The Village At Ocean's End Condominium v. Southwest Harbor Properties, LLC

STATE OF MAINE BUSINESS & CONSUMER COURT

CUMBERLAND, ss. CIVIL ACTION

DOCKET NO. BCD-CIV-2022-00011

THE VILLAGE AT OCEAN’S END )

CONDOMINIUM, )

)

Plaintiff & Counterclaim-Defendant, ) ORDER. GRANTING IN PART

) AND DENYING IN PART

} PLAINTIFF’S ADDITIONAL

) MOTION FOR PARTIAL

v. ) SUMMARY JUDGMENT AND

) GRANTING IN PART AND

) DENYING IN PART

} DEFENDANTS’ CROSS-MOTION

SOUTHWEST HARBOR ) FOR PARTIAL SUMMARY

PROPERTIES, LLC, et al., y JUDGMENT

)

Defendants & Counterclaim-Plaintiffs. )

INTRODUCTION

This matter is again before the court on a second round of cross-motions for summary

judgment filed by Plaintiff/Counterclaim-Defendant The Village at Ocean’s End Condominium

Association (the “Association”) and by Defendants/Counterclaim-Plaintiffs Southwest Harbor

Properties, LLC, Howland Real Estate, LLC, and Jeffrey Howland.!

The Association filed its Additional Motion for Partial Summary Judgment on January 31,

2023. The motion asserts that the Association is entitled to summary judgments on Counts III, V,

and VI of its Complaint, as well as to a declaration by this court that Southwest Harber Properties,

LLC (the “Declarant”) must pay the Association’s attorney’s fees and expenses related to the

' Each party earlier submitted a Motion for Partial Summary Judgment focused on whether certain shoreline property

(1) was lawfully and effectively withdrawn from the Village at Ocean’s End Condominium by Southwest Harbor

Properties, LLC, and (2) whether, subsequent to that withdrawal and a reconveyance of the withdrawn property,

Defendant Howland Real Estate, LLC lawfully leased the property to the Association. (Compl. 4] 32, 36; Countercl.

50-54.) On April 12, 2023, the court addressed these issues in its Order Denying Plaintiff's Motion for Partial

Summary Judgment and Granting in Part and Denying in Part Defendants’ Motion for Partial Sammary Judgment,

The Village at Ocean’s End Condominium v. Southwest Harbor Properties, LLC, BCD-CTV-2022-00011, slip op.

(Apr. 12, 2023).

above-captioned lawsuit.? The Declarant filed a Cross-Motion for Partial Summary Judgment on

April 3, 2023. The cross-motion opposes the Association’s Additional Motion for Partial

Summary Judgment, and it otherwise seeks a summary judgment in favor of the Declarant on

Counts III through VI of its Counterclaim.’

SUMMARY JUDGMENT STANDARD

Summary judgment is appropriate when the parties’ statements of material facts and the

portions of the record referenced therein “disclose no genuine issues of material fact and reveal

that one party is entitled to judgment as a matter of law.” Currie v. Indus. Sec., Inc., 2007 ME 12,

11,915 A.2d 400 (citing M.R. Civ. P. 56(c)). “A material fact is one that can affect the outcome

of the case, and there is a genuine issue when there is sufficient evidence for a fact finder to choose

between competing versions of the fact.” Lougee Conservancy v. CitiMortgage, Inc., 2012 ME

103, { 11, 48 A.3d 774 (quoting Stewart-Dore v. Webber Hosp. Ass'n, 2011 ME 26, { 8, 13 A.3d

773). The Court must view the record facts in the light most favorable to the non-moving party

and must draw all reasonable inferences in favor of the same. Watt v. UniFirst Corp., 2009 ME

47,421, 969 A.2d 897 (citations omitted).

The moving party has the burden to show why summary judgment is appropriate. Core

Corp. y. Kelley Earthworks, Inc., 2014 ME 93, { 8, 97 A.3d 127. Thus, when the plaintiff is the

? Through Count III of its Complaint, the Association seeks payment of unpaid common expense dues assessed against

units owned by the Declarant between March of 2021 through the present. Through Count V, it seeks payment of two

months’ dues paid by new-unit purchasers at closing on their units and collected by the Declarant. Through Count

VI, the Association seeks a declaration that it is not liable on a certain $15,000 loan claimed by the Declarant. (Compl,

{| 37-39, 43-46.)

? In Count HI of its Counterclaim, the Declarant seeks a declaration that a rate and method of assessment for common

expenses imposed upon it by the Association are unlawful and that it is without obligation to pay assessments

calculated thereunder. In Count IV, it seeks a declaration that it is entitled to vote its units as of the time when it

begins paying assessments for them to the Association. The Declarant’s Count V seeks a declaration that it is not

liable for the two-months’ common expenses collected from new-unit purchasers, as alleged by the Association. And,

in Count VI the Declarant seeks a declaration that it is entitled to repayment of the $15,000 loan that it gave to the

Association. (Countercl. {9 58-72.)

moving party, it has the burden to demonstrate that each element of its claim is established in the

record without a dispute of materia! fact. /d (citation omitted). It then becomes the defendant’s

burden to demonstrate a genuine dispute of material fact. When the defendant is the moving party,

“he must establish that there is no genuine dispute of fact and that the undisputed facts would

entitle him to judgment as a matter of law.” Levis v. Konitzky, 2016 ME 167, § 20, 151 A.3d 20

(citation and internal quotation marks omitted). It then becomes the plaintiff's burden to “make

out a prima facie case and demonstrate that there are disputed facts regarding issues material to

the applicable law.” /d. (citation and internal quotation marks omitted).

