Court Opinion

ID: 2681636
Source: CourtListenerOpinion
Date Created: 2014-07-02 14:02:47.522541+00
Date Added: 2024-06-11T13:12:15.109304
License: Public Domain

NOT FOR PUBLICATION WITHOUT THE
               APPROVAL OF THE APPELLATE DIVISION

                                    SUPERIOR COURT OF NEW JERSEY
                                    APPELLATE DIVISION
                                    DOCKET NO. A-4216-12T1

CLAIR W. FLINN and VALERIE K.
FLINN; ROBERT C. MCGIRR;
R. REUEL STANLEY; KEVIN SHULMAN
and GINA SHULMAN; JOSEPH
BUCKELEW; JOHN R. O'BRIEN;
                                         APPROVED FOR PUBLICATION
G. GERARD BARNETT and MARJORIE
P. BARNETT; JOHN MORRONGIELLO                  July 2, 2014
and SUSAN MORRONGIELLO;
ROSEMARIE LAROCCA; JAMES C. DAY            APPELLATE DIVISION
and KATHLEEN DAY; JOSEPH C.
ROSELLE and ANITA ROSELLE;
HENRY DABROWSKI and IRENE W.
DABROWSKI; ROBERT GROSSMAN and
GALE GROSSMAN; D. KASUN
ASSOCIATES; ROBERT A. SHEKITKA
and EDA SHEKITKA;1 JOHN CUTILLO
and PRUDENCE M. CUTILLO; and
CARMELO CONTRINO and SUSAN
CONTRINO,

     Plaintiffs-Appellants,

v.

AMBOY NATIONAL BANK and
AB MONMOUTH, LLC,

     Defendants-Respondents.
_____________________________________

          Argued May 28, 2014   -   Decided July 2, 2014

          Before   Judges     Messano,     Sabatino      and
          Rothstadt.

1
  This plaintiff's name is alternatively spelled in the record as
Edna Shekitka and Eda Shikitka.
              On appeal from Superior Court of New Jersey,
              Chancery Division, Monmouth County, Docket
              No. C-159-12.

              Richard P. Coe, Jr., argued the cause for
              appellants (Kennedy, Wronko, Kennedy and
              Weir   &   Partners   LLP,  attorneys   for
              appellants; Mr. Coe and E. Richard Kennedy,
              on the brief).

              Catherine J. Bick argued the cause for
              respondents (Giordano, Halleran & Ciesla,
              PC, attorneys; J. Scott Anderson and Ms.
              Bick, on the brief).

       The opinion of the court was delivered by

SABATINO, J.A.D.

       This   case   involves   disputes     between   plaintiffs,     who   are

unit owners in a partially-completed condominium project, and

defendants, a bank and its wholly-owned subsidiary that took

over the project after the original developer defaulted on its

loans.

       In their complaint, the unit owners sought to be granted

control over the condominium association pursuant to N.J.S.A.

46:8B-12.1(a) because defendants allegedly have ceased building

more units or offering units for sale in the ordinary course of

business.      Plaintiffs further alleged that defendants made or

are responsible for misrepresentations in the sale documents,

have   mismanaged     the   project,       have   failed   to   make   required

payments, and have otherwise breached their fiduciary duties.

                                       2                               A-4216-12T1
      The trial court granted defendants' motion to dismiss the

complaint      in    its     entirety           with      prejudice,      and    plaintiffs

appealed.       We reverse the trial court's                        dismissal order and

remand for further proceedings.

                                                I.

      Although       the    record         is       not     fully    developed       and    is

essentially      still      in     the     pleadings            stage,    we    derive     the

following background information from the documents furnished on

appeal.       Plaintiffs         are   a    group         of    twenty-eight     owners     of

eighteen2 condominium units in The Monmouth Condominium ("The

Monmouth"), a mixed-use, age-restricted residential condominium

project located in Wall Township.                        They appeal the trial court's

order      dismissing      with    prejudice              their    five-count     complaint

against defendants, Amboy National Bank ("Amboy Bank") and AB

Monmouth,     LLC    ("AB    Monmouth"),             a    wholly-owned      subsidiary       of

Amboy Bank.

      The Project

      As    initially      contemplated,             The       Monmouth   was   to   feature

ninety-six luxury residential units housed in sixteen buildings,

together with other structures and improvements for common use

and     enjoyment.          However,       as        we    describe       further,     infra,

2
  Defendants' brief incorrectly states that plaintiffs own only
sixteen units, but that tabulation is contradicted by an exhibit
attached to one of the certifications.

                                                3                                    A-4216-12T1
financial hardship befell the original developer of the project,

and it failed to construct forty-eight of the planned ninety-six

units.     Ultimately, the property was foreclosed upon by Amboy

Bank,    which   had   financed   the   project.       In   the   wake    of   the

sheriff's sale, ownership of The Monmouth was transferred to

defendants.      As of the time of those foreclosure proceedings,

the original developer had sold only twenty-four of the forty-

eight constructed units.

    Following the change in ownership, eight more units were

sold, bringing the total units sold to thirty-two out of forty-

eight constructed units.          The remaining sixteen units have been

leased.     As for the other forty-eight units that were planned

for completion, they remained unconstructed, at least as of the

time of the trial court's decision.

    Each of the purchased units in The Monmouth is owned in fee

simple by the residents, who concomitantly have an undivided

interest    in   the   common   elements    of   the   condominium       complex,

proportionate with their share of the total units.

