Pursuant to Ind.Appellate Rule 65(D), this Memorandum Decision shall not be regarded as precedent or cited Mar 25 2014, 9:58 am before any court except for the purpose of establishing the defense of res judicata, collateral estoppel, or the law of the case.
ATTORNEY FOR APPELLANT: ATTORNEYS FOR APPELLEE:
JEFFREY D. STANTON PETER S. FRENCH Logansport, Indiana LEEANN P. SIMPKINS Benesch, Friedlander Coplan & Aronoff, LLP Indianapolis, Indiana
IN THE COURT OF APPEALS OF INDIANA
VERNON ROBINSON, ) ) Appellant, ) ) vs. ) No. 52A02-1306-PL-528 ) ESTATES AT EAGLE’S POINTE, ) ) Appellee. )
APPEAL FROM THE MIAMI SUPERIOR COURT The Honorable George A. Hopkins, Special Judge Cause No. 52D01-1203-PL-83
March 25, 2014
MEMORANDUM DECISION - NOT FOR PUBLICATION
BROWN, Judge Vernon Robinson appeals the trial court’s order that he pay $57,375 to the Estates
at Eagle’s Pointe (the “Estates”) following his failure to pay certain fees established by
the homeowner’s association (the “HOA”). Robinson raises four issues which we
consolidate and restate as whether the court erred in entering its order. The Estates
requests appellate attorney fees pursuant to Ind. Appellate Rule 66(E). We affirm in part,
reverse in part, and remand. We also deny the Estates’ request for appellate attorney
fees.
FACTS AND PROCEDURAL HISTORY
The Estates is a group of homes located near Peru, Indiana. The Declaration of
Covenants, Conditions and Restrictions of the Estates (the “Declaration”) was adopted in
1996 and provided for the creation of the HOA. The HOA manages the more than 1,100
units at the Estates.
In 2002 or 2003, Robinson began looking at homes in Eagle’s Pointe, and he
eventually acquired twenty-eight to thirty properties. At the time he bought property in
2006, the HOA fee was thirty-five dollars per month.
At some point, the HOA fee was increased to forty dollars per month. In
December 2008, the board of directors met to vote upon an increase in the HOA fees.
That same month, a letter was sent from Gloria Preece, the HOA representative, to
homeowners at the Estates. The letter states that the association fees for 2009 increased
to fifty dollars per month and indicated that the increase was due to rising costs
associated with “trash service, lawn care and an overall effort to improve the quality of
services provided” by the HOA. Plaintiff’s Exhibit 4. The letter mentioned an increase
2 in bad debt and attorney costs associated with the collections and enforcement of the
rules and regulations. The letter also referenced the 2009 association budget which
included gym repairs, “Capital/Special Projects,” and “Maintenance and Cleaning.” Id.
In a letter dated April 8, 2010, the HOA informed the residents that the HOA dues
were fifty dollars per month, were due on the first of the month, and that on the sixth of
the month a late fee of twenty-five dollars per month would be assessed. That same
month, the board of the HOA approved and adopted any prior action performed by the
manager or board in connection with the performance of the duties of the HOA.
Before June 2010, Preece had contact with Robinson numerous times regarding
his failure to pay HOA fees, and Robinson responded that he had built the HOA fees into
his leases and that his renters were responsible to pay those fees.
On June 22, 2010, the Estates filed a notice of claim against Robinson in the sum
of $2,175 for non-payment of HOA dues/fees in the small claims docket of the Miami
Superior Court. On November 24, 2010, Robinson filed a Complaint / Counterclaim and
Affirmative Defense of Set-off. He alleged that the Estates wrongfully charged him
HOA fees in violation of the HOA bylaws and that the Estates owed him $1,500 in HOA
dues/fees wrongfully charged and paid by him.
On January 26, 2011, the Estates filed a notice of claim under the same cause
number asking for a judgment against Robinson in the amount of $6,019 for non-payment
of HOA fees for twenty-four homes. On September 30, 2011, Robinson filed a Motion to
Transfer Small Claim to Civil Docket and a Motion to Amend Counter-Claim. Robinson
alleged in his Second Amended Complaint / Counterclaim that the HOA breached the
3 Declaration, wrongfully charged HOA fees in violation of the Declaration, and owed him
in excess of $20,000 in HOA fees wrongfully charged and paid by him. Also, in
September 2011, the board met to review the revenues and expenses of the HOA and
decided to fix the fee to charge the homeowners at the existing rate of fifty dollars per
month. On March 7, 2012, the court granted Robinson’s Motion to Amend Counter-
Claim.
