Aqua Beach v. Dept. of Cmty. Affairs

• Decision Date: 18 January 2006
• Citation: 890 A.2d 922,186 N.J. 5
• Parties: AQUA BEACH CONDOMINIUM ASSOCIATION, a not-for-profit Corporation of the State of New Jersey, Petitioner-Appellant, v. DEPARTMENT OF COMMUNITY AFFAIRS, BUREAU OF HOMEOWNER PROTECTION, NEW HOME WARRANTY PROGRAM, Respondent-Respondent.
• Court: New Jersey Supreme Court

890 A.2d 922

186 N.J. 5

AQUA BEACH CONDOMINIUM ASSOCIATION, a not-for-profit Corporation of the State of New Jersey, Petitioner-Appellant, v. DEPARTMENT OF COMMUNITY AFFAIRS, BUREAU OF HOMEOWNER PROTECTION, NEW HOME WARRANTY PROGRAM, Respondent-Respondent.

Supreme Court of New Jersey.

Argued September 28, 2005.

Decided January 18, 2006.

Norman W. Briggs, Philadelphia, PA, argued the cause for appellant (Frey Petrakis Deeb Blum Briggs & Mitts, attorneys Mr. Briggs and Michele L. Weckerly, on the brief).

Patricia E. Stern, Deputy Attorney General, argued the cause for respondent (Peter C. Harvey, Attorney General of New Jersey, attorney; Patrick DeAlmeida, Assistant Attorney General, of counsel).

JUSTICE RIVERA-SOTO delivered the opinion of the Court.

This appeal requires that we address two related issues that arise out of the operation of the New Home Warranty Program administered by the Bureau of Homeowner Protection (Bureau) of the Department of Community Affairs (DCA). First, we must address whether, under the circumstances presented, the Bureau's processing and ultimate denial of certain home warranty claims was arbitrary, capricious or unreasonable and, second, whether there is legally competent evidence in this record to support the claimant's assertion that it had received oral authorization from a representative of the Bureau to proceed with the repairs and, hence, the Bureau is equitably estopped from asserting a failure to comply with the repair pre-authorization requirements of the governing regulations.¹

We hold that the Bureau's regulations requiring that a claimant under the Home Warranty Program submit to the Bureau "two or more bona fide estimates acceptable to the Division [of Codes and Standards of the DCA] for the work intended to be covered," N.J.A.C. 5:25-5.5(e)2, as a condition precedent to certification by the Director of the Division to the State Treasurer for payment from the Home Warranty Security Fund (Fund), N.J.A.C. 5:25-5.5(e)1, for "work authorized in writing by the [DCA] and upon completion to the [DCA's] satisfaction," N.J.A.C. 5:25-5.5(e)2, are neither arbitrary, nor capricious, nor unreasonable, either as written or as applied in this instance. We further hold that, under the circumstances presented here, there was no legally competent evidence on which to base any equitable estoppel claim against the Bureau.

I.

Petitioner Aqua Beach Condominium Association (Aqua Beach) is a New Jersey not-for-profit corporation organized as the condominium association in respect of a complex of three structures (Buildings A, B, and C) located in North Wildwood, New Jersey and constructed in 1989. At that time, Aqua Beach applied for and was certified as eligible to participate in the Fund. Authorized by N.J.S.A. 46:3B-7a, the Fund was established by the State to "protect[ ] the consumer from the builder who ... `is unable to or willfully refuses to correct ... deficiencies. [In that event] an amount sufficient to cure the problem [is] paid from the fund to the [home]owner.'" Fisch v. Bureau of Constr. Code Enforcement, 238 N.J.Super. 410, 412-13, 570 A.2d 2 (App.Div.1990) (citation and footnote omitted). However, as a result of the intervening bankruptcy of Aqua Beach's original developer, only eleven of twenty-four eligible condominium units actually enrolled for participation in the Fund; these were one of eight units in Building A, four of eight units in Building B, and six of eight units in Building C.

