Sunchase IV Homeowners Association, Inc. and Board v. David Atkinson, Cause No. 20-0682 (Supreme Court of Texas)
The Sunchase IV Homeowners Association and its Board (“Petitioners") were sued in a state district court in south Texas by the owner of a condominium unit regarding a dispute over repairs to the unit and to the common areas. After much litigation and a two-week jury trial, Petitioners prevailed – obtaining favorable declaratory relief from the trial court and favorable jury findings on all of the unit owner's contract and tort claims. The trial court signed a final judgment incorporating the jury's findings and awarding Petitioners their attorney's fees of $135,029.94, pursuant to Texas Property Code § 82.161. On appeal, the court of appeals largely affirmed the lower court's judgment – but it reversed the award of fees on the grounds that because (1) Petitioners were not “prevailing parties" under section 82.161(b) of the Texas Property Code, and (2) Petitioners' counterclaim for declaratory relief did not state an affirmative claim. We moved for rehearing and presented additional briefing to the court of appeals on this issue, but it denied rehearing.
Supreme Court of Texas Opinion
Court: Texas Supreme CourtTopic: Attorney's Fees Brief Author: Frank O. Carroll III, Winstead PC Filed: December 9, 2021
CAI Amicus Review Panel: Mr. Robert Diamond, Esq. (VA), Mr. Stephen Marcus Esq. (MA), Mr. David Ramsey, Esq., CCAL (NJ), Ms. Gabriella Comstock, Esq., CCAL (IL), Ms. Tiago Bezerra, Esq. (VA)
Deerlake Homeowners Association, Inc. v. Craig Brown (Georgia Supreme Court) This request is to have an Amicus Brief filed as a companion brief to a Petition for Certiorari to the Supreme Court of Georgia to reverse a decision of the Court of Appeals which, if left standing, will be harmful to all of the nearly 11,000 (or more) community associations in the State of Georgia. A copy of the Opinion of the Court of Appeals is attached for reference. By way of further factual detail, Deerlake Homeowners Association, Inc. (hereinafter the “Petitioner" or “Association") is a Georgia non-profit corporation duly authorized to enforce the covenants for the community commonly known as the Deerlake Community (hereinafter the “Community"), in accordance with the Amended and Restated Declaration of Covenants, Conditions, and Restrictions for Deerlake, recorded in the Public Records of Forsyth County, Georgia, on September 20, 2002 Deed Book 2437, Page 624, et. seq., as amended from time to time (hereinafter the “Declaration"), the Bylaws of Deerlake Homeowners Association, Inc. (hereinafter the “Bylaws"), and the Deerlake Architectural Control Committee design and Maintenance Standards (hereinafter the “ACC Standards"). Pursuant to the Declaration and Bylaws, Petitioner is governed by the Georgia Nonprofit Corporation Code (hereinafter the “Code") and the Property Owners' Association Act O.C.G.A. § 44-3-220, et. seq., (hereinafter the “Act"). Craig Brown (hereinafter the “Respondent" or “Owner") is the record title owner of a parcel of real property known as 595 Fawn Run, Alpharetta, Georgia 30005 (hereinafter referred to as the “Subject Property"). The Subject Property is located within the Community. The Respondent is an “Owner" as defined by the Declaration. Both the Subject Property and the Respondent, by virtue of his ownership interest in the Subject Property, are subject to all terms, conditions, and requirements of the Declaration, Bylaws, ACC Standards, the Code and the Act. The Petitioner is responsible for, among other things, the governance and maintenance of the Community, as more specifically described by the Declaration, Bylaws and ACC Standards, and is authorized to enforce the Declaration and other governing documents of the Petitioner in the manner as more particularly authorized by the Declaration. On February 11, 2020, Petitioner filed suit against the Respondent for ongoing violations at the Subject Property, fines relating to the violations, unpaid assessments, foreclosure of lien pursuant to O.C.G.A. § 44-3-232(a) and attorney's fees. Specifically, the ongoing violations as set forth in the Complaint were failing to maintain, repair, or replace all broken windows on the Subject Property; failing to maintain the landscaping on both the front and back of the Subject Property; and by failing to secure the home from squatters (hereinafter