Greenstein v. Council of Unit Owners of Avalon Court Six Condominium, Inc.

WOODWARD, J. Appellants are 35 of 36 individual unit owners of Avalon Court Six Condominium, Inc. (“the Condominium”) located in Pikesville, Maryland. On January 23, 2008, appellants filed a complaint in the Circuit Court for Baltimore County against ¹⁸⁸ appellee, the Council of Unit Owners of Avalon Court Six Condominium, Inc. (“the Council”), alleging negligence in failing to timely investigate water leakage into the individual units and failing to file a lawsuit against the developer of the Condominium within the statute of limitations. On May 19, 2008, appellants filed for summary judgment, and the Council responded with a cross motion for summary judgment. The circuit court issued a Motions Ruling denying both motions for summary judgment.

Thereafter, on September 19, 2008, the Council filed a renewed motion for summary judgment, arguing that appellants failed to establish that the Council owed a duty to appellants to file a lawsuit against the Condominium’s developer and that appellants’ complaint was time barred. After a hearing on April 13, 2008, the circuit court granted the motion for summary judgment in favor of the Council. On appeal, appellants present two questions for our review, which, in the words of their brief, are: I. Does the Council owe a duty to [ ] appellants to maintain the common elements and, if so, do [ ] appellants have a cause of action against the Council for its failure to maintain the common elements?

II

Are appellants’ claims against the Council time barred? For the reasons set forth herein, we shall reverse the judgment of the circuit court and remand the case for further proceedings. BACKGROUND Duties and Responsibilities of the Council and Board of Directors of the Condominium The Condominium Declaration (“the Declaration”) and the Condominium By-Laws (“the By-Laws”) set forth in detail the responsibilities and obligations of the Council and Condominium Board of Directors, including the obligation of the Council to maintain the common elements and repair the ¹⁸⁹ damage caused to the common elements by the water leaks at issue in the instant appeal. Article V, § 5.2.1. of the Declaration provides that [t]he affairs of the Condominium shall be governed by [the Council], an entity which is both a council of unit owners under the provisions of the [Maryland Condominium Act (“the Act”), Maryland Code (1974, 2010 Repl.Vol.), § 11-101, et seq., of the Real Property Article (“R.P.”) ] and a nonstock corporation organized and existing under the law of Maryland.

See also R.P. § 11-109(a) (“The affairs of the condominium shall be governed by a council of unit owners which, even if unincorporated, is constituted a legal entity for all purposes. The council of unit owners shall be comprised of all unit owners.”). Article V, § 5.2.2. states that “all of the Unit Owners” are members of the Council. Common Elements “(a) shall consist of all of the Condominium other than Units the legal title to which is held by a person other than the Council, and (b) shall be comprised of the Limited Common Elements and the General Common Elements.” Art. III, § 3.3.1 of the Declaration.

According to Article VI, § 6.5.2.(a) of the Declaration, “the Council shall maintain, repair and replace all General Common Elements and Limited Common Elements, including all structural repairs and replacements to Limited Common Elements the costs of which ... shall be Common Expenses.” See also R.P. § 11-108.1 (“Except to the extent otherwise provided by the declaration or bylaws, and subject to § 11-114 of this title, the council of unit owners is responsible for maintenance, repair, and replacement of the common elements, and each unit owner is responsible for maintenance, repair, and replacement of his unit.”). The Common Elements are owned by all of the Unit Owners, each of whom share an undivided percentage interest therein. Art. III, § 3.3.4. of the Declaration. Article II, § 2.2.2. of the By-Laws sets forth the specific powers of the Council.

Relevant to this appeal are the following powers: ¹⁹⁰ Without limiting the generality of the foregoing provisions of this Section, the Council shall have all of the following powers: * * * (d) subject to the provisions of subsection 2.2.5., to sue, be sued, complain and defend in any court of law or equity of Maryland or any other jurisdiction; • (1) to regulate the use, maintenance, repair, replacement, and modification of Common Elements; (r) subject to the provisions of subsection 2.2.5, to enforce the implied warranties made to the Council by the Developer under Section 11-131 of the Act. (t) to perform all of the obligations imposed upon the Condominium under the Homeowners Association Declaration (as defined in the Declaration), and pay any and all amounts coming due thereunder, with all such amounts constituting Common Expenses; and (u) generally, to exercise any and all rights which are vested in it, and to do every other act not inconsistent with law which is appropriate to promote and attain the purposes •set forth in the Act, the Declaration or these By-Laws. (Emphasis added). Article II, § 2.4.10 of the By-Laws provides that “[t]he Board of Directors and the Officers” shall manage “[a]ll of the Council’s business and affairs” and shall exercise and perform all of the Council’s “rights, powers and duties.” Article II, § 2.2.5. of the By-Laws sets forth the responsibility of the Board of Directors regarding legal proceedings.

