AZNH Revocable Trust & a. v. Spinnaker Cove Yacht Club Association, Inc. ( 2023 )

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THE SUPREME COURT OF NEW HAMPSHIRE
___________________________
Belknap
No. 2021-0385
AZNH REVOCABLE TRUST & a.
v.
SPINNAKER COVE YACHT CLUB ASSOCIATION, INC.
Argued: November 15, 2022
Opinion Issued: August 3, 2023
John F. Sullivan, of Chandler, Arizona, on the brief and orally, for the
plaintiffs.
Drummond Woodsum, of Manchester (Demetrio Aspiras on the
memorandum of law and orally), for the defendant.
HICKS, J. The plaintiffs, AZNH Revocable Trust (AZNH) and John F.
Sullivan and Susan B. Sullivan, trustees, appeal an order of the Superior Court
(O’Neill, J.) denying their request for preliminary injunctive relief against the
defendant, Spinnaker Cove Yacht Club Association, Inc. (the Association), and
granting the Association’s motion to dismiss. We affirm.
The following facts were alleged by the plaintiffs, recited in the trial
court’s order, or reflect the contents of documents in the record. Spinnaker
Cove Yacht Club (Spinnaker Cove) is a condominium consisting of ninety-one
units and common area. Ninety units are vehicle parking spaces and the
remaining unit is a commercial warehouse building owned by a business
engaging in boat sales, service, and storage. Appurtenant to each unit is the
exclusive right to use a boat slip corresponding to that unit. The Association is
an organization created to manage and control Spinnaker Cove. Its members
are the condominium unit owners. The supplemental declaration of
condominium for Spinnaker Cove (declaration) provides that each unit has a
one-ninety-oneth (1/91th) undivided interest in the common area and that
“[t]here shall appertain to each condominium unit in Spinnaker Cove Yacht
Club, for voting purposes in connection with meetings of the Association, a
number of votes in proportion to the aforementioned fraction.”
John and Susan Sullivan are trustees and beneficiaries of AZNH, which
owns one of the condominium units. In April 2021, the plaintiffs filed a
complaint against the Association seeking declaratory judgment and
immediate, preliminary, and permanent injunctive relief, alleging that the
Association’s board of directors had “undertaken steps to purchase land
outside the Condominium to add about 10 guest parking spaces.” They further
alleged that the “Association has asserted that, once purchased, the additional
land shall become part of the Condominium common area.”
The plaintiffs requested the court to enjoin the Association “from
expending assessment monies or incurring any debt to purchase land outside
the Condominium.” They also sought declarations that the condominium
instruments of Spinnaker Cove and New Hampshire law prohibit the
Association from both “expending assessment monies or incurring any debt to
purchase land outside the Condominium to add guest parking spaces” and
“expanding the Condominium.”
The Association filed a motion to dismiss. Following a hearing, the trial
court denied the plaintiffs’ request for injunctive relief and granted the
Association’s motion to dismiss. The court reasoned that “[b]ecause the
Condominium Act allows the Association to purchase land, and the Declaration
does not prohibit same,” the plaintiffs’ complaint “fails to state a claim as a
matter of law.” The plaintiffs filed a motion for reconsideration and a motion to
amend their complaint, which the court denied. This appeal followed.
“When reviewing a trial court’s grant of a motion to dismiss, we consider
whether the allegations in the plaintiffs’ pleadings are reasonably susceptible of
a construction that would permit recovery.” New England Backflow v. Gagne,
172 N.H. 655, 661 (2019). “We assume the plaintiffs’ pleadings to be true and
construe all reasonable inferences in the light most favorable to them,”
although “we need not assume the truth of the statements in the plaintiffs’
pleadings that are merely conclusions of law.” Id. “We then engage in a
threshold inquiry that tests the facts in the complaint against the applicable
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law.” Id. “We will uphold the trial court’s grant of a motion to dismiss if the
facts pleaded do not constitute a basis for legal relief.” Id.“When, as here, the part[ies]’ arguments require us to engage in statutory
interpretation, our review is de novo.” Doe v. Attorney General, 175 N.H. 349,
352 (2022). “We first look to the language of the statute itself, and, if possible,
construe that language according to its plain and ordinary meaning.” Id. “We
give effect to every word of a statute whenever possible and will not consider
what the legislature might have said or add language that the legislature did
not see fit to include.” In re Guardianship of C.R., 174 N.H. 804, 807 (2022).
