CAI Law Reporter - July 2010 (Plain Text Version)

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Fraud Cannot Be Asserted against Developer Based on Offering Plan Omissions

Board of Managers of the Chelsea 19 Condominium v. Chelsea 19 Associates, Nos. 2851, 2851A, 105347/08, N.Y. Supr. Ct., April 27, 2010

Contracts/Developer Liability: A New York Supreme Court held that a condominium board of managers was foreclosed by specific disclaimers in the offering plan and purchase agreement from establishing reliance on representations concerning the building's "good" condition.

The Board of Managers of Chelsea 19 Condominium and certain of its unit owners sued the developer and architect of the development seeking damages for injury to the common elements of the building. The trial court granted the developer's motion to dismiss, and sua sponte dismissed (without a motion or request) the claim against the architect because the owners lacked standing to bring suit. The board appealed, and the appeals court denied its motion to renew the case. The board appealed to the supreme court.

The supreme court affirmed the trial court's result, although not for the same reasons. The court found that the board's contract claims based on the architect's description of the building's condition included in the offering plan and incorporated into the purchase agreement were flatly contradicted by the "as is" clause and related disclaimer provisions in those documents, and were not undermined by the general statement in the documents that the building was in "good" condition. The court further determined that all the fraud and tort claims asserted by the board duplicated the insufficient contract claims. It noted that, absent a confidential or fiduciary relationship among the parties, the developer did not have a duty of disclosure, and common-law fraud could not be asserted against a condominium developer based on omissions from the offering plan.

The board's claims for wrongful transfers of development rights, sounding in conversion, unjust enrichment and breach of fiduciary duty were subject to a three-year limitations period and therefore untimely. The court observed that the claims against the architect largely mirrored the insufficient claims against the developer to the extent the claims against the architect were based on professional negligence; and the court held they were untimely.

In view of the foregoing, the court found it unnecessary to address whether the board was authorized to commence the action and, accordingly, dismissed the appeal from the order denying renewal.

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Easement Cannot Be Terminated by Amendment to Declaration

Chancy v. Chancy Lake Homeowners Association, Inc., No. 2081154, Ala. App. Ct., May 28, 2010

Contracts/Covenants Enforcement: An Alabama appeals court ruled that an express access easement granted in writing to the former owner of subdivision property is an interest in land that cannot be terminated by an amendment to the declaration that deletes the reference to the easement.

In September 2003, Wayne Johnson approached Beverly Chancy with a proposal to buy 40 acres of property in Autauga County, Ala., to develop a subdivision. She and Johnson negotiated the terms of an agreement that included reservation of an access easement allowing her to access approximately 197 acres of land she owned that abutted the subject property. She and Johnson agreed that the easement would be depicted on all the subdivision plats, addressed in restrictive covenants, and designed and maintained to meet the City of Prattville's requirements for a public road. She and Johnson also agreed that any proposed subdivision plat would be submitted to her for approval. In accordance with their agreement, Johnson recorded the CC&Rs for Chancy Lake in the Autauga County public records with a plat that depicted the property bound by the declaration and the location of the easement.

In October 2007, the association amended the declaration by deleting Section 5.1 and Article X.  Section 5.1 states:

[Johnson Properties] (1) reserves for itself, its successors and assigns and its other real property located adjacent to the subdivision, the right to use dedicate and/or convey to the State of Alabama, to Autauga County to an appropriate utility company or other company and (2) hereby dedicates for the use of all the lots in the subdivision, rights of way or easements on, over or under the ground to locate and maintain utilities, electric and telephone lines; wires, cables, cable television, conduits, storm sewers, sanitary sewers, water mains, drainage swales and ways and other utilities over the interior ten (10) feet in width along each lot line. 

Article X states:

Section 10.1. The real property adjoining Chancy Lake to the east will have an (sic) easement for ingress/egress as recorded on the Chancy Lake Plat.

