Court Opinion

ID: 2688140
Source: CourtListenerOpinion
Date Created: 2014-07-31 21:46:26.106203+00
Date Added: 2024-06-11T08:32:49.591269
License: Public Domain

IN THE COURT OF APPEALS OF IOWA

                             No. 3-1213 / 13-0433
                             Filed March 26, 2014

BECKY RICE, KIM COSGRIFF, BOBBIE
SALA, DWYLA MOSHER, SUZANNE NEU,
JAMES NEU, and JULIE YOUNG,
     Plaintiffs-Appellants,

vs.

PROVIDENCE POINTE, L.C., PROVIDENCE
POINTE CONDOMINIUM ASSOCIATION, INC.,
PROVIDENCE POINT CONDOMINIUMS, L.C.,
PROVIDENCE POINT OWNER ONE, L.C.,
PROVIDENCE POINT OWNER TWO, L.C.,
PROVIDENCE POINT OWNER THREE, L.C.,
TWO RIVERS BANK AND TRUST, HAVERKAMP
PROPERTIES, L.L.C., and BRENT HAVERKAMP,
     Defendants-Appellees.
________________________________________________________________

      Appeal from the Iowa District Court for Polk County, Mary Pat Gunderson,

Judge.

      The owners of condominium units appeal the court’s summary judgment

ruling dismissing their breach of contract claims. AFFIRMED.

      Jon Hoffmann of The Law Offices of Jon Hoffman, P.C., West Des

Moines, for appellants.

      James E. Nervig of Brick Gentry, P.C., West Des Moines, and Craig R.

Hastings of Hastings Gartin & Boettger, L.L.P., Ames, for appellees Providence

Pointe, L.C., Providence Pointe Condominium Association, Inc., Providence
                                       2

Pointe Owner One, L.C., Providence Pointe Owner Two, L.C., Providence Pointe

Owner Three, L.C., Haverkamp Properties, L.L.C., and Brent Haverkamp.

      Matthew C. McDermott, Thomas L. Flynn, and Margaret C. Callahan of

Belin McCormick, P.C., Des Moines, for appellee Two Rivers Bank and Trust.

      Heard by Potterfield, P.J., and Doyle and Bower, JJ.
                                         3

BOWER, J.

       After Providence Pointe Condominiums, L.C. (PPCLC), the original

developer of a condominium project, defaulted on its note and mortgage with

Two Rivers Bank and Trust (Two Rivers), PPCLC and Two Rivers entered into a

voluntary foreclosure agreement. Four months later, Two Rivers and Haverkamp

Properties entered into a real estate contract.1 Haverkamp Properties completed

the project, added the buildings it constructed into the condominium regime,

retained ownership of its units, and leased or rented the units it owned.

       The Rice plaintiffs, purchasers of condominium units from PPCLC, filed

breach of contract and breach of fiduciary duty claims against PPCLC, the

Providence Pointe Condominium Association (the Association), Two Rivers, and

Haverkamp Properties. The district court granted partial summary judgment to

Two Rivers and Haverkamp Properties,2 and the remaining issues were

submitted to binding arbitration. In this appeal, the Rice plaintiffs claim the court

erred in granting summary judgment on Two Rivers’ and Haverkamp Properties’

alleged contract breaches—(1) failure to turn over control of the Association to

them and (2) failure to provide notice and obtain “vote, consent, or approval”

before taking post-foreclosure actions. We affirm.

I. Background Facts and Proceedings.

       A. PPCLC Development. On September 27, 2006, PPCLC filed articles

of organization forming a limited liability company. Also on September 27, the

1
  We refer to Brent Haverkamp and all Haverkamp entities as Haverkamp Properties.
2
  Because the Association and Haverkamp Properties presented a joint defense, a
reference to court action by defendant Haverkamp Properties includes defendant, the
Association. PPCLC was administratively dissolved before the petition was filed.
                                           4

Association filed articles of incorporation forming a non-profit corporation and

stating its “primary purpose” was operating a homeowner’s association for

Providence Point Condominiums.

