Island Terrace Owners Ass'n v. Unit 91

• Court: Superior Court of Maine
• Decided: March 22, 2012
• Docket: YORre-10-257
• Status: Unpublished

Opinion

pSTATE OF MAINE SUPERIOR COURT YORK, ss. CMLACTION DOCKET NO: RE01 -25~· ...J o Al -'-!'OR.- ~ 1 J.;I .lOlL I /

ISLAND TERRACE OWNERS ASSOCIATION

Plaintiff,

v.

UNIT 91, LLC

Defendant,

ORDER ON PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT

Before the court is the plaintiff's Motion for Summary Judgment seeking

judgment on all counts of the Complaint and the defendant's Counterclaim. The

motion has been fully briefed and oral argument was held on March 8, 2012.

BACKGROUND

Unit 91, LLC is owner of a unit 91 at the Island Terrace Condominiums,

located in Saco, Maine, and has been for all times relevant to this action. (Pl. SM:F

'[ 1.) Unit 91 is the only unit in the Island Terrace Condominium building that is

not restricted to residential use and is authorized to be subdivided. (De£.

Additional SMF '[ 2.) The building itself is a former textile mill and currently

there are several deficiencies in the common elements including, structural

damage to the building's roof, western external wall, foundation, and the floor

and ceiling separating unit 91 from the parking garage below. (De£. Additional

SMF 14.)

1 In 2009, prior to the filing of this case, Island Terrace Owners' Association

("ITOA") brought a foreclosure action agamst Unit 91, LLC for nonpayment of

condominium assessments and fees on unit 91. (Pl. SMF <]I 2.) Unit 91, LLC

brought a two-count counterclaim, including a claim for specific performance of

ITOA' s obligation to repair, mailltaill, and replace the common elements

described above. (Pl. SMF <]I 3.) The claims and counterclaims in the 2009 action

were dismissed with prejudice after Unit 91, LLC and ITOA entered into a

settlement agreement. (Pl. SMF <]I 4.) The settlement agreement required Unit 91,

LLC to pay $102,500 by May 21, 2010 in fulfillment of the claims against it. Upon

receipt of that payment, ITOA agreed to write-off any remaining financial

obligation and to deposit $48,120 of that payment into a separate Capital

Improvement Account in which all amounts received from other unit owners for

the so-called "10% special assessment" would also be deposited. (Pl. SMF <]I 4.)

The settlement agreement also made all disputes arising therefrom subject to

binding, non-appealable arbitration. (Pl. SMF <]I 5.) The parties went to

arbitration to resolve Unit 91, LLC's failure to pay by May 21, 2010 and this

resulted in an award of late fees and attorneys fees in addition to the amounts

due under the settlement agreement. (Pl. SMF <]I 6.)

ITOA has brought this Complaillt on the grounds that Unit 91, LLC has

failed to make payment to ITOA on the fees and assessments that have accrued

since the settlement agreement, namely from June 2010 forward. (Pl. SMF <]I 9.)

The Complaillt seeks relief through foreclosure, breach of contract, personal

action agaillst Unit 91, LLC for money owed, and account annexed. Unit 91, LLC

has brought a one-count counterclaim seeking specific performance of the

necessary repairs to the common elements and seeking costs.

2 DISCUSSION

Summary judgment should be granted if there is no genuine dispute as to

any material fact and the movant is entitled to judgment as a matter of law. M.R.

Civ. P. 56( c). A genuine issue exists when sufficient evidence exists to require a

factfinder to choose between competing versions of the truth. Baillargeon v. Estate

of Dolores A. Daigle, 2010 ME 127, <]I 12, 8 A.3d 709. In considering a motion for

summary judgment, the court should view the facts in the light most favorable to

the non-moving party, and the court is required to consider only the portions of

the record referred to and the material facts set forth in the parties' Rule 56(h)

statements. E.g., Johnson v. McNeil, 2002 ME 99, <]I 8, 800 A.2d 702. The parties'

Rule 56(h) statements must be adequately supported by a record citation setting

forth the facts as would be admissible at trial. If statements are not adequately

supported, the court may disregard them. M.R. Civ. P. 56(h)(4). The Law Court

has noted recently that "strict adherence" to the requirements of the rule is

necessary. Cach, LLC v. Kulas, 2011 ME 70, <]I 12, 21 A.3d 1015.

