Court Opinion

ID: 9404545
Source: CourtListenerOpinion
Date Created: 2023-06-23 14:05:43.303258+00
Date Added: 2024-06-11T17:20:14.988900
License: Public Domain

RENDERED: JUNE 16, 2023; 10:00 A.M.
                         NOT TO BE PUBLISHED

                Commonwealth of Kentucky
                          Court of Appeals

                             NO. 2021-CA-0548-MR
                                     AND
                             NO. 2021-CA-0598-MR

JASON HANS AND NATALIYA
ROWLEY                                       APPELLANTS/CROSS-APPELLEES

                    APPEAL AND CROSS-APPEAL FROM
v.                      FAYETTE CIRCUIT COURT
                  HONORABLE THOMAS L. TRAVIS, JUDGE
                         ACTION NO. 19-CI-03322

THE VILLAS AT ANDOVER
HOMEOWNERS ASSOCIATION,
INC.                                           APPELLEE/CROSS-APPELLANT

                             OPINION AND ORDER
                                 AFFIRMING

                                  ** ** ** ** **

BEFORE: EASTON, JONES, AND LAMBERT, JUDGES.

LAMBERT, JUDGE: Jason Hans and Nataliya Rowley have appealed, and the

Villas at Andover Homeowners Association, Inc., has cross-appealed, from the

orders of the Fayette Circuit Court entered July 6, 2020, and April 27, 2021,
addressing the enforcement of restrictions related to short-term rentals, the

imposition of fines, and the award of attorney fees. We affirm.

             Jason Hans is a resident of Fayette County, Kentucky, and in October

2018 he purchased property on Andover Village Place in the Villas at Andover

neighborhood. The Villas at Andover is governed by a homeowners association

(the Villas at Andover Homeowners Association, Inc. (the HOA)), which is a non-

profit Kentucky corporation formed in 1995 with a principal place of business in

Lexington. A Declaration of Covenants, Conditions, and Restrictions (CC&R) was

filed with the Fayette County Clerk’s Office in 1990, followed by a supplemental

declaration later that year and an amended and restated declaration in 2006

(Amended CC&R). At a Special Board of Directors Meeting in March 2019, the

board voted to ban the use of residences in the HOA as short-term rentals based

upon the Supreme Court of Kentucky’s recent decision in Hensley v. Gadd, 560

S.W.3d 516 (Ky. 2018).

             After Hans purchased the property, he rented it through services such

as Airbnb on a one-night, two-night, weekend, or weekly basis. Hans received a

letter from the HOA on March 20, 2019, informing him that short-term rentals

were incompatible with the residential nature of the neighborhood and were

prohibited. The letter went on to state that the HOA reserved the right to enforce

the restrictions by restricting a lot owner’s or resident’s use of common areas and

                                         -2-
services, imposing fines, or filing a judicial action for injunctive relief and

monetary damages, including costs, expenses, or attorney fees incurred in

enforcing the restrictions. Hans believed that banning the use of residences as

short-term rentals in the Villas at Andover by the HOA was in excess of the

HOA’s authority under the CC&R and Amended CC&R. He responded to the

HOA’s letter indicating that he disagreed with the application of the restriction and

that he did not believe he was in violation.

             On April 3, 2019, the HOA imposed a fine on Hans in the amount of

$1,188.00 (later reduced to $594.00). Three days later, Hans, through his attorney,

requested an appeal of the fines. In May, the HOA responded, through counsel,

that the appeal had been denied and that fines would continue to accrue. In

September of that year, the HOA sent another letter to Hans stating that the amount

of fines he owed totaled $19,332.00.

             On September 16, 2019, Hans filed a verified complaint alleging that

the HOA had breached its fiduciary duty to him. He claimed the HOA owed him

duties of care, of loyalty, and to act within the scope of its authority, and that it had

disregarded these duties when it acted adversely to Hans’ interest and in its own

self-interest. Hans sought compensatory damages, attorney fees, and costs. In its

answer, the HOA denied the allegations raised in the complaint and raised several

affirmative defenses. In November 2019, the court permitted Hans to file an

                                           -3-
amended complaint to add his wife, Nataliya Rowley, as a plaintiff, as she was a

co-owner of the property and was named on the deed. We shall refer to Hans and

Rowley, collectively, as “Hans” for ease of understanding.

             In addition to filing an answer to the amended complaint, the HOA

filed a counterclaim against Hans seeking a declaration pursuant to Kentucky

Revised Statutes (KRS) 418.005 et seq., and Kentucky Rules of Civil Procedure

(CR) 57, that renting the property on a short-term, transient basis was prohibited.

