B. Investment LC v. Anderson ( 2012 )

IN THE UTAH COURT OF APPEALS
‐‐‐‐ooOoo‐‐‐‐
B. Investment LC, a Utah limited ) OPINION
liability company; and Michelle Whitt )
Ortega, Trustee of the Michelle Whitt ) Case No. 20100071‐CA
Ortega Family Trust, )
)
Plaintiffs, Appellants, and ) FILED
Cross‐appellees, ) (January 26, 2012)
)
v. ) 2012 UT App 24)
Cathy O. Anderson, Trustee of the )
Cathy O. Anderson Living Trust; )
Longfellow Holdings, LLC, a Utah )
limited liability company; Joan M. )
Dallof, Trustee of the Joan M. Dallof )
Revocable Trust; Henry S. )
Hemmingway, Trustee of the Henry S. )
Hemmingway Revocable Trust; and )
Spinnaker Point Condominium Owners )
Association, )
)
Defendants, Appellees, and )
Cross‐appellants. )
‐‐‐‐‐
First District, Randolph Department, 060100011
The Honorable Clint S. Judkins
Attorneys: Ronald G. Russell, Salt Lake City, for Appellants
Vincent C. Rampton, Salt Lake City, for Appellees
‐‐‐‐‐
Before Judges Voros, Thorne, and Roth.
VOROS, Associate Presiding Judge:
¶1 This quiet title action involves a stretch of beach at Bear Lake. The beachfront
property is part of a hybrid condominium project known as Spinnaker Point. The
project includes both traditional condominium units and lots intended for single family
dwellings. Owners of the traditional condominium units (the Condo Owners) brought
suit against the condominium declarant, the Spinnaker Point Condominium Owners
Association, and the owners of the single family lots (collectively, the Lot Owners).
¶2 This appeal requires us to interpret the provisions of Spinnaker Point’s Amended
Plat and Amended Declaration in light of the Utah Condominium Ownership Act (the
Act), see Utah Code Ann. §§ 57‐8‐1 to ‐54 (2010 & Supp. 2011).1 Each set of owners
contends that the documents support its position. Because the documents are internally
inconsistent, neither side’s reading is wholly satisfactory. The trial court entered
summary judgment in favor of the Lot Owners, ruling that the Lot Owners as well as
the Condo Owners own a share of the beachfront property. For reasons stated below,
we agree with the trial court and therefore affirm.
BACKGROUND
¶3 Spinnaker Point was created in 1984; the original record of survey map showed
six condominium units in a first phase, with a possible expansion area. After three
condominium units were constructed on what is now Lot 2, Spinnaker Point was
conveyed to Donald and Cathy Anderson. In 2001, the Andersons filed an Amended
Plat and an Amended Declaration, dividing the property into five lots and designating
Lots 1, 3, 4, and 5 for single family dwellings. The Amended Plat also designated, and
marked with a cross‐hatch pattern, a Limited Common Area consisting of a corridor
between Lots 2 and 3 and a beachfront area abutting Lots 2 and 3.
1. The relevant code provisions in effect when the Amended Declaration and Amended
Plat were filed have not been substantively changed. We therefore cite to the current
version of the code for the reader’s convenience.
20100071‐CA 2
¶4 The Limited Common Area is the subject of this dispute. The Condo Owners
contend that they own the Limited Common Area, subject only to the Lot Owners’ right
of access to and from the beach. The Lot Owners contend that they and the Condo
Owners own the Limited Common Area in equal shares. The trial court entered
summary judgment in favor of the Lot Owners.
ISSUES AND STANDARDS OF REVIEW
¶5 On appeal, the Condo Owners contend that “the Amended Declaration and
Amended Plat require” that they are the sole owners of the Limited Common Area.
The Condo Owners also contend that the Condominium Ownership Act “precludes the
Lot Owners from owning a portion of the [Limited] Common Area and requires that the
Condo Owners own the [Limited] Common Area.” Summary judgment is appropriate
when “there is no genuine issue as to any material fact and . . . the moving party is
entitled to a judgment as a matter of law.” Utah R. Civ. P. 56(c). We “review[] a trial
court’s legal conclusions and ultimate grant or denial of summary judgment for
correctness and view[] the facts and all reasonable inferences drawn therefrom in the
light most favorable to the nonmoving party.” Bingham v. Roosevelt City Corp., 2010 UT
37, ¶ 10, 235 P.3d 730 (citation and internal quotation marks omitted).
