August 2010
In This Issue:
Association Cannot Appeal Judgment Language If It Doesn’t Appeal Ruling
Homeowner Who Sued Association Cannot Recover Litigation Costs
Developer Does Not Have Voting Rights After Class B Membership Terminates
Association Not a Debt Collector Subject to the Fair Debt Collection Practices Act
Amendment Invalid If Passed By Combination of Votes During, After Meeting
Unit Owner Entitled to Inspect Association's Financial Records
Argument Not Raised at Trial Barred on Appeal
Association Did Not Abuse Discretion in Assessing Liens, Fines to Enforce Covenants
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Association Cannot Appeal Judgment Language If It Doesn’t Appeal Ruling

Autumn Ridge Homeowners Association, Inc. v. Occhipinto, No. WD71122, Mo. App. Ct., June 8, 2010

Covenants Enforcement/Miscellaneous Association Problems: A Missouri appeals court dismissed an association's motion to amend the language in the trial court judgment because, although the language in the judgment was superfluous, the association did not appeal the ruling.

Frank and Carmeline Occhipinto purchased a home in Autumn Ridge subdivision in Platt County, Mo. Autumn Ridge Homeowners Association is authorized under the subdivision's declaration to levy and collect common area assessments. The association sued the Occhipintos to foreclose a lien for unpaid assessments.

At a bench trial, the association presented evidence showing that the Occhipintos' property was situated within the fourth plat of the subdivision. The evidence failed to show, however, that the fourth plat was encumbered by the declaration.

The association moved to dismiss the case without prejudice, and the Occhipintos objected, asserting that there was nothing to establish that their property was encumbered by the declaration. Upon inquiry by the court, the association conceded that it could not establish that the property was encumbered by the restrictions, and the court ruled in favor of the Occhipintos. Neither party requested findings of facts or conclusions of law.

In its final judgment, the court included among its findings two paragraphs to which the association objected: paragraph 4, which stated that the Occhipintos' property, Lot 149, was situated beyond the authority and jurisdiction of the association and the declaration, and, thus, not encumbered by them; and paragraph 5, which stated that any assessment or other obligations levied by the association against the Occhipintos' lot was void and of no effect. The judgment also denied the association any lien against the property.

The association filed a "motion to amend the judgment," seeking to strike paragraphs 4 and 5. Attached to its motion was a copy of a declaration of annexation that purportedly showed that the fourth plat of the subdivision was subject to the declaration.

At a hearing on the motion, the association argued that the judgment should be amended to strike paragraphs 4 and 5 because they contradicted the public record. It attempted to present a copy of the annexation document to show that the property was encumbered by the declaration. The Occhipintos objected on the basis that the document was not admitted at trial, and the court did not allow it to be admitted to the record.

The association argued that the paragraphs went beyond the pleadings because the Occhipintos did not seek affirmative relief at trial, and the language in the paragraphs had the effect of excluding the Occhipintos' lot from the authority of the association, to the detriment of any successor purchaser, because it created a potential cloud on the title and subsequent purchasers would be likely to want the benefits of the association and its amenities. The court denied the association's motion on the basis that no evidence was presented at trial to show that Lot 149 was included in the land bound by the declaration. The association appealed.

In its appeal, the association argued the trial court's "voluntary" findings contained in paragraphs 4 and 5 of the judgment were "gratuitous," in that neither party requested findings of facts or conclusions of law. It asserted that the paragraphs were unsupported by the evidence and provided relief to the Occhipintos beyond the scope of the pleadings or evidence presented at trial, and should be reversed or stricken from the judgment. The association asked the court to remand the case with instructions that the trial court amend the judgment to strike the paragraphs.

The appeals court recognized the association's underlying concern that the language in the paragraphs would preclude Lot 149, and perhaps other lots in the fourth plat, from the jurisdiction of the homeowners association. In its brief, the association conceded that it failed to establish that it was entitled to recover assessments from the Occhipintos. The association did not contest the trial court's finding for the Occhipintos on its claim for unpaid assessments. Its sole claim of error related to the trial court's gratuitous statements in paragraphs 4 and 5 of the judgment.

The appeals court determined that, as a threshold matter, the facts presented raised the question of whether the association was entitled to appeal incidental language in a judgment when it was not appealing the outcome of the case. Generally, the answer is no. When confusion arises from superfluous wording in a judgment, courts resort to the trial record to determine the true mandate of the judgment. When the mandate is clear, an appeal of the judgment will, as a rule, be unnecessary.

