First State Bank v. Metro District Condominiums Property Owners' Ass'n

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SUPREME COURT OF ARKANSAS
No. CV-13-349
FIRST STATE BANK Opinion Delivered February 6, 2014
APPELLANT
APPEAL FROM THE WASHINGTON
V. COUNTY CIRCUIT COURT
[NO. CIV. 2011-2386-4]
METRO DISTRICT CONDOMINIUMS
PROPERTY OWNERS’ ASSOCIATION, HONORABLE G. CHADD MASON
INC. AND HONORABLE CRISTI
APPELLEE BEAUMONT, JUDGES
AFFIRMED.
DONALD L. CORBIN, Associate Justice
We accepted certification of the instant case from the Arkansas Court of Appeals, as
it involves an issue requiring a first-time interpretation of Arkansas Code Annotated section
18-13-116 (Repl. 2003), known as the Arkansas Horizontal Property Act. Appellant First
State Bank argues on appeal that the circuit court erred in refusing to extinguish a lien for
unpaid assessments held by Appellee Metro District Condominiums Property Owners’
Association, Inc. (Metro POA). Appellant also argues that the circuit court erred in awarding
Appellee attorney’s fees. Our jurisdiction is pursuant to Arkansas Supreme Court Rule 1-
2(b)(1), (4), (5), and (6) (2013). We affirm.
The record reflects the following facts. On December 2, 2008, Nock-Broyles Land
Development, LLC, and Henry D. Broyles executed a promissory note in the amount of
$275,000, to purchase a condominium, Unit 270 in the Metro District Condominiums
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Horizontal Property Regime (Metro HPR), which was located in Fayetteville. The
borrowers agreed to pay First State the principal amount, plus interest, by December 2, 2011,
unless payment was demanded prior to that date, and executed a real estate mortgage in favor
of First State.
Thereafter, on February 23, 2010, Nock-Broyles, Mr. Broyles, and First State entered
into a debt-modification agreement, whereby the parties agreed to modify the repayment
terms and the loan’s maturity date to November 10, 2011. This agreement also added 270
Metro, LLC, as an additional guarantor of all obligations due and owing under the terms of
the loan.
Prior to the loan’s maturity date, First State demanded payment in full under the terms
of the loan agreement. First State then filed an amended complaint in the Washington
County Circuit Court on November 9, 2011, against Nock-Broyles, 270 Metro, and Metro
POA.1 First State alleged that Nock-Broyles had breached and defaulted on its obligations
under the loan, as set forth in the promissory note and the debt-modification agreement, and
that First State was entitled to collect the money owed from Nock-Broyles and 270 Metro.
First State prayed that it be granted judgment against Nock-Broyles and 270 Metro, jointly
and severally, in the amount of $247,289.13, plus all unpaid accrued interest and other costs
and attorney’s fees that might be incurred. First State requested that if payment was not made
within ten days that the property be sold at a foreclosure sale and that Nock-Broyles and 270
1
The original complaint was filed on August 10, 2011, against Nock-Broyles and 270
Metro. Mr. Broyles had declared bankruptcy and was never named as a party to the action.
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Metro be held responsible for any deficiency that existed after the sale. Additionally, First
State sought a declaration that its judgment be declared the first and superior lien on the real
property. It acknowledged that Metro POA might claim an interest in the real property
related to unpaid assessments, but asserted that any such interest was inferior to and subject
to its mortgage and asked that any interest of Metro POA be foreclosed upon, terminated, and
forever extinguished.
No answer was filed by Nock-Broyles or 270 Metro. Metro POA filed an answer and
asserted, in relevant part, that its interest in the real property, as created by Metro HPR, dated
June 21, 2005, was superior to that of First State.
First State moved for a default judgment against Nock-Broyles and 270 Metro, and
subsequently moved for summary judgment as to all parties on July 17, 2012. Therein, First
State reasserted that Nock-Broyles and 270 Metro were in default and further asserted that
Metro POA had not filed any record of lien against the unit for any unpaid assessments and,
regardless, First State’s interest in the property was superior to any interest of Metro POA.
