April 2008
In This Issue:
Injunctions Appropriate Remedy for Covenant Violations
Declaration Amendment Requiring Association Members to Join Club Void
Association Can Suspend Member's Golf Privileges for Belligerent Behavior
'Tester' Has Standing to Bring ADA Claim in Federal Court
Court Traces Chains of Title to Determine Validity of Easement
Residential Owners Association Has Standing to Sue Developer and Design Contractors for Construction Defects
Developer's Reserved Riparian Rights Transfer to New Owner with Waterfront Property Deed
Reasonableness Standard in Analyzing Attorney's Fees
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Injunctions Appropriate Remedy for Covenant Violations

Dauphin Island Property Owners Association, Inc. v. Pitts, No. 206022, Ala. Civ. App. Ct., February 1, 2008


Covenants Enforcement:
Judgment as a matter of law is inappropriate when there is conflicting evidence at trial and where state law upholds an injunction as an appropriate remedy for covenant violations.

 

Chris and Ashley Pitts purchased an undeveloped lot from Pat Edwards in the Indian Bay planned subdivision, which is located in the Town of Dauphin Island, Alabama. In March 2006, the Pitts applied for a building permit from the Dauphin Island Property Owners Association’s architectural review committee. At the time of the application, the Pitts were required to obtain a building permit from the town as well as from the association.

 

The plans the Pitts submitted to the association and the town indicated that the residence would comply with the subdivision covenants, which required a 10-foot setback for all side lots, so the architectural review committee approved the plans. After the Pitts began building their home, the town halted construction because the pilings for the waterfront deck were too close to the water and violated the town's zoning ordinance. The Pitts requested a variance on that condition, but it was denied. Also, the town notified the association that the residence was not situated on the property with a 10-foot side lot setback, as originally indicated in the building plans.

 

Upon receiving that notice from the town, the association wrote the Pitts and requested they either submit new construction plans for approval or take corrective action to comply with the subdivision setback requirements. Instead, the Pitts requested a variance from the restrictive covenants. The association's rules require that any relief from the covenants cannot be granted unless all abutting landowners give consent to the requested relief. Subsequently, Dr. Jon and Lucia Botts, the Pitts’ neighbors, objected to the variance request so the association denied the variance.

 

Despite this, the Pitts resumed construction on their residence without the association's permission, and the association filed a request for a temporary restraining order on October 26, 2006. On October 27, 2006, the Pitts filed a motion to add the Botts to the action as third-party defendants, and the trail court granted that motion. On November 6, 2006, the court also granted the Pitts' motion to dismiss and the association appealed.

 

On appeal, the association asserted that the primary issue was whether its compliant stated a cause of action upon which relief could be granted. The appeals court began its discussion by citing Brown v. Morris, 279 Ala. 241, So. 2d 148 (1996). In Brown, the City of Gadsden enacted a comprehensive zoning ordinance that allowed the construction of commercial buildings on certain lots contained in the subdivision in question; however, the subdivision had adopted restrictive covenants requiring that all lots could only be used for single-family residences. The Alabama Supreme Court noted that private restrictions "may be more, but not less restrictive" than valid zoning provisions, as were the association's restrictions in this case. In addition, the court noted that one of the appropriate remedies for violating restrictive covenants is to seek an injunction to remove the offending structure.

 

Basing its decision on prior Alabama law regarding restrictive covenants and the fact that the trial record contained conflicting affidavits, the appeals court stated that the Pitts were not entitled to judgment as a matter of law because there was, in fact, a cause of action upon which relief could be granted. Therefore, the court reversed the trial court's judgment and remanded the case for further proceedings consistent with its opinion.

 

©2008 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.


 


Declaration Amendment Requiring Association Members to Join Club Void

Granuzzo v. Willoughby Golf Club, Inc., Martin County, Florida, Cir. Ct., No. 432004CA1006, January 18, 2008


Covenants Enforcement:
Based on Florida law, amendments to a community's declaration that required membership to the golf club were found to be void as unreasonable and found to destroy the general scheme or plan of the community.

 

Anthony and Jayne Granuzzo purchased one of the 375 single-family homes in the Willoughby Golf Club subdivision in April 1995. The Granuzzos sued the community's developer, challenging certain amendments to the declaration for Willoughby and the 2003 merger of the Willoughby Golf Club and Willoughby Community Association. In the lawsuit, the Granuzzos alleged that the amended and restated declaration was unreasonable, that the merger of the two organizations created an unreasonable restraint on the alienation of their property, and that the amended declaration was unfair and unreasonable. The court ruled in favor of the developer on the allegation that the merger of the two organizations created an unreasonable restraint on the alienation of their property.

 

The amended and restated declaration made several changes, but the lawsuit addressed two of the more significant ones: (1) the provision that prohibited the conveyance of the golf club to the association was deleted, and (2) all property owners were required to become at least social members of the country club and share in the expenses of the maintenance and upkeep of the country club facilities. Additionally, all property owners were responsible for a yearly food and beverage minimum ($1,200 plus tax) in the country club's restaurant.

