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Marino v. Clary Lakes Homeowners Ass'n, Inc.

Court of Appeals of Georgia

March 16, 2015

MARINO et al.
v.
CLARY LAKES HOMEOWNERS ASSOCIATION, INC

Restrictive covenant. Cobb Superior Court. Before Judge Grubbs.

Julie A. Liberman, for appellants.

Lueder, Larkin & Hunter, John T. Lueder, Cynthia C. Hodge, for appellee.

DILLARD, Judge. Doyle, P. J., and Miller, J., concur.

OPINION

Page 290

Dillard, Judge.

Clary Lakes Homeowners Association, Inc. (the " Association" ) sued homeowners Joseph and Patricia Marino, seeking damages and enforcement of a restrictive covenant that required garages to be used for parking vehicles and not for storage. The Marinos filed an answer and counterclaim, contending that the restrictive covenant was invalid. The trial court granted partial summary judgment to the Association, but in Marino v. Clary Lakes Homeowners Association, Inc.[1] ( Marino I ), we ruled that the restrictive covenant was unenforceable against the Marinos. Consequently, we reversed the trial court's grant of summary judgment to the Association on its claims predicated on the breach of the restrictive covenant and remanded the case with direction for the trial court to enter summary judgment in favor of the Marinos as to those claims.[2] In addition, we reversed the trial court's grant of summary judgment to the Association on its claim for attorney fees under a " prevailing party" provision in the covenants, but we affirmed the denial of summary judgment to the Marinos on this issue because an award of such fees was potentially dependent upon the resolution of the Association's claim for breach of a settlement agreement, which remained pending.[3]

Following remand, the Marinos filed a motion to dismiss the Association's breach-of-settlement-agreement claim, which the trial court denied. Nevertheless, the Association ultimately dismissed this claim and then moved to dismiss the Marinos' attorney fees claim. Finding that neither party prevailed in the litigation, the trial court granted the Association's motion. On appeal, the Marinos contend that the trial court erred in (1) dismissing their claim for attorney fees under the " prevailing party" provision, (2) denying their motion to dismiss the claim for breach of the settlement agreement, (3) denying their motion for attorney fees pursuant to OCGA § 9-15-14 (b), (4) dismissing their counterclaims, and (5) failing to enter final

Page 291

judgment in their favor. For the reasons set forth infra, we affirm in part, reverse in part, and remand the case for further proceedings consistent with this opinion.

[331 Ga.App. 205] A detailed recitation of the background facts can be found in Marino I.[4] Nevertheless, by way of summary, the undisputed record shows that in 2003, a majority of the homeowners in the Clary Lakes subdivision and the Association approved an Amended and Restated Declaration of Protective Covenants for Clary Lakes (the " Amended Declaration" ) and Amended and Restated Bylaws of Clary Lakes Homeowners Association, Inc. (the " Bylaws" ).[5] Importantly, the Amended Declaration included a provision stating that the Association and the Clary Lakes subdivision were submitting to application of the Property Owners' Association Act (" POA Act" ) (OCGA § 44-3-220 et seq.).[6] And under the Amended Declaration, use of garages was governed by Section 11 (i), which provided:

Garage Parking.

All vehicles owned or used on a regular basis by Owners or Occupants shall be parked in garages to the extent that garage space is available and vehicles fit in the garage. Garages shall not be used for storage on a regular basis so that they become unavailable for parking cars therein. The Covenant Committee shall have the power to grant a variance to any Owner or Occupant who demonstrates special circumstances why he cannot comply with this requirement. Application for this variance must be made in writing to the Covenant Committee. The variance to the Owner or Occupant must be in writing and specify the term of the required variance.[7]

The Marinos purchased their home in the Clary Lakes subdivision nearly ten years prior to the approval of the Amended Declaration, and they did not vote in favor of the declaration or give their written consent to it.[8] And because their home did not have a basement, the Marinos used their garage for storage and parked their vehicles on their driveway, which had been permitted prior to the 2003 approval of the Amended Declaration.[9] Consequently, in January 2009, the Association informed the Marinos that they were in violation of the Garage Use Covenant.[10] Initially, the Association attempted to resolve the dispute by issuing a temporary variance to [331 Ga.App. 206] allow the Marinos time to comply with the covenant.[11] But when the Marinos requested a permanent variance, the Association refused and, pursuant to the Amended Declaration, began to levy daily fines, which the Marinos refused to pay.[12]

In 2011, the Association sued the Marinos for damages, injunctive relief, and attorney fees, alleging that they were in violation of the Garage Use Covenant, breached a settlement agreement, and owed fines.[13] The Marinos filed an answer and counterclaims, arguing, inter alia, that the Garage Use Covenant was unenforceable against them because they had not consented to it pursuant to OCGA § 44-5-60 (d) (4)[14] and because it had not been approved by at least two-thirds of the votes in the Association as required by the POA Act.[15] The Marinos also sought attorney fees.[16]