The court considered the issue of mootness. The mootness of a controversy is a threshold question in appellate review of the controversy. A case is moot if a judgment has no practical effect on the existing controversy. The existence of a controversy subject to some form of judicial relief is essential to appellate jurisdiction.

The court noted that a conclusion that exceeds the determination required to dispose of the claim is considered gratuitous surplusage. The court relied on case law determinations that irrelevant, superfluous, or overly broad incidental findings do not require reversal if a judgment is otherwise supported by the evidence.

In this case, the sole issue on appeal was the inclusion of language that the association complained was surplusage. The court held that superfluous findings generally do not present an issue for review by the court.

As a rule, if comments are superfluous, the matter is moot because there is no collaterally preclusive effect to the judgment; if they are not superfluous, then the area part and parcel of the issue properly decided by the court, and the language cannot be separately appealed without appealing the judgment. Either way, the appeal is subject to dismissal.

The court recognized that the trial court's comments in paragraphs 4 and 5 were effective for purposes of res judicata, to bar any further attempt by the association to collect assessments from the Occhipintos. Nevertheless, the comments had no collaterally preclusive effect to the status of the property itself, because neither party had proved whether the declaration encumbered it. The association's claims merely failed for lack of proof.

The appeals court concluded that while the judgment might have been better stated, the fact remained that the trial record could be employed to clarify any confusion as to the actual determination of the court. It found that the issue on appeal was moot and dismissed the motion.

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

Homeowner Who Sued Association Cannot Recover Litigation Costs

Dwan v. Indian Springs Ranch Homeowners Association, Inc., No. S-09-0064, Wyoming Supr. Ct., June 3, 2010

Architectural Control/Covenants Enforcement: A Wyoming Supreme Court affirmed a district court's finding that an owner who sued an association for breach of contract was not entitled to damages or attorney fees because neither was authorized by the declaration.

Ann Dwan purchased a lot in Indian Springs Ranch subdivision, located in Teton County, Wyo. In 1988, Indian Springs Ranch Homeowners Association approved plans for her house, even though the roof had a steeper pitch than was allowed under the subdivision's covenants and restrictions. In 2003, the association approved Dwan's plans for an addition with the same roof pitch, and in 2006, Dwan sought approval for another addition to her home, proposing the same steep pitch. The association denied her 2006 application on the basis that the roof pitch did not comply with the covenants.

Dwan sued the association, claiming her application was unreasonably denied. She sought both equitable relief and damages based on the association's alleged breach of the covenants. The trial court granted summary judgment in favor of the association on all claims, and Dwan appealed.

The Wyoming Supreme Court reversed the trial court's ruling and remanded the case (CAI Law Reporter February 2009), finding that it was unreasonable to require Dwan to alter her roof pitch in order to add an otherwise acceptable addition to her residence. The court stated that it defied reason to require a homeowner to build an addition onto a residence with a shallower roof pitch than the rest of the house. The court remanded the case for an entry of summary judgment in Dwan's favor.

On remand, the trial court granted summary judgment to Dwan on her claim for equitable relief; however, she contended that she was also entitled to recover damages for breach of contract because the association had violated the restrictive covenants. She filed a motion for summary judgment on the association's liability for damages and also sought to recover attorney's fees under the covenant's provisions.

The court denied her motions and granted the association's cross-motion on the issue. Dwan appealed, bringing the case before the supreme court a second time.

The supreme court stated that while restrictive covenants are contractual in nature, it does not necessarily follow that a homeowner can recover contract damages against the homeowners association. Dwan did not identify any provision of the declaration that supported her claims against the association; nor did she cite any legal authority to support her claims. Because she failed to establish that she had a viable cause of action, the supreme court upheld the trial court's grant of summary judgment.

Wyoming follows the rule that each party in a lawsuit bears its own fees in the absence of an expressed contractual or statutory provision for attorney's fees. Dwan claimed that she was entitled to recover attorney's fees under the terms of the declaration. The court observed that although the covenants allowed the association to recover attorney's fees from homeowners in actions to enforce the covenants, it did not allow a homeowner to recover attorney's fees in an action against the association. The court agreed with the trial court that Dwan was not entitled to recover attorney's fees from the association.

Finding no error in the district court's findings, the supreme court affirmed the rulings.

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

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Developer Does Not Have Voting Rights After Class B Membership Terminates

Highland Oaks Estates Homeowners Association, Inc. v. Estapa, No. 2010 CA 0146, La. App. Ct., 1st Cir., June 11, 2010

Covenants Enforcement/Developmental Rights: In an unpublished opinion, a Louisiana appeals court upheld dismissal of a suit against a homeowner improperly brought by the developer after the Class B membership had expired.

