Hildenbrand v. Avignon Villa Homes Community Assoc.

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NOT DESIGNATED FOR PUBLICATION

No. 114,040
No. 114,684

IN THE COURT OF APPEALS OF THE STATE OF KANSAS

JIM HILDENBRAND and JAMES B. HILDENBRAND,
Trustee of the JAMES B. HILDENBRAND LIVING TRUST,
Dated March 1, 2012,
Appellants,

v.

AVIGNON VILLA HOMES COMMUNITY ASSOCIATION, INC.,
Appellee.


MEMORANDUM OPINION

Appeal from Johnson District Court; GERALD T. ELLIOTT, judge. Opinion filed October 28, 2016.
Reversed and remanded with directions.

Eldon J. Shields and Steven R. Smith, of Gates Shields Ferguson Hammond, P.A., of Overland
Park, for appellants.

Lawrence L. Ferree, III, and Brett T. Runyon, of Ferree, Bunn, Rundberg & Ridgway, Chartered,
of Overland Park , for appellee.

Before MALONE, C.J., HILL and ATCHESON, JJ.

Per Curiam: A long-simmering dispute between James Hildenbrand and the
homes association for the Olathe community in which he lives has boiled over in the
Johnson County District Court as a fight about extensive landscaping he had done to his
house. Part way through the legal proceedings, the district court directed that a homes
association committee review the landscaping plan—something that hadn't happened
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even though Hildenbrand already completed the improvements. The committee rejected
the plan, and the district court upheld that determination, finding the decision to have
been made in good faith. The district court later ordered Hildenbrand to remove the
landscaping. On Hildenbrand's appeal, we reverse and remand for further proceedings
because the district court applied an incomplete and legally insufficient standard in
upholding the committee's decision.

FACTUAL AND PROCEDURAL BACKGROUND

Given the comparatively narrow basis for our decision, we need not lay out a
detailed account of the friction between Hildenbrand and the Avignon Villa Homes
Community Association and, in particular, the Association's Architectural Review
Committee. An extended recounting of the litigation is likewise unnecessary. We offer a
highly condensed version of the factual and procedural history for context, recognizing
that the parties are fully familiar with the particulars.

In 2012, Hildenbrand moved into Avignon Villa Homes, a residential development
catering to adults with grown children. The homes are, by design, quite similar in
appearance. The Homes Association arranges for mowing, snow removal, and other
maintenance services for the community residents. The homeowners pay fees to the
Homes Association and agree to abide by the extensive covenants, rules, and regulations
governing land use in the development. Hildenbrand was informed of and received a
copy of those materials during the purchase process.

To promote the common appearance of the community, the Homes Association
has developed several model landscape plans. The association's covenants require a
homeowner to submit any contemplated landscaping to the Architectural Review
Committee for advance approval. The committee consists of development homeowners
elected by their peers.
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Shortly after Hildenbrand moved in, he and the Homes Association were at odds
over some flower pots he put around his residence, his apparently continuing failure to
park a car in his garage, and the placement of a satellite dish in his backyard. While
Hildenbrand and the association were warring over the satellite dish, he submitted a plan
for landscaping of his backyard that was considerably more elaborate than the suggested
approaches. The association refused to consider his plan, since the dispute over the
satellite dish had not been resolved. The association assessed daily "fines" against
Hildenbrand because he refused to move the satellite dish to an approved location on his
property.

In response to a request from Hildenbrand, the Federal Communications
Commission issued an opinion letter to the effect that the Homes Association could not
dictate where the satellite dish should be placed. The association withdrew its demand the
dish be moved and rescinded the fines.

In the meantime, Hildenbrand had been working with a professional landscaper to
design plans for both his backyard and front yard. In late 2012, Hildenbrand submitted
that landscape plan for his backyard to the association. The Architectural Review
Committee approved parts of the plan and rejected other components. The next spring,
Hildenbrand e-mailed a revised backyard plan and says he had a front yard plan hand
delivered to the association's management office. During the court proceedings, the
Homes Association suggested Hildenbrand didn't provide a front yard plan. The parties
do agree the front yard plan never went to the Architectural Review Committee for
consideration.

