June 2007
In This Issue:
A Message to Our Readers
Developer and Association Did Not Have Duty to Warn Licensee Who Used Common Areas
An Express Date for Covenant Amendment or Expiration will be Interpreted Strictly
Owner Does Not Have Standing to Sue for Claims Related to Limited Common Elements
Ordinances Are Construed According to Their Plain Meanings
Nonprofit Corporations Act Provisions Trump Condominium Act
Below-Grade Area in Multi-Level Home Is Calculated as Part of Minimum Living Area Specified in Deed Restriction
Foreclosure Sale Must Meet Reasonableness Standards
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A Message to Our Readers

CAI regrets that you are receiving this issue of Community Association Law Reporter late, and we apologize for the delay.

Developer and Association Did Not Have Duty to Warn Licensee Who Used Common Areas

Bodnar v. Hawthorn of Aurora Limited Partnership, No. 2006-P-0002 , Ohio App. Ct., December 22, 2006


Risks and Liabilities:
Summary judgment in favor of a homeowner’s association and developer is proper where the next of kin of a visitor to the community who dies after a bike accident on an unpaved dirt path cannot prove that the association and the developer owe a duty to the deceased any greater than that of a landowner to a licensee.

In July 1999, Lawrence Spreng, who suffered from mild mental retardation, accompanied his sister Diana Bodnar to visit Bodnar’s daughter, owner of a home located in Hawthorn of Aurora, a 600 acre development in Aurora , Ohio . During the visit, Spreng and Bodnar’s grandson were bicycle riding on an unpaved dirt path, which had been graded and seeded with grass, through a wooded area in the community when Spreng lost control of his bicycle, struck his head on some large rocks in a ravine, and subsequently died at the scene from injuries sustained in the accident.

In October 2003, Bodnar, as representative of Spreng’s estate and next of kin, sued Hawthorn of Aurora Limited Partnership (“developer”) and Hawthorn of Aurora Homeowner’s Association (“association”), alleging negligence and wrongful death claims against each defendant. The developer filed for summary judgment, arguing that it did not create nor did it have notice of a hazardous condition, that it owed no duty to maintain the property on which Spreng was injured, that Spreng had failed to protect himself from an open and obvious danger, and that it was exempt from liability based on Ohio’s Recreational User’s statute (which immunizes a landowner from suit when the injury that forms the basis for the suit occurs on land held open to the general public for use without a fee).

The association and the developer sued Bodnar for summary judgment on the same grounds. The trial court ruled in favor of the association and the developer, and Bodnar appealed.

The appeals court first noted that summary judgment is proper when: (1) there is no genuine issue of material fact; (2) the moving party is entitled to judgment as a matter of law; and (3) reasonable minds can come to but one conclusion, and that conclusion is adverse to the party against whom the motion for summary judgment is made. Furthermore, the court must construe the evidence in the light most favorable to the nonmoving party. Addressing Bodnar’s claims against the developer, the court concluded that the developer was not liable as a matter of law for any injuries arising from defective conditions on the trail, because the developer, having transferred all common properties within the Hawthorn of Aurora development in 1998 to the association, was not in control of the property.

The court then addressed the question of the association’s liability, on the basis of Ohio ’s Recreational User’s statute and Bodnar’s allegation of negligence on the part of the association. Although the court determined that the association was not entitled to summary judgment on the basis of the recreational user’s statute (because the bike path had not been held open for use by the general public), because Bodnar could not prove the elements of breach or causation in her negligence claim, the court decided that the trial court properly granted summary judgment in favor of the developer and the association.

To establish actionable negligence, the party seeking recovery must demonstrate all of the following: (1) the existence of a duty; (2) breach of the duty; and (3) damage or injury resulting proximately from such breach. The burden of proof under Ohio ’s wrongful death statute contains similar elements when the wrongful death claim is premised upon the negligence of another: duty, breach, and proximate causation between the breach and death. The next of kin may recover for mental anguish and loss of society upon proper proof.