collectively referred to as the “Maintenance Violations") pursuant to the Paragraph 14(b) of the Declaration and Section 4.11 of the ACC Standards. The Petitioner sought injunctive relief from the Trial Court ordering the Respondent to cure the Maintenance Violations. The Verified Complaint also sought attorney's fees pursuant to both the Act (O.C.G.A. § 44-3-232(b)) and O.C.G.A. § 13-6-11. On February 11, 2020, the Petitioner filed a verified complaint against the Respondent for ongoing violations of covenants running with the land contained in the Declaration at the SubjectProperty, fines relating to the violations, unpaid assessments, foreclosure of lien pursuant to O.C.G.A. § 44-3-232(a) and attorney's fees. Respondent defaulted on the Complaint, which alleged everything that was needed to lay a prima facie case under the law that existed at the time it was pled for all claims therein, including for injunctive relief for breach of covenant running with the land. However, following a hearing at which Respondent did not appear, the trial court entered a Final Order and Judgment granting the Petitioner's motion for default judgment, but denied the injunctive relief sought the Petitioner. Further, the Final Order and Judgment awarded the Petitioner only $1,000 in attorney's fees and costs1 and although granted foreclosure of the statutory lien, failed to include the required language to pursue foreclosure pursuant to O.C.G.A. § 44-3-232. On March 16, 2021, the Petitioner appealed the Final Order and Judgment regarding the denial of the injunctive relief, the attorney's fees awarded and the failure to include the required foreclosure language. On April 27, 2021, Respondent filed his Appellee Brief and on May 17, 2021, Petitioner filed its Appellant's Reply Brief. On October 26, 2021, the Court of Appeals entered its decision which held that the trial court did not err when it denied Petitioner's injunctive relief, vacated the trial court's award of attorney's fees and costs for further proceedings and clarification, and remanded the matter back to the trial court to clarify that it was an order for foreclosure pursuant to O.C.G.A. § 44-3-232(c). (hereinafter the “Opinion"). This Opinion not only ignored certain Georgia Supreme Court case precedent, as well as its own precedent, which mandated a different result, but also creates a very problematic precedent that will have undoubtedly have dangerous and catastrophic results, as more thoroughly explained herein. For these reasons, Petitioner filed its Motion for Reconsideration on November 4, 2021, and on November 11, 2021, the Court of Appeals denied Petitioner's Motion. Now, Petitioner is filing a Petition for Writ of Certiorari in the Supreme Court of Georgia in regard to the Court of Appeals erroneous Opinion and denial of Petitioner's Motion for Reconsideration. Amicus Brief Court: Georgia Supreme CourtTopic: Remedies at law Brief Author: Jason LoMonaco, NowackHowardFiled: December 10, 2021
CAI Amicus Review Panel: Mr. Robert Diamond, Esq. (VA), Mr. Stephen Marcus Esq. (MA), Mr. Henry Goodman, Esq., CCAL (MA), Ms. Karyn Kennedy Branco, Esq., CCAL (NJ), Ms. Melissa Francis, Esq. (MI), Mr. Daniel Heaton, Esq. (CA)
The basis for this legal action arose when the Defendants-Appellants, the owners of a lot within the Belmont subdivision installed solar panels on the front roof of their home, which faced a public street. The Defendants failed to submit a request and obtain approval from the Architectural Review Committee ("ARC") as required by the Declaration prior to such installation. The Declaration provides for architectural control and establishes an ARC. Section 3(a) of Article XI of the Declaration states, "The ARC shall have the right to refuse to approve any Plans for improvements which are not, in its sole discretion, suitable for the Properties, including for any of the following: (i) lack of harmony of external design with surrounding structures and environment. and (ii) aesthetic reasons. Each Owner acknowledges that determinations as to such matters may be subjective and opinions may vary as to the desirability and/or attractiveness of particular improvements." The Declaration limits the types of “Improvements" an owner can install without first obtaining ARC review and approval. While solar panels are not specifically mentioned in the Declaration as an Improvement requiring