Court Opinion

ID: 4685643
Source: CourtListenerOpinion
Date Created: 2021-05-11 14:11:26.226569+00
Date Added: 2024-06-11T08:04:29.314375
License: Public Domain

NOT FOR PUBLICATION WITHOUT THE
                               APPROVAL OF THE APPELLATE DIVISION
        This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the
     internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.

                                                        SUPERIOR COURT OF NEW JERSEY
                                                        APPELLATE DIVISION
                                                        DOCKET NO. A-2154-19

MICHAEL VOLOVNIK,
PEOPLEMOVER, LLC, and
RE-HOLD, INC., as unit owners
and derivatively on behalf of
Bridge Plaza Condominium
Association, Inc., and all other
Bridge Plaza unit owners
similarly situated,

          Plaintiffs-Appellants,

v.

BRIDGE PLAZA
CONDOMINIUM
ASSOCIATION, INC.,

          Defendant-Respondent,

and

IGOR TROGAN, DAVID
MORAN, MARC FEINGOLD,
ERNEST LEVA, MELIORA
INVESTMENTS, LLC,
DOUGLAS BLOCK, SYDNEY
B. REALTY, LLC, and CRAM IT,
LLC,
      Defendants,

and

BRIDGE PLAZA
CONDOMINIUM
ASSOCIATION, INC.,

      Third-Party Plaintiff,

v.

EVEREST HEATING &
COOLING, LLC, a/k/a EVEREST
CONSTRUCTION, LLC,

      Third-Party Defendant.

            Submitted February 24, 2021 – Decided May 11, 2021

            Before Judges Fuentes and Rose.

            On appeal from the Superior Court of New Jersey, Law
            Division, Monmouth County, Docket No. L-4593-17.

            Rutter & Roy, LLP, attorneys for appellants (Richard
            B. Tucker, Jr., of counsel and on the briefs).

            Ansell Grimm & Aaron, PC, attorneys for respondent
            (David J. Byrne, on the brief).

PER CURIAM

      In this commercial condominium dispute, Michael Volovnik, and his sole

proprietorships, Peoplemover, Inc., and Re-Hold, Inc., (collectively, plaintiffs),

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appeal from a series of Law Division orders that culminated in the dismissal of

their litigation and a fee award in favor of defendant Bridge Plaza Condominium

Association, Inc. (Association). More particularly, plaintiffs appeal from orders

entered on: (1) April 13, 2018, dismissing counts one, three, and four of their

first amended complaint on equitable estoppel grounds; (2) May 25, 2018,

awarding defendant attorneys' fees and costs, and denying plaintiffs' motion for

reconsideration of the April 13, 2018 order; (3) January 18, 2019, granting

summary judgment to defendant on count six of plaintiffs' third amended

complaint, and denying plaintiffs' cross-motion on that count; (4) May 31, 2019,

granting summary judgment in favor of defendant on counts three and four of

plaintiffs' third amended complaint, and denying plaintiffs' cross-motion on

those counts; and (5) July 19, 2019, denying plaintiffs' motion for

reconsideration of the May 31, 2019 orders. Because the allegations raised in

plaintiffs' complaint were raised – or could have been raised – in the parties'

prior litigation, we affirm all orders under review.

                                        I.

      The parties have a long litigious history, which is accurately summarized

in the decisions that accompany the Law Division orders. We also incorporate

by reference the relevant facts and procedural history set forth at length in our

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prior consolidated opinion, affirming certain orders as summarized below.

Trogan v. Volovnik, No. A-1773-13, and Leva v. Volovnik, No. A-1774-13

(App. Div. Jan. 21, 2015). We highlight those facts and events that are pertinent

to our analysis.

      Plaintiffs own twelve of thirty-three units located in the Bridge Plaza

Condominium Complex (Complex) in Manalapan. More than two decades ago

in 1998, Volovnik developed the Complex, assumed the role of sponsor of the

Association, and served as its president and a member of its Board of Directors

(Board) until 2013. Later that year, Volovnik and other members of the Board

unanimously voted to amend the Association's By-Laws, dispensing with its

annual audit requirement. Instead, the audits would occur "[o]nly upon request"

of "an entitled party," including unit owners, at the requesting party's expense.