On April 9 and 10, 2013, the court held a bench trial. At trial, Robinson testified
that he had not paid any HOA fees since the lawsuit was filed, and that the property had
“deteriorated to the fact that it’s unacceptable.”1 Transcript at 168. He also testified that
he knew there was a fee associated with the properties when he bought them, understood
that the historical rate charged for the HOA fee was thirty-five dollars, and understood
that the HOA fee increased to forty dollars and then fifty dollars. Mordechai Arie Gluck,
one of the board members of the HOA, testified that the HOA was requesting a judgment
of $46,375 and that this reflected the amount owed but not paid during the period of
October 2011 to April 2013 and included $11,000 of prior balances owed by Robinson.
The court admitted Plaintiff’s Exhibit 8 which contained a summary of fees owed by
Robinson and reflected a balance as of September 20, 2011 in the amount of $11,250 and
a total balance of $46,375, which included the $11,250. David Douglas, a resident at the
Estates, testified that he served on the board of the HOA and that the board met and
reviewed the HOA rate. Michael Ratican testified that he served on the board of directors
of the HOA for a period of time and attended a meeting at which the board made a
1 Robinson makes no argument on appeal that the HOA breached the Declaration by failing to fulfill its duties with respect to maintenance of the property. 4 decision to fix the HOA fee at fifty dollars per month. Preece testified regarding the
December 2008 letter, the condition of the property, and Robinson’s failure to pay the
HOA fees.
On May 20, 2013, the court entered an order awarding the Estates a judgment of
$57,375 along with attorney’s fees in the amount of $25,000 and costs. The court’s order
states in part:
2. [Robinson] owns twenty eight (28) properties in the Estates . . . . See Plaintiff’s Exhibit 7. [Robinson] is selling eight (8) of the properties on contract.
3. Rules pertaining to properties at [the Estates] are set out in a Declaration of Covenants, Conditions and Restrictions (the [Declaration]).
The business of the [Estates] is managed by a Board of Directors. The current board assumed office in September 2011.
Article VII of the declaration allows the board to fix assessments on each property. Any assessment is a personal obligation of an owner of a lot at the time when the assessment becomes due and payable. When an owner constitutes more than one person, the liability of such persons shall be joint and several.
The board of directors has the right, power and authority to fix a regular assessment without any vote of the members of the association.
After January 1, 1999 a regular assessment may be increased by not more than fifteen (15%) above the regular assessment for the previous calendar year. The board of directors may fix a regular assessment above fifteen (15%) for any calendar year in which a swimming pool or pools, a tennis court or courts, or a recreation center or centers, or any combination thereof . . . [becomes available for use by Owners] in order to provide for the operation, maintenance or repair of such facilities.
Article VII Section 7.2 sets forth the purpose of regular and special assessments.
5 4. When [Robinson] started buying properties, the regular assessment was $35.00. By 2006 the regular assessment had increased to $40.00. The increase from $35.00 to $40.00 was less than 15%.
5. In 2008 the then board of directors decided to increase the regular assessment to $50.00. (The increase exceeds 15%.) By letter dated December 12, 2008, each property owner was informed of the increase. Attached to each letter was a copy of the budget for 2009. See Plaintiff’s Exhibit 4. [Robinson] did not offer any credible evidence to prove that he was not aware of the increase. The court finds that the [Estates] had adequate cause to increase the regular assessment.
6. [Robinson] asserts that from time to time there was no board of directors in existence. [Robinson] did not present any credible evidence to support his assertion.
7. [Robinson] asserts that he has not been allowed to examine any corporate records. In this assertion he is correct. The [Estates] can not produce a complete set of records. During different changes in the managers retained by the [Estates], records have disappeared. [Robinson] has failed to show how he has been harmed by the loss of the records.
8. On April 27, 2010 the then board of directors authorized, approved, ratified, confirmed and adopted all previous actions of the former managers hired by the [Estates].
9. [Robinson] asserts that the [Estates] improperly spent funds of the home owner’s association. The court finds that the issue arose because of accounting errors made by previous managers. The errors have been identified and corrected. The court cannot find any misuse of funds.
