Mountain Top Condominium Ass'n v. Dave Stabbert Master Builder, Inc.

• Decision Date: 18 December 1995
• Docket Number: No. 95-7031,95-7031
• Citation: 72 F.3d 361
• Parties: MOUNTAIN TOP CONDOMINIUM ASSOCIATION v. DAVE STABBERT MASTER BUILDER, INC.; Joseph Huffman Walter Seipel; Susan Seipel, Proposed Intervenors in D.C./Appellants.
• Court: U.S. Court of Appeals — Third Circuit

Page 361

72 F.3d 361

33 Fed.R.Serv.3d 382

MOUNTAIN TOP CONDOMINIUM ASSOCIATION v. DAVE STABBERT MASTER BUILDER, INC.; Joseph Huffman Walter Seipel; Susan Seipel, Proposed Intervenors in D.C./Appellants.

No. 95-7031.

United States Court of Appeals Third Circuit.

Argued Aug. 15, 1995.

Decided Dec. 18, 1995.

Joseph B. Arellano (argued), Campbell, Arellano & Rich, Charlotte Amalie, St. Thomas U.S.V.I., for Appellants.

Adam G. Christian (argued), Hodge & Francois, Charlotte Amalie, St. Thomas U.S.V.I., Sandra N. Younger, Tom Bolt & Associates, Charlotte Amalie, St. Thomas U.S.V.I., for Appellees.

Before: STAPLETON, LEWIS and WEIS, Circuit Judges.

OPINION OF THE COURT

LEWIS, Circuit Judge.

In this appeal, Walter Seipel and Susan Seipel ("appellants") seek the reversal of a district court order denying their motion to intervene in a proceeding pending in that court. The district court held that while the appellants' motion may be timely, "[t]he plain fact is that they have no interest at stake in the litigation, and no standing to become involved in it." Mountain Top Condominium Association v. Stabbert, et. al., No. 1990/215, slip op. at 4 (D.V.I. Dec. 9, 1994). Appellants argue that as a matter of law, their interest in the litigation is sufficient to support intervention as a matter of right under Fed.R.Civ.P. 24(a)(2). We agree, and will reverse the district court's denial of appellants' motion to intervene.

I.

A.

The Seipels allege the following facts in their motion to intervene and their proposed "Complaint in Intervention." These facts are not disputed in the present record and appear to have been accepted by the district court in ruling on the motion to intervene.

On September 17, 1989, Hurricane Hugo struck the Virgin Islands and wreaked tremendous destruction. Included in this natural disaster was the damage and destruction of several buildings which comprised the Mountain Top Condominiums, located on the island of St. Thomas. The Mountain Top Condominiums are governed by the Mountain Top Condominium Association ("MTCA"), which is comprised of all of the condominium owners in the development. The owners had delegated certain powers and duties, including the repair and restoration of the condominiums, to the MTCA's Board of Directors (the "Board") pursuant to the MTCA's bylaws and Virgin Islands law, Title 28 V.I.C. Chapter 33.

Pursuant to Article V, Sections 2 and 3 of the MTCA's By-laws, the MTCA's Board was required to appoint an Insurance Trustee to approve the adjustment of any loss, and to receive all insurance proceeds for losses in excess of $50,000. There is no dispute that the Board did not comply with these requirements.

Instead, the Board took it upon itself to approve the insurance adjustment and to determine how the reconstruction and repair proceeds were to be distributed. As a result, the Board adjusted the hurricane loss and received $1,538,613 from its insurance carrier. The Board then deposited this fund into a separate account specifically designated for hurricane reconstruction. Rather than apply all of the insurance proceeds to repair the damage caused by hurricane Hugo, however, the Board decided to distribute some of the proceeds to the individual condominium owners according to the size of the various condominium units, ¹ minus fifteen percent (15%) for the Board's supervision of the individual owners' reconstruction efforts. Under this plan, a larger unit would receive more from the fund than a smaller unit regardless of the damage sustained, and there was no requirement that the money be used to benefit the condominium units. The appellants allege that this in turn has provided certain unit owners with a cash windfall. The Board also included in the repair costs the reconstruction of five "deck extensions" which were not covered by the MTCA's insurance policy. ² Finally, in order to receive any money from the hurricane restoration fund, the Board required unit owners to sign general releases. Apparently, the appellants are the only owners who refused to sign a release.

B.

As part of its reconstruction plan, the Board entered into an agreement with Dave Stabbert Master Builder, Inc., for construction work on the condominiums. ³ The Board, however, was dissatisfied with the quality of the work performed by Stabbert and its subcontractors, and a dispute arose between the parties. As a result of this dispute, Huffman and Stabbert filed construction liens against the condominiums in the hope of recovering payment for their work. The Board responded by filing a complaint against Stabbert and Huffman, alleging fraudulent misrepresentation, negligent misrepresentation, unfair trade practices, slander of title, injunctive relief, breach of contract, and damages. Huffman and Stabbert filed counterclaims against the MTCA.

