January 2010
In This Issue:
Owner Must Obtain Association Permit to Perform Renovations to Unit
Disputes Arising from Settlement Agreement Must Be Resolved through Mediation
Parties Must Abide by Terms of Agreement Reached in Mediation
Dispute over Ambiguous Language in Deed Restriction Precludes Summary Judgment
Association May Exercise Its Right of First Refusal to Buy Auctioned Properties
Summary Judgment Is Proper Sanction for Violating Discovery Order
Declaration Determines Riparian Rights of Landbound Lot Owners
Condominium Association Can Recover Appellate Attorney Fees
Quick Links:
E-mail Our Editor
Visit Our Home Page
View Archives
View Credits
printer friendly
 

Owner Must Obtain Association Permit to Perform Renovations to Unit

Acacia on the Green Condominium Association, Inc. v. Gottlieb, No. 92145, Ohio App. Ct., Sept. 17, 2009

Covenants Enforcement/Use Restrictions/Powers of the Association/Attorney Fees: An Ohio appeals court affirmed a trial court's grant of summary judgment and a permanent injunction in favor of a condominium association seeking to enforce a rule that all unit owners obtain a permit for any renovations performed inside their units.

In 2001, Howard Gottlieb purchased a condominium unit in Acacia on the Green Condominium, located in Lyndhurst, Ohio. The condominium association’s declaration authorizes the association to promulgate rules and regulations, and the association arranges orientations for new owners providing them with information on the rules governing the condominium units. Rule XV promulgated by the association requires that a unit owner obtain a permit before commencing any renovation of a unit.

Gottlieb believed he was not a member of the association and was not bound by the declaration, bylaws and association rules. He did not obtain permits for multiple renovations to his unit. In 2005, the association's maintenance supervisor discovered construction debris being removed from Gottlieb's unit and reported the incident to the association. That day, the association notified Gottlieb that all renovations required a permit. In 2006, the maintenance supervisor again discovered that Gottlieb was renovating his unit and reported the incident to the association. Through its legal counsel, the association sent letters to Gottlieb on Aug. 14, Oct. 26, and Nov. 3, outlining the provisions of Rule XV and seeking to inspect the renovations to ensure that they met local building codes. The August letter imposed a $100 fine for violation of the permit rule and a $10-per-day additional fine until Gottlieb agreed to inspection of his unit.

On Nov. 28, 2006, the association sued Gottlieb, seeking an injunction to prevent him from conducting any further renovations without first obtaining a permit and seeking damages for the costs incurred in bringing the action. Gottlieb filed an answer and counterclaim, alleging that the association had interfered with quiet enjoyment of his property, invaded his privacy and trespassed into his unit. The association moved for summary judgment on his complaint, and the trial court granted the motion, issuing a permanent injunction against Gottlieb, dismissing his counterclaims and ordering him to pay attorney fees in the amount of $18,642.55. Gottlieb appealed.

Gottlieb argued in his appeal that the trial court committed reversible error in granting the association's motion for summary judgment and issuing a permanent injunction because Rule XV was unreasonable, unlawful and unenforceable. He asserted that the association failed to meet the elements entitling it to the injunction. The court disagreed.

The appeals court noted that a party seeking a permanent injunction must demonstrate by clear and convincing evidence that it is entitled to relief under statutory law, that the injunction is necessary to prevent irreparable harm and that no adequate remedy at law exists. Section 5311.19(A) of the Ohio Revised Code (O.R.C) provides that individuals who purchase condominiums are bound by the covenants and conditions in the deed, condominium declaration and bylaws. The statute further provides that an association may seek injunctive relief when a unit owner does not comply with the association's rules and regulations.

Section 5311.081(B)(5) authorizes the association to control the condominium common elements, which include any features inside individual units that have an impact on other units or association members. Compliance with condominium declarations and bylaws is required under Section 5311.19 when the restrictions are reasonable.

The court used a three-prong test to determine whether the restriction was reasonable: (1) was the restriction arbitrary; (2) was it applied in a discriminatory manner; and (3) was the rule made in good faith for the common welfare of all association members?

Gottlieb argued that the regulation requiring board approval of improvements to the interior of his unit was arbitrary. However, the court observed that units in the condominium shared the same plumbing and electrical systems. Renovations in one individual's unit could significantly affect other units. Further, certain improvements, such as installation of hardwood floors, could cause great noise levels in downstairs units. Rule XV was promulgated to prevent these issues from arising among unit owners living in such close proximity to one another.

The court noted that purchasers of condominium units voluntarily submit themselves to the condominium form of ownership, which requires that owners give up a certain degree of freedom of choice that might otherwise be enjoyed in another form of ownership.

Gottlieb argued that he was the only person to receive a fine for violating the rule, but he failed to provide any evidence demonstrating that other association members were permitted to renovate their units without obtaining a permit.

