Waterford Pointe Condominium Assn. v. Reserve Domiciles, Ltd. , 2019 Ohio 691 ( 2019 )

[Cite as Waterford Pointe Condominium Assn. v. Reserve Domiciles, Ltd., 2019-Ohio-691.]
STATE OF OHIO ) IN THE COURT OF APPEALS
)ss: NINTH JUDICIAL DISTRICT
COUNTY OF SUMMIT )
WATERFORD POINTE CONDOMINIUM C.A. No. 28766
ASSOCIATION
Appellee
APPEAL FROM JUDGMENT
v. ENTERED IN THE
COURT OF COMMON PLEAS
RESERVE DOMICILES, LTD., TRUSTEE COUNTY OF SUMMIT, OHIO
FOR PHOENIX DIVERSIFIED AND CASE No. CV-2015-01-0624
SHIMODA (A DELAWARE PURE
TRUST), et al.
Appellant
DECISION AND JOURNAL ENTRY
Dated: February 27, 2019
CARR, Presiding Judge.
{¶1} Appellant, Reserve Domiciles, Ltd., appeals the judgment of the Summit County
Court of Common Pleas. This Court affirms.
I.
{¶2} This foreclosure action arises out of a dispute between Waterford Pointe
Condominium Association (“Waterford Pointe”), located in Twinsburg, Ohio, and one of its
members and unit owners, Reserve Domiciles, Ltd. (“Reserve”). Reserve has owned one of the
units in Waterford Pointe since 1998. Upon purchasing the property, Reserve became subject to
the terms and conditions set forth in Waterford Pointe’s declaration and bylaws.
{¶3} Members are required to pay monthly assessments that are determined by
Waterford Pointe’s board of directors. In 2007, Waterford Pointe approved a revised collection
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policy stating that monthly assessments are due on the first day of each month. The monthly
assessments are deemed late if not postmarked by the 15th day of each month. Members who
fail to pay their monthly assessments on time are assessed an administrative late fee of $25.00
per month.
{¶4} Upon receiving its monthly invoice for maintenance fees, Reserve has
consistently presented a check containing the following language:
Tendered for maintenance fee (MONTH, YEAR), only, not for any other purpose,
3011 Waterford.
Reserve tendered checks for the assessment amount reflected in the invoice and included a
reference to the month for which the payment was being made. From January 2009 through June
2012, Reserve was late in paying its monthly assessment on a limited number of occasions.
During that timeframe, Waterford Pointe accepted and cashed Reserve’s checks containing the
aforementioned language.
{¶5} In 2012, the monthly assessment for members was $302.79. Reserve failed to
make a timely payment for its monthly assessment in April of 2012 and its account became
delinquent at that time. In 2005, the board of directors amended the bylaws so that, in
accordance with R.C. 5311.18(A)(2), Waterford Pointe would credit payments made by unit
owners in the following order:
(a) First, to interest owed to [Waterford Pointe];
(b) Second, to administrative late fees owed to [Waterford Pointe];
(c) Third, to collection costs, attorney’s fees, and paralegal fees incurred by
[Waterford Pointe]; [and]
(d) Fourth, to principal amounts the unit owner owes to [Waterford Pointe] for
common expenses or penalty assessments chargeable against the unit.
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Waterford Pointe credited a partial payment by Reserve on May 4, 2012. In accordance with the
order of priority set forth in the bylaws, the partial payment was applied first against the
administrative late fee, the outstanding April assessment, and then the balance was applied to the
principal due for the May 2012 assessment. After allocating the money in that order, there was
unpaid principal balance due for the May assessment of $25.00. Waterford Pointe levied a June
assessment on the account in the amount of $302.79, for a total balance of $327.79. In June,
Reserve tended a check for $302.79 that stated, “Tendered for June 2012 maintenance fee only,
not for late fees or any other purpose, for 3011 Waterford.”
