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Soules v. Ramstack (07/30/2004) sp-5827
Soules v. Ramstack (07/30/2004) sp-5827
Notice: This opinion is subject to correction before
publication in the Pacific Reporter. Readers are
requested to bring errors to the attention of the Clerk
of the Appellate Courts, 303 K Street, Anchorage,
Alaska 99501, phone (907) 264-0608, fax (907) 264-0878,
e-mail corrections@appellate.courts.state.ak.us.
THE SUPREME COURT OF THE STATE OF ALASKA
MARY ELLEN SOULES, )
) Supreme Court No. S-11034
Appellant, )
) Superior Court No.
v. ) 3AN-02-00371 PR
)
BETTY RAMSTACK, ) O P I N I O N
)
Appellee. ) [No. 5827 - July 30, 2004]
)
Appeal from the Superior Court of the State
of Alaska, Third Judicial District,
Anchorage, Mark Rindner, Judge.
Appearances: Robert C. Erwin, Erwin & Erwin,
LLC, Anchorage, for Appellant. Gordon F.
Schadt, Schadt Law Office, Anchorage, for
Appellee.
Before: Bryner, Chief Justice, Matthews,
Eastaugh, Fabe, and Carpeneti, Justices.
CARPENETI, Justice.
I. INTRODUCTION
Mary Ellen Soules, personal representative of the
Estate of Pauline King, appeals the superior courts decision
holding that the estate is contractually obligated to pay a
special assessment levied against a condominium that the estate
sold to Betty Ramstack. Soules contracted to sell the unit to
Ramstack in March 2002 and agreed to pay any assessments due at
closing. The condominium association approved a special
assessment in December 2001 and notified all owners of the
assessment in early January 2002. Those who were then
negotiating to sell their units were told that the assessment
would be due at closing. The estate did not pay the assessment
at closing. Because the superior court correctly ruled that the
estate breached its contract with Ramstack, we affirm its
decision requiring the estate to pay the special assessment.
II. FACTS AND PROCEEDINGS
Pauline King died in December 2001, leaving an estate
that included condominium 2F in Mt. Vernon Commons in Anchorage.
At the time, the Mt. Vernon condominium community was unique in
that it did not own the land upon which the units were built, but
instead had a long-term leasehold interest in the property. In
June 2001 the Mt. Vernon Condominium Association began
negotiating with the Central Anchorage Land Company, which owned
the land, to purchase it for a price of $1.8 million. On
September 27, 2001 the board of directors of the condominium
association held an informational meeting to discuss the proposed
land acquisition, including the amount of a special assessment
that would be levied against all units to finance the purchase.
The condominium association proposed to finance the acquisition
through a bank loan, and each homeowner was to be responsible for
a portion of the purchase price payable through a special
assessment. The entire transaction was subject to approval by
the homeowners.
The minutes of this meeting indicate that the proposed
land purchase was controversial. Elouise Schmidt, the real
estate agent who later represented the estate in the transaction
with Ramstack, attended the meeting on her own behalf and as a
proxy for several homeowners. She opposed the land purchase.
According to the minutes, while Schmidt was unsure how the land
purchase would affect condominium values at Mt. Vernon, she
discussed how an owner could explain the assessment to a
potential buyer and how an owner could work the assessment into
the sales price if a unit were offered for sale.
A special board meeting of the homeowners association
was held on December 10, 2001. Although the land acquisition was
still being negotiated, the board anticipated that the homeowners
would approve the transaction and that closing would occur on
December 28, 2001. The board approved a special assessment to
pay for the land purchase.1 The amount of assessment varied
depending on the type of condominium unit, and ranged from
$11,677.54 to $13,914.60, which could be paid as a lump sum or in
installments. The assessment due on unit 2F was $13,139.57.
The board notified homeowners on January 11, 2002 that
the special assessment had been levied, informing them a majority
of the homeowners had approved the land purchase, the amount they
were required to pay, and where and how to pay the assessment.