Finally, “[fJacts contained in a supporting ... statement of material facts, if supported by

record citations as required by [Maine Rule of Civil Procedure 56(h)}], shall be deemed admitted

unless properly controverted.” M.R. Civ. P. 56(h)(4). Specifically, “an assertion of fact set forth

in a statement of material facts shall be followed by a citation to the specific page or paragraph of

identified record material supporting the assertion.” /d. “The court may disregard any statement

of fact not supported by a specific citation to record material.” Jd The court may also disregard

statements of material facts that “rest merely upon conclusory allegations, improbable inferences,

and unsupported speculation.” Est. of Barron v. Shapiro & Morley, LLC, 2017 ME S51, 4 11 1.4,

157 A.3d 769 (citing Dyer v. Dep't of Transp., 2008 ME 106, § 14, 951 A.2d 821). Legal

conclusions and arguments masquerading as factual statements or objections belong in the party’s

memorandum of law, not its statements of facts. Dyer, 2008 ME 106, { 15 n.5, 951 A.2d 821.

The court does not accept as admitted either parties’ statements of material facts that are

unsupported by record citations, or that present conclusory allegations or legal argument.

BACKGROUND

For the limited purpose of deciding the cross-motions for partial summary judgment, the

record evidence is sufficient to support the following facts.

I. The Declarant’s acquisition of The Village at Ocean’s End Condominium.

The Village at Ocean’s End Condominium (the “Condominium”) was established during

2009 by the initial declarant under the Declaration of The Village at Ocean’s End Condominium

(the “Declaration”). (Pl.’s S.M.F. J 1; Defs.’ S.M.F. § 27.) Operation and management of the

Condominium is governed by the Amended Bylaws of The Village at Ocean’s End Condominium

Association. (PL.’s 8.M.F. { 2; Defs.’ S.M.F. § 28.) On October 21, 2009, the Town of Southwest

Harbor approved the construction of up to forty units in the Condominium. (PI.’s 8.M.F. 43.)

The Declarant, Southwest Harbor Properties, LLC, succeeded the initial declarant when it

purchased the real estate and associated development rights during August of 2013. (Defs.’ 8.MLF.

{4 22-23.) At present, the Declarant is completing “Phase 1” of the Condominium’s development,

which involves construction of sixteen units. (Defs.’ S.M.F. 25.) Two units were already under

individual ownership when the Declarant acquired the Condominium. (Defs.’ 8.M.F. [f] 30, 87.)

However, none of the operating or other bank accounts contemplated by the Declaration had been

established. (Defs.’ S.M.F. J] 31-32.) Accordingly, the Declarant, through its attorney, undertook

to set up bank accounts to enable the Association’s management of the Condominium. (Defs.’

S.M.F. Jf 34-35.)

Il. The Association’s Board of Directors.

Pursuant to the Declaration, the period of “declarant control” of the Association was set to

expire during May of 2016, seven years after the first conveyance of a condominium unit during

May of 2009. (Defs.’ S.M.F. J 36.) However, because there were only a few unit owners other

than the Declarant as of May of 2016, and these owners did not wish to serve on the Association’ s

Board of Directors, the Declarant’s principals operated the Association notwithstanding their

desire to cease doing so. (Defs.’ $.M.F. 737.) Ultimately, at the Declarant’s request, the period

of declarant control was terminated during the Association’s July 23, 2018, annual meeting.

(Defs.’ S.M.F. ¥ 38.)

Although the period of declarant control was terminated, the Declarant’s principals

continued serving on the Association’s board because there was an insufficient number of other

unit owners willing to. (Defs.’ S.M.F. 739.) The unit owners present at the July 2018 annual

meeting unanimously voted to elect the Declarant’s principals, as well as an independent unit

owner unaffiliated with the Declarant, to the Association’s board. (Defs.’ S.M.F. 4 40.)

Thereafter, on July 31, 2018, those board members unanimously voted to approve and ratify all of

the board’s prior actions, in all respects. (Defs.’ S.M.F. { 41.) During February of 2021, the

Condominium unit owners agreed to assume control of the Association by serving as its board

directors and officers. (Defs.’ S.M.F. 42.)

Til. Assessments against the Declarant by the Association.

Since its acquisition of the Condominium, the Declarant has always understood that a

“unit” comes into existence upon being declared by amendment to the Declaration’s “Schedule

C.” (Defs.’ S.MLF. 4] 47, 49, 54.) The Declarant also understood that, once declared, a unit is

subject to assessment regardiess of whether it is built. (Defs.’ S.M.F. 4 51-52, 54.)

