Milton Co. v. Council of Unit Owners of Bentley Place Condominium

MURPHY, Chief Judge. In the Circuit Court for Montgomery County, the Council of Unit Owners of Bentley Place Condominium, appellee, filed a complaint against the Milton Company and Tuckerman Lane Development Company, Inc., appellants. Appellee asserted that appellants were responsible for certain defects that existed in the common elements and individual units of the Bentley ¹⁰⁵ Place Condominium, and owed damages as a result of their (1) negligence, (2) breach of implied warranty, (3) breach of contract, (4) breach of fiduciary duty, (5) breach of express warranties, (6) negligent misrepresentation, (7) violation of the Maryland Consumer Protection Act, and (8) civil conspiracy. A jury (the Honorable Michael D. Mason, presiding) returned verdicts in favor of appellee and against both appellants on all but the civil conspiracy and fiduciary duty counts. 1 The jury resolved the negligent misrepresentation count in favor of appellee and against appellant Milton.

This appeal followed in which appellants present the following questions for our review: I. Did the trial court erroneously instruct the jury that it may award damages for alleged common element defects for breach of implied warranty without a finding that the Council complied with the notice and limitations provisions of Title 11?

II

Did the trial court err in holding that the Council has standing to assert common law causes of action on behalf of two or more unit owners for alleged common element defects?

III

Did the trial court err in holding that individual unit owners have common law causes of action with respect to alleged common element defects?

IV

Is the jury verdict for damages to each and every unit at the Project proper in the absence of evidence supporting each unit owner claim? V. Were the appellants prejudiced by the trial court’s admission into evidence of unit owner surveys containing double and triple hearsay and upon which the Council’s primary expert relied in rendering his opinion concerning defects in the Project? ¹⁰⁶ VI. Was the trial court’s award of attorneys’ fees and litigation expenses supported by the record? For the reasons that follow, we shall affirm the judgments of the circuit court. 2 FACTUAL BACKGROUND Appellee is an unincorporated association of 240 families who purchased homes at the Bentley Place Condominium, a residential garden condominium project located in Montgomery County, Maryland.

Tuckerman was the “developer” of the condominium and Milton was the general contractor responsible for hiring subcontractors to perform construction work. Prospective purchasers of the condominiums were provided with a standardized “Sales Agreement” and contract addenda. Paragraph 1 of the Sales Agreement provides that the individual homeowner has contracted to purchase an identified dwelling unit “together with an undivided interest in the common elements.” In Paragraph 6 of the Agreement, “[sjeller agrees to erect or construct the Unit ... substantially according to plans and specifications.” In September of 1989, appellee notified appellants that there were numerous defective conditions at the condominium, and requested that appellants make repairs. Thereafter, the parties discussed the resolution of appellee’s complaints.

These discussions resulted in the execution of a January 23, 1991 Agreement to Extend Statute of Limitations (the “Tolling Agreement”) through April 1, 1991. While the parties attempted to negotiate a resolution, this agreement was later extended through October 31, 1991. Having failed to negotiate a satisfactory resolution, appellee filed its complaint on October 30,1991. ¹⁰⁷ 1 Appellants argue that Judge Mason should not have allowed appellee to assert an implied warranty claim for alleged common element defects under Md.Code Ann.(1974, 1996 Repl.Vol.), § 10-203 of the Real Property Article (“RP”). According to appellants, appellee could only assert an implied warranty claim under RP § 11-131(c).

If appellants are correct, Judge Mason should not have instructed the jury that it may award breach of implied warranty damages for alleged common element defects without first finding that appellee complied with the notice and limitations provisions of RP § 11-131(d). Title 11 of the Maryland Real Property Article, known as the Maryland Condominium Act, applies to all condominiums established in Maryland after July 1, 1982. RP § 11-107(a) provides that each unit owner shall own an undivided fee simple interest in the common elements of the condominium. Recognizing the unique ownership interest created in condominium developments, the General Assembly created an implied warranty with respect to common elements.

That warranty specifically includes the protections referenced in § 11-131(c), as well as those set forth in RP § 10-203. The warranty extends for a period of three years from the first transfer of title to a unit owner (or from the time that the unit has been completed). RP § 11-131(c)(3). RP § 11-131(c)(4) requires that notice of a defect be given within the warranty period, and that suit for enforcement of the warranty must be brought within one year of the warranty period.

The implied warranty in § 11-131(c) runs from a “developer” (defined in § 11-101(g)), to the council of unit owners. RP § 11-131(c)(4) of the Act provides that [a] suit for enforcement of the warranty on general common elements shall be brought only by the council of unit owners. A suit for enforcement of the warranty on limited common elements may be brought by the council of unit owners or any unit owner to whose use it is reserved. ¹⁰⁸ Appellants argue that appellee has no viable claim for implied warranties other than that specifically provided for in Title 11 of the Real Property Article. Judge Mason rejected that argument, concluding instead that the implied warranty found in RP § 10-203 also applies to condominium owners.

