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Harrison v. Casa De Emdeko, Inc.

Supreme Court of Hawaii

April 26, 2018

LaVONNE HARRISON, Trustee of LaVONNE'S FAMILY TRUST, a Revocable Living Trust Agreement dated September 28, 1989, Petitioner/Plaintiff/Counterclaim Defendant/Appellant,
v.
CASA De EMDEKO, INCORPORATED, a Hawaii nonprofit corporation, Respondents/Defendants/Counterclaim Plaintiffs/Appellees.

          CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS (CAAP-15-0000744; CIV. NO. 13-1-153K)

          Francis L. Jung for petitioner

          Wesley H. H. Ching for respondent

          RECKTENWALD, C.J., NAKAYAMA, McKENNA, POLLACK, AND WILSON, JJ.

          OPINION

          McKENNA, J.

         I. Introduction

         LaVonne Harrison, Trustee of LaVonne's Family Trust, a Revocable Living Trust Agreement Dated September 28, 1989 ("Harrison"), an owner of two commercial apartments within a mixed-use development project managed by Casa de Emdeko, Incorporated, a Hawai'i nonprofit corporation, also known as Casa De Emdeko Association of Apartment Owners ("Casa"), filed a complaint in the Circuit Court of the Third Circuit[1] ("circuit court") on March 4, 2013, alleging she was improperly assessed for expenses that should have been charged only to residential apartment owners. Specifically, Harrison asserts she should not have been assessed for expenses related to elevators, lanai railings, drains, cable television, and pest control, because these expenses are attributable solely to residential apartments.

         In the circuit court, Harrison moved for summary judgment. In its memorandum in opposition, Casa asserted that based on case law allowing entry of summary judgment for a non-moving party where there are no genuine issues of material fact, the circuit court should grant summary judgment in its favor. The circuit court treated Casa's memorandum as a cross-motion for summary judgment and granted summary judgment in Casa's favor. It concluded as a matter of law that the disputed assessments were not for limited common elements exclusive to the residential apartments, as argued by Harrison, but rather were for common elements, and were therefore expenses for which Harrison must pay her pro rata share. The circuit court further concluded Harrison was estopped from disputing the expenses because she knew or should have known that Casa had been assessing her for the disputed items for quite some time.

         In its June 20, 2017 Summary Disposition Order ("SDO"), the Intermediate Court of Appeals ("ICA") concluded the circuit court erred in granting summary judgment in favor of Casa with respect to the cable television and pest control expenses because it was unclear whether these assessments related to common elements or limited common elements. The ICA also concluded that pursuant to the Restated Declaration of Horizontal Property Regime and Hawaii Revised Statutes ("HRS") Chapter 514A (2006), the elevators, lanai railings, drains, and cable television wires are common elements, expenses for which Harrison was required to contribute. The ICA also concluded, however, that Harrison was not estopped from disputing the assessments for cable television services and pest control expenses.

         Harrison raises a single question in her Application for Writ of Certiorari ("Application"):

Did the Intermediate Court of Appeals of the State of Hawaii ("ICA") err in affirming the Circuit Court of the Third Circuit, Kona Division's ("Circuit Court") granting of Summary Judgment and Final Judgment; finding that the expenses and costs to maintain interior elevators, interior lanais and related interior improvements located solely within the residential buildings of the Casa de Emdeko Condominium Project and which are reserved exclusively for residential purposes, are "common elements" for which the commercial units of Cas[a] de Emdeko Condominium Project, located entirely in a separate building without elevators, are subject to assessments?

(Emphasis omitted.)

         For the reasons explained below, we hold that the elevators and lanai railings of this project are limited common elements, expenses for which Harrison was not required to contribute as an owner of commercial apartments. We also hold that genuine issues of material fact precluded summary judgment as a matter of law as to whether Harrison is liable for the challenged expenses relating to the drains and cable television wires. We also hold that the circuit court erred in alternatively granting summary judgment based on estoppel by acquiescence as to all items, as genuine issues of material fact also exist as to that defense.

