Wellsgate Homeowners Ass'n v. Hilton

• Decision Date: 05 May 2020
• Docket Number: NO. 2019-CA-00507-COA,2019-CA-00507-COA
• Citation: 296 So.3d 744
• Parties: WELLSGATE HOMEOWNERS ASSOCIATION, Appellant v. Ashley HILTON, Appellee
• Court: Mississippi Court of Appeals

296 So.3d 744

WELLSGATE HOMEOWNERS ASSOCIATION, Appellant

v.Ashley HILTON, Appellee

NO. 2019-CA-00507-COA

Court of Appeals of Mississippi.

May 5, 2020

ATTORNEY FOR APPELLANT: M. REED MARTZ

ATTORNEYS FOR APPELLEE: JESSA KATE, CHRISTIAN CASEY LANGSTON LOTT, Booneville

BEFORE J. WILSON, P.J., WESTBROOKS AND McDONALD, JJ.

McDONALD, J., FOR THE COURT:

¶1. Ashley Suzette Hilton purchased property in the Wellsgate subdivision, which is located in Lafayette County, Mississippi, on October 5, 2017. Hilton's property was subject to two sources of rules and regulations established by the Wellsgate Homeowners Association: (1) "Declaration of Covenants, Conditions, and Restrictions For Wellsgate" (CCRs); and (2) "Declaration of Rules, Regulations and Enforcement Procedure for Wellsgate" (RREs). These included restrictions on short-term sub-leasing. Hilton rented out her house through a website called "Airbnb" for limited periods of time. On May 15, 2018, Wellsgate's management company sent a violation letter to Hilton, which she never received. On June 29, 2018, Wellsgate filed a complaint in the Lafayette County Chancery Court against Hilton to enjoin her from renting out her house in violation of the CCRs. After discovery, the matter went to trial on January 14, 2019. The court ruled in favor of Wellsgate and awarded it (1) a permanent injunction against Hilton; and (2) attorney's fees of $777.50 of the $4,774.97 that Wellsgate had requested. Wellsgate appeals the chancery court's partial award of attorney's fees. After reviewing the record, we reverse and remand.

FACTS AND PROCEDURAL HISTORY

¶2. Hilton purchased property in the Wellsgate subdivision, which is located in Lafayette County, Mississippi, on October 5, 2017. The warranty deed was filed in the Lafayette County Chancery Court on October 10, 2017. Hilton was a fifth-grade language-arts teacher, high school softball coach, and a middle school volleyball coach. To make additional income, Hilton had rented her prior home to tenants, so she decided to rent out her house in Wellsgate as well. In the spring of 2018, she listed her house as available to rent for limited periods of time on Airbnb's website. Additionally, Hilton helped other neighbors in Wellsgate set up profiles on Airbnb.com to rent out their houses.

¶3. Hilton's property was subject to covenants (CCRs), which were recorded with the Lafayette County Chancery Clerk on May 28, 1999. The CCRs contained a provision that prohibited owners of homes located in the subdivision from leasing their homes for a period of less than six months:

Lease or rental of a dwelling for residential purposes shall not be considered to be a violation of this covenant so long as the lease (i) is for not less than the entire dwelling and all the improvements thereon, (ii) is for a term of at least six (6) months, and (iii) is otherwise in compliance with the rules and regulations as may be promulgated and published from time to time by the Board of Directors. All leases shall be required to be in writing, and prior to commencement of any such lease, the Property Owner shall provide the Association and the managing agent of the Association, if any, with copies of such lease.

¶4. Additionally, the CCRs provided that violators would be required to pay the Association's attorney's fees if litigation was necessary:

Any Person entitled to file or maintain a legal action or proceeding for the actual or threatened violation or breach of this Declaration shall be entitled to recover attorney's fees and other costs and expenses attributable to such action or proceeding, and the Association shall be entitled to recover and receive any other amounts specified in Section 9 of Article IV.

¶5. Wellsgate also created a separate document, the RREs, which contained the rules and regulations for homeowners. It prohibited short-term leasing. On or about October 10, 2017, the Board of Directors for Wellsgate revised the RREs to provide:

When a violation occurs, the Association Manager shall send a violation letter to the appropriate owner/owners giving them ten days to correct the violation ... A homeowner in violation of any provision of the CCRs may request a hearing during the ten-day cure period. We will request attorney fees and court costs which will be added to the unpaid amounts and collection expenses ....

