PILOT POINT OWNERS ASS'N v. BONK

Full title: Pilot Point Owners Ass'n, et al. v. Bonk

Court: Court of Chancery of Delaware

Date published: Oct 7, 2010

Civil Action No. 2717-CC (Del. Ch. Oct. 7, 2010)

Opinion

Civil Action No. 2717-CC.

Submitted: September 8, 2010.

Decided: October 7, 2010.

John A. Sergovic, Jr., Sergovic Ellis, P.A., Georgetown, DE.

Eric C. Howard, Wilson, Halbrook Bayard, Georgetown, DE.

WILLIAM B. CHANDLER III, Vice Chancellor

Dear Counsel:

This neighborly dispute arises from the replacement of a wooden walkway that leads to the front of a condominium unit owned by defendant, Harry Bonk. During 2005 and 2006, defendant replaced the wooden walkway with stone pavers. Plaintiffs, Pilot Point Owners Association and the Condominium Council of Pilot Point Owners Association ("Pilot Point"), filed this lawsuit on February 6, 2007, seeking an order to remove, at defendant's expense, the stone walkway and a return to a wooden walkway. Later, Pilot Point moved for summary judgment, and on February 13, 2008, I granted partial summary judgment to Pilot Point, holding that defendant was precluded from asserting equitable estoppel as to construction activities that occurred after the receipt of Pilot Point's May 24, 2005 letter.¹ That ruling left unanswered one question: whether or not defendant's pre-May 24, 2005 conduct was reasonable and would allow assertion of estoppel to bar Pilot Point's claim. At a one day trial, held on June 28, 2010, evidence was presented on that single issue. For the reasons discussed below, I find in favor of Pilot Point and direct counsel to submit an order requiring defendant to remove the stone walkway and replace it with a wooden walkway in accordance with the Pilot Point Regulations.

1 See Pilot Point Owners Ass'n v. Bonk, 2008 WL 401127 (Del. Ch. Feb. 13, 2008).

I. BACKGROUND

The following facts are not in dispute. Pilot Point Condominium is subject to the Delaware Unit Property Act at Title 25, Chapter 22 of the Delaware Code by its adoption of the Declaration Submitting Real Property to the Provisions of the Unit Property Act (the "Original Declaration"), the amendment to the Original Declaration (the "Amended Declaration" and, together with the "Original Declaration," the "Declarations"), the Original Code of Regulations of Pilot Point (the "Original Regulations"), and the various amendments to the Original Regulations (the "Amended Regulations" and, together with the Original Regulations, the "Regulations"). Defendant owns Unit 34 of Pilot Point, which is governed by the documents listed above, and leases it to his tenants, Shauna Thompson and Wayne Hawkins ("Hawkins"). Pursuant to the Original Declaration, "[t]he lead walks leading into each of the units in each of the buildings" were specifically included in paragraph 4, which describes the "common elements."² Additionally, under the Pilot Point Condominium Maintenance Policy (the "Maintenance Policy"), which was incorporated as part of the Amended Regulations, each unit owner has responsibility for the maintenance and repair of certain items, including the lead walks.³ The lead walks, therefore, are part of the common elements of Pilot Point.

2 See Ex. 2 to Pls.' Compl. (Original Declaration) at ¶ 4. The Act defines common elements as the "yards, parking areas and driveways" and "[s]uch facilities as are designated in the declaration as common elements." 25 Del. C. § 2202(3). The Declarations are the governing instruments in disputes concerning condominium common elements. Murray v. Wang, 1995 WL 130727, at *2 (Del. Ch. Mar. 16, 1995).

3 See Ex. 9 to Pls.' Compl. (Maintenance Policy) at ¶ III.

Based on the evidence presented at trial, I now am able to address whether defendant's conduct before May 24, 2005, was reasonable in light of Pilot Point's previous actions regarding the lead walkways.

