U.S. District Court of North Carolina

Lofts at Albert Hall Condominium Association, Inc. v. Vintage Oaks II

No. 1:12-CV-906.

THE LOFTS AT ALBERT HALL CONDOMINIUM ASSOCIATION, INC., et al., Plaintiffs,
v.
VINTAGE OAKS II, et al., Defendants.

United States District Court, M.D. North Carolina.

August 14, 2014.

MEMORANDUM OPINION AND ORDER

CATHERINE C. EAGLES, District Judge.

This case presents the issue of whether the owners of a mixed-use building are responsible for maintaining and replacing the building's leaky roof. The document which gives the defendants their ownership rights in the building also requires them to maintain the roof and replace it when necessary. The plaintiffs are entitled to a declaratory judgment to that effect, to an injunction requiring the defendants to replace the roof, and to a ruling that the defendants are liable for damages caused by their failure to maintain the roof.

Background

The material facts are not in dispute. The plaintiffs are the condominium association and one of the condominium unit owners of the Lofts at Albert Hall Condominium, which occupies the top floor of Albert Hall, a building in Winston Salem owned by the defendants. (Doc. 13 at ¶¶ 1-5.) The defendants own the rest of the building, which they acquired by deed from Piedmont Institute for Research and Technology, LLC, ("PIRT"), the developer of the property; PIRT had executed the Declaration of Condominium creating the Lofts at Albert Hall. (See generally Doc. 12-2.) The defendants are bound by that declaration. (Doc. 29 at ¶ 10.)

The roof of Albert Hall has leaked on many occasions, damaging lower levels of the building including the plaintiffs' property. (Doc. 82 at ¶¶ 4-12, 14-18; Docs. 82-1 to 82-5; Doc. 83 at ¶¶ 3, 6; Doc. 84 at ¶¶ 3, 7, 10; Doc. 85 at ¶¶ 2, 7, 8.) The Association, through its property manager, has informed the defendants of roof leaks. (Doc. 83 at ¶¶ 3-7.) The defendants repeatedly attempted repairs, but these were either totally unsuccessful or only temporarily helpful; the roof has continued to leak and cause damage to common areas and individual units. (Id.; Doc. 84 at ¶¶ 3, 7, 10; Doc. 85 at ¶¶ 2, 7, 8.)

According to one experienced roofer who has inspected the roof, "[i]n my over thirty years of roofing experience, if there was ever a roof that need[ed] to be replaced, it was the roof of Albert Hall." (Doc 84 at ¶ 7; see also id. at ¶ 10.) Another experienced roofer offered similar, if not quite as colorful testimony. (Doc. 85 at ¶¶ 7-8.) The defendants point to no contrary evidence and now concede that the northern half of the roof needs to be replaced. (Doc. 94 at 2.)

After the Court denied a defense motions to dismiss, (Doc. 27), the defendants filed a third-party complaint against PIRT and its successor. The Court granted the third-party defendants' motion to dismiss. (See Docs. 47, 48.) Discovery is now complete. Pending are the defendants' motion to amend their answer to add a counterclaim and the plaintiffs' motions to strike, for partial judgment on the pleadings, and for summary judgment.

Analysis

I. Motion to Amend, (Doc. 67)

The defendants seek to amend their answer to add a counterclaim for maintenance costs. In response, the plaintiffs contend that the defendants failed to show good cause for leave to amend, that permitting the amendment would be futile because the counterclaim does not state a claim upon which relief may be granted, that permitting the amendment would be unduly prejudicial, and that defendants seek the amendment for "an ulterior tactical purpose."

As a threshold matter, the parties dispute the applicable standard. Under Rule 15 of the Federal Rules of Civil Procedure, when amendment is not sought as a matter of course, the court should freely grant leave to amend when justice so requires. Fed. R. Civ. P. 15(a)(2). However, when a motion to amend is filed after the time for filing amendments in a scheduling order has passed, the movant must demonstrate good cause under Rule 16(b). Fed. R. Civ. P. 16(b)(4); Nourison Rug Corp. v. Parvizian, (4th Cir. 2008); Halpern v. Wake Forest Univ. Health Scis., 268 F.R.D. 264, 266 (M.D.N.C. 2010).

Here, the Court in its scheduling order adopted the parties' Rule 26(f) report. (Doc. 43.) That report allowed the parties "until the later of sixty (60) days following the close of the pleadings or a ruling by the Court on third-party defendants' pending Rule 12(b)(6) motion . . . . to request leave to join additional parties or amend pleadings." (Doc. 42 at 5.) The Court granted the third-party defendants' Rule 12(b)(6) motion on July 15, 2013, so the defendants had until September 13, 2013 to seek leave to amend. Because the defendants did not file their motion until March 2014, they must demonstrate good cause under Rule 16(b).

The defendants do not address Rule 16(b)'s good cause requirement in their motion and instead offer only bare assertions that the amendment would not delay trial and that justice "requires the allowance of the amendment." (Doc. 67 at 2.) This is not enough to satisfy the defendants' burden to "justify a departure from the rules set forth in the court's scheduling order," especially when counsel has offered no explanation for the delay. Stonecrest Partners, LLC v. Bank of Hampton Rds., (E.D.N.C. 2011) (internal quotation marks and alterations omitted) (noting that good cause inquiry focuses on timeliness of the amendment and the reasons for its tardy submission).

The defendants contend that the Rule 26(f) report, as adopted by the scheduling order, permits their motion so long as amendment would not delay trial. However, the report clearly states that should a motion to amend be filed after the established deadline, "the court will consider, inter alia, whether the granting of leave would delay trial." (Doc. 42 at 5.) "Inter alia" means "among other things," so the report makes it clear that delaying trial was not the only relevant factor in deciding whether leave to amend would be granted. In any event, even if the Court considered only the issue of delaying trial, adding a new counterclaim in a case which previously had none would entail obvious delays which the defendants have not addressed.

The Court will deny the motion to amend.

II. Motion to Strike, (Doc. 71)

The plaintiffs move to strike the defendants' reply brief to the response to the motion to amend because it sets out arguments and authorities not raised in a brief in support of the original motion. In the alternative, the plaintiffs request leave to file a surreply, with costs and attorneys' fees for its preparation charged to the defendants.

The Court will not strike the reply. The defendants' reply brief responded to the plaintiffs' contentions, albeit unpersuasively. Moreover, the Court has ruled in the plaintiffs' favor on the underlying motion. The motion to strike will be denied.

III. Motion for Partial Judgment on the Pleadings, (Doc. 73)

The plaintiffs move for judgment on the pleadings as to their fifth claim, seeking a declaratory judgment that the defendants are responsible for replacing the Albert Hall roof if necessary and judgment against the defendants on their first, second, fourth, tenth, and twelfth affirmative defenses. As an initial matter, the defendants contend that the pleadings are not yet closed and so this motion is not ripe for review. As stated above, the pleadings closed in 2014. See discussion supra Part I note 1. This motion is ripe for review.

A court may enter judgment on the pleadings pursuant to Federal Rule of Civil Procedure 12(c) "when the material facts are not in dispute and the court can judge the case on its merits by considering the pleadings and any attachments to the pleadings and materials referenced, which are incorporated into the pleadings by Rule 10(c)." Preston v. Leake, (E.D.N.C. 2009). As it does when reviewing a Rule 12(b)(6) motion, the court assumes the facts alleged by the non-moving party as true and draws all reasonable factual inferences in its favor. See Burbach Broad. Co. v. Elkins Radio Corp., (4th Cir. 2002).

The defendants concede that they took title to Albert Hall subject to the terms of the declaration and that they are bound by the declaration. (See Doc. 29 at p. 3 ¶ 10; Doc. 12-4 at 8 (stating deed is subject to terms of declaration).) The declaration unambiguously provides that the declarant is responsible for the maintenance of all structural components generally and the roof specifically. (Doc. 12-2 at 24-26; see also id. at 9 (stating that restrictions, conditions and covenants of declaration run with the land).) As this Court previously held, the defendants assumed the obligations of the declarant when they took title. (Doc. 47 at 3.)

The defendants attempt to manufacture ambiguity in the declaration by suggesting that it contemplates the boundaries of common elements or areas, for which the Association is responsible, as including the roof. (See Doc. 12-2 at 26-27 (making Association responsible for repairs to common elements, including exterior); id. at 2 (defining common elements as "[a]ll portions of the Condominium except the Units.").) There is no such ambiguity. The declaration's floor plan clearly denotes common elements, including exterior patios, and does not designate the roof as such. (Id. at 34-35; see also id. at 3 (defining condominium property as top floor and adjoining elevator tower and lobby area, as described in floor plans).) The declaration is not reasonably susceptible to the defendants' construction; it is plain and unambiguous, and judgment on the pleadings in the plaintiffs' favor is appropriate. See, e.g., Glover v. First Union Nat'l Bank of N.C., (1993) ("If a contract is plain and unambiguous on its face the court may interpret it as a matter of law.")

The defendants' first, second, and fourth affirmative defenses depend on their contention that they did not acquire "special declarant rights" under N.C. Gen. Stat. § 47C-1-103(9), when they purchased Albert Hall such that they are not declarants under the declaration. However, the Court has already rejected this argument, holding that when PIRT transferred its ownership interest in the property to the defendants, it also transferred any obligation it had to maintain the roof. (Doc. 47 at 2-3.) To the extent that Order was not explicit, the Court now holds that as part of the transfer of ownership, PIRT transferred to the defendants and the defendants accepted the obligation to maintain the roof. As a matter of law, the defendants cannot prevail on the first, second, and fourth affirmative defenses.

The plaintiffs also seek judgment on the pleadings as to the defendants' tenth and twelfth affirmative defenses; however, they did not brief this portion of their motion. In the absence of any explanation of the grounds for judgment, the Court will deny the motion as to these affirmative defenses. See L.R. 7.3(k).

IV. Motion for Partial Summary Judgment, (Doc. 81)

The plaintiffs move for partial summary judgment on liability as to their claims under the North Carolina Condominium Act, nuisance, and trespass. They also seek entry of a mandatory injunction directing the defendants to replace the northern part of the roof. The plaintiffs contend that the undisputed facts establish that the roof leaks when it rains, that these leaks have caused substantial damage, and that the roof needs to be replaced.

Summary judgment is appropriate when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Anderson v. Liberty Lobby, Inc., (1986). The movant has the initial burden to show the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, (1986). Once the movant satisfies its burden, the burden shifts to the non-movant to produce admissible evidence from which the finder of fact might return a verdict in his favor. Liberty Lobby, 477 U.S. at 257.

A. North Carolina Condominium Act

The North Carolina Condominium Act provides a cause of action for any person adversely affected by a declarant's failure "to comply with . . . any provision of the declaration." N.C. Gen. Stat. § 47C-4-117. The defendants do not dispute that they are bound by the Act. Nor do the defendants dispute that the northern half of the roof needs to be replaced and that the condition of the roof is causing damage to the plaintiffs. Indeed, the undisputed evidence shows that the roof leaks and has caused damage, that it is not in good condition, and that it is in need of replacement. (See, e.g., Doc. 82 at ¶¶ 4-12, 14-18; Docs. 82-1 to 82-5; Doc. 83 at ¶¶ 3, 6; Doc. 84 at ¶¶ 3, 7, 10; Doc. 85 at ¶¶ 2, 7, 8.)

The defendants' only argument in response to this claim is that the plaintiff Association is responsible for roof repairs, not them. The Court has already rejected this argument and determined as a matter of law that the defendants are responsible for maintaining the roof in good condition and replacing it when needed. Accordingly, the plaintiffs are entitled to relief under N.C. Gen. Stat. § 47C-4-117, including a mandatory injunction and damages. See id. cmt. (noting appropriate relief might include damages or injunctive relief); Wrightsville Winds Townhouses Homeowners' Ass'n v. Miller, (1990) ("A mandatory injunction is the proper remedy to enforce a restrictive covenant.").

B. Nuisance

Generally, to recover for nuisance, "a plaintiff must show the existence of a substantial and unreasonable interference with the use and enjoyment of its property." The Shadow Grp., L.L.C. v. Heather Hills Home Owners Ass'n, 156 N.C. App. 197, 200, (2003). Interference with the flow of surface water can constitute a private nuisance action when the interference is unreasonable and causes substantial damage. Pendergrast v. Aiken. 

The plaintiffs' evidence is that the defendants' failure to properly maintain and replace the roof has caused water to flow into the plaintiffs' property, causing damage in the form of significant annoyance and injury to property; the injuries include mold and damage to ceilings and walls throughout the common areas and Mr. Smith's apartment, as well as damage to furniture in Mr. Smith's apartment. (Doc. 82 at ¶¶ 4-19; Doc. 83 ¶¶ 6-7); see discussion supra Part III. Leaks are constant when it rains and have caused such damage for several years. (Id.)

While the defendants do not dispute the evidence, they contend that they cannot be held liable for nuisance because Pendergrast requires intentional interference with the flow of surface water. However, the court in Pendergrast explicitly recognized a private nuisance cause of action for negligent or reckless interference with the flow of surface water. 293 N.C. at 216-17, 236 S.E.2d at 796-97. Indeed, in Shadow Group, the plaintiff-townhouse owner recovered in nuisance for the failure of the defendant-homeowner's association to stop water from flowing from common areas into the plaintiff's property. 156 N.C. App. at 199, 579 S.E.2d at 286. The facts here are virtually indistinguishable.

It is clear the defendants are responsible for the roof, that they have failed to maintain the roof, and that their failure has caused substantial damage to the Association and to Mr. Smith. They offer no reason for their failure beyond their unreasonable assertion that they are not responsible for the roof. The evidence is thus undisputed and in favor of the plaintiffs. Accordingly, the Court will grant the plaintiffs' motion as to liability for nuisance.

C. Trespass

"[T]o establish a trespass to real property, a plaintiff must show: (1) his possession of the property at the time the trespass was committed; (2) an unauthorized entry by the defendant; and (3) resulting damage to the plaintiff." Id. at 201, 579 S.E.2d at 287. Causing water to flow onto another's property can give rise to a cause of action for trespass. Id.; see also CDC Pineville, LLC v. UDRT of N.C., LLC, 174 N.C. App. 644, 650, (2005).

The plaintiffs' evidence establishes that Mr. Smith and the Association were in lawful possession when the leaks occurred, causing damage to their property. (See Doc. 82 at ¶¶ 2, 4-9 19; Doc. 83 ¶¶ 6-7); see supra note 3. The defendants do not dispute this evidence and respond only that the leaks cannot constitute an unauthorized entry by them because they are not responsible for the roof. The Court has already found that repair of the roof is the defendants' responsibility. See, e.g., Shadow Grp., 156 N.C. App. at 201, 579 S.E.2d at 287 (holding evidence showing defendant's failure to stop the flow of water onto plaintiff's property and that plaintiff did not authorize defendant to cause water to flow onto its property established claim for trespass). There are no disputed questions of fact as to liability, and the plaintiffs are entitled to judgment on their trespass claim.

VI. Conclusion

Because the defendants have not shown good cause for their untimely request to amend, the Court will deny their motion. The Court will deny the plaintiffs' motion to strike because it is moot and the relief it seeks is unwarranted. The Court will grant the plaintiffs' motion for partial summary judgment and their motion for partial judgment on the pleadings in large part because the contract unambiguously requires the defendants to repair and replace the roof.

It is time for the defendants' efforts to avoid legal responsibility for the roof at Albert Hall to come to an end. The amount of damages can only increase if the defendants continue their efforts to avoid their clear and obvious responsibilities. The defendants must replace the roof. The Court suggests the parties return to mediation, (see Doc. 69-5), to resolve other damages issues. If that is unsuccessful, trial will proceed as scheduled.

The Court is prepared to enter a declaratory judgment and an injunction directing the defendants to replace the roof. The Court is also prepared to enter judgment as to liability for the plaintiffs' causes of action seeking damages, with the issue of damages reserved for trial. The Court directs the parties to confer on the form of an injunction and judgment implementing the rulings in this Order. If the parties agree as to form, they shall submit by email to the Clerk a proposed Injunction and Partial Judgment no later than September 30, 2014. If the parties cannot agree, each side shall submit a proposed Injunction and Partial Judgment on that same date.

Finally, the defendants raised a number of defenses in their answer. To facilitate and simplify trial preparation, it will be helpful to have the status of those defenses clarified. The Court perceives the matters raised in the Third, Fifth, Sixth, and Eleventh Defenses will be part of the trial on damages and that this Order disposes of the remaining defenses. If any party disagrees, that party shall immediately advise opposing counsel and thereafter the parties shall confer. To the extent the parties disagree with the Court, they may file short briefs by September 6, 2014. If the parties jointly disagree with the Court, the brief may be joint and should be very short. Otherwise, the briefs are limited to five pages.

For the foregoing reasons, it is therefore ORDERED that:

(1) The defendants' motion for leave to amend their answer, (Doc. 67), is DENIED; (2) The plaintiffs' motion to strike the defendants' reply to the motion to amend, (Doc. 71), is DENIED; (3) The plaintiffs' motion for partial judgment on the pleadings, (Doc. 73), is GRANTED in part and DENIED in part as stated herein; (4) The plaintiffs' motion for partial summary judgment, (Doc. 81), is GRANTED; (5) The parties shall confer and comply with logistical and scheduling directives of the Court as set forth above.

Footnotes

1. The defendants contend that nothing has happened to "trigger" the close of the pleadings, but the complaint and the answer were filed in early 2014, and the third-party defendants were dismissed some months ago. See Fed. R. Civ. P. 7(a) (listing pleadings allowed). They have not identified any additional pleadings that have not been filed.

2. The defendants' contention that the plaintiffs' notice of intent to file dispositive motions was untimely fails, as the plaintiffs filed their notice within fourteen days by the calculations mandated by Local Rule 56.1 and Federal Rule of Civil Procedure 6(a).

3. The defendants do not contend in response to the motion for summary judgment that the Association does not have rights protected by nuisance law, and such an argument would be inconsistent with the North Carolina Condominium Act. N.C. Gen. Stat. § 47C-3-102(a)(4). Nor have they pointed out any evidence inconsistent with the declaration, which gives the Association the right to use and possess the common elements. (Doc. 12-2 at 26-27.)

Pennsylvania Superior Court

Little Mountain Community Association, Inc. v. The Southern Columbia Corp.

No. 769 MDA 2013

92 A.3d 1191 (2014)

2014 PA Super 91

LITTLE MOUNTAIN COMMUNITY ASSOCIATION, INC. and Donald R. Rhodes, Appellee
v.
The SOUTHERN COLUMBIA CORP., Appellant.

Superior Court of Pennsylvania.

Argued January 29, 2014.

Filed May 1, 2014.

Reargument Denied July 8, 2014.

Paul J. Toner, Philadelphia, for appellant.

John A. Mihalik, Bloomsburg, for appellees.

BEFORE: PANELLA, J., OLSON, J., and PLATT, J.

OPINION BY PLATT, J.

Appellant, The Southern Columbia Corp. (Southern Columbia), appeals by permission from the order overruling four of its five preliminary objections to the complaint of Appellees, Little Mountain Community Association, Inc. and Donald R. Rhodes. Appellees chiefly seek to replace Southern Columbia in ownership and operation of roads and another common facility for Mystic Mountain Estates, with Little Mountain, as a mandatory unit owners' association under the Uniform Planned Community Act (also referred to as UPCA, or the Act). We are constrained to conclude that the trial court, in overruling the first preliminary objection, and in its overarching analysis, misinterpreted the retroactivity provisions of the UPCA. Accordingly, we vacate in part and remand.

There is no substantial dispute about the facts directly relevant to our review. The parties stipulated to most of them in an extended colloquy at the hearing held on December 4, 2012. (See N.T. Hearing, 12/04/12, at 8-19; see also Appellant's Brief, at 6 (stating "dispositive facts were not in dispute"); Appellees' Brief, at 2 (noting stipulation at hearing, while also referring to allegations from complaint)).

Appellant Southern Columbia is the successor developer and declarant of Mystic Mountain Estates, a residential subdivision in Columbia County begun in 1972, with the first lot sold in 1974. (See Trial Ct. Op., 12/28/12 at 1). Mystic Mountain Estates is comprised of 423 lots, of which 224 have been sold. Little Mountain is a self-proclaimed community association. (See Complaint, 9/27/12, at -12 ¶¶ 1-4; 8 ¶ 46). Mr. Rhodes, a half-time resident at Mystic Mountain Estates with a fifty percent beneficial interest in three lots by virtue of a living trust, is Little Mountain's treasurer.

Little Mountain does not have an ownership interest in any of the lots.

The warranty deed for each purchaser of a lot at Mystic Mountain included thirteen restrictive covenants otherwise referred to as "Real Estate Development, Construction & Management Restrictions" (Restrictions). (See "Defendant's Preliminary Objections to Plaintiffs' Complaint," 10/18/12, at Exhibit 2). Each warranty deed, including the Restrictions, was recorded. In pertinent part, the Restrictions provided that Appellant Southern Columbia would assess various fees on an annual basis for maintenance and snow removal on community roadways. Each Grantee (Buyer) agreed to the "conditions and charges which shall be required to maintain those necessary community services[.]" (Id. at unnumbered pages 2-3 ¶ 8). The Restrictions were designated "covenants running with the land[.]" (Id. at unnumbered page 3 ¶ 10).

The Restrictions made provision for a permissive assignment, ("may at any time be assigned"), by Appellant Southern Columbia of its "rights and obligations" to a "three-member governing commission" elected on a "one-lot, one-vote basis" "when The Southern Columbia Corp. no longer owns a majority of the total number of lots in or planned for the Mystic Mountain Estates subdivision[.]" (Id. at unnumbered page 4 ¶ 13). There was no other procedure designated for a transfer, voluntary or compulsory, of the maintenance services or the corresponding assessments.

Little Mountain was incorporated in 2011. On September 27, 2012, Appellees Little Mountain and Mr. Rhodes filed a complaint against Appellant Southern Columbia. The complaint alleged, inter alia, defective maintenance of the roadways, and that there was no capital reserve account set aside by Appellant for future contingent expenses; it demanded an accounting of the fees collected, and sought a transfer of title ownership of the common facilities to itself. Chiefly, Appellees claimed a right to relief under the Uniform Planned Community Act, (see Complaint, at 11-12 ¶ 66; 13 ¶ 70; 16-17 ¶¶ 99-103), and the Restatement (Third) Property (Servitudes), (see id. at 10, ¶¶ 62-65; 17-19 ¶¶ 104-26). The complaint also cited various legal theories.

Appellant filed preliminary objections. Briefly summarized, the first four objections challenged the standing of both Appellees to bring suit under the UPCA, demurred to the complaint as legally insufficient, and claimed failure to join all lot owners as necessary parties. (See Defendant's Preliminary Objections to Plaintiffs' Complaint, 10/17/12, at 4-11 ¶¶ 25-66). Specifically, Appellant first objected to Little Mountain's standing as a "Homeowners Association" under section 6.3 of Restatement (Third) Property (Servitudes), and under the UPCA. (Preliminary Objections, at 4-7). Secondly, Appellant objected that the complaint was legally insufficient under Pa.R.C.P. 1028(a)(4). (See id. at 7-8). Third, Appellant objected that Mr. Rhodes lacks standing because he was not the title owner of the units by which he claimed beneficial interest. (See id. at 8-10). Fourth, Appellant objected to Appellees' failure to join all necessary parties, under Pa.R.C.P. 1028(a)(5). (See id. at 10-11). The last preliminary objection challenged Appellees' claim to attorneys' fees. (See id. at 11-12).

