NJ Appellate Court Prevents Member Coup and Sorts Out Ownership Banner Image

NJ Appellate Court Prevents Member Coup and Sorts Out Ownership

NJ Appellate Court Prevents Member Coup and Sorts Out Ownership

What You Need to Know

  • Improper (secret) meetings invalidate major LLC decisions - In Keily v. Iler, the court ruled that Kiely and Marzovilla's decision to remove the Managing Member without proper notice violated fiduciary duties and rendered their actions ultra vires, demonstrating that proper meeting procedures are essential for valid LLC governance.
  • "Majority of ownership interest" requires more than 50% when specified in operating agreements - The Keily court rejected the argument that two members holding 50% combined ownership constituted a majority, emphasizing that courts will strictly interpret operating agreement language rather than apply default statutory rules when parties have contracted around them.
  • Excess capital contributions don't automatically adjust ownership percentages - The Keily decision shows that once "contracted-for contributions" are made and ownership percentages vest, additional contributions are treated as loans to the LLC rather than adjustments to membership interests, protecting members from having their ownership diluted by others' excess funding.
  • Courts will enforce informal membership transfers on equitable grounds despite procedural defects - Even though Iler's 8% membership transfer to Marzovilla lacked required written formalities, the Keily court enforced it based on equitable principles since Marzovilla had already performed his part of the bargain by paying off the mortgage debt.
  • Reasonable business judgment protects managing members from fiduciary duty claims - The Keily court's rejection of claims against Iler for fund commingling, vacation timing, and other management decisions illustrates that courts will defer to reasonable business judgment when financial records are maintained and actions serve legitimate business purposes.

Introduction

In a recent decision, the New Jersey Appellate Division resolved a contentious dispute between three members of a limited liability company on whether: (1) the members adequately fulfilled their contributions to achieve their membership percentages and (2) the Managing Member could be removed from his position when two other members failed to provide him with notice of the meeting. The Court ultimately found that while all three members fulfilled their contribution requirements, both the meeting and the removal of the Managing Member were ultra vires acts due to the two members’ deceitfulness and their failure in forming a majority of the limited liability company at the meeting. Keily v. Iler, Mon-C-8-19, 2025 N.J. Super. Unpub. LEXIS 621 (App. Div. Apr. 17, 2025).

Background

Thomas Kiely, Michael Marzovilla and William C. Iler were members of 30 Jackson Street, LLC (the “LLC”), a limited liability company that held title to and managed property consisting of a two-story house and ten cottages, which was used as a hotel complex. Iler first became interested in purchasing and renovating the property in 2015, and later met Kiely who also expressed interest in the property. Instead of competing with each other, Iler and Kiely joined forces to become the only, and equal, members of the LLC.

Iler and Kiely quickly recognized that they lacked sufficient funding for renovations. They marketed the property and eventually attracted Marzovilla’s attention in November 2016. Marzovilla, based on his ability to finance the development, later became the LLC’s third member. In December 2016, all three members completed a purchase agreement and an amended operating agreement. The purchase agreement stated that the three parties intended “to create an LLC with a net capital value of $420,000,” with each member having a different contribution. The agreement explained that the LLC’s membership percentages would become Iler 50%, Kiely 25%, and Marzovilla 25%, after each member completed a contribution of $210,000, $105,000, and $105,000 respectively. Iler and Kiely each contributed their preexisting half memberships in the LLC, valued at $105,000. Thus, Iler still needed to provide an additional $105,000 and Marzovilla needed to contribute an initial $105,000. Despite Iler and Marzovilla’s incomplete contributions at the time, the parties’ conduct suggested that they agreed on the membership percentage divisions stated in the executed purchase agreement. Moreover, Iler had additional responsibilities as the Managing Member and principally ran the hotel.