“We construe all parts of a statute together to effectuate its overall purpose and
avoid an absurd or unjust result.” Doe, 175 N.H. at 352. “Moreover, we do not
consider words and phrases in isolation, but rather within the context of the
statute as a whole.” Id.
The statute at issue is the Condominium Act, RSA chapter 356-B (2022).
The Condominium Act “provides that a condominium is created by recording
condominium instruments in the local registry of deeds.” Ryan James Realty v.
Villages at Chester Condo. Assoc., 153 N.H. 194, 196 (2006); see RSA 356–B:7,
:11. “The condominium instruments include a declaration of condominium,
which defines the rights as among the condominium owners, the condominium
association, and the developer.” Ryan James Realty, 153 N.H. at 196.
We first address whether the trial court erred in concluding that the
Association possesses the authority to purchase land outside the
condominium. This inquiry has two prongs: first, whether the trial court erred
in concluding that the Condominium Act allows a condominium association to
purchase additional real property; and, second, whether the trial court erred in
concluding that nothing in Spinnaker Cove’s declaration prohibits the
Association from purchasing such property.
RSA 356-B:42, I, provides, in part, that “[e]xcept to the extent prohibited
by the condominium instruments, and subject to any restrictions and
limitations specified therein, the unit owners’ association shall have the power
to . . . [a]cquire, hold, convey and encumber title to real property.” RSA 356-
B:42, I. The plaintiffs concede that this provision allows a condominium
association to “acquire” real property. The plaintiffs also do not appear to
argue on appeal that the term “acquire” in RSA 356-B:42, I, cannot, as a
matter of statutory construction, include an acquisition by purchase. The trial
court found that the dictionary definition of “acquire” includes “to gain
possession or control of” and that the definition “does not limit the manner in
which possession or control is gained to non-purchases.” (Quotation and
brackets omitted.) The plaintiffs do not challenge that finding on appeal.
Rather, the plaintiffs argue that because the statutory authority to
“[a]cquire” title is “subject to any restrictions and limitations specified” in the
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condominium instruments, RSA 356-B:42, I, the Association cannot purchase
additional land because the condominium instruments of Spinnaker Cove do
not allow the Association to use assessment money for that purpose. They
argue that “monies collected as assessments pursuant to the condominium
instruments may not be used to ‘purchase’ (or pay the on-going costs for) real
property outside the existing condominium” because doing so would violate the
agreement between the unit owners as to the use of assessments, which, in
turn, would violate the “restrictions and limitations” clause of RSA 356-B:42.
The plaintiffs point to the definitions of the terms “Assessment” and
“Common Expenses” in the declaration. “Assessment” is defined to mean “that
portion of the cost o[f] maintenance, repairing, and managing the property
which is to be paid by such unit owner.” The term “Common Expenses” is
defined, in relevant part, to mean “all expenditures lawfully made or incurred
by or on behalf of the Association, together with all funds lawfully assessed for
the creation and or maintenance of reserves pursuant to the provisions of the
Condominium Instruments.” The plaintiffs argue that, read together “in
harmony with the overall intent of the Declaration,” these definitions mean that
“a Common Expense is lawfully ‘assessed’ when it arises from the cost to
maintain, repair, or manage the condominium’s existing property, or when
money is needed to fund reserves in anticipation of major replacement or
improvements to existing condominium property.” Thus, according to the
plaintiffs, “[a]ssessment monies may only be used for maintenance, repair and
management of the common area, and for creation and/or maintenance of
reserves.”