¶6 On cross‐appeal, the Lot Owners contend that the trial court erred in refusing to
award attorney fees to which they were entitled under the Amended Declaration.
Generally, “[w]hether attorney fees should be awarded is a legal issue that we review
for correctness.” Gardiner v. York, 2006 UT App 496, ¶ 5, 153 P.3d 791 (citing Valcarce v.
Fitzgerald, 961 P.2d 305, 315 (Utah 1998)).
ANALYSIS
I. Ownership of the Limited Common Area
¶7 This dispute arises from a conflict between the language in the Amended
Declaration and the language in the Amended Plat. The Lot Owners rely principally on
Exhibit C of the Amended Declaration. It features a columnar chart defining the
“Percentage of Ownership of Limited Common Ownership Areas as indicated on the Plat
20100071‐CA 3
Map.” According to this chart, the Lot Owners and the Condo Owners each own an
undivided 14.286% interest in the Limited Common Area.
¶8 The Condo Owners rely principally on a note appearing on the Amended Plat.
This note states, “Limited common ownership on this plat denotes access to and use of
common area at beach. Ownership of this limited common area remains with Lot 2.”
Lot 2 belongs to the Condo Owners. They thus claim full ownership of the Limited
Common Area and argue that the Lot Owners hold only a right of access over it.
¶9 “We interpret the provisions of the Declaration as we would a contract.” View
Condo. Owners Ass’n v. MSICO, LLC, 2005 UT 91, ¶ 21, 127 P.3d 697. “If the Declaration
is not ambiguous, we interpret it according to its plain language.” Id. “We may resort
to extrinsic evidence as an aid to construction only where there is an ambiguity.”2 Id. In
addition, the declaration and the plat must be construed together. See id. ¶ 24.
¶10 We also read the Amended Declaration and Amended Plat in light of the Act.
See Country Oaks Condo. Mgmt. Comm. v. Jones, 851 P.2d 640, 641–42 (Utah 1993).
Condominium declarations and the condominium plats are governed by separate
sections of the Act. Condominium declarations are governed by section 57‐8‐10. That
section requires the declaration to “include the percentage or fraction of undivided
interest in the common areas.” See Utah Code Ann. § 57‐8‐10(2)(d)(i) (Supp. 2011). This
must be done “in accordance with Section 57‐8‐7(2).” Id. Significantly, section 57‐8‐7(2)
provides that “[e]ach unit owner shall be entitled to an undivided interest in the
common areas and facilities in the percentages or fractions expressed in the declaration.”
Id. § 57‐8‐7(2) (2010) (emphasis added). This interest may be “reflected by . . . an exhibit
or schedule accompanying the declaration and recorded simultaneously with it,
containing columns.” Id.
¶11 Plats are governed by section 57‐8‐13. Unsurprisingly, this section focuses on
boundaries, encroachments, locations, dimensions, floorplans, and the like. See id. § 57‐
8‐13 (2010). It does not mention the proportional ownership of common areas.
¶12 As required by section 57‐8‐7(2), Exhibit C to the Amended Declaration
“allocate[s] to each unit an equal undivided interest in the common areas,” see id. § 57‐8‐
2. Here, the parties agree that no parol evidence sheds light on the relevant documents,
which must as a result be read as they are written.
20100071‐CA 4
7(2). In addition, Exhibit C features a columnar chart defining the percentage of
ownership of the Limited Common Area:
Percentage of Ownership of
Limited Common Ownership Areas
as indicated on the Plat Map
by the cross hatched pattern
Lot No.
1 14.286%
2 Unit 1 14.286%
2 Unit 2 14.286%
2 Unit 3 14.286%
3 14.286%
4 14.286%
5 14.286%
This chart complies with the requirements of section 57‐8‐10. See Utah Code Ann. § 57‐
8‐10(2)(d)(i). Exhibit C’s chart specifies that the Lot Owners and the Condo Owners
each own an undivided 14.286% interest in the Limited Common Area.
