Harrison v. Casa De Emdeko, Inc.

418 P.3d 559

LaVonne HARRISON, Trustee of LaVonne's Family Trust, a Revocable Living Trust Agreement dated September 28, 1989, Petitioner/Plaintiff/Counterclaim Defendant/Appellant,

v.CASA DE EMDEKO, INCORPORATED, a Hawaii nonprofit corporation, Respondents/Defendants/Counterclaim Plaintiffs/Appellees.

SCWC-15-0000744

Supreme Court of Hawai‘i.

APRIL 26, 2018

Francis L. Jung, Kailua Kona, for petitioner.

Wesley H. H. Ching, Honolulu, for respondent.

RECKTENWALD, C.J., NAKAYAMA, McKENNA, POLLACK, AND WILSON, JJ.

OPINION OF THE COURT BY McKENNA, J.

I. Introduction

LaVonne Harrison, Trustee of LaVonne's Family Trust, a Revocable Living Trust Agreement Dated September 28, 1989 ("Harrison"), an owner of two commercial apartments within a mixed-use development project managed by Casa de Emdeko, Incorporated, a Hawai‘i nonprofit corporation, also known as Casa De Emdeko Association of Apartment Owners ("Casa"), filed a complaint in the Circuit Court of the Third Circuit¹ ("circuit court") on March 4, 2013, alleging she was improperly assessed for expenses that should have been charged only to residential apartment owners. Specifically, Harrison asserts she should not have been assessed for expenses related to elevators, lanai railings, drains, cable television, and pest control, because these expenses are attributable solely to residential apartments.

In the circuit court, Harrison moved for summary judgment. In its memorandum in opposition, Casa asserted that based on case law allowing entry of summary judgment for a non-moving party where there are no genuine issues of material fact, the circuit court should grant summary judgment in its favor. The circuit court treated Casa's memorandum as a cross-motion for summary judgment and granted summary judgment in Casa's favor. It concluded as a matter of law that the disputed assessments were not for limited common elements exclusive to the residential apartments, as argued by Harrison, but rather were for common elements, and were therefore expenses for which Harrison must pay her pro rata share. The circuit court further concluded Harrison was estopped from disputing the expenses because she knew or should have known that Casa had been assessing her for the disputed items for quite some time.

In its June 20, 2017 Summary Disposition Order ("SDO"), the Intermediate Court of Appeals ("ICA") concluded the circuit court erred in granting summary judgment in favor of Casa with respect to the cable television and pest control expenses because it was unclear whether these assessments related to common elements or limited common elements. The ICA also concluded that pursuant to the Restated Declaration of Horizontal Property Regime and Hawaii Revised Statutes ("HRS") Chapter 514A (2006), the elevators, lanai railings, drains, and cable television wires are common elements, expenses for which Harrison was required to contribute. The ICA also concluded, however, that Harrison was not estopped from disputing the assessments for cable television services and pest control expenses.

Harrison raises a single question in her Application for Writ of Certiorari ("Application"):

Did the Intermediate Court of Appeals of the State of Hawaii ("ICA") err in affirming the Circuit Court of the Third Circuit, Kona Division's ("Circuit Court") granting of Summary Judgment and Final Judgment; finding that the expenses and costs to maintain interior elevators, interior lanais and related interior improvements located solely within the residential buildings of the Casa de Emdeko Condominium Project and which are reserved exclusively for residential purposes, are "common elements" for which the commercial units of Cas[a] de Emdeko Condominium Project, located entirely in a separate building without elevators, are subject to assessments?

(Emphasis omitted.)

For the reasons explained below, we hold that the elevators and lanai railings of this project are limited common elements, expenses for which Harrison was not required to contribute as an owner of commercial apartments. We also hold that genuine issues of material fact precluded summary judgment as a matter of law as to whether Harrison is liable for the challenged expenses relating to the drains and cable television wires. We also hold that the circuit court erred in alternatively granting summary judgment based on estoppel by acquiescence as to all items, as genuine issues of material fact also exist as to that defense.

Therefore, we affirm the ICA's SDO and its July 31, 2017 Judgment on Appeal ("JOA") as to its rulings regarding the cable television service and pest control services expenses and otherwise vacate the SDO and JOA. The circuit court's "Order Denying Plaintiff's Motion for Summary Judgment, Filed 4/17/14 and Granting Defendant Casa de Em Deko, Incorporated's Cross Motion for Summary Judgment," filed on July 22, 2014, and the "Amended Final Judgment," filed on October 8, 2015, are vacated in their entireties, and this case is remanded to the circuit court for further proceedings consistent with this opinion.

