Craig D. Severance and Catherine Severance v. The Pleasant View Homeowners Association, Inc. ( 2018 )

FILED
Feb 27 2018, 8:41 am
CLERK
Indiana Supreme Court
Court of Appeals
and Tax Court
ATTORNEY FOR APPELLANT ATTORNEYS FOR APPELLEE
Peter S. Kovacs Jeffrey M. Bellamy
Peter Kovacs Law PC Stephen R. Donham
Fishers, Indiana Thrasher Buschmann & Voelkel, P.C.
Indianapolis, Indiana
IN THE
COURT OF APPEALS OF INDIANA
Craig D. Severance and February 27, 2018
Catherine Severance, Court of Appeals Case No.
Appellants-Defendants/Cross-Appellees, 29A02-1708-PL-1695
Appeal from the Hamilton Superior
v. Court
The Pleasant View Homeowners The Honorable Jonathan M. Brown,
Judge
Association, Inc.,
The Honorable Daniel J. Pfleging,
Appellee-Plaintiff/Cross-Appellant Judge
Trial Court Cause No.
29D02-1504-PL-2764
Crone, Judge.
Court of Appeals of Indiana | Opinion 29A02-1708-PL-1695 | February 27, 2018 Page 1 of 10
Case Summary
[1] The Pleasant View Homeowners Association, Inc. (“the HOA”), filed a
complaint to enjoin Craig and Catherine Severance from using their residential
lot in a manner inconsistent with Pleasant View subdivision’s covenants and
restrictions by parking commercial vehicles, limousines, on their lot or in the
street in front of and adjacent to their home located in the subdivision.
Following an evidentiary hearing, the trial court issued a preliminary injunction
prohibiting the Severances from continuing to park the vehicles in such a
manner. However, the trial court subsequently declined to enter a permanent
injunction based upon the Severances’ affirmative defense that the HOA lacked
the authority to sue the Severances for an injunction because the HOA’s board
of directors was not properly constituted or operating in accordance with its
own rules of corporate governance. The court set a future date for a hearing on
the Severances’ claimed damages.
[2] Prior to the trial court’s entry of a final judgment, the HOA directed the trial
court to the passage of new statutory law regarding the governance of Indiana
homeowners associations. The HOA claimed that the new law nullified the
Severances’ affirmative defense regarding the HOA’s authority to seek an
injunction. The trial court held a hearing and thereafter entered its final
judgment determining that it could not reconsider its prior denial of the
permanent injunction and that the Severances were entitled to no damages.
The Severances now appeal the trial court’s denial of their request for damages.
The HOA cross-appeals the trial court’s denial of its request for a permanent
Court of Appeals of Indiana | Opinion 29A02-1708-PL-1695 | February 27, 2018 Page 2 of 10
injunction. Concluding that our resolution of the cross-appeal is dispositive, we
reverse and remand to the trial court for further proceedings.
Facts and Procedural History
[3] The HOA is an Indiana not-for-profit corporation with the primary purpose to
manage the residential subdivision known as Pleasant View in Hamilton
County. The Severances are the owners of record of a lot within that
subdivision. The affairs of the HOA and its members are governed by three
documents: (1) the Declaration of Covenants, Conditions and Restrictions for
Pleasant View (“the Covenants and Restrictions”); (2) the Articles of
Incorporation; and, (3) the By-Laws of the HOA (“the Bylaws”). The
Covenants and Restrictions provide in relevant part,
Section 10.4. Parking and Prohibited Vehicles.
(a) Parking. Vehicles shall be parked only in the garages or on
the driveways, if any, serving the Lots or in appropriate spaces or
designated areas in which parking may be assigned and then
subject to such reasonable rules and regulations as the Board may
adopt. Garages shall be used for parking of vehicles and no other
use or modification thereof shall be permitted which would
reduce the number of vehicles which may be parked therein
below the number for which the garage was originally developed.
The [HOA] may designate certain on-street parking areas for
visitors or guests subject to reasonable rules.
….
(b) Prohibited Vehicles. Commercial vehicles, vehicles with
commercial writing on their exteriors, [and] vehicles primarily
used or designed for commercial purposes … shall be parked
Court of Appeals of Indiana | Opinion 29A02-1708-PL-1695 | February 27, 2018 Page 3 of 10
only in enclosed garages or areas, if any, designated by the
Board.
Appellants’ App. Vol. 2 at 64-65.
[4] On April 6, 2015, the HOA filed a complaint for injunctive relief against the
Severances alleging that the Severances operated a commercial limousine
business at their lot and parked commercial vehicles on their lot or in the
adjacent street in violation of the Covenants and Restrictions.1 Following an
evidentiary hearing, the trial court issued an order granting a preliminary
injunction against the Severances. The court found that the Severances had
violated the Covenants and Restrictions and enjoined them from parking their
business vehicles in the subdivision unless stored indoors. The trial court
ordered the HOA to maintain bond in the amount of $2500 to cover any
estimated damages incurred by the Severances “to the extent of an entry of a
wrongful preliminary injunction.” Id. at 127. The court further stated, “[i]f this
injunction is later deemed improper, [the HOA] and [the Severances] shall have
an opportunity to dispute the proper amount of damages at that time.” Id.
