February 2014
In This Issue:
Statute of Limitations Bars Claim against Association President
Absentee Ballot Is Not a Written Consent
Owner Must Pay Assessments on Number of Lots Shown on the Plat
Owner Can Pursue Association for Its Representations Regarding Maintenance Obligations
Association Cannot Expand Easement Beyond Original Scope
Members May Ratify Association Action After the Fact
Liability Insurance Policy Excluded Claims Arising from Damage to Personal Property
Trial Court Is Authorized to Appoint Receiver for Condominium Association
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Statute of Limitations Bars Claim against Association President

Royal Forest Condominium Owners’ Association v. Kilgore, No. ED99047 (Mo. Ct. App. Dec. 24, 2013)

Association Operations: A Missouri appeals court ruled that a condominium association’s action against a former president for alleged improper payments was barred by Missouri’s statute of limitations.

Royal Forest Condominium Owners’ Association (association) governs the Royal Forest Condominium in St. Louis County, Mo. Donna Kilgore served as the association’s president from 1998 through 2004. The association’s bylaws provide that the president is a non-compensated, volunteer board member. There are no exceptions in the bylaws that allow compensation for any board member. The bylaws also require every unit owner to pay a monthly condominium fee.

During Kilgore’s tenure as president, she oversaw certain construction contracts, which she claimed were outside the scope of her duties as president and took 25 to 30 hours of her time each week. In October 2001, Kilgore informed the association that she did not wish to be reelected president or continue overseeing the contracts unless she could receive compensation for the work.

One board member objected to Kilgore’s request as a violation of the bylaws’ prohibition against compensation; however, at the association’s October meeting, the unit owners voted to give Kilgore compensation, not as a board member, but for her construction management work. In December 2001, the owners voted to waive Kilgore’s condominium fees as a form of compensation. Kilgore was reelected president, and from 2002 to 2004, her monthly condominium fees were credited and recorded in a ledger maintained by the community manager.

In May 2011, the association sued Kilgore for the credited fees, seeking damages for alleged breach of contract, fraud and unjust enrichment. The unjust enrichment doctrine is the principle that one person should not be permitted unjustly to enrich himself at the expense of another but should be required to make restitution for the benefits received where just and equitable to do so. The trial court ruled in the association’s favor and awarded damages in the amount of $4,104, which represented three years of monthly condominium fees, and $2,500 for attorney’s fees. Kilgore appealed.

On appeal, Kilgore argued that the association’s claim was barred by the statute of limitations (the maximum time in which suit can be filed or rights enforced). Missouri law provides for a five-year statute of limitations on all contract claims. Since the association’s claim for unjust enrichment was based on an implied contract obligation, the court found the action was subject to the five-year statute.

The parties agreed that the five-year statute applied, but they disagreed as to when it began. Missouri statutes provide that the limitation period begins when a cause of action accrues and the damage can be ascertained. Damage may be ascertained when a reasonable person would have been put on notice that substantial damages may have occurred.

Here, meeting minutes showed that, in October 2001, Kilgore’s request to waive her monthly dues was discussed and approved. The minutes also showed that the secretary objected to this improper compensation. At a meeting in December 2001, a proposal to apply Kilgore’s monthly fees to common area repair expenses in consideration for her supervising major capital expenditures over the next two years was submitted to the board and approved. Minutes of the January 2002 meeting recorded that the board approved the minutes of the December 2001 meeting.

Based on these facts, the appeals court concluded that any damage sustained by crediting Kilgore’s monthly condominium fees was ascertainable by the association each month that it was credited. The first monthly credit Kilgore received was in January 2002. From documentation regarding the dispute over the decision to credit Kilgore the monthly fees, the appeals court concluded that the board was put on notice of a potentially actionable injury at that time.

Kilgore’s term as president ended in December 2004, and that was the last month she received credit of her monthly fees. Although minutes of past board meetings were stored with the community manager, the new board did not review them until Fall 2010. While the board argued that the bylaws did not require subsequent boards to review actions of past boards, and, therefore, the damages were not ascertainable, the appeals court disagreed.

