March 19, 2024
Can a Homeowner Obtain a Declaratory Judgment Against a HOA?
Every lawsuit must have a rational objective in the form of one or more remedies the Court ought to award against the defendant. Civil remedies can include money damages, possession, or an injunction. However, sometimes the claimant is interested in having the rights or duties of the parties resolved for purposes of present or future dealings. Such rulings allow the controversy to be resolved without one party testing validity by breaching or waiting indefinitely for the opponent to breach whatever instrument or law is disputed. The legal name for this sort of remedy is a “Declaratory Judgment.”
Determination of the size and shape of rights is a reoccurring theme of community association controversies. The difference between being made whole in the wake of a breach versus declaration or rights regarding a legal instrument or statute can seem like an abstraction, because the former would seem to follow the latter. Yet, courts are sensitive to the concern that it is not their job to step in and take over the management of a board or committee. Thus, there may be important questions where the court’s ability to take active jurisdiction is not clear. Declaratory relief can provide a remedy where there may not be a clear breach but there nonetheless is a controversy that is ripe for decision.
Where an actual controversy exists, circuit courts “shall have power to make binding adjudications of right” in the form of declaratory judgments. Va. Code § 8.01-184. Under the English common law (which forms the basis of law in Virginia and almost every other state), declaratory relief was not something that was an option. It is a statutory innovation. The declaratory judgment statutes are remedial legislation enacted to remove the common law requirement of actual injury. Declaratory judgments are binding adjudications of the rights of the parties, guiding them in their future conduct together, relieving them of the risk of taking undirected action incident to their rights, which, without direction, would jeopardize their interests. However, the power to make a declaratory judgment will not be exercised where some other mode of proceeding is provided. Because the driving purpose behind declaratory judgments is to resolve disputes before a right is violated, where claims and rights asserted have fully matured, and the alleged wrongs have already been suffered, a declaratory judgment is not available (because one ought to be proceeding for breach of contract or statute, or some other theory).
In many cases it is not clear whether bringing a declaratory judgment in a complaint or counterclaim is necessary, because the court would like to have to make a finding or ruling answering such a question in the court of addressing other claims. In some cases, some other kind of offensive or defensive pleading fits better. Where granting declaratory judgment is duplicative of the relief already available to the claimant, courts may decline to exercise jurisdiction.
Some counterclaims for declaratory relief are better suited to be presented as pleas or affirmative defenses instead. A counterclaim is a cause of action which seeks affirmative relief, while an affirmative defense defeats the plaintiff’s cause of action by denial or confession and avoidance. In contrast, a counterclaim is a claim for relief asserted against an opposing party after an original claim has been made; especially, a defendant’s claim in opposition to or as a setoff against the plaintiff’s claim. One would expect Virginia state courts to be more permissive in terms of raising issues by counterclaim than their federal counterparts, where there are stricter pleading requirements.
Declaratory judgments with related injunctive relief are common remedies in cases involving community associations. In a 1997 Loudoun County Circuit Court case, Cornwell v. Main St. Village HOA, a homeowner brought a suit in equity for declaratory and injunctive relief, challenging the enforcement of a parking policy as ultra vires under the HOA’s governing instruments. The court entered an order granting a declaratory judgment that the policy was void as ultra vires and entered an injunction against enforcement of the void policy.
In a Chesterfield County Circuit Court case, Robins v. CMH Homes, a property owner counterclaimed against a person exercising architectural approval in a subdivision. The owner sought declaratory and injunctive relief. The homeowner argued that based on the covenants, architectural approval was being wrongfully withheld. The court granted declaratory and injunctive relief in favor of the owner.
In 2011, the Circuit Court of Fairfax County rejected a HOA’s demurrer to the propriety of declaratory relief in a HOA governance case. The Farran family sued Olde Belhaven HOA for violation of the POAA, NSCA, and its declaration, while asking for declaratory and injunctive relief. The Farrans disputed the HOA’s denial of their request to add a roof and deck and challenged mismanagement of reserves. The HOA demurred to the claim for declaratory judgment, arguing the alleged breaches already occurred. The Circuit Court overruled this ground to demurrer because the Farrans’ complaint focused on the interpretation of legal rights under multiple HOA documents and statutes for determinations necessary for the parties to understand how to operate in the future under the governing documents and state statutes.
In closing, bear in mind that while courts traditionally have been reluctant to grant equitable relief, the modern trend is to allow declaratory or injunctive relief to be sought, if the allegations can adequately be proven. The declaratory judgment statutes are supposed to make the courts more generous, not less so. Whether a homeowner has been sued by a HOA or is trying to evaluate whether to bring suit, declaratory relief ought to be considered.
Legal Authority:
Pure Presbyterian Church of Washington v. Grace of God Presbyterian Church, 296 Va. 42 (2018).
Liberty Mut. Ins. Co. v. Bishop, 211 Va. 414 (1970)
Bd. of Supervisors v. Hylton Enters., 216 Va. 582 (1976)
Godwin v. Bd. of Dirs. of Bay Point Assn, 82 Va. Cir. 215 (Norfolk 2011).
61A Am. Jur. 2d Pleading § 276.
Black’s Law Dictionary 451 (8th ed. 1999)
Cornwell v. Main St. Village HOA, 42 Va. Cir. 48 (Loudoun Jan. 16, 1997).
Robins v. CMH Homes, 103 Va. Cir. 8 (Chesterfield 2019).
Farran v. Olde Belhaven Towne Owners’ Assn, 83 Va. Cir. 286 (Fairfax Aug. 24, 2011).
February 1, 2024
Christmas at West Hayden Estates First Addition HOA
I enjoy seeing properties adorned with colored lights and other decorations for holidays. It is unusual for a homeowner to set up holiday decorations or host activities that cause a genuine nuisance to neighboring properties. In my view, personalized holiday displays enhance the living experience. It is fun that they are all different. Some are ostensibly religious, others feature Peanuts or Dr. Seuss characters. In December, I saw several inflatable Grinch figures, small and large. The Grinch endures in pop culture because in most people there is a small place in the heart that is jealous of other people’s happiness.
Some people take a different view. To them, that there are certain practices, such as too many lights, leaving them up too long, or too many signs that are not to their taste. Many people who volunteer for HOA leadership positions believe that some residents need firm direction as to what is not acceptable. A process of self-selection brings forth candidates for boards and committees who want to see changes. Their ideas tend to involve stricter rules or increased charges. Personally, I am not much of a libertarian. An orderly sort of liberty requires a few rules. Developers design subdivisions and multifamily buildings according to particular standards and expectations. Usually, the original governing instruments reflect those designs. Many problems seen with HOAs are the result of subsequent boards of directors who want to take the community into a different direction, through a variety of amendments and new policies at odds with what the purchasers fairly though they were buying their families into. Developers rarely show any interest in establishing community standards for holiday displays, because such things are seen as temporary. HOAs are known for instigating enforcement against homeowners who erect holiday displays. Few of those stories ever make it into the news.
One high-profile, ongoing HOA dispute concerns Christmas at West Hayden First Addition HOA in Idaho. Homeowners Jeremy and Kristy Morris have been in disputes with this HOA since 2015. They have a pending appeal in the federal court system. Jeremy Morris is an alumnus of Liberty University in Lynchburg, Virginia. When the Morrises wanted to purchase their home, they reached out to the Board of Directors to ask them if they would oppose the type of Christmas displays and programs that drew crowds to their previous residence. This began a longstanding conflict between the Morrises, the board and other lot owners regarding the holiday activities. Former director Larry Strayer found out about the Morrises inquiry and submitted for the board’s consideration a strident draft letter stating:
And finally, I am somewhat hesitant in bring up the fact that some of our residents are avowed atheists and I don’t even want to think of the problems that could bring up. It is not the intention of the Board to discourage you from becoming part of our great neighborhood but we do not wish to become entwined in any expensive litigation to enforce long standing rules and regulations and fill our neighborhood with the riff-raff you seemed to attract over by WalMart. [sic] Grouse Meadows indeed!!! We don’t allow “those kind” in our neighborhood.