Addressing the third prong of the test to determine whether the rule was implemented in good faith for the benefit of the entire community, the court observed that one purpose of Rule XV was to ensure that contractors who worked on the premises were aware of the condominium rules and regulations in order to allow all unit owners to enjoy their property and to ensure that contractors carried sufficient liability insurance to cover potential damage to surrounding units. The court found no evidence that the rule was not made in good faith and determined that the association had established that it was entitled to injunctive relief based on the condominium statute.

Gottlieb admitted to numerous instances of unauthorized renovations for which he did not verify that the contractors had obtained required permits from the city or possessed any type of liability insurance. The court found that the association demonstrated that injunctive relief was necessary to prevent irreparable harm by its assertion that the rule was crucial to preventing poor workmanship being performed in one unit that had the ability to affect other units sharing common plumbing and electrical lines.

Finally, the court considered whether no other adequate remedy was available to the association. It found that injunctive relief was necessary in this case because it was essential for all unit owners to be protected from the possible dangers of unscreened and uninsured contractors performing renovations in close proximity to their units. The court concluded that absent Rule XV's permit requirement, contractors could work on the premises without being informed of the condominium rules and regulations, disrupting the quiet enjoyment of other unit owners and, further, could perform work that harmed the common plumbing and electrical lines or perform work that did not meet applicable building codes.

Gottlieb raised four assignments of error. First, he argued that he was not required to comply with Rule XV because he had no notice of the condominium rules and regulations. The court held that he had both actual and constructive notice of the rule. The rules and regulations were contained in the resident's handbook, which Gottlieb admitted was in his possession. He signed the association's form confirming he received an orientation and was aware of all applicable association rules. When he purchased his unit, he had constructive notice of the rules because the recorded declaration was public record and each purchaser is deemed to have constructive notice of its contents.

Gottlieb argued that the association waived its right to enforce the rule when it allowed his contractor to enter the premises without a permit. However, the court overruled the assignment of error because the declaration specifically provides that failure to enforce a rule does not constitute a waiver.

Next, Gottlieb argued that at the time the case was filed, he had completed his renovations; therefore, there was no active dispute. The court observed that the primary function of an injunction is to prevent future injury. Gottlieb specifically stated that he planned to have additional renovations. Although he was warned on numerous occasions to obtain the appropriate permit, he never responded to the requests and never obtained a permit. The court interpreted Gottlieb's complete disregard for the association's requirements to be indicative of an ongoing conflict that would arise in the future and overruled this second assignment of error.

In his third assignment of error, Gottlieb contended that the trial court erred by ordering him to pay the association's attorney fees. The Ohio Supreme Court adopted the American Rule in regard to awards of attorney fees. This rule allows the prevailing party to recover attorney fees if provided for by either statute or enforceable contract. The association argued that it was entitled to recover attorney fees pursuant to O.R.C. Sec. 5311.19(A), which provides that violations of condominium covenants is grounds for the association to commence actions for damages or injunctive relief with an award of court costs and reasonable attorney fees. Although Gottlieb argued that the statute did not apply to him because it was amended in 2004 and he purchased his unit in 2001, the court explained that the statute was applicable because the amended statute was in effect at the time the causes of action arose.

Gottlieb further argued that evidence presented by the association was insufficient to support the amount of attorney fees awarded. The court held that the trial court was present for the duration of the proceedings and was in the best position to determine the reasonableness of the requested fees. The appeals court noted that the trial court obtained supporting documentation from the association, and the value of the fees did not shock the conscience, considering the work involved and the length of the litigation. The court determined that Gottlieb's argument that he should not have to pay attorney fees associated with his counterclaims was without merit. He then argued that an entry on itemized billing statements presented by the association for $200 was related to another action pending between the parties. The association conceded that the entry was a mistake and should have been removed and not submitted to the court. 

Gottlieb's final assignment of error was that the trial court erroneously granted the association's motion for summary judgment on his counterclaims for invasion of privacy and trespass. He contended that the association's maintenance supervisor invaded his privacy when he entered his unit during renovations and his actions constituted a trespass. The court concluded that the trial court properly dismissed these counterclaims because Gottlieb could not establish that there was any wrongful intrusion. A review of testimony showed that the maintenance supervisor was admitted to Gottlieb's unit by a contractor, who was there with Gottlieb's express permission. Further, the declaration provides that if any unit owner violates any rules or breaches any covenant, the association has the right to "… enter any unit in which or as to which such violation or breach exists…" Accordingly, the court found that the association had the right to enter Gottlieb's unit to assess whether a violation had occurred, and overruled this last assignment of error.

The court affirmed the trial court's judgment and remanded the matter for correction of the $200 journal entry in the association's documentation of attorney fees.

