Papalexiou v. Tower West Condominium

• Decision Date: 15 March 1979
• Docket Number: B-1
• Citation: Papalexiou v. Tower West Condominium, 167 N.J.Super. 516, 401 A.2d 280 (N.J. Super. 1979)
• Parties: Spyros PAPALEXIOU and Lou Papalexiou, Control Leasing & Management Co., a corporation of New Jersey, Venus Enterprises, Inc., a corporation of New Jersey, Stylianos Ioannidis and Helen Ioannidis, Donald O. Grathwahl, Jr., John H. Wehlau, III, William H. Sapiro and Florence M. Sapiro, Lucille J. McGuinn and Dolores I. McGuinn, Warren L. Schnur and Kathleen O'D Schnur, and Mahesh K. Kotecha, Plaintiffs, v. TOWER WEST CONDOMINIUM, a duly constituted condominium pursuant to R.S.46:8et seq. of the State of New Jersey, Tower West Apartments Association,Inc., a corporation of New Jersey, together with the following individuals intheir capacity asTrustees of Tower West Apartments Association, Inc. and not otherwiseIndividually Claudio Blanco, A. Alfred Landisi, Kenneth W. Thompson, SergioFinzi, Judith Rackmill, Michael Nevard, David Costa and Renee Denkert, and J.I. Sopher & Co., Inc.,believed to be a New York Corporation, in their capacity as managing agent ofTower West Condominium, Defendants.
• Court: New Jersey Superior Court

Page 516

167 N.J.Super. 516

401 A.2d 280

Spyros PAPALEXIOU and Lou Papalexiou, Control Leasing &amp Management Co., a corporation of New Jersey, Venus Enterprises, Inc., a corporation of New Jersey, Stylianos Ioannidis and Helen Ioannidis, Donald O. Grathwahl, Jr. John H. Wehlau, III, William H. Sapiro and Florence M Sapiro, Lucille J. McGuinn and Dolores I. McGuinn, Warren L Schnur and Kathleen O'D Schnur, and Mahesh K. Kotecha, Plaintiffs, v. TOWER WEST CONDOMINIUM, a duly constituted condominium pursuant to R.S.46:8B-1 et seq. of the State of New Jersey, Tower West Apartments Association,Inc., a corporation of New Jersey, together with the following individuals intheir capacity asTrustees of Tower West Apartments Association, Inc. and not otherwiseIndividually Claudio Blanco, A. Alfred Landisi, Kenneth W. Thompson, SergioFinzi, Judith Rackmill, Michael Nevard, David Costa and Renee Denkert, and J.I. Sopher & Co., Inc.,believed to be a New York Corporation, in their capacity as managing agent ofTower West Condominium, Defendants.

Superior Court of New Jersey, Chancery Division.

March 15, 1979.

Barrett F. Kalb, Newark, for plaintiffs (Kalb, Friedman & Siegelbaum, Newark, attorneys; Marc S. Friedman, Newark, on the brief).

John D. Clemen, Newark, for defendants (Shanley & Fisher, Newark, attorneys; Gerald W. Hull, Jr., Newark, and John P. Beyel, Newark, on the reply memorandum).

KENTZ, J. S. C.

This action was instituted by a verified complaint and an order to show cause why defendant Tower West Condominium (Tower West) should not be restrained from asserting a lien or imposing other sanctions against the condominium units of those owners who failed to pay their proportionate share of a special assessment levied by Tower West.

Upon the signing of the order to show cause, temporary restraints were imposed enjoining defendants from asserting or implementing any lien or other sanctions arising out of the nonpayment of the special assessment and from taking any further affirmative action with respect thereto until the return date of the order to show cause. These restraints were thereafter continued by consent orders pending final hearing and further order of the court.

Plaintiffs are owners of apartment units in Tower West located at 6050 Boulevard East, West New York, New Jersey. Tower West is a duly constituted condominium in accordance with the laws of New Jersey, N.J.S.A. 46:8B-1 Et seq. Also named as defendant is the Tower West Apartments Association (Association) which was incorporated in the State of New Jersey and created pursuant to an Offering Plan for the condominium dated June 14, 1975. Defendants Claudio Blanco, A. Alfred Landisi, Kenneth W. Thompson, Sergio Finzi, Judith Rackmill, Michael Nevard, David Costa and Renee Denkert are all members of the Association's board of trustees (board) and were elected to their positions by the unit owners as members of the Association.

Plaintiff Warren L. Schnur is also a trustee of the Association. For purposes of this action, he has elected to be designated as party plaintiff due to his opposition to the board's conduct which is the subject of this litigation. J. I. Sopher & Co. is also named as a defendant. This company served as the managing agent for Tower West and was retained by the former Ad hoc board.