The trial court held a hearing on December 4, 2012. After the hearing and argument, the trial court overruled the first four preliminary objections and sustained the fifth one, the objection to attorneys' fees. (See Order, 12/28/12, at 1-2). Appellant filed a combined motion for reconsideration and request to certify the case for interlocutory appeal, on January 8, 2013. As already noted, on January 22, 2013, the court signed an order certifying its prior order for interlocutory appeal. (See Order, 1/23/13). This timely appeal followed.

Appellant presents one question for our review:

I. Whether the trial court committed an error of law when it concluded that the UPCA can be "retroactively" applied to a "pre-UPCA" planned community in conflict with existing common deed covenants so that a planned community organized before the enactment of the UPCA can be forcibly reorganized into a planned community controlled by a newly formed unit owners association controlled by a minority of lot owners?

(Appellant's Brief, at 4) (quotation marks in original).

Appellant argues that the trial court's conclusion that the Uniform Planned Community Act can be applied retroactively to the facts and issues in this case conflicts with the plain language of the Act. (See id. at 12, 13-19). We agree.

Our standard of review is well-settled.

As a trial court's decision to grant or deny a demurrer involves a matter of law, our standard for reviewing that decision is plenary. Preliminary objections in the nature of demurrers are proper when the law is clear that a plaintiff is not entitled to recovery based on the facts alleged in the complaint. Moreover, when considering a motion for a demurrer, the trial court must accept as true all well-pleaded material facts set forth in the complaint and all inferences fairly deducible from those facts.

Yocca v. Pittsburgh Steelers Sports, Inc., 578 Pa. 479, (2004) (citations and internal quotation marks omitted). Accord, Friedman v. Corbett, ___ Pa. ___, (2013). Furthermore, Our standard of review of an order of the trial court overruling or granting preliminary objections is to determine whether the trial court committed an error of law. When considering the appropriateness of a ruling on preliminary objections, the appellate court must apply the same standard as the trial court. Preliminary objections in the nature of a demurrer test the legal sufficiency of the complaint.... Preliminary objections which seek the dismissal of a cause of action should be sustained only in cases in which it is clear and free from doubt that the pleader will be unable to prove facts legally sufficient to establish the right to relief. If any doubt exists as to whether a demurrer should be sustained, it should be resolved in favor of overruling the preliminary objections.

Joyce v. Erie Ins. Exch., (Pa.Super.2013) (citation omitted).

Appellant's issue involves the interpretation of a statute. The "application of a statute is a question of law, and our standard of review is plenary." Bell v. Dean, (Pa.Super.2010) (citation omitted). In the interpretation of a statute, [W]e are guided by the principles set forth in the Statutory Construction Act of 1972, 1 Pa.C.S. §§ 1501-1991. Accordingly, we begin with the precept that "[t]he object of all interpretation and construction of statutes is to ascertain and effectuate the intention of the General Assembly. Every statute shall be construed, if possible, to give effect to all its provisions." 1 Pa.C.S. § 1921(a). Generally, the best indication of legislative intent is the statute's plain language. We look to the language of the statute, which, if plain and clear, we simply apply; we may not disregard a statute's plain language in order to pursue the statute's spirit. 1 Pa.C.S. § 1921(b). However, our review also must take into account the precepts that the General Assembly does not intend a result that is absurd, impossible of execution, or unreasonable, and that the General Assembly intends the entire statute to be effective and certain. 1 Pa.C.S. § 1922(1), (2). Where words of a statute are not explicit, but ambiguous, a reviewing court engages in a statutory construction analysis that considers "among other matters:" (1) The occasion and necessity for the statute. (2) The circumstances under which it was enacted. (3) The mischief to be remedied. (4) The object to be attained. (5) The former law, if any, including other statutes upon the same or similar subjects. (6) The consequences of a particular interpretation. (7) The contemporaneous legislative history. (8) Legislative and administrative interpretations of such statute. 1 Pa.C.S. § 1921(c).

Phoenixville Hosp. v. Workers' Compensation Appeal Bd. (Shoap), ___ Pa. ___, (2013) (case citations and footnote omitted). Additionally, "[n]o statute shall be construed to be retroactive unless clearly and manifestly so intended by the General Assembly." 1 Pa. C.S.A. § 1926 (emphasis added).

Here, under our plenary standard of review, we are constrained to conclude that the trial court's reasoning in support of its retroactive application of certain sections of the Uniform Planned Community Act, misconstrues the applicable legal principles of statutory interpretation. Section 5102 of the Act sets forth an extensive list of provisions which are expressly made retroactive. The trial court candidly concedes that the section it seeks to apply, "[s]ection [] 5301[,] is not one of the enumerated sections which were dubbed [sic] as retroactively applicable in § 5102." (Trial Ct. Op., 12/28/12, at 15) (emphasis added).

Nevertheless, the trial court maintains that section 5301 must be accorded retroactivity. (See id.). The court appears to reason that because the definition of "Association" in section 5103 is incorporated by reference into other provisions of the statute, which are expressly determined to apply retroactively, then section 5301, organization of unit owners' association, must apply retroactively as well. (See id.). The court reasons generally that unless the Act is applied retroactively to this case, the rights and remedies available through a unit owners' association would not be available to the unit owners of Mystic Mountain. (See id. at 14).

The court also posits a variety of presumed "absurdities" which would follow if a unit owners' association is not available retroactively. (Id. at 14, 15; see also id. at 16-18). These assumed absurdities range from a variation on the lack of association-based remedies to rather melodramatic calamity scenarios (e.g., "an overreaching developer [creating] a despotic fiefdom"). (Id. at 20). Such assumptions are purely speculative, and beyond the proper scope of review of preliminary objections. The court concludes that "[i]n fairness and equity a remedy must be available if [Appellees'] facts are proven." (Id.). We disagree.

Primarily, the trial court's reasoning ignores the fundamental principle of statutory interpretation that we may not disregard a statute's plain language in order to pursue the statute's perceived spirit. See 1 Pa.C.S.A. § 1921(b). The plain language of the Act, as conceded by the trial court, does not include section 5301 in the list of provisions accorded retroactive application. Assuming a remedy "must be available[,]" and reading an implied retroactivity provision into the Act to provide it, is a translucent example of disregarding the plain language of the statute under the pretext of following its sprit. (Trial Ct. Op., 12/28/12, at 20).

Secondly, under section 5301, a unit owners' association must "be organized no later than the date the first unit in the planned community is conveyed to a person other than a successor declarant." 68 Pa.C.S.A. § 5301. Here, that would be impossible. It is undisputed that the first unit was conveyed in 1974. "[T]he General Assembly does not intend a result that is absurd, impossible of execution or unreasonable." 1 Pa.C.S.A. § 1922(1).

Third, under section 5102 of the Act, "those sections [which apply retroactively] apply only with respect to events and circumstances occurring after the effective date of this subpart and do not invalidate specific provisions contained in existing provisions of the declaration, bylaws or plats and plans of those planned communities." 68 Pa.C.S.A. § 5102(b) (emphasis added). Similarly, under section (b.1), both (1) and (2), the enumerated retroactive provisions:

[A]pply to all planned communities created in this Commonwealth before the effective date of this subpart, but those sections apply only with respect to events and circumstances occurring after the effective date of this subsection and do not invalidate specific provisions contained in existing provisions of the declaration, bylaws or plats and plans of those planned communities.

68 Pa.C.S.A. § 5102(b.1)(1) (emphasis added). Subsection (b.1)(2) contains an additional time limitation of 180 days, but otherwise substantially tracks subsection (b.1)(1):

(2) Section 5303(c) and (d), to the extent necessary in construing any of those subsections, apply to all planned communities created in this Commonwealth before the effective date of this subpart, but those subsections apply only with respect to events and circumstances occurring 180 days after the effective date of this subsection and do not invalidate specific provisions contained in existing provisions of the declaration, bylaws or plats and plans of those planned communities.

68 Pa.C.S.A. § 5102(b.1)(2) (emphasis added). "Every statute shall be construed, if possible, to give effect to all its provisions." 1 Pa.C.S.A. § 1921(a).

"It is not a court's place to imbue the statute with a meaning other than that dictated by the plain and unambiguous language of the statute." Sagamore Estates Prop. Owners Ass'n v. Sklar, (Pa.Super.2013) (quoting J.C.B. v. Pennsylvania State Police, (Pa.Super.2012)). Finally, the court's decision ignores the statutory presumption against retroactive effect. See 1 Pa.C.S.A. § 1926.

Accordingly, in this appeal, we conclude that the trial court's attempt to read into the Act a retroactive requirement for the mandatory formation of a unit owners' association under the UPCA violates the plain meaning of the statute and well-established principles of statutory interpretation.

Our sister Commonwealth Court has recently reached a similar conclusion, albeit applying it to different issues. See Pinecrest Lake Community Trust ex rel. Carroll v. Monroe County Bd. of Assessment Appeals, (Pa.Cmwlth. 2013). In pertinent part, the Court explained:

Additionally, in addressing the issue of whether the UPCA applies to pre-existing planned communities as well as new ones, the Uniform Law Commissioners stated (with emphasis added): Two conflicting policies are proposed when considering the applicability of this Act to `old' and `new' planned communities located in the enacting state. On the one hand, it is desirable, for reasons of uniformity, for the Act to apply to all planned communities located in a particular state, regardless of whether the planned community was created before or after adoption of the Act in that state. No state has previously enacted comprehensive legislation dealing with planned communities. Adoption of this Act, which (among other things) places requirements on developers and unit owners' associations, may tend to develop different markets for planned communities created before and after adoption of the Act. In addition, to the extent that `old' planned communities are governed only by common law while `new' planned communities are governed by the additional provisions of this Act, confusion may result in the minds of both lenders and consumers. On the other hand, to make all provisions of this Act automatically apply to `old' planned communities might violate the constitutional prohibition of impairment of contracts. In addition, aside from the constitutional issue, automatic applicability of the entire Act almost certainly would unduly alter the legitimate expectations of some present unit owners and declarants. Accordingly, the philosophy of this section reflects a desire to maximize the uniform applicability of the Act to all planned communities in the enacting state, while avoiding the difficulties raised by automatic application of the entire Act to pre-existing planned communities.

Id. at 76 (citing 68 Pa.C.S.A. § 5102 Uniform Law Comment) (emphasis added in original). The Commonwealth Court further noted:

In addition, 68 Pa.C.S. §§ 5102(b) and (b)(1), provide for a limited retroactive application of certain provisions of the UPCA. Those sections, however, do not include 68 Pa.C.S. § 5301 (organization of unit owners' association) as a retroactive provision. As the drafters of the UPCA recognized, common law homeowners' association regimes may take many forms, including trusts and many other combinations of real and personal property ownership. See Uniform Law Comment preceding 68 Pa.C.S.A. § 5101[.] Thus, the drafters correctly reasoned that the application of certain organizational requirements of the UPCA to pre-existing planned communities could violate the constitutional prohibition against impairment of contracts and lead to confusion among unit owners and declarants. See 68 Pa.C.S.A. § 5102 Uniform Law Comment[.]

Id. at 80 (emphasis added; original emphasis and record citations omitted). The Commonwealth Court also observed in Huddleson v. Lake Watawga Prop. Owners Ass'n, (Pa.Cmwlth.2013):

Generally, the Act applies to planned communities created after 1997 when the Act became effective. Parts of the Act apply retroactively to planned communities created prior to the effective date of the Act. Section 5102(b) of the Act sets forth the specific sections of the Act that apply retroactively. That section also makes it clear that "those sections apply only with respect to events and circumstances occurring after the effective date of this subpart and do not invalidate specific provisions contained in existing provisions of the declaration, bylaws or plats and plans of those planned communities." 68 Pa.C.S. § 5102(b) (emphasis added).

Id. at 72. The Huddleson Court noted our Supreme Court's holding that "provisions affecting property or contractual rights cannot be repealed or altered without the consent of the parties whose interests are thereby impaired." Id. (quoting Schaad v. Hotel Easton Co., A.2d 227, 230 (1952)). We follow the holding of our Supreme Court. We find the reasoning of the Commonwealth Court, applying the holding of the Supreme Court, persuasive, and adopt it as our own.

The trial court reasons in the alternative that "the Restatement [(Third) Property Servitudes] provides another basis to conclude that [Little Mountain] may be an `association' and that Mystic Mountain is a `common-interest community' as those terms are used in the Restatement." (Trial Ct. Op., 12/28/12, at 19). The trial court's reliance is misplaced.

The Restatement at issue here, like all Restatements — as the title suggests — represents the efforts of numerous scholars and other experts, under the auspices of the American Law Institute, to restate, or express, "a comprehensive modern treatment of the law of servitudes that substantially simplifies and clarifies one of the most complex and archaic bodies of 20th century American law." RESTATEMENT (THIRD) PROPERTY SERVITUDES (2000), Introduction. "The underlying law is largely judge-made. Doctrine varies around the country." Id., Foreword.

While the Restatement endeavors to be a comprehensive statement of the Common Law, as articulated in caselaw, and may be cited as such by the courts of our Commonwealth, it does not have the force of law unless our Supreme Court expressly adopts it or it is deemed to be a proper statement of Pennsylvania law. See Bilt-Rite Contractors, Inc. v. The Architectural Studio, 581 Pa. 454, (2005) (adopting section 552 of Restatement (Second) Torts as "consistent with Pennsylvania's traditional common law formulation of the tort of negligent misrepresentation"); (see also id. at 285); Walnut Street Associates, Inc. v. Brokerage Concepts, Inc., 610 Pa. 371, (2011) (adopting Restatement (Second) of Torts § 772, as formulation consistent with Pennsylvania law).

Furthermore, "[w]here the Legislature expressly provides a comprehensive legislative scheme, these provisions supersede the prior common law principles." Sternlicht v. Sternlicht, 583 Pa. 149, (2005). Accordingly, the trial court erred in reasoning that the Restatement established an independent legal basis for retroactive enforcement of the UPCA.

Because we determine that there is no proper basis for concluding that section 5301 of the Act must be applied retroactively, we further conclude that Appellees could not prevail under the UPCA. Therefore, even if we accept as true all well-pleaded, material facts together with all reasonable inferences, Appellees' complaint would be insufficient to establish their right to statutory relief. See Yocca, supra; Friedman, supra; Joyce, supra.

On independent review, we discern no other basis on which Appellees' claim of a statutory right to form a compulsory unit owners' association for all units, and to take title to the property now owned by Appellant, could survive Appellant's first preliminary objection. Accordingly, we conclude that the trial court erred in not sustaining that objection.

This is the only claim of error raised in Appellant's statement of questions involved. For clarity, we expressly decline to address any issues arising out of the trial court's overruling of the remaining (second, third and fourth) preliminary objections. See Pa.R.A.P. 2116 ("No question will be considered unless it is stated in the statement of questions involved or is fairly suggested thereby."). Pa.R.A.P. 2116(a).

We vacate the order to the extent it overrules Appellant's first preliminary objection. We remand the case for further proceedings consistent with this opinion.

Order vacated in part. Case remanded. Jurisdiction relinquished.

Footnotes

* Retired Senior Judge assigned to the Superior Court.

1. By order dated January 22, 2013 (filed January 23, 2013), the trial court "revised and amended" its order of December 28, 2012 to permit an interlocutory appeal. (Order, 1/23/13). On March 4, 2013, the Commonwealth Court, to which Appellant originally appealed, sustained an objection to jurisdiction and transferred the instant case to this Court, as outside of the scope of 42 Pa.C.S.A. § 762(a)(5) (vesting jurisdiction over matters involving not-for-profit corporations in the Commonwealth Court). (See Order, 3/05/13). On May 1, 2013, this Court, per curiam, granted Appellant's petition for permission to appeal, as an appeal from the order of December 28, 2012. (See Order, 5/01/13).

2. Apparently the only other entity at issue besides roadways is a storm water treatment facility. (See Trial Court Opinion, 12/28/12, at 3).

3. The Uniform Planned Community Act, 68 Pa.C.S.A. §§ 5101-5414, was enacted December 19, 1996 as P.L. 1336, No. 180, § 1, effective in forty-five days. Besides Pennsylvania, the Act was adopted in North Carolina. See 68 Pa.C.S.A. § 5101, Uniform Law Comment. For a general background and analysis of the Act, see Jan Z. Krasnowiecki, The Pennsylvania Uniform Planned Community Act, 106 Dick. L.Rev. 463 (Winter 2002). Subsequent to the promulgation of the UPCA, the National Conference of Commissioners on Uniform State Laws which drafted the model Uniform Planned Community Act, consolidated it with The Uniform Condominium Act, and the Model Real Estate Cooperative Act, into the Uniform Common Interest Ownership Act ("UCIOA"), 7 U.L.A. 471. See id. at 521.

4. However, Appellant does dispute several of the allegations in the complaint, notably, the purported defective maintenance of the community roadways. (See, e.g., Appellant's Brief, at 7 n.2).

5. There is no dispute that Southern Columbia is the successor in interest to one "Joe Frame," not otherwise identified. (See N.T. Hearing, 12/04/12, at 14). Mr. Frame is not a party to this litigation, and there is no issue in this appeal involving his preceding interest.

6. The trial court erroneously refers to 432 lots. (See Trial Ct. Op., 12/28/12, at 2). The court apparently transposed the numerals. (See N.T. Hearing, at 14; see also Plaintiffs' Response to Defendant's Preliminary Objections, ¶ 10).

7. Mr. Rhodes spends the other half of his time in Florida. (See N.T. Hearing, at 36). He is also occasionally identified in the record as Little Mountain's secretary. The exact nature of his various offices is never spelled out. Nevertheless, it is apparent from the totality of his testimony that he is the guiding spirit in the formation of Little Mountain and in the prosecution of this suit. (See id. at 40-43, 48-56).

8. Specifically, the complaint alleged breach of fiduciary duty, (see Complaint, at 15 ¶¶ 88-94), breach of promoter's duty, (see id. at 16 ¶¶ 95-98), implied contract, (see id. at 19 ¶¶ 127-34), and detrimental reliance, (see id. at 20 ¶¶ 135-45).

9. The part of the order sustaining the fifth preliminary objection is not at issue in this appeal. (See Appellees' Brief, at 1).

10. Appellant filed a statement of errors on May 10, 2013. See Pa.R.A.P. 1925(b). The trial court filed a Rule 1925(a) opinion on May 16, 2013, incorporating by reference its opinion and order of December 28, 2012. See Pa.R.A.P. 1925(a).

11. In pertinent part, section 5102 of the statute provides: (b) Retroactivity. — Except as provided in subsection (c), sections 5105, 5106, 5107, 5203 (relating to construction and validity of declaration and bylaws), 5204 (relating to description of units), 5218, 5219 (relating to amendment of declaration), 5223 (relating to merger or consolidation of planned community), 5302(a)(1) through (6) and (11) through (15) (relating to power of unit owners' association), 5311 (relating to tort and contract liability), 5315 (relating to lien for assessments), 5316 (relating to association records), 5407 (relating to resales of units) and 5412 (relating to effect of violations on rights of action) and section 5103 (relating to definitions), to the extent necessary in construing any of those sections, apply to all planned communities created in this Commonwealth before the effective date of this subpart; but those sections apply only with respect to events and circumstances occurring after the effective date of this subpart and do not invalidate specific provisions contained in existing provisions of the declaration, bylaws or plats and plans of those planned communities. (b.1) Retroactivity. — (1) Sections 5103, 5108, 5113, 5220(i) (relating to termination of planned community), 5222 (relating to master associations), 5302(a)(8)(i), (16) and (17) (relating to power of unit owners' association), 5303(a) and (b) (relating to executive board members and officers), 5307 (relating to upkeep of planned community), 5314 (relating to assessments for common expenses) and 5319 (relating to other liens affecting planned community), to the extent necessary in construing any of those sections, apply to all planned communities created in this Commonwealth before the effective date of this subpart, but those sections apply only with respect to events and circumstances occurring after the effective date of this subsection and do not invalidate specific provisions contained in existing provisions of the declaration, bylaws or plats and plans of those planned communities. 68 Pa.C.S.A. § 5102(b), (b.1) (emphases added).

12. Section 5301, organization of unit owners' association, provides: A unit owners' association shall be organized no later than the date the first unit in the planned community is conveyed to a person other than a successor declarant. The membership of the association at all times shall consist exclusively of all the unit owners or, following termination of the planned community, of all former unit owners entitled to distributions of proceeds under section 5218 (relating to easement to facilitate completion, conversion and expansion) or their heirs, successors or assigns. The association shall be organized as a profit or nonprofit corporation or as an unincorporated association. 68 Pa.C.S.A. § 5301.

13. Additionally, the court conceded that "the General Assembly determined that the substance of § 5301 may not be applied retroactively." (Trial Ct. Op., 12/28/12, at 15).

14. "Although decisions by the Commonwealth Court are not binding on this Court, they may be persuasive." In re Barnes Foundation, (Pa.Super.2013), appeal denied, ___ Pa. ___, (Pa. 2013) (citation omitted).

15. See also Rybarchyk v. Pocono Summit Lake Property Owners Ass'n, Inc., (Pa.Cmwlth.2012), appeal denied, ___ Pa. ___, (Pa.2013) (concluding, on different facts, that subdivision was not "planned community" as defined in UPCA, precluding assessment for recreational facilities of private club consisting of fewer than all homeowners in community; post-establishment association was not "association" as defined by the Act).

16. Our Supreme Court noted, "[i]n so doing, we emphasize that we do not view Section 552 as supplanting the common law tort of negligent misrepresentation, but rather, as clarifying the contours of the tort as it applies to those in the business of providing information to others." Bilt-Rite Contractors, supra at 287 (emphasis added).

17. We also note the testimony of Father David John Dormer, and retired New Jersey State Trooper David Mackafee, both unit owners, that neither were requested to approve, or in fact approved of, the instant lawsuit. (See N.T. Hearing, 12/04/12, at 22, 28-29, respectively).

18. However, we disagree with the trial court's conclusion that "[i]f [Little Mountain] may not be an association, all of the [preliminary objections] must be granted." (Trial Ct. Op., 12/28/12, at 9). Appellees may still be able to prove breach of fiduciary duty, promoter's duty, implied contract, or detrimental reliance, independently of the UPCA. (See supra at 1194, n.8). Accordingly, we remand without prejudice to either party's raising at trial, or in appropriate pre-trial motions, the respective claims or defenses addressed in the second, third or fourth preliminary objection.

MELISSA R. LIPCHAK, ET AL Plaintiffs-Appellants, v. CHEVINGTON WOODS CIVIC ASSOCIATION, INC., ET AL Defendants-Appellees.

Court of Appeals of Ohio, Fifth District, Fairfield County.

January 20, 2015.

