Kimberly B. Scott v. Fall Line Condominium Association

MAINE SUPREME JUDICIAL COURT Reporter of Decisions
Decision: 2019 ME 50Docket: BCD-18-245
Argued: February 5, 2019
Decided: April 4, 2019
Panel: SAUFLEY, C.J., and ALEXANDER, MEAD, GORMAN, JABAR, HJELM, and HUMPHREY, JJ.
KIMBERLY B. SCOTT et al.
v.
FALL LINE CONDOMINIUM ASSOCIATION
GORMAN, J.
[¶1] Fall Line Condominium Association appeals from a declaratory
judgment entered by the Business and Consumer Docket (Mulhern, J.)
invalidating all rules and regulations previously promulgated by Fall Line’s
Board of Directors but not approved by a majority in interest of Fall Line unit
owners. The court determined that, as a matter of law, none of the Association’s
rules and regulations had been adopted properly pursuant to the Association’s
bylaws, specifically section 5.17. The Association argues that the court erred in
granting summary judgment in favor of Kimberly S. Scott and Thomas H. Scott
and asserts that (1) the bylaws unambiguously give the Board of Directors the
authority to adopt and amend rules and regulations concerning the use and
operation of the property and (2) the court’s interpretation of section 5.17 of
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the bylaws would render the bylaws ambiguous, resulting in a genuine issue of
material fact. We affirm the court’s judgment in part, but vacate the judgment
in other respects and remand.
I. BACKGROUND
[¶2] The parties agreed to the following facts in a joint statement of
material facts. Fall Line comprises 128 condominium units adjacent to Sunday
River ski resort in Newry. The Association is a nonprofit organization whose
membership consists of all record owners of Fall Line’s condominium units. A
board of directors is responsible for the day-to-day operations of the
Association. Fall Line was organized under the Maine Condominium Act,
33 M.R.S. §§ 1601-101 to 1604-118 (2018), and the Fall Line Declaration of
Condominium was adopted on November 19, 1985. Fall Line is governed by its
declaration, its bylaws, and certain promulgated rules and regulations. The
Board first established “Rules and Regulations Applicable to All Unit Owners”
in 1985 and most recently amended the rules in 2017.
[¶3] The Scotts own a unit at Fall Line and therefore are members of the
Association. On February 28, 2017, the Association filed a small claims action
against the Scotts in the District Court (Rumford) seeking $38.29 in outstanding
interest on the Scotts’ account and $500 in attorney fees. In response, the Scotts
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filed a complaint against the Association and certain members of the Board
seeking, inter alia, a declaratory judgment that “all rules, regulations, and
limitations affecting Unit Owners and their use of their units and of any
common element at Fall Line not approved by a majority in interest by the Unit
Owners” are void.1 The Association and certain members of the Board
counterclaimed against the Scotts; the District Court (Carlson, J.) consolidated
all causes of action and later transferred the case to the Business and Consumer
Docket.
[¶4] After discovery, both parties moved for partial summary judgment.
On June 8, 2018, the court (Mulhern, J.) granted summary judgment in favor of
the Scotts on two of their counts, including the count seeking the declaratory
judgment invalidating all rules and regulations promulgated by the Board
without the approval of a majority in interest of the unit owners.2 In its
1 The Scotts simultaneously filed a motion to consolidate the Association’s small claims action
with their complaint.
2 The court also granted a summary judgment in favor of the Scotts with respect to count IV of
their amended complaint—a request for a declaratory judgment that the Scotts have permission to
access the Association’s email list—and granted a summary judgment in favor of the Association on
two counts in the Scotts’ amended complaint alleging that the Association and named directors
violated the Maine Consumer Credit Code, 9-A M.R.S. § 8-509 (2018), and the Federal Fair Debt
Collection Practices Act, 15 U.S.C.S. §§ 1692 to 1692(p) (LEXIS through Pub. L. No. 115-442). With
respect to the Association’s counterclaim, the court granted a summary judgment in favor of the
Scotts on all counts. The present appeal concerns only the court’s grant of a summary judgment for
the declaratory judgment invalidating all rules and regulations of the Association.
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judgment, the court declared “all rules and regulations putatively established
by the Association are void, pending a vote to garner the approval of a majority
in interest of the unit owners at Fall Line” after determining, as a matter of law,
that “none of the extant rules and regulations were properly adopted under the
Bylaws.” After the court issued its combined order on the cross-motions for
summary judgment, the Association timely appealed. See 14 M.R.S. § 1851; M.R.
