Granville Condo Homeowners Assoc, App/cross-resp V Michael & Brenda Kuehner, Resp/cross-apps ( 2013 )

FILED
COURT OF APPFAE -S
26 13 NOV - 5 AM 8: 57
STATE OF WASHINGTON
Y1
FKITY
IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
DIVISION H
GRANVILLE CONDOMINIUM No. 43157 - -II
2
HOMEOWNERS ASSOCIATION, a
Washington non -
profit corporation,
Appellant and Cross -Respondent,
V.
MICHAEL K. KUEHNER and BRENDA W. PUBLISHED OPINION
KUEHNER, husband and wife,
and Cross-
WORSwiCK, C. J. — Granville Condominium Homeowners Association (HOA) appeals
the superior court' s summary judgment dismissal of their action for unpaid monthly operating
and maintenance assessments against Michael and Brenda Kuehner, who lived in a unit rent free
in satisfaction of a debt. The Kuehners cross appeal the superior court' s denial of their request
for attorney fees.
The HOA argues that the superior court erred in granting summary judgment to the
Kuehners because ( 1) under the terms of the " Granville Condominium Declaration" ( the
Declaration), the Kuehners should be held responsible for the amount of unpaid assessments
Casey Gwen Ingels' unit; ( 2) under the Washington
accrued during their occupancy of and
Condominium Act, ch. 64. 34 RCW, the Kuehners should be held jointly and severally liable with
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the Ingels for all unpaid assessments; ( 3) the Kuehners should be required to pay the unpaid
assessments under a theory of quantum meruit; and (4) under the terms of the Declaration, the
HOA should be awarded reasonable attorney fees for having to seek judicial enforcement of the
terms of the Declaration. The Kuehners argue that the superior court should have awarded them
attorney fees because the HOA' s case presented no fairly debatable issues and was therefore
frivolous.
Because neither the Declaration nor the Washington Condominium Act supports the
HOA' s claims, we affirm the superior court' s summary dismissal of their case. In addition,
because the issue presented by this case — whether a tenant -at -will may be held liable for a
condominium owner' s delinquent common operating and maintenance expense assessments — is
one of first impression in Washington, we hold that the superior court did not act in a manifestly
unreasonable manner in denying attorney fees to either party; therefore, we affirm the superior
court' s denial of attorney fees to both parties.
FACTS
The Kuehners lent the Ingels over $ 100, 000 for business projects. When the Ingels were
unable to timely repay the loan, they' "came to an arrangement" with the Kuehners: The Ingels
would satisfy their debt by allowing the Kuehners to live in the Ingels' condominium unit rent
free. Clerk' s Papers ( CP) at 98. The parties did not record the terms of this arrangement or
execute a lease agreement. However, it is undisputed that the Kuehners did not pay the Ingels
l
or the HOA) to live in the condominium.
1
Presumably, the Kuehners deducted the reasonable monthly rent from the debt owed by the
Ingels: Michael Kuehner was " under the impression that the use of the condominium was in
trade for the debt owed." CP at 99.
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At the time the parties made this arrangement, the HOA already had recorded a lien under
RCW 64. 34.
3642
and the terms of the Declaration against the Ingels' unit for $3, 555. 22 in
unpaid assessments related to condominium common operating expenses, such as utilities. The
record does not reflect that the Kuehners knew of the lien when they agreed to the arrangement
with the Ingels.
In October 2010, the Kuehners moved into the Ingels' condominium. Despite the lien on
the unit and the lack of a written lease agreement, HOA member Beaver Brinkman provided the
Kuehners with all necessary keys and a garage door opener for the Ingels' unit. Brinkman did
not discuss the Ingels' unpaid HOA dues at this time or indicate that the Kuehners would be
responsible for such dues during the term of their tenancy.
A few months after they moved in, Brinkman approached the Kuehners about the Ingels'
unpaid HOA assessments. He requested that the Kuehners " make the payments because a
number of owners had not been paying the association dues [ and] that utilities and other
maintenance items would be shut off if the assessments weren' t paid." CP at 99. The Kuehners
made partial payments on a voluntary basis " based upon [ Brinkman' s] representations ...
regarding the potential to have utilities, such as garbage and elevator services shut off on the
premises." CP at 99. The HOA did not record a lien against the Ingels' unit, the Kuehners, or
the Ingels for the remaining unpaid assessments.