Other than Unit 1, which was exempted from any obligation to pay fees or assessments by

the initial declarant, Units 2 and 9 are the only units that were owned by the Declarant and that

had a foundation in the ground during the time when the unit owners gained contro! of the

Association.? (Defs.’ 8.M.F. 4 59.) On or about February 22, 2021, the Association sent the

4 Unit 2 was eventually sold by the Declarant to the current unit owner during 2022, after the commencement of this

lawsuit. (Defs.’ 8.M.F. | 72.) During oral argument, the Declarant confirmed that, as of June 1, 2023, it owns four

declared units, Units 1, 7, 9, and 16, out of the sixteen contemplated by Phase |. Unit | is exempted from common

5

Declarant an invoice imposing an assessment on Unit 2, ostensibly because at the tume that unit

was the only declared unit owned by the Declarant with a foundation in place. (Defs.’ S.MLF. §

57.) The Declarant chose to pay the invoice due to its desire to act in good faith and otherwise to

work amicably with the Association and its members; no other sums were due or claimed from the

Declarant by the Association at the time. (Defs.’? S.M.F. 4 58.)

By letter dated March 5, 2021, the Secretary for the Association acknowledged that he

could not locate any authority for assessing the Declarant common expenses against its units until

such time as a foundation was constructed. (Defs.” $.M.F. | 60.) However, the Association

changed its position shortly thereafter. (Defs.’ S.M.F. 761.) By letter dated March 15, 2021, the

Association notified the Declarant of the board’s decision that the Declarant should pay dues on

its six future home construction sites within the Condominium. (Defs.’ $.M.F. 461.) In this letter,

the Association, for the first time, asserted its right to impose assessments upon unbuilt and

undeclared “units” at a rate equal to 80% of the assessment amount applicable to constructed

condominium units. (Defs.’ S.M.F. 761.) By letter dated March 25, 2021, the Declarant contested

the Association’s assertion as contrary to the Declaration and bylaws. (Defs.’ S.M.F. § 62.) The

Association, through its Secretary, responded on March 28, 2021, to affirm its position. (Defs.’

S.M.F. 7 63.)

The Declarant, at the advice of counsel, ceased payment of dues assessed on its units

beginning during March of 2021. (PI.’s S.M.F. ¥ 110; Defs.’ S.M.F. 7 70.) As of February of

2023, the Association billed the Declarant $41,930.46 for unpaid assessments, penalties, and

interest.” (PL.’s S.M.F. [ 16.) The Declarant has not made any payments to the Association

expense assessments. The Declarant also owns the building sites designated for three more Phase |-units, Units 12,

13 and 14, which units are neither declared nor built.

3 As of the parties’ June 1, 2023, oral argument on the cross-motions for partial summary judgment, the Association

represented to the court that the unpaid assessments, penalties and interest amount to more than $51,000.

6

towards satisfaction of the outstanding assessments against its units. (P!.’s S.M.F. 4 19.)

IV.‘ The Declarant right to vote its units.

Since its acquisition of the Condominium, the Declarant has also always understood that a

unit owner has the right to vote their unit once it is declared, regardless of whether it is completely

built or has a foundation in place. (Defs.’ S.M.F. §] 50, 54.) Through its correspondence with the

Declarant during March of 2021, the Association also expressed a new position regarding for

which of its units the Declarant is entitled to vote as unit owner on matters presented to the

Association. (Defs.’ S.M.F. 9 55, 60-61.) Specifically, the Association declined to permit the

Declarant to vote any of its declared units for which no foundation was constructed. (Defs.’ S.M.F.

q] 55, 60-61.) Notwithstanding its denial of the Declarant’s purported right to vote these units,

the Association assesses common expenses against each of them. (Defs.’ S.M.F. 7 61.)

V. Two-months’ common expenses prepaid by new unit owners.

Pursuant to the Declaration, contemporaneous with the initial conveyance of a unit the

Declarant is required to (1) collect from the unit-purchaser two-months’ estimated common

expenses for the conveyed unit, and (2) deposit the collected funds into the Association’s working

capital fund account segregated from the Association’s other bank accounts. (Pl.’s S.M.F, { 6.)

No funds representing two-months’ common expense charges for either of Units | or 2, the two

units in existence when the Condominium was established, were transferred to the Declarant.

(Defs.’ S.M.F. fff 33, 87.) There is no record of deposits by the Declarant into a working capital

fund account related to prepaid estimated common expense charges that it collected from closings

on condominium units. (PL’s S.M.F. ff 11-12, 17-18.) However, the Declarant collected

estimated two-months’ common expense charges for each of the units it sold, and it deposited

® The amount claimed by the Association is $3,946.80. (Pl.’s S.MLF. ff 12, 115.)

7

those funds into the Association’s operating bank account. (Defs.’ S.M.F. f§ 88-89; Jerry Howland

Aff., Ex. 18.)

