No. 14435
IN THE SUPRElME COURT OF THE STATE OF MONTANA
1979
IDABEL McLEISH JORDAN, ARTHUR McLEISH
JORDAN and ROSEMARY J. JORDAN,
Plaintiffs and Appellants,
ELIZABETHAN MANOR, et al.,
Defendants and Respondents.
Appeal from: ~istrictCourt of the Thirteenth Judicial District,
Honorable Charles Luedke, Judge presiding.
Counsel of Record:
For Appellants:
Towe, Ball, Enright & Mackey, Billings, Montana
Gerald Neely argued, Billings, Montana
For Respondents:
Crowley, Haughey, Hanson, Toole & Dietrich, Billings,
Montana
Ronald Lodders argued, Billings, Montana
Submitted: February 6, 1979
Decided: APR 2 1979
Filed: -
@R 2 F 1Q?s
-,
Mr. Justice John C. Sheehy delivered the Opinion of the
Court.
Plaintiffs appeal from an order of the District Court,
Yellowstone County, granting partial summary judgment in
favor of defendant Elizabethan Manor in an action against it
and one other party.
Elizabethan Manor is a condominium project conceived by
three Billings developers. Desiring to obtain financing for
their project, the developers entered into subscription and
purchase agreements with interested individuals in which the
individuals agreed to purchase certain units of the condominium
to be constructed. In these agreements the prospective unit
owners acknowledged receipt of copies and subscribed to the
condominium declaration and bylaws. Plaintiff Jordan signed
her agreement on September 21, 1971 as indicated by the
record before this Court.
On November 21, 1971, the developers purchased the land
upon which the condominium units were eventually constructed.
On June 1, 1972, pursuant to section 67-2315, R.C.M. 1947,
now section 70-23-302 MCA, the developers filed as a preliminary
declaration and bylaws, the documents represented by the
copies attached to the subscription and purchase agreements.
These documents indicated how the condominium would be
operated once it was completed and had formal existence, and
were virtually identical to the final documents later certified
and filed. Between June 15, 1972 and November 9, 1972 the
developers executed warranty deeds to the separate units to
individuals who had signed the purchase agreements.
The developers on March 22, 1973 filed the final signed
declaration, and a certificate that the bylaws had been
adopted and signed by two of the developers, one as chairman
of the board of directors of the association of unit owners
and one as secretary of the association. This action was
pursuant to section 67-2303, R.C.M. 1947, now section 70-23-
103 MCA, and section 67-2320, R.C.M. 1947, now section 70-
23-307 MCA. As indicated above, these documents were virtually
identical to the copies of documents attached to the subscription
and purchase agreements which were acknowledged and subscribed
to by each individual subscriber and future owner. On
December 11, 1973, at the annual meeting of the defendant
association a majority of the association approved the
bylaws filed on March 22, 1973, and further ratified all
acts of the directors to December 11, 1973.
After the condominium had been functioning for sometime
in a communal living arrangement involving plaintiff and the
Idabel Jordan
other apartment owners, plaintifdbecame dissatisfied with
certain aspects of the situation and stopped paying her
assessed share of the common expenses as provided for in the
bylaws. A series of unpleasant encounters between plaintiff
and other members of the association followed.
On August 20, 1974, plaintiff filed a two-count
complaint in the District Court for Yellowstone County.
Count one named Elizabethan Manor Association as defendant
and alleged the statutory procedure for establishing a
condominium had not been correctly followed. The first
count sought a declaratory judgment as to the rights, status
and legal relation between plaintiffs and the association,
a complete financial accounting from the association to
plaintiff, and an injunction enjoining the association
from "acting in a manner contrary to the law and to the
rights of plaintiffs with respect to the operation and
maintenance of said condominium." Count two named as
defendant a property management firm which was administering
the affairs of the condominium. The partial summary judgment
entered by the District Court does not address the second
count and that count is therefore not involved in this
appeal.
Elizabethan Manor filed an answer and counterclaim
denying any failure to comply with the condominium laws
and claiming damages for arrearages in the assessment of
common expenses. The counterclaim prayed for judgment for
the arrearages and foreclosure and sale of plaintiff's
interest in the condominium unit pursuant to sections 67-
2326 and 2327, R.C.M. 1947, now sections 70-23-607 and 70-23-608
MCA .