Section 2.2.5.(a) states: The Board of Directors shall have the exclusive right to initiate any form of legal proceedings as it deems necessary and appropriate related to the use, operation or maintenance of the General Common Elements and subject to ¹⁹¹ any separate rights vested in the Unit Owners, the Limited Common Elements, subject to the following requirements. (Emphasis added). “Legal Proceedings,” is defined by § 2.2.5.(b) of the By-laws and shall mean any form of action or suit, under the Declaration, or pursuant to the Act or contained in any other statutes, regulations or ordinances or at common law brought by or on behalf of the Council, including, but not limited to, demands for performance of the Developer’s obligations hereunder or under the Act, and shall include the assertion by the Council, through litigation, arbitration, or otherwise, of any claims or actions related to the Common Elements or the Units, or the retention of an attorney, engineer, architect or other expert for purposes of considering or investigating the possible institution of Legal Proceedings. (Emphasis added). Under § 2.2.5.(c), the decision to initiate any Legal Proceeding must be made by a resolution duly adopted at a properly noticed Special Membership Meeting of the Council held for such purpose.

Such resolution shall require the affirmative vote of Unit Owners representing not less than sixty-six percent (66%) of the total Votes of the Unit Owners present and voting. Notwithstanding any other provisions of these By-laws, the presence in person or by proxy of Unit Owners whose respective Votes constitute, in the aggregate, fifty percent (50%) of the total number of Votes which are then outstanding shall be required for and shall constitute a quorum for, such meetings. (Emphasis added). There are two ways in which a Special Membership Meeting may be initiated: (i) The President or the Board of Directors may at any time call a Special Membership Meeting upon his or its own ¹⁹² initiative, and shall in such event determine the date, time and place thereof.

(ii) The President shall call a Special Membership Meeting upon the Council’s receipt, at any time after the first Annual Membership Meeting, of a petition requesting that such Special Membership Meeting be called, stating each intended purpose thereof, and signed by Unit Owners or Proxy Holders having at least twenty-five percent (25%) of the total number of Votes then outstanding. Whenever any such Special Membership Meeting is requested by any such petition, the President shall set a date therefor which is not later than ninety (90) days after the Council’s receipt of such petition. Art. II, § 2.3.3.(b) of the By-Laws. Construction of the Condominium and The History of Water Leaks The facts of the instant appeal are not in dispute, and have already been outlined in a memorandum opinion from a prior lawsuit between the Council and the developer of the Condominium, Questar Homes Avalon Court Six, LLC (“Questar”).

For the purposes of consistency and convenience, we adopt and incorporate substantial portions of the factual history as set forth by the Honorable Vicki Ballou-Watts of the Circuit Court for Baltimore County in her memorandum opinion in that case. Questar is the developer/builder of ... [the] Condominium [], consisting of thirty-six (36) residential condominium units in four (4) buildings located in Pikesville, Baltimore County, Maryland. Buildings 1 and 2 are three-story buildings. Buildings 3 and 4 are two-story buildings.

Settlements on the sale of the individual units began with the first settlement on April 29, 1998 (Building 1). The first settlement for individual units in Buildings 2, 3 and 4 occurred on March 18, 1999, November 21, 2000 and October 26, 1999, respectively. Settlements on the final unit of each building occurred as follow[s]: Building 1 (November 27, 2000); ¹⁹³ Building 2 (June 21, 2000); Building 3 (December 19, 2000) and Building 4 (December 15, 2000). [Questar] served as the initial director-members of the [Condominium's Board of Directors pursuant to the Articles of Incorporation filed with the State Department of Assessments and Taxation on April 6, 1998. As noted, the entire condominium development consists of thirty-six (36) units.

The settlement for the eighteenth and nineteenth units ... occurred on October 26 and 27, 1999, respectively. Pursuant to [R.P. § 11-109(16) ], a meeting of the council of unit owners shall be held within sixty (60) days from the date that units representing fifty percent of the votes in the [Condominium have been conveyed by the developer to the initial purchasers of units. Incorporating the sixty (60) day grace period to elect officers or a board of directors, the latest that [the Council] assumed control of the [C]ondominium was on or about December 27, 1999. After the election of a board of directors by unit owners, [Questar was] no longer [a] director-member[ ] and control of the [Condominium passed to [the Council].