VI. The Declarant’s $15,000 loan to the Association.

During the peried of declarant control between 2014 and 2018, the Declarant subsidized

the operation of the Condominium and the payment of its expenses by both depositing funds into

the Association’s operating bank account and by directly paying its bills and expenses. (Defs.’

S.M.F. | 76.) This practice continued after the period of declarant control terminated to lessen the

amount of the Association’s common expense assessments and to avoid any need to impose special

assessments upon the unit owners. (Defs.’ S.M.F. { 77.)

During this time, one unit owner refused to pay common expenses assessed against his

unit, which generated a shortfall for the Association in the approximate amount of $16,000. (Defs.’

S.M.F. { 78.) The Declarant deposited funds into the Association’s operating account to make up

for this shortfall. (Defs.’ $.M.F. 79.) This loan and advancement was discussed with and among

the Association’s members during the annual meeting of August 28, 2019, when it was

acknowledged that the Association would either repay the Declarant or credit it for the borrowed

funds. (Defs.’ S.M.F. J 79.) Until this lawsuit was initiated, the Association never objected to

repayment of funds loaned to it by the Declarant. (Defs.’ S.M.F. 4 80, 82.)

According to the Declarant, the outstanding balance on its advances to the Association is

$15,000. (Defs.’ S.M.F. 7 83.) It has neither sought to assess interest on this amount nor

commenced any independent action to collect the debt. (Defs.’? S.M.F. J 83.) Statements for the

Association’s operating bank account at Camden National Bank show deposits by the Declarant

totaling $15,000 between September and October of 2020.’ (Defs.’ S.M.F, 7 81.) Likewise, the

? One deposit in the amount of $5,000 was made on September 30, 2020, and a second for $10,000 was made on

October 11, 2020, (Defs.’ S.MLF, 7 81; Kelm Aff, Ex, 37; Jerry Howland Aff., Ex. 16.)

8

Association’s “2021 Budget” projection acknowledges that the Declarant advanced it $15,000

during 2020. (Defs.’ S.M.F. J 75; Jerry Howland Aff, Ex. 13.)

DISCUSSION

The court addresses each of the issues raised by the parties’ cross-motions for partial

summary judgment in turn.* First, however, the court acknowledges issues that are not addressed

herein. Apart from the issues raised in its Additional Motion for Partial Summary Judgment, the

Association asserts two new claims in its reply brief submitted in opposition to the Declarant’s

Cross-Motion for Partial Summary Judgment and in support of the Association’s motion.

According to the Association, it now also claims that it is entitled to (1) repayment of $7,565.86,

representing rental real estate commission rebates for the period 2014 through 2018, which funds

were allegedly diverted into the Declarant’s accounts, and (2) a declaration that the Defendants

may neither cease their maintenance and upkeep of real estate withdrawn from the Condominium

through the exercise of development nights, nor require the unit owners to pay for said

maintenance. Neither of these issues are raised in the Complaint, and the court declines to address

them. See Burns v. Architectural Doors & Windows, 2011 ME 61, § 21, 19 A.3d 823.

I. Assessments against the Declarant’s units.

In its Additional Motion for Partial Summary Judgment, the Association argues it is

entitled to a declaration that the Declarant must pay assessments on its “units,” whether or not

declared or otherwise constructed, and a judgment to recover unpaid assessments. According to

® There are four issues addressed by the parties’ cross-motions for partial summary judgment that are properly before

the court: (1) the Association’s entitlement to common expense dues assessed against the Declarant between early

2021 and the present, and concomitantly the propriety of those assessments (Complaint Count II]; Counterclaim Count

IID); (2) the Declarant’s entitlement to vote its declared units that are not yet constructed (Counterclaim Count 1'V); (3)

the Association’s entitlement to and the Declarant’s liability for two months’ common expense dues collected by the

Declarant from new unit owners (Complaint Count V; Counterclaim Count V); and (4) the Declarant’s entitlement to

and the Association’s liability for repayment of $15,000 that the Declarant claims that it lent to the Association

(Complaint Count VI; Counterclaim Count VI). Each party also asserts an entitlement to costs and attorney’s fees

related to this lawsuit due to the other party’s purported breach of its fiduciary duties.

9

the Association, forty “units” were identified to the Town of Southwest Harbor. Further, the

Declarant is liable for all “expenses in connection with real estate subject to development rights,”

which includes its unbuilt “units.” 33 M.R.S. § 1603-107(b) (2023). And, the Association is

authorized to levy assessments against individual units proportionaliy for any “common expense

benefitting fewer than all of the units.” Jd § 1603-115(c)(2) (2023); Jerry Howland Aff. Ex. 2 §§

11.1(B), 13.1 [hereinafter Declaration}.

Defendants, on the other hand, seek a summary judgment and declaration that no such

assessments for the Declarant’s units are due until such time as a certificate of occupancy is issued

for that.unit, See Declaration § 11.1(D). Accordingly, the Defendants assert that the Association’s

assessment of common expenses, at any rate, against the Declarant’s undeclared and unbuilt .