    The Monmouth Condominium Association, Inc. (the "Monmouth

Association"), which is not a party to this litigation, is the

condominium's association "responsib[le] for the administration,

operation, and management of [The Monmouth] and the recreation

facilities and other improvements intended for the common use

                                        4                                A-4216-12T1
and enjoyment of the residents of [The Monmouth]."                                  Any person

who owns a unit in The Monmouth is automatically a member of the

association, and only an owner may be a member.

       The Monmouth Association is operated by a three-member to

five-member board of trustees (the "board," or the "governing

board"), whose primary duty is to administer the association and

to   preserve         and     maintain      the       common    elements         for      use   and

enjoyment        of     the    residents        in     The     Monmouth.            The     common

elements,        as   defined       in    the     master       deed,       include        streets,

alleys,      walkways,          common      parking          areas,        public      utilities

connections, stairways, steps, landings, as well as amenities

such as a swimming pool and club room.

       The   Oakshire          Group,     LLC     ("Oakshire")          was     the       original

developer of the condominium project.                        Oakshire first registered

the project with the New Jersey Department of Community Affairs

with   the       filing       of,   among      other     things,       a    public        offering

statement (the "Oakshire POS") dated February 4, 2004.                                          The

Oakshire POS functioned as a disclosure statement to potential

buyers, providing certain salient details about The Monmouth,

such   as    a    description        of     the       interests    to      be    offered,       the

management        and     operation       of    common        elements,         easements       and

encumbrances, and applicable warranties.

                                                  5                                       A-4216-12T1
    Oakshire later filed a master deed (the "Oakshire Master

Deed") for The Monmouth dated October 26, 2005.                            The Oakshire

Master   Deed    functioned         as    the     legal       instrument       that,    when

recorded with the county, established the condominium form of

ownership for the land and the improvements located thereon.

    The      Oakshire       Master       Deed     likewise        contained      pertinent

information     about       The    Monmouth,      such       as   descriptions     of    the

individual    units,        descriptions         of    the    common     elements,      unit

owner      association        voting        rights,          powers      of      attorney,

restrictions,         and     statements          of         sponsor's        rights     and

obligations.      Notably, a section of the Oakshire Master Deed,

entitled     "ARTICLE        XV.     SPONSOR'S          RIGHTS     AND    OBLIGATIONS,"

contained    several        provisions      on        liability     of   the     project's

transferor      and    successors.              Those    provisions       included       the

following pertinent language:

            15.04    Liability of Transferor.      Upon
            transfer of any such Special Sponsor Right,
            the liability of the transferor is as
            follows:

            (a)   A transferor is not relieved of any
            obligation or liability arising before the
            transfer and remains liable for warranty
            obligations imposed upon him.     Lack of
            privity does not deprive any Unit Owner of
            standing to bring an action to enforce any
            obligation of the transferor.

            (b)    If a transferor retains any such
            Special Sponsor Right, or if a successor to
            any such Special Sponsor Right is an

                                            6                                     A-4216-12T1
affiliate of the Sponsor, the transferor is
subject to liability for all obligations and
liabilities imposed on a Sponsor by law or
by the Master Deed, arising after the
transfer, and is jointly and severally
liable   with    the   successor   for   the
liabilities and obligations of the successor
which relate to the Condominium.

(c)    A transferor who retains no such
Special Sponsor Rights has no liability of
any act or omission or any breach of a
contractual or warranty obligation arising
from the exercise of any such Special
Sponsor Right by a successor Sponsor who is
not an affiliate of the transferor.

    . . . .

15.07     Liability of Successors.       The
liabilities and obligations of persons who
succeed to all Special Sponsor Rights are as
follows:

(a) A successor to all such Special Sponsor
Rights who is an affiliate of the Sponsor is
subject to all obligations and liabilities
imposed on any Sponsor by law or by the
Master Deed.

(b) A successor to all such Special Sponsor
Rights, . . . who is not an affiliate of
Sponsor, is subject to all obligations and
liabilities imposed upon Sponsor by law or
the Master Deed, but he is not subject to
liability for misrepresentations or warranty
obligations on improvements made by any
previous   Sponsor   or  made   before   the
Condominium was created, or for a breach of
fiduciary   obligation   by   any   previous
Sponsor.

[(Emphasis added).]

                      7                        A-4216-12T1
    The Loan Agreement and Oakshire's Default and Foreclosure

    Amboy Bank and Oakshire entered into and executed a loan

agreement (the "Oakshire Loan Agreement"), providing for Amboy

Bank to finance Oakshire's development and construction of The

Monmouth.     In exchange for that financing, Oakshire executed and

delivered to Amboy Bank a mortgage and security agreement which

granted the bank a first mortgage lien interest on The Monmouth.

At some point following the execution of the mortgage, Amboy

Bank apparently released twenty-two of the units from the lien,

leaving seventy-four units in The Monmouth still subject to it.

    In      the    ensuing      years,       Oakshire       experienced         financial

difficulties and defaulted under the terms of the Oakshire Loan

Agreement.        As    a   result,     Amboy     Bank     filed    a     complaint      for

foreclosure       in    October       2007       against     Oakshire        and        other

defendants.       By that point, only twenty-four of the units in The

Monmouth had been sold.

