Black v. Whitestone Estates Condominium Homeowners' Association

          Appeal from the Superior Court No. 3 AN-16-053 64 CI of the State of Alaska, Third Judicial District, Anchorage, Gregory Miller, Judge.

          Craig Wm. Black, Eagle River, for Appellants.

          Ralph B. Cushman, Law Office of James H. McCollum, LLC, Anchorage, for Appellee Whitestone Estates Condominium Homeowners' Association.

          No appearance by Appellees Donald and Mary E. Jurewicz.

          Before: Bolger, Chief Justice, Winfree, Stowers, Maassen, and Carney, Justices.

          OPINION

          BOLGER, CHIEF JUSTICE.

         I. INTRODUCTION

         For several years two condominium owners withheld a portion of their dues in protest. Then beginning in 2014, they sent the condominium association several payments, with instructions to apply them to recent debts and current dues. In this appeal the owners argue that they accrued no debts within the statute of limitations because their payment directives were binding. But we agree with the superior court's conclusion that these payment directives were not effective because the governing declaration allowed the association to apply any payments to "the oldest balance due." We affirm the superior court on this issue and on the other issues the owners raise in this appeal.

         II. FACTS AND PROCEEDINGS

         A. Facts

         Whitestone Estates is a ten-unit condominium, adjacent to Ptarmigan Boulevard, a public street, in Eagle River. The condominiums are single-family homes on large parcels of land. Units 1 and 2 access Ptarmigan Boulevard by a short, paved drive; units 3 through 10 access Ptarmigan Boulevard by a longer drive.

         Craig Black, a member of the Alaska Bar who has represented himself and his wife, Camille Brill, (collectively the Blacks) throughout this litigation, purchased unit 1 in May 2002. Whitestone has assessed monthly dues of $100 to pay for the maintenance of both drives, mostly snow removal, since before the Blacks purchased their unit. In 2004, relying on a legal opinion he obtained as president of the board of the condominium association, ^[1] Black claimed that this arrangement violated the condominium's governing declaration. He proposed an alternative approach: that each unit owner pay the percentage of the annual snow removal expenses that corresponded to the portion of paved area within the association that serviced his or her unit. The unit owners voted to reject this proposal in 2005. But the Blacks nonetheless began withholding a portion of their assessed dues, paying only what their share would have been under the rejected formula.

         In 2011 Whitestone sought an opinion from a second attorney about its dues structure. This attorney concluded that the main drive was a common element and that the association's dues structure was permissible under the declaration. Nonetheless the Blacks continued to withhold a portion of their assessed dues until 2014.

         On February 6, 2014, the Blacks sent a letter to all unit owners announcing their intent to end their dues protest. The letter explained that an enclosed check for $3, 554.56 and an earlier check for $265.44 "equal the sum of all monthly association assessments for the 50 months from January 2010 through this month, with our intention being to resume regular $ 100 monthly payments for the foreseeable future." The Blacks clarified to the association's treasurer in an email that they intended these payments "to cover the $3, 800.00 that'[d] been assessed beginning January 2010."

         The treasurer then sent an email to all unit owners on March 22, 2014, shortly before that year's annual meeting, saying that his "records show everyone is paid through 12/31/2013 or further." At the annual meeting later that month, the owners voted to disregard the Blacks' directive and instead apply the lump-sum payment to the couple's oldest debts first. The Blacks did not object, either at the meeting or afterwards.

         From then on the Blacks sent monthly $100 checks to Whitestone with instructions that they be applied to their current dues. Whitestone cashed these checks until sometime after litigation began, at which point they started returning them to the Blacks.

         B. Proceedings

         1. Pre-trial motions

         Whitestone filed a complaint for lien foreclosure in March 2016, seeking to recover $4, 714.08 in unpaid assessments and fees from the Blacks, interest on the unpaid amounts, and "full attorney's fees."