2
RCW 64. 34. 364( 1) provides that a condominium association " has a lien on a unit for any
unpaid assessments levied against a unit from the time the assessment is due."
3 RCW 64. 34.200( 1) provides that a " condominium may be created pursuant to [ the Washington
Condominium Act] only by recording a declaration." In the event of a conflict between the
provisions of an HOA' s bylaws and a condominium declaration, the declaration prevails " except
to the extent the declaration is inconsistent with [the Washington Condominium Act]." RCW
64. 34. 208( 3).
No. 43157 -2 -II
In November 2011, the HOA filed a complaint for money due against the Kuehners in
superior court. The HOA did not include the Ingels as defendants. The HOA admitted that the
Ingels own the condominium, that the Kuehners were not paying rent to occupy the unit, and that
the Ingels were delinquent in their assessment payments in the amount of $7, 780. 08 at the time
the Kuehners began occupying the Ingels' condominium. The HOA argued that "[ e] ven though
the defendants Kuehner are not owners of the unit and not technically members of the [ HOA],
they have been utilizing and consuming the utilities and services made available to them as
occupants" and, as a result, " are indebted to the [ HOA] in the amount of $5, 671. 80 for unpaid
assessments ... during the period of their occupancy." CP at 3 -4
The HOA requested a judgment for the $ 5, 671. 80 the Kuehners allegedly owed, in
addition to a " judgment in the amount of $7, 780. 08, plus interest owed by owners [ the Ingels] for
the period of time prior to defendants' occupancy of the premises, provided that said amount
does not exceed the amount of reasonable rent owed by the defendants to said owners.". CP at 5.
In their answer to the complaint, the Kuehners maintained that the HOA " has sued the incorrect
party." CP at 8.
On December 20, the HOA filed a motion for partial summary judgment.' The HOA
argued that the Declaration " is a recorded document and therefore constitutes notice to the
public, including defendants, of the obligation to pay the monthly assessments to the
homeowners association." CP at 13. The HOA also argued that under RCW 64. 34. 364( 12), the
The HOA' s motion for partial summary judgment did not address its claim that the Kuehners
should pay the $7, 780. 08 owed by the Ingels for assessments that had accrued prior to the
Kuehners' occupancy.
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No. 43157 -2 -II
5
Kuehners and Ingels should be held jointly liable for the unpaid assessments. Finally, the HOA
argued that on the basis of quantum meruit, the Kuehners should be liable for the outstanding
6
assessments accrued during their occupancy period.
Before the hearing on the HOA' s summary judgment motion, the Kuehners filed a
motion to dismiss under CR 12( b)( 6). 7 The Kuehners argued that while the Declaration is a
recorded real property instrument, it does not establish contractual privity between the HOA and
the Kuehners and, accordingly, the HOA should be seeking the outstanding assessments from the
Ingels. In addition, the Kuehners argued that the only appropriate remedy an HOA may pursue
against a tenant for outstanding assessments is governed by RCW 64. 34. 364( 10), which
provides,
From the time of commencement of an action by the association to foreclose a
lien for nonpayment of delinquent assessments against a unit that is not occupied
by the owner thereof, the association shall be entitled to the appointment of a
receiver to collect from the lessee thereof the rent for the unit as and when due. If
the rental is not paid, the receiver may obtain possession of the unit, refurbish it
for rental up to a reasonable standard for rental units in this type of condominium,
rent the unit or permit its rental to others, and apply the rents first to the cost of
the receivership and attorneys' fees thereof, then to the cost of refurbishing the
unit, then to applicable charges, then to costs, fees, and charges of the foreclosure
action, and then to the payment of the delinquent Only a receiver
assessments.
may take possession and collect rents under this subsection, and a receiver shall
not be appointed less than ninety days after the delinquency. The exercise by the
5
RCW 64. 34. 364( 12),
discussed more fully below, provides that in a voluntary conveyance of a
unit, the grantee and grantor are jointly liable for unpaid assessments.