{¶6} Starting in June 2012, Waterford Pointe received and returned all of Reserve’s
checks tendered for monthly maintenance assessments. Reserve continued to tender checks that
contained the restrictive language set forth above. In returning Reserve’s check in June 2012,
Waterford Pointe communicated its position that it could not accept payments that included
qualifying endorsements or restrictions due to the delinquency. In July 2012, Reserve’s
delinquency increased to $655.58 as it encompassed the carry-over balance from May 2012;
June’s monthly assessment, June’s administrative late fee, as well as the monthly assessment for
July 2012. Reserve tendered a check specifically for the July monthly assessment that contained
restrictive language specifying that the check was for the maintenance fee only. Waterford
Pointe’s property manager sent a letter that explained the order of priority for allocating
payments and included copies of Waterford Pointe’s collections policy. In August 2012,
Reserve again tendered a check in the amount of $302.79 that included the restrictive language.
Waterford Pointe again returned the check and advised Reserve that it would continue to return
checks that included restrictive language. Waterford Pointe further informed Reserve that it
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needed to bring the amount current. Reserve’s delinquency was $1009.37 as of August 30, 2012.
Waterford Pointe’s attorney sent Reserve a collections letter at that time.
{¶7} In the ensuing months, Reserve’s delinquency continued to increase. Waterford
Pointe’s attorney repeatedly sent letters encouraging Reserve to bring the amount current.
Reserve continued to tender checks with restrictive language. In March 2013, Waterford Pointe
sent its seventh letter to Reserve and offered to waive late fees and legal costs if Reserve
tendered a check in the amount of $2,743.29 that covered all delinquent assessments. In June
2013, Waterford Pointe sent another letter with a similar offer regarding the waiver of late fees
and legal costs and noted that if Reserve did not pay the past due assessments, Waterford Pointe
would file a lien against the property. The letter also specified that Waterford Pointe’s refusal to
accept Reserve’s checks with the restrictive language did not constitute a discharge of Reserve’s
delinquency. In March 2014, Waterford Pointe through counsel sent another letter stressing that
it could not accept checks with restrictive language. Waterford Pointe explained the need to
bring the account current and offered to waive late fees and legal costs for payment of all
delinquent assessments, which at that time totaled $6,570.78. Reserve did not remit payment for
the outstanding assessments. Waterford Pointe recorded a lien on Reserve’s property in
September 2014.
{¶8} On January 30, 2015, Waterford Pointe filed a foreclosure complaint against
Reserve. Reserve filed an answer generally denying the allegations in the complaint and setting
forth numerous counterclaims. Waterford Pointe filed a timely answer denying the allegations
set forth in the counterclaims. With leave of court, Reserve filed an amended answer with
counterclaims for breach of contract, slander of title, fraud, violation of the contract clauses in
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the United States and Ohio constitutions, as well as punitive damages. Waterford Pointe filed an
answer to the amended counterclaims.
{¶9} Waterford Pointe filed a motion for summary judgment that was ultimately
denied. The trial court issued an order bifurcating the issues before the court and setting a date
for a bench trial on the “bifurcated issue of the validity and/or discharge of the lien.” The trial
court further noted that once the status of the lien had been determined, it would address any
remaining causes of action and whether it was necessary to try those issues to a jury.
{¶10} The parties ultimately entered into joint stipulations of facts and submitted joint
exhibits. The parties also submitted written final arguments as well as responsive briefs. On
March 10, 2017, a magistrate issued a decision with findings of fact and conclusions of law
granting judgment in favor of Waterford Pointe. Reserve filed a number of objections to the
magistrate’s decision. Most notably, Reserve argued that the magistrate failed to accurately set
forth the facts as stipulated by the parties and that it had mischaracterized the nature of the
dispute. Waterford Pointe filed a brief in opposition to the objections and Reserve replied
thereto. On July 27, 2017, the trial court issued a journal entry overruling Reserve’s objections
and adopting the magistrate’s decision. Subsequently, on August 15, 2017, the trial court issued
a final decree of foreclosure. The trial court’s foreclosure decree indicated that there was no just
reason for delay pursuant to Civ.R. 54(B).