¶13 Other provisions of the Amended Declaration reinforce the conclusion that the
Lot Owners and the Condo Owners own equal undivided interests in the Limited
Common Area. According to the Amended Declaration, the Common Areas—which by
definition include the Limited Common Area—are “owned by the Unit Owners as
tenants in common.” The Amended Declaration defines “Unit Owners” to include both
Condo Owners and Lot Owners. Accordingly, both Condo Owners and Lot Owners
own the Limited Common Area as tenants in common. Because “tenants in common
are presumed to hold equal, undivided shares in the commonly owned property,” see
Shiba v. Shiba, 2008 UT 33, ¶ 15, 186 P.3d 329, the language in the Amended Declaration
supports Exhibit C’s statement that the Lot and Condo Owners own the same
proportional share of the Limited Common Area.
¶14 The Amended Plat, recorded concurrently with the Amended Declaration but
dated seven weeks before the Amended Declaration was signed, suggests a different
result. The Amended Plat contains a note with five statements. The fourth of these
20100071‐CA 5
describes ownership of the Limited Common Area as belonging to the Condo Owners,
whose units are on Lot 2:
LIMITED COMMON OWNERSHIP ON THIS PLAT
DENOTES ACCESS TO AND USE OF COMMON AREA AT
BEACH. OWNERSHIP OF THIS LIMITED COMMON
AREA REMAINS WITH LOT 2.
¶15 The core question in this case is whether the parties’ relative interests in the
Limited Common Area should be governed by Exhibit C to the Amended Declaration
or by the note on the Amended Plat. We conclude that the Act has resolved the conflict
by designating the declaration as the document that defines unit owners’ relative
interests in the common area: “Each unit owner shall be entitled to an undivided
interest in the common areas and facilities in the percentages or fractions expressed in
the declaration.” Utah Code Ann. § 57‐8‐7(2) (emphasis added). We therefore conclude
that the Condo Owners and the Lot Owners own equal undivided interests in the
Limited Common Area.
¶16 The Condo Owners resist this conclusion on multiple grounds. Most
significantly, they contend that the Utah Supreme Court has held, and the Act itself
provides, that the term “unit” is limited to an area “within a physically enclosed space.”
Thus, they reason, the owner of a single family dwelling lot or a lot without a building
on it cannot be a “unit owner” as that term is used in the Amended Declaration and the
Act.
¶17 This argument finds support in Country Oaks Condominium Management
Committee v. Jones, 851 P.2d 640 (Utah 1993). The question before the supreme court in
Country Oaks was whether owners of undeveloped parcels within a condominium
project owned “units.” See id. at 640. Following the parties’ lead, the court first
examined the condominium declaration and supplemental declaration. See id. at 641.
Taken as a whole, the declarations indicated that “a unit exists only when a structure
provides an enclosed area for the exclusive use and possession of the owner.” Id. at
641–42. For example, both declarations described a unit as “[t]he space enclosed within
the undecorated interior surface of its perimeter walls, floors and ceilings . . . projected,
where appropriate, to form a complete enclosure of space.” Id. at 641 (alteration in
original). The court applied the declarations’ definition of “unit” as an enclosed space.
See id. at 641–42.
20100071‐CA 6
¶18 The court “acknowledge[d] that the Act anticipates that a condominium project
may contain proposed units that are not yet constructed.” Id. at 642. Nevertheless, it
concluded that the declarations’ definition of unit as an enclosed space was buttressed
by another provision of the Act, section 57‐8‐3(8). See id. That section provides, “‘Any
reference in this chapter to a condominium unit includes both a physical unit together
with its appurtenant undivided interest in the common areas and facilities . . . .’” Id.(quoting Utah Code Ann. § 57‐8‐3(8) (Michie 1990) (current version at id. § 57‐8‐3(10)
(LexisNexis Supp. 2011))).