©2010 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.

Disputes Arising from Settlement Agreement Must Be Resolved through Mediation

Adams v. Newport Crest Homeowners Association, No. G039956, Cal. App. Ct., Sept. 9, 2009

Risks and Liabilities/Miscellaneous Association Problems: In an unpublished opinion, a California appeals court upheld dismissal of a case to enforce terms of a settlement agreement, finding that the agreement provided that disputes must first be submitted to mediation.

Kristine Adams owns a condominium unit in Newport Crest, a development located in Orange County, Calif. She sued Newport Crest Homeowners Association for damages to her unit caused by water intrusion that resulted from alleged structural deficiencies. The parties reached a settlement agreement through mediation whereby the association's insurance carrier paid Adams $500,000 and the association agreed to perform extensive remediation of the unit within an anticipated 90-day period, pay her $3,500 per month living expenses while her unit was being repaired, and pay her the costs of storing her personal property until the repairs were complete.

The settlement agreement provided that Anthony Salazar, an industrial hygienist, "shall make the decision whether each repair that he has advised to be done has been correctly and thoroughly completed." In March 2007, the association notified Adams that her unit had been "clearance tested," but that the association had been informed by Anthony Salazar that he would not perform further under the settlement agreement unless Adams released him and his company from liability for the work he was designated to perform under the agreement. The association's letter to Adams stated that if she did not sign the release, the association would, pursuant to the settlement agreement, hire another contractor to take over Salazar's duties. A few weeks later, the association notified Adams that it had hired another licensed general contractor, Angus Smith, to oversee completion of the work on her unit.

In May 2007, Adams notified the association that she would not agree to have Smith do any work on her condominium and demanded that a mutually acceptable expert replacement for Salazar be located. The association immediately replied that the unit had been clearance tested and all of the association's obligations under the settlement agreement had been resolved. The association advised Adams that she was free to move back into her unit, and it would no longer pay her $3,500 per month for living expenses.

Adams claimed the association failed to perform its obligations under the settlement agreement and filed a motion to enforce the agreement under Code of Civil Procedure section 664.6. The association filed an opposition to Adams' motion and an ex parte application for an order to enforce the settlement agreement and compel mediation. Adams argued that she was not required to commence mediation under the settlement agreement because there was no dispute as to the terms of the agreement that would require mediation, but only a dispute as to the performance, which would not require mediation.

She asserted that the association's application should be denied because: (1) the association either never secured Salazar's participation and thereby removed a core consideration for settlement; (2) Salazar's nonparticipation gave rise to an agreement to agree at a later date about a central material term to the settlement; (3) the association's interpretation of the settlement agreement eviscerated the core material terms of the agreement, so there was no contract formation; and (4) requiring binding mediation would make the agreement unenforceable under California case law. The association replied that the parties had entered into a binding settlement agreement that needed to be enforced. It argued that Adams' own motion to enforce the agreement was judicial admission that it was enforceable and, in any event, she was bound by the plain language of the agreement, notwithstanding any subjective understanding on her part.

The court found that the settlement agreement required that disputes thereunder be returned to mediation. The court denied Adams' motion and granted the association's application. However, Adams did not respond to the association's request to set a date for mediation, and the court dismissed the case. She appealed.

In attacking the order denying her motion, Adams insisted that the settlement agreement was binding and the trial court erred in failing to convert it to judgment; yet, when challenging the order granting the association's application, she paradoxically maintained that the agreement was completely unenforceable due to fraud in the inducement, failure of consideration, lack of meeting of the minds and invalidity of the binding mediation provision.

She contended that the mold and fungus in her condominium ruined her health, caused her to close her law practice, caused her to vacate her home and put her home at risk of foreclosure due to her inability to work and argued that the association failed to perform its obligation to remediate the unit.

Code of Civil Procedure section 664.6 provides that:

If parties to pending litigation stipulate, in a writing signed by the parties outside the presence of the court…, for settlement of the case, or a part thereof, the court, upon motion, may enter judgment pursuant to the terms of the settlement. If requested by the parties, the court may retain jurisdiction over the parties to enforce the settlement until performance in full of the terms of the settlement.

The court determined that the trial court in a section 664.6 motion acts as a trier of fact to interpret the terms and conditions of the settlement. The appeals court found that the proper standard of review was whether the trial court's construction of the settlement is supported by substantial evidence.

The trial court's order provided that the association's motion was granted because the settlement agreement provided that disputes must first be submitted to a mediator who may issue a final and binding ruling; and Adams' motion was denied because the administrative remedy—mediation—was not exhausted. In granting the association's application and ordering mediation, the trial court impliedly found that the parties had entered into a binding settlement agreement. The appeals court noted that substantial evidence supported that finding. All parties signed the agreement, which was approved by their counsel. All parties wanted the agreement to be enforced, except, the court noted, that Adams, in effect, wanted the mediation provision to be excised from the agreement.