¶6. The RREs also imposed daily fines after notice of a violation was given. The daily fines accrue each night after notice that the owner advertised or made her property available for lease, rental, or other prohibited occupation. The RREs provide:

For a first violation, the daily fine shall be 75% of the advertised nightly price or $1000/day, whichever is greater. Upon a second violation by the owner, the above procedure shall be followed except that the fine shall be 85% of the advertised nightly price or $1500/day, whichever is greater. Upon a third violation by the owner, the above procedure shall be followed except that the fine shall be 90% of the advertised nightly price or $2000/day, whichever is greater.

Thus, violations of the covenants subjected homeowners to paying attorney's fees relating to violations, and the RREs subjected them to daily fines after the owner received the notification of the violation.

¶7. On May 15, 2018, the Association's management company sent a notice-of-violation letter to Hilton.¹ In the letter, the Association noted that her property was listed for rent on Airbnb.com in violation of the CCRs. The letter requested that Hilton remove the property from the listing within ten days and cease any further attempt to lease the property except as provided in the CCRs. Additionally, in the letter, the Association stated that a failure to comply could result in legal action and fines. The letter was sent to an address in Hattiesburg, Mississippi. However, Hilton had never resided or received mail in Hattiesburg, Mississippi. Thus, Hilton never received the violation letter.

¶8. On June 29, 2018, Wellsgate filed a complaint against Hilton in the Lafayette County Chancery Court to enjoin her from renting out her house in violation of the CCRs and the RREs. In the complaint, Wellsgate sought (1) a judgment equal to the applicable daily fines, reasonable attorney's fees, court costs, and pre-judgment interest; and (2) an injunction against Hilton enjoining her from future violations of the CCRs. Hilton was served with the complaint on July 30, 2018, and filed her answer denying all claims on August 30, 2018. The answer generally denied the allegations and pleaded various generic defenses. However, the answer did not say that Hilton had stopped renting the home. From the record, it does not appear that Hilton ever informed Wellsgate that she was no longer renting the home prior to the lawsuit or the filing of her answer.

¶9. On October 4, 2018, trial counsel for Wellsgate took Hilton's deposition. In preparation for deposition, Wellsgate had propounded written discovery to Hilton, including requests for admission, interrogatories, and requests for the production of documents. Wellsgate did not receive any response to its requests until after the deposition.

¶10. At her deposition, Hilton testified that she was a member of the Wellsgate Homeowners Association. She could not remember if she was given a copy of the CCRs, but Hilton admitted that someone went over the CCRs with her when she bought her house and that she personally "skimmed" over them herself. Hilton also admitted to renting out her home on several occasions in the spring of 2018.

¶11. Hilton further testified that shortly after she received the complaint, but without notifying the Association, she deleted her profile and records from the Airbnb website. Hilton testified that her attorney told her to make sure she removed everything from the Airbnb website, which she did. Aside from Hilton's Airbnb banking deposits, all other records related to the matter were deleted once Hilton deleted her profile. Hilton also testified that she did not receive any violation letters. Additionally, Hilton testified that she did not review the CCRs carefully until after she received the notice of the lawsuit. Once she reviewed the pleadings and CCRs, she admitted she was in violation of the CCRs regarding the leasing of her home.

¶12. On January 8, 2019, Hilton moved for summary judgment² against Wellsgate on the issue of her liability for fines. In her motion, Hilton claimed that Wellsgate sent the violation letter to the wrong address in May 2018. Therefore, she allegedly did not receive notice of her violation of the CCRs until she was served with a summons and a copy of her complaint on July 30, 2018.

¶13. The matter was tried on January 14, 2019. Because Hilton had stopped leasing her home, the chancery court addressed only two issues: whether Hilton would be fined, and whether Wellsgate was entitled to any attorney's fees and costs. The daily-fines issue depended on whether Hilton had received notice of her violation against the CCRs, which was required by the RREs. Hilton testified that she did not receive any violation letters. Additionally, she testified that she only realized she was in violation of the CCRs when she received notice about the lawsuit. But she was allegedly aware of the existence of the CCRs and had "skimmed" them prior to renting out her house. Hilton also testified that she did not look at the RREs until after she was served with a copy of the complaint.

¶14. At the end of hearing testimony, the chancery court directed Wellsgate's counsel to submit any documentation to support the request for attorney's fees. Wellsgate did this in the form of an email that contained billing records on the matter.

¶15. The chancery court entered judgment in favor of Wellsgate on February 14, 2019. The court found that Hilton admitted to eleven instances where she violated the CCRs, specifically Article XI, regarding renting out her property. Therefore, the court enjoined and...