App. P. 2B(c)(1).
II. DISCUSSION
[¶5] We review a ruling on cross-motions for summary judgment de
novo, reviewing the trial court’s decision for errors of law and considering the
evidence in the light most favorable to the party against whom the judgment
has been granted in order to determine whether there is a genuine issue of
material fact. See Estate of Frost, 2016 ME 132, ¶ 15, 146 A.3d 118. Summary
judgment is appropriate only when “the record reflects that there is no genuine
issue of material fact and the movant is entitled to a judgment as a matter of
law.” Burdzel v. Sobus, 2000 ME 84, ¶ 6, 750 A.2d 573. “A material fact is one
that could potentially affect the outcome of the suit,” and “[a] genuine issue of
material fact exists when the evidence requires a fact-finder to choose between
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competing versions of the truth.” Farrington’s Owners’ Ass’n v. Conway Lake
Resorts, Inc., 2005 ME 93, ¶ 9, 878 A.2d 504.
[¶6] A condominium association’s bylaws and declaration are contracts,
cf. id. ¶ 10, and “[t]he interpretation of a contract, including whether or not its
terms are ambiguous, is a question of law that we review de novo.” Id. If,
however, we determine that language in the contract is ambiguous, then the
interpretation of that language becomes a question of fact for the factfinder. Id.
“Language is considered to be ambiguous if it is reasonably susceptible to
different interpretations.” Id. (quotation marks omitted).
[¶7] Bylaws must be “construed in accordance with the intention of the
parties, which is to be ascertained from an examination of the whole
instrument. All parts and clauses must be considered together that it may be
seen if and how one clause is explained, modified, limited or controlled by the
others.” Am. Prot. Ins. Co. v. Acadia Ins. Co., 2003 ME 6, ¶ 11, 814 A.2d 989(quotation marks omitted). Generally, “we will avoid an interpretation that
renders meaningless any particular provision in the contract.” Farrington’s
Owners’ Ass’n, 2005 ME 93, ¶ 10, 878 A.2d 504 (quotation marks omitted). “The
language employed by the parties is to be construed to give effect to the plain
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meaning of the words used.” City of Augusta v. Quirion, 436 A.2d 388, 392
(Me. 1981).
[¶8] The language at issue in this case is section 5.17 of the bylaws,
entitled “Rules of Conduct.” It states,
Rules and regulations concerning the use of the Units and the
Common Areas and facilities may be promulgated and amended by
the Board of Directors with the approval of a majority in interest of
the Unit Owners.
(emphasis added). The Scotts assert that the word “may” indicates that the
Board is permitted to promulgate and amend rules and regulations concerning
the use of the units, common areas, and facilities, but that, when the Board does
so, it must be with the approval of a majority in interest of the unit owners. The
Association, on the other hand, argues that the Board has the unfettered
authority to promulgate and amend such rules and regulations regardless of
whether the unit owners approve, but that the Board may seek to have its
actions approved by a majority in interest of the unit owners.
[¶9] As always, we start with the language of the contract itself to
determine the contract’s meaning. See Farrington’s Owners’ Ass’n, 2005 ME 93,
¶ 10, 878 A.2d 504; Am. Prot. Ins. Co., 2003 ME 6, ¶ 11, 814 A.2d 989. Here, the
placement of the word “may” and the context in which it is used determines the
plain meaning of the word and the contract. See City of Augusta, 436 A.2d at
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392. Because “may” appears before the phrase “be promulgated and amended
by the Board of Directors with the approval of a majority in interest of the Unit
Owners,” we would read the word as modifying that entire phrase, unless doing
so creates an absurd result. See id. As written, the section limits the Board’s
authority to promulgate or amend “[r]ules of [c]onduct,” i.e. “[r]ules and
regulations concerning the use of the [u]nits and the [c]ommon [a]reas and
facilities . . . .”
[¶10] The Association, however, asserts that “may” should not be read as
modifying the language it precedes and argues that “may” imposes no limitation
on the Board’s authority to promulgate or amend rules of conduct. In support
of its argument, the Association points to section 2.03(e) of the bylaws, entitled
“Powers and Duties [of the Board of Directors].” Section 2.03 states,
The Board of Directors shall have the powers and duties necessary
for the administration of the affairs of the Condominium
Association and shall do all such acts and things except as by law or
by the Declaration or by these Bylaws may not be delegated to the
Board of Directors by the Unit Owners. Such powers and duties of
the Board of Directors shall include, but shall not be limited to, the
following:
. . . .