Because Spreng was a licensee with respect to his use of the common areas, the court ruled that his use was subject to all of the attendant perils and risks, and the association had no duty to him except to refrain from wantonly or willfully causing injury and to warn him of any known hidden dangers, pitfalls, and obstructions. Since there were no hidden dangers on the path of which the association was aware, Bodnar could not prove the elements of breach or causation, and the court upheld the trial court’s grant of summary judgment in favor of the developer and the association.

 

©2007 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.

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An Express Date for Covenant Amendment or Expiration will be Interpreted Strictly

Cunningham v. Ravenwood Hills Homeowners Association, No. DV-04-147 Mont. Dist. Ct., Missoula Co. , November 16, 2006


Covenants Enforcement:
Restrictive covenants are strictly construed and ambiguities in covenants are resolved to allow free use of property.

The Ravenwood Hills Declaration of Restrictive Covenants was recorded on September 22, 1972 in the Missoula County, Montana land records. The declaration required all tracts in the subdivision to be maintained as acreage tracts and forbade the subdivision of lots. The declaration was to run with the land for 25 years, after which, the declaration could be amended, in whole or in part, in writing signed by the majority of the then owners subject to the declaration. Further, the declaration provided that any tract owner could enforce the covenants and restrictions by proceedings at law or in equity against any person violating or attempting to violate any covenant, either to restrain the violation or to recover damages.

Thomas and Margaret Cunningham acquired tract number 31A in Ravenwood Hills in November of 1979. They were given final approval to subdivide the tract on January 27, 2003. The Ravenwood Hills Homeowners Association (“association”) was incorporated on September 26, 2003. Almost a year after they were approved for subdivision of the tract, the Cunninghams received a “Notice of Intent to Enforce Covenant” signed by two members of the association. That notice was subsequently filed in the Missoula County land records. On February 17, 2004, the Cunninghams sued the association, asking the court for declaratory judgment. The Cunninghams filed a motion for summary judgment in March of 2006. On April 19, 2006, the association filed a corporate resolution with an officer’s affidavit signed by Mark Lodine as president of the association and as an individual.

The court noted that summary judgment is proper if “pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.” The Cunninghams contended that no genuine issues of material fact existed. They asserted that the declaration did not provide for establishing a homeowners association and that pursuant to the declaration, only tract owners can enforce the covenants. They argued that the association could not enforce the declaration because it had no ownership interest in Ravenwood Hills and that the declaration expired on September 22, 1997. Since the association was established after that date, the Cunninghams maintained that it was not validly formed and, therefore, could not enforce the declaration.

Fifty-seven of the owners of property in Ravenwood Hills responded to the Cunninghams’ motion, as did the association. All of the parties agreed that the dispositive issue to be determined was the interpretation of the declaration, particularly paragraph 13, which states:

These covenants are to run with the land and shall be binding on all parties and all persons claiming under them for a period of twenty-five years from the date these covenants are recorded, after which time, said covenants may be changed in whole or in part any time by an instrument in writing, signed by a majority of the then owners of the lots affected thereby….


Neither party disputed that the declaration began with a clear statement that provided that the declaration bound all parties for a period of 25 years. However, the association interpreted the remainder of the paragraph to permit the declaration to bind all parties indefinitely and argued that the declaration could be changed even after expiration of the initial 25-year period. The Cunninghams interpreted the declaration to expire after 25 years unless a majority of the homeowners changed the declaration prior to the expiration of the 25 years.

The court ruled that the declaration, as written, specifically included an initial binding period, followed by a phrase sparking controversy, “after which time.” Based on its strict interpretation of the declaration language, the court concluded that no changes to the declaration could occur until after the initial 25-year period. The court further concluded that, based on the inclusion of an express 25-year period without the possibility of amendment and the fact that the amendment language allowed amendment “in whole or in part,” no ambiguity existed. Given the lack of ambiguity in the declaration, the court ruled that the declaration had to be interpreted as continuing as written until the majority of the homeowners took further action. Thus, the court ruled in favor of the association and concluded that the declaration remained in effect and could not be withdrawn or amended except by majority vote of the owners. Based on this determination, the court denied the Cunninghams’ motion for summary judgment and ordered that the 1972 declaration remained binding on the Ravenwood Hills subdivision.