The board did not like the incendiary wording of this draft. The directors made edits to the letter. Director Pat Kellig sent to the Morris family a revised version including the following language:
And finally, I am somewhat hesitant in bringing up the fact that some of our residents are non-Christians or of another faith and I don’t even want to think of the problems that could bring up. It is not the intention of the Board to discourage you from becoming part of our great neighborhood but we do not wish to become entwined in expensive litigation to enforce long standing rules and regulations and fill our neighborhood with the hundreds of people and possible undesirables. We have worked hard to keep our area peaceful, quiet, and clean. Neighbors respect the CC & R’s [sic] and show common courtesy to those around them. These are why people want to live here.
This version was sent by Ms. Kellig to the Morrises without the approval of the other directors. When the Morrises obtained a copy of Mr. Strayer’s initial version, they saw it as evidence of an anti-Christian animus within the HOA.
The case ended up in the U.S. District Court for Idaho. The Judge found that the purpose of the Morrises Christmas program was to support charities and to engage in religious ministry. They did not request or obtain approval from the HOA to conduct the five-day long program. They decorated the house with 200,000 Christmas lights. They invited thousands of people. The attendees arrived by the busload or drove themselves and parked on the street. The program included people dressed as the Grinch, Frosty the Snowman, Clifford the Big Red Dog, Roman soldiers and Santa Claus. Someone brough a live camel and donkey to enhance the nativity scene. The program included amplified Christmas music. Neighbors complained about the traffic, parking and noise problems. As you can imagine, this Christmas program drew strong pro and con reactions within the community.
The Morrises presented evidence that various residents of the community exhibited threatening behavior towards them regarding the Christmas program. Mr. Morris described receiving a “death threat.” However, the Morrises could not prove that the threats shouted at them were made by board members. The Judge later concluded that whatever statement that resident made did not amount to a “death threat.” The opinion suggests that the angry resident said that he would “take care” of Mr. Morris.
At trial, the jury found in favor of the Morrises on their religious discrimination claim. They awarded the Morrises $60,000.00 in compensatory damages and $15,000 in punitive damages. The HOA filed a motion challenging the basis for the jury’s verdict and sought entry of an injunction to order the Morrises to stop conducting their Christmas program on the grounds that it violated the restrictive covenants.
The Judge agreed with the HOA. The Judge’s view was that the HOA letters introduced into evidence did not evidence a discriminatory animus on the part of the board with regard to the family’s Christian religion. The Judge observed that the original version of the letter was not written by a director, and that the version that was actually sent was toned down and reflected a sense of religious pluralism. To some, approval of the Morris Christmas celebration would suggest favoritism towards Christianity. Also, it came out at trial that the members of the board were also of the Christian religion.
The opinion does not state to what extent any of the board’s deliberations were conducted in an open meeting or duly convened executive session. The letters in this case illustrate how directors, managers and lot owners ought to conduct themselves in a civil fashion, realizing that the communications may eventually come out. I don’t understand why the board agreed to field this question. In my view, the covenants ought to speak for themselves, and the board should not be considering architectural “applications” from persons who haven’t even purchased their homes.
Regarding the residents shouting at the Morrises, the Judge considered to what extent the HOA could be responsible for threats made by persons not proved to be directors. A handful of courts have considered to what extent a HOA board may be found responsible under the Fair Housing Act for the discriminatory animus of persons who are not on the board or some other position of authority. HUD interprets the Fair Housing Act to only hold landlords or boards responsible for the discriminatory actions of other residents if the person in authority knew about the discriminatory conduct and had the power to correct it. If the HOA board doesn’t have meaningful ability to control or correct the harassment, then they can’t be held liable for the discrimination. Sometimes, HOAs and condominiums justify harsh litigation or enforcement activity on the grounds that the failure to do so could result in fair housing claims. However, if the declaration and the statutes do not give the HOA the authority to regulate the activity, then this is not an adequate justification.
The judge set aside the jury’s verdict in favor of the Morrises as not adequately supported by the evidence. Readers, please be aware that setting aside a jury verdict is ordinarily considered to be an extreme decision, only taken where there is a miscarriage of justice. A jury’s verdict is supposed to be upheld even if the judge disagrees with the jury’s findings regarding the credibility of the witnesses.
The judge’s decision also considered the HOA’s request for an injunction against future Christmas celebrations by the Morris family. The HOA’s restrictive covenants contained typical provisions that one sees in recorded instruments throughout the country from the past 10-15 years. The “modern” trend is to have general language that allows the HOA to adopt rules and regulations governing the architectural alternations or decorations to the property, and to require lot owners to apply and obtain approval for changes. The judge found the Morrises holiday celebrations excessive and not in keeping with the residential character of the development. The Judge found the impact of the glare, noise, parking and traffic to be a nuisance. The judge didn’t really consider what, if any holiday decorations or observances that the Morris family could have without approval or provide any guidance on what the HOA ought to approve.
The focus of the Morrises and the judge was the question of anti-Christian discriminatory animus. However, what’s important when it comes to religious liberty is the free exercise of sincerely held religious beliefs. The First Amendment to the U.S. Constitution protects us against governmental action that infringes upon freedoms of speech, assembly and religion. Generally speaking, this does not speak to situations where a private citizen or corporation, such as a HOA or landlord, infringes upon such freedoms. In the context of enforcement of HOA rules and covenants, there are other public policy considerations that may make a covenant or rule unenforceable on the basis of civil liberties. For example, a state constitution may have protections of civil liberties that may be broader than the U.S. Constitution.
If this case was all about temporary religious or political decorations, I would be inclined to take Jeremy Morris’ side. From reading this opinion, I can’t tell whether any of his neighbors’ ability to drive to their houses was impaired by the traffic or parking. Also, it’s not clear whether the lights or the music interfered with the ability of a person of normal sensitivity to fall asleep at night, even with the windows closed. That said, I do sympathize with the Morris family’s concerns. For many homeowners, trying to fight their HOA over decorations is too difficult. His case brings some publicity to important issues that might not be otherwise considered by the public.
Lastly, I want my readers to note that Jeremy Morris is an attorney and he represented himself and his wife in this federal lawsuit. Many of the homeowners, officers, directors and committee members who are active in HOA and condominium disputes and business went to law school or work in law offices. It’s natural for people with legal training or experience to find the legal affairs of their HOA to be interesting. However, it’s difficult to represent oneself in a major federal lawsuit. There is an adage, (which is sometimes attributed to Abraham Lincoln), “The man who represents himself has a fool for a client.” This saying is particularly true for attorneys who find themselves the party to the suit. As a result of this case, Mr. Morris is under investigation by the Idaho State Bar, because he made some public statements about the judge who ruled against him. It’s hard to say whether the Morris case would have gone better if they had hired another lawyer to advise and represent them.
