### No. 14435 IN THE SUPRElME COURT OF THE STATE OF MONTANA 1979

IDABEL McLEISH JORDAN,ARTHUR McLEISH JORDAN and ROSEMARY J. 

### JORDAN, Plaintiffs andAppellants,

ELIZABETHAN MANOR, et al., Defendants and Respondents.

Appeal from: ~istrict Court of the Thirteenth Judicial District, Honorable Charles Luedke,Judgepresiding. Counsel of Record: ForAppellants: Towe,Ball, Enright & 

### Mackey, Billings,Montana Gerald Neely argued, Billings, Montana

For Respondents: Crowley, Haughey, Hanson,Toole & 

### Dietrich,Billings,

Montana Ronald Lodders argued,Billings, Montana

Submitted: February 6,

### 1979 Decided:

## APR2 1979 Filed:

## @R 2

# F1Q?s -,

# -Mr. Justice John C. Sheehy delivered the Opinion of the Court.

Plaintiffsappeal from an order of the DistrictCourt, Yellowstone County, granting partial summary judgment in favor of defendant Elizabethan Manor in an action against it and one other party. ElizabethanManor is a condominium project conceived by three Billings developers. Desiring to obtain financing for their project, the developers entered into subscription and purchase agreements with interested individuals in which the individuals agreed to purchase certain units of the condominium to be constructed. In these agreements the prospective unit

owners acknowledged receipt of copies and subscribed to the condominium declaration and bylaws. Plaintiff Jordan signed her agreement on September 21, 1971 as indicated by the record before this Court. On November 21, 1971, the developers purchased the land upon which the condominium units were eventually constructed. On June 1, 1972,pursuant to section 67-2315,R.C.M. 1947,

now section 70-23-302MCA, the developers filed as a preliminary declaration and bylaws, the documents represented by the copies attached to the subscription and purchase agreements. These documents indicated how the condominium would be operated once it was completed and had formal existence, and

were virtually identical to the finaldocuments later certified and filed. Between June 15, 1972 and November 9, 1972 the developers executed warranty deeds to the separate units to individualswho had signed the purchase agreements. The developers on March 22, 1973 filed the final signed declaration,and a certificate that the bylaws had been adopted and signed by two of the developers,one as chairmanof the board of directors of the association of unit owners and one as secretary of the association. This action was pursuant to section 67-2303,R.C.M. 1947,now section 70-23- 103MCA, and section 67-2320,R.C.M. 1947,now section 70- 23-307MCA. As indicated above, these documents were virtually identical to the copies of documents attached to the subscription and purchase agreements which were acknowledged and subscribed to by each individual subscriber and future owner. On December 11, 1973,at the annual meeting of the defendant association a majority of the association approved the bylaws filed on March 22, 1973,and further ratified all acts of the directors to December 11, 1973. After the condominium had been functioning for sometime in a communal living arrangement involving plaintiff and the Idabel Jordan other apartment owners,plaintifdbecame dissatisfied with certain aspects of the situation and stopped paying her assessed share of the common expenses as provided for in the bylaws. A series of unpleasant encounters between plaintiff and other members of the association followed. On August 20, 1974,plaintiff filed a two-count complaint in the District Court for Yellowstone County. Count one named ElizabethanManor Association as defendant and alleged the statutory procedure for establishing a condominium had not been correctly followed. The first count sought a declaratory judgment as to the rights, status and legal relationbetween plaintiffs and the association, a complete financialaccounting from the association to plaintiff,and an injunction enjoining the association from "acting in amanner contrary to the law and to the rights of plaintiffswith respect to the operation andmaintenance of said condominium." Count two named as defendant a property management firm which was administering the affairs of the condominium. The partial summary judgment entered by the District Court does not address the second count and that count is therefore not involved in this appeal. Elizabethan Manor filed an answer and counterclaim denying any failure to complywith the condominium laws and claiming damages for arrearages in the assessment of

common expenses. The counterclaimprayed for judgment for the arrearagesand foreclosure and sale of plaintiff's interest in the condominium unit pursuant to sections 67- 2326 and 2327, R.C.M. 1947,now sections 70-23-607 and 70-23-608 MCA