    In      January     2008,     the    Chancery        Division       judge      in     the

foreclosure case3 entered a custodial receivership order.                               Among

other things, that order appointed a third-party entity as the

custodial receiver for The Monmouth.                     The order also enjoined

3
  A different          judge   subsequently        presided        over    the     present
lawsuit.

                                             8                                     A-4216-12T1
Oakshire from incurring further debts on the                                property.       The

duties of the custodial receiver were subsequently expanded.

       In    November          2008,      the      Oakshire    POS     was    amended      (the

"Amended      Oakshire         POS")      to      reflect    certain      events    that    had

followed         its   default       of      the    Oakshire       Loan   Agreement.          In

relevant part, the Amended Oakshire POS disclosed to potential

buyers      that       Amboy    Bank        had    brought    foreclosure       proceedings

against Oakshire, that the bank had elected to proceed with a

sheriff's sale to acquire the property, that the property was

under the care of a custodial receiver, and that all deposit

monies paid by potential purchasers would be held in escrow

pending the resolution of the foreclosure proceedings.

       At the ensuing sheriff's sale held on November 2, 2009,

Amboy Bank was the successful bidder to purchase the seventy-two

remaining unsold units at The Monmouth.                            The seventy-two units

were   then       conveyed      to     AB    Monmouth4      via    Sheriff's       Deed   dated

November 19, 2009, and recorded in the Monmouth County Clerk's

Office      on    December       9     and      December     24,    2009.      By    separate

instrument,        the    Sheriff's          Deed      conveyed     the   Special     Sponsor

4
   As we previously noted, AB Monmouth is a wholly-owned
subsidiary of Amboy Bank.   It is unaffiliated with Oakshire.
Amboy is the sole member of AB Monmouth, a New Jersey limited
liability company ("LLC").

                                                   9                                  A-4216-12T1
Rights, described supra, in Article XV of the Oakshire Master

Deed.

    AB     Monmouth   thereafter    issued   a   revised   Public    Offering

Statement (the "AB Monmouth POS") on June 21, 2010.                    The AB

Monmouth    POS   detailed   the   events    that   led   to   AB   Monmouth's

holding of title to The Monmouth.            The document also contained

the following relevant summary of the status of the project:

            At   this   time,    Oakshire    has    completed
            construction of 8 Buildings containing 48
            Units (the "Oakshire Units") and common
            elements (the "Common Elements") serving the
            Condominium     including      all      of    the
            recreational amenities which include the 18-
            hole putting course, outdoor swimming pool,
            indoor    swimming     pool,    and     clubhouse
            ("Oakshire Common Facilities").          Oakshire
            previously sold 24 Oakshire Units, and 24
            Oakshire Units remain unsold.         As part of
            the within Registration, AB Monmouth is
            registering the 24 Oakshire Units that
            remain unsold along with the remaining 48
            Units that are unbuilt.      In the event that
            AB Monmouth does construct the AB Units, it
            will complete any associated Common Elements
            which were discussed in the Oakshire Public
            Offering Statement.      AB Monmouth reserves
            the right to add up to the planned 48 Units
            in the 8 unbuilt buildings ("AB Units"), but
            is   under    no    obligation     to    do   so.
            Additionally,    AB   Monmouth    reserves    the
            right, with the approval of the necessary
            number of the Unit Owners of the 24 Oakshire
            Units not owned by AB Monmouth, and with
            such other required governmental approvals,
            to alter the configuration of the AB Units
            in the 8 unbuilt buildings and construct an
            additional 48 Units within the remaining 8
            unbuilt buildings for a total of 144 Units
            in the Project.

                                     10                               A-4216-12T1
         Further, AB Monmouth reserves the right,
         with the approval of the necessary number of
         the Unit Owners, and with such other
         required governmental approvals, to modify
         the age-restriction for the Project to allow
         a certain percentage of Units, as specified
         more fully below, to be conveyed for
         occupancy by individuals under the age of
         fifty-five.

         [(Emphasis added).]

    Plaintiffs' Complaint

    In October 2012, plaintiffs filed their complaint in the

Chancery Division against Amboy Bank and AB Monmouth.               Among

other things, the complaint seeks an order requiring defendants

to turn over control of the condominium association to the unit

owners, in addition to statutory money damages.               The record

shows that seventeen of the named plaintiffs took title to their

units before the Sheriff's Deed was conveyed to AB Monmouth.

The complaint identifies each defendant, i.e., Amboy Bank and AB

Monmouth, as a "Developer/Sponsor" of The Monmouth.

    According    to   the   complaint,   since   the   time    of   title

transfer of The Monmouth to AB Monmouth, eight more units in the

condominium project had been sold, bringing the total number of

units sold in the forty-eight units that have been built to

thirty-two.   Defendants do not dispute that fact, nor do they

dispute the fact that the remaining sixteen units have been

leased out.     The complaint further alleges that of the forty-

                                  11                             A-4216-12T1
eight remaining unbuilt units, defendants are no longer offering

those units up for sale in the ordinary course of business.5

     Count     I    of      the    complaint     seeks     the    divestiture      of

defendants'       control    over    the    condominium      association.        That

request   is   predicated         upon   proviso     language     within   N.J.S.A.

46:8B-12.1(a), which plaintiffs contend requires a condominium

developer    to    relinquish       control     of   a   condominium   association

when it no longer is building or offering condominium units for

sale in the ordinary course of business.