I. Counterclaim

ITOA moves for summary judgment on Unit 91, LLC' s counterclaim for

specific performance on two grounds: 1) claim preclusion, because this claim was

dismissed with prejudice in the prior case and 2) if not precluded, unclean hands,

because Unit 91, LLC's failure to pay the assessments is "single biggest

impediment" to completion of the renovations. Unit 91, LLC, admits that this

counterclaim and the counterclaim brought in the prior action do allege the same

injuries. However, it argues that the counterclaim is not barred by the doctrine

of claim preclusion because it is seeks redress of a continuing harm. (De£. Opp.

4-6.)

3 Claim preclusion bars the relitigation of a claim when "(1) the same

parties or their privies are involved in both actions; (2) a valid and final

judgment was entered in the prior action; and (3) the matters presented for

decision in the second, were, or might have been litigated in the first action."

Macomber v. Macquinn-Tweedie, 2003 ME 121,

with prejudice acts as a valid final and judgment,l Johnson v. Samson Constr.

Corp., 1997 ME 220,

Inc., 267 F.3d 538, 542 (6th Cir. 2001) ("A voluntary dismissal with prejudice

operates as a final adjudication on the merits."). The Supreme Court has stated

that the doctrine of claim preclusion is not subject to a court's ad hoc

determination of the equities of a case and that the principles of judicial

administration and repose require strict adherence to the doctrine. Federated

Dep't Stores v. Moitie, 452 U.S. 394,401 (1981).

Claims that arise after the first action are not barred by claim preclusion

despite the fact that they involve the same parties and the same set of facts. This

is especially relevant to cases where a continuing or repetitive injury occurs and

each successive injury creates a new cause of action. Darney v. Dragon Products

Co., 592 F. Supp. 2d 180, 184 (D. Me. 2009); see also Restatement (Second)

Judgments§ 26(1)(e) (claim preclusion does not apply "in a case involving a

continuing or recurrent wrong" when the plaintiff chases "to sue from time to

time for the damages incurred to the date of suit.").

1 For the purposes of claim preclusion, a final judgment does not require that the court have adjudicated the merits of the claim because the rationale behind the doctrine of claim preclusion is "fairness to the defendant, and sound judicial administration, [which] require that at some point litigation over the particular controversy come to an end." Restatement (Second) Judgments§ 19, cmt. a (1982).

4 Unit 91, LLC argues that ITOA' s continuing obligation to "maintain,

repair, and replace" the common elements of the building, imposed by statute

and by contract, is an obligation that did not end with the settlement agreement

between the two parties; that is, that the settlement agreement did not immunize

ITOA from claims against it for failure to meet this obligation. (De£. Opp. 6.)

Unit 91, LLC' s characterization of this wrong as akin to a continuing trespass or

nuisance is misplaced. First, when a plaintiff chooses to split his causes of action

in the case of a continuing trespass or nuisance, the available remedy is damages

incurred from the time of the last adjudication until the next adjudication. In this

case, Unit 91, LLC is not seeking damages from the last adjudication but rather is

seeking specific performance of the same repairs sought in the last action. This

kind of equitable relief does not lend itself to being split into separate causes of

action. Second, the wrong in this case, although arguably continuing, is not of a

kind that gives rise to an independent cause of action for each day of continuing

wrong. Instead, it is an action on an indivisible contract. The contract was

allegedly breached by failure to repair and it remains breached for failure to

repair of the same defects. Remedies for breach of contract accrue when the

contract is breached. Dunelawn Owners' Ass'n v. Gendreau, 2000 ME 94, 'li 10, 750

A.2d 591; see also Johnson, 1997 ME 220, 704 A.2d 866. New remedies would

accrue for a subsequent breach of a different provision of the contract but a

failure to remedy a breach is not in and of itself a new breach.