The appeal in this case was argued before the Ninth Circuit Court of Appeals on June 5, 2020. That court has not made a ruling yet. The Morris family’s disputes over Christmas at West Hayden First Addition HOA have been going on for eight years and the litigation is not resolved. Whatever decision the appeals court makes will only address narrow questions and give specific directions to the trial court. Courts cannot take the reins of the operation of a private business or government agency. These neighbors are going to go on living with each other until someone moves.
Case Citation:
March 10, 2023
Court Declares Cryopreserved Human Embryos May be Partitioned, Auctioned, and Sold
When co-owners of cannot agree as what to do with property, the ordinary remedy is to bring a lawsuit for partition. In partition, the preference is for the property to be subdivided among the co-owners. If the property cannot be equitably divided among the co-owners (such as there being a single family dwelling that takes up the land), then the entire property may be sold at auction and the proceeds divided. This is a process that most people try to avoid because it can be time-intensive for the attorneys billing by the hour.
By statute, real estate is the only property that can be partitioned. Personal property (“chattels”) can also be partitioned. On February 8, 2023, Judge Richard E. Gardiner of Fairfax County Circuit Court issued an opinion that addressed the partition of something unusual: cryopreserved human embryos. This opinion discusses a number of my own interests: property litigation, bioethics, and Virginia history. Property law can “touch and concern” just about any aspect of human relations.
The use of IVF raises numerous ethical questions, such as what to do with “leftover” stored embryos after the couple conceives the number of children they both desire to have together. People are not property, at least not anymore. The law treats stored embryos as property. At some point, the parents must start thinking of their offspring as a person. The way parents relate to their child begins before the time that the law starts treating the offspring as a person. Otherwise, the notion of trying to have (or avoid having) children doesn’t make sense. These issues will continue to present thorny questions as these technologies evolve and human moral standards change. The law plays catch-up.
Honeyhline and Jason Heidemann divorced in 2018. During the marriage, the Heidemanns used in vitro fertilization due to difficulty conceiving. This resulted in three embryos. According to the paperwork, the parties agree to joint ownership of any embryos produced. The Heidemanns used one embryo to conceive one child (a daughter) during the marriage. In the divorce, the Heidemanns signed a property settlement agreement that addressed the embryos, basically deferring their disposition to be resolved by agreement or court order at a later date. The parties agreed to continue to jointly own the embryos and pay for their storage in the meantime. After the divorce, Ms. Heidemann wanted to use the remaining embryos to conceive more children because chemotherapy rendered her infertile. Mr. Heidemann did not agree, viewing this to interfere with his asserted right of “procreational autonomy.” In November 2021, Ms. Heidemann filed a Complaint for Partition of Personal Property. The lawsuit asked the Court to award her both or one of the stored embryos.
Mr. Heidemann opposed the lawsuit with numerous arguments. First, he asserted that the embryos could not be sold because they constitute “human fetal tissue” for purposes of federal statutes. Second, the embryos were not “goods or chattels” that having monetary value and therefore could not be partitioned by statute. Third, under the PSA there could be no use of the embryos without his consent. Fourth, allowing use of the embryos without his consent would violate his 14th Amendment rights. The Court found that none of these arguments warranted short circuit of the lawsuit in Mr. Heidemann’s favor.
Judge Gardiner disagreed that the PSA precluded the action. The PSA contemplated that the embryos be disposed of by agreement or a court order. The plain meaning of the PSA did not give Mr. Heidemann veto power that could prevent a judge from determining the parties property rights in partition.
The Court did not reject Mr. Heidemann’s argument outright that he had a right of personal “reproductive autonomy” under the 14th Amendment that would prevent partition of the embryos. Instead, the Court found that such arguments would have to be considered at a later stage in litigation. I would infer that Mr. Heidemann did not argue that the 14th Amendment requires treating the embryos as something other than property.
Mr. Heidemann argued that the embryos cannot be partitioned pursuant to Va. Code § 8.01-93 because they are not “goods or chattels,” observing that they are “distinct, unique and not fungible” and thus of a character different from parcels of land. Judge Gardiner observed that Mr. Heidemann had already agreed to treat the embryos as properties by signing the PSA.
The Court observed that the “goods or chattels” referenced in the statute is not limited to personal property laying upon or attached to real estate that is also being partitioned. The opinion letter discusses the history of the partition statute. Originally, only real estate could be partitioned. The statute expanded this to include personal property, and for many years it also included people enslaved within the definition of partitionable property. By 1849, enslaved persons were partitionable in kind (divided by individual among the co-owners) or subject to sale (for example, a single person sold and the proceeds divided among the former owners). Before 1819, the law was unsettled as to whether enslaved persons were considered to be property rights appurtenant to the real estate upon which they lived and worked for purposes of partition.
I will pause my summary of the opinion to add a few thoughts of my own: Its interesting that the opinion discusses the question as to whether enslaved persons are the “direct” property of their owners or “indirectly” as tied to the owned land. Serfdom was understood to be something related to landlord-tenant law, whereby the serfs were in a binding “contractual” relation to the land upon which they lived and did agricultural labor. Personal servitude was abolished in the context of the Civil War. Good riddance! Serfdom is compared to “sharecropping,” which also includes conflates notions of employment with ties to the land. All of this is alien to our modern understanding of a contract as a bargained-for meeting of the minds. Yet, the notion of “servitudes” continues in other forms, such as real (predial) servitudes, whereby one parcel of land is yoked to another parcel by a covenant or easement. Being a sharecropper, tenant or owner of servitude-burdened property is not the same as serfdom. Yet, the concepts are not alien to each other. Once land is burdened by obligations to another person’s interest in the same or appurtenant property, the person with an interest in land so burdened cannot retain the real estate interest and walk away from the burden without the other’s permission or adjudication of a legal right. This language of servitudes lives on in easement terminology. There is a “dominant” parcel that enjoys a privilege with respect to a “servient” parcel. After slavery was abolished, in the same time frame in which “Jim Crow” laws developed (including heavy use of “sharecropping” with many blacks, but also whites), use of real servitudes, particularly restrictive covenants, developed to manage subdivisions newly created to house in the suburbs a new middle class created by the industrial revolution. Some of these “servitudes” were expressly discriminatory against African-Americans, others were irksome to everyone. Real servitudes (together with landlord-tenant law and zoning laws) developed to control people through restrictions placed on land use. Real estate, development/construction, and land use law are used to indirectly control the movement and activity of people. The relationship between real and personal property in the context of partition is important, because partition does not “clean” or redefine property (beyond the dilemma of deadlocked common ownership), it merely divides, sells or disposes of a set of rights and duties that already exist. Also consider that in the event that the terms of condominium statutes or recorded instruments do not provide a streamlined framework for disposing of the property in termination, the property in the development goes into a cumbersome, time consuming process of partition.
Getting back to the Judge Gardiner opinion. In 1819, a statute declared that “all Negro and mulatto slaves . . . shall be held, taken, and adjudged to be personal estate.” From his study of the legislative history of the partition statute, with focus on its use with slavery, Judge Gardiner concludes that the present day partition statute, Va. Code § 8.01-93 must be interpreted to include personal property not attached to land, and its use with respect to the same in not limited to situations where the goods or chattels are found on or attached to the land being partitioned. Judge Gardiner did not find that the legal status of human embryos is analogous to slavery, but his opinion stimulates such thoughts.
