Ass'n of Owners of Maalaea Kai v. Stillson
| Decision Date | 22 July 2005 |
| Docket Number | No. 23932.,23932. |
| Citation | 116 P.3d 644 |
| Court | Hawaii Supreme Court |
| Parties | ASSOCIATION OF APARTMENT OWNERS OF MAALAEA KAI, INC., Plaintiff/Counterclaim Defendant-Appellant v. THOMAS HAYDEN STILLSON; Phyllis Ann Payne-Stillson, fka Phyllis Ann Payne, Defendants/Counterclaimants-Appellees and Pioneer Federal Savings Bank; John Does 1-50; Jane Does 1-50; Doe Partnerships 1-50; Doe Corporations 1-50; Doe Entities 1-50 and Doe Governmental Units 1-50, Defendants (Nos. 23932 & 24257). |
Kevin P.H. Sumida and Lance S. Au (Matsui Chung Sumida & Tsuchiyama), Honolulu, on the briefs, for plaintiff/counterclaim defendant-appellant.
Dennis Niles, William M. McKeon and Tom Pierce (Paul, Johnson, Park & Niles), Wailuku, on the briefs, for defendants/counterclaimants-appellees.
We hold (1) Hawai'i Revised Statutes (HRS) § 514C-6(a) requires lessees of condominium units to which 75% of the common interests are appurtenant to approve of a leased fee purchase, (2) because HRS § 514C-6(a) is silent on the method of calculating the votes of multi-owner units, the bylaws of an association of apartment owners may govern on how the votes are to be calculated so long as not violative of any law, (3) if any defects affected the approval process, the 75% requirement was satisfied by the lessees' subsequent ratification of the previous vote when they executed deeds necessary for conversion, and (4) pursuant to HRS § 514C-6(a)(3), an association of apartment owners may assess a "conversion" surcharge in "a fair and equitable manner" against lessees who oppose the fee purchase.
Because the November 29, 2000 order of the Circuit Court of the Second Circuit1 (the court) granting partial summary judgment to Defendants/Counterclaimants-Appellees Thomas Hayden Stillson and Phyllis Ann Payne-Stillson (collectively, the Stillsons), who opposed the leased fee purchase of the Maalaea Kai condominium, did not comport with the representative-vote-per-unit method set forth in the bylaws of Plaintiff/Counterclaim Defendant-Appellant Association of Apartment Owners of Maalaea Kai, Inc. (the Association), the order and the court's December 27, 2000 judgment and its May 2, 2001 amended final judgment are vacated, and this case is remanded for the court to enter an order (1) denying the Stillsons' motion for partial summary judgment and (2) granting the Association's cross-motion for summary judgment as to the 75% requirement. Also, consistent with such vacation of the November 29, 2000 order and because the court found the conversion surcharge levied on the Stillsons was inequitable without setting forth the grounds for its findings, the case is remanded to the court to decide whether the Association assessed the surcharge against the Stillsons in "a fair and equitable manner."
This is the second appeal in a case that began as a foreclosure action brought by the Association against the Stillsons. On September 25, 1996, the Association filed a complaint to foreclose on the Stillsons' Maalaea Kai condominium apartment for failure to pay a monthly conversion surcharge relating to the Association's purchase of the leased fee interest of the Maalaea Kai condominium project. On February 28, 2000, this court issued a memorandum opinion vacating the circuit court's judgment in favor of the Stillsons. AOAO Maalaea Kai, Inc. v. Stillson, No. 22310, 92 Hawai'i 628, 994 P.2d 560 (Feb. 28, 2000) (mem.) [hereinafter, "Memo op."]. The memorandum opinion set forth the following pertinent facts:
On October 7, 1974, the Stillsons acquired fee simple title to apartment 209 at the Maalaea Kai condominium project (the "Project") and an appurtenant undivided 1.4306% interest in the Project's common elements. The Stillsons were granted a leasehold estate in the land appurtenant to their apartment. The leasehold estate, created by the lease, was one of seventy-nine such leasehold estates, representing each of the Project's seventy-nine condominium apartments.
....
... On December 28, 1994, the Association's bylaws were amended to allow the Association to purchase the leased fee interest "subject to the approval of the Apartment Owners ... constituting 70%[2] of the common interest in the Project."