In 1998, Aqua Beach noted certain structural defects in construction in the common elements of each of the three buildings constituting the condominium complex. By a letter dated March 18, 1998, the Bureau was advised by Aqua Beach that it was submitting those claims to the Fund for processing. After an exchange of correspondence, on September 15, 1998, the Bureau inspected the condominium complex, cautioning Aqua Beach that, because only eleven of twenty-four units participated in the Fund, the Bureau would limit its inspection to the common elements related to the covered units. As a result of the inspection, the Bureau advised that it would cover repairs to major structural defects, but only in proportion to the number of units covered by the Fund in their respective buildings. The separate inspection reports for each of the buildings, which were forwarded to Aqua Beach in late October and early November of 1998, revealed no covered major structural defects in respect of Building A. However, because the inspection reports disclosed major structural defects in Buildings B and C, the Bureau notified Aqua Beach that the Fund would cover fifty percent of the costs of repairs for major structural defects in Building B (where four of eight units, or fifty percent, participated in the Fund), and seventy-five percent of the costs of repairs for major structural defects in Building C (where six of eight units, or seventy-five percent, participated in the Fund). In the inspection reports for Buildings B and C, and in order to implement its findings, the Bureau advised Aqua Beach in writing that Aqua Beach was required to submit "two or more bona fide estimates acceptable to the Division for work intended to be covered." N.J.A.C. 5:25-5.5(e)2. Aqua Beach never contested the contents of the inspection reports. Instead, Aqua Beach acknowledged its obligation to submit, and ultimately requested and received additional time to submit, the required minimum two estimates of repair work sought to be covered by the Fund. Despite that additional time, Aqua Beach nevertheless failed to complete that process, even after a July 12, 1999 written warning from the Bureau that a failure to complete it by August 11, 1999 would result in the administrative denial of Aqua Beach's claims.² Based on Aqua Beach's failure to complete the claim submission process by the deadline set forth, the Bureau closed its file.

Aqua Beach's response was two-fold. First, through its counsel, Aqua Beach sought to contest the Bureau's administrative denial of the claims, and, ultimately, Aqua Beach requested a hearing on the denial of the claims. See generally N.J.A.C. 5:25-5.5. That matter then was referred to the Office of Administrative Law (OAL). Second, without notice to the Bureau, without submitting to the Bureau the required minimum of two bids for the repair work, and without allowing the Bureau the opportunity to approve the same, Aqua Beach unilaterally hired a contractor and, at some time during the first half of 2001, completed the repair work.

It was not until August 16, 2001 that Aqua Beach notified the Bureau that the repair work had been completed. On October 5, 2001, the Bureau moved before the assigned Administrative Law Judge to dismiss Aqua Beach's claims. In reply, Aqua Beach's counsel asserted that, during a February 6, 2001 telephone conversation between counsel and the Bureau's supervising project engineer, the Bureau's engineer orally authorized the repair work. The Administrative Law Judge instructed the parties to brief that issue. The evidence propounded consisted of the certification of Aqua Beach's counsel, the certification of the Deputy Attorney General (DAG) assigned to handle Aqua Beach's contested case before the OAL, and the testimony of the Bureau's engineer.

In a nutshell, Aqua Beach's counsel certified that he spoke with the DAG on February 5, 2001 to discuss whether Aqua Beach could proceed with the repairs despite the acknowledged fact that Aqua Beach had not submitted, and the Bureau hence had not approved, the required minimum two bids. Aqua Beach's counsel certified that he told the DAG that Aqua Beach wished to proceed with its repairs but did not want to jeopardize its pending claims against the Fund. The DAG certified that he had advised Aqua Beach's counsel that, if Aqua Beach proceeded with the repairs without prior Bureau approval, the costs of the repair would not be covered by the Fund and the claims would be waived. According to the DAG's certification, Aqua Beach's counsel explained that Aqua Beach considered the repairs to be "emergency repairs" and requested permission to speak with a Bureau representative. The DAG acceded to that last request and arranged for a Bureau representative to call counsel.

According to both the certification of counsel and the testimony of the Bureau's engineer, the next day, February 6, 2001, the Bureau's engineer called counsel and again recommended that Aqua Beach obtain the required minimum two bids for the repair work. Tellingly, the certification of Aqua Beach's counsel does not assert that the Bureau ever expressly authorized Aqua Beach to proceed with the repair work or that Aqua Beach's counsel ever confirmed with the DAG that any such approval was granted. Although Aqua Beach ultimately did obtain bids, it did not submit them to the Bureau until November 5, 2001, almost three months after first advising the Bureau that the repair work had been completed, at least five months after the repair work in fact had been completed, and nine months after, according to Aqua Beach's counsel, the Bureau purportedly authorized Aqua Beach to proceed with the repair work. In his testimony, the Bureau's engineer could not specifically recall his February 6, 2001 telephone conversation with Aqua Beach's counsel. The Bureau's engineer explained that, although it was not uncommon to receive inquiries from anxious homeowners desiring to start repairs immediately, his practice invariably was to cite to the regulations and warn the homeowner that no reimbursement would be made for repairs performed prior to the Bureau's written authorization therefor, a requirement he viewed as "sacrosanct" and one from which he had never deviated in his eleven years as the Bureau's engineer.

By an initial decision dated July 22, 2002, the Administrative Law Judge granted the Bureau's motion to dismiss Aqua Beach's claims. Aqua Beach Condo. Ass'n v. Bureau...