“units” is unlawful and without legal basis.

As of the parties’ June 1, 2023, oral argument on their cross-motions, the Declarant owned

real estate for seven “units.” This includes four declared units (Units 1, 7, 9 and 16), and three

building sites (designated for Units 12, 13 and 14). Of the four declared units, the parties agree

that Unit 1’s liability for common expense assessments is limited by the Declaration. See

Declaration § 2.4 & Schedule C. It is also undisputed that the Declarant has not paid common

expense assessments since March of 2021.°

a. A “unit” does not come into existence until it is declared.

The Maine Condominium Act defines a “unit” as a “physical portion of the condominium

designated for separate ownership or occupancy.” 33 M.R.S. § 1601-103(26) (2023). Unless it is

° The court notes that the Association’s denial of the Declarant’s claimed right to vote its units subjected to common

expense assessments is not a legal basis for the Declarant to withhold payment of common expense assessments for

its declared units. To the contrary, according to the Declaration “{uJnit owners shall pay regular and special

assessments and service charges levied by the Association without any deduct or offset whatsoever.” Declaration §

11.3.

10

inconsistent with the Maine Condominium Act, a condominium is governed pursuant to the terms

of its declaration. Jd § 1602-102(c). In this case, the Declaration expressly contemplates forty

units; however, it acknowledged only two units in existence when it was executed and the

Condominium was established. See Declaration, art. [ & Schedule C. Among the Declarant’s

Development Rights, it is authorized to create units in addition to the two initial units. fa § 4.1;

see 33 MLR.S. § 1601-103(11) (defining “Development Rights”).

The Declarant was required to amend the Declaration to reflect its exercise of Development

Rights, including the creation of condominium units. Declaration § 4.1, Moreover, when it created

a new condominium unit, the Declarant was specifically required to amend the Declaration’s

Schedule C to reallocate voting rights and common expense assessment liability among the

declared units. /d. §§ 2.4, 4.1. Consequently, no unit is created or added to the Condominium

until the Declaration is amended pursuant to its terms.

This means that no common expenses can be assessed by the Association against an

undeclared “unit,” because there is no allocation of common expense liability to a “unit” until it is

declared or, in other words created, by amendment to Schedule C of the Declaration. In

consideration of the Declaration’s terms, neither the number of units contemplated by the Town

of Southwest Harbor when the Condominium was established, nor the fact of whether a “unit”

exists as a physical structure bear on this issue. See Pilgrim Place Condo. Ass’n v. KRE Props.,

666 A.2d 500, 502 (Me. 1995) (“[t]he Act implicitly recognizes that the creation of units owned

by the declarant and the concomitant obligation to pay assessments may occur prior to the actual

construction of the physical units.”).

b. The Maine Condominium Act does not provide a basis for the Association to

assess common expenses against the Declarant’s interests in condominium real

estate other than its declared units.

The Association argues that it is authorized to assess common expenses against the

11

Declarant’s undeclared units pursuant to the Maine Condominium Act. See 33 M.R.S. §§ 1603-

107(b), -115(c)(2) (2023). “Common expenses” is defined specifically to mean “expenditures

made by or financial liabilities of the association, together with any allocations to reserves.” /d. §

1601-103(5).

First, section 1603-107(b) provides that “the declarant alone is liable for all expenses in

connection with real estate subject to development rights.” /d § 1603-107(b). This statute,

however, only applies to claims for payment made by others in the context of upkeep of the

condominium. In other words, it relates to claims flowing from “maintenance, repair and

replacement” of real estate subject to development rights, distinguished from a condominium’s

units and its common elements. See id § 1603-107(a). It does not apply to common expense

assessments by a condominium association against declared condominium units. Compare id. §§

1602-107(a), (b) (“[t]he declaration shal! allocate a fraction or percentage of undivided interests

in the ... common expenses of the association ... to each unit’) with § 1603-107(b) (“[i]n addition

to the liability which a declarant has ... as a unit owner, the declarant alone is liable for all expenses

in connection with real estate subject to development rights”) (emphasis provided). Section 1603-

107 does not provide a legal basis to assess common condominium expenses against the

Declarant’s interests in condominium real estate that do not constitute declared units.'°

Next, the Maine Condominium Act provides, in relevant part, that “[t]o the extent required

by the declaration ... Any common expense benefiting fewer than all of the units shall be assessed

1 The Association is concerned that the Declarant makes no contribution to common expenses for its real estate

interests that have not been declared as units. In other words, the Declarant owns real-estate that may burden the

Association, but it does not pay common expense dues for that real estate. However, there is no statutory authority

that would permit the Association to assess common expense assessments against the Declarant’s condominium real

estate until such time as it is declared as a condominium unit by amendment to the Declaration. If there was evidence

of specific expenses burdening the Association arising from the undeveloped real estate, then section 1603-107(b)

may apply. The record here does not reflect any expenses associated with the real estate in question that burden the

