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Committee Activity 2015

September 2015

Deutsche Bank v. Harry Beauvais and Aqua Master Association, Etc., ET. AL (Florida)

In this case, the lower court ruled in favor of the Aqua Master Association. Deutsche bank is appealing the ruling. 

After waiting years for the bank to prosecute their lien interest in this case, Aqua Master Association proceeded to foreclose on the subject property and took title on February 22, 2011. The Beauvais case presents an all too common set of facts. The first foreclosure action was filed on January 23, 2007 and was later dismissed without prejudice on December 6, 2010. Meanwhile, the Aqua Master Association foreclosed on its lien in early 2011 and took title subject the first mortgage. By the time the lender began the foreclosure process on December 18, 2012, the five (5) year statute of limitations had run and the lower court granted a summary judgment in favor of the association and extinguished the lien. The bank appealed to the 3rd DCA and on December 17, 2014, an opinion favorable to the association was issued. The 3rd DCA upheld the statute of limitation making the debt unenforceable but reversed the lower court as to the decision to extinguish the lien. The bank requested and was granted a motion of rehearing en banc and oral arguments are scheduled for November 12, 2015. Currently, there are seven (7) amicus curiae expected to file briefs, six of which favor the lender's position. The court sitting en bane should receive a broad view on this issue that will undoubtedly affect not only homeowners but associations as well.  

Brief
Status:
District Court of Appeal's Opinion
CAI Amicus Brief Author:
 Matthew Estevez, Matthew Estevez, P.A. 
CAI Amicus Brief Review Committee: Robert Diamond, Esq; Mary Howell, Esq.  (California), Stephen Marcus, Esq. (Massachusetts), Laurie S. Poole, Attorney at Law (California), and Steven Sugarman, Esq. (Pennsylvania)

August 2015

The Travelers Property Casualty Company v. USA Container Co. (New Jersey)

CAI holds the position that USA Container's inadvertent faulty workmanship constitutes an “occurrence” (an accident or unintentional harm) inasmuch as insurers frequently take that position that there is no “occurrence” because the coverage policy was not intended to provide coverage where liability arises from the breach of contract or faulty workmanship, regardless of whether harm/damage was intended.

For condominium associations involved in transition litigation, obtaining coverage through the general contractors CGL policy may be the only means of obtaining a meaningful remedy for construction defects. Many courts have determined that Weedo v. Stone-E-Brick compels a no “occurrence” finding, defeating coverage regardless of whether coverage would be defeated by a policy’s exclusions, and notwithstanding that contractor negligence would appear to fall within the ordinary meaning of an “occurrence.” Compounding the collectability problem, some courts have adopted Weedo’s narrow view of an “occurrence.” USA Container obtained a favorable coverage determination which found that there was an “occurrence,” notwithstanding Traveler’s position that there was no “occurrence” pursuant to Weedo.

Brief: Pending
Prior Ruling: Lower Court Decision
Status: Pending
CAI Amicus Brief Author: Traci Rea, Esquire and Jay Levin, Esquire
CAI Amicus Brief Review Committee: Robert Diamond, Esq; Tom Moriarty, Esq; Jennifer Loheac, Esq; David Ramsey, Esq; Gary Daddario, Esq.

Parker Estates Homeowners Association v. Pattison (Washington State)

The Court of Appeals will decide whether this association’s governing documents and the Washington Non-Profit Corporation Act provide board members with the authority to continue in their positions on the board and to fill vacancies in the board as a result of a failure to achieve quorum at Association meetings.

The plain language of the Nonprofit Act provides an opportunity for the board of a corporation to continue managing and administering the corporation even if members fail to participate in meetings and voting. The Trial Court’s interpretation of this language leaves the corporation without a governing entity to make and implement decisions on behalf of the corporation for any period of time during which a quorum of the members cannot be achieved. If boards are prohibited from taking action on behalf of the corporation during that time, the corporation is incapable in conducting its daily business activities. For a homeowner’s association like Parker Estates, this means there would be no one authorized to address immediate needs like consulting with professionals, renewing insurance policies, arranging for necessary maintenance and repairs, paying bills, and collecting assessments from owners for shared expenses.