Judge Gardiner rejected Mr. Heidemann’s argument that frozen embryos cannot be partitioned because they cannot be sold pursuant to federal law. There is a federal statute that says that “human fetal tissue” cannot be sold for consideration such as money. The problem with this argument is that the statute defines “human fetal tissue” as tissue or cells from a dead human embryo or fetus. The embryos fought over in this lawsuit were cryopreserved. Remarkably, dead embryos or fetal tissue have greater legal protection than the living, at least in the Commonwealth of Virginia. Rejecting all of these arguments, the court overruled Mr. Heidemann’s demurrers and permitted his ex-wife’s partition suit to proceed to the next stage. Personally, I find the application of the general laws for partition in the context of human embryos to be problematic, and warranting a legislative fix, because an auction to the highest bidder of embryos seems, in my view, susceptible to corrupting of morals. But, in the absence of any other legal process, this is the only way to handle it. When the parties are deadlocked in their negotiations, the law channels them into an existing system of procedures and remedies.
March 10, 2023 Addendum:
An interesting article about this case was published yesterday, March 9, 2023. The article focuses on an aspect of the opinion that some people found troubling, that Judge Gardiner made use of the legislative history regarding partition of enslaved persons in his attempt to try to interpret the current statute. That article is by Matthew Barakat and is entitled, Judge Uses Slavery Law to Rule Frozen Embryos are Property.” This is worthwhile reading. Barakat quotes Georgetown Professor Susan Crockin saying that, “she’s not aware of any other judge in the U.S. who has concluded that human embryos can be bought and sold. She said the trend, if anything, has been to recognize that embryos have to be treated in a more nuanced way than as mere property.” However, the article does not explain what other courts have held and on what basis. The history of Virginia legislation is replete with slavery references and other horrible policies. I would agree with Professor Crockin that embryos ought not to be treated as property, which leads to the appalling result that they can be auctioned off to the highest bidder. However, it is my impression that, based purely on reading the letter opinion, that Judge Gardiner believes that the governing law of Virginia is woefully inadequate. Laws are words written in code books, case precedents, and the like. The General Assembly really needs to take action. It is the judge’s job to apply the law, and not to engage in exercises of creative writing in order to achieve results that comport with abstract notions. People feel troubled because they should.
March 14, 2023 Addendum:
Note that there currently is partition reform legislation that the General Assembly passed in its 2023 that awaits the governor’s signature. House Bill 1755 does not address the issue of frozen embyros specifically, but it does add language that would likely be litigated in such cases. The bill, among other changes, adds a new subsection B to Va. Code § 8.01-81:
“If the court orders partition in kind, it shall consider: 1. Evidence of the collective duration of ownership or possession of any portion of the property by a party and one or more predecessors in title or predecessors in possession of the property who are or were related to the party; 2. A party’s sentimental attachment to any portion of the property, including any attachment arising because such portion of the property has ancestral or other unique or special value to the party; 3. The lawful use being made of any portion of the property by a party and the degree to which the party would be harmed if the party could not continue the same use of such portion of the property; 4. The degree to which a party has contributed to the physical improvement, maintenance, or upkeep of any portion of the property; and 5. Any other relevant factor.”
Of course, these reforms are woefully inadequate to address the controversies illustrated in the February 2023 Fairfax demurrer ruling. These legislative amendments have “normal” property in mind.
Legal Authority:
Heidemann v. Heidemann, CL-2021-15372, 2023 Va. Cir. Lexis 13 (Fairfax Feb. 8, 2023).
Note that the photograph used for this blog post is a stock image downloaded from Shutterstock and does not show anything specifically referenced in the article.
July 20, 2022
Awards of Attorney’s Fees in Community Association Litigation
I am frequently asked if the winner of a lawsuit between a community association and a homeowner will get an award of attorney’s fees at the end. For many property owners, the cost of litigating for months or years is burdensome, especially if it cannot be recovered. Virginia, like most states, follows the “American Rule” requiring each side bear their own fees, unless there is a statute, contract or other exception that allows fee shifting. The Virginia Condominium Act and Property Owners Association Act (HOAs) allow for prevailing party attorney fee awards in actions to enforce the statutes or instruments. Also, some recorded instruments (declarations, bylaws, amendments) provide a “contractual” basis for attorney fee awards. In most community association litigation, there is a statutory or contractual basis for an award of prevailing party attorney’s fees and costs. However, the statutes may not apply if the development does not meet the statutory definition of a condominium or property owners association. In such cases, the homeowner ought to consider whether another exception to the American Rule applies.
There are judicial opinions that address attorney fee awards in the HOA context. I discussed an important Supreme Court of Virginia case in my April 28, 2017 blog post, “Condo Owner Prevails on Her Request for Attorney Fees” That case, Lambert v. Sea Oats Owners Association, restates the seven factors that courts weigh in considering the reasonableness of a petition for attorney’s fees:
- The time and effort expended by the attorney.
- The nature of the services rendered.
- The complexity of the services.
- The value of the services to the client.
- The results obtained.
- Whether the fees incurred were consistent with those generally charged for similar services
- Whether the services were necessary and appropriate.
In Lambert v. Sea Oats, the trial judge decided to reduce the fee award on the grounds that the underlying amount of compensatory damages was much lower than the attorney’s fees. The trial judge decided that the attorney’s fee ought not to be out of proportion to the claim on the merits. This presented a problem to the unit owner, whose victory was hollowed by having her attorney’s fees award drastically reduced. This practice could encourage some to “stonewall” their opponent in a way that practically deprives them of their rights. In Lambert the Supreme Court disallowed cutting fees on such grounds.
In today’s post I would like to focus more on the procedural aspects of attorney’s fees petitions, because there are things are party is required to do if they want to avail themselves of the statutory or contractual provisions that entitle them to fees. Fulfilling these procedural requirements are important in part because many trial judges in Virginia are inclined not to award attorneys fees, even when the prevailing party is entitled to such an award by a contract or statute.
The procedural requirements for presenting a petition for attorney’s fees in Virginia vary from those used in the federal courts and some other states. In Virginia, the basis for the attorney’s fees claim must be specifically alleged the lawsuit. The parties are entitled to obtain copies of their opponent’s attorney fee invoices in discovery. Unless an order is entered otherwise, any party asserting an attorney fee claim must submit evidence in support of it at trial, otherwise the claim is waived. The rules allow for bifurcation of attorney’s fees. This allows the court to declare a victor and decide the attorneys fees at a subsequent hearing. However, bifurcation is supposed to be made by the parties mutual consent or by a pretrial order. In many cases, the party seeking fees will call an expert witness to testify regarding the reasonableness of the fee. In many lawsuits regarding property, by the time the case goes to trial, recovery for the cost of litigating becomes an important issue for the parties. Attorneys and their clients often prefer dealing with attorney fee petitions post-trial for a number of reasons. Trying to win on the merits requires a tremendous amount of attention to detail. If a party presents a large fee petition as a part of their trial presentation, the judge or jury may view their case as more about the attorneys fees and less about the merits. Also, its easier to calculate the attorneys fees award a couple weeks after trial because the trial is already concluded.
By contrast, in the federal courts a claim for attorneys fees is made by a post-trial motion filed in usually a couple weeks, unless a statute or scheduling order requires it to be presented at trial. As you can imagine, attorneys accustomed to the federal rules may miss the pretrial requirements imposed by the Virginia court rules, and later discover that they are procedurally barred from presenting their attorney’s fees claim.
Many attorneys mistakenly believe that if their client prevails, they can add all of their assorted litigation costs to the attorney fee and costs award. I’m talking about things like court reporter appearance or transcript fees, hotel fees, rental cars, expert witness fees, overnight delivery charges, and so on. Many of these things, such as court reporters and photocopies are as essential to the clients case. However, the only costs that are ordinarily recoverable under Virginia law are the court filing fees and the service of process fees. Depending upon the subject matter of the case and the contract documents, other costs may be made part of an award.