Association,

12

exclusively against the units benefited.” fd. § 1603-115(c)(2}. This provision is operative only as

to units that benefit from a common expense to the exclusion of other units, which expense does

not arise from a limited common element. Jerry Howland Aff., Ex. 3, § 4.1 [hereinafter Bylaws]

(“[t]he maintenance and repair costs of a limited common element and any other common expense

which benefits fewer than all of the units, even though not arising from a limited common element,

shall be assessed exclusively against those units which it benefits, in the same proportion as their

allocated percentages of common expense liability bear’); see also Declaration § 11.1(D) (defining

“Common Expenses”). It does not apply here, where (1) the Association seeks to assess common

expenses against undeclared “units,” which do not exist until declared for purposes of liability for

common expenses assessments, and (2) there are no record facts indicating that any of the

Declarant’s units benefit from a common expense to the exclusion of the common elements or to

the other units in the Condominium.

c. Whether a certificate of occupancy was issued for a unit does not control its

Hability for common expense assessments.

The Declarant argues that according to the Declaration, it cannot be liable for assessments

on any of its units until such time as a certificate of occupancy is issued for them. See Declaration

§ 11.1(D). However, the Law Court interprets the Maine Condominium Act to prohibit

“discrimination in favor of the declarant in the allocation of liability for common expenses.”

Pilgrim Place Condo. Ass'n, 666 A.2d at 502 (interpreting 33 M.R.S. § 1602-107). The language

in the Declaration limiting assessment of a unit until the issuance of a certificate of occupancy is

limited to units owned by the Declarant. This is discrimination favorable to units owned by the

Declarant that is prohibited by statute.

The Declarant argues that the limitation imposed by the Declaration on its liability for

common expense assessments against units that it owns merely places it on equal footing with

13

other unit owners. According to the Declarant, this is because the Maine Condominium Act

restricts conveyance of a condominium unit to a purchaser until the unit is substantially completed,

as evidenced by a certificate of occupancy. 33 M.R.S. § 1602-101 (2023). Thus, the Declarant

cannot convey any of its units to a third party until a certificate of occupancy is issued for the unit.

However, this would mean that the Declarant is not liable for its unbuilt declared units’ allocations

of common expenses, which is inconsistent with the Declaration’s allocation of interests. See

Declaration § 2.4.

d. Whether summary judgment is appropriate on Count III of the Association’s

Complaint or on Count [II of the Declarant’s Counterclaim.

First, for the reasons discussed above, the court denies the Association’s Additional Motion

for Partial Summary Judgment concerning Count III of its Complaint insofar as it seeks payment

of common expenses assessed against the Declarant’s real estate interests in the Condominium

that are not declared units. The court also grants the Association’s motion to the extent it concerns

assessments made against the Declarant’s three non-exempt declared units. The Association’s

denial of the Declarant’s claimed right to vote its unbuilt declared units does not provide the

Declarant a defense excusing it from payment of common expenses for its declared units.

Declaration, § 11.3 (unit owners to pay assessments “without any deduct or offset whatsoever.”)

Even though the Asscciation was and is authorized to make assessments against the

Declarant’s non-exempt declared units, those assessments must be consistent with the allocations

provided by Schedule C of the Declaration. Accordingly, the court grants summary judgment on

Count III of the Declarant’s Counterclaim and declares that the assessment methodology that the

Association began using during March of 2021 is inconsistent with the Declaration and unlawful.

The Association’s may levy assessments against declared units only to the extent the assessments

are consistent with the Declaration’s Schedule C.

14

Il. The Declarant’s entitlement to vote its declared units.

According to the Association’s bylaws, the Condominium unit owners may vote at the

Association’s annual meeting to elect officers to its board. Declaration §§ 2.1,2.4. “The declarant

is the owner of any unsold units and may vote.” /d. § 2.4. After the unit owners assumed control

of the Association, the Association adopted the position that the Declarant is not entitled to vote

its unbuilt units. This position is based on the Association’s interpretation of the Declaration to

require a “unit” to have a foundation in the ground. See Id. § 2.2.

The Association bases its position on the provision of the Declaration entitled “Unit

Boundaries,” which establishes the bounds of condominium units relative to one another and to

the common elements. fa) The Maine Condominium Act requires a condominium declaration to

describe the boundaries of each unit created thereby. 33 M.R.S. § 1602-105(5) (2023). It also

provides a gap-filler provision that becomes operative if a declaration does not include such a

description and ts silent regarding the condominium’s units’ boundaries. Jd. § 1602-102. Inclusion

in the Declaration of the description of unit boundaries as required by statute has no bearing on a

unit owner’s right to vote their unit in Association matters. Moreover, just as “[njo provision of

the [Maine Condominium Act] requires any distinction between built and unbuilt units in the

assessment for common expenses,” Pilgrim Place Condo. Ass’n, 666 A.2d at 502, no provision

requires such a distinction in the context of unit owners’ votes.

In addition to a description of unit boundaries and allocation of interests in the common

elements and expenses, the Maine Condominium Act also requires condominium declarations to

“allocate a... a portion of the votes in the association to each unit.” 33 M.R.S. § 1602-107(a).