# .Motion forpartial summary judgment as to the matters concerning themwas made by Elizabethan Manor Association on October 28, 1976. After briefs had been submitted by both parties, the District Court entered an order of partial summary judgment in favor of the association to the extent the finaldeclaration and bylaws of the condominiumwere valid and enforceable and the association was entitled to judgment againstMrs. Jordan for arrearages in the assessment for admitted common expenses. The court reserved judgment on expenditures not admitted by plaintiff. Foreclosurewas granted but stayed on the condition the amount of admitted common expenses due be made current forthwith and thereafter paid regularly when due. The order of partial summary judgment

was made finalby certification pursuant to Rule 54(b), M0nt.R.Civ.P. on April 24, 1978. This appeal followed. Elizabethan Manor cross-appealed from that portion of the partial summary judgment entered by the District Court which denied respondent its attorney fees as claimed in its motion for summary judgment.Before proceeding with a discussion of the merits in this appeal it isnecessary to indicate the scope of our consideration of this case. This matter is before this Court on an appeal from a partial summary judgment,properly certified as final,declaring only that the finaldeclaration and bylaws were valid and thus the condominium had proper existence,defendant Elizabethan Manor was entitled to a judgment forplaintiffs'share of admitted expenditures,and that defendant Elizabethan Manor was entitled to a foreclosure of its lien for such expenditures. Such foreclosurewas stayed upon the condition the plaintiff pay her share of expenses determined as due and owing and thereafter regularly pay the assessed share of common expenses. These are the only matters which have been finally determined by the District Court. Ithas reserved issues on the remaining challenged expenses and thus stillhas jurisdiction over these two parties. We therefore declineplaintiff Jordan's invitation to rule on issues not addressed by the District Court,preferring towait until a final judgment on those issueshas been presented to us. See Rule 1,M0nt.R.App.Civ.P. In reviewing an appeal from a summary judgment this Court's concern iswhether the moving party is entitled to judgment on the law applicable to the facts established by the pleadings, depositions,answers to interrogatories and admissions on file togetherwith affidavitsappearing in the record. Audit Services, Inc. v. Haugen (19791, Mont

# .

, 591 P.2d 1105, 36 St.Rep. 451; Statev. Jennings (Alaska1976), 555 P.2d 248; Cherry v. Vanlahi, Inc. (19751, 216 Kan. 195, 531 P.2d 66;Rule 56(c), M0nt.R.Civ.P. Reviewing the record it is apparent the only issue in this appeal between these parties is the validity of the procedure establishing the condominiumproject. Plaintiff has admitted expenditures forming the basis of the judgment, questioning only their validity as to the authority of the condominium -5-to make the assessment,alleging it was not properly formed. Thus,we are able to frame the issuespresented by this appeal in the followingmanner. First,was the District Court correct in ruling the finaldeclaration and bylaws

were valid? Second,was itproper for the District Court to stay the foreclosure of the lien upon the condition plaintiff Idabel Jordan regularly pay the future charges not yet assessed? Third,was the amount of the judgment here correctly computed? Finally, isdefendant Elizabethan Manor entitled to attorney fees in this action? The initial issue presents a question of first impression to this Court which involves the statutory construction of provisions of the Montana Unit Ownership Act, sections 67-2301,et seq., R.C.M. 1947, now sections 70-23-101,et seq., MCA. Section 67-2303,R.C.M. 1947, as it read at the times pertinent hereto stated that in order to submit any property to the provisions of the act a "declaration" must be recorded by the owner of the property. Section 67- 2304, R.C.M. 1947,now section 70-23-401 MCA, indicates that once the property is submitted to the act the individual unitsmay be conveyed, encumbered or subjected to other "juridic acts". Section 67-2302, now section 70-23-102MCA, defines "unit"as a part of the property intended for independent use; "unitowner" as a person owning a unit in fee simple;and "association"as all the unit owners acting in accordance with the declaration and bylaws. Plaintiff argues the statutory requirements for establishment of a condominium project have not been complied with and therefore the assessmentsmade against her unit are without legal authority. This argument is based on the contention thatwhen the final declaration,which was

### signed by the developers, was filed in March 1973 the developerswere not "owners"and thus not capable of executing that document. The developers had previously executed subscription agreements and warranty deeds to the units to the prospective grantees and thus, contends plaintiffs were not owners of theproperty entitled to file the declaration. Plaintiffs aaso contend the bylaws

were improperly adopted and certified. These bylaws were signed and certified by the developers as owners and officers of the association and were filed simultaneously with the final declaration on March 22, 