II. ANALYSIS

A. Legal Standards

At the summary judgment stage, the burden of proof was upon plaintiffs to show the absence of a genuine issue of material fact.⁴ Now that the case has proceeded to trial, the burden of proof to establish an equitable estoppel defense by "clear and convincing evidence" — to defend the stone construction which occurred during the period before May 24, 2005 — shifts to the defendant.⁵ As the party asserting equitable estoppel, defendant bears the burden of demonstrating by clear and convincing evidence that: (1) defendant lacked knowledge or the means of obtaining knowledge of the truth of the facts in question; (2) defendant reasonably relied upon the conduct of the party against whom the estoppel is claimed (here, Pilot Point); and (3) defendant suffered a prejudicial change of position as a result of his reliance upon that conduct.⁶ Such reliance must be both reasonable and justified under the circumstances.⁷ Thus, the standards for establishing the elements of equitable estoppel are stringent; the doctrine is applied cautiously and only to prevent manifest injustice.⁸ B. Equitable Estoppel: Pre-May 24, 2005 Conduct The significance of the May 24, 2005 date is that, on this date, the property manager of Pilot Point (at the direction of the Council) sent a letter to defendant directing defendant to cease all work on his unit.⁹ At this point, defendant knew that the in-progress modification was prohibited. Therefore, as of his receipt of the May 24, 2005 letter, defendant's reliance on the alleged past conduct of Pilot Point in order to make further modifications is unreasonable, and defendant failed to satisfy at least one of the elements necessary to assert equitable estoppel as to his post-May 24, 2005 conduct. After a one-day trial, and based on the evidence that was presented before me, I am now able to determine and conclude, as a matter of fact and law, that defendant's pre-May 24, 2005 conduct was also unreasonable.

4 See generally Ct. Ch. R. 56(c) (The summary judgment is appropriate only when "there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law.").

5 See, e.g., Nevins v. Bryan, 885 A.2d 233, 249 (Del. Ch. 2005) ("Regardless of the form of the action, the burden of proof of estoppel rests upon the party asserting it. Furthermore, equitable estoppel must be proven by clear and convincing evidence; `[a]n estoppel may not rest upon an inference that is merely one of several possible inferences.'" (quoting Employers' Liab. Assur. Corp. v. Madric, 183 A.2d 182, 188 (Del. 1962))).

6 Id.; see also Employers' Liab. Assurance Corp. v. Madric, 183 A.2d 182, 184 (Del. 1962).

7 Progressive Intern. Corp. v. E.I. Du Pont de Nemours Co., No. 19209, 2002 WL 1558382, at *6 n. 26 (Del. Ch. July 9, 2002) (citing Two South Corp. v. City of Wilmington, No. 9907, 1989 WL 76291, at *7 (Del. Ch. July 11, 1989 ( revised July 18, 1989))).

8 Id.; 28 AM. JUR. Estoppel and Waiver § 129 (2001); Singewald v. Girden, 127 A.2d 607, 617 (Del. Ch. 1956).

9 Pls.' Ex. 10 to Compl. (May 24, 2005 letter to defendant).

To save any portion of the lead walkway, defendant must show by clear and convincing evidence what portion of the walkway was in fact constructed before May 24, 2005. Defendant failed to show what portion of the walkway was constructed before that point in time for several reasons. First, defendant admitted in his answer that replacement of his lead walkway continued throughout 2005 and into 2006.¹⁰ Defendant thus made a judicial admission that the construction continued into 2006.¹¹ By this admission, defendant concedes that the construction was not completed before May 24, 2005. This admission undermines the credibility of defendant's witness, Hawkins, who testified that the walkway construction was completed before May 24, 2005.

10 Compl. at ¶ 13; see also Def.'s Answer at ¶ 13.

11 See Ervin v. Vesnaver, 2000 WL 1211201, at *2 (Del. Super. June 20, 2000) (the question was whether admitting negligence generally in the answer to the complaint constitutes a judicial admission, and Superior Court noted that "Wigmore states that pleadings in a cause are, for the purposes of use in that suit, not mere ordinary admissions but judicial admissions.").

Second, Hawkins' own testimony and related documents were not credible. On July 29, 2005, Hawkins wrote a letter to the Association, stating that "we would like to finish the work as we have been without a walkway since May 2005."¹² The testimony of Mrs. Janice Ridings also confirms that construction was "still being worked on and expanded" in October of 2005.¹³ In addition, trial testimony by other witnesses, as well as documentary evidence from the property manager of Pilot Point, demonstrate that the construction in May 2005 was either in progress or in its earliest stages. Specifically, Hawkins produced two documents, a letter from a bookkeeper for T.A. Chance dated May 20, 2004 (the "Letter"), ¹⁴ and a billing invoice from T.A. Chance dated May 20, 2005 (the "Invoice"), ¹⁵ to prove that construction was completed before May 24, 2005. Both the Letter and the Invoice are not credible. The bookkeeper, who had a ministerial role, had no direct knowledge of the construction completion date; she was under the supervision of Hawkins. Moreover, the Letter and the Invoice lack supporting annotations about the date of the receipt, which conflicts with the routine business practice of Hawkins. I also note that the two documents (Letter and Invoice) are in direct conflict with Hawkins' statement in his letter to the Association of July 29, 2005 that he had been without a walkway since May 2005.¹⁶ This contradiction further impeaches Hawkins' testimony. Similarly, the two documents also conflict with the judicial admission made by defendant, discussed above, that construction continued into 2006. Thus, there is no credible evidence that the walkway construction was completed before May 24, 2005. On the contrary, the most persuasive evidence demonstrates that the walkway was not completed until 2006.