Highland Oaks Estates is a residential community in St. Tammany Parish, La., that consists of 84 lots. The developer, David Aymond, recorded restrictive covenants against the property. The covenants provided for creation of Highland Oaks Estates Homeowners Association to control, regulate and maintain the common facilities. The covenants provided for two classes of voting memberships in the association: Class A, consisting of purchasers, each of whom would be entitled to one vote for each lot; and Class B, consisting of 84 memberships, all of which were issued to the developer. The Class B membership was entitled to one vote for each membership so held; however, the Class B membership would terminate upon the occurrence of one of the following events:

(i) thirty (30) days following the date upon which the total authorized issued and outstanding Class A memberships equal eighty-four (84); or

(ii) on Jan. 1, 2015; or

(iii) upon surrender of said Class B memberships, as provided for in this article, the developer shall continue to be a Class A member of the association as to each and every lot in which the developer holds the interest otherwise required for such Class A membership.

Susan Estapa purchased a lot in Highland Oaks Estates in April 2007. By the end of April 2007, all 84 lots in the subdivision had been sold. In 2008, Estapa was elected president of the association. A meeting of the association members was held in May 2009, and she attended the meeting. David Aymond attended an association meeting in May 2009 and announced that he was in control of the association and would appoint officers and directors at his discretion, with no input from the lot owners. He then nominated himself to the board and appointed himself president of the association.

In July 2005, without giving notice to the lot owners, Aymond filed articles of incorporation for the association with the Louisiana Secretary of State. Paragraph A of the articles provided for a Class A membership that was nearly identical to that described in the restrictive covenants. However, Paragraph B of the articles, which described the Class B membership, was vastly different from the covenants, in that the number of Class B memberships was increased from 84 to 200 and the provision for termination of the Class B membership was entirely eliminated.

As the purported president of the association, Aymond demanded that Estapa turn over the corporate checking account to him. She refused, asserting that she was still the president. She then moved the funds to another bank. Aymond sued her for conversion, seeking a preliminary injunction to prohibit her from transferring or disposing of association assets. Estapa filed a third-party demand against Aymond for breach of the covenants, fraud, misrepresentation, unfair trade practices and defamation. Thereafter, she filed a motion for summary judgment, seeking dismissal of the suit against her on the basis that Aymond had no standing because he was not entitled to vote at the May 15, 2009 meeting, had no voting rights after May 2007, and his attempt to take over the board and/or the presidency was illegal.

The trial court granted Estapa's motion for summary judgment and dismissed the suit. Aymond appealed.

Since the material facts were not in dispute, the appeals court looked solely to the legal question presented by Estapa's motion for summary judgment: whether Aymond was entitled, as a matter of law, to vote at the association's meeting held on May 15, 2009.

The court noted that when the words of a contract are clear and explicit, no further interpretation may be made in search of the parties' intent. Based on its review of the restrictive covenants, the court found that the intent with regard to membership in the association was clear: that each lot owner shall be a Class A member and entitled to one vote for each lot owned, and that Aymond, as the developer, was entitled to be issued 84 Class B memberships in the association that would lapse and become null and void 30 days following the date that the total authorized issued and outstanding Class A memberships equaled 84. Evidence presented at court showed that the sales of lots were completed in April 2007. Thus, by the terms of the restrictive covenants, Aymond's Class B memberships (and voting rights) lapsed 30 days thereafter, or in May 2007.

Accordingly, at the meeting held May 15, 2009, the developer did not hold any Class B memberships. No evidence was offered to establish that the developer held any Class A membership. Therefore, Aymond was not entitled to vote at the meeting or appoint himself president or a member of the board of directors. The court found, as did the trial court, that he was without authority to bring suit against Estapa on behalf of the association.

The appeals court ruled that the trial court properly granted summary judgment in Estapa's favor and dismissed the suit brought by the association through Aymond.

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

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Association Not a Debt Collector Subject to the Fair Debt Collection Practices Act

Madura v. Lakebridge Condominium Association, Inc., No. 09-11636, U.S. App. Ct., 11th Cir., June 14, 2010

Federal Law and Legislation/Association Operations: In an unpublished opinion, a U.S. appeals court affirmed dismissal of a unit owner's claims that a Florida condominium association and its property manager acted as debt collectors subject to the Fair Debt Collection Practices Act when they foreclosed the owner's property for unpaid assessments.