MELISSA R. LIPCHAK, 7658 Slate Ridge Blvd., Reynoldsburg, OH 43068; GAIL M. ZALIMENI, P.O. Box 22, Albany, OH 45710, for Plaintiffs-Appellants.

R. GARY WINTERS, IAN R. SMITH, 632 Vine Street, Ste. 900, Cincinnati, OH 45202; TIMOTHY R. RANKIN, 266 North Fourth Street, Suite 100, Columbus, OH 43215, for Defendants-Appellees.

William B. Hoffman, P.J., W. Scott Gwin, J. and Sheila G. Farmer, J., Judges.

OPINION

GWIN, J.

{¶1} On May 13, 1996, appellants Melissa Lipchak ("Lipchak") and Oron Schuss ("Schuss") purchased a home in a subdivision known as Chevington Woods North, Section 2 ("Section 2"). On September 2, 2011, appellants filed a declaratory judgment action seeking a declaration that they were not required to be members of the homeowner's association, appellee Chevington Woods Civic Association, Inc. ("Association"). On November 1, 2011, the Association filed an answer and counterclaim, seeking unpaid dues, interest, attorney fees, and costs. On September 14, 2012, appellants amended their complaint to add a claim against the Association for defamation. On November 21, 2012, the trial court granted appellee's motion to dismiss appellants' defamation claim.

{¶ 2} Both parties filed motions for summary judgment, which the trial court initially denied on February 12, 2013. On April 10, 2013, the trial court granted appellants' motion to file a second amended complaint over appellee's objection. Appellants filed their amended complaint on April 19, 2013, which added all of the other homeowners residing in Section 2 as defendants. The Association filed an answer and amended counterclaim on May 3, 2013. The parties again filed motions for summary judgment in December of 2013 and January of 2014.

{¶ 3} On January 13, 2014, appellants filed a new action asserting a Marketable Title Act theory of recovery and filed a motion to stay this case pending resolution of the new action. On January 30, 2014, the trial court denied appellants' motion to stay this case pending resolution of the newly-filed case. On February 6, 2014, appellants voluntarily dismissed the new action. On February 10, 2014, appellants filed a motion to amend the complaint in the instant case for a third time in order to include a Marketable Title Act theory of recovery.

{¶ 4} In a judgment entry filed on March 5, 2014, the trial court denied appellants' motion for summary judgment and granted summary judgment to appellee on its counterclaim and on appellants' complaint. A damages hearing on counterclaim damages was held on April 25, 2014. On May 14, 2014, the trial court awarded appellee $8,185.74 in damages for unpaid dues, filing fees, and attorney fees.

{¶ 5} Appellants appeal the judgment entries of the Fairfield County Court of Common Pleas and assign the following as error:

{¶ 6} "I. THE TRIAL COURT ERRED IN GRANTING DEFENDANT-APPELLEE CWCA'S MOTION FOR SUMMARY JUDGMENT AND DENYING APPELLANTS' MOTION FOR SUMMARY JUDGMENT BY CONCLUDING, AS A MATTER OF LAW, THAT APPELLANTS WERE REQUIRED TO BE MEMBERS OF CWCA.

{¶ 7} "II. THE TRIAL COURT ERRED IN GRANTING DEFENDANT-APPELLEE'S MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFFS-APPELLANTS' MOTION FOR SUMMARY JUDGMENT BY CONCLUDING, AS A MATTER OF LAW, THAT THE DEED TO NORTH 2 SHOULD BE REFORMED WHEN DEFENDANT-APPELLEE DID NOT PROVE THAT IT WAS ENTITLED TO REFORMATION BY CLEAR AND CONVINCING EVIDENCE.

{¶ 8} "III. THE TRIAL COURT ERRED IN GRANTING DEFENDANT-APPELLEE'S MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFF-APPELLANTS' MOTION FOR SUMMARY JUDGMENT BY CONCLUDING, AS A MATTER OF LAW, THAT DEFENDANT-APPELLEE HAS VALID BYLAWS.

{¶ 9} "IV. THE TRIAL COURT ERRED IN GRANTING DEFENDANT-APPELLEE'S MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFF-APPELLANTS' MOTION FOR SUMMARY JUDGMENT BY CONCLUDING, AS A MATTER OF LAW, THAT PLAINTIFFS-APPELLANTS ARE REQUIRED TO PAY ANY DUES OR SPECIAL ASSESSMENTS TO DEFENDANT UNDER THE BYLAWS.

{¶ 10} "V. THE TRIAL COURT ERRED IN GRANTING DEFENDANT-APPELLEE'S MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFF-APPELLANTS' MOTION FOR SUMMARY JUDGMENT BY CONCLUDING, AS A MATTER OF LAW, THAT PLAINTIFFS-APPELLANTS ARE REQUIRED TO PAY THE $30.00. PLAINTIFFS-APPELLANTS ARE NOT REQUIRED TO PAY ANY SPECIAL ASSESSMENTS AS THE BYLAWS WERE NOT PROPERLY AMENDED IN OCTOBER OF 2007.

{¶ 11} "VI. THE TRIAL COURT ERRED IN GRANTING DEFENDANT-APPELLEE'S MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFF-APPELLANTS' MOTION FOR SUMMARY JUDGMENT BY CONCLUDING, AS A MATTER OF LAW, THAT PLAINTIFFS-APPELLANTS ARE REQUIRED TO PAY THE $30.00 SPECIAL ASSESSMENT AFTER 2010.

{¶ 12} "VII. THE TRIAL COURT ABUSED ITS DISCRETION WHEN IT DENIED PLAINTIFFS-APPELLANTS' MOTION FOR LEAVE, IN THE ALTERNATIVE, TO FILE A SUPPLEMENTAL COMPLAINT, LEAVE TO FILE A THIRD AMENDED COMPLAINT, TO AMEND PLAINTIFFS' REPLY TO COUNTERCLAIM, OR TO HAVE A DETERMINATION MADE THAT THE PLEADINGS IN THIS MATTER ARE FAIR NOTICE OF A CLAIM UNDER THE MARKETABLE TITLE ACT.

{¶ 13} "VIII. THE TRIAL COURT ERRED IN AWARDING DAMAGES, ATTORNEY FEES, COSTS, AND INTEREST TO DEFENDANT-APPELLEE.

{¶ 14} "IX. THE TRIAL COURT ERRED IN DISMISSING ALL DEFENDANTS ON THE BASIS THAT THE ISSUES AGAINST THEM WERE MOOT.

{¶ 15} "X. THE TRIAL COURT ERRED AS A MATTER OF LAW IN FINDING THAT ALL HOMEOWNERS IN NORTH 2 SHOULD BE JOINED AS PARTIES."

{¶ 16} This matter is before this Court for review on a summary judgment decision. The trial court found in favor of the Association on its counterclaim and on appellants' second amended complaint. The second amended complaint filed April 19, 2013, prayed for declaratory judgment as follows:

WHEREFORE, Plaintiffs, Melissa R. Lipchak and Oron E. Schuss, respectfully request that a Declaratory Judgment be entered that the lot owners of the subdivision, Chevington Woods North, Section No. 2, are not required to be members of the Chevington Woods Civic Association, Inc., a nonprofit corporation.In the alternative, Plaintiffs, for their Second Claim, respectfully request that a Declaratory Judgment be entered declaring that a property owner agrees to and shall be a member of and be subject to the obligations and duly enacted by-laws and rules of the Chevington Civic Association, a nonprofit corporation and/or Chevington Woods Civic Association, Inc., a nonprofit corporation, be found to have been waived and/or abandoned and unenforceable and Plaintiffs are not required to be members;Further, Plaintiffs, Oron E. Schuss and Melissa R. Lipchak, also respectfully request that this Court enter judgment for them against Defendant, Chevington Woods Civic Association, Inc., for their costs, expenses, and attorney fees incurred herein.

{¶ 17} The Association's amended counterclaim filed May 3, 2013, was a claim for unjust enrichment and monetary damages for past and present membership dues, pre- and post-judgment interest, costs, expenses, and attorney fees pursuant to R.C. 5312.13.

{¶ 18} Although appellants list ten assignments of error, we find they can be resolved in five collective discussions of the facts and law sub judice.

{¶ 19} This matter was heard under a summary judgment standard with the parties arguing no genuine issues of material fact existed and they were entitled to judgment as a matter of law. Only Assignment of Error VIII involves issues of fact, i.e., damages claimed, but, at the damages hearing, appellants did not object to the damages testimony nor object to the matter being tried to the court.

{¶ 20} Summary judgment motions are to be resolved in light of the dictates of Civil Rule 56. Civil Rule 56 was reaffirmed by the Supreme Court of Ohio in State ex rel. Zimmerman v. Tompkins, 75 Ohio St.3d 447, 448, 1996-Ohio-211, 663 N.E.2d 639:

Civ.R. 56(C) provides that before summary judgment may be granted, it must be determined that (1) no genuine issue as to any material fact remains to be litigated, (2) the moving party is entitled to judgment as a matter of law, and (3) it appears from the evidence that reasonable minds can come to but one conclusion, and viewing such evidence most strongly in favor of the nonmoving party, that conclusion is adverse to the party against whom the motion for summary judgment is made.

Id., citing State ex rel. Parsons v. Fleming, 68 Ohio St.3d 509, 511, 628 N.E.2d 1377 (1994).

{¶ 21} As an appellate court reviewing summary judgment motions, we must stand in the shoes of the trial court and review summary judgments on the same standard and evidence as the trial court. Smiddy v. The Wedding Party, Inc., 30 Ohio St.3d 35, 506 N.E.2d 212 (1987).

I., II., III., IV., V., VI.

{¶ 22} Appellants claim the trial court erred in granting summary judgment to the Association and erred in denying their request for declaratory relief. Appellants contend the trial court erred in finding they were required to be members of the Association, and finding they were subject to the dues and special assessment provisions of the bylaws and regulations of the Association.

{¶ 23} The parties agree to the material facts and the documents (deeds) presented. There are three separately plated developments bearing the titles of Chevington Woods, Chevington Woods North, and Chevington Woods North, Section 2.

{¶ 24} Lots 1 through 159 located in Chevington Woods were deeded via quit-claim deed from George Ankney, Jr. to C&G Development, Inc. on June 25, 1968, recorded on June 26, 1968. The deed contained covenants which the grantee could modify, but did not contain any mention of a homeowner's association. On December 11, 1971, C&G Development, Inc. modified the covenants to provide for a homeowner's association listed as "Chevington Woods Civic Association."

{¶ 25} Lots 1 thorough 98 located in Chevington Woods North were deeded via quit-claim deed from Mildred Fishbaugh, Trustee to C&G Development, Inc. on March 1, 1972, recorded on March 2, 1972. The deed contained covenants which the grantee could modify, and included a homeowner's association listed as "Chevington Woods North Civic Association."

{¶ 26} Appellants own Lot Number 128 in Section 2 and took title in 1996. This lot was part of a group of lots (numbers 99 through 226) deeded via warranty deed from Mildred Fishbaugh, Trustee to C&G Development, Inc. on December 7, 1972, recorded on December 8, 1972. The deed contained covenants which the grantee could modify, and included a homeowner's association listed as "Chevington Civic Association."

{¶ 27} On March 8, 1973, C&G Development, Inc. modified the homeowner's association name in Chevington Woods North to "Chevington Woods Civic Association, Inc." and included all the lot owners in the Chevington Woods subdivision. Also on March 8, 1973, C&G Development, Inc. modified the homeowner's association name in Chevington Woods to "Chevington Woods Civic Association, Inc.," and included all the lot owners in the Chevington Woods North subdivision.

{¶ 28} The Articles of Incorporation for "Chevington Woods Civic Association, Inc." were filed on March 1, 1973. At the time, there were no lot owners in Section 2. Although the Articles of Incorporation were cancelled by the Secretary of State on June 24, 1991, they were reinstated on November 13, 2002.

{¶ 29} In the transfer of appellants' lot, Lot 128 in Section 2, their survivorship deed from Gary and Peggy Garrett identifies the property "as the same numbered and delineated upon the recorded plat thereof, of record in Plat Book 10, page 61, Recorder's Office, Fairfield County, Ohio." The survivorship deed was recorded on June 6, 1996, and there are no references to deed covenants/restrictions.

{¶ 30} The current bylaws of the Association provide in part: "Membership in this Association is assumed by the land owner(s) of each improved lot in Chevington Woods Subdivision. Improved lot defines a lot on which has been construed a single family residence." We note the bylaws are in compliance with R.C. Chapter 5312, et seq.

{¶ 31} It is the Association's position that the omission of the word "Woods" in the December 1972 covenants for Section 2 was a scrivener's error and should be corrected because of the passage of forty years, the uniformity among the deeds for the subdivisions, the understanding of all the residents in each of the three subdivisions, and the origin form a single grantor, C&G Development, Inc. We agree with the Association.

{¶ 32} "Ordinary rules of contract construction are used to construe a restrictive covenant * * * [t]hus, covenants should be construed with the parties' intent." Dillingham v. Do, 12th Dist. Butler Nos. CA2002-01-004, CA 2002-01-017, 2002-Ohio-3349. The language in the covenant "should be given its common, ordinary meaning in light of the circumstances surrounding the creation of the covenant." Id. "Restrictive covenants should be construed to effect the purpose for which they were intended." Id.

{¶ 33} There are five requirements for the creation of an enforceable restriction on the use of land by covenant. Id. These requirements are as follows:

First, the restrictions must be a part of the general subdivision plan, applicable to all lots in the subdivision. Second, lot purchasers must be given adequate notice of the restriction. Third, the restrictions must be in accord with public policy, and they are unenforceable to the extent that they are not. Fourth, the restriction cannot be implied, but must be express. Fifth, the restrictions must run with the land, and therefore must be inserted in the form of covenants in the owner's chain of title. Otherwise, subsequent purchasers are not bound.

Id., quoting Maasen v. Zopff, 12th Dist. Warren Nos. 98-10-135, 98-10-138, 98-12-153, 1999 WL 552747 (July 26, 1999).

{¶ 34} In this case, the deed restrictions apply to all of appellants' neighbors and are part of the general subdivision plan, the deed restrictions are in accord with public policy, and the deed language is express as it states it runs with the land. With regards to adequate notice of the restriction, Schuss testified that the realtor they utilized in purchasing the lot who was a long-term resident of the neighborhood, told them about the deed restrictions, though the realtor said restrictions such as those regarding tool sheds and RV's in driveways were frequently ignored or were not enforceable after the passage of a long period of time. Schuss stated they first saw the deeds with the deed restrictions "before we purchased the home, before we made an offer, sometime in 1996 or 1997." Schuss testified he did attend association meetings from time to time and paid dues for 2005 and 2006. Lipchak confirmed that when she purchased the property, she was notified by the realtor that there were deed restrictions. Thus, appellants had adequate notice of the restrictions.

{¶ 35} Apart from the lack of the word "Woods" in the homeowner's association's title for Section 2, all of the five requirements are satisfied by the evidence. The Association contends this was a scrivener's error and thus the 1972 deed should be corrected. Black's Law Dictionary defines "scrivener's error" as a synonym for "clerical error." A "clerical error" is one "resulting from a minor mistake or inadvertence, esp. in writing or copying something on the record, and not from judicial reasoning or determination." Black's Law Dictionary 18(c) (9th ed. 2009). Examples of clerical or "scrivener's" errors include: "omitting an appendix from a document, typing an incorrect number, mistranscribing a word, and failing to log a call." Id.

{¶ 36} Edward Laramee ("Laramee"), involved with the Association as a trustee and an officer since moving into Section 2 in 1979, testified as follows:

Q. There is no Chevington Civic Association; is that correct?A. If I want to say Chevington Woods Civic Association, Chevington Civic Association, or the lack of including that — the Woods, to me, you could call it scrivener's — what is the term, scrivener's error? I'm not sure if I'm quoting that exactly properly at this point in time, again, looking back. Laramee Deposition page 49-50.

{¶ 37} Laramee stated the issue about the difference in the names of the Association was discussed in 1999, but he did not recall the outcome. As a resident of Section 2 since 1979, Laramee considered himself a member of the Association, and was both a trustee and an officer.

{¶ 38} Appellants' own testimony and actions reflect that their understanding was the Association is the "association" listed in their deed. Lipchak testified that she does not believe the entity of "Chevington Civic Association" exists. Schuss confirmed that appellants paid dues to the Association in April of 2005 and October of 2006 and, though Lipchak characterized the payments as "charitable contributions," she confirmed the checks were "payment — they went with a payment of invoices" from the Association. Appellants disregarded any assessments after 2006, but attended some meetings, the last one in January of 2007.

{¶ 39} In addition to the testimony of Laramee, Lipchak, Schuss, and the actions of appellants themselves, based upon the evidence of the uniformity of the deeds for the subdivisions except for the "Woods" omission, the fact that the Association has been the one and only civic association in the Chevington Woods subdivisions for forty years, and the stated purpose in the Articles of Incorporation to "promote the general welfare of the people who reside in the Chevington Woods Subdivisions," we find the Association has met their burden to demonstrate the unintentional omission of the word "Woods" was a scrivener's error. Accordingly, we find that the scrivener's or clerical error omitting the term "Woods" from the deed restriction does not excuse appellants from membership in the Association. The trial court did not err in finding appellants were bound by the Association's rules and regulations and were members of the Association.

{¶ 40} Appellants also argue the trial court erred in finding the bylaws of the Association are valid. The Planned Community Law required existing owners associations and nonprofit corporations such as the Association to file and record its bylaws within 180 days of the effective date of the law and stated what the declaration and bylaws should contain, such as the election of the board. R.C. 5312.02. In this case, the bylaws were timely filed and recorded as required by R.C. 5312. We further find the bylaws are in compliance with Chapter 5312, et seq. Article III, Section 1 of the bylaws states that, "[d]ues as determined by a vote of a majority of Trustees and Officers in attendance at the first meeting of the new administration in June shall be assessed each on each membership as classified in Article II, Section 1" (land owners of each improved lot). Accordingly, the Association has valid bylaws stating appellants, as land owners of an improved lot, owe dues.

{¶ 41} Appellants argue the trial court erred in granting summary judgment as to the special assessments because the bylaws were not properly amended in October of 2007. We disagree. Article III, Section 7 of the bylaws provides that, "[t]he Board of Trustees shall have the power to appeal to the association membership for special dues assessments in the event of emergency conditions requiring expenditures of funds not available in the association treasury." Pursuant to the minutes of the October 2007 association meeting, the secretary introduced a resolution from the trustees, pursuant to Article III, Section 7 of the bylaws, requesting a special dues assessment for legal fees and other financial obligations of the Association. The resolution passed. Accordingly, the bylaws were not improperly amended.

{¶ 42} Appellants further argue that, based upon the total funds the Association had at the end of 2010, the legal fees should have been paid off by the special assessment. However, the resolution passed at the October 2007 meeting was for "legal fees currently due and owing" and "other financial obligation of the Association." Appellants failed to set forth evidence that the legal fees and other financial obligations of the Association as set forth in the resolution were actually paid off in 2010.

{¶ 43} Upon review, we find the trial court did not err in granting summary judgment to the Association on its counterclaim and on appellants' complaint. Assignments of Error I, II, III, IV, V, and VI are overruled.

VII.

{¶ 44} Appellants argue the trial court abused its discretion when it denied their motion for leave to file a third amended complaint or file a supplemental complaint to add a Marketable Title Act theory of recovery. We disagree.

{¶ 45} Civil Rule 15(A) provides that a party may amend its pleading "only by leave of court or by written consent of the adverse party" when the opposing party has already filed its responsive pleading in the case. An appellate court reviews a trial court's decision on a motion for leave to file an amended pleading under an abuse of discretion standard. Wilmington Steel Products, Inc. v. Cleveland Electric Illuminating Co., 60 Ohio St.3d 120, 573 N.E.2d 622 (1991). An abuse of discretion connotes more than a mere error in judgment; it signifies an attitude on the part of the trial court that is unreasonable, arbitrary, or unconscionable. State v. Myers, 97 Ohio St.3d 335, 2002-Ohio-6658, 780 N.E.2d 186. While Civil Rule 15(A) allows for liberal amendment, the trial court does not abuse its discretion if it denies a motion to amend pleadings if there is a showing of bad faith, undue delay, or undue prejudice to the opposing party. Hoover v. Sumlin, 12 Ohio St.3d 1, 465 N.E.2d 377 (1984).

{¶ 46} In this case, the trial court had already permitted appellants to file two amended complaints. By the time appellants filed the motion for leave to amend in February of 2014, this case had been pending for over two years, discovery was completed, both parties had filed their motions for summary judgment, a non-oral hearing on the motions for summary judgment was set for ten days after the motion to amend was filed, and the second deadline to amend the pleadings had expired on September 14, 2012. Further, appellants filed their motion to amend only after their motion to stay this case based on a new complaint filed for violations of the Marketable Title Act was denied and their new case was voluntarily dismissed. Accordingly, due to the potential undue prejudice to the opposing party and the undue delay in filing the motion, the trial court did not abuse its discretion in denying appellants' motion to amend complaint.

{¶ 47} Appellants also argue the trial court abused its discretion in denying its motion to file a supplemental complaint adding the Marketable Title Act cause of action.

{¶ 48} Civil Rule 15(E) vests broad discretion in the trial court in allowing parties to amend their pleadings and provides that a trial court may "upon reasonable notice and upon such terms as are just, permit [a party] to serve a supplemental pleading setting forth transactions or occurrences or events which have happened since the date of the pleading sought to be supplemented." A trial court's decision whether to grant leave to file a supplemental pleading will not be disturbed on appeal absent an abuse of discretion. Civil Rule 15(E); Mork v. Waltco Truck Equipment Co., 70 Ohio App.3d 458, 591 N.E.2d 379 (9th Dist. 1990). Under Civil Rule 15(E), a supplemental pleading is a mere addition to or a continuation of the original complaint and cannot be used to raise new and different causes of action. Gilson v. Windows and Doors Showcase, LLC, 6th Dist. Fulton Nos. F-05-017, F-05-024, 2006-Ohio-292.

{¶ 49} As noted above, appellants' motion for leave to file supplemental complaint was filed after discovery had been completed, after the parties had filed their motions for summary judgment, and only after appellants' motion to stay this case pursuant to a newly-filed case asserting the Marketable Title Act theory of recovery was denied. Further, appellants' supplemental pleading is more than a mere addition to, or continuation of, the original complaint and sets forth a new and different cause of action. Thus, under these circumstances, the trial court did not abuse its discretion in denying appellants' motion to file a supplemental complaint.

{¶ 50} Appellants' Assignment of Error VII is overruled.

VIII.

{¶ 51} Appellants incorporate their previous arguments and contend since they are not required to be members of the Association, they are not required to pay dues and Chapter 5312 regarding attorney fees is not applicable to them. Based upon our resolution of Assignments of Error I — VI that appellants are required to be members of the Association pursuant to the bylaws, appellants are required to pay dues and Chapter 5312, authorizing an award of attorney fees and costs, is applicable to them. Appellants did not contest the amount for unpaid dues. Further, at an April 25, 2014 damages hearing, while appellants objected to the fact that attorney fees were due since they were not required to be members of the Association, they stipulated to the reasonableness of attorney fees in the amount of $7,625.74. Accordingly, appellants' Assignment of Error VIII is overruled.

