THE WILLOWS CONDOMINIUM )
OWNERS ASSOCIATION, INC., )
)
Plaintiff-Respondent, )
)
v. )
)
MICHAEL KRAUS, ROSEMARY )
LANZONE, SHERYL FIALA, THOMAS )
LONG, DENNIS BATTERAM, NATHAN )
SUTTON AND SHANNON SUTTON, ) No. SD33447
PAUL ROBERTS AND MOONBOW ) Filed: 3-23-15
PROPERTIES, LLC, )
)
Defendants-Appellants, )
and )
)
STANLEY WOLINSKI AND )
JEAN WOLINSKI, DARREN LOWDER )
AND BRENDA LOWDER, )
)
Defendants. )
APPEAL FROM THE CIRCUIT COURT OF CAMDEN COUNTY
Honorable G. Stanley Moore, Circuit Judge
AFFIRMED
The Willows Condominium Owners Association, Inc. (the Association) filed the
underlying action to obtain declaratory relief concerning the proper distribution of
surplus insurance proceeds that remained after the reconstruction of Building 158, which
had been totally destroyed by fire. The defendants in the action were the nine unit
owners of Building 158, who wanted the surplus insurance proceeds distributed to them.
The Association took the position that the surplus insurance funds should be distributed
to all 58 unit owners at The Willows on the Lake (the Willows). Seven of the nine
defendants (hereinafter referred to as Counterclaimants) filed a counterclaim against the
Association seeking, inter alia, declaratory relief, and damages for breach of trust, breach
of fiduciary duty and breach of contract concerning Association dues.1 The Association
and Counterclaimants filed cross-motions for summary judgment.
The material facts are not in dispute. The governing document used by the
Association is the “Condominium Declaration for The Willows on the Lake, a
Condominium” (Declaration), which was recorded on July 21, 1983. As required by the
Declaration, the Association purchased and maintained property insurance to cover the
replacement of all the structures on the property. In May 2011, a fire destroyed all nine
units in Building 158.2 The Association received $1,154,300 as insurance proceeds for
the destruction of Building 158. After reconstruction was completed, approximately
$550,000 of the insurance proceeds remained. During the nearly year-long rebuilding
process, the Association assessed quarterly dues to be paid by all unit owners, including
1
The parties who filed counterclaims were Michael Krause, Rosemary Lanzone,
Sheryl Fiala, Thomas Long, Dennis Batteram, Nathan Sutton and Shannon Sutton, Paul
Roberts and Moonbow Properties, LLC. Defendants Stanley and Jean Wolinski, and
Darren and Brenda Lowder are the owners of the remaining two units in Building 158.
They were defendants in the underlying proceedings, but they did not file a counterclaim.
They also have not appealed from the underlying judgment.
2
Building 158 was the only building damaged by the 2011 fire. The owners of
the 49 units in the undamaged buildings were not named as parties in the declaratory
judgment action.
2
the nine unit owners of Building 158. Counterclaimants paid those assessments. The
trial court granted the Association’s summary judgment motion and denied
Counterclaimants’ cross-motion. In granting summary judgment in favor of the
Association, the trial court concluded that certain provisions in the Declaration were
determinative of the issues. The judgment distributed the surplus insurance proceeds to
all 58 unit owners and denied relief on all counts of the counterclaim.
Counterclaimants appealed and present three points for decision. Point I
contends the trial court erred by distributing the surplus insurance proceeds to all 58 unit
owners because that ruling is contrary to the Declaration and Missouri’s Uniform
Condominium Act (UCA).3 Point II contends the trial court erred by denying relief on
Counterclaimants’ breach of trust and fiduciary duty theories because the Association
breached both of those duties when it failed to distribute the surplus funds solely to
Building 158 unit owners. Point III contends the trial court erred by denying relief on
Counterclaimants’ breach of contract claim because the Association improperly assessed
quarterly dues against Building 158 unit owners after their building burned.