The attorneys fees statutes for HOAs and condominiums don’t just apply to claims by the homeowner against the association. The association can assert the same basis for attorneys fees, be it as a plaintiff or defendant. Also, the statute can apply to claims brought by a homeowner against another homeowner under the acts or the governing instruments.
When a homeowner files a lawsuit against the community association, other owners are often concerned about payment of attorney fees in defense of the suit. Ordinarily, when an association is sued, they place a claim with their insurance, who appoints them a lawyer to defend the case. The insurance defense attorneys are ordinarily seasoned trial attorneys who different kinds of civil defense work in addition to defending HOAs. Often, the board will assure residents that the insurance is taking care of the attorney’s bills. However, the association is likely to incur additional attorneys fees, because the board’s regular general counsel ordinarily participates in the communications between the board and the insurance defense attorney. The general counsel’s fees are not ordinarily reimbursed by the insurance.
Given how expensive it can become to litigate a HOA case to the end, the parties ought to give careful consideration to how a petition for fees will be supported or opposed. One must also consider that in the event that the case can be resolved through a negotiated agreement, the attorney fee claims have to settled or released in the context of the settlement of the case.
Legal Authority:
Va. Code § 55.1-1828 (POAA – Attorney’s Fees)
Va. Code § 55.1-1915 (Condominiums – Attorney’s Fees)
Prospect Dev. Co. v. Bershader, 258 Va. 75 (1999)
Lambert v. Sea Oats Condo. Ass’n, 293 Va. 245 (2017)
Federal Rules of Civil Procedure, Rule 54
Fairfax Square LLC v. Hermes of Paris, Inc., 89 Va. Cir. 406 (Fairfax 2015)
Advance Marine Enterprises, Inc. v. PRC Inc., 256 Va. 106 (1998)
July 12, 2022
Homeowner Injunction Claims Against HOAs
In property cases, many parties seek an injunction. An injunction is a court ruling directing a defendant do something specific or to refrain from doing something. Violations of an injunction order may be enforced by contempt proceedings. Injunctions contrast with other remedies such as awards money damages. Injunctions are important in condominium and HOA cases. Sometimes boards sue to force an owner to obey a restrictive covenant. Someone may be obstructing an easement. The board may be acting in a fashion that is contrary to the statutes or declaration. While a party may believe that injunctive relief is the obvious answer, obscure doctrine may hinder the use of this “extraordinary” remedy. Today’s post covers considerations for bringing or opposing homeowner injunction claims against HOAs. On May 24, 2019, I posted an article, “Injunctions in HOA cases.” I am blogging about this again today because of how important this remedy is to homeowners seeking legal solutions in HOA matters.
Virginia law usually requires, (1) irreparable harm and, (2) an inadequate remedy at law to warrant an injunction. The harm doesn’t have to threaten life, limb or entire loss of the property to be deemed “irreparable” or to be absolutely permanent. But it must be some sort of substantial threat or actual, continuing infringement of a legal right. “Inadequate remedy at law” means that the problem cannot be sufficiently resolved by means of an award of possession, money damages, or some sort of appropriate legal process defined by law.
For enforcement of property rights, the Supreme Court of Virginia recognizes that an injunction is an appropriate remedy. The violation of a real property interest is deemed “irreparable”, and the owner ought to be protected in the enjoyment of his property. Yet, the other party may avoid the imposition of an injunction if it can demonstrate that it would create a hardship or injustice that is out of proportion to the relief sought. Although there are many published judicial opinions regarding injunctions, the distinctions may seem “fuzzy.” This is because the relevant facts, recorded instruments and statutes will vary. Injunctions involve judicial discretion.
There are other exceptions to the requirement of irreparable harm and inadequacy of a legal remedy. Neither must be proven when a statute or ordinance expressly empowers a court to grant injunctive relief. In that case, all that is required is proof that the statute or regulation has been violated. This is important in homeowner injunction claims against HOAs because the statutes allow such relief to enforce the VPOAA or Condominium Act.
A party seeking to enforce a real covenant is entitled to the equitable remedy requested upon showing the validity of the covenant and its breach. In such instances, the plaintiff is not required to prove damages or the inadequacy of a remedy at law. The relative equities of the parties do not need to be “balanced” by the judge. The courts will grant injunctions to enforce contracts for the sale of real estate. But the common law requires that restrictive covenants be clear in their express meaning to be enforced. Sometimes HOA or condominium boards act in an “ultra vires” fashion, exercising powers that the covenants don’t actually authorize them to use. Courts will enter injunctions against ultra vires activity.
Because homeowner injunction claims against HOAs focus on state statutes and recorded covenants, courts are likely to find injunctive relief appropriate. This is not to say that it is automatic. There are many defenses that may be asserted against an injunction suit. For example, the language of the statute or covenant may not entitle the plaintiff to a remedy. Relevant facts or other legal authority may provide much needed context for the court to ascertain whether an injunction is appropriate.
The defendant may be able to prove that the plaintiff is not entitled to an injunction because she slept on or relinquished her rights. There may be a statute of limitations barring the claim as too stale. The party may have affirmatively waived their claim or acted in such a way as to induce the defendant to treat it as abandoned. Such circumstances could give rise to a defense of waiver, estoppel, laches or condonation. Such defenses can be difficult to prove in the absence of a written or electronic communication by the plaintiff that constitutes an express waiver or consent.
Ordinarily, claims for injunctions are resolved at trial. But a claimant can ask for what is called a temporary or preliminary injunction pre-trial. A temporary injunction allows a court to preserve the status quo between the parties while litigation is ongoing. Many circuit court judges in Virginia expect litigants to prove the four elements of the federal courts’ test. To obtain a preliminary injunction Plaintiffs must establish they are likely to succeed on the merits, likely to suffer irreparable harm in the absence of preliminary relief, the balance of equities tips in their favor, and an injunction is in the public interest. Many judges require strict proof of these four elements if the motion is made pretrial, even if it is a property right or the statute allows for injunctive relief. The merits of preliminary injunction motion are dependent upon the unique facts and circumstances of the case.
Sometimes an injunction order may be enforced against tenants, purchasers or other successors to the party enjoined. For example, if a property owner is found to be causing a stormwater diversion nuisance, and the injunction requires them to make changes to the property by abating the nuisance, the defendant cannot avoid the effect of the order by leasing or conveying the property to another party who did not participate in the injunction lawsuit.
Boards of directors have a variety of remedies they can pursue that don’t necessarily require them to go to court, such as fines, privilege revocation or liens. Absent major legal reforms, homeowners remain reliant on other strategies, such as winning elections, negotiation, self-help or litigating to vindicate their rights. But these cases are winnable because the rights are set forth in recorded instruments, contracts or statutes that unless an exception or defense applies, can be enforced by injunction. Many lawyers are unfamiliar with the case law that facilitates homeowner injunction claims against HOAs. Showing that the landowner is entitled to and intending to pursue such relief may lead to faster and stronger results in resolving such disputes.
Legal Authority:
Norfolk Southern Ry. Co. v. E.A. Breeden, Inc., 287 Va. 456 (2014)
May v. R.A. Yancey Lumber Corp., 297 Va. 1 (2019).
Ticonderoga Farms, Inc. v. County of Loudoun, 242 Va. 170 (1991)
The Real Truth About Obama, Inc. v. F.E.C., 575 F.3d 342 (4th Cir. 2009)
Farran v. Olde Belhaven Towne Owners’ Assn, 83 Va. Cir. 286 (2011)
Calamos v. Comm., 184 Va. 397 (1945)
Gottlieb v. Economy Stores, Inc., 199 Va. 848 (1958)
This post was updated on Sept. 29, 2022.