12 See Pls.' Trial Ex. 62.

13 See Pls.' Trial Ex. 63.

14 See Pls.' Trial Ex. 93. at p. 3

15 See Pls.' Trial Ex. 92.

16 See Pls.' Trial Ex. 62.

Lastly, Hawkins' statements alone constitute the only witness testimony in support of defendant's argument that the walkway was completed before May 24, 2005. I find Hawkins' testimony unpersuasive on this issue. First, Hawkins is an interested witness because he holds a leasehold interest, which is an interest in land.¹⁷ The value of Hawkins' interest and his enjoyment of that interest are related to the outcome of this litigation. Second, Hawkins worked for the construction company (T.A. Chance) that built the walkway. Third, as the construction supervisor, Hawkins had the ability and power to direct the bookkeeper to date the documents as he wanted them. This Court has held that the testimony of a single witness does not meet the standard of clear and convincing evidence especially when that witness is interested in the outcome of the litigation.¹⁸ Thus, Hawkins' testimony is not supported by reliable documentary evidence and falls short of the required evidentiary standard. It is defendant's burden to prove to the Court by clear and convincing evidence that the construction completion date was before May 24, 2005. Defendant failed to do so.

17 See Hendry v. Hendry, 2006 WL 4804019, at *7 (Del. Ch. May 30, 2006) ("The word "interest" as it applies to land has been defined to include leasehold interests and rights"); see also Concord Mall, LLC v. Best Buy Stores, L.P., 2004 WL 1588248, at *5 (Del. Super. 2004) (holding that a leasehold interest is an "intangible interest owned by Defendants, as the tenant, as transferred from Plaintiff, as landlord, to the tenant.").

18 See Brown v. Wiltbank, 2010 WL 892069, at *3 (Del. Ch. Feb. 10, 2010) (holding that "[a]s an interested witness, Claudia's testimony in this regard was self-serving and does not constitute clear and convincing evidence of an oral contract"); In re Partition of Lands and Tenements of Skrzec, 2010 WL 2696257, at *8 (Del. Ch. June 30, 2010) (noting that "the only evidence of this purported loan is her own self-serving testimony.").

I now turn to defendant's reliance argument in which defendant asserts that he reasonably relied upon the provisions of Regulations which, in his view, allow changes to the walkway and that defendant's reliance on past, purportedly unauthorized modifications and alterations undertaken in other units of Pilot Point, is reasonable. For the reasons discussed below, I find that defendant failed to show that his departure from the procedures set forth in the condominium documents concerning common element modifications was reasonable.

First, defendant argues that the Regulations, which authorize changes to the interior of a condominium unit, apply to lead walks. Defendant specifically argues that unit owners, including defendant, have relied on Article VI, Section 3 to make both internal and external alterations to common elements.¹⁹ I find that the modification by defendant to the lead walk — which exceeded the scope of "maintenance and repair"²⁰ — was improper because the modification was not authorized and, moreover, could not be authorized under Article VI, Section 3 because the lead walks, as common elements, cannot be modified.²¹ Thus, defendant's reliance on the Regulations is unreasonable. Furthermore, even if the reliance was reasonable, defendant was put on notice by the letter sent by L N, property manager, on April 28, 2005, that Pilot Point had no knowledge of his construction activities and that defendant should first get approval from Pilot Point.²² Another letter to defendant from L N followed on May 20, 2005, which clarified that Pilot Point does not have any record of defendant's request, and that defendant needs to submit a request for the walkway and the landscaping for review and approval.²³ Moreover, the May 20, 2005 letter referenced Hawkins' telephone call of May 3, 2005, in which Hawkins acknowledged receipt of the notice sent to defendant. In this letter, it also references Hawkins' assertion that he sent a prior submission of a plan for approval, but Hawkins was not able to confirm the exact date of the letter or what address it was sent to. In light of the foregoing, defendant's argument that he reasonably relied upon the provisions of the Regulations, in his view, that allow for approval of construction based upon lack of a response to a submitted plan, is unreasonable.

