First Int'l Bank & Trust v. Peterson

• Decision Date: 11 May 2011
• Docket Number: No. 20100280.,20100280.
• Citation: 797 N.W.2d 316,2011 ND 87
• Court: North Dakota Supreme Court
• Parties: FIRST INTERNATIONAL BANK & TRUST, PlaintiffandVillage Homes at Harwood Groves, LLC a/k/a Village Homes at Harwood Groves Condominium Association, Danovic Properties, LLC, Marland Hoff, Virginia Hoff, Adams Development Corporation, Duane Rogne, Daniel Shelstad, Gary Cornforth Revocable Living Trust, Gerald Hendricks, Jane Hendricks, Rogne Family, LLP, Ralph Peterson, Gwen Peterson, Robert Norwood, Richard Ripplinger, Jean Ripplinger, First International Bank & Trust, Arlan Anderson, Abner Selvig, John Volkerding and Molly Volkerding, David Halvorson, Valerie Halvorson, West Park II Investments, LLC and Ramsey National Bank & Trust as Trustee of the Daniel E. Shelstad IRA, Intervener Plaintiffs and Appelleesv.D. Duane PETERSON, MID AM Group, LLC, a North Dakota Limited Liability Company, and MID AM Group Realty, Defendants and AppellantsandAuto–Owners Insurance Co., Defendant.

797 N.W.2d 316

2011 ND 87

FIRST INTERNATIONAL BANK & TRUST, PlaintiffandVillage Homes at Harwood Groves, LLC a/k/a Village Homes at Harwood Groves Condominium Association, Danovic Properties, LLC, Marland Hoff, Virginia Hoff, Adams Development Corporation, Duane Rogne, Daniel Shelstad, Gary Cornforth Revocable Living Trust, Gerald Hendricks, Jane Hendricks, Rogne Family, LLP, Ralph Peterson, Gwen Peterson, Robert Norwood, Richard Ripplinger, Jean Ripplinger, First International Bank & Trust, Arlan Anderson, Abner Selvig, John Volkerding and Molly Volkerding, David Halvorson, Valerie Halvorson, West Park II Investments, LLC and Ramsey National Bank & Trust as Trustee of the Daniel E. Shelstad IRA, Intervener Plaintiffs and Appellees

v.D. Duane PETERSON, MID AM Group, LLC, a North Dakota Limited Liability Company, and MID AM Group Realty, Defendants and AppellantsandAuto–Owners Insurance Co., Defendant.

No. 20100280.

Supreme Court of North Dakota.

May 11, 2011.

Stephannie Nicole Stiel, Fargo, N.D., for intervenor plaintiffs and appellees.Paul A. Sortland, Minneapolis, MN, for defendants and appellants.

CROTHERS, Justice.

[¶ 1] D. Duane Peterson, Mid Am Group, LLC, and Mid Am Group Realty (collectively “Mid Am”) appeal from a summary judgment declaring that Village Homes at Harwood Groves, LLC, also known as Village Homes at Harwood Groves Condominium Association (“Association”), is entitled to $215,503.22 in insurance proceeds. We affirm, concluding the Association has standing and the district court did not err in ruling the Association is entitled to the insurance proceeds.

I

[¶ 2] Mid Am Group, LLC, is owned by D. Duane Peterson and did business under the name Mid Am Group Realty. Mid Am developed and built the Village Homes at Harwood Groves Condominiums (“Village Homes”) in Fargo. Village Homes consists of fifty condominium units in one building. Mid Am obtained financing to build and develop the condominiums through First International Bank & Trust. On May 24, 2005, Mid Am recorded the Declaration, Bylaws, and Covenants and Restrictions (“condominium documents”) for Village Homes with the Cass County Recorders Office. The Village Homes at Harwood Groves Condominium Association was initially an unincorporated condominium association, which was formed when Mid Am recorded the condominium documents, and was the predecessor to the present Association. Mid Am did not create a board of managers for the condominium association. Mid Am obtained insurance for Village Homes through Auto–Owners Insurance Company. Mid Am and Mid Am Group Realty were listed as the insured parties.

[¶ 3] On September 12, 2007, a hail storm occurred. Mid Am submitted a proof of loss with Auto–Owners and made a claim for damage to Village Homes' roof under the insurance policy. Auto–Owners adjusted the claim in the amount of $215,503.22. At the time of the hail storm, ten of the fifty condominium units had been sold, and Mid Am owned the remaining units.

[¶ 4] On October 18, 2007, First International initiated foreclosure proceedings on the forty condominium units Mid Am owned, which were mortgaged and secured Mid Am's debt. On February 28, 2008, judgment was entered in favor of First International. A foreclosure sale was held in April 2008, and First International purchased the remaining forty condominium units for the full amount of Mid Am's indebtedness and costs. First International later sold the forty units to Adams Development Corporation, and five of the units were later sold or transferred to other purchasers. In September 2009, the condominium unit owners held their first annual meeting and elected a board of managers for the condominium association. In October 2009, Village Homes at Harwood Groves, LLC was established and is the successor to the unincorporated condominium association formed under the condominium documents.