 

©2007 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited. 

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Owner Does Not Have Standing to Sue for Claims Related to Limited Common Elements

Kuznicki v. Mason, 639 S.E.2d 308 ( Va. 2007)


Powers of the Association:
  Homeowners do not have standing to sue for injunctive relief and damages against two other unit owners for their installation of a heat pump on a limited common element that allegedly decreased the size of the limited common element; only homeowners associations have standing to sue on such claims.

Joseph and Padmaja Kuznicki and Robert and Sherril Mason own condominium units in a condominium complex. The Masons’ unit is located on the bottom level of a building that houses multiple units. The Kuznickis’ unit is in the same building, immediately above the Masons’ unit. The master deed governing the condominium designates “yard areas” as limited common elements and states that the owner of a unit to which a yard area attaches has exclusive use of that yard area, to the exclusion of all other owners of other units. The dimension of the Kuznickis’ yard area is 10 by 10 feet.

When the condominium complex was constructed, cooling units were installed for each unit on separate concrete slabs located on the ground adjacent to the building. The Masons’ cooling unit measured 29 inches by 20 inches, and both it and the Kuznickis’ cooling unit were situated on the Kuznickis’ limited common element.

In October 2004, the Masons experienced mechanical problems with both their cooling and heating units. Consequently, the Masons replaced their cooling unit with a “heat pump” that measured 42 by 30 inches. The heat pump was located on the spot where the original cooling unit was situated. In order to accommodate the larger heat pump, the workers who installed it cut down shrubbery next to the Masons’ cooling unit. The Masons did not discuss with, or seek the approval of, the Kuznickis or the Piedmont Council of Co-Owners (“association”) before installing the heat pump or removing the shrubbery.

At a November 2004 association meeting, the Kuznickis expressed concern about the newly installed heat pump and the fact that it was larger than the cooling unit it replaced. The association retroactively approved the installation of the heat pump unit, noting that the Masons had satisfied the association’s criteria for approval. The association did, however, require the Masons to reimburse the association for the cost of replacing the shrubbery cut down.

The Kuznickis subsequently sued the Masons, seeking removal of the heat pump from their limited common element and monetary relief. The Masons asked the court to dismiss the case, asserting that the Kuznickis lacked standing to sue them. The trial court ruled in favor of the Masons, basing its decision on the common law theory that a different use of an easement is permissible if it does not place an additional burden on the servient estate.

After hearing additional arguments, the court concluded that the heat pump was of the same nature and character as the original cooling unit and served the same purpose as the original unit except for adding heat. The court also noted the size of the heat pump did not require significantly more space than the old unit and did not place an additional burden on the limited common element. The court then affirmed its dismissal of the Kuznickis’ suit. The Kuznickis then appealed the case to the Virginia Supreme Court.

The dispositive issue on appeal was whether only the unit owners association, and not the Kuznickis, had standing to bring the claims asserted. According to the Supreme Court, “the point of standing is to ensure that the person who asserts a position has a substantial legal right to do so and that his rights will be affected by the disposition of the case.” Siding with the Masons, the Supreme Court based its conclusion, in part, on the fact that in 1981 the Virginia General Assembly amended the state’s Condominium Act to give condominium unit owners associations “the power to act as attorney-in-fact for the individual unit owners in asserting or defending actions relating to the common elements.” According to the Supreme Court, the effect of the 1981 amendment was to “transfer irrevocably, by operation of law, to the unit owners association, whatever rights of action the individual unit owners might have had concerning common elements.”

The Kuznickis countered with the argument that while the amendment divested an individual owner of standing to maintain an action concerning rights held in common by all unit owners, a unit owner still had standing to maintain an action concerning an individual right not held in common by all unit owners.

The high court disagreed with that argument for three reasons: (i) the Kuznickis’ position was inconsistent with the Condominium Act; (ii) the association retained some control over the area designated as the Kuznickis’ limited common element, thus giving it the ability to sue; and (iii) allowing an association to sue for claims or actions relating to common elements necessarily pertains to claims or actions concerning limited common elements. For these reasons, the Supreme Court concluded that the Kuznickis had no standing to sue the Masons and that the circuit court properly dismissed the Kuznickis’ case for lack of standing. However, the court added that if the Kuznickis had any claim, it would have been against the homeowners association because it approved the Masons’ installation of the heat pump.