This does not mean that ITOA is isolated from liability for failure to repair

the common elements in question. None of the other unit owners' rights

regarding this matter have been adjudicated and those owners continue to have

cause of action against ITOA. However, because Unit 91, LLC compromised its

5 claim for specific performance of repairs to the common elements in question by

dismissing the prior claim with prejudice, it cannot relitigate that issue in this

action. Because the court concludes that the Counterclaim is barred by the

doctrine of claim preclusion, it is unnecessary to reach the equitable defense of

unclean hands.

II. Complaint

ITOA moves for summary judgment on the claims contained in its

Complaint. Each of these claims are based on the same alleged facts, namely that

Unit 91, LLC has failed to make the assessment payments and now owes those

assessments, late fees, and attorneys fees. Unit 91, LLC opposes ITOA' s motion

on the grounds that a genuine issue of material fact exists with regard to the

amount owed, that ITOA cannot sue for breach of contract because it is also in

material breach of contract, and that ITOA' s motion on the foreclosure claim is

procedurally defective because the statements of material fact are not supported

by admissible evidence.

z. Breach of Contract

The rights and obligations of the parties are established by the Maine

Condominium Act, 33 M.R.S.§§ 1601-101-1604-118 (2001), and the ITOA

Declaration and By-laws. A condominium's declaration and by-laws are

contracts between the association and the individual unit owners. Alexander v.

Fairway Villas, 1998 ME 226, <][ 11, 719 A.2d 103; Bhatnagar v. Mid-Maine Med. Ctr.,

510 A.2d 233, 234 (Me. 1986). One cannot recover damages for a failure to pay

under a contract if the non-paying party rightfully withheld payment because

the party seeking damages has materially breached the contract. Restatement

(Second) Contracts § 237 (1981). A material breach is non-performance that is so

6 important that the other party is justified in regarding whole transaction at an

end. Cellar Dwellers, Inc. v. D'Alessio, 2010 ME 32, IJI 16, 993 A.2d 1. Whether or

not there has been a breach of a contract and whether or not that breach is

material are questions of fact. Jenkins, Inc. v. Walsh Bros., 2001 ME 98,

A.2d 1229; Waterville Indus. v. Fin. Auth. of Me., 2000 ME 138,

(treating materiality as a question of fact); Oak Ridge Builders v. Howland, 2006 Me.

Super. LEXIS 215, * 15 (Oct. 10, 2006).

The obligation to pay assessments is contained in Article V(C)(9) of the

ITOA By-laws. Section 9(£) of the Declaration and Article II(A) of the By-laws

impose the obligation on the ITOA to maintain, repair, and replace the

condominium's common elements. ITOA asserts that Unit 91, LLC breached its

obligations under the By-laws by failing to pay assessments when due and Unit

91, LLC alleges that ITOA has materially breached the Declaration and By-laws

by failing to complete needed repairs to the common elements. 2 (Pl. SMF

De£. Opp. SMF IJI

Although ITOA has the obligation to maintain and repair the common

elements including the roof and foundation, the Declaration and By-laws do not

impose any specific manner or time for performance. There is no dispute that

the required repairs to the common elements have not been fully completed.

However, ITOA claims that it has sufficiently moved forward on the project, in

the face of financial strain, such that it is satisfying its obligations under the

Declaration and By-laws. (Pl. SMF

certain actions have been taken by ITOA, but it does dispute that this satisfies the

2 ITOA is correct to assert that the Declaration and By-laws do not authorize a unit owner to withhold payment of fees and assessments or to set off assessments against other obligtions. (Pl. Reply SMF '1[ 14.) However, Unit 91, LLC's claim is based on general principles of contract law and not the specific language of this contract. 7 obligation. (De£. Opp. SMF 1115-17; De£. Opp. 10.) Given that this is a question

of whether there has been a failure to meet a contractual obligation and whether

that failure is a material breach, the parties have presented a genuine issue of

material fact and, therefore, summary judgment is improper.

Unit 91, LLC also argues that there is a genuine issue of material fact

regarding the amounts owed on the account. (De£. Opp. SMF 19.) It states that

the June and July assessments were paid as part of the $8,511.79 payment and the

August and September assessments were paid on November 29,2010. (De£.