November 5, 2021
Vicarious Admissions by Agents of Opposing Parties
In property and construction disputes, it’s easy to allege wrongdoing. What separates a viable claim from mere allegations is the essential facts that can be proved. A favored type of evidence is any “admission” by an opposing party. Unless privileged or a settlement deliberation, a relevant party admission will get into evidence, leaving that party with the task of explaining it away. In real estate, many parties operate through managers, supervisors, realtors, brokers, employees, community managers, board directors, committee members, or attorneys. These agents can find themselves in the middle of acrimonious disputes.
October 21, 2021
Absolute Privilege and Damages Caused by False Statements in Legal Papers
Virginia statutes provide enforcement remedies giving community association leaders great power over their members. Sometimes such powers are misused by submission of inaccurate statements in a lawsuit, notice, lien or certificate that harms the reputation of the owner or interferes with sale to a purchaser.
May 20, 2021
Making Property Decisions as the Region Reopens
On May 14, 2021, Virginia Governor Ralph Northam lifted the indoor mask mandate in light of updated CDC guidance. Governor Northam also declared that the indoor capacity restrictions and distancing restrictions will ease, effective May 28, 2021. The District of Columbia and neighboring states are also lifting restrictions, effective around the Memorial Day weekend.
May 13, 2021
Do Attorney General Lawsuits Actually Help Consumers?
Whenever a legal dispute seems intractable, many people want an agency or official to bring the power of the government to bear on their problem with their adversary. Aggrieved persons often try to exhaust such possibilities before retaining their own attorney. Regulatory enforcement through federal, state or local resources seems more attractive than expending one’s own.
April 28, 2021
Have We Already Agreed to Settle or Merely Agreed to Later Agree?
People usually think of a “litigation settlement” as written, agreed terms signed by the parties. However, parties can become legally bound to oral or electronic settlement terms before the parties get to a formal writing or court order. Generally speaking, a contract to settle a lawsuit or other dispute does not require a signed writing to be binding. When settlement discussions culminate late at night or on the courthouse steps, the parties may be confused as to whether the exchange constitutes a binding agreement or a mere step towards a future agreement. When the parties agree upon a set of settlement terms, the legal work does not end there. Best practices call for the attorneys to properly reduce the agreement to a written agreement, so that its terms may be implemented and avoid the acrimony over what had been agreed to.
There have been recent judicial opinions about what constitutes a settlement agreement. In the 2019 personal injury case Cully v. Smith, the Circuit Court of Fairfax County found that although the parties had not signed a written instrument, they had entered into a binding agreement in the form of email exchanges between their lawyers regarding settlement of a personal injury case by payment of $610,000.00 in exchange for a dismissal. In Cully v. Smith, the insurance defense lawyer representing Todd Smith sent the plaintiff David Cully’s counsel an email stating, “Our last and final offer is $610,000. If not accepted before the settlement deadline of May 7 at noon, that offer is withdrawn and no further settlement will be considered.” Cully’s lawyer responded, “Mr. Cully accepted your below offer of $610,000 in full and final settlement of this case.” Next, the insurance companies sent $610,000.00 to the defense lawyers, who then told the plaintiff they would pay the money if provided with a written release of Smith, Smith’s employer and the insurance companies. Counsel to the Plaintiff Cully responded that the settlement only had two terms: (1) payment of $610,000 and (2) settlement of the civil suit. The insurance defense lawyers argued that the execution of a written release was customary in settlement of personal injury claims and ought to be included in understanding what the parties meant, or alternatively that the agreement was only “in principle” and ought not to be enforced by the court as to only those two terms because it wasn’t fully formed. The wording used in negotiations determines whether it is mere words discussing ideas about settlement or if the exchange constitutes an enforceable contract itself. So, if there is a preliminary settlement agreement, how does one know if it is binding or unenforceable? Some states such as Maryland (in the 2020 case 4900 Park Heights Ave. LLC v. Cromwell Retail 1, LLC) recognize four categories of “settlements in principle” as identified in the treatise, Corbin on Contracts:
- At one extreme, the parties may say specifically that they intend not to be bound until the formal writing is executed, or one of the parties has announced to the other such an intention.
- Next, there are cases in which they clearly point out one or more specific matters on which they must yet agree before negotiations are concluded.
- There are many cases in which the parties express definite agreement on all necessary terms, and say nothing as to other relevant matters that are not essential, but that other people often include in similar contracts.
- At the opposite extreme are cases like those of the third class, with the addition that the parties expressly state that they intend their present expressions to be a binding agreement or contract; such an express statement should be conclusive on the question of their “intention.”
According to this analysis, when an agreement to settle falls into the first or second categories, it is not yet enforceable, and the parties must finalize the terms before it becomes binding. For agreements that fall within the third or fourth categories, they do not require any additional formalization to be legally enforceable. Even if there is already a binding contract, the parties can agree to amend or restate it for whatever reason. While Judge David Oblon does not cite the Maryland case law outlining these categories, the settlement emails in the Cully v. Smith case would appear to fall within the third category. A settlement agreement is a “contract,” formed by “consideration” and “mutual assent.” Consideration is what is bargained for, i.e., a price, property, benefit to the party making the promise or the detriment to whom the promise is made. A promise that does not include anything bargained for in exchange isn’t a contract. Mutual assent is determined by the reasonable meaning of the parties’ expressions actually communicated to the other party. We typically think of this in terms of “offer and acceptance.” When one party communicates something that comes across as a clear, definite take-it-or-leave-it proposition, and that is accepted, then that creates a binding contract. An exchange of emails between lawyers (or the parties themselves) regarding settlement can result in an enforceable contract between the parties (without the necessity of later reducing that to a formal looking written agreement). Not all email exchanges accomplish this, because the wording of the exchanged communications matters. Generally speaking, attorneys have authority to bind their clients in matters dealing with the litigation, such as signing consent orders or submitting responses that may be deemed a party admission. However, in settlement negotiations, attorneys do not have implied authority – there must be express authority from the client to bind him under contract law. However, no authorization letter from the client is necessary. The client’s express authorization of the attorney may be inferred from the words or conduct of the attorney.
In the Cully v. Smith case, there was no apparent issue with the lawyers’ authority to negotiate the settlement. The defense attorney’s email was deemed a contractual “offer” because of how clear and unequivocal it was. His words manifested an intention for the recipient to have the power to accept it, because of the take-it-or-leave-it qualities. Courts are loathe to set aside formed contracts (even if oral or unofficial looking). There is a judicial presumption in favor of finding the contract not to be so indefinite or uncertain as to set it aside. The lawyer’s email included a specific dollar amount. The court observed that the term “settlement” unambiguously refers to ending of a suit or dispute by a compromise including specific compensation. By contrast, a “release” is an immediate relinquishment or discharge of the right of action. Both a release and a settlement preclude further suit regarding the resolved claim. Documents are often styled “Settlement and Release Agreement” or “Settlement Agreement and Release” because the insurers want the release and the claimant views the compensation as essential. Fairfax County Circuit Court ruled that the email exchange was binding and that the plaintiff was not required to provide the written release as an additional requirement to get the $610,000.00. Insurance companies are accustomed to getting things resolved the way they desire because they are the ones paying the money. Its common for plaintiffs, once they get to a certain point in the case and the promise of money is made, to be willing to sign what they are asked to sign when they are okay with the price. It’s not uncommon for the parties and lawyers to agree upon certain terms and then the lawyer for one side prepares a written agreement that fails to properly reflect the agreed upon terms, adds additional language that changes the overall meaning of the settlement or other bait-and-switch tactics. Sometimes the parties agree to terms, and then all the terms have to be re-negotiated in the context of reducing the agreement to a written instrument to be signed.