In February 2008, Chancy sued Johnson for breach of contract and fraudulent misrepresentation and Chancy Lakes Homeowner Association, Inc., for interference with access easement/intentional violation of her property rights, continuing trespass, nuisance, invasion of her right to privacy and the tort of outrage. She also sought an injunction and a declaration that she had an easement by adverse possession, by prescription, by necessity and by implication across the subdivision property.

She alleged that Johnson had sold lots in the subdivision without first obtaining her approval. She also alleged that the association erected a gate that could only be accessed with a code, which the association withheld from her, thereby denying her access to her adjoining property. She stated that the easement currently functioned as a drainage culvert for a pond and was blocked by power poles and water-draining infrastructure. Moreover, she alleged that the easement was never paved or improved, and, thus, did not meet the city requirements for a public road.

In April 2008, Johnson filed a motion to dismiss Chancy's claim of the tort of outrage and the association and individual members filed a number of joint and separate motions for summary judgment. Members stated they had not made any contracts or agreements with Chancy regarding their lot purchases or any future use or restrictions on the use of their lots or the subdivision common areas, and that, at the time they purchased their respective lots, the declaration had already been prepared. They further stated that their deeds did not contain an easement allowing Chancy to cross their property or other subdivision property, and they had not altered the drainage system that was located in Chancy Lake.

In September 2008, Johnson filed a motion for summary judgment and a counterclaim. In Chancy's response to the association's motions, she conceded that the members were entitled to summary judgment on the claims of breach of contract, fraudulent misrepresentation, invasion of privacy and tort of outrage. However, she argued that her claim for interference with access easement and intentional violation of property rights was valid because the easement was properly created by the declaration, and the amendment to the declaration did not extinguish or revoke the easement.

In February 2009, the trial court granted summary judgment to the association and its members on all Chancy's claims. On June 5, 2009, the trial court entered an order denying Chancy's motion to vacate the summary judgment entered in the association's favor and denying Johnson's motion for summary judgment.

Chancy filed her notice of appeal to the Alabama Supreme Court in August 2009. She argued that the trial court erred by entering summary judgment in favor of the association on her claims of interference with her access easement, intentional violation of her property rights, trespass and nuisance and on her claims seeking declaratory judgment and injunctive relief. She asserted that she had an easement expressly conveyed to her in the declaration that was never terminated. She contended that the trial court's grant of summary judgment was improper because there remained a genuine issue of material fact regarding whether the association's attempt to revoke the easement by recording the amendment was proper termination.

In its review, the court noted that Alabama law recognizes that an easement may be created by contract. Chancy and Johnson stipulated in their agreement that Johnson would ensure access to Chancy's adjoining property through the subject property. Thus, Johnson purchased the subdivision property subject to an access easement. In turn, Johnson recorded the declaration, which referred in Article X to an easement for ingress and egress in favor of Chancy's adjoining property. Alabama case law establishes that the critical factor in determining whether parties create an easement lies in the parties' intent.

The Alabama Supreme Court adopted language in The Law of Easements & Licenses in Land Sec. 11.1 (West 2001) to consider when determining the nature of the interests in easements created by parties. Non-possessory property rights, such as covenants and easements, run with the land, becoming an incident of ownership, and they generally are not personal. An express easement must be in writing to satisfy the Statute of Frauds, and easement holders are entitled to protection from interference from third parties. The creation of a right to be used in a particular portion of a servient estate indicates that an easement was intended, and the existence of authority in the holder of the right to maintain or improve the burdened property also suggests an easement. A set duration indicates an easement, and a grant in perpetuity also indicates an easement. Further, an express provision that the right benefits its holders' successors and assigns supports the conclusion that an easement was intended; likewise, an easement is indicated if the right expressly binds the servient landowner's successors and assigns.

The court concluded that the declaration created an easement in Chancy's favor because it is a written document that indicates the covenants therein shall run with the land and be binding. It references an "easement for ingress/egress," as recorded on the plat of Chancy Lake Subdivision, which indicates it is an interest in land. Moreover, to the extent that the conditions for modification or termination outlined in Article XI conflict with the intent to create a binding easement expressed in Article X, reference to the agreement between Johnson and Chancy indicates that Johnson's intent was to create a binding easement.