6 The HOA also argued that it was entitled to reasonable attorney fees.
As fully below, although filed as a motion to dismiss under CR 12( b)( 6), it is
explained more
clear that the superior court treated the Kuehners' motion as one for summary judgment under
CR 56( c): The court considered matters outside the pleadings, including the Declaration and the
other evidence submitted supporting and responding to the HOA' s motion for summary
judgment.
No. 43157 -2 -II
association of the foregoing rights shall not affect the priority of preexisting liens
on the unit.
On February 3, 2012, the superior court heard argument on both motions. After
explaining that it had looked at the statutes in question, the Declaration, and the parties' motions
and responses, the court ruled that the assessment " obligation is that of the owner, not the
tenant." Report of Proceedings ( RP) ( Feb. 3, 2012) at 16. The court then granted the Kuehners'
motion$ but did not award attorney fees because it did not find that the HOA' s suit was frivolous
or advanced without reasonable cause.
The HOA now appeals, arguing that the superior court erred in failing to grant its motion
for partial summary judgment and in granting the Kuehners' dismissal motion. The Kuehners
cross appeal the superior court' s denial of attorney fees.
ANALYSIS
1. STANDARD OF REVIEW
As a preliminary matter, while the superior court' s order of dismissal states that it granted
the Kuehners' motion to dismiss " based upon CR 12( b)( 6)," it is clear from the record that the
court considered matters beyond the face of the complaint and outside the pleadings, including
the Declaration. CP at 204. See, e. g., RP ( Feb. 3, 2012) at 14 ( " I have also looked very closely
at the declaration, in particular, the pertinent sections that apply. "). Because "[ a] motion to
dismiss for failure to state a claim is treated as a motion for summary judgment when matters
outside the pleading are presented to and not excluded by the court," we treat the Kuehners' CR
8
The superior court did not explicitly deny the HOA' s summary judgment motion. However,
because granting the Kuehners' dismissal motion was dispositive, the superior court effectively
denied the summary judgment motion sub silentio.
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No. 43157 -2 -II
12( b)( 6) as a motion for summary judgment. Sea -Pac Co. v. United Food & Commercial
Workers Local Union 44, 103 Wash. 2d 800, 802, 699 P.2d 217 ( 1985).
We review a superior court' s summary judgment order de novo. Torgerson v. One
Lincoln Tower, LLC, 166 Wash. 2d 510, 517, 210 P.3d 318 ( 2009). Summary judgment is
appropriate only if the pleadings, affidavits, depositions, and admissions on file demonstrate the
absence of any genuine issues of material fact, and the moving party is entitled to judgment as a
matter of law. CR 56( c). A material fact is one on which the outcome of the litigation depends
in whole or in part. Atherton Condo. Apartment -Owners Ass' n Bd. ofDirs. v. Blume Dev. Co.,
115 Wash. 2d 506,, 516, 799 P.2d 250 ( 1990). Ina summary judgment motion, the moving party
bears the initial burden of showing the absence of an issue of material fact. See, e. g., LaPlante v.
State, 85 Wash. 2d 154, 158, 531 P.2d 299 ( 1975). " If the moving party is a defendant and meets
this initial showing, then the inquiry shifts to the party with the burden of proof at trial, the
plaintiff. If, at this point, the plaintiff ``fails to make a showing sufficient to establish the
existence of an element essential to that party' s case, and on which that party will bear the
burden of proof at trial,' then the trial court should grant the motion." Young v. Key Pharm.,
Inc., 112 Wash. 2d 216, 225, 770 P.2d 182 ( 1989) ( footnote omitted) ( quoting Celotex Corp. v.
Catrett, 477 U.S. 317, 322, 106 S. Ct. 2548, 91 L. Ed. 2d 265 ( 1986)). "[ A] complete failure of
proof concerning an essential element of the nonmoving party' s case necessarily renders all other
facts immaterial." Celotex, 477 U.S. at 323.
II. THE GRANVILLE CONDOMINIUM DECLARATION
The HOA argues that under the Declaration' s terms, the Kuehners were obligated to pay
monthly assessments levied against the Ingels' condominium. Because the Declaration makes
these assessments the unit owners' personal obligation, we disagree.
