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Southern Trace Property Owner's Association v. Williams

Court of Appeals of Louisiana, Second Circuit

September 25, 2019

SOUTHERN TRACE PROPERTY OWNER'S ASSOCIATION Plaintiff-Appellant
v.
CHARLES WILLIAMS Defendant-Appellant

          Appealed from the First Judicial District Court for the Parish of Caddo, Louisiana Trial Court No. 579552 Honorable Ramon Lafitte, Judge

          ROBERT I. THOMPSON, III Counsel for Plaintiff-Appellant.

          THE PESNELL LAW FIRM By: William Alan Pesnell Counsel for Defendant-Appellant

          Before PITMAN, GARRETT, STONE, McCALLUM, and BLEICH (Ad Hoc), JJ.

          BLEICH, J. (AD HOC)

         This is an action to collect homeowners association dues. Both parties have appealed from the trial court's judgment which granted in part an exception of prescription filed by the delinquent homeowner, Dr. Charles Williams, and granted in part the relief sought by the homeowners association, Southern Trace Property Owners Association ("STPOA"). For the reasons set forth below, we reverse in part, amend in part, and, as amended, affirm.

         FACTS AND PROCEDURAL HISTORY

         STPOA filed this action against Dr. Williams on September 15, 2014, seeking the payment of past-due homeowners association dues. Dr. Williams filed an answer and an exception of prescription wherein he asserted that La. C.C. art. 781 bars all recovery sought by STPOA in this case. Dr. Williams also filed a reconventional demand seeking reimbursement for funds expended and services rendered allegedly on behalf of and/or authorized by the homeowners association.

         At the initial trial of the exception, the parties submitted the matter without introducing any evidence. Based upon the arguments of the parties, the trial court granted in part the exception of prescription filed by Dr. Williams based upon the court's finding that the two-year prescriptive period for building restrictions set forth in La. C.C. art. 781 applied as a bar to STPOA's claim for recovery of all association dues that had accrued more than two years prior to the date STPOA filed its petition seeking to recover the unpaid dues.

         STPOA appealed the adverse judgment. This Court vacated the judgment and remanded for further proceedings, directing that the trial court conduct a hearing at which evidence "includ[ing] any and all documents necessary to determine the relevant restrictions on the property at issue, including the covenants particular to the subdivision and Dr. Williams's deed, as well as any other documents." Alternatively, this Court noted that the parties could agree to defer the issue to the merits of the trial. See, Southern Trace Property Owners Ass'n v. Williams, 50, 992 (La.App. 2 Cir. 11/23/16), 210 So.3d 835.[1]

         On remand, at a hearing held on September 28, 2017, the parties introduced evidence, which included the subdivision covenants. The trial court's judgment, which was rendered on March 29, 2018, and signed on May 21, 2018, granted in part the exception of prescription filed by Dr. Williams as to all dues that had accrued more than two years prior to September 15, 2014, the date that STPOA's petition had been filed, and rendered judgment in favor of STPOA, awarding it "assessment dues from two (2) years prior to the petition being filed, September 15, 2014, to date, " together with interest thereon until paid. The trial court further granted an exception of prescription filed by STPOA as to claims for damages filed by Dr. Williams, which were dismissed with prejudice.[2] As noted above, both parties have appealed from this judgment.

         DISCUSSION

         In its appeal, STPOA has assigned as error: (1) the trial court's determination that the two-year prescriptive period for an action for damages for the violation of a building restriction set forth in La. C.C. art. 781 was applicable rather than the ten-year prescriptive period applicable to personal obligations provided by La. C.C. art 3499; and (2) the trial court's failure to award attorney fees to STPOA. Dr. Williams' assignments of error are that: (1) the trial court erred in ignoring the second sentence of La. C.C. art. 781, which provides "[a] building restriction that is not enforced within two years of a noticeable violation thereof is extinguished as to the property in violation of the building restriction." According to Dr. Williams, his obligation to pay homeowners dues was extinguished by operation of law and he therefore is not liable for any assessments or dues; or, alternatively, (2) the trial court erred in calculating the amount of the assessments he owes by including dues for years neither pled in STPOA's petition nor proven by the evidence presented; and, (3) the principal amounts that Dr. Williams owes are subject to 12% annual interest rather than the 18% annual interest provided for in the STPOA community documents.