{¶11} On appeal, Reserve raises five assignments of error.
II.
ASSIGNMENT OF ERROR I
THE LOWER COURT ERRED AND ABUSED ITS DISCRETION IN
LIMITING ITS REVIEW OF THE MAGISTRATE’S DECISION TO THE
FACTS FOUND BY THE MAGISTRATE CITING APPELLANT’S FAILURE
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TO FILE A TRANSCRIPT OR AFFIDAVIT ALONG WITH ITS
OBJECTIONS[.]
{¶12} In its first assignment of error, Reserve contends that the trial court erred in
refusing to consider its challenge to the magistrate’s factual findings. This Court disagrees.
{¶13} As noted above, the parties entered into joint stipulations of fact and submitted
joint exhibits to the magistrate. In setting forth factual findings, the magistrate relied both on the
joint stipulations as well as the exhibits. Many of Reserve’s objections were aimed at
challenging the magistrate’s factual findings. In overruling Reserve’s objections, the trial court
noted that “[w]hile joint stipulations of fact and briefs are filed for record within the docket, the
joint exhibits presented at the bench trial are not.” On this basis, the trial court overruled
Reserve’s objections to the factual findings and stated that it was limited to reviewing the
magistrate’s legal conclusions.
{¶14} Reserve argues that the requirements of Civ.R. 53(D)(3)(b)(iii) were not
applicable to this case because the parties entered into joint exhibits and joint stipulations.
Civ.R. 53(D)(3)(b)(iii) provides that a party filing an objection to a magistrate’s factual finding
must support the objection with “a transcript of all the evidence submitted to the magistrate
relevant to that finding or an affidavit of that evidence if a transcript is not available.” The trial
court must have a record of the proceedings before the magistrate in order to conduct an
independent review. Civ.R. 53(D)(3)(b)(iii) places the burden for providing the transcript of
proceedings or an appropriate substitute on the party objecting to the magistrate’s factual
determinations. See Welch v. Prompt Recovery Servs., Inc., 9th Dist. Summit No. 27175, 2015-
Ohio-3867, ¶ 10. The parties filed their joint stipulations on October 18, 2016. Significantly,
however, the parties’ joint exhibits were not filed at that time. In support of its objections,
Reserve neither filed the joint exhibits in the trial court, nor filed an affidavit pertaining to the
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contents of those exhibits. Because Reserve did not comply with Civ.R. 53(D)(3)(b)(iii), the trial
court was required to accept the magistrate’s findings of fact. Helms v. Stegeman, 9th Dist.
Summit No. 27995, 2016-Ohio-5118, ¶ 13.
{¶15} The first assignment of error is overruled.
ASSIGNMENT OF ERROR II
THE COURT ERRED IN FINDING THAT APPELLEE’S LIEN WAS A
VALID LIEN ON THE PROPERTY FOR UNPAID MAINTENANCE
ASSESSMENTS AS THE SAME IS AN ABUSE OF DISCRETION AND
AGAINST THE MANIFEST WEIGHT OF THE EVIDENCE.
{¶16} In its second assignment of error, Reserve contends that the trial court erred in
concluding that Waterford Pointe had a valid lien on the property. Though Reserve couches its
argument in terms of manifest weight and abuse of discretion, Reserve effectively argues that
Waterford Pointe did not have a legal basis to refuse to accept Reserve’s monthly payments.
Reserve maintains that Waterford Pointe was not entitled to a lien on the property because
Reserve never defaulted on its monthly assessments.
