Cassel, J.
This appeal was taken from a judgment invalidating the sale of limited common elements of a condominium governed by the Nebraska Condominium Act
Paul F. McGill developed Lion Place Condominium with Michael L. Henery. The recorded "Declaration of Condominium Property Regime" established 16 units, consisting of 12 residential and 4 commercial units. Henery purchased the commercial units, and McGill purchased four of the residential units.
The declaration allocated certain common elements as limited common elements for the exclusive use of the commercial units. These limited common elements consisted of "[a]ll [c]ommon [e]lements in the basement level and first floor." Under Nebraska law, "[c]ommon elements" include "all portions of a condominium other than the units."
To govern the condominium, the declaration established an unincorporated association, composed of all of the unit owners. Each unit owner was granted one vote for each unit owned, except that the owner of the basement commercial unit was granted three votes. Although the association was granted "all of the powers necessary to govern" the condominium, an "[e]xecutive [b]oard" of five unit owners was created to act on the association's behalf and to administer its affairs.
In 2008, Henery offered to pay $35,000 to purchase the limited common elements adjacent to his commercial units. The minutes of a July 2008 meeting of the association reveal that Henery's offer may have been the "key" to financing repairs to the exterior of the condominium building. At a meeting in September, the association agreed to withhold approval of Henery's offer until its next meeting in order to facilitate other offers. However, "[e]very [one]" agreed to sell the limited common elements and to accept the highest offer.
McGill also sought to purchase the limited common elements and offered $36,000. Upon learning of McGill's offer, Henery immediately countered with an offer of $36,000, plus the payment of all closing costs and related expenses. At a meeting in December 2008, the association ultimately voted to accept Henery's second offer. As we explain below, the heart of the controversy is the sufficiency of the vote at the December 2008 meeting.
In May 2009, Henery and the president of the association signed a purchase agreement for a portion of the limited common elements adjacent to Henery's commercial units. And in order to transfer the limited common elements to Henery, the president signed an amendment to the condominium declaration, modifying the boundaries of three of Henery's commercial units to incorporate the limited common elements. The president then reconveyed the modified commercial units to Henery via a warranty deed.
In January 2010, McGill filed an action in the district court for Douglas County against Henery and the association, challenging
After the dismissal of the 2010 action, McGill filed a second action against Henery and the association in the district court for Douglas County. And McGill again challenged the sale of the limited common elements. However, in contrast to the 2010 action, McGill brought the second action "on his own behalf, as well as on behalf of all other members of the [a]ssociation similarly situated, derivatively in the right of and for the benefit of the [a]ssociation." And he asserted that he had made demand upon the association to initiate proceedings regarding the sale, but that the executive board had refused.
Both Henery and the association moved to dismiss on the basis that the second action was barred by the dismissal of the 2010 action. The district court overruled the motions, observing that the 2010 action was dismissed due to McGill's lack of standing as an individual. But the second action was brought derivatively on behalf of the association. Thus, the court determined that while any suit in McGill's individual capacity was barred, a derivative action was appropriate.
Each party subsequently moved for summary judgment. At the summary judgment hearing, the district court received McGill's deposition testimony. In his deposition, McGill indicated that prior to the sale, Henery had been using the limited common elements adjacent to Henery's commercial units. McGill believed that Henery should be paying rent, and McGill complained of Henery's use of the limited common elements to the president of the association. In an affidavit, Henery explained that he sought to incorporate the limited common elements into his commercial units in order to "avoid any confusion or conflict."
McGill further explained that he had been interested in purchasing the limited common elements and that the sale to Henery "was not done right." McGill had made an offer and included everything that Henery had proposed. But McGill believed that the limited common elements were going to be auctioned, and his offer was only his "beginning bid." McGill also believed that Henery should have paid market value, because the limited common elements had been appraised for $88,000.
The district court overruled each of the motions for summary judgment. Henery subsequently filed a second motion for summary judgment, claiming that McGill could not maintain a derivative action on behalf of the association, because it was unincorporated. The district court rejected Henery's argument and overruled the motion. The court observed that while a derivative action is generally associated with a corporation, "there is nothing that prevents it from being brought on behalf of a partnership, a limited liability company, or some type of other unincorporated association."
The matter proceeded to trial, and the district court received evidence regarding the December 2008 approval of the sale to Henery. According to the treasurer of the
Henery also testified and clarified the circumstances of the vote. According to Henery, the absent unit owner had been represented by a proxy. Henery testified that there were "14 votes voted for the sale and four votes against."