10. Failure to pay an assessment carries a late fee of $25.00 per assessment.
11. [Robinson] has failed to pay the assessments for many years, [h]is failures would amount to tens of thousands of dollars. The [Estates] seeks to recover only the assessments and late fees since October 1, 2011 and “$11,000 to $12,000” of the past balance. (See testimony of Mr. Gluck.) The declaration allows for the recovery of attorney’s fees.
6 12. Court enters judgment for the [Estates] and against [Robinson] in the amount of $57,375.00 along with attorney’s fees in the amount of $25,000.00 and costs.
Appellant’s Appendix at 30-32.
STANDARD OF REVIEW
The trial court issued findings of fact and conclusions of law pursuant to Indiana
Trial Rule 52. Under Indiana Trial Rule 52(A), the clearly erroneous standard applies to
appellate review of facts determined in a bench trial with due regard given to the
opportunity of the trial court to assess witness credibility. Trinity Homes, LLC v. Fang,
848 N.E.2d 1065, 1067 (Ind. 2006). When special findings of fact and conclusions of
law are made in accordance with Indiana Trial Rule 52, this Court must determine
whether the evidence supports the findings and whether the findings support the
judgment. CSL Cmty. Ass’n, Inc. v. Meador, 973 N.E.2d 597, 600 (Ind. Ct. App. 2012),
trans. denied. Findings of fact are clearly erroneous when the record lacks any
reasonable inference from the evidence to support them, and the trial court’s judgment is
clearly erroneous if it is unsupported by the findings and conclusions which rely upon
those findings. Id. In establishing whether the findings or judgment are clearly
erroneous, we consider only the evidence favorable to the judgment and all reasonable
inferences to be drawn therefrom. Id. We cannot reweigh the evidence or judge the
credibility of any witness, and must affirm the trial court’s decision if the record contains
any supporting evidence or inferences. Id. While we defer substantially to findings of
fact, we do not do so for conclusions of law. Id. We evaluate conclusions of law de novo
and owe no deference to a trial court’s determination of such questions. Id.
7 To the extent that Robinson alleged in his counterclaim that the HOA breached the
Declaration, we observe that Robinson had the burden of proof. See Indiana-American
Water Co., Inc. v. Town of Seelyville, 698 N.E.2d 1255, 1258 (Ind. Ct. App. 1998) (“The
party asserting a breach of contract bears the burden of proof.”). When a trial court rules
against the party with the burden of proof, “it enters a negative judgment that we may not
reverse for insufficient evidence unless ‘the evidence is without conflict and leads to but
one conclusion, but the court reached a different conclusion.’” Heartland Crossing
Found., Inc. v. Dotlich, 976 N.E.2d 760, 762 (Ind. Ct. App. 2012) (quoting Eppl v.
DiGiacomo, 946 N.E.2d 646, 649 (Ind. Ct. App. 2011)).
DISCUSSION
The issue is whether the court erred in entering its order. Robinson concedes that
he does not assert that he does not owe any HOA fees. Rather, he argues that the trial
court erred: (A) in calculating the HOA fees owed; (B) by determining that the HOA did
not breach the Declaration; and (C) by failing to find that the late fees imposed by the
HOA constituted an unenforceable penalty. The Estates argue that Robinson waived his
arguments for failing to include the applicable standard of review and develop cogent
arguments. To the extent that Robinson develops cogent arguments, we will address
those issues.
A. Amount of HOA Fees
Robinson argues that the court miscalculated when it added the past due balance to
the $46,375 because the evidence was that it was already included in the $46,375. In the
argument section of his brief addressing this issue, Robinson does not cite to the record or
8 authority. See Ind. Appellate Rule 46(A)(8)(a) (“Each contention must be supported by
citations to the authorities, statutes, and the Appendix or parts of the Record on Appeal
relied on, in accordance with Rule 22.”). However, Robinson points to portions of the
record in the statement of facts section of his brief to support the idea that $11,250 was
included in the $46,375.