After some time, the parties became embroiled in a dispute. In the Fall of 2018, Kiely and Marzovilla requested an LLC meeting with Iler, which he agreed to participate in, but a firm date and time were never set. In November 2018, Kiely and Marzovilla conducted a meeting without advising Iler, where they removed him as the LLC’s Managing Member and reduced his membership percentage by eight percent. Additionally, Kiely and Marzovilla had a laundry list of complaints claiming that Iler commingled funds, misled them about financial matters and the use of funds, vacationed during a particularly busy time for the LLC, negatively affected the LLC by providing a discount to a friend, purchased and developed another rental property in the area, and mismanaged bookings.

The First Trial and Remand from the Appellate Decision

The issues between the parties resulted in two consolidated lawsuits decided at a bench trial in June 2022. At the close of the trial, the judge described the actions of all three parties as “less than optimal,” and ultimately ordered one side to buy out the other. When the parties cross-appealed, the Appellate Division concluded that the trial judge had reached inadequate findings. Kiely v. Iler, No. A-1363-22 (App. Div. Feb. 12, 2024) (slip op. at 2,28). However, the appellate court emphasized that it had not taken a position on any other substantive issue raised in the appeal.

Since the trial judge had retired and was therefore unavailable to make the required findings on remand, the Court contemplated how to best discharge the judicial duties. After considering several options, the Court decided it was most appropriate to allow each of the three parties to testify again so that the Court could gauge their credibility and better understand the previously presented evidence. The parties proceeded to testify at a second trial in January 2025.

The Second Trial

A. Membership Interests at Inception

In analyzing the issues, the Court first addressed each parties’ membership interests. The Court began by emphasizing that the parties’ purchase agreement explicitly stated that the parties’ ownership percentages in the LLC would only “fully vest[],” when they paid the entire “contracted-for contribution[s].” Although no deadline for the contributions was clearly stated in the agreement, the Court determined that the main purpose of the contributions was for renovations and it therefore assumed that the contributions were expected around September 2017 when the renovations were substantially completed.

While there was no dispute that Marzovilla made his required contribution in a timely manner, the Court considered the evidence presented to determine whether Iler satisfied his contribution. Although Kiely and Marzovilla agreed that Iler satisfied his $105,000 contribution, they argued that he was required to contribute more to successfully maintain his 50% interest. Their argument was based on the idea that for every dollar they contributed, Iler had to contribute at least double that amount. Hence, since their own contributions exceeded the required amount, they argued that Iler’s required contribution needed to increase too. The Court disagreed with Kiely and Marzovilla’s position that the members’ ownership percentages fluctuated with each contribution, and instead interpreted the purchase agreement as meaning that when the “contracted-for contributions” were made, the parties’ ownership percentages fully vested and could not change afterward based on additional contributions provided at a later date. Thus, the Court found that Iler provided $105,000 and satisfied his required contribution by the time the renovation was finished. The Court further concluded that Kiely and Marzovilla’s excess contributions were to be considered loans to the LLC. In light of the purchase agreement’s ambiguity, the Court relied on Kampf v. Franklin Life Ins. Co., 33 N.J. 36, 43 (1960) to assume its role of not rewriting the parties’ agreement, but instead providing an interpretation that most likely coincided with the parties’ intentions.

B. The Clandestine LLC Meeting

In evaluating the validity of Kiely and Marzovilla’s decisions at the meeting where Iler was not present, the Court found that it was beyond dispute that Iler was not given adequate or indeed any notice of the meeting. Since the operating agreement was silent about matters relating to when a meeting shall occur or be scheduled, the Court relied on N.J.S.A. 42:2C-39(d) (the Revised Uniform Limited Liability Company Act), general contract principles, and case law to explain that “equity, fairness, and the covenant of good faith and fair dealing firmly apply.” The Court further noted that N.J.S.A. 42:2C-39(a) and (b) provide that LLC members owe each other fiduciary duties, including the duties of loyalty and care. The Court found that Kiely and Marzovilla breached those duties in conducting a meeting where the primary point of the meeting was to remove Iler as Managing Member and reduce his membership interest, without giving notice to Iler.