IX.

{¶ 52} Appellants incorporate their foregoing arguments and contend that since the trial court erred in finding that appellants were required to be members of the Association and required to pay dues, the trial court also erred in dismissing the defendants other than the Association on the basis that the issues against them were moot. Based upon our disposition of Assignments of Error I — VI, we overrule this assignment of error.

X.

{¶ 53} Appellants claim the trial court erred in finding all the homeowners in Section 2 had to be joined as parties. We disagree.

{¶ 54} Civil Rule 19 governs joinder of persons needed for just adjudication. Civil Rule 19(A) provides, in pertinent part:

A person who is subject to service of process shall be joined as a party in the action if * * * (2) he claims an interest relating to the subject of the action and is so situated that the disposition of the action in his absence may * * * (b) leave any of the persons already parties subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations by reason of his claimed interest.

{¶ 55} On April 13, 2013, the trial court granted appellants' March 25, 2013 request for leave to file an amended complaint to add the other homeowners in Section 2. Appellants sought to amend their complaint after the Association filed a March 15, 2013 motion challenging the trial court's jurisdiction without the additional parties.

{¶ 56} In their amended complaint filed on April 19, 2013, appellants sought declaratory relief, seeking to absolve themselves from participation in the Association. In doing so, they challenged the Association's right to force them to obey deed covenants or restrictions and pay dues and assessments. Their premise was that all the homeowners in Section 2 were not required to be members in the Association. As such, they challenged the right or privilege of membership in the Association for all homeowners in Section 2, thereby affecting the rights of those homeowners and the Association's right to collect dues and assessments from them. Accordingly, we find no error in the joining of the additional homeowners. Assignment of Error X is overruled.

{¶ 57} Based upon the foregoing, appellants' assignments of error are overruled and the judgment entries of the Fairfield County Court of Common Pleas are affirmed.

FARMER, J., dissents.

{¶58} I respectfully dissent from the majority's resolution of Assignments of Error I through VI and Assignment of Error VIII.

{¶ 59} From my review of the record, I conclude there is insufficient evidence to support the finding of a "scrivener's error."

{¶ 60} It is axiomatic that the party who asserts a proposition i.e., scrivener's error, bears the burden of proof to establish the issue. As explained by this court in Dornbirer v. Conrad, 5th Dist. Perry No. 99-CA-26, 2000 WL 1751264, *2 (Nov. 20, 2000):

Reformation of an instrument based on mutual mistake is permitted only where there is clear proof that the parties to the instrument made the same mistake and that both parties understood the instrument as the party seeking reformation alleges it ought to have been. See Snedegar v. Midwestern Indemn. Co. (1988), 44 Ohio App.3d 64, 69. The party alleging mutual mistake has the burden of proving its existence by clear and convincing evidence. Castle v. Daniels (1984), 16 Ohio App.3d 209.

{¶ 61} The sole testimony to a scrivener's error was provided by Mr. Laramee who was not a property owner at the time of the claimed error in 1972 as he had purchased his property in 1979. Therefore, he lacks personal knowledge of any claimed scrivener's error. The Association did not present any evidence on the claimed error from an original grantor of the three original deeds, plats, and subsequent amendments.

{¶ 62} Further, when the Chevington Woods and Chevington Woods North homeowner's associations were modified in 1973, Section 2 was specifically omitted. As cited by the majority in ¶ 30, the current bylaws of the Association provide in part: "Membership in this Association is assumed by the land owner(s) of each improved lot in Chevington Woods Subdivision." Appellants argue the Association declared as "Chevington Woods Subdivision" does not support the Association's claim of a scrivener's error because the Association used the singular word "Subdivision" as opposed to the plural "Subdivisions."

{¶ 63} Although the Association seeks to bootstrap its claim that it represents Section 2, the evidence is less than minimal to support this argument. Mr. Laramee's affirmation and belief as to "that was how it was done," is insufficient to support the Association's position.

{¶ 1} I would grant Assignments of Error I through VI. The inescapable fact is that although Section 2 has deed covenants/restrictions within the chain of title, the covenants are not to the Association, "Chevington Woods Civic Association, Inc.," but to a nonexistent entity, "Chevington Civic Association."

{¶ 64} In Assignment of Error VIII, the majority affirms the award of grossly exaggerated fees involved in the collection of the outstanding dues. The trial court awarded the Association $8,185.74, $430.00 of which amounted to the unpaid dues. A review of the record demonstrates that appellants never contested the amount of the unpaid dues or that they were sent a statement of the amount owed. They challenged the Association's right to collect dues from Section 2 residents. As a result, a great deal of the depositional testimony centered upon the loss of the original Articles of Incorporation and bylaws, the loss of the Secretary of State's compliance certificate, and the justification of the Association's very existence. It appears at times during the Association's various annual meetings, there was insufficient representation to satisfy a quorum.

{¶ 65} By a "scrivener's error" as the majority accepts, the Association bootstraps a collection fee of $7,755.74 on a $430.00 debt. In fact, most of the Association's legal maneuvers were an effort to justify its own existence.

{¶ 66} I would grant Assignment of Error VIII and deny the award for counterclaim filing fees and attorney fees.

DOUGLAS A. LARSON AND FLS, LLP, PLAINTIFFS-APPELLANTS, v. CASTLE AT THE BAY, LLC, TIMBER SHORES, LLC AND SUNSET CONDOMINIUMS AT NORTHERN BAY OWNERS ASSOCIATION, INC., DEFENDANTS-RESPONDENTS, CITY OF ADAMS, DEFENDANT.

December 11, 2014.

Before Blanchard, P.J., Lundsten and Higginbotham, JJ.

LUNDSTEN, J.

¶1 This case involves two condominium owners who seek a declaratory judgment, under WIS. STAT. § 841.01(1), declaring that all of the condominium owners in their association jointly own a sewage system because the sewage system is part of the condominium common elements, and declaring that nearby property owners do not own the sewage system. The complaint alleges that the nearby property owners falsely claim that they own the sewage system. The circuit court, acting on a motion filed by the nearby property owners, concluded that the two condominium owners lacked standing to obtain the declaratory relief requested with respect to the nearby property owners, and dismissed the owners' claims against the nearby property owners. We conclude that the arguments of the nearby property owners fail to demonstrate that the two owners lack standing. Accordingly, we reverse and remand for further proceedings.

Background

¶2 This dispute concerns Sunset Condominiums at Northern Bay, located in Adams County. Although many of the following facts, taken from the amended complaint, are disputed by Castle at the Bay and Timber Shores, those facts are accepted as true for purposes of Castle at the Bay's and Timber Shores' motion to dismiss for lack of standing. We also note at the outset that the amended complaint is complicated and makes many allegations involving Castle at the Bay, Timber Shores, the Sunset Condominiums Owners Association, and the City of Adams. We summarize here only the facts necessary to understand and resolve the dispute on appeal.

¶3 Sunset Condominiums has 248 units. Douglas Larson and FLS, LLP, a limited liability partnership, collectively own eight of the units.

¶4 Sunset Condominiums was declared a condominium in 2003 under WIS. STAT. ch. 703 by Larson's predecessor in title, Northern Bay, LLC. The common elements of Sunset Condominiums include a sewage system that transports condominium sewage water about 7 miles to a wastewater treatment facility owned and operated by the City of Adams.

¶5 The sewage system, "buried" below the condominium complex, includes a lift station, pumps, and a portion of a "Force Main" pipeline. The sewage system has an "off site" component consisting of the portion of the "Force Main" pipeline that extends beyond the condominium property until it connects with a wastewater facility owned by the City. The estimated construction cost of the sewage system was $1,700,000 and estimated present fair market value exceeds $2,000,000.

¶6 Defendant Castle owns adjacent property, including a golf course and an undeveloped 32-acre parcel. Defendant Timber Shores owns real estate located approximately one mile from Sunset Condominiums that Timber Shores is in the process of developing for resale. Castle's golf course disposes of its waste water through "sewer laterals" connected to the condominium's sewage system. Timber Shores has an easement to connect to the "off site" portion of the condominium's sewage system's "Force Main" pipeline, which requires Timber Shores to pay a percentage of the expense of maintaining the "off site" portion of the sewage system. Timber Shores has a separate agreement with the City of Adams for the treatment of waste water.

¶7 At some point, Northern Bay was put into receivership. The receiver conveyed the last of the 248 units by quit claim deed on March 30, 2011. Northern Bay is now a defunct corporation.

¶8 At a meeting on April 28, 2013, and in subsequent writings, Castle's president asserted, in effect, that Castle and Timber Shores own the sewage system, including its "off site" component. Castle's president further stated that Castle is "working on a proposal to charge the [Sunset Condominiums] Association . . . a fair fee for the use of the sewer line, [because Castle] is responsible for its maintenance and the Association has been using this line for free for at least as long as I've been involved." We assume for purposes of this decision that a reasonable inference from the amended complaint is that Sunset Condominiums owners, via the mechanism of condominium fees, would be required to bear the expense associated with Castle charging the Association for use of the sewage system.

¶9 Larson and FLS filed suit against Castle and Timber Shores, seeking declaratory relief under WIS. STAT. § 841.01(1), which authorizes declaratory relief to persons "claiming an interest in real property," and under WIS. STAT. § 806.04, the general declaratory judgment statute. Larson and FLS sought a declaration that Castle and Timber Shores do not own the sewage system and that the system is part of the condominium's real property and, therefore, jointly owned by Sunset Condominiums' unit owners.

¶10 Based on the court's conclusion that Larson lacked standing to bring a declaratory judgment action against Castle and Timber Shores on the topic of who owns the sewage system, the circuit court ordered dismissal of claims against Castle and Timber Shores.

Discussion

¶11 The multiple parties in this case make it cumbersome to talk about their arguments and disputes. To simplify our discussion, we will speak as if Larson was the sole plaintiff/owner on appeal. And, we generally refer to Castle and Timber Shores collectively as Castle.

¶12 Larson seeks a declaration that the sewage system located under Sunset Condominiums is a condominium common element, rather than property owned by Castle. With respect to this requested relief, the circuit court decided that Larson lacked standing, at least as against Castle. Our review of this decision requires us to construe statutes and language in condominium documents and, then, to apply such statutes and contract language to undisputed facts. These are questions of law that we decide without deference to the circuit court. See Northernaire Resort & Spa, LLC v. Northernaire Condo. Ass'n, 2013 WI App 116, ¶15, 351 Wis.2d 156, 839 N.W.2d 117 ("Interpretation and application of a statute to an undisputed set of facts are questions of law that we review de novo. Interpretation of a written document affecting land is also a question of law that we review independently of the circuit court." (citations omitted)), review denied, 2014 WI 22, 353 Wis.2d 449, 846 N.W.2d 14.

¶13 As indicated, the pertinent facts are undisputed. But we note that they are undisputed in a particular sense. The circuit court decided standing based on the pleadings. This means that the circuit court, and now this court, accepts allegations in the complaint as true for purposes of resolving whether Larson has standing. See Town of Eagle v. Christensen, 191 Wis.2d 301, 316, 529 N.W.2d 245 (Ct. App. 1995) ("When standing is challenged on the basis of the pleadings, we `accept as true all material allegations of the complaint, and . . . construe the complaint in favor of the complaining party.'" (quoted source omitted)).

1. Preliminary Observations And Dispute Clarification

¶14 In an effort to clarify the dispute, we make four observations and then summarize Larson's argument. In subsequent subsections, we organize our discussion around Castle's counter-arguments.

¶15 First, like the parties, we focus our attention on whether Larson has standing under WIS. STAT. § 841.01(1), sometimes referred to as the quiet title statute.⁴ Because we conclude that Larson has standing under this statute, we need not address whether Larson also has standing under the general declaratory judgment statute, WIS. STAT. § 806.04.

¶16 Second, the dispute here does not involve whether unit owners like Larson have standing generally with respect to matters affecting common elements. For example, we do not address whether an owner like Larson has standing to seek declaratory relief under WIS. STAT. § 841.01(1) if the owner's unit was, allegedly, uniquely or disproportionately affected by an issue involving the common elements. Rather, it appears that the dispute over standing arises here because of the parties' apparent agreement that the requested declaration would uniformly affect all Sunset Condominiums unit owners — that is, apparent agreement that there is no allegation of a unique harm to Larson.

¶17 Third, the fact that Larson named the Association and the City of Adams as defendants does not affect the dispute on appeal. First, the record indicates that default judgment has previously been granted against the City of Adams. As to the Association, although the parties do not discuss the topic, it appears that the circuit court's decision to dismiss claims against Castle, but not the Association, stems from the fact that some relief Larson seeks against the Association does not plainly hinge on Larson's standing with respect to the claims against Castle. The court explained that, to the extent the amended complaint "contains actions pled against Sunset Condominiums at Northern Bay Owners Association," such "claims stay." We do not weigh in on whether it makes sense for the Association to remain a party in the absence of Castle. Our point here is that, so far as the parties' arguments disclose, the fact that the Association and the City were named as defendants has no effect on the standing issue presented on appeal.

¶18 Fourth, a twist in this case is that it pits the rights of a condominium association against the rights of a condominium owner, but the Sunset Condominiums Owners Association does not participate in the appellate briefing. Rather, Castle, a third party that stands to gain if the sewage system is not a common element, effectively argues on behalf of the Association. This alignment may implicate whether the interests of the Association are adequately represented on appeal, but no one suggests that we need to take this circumstance into consideration, and we discuss it no further.

¶19 We now turn our attention to Larson's argument.

¶20 Larson sought a declaratory judgment under WIS. STAT. § 841.01(1). That statute provides: "Any person claiming an interest in real property may maintain an action against any person claiming a conflicting interest, and may demand a declaration of interests." Larson contends that his situation, and the action he brings, fits this statutory language. Boiled down, we understand Larson to be relying on the following propositions:

1. The disputed sewage system is real property;2. Larson's suit alleges that the sewage system is a part of the common elements of Sunset Condominiums;3. Larson claims an ownership interest in the sewage system;4. Larson has an ownership interest in whatever comprises the common elements of Sunset Condominiums because he is a condominium unit owner and, as such, owns a proportionate share of condominium common elements pursuant to WIS. STAT. § 703.04 ;5. Sunset Condominiums Owners Association does not own common elements and, therefore, has no ownership interest in the sewage system; and6. Larson's suit alleges that Castle asserted a conflicting ownership interest in the sewage system.

According to Larson, these six propositions show that his declaratory judgment action against Castle satisfies the requirements of § 841.01(1) because, in the words of the statute, Larson is a "person claiming an interest in real property . . . against [another] person [Castle] claiming a conflicting interest."

¶21 We do not understand Castle to be disputing this part of Larson's argument, so far as it goes. For example, although Castle disputes whether the sewage system actually is part of the Sunset Condominiums common elements, Castle does not, and could not reasonably, dispute the fact that Larson's suit alleges that the sewage system is a part of the common elements, the second proposition above. And, we perceive no dispute regarding the legal underpinnings of these six propositions. For example, regarding the fourth proposition, Castle does not dispute that Larson has, pursuant to WIS. STAT. § 703.04, an ownership interest in whatever comprises the common elements of Sunset Condominiums. For that matter, Castle does not dispute that Larson's condominium ownership confers on Larson the type of ownership interest in real property normally covered by WIS. STAT. § 841.01(1). Indeed, Castle states: "Wisconsin's declaratory judgment laws under Wis. Stat. ch. 840 and 841 apply to all real property interests, including condominium property . . . ."

¶22 Rather, the parties' dispute concerns whether other aspects of the condominium context here should lead to the conclusion that Larson lacks standing. According to Castle, Larson's reliance on WIS. STAT. § 841.01(1) is misplaced because § 841.01(1) is trumped here by more specific language in the Condominium Ownership Act and the condominium documents. Castle's general argument, in its own words, is that Larson "fail[s] to account for the special nature of common elements, which are jointly owned by unit owners, [and fails to account for] the power granted to the Association and the commensurate restriction on the rights and interests of individual unit owners relating to common elements under the Condominium Ownership Act." As to this alleged "special nature," we organize our discussion around Castle's specific arguments.

2. Castle's Arguments

a. Castle's "Exclusive"-Right-To-Sue Argument

¶23 According to Castle, when Larson purchased his units, Larson bought into an unambiguous contractual and statutory scheme that caused Sunset Condominiums' buyers to relinquish to the Association any rights that the buyers would otherwise have to sue with respect to all issues involving the common elements. In Castle's words, "on matters involving the common elements," the Association has the "exclusive right to sue."

¶24 In support, Castle points to language in the Sunset Condominiums declaration granting the Association "exclusive management and control of the Common Elements and facilities of the Condominium" and the "powers . . . set forth in . . . the Condominium Ownership Act." Turning to the Condominium Ownership Act, WIS. STAT. ch. 703, Castle points to WIS. STAT. § 703.15(3)(a)3., which confers on condominium associations "the power to . . . [s]ue on behalf of all unit owners."

¶25 Castle's reliance on this declaration and statutory language is misplaced. Neither the declaration nor the statute says anything about an exclusive right to sue. The declaration confers the exclusive right to manage and control whatever comprises the common elements. In this regard, the phrase "management and control" is not an unambiguous reference to the power to sue, much less a reference to the exclusive power to do so. Turning to the statute, it does address the power to sue, but says nothing about such power being exclusive. Indeed, Castle acknowledges that WIS. STAT. § 703.15(3)(a)3. is silent as to whether a unit owner may also sue.

¶26 Castle argues that "[a]ny possible question" as to whether the Association has an exclusive right to sue is "laid to rest by the Association's Bylaws." Castle does not, however, explain why any bylaws language might clarify language in the declaration and the statutes that we have already addressed. For example, Castle directs our attention to the following bylaws language addressing the powers of the Association board of directors: "All of the powers and duties of the Association . . . shall be exercised by the Board of Directors except those powers and duties specifically given to or required of any committees of the Association or the Unit Owners," but Castle does not explain how this language puts the question to rest. And, we see no reason why it might bolster Castle's position. The quoted language tells us that the "powers and duties" of the Association, whatever those powers and duties might be, are exercised by the board of directors or, under some circumstances, a committee made up of unit owners. The language sheds no light on whether the exclusive right to sue is one of the "powers and duties." We do not address here the remainder of Castle's bylaws discussion because that discussion is similarly unpersuasive.

¶27 We have suggested the possibility of ambiguity, but, notably, Castle does not address the topic. Castle does not argue that, if the declaration language or the statutory language quoted above is ambiguous, then that ambiguity may, based on the record before us, be resolved in favor of Castle's exclusive-right-to-sue interpretation. We simply comment here, without definitively resolving the issue, that the language Castle points to seems unambiguous in that the language does not on its face confer an exclusive right to sue with respect to common elements.

¶28 We pause to comment on two of Castle's arguments that might be viewed as relating to possible ambiguity.

¶29 First, Castle presents policy reasons for why the legislature would want to limit lawsuits like the one Larson filed. For example, Castle asserts that the "Association's board of directors, as the body of elected representatives for all unit owners, is in the best position to determine how matters affecting the Condominium's common elements, and thus the shared interests of all unit owners, should be handled." However, in the absence of demonstrated ambiguity, there is no apparent cause to consider reasons why the legislature might desire a different construction.

¶30 Second, specific to the facts here, Castle appears to argue that an interpretation allowing Larson to seek a declaratory judgment would unreasonably allow Larson to undermine the Association's management and control of common elements. As with the prior argument, in the absence of ambiguity this argument goes nowhere. We comment further that the argument seemingly assumes that Larson is interfering with a legitimate exercise of authority, an assumption that is at the heart of the dispute. If Larson is correct that the Association negotiated with Castle for the use of a sewage system that belongs to the unit owners, not Castle, then the part of Larson's suit seeking a declaration that the sewage system is owned by the unit owners would not interfere with any proper exercise of the Association's right to manage and control common elements.

b. Castle's Reliance On Apple Valley Gardens And WIS. STAT. §§ 703.09, 703.10, And 703.15

¶31 Castle contends that the Condominium Ownership Act "both confers rights on condominium owners' associations and permits the modification and restriction of unit owners' property rights." In support, Castle quotes the following from Apple Valley Gardens Ass'n v. MacHutta, 2009 WI 28, 316 Wis.2d 85, 763 N.W.2d 126:

Condominium ownership is a statutory creation that obligates individual owners to relinquish rights they might otherwise enjoy in other types of real property ownership. When purchasing a condominium unit, individual owners agree to be bound by the declaration and bylaws as they may be amended from time to time.

Id., ¶17. Turning to the statutes, Castle argues that WIS. STAT. §§ 703.09 and 703.10, viewed together, authorize limiting the rights of condominium owners regarding the management and operation of condominiums, and that WIS. STAT. § 703.15(3)(b)4. permits associations to acquire and convey title or interest in real property.

¶32 We need not address the particulars of this part of Castle's argument. At best, Apple Valley Gardens and the three statutes quoted above demonstrate that a condominium association could hold property rights in common elements (thereby possibly conferring an ownership interest in common elements to the Association) and that a condominium purchaser could contract away his or her right to file the sort of declaratory judgment action at issue here. Even if this legal argument is correct, something we need not and do not decide, Castle has not demonstrated that such authority has been exercised here. That is, Castle has not demonstrated that the Association here actually holds pertinent property rights or that Larson has effectively contracted away his right to seek declaratory relief under WIS. STAT. § 841.01(1).

c. Castle's Real-Party-In-Interest Argument based on Marshfield Clinic

¶33 Castle argues that Larson lacks standing because the Association, not Larson, is the "real party in interest." Castle begins by reciting real-party-in-interest language from case law. For example, Castle quotes the portion of Mortgage Associates, Inc. v. Monona Shores, Inc., 47 Wis.2d 171, 177 N.W.2d 340 (1970), which states: "The real party in interest . . . is one who has a right to control and receive the fruits of the litigation." Id. at 179. Castle does not, however, fashion an argument based on general case law. Rather, as we read on in Castle's briefing, Castle's only discernible affirmative argument hinges on the proposition that the Association here is similarly situated to a corporation deemed to be a real party in interest in Marshfield Clinic v. Doege, 269 Wis. 519, 69 N.W.2d 558 (1955). However, the comparison of the Association here and the corporation in Marshfield Clinic does not withstand scrutiny.

¶34 Marshfield Clinic involved a dispute over compliance with a non-compete agreement between Marshfield Clinic, a stock corporation, and a former employee of the corporation. Id. at 520-21. The corporation and three of its stockholders sued the former employee. The question on appeal was whether the three stockholders — who sued to vindicate alleged contractual obligations to them as individuals — were real parties in interest. See id. at 522-24. The Marshfield Clinic court concluded that the answer was no. Rather, as the court explained, the corporation alone was the real party in interest because the corporation, as the beneficiary of the contract at issue, was entitled to the fruits of the litigation. Id. at 524. That is, the corporation was the sole real party in interest because a successful action against the former employee based on the non-compete agreement would have resulted in a payment to the corporation, not to individual stockholders. Consistent with this holding, the court made the observation that, if the corporation had refused to enforce its rights, a stockholder may be "privileged to do so on [the corporation's] behalf." Id. at 526.