Consistent with this requirement, the Declaration provides that “each unit shall have one equal

vote as a member of the Association.” Declaration § 2.4. This and related provisions of the

Declaration control the issue presented by Count IV of the Counterclaim. And, as with common

15

element interest and common expense liability, the allocations of unit votes are shown in the

Declaration’s Schedule C. Every time a unit is added to the Condominium, the Declaration

requires an amendment to reallocate unit votes to achieve the one-vote-per-unit ratio. Id. § 4.1.

The result is that, consistent with the Declaration, each declared unit must be allocated one vote in

Association matters.

In opposition to the Declarant’s motion, the Association provided the court with little

authority supporting its denial of the Declarant’s right to vote its unbuilt declared units. Compare

Riverstone Creek Condo. Owners Ass’n v. Hall, 902 N.W.2d 809, 2017 Wisc. App. LEXIS 528,

at *8-9 (Wisc. Ct. App. July 18, 2017) (rejecting contention, based upon the declaration’s

definition of “what parts of a building are included in a unit,” that the declaration limited voting

rights to constructed units), with Northernaire Resort & Spa, LLC vy. Northernaire Condo. Ass’n,

839 N.W.2d 116, 119, 121 (Wis. Ct. App. Sept. 17, 2013) (concluding, based in part on the

declaration’s definition limiting the meaning of “unit” to “a structure,” the declarant was entitled

to a single vote for each constructed unit it owned but not for its unbuilt units). Instead, these cases

provide further support for the proposition that a condominium declaration’s terms control

allocation of voting rights and powers to and among unit owners.

Ill. The two months’ common expense charges collected by the Declarant from new

unit owners.

The Association claims that it is entitled to $3,946.80 from the Declarant, or the sum of

two-months’ estimated common expense charges collected by the Declarant on eight units

contemporaneously with the closing on those units. The Declaration authorized the Declarant’s

collection of these funds, and specifically obligated it to deposit the funds into a working capital

fund account for the Association, Declaration § 11.1. That account was to be established as a

segregated account. fd. (emphasis provided). The Association submits that after the Declarant

16

collected the prepayments from new unit owners, it either kept the funds collected or deposited the

money into the Association’s operating bank account but not into a segregated working capital

fund account.

The check ledger for the Association’s operating bank account discloses account activity

for the period beginning January 1, 2015, through March 1, 2021.'! Kelm Aff, Ex. 37. The ledger

and bank statements supplied by the Declarant show deposits into one of the Association’s bank

accounts related to the six closings that occurred between January 1, 2015 and March 1, 2021. id;

Jerry Howland Aff., Ex. 18. However, absent from the summary judgment record is any evidence

of a working capital fund account established separately from the Association’s operating bank

account and into which the Declarant deposited the funds at issue pursuant to the Declaration. The

failure to establish such an account and to house these funds therein constitutes a breach of the

Declaration by the Declarant. Accordingly, the court grants summary judgment in part for the

Association on Count V of its Complaint, and denies the Declarant’s cross-motion on Count V of

its Counterclaim, to the extent there is no genuine issue of material fact that the money was placed

in a segregated account.

Although here the court grants summary judgment for the Association, the questions of

whether the claimed funds were improperly spent or the Association sustained any injury as a

result of the Declarant’s breach present factual issues for trial.

IV. The parties’ dispute regarding the $15,000 loaned by the Declarant to the

Association.

The Association bases its claim that it is entitled to a declaration that it is net obligated to

repay $15,000 that it allegedly borrowed from the Declarant on: (1) the provision of the Maine

'| Therefore, it is inadequate record evidence to decide this issue with respect to the payments the Declarant allegedly

collected from the four closings that occurred prior to January 1, 2015.

17

Condominium Act providing that “the declarant alone is liable for all expenses in connection with

real estate subject to development rights,” 33 M.R.S. § 1603-107(b), and (2) the absence of a

promissory note or documentation of the loan. The Declarant argues that the Association’s board

directors and members were aware of the loan, never objected to repayment, and in fact

acknowledged their obligation to repay it. It asserts it is entitled to a summary judgment on Count

VI of its Counterclaim under an equitable theory of unjust enrichment.

Turning first to the Association’s arguments, section 1603-107 does not provide a means

for the court to grant the Association the declaratory relief it seeks as a matter of law. The loan in

question was made to cover a budgetary shortfall caused by a unit owner’s refusal to pay common

expense assessed on their unit. As noted above, section 1603-107(b) contemplates “expenses in

connection to real estate subject to development rights,” distinguished from common expense dues

assessed against condominium units. Id.

Next, the absence of a promissory note or other documentation of the loan in question is

not necessarily dispositive proof that no money was borrowed from the Declarant by the

Association. The existence and terms of an oral contract concerning the loan are disputed material

facts for the factfinder to resolve. See Pelletier v. Pelletier, 2012 ME 15, 7 13, 36 A.3d 903.