 

The court ruled that the amendment was done correctly by a vote of 67 percent. The court noted, however, that in Florida there is a limitation on the right to amend. In Holiday Pines Property Owners Association, Inc. v. Wetherington, 596 So. 2d 84 (Fla. Dist. Ct. App. 1992) (CALR February 1993), two amendments were made. The first, done in 1983, created a homeowners association for the purpose of establishing and amending regulations regarding the use of property within the development. The second amendment, done in 1987, made membership to the homeowners' association mandatory and provided for the enforcement of liens against property owners upon their failure to pay fees. The Holiday court ruled that the amendments were not a continuation of a scheme of development but a radical change of plans, altering the relationship of lot owners to each other and the right of individual control over one's own property.

 

Willoughby Golf Club cited Eastpointe Property Owners' Association, Inc. v. Cohen, 505 So. 518 (Fla. Dist. Ct. App. 1987) (CALR January 1988), arguing that amendments to declarations may have a certain degree of unreasonableness but still remain valid and enforceable. In Eastpointe, the interpretation of the terms "improvement" and "structure" were in contention over a homeowner's installation of awnings on his property. The court in this case noted that Eastpointe involved a restriction on the use of a homeowner's property, not the issue of the validity of amendments to declarations of covenants and restrictions. Instead, the court relied on a case that concerned the validity of amendments and not a restrictive use case, Woodside Village Condominium Association, Inc. v. Jahren, 806 So. 2d 452 ( Fla. 2002) (CALR October 2003). In Woodside, the Florida Supreme Court stated that restrictions contained within condominium declarations should be clothed with a very strong presumption of validity when challenged and that owners who challenged amendments were on notice that they acquired a unique form of ownership.

 

Relying on Woodside, the court ruled that the standard of review to be used to decide whether amendments are valid and enforceable is whether the power to amend the original declaration was exercised in a reasonable manner so as not to destroy the general scheme or plan of development. The court determined that the amendments in this case were not exercised in a reasonable manner, and the amendments had the effect of destroying the general scheme or plan of the community. Owners who purchased homes in Willoughby knowing that they were not required to become members of the golf course or country club, and who are now required to become at least social members with an additional obligation of contributing to the maintenance and upkeep of the country club, led the court to that conclusion. Since the amendment was void, the merger of the golf club and the association, which was controlled by the amendment, was also void.

 

Editor’s Observation: Special thanks to J. Michael Stetson from Stuart, Fla. for contributing this case.

 

©2008 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.


 

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Association Can Suspend Member's Golf Privileges for Belligerent Behavior

Hawkins v. Waikoloa Village Association, No. 26626, Haw. App. Ct., February 5, 2008

Covenants Enforcement: A declaration gave an association broad authority to govern common areas and to suspend a member's golf privileges, even though there were no explicit references to the golf course in the declaration.

 

Waikoloa Village is a planned community on the island of Hawaii. All lots and parcels located within Waikoloa Village are subject to a declaration that was executed on May 27, 1971, by and between developer Boise Cascade Home & Land Corporation and First Hawaiian Bank. The declaration established Waikoloa Village Association as a not-for-profit corporation and provided that every residential lot owner was a member of the association.

 

Lynn Hawkins owns a home in Waikoloa Village and was an association member since 1983. Prior to 1995, the manager and golf pro at the Village was Charles Rogosheske. When Rogosheske was the golf pro, Hawkins was allowed to: (1) walk for free, which meant that if there was no need to pay a fee and no need for a cart, he could golf without having to check in at the pro shop; (2) retrieve golf balls from the water hazard; (3) golf at specific times set aside for him and his friends; (4) golf with whomever he chose; and (5) provide informal golf lessons. John Mauro became the golf professional and manager of golf course operations in 1995. At that time, the golf course was in poor condition, both physically and financially. The court record indicates that Mauro streamlined operations, increased revenues from golfers and the sale of merchandise, and improved fiscal controls and financial management of the golf course.

 

With instruction from the association's board, Mauro prepared and instituted guidelines for the Waikoloa Village Golf Club. In the process of instituting the new guidelines and making changes to golf course operations, Mauro upset Hawkins. According to the record, after Mauro became the golf pro, Hawkins violated the guidelines and standard acceptable golf course behavior and etiquette by engaging in the following:

 

(1) Hitting golf balls from his residence across Paniolo Street and into the golf course, endangering the health and well-being of golf course employees.

(2) Threatening to kill Mauro because he was upset with the way the golfer with whom he was paired drove the golf cart.

(3) Refusing to check-in prior to playing golf, despite being aware of that requirement.

(4) Wrongfully taking golf course property from the course, including taking golf balls out of a pond with a "rake" retriever, taking a range basket of golf balls belonging to the golf course, and taking balls from the driving range.

(5) Using the golf course driving range to sell equipment in competition with the pro shop without the pro shop's permission.

(6) Using the golf course to give private golf lessons without permission, which exposed the golf course and the association to potential liability and wrongfully competed with the operations of the golf course.

(7) Intentionally hitting balls and striking the range picker, even after the range picker employee asked Hawkins to stop this behavior.

(8) Wrongfully taking the "Lucky Stone" from the rock wall on the No. 7 tee and golf course.

