The Lodge at Bolton Valley Condominium Assoc. v. Hamilton

The Lodge at Bolton Valley Condominium Assn. v. Hamilton (2005-442); 180 Vt. 497; 
905 A.2d 611

2006 VT 41

[Filed 15-May-2006]

                                 ENTRY ORDER

                                 2006 VT 41

                      SUPREME COURT DOCKET NO. 2005-442

                              MARCH TERM, 2006

  The Lodge at Bolton Valley Condominium  }      APPEALED FROM:
  Association                             }
                                          }
       v.                                 }      Chittenden Superior Court
                                          }  
  Edward J. Hamilton, Carolyn T.          }
  Hamilton, Banknorth, N.A.,              }      DOCKET NO. S0372-05 CnC
  f/k/a Granite Savings Bank              }
  and Trust Co.                           }  
                                                 Trial Judge: Richard W. Norton

             In the above-entitled cause, the Clerk will enter:

       ¶  1.  Plaintiff Lodge at Bolton Valley Condominium Association
  appeals the dismissal of its first amended complaint, which included in
  personam claims against defendants Edward J. Hamilton and Carolyn T.
  Hamilton and in rem claims against three condominium units purchased by
  defendants.  The superior court dismissed the Association's claims pursuant
  to 27A V.S.A. § 3 116(e), the statute of limitations for foreclosure of
  condominium liens.  In its appeal, the Association argues that it brought
  all of its claims within the time period required by statute, or, in the
  alternative, that its claims should be tolled by statute or under the
  doctrines of equitable tolling and equitable estoppel.  The Association
  also contends that the court erred by dismissing the complaint in its
  entirety instead of considering its in rem and in personam claims
  separately.  We reverse and remand the action to the superior court.

       ¶  2.  The Association alleges the following facts, which we must
  treat as true for the purposes of considering the superior court's
  dismissal.  Gilman v. Maine Mut. Fire Ins. Co., 2003 VT 55, ¶ 14, 175 Vt.
  554, 830 A.2d 71 (mem.).  From 1998 through 2001, defendants owned and
  controlled Bolton Valley Holiday Resort, Inc., which the Association
  employed to manage its maintenance and accounting.  On March 26, 1999,
  defendants purchased three condominium units from the Association.  On June
  1, 1999, defendants, in their managerial capacity, issued three credit
  memoranda characterizing a total of $6,757.43 as "bad debt."  The effect of
  these credit memoranda was to write off arrears owed on defendants'
  condominiums due to unpaid assessments.  These writeoffs were brought to
  the Association's attention in 2002, when its new financial managers
  discovered the credit memoranda and believed them to be suspicious.  On
  September 30, 2002, the Association issued a notice of lien against
  defendants' three condominium units.  Defendants did not pay the amount
  owed on the lien. 

       ¶  3.  On April 11, 2005, the Association filed a complaint for
  foreclosure against the three condominium units purchased by defendants. 
  Defendants filed a motion for a more definite statement, and on June 17,
  2005, the Association filed its first amended complaint, which retained
  claims against the condominiums for foreclosure and added a number of
  claims against defendants personally, including fraud, breach of fiduciary
  duty, and breach of the duty of good faith and fair dealing.  The court
  granted defendants' motion to dismiss and subsequently denied the
  Association's motion to reconsider, citing 27A V.S.A. § 3-116(e), which
  sets a three-year limitations period for condominium lien foreclosures. 
  The Association appeals from these decisions.
   
       ¶  4.  "A motion to dismiss for failure to state a claim upon which
  relief can be granted . . . should not be granted unless it appears beyond
  doubt that there exist no facts or circumstances that would entitle the
  plaintiff to relief."  Amiot v. Ames, 166 Vt. 288, 291, 693 A.2d 675, 677
  (1997) (quotations omitted).  Although a defendant may properly raise a
  statute of limitations defense in a motion to dismiss pursuant to Vermont
  Rule of Civil Procedure 12(b)(6), Fortier v. Barnes, 165 Vt. 189, 193, 678 A.2d 890, 892 (1996), dismissal is inappropriate: (1) where some facts and
  circumstances, viewed in the light most favorable to the plaintiff, would
  entitle the plaintiff to relief, Amiot, 166 Vt. at 291, 693 A.2d  at 677; or
  (2) where factual questions relating to the tolling of the statute of
  limitations remain for a jury to decide.  Fila v. Spruce Mountain Inn, 2005
  VT 77, ¶ 9, 16 Vt. L. Wk. 242, 885 A.2d 723.  

       ¶  5.  We first address the Association's in rem claims.  The
  Association presents three arguments: (1) that the claims were brought
  within the three-year limitations period for foreclosure claims; (2) that
  the statute of limitations should be tolled for these claims pursuant to 12
  V.S.A. § 555; and (3) that the claims should be allowed notwithstanding the
  statute of limitations according to the doctrines of equitable tolling and
  equitable estoppel.  