       In October 2006 Century Trace Development II, L.C. conveyed Lots 1-7 in

Plat 1 to PPCLC.3 PPCLC signed a $6 million promissory note with Two Rivers,

and the note was secured by a mortgage encumbering Lots 1-7. In December

2006 PPCLC platted these lots as Providence Pointe Plat 2.              In June 2007

PPCLC filed a “Declaration of Submission of Property to Horizontal Property

Regime for Providence Pointe Condominiums” (Declaration). See Iowa Code

Ch. 499B (2007) (Horizontal Property Act (Condominiums)).

       The 2007 Declaration identified PPCLC as the “Developer” with an interest

in “proposed improvements to be known as Providence Pointe Condominiums.”

PPCLC conveyed Phase 1 into the regime. Phase 1 “is to consist of” a two-story,

sixteen-unit building on Lot 5 and a clubhouse with a pool on Lot 7.

       The 2007 Declaration showed PPCLC                  intended to construct a

condominium building on each of Lots 1-4 and Lot 6 by (1) expressly identifying

Plat 2’s remaining lots as “Additional Land” and (2) expressly providing for the

later expansion of the regime in phases “at any time by subsequent amendments

thereto adding the Additional Land” in the Developer’s “sole discretion”—“up to

3
 Prior transactions included: in May 2004 Century and the City of Johnston entered into
an agreement regarding the development of land into residential and commercial
properties; in January 2006 a portion of Century’s land was platted as Providence Pointe
Plat 1, and Plat 1 included “Outlot X”; in May 2006, Century and the City of Johnston
entered into a development agreement dividing a part of “Outlot X” into Lots 1-7 for a
condominium project.
                                            5

three (3) two-story buildings with twenty (20) single family units and two (2)

buildings with thirty-six (36) single family units.”

       Declaration Article III.3 created ownership units with voting privileges

appurtenant to each Unit. Owners could rent or lease their unit, and a unit’s vote

“shall be counted for all purposes . . . irrespective of any actual occupancy or use

of the Unit to which appurtenant.”               Declaration Article III.7 provided:

“Appurtenant to each Unit shall be membership in the Association and one vote

in the affairs of the Association and of the Condominium Regime.”

       Declaration Article V explained the “Developers Reserved Rights, Powers,

and Obligations.”       Under Article V.1, the “Developer is irrevocably and

perpetually empowered . . . to sell, lease or rent Units not previously sold by the

Developer to any person.”         Under Article V.3, “Designation of Association

Directors,” the Developer had the initial right to name the Association’s board of

directors and, consequently, PPCLC initially controlled the Association.           This

Article also established the “control transfer date,” the date the Developer’s

control of the Association was transferred to the unit owners—the earlier of

       the date by which all of the Units (after completion of all phases of
       the development of the Condominium Regime) have been
       conveyed to Unit purchasers or five (5) years from the date of the
       sale of the first unit . . . . Thereafter the Board of Directors shall be
       selected in the manner specified in the Bylaws of the Association.

Importantly, the final sentence’s use of “thereafter” shows the Declaration’s “right

of control” provisions take precedence over the Association Bylaws.
                                         6

      Declaration Article VI.1 noted the condominium regime’s business shall be

managed by the Association and stated the Association Bylaws are attached to

the Declaration as Exhibit G.

      PPCLC constructed Phase 1’s sixteen-unit Building 5 on Lot 5 and the

pool and clubhouse on Lot 7. PPCLC offered the sixteen units for sale as owner-

occupied condominiums. In June 2007 PPCLC recorded a “First Amendment” to

the Declaration, amending the rent or lease provision. On August 20 PPCLC

recorded a “Second Amendment” to the Declaration, listing the percentage

ownership interest of each Building 5 unit.

      On August 28, 2007, plaintiff and unit owner Bobbi Sala recorded the first

deed of sale for a Building 5 unit in Providence Pointe Condominiums. Sala and

the subsequent Building 5 unit owners received a deed conveying title to their

condominium unit and to “the undivided interest in the general and limited

common elements appurtenant to such unit as provided in the Declaration . . .

and as amended and with any and all other interests appurtenant to such unit

pursuant to said Horizontal Property Regime.”