      In January 2012, the Board adopted a parking resolution, which

designated a series of new parking rules including the allotment of "[four]

parking spaces per every 1000 square feet of unit space." The Board further

established a monetary fine for violation of those rules.

      In June 2012, Igor Trogan and seven other unit owners (Trogan plaintiffs),

individually, and derivatively on behalf of the Association, sued Volovnik and

the remainder of the Board (Trogan litigation). Among other allegations, the

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Trogan plaintiffs claimed the Board failed to hold elections and conduct public

meetings as required by the Association's By-Laws. The Trogan plaintiffs also

challenged the legality of the Board's parking regulations.

      In May 2013, the parties executed a settlement agreement, thereby

resolving the Trogan litigation.

                   In pertinent part, the settlement provided that the
            Board would hold elections within sixty days, at which
            the non-sponsor unit owners would elect four directors,
            with Volovnik retaining control of one board seat as
            sponsor. The settlement also provided that the Board
            would "forgiv[e] and/or cancel[] all fines issued to
            [p]laintiffs for violation of the Association's rules."
            The parties also agreed, "as a material term of th[e]
            Settlement Agreement[,] that they [would] comply with
            all existing parking rules and regulations," they would
            be limited to four parking spaces per 1000 square feet
            of space owned or occupied, and they would utilize
            only spaces in front of, or on the side of, the building
            in which their unit was located. In this regard, the
            settlement specifically fixed the penalties the
            Association would impose if "any party . . . violate[d]
            the parking rules and regulations."

            [Id. at 4.]

      In the interim, the Association held an election, but Volovnik and the

remainder of the outgoing Board refused to certify the results, and filed a motion

to vacate the settlement agreement. Newly-elected Board member Ernest G.

Leva instituted a declaratory action in the Chancery Division against Volovnik

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and the holdover Board (Leva litigation), seeking to confirm the election results.

On October 29, 2013, the General Equity judge entered an order certifying the

results of the election, and denied Volovnik's motion to vacate the settlement

agreement. In a consolidated appeal, we affirmed the October 29, 2013 orders.

Id. at 13.

      The following month, in November 2013, the Association filed an order

to show cause and verified complaint against Volovnik. 1 Among other relief,

the Association sought to prevent the conversion of funds "collected for or on

behalf of the Association." (Turnover litigation). In response, Volovnik filed

counterclaims, seeking to rescind the settlement agreement. Volovnik asserted

the Association violated the parking rules and regulations and, as such, the

Association repudiated the settlement agreement and breached its terms.

Volovnik also alleged the Association thereby committed fraud and breached its

fiduciary duty. In his second amended counterclaim, Volovnik averred that the

Association's failure to enforce the parking rules and regulations interfered with

Re-Hold's ability to rent its 6300 square-foot building unit.

1
  The complaint also was filed against Re-Flex, U.S.A, Inc., which was owned
by Volovnik and served as the Association's prior management company when
Volovnik controlled the Board.

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      In July 2017, a jury rendered a verdict in favor of the Association,

awarding no damages on Re-Hold's claim for lost rent. Thereafter, the trial

judge dismissed Volovnik's equitable claim for recission of the settlement

agreement, apparently finding the agreement was valid and enforceable. Later,

in August 2018, Volovnik sought enforcement of the settlement agreement but

another judge denied the motion, finding the agreement settled "a different

action," i.e., the Trogan litigation, which was not the subject of the jury trial.

      Against that protracted litigation, we turn to the relevant allegations that

give rise to the present appeal. In February 2018, plaintiffs as unit owners and

derivatively on behalf of the Association and similarly-situated unit owners,

filed a nine-count first amended verified complaint against the Association and

other parties,2 seeking declaratory relief to: inspect the Association's books and

records regarding legal expenses incurred in the prior litigation; establish

Volovnik's rights as a member of the Board; invalidate a 2017 special

assessment inapplicable to plaintiffs; permit plaintiffs to display "For Sale"

signs in the Complex's common areas; and call a special meeting of the unit

2
  Plaintiffs also filed their complaint against some of the Trogan plaintiffs, Leva,
and other individuals and entities, all of whom have been dismissed from the
litigation and are not parties to this appeal. We confine our review to the
decisions pertaining to the Association's motions.
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owners.    Plaintiffs' complaint also alleged breach of fiduciary duty for:

discriminatory maintenance of the Complex's common areas; failure to enforce

the parking resolution; and wasting of Association funds. Finally, plaintiffs

sought damages for breach of contract.