The court found further, that not only had the settlement agreement been fully signed, it had been partially performed. Adams had received a $500,000 payment and acknowledged that the monetary and performance obligations under the agreement were not severable. Furthermore, the association had made a number of $3,500 payments, had paid for storage of her personal property, had performed some remediation on her unit and paid for some amount of remediation with respect to her personal property. The court found the dispute to be whether the association had finished its work, and if not, what was left to be done.

The court found that the settlement agreement made plain that the court was to adjudicate compliance issues only if the mediator had not done so or would not do so.

Before the parties entered into the settlement agreement, the association sought discovery sanctions against Adams. The trial court ordered Adams to pay $3,000.

The court affirmed the trial court's order denying Adams' motion to enforce the settlement agreement and granting the association's application. It also affirmed the trial court's award of sanctions against Adams and dismissal of the case.

©2010 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.

[ return to top ]

Parties Must Abide by Terms of Agreement Reached in Mediation

Claridge House One Condominium Association, Inc. v. Beach Plum Properties, LLC, No. A-6978-03T2, N.J. Super. Ct., Feb. 8, 2006

Miscellaneous Association Operations: In an unpublished opinion, a New Jersey appeals court affirmed a trial court's determination that a settlement reached in mediation was binding on the parties even though no formal settlement agreement was executed.

Claridge House One in Verona is a 275-unit condominium located in Essex County, N.J. In Dec. 1999, the association amended its bylaws to provide that an individual or entity could own no more than one unit for investment purposes, in addition to a unit personally occupied as a residence. At the time Beach Plum Properties, LLC, Mark Weber and Sylvia Swimmer (collectively, "Beach Plum") owned multiple units. There was no dispute that the units owned by Beach Plum prior to the amendment were "grandfathered" and not affected by the amendment. However, Beach Plum sold some units and took steps to purchase at least one other unit.

In Nov. 2001, the association sued Beach Plum in the Chancery Division seeking to enjoin it from acquiring Unit 1000, which it had taken steps to buy, or any units other than those it already owned. The association argued that Beach Plum’s purchase of additional properties would violate the amended bylaws. Although temporary restraints were entered, they were vacated several months later.

In Nov. 2002, Beach Plum sued the association in the Law Division for damages, alleging harassment, interference with a business relationship, discrimination, illegal and improper restraint on alienation and other claims. Beach Plum contended it had lost the opportunity to purchase Unit 1000 due to the improper actions of the association. In March 2003, the actions were consolidated in the Law Division.

The court issued a mediation referral order and assigned a mediator. At the conclusion of the mediation session, a memorandum was prepared that set forth the terms of the settlement, which included provisions for the number of units Beach Plum could own and also provided for a cash payment to them of $18,000. The final provision in the memorandum stated that "all of the above is subject to ratification" by the association's board of directors, which was scheduled to occur on or before Dec. 15, 2003, and "the execution and delivery of a formal settlement agreement which shall embody the above terms." The memorandum further provided that the litigation would be dismissed with prejudice and the parties would execute and deliver general releases.

In Feb. 2004, Beach Plum moved to extend the time for discovery. The association filed a cross-motion to enforce the settlement. When the motions came before the court, Beach Plum argued that no final settlement was reached in the November mediation. It asserted that the memorandum prepared at that time merely set forth the framework for a potential settlement, and, by its terms, no actual settlement would be effected until the terms were ratified by the association's board of directors and a formal settlement agreement was executed by all the parties. The judge scheduled a plenary hearing.

At the hearing, the judge heard testimony from the mediator of the November session, and concluded that the November settlement was complete as to all material terms. He ordered enforcement of the agreement. In light of his determination, he denied Beach Plum's motion to extend discovery. Beach Plum appealed.

The appeals court determined that although a formal settlement agreement was never entered, the parties exchanged drafts and disputed proposed language, which rendered that step in the process futile. Thus, the terms were agreed upon, and the anticipated agreement was presumably intended to express those terms in more comprehensive and detailed language. By exchanging proposed settlement agreements, Beach Plum acknowledged its understanding that the case was settled and that efforts to draft an acceptable settlement agreement were nothing more than recasting of the terms agreed upon.

The appeals court found no legal significance to the absence of a formal resolution adopted by the association's board to ratify the terms of the agreement because the terms were approved at the mediation session by the association's authorized representatives. Further, by moving to enforce the settlement, the association unequivocally evidenced its approval of the settlement terms.

The court found that the trial court's factual findings were well supported by adequate, substantial and credible evidence in the record, and the judge correctly applied the principles of law to those findings. The court affirmed the trial court's ruling.

