Lakeside Vill. Homeowners Ass'n, Inc. v. Belanger

• Decision Date: 14 June 2017
• Docket Number: No. 08-15-00214-CV,08-15-00214-CV
• Citation: 545 S.W.3d 15
• Parties: LAKESIDE VILLAGE HOMEOWNERS ASSOCIATION, INC., Principal Management Group of North Texas, and Principal Management Group, Inc., Appellants, v. Alfred "Corky" BELANGER, and Michael Drennan, Appellees.
• Court: Texas Court of Appeals

545 S.W.3d 15

LAKESIDE VILLAGE HOMEOWNERS ASSOCIATION, INC., Principal Management Group of North Texas, and Principal Management Group, Inc., Appellants,

v.Alfred "Corky" BELANGER, and Michael Drennan, Appellees.

No. 08-15-00214-CV

Court of Appeals of Texas, El Paso.

June 14, 2017

Hon. Melissa J. Papaleo, Dawn Woelfel Hansen, Dallas, for Appellants.

Hon. Cynthia Kent Maragoudakis, Fort Worth, for Appellees.

Before McClure, C.J., Rodriguez, and Hughes, JJ.

OPINION

ANN CRAWFORD McCLURE, Chief Justice

This appeal arises from two townhome duplex owners, Alfred "Corky" Belanger and Michael Drennan, who brought breach of contract, trespass, negligence, and diversion of water claims against their homeowners association and its management company.

FACTUAL AND PROCEDURAL BACKGROUND

Lakeside Village

Lakeside Village is a gated townhome community comprised of 498 units by a lake in Rockwall County, Texas. It is governed by a homeowners association, which we refer to as Lakeside. Lakeside’s Board of Directors consists of nine members and four officers. The board members live in the community and are not paid, but rather, volunteer their time. Property that is not privately owned by the residential owners is owned by and subject to the control of Lakeside and is referred to as the "common area." For example, Lakeside is responsible for the 13,500 square feet of streets, 7,800 square feet of retaining walls, street lights, tennis courts, the pool, the gym, and the golf course. Lakeside has owned and controlled the common areas at all relevant times concerning this lawsuit.

The Declaration of Covenants, Articles of Incorporation, and By-Laws

The documents governing the duties and responsibilities of Lakeside are set forth in the applicable Declaration of Covenants, Conditions and Restrictions (as amended)(the Declaration), Articles of Incorporation (as amended)(the Articles), and the Amended and Restated By-Laws (the By-Laws).

The Declaration was executed on September 27, 1971, and subsequently amended on October 3, 1974, and on July 1, 1977. Pursuant to the Declaration, "common area" means "all real property owned by [Lakeside] for the common use and enjoyment of the owners," and "owner" is defined as "the record owner, whether one or more persons or entities, of a fee simple title to any Lot which is part of the Properties, including contract sellers, but excluding those having such interest merely as security for the performance of an obligation." Article IV, entitled "Covenant for Maintenance Assessments" provides:

Section 1. Creation of the Lien and Personal Obligation of Assessments. [Lakeside Village], for each Lot owned within the Properties, hereby covenants, and each Owner of any Lot by acceptance of a deed therefor, whether or not it shall be so expressed in such deed, is deemed to covenant and agree to pay to the Association: (1) annual assessments or charges and (2) special assessments for capital improvements within the Common Areas, such assessments to be established and collected as hereinafter provided; ...

Section 2. Purpose of Assessments. The assessments levied by the Association shall be used exclusively to promote the recreation, health, safety, and welfare of the residents in the Properties, for the improvement and maintenance of the Common Area, and of the homes situated upon the Properties.

The Articles of Incorporation provide:

In order to provide for the health, safety and welfare of the owners of the lots within the above-described property, ... the following specific purposes are adopted:

To exercise all of the powers and privileges to perform all of the duties and obligations of the corporation as set forth in that certain Declaration of Covenants, Conditions and Restrictions ...

To ... own, hold, improve, build upon, operate, maintain, ... real property....

To erect, construct, maintain, improve, rebuild, enlarge, alter, manage, control, furnish, decorate, and fit up any and all kinds of buildings and structures of every description and which can lawfully be done under the laws of the State of Texas.

Finally, the By-Laws give the Board of Directors the power to take all legal acts, including making reasonable rules and regulations pertaining to all common areas. The By-Laws authorize the Board to regulate the use, maintenance, repair, replacement, modification, and appearance of the common areas and to make additional improvements in the common area.