      In lieu of answer, the Association moved to dismiss the complaint

pursuant to Rule 4:6-2(e). The Association argued plaintiffs' action was barred

by the entire controversy doctrine, plaintiffs failed to satisfy financial

obligations imposed by prior court orders, and plaintiffs lacked standing to call

for a special meeting to remove certain Board members.

      Following argument on April 13, 2018, the motion judge rendered a

cogent oral decision granting in part, and denying in part, the relief requested

by the Association. The judge dismissed with prejudice plaintiffs' claims based

on the failure to enforce the parking resolution and breach of contrac t, and their

demand to inspect the Association's books and records.

      Citing our decision in Camden County Energy Recovery Associates L.P.

v. New Jersey Department of Environmental Protection, 320 N.J. Super. 59, 64

(App. Div. 1999), the judge correctly iterated his "obliga[tion]" under Rule 4:6-

2(e) "to search the complaint in depth and with liberality to ascertain whether

the fundament of the cause of action may be gleaned, even from an obscure

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statement or claim" with the opportunity to afford an amendment, "if necessary."

The judge then summarized the legal principles underpinning the entire

controversy doctrine, established by case law and set forth in Rule 4:30A.

      Accordingly, the motion judge cited Cogdell v. Hospital Center at Orange,

in which the Court recognized "the adjudication of a legal controversy should

occur in one litigation in only one court; accordingly, all parties involved in a

litigation should at the very least present in that proceeding all of their claims

and defenses that are related to the underlying controversy." 116 N.J. 7, 15

(1989). Citing the Supreme Court's decision in Watkins v. Resorts International

Hotel & Casino, 124 N.J. 398, 412 (1991), the judge also recognized New Jersey

law requires three basic elements for res judicata to apply. Pursuant to Watkins,

            (1) the judgment in the prior action must be valid, final,
            and on the merits; (2) the parties in the later action must
            be identical to or in privity with those in the prior
            action; and (3) the claim in the later action must grow
            out of the same transaction or occurrence as the claim
            in the earlier one.

            [Ibid.]

      With respect to plaintiffs' demand to examine the Association's books and

records, the motion judge recognized the Complex's governing documents "in

part" supported plaintiffs' argument that they were not liable for legal expenses

incurred in the prior litigation.   But the judge concluded "there [wa]s no

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                                        9
evidence in the record" that plaintiff instituted "the claim . . . during the prior

litigation, despite . . . having [the] full opportunity to do so." Instead, "the record

plainly establish[ed] that numerous judgments" for counsel fees were awarded

in favor of the Association. The judge further determined discovery was not

necessary "to support the validity of such expenses."

      The motion judge dismissed plaintiffs' failure to enforce the parking

resolution and breach of contract claims under the same doctrine. In doing so,

the judge rejected plaintiffs' argument that the violations asserted in their

complaint arose after resolution of the prior litigation. On the contrary, the

judge found the allegations arose "from the same transactional events which

were previously disposed of [at trial] and, thus, the relief sought cannot be

provided."

      Thereafter, the same judge granted the Association's ensuing motion for

attorneys' fees and costs incurred for filing its April 13, 2018 motion to dismiss,

pursuant to Rule 1:4-8 and N.J.S.A. 2A:15-59.1. In an oral decision, the motion

judge noted the Association duly sent plaintiffs a frivolous litigation letter

advising that the allegations in their complaint were barred by the doctrines of

res judicata and collateral estoppel. The judge concluded plaintiffs "were fully

aware of the previous orders and rulings on the parking resolution, yet continued

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                                         10
forward with this litigation." The judge also found the amount of counsel fees

and expenses requested was reasonable. On the same day, the judge also denied

plaintiffs' motion for reconsideration of the April 13, 2018 order.