         Therefore, we affirm the ICA's SDO and its July 31, 2017 Judgment on Appeal ("JOA") as to its rulings regarding the cable television service and pest control services expenses and otherwise vacate the SDO and JOA. The circuit court's "Order Denying Plaintiff's Motion for Summary Judgment, Filed 4/17/14 and Granting Defendant Casa de Em Deko, Incorporated's Cross Motion for Summary Judgment, " filed on July 22, 2014, and the "Amended Final Judgment, " filed on October 8, 2015, are vacated in their entireties, and this case is remanded to the circuit court for further proceedings consistent with this opinion.

         II. Background

         A. Facts

         Casa is a Hawai'i nonprofit corporation organized and incorporated for the purpose of managing, maintaining, protecting, and preserving 106 residential condominium apartments and three commercial apartments located in North Kona, Hawai'i ("the Project"). There are five buildings in the Project -- two three-story buildings, designated as Wing A and Wing B, containing only residential apartments, and three two-story buildings, designated as Building C, Building D, and Building L, each containing and constituting one commercial apartment.

         The Project was first established pursuant to a Declaration of Horizontal Property Regime, with attached bylaws, dated February 19, 1969.[2] Since 1995, the Project has been governed by a Restated Declaration of Horizontal Property Regime and By-Laws of Casa De Emdeko dated February 3, 1995 ("Declaration" or "Casa Declaration").[3]

         Since 1982, Harrison has been the owner of two commercial apartments, Apartments C and D, which are buildings C and D of the Project, and has a 6.726% ownership interest in the Project.[4]Harrison also served on Casa's Board of Directors ("Board") from at least 2001 to 2011. Her two commercial apartment unit buildings do not have elevators, cable television, or lanais, and they are physically separated from Wings A and B, the two three-story buildings that contain residential apartments.

         Pursuant to Section M of the Casa Declaration, a Maintenance Reserve Fund was created into which all apartment owners must pay to cover their respective obligations "to provide for utilities, insurance, maintenance, and repair of the common elements and other expenses of administration of the project, which shall be deemed conclusively to be a common expense of the project."[5] Pursuant to Section M, the apartments are assessed dues that are deposited into Casa's "maintenance" and "reserve" accounts for the purpose of maintenance, repair, and replacement of both "common elements" and "limited common elements" of the entire Project.

         B. Procedural History

         1. Circuit Court Proceedings a. Complaint

         On March 4, 2013, Harrison filed a civil complaint against Casa, seeking declaratory relief, damages, and attorneys' fees and costs. She alleged that between 2010 and 2013, she was improperly assessed for amounts paid into the "reserve" account" for residential elevators, lanai railings and drains, which were for "limited common elements" attributable solely to residential apartments. She also asserted that between 2009 to 2013, she was improperly assessed for amounts paid into the "maintenance" account" for cable TV, pest control and elevator maintenance costs. She alleged these funds were actually for "limited common elements, " attributed solely to residential buildings and apartments, for which she was not responsible. Harrison alleged that Casa therefore violated the Casa Declaration and applicable law.

         On October 15, 2013, Casa filed its answer and a counterclaim seeking declaratory relief that (1) its assessments were lawful; and (2) Harrison had an obligation to pay the assessments.

         b. Motions for Summary Judgment

         On April 17, 2014, Harrison filed a motion for summary judgment. Harrison and Casa repeat their various legal arguments in the circuit court, on appeal to the ICA, and on certiorari to this court. Therefore, their arguments are discussed and analyzed in the Discussion section, Section IV below.

         To summarize, in her motion, Harrison argued she was improperly assessed for costs relating to elevators, stairways, walkways, lanais, lanai railings, drains, cable television, pest control, and elevator maintenance because they related to residential building limited common elements. She attached Casa's maintenance fee calculations from 2006 to 2013 ("maintenance fee calculations") and Casa's "Reserve Expenses Per Financial Statements 10/01/03 - 09/30/2012" to her motion.