Page 292

After the parties filed cross-motions for summary judgment, the trial court ruled that the Garage Use Covenant was not subject to either the written-consent requirement imposed by OCGA § 44-5-60 (d) (4) or the two-thirds voting requirement imposed by the POA Act.[17] Thus, the trial court denied summary judgment to the Marinos and granted summary judgment to the Association on its claims for damages for the nonpayment of fines, injunctive relief, and attorney fees.[18] However, the court also ruled that genuine issues of material fact precluded a grant of summary judgment in favor of the Association as to its breach-of-settlement-agreement claim.[19]

Thereafter, the Marinos filed an appeal with this Court. And in Marino I, we concluded

that for the restrictive covenant at issue to be enforceable against the Marinos, they had to agree to the covenant in writing pursuant to OCGA § 44-5-60 (d) (4), or the covenant had to be approved by at least two-thirds of the votes in the Association pursuant to OCGA § 44-3-226 (a) of the POA Act. [331 Ga.App. 207] Because the uncontroverted evidence shows that neither condition was met in this case, the restrictive covenant was unenforceable against the Marinos, and the trial court erred in concluding otherwise.[20]

Accordingly, we reversed the grant of summary judgment to the Association, and the denial of summary judgment to the Marinos, on the Association's claims for damages and injunctive relief based on the violation of the restrictive covenant, and we remanded the case with direction for the trial court to enter summary judgment for the Marinos on those claims.[21] We also reversed the grant of summary judgment to the Association on its claim for attorney fees under the " prevailing party" provision of the Amended Declaration.[22] But we held that an award of attorney fees to either party would be premature because the Association's claim for the alleged breach of the settlement agreement remained pending, " and the outcome with regard to that claim may affect who is deemed the 'prevailing party' in this litigation." [23]

On remand, the Marinos moved to dismiss the Association's breach-of-settlement-agreement claim, arguing that it violated public policy. The Marinos also sought to be declared the " prevailing party" and awarded attorney fees. The Association responded and, while the motions were pending, it amended its complaint to request both damages and injunctive relief for the Marinos' alleged breach of the settlement agreement. In addition, the Association moved to dismiss the Marinos' counterclaims for attorney fees.

Despite its recent amendment, on April 29, 2014, the Association voluntarily dismissed its claim for breach of the settlement agreement. And shortly thereafter, the trial court scheduled a hearing for arguments on the Association's motion to dismiss the Marinos' counterclaims for attorney fees, as well as their motion seeking an award of attorney fees as the " prevailing party." On May 30, 2014, the day of the hearing, the Marinos filed a supplemental motion, seeking attorney fees pursuant to OCGA § 9-15-14 (b). At the conclusion of the hearing, the trial court found that because the Association's claim for breach of the settlement agreement was not adjudicated on the merits, neither party had prevailed. Consequently, the trial court issued an order ruling that the Marinos were not entitled to attorney [331 Ga.App. 208] fees as the " prevailing party" and further ruled that they were not entitled to attorney fees under OCGA § 9-15-14 (b). This appeal follows.

1. The Marinos contend that the trial court erred in ruling that they were not the " prevailing party" to the litigation and, therefore, were not entitled to attorney fees under the Amended Declaration. We agree.

Page 293

At the outset, we note that the declaration of a homeowner's association is " considered a contract, and we therefore apply the normal rules of contract construction to determine the meaning of the terms therein." [24] First, the construction of a contract is " a question of law for the court." [25] That being said, it is well established that the cardinal rule of construction is " to ascertain the intent of the parties[ and w]here the contract terms are clear and unambiguous, the court will look to that alone to find the true intent of the parties." [26] In determining the parties' intent, " all the contract terms must be considered together in arriving at the construction of any part, and a construction upholding the contract in whole and every part is preferred." [27] And when the language employed by the parties in their contract is plain, unambiguous, and capable of only one reasonable interpretation, the language used " must be afforded its literal meaning and plain ordinary words given their usual significance." [28] With these guiding principles in mind, we turn now to the Marinos' specific claim of error.

The final sentence of Section 16 (b) of the Amended Declaration provides: " In the event of litigation, the losing party shall pay the litigation expenses, including the reasonable attorney's fees actually incurred, of the prevailing party." Construing similar language, the Supreme Court of Georgia has held that " a plaintiff prevails when actual relief on the merits materially alters the legal relationship between the parties by modifying the defendant's behavior in any [331 Ga.App. 209] way that directly benefits the plaintiff," [29] and that " unlike plaintiffs who typically must obtain some affirmative relief on their claim to be deemed the 'prevailing party' ... defendants prevail by not having any relief imposed against them." [30]

Here, the Marinos (as defendants in this action) prevailed as to the Association's claims for damages and injunctive relief predicated on the breach of the Garage Use Covenant when this Court ordered the trial court to enter summary judgment in their favor as to those claims. At that point in time, the Association's claim for breach of the settlement agreement was still pending, and thus, we held that deeming either the Marinos or the Association as the " prevailing party" under Section 16 (b) of the Amended Declaration was premature. But once the Association voluntarily dismissed its only remaining claim, the Marinos prevailed, regardless of their counterclaims, " by not having any relief imposed against them." [31]