The association argued that the amendment properly terminated that easement, but the court concluded that the easement could not be terminated by the amendment because it was an interest in land. The court noted that Johnson's interest in the subject property was subject to the easement in favor of Chancy. Their agreement did not assign any limitations to the easement; thus, Johnson did not possess a right to limit the easement without Chancy's consent.

Because the court concluded that Chancy possessed an express easement across the property, it reversed the trial court's summary judgments in favor of the association and its members on Chancy's claims of interference with her access easement and intentional violation of her property rights and her claim seeking injunction, each of which was dependent on her possession of an express easement.

Chancy's claims for nuisance and trespass both relied on her assertion that a lake existed in the middle of the subdivision, and the association intentionally altered or interfered with the natural drainage of that lake, causing it to drain through the easement reserved in her favor and onto her adjacent property.

The association argued that Chancy had presented no substantial evidence indicating that it had caused drainage onto her property or that damage from the drainage resulted. Chancy referred to an affidavit by Johnson stating that a surface-water retention pond was constructed after he purchased the property, and she conceded that Johnson was the party that altered the drainage flow from Chancy Lake. However, she argued that each of the current association members owned a portion of the lake and had made no effort to halt or correct the artificial flow of water toward her property. She cited Carlton v. Hollon, 4 So.3d 439 (Ala. 2008) for the proposition that lot owners may be held liable for failing to correct the drainage when they have had a reasonable time to correct the condition.

Based on this case, the court concluded that a genuine issue of material fact existed regarding Chancy's claims of nuisance and trespass, such that summary judgment was improper. The court, therefore, reversed the trial court's judgments with regard to those claims.

The court affirmed the trial court with regard to Chancy's claims for breach of contract, fraudulent misrepresentation, invasion of privacy, and the tort of outrage and reversed with regard to her claims seeking injunction for interference with her access easement, intentional violation of her property rights, nuisance and trespass. The case was remanded for further proceedings.

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Insurer Does Not Have to Defend Association Against Tangible Property Damage Suit

Eastpointe Condominium I Association, Inc. v. Travelers Casualty & Surety Company of America, No. 09-151866, U.S. App. Ct., 11th Circuit, May 20, 2010

Risks and Liabilities: A U.S. Court of Appeals ruled that an insurer had no duty to defend a suit against a condominium association because the policy contained an exclusion for loss in connection with claims arising from damage to tangible property.

Eastpointe Condominium I Association operates a condominium in Singer Island, Fla. One of the unit owners, Lynn Bursten, sued the association for failing to adequately maintain and repair the roof and air conditioning system when two hurricanes hit south Florida in October 2004.

The condominium building sustained severe water intrusion that caused pervasive mold and other damage to Bursten's unit. Bursten sued the association for negligence, breach of fiduciary duty and breach of contract.

The association had liability insurance coverage under two different policies: a commercial general liability policy from QBE Insurance Corporation and a directors and officers ("D&O") policy from Travelers Casualty & Surety Company of America. The D&O policy contained a "property damage" exclusion that excluded coverage for loss in connection with any claim arising out of damage to any tangible property, including mold, toxic mold, mildew, fungus, or wet or dry rot.

The association gave notice to both insurance companies of Bursten's complaint. QBE accepted defense of her suit, but Travelers denied coverage and disclaimed any duty to defend pursuant to the property damage exclusion. When the suit went to trial, the association obtained a defense verdict on all counts, and then filed this declaratory judgment and breach of contract action against Travelers, seeking to recover attorney's fees paid in the underlying suit.

After considering the parties' cross-motions for summary judgment and hearing oral argument, the trial court entered summary judgment for Travelers, finding that the sole basis for Bursten's lawsuit was water damage to condominium property that resulted in leaking, mold and loss of use of her unit, which the court deemed to be destruction of tangible property. The association appealed.

Under Florida law, insurance policies are construed according to their plain meaning, with any ambiguities being construed in favor of the insured.

