CAI Law Reporter - January 2011 (Plain Text Version)

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Association Lacks Standing to Sue on Behalf of Its Members

Aspen Grove Owners Association v. Park Promenade Apartments, LLC, No. CV09-1110, U.S. Dist. Ct., W. Dist. of Wash., Nov. 19, 2010

Conversions/Warranties/Risks and Liabilities:  A Washington district court denied an association's motion for summary judgment in an action seeking to establish a seller's liability for the costs of repairing structural damage found after the units' conversion into condominiums.

In 2005, Aspen Grove Owners Association bought an apartment complex from Park Promenade Apartment, LLC and converted into condominiums. However, after the sell, Aspen Grove made allegations that the building was poorly constructed and that Park Promenade had given them insufficient disclosure about these problems.

The association sought summary judgment on Park Promenade Apartment, LLC's liability for the costs of repairing construction defects in the Aspen Grove conversion condominium on three grounds:  (1) the construction defects violated the Washington Condominium Act (WCA); (2) warranty of suitability, arising from Park Promenade's failure to inspect for defects in violation of the WCA; and (3) Park Promenade deceived unit purchasers in violation of the Consumer Protection Act (CPA). 

Summary judgment demands an inquiry into whether the evidence presents a sufficient dispute to require a jury trial or whether it is so one-sided that one party must prevail as a matter of law.  The WCA establishes a warranty of suitability covering the sale of condominiums, by which the seller impliedly warrants that the unit and common elements of the condominium are suitable for ordinary uses of real estate. Also, it states that any improvements are free from defective materials, are constructed in a workmanlike manner in accordance with sound engineering and construction standards and that they are in compliance with all laws applicable to the improvements.

The court concluded from the association's pleadings that the association failed to provide enough information to merit summary judgment as a matter of law.  There remained genuine issues of material fact with respect to the 1990 building code and whether damage to the condominium was aggravated by a lack of maintenance.  The court found that these issues made the case an improper subject for summary judgment.

The WCA also establishes requirements for the inspection report that accompanies a condominium public offering statement.  The seller is required to provide either a copy of a report prepared by an independent, licensed architect or engineer—or a statement by the declarant based on such report that describes with reasonable certainty—the present condition of all structural components and mechanical and electrical installations. 

The parties to this action agreed that Park Promenade performed a visual inspection, but did not remove building trim to examine structural components.  The issue in dispute was whether the defects could have been found by a more invasive inspection. Therefore, the court found that the association failed to show that there was no genuine issue of material fact as to the reasonableness of the inspection.

The association also sought summary judgment on its CPA claims.  The court observed that to maintain a private CPA action, a plaintiff must establish that a person or entity has engaged in an unfair or deceptive practice that occurred in trade or commerce that impacted the public interest and caused injury to a plaintiff in his or her business or property.  A plaintiff must further establish a cause between the unfair or deceptive practice and the injury that was suffered.

Here, the primary dispute between the parties was whether the association had standing to bring a CPA claim.  Associations of individuals can establish standing by showing direct injury to the association or by showing injury to its individual members.  The association claimed that it had representational standing to litigate claims for harm to its members stemming from Park Promenade's deceptive failure to disclose defects.  Park Promenade responded that the association did not meet the requirements for an organization suing in its representative capacity. 

An association has standing to bring suit on behalf of its members when: (1) its members would otherwise have standing to sue in their own right; (2) the interests it seeks to protect are applicable to the organization's purpose; and (3) neither the claim asserted nor the relief sought require the participation of the individual members in the lawsuit.  Park Promenade argued that it would be impossible for the association to bring the CPA claim without the participation of the individual members.  The court agreed and dismissed the association's CPA claims without prejudice.

The court denied the association's motion for summary judgment, and likewise, denied Park Promenade's motion to strike testimony.

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Owner Can't Claim Damages for Bad Roofs; Bought "As Is"

Buttross V., Inc. v. Victoria Square Condominium Homeowners' Association, Inc.,  No. 03-09-00526-CV, Texas App. Ct., Aug. 18, 2010

Risks and Liabilities:  An investor owner could not support its claim of breach of contract because it did not show evidence that an amendment to the condominium declaration caused proximate damage.  Likewise, its negligence suit against the contractor who installed faulty roofs in the condominium did not prevail because the owner purchased the units in "as is" condition.          

In November 2006, Buttross V., Inc. purchased 15 units  from Victoria Square Condominiums Homeowners' Association, which is located in Austin, Texas.  Before Buttorss purchased the units, the seller's disclosure described the existing problems with the roofs, indicating that the roofs were defective and would have to be completely replaced.  The disclosure also indicated there was water damage to the units.  After reading the disclosures, Buttross purchased the units "as is."

In June 2007 and July 2007, Buttross purchased two additional units from different sellers. 

The association adopted the First Amendment to its Declaration and Master Deed in January 2007.  The amendment prohibited a single person or entity from owning more than 10 percent of the units in Victoria Square.  If, at the time the amendment was adopted, a single owner or entity already owned more than 10 percent of the units, that owner was prohibited from serving on the association's board of directors and from exercising more than a 10 percent voting right.  The restrictions applied to Buttross, which owned over 10 percent of the 48 units in the condominium.

