SUSAN POWELL, JIM VAUGHN, SHARON VAUGHN, DON GANO, HERBERT TREFTZ, RUTH TREFTZ, CAROLE SIX, and VELMA LEFFERT, Petitioners-Appellants, vs. CEDAR TREE VILLAGE HOMEOWNERS ASSOCIATION, an Iowa non-profit corporation, Respondent-Appellee.
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IN THE COURT OF APPEALS OF IOWA
No. 8-088 / 07-1109
Filed March 14, 2008
SUSAN POWELL, JIM VAUGHN, SHARON
VAUGHN, DON GANO, HERBERT TREFTZ,
RUTH TREFTZ, CAROLE SIX, and VELMA
LEFFERT,
Petitioners-Appellants,
vs.
CEDAR TREE VILLAGE HOMEOWNERS ASSOCIATION,
an Iowa non-profit corporation,
Respondent-Appellee.
________________________________________________________________
Appeal from the Iowa District Court for Scott County, Mary E. Howes,
Judge.
Members of a homeowners’ association appeal from a district court
decision denying their petition for a declaratory judgment that the association
improperly levied an assessment against them.
AFFIRMED IN PART,
REVERSED IN PART, AND REMANDED.
Richard A. Davidson and David A. Dettman of Lane & Waterman, L.L.P.,
Davenport, for appellants.
Stephen T. Fieweger and H. Karl Huntoon of Katz, Huntoon & Fieweger,
P.C., Moline, Illinois, for appellee.
Considered by Huitink, P.J., and Zimmer and Miller, JJ.
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MILLER, J.
Susan Powell, Jim and Sharon Vaughn, Don Gano, Herbert and Ruth
Treftz, Carole Six, and Velma Leffert appeal from a district court decision denying
their petition for a declaratory judgment that the Cedar Tree Village Homeowners
Association (Association) improperly levied an assessment against them. We
affirm in part, reverse in part, and remand for further proceedings consistent with
this opinion.
I.
BACKGROUND FACTS AND PROCEEDINGS.
The petitioners own lots in Cedar Tree Village, a planned unit
development in Bettendorf, Iowa, and reside in townhomes constructed on the
lots. The lots in the development are subject to a document entitled “Restrictive
and Protective Covenants and Conditions” (RPC) recorded by the developer in
1976. The RPC identifies certain lots in the development as “Common Area[s]”
owned by the Association “for the common use and enjoyment of the members of
the Association.” All of the owners of the other lots located in the development
are members of the Association, which was incorporated “[t]o provide for the
maintenance, preservation, and architectural control of the residence Lots and
Common Area within . . . Cedar Tree Village.”
There are 191 attached townhome units in the development. The six units
on the lots owned by the petitioners were constructed in 1996 with vinyl siding.
The other 185 units in the development were built approximately twenty-five to
thirty years ago with wood siding, which has deteriorated in condition over time.
The exterior condition of the townhomes with wood siding has resulted in
continuing problems for the Association.
The Association consequently
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established a “re-siding committee” in 1991. That committee, however, was not
certain about the Association’s responsibilities for the exterior siding of the
townhomes. In 1995, the Association’s board of directors sought advice from
their attorney, who stated he believed the Association had an obligation to
maintain the exteriors of the townhomes pursuant to Article VI, paragraph 4 of
the RPC. That provision requires the Association to provide
exterior maintenance upon each Lot which is subject to assessment
hereunder as follows: Paint and maintain gutters, downspouts,
exterior building surfaces, . . . and other exterior improvements,
excluding driveways, patios and enclosed courtyards. . . . The
Association shall replace the roofs on dwelling buildings when
necessary due to age.
Article IV of the RPC, “Covenant for Maintenance Assessments,”
authorizes the Association to collect “(1) annual assessments or charges, and (2)
special assessments for capital improvements, such assessments to be
established and collected from time to time.” Paragraph 3 of that article sets
forth the maximum annual assessment the Association is allowed to charge its
members and states “the maximum annual assessment may be increased above
the limitation . . . only by a vote of two-thirds (2/3) of each class of Members . . .
at a meeting duly called for this purpose.” Paragraph 4 states that in addition to
the annual assessments,
the Association may levy, in any calendar year, a special
assessment applicable to that year only for the purpose of
defraying . . . the cost of any construction, reconstruction, repair or
replacement of a capital improvement upon the Common Area, . . .
provided that any such assessment shall have the assent of twothirds (2/3) of the votes of each Class of Members . . . at a meeting
duly called for this purpose.
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Despite measures taken by the Association to correct the problem, the
exteriors of the townhomes with wood siding continued to deteriorate. 1
The
Association’s board of directors formed a “Siding Taskforce” toward the end of
2005. At a special meeting in March 2006, the taskforce recommended that the
siding on the 185 units with wood siding be replaced with vinyl siding. The
Association’s members approved “a special assessment of the membership of
$1,000.00 per unit” for installation of the vinyl siding.
The petitioners refused to pay the special assessment.
