KEVIN AND CHERYL ROCHE VS. OCEAN BEACH AND BAY CLUB (L-0497-17, OCEAN COUNTY AND STATEWIDE)

• Court: New Jersey Superior Court Appellate Division
• Decided: October 28, 2019
• Docket: A-4210-17T2
• Status: Unpublished

Opinion

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION This opinion shall not "constitute precedent or be binding upon any court."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-4210-17T2

KEVIN and CHERYL ROCHE,

Plaintiffs-Appellants/ Cross-Respondents,

v.

OCEAN BEACH AND BAY CLUB,

Defendant-Respondent/ Cross-Appellant.

Argued October 8, 2019 – Decided October 28, 2019

Before Judges Yannotti, Currier, and Firko.

On appeal from the Superior Court of New Jersey, Law Division, Ocean County, Docket No. L-0497-17.

Brian T. Giblin, Sr., argued the cause for appellants/ cross-respondents (Giblin & Gannaio, attorneys; Brian T. Giblin, Sr., and Brian T. Giblin, Jr., on the briefs).

Gregg S. Sodini argued the cause for respondent/cross- appellant (Cutolo Barros LLC, attorneys; Gregg S. Sodini, on the brief).

PER CURIAM Plaintiffs Kevin and Cheryl Roche appeal from the April 5, 2018 order

granting summary judgment to defendant Ocean Beach and Bay Club (defendant

or the Club). Defendant appeals from the May 17, 2018 order denying its

application for attorney's fees. We affirm both orders.

The Club, a New Jersey nonprofit corporation, was established in the

1950's to operate a community consisting of approximately 986 lots individually

owned by members, with common areas, including a clubhouse. The Club leases

a bay beach and an ocean beach for the use of its members. Plaintiffs own a

home in the community.

A 1955 recorded map of the Club depicted the future acquisition of

properties, including plaintiffs' lot. The original Club deed restrictions were

recorded on January 9, 1957. The deed and by-laws require every resident to be

a member of the Club. The first restriction states: "All property owners in this

development are required to be members of a property owners' association

known or to be known as 'OCEAN BEACH CLUB' or similar name and to

faithfully abide by its rules." The restrictions require the members to pay

"yearly collections" as consideration for the members' "exclusive use" of the

beach and other common facilities.

A-4210-17T2 2 The Club purchased by indenture the tract that included plaintiffs'

property in 1961, fulfilling the plan depicted in the 1955 map. The indenture

was recorded in October 1961.

Plaintiffs purchased their property in 1998. They claim they were never

informed of the required Club membership as a condition of purchasing the

property. Their deed stated the property is "SUBJECT TO COVENANTS,

EASEMENTS, AND RESTRICTIONS OF RECORD, IF ANY, AND TO SUCH

STATE OF FACTS AS AN ACCURATE SURVEY WOULD DISCLOSE."

Plaintiffs contend the title search of the property pursuant to their

purchase revealed four prior deeds. The first, dated April 25, 1980, refers to

plaintiffs' property "as shown on plan of Ocean Beach Unit #3, dated March 1,

1955 . . . ." A second deed, recorded on June 20, 1984, states the property is

"SUBJECT to Ocean Beach, Unit No. 3 Restrictions attached hereto." The

restrictions were not attached to the deed.

A June 15, 1987 deed recognizes the property is as "shown on [the] plan

of Ocean Beach Unit #3," and states the property is "SUBJECT to easements,

zoning ordinances and restrictions of record." Lastly, a September 27, 1991

deed described the property as "shown on a map of a portion of Ocean Beach

Unit #3 . . . ."

A-4210-17T2 3 From 1998 until 2016, plaintiffs paid the annual Club member dues and

used the Club's facilities. After plaintiffs' home was substantially damaged

during Superstorm Sandy, they filed a building permit application with the Club

to demolish and rebuild their residence. The application, signed by Kevin,

stated:

I, Kevin Roche, warrant that all work shall be performed in accordance with the description and specifications as they appear within the scope of this building permit application. I grant access to the exterior of my property to Ocean Beach and Bay Club staff and Trustees to insure compliance with [d]eed [r]estrictions and [Club] rules.

Plaintiffs received a permit on November 18, 2015. Thereafter, they refused to

pay the Club's annual fees.

Plaintiffs' complaint sought a declaratory judgment that they were not

subject to the Club's restrictions or required to be Club members because the

restrictions were not included in their deed. After filing its answer and

counterclaims, defendant sent plaintiffs a letter on October 13, 2017, advising

the complaint lacked merit, and demanding dismissal of the action. The letter

further advised that if plaintiffs did not dismiss the complaint, the Club would

seek sanctions, including reasonable attorney's fees. Plaintiffs did not di smiss

their complaint.

