Anton v. Houze

• Decision Date: 03 October 2019
• Docket Number: C. A. NC-2017-0493
• Parties: CHARLES A. ANTON and TAMI D. ANTON, as Trustees of the Victoria Avenue Realty Trust, Plaintiffs, v. PHILIPPE L. HOUZE and MARIE HOUZE, Defendants.
• Court: Superior Court of Rhode Island

CHARLES A. ANTON and TAMI D. ANTON, as Trustees of the Victoria Avenue Realty Trust, Plaintiffs, v. PHILIPPE L. HOUZE and MARIE HOUZE, Defendants.

C. A. No. NC-2017-0493

Superior Court of Rhode Island, Newport

October 3, 2019

For Defendant: Rachelle R. Green, Esq.; R. Daniel Prentiss, Esq.

For Plaintiffs: Evan S. Leviss, Esq. for Defendants

DECISION

VAN COUYGHEN, J.

This matter is before this Court for decision following a non-jury trial on a complaint by Charles A. Anton and Tami D. Anton (the Plaintiffs or Antons) against Philippe L. Houze and Marie Houze (the Defendants or Houzes). Jurisdiction is pursuant to G.L. 1956 §§ 8-2-13, 8-2-14, 9-30-1 and Rule 65 of the Rhode Island Superior Court Rules of Civil Procedure.

I Facts

This case involves a dispute between the Unit Owners of the D & J Condominium (the Condominium) concerning the Condominium's governance scheme and the approval required before altering the Condominium's Units and Common Elements. The Condominium is located at 9 Victoria Avenue Newport, Rhode Island and is comprised of two units: Unit 9 and Unit 9A. The organization and operation of the Condominium is governed by the Rhode Island Condominium Act G.L. 1956 §§ 34-36.1-1 et seq. (the Act) as well as the Condominium's Declaration, By-Laws, and Rules and Regulations. (collectively, the Condominium Documents). The Condominium is a Rhode Island unincorporated association organized under the Act and established by the original property owners, Dr. Richard D. Stengel and JoAnn R Stengel (the Stengels), in 1990. The Stengels converted their property into a Condominium in order for Dr. Stengel's father, Charles Stengel, to live in Unit 9A. In May 1997, Charles Stengel transferred ownership of Unit 9A to the Stengels. (Defs.' Ex. O.)

The Antons purchased Unit 9A from the Stengels and have used it as a secondary residence since 2006. The title to Unit 9A is held by their trust, the Victoria Avenue Trust. Trial Tr. (Tr.) 16:11-16, Oct. 2, 2018; Pls.' Exs. 8 & 12. The Houzes purchased Unit 9 from the Stengels on May 24, 2017. (Pls.' Ex. 21.) Disputes regarding the management and renovation of the Condominium have resulted in this litigation.

Plaintiffs' first witness was Mr. Charles Anton. Mr. Anton testified that he and his wife first leased Unit 9A from the Stengels during the summer of 2005. Tr. 6:23-7:2, Oct. 2, 2018. During that summer, Mr. Anton testified that both he and his wife became interested in purchasing Unit 9A from the Stengels. Id. at 7:3-7. In early 2006, the Antons broached purchasing Unit 9A with the Stengels. Id. at 7:3-14. Although the Stengels previously had no intention to sell Unit 9A, they took their long-standing relationship with the Antons into consideration and ultimately agreed to sell. Id. at 7:3-21. Dr. Stengel then explained to the Antons how the Condominium operated, providing copies of the Condominium Documents for their review. Id. at 7:22-8:5; Pls.' Ex. 1.

The Condominium Documents were originally drafted to give Dr. Stengel, the Owner of Unit 9, control over the Condominium Association. Dr. Stengel, as the Owner of Unit 9, possessed 67% of the Allocated Interest while the owner of Unit 9A held the remaining 33% of the Allocated Interest.^[1] Originally, the Allocated Interest applied to various voting rights of the Unit Owners as well as the apportionment of common expenses related to the management of the Condominium. Prior to purchase the Antons sought, through counsel, to amend the Condominium's Declaration to modify their rights as the Owners of Unit 9A.^[2] Tr. 9:19-25, Oct. 2, 2018. Mr. Anton testified that their overarching goal in amending the Declaration was to establish that the Condominium was equally governed by both Units, providing each Unit an equal say in managing the Condominium's affairs. Tr. 10:22-11:4, Oct. 2, 2018. This was so neither Owner could unilaterally make changes to the Condominium without the other Owner's approval-irrespective of their Unit's Allocated Interest. Tr. 10:22-11:4, Oct. 2, 2018. Mr. Anton understood and intended that the First Amendment to the Declaration accomplished this principally through two changes. First, that the Board of Directors consisted of two members, one from Unit 9 and one from Unit 9A. Id. at 11:5-10. Second, to be "crystal clear," that the approval from one hundred (100%) percent of the Unit Owners would be required before making changes to the Condominium, including the Common Elements. Tr. 11:10-13, Oct. 2, 2018. The Antons instructed their lawyers to draft the corresponding amendment to the Condominium Declaration. Tr. 11:14-18; Pls.' Exs. 30, 32, 33). Mr. Anton testified that the Stengels had no objection to the substance of the proposed amendment.