In late April 2013, Hildenbrand spoke with the Homes Association property
manager about his landscaping plans. She apparently looked at a file and seeing the
review of the backyard plan from the preceding fall told Hildenbrand something to the
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effect that the landscaping had been approved. Taking that representation as a categorical
go-ahead, Hildenbrand had the landscaper begin the extensive changes to his front and
backyards. In June, the Homes Association and its lawyer sent letters to Hildenbrand
telling him to stop the landscaping because his plan had not been approved. Although not
directly relevant to the point we decide, we mention conflicting trial evidence some of
which suggests the landscaping had largely been completed by then and some of which
suggests the most sweeping aspects of the plan remained to be done. The undisputed trial
evidence established Hildenbrand completed the landscaping and paid about $17,000 for
the project.

Rather than responding directly to the Homes Association or its lawyer about the
demand he halt the landscaping, Hildenbrand hired his own lawyer and filed a Chapter 61
limited action in the district court alleging the association's position violated his legal
rights. The Homes Association counterclaimed for an order requiring removal of the
landscaping—characterized as specific performance of the association's covenants—and
for a money judgment reflecting both fines it had levied against Hildenbrand for the
unapproved landscaping and its legal fees. Given the issues and the relief each side
sought, the district court removed the case from the limited actions docket and treated it
as a regular Chapter 60 civil suit, substantially expanding the discovery options and
pretrial motions routinely available to litigants.

Hildenbrand and the Homes Association tried the case to the district court sitting
without a jury in early 2014. Broadly characterizing the evidence, the Homes Association
did not contend the landscaping was aesthetically objectionable in any abstract sense or
offer specific evidence it would materially diminish property values within the
community. Rather, the association argued that Hildenbrand patently violated the
covenants, rules, and regulations to which he agreed by making substantial changes to his
property without advance approval and that the landscaping was far and away the most
elaborate and ostentatious in the community. The association suggested both current
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owners and potential buyers might be put off by widely varying landscaping of the homes
or especially elaborate landscaping of a few homes, thus undercutting a fundamental goal
of presenting a common appearance throughout the development. Hildenbrand presented
evidence, albeit questioned by the Homes Association, that removing the landscaping and
restoring his property would cost about $40,000. The district court ruled against
Hildenbrand on his claims against the Homes Association and entered an order that the
landscaping be removed. In its ruling, the district court noted that Hildenbrand's overall
landscaping plan had never been submitted to or considered by the Architectural Review
Committee. So the district court stayed its order and directed that the Architectural
Review Committee render a decision on the landscaping plan. The district court also gave
Hildenbrand the option to challenge the committee's decision if he believed it were
improperly made.

Hildenbrand promptly submitted his full landscaping plan to the Architectural
Review Committee, and the committee, a week later, rejected the bulk of the plan and,
thus, the actual work that had been done. Exercising his prerogative under the district
court's order, Hildenbrand disputed the decision.

The district court heard testimony and received other evidence regarding the
Architectural Review Committee's decision. The district court ruled that the committee
acted in "good faith" in denying Hildenbrand's landscaping plan and, therefore, satisfied
the governing legal standard. The district court rejected Hildenbrand's arguments that the
committee applied unwritten or nonexistent restrictions to the plan and had allowed
comparable landscape motifs for other residents. The district court reasoned that good
faith could shield a committee decision that differed from earlier decisions for other
residents or was "erroneous or unfair." In its memorandum decision on this point, the
district court focused on what it perceived to be the "state of mind" of the committee
members as they reviewed the landscaping plan. Hildenbrand filed a notice of appeal
seeking review of the district court's determination and other issues arising from the trial.
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After the notice had been filed, the district court took up the Home Association's
request for a judgment covering the fines assessed against Hildenbrand and an award of
its litigation costs, including attorney fees. The district court awarded the association
$85,000 in attorney fees but withheld any ruling on the association's fines specifically to
await the outcome of Hildenbrand's appeal. The district court also stayed its order for
removal of the landscaping during the appeal, conditioned on Hildenbrand posting a bond
for the attorney fees. We understand Hildenbrand has posted the bond. He then filed a
second notice of appeal pertaining to the attorney fees.