¶35 Castle asserts that the Association's interest here is comparable to the stock corporation's interest in Marshfield Clinic. Castle's supporting discussion, however, fails to explain why the interests are comparable. Why is a stock corporation's interest in its own profit comparable to a condominium association's interest in whether it manages and controls a sewage system as part of common elements owned not by the association but by its members? Although the Association here is charged with controlling and managing common elements, whatever they may be, the Association is not richer or poorer depending on the value of the common elements. In contrast, the lawsuit at issue in Marshfield Clinic had the potential to add to the corporation's own coffers. The Marshfield Clinic corporation's direct stake in the outcome of litigation was obvious. The Association's interest in what it manages or how much property its members own is not, so far as we can tell, similarly direct.

¶36 Thus, in the absence of an explanation as to why the Association is comparably situated to the stock corporation in Marshfield Clinic, we discuss Castle's reliance on that case no further. And, because Castle's real-party-in-interest argument is built on Marshfield Clinic, we reject the argument.

¶37 Before moving on, we note that Larson argues that Castle has forfeited its real-party-in-interest argument because Castle makes the argument for the first time on appeal. We agree that the argument is made for the first time on appeal, but that is not a problem for Castle because Castle makes the argument in an effort to persuade us to affirm the circuit court. As we have explained, forfeiture "generally applies only to appellants, and we will usually permit a respondent to employ any theory or argument on appeal that will allow us to affirm the trial court's order, even if not raised previously." Finch v. Southside Lincoln-Mercury, Inc., 2004 WI App 110, ¶42, 274 Wis.2d 719, 685 N.W.2d 154.

d. Castle's Reliance On The Direct Action Statutes In WIS. STAT. Ch. 181

¶38 Castle argues that Larson "cannot" bring his action "under the derivative action provisions of Wisconsin's nonstock corporation law, Wis. Stat. § 181.0740, et seq." The simple response to this argument is the one Larson provides: his suit is not, and does not purport to be, a derivative action authorized under WIS. STAT. ch. 181. Indeed, it is undisputed that Larson has not complied with the requirements of a derivative action suit under ch. 181. See WIS. STAT. §§ 181.0741 and 181.0742. Thus, Castle's contention that Larson may not bring his action as a derivative action under ch. 181 addresses a non-issue.

¶39 Castle may be arguing that, because of the condominium context here, Larson may only bring his suit as a derivative action under WIS. STAT. ch. 181 — that is, that Larson lacks standing to bring his declaratory action as anything other than a derivative action. If Castle means to make this argument, we reject it.

¶40 According to Castle, Ewer v. Lake Arrowhead Ass'n, 2012 WI App 64, ¶50, 342 Wis.2d 194, 817 N.W.2d 465, recognizes "the ability of one or more appropriate representatives to sue on behalf of a class of unit owners." Relying on Ewer, Castle writes:

The fundamental inquiry in determining whether a claim must be brought as a derivative claim is "to determine whether the direct injury is to the shareholder or member as an individual or, instead, is to the corporation." Ewer v. Lake Arrowhead Assoc., Inc., 2012 WI App 64, ¶25, 342 Wis.2d 194, 208, 817 N.W.2d 465, 472 (Ct. App. 2012). A derivative action involves an injury primarily to the corporation, with the resulting right of action belonging to the corporation. See Ewer, 2012 WI App 64, ¶17, 342 Wis. 2d at 204, 817 N.W.2d at 470 (listing examples of derivative actions).

(Emphasis added; footnote omitted.) Continuing with its reliance on Ewer, Castle goes on to argue:

The key distinction that makes the claims in this case derivative is that the rights of the unit owners in common property are not several and independent but are, instead, joint and shared — and are explicitly placed in the care of the Association. For this reason, the claims at issue do not involve any right or obligation of any individual unit owner, but rather the collective interests of all unit owners.The Association's rights and interests are directly impacted by claims concerning the title of the common elements, because the Association has exclusive responsibility for them. . . . The Association is the representative of the Condominium, and acts on behalf of the Condominium as an undivided whole. As a result, the Association is the party "[w]hose right is sought to be enforced." Ewer, 2012 WI App 64, ¶17, 342 Wis. 2d at 203-204, 817 N.W.2d at 470 (Ct. App. 2012).Although this controversy necessarily involves the unit owners' proportionate interests in the common elements, the primary injury is to their collective interests, and claims to redress the injury are, therefore, derivative.

¶41 We understand this part of Castle's argument to hinge on the existence of at least one of the following two assumptions: (1) that the right to sue to vindicate ownership rights in common elements has been "explicitly placed in the care of the Association" by the unit owners through a combination of contractual and statutory provisions, or (2) that the Association is the party whose right is sought to be enforced in the declaratory judgment action. We reject both underlying assumptions.

¶42 Assumption 1: So far as we can tell, Castle's assumption that the right to sue to vindicate ownership rights in common elements has been "explicitly placed in the care of the Association" is based on Castle's argument that condominium documents, read in combination with certain provisions in the Condominium Ownership Act, unambiguously grant the Association the exclusive right to sue with respect to issues involving the common elements. We explain in paragraphs 23 to 32 above why we reject that argument. Thus, we reject the first assumption.

¶43 Assumption 2: Castle's assumption that the Association is the party whose right is sought to be enforced in Larson's declaratory judgment action is also a topic that we have touched on in the context of discussing Marshfield Clinic, but we explain a bit more here.

¶44 The point of our discussion of Marshfield Clinic was to explain the flaw in Castle's reliance on that case. Simply put, the interest of the Association here is not the same as the interest of the corporation in Marshfield Clinic. However, just because Marshfield Clinic does not help Castle does not mean that Castle's second assumption is wrong. Indeed, we do not mean to suggest that the Association has no interest in the outcome of Larson's request for a declaration specifying who owns the sewage system. Obviously, if a court declares that the sewage system is a common element, the Association must manage and control the sewage system rather than negotiate over the use of that system.

¶45 However, Castle fails to persuade us that the Association is the party whose right is sought to be enforced in Larson's declaratory judgment action. The right directly at stake in Larson's action is ownership and the benefits that come with ownership. Larson effectively argues that property has been taken from him and other owners and, if the situation goes uncorrected, he and other owners will not only lose the property, they will have to pay for the use of that property. Thus, if it can be said that the Association is harmed, it is a different and less substantial harm. The Association does not own and it does not pay for use of the sewage system. Rather, members such as Larson own or, in the alternative, would pay.

¶46 As Castle's brief accurately states: "A derivative action involves an injury primarily to the corporation, with the resulting right of action belonging to the corporation." Castle fails to suggest any reason why the injury alleged is primarily to the Association.

¶47 Thus, we reject Castle's second assumption and turn to what remains of Castle's derivative action argument.

¶48 Castle appears to argue that Larson's only available option was to pursue a derivative action because the dispute here involves a third party, rather than being an "internal dispute" between Larson and the Association. In support, Castle cites Ewer and Annoye v. Sister Bay Resort Condominium Ass'n, 2002 WI App 218, 256 Wis.2d 1040, 652 N.W.2d 653. However, we find no such "third-party" rule in those cases. It is true that both Ewer and Annoye involved "internal" disputes between owners and their associations and that the owners in those cases brought non-derivative actions against their associations. See Ewer, 342 Wis.2d 194, ¶¶6-9; Annoye, 256 Wis.2d 1040, ¶¶1-7. But nowhere do those cases suggest that owners like Larson may only bring a derivative action if a dispute involves a third party. Indeed, Annoye does not even involve a dispute over the propriety of or need for a derivative action.

Conclusion

¶49 For the reasons above, we conclude that Castle's arguments fail to demonstrate that Larson lacks standing under WIS. STAT. § 841.01(1). Accordingly, we reverse the order dismissing claims against Castle and Timber Shores, and remand for further proceedings.

By the Court. — Order reversed and cause remanded for further proceedings.

Not recommended for publication in the official reports.

Pennsylvania Superior Court

Khalil v. Diegidio

No. 1019 EDA 2013.

AHLAM KHALIL, APPELLANT,
v.
JASON DIEGIDIO, ANNE MARIE DIEGIDIO, STATE FARM FIRE AND CASUALTY CO., TRAVELERS PROPERTY AND CASUALTY CO., TRAVELERS PROPERTY & CASUALTY COMPANY OF AMERICA AND TRAVELERS INDEMNITY COMPANY OF AMERICA

Superior Court of Pennsylvania.

Filed April 10, 2014.

BEFORE: FORD ELLIOTT, P.J.E., OTT, and STRASSBURGER, JJ.

NON-PRECEDENTIAL DECISION — SEE SUPERIOR COURT I.O.P. 65.37.

MEMORANDUM BY STRASSBURGER, J.

Ahlam Khalil (Appellant) appeals from the March 15, 2013 order denying her motion to set aside or vacate stipulation for settlement and release. Appellant also purports to appeal from the January 7, 2013 order marking this case as settled, discontinued, and ended; and, from the February 21, 2013 order denying reconsideration of the same. For the following reasons, we quash the instant appeal.

Since 1997, Appellant has owned a condominium unit in the Pier 3 Condominium building (Pier 3) located in Philadelphia, Pennsylvania. On or about May 25, 2007, Appellant's unit sustained damage caused by a water leak in an adjacent unit owned by Jason and Anne Marie Diegidio (collectively, the Diegidios). This appeal concerns the property damage litigation commenced by Appellant against the Diegidios, State Farm Fire and Casualty Company (State Farm), and Travelers Property Casualty Company of America (Travelers) (Property Damage Litigation).

On July 16, 2008, Appellant filed a complaint sounding in negligence against the above-named defendants. After three years and multiple motions on both sides, the Property Damage Litigation was set for trial on May 16, 2011. Prior to trial, on or about May 12, 2011, Appellant and Travelers reached a settlement agreement. The terms of the settlement provided, inter alia, that Appellant's claims against Travelers would be settled in the amount of $17,500. Appellant, with counsel present, signed the settlement and release, which was then forwarded by electronic mail to counsel for Travelers. As a result, Travelers was excused from attending trial.

The Property Damage Litigation proceeded to trial before the Honorable Frederica Massiah-Jackson. During trial, Appellant agreed on the record to settle her remaining claims against the Diegidios and State Farm for $50,000 and $40,000, respectively. N.T., 5/20/2011, at 3-5. Appellant further agreed to release Jason Diegidio, individually and in his capacity as a condominium board member, from the Pier 3 Litigation and the Property Damage Litigation. N.T., 9/30/2011, at 17. The matter was then marked "settled by the parties" by Judge Massiah-Jackson on May 26, 2011.

Appellant refused to accept any of the payments in the Property Damage Litigation. As a result, on September 30, 2011, Judge Massiah-Jackson held a hearing to review, clarify, and confirm the terms of the three settlement agreements. At the hearing, Appellant raised three objections to the proposed settlement agreements: (1) following the Property Damage Litigation settlements Appellant determined that a large quantity of her personal property, which had been placed into storage with two separate third-party companies by State Farm, was missing and/or destroyed, a loss not envisioned at the time of the settlement and for which Appellant held State Farm accountable; (2) Appellant contended that she never agreed to release Jason Diegidio, either individually or in his capacity as a board member, from the Pier 3 Litigation; and (3) Appellant argued that the settlement with Travelers in the Property Damage Litigation would negatively impact her counterclaims in the then-pending Pier 3 Litigation.

On October 11, 2011, Judge Massiah-Jackson issued an order finding valid settlements as to all three defendants, and directed each defendant to deposit its respective settlement amount into a designated court account, pending a motion for release of funds. The record reflects that on November 14, 2011, the full settlement amount as to all defendants in the Property Damage Litigation, $107,500, was placed in escrow with the Philadelphia County Court of Common Pleas.

Over a year later, on November 14, 2012, Appellant's counsel filed a motion to withdraw his appearance. On January 7, 2013, a hearing was held, following which the Honorable Sandra Mazer Moss granted the motion to withdraw and further ordered the case "settled, discontinued, and ended". Judge Moss informed Appellant that she had 30 days to file a motion for reconsideration of the January 7, 2013 order.

On February 6, 2013, Appellant, acting pro se, filed a motion for reconsideration of Judge Moss's January 7, 2013 order and a "Motion to Vacate and/or Set Aside Stipulation for Settlement and Release(s)" with Judge Massiah-Jackson.

On February 21, 2013, Judge Moss entered an order denying Appellant's motion for reconsideration. On March 15, 2013, Judge Massiah-Jackson entered an order denying Appellant's motion to vacate.

On March 19, 2013, Appellant filed a notice of appeal from Judge Moss's January 7, 2013 order marking the case settled, discontinued, and ended, Judge Moss's February 21, 2013 order denying her motion for reconsideration, and Judge Massiah-Jackson's March 15, 2013 order denying her motion to vacate. Appellant and the trial courts have complied with Pa.R.A.P. 1925.

Appellant raises the following issues for our consideration.

1. Did Judge Massiah-Jackson err or otherwise abuse her discretion by denying [Appellant's] motion to vacate and/or set aside the supposed settlements and releases? 2. Did Judge Massiah-Jackson err or otherwise abuse her discretion in failing to hold an evidentiary hearing, as required by applicable Pennsylvania appellate court rulings, before issuing a ruling on [Appellant's] motion to vacate and/or set aside the supposed settlements and releases? 3. Did Judge Moss err or otherwise abuse her discretion by marking this case "settled, discontinued, and ended" following a hearing that was intended to be devoted solely to the motion of [Appellant's] former counsel seeking to withdraw from this case, because in advance of that hearing no party had pending any motion seeking the entry of an order marking this case "settled, discontinued, and ended"? 4. Did Judge Moss err or otherwise abuse her discretion in refusing to grant reconsideration of her order marking this case "settled, discontinued, and ended"?

Appellant's Brief at 5.

Before we may address any of the issues raised on appeal, we must consider whether this appeal is properly before this Court.

Pursuant to 42 Pa.C.S. § 742(a), this Court has jurisdiction over appeals from final orders. The rule provides, in pertinent part, "e[]xcept as otherwise prescribed by this rule, the notice of appeal ... shall be filed within 30 days after the entry of the order from which the appeal is taken." With respect to Judge Moss's February 21, 2013 order denying Appellant's petition for reconsideration, we note that the denial of a motion for reconsideration is not generally subject to review, see Cheathem v. Temple Univ. Hospital, (Pa. Super. 1999). Thus, we are without jurisdiction to consider those claims arising out of the February 21, 2013 order.

Appellant's appeal from Judge Moss's January 7, 2013 order marking the case settled, discontinued, and ended is patently untimely pursuant to Rule 903(a). Nonetheless, Appellant urges this Court to analogize the procedural posture of the instant case with that of Brannam v. Reedy,  (Pa. Cmwlth. 2006), and find that her appeal was filed timely. Appellant's Brief at 15-18.

In Brannam, the Commonwealth Court was asked to consider whether the trial court erred in failing to hold an evidentiary hearing on plaintiffs' motion to strike judgment. The case in Brannam was marked as settled on June 23, 2005. Three-and-a-half months later, the plaintiffs filed a motion to strike the order of settlement. The trial court denied that motion by order dated November 22, 2005. Plaintiffs untimely filed a motion for reconsideration on December 28, 2005, which was denied as moot. Also, on December 28, 2005, the plaintiffs filed a praecipe for the entry of judgment and a notice of appeal. Appellant argues that, although jurisdiction is not expressly addressed in the Brannam opinion, the Commonwealth Court apparently found that the appeal was timely because it was filed within 30 days of the entry of judgment. Thus, Appellant contends that, because there has been no final judgment entered in this matter, applying the procedural posture of Brannam, her appeal is "at most premature." Appellant's Brief at 15-17. We disagree.

We have held that "[m]arking a case settled, discontinued and ended has the same effect as the entry of judgment". Kaiser v. 191 Presidential Corp., (Pa. Super. 1982). The record reflects that the Property Damage Litigation was marked as settled first by Judge Massiah-Jackson on October 19, 2011, nearly two years before the appeal was taken, and again by Judge Moss on January 7, 2013, a full two months before Appellant's notice of appeal was filed. Even assuming, arguendo, that Judge Moss's January 7 order, and not the 2011 order of Judge
Massiah-Jackson, had the same effect as the entry of judgment in this case, Appellant's March 19, 2013 notice of appeal is untimely.

Further, we reject Appellant's claim that her appeal from the January 7, 2013 order is timely due to fraud or a breakdown in the trial court's operation based on Judge Moss's statement to Appellant that she had 30 days to file a motion for reconsideration of the January 7, 2013 order. Appellant's Brief at 19-21. Appellant appears to argue that, because she was proceeding pro se following the withdrawal of her counsel, Judge Moss's statements mislead her to believe that a motion for reconsideration would toll the time to file an appeal, or that an appeal would not be necessary if a motion for reconsideration was filed. Contrary to Appellant's assertion, Judge Moss's comment was neither incorrect nor misleading. Indeed, it was entirely accurate. See 42 Pa.C.S. § 5505 ("Except as otherwise provided or prescribed by law, a court upon notice to the parties may modify or rescind any order within 30 days after its entry, notwithstanding the prior termination of any term of court, if no appeal from such order has been taken or allowed.")

Moreover, "[t]he United States Supreme Court has explained: The right of self-representation is not a license to abuse the dignity of the courtroom. Neither is it a license not to comply with relevant rules of procedural and substantive law." Jones v. Rudenstein,  (Pa. Super. 1991) quoting Farretta v. California,  (1975). Accordingly, for all of the foregoing reasons, we quash Appellant's claims with respect to Judge Moss' January 7, 2013 order. Pa.R.A.P. 903; Pa.R.A.P. 2101.

Finally, Appellant contends that, even if this Court rejects her arguments with respect to the timeliness of her appeal from Judge Moss's orders, we still possess jurisdiction to consider her claims with respect to Judge Massiah-Jackson's March 15, 2013 order denying her motion to vacate. We disagree. After reviewing Appellant's motion, Judge Massiah-Jackson determined that the trial court "ha[d] no jurisdiction to vacate the 2011 settlement." Judge Massiah-Jackson's Opinion, 4/24/2013, at 5. The record indicates that Appellant raised with Judge Massiah-Jackson the issues which form the basis of her motion to vacate during the September 30, 2011 hearing regarding the validity of the underlying settlements. Judge Massiah-Jackson issued on order on October 19, 2011 denying Appellant relief and confirming the May 25, 2011 order listing the matter as settled. Pursuant to rule 903(a), Appellant should have filed an appeal of Judge Massiah-Jackson's order within 30 days. She failed to do so. Appellant cannot in 2013 attempt to revive claims that were previously litigated in 2011. Thus, we agree with Judge Massiah-Jackson: this matter is long over, and Appellant's attempt to effectuate an appeal of these issues at this late date is procedurally impermissible.

Appeal quashed.

FootNotes

* Retired Senior Judge assigned to the Superior Court

1. The Diegidios' unit was insured under a condominium owners' policy issued by State Farm; the unit was also covered by policies issued to the Pier 3 Condominium Association by Travelers.

2. In 2009, while the Property Damage Litigation was pending, Pier 3 filed a complaint against Appellant seeking repayment of outstanding condominium association fees incurred when Appellant was forced to leave her unit due to the water damage (the Pier 3 Litigation). Appellant filed a counterclaim against the Pier 3 Condominium Association related to the water damage to her unit. Appellant also filed a joinder complaint against the Diegidios, individually and as members of the Pier 3 Condominium Board, and Wentworth Property Management. Travelers, as the insurer of Pier 3 provided a defense for Pier 3 as the counterclaim defendant. Wentworth filed a motion for summary judgment, which was denied. However, prior to trial the Honorable Judge George Overton dismissed Appellant's claims against Pier 3 and Wentworth. On August 5, 2011, Judge Moss approved a stipulation by and between all parties which allowed Appellant to withdraw her claims, with prejudice, against the Diegidios in the Pier 3 Litigation. On July 10, 2012, a jury entered a verdict in favor of Pier 3 in the Pier 3 Litigation. Appellant filed post-trial motions, which were denied. Appellant appealed to the Commonwealth Court. Pier 3 Condominium Assoc. v. Khalil, 15 CD 2013 (Pa. Cmwlth. 2013). The disposition of that appeal has been stayed pending the outcome of the instant appeal.

3. This intent also was memorialized in a stipulation before Judge Moss on August 5, 2011, whereby the parties agreed to release the Diegidios from the Pier 3 Litigation.

4. During the hearing, Judge Moss questioned Appellant extensively regarding the finality of the settlements reached in the Property Damage Litigation. In particular, Judge Moss inquired whether Appellant had ever filed a motion to vacate the settlements or appealed Judge Massiah-Jackson's September 25, 2011 order listing the case as settled or the subsequent order, entered September 30, 2011, escrowing the funds. Appellant indicated that she had not. N.T., 1/7/2013.

5. On May 8, 2013, this Court issued an order directing Appellant to show cause why the instant appeal should not be quashed as untimely. Appellant timely responded to that order.

6. "There is only one way for the trial court to toll or stay the appeal statute and thus to `retain control' once a petition for reconsideration has been filed. As stated in the Rules of Appellate Procedure, the 30-day period may only be tolled if that court enters an order "expressly granting" reconsideration within 30 days of the final order. Pa.R.A.P. 1701(b)(3)(i), (ii) and Note thereto[.]" Cheathem, 743 A.2d at 520. This limited exception does not apply to the case at bar.

7. We recognize that "a decision of the Commonwealth Court is not binding precedent upon this Court; however, it may be considered for its persuasive value." Holland ex rel. Holland v. Marcy,  (Pa. Super. 2002) quoting Commonwealth v. Lewis,  (Pa. Super. 1998).

FALLON RAHIMA JALLALI, Appellant, v. KNIGHTSBRIDGE VILLAGE HOMEOWNERS' ASSOCIATION, INC., Appellee.

District Court of Appeal of Florida, Fourth District.

December 10, 2014.

Alan Martin Medof, Boca Raton, for appellant.

Alan Schwartzseid of Kaye Bender Rembaum, P.L., Pompano Beach, for appellee.

GROSS, J.

The circuit court entered an amended final judgment while the appeal of the original final judgment was pending in this court. We quash the amended final judgment because the circuit court was without jurisdiction to enter it.

This case began with a complaint filed by the appellee homeowner's association to foreclose a claim of lien for the non-payment of dues. The circuit court entered a default final judgment of foreclosure on November 21, 2012. That final judgment was on appeal when appellant filed bankruptcy, triggering an automatic stay.

After the foreclosure case was permitted to proceed, the homeowner's association moved in 2013 to amend the 2012 final judgment. At that time, the appeal from the 2012 final judgment was still pending in this court. The circuit court granted the motion and entered an amended final judgment on December 30, 2013.

The trial court erred in entering the amended judgment because the pendency of the appeal of the 2012 judgment divested the trial court of jurisdiction.