      On September 19, 2018, plaintiffs filed a six-count third amended

complaint. Only counts three, four, and six are pertinent to this appeal. In count

three, plaintiffs alleged they were not required to contribute to the payment for

the Association's siding replacement project. In count four, plaintiffs asserted

the Association was required to perform an annual audit of its books and records

and demanded an audit for 2017. In count six, plaintiffs demanded a special

meeting of unit owners to vote on the removal of the Board members.

      On November 9, 2018, the Association moved for partial summary

judgment on count six, in which plaintiffs alleged the Association ignored their

written request for a special meeting under Article III, Section 3 of the By-Laws.

That provision mandates a special meeting of unit owners "upon the written

request of [m]embers representing not less than twenty-five . . . percent in

interest of all the votes entitled to be cast at such meeting."

      Relying on N.J.S.A. 46:8B-12.1, and our interpretation of that statute in

Hill v. Cole, 248 N.J. Super. 677 (App. Div. 1991), the Association argued

Volovnik, as the Complex's sponsor, was not permitted to vote on replacement

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Board members and, as such, Volovnik's companies, Peoplemover and Re-Hold,

could not request a special meeting to remove the four remaining non-sponsor

members. Plaintiffs cross-moved for the right to call the special meeting and to

vote to remove the existing Board members.

      During oral argument on January 18, 2019, another judge (second motion

judge) framed the issues as whether a sponsor was entitled to call a special

meeting "wearing [his] unit owner hat" and, if so, whether the sponsor was

entitled to vote to remove members of the Board when the sponsor was not

entitled to vote on new members of the Board. Following argument, the judge

reserved decision to, among other things, review the April 13, 2018 transcript

of the initial motion judge's decision that denied the Association's motion to

dismiss count six.

      On January 25, 2019, the judge rendered a decision from the bench

concluding the Association's By-Laws barred Peoplemover and Re-Hold – as

owners of more than twenty-five percent of the Complex's units – from voting

to call a special meeting for the purpose of "vot[ing] out the current board

members other than Mr. Volovnik" as the Complex's sponsor. The judge was

persuaded that our decision in Hill constrained plaintiffs from calling a meeting

to oust Board members that the sponsor was not permitted to elect.

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      As the judge explained, "[t]he [sponsor] is not permitted to control who's

on the Board by picking them[, and ] can't control who's on the Board by kicking

them off, either." In reaching her decision, the judge recognized the sponsor

was permitted to retain units in the Complex and "as thirty-percent owner[s]"

plaintiffs were "allowed to call for a special election" but "they [we]re not

allowed to call for a . . . special election for the purpose of getting rid of the

other Board members."

      On March 1, 2019, the Association moved for partial summary judgment

on the third and fourth counts of plaintiffs' third amended complaint. As to

count three, the second motion judge framed the issue as "whether the siding

project should be categorized as a capital improvement," which required

approval of two-thirds of the Complex's unit owners. Or whether the project

was simply a replacement of "existing common elements."               The judge

determined the siding project "was not a capital improvement" because it

"merely replaced the wood siding already in existence with siding of a different

material" and "did not add anything to the condominium unit" that was not

originally a part of the structure. The judge therefore concluded plaintiffs, as

unit owners, were required to contribute to the funding of the project.

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      As to count four, the second motion judge recognized the Association's

By-Laws were amended by a "unanimous vote" in 1998 – when Volovnik was a

Board member – to limit annual audits only "upon request from an entitled

party." The judge further noted: "In 2012, in response to a request from unit

owners for copies of any audits performed by the Association, counsel for

Volovnik cited the 1998 meeting in which the By-Law amendment was enacted,

in stating that the requesting owners had to bear the costs of the audit."