In its order denying the Marinos' claim for attorney fees, the trial court characterized our holding in Marino I as having " found that Plaintiff had a separate, viable claim against Defendants and that the outcome of such claim would determine the 'prevailing party' in this case." [32] And based on this

Page 294

reading, it concluded that because there was no adjudication on the merits of the breach-of-settlement-agreement claim, neither party prevailed. However, this conclusion is belied by the actual language of our opinion in Marino I, which indicated that the outcome with regard to the breach-of-settlement-agreement claim " may affect who is deemed the 'prevailing party' in this litigation." [33] The rather simple conclusion that follows from this language is that even though the Marinos succeeded in arguing that the covenant was not enforceable against them, the Association might nevertheless be deemed as prevailing if it succeeded on its alternative claim that the Marinos agreed to a compromise of the dispute and then breached that agreement. But when the Association's remaining claim was dismissed, the Marinos were then in the position of having prevailed on the only claims that were adjudicated on the merits. Given these circumstances, we reverse the trial court's ruling that the Marinos were not the " prevailing party" to this [331 Ga.App. 210] litigation and were not entitled to attorney fees,[34] and remand the case for further proceedings to determine the exact amount of attorney fees to be awarded.

2. The Marinos also contend that the trial court erred in denying their motion to dismiss the Association's claim for breach of the settlement agreement. However, the Association dismissed this claim, and in Division 1, supra, we held that the Marinos are the " prevailing party" despite the fact that the claim was not adjudicated on the merits. Thus, this enumeration is moot, and we need not address it.[35]

3. The Marinos also contend that the trial court erred in denying their motion for attorney fees pursuant to OCGA § 9-15-14 (b). We disagree.

Under OCGA § 9-15-14 (b), the trial court may award fees if

it finds that an attorney or party brought or defended an action, or any part thereof, that lacked substantial justification or that the action, or any part thereof, was interposed for delay or harassment, or if it finds that an attorney or party unnecessarily expanded the proceeding by other improper conduct. ...[36]

And this statute defines " lacked substantial justification" as meaning " substantially frivolous, substantially groundless, or substantially vexatious." [37] Importantly, we will affirm a trial court's grant or denial of a motion for attorney fees under OCGA § 9-15-14 (b) " unless the court has abused its discretion." [38]

Here, the Marinos claim that, in light of our opinion in Marino I, the Association's decision, following remand, to continue litigating its claim for breach of the settlement agreement lacked substantial justification. They further argue that the Association's amendment to [331 Ga.App. 211] the claim to seek monetary damages, in addition to injunctive relief, was done for purposes of delay and harassment. But in Marino I, we expressed no opinion on the merits of the Association's claim for breach of the settlement agreement. Furthermore, we are unpersuaded that the aforementioned opinion can be read as implicitly holding that the settlement agreement was void as a violation of public policy. Indeed, under our contract law, " a person may waive or renounce what the law has

Page 295

established in his favor when he does not thereby injure others or affect the public interest." [39] And there is nothing in the appellate record which would possibly lead us to conclude that the settlement agreement here injured others or affected the public interest.[40]

Moreover, when a trial court denies summary judgment because genuine issues of material fact remain, as the trial court did in this matter with regard to the Association's breach-of-settlement-agreement claim, an award of attorney fees under OCGA § 9-15-14 (b) is not warranted except in unusual cases.[41] And we do not find that our decision in Marino I or the Association's decision to amend its claim to include a request for damages constitutes an unusual circumstance entitling the Marinos to attorney fees under this particular statute. Accordingly, the trial court did not abuse its discretion when it declined to award the Marinos fees under OCGA § 9-15-14 (b).[42]

4. Finally, the Marinos contend that the trial court erred in granting the Association's motion to dismiss their counterclaim for attorney fees. Specifically, they argue that the trial court erred to the extent that it granted the Association's motion on the ground that they failed to comply with Section 16 (b) of the Amended Declaration, which requires that homeowners attempt to resolve disputes by filing a grievance with the Board and attending a hearing regarding the dispute prior to filing a lawsuit. However, we held in Division 1, supra, that the Marinos are the " prevailing party" because they successfully defended against the Association's action, and thus, they [331 Ga.App. 212] are entitled to attorney fees regardless of whether they succeeded on their counterclaims. Accordingly, we need not address this enumeration of error.

In summary, for all of the foregoing reasons, we reverse the trial court's ruling that the Marinos were not the " prevailing party" to the litigation and were not entitled to attorney fees. And we remand the case for further proceedings to determine the exact amount of attorney fees to be awarded and for final judgment to be entered in favor of the Marinos.

Judgment affirmed in part and reversed in part, and case remanded.

Doyle, P. J., and Miller, J., concur.


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