WOODWARD, J.
Appellants are 35 of 36 individual unit owners of Avalon Court Six Condominium, Inc. ("the Condominium") located in Pikesville, Maryland. On January 23, 2008, appellants filed a complaint in the Circuit Court for Baltimore County against appellee, the Council of Unit Owners of Avalon Court Six Condominium, Inc. ("the Council"), alleging negligence in failing to timely investigate water leakage into the individual units and failing to file a lawsuit against the developer of the Condominium within the statute of limitations. On May 19, 2008, appellants filed for summary judgment, and the Council responded with a cross motion for summary judgment. The circuit court issued a Motions Ruling denying both motions for summary judgment. Thereafter, on September 19, 2008, the Council filed a renewed motion for summary judgment, arguing that appellants failed to establish that the Council owed a duty to appellants to file a lawsuit against the Condominium's developer and that appellants' complaint was time barred. After a hearing on April 13, 2008, the circuit court granted the motion for summary judgment in favor of the Council.
On appeal, appellants present two questions for our review, which, in the words of their brief, are:
For the reasons set forth herein, we shall reverse the judgment of the circuit court and remand the case for further proceedings.
The Condominium Declaration ("the Declaration") and the Condominium By-Laws ("the By-Laws") set forth in detail the responsibilities and obligations of the
Article V, § 5.2.1. of the Declaration provides that
See also R.P. § 11-109(a) ("The affairs of the condominium shall be governed by a council of unit owners which, even if unincorporated, is constituted a legal entity for all purposes. The council of unit owners shall be comprised of all unit owners."). Article V, § 5.2.2. states that "all of the Unit Owners" are members of the Council.
Common Elements "(a) shall consist of all of the Condominium other than Units the legal title to which is held by a person other than the Council, and (b) shall be comprised of the Limited Common Elements and the General Common Elements." Art. III, § 3.3.1 of the Declaration. According to Article VI, § 6.5.2.(a) of the Declaration, "the Council shall maintain, repair and replace all General Common Elements and Limited Common Elements, including all structural repairs and replacements to Limited Common Elements the costs of which ... shall be Common Expenses." See also R.P. § 11-108.1 ("Except to the extent otherwise provided by the declaration or bylaws, and subject to § 11-114 of this title, the council of unit owners is responsible for maintenance, repair, and replacement of the common elements, and each unit owner is responsible for maintenance, repair, and replacement of his unit."). The Common Elements are owned by all of the Unit Owners, each of whom share an undivided percentage interest therein. Art. III, § 3.3.4. of the Declaration.
Article II, § 2.2.2. of the By-Laws sets forth the specific powers of the Council. Relevant to this appeal are the following powers:
(Emphasis added).
Article II, § 2.4.10 of the By-Laws provides that "[t]he Board of Directors and the Officers" shall manage "[a]ll of the Council's business and affairs" and shall exercise and perform all of the Council's "rights, powers and duties." Article II, § 2.2.5. of the By-Laws sets forth the responsibility of the Board of Directors regarding legal proceedings. Section 2.2.5.(a) states:
(Emphasis added).
"Legal Proceedings," is defined by § 2.2.5.(b) of the By-laws and
(Emphasis added).
Under § 2.2.5.(c), the decision to initiate any Legal Proceeding
(Emphasis added).
There are two ways in which a Special Membership Meeting may be initiated:
Art. II, § 2.3.3.(b) of the By-Laws.
The facts of the instant appeal are not in dispute, and have already been outlined in
(Some alterations in original) (emphasis in original).
On August 8, 2006, the Council filed an 11 count complaint against Questar on behalf of the Council and individual unit owners, seeking recovery for injury and damage to the condominium building, units, and Common Elements from water leakage, seepage, and deterioration that allegedly were caused by defects in design and construction. The counts in the complaint were negligent design (Count 1), negligent construction (Count 2), negligent supervision (Count 3), breach of implied warranty (Count 4), breach of express warranty (Count 5), negligent misrepresentation (Count 6), fraudulent misrepresentation (Count 7), breach of contract of sale (Count 8), violation of Consumer Protection Act (Count 9), breach of fiduciary duty (Count 10), and constructive fraud (Count 11).
