Opinion
Nos. 59479-6-I; 59572-5-I.
March 31, 2008.
Appeal from a judgment of the Superior Court for King County, No. 02-2-30081-2, Sharon S. Armstrong, J., entered January 17, 2006.
Affirmed by unpublished opinion per Schindler, A.C.J., concurred in by Becker and Dwyer, JJ.
This is the second appeal in this case. In the first appeal, we reversed the trial court's decision to grant summary judgment to the condominium homeowner association, Sixty-01 Association of Apartment Owners (Sixty-01), and remanded for trial. In this appeal, Louis and Betty Keller challenge entry of the judgment on the verdict in favor of Sixty-01 on a number of grounds. We conclude the trial court did not abuse its discretion in allowing Sixty-01 to argue that the 1992 amendment to the condominium Declaration violated the voting procedures of the Bylaws and the Declaration; the trial court did not err in refusing to instruct the jury on substantial compliance or that if the amendment was improperly adopted, it was void; and the evidence supports the jury verdict. We also conclude the court did not abuse its discretion in awarding Sixty-01 attorney fees and costs, and affirm.
FACTS
In 1980, Louis and Betty Keller (the Kellers) purchased a three bedroom penthouse condominium in the Sixty-01 condominium complex. Approximately 770 homeowners own condominiums in the Sixty-01 complex. All the homeowners belong to the Sixty-01 nonprofit corporation of owners, Sixty-01 Association of Apartment Owners (Sixty-01).
The governing documents for Sixty-01 are the condominium Declaration and the Bylaws which were adopted in 1978. The Declaration and Bylaws contain specific requirements to amend the governing documents. Section 28.1 of the Declaration provides that in order to adopt an amendment,
[n]otice of a meeting at which an amendment is to be considered shall include the text of the proposed amendment. Amendments may be adopted at a meeting of the Association or by written consent of the requisite number of persons entitled to vote, after notice has been given to all persons (including mortgagees) entitled to receive notice of a meeting of the Association. . . . All other amendments shall be adopted if approved by 60% of the apartment owners and there is compliance with Section 28.2.
Section 28.2 of the Declaration also requires prior written approval of institutions holding 75% of the first mortgages for any "material amendment."
Article 10 of the Bylaws has identical language to the part of Section 28.1 of the Declaration that requires that "[n]otice of a meeting at which an amendment is to be considered shall include the text of the proposed amendment." Article 10 also provides that amendments must be approved by 60% of the home owners and that "[n]o material amendment of the Declaration or of these Bylaws may be made without the prior written approval of each institutional holder of a first mortgage lien on an apartment."
The Declaration governs the method by which common expenses are assessed against each homeowner. From 1978 to 1992, each homeowner paid expenses for common areas and reserves for operations, maintenance, and insurance in proportion to percentage of ownership. In 1989, the legislature enacted the Condominium Act, chapter 64.34 RCW. The Condominium Act allows owners to allocate expenses based on factors other than relative value. In response to the change in the law, a group of homeowners formed the "Maintenance Fees Reassessment Committee" (Reassessment Committee) and proposed amending the Declaration with a different method for allocating expenses. Instead of allocating the common expenses and reserves based on percentage of ownership, the Committee proposed allocating expenses in "direct relationship to actual expenses incurred and benefits received" for each type of unit.
Keller v. Sixty-01 Associates of Apartment Owners, 127 Wn. App. 614, 618, 112 P.3d 544 (2005) (Keller I).
RCW 64.34.224; Keller I, 127 Wn. App. at 619.
Keller I, 127 Wn. App. at 619.
In early 1992, the Reassessment Committee sent a series of four letters to the homeowners, explaining the proposed change as a "fair and equitable assessment" based on the Condominium Act. However, none of the letters included the text of the amendment. The letters informed the homeowners that they would each receive a ballot telling them how the new plan would affect them.
