Key Rulings for Condominium Associations in Square Lake Hills Association v Russel Garland and Highlander Group MMC, Inc.
On March 23, 2023, the Michigan Court of Appeals decided several important issues in favor of Michigan condominium associations. In Square Lake Hills Association v Russel Garland and Highlander Group MMC, Inc et al, unpublished opinion of the Court of Appeals, (Docket No. 360405), the Court of Appeals made the following rulings:
- Mere speculation is insufficient to establish that the association breached its contractual obligations to the co-owner when there is no evidence identifying the actual cause of the damage to the co-owner’s unit.
- An oral promise did not trump a provision in the condominium bylaws that prevent a boat from being stored on the property when the purchase agreement has an integration clause and no exception applied.
- Although the association owes its co-owners a duty of care stemming from the condominium bylaws and the property management company owes the condominium’s co-owner’s a duty of care rooted in the common law, these duties of care are not breached when there is no evidence that the repairs were not made in a competent and reasonable manner.
Facts
Garland was a co-owner of one of the units and purchased the unit on a land contract from the Square Lake Hills Condominium Association. Cornak was the president of the association, and Donia was a board member. Highlander is the property management company that managed the Condominiums, and Sigler is a Highlander employee who was the property manager for the association.
Garland alleged that he purchased his condominium unit from the association on March 1, 2017. He denied being aware of or being informed of water leakage problems within his unit when he purchased it or knowing that a prior water leak had taken place in 2015. Garland alleged that his unit experienced water leakage in December 2017, which cased significant damage, and the leakage was the result of the association and Highlander’s negligence in failing to address the ventilation issues of the attic of the building where his unit was located. Separately, Garland alleged that Cornak, Sigler, and Highlander orally promised that he would be able to turn his carport into an enclosed garage to store his boat.
Relevant to this appeal, Garland filed a countercomplaint against the association and a third-party complaint against the third-party defendants alleging (1) breach of contract against the association for breach of the amended and restated condominium bylaws, (2) negligence against the association and Highlander, and (3) breach of contract against Cornak, Highlander.
Court of Appeals ruled that speculation is insufficient to establish the association breached its contractual obligations.
Circumstantial evidence may be sufficient to establish a claim, but the nonmoving party “must present more than conjecture and speculation to meet their burden of providing evidentiary proof establishing a genuine issue of material fact.” For Garland’s first breach of contract counterclaim against the association, he alleged that the association breached their obligations under the condominium bylaws by failing to repair or replace improper ventilation, insulation, or pipes after a water leak in 2015, which caused the leak to Garland’s unit in 2017. To establish a breach of contract claim, the claimant must prove that: (1) there was a contract, (2) the other party breached the contract, and (3) the breached resulted in damages to the party claiming breach. Because a condominium project is administered by the condominium bylaws, the court looked at the plain language of the condominium documents to decide this issue. Specifically, the Court looked to the Amended and Restated Condominium Bylaws of Square Lake Hills, Article V, §§ 3 and 4, which address the allocation of responsibility for damage to a condominium unit:
Section 3.
A. Definition of Responsibility
If the damage is only to a part of a Unit or common elements which are the responsibility of a Co-owner to maintain and repair and/or insure, it shall be the responsibility of the Co-owners to promptly repair such damage in accordance with Subsection B, hereof. In all other cases, the responsibility for reconstruction and repair, although not necessarily the costs thereof, shall be that of the Association.
B. Co-owner Items
… [E]ach co-owner shall be responsible for the reconstruction and repair of the interior of the Co-Owner’s Unit and all fixtures, equipment, trim and personal property, including, but not limited to, drywall, floor coverings, window shades, draperies, interior walls (but not any General Common Elements therein), wall coverings, interior trim, furniture, light fixtures, and all appliances, whether freestanding or built-in. In the event damage to interior walls within a Co-Owner’s unit or to pipes, wires, conduits, ducts, or other Common Elements therein is covered by insurance held by the Association, then the reconstruction or repair shall be the responsibility of the Association in accordance with Section 4 of this Article, although the responsibility for costs thereof shall be allocated in accordance with the provisions of this Section and Section 4. [Emphasis added.]
Section 4. Association Responsibility for Reconstruction or Repair of Common Elements.
Subject to the responsibility of the individual Co-Owners as outlined in Section 3 above, and other provisions of these Bylaws or the Amended and Restated Master Deed applicable to such situations, the Association shall be responsible for the reconstruction and repair of the Common Elements. Immediately after a casualty causing damage to property for which the Association has the responsibility of maintenance, repair, or reconstruction, the Association shall obtain reliable and detailed estimates of the cost to place the damaged property in a condition as good as that existing before the damage. [Emphasis added.]
In this case, Cornak testified that unnamed individuals “speculated” that a ventilation issue could be a cause of building leaks but there was no evidence identifying improper ventilation as the cause of the damage to Garlan’s unit, and Cornak testified that there was never any finding that ventilation was a cause of the damage to Garland’s unit. The Court of Appeals held that there is no genuine issue of material fact regarding whether improper ventilation issues in Building 8 caused or contributed to the 2017 leak because the moving party must present more than speculation to meet their burden of proof to establish a genuine issue of material fact. Thus, the Court of Appeals upheld the trial court’s decision and found that the trial court did not err by dismissing Garland’s breach of contract claim against the association under MCR 2.116(c)(10).