On December 6, 2006, Questar filed a motion to dismiss, or in the alternative, for summary judgment, alleging, inter alia, that the Council's claims were time barred. A hearing on Questar's motion was held on April 11, 2007, before Judge Ballou-Watts. On June 19, 2007, Judge Ballou-Watts issued a memorandum opinion and order granting Questar's motion for summary judgment, ruling that all of the claims in the Council's complaint were time barred. According to Judge Ballou-Watts, "[p]ursuant to the `discovery rule,' the three year statute of limitations for all claims (except warranty claims) began to run—at the latest—in June 2002, when CAM received responses to its memorandum and not [o]n December 1, 2005 when [the Council] received the SGH Building Leakage Investigation report." (Emphasis added). The Council did not appeal this order, and thus it became a final judgment.
As a result of Judge Ballou-Watts' order, the Council was unable to recover from Questar the costs of correcting the water infiltration problems, as well as other design and construction defects, and was forced to bear such costs that exceeded $1,000,000. The Council obtained a construction loan to cover the cost of the repairs and, in order to repay the loan, mandated that each unit owner pay certain special assessments and an increase of $400 in the monthly condominium fee.
Thereafter, on January 23, 2008, appellants, consisting of 35 of the 36 unit owners, filed a lawsuit against the Council to recover the monetary damages that they
On May 19, 2008, appellants filed a motion for summary judgment, arguing that the Council was negligent, as a matter of law, because the Council "had the sole and exclusive duty, as well as the legal obligation, to investigate and ascertain the reasons and/or sources of the water infiltration problems and proceed to repair said water infiltration problems," as well as "the sole and exclusive duty to bring legal action regarding the water infiltration problems." On May 29, 2008, the Council filed a response to appellant's motion for summary judgment and a cross motion for summary judgment, contending that appellant's complaint was barred by the three year statute of limitations, as they were on notice of the water problems in June of 2002 and thus had until June of 2005 to file a lawsuit. Additionally, the Council argued that it did not have a duty to appellants to file a legal action against Questar.
On July 14, 2008, the circuit court issued a Motions Ruling denying both appellants' and the Council's motions for summary judgment. In its ruling, the circuit court stated, in pertinent part:
(Footnote omitted).
Two months later, on September 19, 2008, the Council filed a Renewed Motion for Summary Judgment, wherein it argued that appellants failed to produce any authority establishing a legal duty on the part of the Council to file a lawsuit on behalf of individual unit owners and that appellants' complaint was time barred. A hearing on the renewed motion was held on April 13, 2009. At the conclusion of the hearing, the court granted the Council's renewed motion for summary judgment.
This timely appeal followed.
Maryland Rule 2-501(f) provides, in relevant part, that "[t]he court shall enter judgment in favor of or against the moving party if the motion and response show that there is no genuine dispute as to any material fact and that the party in whose favor judgment is entered is entitled to judgment as a matter of law." The standard of review on appeal is well settled:
Prop. & Cas. Ins. Guar. Corp. v. Yanni, 397 Md. 474, 480-81, 919 A.2d 1 (2007) (citations omitted) (quoting River Walk Apartments, LLC v. Twigg, 396 Md. 527, 541-42, 914 A.2d 770 (2007)). "If the trial court did not specify the grounds upon which it granted summary judgment, appellate courts assume that the trial court `carefully considered all of the asserted grounds and determined that all or at least enough of them ... were meritorious.'" Kimmel v. SAFECO Ins. Co., 116 Md.App. 346, 354-55, 696 A.2d 482 (1997) (ellipsis in original) (quoting Bond v. NIBCO, Inc., 96 Md.App. 127, 133, 623 A.2d 731 (1993)).
In the case sub judice, it is unclear on which ground the circuit court relied in granting summary judgment in favor of the Council. Therefore, we shall review the circuit court's grant of summary judgment on both grounds asserted by the Council, to wit, (1) there is no legal duty owed by the Council to the unit owners to file a lawsuit against Questar for claims related to the Common Elements, and (2) appellants' claims are barred by the applicable statute of limitations.