The Association, on the other hand, argues that the plaintiffs’
interpretation adds a restriction — “existing condominium property” — that
does not appear in either of the definitions on which they rely. In addition,
noting that the definition of “assessment” includes the cost of “managing” the
property, the Association argues that because it is the entity that manages the
condominium, the definition of assessment “necessarily includes the expenses
incurred by the Association.” Finally, the Association points out that the
plaintiffs “rely on definitions of terms, without regard to” the declaration
provisions that actually govern expenses and assessments. The Association
contends that the definition of common expenses should be read together with
section 9-100 of the declaration, which provides that “[e]ach unit owner shall
pay all Common Expenses assessed against him by the [Association] Board in
accordance with the terms of the Declaration and the By-Laws.” The
Association concludes that, reading those provisions in conjunction, an
assessment is just “a portion charged to the unit owner” and that, if it has the
authority to purchase land and the Association members approve the
purchase, then, as the trial court found, “the money used is ‘properly a
common expense’ chargeable to Unit Owners.”
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Resolution of this issue requires us to interpret the declaration. “A
condominium association’s legal documents are a contract that governs the
legal rights between the association and property owners.” Nordic Inn Condo.
Owners’ Assoc. v. Ventullo, 151 N.H. 571, 575 (2004). “As is the case with any
contract, the interpretation of a condominium’s declaration is a question of
law, which we review de novo.” Id. “When interpreting a written agreement, we
give the language used by the parties its reasonable meaning, considering the
circumstances and the context in which the agreement was negotiated, and
reading the document as a whole.” Town of Pembroke v. Town of Allenstown,
171 N.H. 65, 70 (2018) (quotation omitted). We also “must, wherever possible,
adopt the interpretation of an ambiguous clause that will be in harmony with
the remainder of the document, so that all provisions will have meaning and
effect.” Thiem v. Thomas, 119 N.H. 598, 602-03 (1979); see also Sanders v.
Insurance Co., 72 N.H. 485, 501 (1904) (concluding, in case involving an
insurance policy, that “it appears sufficient to rest the decision upon an
interpretation of the contract which gives effect to all its provisions, avoids any
conflict between them, and is fairly and reasonably inferable from the
evidence”).
Reading the declaration as a whole, we conclude that the Association’s
interpretation harmonizes and gives effect to all of the declaration’s provisions,
and avoids any conflict between them. See Thiem, 119 N.H. at 602–03;
Sanders, 72 N.H. at 501. In so concluding, we note an additional provision
that conflicts with the plaintiffs’ interpretation. Section 8-103 of the
declaration provides:
Purchase by Association. The Board of Directors may, with the
authorization and approval of a majority of the unit owners present
at any regular or special meeting of the unit owners, acquire a
condominium unit in the name of the Association or designee.
Acquisition of condominium units by the Association may be made
from the Common Expenses Fund, or if such fund is insufficient,
the Board may levy an assessment against each unit owner in
proportion to his fraction set forth in Chapter 2-500, or the Board
in its discretion, may borrow money from an institutional lender to
finance the acquisition of such condominium unit; provided,
however, that no financing may be secured by an encumbrance on
any property other than the condominium unit so acquired by the
Association.
(Emphasis added.) If, as the plaintiffs argue, “[a]ssessment monies may only
be used for maintenance, repair and management of the common area, and for
creation and/or maintenance of reserves,” a levy authorized by section 8-103
would not be an “assessment” as the plaintiffs interpret that term. Yet, section
8-103 plainly refers to the levy as an “assessment.”
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For the foregoing reasons, we conclude that the term “assessment” refers
to a unit owner’s pro rata share of “all expenditures lawfully made or incurred
by or on behalf of the Association,” and “all funds lawfully assessed for the
creation and or maintenance of reserves pursuant to the provisions of the
Condominium Instruments.” Accordingly, we reject the plaintiffs’ contention
that the purchase of additional land will “[e]xceed[] the limitations and
restrictions for which assessment monies may be used, i.e., maintenance,
repair and management of the existing condominium property (or funding
reserves).”