The material facts are undisputed, and only issues of law are presented for our de
novo review. See Nevils v. Group Health Plan, Inc., 418 S.W.3d 451, 453 (Mo. banc
2014). We find no merit in Counterclaimants’ points and affirm the judgment.
Additional facts necessary to the disposition of the case are included below as we address
Counterclaimants’ three points on appeal.
3
The UCA, §§ 448.1-101 to .4-120, was enacted in 1983 and applies to all
condominiums created in Missouri after September 28, 1983. See § 448.1-102.1; Epstein
v. Villa Dorado Condominium Ass’n, Inc., 371 S.W.3d 23, 27 (Mo. App. 2012).
3
Point I
Counterclaimants contend the trial court erred by distributing the surplus funds to
all 58 unit owners because that ruling does not comply with sections 26(f) and (h) in the
Declaration. In determining the meaning of those provisions, we consider the document
as a whole and give the words their natural and ordinary meaning. Clampit v. Cambridge
Phase II Corp., 884 S.W.2d 340, 345 (Mo. App. 1994). We will find ambiguity in these
provisions only if the terms are susceptible of more than one meaning so that reasonable
persons may fairly and honestly differ in the construction of the terms. Id.
Section 1(bb) of the Declaration defines a “Unit Owner” as a “person or persons
whose estate or interests individually or collectively aggregate fee simple absolute
ownership of a Unit or Units[.]” Section 26(a) of the Declaration requires the
Association to purchase and maintain property insurance on all structures on the property.
Section 21 of the Declaration makes these insurance premiums common expenses that are
borne by all Unit Owners. Section 26(f) of the Declaration states:
(f) Any loss covered by the insurance described in subparagraph (a)
hereinabove shall be adjusted with the Association, and insurance
proceeds for that loss shall be payable to the Association (as trustee for
Unit Owners and lienholders as their interests may appear), and not
directly to any mortgagee or beneficiary under any deed of trust. Subject
to the provisions of subparagraphs (h) and (i) hereinbelow, the proceeds
shall be disbursed first for the repair or restoration of the damaged
property, and Unit Owners and lienholders are not entitled to receive
payment of any portion of the proceeds unless there is a surplus of
proceeds after the property has been completely repaired or restored, or
the Condominium is terminated.
Counterclaimants argue that “Unit Owners” means only the owners of units in Building
158. Reading section 26(f) together with section 26(h), as we must, we disagree with that
assertion. The latter subsection states:
4
(h) Any portion of the Condominium for which insurance is required
under this section which is damaged or destroyed shall be repaired or
replaced promptly by the Association unless (i) the Condominium is
terminated, or (ii) repair or replacement would be illegal under any state
or local health or safety statute or ordinance, or (iii) eighty percent (80%)
of the Unit Owners vote not to rebuild, which 80% must include the
unanimous agreement of each Owner of a Unit or assigned Limited
Common Element which will not be rebuilt. The cost of repair or
replacement in excess of insurance proceeds and reserves is a Common
Expense ….
Section 26(h).4 Based upon the plain language of this section, all of the Unit Owners
would have to bear the shortfall as a common expense (either by resort to the reserves or
an additional assessment) if Building 158 could not be fully reconstructed using only the
insurance proceeds. Given the clear intent expressed in this section for all Unit Owners
to share the burden when the insurance proceeds are insufficient, we conclude that “Unit
Owners” in section 26(f) similarly refers to all of the Unit Owners when there are surplus
funds to be distributed.
Counterclaimants suggest this construction conflicts with a later portion of section
26(h), which deals with the disbursement of insurance proceeds if no rebuilding occurs:
(h) .... If the entire Condominium is not repaired or replaced: (i) the
insurance proceeds attributable to the damaged Common Elements shall
be used to restore the damaged area to a condition compatible with the
remainder of the Condominium, (ii) the insurance proceeds attributable to
Units and Limited Common Elements which are not rebuilt shall be
distributed to the Owners of those Units and to the Owners of the Units to
which those Limited Common Elements were allocated, (iii) and the
remainder of the proceeds shall be distributed to all the Unit Owners or
lienholders, as their interests may appear, in proportion to the Common
Element interests of all Units.
