SEACOAST HANGAR CONDO. II ASS'N v. Martel

• Court: Maine Supreme Court
• Writing for the Court: DANA, J.
• Citation: SEACOAST HANGAR CONDO. II ASS'N v. Martel, 775 A.2d 1166, 2001 ME 112 (Me. 2001)
• Decision Date: 18 July 2001
• Parties: SEACOAST HANGAR CONDOMINIUM II ASSOCIATION et al. v. Donald E. MARTEL et al.

775 A.2d 1166

2001 ME 112

SEACOAST HANGAR CONDOMINIUM II ASSOCIATION et al. v. Donald E. MARTEL et al.

Supreme Judicial Court of Maine.

Argued May 15, 2001.

Decided July 18, 2001.

David A. Soley (orally), William M. Welch, Bernstein, Shur, Sawyer & Nelson, Portland, for plaintiffs.

Robert M.A. Nadeau (orally), Thomas P. Elias, Nadeau & Assoc., P.A., Sanford, for defendants.

William H. Dale, Natalie L. Burns, Jensen Baird Gardner & Henry, Portland, for party in interest.

Panel: WATHEN, C.J.,¹ and CLIFFORD, RUDMAN, DANA, SAUFLEY, ALEXANDER, and CALKINS, JJ.

DANA, J.

[¶ 1] Donald E. Martel, Norwood Nelson, and Sanford Air, Inc. (collectively, Martel et al.), appeal from the judgments of the Superior Court (York County, Fritzsche, J.) rendering partial summary judgments on the first two counts of a complaint filed by the Seacoast Hangar Condominium II Association (the Association), dismissing the third-party complaint filed by Nelson and Chester Sawtelle, denying Martel and Nelson's motion for attorney fees, and granting the Association's verified bill of costs. Martel et al. contend that the court erred in declaring that Donald Percy, George Chaudoin, and Charles Smith are the directors of the Association and Percy, Chaudoin, and Mark Brunelle are its officers; in declaring that the Association, not Sanford Air, has all tenant rights pursuant to a lease with the Town of Sanford; in dismissing the third-party complaint alleging breaches of fiduciary duties by Percy, Brunelle, Chaudoin, and Smith; in denying Martel and Nelson's request for attorney fees without conducting an evidentiary hearing; and in granting the Association's verified bill of costs without an evidentiary hearing. We agree that the court should hold a hearing on Martel and Nelson's request for attorney fees and costs, but otherwise affirm.

BACKGROUND

[¶ 2] On September 31, 1986, Sanford Air leased premises located at the Sanford Municipal Airport from the Town of Sanford pursuant to a Land Lease and Rights Agreement (the lease) that will expire on September 31, 2006. In the fall of 1986, Sanford Air constructed a ten-unit hangar on the leased property. Sanford Air formed the Seacoast Hangar Condominium II (the Condominium) by declaration on November 28, 1986, pursuant to the Maine Condominium Act, 33 M.R.S.A. §§ 1601-101 to 1604-118 (1999).

[¶ 3] The declaration of the Condominium provided for Sanford Air to appoint an executive board for the control period, which would expire sixty days after the conveyance of seventy-five percent of the units or within two years after the conveyance of the first unit, whichever happened first. At the expiration of the control period, the declaration provides for the unit owners to participate in a transition meeting to elect three new directors, at least two of whom must be unit owners or the spouses of unit owners.

[¶ 4] Sanford Air sold all the units to individual purchasers by the end of December, 1986. On December 30, Sanford Air appointed Martel president of the Condominium Association and Loren Harmon the treasurer and secretary. The parties dispute whether the Condominium held a transition meeting on or about December 31, 1986, electing Martel president and Harmon vice president.

[¶ 5] Seacoast Hangar Condominium II Association (the Association) was incorporated as a nonprofit non-stock corporation by filing articles of incorporation on May 16, 1988. The articles of incorporation named Martel, Harmon, and attorney Peter Edmands directors, Martel president, and Harmon treasurer and secretary. The by-laws of the Association provide for the first annual meeting of the unit owners to be held "[w]ithin thirty (30) days after the turnover date as hereinafter defined, or at any time at the option of [Sanford Air] set forth in the aforesaid Declaration, whichever first shall occur...." According to the by-laws, the turnover date is "that certain date immediately after the earlier to occur of sixty (60) days after the closing of the conveyance of seventy-five percent (75%) of the units or two (2) years following the conveyance of the first Unit to a purchaser." The by-laws also provide that the removal of any member or members from the board of directors requires a two-thirds vote of the Association.