Andrzej and Anna Madura owned a condominium unit managed by Lakebridge Condominium Association in Florida. In July 2007, the association sent Madura a "Notice of Intent to File Lien" for past due assessments with a statement of assessments owed to the association as of July 13, 2007. On Aug. 10, 2007, Madura demanded an explanation of the assessments and alleged that a portion of the assessments had been paid. The association sent another notice on Aug. 23, 2007, that included a statement of assessments owed as of that date. On Sept. 7, 2007, the association filed a lien against Madura's unit. The notices sent to Madura set out the association's name, address and telephone number; they detailed the date, description, assessment amount, interest amount, and total amount due. On Oct. 3 and 8, 2007, the association notified Madura of its intent to foreclose the lien. The letters included an amended claim of lien for past due assessments, costs and fees. Madura sued the association, alleging the association and its property manager had violated the Fair Debt Collection Practices Act.

The district court granted judgment on the pleadings, with prejudice, in favor of the association, holding that neither the association nor its property manager acted as a "debt collector" as the term is defined in the act. The court dismissed Madura's remaining state law claims without prejudice, and Madura appealed.

On appeal, Madura argued that the district court committed reversible error when it considered a "Management Services Agreement" between the association and its property manager, to conclude that the property manager acted as agent for the association and was not a debt collector under the act. Madura asserted that the Management Services Agreement was disputed and the Rules of Federal Civil Procedure require that the motion for judgment on the pleadings be converted into a motion for summary judgment.

The appeals court concluded that judgment on the pleadings was granted appropriately in favor of the association. The court noted that the act defines "debt collector" as "any person who … regularly collects … debts owed … or due another." The act defines a "creditor" as "any person … to whom a debt is owed."  The court determined the association was not subject to the act because it was a creditor, not a debt collector. However, the appeals court did acknowledge that the trial court's consideration of the disputed Management Services Agreement to determine that the property manager was not a debt collector for purposes of the act constituted error because Fed.R.Civ.P. 12(d) prescribes that a motion for judgment on the pleadings that presents matters outside the pleadings be treated as a motion for summary judgment. Nonetheless, the court concluded that judgment on the pleadings was properly granted, even ignoring the property manager's status under the Management Services Agreement. The pleadings made clear that the property manager did not violate the act.

The purpose of the act is to eliminate abusive debt collection practices. The association sent Madura verification of the debt with its Notice of Intent to File Lien. When Madura requested verification, the association, contemporaneously with filing of the lien, sent Madura a current statement in verification of the debt. Even if the property manager were a debt collector subject to the act, it had complied with the verification requirements of the act. The court could find no reversible error in the trial court's grant of judgment on the pleadings.

Madura complained that the trial court erred when it dismissed his state law claims without prejudice. He claimed that the court's decision not to exercise supplemental jurisdiction was an abuse of discretion because the statute of limitations had run out on some of the claims. The appeals court explained that a district court may decline to exercise supplemental jurisdiction if all claims over which it has original jurisdiction have been dismissed.

The court determined that the district court committed no abuse of its discretion when it dismissed Madura's state law claims. Under Florida law, he had four years to commence a suit for slander of title and intentional infliction of emotional distress; two years to file suit under the Florida Consumer Collection Practices Act ("FCCPA"); and, at the time of dismissal, approximately four months to file FCCPA claims and over two years to file his other state law claims.

In Madura's last assertion of error, he contended that the trial court abused its discretion when it denied his motion to amend his amended complaint. However, his motion was filed 22 days after final judgment, and the court observed that after judgment, a plaintiff who seeks to amend his complaint must do so within 10 days of entry of judgment. Because Madura failed to act within 10 days of the judgment, no relief was available to him.

After considering all the errors advanced by Madura, the appeals court found no basis for reversal and affirmed the district court's rulings.

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

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Amendment Invalid If Passed By Combination of Votes During, After Meeting

The Meadows Condominium Unit Owners Association v. Blakey, No. CA2009-09-247, Ohio App. Ct., June 1, 2010

Association Operations/Powers of the Association/Covenants Enforcement: An Ohio appeals court reversed an order for summary judgment in a foreclosure action, finding there to be genuine issues of material fact surrounding the manner in which an amendment increasing common expense assessments was enacted.

Jesse Blakey owns one of 56 units in The Meadows Condominiums in Butler County, Ohio. All unit owners are members of The Meadows Condominium Unit Owners Association.

In 2007, the association's board of directors sent all unit owners a notice of the annual meeting, informing them that voting would begin at the meeting on two proposed amendments to the declaration and bylaws that would be conducted over a 14-day period beginning the date of the meeting. Voting was to continue during the 14-day period until a sufficient number of votes were collected to either pass or defeat the proposed amendments. Ohio statutes require that amendments to the declaration must receive an affirmative vote of at least 75 percent of unit owners to pass.

