Grooms Prop. Mgmt. ( 2022 )

IN THE COURT OF APPEALS OF NORTH CAROLINA
2022-NCCOA-488
No. COA22-49
Filed 19 July 2022
Mecklenburg County, Nos. 20 CVS 269, 20 CVS 300
GROOMS PROPERTY MANAGEMENT, INC., DELORES BOWDIDGE, YEVETTE
BOWDIDGE-JIMENEZ, PENNY LYNN CARROLL, YING DING, SHUO JIAO,
DIANNE R. EASON, and BARBARA TONEY, Plaintiffs,
v.
MUIRFIELD CONDOMINIUM ASSOCIATION and WILLIAM DOUGLAS
MANAGEMENT. INC., Defendants and Third-Party Plaintiffs,
v.
HOLLY MOORE and TC CORPORATE HOLDINGS, INC. f/k/a TRISURE
CORPORATION, Third-Party Defendants.
JENNIFER HAYES, Plaintiff,
v.
MUIRFIELD CONDOMINIUM ASSOCIATION, STANAGE ELLING, MICHAEL
HOWARD, LINDA KILGO, and CHARITY GUARD, Defendants.
Appeal by Defendant/Third-Party Plaintiff Muirfield Condominium
Association from an Order entered 27 August 2021 by Judge Carla Archie in
Mecklenburg County Superior Court. Heard in the Court of Appeals 7 June 2022.
GROOMS PROP. MGMT., INC. V. MUIRFIELD CONDO. ASS’N
2022-NCCOA-488
Opinion of the Court
Cranfill Sumner LLP, by Steven A. Bader and Patrick H. Flanagan, for
Defendant/Third-Party Plaintiff-Appellant Muirfield Condominium
Association.
Villmer Caudill, PLLC, by Bo Caudill, for Plaintiff-Appellee Jennifer Hayes.
No briefs filed by the remaining parties.
INMAN, Judge.
I. FACTUAL AND PROCEDURAL BACKGROUND
¶1 Defendant/Third-Party Plaintiff Muirfield Condominium Association
(“Muirfield”) is the condominium association for multiple buildings totaling around
50 units. Plaintiff Jennifer Hayes (“Ms. Hayes”) owns one of the condominium units
in Building 5, which was destroyed by fire on 19 December 2018.1
¶2 Complete exterior and interior repairs to Building 5 were estimated to cost
between $1.36 and $1.46 million. Muirfield, however, received only $933,421.00 in
insurance proceeds toward the repairs. On 29 October 2019, Muirfield’s board held
a special meeting where it voted not to obtain a loan to cover the remaining deficiency,
which included the completion of the units’ interior upfit.
1 Ms. Hayes’s suit was consolidated with a related case brought against Muirfield by
the remaining plaintiffs-appellees. Because this appeal concerns only Ms. Hayes’s claims for
relief, we omit discussion of the other parties’ claims except where necessary.
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¶3 On 10 January 2020, Ms. Hayes filed suit in Mecklenburg County Superior
Court against Muirfield and its directors for (1) declaratory relief, (2) violations of
Muirfield’s Declaration Creating Unit Ownership and Establishing Restrictions,
Covenants, and Conditions for Muirfield (the “Declaration”), (3) violations of Chapter
47A of our General Statutes, (4) breach of fiduciary duties, and (5) negligence.
Specifically, she contended Muirfield violated Chapter 47A as well as the Declaration
by failing to maintain the requisite insurance coverage on the buildings.
¶4 On 24 May 2021, Ms. Hayes filed a motion for partial summary judgment
seeking declaratory relief “that the Association must promptly repair and restore the
damage to Plaintiff’s condominium unit and the building in which Plaintiff’s unit is
situated,” as well as an injunction requiring Muirfield to repair her unit. Muirfield
maintained that the Declaration required it to insure only the building’s exterior and
that it had therefore complied with both the statute and its governing Declaration.
