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Heckenberger v. Livingston Development Corp.

Court of Appeals of Mississippi

October 8, 2019

JEFFREY HECKENBERGER, BARBIE HECKENBERGER, DARRYL GIBBS, HOWELL COBB WARE, JR. AND MIKEL SHANNON MCMILLIAN APPELLANTS/ CROSS-APPELLEES
v.
LIVINGSTON DEVELOPMENT CORPORATION AND MADISON COUNTY, MISSISSIPPI, BOARD OF EDUCATION APPELLEES/ CROSS-APPELLANTS

          DATE OF JUDGMENT: 12/15/2017

          MADISON COUNTY CHANCERY COURT HON. CYNTHIA L. BREWER JUDGE

          ATTORNEYS FOR APPELLANTS: JOHN HOWARD SHOWS JOHN SAMUEL GRANT IV RICHARD ALLEN EISENBERGER JR.

          ATTORNEYS FOR APPELLEES: JERRY L. MILLS JOHN PRESTON SCANLON HOLMES S. ADAMS LINDSEY O. WATSON

          BEFORE J. WILSON, P.J., TINDELL AND McDONALD, JJ.

          McDONALD, J.

         ¶1. Five homeowners-Jeffrey Heckenberger, Barbie Heckenberger, Darryl Gibbs, Howell Cobb Ware Jr., and Mikel Shannon McMillian (Homeowners)[1]-from the Livingston Subdivision in Madison County sued three defendants: Livingston Development Corporation (Developer), Livingston Property Owners Association (Association), and the Madison County School Board.[2] The Homeowners sought a declaratory judgment that (1) the Developer was an owner and owed assessments to the Association; (2) a continuing lien existed for the unpaid assessments; (3) the Developer should be stripped of its voting rights until it pays the assessments; and (4) the Developer is an owner of the common areas. At the conclusion of the Homeowners' case-in-chief, the Developer made a motion to dismiss pursuant to Rule 41(b) of the Mississippi Rules of Civil Procedure and argued that the Homeowners failed to show a right to relief.

         ¶2. The Madison County Chancery Court granted the Developer's motion to dismiss in part and deferred ruling on the following two issues until the close of all of the evidence: (1) the Homeowners' request for a declaratory judgment that the Developer is an "owner" of certain lots and (2) the issue of attorney fees. At the close of the case, the chancery court ruled that the Developer was an owner because its leasehold interest in and to its remaining lots fell within the definition of an "owner" as provided in the covenants. But the chancery court dismissed the Homeowners' requested relief regarding this issue because it found that the Association did not provide the Developer with written notice of the assessments to the Developer as required in Section 5.01 of the covenants. The court also ruled that each party was to bear its own attorney fees. The Homeowners now appeal the chancery court's decision. The Developer cross-appeals the court's finding that it is an owner and that it was not entitled to attorney fees. Finding no error, we affirm.

         FACTUAL BACKGROUND

         ¶3. In 1999, the School Board entered into a development lease with the Developer for the purpose of developing and marketing subdivision lots for long-term residential leases.[3]The land to be developed is Sixteenth Section land[4] that is owned by the State of Mississippi and held in trust by the School Board. After entering into the lease, [5] the Developer divided the land into fifty-nine lots for residential use and certain common areas.

         ¶4. In 2001, the School Board and the Developer executed and filed, in the land records of Madison County, the "Corrected Declaration of Covenants, Conditions and Restrictions for Livingston Subdivision."[6] Under the terms of the covenants, the Developer and the District created and organized the Association. They delegated and assigned to the Association the powers and duties for the administration and maintenance of the common areas and the lakes, the administration and enforcement of the provisions of the covenants, and the determination, collection, and disbursement of the maintenance and special assessments and other charges. The common areas included, among other things, the streets throughout the subdivision, a drainage easement, and a lake.

         ¶5. The covenants include several definitions. An owner is defined in Article I, Section 1.01 as:

the record holder, whether one or more Persons, of a Leasehold Interest or a fee or undivided fee interest in or to any Lot, including contract sellers, but excluding those Persons who hold an interest in a Lot merely as security for the performance of an obligation or payment of debt. Each owner shall be either a Class A Member or a Class B member as provided by Article III. The District shall not be considered to be an owner.