The plaintiffs next contend that the proposed purchase of additional land
breaches the agreement between unit owners because it “[d]oes not mutually
benefit each condominium unit owner.” They assert that “purchasing land for
the sole purpose of providing 10 parking spaces to guests,” not unit owners,
“does not mutually benefit all the unit owners.” The plaintiffs do not explain
how the availability of parking spaces to unit owners’ guests does not benefit
the unit owners themselves. Nor have they alleged that use of the additional
parking spaces would be restricted to the guests of some, but not all, unit
owners. Accordingly, we are not persuaded that the proposed purchase would
not mutually benefit all unit owners.
The plaintiffs further assert that the use of assessment monies to
purchase additional land contravenes the reasonable expectations of a
purchaser of a unit in Spinnaker Cove. They cite a portion of the offering
statement that states “[i]n addition to the purchase price, the unit owner will
be required to pay for certain maintenance, use, and utility service.” They
further cite the statement that, after the declarant turns operation of the
condominium over to the unit owners’ association, “[t]he unit owners
association will thereafter be responsible for maintaining and operating the
condominium, and each unit owner will be responsible for paying his prorate[d]
share of the maintenance and operating budget in the form of a common
expense assessment.” They then argue that, based on the material facts
disclosed in the public offering statement:
[A] reasonable unit owner (or potential unit owner) would
understand the intent of the agreement as requiring payment of
assessments which mutually benefit all unit owners by supplying
funds to maintain, repair and manage the Condominium. It
would not be reasonable, in light of the situation of the unit
owners and the expressed intent of the agreement, to conclude
that assessment monies may be collected and spent for any other
purpose (like purchasing land outside the Condominium and
paying costs of ownership).
The select portions of the offering statement chosen by the plaintiffs do
not persuade us. Directly following the last-quoted statement, the offering
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statement cautions that “[t]he common expense assessments payable by each
unit owner will vary from year [to year] depending on actual expenditures
approved by the unit owners association.” (Emphases added.) As noted above,
“assessment” refers to a unit owner’s pro rata share of “common expenses,”
which, in turn, includes “all expenditures lawfully made or incurred by or on
behalf of the Association.” Therefore, a unit owner could reasonably expect to
be assessed for any lawfully-incurred expenditure approved by the Association,
including an expenditure for the purchase of land in accordance with RSA 356-
B:42, I. Accordingly, we are not persuaded by the plaintiffs’ “reasonable
expectations” argument.
We next address the plaintiffs’ contention that the trial court erred in not
granting declaratory and injunctive relief because the court’s “finding that the
Spinnaker Cove condominium is ‘not an expandable condominium’
conclusively supports the allegations that the condominium is non-
expandable.” The plaintiffs assert that this finding compels the conclusion that
their complaint “state[d] a claim for declaratory relief and warrant[s] an
injunction with respect to the [Association’s] intent to expand the
condominium.”
The Condominium Act defines an “[e]xpandable condominium” to mean
“a condominium to which additional land may be added in accordance with the
provisions of the declaration and of this chapter.” RSA 356-B:3, XV. “By
declaring an expandable condominium, a developer may submit land to the
condominium while reserving the right to expand the condominium by later
adding more land.” Ryan James Realty, 153 N.H. at 196 (quotation omitted).
“If [a] condominium is an ‘expandable condominium,’ the declaration must
contain an explicit reservation of the option to add land to the condominium, a
legal description of the ‘additional land,’ which is the land that may be added to
the condominium, and numerous other provisions.” Id. (quoting RSA 356-
B:16, III); see RSA 356-B:16, III (2022). The trial court found that “[b]ecause
[Spinnaker Cove’s] Declaration does not contain an explicit reservation of the
option to add certain land to the condominium, it is not an expandable
condominium.”
This finding does not, however, entitle the plaintiffs to the declaratory
and injunctive relief that they seek. First, as the Association points out, the
plaintiffs are not entitled to a declaratory judgment that Spinnaker Cove is not
an expandable condominium because the parties are not adverse on that issue
— the Association agrees that it is not. More importantly, the plaintiffs seek
not only a declaration that the condominium is not expandable, but also a
declaration that “the Condominium Instruments for Spinnaker Cove . . . and
New Hampshire law, prohibit or otherwise restrict or limit the [Association]
from adding land to the Condominium.”