Additionally, the Declarant presented evidence of deposits in the amount of $15,000 into the

Association’s operating bank account. Kelm Aff, Ex. 37; Jerry Howland Aff, Ex. 16. It also

produced the Association’s annual meeting minutes acknowledging that the Declarant “fronted”

funds to the Association for reimbursement.

Jerry explained that SWH Properties is lending the association the fees that unit 10

is accumulating until the issue is resolved. Once resolved the association will

reimburse SWH Properties. This was discussed as being a HOA matter and not a

developer matter because the fees owed are for association expenses as outlined in

the Condo Association Docs. ... It was explained that SWH Properties is fronting

the money for unit 10 so that the association monthly fees won’t increase while we

18

wait for a resolution.

Jerry Howland Aff., Ex. 15. Viewing this record evidence in the light most favorable to the

Declarant, it is enough to generate a fact dispute for summary judgment purposes.

Turning to the Declatant’s cross-motion, viewing the record evidence in the light most

favorable to the Association, whether the Association became obligated to repay the Declarant’s

claimed loan is a disputed issue of material fact. There is no evidence of an agreement by the

Association to accept a loan for repayment, even if there is evidence of the Association’s board

directors’ and members’ knowledge of the loan. Nor is there any evidence of the purported loan’s

terms. Moreover, the Declarant lent the $15,000 to the Association during a time when (1) it

served the Condominium as declarant, (2) its principals controlled the Association’s board, and

(3) after the expiration of the period of declarant control. Then, the Declarant and its principals

overseeing the Association’s board owed the Association fiduciary duties. See 33 M.R.S. §§ 1601-

113, 1603-103(a) (2022); 13-B M.R.S. § 717 (2023).

Viewing these facts in the light most favorable to the Association, there is a disputed issue

of material fact regarding whether the Association’s acceptance and retention of the loaned funds

were “under such circumstances as to make it inequitable for it to retain the benefit” of the

purported loan “without payment of its value.” Knope v. Green Tree Servicing, LLC, 2017 ME

95, { 12, 161 A.3d 696 (citation omitted).

For these reasons, the court denies the Association’s Additional Motion for Partial

Summary Judgment on Count VI of its Complaint, as well as the Declarant’s Cross-Motion for

Additional Partial Summary Judgment on Count VI of its Counterclaim.

V. The parties’ entitlement to costs and attorney’s fees.

Attorney fees may be awarded only when provided for by statute or agreement by the

parties. Seacoast Hangar Condo. I Ass'n v. Martel, 2001 ME 112, 425, 775 A.2d 1166. For its

19

part, the Maine Condominium Act limits recovery of attorney’s fees and costs resulting from a

declarant’s tort or contract liability to breaches that occur or accrue during the period of declarant-

control of the condominium association. 33 M.R.S. 1603-111 (2023). Meanwhile, the Declaration

provides that “[eJach unit is subject to a lien in favor of the Association for the unpaid common

expense assessments, interest and costs of collection ... ‘Costs of collection’ shall include

reasonable attorney’s fees incurred by the Association in connection with any enforcement of the

Declaration.” Declaration § 11.1(D).

The court may also award attorney’s fees for breaches of fiduciary duties. See Murphy v.

Murphy, 1997 ME 103, 4 15, 694 A.2d 932. A condominium association owes fiduciary duties to

its members, the unit owners. Seacoast Hangar Condo. If Ass'n, 2001 ME 112, 9 19, 775 A.2d

1166 (citing 13-B MLR.S. § 716 (1981)).

Even though the court grants a summary judgment to each party on a claim that may entitle

it to attorney’s fees, the court declines to grant any such award until a final judgment is issued in

this case.

CONCLUSION

Based on the foregoing, the entry will be:

1. The Village at Ocean’s End Condominium Association’s Additional Motion for Partial

Summary Judgment is denied on Count III of its Complaint insofar as it concerns the

Declarant’s real estate interests other than its declared units, but the motion is granted

regarding the Declarant’s declared units. The record does not reflect the amount owed

for only declared units so the court does not enter summary judgment on the amount

owed at this time.

2. The Association’s motion is granted concerning Count V of its Complaint in that there

20

is no dispute that the funds were not placed in a segregated account. It is otherwise

denied as there are factual issues whether or how much the Association was damaged.

3. The Association’s motion is denied on Count Vi of its Complaint.

4. The Association’s motion is denied with respect to attorneys fees.

5. The Defendants’ cross-motion is also denied on Count III of the Counterclaim insofar

as it concerns the Deciarant’s declared units, but it is granted regarding the Declarant’s

real estate interests other than its declared units.

6. The cross-motion is also granted respecting Count IV of the Counterclaim. Any

declared units have the right to vote.

7. The cross-motion is denied on Counterclaim Counts V and VI.

So ordered.

The Clerk is requested to enter this Order on the Docket, incorporating it by reference

pursuant to Maine Rule of Civil Procedure 79(a).

ah

4

aq

Date: Jie. fo fuee) ew fe et

: Thomas R. McKeon

Justice, Business & Consumer Court

Entered on the docket: 06/13/2023

21