More specifically, First State argued that under section 18-13-116(c), its mortgage interest in
the property was superior to any interest resulting from any unpaid assessments owed to
Metro POA. First State again requested the circuit court to find that Metro POA’s interest
was inferior and to extinguish any such claim it may have.
On September 12, 2012, Metro POA filed a notice of lis pendens, asserting its right
to collect certain past-due property owners’ association fees and assessments due and owing
on Unit 270.
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The circuit court entered an order on October 12, 2012, denying without prejudice
First State’s motion for summary judgment. Thereafter, Metro POA filed a motion for
attorney’s fees on December 11, 2012, based on the circuit court’s ruling that its interest
survived First State’s foreclosure action and asserted that the master deed and bylaws provided
for the collection of attorney’s fees. First State responded, arguing that because Metro POA
had not complied with its own bylaws by filing a lien for the unpaid assessments, it could not
avail itself of the attorney’s fees provision in the bylaws. Moreover, First State argued that
Metro POA was not entitled to an award of attorney’s fees as it had never filed an action or
a cross-claim in this case seeking to enforce its claim for unpaid assessments.
On February 6, 2013, the circuit court entered an amended order of default judgment
and decree of foreclosure, granting First State judgment against Nock-Broyles and Metro 270
in the amount of $247,289.13, plus interest and costs.2 The judgment gave First State the
right to foreclose on the property if the judgment was not paid and appointed the circuit
court clerk as Commissioner of the Court to conduct any foreclosure sale. The circuit court
also found that Metro POA’s interest from the unpaid monthly assessments would survive the
foreclosure and would become the liability of whoever purchased the property at the
foreclosure sale. Thereafter, First State purchased the property at the foreclosure sale for
$148,000, by way of a credit against its judgment.
2
Neither Nock-Broyles nor Metro 270 appealed the order of the default judgment, and
they are not parties to the instant appeal.
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First State filed a timely notice of appeal on February 15, 2013, specifically stating that
it was appealing only that part of the order and amended order finding that Metro POA’s
interest should not be extinguished and would survive the foreclosure of the property and
become the liability of the purchaser. Thereafter, on March 22, 2013, the circuit court
entered an order awarding Metro POA attorney’s fees in the amount of $1,500. First State
filed a supplemental notice of appeal on March 28, 2013, stating its intent to appeal the award
of attorney’s fees as well. We turn now to the arguments on appeal.
First State first argues that the circuit court properly recognized that it had the superior
interest in the real property but erred in its interpretation of section 18-13-116(d) to conclude
that Metro POA’s interest for the unpaid assessments should not be extinguished and would
become First State’s responsibility as the purchaser of the property at the foreclosure sale. In
advancing this argument, First State asserts that the effect of the circuit court’s ruling was to
elevate Metro POA’s assessment above the bank’s mortgage on the property in contravention
of section 18-13-116(c). According to First State, subsection (d) contemplates only an
ordinary course-of-business sale. To hold otherwise, First State argues, would be contrary to
the well-established law that liens being foreclosed upon are extinguished by the judgment
of foreclosure. In sum, First State argues that subsection (c) controls in those instances where
there is a foreclosure sale, while subsection (d) governs regular course-of-business sales.
Metro POA argues to the contrary that the circuit court properly refused to extinguish
its interest, as the purchaser of a foreclosed unit is liable for delinquent assessments by virtue
of section 18-13-116(d), which provides no exception for foreclosure sales. Thus, according
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to Metro POA, the plain language of section 18-13-116(d) dictates that a purchaser of the
property is statutorily liable for the unpaid assessments. Metro POA further argues that the
obligation imposed under section 18-13-116(d) is of a personal nature and that a foreclosure
does not extinguish a direct, personal liability.