In May 1992, the Board of Directors (the Board) distributed ballots to the homeowners to vote on the new proposal for allocating expenses. The ballots did not explain the new method used to allocate expenses, did not refer to the Declaration, and did not include the text of the proposed amendment. The ballots asked each homeowner to vote for or against the change "based on the equalization of assessments plan which has been presented to you in letters over the past four months. . . ." The ballot set forth the individual homeowner's present monthly dues, the proposed monthly dues, and the difference in payment. The homeowner was then asked to vote to either accept or reject the reassessment plan.
In September 1992, the Reassessment Committee reported that of the 77% units that voted, 76% voted to change the allocation, and 24% voted against it. Because the response exceeded the 60% required to amend the declaration, the Board concluded the change was effective beginning in January 1993.
In 1999, a Board consisting of different members was concerned that the 1992 amendment did not comply with the requirements to amend the Declaration and sought the advice of an attorney. Based on the attorney's determination that the voting procedure did not comply with the Declaration, the Board revoked the 1992 amendment and reinstated the previous formula for allocating common expenses.
Keller I, 127 Wn. App. at 619-20.
Keller I, 127 Wn. App. at 620.
In 2002, the Kellers sued Sixty-01. The Kellers alleged that the 1992 amendment was properly adopted and the Board's decision to revoke the 1999 amendment violated the Declaration and Bylaws. The Kellers sought damages for the resulting higher expenses they had to pay. Sixty-01 filed a motion to dismiss under CR 12(b)(6) and a motion for summary judgment. The court dismissed the Kellers' lawsuit, ruling that because the 1992 amendment was improperly adopted as a matter of law, the amendment was void.
Keller I, 127 Wn. App. at 620.
On appeal, this court reversed dismissal of the Kellers' lawsuit because there were material issues of fact about whether the 1992 amendment complied with the requirements to obtain prior written approval from first mortgage holders and whether the amendment was properly adopted.
Keller I, 127 Wn. App. at 627. We awarded the Kellers their costs on appeal as the substantially prevailing party but did not award them attorney fees because they did not request them. The Kellers argued that attorney fees should not be awarded. Keller I, 127 Wn. App. at 630.
On remand, Sixty-01 filed a second motion for summary judgment, arguing that the 1992 amendment was contrary to the requirements of Section 28 of the Declaration. Sixty-01 also argued that without the prior written approval of 75% of the institutions first mortgages holding, the 1992 amendment was invalid. The trial court denied the motion for summary judgment.
At trial, the Kellers claimed that the 1992 amendment was properly adopted and the Board's decision in 1999 to revoke the amendment violated the Declaration and Bylaws. The Kellers claimed damages for the additional amount they had paid for common expenses. Sixty-01 asserted that because the Board did not obtain prior written approval of 75% of the first mortgage holders and did not comply with the requirements of the Declaration and Bylaws in adopting the amendment, the 1992 amendment was void. The letters to the homeowners and the ballots used for the 1992 amendment were admitted as exhibits. Neither the letters nor the ballots contain the text of the amendment. Homeowners also testified that prior to casting their ballots they were never provided the text of the amendment.
In the special verdict form, the jury found that because the 1992 amendment was not material to the first mortgage holders, their approval was not necessary. But the jury also found the procedures used to amend the Declaration in 1992 violated the Declaration and Bylaws. The trial court denied the Kellers' motion to vacate the verdict and entered a judgment in favor of Sixty-01. The court also awarded Sixty-01 attorney fees. The Kellers appeal.
ANALYSIS
Violation of the Declaration and Bylaws Violations
The Kellers contend the trial court abused its discretion by allowing Sixty-01 to argue the 1992 amendment violated the requirements of Section 28.1 of the Declaration and Article 10 of the Bylaws. The Kellers claim that prior to trial, Sixty-01 did not disclose that it intended to rely on these provisions in the Declaration and Bylaws. In support of this argument, the Kellers point to the response of Sixty-01 to interrogatories.