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No. 43157 -2 -II
A condominium declaration is like a deed, the review of which is a mixed question of
law and fact." Lake v. Woodcreek Homeowners Ass' n, 169 Wash. 2d 516, 526, 243 P.3d 1283
2010). The factual issue is the declarant' s intent, which we discern from the face of the
declaration; the declaration' s legal consequences are questions of law we review de novo. Lake,
169 Wash. 2d at 526. Here, section 16( f) of the Declaration states,
Each Unit Owner shall be obligated to pay Assessments...
No Unit Owner may exempt himself from liability for payment of
Assessments, monetary penalties, and other fees and charges levied pursuant to
the Declaration by waiver or nonuse of any of the Common Elements and
facilities or by the abandonment of his or her Unit.
CP at 132 -33. Section 1 l ( states,
b)
An Owner of any Unit may lease or rent his or her Unit for any residential
purpose ( except hotel or transient purposes) at any time subject to the provisions
of this Declaration. Each lease or rental agreement shall be in writing and by its
terms shall provide that the terms of the lease or rental agreement are subject in
all respects to the provisions of this Declaration and the Bylaws of the
Association, and all rules and regulations promulgated thereunder. The
Association shall not consent to any lease, rental agreement or sublease, the effect
of which will result in non -compliance with this Section.
CP at 118. And section 16( k) states,
Rental Units. If a Unit is rented by its Owner, the Board may collect and the
Tenant shall be obligated to pay over to the Board so much of the rent for such
Unit as is required to pay any amounts due for Assessments.
CP at 134.
The HOA appears to argue that when taken together, these provisions imputed liability to
the Kuehners for the Ingels' unpaid common expense condominium assessments. But section
16( f) contains no provision that the owner' s tenant is obligated to pay assessments, just the
owner. Additionally, section 11( b) is inapplicable here because there was no written rental
agreement. The HOA could have but did not demand that the Ingels execute a written lease that
No. 43157 -2 -II
complied with section 11( b). And section 16( k) is inapplicable because the Kuehners did not pay
any rent, so there was no rent for the HOA to collect.
Thus, by the Declaration' s clear terms, the obligation to pay monthly assessments
belongs solely to the unit owner. This obligation cannot be imputed to the Kuehners.
Accordingly, the HOA' s argument that the Kuehners were liable for the monthly assessments
lacks merit.
III. JOINT AND SEVERAL LIABILITY
The HOA next argues that under RCW 64. 34. 364( 12), the Kuehners should be held
jointly and severally liable (with the Ingels) for unpaid assessments related to the Ingels' unit.
Because the arrangement between the Kuehners and the Ingels does not involve a " voluntary
conveyance" of property, we disagree.
RCW 64. 34. 364( 12) provides,
In addition to constituting a lien on the unit, each assessment shall be the joint and
several obligation of the owner or owners of the unit to which the same are
assessed as of the time the assessment is due. In a voluntary conveyance, the
grantee of a unit shall be jointly and severally liable with the grantor for all
unpaid assessments against the grantor up to the time of the grantor' s conveyance,
without prejudice to the grantee' s right to recover from the grantor the amounts
paid by the grantee therefor. Suit to recover a personal judgment for any
delinquent assessment shall be maintainable in any court of competent jurisdiction
without foreclosing or waiving the lien securing such sums.
The statute fails to define " voluntary conveyance" and neither party offers a definition of
the term. However, when read in context with the rest of RCW 64. 34. 364, the meaning is clear.
RCW 64. 34. 364( l 1) states that " the holder of a mortgage or other purchaser of a unit who
obtains the right of possession of the unit through foreclosure shall not be liable for assessments
that became due prior to such right of possession." In contrast, RCW 64. 64. 364( 12) explains
No. 43157 -2 -II
what happens in situations where conveyance of a unit is made voluntarily, as through a gift or
sale.
Here, it is undisputed that the arrangement between the Ingels and Kuehners did not
involve a conveyance of the condominium under RCW 64. 34. 364. The Kuehners were mere
tenants -at -will. RCW 64. 34.364( 12) is inapplicable to this situation and this argument lacks
merit.