(9) Repeatedly contacting the architect and designer of the course, Robert Trent Jones, and thereby interfering and jeopardizing the on-going business relationship between the golf course and Jones.

(10) Disparaging the golf course to Charles Park, general manager of Mauna Kea Resort, one of the golf course's major supporters for the Waikoloa Open and thereby interfering with and endangering an on-going business relationship.

(11) Using his remote control golf cart to harass and intimidate one of the board members playing golf.

(12) Refusing to play in a scheduled foursome or be paired with other golfers as required under the guidelines.

(13) Harassing and intimidating the golf staff when he was assigned to a foursome.

(14) Hitting into a group of golfers ahead of him and complaining that the group was playing too slowly.

(15) Failing to make tee reservations and demanding that the noon hour be automatically reserved for him and his "noon group," resulting in inconvenience to the golf course and other golfers and lost revenues to the golf course.

 

As a result of these misdeeds, Mauro sent a letter to Hawkins explaining to him that he was in violation of the guidelines, was required to check-in prior to golfing, and could have his golf privileges suspended. Subsequently, Mauro, with the approval of the association's board, sent Hawkins another letter stating that his golf privileges were suspended for a period of one year. Hawkins then sued the association and Mauro, seeking damages for an alleged breach of contract and seeking a mandatory injunction directing the association and Mauro to restore his golf privileges. The association and Mauro counterclaimed, seeking injunctive relief against Hawkins' dangerous and tortious conduct, together with an award of costs and reasonable attorney's fees, damages for Hawkins' alleged assault of Mauro, damages for Hawkins' conversion of the association's property, and damages for Hawkins' alleged intentional interference with the association's existing and/or prospective business advantage.

 

The trial court awarded Hawkins $4,928 in damages for breach of contract based on a conclusion that the association's board violated the declaration by failing to declare Hawkins in continuing violation of the provisions of the declaration and by failing to provide Hawkins with a hearing prior to suspending his golf privileges. In addition, the trial court awarded Hawkins $98,150 in attorney's fees and $7,619.67 in costs based on a conclusion that Hawkins was the prevailing party and was entitled to attorney's fees and costs pursuant to a Hawaii statute.

 

The appeals court agreed with the association that under the declaration, it had broad authority to promulgate and enforce rules and regulations covering the use and enjoyment of the common areas of Waikoloa Village. In addition, the court took judicial notice of the fact that some of Hawkins' conduct was inherently dangerous and could have subjected the association to great liability if a third party were hurt by Hawkins' actions. Based on the court's view of the record and the facts in this case, it concluded that the association acted prudently when it approved a one-year suspension of Hawkins' golf privileges, which were "an amenity, not a necessity."

 

The court also agreed with the association that the trial court erred in finding that the association breached a section of the declaration that allows the association to suspend members' privileges for failure to comply with the declaration. While the court disagreed with the association's argument that the declaration only applied to the suspension of a member's privileges for the member's "continuing failure to pay charges levied against the member by the association," it agreed that the procedural requirements of the provision did not apply to Hawkins' suspension for dangerous and disruptive conduct on the golf course.

 

The court stated that the declaration did not specifically govern a member's behavior on the golf course. The guidelines were not considered "provisions of the declaration" because the express wording of the declaration only made one section applicable to covenants, conditions, restrictions and other language expressly set forth in the declaration and not created as a result of the declaration.

 

In addition, the court found that the trial court erred in awarding Hawkins attorney's fees and costs since Hawkins did not prevail on any count for enforcement of any provision of the association's declaration, bylaws or guidelines. The Hawaii law on which Hawkins relied only applies to condominium associations, which the Villages is not—it is a planned community. Accordingly, the appeals court reversed in part and affirmed in part the trial court's decision.

 

©2008 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.


 

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'Tester' Has Standing to Bring ADA Claim in Federal Court

Lucibello v. McGinley, No. 2:07-cv-217-FtM-34SPC, U.S. Dist. Ct. (Middle Dist. of Fla.), February 12, 2008


State and Local Legislation and Regulations:
In an unpublished opinion, a U.S. district court ruled that a plaintiff has standing to sue a defendant pursuant to the Americans with Disabilities Act.

 

This case arose after Tony Lucibello, who suffers with multiple sclerosis, visited Majestic Coffee Company. Lucibello also acts as a "tester," by visiting public accommodations for the purpose of discovering, encountering and engaging discrimination against the disabled in public accommodations. As a tester, Lucibello seeks situations he deems to be incongruent with the Americans with Disabilities Act of 1990 ("Act") and subsequently files suits seeking to remedy such situations.

 

After his visit to the coffee shop, Lucibello noted that the shop had inadequate parking facilities and that an entrance was not in compliance with the Act. He sued Michael McGinley and the Sun View Business Center, seeking injunctive relief to address the discriminatory barriers. The Act prohibits the discrimination of disabled persons in places of "public accommodation" and requires that entities that are covered by the Act make "reasonable modifications in policies, practices, or procedures" for disabled persons, and eliminate "architectural barriers, and communication barriers that are structural in nature" where the removal of the barriers is "readily achievable." When a court finds an entity to be in violation, the Act provides plaintiffs with only injunctive relief.