     Count II of the complaint seeks from defendants monetary

damages and counsel fees, on the basis that the AB Monmouth POS

contained      material       misrepresentations           and    omissions,       in

violation    of    N.J.S.A.       45:22A-37,     a   provision    within   the    New

Jersey    Planned     Real    Estate       Development     Full   Disclosure      Act

("PREDFDA"), N.J.S.A. 45:22A-21 to -56.

     Count III of the complaint alleges that defendants violated

their financial obligations under N.J.A.C. 5:26-8.6(b), certain

statutory provisions of the New Jersey Condominium Act ("NJCA"),

N.J.S.A. 46:8B-1 to -38, (specifically N.J.S.A. 46:8B-3 and -6),

and portions of the Master Deed.

5
  As discussed, infra, defendants strenuously dispute this latter
contention alleging an ongoing failure to market the unsold
units.

                                           12                               A-4216-12T1
       Count IV of the complaint alleges that defendants failed to

pay    for   common    expenses,    as     they    were    required   to    do     under

certain      PREDFDA        regulations,        N.J.A.C.      5:26-8.6,     -8.7(a),

-8.7(c), and -8.7(d).

       Lastly, Count V of the complaint alleges that defendants

breached     their     fiduciary    duties      and   that    plaintiffs    suffered

damages as a result.

       The Motion to Dismiss

       Shortly after being served with the complaint, defendants

moved    for    dismissal       under    Rule     4:6-2(e),    arguing     that       the

complaint failed to state viable claims upon which relief may be

granted.       Both sides filed certifications in support of their

competing positions on the dismissal motion.6                      Following oral

argument, the trial court issued a bench opinion dismissing all

five    counts    of    the     complaint,      specifically     doing     so      "with

prejudice."

       As to Count I, the trial court held that a regulation cited

by defendants, N.J.A.C. 5:26-8.4(d), required the unit owners to

first    approve,      by   a   majority    vote,     a    willingness     to     assume

control over the association.              The court determined that such a

6
  Although these submissions asserted matters outside of the
contents of the complaint, the trial court, with the mutual
assent of counsel, did not convert the application to a Rule
4:46 motion for summary judgment.     See R. 4:6-2(e) (last
sentence).

                                           13                                   A-4216-12T1
majority vote, as specified under the regulation, was a legal

precondition to a judicial order for the turnover of control

under N.J.S.A. 46:8B-12.1(a).

       The court next dismissed Count II.               It ruled, first, that

plaintiffs       had   failed   to    plead     their     fraud    claims   with

specificity as required under Rule 4:5-8(a).                 Second, the court

found that AB Monmouth, under the terms of the Oakshire Master

Deed and as a successor to Oakshire, could not be held liable

for misrepresentations Oakshire made, and third, that plaintiffs

were    barred    by    PREDFDA's    six-year      statute    of   limitations,

N.J.S.A.     45:22A-37(d).          The    court   further     concluded    that

plaintiffs' claims of misrepresentation were not cognizable in

particular against co-defendant Amboy Bank, because the bank was

"not a developer sponsor" of the condominium, and also because

the bank, as a mere member of AB Monmouth, cannot be liable for

that LLC's obligations.

       Lastly, the court dismissed Counts III, IV, and V of the

complaint, based on a determination that all of the plaintiffs

lacked standing to bring those particular claims.

       The trial court issued a corresponding order of dismissal

that same day.         The court thereafter denied plaintiffs' motion

for reconsideration.       This appeal followed.

                                          14                            A-4216-12T1
                                       II.

    On   appeal,     plaintiffs      advance        several     arguments   why   the

court's dismissal of their complaint, with prejudice, was in

error.

    As     to   their     claim      for        control   of     the    association,

plaintiffs contend that the trial court erred in construing a

regulation, N.J.A.C. 5:26-8.4(d), to constrain their statutory

rights under N.J.S.A. 46:8B-12.1(a) to assume control of the

condominium association when a developer has ceased building or

marketing additional units.

    With    respect     to   their    fraud       claims,      plaintiffs   maintain

that their complaint was sufficiently specific.                     However, if it

was not, they urge that the preferred remedy under case law is

to allow them to revise their complaint to be more specific,

rather   than   to      dismiss   it       conclusively         "with    prejudice."

Plaintiffs do acknowledge that principles of standing and also

the statute of limitations may disallow some of the unit owners

presently named in the complaint from suing AB Monmouth for

fraud.   However, they contend that the trial court went too far

in dismissing all of those claims.                  Instead, the court should

have preserved the claims of the specific unit owners who are

eligible to sue.

                                           15                               A-4216-12T1
       As to Counts III, IV, and V, plaintiffs argue that the

trial court failed to recognize their ability under case law to

sue derivatively on behalf of the association where, as here,

the association remains in the control of the developer.

       Lastly, plaintiffs submit that the trial court should have

allowed the claims against Amboy Bank to proceed, despite the

entity status of AB Monmouth as an LLC, because PREDFDA provides

that    a    defendant    that    "directly       or     indirectly     controls"       a

developer      nonetheless       may     be    liable      for   the     developer's

violations of the statute.             See N.J.S.A. 45:22A-37(c).

                                          A.

       We begin with a few general observations concerning the

standards governing dismissal motions under Rule 4:6-2(e) and

our scope of review of orders granting such motions.