IV. QUANTUM MERUIT
The HOA next argues that "[ e] ven if [
the] Kuehners were not obligated by their
knowledge of the recorded requirement of payment of the monthly homeowner' s dues, or the
Condominium Act, they are obligated to pay for the benefits provided to them on the basis of
9
quantum meruit. " Br. of Appellant at 8( bolding omitted). But the HOA fails to adequately
explain this assignment of error or provide us with reference to any authority supporting its
position.
Quantum meruit " is the method of recovering the reasonable value of services provided
under a contract implied in fact." Young v. Young, 164 Wash. 2d 477, 485, 191 P.3d 1258 ( 2008).
A contract implied in fact
is an agreement depending for its existence on some act or conduct of the party
sought to be charged and arising by implication from circumstances which,
9
The HOA states that quantum meruit " describes the extent of liability on a contract implied by
law." Br. of Appellant at 8. This is incorrect. Unjust enrichment claims are claims involving
contracts implied in law (sometimes called quasi contracts) whereas quantum meruit claims
involve contracts implied in fact. Chandler v. Wash. Toll Bridge 4uth., 17 Wash. 2d 591, 600, 137
P.2d 97 ( 1943). " The two terms are distinct approaches founded on discrete legal theories."
Young v. Young, 164 Wash. 2d 477, 483, 191 P.3d 1258 ( 2008). Because the HOA fails to
adequately develop a claim for unjust enrichment in its briefs, we deem any such claim
abandoned. Kittitas County v. Kittitas County Conservation Coal., Wn. App. , 308 P.3d
745, 752 ( 2013) ( " Unsubstantiated assignments of error are deemed abandoned. ").
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No. 43157 -2 -II
according to common understanding, show a mutual intention on the part of the
parties to contract with each other. The services must be rendered under such
circumstances as to indicate that the person rendering them expected to be paid
therefor, and that the recipient expected, or should have expected, to pay for them.
Johnson v. Nasi, 50 Wash. 2d 87, 91; 309 P.2d 380 ( 1957). "[ T] he elements of a contract implied
in fact are ( 1) the defendant requests work, ( 2) the plaintiff expects payment for the work, and
3) the defendant knows or should know the plaintiff expects payment for the work." Young, 164
Wash. 2d at 486.
Here, the HOA fails to explain the circumstances " which, according to common
understanding, show a mutual "
intention on the part of the parties to contract with each other."
Johnson, 50 Wash. 2d at 91. The HOA also fails to cite any authority for the proposition that a
tenant -at -will may be liable under a theory of quantum meruit for common expense assessments
10
owed by his or her landlord. Accordingly, we refrain from further addressing this issue. RAP
10. 3( a)( 6); Cowiche Canyon Conservancy v. Bosley, 118 Wash. 2d 801, 809, 828 P.2d 549 ( 1992).
V. ATTORNEY FEES
Both parties argue that they were entitled to an award of attorney fees below and are
entitled to attorney fees on appeal. Although the HOA' s suit against the Kuehners fails in light
of our interpretation of the provisions of the Declaration and the Washington Condominium Act,
we conclude that the superior court did not err in denying an award of attorney fees to the
Kueheners or the Ingels below. Because this is a matter of first impression, it was a debatable
io
The HOA argues that "[ i] t is hard to imagine a scenario where someone living in a rented
residential unit can claim to have no liability for the utilities and services they are using." Br. of
Appellant at 9. But this arrangement is actually quite common. In many residential leases,
utilities are included in the cost of the rent. Here, because the Kuehners and Ingels did not
reduce their arrangement to writing, we have no way of knowing how the. parties intended to
handle the condominium common expenses. Nevertheless, the HOA has the burden of
adequately explaining this assignment of error and, here, they have failed to meet that burden.
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No. 43157 -2 -II
issue of law whether a tenant - -will could be held liable for a condominium owner' s delinquent
at
HOA assessments as no Washington case has addressed this scenario. Thus, although we reject
the HOA' s arguments, we do not believe the HOA' s suit was frivolous: the superior court did
not err in denying attorney fees below, and we refrain from awarding either party attorney fees
on appeal.
