Mullin v. Silvercreek Condominium Owner's, No. 27333.

• Court: Court of Appeal of Missouri (US)
• Writing for the Court: Nancy Steffen Rahmeyer
• Citation: 195 S.W.3d 484
• Docket Number: No. 27333.
• Decision Date: 07 July 2006
• Parties: Michael P. MULLIN and, Sandra L. Mullin, and Bobby Overton and Boydine Overton, Plaintiffs-Respondents, v. SILVERCREEK CONDOMINIUM, OWNER'S ASSOCIATION, INC., A Missouri Not for Profit Corporation, Defendant-Appellant.

195 S.W.3d 484 Michael P. MULLIN and, Sandra L. Mullin, and Bobby Overton and Boydine Overton, Plaintiffs-Respondents,
v.
SILVERCREEK CONDOMINIUM, OWNER'S ASSOCIATION, INC., A Missouri Not for Profit Corporation, Defendant-Appellant. No. 27333. Missouri Court of Appeals, Southern District, Division One. July 7, 2006.

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Randy S. Anglen, Branson, for Appellant.

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Michael P. Mullin and Sandra L. Mullin, Pequot Lakes, MN, pro se.

Bobby Overton and Boydine Overton, Kissee Mills, pro se.

NANCY STEFFEN RAHMEYER, Presiding Judge.

This is an appeal from a judgment in a declaratory judgment suit brought by Michael and Sandra Mullin ("the Mullins") and Bobby and Boydine Overton ("the Overtons") against Silvercreek Condominium Owner's Association, Inc. ("Silvercreek"), which held that unit owners in Silvercreek are not restricted from renting their units on a nightly basis. The trial court found that Silvercreek's Declaration of Condominium and By-Laws ("the declaration") did not prohibit or restrict unit owners from renting or leasing their units on a daily or nightly term, that nightly rentals did not violate the declaration, or appear to be a violation of law. Silvercreek raises two points on appeal: first, that the declaration reserves the condominiums for single-family residential use, prohibiting businesses and activities that raise the insurance rates for the condominiums; and second, that the nightly rental activity was a violation of the zoning ordinances of the city of Rockaway Beach ("the City") and the declaration prohibits illegal use of the units.

Silvercreek Condominiums were built in 1993 or 1994. At the time they were constructed, a nightly rental program was advertised as being available. The Mullins purchased two Silvercreek Condominiums, Unit B-7 in January 2001 and Unit B-2 in October 2003. Before he purchased the units, Michael Mullin spoke with members of Silvercreek, including its president, and was told that nightly rentals were allowed. Silvercreek's treasurer, Dean Walker,¹ advised the Mullins that two property managers were available and they hired Bobby Overton to manage the rental of their units since they lived primarily out of state. The Mullins began renting out the units on a nightly or short-term basis. In 2001, Mullin received a Uniform Project Questionnaire, signed by Walker and dated September 2002, which stated in paragraph 10 that the project permitted daily and weekly rentals. The Mullins and Overtons received a letter from Silvercreek's attorney in May 2003, which stated condominium units "are not to be used for business purposes" and stated that this could affect the use of the units for overnight, weekend and weekly rentals, but did not advise them to cease renting their units.

On June 23, 2003, however, the Mullins received a letter from Silvercreek's attorney, which stated they were in violation of article 6 of the declaration "by renting or allowing rental of [their] units for overnight rental." The letter notified them to "refrain from and cease the renting of such unit[s] for overnight tenancy." If the Mullins refused, Silvercreek claimed the authority to terminate their rights as condominium unit owners and/or seek a mandatory injunction to cure the restriction violation. The Mullins also received a copy of a letter from the City attorney to Walker, which stated that the nightly rentals violated the existing zoning ordinances of the property. The City attorney advised that "[i]f [Silvercreek] or the individual owners wish[ed] to continue using the property for nightly rentals, they should file a variance request with the Board of Adjustments."

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The Overtons were also informed that the short-term and nightly rental of their units was in violation of the declaration and the zoning ordinances of the City. Several unit owners, including the Mullins and the Overtons, applied for a variance, but they were denied. The Overtons and the Mullins (collectively, "Respondents") filed a petition for declaratory judgment on August 1, 2003, to determine the validity of section 6.2 of the declaration and the rights, obligations, and liabilities between the unit owners and Silvercreek.² They subsequently filed an amended petition on November 8, 2004.

Bobby Overton testified that he owned Unit B-6, purchased in 1999, and his wife owned Unit C-4, purchased in 2001. He also had a lease on Unit C-8, which he used for nightly rentals. The units had been rented on a short-term or nightly basis since their purchase. Overton testified that Walker often called him and inquired if he had vacancies in his units for rent. In order to rent out the units, Overton obtained a license from the City and he also collected and paid sales tax on all of the units used for short-term and nightly rentals, including the units he managed for the Mullins.

William E. Barrett³ testified that he purchased Unit C-7 at the Silvercreek Condominiums, specifically "to put [it] on [a] nightly rental program," and was unaware of any prohibition against nightly rentals until he received notice from Silvercreek that nightly rentals were illegal. Barrett also testified that his wife's cleaning service did the initial construction cleanup for Silvercreek Condominiums and continued to clean at least three of the units in the nightly rental program.

Walker testified that, for at least the ten years he had owned a unit, individuals rented their condominiums on a nightly basis and until the spring of 2003, no official complaint was made regarding nightly rentals. Further, Silvercreek's records of annual meetings and Board of Directors meetings, together with other correspondence, indicated that a nightly rental program was in existence and accepted by Silvercreek.

Minutes from a Silvercreek Board of Directors meeting dated March 15, 2003, discussed a letter from the City attorney sent to inform Silvercreek that the nightly rentals violated their zoning code as Silvercreek Condominiums were zoned residential and nightly rentals were commercial. At the Board of Directors' meeting on June 21, 2003, the minutes included a proposal by the Mayor to arrange an agreement between the City, Silvercreek, and the owners of the nightly rentals. The owners of the nightly rentals did not respond. According to the minutes from the July 26, 2003 Board of Directors' meeting, Walker presented an overview of the events leading toward enforcement of the by-laws, together with a list of problems related to the nightly rentals that would be discussed at Silvercreek's annual meeting.

The declaration states in pertinent part:

Article 6 — Restrictions

In addition to any and all restrictions now existing against said property and all improvements now or hereafter constructed thereon, the use of condominium units and common elements (including restricted common elements) is hereby expressly restricted as follows:

6.1 Single Family Residential Use. All units and restricted common elements

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shall be used, improved and devoted exclusively to residential use by a single family.

6.2 Business Use. No business, trade, occupation or profession of any kind shall be conducted, maintained or permitted on any part of the property, nor, without the prior written authorization of the Association, shall any "For Sale" or "For Rent" signs be displayed by any person, firm or corporation, bank, savings and loan association, lending institution, or insurance company who as holder of a deed of trust against any condominium unit acquired ownership thereof through foreclosure (or by deed in lieu of foreclosure), or the agent of any of them. Nothing in this Section 6.2 is intended to...