In his opinion, Judge Oblon discussed a 2001 settlement dispute that went to the Supreme Court of Virginia, Alexakis v. Mallios. In that case, the parties informed the judge that the case had been settled and recited the terms into the court reporter’s transcript at the hearing, indicating that they had resolved all claims. Included in the settlement was sale of a parcel of real estate on documentation identical to those used in a prior transaction. In that case, the Supreme Court observed that the purchaser’s undisclosed interpretation could not defeat the unambiguous, express terms of the settlement. If one side later had concerns arising after the recitation of the terms into the record, they came too late. The Alexakis case illustrates why lawyers should be on their toes should their opponent try to recite settlement terms in open court before a judge so that they are recorded in the court reporter’s transcript as an official evidence of contract, because the terms may not be recited correctly. Also, counsel should be cautious about employing the “read the terms into the record” trick because their opponent may later hold them to precisely those terms, despite the absence of desired items. Once the terms are recited into the court reporter transcript and assented to, either side can move the court to reduce the terms to a written order that can subsequently enforced legally if breached. In the Cromwell Retail 1, LLC opinion, the Maryland Court of Special Appeals partially reversed the judgment because the trial court entered an order that did not accurately reflect the terms of the settlement made by the parties.
In April 2021, the Supreme Court of Virginia decided Bolton v McKinney, reflecting a development of the law in Virginia with respect to litigation settlements. Generally speaking, prevailing litigants in Virginia (and almost all other states) may not, with very limited exception, recover their attorney’s fees against their opponent unless there is a statute or contract that provides for an award of attorney’s fees. This is called the “American Rule.” The issue of attorney’s fees arises in the context of settlement agreements because having to pay a lawyer to defend a lawsuit brought after there has been a settlement and release is contrary to the whole notion of settling in the first place. Attorneys routinely put prevailing party attorneys’ fees provisions into their settlement agreements. Bolton and McKinney made a “Settlement Agreement and Global Mutual Release of Claims.” Later, McKinney sued Bolton three times relating to the same issues in the settlement, causing Bolton to incur lawyer bills in excess of $80,000.00. The Settlement Agreement was silent on the issue of attorney fee awards. The issue of Bolton’s attorney’s fees came up, and the circuit court declined to award them, because they weren’t provided for in the contract or any applicable legislation. The Supreme Court decided that the “American Rule” does not apply in breach of covenants not to sue cases, because the expenditure of attorney time in a direct or consequential result of the breach of the covenant not to sue. The Court observed that without a fee-shifting effect, the covenant not to sue could not be vindicated, because there would not be any practical consequence if a party can repeatedly breach the covenant not to sue and not bear financial consequences. The holding of Bolton v. McKinney is important to understand in cases like Cully v. Smith or Alexakis v. Mallios where there is a covenant not to sue that is agreed upon in emails or in a recorded conversation, and later there is a subsequent suit and the issue of attorneys’ fees arises.
These things may make settlement agreements sound mysterious or scary but they really aren’t. The meaning of words used in settlement negotiations matters. An experienced attorney can help the client when the opponent tries to walk back on terms already agreed. Parties should carefully consider what is being said or not said when engaged in settlement discussions that become exhaustingly protracted or are sprung on you unexpectedly.
Legal Authority:
Cully v. Smith, 102 Va. Cir. 293 (Fairfax Co. Jul. 9, 2019)
Alexakis v. Mallios, 261 Va. 425 (2001)
Bolton v. McKinney, 2021 Va. Lexis 24 (Supr. Ct. Va. Apr. 1, 2021)
4900 Park Heights Ave. LLC v. Cromwell Retail 1, LLC, 246 Md. App. 1 (2020)
April 8, 2021
Resolving HOA Enforcement Through Voluntary Compliance
When a homeowner receives a notice of violation from their HOA or condominium, they must decide if they are going to fight it, comply or file an architectural application to receive formal approval. There are many instances when the homeowner can and ought to keep the installed improvement. However, there are other situations in which it makes more sense to comply with the HOA’s request or to otherwise adjust things to address the violation. Also, HOAs frequently send out notices in error or the homeowner receives them after the violation was cured. However, the story does not always end with the voluntary compliance by the landowner. Often the covenant enforcement process will continue with additional letters or HOA hearings despite the correction. There may be pending litigation. The HOA or neighbor instigating such in or out of court complaints may have some sort of axe to grind and wants to continue the legal action vindictively. This blog post addresses the legal aspects of covenant enforcement when the accused owner has cured or abandoned the complained of structure or activity. I am not saying that the owner’s default response to a HOA letter ought to be to just obey it.
Fairfax County Circuit Court considered such questions in a 2004 decision. Rose Hall HOA filed a complaint with the court seeking an injunction and attorney’s fees against an owner, Charles H. Jelinek, whose architectural application for a black ornamental fence was denied but they installed it anyway. While suit was pending, the Jenlineks removed the complained of fence. The letter opinion of Judge Kathleen MacKay doesn’t say whether they removed the fence because it was not allowed by the language of the covenants or if the owners took it down not because they were in the wrong but to simply avoid continued legal action. The HOA filed discovery requests in an effort to continue fighting in court. The Jelineks filed a motion to have the suit dismissed on the grounds that it was now moot because the fence was removed. The HOA wanted to continue the suit, not because they thought that the fence would be put back up, but only because they wanted to get an award of attorney’s fees as the prevailing party. Did the HOA “prevail” in the litigation because the owner removed the complained of fence after suit was filed? In this suit, the HOA did not seek any damages. The court found that now that the fence is gone, the HOA cannot prevail because an injunction order cannot be entered because the grounds for the injunction is no longer at issue. Where the defendants action sought to be enjoined has been abandoned, the whole grounds for equitable relief no longer exists, and the matter ought to be dismissed. Unlike suits for money damages, cases like injunctions or declaratory judgments are in what’s called “equity jurisdiction,” which requires an actual controversy to be presently existing. This doctrine is commonly referred to as a question of “mootness” (when the alleged violation has ceased) or “ripeness” (when the offense hasn’t happened yet). The court found the case moot and dismissed it in its entirely.
In some cases, the factual context for the mootness question is less clear-cut than a complaint about a fence that has been completely removed. Sometimes suits for injunctions are more about conduct or how improvements or objects on the property are used rather than their mere existence. In cases involve flooding or erosion, the water infiltration may not occur every day, and in fact may be irregular depending upon the weather or how the defendant has configured downspouts that day, or other conditions. In some cases, an injunction may be granted even if the complained of conduct only occurred once. Some cases raises a question as to whether the complained of improvement actually violates a legal obligation owed by the landowner to the association under the governing instruments or if the HOA is overstepping its bounds. The owner may decide to reconfigure the fence, drain or other structure or vegetation to conform to the instruments (and not necessary what the manager is ordering them to do). The opponents may want to pursue the case more aggressively, arguing that the corrective activity somehow functioned as an admission that the HOA or neighbor was right and the owner was wrong. However, that may misconstrue the defendant’s actions or intentions. Also, angry people sometimes want their opponent to cease doing things related things that have always been legal as a kind of punishment.