Although ample documentation put board members on notice that Kilgore’s monthly association fees were credited, no member of the board took an opportunity to ascertain the extent of any damages by obtaining and reviewing Kilgore’s tenant ledger, but the fact remained that the opportunity existed at that time.

Because the last alleged damage (the final fee credited to Kilgore in December 2004) could have been ascertained by January 2005, and the association did not file its suit until May 2011, the association failed to bring the action within the applicable five-year statute of limitations.

The appeals court reversed the judgment of the trial court and vacated its damage award to the association.

©2014 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.

Absentee Ballot Is Not a Written Consent

Berkovich v. Casa Paradiso North, Inc., 125 So.3d 938 (Fla. Dist. Ct. App. May 29, 2013)

Association Operations: A Florida appeals court ruled that absentee ballots could not be counted to establish a quorum at a housing cooperative meeting or for voting at the meeting.

Alex Berkovich purchased a unit in Casa Paradiso North, Inc. (co-op), a housing cooperative in Broward County, Fla. In January 2005, when Berkovich was in the process of buying the unit, the co-op’s president informed him that the board was considering changes to the bylaws regarding the length of tenancies. Berkovich asked the president to keep him apprised if any amendments were going to be passed.

Later that year, the co-op board sent out ballots for proposed changes to the bylaws, one of which was a provision to restrict unit leasing terms to six months per year. The votes were to be counted at a meeting held on May 5, 2005.

The bylaws provide for amendments to be made “at any duly called meeting of the members, provided . . . three-fourths of the entire membership vote for the amendment at a called meeting, or give their consent thereto in writing.” The bylaws further provide that 50 percent of the total number of co-op members, present in person or represented by proxy, is the required quorum at all co-op member meetings to transact business.

The co-op needed 30 members in attendance or represented by proxy to establish a quorum at the May 2005 meeting. Twenty members attended—14 in person and six by proxy. Also, 51 members submitted absentee ballots. The board counted 53 votes (including the absentee ballots and in-person votes) in favor of the amendment and concluded that it had passed.

Berkovich learned about the amendment sometime after he took title to his unit in September 2005. In March 2009, the co-op sued Berkovich to prevent him from renting his unit to a tenant who had been leasing for more than six months. Berkovich filed a counterclaim against the co-op, alleging the board members breached their fiduciary duty when they enacted a lease restriction knowing they lacked the requisite quorum. He sought a declaration that the amendment was improperly passed and invalid.

Berkovich filed a motion for summary judgment (judgment without a trial). The trial court found that the bylaws were ambiguous, but the meeting had been called unequivocally for a vote, and the vote was accomplished by those who were present in person, by proxy and by ballot. The trial court denied Berkovich’s motion.

Subsequently, the co-op moved for summary judgment on its request for an injunction and on Berkovich’s counterclaim. The trial court ruled in the co-op’s favor on Berkovich’s counterclaim but denied the co-operative’s motion for injunctive relief. Berkovich appealed.

The appeals court considered three relevant provisions of the bylaws. First, a quorum of at least 50 percent of the total number of members must be present “in person or represented by proxy” to conduct business at a meeting other than an annual meeting. Second, provided a quorum is present, “the vote of a majority of the members present in person, or represented by proxy, shall decide any question brought before such meeting.” Third, “[a]t any meeting of the members, every member having the right to vote shall be entitled to vote in person, or by proxy appointed by an instrument in writing subscribed by such member for such meeting.”

The appeals court did not find the bylaws ambiguous. Although “quorum” commonly means the presence of individuals, the bylaws provide for both persons and proxies to be counted toward a quorum. However, the bylaws did not contemplate that written votes could be construed as proxies or used to determine the presence of a quorum.

This interpretation is supported by Rule 61B-23.002(8) of Florida’s Administrative Code, which provides that, “[f]or the purposes of establishing a quorum at any association meeting, only the voting interests present in person or by proxy shall be counted. The written joinder or absentee ballot of a unit owner may not be utilized to establish a quorum.”

While the appeals court recognized that the requisite member approval to amend the bylaws could be accomplished either by voting at a meeting or by written consent, it concluded that a ballot is not a written consent. Under Section 617.0701(4)(a) of the Florida Statutes, a written consent must identify the person giving consent and include his or her signature. A ballot, however, is anonymous, and the co-op specifically described the document as a “secret ballot.”