¶5 On 27 August 2021, the trial court granted Ms. Hayes’s motion for partial
summary judgment for declaratory relief but denied injunctive relief. Specifically,
the trial court ordered
[t]hat the Association’s failure to purchase insurance
sufficient to cover at least 80% of the replacement value of
Building 5 constituted a violation of the COA’s
declarations, covenants, and restrictions and Chapter 47A
of the N.C. General Statutes[,]
....
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[and] [t]hat the Association must comply with Chapter 47A
of the N.C. General Statutes, including but not limited to
N.C. Gen. Stat. § 47A-25, which provides that “damage to
or destruction of the building shall be promptly repaired
and restored by the manager or board of directors . . . using
the proceeds of insurance on the building for that purpose,
and unit owners shall be liable for assessment for any
deficiency,” . . . .
¶6 The trial court certified its order as a final judgment pursuant to Rule 54(b) of
our Rules of Civil Procedure. Muirfield filed notice of appeal 24 September 2021, and
Ms. Hayes noticed a cross-appeal four days later. Muirfield also filed a petition for
writ of certiorari on 23 March 2022, and Ms. Hayes filed a motion to dismiss
Muirfield’s appeal for lack of jurisdiction on 4 April 2022.2
¶7 On appeal, Muirfield argues the applicable provisions of the Declaration are
ambiguous regarding its coverage obligations, creating a genuine issue of fact that
could not be resolved by summary judgment. We disagree and affirm.
II. ANALYSIS
A. Appellate Jurisdiction
¶8 The parties disagree as to whether this Court has jurisdiction to review the
trial court’s interlocutory order granting partial summary judgment for Ms. Hayes
on fewer than all of her claims. An interlocutory order is subject to immediate review
2Muirfield has moved this Court to dismiss Ms. Hayes’s cross-appeal. Ms. Hayes did
not respond to that motion and did not file a brief in support of her cross-appeal. As a result,
we grant Muirfield’s motion to dismiss.
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if “the order or judgment is final as to some but not all of the claims or parties, and
the trial court certifies the case for appeal pursuant to N.C. Gen. Stat. § 1A-1, Rule
54(b), . . . [or] if the trial court’s decision deprives the appellant of a substantial right
which would be lost absent immediate review.” N.C. Dep’t of Transp. v. Page, 119
N.C. App. 730, 734, 460 S.E.2d 332, 334 (1995) (citations omitted). If an interlocutory
appeal does not fall within these two categories, we may nonetheless exercise our
discretion to review the appeal on the merits by writ of certiorari pursuant to Rule
21(a)(1) of the North Carolina Rules of Appellate Procedure. Midsouth Golf, L.L.C.
v. Fairfield Harbourside Condo. Ass’n, Inc., 187 N.C. App. 22, 26, 652 S.E.2d 378, 382
(2007).
¶9 Assuming, arguendo, that the trial court’s partial summary judgment order
was neither properly certified pursuant to Rule 54(b) nor affecting a substantial right,
we allow Muirfield’s petition for writ of certiorari in our discretion. See id.(“[A]ssuming arguendo that Plaintiff appeals from a nonappealable interlocutory
order, we elect to consider the appeal by granting Plaintiff’s conditional petition for
writ of certiorari.”).
B. Standard of Review
¶ 10 We review appeals from summary judgment orders de novo, meaning we
review the matter anew without restriction by the trial court. Midrex Techs., Inc. v.
N.C. Dep't of Revenue, 369 N.C. 250, 257, 794 S.E.2d 785, 791 (2016). The moving
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Opinion of the Court
party bears the burden of showing it was entitled to summary judgment as a matter
of law and that there is no genuine dispute as to any material fact. Jenkins v. Stewart
& Everett Theatres, Inc., 41 N.C. App. 262, 265, 254 S.E.2d 776, 778 (1979); N.C. Gen.
