N. Fork Meadows Owners Ass'n, Inc. v. Dove

537 P.3d 258

NORTH FORK MEADOWS OWNERS ASSOCIATION, INC., Appellee,

v.Michael B. DOVE and Cassie J. Dove, Appellants.

No. 20220356-CA

Court of Appeals of Utah.

Filed September 21, 2023

Lincoln W. Hobbs, Salt Lake City, Attorney for Appellants

Justin R. Baer, Salt Lake City, Attorney for Appellee

Judge Ryan D. Tenney authored this Opinion, in which Judges Michele M. Christiansen Forster and David N. Mortensen concurred.

Opinion

TENNEY, Judge:

¶1 After Michael and Cassie Dove began constructing a home that did not conform to the rules of the North Fork Meadows Owners Association (the Association), the Association filed a complaint and motion for a temporary restraining order (TRO) seeking to halt the Doves’ construction. But the Association soon looked the other way when construction began on two other non-conforming homes in the same subdivision. The district court initially granted the Association's request for a TRO against the Doves. But it later dissolved the TRO and declined to issue a preliminary injunction, reasoning that the Association had "effectively abandoned" its claims by allowing the other construction and that the Association "would not likely prevail on the merits of the case."

¶2 The Doves subsequently filed a motion asserting that they were entitled to (1) damages and attorney fees under a rule that applies when a party has been "wrongfully restrained or enjoined," as well as (2) attorney fees under a "prevailing party" clause in the Association's governing documents. The district court denied the motion, and the Doves now challenge that ruling on appeal. For the reasons set forth below, we affirm the district court's denial of damages and attorney fees under the wrongful injunction rule, but we remand for further proceedings on the question of whether the Doves were entitled to attorney fees under the Association's prevailing party clause.

BACKGROUND

¶3 The North Fork Meadows subdivision (North Fork) is located in Weber County and includes 12 lots intended for residential development. Michael and Cassie Dove acquired one of these lots in October 2018. The following February, the Doves sought information about the status of the applicable covenants, conditions, and restrictions (CC&Rs), as well as "who approval needs to go through" for home construction. At the time, lots in North Fork were subject to the Second Amended and Restated Declaration of Covenants, Conditions, and Restrictions for North Fork (the Second Amended Declaration). The Second Amended Declaration provided that in a legal action, "the prevailing Owner(s) (or Association, as the case may be) ... shall be entitled to recover from the other Owner(s) all costs and expenses incurred in connection therewith, including reasonable attorneys’ fees and costs."

¶4 After the Doves did not receive a response to their initial inquiry about North Fork's CC&Rs, they made additional efforts. In March 2019, the Doves received the name and contact information for a person who owned the majority of the North Fork lots and who also sat on the Association's board of directors and architectural control committee. The Doves sent their proposed building plans to the majority owner in April 2019, after which he confirmed receipt of the plans and indicated that he would pass them along to the Association's design committee. When the Doves again requested that the majority owner send them North Fork's CC&Rs, they received no response.

¶5 In May 2019, the Doves met with a member (Board Member) of the Association's board of directors. Although the Doves’ building plans were not officially approved or disapproved at this meeting, Board Member told the Doves that he would take a "soft" approach to helping them conform with the Second Amended Declaration. The following month, Board Member sent the Doves a message asking them to "keep the conversation going."

¶6 Despite the lack of official approval, the Doves began constructing their home in early July 2019. After construction began, however, Board Member sent messages to the Doves and their builder stating that "this home has not been approved by the [Association] due to design concerns." Board Member claimed that the Doves’ home did not conform to the Second Amended Declaration "because of the position of the three-car garage facing the street, the height of the garage, the color and materials used for the exterior and the percentage of the stone versus other materials." The Doves nevertheless continued constructing their home.

¶7 On October 1, 2019, the Association filed a complaint against the Doves, accompanied by a request for a TRO, "followed by a preliminary injunction," that would prevent further construction on the Doves’ home. But after the Association filed its complaint against the Doves, construction commenced on two more North Fork lots, both of which were owned by a member of the Association's board of directors, and both of which also contained "numerous deviations from the requirements of the Second Amended Declaration."