Appellants argue that the circuit court erred in granting summary judgment in favor of the Council, because the Council has a duty to the unit owners to pursue claims against a third party related to the maintenance and repair of the Common Elements. According to appellants, if the Council fails in this duty, the unit owners can pursue litigation against the Council. In support of their position, appellants note that "the law of Maryland, the Declaration[,] and the By-Laws explicitly impose on the Council and the Board of Directors the exclusive duty to maintain and repair the common elements of the Condominium." Appellants also observe that "the By-Laws instill in the Board of Directors of the Council `the
Assuming the existence of such duty, appellants contend that the Council was required to timely file suit against Questar for claims related to the defects in the design, construction, and water infiltration affecting the Common Elements of the Condominium. Appellants assert that, had the Council timely filed a lawsuit against Questar on behalf of appellants and the Condominium, the Council would have prevailed and thus would not have levied special assessments and increased condominium fees on the unit owners. Thus appellants conclude that the circuit
The Council contends that "Maryland [law] does not recognize a duty on the part of the [Council] to file suit on behalf of individual unit owners." The Council emphasizes the difference between a right and a duty, and argues that neither Maryland law, the Declaration, nor the By-Laws compels the Council to file suit on behalf of individual unit owners. Indeed, the Council points out that, according to the By-Laws, it may not file suit without "express permission from the individual unit owners." Therefore, the Council concludes that it was under no duty to appellants to file a lawsuit against Questar for damages to the Common Elements.
We have found no Maryland case involving the right of individual unit owners to initiate a negligence action against their condominium association for failing to maintain the common elements. In their brief and reply brief, appellants discuss three cases, which this Court finds instructive: Queen's Grant Villas Horizontal Property Regimes I-V v. Daniel International Corp., 286 S.C. 555, 335 S.E.2d 365 (1985); Murphy v. Yacht Cove Homeowners Ass'n, 289 S.C. 367, 345 S.E.2d 709 (1986); and Siller v. Hartz Mountain Associates, 93 N.J. 370, 461 A.2d 568 (1983).
Queen's Grant Villas involved an action brought by the association against the developer "for alleged defects in the construction of the common elements of a condominium project," which the lower court disposed of on summary judgment for lack of standing. 335 S.E.2d at 365. The Supreme Court of South Carolina reversed, holding that the "property regime ha[d] standing to bring an action for construction defects in common elements that the regime ha[d] the duty to maintain," particularly when "master deeds and the by-laws" charged the association with "the obligation to maintain the common elements." Id. at 366. The Court went on to state, albeit in dicta: "Should the Regime not uphold its duty to pursue a recovery for any alleged construction defects in the common elements which it maintains, it may be liable to the homeowners for its omissions." Id. (emphasis added).
One year later, in Murphy, the Supreme Court of South Carolina held "that a member of a condominium association" had standing to "bring an action in contract or tort against the association." 345 S.E.2d at 710. In that case, joint owners of a condominium unit brought a negligence action against Yacht Cove Homeowner's Association ("the Association"), an unincorporated condominium association, for failure to maintain the common elements after one of the owners suffered physical injury in the common area. Id. at 709. The Association raised imputed negligence as a defense, arguing that, as members of an unincorporated association, each member is both a principal and agent for the other members of the Association, and thus the negligence of each member must be imputed to every other member. Id. Accordingly, the Association concluded that the joint owners "should be precluded from maintaining
The Supreme Court of South Carolina disagreed with the Association, reasoning that, "since the association can sue a member for failure to adhere to the bylaws, rules, and regulations, a member necessarily can sue the association for this same failure." Id. at 710. In so holding, the Court relied on its opinion in Queen's Grant Villas, stating:
Murphy, 345 S.E.2d at 710 (alterations in original) (emphasis added).