Buttross sued the association for breach of fiduciary duty, breach of contract and negligence.  It also sued Storcorp, the company that installed the defective roofs, for negligence.  The court ruled in the association's favor, finding that Buttross failed to show that it sustained any compensable damages caused by the association's conduct.  In its claim against Storcorp, the court concluded that Buttross failded to show that Storcorp's acts or omissions proximately caused damage.  Buttross appealed.

In its first issue on appeal, Buttross argued that the amendment to the declaration was not validly adopted because it was not approved by the unit owners. It alleged statutory violations solely as a basis for relief under a breach-of-contract cause of action. 

The association argued that Buttross failed to preserve error by failing to raise the claim to the district court; and, even if error had been preserved, Buttross could not show harm. 

The appeals court agreed with the association, finding that Buttross' breach-of-contract claim failed because it could not show that it sustained damages as a result of the association's alleged breach.  The association further argued that Buttross' failure to request a specific finding of fact that the association violated the declaration by illegally amending it waived any error on this point.  However, the court found that any finding, whether in Buttross' favor or not, would have no effect on the trial court ruling, which determined that Buttross incurred no damage as a result of the association's alleged breach.  Thus, whether or not Buttross was required to obtain a specific finding as to the allegedly invalid amendment was irrelevant because he could not show it would have had any effect on his ability to prevail on his breach-of-contract claim.  This finding was sufficient to support the trial court's judgment on the claim.

In its petition, Buttross claimed damages for physical damage sustained by its units—lost rents, loss of value of the sold units, monthly mortgage credits to some buyers pending replacement of the roofs, association assessments and charges against its units from January 2007 through the sales dates.  However, he presented no evidence that its presence on the board of directors, if elected, would have had any impact on the alleged damages.

Buttross also argued that, whether it could show economic damages or not, it could recover on its breach-of-contract claim as a party adversely affected by the association's actions.  However, the appeals court noted that it must not simply show that it was adversely affected, but meet each element of its claim, including proving that it incurred damages resulting from the association's breach. 

Buttross then argued that it was entitled to nominal damages from the association's breach.  The court, however, found that while nominal damages are recoverable for breach of contract, they are only available where the breach has caused non-economic harm as opposed to this case, where the damages alleged by Buttross were entirely economic.  Because Buttross did not prevail on its breach-of-contract claim, the court found it was not entitled to recover attorney's fees on the claim. 

In its second issue, Buttross argued that the trial court erred in rendering a take-nothing judgment on its negligence claims against Storcorp.  To prevail on its cause of action against Storcorp, Buttross would have to show that Storcorp owed it a legal duty and breached that duty, and that Buttross suffered damages proximately caused by Storcorp's breach. 

Although Buttross correctly asserted that damage to its units was caused by the defective roofs installed by Storcorp, it failed to show that Storcorp breached a legal duty owed and that Buttross suffered damages proximately caused by that breach.

Consistent with the trial court's findings, the record showed that although the roofs installed by Storcorp were defective, there was no evidence that any damage to Buttross was proximately caused by Storcorp.  The court found that because the seller expressly disclosed to Buttross that the roofs were defective and would need to be replaced entirely.  Also, because Buttross bought the units in "as is" condition and—given full knowledge of the condition of the roofs and the risk involved—paid what it thought was a fair price,  Buttross was already compensated for any later damages that might result.

The appeals court concluded, based on the record, that Buttross failed to meet its burden of showing either that it sustained damages proximately caused by Storcorp or that the trial court's findings were wrong or unjust. 

Having overruled both of Buttross' issues, the court affirmed the trial court's judgment.

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Homeowner's Frivolous Lawsuits Constitute Harassment

Heitman v. Bear Lake West Home Owners Association Corporation, No. CV 07-209-E-BLW, U.S. Dist. Ct., Dist. Idaho, Nov. 21, 2007

Federal Law and Legislation:  An Idaho court granted an association's motion to dismiss and motion for Rule 11 sanctions against a homeowner who filed repeated lawsuits against the association and its board of directors for the purpose of harassment.

In 2004, Ralph-Edward Heitman, who owns property in Idaho at Bear Lake West Homeowners Association, began renovation construction on his property without obtaining prior approval from the association.  In doing so, he cut the waterline serving neighboring properties.  The association sued him in state court to collect the costs of repairing the water pipe, which was owned by the association, as well as unpaid homeowners assessments and injunctive relief concerning construction of the unapproved renovation.  Heitman argued that the pipe line crossing his property constituted trespass on the property. 

During the course of the litigation, Heitman repeatedly served the association's board members with fictitious claims, judgment and other documents wherein he claimed to have obtained an administrative judgment for $16,000.  The association filed a motion to dismiss and a motion for sanctions, which the state court granted in the amount of $1,500. 

When Heitman failed to pay the judgment, the association filed a motion for contempt.  Heitman moved the action to federal court and asked the court to dismiss the complaint and other pleadings on the basis of admiralty law and brought a counterclaim. 