(e) Adoption and amendment of rules and regulations
covering the details of the operation and use of the Property.
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(emphasis added). Although we agree that section 2.03 does grant the Board
the “powers and duties” to adopt and amend “rules and regulations covering
the details of the operation and use of the [p]roperty,” we note that section 2.03
includes a limiting clause. That clause—italicized above—explains that the
Board’s authority may be curtailed or held in check by, among other things,
provisions in the bylaws. Section 5.17 is just such a check. Because we are
careful not to render any language in a contract superfluous, we read section
5.17 to unambiguously limit the Board’s broad authority under section 2.03(e)
to adopt and amend rules and regulations, at least those rules and regulations
of conduct concerning the use of the units, common areas, and facilities. See
Farrington’s Owners’ Ass’n, 2005 ME 93, ¶ 10, 878 A.2d 504; Am. Prot. Ins. Co.,
2003 ME 6, ¶ 11, 814 A.2d 989.
[¶11] The Business Court declared “all rules and regulations putatively
established by the Association are void, pending a vote to garner the approval
of a majority in interest of the unit owners at Fall Line.” Because section 5.17
deals exclusively with “rules of conduct,” i.e., rules and regulations concerning
the use of the units, common areas and facilities, and because section 2.03(e)
gives the Board broad authority to enact rules covering the general “operation
and use” of the property, the Business Court’s declaratory judgment
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invalidating all rules and regulations established by the Association is
overbroad.3 See Am. Prot. Ins. Co., 2003 ME 6, ¶ 11, 814 A.2d 989 (affirming the
general principle that contract language must be construed in accordance with
the intention of the parties and that all clauses of a contract “must be
considered together that it may be seen if and how one clause is explained,
modified, limited or controlled by the others”). The limitations found in section
5.17 are applicable exclusively to the rules and regulations concerning the use
of the units, common areas, and facilities, and, therefore, the only existing rules
and regulations that are “void” are those concerning the use of the units,
common areas, and facilities.
[¶12] If the parties cannot agree on which rules and regulations concern
the general “operation and use” of the property and which concern the “use” of
the units, common areas, and facilities, or cannot undertake successfully the
process required to approve any previously adopted rules or regulations, they
may have to ask the court to determine which of the rules and regulations
previously promulgated or amended by the Board are rules and regulations
concerning the use of the units, common areas, and facilities. We sincerely hope
3 The Scotts conceded at oral argument that section 5.17 applies only to rules of conduct and that
the Business Court overshot the mark by invalidating all Association rules.
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that such a use of judicial resources will not be necessary to make common
sense determinations that should be within the parties’ own capabilities.
[¶13] To summarize, we declare that section 5.17 unambiguously states
that the Board, in order to promulgate or amend rules of conduct concerning
the use of the units, common areas, and facilities, must seek approval from a
majority in interest of unit owners. There is no such limitation on other types
of rules or regulations governing the general operation and use of the property.
We do not pass judgment on what constitutes a rule of conduct that dictates the
use of the units, common areas, or facilities. If the parties insist on prolonging
this litigation, the question of what is or is not a rule of conduct regarding the
use of a unit, common area, or facility would be a question of fact appropriate
for a factfinder.
The entry is:
Judgment affirmed in part and vacated in part.
Declaratory judgment voiding rules and
regulations—not approved by a majority in
interest of unit owners—that concern the use of
units, common areas, and facilities is affirmed.
Declaratory judgment as to all other rules and
regulations vacated. Remanded, if necessary, for
further consideration of which rules and
regulations are rules and regulations of conduct
that govern the use of units, common areas, or
facilities.
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Adam S. Taylor, Esq. (orally), and Andre G. Duchette, Esq., Taylor, McCormack
& Frame, LLC, Portland, for appellant Fall Line Condominium Association
Daniel L. Rosenthal, Esq., and David C. Johnson, Esq. (orally), Marcus Clegg,
Portland, for appellees Kimberly B. Scott and Thomas H. Scott
Business and Consumer Docket docket number CV-2017-26
FOR CLERK REFERENCE ONLY