After trial, the district court entered an order finding that the sale and conveyance were void. The court determined that under the Nebraska Condominium Act, the sale required the approval of 80 percent of the association. But at most, only 77.7 percent of the association approved the sale. Further, the act required an agreement signed by the requisite number of unit owners. But no evidence of such an agreement had been offered by Henery or the association. Consequently, the court concluded that the sale was void and that title to the limited common elements remained with the association. And in a later order, the court awarded McGill his attorney fees in the amount of $28,016 and expenses of $1,209.14, plus costs.
Henery and the association filed several motions to alter or amend or for a new trial, which were all overruled. Henery filed a timely notice of appeal, and the case was initially assigned to the Nebraska Court of Appeals' docket. We moved the case to our docket.
Henery assigns, consolidated and restated, that the district court erred in (1) finding that the derivative action was not barred by the dismissal of the 2010 action, (2) permitting McGill to bring a "shareholder derivative suit" on behalf of the association, (3) determining that McGill was not equitably estopped from bringing the derivative action, and (4) finding that the sale and conveyance of the limited common elements were void.
In its cross-appeal, the association makes the same assignments of error as Henery. But in addition, it contends that the district court erred in (1) finding that McGill had stated a claim, (2) determining that title to the limited common elements remained with the association, and (3) awarding McGill his attorney fees and costs.
The applicability of claim and issue preclusion is a question of law.
In an appeal of an equitable action, an appellate court tries factual questions de novo on the record and reaches a conclusion independent of the findings of the trial court, provided, where credible evidence is in conflict on a material issue of fact, the appellate court considers and may
Before addressing Henery's and the association's assignments of error, we recall general principles of the condominium form of property ownership. Although Nebraska retains another group of statutes governing condominiums,
The condominium form is distinguished by its dual levels of property ownership. Individual units are separately owned, while the remainder is designated for common ownership by the unit owners.
However, the use of some common elements may be reserved to fewer than all of the unit owners. These restricted common elements are known as limited common elements.
Although each unit owner possesses an undivided ownership interest in the common elements, the individual unit owners have no right of control over the common elements. The power to "[r]egulate the use, maintenance, repair, replacement, and modification of common elements" is vested in the association
Having reviewed some basic characteristics of condominium property ownership, we now turn to Henery's and the association's assignments of error. We first address their claims regarding McGill's ability to bring the present action challenging the sale to Henery. We then turn to the validity of the sale and McGill's award of attorney fees, expenses, and costs.
Henery and the association contend that McGill did not properly sue in a derivative capacity and that Nebraska law did not permit McGill to bring a derivative suit on behalf of the association.
Although McGill's complaint was not captioned as being brought in a representative capacity, we have stated that the character in which one is a party to a suit, and the capacity in which a party sues, is determined from the allegations of the pleadings and not from the caption alone.
We read McGill's complaint as asserting a claim on behalf of the association. The complaint specifically stated that the action was brought "derivatively in the right of and for the benefit of the [a]ssociation." And McGill alleged a common injury to the unit owners of the condominium. Each unit owner possessed an undivided ownership interest in the common elements, and McGill claimed that Henery had unlawfully obtained title to certain common elements. Because the association was granted the power to institute litigation on matters affecting the condominium,
We agree that the action did not fall within an express grant of statutory authority. Derivative proceedings are typically initiated pursuant to Nebraska's Business Corporation Act.
But derivative proceedings are not dependent upon legislative authorization. Many courts have recognized that derivative actions originated in equity, existing independent of specific legislation.
Recognizing the equitable origins of derivative actions, in Caprer v. Nussbaum,
(Citations omitted.)
We agree with the New York court that the same factors prompting the development of derivative actions in other contexts apply equally to condominiums. All of the unit owners possess an interest in the condominium. But the power to initiate proceedings on matters affecting the condominium is granted to the association and may be delegated to a separate body.
Further, we have previously recognized that in certain circumstances, a member of an unincorporated association may properly bring a derivative suit on the association's behalf.
We therefore hold that in appropriate circumstances, a unit owner may bring a derivative suit on behalf of an unincorporated condominium association to enforce a cause of action belonging to the association. But the unit owner must allege that demand has been made upon the association or governing body to enforce the claim or that demand would have been futile.
In the present action, McGill sought to invalidate the alleged unlawful sale of the limited common elements to Henery. And because the sale affected
But Henery and the association also rely upon the executive board's refusal of McGill's demand and contend that the business judgment rule precluded McGill from maintaining a derivative suit. They claim that because the executive board's refusal was reasonable and made in good faith, the district court was barred from questioning the sale's validity.
This argument is not well taken. According to the business judgment rule, courts are precluded from conducting an inquiry into actions of corporate directors taken in good faith and in the exercise of honest judgment in the lawful and legitimate furtherance of corporate purposes.