It also sought an injunction against renting the property on a short-term, transient

basis pursuant to CR 65. Finally, the HOA sought to recover the fines it had

assessed against Hans for violating the restrictions as well as attorney fees and

court costs. Hans disputed the allegations in the counterclaim in his answer.

             In May 2020, the HOA filed a motion for a judgment on the pleadings

pursuant to CR 12.03, seeking dismissal of Hans’ claim for breach of fiduciary

duty and a declaration that the restrictions prohibited him from renting the property

on a short-term, transient basis. The HOA sought dismissal of Hans’ claim as

Kentucky law does not recognize the existence of a fiduciary duty between a

homeowners association and the individual property owners, citing Ballard v. 1400

Willow Council of Co-Owners, Inc., 430 S.W.3d 229 (Ky. 2013). As to its

declaratory action, the HOA argued that controlling precedent held that a property

                                         -4-
restriction that limits use to residential purposes prohibits short-term, transient

rentals, citing Hensley, supra.

             In his response, Hans stated that he had discussed purchasing the

property with then-board member Gregg Slater, who told him that the HOA board

had not voted to prohibit short-term rentals. He went ahead with the purchase and

stated he had received written confirmation from HOA President Timothy Shuck in

September 2018 that an attempt to restrict rentals had failed to pass at the January

2015 annual meeting. Slater told him in September 2018 that no members of the

HOA board had voiced any objection to short-term rentals. As to his breach of

fiduciary claim, Hans stated he would be filing a motion to amend his complaint to

include a breach of contract claim as set forth in Ballard, supra, as well as a third-

party breach of fiduciary duty claim against Shuck, in his individual capacity as

President of the HOA Board of Directors, and the HOA Board of Directors. Hans

also disputed that the HOA was entitled to a declaratory judgment based upon

Hensley, supra, citing waiver and equitable estoppel grounds.

             In its reply, the HOA noted that Hans admitted that it did not owe any

fiduciary duties to the members; therefore, his claims should be dismissed. The

HOA also disputed that it had waived the restrictions, or that equitable estoppel

was warranted.

                                          -5-
             The circuit court heard arguments from the parties, and in an order

entered July 6, 2020, it granted the HOA’s motion for a judgment on the pleadings.

It first held that there was no fiduciary duty between an HOA and the individual

property owners under Kentucky law and, accordingly, dismissed Hans’ causes of

action against the HOA. Second, it agreed with the HOA that short-term rentals

were prohibited by the residential restrictions found in Article V, Section 1, of the

Amended CC&R and therefore granted the HOA’s motion on Count 1 of its

counterclaim. That section provides:

             SECTION 1. PRIMARY USE RESTRICTIONS. No
             Lot shall be used except for Private single family
             residential purposes. No structure shall be erected,
             placed or altered or permitted to remain on any Lot
             except one single family dwelling designed for the
             occupancy of one family (including any employees living
             on the premises), not to exceed two stories in height and
             containing an attached garage for the sole use of the
             owner and occupants of the Unit. All Members shall use
             their Lots in conformance with all federal, state, and local
             statutes.

Based upon this restriction and citing to Hensley, supra, the court held:

                    Virtually identical residential use restrictions have
             been found to be lawful and enforceable against property
             owners seeking to rent his property on a short-term,
             transient basis. Interpretations of such agreements are
             matters of law for the court to decide. The terms here are
             unambiguous, and rationally related to serving a purpose
             to promote legitimate goals of neighborhood stability.
             Arguments such as waiver and estoppel raised by the
             Plaintiff cannot as a matter of law defeat the HOA’s right

                                         -6-
             to enforce. Alleged arbitrary enforcement does not
             render such covenants unenforceable.

(Footnotes omitted.) The court declared that the property restrictions of record

prohibited Hans from renting his property on a short-term, transient basis, which

included one-night, two-night, weekend, or weekly rentals. The court reserved

ruling on issues related to damages, including costs and attorney fees.

             Less than two months later, on August 21, 2020, the HOA moved the

court to enter an order requiring Hans to show cause why he should not be held in

contempt for failing to comply with the July 6 order that prohibited him from

renting the property on a short-term, transient basis. Hans had continued to allow

rentals on a short-term basis, and future rentals had been reserved in the months of

August and September. In response, Hans stated that any short-term rentals were

pre-existing and that no new reservations had been made, which was consistent

with the order. He had been in Alaska on sabbatical for two months and had not

been available until his return in mid-August 2020. He said he did not willfully

violate the court’s order.

             The same day, the HOA filed a motion for summary judgment as to

Hans’ personal liability to pay the fines. Through August 8, 2020, Hans owed

$90,480.61 in fees and costs, including legal fees, which would continue to accrue.

