Blood v. Edgar's, Inc.

• Decision Date: 28 April 1994
• Docket Number: Nos. 93-P-336,93-P-571,s. 93-P-336
• Citation: 632 N.E.2d 419,36 Mass.App.Ct. 402
• Court: Appeals Court of Massachusetts
• Parties: Roger BLOOD & others, trustees, v. EDGAR'S, INC.

Page 419

632 N.E.2d 419

36 Mass.App.Ct. 402

Roger BLOOD & others, trustees, v. EDGAR'S, INC.

Nos. 93-P-336, 93-P-571.

Appeals Court of Massachusetts Dukes County.

Argued Jan. 6, 1994.

Decided April 28, 1994.

Frances A. Miniter, Hartford, CT, for plaintiffs.

Russell Beck, Edgartown, for defendant.

Before BROWN, GILLERMAN and IRELAND, JJ.

IRELAND, Justice.

The plaintiffs, trustees of Katama Shores Condominium Trust, brought this action to recover unpaid common expense assessments owed by the defendant to an organization of unit owners of a condominium. G.L. c. 183A, §§ 6 & 10. Both parties appeal from the entry of summary judgment in the Superior Court. Mass.R.Civ.P. 56, 365 Mass. 825 (1974). On appeal, the defendant, found liable for the unpaid assessments, argues that it rightfully withheld payment of certain "illegal" common expense charges assessed by the plaintiffs. Although we decide that it is improper to challenge the lawfulness of a common expense assessment in a condominium by nonpayment, we also decide that in this case the assessment was, indeed, unlawful. The plaintiffs appeal the judge's denial of their motion for award of attorney's fees; we affirm the denial of that motion.

The facts. The material facts are not disputed. Katama Shores Condominium is a mixed use condominium (see Barclay v. DeVeau, 384 Mass. 676, 678, 429 N.E.2d 323 [1981] ) in which the defendant, Edgar's, Inc. (Edgar's), owns the sole commercial unit in an otherwise residential complex. Under the condominium master deed, the owner of the commercial unit was responsible for payment of 10.555685 percent of the total common expenses. ¹ In both 1990 and 1991, Edgar's refused to pay its portion of the assessment for common expenses on the ground that a part of each assessment was illegal. Specifically, Edgar's claimed that the plaintiffs, trustees of the Katama Shores Condominium Trust (trustees), illegally charged to Edgar's costs allocable to operating a de facto motel, a function that Edgar's claimed to be in contravention of the enabling act (G.L. c. 183A) as well as the master deed and the by-laws governing management of the condominium complex.

As a service to owners of residential units in the condominium, the trustees ran a rental operation of sorts, advertising the availability of condominium units for rent, booking openings, servicing, e.g., cleaning the units, and collecting rental charges for those residential owners who chose to participate in this "rental program." For those services the trustees charged those residential owners participating in the program a fee of thirty-five percent of the gross rental income earned on a unit rented through the trustees. The participating unit owners received the remaining sixty-five percent of the rental income attributed to their units, with interest at seven percent on any monies held by the trustees for their benefit.

In 1990, the thirty-five percent fee charged to the rental program participants was insufficient to cover the expenses of the rental program. The trustees rolled the deficit into the common expenses, to be paid by all unit owners in their designated proportions. Edgar's, a commercial enterprise, was obviously not eligible to participate in the rental program.

The common expense assessments. Edgar's defense to the trustees' action to collect the common expense assessments is simply that Edgar's is not required to pay illegal or unauthorized assessments. We conclude that a unit owner in a condominium may not challenge a common expense assessment by refusing to pay it.

In support of its position, Edgar's points to the enabling act, which provides: "The unit owner shall be personally liable for all sums lawfully assessed for his share of the common expenses" (emphasis supplied). G.L. c. 183A, § 6(b ), as inserted by St.1963, c. 493, § 1. Decisions interpreting that section have stressed that set-off and other self-help remedies are not available defenses to an action to collect lawfully assessed condominium common charges. Trustees of the Prince Condominium Trust v. Prosser, 412 Mass. 723, 724-726, 592 N.E.2d 1301 (1992). Baker v. Monga, 32 Mass.App.Ct. 450, 454, 590 N.E.2d 1162 (1992).

Condominiums are a creature of statute. G.L. c. 183A, § 1 et seq. "Our primary duty is 'to interpret a law so as to effectuate the intent of the Legislature in enacting it.' " Sterilite Corp. v. Continental Cas. Co., 397 Mass. 837, 839 n. 3, 494 N.E.2d 1008 (1986), quoting from International Org. of Masters v. Woods Hole, Martha's Vineyard & Nantucket S.S. Authy., 392 Mass. 811, 813, 467 N.E.2d 1331 (1984). "In determining the scope of the statute, we look not only at the Legislature's words, but also at 'the cause of [the statute's] enactment, the mischief or imperfection to be remedied and the main object to be accomplished.' " Manning v. Nobile, 411 Mass. 382, 387, 582 N.E.2d 942 (1991), quoting from Telesetsky v. Wight, 395 Mass. 868, 872, 482 N.E.2d 818 (1985).