The Court further held that even if the meeting had been validly scheduled, the parties’ operating agreement called for a majority of the LLC’s ownership interest in order to act. The Court rejected Kiely and Marzovilla’s argument that they made up two-thirds of the owners and were thus a majority. While N.J.S.A. 42:2C-37(c)(5) appeared to support Kiely and Marzovilla’s view, it also allows for members to contract around the default rule in their operating agreement. Here, the agreement specified that the consent of a majority “of the ownership interest” in the LLC is required. The Court concluded that Kiely and Marzovilla’s collective 50% interest did not equate to a majority.

C. Iler’s Alleged Breach of Fiduciary Duties

The Court next addressed Kiely and Marzovilla’s claims that Iler breached the fiduciary duties he owed to them or the LLC by wrongfully commingling the LLC’s funds with his personal funds. The Court held that although Iler may not have handled the money in an optimal way, there was no evidence suggesting that he used the money for matters unrelated to the LLC’s business and renovations. In addition, Iler provided periodic accountings, which Kiely and Marzovilla never previously objected to. The Court further concluded that any errors in Iler’s accountings were inconsequential and “the discrepancies amounted to less than one percent of the expenditures.”

Kiely and Marzovilla also argued that Iler breached his fiduciary duty by going on an out-of-state extended vacation during the hotel’s peak season. They claimed that due to Iler’s physical absence, he could not tend to guests, mitigate potential emergencies, or fulfill his other managerial responsibilities on-site. The Court disagreed and held that although Iler was away, he satisfied his duties by remaining involved in the LLC’s business matters and continuously communicating by laptop and phone when necessary. Ultimately, after considering these claims along with Kiely and Marzovilla’s other assertions related to Iler’s alleged breach of fiduciary duty, the Court found each claim to be meritless.

D. Reduction in Iler’s Membership Interest

Over and above his $105,000 contribution, Marzovilla had paid $56,000 to terminate the mortgage held by the property’s prior owner. Although the purchase agreement provided that Kiely and Iler were solely responsible for this debt, Iler was unable to pay his part. Iler claimed that Marzovilla’s payment constituted a loan to LLC. The Court, however, found that the parties’ communications at the time of the transaction suggested that Iler viewed the situation as him compromising part of his membership percentage in return for relief from his $56,000 obligation to the mortgagee. That said, the operating agreement allowed for a change in the degree of membership only “by written instrument signed with the same formality as his [a]greement, upon a vote of a majority of the ownership interest in the [c]ompany.” It follows that although Iler and Marzovilla collectively held a majority of the ownership at 75%, a writing was still required for the transaction to be valid. Nevertheless, the Court concluded that since Iler and Marzovilla entered an agreement in which Marzovilla already fully performed his part of the bargain, part of the judgment should reflect the considered transfer. The Court relied on equitable principles to hold that Iler must perform his obligations of the agreed on transaction from which he benefited, and thus transfer eight percent of his membership in the LLC to Marzovilla.

Takeaways

With its discussion of members’ ownership interests in a limited liability company and their authority to make certain decisions regarding their shares and the company’s management, this case demonstrates that parties should understand the terms of their operating agreements and the requirements they must fulfill to ensure that they are acting in accordance with their potential fiduciary duties. In addition, this case highlights a court’s role in interpreting ambiguous language within operating agreements and balancing the equities.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com, Matthews Florez at mflorez@riker.com or Shelley Wu at swu@riker.com. We acknowledge our Summer Associate Meghna Gohil, Wake Forest University School of Law, for her valuable contribution to this post.