¶19 We read Country Oaks as allowing declarants a measure of latitude in defining a
unit. The court concluded that the Country Oaks declarations’ definition of unit as an
“enclosed space” found sufficient support in a provision of the Act providing that a unit
be “physical.” See id. This statutory definition gives limited support to the proposition
that a unit must be an enclosed space, although the opinion does not explain why a
vacant lot does not also qualify as “physical.” Nevertheless, even where “the Act
anticipates that a condominium project may contain proposed units that are not yet
constructed,” id., this reference to a “physical unit” offered sufficient statutory support
for the court to apply the Country Oaks declarations’ definition of “unit.”
¶20 The Spinnaker Point Amended Declaration defines “Unit” to mean “one of the
Condominium Units, and/or Lots 1, 3, 4 and 5 . . . .” Similarly, a “Unit Owner” includes
an “entity, person or persons owning one or more of Lots 1, 3, 4 and 5 for single family
dwellings . . . .” Thus, under the Amended Declaration, Lots 1, 3, 4, and 5 are “units.”
This definition of “unit” finds at least as much support in the Act as the definition
upheld in Country Oaks.
¶21 Subsection 57‐8‐3(10) of the Act states, “Any reference in this chapter to a
condominium unit includes both a physical unit together with its appurtenant
undivided interest in the common areas and facilities . . . .” Utah Code Ann. § 57‐8‐
3(10) (Supp. 2011). Subsection 57‐8‐3(27) of the Act defines “unit” to include “a separate
physical part of the property intended for any type of independent use, including one
or more rooms or spaces located in one or more floors or part or parts of floors in a
building . . . .” Id. § 57‐8‐3(27). Finally, subsection 57‐8‐3(23) of the Act defines
“property” as “the land, whether leasehold or in fee simple, the building, if any, all
improvements and structures thereon, all easements, rights, and appurtenances
belonging thereto, and all articles of personal property intended for use in connection
therewith.” Id. § 57‐8‐3(23) (emphasis added). In addition, section 57‐8‐13 refers to “any
20100071‐CA 7
unit or convertible space not contained or to be contained in a building or whose boundaries
are not to be coextensive with walls, ceilings, or floors within a building . . . .” Id. § 57‐8‐
13(1)(a)(iv) (2010) (emphases added).
¶22 These definitions cannot reasonably be read to categorically exclude a vacant lot
or a single family dwelling from the definition of “unit.” Each lot designated by the
Spinnaker Point Amended Declaration is “a separate physical part of the property
intended for any type of independent use,” see id. § 57‐8‐3(27) (Supp. 2011), especially
where the statutory definition of “property” includes land without a building on it, see
id. § 57‐8‐3(23). Each such lot, moreover, is a “unit . . . not contained . . . in a building.”
See id. § 57‐8‐13(1)(a)(iv) (2010). Thus, the Amended Declaration’s definition of “unit” is
sufficiently consistent with the Act’s definitions to meet the standard set in Country
Oaks.
¶23 The Condo Owners’ other principal contention is that, properly read, the
Amended Plat and Exhibit C to the Amended Declaration present no irreconcilable
conflict. To harmonize the provisions, the Condo Owners read Exhibit C’s designation
of “Percentage of Ownership of Limited Common Ownership Areas” to refer to
percentage of ownership “in the limited property right” of “access to and from the lake
and beach” across the Limited Common Area.
¶24 We agree with the Condo Owners that the provisions of the Amended
Declaration “should be read as a whole, in an attempt to harmonize and give effect to
all of the . . . provisions,” see Lee v. Barnes, 1999 UT App 126, ¶ 11, 977 P.2d 550 (citation
and internal quotation marks omitted) (referring to contract interpretation).
Consequently, “[p]rovisions which are apparently conflicting are to be reconciled and
harmonized, if possible, by reasonable interpretation so that the entire agreement can be
given effect.” Big Cottonwood Tanner Ditch Co. v. Salt Lake City, 740 P.2d 1357, 1359 n.1
(Utah Ct. App. 1987) (citation and internal quotation mark omitted). However, we do
not agree that the Condo Owners’ interpretation of Exhibit C is reasonable.