       "In   reviewing    a   complaint        dismissed    under     Rule   4:6-2(e)

[the] inquiry is limited to examining the legal sufficiency of

the facts alleged on the face of the complaint."                    Printing Mart-

Morristown     v.   Sharp     Elecs.     Corp.,    116 N.J. 739,    746     (1989)

(citing Rieder v. Dep't of Transp., 221 N.J. Super. 547, 552

(App.   Div.    1987)).        The     "essential      test,"    Green    v.    Morgan

Properties, 215 N.J. 431, 451 (2013), is "whether a cause of

action is 'suggested' by the facts."                   Printing Mart, supra, 116

N.J. at 746 (quoting Velantzas v. Colgate-Palmolive Co., 109

                                          16                                   A-4216-12T1
N.J.   189,       192   (1988)).        "[A]         reviewing    court    'searches       the

complaint in depth and with liberality to ascertain whether the

fundament of a cause of action may be gleaned even from an

obscure statement of claim, opportunity being given to amend if

necessary.'"           Ibid. (citing Di Cristofaro v. Laurel Grove Mem'l

Park, 43 N.J. Super. 244, 252 (App. Div. 1957)).

       In Rule 4:6-2(e) dismissals, "the [c]ourt is not concerned

with the ability of plaintiffs to prove the allegation contained

in the complaint."              Ibid. (citing Somers Constr. Co. v. Bd. of

Educ.,     198     F.     Supp.     732,        734    (D.N.J.     1961)).         Instead,

"'plaintiffs        are      entitled      to    every        reasonable       inference   of

fact[,]'      .    .     .   and     '[t]he       examination       of     a    complaint's

allegations        of    fact      required      by     the    aforestated       principles

should be one that is at once painstaking and undertaken with a

generous and hospitable approach.'"                       Green, supra, 215 N.J. at

452 (quoting Printing Mart, supra, 116 N.J. at 746).

       Notwithstanding this "indulgent standard," id. at 456, "[a]

pleading should be dismissed if it states no basis for relief

and discovery would not provide one."                         Rezem Family Assocs., LP

v. Borough of Millstone, 423 N.J. Super. 103, 113 (App. Div.),

certif. denied and appeal dismissed, 208 N.J. 366 (2011); see

also Sickles v. Cabot Corp., 379 N.J. Super. 100, 106 (App.

Div.), certif. denied, 185 N.J. 297 (2005).                               In those "rare

                                                17                                  A-4216-12T1
instances," Smith v. SBC Communications, Inc., 178 N.J. 265, 282

(2004),     "[a]    motion    to    dismiss      pursuant    to   Rule   4:6-2(e)

ordinarily is granted without prejudice."                 Hoffman v. Hampshire

Labs, Inc., 405 N.J. Super. 105, 116 (App. Div. 2009) (emphasis

added) (citing Smith, supra, 178 N.J. at 282).

    Our review of the trial court's dismissal order in this

context is de novo.           A reviewing court "'appl[ies] a plenary

standard of review from a trial court's decision to grant a

motion to dismiss.'"          Gonzalez v. State Apportionment Comm'n,

428 N.J. Super. 333, 349 (App. Div. 2012) (quoting Rezem Family

Assocs., supra, 423 N.J. Super. at 114).                 We "owe[] no deference

to the trial court's conclusions."             Ibid.

    Applying        these    well-established       principles,     we   conclude

that the trial court's "with-prejudice" dismissal of plaintiffs'

complaint    in    its   entirety    was     premature,     overbroad,   and,   in

certain respects, based on a mistaken application of the law.

We now turn to the specific components of our conclusion.

                                        B.

    The trial court's dismissal of plaintiffs' request in Count

I to gain control of the association was erroneous, for several

reasons.

    Under the applicable provisions of the NJCA, a condominium

association        is    "responsible      for     the      administration      and

                                        18                               A-4216-12T1
management    of     the    condominium         and   condominium        property,

including but not limited to the conduct of all activities of

common interest to the unit owners."                  N.J.S.A. 46:8B-12; see

also Thanasoulis v. Winston Towers 200 Ass'n, 110 N.J. 650, 656-

57   (1988)    ("The       most     significant       responsibility          of     an

association   is    the    management     and    maintenance     of     the    common

areas of the condominium complex." (citation omitted)).                             The

association is thus charged with various duties, not the least

of which include the maintenance of the common elements and the

assessment and collection of funds for common expenses.                             See

N.J.S.A. 46:8B-14.

     Each unit owner automatically retains an interest in the

common   elements    by    virtue    of   his    or   her     holding    title       to

individual units in the condominium.              See N.J.S.A. 46:8B-6.             The

governing board of the association (or other similar governing

body)    manages    the    day-to-day        functions   of    the    association

itself, which in turn maintains the common elements.                      N.J.S.A.

46:8B-12.1.    Typically composed of three to five individuals,

the governing board decides, for example, whether to enter into

contracts with third parties, how much to set association fees

and related assessments, and the manner in which to provide

bookkeeping and other limited administrative services for the

benefit of the association.          N.J.S.A. 46:8B-12.2.

                                        19                                    A-4216-12T1
      The composition of the governing board is of particular

importance both to unit owners and the developer, because they

may at times have competing interests with respect to the manner

in which common elements are to be managed or maintained.                     The

NJCA dictates the apportionment of control between developer-

appointed     trustees   and   unit-owner-elected      individuals      on    the

governing     board.     Those   statutory    provisions,      set    forth   in

N.J.S.A.      46:8B-12.1(a),     initially        establish    a     lock-step,

percentage-based method by which unit owners may gradually gain

control of the association:

            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 other form of administration upon
            the conveyance of 75% of the units in a
            condominium.