### 1973. Because the developers were not owners as plaintiffs have previously argued, and because the bylaws were not adopted by each of the persons to whom the developers had executed warranty deeds and were not certified by officers of an association of those persons,plaintiffs contend the bylaws were ineffectual and actions taken pursuant to those bylaws were without legal authority. We do not agree with this argument. The filing of the final declaration is themost significant event in the establishment of a condominium. It is this action which subjects the property in question to the provisions of the act and it is this subjectionwhich allows the units of the condominium to be conveyed as "individual"units. In construing an actvery similar to Montana's, the Hawaii Supreme Court stated that the filing of the finaldeclaration submitting the property to the provisions of 

### the act "makes the property susceptible to conveyance of individual units." State Savings & 

### Loan - - 

### Associationv. Kauaian Development Co. (1969),50 Haw. 540, 445 P.2d 109, 116 (emphasisadded.) Our own statute indicates,

as did the Hawaiian provision, that it is onlywhile the

### property is submitted to the Unit Ownership Act, via the finaldeclaration, that a unit may be individually conveyed and encumbered. Section 67-2304,R.C.M. 1947, now section 70-23-401MCA. We therefore conclude that until the final declaration is filed those who are the fee owners of the condominiumproject are the fee owners of the units of theproject. As such, these persons are the parties contemplated by statute to sign and file the finaldeclaration. Section 67-2303,R.C.M. 1947, now section 70-23-103MCA. In the present case the developers of the project were suchparties and did sovalidly file the finaldeclaration. Because no unitsmay be individually conveyed, or encumbered until the final declaration is filed submitting the property to the act, the subscription agreements and warranty deeds divested the developers of no interest in the property until the finaldeclarationwas filed;,thus they remained the fee ownersuntil that time. See, 15AArn.Jur.2d Condominiums S26,p. 855. Having determined the final declarationwas properly executed and recorded,we now considerplaintiffs: arguments with respect to the bylaws. As we have stated above, the fee owners of the units until the final declaration is recorded, and thus "unit owners"by statutory definition (section67-2302(14), R.C.M. 1947, now section 70-23-102(17) MCA), are those personswho own the condominium project, here the developers. The statutory scheme requires all unit owners to adopt the bylaws by which the association of unit owners is governed and for the presiding officer and secretary of the association to certify these bylaws. This certificationmust be recorded simultaneouslywith the recording of the finaldeclaration. Section 67-2320(2), R.C.M. 1947, now section 70-23-307(2) MCA. The developers



## -8-

### in this case signed the bylaws as unit owners and certified the bylaws as officers of the association of unit owners of which they were the solemembers. Appellant argues this procedure was notvalid. We conclude itwas -

### valid. Until the finaldeclaration is filed,the fee owners of the project are the fee owners of the units and thus the "unitowners". As "unit owners" they are the "association" who must adopt bylaws and whose officersmust certify the bylaws, such certificate to be recorded simultaneously with the final declaration. This iswhat happened in the present case and whichwe determinewas not improper. We note, moreover, that in the present case all futureunit owners, including plaintiff, affirmed virtually the same declaration and bylaws when they signed the subscription and purchase agreements. Furthermore, once the final declarationwas recorded thus giving life to the otherwise inertwarranty deeds to the individual purchasers, these

owners then constituted the association and could amend the bylaws if they desired. We therefore hold the District Court was correct in its conclusion the condominiumwas properly formed and affirm the summary judgment on thispoint. We nowmust consider whether the District Court could correctly stay the foreclosure of the lien provided for by statute upon the condition the plaintiff pay all overdue assessments determined to be owing and to regularlypay all future assessments for common expenses. We note preliminarily that section 67-2326(1)

## ,R.C.M. 

### 1947, now section 70-23-607(1) MCA provides for a 

### lien against the individual unit for common expenses. This lien isperfected by filing a 

### claim containing a true statement of the account due for such common expenses. Section 67-2326(2), R.C.M. 1947, -9-now section 70-23-607(2) MCA. The lien in this casewas properly perfected to the extent of the supporting account. Because the condominium project was validly Idabel Jordan established the expendituresplaintiff/has admitted are proper as against her and thus the lien could be foreclosed. The question that remains iswhether the District Court could impose a staywith respect to the payment of current and future assessments. Section 67-2326(1), R.C.M. 1947, now section 70-23-607(1) MCA, provides for a lien upon the individualunit for all common expenses chargeable to that unit. The defendant association perfected its lien in the manner provided for in section 67-2326(2)