This letter also informed homeowners that the association was
negotiating with the bank for better loan terms and that if the
transaction was not completed, any payments made would be
refunded with interest. A second letter sent on January 16, 2002
explicitly informed homeowners who were attempting to sell their
units that the special assessment [was] on the unit and due upon
closing. The letter encouraged such homeowners to [i]nstruct
your closing agent to deposit those funds in [the special
assessment] account at Northrim Bank.
The proposed land acquisition presented many challenges
because, according to Michael Olson, Vice President of the Board,
it was the first time in Alaska that an existing condominium
association had attempted to convert leasehold land to fee simple
ownership, and in February the deal was temporarily derailed when
the parties reached an impasse. After further negotiations the
deal was reinstated on the same financial terms. In a special
board meeting on March 27, 2002 the board voted to seek a new
closing date of May 1, 2002 and to impose a deadline for payment
of the special assessment, the amount of which was unchanged
since it was reported to homeowners in January. The board set a
deadline of April 30, 2002 for partial or total payment of the
special assessment and notified all homeowners of this date in
writing on April 3, 2002.
Meanwhile, Kings estate had listed her condominium for
sale with Schmidt in March of 2002. The listing announcement
indicated that the condominium association was still working on
the land acquisition and specified the amount of the monthly land
lease, but it did not mention the special assessment already
announced by the association. Ramstack submitted an earnest
money agreement on March 20, which provided that assessments on
the property would be paid by the seller. The estate accepted
the earnest money agreement on March 22. A resale certificate
obtained by the estate on April 10, and provided to Ramstack on
April 11, was accompanied by a disclosure statement2 that
indicated that there were no unpaid common expenses on the unit.
Ramstack purchased the condominium on April 19. The monthly land
lease and condo fees owing on the unit were collected from the
estate. However, the special assessment was not included in the
settlement charges due from the estate or the buyer.3 Ramstack
first learned of the special assessment on or about April 25,
2002 when she took her monthly land lease payment to Michael
Olson, who informed her that she actually owed over $13,000. On
May 29, 2002 the association claimed a lien against all units
that had not paid the assessment, including the unit purchased by
Ramstack. The association finally purchased the land on
September 6, 2002.
Ramstack filed a creditors claim against the estate on
June 13, 2002, seeking to enforce the terms of the contract by
collecting $13,139.57 to pay the special assessment charged to
her unit. Following a two-day bench trial on February 11 and 12,
2003 Superior Court Judge Mark Rindner issued a decision on March
10, 2003 holding the estate liable for the unpaid special
assessment. The superior court found that the board had levied
the special assessment through a duly enacted resolution at the
December 10, 2001 special meeting and that it remained valid
throughout the negotiations to purchase the land. The superior
court further found that the estate had agreed to pay all
assessments owed on the condominium at closing, including the
special assessment. Finally, the superior court rejected the
estates argument that Ramstack would be unjustly enriched if the
estate were forced to pay the assessment without the benefit of a
higher sales price, noting that Ramstack may not have even
contracted to buy the unit had she known of the assessment, and
that requiring the estate to honor its contract would merely give
Ramstack the benefit of her bargain. The court ordered the
estate to pay the special assessment.
Soules appeals on two grounds. First, she claims that,
because the special assessment was not due on April 19, 2002 when
the estate sold the condominium to Ramstack, the estate bore no
obligation to pay the assessment at that time. Second, she
claims that Ramstack will be unjustly enriched if the estate is
required to pay the assessment.
III. STANDARD OF REVIEW
Whether the assessment was due at the time of closing
presents a mixed question of law and fact, which we review using
two different standards.4 Factual determinations are reviewed
under the clearly erroneous standard.5 We will find clear error
only if, after a thorough review of the record, we come to a
definite and firm conviction that a mistake has been made.6
Legal questions are reviewed de novo, and we will adopt the rule
of law that is most persuasive in light of precedent, reason, and
policy.7 Whether there has been unjust enrichment is generally a
question of fact.8 But [w]here the facts are clearly
established, the issue becomes one of law, and the court must
adopt the rule of law that is most persuasive in light of
precedent, reason, and policy. 9 Additionally, the trial courts
findings regarding the credibility of the witnesses will be
reversed only if clearly erroneous.10 We can affirm the decision
of the superior court on any basis supported by the record.11
IV. DISCUSSION
The primary question presented by this appeal is
whether the special assessment enacted by the board on December
10, 2001 and announced to homeowners in January 2002 was due on
the date of closing and thus payable by the estate by the terms
of its contract with Ramstack. Soules argues that the estate was
not contractually bound to pay the assessment because it was not
due until April 30, 2002, eleven days after it sold the
condominium to Ramstack.