A-4210-17T2 4 In February 2018, defendant moved for summary judgment, asserting: 1)

plaintiffs were subject to the Club's deed restrictions; 2) plaintiffs had actual,

inquiry, and constructive notice of the restrictions since the time of their

purchase of the property in 1998; 3) it was entitled to declaratory judgment

stating plaintiffs are members of the Club; and 4) plaintiffs breached their

contract and other implied covenants with the Club.

Plaintiffs cross-moved for summary judgment, and included a

certification from a title abstractor, Christopher Gillich. He opined that none of

the deeds from 1953 to 1998 contained or mentioned the recorded restrictions.

Thus, Gillich concluded that "a single reference in a [c]hain of [t]itle containin g

nearly thirteen [d]eeds to '[r]estrictions' that were not attached thereto would not

have caused any reasonable suspicion as to a possible claim . . . ." Gillich

asserted he performed a "reasonable and diligent inquiry" and was "unable to

determine what restrictions, if any, would have applied to . . . [p]laintiff's

property."

In a comprehensive written decision of April 5, 2018, Judge James Den

Uyl granted defendant summary judgment and denied plaintiffs' cross-motion.

The judge found plaintiffs had actual, constructive and inquiry notice of the deed

restrictions from the time of their 1998 purchase of the property.

A-4210-17T2 5 Judge Den Uyl addressed each of the forms of notice in turn. He

determined that the chain of title, plaintiffs' use of the Club's exclusive common

property for twenty years, the payment of the annual Club member fees for

eighteen years, and Kevin's acknowledgement of the Club deed restrictions on

the building permit application demonstrated plaintiffs had actual notice of the

deed restrictions.

The judge also found plaintiffs had constructive notice of the restrictions

because the 1984 deed, included in plaintiffs' chain of title, "clearly and

unambiguously" stated the property was "SUBJECT" to the Club restrictions.

The judge noted it was the developer's intent to include plaintiffs' property, as

indicated on the 1955 map and 1961 indenture, in the planned community, and

therefore, the property was subject to the deed restrictions.

In considering inquiry notice, Judge Den Uyl found that a reasonable and

diligent inquiry included searching through the deed books. He reasoned that

the 1984 deed's "SUBJECT" language "demanded further investigation by

[p]laintiffs." This inquiry would have "taken minimal effort" and would have

revealed the restrictions with "relative[] ease" due to the references in the chain

of title to the 1955 map and the restrictions.

A-4210-17T2 6 Therefore, Judge Den Uyl granted defendant summary judgment, stating:

"[p]laintiffs, as owners of the Lot, are obligated to be members of [the Club],

are obligated to comply with the rules, regulations, and restrictions of [the Club],

and may enjoy the rights of membership of [the Club]." The judge also found

plaintiffs had breached their contract with the Club and the implied covenants

of the homeowner's association by failing to pay the annual member dues. He

ordered plaintiffs to pay the outstanding amount due.

Subsequent to the court's order, defendant filed a motion for attorney's

fees and costs under Rule 1:4-8 and N.J.S.A. 2A:15-59.1, alleging plaintiffs'

claims lacked merit and were not supported by a good faith argument.

In a May 17, 2018 written opinion, Judge Den Uyl denied defendant's

motion. He noted that, although plaintiffs' deed referred to restrictions in the

chain of title, the restrictions were not attached. In addition, when plaintiffs

consulted with a title agency in 2016, the agency advised them it had not found

any "restrictions contained in the [d]eed. . . ." Therefore, the judge found, under

"the totality of the circumstances," plaintiffs' claims were not frivolous at the

outset of their case. Because plaintiffs had "a reasonable and good faith belief

in the merits of their case," the judge denied defendant's motion for attorney's

fees.

A-4210-17T2 7 On appeal, plaintiffs contend they did not have any form of notice of the

deed restrictions, the judge erred in not considering their expert's opinion, and

defendant was not entitled to summary judgment. Defendant cross-appeals,

asserting error in the denial of its motion for attorney's fees and costs.

We review a grant of summary judgment de novo, observing the same

standard as the trial court. Townsend v. Pierre, 221 N.J. 36, 59 (2015) (citing

Davis v. Brickman Landscaping, Ltd., 219 N.J. 395, 405-06 (2014)). Summary

judgment should be granted only if the record demonstrates "there is no genuine

issue as to any material fact challenged and that the moving party is entitled to

a judgment or order as a matter of law." R. 4:46-2(c).

