Fairway Estates v. Unknown Heirs And Devisees Of Robert D. Young, Et Al,

The Fairway Estates Association of Apartment Owners -- a

condominium association comprised entirely of persons owning their apartment

units by way of leasehold -- appeals from the trial court's determination that its

statutory lien for unpaid assessments attaches only to a member's leasehold

interest in that unit. The Association asserts that, because both the relevant

statutory scheme and the condominium declaration stipulate that the Association

has a lien on a "unit" for unpaid assessments, this lien must be construed to also

attach to the lessor's underlying fee simple interest.

However, the Horizontal Property Regimes Act, chapter 64.32 RCW

(HPRA), expressly permits an apartment unit owner to "own" his or her

apartment by way of leasehold. Here, the condominium declaration designated

apartment units for leasehold ownership, created an association of apartment

owners comprised solely of leasehold owners, and expressly excluded the

lessor's underlying fee ownership interest in the apartment units from its

definition of an "apartment owner." In such circumstances, because it is clear

that the declaration intends that the "unit" designated for separate ownership is a

leasehold unit, the trial court did not err by determining that the Association's

lien attaches only to this leasehold interest. Accordingly, we affirm.

I

Sand Point Country Club, Inc. is the fee owner of real property located in

Seattle, Washington. In 1973, Sand Point leased this property to Fairway

Estates, a limited partnership, for the purpose of developing the property through

the construction of apartment buildings and other improvements. Pursuant to

the lease, Sand Point was to be paid rent periodically with Fairway Estates

accepting responsibility for all costs and expenses such as taxes, insurance,

repairs, and maintenance. This lease was thereafter amended to encompass an

88-year term, expiring in March 2061.

In November 1974, following the construction of 84 apartment units

(located within three buildings designated as Buildings A, B, and C), Sand Point

and Fairway Estates determined that these apartments would best be marketed

as individual condominium units. Accordingly, Sand Point and Fairway Estates,

acting in concert as "Declarant," entered into and caused to be recorded a

condominium declaration, submitting "Buildings A, B & C, together with all

appurtenances thereto, to the provisions of the Horizontal Property Regimes

Act." The declaration states:

Declarant desires to establish by this Declaration a plan [1] for the ownership of units of the area and space contained in Buildings A, B & C, as provided herein, [2] for the co-ownership by the owners of such units of an individual interest in the property which is subject to this Declaration . . . and [3] to provide for the rights and obligations of the owners with respect to the property.

The declaration further provides that "[a]ll of the owners of apartment units

submitted to this Declaration shall constitute the Association of Apartment

Owners as provided by [the HPRA]." Although the term "owner" is not defined in

the declaration, the declaration notes that "Declarant desires and intends to

assign leasehold interests to apartment units in Buildings A, B & C."

An amendment to the original lease was recorded on the same day. The

modified lease converted the subject of the lease from traditional real property to

condominium estates, converted Fairway Estates' interest from a lessee's

interest in real property to a lessee's interest in condominium units, and

contemplated that Fairway Estates would incrementally transfer its leasehold

interest in the condominium by way of specific assignments of the apartment

units to individual purchasers. The lease was "subordinated and made inferior

to all of the condominium estates" established by the declaration.

Following the assignment of Fairway Estates' leasehold interests in

apartment units to individual purchasers, a condominium association was

created under the terms of the declaration. The "Fairway Estates Association of

Apartment Owners" was duly organized as a non-profit corporation pursuant to

the HPRA for the operation of the condominium estates. Pursuant to the

declaration, the Association was (and is) comprised of the assignees of Fairway

Estates' leasehold interest in the condominium. Sand Point, which is not such

an assignee, is not a member of the Association.

In 1996, the Association's board of directors submitted an amended

condominium declaration to its members for approval. As specified in the

original declaration, the assignees of Fairway Estates' leasehold interest (the

apartment owners) were given notice of the proposed amendment. The

necessary percentage of Association members approved the amended

declaration and the president and secretary of the Association thereafter

certified that the amended declaration "restates, supersedes, replaces and

amends, in its entirety, the Original Declaration previously recorded for the Condominium."1

The amended declaration varies from the original declaration in several

respects. Of significance here, it contains a substantial "definitions" section,

assigning specific meaning to terms left undefined in the original declaration.

