Facts

Defendant, Castletown Corner Owner’s Association, Inc. (“Association”), had a duty to maintain a lift station.  Specifically, the declaration imposed an obligation on the Association to pay “all Maintenance Costs in connection with” improvements constructed at the Association.  Maintenance costs are then defined as “all of the costs necessary to maintain the … sewers, utility strips, and other facilities … and to keep such facilities operational and in good condition, including, but not limited to, the cost of all upkeep, maintenance, repair, replacement … for the continuous operation of such facilities.”  Plaintiff, owner of one of the commercial units, sued the Association for failing to properly maintain the lift station after an incident where the sanitary lift station malfunctioned and flooded the building with human sewage, which allegedly caused Plaintiff’s tenant to terminate its lease.

Issue

Did the Association breach the Declaration (contract) by failing to keep the lift station continually operable?

Trial Court

The trial court “found in favor of the Association on Plaintiff’s claims for negligence and breach of fiduciary duty.  However, the court concluded that the “phrase ‘continuous operation’ in the Declaration imposed a strict liability obligation on the Association.  By contract, the Association was required to keep the Lift Station working.  The Association did not…. Thus, the court found that the Association had breached its contract with [Plaintiff]” and awarded Plaintiff almost $100,000 in damages for lost rent, lost property taxes, insurance premiums and CAM charges.  Both sides appealed.

Court of Appeals

The words in the Declaration matter and the words “continuous operation” are clear and unambiguous.  The risk of an electrical failure was foreseeable.  After a relatively succinct description of exactly what the Declaration requires, the Court found “the plain text of the Declaration requires the Association to ensure that the lift station operates continuously.  Because the lift station stopped functioning on February 14, 2015, the Association breached the terms of the Declaration.  The trial court’s judgment for breach of contract is not clearly erroneous, and we affirm on this issue.”

LESSONS LEARNED
  1. Read your Declaration. If it puts a duty on you, make sure you plan for that duty.  In this case an emergency back-up generator might have been required;
  2. If you are arguing that a condominium document doesn’t say something it seems to clearly say, consider an alternative approach – find a way to settle; and
  3. If you can’t reach a settlement, because the other side makes it impossible, then get the case tried as quickly and efficiently as possible or consider arbitration where the time and expense is likely less.

Castleton Corner Owners Association, Inc. v. Conroad Associates, L.P., No. 19A-PL-2687 (Ind. Ct. App. Oct. 30, 2020)

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