A. The Special Assessment Was a Debt at Closing.
The board of the Mt. Vernon Commons Condominium
Association voted to levy a special assessment on December 10,
2001, a fact reflected in the minutes of the special board
meeting, the corporate resolution, and the testimony of Michael
Olson, whom the superior court found to be fully credible. This
decision was communicated to homeowners in letters dated January
11 and 16, 2002, along with the amount due from each homeowner,
including the interest rate applicable to installment payments.
Although the board did not vote to impose a deadline for payment
until the March 27, 2002 special board meeting, the January
correspondence specifically informed homeowners who were
negotiating to sell their units that the special assessment is on
the unit and due upon closing and encouraged them to ensure that
the closing agent deposited the funds in a special account set up
for that purpose.
The question is whether the assessment existed as an
obligation of the estate prior to the sale of the unit or whether
the assessment became effective only on April 30, 2002 and was
thus payable by Ramstack. Resolution of this question requires
us to determine when a condominium assessment becomes effective
and whether the special assessment at Mt. Vernon Commons was an
existing obligation when Ramstack purchased unit 2F from the
estate.
Soules raises two arguments in support of her position
that the estate is not contractually obligated to pay the
assessment, both of which rely on the April 30 deadline for
paying the assessment. First, she argues that, in the absence of
an express provision in an associations bylaws, an assessment is
not payable until a condominium association has statutory
authority to attach a lien against a unit to enforce collection.
She relies upon AS 34.08.470, which provides that a lien attaches
from the date an assessment is due, to support her argument that
the assessment was only effective when it was due. Second,
Soules argues that the assessment was a contingent liability when
the estate contracted to sell the condominium to Ramstack, and
that the liability only became definite on April 30 when the
assessment was due. Under both arguments, Soules claims that
since the assessment was not due until after the estate sold the
unit on April 22, 2002 the estate bore no duty to pay the
assessment.
While the condominium associations bylaws do not
indicate when a special assessment is effective, Soules notes
that AS 34.08.470, a provision of the Uniform Common Interest
Ownership Act,12 states that a condominium association has a lien
on a unit for an assessment from the time the assessment becomes
due.13 According to Soules, if no lien could attach against the
unit until after April 30 then no debt was due and the
association could pursue no action for collection. Her argument
reduces to a syllogism: if no lien could attach, no debt was
payable; if no debt was payable, the assessment had not been
levied; if the assessment had not been levied, the estate did not
breach its contract.
While this argument has the virtue of simplicity, it
misses an important point: An assessment does not become valid
only when it attaches as a lien. Debts can exist before they are
due, and condominium assessments can be effective before they
must be paid. Condominium associations in most states have
statutory authority to attach liens as a collection mechanism to
ensure that homeowners pay the fees it has assessed.14 Alaska
Statute 34.08.470 describes one way for an association to collect
assessments from recalcitrant homeowners: It grants the
authority to impose liens to collect unpaid assessments, it
allows these liens to attach from the time an assessment is due,
and it gives these liens priority over other types of liens and
encumbrances.15 But it says nothing about when an assessment
itself becomes effective. A condominium association also has
other means available to encourage the timely payment of
assessments, including authority to impose late fees and fines16
and to charge up to an eighteen percent interest rate on unpaid
balances.17
Indeed the typical sequence by which an association
adopts, announces, and collects assessments implies that an
assessment will be effective before it is due, and almost
certainly before the association could attach a lien against a
unit to compel payment. Typically an association board will
adopt a budget for planned expenses, enact an assessment to meet
these expenses, set a deadline for payment and, if the assessment
remains unpaid, pursue various collection strategies ranging from
sending a reminder letter, charging interest, attaching a lien,
and even foreclosing on a unit.18 But the assessment exists even
though it might not be immediately payable. Allowing a period of
months before payment is due is particularly important where, as
here, the association levied an assessment of more than $13,000,
greater than ten percent of the value of the condominium, which
sold for $126,900. When the announcement of an assessment
predates the due date, the assessment is best viewed as an
unmatured obligation, a debt for which the sum is certain though
the time for payment is deferred.19 Though the time for payment
had not yet passed when the estate sold unit 2F to Ramstack, the
assessment existed as an obligation of the estate from the time
it was enacted. Because the assessment was an existing
obligation when the estate contracted to sell the unit, the
superior court correctly found that the estate bore the
obligation of paying the assessment.