The Estates notes that Gluck testified that Robinson owed the HOA at least
$46,375 and that based upon Robinson’s own testimony he owed the HOA approximately
$4,950 in unpaid assessments for 2009 and approximately $9,000 in unpaid assessments
for 2010, not including late fees. The Estates contend that the trial court’s calculation of
damages not only conformed to the evidence but was mathematically conservative. The
Estates also assert that “assuming arguendo that the trial court erred in the calculation of
damages, any error would be harmless, as the HOA was entitled to receive pre-judgment
interest.” Appellee’s Brief at 25 (citing Section 7.6 of the Declaration). Lastly, the
Estates state that “to the extent the trial court made a calculation error in its judgment –
which the HOA disputes –, resolution of this one issue does not require reversal of a
judgment on the merits.” Id.
During trial, the Estates’ attorney stated: “The suit was filed, I believe, in June,
2010, Your Honor, but we are, we are only seeking to recover today fees that are past due
beginning October, 2011, through today and that’s the 46,375.” Transcript at 48. During
direct examination, Gluck answered that the total amount owed but not paid during the
period of October 2011 to April 2013 was $46,375. The following exchange occurred
during the cross-examination of Gluck:
9 Q So your testimony is that the 46,000 plus or minus dollars that you’re trying to collect from Mr. Robinson, that is for only an amount after September of 2011, or does that include the 11,000, plus or minus, prior to September of 2011?
A It includes all amounts outstanding as of today, which include amounts that we’ve tallied and we’ve accounted for on a monthly basis, on a daily basis, since September 19th, 2011, plus the then outstanding 11,000 plus or minus dollars that were outstanding on the corporate books of the HOA and as discussed with the outgoing HOA management, Buckingham.
Q So that’s included then?
A The 46,000, yes.
Q Includes the 11,000?
A Yes.
Id. at 74-75. Plaintiff’s Exhibit 8 contains a summary of fees owed by Robinson and it
also appears that the total balance of $46,375 includes the previously unpaid balance of
$11,250. Gluck testified that the exhibit displayed the total amount of fees and late fees
that the Estates was seeking.
To the extent that the Estates cite Section 7.6 of the Declaration, we observe that
Section 7.6 states that “[t]he Board of Directors may provide for reasonable interest and
late charges on past due assessments.” Plaintiff’s Exhibit 1A. However, the Estates do
not point to any evidence or develop the argument that the Board provided for reasonable
interest. We cannot say that the trial court’s addition of $11,000 to the $46,375 was
proper on this basis. Based upon the record, we conclude that the trial court erred in
awarding the Estates $57,375.
10 B. Breach of Declaration by the HOA
We note that the Articles of Incorporation and Bylaws of a non-profit corporation
constitute a contract between the corporation and its members and among the members
themselves. Lynn v. Windridge Co-Owners Ass’n, Inc., 743 N.E.2d 305, 313 (Ind. Ct.
App. 2001), reh’g denied, trans. denied. A party who fails to make payments as required
by a contract is guilty of a breach thereof. Henthorne v. Legacy Healthcare, Inc., 764
N.E.2d 751, 758 (Ind. Ct. App. 2002).
Section 7.3 of the Declaration states:
Regular Assessments. The Board of Directors shall have the right, power and authority, without any vote of the members of the Association, to fix, from time to time, the Regular Assessment against each Lot at any amount not in excess of the maximum Regular Assessment hereinafter provided:
(i) Until January 1, 1999, the maximum Regular Assessment for a calendar year on any Lot shall not exceed One Thousand Two Hundred and 00/100 Dollars ($1,200.00), except as provided in the following paragraph (iv).
(ii) From and after January 1, 1999, the maximum Regular Assessment on a Lot for any calendar year may be increased by not more than fifteen percent (15%) above the Regular Assessment for the previous calendar year, except as provided in the following subparagraphs (iii) and (iv).
(iii) From and after the Applicable Date, the Board of Directors may fix the Regular Assessment at an amount in excess of the maximum amount specified in subparagraph (ii) above with the approval of a majority of the votes cast, in person or by proxy, by all of the members of the Association, voting as a single voting group, present at a meeting at which a quorum is present.
11 (iv) The Board of Directors may fix the Regular Assessment at an amount in excess of the maximum specified in subparagraphs (i) and (ii) above for any calendar year in which a swimming pool or pools, a tennis court or courts or a recreation center or centers, or any combination thereof, that have been installed or constructed by the Declarant in or on any Common Area(s) becomes available for use by Owners in order to provide for the operation, maintenance and repair of such facilities.