         Applicable Prescriptive Period

         The two prescriptive statutes cited by the parties are La. C.C. art. 781, which applies solely to an action for a violation of a building restriction, and La. C.C. art. 3499, which applies to all personal actions that are not specifically addressed by other legislative enactments.

         Louisiana C.C. art. 781 provides:

No action for injunction or for damages on account of the violation of a building restriction may be brought after two years from the commencement of a noticeable violation. After the lapse of this period, the immovable on which the violation occurred is freed of the restriction that has been violated.
Louisiana C.C. art. 3499 provides:
Unless otherwise provided by legislation, a personal action is subject to a liberative prescription of ten years.

         Building restrictions, or "restrictive covenants" as they are generally known in the common law and occasionally termed in Louisiana, are charges imposed by the owner of an immovable in pursuance of a general plan governing building standards, specified uses, and improvements. La. C.C. art. 775; Fern Creek Owners' Ass'n, Inc. v. City of Mandeville, 08-1694 (La.App. 1 Cir. 06/30/09), 21 So.3d 369.

         The Louisiana Homeowners Association Act, La. R.S. 9:1141.1, et seq. ("the LHAA"), became effective June 16, 1999. Acts 1999, No. 309. It applies to existing and future residential planned communities such as Southern Trace whose declarations have been duly executed and filed for registry. La. R.S. 9:1141.3(A). The LHAA does not affect the validity or superiority of any provision of a community document and applies only to the extent that community documents are silent. Id.

         Louisiana R.S. 9:1141.2(3) defines "Community Documents" as:

the articles of incorporation, bylaws, plat, declarations, covenants, conditions, restrictions, rules and regulations, or other written instruments, including any amendment thereto, by which the association has the authority to exercise any of its powers to manage, maintain, or otherwise affect the association property.

         The statutory scheme established by the LHAA mandates that community documents prevail over the LHAA, except to the extent that community documents are silent. The LHAA also amended La. C.C. art. 783 to provide that the [LHAA] "shall supersede any and all provisions of . . . Title [V. Building Restrictions] in the event of a conflict." Fern Creek Owners Ass'n, Inc., supra at 377.

         La. R.S. 9:1141.5(B) provides that building restrictions may include the imposition of an affirmative duty, including the affirmative duty to pay monthly or periodic dues or fees, or assessments for a particular expense or capital improvement, that are reasonable for the maintenance, improvement, or safety, or any combination thereof, of the planned community. See also, La. C.C. art. 778, which provides that building restrictions may impose on owners of immovable affirmative duties that are reasonable and necessary for the maintenance of the general plan.

         Prior to the enactment of the LHAA, the Louisiana Supreme Court decided Brier Lake, Inc. v. Jones, 09-2413 (La. 04/14/98), 710 So.2d 1054. In that case, a homeowners association filed suit, claiming that the defendant homeowner had violated subdivision restrictions and also failed to pay dues and assessments. On the issue of whether a majority of lot owners in a subdivision could amend existing building restrictions to make them more restrictive, the supreme court found that unanimous consent of all lot owners was required. The second issue in Brier Lake was the prescriptive period for filing suits to collect delinquent dues and assessments. Like Dr. Williams in the instant case, the defendant homeowner asserted that the assessments were building restrictions and as such, were subject to the two-year prescriptive period set forth in La. C.C. art. 781. Agreeing with the homeowners association's argument, the trial court found that the assessments were a personal obligation subject to the 10-year prescriptive period of La. C.C. art. 3499. The supreme court reversed, finding that the obligation was instead a building restriction subject to the two-year period of La. C.C. art. 781. Therefore, the defendant homeowner was only obligated to pay assessments that were due within two years from when suit was filed.[3]

         This Court observed, in Southern Trace Property Owners Ass'n, 210 So.3d at 842:

During the next legislative session, the legislature passed Act 309, which was specifically designed to overrule Brier Lake. The act stated that "[t]he provisions of this Act legislatively overrule the case of Brier Lake, Inc. v. Jones, 97-C-2413 (La. 04/14/98), 710 So.2d 1054, are remedial, and shall apply both prospectively and retroactively." See Acts 1999, No. 309. The Louisiana Homeowners Association Act ("LHAA"), consisting of La. R.S. 9:1141.1-9:1141.9, was enacted. The act also amended La. C.C. arts. 776 and 780 (regarding amendments and termination of building restrictions, which no longer require unanimous consent) and 783 (regarding conflicts with the LHAA and the Louisiana Civil Code). The LHAA legislation provides for building restrictions in a "residential planned community" or "planned community." The legislation emphasizes the importance of "community documents, " building restrictions and their enforcement. Under the statutory scheme, the community documents prevail over any conflicts with the Louisiana Civil Code articles on building restrictions.

         Following the rendition of Brier Lake, supra, and the passage of Acts 1999, No. 309, there have been several appellate cases addressing the issue of prescription in the context of homeowners association dues and assessments. None of these have found the two-year period of La. C.C. art. 781 to apply. Southern Trace Property Owners Ass'n, 210 So.3d at 843. This Court's analysis of these cases is set forth below:

In Lakewood Estates Homeowner's Ass'n, Inc. v. Markle, 2002-1864 (La.App. 4th Cir. 04/30/03), 847 So.2d 633, writ denied, 2003-1511 (La. 09/26/03), 854 So.2d 362, a homeowners association sought to enforce liens against property for the nonpayment of assessments from 1997 to 2001. The defendant homeowners argued their assessment dues were prescribed under La. C.C. art. 781, 782 and 783, and, due to the homeowners association's failure to comply with its Act of Establishment for more than 10 years, any real rights associated with the Act of Establishment were dissolved. However, with little discussion, the court held that La. C.C. art. 781 and 782 were inapplicable to the payment of dues and fees and that the LHAA superseded La. C.C. art. 783. No mention was made of Brier Lake.
In Eastover Prop. Owner's Ass'n, Inc. v. Cochrane, 2002-1502 (La.App. 4th Cir. 05/21/03), 848 So.2d 710, writ denied, 2003-1604 (La. 11/21/03), 860 So.2d 544, a property owners association filed suit against homeowners who had failed to pay association dues and assessments for several years. The court rejected the homeowners' contention that the two-year prescriptive period of La. C.C. art. 781 was applicable. In so ruling, it looked to the terms of the subdivision's act of restriction, which set forth the nature of the assessments as being personal to the owners of the property. Because it was a personal obligation, the 10-year prescriptive period of La. C.C. art. 3499 applied. Again, Brier Lake was not mentioned.
In Louisiana Bureau of Credit Control, Inc. v. Landeche, 2008-1099 (La.App. 3 Cir. 03/04/09), 6 So.3d 935, the homeowners association assigned to a collection agency the defendant's delinquent assessments account. The defendant filed an exception based on three years under the open account law in the civil code, which was sustained by the trial court. The plaintiff's argument that the 10-year prescriptive period was applicable was not reached on appeal because the assessment sued upon had not been properly passed by the homeowners association. Brier Lake was cited in passing in a discussion of whether the assessment was a building restriction or a personal obligation. Also of relevance was the court's finding that LHAA only applied when the homeowners association's community documents were silent. . . .
In all of these cases, the courts had before them and carefully considered the provisions of the pertinent homeowners associations articles of incorporation and other community documents. . . .

Southern Trace Property Owners Ass'n, supra at 843-44.

         On December 1, 1987, Southern Trace, a Limited Partnership, filed a "Declaration of Protective Covenants, Conditions, and Building Restrictions and Grants of Servitudes" ("Covenants") establishing the Southern Trace District, which includes the Southern Trace Property Owners Association. These Covenants have been supplemented several times over the years.

         The Southern Trace Covenants specify that, as used therein, these terms, inter alia, have the following meanings:

1.3 "Association" shall mean that automatic-membership, Louisiana non-profit corporation made up of Owners and called the Southern Trace Property ...

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