In 2006, the case was remanded to state court for further proceedings.  The state court found Heitman in contempt, ordered him to serve five days in jail and awarded the association a money judgment for all damages, attorney's fees and costs in the amount of $18,390.59.  Heitman appealed the decision, and the case is still pending before the Idaho Supreme Court.

In October 2005, during the pendency of the above case, Heitman filed a separate federal case that was dismissed with prejudice. 

In May 2007, Heitman filed his 95-page complaint in this case, which consisted of nonsensical phrases strung together with legal citations.  He alleged fraud, but failed to present any discernable factual allegations to support a cause of action.  The complaint also made indecipherable allegations challenging the punctuation, syntax and grammar of contracts or written communications between him and the association.

The association filed a motion to dismiss and motion for Rule 11 sanctions.  Heitman failed to file a response to the association's motions despite the court's ordering him to do so.

The court found that under the most liberal reading of Heitman's complaint, it could discern no cognizable set of facts or legal theory upon which relief could be granted.  Because he failed to state sufficient allegations to show that he could maintain his claims, and because he was barred from challenging a state court judgment in federal court, the court concluded that allowing amendment of his complaint would be futile based on the nonsensical nature of his filings and dismissed his complaint with prejudice. 

The court noted that a defendant may recover attorney's fees if a plaintiff's action is frivolous, unreasonable or without foundation, even though not brought in subjective bad faith (see 42 U.S.C. § 1988).  The court concluded that this was an exceptional case in which attorney's fees were warranted.  It found that Heitman's lawsuit was groundless, frivolous and without basis in law or fact.  It noted that the association had to expend attorney's fees and costs to defend his frivolous action.  In addition, the matter had already been litigated in state court, where the association had to expend further effort, fees and costs.  Therefore, the court granted the association's request for attorney's fees and costs. 

Among other grounds, a court may impose Rule 11 sanctions if a pleading filed with the court is frivolous or filed for an improper purpose.  The court observed that successive complaints based on propositions of law previously rejected may constitute harassment under Rule 11.  The court observed that Heitman was told on more than one occasion, and by more than one judge, that his legal theories were groundless or frivolous.  Even upon the most liberal reading, the court found his pleadings and papers, "incomprehensible and utterly nonsensical" and filed for an improper purpose. 

The court granted the association's motion to dismiss and awarded attorney's fees as a sanction.  Because the court determined that it should hold a "vexatious litigant order to show cause hearing" for Heitman, requiring him to show cause why he should not be barred from filing further complaints in federal court without prior authorization, it declined to order other sanctions.

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Covenants Don't Require RVs to Connect to Septic System

Hicks v. Falcon Wood Property Owners Association, No. 03-09-00238-CV, Texas App. Ct., Aug. 19,  2010

Architectural Control/Covenants Enforcement:  An award of damages to a homeowners association was reversed on appeal, with the court finding no evidence that the property owner kept an RV on her lot longer than the six-month construction period.

Falcon Woods is a residential subdivision in Hays County, Texas, and lots in Falcon Woods are subject to restrictive covenants.  The restrictions limit the types of structures permitted to be erected on lots to "one dwelling unit . . . to be used for residential purposes."  According to the restrictions, the dwellings must "be equipped with septic tank or other sewage disposal system meeting all applicable laws, rules, standards and specifications."  Use of a temporary structure as a residence is prohibited; however, other types of outbuildings are permitted. 

The restrictions are administered and enforced by Falcon Wood Property Owners Association.  The restrictions require prior approval by an architectural control committee (ACC) before permissible dwellings can be erected, altered or placed on property.  When structures are approved, they must be completed within six months from the commencement date.  Until construction is complete, the restrictions limit owners' rights to occupy campers, recreational vehicles or tents on their land. 

Hicks purchased two adjacent lots in Falcon Wood in 2006 and made plans to construct a two-story house on her property.  In 2007, she submitted her plans to the ACC for approval. 

In the meantime, Hicks closed the sale of her existing residence before construction was to begin on her new house in Falcon Wood.  Searching for a place to live while her new house was being constructed, she asked the association whether she could live on her property in an RV and comply with the restrictions prohibition against keeping the RV on the property "longer than 14 consecutive days out of a 30 day period" by moving it back and forth between each of her two adjacent lots every 14 days.  The association denied her request.

In July 2007, Hicks' plans for her septic system were approved.  Construction of her house began in August, triggering the restrictions' six-month time period for completing the house.  When construction on the house began, Hicks moved an RV onto her property.  Installation of her septic system encountered a major setback when excavators hit a cave.  A geologist later determined that the area around Hick's property contained numerous caves, and the subdivision was located over the environmentally sensitive Edwards Aquifer.  It was necessary for Hicks to obtain a new design and location for her septic system.  Disputes between her and her contractors led to further delays in having the system installed. 

In September, two members of the association's board visited Hicks' property to inspect the site.  They told her she could not live on her property in the RV because the restrictions required that the RV be connected to the house's septic system.  Hicks told them about the problems she had encountered with the septic system installation and expressed the view that she was in compliance with the restrictions because she had a porta-potty that she used to minimize wastewater.  She also furnished evidence that she frequently stayed in a motel or with friends. 