They filed a
petition for declaratory judgment, seeking a determination “as to whether the
Association can assess a special assessment for the purpose of raising the funds
necessary to install new siding on the dwelling unit buildings.” The Association
resisted, arguing Article VI, paragraph 4 of the RPC required it to provide exterior
maintenance for each lot, which would include replacement of siding.
The
Association asserted the special assessment was authorized by Article IV,
paragraph 3, which allows the members to approve an increase in their annual
assessment.
The case was submitted to the district court on stipulated facts. The court
entered a declaratory judgment in favor of the Association, finding the special
assessment was authorized by Article IV, paragraph 4 of the RPC, which allows
the Association to charge a special assessment for capital improvements to the
development’s common area. The court found “the buildings to be sided are
1
The Association asserted in its response to the petition for declaratory judgment that in
May 1995, its members approved a “‘special assessment’ of $36.00 per month per Lot
for three years to repair/replace any rotten siding and fascia, caulk, and paint all
buildings.” Although there is no evidence in the record supporting this assertion, the
petitioners did not challenge it in the district court proceedings.
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‘common areas’ and the siding is a ‘capital improvement.’” The district court
further found the “exterior maintenance paragraph,” Article VI, paragraph 4, “can
be broadly construed under the facts and circumstances of this case to include
siding, although it is not specifically mentioned.”
The petitioners appeal. They claim the district court erred in finding that
the assessment was authorized by Article IV, paragraph 4, because the
townhome units are not common areas within the meaning of the RPC. They
further claim the court erred in finding that the Association was responsible for
replacing the siding under Article VI, paragraph 4.
II.
SCOPE AND STANDARDS OF REVIEW.
Our review of actions for declaratory judgment depends upon how the
action was tried to the district court. Passehl Estate v. Passehl, 712 N.W.2d 408,
414 (Iowa 2006). Whether a declaratory judgment action is considered legal or
equitable in nature is determined by the pleadings, the relief sought, and the
nature of the case. Gray v. Osborn, 739 N.W.2d 855, 860 (Iowa 2007).
Both parties contend our review should be for the correction of errors at
law because the case involves questions of contract interpretation. See Fjords
North, Inc. v. Hahn, 710 N.W.2d 731, 735 (Iowa 2006) (“Restrictive covenants
are contracts.”). We agree. See Sky View Fin., Inc. v. Bellinger, 554 N.W.2d
694, 696 (Iowa 1996) (reviewing district court’s interpretation of a restrictive
covenant for correction of errors at law).
The court’s findings of fact are binding upon us if those facts are
supported by substantial evidence. Iowa R. App. 6.14(6)(a). The district court’s
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legal conclusions, however, are not. Tim O’Neill Chevrolet, Inc. v. Forristall, 551
N.W.2d 611, 614 (Iowa 1996).
III.
MERITS.
We first address the petitioners’ claim that the district court erred in finding
the Association was responsible for replacing the siding under Article VI,
paragraph 4. The petitioners argue that provision does not allow the Association
to use the assessments it collects from its members for installation of vinyl siding.
We do not agree.
The RPC states that the assessments collected from the Association’s
members “shall be used exclusively to promote the recreation, health, safety and
welfare of the residents . . . and in particular for the maintenance of the
Properties and replacement of roofs as herein provided.” Article VI, paragraph 4,
“Exterior Maintenance,” delineates the specific maintenance duties of the
Association, stating in relevant part, that “the Association shall provide exterior
maintenance upon each Lot . . . as follows: Paint and maintain gutters,
downspouts, exterior building surfaces. . . and other exterior improvements.”
That provision further states, “The Association shall replace the roofs on the
dwelling buildings when necessary due to age.”
Relying on the maxim
“expressio unius est exclusio alterius,” which is a “canon of construction holding
that to express or include one thing implies the exclusion of the other,” RPC
Liquidation v. Iowa Dep’t of Transp., 717 N.W.2d 317, 324 (Iowa 2006), the
petitioners assert the maintenance obligation of the Association regarding its
members’ townhomes is limited to painting and re-roofing.
otherwise.
We conclude
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“Because restrictive covenants are contractual in nature, we apply
contract-based rules of construction to interpret them.”
Sky View Fin., 554
N.W.2d at 697. “In construing a restrictive covenant, . . . the words must be
given their ordinary obvious meaning. . . .” First Sec. Co. v. Dahl, 560 N.W.2d
327, 332 (Iowa 1997).
Particular words and phrases are not interpreted in
isolation; instead, they are interpreted in the context in which they are used.
Hartig Drug Co. v. Hartig, 602 N.W.2d 794, 798 (Iowa 1999).
Article VI, paragraph 4 clearly states the Association is required to “[p]aint
and maintain . . . exterior building surfaces.” (Emphasis added.) The petitioners’
contrary interpretation of the RPC ignores the expressly stated duty of the
Association to provide “exterior maintenance” and “maintain . . . exterior building
surfaces . . . and other exterior improvements.”
See RPC Liquidation, 717
N.W.2d at 324 (declining to apply the rule expressio unius est exclusio alterius
where its application would render what went before it meaningless).