The majority of the board approved a special assessment of $100,000 to be levied against the unit owners due to the various conditions which in its opinion constituted an emergency within the meaning of § 12(C) of the by-laws. The board acted on authority it believed it had been granted under this section, which reads as follows: By majority vote of the Board, to adjust or increase the amount of any such assessments, and to levy and collect in addition thereto, special assessments in such amounts as the Board may deem proper, whenever the Board is of the opinion it is necessary to do so in order to meet increased operating or maintenance costs, or additional capital expenses, or because of emergencies.

However, plaintiffs claim that § 12(B) of the by-laws applies. This section provides:

Anything in these By-laws or elsewhere to the contrary notwithstanding, the Board of Trustees shall not have the authority, except in the case of an extreme emergency, without the consent of a majority of all unit owners to expend in excess of $5,000 on any item of expense in any year which is not specified in, or if specified, over the amount indicated for such item, in the aforesaid budget for such year. Such limitation shall not, however, relate to expenses which may be incurred beyond the control of the Association arising from increases of utility or fuel charges attributable to the operation of the premises.

Since no vote of the unit owners was obtained or even solicited as provided in § 12(B), plaintiffs contend that the board's assessment was beyond its authority and is invalid. Plaintiffs maintain that an extreme emergency did not exist and therefore it was necessary to obtain the vote of the unit owners. Plaintiffs seek a final determination as to the validity of the assessment prior to the imposition of a lien or other sanctions on the units of those owners, including most of the plaintiffs, who refused to pay their proportionate share of the special assessment.

Upon a consideration of the evidence adduced at trial, I find the facts to be as follows. The present membership of the board was elected to office in August 1977. Until that time an Ad hoc board of trustees, of which plaintiff Schnur was president, functioned as an advisor to the then managing agent, J. I. Sopher & Co. The managing agent was empowered to make decisions concerning the operation of Tower West. The present board, unlike its predecessor, has the power to act in the name of the Association rather than merely in an advisory capacity.

After assuming office the board learned of the Association's serious financial problems which were brought about by several contributing factors. Firstly, unpaid bills for 1976 had been paid from funds allocated for 1977. This depleted the 1977 budget for nearly $60,000 for expenditures made in the previous year, which should have come from that year's budget. Secondly, the Association owed $68,449.01 to vendors and suppliers. It was also indebted to the managing agent, Charles H. Greenthal & Co. (Greenthal) for its services in the sum of $4,500. In addition, the Association owed Greenthal for monies advanced on account of the Association's outstanding bills. Thirdly, the Association owed over $40,000 for fuel and electricity. Of this amount, almost $30,000 was due the Public Service Electric & Gas Company which had sent a notice warning of discontinuance of service to the Association unless the arrearage was paid. Fourthly, in addition to its financial problems, the building was in dire need of repair. This condition had originally been discovered when Schnur, in his capacity as president of the Ad hoc board and David Costa, as a member of that board, had conducted a thorough survey of the building facilities. Their report revealed that the air conditioning, heating and fire systems needed extensive repair. The estimated cost of this work was about $21,000. A condition which required immediate attention was the weakened state of the "curtain wall" of the building. Because of this problem, about 60 units suffered water damage due to leakage whenever it rained. This condition had been deteriorating for several years, but a lack of funds had prevented earlier repairs from being made. An estimate of $11,600 for this necessary repair work had been obtained.

In order to consider these problems and to determine the course of action to be taken, the board held a meeting on September 19, 1977 which was continued to the next day. The board determined that a serious emergency existed which could not be eliminated even if all the past due maintenance charges of the members were collected. Several alternatives were considered, among them a loan, an assessment, or a combination of both. The board also sought the advice of legal counsel as to the validity of an assessment under the by-laws. Its counsel advised the board by letter opinion that such an assessment was within its authority as granted by the by-laws.

After considerable discussion the board concluded that an emergency did exist within the meaning of § 12(C). Thereupon, a motion was introduced to levy an assessment of $100,000 to meet the anticipated deficit in the budget, the cash flow crisis and the need to waterproof the building. ¹ Schnur opposed the motion because of his doubt that the cash flow situation constituted an emergency. The board's final action on the motion was postponed to another meeting scheduled for September 25, 1977.

At the next meeting the board continued its review of the grave financial problems. Particular attention was given to an audit completed by the accounting firm of Harris, Kerr, Forster & Co. This report confirmed the dismal financial status of the Association. ² The possibility of Tower West's gas and electrical services being cut off due to nonpayment of the large utility bill was also given further consideration. It was decided that all overdue bills had to be paid promptly and that the repair of the leaks in the apartments must be completed. It was estimated that a little more than $100,000 was needed to accomplish this, and that this amount could not be realized from the maintenance payments of the unit owners. Finally, the motion to levy an assessment of $100,000 was approved by all present except Schnur, who did not then object to the assessment but only questioned its amount. He proposed an assessment of $36,000 to cover $12,000 for emergency repair of leaks, $12,000 for an expected income deficit and $12,000 for a projected expense deficit which might eventually be even greater. Schnur maintained that this amount, together with the payment of the...