      The judge therefore found untenable plaintiffs' present position that "the

amendment was merely discussed and never formally enacted." The judge

elaborated:

                     Plaintiffs' argument that the amendment was
              merely discussed and never formally enacted is simply
              unsustainable in light of plaintiffs' prior representations
              that the amendment was enacted. Plaintiffs cannot use
              the adoption of the amendment as a shield in one
              circumstance where it benefits them, and then as a
              sword in arguing that a formal amendment of the By-
              Laws never actually occurred. Plaintiff Volovnik had
              actual knowledge that the sponsor-controlled Board
              unanimously agreed to enact the amendment to the By-
              Laws to require the requesting party to bear the costs of
              an audit, as he himself was a voting director in the
              decision to amend the By-Laws.               The sponsor-
              controlled board and then Volovnik's own counsel cited
              this amendment and the specific meeting in which the
              amendment was enacted, in response to inquiries by
              others regarding the performance of an audit on the
              Association's books.

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                                         14
                   Based on the foregoing history, it is clear that the
            Board voted to change the By-Laws to require the
            requesting party to bear the costs of an audit. The
            failure to actually change the text of the By-Laws
            following the amendment must thus be seen as nothing
            more than a ministerial error, and has no effect on the
            fact that the By-Laws were in fact substantively
            amended.

                   Moreover, if Volovnik knew that the amendment
            to the By-Laws had never been formally enacted, yet
            still asserted the position that such amendment had
            occurred, then under the doctrine of unclean hands,
            plaintiffs cannot now come before this court to seek an
            equitable remedy. See Pellitteri v. Pellitteri, 266 N.J.
            Super. 56, 65 (App. Div. 1993) ("The doctrine of
            unclean hands embraces the principle that a court
            should not grant equitable relief to a party who is a
            wrongdoer with respect to the subject matter of the suit.
            It calls for the exercise of careful and just discretion in
            denying remedies where a suitor is guilty of bad faith,
            fraud or unconscionable acts in the underlying
            transaction.").

                   On the other hand, if Volovnik had simply
            forgotten about the amendment, or mistakenly thought
            that the subject By-Laws provision had not in fact been
            amended, then his representations over the past several
            years that the By-Laws had been amended, would estop
            plaintiffs from arguing to the contrary.

The judge then aptly quoted our decision in Talcott v. Fromkin Freehold

Associates, 383 N.J. Super. 298, 315-16 (App. Div. 2005) regarding the doctrine

of equitable estoppel.

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                                       15
      On May 31, 2019, the judge entered orders granting the Association's

motions for summary judgment on counts three and four of plaintiffs' third

amended complaint, and denying plaintiffs' cross-motions for summary

judgment on those counts. On July 19, 2019, the second motion judge denied

plaintiffs' motion for reconsideration of the May 31, 2019 orders, concluding

the motion was premised merely on plaintiffs' dissatisfaction with the court's

orders.

      On appeal, plaintiffs reprise the arguments raised before the Law

Division, arguing the judges erroneously: (1) dismissed counts one, three and

four of their first amended verified complaint under the doctrine of equitable

estoppel, and denied reconsideration of that decision; (2) awarded the

Association a sanction fee; and (3) dismissed counts three, four, and six of

plaintiffs' third amended complaint on summary judgment and denied their

cross-motions.

      We have carefully considered plaintiffs' contentions in view of the

applicable law, and conclude they lack sufficient merit to warrant discussion in

a written opinion. R. 2:11-3(e)(1)(E). We affirm substantially for the reasons

expressed by the motion judges in their well-reasoned decisions. We add only

the following remarks.

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      Similar to the initial motion judge, we reject plaintiffs' contentions that

the allegations raised in counts one, three, and four of the first amended verified

complaint arose after the prior litigation was resolved. In count one, plaintiffs

challenge the legal expenses incurred in relation to the Turnover litigation.

However, the issue of legal expenses was addressed by the court during the

course of the Turnover litigation, as evidenced by the court orders in that action.

In count three, plaintiffs allege the Association's parking regulations have been

violated, and attempt to distinguish these allegations from those made in the

prior matters concerning the parking violations by asserting that violations were

still occurring. However, the violations alleged in count three of the complaint

are not limited to those that occurred after the prior litigation, but rather are

described as violations that have been occurring since the regulations were

instituted. Plaintiffs' parking-related claims were addressed and disposed of in

the Trogan and Turnover litigations where no violations were found.