Hans objected to the motion, arguing that he had affirmatively pled a waiver

defense as the HOA had acquiesced in the use of property in violation of the

                                         -7-
restrictions. Hans also argued that the HOA did not have the authority to levy

fines against him pursuant to the Amended CC&R; it could only levy annual and

special assessments. Finally, he argued that because he was not a party to the

original covenants, KRS 411.195 prevented the HOA from collecting attorney fees

from him.

             On September 1, 2020, Hans moved for leave to file a second

amended complaint, in which he alleged causes of action for breach of fiduciary

duty on the HOA’s part and for breach of the covenant of good faith and fair

dealing. In addition, Hans moved the court for a temporary injunction to prevent

the HOA from levying fines against him and from preventing his short-term rental

of the property as long as his activities did not create a nuisance to residents. He

also sought attorney fees and costs. The HOA objected to the motion for a

temporary injunction and sought its own attorney fees.

             The court heard arguments from the parties on September 4, 2020,

and entered an order ruling on the pending motions a few days later. It denied

Hans’ motion to file an amended complaint and for a temporary injunction, denied

the HOA’s motion for summary judgment, and held the motion to show cause in

abeyance. The parties were referred to mediation, and an evidentiary hearing was

scheduled to be held several months later. In October, the parties filed a joint

report indicating that they had not resolved the matter in mediation.

                                         -8-
             The court held an evidentiary hearing on January 19, 2021, to

consider the HOA’s motion to show cause as well as the factual and legal basis for

the HOA’s claim for damages (including fines, costs, and attorney fees).

Witnesses included Hans as well as current and former HOA residents and board

members.

             Hans filed a post-hearing brief on February 8, 2021, arguing that the

HOA lacked authority to impose fines and expenses against him and that the court

should deny the motion for sanctions for violating the July 6, 2020, order because

the violation was unintentional. Hans had been unavailable except by satellite

phone when the order was entered. The HOA filed its brief later that month. It

argued that the evidence presented at the hearing established that Hans had

continued to operate the property as a short-term rental business after entry – and

with knowledge – of the July 6, 2020, order. The HOA also stated that the exhibits

attached to Hans’ post-hearing brief had not been authenticated or admitted at the

evidentiary hearing and, therefore, should not be considered. It went on to argue

that the fines were enforceable and that it had the authority to impose the fines to

enforce the restrictions. The HOA asserted that the governing documents granted

it “the breadth and discretion to enforce the Restrictions through various means,

including fines.” As to Hans’ violation of the July 6, 2020, order, the HOA argued

that Hans did not dispute that he continued to rent the property on a short-term

                                         -9-
basis after he knew of the order, and he had not provided any justification for his

non-compliance. In all, the HOA sought to recover $59,096.27 in fines through

July 31, 2020 (the amount Hans had earned during that time period); $39,266.40 in

attorney fees and costs (including $26,835.40 in post-order attorney fees); and

$19,033.84 for post-order revenue from transient rentals.

             By order entered April 2, 2021, the Court denied the HOA’s motion to

strike Hans’ exhibits that had been filed prior to the hearing but had not been

authenticated or sought to be admitted at the hearing. The court opted to liberally

construe the rules in favor of allowing the exhibits to remain, noting that it would

be able to assess their relevance, validity, and authenticity. However, it permitted

the HOA 10 days to file a written objection as to the authenticity of any document.

The HOA did not appear to file a written objection.

             On April 27, 2021, the court entered an order ruling on the pending

issues presented at the evidentiary hearing. The court stated that at the evidentiary

hearing, “the HOA’s presentation focused on the revenues the Owners derived

from transient rentals since the first cease and desist letter on March 20, 2019,

including such revenues generated by the Owners from rentals that occurred after

the Court’s July Order. The HOA’s counsel also submitted affidavits in support of

the HOA’s claim for an award of attorney fees.” As to Hans’ presentation at the

hearing, the court stated:

                                         -10-
[T]he Owners sought to revisit their claims of
waiver/estoppel by reintroducing the statements allegedly
made by Mr. Slater around the time Mr. Hans purchased
the property. The statements, according to the Owners,
induced Mr. Hans to purchase the home and led him to
believe to his detriment that there would be no problems
associated with renting the Property. Mr. Hans also
discussed the expenses associated with renting the
Property, thereby claiming that the rental revenue and
income figures procured by the HOA are misleading as
they don’t reflect the true net income generated by the
property. Accounting for overhead and expenses, he
explained, his net income from the rentals was not
significant. Additionally, Mr. Hans addressed the
continued transient rentals following the Court’s July 6,
2020 Order, explaining that he was in the Alaskan
wilderness during the issuance of the Order. According
to Mr. Hans, the area he was visiting is remote and
contact with civilization is limited; resultantly, he was
unable to receive notice of the Court’s Order until weeks
later. However, subpoenaed Airbnb and Vrbo records
show that after a hiatus in rentals beginning on June 4,
2020, Mr. Hans began to rent the Property again on July
17, 2020. Therefore, the Court finds that Mr. Hans knew
or should have known of the Order within a few weeks
after its issuance. Regardless, Mr. Hans acknowledged
that he continues to rent the Property, albeit in a different
manner. Instead of charging renters daily, he charges on
a monthly basis and at a reduced rate, while also
permitting renters to leave early. The Court’s
interpretation is that this is a scheme that attempts to
circumvent the HOA’s restrictions on rentals lasting less
than thirty days.