The meeting took place on the scheduled date, and the amendments received 71 percent of the votes in favor and 13 percent of the votes in opposition. In accordance with the notice, votes were collected during the 14-day open voting period, and the final tally was 77% of the votes in favor and 13% of the votes in opposition. Having obtained enough votes to pass, the amendments were recorded.

The amendment that was the key to the dispute in this case modified the declaration and bylaws to allow the board to charge common expenses on a monthly and/or quarterly basis. Prior to the proposed amendment, assessments were levied on a monthly basis only. After the amendment was passed, the board altered assessments to impose quarterly charges in addition to monthly charges. According to the association, each owner's annual obligation remained unaffected by the change, but according to Blakey, his annual assessments increased by approximately $650.

Blakey refused to pay the quarterly assessments, asserting that the vote on the amendments was invalid. The association filed a lien against his unit and an action to foreclose the lien in June 2008. Blakey sued the association, and his suit was joined to the foreclosure action. Both parties then filed cross motions for summary judgment.

The trial court found that the final number of votes collected resulted in passage of the amendment and concluded that no questions of fact remained. The court determined that voting was conducted in accordance with the declaration and bylaws, and the amendments were passed through an action taken without a meeting.

The trial court awarded summary judgment to the association and subsequently issued a judgment entry and decree in foreclosure. Blakey appealed.

In his first assignment of error, Blakey maintained that the vote that passed the amendments contravened constraints imposed by the declaration, bylaws and Ohio law.

At the outset of its review, the appeals court observed that similar amendments had been stricken before. The court relied on Gormley v. The Meadows Condominium Unit Association, (Mar. 20, 2007), Butler CP. No. CV06 10 3802, in which the board called a special meeting at which votes cast for two amendments failed, and the meeting was adjourned. Board members then solicited votes from members who did not attend the meeting. The association claimed it acted within its authority because the bylaws authorized actions taken without a meeting. The trial court disagreed, declaring that "[t]he bylaws allow special meetings or actions without a meeting [,] but there is not [a] provision allowing a combination of the two]."  Such unauthorized combination is what the Gormley court found the board had attempted. That court found that both amendments failed at the special meeting and at the action without a meeting because an insufficient number of votes was received by either means when viewed individually and not improperly combined.

Blakey argued that the board had combined two methods—an annual meeting and an action without a meeting—in violation of the prohibitions set forth by the Gormley court. The association maintained that there was an open voting period rather than a single voting date, and unit owners received notice thereof. It asserted that all votes were properly obtained during the announced voting period and not improperly solicited after the conclusion of the annual meeting.

The appeals court found that despite the trial court's conclusion that the amendments were passed through an action without a meeting, the record did not consistently support its conclusion. Although the notice did not use the language "action without a meeting," the association argued that the notice was worded to convey that intention. However, the appeals court interpreted the notice to convey that there would be action taken at the meeting, not merely afterwards. Other evidence in the record suggested that the vote was accomplished by combining the annual meeting and an action without a meeting.

The resolution recording the amendments stated that an "annual meeting was held … for the purpose of … amending the declaration and bylaws …" This wording contradicts the association's claim that the voting was separate from the annual meeting, and the amendments were passed by an action without a meeting. In addition, the certificate to the resolution stated that the amendments were true and accurate copies of those passed at the annual meeting, when, in reality, the amendments were not passed at the meeting. In the court's view, this assertion insinuated that the annual meeting was combined with the subsequent action without a meeting to accumulate sufficient votes to pass the amendments.

After a thorough review of the record, the appeals court came to the conclusion that similarities between this case and the Gormley case were manifest. The court observed that the association convened an annual meeting, undertook a vote, may or may not have adjourned the meeting, and thereafter collected additional votes during an open voting period to pass the amendments. The court's review did not support the trial court's finding that there was no combination of methods to collect sufficient votes to pass the amendments. In the court's opinion, there remained questions of fact regarding whether the amendments were passed at the annual meeting, by an action without a meeting, or by an improper combination thereof. Construing the facts in Blakey's favor for purposes of the summary judgment order, the court held that these genuine issues of material fact precluded summary judgment.

The court sustained Blakey's first assignment of error, rendering his remaining assignments of error moot. The trial court's judgment was reversed and the case remanded for further proceedings consistent with its opinion.