¶25 First, while the Condo Owners’ reading of Exhibit C is consistent with the note to
the Amended Plat, and perhaps with other provisions of the Amended Declaration, it is
not consistent with the plain language of Exhibit C. Exhibit C is entitled “Ownership of
Common Areas.” The exhibit is divided into sections referring to percentage ownership
of “Common Areas for Lot #2,” “Common Ownership Areas for all Lots,” and “Limited
Common Ownership Areas.” It does not mention easements or access rights. Similarly,
20100071‐CA 8
while other provisions of the Amended Declaration deal explicitly with access and use,
the Amended Declaration describes Exhibit C as setting forth “the fractional ownership
interests in the Common Areas.” (Emphasis added.) Also, the exhibit was obviously
designed to mirror the table described in Utah Code section 57‐8‐7(2). See Utah Code
Ann. § 57‐8‐7(2) (2010). That subsection refers to unit owners’ “undivided interest in
the common areas and facilities,” id.; it does not mention rights of access.
¶26 Second, the Condo Owners’ reading of Exhibit C does not explain why the
declarants would divide a right of access into seven equal 14.286% portions. More
fundamentally, it does not explain why the Condo Owners, as the fee simple owners of
the Limited Common Area, would each be granted a 14.286% right of access over it.
Accordingly, we do not agree that Exhibit C and the note to the Amended Plat may be
read in harmony without doing violence to the plain language of Exhibit C.
¶27 Next, the Condo Owners contend that Lots 1, 3, 4, and 5 are not part of the
condominium project at all and, thus, the Lot Owners hold no interest in the project’s
common areas. In support, they cite to several provisions, including a notation in the
Amended Plat stating, “Lot 2 has recorded covenants pertaining to the condominium
association on Lot 2 only,” and a provision in the Amended Declaration stating,
“Declarant desires . . . to submit . . . Lot #2, and other improvements constructed
thereon to the provisions of the [Act] as a Condominium Project as set forth in the
original declaration, and convert Lots 1, 3, 4 and 5 as single family dwellings.”
¶28 Against these provisions, however, are many provisions unequivocally stating
that Lots 1, 3, 4, and 5 are part of the condominium project and subject to the Act. For
example, the Amended Declaration defines “the Property” to include Lot 2 and the Lot
Owners’ parcels. It then goes on to “submit[] the Property to the provisions of the Act
as a Condominium Project.” It also defines “Condominium Project” as referring to “the
entire property.” In addition, the Amended Declaration makes no material distinction
between the Condo Owners’ parcel and the Lot Owners’ parcels. For instance, as noted
above, the Amended Declaration defines the word “Unit” to include “one of the
Condominium Units, and/or Lots 1, 3, 4 and 5.” Accordingly, we conclude that the Lot
Owners’ parcels are part of the condominium project.
¶29 Finally, the Condo Owners briefly argue that granting the Lot Owners ownership
interests in the Limited Common Area would cause the building on Lot 2 to violate a
city setback ordinance. They conclude that “[i]t would not have made any sense for the
20100071‐CA 9
drafters of the Amended Plat and Amended Declaration to intentionally violate setback
requirements and, in any event, had they done so, [the city] could not have approved
the Amended Plat.” We understand this argument to be that the declarants and the city
council must have understood the Amended Declaration as the Condo Owners do,
because neither would have intended a zoning violation. Assuming without deciding
that effectuating the clear intent of Exhibit C to the Amended Declaration would result
in the violation of a zoning ordinance, we are not persuaded that this result was not
simply inadvertent. In any event, this argument by inference is insufficient to refute the
explicit language of Exhibit C.
¶30 For the foregoing reasons, we affirm the trial court’s ruling that the Lot Owners
and the Condo Owners own equal undivided interests in the Limited Common Area.
II. Attorney Fees
¶31 On cross‐appeal, the Lot Owners contend that they are entitled to an award of
attorney fees. They rely on a provision of the Amended Declaration that allows
recovery of costs and fees in an action against a unit owner for failure to comply with
the Amended Declaration:
Each Unit Owner . . . shall comply with the provisions of . . .
this Declaration, . . . and any failure to comply with any of
the provisions thereof shall be grounds for an action . . . for
injunctive relief or to recover any loss or[] damage resulting
therefrom, including costs and reasonable attorney’s fees.