LEGAL ANALYSIS

Before turning to the issue on which we reverse and remand, we mention two
procedural wrinkles in the appeal ostensibly affecting our jurisdiction. Neither, however,
prevents us from going forward.

First, we questioned whether the district court had entered an appealable final
judgment or decision because the matter of the fines had been left unresolved. We issued
a show cause order to the parties, received supplemental briefing from them, and
addressed the jurisdictional question during oral argument. Shortly after the argument,
the Homes Association filed a supplemental brief stating its claim for fines against
Hildenbrand had been "withdrawn for purposes of this litigation." Based on that
representation, our concerns about the lack of appellate jurisdiction for want of a final
judgment have been alleviated.

Second, the Homes Association contends Hildenbrand did not file a timely appeal
from the district court's order that he remove the landscaping and, therefore, this court
lacks jurisdiction to consider any issue that could negate the order. A party's failure to file
a timely notice of appeal deprives this court of jurisdiction. Andres v. Claassen, 238 Kan.
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732, 737, 714 P.2d 963 (1986); Ohlmeier v. Jones, 51 Kan. App. 1014, 1024, 360 P.3d
447 (2015). The association characterizes the order as a permanent injunction and argues
the 30-day period to appeal ran from the entry of the order. See K.S.A. 2015 Supp. 60-
2102(a) (injunction among district court rulings immediately appealable as a matter of
right); K.S.A. 2015 Supp. 60-2103(a) (time to appeal). The order did not constitute an
injunction, so the argument fails. We have jurisdiction to consider all of the issues
Hildenbrand has raised.

The district court appears to have ordered specific performance of the contractual
covenants between Hildenbrand and the Homes Association that require abatement of
unapproved changes to or uses of property within the development. But the district court
set no defined time period or particular date for Hildenbrand to perform that obligation; it
simply required compliance "within a reasonable time." An order for specific
performance may be functionally treated as a mandatory injunction for purposes of
appeal if it states with particularity when the party must act and what the party must do.
See Petrello v. White, 533 F.3d 110, 114-16 (2d Cir. 2008); 16 Wright & Miller, Federal
Practice and Procedure: Jurisdiction § 3922 & n.37 (2012). Otherwise, the order should
not be considered injunctive relief. Petrello, 533 F.3d at 116 ("[T]he order did not
constitute an injunction because it did not impose any deadline for [the defendant] to
perform any act."). That is the case here. The district court's decisions to stay the order to
allow Hildenbrand to submit his landscape plan to the Architectural Review Committee
during the litigation and to again stay the order on the appeal bolster our conclusion.
Because Hildenbrand never faced a specific deadline for removing the landscaping, the
order could not be considered an injunction for purposes of triggering the time to appeal.
See K.S.A. 2015 Supp. 60-906 ("Every order granting an injunction . . . shall be specific
in [its] terms."); Wing v. City of Edwardsville, 51 Kan. App. 2d 58, 67-68, 341 P.3d 607
(2014) (noting specificity requirement for injunctions and recognizing federal law as
analogous persuasive authority), rev. denied 302 Kan. 1022 (2015); see also Kartman v.
State Farm Mut. Auto. Ins. Co., 634 F.3d 883, 893 (7th Cir. 2011) (injunction must be
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sufficiently definite that "the enjoined party is fairly apprised of his responsibilities and
the court can objectively assess compliance"); First Assembly of God, Alexandria, Va. v.
City of Alexandria, Va., 739 F.2d 942, 944 (4th Cir. 1984) (specificity requirement
protects enjoined parties by informing them of precisely what they must do to comply
with injunction).