In determining whether a summary judgment motion was properly

granted, we review the evidence, "draw[ing] all legitimate inferences from the

facts in favor of the non-moving party." Globe Motor Co. v. Igdalev, 225 N.J.

469, 480 (2016) (citing R. 4:46-2(c)); see also Brill v. Guardian Life Ins. Co. of

Am., 142 N.J. 520, 523 (1995).

If no genuine issue of material fact exists, the inquiry then turns to whether

"the trial court correctly interpreted the law." DepoLink Court Reporting &

Litig. Support Servs. v. Rochman, 430 N.J. Super. 325, 333 (App. Div. 2013)

(citation omitted). Our review of issues of law is de novo; we accord no

A-4210-17T2 8 deference to the trial judge's legal conclusions. Nicholas v. Mynster, 213 N.J.

463, 478 (2013) (citing Murray v. Plainfield Rescue Squad, 210 N.J. 581, 584

(2012)).

Under New Jersey's well-established common law, restrictive covenants

are generally disfavored. Cooper River Plaza E., LLC v. Briad Grp., 359 N.J.

Super. 518, 526 (App. Div. 2003). "Restrictions on the use to which land may

be put are not favored in law because they impair alienability." Bruno v. Hanna,

63 N.J. Super. 282, 285 (App. Div. 1960). Accordingly, enforcement of

provisions by one person restricting another in the use of his land occurs when

"the right to restrict is made manifest and clear in the restrictive covenant." Ibid.

(citing Hammett v. Rosensohn, 46 N.J. Super. 527 (App. Div. 1957)).

Despite the premise of strict construction, our courts have upheld a

restrictive covenant if it is found in the chain of title. See Pearson v. DMH 2

LLC, 449 N.J. Super. 30, 50 (Ch. Div. 2016) (citations omitted); see also Olson

v. Jantausch, 44 N.J. Super. 380, 388 (App. Div. 1957). Therefore, plaintiffs

are subject to the restrictions referenced in the 1984 and earlier deeds.

Even if the restrictions are applicable to their property, plaintiffs contend

they cannot be bound by the restrictions, as they had no notice of them. We

disagree.

A-4210-17T2 9 "Under New Jersey law, '[a] grantor may, by covenant in a deed, restrict

the use of land conveyed for the benefit of land retained and bind the grantee

and his or her successors in title who take with notice.'" Pearson, 449 N.J. Super.

at 49-50 (alteration and emphasis in original) (quoting Perelman v. Casiello, 392

N.J. Super. 412, 418 (App. Div. 2007)). There are three forms of notice: actual,

constructive, and inquiry.

Actual notice arises when the purchaser has actual knowledge or information that a claim is outstanding against the property he or she proposes to acquire. It exists even though the purchaser may have to make an inquiry to ascertain the validity of the claim.

Constructive notice is notice inferred from the record and it exists whether or not the purchaser inspects the record. It exists when the record reveals the outstanding claim even if the purchaser must make an inquiry to ascertain the validity of the claim.

Inquiry notice (notice inferred from secondary facts) exists when the purchaser has notice of some fact that, in accordance with human experience, is sufficiently curious or suspicious that the purchaser should be obliged to make a further inquiry into it. If a reasonable inquiry would reveal that there is another outstanding interest, then the purchaser is on inquiry notice of that interest.

[14 Powell on Real Property §82.02(1)(d)(iv) (Michael Allan Wolf ed. 2019) (emphasis in original).]

A-4210-17T2 10 We are satisfied Judge Den Uyl's determinations on the forms of notice in

his well-reasoned decision are supported by the record. Evidence that plaintiffs

had actual notice of the restrictions is found in Kevin's statement in the building

permit application in which he acknowledged demolition and rebuilding of the

property must comply with "[d]eed [r]estrictions and [Club] rules." Plaintiffs

lived on a private road maintained by the Club and used the common area

facilities for twenty years. They also paid their annual member dues until 2016.

These actions demonstrate plaintiffs' awareness of their membership in the Club

and knowledge of the restrictions on their property.

Our courts have previously considered, and rejected, the argument that a

subsequent purchaser does not have constructive notice of a deed restriction if

it is not mentioned in their deed. See Pearson, 449 N.J. Super. at 50; see also

Olson, 44 N.J. Super. at 388 (finding "[t]he fact that [the] defendants' deed

contained no mention of the restriction [was] of no moment" because the

restriction was in the chain of title).

Here, the restrictions were recorded publicly several times, beginning in

1957. Subsequent deeds referred to the restrictions, as close in time as 1984 ,

and plaintiffs' own deed advised it was subject to any restrictions of record. All

A-4210-17T2 11 of these deeds were readily available. Because the restrictions were found in

the chain of title, plaintiffs were on constructive notice of them.