For reasons such as these, when HOA or neighbor disputes escalate to litigation, sometimes “giving in” on certain points can be a powerful legal defense strategy, but one that must be properly navigated to resolve the dispute while adequately defending the owner’s rights.
Case Discussed:
Rose Hall HOA, Inc. v. Jelinek, et al., 66 Va. Cir. 172 (Fairfax Co. Oct. 28, 2004)(MacKay, J.).
Note that the picture associated with this blog post is a stock image and does not depict anything discussed in this article.
December 4, 2020
The Voluntary Payment Doctrine and HOA Liens
Homeowners disputes with HOAs and condominium associations frequently revolve around disputed demands for payments, large and small. Homeowners often wonder if they have to pay their monthly assessments if their HOA failed to fulfill an obligation. Generally speaking, if the assessments were legitimately determined by the HOA’s board of directors pursuant to its recorded instruments, then lot owners have to pay them. The assessments are made to fund the upkeep of commonly owned property. Ordinarily, the obligation to pay legitimately imposed assessments and the HOA’s obligations to its members are “independent covenants.” The lot owners usual remedy is to compel the HOA’s performance, not to withhold dues. However, under certain circumstances the owner must not voluntarily make a payment in order to preserve a legal challenge to the payment demand. This is because when an owner is in full knowledge of all of the facts, and makes the payment anyway, then it is as though he waived the legal challenge to the payment. Various courts recognize that application of the Voluntary Payment Doctrine can be harsh. Some consumer protection advocates call for its abolition. But as of 2020, it remains the law in Virginia. This rule has a number of important caveats and exceptions. The doctrine is particularly important in the context of the financial realities of community association life.
A 2020 court opinion from Missouri illustrates one way the Voluntary Payment Doctrine may be applied. Michael and Wendy Halliday owned a unit in the Malibu Shores Condominium, located on the Lake of the Ozarks. The Hallidays became delinquent on their assessments. In March 2016, the condominium obtained a $6,156.46 court judgment against them and lien against the condo unit. In May 2016, Randall Koeller and Jeff Haskenhoff purchased the unit at the sheriff’s sale. At that time, Jeff and Randall’s wife Angela were directors on the condominium board. Yes, dear reader, this is shady! It is not uncommon for people with family or business connections with an association board to purchase foreclosures, especially in a waterfront development where many are rentals or second homes. However, such connections may not insulate them from the risks and surprises that can come from investing in foreclosures. In June 2016, Randal and Jeff asked what the amount was of any lien. They were told that it increased to $8,154.00 because of additional months, finance charges, late fees, and attorneys’ fees. In fact, Jeff (who was a board member) assured Randall that this amount was correct. In July 2016, Randall and Jeff signed separate checks, each paying half of the updated demand. Later Randall and Jeff sold the unit to a third party at a profit.
But the story does not end there. Later, Randall and Jeff sued the condominium for allegedly misrepresenting the value and validity of the lien. The trial court found in favor of the association, finding insufficient evidence of misrepresentation, and ruling that by paying the sum, the two men could not later challenge its legality.
The Missouri Court of Appeals focused on the trial court’s application of the Voluntary Payment Doctrine. The Missouri rule is that a person who voluntarily pays money with full knowledge of all of the facts in the case, and in the absence of fraud and duress, cannot recover it back, even though the payment is made without sufficient consideration and under protest. The Missouri Court of Appeals explained the reason behind the rule.
a person who, induced thereto solely by a mistake of law, has conferred a benefit upon another to satisfy in whole or in part an honest claim of the other to the performance given, is not entitled to restitution. The underlying reason for those requirements is that it would be inequitable to give such a person the privilege of selecting his own time and convenience for litigation. . . .
In other words, when all the facts are known to the payor, the time for objecting is when the demand is made, not after the payment is made. In this case, Angela (the widow of Randall) and Jeff both were fully aware of the facts because they were also board members of the same association. This circumstance deprived them of the ability to claim that they were unaware of the facts relevant to their decision to make the payment. For this reason, the court deemed this to be purely a mistake of law, not of fact. In other cases where the association may claim voluntary payment, the homeowner may not be imputed full knowledge. In fact, many associations keep their owners in the dark about many decisions, including those that may affect specific lot owners in unique ways. This illustrates why directors may have legal problems when they do transactions with the association even though the deal may not be forbidden by the covenants or statutes. A purchaser who was less in the know may have been able to challenge the amount of the lien.
The Malibu Shores case concerned unique facts where the payor was imputed full knowledge of the facts because of their unique position as board members, transforming it into a purely legal question. In other cases, the question turns on whether the payment was voluntary or involuntary. For example, in a recent Supreme Court of Virginia case, Rene Williams obtained a money judgment against Kerry Ann Sheehy and recorded it in the land records where Sheehy owned property. After initiating an appeal, Sheehy sold the property, and Williams obtained a payoff check out of the real estate closing. In Virginia, a defendant forfeits her appeal if she voluntarily pays off a judgment. The Supreme Court of Virginia contrasted the voluntariness of a payoff of a lien in a real state closing with payments made by the defendant during post-judgment execution proceedings such as garnishments, levies, or judicial sales. Such post-judgment collection proceedings would constitute coerced payments that do not fit into the definition of a voluntary payment. The Supreme Court of Virginia noted that there may be coercion in the foreclosure context. The Supreme Court remanded the case for the trial court to determine whether the transactional payoff was in fact voluntary.
In D.R. Horton, Inc. v. Board of Supervisors of Warrant County, the Supreme Court of Virginia observed that for purposes of the Voluntary Payment Doctrine, it doesn’t matter if the payor submits a written protest of the legality of the demand at the time payment is made for purposes of determining voluntariness. However, in D.R. Horton, the Court recognized three exceptions to the Voluntary Payment Doctrine: (1) in the event of “an immediate and urgent necessity,” (2) the payment is made to release his person or property from detention and (3) to prevent an immediate seizure of his person or property. As seen by these cases, what constitutes a necessity, detention or seizure is akin to duress or coercion, and not just an inconvenience. Also, the Voluntary Payment Doctrine does not apply where the plaintiff is not suing for return of erroneously sums paid.
The state legislatures granted HOAs and condominium associations substantial legal powers by allowing recordation of a lien without first initiating a civil claim and reducing it to a judgment at trial. In a sense, the legislation blesses, through legal recognition, attempts to coerce owners to pay certain sums to their associations, be they assessments, fines, late fees, attorneys fees, interest. It is common for associations to overstep what they are entitled to charge. Sometimes representatives of an association do not want the owner to climb out of default, for various reasons. For many owners, payment of the lien is seen as less troublesome and more certain than mounting a legal challenge or defense. However, owners do not have to surrender to extortionary or overbearing tactics. How is one to know whether payment would be necessary to prevent further bona fide collections action or if it would constitute a waiver of legitimate claims? Often it may not be clear to the landowner whether making the payment or refusing to pay is the right thing to do. The answer may require review of the governing instruments in light of state law. There is a “big picture” to the HOA-owner relationship that frames the issues raised by a specific demand for payment.
Referenced Legal Authority.
Koeller, et al. v. Malibu Shores Condo. Ass’n, 602 S.W.3d 283 (Mo. Ct. App. May 22, 2020)
Sheehy v. Williams, Nos. 190802 & 191089 (Va. Supreme Ct. Nov. 25, 2020)
D.R. Horton, Inc. v. Warren Co. Bd. of Supervisors, 285 Va. 467 (2013)
NOTE: The photo associated with this blog post does not illustrate anyone specifically referenced in the text of the article.