When an appeal is taken, "the lower court [is] divested of jurisdiction to proceed with matters related to the final judgment." Hudson v. Hofmann, 471 So.2d 117, 118 (Fla. 2d DCA 1985) (citing Wilson Realty, Inc. v. David, 369 So.2d 75 (Fla. 2d DCA 1979)). During the appeal's pendency, the trial court lacks jurisdiction "to modify or amend the judgment on appeal," Brown v. Brown, 931 So.2d 251, 251 (Fla. 1st DCA 2006), or "entertain ... motion[s] pursuant to Florida Rule of Civil Procedure 1.540(b)."¹ State ex. rel. Schwartz v. Lantz, 440 So.2d 446, 449 n.3 (Fla. 3d DCA 1983) (citations omitted); see, e.g., Zuckerman v. Alex Hofrichter, P.A., 630 So.2d 210, 211 (Fla. 3d DCA 1993) ("[A] trial court lacks jurisdiction to proceed on a motion for relief from judgment once appellate jurisdiction is invoked" (citations omitted)); Flemenbaum v. Flemenbaum, 636 So.2d 579, 580 n.1 (Fla. 4th DCA 1994) ("The pendency of the appeal divested the trial court of jurisdiction to hear the rule 1.540 motion." (citation omitted)). Under such circumstances, the proper recourse is to ask the appellate court to "relinquish[] jurisdiction to the trial court." Glatstein v. City of Miami, 391 So.2d 297, 298 (Fla. 3d DCA 1980) (citations omitted); see also Fla. R. App. P. 9.600.

A pending appeal does not entirely nullify a trial court's ability to enter orders on a case. While the appeal is pending, the trial court retains jurisdiction "with regard to those matters which do not interfere with the power and authority of the appellate court or with the rights of a party to the appeal which are under consideration by the appellate court." Palma Sola Harbour Condo., Inc. v. Huber, 374 So.2d 1135, 1138 (Fla. 2d DCA 1979) (citations omitted). As the third district has explained:

Whether the trial court lacks jurisdiction depends not simply on the fact that an appeal in the case has been taken and is pending, but rather on the nature of the action being taken by the trial court in relation to the subject matter of the pending appeal. If what the trial court does while the appeal is pending cannot affect or interfere with the subject matter of the appeal, and thus impinge upon the appellate court's power and authority to decide the issues presented to it by the appeal, then the trial court can act. The jurisdiction of the appellate court is exclusive only as to the subject matter of the appeal.

Bailey v. Bailey, 392 So.2d 49, 52 (Fla. 3d DCA 1981). Thus, for example, a trial court retains jurisdiction to award post-trial attorney's fees since such a ruling "does not interfere with the authority of the appellate court with regard to the matters under consideration in the main appeal." Schultz v. Schickedanz, 884 So.2d 422, 424 (Fla. 4th DCA 2004) (citations omitted).

For these reasons we quash the December 2013 amended final judgment and reinstate the 2012 final judgment.

DAMOORGIAN, C.J., and MAY, J., concur.

Not final until disposition of timely filed motion for rehearing.

FootNotes

1. Although not stated in its motion to amend, appellee concedes on appeal its motion was filed pursuant to Florida Rule of Civil Procedure 1.540(b)(5).

U.S. District Court of Colorado

Ironstone Condominiums at Stroh Ranch Owners Association, Inc. v. Peerless Indemnity Insurance Company

Civil Action No. 12-cv-03160-CMA-KMT.

IRONSTONE CONDOMINIUMS AT STROH RANCH OWNERS ASSOCIATION, INC. a/k/a IRONSTONE CONDOMINIUM ASSOCIATION AT STROH RANCH, a non-profit Colorado corporation, Plaintiff,
v.
PEERLESS INDEMNITY INSURANCE COMPANY, an Illinois Corporation, Defendant.

United States District Court, D. Colorado.

February 7, 2014.

ORDER

KATHLEEN M. TAFOYA, Magistrate Judge.

This matter is before the court on Plaintiff's "Motion to Modify Scheduling Order Re: Additional Deposition of Ken Smith" filed December 16, 2013 [Doc. No. 85] ("Mot."). Defendant filed its "Response in Opposition to Plaintiff's Motion to Modify Scheduling Order Re: Additional Deposition of Ken Smith [ECF No. 85]" on January 9, 2014 [Doc. No. 92] ("Resp.") and Plaintiff filed a reply on January 14, 2014. The matter is ripe for review and ruling.

The Plaintiff seeks to re-open the deposition of Ken Smith, a consultant working for Grecco Consulting. Grecco was hired by Defendant to evaluate the damage to its insured's property, referred to here as "Ironstone," which occurred on June 6, 2012 and which is now the subject of this lawsuit. Mr. Smith's deposition originally was held on May 15, 2013. (Mot. ¶ 6.) The parties do not dispute that Mr. Smith has done additional consulting work through Grecco concerning the Plaintiff's claim since that date.

Fed. R. Civ. P. 26(b) provides, of course, that "discovery of any matter relevant to the subject matter involved in the action" may be ordered "for good cause." In re Cooper Tire & Rubber Co., (10th Cir.2009). Pursuant to Fed. R. Civ. P. 30(a)(2), "[a] party must obtain leave of court, and the court must grant leave to the extent consistent with Rule 26(b)(2): (A) if the parties have not stipulated to the deposition and: . . . (ii) the deponent has already been deposed in the case;. . . ." Further, pursuant to Fed. R. Civ. P. 26(b)(2)(C):

On motion or on its own, the court must limit . . . discovery otherwise allowed . . . if it determines that: (i) the discovery sought is unreasonably cumulative or duplicative, or can be obtained from some other source that is more convenient, less burdensome, or less expensive; (ii) the party seeking discovery has had ample opportunity to obtain the information by discovery in the action; or (iii) the burden or expense of the proposed discovery outweighs its likely benefit, considering the needs of the case, the amount in controversy, the parties' resources, the importance of the issues at stake in the action, and the importance of the discovery in resolving the issues.

Id.

As a general rule, the court will not require a deponent to appear for a second deposition without some showing of need or good reason for doing so. Ice Corp. v. Hamilton Sundstrand Corp., Case No. 05-4135-JAR, 2007 WL 1590845, *2 (D. Kan. May 30, 2007) (citing Cuthbertson v. Excel Indus. Inc., 179 F.R.D. 599, 605 (D. Kan. 1998)). Scheduling a second deposition of the same person without a showing of reason will generally support a finding of annoyance and undue burden or expense. Myers v. Mid-West Nat. Life Ins. Co., Case No. 04-cv-00396-LTB-KLM, 2008 WL 2410413, *1-2 (D. Colo. June 11, 2008); Cuthbertson at 605.

The court has "discretion to tailor discovery to the circumstances of the case at hand," Rocha v. Twilleger, Case No. 10-cv-00357-CMA-MEH, 2011 WL 4048789, *2 n. 1 (D. Colo. Sept. 12, 2011), and has "great discretion in establishing the time and place of a deposition." In re Standard Metals Corp., (10th Cir.2008).

Plaintiff states that Mr. Smith issued his first report concerning the scope and cost to repair the damages at Ironstone on November 14, 2012 and that at his first deposition it became clear that Mr. Smith had made an error in measurement with respect to the roofs on the 31 buildings at issue. This mistake allegedly equated to about a 40% error in the perimeter measurements of each roof. (Mot. ¶ 9.) Given that Mr. Smith's report was the evaluation at hand for the Defendant immediately prior to the filing of the lawsuit, it was reasonable that Plaintiff would seek his deposition near the beginning of discovery rather than waiting until the end.

It is also not disputed that within a few days of Mr. Smith's initial deposition, several thousand pages of documents were submitted to the Plaintiff as discovery by Defendants. Additionally, the Plaintiff was unable to obtain a copy of the Grecco case file supporting its evaluations until it was supplied by the deponent on the day of the deposition.

Both Ken Smith and Grecco stated that additional work would need to be undertaken to fully evaluate the damages sustained by Ironstone in the hailstorm and that the work would be done subsequent to Mr. Smith's initial deposition. If a witness is pivotal to the important issues in a case and the information sought could not have been addressed in the first deposition, a second deposition may be appropriate. See Federal Trade Commission v. Digital Interactive Associates, Inc., Case No. 95-Z-754, 1996 WL 912155 (D. Colo. December 12, 1996). It is not disputed that Grecco has issued at least two reports subsequent to Mr. Smith's initial deposition.

Defendant's primary objection to the taking of a second deposition of Mr. Smith is that, in Defendant's opinion, the Plaintiff should not have taken Mr. Smith's deposition so early in the case. This court, however, finds no fault with Plaintiff seeking to obtain Mr. Smith's deposition early in the case given the timing of the surrounding events and Mr. Smith's initial report date. Mr. Smith was paid for his time and appearance for the deposition which was taken by agreement in Colorado even though Mr. Smith was due to be on site at the Colorado property of Plaintiff for the entire week in any event. ("Resp. at 2.)

Given the late disclosure of documents only two days before Mr. Smith's planned and noticed deposition, as well as the fact that Mr. Smith had significant further experience with the evaluation of damages to the Ironstone property going to the very core of this litigation, the court finds that the Plaintiff has provided ample good cause to support a second deposition of Mr. Smith.

Wherefore it is ORDERED

Plaintiff's "Motion to Modify Scheduling Order Re: Additional Deposition of Ken Smith" [Doc. No. 85] is GRANTED. Plaintiff may take an additional discovery deposition of Ken Smith under the following conditions:

1. The deposition shall last no longer than five (5) hours;

2. The scope of the deposition shall be limited to the documents which were produced by the Defendant immediately preceding the initial deposition of Mr. Smith, including the Grecco case file, and to events occurring on or after May 13, 2013; and

3. The deposition shall be taken within 100 miles of Mr. Smith's residence unless otherwise agreed by the parties.

Texas Appeals Court

Hydrotech Engineering, Inc. v. OMP Development, LLC

No. 05-13-00713-CV.

HYDROTECH ENGINEERING, INC. AND SWABACK PARTNERS, PLLC, Appellants,
v.
OMP DEVELOPMENT, LLC., ICI CONSTRUCTION, INC., PAVECON COMMERCIAL CONCRETE, LTD., G&D POOL & SPA, INC., H.E. JONES & COMPANY, INC. d/b/a LASTING IMPRESSIONS LANDSCAPE, AND 2600 MONTGOMERY, LLC, Appellees.

Court of Appeals of Texas, Fifth District, Dallas.

Opinion Filed July 25, 2014.

Before Justices FitzGerald, Francis, and Myers.

OPINION

Opinion by Justice FITZGERALD.

This consolidated interlocutory appeal concerns alleged defects in a commercial construction project and the question of whether cross-claimants and third-party plaintiffs seeking contribution or indemnity in suits against licensed or registered professionals are obligated to comply with the certificate of merit requirement prescribed by Chapter 150 of the civil practice and remedies code. Appellants Hydrotech Engineering, Inc. ("Hydrotech") and Swaback Partners, PLLC ("Swaback") (together, "Appellants") assert that third-party plaintiffs and cross-plaintiffs must comply with Chapter 150, and therefore the trial court abused its discretion in denying their motions to dismiss the claims of ICI Construction, Inc. ("ICI"), Pavecon Commercial Concrete, Ltd. ("Pavecon"), G&D Pool & Spa, Inc. ("G&D"), and H.E. Jones & Company, Inc. d/b/a/ Lasting Impressions Landscape ("Lasting Impressions") (collectively, "Appellees"). Hydrotech further asserts that one of the certificates of merit upon which Appellees relied was deficient, and Swaback claims the parties are not entitled to rely on a late-filed certificate of merit. The Texas Supreme Court recently concluded that cross-claimants and third-party plaintiffs are not required to file a certificate of merit in suit arising under Chapter 150. In a separate decision, the court also concluded that the failure to file a certificate of merit with the original petition cannot be cured by amendment. Therefore, we affirm the trial court's orders denying Swaback's and Hydrotech's motions to dismiss the cross-claims and third party-claims, and reverse the trial court's order denying Swaback's motion to dismiss the fifth amended petition.

BACKGROUND

This lawsuit arises from a commercial construction project known as One Montgomery Plaza in Fort Worth, Texas. OMP Development, LLC ("OMP"), a real estate development company, hired ICI as the general contractor for construction of a rooftop pool and deck ("the Project"). OMP hired Hydrotech, a professional engineering firm, to provide certain engineering and design services relating to the Project. Swaback was the architect of record for the Project and provided architectural and design services. ICI hired various subcontractors, including G&D, Pavecon, and Lasting Impressions to perform various aspects of the construction work for the Project.

The lawsuit was initiated by OMP, and OMP was subsequently joined by 2600 Montgomery, LLC (together, "Plaintiffs"). One Montgomery Plaza Residential Condominium Association ("Intervenor") intervened in the lawsuit. ICI and Pavecon were named as defendants. Plaintiffs and Intervenor claimed that the pool for the Project leaked, and sought to recover damages for this and other alleged construction deficiencies.

Numerous third-party claims and cross-claims among and against the various parties followed. The pleadings pertinent to this appeal include the third-party claims of ICI and Pavecon against Hydrotech and Swaback, Plaintiffs' fifth amended petition, and the cross-claims of G&D and Lasting Impressions against Hydrotech and Swaback. We limit our recitation of the procedural posture accordingly.

ICI's third-party petition against Hydrotech and Swaback sought contribution in the event ICI was found liable to Plaintiffs or Intervenor. ICI attached a certificate of merit to its third-party petition. The certificate, from Warren Maierhoffer, P.E., Jerry Jackson, P.E., and Scott Kenzer, P.A. (the "Maierhoffer Affidavit") offered several reasons why Hydrotech's alleged errors, acts, and omissions on the Project caused the problems for which Plaintiffs and Intervenor sought recovery. Pavecon filed a similar third-party petition and also attached the Maierhoffer Affidavit.

The next business day, ICI filed an amended third-party petition because the initial pleading referenced, but failed to attach a certificate of merit from David Yarbrough (the "Yarbrough Affidavit"). The Yarbrough Affidavit supported the claims against Swaback. A few days later, Pavecon amended its third-party petition to attach and incorporate the Yarbrough Affidavit. Hydrotech moved to strike the third-party claims of ICI and Pavecon based on the failure of the parties to obtain leave of court to file the claims and the alleged insufficiency of the certificate of merit. Swaback joined in the motion.

After these motions were filed, G&D filed a cross-claim against Hydrotech, Swaback, and others. G&D's cross-claim attached and referenced the Maierhoffer and Yarbrough Affidavits. Hydrotech amended its motion to dismiss to include G&D's cross-claim.

Lasting Impressions then filed its cross-claim against ICI, Swaback, Hydrotech, G&D and others. The cross-claim did not include, reference, or incorporate any previously filed certificates of merit. Hydrotech amended its motion to dismiss to include the Lasting Impressions cross-claim.

Plaintiffs also filed a fifth amended petition asserting claims against ICI and numerous third-party defendants, including Hydrotech and Swaback. With regard to the third party defendants, the amended petition states, "If Defendant ICI's allegations are accurate, the work by third-party defendants . . . was insufficient and resulted in a property that was not properly built." The fifth amended petition did not include a certificate of merit. Swaback answered and moved to dismiss the fifth amended petition.

The trial court conducted a hearing, and signed orders denying Hydrotech's motion to dismiss and Swaback's motions to dismiss. Hydrotech and Swaback initiated separate appeals of these orders, but the cases were consolidated by this Court on its own motion. We have jurisdiction over this interlocutory appeal pursuant to TEX. CIV. PRAC. & REM. CODE ANN. § 150.002(f) (West 2011).

ANALYSIS

Swaback and Hydrotech assert the trial court erred in denying their motions to dismiss because cross-claimants and third-party plaintiffs seeking contribution or indemnity are required to file a certificate of merit in a lawsuit arising under section 150.002 of the civil practice and remedies code. Appellees respond that a certificate of merit is not required under the circumstances present here.

We review a trial court's decision on a defendant's motion to dismiss under section 150.002 under an abuse of discretion standard. A trial court abuses its discretion when it reaches a decision so arbitrary and unreasonable as to amount to a clear and prejudicial error of law. A trial court acts arbitrarily and unreasonably if application of the law to the facts dictates only one correct decision, but the trial court reaches a different one. A trial court abuses its discretion when it fails to analyze or apply the law correctly.

Chapter 150 applies to lawsuits against certain licensed or registered professionals, including architects, engineers, land surveyors, and landscape architects, or any firm in which such a licensed or registered professional practices. Section 150.002(a) requires "a plaintiff" to file a certificate of merit "with the complaint." Specifically, the statute provides in pertinent part:

Certificate of Merit In any action or arbitration proceeding for damages arising out of the provision of professional services by a licensed or registered professional, the plaintiff shall be required to file with the complaint an affidavit of a third-party licensed architect, licensed professional engineer, registered landscape architect, or registered professional land surveyor.

The purpose of the statutory certificate of merit is to be sure that the plaintiff's claims have merit. The statute further provides that the failure to file the affidavit "shall result in dismissal of the complaint against the defendant."

The Texas Supreme Court recently considered whether the statute's certificate of merit requirement applies to third-party plaintiffs or cross-claimants. In a plurality decision, the court concluded that "cross-claimants and third-party plaintiffs are not `the plaintiff' in an `action or arbitration proceeding'" and therefore "the statute's expert affidavit requirement does not apply to them."

The court resolved the issue by examining the language of the statute. In so doing, the court reasoned that because the statute does not define the terms "plaintiff" or "action," the terms should be given their ordinary meaning. Applying the terms' common, ordinary meanings, the court noted that the term "action" means "suit," and the term "plaintiff" is the party who initiates the action or suit, "not any party who asserts claims or causes of action within the suit." After determining that the context of the terms within the statute supports these common meanings, the court held that "section 150.002's certificate-of-merit requirement applies to a party who initiates the lawsuit, and not to defendants or third-party defendants who assert claims for relief within a suit."

In a concurring opinion, Justice Willett joined the plurality opinion, but wrote separately "to underscore the centrality of semantic context in statutory interpretation and the perils of resting on a statute's supposed purpose." Justice Willett agreed with the plurality's analysis of the word "action," but added "several other contextual considerations" to support the conclusion "that the statute does not require third-party plaintiffs to file expert affidavits."

The concurring opinion noted that use of the article "the," which emphasizes a particular plaintiff, supports a conclusion that the statute is directed toward the plaintiff who initiated the suit. The concurrence also noted that "section 150.002 does not apply to third-party plaintiffs seeking indemnity and contribution because the affidavit requirement is limited to actions `for damages.'" In this regard, Justice Willett noted:

When a defendant files a third-party action against a third-party defendant seeking contribution and indemnity, the defendant does not increase the possible scope of damages that the plaintiff will ultimately recover. The only changing dynamic is the proportionate share of the damages to be paid.

Justice Willett also cautioned against the dissent's use of the absurdity doctrine to effectuate the statute's purpose. To this end, he observed that "[l]iberal use of the absurdity doctrine too often devolves into purposive interpretation of statutes. And reliance on legislative purpose always tempts but rarely tempers." Swaback advances the same absurdity argument here. But Justice Willett suggested that "[i]n order to carefully police our limited role, the bar for the application of the absurdity doctrine must remain high. Peculiarity or unfairness is not sufficient to trigger the absurdity doctrine." Otherwise, "when legislatures come to see courts as editors rather than adjudicators, busy legislators may leave the judiciary to tighten the screws on loose language down the road."

Because the substantive issues in the present case are identical to those addressed in Jaster, Jaster is controlling here. Therefore, we conclude the trial court did not err in denying the motions to dismiss the third-party claims and cross-claims.

Although we need not reach Swaback's argument concerning the timeliness of the filing of the Yarbrough Affidavit in connection with the third-party claims and cross-claims, Swaback also moved to dismiss Plaintiffs' fifth amended petition. On appeal Swaback argues that it was "brought into the lawsuit by two third-party petitions that did not attach a certificate of merit," and that Plaintiffs are not entitled to rely on a certificate of merit that was untimely filed. In the court below, Plaintiffs argued that when the fifth amended petition was filed, there was already a certificate of merit on file, attached to ICI's amended petition. Plaintiffs have not responded to Swaback's argument on appeal.

Swaback does not challenge whether Plaintiffs were entitled to rely on the Yarbrough Affidavit filed by ICI. Instead, its complaint is that the affidavit was filed with an amended petition the day after the original filing. The record reflects that ICI filed its amended third-party petition with the Yarbrough Affidavit attached before Swaback answered and moved to dismiss, and Swaback does not dispute these facts. Nonetheless, Swaback insists that a certificate of merit must be filed with the first-filed petition and this "contemporaneous filing requirement is mandatory."

We note at the outset that ICI's original third-party petition referenced the Yarbrough Affidavit, but simply failed to attach it. The failure to attach the referenced affidavit, described by ICI as a clerical error, was remedied the very next business day. We are loathe to impose hyper-technical applications of the statute that do not advance the purpose of the statute — to protect engineers and architects from frivolous lawsuits. We are not unsympathetic to the fact that clerical errors do occur. But we are constrained to follow the Texas Supreme Court's recent decision in Crosstex Energy Svcs, L.P. v. Pro Plus, Inc. And Crosstex unequivocally stated that "failure to file a certificate of merit with the original petition cannot be cured by amendment."

In Crosstex, plaintiff's original petition named Pro Plus, a professional engineering firm, as a defendant. The original petition was filed without a certificate of merit. Pro Plus answered the lawsuit, participated in discovery, joined in continuance and docket control orders, and entered into a Rule 11 agreement before it raised the lack of a certificate of merit. After the statute of limitations had expired, Pro Plus filed a motion to dismiss. The trial court denied the motion and granted Crosstex an extension of time to file the certificate of merit. The court of appeals reversed the trial court's ruling and remanded the case. The Texas Supreme Court granted Crosstex's petition for review to determine: (1) whether the court of appeals had jurisdiction to consider the interlocutory appeal of the extension order; (2) whether section 150.002's "good cause" extension is available only when a party filed suit within ten days of the expiration of the limitations period; (3) whether a defendant's conduct can waive the certificate of merit requirement; and (4) whether Pro Plus's conduct constituted waiver.

The court concluded that the court of appeals did not err in exercising jurisdiction. Then, the court examined whether the statutory provision allowing a "good cause" extension of time to file the certificate of merit applied to Crosstex's failure to file.

The "good cause" extension is set forth in subsection (c) of the statute, and states:

The contemporaneous filing requirement of Subsection (a) shall not apply to any case in which the period of limitation will expire within 10 days of the date of filing and, because of such time constraints, the plaintiff has alleged that an affidavit of a third-party licensed . . . professional . . . could not have been prepared. In such cases, the plaintiff shall have 30 days after the filing of the complaint to supplement the pleadings with the affidavit. The court may, on motion after hearing and for good cause, extend such time as justice requires.

Pro Plus argued that the foregoing exception only applies if the plaintiff files the lawsuit within ten days of the limitations period. Crosstex asserted the trial court may extend the time to file the certificate of merit regardless of when the lawsuit is filed. The court concluded that the "good cause" exception does not stand alone, and can be read only in conjunction with the remainder of subsection (c). Thus, a plaintiff who files suit outside the ten day window cannot claim protection of the good cause exception.