Plaintiff’s Exhibit 1A at 18-19.
Robinson argues that the HOA breached the Declaration by failing to comply with
the requirements of Section 7.3. Specifically, he contends that the HOA failed to meet to
increase/fix HOA assessments, failed to provide homeowners with notice of meetings at
which HOA assessments would be increased/fixed, and failed to fix the regular
assessment after 2006. He maintains that there was no evidence that the increase from
forty dollars to fifty dollars was approved. He also asserts that the increase in the
monthly assessment from forty dollars to fifty dollars violated Section 7.3(ii) because the
increase was more than fifteen percent of the previous calendar year’s assessment and
that the requirements under Section 7.3(iii), which allows an increase in excess of fifteen
percent, were not met. In other words, Robinson’s position is that he should be
responsible for HOA fees of only thirty-five dollars per unit per month which was the
assessment when he first began purchasing properties. He also argues that “[i]t would
further be inappropriate to award . . . attorney fees because the assessment figure was
improperly raised and the Plaintiff/Counter-Defendant attempted to collect such fees in
violation of Section 7 of the Declaration.” Appellant’s Brief at 13.
12 The Estates contend that the exceptions in Section 7.3(iv) apply, that the evidence
was overwhelming that Section 7.3(iv) was properly invoked in fixing the amount of
assessments by the board, and that Robinson does not explain or address why Section
7.3(iv) does not apply. The Estates also contend that there is no requirement for the
board to meet or provide written documentation to fix or increase assessments.
To the extent that Robinson argues that there was no evidence of a price increase
from thirty-five dollars to forty dollars and from forty dollars to fifty dollars or that the
board met and approved the price increases, we disagree. We note that Robinson testified
that he understood the HOA fee to be thirty-five dollars in 2006, that the fee increased to
forty dollars in 2007, and that the fee increased to fifty dollars in 2009. The record also
reveals that Gluck testified that his understanding was that the fees were raised from
thirty-five dollars to forty dollars and then to fifty dollars under Section 7.3(iv) and that
notice was provided to homeowners each time the fee was fixed by the HOA. Preece
testified that the board of directors met to vote upon an increase in the HOA fees in about
December 2008 and that it was her opinion that fifty dollars per month per unit was a
necessary fee to maintain the services and amenities that had been provided. Michael
Ratican testified that he served on the board of directors of the HOA for a period of time
and that the board met and made a decision to fix the HOA fee at fifty dollars per month.
With respect to Robinson’s argument that Section 7.3(ii) was violated and that
Section 7.3(iii) only allowed an increase less than fifteen percent, we observe that Section
7.3(ii) states: “From and after January 1, 1999, the maximum Regular Assessment on a
Lot for any calendar year may be increased by not more than fifteen percent (15%) above
13 the Regular Assessment for the previous calendar year, except as provided in the
following subparagraphs (iii) and (iv).” Plaintiff’s Exhibit 1A at 19 (emphasis added).
Thus, we turn our attention to Sections 7.3(iii) and (iv). Section 7.3(iii), which Robinson
relies upon, states:
From and after the Applicable Date, the Board of Directors may fix the Regular Assessment at an amount in excess of the maximum amount specified in subparagraph (ii) above with the approval of a majority of the votes cast, in person or by proxy, by all of the members of the Association, voting as a single voting group, present at a meeting at which a quorum is present.
Id. The Declaration defines the “Applicable Date” as the “date determined pursuant to
Section 4.3 of this Declaration.” Id. at 2. Section 4.3 states:
As used herein, the term “Applicable Date” shall mean the date which is the earlier of (a) the date on which the written resignation of Declarant as a Class B member is delivered to the Secretary of the Association, (b) December 31, 2035, or (c) the first date on which the total votes outstanding in the Class A membership is equal to or more than the total votes outstanding in the Class B membership. Where more than one person or entity constitutes the Owner of a particular Lot, all such persons or entities shall be members of the Association, but the vote in respect of such Lot shall be exercised as the persons or entities holding an interest in such Lot determine among themselves, but in no event shall more than one (1) vote (in the case of Class A membership), be cast with respect to such Lot.