The Court ruled that an oral promise will not trump a restriction in the condominium bylaws.
An oral promise will not trump a provision in the condominium bylaws when there is no evidence that the oral promise was ratified and there is an integration clause in the purchase agreement. As a part of Garland’s third-party complaint, he alleged a claim for breach of an oral promise to allow Garland to convert his carport into a garage to store his boat, which was supported by handwritten notation that he wrote on his rental application in which he recited his understanding that he could convert his carport into a garage for his boat. The handwritten notation was not signed by anyone from Highlander, Sigler, or Cornak. Garland alleged the agreement was breached when they did not authorize turning his carport into a garage for his boat and he was subjected to fines for violating applicable condominium bylaws. The Court cited Article VI, § 8 of the condominium bylaws, which prohibits residents from storing recreational vehicles, including boat and boat trailers, on the premises of the condominium. Garland relies on his handwritten notation to argue that the agreement was breached. Not only was the handwritten notation not signed by anyone but there was also an integration clause in the purchase agreement that stated that the “Agreement constitutes the entire agreement between the buyer and seller.” Thus, the Court found that the trial court did not err in dismissing this breach of contract claim against Highlander, Sigler, and Cornak.
The Court ruled that although the association and Highlander owed a duty of care to Garland that duty of care was not breached when the repair was competent and reasonable.
Absent evidence that a repair is competent and reasonable, an association and project management company does not breach their duty of care for a negligence claim. In his countercomplaint and third-party complaint, Garland alleged that the association and Highlander owed him a duty of care “to inspect, repair, and remediate common elements within the walls of the condominium units.” Under Michigan law, Garland must establish the following elements for his negligence claim: (1) the defendant owed the plaintiff a legal duty, (2) the defendant breached the legal duty, (3) the plaintiff suffered damages, and (4) the defendant’s breach was a proximate cause of the plaintiff’s damages. He alleged that the association and Highlander breached that duty of care by “acting in a negligent, willful, and wanton manner, thereby demonstrating a substantial lack of concern as to the source of improper venting, insulation, and HVAC systems, which were damaged and not repaired nor replaced.” The Court looked to the duty of care that both the association and Highlander as the property management company owed to Garland to make its determination. The Court found that the condominium bylaws imposes the association’s duty of care. Specifically, Article V, § 3A, imposes on the association, “the responsibility for reconstruction and repair” for damage to the common elements. Highlander’s duty of care stems from the common law, which “imposes on every entity engaged in the prosecution of an undertaking the obligation to exercise due care to not unreasonably endanger the person or property of others.” The Court found “even accepting that the association and Highlander owed Garland a duty of care, there is no genuine issue of material fact regarding whether these parties breached that duty of care.” The Court explained that the association and Highlander did not breach their duty of care because there was no evidence that either the Association or Highlander failed to address and resolve the 2015 leak in a competent and reasonable manner. Ultimately, the Court found that the lower court did not err in dismissing Garland’s negligence claim.
Conclusion
While Square Lake Hills Association v Russel Garland and Highlander Group MMC, Inc et al, unpublished opinion of the Court of Appeals, issued on March 23, 2023 (Docket No. 360405) is an unpublished opinion, it establishes three important rulings in favor of condominium associations. First, the Court found that an association does not breach its contractual obligations to a co-owner when there is no actual evidence identifying the cause of the damage to the co-owner’s unit. Second, an oral promise did not trump a provision in the condominium bylaws that prevent a boat from being stored on the property when the purchase agreement had an integration clause and there was no evidence that the association or management company ratified the oral promise. Third, the bylaws impose a duty of care on the association, “the responsibility for reconstruction and repair” for damage to the common elements, and the property management’s duty of care owed to the co-owners stems from the common law and requires that the property management company exercise due care to not unreasonably endanger the person or property of another. Importantly, this duty of care is not breached when there is no evidence to show that the association or property management company completed the repairs in a competent and reasonable manner.
Livia Khemmoro is an Associate Attorney at Hirzel Law in the firm’s litigation group. Ms. Khemmoro received her Bachelor of Business Administration, magna cum lade, from Walsh College and her Juris Doctor, magna cum lade, from the University of Detroit Mercy School of Law, where she was a Legal Research and Writing II teaching assistant, research assistant, law review, and moot court member. She received the book award in Applied Legal Theory and Analysis II, Constitutional Law, Business Organizations, Advanced Advocacy, Estates and Trusts, and Immigration Law Clinic. Ms. Khemmoro was also the Class of 2021 commencement speaker. Ms. Khemmoro courageously advocates for clients, digging into her work with a zeal to win. She delights in overcoming challenges and fact-finding to ensure a positive outcome for her clients. Never satisfied with the status quo, Ms. Khemmoro pushes herself to outdo the expected – reaching for better and more. It’s her competitive and fighting spirit that propels her into the top of her class and a leader among her peers. Prior to joining Hirzel Law, Ms. Khemmoro was an Associate Attorney at Warner Norcross + Judd LLP, where most of her matters involved handling business and real estate litigation matters. She can be reached at (248) 478-1800 or at lkhemmoro@hirzellaw.com.