In the context of considering whether the certificate of merit requirement can be waived, the court noted that section 150.002(a) (regarding the contemporaneous filing of a certificate of merit with the original petition) imposes a mandatory duty, but that duty is not jurisdictional." Therefore, a defendant can waive its right to seek dismissal under the statute.

In support of its argument that Pro Plus waived its right to complain about the absence of a certificate of merit, Crosstex asserted Pro Plus was required to specially except to any alleged pleading defect. The court rejected this argument, stating that "failure to file a certificate of merit with the original petition cannot be cured by amendment." The court further stated that "[i]f a defect in the pleadings is incurable by amendment, a special exception is unnecessary." The court concluded that Pro Plus had not waived its right to complain about the lack of a certificate of merit to accompany the original filing.

In the instant case, there was no motion for an extension of time to file the certificate of merit, nor did Plaintiffs invoke the "good cause" exception to the contemporaneous filing requirement. Indeed, Plaintiffs simply argued that the ICI certificate upon which they relied had been filed by the time they served the fifth amended petition. In light of the court's holding in Crosstex, we are not persuaded by this argument. The only statutory exception to an untimely filing is set forth in subsection (c), and this exception is inapplicable here. The Yarbrough Affidavit was not timely filed, and the amended pleading did not remedy the failure to comply with the contemporaneous filing requirement mandated by the statute. Therefore, the trial court erred in denying Swaback's motion to dismiss Plaintiffs' fifth amended petition as to the claims asserted against Swaback.

CONCLUSION

We affirm the trial court's orders denying Swaback's and Hydrotech's motions to dismiss the cross-claims and third-party claims, reverse the trial court's order denying Swaback's motion to dismiss the fifth amended petition as to the claims against Swaback, and remand to the trial court for further proceedings consistent with this opinion. ICI's motion to dismiss the appeal is overruled.

JUDGMENT

In accordance with this Court's opinion of this date, the trial court's orders denying the motions to dismiss the third-party claims and cross-claims are AFFIRMED. The trial court's order denying Appellant SWABACK PARTNERS, PLLC's motion to dismiss plaintiffs' fifth amended petition as to the claims against SWABACK is REVERSED and the case is remanded to the trial court for further proceedings consistent with this court's opinion.

It is ORDERED that appellees OMP DEVELOPMNET, LLC, ICI CONSTRUCTION, INC., PAVECON COMMERCIAL CONCRETE, LTD., G&D POOL & SPA, INC., H.E. JONES & COMPANY, INC. d/b/a LASTING IMPRESSIONS LANDSCAPE, AND 2600 MONTGOMERY, LLC recover their costs of this appeal from appellants SWABACK PARTNERS, PLLC, AND HYDROTECH ENGINEERING, INC.

Colorado Appeals Court

Houston v. Wilson Mesa Ranch Homeowners Association, Inc.

David Houston, Trustee of the David Houston 1997 Trust dated October 6, 1997, Plaintiff-Appellee, v. Wilson Mesa Ranch Homeowners Association, Inc., a Colorado nonprofit corporation, Defendant-Appellant.

Court of Appeals of Colorado, Division III.

Announced August 13, 2015.

Solomon Law Firm, P.C., Joseph A. Solomon, Telluride, Colorado, for Plaintiff-Appellee.

Dewhirst & Dolven, LLC, Miles M. Dewhirst, Jeffery D. Bursell, Denver, Colorado; Garfield & Hecht, PC, Mary Elizabeth Geiger, Glenwood Springs, Colorado, for Defendant-Appellant.

Lichtenstein and Fox, JJ., concur.

Opinion by Judge VOGT.^*

¶ 1 In this dispute regarding the scope of restrictive covenants, defendant, Wilson Mesa Ranch Homeowners Association, Inc., appeals the district court's judgment on the pleadings in favor of plaintiff, David Houston, Trustee of the David Houston 1997 Trust dated October 6, 1997. We affirm.

I. Background

¶ 2 Wilson Mesa Ranch is a subdivision in San Miguel County. The subdivision is subject to protective covenants that are enforced by the Association's board of trustees. The covenants provide, as relevant here, that "the lands within Wilson Mesa Ranch [are intended to] be developed and maintained as a highly desirable scenic and secluded residential area;" that all tracts designated on the recorded plats by number "shall be residential tracts;" and that "[n]o lands within Wilson Mesa Ranch shall ever be occupied or used for any commercial or business purpose nor for any noxious activity and nothing shall be done . . . on any of said lands which is a nuisance or might become a nuisance to the . . . owners of any of said lands."

¶ 3 Houston owns a single-family residence in the subdivision. Beginning in December 2012, Houston began renting out the property for short-term vacation rentals. He advertised the residence on the website of VRBO, a company that facilitates the booking of such rentals. When the board learned that Houston had been renting out the residence, it adopted an amendment ("Section 11") to its administrative procedures that prohibited Association members from renting out their properties for periods of less than thirty days without prior board approval. Section 11 also provided for a $500 fine for each violation of this prohibition.

¶ 4 The board notified Houston of its adoption of Section 11 and ordered him to comply with it. Houston objected to Section 11 as an unlawful attempt to amend the covenants. The board responded that short-term rentals were a commercial use that was already prohibited under the covenants, and that Section 11 was simply adopted to clarify the board's position and set forth procedures for seeking an exception to the prohibition.

¶ 5 After the board denied Houston's request to continue leasing the property on a short-term basis, he took two additional rental reservations through VRBO. The board treated these reservations as anticipatory breaches of the covenants and Section 11 and fined Houston $500 for each reservation.

¶ 6 Houston then filed this action, seeking a declaration that the Association could not bar the short-term rental of his property based on the commercial use prohibition in the covenants. The Association counterclaimed for a declaration that the covenants barred rentals of less than thirty days; that Section 11 was enforceable against Houston; and that Houston was in violation of the covenants and Section 11 by advertising, and taking reservations for, short-term rentals of his property. The Association also sought a permanent injunction requiring Houston to comply with the covenants and Section 11.

¶ 7 Both parties moved for judgment on the pleadings pursuant to C.R.C.P. 12(c). In a detailed written order, the district court entered judgment in favor of Houston and dismissed the Association's counterclaims. It reviewed the covenant language, found no Colorado case law that was "dispositive on the issue of whether a prohibition on commercial use bars short term rentals or conversely whether the requirement of residential use is somehow inconsistent with short term rentals," and reviewed cases from other jurisdictions that the parties had cited. The court concluded that nothing in the covenants prohibited short-term rentals, either expressly or by implication; that the covenant language was ambiguous regarding the permissibility of short-term rentals; and that, because such ambiguity required that all doubts be resolved in favor of the free and unrestricted use of property, the covenants did not prohibit or limit Houston's short-term vacation rentals. It also found that Section 11's "differentiation between forbidden `short term' rentals and permitted `long term' rentals [was] arbitrary and . . . not plainly within the confines of the [c]ovenants;" thus, the fines imposed against Houston were not enforceable.

II. Discussion

A. Standards of Review and Applicable Law

¶ 8 Our review is de novo, both because the district court's judgment was a judgment on the pleadings, see Melat, Pressman & Higbie, L.L.P. v. Hannon Law Firm, L.L.C., 2012 CO 61, ¶ 17, and because the court construed a written instrument. See In re Estate of Foiles, 2014 COA 104, ¶ 20.

¶ 9 We construe restrictive covenants according to their plain language, interpreting them as a whole and keeping in mind their underlying purpose. See Evergreen Highlands Ass'n v. West,  (Colo. 2003); Good v. Bear Canyon Ranch Ass'n,  (Colo. App. 2007). A covenant will be enforced as written if it is clear on its face. Good, 160 P.3d at 253. However, if there is any ambiguity or doubt as to the meaning of a covenant, we must adopt the construction that favors the unrestricted use of property. Id. at 253-54; see also Double D Manor, Inc. v. Evergreen Meadows Homeowners' Ass'n, (Colo. 1989).

B. Scope of the Covenants

¶ 10 It is undisputed that the covenants do not expressly prohibit short-term rentals of residences within Wilson Mesa Ranch. The issue is whether such rentals are prohibited by necessary implication based on covenant language that (1) Wilson Mesa Ranch is to "be developed and maintained as a . . . residential area," with all subdivision tracts to be "residential tracts," and that (2) "[n]o lands within Wilson Mesa Ranch shall ever be occupied or used for any commercial or business purpose." The Association contends that the district court erred in failing to construe the "commercial use" prohibition as precluding unapproved rentals of less than thirty days, and in failing to recognize that such short-term rentals are inconsistent with the covenants' "residential use" requirement. We disagree.

¶ 11 We are aware of no Colorado case that has addressed the meaning of prohibitions against "commercial use" or requirements of "residential use" in the context of short-term rentals of residences. With the exception of Double D Manor, discussed below, Colorado case law discussing these terms in other contexts affords little guidance in resolving the issue before us.

¶ 12 Like the district court, we find the two Colorado cases on which the Association relies — Jackson & Co. (USA), Inc. v. Town of Avon,  (Colo. App. 2007), and E.R. Southtech, Ltd. v. Arapahoe County Board of Equalization, (Colo. App. 1998) — to be distinguishable. The Jackson division concluded that a duplex with six individual bedroom-bathroom suites, used for short-term vacation rentals, qualified as a "lodge" under the definition of that term in a municipal ordinance; thus, such short-term rentals were impermissible under the ordinance and a subdivision plat that explicitly prohibited the use of property within the residential subdivision as a lodge. There is no such explicit prohibition in the covenants here.

¶ 13 In Southtech, the division held that, for property tax purposes, rentals of space in a large housing complex for less than thirty days should be taxed as a "hotel-type commercial use," while longer rentals should be taxed as "apartment-type residential" use. The division relied on constitutional and statutory provisions that excluded "hotels and motels" from the definition of "residential real property" for property tax purposes but included "apartments" in that definition. Again, the covenants at issue here do not contain similar definitional language.

¶ 14 We therefore look to the plain meaning of the covenant language, and we find guidance in cases from other jurisdictions that have applied this language in situations involving short-term rentals of residential property.

1. Requirement That Subdivision Tracts Be "Residential"

¶ 15 "Residential" is defined as "used, serving, or designed as a residence or for occupation by residents." Webster's Third New International Dictionary 1931 (2002). "Residence" means "the act or fact of abiding or dwelling in a place for some time; an act of making one's home in a place." Id.; see also The American Heritage Dictionary of the English Language 1483 (4th ed. 2000) (defining "residential" as "[o]f, relating to, or having residence," or "[o]f, suitable for, or limited to residences," and defining "residence" as "[t]he place in which one lives; a dwelling," or "[t]he act or a period of residing in a place").

¶ 16 "`Residential use,' without more, has been consistently interpreted as meaning that the use of the property is for living purposes, or a dwelling, or a place of abode." Lowden v. Bosley,  (Md. 2006); see also Mullin v. Silvercreek Condo. Owner's Ass'n,  (Mo. Ct. App. 2006) (A place used for "residential purposes" is, according to its plain and ordinary meaning, "one in which people reside or dwell, or which they make their homes, as distinguished from one which is used for commercial or business purposes." (quoting Blevins v. Barry-Lawrence Cnty. Ass'n for Retarded Citizens,  (Mo. 1986))).

¶ 17 Although "residential" unambiguously refers to use for living purposes, courts have recognized ambiguity in the term in cases involving short-term rentals or other situations where those residing in the property are living there only temporarily, not permanently. See Yogman v. Parrott,  (Or. 1997) ("The ordinary meaning of `residential' does not resolve the issue between the parties. That is so because a `residence' can refer simply to a building used as a dwelling place, or it can refer to a place where one intends to live for a long time."); Scott v. Walker,  (Va. 2007) (Restrictive covenant's requirement that lots be used for "residential purposes" was "ambiguous both as to whether a residential purpose requires an intention to be physically present in a home for more than a transient stay and as to whether the focus of the inquiry is on the owner's use of the property or the renter's use. . . . Moreover, if the phrase `residential purposes' carries with it a `duration of use' component, it is ambiguous as to when a rental of the property moves from short-term to long-term."); see also Dunn v. Aamodt,  (8th Cir. 2012) (phrase "residential purposes" in restrictive covenant was ambiguous as to short-term rental of property). These courts concluded that, because ambiguities in restrictive covenants were to be construed in favor of the free use of property, short-term rentals were not precluded as inconsistent with residential use.

¶ 18 Other courts have found no ambiguity, reasoning that, as long as the property is used for living purposes, it does not cease being "residential" simply because such use is transitory rather than permanent. In Lowden, 909 A.2d at 267, the court summarized cases applying the term "residential" to a variety of structures used for habitation purposes and recognizing that the transitory or temporary nature of such use did not defeat the residential status. It concluded that "[w]hen the owner of a permanent home rents the home to a family, and that family, as tenant, resides in the home, there obviously is no violation of the [d]eclaration. While the owner may be receiving rental income, the use of the property is unquestionably `residential'." Id. In Pinehaven Planning Board v. Brooks,  (Idaho 2003), the covenants at issue restricted the use of residential property to the construction of a single-family residence, which could not be used for commercial, industrial, or business purposes. The Idaho Supreme Court held that renting a property to people who used it for residential purposes, whether short or long term, did not violate the covenants. Id. at 668-69; see also Slaby v. Mountain River Estates Residential Ass'n,  (Ala. Civ. App. 2012) ("[P]roperty is used for `residential purposes' when those occupying it do so for ordinary living purposes. Thus, so long as the renters continue to relax, eat, sleep, bathe, and engage in other incidental activities . . . they are using the [property] for residential purposes."); Ross v. Bennett,  (Wash. Ct. App. 2008) (rejecting argument that short-term vacation rentals were distinguishable from permitted long-term rentals and concluding that: "Renting the . . . home to people who use it for the purposes of eating, sleeping, and other residential purposes is consistent with the plain language of the . . . [c]ovenant. The transitory or temporary nature of such use by vacation renters does not defeat the residential status.").

¶ 19 In this case, the pleadings and attached documents do not suggest that renters used Houston's residence for anything other than ordinary living purposes, and the Association does not so argue.¹ In these circumstances, we agree with the courts that have held that mere temporary or short-term use of a residence does not preclude that use from being "residential." Moreover, even if we were to find the covenants ambiguous in this regard, we would be required to adopt the construction of "residential" that favors the free and unrestricted use of Houston's property. See Good, 160 P.3d at 253-54.

2. Prohibition Against Commercial Use

¶ 20 "Commercial" means "occupied with or engaged in commerce . . . related to or dealing with commerce . . . [or] having profit as the primary aim." Webster's Third New International Dictionary 456 (2002). "Commerce," in turn, means "the exchange or buying and selling of commodities esp. on a large scale," but it can also mean "dealings of any kind." Id. A "commercial use" is one "that is connected with or furthers an ongoing profit-making activity." Black's Law Dictionary 1775 (10th ed. 2014).

¶ 21 As with the requirement of "residential use," the dictionary definitions of "commercial" and "commercial use" do not by themselves resolve the question of whether short-term vacation rentals are prohibited under the covenants at issue here; and the covenants do not further define those terms.

¶ 22 As in cases construing "residential use," some courts have recognized an ambiguity in the term "commercial use" when deciding whether prohibitions against commercial use apply to short-term rentals of residential property. See Yogman, 937 P.2d at 1021 ("commercial" use encompasses a broad range of meanings, from merely using the property in a way that generates revenue up to operating a business, such as a bed and breakfast, with profit as its primary aim); see also Russell v. Donaldson,  (N.C. Ct. App. 2012) (where covenants did not define "business or commercial purpose," they were ambiguous as to whether short-term residential vacation rentals came within the prohibition against use of lots for such purpose; however, upon review of cases from other states, and given requirement that ambiguities be construed in favor of unrestricted use of property, court held that prohibition did not bar short-term residential vacation rentals).

¶ 23 Other courts have held that prohibitions against commercial or business uses unambiguously do not bar short-term vacation rentals of residences where a renter uses the premises for residential activities such as eating and sleeping and not for commercial activities such as running a business. In Slaby, a residential association claimed that property owners' short-term rentals of their cabin violated restrictive covenants prohibiting commercial use. 100 So. 3d at 571. However, the court reviewed case law from other states and agreed with "the majority of other jurisdictions" that rental of the cabin for eating, sleeping, and other residential purposes did not amount to commercial use. Id. at 580-82; see also Pinehaven Planning Bd., 70 P.3d at 668 ("[R]enting [defendants'] dwelling to people who use it for the purposes of eating, sleeping, and other residential purposes does not violate the prohibition on commercial and business activity as such terms are commonly understood."); Lowden, 909 A.2d at 267 ("The owners' receipt of rental income in no way detracts from the use of the properties as residences by the tenants."); Mason Family Trust v. DeVaney,  (N.M. Ct. App. 2009) ("While [the owner's] renting of the property as a dwelling on a short-term basis may have constituted an economic endeavor on [his] part, to construe that activity as one forbidden by the language of the deed restrictions [prohibiting use for business or commercial purposes] is unreasonable and strained. Strictly and reasonably construed, the deed restrictions do not forbid short-term rental for dwelling purposes.").

¶ 24 We agree with the cases discussed above and conclude that short-term vacation rentals such as Houston's are not barred by the commercial use prohibition in the covenants. Our conclusion is consistent with the Colorado Supreme Court's holding, in a different context, that receipt of income does not transform residential use of property into commercial use. In Double D Manor, the court addressed a homeowners association's challenge to use of property in the subdivision as a home for developmentally disabled children. 773 P.2d at 1046. In rejecting the association's argument that such use was not a permissible "residential use" because Double D used the property to earn money to pay wages and cover costs, the court stated: "Double D's receipt of funding and payment to its staff to supervise and care for the children do not transform the use of the facilities from residential to commercial." Id. at 1051.

¶ 25 Finally, we are not persuaded to reach a contrary conclusion based on the cases on which the Association relies.

¶ 26 Ewing v. City of Carmel-By-The-Sea,  (Cal. Ct. App. 1991), cited by the Association for the proposition that short-term vacation rentals are inconsistent with the residential character of a neighborhood, was addressing the validity of a municipal ordinance explicitly prohibiting rentals under thirty days in an area zoned for single-family residential use; it was not interpreting a covenant lacking any such explicit prohibition. In Mission Shores Ass'n v. Pheil,  (Cal. Ct. App. 2008), the amended covenants — unlike the covenants here — expressly prohibited rentals of under thirty days. Similarly, in Munson v. Milton,  (Tex. App. 1997), the court relied on specific language in the covenants that defined "business use" to include "transient-type housing" as supporting a conclusion that short-term rentals were prohibited.

¶ 27 Finally, in concluding that short-term rentals were prohibited under the covenants at issue in Benard v. Humble,  (Tex. App. 1999), the court applied a Texas statute requiring that covenant language be "liberally construe[d]." Noting the tension between the statutory requirement and the common law, the court observed:

The present case is a prime example of the dilemma: The deed restrictions in question do not explicitly contain language covering temporary renting of property. Were we to give construction against the drafter of the covenant [instead of liberally construing it], we would be required to reverse the trial court's judgment [finding that short-term rentals are prohibited].

Id. at 931.

¶ 28 Unlike Texas, Colorado adheres to the common law principle that ambiguities in covenants are construed in favor of the unrestricted use of property.

¶ 29 In sum, we conclude that Houston's short-term vacation rentals are not barred under the covenants.

C. Validity of Section 11

¶ 30 The Association further contends that the district court erred in concluding that Section 11, the amendment to the board's administrative procedures that precludes unapproved short-term rentals and imposes fines for violations of that prohibition, was arbitrary and thus unenforceable. We agree with the district court that Section 11 is unenforceable, although we reach that conclusion for reasons other than those stated by the district court. See Meister v. Stout, 2015 COA 60, ¶ 8 (where district court reaches correct result, its judgment may be affirmed on different grounds that are supported by the record).

¶ 31 The Association argues that Section 11 was adopted at a "duly called and duly conducted board meeting" to "clarif[y] that the [covenants'] prohibition on commercial and business uses of property . . . prohibits the unapproved short-term rental" of lots within the subdivision. However, as set forth above, the covenants do not prohibit such rentals.

¶ 32 Thus, while the Association has the authority to enforce the covenants, it cannot rely on that authority to enforce a nonexistent covenant provision. For short-term vacation rentals to be prohibited, the covenants themselves must be amended. It is undisputed that the amendment procedure set forth in the covenants — which, among other things, requires a vote of three-fourths of the Association members and permits such vote only at ten-year intervals — was not followed here. The board's attempt to accomplish such amendment through its administrative procedures was unenforceable. See Mauldin v. Panella,  (Colo. App. 2000) (purported amendments to restrictive covenants that would have precluded the plaintiff's proposed use of his property were invalid because they were not promulgated in compliance with covenant provisions regarding amendment procedures); Johnson v. Howells, (Colo. App. 1984) (same); cf. Good, 160 P.3d at 253-55 (where covenants allowed amendment and amendment procedures were followed, amendment prohibiting construction of guest houses and caretaker residences was valid). D. Attorney Fees

¶ 33 Given our resolution of the issues raised in this appeal, we deny the Association's request for attorney fees under section 38-33.3-123(1)(c), C.R.S. 2014.

III. Conclusion

¶ 34 The judgment is affirmed.

JUDGE LICHTENSTEIN and JUDGE FOX concur.

Footnotes

* Sitting by assignment of the Chief Justice under provisions of Colo. Const. art. VI, § 5(3), and § 24-51-1105, C.R.S. 2014.

1. In a letter to the Association (which, because it was attached to Houston's verified complaint, could be considered by the district court in ruling on cross-motions under C.R.C.P. 12(c), see Van Schaak v. Phipps, 38 Colo. App. 140, 143, (1976); see also C.R.C.P. 10(c)), Houston's counsel explained the use of the property as follows: The HOA also argues that the current use is a commercial use. It is not. Mr. Houston has owned his Wilson Mesa home for over twenty years. At one point, he used the home for long-term rental. After that time, he made the decision he did not want the wear and tear on the house that permanent tenants bring. As a consequence he stopped renting it and hoped to use it more.However, it became apparent without people in the house and the accompanying maintenance, the house actually suffered. Mr. Houston decided the best solution for the property was to have it used to some extent, and thus he has been leasing it out for some vacation rental use.The home is very small. Occupancy is limited to a maximum of four guests. It is typically used by a couple, or a single adult. Mr. Houston also has a local caretaker handling maintenance and other related home needs.The amount of people staying in the residence with one vehicle certainly presents less road traffic than if Mr. Houston had a permanent tenant with two vehicles. Also, Wilson Mesa is usually quite vacant. Most properties are rarely occupied second homes. Very few homes are occupied on a full time basis. Also, these are seven acre parcels and do not have neighbors wall to wall.

2. In its reply brief, the Association also cites unpublished cases from three other jurisdictions. Because these unpublished opinions are not to be used as precedent under the rules of those jurisdictions, we do not consider them.

U.S. District Court of Tennessee

Hollis v. Chestnut Bend Homeowners Association

Case No. 3:12-cv-0137.