The question of the correct application and interpretation of an Arkansas statute is a
question of law, which this court decides de novo. McLemore v. Weiss, 2013 Ark. 161, ___
S.W.3d ___. We are not bound by the circuit court’s decision; however, in the absence of
a showing that the circuit court erred, its interpretation will be accepted as correct. Id. The
basic rule of statutory construction to which all other interpretive guides defer is to give effect
to the intent of the drafting body. Richard v. Union Pac. R.R. Co., 2012 Ark. 129, 388
S.W.3d 422. In reviewing issues of statutory interpretation, we first construe a statute just as
it reads, giving the words their ordinary and usually accepted meaning in common language.
McLemore, 2013 Ark. 161, ___ S.W.3d ___. When the language of a statute is plain and
unambiguous and conveys a clear and definite meaning, there is no need to resort to rules of
statutory construction. Id. It is axiomatic that this court strive to reconcile statutory
provisions to make them consistent, harmonious, and sensible. Brock v. Townsell, 2009 Ark.
224, 309 S.W.3d 179.
The Horizontal Property Act is codified at Arkansas Code Annotated sections 18-13-
101 to -120 (Repl. 2003), and provides for mandatory pro rata contributions from property
owners within a horizontal property regime for “the expenses of administration and of
maintenance and repair of the general common elements.” See section 18-13-116(a)(1).
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Subsections (c) and (d) of section 18-13-116 are at issue in the instant case and provide
as follows:
(c) Upon the sale or conveyance of an apartment, all unpaid assessments against
a co-owner for his or her pro rata share in the expenses to which subsection (a) of this
section refers shall first be paid out of the sales price or by the acquirer in preference
over any other assessments or charges of whatever nature except the following:
(1) Assessments, liens, and charges for taxes past due and unpaid on the
apartment; and
(2) Payments due under mortgage instruments of encumbrance duly
recorded.
(d) The purchaser of an apartment shall be jointly and severally liable with the
seller for the amounts owing by the latter under subsection (a) of this section up to the
time of the conveyance, without prejudice to the purchaser’s right to recover from the
other party the amounts paid by him or her as the joint debtor.
Ark. Code Ann. § 18-13-116(c), (d).
First State asserts that the plain language of subsection (d) demonstrates that this
subsection is not applicable in a foreclosure sale. According to First State, the provision in this
subsection that the purchaser shall be liable with the seller for the amounts owing
demonstrates that this applies only in an ordinary sale, because neither the circuit clerk
appointed as the commissioner nor the mortgagee owe any money that may be imputed to
the purchaser. Moreover, First State argues that the circuit court’s interpretation of this
provision would effectively nullify subsection (c)’s requirement that a mortgage be given
priority over other liens. In other words, to read subsection (d) as making a purchaser at a
foreclosure sale liable for unpaid assessments would nullify the special position given to a
mortgagee under subsection (c).
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Clearly, under subsection (c), when a unit is sold, the money due and owing under a
mortgage takes priority over any unpaid assessments. Turning now to subsection (d), we see
that it provides that a “purchaser of an apartment shall be jointly and severally liable with the
seller for the amounts owing by the latter.” There is nothing in the plain language of this
provision that supports First State’s assertion that subsection (d) does not apply to a mortgage
foreclosure sale. We are bound by our rules to give the words in the statute their plain and
ordinary meaning. McLemore, 2013 Ark. 161, ___ S.W.3d ___. Moreover, when the
language of a statute is plain and unambiguous and conveys a clear and definite meaning, there
is no need to resort to rules of statutory construction. See id. First State asks us to read words
into subsection (d) that simply are not there. Thus, in light of the plain language of the
statute, we cannot say that the circuit court erred in refusing to extinguish Metro POA’s
interest.
