Thomas Lakes Owners Ass'n v. Riley

• Decision Date: 20 June 2000
• Docket Number: No. A-99-401 to A-99-411, No. A-99-413 to A-99-415.
• Citation: 612 N.W.2d 529,9 Neb. App. 359
• Parties: THOMAS LAKES OWNERS ASSOCIATION, appellant and cross-appellee, v. Mary Ann Getchell RILEY et al., appellees and cross-appellants.
• Court: Nebraska Court of Appeals

612 N.W.2d 529

9 Neb. App. 359

THOMAS LAKES OWNERS ASSOCIATION, appellant and cross-appellee, v. Mary Ann Getchell RILEY et al., appellees and cross-appellants.

Nos. A-99-401 to A-99-411, A-99-413 to A-99-415.

Court of Appeals of Nebraska.

June 20, 2000.

Loren L. Lindahl and Becky J.W. Dias, of Edstrom, Bromm, Lindahl, Sohl & Skokan, Wahoo, for appellant.

Jeanelle R. Robson and Trev E. Peterson, of Knudsen, Berkheimer, Richardson & Endacott, Lincoln, for appellees.

IRWIN, Chief Judge, and SIEVERS and MOORE, Judges.

MOORE, Judge.

INTRODUCTION

This appeal arises from a series of collection actions brought in Saunders County Court. The Thomas Lakes Owners Association (Association) sued the owners (Owners) of various cabins and lots at the Thomas Lakes subdivision for unpaid assessments for dredging the lake and road repairs after a flood, and in some cases, unpaid annual maintenance assessments and dues. The Association also sought prejudgment interest and attorney fees.

The Owners, who are all Association members, answered and counterclaimed, alleging (1) that the Association's bylaws had not been validly adopted, (2) that the Association's right to make assessments was limited by easements granted to the Owners by the Association's predecessors in title and by their course of dealing, and (3) that the interest charged was in violation of the usury statutes. The county court found that the Owners were collaterally estopped from litigating the adoption of the bylaws; that the Association was entitled, as a matter of law, to recover the assessments as per the formula found in the bylaws; and that the Association was entitled to recover prejudgment interest. The Owners appealed to the district court for Saunders County which reversed, and remanded for further proceedings after finding that the county court's ruling on collateral estoppel was in error.

BACKGROUND

The Thomas Lakes subdivision, located in Saunders County, comprises approximately 125 lots, some owned by individuals and some leased by cabin owners. The subdivision includes lakes, roads, and other "common areas" accessible to lot owners and tenants. These common areas were owned by the late Melvin Thomas (Thomas), who retained approximately 75 lots for rent to third parties, selling the balance to various purchasers. Thomas and the lessees of a particular lot entered into lease agreements, which stated that the lessee would abide by the rules, regulations, and bylaws of the Thomas Lakes Association, a predecessor of the Association.

Thomas offered to sell lots to the various cabin owners in 1981, and he filed restrictive covenants against the lots at Thomas Lakes subdivision on February 8, 1982, prior to sale. The restrictive covenants, among other things, required each lot owner to become a member of the Thomas Lakes Cabin Owners Association (cabin owners association), another predecessor of the Association, and gave the cabin owners association authority to assess lot and cabin owners for their respective shares for street and common area maintenance and similar services. The covenants provided for the cabin owners association to promulgate other consistent rules and regulations.

Ownership interest in the common areas at the Thomas Lakes subdivision arose through easements granted in 1983, 1984, and 1985 by Thomas, directly to the individual owner in some cases (Owned Lots Easements), and in others to the current owner's predecessor in title (Farmers Bank Easement). The obligation to maintain the road and lake area described in the easements was assumed by the cabin owners association. The easements also stated that the nature and extent of any repairs or replacements of the road and lake rested in the sole discretion of the cabin owners association. The Farmers Bank Easement contains an allocation formula for assessments relating to natural disasters such as floods. Paragraph 5 of the Owned Lots Easements discusses maintenance fees, but contains no specific requirement that the grantee pay special assessments such as the road repair and dredging assessments. All easements require the payment of an annual maintenance fee to the cabin owners association.