       In the July 2020 Order, this Court declared that the
HOA’s restrictions prohibit renting the Property “on a
short-term, transient basis, including one-night, two-
night, weekend, or weekly rentals.” Given the
aforementioned hiatus in rentals between June and July
of 2020, it appears that Mr. Hans waited until the Court’s

                            -11-
             Order before continuing his rental business. Upon
             learning of the Order, Mr. Hans likely devised the
             scheme in an attempt to appear in compliance with the
             Order, when in fact he has not been compliant. Lastly,
             the Plaintiffs’ counsel challenged any award of attorney
             fees, noting that counsel for the HOA does other work for
             the HOA that is unrelated to this case. Therefore, he
             asserted, the Court should not award the full attorney fees
             requested, absent detailed invoices submitted by the
             Defendant.

             The court granted the HOA’s motion, in part, and awarded it: 1)

$15,206.10 in fines; 2) $30,000.00 in attorney fees, which included the costs the

HOA incurred to enforce the restrictions Hans had violated; and 3) $12,000.00 as a

civil contempt sanction imposed by the court against Hans due to his continued

short-term rental of the property after the July 6, 2020, order was entered.

             The court determined that “[w]hile the HOA possesses the authority to

enforce its restrictions, it is not authorized to issue fines under any of its governing

documents.” Therefore, the HOA could not impose fines on Hans until the legal

dispute had been adjudicated on July 6, 2020, and Hans could only be fined for

violations he committed after that order was entered. The court held that the HOA

was entitled to the imposition of a fine against Hans for violations of the

restrictions that occurred from July 6, 2020, through December 31, 2020. The

court based the fine on Hans’ net revenues from short-term rentals, which it stated

was “fair, reasonable, and appropriate under the circumstances.”

                                          -12-
             As to the award of attorney fees, costs, and expenses, the $30,000.00

the court awarded was for expenses through February 22, 2021. The court rejected

Hans’ argument that attorney fees were not payable under KRS 411.195, stating

that it was immaterial that he was not the original party to the CC&R. The court

had no reason to doubt the truthfulness of the recorded fees, noting that

“[u]ndoubtedly, extensive litigation expenses were incurred by the HOA in order

to enforce its valid restriction against transient rentals.” But the court did not

award the full amount sought because it did not have “the actual invoices for a

detailed review of the attorney fee structure and work specifically completed on

this matter,” noting that the firm had been generally retained by the HOA to work

on other unrelated matters.

             Finally, the court held Hans in contempt for his refusal to abide by the

July 6, 2020, order, noting his attempt to circumvent the ruling. It fined Hans

$2,000.00 per month for each month he continued to rent the property “in a matter

knowingly and purposefully inconsistent” with its order. The total fine was

$12,000.00 for the months of July through December 2020.

             Hans appealed from the July 2, 2020, and April 27, 2021, orders. And

the HOA cross-appealed from the April 27, 2021, order as well as all prior orders

and rulings made final by that order.

                                          -13-
             Before we address the merits, we must consider the HOA’s motion to

strike Hans’ brief or dismiss his appeal for failure to procedurally comply with CR

76.12, which was passed to the merits panel. Kentucky Rules of Appellate

Procedure (RAP) 32 now provides the procedure for the organization and content

of an appellate brief. That Rule provides, in subsection (A), that an appellant’s

opening brief must contain:

             (3) A statement of the case consisting of a summary of
             the facts and procedural events relevant and necessary to
             an understanding of the issues presented by the appeal,
             with ample references to the specific location in the
             record supporting each of the statements contained in the
             summary.

             (4) An argument conforming to the statement of points
             and authorities, with ample references to the specific
             location in the record and citations of authority pertinent
             to each issue of law and which shall contain at the
             beginning of the argument a statement with reference to
             the record showing whether the issue was properly
             preserved for review and, if so, in what manner.

Id. RAP 31(H) sets forth penalties that may be imposed in relation to the filing (or

non-filing) of briefs:

             (1) A brief may be stricken for failure to substantially
             comply with the requirements of these rules.