ARC review and approval, solar panels do fall within the Declaration's definition of an "Improvement" and therefore required approval prior to installation.When Belmont discovered the violation, it sent the Defendants notice of architectural violation and requested submission of an architectural request. The Defendants submitted a request after the fact and that request was denied by the ARC based on the finding that solar panels installed on the front roof of the home could be seen from the road. This denied location is a statutorily specified location in which solar panels may be prohibited as provided for in N.C. Gen. Stat. § 22B-20(d), the exception afforded to the general rule provided in N.C. Gen. Sat. § 22B- 20(b). Additionally, the ARC had rejected at least four (4) other applications to install solar panels from other homeowners in the community on the same grounds that they are inconsistent with the plan and scheme of development at Belmont. Therefore, the ARC exercised its powers in making its decision in line with a consistent policy and within the scope of N.C. Gen. Stat. § 22B-20(d).The lawsuit was initially filed in Wake County Superior Court (19 CVS 4245) in April of 2019 by Belmont after the Defendants refused to remove the solar panels or move them to the rear of the roof as requested by the ARC. The trial court granted the Association's Motion for Summary Judgment. Defendants appealed to the North Carolina Court of Appeals, and the Court of Appeals affirmed the decision of the trial court. The main issue at the trial level and the primary issue on appeal is whether the architectural control restrictions in the Belmont Declaration are "deed restrictions which would prohibit the location of solar panels" as that specific verbiage is used in N.C. Gen. Stat.§ 22B-20(d), which regulates deed restrictions and covenants on solar collectors. Defendants-Appellants would have the court declare that a Declaration must specifically call out the required location for solar panels to qualify for the statutory exception, rather than allow the architectural control covenants requiring approval by an ARC to stand for such exception.The North Carolina Court of Appeals heard the case without oral argument. On 18 May 2021, the North Carolina Court of Appeals, in a 2-1 decision, affirmed the trial court's judgment in favor of the Association. The Defendants appealed to the North Carolina Supreme Court, therefore jurisdiction now rests with the North Carolina Supreme Court and the amicus brief would be filed in the North Carolina Supreme Court.This is a case of first impression in the state of North Carolina. It is generally understood that all legal costs for Defendants-Appellants have been paid by solar industry concerns. Solar industry interests have also paid tens of thousands of dollars of fines that have been levied against Defendants as a result of the unapproved solar panel installation. Friends of the court filing briefs in support of the Defendants-Appellants are all vested in supporting a very narrow statutory interpretation with the intent of allowing unfettered installation of solar panels. Similar (if not identical) industry interests unsuccessfully lobbied a bill during the 2021 North Carolina legislative session to eliminate the statutory exceptions for restrictive covenants which would allow control over solar panel placement. CAI-NC's LAC was active in successfully opposing that bill. The prevailing scheme of architectural control, as stated in the vast majority of CCR's nationwide, is directly implicated by the decision in this case, as concerns the ability of community associations and their ARCs to review and approve the location of satellite dishes. This is explained in more detail below in Section II regarding importance of issue to the development of community association law. Additionally, the plethora of amicus briefs filed in support of the homeowners' position indicate a significant commitment level to limit the ability of community associations to exercise covenanted control in the solar panel arena. While communities may differ on their appreciation or intolerance of the aesthetics of solar panel, the impact of this decision is to preserve that control that is vested in the association, rather than legislating a pre-determined outcome and taking all control away from the individual community association.