 

Lucibello met the standard of being "disabled" as set out in the Act; however, because the relief contemplated by the Act is injunctive, Lucibello could only bring a claim under the Act if he alleged a real and immediate threat of future injury, as opposed to a merely conjectural or hypothetical threat. In order for his claim to be heard in court, Lucibello had to show that he had "such a personal stake in the outcome of the controversy as to warrant his invocation of federal-court jurisdiction and to justify exercise of the court's remedial powers on his behalf."

 

Lucibello also had to demonstrate that he "suffered an injury-in-fact," that there was a "causal connection between the asserted injury-in-fact and the challenged action of the defendant," and that his "injury will be redressed by a favorable decision."

 

In a motion to dismiss the case, McGinley and Sun View Business Center argued that Lucibello had not established standing to sue them. The court disagreed. While the court determined that Lucibello's potential for future harm was tenuous at best, it followed decisions by the U.S. District Court for the Tenth Circuit in extending standing to "testers" even where the motivation is solely to challenge the legality of preceded discriminatory practices.

 

©2008 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.


 

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Court Traces Chains of Title to Determine Validity of Easement

Metzger v. Allendorf, No. DV-06-377, Ravalli Co., Montana Dist. Ct., January 17, 2008


Covenants Enforcement:
A trial court determined that a 1979 reservation of a 60-foot easement created an easement in gross, and a 1980 grant of easement was ineffective in creating an easement in favor of homeowners in an adjacent subdivision.

 

Michael Metzger and Chris and Karin Larson own property in Granite Creek Ranches subdivision created in 1979 near Florence, Mont. In August 2006, they sued John and Donna Allendorf and Peter and Louise Daley, seeking declaratory and injunctive relief that they had an easement across properties owned by the Allendorfs and the Daleys by virtue of a 1980 "Grant of Easement and Right of Way" of public record in favor of the Granite Creek subdivision. The Allendorfs and the Daleys own real property in Pleasant Valley Estates, a subdivision adjacent to and west of Granite Creek Ranches. Metzger and the Larsons also complained that the Allendorfs and Daleys erected a locked gate across the easement that blocked their access to and use of the easement. In response, they asked the court to issue an injunction ordering removal of the gate, a declaratory judgment they had the right to use the easement; damages for private nuisance; and punitive damages.

 

The Allendorfs and Daleys responded by filing a motion for summary judgment. Metzger and the Larsons argued that the record was too incomplete to allow for a ruling and that they should be allowed to conduct discovery. Specifically, they stated that the following discovery was necessary to determine whether the motion was appropriate: (1) various contracts for deed and assignments; (2) testimony as to the intent of the grant of easement; (3) depositions of several witnesses; (4) depositions of several fact witnesses; (5) depositions of a title expert; (6) depositions of and/or documents in the Allendorfs', Daleys', and Pleasant Valley Homeowners Association's possession; and (7) third-party discovery to other individuals who may have information concerning the dispute. The court disagreed and decided that most of the requests were outside the scope of the relevancy and that a decision should be made on the record.

 

The first issue before the court was whether a valid easement existed across the northern boundary of Parcel 69 in favor of Metzger and the Larsons, and if so, what the scope of that easement was. The second issue was whether Metzger and the Larsons had the right to use the private access easements for ingress and egress or any other purpose with respect to real property adjacent to or in the vicinity of the real property. Several roads wind through Pleasant Valley Estates to provide access to the lots within the subdivision for ingress and egress to five different points.

 

In 2005, Metzger purchased Parcels 14-17 and 14-18 in order to subdivide them. In 2005, the Larsons purchased Parcel 14-16, which has since been subdivided into Parcels 14-16A and 14-16B. Metzger's and the Larsons' parcels border Pleasant Valley Estates in the vicinity of the Allendorfs' and Daleys' property. Metzger and the Larsons asked the court to declare that the 1980 grant of easement entitled them to access to their lots and any future subdivided lots via the Pleasant Valley Estates road system and the easement across Parcel 69 in Pleasant Valley Estates.

 

The Allendorfs and Daleys argued that the easement across the northern boundary of Parcel 69 was not a valid easement; and, if it was, the scope of the easement did not include the use that Metzger and the Larsons sought to impose upon the property subject to the easement. They also argued that Metzger and the Larsons did not have the right to use the private access easements for ingress, egress, or any other purpose with respect to real property adjacent to or in the vicinity of Parcel 69 and property within Pleasant Valley Estates. The Allendorfs and Daleys contended that the July 2, 1979, sale of several lots by Reely and Ashmore to Springs/Spanish Peaks divested Reely and Ashmore of any right, title, or interest in Parcel 69. They cited Montana case law to support their argument that when Springs/Spanish Peaks purchased Parcel 69 pursuant to a contract for deed, equitable and beneficial ownership in Parcel 69 passed to Springs/Spanish Peaks, leaving sellers Reely and Ashmore holding naked title, which is a personal property interest. Metzger and the Larsons also argued that failure of the Springs/Spanish Peaks transaction and the ultimate quitclaiming back to Reely and Ashmore of all disputed interests in 1984 and the recording of the warranty deed in 1985 from the Henslers to Reely and Ashmore vested the property in Reely and Ashmore. As a result, this cured any defect in and/or validated the 1980 grant of easement, pursuant to the doctrines of after-acquired title and estoppel.