Based upon the foregoing language, Counterclaimants argue that the insurance proceeds
would have been distributed solely to the nine unit owners in Building 158 if it had not
4
None of the conditions in subsections (i)-(iii) apply in this case.
5
been rebuilt. Therefore, they assert that the phrase “Unit Owners” in section 26(f) also
must refer only the nine unit owners in Building 158. We are not persuaded by that
argument.
First, this later provision does not apply because Building 158 was completely
reconstructed using insurance proceeds that were funded by all of the Unit Owners.
After reconstruction, Counterclaimants’ interest in the condominium was fully restored.
To construe section 26(f) as they suggest would provide them with a windfall.
Moreover, if the insurance proceeds had been insufficient for reconstruction, the plain
language of section 26(h) requires all Unit Owners to share that shortfall.
Counterclaimants’ interpretation would favor them if there is a surplus, and burden all
other Unit Owners if there is a shortfall. Our harmonious construction of sections 26(f)
and (h), on the other hand, avoids that inequitable result.
Second, if Building 158 had not been reconstructed, we do not interpret the later
provision in section 26(h) to require that all of the insurance proceeds be given to
Counterclaimants, as they contend. Based upon the plain language of subsection (i), the
insurance proceeds would have to be used to repair damaged common elements before
Counterclaimants would have received anything. Next, the plain language of subsection
(ii) states that “the insurance proceeds attributable to Units and Limited Common
Elements which are not rebuilt shall be distributed to the Owners of those Units and to
the Owners of the Units to which those Limited Common Elements were allocated ….”
(Italics added.) It is important to note that, if no rebuilding occurred, Counterclaimants’
interest in the condominium would have been extinguished. Subsection (ii) provides a
mechanism for compensating the affected unit owners by giving them the insurance
proceeds attributable to the units which are not rebuilt. The language of this subsection
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explicitly states that such proceeds shall be distributed to the owners of those units. If
the phrase “Unit Owners” in section 26(f) already referred only to the owners of
damaged units, then this additional limiting language added to subsection (ii) would be
meaningless.5 Finally, once the allocation process is completed, subsection (iii) states
that any surplus funds would be distributed to all the Unit Owners or lienholders.
Accordingly, we disagree with Counterclaimants’ proposed construction of sections
26(f) and (h).6
For all of the foregoing reasons, the trial court did not err in distributing the
surplus insurance proceeds to all Unit Owners. Point I is denied.
Point II
Counterclaimants contend the trial court erred by denying relief on Count II
(breach of trust) and Count III (breach of fiduciary duty) of their counterclaim. This
point assumes the trial court erred in distributing the surplus insurance proceeds to all
Unit Owners. Because this assumption is wrong, Point II is denied.
Point III
Counterclaimants contend the trial court erred in granting summary judgment on
Counterclaimants’ breach of contract theory because that ruling is contrary to section 3 of
the Declaration. Their argument is based on the following facts.
5
The absence of such limiting language in section 26(f) suggests the omission
was intentional and supports our construction of the phrase “Unit Owners” there to mean
all Unit Owners.
6
Counterclaimants also present a statutory argument based upon UCA § 448.3-
113.5 and § 448.3-113.8. Because the Willows was created in July 1983, however, the
UCA does not apply. See § 448.1-102.1 (providing that the UCA applies to
“condominiums created within this state after September 28, 1983”).
7
Counterclaimants sought to recover their quarterly assessment for Association
dues in the second, third, and fourth quarters of 2011 and first quarter of 2012 when their
individual units were in the process of being rebuilt. Counterclaimants claim they did not
owe the assessment based upon the language of the assessment formula in section 3:
[T]he percentage figure represented by a fraction whose numerator is the
area of such Unit (in square feet) and whose denominator is the area (in
square feet) of all Units in the Condominium at any given time.