Id. at 11-12. Gluck testified that Section 7.3(iii) was not relevant because the Applicable
Date had not yet occurred. Moreover, Robinson makes no argument that either
subsections (a) or (c) mentioned in Section 4.3 applies and the date mentioned in
subsection (b) has not occurred yet. Consequently, we cannot say that Section 7.3(iii) is
applicable.
Section 7.3(iv) states:
14 The Board of Directors may fix the Regular Assessment at an amount in excess of the maximum specified in subparagraphs (i) and (ii) above for any calendar year in which a swimming pool or pools, a tennis court or courts or a recreation center or centers, or any combination thereof, that have been installed or constructed by the Declarant in or on any Common Area(s) becomes available for use by Owners in order to provide for the operation, maintenance and repair of such facilities.
Id. at 19. Gluck testified that he understood that the HOA increased the rates from thirty-
five dollars to forty dollars and then to fifty dollars under Section 7.3(iv) and that the
requirements of Section 7.3(iv) were undoubtedly met. Preece testified that the
December 2008 letter regarding the fee increase was written because there were many
capital improvements that needed to be done including improvements to the swimming
pool and fitness center. Based upon the record, we cannot say that the trial court erred in
finding that Section 7.3(iv) applied, and we cannot say that Section 7.3 required notice be
given that the HOA fees were increased under Section 7.3(iv). Given this conclusion, to
the extent Robinson argues that the trial court erred by awarding attorney fees because
the fees were improperly imposed, we determine that Robinson’s argument lacks merit.
C. Late Fees
Robinson argues that the late fees violate the Declaration because there is no
evidence that the late fees were properly fixed or established, that the late fees constitute
an unenforceable penalty as opposed to liquidated damages, and that a late fee of twenty-
five dollars is excessive because it would punish him at the rate of fifty percent of the
monthly payment. The Estates argue that Robinson failed to preserve this issue for
appeal because he raises it for the first time on appeal and that, waiver notwithstanding,
the late fees are not excessive and that the charges fall within the definition of liquidated
15 damages. The Estates further contend that the Declaration authorizes the board to
provide for late charges and that such a late charge was adopted and ratified by the board.
In his reply brief, Robinson points to a portion of the record in which he testified that he
did not think that he should be responsible for late fees.
To the extent Robinson alleges that the late fees were not properly established, we
observe that Section 7.6 of the Declaration states that the board of directors “may provide
for reasonable interest and late charges on past due assessments.” Plaintiff’s Exhibit 1A
at 19. Gluck testified that the board made the decision to impose a twenty-five dollar late
fee. Douglas also testified that the April 2010 letter establishing the late fee of twenty-
five dollars per month was sent out by management of the HOA at a point in time when
he was a member of the board and that the management had his authority to send the
letter. Based upon the record, we cannot say that Robinson has demonstrated that the late
fee was not properly established.
We next turn to Robinson’s argument that the late fee constitutes an unenforceable
penalty as opposed to liquidated damages. Generally, the term “liquidated damages”
“applies to a specific sum of money that has been expressly stipulated by the parties to a
contract as the amount of damages to be recovered by one party for a breach of the
agreement by the other, whether it exceeds or falls short of actual damages.” Time
Warner Entm’t Co., L.P. v. Whiteman, 802 N.E.2d 886, 893 (Ind. 2004), reh’g denied.
The question whether a liquidated damages clause is valid, or whether it constitutes an
unenforceable penalty, is a pure question of law for the court. Gershin v. Demming, 685
N.E.2d 1125, 1128 (Ind. Ct. App. 1997). “The distinction between a penalty provision
16 and one for liquidated damages is that a penalty is imposed to secure performance of the
contract and liquidated damages are to be paid in lieu of performance.” Id. “In
determining whether a stipulated sum payable on a breach of contract constitutes
liquidated damages or a penalty, the facts, the intention of the parties and the
reasonableness of the stipulation under the circumstances of the case are all to be
considered.” Id. If the sum sought by a liquidated damages clause is grossly
disproportionate to the loss that may result from a breach of contract, we should treat the
sum as a penalty rather than liquidated damages. Rogers v. Lockard, 767 N.E.2d 982,
991 (Ind. Ct. App. 2002). “Liquidated damages provisions have value and are generally
enforceable in those situations where the calculation of actual damages would be
uncertain, difficult, or impossible.” Id. at 990.