Stat. § 1A-1, Rule 56(c) (2021). We view the evidence in the light most favorable to
the non-moving party, giving them the benefit of all reasonable inferences. Jenkins
v. Lake Montonia Club, Inc., 125 N.C. App. 102, 104, 479 S.E.2d 259, 261 (1997).
¶ 11 Furthermore, “[i]nterpretation of the language of a restrictive covenant is a
question of law reviewed de novo.” Erthal v. May, 223 N.C. App. 373, 378, 736 S.E.2d
514, 517 (2012). “In construing restrictive covenants, the fundamental rule is that
the intention of the parties governs, and that their intention must be gathered from
study and consideration of all the covenants contained in the instrument or
instruments creating the restrictions.” Friends of Crooked Creek, L.L.C. v. C.C.
Partners, Inc., 254 N.C. App. 384, 389, 802 S.E.2d 908, 912 (2017) (citation omitted).
C. Interpreting the Unambiguous Declaration is a Question of Law
¶ 12 Muirfield argues the Declaration provisions are ambiguous and therefore the
trial court erred in granting Ms. Hayes partial summary judgment and concluding
Muirfield violated the Declaration and Chapter 47A by failing to procure coverage for
80 percent of the replacement value of Building 5. Specifically, Muirfield contends
that the word “building” only refers to the outside structure and not the interior
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units.3 We are not persuaded by these arguments because, when considered in the
context of the language in the entire Declaration, we conclude the word “building” is
not ambiguous.
¶ 13 Section 47A-24, in relevant part, requires condominium associations to, “if
required by the declaration, bylaws or by a majority of the unit owners, . . . obtain
insurance for the property against loss or damage by fire and such other hazards
under such terms and for such amounts as shall be required or requested.” N.C. Gen.
Stat. § 47A-24 (2021). Section 47A-25, in turn, states that “damage to or destruction
of the building shall be promptly repaired and restored by the manager or board of
directors, . . . using the proceeds of insurance for that purpose, and unit owners shall
be liable for assessment for any deficiency[.]” N.C. Gen. Stat. § 47A-25 (2021).
¶ 14 Thus, whether Muirfield violated Sections 47A-24 and -25 is determined by
whether Muirfield violated the terms of its Declaration.
¶ 15 This Court has previously held that the construction of unambiguous contract
3 Ms. Hayes argues that Muirfield waived its argument that the Declaration was
ambiguous because Muirfield did not use the word “ambiguous” at the hearing on Ms. Hayes’s
motions. At the hearing, however, counsel for the other plaintiffs in the consolidated case
conceded, “I think the parties would acknowledge there’s some ambiguity . . . .” Additionally,
counsel for Muirfield argued that it was not responsible for interior repairs—exactly what it
is arguing on appeal. Therefore, Muirfield “raised that specific issue before the trial court to
allow it to make a ruling on that issue,” and did not “swap horses between courts in order to
get a better mount [on appeal].” Regions Bank v. Baxley Com. Props., L.L.C., 206 N.C. App.
293, 298-99, 697 S.E.2d 417, 421 (2010) (citations omitted).
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terms, including the terms of a homeowners’ association declaration, presents a
question of law. Dep’t. of Transp. v. Idol, 114 N.C. App. 98, 100, 440 S.E.2d 863, 864
(1994); see also Shearon Farms Townhome Owners Ass’n. II, Inc. v. Shearon Farms
Dev., L.L.C., 272 N.C. App. 643, 649-51, 847 S.E.2d 229, 234-36 (2020) (observing that
a homeowners’ association declaration is interpreted “under ordinary contract
principles” and applying a declaration’s plain language on de novo review). A genuine
issue of material fact arises only when an ambiguity in a contract’s terms requires
the factfinder to discern the parties’ intent from the evidence. See Landover
Homeowners Ass’n. v. Sanders, 244 N.C. App. 429, 430, 781 S.E.2d 488, 489 (2015)
(“Where ambiguities exist in the language of a [homeowners association] declaration
which create an issue of material fact, the trial court erred in granting summary
judgment . . . .”).
