Roy H.A. Watson III v. The Village at Northshore I Association, Inc. ( 2014 )

Note: Decisions of a three-justice panel are not to be considered as precedent before any tribunal.
ENTRY ORDER
SUPREME COURT DOCKET NO. 2013-451
MAY TERM, 2014
Roy H.A. Watson III } APPEALED FROM:
}
} Superior Court, Chittenden Unit,
v. } Civil Division
}
}
The Village at Northshore I Association, Inc. } DOCKET NO. 835-8-13 Cncv
Trial Judge: Dennis R. Pearson
In the above-entitled cause, the Clerk will enter:
Plaintiff, an owner of a unit in a common-interest community, filed a declaratory
judgment action against defendant, the governing association. Defendant moved to dismiss on
account of plaintiff’s failure to exhaust contractual remedies provided for in the association’s
governing documents. The court granted the motion and dismissed the case without prejudice.
On appeal, plaintiff argues that he complied with all of the requirements of the applicable bylaws
and rules, and that dismissal on the basis of his failure to do so was unwarranted. We agree that
on the basis of this record dismissal was premature or unwarranted, and reverse and remand.
The applicable statutory and contractual framework is not in substantial dispute.
Defendant is a common-interest community. Defendant’s powers are defined by Vermont’s
Common Interest Ownership Act. 27A V.S.A. §§ 1-101 to 4-120. Under the statute, owners’
associations “[m]ay require that disputes between the executive board and unit owners or
between two or more unit owners regarding the common interest community must be submitted
to nonbinding alternative dispute resolution as a prerequisite to commencement of a judicial
proceeding.” Id. § 3-102(a)(16). Defendant is governed by association bylaws. Those bylaws
were attached as an exhibit to plaintiff’s complaint, and include a provision empowering
defendant
To require, by Rule, that disputes between the Board of Directors
and Unit Owners or between two or more Unit Owners regarding
the Common Interest Community must be submitted to nonbinding
alternative dispute resolution in the manner described in the
regulation as a prerequisite to commencement of a judicial
proceeding.
Defendant also has adopted rules. Those rules, which were also attached to the
complaint, contain a section on conflict resolution that provides in part:
Written complaints shall be made to the management company
and, if not satisfactorily resolved, then in writing to the Board of
Directors. Complaints from a unit owner may be directed by the
Board to the Conflict Resolution Committee for mediation and
resolution. If the Conflict Resolution Committee is unable to
mediate said dispute, then upon notice and hearing to the affected
parties, the Conflict Resolution Committee shall take evidence
from the parties and make a written recommendation of resolution
to the Board of Directors.
Plaintiff filed suit in August 2013, alleging that defendant had breached certain covenants
and statutes, and seeking a declaratory judgment delineating those breaches. The complaint was
fifty-four pages long and contained thirty-five exhibits. In lieu of an answer, defendant moved to
dismiss for lack of subject matter jurisdiction, alleging that plaintiff had failed to pursue or
exhaust the remedies provided by the governing documents by failing to make a written
complaint to the management company or the Board of Directors, and to engage in alternative
dispute resolution (ADR). In the alternative, defendant requested that the matter be stayed to
permit the parties to engage in mediation.1
Plaintiff filed a response framed as both an opposition to defendant’s motion to dismiss
and as a motion to strike. On the merits of the motion to dismiss, he alleged that he had
complied with the contractual remedy by already raising most2 of the issues in the complaint
with the Board—most recently by submitting a letter to the Board in January 2013—and the
Board resolved the issues without exercising its authority to refer the questions for ADR
pursuant to the rules. He also claimed that although the Board was empowered to create a rule
requiring ADR, the enacted rule did not so require, but made the mediation process voluntary.
Plaintiff stated that he was not “averse to allowing” mediation, and he would “happily agree to
non-binding mediation” as long as the judicial proceedings were stayed and not abandoned.
Defendant responded that dismissal was appropriate because the grievances plaintiff had
previously submitted to the Board were different from those in the complaint. In any event,
defendant stated that it was appropriate to stay the proceedings because plaintiff expressed a
willingness to engage in ADR.
The trial court denied the motion to strike, noting that there was nothing “impertinent or
scandalous” about the motion to dismiss. V.R.C.P. 12(f). On the merits, the trial court granted
the motion to dismiss based on its conclusions that the bylaws required nonbinding ADR,
plaintiff consented to engage in ADR, and no mediation had occurred. Plaintiff appealed the
dismissal and the denial of the motion to strike.