 

The court determined that the 1979 reservation created an easement in gross in favor of Reely and Ashmore. The court stated that a 60-foot right-of-way and utility easement along the northerly boundary of Parcel 69 created an easement in gross in favor of Reely and Ashmore to cross Parcel 69.

 

The court also concluded that the 1980 grant of easement was ineffective in creating an easement in favor of the homeowners in the Granite Creek Ranches subdivision as successors-in-interest as a matter of law on the grounds that: (1) it purported to convey an easement appurtenant to the lands of the developer of Granite Creek Ranches, when the only interest Reely and Ashmore retained was in gross; and (2) it purported to convey road rights-of-way in which Reely and Ashmore had no retained interest. As a result of these conclusions, the court ruled in favor of the Allendorfs and Daleys related to their claim that the 1980 grant of easement and rights-of-way did not create an easement in favor of owners in Granite Creek Ranches. The court also ruled in favor of the Allendorfs and Daleys regarding their claim that Granite Creek Ranches' residents do not have the right to use the private roads in Pleasant Valley Estates but allowed Metzger and the Larsons to amend their complaint to add an additional claim for prescriptive easement.

 

©2008 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.


 

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Residential Owners Association Has Standing to Sue Developer and Design Contractors for Construction Defects

Oates v. Larkin, 23 Mass. L. Rep. 390 (2007)


Developer Liability:
A Massachusetts court ruled that a residential owners association has standing to sue a developer and contractors for defects in construction of condominiums.

 

Millennium Place is a condominium project located on either side of Avery Street in downtown Boston. It was developed by New Commonwealth Center Limited Partnership and New Commonwealth Residential Co., LLC d/b/a Millennium Partners-Boston (collectively, "developer"). The project is a two-tier condominium consisting of four separate condominiums that together make up the primary condominium. Of the four, one is commercial and three are residential. Each condominium has its own unit owners association.

 

The primary condominium is controlled by a seven-member board of managers, consisting of the president of each of the three residential owners associations and four members appointed by the commercial association. The residential associations are controlled by their unit owners; the commercial association remains under the developer's control.

 

Keith Oates is president of the North High-Rise Association ("association") and is the North High-Rise Condominium's representative on the Millennium Primary Place Association ("primary association") board of managers.

 

The North High-Rise and North Low-Rise condominiums are located in one building and the south condominium, commercial condominium, and parking garage are located in another. After the residential owners took control of their respective condominium associations, they identified certain defects in the buildings. In June 2005, the North High-Rise Association notified the developer of defects in the construction of the building. The association demanded that the developer cure the problems or pay the association an amount sufficient to do so. The defects the association identified included concrete in the stairwell, balancing of the ventilation system, drainage on balconies, heat pumps and thermostats inside units, stairwell door closers, fire-proofing at fire wall penetrations, lack of plumbing access panels, inadequate roof fans, security measures for the service elevator, and dents in the elevator panel. The developer met some of the demands, but some issues remained.

 

Two more demands for relief were sent to the developer by the association's counsel in August 2006, identifying remaining defects, the most significant of which was the lack of waterproofing membranes on the floor slabs in the parking garage that resulted in water intrusion.

 

In November 2006, the association sent a letter to the primary association, insisting that the board demand that the developer address the problem. In March 2007, the association sued the developer, the primary association, and the commercial association, claiming negligence, breach of fiduciary duty, and violation of a Massachusetts' law with respect to certain accounting issues and alleged building defects.

 

In a vote by the board of managers held in July, three managers representing each of the residential associations voted to sue the developer, and the four managers representing the commercial association, appointed by the developer, voted against the motion.

 

On the association's behalf, Keith Oates, as its president, sued the four developer-appointed managers; the developer; the general contractor, Bovis Lend Lease LMB, Inc. ("Bovis"); the design architect, Gary Edward Handel & Associates, Inc.; the mechanical, electrical, and plumbing engineer, Cosentini Associates, Inc.; and the structural engineer, DeSimone Consulting Engineers, Inc. The primary association was also named as a nominal party, but no relief was sought.

 

The complaint set forth four counts. Count I claimed breach of fiduciary duty by the four managers appointed by the developer, Count IV claimed indemnification from those managers for the costs of bringing suit. Counts II and III claimed negligence and breach of contract, respectively, by all the other defendants.

 

The developer filed a motion to dismiss, asserting that (1) Oates lacked standing to bring a derivative claim on behalf of the primary association, and (2) he was not the real party in interest. The court agreed that the proper plaintiff was not Oates, but concluded that, pursuant to Massachusetts Rules of Civil Procedure, dismissal was not required if the complaint was amended within 30 days to substitute the association's name for Oates. The association, as a member of the primary association, had standing to bring a derivative claim.

 

Bovis moved to dismiss the complaint against it on alternative grounds, arguing that no contractual relationship existed between Bovis and the association and the statute of limitations on contract claims had run. The court agreed that the language of the contract supported Bovis' argument and dismissed the contract claim for failure to state a claim.