Motion for partial summary judgment as to the matters
concerning them was made by Elizabethan Manor Association
on October 28, 1976. After briefs had been submitted by
both parties, the District Court entered an order of partial
summary judgment in favor of the association to the extent
the final declaration and bylaws of the condominium were
valid and enforceable and the association was entitled to
judgment against Mrs. Jordan for arrearages in the assessment
for admitted common expenses. The court reserved judgment
on expenditures not admitted by plaintiff. Foreclosure was
granted but stayed on the condition the amount of admitted
common expenses due be made current forthwith and thereafter
paid regularly when due. The order of partial summary judgment
was made final by certification pursuant to Rule 54(b),
M0nt.R.Civ.P. on April 24, 1978. This appeal followed.
Elizabethan Manor cross-appealed from that portion of
the partial summary judgment entered by the District Court
which denied respondent its attorney fees as claimed in its
motion for summary judgment.
Before proceeding with a discussion of the merits in
this appeal it is necessary to indicate the scope of our
consideration of this case. This matter is before this
Court on an appeal from a partial summary judgment, properly
certified as final, declaring only that the final declaration
and bylaws were valid and thus the condominium had proper
existence, defendant Elizabethan Manor was entitled to a
judgment for plaintiffs'share of admitted expenditures, and
that defendant Elizabethan Manor was entitled to a foreclosure
of its lien for such expenditures. Such foreclosure was
stayed upon the condition the plaintiff pay her share of
expenses determined as due and owing and thereafter regularly
pay the assessed share of common expenses. These are the
only matters which have been finally determined by the
District Court. It has reserved issues on the remaining
challenged expenses and thus still has jurisdiction over
these two parties. We therefore decline plaintiff Jordan's
invitation to rule on issues not addressed by the District
Court, preferring to wait until a final judgment on those
issues has been presented to us. See Rule 1, M0nt.R.App.Civ.P.
In reviewing an appeal from a summary judgment this
Court's concern is whether the moving party is entitled to
judgment on the law applicable to the facts established by
the pleadings, depositions, answers to interrogatories and
admissions on file together with affidavits appearing in the
record. Audit Services, Inc. v. Haugen (19791, Mont .
, 591 P.2d 1105, 36 St.Rep. 451; State v. Jennings
(Alaska 1976), 555 P.2d 248; Cherry v. Vanlahi, Inc. (19751,
216 Kan. 195, 531 P.2d 66; Rule 56(c), M0nt.R.Civ.P. Reviewing
the record it is apparent the only issue in this appeal
between these parties is the validity of the procedure
establishing the condominium project. Plaintiff has admitted
expenditures forming the basis of the judgment, questioning
only their validity as to the authority of the condominium
-5-
to make the assessment, alleging it was not properly formed.
Thus, we are able to frame the issues presented by this
appeal in the following manner. First, was the District
Court correct in ruling the final declaration and bylaws
were valid? Second, was it proper for the District Court to
stay the foreclosure of the lien upon the condition plaintiff
Idabel Jordan regularly pay the future charges not yet
assessed? Third, was the amount of the judgment here
correctly computed? Finally, is defendant Elizabethan Manor
entitled to attorney fees in this action?
The initial issue presents a question of first impression
to this Court which involves the statutory construction of
provisions of the Montana Unit Ownership Act, sections
67-2301, et seq., R.C.M. 1947, now sections 70-23-101, et
seq., MCA. Section 67-2303, R.C.M. 1947, as it read at the
times pertinent hereto stated that in order to submit any
property to the provisions of the act a "declaration" must
be recorded by the owner of the property. Section 67-
2304, R.C.M. 1947, now section 70-23-401 MCA, indicates that
once the property is submitted to the act the individual
units may be conveyed, encumbered or subjected to other
"juridic acts". Section 67-2302, now section 70-23-102 MCA,
defines "unit" as a part of the property intended for indep-
endent use; "unit owner" as a person owning a unit in fee
simple; and "association" as all the unit owners acting in
accordance with the declaration and bylaws.
Plaintiff argues the statutory requirements for esta-
blishment of a condominium project have not been complied
with and therefore the assessments made against her unit are
without legal authority. This argument is based on the
contention that when the final declaration, which was
signed by the developers, was filed in March 1973 the
developers were not "owners" and thus not capable of
executing that document. The developers had previously
executed subscription agreements and warranty deeds to
the units to the prospective grantees and thus, contends
plaintiffs were not owners of the property entitled to
file the declaration. Plaintiffs aaso contend the bylaws
were improperly adopted and certified. These bylaws were
signed and certified by the developers as owners and
officers of the association and were filed simultaneously
with the final declaration on March 22, 1973. Because
the developers were not owners as plaintiffs have previously
argued, and because the bylaws were not adopted by each of
the persons to whom the developers had executed warranty
deeds and were not certified by officers of an association
of those persons, plaintiffs contend the bylaws were in-
effectual and actions taken pursuant to those bylaws were
without legal authority. We do not agree with this argument.
