KEYSTONE PLAZA CONDOMINIUMS ASSOCIATION v. Eastep, 22732

• Citation: 676 NW 2d 842,2004 SD 28
• Decision Date: 03 March 2004
• Docket Number: No. 22732,22732
• Parties: KEYSTONE PLAZA CONDOMINIUMS ASSOCIATION, Plaintiff and Appellee, v. RON EASTEP, Defendant and Appellant.
• Court: Supreme Court of South Dakota

2004 SD 28

676 NW 2d 842

KEYSTONE PLAZA CONDOMINIUMS ASSOCIATION, Plaintiff and Appellee, v. RON EASTEP, Defendant and Appellant.

No. 22732

Supreme Court of South Dakota.

Considered On Briefs On November 17, 2003

Opinion Filed March 3, 2004

SCOTT A. ROETZEL of Johnson, Eiesland, Huffman & Clayborne, Rapid City, South Dakota, Attorneys for plaintiff and appellee.

KENNETH E. JASPER of Jasper Law Office, Rapid City, South Dakota, Attorney for defendant and appellant.

KONENKAMP, Justice.

[¶ 1.] Keystone Plaza Condominiums Association sued Ron Eastep, owner of a condominium unit controlled by the association. The complaint alleged that Eastep failed to open his business for 99 days between the months of May and September of 2001, in contravention of association bylaws. The association sought a judgment for liquidated damages. Eastep responded that the association did not have the authority to levy liquidated damages against him. His response was based in part on a previous decision in magistrate court concluding that the association's noncompliance section of its bylaws providing that a fine be levied for noncompliance with the rules of the association was void. Following arguments of counsel and consideration of briefs, the circuit court granted summary judgment for the association. Eastep appeals, and we reverse.

Background

[¶ 2.] Since 1990, Eastep has owned a unit in the Keystone Plaza Mall. Currently, he owns Unit No. 15, which he purchased in 1997. Keystone Plaza Condominiums was created by a master deed, in accordance with SDCL 43-15A-3 and 43-15A-4. The deed was recorded with the Pennington County Register of Deeds. Relevant here, the deed provided that unit owners must "comply with the provisions of this Deed, the Bylaws, and decisions and resolutions of the council of co-owners, or its representatives, as determined or amended from time to time. . . ." It further stated that "failure to comply with any such provisions or resolutions" would be "grounds for an action to recover sums due for damages or for injunctive relief." (Emphasis added.) In addition, the deed provided:

All present or future owners, tenants, future tenants, or any other person that might use the facilities of the project in any manner are subject to the provisions of this Deed, and the mere acquisition or rental of any of the units of the project or the mere act of occupancy of any of the units shall signify that the provisions of this Deed are accepted and ratified.

[¶ 3.] Along with recording the deed, Keystone filed the Bylaws of Keystone Plaza Condominiums Council of Co-Owners. Relevant portions of the amended bylaws provide:

Article III Section 3:

Annual fall meetings shall be held at a time convenient for the majority of the members of the Association. . . . There shall also be an annual spring meeting held at a time convenient for the majority of the members of the association. At such meeting there shall be approved the current year's budget and approval of the current year's assessments. The owners may also transact such other business of the association at such meetings as may properly come before them.

Article III Section 4:

It shall be the duty of the president to call a special meeting of the owners at any time the majority of owners shall determine it is necessary or in their best interest to hold a meeting. No business shall be transacted at a special meeting except as stated in the notice.

Article III Section 5:

It shall be the duty of the secretary to mail a notice of each annual or special meeting, stating the purpose thereof, as well as the time and place of the meeting, to each owner of record, at least five (5) but not more than ten (10) days prior to such meeting. The mailing of notice in the manner provided in this section shall be considered notice served. . . .

Article VII Section 6(G):

Months of normal operation for the Keystone Mall shall be Memorial Day through Labor Day. Owners or tenants may be open prior to and after these dates at their discretion. In an extreme emergency written notification and reasonable reasons for not opening must be made to the board.

Article IX Section 1:

These bylaws may be amended by the association in a duly constituted meeting for such purpose, and no amendment shall take effect unless approved by owners representing at least two-thirds (2/3) of all units in the project as shown in the master deed.

