NOT FOR PUBLICATION WITHOUT THE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-1517-17T2
COMMUNITY CORPORATION OF
HIGH POINT, INC.,
Plaintiff-Respondent,
v.
PONKY, INC., JAMES GOLDEN,
KRUMPFER REAL ESTATE, LLC and
JOSEPH KRUMPFER,
Defendants-Appellants.
_______________________________________
Argued September 12, 2018 – Decided September 27, 2018
Before Judges Yannotti and Natali.
On appeal from Superior Court of New Jersey,
Chancery Division, Sussex County, Docket No. C-
000017-17.
Robert J. Kenny argued the cause for appellants
(Hoagland, Longo, Moran, Dunst & Doukas, LLP,
attorneys; Kathleen Huntley-Robertson and Richard J.
Mirra, of counsel and on the briefs; Ken Cesta and
Robert J. Kenny, of counsel).
Jared M. Lans argued the cause for respondent.
PER CURIAM
In this appeal, we consider whether the trial court erred in permanently
enjoining defendants from constructing and operating a real estate office
contrary to a homeowners' association's by-laws. After a careful review of the
record, we conclude the procedural framework outlined in Rules 4:52-1 and -2
precluded the entry of a permanent injunction. However, because plaintiff
clearly and convincingly established the need for interim injunctive relief in
accordance with Crowe v. DeGioia, 90 N.J. 126 (1982), we vacate the order
under review to the extent it granted a permanent injunction, modify the order
to impose preliminary injunctive relief, and remand the matter to the trial court
for further proceedings.
Plaintiff Community Corporation of High Point, Inc. (CCHP) is a
homeowners' association that manages, maintains, and operates a residential,
membership-based community known as High Point Country Club Community
(Community) located in Montague Township, New Jersey. It was created
pursuant to the January 2, 1985 order entered by the court in Altamount
Development Corp. v. Property Owners, et al., Sussex County, Docket No. C-
4307-81E (Ch. Div. 1985) (Altamount Order). The Altamount Order established
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the Community within Montague Township's R-4 zone, a high density
residential district that permits:
(a) Single-family detached [housing];
(b) [and the] following uses existing at the time of
adoption of [the R-4 residential district]:
1. Single-family semi-detached residences;
2. Two-family detached, two-family semi-
attached residences;
3. Multiple dwellings containing not more than
six (6) dwelling units;
4. Golf courses; [and]
5. Restaurants, Taverns and Bars.
The Altamount Order further created a scheme of restrictions and
covenants that affect all land, premises and dwelling units within the
Community. Consistent with the Altamount Order, CCHP established a Board
of Trustees (CCHP Board) charged with adopting by-laws to administer and
manage the residences and recreational facilities. Article 6, Section 4 of the by-
laws provides:
[e]xcept for commercial uses which are in existence on
the date the [b]y-[l]aws become effective, there shall be
no commercial uses conducted in any Dwelling Unit or
within the Community except by express written
consent of the [CCHP Board]. Nothing in this Section
shall be deemed to abrogate or impair any law, statute,
ordinance, covenant, agreement or restriction in any
manner prohibiting such commercial use.
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Defendant Ponky, Inc., (Ponky) owns a golf course and clubhouse within
the Community and is subject to the by-laws. Defendant Joseph Krumpfer is
the owner and managing member of defendant Krumpfer Real Estate, LLC
(Krumpfer Real Estate), a New Jersey-licensed real estate company.
In March 2017, plaintiff became aware that Ponky intended to lease a
portion of the clubhouse, previously used for CCHP board meetings, to
Krumpfer Real Estate for use as a sales office. Shortly thereafter, plaintiff
notified Ponky that its proposed actions violated Article 6, Section 4 of the by -
laws and that Ponky was required to obtain written approval from the CCHP
Board before the lease could proceed. According to plaintiff, without any
municipal approvals and despite the clear language in the by-laws and its written
objection, Ponky nevertheless commenced construction at the clubhouse.
Eventually, Ponky sought approval from the CCHP Board and a meeting
was scheduled to vote on Ponky's request after notice was sent to the
Community. Prior to the meeting, the CCHP Board received a letter from
another CCHP resident who requested permission to operate a real estate office
and insurance brokerage within the Community in the event that Ponky's
application was granted. The CCHP Board voted against defendants' request at
its May 7, 2017 annual meeting.
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Defendants applied to the Montague Township Land Use Board (MTLUB)
for a use variance, which would allow Krumpfer Real Estate to operate the real
estate office in the clubhouse. On June 2, 2017, after Montague Township
issued a stop work order, defendants ceased all construction work.