Up until 1995, neither the cabin owners association nor the Thomas Lakes Association had governing bylaws. The cabin owners association was an unincorporated association of lot owners created by the terms of the restrictive covenants. The Thomas Lakes Association was an association of tenants created in the lot lease agreements. Following a trial in 1993 in the district court for Saunders County (Thomas case), the court enjoined the cabin owners association from a number of things, including assessing tenants and homeowners and performing any acts related to the Thomas Lakes subdivision. The district court retained jurisdiction to implement bylaws for the Thomas Lakes Association, which were enacted on May 13, 1995, by the present unincorporated Association. The district court terminated its jurisdiction on November 16, 1995. The bylaws, created under the district court's supervision, contain an allocation formula for assessments relating to natural disasters different from that found in the Farmers Bank Easement.

In the present case, the Association filed a motion to strike the Owners' counterclaim on the basis of collateral estoppel or issue preclusion, alleging that the counterclaim was barred by a ruling in a 1996 Saunders County Court case brought by Edward Haffke, a tenant at Thomas Lakes subdivision, who raised the issue of the bylaws' validity (Haffke case). The 1996 county court determined that the Association's bylaws were valid.

In the present case, the county court ruled on the Association's motion to strike at a hearing on October 21, 1997, holding that issue preclusion could be used to prevent the Owners from relitigating the bylaws' validity. The county court based this ruling on its finding in the Haffke case that the bylaws were validly adopted. In its journal entry dated December 9, 1997, the county court treated the motion to strike as a motion for summary judgment, holding that the Owners were collaterally estopped from raising the validity of the bylaws' adoption in the current cases. The Association filed several more collection cases following this order, which were consolidated for trial.

Subsequently, the Association and the Owners both filed motions for partial summary judgment on the issue of whether the Association's right to make assessments for road repairs and dredging was limited by the easements granted to the Owners by the Association's predecessors in title. On August 17, 1998, the county court sustained the Association's motion and denied the Owner's motion for partial summary judgment, concluding that the assessment provisions contained in the bylaws superseded the easement provisions and governed the assessments at issue. Trial was held before the county court on August 17. At trial, the county court stated that its previous decision on collateral estoppel was applicable to all of the consolidated cases. The county court found in favor of the Association in its order of September 8, ruling that the assessments should be calculated according to the bylaws formula, rather than by the Association's prior course of dealing. The court reasoned that the bylaws were in effect on the date of the flood which precipitated the assessments, so the assessment formula in the bylaws should control. The county court also awarded prejudgment interest to the Association without specifying a date or specific interest rate in the ruling.

From these rulings, the Owners appealed to the Saunders County District Court. The district court reversed the county court's ruling on the collateral estoppel issue, finding that the validity of the bylaws could be relitigated. In its journal entry of March 22, 1999, the district court reversed, and remanded for further proceedings. From the district court's decision, the Association appeals on the collateral estoppel issue. The Owners have filed a cross-appeal on the issues of whether the bylaws, the easements, or the Association's course of dealing control the assessment amount and whether prejudgment interest was properly awarded.

ASSIGNMENTS OF ERROR

The Association asserts that the district court erred in reversing the county court's ruling on the applicability of issue preclusion as a means to prevent the Owners from litigating the validity of the Association's governing bylaws.

In the Owners' cross-appeal, they assert that the county court erred in (1) granting the Association's motion for partial summary judgment, finding that the bylaws, not the easements, governed the Owners' obligation to pay for improvements; (2) failing to hold that the Association's course of dealing established that the Owners were only responsible for one-half of the costs of road repair and the dredging assessments; and (3) awarding prejudgment interest to the Association.

STANDARD OF REVIEW

Neb.Rev.Stat. § 25-2733(1) (Reissue 1995), regarding appellate review by the district court, provides in pertinent part that "the district court shall review the case for error appearing on the record made in the county court. The district court shall render a judgment which may affirm, affirm but modify, or reverse the judgment or final order of the county court." The district court may enter judgment in accordance with its "findings." § 25-2733(1).

A county court's factual findings in a bench trial of a law action have the effect of a verdict and will not be set aside unless such findings are clearly erroneous. Holden v. Urban, 224 Neb. 472, 398 N.W.2d 699 (1987). When a district court as an appellate court reviews a judgment in a bench trial of a law action in a county court, it does not reweigh evidence, but considers the judgment in the light most favorable to the successful party and resolves evidentiary conflicts in favor of the successful part...