"Apartment Unit" is defined in the amended declaration to mean "an 'Apartment'

or 'Unit' . . . which is a physical portion of the Condominium designated for

separate ownership." "Owner" or "Unit Owner" is defined to mean "the person or

persons owning a leasehold interest in a Unit." The amended declaration further

notes that "[w]henever the word 'Owner' or 'Owners' is used, it shall mean the

assignee(s) of [Fairway Estates'] leasehold interest" and that the words "'sale',

'sold', 'convey', 'rent', 'lease', or any other words . . . giving rise to the inference

of a transfer of an interest in [a] Unit(s) or an estate(s) in the same shall mean

the assignment of lessee's interest under the Underlying Lease." Finally, the

declaration reiterates that only "Owners" -- defined as the assignees of Fairway

Estates' leasehold interest -- enjoy membership in the Association.

In March 2011, the Association brought an action to foreclose a lien for unpaid assessments.2 The owners of the unit were Robert and ZelIa Young.

Both were deceased at the time that the action was brought and no assessments

had been paid since October 1, 2006. Pursuant to the condominium declaration,

the assessments were the "separate or joint and several personal debts and

obligations" of the Youngs. In addition, the declaration stipulates that the "[t]he

amount of any Assessment . . . assessed to the Owner of any Apartment Unit or

to any Apartment Unit . . . shall be a lien upon such Apartment Unit." In its

complaint for foreclosure, the Association contended that this lien attached, not

merely to the Youngs' leasehold interest in the condominium, but also to Sand

Point's underlying fee simple ownership interest in the unit.

Both Sand Point and the Association moved for summary judgment on

this issue. The trial court denied the Association's motion and granted Sand

Point's motion, ruling that "Sand Point Country Club's fee ownership interest in

[the] individual condominium units . . . is senior to the lien of [the Association], and is not subject to elimination in any lien foreclosure by the Association."3

The Association appeals.

II

The Association first asserts that the trial court erred by determining that

the Association's lien for assessments attached only to the Youngs' leasehold

interest in the apartment unit. We disagree.

The trial court's summary judgment order involved the interpretation of a

statute and a condominium declaration. We review a summary judgment order

de novo, engaging in the same inquiry as the trial court. Lake v. Woodcreek

Homeowners Ass'n, 169 Wn.2d 516, 526, 243 P.3d 1283 (2010). Summary

judgment is proper if, after viewing all facts and reasonable inferences in the

light most favorable to the nonmoving party, there are no genuine issues as to

any material fact and the moving party is entitled to judgment as a matter of law.

CR 56(c). Statutory interpretation is a question of law that we review de novo.

Quality Food Ctrs. v. Mary Jewell T, LLC, 134 Wn. App. 814, 817, 142 P.3d 206

(2006). "A condominium declaration is like a deed, the review of which is a

mixed question of law and fact." Lake, 169 Wn.2d at 526. The factual issue is

the declarant's intent, which we discern from the face of the declaration; the

declaration's legal consequences are questions of law, which we review de

novo. Lake,169 Wn.2d at 526.

Here, the Association relies upon the condominium declaration, the HPRA, and the Condominium Act, chapter 64.34 RCW,4 for the proposition that

Sand Point's fee simple interest in the Youngs' condominium unit is subject to

the Association's lien. RCW 64.34.364(1) stipulates that a condominium

association "has a lien on a unit for any unpaid assessments levied against a unit from the time the assessment is due."5 Mirroring this statutory language, the

condominium declaration stipulates that "[t]he amount of any Assessment . . .

assessed to the Owner of any Apartment Unit or to any Apartment Unit . . . shall

be a lien upon such Apartment Unit." "Apartment Unit" is defined in the

declaration to mean an "'Apartment' or 'Unit' . . . which is a physical portion of

the Condominium designated for separate ownership."