On June 5, 2017, plaintiff filed a verified complaint and order to show
cause seeking a preliminary and permanent injunction to enjoin defendants from
"continuing any activity to convert the existing space into a real estate office"
and restraining defendants from "making application before the MTLUB for a
use variance to permit the real estate office" in the clubhouse. Plaintiff also
sought a mandatory injunction restoring the property to its previous condition
and to provide plaintiff with appropriate space to conduct meetings.
In response to the order to show cause, the Krumpfer defendants filed only
a letter brief without accompanying affidavits or certifications. Ponky and
defendant James Golden, Ponky's owner and managing member, filed a letter
brief with a certification from Golden claiming the verified complaint was
unauthorized because it was not approved by the CCHP Board.
On June 26, 2017, after oral argument, the court denied plaintiff's request
for interim injunctive relief. The court considered the Crowe factors, and
determined that a temporary restraining order was not warranted based, in large
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part, on the absence of irreparable harm as Montague Township had issued a
stop work order. The court reasoned that because defendants were in a "stop
work situation", injunctive relief was unnecessary at that time. The court
adjourned the order the show cause "for a relatively short return date" until after
the next MTLUB meeting, scheduled for July 2017, when defendants' pending
variance application was expected to be decided. Anticipating that the MTLUB
would meet as scheduled, the court re-scheduled the hearing on the order to
show cause for July 10, 2017.
The MTLUB met on July 14, 2017, but defendants requested the first of
four adjournments. On October 12, 2017, the MTLUB dismissed defendants'
variance application without prejudice.
As a result of the adjournments, the previously scheduled July 10, 2017
order to show cause hearing was rescheduled to October 19, 2017. Other than
the previously filed Golden certification, defendants submitted no further
certifications or affidavits in opposition to plaintiff's application and failed to
answer the verified complaint.
After oral argument, the court issued an oral opinion and concluded that
plaintiff satisfied Crowe's four-prong test for preliminary injunctive relief. The
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court determined that permitting a non-conforming use in the Community
constituted irreparable harm because:
[t]here is a community scheme. The defendants don't
seem to accept that. But we have here a community
association designed to be a residential area within
certain narrow exceptions. And the court can
understand the community's desire to maintain – the
ambiance, if you will, and the plan and scheme and the
atmosphere of a community with … at least no new
commercial undertakings. Disruption of that scheme
can amount to irreparable harm because property
owners have acquired their properties on the
understanding that the community would be
maintaining pursuant to its … constitution, which is the
[Altamount Order] and its by[-]laws, and the consent
orders into which the parties have entered in the past.
The court further concluded that the legal right underlying plaintiff's claim
was settled because the by-laws expressly precluded launching "a new
commercial undertaking . . . without the [CCHP Board's] authority or without
the [CCHP Board's] approval." As to the third prong of Crowe, the court ruled
that plaintiff established a reasonable probability of success on the merits
because of the "proof submitted by way of the verification in the verified
complaint" and the paucity of competing evidence. The court stated:
the only record evidence that the court has is that
attached to the verified complaint, as well as the
certification that Mr. Golden did submit . . . most of
which is hearsay and none of which addresses directly
the issues raised in the verified complaint.
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....
I don’t know that to make of [defendants' argument]
because I don't have any proof of it. What I have is a
by[-]law that says in order to operate commercially
within the community, there has to be [CCHP Board]
approval. And there's no approval.
Finally, the court determined the equities favored plaintiff because Ponky
understood the community scheme prior to contracting with the Krumpfer
defendants and was obligated to obtain the CCHP Board's written approval
before embarking on a new commercial undertaking at the clubhouse.
While the court applied the Crowe criteria for a preliminary injunction
and found that plaintiff had established that relief was warranted, the court did
not enter a preliminary injunction. Instead, the court entered a "narrow order of
injunction" on November 13, 2017 that permanently "enjoined and restrained
defendants from continuing any activity to convert the clubhouse space into a
real estate office and otherwise operating a real estate office" at the clubhouse
without first obtaining legally required approvals, including from the CCHP
Board. The court referred the remaining claims in the verified complaint to
arbitration in accordance with the terms of a prior consent order entered between
the parties and dismissed the litigation.
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Defendants appeal and raise the following arguments: (1) the trial court
erred in granting plaintiff a permanent injunction and terminating the action on
the return date of the order to show cause; (2) the trial court erred in granting
plaintiff a permanent injunction because plaintiff failed to show a continuing
irreparable harm; (3) the trial court erred in granting plaintiff a permanent
injunction because it made an erroneous and unsupported conclusion that
defendant Ponky was required to gain approval by the CCHP Board of Trustees
prior to leasing the clubhouse space for use as a real estate office; and (4)
defendants were denied due process when the trial court granted plaintiff a
permanent injunction on the order to show cause return date and terminated the
action prior to a full and fair hearing.