Between 1998-2002, seventeen (17) unit owners reported problems regarding water infiltration primarily through windows.... On January 3, 2002, the elected Board of Directors entered into a Management Agreement with Community Association Management, LLC (herein referred to as “CAM”). Six (6) months later, David Caplan, the CAM property manager, sent a memorandum to all condominium unit owners and residents requesting information regarding the status of any water leaks. The memorandum was dated June 10, 2002.

In the 2002 CAM memorandum, unit owners were specifically asked about any past or then existing water leakage “from the outside into (your) unit.” They were asked to respond by June 30, 2002, even if the problem was reported and resolved. ¹⁹⁴ Unit owners responding to the 2002 CAM memorandum included: • 6 Barbican Way—Reported leaking from windows; and • 30 Barbican Way—Reported water leak in utility closet; and • 35 Barbican Way—Reported water damaged walls and ceilingf; and] • 4.2 Barbican Way—Reported window leak in kitchen; and • 44 Barbican Way—Reported window leak in kitchen; and • 50 Barbican Way—Reported a history, beginning in 2002, of a water leak in master bedroom ceiling. In one response to CAM’s memorandum, a unit owner asserted “window leakage in practically every window in our condo” on numerous occasions for the previous four (4) years. On August 26, 2002, U.S. Inspect, Inc. issued a Replacement Reserve Report which “covered the common elements of the community including building exteriors, concrete walks, curb and gutter and retaining wall.” No unit interiors were evaluated and the survey was based upon “a limited visual assessment.” In September 2005, [the Council]’s Board of Directors authorized the commission of a building leakage investigation by Simpson, Gumpertz & Herger (“SGH”). SGH completed a report titled Building Leakage Investigation, Avalon Court Six Condominiums, Pikesville, MD which is dated December 1, 2005.

In the Background Section on page 1 of the SGH report, the preparer noted that “[t]he buildings continue to leak at window heads despite past repairs by the original contractor.” ... (Some alterations in original) (emphasis in original). The Dispute On August 8, 2006, the Council filed an 11 count complaint against Questar on behalf of the Council and individual unit ¹⁹⁵ owners, seeking recovery for injury and damage to the condominium building, units, and Common Elements from water leakage, seepage, and deterioration that allegedly were caused by defects in design and construction. The counts in the complaint were negligent design (Count 1), negligent construction (Count 2), negligent supervision (Count 3), breach of implied warranty (Count 4), breach of express warranty (Count 5), negligent misrepresentation (Count 6), fraudulent misrepresentation (Count 7), breach of contract of sale (Count 8), violation of Consumer Protection Act (Count 9), breach of fiduciary duty (Count 10), and constructive fraud (Count 11).

On December 6, 2006, Questar filed a motion to dismiss, or in the alternative, for summary judgment, alleging, inter alia, that the Council’s claims were time barred. A hearing on Questar’s motion was held on April 11, 2007, before Judge Ballou-Watts. On June 19, 2007, Judge Ballou-Watts issued a memorandum opinion and order granting Questar’s motion for summary judgment, ruling that all of the claims in the Council’s complaint were time barred. According to Judge Ballou-Watts, “[pjursuant to the ‘discovery rule,’ the three year statute of limitations for all claims (except warranty claims) began to run—at the latest—in June 2002, when CAM received responses to its memorandum and not [o]n December 1, 2005 when [the Council] received the SGH Building Leakage Investigation report.” (Emphasis added).

The Council did not appeal this order, and thus it became a final judgment. As a result of Judge Ballou-Watts’ order, the Council was unable to recover from Questar the costs of correcting the water infiltration problems, as well as other design and construction defects, and was forced to bear such costs that exceeded $1,000,000. The Council obtained a construction loan to cover the cost of the repairs and, in order to repay the loan, mandated that each unit owner pay certain special assessments and an increase of $400 in the monthly condominium fee. Thereafter, on January 23, 2008, appellants, consisting of 35 of the 36 unit owners, filed a lawsuit against the Council to ¹⁹⁶ recover the monetary damages that they suffered as a result of the Council’s negligence.