[¶ 5] On November 20, 2008, Auto–Owners issued a settlement check for the claim from the hail storm made payable to Mid Am, Mid Am Group Realty, and First International. In March 2009, First International brought an action against Mid Am and Auto–Owners, seeking a declaration that the insurance proceeds be paid to First International and that Mid Am was not entitled to the proceeds. First International argued it was entitled to the proceeds under the terms of Mid Am's mortgage and as an additional insured. Mid Am denied First International's claims and sought possession of the proceeds. Auto–Owners agreed to pay the insurance proceeds to the party the court determined was the proper party. First International and Mid Am both moved for summary judgment, and the district court granted Mid Am's motion. The court ruled First International was not entitled to the insurance proceeds as a “loss payee” or under the terms of the mortgage, all of the interested parties were not named in the action, and interested parties would have forty-five days to join the action and amend the pleadings. The court also ordered Auto–Owners to pay the insurance proceeds into the court. Auto–Owners was dismissed from the action after paying the court the insurance proceeds.

[¶ 6] The ten unit owners who owned at the time of the hail storm, the current unit owners and the Association (collectively “Intervener Plaintiffs”) moved to intervene. The district court granted their motion. In October 2009, Mid Am's attorney filed a Notice of Attorney Lien. The Intervener Plaintiffs filed an objection to the lien. The Intervener Plaintiffs and Mid Am both moved for summary judgment. The court granted the Intervener Plaintiffs' motion, denied Mid Am's motion and declared the Association was entitled to the insurance proceeds. The court ruled the Association and unit owners had standing to enforce the Declaration and Bylaws. The court ruled Mid Am was the de facto board of managers, was required to purchase insurance and had a fiduciary duty to act in good faith and in furtherance of the unit owners' legitimate interests. The court further held the unit owners and the Association were the intended beneficiaries, the unit owners had an expectation under the condominium documents that the insurance proceeds would be applied to repair the roof and the unit owners had a right to rely on the condominium documents. The court ruled Mid Am would be unjustly enriched if it was allowed to keep any portion of the insurance proceeds. The court also ruled the attorney lien was without effect and is released because it does not meet the statutory requirements.

II

[¶ 7] The standard for summary judgment is well-established:

“ ‘Summary judgment is a procedural device for the prompt resolution of a controversy on the merits without a trial if there are no genuine issues of material fact or inferences that can reasonably be drawn from undisputed facts, or if the only issues to be resolved are questions of law. A party moving for summary judgment has the burden of showing there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. In determining whether summary judgment was appropriately granted, we must view the evidence in the light most favorable to the party opposing the motion, and that party will be given the benefit of all favorable inferences which can reasonably be drawn from the record. On appeal, this Court decides whether the information available to the district court precluded the existence of a genuine issue of material fact and entitled the moving party to judgment as a matter of law. Whether the district court properly granted summary judgment is a question of law which we review de novo on the entire record.’ ”

Lucas v. Riverside Park Condo. Unit Owners Ass'n, 2009 ND 217, ¶ 16, 776 N.W.2d 801 (quoting Barbie v. Minko Constr., Inc., 2009 ND 99, ¶ 5, 766 N.W.2d 458).

III

[¶ 8] Mid Am argues the district court erred in allowing the Association to intervene and in deciding the Association was entitled to the insurance proceeds because it lacks standing. Citing Jablonsky v. Klemm, 377 N.W.2d 560 (N.D.1985), Mid Am contends the Association does not have standing and cannot sue on the unit owners behalf because it does not have an ownership interest in the common elements.

[¶ 9] “Standing is a question of law, which we review de novo.” Hagerott v. Morton Cnty. Bd. of Comm'rs, 2010 ND 32, ¶ 9, 778 N.W.2d 813. Courts do not render advisory opinions and decide purely abstract questions; therefore plaintiffs must demonstrate they have standing by alleging “such a personal stake in the outcome of a controversy to justify a court's exercise of remedial powers on [the plaintiff's] behalf.” Ackre v. Chapman & Chapman, P.C., 2010 ND 167, ¶ 11, 788 N.W.2d 344 (quoting Kjolsrud v. MKB Management Corp., 2003 ND 144, ¶ 13, 669 N.W.2d 82). To have standing plaintiffs must show they have “suffer[ed] some threatened or actual injury resulting from the putatively illegal action,” and the “harm must not be a generalized grievance shared by all or a large class.” Nodak Mut. Ins. Co. v. Ward Cnty. Farm Bureau, 2004 ND 60, ¶ 11, 676 N.W.2d 752.

[¶ 10] In Jablonsky, 377 N.W.2d at 569, this Court held a condominium association was not a real party in interest in an action against a developer to recover damages for a defective retaining wall because the association did not have an ownership interest in the common elements involved in the lawsuit and because N.D.C.C. ch. 47–04.1 does not specifically authorize a condominium association to bring a suit on behalf of unit owners. However, this case is different from Jablonsky because it is not an action for damages. This is a declaratory action to determine who is entitled to the insurance proceeds.

[¶ 11] An association may have “associational standing” to bring a suit on behalf of its members, even if the association has not suffered an injury to itself, but generally only when the association is seeking declaratory, injunctive, or other prospective relief....