Court Opinion

ID: 4248505
Source: CourtListenerOpinion
Date Created: 2018-02-27 16:10:28.565496+00
Date Added: 2024-06-11T14:43:37.862472
License: Public Domain

FILED
                                                                               Feb 27 2018, 8:41 am

                                                                                   CLERK
                                                                               Indiana Supreme Court
                                                                                  Court of Appeals
                                                                                    and Tax Court

ATTORNEY FOR APPELLANT                                     ATTORNEYS FOR APPELLEE
Peter S. Kovacs                                            Jeffrey M. Bellamy
Peter Kovacs Law PC                                        Stephen R. Donham
Fishers, Indiana                                           Thrasher Buschmann & Voelkel, P.C.
                                                           Indianapolis, Indiana

                                              IN THE
      COURT OF APPEALS OF INDIANA

Craig D. Severance and                                     February 27, 2018
Catherine Severance,                                       Court of Appeals Case No.
Appellants-Defendants/Cross-Appellees,                     29A02-1708-PL-1695
                                                           Appeal from the Hamilton Superior
        v.                                                 Court

The Pleasant View Homeowners                               The Honorable Jonathan M. Brown,
                                                           Judge
Association, Inc.,
                                                           The Honorable Daniel J. Pfleging,
Appellee-Plaintiff/Cross-Appellant                         Judge
                                                           Trial Court Cause No.
                                                           29D02-1504-PL-2764

Crone, Judge.

Court of Appeals of Indiana | Opinion 29A02-1708-PL-1695 | February 27, 2018                           Page 1 of 10
                                              Case Summary
[1]   The Pleasant View Homeowners Association, Inc. (“the HOA”), filed a

      complaint to enjoin Craig and Catherine Severance from using their residential

      lot in a manner inconsistent with Pleasant View subdivision’s covenants and

      restrictions by parking commercial vehicles, limousines, on their lot or in the

      street in front of and adjacent to their home located in the subdivision.

      Following an evidentiary hearing, the trial court issued a preliminary injunction

      prohibiting the Severances from continuing to park the vehicles in such a

      manner. However, the trial court subsequently declined to enter a permanent

      injunction based upon the Severances’ affirmative defense that the HOA lacked

      the authority to sue the Severances for an injunction because the HOA’s board

      of directors was not properly constituted or operating in accordance with its

      own rules of corporate governance. The court set a future date for a hearing on

      the Severances’ claimed damages.

[2]   Prior to the trial court’s entry of a final judgment, the HOA directed the trial

      court to the passage of new statutory law regarding the governance of Indiana

      homeowners associations. The HOA claimed that the new law nullified the

      Severances’ affirmative defense regarding the HOA’s authority to seek an

      injunction. The trial court held a hearing and thereafter entered its final

      judgment determining that it could not reconsider its prior denial of the

      permanent injunction and that the Severances were entitled to no damages.

      The Severances now appeal the trial court’s denial of their request for damages.

      The HOA cross-appeals the trial court’s denial of its request for a permanent

      Court of Appeals of Indiana | Opinion 29A02-1708-PL-1695 | February 27, 2018   Page 2 of 10
      injunction. Concluding that our resolution of the cross-appeal is dispositive, we

      reverse and remand to the trial court for further proceedings.

                                  Facts and Procedural History
[3]   The HOA is an Indiana not-for-profit corporation with the primary purpose to

      manage the residential subdivision known as Pleasant View in Hamilton

      County. The Severances are the owners of record of a lot within that

      subdivision. The affairs of the HOA and its members are governed by three

      documents: (1) the Declaration of Covenants, Conditions and Restrictions for

      Pleasant View (“the Covenants and Restrictions”); (2) the Articles of

      Incorporation; and, (3) the By-Laws of the HOA (“the Bylaws”). The

      Covenants and Restrictions provide in relevant part,

              Section 10.4. Parking and Prohibited Vehicles.
              (a) Parking. Vehicles shall be parked only in the garages or on
              the driveways, if any, serving the Lots or in appropriate spaces or
              designated areas in which parking may be assigned and then
              subject to such reasonable rules and regulations as the Board may
              adopt. Garages shall be used for parking of vehicles and no other
              use or modification thereof shall be permitted which would
              reduce the number of vehicles which may be parked therein
              below the number for which the garage was originally developed.
              The [HOA] may designate certain on-street parking areas for
              visitors or guests subject to reasonable rules.