         In the same section a member is defined as "each Person who holds or has any class of membership in the Association as provided by Article III." According to Article III, Section 3.01, the covenants membership includes:

the Members of the Association shall be and consist of every Person who is, or who becomes, an owner of record of the fee title to or a Leasehold Interest in a Lot and is included in the definition of an Owner under Article I. When more than one Person owns or holds an interest or interests in a Lot, then all such persons shall be Members. For the purposes of membership in the Association, the District shall not be considered to be an Owner.

         ¶6. For voting purposes, there are two classes of members, Article III, Sections 3.02 and 3.03. Class A members who are entitled to one vote per lot or leasehold are all members except the Declarant (i.e., the Developer). The Developer is the only Class B member, and it is entitled to ten votes for each unsold lot it still owns. While defined separately, elsewhere the covenants appear to use the terms "owners" and "members" interchangeably.

         ¶7. The marketing and sale of the lots commenced in 2002. Since then, the Association has required owners/members to pay annual assessments in the amount of $500 per lot pursuant to Article V, Section 5.01 of the covenants. Failure to pay the assessment could result in the suspension of a member's voting rights pursuant to Article IX, Section 9.01(b) of the covenants. The Developer is a member of the Association, and it is undisputed that it has never paid any assessments. When the amended complaint was filed, the Developer retained an interest in nine lots. At the beginning of the trial, the Developer retained an interest in six lots.

         PROCEDURAL HISTORY

         ¶8. On November 24, 2014, the Homeowners filed a complaint on behalf of the Association. They requested a declaratory judgment, a preliminary injunction, and a permanent injunction. The Homeowners asserted that the Developer owned certain lots within the subdivision and was liable to the Association for assessments pursuant to the covenants. The Homeowners also claimed, among other things, that the Developer was obligated to make certain repairs to the subdivision's common areas; that it should be stripped of all of its voting rights; and that it should be prevented from selling any more lots because a continuing lien existed for its unpaid assessments.

         ¶9. On April 22, 2015, the Developer filed a motion to dismiss arguing that the Homeowners lacked standing to sue under Mississippi Code Annotated section 79-11-193(3) (Rev. 2013) because the Homeowners never made a demand to the Association. The Developer also requested attorney fees.

         ¶10. The chancery court entered an order denying the Homeowners' preliminary injunction request on April 6, 2016. On May 2, 2016, the chancery court entered a separate order granting the Developer's motion to dismiss and again denying the preliminary injunction. As to the standing issue, the court found that the Homeowners, as owners, had individual rights to sue under the covenants, but not on behalf of the other homeowners in the Association. The court granted the Homeowners thirty days within which to amend their complaint to sue in their individual capacities.

         ¶11. On May 24, 2016, the Homeowners filed their amended complaint for a declaratory judgment and the enforcement of the covenants. The Homeowners requested that the court determine and declare that: (1) the Developer is or was the owner of nine lots in the subdivision and is liable for unpaid assessments; (2) a continuing lien existed on the nine lots and the Developer should be personally liable for the lien; (3) the Developer was not entitled to cast any votes until the assessments were paid; and (4) the Developer was the owner of the common areas and has not conveyed them to the Association.

         ¶12. On February 3, 2017, the Developer filed a motion to dismiss the Homeowners' amended complaint or, alternatively, for summary judgment. The Developer argued that the matter should be dismissed because the Homeowners failed to state a claim upon which relief could be granted pursuant to Rule 12(b)(6) of the Mississippi Rules of Civil Procedure. The Developer also argued that summary judgment was proper because it had no obligation to make the requested repairs to the common areas.