## ,R.C.M. 1947, now section 70-23-607 (2) MCA and it is this lien defendant association sought to foreclose in its counter-claim. The District Court granted the foreclosurebut stayed its execution upon the condition Idabel set forth above. However, if plaintiff/Jordan complies with that part of the condition requiring payment of common expenses currently due and owing, the lien of the defendant association is extinguished. Payment of the debt upon which

a lien is based extinguishes the lien, and thus here also the foreclosurebased upon it. Bushman Construction Co.

v. Air Force Academy Housing, Inc. (10thCir. 1964), 327 F.2d 481, 485; Richter v. Walker (1951), 36 Cal.2d 634, 226 P.2d 593, 599; 57 C.J.S. ~echanid Liens S247. The debt in this case obviously consistsonly of those assessments due up until the time of judgment of foreclosure or otherwise as any future assessments are undetermined and not yet in issue. In this circumstance there is nothing to staywith respect to payment of future assessments,

as payment of currently due and owing assessments extinguishes -10-the lien and thus the basis for foreclosure. We therefore modify the District Court's partial summary judgment by striking thatportion of the judgment staying the execution of foreclosure on the condition the plaintiff "thereafter regularly pay the common expenses as assessed when due 

# . . ." and by limiting the stay to the condition plaintiff pay those expenses determined by the District Court as currently owing. We are next asked to consider the correctness of the Idabel District Court's computation of plaintiff/Jordantsshare of admitted expenditures. Defendant Elizabethan Manor has Idabel agreed with plaintiff/Jordanlsargument that the amount of common expenses plaintiff has paid should be deducted from her assessed share and not from the total common expenditures before computing her share as was done by the District Court. The only question remaining are the numbers to be used in Idabel this computation. ~laintiff/Jordanargues she has been assessed twice for amounts placed in reserve accounts and would therefore not include those amounts in her computation. The bylaws of the association,which we have upheld herein, clearly provide for such reserves. See,Bylaws,Art. VI, Sl(d). Themaintenance of such reservesby condominium associations has been judicially sanctioned. Association of Unit Owners of the Inn of the SeventhMountain v. Gruenfeld

(1977), 277 Ore. 259, 560 P.2d 641, 644. Because plaintiff has not paid any expenses except for the amount credited below, she could not have already made her contribution to the reserve account and thus is not being twice assessed for the same expense. The judgment of the District Court is thereforemodified to comportwith the following computation.Total of association checks for common expenditures Sept. 1972

## - October 1976 Less: Total of checks not "admitted" reserved by the court 4,840.44 Total to be divided fourteenways (Fourteen individual units) 26,326.87

One-fourteenth of above 1,880.49 Less: Jordan payment Total due by Jordan under judgment dated April 24, 1978 $1,225.74 The finalmatter in this appeal is defendant association's claim for attorney fees. Defendant is correct in its statement that this Court has held attorney fees are available when provided for in an agreementbetween the parties to a lawsuit. Kintner v. Harr (1965),146Mont. 461, 408 P.2d 487. In this cause the declarationprovided for recovery of attorney fees by the prevailing party in litigation resulting from the default of payment of common expenses. Final Declaration, 516

### (a)

### ,(c)

# . The operative words are "theprevailing party". As this action now stands

we do not perceive a prevailing party with respect to a final,complete judgment. The District Court has only decided,and we have affirmed, that the condominiumwas validly formed and that the defendant is entitled to a judgment of $1,225.74. There remains to be decided the validity of plaintiffs' assessed share of over $4,80O,.QOin

common expenses and the necessity of an accounting. A prevailing party is the one who has an affirmative judgment rendered in his favor at the conclusion of the entire case. Ennis v. Ring (1959),56 Wash.2d 465, 341 P.2d 885, 889. The entire case here has not been concluded as between these two 

### - parties. We therefore affirm the District Court's rulingat this point that each party bear their own attorney fees. Judgmentmodified in part and affirmed in part, and remanded for further proceedings in accordance with this opinion. The parties shall bear their own appeal costs.



### -- Justice

We Concur:

Chief Justice