We affirm the trial court’s denial of plaintiff’s motion to strike. A motion to strike is not
designed as a mechanism for presenting disputes about law or fact; it authorizes the court to
strike “any insufficient defense or any redundant, immaterial, impertinent, or scandalous matter.”
V.R.C.P. 12(f). Because the motion to strike in this case was nothing more than an alternative
method for presenting plaintiff’s factual and legal disagreements with defendant’s motion to
dismiss, the trial court properly denied plaintiff’s motion to strike.
1
On the same day, plaintiff filed a motion for default judgment based on defendant’s
failure to file an answer. The court denied this motion.
2
Plaintiff admitted that he had not previously raised the “ ‘Unit Expansions’ issue” that
formed one basis for his civil complaint.
2
We review a dismissal for lack of subject matter jurisdiction de novo, and accept as true
all factual allegations in the complaint. Jordan v. State Agency of Transp., 166 Vt. 509, 511
(1997); see V.R.C.P. 12(b)(1) (allowing party to file motion to dismiss for lack of jurisdiction
over subject matter prior to filing answer).
To the extent that the trial court predicated its dismissal on its view that defendant
association’s rules compelled pre-suit mediation in all cases, we read the relevant rule
differently. The rule apparently in effect at the time did not authorize plaintiff to invoke the
mediation requirement; it gave the board discretion to refer, or not refer, complaints to
mediation. In particular, it stated: “Complaints from a unit owner may be directed by the Board
to the Conflict Resolution Committee for mediation and resolution.” If plaintiff duly raised his
complaints with the Board as required by the rule, and the Board opted to decide the disputed
questions without referring the matter to the Conflict Resolution Committee, the lack of
mediation would not stand as an obstacle to plaintiff’s pursuing his claims in court.3
There does not seem to be any substantial dispute that defendant did not refer plaintiff’s
complaints to mediation prior to this lawsuit. There is a substantial dispute as to whether
plaintiff did, in fact, raise each of the claims in this lawsuit in prior complaints to the Board.
Because the trial court dismissed the case based on its view that the Association’s rules require
mediation in every case as a precondition to litigation, the trial court did not address these
questions in its entry order. In his appeal brief, plaintiff cites the documents in the record that he
contends reflect his prior submission of issues to the Board. Any dismissal of claims on the
ground that plaintiff failed to raise them to the Board must be based on an assessment of the
evidence as it relates to each claim after each party has had the opportunity to present pertinent
materials.4
To the extent that the trial court dismissed plaintiff’s claims because both parties had
expressed an interest in and agreement to mediation, a stay of the proceedings to facilitate such
mediation would have been appropriate.
On a final note, plaintiff has submitted facts and evidence on appeal pertaining to events
that occurred after he filed his notice of appeal. In his appellate brief, plaintiff claims that he
submitted his complaint to the association board for mediation two days after dismissal, and he
raises arguments based on these facts, particularly related to the futility of mediation. Defendant,
3
Much of the parties’ briefing addresses whether compliance with the association rule
setting forth defendant’s dispute-resolution process is properly characterized as a “jurisdictional”
prerequisite as opposed to an element of the underlying claim. Because we conclude that the
undisputed facts do not support defendant’s claim that plaintiff did not comply with these
requirements, we need not rehash our discussions of this question at length. See Lamell Lumber
v. Newstress Int’l, Inc., 2007 VT 83, ¶¶ 7-11, 182 Vt. 282 (stating that arbitration agreement
does not divest court of its general jurisdiction to adjudicate contract claims, and agreement to
arbitrate can be waived).
4
Although the trial court dismissed plaintiff’s claims on the pleadings, it acknowledged
that it had considered matters outside of the initial pleadings. It is not entirely clear from the
record whether the parties had notice that the matter would be adjudicated on a summary
judgment standard. See V.R.C.P. 12(c) (stating that motion to dismiss on pleadings may be
treated as summary judgment if parties submit matters outside pleadings and they are given
opportunity to present pertinent materials).
3
in response to plaintiff’s recitation of what occurred, has included its own version of the events.
This Court’s review is limited to the record introduced below. V.R.A.P. 10(a). Because the
events took place after plaintiff filed his notice of appeal and were not before the trial court when
it issued its decision, we do not consider any facts related to those events or documents
submitted for the first time on appeal.
We affirm the trial court’s denial of plaintiff’s motion to strike, and reverse the trial
court’s dismissal of plaintiff’s claims and remand for further proceedings consistent with this
opinion.
Affirmed in part, reversed in part and remanded.
BY THE COURT:
_______________________________________
Paul L. Reiber, Chief Justice
_______________________________________
Marilyn S. Skoglund, Associate Justice
_______________________________________
Beth Robinson, Associate Justice
4