The Association asserts that the "unit" that is subject to the Association's

lien must be determined by reference to the ownership interest of the original

declarant. As the Association correctly points out, the ownership interests of

both Sand Point and Fairway Estates were submitted to the provisions of the

HPRA. Accordingly, because Sand Point held a fee simple interest in the land,

the Association asserts that the units created by the declaration are units owned in fee simple by Sand Point.6 The Association characterizes the assignees of

Fairway Estates' leasehold interest as mere "tenants" of Sand Point and not as

true "owners" of their units. Because the condominium declaration subjects

Sand Point's fee simple interest in the property to the HPRA, the Association

asserts that its lien must be construed to attach to that fee simple interest.7 The

Association contends that the plain meaning of the statute leaves room for no

other interpretation.8

The Association's interpretation, however, is not the only reasonable one.

A statute is ambiguous when it is susceptible to two or more reasonable

interpretations. State v. Gonzalez, 168 Wn.2d 256, 263, 226 P.3d 131 (2010).

Here, although RCW 64.34.364(1) stipulates that a condominium association

"has a lien on a unit," the HPRA expressly states that an apartment unit owner

may include "persons owning an apartment . . . by way of leasehold." RCW

64.32.010(2). Moreover, "[e]ach apartment owner shall be entitled to the

exclusive ownership . . . of his or her apartment." RCW 64.32.040. When read

in conjunction, these statutory provisions make clear that the HPRA

contemplates situations in which an apartment unit is defined to exclude the

underlying fee simple interest of a lessor -- after all, an apartment owner who

owns his or her unit by way of leasehold, as is permitted by RCW 64.32.010(2),

could not have "exclusive" ownership of that apartment unit if the term "unit" was

defined to necessarily include the lessor's underlying fee interest. Moreover,

under the Condominium Act, the term "unit" is defined to mean "a physical

portion of the condominium designated for separate ownership." RCW

64.34.020(41) (emphasis added). Accordingly, the "unit" that is subject to a

condominium association's lien may reasonably be interpreted to be whatever

"unit" is designated for separate ownership by the condominium declaration.

Here, the condominium declaration contemplates that all apartment units

within the condominium be owned by way of leasehold. Sand Point and Fairway

declaration. The priority of that lien is not pertinent in the context of this case.

Estates declared their mutual intent "to assign leasehold interests to apartment

units in Buildings A, B & C." The declaration expressly provides that "[w]henever

the word 'Owner' or 'Owners' is used, it shall mean the assignee(s) of [Fairway

Estates'] leasehold interest under the Underlying Lease in the Unit(s)." Sand

Point's fee simple ownership interest in the individual apartment units is

excluded from the declaration's definition of an "owner" of an individual

apartment unit.

Furthermore, as noted above, the declaration specifies that an "Apartment

Unit" means an "'Apartment' or 'Unit' . . . which is a physical portion of the

Condominium designated for separate ownership." In this case, only Fairway

Estates' leasehold interest in the condominium estate was designated for

separate ownership. The declaration specifies that it is the declarant's intent to

assign only the leasehold interest of Fairway Estates to individual purchasers;

Sand Point's fee simple interest is not so designated in the declaration.

Moreover, only the assignees of Fairway Estates' leasehold interest are

entitled to membership within the condominium association created by the

declaration. Sand Point possesses none of the rights and is subjected to none

of the obligations of such voting owners. Sand Point is not obliged to maintain

or to repair the premises, or to pay any assessments levied against a unit owner

by the Association.

Finally, the condominium declaration makes clear that an apartment

owner's leasehold interest in the unit constitutes "title to the Apartment Unit."

The declaration explains that an apartment owner's membership in the

Association cannot be "transferred, pledged, hypothecated, conveyed or

alienated except upon the transfer of title to the Apartment Unit and then only to

the transferee of title to the Apartment Unit." (Emphasis added.) Accordingly,

when the condominium scheme is viewed as a whole, it is clear that the intended

unit of ownership -- and thus the "unit" subject to the Association's lien -- is limited

to a leasehold interest in the apartment unit and does not include Sand Point's

underlying fee simple interest in the unit.