[5] On December 4 and 28, 2015, the Severances objected to the preliminary
injunction based on alleged irregularities in the election and/or appointment of
the HOA’s board of directors. In sum, the Severances argued that the board of
directors was without authority to exercise corporate power (including the
1
The record indicates that the Severances own and operate Indy Limo Transport LLC.
Court of Appeals of Indiana | Opinion 29A02-1708-PL-1695 | February 27, 2018 Page 4 of 10
power to sue for injunctive relief to enforce the Covenants and Restrictions) on
behalf of the HOA. On January 15, 2016, the Severances made a similar
argument by way of a counterclaim that was subsequently struck by the trial
court on the HOA’s motion. On March 16, 2016, the Severances filed a
“Request for a Hearing to Rule on all Pretrial Evidence” again arguing that the
board of directors was not properly constituted or operating within its own
Bylaws. The trial court took no action on the request.
[6] On July 1, 2016, the HOA requested a permanent injunction hearing. An
evidentiary hearing was held on August 4 and 31, 2016. On November 1, 2016,
the trial court entered its findings of fact, conclusions thereon, and order
declining to enter a permanent injunction. Specifically, the trial court
incorporated its findings of fact and conclusions thereon supporting its order of
preliminary injunction but then found and concluded in relevant part:
7. [The Severances] contend that the Directors of [the HOA] are
not legitimate and therefore cannot exercise the powers and
duties of [the HOA] because they were not installed according to
[the HOA’s] Bylaws.
8. The evidence received at the hearings support [the
Severances’] contention….
….
11. In short, [the HOA] is clearly a dysfunctional entity because
it has, and continues to operate outside of its Bylaws.…
12. [The HOA] seems to have strayed significantly from the
Court of Appeals of Indiana | Opinion 29A02-1708-PL-1695 | February 27, 2018 Page 5 of 10
language of the Bylaws. While the Directors’ testimony at the
Hearing describing the time and effort they devoted to ensuring
the operation of [the HOA] was laudable, this does not make it
legal according to the Bylaws. Volunteering is not a qualification
by itself to assume the mantle of director. The Court recognizes
the effort put forth [by the HOA], and [its] attempt in this
situation to remedy a nuisance. The limousines being park[ed]
on the streets of the subdivision merited the granting of the
preliminary injunction and could have possibly resulted in a
permanent injunction being issued, if there was a legally
constituted Board of Directors.
….
13. Because the [HOA’s] Board of Directors is not legitimate due
to the Directors neither being properly elected nor properly
appointed, they could not exercise the corporate powers found in
the [Covenants and Restrictions], Articles of Incorporation, or
Bylaws, including the power to file the instant lawsuit against the
Severances seeking to enforce the [Covenants and Restrictions].
Id. at 195-97. Accordingly, the trial court ordered the preliminary injunction
dissolved and declined to enter a permanent injunction. The trial court
scheduled a damages hearing for a later date.
[7] Shortly thereafter, the HOA held a special meeting in an attempt to cure its
corporate governance deficiencies. On December 1, 2016, the HOA filed a
motion requesting the trial court to reconsider its denial of the permanent
injunction. The HOA supported its motion with an affidavit informing the trial
court that a properly constituted board of directors was now in place and that
the HOA’s membership had voted to ratify and approve all prior actions of the
Court of Appeals of Indiana | Opinion 29A02-1708-PL-1695 | February 27, 2018 Page 6 of 10
board of directors, including institution of the current lawsuit. The trial court
denied the motion on December 22, 2016.
[8] A damages hearing was held on February 9, 2017, during which the Severances
argued that they were entitled to recover damages, specifically the attorney’s
fees they incurred in defending the injunction. Prior to the trial court issuing
any ruling regarding damages, the HOA filed a “Notice of Emergency Change
in Law and Request for Hearing” asking the trial court to reconsider its denial
of the permanent injunction, this time based on the passage of new legislation,
Indiana Code Section 32-25.5-3-11, regarding corporate governance for
homeowners associations. The HOA argued that the new legislation nullified
the Severances’ affirmative defense regarding the HOA’s authority to enforce
the Covenants and Restrictions. The trial court held a final hearing and on June
5, 2017, issued an order reiterating its prior denial of the permanent injunction
and further determining that the Severances were not entitled to recover
damages. This appeal and cross-appeal ensued.