We now turn to the issue on which we remand. The district court applied an
incorrect legal standard to the Architectural Review Committee's decision on the
landscaping plan, thereby handing the Homes Association an impermissible advantage.
The proper standard is more demanding. Accordingly, we have to reverse the ruling of
the district court and remand for further proceedings. We do not address the other issues,
including Hildenbrand's challenge to the attorney fee award, since they are no longer ripe
for review.

As the district court correctly recognized, the Kansas Legislature has enacted a
statutory scheme aimed at regulating the interaction of homes associations and their
members to require some measure of fair play in their relationship. K.S.A. 2015 Supp.
58-4601 et seq. Known as the Kansas Uniform Common Interest Owners Bill of Rights
Act, the measure went into effect January 1, 2011, and applies to this dispute. K.S.A.
2015 Supp. 58-4601. The Kansas Act essentially parallels model legislation drafted in
2008 by the National Conference of Commissioners on Uniform State Laws. The
conference recognizes Kansas as the only state to have adopted the Act. The Act is an
abbreviated version of draft legislation comprehensively regulating the formation,
operation, financing, and dissolution of home owners associations and similar
organizations, such as condominium boards and real estate cooperatives. Several states
have adopted versions of the comprehensive scheme, according to the National
Conference.

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Particularly pertinent here, the Kansas Act provides: "Every contract or duty
governed by this act imposes an obligation of good faith in its performance or
enforcement." K.S.A. 2015 Supp. 58-4604(a). The district court acknowledged K.S.A.
2015 Supp. 58-4604(a) governs the covenants, rules, and regulations of the Homes
Association and the decisions of its various boards and committees. And the district court
endeavored to apply the statutory "good faith" provision to the Architectural Review
Committee's decision effectively denying Hildenbrand's landscaping plan. Neither
Hildenbrand nor the Homes Association disputes the applicability of K.S.A. 2015 Supp.
58-4604(a). But they disagree about what it means. Nobody has found a Kansas appellate
court decision construing K.S.A. 2015 Supp. 58-4604(a).

The issue we consider turns on the proper meaning of K.S.A. 2015 Supp. 58-
4604(a) and whether the district court then correctly applied the statutory requirement.
That is a question of law, so we owe no deference to the meaning the district court
imputed to the term "good faith." Unruh v. Purina Mills, 289 Kan. 1185, 1193, 221 P.3d
1130 (2009) ("Interpretation of a statute is a question of law over which [an appellate]
court has unlimited review."); Wilson v. Larned State Hospital, No. 112,193, 2016 WL
1079453, at *2 (Kan. App. 2016) (unpublished opinion).

Although the Kansas Act has some defined terms, "good faith" is not among them.
See K.S.A. 2015 Supp. 58-4602. The drafters of the uniform act provided explanatory
comments for each of its sections, including the provision that verbatim became K.S.A.
2015 Supp. 58-4604(a). The comment for that section states that "good faith" has two
components: "'honesty in fact'" and "observance of reasonable standards of fair dealing."
7 U.L.A. Uniform Act § 4, comment p. 190. The comment points out that the concept of
"good faith" for purposes of the uniform act has been drawn from and is synonymous
with the term as it is used in the Uniform Commercial Code. See K.S.A. 2015 Supp. 84-
1-201(b)(20) (defining "good faith" as "honesty in fact and the observance of reasonable
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commercial standards of fair dealing"); K.S.A. 2015 Supp. 84-7-102(a)(6) (same
definition of good faith).