For these reasons, the appeals court reversed the grant of summary judgment in the co-op’s favor and remanded the case for entry of summary judgment in favor of Berkovich on his claim for declaratory relief.

©2014 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.

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Owner Must Pay Assessments on Number of Lots Shown on the Plat

Straub v. Muir-Villas Homeowners Association, Inc., No. 4D12-1335 (Fla. Dist. Ct. App. Dec. 18, 2013)

Covenants Enforcement: Because the declaration was not amended to reference re-platted lots, the owner must pay assessments on the number of lots originally platted.

The Villas at Muirfield is a neighborhood within the larger development of Palm Beach Polo and Country Club in Palm Beach County, Fla., which is governed by Muir-Villas Homeowners Association, Inc. (association).

The rights and responsibilities of the association and residents of the Villas are contained in a declaration of covenants, conditions and restrictions. Article II of the declaration provides that each lot is subject to assessments charged by the association. In the event of nonpayment, the association has the power to place a lien on the property and to foreclose the lien.

The Villas lots are shown on several land plats. In 1988, the declaration was amended to subject the lots on Plat 5, which originally consisted of nine lots, to the declaration. In 1989, a re-plat of the property was recorded that reconfigured the original nine lots on Plat 5 into four larger lots. Straub acquired lots 1 through 8 (re-platted as lots 1 through 3).

The association had made an agreement with the prior owner of lots 1-8 (now 1-3) to pay only half the assessments paid by other owners, and in exchange the property owner—in this case Straub—would maintain his own property. Two amendments to the declaration were made to reflect this agreement. Nonetheless, Straub never paid assessments on his Villas lots.

The association filed a lien against Straub’s lots for unpaid assessments and subsequently sued him to foreclose the lien. At trial, Straub argued that he was exempt from assessments under the declaration; and, alternately, if he were required to pay assessments, they should be based on the re-platted number of lots. The association argued it was entitled to recover assessments on all eight lots on Plat 5 because the declaration was never amended to reflect any re-plat or change in the number of lots.

The trial court found that the association was entitled to assess Straub’s property as eight separate lots at a rate of 50 percent per lot. The final judgment ordered Straub to pay the association $145,824.67 in unpaid assessments, late fees and interest, and $71,955.04 in attorney’s fees and costs. Straub appealed.

Straub argued that his property should be assessed according to the three lots identified on the re-platted Plat 5 rather than the original eight lots. The association responded that the re-plat was irrelevant because the association did not approve it, and the declaration was not amended to reflect it.

Under the declaration, each lot owner is required to pay an assessment. “Lot” is defined as one of the numbered parcels shown on specific plats. Straub claimed that the reference to specific plats could refer to re-plats as well. The appeals court, however, found that since the plat definition in the declaration specifies certain plats by their recording information without contemplation of any amendments, the term could not encompass any plats other than those specifically identified.

The appeals court found nothing ambiguous about the declaration’s operative language. Accordingly, Straub owes assessments on the eight lots shown on the original plat.

The trial court’s judgment was affirmed.

©2014 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.

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Owner Can Pursue Association for Its Representations Regarding Maintenance Obligations

Polo Golf and Country Club Homeowners’ Association, Inc. v. Rymer, Nos. S13A1635, S13A1636 (Ga. Ct. App. Jan. 21, 2014)

Covenants Enforcement: A Georgia appeals court held that a lot owner could pursue a case against an association where the association told the owner it would repair stormwater maintenance facilities on the owner’s lot, even though the subdivision covenants required the owner to repair the facilities.

Polo Golf and Country Club Homeowners’ Association, Inc. (association) governs the Polo Fields subdivision in Forsyth County, Ga. The subdivision covenants, recorded in 1987, require each homeowner to maintain and repair any stormwater facilities or devices on his or her lot that affect or alter the natural flow of surface water. The association is empowered to pursue remedies against any homeowner who violates this covenant.