 

The economic loss doctrine bars recovery on a negligence claim in the absence of personal injury or physical damage to property other than the property alleged to have been negligently constructed. Nothing in the complaint suggested personal injury, and although the letters in support of the complaint suggested possible maintenance problems to the parking garage as a result of water infiltration, the court found considerable room for doubt as to whether such damage had actually occurred. However, the court interpreted the complaint broadly in favor of the association and did not dismiss the negligence claim, stating that it would be considered again at the stage of summary judgment.

 

In addressing the timeliness issue of the negligence claim, the court determined that Massachusetts law provides for both a six-year statute of repose and a three-year statute of limitations applicable to claims of negligence in connection with building construction. The repose portion of the statute operates as an absolute bar, extinguishing any cause of action upon the conclusion of the statutory period. It is triggered upon the earlier of the opening of the improvement to use, or substantial completion and possession by the owner for occupancy.

 

The first certificate of occupancy in North High-Rise condominium was issued on May 29, 2001 more than six years before the filing of the association's complaint. A month after the first certificate of occupancy was issued, but still more than six years before this action was filed, the City of Boston issued temporary certificates for a special event at Loews Theater. The association argued that the certificates were temporary and issued for only parts of the building.

 

The court relied on a case decided in the federal district court to conclude that a temporary certificate of occupancy does trigger the Massachusetts statute of repose in the absence of any limitation on the use to be made of the building during the temporary period. Because the May 29, 2001, certificate imposed no limitation on use of the building while it was in effect, the issuance of the certificate triggered the repose period for any claims of defect in those portions of the project to which it applied. What portions those were, however, and how they related to the claims in the case were unclear in the record before the court.

 

Since the alleged defects forming the basis for the complaint were in the North building and the parking garage was in the south building, the issues raised by the temporary certificates was more problematic. The descriptions of property contained in the May 29, 2001, temporary certificate and the April 1, 2002, permanent certificate seemed to suggest, but did not clearly establish, that the May 29, 2001, certificate covered only the theater and that a permanent certificate issued November 25, 2002, covered the south building, including the parking garage. Because no other evidence as to the meaning of the various certificates was before the court, it could not resolve the issue raised in the motion and left it open for further consideration at the summary judgment stage.

 

Bovis also invoked the statute of limitations, arguing that the association should have been aware of its claim as soon as it acquired its interests in the building in 2001. Though the court thought that Bovis' argument might prevail at the summary judgment stage, the argument did not provide a basis for dismissal. The court noted that the association's complaint did not allege that the building contained widespread water leaks, nor did the association acknowledge awareness of the defects from the beginning of its members' occupancy. However, the complaint did not contain sufficient detail to support a determination that the negligence claim was barred.

 

Bovis' final motion charged that the association failed to meet the requirements for derivative action because the complaint did not allege that it was brought on behalf of the primary association, and the association was not a member of the primary association at the time of the construction.

 

In the court's opinion, the complaint adequately alleged that the suit was brought on behalf of the primary association because it stated that it was a derivative action seeking to enforce the right of the primary association to take legal action it previously refused to take. Furthermore, the primary association was the beneficiary of the complaint's prayer for relief.

 

At the time of construction, the primary association did not exist. Assuming that the associations came into existence when the condominium master deed was filed, the association would have become a member of the primary association as soon as the two entities existed and as soon as the primary association had members. The court explained that the requirement under the state's Rules of Civil Procedure that the plaintiff be a member at the time of the alleged wrong, serves to prevent a plaintiff from effectively buying a claim by buying an ownership interest after the fact for the purpose of bringing the claim. The court deemed that in this instance, the purposes of the rule were fully met by the association's membership in the primary association from the date of its inception.

 

The court dismissed Bovis' argument that the action did not identify complaints by the North Low-Rise and Commercial Associations because it ignored the allegations that North Low-Rise's representative voted in favor of suing the developer and that the Commercial Association representatives are under the developer's control. The court noted that Bovis' theory would preclude any derivative suit being brought since a minority could never be found to represent adequately the controlling majority.

 

After the court heard the two motions discussed above, CBT Architects, Inc. ("CBT") filed a motion for leave to join Bovis' motion. The court allowed the motion to join and ruled with respect to CBT in accordance with its rulings on Bovis' motion.

 

The court's conclusion and order provided that the developer's motion to dismiss was denied provided the association's complaint was amended within 30 days to reflect the association as plaintiff. Bovis' motion to dismiss was allowed with respect to breach of contract but otherwise denied. CBT's motion to join Bovis' motion was allowed, dismissing the charge of breach of contract against CBT.

 

©2008 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.


 

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Developer's Reserved Riparian Rights Transfer to New Owner with Waterfront Property Deed

Olde Severna Park Improvement Association, Inc. v. Gunby, 402 Md. 317, 936 A.2d 365 (2007)


Risks and Liabilities:
The conveyance of the waterfront land in fee simple in 1963, with reference to a 1931 plat, conveyed the riparian rights.