Nevertheless, the Association asserts that the assignees of the Fairway

Estates' leasehold interest are not the true "owners" of their units. The

Association contends that the declaration's use of the term "owner" to describe

such persons is a matter of semantics and that the declaration "could just as well

have labeled them 'Lease Assignee' or 'Tenant' or anything else" without legal

significance. However, the words of the declaration matter. Of importance here,

RCW 64.32.010(4) provides that the condominium association created by a

declaration must be comprised of "apartment owners." The declaration likewise

stipulates that only an apartment unit "owner" -- defined by the declaration as an

assignee of Fairway Estates' leasehold interest -- is qualified for membership in

the Association. Moreover, only an "association of apartment owners" may levy

assessments against an apartment owner's unit. RCW 64.32.200(1).


Here, it is undisputed that Sand Point is not a member of the Association.

Accordingly, if the Association were correct that Sand Point is the "owner" of the

Youngs' apartment unit, then it would also be true that the Association is

improperly constituted under both the HPRA and the declaration. If the

members of the Association are mere "tenants" or "lease assignees," then the

Association itself is nothing more than a tenants' association. However, the

Association's power to levy assessments against a unit arises by virtue of its

status as a condominium association. RCW 64.32.200(1). Thus, if the

Association is not such a condominium association, it had no power to levy the

assessments at issue in this case. Nor does the statute grant a "lien on a unit"

to a tenants' association -- such a lien may only be held by a properly constituted

"association of apartment owners." RCW 64.32.200(2).

Accordingly, because the condominium declaration stipulates that the

association of apartment owners is to be comprised of persons owning their

units by way of leasehold, the Association's lien for unpaid expenses must be

construed as attaching only to the leasehold interests of such persons.

Despite the intent of the condominium declaration, the Association

nevertheless asserts that "there is no provision Sand Point could have drafted"

that would limit the Association's lien for unpaid assessments from attaching

only to the leasehold interest of the Youngs. However, as explained above, the

language of the statute does not preclude such an arrangement. Moreover, the

Association's alternative interpretation -- whereby the "unit" subject to a statutory

lien is determined solely by reference to the declarant's ownership interest in the

land submitted to the HPRA -- leads to absurd and unjust results. Where a

statute is ambiguous, a court may "employ various rules for discerning the

legislature's intent for the statute as a whole." Summerhill Vill. Homeowners

Ass'n v. Roughley, 166 Wn. App. 625, 631, 270 P.3d 639 (2012). One of these

rules is that "[a] statute must be read to avoid injustice or an absurd result."

Newby v. Gerry, 38 Wn. App. 812, 814, 690 P.2d 603 (1984).

In this case, if -- despite the intent of the condominium declaration -- the

statute were interpreted to require that the Association's lien attach to Sand

Point's fee simple interest in the unit, Sand Point could be divested of its

property through no fault of its own. Only leasehold owners of the apartment

units are personally liable for the Association's assessments. No provision of

the declaration provides for notice to Sand Point regarding the imposition of

assessments, the default in the payment of such assessments, or the process for

the collection of unpaid assessments. Accordingly, under the Association's

proposed interpretation, Sand Point would have no opportunity to protect its

interests prior to a foreclosure action. Indeed, any failure by a leasehold owner

to pay the Association's assessments would subject Sand Point's fee ownership

interest to elimination.9

The legislature cannot have intended such a result. Significantly, the

Association's interests are fully protected by a lien attaching to the leasehold

owner's interest in the apartment unit. Following the foreclosure of such a lien,

the leasehold unit would be sold at a sheriff's sale. RCW 61.12.060. The

purchaser of such a unit would have the same ownership interest in the unit as

all other members of the Association. The Association's proposed

interpretation -- whereby a blameless fee owner could be divested of its

property -- offends fundamental notions of fairness. Because an ambiguous

statute should not be read to produce injustice, Newby, 38 Wn. App. at 814, we

must reject this interpretation of the statute.