II. Background

A. Facts

Casa is a Hawai‘i nonprofit corporation organized and incorporated for the purpose of managing, maintaining, protecting, and preserving 106 residential condominium apartments and three commercial apartments located in North Kona, Hawai‘i ("the Project"). There are five buildings in the Project—two three-story buildings, designated as Wing A and Wing B, containing only residential apartments, and three two-story buildings, designated as Building C, Building D, and Building L, each containing and constituting one commercial apartment.

The Project was first established pursuant to a Declaration of Horizontal Property Regime, with attached bylaws, dated February 19, 1969.² Since 1995, the Project has been governed by a Restated Declaration of Horizontal Property Regime and By-Laws of Casa De Emdeko dated February 3, 1995 ("Declaration" or "Casa Declaration").³

Since 1982, Harrison has been the owner of two commercial apartments, Apartments C and D, which are buildings C and D of the Project, and has a 6.726% ownership interest in the Project.⁴ Harrison also served on Casa's Board of Directors ("Board") from at least 2001 to 2011. Her two commercial apartment unit buildings do not have elevators, cable television, or lanais, and they are physically separated from Wings A and B, the two three-story buildings that contain residential apartments.

Pursuant to Section M of the Casa Declaration, a Maintenance Reserve Fund was created into which all apartment owners must pay to cover their respective obligations "to provide for utilities, insurance, maintenance, and repair of the common elements and other expenses of administration of the project, which shall be deemed conclusively to be a common expense of the project."⁵ Pursuant to Section M, the apartments are assessed dues that are deposited into Casa's "maintenance" and "reserve" accounts for the purpose of maintenance, repair, and replacement of both "common elements" and "limited common elements" of the entire Project.

B. Procedural History

1. Circuit Court Proceedings

a. Complaint

On March 4, 2013, Harrison filed a civil complaint against Casa, seeking declaratory relief, damages, and attorneys' fees and costs. She alleged that between 2010 and 2013, she was improperly assessed for amounts paid into the "reserve" account" for residential elevators, lanai railings and drains, which were for "limited common elements" attributable solely to residential apartments. She also asserted that between 2009 to 2013, she was improperly assessed for amounts paid into the "maintenance" account" for cable TV, pest control and elevator maintenance costs. She alleged these funds were actually for "limited common elements," attributed solely to residential buildings and apartments, for which she was not responsible. Harrison alleged that Casa therefore violated the Casa Declaration and applicable law.

On October 15, 2013, Casa filed its answer and a counterclaim seeking declaratory relief that (1) its assessments were lawful; and (2) Harrison had an obligation to pay the assessments.

b. Motions for Summary Judgment

On April 17, 2014, Harrison filed a motion for summary judgment. Harrison and Casa repeat their various legal arguments in the circuit court, on appeal to the ICA, and on certiorari to this court. Therefore, their arguments are discussed and analyzed in the Discussion section, Section IV below.

To summarize, in her motion, Harrison argued she was improperly assessed for costs relating to elevators, stairways, walkways, lanais, lanai railings, drains, cable television, pest control, and elevator maintenance because they related to residential building limited common elements. She attached Casa's maintenance fee calculations from 2006 to 2013 ("maintenance fee calculations") and Casa's "Reserve Expenses Per Financial Statements 10/01/03-09/30/2012" to her motion.

In its June 12, 2014, memorandum in opposition, in summary, Casa argued the disputed expenses related to common elements, not limited common elements. In addition, Casa argued that Harrison's claims were barred by estoppel by acquiescence and consent since she had been an owner of the commercial apartments for 30 years and had served on the Board from at least 2001 to 2011, but had not objected to the disputed items until recently. Casa then argued that Flint v. MacKenzie, 53 Haw. 672, 673, 501 P.2d 357, 357-58 (1972) (per curiam), authorized the circuit court to enter summary judgment in its favor as a non-moving party, based on a lack of genuine issues of material fact entitling it to summary judgment as a matter of law.⁶

Casa attached to its memorandum a declaration from Susan Gand ("Gand"), a director of Pacifica Realty Management, Inc., which was the property manager for Casa from 2003. Gand's declaration stated in relevant part that (1) Harrison served on the Board from at least 2001 until 2011, and during that time, she ...