This action arose when the Condo Owners sued seeking a declaration that they were the
sole owners of the Limited Common Area, subject to a right of access in the Lot Owners.
The Lot Owners prevailed. However, the trial court ruled that the Condo Owners “did
not violate any provision of the Amended Declaration by filing a lawsuit.” It also ruled
that “there is no reasonable evidence that would justify an award of attorney’s fees
under the Amended Declaration.” It accordingly denied the Lot Owners’ request for
attorney fees.
¶32 Subject to exceptions inapplicable here, “‘attorney fees are not recoverable by a
prevailing party unless authorized by statute or contract.’” Gallegos v. Lloyd, 2008 UT
App 40, ¶ 8, 178 P.3d 922 (quoting Faust v. KAI Techs., 2000 UT 82, ¶ 17, 15 P.3d 1266).
20100071‐CA 10
“If [recoverable] by contract, the award of attorney’s fees is allowed only in accordance
with the terms of the contract.” Turtle Mgmt., Inc. v. Haggis Mgmt., Inc., 645 P.2d 667,
671 (Utah 1982). The narrow question here is whether, by filing an unsuccessful
declaratory judgment action, the Condo Owners failed to comply with any provision of
the Amended Declaration.
¶33 This issue is controlled by Faulkner v. Farnsworth, 714 P.2d 1149 (Utah 1986) (per
curiam). There, our supreme court set aside an award of attorney fees to a prevailing
party. See id. at 1151. The court held that where the attorney fee provision requires the
“defaulting party” to pay costs and expenses, the prevailing party must prove default:
The contractual language does not award attorney fees to the
prevailing party who succeeds in enforcing the agreement,
but against the defaulting party whose default necessitates
enforcement. As neither party was held in default, neither
was entitled to attorney fees.
Id. The court observed that “[o]ther jurisdictions have held the award of attorney fees
improper in disputes dealing with the declaration of rights and obligations under
contract, where the contractual language restricted the award to curing default or
breach or to enforcing the payment of rent or other provisions of a lease.” Id. (collecting
cases).
¶34 Here, the Lot Owners prevailed in the trial court, but they did not demonstrate
that the Condo Owners violated any provision of the Amended Declaration.
Accordingly, they have not come within the language of the attorney fee provision. The
Lot Owners maintain that they have “expended significant costs and fees vindicating
Spinnaker Point Condominium Association’s right to regulate changes and
improvements to the Limited Common Area, in the face of direct challenges to that
right . . . .” Even if we agreed with that assertion, we cannot under Faulkner agree that
the attorney fee provision in the Amended Declaration “should be construed broadly
enough to reimburse [the Lot Owners] for the costs imposed on them by those
challenges.” Like the trial court here, and the supreme court in Faulkner, we construe
the attorney fee provision according to its terms, which do not support an award of fees
on the facts of this case.
20100071‐CA 11
CONCLUSION
¶35 This case presents a conflict between the Amended Declaration, which grants
each Lot Owner an equal undivided ownership interest in the Limited Common Area,
and the Amended Plat, which states that ownership of the Limited Common Area is
held by the Condo Owners. The Utah Condominium Ownership Act specifies that a
unit owner is entitled to an undivided interest in common areas as provided in the
declaration. Thus, like the trial court, we conclude that the Amended Declaration
governs. Accordingly, every Unit Owner—including each Lot Owner and each Condo
Owner—owns an equal undivided interest in the Limited Common Area. The Condo
Owners’ objections to this reading, though plausible, are ultimately not persuasive.
¶36 On cross‐appeal, we are not persuaded that the Condo Owners violated any
provision of the Amended Declaration by bringing this declaratory action to clarify the
parties’ rights. Accordingly, we affirm the trial court’s refusal to award the Lot Owners
attorney fees and we likewise award no attorney fees on appeal.
¶37 Affirmed.
____________________________________
J. Frederic Voros Jr.,
Associate Presiding Judge
‐‐‐‐‐
¶38 WE CONCUR:
____________________________________
William A. Thorne Jr., Judge
____________________________________
Stephen L. Roth, Judge
20100071‐CA 12