             (2) If the appellant’s brief has not been filed within the
             time allowed, the Court may dismiss the appeal.

             (3) If the appellee’s brief has not been filed within the
             time allowed, the court may: (a) accept the appellant’s
             statement of the facts and issues as correct; (b) reverse

                                         -14-
            the judgment if appellant’s brief reasonably appears to
            sustain such action; or (c) regard the appellee’s failure as
            a confession of error and reverse the judgment without
            considering the merits of the case.

And RAP 10(B) addresses, generally, the consequences if a party fails to comply

with the Rules:

            A party’s failure to take any step other than the timely
            filing of a notice of appeal, cross-appeal, or motion for
            discretionary review does not affect the validity of the
            appeal or other proceeding in an appellate court.
            Although failure to comply with rules other than timely
            filing of a notice of appeal, cross-appeal, or motion for
            discretionary review does not affect the validity of an
            appeal or other proceeding, the failure of a party to
            substantially comply with the rules is ground for such
            action as the appellate court deems appropriate, which
            may include:

                  (1) A deficiency notice or order directing a
                  party to take specific action,

                  (2) A show cause order,

                  (3) Striking of filings, briefs, record or
                  portions thereof,

                  (4) Imposition of fines on counsel for failing
                  to comply with these rules of not more than
                  $1,000,

                  (5) A dismissal of the appeal or denial of the
                  motion for discretionary review, and

                  (6) Such further remedies as are specified in
                  any applicable rule.

                                        -15-
               The HOA argues that Hans failed to include supportive references to

the record or statements referencing how and where in the record his arguments

were properly preserved for our review. We note that in his response to the

motion, Hans stated that any inadequacies could be cured in a reply brief.

However, Hans essentially failed to correct these deficiencies in his

appellant/cross-appellee reply brief, as the HOA argued in its reply brief.

               As to his references to the record, in his appellant/cross-appellee reply

brief, Hans cited 18 times to page 1182 of the record, which he identified as

appearing in Volume III. Page 1182 of the record is in Volume VIII and is the first

page of the exhibits Hans filed on January 18, 2021, prior to the hearing, beginning

with a redacted invoice. He also attached these exhibits to the appendix of that

brief and cited to the appropriate appendix number in the brief.1 RAP 32(A)

specifically requires “ample references to the specific location in the record” to

support the statement of facts and argument sections of the brief. RAP 32(A)(3)

and (4). Here, Hans did not provide accurate references to the record. He only

cited to one page of the record in the incorrect volume. In addition, Hans did not

properly cite to testimony at the hearing, merely referring to “Hans hearing

1
  The HOA disputes Hans’ inclusion of these exhibits in the appendix, stating they were not part
of the record. It appears that the exhibits included in the appendix were the ones Hans filed prior
to the hearing and which the court declined to strike, despite Hans’ failure to authenticate or
introduce them into the record at the hearing. We decline to revisit that ruling.

                                               -16-
testimony” in several footnotes. Although we decline to strike Hans’ brief for

problems with citations to the record, counsel is cautioned to comply with the RAP

32 in future appeals by properly referring to the appellate record, both

documentary and recorded, to support the statements in briefs.

             This Court is more concerned about Hans’ failure to state how and

where in the record he preserved the arguments he made in his initial brief as well

as his attempt to raise issues that were either not raised in his initial brief or were

never raised before the circuit court. Again, we shall not grant the passed motion,

but we shall impose sanctions in our review of the appeal.

             The Supreme Court of Kentucky stated in Ford v. Commonwealth,

628 S.W.3d 147, 155 (Ky. 2021), that:

             [T]he manifest injustice standard of review is reserved
             only for errors in appellate briefing related to the
             statement of preservation. If a party fails to inform the
             appellate court of where in the record his issue is
             preserved, the appellate court can treat that issue as
             unpreserved. Appellate courts

                    review[ ] unpreserved claims of error on
                    direct appeal only for palpable error. To
                    prevail, one must show that the error
                    resulted in “manifest injustice.” [Kentucky
                    Rules of Criminal Procedure] RCr 10.26
                    provides:

                           A palpable error which affects
                           the substantial rights of a party
                           may be considered . . . by an
                           appellate court on appeal, even

                                          -17-
                           though insufficiently raised or
                           preserved for review, and
                           appropriate relief may be
                           granted upon a determination
                           that manifest injustice has
                           resulted from the error.
                           (Emphasis added).

             Martin v. Commonwealth, 207 S.W.3d 1, 3 (Ky. 2006).

Because Hans failed to state where in the record and how he raised the issues in his

initial brief and failed to correct that error in his appellant/cross-appellee reply

brief, we shall confine our review to the manifest injustice standard.