Section 28.1 of the Declaration provides:
Amendments by the Association. An apartment owner may propose amendments to this Declaration, the Survey May, or the Plans to the Board. A majority of the members of the Board may cause a proposed amendment to be submitted to the members of the Association for their consideration. If an amendment is proposed by owners of 20% or more of the apartments in the condominium, then, irrespective of whether the Board concurs in the proposed amendment, it shall be submitted to the members of the Association for their consideration at their next regular or special meeting for which timely notice may be given. Notice of a meeting at which an amendment is to be considered shall include the text of the proposed amendment. Amendments may be adopted at a meeting of the Association or by written consent of the requisite number of persons entitled to vote, after notice has been given to all persons (including mortgagees) entitled to receive notice of a meeting of the Association. The unanimous consent of all apartment owners shall be required for adoption of either (1) an amendment altering the value of the property and of each apartment or the percentages of undivided interest in the common areas and facilities (it being understood that changes in such percentages of undivided interest resulting from expansion of the condominium into Subsequent Phase or Phases will not be deemed an amendment hereof), or (2) a decision that the property be removed from condominium status, or (3) an amendment that in any way alters or restricts Declarant's powers or procedures for expanding the condominium into Subsequent Phases or electing not to do so, or (4) an amendment of Section 14.7 or of this Article 28. All other amendments shall be adopted if approved by 60% of the apartment owners and there is compliance with Section 28.2. Once an amendment has been adopted by the Association and any necessary approval of the mortgagees has been obtained, the amendment will become effective when a certificate of the amendment, executed by two officers of the Association, has been recorded in the public records.
Article 10 of the Bylaws provides that:
Any apartment owner or owners who desire that these By laws be amended may proposed amendments to the Board. A majority of the members of the Board may cause a proposed amendment to be submitted to the members of the Association for their consideration. If an amendment is proposed by owners of 28% or more of the apartments in the condominium, then irrespective of whether the Board concurs in the proposed amendment it shall be submitted to the members of the Association for their consideration at their next regular or special meeting for which timely notice may be given. Notice of a meeting at which an amendment is to be considered shall include the text of the proposed amendment. Amendments may be adopted at a meeting of the Association or by written consent of the requisite number of persons entitled to vote, after notice has been given to all persons (including mortgagees), entitled to receive notice of a meeting of the Association. The unanimous vote of all apartment owners shall be required for adoption of either an amendment altering the value of the property and of each apartment or the percentages of undivided interest in the common areas and facilities, or an amendment of this Article 10. All other amendments shall be adopted if approved by 60% of the apartment owners. No material amendment of the Declaration or of these Bylaws may be made without the prior written approval of each institutional holder of a first mortgage lien on an apartment.
In answer to interrogatories asking Sixty-01 to identify all material facts, witnesses, and documents to support its denial that the 1992 amendment was proper and its denial that the Board's decision to revoke the 1992 amendment violated the terms of the Declaration, Sixty-01 referred the Kellers to the two motions for summary judgment:
INTERROGATORY NO. 6 : As to your denial of Paragraph 11 of our Complaint the effect that your adoption in 1992 and use thereafter (until abandoned) of Article 18.11 was proper, please:
6.1 State all material facts;
6.2 Identify all witnesses you know to have material information; and,
6.3 Identify all documents you know to have material relevance.
ANSWER :
Defendant answers this interrogatory by referring to the statements of fact contained in both its original Motion for Partial Summary Judgment, and its Renewed Motion for Summary Judgment. . . .
. . .
INTERROGATORY NO. 8 : As to your denial of Paragraph 18 of our Complaint which alleged that your abandonment of Article 18.11 violated the Declaration, rules and statutes. To the extent that the basis for that denial is more than a claim by you that Article 18.11 was invalidly adopted, please:
8.1 State all material facts;
8.2 Identify all witnesses you know to have material information; and,
8.3 Identify all documents you know to have material relevance.
ANSWER :
Defendant objects to this interrogatory on the grounds that it calls for a legal conclusion, and is thus not required to answer. Without waiving this objection, Defendant answers this interrogatory by referring to the statements of fact contained in both its original Motion for Partial Summary Judgment, and its Renewed Motion for Summary Judgment.