{¶17} A condominium association’s declaration and bylaws serve as a contract between
the association and its individual members. Murtha v. Ravines of McNaughton Condominium
Assn., 10th Dist. Franklin No. 09AP-709, 2010-Ohio-1325, ¶ 13; see also Nottingdale
Homeowners’ Assn., Inc., v. Darby, 33 Ohio St.3d 32, 35-36 (1987). R.C. 5311.19(A) provides
in part that “[a]ll unit owners * * * shall comply with all covenants, conditions, and restrictions
set forth in a deed to which they are subject or in the declaration, the bylaws, or the rules of the
unit owners association, as lawfully amended.”
{¶18} Reserve’s primary argument in support of its second assignment of error is that
Waterford Pointe did not have a legal justification to refuse acceptance of Reserve’s checks.
Reserve contends that the restrictive language was not “more restrictive” than the language in the
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bylaws and that Waterford Pointe could have simply accepted the checks and allocated the
money appropriately. Reserve maintains that Waterford Pointe has shifted the narrative in this
case by suggesting that foreclosure is necessary due to Reserve’s failure to pay the monthly
assessments when, in actuality, the conflict stems from Waterford Pointe’s refusal to accept
checks.
{¶19} At the outset of our discussion, we are mindful that, like the trial court, this Court
is required to accept the magistrate’s factual findings because Reserve did not comply with
Civ.R. 53(D)(3)(b)(iii). Welch, 2015-Ohio-3867, at ¶ 22.
{¶20} In 2012, the monthly maintenance assessment for Waterford Pointe members was
$302.79. After reviewing the parties’ joint stipulations and exhibits, the magistrate determined
that Reserve failed to make a timely payment in April 2012. Pursuant to Waterford Pointe’s
collections policy, a $25.00 administrative late fee was assessed to Reserve in light of the
delinquency. Waterford Pointe’s bylaws contained a provision indicating that payments from
unit owners shall be credited in the order of priority set forth in R.C. 5311.18(A)(2). In
accordance with the order of priority set forth in the bylaws, Reserve’s May payment was
applied first against the administrative late fee and eventually applied to the principal due for the
May 2012 assessment. After allocating the money in that order, there was an unpaid principal
balance due for the May assessment of $25.00. The June assessment levied against Reserve
reflected the $25.00 deficit for a total balance due of $327.79. For June, Reserve tendered a
check for $302.79 that contained restrictive language stating, “[t]endered for June 2012
maintenance fee only, not for late fees or any other purpose, for 3011 Waterford.” Waterford
Pointe returned the check and notified Reserve that, due to the delinquency on the account, it
could not accept any checks with restrictive language in light of the order of priority for
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allocating payments set forth in the bylaws. Going forward, the parties were unable to reconcile
this issue as Reserve continued to tender checks on a monthly basis with restrictive language.
Despite repeated communications where Waterford Pointe explained that it could not accept
checks containing restrictive language, Reserve continued to tender checks with the restrictive
language and its delinquency continued to increase. Waterford Pointe eventually offered to
waive all late fees and legal costs if Reserve would tender a check that satisfied the outstanding
delinquency on its account. Reserve declined to present a check for the delinquency on its
outstanding assessments.
{¶21} Under these circumstances, Reserve cannot prevail on its argument that Waterford
Pointe did not have a valid lien against its property. As a member of Waterford Pointe’s
condominium association, Reserve was contractually bound to comply with Waterford Pointe’s
bylaws. See R.C. 5311.19(A). Reserve’s account became delinquent in April 2012 when it
failed to timely pay its monthly assessment and a late fee was assessed accordingly. Reserve
tendered a check in June 2012 that did not account for the delinquency and contained restrictive
language. In the months that followed, Reserve continued to tender checks with the restrictive
language and the amount of the delinquency steadily increased. A condominium association
“has a lien upon the estate or interest of the owner in any unit * * * for the payment of any of the
* * * expenses that are chargeable against the unit and that remain unpaid for ten days after any
portion has become due and payable.” Prescott Green Condominium Assn. v. Walker, 9th Dist.