            [(Emphasis added).]

      Apart from this lock-step construct, the last sentence of

the   first     unnumbered     paragraph     of     N.J.S.A.   46:8B-12.1(a)

contains the following proviso, which creates a separate pathway

                                     20                                A-4216-12T1
for unit owners to gain control.      The proviso covers situations

where, as is alleged here, the developer is not building and not

marketing for sale additional units "in the ordinary course of

business":

         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.

         [Ibid. (emphasis added).]

    The statute grants the developer the right to elect at

least one member of the board, but only if the developer is

continuing to hold for sale at least one condominium unit:

         Notwithstanding any of the provisions of
         [N.J.S.A.   46:8B-12.1(a)],  the   developer
         shall be entitled to elect at least one
         member of the governing board or other form
         of administration of an association as long
         as the developer holds for sale in the
         ordinary course of business one or more
         units in a condominium operated by the
         association.

         [Ibid. (emphasis added).]

    Plaintiffs   claim   in   their    complaint,   and   in      their

certifications opposing defendants' motion to dismiss Count I,

that AB Monmouth and Amboy Bank were not, in fact, constructing

or offering for sale any more units in The Monmouth.      Defendants

disputed that factual assertion in their own submissions.            The

                               21                              A-4216-12T1
trial court did not resolve that factual disagreement because it

concluded, as a matter of law, that plaintiffs were precluded

from   control   of   the   association   without   first   obtaining    a

majority vote of unit owners approving such a takeover.

       Specifically, the trial court hinged its analysis on the

PREDFDA regulation cited by defendants, N.J.A.C. 5:26-8.4(d).

That provision is contained within N.J.A.C. 5:26-8.4, a lengthy

regulation which reads in full as follows:

           (a) Irrespective     of   the   time   set   for
           developer    control    of    the    association
           provided in the master deed, covenants and
           restrictions    or    other    instruments    of
           creation, control of the association shall
           be   surrendered   to    the   owners   in   the
           following manner:

           1.   Sixty days after conveyance of 25
           percent of the lots, parcels, units or
           interests, not less than 25 percent of the
           members of the executive board shall be
           elected by owners;

           2.   Sixty days after conveyance of 50
           percent of the lots, parcels, units or
           interests, not less than 40 percent of the
           members of the executive board shall be
           elected by the owners;

           3.   Sixty days after conveyance of 75
           percent of the lots, parcels, units or
           interests, the developer's control of the
           executive board shall terminate at which
           time the owners shall elect the entire
           executive board.

           (b) Notwithstanding (a)1, 2 and 3 above,
           the developer may retain one member of the
           executive board so long as there are any

                                   22                           A-4216-12T1
units remaining unsold in the regular course
of business.

(c) In calculating the above percentages,
it is presumed that they are calculated on
the basis of the entire number of units
entitled to membership in the association.

(d) A developer may surrender control of
the executive board of the association prior
to the time as specified, provided the
owners agree by a majority vote to assume
control.

(e) Upon    assumption  by   the  owners  of
control of the executive board of the
association, the developer shall forthwith
deliver to the association all items and
documents pertinent to the association such
as, but not limited to a copy of the master
deed,    declaration   of    covenants   and
restrictions, documents of creation of the
association, by-laws, minute book, including
all minutes, any rules and regulations, an
accounting of association funds, association
funds, all personal property, insurance
policies, government permits, a membership
roster and all contracts and agreements
relative to the association.

(f) The association, when controlled by the
owners, shall not take any action that would
be detrimental to the sales of units by the
developer and shall continue the same level
of maintenance, operation and services as
immediately prior to their assumption of
controls, until the last unit is sold.

(g) From the time of conveyance of 75
percent of the lots, parcels, units or
interests, until the last lot, parcel, unit
or interest in the development conveyed in
the ordinary course of business the master
deed, by-laws or declaration of covenants
and restrictions shall not require the
affirmative vote of more than 75 percent of

                     23                        A-4216-12T1
            the votes to be cast in order to amend the
            by-laws or rules and regulations.

            (h) The developer shall not be permitted to
            cast any votes allocated to unsold lots,
            parcels, units or interest in order to amend
            the master deed, by-laws or any other
            document for the purpose of changing the
            permitted use of a lot, parcel, unit or
            interest, or for the purpose of reducing the
            common elements or facilities.

            [(Emphasis added).]

    In essence, the trial court concluded that before it could

entertain    a    request    by   the     plaintiff       unit     owners    to     assume

control of the association, all of the owners, by a majority

vote,    must    first    consent    to      such    a   transfer    of     control       in

accordance       with    N.J.A.C.      5:26-8.4(d).           The     trial       court's

reliance on the regulation in this setting was misplaced.

    The legislative intent underlying the transfer-of-control

statutes, N.J.S.A. 46:8B-12.1 and -12.2, contemplates that unit

owners    should        ultimately      be    vested      with     control        of    the

association, rather than the developer, in order to safeguard

their property interests as the people who own (and who, most

likely, live in) the premises.                    The developer is not to retain

control    of    the     association      once      it   becomes    clear     that      the

statutory criteria for the transfer of that control have been

triggered.