 

In 1931, Severna Company recorded a plat for waterfront property in the land records of Anne Arundel County, Maryland. In the upper left hand corner of the plat appeared the handwritten notation, "It is the intention of the Severna Company not to dedicate to the public, the streets, alleys, roads, drives, and other passage ways and parks shown on this plat, except that the same may be used in common by lot owners and residents of Severna Park Plat 2. All riparian rights being retained by the … Severna Company."

 

In 1963, Severna Company conveyed the waterfront property to Christian Rossee in fee simple. Shortly after the conveyance four jetties were constructed from the shoreline to prevent erosion. Those jetties were built and maintained until the early 1970s without any objections. In 1972, Rossee conveyed the property to John and Carol Jones with reference to the conveyance from Severna Company to Rossee. In 1991, the Joneses conveyed the waterfront property plus a landlocked parcel to Paul and Joan Gunby.

 

In 1977 and 1991, Severna Company transferred all of its remaining property rights, including any riparian rights, to Olde Severna Park Improvement Association. In 1989, after Debra Shepley, Rossee's daughter, obtained title to the remaining Rossee property she constructed, with the Jones' permission, several more jetties into the water from both her property and that of the Joneses. No one objected to the new jetties.

 

In November 2003, the Gunbys filed a joint federal/state application for the alteration of any tidal wetland in Maryland to obtain a license to construct a 200-foot pier plus a 410-foot walkway over a tidal pond that bisected their property. The association objected to the application in February 2004, claiming that riparian rights had never been conveyed to Mr. Rossee and, as a result, the Gunbys could not have obtained the riparian rights through the chain of title. Despite the association's objection, the Maryland Department of the Environment issued a license to the Gunbys in July 2004.

 

The association filed a petition for judicial review in September 2004. While that petition was pending, the circuit court heard cross-motions for summary judgment and issued an opinion granting Severna Company riparian rights via the notation of the 1931 plat and ruled that the deed from Rossee did not convey riparian rights. The court cited Maryland case law that stated that as long as a deed contains a reference to a plat, then it is incorporated into the deed and that the entire deed must be interpreted as a contract with no part being disregarded unless violative of some principle of law.

 

The court also found that the 1931 plat was ambiguous and looked to the language of other deeds from Severna Company to determine the grantor's intent, which the court determined was an intention to reserve riparian rights free from the claims of subsequent individual property owners. The court later determined that the Gunbys did not possess riparian rights and were not entitled to construct the walkway or pier.

 

The Gunbys then appealed. The court of special appeals ruled that to sever riparian rights, a more express and definitive statement of reservation would normally be required than existed in this case. The notation on the 1931 plat served only to ensure that the riparian rights were not dedicated to the public or a governing body. When Severna Company conveyed the waterfront property to Rossee, it conveyed exactly what it had, both the land and the riparian rights that went with the land. There was no longer a reservation of any riparian rights to that land being conveyed. As noted by the court of special appeals, one who buys waterfront property in a development usually expects to acquire riparian rights unless those rights are clearly and expressly excluded.

 

The court also noted that when a plat is recorded it is presumed there is intent to dedicate particular types of land interests to public use, such as roads, parks, etc., and when that dedication is accepted the dedication is complete and the local government has jurisdiction over that land. The reservation language on the plat in this case is the type of language used to show that no offer to dedicate riparian rights was made by the filing of the 1931 plat. The court cited Maryland case law that stated when waterfront property is conveyed, there exists a presumption that the property is accompanied by the riparian rights to those waters.

 

In this case, the 1931 plat's notation had the effect of showing Severna Company's intent not to dedicate the riparian rights to the public. This language protected the streets, alleys, roads, drives, other passage ways, parks and riparian rights from becoming the property of Anne Arundel County. As a result, there could not have been an intent to dedicate the riparian rights to the community at large when those rights reserved in a notation restricting the dedication offer because the very nature of the type of dedication that might apply in this case usually requires that the public be the beneficiary of a dedication.

 

The notation on the plat contained no ambiguity of language that would require the court to look beyond the plain language of the 1931 plat and the relevant deeds to the waterfront property at issue if the notation on the plat is read in its proper context, which is as a dedication. As a result, when the property was conveyed to Rossee in 1963 in fee simple, Rossee received what Severna Company possessed at that time, which included the riparian rights to the land. In the subsequent conveyances to the Joneses and the Gunbys, no reservation of rights was ever made. As a result, the Gunbys derived riparian rights through the chain of title from the original deed to Rossee.

 

©2008 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.


 

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Reasonableness Standard in Analyzing Attorney's Fees

Warren v. Highland Lakes Condo Association, Nos. 272061, 274861, 275034, Mich. App. Ct., February 7, 2008


Assessments:
A trial court's award of $10,000 in attorney's fees for an arrearage of assessments was not an abuse of discretion despite the trial court's failure to make findings of fact.

 

Cheryl Warren purchased unit 52 in the Highland Lakes Condominiums. The bylaws of Highland Lakes Condo Association require every unit owner to pay monthly assessments to the association. Warren established a monthly automatic payment by check system to pay her assessments.