Summit No. 24948, 2010-Ohio-2572, ¶ 4, quoting R.C. 5311.18(A)(1). “The lien * * * may be
foreclosed in the same manner as a mortgage on real property in an action brought on behalf of
the unit owners association[.]” Walker at ¶ 4, quoting R.C. 5311.18(B)(1). Under these
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circumstances, where Reserve did not take the appropriate measures to cure its delinquency,
Waterford Pointe had a valid lien on the property.
{¶22} Finally, Reserve’s argument that it never actually missed a payment is also
without merit. While Reserve disputes the magistrate’s finding that it failed to timely remit
payment in April 2012, this Court must accept the magistrate’s factual findings in light of
Reserve’s failure to satisfy the requirements of Civ.R. 53(D)(3)(b)(iii). See Welch, 2015-Ohio-
3867, at ¶ 22. Moreover, though Reserve emphasizes that it continued to tender checks on a
monthly basis throughout the timeframe in question, as discussed above, it failed to do so in a
manner that complied with Waterford Pointe’s bylaws.
{¶23} The second assignment of error is overruled.
ASSIGNMENT OF ERROR III
THE TRIAL COURT ERRED IN FAILING TO FIND THAT A COURSE OF
DEALING WAS ENTERED INTO BETWEEN THE PARTIES WHICH CAN
BE ENFORCE[D] BY THE COURT.
{¶24} In its third assignment of error, Reserve argues that the trial court erred in finding
that the parties had entered into a course of dealing when it accepted the checks with the
restrictive language in the years leading up to June 2012. In support of this position, Reserve
posits that the restrictive language was merely “intended to make sure [Waterford Pointe]
complied with the [bylaws] regarding the use of the money it collected” and, for a time, it
accomplished that objective. This Court disagrees.
{¶25} A party cannot prevail on a course of dealing theory when there is no evidence
demonstrating that the parties intended to alter the terms of their legal relationship. See
generally Westenbarger v. St. Thomas Med. Ctr., 9th Dist. Summit No. 16119, 1994 WL
286022, *4 (June 29, 1994). The parties stipulated that “[t]he language that Reserve [] placed on
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the back of its checks did not change, amend or modify the contract between the parties.” The
parties further stipulated that the bylaws “allow [Waterford Pointe] to assess late fees and legal
fees to a delinquent account in accordance with its collection policy.” Accordingly, the fact that
Waterford Pointe accepted checks containing the restrictive language for a period of time did not
alter the legal responsibilities of the parties as stated in the bylaws and Reserve’s course of
dealing argument is without merit.
{¶26} The third assignment of error is overruled.
ASSIGNMENT OF ERROR IV
THE LOWER COURT ERRED IN FAILING TO FIND THAT [WATERFORD
POINTE] BREACHED ITS CONTRACT WITH THE APPELLANT.
{¶27} In its fourth assignment of error, Reserve contends that the trial court erred by
failing to conclude Waterford Pointe breached its contractual agreement with Reserve. This
Court disagrees.
{¶28} This Court has recognized that “[a] foreclosure requires a two[-]step process.”
(Internal quotations and citations omitted.) Bank of N.Y. Mellon v. Chappell, 9th Dist. Lorain
No. 17CA011114, 2018-Ohio-1879, ¶ 13, quoting Natl. City Bank v. Skipper, 9th Dist. Summit
No. 24772, 2009-Ohio-5940, ¶ 25. After the trial court has determined that a party has defaulted
on its obligation, it must consider the equities of the situation in order to determine if foreclosure
is an appropriate remedy. (Internal quotations and omitted.) Chappell at ¶ 13.
{¶29} Reserve effectively renews its position that Waterford Pointe manufactured this
dispute and that it could have simply cashed Reserve’s checks containing the restrictive language
as it had done in the months and years leading up to June 2012. Even assuming that Reserve
breached the contract, Reserve maintains that Waterford Pointe could have greatly mitigated its
damages if it had simply accepted the checks. Reserve also contends that foreclosure was not an
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equitable remedy under the circumstances of this case because it continued to tender checks on a
monthly basis.