In October, the association voted to grant Hicks a two-week variance allowing her to keep her RV on the property without it being connected to the septic system.  The relationship among Hicks and the board members had, however, become strained.  At a board meeting in November, Hicks explained that she would be unable to complete installation of the septic system before November 3, and the board refused to grant an additional variance or extension.  The following day, two board members returned to Hicks property to inspect the septic system.  Hicks called 911, threatened to have them arrested, and had them escorted off her property.

Subsequently, the association sued Hicks, alleging that since the date the variance expired, she had been in violation of the restrictions related to living on the property without an approved septic system and by residing in the RV.  The association sought a temporary and permanent injunction barring her from the property in any way until an approved septic system was installed.  The association also sought statutory damages of $200 per day for each day she violated the restrictions and an award of attorney's fees. 

The trial court granted a temporary injunction, compelling Hicks to remove the RV and move off her lots until the septic system was installed.  Hicks filed a mandamus petition that prompted the appeals court to stay the temporary injunction.  While her petition was pending, the trial court amended the temporary injunction twice.  The appeals court ultimately denied mandamus relief in March 2008.

In the meantime, Hicks obtained another permit to install her septic system in December 2007.  The system was installed, inspected, and approved in March 2008.  On or after the expiration of the February 2008 six-month completion-of-construction deadline, two association board members again entered Hicks' property to inspect the construction.  The exterior structure of the house was complete; however, the association complained that the garage had exposed cinder block walls that appeared "unfinished."  Hicks indicated she planned to apply stucco to the garage walls, but the weather had been too cold for proper application. 

In May, the association advised Hicks that she was in violation of the restrictions' six-month construction time period because she had not finished the walls.  The association also accused her of violating a restriction prohibiting "junk motor vehicles" (her RV) stating that, "[a]n inoperable motor home of that vintage is in our opinion a junk motor home and must be removed from your property."  

The case went to trial in January 2009.  The jury found that the association did not meet its burden to prove that Hicks kept an unoccupied recreational vehicle on the property longer than 14 consecutive days or that she had used her property as a depository for a junk motor vehicle.  However, it found that she had violated the restrictions by (1) keeping the RV on the property for more than six months during construction without its being hooked up to a septic system; (2) kept the RV on the property without an approved septic system; and (3) failed to complete the house within six months from the commencement of construction.

Hicks moved the court to disregard the jury's findings.  Instead, the court rendered judgment on the verdict.  Based on the jury's findings, the court determined that Hicks had violated the restrictions for a total of 754 days.  The court then multiplied that number of days by the maximum $200-per-day statutory damages amount, for a total of $150,800, and rendered judgment awarding that amount to the association.  Further, the court issued a permanent injunction, ordering Hicks to complete the exterior construction of her house within 90 days, and awarded the association $11,287 in attorney's fees.  Hicks appealed.

In her appeal, Hicks challenged the trial court's relief award based on the jury findings that she kept an RV on her property "without a septic system."  Her second issue was a challenge to the court's award of monetary and injunctive relief for failing to complete her house ". . . as to exterior finish and appearance."  The third issue of her appeal was that if either of the foregoing issues were sustained, the appeals court should reverse the award of attorney's fees. 

The appeals court found that several of Hicks' challenges turned on construction of the restrictions.  Courts are required to construe the restrictive covenants according to contract law principles in light of the circumstances at the time they were enacted. 

Hicks urged that both of the jury's finding—that she failed to complete her house within six months from commencement of construction and the duration of the violation—should have been disregarded.  She argued that the evidence was legally and factually insufficient to support a finding that she committed any conduct that constituted a violation of the requirement. 

The appeals court agreed, observing that the restrictions did not define the phrase "completed as to the exterior finish and appearance."  Reading the restrictions as a whole, the court construed the phrase to contemplate completion of the exterior construction in accordance with the plans and specifications approved by the ACC.  The second feature of the restrictions that was instructive to the court was the exclusion of "painting, staining or siding" from the types of "changes made in the design or exterior appearance" of "buildings or other improvements" that require approval of the ARC. 

The court concluded that the requirement that "[a]ny building, structure or improvement commenced on any tract shall be completed as to exterior finish and appearance within six (6) months from the commencement date" unambiguously required only that Hicks complete her house's exterior construction in accordance with the plans and specifications approved by the ACC.  Applying this construction, the court found no evidence that Hicks failed to comply with the restrictions. 

Her approved plans did not require her to apply stucco to her garage.  Thus, there was no evidence that she violated the restrictions.  Consequently, the court held that the jury's findings must be disregarded and could not be the basis for a judgment awarding damages and injunctive relief to the association.

Hicks further argued that the jury's findings were immaterial because "keeping a camper or recreational vehicle on the property without an approved septic system" was not a violation of the restrictions as a matter of law. 

