Clair W. Flinn v. Amboy National Bank and Ab Monmouth, LLC
436 N.J. Super. 274
| N.J. Super. Ct. App. Div. | 2014Background
- The Monmouth is an age-restricted condominium planned for 96 units; only 48 were built by developer Oakshire, of which 32 were sold and 16 leased after foreclosure.
- Amboy Bank foreclosed on Oakshire, acquired remaining liened units via sheriff's deed, and conveyed title and sponsor rights to its subsidiary AB Monmouth. AB Monmouth issued a new POS reserving discretion whether to finish the unbuilt units.
- Twenty-eight unit owners (plaintiffs) sued Amboy and AB Monmouth seeking (1) judicial turnover of association control under N.J.S.A. 46:8B-12.1(a) alleging the developer ceased building/offering units in the ordinary course, and (2) fraud, statutory/regulatory violations, failure to pay common expenses, and breach of fiduciary duty.
- The trial court granted defendants’ motion to dismiss all five counts with prejudice, holding (a) owners needed a majority vote under N.J.A.C. 5:26-8.4(d) before seeking judicial turnover, (b) fraud claims were insufficiently pled and time-barred, and (c) many plaintiffs lacked standing for other counts.
- The Appellate Division reversed the dismissal of Count I (control turnover), holding the regulation permitting voluntary early surrender by a developer (N.J.A.C. 5:26-8.4(d)) cannot be read to limit the statutory, mandatory turnover remedy in N.J.S.A. 46:8B-12.1(a); factual disputes about whether the developer ceased offering/building must be resolved after discovery.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| 1. Whether owners may obtain judicial turnover of association control under N.J.S.A. 46:8B-12.1(a) when developer ceased building/marketing units | Owners: Statute’s proviso authorizes mandatory turnover when developer is not constructing/marketing in the ordinary course; no prior majority-owner vote required | Defendants: Regulation N.J.A.C. 5:26-8.4(d) requires a majority owner vote before turnover | Court: Reversed dismissal — regulation is permissive (allows voluntary surrender) and cannot limit statutory mandatory turnover; factual question on whether proviso is triggered remanded for discovery/trial |
| 2. Sufficiency/time bar of PREDFDA fraud claims (material misrepresentations in POS) | Owners: Complaint adequately alleged misrepresentations; if pleading deficient, should be allowed to amend; some owners remain within limitations and have standing | Defendants: Plaintiffs failed to plead fraud with particularity (Rule 4:5-8); PREDFDA six-year statute bars claims; AB Monmouth not liable for predecessor’s misrepresentations per master deed | Court: (Opinion omits detailed resolution in published parts) Trial court’s dismissal with prejudice was overbroad; plaintiffs should have opportunity on viable claims; factual/standing/statute of limitations issues require further proceedings |
| 3. Whether plaintiffs may bring derivative claims (Counts III–V) while developer controls association | Owners: Can sue derivatively on association’s behalf where developer controls association | Defendants: Many plaintiffs lack standing to pursue statutory/regulatory/master-deed claims | Court: Trial court erred in dismissing whole complaint with prejudice; standing/derivative issues left to be resolved below after discovery |
| 4. Liability of Amboy Bank (non-developer parent) under PREDFDA | Owners: PREDFDA imposes liability on any person who "directly or indirectly controls" developer | Defendants: Amboy is not a developer/sponsor and cannot be held liable merely as member of LLC | Court: Not finally resolved in published portion; dismissal with prejudice was improper — issues of control and statutory liability require further factual development |
Key Cases Cited
- Printing Mart-Morristown v. Sharp Elecs. Corp., 116 N.J. 739 (discusses standard for Rule 4:6-2(e) dismissal and liberal inference requirement)
- Green v. Morgan Props., 215 N.J. 431 (explains ‘suggested by the facts’ test and liberal pleading review on dismissal)
- Fox v. Kings Grant Maint. Ass'n, 167 N.J. 208 (statutory scheme vests ultimate management responsibility in unit owners; developer control must not subvert owners’ interests)
- Jersey Cent. Power & Light Co. v. Melcar Util. Co., 212 N.J. 576 (interpretive principle that use of ‘shall’ is normally mandatory)