Forsyth County enacted a stormwater management ordinance in 1996 that authorized its Engineering Department to determine how stormwater facilities are operated and to adopt and implement the County’s stormwater management program. The ordinance also provided for the Department to develop an addendum to the state stormwater management design manual as part of the program. The addendum adopted by the Department in 2004 required homeowner associations to take responsibility for stormwater management facilities within their subdivisions.

The Rymers own a home in Polo Fields. After their house was flooded repeatedly, they demanded that the association and the County take action to fix the stormwater system. The association responded that it had given notice to the County that neither the association nor the homeowners should be held responsible for the maintenance, repairs and continued upkeep of the stormwater easements. The association also informed the Rymers that it had commissioned a stormwater facilities study. The study reported that much of the system was failing because the corrugated metal pipes had exceeded their 25-year life span.

Later, the association informed the Rymers it would be selecting a contractor to repair all stormwater facilities in the subdivision, including those on their property, at the association’s expense. However, the repairs were never made, and the Rymer’s property experienced additional flooding. At no time did the association claim that the Rymers were responsible for repairing their own stormwater facilities.

The Rymers sued the association and the County. The association counterclaimed, seeking an injunction to compel the Rymers to repair the stormwater facilities on their property as required by the covenants. The association also cross-claimed against the County, claiming that it was unconstitutional for the County to require the association to maintain the stormwater facilities.

Subsequently, the pipes around the Rymers property failed completely, causing not only additional flooding on the Rymers’ property, but flooding and sinkholes on other lots. The County issued a notice to comply and warning to the association, pursuant to the terms of the addendum. In so doing, it directed the association to make necessary repairs within 30 days. The association did not make the repairs, and the County issued a notice of violation.

The association filed a separate action against the County, seeking a declaration that the addendum impaired the covenants’ obligation and was unconstitutional and invalid. The trial court denied the Rymers’ and the association’s motions, but granted summary judgment (judgment without a trial) to the County, finding that the addendum could be enforced against the association. The association appealed.

The appeals court held that the association could not enforce the maintenance covenant against the Rymers. When the Rymers brought their flooding problem to the association’s attention, the association took the position that the Rymers were not responsible for the stormwater facility upkeep. Instead, the association stated that maintenance and repair responsibility rested with the County. Moreover, the association assured the Rymers that it would make repairs to the stormwater facilities at its own expense. The Rymers argued they had relied on the association’s promises to make the necessary repairs, but the repairs were never made, causing additional flooding.

The appeals court noted that, with these facts, a jury could find that the Rymers reasonably relied on the association’s promise. Furthermore, a jury could determine there was sufficient consideration to enforce the association’s promise. Accordingly, it could not be said that the trial court erred in denying the association’s motion for summary judgment in its dispute with the Rymers.

The appeals court did not address the association’s claim that the addendum was unconstitutional. The appeals court found that the addendum did not apply to the association because the addendum was replete with language to indicate that it applied only to new developments and re-developments. Accordingly, the trial court should have granted the association’s motion against the County.

©2014 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.

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Association Cannot Expand Easement Beyond Original Scope

Crabapple Lake Parc Community Association, Inc. v. Circeo, No. A13A1584 (Ga. Ct. App. Nov. 21, 2013)

Developmental Rights/Covenants Enforcement: A Georgia appeals court affirmed that only lot owners whose lots abutted the lake could use the lake, and an association easement did not authorize all other lot owners in the subdivision to access the lake.

In 1993, Torrey/Lake Parc, L.P. (declarant) developed a 260-lot subdivision in Roswell, Ga. The initial subdivision property was submitted to a Declaration of Protective Covenants for Crabapple (declaration), and Crabapple Lake Parc Community Association, Inc. (association) was created to govern the community.

A lake adjacent to the subdivision abuts approximately 20 lots (lake-lots). The lake was not included in the property originally submitted to the declaration. However, the original declaration provided that use of the lake was restricted to lake-lot owners.

In August 1994, the declarant subjected an additional 7.43 acres of land to the declaration and conveyed the tract to the association. The tract included the lake, an earthen dam and additional land below the dam. The deed to the association referred to a recorded plat for Crabapple Unit II. On the plat, the lake is labeled “LAKE” and underneath it “Common Area.” The plat also depicts a 20-foot maintenance and access easement running along the common property line between lots 58 and 59, with 10 feet of easement on each lot (easement).