Later, Huffman and Stabbert agreed to release the liens. In return, the Board deposited $250,000 of the insurance proceeds in escrow in the registry of the district court. This sum represented all that remained of the hurricane reconstruction fund. In February, 1994, pursuant to the district court's order, this dispute proceeded to mediation.

C.

Appellants own two condominiums that were heavily damaged during Hurricane Hugo. They believed that the distribution of funds for the reconstruction of their condominiums was not being accomplished in good faith. Thus, on March 20, 1992, they instituted a civil action against the MTCA in the Territorial Court of the Virgin Islands. The basis of the Seipels' complaint was that the MTCA violated the by-laws of the Mountain Top Condominiums by, inter alia, failing to appoint an Insurance Trustee to manage the distribution of the insurance proceeds. This civil action is presently pending in the Territorial Court. ⁴

When it became apparent that any settlement between MTCA, Stabbert and Huffman might deplete all of the remaining funds allocated for repairing the damage caused by Hurricane Hugo, the Seipels decided to intervene in the mediation process between the MTCA, Stabbert and Huffman. On February 7, 1994, the day the mediation was to occur, counsel for the Seipels sent a written request to MTCA that he be allowed to attend the mediation. When this request was denied, the Seipels filed a motion to intervene pursuant to Rule 24 of the Federal Rules of Civil Procedure, claiming that if the litigation between the MTCA and its contractor is successfully mediated, the entire $250,000 escrow deposit may be lost. ⁵ Both parties to the mediation opposed the proposed intervention.

The district court denied the Seipels' motion to intervene. The court held that the appellants', "only conceivable interest in this lawsuit lies in the fact that, if plaintiff [the MTCA] is successful, plaintiff may be in a somewhat better position to satisfy any judgment which the Seipels may succeed in obtaining in Territorial Court, than would be the case if plaintiff loses this lawsuit." Mountain Top, slip op. at 5. This appeal followed.

II.

The District Court of the Virgin Islands had subject matter jurisdiction over this case pursuant to 4 V.I.C. Sec. 32, ⁶ and Section 21 of the Revised Organic Act, 48 U.S.C. Sec. 1611. ⁷ We have jurisdiction over this appeal under 28 U.S.C. Sec. 1291. In reviewing a district court's decision denying intervention as a matter of right, we will reverse a district court's determination only if the court "has applied an improper legal standard or reached a decision that we are confident is incorrect." Harris v. Pernsley, 820 F.2d 592, 597 (3d Cir.1987) (citations omitted).

III.

We have stated that a non-party is permitted to intervene under Fed.R.Civ.P. 24(a)(2) only if: (1) the application for intervention is timely; (2) the applicant has a sufficient interest in the litigation; (3) the interest may be affected or impaired, as a practical matter by the disposition of the action; and (4) the interest is not adequately represented by an existing party in the litigation.

Harris, 820 F.2d at 596. Each of these requirements must be met to intervene as of right. Id. The district court denied appellants' motion because it found that they did not have a sufficient interest in the litigation, and thus had failed to satisfy subsection (2) of Rule 24(a). Appellants argue that because a specific fund is at issue, they have a sufficient interest in the litigation pending in the district court.

While we will address each of Rule 24(a)'s requirements, we first turn to whether the appellants have a sufficient interest in the litigation.

A.

Rule 24(a)(2) requires the intervenor to demonstrate "an interest relating to the property or transaction which is the subject of the action ..." Fed.R.Civ.P. 24(a)(2). While the precise nature of the interest required to intervene as of right has eluded precise and authoritative definition, Harris, 820 F.2d at 596; 3B Moore's Federal Practice, p 24.07, at 24-57 (2d ed. 1982); 7C Wright, Miller & Kane, Federal Practice & Procedure Sec. 1908, at 263 (1986), some general guidelines have emerged. According to the Supreme Court, an intervenor's interest must be one that is "significantly protectable." Donaldson v. United States, 400 U.S. 517, 531, 91 S.Ct. 534, 542, 27 L.Ed.2d 580 (1971). In defining the contours of a "significantly protectable" legal interest under Rule 24(a)(2), we have held that, " 'the interest must be a legal interest as distinguished from interests of a general and indefinite character.' * * * The applicant must demonstrate that there is a tangible threat to a legally cognizable interest to have the right to intervene." Harris, 820 F.2d at 601 (citations omitted). This interest is recognized as one belonging to or being owned by the proposed intervenor. United States v. Alcan Aluminum, Inc., 25 F.3d 1174, 1185 (3d Cir.1994) (quoting New Orleans Public Service, Inc. v. United Gas Pipe Line Co., 732 F.2d 452, 464 (5th Cir.1984)). We must therefore determine...