Amicus Brief Court: North Carolina Supreme CourtTopic: Solar Panel and Association Covenants Brief Author: Harmony W. Taylor, Esq., Law Firm Carolinas Filed: October 4, 2021
CAI Amicus Review Panel: Mr. Robert Diamond, Esq. (VA), Mr. Stephen Marcus Esq. (MA), Mr. Thomas Moriarty, Esq., CCAL (MA), Ms. Mary Howell, Esq., CCAL (CA), and Ms. Lydia Linsmeier, Esq. (AZ)
CAI approved and filed an amicus brief in this original matter in the Alabama Supreme Court in April of 2020. On June 30, 2021, the Alabama Supreme Court issued an opinion reversing and remanding the case for further proceedings. The opinion consists of four different writings indicative of conflict within the Court. The primary opinion holds that reformation was not an appropriate remedy because the developer did not violate the Act and/or that a trial court should not disturb the terms of a recorded declaration based upon the complaints of a single unit owner (Montgomery). The primary opinion will result in substantial judicial changes in the Act as the result of the Court misapprehending the existence and importance of constraints within the Act on developers as to developer rights, creation of units, and use restrictions; the consumer protection purpose of the Act; the relationship of the offering statement to the obligations of a developer in protecting unit buyers; and that the Association has standing to bring claims on behalf of all Unit owners. This opinion leaves the Association in an untenable position with a developer that the Act was designed to protect against. The remand directs the trial court to address the alternative claims for damages and injunctive relief. Neither of those remedies will resolve the existing conflicting provisions in the declaration or how the Association is to administer the use of commercial units with a condominium restricted exclusively to single family residential use. The association has now filed an application for rehearing.
Phoenix on the Bay II is a condominium created in 2007 ("Condominium") pursuant to the Alabama Uniform Condominium Act of 1991 ("Act") found at Ala. Code§§ 35-BA-101, et seq. (2014 Repl. Vol.). The Condominium is situated in a resort community on the Alabama Gulf Coast and consists of a free-standing house and one eight-story building with an attached parking garage, marina, and other amenities common in a coastal condominium. The Developer of the Condominium was three individuals, who have developed 18 other condominiums. Through "Affiliates," Developer develops, constructs, sells Units pre construction, and provides post completion rental and management services. Developer formed the Association in 2007 simultaneously with the creation of the Condominium to maintain, operate, and manage the Condominium common elements pursuant to the Act. The Association was managed by an Affiliate under a written Management Agreement from inception until May of 2015. Montgomery, along with her spouse, contracted with Developer to buy Unit 2G1 pre-construction. She has owned Unit 2G1 since shortly after completion of the Condominium. She has been President of the Association since May of 2015.
Undisputedly, Developer represented to pre-construction purchasers and all permitting agencies that the Condominium was restricted to single family use and would contain only 104 residential Units. An offering statement, along with all the exhibits thereto, inclusive of a proposed declaration with plats and plans, is a mandatory statutory disclosure required by Article 4 of the Act pursuant to which a developer must truthfully disclose the number of units that can exist within a condominium and any non-residential uses that could be made of units. Developer's offering statement and the proposed declaration, plats and plans attached thereto represented that the Condominium was to consist of 104 Units; that the Condominium was restricted to single family residential use; that ownership of the common elements was allocated to only 104 Units; and that any areas to be reserved were as indicated on the plats and plans attached thereto. The plats and plans did not indicate any reserved areas.
Despite the offering statement representations, Developer undisputedly intended at the time it issued the offering statement to ensure that its Affiliates could operate in the Condominium in perpetuity. Without any disclosure, Developer made changes to the Condominium building and declaration to convert common area to four commercial Units and included illegal easements for the purpose of reserving areas in the building for Affiliates to operate its condominium rental management business or such "other business" in perpetuity. Developer's conduct violated the Act in the following ways: the lack of timely and truthful disclosure violated Article 4; the changes purporting to create the four commercial Units shortly before recording the declaration failed to comply with Article 2 and caused internal conflicts within the document; the changes in the building resulted in violations of Article 3 regarding operations of the Association; and negated the Section 35-SA-305 power of an association to terminate service contracts entered into by a declarant in an effort to prevent a declarant from creating "sweetheart transactions" benefitting itself or its affiliates.