Janet Lacey purchased lot 58 in 1995, and Louis Circeo purchased lot 59 in 2001. Both deeds incorporate, by reference, the Crabapple Unit II plat and state that the lots are subject to all easements and restrictions of record.

In 2008 and 2009, the association began a project to improve the lake and dam. It planned to construct a park on top of the dam and a wooden footbridge over the easement for all community lot owners to use. In February 2008, following a membership vote, the association recorded a declaration amendment that purported to open access to the lake to all lot owners through the easement.

Before beginning construction, the association sued Circeo and Lacey for a judicial determination concerning the easement. The association argued that, based on its name, the easement had two functions—maintenance and access. While the association required the easement for lake and dam maintenance, the “access” function gave the association the authority to allow all association members access to the lake and dam for recreational purposes through the easement. Circeo and Lacey argued that such expanded access (as well as any construction on the easement) was prohibited without their consent because it would unreasonably expand the original easement’s scope and nature.

The trial court ruled in favor of Circeo and Lacey, holding that the easement came into existence when the lake was accessible only to lake lots, at which time its scope was determined. The lake was a limited common element, and the easement did not authorize general access to the lake for all association members. Further, the scope of the easement could not be extended or expanded after the fact. The association appealed.

On appeal, the association argued that the trial court misapplied the rules of contract interpretation to the declaration. The appeals court held that the declaration is indeed a contract and that contract interpretation rules are to be applied to determine the meaning of the declaration’s terms. Georgia law also applies contract interpretation rules to easements. Under these rules, the declaration and the easement terms are to be interpreted so as to give a reasonable, lawful and effective meaning to all terms rather than rendering portions to be unreasonable or of no effect.

The appeals court noted that when the lake and dam were conveyed to the association, they became “common property” under the declaration’s terms. The declaration also provides that every lot owner shall have a right to use and enjoy the common property. However, at the time the lake was conveyed to the association, the declaration limited lake use to lake-lot owners.

Applying contract rules, the appeals court held that the specific restriction limiting lake use to lake-lot owners controls over the general access to common property granted to all members. Therefore, the word “access” in the easement’s name did not indicate that all members had a right to access the lake and dam. Finally, even if the term “access” was ambiguous, circumstances showed that no association member had ever used the easement.

The appeals court affirmed the trial court’s ruling.

©2014 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.

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Members May Ratify Association Action After the Fact

Port Liberte II Condominium Association, Inc. v. New Liberty Residential Urban Renewal Company, LLC, Nos. A-2574-11T1, A-3129-11T1 (N.J. Super. Ct. App. Div. Jan. 21, 2014)

Powers of the Association: A N.J. appeals court determined that an association obtained the requisite approval of its members when the members ratified the litigation after the lawsuit had been filed.

Port Liberte II Condominium Association, Inc. (association) manages a 225-unit condominium development in Jersey City, N.J. After the developer turned the project over to the association’s members, a number of alleged construction defects were discovered in the common areas.

The association attempted to negotiate a settlement with the developer; but, ultimately in March 2008, it filed suit against the developer, the general contractor and numerous subcontractors (the defendants) before the statute of limitations expired (a law setting a maximum time period during which suit can be filed or rights enforced). Due to the time limit, the association proceeded to file suit without obtaining member approval, even though its bylaws provide that the commencement of litigation must be decided by a member vote at a special meeting.

Even though suit had been filed, the parties continued to negotiate. When negotiations failed, the association called a member meeting in October 2009 to obtain approval to pursue the litigation and to borrow money to fund the litigation. At the meeting, the members present voted 72 to 3 to obtain the loan and pursue the litigation. Thereafter, no member objected to the vote, intervened in the lawsuit or questioned the association’s legal authority to conduct litigation.

In May 2011, the defendants filed a summary judgment motion, seeking to dismiss the lawsuit on the grounds that the association had not received proper authority from its members to pursue litigation. The trial court granted the motion and dismissed the lawsuit.