             And we shall also accept the HOA’s request to not consider the issues

that Hans either did not raise before the circuit court and/or raised for the first time

in his appellant/cross-appellee reply brief. These arguments are found in Sections

I.A, I.C, II.A, and II.D of that brief. See Norton Healthcare, Inc. v. Deng, 487

S.W.3d 846, 852 (Ky. 2016) (citations omitted) (“We have long endorsed a rule

that ‘specific grounds not raised before the trial court, but raised for the first time

on appeal will not support a favorable ruling on appeal.’ When a trial court never

has the opportunity to rule on a legal question presented to an appellate court, an

appellant presents a different case to the appellate court than the one decided by

the trial court. Indeed, an appellate court is ‘without authority to review issues not

raised in or decided by the trial court.’ The proper role for an appellate court is to

review for error – and there can be no error when the issue has not been presented

                                          -18-
to the trial court for decision.”); Seeger Enterprises, Inc. v. Town & Country Bank

and Tr. Company, 518 S.W.3d 791, 796 (Ky. App. 2017) (“Seeger does not raise

this issue in his initial brief, and he was not permitted to raise the issue for the first

time in his reply brief. See, e.g., Catron v. Citizens Union Bank, 229 S.W.3d 54,

59 (Ky. App. 2006) (‘The reply brief is not a device for raising new issues which

are essential to the success of the appeal.’) (Citation omitted). Therefore, we

consider the issue waived.”).

              The issues raised in Hans’ direct appeal address whether the circuit

court properly imposed a fine for his renting of the property in violation of the

circuit court’s July 6, 2020, order regarding short-term rentals and whether the

award of attorney fees to the HOA was arbitrary and capricious. We have

reviewed these arguments, and we cannot identify any manifest injustice that

would support a reversal on either issue. Therefore, we affirm the circuit court’s

award of fines and sanctions as well as its decision to award attorney fees.

              Turning to the cross-appeal, the HOA seeks review of the circuit

court’s decision to award less than the $39,266.40 in attorney fees it had claimed

and in holding that it did not have the authority to enforce the Amended CC&R

through fines prior to the entry of the July 6, 2020, order.

              We shall first consider whether the HOA had the authority to fine

Hans prior to the entry of the July 6, 2020, order when the power to do so was not

                                           -19-
expressly granted or expressly excluded in the HOA’s governing documents,

which the HOA identifies as a matter of first impression in Kentucky. Our

standard of review is set forth in Gosney v. Glenn, 163 S.W.3d 894, 898-99 (Ky.

App. 2005):

              [T]his case was tried by the circuit court sitting without a
              jury. It is before this Court upon the trial court’s findings
              of fact and conclusions of law and upon the record made
              in the trial court. Accordingly, appellate review of the
              trial court’s findings of fact is governed by the rule that
              such findings shall not be set aside unless clearly
              erroneous. A factual finding is not clearly erroneous if it
              is supported by substantial evidence. Substantial
              evidence is evidence, when taken alone or in light of all
              the evidence, has sufficient probative value to induce
              conviction in the mind of a reasonable person. The trial
              court’s conclusions of law, however, are subject to
              independent de novo appellate determination.

(Citations omitted.) And we shall keep in mind the following recitation of the law

as we review the issue before us:

                     As a general rule, courts will not interfere with the
              internal affairs of voluntary associations. In the absence
              of mistake, fraud, collusion or arbitrariness, the decisions
              of the governing body of an association will be accepted
              by the courts as conclusive. Voluntary associations may
              adopt reasonable bylaws and rules which will be deemed
              valid and binding upon the members of the association
              unless the bylaw or rule violates some law or public
              policy. It is not the responsibility of the courts to inquire
              into the expediency, practicability or wisdom of the
              bylaws and regulations of voluntary associations. . . .
              Furthermore, the courts will not substitute their
              interpretation of the bylaws of a voluntary association for
              the interpretation placed upon those bylaws by the

                                          -20-
            voluntary association itself so long as that interpretation
            is fair and reasonable.

Kentucky High School Athletic Ass’n v. Hopkins Cnty. Bd. of Ed., 552 S.W.2d 685,

687 (Ky. App. 1977), overruled on other grounds by Nat’l Collegiate Athletic

Ass’n v. Lasege, 53 S.W.3d 77 (Ky. 2001) (citations omitted).