Section 3 (emphasis added).7 “Unit” is defined by the Declaration as “a physical portion
of the Property including one or more rooms occupying one or more floors, or a part or
parts thereof, and designed and designated for separate ownership or occupancy as a
residential apartment for one family, and having lawful access to a public way[.]” See
§ 448.010(10) (defining a condominium “unit” in nearly identical terms).8
Counterclaimants argue that the assessment formula’s language “at any given time”
means the Declaration only allows for assessment of dues “based on the square footage of
the units presently existing at each time of assessment.” They argue that their units had
zero square footage while being rebuilt, which should result in zero assessment.
Counterclaimants’ argument assumes their units must be complete and capable of
7
Section 3 of the Declaration is entitled “DIVISION OF PROPERTY AND
ALLOCATION OF INTERESTS” and first addresses how the property is divided:
The real property described in Exhibit A and the improvements thereon
are hereby divided into fee simple estates, each such estate consisting of
separately designated Unit, with the Limited Common Elements reserved
to the use of such Unit as designated on the Plat and set forth on “Exhibit
C”, attached hereto and made part hereof by this reference, and the
undivided percentage or fractional interest in and to the Common
Elements appurtenant to each Unit.
8
This definition is from Missouri’s Condominium Property Act (CPA),
§§ 448.005-.210, which does apply in this case. See Epstein, 371 S.W.3d at 27 (“CPA
governs condominium associations created prior to 1983”).
8
occupancy for their square footage to be included in the dues assessment formula. We
disagree.
A similar argument was rejected in Bradley v. Mullenix, 763 S.W.2d 272, 275
(Mo. App. 1988). There, a party argued that “a ‘unit’ is not a ‘unit’ until competed and
capable of occupancy” because “it would be unreasonable to assess maintenance, repair
and administrative expenses against units which were under construction.” Id. at 275. In
rejecting this argument, the eastern district of this Court explained:
Whether a building contains one complete and occupied unit and nine
incomplete units or vice versa the grass on the lawn grows to the same
length, the snow on the sidewalk accumulates to the same depth, the roof
and exterior paint deteriorate at the same rate.
Id. at 275-76. The Court also noted the argument is contrary to the definition of “unit,”
as defined “in the statute [§ 448.010(10)] and the Declaration of Condominium”:
Both define “unit” as meaning a part of the property designed and
intended for independent use and having lawful access to a public way.
Both refer to the designation of units on a plat required to be recorded
simultaneously with the Declaration. Both assign ownership interest in
the common elements and proportionate share of common element
expense on the basis of the percentage of each unit to the total units listed
in the Declaration. Neither the statute nor the Condominium Declaration
makes any distinction between completed and unfinished units.
Id.; see also Mountain View Condominiums Homeowners Ass’n Inc. v. Scott, 883 P.2d 453,
457 (Az. Ct. App. 1994) (citing Bradley and holding that because unit ownership includes a
vested, undivided interest in the common elements, the obligation to pay assessment arises
from unit ownership and is not dependent upon unit completion).
We reach the same conclusion here. The assessment language upon which
Counterclaimants rely, “at any given time,” does not require the Association to ensure that
Counterclaimants’ unit square footage is complete before applying the assessment formula.
Further, we note the above assessment language appears after describing the formula’s
9
“denominator,” which “is the area (in square feet) of all Units,” indicating that it is square
footage of all units that may change “at any given time,” depending on the addition or
termination of certain units. The platted square footage of a unit used as the numerator in the
assessment formula is known and does not change. Therefore, the trial court did not err in
granting summary judgment against Counterclaimants on their breach of contract theory. Point
III is denied.
The judgment of the trial court is affirmed.
JEFFREY W. BATES, J. – OPINION AUTHOR
DANIEL E. SCOTT, J. – CONCUR
WILLIAM W. FRANCIS, JR., C.J./P.J. – CONCUR
10