Patrician Towers Owners, Inc. v. Fairchild, 73-2182

• Decision Date: 26 March 1975
• Docket Number: No. 73-2182,73-2182
• Parties: PATRICIAN TOWERS OWNERS, INC., a Delaware Corporation, et al., Appellees, v. Charles M. FAIRCHILD (Individually and as general partner, Patrician Towers limited partnership), Appellant.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 216

513 F.2d 216

PATRICIAN TOWERS OWNERS, INC., a Delaware Corporation, et al., Appellees, v. Charles M. FAIRCHILD (Individually and as general partner Patrician Towers limited partnership), Appellant.

No. 73-2182.

United States Court of Appeals Fourth Circuit.

Argued Feb. 6, 1975.

Decided March 26, 1975.

Fred C. Alexander, Jr., Alexandria, Va. (Boothe, Prichard & Dudley, Alexandria, Va., on brief), for appellant.

Henry J. Cappello, Washington, D. C. (Rothwell, Cappello & Berndtson, Washington, D. C., on brief), for appellees.

Before RUSSELL, FIELD and WIDENER, Circuit Judges.

DONALD RUSSELL, Circuit Judge:

This is a suit on behalf of the owners of units in a condominium, constructed at Rehoboth Beach, Delaware, to recover costs of making allegedly necessary repairs to the condominium due to defects in the original construction as well as to recover assessments levied against the builder as the owner of certain unsold units.

Federal jurisdiction rests on diversity.

After a trial without a jury, the District Court granted judgment in favor of the plaintiffs and the defendant has appealed. We vacate the judgment and remand for more specific and detailed findings in conformity with Rule 52(a), Rules of Civil Procedure, 28 U.S.C.

The initial issue is the threshold one of jurisdiction and standing. An understanding of this issue requires some elaboration of the facts.

The condominium, which is the subject of this controversy, began initially as a project of a partnership composed of the defendant Fairchild and another. A few months after construction had commenced but not before the partnership had entered into a number of sales contracts with prospective unit owners with a warranty of "the building and the mechanical equipment therein for a period of one year from completion," the partnership secured a charter for a Delaware corporation, Patrician Towers, Inc. All the stock in the corporation was owned by the partnership. The condominium property was thereupon transferred to the corporation and the building of the condominium proceeded in the name of the corporation as owner. When the corporation thereafter executed sales contracts, it, unlike the partnership, included therein no express warranty.

At some point during the construction, the defendant Fairchild purchased the interests of his co-partner and became the sole general partner in the partnership and the owner of all the stock in the corporation Patrician Towers, Inc.

The purchasers of units in the condominium early constituted themselves an unincorporated association under the authority of the Delaware Unit Property Act, ¹ and, as provided in that Act, elected a Council with the powers defined in the Act. The members of this Council, which might under Delaware law number from 3 to 5, were required to be either citizens of Delaware or unit owners. ² The Council was authorized and empowered in the name of the Association and for its benefit to maintain, repair or replace the common areas or "elements" of the condominium, to assess and collect from the unit owners all common expenses, and to pay all common expenses and obligations. ³ For these purposes, it was constituted a legal entity, authorized under the Act to sue for and on behalf of the unit owners to recover for any assessments made or obligations undertaken. ⁴

When construction of the condominium was completed in 1970 and the unit owners entered into possession of their respective units, a number of complaints quickly developed because of leaks throughout the building. After the defendant failed to correct the alleged defects, the Council retained counsel, and through such counsel, notified the defendant that unless the alleged defects in the building were corrected, it would proceed "to have the defects corrected and would look to defendant for reimbursement." The plaintiffs claimed the builder failed to correct the defects as requested. By reason of the builder's failure, the Council claims it was forced to contract for the correction of the "defects in the buildings" and in so doing incurred expenses in discharging what was alleged to have been a breach of the builder's obligation to construct the condominium in "a good workmanlike manner * * * suitable for human habitation."

