in the sidewalk — lacking any ability to pursue reimbursement from the association so that the other unit owners could share in such costs.
That said, it is not entirely clear, however, from the survey map and the other materials provided in the appendix whether the public sidewalk here was intended to be regarded as a "common element" or "common area" of this particular condominium. Nor is it entirely clear without testimony at a fact-finding hearing whether the dry cleaner would have been allowed to dig up the sidewalk as a matter of custom and the day-to-day maintenance practices of this building. It is also unclear whether the dry cleaner breached any duty to notify the association of a known dangerous condition on the sidewalk and request a repair, a concern that the second judge noted at oral argument. Although we are mindful of the additional litigation costs caused by prolonging this case, we are constrained to remand for a plenary hearing on these pivotal fact-laden questions.
Na's separate contention regarding his breach-of-contract claim under Article VIII also warrants a remand for fact-finding. The provision states, in relevant part, as follows:
The Board, as insurance trustee for each of the dwelling unit owners shall be required to obtain and maintain to the extent obtainable, without prejudice to the right of each unit owner to insure his own
unit for his own benefit, the following insurance policies:This provision is ambiguous, as it is unclear whether Na, as an individual unit owner, is a "member" entitled to coverage within Article VIII, or whether the term "member" as used in that Article covers only members of the Board of Directors. The meaning of this provision must also be sorted out at a plenary hearing on remand.
. . . .
(2) To the extent obtainable, public liability insurance in such limits as the Board of Directors may, from time to time, determine covering each member of the Board of Directors, the managing agent, the manager and each member.
[(Emphasis added).]
Apart from these open issues, the trial court also should examine on remand whether the dry cleaner acted improvidently in settling the claims asserted by Perez or whether, in hindsight, Na should have defended the claim on a basis that he had no control of the dangerous condition and was not the proximate cause of any hazard. See Serpa, supra, 401 N.J. Super. at 379 (requiring the court, in a case where indemnification of a settlement payment is sought, to evaluate whether "the indemnitee faced potential liability for the claims underlying the settlement").
Because Perez settled and apparently did not appeal summary judgment granted to the association, we have no occasion to reach whether Luchejko is distinguishable because it involved an icy condition on a sidewalk, which presumably a commercial tenant or unit owner in a condominium complex could address, as opposed to a structural condition such as a raised surface, which might be within an association's exclusive authority to repair or rectify. No such potential distinction appears to have been argued to Judge Mantineo, nor the two judges who sequentially presided in this indemnification case, so we simply note the question as a subject that might warrant consideration in a future matter where it is properly raised. --------
Lastly, our review of the by-laws reproduced in the appendix reveals that Article VIII (entitled "Insurance") contains terms that could be fairly considered an "anti-subrogation" provision. The potentially applicable language states that "All policies of physical damage insurance shall, to the extent obtainable, contain waivers of subrogation and waivers from any acts of the insured, and shall provide that such policies may not be cancelled or substantially modified without at least ten (10) days prior written notice to all of the insured [sic], including all mortgages of dwelling units." (Emphasis added). The association's answer to this indemnification complaint does not invoke this provision, nor do the briefs on appeal or the decisions of the trial court address it. Nevertheless, the potential preclusive effect of this provision, if it has not been waived, upon Na's indemnification claim is an additional subject that should be explored on remand. See Skulskie v. Ceponis, 406 N.J. Super. 510 (App. Div. 2009) (enforcing such a provision to preclude an indemnification claim by a unit owner against another unit owner). This provision, and its possible waiver by the association, should also be explored on remand.
For these many reasons, the successive orders of the first judge and second judge are all vacated without prejudice. The matter is remanded for further proceedings consistent with this opinion. The Presiding Judge of the Civil Part shall assign a new judge to conduct the remand proceedings and make the necessary determinations. We do not retain jurisdiction. I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION