Granville Condo. Homeowners Ass'n, Non-Profit Corp. v. Kuehner

• Decision Date: 05 November 2013
• Docket Number: No. 43157–2–II.,43157–2–II.
• Citation: 312 P.3d 702,177 Wash.App. 543
• Parties: GRANVILLE CONDOMINIUM HOMEOWNERS ASSOCIATION, a Washington non-profit corporation, Appellant and Cross–Respondent, v. Michael K. KUEHNER and Brenda W. Kuehner, husband and wife, Respondents and Cross–Appellants.
• Court: Washington Court of Appeals

177 Wash.App. 543

312 P.3d 702

GRANVILLE CONDOMINIUM HOMEOWNERS ASSOCIATION, a Washington non-profit corporation, Appellant and Cross–Respondent,

v.Michael K. KUEHNER and Brenda W. Kuehner, husband and wife, Respondents and Cross–Appellants.

No. 43157–2–II.

Court of Appeals of Washington, Division 2.

Nov. 5, 2013.

Steve C. Franklin, Krilich La Porte, West & Lockner P.S., Tacoma, WA, for Appellant/Cross–Respondent.

David Clement Smith, Law Offices of David Smith PLLC, Tacoma, WA, for Respondent/Cross–Appellant.

WORSWICK, C.J.

¶ 1 Granville Condominium Homeowners Association (HOA) appeals the superior court's summary judgment dismissal of their action for unpaid monthly operating and maintenance assessments against Michael and Brenda Kuehner, who lived in a unit rent free in satisfaction of a debt. The Kuehners cross appeal the superior court's denial of their request for attorney fees.

¶ 2 The HOA argues that the superior court erred in granting summary judgment to the Kuehners because (1) under the terms of the “Granville Condominium Declaration” (the Declaration), the Kuehners should be held responsible for the amount of unpaid assessments accrued during their occupancy of Casey and Gwen Ingels' unit; (2) under the Washington Condominium Act, ch. 64.34 RCW, the Kuehners should be held jointly and severally liable with the Ingels for all unpaid assessments; (3) the Kuehners should be required to pay the unpaid assessments under a theory of quantum meruit; and (4) under the terms of the Declaration, the HOA should be awarded reasonable attorney fees for having to seek judicial enforcement of the terms of the Declaration. The Kuehners argue that the superior court should have awarded them attorney fees because the HOA's case presented no fairly debatable issues and was therefore frivolous.

¶ 3 Because neither the Declaration nor the Washington Condominium Act supports the HOA's claims, we affirm the superior court's summary dismissal of their case. In addition, because the issue presented by this case—whether a tenant-at-will may be held liable for a condominium owner's delinquent common operating and maintenance expense assessments—is one of first impression in Washington, we hold that the superior court did not act in a manifestly unreasonable manner in denying attorney fees to either party; therefore, we affirm the superior court's denial of attorney fees to both parties.

FACTS

¶ 4 The Kuehners lent the Ingels over $100,000 for business projects. When the Ingels were unable to timely repay the loan, they' “came to an arrangement” with the Kuehners: The Ingels would satisfy their debt by allowing the Kuehners to live in the Ingels' condominium unit rent free. Clerk's Papers (CP) at 98. The parties did not record the terms of this arrangement or execute a lease agreement. However, it is undisputed that the Kuehners did not pay the Ingels (or the HOA) to live in the condominium.¹

¶ 5 At the time the parties made this arrangement, the HOA already had recorded a lien under RCW 64.34.364² and the terms of the Declaration ³ against the Ingels' unit for $3,555.22 in unpaid assessments related to condominium common operating expenses, such as utilities. The record does not reflect that the Kuehners knew of the lien when they agreed to the arrangement with the Ingels.

¶ 6 In October 2010, the Kuehners moved into the Ingels' condominium. Despite the lien on the unit and the lack of a written lease agreement, HOA member Beaver Brinkman provided the Kuehners with all necessary keys and a garage door opener for the Ingels' unit. Brinkman did not discuss the Ingels' unpaid HOA dues at this time or indicate that the Kuehners would be responsible for such dues during the term of their tenancy.

¶ 7 A few months after they moved in, Brinkman approached the Kuehners about the Ingels' unpaid HOA assessments. He requested that the Kuehners “make the payments because a number of owners had not been paying the association dues [and] that utilities and other maintenance items would be shut off if the assessments weren't paid.” CP at 99. The Kuehners made partial payments on a voluntary basis “based upon [Brinkman's] representations ... regarding the potential to have utilities, such as garbage and elevator services shut off on the premises.” CP at 99. The HOA did not record a lien against the Ingels' unit, the Kuehners, or the Ingels for the remaining unpaid assessments.

¶ 8 In November 2011, the HOA filed a complaint for money due against the Kuehners in superior court. The HOA did not include the Ingels as defendants. The HOA admitted that the Ingels own the condominium, that the Kuehners were not paying rent to occupy the unit, and that the Ingels were delinquent in their assessment payments in the amount of $7,780.08 at the time the Kuehners began occupying the Ingels' condominium. The HOA argued that “[e]ven though the defendants Kuehner are not owners of the unit and not technically members of the [HOA], they have been utilizing and consuming the utilities and services made available to them as occupants” and, as a result, “are indebted to the [HOA] in the amount of $5,671.80 for unpaid assessments ... during the period of their occupancy.” CP at 3–4.

¶ 9 The HOA requested a judgment for the $5,671.80 the Kuehners allegedly owed, in addition to a “judgment in the amount of $7,780.08, plus interest owed by owners [the Ingels] for the period of time prior to defendants' occupancy of the premises, provided that said amount does not exceed the amount of reasonable rent owed by the defendants to said owners.” CP at 5. In their answer to the complaint, the Kuehners maintained that the HOA “has sued the incorrect party.” CP at 8.

¶ 10 On December 20, the HOA filed a motion for partial summary judgment. ⁴ The HOA argued that the Declaration “is a recorded document and therefore constitutes notice to the public, including defendants, of the obligation to pay the monthly assessments to the homeowners association.” CP at 13. The HOA also argued that under RCW 64.34.364(12), the Kuehners and Ingels should be held jointly liable for the unpaid assessments.⁵ Finally, the HOA argued that on the basis of quantum meruit, the Kuehners should be liable for the outstanding assessments accrued during their occupancy period.⁶

¶ 11 Before the hearing on the HOA's summary judgment motion, the Kuehners filed a motion to dismiss under CR 12(b)(6).⁷ The Kuehners argued that while the Declaration is a recorded real property instrument, it does not establish contractual privity between the HOA and the Kuehners and, accordingly, the HOA should be seeking the outstanding assessments from the Ingels. In addition, the Kuehners argued that the only appropriate remedy an HOA may pursue against a tenant for outstanding assessments is governed by RCW 64.34.364(10), which provides,

From the time of commencement of an action by the association to foreclose a lien for nonpayment of delinquent assessments against a unit that is not occupied by the owner thereof, the association shall be entitled to the appointment of a receiver to collect from the lessee thereof the rent for the unit as and when due. If the rental is not paid, the receiver may obtain possession of the unit, refurbish it for rental up to a reasonable standard for rental units in this type of condominium, rent the unit or permit its rental to others, and apply the rents first to the cost of the receivership and attorneys' fees thereof, then to the cost of refurbishing the unit, then to applicable charges, then to costs, fees, and charges of the foreclosure action, and then to the payment of the delinquent assessments. Only a receiver may take possession and collect rents under this subsection, and a receiver shall not be appointed less than ninety days after the delinquency. The exercise by the association of the foregoing rights shall not affect the priority of preexisting liens on the unit.

¶ 12 On February 3, 2012, the superior court heard argument on both motions. After explaining that it had looked at the statutes in question, the Declaration, and the parties' motions and responses, the court ruled that the assessment “obligation is that of the owner, not the tenant.” Report of Proceedings (RP) (Feb. 3, 2012) at 16. The court then granted the Kuehners' motion ⁸ but did not award attorney fees because it did not find that the HOA's suit was frivolous or advanced without reasonable cause.

¶ 13 The HOA now appeals, arguing that the superior court erred in failing to grant its motion for partial summary judgment and in granting the Kuehners' dismissal motion. The Kuehners cross appeal the superior court's denial of attorney fees.

ANALYSIS

I. Standard of Review

¶ 14 As a preliminary matter, while the superior court's order of dismissal states that it granted the Kuehners' motion to dismiss “based upon CR 12(b)(6),” it is clear from the record that the court considered matters beyond the face of the complaint and outside the pleadings, including the Declaration. CP at 204. See, e.g., RP (Feb. 3, 2012) at 14 (“I have also looked very closely at the declaration, in particular, the pertinent sections that apply.”). Because “[a] motion to dismiss for failure to state a claim is treated as a motion for summary judgment when matters outside the pleading are presented to and not excluded by the court,” we treat the Kuehners' CR 12(b)(6) as a motion for summary judgment. Sea–Pac Co. v. United Food & Commercial Workers Local Union 44, 103 Wash.2d 800, 802, 699 P.2d 217 (1985).

¶ 15 We review a superior court's summary judgment order de novo. Torgerson v. One Lincoln Tower, LLC, 166 Wash.2d 510, 517, 210 P.3d 318 (2009). Summary judgment is appropriate only if the pleadings, affidavits, depositions, and admissions on file demonstrate the absence of any genuine issues of material fact, and the moving party is entitled to judgment as a matter of law. CR 56(c). A material fact is one on which the...