First State’s second point on appeal is that the circuit court erred in awarding attorney’s
fees to Metro POA in the amount of $1,500. First State argues that Metro POA asserted
entitlement to such fees based on language in the master deed and bylaws but, because Metro
POA did not comply with those bylaws, it is not entitled to attorney’s fees. More specifically,
First State asserts that because Metro POA never obtained a lien for the unpaid assessments,
as required in the bylaws, it cannot seek attorney’s fees. Metro POA counters that it was not
required to file any such lien or “notice of delinquent assessment” to be entitled to attorney’s
fees. According to Metro POA, the fee award was a “lawfully agreed upon” expense
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authorized by the Horizontal Property Act, as demonstrated by this court’s decision in Damron
v. Univ. Estates, Phase II, Inc., 295 Ark. 533, 750 S.W.2d 402 (1988).
This court follows the American rule, which requires every litigant to bear his or her
attorney’s fees absent statutory authority or a contractual agreement between the parties. See
Carter v. Cline, 2013 Ark. 398, ___ S.W.3d ___. Because of the circuit court’s intimate
acquaintance with the trial proceedings and the quality of service rendered by the prevailing
party’s counsel, we usually recognize the superior perspective of the circuit court in
determining whether to award attorney’s fees. Harrill & Sutter, PLLC v. Kosin, 2011 Ark. 51,
378 S.W.3d 135. The decision to award attorney’s fees and the amount to award are
discretionary determinations that will be reversed only if the appellant can demonstrate that
the trial court abused its discretion. Id.
Here, First State’s only argument challenging the award of attorney’s fees is that Metro
POA did not comply with its bylaws and seek a lien for the unpaid assessments and thus
cannot avail itself of the bylaws for support in seeking attorney’s fees. This argument is
unavailing, as nothing in section 18-13-116 required Metro POA to obtain a lien, and, in any
event, Metro POA filed a lis pendens with regard to its claimed interest in the property.
Accordingly, based on the argument presented to this court, we cannot say that the circuit
court abused its discretion in awarding attorney’s fees to Metro POA.
Affirmed.
GOODSON, J., dissents.
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COURTNEY HUDSON GOODSON, Justice, dissenting. A review of the record in
this case discloses the absence of a judgment reflecting the amount of the unpaid assessments
owed by First State Bank as the purchaser of the condominium unit. As such, there is no final
order upon which to appeal the circuit court’s ruling that any purchaser of the condominium
unit at the foreclosure sale would be liable for the unpaid assessments. Therefore, I must
respectfully dissent, as the nonexistence of a final order deprives this court of jurisdiction to
decide the question of law presented on appeal.
The amended foreclosure decree entered on January 16, 2013, sets out the circuit
court’s previous ruling that any prospective purchaser of the condominium unit at the
foreclosure sale would be liable for the payment of the delinquent assessments. Specifically,
the amended decree provides in relevant part that the “purchaser of said property shall be
liable for the assessments of $233.33 per month for the time period of November 2011 to the
date of foreclosure.” It also states, by parenthetical, that “[i]n order to have the precise
amount of assessments remaining unpaid as of the date of the foreclosure sale, five (5) days
prior to the foreclosure sale, Metro POA shall certify in writing to the Commissioner, with
a copy to the Plaintiff, the amount of unpaid assessments incurred from the date of the
Judgement to the date of the foreclosure sale.”
On March 22, 2013, the circuit court entered an order awarding attorney’s fees to
Metro POA. This order includes the statement that “[a]t trial, the amount of assessments
owed to Metro was determined to be $3,266.62.” Subsequently, on March 25, 2012, Metro
POA filed a “Certification,” pursuant to the circuit court’s directive contained in the
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amended decree. The Certification stated that the amount of the unpaid assessments was
$3,966.61. Then on April 4, 2013, the circuit court entered an amended fee order, which
again includes the statement that the amount of the unpaid assessments totalled $3,266.62.
The amended order of foreclosure contains a clear ruling that any prospective
purchaser would be required to pay the delinquent assessments. What is not clear from this
record is the actual amount of the unpaid assessments that the purchaser is obligated to pay.
The record is unclear because, as of yet, the circuit court has not reduced the amount owed
to judgment.