NY Court Dismisses RESPA Claims: No Actual Damages from Mortgage Servicing

What You Need to Know

  • The Real Estate Settlement Procedures Act (“RESPA”) applies to errors made in the servicing of a loan like mishandling payments or providing incorrect account information, not to issues related to the terms or validity of an initial loan or loan modification itself.
  • To successfully bring a claim under RESPA, a borrower must plead actual damages that were proximately caused by the mortgage servicer’s specific violation.
  • Even if a borrower has standing to bring a RESPA claim and a violation is established, the borrower’s claim will be dismissed if they cannot show that the violation caused them actual, quantifiable harm.

Introduction

In a recent decision from the United States District Court for the Eastern District of New York, the District Court dismissed claims brought by a borrower against two mortgage servicers, alleging violations of the Real Estate Settlement Procedures Act (“RESPA”), 12 U.S.C. §§ 2601 et seq., its implementing regulation—Regulation X, 12 C.F.R. §§ 1024.1 et. seq., and New York state laws prohibiting deceptive business acts and mandating annual accounting reports for mortgage loans. In the case, Murray v. Newrez LLC, the mortgage servicers failed to (1) respond to letters from the borrower’s counsel, deemed Qualified Written Requests (“QWRs”) under 12 U.S.C. § 2605(e)(1)(B), seeking information on her loan, and (2) provide notice of servicing transfers, which the borrower claimed led to the accrual of improper fees. The Court found that, while the servicers had violated RESPA’s procedural requirements, the borrower ultimately failed to adequately allege that these violations caused her any actual damages, leading to the dismissal of her claims. Murray v. Newrez LLC, 24-cv-6160, 2025 U.S. Dist. LEXIS 75676 (E.D.N.Y. Apr. 21, 2025).

Facts

Sherry Ann Murray (“Plaintiff”) was the borrower on a 2005 mortgage, recorded as a lien against real property she owned. After Plaintiff defaulted on payments, the noteholder commenced a foreclosure action that was later dismissed by stipulation in 2011. In October 2011, Plaintiff then entered into a Loan Modification Agreement with GMAC Mortgage, LLC, splitting the previous total balance of $510,602.15 into a “Deferred Principal Balance” of $131,717.67 and a “New Principal Balance” of $378,884.48. Plaintiff was not required to pay interest or make monthly payments on the Deferred Principal Balance, while the New Principal Balance had a 3.875% interest rate until October 1, 2016, when it increased to 4.25%.

Plaintiff alleged that the Loan Modification Agreement did not provide detailed information about the specific charges and fees constituting these balances. She noted that the $510,602.15 balance was a significant increase, specifically $70,277.15 over her original 2005 mortgage principal of $440,325. She claimed this increase represented “undisclosed and unidentified fees, interest, advances, and other charges and amounts” unlawfully added at the time of the modification, and that mortgage servicers, PHH Mortgage Corporation (“PHH”) and Newrez LLC (“Newrez” and collectively, “Defendants”), and their predecessors had continued adding “excessive, improper, and/or illegal [sums]” since 2011. PHH had been the servicer or subservicer of her loan account since 2018, and in April 2019, Newrez became the master servicer. Plaintiff alleged she did not receive notice of these servicing transfers.

In May 2024, Plaintiff’s attorneys sent two Qualified Written Requests (“QWR”) to PHH and Newrez, seeking information about her account and the amounts included in her loan balance. Neither defendant acknowledged receipt of the QWR letters nor provided a written response. In June, Plaintiff’s attorneys again sent QWRs to Defendants and received no acknowledgement nor response.

Based on these events, Plaintiff filed suit alleging Defendants violated RESPA and its implementing regulation, Regulation X, by failing to respond to her QWRs and failing to provide notice of servicing transfers. Additionally, she brought New York state law claims for deceptive business practices and lack of proper accounting. Defendants moved to dismiss under Rule 12(b)(1) and Rule 12(b)(6).