©2010 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.

[ return to top ]

Dispute over Ambiguous Language in Deed Restriction Precludes Summary Judgment

Killearn Homes Association, Inc. v. Visconti Family Limited Partnership, No. 1D08-5681, Fla. Dist. Ct. App., Sept. 17, 2009

Covenants Enforcement/Architectural Control/Contracts: A Florida district court reversed a trial court's grant of summary judgment, finding that the interpretation of ambiguous language in a deed restriction that required "buildings" to be approved by the homeowners association constituted a genuine issue of material fact that precluded summary judgment.

Visconti Family Limited Partnership and The Lamar Company L.L.C., doing business in Florida as The Lamar Companies ("company"), erected a billboard on property it owned in Killearn Estates Subdivision, located in Leon County, Fla. Killearn Homes Association sued the company to enforce a deed restriction that required that buildings be approved by the developer prior to construction.

The restriction states:

No building shall be erected, placed or altered on said tract until the construction plans and specifications and a plan showing the location of the structure or structures and landscaping upon said tract or parcel have been approved by the President of Killearn Properties, Inc., as to quality of workmanship and materials, harmony of external design with existing or proposed structures in the Killearn Estates Subdivision, and location with respect to topographical and finished grade elevation.

The trial court granted summary judgment to the company, allowing it to erect a billboard on the property without prior approval. The association appealed.

On appeal, the court noted that the trial court expressly found that the term "building" as used in the covenant was not ambiguous, even though another court had construed the same term in the same deed restriction a few years earlier and interpreted that the restriction barred construction of an unapproved cell phone tower. The court determined that if two sides argue that language is clear and unambiguous, but each ascribes different meaning to the language, the provision is rendered ambiguous, making summary judgment improper.

In addition, the court found that the trial court erred by assigning the definition found in the Tallahassee Land Development Code to the term "building." The appeals court held it was improper for the trial court to look to an outside source to determine the meaning of that word as it was used in the restriction rather than first considering the language of the deed restriction as a whole. The court relied on Gem Estates Mobile Home Village Ass'n, Inc. v. Bluhm, 885 So. 2d 435 (Fla. 2d DCA 2004), where the court held that the trial court's reliance on a statutory definition to interpret a term of a restrictive covenant was "entirely misplaced." Likewise, here, the court determined that the sole function of the definition of "building" in the Tallahassee Land Development Code is to demarcate types of buildings controlled by that code.

The appeals court reversed the trial court's decision and remanded the case for further consideration, advising that, "On remand, the trial court may consider extrinsic evidence to ascertain the intent of the parties or to explain or clarify the ambiguous term 'building' in the deed restriction."

©2010 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.

[ return to top ]

Association May Exercise Its Right of First Refusal to Buy Auctioned Properties

LaCascata Homeowners Association, Inc. v. Riiff, No. A-2914-03T2, N.J. Super. Ct., Nov. 2, 2005

Covenants Enforcement: In an unpublished opinion, a New Jersey appeals court upheld a ruling in favor of a homeowners association to enforce its right of first refusal contained in deed restrictions.

Gloucester Township Housing Authority ("Authority") owned two properties in LaCascata, a subdivision located in Camden County, N.J. The properties were subject to a right of first refusal embodied in restrictive covenants contained in the deeds. The Authority wished to sell the properties pursuant to New Jersey's Public Bidding Laws. It contacted LaCascata Homeowners Association, requesting forms related to the association's right of first refusal, and announced the date and time of the auction in local newspapers.

Daniel Riiff was the sole bidder at the auction, winning with bids of $25,000 and $27,500. He made the required deposit to purchase the properties and the closing was scheduled for the following month.

The week after the auction, the association notified the Authority that it was exercising its right of first refusal to purchase the properties at the prices established by the auction. The Authority did not respond to the association's demand. The association then contacted Riiff, requesting that he assign his bid to the association, but he refused. On Aug. 28, 2003, the association sued the Authority and Riiff, seeking a temporary restraining order to enforce its right of first refusal and seeking fines and reimbursement of legal costs. The judge denied the association's request for a temporary restraining order due to lack of irreparable harm, but scheduled a hearing to show cause why the sale should not be permanently stayed. The judge allowed the sale to go forward on condition that Riiff assume any risk of an adverse judgment and acknowledge that he would not be allowed to recover from the association any rehabilitation costs he might incur in the meantime. The judge dismissed the Authority from the case after the transfer of the properties to Riiff, noting that any order of the court to convey would, of necessity, be directed to Riff, not to the Authority. After hearing oral arguments, the court concluded there were no material facts in dispute and granted the association's enforcement of the restrictive covenant, ordering the sale of the property by Riiff to the association for the auction price. Riiff appealed.