The petitioners further argue that the term “exterior maintenance” should
be “construed narrowly, limited to routine upkeep” because “it is established Iowa
law that restrictive covenants are to be construed strictly against the party
seeking enforcement.”
While it “is true that a restriction on the free use of
property must be strictly construed against a party seeking to enforce it,” that rule
has “application ‘only where the wording of the restriction is ambiguous.’” Iowa
Realty Co., Inc. v. Jochims, 503 N.W.2d 385, 386 (Iowa 1993) (citation omitted).
A mere disagreement, as here, over the meaning of a word does not establish
ambiguity. Sky View Fin., 554 N.W.2d at 697.
8
“Words of a contract must be given their commonly understood meaning.”
Iowa Realty Co., 503 N.W.2d at 386. The word “maintain” is commonly used to
mean “acts of repairs and other acts to prevent a decline . . . from an existing
state or condition; . . . replace.” Black’s Law Dictionary 953 (6th ed. 1990). We
therefore conclude the district court did not err in finding that the replacement of
the siding was within the Association’s responsibility to maintain the exterior
building surfaces.
We turn next to the petitioners’ claim that the district court erred in finding
the assessment charged by the Association for the vinyl siding was authorized by
Article IV, paragraph 4. That provision authorizes the Association to charge a
“special assessment” for the “cost of any construction, reconstruction, repair or
replacement of a capital improvement upon the Common Area.” The district
court found the townhome units were common areas within the meaning of
Article IV, paragraph 4 because “[t]he buildings themselves are owned by the
Association, not owned by the individual owners who own the ground only.” The
evidence in the record does not support this finding.
Article I of the RPC defines “Common Area” to mean “all real property
owned by the Association for the common use and enjoyment of the members of
the Association.” “Lot” is defined as “any plot of land shown upon any recorded
subdivision map or plat of the Properties with the exception of the Common
Area.” “Owner” means the “record owner, . . . of a fee simple title to any Lot
which is a part of the Properties.” Each stage of the development plan for Cedar
Tree Village likewise distinguished between “residence lots” and the “common
area lots.”
For example, the first stage of the development consisted of 58
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residence lots and three common area lots. Thus, it is clear from the RPC and
the development plan that the townhome units are not “Common Area[s].”
Furthermore, the Association admits that “the owners of the property do in fact
own the real estate and dwelling constructed on the real estate” and concedes
the district court incorrectly found the townhome units were common areas. We
therefore conclude the district court erred in determining that Article IV,
paragraph 4 authorized the assessment charged by the Association.
The Association argues, however, that we should affirm the court’s ruling
because the assessment was authorized by paragraph 3 of Article IV.
That
provision allows the Association to increase its members’ annual assessment if
such increase is approved by the required majority of the Association’s voting
members. The district court did not address this argument in its ruling although it
was raised by the Association in its pleadings.
While “we may affirm the ruling on a proper ground urged but not relied
upon by the trial court,” Krohn v. Judicial Magistrate Appointing Comm’n, 239
N.W.2d 562, 563 (Iowa 1976), we decline the Association’s invitation to do so in
this case. Our task in cases we review for the correction of errors at law “is to
determine the proper rules of law applicable to facts previously decided.” State
v. Marcum, 245 Iowa 396, 398, 62 N.W.2d 238, 239 (1954). We must “confine
[ourselves] to the correction of errors at law and a possible review of facts
determined from the evidence introduced below.” Id. “It is neither our duty nor
privilege to decide disputed fact questions.” Id.
The Association’s argument regarding whether the assessment was
authorized under Article IV, paragraph 3 would require us to engage in contract
10
interpretation in the first instance. Contract interpretation may involve resolution
of questions of fact where, for example, the meaning of the agreement depends
on extrinsic evidence.
Walsh v. Nelson, 622 N.W.2d 499, 504 (Iowa 2001)
(remanding case for the “district court, as the trier of fact, to interpret the contract
anew” because “‘[i]f the language in a contract is ambiguous, evidence may be
admitted as to the intent of the parties, and the determination of the parties’ intent
is a question of fact’” (citation omitted)). We therefore remand the case to the
district court to determine whether Article IV, paragraph 3 authorized the special
assessment charged by the Association for installation of vinyl siding on the 185
townhome units that have wood siding.
IV.
CONCLUSION.
We conclude the district court did not err in finding that replacement of the
siding was within the Association’s responsibility to maintain the exterior building
surfaces. The court did err in finding that Article IV, paragraph 4 of the RPC
authorized the assessment charged by the Association because, as the parties
agree, the townhome units are not common areas within the meaning of that
provision. We remand the case to the district court to determine whether Article
IV, paragraph 3 authorized the assessment charged by the Association for
installation of vinyl siding on the 185 townhome units that have wood siding.
The judgment of the district court is accordingly affirmed in part and
reversed in part. We remand for further proceedings consistent with this opinion.
Costs on appeal are taxed one-half to the petitioners and one-half to the
Association.
AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.
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