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

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Unit Owner Entitled to Inspect Association's Financial Records

Palm v. 2800 Lake Shore Drive Condominium Association, No. 1-08-2436, Ill. App. Ct.,  May 28, 2010

Association Operations/State and Local Legislation and Regulations: An Illinois appeals court affirmed that under Chicago's "home rule," a unit owner is entitled to inspect a condominium association's financial records.

Gary Palm owns a unit in 2800 Lake Shore Drive Condominium. While serving on the board of directors, he became aware of various improprieties and departures from the condominium bylaws. He sought production of various books and records from 2800 Lake Shore Drive Condominium Association pursuant to the City of Chicago Condominium Ordinance. The association did not comply. Palm sued the association. His single-count complaint requested the trial court to allow him to grant an order requiring the association to allow him to inspect certain records, declaring members of the board exempt from having to state a proper purpose in order to obtain records, and declaring that the board may not take action except at an open meeting.

The association claimed it did not have to comply with the ordinance because it conflicted with Illinois state law and, therefore, was invalid. The City of Chicago intervened, alleging that the ordinance was validly enacted according to its home rule power.

Under the Illinois Constitution, a municipality with a population exceeding 25,000 is deemed a "home rule unit" and is granted authority to enact laws relating to the rights and duties of its citizens. It is intended to give home rule units like Chicago the broadest powers possible to regulate matters of local concern.

The trial court granted Palm's and the city's motion for summary judgment and ordered the association to immediately produce the requested documents to Palm, finding that the ordinance was valid and did not conflict with Illinois law. The court also granted interim attorney's fees to Palm. The association appealed.

The association argued in its appeal that the trial court erred in granting summary judgment to Palm because the city ordinance was invalid and the award of attorney's fees was improper. Additionally, the association asserted that the trial court erred in refusing to consider its motion for sanctions and in granting the association's request for certain documents pursuant to the condominium declaration.

Specifically, the association alleged that the ordinance was in direct conflict with the provisions relating to production of documents contained in both the Illinois Condominium Property Act and the Not for Profit Corporation Act. Palm responded that the ordinance's provision was the valid exercise of the city's home rule power.

The ordinance states:

No person shall fail to allow unit owners to inspect the financial books and records of the condominium association within three business days of the time written request for examination … is received.

The Condominium Property Act authorizes any member of a condominium association to inspect, examine and make copies of association records at any reasonable time, at the association's principal office, when the request is made in writing and with particularity. The statute also provides that the association's failure to make requested records available within 30 days constitutes a denial. The general Not for Profit Corporation Act allows any member of a corporation who is entitled to vote to inspect the corporation's books and records "for any proper purpose at any reasonable time." The association argued that these two provisions directly conflicted with the city ordinance.

The appeals court noted, however, that a statute intended to limit or deny home rule powers must contain an express statement to that effect. Unless a state law "specifically states that a home rule unit's power is limited, the authority of the home rule unit to act concurrently with the state cannot be considered restricted." The court found that neither act specifically excluded home rule units from governing the manner in which a condominium unit owner could gain access to the association's financial records. Although the ordinance does not contain the exact same language as either of the statutes, it was by no means rendered invalid.

Although the association raised the issue on appeal of whether the ordinance provisions regarding inspection of records were outside the city's home rule power, it failed to raise the issue of whether the provisions governing attorney's fees were also outside home rule power. Consequently, the court found that the association waived this issue on review.

The court noted that Palm provided the trial court with detailed records containing facts and computations upon which he predicated his request for attorney's fees. He also presented the court with information about his attorney's skill and standing, the nature of the case, the usual and customary charges for comparable services and an affidavit of a retired judge in support of his petition. The appeals court did not find that the trial court abused its discretion in its award of attorney's fees.

The association alleged that the trial court erred in refusing to consider its motion for sanctions, claiming that Palm violated an earlier court order related to Palm's fee petition. The court noted, however, that the brief submitted by the association contained no citations to legal authority, and treated the issue as having been waived for failure to cite authority.

The association's final contention was that the declaration conflicted with Sec. 19 of the Condominium Property Act. The court held that the act and the declaration were not inconsistent just because one requires a proper purpose for inspection of records to be stated and one does not. In fact, Palm did state a proper purpose in his original letter to the association seeking documents to establish fraud, mismanagement or self-dealing. Accordingly, the court held that the trial court did not err in granting Palm's request for inspection of the association's financial records.

The trial court's judgment was affirmed.

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

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Argument Not Raised at Trial Barred on Appeal

Prescott Green Condominium Association v. Walker, C. A. No. 24948, Ohio App. Ct., June 9, 2010

Covenants Enforcement/Powers of the Association: An Ohio appeals court affirmed an order granting summary judgment and a decree of foreclosure to a condominium association, dismissing the unit owner's counterclaim that the state's condominium statute violated her rights under the Ohio Constitution.