[¶ 6] In November 1998, six of the ten Association members requested that the secretary call a transition meeting to elect successor members of the board of directors. After notice, the Association held a meeting on December 8, 1998, which all members attended in person or by proxy. The vote was six to four in favor of a new board (Smith, Chaudoin, and Percy), which unanimously elected Percy president, Chaudoin secretary, and Brunelle treasurer. Percy formally notified all unit owners of the election.

[¶ 7] Edmands, as clerk, filed the Association's 1999 annual report with the Secretary of State, listing the newly elected individuals as the directors and officers, Edmands remaining as clerk. After the 1998 meeting, however, Martel continued to act as president, and Sanford Air billed the unit owners for special assessments and regular condominium fees. The newly elected individuals requested in writing that Martel cease acting as an officer and director.

[¶ 8] The Association filed a complaint in the Superior Court seeking a declaratory judgment that the new directors and officers were elected at the 1998 meeting (count one); a declaratory judgment that the Association is the lawful tenant under the lease (count two); an accounting pursuant to 33 M.R.S.A. § 1603-118 and 13-B M.R.S.A. § 715 (1981) (count three); damages for breach of fiduciary duty by Martel (count four); damages for breach of the Maine Condominium Act, the declaration, and the by-laws (count five); damages for conversion and an order that Martel turn over all of the books, records, and funds related to the Condominium and the Association (count six); and costs. Thereafter the Town refused to accept money from the Association or to renegotiate the lease of the premises until the court determined who was the legal tenant. Following the Association's motion, the court granted summary judgments on counts one and two, but denied the Association's motion on count five. Martel et al. filed a motion to reconsider the summary judgment granted on count two, which the court denied. [¶ 9] Defendants Nelson and Sawtelle also filed a third-party complaint against Percy, Brunelle, Chaudoin, and Smith (hereinafter sometimes Percy et al.), alleging that they breached their fiduciary duties to the Association by incurring legal fees for meritless litigation. The third-party complaint sought damages, costs, and attorney fees. Percy et al. moved to dismiss the third-party complaint on the ground that they were authorized to bring a law suit on behalf of the Association to resolve a legitimate dispute with Martel et al. The court granted the motion to dismiss the third-party complaint.

[¶ 10] The Association moved to withdraw the remaining counts of its complaint. The court granted the motion and entered a final judgment incorporating the earlier summary judgments on counts one and two, as well as the dismissal of the third-party complaint. Martel and Nelson filed a motion for attorney fees based on the indemnification provisions of the declaration and the by-laws. Without an evidentiary hearing, the court denied Martel and Nelson's motion for attorney fees and awarded costs in the Association's favor in the amount of $1703.64. This appeal followed.

DISCUSSION

A. Summary Judgment on Count One

[¶ 11] Martel et al. contend that the court erred in rendering a summary judgment declaring that Smith, Chaudoin, Percy, and Brunelle were properly elected as directors and officers of the Association. According to Martel et al., a transition meeting took place, pursuant to article VII, section 7.2.1 of the declaration, on or about December 31, 1986. Martel et al. also contend that article V, section 10 of the by-laws requires a two-thirds vote to remove board members, which was not satisfied at the 1998 meeting when six of the ten unit owners voted for a new board.

[¶ 12] The Association contends that a valid election took place at the 1998 meeting and that, even if a transition election occurred in 1986, the directors' terms had long since expired, so a simple majority was sufficient to elect their successors.

[¶ 13] "[W]hen we review the grant of summary judgment, we consider the evidence in the light most favorable to the party against whom the judgment is issued, and we will only affirm the judgment if a review of the record demonstrates that there is no genuine issue of material fact and the grant of the judgment was correct as a matter of law." Stitham v. Henderson, 2001 ME 52, ¶ 10, 768 A.2d 598, 601.

[¶ 14] A majority vote of the unit owners was adequate to elect new directors because each director was to serve for a one-year, two-year, or three-year term pursuant to the by-laws, and Martel et al. admit that the board held no annual meetings or elections between December 1986 and December 1998. Because the directors' terms had expired, a simple majority was adequate to elect their replacements. See 13-B M.R.S.A. § 702(3) (1981) ("Each director shall hold office for the term to which he is elected or appointed and until his successor shall have been elected or appointed and qualified."). We therefore affirm the court's summary judgment declaring that Smith, Chaudoin, Percy, and Brunelle were elected directors and officers at the 1998 meeting.

B. Summary Judgment on Count Two

[¶ 15] Sanford Air contends that the court erred in depriving it of its right to act as a Fixed Base Operator (FBO) of the Sanford Municipal Airport. At oral argument, counsel agreed that the Association did not have a right, pursuant to the lease or the court's judgment, to act as FBO. With the understanding that the court's judgment only relates to the real estate...