Again, the appeals court agreed.  Leaving aside whether the term "approved septic system" was limited to the septic system ultimately installed for the permanent dwelling, the court concluded that the act of "keeping a camper or recreational vehicle on the property" prior to the approval of the dwelling's septic system did not violate the restrictions.  To the contrary, the restrictions explicitly permitted "an unoccupied, self-contained camper or recreation vehicle" to be kept on the property up to 14 days of a 30-day period, even before construction of the dwelling begins. 

The restrictions further allowed "[o]ccupied, non-self-contained campers and tent camping" with only "some type of chemical toilet for their campsite," up to seven consecutive days out of a 30-day period.  The court noted that these express authorizations would be meaningless if the restrictions were construed to prohibit keeping a camper or recreation vehicle on the property before the dwelling septic system was installed. 

Whether Hicks violated the restrictions was not the issue; instead, the issue was whether Hicks violated the restrictions by keeping a camper or recreational vehicle on the property without an approved septic system.  The court concluded that her conduct in itself did not violate the restrictions.  Therefore, the jury's finding that Hicks engaged in that conduct was immaterial and could not be used as a basis for the trial court's judgment.

For the same reasons, there was no evidence to support the jury's finding that Hicks violated the six-month completion-of-construction deadline because there was no evidence that construction of her house was not completed within six months of the commencement date. 

The association interpreted that the "approved septic system" to which Hicks' RV was required to be connected to mean the same septic system that she was constructing for her house. 

In the court's view, the evident purpose of the requirement was that a self-contained RV must be hooked up to an approved septic system to ensure that the property owners disposed of any wastewater from RVs in a manner that is legally authorized or approved.  The court found no evidence that Hicks failed to comply with this requirement. 

Because the association did not prevail on its claims, the court sustained Hicks' challenge of the trial court's award of attorney's fees to the association as the prevailing party.

The court reversed the trial court's judgment and ruled that the association would take nothing on its claim.

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Gate in Security Fence Must be Approved by Homeowners

Margerison v. Charter Oak Homeowners Association, No. 107843, Okla. App. Ct., May 21, 2010

Use Restrictions/Sale and Lease Restrictions:  An Oklahoma appeals court reversed summary judgment granted to a homeowners association, finding that there were disputed facts about whether gates located on a homeowner's property could remain in a security fence along an easement reserved by the association.

Keith Margerison owns a lot in Charter Oak subdivision.  His lot is burdened by an easement reserved by the Charter Oak Homeowners Association to maintain a security fence around the perimeter of the development.  When Margerison bought his lot, the fence included a gate on his lot that afforded access to a public park behind the property. 

When the association announced plans to replace the perimeter fence, Margerison sought to replace the existing gate on his lot at his own expense.  The association approved his request, and he replaced the gate in September 2008.  However, in January 2009, the association demanded that he remove the new gate.  Later, the association voted to remove all gates in the fence.  Margerison sued the association, seeking a declaratory judgment that he had a property interest in the gate and the association did not have the authority to demand that he remove it. 

The association responded that it possessed an exclusive easement granted in the original subdivision plat and deed of dedication.  It further asserted that the board's action granting Margerison permission to install a new gate was made without authority because it was never voted on by the association members.  The association revoked any license granted to give Margerison permission to install a replacement gate.  Both parties sought summary judgment. 

The association’s CC&Rs provides:

Within the Deed of Dedication of Charter Oak there has been heretofore established for the benefit of the Association a perpetual easement upon the perimeter of Charter Oak for the purposes of the erection, installation and maintenance of security and entry facilities, decorative fencing, walls and landscaping.  The maintenance of the perimeter. . . fencing. . . shall be the obligation of the Association.  The perimeter easement of the Association shall be deemed exclusive, and no individual lot owners shall construct any fence or wall within the perimeter easement area or within 20 feet of the perimeter boundary line of Charter Oak, unless the proposed fence or wall shall have first been approved in writing by the Association.

The trial court entered summary judgment in favor of the association, finding that the developer assigned an exclusive easement to the association for purposes of creating a limited access gated community.  The court noted that easements may not be enlarged by implication.  The trial court further held that there was no issue of material fact as to waiver or acquiescence because the 15-year adverse possession period had not run out.  Lastly, the court held that, "any claim to create private rights in the common element of the fence is not permitted by any of the foundation (association) documents."  The court lifted the injunction against the association's plan to remove the gates.  Margerison appealed.

In its review of the trial court record, the appeals court found that a dispute of material fact existed about whether the association was estopped from demanding removal of the gates after acquiescing in their existence for a number of years and after expressly granting Margerison permission to replace the gate on his lot.  The court found that the trial court erred in basing its decision on the 15-year limitations period for boundary by acquiescence. 

The court relied upon The Restatement (Third) of Property: Servitudes (2000), which provides for a change to an easement based on estoppel.  Section 7.6 of the Restatement provides:

A servitude is modified or terminated when the person holding the benefit of the servitude communicates to the party burdened by the servitude, by conduct, words, or silence, an intention to modify or terminate the servitude, under circumstances in which it is reasonable to foresee that the burdened party will substantially change position on the basis of that communication, and the burdened party does substantially and detrimentally change position in reasonable reliance on that communication. 