¶8 In January 2020, the district court granted the Association's request for a TRO against the Doves. The court then scheduled an evidentiary hearing to determine "whether the temporary restraining order should be terminated" or instead "converted to a preliminary injunction," and that hearing was held the following month.¹

¶9 In March 2020, the district court issued a decision that dissolved the TRO and denied the request for a preliminary injunction. In its assessment of whether to grant the preliminary injunction, the court looked to the grounds set forth in rule 65A(e) of the Utah Rules of Civil Procedure. Under the version of the rule then in effect, one of the grounds was that the "threatened injury to the applicant outweighs whatever damage the proposed order or injunction may cause the party restrained or enjoined." Utah R. Civ. P. 65A(e)(2) (2020). On this, the court concluded that "both parties [were] equally harmed" because if "the court determines the harm to [the Association] to be greater, then [the Doves] would be required to deconstruct their home at significant cost," and if "the court finds for [the Doves], [the Association] will have a non-conforming interloper in the subdivision affecting aesthetic presentation and future marketing." One of the other grounds was that there was "a substantial likelihood that the applicant will prevail on the merits of the underlying claim, or the case presents serious issues on the merits which should be the subject of further litigation." Id. R. 65A(e)(4). With respect to this ground, the court concluded that by allowing non-conforming construction to proceed on the other lots, the Association had "effectively abandoned certain material sections" of the Second Amended Declaration. The court thus concluded that the Association "would likely not prevail on the merits of the case," and it accordingly decided to dissolve the TRO and deny the request for a preliminary injunction. At the close of its decision, the court ordered the Doves to "draft an order consistent with this memorandum decision and submit the order" to the Association.

¶10 The proposed order that the Doves subsequently submitted set forth the reasons why the TRO was being dissolved. The conclusion of this proposed order also stated that the Doves were "entitled to an award of attorneys’ fees and damages arising from the entry of the [TRO]" and that "such damages shall be ascertained at a hearing to be held hereafter, or at the trial in this matter." The Association filed an objection to this proposed order, taking issue with the insertion of language awarding attorney fees and damages to the Doves. As part of this objection, the Association noted that construction on the other non-conforming homes had not begun until after the Association had filed its complaint against the Doves. The Association argued that even if the subsequent construction could constitute abandonment, the TRO was not wrongful as to the Doves and should not result in an award of damages or attorney fees.

¶11 In a subsequent ruling, the district court held that "[a]ny request for attorney fees by either party shall be reserved until the matter is resolved on the merits." And the court also "acknowledge[d]" the Association's "position that at the time the lawsuit commenced," construction on the other non-conforming homes had not yet begun and "that the lawsuit itself may not have been without merit."

¶12 After some additional litigation that's unrelated to the issues on appeal, the court issued a notice of intent to dismiss the case for lack of prosecution. The Doves objected to the court's notice of intent, asking the court to instead dismiss the case pursuant to a motion to dismiss that they were filing contemporaneously with their objection. The apparent reason for this request was that the Doves’ motion to dismiss contained a request for "an award of attorney fees to [the Doves]" and a request for an award of "damages arising from the wrongful issuance of a [TRO]." In the Doves’ view, they were entitled to (1) both attorney fees and damages under rule 65A(c)(2) of the Utah Rules of Civil Procedure, which applies when a party "is found to have been wrongfully restrained or enjoined," and (2) attorney fees under the provision in the Second Amended Declaration that awarded "costs and reasonable attorney fees" to the "prevailing party in an action for the enforcement of any provisions of this Declaration." The Association later filed a response in which it did not oppose the request for a dismissal of the case, but in which it did oppose the request for attorney fees and damages. The Association maintained that "[a]lthough the Court did not grant a preliminary injunction, the [TRO] was not wrongfully issued."

¶13 The district court subsequently held a hearing on the Doves’ request for attorney fees and damages, after which it issued a ruling denying the request and dismissing the case with prejudice....