Powell v. Cedar Tree Village Homeowners Association, No. 8-088/07-1109 (Iowa App. 3/14/2008)

• Decision Date: 14 March 2008
• Docket Number: No. 8-088/07-1109,8-088/07-1109
• Parties: SUSAN POWELL, JIM VAUGHN, SHARON VAUGHN, DON GANO, HERBERT TREFTZ, RUTH TREFTZ, CAROLE SIX, and VELMA LEFFERT, Petitioners-Appellants, v. CEDAR TREE VILLAGE HOMEOWNERS ASSOCIATION, an Iowa non-profit corporation, Respondent-Appellee.
• Court: Iowa Court of Appeals

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SUSAN POWELL, JIM VAUGHN, SHARON VAUGHN, DON GANO, HERBERT TREFTZ, RUTH TREFTZ, CAROLE SIX, and VELMA LEFFERT, Petitioners-Appellants, v. CEDAR TREE VILLAGE HOMEOWNERS ASSOCIATION, an Iowa non-profit corporation, Respondent-Appellee.

No. 8-088/07-1109

Court of Appeals of Iowa.

Filed March 14, 2008

Appeal from the Iowa District Court for Scott County, Mary E. Howes, Judge.

Members of a homeowners' association appeal from a district court decision denying their petition for a declaratory judgment that the association improperly levied an assessment against them. AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.

Richard A. Davidson and David A. Dettman of Lane & Waterman, L.L.P., Davenport, for appellants.

Stephen T. Fieweger and H. Karl Huntoon of Katz, Huntoon & Fieweger, P.C., Moline, Illinois, for appellee.

Considered by Huitink, P.J., and Zimmer and Miller, JJ.

MILLER, J.

Susan Powell, Jim and Sharon Vaughn, Don Gano, Herbert and Ruth Treftz, Carole Six, and Velma Leffert appeal from a district court decision denying their petition for a declaratory judgment that the Cedar Tree Village Homeowners Association (Association) improperly levied an assessment against them. We affirm in part, reverse in part, and remand for further proceedings consistent with this opinion.

I. BACKGROUND FACTS AND PROCEEDINGS.

The petitioners own lots in Cedar Tree Village, a planned unit development in Bettendorf, Iowa, and reside in townhomes constructed on the lots. The lots in the development are subject to a document entitled "Restrictive and Protective Covenants and Conditions" (RPC) recorded by the developer in 1976. The RPC identifies certain lots in the development as "Common Area[s]" owned by the Association "for the common use and enjoyment of the members of the Association." All of the owners of the other lots located in the development are members of the Association, which was incorporated "[t]o provide for the maintenance, preservation, and architectural control of the residence Lots and Common Area within . . . Cedar Tree Village."

There are 191 attached townhome units in the development. The six units on the lots owned by the petitioners were constructed in 1996 with vinyl siding. The other 185 units in the development were built approximately twenty-five to thirty years ago with wood siding, which has deteriorated in condition over time. The exterior condition of the townhomes with wood siding has resulted in continuing problems for the Association. The Association consequently established a "re-siding committee" in 1991. That committee, however, was not certain about the Association's responsibilities for the exterior siding of the townhomes. In 1995, the Association's board of directors sought advice from their attorney, who stated he believed the Association had an obligation to maintain the exteriors of the townhomes pursuant to Article VI, paragraph 4 of the RPC. That provision requires the Association to provide

exterior maintenance upon each Lot which is subject to assessment hereunder as follows: Paint and maintain gutters, downspouts, exterior building surfaces, . . . and other exterior improvements, excluding driveways, patios and enclosed courtyards. . . . The Association shall replace the roofs on dwelling buildings when necessary due to age.

Article IV of the RPC, "Covenant for Maintenance Assessments," authorizes the Association to collect "(1) annual assessments or charges, and (2) special assessments for capital improvements, such assessments to be established and collected from time to time." Paragraph 3 of that article sets forth the maximum annual assessment the Association is allowed to charge its members and states "the maximum annual assessment may be increased above the limitation . . . only by a vote of two-thirds (2/3) of each class of Members . . . at a meeting duly called for this purpose." Paragraph 4 states that in addition to the annual assessments,

the Association may levy, in any calendar year, a special assessment applicable to that year only for the purpose of defraying . . . the cost of any construction, reconstruction, repair or replacement of a capital improvement upon the Common Area, . . . provided that any such assessment shall have the assent of two-thirds (2/3) of the votes of each Class of Members . . . at a meeting duly called for this purpose.