Principal Management Group of North Texas/Principal Management Group, Inc.

Principal Management Group, Inc. (Principal) is Lakeside’s property manager for the Lakeside Village community. Lakeside contractually engaged Principal to be its managing agent in January 2005. A Management Agreement governed the parties' relationship. According to Terry Tolleson, Lakeside’s president in 2011, Lakeside did not delegate any decisions regarding capital improvements to Principal. James Heck, Principal’s Director of Association Services, testified that Principal is responsible for maintaining Lakeside’s common areas. Specifically, the Management Agreement provides that subject to availability of funds, Principal will maintain Lakeside’s common elements in accordance with reasonable standards acceptable to Lakeside’s Board. Principal was authorized, under the general supervision of Lakeside’s Board, to: (1) maintain office hours on site at Lakeside Village; (2) spend approximately one hour, during office hours, inspecting Lakeside in addition to the above mentioned office hours; (3) establish liaison with contractors for corrective work on common elements in accordance with Lakeside’s competitive bid requirements; (4) periodically inventory all of Lakeside’s assets, recommend purchase of same where necessary, and provide Lakeside with a copy of each inventory from time to time; (5) ensure that its managers are available by telephone and email during business hours and after hours for emergencies; (6) maintain business-like relations with Owners and their tenants, whose service requests, questions and complaints shall be received, considered, recorded in a systematic fashion and responded to promptly and efficiently; (7) requests or complaints which are deemed extraordinary by Principal shall after thorough investigation, be reported to Lakeside’s Board with appropriate recommendations; (8) recruit, hire, train, supervise and discharge all Project personnel, except for the maintenance staff employed by the Association; (9) supervise and direct Lakeside’s maintenance staff in accordance with a Project plan to be prepared by Principal on a weekly basis and submitted to the Lakeside’s president for approval; (10) Lakeside’s maintenance supervisor shall have a dual reporting function to the Board’s president and Principal’s Portfolio Manager, except however, Principal has no authority to discharge Lakeside’s supervisor or other employees; (11) conduct periodic physical inspections of the property; (12) subject to availability of funds, maintain common elements of Project in accordance with reasonable standards acceptable to the Board; (13) negotiate and make contracts for services, including utilities, trash remove, law maintenance, pest control and such other contract services as may be necessary and advisable, subject to Board approval and competitive bid procedures. Additionally, Principal was authorized to enforce Lakeside’s covenants and provide fiscal and accounting services, which include preparing an annual budget for the next fiscal year. Finally, Principal was authorized to prepare any special reports in accordance with Lakeside’s requests and maintain records and collect any fees and assessments.

Subject Townhouse Duplex

The properties involved in this lawsuit, 3805 Mediterranean (Drennan’s property) and 3809 Mediterranean (Belanger’s property)(collectively, the duplex property), are connected by an interior wall and a foundation wall, thereby making the units a duplex. East of the properties is the common area, except for a small area immediately adjacent to the party wall. When both properties were purchased, railroad tie retaining walls were located on the common areas to the north, east, and south of the duplex property.

Rockwall County’s soil consists primarily of sandy clay. This is significant to a structure’s foundation, as sandy clay is highly receptive to moisture and can cause the foundation of a house to swell and contract. The duplex property at issue was built in the early 1980s, around the same time that many of the railroad tie retaining walls were built. The duplex was built on a single foundation with a cripple wall down the middle. A cripple wall, sometimes referred to as an extension wall, is a mechanism used to extend the top grade beam to level two properties, so that the duplex property would not look like a split level dwelling from the outside. Instead of resting on top of the concrete foundation, the main floor of the duplex property relies upon the cripple wall for support, which is made out of several two-by-four boards. Due to the change in elevation, the crawl space underneath a portion of the duplex property is so large that one can walk directly into it. Upon entering the crawl space and looking to the right, one observes a slope continuing down to the south and to the west. As one continues in the southwest direction of the crawl space, the distance between the ground and the main floor increases.

Testimony at trial indicated that there was a drainage pipe that was supposed to be connected to an inlet drain on the outside of the duplex property, so that it would collect water from the retaining wall behind the duplex property and direct it away from the property. Instead, the pipe carried water from the retaining wall to a catch basin located in the crawlspace underneath the foundation of the duplex. Belanger’s property also had a gutter system with downspouts that Donald Scott, chairman of Lakeside’s Capital Expenditure Committee, believed...