The restrictive covenant in the deeds provides that any lot owner receiving a bona fide offer for the purchase of his lot which he intends to accept shall give notice to the association and offer to sell or lease the lot to the association on the same terms and conditions as contained in the original offer. Riiff argued that since the right of first refusal only applies to a "lot owner" and he was a buyer, not an owner, the restriction did not apply to him. He argued that because the association did not appeal the dismissal of the Authority it had waived its interest in its right of first refusal. The association argued that Riiff was judicially estopped from taking that position, and the court agreed. The court held that Riiff acquiesced in the dismissal of the Authority in the face of the judge's statement that any subsequent order to convey the property would be "directed to him, not to the Authority." The appeals court interpreted this to mean that Riiff stepped into the shoes of the Authority for purposes of litigation.

Riiff argued that the Authority did not receive a "bona fide offer" for the properties. The court disagreed, however, holding that the highest bidder at an auction is making a "bona fide offer" to purchase. Riiff contended that the restriction was contrary to public policy, and therefore void. Specifically, he argued that the right of first refusal contradicted the Public Bidding Law and rendered it meaningless. The court also disagreed with this argument.

The court noted that all bidders, including Riiff, had constructive notice of the right of first refusal. The resolution that authorized the sale provided that the lots were being sold "subject to all restrictions and easements of record, if any." Further, it appeared to the court that Riiff had actual notice of the restriction. Concerning his argument that a right of first refusal discouraged bidders, the court found the exact opposite to be true. The court noted that while the restriction might discourage a bidder hoping to "steal" the property with a low bid, it would not deter someone willing to pay full value for the property since the holder of the refusal right might not wish to match such a bid. The refusal right would, therefore, more likely encourage higher bids, thereby serving the purposes of the Public Bidding Law.

The court rejected, as without merit, Riiff's argument that he was damaged by participating in the auction, and found that, in any event, he was on full notice that his bid might be trumped by the association's exercise of its right. Nor did the court agree with Riiff's position that the association waived its right by waiting for the outcome of the auction, holding that until the auction took place, there was no offer to match and no right to exercise.

After carefully considering all of Riiff's arguments, the court affirmed the trial court's ruling.

©2010 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.

[ return to top ]

Summary Judgment Is Proper Sanction for Violating Discovery Order

Laurentian Commons Condominium Association of Co-Owners, Inc., v. Dulmage, No. 286496, Mich. App. Ct., Sept. 10, 2009

Miscellaneous: In an unpublished opinion, a Michigan appeals court affirmed the grant of summary judgment in favor of a condominium association as a sanction for violating the court's discovery order.

Philip Dulmage appealed an action by the Genesee Circuit Court granting summary judgment to Laurentian Commons Condominium Association of Co-Owners. The trial court granted the association's motion after striking Dulmage's answer as a sanction for failure to respond to discovery in an action to enforce condominium bylaws.

On appeal, Dulmage argued that the trial court erred in determining there was no genuine issue of material fact in deciding the motion for summary disposition. The appeals court relied on Enci v. Jackson, 433 N.W. 2d 313 (1988), in which the court properly granted summary judgment pursuant to Michigan court rules of 1985, Chapter 2, Section 2.116(C) (9), after having stricken the defendant's answer and affirmative defenses as a sanction for violations of the court's discovery order. It concluded that if striking of the documents was proper, the trial court properly granted summary disposition.

Dulmage asserted that he did not respond to the requests for admission, production of documents, interrogatories and motion for sanctions because he did not receive the pertinent documents in the mail. He claimed that he had persistent problems with his mail not being delivered, and he submitted documentation indicating other mail was diverted as being undeliverable. His second argument was that health conditions interfered with his ability to act diligently. The appeals court agreed with the trial court that neither argument constituted good cause or excused his inaction.

The court held that Dulmage must have known of the discovery requests when he filed an objection to the proposed order for sanctions and should have taken action to respond in an expeditious manner. He asserted that the association had not sent him a copy of the discovery materials as promised, but he did not attempt to obtain the discovery materials; instead, he did nothing and failed to appear at the hearing on his objections because he allegedly forgot the date.

The court acknowledged that it would be willing to make allowances for defendants unfamiliar with the legal system and their deadlines. However, it noted that Dulmage was a licensed attorney and had an understanding of discovery and its deadlines.

The court also found that Dulmage's claimed health difficulties did not excuse his failure to provide discovery. It noted that by his own actions, he was able to write correspondence, he knew the nature of the documents he received, and he was physically able to go to the courthouse.

The court concluded that, under the circumstances, the trial court's decision to strike Dulmage's answer was not an abuse of its discretion and, accordingly, found its judgment against Dulmage was proper.

©2010 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.