In its appeal, the association made three arguments: (1) that the origin of the claims was a breach of fiduciary duty, so the fact that the breach resulted in property damage did not trigger the exclusion; (2) that the policy language was ambiguous; and (3) that any wrongful acts committed by the association necessarily related to property, so enforcing the exclusion would render the policy illusory.

The court was not persuaded by the association's attempt to differentiate between losses originating from property damage and losses originating from breaches of fiduciary duty that ultimately result in property damage. The plain language of the D&O policy excluded coverage for any claim made, "for or arising out of any damage, destruction or loss of use or deterioration of any tangible property." Even though the court acknowledged that the association's breach of fiduciary duty had a connection with the property damage, the premise of Bursten's breach of fiduciary duty claim was that the association's failure to properly maintain the building's roof and air conditioning system resulted in extensive damage to her unit.

The court did not find the policy language to be ambiguous. As for the association's third argument, the court disagreed that enforcing the exclusion would render the D&O policy illusory. The fact that the association's primary responsibilities related to operation and maintenance of tangible property did not mean that the property damage exclusion barred coverage for all claims that might be asserted against the association. Although the claims at issue were excluded because they arose out of damage to Bursten's property, other claims could be asserted against the association that would not fall within the property damage exclusion and might, therefore, be covered by the D&O policy.

The court affirmed that because Bursten's claims fell within the property damage exclusion, Travelers had no duty to defend the association against the claims brought by Bursten.

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Foreclosure Action Must Be Tried in County of Residence

Foster v. Wilmington Plantation Owners Association, Inc., Nos. A10A0262 and A10A0374, Ga. App. Ct., May 28, 2010

State and Local Legislation and Regulations: A Georgia appeals court reversed a judgment denying a motion to dismiss or transfer venue in an action to foreclose a lien for condominium association fees.

William Foster, a Twiggs County, Ga., resident, owned four units in Wilmington Plantation, a condominium development in Savannah, Chatham County, Ga. In 2006, he sold two units to EKL Georgia, also a Twiggs County resident. In 2005, he sold two units to Inglesby & Inglesby Real Estate Holdings, LLC, which has its principal office and registered agent for service in Fulton County, Ga.

In 2008, Wilmington Plantation Owners Association brought two actions for unpaid condominium association fees, one against Foster and EKL for units that EKL now owns, and one against Foster and Inglesby for the units Inglesby now owns. The association alleged that it believed Foster and EKL were residents either of Bibb County or Twiggs County, and that Inglesby was a Fulton County resident. However, the association argued that venue was proper in Chatham County as an action for foreclosure of real property. In their answer to the complaint, Foster and EKL challenged venue, but Inglesby, in its answer, admitted venue was proper in Chatham County.

In both actions, Foster moved to dismiss or transfer for improper venue. The trial court entered separate orders in each action, denying Foster's motions on the ground that a foreclosure action is an in rem action against the property and considered the case "respecting title to land." The court held that venue was proper in Chatham County, where the condominium property is located. In any event, the court considered that since Inglesby admitted venue, venue as to Foster was also proper. The court cited the Georgia Constitution, which "permits a trial and entry of judgment against a resident of Georgia in a county other than the county of the defendant's residence only if the Georgia resident is a joint obligor, joint tort-feasor, joint promisor, copartner, or joint trespasser." Foster appealed the ruling.

The Georgia Condominium Act provides for creation and enforcement of liens for sums assessed by the association against any unit owner. It does not specifically provide for venue of a foreclosure action, but does state that, "the lien may be foreclosed by the association by an action, judgment, and foreclosure in the same manner as other liens for the improvement of real property." Georgia statutory and case law provide that an action to foreclose the lien must be filed in the county of residence of the defendant.

The appeals court determined that the trial court erred in concluding that the venue provision of the Georgia Constitution applied to the actions, finding that cases respecting title to land do not include foreclosure actions on real estate in the context of the Georgia Constitution. The court went on to say that a suit seeking to stay a foreclosure proceeding was a personal suit that could only be brought in the person's county of residence. Therefore, an action to foreclose a condominium association lien is not an action "respecting title to land" for purposes of venue. The court concluded that the trial court erred when it denied Foster's motion to dismiss or transfer for improper venue.