Unlike the implied warranty found in Title 11, this warranty deals with the sale of property in general, runs from a “vendor” to the owner, extends for a period of two years from the date of conveyance, and does not require that notice of defect be given within the warranty period. Appellants argue that, due to the unique ownership interest in condominium property, Title 11 was not enacted to create additional implied warranties for common elements, but rather to create exclusive warranties for condominiums. According to appellant, because Title 11 reserves such claims exclusively to the council, condominium owners do not have individual implied warranties against “vendors” or anyone else for common element defects. In Starfish Condominium Ass’n v. Yorkridge Service Corp., 295 Md. 693, 699-701 , 458 A.2d 805 (1983), decided before the enactment of Title 11, the Court of Appeals held that Title 10 warranties do apply to newly constructed condominiums.

In Antigua Condominium v. Melba Investors, 65 Md.App. 726 , 501 A.2d 1359 (1986), rev’d 307 Md. 700 , 517 A.2d 75 (1986), decided after the enactment of Title 11, this Court held that condominium warranties were governed by the shorter one year limitation period of RP § 11-131 (d), and not the two year limitations prescribed in RP § 10-204(d). We reasoned as follows: When § 11-131(a) made the express and implied warranties of §§ 10-202 and 10-203 applicable to condominium sales, it specifically provided a one year period of limitations for them in § 11 — 131(d). The provisions of § 10-204, containing a two year limitation period, were not made applicable to condominiums by § 11-131. Id. at 745, 501 A.2d 1359 .

The Court of Appeals, however, concluded that our reasoning was based on a “premise [that] ¹⁰⁹ was faulty”, namely: “that Title 10 warranties had not applied to condominiums [prior to the effective date of § 11-131] and that the enactment of RP § 11-131(a) first made § 10-202 and § 10-203 applicable to condominium developers.” Antigua Condominium, 307 Md. at 725 , 517 A.2d 75 . Judge Mason came to the following conclusions regarding the interplay between Title 10 and Title 11: Really what Title 11 sought to do was to make sure — in some of the cited cases, it looked to me like occasionally there were persons who sort of got out on the issue of liabilities because they really weren’t vendors and so Title 11 really sought to hold those kinds of persons, the developers, and say you can’t avoid liability by not falling within the definition of a vendor, we are going to make you liable as a matter of law so you vendors will henceforth also be liable, but vendors were and still are liable. Judge Mason therefore allowed the jury to deliberate on two different standards for statutory implied warranties; one under Title 10, which does not require proof of notice of defects, and one under Title 11, which does require proof of notice of defects. He delivered the following instructions: Now, before describing for you the implied warranties which are imposed by statute let me define two terms for you because different persons and specifically vendors and developers who are considered persons within the law by law give different implied warranties.

So let me first define those two terms for you, vendor and developer. A vendor means any person engaged in the business of erecting or otherwise creating an improvement on realty. A developer means anyone who subjects his property to a condominium regime. Now, here I would tell you that as a matter of law that the only developer could be the Tucker-man Lane Development Company because they are the ones who actually signed off on the condominium regime which was filed.

In other words, Milton is not a developer, okay. However, as you can tell from the definition of a vendor a ¹¹⁰ developer may under the facts of a particular case also be a vendor. In other words the term vendor is broad enough under certain facts to include a person who is also a developer, okay. Now, with respect to the implied warranties.

First there are implied warranties found in what we refer to as Title 10 of the real property statute or real property article. Under Title 10 of the Maryland real property article there is provided an implied warranty that runs from the vendor to the unit , owner that at the time of the delivery of the deed to a completed improvement or at the time of a completion of an improvement not completed where the deed is delivered the condominium unit is: One, free from faulty materials; Two, constructed according to sound engineering standards; Three, constructed in a workmanlike manner; and Four, fit for habitation. The warranty period is two years from the date of conveyance of a unit. There is no requirement that the vendor be given notice of the defects under Title 10 within the warranty period.

Now, I told you about Title 10. Under Title 11 of the Maryland real property article there is provided an additional implied warranty. This is on the common elements of a condominium and this runs from the developer to the council of unit owners. Common elements means all of the condominium except the individual units.

The implied warranty applies to the following: the roof, the foundation, external and supporting walls, mechanical, electrical, plumbing systems and other structural elements. The warranty is that the developer is responsible for correcting any defect in materials or workmanship and that the specified common elements are within acceptable industry standards in effect when the building was constructed. ¹¹¹ The warranty period is three years from the date of the first conveyance of a unit at the condominium. The warranty of any common elements not completed at that time shall commence with the completion of that element or with its availability for use by all unit owners whichever occurs later. Now, under Title 11 a developer is not responsible for a breach of the aforegoing implied warranty which is found in Title 11 unless he has given notice of such breach within the applicable warranty period.