In Rajski v. Tezich, 514 N.E.2d 347, 348 (Ind. Ct. App. 1987), reh’g denied, trans.
denied, relied upon by Robinson, the trial court ordered a garage that a homeowner had
constructed in violation of subdivision restrictions removed and ordered liquidated
damages in the amount of $2,930 to the date of judgment together with ten dollars per
day for each day the garage remained in violation of the restrictive covenants. On appeal,
the homeowners alleged that the provision for liquidated damages contained in the
restrictions was a penalty and should be declared unenforceable. 514 N.E.2d at 349. The
court concluded that three undisputed facts combined to lead to the conclusion that a
penalty was intended by the provision. Id. First, the provision was not the result of direct
negotiations between the homeowners and the proprietors of the plat or the other lot
owners. Id. Thus, there was missing an inference of mutual personal intent in creating
17 the provision that true liquidated damages were intended. Id. Second, and “very
significantly,” the covenant imposed the penalty of ten dollars per day up to and
including the total value of the real estate and improvements for any violation of the
restrictions, whether serious or trivial. Id. Third, the damages in question were not
payable to the property owners in the subdivision but were to be paid to the homeowners
association. Id. The court held that such a provision is at odds with the notion of
providing compensation to interested parties for actual injuries. Id.
In Gaddis v. Stardust Hills Owners Ass’n. Inc., 804 N.E.2d 231, 233 (Ind. Ct.
App. 2004), according to the bylaws of the Stardust Hills Owner’s Association, Inc.
(“Association”), every homeowner in the subdivision was required to be a member of the
Association and pay annual dues of $200 for the maintenance of common areas and other
community services. There was a ten-day grace period for payment, after which the
amount of the unpaid annual obligation incurred a delinquent fee at a rate of two dollars
per day. 804 N.E.2d at 233. On appeal, Phyllis Gaddis argued that the delinquent fee
charged for late payment of her membership dues constituted usurious interest, and, in
the alternative, that the delinquent fee was an unenforceable penalty. Id. The court held
that the delinquent fee charged did not constitute usurious interest under the
circumstances. Id. at 236. Specifically, the court observed that the late payment and its
consequential effects may interrupt the ability of the Association to pay for the
maintenance of the common area and to provide other community services. Id. The
court also observed that the total of the late fees may seem high, but the accumulation of
18 the late fees only occurred because Gaddis breached two contractual obligations to pay
her annual dues. Id.
With respect to whether the delinquent fee constituted an unenforceable penalty,
the court held:
The provision at issue here, which provides for a flat rate of two dollars per day when the annual dues are not paid on time, regardless of proof of damages, clearly fits within the definition of liquidated damages. Gaddis asserts, without citation to any authority, that the Association’s actual loss from the late payment can be gauged by what interest rate it might receive by placing the money in an interest-bearing account. She therefore contends that the fee of two dollars per day is “so obviously disproportionate to this amount, the failure of the court to declare it a penalty was a blatantly obvious error.” Appellant’s Br. p. 18. However, as we observed above, the costs of enforcing the payment of the annual dues can be high and are directly related to the two dollar per day fee. Thus, the sum sought by this liquidated damages clause is not grossly disproportionate to the loss that may result from a breach of contract.
Id. at 236-237.
In the December 2008 letter, the HOA informed residents that the HOA had
experienced an increase in bad debt and attorney costs associated with the collections and
the enforcement of the rules and regulations. In the April 2010 letter, the HOA informed
the residents that the HOA dues were due on the first of the month and that on the sixth
of the month a late fee of twenty-five dollars per month would be assessed. This late fee
amounts to less than one dollar a day when divided over the course of a month and much
less than the fee of ten dollars per day in Rajski which was imposed for any violation no
matter how trivial. The fee is also less than the late fee of two dollars per day which was
upheld in Gaddis. Preece testified that the rate increase from forty dollars to fifty dollars
was due to the need for capital improvements that had not been done for “many, many
19 years.” Transcript at 94. Specifically, Preece testified that most pressing was the
swimming pool because the pool pump was “completely out and the pool was non-
operational from the year before” and the “fitness center equipment was very old” and
had been “home gym type equipment” instead of professional equipment, and the
“entrance lighting was bad.” Id. at 94-95. Preece also testified that the property needed
“overall repair” and it “just needed a lot of, a lot of work.” Id. at 95. Thus, the HOA fees
were important to benefit the homeowners at the Estates. We conclude that this case is
similar to Gaddis and affirm the trial court’s award of late fees.