Despite measures taken by the Association to correct the problem, the exteriors of the townhomes with wood siding continued to deteriorate.¹ The Association's board of directors formed a "Siding Taskforce" toward the end of 2005. At a special meeting in March 2006, the taskforce recommended that the siding on the 185 units with wood siding be replaced with vinyl siding. The Association's members approved "a special assessment of the membership of $1,000.00 per unit" for installation of the vinyl siding.

The petitioners refused to pay the special assessment. They filed a petition for declaratory judgment, seeking a determination "as to whether the Association can assess a special assessment for the purpose of raising the funds necessary to install new siding on the dwelling unit buildings." The Association resisted, arguing Article VI, paragraph 4 of the RPC required it to provide exterior maintenance for each lot, which would include replacement of siding. The Association asserted the special assessment was authorized by Article IV, paragraph 3, which allows the members to approve an increase in their annual assessment.

The case was submitted to the district court on stipulated facts. The court entered a declaratory judgment in favor of the Association, finding the special assessment was authorized by Article IV, paragraph 4 of the RPC, which allows the Association to charge a special assessment for capital improvements to the development's common area. The court found "the buildings to be sided are `common areas' and the siding is a `capital improvement.'" The district court further found the "exterior maintenance paragraph," Article VI, paragraph 4, "can be broadly construed under the facts and circumstances of this case to include siding, although it is not specifically mentioned."

The petitioners appeal. They claim the district court erred in finding that the assessment was authorized by Article IV, paragraph 4, because the townhome units are not common areas within the meaning of the RPC. They further claim the court erred in finding that the Association was responsible for replacing the siding under Article VI, paragraph 4.

II. SCOPE AND STANDARDS OF REVIEW.

Our review of actions for declaratory judgment depends upon how the action was tried to the district court. Passehl Estate v. Passehl, 712 N.W.2d 408, 414 (Iowa 2006). Whether a declaratory judgment action is considered legal or equitable in nature is determined by the pleadings, the relief sought, and the nature of the case. Gray v. Osborn, 739 N.W.2d 855, 860 (Iowa 2007).

Both parties contend our review should be for the correction of errors at law because the case involves questions of contract interpretation. See Fjords North, Inc. v. Hahn, 710 N.W.2d 731, 735 (Iowa 2006) ("Restrictive covenants are contracts."). We agree. See Sky View Fin., Inc. v. Bellinger, 554 N.W.2d 694, 696 (Iowa 1996) (reviewing district court's interpretation of a restrictive covenant for correction of errors at law).

The court's findings of fact are binding upon us if those facts are supported by substantial evidence. Iowa R. App. 6.14(6)(a). The district court's legal conclusions, however, are not. Tim O'Neill Chevrolet, Inc. v. Forristall, 551 N.W.2d 611, 614 (Iowa 1996).

III. MERITS.

We first address the petitioners' claim that the district court erred in finding the Association was responsible for replacing the siding under Article VI, paragraph 4. The petitioners argue that provision does not allow the Association to use the assessments it collects from its members for installation of vinyl siding. We do not agree.

The RPC states that the assessments collected from the Association's members "shall be used exclusively to promote the recreation, health, safety and welfare of the residents . . . and in particular for the maintenance of the Properties and replacement of roofs as herein provided." Article VI, paragraph 4, "Exterior Maintenance," delineates the specific maintenance duties of the Association, stating in relevant part, that "the Association shall provide exterior maintenance upon each Lot . . . as follows: Paint and maintain gutters, downspouts, exterior building surfaces. . . and other exterior improvements." That provision further states, "The Association shall replace the roofs on the dwelling buildings when necessary due to age." Relying on the maxim "expressio unius est exclusio alterius," which is a "canon of construction holding that to express or include one thing implies the exclusion of the other," RPC Liquidation v. Iowa Dep't of Transp., 717 N.W.2d 317, 324 (Iowa 2006), the petitioners assert the maintenance obligation of the Association regarding its members' townhomes is limited to painting and re-roofing. We conclude otherwise.

"Because restrictive covenants are contractual in nature, we apply contract-based rules of construction to interpret them." Sky View Fin., 554 N.W.2d at 697. "In construing a restrictive covenant, . . . the words must be given their ordinary obvious meaning. . . ." First Sec. Co. v. Dahl, 560 N.W.2d 327, 332 (Iowa 1997). Particular words and phrases are not interpreted in isolation; instead, they are interpreted in the context in which they are used. Hartig Drug Co. v. Hartig, 602 N.W.2d 794, 798 (Iowa 1999).

Article VI, paragraph 4 clearly states the Association is required to "[p]aint and maintain . . . exterior building surfaces." (Emphasis added.) The petitioners' contrary interpretation of the RPC ignores the expressly stated duty of the Association to provide "exterior maintenance" and "maintain...