Suzanna Walker owns a unit in Prescott Green Condominium, located in Summit County, Ohio. She is a member of Prescott Green Condominium Association. The association filed a foreclosure action against her for unpaid assessments. Walker filed a counterclaim, alleging that the association failed to properly maintain her unit and refused to accept payments she made. The association filed a motion to dismiss.

The trial court granted the association's motion to dismiss regarding Walker's refusal-to-accept-payment claim because she could not establish that the association wrongfully refused to accept checks from her after she was in default. The court also granted the association's motion for summary judgment and issued a decree of foreclosure. Walker appealed.

In her appeal, Walker's assignment of error was that the trial court incorrectly dismissed her counterclaims under Sec. 5311.18(B)(6) of the Ohio statutes. She asserted that the statute was unconstitutional because it violated her right under the Ohio Constitution to seek redress in Ohio courts. The statute provides that:

In any foreclosure action, it is not a defense, set off, counterclaim, or crossclaim that the unit owners association has failed to provide the unit owner with any service, goods, work, or material, or failed in any other duty.

In her opposition to the association's motion to dismiss, Walker did not argue that the statute was unconstitutional; therefore, the appeals court determined she forfeited that argument on appeal. Under Sec. 5311.18(B)(6) of the Ohio statutes, a condominium association has a right to a lien on any unit for payment of the expenses that are chargeable against the unit and that remain unpaid for 10 days after the charge is due and payable. Therefore, the court concluded that Walker's claim was barred.

Under the Ohio Constitution, "[a]ll courts shall be open, and every person, for an injury done him in his land, goods, person, or reputation, shall have remedy by due course of law, and shall have justice administered without denial or delay." The association asserted that Sec. 5311.18(B)(6) did not violate the Ohio Constitution because Walker had adequate remedies under other sections of the statute. Under Sec. 5311.18(C), "[a] unit owner who believes that the portion of the common expenses chargeable to the unit … has been improperly charged may commence an action for the discharge of the lien in the court of common pleas of the county in which all or a part of the condominium property is situated." Under Sec. 5311.19(A), a condominium owner has the right to sue a condominium association for damages or injunctive relief if the association has violated the condominium's governing documents.

The appeals court ruled that Walker forfeited her argument that the condominium statute was unconstitutional and affirmed the judgment of the trial court.

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

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Association Did Not Abuse Discretion in Assessing Liens, Fines to Enforce Covenants

Raines v. Boulder Village Townhomes Association, No. A09-1079, Minn. App. Ct., June 8, 2010

Covenants Enforcement/Attorney's Fees: In an unpublished opinion, a Minnesota appeals court upheld a ruling that a townhome association had the authority to levy fines and impose liens to secure payment of those fines when a unit owner violated the association's governing documents.

Sandi Raines owns a unit in Boulder Village Townhomes located in Dakota County, Minn. After holding hearings in her ongoing disputes with Boulder Village Townhomes Association, the association ruled against her on several issues, fined her and imposed liens on her unit to secure payment of the fines. Raines sued the association, and the court granted summary judgment to the association on her claims and the association's counterclaim. She appealed.

Raines challenged the summary judgment granted on her claims against the association for slander of title, declaratory judgment, breach of the covenant of quiet enjoyment and discrimination.

Raines argued that the liens placed on her unit were false statements because they were not authorized by relevant statute or by the association's governing documents. Slander of title requires a showing that a false statement is made about a property with malicious intent; however, Raines presented no evidence of falsity or malice.

Although it was not clear whether Raines waived the issue of the 2005 lien with the district court, the district court did not address that lien in its order; nor did Raines request the district court to address an omitted issue. Thus, her argument regarding the 2005 lien was not properly before the court for review.

The crux of her challenge to the 2007 lien was that it allegedly included assessments related to violations of non-existent parking regulations. Some parking regulations were enacted after the 2007 assessment against Raines, but the association asserted that her prior parking-related conduct violated existing declaration provisions and rules and regulations. She did not argue that the provisions were improperly applied to her.

She also challenged that portion of the 2007 lien that secured her obligation to pay an assessment for feeding raccoons on her property. The association asserted that the assessment was levied because Raines violated portions of the declaration and rules and regulations that prohibited conduct that could cause waste or an increase in insurance rates, or could otherwise cause liability, health or safety risks for the association, including feeding of wild animals other than birds. On appeal, Raines did not assert that the provisions were improperly applied to her, but argued that she was penalized for feeding raccoons before enactment of the provisions that prohibited that conduct.