This suit was instituted to recover the expenses incurred by the Council, in making the repairs to the common areas of the condominium. In addition, recovery was sought for the assessments made by the Council against defendant, as owner of six units which had been retained by the defendant, for its pro rata share of common operating expenses. Though filed to recover items which were thus clearly recoverable by the Council, the action named three plaintiffs and recovery was sought jointly on their behalf. ⁵ One of these plaintiffs was the Council of the Patrician Towers Condominium Association, described in the complaint as an "unincorporated association." Another was a Delaware corporation formed by the Council, to which it had assigned its right and title in the "real property" and its "rights and duties * * * to manage the condominium property." The third plaintiff consisted of two individuals, one a citizen of the District of Columbia and the other a citizen of Maryland, who identified themselves as "members of the Council (Association) and, as such, (could) fairly and adequately protect the interests of the Association and its members," in maintaining this action "under provisions of Rule 23.2 Federal Rules of Civil Procedure" "individually in their own right as representatives of the class of property owners in Patrician Towers Condominium."

The defendant, named in the complaint, is alleged to be a citizen of Virginia. ⁶ In his answer to the suit, the defendant expressly denied among other allegations, the allegations of federal jurisdiction, stating explicitly that there was an absence of diversity between the members of the plaintiff Association (Council) and the defendant. He, also, challenged the standing of the representative plaintiffs as a party plaintiff. The answer made a somewhat ambiguous reference in its assault on the jurisdiction to the status of the corporate plaintiff, which was alleged to be an assignee of the Council. Both the plaintiffs and the defendant have disregarded this plaintiff in their discussion of the issue and in the present posture of the case we do so, too, though it may be necessary on remand to consider its status for jurisdictional purposes. ⁷

With the issues as made by the answer of the defendant, the representative plaintiffs were placed under the burden of establishing their standing to maintain the action under Rule 23.2. ⁸ In addition, the Council representing the Association and dependent on whether it was found to have standing, the representative plaintiffs, in turn, had the burden of establishing diversity of citizenship between them, on the one hand, and the defendant, on the other. ⁹ And, in resolving after trial the material issues of jurisdiction and standing thus made by the pleadings, the District Court was obligated under Rule 52(a) to set forth in this nonjury case its decision in the form of detailed findings of fact and conclusions of law. ¹⁰ In the normal course of the proceedings, such findings and conclusions should have preceded any decision on the substantive merits of the case.

In their proposed findings of fact and conclusions of law, counsel for the plaintiffs, and the District Court in its original findings and conclusions, however, made no reference whatsoever to the material issues of standing and jurisdiction but dealt exclusively with the substantive merits of the case. It was only after the defendant moved for a "New Trial and to Amend or Alter the Judgment" given, that the District Court took any note of the challenge either to standing or jurisdiction. In dismissing that motion, the Court did state as to standing:

"The arguments relative to the standing of the plaintiffs are answered by reference to Rule 23.2, F.R.Civ.P., the Court finding that the named individual plaintiffs will fairly and adequately protect the interests of the plaintiff association and its members. While there may be some uncertainty, as among the plaintiffs, which plaintiff is entitled to the award in this case, collectively the plaintiffs comprise all the entities which could have an interest in that award."

This statement is, however, no more than a bare conclusory finding in the language of the Rule itself. Expressed in absolute terms, it is predicated on no articulated subsidiary findings or reasoning. In their complaint the plaintiffs seemingly would have justified a finding that the representative plaintiffs could "fairly and adequately protect the interests of the plaintiff association and its members" under Rule 23.2 the conclusory finding made by the District Court on the fact that the representative plaintiffs were members of the Council. But the trial court did not allude to this circumstance in its conclusory declaration and we have no reason to assume that such fact influenced in any way the conclusion reached by the District Court. Perhaps, but this is only conjecture, the District Court was prompted to disregard this fact because of evidence in the record contradictory of the allegation that both representative plaintiffs were members of the Council. The representative plaintiff Bucher was not a resident of Delaware and, if the exhibit included in the agreed appendix is correct, his wife, and not he, was the owner of unit 106. He was accordingly not qualified to be a member of the Council. But the District Court neither relied on the alleged membership of the representative parties in the Council nor on any other stated facts in support of its finding of standing.

Beyond the absence of any factual statement in support of its finding of standing is the failure of the District Court to express the legal basis for its conclusion....