On July 17, 1995, the Board [of Directors of the Association] sent a second letter to the apartment owners, noting that "the lessor has now taken the position that it is unwilling to consider an offer contingent upon 70% of the owners agreeing to purchase their share of the leased fee interest from the Association." The Association issued a "written consent ballot" to the apartment owners, asking the owners to indicate whether they were "in favor of" or "against" an "[a]mendment of ... the By-laws to allow the Association to make an offer to purchase the lessor's interest in the Project without requiring 70% of the owners to execute contracts for the purchase of their leased fee interest." The Stillsons voted "against" the amendment. On August 11, 1995, the Association's bylaws were amended to remove the seventy percent participation requirement. On February 23, 1996, the Association acquired the leased fee interest.
On January 31, 1996, the Stillsons were notified that their monthly payment of maintenance fees would increase due to "the Association's purchase of the fee." The increase included a $276.00 monthly "conversion surcharge," which was equal to the Stillson's proportionate 1.4306% interest in the Project's common elements. The Stillsons did not pay the conversion surcharge.
....
On September 25, 1996, the Association filed a complaint against the Stillsons ... [seeking] foreclosure on the Stillsons' apartment.
....
On November 13, 1996, the Stillsons filed their answer and counterclaim. In their counterclaim, the Stillsons alleged, in Count I, that the Association had violated HRS § 514C-6 ... by requiring them to pay fee conversion surcharges and to service the Association's fee conversion debt.
....
On July 31, 1997, the Stillsons filed a motion for summary judgment on Count I of their counterclaim.... On October 8, 1997, the circuit court entered an order denying the Stillson[s'] motion[.]
....
On December 1, 1997, the Stillsons filed a motion for summary judgment on Count III of their counterclaim. The Stillsons' central argument was that, inasmuch as "purchase of the fee interest altered the common element[s], the Association was required to obtain the consent of all condominium owners" prior to purchasing the interest, pursuant to HRS § 514A-13[.] ... On January 15, 1998, the circuit court entered an order granting the Stillsons' motion....
Memo op. at 3-7 (brackets in original, brackets added) (emphasis added).
In the first appeal, this court vacated "the circuit court's final amended judgment of January 14, 1999" and remanded the case "for a determination of whether the Association met the requirements of HRS § 514C-6(a)[,]" memo op. at 21, "and ... whether the fee conversion surcharge ... was assessed in a `fair and equitable manner' pursuant to HRS § 514C-6(a)(3)," memo op. at 17 n. 10.
On remand, the Stillsons filed a motion on July 20, 2000, for partial summary judgment on the first of the two remanded issues. On September 18, 2000, the Association filed a cross-motion for summary judgment, praying for judgment "in its favor as to all remaining issues[,]" which apparently included a determination that the 75% approval requirement was met, or, alternatively, that the savings clauses in HRS §§ 514C-4 and 514C-6(b) upheld the purchase, and that the conversion surcharge was assessed in a "fair and equitable manner." On October 4, 2000, the court granted the Stillsons' motion for partial summary judgment, concluding that the Association did not satisfy the 75% approval requirement of HRS § 514C-6(a). On November 28, 2000, the court denied the Association's cross-motion for summary judgment. The court's November 29, 2000 findings of fact, conclusions of law, and order granting the Stillsons' motion for partial summary judgment stated, inter alia,
....
4. Fewer than 75% of the unit lessees actually signed the 1995 Written Consent.
5. The 1995 Written Consent was signed by unit lessees representing 66.9518% of the common interest.
....
CONCLUSIONS OF LAW
....
2. Section 514C-6(a) is unambiguous.
3. [Section 514C-6(a)] may be read as requiring the affirmative vote of seventy-five percent (75%) of the condominium unit lessees, as weighted to reflect the percentage common interest appurtenant to each such unit, without creating a result that is absurd or inconsistent with the purposes of the statute.
4. The Association failed to meet the 75% lessee approval requirement of Section 514-C(6)(a) in purchasing the leased fee interest.
5. The Association's conveyance of the fee interest appurtenant to certain condominium units to their respective owners after acquiring the fee interest did not validate the original purchase by "ratification."
6. The savings clauses found in H.R.S. §§ 514C-4 and 514C-6(b), to the extent either provision could be read as validating a purchase without 75% lessee approval, may not be read as allowing the Association to assess the costs of acquiring the leased fee interest. To read the "savings" clause more broadly would vitiate the requirement of 75% lessee approval.
7. While the Legislature may have intended Act 241 to be retroactive, application of the "savings" clause to permit assessment of the Stillsons for a share of fee conversion costs, under the circumstances of this case, would violate the Contracts Clause of the United States Constitution.
(Emphases added.) At the hearing on the motion, the court apparently accepted the Stillsons' method for calculating the votes of multiple-owner units. According to the Stillsons' method, in an apartment with two...
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