         ¶13. On April 3, 2017, a four-day bench trial on the merits began after the court denied the Developer's motion to dismiss. At the conclusion of the Homeowners' case-in-chief, the Developer moved to dismiss pursuant to Rule 41(b). The court granted the Developer's motion ore tenus to dismiss all but two counts within the Homeowners' amended complaint. The court dismissed the Homeowners' requested relief by holding that: (1) the Developer was not liable for assessments because it had not received written notice of them; (2) the Homeowners failed to show that a continuing lien existed against the Developer; (3) the Developer was entitled to vote; and (4) the Homeowners failed to prove that the Developer owned or was responsible for the upkeep of the common areas. The court deferred ruling on two issues until the close of all of the evidence: (1) the Homeowners' request for a declaratory judgment that the Developer was the "owner" of certain lots, and (2) the issue of attorney fees. After the Developer rested its case, the Homeowners asked the court to reconsider its decision regarding ownership of the common areas. The court denied that request because it had not entered a final judgment.

         ¶14. On April 25, 2017, the Homeowners filed their notice of appeal from the court's April 6, 2017 bench ruling granting in part the Developer's Rule 41(b) motion to dismiss. The Mississippi Supreme Court dismissed the Homeowners' appeal for lack of a final judgment.

         ¶15. On December 15, 2017, the chancery court entered its final judgment. The court ruled that the Developer was the "owner" of its remaining lots. But the court dismissed the Homeowners' request for unpaid assessments because the Developer was not given written notice as required by the covenants. Because the Developer had not received written notice of the assessments, the court ruled that there was no continuing lien on its lots, and its voting rights would not be suspended. The court also found that because the Homeowners failed to prove that the Developer owned the common areas, they were not entitled to relief on that issue either. Lastly, the court denied both parties' requests for attorney fees.

         ¶16. The Homeowners timely filed a notice of appeal. They argue that the court erred in ruling that: (1) the Developer did not owe assessments; (2) a continuing lien did not exist against the Developer; (3) the Developer's voting rights should not be suspended; (4) the Homeowners were not entitled to attorney fees; and (5) the Homeowners' motion to reconsider the court's bench ruling on the common areas was not ripe due to the fact that a final judgment had not been entered.

         ¶17. The Developer cross-appeals and argues that the court erred in finding that it was an owner because it has a development lease on gross acreage as opposed to a long-term residential lease on individual lots. Therefore, the Developer reasons that it did not fit within the definition of an owner. The Developer also argues that it is entitled to attorney fees because the Homeowners' suit was frivolous, made in bad faith, without reasonable cause, and for an improper purpose.

         STANDARD OF REVIEW

         ¶18. "In a bench trial, after a plaintiff has completed the presentation of his evidence, the defendant may move for a dismissal on the ground that upon the facts and the law the plaintiff has shown no right to relief."[7] Dissolution of Marriage of Lewis v. Lewis, 269 So.3d 230, 235 (¶13) (Miss. Ct. App. 2018) (internal quotation marks omitted). When considering a Rule 41(b) motion to dismiss, the judge must view the evidence fairly, rather than in the light most favorable to the plaintiff. Id. at (¶14). In other words, "the trial judge should give the plaintiff's evidence only 'such weight and credibility as he or she would ascribe to it if he or she were making findings of fact and rendering final judgment.'" Id. "If the judge would find for the defendant on the evidence presented, the case should be dismissed." Id. (internal quotation marks omitted). Also, "[t]he motion should be granted if the plaintiff has failed to prove one or more essential elements of his claim or if the quality of the proof offered is insufficient to sustain the plaintiff's burden of proof." Id. However, "the court must deny a motion to dismiss only if the judge would be obliged to find for the plaintiff if the plaintiff's evidence were all the evidence offered in the case." Id.

         ¶19. "This Court applies the substantial evidence/manifest error standard to an appeal of a grant or denial of a motion to dismiss pursuant to Rule 41(b)." Id. at 236 (¶15). The trial judge's decision will not be disturbed on appeal unless it was manifestly wrong. Id. Moreover,

[i]n reviewing appeals taken from chancery court rulings, we apply a limited standard of review in that the factual findings of the chancery court, if supported by substantial evidence, will not be disturbed unless the chancery court abused its discretion, applied an erroneous legal ...

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