¶ 16 Whether such an ambiguity exists in the first instance is a question of law for
this Court on de novo review. Bicket v. McLean Sec., Inc., 124 N.C. App. 548, 553,
478 S.E.2d 518, 521 (1996). For the reasons explained below, we hold that no
ambiguity exists here.
¶ 17 Section 20 of the Declaration provides:
(A) The following insurance coverage shall be maintained
in full force and effect by the Association covering the
operation and management of the Condominium Units and
Common Property:
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(1) Casualty insurance covering the building and all
improvements upon the land and all personal property
subject to this Declaration and any additions added by
amendment, except such personal property as may be
owned by the Condominium Unit Owners, shall be
procured in an amount equal to the maximum insurable
replacement value thereof (exclusive of excavation,
foundations, streets and parking facilities) as determined
annually by the insurance company affording such
coverage; and provided that such policies may be written
on a co-insurance basis of not less than eighty percent
(80%). . . . Such coverage shall afford protection against:
(a) loss or damage by fire or other hazards covered by the
·standard extended coverage endorsement . . . .
¶ 18 Section 21 of the Declaration states who has responsibility for repairs in the
event of a casualty, including a total destruction of the building:
(A) If any part of the Common Areas and Facilities shall
be damaged by casualty, the determination of whether or
not to reconstruct or repair it shall be made as follows:
....
(2) Total destruction shall be destruction of more
than two-thirds (2/3) of the building. In the event of
total destruction, the Common Areas and Facilities
shall not be reconstructed or repaired
if . . . Condominium Unit Owners who own three-
fourths (3/4) or more of the building vote against
reconstruction or repair.
(3) Any such reconstruction or repair shall be
substantially in accordance with the plans and
specifications contained herein.
(B) If the damage is only to those parts of one or more
Condominium Units for which the responsibility for
maintenance and repair is that of the Unit Owner, then the
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Condominium Unit Owner shall be responsible for
reconstruction and repair after casualty. In all other
instances, the responsibility of reconstruction and repair
after casualty shall be that of the Association as follows:
(1) Immediately after the casualty causing damage
to property for which the Association has the
responsibility for maintenance and repair, the
Association shall obtain reliable and detailed
estimates of the cost to place the damaged property
in condition as good as that before the casualty. Such
costs may include professional fees and premiums
for such bonds as the Boards of Directors deem
appropriate.
(2) When the damage is to both the Common Areas
and Facilities and Condominium Units, the
insurance proceeds shall be applied first to the costs
of repairing the Common Areas and Facilities and
the balance to the Condominium Units.
¶ 19 Section 4 of the Declaration provides the following description of the term
“units”:
Each unit shall include all the space within the boundaries
thereof. . . . It is the intent that each unit will include all
interior drywall, panelling [sic] and molding and any
surface finish, or wallpaper, and all finished flooring, such
as exposed wooden flooring, vinyl or linoleum floor
covering, matting and carpeting, but will not include studs,
supports and wall insulation, concrete slabs, floor or ceiling
joists. Each unit shall be deemed to include the interior
and exterior of any and all doors, windows, sliding glass
doors and other closures. . . . Included also as part of a
unit are the following: (a) the heating and air conditioning
systems serving the unit . . . (b) all electrical switches,
electrical outlets and light fixtures . . . (c) the electrical
wiring and service system . . . (d) the plumbing for water
service . . . and (e) the drainage or sewer plumbing . . . .
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¶ 20 Section 20(A) of the Declaration provides that the insurance will cover both
“the Condominium Units and Common Property.” (Emphasis added). Moreover, the
casualty insurance required by Section 20(A)(1) is to cover the “building” and only
excepts “such personal property as may be owned by the Condominium Unit
Owners[.]” The word “building” is in a subsection that mandates insurance coverage
for “Condominium Units,” disclosing that the building includes such units, which
aligns with the definition of “building” as “containing” units.4
¶ 21 Muirfield does not contest that it failed to procure coverage for 80 percent of
the estimated cost of replacing both the interior and exterior of the building. We
reject Muirfield’s argument that the coverage requirement applied only to the
exterior building structures.