The filing of the final declaration is the most
significant event in the establishment of a condominium.
It is this action which subjects the property in question to
the provisions of the act and it is this subjection which
allows the units of the condominium to be conveyed as
"individual" units. In construing an act very similar to
Montana's, the Hawaii Supreme Court stated that the filing
of the final declaration submitting the property to the
provisions of the act "makes the property susceptible
- conveyance - individual units."
to of State Savings & Loan
Association v. Kauaian Development Co. (1969), 50 Haw. 540,
445 P.2d 109, 116 (emphasis added.) Our own statute indicates,
as did the Hawaiian provision, that it is only while the
property is submitted to the Unit Ownership Act, via
the final declaration, that a unit may be individually
conveyed and encumbered. Section 67-2304, R.C.M. 1947,
now section 70-23-401 MCA. We therefore conclude that
until the final declaration is filed those who are the
fee owners of the condominium project are the fee owners
of the units of the project. As such, these persons are
the parties contemplated by statute to sign and file the
final declaration. Section 67-2303, R.C.M. 1947, now
section 70-23-103 MCA. In the present case the developers
of the project were such parties and did so validly file
the final declaration. Because no units may be individually
conveyed, or encumbered until the final declaration is filed
submitting the property to the act, the subscription agree-
ments and warranty deeds divested the developers of no
interest in the property until the final declaration was
filed;, thus they remained the fee owners until that time.
See, 15A Arn.Jur.2d Condominiums S26, p. 855.
Having determined the final declaration was properly
executed and recorded, we now consider plaintiffs:
arguments with respect to the bylaws. As we have stated
above, the fee owners of the units until the final declara-
tion is recorded, and thus "unit owners" by statutory
definition (section 67-2302(14), R.C.M. 1947, now section
70-23-102(17) MCA), are those persons who own the condominium
project, here the developers. The statutory scheme requires
all unit owners to adopt the bylaws by which the association
of unit owners is governed and for the presiding officer
and secretary of the association to certify these bylaws.
This certification must be recorded simultaneously with
the recording of the final declaration. Section 67-2320(2),
R.C.M. 1947, now section 70-23-307(2) MCA. The developers
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in this case signed the bylaws as unit owners and certified
the bylaws as officers of the association of unit owners
of which they were the sole members. Appellant argues
this procedure was not valid. -
We conclude it was valid.
Until the final declaration is filed, the fee owners of
the project are the fee owners of the units and thus the
"unit owners". As "unit owners" they are the "association"
who must adopt bylaws and whose officers must certify the
bylaws, such certificate to be recorded simultaneously
with the final declaration. This is what happened in the
present case and which we determine was not improper. We
note, moreover, that in the present case all future unit
owners, including plaintiff, affirmed virtually the same
declaration and bylaws when they signed the subscription
and purchase agreements. Furthermore, once the final
declaration was recorded thus giving life to the otherwise
inert warranty deeds to the individual purchasers, these
owners then constituted the association and could amend
the bylaws if they desired.
We therefore hold the District Court was correct in
its conclusion the condominium was properly formed and
affirm the summary judgment on this point.
We now must consider whether the District Court could
correctly stay the foreclosure of the lien provided for by
statute upon the condition the plaintiff pay all overdue
assessments determined to be owing and to regularly pay
all future assessments for common expenses. We note
,
preliminarily that section 67-2326 (1) R.C.M. 1947, now
section 70-23-607(1) MCA provides for a lien against the
individual unit for common expenses. This lien is perfected
by filing a claim containing a true statement of the account
due for such common expenses. Section 67-2326(2), R.C.M. 1947,
-9-
now section 70-23-607(2) MCA. The lien in this case was
properly perfected to the extent of the supporting
account. Because the condominium project was validly
Idabel Jordan
established the expenditures plaintiff/has admitted are
proper as against her and thus the lien could be foreclosed.
The question that remains is whether the District Court
could impose a stay with respect to the payment of
current and future assessments.