                                             24                                   A-4216-12T1
       As the Supreme Court has explained, "the statutory scheme

is to vest ultimate responsibility for the management of common

elements in the unit owners of each condominium. . . . [It]

requires the association to act on behalf of its unit owners and

gives primary responsibility to the association to protect those

interests."     Fox v. Kings Grant Maint. Ass'n, 167 N.J. 208, 220

(2001) (emphasis added); see also Port Liberte Homeowners Ass'n

v. Sordoni Const. Co., 393 N.J. Super. 492, 503 (App. Div.)

("The unique relationship between a condominium association and

a developer, created by statute, allows an association to step

into   the    developer's    shoes   when   control   is   passed   to    the

association." (citing N.J.S.A. 46:8B-12.1(a))), certif. denied,

192 N.J. 479 (2007).        As the Court noted in Fox:

             N.J.S.A. 46:8B-12.1 and N.J.S.A. 46:8B-12.2
             reflect more than the orderly transition of
             power between the developer and unit owners.
             They     demonstrate      the     Legislature's
             understanding    that    in    a    condominium
             community, the unit owners' interests take
             precedence   over    any    outside   interest,
             whether that interest is a developer, an
             umbrella association, or any other outside
             party.      Furthermore,     those   provisions
             demonstrate    that    condominium    ownership
             differs significantly from traditional forms
             of property ownership, and that because unit
             owners have an undivided interest in their
             community's common elements any governance
             scheme that conflicts with the recognition
             of that interest is inconsistent with and in
             violation of the [NJCA].

                  . . . .

                                     25                             A-4216-12T1
           The [NJCA] contains no provision giving the
           developer the right to use the property
           interests of . . . unit owners as a
           bargaining chip for the developer's own
           interests. To the contrary, the Legislature
           included specific language in the [NJCA] to
           prevent a developer's lingering control over
           a condominium association.

           [Fox, supra, 167 N.J. at 225-26 (emphasis
           added).]

    The customary manner in which the transfer of governance is

to occur is specified in the lock-step provisions, which are

contained in both N.J.S.A. 46:8B-12.1(a) and in the associated

regulations set forth in N.J.A.C. 5:26-8.4(a).               Those companion

regulations prescribe that a specified percentage of the seats

on the governing board "shall be surrendered" to the unit owners

through an election held within sixty days of the conveyance of,

respectively,      twenty-five   percent,    then   fifty     percent,   then

seventy-five percent, of the units or other property interests.

N.J.A.C. 5:26-8.4(a).

    Apart from this lock-step mechanism, N.J.A.C. 5:26-8.4(d)

adds a separate optional procedure, in which a project developer

may voluntarily seek to cede control to the unit owners, if the

unit owners agree by a majority vote to accept such control.

The regulation specifies that the developer "may surrender" such

control   "prior    to   the   time   as   specified   [in    the   lock-step

provisions]," but only "provided [that] the owners agree by a

                                      26                             A-4216-12T1
majority vote to assume control."                    N.J.A.C. 5:26-8.4(d).          The

manifest purpose of this regulation7 is to assure that if the

developer wants to step out of the management of the association

at a time earlier than contemplated under the percentage-based

lock-step milestones described supra, it may do so, but only if

a    majority   of    the   owners    would     prefer      to   assume   such   total

control at that earlier stage.            Ibid.

       We do not construe the "majority vote" regulatory procedure

in N.J.A.C. 5:26-8.4(d) to curtail the unit owners' statutory

rights established under N.J.S.A. 46:8B-12.1(a) to have control

transferred to them in circumstances where the developer has, in

effect, become dormant in ceasing the construction of more units

or in marketing unsold units.                  If the developer is, in fact,

failing    to    build      or    advertise     in    the    "ordinary    course    of

business," then the proviso in N.J.S.A. 46:8B-12.1(a) authorizes

a court to strip the developer of control involuntarily.                         This

transfer of control is mandatory, and not discretionary, given

that the statute explicitly states that the unit owners "shall

be   entitled"       to   elect   a   certain    number     of   board    members   at

certain milestones.              N.J.S.A. 46:8B-12.1(a) (emphasis added);

see also Jersey Cent. Power & Light Co. v. Melcar Util. Co., 212

7
  Curiously, this regulation has no cognate provision in the
relevant statutes. There is no history of it in the New Jersey
Register that provides any relevant insight about its origins.

                                          27                                 A-4216-12T1
N.J. 576, 587-88 (2013) ("[T]he Legislature's choice of the word

'shall,'      []    is   ordinarily      intended     to    be     mandatory,       not

permissive.").

       In    contrast,      the   regulation     codified    at    N.J.A.C.        5:26-

8.4(d) addresses a developer's voluntary decision to relinquish

control over the condominium association.                  It provides that "[a]

developer may surrender control of the executive board of the

association prior to the time as specified,8 provided the owners

agree by a majority vote to assume control."                     (Emphasis added).

"Under the 'plain meaning' rule of statutory construction, the

word    'may'      ordinarily     is    permissive[.]"           Aponte-Correa        v.

Allstate Ins. Co., 162 N.J. 318, 325 (2000).

       Thus, under the terms of the regulation, a developer has

the discretion to relinquish its control over to the governing

board before it is otherwise required to do so by statute in the

NJCA.       However, the developer may not indiscriminately abdicate

its     control,      and     therefore        its   responsibility,          of    the

association.         Instead,     the   developer    can    only    do   so    when    a

majority of unit owners vote to approve of that step.                         N.J.A.C.