We agree with defendants that the trial court erred in granting a permanent
injunction on the return date for the order to show cause. As explained by the
court in Waste Management v. Union County Utilities Authority, 399 N.J.
Super. 508, 516 (App. Div. 2008), "[t]he process adopted in our court rules for
seeking injunctive relief applications … does not allow for an order to show
cause for the entry of a permanent injunction; rather, it permits only the entry of
an order requiring a party to show cause why a temporary restraint or an
interlocutory injunction should not issue." Id. (emphasis in original) (citing R.
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9
4:52–1 and 2; Solondz v. Kornmehl, 317 N.J. Super. 16, 20–21, (App. Div.
1998)).
In addition, we note that the order to show cause vaguely referenced
plaintiff's intention to proceed as a "summary action." Our court rules, however,
precluded plaintiff from proceeding in this fashion. Although Rule 4:67-1(a)
permits "the entry of an order at the commencement of the action that requires
a defendant to show cause why final judgment should not be entered," Waste
Management, 399 N.J. Super. at 516, n.2, proceeding under this Rule is allowed
only when a "rule or statute" authorizes the court to resolve the matter
summarily. Id. Here, there was no applicable rule or statute that permitted
plaintiff to proceed summarily.
Further, a permanent injunction was improperly issued here because
neither the proposed order to show cause nor the resulting proceedings
suggested that defendants consented to summary disposition of the dispute.
While the verified complaint sought permanent and preliminary injunctive
relief, the order to show cause requested, in addition to interim relief prior to
the return date, only "preliminary restraints."
In addition, at the October 19, 2017 return date, the court clearly treated
the matter as a proceeding to issue a preliminary injunction. For example, the
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court relied on Crowe rather than Sheppard v. Township of Frankford, 261 N.J.
Super. 5, 10 (App. Div. 1992), which addresses the standard for permanent
injunctive relief, and the court characterized the proceeding as an adjournment
of the June 26, 2017 hearing which denied "the application for injunctive relief
on a temporary basis."
Consequently, we do not find persuasive plaintiff's arguments that the
word "summary" in the order to show cause or the provision that default would
be entered if defendants failed to answer, somehow alerted defendants that a
permanent injunction would issue at the October 19, 2017 proceeding. As the
Waste Management court explained:
[w]e are mindful that in practice it is not unheard of for
parties to consent to a final determination on the return
of an order to show cause for an interlocutory
injunction when the facts are not in dispute or when an
evidentiary hearing would add no illumination to the
court's resolution of the issues presented. It is also not
uncommon, when a plenary hearing is conducted for the
purposes of resolving factual disputes on an
interlocutory injunction application, for the parties to
consent to have the trial judge render a final judgment.
Such a sensible and practical approach often provides
the parties with a swift and efficient resolution of their
disputes that is not inconsistent with our rules of
procedure, which favor “just determination[s],
simplicity in procedure, fairness in administration and
the elimination of unjustifiable expense and delay.” R.
1:1–2. (citations omitted). Accordingly, we do not
intend to preclude pragmatism in the resolution of
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11
disputes, but we must insist that such an approach is
only appropriate when the parties understand and
consent to a summary disposition of their disputes.
Otherwise, the process would possess only the qualities
of simplicity and efficiency, not fairness or justice.
[Waste Management, 399 N.J. Super. at 518 (emphasis
added).]
Although we have determined that the trial court erred by entering a
permanent injunction, we conclude the record supports the trial court's findings
on the Crowe factors. Based on those findings, the court should have entered a
preliminary injunction to preserve the status quo pending further proceedings on
plaintiff's complaint. Id. at 519.
In Crowe, the Supreme Court clearly established the standards for
granting a preliminary injunction. Paternoster v. Schuster, 296 N.J. Super. 544,
555-56 (App. Div. 1997) (citing Crowe, 90 N.J. at 132–34). When a trial court
determines whether to grant interim injunctive relief, it must consider: (1)
whether the injunction is “necessary to prevent irreparable harm;" (2) whether
“the legal right underlying the claim is unsettled;” (3) whether the applicant has
made “a preliminary showing of a reasonable probability of ultimate success on
the merits;" and (4) “the relative hardship to the parties in granting or denying
[injunctive] relief.” Crowe, 90 N.J. at 132–34. These factors must be clearly
and convincingly established. McKenzie v. Corzine, 396 N.J. Super. 405, 414
A-1517-17T2
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(App. Div. 2007); Subcarrier Communications, Inc. v. Day, 299 N.J. Super. 634,
639 (App. Div. 1997). And, "although it is generally understood that all these
factors must weigh in favor of injunctive relief," McKenzie, 396 N.J. Super. at
414, a more flexible approach may be applied when the preliminary injunction
seeks to merely to maintain the status quo. Waste Management, 399 N.J. Super.
at 520 (citing General Elec. Co. v. Gem Vacuum Stores, Inc., 36 N.J. Super.