For the same reasons set out above, the appeals court concluded that the trial court erred and that it additionally erred in finding that venue over Inglesby conferred venue over Foster. Although the Georgia Constitution provides that suits against joint obligors residing in different counties may be tried in either county, Foster was no longer a unit owner, and thus was not a joint obligor subject to this venue provision.

Although the association argued forum non conveniens, the court held that the provision was only applicable where an action would be more properly heard "in a different county of proper venue within this state." Official Code of Georgia Annotated (O.C.G.A.) Sec. 9-10-31.1(a).

The court reversed the trial court's judgments.

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Association Does Not Have Duty to Maintain Security Cameras

Mill Harbour Condominium Owner's Association v. Marshall, No. 2008-0085, Virgin Islands Supr. Ct., May 6, 2010

Risks and Liabilities/Association Operations: A Virgin Islands appeals court ruled that a condominium association had no duty to maintain security cameras in its parking lot and found no evidence to suggest that a functional camera would have prevented damage to a resident's vehicle.

In March 2008, Denese Marshall discovered her car had been vandalized in the parking lot of her residence at Mill Harbour Condominium Owner's Association. She notified the association’s managing agent, who stated Mill Harbour would not be able to assist her with fixing her vehicle.  She sued the association for damages sustained to the car in the amount of $3,317.15.

Marshall contended that the association had a duty either to have maintained security cameras in the parking lot or to have informed her of which portions of the parking lot were not recorded by cameras. The trial court ruled in her favor and awarded her damages in the amount of $2,103.15. The association appealed.

On appeal, the association argued that there was no contractual obligation between the association and Marshall. The elements of a cause of action for negligence are duty, breach of duty, causation and damages. The appeals court determined that the trial court had failed to make any factual findings that established the basis for any legal duty the association might have owed to Marshall. Significantly, the trial court found, "that the plaintiff rents a condominium from someone who is the owner of a condo at Mill Harbour." The lease agreement, by its own terms states that it is between Marshall and the unit owner. Additionally, the lease advises Marshall to "acquire … personal property insurance … in case of theft or vandalism."

Accordingly, because neither the trial court's findings nor any evidence in the record supported a conclusion that the association owed Marshall a duty to maintain cameras in the parking lot, or that the association had assumed a duty to act as an insurer of Marshall's vehicle, the appeals court found that the trial court erred in entering judgment in her favor. Even assuming that testimony of either of the parties would have been sufficient for a finding that the association gratuitously assumed a duty to monitor its parking lot and breached that duty by not repairing or removing non-functional cameras or informing residents what areas of the parking lot were not covered, no evidence existed in the record that would have allowed the trial judge to properly find that the association's failure caused the damage to Marshall's car.

Significantly, the record was devoid of any evidence that would indicate that a functional camera could have prevented or deterred another car from hitting her parked vehicle.

The trial court's judgment was reversed.

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Placement of Swimming Pool Violates Restrictive Covenant

Millpointe of Hartland Condominium Association v. Cipolla, No. 289668, Mich. App. Ct., May 11, 2010

Covenants Enforcement/Architectural Control: In an unpublished opinion, a Michigan appeals court ruled that a homeowner's swimming pool violated a restriction in the bylaws that prohibited accessory uses from being located more than halfway between units and their property lines.

Denise Cipolla constructed a swimming pool in the backyard of her unit in Millpointe of Hartland Condominium Association, located in Livingston County, Mich. The Millpointe of Hartland bylaws restrict "accessory uses" behind residential units to placement no more than halfway between the unit and its property line ("50 percent rule"). Cipolla's pool violates the 50 percent rule.

Millpointe of Hartland sued Cipolla to have the pool removed. The trial court denied the association's motion for summary judgment and granted summary disposition to Cipolla. The association appealed.

Cipolla argued that the use restriction did not apply to her pool, either because pools are exempt from the definition of an "accessory use" or because the association's actions induced her to reasonably rely to her detriment on being able to construct the pool.