Brief
Prior Ruling: Lower Court Decision
Status: Pending
CAI Amicus Brief Author: Ken Harer, Esquire
CAI Amicus Brief Review Committee: Robert Diamond, Esq; Henry Goodman, Esq; Mary Howell, Esq; James Strichartz, Esq; Steven Sugarman, Esq.

June 2015

MARK and RONDA RONES, Debtors. Case No. 14-35899 | Whispering Woods Association (New Jersey)

The debtors are owners of a unit located within the association. The owners failed to pay their assessments and a Notice of Lien was filed by the association in the amount of $18,761.76. After three prior failed attempts to confirm a Chapter 13 plan, the debtors filed this Chapter 13 bankruptcy on December 30, 2014, proposing payment in full of $1,494 of that lien with the balance treated as unsecured debt in the plan. The $1,494 represents the statutory six-month priority over the mortgage as codified under state law.

The debtors argue that the unsecured portion is subject to modification while the association argues that the entire lien is secured and thus ineligible for modification pursuant to the anti-modification provisions of the Bankruptcy Code. The Association is consistent with precedent – that so long as there is security in the primary residence of the debtors, the entire lien is protected from modification. The court correctly held that the condominium lien was a security interest, created by the recording of the master deed and made effective upon the acceptance of a unit deed. However, the court incorrectly analyzed the lien in determining that the lien was still not protected by the anti-modification clause, which has the effect of categorizing the lien as both a security interest and a statutory lien, something that Congress has prohibited.

The issue is one of both local and national consequence as the decision is the first in the nation to determine that condominium assessment liens are eligible to be stripped off as wholly unsecured liens despite being classified as security interests in Chapter 13 cases.

Brief
Prior Ruling: Lower Court Decision
Status: District Court Opinion
CAI Amicus Brief Author: Steven G. Mlenak, Esquire
CAI Amicus Brief Review Committee: Robert Diamond, Esq; Tom Moriarty, Esq; Karyn Kennedy Branco, Esq; Jennifer Loheac, Esq; Jim Strichartz, Esq.


Metropolitan Homes v. Vallagio at Inverness Residential (Colorado)

CAI previously filed an amicus brief in this same case back in October 2014. The case has now been directed to the Colorado Supreme Court and a follow up brief has been filed on behalf of the association. The Vallagio at Inverness development is a 197-unit condominium community in Arapahoe County, Colorado. It is suffering from serious construction defects, which it lacks the financial means to repair, and which it has attempted to address by filing a construction defect lawsuit against its developer. The developer filed a motion to compel arbitration in the trial court, arguing that the purported declaration amendment removing its arbitration provisions was invalid because the developer did not consent to the amendment.

The Association argued that, as a matter of law, the developers consent was not required to effect the declaration amendment because Colorado’s Common Interest Ownership Act prohibits any declaration provision purporting to give a declarant a unilateral right to control the Association over turnover. The Association also argued, because it is not a party to the individual unit owner purchase agreements, it cannot be bound by arbitration provisions in such agreements.

The trial court agreed with the association’s arguments, but the appeals court overturned that ruling and sided with the developer. The association has appealed to the Colorado Supreme Court. The developer makes the same arguments in the Supreme Court as in the appeals and trial court. The association’s arguments on appeal are also the same arguments made in the prior courts.

Brief
Prior Ruling: Lower Court Decision
Status: Colorado Supreme Court Opinion 
CAI Amicus Brief Author: Jeffrey P. Kerrane, Esquire
CAI Amicus Brief Review Committee: Robert Diamond, Esq; Stephen Marcus, Esq; Jennifer Loheac, Esq; Damien Bielli, Esq; Steven Sugarman, Esq; Gary Kessler, Esq.