       ¶  6.  The Association first argues that it brought all of its
  claims within the period required by statute.  We agree with the superior
  court that the Association's foreclosure claims were untimely under the
  statute.  The Uniform Common Interest Ownership Act, 27A V.S.A. §§ 1-101 to
  4-120, provides, in relevant part: "A lien for unpaid assessments is
  extinguished unless proceedings to enforce the lien are instituted within
  three years after the full amount of the assessment becomes due."  Id. §
  3-116(e).  The Association alleges that defendants purchased the
  condominiums on March 26, 1999, with actual or constructive knowledge of
  the units' arrears.  The full amount of the assessments became due from
  defendants on that date, not, as the Association argues, on September 30,
  2002, the date the notice of lien issued.  Thus, the Association's cause of
  action accrued on March 26, 1999, and § 3-116(e)'s three-year limitations
  period expired no later than March 26, 2002-more than three years before
  the Association filed its initial complaint.  

       ¶  7.  The Association next argues that the statute of limitations
  for its foreclosure claims should be tolled pursuant to 12 V.S.A. § 555,
  which provides express authorization for tolling when a defendant
  fraudulently conceals the plaintiff's cause of action.  That section allows
  for tolling, however, only with respect to personal, or in personam,
  actions.  See id. ("When a person entitled to bring a personal action is
  prevented from so doing by the fraudulent concealment of the cause of such
  action . . . , the period prior to the discovery of such cause of action
  shall be excluded in determining the time limited for the commencement
  thereof.") (emphasis added).  The claim at issue is an in rem claim for
  foreclosure of a lien, which is a claim against the condominiums, as
  opposed to a claim against the defendants.  See Pomfret Farms Ltd. P'ship.
  v. Pomfret Assocs., 174 Vt. 280, 283, 811 A.2d 655, 658 (2002) ("[A]
  foreclosure is an action in rem which does not impose personal liability on
  a defendant.").  Section 555, therefore, does not apply to the
  Association's foreclosure claims.
         
       ¶  8.  The Association next argues that the court should not have
  dismissed its foreclosure claims without considering equitable tolling and
  equitable estoppel.  Equitable tolling is applied "only when (1) the
  defendant actively misled the plaintiff or prevented the plaintiff in some
  extraordinary way from filing a timely lawsuit; or (2) the plaintiff timely
  raised the precise claim in the wrong forum."  Beecher v. Stratton Corp.,
  170 Vt. 137, 143, 743 A.2d 1093, 1098 (1999).   To invoke the doctrine of
  equitable estoppel, a plaintiff must make a similar showing:  (1) that the
  party to be estopped knew the facts; (2) that the party being estopped
  intended that its conduct would be acted upon; (3) that the party asserting
  estoppel was ignorant of the true facts; and (4) that the party asserting
  estoppel detrimentally relied on the other party's conduct.  Town of
  Victory v. State, 174 Vt. 539, 540, 814 A.2d 369, 372 (2002) (mem.).  "The
  doctrine of equitable estoppel seeks to promote fair dealing and good faith
  by preventing 'one party from asserting rights which may have existed
  against another party who in good faith has changed his or her position in
  reliance upon earlier representations.' "  Beecher, 170 Vt. at 139, 743 A.2d  at 1095 (quoting Fisher v. Poole, 142 Vt. 162, 168, 453 A.2d 408, 411
  (1982)). 

       ¶  9.  The Association alleges that defendants, as fiduciaries,
  failed to disclose material financial information with respect to the
  condominium units.  In particular, the Association claims defendants issued
  the three credit memoranda, which wrote off arrears owed on defendants'
  condominiums as "bad debt," at a time when the Association relied on
  defendants to manage its accounts.  Thus, the Association argues that
  defendants failed to pay their condominium assessments and then issued the
  credit memoranda to conceal their actions from the Association.  Taking all
  of its allegations as true, the Association raises a colorable argument
  that it was "actively misled" by defendants' behavior, and that it failed
  to file a timely claim due to its reliance on defendants' actions.  These
  claims could have provided a basis for equitable tolling or equitable
  estoppel of defendants' statute-of-limitations argument.  It was therefore
  inappropriate for the superior court to grant defendants' motion to
  dismiss, as it did not "appear[] beyond doubt that there exist[ed] no facts
  or circumstances that would entitle the plaintiff to relief."  Amiot, 166
  Vt. at 291, 693 A.2d  at 677 (quotations omitted).  Accordingly, we remand
  these claims to the superior court for consideration of whether to apply
  the doctrines of equitable tolling and equitable estoppel to the
  Association's in rem claims.