We next turn to the Estates’ request for appellate attorney fees. Appellate Rule
66(E) provides in part that this court “may assess damages if an appeal, petition, or
motion, or response, is frivolous or in bad faith. Damages shall be in the Court’s
discretion and may include attorneys’ fees.” Our discretion to award attorneys’ fees
under Ind. Appellate Rule 66(E) is limited to instances when “an appeal is permeated
with meritlessness, bad faith, frivolity, harassment, vexatiousness, or purpose of delay.”
Thacker v. Wentzel, 797 N.E.2d 342, 346 (Ind. Ct. App. 2003) (citing Orr v. Turco Mfg.
Co. Inc., 512 N.E.2d 151, 152 (Ind. 1987)). In addition, while Ind. Appellate Rule 66(E)
provides this court with discretionary authority to award damages on appeal, we must use
extreme restraint when exercising this power because of the potential chilling effect upon
the exercise of the right to appeal. Id. (citing Tioga Pines Living Ctr., Inc. v. Ind. Family
& Soc. Serv. Admin., 760 N.E.2d 1080, 1087 (Ind. Ct. App. 2001), affirmed on reh’g,
trans. denied). A strong showing is required to justify an award of appellate damages and
20 the sanction is not imposed to punish mere lack of merit but something more egregious.
Harness v. Schmitt, 924 N.E.2d 162, 168 (Ind. Ct. App. 2010).
Indiana appellate courts have classified claims for appellate attorneys’ fees into
substantive and procedural bad faith claims. Thacker, 797 N.E.2d at 346 (citing Boczar
v. Meridian St. Found., 749 N.E.2d 87, 95 (Ind. Ct. App. 2001)). To prevail on a
substantive bad faith claim, the party must show that “the appellant’s contentions and
arguments are utterly devoid of all plausibility.” Id. Procedural bad faith, on the other
hand, occurs when a party flagrantly disregards the form and content requirements of the
rules of appellate procedure, omits and misstates relevant facts appearing in the record,
and files briefs written in a manner calculated to require the maximum expenditure of
time both by the opposing party and the reviewing court. Id. at 346-347.
The Estates argues that in his briefing, Robinson failed to include a table of
contents or table of authorities, support his arguments with cogent reasoning and citations
to authorities, state the standard of review for each issue, and provide a copy of the
judgment in the brief. The Estates contends that Robinson “flippantly moves from issue
to issue making frivolous assertions” and misstates the record. Appellee’s Brief at 13.
To the extent the Estates argues substantive bad faith, we find Robinson’s
argument that the trial court erred by awarding $57,375 meritorious and while we find
Robinson’s other arguments to be unpersuasive we cannot say that they are utterly devoid
of all plausibility. With respect to the Estates’ procedural bad faith claim, we
acknowledge that Robinson’s brief violated some of our Appellate Rules,2 but contrary to
2 For example, Robinson did not include a concise statement of the applicable standard of review and failed to cite to the record for certain statements. See Ind. Appellate Rule 46(A)(8)(a)-(b). 21 the Estates’ argument, Robinson’s briefs contain a copy of the judgment as well as a table
of contents and table of authorities.3 We cannot say that he flagrantly disregarded the
form and content requirements of the rules and filed a brief written in a manner
calculated to require the maximum expenditure of time. Consequently, we deny the
Estates’ request for appellate attorney fees.
CONCLUSION
For the foregoing reasons, we reverse the trial court’s order to the extent that it
awarded the Estates $57,375, affirm the remainder of the court’s order, and remand for
entry of a judgment in favor of the Estates in the amount of $46,375 plus attorney’s fees
of $25,000 and costs.
Affirmed in part, reversed in part, and remanded.
ROBB, J., and BARNES, J., concur.
3 We observe that one of the copies of Robinson’s briefs submitted to the court contained the table of contents and table of authorities at the end of the brief. See Ind. Appellate Rule 46(A) (“The appellant’s brief shall contain the following sections under separate headings and in the following order: (1) Table of Contents. . . . (2) Table of Authorities. . . . .”). The other copies of Robinson’s brief complied with the order requirement of Rule 46(A). 22