In interpreting the condominium enabling act we acknowledge the legislative concern for prompt collection of common expense assessments. Failure by a large unit owner, such as Edgar's, to pay its common expense assessment would have a serious financial impact on the stability of a condominium association. Trustees of the Prince Condominium Trust v. Prosser, 412 Mass. at 726, 592 N.E.2d 1301. Baker v. Monga, 32 Mass.App.Ct. at 454 n. 8, 590 N.E.2d 1162. For that reason, unit owners may not assert a right of set-off against common expenses assessed in a lawful fashion. Trustees of the Prince Condominium Trust v. Prosser, supra, 412 Mass. at 725-726, 592 N.E.2d 1301. Baker v. Monga, supra, 32 Mass.App.Ct. at 453-454, 590 N.E.2d 1162. In view of the importance placed by the Legislature on prompt collection of common expenses, we conclude that in the context of the condominium act, absent a prior judicial determination of illegality, a unit owner must pay its share of the assessed common expenses. ² Self-help remedies, such as withholding condominium common expense assessments, are not available.

We add that a unit owner is not without remedy or recourse to challenge the propriety of common expense assessments. We suggest that aggrieved unit owners should timely pay--under protest--the common expense assessment. Thereafter, a judicial determination of the legality of the assessment, and suitable reimbursement, may be sought. See, e.g., Kaplan v. Boudreaux, 410 Mass. 435, 436, 573 N.E.2d 495 (1991); Commercial Wharf East Condominium Assn. v. Waterfront Parking Corp., 407 Mass. 123, 124, 552 N.E.2d 66 (1990). In this respect, the condominium unit owner stands in much the same position as an owner of real estate, who is bound to pay the tax assessed before challenging it. See G.L. c. 58A, § 6. If appropriate, the unit owner may also petition the court for equitable relief. See, e.g., Mass.R.Civ.P. 4.1(a), as amended, 365 Mass. 737 (1974); Mass.R.Civ.P. 65, 365 Mass. 832 (1974). But see Boston Teachers Union, Local 66 v. Boston, 382 Mass. 553, 565-566, 416 N.E.2d 1363 (1981).

Although "[d]ecisional law is generally applied retroactively to past events," Schrottman v. Barnicle, 386 Mass. 627, 631, 437 N.E.2d 205 (1982) (citing Tucker v. Badoian, 376 Mass. 907, 918, 384 N.E.2d 1195 [1978] [Kaplan, J., concurring] ), we conclude that our decision establishing that a condominium unit owner may not challenge a common expense assessment by refusing to pay it ought to apply prospectively only. In so deciding, we consider "(1) the extent to which the decision creates a novel and unforeshadowed rule; (2) the benefits of retroactive application in furthering the purpose of the new rule; and (3) the hardship or inequity likely to follow from retroactive application." Schrottman v. Barnicle, 386 Mass. at 631-632, 437 N.E.2d 205, citing McIntyre v. Associates Financial Servs. Co. of Mass., Inc., 367 Mass. 708, 712, 328 N.E.2d 492 (1975). See also Tamerlane Corp. v. Warwick Ins. Co., 412 Mass. 486, 490, 590 N.E.2d 191 (1992). In view of the significance placed on the legality of common expense assessments as a precursor to an action to collect, see G.L. c. 183A, § 6; Trustees of the Prince Condominium Trust v. Prosser, 412 Mass. at 724-726, 592 N.E.2d 1301, prior law is of questionable prognosticative value. See Harrison v. Massachusetts Society of Professors/Faculty Staff Union/MTA/NEA, 405 Mass. 56, 62 n. 7, 537 N.E.2d 1237 (1989). The compelling inequity of condominium unit owners being held liable for illegal or unauthorized common expense assessments solely because they have brought an action as a counterclaim to a collection action instead of as an independent action ³ outweighs the benefits of retroactive application. In such a case, it is preferable to carry out the reasonable expectations of the parties. See Tamerlane Corp. v. Warwick Ins. Co., 412 Mass. at 490, 590 N.E.2d 191.

Turning then to the merits of Edgar's dispute, we conclude that inclusion, as a common expense, of the deficit incurred by the trustees in operating the rental program was not authorized by the enabling act, the master deed, or the by-laws governing this condominium association. The powers of the trustees, enumerated in the association by-laws, are specifically subject to the enabling act and the master deed. ⁴ Thus, the trustees may appropriately assess common expenses only for those areas or facilities designated either specifically or by obvious inference in the enabling act and/or in the master deed as common. G.L. c. 183A, §§ 1, 10. See also Tosney v. Chelmsford Village Condominium Assn., 397 Mass. 683, 686- 687, 493 N.E.2d 488 (1986) ("Matters not specifically addressed in the statute should be directed to the parties to be worked out"). Generally, common expenses are those incurred in the "administration, maintenance, repair or replacement of the common areas and facilities...." G.L. c. 183A, § 1, as inserted by St.1963, c....