       ¶  10.  We next consider the Association's in personam claims.  The
  Association contends that the court improperly applied 27A V.S.A. §
  3-116(e)'s three-year limitations period to the Association's in personam
  claims.  "A single complaint may contain multiple causes of action, some of
  which are time barred and some not."  Fitzgerald v. Congleton, 155 Vt. 283,
  290, 583 A.2d 595, 599 (1990).  Because the terms of § 3-116(e) apply only
  to in rem foreclosure claims, and no specific statute of limitations
  applies to the Association's in personam claims, these claims should be
  analyzed under the general six-year statute of limitations governing civil
  actions.  See 12 V.S.A. § 511 ("A civil action, . . . except as otherwise
  provided, shall be commenced within six years after the cause of action
  accrues and not thereafter.").  We note that the Association's in personam
  claims accrued after its in rem claims.  Defendants purchased the
  condominiums on March 26, 1999, causing 27A V.S.A. § 3-116(e)'s three-year
  statute of limitations to begin running on the Association's in rem claims
  by virtue of the fact that the assessments became due from defendants on
  that day.  Defendants issued the allegedly fraudulent credit memoranda on
  June 1, 1999, causing 12 V.S.A. § 511's six-year statute of limitations to
  begin running on the Association's in personam claims.  See Furlon v.
  Haystack Mountain Ski Area, Inc., 136 Vt. 266, 270, 388 A.2d 403, 406
  (1978) ("The statute of limitations runs from the time when a plaintiff can
  first sue and recover his demand.").  Therefore, absent statutory or
  equitable tolling, the statute of limitations on the Association's in
  personam claims expired on June 1, 2005.

        
       ¶  11.  The Association first raised its in personam claims when it
  filed its first amended complaint on June 17, 2005, sixteen days after the
  limitations period expired.  We must therefore decide whether these claims
  "relate back" to April 11, 2005, the date of the Association's initial
  complaint.  Under Rule 15(c), an amendment relates back to the date of the
  original pleading when "the claim or defense asserted in the amended
  pleading arose out of the conduct, transaction, or occurrence set forth or
  attempted to be set forth in the original pleading."  V.R.C.P. 15(c)(2). 
  The transaction or occurrence underlying the Association's in rem and in
  personam claims is the nonpayment of arrears owed on defendants'
  condominiums.  Although the first amended complaint raised new causes of
  action with respect to the credit memoranda issued by defendants, that
  conduct was part of the overall nonpayment of arrears.  The Association's
  original complaint put defendants on notice as to the nature of the claims
  alleged in the first amended complaint. See Perkins v. Windsor Hosp. Corp.,
  142 Vt. 305, 314, 455 A.2d 810, 816 (1982) (holding that tort claim against
  hospital related back to date of original complaint against physician when
  hospital "had notice from the beginning of this action" as to the nature of
  the plaintiff's claim).  The fact that defendants were on notice is of more
  importance than the fact that the Association's first amended complaint
  added in personam claims that exposed defendants to greater liability than
  the original in rem claims.  See 6A C. Wright, A. Miller & M. Kane, Federal
  Practice and Procedure § 1501, at 162 (2d ed. 1990) ("As long as the
  original complaint gives defendant adequate notice, an amendment relating
  back is proper even if it exposes defendant to greater damages.").  Our
  practice is to use "pragmatic terms rather than the technical 'cause of
  action' to state the test for permitting relation back."  Reporter's Notes,
  V.R.C.P. 15.  Practically speaking, the Association's in rem and in
  personam claims arise from the same transaction, and defendants were on
  notice of the litigation.  As a result, the Association's in personam
  claims relate back to April 11, 2005, the date the initial complaint was
  filed.  Because this date was within § 511's six-year statute of
  limitations, these claims were timely filed and should not have been
  dismissed.  On remand, these claims should survive regardless of the
  court's determination with respect to equitable tolling and equitable
  estoppel.  Rule 15(c) does not specifically address relation back when the
  original claim was untimely, but allowing relation back for the purpose of
  correcting this defect in the original complaint is in keeping with the
  policy of both the rule and the statute of limitations.  See Hojaboom v.
  Town of Swanton, 141 Vt. 43, 51, 442 A.2d 1301, 1305 (1982) (superseded by
  statute on other grounds) ("Rule 15(c) is grounded on the notion that a
  party who has been notified of litigation concerning a given transaction
  has been accorded all the notice that statutes of limitations are intended
  to afford."); 6A C. Wright et al., supra, § 1497, at 85 (indicating that
  "the rationale of the relation back rule is to ameliorate the effect of the
  statute of limitations").

       Reversed and remanded for proceedings consistent with the views
  expressed herein.


                                       BY THE COURT:


                                       _______________________________________
                                       Paul L. Reiber, Chief Justice

                                       _______________________________________
                                       John A. Dooley, Associate Justice
     
                                       _______________________________________
                                       Denise R. Johnson, Associate Justice

                                       _______________________________________
                                       Marilyn S. Skoglund, Associate Justice

                                       _______________________________________
                                       Brian L. Burgess, Associate Justice