      On September 17, 2007, PPCLC recorded a Third Amendment to the

Declaration, substituting a new Article V.3 “control transfer date” provision:

Developer’s control of the Association was transferred when the earlier of—(1)

“75% of all of the Units (after completion of all phases of development of the
                                           7

Condominium Regime) have been conveyed to Unit purchasers” or (2) “seven (7)

years from the date of the sale of the first Unit.”4

       By the summer of 2008, PPCLC had sold eleven of the sixteen Building 5

units. PPCLC sold six units to the Rice plaintiffs.

       B. Foreclosure and Subsequent Transactions. PPCLC had partially

completed the construction of the next building in the project, a thirty-six-unit

Building 6 on Lot 6.         PPCLC defaulted on its loan with Two Rivers and

abandoned construction. In August 2008 PPCLC and Two Rivers recorded an

“Alternative   Nonjudicial    Voluntary    Foreclosure    Agreement”      (Foreclosure

Agreement). PPCLC’s unpaid note balance was $4,234,232.

       On the same date, PPCLC recorded a Quit Claim Deed transferring all of

PPCLC’s “right, title, interest, estate, claim and demand” in “real estate in Polk

County, Iowa: Lots 1, 2, 3, 4, 5, 6 and 7 in Providence Pointe Plat 2” and the five

unsold units “in Building 5 in Providence Pointe Condominiums, a horizontal

property regime” in “the City of Johnston, Polk County . . . together with the

undivided interest in the . . . common elements appurtenant to such unit as

provided in the Declaration.” Two Rivers eventually sold these five units to

condominium purchasers.

4
  Consistent with the original Declaration’s “control transfer date” provision, the new
section also ended with the statement: “Thereafter the Board of Directors shall be
selected in the manner specified in the Bylaws of the Association.” Therefore, the final
sentence again shows the Declaration controls over the Association Bylaws until the
transfer of control threshold has been met.
        This amendment also adopted a new lease or rental provision and added a
paragraph to the “Expansion of the Condominium Regime” section.
                                         8

      After the foreclosure, many unit owners chose not to pay their dues and

assessments, forcing Two Rivers to subsidize the Association’s expenses.5 At

this time Building 6 was open to the winter elements. Two Rivers contacted

Brent Haverkamp of Haverkamp Properties about taking over the development.

      After a meeting with unit owners, Haverkamp Properties decided to finish

the development.     In late December 2008, Haverkamp Properties and Two

Rivers entered into a real estate contract—Haverkamp Properties agreed to buy

Two Rivers’ interest in Polk County real estate, “Lots 1, 2, 3, 4, 6, and 7,

Providence Pointe Plat 2, Johnston, Iowa” in phased purchases matching phased

construction ($3,625,000), and Two Rivers agreed to provide construction

financing to Haverkamp Properties.       Also, Haverkamp Properties agreed to

become the Association’s agent.

      After Two Rivers transferred Lot 6 to Haverkamp Properties on December

31, 2008, Haverkamp Properties winterized Building 6 and completed its

construction.   Haverkamp Properties informed the unit owners, “Effective

February 1, 2009, Haverkamp Properties will manage the Owner’s Association.”

Haverkamp Properties installed its own representatives as directors of the

Association.

      Two Rivers deeded its other lots to Haverkamp Properties in phases as

the construction continued—Lot 3 in June 2009, Lot 4 in October 2009, and Lot 1

5
 The expenses Two Rivers paid on behalf of the Association include $15,000 to Conlin
Properties for property management, $1500 in insurance premiums, and over $23,000 to
settle the Association’s books.
                                            9

in November 2009. Haverkamp Properties retained the ownership of the

completed units and rented the units.

       In   December      2009,    Haverkamp      Properties    recorded    the   Fourth

Amendment, replacing “the Original Declaration including the Bylaws and all

exhibits thereto . . . and all Amendments” and adding buildings and lots into the

condominium regime (Lots and Buildings 6, 3, 4, and 1).