Although Queen's Grant Villas and Murphy focus on the issue of standing, both cases endorse the proposition that a condominium association has a "duty to pursue a recovery for any alleged construction defects in the common elements which it maintains," Queen's Grant Villas, 335 S.E.2d at 366 (emphasis added), and that, if they fail to do so, individual unit owners have a cause of action against the association for its negligence. Such a proposition is pertinent to the instant case, as appellants initiated a lawsuit against the Council for negligence in failing to bring a legal action against Questar prior to the expiration of the applicable statute of limitations.
Siller is more factually apposite to the facts of the case sub judice. In Siller, the plaintiffs, who were owners of condo units in the Harmon Cove community, brought suit against the developer and two associations, Harmon Cove I Condominium Association, Inc. ("the Association") and Harmon Cove Recreation Association, Inc. ("the Recreation Association") (collectively "the Associations"). 461 A.2d at 569. "The suit related to alleged defects in and about the units and common areas and facilities and to a settlement that the two associations were prepared to effectuate on behalf of all unit owners, including plaintiffs, with the [d]eveloper." Id.
Relevant to the instant appeal is the fourth count in the plaintiffs' complaint, which was directed solely against the Associations. Id. at 570. Apparently, the Association's board of directors designated a Legal Action Committee to investigate claims against the developer for (1) construction and design and (2) misrepresentation and fraud. Id. at 575. The Committee reported several deficiencies attributable to the developer and recommended engaging an attorney to institute litigation, which the board of directors initially adopted. Id. "[S]hortly thereafter the board rescinded the action engaging that attorney and instead utilized the Association's general counsel in its negotiations with the [d]eveloper." Id. The negotiated settlement provided that the developer would pay the Association and the Recreation Association $400,000, and that the developer would receive "a general release except for `repair and replacement' of underground utility breaks" on part of the common elements for a period
Id. at 570 (footnote omitted).
The Supreme Court of New Jersey first interpreted New Jersey's Condominium Act to hold that an association "may sue to protect the rights and interests of the unit owners in the common elements." Id. at 573. In discussing whether the association had the "exclusive right to maintain those actions," the Court reasoned:
Id. at 573 (ellipses in original) (citations omitted) (emphasis added). The Court, however, clarified that
Id. at 574 (emphasis added).
In applying the above principles to the facts of Siller, the Court held that the individual unit owners had the right to sue the Associations for obtaining an inadequate or unreasonable settlement of the claims against the developer for defects in the design and construction of the condominium buildings and common elements. Id. at 570, 575. A necessary predicate to this holding is a duty on the part of the Associations to pursue a recovery against the developer for damages caused by the defective design or construction of the common elements. Therefore, Siller, along with Queen's Grant Villas and Murphy, supports the principle that a condominium association, which has the obligation to maintain and repair the common elements and the right to bring suit thereon, has the "duty to pursue a recovery for any alleged construction defects in the common elements which [the association] maintains," see Queen's Grant Villas, 335 S.E.2d at 366; Murphy, 345 S.E.2d at 710, and the individual unit owners have a cause of action against the association
In the instant case, the Declaration sets forth that appellants have a property interest in the Common Elements of the Condominium. Appellants, however, do not possess the authority to act in regard to the Common Elements; that authority lies exclusively with the Council. The Declaration provides: "[T]he Council shall maintain, repair and replace all General Common Elements and Limited Common Elements." Art. VI, § 6.5.2.(a) of the Declaration. The By-Laws also delegate to the Board of Directors "the exclusive right to initiate any form of legal proceedings," Art. II, § 2.2.5.(a) of the By-Laws, which includes, but is not limited to, "demands for performance of the Developer's obligations" and "any claims or actions related to the Common Elements," Art. II, § 2.2.5.(b) of the By-Laws. By virtue of the Council's exclusive control over the Common Elements of which appellants, as individual unit owners, have no control, a duty arises in the Council to act in regards to the Common Elements on behalf of the individual unit owners. Therefore, we hold that the duty to "maintain, repair and replace" the Common Elements, together with the exclusive right to initiate litigation regarding the Common Elements, creates a concomitant obligation on the part of the Council to pursue recovery from Questar on behalf of appellants for damage to the Common Elements caused by Questar's negligence, breach of contract, or violation of any applicable law.