Additional SMF 1116-17.) ITOA counters by stating that the $8,511.79 payment

was applied first to the settlement agreement amount and then to attorney's fees

and late fees such that there was an insufficient amount to cover even one

month's assessment. (Pl. Reply SMF 19.) Unit 91, LLC also argues that ITOA's

statement of the amount due is not supported by the record citation because Mr.

Keegan's affidavit testimony is hearsay. (De£. Opp. 11.) The objection appears to

be based on the fact that no business records are attached to the affidavit and so

the Plaintiff cannot rely on the business records exception to the hearsay rule.

The affidavit, however, is based on Mr. Keegan's personal knowledge, which the

scope of his employment appears to require, and therefore is admissible. (See

Keegan A££.

Each party supports its statements with affidavit testimony and, although

ITOA has provided more detail with regard to the calculation of the amount

owed, this issue and the evidence supporting both sides are sufficient to require

a fact-finder to resolve.

8 zz. Foreclosure

The Plaintiff has brought a foreclosure action pursuant to 33 M.R.S. §

1603-116(a) and 14 M.R.S. § 6321. The Maine Condominium Act establishes a

lien on any unit for assessments or fines levied against that unit from the time the

assessment becomes due. 33 M.R.S. § 1603-116(a). That lien may be foreclosed in

like manner as a mortgage on real estate. Id.

Although this statutory provision creates the security rights of the

condominium association and gives the association a cause of action, the

obligation to pay an assessment is a contractual obligation defined in the

condominium Declaration and By-laws. ITOA has not proven that it is entitled

to summary judgment on the breach of contract claim and therefore summary

judgment is equally inappropriate for this claim because of its contractual nature.

m. Money Owed

ITOA brings count III as an action for money owed against Unit 91, LLC

personally. As stated in the Complaint, the By-laws make the assessments the

personal obligation of the owner of the unit at the time the assessment becomes

due. See By-laws, article V(C)(9). There does not appear to be any dispute about

what entity was the owner of the unit at the times these assessments were made.

(Pl. SMF CJI 1, De£. Opp. SMF CJI 1.) The action for money owed also requires

resolution of the factual issues raised under the breach of contract claim, making

summary judgment inappropriate.

zv. Account Annexed

Section 355 of Title 16 states that an affidavit swearing to the truth and

accuracy of an account is prima facie evidence of a claim for account annexed. A

plaintiff submitting such an affidavit is entitled to judgment in its favor unless

9 the defendant rebuts statements made in the affidavit with competent and

sufficient evidence. Cianchette v. Hanson, 152 Me. 84, 85, 123 A.2d 772, 773 (1956).

The Complaint contains Exhibit B, a statement of account on which it

seeks to recover. The Complaint, however, is not a verified complaint and

therefore this exhibit is insufficient evidence in the action for account annexed.

An account statement was not submitted with ITOA' s original summary

judgment record. ITOA finally submitted an account statement as Exhibit G,

attached to the Supplemental Affidavit of Keegan supporting its Reply to Unit

91, LLC's denial of Statement of Material Fact, paragraph 9. In this Supplemental

Affidavit, ITOA admits that the account statement originally submitted with the

Complaint is incorrect.

Regardless of whether Exhibit G and the Supplemental Affidavit are

sufficient for establishing a prima facie case of account annexed, the debt is

premised on the same breach of contract to which Unit 91, LLC has created two

genuine issues of material fact, thus making summary judgment on this count

equally inappropriate.

The entry is:

The Plaintiff's Motion for Summary Judgment is GRANTED as to the

Defendant's Counterclaim but DENIED as to the counts of the Complaint.

The Clerk is directed to incorporate this Order into the docket by reference

pursuantto M.R. Civ. P. 79(a).

DATE: 3 /;);:;;>-..!I d- John O'Neil, Jr. Justice, Superior Court

10 ATTORNEY FOR PLAINTIFF: BRENDAN RIELLY JENSEN BAIRD ET AL 10 FREE STREET PO BOX 4510 PORTLAND ME 04112

ATTORNEY FOR DEFENDANT: ROY PIERCE PRETI FLAHERTY BELIVEAU PACHIOS & HALEY ONE CITY CENTER PO BOX 9546 PORTLAND ME 04112-9546