For all of these reasons, where a condominium declaration is clear that

individual units are designated for separate ownership by way of leasehold, the

condominium association's statutory lien on a unit for unpaid assessments

attaches solely to the owner's leasehold interest in that unit. The trial court did

not err by so ruling.


III

The Association next contends that the trial court erred by awarding

attorney fees and costs to Sand Point. We disagree.

Whether a party is entitled to attorney fees is an issue of law that we

review de novo. Ethridge v. Hwang, 105 Wn. App. 447, 460, 20 P.3d 958

(2001). We review the reasonableness of the fees awarded for abuse of

discretion. Ethridge, 105 Wn. App. at 460.

"In Washington, attorney fees may be awarded only when authorized by a

private agreement, a statute, or a recognized ground of equity." Labriola v.

Pollard Group, Inc., 152 Wn.2d 828, 839, 100 P.3d 791 (2004). One such "well

recognized principle of equity" is the principle of mutuality of remedy. Kaintz v.

PLG, Inc., 147 Wn. App. 782, 789, 197 P.3d 710 (2008) (quoting Mt. Hood

Beverage Co. v. Constellation Brands, Inc., 149 Wn.2d 98, 121, 63 P.3d 779

(2003)). Pursuant to this principle, where a party has successfully argued that a

statute is invalid (thus rendering the statute's attorney fee provision without

force), that party is nevertheless entitled to an award of attorney fees if such

fees would have been awarded to the opposing party had the statute been

deemed valid. Kaintz, 147 Wn. App. at 789 (citing Mt. Hood Beverage Co., 149

Wn.2d at 121-22). This same equitable principle underlies the legislature's

enactment of RCW 4.84.330, which requires that a unilateral attorney fee

provision contained in a contract be applied on a reciprocal basis. Yuan v.

Chow, 96 Wn. App. 909, 918, 982 P.2d 647 (1999).

Here, Sand Point has successfully argued that the Association's statutory

lien does not attach to its fee interest in the Youngs' condominium unit.

Accordingly, as in Mt. Hood, the statutory fee provision set forth by RCW

64.34.364(14) is inapplicable. However, if the Association had prevailed on this

claim, the Association would have been "entitled to recover any costs and

reasonable attorneys' fees incurred in connection with the collection of

delinquent assessments." RCW 64.34.364(14). In these circumstances, the

principle of mutuality of remedy applies. See Kaintz, 147 Wn. App. at 789.

Because the Association would have been entitled to attorney fees had it

prevailed on this issue, pursuant to the equitable principle of mutuality of

remedy, Sand Point is entitled to an award of fees as the prevailing party.

Moreover, the amount awarded as attorney fees was not unreasonable.

Absent a manifest abuse of discretion, we will not disturb an award of attorney

fees. Seattle-First Nat'l Bank v. Wash. Ins. Guar. Ass'n, 94 Wn. App. 744, 761-

62, 972 P.2d 1282 (1999). Here, an affidavit of Sand Point's attorney described

the work performed, the total number of hours expended, and the billing rate of

each lawyer associated with the case. Applying the "lodestar" method set forth

in Bowers v. Transamerica Title Ins. Co., 100 Wn.2d 581, 594, 675 P.2d 193

(1983), the trial court ordered that Sand Point be awarded attorney fees in the

amount of $24,196.1


The trial court did not abuse its discretion by so ruling. Although the

Association argues on appeal that block billing and duplicative fees should have

precluded Sand Point from recovering its fees, there is no indication that the trial

court's determination of the attorney fee award was unreasonable. Indeed, in

this very case, the Association requested and was awarded $32,977.70 in

attorney fees, enforceable against the Youngs' leasehold interest in the

apartment unit. There was no trial court error.

Sand Point requests an award of attorney fees and costs incurred on

appeal. Sand Point is entitled to a reasonable award of fees and costs. Upon a

proper application, a commissioner of this court will enter an appropriate award.


* * *

See: http://www.courts.wa.gov/opinions/?fa=opinions.disp&filename=681524MAJ

Affirmed.