On March 24, 2006, prior to the conveyance of Unit 9A to the Antons, the Stengels executed and recorded the First Amendment to the Declaration. (Pls.' Ex. 2.) In fact, the Antons' Purchase and Sale Agreement for Unit 9A was contingent upon the execution of the First Amendment. (Pls.' Exs. 30 & 32.) The Antons purchased Unit 9A on March 28, 2006. (Pls.' Ex. 8). On August 31, 2015, for estate reasons, the Antons transferred title to Unit 9A to the Victoria Avenue Trust and took title in their capacity as trustees Tr. 16:11-16; Pls.' Ex. 12.^[3]

The First Amendment to the Declaration amended, amongst other things, the definition of "Board of Directors" in § 1.5 of the Declaration.^[4] As originally drafted, § 1.5 of the Declaration defined the term "Board of Directors" as follows:

Board of Directors' means those persons elected from time to time as members of the Executive Board of the Association pursuant to the By-Laws and as defined in the Act, and their successors in office. (Pls.' Ex. 1, § 1.5 of the Declaration.)

Section 1.5 of the Amended Declaration's definition now states:

1.5 'Board of Directors' means those persons who are the owners of Units 9 and 9A and who shall also be the Executive Board of the Association. Notwithstanding any other provision in this Declaration, Rules and Regulations and the By-Laws to the contrary (including without limitation Section 3.2 of the By-Laws), the Board of Directors and Executive Board of the Association shall at all times be comprised of those persons who are the owners of Units 9 and 9A. (Pls.' Ex. 2, § 1.5 of the Amended Declaration.)

The First Amendment also changed the percentage of Unit Owner approval required-from 67% Unit Owner approval to 100% Unit Owner approval-in order to make various changes to the Condominium or to the Condominium Documents. Section 8.1(i) of the Declaration originally stated:

8.1(i) In addition to all other requirements of this Declaration or the By-Laws, the prior written consent of First Mortgagees holding mortgages on Units entitled to at least fifty-one (51%) percent of the Common Areas and Facilities, and Unit Owners entitled to at least sixty-seven (67%) percent of the Common Areas and Facilities of the Condominium shall be required for the following: . . . (Pls.' Ex. 1.)

The First Amendment amended § 8.1(i) of the Declaration and added an additional clause, which now states:

8.1(i) In addition to all other requirements of this Declaration or the By-Laws, the prior written consent of . . . Unit Owners entitled to one hundred (100% percent) of the Common Areas and Facilities^[5] of the Condominium shall be required for the following:

(v) any increase in the Annual Assessment by more than ten (10%) present in any one calendar year period or any additions, alterations, or improvements to the Common Elements costing in excess of One Thousand ($1, 000.00) Dollars. (Pls.' Ex. 2) (emphasis added).^[6]

Mr. Anton testified these changes were to protect their investment in Unit 9A, preventing the Owner of Unit 9 from making unilateral changes to the Common Elements of the Condominium without their consent. Tr. 14:18-15:3, Oct. 2, 2018.

After the Antons purchased Unit 9A, the Antons and the Stengels ran their Condominium informally. Tr. 18:20-22. Dr. Stengel would discuss the condominium affairs with Mr. Anton when they would meet or contact him by phone or email if something came up in the meantime. Tr. 18:23-19:3. The two would successfully resolve any disagreements that would arise between them. Tr. 19:4-9. The Condominium would not otherwise hold formal Condominium Association meetings, Board of Directors meetings, or set a Condominium budget. Tr. 19:10-15. Instead, Dr. Stengel essentially managed the Condominium and kept track of the expenses, sending invoices or summaries of the expenses to the Antons twice a year. Tr. 19:16-20:1; Pls.' Ex. 23. Dr. Stengel's invoices show each Owner paid an amount of the Condominium's expenses proportionate to their Unit's Allocated Interest in the Common Elements-sixty-seven (67%) percent for the Stengels and thirty-three (33%) percent for the Antons. Tr. 20:4-20, Oct. 2, 2018.

The Antons' and the Stengels' informal management of the Condominium continued until Mrs. Stengel fell and broke her hip in late 2016, making it difficult for her to navigate Unit 9's stairs. At that time, the Stengels informed the Antons of their intention to sell Unit 9. Tr. 23:21-24:1. Mr Anton first learned about the Houzes as the prospective purchasers of Unit 9 in late December 2016 through Dr. Stengel's broker. Tr. 26:4-10. On December 30, 2016, shortly after being first notified by the broker, Mr. Anton emailed her to ask that she be fully transparent with the prospective purchasers about the contents of the Condominium Documents and what they require of the Unit Owners. Tr. 26:11-21; Pls.' Ex. 34. Mr. Anton further requested that Dr. Stengel's broker confirm that she had advised the buyers of the protections and restrictions of the Condominium contained...