19 Article VI, Section 3 provides that the Council has sixty days within which to respond to a unit owner's written notice; if sixty days elapses without a response, this means that there is no objection to the proposed modification or alteration. See Ex. 4 to Pls.' Compl. (Original Regulations) at Article VI, Section 3; Ex. 5 to Pls.' Compl. (Amended Regulations).

20 In Article VI, Section 1, the Regulations obligate owners to pay monthly assessments for "those expenses for maintenance, repair and replacement of the common elements." This supports the conclusion that defendant's modification — replacement of the wood composite with stone — goes beyond the "maintenance and repair" contemplated by the maintenance policy.

21 Article VI, Section 3 addresses "structural modifications or alterations of the unit or installations located therein (emphasis added)" and is therefore inapplicable to the lead walk at issue here. See Ex. 7 to Pls.' Compl. (Amended Regulations).

22 See Pls.' Trial Ex. 61.

23 See Pls.' Trial Ex. 91.

Second, defendant must show that Pilot Point waived its right to seek enforcement against modifications to the lead walkways in the past.²⁴ Defendant contends that because the plaintiffs failed to insist upon strict adherence to the preservation of the common elements in other instances, the defendant reasonably relied to his detriment on such past acquiescence. I agree with plaintiffs that simply because Pilot Point may not have objected to rooms and decks being constructed in the common elements in the past, or even that it approved some of those modifications through a process it adopted, does not mean that Pilot Point waived its right to object to walkway modifications, which is a different common element. Defendant argues that because Pilot Point may have acquiesced to other (non-walkway) related common element modifications in the past, following a practice it had adopted in the past that its process for all common element modifications has been waived. Defendant's theory is undermined by the fact that defendant was aware of and used the approval process.²⁵ In addition, I note that Delaware law recognizes that a litigant must show a waiver of the particular restriction at issue to prevail on a theory of acquiescence, not waiver of other or different features or common elements.²⁶ Thus, defendant failed to show Pilot Point waived its right to prevent modifications to the common element as it applies to the lead-walkways. In sum, I find that defendant's departure from the procedures concerning common element modifications to the lead walkway was unreasonable.

24 See Lawhon v. Winding Ridge Homeowners Ass'n, Inc., 2008 WL 5459246, at *9 (Del. Ch. Dec. 31, 2008) (observing that "[t]he party claiming waiver has the burden of proof to establish acquiescence").

25 See Pls.' Trial Exs. 62, 64.

26 See Brookside Cmty., Inc. v. Williams, 290 A.2d 678, 682 (Del. Ch. 1972) (noting that "abandonment or acquiescence in the violation of certain restrictions does not amount to abandonment of another separate and distinct restriction material and beneficial to the owners of lots affected thereby"); Andrews v. McCafferty, 275 A.2d 571 (Del. Ch. 1971) (noting that "[a]ssuming waiver or abandonment of the restrictions as to setback, fences and buildings, this, without more, does not show intent to abandon the residential nature of the community nor to waive Restriction #9 relating to pigs, cattle, poultry, and so on.").

C. Attorneys' Fees and Other Fees

Lastly, plaintiffs make a number of additional requests for relief. Plaintiffs request attorneys' fees, which are made available pursuant to Article X, Compliance Section 2 of the Regulations.²⁷ I direct plaintiffs' counsel to submit an appropriate affidavit of the fees incurred and an implementing order. Plaintiffs have further requested that the Court award to them both the construction fees they expect to incur in removing the stone walkway and the construction of a wooden walkway. I will not award such fees unless Pilot Point advises me that the defendant would rather have Pilot Point complete the replacement work rather than doing it himself.

27 See Ex. 7 to Pls.' Compl. (Amended Regulations)("A unit owner shall be obligated to pay any and all legal and other fees, and to reimburse the Association for all other expenses, incurred in effecting his compliance with this CODE, the DECLARATION, or any obligation legally imposed upon him by the Association. . . .").

III. CONCLUSION

Accordingly, for the foregoing reasons, I enter judgment in favor of Pilot Point and ask that plaintiffs' counsel and defendant's counsel agree on a form of order.