 

©2007 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited. 

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Ordinances Are Construed According to Their Plain Meanings

Oak Lane Homeowners Association v. Griffin , 153 P.3d 740 ( Utah App. 2006)


State and Local Legislation and Regulations: The question of whether

Oak Lane was deemed a common-use private lane by local ordinance presents a disputed issue of material fact.

Dennis and Renae Griffin own a home in a residential subdivision in Alpine, Utah . This case arose from a disagreement between the Griffins and other homeowners over whether
Oak Lane, a road providing access to the other owners’ homes and to the Griffins’ home, is public property or the private property of the Oak Lane Homeowners Association (“association”). The association members’ homes are located in a cul-de-sac, and Oak Lane is the exclusive means of access. The Griffins’ home is not in the cul-de-sac proper and is accessible from both Oak Lane and High Bench Road , which is perpendicular to Oak Lane.

On April 26, 1976, the Alpine City Council adopted Alpine City Zoning Ordinance 01-76, which governed zoning during the development of the subdivision. Section B of that ordinance states that “every lot within the city…shall have frontage upon a dedicated or publicly-approved street or upon a common-use private lane, or other private lane, approved by the Planning Commission.” The ordinance defines common-use private lane but does not define other forms of private lanes.

In December 1976, the Alpine City Planning Commission voted in favor of a moratorium on private lanes but expressly exempted Oak Lane from the moratorium because Oak Lanehad been previously designated as a private lane. Later that month, the city council approved the moratorium on private lanes and affirmed Oak Lane’s exemption from the moratorium. On January 13, 1977, the council approved the subdivision’s original plat map, which contained language indicating that the developer intended Oak Lane to be a private lane. The plat map contains both an “Owners’ Dedication” section and an “Acceptance by Legislative Body” section. In both sections, the language dedicating Oak Lane as a public road is stricken.

The association sued the Griffins to prevent them from using Oak Lane , and the Griffins filed a counterclaim against the association. The trial court granted the Griffins’ motion for partial summary judgment, ruling that they had a right to access their lot via Oak Lane because the street was deemed a common-use private lane open to the public under the terms of the city’s zoning ordinance. The association appealed.

The trial court determined that Oak Lane was a common-use private lane because (1) the ordinance enacted in 1976 provided for the creation of a common-use private lane; (2) although a moratorium was placed on the development lanes before the city council approved the subdivision, the subdivision was expressly exempted by the commission and the council; (3) the commission approved Oak Lane as a common-use private lane; and (4) the council approved a plat map labeling Oak Lane a “private lane.”

The appeals court disagreed with the trial court’s conclusions for several reasons, noting that it had not been conclusively shown that the commission specifically approved Oak Lane as a common-use private lane. The trial court determined that the commission approved Oak Lane as a common-use private lane before the commission instituted a moratorium on private lanes, but the appeals court found no evidence of this in the record. The court also noted that, even though the subdivision was subject to the 1976 ordinance despite the moratorium, that did not necessarily mean that Oak Lane was, by force of law, a common-use private lane. According to the court, nothing in the ordinance mandated the use of common-use private lanes. Rather, the ordinance refers to both common-use private lanes and “other private lanes.”

The court also pointed out that the plain terms of the ordinance appear to exclude Oak Lane from the common-use private lane category because Oak Lane serves more than four residential units. While it is possible that the council approved Oak Lane as a common-use private lane despite this defect, the court contended that it could be argued that the council intended to make an exception to the ordinance or that it had the authority to do so.

 

©2007 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited. 

Accordingly, the appeals court determined that the question of whether Oak Lane was a common-use private lane presented a disputed issue of material fact. The court reversed the trial court’s order granting the Griffins’ motion for partial summary judgment and remanded the case for further proceedings.

 

©2007 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.