The two summary judgment motions clearly indicate that Sixty-01 claimed the 1992 amendment violated the requirements of the Declaration. And although Bylaws are not specifically referred to, the pertinent language in Article 10 of the Bylaws is identical to the language in Section 28.1 of the Declaration.
Sixty-01 first mentioned Section 28.1 of the Declaration in the first motion for partial summary judgment, and argued that the 1992 amendment was invalid because it was adopted in violation of the Declaration. In the first appeal, this court not only addressed Section 28.2 but also pointed to Section 28.1 stating that it required unanimous consent for an amendment to the Declaration "?altering the value of the property and of each apartment or the percentages of undivided interest in the common areas and facilities.'" On remand, Sixty-01 again argued in a second motion for summary judgment, that the 1992 amendment did not comply with the procedures required by the Declaration and was void. We conclude the trial court did not abuse its discretion by allowing Sixty-01 to argue at trial that the 1992 amendment to the Declaration were adopted in violation of at trial Section 28.1 of the Declaration and Article 10 of the Bylaws.
Keller I, 127 Wn. App. at 625.
Jury Instructions
The Kellers assert that the trial court erred in refusing to instruct the jury that the Board substantially complied with the voting requirements of the Declaration and the Bylaws. The Kellers proposed giving the following jury instruction:
"[t]here was no requirement that the text of the amendment adopted in 1992 be included in the ballot as it was voted on by the members of the association. Substantial compliance with the procedures in the Declaration is sufficient."
The Kellers also assigned error to the court's refusal to give the Kellers' burden of proof instruction. But because the Kellers do not support the assignment of error with argument, we decline to consider it. RAP 10.3(a)(6); Bercier v. Kiga, 127 Wn. App. 809, 824, 103 P.3d 232 (2004), rev. denied, 155 Wn.2d 1015, 125 P.3d 304 (2005).
We review de novo claimed errors of law in giving jury instructions. Jury instructions are sufficient if, when read as a whole, the instructions properly inform the jury of the applicable law, permit each party to argue its theory of the case, and are not misleading. Boeing Co. v. Key, 101 Wn. App. 629, 632-633, 5 P.3d 16 (2000). Whether to give a particular instruction is within the trial court's discretion. Stiley v. Black, 130 Wn.2d 486, 498, 925 P.2d 194 (1996).
Below and on appeal, the Kellers cite 7A Fletcher Cyc. Corp. § 3727 for the proposition that "[i]n accepting an amendment to a charter of a corporation, there must be substantial compliance with essential steps contemplated or required by the statute or charter, and if required, a formal meeting and vote must be had." The Kellers argue that because there is no Washington authority to the contrary, the trial court should have followed the common law and instructed the jury on substantial compliance instead of strict compliance with the voting requirements. Because the Kellers have cited no legal authority that substantial compliance is the law in Washington and the governing documents for Sixty-01 require strict compliance with the adopted procedures, we conclude that the trial court did not err as a matter of law by refusing to give the jury the Kellers' proposed instruction on substantial compliance.
Likewise, we also conclude that the trial court did not err in refusing to instruct the jury that if the amendment was within the Board's authority, the amendment was not "automatically void."
In addition, the Kellers did not object to giving the jury instruction which states that Washington state law requires strict compliance with a condominium's governing documents. Jury Instruction No. 6 provides:
A condominium declaration is a contract among the parties to it. A Washington statute requires that each condominium owner shall comply strictly with the bylaws, and with the covenants, conditions and restrictions set forth in the condominium declaration. A condominium association is equally bound by the declaration and bylaws.