A. ATTORNEY FEES BELOW
Under RCW 4. 84. 185, we review a superior court' s denial of a request for reasonable
attorney fees and costs for an abuse of discretion. Bldg. Indus. Ass' n of Wash. v. McCarthy, 152
Wn. App. 720, 745, 218 P.3d 196 ( 2009). A court abuses its discretion when its decision is
manifestly unreasonable or based on untenable grounds. Dix v. ICT Grp., Inc., 160 Wash. 2d 826,
833, 161 P.3d 1016 ( 2007). A court necessarily abuses its discretion when basing its decision on
an erroneous view of the law or when applying an incorrect legal standard: Dix, 160 Wash. 2d at
833.
When an action is frivolous, RCW 4. 84. 185 authorizes the superior court to award the
prevailing party reasonable expenses, including attorney fees. Bldg. Indus. Ass' n, 152 Wash. App.
at 745. " A lawsuit is frivolous if, when considering the action in its entirety, it cannot be
supported by any rational argument based in fact or law." Wright v. Dave Johnson Ins. Inc., 167
Wash. App. 758, 785, 275 P.3d 339, review denied, 175 Wash. 2d 1008 ( 2012).
Here, the HOA' s main argument below was that under either the Declaration' s terms or
the provisions of the Washington Condominium Act, the Kuehners should be held liable for the
Ingels' unpaid common expense assessments. While this was an incorrect interpretation of both
the Declaration and the Washington Condominium Act, we do not believe this argument to be a
frivolous one. There is a paucity of Washington law covering the relationship between
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No. 43157 -2 -II
condominium tenants and the HOAs that pay for and operate such buildings. Accordingly, we
are not convinced that this lawsuit presented " no debatable issues and [ was] so devoid of merit
that no possibility of reversal exist[ ed]." W.R.P. Lake Union Ltd. P' ship v. Exterior Servs., Inc.,
85 Wn. App. 744, 752, 934 P.2d 722 ( 1997). The superior court did not abuse its discretion in
11
failing to award the Kuehners attorney fees below.
B. ATTORNEY FEES ON APPEAL
The Kuehners argue that "[ b] ecause Granville HOA can still cite no statute, case law, or
contract which grants them an action against the Kuehners, this Court should grant [ them]
attorney fees and costs incurred in defending this appeal" under RAP 18. 9( a). Br. of Resp' t at
25 -26. We disagree.
RAP 18. 9( a) allows us to award sanctions, such as a grant of attorney fees and costs to an
opposing party, when a party brings a frivolous appeal. "[ A] n appeal is frivolous if there are no
debatable issues upon which reasonable minds might differ, and it is so totally devoid of merit
that there was no reasonable possibility of reversal." Streater v. White, 26 Wash. App. 430, 435,
613 P.2d 187 ( 1980). "[ A]n appeal that is affirmed simply because the arguments are' rejected is
not for that reason alone frivolous." Carillo v. City of Ocean Shores, 122 Wash. App. 592, 619, 94
11 The Kuehners also argue that under RCW 64.34.455, the superior court should have awarded
them reasonable attorney fees in this action. RCW 64. 34.455 provides,
If a declarant or any other person subject to this chapter fails to comply with any
provision hereof or any provision of the declaration or bylaws, any person or class
of persons adversely affected by the failure to comply has a claim for appropriate
relief. The court, in an appropriate case, may award reasonable attorney' s fees to
the prevailing party.
This statute grants the superior court discretion as to whether to award reasonable attorney fees,
and we do not find the superior court abused its discretion when it did not award attorney fees
under this statute.
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P. 3d 961 ( 2004). In addition, we resolve all doubts to whether an appeal is frivolous in favor of
the appellant. Camer v. Seattle Sch. Dist. No. 1, 52 Wash. App. 531, 540, 762 P.2d 356 ( 1988).
Here, as explained above, the HOA incorrectly interpreted its own Declaration and
certain provisions of the Washington Condominium Act. Nevertheless, this appeal did present
an issue of first impression— whether a tenant -at -will may be held liable for a condominium
owner' s delinquent common operating and maintenance expense assessments. As a general rule,
we will not find a case frivolous when it presents an issue of first impression. See, e. g., deckle v.
Crotty, 120 Wn. App. 374, 387 -88, 85 P.3d 931 ( 2004). Seeing no reason to depart from that
rule in these circumstances, we refrain from awarding either party attorney fees on appeal.
We affirm.
C. J.
14