              ….

              (b) Prohibited Vehicles. Commercial vehicles, vehicles with
              commercial writing on their exteriors, [and] vehicles primarily
              used or designed for commercial purposes … shall be parked

      Court of Appeals of Indiana | Opinion 29A02-1708-PL-1695 | February 27, 2018   Page 3 of 10
                 only in enclosed garages or areas, if any, designated by the
                 Board.

      Appellants’ App. Vol. 2 at 64-65.

[4]   On April 6, 2015, the HOA filed a complaint for injunctive relief against the

      Severances alleging that the Severances operated a commercial limousine

      business at their lot and parked commercial vehicles on their lot or in the

      adjacent street in violation of the Covenants and Restrictions.1 Following an

      evidentiary hearing, the trial court issued an order granting a preliminary

      injunction against the Severances. The court found that the Severances had

      violated the Covenants and Restrictions and enjoined them from parking their

      business vehicles in the subdivision unless stored indoors. The trial court

      ordered the HOA to maintain bond in the amount of $2500 to cover any

      estimated damages incurred by the Severances “to the extent of an entry of a

      wrongful preliminary injunction.” Id. at 127. The court further stated, “[i]f this

      injunction is later deemed improper, [the HOA] and [the Severances] shall have

      an opportunity to dispute the proper amount of damages at that time.” Id.

[5]   On December 4 and 28, 2015, the Severances objected to the preliminary

      injunction based on alleged irregularities in the election and/or appointment of

      the HOA’s board of directors. In sum, the Severances argued that the board of

      directors was without authority to exercise corporate power (including the

      1
          The record indicates that the Severances own and operate Indy Limo Transport LLC.

      Court of Appeals of Indiana | Opinion 29A02-1708-PL-1695 | February 27, 2018            Page 4 of 10
      power to sue for injunctive relief to enforce the Covenants and Restrictions) on

      behalf of the HOA. On January 15, 2016, the Severances made a similar

      argument by way of a counterclaim that was subsequently struck by the trial

      court on the HOA’s motion. On March 16, 2016, the Severances filed a

      “Request for a Hearing to Rule on all Pretrial Evidence” again arguing that the

      board of directors was not properly constituted or operating within its own

      Bylaws. The trial court took no action on the request.

[6]   On July 1, 2016, the HOA requested a permanent injunction hearing. An

      evidentiary hearing was held on August 4 and 31, 2016. On November 1, 2016,

      the trial court entered its findings of fact, conclusions thereon, and order

      declining to enter a permanent injunction. Specifically, the trial court

      incorporated its findings of fact and conclusions thereon supporting its order of

      preliminary injunction but then found and concluded in relevant part:

              7. [The Severances] contend that the Directors of [the HOA] are
              not legitimate and therefore cannot exercise the powers and
              duties of [the HOA] because they were not installed according to
              [the HOA’s] Bylaws.

              8. The evidence received at the hearings support [the
              Severances’] contention….

              ….

              11. In short, [the HOA] is clearly a dysfunctional entity because
              it has, and continues to operate outside of its Bylaws.…

              12. [The HOA] seems to have strayed significantly from the

      Court of Appeals of Indiana | Opinion 29A02-1708-PL-1695 | February 27, 2018   Page 5 of 10
              language of the Bylaws. While the Directors’ testimony at the
              Hearing describing the time and effort they devoted to ensuring
              the operation of [the HOA] was laudable, this does not make it
              legal according to the Bylaws. Volunteering is not a qualification
              by itself to assume the mantle of director. The Court recognizes
              the effort put forth [by the HOA], and [its] attempt in this
              situation to remedy a nuisance. The limousines being park[ed]
              on the streets of the subdivision merited the granting of the
              preliminary injunction and could have possibly resulted in a
              permanent injunction being issued, if there was a legally
              constituted Board of Directors.

