Richard Gill Co. v. Jackson's Landing Owners' Ass'n

• Decision Date: 22 September 1988
• Docket Number: No. 13-87-496-CV,13-87-496-CV
• Citation: 758 S.W.2d 921
• Parties: The RICHARD GILL COMPANY and Bayhouse, Ltd., Appellants, v. JACKSON'S LANDING OWNERS' ASSOCIATION, Appellee.
• Court: Texas Court of Appeals

Page 921

758 S.W.2d 921

The RICHARD GILL COMPANY and Bayhouse, Ltd., Appellants, v. JACKSON'S LANDING OWNERS' ASSOCIATION, Appellee.

No. 13-87-496-CV.

Court of Appeals of Texas Corpus Christi.

Sept. 22, 1988.

Rehearing Denied Oct. 20, 1988.

Paul T. Curl, Martin, Shannon & Drought, P.C., San Antonio, for appellants.

Savannah Robinson, Corpus Christi, for appellee.

Before KENNEDY, UTTER and DORSEY, JJ.

OPINION

KENNEDY, Justice.

Jackson's Landing Owners' Association sued Bayhouse, Ltd., a Texas Limited Partnership, and one of the limited partners, The Richard Gill Company (TRGC), as the past managers and partial owners of a condominium project, for failure to pay properly assessed dues, and for negligent failure to keep the books of the condominium project in good order during the period of development. In a trial to the court, judgment was rendered for the Association for $14,484.09 in unpaid assessments, $7,063.74 as late fees on the assessments, $7,063.74 as pre-judgment interest on the assessments, $3,725.00 as actual damages for failure to keep the books in good order, $705.19 as prejudgment interest on actual damages, and $7,500.00 as attorney's fees. Appellants bring four points of error complaining that the trial court erred in holding Bayhouse liable for the assessments, in disregarding TRGC's status as a limited partner, and in awarding attorney's and accountant's fees to appellee.

Bayhouse, Ltd. is a limited partnership that was set up by Jack Turner, a Corpus Christi architect, and Corpus Christi Partners, Ltd., as general partners, and TRGC, as limited partner, for the purpose of converting the Bayshore Apartments into Jackson's Landing Condominium. In accordance with the Texas Condominium Act, Tex.Prop.Code Ann. § 81.102 (Vernon 1984), Bayhouse filed a declaration of condominium in Nueces County on December 30, 1981, along with a copy of the bylaws of the owner's association.

The declaration provided for Bayhouse to manage the condominium and perform the duties of the owners' association during the development period, which would continue until 75% of the units were sold or three years from the date of the declaration, whichever came first. At that time the owners' association would be formed and would elect a board of directors to take over control of the condominium. On July 15, 1982, Bayhouse executed a management agreement under which TRGC took over the management of Jackson's Landing on behalf of Bayhouse. TRGC continued to manage Jackson's Landing until May 3, 1984, when the first owners' association meeting was held.

At the first meeting, officers of the association and a board of directors were promptly elected. The board asked TRGC to turn the books over to the association in order for the association to do an accounting as required by the declaration. The accounting firm of Fancher & Co. was hired by the association to do the audit. The records TRGC gave to the association and that were passed on to Fancher, however, were inauditable in the opinion of the accountant. He had to do a large amount of work on the materials received to put them in an order which would permit the association to continue business. From the records that the accountant pieced together, the association noticed that Bayhouse, and TRGC as manager, had failed to properly make monthly assessments against itself for the units within the condominium that it still owned during the development period. Instead, Bayhouse had pro-rated certain expenditures it made on behalf of the condominium, by paying for a portion of the expenses itself. The association brought suit against Bayhouse and TRGC for the difference between these pro-rated amounts and the amounts that Bayhouse properly should have assessed against itself under the terms of the declaration. Bayhouse also brought suit for the accounting fees necessary to put the books in order, and for reasonable attorney's fees.

Appellants' first point of error is multifarious. It attacks the trial court's award of assessments to appellee on the grounds that offsets to the award were proved as a matter of law or by the great weight and preponderance of the evidence, that Bayhouse had no obligation to pay assessments, and that most of the assessments are barred by the statute of limitations. Nevertheless, since appellants separately briefed each complaint within their first point, we will address each separately.

The first complaint we address is appellants' contention that as a matter of law Bayhouse had no obligation, as developer, to pay assessments. Appellants claim that the declaration and bylaws which established the relationship between Bayshore and the future apartment owners in Jackson's Landing did not obligate Bayshore to pay assessments on the number of apartments that it owned during the development period.