May 2015

Walworth State Bank v. Abbey Springs Condominium Association (Wisconsin)

This brief request addresses the case of a lender, who owned a unit as a result of a foreclosure, filed suit to recover $13,000 that it was required to pay in order for its purchaser to use recreational equipment that was owned or controlled by the Association. The recreational equipment was not common element and prior to the bank even lending on the unit years earlier, the association had adopted a policy that the assessments had to be paid to use the recreational equipment. The association utilizes the policy to manage the use of its assets and facilities, which are oversubscribed. In this case, the bank argues that this policy runs afoul by resurrecting assessments previously wiped out or eliminated through foreclosure and that denial of the use of recreational facilities to a new unit owner affects the quality of the unit’s title or marketability.

This case requires the Court to interpret certain provisions of Chapter 703 of the Wisconsin Statutes. Condominium associations may acquire and hold real property, and the board of directors for an association has the right to make policies for the association, including the requirements for the use of association-owned assets. Like Abbey Springs, many other condominium associations throughout Wisconsin and the United States have recreational facilities and other assets owned by the association, which facilities and assets are not common elements and which the boards of those associations must have the authority to control.

Brief
Prior Ruling: Lower Court Decision
Status: Pending
CAI Amicus Brief Author: Daniel Miske, Esquire
CAI Amicus Brief Review Committee: Robert Diamond, Esq; Richard Ekimoto, Esq; Stephen Marcus, Esq; Lara Anderson, Esq; Gary Kessler, Esq; Marc Markel, Esq.

March 2015

1010 Lake Shore Association vs. Deutsche Bank (Illinois)

This case addresses the interpretation and application of the final sentence in Section 9(g)(3) of the Illinois Condominium Property Act. 9(g)(3) provides: The purchaser of a condominium unit at a judicial foreclosure sale, or a mortgagee who receives title to a unit by deed in lieu of foreclosure or judgment by common law strict foreclosure or otherwise takes possession pursuant to court order under the Illinois Mortgage Foreclosure Law, shall have the duty to pay the unit's proportionate share of the common expenses.

The argument made by the association’s attorneys was that where Deutsche Bank purchased the unit at a judicial foreclosure sale, which sale was confirmed, and failed to make payment of assessments for more than two years, Deutsche Bank had failed to “confirm the extinguishment” of the association’s lien for pre-foreclosure assessments. A majority of the First District Appellate Court agreed with the association. The judgment in this case included approximately $43,000 in pre-foreclosure assessments. While the judgment itself was positive for the association, there is a bigger benefit to the community association industry at large. Namely, the banks (and foreclosure purchasers) will likely come forward more readily and rightfully pay their assessments moving forward.

Brief
Prior Ruling: Appeals Court Modified Opinion
Status: Supreme Court Ruling for CAI's Position
CAI Amicus Brief Sponsor: David Bloomberg, Esq.
CAI Amicus Brief Review Committee: Robert Diamond, Esq; Tom Moriarty, Esq; Lara Anderson, Esq; James Strichartz, Esq; Damien Bielli, Esq.

February 2015

Zgabay v. NBRC Property Owners Association (Texas) ​

This case addresses a short-term rental case on appeal at the Third Court of Appeals in Austin, Texas. The trial court held correctly that a use restriction prohibiting anything other than “single family residential use” unambiguously prohibits short-term rentals. The trial court’s rationale was that a short-term rental is not a residential use because the short-term tenant does not have the requisite intent to remain.

Many community associations are now having to deal with transient housing uses and the deleterious effects such uses have on residential neighborhoods. Given that many associations are governed by restrictive covenants adopted prior to short-term rentals becoming popular, and given that those covenants usually require a super-majority to amend to be more specific, an appellate level decision affirming that the covenants as they stand prohibit this type of nonresidential activity would be beneficial to community associations throughout Texas.

The importance of this ruling has strong ramifications for the interpretation of covenants that are created for residential purposes and then leased out for short periods of time by the owner. The lower courts have held these short term rentals – often just a few days in length – to not be a residential purpose but more commercial.

Brief
Prior Ruling: Lower Court Decision
Status: Pending
CAI Amicus Brief Author: Darryl, W. Pruett, Esq.
CAI Amicus Brief Review Committee: Robert Diamond, Esq; Richard Ekimoto, Esq; Steven Sugarman, Esq; Gary Kessler, Esq; Jennifer Loheac, Esq.

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