         In its June 12, 2014, memorandum in opposition, in summary, Casa argued the disputed expenses related to common elements, not limited common elements. In addition, Casa argued that Harrison's claims were barred by estoppel by acquiescence and consent since she had been an owner of the commercial apartments for 30 years and had served on the Board from at least 2001 to 2011, but had not objected to the disputed items until recently. Casa then argued that Flint v. MacKenzie, 53 Haw. 672, 673, 501 P.2d 357, 357-58 (1972) (per curiam), authorized the circuit court to enter summary judgment in its favor as a non-moving party, based on a lack of genuine issues of material fact entitling it to summary judgment as a matter of law.[6]

         Casa attached to its memorandum a declaration from Susan Gand ("Gand"), a director of Pacifica Realty Management, Inc., which was the property manager for Casa from 2003. Gand's declaration stated in relevant part that (1) Harrison served on the Board from at least 2001 until 2011, and during that time, she "approved the association's operating budgets, maintenance fee calculation schedules, operating expenses, and reserves budgets, including all assessments and expenses for common elements and limited common elements"; (2) in 2005, Harrison did not object to a common reserve expense for elevator repairs and paid her proportionate share; (3) Harrison did not object to and voted to approve common reserve expenses regarding drains in 2005 and fiscal year 2007-2008; (4) at a Board meeting on August 3, 2010, Harrison did not object to and voted to approve elevator modernization as a common reserve expense of $82, 500; and (5) Harrison did not notify Casa in writing of any complaints or objections regarding the drains, lanai railings, pest control or cable television expenses until October 24, 2012.

         On June 26, 2014, Harrison filed a reply memorandum, raising various arguments as to why the disputed expenses constituted charges for limited common elements for which she was not responsible. In response to Casa's estoppel by acquiescence argument, Harrison argued she should not be estopped for simply being an apartment owner for thirty years and having served on the Board, because she objected after she was made aware of the Association's method of characterizing expenses. Harrison attached a declaration asserting that (1) after she determined how Casa was wrongfully assessing her expenses relating to residential units, she complained to Gand and the Board on multiple occasions; (2) after she complained to Gand, Gand "agreed" with her complaints and brought it to the attention of the Board; (3) thereafter, Casa's budgets included line items for limited common elements and one of the line items was for elevator modernization; (4) in the approved Casa fiscal year 2011-2012 Budget ("2011-2012 Budget"), the elevator modernization expense of $82, 500 was listed as a limited common element under reserve expenses; (5) the approved 2011-2012 Budget also contained the statement "LCD CE = Limited Common Elements which are only appurtenant to the 106 residential units"; (6) she did not know of replacements of the drain lines in the residential apartments until after the renovations to the residential apartments in 2006 and that there are seventeen three-story stacks with drain lines appurtenant to and for the use of the residential apartments only; (7) the residential apartments each have a lanai exclusive to and appurtenant to their apartment and the lanais on the second and third floors of the residential apartments have lanai railings; and (8) the lanai railings were not an issue until their replacement on or about 2006. She also attached the 2011-2012 Budget and Casa's 2011-2012 maintenance fee calculations.

         c. Circuit Court Judgment

         After a hearing on July 2, 2014, on July 22, 2014, the circuit court entered an "Order Denying Plaintiff's Motion for Summary Judgment, Filed 4/17/14 and Granting Defendant Casa De Emdeko, Incorporated's Cross-Motion for Summary Judgment" ("Order"), stating, in relevant part, the following:

The Court concludes as a matter of law that the residential elevators, lanai railings, drains, and cable tv wires are common elements and the expenses relating to the residential elevators, lanai railings, drains, cable tv, and pest control are common expenses pursuant to Casa de Emdeko's restated declaration and bylaws, and Hawaii Revised Statutes ("HRS") Chapter 514A, except as provided in HRS §514B-22 and HRS §514B-23.
Further, estoppel operates to bar the Plaintiff's claims for damages during the time she knew or should have known that the Defendant was applying funds from the reserve account and maintenance account to alleged limited common elements or limited common expenses, but delayed in bringing an action.

         On August 22, 2014, the circuit court entered its final judgment. (On October 8, 2015, it entered its amended final judgment.) Harrison timely appealed to the ICA on September 19, 2014.