The appeals court noted that the policy of Michigan courts is to protect property owners who have not themselves violated restrictions in the enjoyment of their homes from those who violate restrictions with the excuse that "others have violated the restrictions."

Cipolla argued that the bylaw exempted swimming pools, but the court found that the rule applies to "… any accessory use in the rear of any unit, except landscaping, playgrounds and swings." Although the court agreed that "playgrounds" must have been intended to include something other than swings, it deemed that the common understanding of what constitutes a playground does not include swimming pools.

Cipolla then argued that, for several reasons, the association could not enforce the bylaw. Contrary to her assertions, the court observed that a prior board of directors had attempted to amend the bylaws to permit accessory uses up to 75 percent of the way from their units to the property line. A former president of the association testified that the bylaws did not contain any provision for granting variances to individual property owners, nor did the board have the power to ignore violations without amending the bylaws. Although the record contained evidence that a prior board had tried to amend the bylaw, the court deemed it irrelevant because the bylaw was not actually changed. The court concluded that the 50 percent rule was still a valid bylaw and functioned as a deed restriction enforceable by the courts.

Cipolla argued that the association was estopped from enforcing the bylaw because she was negligently led to believe that her pool would not violate the bylaws. The association argued that any reliance by Cipolla was unjustified because, although she was given conflicting information, she also was given notice "of such facts that would lead any honest man, using ordinary caution, to make further inquiries." The court agreed.

The association argued that no other possibilities applied because the 50 percent rule was a valid bylaw, and the only established equitable reasons for a court not to enforce it would be if the violation were a harmless technical one; if there were changed conditions; or limitations and laches.

Cipolla did not argue that the pool was a harmless technical violation. She argued laches, but the court found laches did not apply because she only argued that the association waited too long to enforce other violations in the community, not that it waited too long to commence the action to enjoin her violation. She made the argument that there had been changed conditions in the context of a "waiver" argument. However, the court found no evidence in the record that the character of the community had changed so much that the original purpose of the bylaws had been defeated. The court ruled that the 50 percent rule was a valid bylaw, and it, therefore must be enforced as written.

The trial court's grant of summary judgment to Cipolla was reversed.

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Association Not Required to Arbitrate Before Filing Suit

Saguaro Highlands Community Association v. Biltis, 229 P.3d 1036 (Ariz. App. Ct. 2010)

Covenants Enforcement: An Arizona appeals court affirmed the denial of a motion to compel arbitration in an association's action to enforce restrictive covenants.

Jack and Leigh Biltis own a home in Saguaro Highlands Community Association in Maricopa County, Ariz.

Biltis installed a swing set in the backyard that violated Saguaro Highlands’ declaration restrictions. After sending several letters requesting compliance with the restriction, the association sued Biltis, seeking an injunction and alleging breach of contract.

Biltis filed a motion to compel arbitration. He argued that pursuant to the declaration, "all matters are to first be submitted to negotiation, mediation and arbitration before filing a lawsuit." The trial court determined it would be beneficial to permit the parties to brief the issue of whether an arbitrator could issue an injunction under Arizona law. After considering the briefs, the court denied Biltis' motion, finding that the arbitration clause was not intended to apply to disputes between the association and individual homeowners concerning construction of improvements that violated the restrictions.

The court held that the declaration granted the association the right to enforce the project documents in any manner provided by law or in equity, including an action to obtain an injunction to compel removal of improvements or to otherwise compel compliance with the project documents. Biltis appealed.

Arizona law has long favored arbitration as a way to resolve legal disputes when the parties agree to arbitrate. A deed restriction that runs with the land is a contract, the interpretation of which is a matter of law. In the appeal, neither the association nor Biltis asserted the existence of any disputed factual issues concerning the creation of the restrictions or the meaning of the language used in the declaration.

The declaration provides that all improvements shall be constructed in compliance with applicable building codes and ordinances, and will be of a quality consistent with good construction and development practices in the area where the project is located. It further provides that disputes over alleged defects "will be resolved amicably without the necessity of time-consuming and costly litigation."