The District Court Decision

The Court first addressed Defendants’ Rule 12(b)(1) motion to dismiss, which facially challenged Plaintiff’s standing to bring her claims. Applying the Lujan three-part test, the Court found that it possessed the statutory and constitutional power to adjudicate Plaintiff’s claims because there was an injury in fact, causation, and redressability. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-561 (1992). Specifically, Plaintiff had adequately showed that she suffered monetary injury from improperly imposed fees, increased debt, and financial burdens. These concrete injuries were caused by Defendants’ actions as servicers and further exacerbated by their failure to acknowledge or respond to her QWRs. As servicers of her account, Defendants were capable of redressing her injury by providing her with information regarding her mortgage or by correcting any inaccurate fees that may have accrued. Finding all three elements satisfied, the Court denied the Defendants’ motion to dismiss under Rule 12(b)(1).

The Court then assessed the substance of Plaintiff’s RESPA claims under Rule 12(b)(6). Under RESPA, servicers must acknowledge receipt of a QWR within five business days and provide a substantive written response within 30 days. Even if a QWR is deemed “overbroad or unduly burdensome,” the servicer must still provide a written determination to the borrower within five days, identifying any valid information request within the submission if reasonable to do so. The Court found that Plaintiff had sufficiently alleged that Defendants violated RESPA and Regulation X by failing to provide any acknowledgment or written response. Although Defendants had alleged that the requests were “overbroad or unduly burdensome,” the Court noted that under RESPA, they were still required to provide written notification of that determination within five days. Thus, by failing to respond at all to Plaintiff’s requests, Defendants had violated RESPA.

Despite Plaintiff’s success in establishing violations of RESPA, the Court found that she failed to plead actual damages related to servicing that were proximately caused by the Defendants’ failure to respond to the QWRs. The Court first clarified that liability under § 2605(e)(1) attaches to inquiries related to the servicing of a loan, not to challenges to a loan’s creation or validity. Thus, Plaintiff’s allegations arising from the 2011 Loan Modification, entirely unrelated to the servicing of the mortgage, did not fall under § 2605. Further, the Court explained that the alleged $70,277.15 in improper fees originating from the 2011 Loan Modification had occurred long before the 2024 QWRs were sent and thus could not have been proximately caused by the failure to respond to those requests. The Court also rejected Plaintiff’s argument that the costs of litigation and general emotional distress suffered qualified as actual damages, noting that attorney’s fees are insufficient to establish an entitlement to actual damages under RESPA, and Plaintiff’s allegations of emotional distress were insufficient as they were not shown to be proximately caused by Defendants’ violations.

The Court also dismissed the request for statutory damages because RESPA requires an allegation of actual damages as a prerequisite for statutory damages. Even if Plaintiff had adequately pled actual damages, the Court found that the two alleged instances of failing to respond to the May and June QWRs were insufficient to establish a “pattern or practice of noncompliance” as required for statutory damages.

Similarly, the Court dismissed the claim for failure to provide required notices of servicing transfers. While RESPA mandates that both servicers provide such notices, Plaintiff again failed to allege any non-conclusory actual damages proximately caused by the absence of these notices in 2018 and 2019. Her claim that the lack of notice prevented her from obtaining information to correct errors and stop the accrual of improper fees was linked to the fees allegedly imposed by the 2011 modification, not the servicing transfers themselves. Once more, the Court reiterated that actual damages under RESPA must relate to errors in the servicing, not the modification, of a mortgage loan.

Since all federal claims were dismissed, the Court declined to exercise supplemental jurisdiction over Plaintiff’s New York state law claims. The Court cited factors of judicial economy, convenience, fairness, and comity, which generally weigh in favor of dismissing state law claims when federal claims are dismissed early in the litigation.

The Court did grant Plaintiff leave to file an amended complaint to address the deficiencies regarding actual damages for the RESPA claims, specifically requiring allegations that the damages were proximately caused by the failure to respond and that the requests related to ongoing loan servicing errors, not the 2011 modification.