         2. ICA Proceedings

         On appeal to the ICA, Harrison asserted four points of error in the circuit court's Order, three of which are relevant to this certiorari proceeding: (1) the circuit court erred in concluding the disputed items were common elements and therefore constituted common expenses; (2) estoppel by acquiescence was improperly applied as there were genuine issues of material fact; (3) the circuit court erred in concluding the disputed items were assessable to both residential and commercial apartments.[7]

         The ICA vacated the circuit court's decision in part. Harrison v. Casa de Emdeko, No. CAAP-15-0000744 (App. June 20, 2017) (SDO). The ICA affirmed the circuit court's conclusion that the elevators were common elements, ruling that the elevators were not apartments or limited common elements. Casa, SDO at 4. The ICA further concluded that elevators were common elements under HRS § 514A-13(h) (2006) because they were not within the apartments themselves. Id. at 5. It also concluded that the elevators were not entries, stairways, or walkways under Section A(3) of the Casa Declaration, and were therefore not limited common elements. Id.

         The ICA also ruled that lanai railings were common elements. Id. Because lanai railings were not specified as common elements or limited common elements in the Casa Declaration, the ICA looked to HRS Chapter 514A and concluded that under HRS § 5l4A-3(8), as lanai railings were necessary for the Project's safety, they were common elements, regardless of whether or not they were exclusive to the residential apartments. Id.

         In addition, the ICA concluded that drains were common elements under Section A(2)(d) of the Casa Declaration because they were pipes that can be used for services such as water and sewer. Id. at 6. In its decision, the ICA referred to Merriam-Webster's definition of "drain" as "a means (as a pipe) by which usu. liquid matter is drained." Merriam-Webster's Collegiate Dictionary at 378 (11th ed. 2003). Casa, SDO at 6 n.3.

          Furthermore, the ICA concluded that cable television wires were common elements under the Casa Declaration because the Casa Declaration provides that "[a]11 . . . wiring . . . and other central and appurtenant transmission facilities and installations over, under and across the project for services such as . . . television signal distribution" were common elements. Id.

         The ICA therefore rejected Harrison's claim that she was not liable for expenses relating to the elevators, lanai railings, drains, and cable television wires, reasoning that since they were common elements, the expenses related to them were common expenses. Id. Based on its conclusion that these were common elements, the ICA did not address the circuit court's alternative estoppel by acquiescence ruling regarding these expenses. Id. at 7.

         The ICA concluded, however, that the record was unclear as to whether cable television service and pest control expenses were common expenses for common elements. It also ruled there were genuine issues of material fact as to the estoppel by acquiescence defense regarding these expenses, and vacated and remanded the circuit court's amended final judgment as to these expenses. Id.

         3. Certiorari proceedings

         On September 20, 2017, Harrison timely filed her Application, presenting the following question:

Did the Intermediate Court of Appeals of the State of Hawaii ("ICA") err in affirming the Circuit Court of the Third Circuit, Kona Division's ("Circuit Court") granting of Summary Judgment and Final Judgment; finding that the expenses and costs to maintain interior elevators, interior lanais and related interior improvements located solely within the residential buildings of the Casa de Emdeko Condominium Project and which are reserved exclusively for residential purposes, are "common elements" for which the commercial units of Cas[a] de Emdeko Condominium Project, located entirely in a separate building without elevators, are subject to assessments?

(Emphasis omitted.)

         She argues the ICA erred in concluding the elevators, lanais, and "related interior improvements" (the drains and cable television wires) were common elements because her commercial apartments are in buildings separate from the residential apartment buildings and do not have these items. She also argues that if this court reverses the ICA's holding, the issue of estoppel is no longer moot. We accepted certiorari to address whether the circuit court and ICA erred by summarily ruling that elevators, lanai railings, drains, and cable television wires were common elements, expenses for which Harrison would be responsible. If so, we must also address whether the circuit court erred by alternatively granting summary judgment in favor of Casa based on estoppel by acquiescence.

         III. Standards of Review

         A. Summary Judgment

         An appellate court reviews a grant of summary judgment de novo, applying the same standards as a trial court:

Summary judgment is appropriate if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. A fact is material if proof of that fact would have the effect of establishing or refuting one of the essential elements of a cause of action or defense asserted by the parties. The evidence must be viewed in the light most favorable to the non-moving party. In other words, we must view all of the evidence and the inferences drawn therefrom in the light most favorable to the party opposing the motion.

Jou v. Dai-Tokyo Royal State Ins. Co., 116 Hawai'i 159, 164, 172 P.3d 471, 476 (2007) (citations ...


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