            The applicable provisions are set forth in the Amended CC&R from

2006 and in the Articles of Incorporation from 1995. Article IV of the Amended

CC&R addresses assessment and states:

                    SECTION 1. ASSESSMENTS, CREATION OF
            THE LIEN AND PERSONAL OBLIGATION. Each
            Owner, by acceptance of a deed for the Lot whether or
            not it shall so be expressed in such deed, covenants and
            agrees to pay the Association (i) annual assessments or
            charges, and (ii) special assessments for capital
            improvements, such assessments to be established and
            collected as provided in Article IV. The annual and
            special assessments, together with interest, costs and
            reasonable attorneys’ fees, shall be a charge on the land
            and shall be a continuing lien upon the property against
            which each such assessment is made. Each such
            assessment, together with interest, costs and reasonable
            attorneys’ fees, shall also be the personal obligation of
            the party who was the Owner of the Lot at the time
            assessment fell due. The personal obligation for
            delinquent assessments shall not pass to his successors in
            title unless expressly assumed by them.

                SECTION 2. PURPOSES OF ASSESSMENTS.

                   (A) The assessments levied by the Association
            shall be used to promote the recreation, health, safety,
            and welfare of the residents and, in particular, for the
            acquisition, leasing, improvement and maintenance of

                                        -21-
Property, services and facilities devoted to this purpose,
or for the use and enjoyment of the Common Areas,
including but not limited to, the cost of repairs,
replacements and additions, the cost of labor, equipment,
materials, management and supervision, payment of
taxes assessed against the Common Areas, including but
not limited to landscaping (trees, shrubs, etc.), common
utilities (sprinkler systems, lights, etc.), common signage
and maintenance of the entrance, the procurement and
maintenance of insurance in accordance with the By
Laws, the cost of providing security for the Property, the
employment of attorneys to represent the Association
when necessary, and such other needs as may arise, and
for the improvement and maintenance of the Common
Areas and Lots.

       SECTION 3. SPECIAL ASSESSMENTS FOR
CAPITAL IMPROVEMENTS. In addition to the annual
assessments authorized above, the Association may levy,
in any assessment year, a special assessment applicable
to that year only for the cost of defraying in whole or in
part the cost of any construction, reconstruction or repair
or replacement of a capital improvement upon the
Common Areas, including fixtures and personal property
thereto. Any such assessment shall require the assent of
the Members in accordance with the By Laws.

       SECTION 4. UNIFORM RATE OF
ASSESSMENT. Annual assessments shall be the same
for each Lot. Special assessments shall be the same for
each lot.

      SECTION 5. EFFECT OF NON-PAYMENT OF
ASSESSMENTS; REMEDIES OF THE VILLAS AT
ANDOVER HOMEOWNERS ASSOCIATION, INC.
Any assessment not paid within fifteen (15) days of the
due date shall be subject to a late charge as determined
by the Board of Directors of the Association. The
Association may bring an action at law against the Owner
personally obligated to pay the assessment, or foreclose

                           -22-
             the lien against the Property, and interest, costs and
             reasonable attorneys’ fees of such action or foreclosure
             shall be added to the amount of such assessments. No
             Owner may waive or otherwise escape liability for the
             assessments provided for herein by non-use of the
             Common Areas or abandonment of his Lot.

Article VII of the Amended CC&R addresses the enforcement of the restrictions:

                    SECTION 1. ENFORCEMENT. Enforcement of
             these restrictions shall be by a proceeding at law or in
             equity brought by any Owner or by the Association
             against any party violating or attempting to violate any
             covenant or restriction either to restrain violations, to
             direct restoration and/or to recover damages. Failure of
             any Owner of the Association to demand or insist upon
             observance of any of these restrictions or to proceed for
             restraint in violations shall not be deemed a waiver of the
             violation or the right to seek enforcement of these
             restrictions.

Article III of the HOA’s Articles of Incorporation (filed in 1995) defines the

purpose of the HOA as follows:

                    PURPOSES. The corporation is organized for the
             purpose of performing those functions defined for it in
             the Declaration of Covenants, Conditions and
             Restrictions for the Villas at Andover, of record in Deed
             Boos 1558, Page 05 and 1570, Page 454, in the office of
             the Clerk of the Fayette County Court, including, but not
             limited to maintaining and administering the common
             areas of The Villas at Andover; administering and
             enforcing the Covenants and Restrictions applicable to
             The Villas at Andover; collecting and disbursing the
             assessments and charges as defined in the aforesaid
             Covenants; the performance of all other functions
             ascribed to the corporation in such Declaration; and the
             performance of any other function necessary and
             appropriate to carry out the purposes of the Declaration.

                                        -23-
             Based upon its interpretation of the applicable provisions, the circuit

court held that while the HOA had the authority to enforce the restrictions, the

HOA “did not have the authority to unilaterally impose ‘fines’ on the Owners until

the legal adjudication of the dispute, which in this case was on July 6, 2020.” It

held that none of the governing documents provided such authority to the HOA to

impose fines to enforce the restrictions without a court order. The Amended

CC&R only addressed the HOA’s ability to levy special assessments against the

owners. The court specifically cited to Article VII of the Amended CC&R, which

provides that enforcement of the restrictions “shall be by a proceeding at law or in

equity[.]” The court stated that this was the “clearest language regarding the right

to impose fines – or, more specifically, the lack thereof.” It then held that Hans

could only be fined for violations he committed after the entry of the July 6, 2020,

order pursuant to that provision.