The Kellers also contend that the trial court erred in instructing the jury that if the vote and voting procedures for the 1992 amendment violated the Declaration and Bylaws, the amendment was void. In the first appeal, we stated that if the 1992 amendment was not properly adopted, the trial court had to determine whether the amendment was void or voidable. Keller I, 127 Wn. App. 614, 621, 112 P.3d 544 (2005).
On remand, the court relied on Hartstene Point Maintenance Ass'n v. Diehl, 95 Wn. App. 339, 979 P.2d 854 (1999), to rule that if the jury found the Board did not follow the condominium's governing documents, as a matter of law, the 1992 amendment was void. Over the Kellers' objection, the court instructed the jury that it had to answer two questions: first, whether the 1992 amendments should have included the institutional first mortgage holders, and second, whether the voting procedures violated the Declaration and Bylaws. If the jury found that the 1992 amendments violated the requirements of the Declaration and Bylaws, the instruction states that the amendment is void. Jury Instruction No. 15 provides:
If you determine that the vote on the amendment in 1992 should have included the institutional holders of first mortgages on condominium units, or the voting procedures were contrary to the Declaration and Bylaws, then the 1992 amendment is automatically void and of no effect.
In Hartstene, the Architectural Control Committee (ACC) of the Hartstene Point Maintenance Association's Board of Directors (the Association) denied a homeowner's request to cut down a tree on his lot. Hartstene, 95 Wn. App. at 341. When the homeowner went ahead and cut down the tree, the ACC filed a lawsuit against him. Hartstene, 95 Wn. App. at 341-42. In response, the homeowner asserted that the ACC did not have the authority to deny his request because the composition of the ACC violated the requirements of the Association's governing documents. Hartstene, at 342-43. The court held that because the homeowner did not challenge the ACC's corporate authority, but only the manner of executing its authority, if the ACC action did not comply with the governing documents, the act is void. Hartstene, at 345. The court noted that to rule otherwise would mean that "the corporation would be free to disregard its own bylaws. . . . [and] the corporate articles and bylaws would be largely meaningless." Hartstene, 95 Wn. App. at 345. Here, as in Hartstene, Sixty-01 did not argue that the Board did not have the authority to amend the Declaration, it only challenged the procedures the Board used in 1992 to amend the Declaration.
The Kellers' reliance on Twisp Mining Smelting Co. v. Chelan Mining Co., 16 Wn.2d 264, 133 P.2d 300 (1943), to argue that the trial court erred in stating that if the requirements of the Declaration and Bylaws were violated, the 1992 amendment was void instead of voidable, is misplaced. In Twisp, Twisp Mining Smelting Company brought an action against Chelan Mining Company to declare a deed from Twisp to Chelan void and to quiet title. Twisp, at 266. Twisp alleged that the deed was void because the Board of Trustees did not have a quorum. Twisp also argued that entering into the deed was ultra vires and could not be ratified. The Washington Supreme Court rejected both of these arguments. The court stated the general rule that a corporation must follow the procedures provided by its governing documents. Twisp, at 294. But the court held that if a party benefits from the contract, the party is estopped from declaring the contract ultra vires because it did not follow a formality. Twisp, at 294. In those circumstances, the contract is voidable, not void. Twisp, at 294. We conclude the trial court did not err in relying on Hartstene to instruct the jury that if the vote and voting procedures were contrary to the Declaration and Bylaws, the amendment was void.
The court in Hartstene noted that its conclusion was consistent with Twisp. Hartstene, 95 Wn. App. at 345.
Consequently, the trial court did not err by refusing to instruct the jury that if the amendment was not void, the jury had to decide whether the Board's revocation was time-barred. It also was not error to refuse to instruct the jury that no action of a condominium association is void even if the association did not have the authority to amend the Declaration and that the Board's action could be enjoined.
Sufficiency of the Evidence
The Kellers also assert that the evidence does not support the jury's determination that the vote and voting procedure for the 1992 amendment violated Section 28.1 of the Declaration and Article 10 of the Bylaws.