Both Henery and the association contend that the present action was barred by the dismissal of the 2010 action. They assert that the present action was an impermissible attempt to relitigate issues either that were conclusively determined or that could have been raised in the 2010 action.
As previously discussed, the district court determined that any action brought by McGill in his individual capacity was barred by the dismissal of the 2010 action. No party contests this determination. The court further concluded that the derivative suit brought on the association's behalf was appropriate. We therefore restrict our analysis to the derivative suit.
Henery's and the association's arguments invoke the concepts of claim preclusion and issue preclusion. In the past, we have referred to these concepts as res judicata and collateral estoppel.
The present action and the 2010 action clearly invoked the same cause of action or claim. In both suits, McGill sought to invalidate the sale of the limited common elements to Henery. But in order for claim or issue preclusion to apply, some nexus must exist between the parties to the successive actions.
We addressed a similar scenario in Hickman v. Southwest Dairy Suppliers, Inc.
We rejected the defendants' argument and observed that even if the husband had been appointed the administrator of his wife's estate, res judicata or collateral estoppel would likely not have applied. "`In order that parties for or against whom the doctrine of res judicata is sought to be applied may be regarded the same in both actions, the general rule is that they must be parties to both actions in the same capacity or quality.'"
But Henery and the association argue that McGill's different capacity was irrelevant, because he was in privity with the association in the 2010 action. Both claim preclusion and issue preclusion require an identity or privity of parties.
In analyzing federal law, we have previously observed:
And we have stated that the basis of the doctrine of res judicata is that the party to be affected, or someone with whom he or she is in privity, has litigated or has had an opportunity to litigate the same matter in a former action.
In this case, McGill and the association cannot be said to be in privity, because they are not really and substantially the same in interest. In the 2010 action, the district court determined that McGill did not have an interest in contesting the sale to Henery and that, thus, he did not have standing. McGill did not appeal this ruling. In contrast, in representing the interests of the unit owners and the condominium as a whole, the association was necessarily interested in the validity of the sale. We therefore reject the assertion that McGill was in privity with the association.
And it cannot be said that prior to the derivative suit, any party had yet litigated the validity of the sale, either independently or on the association's behalf. The doctrine of issue preclusion recognizes that limits on litigation are desirable, but a person should not be denied a day in court unfairly.
The association claims that McGill's complaint failed to state a claim, because the action was filed more than 1 year from the date that the amendment to the declaration was recorded. As discussed above, in order to effect the sale to Henery, the president of the association executed an amendment to the declaration modifying the boundaries of Henery's commercial units and then reconveyed the units to Henery. Section 76-854(b) provides that "[n]o action to challenge the validity of an amendment adopted by the association pursuant to this section may be brought more than one year after the amendment is recorded."
We reject the premise of this argument—that McGill challenged the amendment to the declaration and not the sale of the limited common elements. The president executed the amendment only to transfer the limited common elements to Henery. The sale of these limited common elements was at the heart of McGill's derivative action, and the evidence established that the limited common elements were sold. Section 76-870 specifies the requirements to convey a portion of the common elements. Therefore, that statute controls.
Even if § 76-854 were controlling, Henery and the association waived any defense based upon the 1-year limitations period. Neither Henery nor the association raised a statute of limitations defense in their answers or motions to dismiss. The association did not raise
Henery and the association assert that equitable estoppel should defeat McGill's claim, because the association accepted the benefits of the sale by using the funds received from Henery. They further argue that McGill also benefited from the sale and that he voted in favor of using the funds.
Equitable estoppel is a bar which precludes a party from denying or asserting anything to the contrary of those matters established as the truth by his or her own deeds, acts, or representations.
Because this is a derivative action, the association is the party to be estopped. And as to the association, the defense clearly fails. To be estopped, the association is required to have possessed "knowledge, actual or constructive, of the real facts."
Further, it cannot be said that the parties were unable to ascertain the truth or falsity of the pertinent facts.
Henery and the association assert that the sale of the limited common elements was not invalid. And the association further claims that the district court erred in determining that title to the limited common elements remained with the association, rather than Henery.
In arguing that the sale was not invalid, the association again relies upon § 76-854, concerning amendments to the declaration. But as already discussed, the amendment in this case was executed only to carry out the sale to Henery. Regardless of the form of the transfer, the sale was required to comply with the provisions of § 76-870.
Section 76-870 provides, in relevant part:
Henery and the association also misunderstand the requirements of § 76-870(a). They assert that only Henery's consent was necessary to approve the conveyance, because he owned all of the commercial units to which the limited common elements were allocated. Thus, they do not read the 80-percent requirement as applying to limited common elements. We disagree.
