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Court Rules in Favor of Community Association Business Judgment Rule

The New Jersey Appellate Division recently addressed a community association case, Apple Ridge Condominium Association v. Rodgers, in which a unit owner alleged that the Association caused him to be rejected for a reverse mortgage on his condominium by engaging in bad faith through its involvement in a lawsuit with a group of fee simple owners at the Association.

The Apple Ridge Condominium Association consists of 260 condominiums, and sixteen detached fee simple residential units. Charlie Rodgers, a retired lawyer, and his wife were one of the condominium unit owners. They did not pay their maintenance fees and the Association brought a collection action against them. Mr. Rodgers counterclaimed that the Association had caused them monetary damage by engaging in bad faith in its lawsuit with the fee simple owners regarding overcharged maintenance fees. Mr. Rodgers claimed this litigation had caused him to be unable to obtain a reverse mortgage on his condo. The trial court granted summary judgment dismissing Mr. Rodgers counterclaim.

On appeal, Mr. Rodgers contended that summary judgment should not have been granted because evidence showed that the Association had acted in bad faith by withholding financial information from the fee simple owners, thereby causing the fee simple lawsuit to be filed. Mr. Rodgers further argued that the Association had engaged in bad faith by failing to participate in discovery with the fee simple owners, and by denying Mr. Rodger’s motion to intervene in the litigation. Furthermore, in support of his allegation that the Association’s bad faith had caused him monetary damage by preventing him from obtaining a reverse mortgage on his condo, he referred to an admission by an Association board member that another individual was also denied a reverse mortgage for the same reason. Additionally, Mr. Rodgers contends that he is an attorney with fifty years of experience and therefore can testify as an expert witness about the conditions of the real estate market and the reasons he was unable to obtain a reverse mortgage.

The Association countered that Mr. Rodgers had not produced any admissible evidence to prove that the fee simple litigation had caused him not to obtain a reverse mortgage. The Association also argued that the business judgment rule precluded a claim against the Association for the way it conducted its litigation against the fee simple owners.

The Court agreed with the Association on all counts, holding that Mr. Rodgers relied only on his own conclusory testimony to prove that the Association had acted in bad faith regarding the litigation with the fee simple owners. The Court further held that the Association, along with its attorney, must have the ability to make decisions regarding disputes and litigation, whether through the business judgment rule or litigation privilege, without being second guessed by unit owners. The Association, the Court said “cannot be liable for damaging individual unit owners such as Defendants simply because its actions in the course of litigation on behalf of all members may have affected some of the members unfavorably.”

Finally, the Court held that Mr. Rodgers had presented no admissible evidence that the Association caused him to fail to obtain a reverse mortgage. For these reasons the Court affirmed the trial court’s decision.

Here at Lieberman Blecher & Sinkevich our attorneys are well versed in all facets of community association representation, and represent multiple associations with various legal matters. Our attorneys are experienced in area involving association creation, site remediationtoxic exposure and liability concerns, and collections matters.

 

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