CHARLES M. HOLLIS, JR., and MELANIE HOLLIS, Individually and as Next Friends for H.H. and C.A.H., two minors, Plaintiffs, v. CHESTNUT BEND HOMEOWNERS ASSOCIATION and WESTWOOD PROPERTY MANAGEMENT, LLC, Defendants.

United States District Court, M.D. Tennessee, Nashville Division.

September 10, 2014.

Charles M. Hollis, Jr., Plaintiff, represented by Larry Lamont Crain & Tracey M. McCartney, Tennessee Fair Housing Council.

Melanie Hollis, Plaintiff, represented by Larry Lamont Crain & Tracey M. McCartney, Tennessee Fair Housing Council.

Chestnut Bend Homeowners Association, Defendant, represented by Gary R. Wilkinson, The Law Office of Gary R. Wilkinson & Robert John Notestine, III.

MEMORANDUM

ALETA A. TRAUGER, District Judge.

This case is again before the court on a Motion for Summary Judgment filed by defendant Chestnut Bend Homeowners Association (the "CBHA") (Docket No. 22). The court previously granted summary judgment to the CBHA. Hollis v. Chestnut Bend Homeowners Assoc. et al.,  (M.D. Tenn. 2013). Upon appeal, the decision was vacated and remanded with instructions to apply a proper summary judgment framework to the plaintiffs' claims. See Hollis v. Chestnut Bend Homeowners Assoc. et al., ___ F.3d ___, No. 13-6434, 2014 WL 3715088 (6th Cir. July 29, 2014.) For the reasons discussed herein, the defendant's Motion for Summary Judgment will be denied and the plaintiffs' claims will proceed to trial.

FACTUAL BACKGROUND

The facts of this case have been described thoroughly by this court and the Sixth Circuit. See  (M.D. Tenn. 2013); see also 2014 WL 3715088, at *1-5. For purposes of context, however, the court will briefly describe the events underlying the plaintiffs' claims.

I. Overview

In late 2011 and early 2012, Charles and Melanie Hollis lived with their five children, including two minors who are physically and mentally disabled, in a home they owned in Franklin, Tennessee. Their home was situated in a residential subdivision known as Chestnut Bend. The defendant, the CBHA, is an organization of homeowners within the Chestnut Bend community that is responsible for managing the subdivision. A board of five members governs the CBHA and is responsible for appointing members of various committees (the "Board"). The CBHA employs a property manager, Westwood Property Management ("Westwood"), to handle daily affairs. Mary Jean Turner, employed by Westwood, met and corresponded regularly with the Board during the relevant period.

Properties within Chestnut Bend are subject to various covenants, conditions, and restrictions. One such covenant precludes homeowners from building above-ground structures or improvements until the homeowner receives approval from the CBHA's Architectural Review Committee (the "ARC"). The ARC is comprised of three members, all of whom are appointed by the Board.

Homeowners submit architectural improvement applications to Turner, using a form that requires disclosure of various specifications of the proposed improvement. At all relevant times, Turner was in charge of reviewing homeowners' applications, to ensure their completeness, and party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,  (1986); Brown v. United States,  (6th Cir. 2009). then submitting the applications to the ARC members for review. The ARC members would review the proposal and convey their decision to Turner.

In March 2011, Mrs. Hollis sent an email to an ARC member declaring the Hollises' intention to add a sunroom to their house. The Hollises stated that the purpose of the sunroom was to add a "particularized living environment" for H.H. and C.A.H. that was "therapeutically designed to stimulate their development." The first proposal was incomplete and the ARC rejected it, for reasons detailed in this court's September 24, 2013 Opinion. 974 F. Supp. 2d at 1099-1101. Over several months, the Hollises submitted two additional proposals to the ARC, which were also rejected for a variety of reasons, including the applications' deficiencies. Id. at 1101-05. Because of the numerous applications filed by the Hollises and discord that arose among the parties over time, the Board became involved in the review process of the Hollises' applications (in conjunction with the ARC).

II. The December Request

The fourth application submitted by the Hollises is the only application at issue here. 2014 WL 3715088 at *2. On December 6, 2011, the Hollises' attorney, Tracey McCartney, submitted a complete application to the ARC (the "December Request"). The December Request expressly stated that the plaintiffs' addition "is to be a reasonable modification of the Hollis home under the federal Fair Housing Act." After the Board reviewed and discussed the proposal at the December meeting, the Board's attorney, Bob Notestine, prepared an "approval letter" that included a "request for consideration of a shingled roof," instead of the metal roof proposed by the plaintiffs in their December Request ("December Board Letter"). The December Board Letter, which Notestine sent to the Hollises' attorney on December 15, 2011, stated that the "ARC prefers not to approve a metal roof" because "there is some feeling that approval of metal roofs could create a new standard or at least would cause confusion about the shingle roof preference" of the neighborhood. Notestine further requested assurances, on behalf of the Board, that H.H. and C.A.H.'s exercise equipment, which the plaintiffs mentioned would be stored in the sunroom, would not be left outside. The letter concluded: "Please review these comments and advise if your client would agree to the above . . . requests by the ARC. If so, I would suspect that approval will be forthcoming."

McCartney responded to the December Board Letter on the same day. McCartney wrote that her clients would consider the shingled roof option but were leaning towards a metal roof. She further explained that cost was a consideration with regard to the roofing material. McCartney's response also directed Notestine to a letter sent by Turner on October 31, 2011, which stated that a metal roof was permissible under the ARC's guidelines. (Docket No. 25, Ex. 5 (citing Docket No. 31, Ex. 6 at 23).) She wrote that she would consult with her clients about the shingled roof consideration but requested that the ARC honor the October letter and approve the proposed metal roof. Notestine forwarded McCartney's December 15, 2011 letter to Turner, who in turn forwarded it to the board members. At least one board member immediately responded: "We said it in writing so we honor it. Our request for alternate roofing has been acknowledged; perhaps they will come through on it."

On December 16, 2011, McCartney followed up with Notestine. In a letter, she wrote that the Hollis family would be moving forward with a metal roof, which was acceptable per Turner's October 31, 2011 letter and the ARC guidelines, because "[a] metal roof has a number of advantages for the Hollises, including cost and relative ease of installation." The letter further stated that the Hollises prefer metal because of the sensory stimulation that it can provide for H.H. and C.A.H. McCartney wrote that the Hollises would proceed with legal options if the ARC did not "consent[] to the design as submitted, metal roof included," within six days.

A month passed before Notestine responded to McCartney's letter. On January 16, 2012, Notestine replied to McCartney by email, copying Turner:

I obviously was unable to get back to you by December 22, 2011. The end of the year was particularly hectic for me (as was the start of this year). You stated in your letter that your clients would proceed "with available legal options." What options have your clients decided to pursue?

III. The Hollises' Move

Sometime in 2011, shortly after the ARC rejected the Hollises' initial sunroom application, the Hollises began to look for a new house in a different neighborhood. In December 2011, they found and purchased a new home on Kinnard Springs Road in Franklin, Tennessee. The Hollises testified that, although Mrs. Hollis was reluctant to leave their home in Chestnut Bend, Mr. Hollis felt that they were being "forced out" of Chestnut Bend by the sunroom debacle. The Hollises moved into their new home in March 2012 and sold their Chestnut Bend home in the same month.

The Hollises' move is the basis for their monetary damages claim in the amount of nearly $300,000. The plaintiffs claim that, as a result of the move, they lost $206,265.79 in improvements that they had already made to their Chestnut Bend home, including nearly $10,000 spent on "Personal Touch Ceramic Tile," tens of thousands of dollars in landscaping fees (including what appears to be nearly $50,000 in landscaping fees over an eight-month period in 2009 alone), a dishwasher worth over $1,000, and nearly $13,000 spent on hardwood flooring. (Docket No. 39 at 141-47). The plaintiffs also claim a loss of $45,100—the difference between the purchase price of their home in 2006 and the sale of their home in 2012 and seek recovery of damages related to "emotional upheaval" suffered by H.H., C.A.H., Mr. Hollis, and Mrs. Hollis.

IV. Procedural History

The Hollises filed this action against the CBHA and Westwood on February 2, 2012, alleging, inter alia, that the defendants failed to grant the Hollises a reasonable accommodation or reasonable modification in violation of the Fair Housing Act, 42 U.S.C. § 3601 et seq. ("FHA" or "the Act"). (Docket No. 1.) The defendants answered the Complaint on March 13, 2012. (Docket No. 10.) On June 26, 2013, the CBHA and Westwood filed this Motion for Summary Judgment (Docket No. 22), which the plaintiffs opposed (Docket No. 30). On August 14, 2013, the plaintiffs agreed to dismiss Westwood from the litigation, and in return, Westwood agreed to educate its employees about the "requirements, spirit and purpose of the Fair Housing Act."

On September 26, 2013, this court granted summary judgment to the defendant after applying the familiar three-part evidentiary standard set forth in McDonnell Douglas Corp. v. Green,  (1973), to the plaintiffs' FHA claims. The court concluded that, although the plaintiffs had met their prima facie burden, the CBHA had set forth a legitimate, non-discriminatory reason for its rejection of the December Request, and the plaintiffs had failed to present evidence of pretext. The court also dismissed the individual claims filed by Mr. and Mrs. Hollis on the ground that they lacked standing to bring personal-capacity FHA claims. Subsequently, the court denied a motion for reconsideration filed by the Hollises. The Hollises filed a timely appeal.

The Sixth Circuit considered two issues upon appeal: (1) whether this court erred in dismissing the individual FHA claims of Mr. and Mrs. Hollis, and (2) whether this court's application of the McDonnell Douglas standard to the plaintiffs' claims was inappropriate. The Sixth Circuit found for the Hollises with regard to both questions. As to the appropriate standard for the Hollises' FHA claims, the court rejected the McDonnell Douglas test, which focuses on intent, because "[i]ntent is irrelevant in reasonable-modification cases." 2014 WL 3715088, at *7-8 (internal citations omitted). The court then offered guidance with regard to the proper legal standard for reasonable modification claims:

An FHA reasonable-modification plaintiff, like an FHA reasonable-accommodation plaintiff, must prove both the reasonableness and necessity of the requested modification. And although we sometimes refer to those as the "operative elements," other equally important elements also comprise the claim. In addition to proving reasonableness and necessity, an FHA reasonable-accommodation or reasonable-modification plaintiff must also prove that she suffers from a disability, that she requested an accommodation or modification, that the defendant housing provider refused to make the accommodation or to permit the modification, and that the defendant knew or should have known of the disability at the time of refusal. The burden is on the plaintiff to establish each element.

Id. As to the mechanics of the proper standard at the summary judgment stage, the court wrote:

When a plaintiff brings an FHA reasonable-accommodation or reasonable-modification claim, the burden of persuasion—i.e., the ultimate burden to prove both reasonableness and necessity—lies always with the plaintiff. If the case goes to trial, in other words, it is the plaintiff rather than the defendant who must show that the request is both reasonable and necessary. But when the defendant moves for summary judgment, the defendant bears the burden to show that there is no genuine issue of material fact and that the defendant is entitled to judgment as a matter of law.

Id. (internal citations omitted). Accordingly, the Sixth Circuit vacated this court's decision and remanded the action for application of the appropriate summary judgment standard to Mr. and Mrs. Hollis's individual FHA claims, as well as their claims as next friends of their minor children.

ANALYSIS

I. Rule 56 Standard

Rule 56 requires the court to grant a motion for summary judgment if "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). If a moving defendant shows that there is no genuine issue of material fact as to at least one essential element of the plaintiff's claim, the burden shifts to the plaintiff to provide evidence beyond the pleadings, "set[ting] forth specific facts showing that there is a genuine issue for trial." Moldowan v. City of Warren,  (6th Cir. 2009); see also Celotex Corp. v. Catrett,  (1986). "In evaluating the evidence, the court must draw all inferences in the light most favorable to the non-moving party." Moldowan, 578 F.3d at 374 (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,  (1986)).

At this stage, "`the judge's function is not . . . to weigh the evidence and determine the truth of the matter, but to determine whether there is a genuine issue for trial.'" Id. (quoting Anderson v. Liberty Lobby, Inc.,  (1986)). But "[t]he mere existence of a scintilla of evidence in support of the [non-moving party's] position will be insufficient," and the party's proof must be more than "merely colorable." Anderson v. Liberty Lobby,  (1986). An issue of fact is "genuine" only if a reasonable jury could find for the non-moving party. Moldowan, 578 F.3d at 374 (citing Anderson, 477 U.S. at 252).

II. The Fair Housing Act

A. The Act

The FHA prohibits discrimination "against any person in the terms, conditions, or privileges of sale or rental of a dwelling, or in the provision of services or facilities in connection with such dwelling, because of a handicap." 42 U.S.C. § 3604(f)(2).

Discrimination under the Act includes "a refusal to permit, at the expense of the handicapped person, reasonable modifications of existing premises occupied or to be occupied by such person if such modifications may be necessary to afford such person full enjoyment of the premises." 42 U.S.C. § 3604(f)(3)(A). The statute also makes unlawful any "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." Id. § 3605(f)(3)(B).

A "modification" under the FHA is distinct from an accommodation. See Weiss v. 2100 Condominium Ass'n, Inc., ___ F. Supp. 2d ___, 2013 WL 1767974, at *6 (S.D. Fla. Apr. 8, 2013); see also 24 C.F.R. § 100.203; Joint Statement of HUD and DOJ, Reasonable Modifications under the Fair Housing Act (Docket No. 31 Ex. 69) ("Joint Statement"). The Act does not provide a definition for "modification," but regulations promulgated by HUD define a modification as "any change to the public or common use areas of a building or any change to a dwelling unit." 24 C.F.R. § 100.201. Claims for reconstruction or renovation to a dwelling are actionable under the reasonable modifications section of the FHA, and not the reasonable accommodation section. See Weiss, 2013 WL 1767974, at *6; see also Reyes v. Fairfield Properties,  E.D.N.Y. 2009); Joint Statement at 3, 6.

974 F. Supp. 2d at 1108-09. Here, the plaintiffs have urged the court to treat their sunroom request as a request for reasonable modification, and not reasonable accommodation. The distinction is unnecessary because, as described below, the Sixth Circuit has determined that the same essential elements apply to both claims.

B. Elements of the Plaintiffs' FHA Claims

The essential elements of the Hollises' reasonable-modification claims—meaning, the elements that the plaintiffs must establish to win at trial—are: (1) H.H. and C.A.H. suffered from a disability; (2) the Hollises requested an accommodation or modification; (3) the CBHA refused to make the accommodation or permit the modification, and (4) the CBHA knew or should have known of the disability at the time of the refusal. The Hollises must also demonstrate that the requested modification was both reasonable and necessary.

With regard to the necessity of the modification, a plaintiff must demonstrate that, "but for the requested accommodation or modification, he `likely will be denied an equal opportunity to enjoy the housing of [his] choice.'" 2014 WL 3715088, at *9 (quoting Smith & Lee Assocs., Inc. v. City of Taylor, Mich.,  (6th Cir. 1996)). "The necessity element is, in other words, a causation inquiry that examines whether the requested accommodation or modification would redress injuries that otherwise would prevent a disabled resident from receiving the same enjoyment from the property as a non-disabled person would receive." Id.

Typically, however, a reasonable accommodation or modification claim will turn on the question of reasonableness. "To determine the reasonableness of the requested modification, the burden that the requested modification would impose on the defendant (and perhaps on the persons or interests whom the defendant represents) must be weighed against the benefits that would accrue to the plaintiff. This is a highly fact-specific inquiry." Id. Put simply, "[a] modification should be deemed reasonable if it `imposes no fundamental alteration in the nature of a program or undue financial and administrative burdens.'" Id. (quoting Groner v. Golden Gate Apartments,  (6th Cir. 2001)) (additional citations omitted).

III. The Defendant's Motion

To succeed at this stage and win dismissal of the plaintiffs' claims, the CBHA must demonstrate that no genuine question of material fact exists as to at least one essential element of the plaintiffs' claims. Here, the CBHA challenges two elements of the Hollises' claims. It argues that it is undisputed that (1) the CBHA did not refuse to make a modification, and (2) the plaintiffs' requested modification was unreasonable. At this stage, the Hollises' burden is not insignificant. They must provide evidence beyond their Complaint and set forth specific facts demonstrating that a genuine issue of fact for trial exists as to these two elements.

A. Is it undisputed that the CBHA did not refuse to make a modification?

The CBHA argues that Notestine's December 15, 2011 letter, requesting that the plaintiffs consider a shingle roof instead of a metal roof, constitutes an "approval" (and therefore, not a refusal) of the December Request. Moreover, it contends, "even if the [December 15, 2011 Letter] is not read to be an approval, neither can it be read to be a denial or refusal of a requested modification or accommodation." Therefore, the CBHA argues, it is undisputed that the CBHA did not refuse the December Request.

The court disagrees. First, the express language of Notestine's December 15, 2011 letter contradicts the defendant's categorization of the letter as an approval. The letter concludes: "Please review these comments and advise if your client would agree to the above . . . request[] by the ARC. If so, I would suspect that approval will be forthcoming." (Docket No. 25, Ex. 4 (emphasis added).) By its own plain text, the Letter cannot be considered an approval because an approval was forthcoming. Moreover, the approval appears to have been conditioned on the Hollises' selection of roof material and promise to keep exercise equipment indoors.

Second, following the December Approval Letter, the plaintiffs responded twice and requested communication of approval from the Board before December 22, 2011—what appears to the court to be a reasonable deadline. Despite the plaintiffs' timely responses to Notestine, no further communication to the plaintiffs with regard to approval was made—not even after the year ended or when Notestine reached out to McCartney in January 2012. Finally, although Notestine testified at his deposition that he "thought [the CBHA] had basically approved the room," the written communications between the parties demonstrate that no such approval was communicated to the plaintiffs. As explained by the court in its earlier decision, whether or not the Board considered the application approved is irrelevant—what matters is that the plaintiffs never received a communication of approval for their December Request.

In short, it is undisputed that (1) the defendant did not send any communication expressly approving the December Request, and, (2) despite McCartney's request for approval of the proposal before December 22, 2011, the defendant was silent with regard to approval between December 15, 2011 and January 16, 2012. Upon review of the record, the court cannot conclude that no reasonable jury could find that the CBHA approved (or did not refuse) the Hollises' modification. Consequently, summary judgment is inappropriate for the defendant with regard to the element of "refusal."

B. Is it undisputed that the Hollises' requested modification was unreasonable?

The CBHA appears to argue that the Hollises' requested modification was unreasonable because the Hollises insisted on a metal roof. According to the defendant, it approved the addition of the sunroom on December 15, 2011, but "requested a shingle roof rather than a metal roof" and sought assurance that the children's exercise equipment would be kept inside the sunroom. It submits that, because "[t]here was nothing about these requests" that would have affected the plaintiffs' intended use and enjoyment of the sunroom, it is undisputed that the plaintiffs' requested modification was unreasonable. The defendant relies on Loren v. Sasser,  (11th Cir. 2002) and argues that, as in Loren, the plaintiffs' request for modification was unreasonable because an alternative modification (the shingle roof suggested by the defendant) would have accomplished the same purpose as the proposed modification.

In Loren, a Florida homeowner (and two disabled members of her family) sued an association of property owners and their subdivision's corporate developer, alleging that the defendants, who managed their deed-restricted subdivision, failed to provide a reasonable modification to the plaintiffs' home because they did not permit the plaintiffs to build a chain-link fence in their front yard for the disabled plaintiffs to use as safe outdoor space. 309 F.3d at 1298. After the district court granted summary judgment to the defendants, the plaintiffs appealed. The Eleventh Circuit affirmed the district court's decision after concluding that there was no evidence that the defendants had discriminated against the plaintiffs/appellants. Specifically, the Eleventh Circuit found it persuasive that (1) the appellants failed to introduce evidence that other houses in the subdivision had been permitted to construct fences on the front of their lots, and (2) the defendants had informed the appellants that they would approve the construction of a fence on the back yard or side yard of their property. The court wrote, "[w]hile a chain-link fence on the back or side yard of their property may not be appellants' preference, it nevertheless would be a reasonable accommodation for the asserted needs of the handicapped appellants." Id. at 1302-03.

At this stage, the court concludes that the defendant's argument is without merit and its reliance on Loren is misplaced. Here, substantial evidence in the record demonstrates that, unlike in Loren, a question of fact exists as to whether the Hollises' proposed sunroom would have imposed a fundamental alteration in the nature of the CBHA's program or otherwise imposed undue financial or administrative burdens on the CBHA. For instance, it is undisputed that at least one other Chestnut Bend homeowner was permitted to build a sunroom with a metal roof and that the ARC guidelines list metal as an acceptable material for roofing. Moreover, it is undisputed that, in an October 2011 letter, Turner stated that metal roofing was an acceptable material for home additions. Taking this evidence in the light most favorable to the plaintiffs, the court finds it difficult to believe that a metal roof constitutes a fundamental alteration of the aesthetic of the Chestnut Bend community, or that the metal roof would have imposed undue burdens on the neighborhood. Nevertheless, at a minimum, the plaintiffs have met their burden and established that a triable issue of fact exists as to the reasonableness of the proposed metal roof.

Additionally, the plaintiffs have presented sufficient facts to demonstrate that the benefits to H.H. and C.A.H. from the proposed sunroom may have outweighed the possible harm to the CBHA. Unlike the appellants' proposed front-yard fence modification in Loren, it appears undisputed that the plaintiffs' proposed modification here—a metal roof—was not just the plaintiffs' preference. According to H.H. and C.A.H.'s physical therapist, the metal roof was intended to provide additional sensory benefits to H.H. and C.A.H. that the defendant's alternative proposal—a shingle roof—would not provide.

Consequently, a triable issue of fact exists as to whether the plaintiffs' December Request was reasonable. Accordingly, summary judgment is inappropriate for the defendant with regard to this element of the plaintiffs' claims.

CONCLUSION

For these reasons, the defendant's Motion for Summary Judgment (Docket No. 22) will be denied and the plaintiffs' FHA claims will proceed to trial.

An appropriate order will enter.

Footnotes

1. Unless otherwise noted, the facts are drawn from the defendant's statement of undisputed facts (Docket No. 26), the plaintiffs' responses thereto (Docket No. 32), the exhibits filed in support of the plaintiffs' Response (Docket No. 31), the full deposition transcripts of Melanie Hollis, Charles M. Hollis, Mary Jean Turner, Robert Notestine, and Tracey McCartney (Docket Nos. 39-43), and related exhibits. The court draws all reasonable inferences in favor of the non-moving

2. The court notes that the Sixth Circuit consistently applies the McDonnell Douglas burden-shifting framework to interference claims under the Family and Medical Leave Act, 29 U.S.C. § 2601 et seq. ("FMLA"), even though it is well settled that the element of intent is irrelevant to the FMLA interference inquiry. See Donald v. Sybra,  (6th Cir. 2012); Grace v. USCAR,  (6th Cir. 2008); see also Tillman v. Ohio Bell Telephone Co., 545 F. App'x 340, 352 (6th Cir. 2013). It is unclear how the Sixth Circuit's ruling in this case will affect the application of McDonnell Douglas to FMLA interference claims going forward.