Opinion ID: 6491588
Heading Depth: 2
Heading Rank: 4

Heading: The Dorans ’ Purchase of Their Lot

Text: On July 5, 1996, [Respondents/Defendants-Appellants Dana D. Doran and Michael P. Doran] became the owners of Lot No. 42 in the Subdivision when their warranty deed was recorded. Prior to purchasing their lot, the Dorans had actual and constructive notice of the existence of KHHA. The Dorans’ warranty deed stated that their lot was subject to the Declaration, the First Amended Declaration, and the Partial Assignment. The Partial As signment identified KHHA as the organization responsible for enforcing the covenants and restrictions in the Declaration and First Amended Declaration. The Do-rans’ warranty deed, however, did not state that their lot was subject to KHHA’s Charter or By-[L]aws. Prior to closing, the Dorans received documents which referred to KHHA, the mandatory nature of membership in KHHA, and the obligation to pay assessments for services provided by KHHA. In particular, the Dorans admit they received copies of KHHA’s Charter and By-[L]aws before they purchased. The Dorans’ Deposit Receipt Offer and Acceptance (DROA) stated that “Maintenance Fees are $240.00 paid quarterly,” and their escrow settlement statement reflected the apportionment of the $240.00 quarterly maintenance fee with the seller. The Do-rans’ DROA notified them that their obligation to purchase was contingent on their review of homeowner organization documents, including the articles of incorporation, [B]y-[L]aws, minutes of the last annual meeting, and financial statements. The Dorans also executed a mortgage dated July 1, 1996, that contained a planned unit development (PUD) rider, which stated that the Dorans’ property was part of a PUD. The PUD rider required the Dorans to perform all their obligations under PUD’s “Constituent Documents,” which were defined to include the owners association’s articles of incorporation and [B]y-[L]aws. The Dorans were required to “promptly pay, when due, all dues and assessments imposed pursuant to the Constituent Documents.” At trial, Michael Doran testified that at the time he purchased his home, he was under the impression that the Subdivision was a PUD, that membership in KHHA was mandatory, and that he was obligated to pay assessments to KHHA. From July 1996 through March 1999, the Dorans paid assessments to KHHA, participated in KHHA meetings, and even requested that KHHA enforce the land use restrictions contained in the First Amended Declaration against other lot owners. In February 1999, however, the Dorans circulated a newsletter to homeowners disputing the authority of KHHA to collect assessments. The Dorans stopped paying their assessments and demanded that KHHA refund the assessments they had previously paid. On June 22, 1999, the Dorans sued KHHA in small claims court seeking the return of assessments paid to KHHA. The suit was later dismissed. KHHA I, 112 Hawai'i at 360-61, 145 P.3d at 903-04 (emphasis added).