       In August 2010 the Secretary of State issued a certificate of dissolution for

PPCLC, the original developer. In November 2010 Two Rivers transferred Lot 2,

the last remaining lot, to Haverkamp Properties. In January 2011 Haverkamp

Properties, as owners of 67% of the total votes of the Association,6 executed a

“First Amendment to the Amended Declaration” adding Lot 2, Building 2 into the

condominium regime. The completed regime consisted of 157 units in six multi-

unit residential buildings and a clubhouse and pool.            Haverkamp Properties

owned 141 units, and the sixteen units in Building 5 are owned by others.

       C. District Court Litigation. In February 2011 the owners of six units in

Building 5 filed a two-count petition alleging breach of contract and fiduciary

duties. The contract and the fiduciary counts alleged the same three categories

of claims—failure to turn over the Association, failure to give notice and hold a

vote after the foreclosure, and failure to properly manage the Association and

provide requested information.       Alleged damages included the Rice plaintiffs’

inability to refinance their units, their inability to sell their units using conventional

6
 The Fourth Amendment’s Declaration Article XV.1 stated: “[T]his Declaration may be
amended . . . by a resolution . . . duly adopted by the affirmative vote of Unit Owners
holding not less than sixty-seven percent (67%) of the total votes in the Association.”
                                            10

lending practices, and their inability to participate in the Association’s

governance.

       In May and June 2012 Haverkamp Properties and Two Rivers filed

motions for summary judgment. The Rice plaintiffs resisted. The court granted

the motions7 on the contract and fiduciary breaches based on: (1) the

defendants’ failure to turn over control of the condominium Association to the

plaintiffs; and (2) the defendants’ failure to give the plaintiffs notice and obtain

consent before acting to add additional property into the condominium regime.

       After the court’s grant of partial summary judgment, the parties agreed to

submit to binding arbitration the contract-fiduciary claims based on the third

category—improper management of the Association and failure to provide

requested information. On February 22, 2013, the parties entered into a private

arbitration agreement.       After hearing, the arbitrator ruled in favor of the

defendants.    Also on February 22, the court entered a final order on the district

court litigation.   The Rice plaintiffs now appeal the district court’s grant of

summary judgment to the defendants on the contract-based claims.8

7
   The court’s summary judgment ruling initially addressed the issue of what constituted
the contract allegedly breached. In their resistance to summary judgment the Rice
plaintiffs claimed, for the first time, that additional contracts were allegedly breached:
2004 City of Johnson development agreement, 2006 City of Johnston zoning
documents, and the real estate contract between the defendants. The court ruled (a) the
petition explicitly alleges the defendants violated the Declaration and Bylaws and (b) “the
alleged breach of these documents alone forms the basis for this suit.” During oral
argument counsel confirmed the contract allegedly breached for purposes of this appeal
is the Declaration and the Association Bylaws.
8
   The Rice plaintiffs-appellants’ brief includes a section: “Issue II—[S]ummary judgment
as to the breach of fiduciary duty claim should have been denied.” Defendants-
appellees’ briefs responded to the fiduciary issues raised. Plaintiffs-appellants did not
file a reply brief. During oral argument the plaintiffs-appellants’ counsel stated the
fiduciary issues were not at issue on appeal. Because the court prepares for and
                                              11

II. Scope and Standards of Review.

        We review rulings on motions for summary judgment for the correction of

errors at law. Mueller v. Westmark, Inc., 818 N.W.2d 244, 253 (Iowa 2012).

“Summary judgment is appropriate if there are no genuine issues of material fact

and the moving party is entitled to judgment as a matter of law.” Emp’rs Mut.

Cas. Co. v. Van Haaften, 815 N.W.2d 17, 22 (Iowa 2012).                        “We view the

evidence in the light most favorable to the non-moving party.” Id.

III. Breach of Contract—Failing to Turn Over Control of the Association.

        A.   Two Rivers.       The Rice plaintiffs claim Association Bylaws section

3.4—PPCLC “shall be the only Member of the Association entitled to vote for so

long as it holds title to any Unit”—was “put into effect” by the Foreclosure

Agreement and also claim the “bylaws of this corporation do in fact control” over

the Declaration’s provisions.        At foreclosure, PPCLC “ceased being a voting

member of the Association and by operation of the bylaws should at that point in

time, [have] turned over to the unit owners at the Association the voting rights.”