              ….

              13. Because the [HOA’s] Board of Directors is not legitimate due
              to the Directors neither being properly elected nor properly
              appointed, they could not exercise the corporate powers found in
              the [Covenants and Restrictions], Articles of Incorporation, or
              Bylaws, including the power to file the instant lawsuit against the
              Severances seeking to enforce the [Covenants and Restrictions].

      Id. at 195-97. Accordingly, the trial court ordered the preliminary injunction

      dissolved and declined to enter a permanent injunction. The trial court

      scheduled a damages hearing for a later date.

[7]   Shortly thereafter, the HOA held a special meeting in an attempt to cure its

      corporate governance deficiencies. On December 1, 2016, the HOA filed a

      motion requesting the trial court to reconsider its denial of the permanent

      injunction. The HOA supported its motion with an affidavit informing the trial

      court that a properly constituted board of directors was now in place and that

      the HOA’s membership had voted to ratify and approve all prior actions of the

      Court of Appeals of Indiana | Opinion 29A02-1708-PL-1695 | February 27, 2018   Page 6 of 10
      board of directors, including institution of the current lawsuit. The trial court

      denied the motion on December 22, 2016.

[8]   A damages hearing was held on February 9, 2017, during which the Severances

      argued that they were entitled to recover damages, specifically the attorney’s

      fees they incurred in defending the injunction. Prior to the trial court issuing

      any ruling regarding damages, the HOA filed a “Notice of Emergency Change

      in Law and Request for Hearing” asking the trial court to reconsider its denial

      of the permanent injunction, this time based on the passage of new legislation,

      Indiana Code Section 32-25.5-3-11, regarding corporate governance for

      homeowners associations. The HOA argued that the new legislation nullified

      the Severances’ affirmative defense regarding the HOA’s authority to enforce

      the Covenants and Restrictions. The trial court held a final hearing and on June

      5, 2017, issued an order reiterating its prior denial of the permanent injunction

      and further determining that the Severances were not entitled to recover

      damages. This appeal and cross-appeal ensued.

                                      Discussion and Decision
[9]   Because we find it dispositive, we address only the HOA’s cross-appeal

      challenging the trial court’s denial of its request for a permanent injunction

      against the Severances based upon the trial court’s conclusion that the HOA

      lacked the authority to enforce the Covenants and Restrictions due to

      Court of Appeals of Indiana | Opinion 29A02-1708-PL-1695 | February 27, 2018   Page 7 of 10
       irregularities in how the board of directors was constituted.2 Our review of the

       convoluted procedural history in this case reveals that, prior to the entry of its

       judgment on June 5, 2017, the trial court declined to entertain certain

       arguments advanced by the HOA or consider certain legal authority or evidence

       because the court genuinely believed that it could not “go back and reopen” and

       consider the merits of its November 20163 order denying the permanent

       injunction because that order was a final judgment. Id. at 19. This belief was

       mistaken.

[10]   It has long been recognized that a final judgment disposes of all issues as to all

       parties, thereby ending the particular case and leaving nothing for future

       determination. John C. & Maureen G. Osborne Revocable Family Tr. v. Town of

       Long Beach, 78 N.E.3d 680, 692 (Ind. Ct. App. 2017) (citations and quotation

       marks omitted), trans. denied. Indiana Appellate Rule 2(H) formalizes this

       principle and “defines a judgment as a ‘final judgment’ if among other things, it

       disposes of all claims as to all parties or the trial court determines in writing that

       there is no just reason for delay and expressly directs entry of judgment” to

       fewer than all the claims or parties pursuant to Indiana Trial Rule 54(B) or

       56(C). Town of Ellettsville v. Despirito, 87 N.E.3d 9, 11-12 (Ind. 2017). Contrary