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The plaintiffs argue that “[c]ontrary to RSA 356-B:25, the [trial court]
incorrectly found, there is no provision in the Condominium Act which
prohibits adding land to non-expandable condominiums.” That provision,
entitled “Expansion of the Condominium,” provides, in relevant part, that “[n]o
condominium shall be expanded except in accordance with the provisions of
the declaration and of this chapter.” RSA 356-B:25. The plaintiffs appear to
view “expansion” of a condominium, as referenced in RSA 356-B:25, as
providing the only means by which land may be added to a condominium; in
other words, they appear to regard “expand” and “add land” as synonymous.
We disagree.
Reading the provisions regarding expandable condominiums in light of
the Condominium Act as a whole, we conclude that those provisions refer to
and govern a specific mechanism by which a declarant may reserve the right to
add land to a condominium and subsequently do so; in providing that “[n]o
condominium shall be expanded except in accordance with the provisions of
the declaration and of this chapter,” RSA 356-B:25 refers only to that specific
mechanism. The provisions regarding expandable condominiums, including
RSA 356-B:25, neither apply to nor preclude the addition of land by another
method consistent with the Condominium Act and the condominium
instruments. Accordingly, we reject the plaintiffs’ contention that an addition
of land to the condominium by such means would constitute a “de facto
expansion of the condominium which nullifies the legislature’s specific
prohibition” in RSA 356-B:25.
Construing the Condominium Act as a whole, we necessarily consider
RSA 356-B:42, I, another statutory provision at issue here. It provides:
I. Except to the extent prohibited by the condominium
instruments, and subject to any restrictions and limitations
specified therein, the unit owners’ association shall have the power
to:
...
(d) Acquire, hold, convey and encumber title to real property,
including but not limited to condominium units, whether or not
the association is incorporated.
RSA 356-B:42, I (emphasis added). This section plainly allows a condominium
association to acquire real property outside the condominium. If the plaintiffs’
construction of RSA 356-B:25 were correct, however, the association would
never be able to add the real property so acquired to the condominium. We
conclude that the legislature did not intend such a result.
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We now consider whether the Condominium Act provides another
mechanism, other than RSA 356-B:25, for adding land to a condominium.
There is no provision that specifically addresses the addition of land to a
condominium other than by the declarant of an expandable condominium. The
Association asserts that “any change to the physical scope of a condominium
necessarily requires an amendment to the declaration” and contends that
“[n]othing in the Condominium Act prohibits the unit owners from adding land
to the condominium, including land purchased by the association.” We agree.
Amendments to a condominium declaration are governed by RSA 356-
B:34, which provides, in relevant part:
II. If there is any unit owner other than the declarant, then
the condominium instruments shall be amended only by
agreement of unit owners of units to which 2/3 of the votes in the
unit owners’ association appertain, or such larger majority as the
condominium instruments may specify, except in cases for which
this chapter provides different methods of amendment. . . .
....
III. If none of the units in the condominium is restricted
exclusively to residential use, then the condominium instruments
may specify majorities smaller than the minimums specified by
paragraphs I and II.
....
V. Except to the extent expressly permitted or expressly
required by other provisions of this chapter, no amendment to the
condominium instruments shall change the boundaries of any
unit, the undivided interest in the common areas appertaining
thereto, the liability for common expenses or rights to common
profits appertaining thereto, or the number of votes in the unit
owners’ association appertaining thereto.
RSA 356-B:34. This section expresses no limitations, other than those
contained in paragraph V, on the unit owners’ ability to amend the declaration.
Accordingly, nothing in this section prohibits unit owners from adding land
purchased by the condominium association to the common area of the
condominium.
We find support for this conclusion in our decision in Holt v. Keer, 167
N.H. 232 (2015). In Holt, the Keers challenged an amendment to the
condominium declaration that “changed the designation of certain
condominium property from common area to limited common area, to the
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benefit of [two] units . . . , and to the detriment of the remaining units,”
including the Keers’ unit. Holt, 167 N.H. at 237. We addressed the challenge
under RSA 356-B:19, which then provided, and currently provides, in relevant
part, that “[n]o amendment to any condominium instrument shall alter any
rights or obligations with respect to any limited common area without the
consent of all unit owners adversely affected thereby as evidenced by their
execution of such amendment.” RSA 356-B:19, I; see Holt, 167 N.H. at 240.