Article XI Section 2:

After written notice of a violation, the continuing failure to comply with any of the bylaws will result in a fine of not more than Fifty Dollars ($50.00) per day being levied against the owner of record by the board of directors for each day the violation continues. The board of directors shall have the responsibility of notifying the offending party and setting the absolute day of compliance, (not to be more than ten (10) days from date of notification). Should the offending party not remedy the non-compliance by the specified date, the board of directors shall appropriate the fine and may instruct the association treasurer to begin small claims proceedings or file a lien to force compliance and collect all fines and costs from the offending party. The daily fine may be increased above Fifty Dollars ($50.00), but to not more than One Hundred Dollars ($100.00) per day with the written consent of the owners of at least two-thirds (2/3) of the units. No meeting of members shall be required to assess said fine.

[¶ 4.] In a previous action, brought in September 2000, the association sued Eastep, alleging that he had failed to open his business for sixteen days during the months of June, July, and August of 2000, in contravention of Article VII Section 6(G) of its bylaws. Because of this noncompliance, the association reasoned that it could assess a "fine" of $100 per day under Article XI Section 2 against Eastep. The case was heard in magistrate court.

[¶ 5.] Not yet having received the magistrate's decision, Eastep sent a letter to the president of the association requesting that he be granted an exemption in 2001 from the opening requirements delineated in Article VII Section 6(G). The association's president responded to Estep's request in a letter dated June 10, 2001:

As you know, the by-laws are very clear that all stores in the Keystone Mall must be open Memorial Day through Labor [D]ay each year. At the fall meeting last season, the association approved the requirement of seven consecutive hours of operation daily.

Ron, be on notice that the association has approved a fine of $100.00 per day starting Memorial Day, May 28, 2001, and will continue for each day that you are not open through Labor Day, September 03, 2001.

(Emphasis added.) Meanwhile, the magistrate issued a decision to the parties from the earlier litigation. As a result of that opinion, both the association and Eastep submitted proposed findings of fact and conclusions of law. On June 29, 2001, the magistrate accepted Eastep's findings and conclusions, which incorporated the memorandum opinion. The opinion stated:

The court has reviewed the Amended Bylaws Article [XI] sections 1 and 2. Section 2 provides a fine of not more than a $100.00 per day to be levied against the owner of record for non-compliance with any of the by-laws. The section does not say that the fine is to be paid as a compensation for any damage suffered by the Keystone Plaza Condominiums. Certainly in the present case it might be difficult to ascertain an exact amount of damages. In such a case an agreement for payment of liquidated damages would be appropriate. However, in the present case the language of the by-laws seems to set out a penalty. There is no language that would lead one to believe that the fine was meant to be liquidated damages. At best the court cannot determine whether the by-laws provide for a penalty or liquidated damages. Because of this the court finds that Section 2 Article [XI] sets out a penalty and is thus void.

[¶ 6.] After this point, the record is unclear on what happened next. According to an affidavit submitted by one of the association's members, the association held its spring meeting on July 6, 2001.¹ The affiant asserted that Eastep received proper notice of the meeting. However, beyond the affidavit, nothing in the record shows that Eastep was so notified. The affiant further claimed that during that meeting, Article XI Section 2 was amended to clarify its import.² The document provides:

We, the undersigned, representing owners and voting members of the Keystone Plaza Condominium association do hereby adopt and ratify the following amendment to the Bylaws of Keystone Plaza Condominium Association, to-wit:

We hereby ratify and affirm that any and all provisions of the current Bylaws affecting the damages for units being closed in violation of the Bylaws, those provisions are amended to reflect that the voting members of the association acknowledge that such closures have a detrimental effect on all of the businesses of the mall as a whole. However, damages for such closures are difficult to ascertain with exact certainty and, therefore, the association agrees that the liquidated damages for such wrongful closures shall be equal to $100 per day for each day that the unit is not open. This amount shall be levied against the unit owner at such reasonable intervals as determined by the association and shall be due within ten (10) days following notice to the owner of the imposition of the liquidated damages. Failure to pay such amounts when due will subject the unit owner to litigation and other remedies as the association sees fit and the unit owner shall be responsible for all costs incurred in the prosecution of such actions, including reasonable attorneys' fees, together with reimbursement of the association at a rate of $35 per member, per hour for each hour spent by the members of the association in pursuing the action.

This amendment is intended to clarify the Bylaws and

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