The duty of apartment owners to pay assessments is set out in the declaration as follows: " § 21.1.1 Commencing with the effective date of this Declaration each apartment owner shall be liable for a proportionate share of the common expenses...." The Texas Condominium Act also provides in § 81.204(a) that "[a]n apartment owner in a condominium regime is responsible for the apartment owner's pro rata share of: (1) the expenses to administer the condominium regime and to maintain and repair the general common elements...." The question on appeal is whether the trial court correctly interpreted the declaration to include Bayhouse as an "apartment owner" subject to assessments during the development period.

The relevant portions of the declaration suggesting that Bayhouse is an apartment owner are:

§ 1.8 Declarant [Bayhouse] is the sole owner of the Property.

§ 9.1 The persons or entities, including the Declarant, who are, at the time of reference, the apartment owners shall constitute the Home Owners Association....

Bayhouse was the legal owner of the property consisting of unsold apartments within the condominium during the period of development. Section 9.1, moreover, clearly includes Bayhouse in the group that it refers to as "apartment owners."

Appellants contend, however, that other terms of the declaration providing that Bayhouse itself had the power to make and collect assessments, to advertise the development by posting signs on the property, and to perform routine maintenance on the common areas, all of which are not allowed for individual apartment owners, suggest that Bayhouse as developer was not intended to be an "apartment owner" under the declaration.

Appellee, however, points out that it is not inconsistent for Bayhouse to be considered an apartment owner and at the same time exercise powers specifically denied to individual owners in the declaration. The board of directors itself, though merely a group of individual owners, would eventually gain these same powers. The distinction is that Bayhouse was not acting in its capacity as an owner of individual apartments when it undertook maintenance or advertising, but in its capacity as an interim manager. This did not detract from Bayhouse's status under either capacity, nor does it make the declaration ambiguous. The trial court correctly concluded that Bayhouse was an apartment owner under the declaration for the purpose of assessments.

The second complaint we address is appellants' contention that most of the assessments claimed by appellee are barred by the four year statute of limitations for collection of a debt under Tex.Civ.Prac. & Rem.Code Ann. § 16.004(a)(3) (Vernon 1986). Under the declaration, Bayhouse should have been making monthly assessments against itself from January 1, 1982, until the last unit was sold on March 7, 1984. Appellee filed "Plaintiff's First Amended Original Petition" on February 3, 1986, against Gill Savings Association, later dropped from the suit, TRGC and "Bayshore, Ltd.," a separate partnership then in existence but not involved in the present transaction. On March 5, 1986, appellee filed "Plaintiff's Second Amended Original Petition" against Gill, TRGC and "Bayhouse, Ltd." Appellants complain that for assessments due before March 5, 1982, the statute of limitations had run before Bayhouse was properly made a party to the present action. Appellee contends that, since the trial court found that Bayhouse's failure to maintain auditable records constituted fraud against appellee, the statute of limitations was tolled until appellee reasonably should have become aware of the failure to assess, when it first assumed management responsibility and took the books from Bayhouse in the summer of 1984.

The law is clear that fraud prevents the running of the statute of limitations until it is discovered, or by the exercise of reasonable diligence it should have been discovered. Andress v. Condos, 672 S.W.2d 627, 630 (Tex.App.--Fort Worth 1984, writ ref'd n.r.e.); Bush v. Stone, 500 S.W.2d 885, 889 (Tex.Civ.App.--Corpus Christi 1973, writ ref'd n.r.e.). In addition, when there is a fiduciary relationship between the parties, diligence on the part of the defrauded party does not require as prompt or as searching an inquiry into the conduct of the other party as when the parties are strangers or are dealing at arm's length. Andress, 672 S.W.2d at 630; Bush, 500 S.W.2d at 890; see also Gaynier v. Ginsberg, 715 S.W.2d 749, 756 (Tex.App.--Dallas 1986, writ ref'd n.r.e.); Pace v. McEwen, 574 S.W.2d 792, 797 (Tex.Civ.App.--El Paso 1978, writ ref'd n.r.e.).

Under the declaration, appellants assumed the responsibility for managing the condominium until an owners' association could be formed. The owners of individual apartments who would later form the association put their trust in appellants and relied upon them to fairly and competently carry out their duties, and a fiduciary relationship was thus established between appellants and the owners. See Texas Bank and Trust Co. v. Moore, 595 S.W.2d 502, 507 (Tex.1980); Hruska v. First State Bank, 727 S.W.2d 732, 736 (...