Miller v. Rocking Ranch No. 3 Prop. Owners' Ass'n, Inc.
| Docket Number | Docket No. 49371 |
| Decision Date | 12 January 2024 |
| Citation | 541 P.3d 1279 |
| Parties | Glen MILLER and Cynthia Anderson, TRUSTEES OF the GLEN MILLER AND CYNTHIA ANDERSON REVOCABLE LIVING TRUST, Plaintiffs-Counterdefendants-Appellants-Cross Respondents, v. ROCKING RANCH NO. 3 PROPERTY OWNERS’ ASSOCIATION, INC., an Idaho nonprofit corporation, Defendant-Counterclaimant-Respondent-Cross Appellant. |
| Court | Idaho Supreme Court |
Appeal from the District Court of the Fifth Judicial District of the State of Idaho, Blaine County. Ned C. Williamson, District Judge.
The decision of the district court is affirmed in part and vacated and remanded in part.
Givens Pursley LLP, Boise, for Plaintiffs-Counterdefendants-Appellants-Cross Respondents, Glen Miller and Cynthia Anderson. Morgan D. Goodin argued.
Lawson Laski Clerk PLLC, Ketchum, for Defendant-Counterclaimant-Respondent-Cross Appellant, Rocking Ranch No. 3 Property Owners’ Association, Inc. Edward A. Lawson argued.
This appeal arises from a property dispute in Ketchum, Idaho. Glen Miller and Cynthia Anderson ("Miller and Anderson") filed a lawsuit against the Rocking Ranch No. 3 Property Owners’ Association, Inc. ("the Association"), after the Association prevented Miller and Anderson from building a home on a lot they purchased within the subdivision. Miller and Anderson asserted, among other things, that the Association’s decision to deny their application to construct a home and provisions of the Association’s Covenants, Conditions and Restrictions ("CC&Rs") and Design Rules they relied on were and are unlawful. The Association asserted several counterclaims against Miller and Anderson to recover unpaid HOA assessments, the bulk of which were for legal fees the Association incurred as a result of this litigation. The district court ultimately granted summary judgment to the Association on Miller and Anderson’s claims and dismissed the Association’s counterclaims. Relying on Farm Credit Bank of Spokane v. Wissel, 122 Idaho 565, 836 P.2d 511 (1992), the district court granted the Association’s subsequent request for attorney fees based on its conclusion the CC&Rs required that result, even though the district court determined neither party prevailed. Both parties timely appealed. For the reasons set forth below, we affirm the district court’s dismissal of the Association’s counterclaims and vacate and remand the district court’s award of attorney fees to the Association for further proceedings.
While the facts of this case reflect acrimony between the parties, the facts are largely undisputed. Rocking Ranch No. 3 ("Rocking Ranch") is a small subdivision in Ketchum, Idaho, that is divided into four residential lots. Each of the four lots is governed by the CC&Rs. Rocking Ranch is managed by the Association’s Board ("Board"), which carries out its duties and powers as set out in the CC&Rs. Under the CC&Rs, a Design Review Committee ("DRC") has "the sole authority to determine the proper use, appearance, design and aesthetic qualify [sic] of any proposed [i]mprovement." The CC&Rs also establish the ability of the Association to amend the CC&Rs "by an instrument in writing signed and acknowledged by the president and secretary of the Association certifying that such amendment has been approved by the vote or written consent of at least three-fourths (¾) of the Owners[.]"
Miller and Anderson, as Trustees of the Glen Miller and Cynthia Anderson Revocable Living Trust, purchased Lot 3 in the Rocking Ranch subdivision, which was subject to the recorded CC&Rs. Miller and Anderson wanted to build a prefabricated, modular home with a "modern mountain" design. In accordance with the rules established by the DRC, Miller and Anderson prepared and submitted a preliminary application of their proposed home construction to the DRC for review in September 2017.