This argument neglects the common ownership of limited common elements. As previously discussed, although allocated to the exclusive use of certain units, limited common elements are nonetheless common elements of the condominium. Because they are common elements, each unit owner possesses an undivided ownership interest in the limited common elements, even if the owner has no right to their use. Section 76-870(a) protects this ownership interest by requiring the approval of 80 percent of the total authorized votes in the association to convey common elements, whether or not the common elements are also limited common elements.
Rather than providing an alternative method of approval, § 76-870(a) provides an additional safeguard as to the sale of limited common elements. Not only must 80 percent of the total votes approve the sale of limited common elements, but the sale must be approved by all of the unit owners entitled to the use of the limited common elements. Without the unanimity requirement, the association could vote to sell limited common elements despite an objection from those unit owners entitled to their use.
Because § 76-870(a) required approval by both 80 percent of the total votes and 100 percent of the unit owners to whom the limited common elements were allocated, the vote was clearly insufficient. While the second requirement was satisfied, the first was not. As the district court determined, at most, the sale to Henery was approved by a vote of only 77.7 percent. Thus, the conveyance fell short of the 80-percent requirement.
Further, there is no evidence of any agreement executed by the unit owners approving the sale, or ratifications thereof, as required by § 76-870(b). Only Henery and the president of the association signed the purchase agreement for the limited common elements. And only the president signed the amendment to the declaration and the warranty deed. We therefore agree with the district court that the conveyance of the limited common elements was void.
Henery and the association raise additional arguments relying upon provisions of the declaration and of the act which are similarly unpersuasive. Section 76-845(b)
As to the association's assertion regarding the state of title to the limited common elements, we agree that the district court could have been more specific. Rather than indicating that title to the limited common elements remained with the association, it would have been more clear to state that each unit owner retained his or her undivided ownership interest. But because the association was composed of all the unit owners, the district court was not necessarily incorrect. However, we reject the association's premise that title to the limited common elements remained with Henery. The limited common elements are still allocated to the exclusive use of the commercial units. But Henery's ownership of the limited common elements is shared with all of the unit owners. This assignment of error is without merit.
The association assigns that the district court erred in awarding McGill his attorney fees and costs. It claims that there was no statutory basis to permit the award, that the award included attorney fees incurred in the 2010 action, and that McGill was improperly granted payment of certain "expenses."
The association is correct that some basis must exist to permit an award of attorney fees. We have stated that attorney fees and expenses may be recovered only where provided for by statute or when a recognized and accepted uniform course of procedure has been to allow recovery of attorney fees.
However, a specific statutory basis exists in § 76-891.01, which provides:
We determine that an award of attorney fees and costs was proper under § 76-891.01.
As to the amount of the award, we find no abuse of discretion regarding the services provided by McGill's attorneys. When an attorney fee is authorized, the amount of the fee is addressed to the trial court's discretion, and its ruling will not be disturbed on appeal absent an abuse of discretion.
The association also argues that the district court improperly awarded McGill payment for several miscellaneous expenses charged by his attorneys, including postage, photocopies, and court reporters. Our prior case law has not been consistent in its treatment of such litigation expenses. For example, in National Am. Ins. Co. v. Continental Western Ins. Co.,
Since as early as 1922, we have recognized that litigation expenses are not recoverable unless provided for by statute or a uniform course of procedure.
This disparity arises, in part, from the numerous distinct statutory provisions addressing the recovery of attorney fees and costs in certain types of litigation. For example, specific statutes expressly permit the recovery of certain litigation expenses.
In City of Falls City v. Nebraska Mun. Power Pool,
We therefore hold that without indication to the contrary, where a statute speaks only to attorney fees and costs, a
As previously discussed, § 76-891.01 speaks only to the recovery of attorney fees and costs. But the district court allowed McGill to recover $1,209.14 in expenses, including expenses for postage, photocopies, and court reporters. Our attention has not been directed to any statute which defines taxable costs to include these items. But we are also aware that the parties have not had the opportunity to brief the statutory basis for the items to be claimed as costs, and we think it is appropriate that the district court consider the matter in the first instance.
Based upon the requirements of the Nebraska Condominium Act, the sale and conveyance of the limited common elements were void. The conveyance was neither approved by the requisite vote of the association nor evidenced by an agreement signed by the unit owners. And we further conclude that McGill was not barred from bringing the present derivative action and that a statute authorized the district court to award McGill his taxable costs and reasonable attorney fees. We therefore affirm the award of attorney fees of $28,016, but we vacate the award of costs and expenses and remand the cause to the district court to determine the amount of taxable costs to be awarded to McGill in conformity with this opinion. In all other respects, we affirm the judgment of the district court.
AFFIRMED IN PART, AND IN PART VACATED AND REMANDED FOR FURTHER PROCEEDINGS.