¶ 22 As stated above, the Declaration excludes only “personal property” from the
coverage requirement. Since the Declaration defines what the “unit” includes in
Section 4, the “personal property” of the unit owner referenced in Section 20(A)(1)
must refer to everything else in the unit. Therefore, Muirfield is required to maintain
4 We find Craig v. Sandy Creek Condo. Ass’n, Inc., No. COA08-1048, 2009 WL 1663950(N.C. Ct. App. June 16, 2009) (unpublished), persuasive on this matter. The court in Craig
reasoned that Section 47A-24’s mandate that the board “obtain insurance for the property,”
combined with the definitions of “property,” “building,” and “unit” in Chapter 47A, meant
“pursuant to Article 1, Chapter 47A, ‘property’ includes the ‘units’ which are housed inside
the ‘buildings.’ ” Id. at *3-4.
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insurance to cover those items that the Declaration mentions as being part of the
“unit,” none of which is excepted by Section 20(A)(1) as “personal property.”
¶ 23 Muirfield also argues that Section 21 of the Declaration, which defines who is
responsible for repair in the case of a casualty, means that it is not responsible for
repairing the interior of Building 5 because unit owners must repair and replace
damage to their units. Section 21(B) of the Declaration provides:
If the damage is only to those parts of one or more
Condominium Units for which the responsibility for
maintenance and repair is that of the Unit Owner, then the
Condominium Unit Owner shall be responsible for
reconstruction and repair after casualty. In all other
instances, the responsibility of reconstruction and repair
after casualty shall be that of the Association as follows:
....
(2) When the damage is to both Common Areas and
Facilities and Condominium Units, the insurance
proceeds shall be applied first to the costs of
repairing the Common Areas and Facilities and the
balance to the Condominium Units.
(Emphasis added).
¶ 24 Muirfield contends that, because unit owners typically have the responsibility
of repairing and replacing things that are defined as part of the “unit,” the unit
owners also have the responsibility to replace those things in the event of “total
destruction.” This argument conflicts with provisions in the Declaration requiring
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the Association to repair and replace damage to more than the just a unit, such as
when there is a “total destruction” of the building.
¶ 25 Muirfield next argues that because unit owners can obtain their own
insurance, and Section 21 mandates the Association’s insurance proceeds be applied
first to the common areas, that Muirfield is not responsible for insuring the interior
units. This argument also fails.
¶ 26 The Declaration provides that unit owners are responsible in the event of unit-
only damage. In the event of “total destruction,” however, the coverage responsibility
shifts to Muirfield. A unit owner’s ability to obtain insurance coverage for the interior
does not negate the Association’s coverage obligations. The applicable provisions
simply specify the priority order for the Association to make repairs: first to the
Common Areas and then to the units.
¶ 27 Accordingly, we hold that by the express terms of the Declaration, Muirfield
was required to procure insurance sufficient to cover 80 percent of the “building,”
including the interior upfits of the individual units. And, because the Declaration
required said insurance, the plain language of Sections 47A-24 and -25 compelled the
Association to insure and apply insurance proceeds to the building structure and the
units. Therefore, the trial court did not err in granting Ms. Hayes’s motion for partial
summary judgment as to these issues.
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III. CONCLUSION
¶ 28 For the foregoing reasons, we affirm the trial court’s order.
MOTION TO DISMISS APPEAL GRANTED; MOTION TO DISMISS CROSS-
APPEAL GRANTED; PETITION FOR WRIT OF CERTIORARI ALLOWED;
AFFIRMED.
Judges HAMPSON and GRIFFIN concur.