With exceptions not applicable here, an appeal may be taken only from a final
judgment or decree entered by the trial court. Ark. R. App. P.–Civ. 2(a)(1) (2013). For a
judgment to be final and appealable, it must dismiss the parties from the court, discharge them
from the action, or conclude their rights to the subject matter in controversy. Kelly v. Kelly,
310 Ark. 244, 835 S.W.2d 869 (1992); Jackson v. Yowell, 307 Ark. 222, 818 S.W.2d 950
(1991). An order is not final and appealable merely because it settles the issue as a matter of
law. See Festinger v. Cantor, 264 Ark. 275, 571 S.W.2d 82 (1978). Even though the issue
decided might be an important one, an appeal will be premature if the decision does not,
from a practical standpoint, conclude the merits of the case. Robinson v. Villines, 2013 Ark.
211. To be final, an order must not only decide the rights of the parties, but also put the
court’s directive into execution, ending the litigation or a separable part of it. Kilgore v. Viner,
293 Ark. 187, 736 S.W.2d 1 (1987).
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In Ford Motor Co. v. Washington, 2013 Ark. 88, we had occasion to discuss what is
necessary for an order to be considered final when a party is obligated to pay a sum of money.
We observed,
In Thomas v. McElroy, 243 Ark. 465, 420 S.W.2d 530 (1967), we explained the formal
requirements of what constitutes a final judgment. To be final, a judgment for money
must state the amount that the defendant is required to pay. Id. In citing Arkansas
statutory law, we said that the amount of the judgment must be computed, as near as
may be, in dollars and cents and that the judgment must specify clearly the relief
granted or other determination of the action. Id.; see also Ark.Code Ann. § 16–65–103
(Repl.2005) (declaring that all judgments or decrees shall be computed, as near as may
be, in dollars and cents). In Thomas, we noted that a final judgment or decision is one
that finally adjudicates the rights of the parties, and it must be such a final
determination as may be enforced by execution or in some other appropriate manner.
See also Villines v. Harris, 362 Ark. 393, 208 S.W.3d 763 (2005) (holding that, although
a previous order set out a formula for calculating damages, the order was not final
because it did not establish the amount of damages); Office of Child Support Enforcement
v. Oliver, 324 Ark. 447, 921 S.W.2d 602 (1996) (holding that an order was not final
where an arrearage in child support was found but the amount of the arrearage was not
determined); Hastings v. Planters & Stockmen Bank, 296 Ark. 409, 757 S.W.2d 546
(1989) (holding that an order of summary judgment was not final where the amount
owed was not specified in dollars and cents, there were issues that appeared to be
outstanding, and the judgment did not dismiss or discharge the appellant).
Ford, 2013 Ark. at 3. Based on these principles, this court in Ford held that a judgment which
merely reproduced the jury’s verdict without assigning how much was owed in dollars and
cents was not a final, appealable order. Consequently, we dismissed the appeal.
By the same token, the amended decree in this case sets out a formula by which the
amount of the unpaid assessments was to be calculated. However, the circuit court has not
entered a judgment setting forth the specific dollar amount to be paid by the purchaser at the
foreclosure sale. Metro POA’s Certification is demonstrably not a judgment. There is also
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an element of confusion as to the amount owed given the different figures stated in the
Certification and the orders granting attorney’s fees.
Even if neither party raises the issue of jurisdiction on appeal, the appellate court is
obligated to raise the issue sua sponte. Elis v. Ark. State Highway Comm’n, 2010 Ark. 196, 363
S.W.3d 321. From my review of this record, I can only conclude that a final order is lacking
in this case, and I would dismiss the appeal. As I joined the majority in Ford, I must dissent
in this case. Fairness dictates that this court’s application of the rules concerning finality
should be applied equally to all litigants and not conveniently ignored.
Conner & Winters, LLP, by: Todd P. Lewis and Kerri E. Kobberman, for appellant.
Knight Law Firm, PLC, by: K. Vaughn Knight and Mason J. Wann, for appellees
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