On March 4, 2008, appellants filed an amended complaint alleging that the Council was negligent in (1) failing to timely investigate the water infiltration problems, and (2) failing to bring a lawsuit against the developer within the period of the statute of limitations. Appellants claimed that, as a result of the Council’s negligence, they “have suffered, and will continue to suffer, actual monetary damages in excess of Thirty Five Thousand ($35,-000.00) dollars each and have collectively suffered actual monetary damages in excess of One Million dollars ($1,000,-000.00).” On May 19, 2008, appellants filed a motion for summary judgment, arguing that the Council was negligent, as a matter of law, because the Council “had the sole and exclusive duty, as well as the legal obligation, to investigate and ascertain the reasons and/or sources of the water infiltration problems and proceed to repair said water infiltration problems,” as well as “the sole and exclusive duty to bring legal action regarding the water infiltration problems.” On May 29, 2008, the Council filed a response to appellant’s motion for summary judgment and a cross motion for summary judgment, contending that appellant’s complaint was barred by the three year statute of limitations, as they were on notice of the water problems in June of 2002 and thus had until June of 2005 to file a lawsuit. Additionally, the Council" argued that it did not have a duty to appellants to file a legal action against Questar. On July 14, 2008, the circuit court issued a Motions Ruling denying both appellants’ and the Council’s motions for summary judgment.

In its ruling, the circuit court stated, in pertinent part: From the standpoint of the judge hearing the motion for summary judgment, the decision may not be all that difficult at the circuit court level unless [appellants] prove[ ] to the court there is entitlement to a cause of action against [the Council]. New causes of action should ordinarily be established by the appellate courts of Maryland. Trial judges should not usually establish new causes of action and there ¹⁹⁷ fore the Plaintiff pays the price to go to Annapolis if there is a doubt as to the existence of an action for negligence against the Council and as to the extent of that duty. ... [Appellants] ha[ve] the responsibility to demonstrate the existence of a duty and the probable recognition of that duty by Maryland appellate courts or this case on this level should end. (Footnote omitted).

Two months later, on September 19, 2008, the Council filed a Renewed Motion for Summary Judgment, wherein it argued that appellants failed to produce any authority establishing a legal duty on the part of the Council to file a lawsuit on behalf of individual unit owners and that appellants’ complaint was time barred. A hearing on the renewed motion was held on April 13, 2009. At the conclusion of the hearing, the court granted the Council’s renewed motion for summary judgment. This timely appeal followed.

DISCUSSION Maryland Rule 2-501(f) provides, in relevant part, that “[t]he court shall enter judgment in favor of or against the moving party if the motion and response show that there is no genuine dispute as to any material fact and that the party in whose favor judgment is entered is entitled to judgment as a matter of law.” The standard of review on appeal is well settled: The question of whether the trial court properly granted summary judgment is a question of law and is subject to de novo review on appeal. If no material facts are in dispute, we must determine whether summary judgment was correctly entered as a matter of law. On appeal from an order entering summary judgment, we review “only the grounds upon which the trial court relied in granting summary judgment.” ¹⁹⁸ Prop. & Cas. Ins.

Guar. Corp. v. Yanni, 397 Md. 474, 480-81 , 919 A.2d 1 (2007) (citations omitted) (quoting River Walk Apartments, LLC v. Twigg, 396 Md. 527, 541-42 , 914 A.2d 770 (2007)). “If the trial court did not specify the grounds upon which it granted summary judgment, appellate courts assume that the trial court ‘carefully considered all of the asserted grounds and determined that all or at least enough of them ... were meritorious.’ ” Kimmel v. SAFECO Ins. Co., 116 Md.App. 346, 354-55 , 696 A.2d 482 (1997) (ellipsis in original) (quoting Bond v. NIBCO, Inc., 96 Md.App. 127, 133 , 623 A.2d (1993)). In the case sub judice, it is unclear on which ground the circuit court relied in granting summary judgment in favor of •the Council.

Therefore, we shall review the circuit court’s grant of summary judgment on both grounds asserted by the Council, to wit, (1) there is no legal duty owed by the Council to the unit owners to file a lawsuit against Questar for claims related to the Common Elements, and (2) appellants’ claims are barred by the applicable statute of limitations. I. Appellants argue that the circuit court erred in granting summary judgment in favor of the Council, because the Council has a duty to the unit owners to pursue claims against a third party related to the maintenance and repair of the Common Elements. According to appellants, if the Councifails in this duty, the unit owners can pursue litigation against the Council. In support of their position, appellants note that “the law of Maryland, the Declaration!,] and the By-Laws explicitly impose on the Council and the Board of Directors the exclusive duty to maintain and repair the common elements of the Condominium.” Appellants also observe that “the By-Laws instill in the Board of Directors of the Council ‘the exclusive right to initiate any form of legal proceedings ... related to use, operation or maintenance of the [ ] Common Elements.’ ” (Ellipsis in