In October 2011, the association held another meeting to ask members to ratify the litigation filing, which they did 65 to 1. The association then filed a motion to reinstate the complaint. The trial court denied the motion stating the association lacked standing (authority to sue or right to complain) at the suit’s commencement and that could not be cured. This meant the members faced what the association contended was an $18 million construction defect repair cost without recourse against the defendants. The association appealed.

The appeals court held that the members could remedy the lack of authorization by voting to ratify the lawsuit filing. The appeals court found that to deny the members the chance to ratify the litigation was contrary to the condominium act and the spirit and purpose of the bylaws. The condominium act authorizes a condominium association to file suit against builders and other third parties for damage to the common areas.

The ratification concept has been applied in situations where an entity has the legal power to act if it follows the required formalities. Acts that are ultra vires (without any authority to act) are void and may not be ratified, while intra vires acts (within the scope of authority) may be ratified. An act is ultra vires if the entity is utterly without capacity to perform the act.

Ratification must be accomplished with the same formalities required for the original authority. If the action is properly ratified, the approval relates back to the date of the original action. The appeals court concluded that the association’s members properly ratified the lawsuit filing. Not only did the appeals court find that the trial court disserved the members’ interests by not recognizing the ratification, but it determined that the defendants had no standing to enforce the owners’ rights under the bylaws.

The trial court’s orders were reversed, and the case remanded to the trial court for reinstatement.

©2014 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.

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Liability Insurance Policy Excluded Claims Arising from Damage to Personal Property

Salisbury West Condominium Trust v. Travelers Casualty & Surety Company of America, No. 13-cv-40051-TSH, U.S. Dist. Ct. (D. Mass. Oct. 15, 2013)

Risk and Liability: A Massachusetts district court dismissed a suit by a condominium association against its insurance provider because the insurer showed that the claims for which the association sought coverage fell squarely within the policy’s exclusions clause.

Salisbury West Condominium is a development in Worcester, Massachusetts. The development is managed and maintained by Salisbury West Condominium Trust (trust). The Hannigans own Unit 207 in the condominium. In 2008, Travelers Casualty and Surety Company of America (Travelers) issued a “Non-Profit Management and Organization Liability Insurance Policy” to defend and indemnify the trust against liability it might incur in connection with its management of the condominium.

In December 2008, the Hannigans notified the trust that remedial measures taken by the trust to address ground water flooding had failed, and ongoing flooding had damaged their unit and personal property. The trust forwarded the Hannigans’ letter to Travelers, demanding that Travelers defend and indemnify the trust against liability from the Hannigans’ losses. Travelers disclaimed coverage based on a policy endorsement exclusion. In May 2010, the Hannigans sued the trust for damages. Again the trust sent Travelers their complaint, reiterating their demand that Travelers defend and indemnify the trust against the Hannigans’ claims. Travelers again denied coverage.

In January 2013, the trust wrote Travelers claiming that Travelers had erroneously relied on the Tangible Property Exclusion (TPE) to deny coverage. The trust contended that the damage to the Hannigans’ property resulted from a broken water pipe and, thus, was not within the language of the TPE. Travelers again denied coverage.

When further correspondence failed to resolve the matter, the trust sued Travelers, alleging breach of contract and seeking a declaration that Travelers must defend and indemnify the trust against the Hannigans’ claims.

Travelers filed a motion to dismiss, asserting that the trust had purchased a directors and officers liability policy to protect the trust from claims in connection with its management responsibilities to the condominium owners. The trust did not pay for, and Travelers did not issue a policy to protect the trust from liability for any type of bodily injury, death, mental and emotional injury or tangible property loss from unit owners. Travelers pointed to the plain meaning and broad scope of the exclusion, which excluded coverage:

. . . based upon, arising out of, directly or indirectly resulting from, in consequence of, or in any way involving bodily injury, sickness, mental anguish, emotional distress, disease or death of any person . . .

Further, the TPE expressly barred coverage for any claims for or arising out of any damage, destruction, loss of use or deterioration of tangible personal property.