Developer thus effectively thwarted the ability of the Association to contract with a third-party management agent of its choice. Since Developer constructed critical infrastructure that a management agent must necessarily utilize and maintain to provide management services for the Condominium in these areas and claimed ·to reserve exclusively to the use of Developer either by illegal easements or as claimed commercial Units, it is practically impossible for the Association to hire another management agent with Developer/Affiliates occupying the areas from which a management agent would naturally stage its operations. To alter the status quo, the Association would be forced to recreate the spaces and relocate infrastructure needed for the operation and management of the Condominium at significant expense and further loss of common element space to the detriment of the Condominium as a whole. Further, Developer's conduct resulted in unresolvable conflicts within the declaration that make it impossible for the Association to efficiently and consistently manage and operate the Condominium. For example, the creation of commercial Units contradicts the residential use restriction imposed upon all Units; thus, the Association is uncertain in its ability to regulate uses of the property.
Litigation was filed shortly after termination of the Management Agreement by Affiliate asserting tort claims against Association and Montgomery for entering the check-in desk area. The Association/Montgomery counterclaimed and sued Developer and Affiliate real estate company pursuant to the Act, common law fraud, and equity seeking equitable relief in the form of declaratory judgment, injunction, and reformation that the four areas were common areas and not commercial units, that the Condominium was restricted to residential use only, and that the 2015 deed purporting to convey the spaces as commercial Units was a nullity. After a bench trial, the trial court ruled in favor of the Association and Montgomery and granted equitable relief that struck the provisions from the recorded declaration purporting to create perpetual easements or commercial Units, declared the 2015 deed a nullity, and permanently enjoined Developer/Affiliates from attempting to assert any rights appertaining the four areas at issue.
Brief Author: Steven Casey, Esq., of Jones Walker LLP
CAI Amicus Review: Amicus Committee Co-Chairs: Mr. Robert Diamond, Esq. (VA), Mr. Stephen Marcus (MA)
This case stems from a 2014 lawsuit in the Superior Court of the State of Washington for the County of Snohomisi. A homeowner, Matt Surowiecki Sr, sued the community association, Hat Island Community Association, in which he owns 270+ lots, both individually as a lot owner and derivatively on behalf of the association, arguing that the community association was in violation of their governing documents for failing to levy assessments on an equitable basis and a number of other claims, which were largely dismissed via summary judgment. The trial court eventually dismissed Surowiecki's claim and cited the business judgment rule for their reasoning. Surowiecki then appealed the decision to the Washington Court of Appeals, Division One who reversed the trial court decision “that the business judgment rule limits only personal liability of individuals" and that the trial court applied judgment for a board absent evidence of fraud, dishonesty, or incompetence (ie. Failure to exercise proper care, skill and diligence).
Now, both Hat Island Community Association and Surowiecki are seeking review of the Court of Appeals opinion. HICA sought review arguing that trial court properly applied the law in Washington, giving deference to a board's discretionary decision absent evidence of fraud, dishonesty, or incompetence (ie. Failure to exercise proper care, skill and diligence.) Surowiecki sought review arguing that the court of appeals inappropriately limited the issues on remand to a review of board's decision for its “reasonableness" and “whether a homeowner association's decision to adopt any particular assessment structure is reasonable depends not on the substance of the decision but rather on the “process employed and the facts considered." The Washington Supreme Court granted review of the business judgment rule issue and the assessment claim.
The Court of Appeals holding that the business judgment rule applies only to limit the liability of individual directors calls that fundamental rule into question and creates significant liability for all Washington community associations. It could set bad precedent on a national level regardless of the state law being applied. The two principal issues addressed in the brief are whether the business judgment rule applies to the association (and not just the board members) and whether the business judgment rule requires that the boards' decisions be “reasonable."
Supreme Court of the
State of Washington Opinion – February 2022
Supreme Court of the State of Washington - Motion for Reconsideration Denied
Court: Washington State Supreme Court
Topic: Business Judgment Rule
Brief Author: Anthony Rafel, Esq., CCAL and Terry Leahy, Esq., CCAL
Filed: April 12, 2021
CAI Amicus Review Panel: Mr. Robert Diamond, Esq. (VA), Mr. Stephen Marcus Esq. (MA), Mr. Ed Allcock, Esq., CCAL (MA), Mr. Steven Sugarman, Esq., CCAL (PA), Mr. Anthony Rafel, Esq. CCAL (WA), Mr. Elia Ellis, Esq., and Mr. Russell Robbins, Esq. (FL)