Soules argues that the assessment was a contingent
liability rather than an unmatured obligation, because the
assessment would only become a debt when all events [had]
occurred which fix and determine the liability of the debtor. A
contingent liability is a liability that depends upon the
occurrence of a future and uncertain event.20 But Souless
argument would mean that the assessment was not valid until the
association closed on the land, because that is when the event
finally occurred which fixed the liability of each unit owner.
That claim is clearly wrong.21 The transaction did not finally
close until September 6, 2002. If the assessment was contingent
upon the land transaction being completed, it was not due until
September 6, notwithstanding the fact that the assessment was
voted in December and announced in January, payment was due in
April, and liens attached against unpaid units in May. But even
Soules acknowledges that payment was due on April 30, 2002.
The validity of the assessment was not contingent upon
whether the association purchased the land. Had the land
transaction irreparably fallen apart, the assessment payments
would have been refunded with interest. Though the assessment
was not due until April 30, when the estate sold the unit to
Ramstack, payment of the assessment was contingent upon nothing
but the passage of time. Thus the assessment must be viewed as
an unmatured debt rather than a contingent liability.
The superior court found that the board enacted a
special assessment on December 10, 2001, that it communicated the
amount due from each homeowner in January 2002, and that the
assessment remained valid even though the association continued
to negotiate the terms of the transaction with the seller and the
bank. These factual findings are not clearly erroneous.
Correspondence from the association specifically instructed
owners who were selling units to withhold the assessment at
closing and informed them that any funds paid would be refunded
with interest in the event that the land transaction was not
completed. Although the association did not initially impose a
due date, Michael Olson testified that the board hoped that
owners would pay the assessment before the association purchased
the land so that these funds could be used as a down payment.
When the transaction was renewed on March 27, 2002 the board set
an April 30 deadline for payment. The amount assessed against
each unit remained unchanged at least from the initial
communication to homeowners on January 11, 2002. Under these
circumstances, the superior court correctly ruled that the
assessment was a debt of the estate at the time of closing.
The superior court also found that Schmidt was fully
aware of the status of the land transaction and the special
assessment, but that this information was not disclosed to
Ramstack or her agent. Because the estate had greater knowledge
of the pending assessment, the superior court correctly ruled
that the estate bore the burden of exempting the special
assessment from its contractual agreement with Ramstack if it
wished to avoid its obligation to pay the assessment.
B. Ramstack Will Not Be Unjustly Enriched if the Estate
Must Pay the Assessment.
Soules also argues that Ramstack will be unjustly
enriched if the estate is required to pay the special assessment,
because the unit is now worth more with a fee interest in the
land and Ramstack paid a purchase price based upon the value with
only a leasehold interest. The superior court rejected this
argument for three reasons. First, it noted that the estates own
agent had previously stated that she was unsure how the land
purchase would affect real estate values, rendering the unjust
enrichment theory problematic at best. Second, there was no
evidence that Ramstack would have purchased the unit had she
known that the ultimate purchase price would be more than $13,000
higher than the contracted amount. Finally, and most
importantly, the court found that Ramstack was not receiving a
windfall, but merely the benefit of her bargain. We agree. An
allegation of unjust enrichment will succeed only when the
defendant has received a benefit from the plaintiff and it would
be inequitable for the defendant to retain the benefit without
compensating the plaintiff for its value. 22 But there can be no
valid claim of unjust enrichment where a party has given fair
consideration or value for the benefits obtained.23 The contract
between Ramstack and the estate specified that the latter would
pay any assessments against the unit. But the estate did not
pay. Enforcement of a valid contract does not constitute unjust
enrichment.