The Oklahoma Supreme Court has recognized that, "[a]cquiescence involves a quiet submission or compliance with acts from which assent can reasonably be inferred.  A person may, through long acquiescence in a practice or recognition of a right, be precluded from denying the legality of the actions taken."  Smith v. Baptist Foundation of Oklahoma, 2002 Okla. 57, P10, 50 P.3d 1132

The appeals court explained that the rationale for the principle of estoppel is that the owner of an easement is not permitted to change a position once taken by him if the change would work undue prejudice to the owner of the servient estate.  It is not essential that the owner has made, intentionally or otherwise, any misstatement of fact; it is only necessary that he shall have led the owner of the servient estate into some action inconsistent with the continued existence of the easement.  Thus, if the owner of an easement acts as though he has no intention to make the use authorized by the easement in the future, he may become estopped from making such use if the owner of the servient estate acts in reliance upon the intention indicated. 

The social policy originates in the feeling that unused easements constitute objectionable encumbrances on the title to land subject to them.  The appeals court found that the evidence showed a dispute as to whether the association acquiesced in the existence of the gate, as well as whether it acted within its authority in granting permission to Margerison to install the replacement gate in 2008.  Finally, the evidence showed a dispute of material fact as to whether the presence of the gate constituted an unreasonable burden on the association's use of the easement.  The court again relied on The Restatement (Third) of Property: Servitudes (2000), Section 4.9, which provides that "the holder of the servient estate is entitled to make any use of the servient estate that does not unreasonably interfere with enjoyment of the servitude." 

The court concluded that whether the use planned by Margerison was unreasonable or inconsistent with the rights of the association in the easement was a question of fact, and factors to be considered in deciding the question included the intent of the original parties, the language in the deed of dedication and the construction or practice of the parties. 

Because the record showed the above disputed facts, the appeals court reversed the trial court's grant of summary judgment and remanded the case for further proceedings.

In a dissenting opinion, Judge Carol M. Hansen found the majority mischaracterized the issue as one of whether a gate could remain in the fence.  The 1983 charter and bylaws reserved a three-foot perimeter and fence easement in favor of the association.  The fence had three gates when Margerison purchased his lot.  Judge Hansen observed that it was undisputed that the charter, covenants and bylaws had no provision to allow lot owners to install gates in the perimeter fence.  Further, Margerison was a member of the association's board of directors and received a minority vote that allegedly allowed him to install a gate in the fence at his own expense, which he did.  However, he did not have a majority vote by the board members present approving his petition.  Later the association, by a vote of the homeowners, demanded he remove the gate. 

In Judge Hansen's opinion, the association clearly had the right in the easement to build a perimeter fence consistent with the purposes of the easement.  The association owned the fence.  Placing a gate in the fence was inconsistent with the easement and in conflict with the intended limited access and exclusive rights of the association.  She noted that there was no provision in the subdivision's governing documents that permitted a vote by the board to prevail without a vote of the homeowners.  In her view, Margerison claimed an ownership right superior to the association's easement rights.  She found that the fact that Margerison bought his property partly based on access to the park; the fact it was inconvenient for him to walk or ride to the community exit for that access was not material to the decision.  The judge found that there were no material facts in controversy, and accordingly, the trial court did not err in granting the association's motion for summary judgment.

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Overbroad Sign Restriction Is Unconstitutional

Mazdabrook Commons Homeowners' Association v. Kahn, No. A-6106-08T3, N.J. Super. Ct., Sept. 1, 2010

Architectural Control/Covenants Enforcement:  In an unpublished opinion, a New Jersey appeals court ruled that an overbroad sign restriction that imposed a ban on the placement of signs inside or outside condominium units violated owners constitutional rights to free speech under the New Jersey constitution because it eliminated an entire means of expression without a readily available alternative.

In 2005, Wasim Khan purchased a condominium unit in Mazdabrook Commons, a condominium development located in Morris County, N.J.  In 2006, Kahn planted a climbing rose bush in the mulched area between the front of his unit and his garage.  The bush grew to be taller than the garage entrance.  The association sent him four letters advising him that the bush constituted a fire hazard and was in violation of the declaration and must be removed.  On May 11, 2006, the association began fining him $25 per day for the violation.  Kahn appealed imposition of the fines to the board, but never received a response from the association.  In the latter part of 2006, he trimmed the rose bush to a height of two feet.  The rose bush again became an issue in 2007, and the association passed a resolution prohibiting owners from planting any bush within landscaped areas that exceeded two and a half feet.

In 2008, Kahn was nominated for a township office.  After seeing election signs in windows of the project's model unit, he placed a sign in a window of his own unit.  The association sent him a notice advising him that the sign was prohibited by the governing documents and must be removed.  Although he removed the sign, he was nonetheless fined $75 by the association. 

In May 2008, the association again sent Kahn a notice of violation with respect to his rose bush, stating that he had previously been notified of height restrictions and a fine of $25 per day would be assessed against him if he did not dispute the assessment within 10 days.  A second notice involving two rose bushes was sent in June 2008, citing the same restriction.  It stated that a fine of $50 per day would be assessed for the period from May 26, 2008, until June 3, 2008, totaling $450.