The Rice plaintiffs conclude the district court erred in ruling (1) the Declaration

controls over the Association Bylaws, and (2) PPCLC transferred all of its rights

as Developer, including the right to control the Association, to Two Rivers.

        Two Rivers responds the district court correctly ruled (1) the Declaration

controls over the Association Bylaws, and (2) it took over all of PPCLC’s interest,

rights, and obligations as Developer under the Foreclosure Agreement and deed.

analyzes all of the issues briefed, prompt notice (in a reply brief or a letter) that plaintiffs-
appellants had decided to abandon the fiduciary-duty issues in their appeal should have
been submitted to the court.
                                          12

During oral argument, counsel stated PPCLC’s numerous rights and obligations

as the Developer can be viewed as a bundle of sticks and, in essence, the Rice

plaintiffs are illogically claiming one stick—the right to control the Association—

was somehow not transferred along with the other Developer’s rights and

obligations.

       In our review, we “apply the general rules for contracts to construe” the

“governing documents”—“its declaration and bylaws.” See Oberbillig v. West

Grand Towers Condo. Ass’n, 807 N.W.2d 143, 150 (Iowa 2011). We construe

the Declaration and the Association Bylaws as a whole. See id. As the district

court noted, the Association Bylaws stem from, are annexed to, and are a part of

the Declaration.    But for PPCLC recording the Declaration with the Bylaws

attached as an exhibit, the Association Bylaws would not exist. See Iowa Code

§§ 499B.3 (recording of declaration to submit property to regime), 499B.4

(contents of declaration), 499B.14 (stating “administration of every property shall

be governed by bylaws, a true copy of which shall be annexed to the declaration

and made a part thereof”) (2011).

       Our “Horizontal Property Act (Condominiums)” also provides that no valid

change to the Association Bylaws can be made unless such change is set forth

in the Declaration and “duly recorded.” See id. § 499.14. Finally, our supreme

court recognizes a declaration filed under this chapter “is the association’s

‘constitution.’” See Oberbillig, 807 N.W.2d at 150 (stating the bylaws in this case

specifically provided the declaration controls in the event of any conflict and this

bylaw is consistent with the declaration’s role as “the association’s ‘constitution’”).
                                          13

Accordingly, we find no error in the district court’s conclusion the Association

Bylaws should not be applied to “override any powers or provisions expressly

provided in the Declaration.”

       We turn to whether PPCLC transferred all of its rights as Developer to

Two Rivers in the Foreclosure Agreement and deed. Under 2007 Declaration

Article V.7, the Developer “shall have the right to assign all of its Reserved Rights

and obligations as Developer to any person, corporation, or other entity.”

Therefore, the Declaration does not preclude the transfer of all of PPCLC’s rights

to Two Rivers.9       Pointing to linguistic inconsistencies in the Foreclosure

Agreement—the use of the word Declarant and not Developer—the Rice

plaintiffs claim the Foreclosure Agreement was inadequate to actually assign

PPCLC’s rights to Two Rivers.

       Two Rivers responds the assignment conveyed all of PPCLC’s rights as

declarant “or otherwise,” notes the Rice plaintiffs identify no separate role of a

“Declarant” and no separate rights, apart from the Developer’s rights, to which

the language could refer, and claims the district court properly concluded the

terms “developer” and “declarant” have the same meaning.                The disputed

provision in the Foreclosure Agreement stated:

       The Deed also conveys transfers and assigns Borrower’s [PPCLC]
       rights of possession and equity of redemption in and to the
       Property, and all rights of Borrower as the “Declarant” or otherwise,
       under any covenants pertaining to the Property and recorded in the
       Dallas County, Iowa records. This Agreement shall be deemed a
       transfer and assignment by Borrower of any and all interests it has

9
 Two Rivers’ lack of intent to complete the regime itself is irrelevant to the rights it
obtained under the Foreclosure Agreement for the purpose of passing on those rights
and powers to another.
                                            14

       in the . . . Providence Pointe Condominium Association and
       Borrower shall turn over to Bank all books and records in
       connection therewith. Further, contemporaneously with the
       execution of this Agreement, Obligors, as applicable, shall resign
       as officers, directors (or otherwise) of the Providence Pointe
       Condominium Association.