{¶30} As discussed in our resolution of Reserve’s second and third assignments of error,
Reserve’s account became delinquent in April 2012 and Waterford Pointe was not obligated to
accept Reserve’s checks tendered thereafter that contained restrictive language in contravention
of the order of priority set forth in the bylaws. Accordingly, we cannot accept the supposition
that Waterford Pointe either breached the contract or failed to mitigate damages after Reserve’s
breach.
{¶31} With respect to Reserve’s contention that foreclosure was not an equitable remedy
in this case, we are mindful that a trial court’s decision regarding whether foreclosure is an
equitable remedy is reviewed for an abuse of discretion. Chappell at ¶ 14, citing PHH Mtge.
Corp. v. Barker, 190 Ohio App.3d 71, 2010-Ohio-5061, ¶ 35 (3d. Dist.). In this case, Waterford
Pointe engaged in frequent communications with Reserve in an attempt to address the problem
with the restrictive language. After Reserve had accrued a sizable delinquency, Waterford
Pointe offered to waive late fees and costs if Reserve would tender a check for the outstanding
delinquency for its monthly assessments. Waterford Pointe attempted to resolve the issues with
Reserve for more than two years. Despite these efforts, Reserve continued its practice of
tendering checks on a monthly basis that contained the restrictive language. Under these
circumstances, Reserve has not demonstrated that the trial court abused its discretion by
concluding that foreclosure was an appropriate remedy.
{¶32} The assignment of error is overruled.
ASSIGNMENT OF ERROR V
THE LOWER COURT FAILED TO FOLLOW THE FACTS, THE CIVIL
RULES AND/OR ABUSED ITS DISCRETION IN FAILING TO GRANT
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APPELLANT’S DEMAND FOR A JURY TRIAL AS TO ITS
COUNTERCLAIMS[.]
{¶33} In its final assignment of error, Reserve contends that its counterclaims should be
tried to a jury. On July, 26, 2016, the trial court issued an order bifurcating the issues before the
court and noting that the issue of the validity of the lien would be tried to the bench. The trial
court further specified that “[o]nce the status of the lien has been determined, the Court can
engage in a more detailed analysis and determine whether the remaining causes of action will
proceed with a jury or bench trial.” On appeal from the trial court’s determination that the lien
was valid, Reserve argues that if it prevails in this appeal, its counterclaims should be tried to a
jury. The instant appeal pertains solely to the trial court’s determination regarding the validity of
the lien and this Court declines to address issues that fall outside the scope of the instant appeal.
III.
{¶34} Reserve’s first, second, third, and fourth assignments of error are overruled. We
decline to address Reserve’s fifth assignment of error as it falls outside the scope of the instant
appeal. The judgment of the Summit County Court of Common Pleas is affirmed.
Judgment affirmed.
There were reasonable grounds for this appeal.
We order that a special mandate issue out of this Court, directing the Court of Common
Pleas, County of Summit, State of Ohio, to carry this judgment into execution. A certified copy
of this journal entry shall constitute the mandate, pursuant to App.R. 27.
Immediately upon the filing hereof, this document shall constitute the journal entry of
judgment, and it shall be file stamped by the Clerk of the Court of Appeals at which time the
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period for review shall begin to run. App.R. 22(C). The Clerk of the Court of Appeals is
instructed to mail a notice of entry of this judgment to the parties and to make a notation of the
mailing in the docket, pursuant to App.R. 30.
Costs taxed to Appellant.
DONNA J. CARR
FOR THE COURT
HENSAL, J.
CALLAHAN, J.
CONCUR.
APPEARANCES:
CLIFFORD THORNTON, Attorney at Law, for Appellant.
ARTHUR TASSI, Attorney at Law, for Appellee.
JOSEPH E. DIBAGGIO, Attorney at Law, for Appellee.
KIMBERLY K. WYSS, Attorney at Law, for Appellee.