The association sued Kahn to collect unpaid maintenance fees and late fees in the amount of $4,450.98.  Kahn raised the defense of unclean hands and counterclaimed alleging breach of contract and violation of his right to free speech.  The trial court ruled in favor of the association and assessed Kahn $3,500 consisting of a $1,500 fine for maintaining the over-height rose bush and $2,000 for nonpayment of maintenance fees in March 2007 and July 2007 through October 2008.  The court reduced the interest fee due on the unpaid maintenance fees from 20 percent to 10 percent and denied Kahn's free speech claim.  Both parties appealed.

The appeals court adopted an analytical framework, used in State v. Schmid, 84 N.J. 535, 423 A.2d 615 (1990), that requires courts to consider:  (1) the nature, purposes and primary use of the private property; (2) the extent and nature of the public's invitation to use the property; and (3) the purpose of the expressional activity undertaken upon the property in relation to private and public use. 

The association argued that the trial court erred by arbitrarily establishing the cut-off date for the rose bush fines.  The appeals court determined that the court was mistaken in its award of $1,500 in fines, but determined that the trial court correctly declined to find that the violation continued beyond August 2007.  The association began to fine Kahn the day after it adopted the plant height resolution for a period that continued to August 23, 2007.  However, the bylaws require written notice and a 10-day notice period before fines can be levied.  The only evidence of proper notice provided to Kahn was dated August 20, 2007.  Therefore, any fines levied prior to that date did not conform to the procedures established by the association.  The appeals court vacated the trial court's award of $1,500 in fines and upheld its determination that Kahn did not incur any fines after July 7, 2007. 

The association contested the trial court's reduction of interest charged on the unpaid maintenance fees from 20 percent to 10 percent.  The appeals court determined that the 20 percent payment was not "interest, but constituted liquidated damages established in the bylaws in lieu of attorney's fees for instances when the association sued to enforce the covenants."

As a final matter, the appeals court addressed Kahn's free speech argument arising from the association's restriction on posting signs and the fine imposed upon him for violating the restriction.  The appeals court concluded that Mazdabrook is a residential, common-interest community that is not open to the public.  The association imposed almost a total ban on the placement of signs in the condominium units, eliminating an entire means of expression without a readily available alternative, which rendered the restriction overbroad.  The court found that the right to free speech outweighed any of the association's concerns about use of the condominium property.  Accordingly, the court held that the sign resolution was unconstitutional.  Nevertheless, the court found that Kahn was not entitled to damages as the result of his violation of the restriction because those damages were not proven through evidence at trial.  The trial court's judgment was reversed in part and remanded for entry of judgment in the amount of $2,290.98. 

In a dissenting opinion, Judge Miniman argued that Kahn's right to free speech did not outweigh the association's concerns regarding use of the condominium property.  He noted that the New Jersey Supreme Court, quoting Wayne Hyatt in Condominium and Homeowner Association Practice:  Community Association Law, recognized that common-interest communities are distinguishable from any other form of real property ownership because "there is a commonality of interest, an interdependence directly tied to the use, enjoyment and ownership of property." 

Judge Miniman noted that all the owners purchased their units subject to the terms and conditions set forth in the declaration.  The restrictions applying to the outside of the units were intended to preserve a unique architectural design by maintaining a uniform aesthetic throughout the development.  The declaration provides that while land in front of the units is to be maintained by the owners, the landscaping is to be maintained by the association.  In his opinion, it was clear that the restrictions were intended to directly benefit each owner by preserving this unique architectural design, and failure to comply with the declaration is grounds for an action to recover damages, for injunctive relief or both by the association. 

In Judge Miniman's opinion, the sign restriction was a servitude that runs with the land, created because the owner of the property conveyed the property subject to the recorded declaration of restrictions.  The restrictions, therefore, are valid unless they are illegal or unconstitutional. 

Here, Kahn had the means at his disposal to mail information about his candidacy, or any other topic, directly to other unit owners.  He was also free to stand at the entrance to the development and hand out leaflets or go door-to-door to speak with voters in each unit.  He could attend association meetings and advance his candidacy or, most importantly, he could have sought permission from the board to place the sign in his window until after the election.  Therefore, he had readily available alternative forms of speech. 

Consequently, Judge Miniman, did not consider the sign restriction to be an untoward interference with the reasonable use of Kahn's property because the sign restriction was contained in the recorded declaration and included in the bundle of rights, restrictions, encumbrances and easements contained in Kahn's deed to the unit.  Thus, Kahn had expressly agreed that he would not violate the restriction.  Furthermore, the judge found that individuals are permitted to waive their constitutional rights.  The judge concluded that Kahn waived his free speech right to post signs in his windows and the outcome of the balancing of the rights and privacy interests was obvious.  The limitation on signs was no more than a minor restriction on Kahn's expressional activities that was not unreasonable or oppressive.  The association's policy did not violate Kahn's right of free speech, and the sign restriction, which the board could waive on a case-by-case basis, was reasonable as to time, place and manner.