V. CONCLUSION
Because the Estate of Pauline King contractually agreed
to pay any assessments owed on the condominium, and because a
special assessment was imposed prior to closing, we AFFIRM the
decision of the superior court that the estate is contractually
obligated to pay the special assessment.
_______________________________
1 The corporate resolution authorizing the special
assessment was not actually signed by the secretary until July
14, 2002. However, the resolution, the minutes of the December
special board meeting, and testimony from Michael Olson, Vice
President of the Board, indicate that the assessment was
effective as of December 10, 2001 when the resolution was
adopted. The superior court found Olsons testimony to be fully
credible.
2 The original disclosure statement was not available at
trial, but a statement from a similar transaction was introduced.
3 Ramstacks real estate agent testified that the buyer
and seller typically do not see the others settlement statement,
thus the fact that the special assessment was not included in the
buyers settlement statement would not have alerted Ramstack to
any potential problem.
4 Carr-Gottstein Props., Ltd. Pship v. Benedict, 72 P.3d
308, 310 n.4 (Alaska 2003).
5 Id. at 310.
6 Rausch v. Devine, 80 P.3d 733, 737 (Alaska 2003).
7 Carr-Gottstein, 72 P.3d at 310 (citing Bennett v.
Bennett, 6 P.3d 724, 726 (Alaska 2000)).
8 State, Dept of Revenue v. Wetherelt, 931 P.2d 383, 390
n.11 (Alaska 1997).
9 Id., quoting Guin v. Ha, 591 P.2d 1281, 1284 n.6
(Alaska 1979).
10 Rausch, 80 P.3d at 737.
11 Id.
12 Ch. 95, SLA 1985. The Uniform Common Interest
Ownership Act applies to condominium communities created after
January 1986. AS 34.08.010. Mt. Vernon Commons was established
in 1974 and the bylaws state that it is governed by the
Horizontal Property Regimes Act, AS 34.07. Because the Uniform
Common Interest Ownership Act does not resolve the question of
when an assessment becomes effective, we need not address whether
it would apply to the activities of the Mt. Vernon Commons
Condominium Association.
13 AS 34.08.470(a).
14 See Gary A. Poliakoff, Law of Condo Operations 5.15,
5.23 (1988).
15 AS 34.08.470(a)-(b).
16 AS 34.08.320(a)(11).
17 AS 34.08.460(b).
18 See Wayne S. Hyatt, Condominium and Homeowner
Association Practice: Community Association Law 6.07(a)(1) (3d
ed. 2000) (describing sequence of levying and collecting
assessments).
19 See Consol. Constr. Servs., Inc. v. Simpson, 813 A.2d
260, 269 (Md. 2002) (defining unmatured debt).
20 Blacks Law Dictionary at 926 (7th ed. 1999).
21 The record does show that the proposed closing date was
postponed several times after the assessment was first announced.
In December 2001 the board projected a December 28 closing date.
When the assessments were announced to homeowners on January 11,
2002 the board anticipated a late January closing date. On April
3, when the board announced that the transaction had been
reinstated and set the April 30 deadline for paying the
assessment, it projected a May 1 closing. Closing finally
occurred in September.
22 Crittell v. Bingo, 83 P.3d 532, 538 (Alaska 2004)
(quoting Sparks v. Gustafson, 750 P.2d 338, 342 (Alaska 1988)).
23 Alaska Sales & Serv. Inc. v. Millett, 735 P.2d 743, 746
(Alaska 1987).