The court observed, based on the foregoing language, that alternative dispute resolution procedures were to be used to resolve disputes over construction defects. However, Section 10.4 of the declaration pointed to a much broader possible interpretation of when these procedures should be applied. That section reads as follows:

Any dispute or claim between or among (a) a Developer (or its brokers, agents, consultants, contractors, subcontractors, or employees) on the one hand, and any  Owner(s) or the Association on the other hand; or (b) any Owner and another Owner; or (c) the Association and any Owner regarding any controversy or claim between the parties, including any claim based on contract, tort, or statute arising out of or relating to (i) the rights or duties of the parties under this Declaration; (ii) the design or construction of the Project; (iii) or an Alleged Defect, but excluding disputes relating to the payment of any type of Assessment (collectively a "Dispute"), shall be subject first to negotiation, then mediation, and then arbitration, as set forth in this Section 10.4, prior to any party to the Dispute instituting litigation with regard to the Dispute.

Section 9.1 of the declaration provides:

The Association or any Owner shall have the right to enforce the Project Documents in any manner provided for in the Project Documents or by law or in equity, including, but not limited to, an action to obtain an injunction to compel removal of any improvements constructed in violation of this Declaration or to otherwise compel compliance with the Project Documents.

Biltis argued that Section 10.4 was clear and applied to the dispute.  The court, like the trial court, concluded that the declarant intended for all disputes involving construction defects to be handled through alternative dispute resolution; however, it found no indication that Article 10 of the declaration was intended to apply to a dispute between the association and a lot owner regarding an improper structure being placed on a lot.

The court found additional support for its conclusion in other provisions of the declaration. Even accepting Biltis' view that an arbitrator can order an injunction, the association would not be able to enforce the restrictions until negotiation and mediation were completed, which could take months.

The court deemed that the plain reading of the declaration as a whole implied that Section 10.4 applied to disputes over alleged construction defects, and Section 9.1 applied to actions to enforce the covenants. Therefore, pursuant to Section 9.1, the association had authority to obtain an injunction to compel removal of Biltis' swing set.

Based on these conclusions, the court affirmed the trial court's denial of Biltis' motion to compel arbitration.

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Rule Prohibiting Homeowners from Walking Pets on Common Areas Invalid

Yusin v. Saddle Lakes Home Owners Association, Inc., Nos. 2009-07644, 2009-07648, N.Y. Supr. Ct., May 25, 2010

Powers of the Association: The New York Supreme Court ruled in favor of homeowners who challenged a rule adopted by the association that prohibited walking pets on condominium common areas.

Jane and Wendy Yusin are residents of a condominium in Saddle Lakes Condominium Home Owners Association, located in Riverhead, N.Y. The condominium bylaws provide that homeowners are permitted to walk their pets over the common areas.

In July 2008, Saddle Lakes passed a rule prohibiting homeowners from walking their pets on the common areas. Those who violated the rule were subject to a $50 fine.

Yusin sued the association, seeking to permanently enjoin the association from enforcing the rule; a judgment declaring that the rule was invalid; and damages relating to the fines imposed by the association for violations. Yusin asserted that because amendments to the bylaws required the votes of 66.66 percent of the homeowners, the rule was invalid.

The association moved to dismiss the complaint and for summary judgment. The trial court declined to dismiss the complaint and denied the association's motion for summary judgment. Because the arguments were addressed in motions before the trial court, upon searching the record, the appeals court awarded summary judgment to Yusin. In a consolidated action, the association appealed, as limited by its brief to the Supreme Court of Suffolk County.

The high court noted that amendment of the condominium's bylaws required the approval of 66.66 percent of the homeowners, as well as the approval of at least 51 percent of the votes of homes that were subject to first mortgages. The record showed that the association's adoption of the rule was unauthorized by the bylaws and, thus, was not protected by the business judgment rule. The court determined that the trial court properly denied the association's motions for summary judgment. It modified the orders of the trial court and the appeals court to add a provision granting the homeowners' motion for summary judgment, declaring the rule invalid, and permanently enjoining the association from enforcing the rule. As modified, the orders were affirmed insofar as appealed from.

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