Takeaways

This case serves as a crucial reminder that simply demonstrating a technical violation of RESPA’s procedural requirements like failing to respond to a QWR or failing to provide notice of a servicing transfer is not enough to sustain a claim for damages. Plaintiffs must also plead and ultimately prove that they suffered actual, quantifiable harm that was a direct result of that specific violation. Moreover, this case reinforces that RESPA’s provisions on QWRs are focused on the servicing of the loan after it is originated or modified, and cannot be used to challenge fees or terms that arose from the initial loan agreement or a subsequent modification agreement.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com, Matthews Florez at mflorez@riker.com or Shelley Wu at swu@riker.com. We acknowledge our Summer Associate Carla Ko, Seton Hall University Law School, for her valuable contribution to this post.

New Jersey Appellate Division Strictly Interprets an HOA’s Restrictive Covenant On Fences

What You Need to Know

  • Restrictive covenants are strictly construed: Courts apply the principle that restrictive covenants must be interpreted literally and any ambiguities are resolved in favor of the property owner's unrestricted use of their land. Here, the court found that Section 8.1(c) of the HOA declaration, which specifically addressed fences and their requirements, governed rather than Section 8.1(dd), which set a 30-foot setback for "accessory buildings" but didn't mention fences.
  • Intentional omission doctrine applied: Under "expressio unius est exclusio alterius," the court ruled that mentioning fences in some sections but not in the setback provision (8.1(dd)) indicated the drafters intentionally excluded fences from that requirement.
  • HOA's own actions undermined their position: The Association's Architectural Control Committee had approved the fence with full knowledge of its 4-inch setback location, and they only attempted to amend the declaration to add fence setback requirements after the fence was built, which homeowners rejected.

Introduction

In a recent decision from the New Jersey Appellate Division, the Court affirmed an order granting summary judgment, finding that a setback specified in a section of a homeowners association’s declaration  did not govern fences where the language failed to expressly state that it did and deferred to Town’s ordinances. Ests. at Layton’s Lakes Homeowners Ass’n, Inc. v. Watson, No. A-3123-23, 2025 N.J. Super. Unpub. LEXIS 760 (App. Div. May 7, 2025).

Background

Plaintiff, the Estates at Layton’s Lakes Homeowners Association, Inc. (the “Association”), is a non-profit corporation that governs a residential community in Carneys Point Township. Defendants, Bonnie Watson and Lorraine Bock (the “Defendants”), own a home on a half-acre property within that community (the “Property”). In 2008, the Association recorded a Declaration of Covenants, Conditions, and Restrictions (the “Declaration”) that is applicable to properties within the community, including the Property. Further, the Declaration contains a section of “Protective Covenants” which enumerates restrictions on owners’ use of their lots.

Specifically, Section 8.1(c) of the Declaration requires that any “fence, wall, hedge, mass planting, or similar continuous structure” must be: (1) a maximum of four feet tall; (2) approved by the Architectural Control Committee (the “Committee”); (3) not in conflict with any municipal ordinance; (4) constructed of wood, white PVC or black aluminum tubing; and (5) of an open style. Carneys Point Township’s zoning ordinance (the “Ordinance”) barred fences erected less than four inches from a property line without written approval of the adjacent property owner. Carneys Point Township, NJ. Code § 94-12 (1982). Additionally, Section 8.1(dd) of the Declaration provided for a minimum thirty-foot setback on any “accessory building, shed, shack, porch, or other similar type of structure of improvement” located on any lot within the community.

In November 2022, the Defendants sought to erect a fence on the Property. A survey of the Property showed the exact size (forty-eight inches in height) and location of the fence (four inches from the property line along the sides and back of the property). The Defendants obtained a permit from the zoning board, as well as approval from the Committee which did not advise that the height or location of the fence violated the Declaration. After the fence was constructed, the Association attempted to amend Section 8.1(c) of the Declaration to add a ten-foot setback restriction to all fences within the community, despite their later claim that the setback in Section 8.1(dd) applied to fences. The proposed amendment was rejected by homeowners.