[ return to top ]

Declaration Determines Riparian Rights of Landbound Lot Owners

Schebel v. The Pine Creek Ridge Home Owners Association, No. 284177, Mich. App. Ct., Sept. 15, 2009

Covenants Enforcement/Use Restrictions: In an unpublished opinion, a Michigan appeals court ruled that the lake access and boating rights of landbound lot owners are governed by a subdivision's planned unit development agreement and declaration of covenants.

Jay and Jody Schebel own property in Pine Creek subdivision, located in Brighton, Mich. Lots in Pine Creek are subject to a Planned Unit Development Agreement ("PUD") and a declaration. All lot owners are members of Pine Creek Ridge Home Owners Association. The developer also created Pine Creek Conservancy as a separate legal entity charged with preserving the natural resources in Pine Creek.

There are two types of lot owners in Pine Creek, those with lakefront property, Dock Privilege Owners ("DPOs"), and Landbound Owners. The DPOs and the Landbound Owners do not share the same lake access and boating rights. DPOs are not allowed to launch or withdraw boats from the lake on their personal lots. They must use Westminster Park boat launch. The developer established the launch in 1990 and, since then, the launch was used exclusively by DPOs residing on Brighton Lake.

Between 2001 and 2005, access to Westminster Park was restricted exclusively to DPOs. In May 2005, the developer conveyed Westminster Park to the association.

Pine Creek includes a dam that controls water flow from Brighton Lake. A strip of land approximately 15 to 20 feet wide and 100 yards long ran across the dam to allow access for operation, repair and maintenance ("Dam Access Road"). Due to structural concerns, a portion of the Dam Access Road was moved to Westminster Park, closer to the boat launch, so that vehicles would no longer drive directly over the dam.

A system of trails exists on parts of the conservancy. The declaration created conservation areas on nearly every lot in the subdivision. They are defined in the declaration as areas encumbered by private easements for storm drainage and conservation of wetlands and must be left predominantly in their natural states.

Trails within conservation areas located on Lots 43-63 were cleared and marked in 1990 and 2004. Ralph Mezel, director of the conservancy and an employee of the developer, personally maintained and cut trails that were authorized by the association's board of directors.

Schebel sued the association, the conservancy and Ralph Mezel, seeking declaratory relief and specific performance on issues of riparian rights, maintenance and construction of nature trials, and placement of the Dam Access Road. The trial court granted summary disposition to Schebel in part and to the association in part. Schebel appealed from the trial court's grant of summary disposition in favor of the association and riparian owners of waterfront lots located on Brighton Lake.

The appeals court first addressed Schebel's argument that the trial court erred in granting the association's motion for summary judgment on the boat launch issue. The court disagreed, finding that the declaration and PUD controlled the issue. The court stated that a covenant running with the land is a contract created to enhance the value of property and, accordingly, is a valuable property right. In an action to enforce a covenant, the intent of the drafter controls and where the language of a restriction is clear, the parties are confined to the language employed. Here, all parties were subject to covenants and deed restrictions contained in the PUD that provides that covenants and deed restrictions governing use of the land in Pine Creek are binding on all successors of interest in the property. The declaration provides that:

Landbound Owners of this development will have access to Brighton Lake only in the designated common beach and dock areas in Pine Creek Park North. No Landbound Owners shall have access from within the Subdivision to any portion of Brighton Lake located outside the Subdivision unless and until a park, conservation area or easement specifically designated for that purpose shall be established and brought within this declaration.

Schebel urged the court to interpret the last sentence of the provision to find that the Westminster Park boat launch was "designated for that purpose," i.e., the launching of boats on Brighton Lake. However, the court noted that the clear intent of the PUD was to limit the number of boats on the lake and the declaration specifically prohibited the Landbound Owners from mooring boats in portions of Brighton Lake adjacent to the subdivision. Furthermore, the statement provides that, "No Landbound Owners shall have access … to any portion of Brighton Lake located outside the Subdivision…" The court pointed out that Westminster Park is inside the subdivision.

In addition, the declaration, which was drafted in 2000, specifically mentions the future inclusion of Westminster Park. Although Westminster Park was not conveyed to the association until 2005, its specific reference indicated that the final sentence could not have meant Westminster Park because it was already specifically named in the declaration.

Schebel next argued that no one should be allowed to use the boat launch if the Landbound Owners could not use it. The Schebels based their argument on a portion of the declaration that granted each owner a non-exclusive right and easement of use and enjoyment in the Park Areas "subject to Article III below" of the declaration. However, Article III of the declaration distinguishes between the rights of Landbound Owners and DPOs and limits the rights of Landbound Owners with respect to lake access and riparian rights. Article III clearly refutes their assertion that either everyone or no one should be allowed access to the boat launch. The appeals court affirmed the trial court's finding that Schebel did not have the right to access Brighton Lake via the Westminster Park boat launch.