5:26-8.4(d).

8
  This phrase obviously refers to the lock-step percentage
milestones in N.J.S.A. 46:8B-12.1(a) and N.J.A.C. 5:26-8.4(a).

                                          28                                  A-4216-12T1
       The     trial    court's        erroneous         interpretation      of      these

provisions essentially allows a voluntary and optional procedure

set forth in a regulation to trump a mandate called for by a

statute.      We reject that interpretation.

       It is well settled that "when the provisions of the statute

are clear and unambiguous, a regulation cannot amend, alter,

enlarge or limit the terms of the legislative enactment."                                 L.

Feriozzi Concrete Co. v. Casino Reinvestment Dev. Auth., 342
N.J. Super. 237, 250-51 (App. Div. 2001) (citing N.J. State

Chamber of Commerce v. N.J. Election Law Enforcement Comm'n, 82
N.J. 57, 82 (1980); Hotel Suburban Sys., Inc. v. Holderman, 42

N.J.   Super.     84,    90    (App.    Div.        1956)).      "Where    there     is    a

conflict, the statute prevails over the regulation."                        Id. at 251

(citing Siri v. Bd. of Trs. of the Teachers' Pension & Annuity

Fund, 262 N.J. Super. 147, 152 (App. Div. 1993)).                            Moreover,

"'[s]tatutes, when they deal with a specific issue or matter,

are the controlling authority as to the proper disposition of

that   issue     or    matter.        Thus,        any   regulation   or    rule     which

contravenes      a    statute    is    of   no      force,    and   the   statute     will

control.'"      Ibid. (quoting Terry v. Harris, 175 N.J. Super. 482,

496 (Law Div. 1980)).

       For these reasons, we reject the trial court's conclusion

that   a     majority   vote     of    unit    owners      was   required    to    accept

                                              29                                  A-4216-12T1
control of the association before the court was empowered to

implement the transfer of control mandated by the proviso in

N.J.S.A. 46:8B-12.1(a) for situations with a dormant developer.

As a matter of law, such a majority vote is not required in this

setting under the statute.           Indeed, a significant number 9 of unit

owners     (twenty-eight)           have        implicitly      displayed      their

acquiescence to the assumption of control by joining forces in

this   lawsuit     as   co-plaintiffs.             Their   legislatively-granted

right to proceed with such a transfer of control must not be

thwarted by a misapplication of N.J.A.C. 5:26-8.4(d).10                       Hence,

Count I of the complaint should not have been dismissed, and

certainly not in a conclusive manner "with prejudice."

       That said, we cannot and do not resolve on the present

record   whether    the      "ordinary     course     of   business"    proviso    in

N.J.S.A.   46:8B-12.1(a)           has   actually      been    triggered.       That

disputed question cannot be answered by a mere paper review of

the    pleadings,       or    of     the        parties'     motion    submissions.

9
  Assuming the total of eighteen units corresponding to the named
plaintiffs is correct, it appears that a majority of the thirty-
two non-developer units are owned by persons who favor assuming
control of the association, although they apparently have not
taken a formal vote on the question.
10
  We need not ponder here whether a single "gadfly" unit owner
could foist control under the statute upon otherwise unwilling
owners, where a developer has not been constructing or marketing
units in the ordinary course of business.

                                           30                               A-4216-12T1
Defendants,          as    we     have        already     noted,      strongly        dispute

plaintiffs' claim that the units have not been advertised in the

ordinary course of business.                   That dispute should be resolved by

the trial court, after appropriate discovery on the question has

been completed.            See State v. Gaitan, 209 N.J. 339, 381 (2012)

(noting the potential necessity of a plenary hearing to resolve

factual issues disputed in the parties' written submissions);

see also Bruno v. Gale, Wentworth & Dillon Realty, 371 N.J.

Super. 69, 76-77 (App. Div. 2004).                        Given the passage of time

while    this       appeal      has    been    pending,       the   trial     court     should

examine       the     current         circumstances,       rather        than      perform     a

retroactive evaluation of what had existed several years ago

when    the    complaint         was    filed.11        See    N.J.S.A.       46:8B-12.1(a)

(expressing         the    proviso,      in    the   present        tense,    in    terms    of

whether units "are being constructed or offered for sale by the

developer in the ordinary course of business" (emphasis added)).

       The    trial       court's      dismissal     of    Count     I   is     consequently

reversed.       On remand, the factual issues under N.J.S.A. 46:8B-

12.1(a) relating to Count I should be resolved in the trial

court.

11
   It is undisputed that plaintiffs have yet to attain the
seventy-five percent ownership milestone that would enable them
to obtain a transfer of total control under the lock-step
mechanism in N.J.S.A. 46:8B-12.1(a) and N.J.A.C. 5:26-8.4(a)(3).

                                                31                                    A-4216-12T1
          [At   the  direction  of   the  court, the
          published version of this opinion omits
          Parts II(C), (D), and (E), which address
          issues distinct from the control issues
          pleaded in Count I. See R. 1:36-3.]

                                 III.

    The   orders   dismissing   plaintiffs'   complaint     and   denying

reconsideration    are   consequently   reversed,   on   the   terms    and

conditions we have set forth in this opinion.            The trial court

shall conduct a case management conference with counsel within

thirty days.   We do not retain jurisdiction.

                                  32                              A-4216-12T1