The Homes Association contends we should ignore the comments to the uniform
act because the Kansas Legislature did not adopt them. But the comments are not part of
the uniform act, and we wouldn't expect the legislature to pass them or the governor to
sign them. At the same time, however, we may presume the legislature knew the Kansas
Act tracked a model statute accompanied by explanatory comments. If the legislature
intended the Kansas Act to be applied in a way that differed from the comments, we may
fairly conclude it would have modified the statutory language to reflect that difference.
We, therefore, have no reluctance in reviewing the comment for persuasive guidance
regarding the meaning of "good faith" as used in the Act. See 7 K.S.A. vii (Furse 1996)
(explanatory note of Kansas Revisor of Statutes that comments accompanying Uniform
Commercial Code may be "persuasive in the interpretation of the statutory material").

As we have indicated, good faith as used in K.S.A. 2015 Supp. 58-4604(a)
imposes two distinct requirements. Honesty in fact entails a subjective intent to be
forthright and fair. See K.S.A. 2015 Supp. 84-1-201, comment 20; City of Riverdale v.
Diercks, 806 N.W.2d 643, 656 (Iowa 2011); Community Bank v. Ell, 278 Or. 417, 428-
29, 564 P.2d 685 (1977). It is roughly the opposite of maliciousness in the sense of ill-
will or a desire to do harm. This subjective mental state corresponds to the understanding
of good faith as expressed in Kansas common law. See Sowder v. Lawrence, 129 Kan.
135, 138, 281 P. 921 (1929); Richardson v. Gunby, 88 Kan. 47, 50-51, 127 P. 533 (1912).

But adherence to reasonable standards of fair dealing—the second part of the
statutory definition of good faith—imposes an objective requirement of evenhandedness
in any given transaction or decision. See K.S.A. 2015 Supp. 84-1-201, comment 20 (fair
dealing reflects "objective element" addressing parties' "conduct"); Will v. Mill
Condominium Owners' Ass'n, 176 Vt. 380, 388, 848 A.2d 336 (2004). That is, the parties'
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interaction actually must reflect a course of fair dealing. So the requirement goes beyond
a subjective intent or state of mind to define behavior or actions. The reasonableness of
the conduct will be shaped by the nature of the parties' relationship or the particular
transaction in which they engage.

In Will, the Vermont Supreme Court applied that state's version of the
comprehensive uniform act to find that a condominium association breached the good-
faith requirement by selling a member's condominium at a private foreclosure sale that
did not conform to "commercially reasonable" standards aimed at securing the best price
and that lacked due regard for the owner's interests. 176 Vt. at 388. The court vacated the
sale without deciding whether the association acted in subjective good faith or honesty in
fact. The association's failure to use reasonable methods in conducting the sale was
sufficient to negate good faith under Vermont's statutory scheme. 176 Vt. at 389. The
good-faith requirement in Vermont's Uniform Common Interest Ownership Act, as
applied in Will, matches the good-faith requirement in K.S.A. 2015 Supp. 58-4604(a).
See 176 Vt. at 386 (quoting Section 1-113 of the Vermont Act and the explanatory
comment).

Here, the district court looks to have applied only a subjective honesty-in-fact
standard to the Architectural Review Committee's decision to deny Hildebrand's
landscaping plan. The memorandum decision cites only the committee members' state of
mind in finding the denial to be in good faith. Although acknowledging Hildenbrand's
argument that good faith under the Act also requires reasonable standards of fair dealing,
the district court never considers or applies that requirement. By failing to do so, the
district court used too short a legal ruler to measure the evidence. And the resulting
measurement impermissibly slighted Hildenbrand.

In arguing the point, Hildenbrand, however, hasn't been entirely faithful to what
we understand the fair-dealing requirement entails. Hildenbrand has emphasized the
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purported unfairness of the result—that he will have to remove $17,000 in landscaping at
a cost he has estimated to be $40,0000. But the "fair dealing" that composes good faith
under the Act (along with honesty in fact) addresses the process or means used in getting
to the result. The method must be fair.