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Nonprofit Corporations Act Provisions Trump Condominium Act

Park West Condominium Association, Inc. v. Deppe, 567 Utah Adv. Rep. 55 (2006)


Covenants Enforcement:
Despite having explicit language in a condominium’s declaration that allowed mail-in votes to be valid with a simple majority for assessments, a Utah appeals court ruled that Utah law required unanimous consent for mail-in votes because the association falls under the Nonprofit Corporations Act.

The Park West Condominium Association, Inc. (“association”) sought approval for a special assessment to fund substantial improvements and renovations to Park West Condominiums in 2000. The condominium declaration stated that such an assessment required approval “by at least a majority of the Project’s undivided ownership interest.” The declaration also provided that if a vote was ever required, it could be obtained with or without a meeting and in writing. Pursuant to this provision, the association chose to seek majority approval of the proposed assessment through a mail-in ballot instead of taking a vote at an annual or special meeting. The ballot was mailed to members in October 2000 and was required to be completed and returned by November 15, 2000. After the votes were tallied, 64% of the members approved the special assessment, 19% voted against the special assessment, and 17% did not vote. Since a simple majority was necessary for approval, the association approved the assessment.

Lawrence and Judith Deppe owned one of the units that failed to return a ballot. Two days before the association recorded the Notice of Special Assessment, the Deppes entered into a purchase contract to sell their unit to Bryan Morgan. Despite an Assumption Agreement being entered in favor of the association (the terms of the assumption agreement being to pay the special assessment) neither the Deppes nor Morgan paid the assessment. The association sued the Deppes and Morgan to collect the past due amount plus interest.

In response, the Deppes asked the trial court to rule that the assessment was void because the mail-in ballot procedure failed to comply with the requirements of the Utah Nonprofit Corporation and Co-Operative Association Act (“Nonprofit Act”) and Utah ’s Condominium Ownership Act (“Condominium Act”). With regard to those statutes, a mail-in vote must be unanimous, and approval by a majority vote of Park West unit owners was not sufficient to create such an assessment. The trial court ruled that since the mail-in ballot procedure was expressly permitted by the association’s own Declaration it was valid. The Deppes appealed that decision.

On review, the appeals court stated that Utah law required that the association’s mail-in vote garner the unanimous consent of its members before the assessment could be validly imposed. The court opined that in most instances the Condominium Act provided the definitive answer to issues that arise out of the operation of condominium associations but was limited by the Nonprofit Act. Under the court’s analysis, the association subjected itself to the Condominium Act and the Nonprofit Act. The Nonprofit Act provides that actions require that all members entitled to vote consent to the action for it to be valid. Since the special assessment in this case did not pass by unanimous vote, the court ruled that the assessment was not validly approved by the mail-in ballot and rendered the assessment invalid. The court noted that the Utah legislature may have used this tactic (requiring a unanimous vote) as a way to lessen the appeal of mail-in votes as a realistic alternative for passing an assessment.

The court reversed the trial court’s summary judgment order holding that the Nonprofit Act did not apply to the association’s mail-in ballot approval of the special assessment. The court stated that where the Condominium Act is silent concerning the proper procedure for obtaining member approval or measures via mail-in ballot, provisions in the Nonprofit Act applied to the association. Moreover, the Nonprofit Act, and its provisions requiring unanimity for mail-in ballots was held superior to the provisions of the condominium’s declaration, which only requires a majority approval of the assessment. As a result of these actions, the court reversed the trial court’s decision and ruled in favor of the Deppes and Morgan.

 

©2007 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.

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Below-Grade Area in Multi-Level Home Is Calculated as Part of Minimum Living Area Specified in Deed Restriction

Stoneridge Farms Association v. Fuller, No. L-06-1103, Ohio App. Ct., March 16, 2007


Covenants Enforcement/Architectural Control:

An Ohio appeals court upheld a decision that a multi-level home containing 672 square feet of below-grade living area met the requirements of a deed restriction that required home in the subdivision to have 2,000 square feet of living area.