Even before Miller and Anderson submitted their preliminary application, members of the DRC and the Board exchanged communications among themselves indicating their aversion to the proposed design. Members of the DRC and the Board expressed comments such as "chances don’t look good even at the preliminary review stage[,]" and, "I just do not understand how Cindi [Anderson] either did not read our CC & Rs or she disregarded them completely thinking she could build her Method Modular plan regardless." After Miller and Anderson submitted their preliminary application, the Association’s secretary emailed an architect stating, "[w]e are all hoping that Cindi [Anderson] and Glen [Miller] will not be able to move forward with any of it and we hope even more that they find another piece of property somewhere more suitable for the Method Home."
Despite the apparent opposition from the Board to the preliminary plans for the modular concept home, the CC&Rs contained no rules limiting the methods of construction for the homes in Rocking Ranch. Nevertheless, the DRC denied the preliminary application, concluding that the designs submitted by Miller and Anderson were unsuitable pursuant to the DRC requirements. Miller and Anderson revised their plans and resubmitted their application, which purportedly fully complied with the DRC requirements. However, the DRC again denied the application explaining
In January 2018, after the DRC had denied the preliminary application, the Board proposed an amendment to the CC&Rs that included both a section related to prohibiting prefabricated homes and a section related to restricting the use of the properties within Rocking Ranch to certain persons ("Proposed Second Amendment"). If approved, the prefabrication provision would have limited the DRC to "have no authority to approve buildings or grant variances for buildings that are to be constructed offsite in whole or in part in modules that are then transported to the site for final assembly." Additionally, if approved, the residential use provision of the Proposed Second Amendment would require that: Coincidentally, Miller and Anderson are unmarried.
Unable to construct their desired residence within the Rocking Ranch No. 3 Subdivision and concerned with the adoption of the Proposed Second Amendment, Miller and Anderson sued the Association in January 2018, seeking three remedies: (1) a declaratory judgment that the actions of the DRC as well as the provisions of the CC&Rs that it relied upon in denying Miller and Anderson’s application were unlawful; (2) a declaratory judgment that the Proposed Second Amendment to the CC&Rs was unlawful; and (3) injunctive relief prohibiting the Association from adopting the Proposed Second Amendment.
The district court eventually dismissed Miller and Anderson’s Counts 2 and 3, concluding that they were not ripe for adjudication. Soon after, the district court also granted summary judgment to the Association on Count 1. The district court then allowed Miller and Anderson to amend their complaint to add two more claims: Count 4 for breach of the implied covenant of good faith and fair dealing; and Count 5 for breach of contract.
In its answer to the amended complaint, the Association included three counterclaims against Miller and Anderson to recover unpaid HOA assessments. The Association is authorized by the CC&Rs to levy assessments on its members to cover its expenses. However, during this litigation, the Association included in its assessments the attorney fees and costs it had incurred in defending against Miller and Anderson’s lawsuit. The first assessment occurred in June 2018, when the Association required each of its four lot owners to pay $5,884.56. This included $754.28 for routine HOA expenses such as snow removal, insurance, and maintenance, as well as an additional $5,130.28 in attorney fees and costs from defending this lawsuit. While Miller and Anderson ultimately paid the nonlegal fee portion of this assessment, they refused to pay the remaining amount, arguing they were not obligated to subsidize the defense of a lawsuit they had initiated. In response, the Association asserted three counterclaims against Miller and Anderson. These included claims of an open account, an account stated, and for breach of contract to recover the unpaid balance of the assessment.
Thereafter, the Association continued to include its attorney fees and costs in its HOA assessments, and Miller and Anderson continued to refuse to pay the portion of these assessments that related to the Association’s legal expenses from this lawsuit. In 2019, Miller and Anderson sold their property in Rocking Ranch, at which point, the Association ceased levying assessments on Miller and Anderson. In total, Miller and Anderson refused to pay $40,778.08 in HOA assessments, all of which related to the Association’s attorney fees and costs from this litigation.
The district court ultimately granted summary judgment to the Association on Counts 4 and 5 of Miller and Anderson’s amended complaint. The parties then stipulated to the submission of the Association’s counterclaims to the district court for resolution in lieu of a trial. The district court thereafter dismissed the Association’s counterclaims.
Following the dismissal of these counterclaims, and relevant to this appeal, the Association filed two motions. First, the Association filed a motion to reconsider the district court’s dismissal of the Association’s counterclaims. The district court denied this motion. Second, the Association filed a motion to recover its attorney...
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