234, 236-37 (App. Div. 1955)).
As noted, the court must consider whether the applicant demonstrated a
reasonable likelihood of success on the merits. Crowe, 90 N.J. at 133. This
involves a fact sensitive analysis that "requires a determination of whether the
material facts are in dispute and whether the applicable law is settled." Waste
Management, 399 N.J. Super. at 528 (citations omitted). However, when
considering this factor in the context of a preliminary injunction:
doubt about a suit's merits does not entirely preclude
the entry of an interlocutory injunction designed to
preserve the status quo. So long as there is some merit
to the claim, a court may consider the extent to which
the movant would be irreparably injured in the absence
of pendente lite relief, and compare that potential harm
to the relative hardship to be suffered by the opponent
if an injunction preserving the status quo were to be
entered. If these factors strongly favor injunctive relief,
the status quo may be preserved through injunctive
relief even though the claim on the merits is uncertain
or attended with difficulties.
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[Id. at 535 (citation omitted).]
Here, the record shows that plaintiff established a reasonable likelihood
of success on the merits. The by-laws and related formation documents govern
the relationship between the parties. See Reilly v. Riviera Towers Corp., 310
N.J. Super. 265, 269 (App. Div. 1998) (holding that "the relationship between a
cooperative and its shareholders should be determined by its Certificate, by-
laws, and proprietary lease and that the documents must be read together");
Faunce v. Boost Co., 15 N.J. Super. 534, 538 (Ch. Div. 1951) (holding "[t]he
certificate of incorporation, constitution and bylaws of the corporation
constitute a contract between the corporation and its stockholders and the
stockholders inter sese").
Under Article 6, Section 4 of the by-laws, "commercial uses" may not be
established in a dwelling unit in the Community without the express written
consent of the CCHP Board, except for those "in existence on the date [the] by -
laws became effective." The trial court interpreted the by-laws as clearly and
unequivocally precluding defendants from operating a real estate office in the
clubhouse because that specific use was not in existence when the by-laws
became effective. Plaintiff established a reasonable likelihood it will prevail on
its interpretation of the by-laws. It is undisputed that the CCHP Board rejected
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Ponky's request to construct space within the clubhouse for the purpose of a real
estate office.
Defendants claimed that use of the space in the clubhouse for a real estate
office did not require approval by the CCHP Board of Trustees because similar
commercial uses existed when the by-laws became effective. However,
defendants did not identify the prior uses that existed before the by-laws took
effect. Indeed, the trial court observed that defendants had submitted "no proof
about what has gone on in the past." In this regard, we note that in his
certification, Golden did not provide details regarding the alleged prior
commercial use. Moreover, most of his certification consisted of statements that
were either irrelevant or inadmissible hearsay. Thus, based on the evidence
presented before the trial court, plaintiff established a reasonable likelihood of
success on its claim that the space in the clubhouse could not be used as a real
estate office without prior written approval of the CCHP Board.
Moreover, the record supports the judge's finding that the injunctive relief
was warranted to prevent irreparable harm and preserve the status quo. As the
trial court correctly found, without injunctive relief, "the community scheme
would be compromised" and a deviation from that scheme would irreparably
harm the community and its members. In addition, no party has claimed that an
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adequate remedy of law exists to address a potential violation of the by-laws.
Finally, the record shows that the public interest will not be harmed by the grant
of a preliminary injunction.
Defendants' claims that injunctive relief is unnecessary because
construction of the real estate office was halted, and zoning approval
applications abandoned without prejudice, is misplaced. To the extent
defendants maintain these actions vitiate any claims of imminent irreparable
harm, we observe that defendants started construction without seeking CCHP
Board approval and did not cease when requested by plaintiff, but only when
Montague Township affirmatively issued a stop work order. Under these
circumstances injunctive relief is warranted to preserve the status quo.
Accordingly, we reverse the November 13, 2017 order to the extent it
granted a permanent injunction, modify the order to grant preliminary injunctive
relief, and remand the matter to the trial court for further proceedings on
plaintiff's complaint. We do not retain jurisdiction.
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