Section 67-2326(1), R.C.M. 1947, now section 70-23-607(1)
MCA, provides for a lien upon the individual unit for all
common expenses chargeable to that unit. The defendant
association perfected its lien in the manner provided for
in section 67-2326 (2), R.C.M. 1947, now section 70-23-607 (2)
MCA and it is this lien defendant association sought to
foreclose in its counter-claim. The District Court granted
the foreclosure but stayed its execution upon the condition
Idabel
set forth above. However, if plaintiff/Jordan complies
with that part of the condition requiring payment of common
expenses currently due and owing, the lien of the defendant
association is extinguished. Payment of the debt upon which
a lien is based extinguishes the lien, and thus here also
the foreclosure based upon it. Bushman Construction Co.
v. Air Force Academy Housing, Inc. (10th Cir. 1964), 327
F.2d 481, 485; Richter v. Walker (1951), 36 Cal.2d 634,
226 P.2d 593, 599; 57 C.J.S. ~ e c h a n i dLiens S247. The
debt in this case obviously consists only of those assess-
ments due up until the time of judgment of foreclosure or
otherwise as any future assessments are undetermined
and not yet in issue. In this circumstance there is
nothing to stay with respect to payment of future assessments,
as payment of currently due and owing assessments extinguishes
-10-
the lien and thus the basis for foreclosure. We therefore
modify the District Court's partial summary judgment by
striking that portion of the judgment staying the execution
of foreclosure on the condition the plaintiff "thereafter
regularly pay the common expenses as assessed when due . . ."
and by limiting the stay to the condition plaintiff pay
those expenses determined by the District Court as currently
owing.
We are next asked to consider the correctness of the
Idabel
District Court's computation of plaintiff/Jordants share of
admitted expenditures. Defendant Elizabethan Manor has
Idabel
agreed with plaintiff/Jordanls argument that the amount of
common expenses plaintiff has paid should be deducted from
her assessed share and not from the total common expenditures
before computing her share as was done by the District Court.
The only question remaining are the numbers to be used in
Idabel
this computation. ~laintiff/Jordan argues she has been
assessed twice for amounts placed in reserve accounts and
would therefore not include those amounts in her computation.
The bylaws of the association, which we have upheld herein,
clearly provide for such reserves. See, Bylaws, Art. VI,
Sl(d). The maintenance of such reserves by condominium
associations has been judicially sanctioned. Association
of Unit Owners of the Inn of the Seventh Mountain v. Gruenfeld
(1977), 277 Ore. 259, 560 P.2d 641, 644. Because
plaintiff has not paid any expenses except for the amount
credited below, she could not have already made her contribution
to the reserve account and thus is not being twice assessed
for the same expense. The judgment of the District Court
is therefore modified to comport with the following computation.
Total of association checks
for common expenditures
Sept. 1972 - October 1976
Less:
Total of checks not "admitted"
reserved by the court 4,840.44
Total to be divided fourteen ways
(Fourteen individual units) 26,326.87
One-fourteenth of above 1,880.49
Less:
Jordan payment
Total due by Jordan under judgment
dated April 24, 1978 $1,225.74
The final matter in this appeal is defendant association's
claim for attorney fees. Defendant is correct in its
statement that this Court has held attorney fees are
available when provided for in an agreement between the
parties to a lawsuit. Kintner v. Harr (1965), 146 Mont.
461, 408 P.2d 487. In this cause the declaration provided
for recovery of attorney fees by the prevailing party in
litigation resulting from the default of payment of common
expenses. Final Declaration, 516 (a), (c). The operative
words are "the prevailing party". As this action now stands
we do not perceive a prevailing party with respect to a
final, complete judgment. The District Court has only
decided, and we have affirmed, that the condominium was
validly formed and that the defendant is entitled to a
judgment of $1,225.74. There remains to be decided the
validity of plaintiffs' assessed share of over $4,80O,.QO in
common expenses and the necessity of an accounting. A
prevailing party is the one who has an affirmative judgment
rendered in his favor at the conclusion of the entire case.
Ennis v. Ring (1959), 56 Wash.2d 465, 341 P.2d 885, 889. The
entire case here has not been concluded as between these two
-
parties. We therefore affirm the District Court's ruling
at this point that each party bear their own attorney fees.
Judgment modified in part and affirmed in part, and
remanded for further proceedings in accordance with this
opinion. The parties shall bear their own appeal costs.
--
Justice
We Concur:
Chief Justice