In September 2023, the Association filed a complaint seeking a declaratory judgment determining that Section 8.1(dd) of the Declaration governs fences within the community and sought injunctive relief requiring the Defendants to remove the fence because it was located within the designated thirty-foot setback.

In response, the Defendants filed an answer and counterclaim requesting that the trial court rule that Section 8.1(c) of the Declaration governed fences and that it deferred to the four-inch setback stated in the Ordinance.

The Chancery Court granted summary judgment in favor of the Defendants, denying the Association’s motion for summary judgment. The trial court held that a clear, unambiguous reading of the Declaration shows that Section 8.1(c) governs fences and defers to the Ordinance in which the defendants’ fence does not violate.

The Decisions

On appeal, the Association asserted that the trial court incorrectly determined that Section 8.1(c) of the Declaration deferred to the Ordinance regarding fence setback requirements for two reasons: (1) the trial court interpreted Section 8.1(c) in isolation and failed to consider broader context of the remaining provisions in the Declaration, specifically Section 8.1(dd); and (2) the trial court based the decision on the judge’s personal opinion that the setbacks were not “aesthetically pleasing” and differed from setbacks in other communities.

The Appellate Division rejected the Association’s first argument stating that the mention of “fence[s]” in Section 8.1(c) of the Declaration, but not Section 8.1(dd), implies the omission was intentional. The Declaration is a restrictive covenant that is subject to the general rules of contract construction, including contract interpretation focusing on the intent of the parties. Under the doctrine of expressio unius est exclusio alterius, the inclusion of one thing implies the intent to exclude another not mentioned. Moreover, restrictive covenants are subject to strict construction in which a judge should interpret a document according to its literal terms without looking to another source to determine its meaning. Any ambiguities in a restrictive covenant must be resolved in favor of an owner’s unrestricted use of their property.

Here, Section 8.1(c) of the Declaration expressly applies to fences and is silent on setbacks, but requires that a fence must be approved by the Committee. However, a fence must not be in conflict with any municipal ordinance, which requires a four-inch setback in Carneys Point Township. Section 8.1(dd) appears twenty-seven paragraphs after and does not have the word “fence.”  The word “fence” only appears in Sections 8.1(c) and 8.1(z) (which does not apply to the Property) of the Declaration, not Section 8.1(dd). The mention of “fence[s]” in other sections and exclusion from Section 8.1(dd) implies the omission was intentional. Thus, in its entirety Section 8.1(c) applies to fences and defers to the Ordinance in which the fence on the Property does not violate.

Further, the Ordinance was enacted twenty-six years prior to the recording of the Declaration, so the Association should have been aware of Carneys Point Township’s four-inch setback requirement for fences. If the Declaration drafters intended a greater setback, then they should have expressly stated so. In fact, the Association had the opportunity to advise that the fence was in violation of the Declaration when the Defendants presented their application to the Committee. Instead, their application, with a survey depicting the exact location of the fence and an indication of four-inch setback, was approved for construction on the Property.

Lastly, the Court found no support in the record for the Association’s argument that the trial court’s decision was based on the judge’s personal opinion. The judge determined that Section 8.1(c) governed fences, not Section 8.1(dd), through analyzing Declaration’s plain and unequivocal language. The trial court judge did not attempt to rewrite the Declaration or find a meaning for its language outside the bounds of the document. Rather, he merely made a remark stating he had never heard of a thirty-foot setback for fences and such a setback would significantly reduce the size of Defendants’ useable yard.

Takeaway

This case highlights that restrictive covenants are strictly enforced against those seeking to exercise them and must be set forth in clear unequivocal language. The absence of clear language will lead a court to decline to enforce such a covenant. For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com, Matthews Florez at mflorez@riker.com or Shelley Wu at swu@riker.com. We acknowledge our Summer Associate Maya Pacheco-Smith, Rutgers Law School, for her valuable contribution to this post.

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