On or about May 27, 2004, Frank and Rachelle Fuller submitted an offer to purchase Lot 46 in Stoneridge Farms, Plat 3, a subdivision in Springfield Township , Lucas County, Ohio. Attached to the offer was a set of plans for a multi-level residence the Fullers intended to build on the lot. When the developer reviewed the plans, he decided that the proposed residence did not conform to a deed restriction that required that any new structure have at least 2,000 square feet of living area. As a result, the plans and specifications were returned to the Fullers for modification. The Fullers had new plans drawn and resubmitted them to the developer, who found that they were fully compliant with the deed restriction and approved the construction. In August, the Fullers began construction of the home, and it was completed in December.

In May 2005, Stoneridge Farms Association (“association”) sued the Fullers alleging that because the residence had only 1,400 square feet of living space above grade, it violated the deed restriction. In July, the Fullers answered the suit by denying the allegations. The trial court ruled in the Fullers’ favor and dismissed the association’s complaint with prejudice. The association appealed.

On appeal, the association argued that the trial court erred because it did not declare the section of the Ohio Basic Residential Building Code unconstitutional under the Supremacy Clause of the U.S. Constitution. The association maintained that a section of the building code conflicted with the rules and regulations adopted by Congress’s Financial Institutions, Recovery, and Reform Act. Fundamentally, this case requires that the court interpret, within the context of the Fullers’ multi-level home, the language of a deed restriction that sets the lower limits for the size of that home. The appeals court reviewed the construction of the deed restriction de novo as a matter of law.

The appeals court stated that, in construing the language of a deed restriction, the court’s goal is to ascertain the intention of the parties as reflected by the language used in the restriction. The court must interpret the language of the restriction by giving it its common and ordinary meaning. Where the language of a deed restriction is unambiguous, the court must enforce the restriction as written, but if the language is indefinite and may be subject to a contradictory interpretation, the construction must be adopted that least restricts the free use of the land.

The deed restriction provides:

 

No structure shall be erected, placed or maintained on any residential lot other than one (1) single-family residence of not less than 2000 sq. ft. of living area (measured from the outside of exterior walls and excluding basements, decks, porches and garages...)


The Fullers’ home is a tri-level house that contains three levels of heated space totaling more than 2,000 square feet: the main level, containing the dining room; the upper level, containing the bedroom area; and the lower level that consists of an area that measures 672 square feet and is partly below-grade level, containing a family room and utility room. In addition to these three levels of heated space, there is a fourth level that contains a below-grade unheated basement (which neither party includes in its calculation of total living area).

The appeals court found that the disagreement between the association and the Fullers hinged on their differing definitions of the term “basement” and their differing notions of the effect of the basement as it applied to the Fullers’ home. The association argued that any area below grade, including the 672 square feet containing the family and utility rooms, should be excluded. The Fullers maintained that the fact that the area is partly below grade is insufficient to prevent its inclusion as living area capable of satisfying the square footage requirement of the deed restriction.

At trial, the association presented various federal provisions to illustrate that when appraisals are conducted for purposes of federally-insured purchase loans, the term “gross living area” specifically includes only finished, above-grade residential space. The Fullers presented more than six witnesses who testified that the square footage of the family room level of their home should be included when calculating total living area. In addition, the Lucas County Chief Building Official testified that the fact a room in a multi-level house is partially below grade level is insufficient, in and of itself, to render the room a basement under the Ohio Residential Building Code and confirmed that the family room level of the Fuller home would not be considered a basement under the Code.

On the basis of the conflicting evidence, the appeals court concluded that the deed restriction was ambiguous. As such, it must be construed in a manner that least restricts the free use of the land, i.e., that the house satisfies the 2,000 square foot deed restriction requirement. In an attempt to avoid this result, the association argued that the fact that the Fullers’ house satisfied the deed restriction when construed in accordance with the Ohio Residential Building Code but failed to satisfy the deed restriction when construed in accordance with the regulations concerning federally-insured home loans, revealed a conflict between state and federal laws, thereby invoking the Constitution’s Supremacy Clause. The association argued that the Supremacy Clause mandates that the federal definition of “basement” prevail in the appeal.

The appeals court, however, strongly disagreed. The court noted that nothing in the deed restriction suggested that the parties intended for the federal definition of “basement” to apply. The court affirmed the trial court’s decision and ordered the association to pay the costs of the appeal.