The Council, nevertheless, contends that appellants are attempting to "turn back the clock [] or now by inventing [a] new cause[] of action" against the Council for claims appellants should have filed individually against Questar. In other words, the Council is arguing that, because the statute of limitations has expired for appellants to file lawsuits against Questar, appellants are attempting to redress their alleged injury by filing a lawsuit against the Council. The Council's argument is without merit.
It is clear that in their amended complaint, appellants seek recovery for only the increased annual and special assessments that they were forced to pay for the repair of the damage to the Common Elements. The By-Laws provide that the annual assessments and special assessments can only be used for Common Expenses for the Common Elements. Specifically, § 3.1.1.(b) of the By-Laws provides:
As previously stated, Common Expenses are the costs of maintenance, repair, and replacement of the Common Elements. See Art. VI § 6.5.2.(a) of the Declaration. Appellants' claims thus are related to the Common Elements and Common Expenses, not to any damage sustained by appellants to their individual units.
Finally, the Council argues that it owed no duty to appellants to file suit on their behalf against Questar, because the By-Laws provide that the Council may not file suit "absent express permission from the individual unit owners." Section 2.2.5.(c) of the By-Laws requires the unit owners of the Condominium to vote at a Special Membership Meeting on whether to bring legal proceedings in regards to the Common Elements. The Council appears to contend that, because the unit owners
Under Art. II, § 2.3.3.(b)(i) of the By-Laws, the President of the Board of Directors of the Council may at any time call a Special Membership Meeting "upon his or its own initiative."
Appellants also argue that the circuit court erred in finding that their complaint was barred by the statute of limitations. According to appellants, their claims against the Council were for "the Council's failure to properly secure the repair of the common elements," and thus the statute of limitations began to run when Judge Ballou-Watts issued her order on June 19, 2007. At that time, appellants discovered that the Council "failed to properly maintain and repair the common elements of the Condominium[] and protect the Unit Owners by filing a timely and proper action against [Questar]."
The Council responds that "[a]ppellants' complaint is time barred by the statute of limitations because the individual unit owners were on notice of water problems in the units as of June of 2002," but did not file their suit until January 23, 2008, after the three year statute of limitations had expired. According to the Council, upon discovering water seepage into their individual units due to the structural defects in the Common Elements, appellants should have pursued legal action against the Council for failing to maintain the Common Elements; the Council, in turn, would have pursued legal action against Questar. Instead, the Council argues, appellants relied on the Council to protect their rights, thus permitting the statute of limitations to expire.
Maryland Code (1974, 2006 Repl.Vol.), § 5-101 of the Courts and Judicial Proceedings Article provides: "A civil action at law shall be filed within three years from the date it accrues unless another provision of the Code provides a different period of time within which an action shall be commenced." The Court of Appeals, in Frederick Road Ltd. Partnership v. Brown & Sturm, 360 Md. 76, 756 A.2d 963 (2000), explained that Maryland employs
In the case sub judice, appellants sought recovery for the Council's failure to properly pursue a legal remedy against Questar, not for Questar's deficient design or construction of the Condominium and Common Elements. Indeed, under Art. II, § 2.2.5.(a) of the By-Laws, the "exclusive right to initiate any form of legal proceedings" related to the Common Elements is vested in the Board of Directors of the Council, not appellants. Thus the earliest appellants' cause of action accrued was in June of 2005, when, according to Judge Ballou-Watts' memorandum opinion, the three-year statute of limitations expired, thus precluding any recovery by the Council from Questar. Appellants filed their complaint against the Council on January 23, 2008, well within the three year statute of limitations that would have expired in June of 2008. Therefore, we conclude that appellants' complaint was not time barred.
In sum, we hold that the Council had a duty to appellants to properly pursue any claims against Questar arising out of defects in design and/or construction of the Common Elements, and a breach of that duty gave rise to a cause of action for negligence, which appellants filed within the applicable statute of limitations. Accordingly, we reverse the judgment of the circuit court and remand for further proceedings not inconsistent with this opinion.