Raines argued that the trial court erred in granting summary judgment in favor of the association on her claim for a declaratory judgment regarding the validity of 2007 lien, but because the court found that the association had the authority to rule that she violated the provisions, the court did not address her argument on this point any further. Likewise, her argument that the 2007 lien was excessive was not raised in her initial brief, and was, therefore, not properly before the court, so the court declined to address the question.

Raines argued that under the association's governing documents, the association's failure to notify her within six months that her deck encroached on the common areas was waiver of its right to take action against her. However, she did not identify what governing documents were the basis for her argument; therefore, the court considered her argument waived.

Raines contended that the association violated her right to quiet enjoyment by subjecting her to stricter enforcement of the declaration and rules and regulations than other unit owners. The declaration states that, "[all] Owners and Occupants" have a right of quiet enjoyment in units and are to act in a manner that will not "unduly restrict, interfere with or impede the use of the Property …" The court determined that the association had a duty to protect the interests of other unit owners, and, in this case, certain assessments against Raines were based on complaints by other unit owners. The court found that she had not shown that the association lacked authority to act against her, or that the exercise of its authority was hostile to her. She alleged that the association employed a double standard by requiring that she remove her deck's ramp because it encroached on common property, while other owners were not required to remove invisible dog fences that allegedly encroached on common areas. However, she did not identify third parties or identify what part of the trial record supported her assertions.

She asserted that the association refused to permit reasonable modifications to her property so that it could be occupied by her disabled mother. The trial court granted summary judgment to the association on this claim, noting that (1) Minnesota law discrimination claims must be brought within one year of the practice at issue; (2) the association denied Raines' application to retain her unapproved ramp; (3) Raines filed her suit two years after the association denied her application; and (4) even if Raines' 2008 amended complaint related back to her 2006 complaint, more than one year elapsed between the alleged discriminatory practice and the commencement of her lawsuit.

Raines argued to the contrary based on her theory of continuing discriminatory violations related to a series of ramp-related incidents occurring as late as 2007. However, her argument was not presented at trial, and, thus, was not properly before the court.

She argued that, to the extent that the association's attorney assisted the insurer's attorney in defending against the insured claims, requiring her to pay the resulting attorney's fees violated the anti-subrogation provision of Minnesota law. The court agreed.

To the extent the association's attorney did work necessary to defend the association against Raines' uninsured claims or pursue the association's counterclaim, that work, even if it had ancillary benefit to the insurer's defense of the insured claims, was work that could be the basis for a fee award; but to the extent that the association's attorney did work that was not required to defend the association against Raines' uninsured claims or pursue the association's counterclaim against Raines, that work, even if it reduced the fees generated by the insurer's attorney, should not be the basis of a fee award against Raines. The court found that the district court's findings were insufficiently specific for the court to review whether and to what extent the fees awarded against Raines were properly apportioned. Therefore, the court reversed the fee award and remanded the issue to the district court to clarify whether and to what extent the award was for work done on matters not involved in defending uninsured claims or pursuing the association's counterclaim.

Raines also alleged that duplicative work by the association's attorney was motivated by intent to damage her, but the district court made no such finding; and, to the extent that she asked the appeals court to make that finding, she ran afoul of the scope of its review.

She challenged the trial court's denial of her motion to vacate the judgment. The court observed that reopening the judgment would require that Raines show (1) a reasonable defense on the merits; (2) a reasonable excuse for her failure to act; (3) that she acted with due diligence after notice of the entry of judgment; and (4) that no substantial prejudice would result to the association if the judgment was vacated. Her motion to vacate argued that her failure to receive a copy of a discovery order precluded her from seeking discovery allowed by that order, which would have shown the existence of a reasonable claim on the merits. However, the trial court stated that even though the order was sent to Raines' prior counsel due to an administrative mix-up, she, nevertheless, learned about the order on the same day as the association. The trial court stated that its prior summary judgment order showed that Raines lacked a defense on the merits, and the only effect of the discovery order would have been to allow her to re-examine documents that she had already examined. The appeals court concluded that not only did the record not show that the trial court wrongly applied the required factors, but Raines failed to effectively challenge the court's analysis of those factors.

Because the record supported the trial court's determinations that Raines failed to show two elements necessary to vacate a judgment, the appeals court did not address whether she satisfied the other two elements, and left the question of whether to reopen the record on remand up to the discretion of the trial court.

The trial court's judgment was affirmed in part, and reversed in part. The case was remanded for more specific findings regarding the trial court's award of attorney's fees.

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