Similarly, the language in plaintiffs' own deed and the 1984 deed included

in the title search and in their chain of title supports a finding of inquiry notice.

As we have stated:

It is well recognized that a record which affords record notice of the transfer therein made may contain a statement or recital which does not of itself give either record notice or actual notice but which does place on inquiry one who is affected by the record. . . . A purchaser who is placed on inquiry is chargeable with notice of such facts as might be ascertained by a reasonable inquiry.

[Garden of Memories v. Forest Lawn Mem'l Park Ass'n, 109 N.J. Super. 523, 534-35 (App. Div. 1970) (citations omitted).]

A purchaser "will be charged with knowledge of whatever such an inquiry would

uncover where facts are brought to his attention, 'sufficient to apprise him of the

existence of an outstanding title or claim, or the surrounding circumstances are

suspicious and the party purposefully or knowingly avoids further inquiry.'"

Friendship Manor Inc. v. Greiman, 244 N.J. Super. 104, 108 (App. Div. 1990)

(emphasis in original) (quoting Scult v. Bergen Valley Builders, Inc., 76 N.J.

Super. 124, 135 (Ch. Div. 1962)).

A-4210-17T2 12 The language in plaintiffs' own deed was sufficient to apprise them that a

search of the deed book would reveal the restrictions referred to in the deed.

However, they did not need to even perform that search because the 1984 deed

included in their chain of title explicitly stated the property was "SUBJECT to

Ocean Beach, Unit No. 3 restrictions attached hereto." Even though the

restrictions were not attached to the deed, this provided notice of the existence

of restrictions, which were discoverable through a reasonable investigation. The

chain of title here was limited and not complicated. A review of it clearly

indicates plaintiffs' property is subject to the Club's restrictions.

Plaintiffs' assertion that the trial court erred in not considering Gillich's

"unrefuted expert opinion" as clear evidence that they were not on actual,

constructive, or inquiry notice of the deed restrictions is meritless. 1 Plaintiffs

did not name Gillich as an expert or produce any expert report during the

discovery period. Gillich's opinion was only proffered to defendant in a four-

page certification in opposition to defendant's summary judgment motion and in

support of plaintiffs' cross-motion.

1 Judge Den Uyl does not refer to the expert's certification in his April 5, 2018 decision. It is not clear if there was oral argument on the summary judgment motions. Since we have not been provided with a transcript of any argument, we do not know if there was any discussion of the certification. The judge did consider the expert's conclusions in his May 17, 2018 opinion. A-4210-17T2 13 Because plaintiffs failed to comply with any of the procedural

requirements regarding the production of an expert report, it was not an abuse

of discretion for the judge to reject the expert's opinion. See R. 4:10-2(d)(1);

see also R. 4:17-7. Even so, Judge Den Uyl referred to the report in his second

decision, noting the expert's opinion that none of the deeds from 1953 to 1998

contained or referred to the recorded restrictions. This conclusion is

contradicted by the evidence in the record, notably the language in the 1957,

1984, 1987 and plaintiffs' own 1998 deed referring to the deed restrictions.

Because the expert's conclusions were unsupported by factual evidence, the

judge was not bound by them.

We turn to defendant's cross-appeal, reviewing the trial judge's decision

for an abuse of discretion. Bove v. AkPharma Inc., ___ N.J. Super. ___, ___

(App. Div. 2019) (slip op. at 23) (citing McDaniel v. Man Wai Lee, 419 N.J.

Super. 482, 498 (App. Div. 2011)). We will reverse a decision only when "the

discretionary act was not premised upon consideration of all relevant factors,

was based upon consideration of irrelevant or inappropriate factors, or amounts

to a clear error in judgment." Masone v. Levine, 382 N.J. Super. 181, 193 (App.

Div. 2005) (citing Flagg v. Essex Cty. Prosecutor, 171 N.J. 561, 571 (2002)).

A-4210-17T2 14 We discern no error in the judge's determination not to award counsel fees

to defendant. The judge found plaintiffs had a good faith belief in their cause

of action at the outset of their case because their deed did not list any restrictions

and the 1984 deed did not attach the restrictions. As we have stated, sanctions

are not warranted where the party or the party's attorney "had a reasonable, good

faith belief in the merits of the action" or defense. Wyche v. Unsatisfied Claim

& Judgment Fund of N.J., 383 N.J. Super. 554, 561 (App. Div. 2006) (citing

DeBrango v. Summit Bancorp, 328 N.J. Super 219, 227 (App. Div. 2000)). We

see no reason to disturb his ruling.

Affirmed.

A-4210-17T2 15