To summarize, then, there are two types of implied warranties that apply to the facts of this case and the sale of the condominiums herein. The first is from the vendor to the unit owners under Title 10 and the second is from the developers to the council of unit owners under Title 11 which incorporates specifically in the body of that title the warranties as I have just elaborated on them, specifically under Title 11. Appellants argue that because these instructions were unclear and confusing, the jury’s verdict in favor of the appellee on the implied warranty count does not permit any way of determining whether the verdict was based on a finding that the appellants received notice of the defects or whether the jury simply based its verdict on the relaxed standard which did not require notice as a prerequisite to liability. In support of their argument, appellants rely on two cases that are clearly distinguishable.

It is true that in Home Beneficial Life Ins. Co. v. Partain, 205 Md. 60, 71 , 106 A.2d 79 (1954), the Court of Appeals held that a new trial is required when instructions failed to distinguish a supportable claim from other claims that could not be supported by the evidence. It is also true that in Dechello v. Johnson Enterprises, 74 Md.App. 228, 240-43 , 536 A.2d 1203 (1988), this Court held that confusing jury instructions required a remand for a new trial. As we see it, however, Judge Mason’s instructions regarding Title 10 and Title 11 were clear, concise, and correct.

Appellants’ true concern with the instructions is that ¹¹² appellee was permitted to seek damages under the implied warranty provided for in Title 10. As Judge Mason was correct in his conclusion that appellee could do so, no error exists in the instructions that were delivered. II Appellants argue that appellee should not have been allowed to assert common law claims with respect to the common elements. According to appellants, because RP § ll-131(c) is the exclusive source' of standing to sue for common element related matters, the claims for common element damages should have been limited to a warranty claim under that statute.

We disagree. Appellee may sue in two capacities to enforce property interests it does not own: (1) representative actions under RP § 11-109(d)(4); and (2) direct (non-representational) actions under RP § 11-109(d)(19). (1) Representative actions under RP § 11-109(d)(4). RP § 11-108.1 assigns to a council the responsibility for maintaining and repairing the common elements on the unit owner’s behalf.

As an entity, a council typically owns no property interest. For this reason the General Assembly enacted RP § 11-109(d)(4), which provides the council of unit owners with the power [t]o sue and be sued, complain and defend, or intervene in litigation or administrative proceedings in its own name on behalf of itself or two or more unit owners on matters affecting the condominium. Thus, a council has a statutory grant of representational standing to pursue remedies belonging to the unit owners. In Starfish Condominium Ass’n , the Court of Appeals explained that RP § 11-109(d)(4) merely “created a new procedure” whereby the council was granted standing to sue on behalf of “two or more unit owners” for purposes of asserting claims that any single unit owner might have brought as an individual. 295 Md. at 708 , 458 A.2d 805 .

Appellants contend, however, that the statutory grant of representational standing under RP § 11-109(d)(4) is limit ¹¹³ ed to suits for statutory implied warranties. We disagree. Nothing in RP § 11-109(d)(4) or in Starfish supports such a limitation. Under RP § 11-107(a), each unit owner who purchases a condominium property obtains an undivided percentage ownership interest in the common elements.

Thus, each unit owner is able to assert individual ownership in the entire common elements. Since each has an ownership interest in the entire common elements, any single unit owner or group of owners may bring suit and seek the entire damage to the common elements. Under the Court of Appeals’ holding in Starfish, a council suing on behalf of at least two unit owners may seek and recover “the entire damage to the common elements” even though other unit owners who were legally barred from recovery would benefit. Id. at 707-08, 458 A.2d 805 .

In Starfish, the Court rejected the argument that individual unit owners’ entitlement to damages should be limited by their percentage ownership, and cited with approval the case of Stony Ridge Hill Condominium Owners Ass’n v. Auerbach, 64 Ohio App.2d 40 , 410 N.E.2d 782 (1979), in which the court rejected the developer’s contention that, because only four of the twenty four unit owners were told that the roof of the building was a “twenty year roof,” the council of unit owners could not assert a claim on behalf of the other twenty owners: “[Ejach person who purchased a condominium unit ... has a right to have the whole damage to the entire common area of the building remedied and completely satisfied.” Otherwise, “[pjayment by defendants of only one-sixth of the roof damage, representing the share of four unit owners, and the consequent repair of only one-sixth of the roof would still leave the roof in the same leaky condition, and would be the equivalent of giving plaintiff no legal remedy or relief whatever.” Starfish, supra at 707 , 458 A.2d 805 (quoting Stony Ridge, supra at 43-44 , 410 N.E.2d 782 ). ¹¹⁴ (2) Direct(non-representational) Actions Under RP § 11-109(d)(19). RP § 11 — 131(c) creates an implied warranty applicable to common elements that runs directly to a council. This statute does not, however, provide a council with standing to sue in a non-representational capacity for damage to