       We agree with and adopt the district court’s resolution—it “is clear from

the language of the rest of this paragraph as well as the [Foreclosure] Agreement

as a whole10 that the parties intended a conveyance of Developer rights”

because: (1) the assignment extended to all rights of PPCLC as Declarant or

otherwise; (2) the assignment referenced the recorded covenants;11 and (3) the

assignment specifically noted the transfer included PPCLC’s interest in the

Association.

       We find additional support for this conclusion in the fact the terms

“declarant” and “developer” are used interchangeably in 2007 Declaration Article

XIV.1, “Expansion of the Condominium Regime,” as follows:

              The right to enlarge the Condominium Regime from time to
       time, is reserved exclusively to Developer . . . . Developer shall
       have and exercise the right to enlarge the Condominium Regime
       not only in its individual capacity but also as agent for all of the Unit
       Owners in the Condominium Regime as now constituted or
       hereafter enlarged and such Unit Owners do hereby irrevocably

10
   The first page of the Foreclosure Agreement set out the legal description of the
property in Plat 2, City of Johnson, Polk County, “presently” encumbered by the Two
Rivers mortgage and designated it “the Property.” PPCLC agreed to simultaneously
“convey to Bank all of its interest in the Property, subject to the Mortgage, by Quit Claim
Deed.”
11
   The reference to Dallas County rather than Polk County is an “obvious error” and the
intent of PPCLC and Two Rivers to transfer Polk County property is clear. See Pillsbury
Co. v. Wells Dairy, Inc., 752 N.W.2d 430, 436 (Iowa 2008) (ruling the “cardinal rule of
contract interpretation is to determine what the intent of the parties was at the time they
entered into the contract“).
                                          15

       appoint Developer as their agent for the purpose of so enlarging the
       Condominium Regime. Declarant shall signify this expansion . . .
       by filing an Amendment to this Declaration . . . with the County
       Recorder.

       Based on all of the above, we conclude the Foreclosure Agreement clearly

and specifically transferred all rights and responsibilities of PPCLC to Two

Rivers, and Two Rivers legally succeeded to the role of Developer under the

Foreclosure Agreement.

       As the successor Developer, Two Rivers’ right to control the Association

continued until the earlier of Declaration Article V’s “transfer of control” provisions

was met.     Here, neither the time nor the units-sold thresholds (in either the

original Declaration or the Third Amendment) were triggered during the time Two

Rivers was the Developer (August through December 2008). Accordingly, Two

Rivers did not breach the contract by failing to turn over control of the Association

to the Rice plaintiffs.

       B. Haverkamp Properties. In the December 2008 real estate contract,

Haverkamp Properties legally succeeded to the role of Developer and assumed

all Developer rights and responsibilities. As with Two Rivers, neither the time nor

the units sold “transfer of control” thresholds were met in December 2008 or

when Haverkamp Properties took over management of the Association from

Conlin Properties on February 1, 2009. Thus, Developer Haverkamp Properties

had no obligation to turn over control of the Association to the Rice plaintiffs. To

the extent the Rice plaintiffs broadly assert additional theories on this breach of

contract ground, these claims are waived for inadequate appellate presentation.

See Baker v. City of Iowa City, 750 N.W.2d 93, 102-03 (Iowa 2008).
                                      16

IV. Breach of Contract—Failing to Give Notice and Obtain Consent.

      The Rice plaintiffs claim “any actions which occurred after the Voluntary

Nonjudicial Foreclosure, on behalf of [PPCLC], Haverkamp Properties, or [Two

Rivers] were without authority, vote, consent, or approval.” These claims are

waived for inadequate appellate presentation. See id.

V. Conclusion.

      We have considered all claims raised by the Rice plaintiffs on appeal and

arguments not specifically addressed are deemed to be without merit. We affirm

the district court’s grant of summary judgment to Two Rivers and Haverkamp

Properties.

      AFFIRMED.