 

In October 2003, the association's monthly assessments were increased, but Warren failed to update her electronic payment system to reflect the higher payment. As a result, she did not pay the full amount due. Because Warren never made up the difference she began to accrue late fees, which also went unpaid. In May 2005, Warren's bank issued a check to the association for payment of her monthly assessment on a closed account; since the account was closed, the check was returned unpaid. In June 2005, the association's counsel, Wegner & Associates, PC, sent a letter to Warren about the arrearage and indicated that legal fees would be assessed on her account because legal counsel was involved in the collection effort. Wegner also stated that legal action would commence if Warren did not pay her account in full by June 17, 2005.

 

The association's bylaws and the Michigan Condominium Act ("Act") authorize the association to enforce collection of delinquent assessments by foreclosure of a statutory lien that secures payment of the assessments. The bylaws also provide that expenses incurred in collecting unpaid assessments, including actual attorney's fees, are chargeable and may be secured by a lien on the property. On July 27, 2005, Warren's bank issued another check for her monthly assessments on the same closed account, which also bounced. On behalf of the association, John Sabo filed a police report with the Northville Township Police Department concerning the returned checks.

 

On August 5, 2005, a lien was recorded against Warren's property. Wegner sent a letter to Warren notifying her of the lien against her property and threatening foreclosure if the unpaid assessments were not paid within 10 days. On August 18, 2005, in response to the police report, Warren paid $1,114.43 to the association. However, the total arrearage was $1,675.25, excluding the legal fees already incurred. The police investigation was dropped, but Warren's account still had an outstanding balance and late fees continued to accrue. Wegner sent another letter to Warren regarding her continued arrearage and informing her that the association had, as allowed under the bylaws, declared all remaining assessments for the current fiscal year due. The amount due was $6,327.90, which did not include interest or attorney's fees. The letter also said that the association intended to foreclose on the lien.

 

On October 27, 2005, Wegner sent a letter to Warren demanding payment of the arrearage by November 22, 2005. The letter stated that if the arrearage was not paid, the association would go forward with the public sale of her property. Notice of the impending foreclosure sale was posted at Warren's residence on November 1, 2005. After the notice was posted on her door, Warren began a series of phone calls and emails that threatened legal action against the association, its agents and officers, and Wegner. On November 29, 2005 in an effort to stop the foreclosure action, Warren sued the association, Wegner, several individually-named attorneys at Wegner, and Steve Lone and Jon Sabo, both of whom were agents of the association.

 

On December 1, 2005, Warren filed for Chapter 13 bankruptcy protection, which caused the association to drop the foreclosure action. The United States Bankruptcy Court for the Eastern District of Michigan dismissed Warren's bankruptcy petition because she failed to meet filing deadlines. On December 20, 2005, the association filed its first set of interrogatories to Warren in response to her suit. When Warren failed to respond within the statutory period, the association filed a motion to compel her to answer the interrogatories, and the trial court ordered Warren to answer the interrogatories by February 17, 2006.

 

On March 29, 2006, Warren filed an answer, but she refused to answer every paragraph. After a hearing was held on the association's motion to compel answers to a second set of interrogatories, the association sued Warren to foreclose on the lien against her unit. After Warren missed a May 2006 deadline for the filing of a witness list, a hearing was held to consider the association's two motions for summary disposition of Warren's compliant.

 

At two November 2006 hearings, the trial court—citing its appreciation of the materials submitted by the parties, its familiarity with the issue, and its understanding of the position of the parties—granted summary disposition of the association's foreclosure action and ordered Warren to pay association fees of $9,624.15. The trial court also dismissed Warren's counter-claims with prejudice and awarded the association $10,000 in attorney's fees, even though the association requested $19,242 in attorney's fees. Both parties appealed the award of attorney's fees.

 

After affirming the trial court's summary disposition of Warren's counterclaims against the association and its summary disposition of the foreclosure action, the appeals court took up the issue of whether the award of $10,000 attorney's fees was reasonable under the circumstances of the case. Warren argued that because she did not have the opportunity to challenge the attorney's fees they were unreasonable. In contrast, the association's argument was rooted in the premise that the mandatory language of the bylaws trumped the statutory language found in the Act, which gives trial courts discretion in determining attorney's fees. The association argued that since the bylaws stated that "actual attorney's fees" were chargeable to the owner in default, this language precluded the trial court from making a reasonableness inquiry.

 

The appeals court stated that Warren had the opportunity to challenge the attorney's fees; however, she chose not to challenge the reasonableness of the fees, instead repeating arguments that were barred or had been rendered irrelevant by the trial court's summary disposition in favor of the association. The court also found fault with the association's argument since it emphasized some language in the Act to the exclusion of other language. In the court's view, the mandatory language of the bylaws did not override the statutory language of the Act but instead created a conflict between the bylaws and the statute. Since a contract that conflicts with a statute is void as against public policy, the court said it should be construed, if possible, in a way that is in harmony with the statute.

 

The appeals court found that the trial court could have construed the bylaws to mean "actual attorneys' fees (as deemed reasonable by the court)." Since the trial court did not err in its interpretation of the Act, the appeals court upheld the trial court's award of $10,000 to the association because it was not an abuse of the trial court's discretion.

 

©2008 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.


 

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