Discussion and Decision
[9] Because we find it dispositive, we address only the HOA’s cross-appeal
challenging the trial court’s denial of its request for a permanent injunction
against the Severances based upon the trial court’s conclusion that the HOA
lacked the authority to enforce the Covenants and Restrictions due to
Court of Appeals of Indiana | Opinion 29A02-1708-PL-1695 | February 27, 2018 Page 7 of 10
irregularities in how the board of directors was constituted.2 Our review of the
convoluted procedural history in this case reveals that, prior to the entry of its
judgment on June 5, 2017, the trial court declined to entertain certain
arguments advanced by the HOA or consider certain legal authority or evidence
because the court genuinely believed that it could not “go back and reopen” and
consider the merits of its November 20163 order denying the permanent
injunction because that order was a final judgment. Id. at 19. This belief was
mistaken.
[10] It has long been recognized that a final judgment disposes of all issues as to all
parties, thereby ending the particular case and leaving nothing for future
determination. John C. & Maureen G. Osborne Revocable Family Tr. v. Town of
Long Beach, 78 N.E.3d 680, 692 (Ind. Ct. App. 2017) (citations and quotation
marks omitted), trans. denied. Indiana Appellate Rule 2(H) formalizes this
principle and “defines a judgment as a ‘final judgment’ if among other things, it
disposes of all claims as to all parties or the trial court determines in writing that
there is no just reason for delay and expressly directs entry of judgment” to
fewer than all the claims or parties pursuant to Indiana Trial Rule 54(B) or
56(C). Town of Ellettsville v. Despirito, 87 N.E.3d 9, 11-12 (Ind. 2017). Contrary
2
The Severances have filed a motion to dismiss the HOA’s cross-appeal claiming that the trial court’s
November 2016 order dissolving the preliminary injunction and denying the HOA’s request for a permanent
injunction constituted a final appealable judgment, and that the HOA’s failure to timely appeal that order has
deprived this Court of jurisdiction to consider the HOA’s challenge of that ruling. As we will explain further,
we disagree with the Severances and deny their motion to dismiss by separate order issued
contemporaneously with this decision.
3
Although the trial court refers to the date of its order as October 28, 2016, the actual date is November 1,
2016.
Court of Appeals of Indiana | Opinion 29A02-1708-PL-1695 | February 27, 2018 Page 8 of 10
to the trial court’s belief, its November 2016 order was not a final judgment
because it specifically reserved the issue of damages for future determination
and did not otherwise expressly direct entry of judgment as to fewer than all the
claims between these parties. No order of the trial court prior to the judgment
issued on June 5, 2017, finally disposed of all claims as to all parties.4
[11] It is well settled that a trial court has inherent power to reconsider an order or
ruling if the action remains in fieri, or pending resolution. Pond v. Pond, 700
N.E.2d 1130, 1135 (Ind. 1998). The trial court’s June 2017 judgment contains
erroneous findings and conclusions referencing the November 2016 ruling as a
final appealable judgment, thus limiting the issues available for the trial court’s
consideration. A judgment is clearly erroneous “if it applies the wrong legal
standard to properly found facts.” Johnson v. Wysocki, 990 N.E.2d 456, 460
(Ind. 2013). Because much of the trial court’s resolution of this case appears to
be hinged on its mistaken belief that it was precluded from considering the
merits of its prior order denying the permanent injunction, the appropriate
remedy is to reverse the trial court’s judgment and remand this case for an
evidentiary hearing to consider the merits of issuing a permanent injunction
4
Following the trial court’s November 2016 order dissolving the preliminary injunction and declining to
enter a permanent injunction against the Severances, the HOA filed what it called a “Motion to Correct Error
or in the Alternative Motion to Reconsider.” Appellants’ App. Vol. 2 at 199. Regardless, because there was
no final judgment, the HOA’s self-styled motion was in fact a motion to reconsider and, contrary to the trial
court’s conclusion here, its subsequent ruling on that motion could not itself be considered a final judgment
pursuant to Indiana Appellate Rule 2(H)(4). Guardianship of Hurst, No. 45A03-1612-GU-2790, 2018 WL
627290, at *2 (Jan. 31, 2018), opinion on reh’g; see Snyder v. Snyder, 62 N.E.3d 455, 458 (Ind. Ct. App. 2016)
(“motions to correct error are proper only after the entry of final judgment; any such motion filed prior to the
entry of final judgment must be viewed as a motion to reconsider).
Court of Appeals of Indiana | Opinion 29A02-1708-PL-1695 | February 27, 2018 Page 9 of 10
against the Severances based on the facts and circumstances as they stand today
and pursuant to current Indiana law.5 Accordingly, we reverse the trial court’s
June 5, 2017 judgment and remand to the trial court for proceedings consistent
with this opinion.
[12] Reversed and remanded.
Robb, J., and Bradford, J., concur.
5
On remand, we direct the trial court to consider Indiana Code Section 32-25.5-3-11, effective upon passage
on April 12, 2017, which protects the authority of homeowners associations by preventing collateral attacks
based upon specific board irregularities and nullifying affirmative defenses to covenant violations under
certain circumstances.
Court of Appeals of Indiana | Opinion 29A02-1708-PL-1695 | February 27, 2018 Page 10 of 10