      In count four, plaintiffs contend the settlement agreement has been

violated, particularly concerning the parking-related provisions. As with count

three, the violations alleged in count four are not limited to those that occurred

after the prior litigation, but rather are described as violations that have occurred

"[a]t all times after the [s]ettlement [a]greement was entered into." Similar to

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the claims asserted in count three, the alleged violations of the 2013 Settlement

were fully addressed and disposed of in the Trogan and Turnover litigations.

Having employed the same standard as the trial court, Donato v. Moldow, 374

N.J. Super. 475, 483 (App. Div. 2005), we likewise conclude dismissal was

appropriate here on the grounds of equitable estoppel.

      Further, we have reviewed de novo the second motion judge's decisions

on summary judgment, Templo Fuente De Vida Corp. v. Nat'l Union Fire Ins.

Co. of Pittsburgh, 224 N.J. 189, 199 (2016), and likewise conclude dismissal of

counts three, four, and six of plaintiffs' second amended complaint was

warranted. We add the following comments as to count six.

      On appeal, plaintiffs contend Volovnik is not the Complex's sponsor or

developer. They argue the inability of Peoplemover and Re-Hold to vote in the

2013 transition Board election does bar them from voting in any "subsequent

special meeting to remove board members." The Association counters that

Peoplemover and Re-Hold are, collectively, the Association's sponsor and

Volovnik is the sponsor's appointed Board member. The Association maintains

the sponsor cannot call a special meeting to vote to remove members of the

Board whom the sponsor was "unable to elect in the first place."

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      Article III, Section 3 of the Association's By-Laws permits unit owners to

call a special meeting if they represent a combined twenty-five percent interest

in in the Complex. Peoplemover and Re-Hold, as owners of twelve of thirty-

three units, fall within that category. As the second motion judge recognized,

however, pursuant to the terms of the settlement agreement the parties agreed

that Volovnik, as sponsor "retain[ed] the right to appoint one member to the

Board" but was "not eligible to cast a vote in the election of the remaining four

members of the Board" who must "be elected by the non-sponsor owners."

      In Hill, we addressed whether a developer, "in addition to appointing one

member of the seven-member board, [wa]s entitled to cast votes, represented by

the [fifty] units it continue[d] to hold, in the election of the remaining six

trustees." 248 N.J. Super. at 680-81. We concluded this issue was encompassed

within N.J.S.A. 46:8B-12.1(a), which provides:

                   When unit owners other than the developer own
            25% or more of the units in a condominium that will be
            operated ultimately by an association, the unit owners
            other than the developer shall be entitled to elect not
            less than 25% of the members of the governing board
            or other form of administration of the association. Unit
            owners other than the developer shall be entitled to
            elect not less than 40% of the members of the governing
            board or other form of administration upon the
            conveyance of 50% of the units in a condominium.
            Unit owners other than the developer shall be entitled
            to elect all of the members of the governing board or

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            other form of administration upon the conveyance of
            75% of the units in a condominium. However, when
            some of the units of a condominium have been
            conveyed to purchasers and none of the others are being
            constructed or offered for sale by the developer in the
            ordinary course of business, the unit owners other than
            the developer shall be entitled to elect all of the
            members of the governing board or other form of
            administration.

      In Hill, we agreed with the trial court's finding that the statute's "purpose

is to shift control from the developer to the unit purchasers." 248 N.J. Super. at

682. However, we found "the trial court's ruling that the developer has a

continuing right to vote its unsold units for all board candidates obstructs the

legislative intent by impeding the gradual and measured shift of control to the

purchasers." Id. at 682-83.

      It follows from Hill that where a sponsor-developer, such as Volovnik, is

prohibited from voting to elect new board members, the sponsor is therefore

prohibited from voting to remove board members. To allow Peoplemover and

Re-Hold to call a special meeting for the purpose of removing Board members

would contravene the applicable governing documents and our decision in Hill.

We therefore discern no reason to disturb the second motion judge's decision.

      Affirmed.

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