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FHA Claims Must be Made Within Two Years of Incident

Telesca v. The Village of Kings Creek Condominium Association, Inc., No. 09-13910, U.S. App. Ct., 11th Cir., Aug. 2, 2010

Federal Law and Legislation/Association Operations:  A handicapped person who sued a condominium association under the Fair Housing Act for its failure to provide an assigned parking space near the owner's vacation unit failed to state a claim within the two-year statute of limitations.

Virginia and Michael Telesca live in Massapequa Park, N.Y., and own a condominium unit at the Village of Kings Creek Condominium Association, Inc. in Kendall, Fla.  The Telescas have owned the condominium unit as a vacation home for more than 15 years.

The condominium has several handicap parking spaces throughout the parking lot that are available on a first-come, first-served basis.  However, they are located a considerable distance from the Telescas' unit.  When their health began to decline in 2004, the Telescas asked the association to assign them a parking space close to their unit.  The association denied their request because the policy was that all parking spaces were unassigned. 

In 2005, the Telescas again asked the association for an assigned parking space and the association again denied their request, stating that the available handicap parking spaces were a reasonable accommodation.  Then in February 2007, the Telescas once again requested for an assigned parking space closer to their unit, and the association denied the request.  The Telescas' health problems had made it difficult for them to visit their unit since 2004.

In May 2008, the Telescas sued the association, alleging that the association's denial of their requests for assigned parking constituted harassment, retaliation and discrimination in violation of the Fair Housing Act.  The district court granted the association's motion to dismiss the complaint, finding that the Telescas failed to plead a particularized injury that fell within the two-year statute of limitations. 

The only specific injury named in their complaint was an incident that occurred in 2005 when Maria Telesca visited her unit.  She was unable to find an available handicap parking space and parked in a resident parking space, which resulted in her car being towed.  The trial court found that this incident fell outside the two-year statute of limitations.  Furthermore, the Telescas did not satisfy the standing requirements for claims arising under the act.  In the court's opinion, the act was not intended to create a cause of action for properties that were not full-time residences.  The Telescas appealed.

The appeals court observed that the act prohibits discrimination "in the provision of services or facilities in connection with [a] dwelling because of a handicap."  Discrimination includes "a refusal to permit, at the expense of the handicapped person, reasonable modifications of existing premises occupied by such person if such modifications may be necessary to afford such person full enjoyment of the premises."  It also includes "a refusal to make reasonable accommodations in rules, policies, practices, or services, when such accommodations may be necessary to afford such person equal opportunity to use and enjoy a dwelling.

The appeals court determined that the only requirement for standing to sue under the act was injury in fact.  The court noted three elements to determine standing under the statute:  (1) a person must suffer an injury in fact; (2) there must be a causal connection between the injury and the conduct complained of; and (3) it must be likely that the injury will be redressed by a favorable decision. 

The appeals court found that the act explicitly states that it creates a cause of action for owners of a dwelling.  The act defines a dwelling as "any building, structure, or portion thereof that is occupied as a residence by one or more families.”  After examining the plain meaning of residence, the court found there to be no doubt that the Telescas' unit was a secondary home (emphasis added).  They purchased the unit for their own personal use and they used the unit on a regular basis until 2005.  The court, therefore, concluded that the fact that their unit was a secondary or vacation home did not divest them of standing under the act. 

However, the Teslescas did not state an injury that was within the two-year statute of limitations.  They filed their initial complaint in May 2008.  Their second amended complaint, filed in January 2009, stated that "Maria Telesca arrived at the complex to visit her unit in 2005 and attempted to park in the designated handicapped parking spaces provided, but all handicapped spaces were occupied." 

The act's statute of limitations begins to run as soon as "facts supportive of the cause of action are or should be apparent to a reasonably prudent person similarly situated."  A claim arising from an injury which only continues because a person fails to seek relief is barred by the limitation period. 

The retaliation acts alleged by the Telescas were committed by employees of the association against their grandson.  The court found that their grandson did not have standing to assert a retaliation claim.  The plain language of the act only creates a cause of action for persons who are themselves exercising a right under the act or somehow aiding another to exercise his or her rights under the act. 

The Telescas argued that they had a cause of action against the association under the theory that the association's harassment of their grandson resulted in their loss of enjoyment of their unit because they were denied the right to use it as they wished, in this case allowing their grandson to live there peacefully.

However, they did not plead either theory of retaliation with sufficient particularity.  To survive the association's motion to dismiss, they would have had to provide a short and plain statement of the claim showing that they were entitled to relief in order to give the association fair notice of what the claim was and the grounds upon which it rested. 

The court concluded that the Telescas had standing to bring a claim against the association under the act, but failed to state a claim within the statute of limitations.  Furthermore, their complaint did not plead a retaliation claim with a sufficient level of clarity to give the association adequate notice of the particular retaliation claim being filed. 

Therefore, the court concluded that the trial court was proper in dismissing the Telescas' complaint, and affirmed its ruling in the association's favor.

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