BLUE WATER TOWNHOME ASSOCIATION, INC. VS. LORI DIFABIO (L-0120-15, CAPE MAY COUNTY AND STATEWIDE), A-4709-16T4

Background

DiFabio owns two condo units in Townhomes at Blue Water and became delinquent on assessments; plaintiff association sought collection.
In July 2014 the board voted to impose a $60,000 per unit special assessment for siding/deck work; notice procedures and contractor retention followed contested processes.
Plaintiff retained a contractor in October 2014 (the contractor is owned by the board president, who did not participate in the selection). All other owners paid the $60,000 assessment; DiFabio did not.
Plaintiff sued in March 2015 seeking unpaid regular fees, special assessments (including $120,000 for two units), costs, receivership fees, and attorney’s fees; DiFabio counterclaimed challenging the validity of the assessment and contractor retention, and asserted fiduciary/CFA claims (CFA later dismissed).
Trial court granted summary judgment for plaintiff awarding $377,815.09 (including $120,000 for the special assessment and $171,866 in attorney’s fees) and dismissed DiFabio’s counterclaims.
Appellate court affirmed liability for $85,949.09 in unpaid dues/fees/costs, reversed the $120,000 assessment award and dismissal of the related counterclaims, vacated the attorney’s fee award, and remanded for further proceedings.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Validity of July 18, 2014 $60,000 per-unit special assessment	Board properly approved the assessment at the July meeting; DiFabio was ineligible to vote so any notice defect is immaterial	Approval violated master deed §6.10 (requires 30 days' notice and 2/3 assent of members in good standing); DiFabio entitled to notice despite delinquency	Reversed: plaintiff failed to satisfy §6.10; genuine notice issue and untimely/insufficient ratification evidence; assessment invalid as approved and not properly ratified
Ratification (Feb 2016 meeting / ballot-by-mail) of the July 2014 approval and October 2014 contractor retention	The association ratified the prior acts by a Feb 2016 meeting and mail ballot; ratification cures earlier defects	Ratification did not satisfy formalities in the master deed (30 days' notice and in-person board meeting for a special assessment); evidence of ratification was unsworn counsel letter	Reversed as to ratification of the special assessment (insufficient notice and improper mail-ballot procedure under §6.10). Ratification evidence was inadmissible at summary judgment; remanded to adjudicate counterclaims and contractor-retention issues
Contractor retention and alleged conflict of interest (board president's firm)	Retention was proper; president recused from bid review; business judgment rule protects board decisions	Retention was unauthorized and tainted by conflict/self-dealing; required formal board authorization/notice	Reversed dismissal of counterclaim re contractor retention because ratification evidence was unsupported; however, if properly ratified on remand, retention would be protected by the business judgment rule absent evidence of fraud/self-dealing
Award of attorney’s fees	Fees are recoverable under the master deed/by-laws for collection efforts and were reasonable	Fees are excessive/unreasonable given results and improper pursuit of invalid assessment; court must apply RPC 1:5(a) factors	Vacated fee award and remanded: trial court failed to apply and make findings on the RPC 1:5(a) factors (including amount recovered). On remand fees must be reassessed in light of invalidated $120,000 assessment

Key Cases Cited

Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520 (N.J. 1995) (summary judgment: view facts in favor of nonmoving party)
Lee v. Brown, 232 N.J. 114 (N.J. 2018) (standard of review for summary judgment)
Bhagat v. Bhagat, 217 N.J. 22 (N.J. 2014) (definition of ‘genuine issue’ under Rule 4:46-2)
Port Liberte II Condominium Ass'n v. New Liberty Residential Urban Renewal Co., 435 N.J. Super. 51 (App. Div. 2014) (ratification requires same formalities as original act)
Ridge at Back Brook, LLC v. Klenert, 437 N.J. Super. 90 (App. Div. 2014) (unsworn counsel assertions cannot support/defeat summary judgment)
Seidman v. Clifton Savings Bank, 205 N.J. 150 (N.J. 2011) (business judgment rule framework)
Alloco v. Ocean Beach & Bay Club, 456 N.J. Super. 124 (App. Div. 2018) (apply business judgment rule to condo-board decisions)
Furst v. Einstein Moomjy, 182 N.J. 1 (N.J. 2004) (court must analyze and state reasons under RPC 1:5 when awarding counsel fees)