       2
         The Severances have filed a motion to dismiss the HOA’s cross-appeal claiming that the trial court’s
       November 2016 order dissolving the preliminary injunction and denying the HOA’s request for a permanent
       injunction constituted a final appealable judgment, and that the HOA’s failure to timely appeal that order has
       deprived this Court of jurisdiction to consider the HOA’s challenge of that ruling. As we will explain further,
       we disagree with the Severances and deny their motion to dismiss by separate order issued
       contemporaneously with this decision.
       3
        Although the trial court refers to the date of its order as October 28, 2016, the actual date is November 1,
       2016.

       Court of Appeals of Indiana | Opinion 29A02-1708-PL-1695 | February 27, 2018                       Page 8 of 10
       to the trial court’s belief, its November 2016 order was not a final judgment

       because it specifically reserved the issue of damages for future determination

       and did not otherwise expressly direct entry of judgment as to fewer than all the

       claims between these parties. No order of the trial court prior to the judgment

       issued on June 5, 2017, finally disposed of all claims as to all parties.4

[11]   It is well settled that a trial court has inherent power to reconsider an order or

       ruling if the action remains in fieri, or pending resolution. Pond v. Pond, 700
N.E.2d 1130, 1135 (Ind. 1998). The trial court’s June 2017 judgment contains

       erroneous findings and conclusions referencing the November 2016 ruling as a

       final appealable judgment, thus limiting the issues available for the trial court’s

       consideration. A judgment is clearly erroneous “if it applies the wrong legal

       standard to properly found facts.” Johnson v. Wysocki, 990 N.E.2d 456, 460

       (Ind. 2013). Because much of the trial court’s resolution of this case appears to

       be hinged on its mistaken belief that it was precluded from considering the

       merits of its prior order denying the permanent injunction, the appropriate

       remedy is to reverse the trial court’s judgment and remand this case for an

       evidentiary hearing to consider the merits of issuing a permanent injunction

       4
         Following the trial court’s November 2016 order dissolving the preliminary injunction and declining to
       enter a permanent injunction against the Severances, the HOA filed what it called a “Motion to Correct Error
       or in the Alternative Motion to Reconsider.” Appellants’ App. Vol. 2 at 199. Regardless, because there was
       no final judgment, the HOA’s self-styled motion was in fact a motion to reconsider and, contrary to the trial
       court’s conclusion here, its subsequent ruling on that motion could not itself be considered a final judgment
       pursuant to Indiana Appellate Rule 2(H)(4). Guardianship of Hurst, No. 45A03-1612-GU-2790, 2018 WL
627290, at *2 (Jan. 31, 2018), opinion on reh’g; see Snyder v. Snyder, 62 N.E.3d 455, 458 (Ind. Ct. App. 2016)
       (“motions to correct error are proper only after the entry of final judgment; any such motion filed prior to the
       entry of final judgment must be viewed as a motion to reconsider).

       Court of Appeals of Indiana | Opinion 29A02-1708-PL-1695 | February 27, 2018                       Page 9 of 10
       against the Severances based on the facts and circumstances as they stand today

       and pursuant to current Indiana law.5 Accordingly, we reverse the trial court’s

       June 5, 2017 judgment and remand to the trial court for proceedings consistent

       with this opinion.

[12]   Reversed and remanded.

       Robb, J., and Bradford, J., concur.

       5
        On remand, we direct the trial court to consider Indiana Code Section 32-25.5-3-11, effective upon passage
       on April 12, 2017, which protects the authority of homeowners associations by preventing collateral attacks
       based upon specific board irregularities and nullifying affirmative defenses to covenant violations under
       certain circumstances.

       Court of Appeals of Indiana | Opinion 29A02-1708-PL-1695 | February 27, 2018                   Page 10 of 10