The court next addressed Schebel's argument that the declaration set the location of the Dam Access Road and when the association moved the road, it caused injury to Schebel. The court determined that the declaration imposed on the association the responsibility to maintain and operate the dam. The declaration authorizes the association's board of directors to, "restrict access to all or any part of the restricted dam area, if necessary, in its sole judgment to provide for the safety of the residents of the subdivision or others…" The court noted that testimony at trial established that the Dam Access Road was moved to protect the structural integrity of the dam and to protect it from potential damage from vehicular traffic. The court found, therefore, that the association had the authority to move the road. Furthermore, the court agreed with the trial court that Schebel failed to show injury suffered because of the move to a safer location or any legally protected interest in the prior location of the road. Furthermore, the Schebels failed to demonstrate that moving the road back to its original location would in any way benefit them.

Schebel next argued that the trial court erred in refusing to grant summary disposition of the dispute about whether Mezel was cutting and creating new trails where they did not previously exist or simply maintaining existing trails. The appeals court disagreed. The court noted that the declaration established the conservancy and granted homeowners the right to use hiking trails. Specifically, the declaration identifies as "desirable" and "consistent with the Developer's intent and the purpose of the conservation easement" the "use of Conservation Areas by the Owners for hiking along the trail system established or to be established through the Conservation Areas." Further, the declaration expressly reserves for owners the right to, "walk over and across those portions of the Conservation Areas upon which a trail system has or will be constructed." The court found that the declaration made it clear that the trails were an intended and integral part of the conservation areas and must be maintained. Thus, it considered that the trial court properly determined that the association, conservancy and Ralph Mezel could maintain existing trails. Furthermore, it found that Schebel's attempt to limit the scope of the trial court's ruling to Lots 48 to 60 was without merit because of testimony of Mezel and other employees of the developer that they walked on trails from Lots 43 through 63 before the declaration was signed in 1990.

The appeals court further disagreed with Schebel that the trial court erred in granting Mezel's motion for summary disposition, finding that the declaration states that, "neither the Pine Creek Conservancy nor the members of its Board of Directors shall be liable in damages or otherwise for exercising or declining to exercise their rights under this conservation agreement." Mezel made clear in his testimony that he performed trail maintenance and cut trails with a directive from the association. Schebel's contention that Mezel acted outside the scope of his capacity as a director of the conservancy was unsupported by the evidence.

Lastly, Schebel argued that the trial court made a procedural error in entry of the judgment in this case. However, the appeals court found that any procedural error was not grounds for setting aside the judgment.

The appeals court affirmed the trial court's judgment and awarded costs to the association.

©2010 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.

[ return to top ]

Condominium Association Can Recover Appellate Attorney Fees

Springside Condominium Association, Inc. v. The Harpagon Company, LLC, 679 S.E.2d 85 (2009)

Attorney Fees: A condominium association is entitled to recover attorney fees incurred in an appeal because they are authorized by the Georgia Condominium Act and the association's bylaws.

Harpagon Company bought a unit in Springside Condominium, located in Fulton County, Ga., at a tax sale. It filed a petition to quiet title to remove a lien for unpaid assessments entered by Springside Condominium Association. At issue was whether Harpagon was liable for condominium assessments from the date of purchase through the date the owner's right to redeem the property expired. The association filed a counterclaim for unpaid assessments and attorney fees incurred. The association prevailed. Harpagon's subsequent appeal to the Supreme Court was dismissed, and the remittitur was returned to the superior court. The association filed a motion to recover attorney fees incurred in the appeal under the Georgia Condominium Act and requested a hearing on the motion. Harpagon argued that the association was not entitled to recover appellate fees, generally. The court, without holding a hearing, ruled in Harpagon's favor, and the association appealed the decision.

The appeals court determined that an award of attorney fees is only available if the award is supported by statute or contract. The act provides that, "[t]o the extent that the condominium instruments provide, … the lien for assessments shall also include … [t]he costs of collection, including court costs, … and reasonable attorney fees actually incurred." The court noted it had repeatedly recognized that condominium associations were entitled to recover reasonable attorney fees under the act. The association's bylaws authorize assessments against owners for "reasonable attorney fees actually incurred." Because attorney fees incurred in appeals were contemplated by the act and the association's bylaws, the court concluded that the trial court erred by failing to hold a hearing to determine the amount of reasonable attorney fees to be awarded to the association. It, therefore, vacated the trial court's order and remanded the case for a hearing on the issue.

©2010 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.

[ return to top ]

 

6402 Arlington Blvd. | Suite 500 | Falls Church, VA  22042 | (888) 224-4321
This e-mail was sent to inform you of CAI products, services or events.
For more information, please visit www.caionline.org.
Change your e-mail address