We held that the amendment at issue was unlawful “[b]ecause the Keers’ right
to use certain portions of the common area was extinguished by the
assignment of those areas as limited common area,” and thus the Keers were
adversely affected, “yet they did not consent to or execute the amendment as
contemplated by RSA 356-B:19, I.” Holt, 167 N.H. at 242.
In so holding, we rejected the opposing parties’ argument that the
amendment, adopted by three of the four unit owners, “was lawfully made
pursuant to the second clause of RSA 356-B:19, III, which states that limited
common area may be created or expanded by an amendment to the
condominium instruments by 2/3 of the votes in the unit owners association,
or such higher percentage as the condominium instruments may provide.” Id.
at 241 (quotations omitted); see RSA 356-B:19, III. We reasoned:
The second clause of RSA 356-B:19, III allows limited
common areas to be “created or expanded” pursuant to a two-
thirds vote, or such higher percentage as provided in the
condominium instruments. If, as discussed above, “created or
expanded” limited common area were construed to include all
assignment and reassignment of limited common areas, the second
clause would directly conflict with RSA 356-B:19, I. Instead, we
interpret the second clause of RSA 356-B:19, III to apply only when
the creation or expansion of limited common area would not
adversely affect unit owners under RSA 356-B:19, I.
Holt, 167 N.H. at 243.
Under analogous reasoning, amending a condominium declaration,
pursuant to RSA 356-B:34, II, to add common area would not run afoul of RSA
356-B:34, V “[b]ecause pre-existing common area and limited common area
rights would remain unaffected.” Id. Accordingly, we reject the plaintiffs’
assertion that “no land may be added” to a non-expandable condominium.
The plaintiffs next contend that the trial court’s decision was a de facto
declaratory judgment in favor of the Association, which, they appear to assert,
was erroneous in light of the procedural posture of the case. They argue:
[T]he Superior Court’s proceedings . . . constitute a declaratory
judgment, based upon a misperception about the merits, in favor
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of the [Association]. There was no motion for judgment on the
pleadings, no motion for summary judgment, and no formal trial.
The Court did not dismiss on the basis that there was a procedural
defect in Plaintiffs’ pleadings, but dismissed on the basis that the
Plaintiffs lose as a matter of law.
The Association moved to dismiss, in part, on the ground that the
plaintiffs’ complaint “is premised entirely on a fundamental misunderstanding
of the law.” The trial court properly interpreted that ground as a motion to
dismiss for failure to state a claim and, for the reasons stated herein, properly
granted it. Accordingly, we reject this claim of error.
The plaintiffs also appeal the denial of the injunctive relief they sought.
The trial court denied the requested relief after finding that the plaintiffs had
not shown a likelihood of success on the merits, a prerequisite to the issuance
of a preliminary injunction. See N.H. Dep’t of Envtl. Servs. v. Mottolo, 155 N.H.
57, 63 (2007). Having concluded that the trial court properly dismissed the
plaintiffs’ complaint for failure to state a claim, we necessarily also affirm the
court’s denial of the requested injunctive relief.
To the extent that the plaintiffs challenge the denial of their motion to
amend their complaint, we find no error. The plaintiffs concede that their
original and amended complaints “state identical claims for relief.” They
assert, however, that their amended complaint “also contains specific
references to applicable portions of the condominium instruments which show
the limitations and restrictions applicable to spending assessment monies.”
Having reviewed the amended complaint and the portions of the condominium
instruments and the law cited therein, we agree with the trial court that the
amended complaint does not cure the deficiencies of the original complaint. In
other words, for all of the reasons stated in this opinion, the amended
complaint also fails, as a matter of law, to state a claim.
Affirmed.
MACDONALD, C.J., and BASSETT, HANTZ MARCONI, and DONOVAN,
JJ., concurred.
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