         In their answer the Blacks asserted a statute of limitations defense, alleging that they had fully paid all debts owed to Whitestone for the previous three years and that recovery on any debt older than that was time-barred.^[2] The Blacks also filed numerous counterclaims. They alleged that Whitestone had amassed surplus funds that it was required to distribute to unit owners, that Whitestone had held meetings without giving the Blacks proper notice, and that Whitestone had not prepared and approved minutes for its board meetings, all in violation of the declaration. The Blacks requested that the court invalidate every action taken at a meeting for which "ample advance notice was not first given," direct Whitestone to "generate and approve minutes" for each of its meetings since January 1, 2009, and award money damages in the amount of the Blacks' pro rata share of the alleged surplus. The Blacks also requested attorney's fees and punitive damages, alleging that Whitestone willfully failed to comply with the requirements of Alaska's Common Interest Ownership Act.^[3]

         Whitestone filed an amended complaint in which it explicitly addressed Black's statute of limitations defense, claiming that the Blacks' payment directives were ineffective, that it had applied their payments to their oldest debts first, and that the debts on which it sought to recover were thus not older than three years.

         Whitestone also sought declaratory judgment to determine whether the owners of units 1 and 2 could legally be required to pay assessments for the upkeep of the main drive. It alleged that the Blacks had "asserted for years" that they were not required to pay for the maintenance of the drive, while also asserting that Whitestone should be responsible for the maintenance of the smaller drive that served units 1 and 2. The Blacks moved to dismiss this claim for declaratory relief, arguing that no actual controversy existed over the drives issue because they had abandoned their dues protest in 2014. The superior court denied this motion. Whitestone then filed a motion for partial summary judgment on its declaratory judgment claim, which the superior court eventually granted.

         2. Trial and post-trial orders

         The case proceeded to a five-day bench trial on the remaining issues in late August 2017. Whitestone presented the testimony of multiple unit owners, while the Blacks called a former unit owner who had been Whitestone's treasurer when they made their 2014 payment. Both Black and Brill also testified. In their closing argument, the Blacks agreed to the dismissal of their counterclaims for an injunction, based on the failure to provide notice of meetings, and for punitive damages, saying that they did not "believe there's evidence sufficient to award either of those."

         After the parties gave their closing arguments, the court issued a decision on the record. The court stated that "[t]his isn't a close call" and resolved all the issues in Whitestone's favor, awarding it $11, 518.20 in damages. It explained that this was "largely a credibility case," and found "every one of [Whitestone's] witnesses to be very, very credible." On the other hand, the court said that it did not find Black's explanations of his actions to be credible and found that Black was "trying to sneak up on the association," which the court considered an act of bad faith.

         The court found that Black had "created ... a decade of animosity and mistrust amongst [himself] and [his] neighbors and... w[as] simply not willing to abide by the declaration" and accept the 2005 vote that rejected his alternative dues structure. It explained that it concluded from testimony that Black had "bullied everybody with [his] position as a lawyer" and that this demeanor was evident in his filings and presentation before the court. The court further explained that despite Black's posturing, his legal arguments were not as strong as he believed: "[T]he facts establish that [he was] very assertive and self-confident with the association, but under the light of day here in this courtroom, [he] had no substance to that assertion."

         The Blacks filed a motion for reconsideration, which the superior court denied with a written order. In it the court explained the basis for its decision that Whitestone's claims were not time-barred. It concluded that the Blacks' payment directives were not binding on the association for two reasons: first that they could not override a provision of the declaration that gave "Whitestone ... the right to apply payments received to the oldest debts first," and second that Black had breached a fiduciary duty to the association by not "warn[ing] his fellow board members and unit owners what the effect of ignoring his payment directives might be" while he was a board member from 2005 to 2009. For these reasons, the superior court found that "while the Blacks may have made payment directives, they made no effective payment directives." (Emphasis in original.)

         The superior court issued its final judgment and a decree of foreclosure in October 2017 and granted Whitestone full attorney's fees in January 2018. In all, it granted Whitestone a total monetary judgment of $ 132, 670.16: $ 11, 518.20 for unpaid assessments, associated late fees, and interest (less $4, 382, which the Blacks had already paid into the court registry) and $125, 533.96 in attorney's fees and costs. The court placed a foreclosure lien in that amount on the Blacks' property.

         The Blacks appeal.

         III. DISCUSSION

         The Blacks argue that the superior court erred when it determined that their payment directives were ineffective, found that they were not entitled to recover alleged surplus funds from the association, denied their motion to dismiss the declaratory judgment claim, included a disputed special assessment in Whitestone's award, and determined ...