             As held by the circuit court, the problem for the HOA in this case is

that the governing documents do not expressly authorize it to impose fines to

enforce its restrictions. And the HOA concedes that there is no express language

in these documents specifically stating this. The HOA argues that the governing

documents give it broad authority to enforce the restrictions and that one way to do

so is to bring an action to recover damages. The HOA relies on Landrum v.

Commonwealth ex rel. Beshear, 599 S.W.3d 781, 792-94 (Ky. 2019), to argue that

                                        -24-
its actions in imposing the fines against Hans were not arbitrary or unreasonable

because it had authority to take this action, Hans was afforded due process, and the

action was based on substantial evidence or relevant factors. We would agree with

the HOA’s argument had it not been for the language that is actually in the

Amended CC&R.

             Article VII of the Amended CC&R addresses the enforcement of the

restrictions and specifically states: “Enforcement of these restrictions shall be by a

proceeding at law or in equity brought by any Owner or by the Association against

any party violating or attempting to violate any covenant or restriction either to

restrain violations, to direct restoration and/or to recover damages.” (Emphasis

added.) The use of the word “shall” means that this method of enforcement is

mandatory and not merely one way for the HOA to enforce its restrictions. The

governing documents do not address the HOA’s authority to impose fines prior to

obtaining a court order, and the only assessments specifically authorized for the

HOA to impose are annual and special assessments, which are to be the same

amount for each lot. For these reasons, we hold that the circuit court did not err as

a matter of law in awarding only post-order fines as damages.

             Finally, we shall consider the HOA’s argument that the circuit court

improperly reduced the amount of attorney fees it claimed in connection with

enforcing the restriction. The circuit court awarded $30,000.00 in fees; the HOA

                                         -25-
had sought $39,266.40, which included $26,835.40 in post-order attorney fees.

“We review a trial court’s award of attorney fees for abuse of discretion.” Banker

v. University of Louisville Athletic Association, Inc., 466 S.W.3d 456, 465 (Ky.

2015). “The test for abuse of discretion is whether the trial judge’s decision was

arbitrary, unreasonable, unfair, or unsupported by sound legal principles.”

Commonwealth v. English, 993 S.W.2d 941, 945 (Ky. 1999).

             The circuit court stated in its order that it could not award the full

amount the HOA sought in fees “without the actual invoices for a detailed review

of the attorney fee structure and work specifically completed on this matter,”

noting that the firm had been “retained generally in order to work on other

unrelated matters for the HOA.” In its brief, the HOA states that the circuit court

did in fact have the redacted invoices that reflected fees through November 1,

2020. Our review of the invoices for work between April 1, 2019, and October 28,

2020, beginning on page 1182 of the record, confirms that while the invoices

certainly list the dates, time spent, and rates, the description of the work performed

for each of the entries is redacted. This precluded the court from conclusively

determining that the billed work was specifically related to Hans’ case as opposed

to other work the firm performed for the HOA, despite counsel’s affidavit that it

indeed was. We also note that the record does not appear to include any billing

                                         -26-
statements for work performed after October 28, 2020, to support counsel’s second

affidavit dated February 22, 2021.

             The court ultimately based its decision to award the HOA $30,000.00

in attorney fees upon the “extensive litigation expenses” it had incurred “to

undertake numerous costly and time-consuming actions, including, inter alia, the

researching of issues, the drafting of pleadings and motions, discovery, alternative

dispute resolution efforts, and preparation for and attendance at numerous

hearings.” Had the litigation with Hans been the only matter for which the firm

had been retained, the result would be different. However, the firm had been

retained to generally represent the HOA and should only be permitted repayment

of its fees for that matter. We find no abuse of discretion in the circuit court’s

decision to award $30,000.00 in attorney fees for the reasons set forth in its order.

             For the foregoing reasons, the judgment of the Fayette Circuit Court is

affirmed, and the HOA’s passed motion to strike Hans’ brief or dismiss his appeal

is denied.

             ALL CONCUR.

 ENTERED: _June 16, 2023_____
                                             JUDGE, COURT OF APPEALS

                                         -27-
BRIEFS FOR              BRIEFS FOR APPELLEE/CROSS-
APPELLANTS/CROSS-       APPELLANT:
APPELLEES:
                        Christopher P. Farris
Kamp Townsend Purdy     Lexington, Kentucky
Lexington, Kentucky

                      -28-