 

©2007 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.

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Foreclosure Sale Must Meet Reasonableness Standards

Will v. Mill Condominium Owners’ Association, 179 Vt. 500, 898 A.2d 1264 (2006)


Assessments:
Where a private foreclosure sale did not meet the standard of commercial reasonableness, a foreclosed party may be entitled to damages.


This is the second appeal of this case to the Vermont Supreme Court. Anne Will failed to pay her condominium dues for a period of time, and the Mill Condominium Owners’ Association (“association”) foreclosed its lien on her unit and sold the unit for $3,510.10, although the unit was valued at approximately $70,000. Will sued the association, the association’s attorney, and the buyers of the unit, challenging the validity of the foreclosure sale and seeking its rescission. Will eventually amended her complaint to add claims for monetary damages based on various theories, including breach of contract, mutual mistake, unjust enrichment, inadequacy of consideration, breach of fiduciary duty, and breach of the duty to sell the unit in a commercially reasonable manner.

The trial court concluded that Will was not entitled to damages and that the foreclosure sale was valid, and Will filed the first appeal. The appeals court ruled that a standard of commercial reasonableness applied to the foreclosure sale and that the association’s attorney failed to meet that standard in this case and remanded the case.

On remand, Will asked the trial court to vacate the foreclosure deed and filed a motion for damages and attorney’s fees and costs. Will claimed that her damages were $79,500 for loss of use of her condominium, $5,000 for removal and storage of property, $3,500 to reimburse her for the cost of replacing personal property, $1,200 for cleaning and repairing the unit, and $12,500 for lost personal time. The trial court found that Will was not entitled to money damages because an award of money damages would exceed the scope of the remand from the Vermont Supreme Court in the initial case. The trial court vacated the foreclosure immediately but eventually denied Will’s claim for damages, denied her claim for costs because she had not adequately accounted for the costs, and denied her claim for attorney’s fees as a matter of law. Will appealed again, and the supreme court reviewed the case de novo.

The supreme court initially examined whether Will should have been allowed to pursue a claim for monetary damages against the association and its attorney for breach of duty in selling the unit. The trial court provided three reasons why Will could not pursue the damage claims. First, rescission and money damages are alternative and mutually exclusive remedies. While a plaintiff is generally not permitted to recover twice for the same injury, the supreme court found that in this case Will’s claim for rescission and her claim for money damages were directed at different injuries. Will could not have the foreclosure sale rescinded and recover the full value of the unit, but that is not what Will was seeking to do. Will only sought compensation for damages resulting from her loss of use of the unit.

Second, the trail court concluded that the supreme court had confirmed that the rescission and damages were mutually exclusive remedies. In the initial appeals court decision, the supreme court specifically instructed the trial court to void the foreclosure and vacate the summary judgment against Will. In this appeal, the supreme court noted that the scope of a trial court’s ability to revise an initial decision is generally limited to the specific direction in the remand order; however, the court also noted that remand must encompass the scope of the error found. By ignoring the impact of the supreme court’s ruling on the claims disposed of in the vacated summary judgment rulings, the trial court failed to implement the remand order in light of the content of the supreme court’s opinion.

Third, the trial court found that Will waived her claim for money damages because she did not raise those claims for damages in the first appeal. The supreme court noted that Will had in fact raised a claim for damages in the amended complaint, and as such, Will’s claims were timely raised and should not be waived.

Finally, with respect to Will’s claim for costs, the court looked to Vermont ’s rules of civil procedure, which provide that the prevailing party in a civil action is entitled to recover costs as a matter of course. If a Vermont appeals court reverses and remands a decision, the appellee is responsible for costs of the appeal, and the costs of the “first trial are held in abeyance pending judgment in the new trial, when costs of both trials shall be allowed to the prevailing party.” The supreme court found the trial court did not allow Will adequate time to produce an itemized list of costs associated with these claims, and therefore, the trial court’s denial of Will’s costs was premature.

The supreme court also explained that its decisions were not a comment on the merits of the claims for damages; the court was merely directing the trial court to hear those claims.

 

©2007 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.

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