In some circumstances, a grossly inequitable result may be circumstantial
evidence of an unfair process. The Will case offers a good example. There, the
condominium association's private foreclosure sale of the unit for nonpayment of dues
yielded a single bid for less than 15 percent of the amount the association believed to be
the member's equity in the property. The Vermont Supreme Court considered the extreme
disparity between the bid and the actual value of the condominium to be evidence of the
unreasonableness of the sale process. Will, 176 Vt. at 388-89. At the same time, however,
the court cautioned that a foreclosure sale should not be treated as falling outside the
standards of fair dealing and, hence, good faith merely because "a better price could have
been obtained." 176 Vt. at 388.

Here, there isn't the same kind of direct linear connection between an outcome
startling in its demonstrable inadequacy and the process generating that outcome. The bid
price of the condominium as compared to the owner's equity or the unit's fair market
value reflects an accounting measured in dollars and cents. The reasonableness—or,
perhaps more accurately, the unreasonableness—of the sale process would explain a
readily quantifiable and obviously depressed outcome.

In this case, however, we are concerned with the deliberative processes of the
Architectural Review Committee and a decision or outcome that can't be measured
simply in financial terms or by some other easily calculated gauge. So the purported
fairness of the result itself can't be the determinative factor as to whether the Homes
Association and its Architectural Review Committee acted in good faith under K.S.A.
2015 Supp. 58-4604(a), even though Hildenbrand had tried to channel the debate in that
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direction. By the same token, however, the result should not be reflexively discarded as
irrelevant to the nature of the process. On remand, the district court may or may not find
the ultimate outcome reached by the Architectural Review Committee to be of some
evidentiary value under all of the circumstances in assessing the issue of statutory good
faith.

Without attempting to limit the range of what the district court might consider, we
think the process the Architectural Review Committee used in passing on other residents'
landscape plans would be highly instructive on the issue of fair dealing. The committee's
handling of other proposals deviating significantly from the model plans would be
especially enlightening. How the committee treated Hildenbrand obviously would be
material. After receiving the front and backyard plans, did the committee candidly
identify particular concerns about the landscaping and give Hildenbrand a fair
opportunity to speak to those concerns before it reached a final decision? Were the
committee's reasons for rejecting the plans (or significant portions of them) clearly stated
and well anchored in specific standards in the Homes Association's covenants, rules, and
regulations? Limiting input from Hildenbrand or basing the rejection on unarticulated
reasons or grounds that don't match written criteria would tilt against good faith. Those
considerations retrace some of the evidence and argument the district court has already
received. But they may be weighed differently in taking full account of the good-faith
requirement imposed in K.S.A. 2015 Supp. 58-4604(a). Additional circumstances likely
would inform the district court's determination of good faith. We do not mean to set out a
strict template for that call or otherwise constrain what the district court may identify as
pertinent in evaluating the committee's good faith.

We similarly offer no directive on remedy. If the district court were to find the
Homes Association, operating through the Architectural Review Committee, failed to act
in good faith within the meaning of K.S.A. 2015 Supp. 58-4604(a) in rejecting
Hildenbrand's landscaping plan, the appropriate relief ought to be calibrated to the degree
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of the statutory violation. An especially egregious breach of good faith arguably might be
best remedied with a finding that a homes association's right to review had been forfeited
as to the particular landscaping plan or other request. The remedy ought to be tailored to
the circumstances of the case in light of the request and the association's handling of it.

Because the district court applied an incomplete test for good faith in ruling on the
propriety of the Architectural Review Commission's rejection of Hildenbrand's
landscaping plan and that error favored the Homes Association, we reverse and remand
for further proceedings consistent with this decision. On remand, the district court must
decide the matter of good faith in conformity with the twin requirements of K.S.A. 2015
Supp. 58-4604(a) addressing both subjective honesty in fact and objectively reasonable
standards of fair dealing. We leave it to the district court, in consultation with the lawyers
for the parties, to fashion the appropriate proceedings, which could range from
reconsideration of the present trial record with or without additional briefing or argument
to reopening of the record for additional evidence, taking account of the admonition of
K.S.A. 60-102 that civil proceedings be conducted in a way conducive to "the just,
speedy and inexpensive determination of every action."

Reversed and remanded with directions.