The court found that the choice and breadth of the words “arising out of” unambiguously conveyed that injuries to persons or property were excluded from the insurance coverage. In sum, the court concluded that the TPE was a very broad provision, which unambiguously expressed the exclusions that applied to the policy. Therefore, Travelers met its burden of showing that the exclusion was unambiguous and subject to interpretation as a matter of law.

The court noted that the trust demanded that Travelers defend and indemnify claims for personal injury, emotional distress and property damage allegedly caused by flooding. The Hannigans sought damages for “destruction of personal property and sentimental possessions; damage to the integrity of their residence; improper and illegal installation of a sump; and, most significantly, lasting personal injury to safety, health, and welfare.” Taking all facts pleaded by the trust as true, the trust could not demonstrate that it was entitled to the relief it sought.

As a matter of law, the plain language of the exclusion in Travelers insurance policy did not afford coverage for the Hannigans’ claims. Therefore, the court recommended that Travelers’ motion to dismiss be granted.

In accordance with the court’s approval of the Report and Recommendations issued on October 15, 2013, the district court ordered on November 18, 2013, that Travelers’ motion to dismiss be granted and the trust’s action be dismissed.

©2014 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.

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Trial Court Is Authorized to Appoint Receiver for Condominium Association

Granada Lakes Villas Condominium Association, Inc. v. Metro-Dade Investments Co., 125 So.3d 756 (Fla. Oct. 31, 2013)

State and Local Legislation and Regulations/Assessments: The Florida Supreme Court held that a court’s inherent equitable power to appoint a receiver over a nonprofit condominium association is not limited to the types of circumstances described in the Florida Statutes.

Metro-Dade Investments Company (Metro-Dade) developed Granada Lakes Villas, which is part of the larger Santa Barbara Landings condominium complex in Collier County, Fla. Metro-Dade still owned several units in the complex.

Unit owners must pay fees and assessments to both the master association, Santa Barbara Landings Property Owner’s Association (Santa Barbara) and Granada Lakes Villas Condominium Association, Inc. (association). Initially, all parties agreed the association would collect fees and assessments from all unit owners and pay Metro-Dade and Santa Barbara the related common area expenses. However, a financial dispute arose in 2009, and Metro-Dade and Santa Barbara sued the association, alleging it collected the fees and assessments but failed to pay Metro-Dade and Santa Barbara. As a consequence, Santa Barbara and Metro-Dade were unable to pay utilities and maintenance expenses for Granada Lakes Villas, which resulted in ongoing health nuisances on the property.

In 2010, Metro-Dade filed an emergency motion to appoint a receiver for the association to collect fees and assessments and to perform a proper accounting. The trial court found it lacked authority to appoint a receiver. Specifically, the trial court held it was not authorized to order an accounting even though that would greatly assist the court and all parties. The trial court’s interpretation of the Florida Statutes was that the circumstances of the case did not fit any statutory category under which a court may appoint a receiver. Metro-Dade appealed.

A receiver is a neutral party appointed by a court to protect or collect property that is the subject of diverse claims. The Second District appeals court reversed the trial court’s decision and remanded the case for that court to exercise its discretion on whether to appoint a receiver. The appeals court held that, as a matter of law, the trial court’s right to appoint a receiver was inherent in a court of equity, not a statutorily created right. Specifically, the trial court’s broad, equitable authority to appoint a receiver was not restricted to circumstances enumerated in the statutes, but rather, the statutes merely cited specific instances when a receiver might be appointed. The association appealed to the Supreme Court.

Equitable receiverships are common law creations, which should be reserved for cases involving fraud, self-dealing or waste. A statute can also authorize appointing a receiver, and a statutory receivership may serve a different purpose than an equitable receivership. Florida statutes authorize appointing a receiver in instances that do not involve fraud, self-dealing or waste.

The association contended that the court’s power to appoint a receiver for a nonprofit condominium association was limited to those circumstances set forth in the Condominium Act and the Not-for-Profit Corporation Act. However, the Supreme Court found nothing in the statutory language that expressly prohibited or even implied that the statutes’ enumerated circumstances are the only instances in which a court may appoint a receiver for nonprofit condominium associations.

Accordingly, the Supreme Court approved the Second District appeals court’s decision in the case.

©2014 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.

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