This court may only overturn a jury verdict if the verdict was not supported by substantial evidence. Winbun v. Moore, 143 Wn.2d 206, 213, 18 P.3d 576 (2001). Substantial evidence is "a sufficient quantity of evidence to persuade a rational, fair-minded person of the truth of the premises in question." Wlasiuk v. Whirlpool Corp., 81 Wn. App. 163, 170, 914 P.2d 102 (1996).
Article 28.1 of the Declaration and Section 10 of the Bylaws clearly state that "[n]otice of a meeting at which an amendment is to be considered shall include the text of the proposed amendment." Neither the letters that the Reassessment Committee sent to the homeowners nor the ballots used for the 1992 amendment to the Declaration included the text of the amendment. In addition, homeowners testified at trial that they were not provided with the text of the amendment prior to casting their ballots. Sufficient evidence supports the jury verdict that the vote and voting procedure for the 1992 amendment violated the Declaration and Bylaws.
Attorney Fees
The Kellers assert that the trial court abused its discretion in awarding attorney fees and costs to Sixty-01 under Section 17.2 of the Declaration. The Kellers contend Sixty-01 is not entitled to fees and costs under Section 17.2 and the trial court did not adequately address the basis for the award in its findings and conclusions.
If a contract provides for attorney fees and costs, the prevailing party in any action on the contract is entitled to reasonable attorney fees. RCW 4.84.330. The court must enter findings of facts and conclusions of law in support of an attorney fee award. Mahler v. Szucs, 135 Wn.2d 398, 435, 957 P.2d 632 (1998).
Section 17.2 of the Declaration provides:
If a legal action is brought to interpret or enforce compliance with the provisions of this Declaration, the Articles, the Bylaws, or the rules or regulations of the Association, the prevailing party shall be entitled to judgment against the other party for its reasonable expenses, court costs, and attorney's fees in the amount awarded by the court.
Under Section 17.2, Sixty-01 is entitled to attorney fees as the prevailing party. Contrary to the Kellers' argument, there is no requirement in Section 17.2 that the legal action be brought by an owner.
A trial court's award of attorney fees is reviewed for abuse of discretion. Scott Fetzer Co. v. Weeks, 122 Wn.2d 141, 147, 859 P.2d 1210 (1993). A trial court abuses its discretion only when its decision is manifestly unreasonable or based on Page 15 untenable grounds or reasons. Wick v. Clark County, 86 Wn. App. 376, 382, 936 P.2d 1201 (1997). If attorney fees are only reasonable for certain claims, the court must segregate the time spent on other theories and claims on the record, even if the other theories and claims are interrelated or overlap. Hume v. Am. Disposal Co., 124 Wn.2d 656, 673, 880 P.2d 988 (1994). The party claiming the fees bears the burden of segregating. Loeffelholz v. Citizens for Leaders with Ethics Accountability Now (CLEAN.), 119 Wn. App. 665, 690, 82 P.3d 1199 (2004).
Sixty-01 provided extensive documentation of its fees and costs. The record reflects that the trial court independently determined the amount of the attorney fee award and segregated the claims on which Sixty-01 was not the prevailing party. In the order, the trial court awarded Sixty-01 approximately half of the amount it requested. The court explained that Sixty-01 "was unsuccessful on its assertion the amendment at issue was `material,' lost its appeal of this issue, failed to prevail on its subsequent motion for summary judgment and prevailed at trial only on the issue of whether the amendment was properly presented for a vote." The court also stated that it had "done its best to apportion a fair amount of fees to work that was successful on this issue." The trial court did not abuse its discretion in awarding attorney fees and costs to Sixty-01 under Section 17.2. Because Sixty-01 is the prevailing party on appeal, Sixty-01 is entitled to reasonable attorney fees and costs under Section 17.2 of the Declaration upon compliance with RAP 18.1.
We affirm.
WE CONCUR: