2015-0514, New Hampshire Housing Finance Authority v. Pinewood Estates Condominium Association

Hampshire Bankers Association, as amici curiae. Mortgage Bankers and Brokers Ass ociation of New Hampshire, Inc.; and New Robert J. Dietel on the brief), for Cooperative Credit Union Association, Inc.; Gallagher, Callahan & Gartrell, P. C., of Concord (W. John Funk and

for the respondent. Daniel D. Muller, Jr. and Ashley B. Scott on the brief, and Mr. Muller orally), Cronin, Bisson & Zalinsky, P.C., of Manchester (Mark E. Connelly,

brief and orally), for the petitioner. Law Office of Joshua L. Gordon, of Concord (Joshua L. Gordon on the

No. 2015 - 0514 Hillsborough - northern judicial district

page is: http://www.courts.state.nh.us/supreme. a.m. on the morning of their release. The direct address of the court's home reporter@courts.state.nh. us. Opinions are available on the Internet by 9:00 to press. Errors may be reported by E - mail at the following address: editorial errors in order that corrections may be made before the opinion goes Hampshire, One Charles Doe Drive, Concor d, New Hampshire 03301, of any Readers are requested to notify the Reporter, Supreme Court of New well as formal revision before publication in the New Hampshire Reports. NOTICE: This opinion is subject to motions for rehearing under Rule p. 2 22 as 2

had paid all post - foreclosure assessments, under Section 6.1(c) of the past - due assessments. The trial court also concluded that, although NHHFA against the Unit,” the trial court concluded that NHHFA was responsible for all a Unit shall be liable . . . for any prior and outstandin g asse ssments lev ied p. 2 2.3 of the condominium d eclaration, which provides that “any Owner acquiring summary judgment in favor of Pinewood on both issues. Relying upon Section of unpaid assessments accrued prior to the foreclosure. T he trial court granted Pinewood had no authority to terminate common services to the unit because including Pinewood’s claim to the pre - foreclosure assessments; and (2) court, arguin g that: (1) it took title to the unit free and clear of encumbrances, NHHFA then filed a petition for declaratory judgment in the superior

pre - foreclosure a ssessments. NHHFA paid all of the post - foreclosure assessments, but refused to pay the accrued prior to the foreclosure, as well as post - foreclosure assessments. notified NHHFA that it owed $4,79 6. p. 2 20, including $4,414.75 in assessments purchased the unit at the foreclosure sale. Shortly thereafter, Pinewood in s uperior c ourt. The court granted the petition, and, i n August, NHHFA 2013, NHHFA filed a Petition for Foreclosure Decree of S ale and to Quiet Title Rugg’s mortgage payments also went unpaid after her death. I n January

terminated t he unit’s common services, including water and sewer services. Rugg ’s estate paid the past - d ue assessments. S ubsequently, Pinewood due assessments were paid. See RSA 356 - B:46, IX ( p. 2 2009). Neither NHHFA nor unit’s common services would be terminated in thirty days unless all the past - Pinewood notified Rugg ’s estate and NHHFA, as the first mortgagee, that the owed $1,375 in past - due assessments and attorney’s fees. I n August, In June 2012, Pinewood sent a letter to Rugg informing her that she

The assessments on Rugg’s condominium went unpaid after her death. bank subsequently a ssigned the mortgage to NHHFA. Rugg died in May p. 2 2011. Manchester. Rugg granted a mortga ge for the unit to a local bank, and the Patricia Rugg purchased a unit in Pinewood’s condominium complex in The summary judgment record supports the following facts. In 2005,

unpaid pre - foreclosure condominium assessment s, w e reverse and remand. chapter p. 3 356 - B ( p. 2 2009 & Supp. 2015), operates to bar Pinewood’s claim for assessments were paid. Because we conclude that the Condominium Act, RSA Pinewood was not obligated to provide common services to the unit until all the previous owner of a unit N H HFA purchased at a foreclosure sale, and that was responsible for p aying condominium assessments that were accrued by court ruled that, pursuant to Pinewood’s condominium d eclaration, NHHFA Association (Pinewood), and awarding attorney’s fees to Pinewoo d. The trial summary judgment in favor of the respondent, Pinewood Estates Condomini um (NHHFA), appeals a decision of the Superior Court (Nicolosi, J.) granting BASSETT, J. The petitio ner, New Hampshire Housing Finance Authority 3

Lafayette, LLC, 168 N.H. 582, 585 (2016) (quotation omitted). “We interpret add language that the legi slature did not see fit to include.” Sanborn v. 428 statute as written and will not consider what the legislature might have said or to i ts plain and ordinary meaning. Id. “We interpret legislative intent from the language of the s tatute itself, and, if possible, construe that language according Olson v. Town of Grafton, 168 N.H. 56 p. 3 3, 566 (2016). We first look to the legislature as expressed in the words of the statute considered as a whole. of statutory interpretation, we are the final arbiter of the intent of the Fighters of N.H. v. N.H. Local Gov’t Ctr., 163 N.H. 613, 614 (2012). In matters statutory interpretation, and, therefore, our review is de novo. Prof. Fire accrued prior to the f oreclosure. Resolving this issue requires us to engage in 479:26 (2013), NHHFA is obligated to pay condominium assessments that We next address whether, pursuant to RSA 356 - B:46, I(a) and RSA

Accordingly, we conclude that NHHFA has standing. and refuses to restor e them until all past - due assessments are paid. termina ted basic services to the unit — including water and sewer services — maintain or use the unit it purchased in foreclosure because Pinewood has omitted). Here, NHHFA has suffered a cognizable legal injury: it cannot Libertarian Party of N.H. v. Sec’y of State, 158 N.H. 194, 195 (2008) (quotation suffered a legal injury against which th e law was designed to protect.” evaluating whether a party has standing to sue, we focus on whether the party appeal the trial court’s decision regarding the t ermination of services. “In As a threshold matter, Pinewood argues that NHHFA lacks standing to

paid. Pinewood also filed a cross - appeal. common services until all assessments — both pre - and post - foreclosure — are against units rather than against individual owners, Pinewood need not restore foreclosure sale. Pinewood also argues that, because assessments are levied Pinewood’s claim for the pre - foreclosure assessments was not affected by the court correctly relied upon the provisions of the d eclaration to conclude that withhold common services from the unit. Pinewood counters that the trial because it paid all post - foreclosure assessments, Pinewood cannot lawfully 2015); RSA ch. 479 (201 p. 3 3 & Supp. 2015). NHHFA further contends that, assessments was extinguished by the foreclosure. See RSA 356 - B:46 (Supp. Pinewood’s encumbrance on the unit arising out of unpaid pre - foreclosure that, pursuant to the Condominium Act and the foreclosure statute, that NHHFA is liable for the pre - foreclosure assessments. NHHFA contends On appeal, NHHFA argues that the tri al court erred when it concluded

pursuant to RSA p. 3 356 - B:15, II (Supp. 2015). This appeal followed. Declaration,” t he trial court also awarded Pi newood its attorney’s fees and costs assessments.” Because Pinewood “successfully enforced the provisions of the assessments are paid, which includes the unpaid pre - foreclosure condominium declaration, Pinewood could “terminate services until all p. 4 4

restored upon payment of all assessments. association. Any terminated services and privileges shall be services normally supplied or paid for by the unit owners’ privileges and cease supplying a deli nquent unit with any and all common assessments, terminate the delinquent unit’s common unit owner and unit owner’s first mortgagee of nonpayment of its board of directors to, after 30 days’ prior written notice to the unit owners’ association may autho rize, pursuant to RSA 356 - B, condominium declaration, bylaws, or rules to the contrary, the Notwithstanding any law, rule, or provision of the

if assessments go unpaid. RSA 356 - B: p. 4 46, IX provides: authorizes a condominium association to terminate common services to a unit the priority of an association’s claim for unpaid assessments. The Act also T he Act empowers association s to collect unpaid assessments, and establishes and/or allow the community’s appearance and quality of living to decline”). (observing that without assessments, association will “decrease servi ces, Priority in Condominium Foreclosures, 67 Ark. L. Rev. 225, 240 (2014) Muddying the Waterfall: How Ambiguous Liability Statutes Distort Creditor elements of the common areas of the condominium. See Boyack & Foster, pay for the operation, maintenance, repair, renovation, and replacement of 356 - B:45 (2009). Condominium associations rely upon these assessments to include the ability to impose and collect assessments from each unit. See RSA The Act enumerates the powers of condominium associations, which

statute controls.”). bylaws conflict with a statute under which the corporation was established, the Corporations § 16 (200 p. 4 4) (“Where a corporation’s articles of incorporation or cannot negate the applicabi lity” of a controlling statute); cf. 18 Am. Jur. 2d “[r]egardless of the provisions of the [condominium] bylaws . . . the bylaws Act, the Act control s. See Sanborn, 16 8 N.H. at 586 (explaining that with the Condominium Act, and, if the terms of a declaration conflict with the the terms of a condominium declaration must be interpreted to be cons istent law concepts.” (qu otation omitted)). We recently reaffirmed the principle that (“[C] ondominium ownership is based on statutory authority, not on common Bibliography of Legal Sources, 103 Law Libr. J. 249, 263 (2011) Condominium Homeownership in the United States: A Selected Annotated condominium form of property ownership in New Hampshire. Cf. Bennett, 147 N.H. 111, 112 - 13 (2001). It is the enabling statutory authority for the projects.” Neumann v. Village of Winnipesaukee Timeshare Owners ’ Assoc., The Condominium Act “governs all condominiums and all condominium

isolation.” Id. (quotation omitted). statutory provisions in the context of the overall statutory scheme and not in p. 5 5

interest, and, therefore, that NHHFA owns the unit “free and clear of all pre - foreclosure assessments does not have priority over NHHFA’s mortgage NHHFA argues that Pinewood’s claim to the debt arising from unpaid

(observing that “[s] urviva bility of a junior li en is unheard of in foreclosure”). (Third) of Property (Mortgages) supra at 448; s ee Boyack, supra at 286 interests). This is “a fundamental principle of mortgage law.” Restatement a “power of sale (nonjudicial) foreclosure” result in the extinguishing of junior cmt. a at 448 - 49 (1997) (explaining that both “a valid judicial foreclosure” and RSA 479:26, III (2013); see Restatement (Third) of Property (Mortgages) § 7.1 interests and encumbrances which do not have priority over such mortgage.” to the foreclosed premises “shall pass to the purchaser free a nd clear of all :24 (2013). Under both methods, upon recording of the deed and affidavit, title involves petitioning the court for a judgment of foreclosure. See RSA 479:22 mortgagee complies with the statute. R SA 479:2 p. 5 5 (Supp. 2015). The other allows mortgagees to foreclose without judicial oversight provided that the pursuant to “a power of sale.” RSA 479:22 -:25 (2013 & Supp. 2015). One New Hampshire law provides for two types of foreclosure proceedings

to “one priority lien.” See RSA 3 p. 5 56 - B:46, I(d). amount of months’ worth of unpaid assessments”). The Act limits associations “creat [ing] a limited and capped super - priority - association lien for a certain “modern statutes typically balance lender and association interests” by assessments can receive priority. See Boyack, supra at 283 (observing that protects first mortgagees by ensuring that no more than six months of unpaid encourages associations to promptly act up on unpaid assessments and be junior to the first mortgage. See RSA 356 - B:46, I(a). This provision I(c). If that procedure is not followed, the association’s lien for assessments will assessments if the association follows the procedure provided in RSA 356 - B:46, h owever, gain limit ed priority over a first mortgage for six months of unpaid RSA 356 - B:46, I(a) (e mphase s added). A condominium association may,

lenders. encumbering that condominium unit and securing institutional and (3) sums unpaid on any first mortgages or first deeds of trust encumbrances recorded prior to the re cordation of the declaration, estate tax liens on that condominium unit, (2) liens and shall be prior to all other liens and encumbrances except (1) real if perfected as hereinafter provided. The said lien, once perfected, chapter and all lawful provisions of the condominium instruments, condominium unit in accordance with the provisions of this condominium unit for unpaid assessments levied against that The unit owners’ association shall have a lien on every

junior to a first mortgage: The Act provides that a lien for condominium assessments is generally p. 6 6

extinguished by the foreclosure, see RSA 479:2 p. 6 6, III, we conclude that NHHFA foreclosure assessments is junior to NHHFA’s mortgage, and, therefore, is because RSA 356 - B:46, I(a) establishes that Pinewood’s claim for the pre operation — is subject to the priority rules in RSA 356 - B:46, I(a). According ly, Thus, we conclude that Pinewood’s interest — whether a lien in name or in terminating services under RSA 356 - B:46, IX based upon unpaid assessments. requirements for obtaining priority over a firs t mortgage holder merely by meaningless if a condominium association could side - step the procedural priority rules set forth in RSA 356 - B:46, I(a) to I(d) of the Act would be legislature did not see fit to include.” (quotation omitted)). Additionally, the consider what the legislature might have said or add language that the the statute to that effect. See Sanborn, 168 N.H. at 585 (“We .. . will not services resolution to act as a priority lien, it would have included language in 356 - B:46, I (c) - (d). Had the legislature intended to allow a terminatio n of one pri ority lien for no more than six months of unpaid assessments. See RSA on an association’s claim for unpaid assessments. An association is limited to Pinewood’s construction directly contravene s the Act’s explicit limitations

result is plainly not allowed by RSA 35 p. 6 6 - B:46. superior lien of an indeterminate amount lasting for an indefinite time. This ra ther than filing a lien for unpaid assessments, it can, in effect, create a argue that, by terminating common services pursuant to RSA 356 - B:46, IX usu[ally] until a debt or duty that it secures is satisfied”). Pinewood appears to “[a] legal right or interest that a creditor has in another’s property, lasting the unit. See Black’s Law Dictionary 1063 (10th ed. 2014) (d efining “lien” as foreclosure that — a lthough not a statutory lien — would operate as a lien on priority rules, an association could maintain an encumbrance on the unit after foreclosure. If a termination of services resolution were not subject to these mortgage, and, RSA 479:26, III provides that a junior lien i s extinguished by circums tances such as those here, a lien for assessments is junior to the first ownership of the un it. RSA 356 - B:46, I(a) explicitly provides that, under ignores the effec t of the termination of services resolution on NHHFA’s assessments, rather than from a statutory lien for assessments, Pinewood stems from Pinewood’s termination of common services because of unpaid 356 - B:46, I(a). Although Pinewood is cor rect that the dispute in this case Act, and fail s to give effect to the specific priority provisi ons set forth in RSA Pinewood’s argument contradicts the plain language of the Condominium

with NHHFA. in land subject to the priority det ermination s” of RSA 35 p. 6 6 - B:46, I. We agree the Condominium Act and Declaration,” it “is not an encumbrance or interest asserts that because the termination of services is “a distinct legal right under RSA 356 - B:46, IX, no t a statutory lien for unpaid assessments. Pinewood applicable here because this case inv olves a “Termination Resolution” under Pinewood counters that the priority rules in RSA 356 - B:46, I(a) are not interests and encumbrances of the association.” (Quotation omitted.) p. 7 7

declaration than is otherwise allowed by the Act. Accordingly, we conclude obligation to pay pas t - due condominium assessments under Pinewood’s encumbrance on a unit after foreclosure. NHHFA cannot have a greater concluded that the Act does not allow an association to have an ongoing conflict, the Act controls. See Sanborn, 168 N.H. at 586 - 8 p. 7 7. We have to the unit. We disagree. W hen the Declaration an d the Condominium Act assessments must be paid in order to restore common privileges and services condominium unit, not the unit owner,” and, therefore, all past - due Condominium Act, “the debt for unpaid assessments is . . . one inuring to the Pinewood, nonetheless, argues that, pursuant to its declaration and the

debt. continue to withhold services from the unit based upon the pre - foreclosure post - foreclosure owner, is not responsible fo r Rugg’s debt, Pinewood cannot authorized by the Act. We therefore conclude that, because NHHFA, as the association would have an ongoing encumbrance on the unit that exceeds that foreclosure owner to ensure that the debt of the previous owner is paid, an withhold services from the unit post - foreclosure in order to force the post month priority lien. See RSA 356 - B:46, I(c) - (d). If an association could E ven when this procedure is followed, the Act limits an association to one six mortgage holder only by followi ng the procedure set forth in RSA 356 - B:46, I(c). does not create a duty to pay.” An association can gain priority over a first make [NH]HFA chargeable. . . . Merely knowing of the outstanding assessment fact “[t]h at Ms. Rugg (or her estate) still owes Pinewood money . . . does not but underlying debt obligation survives). As NHHFA correctly observes, t he Dejadon, 153 N.H. 3 p. 7 76, 379 (2006) (foreclosure extinguishes lien on property, assessments, Rugg’s underlying debt to Pinewood survives. See Cadle Co. v. against the post - foreclosure owner — NHHFA — for the pre - foreclosure We note that, although the foreclosure extinguished Pinewood’s claim

accrued pre - foreclosure, have been paid. We agree with NHHFA. not restore services to the unit until all past - due assessments, including those must restore common services immediately. Pinewood counters that it need asserts that, because it has paid all post - foreclosure assessments, Pinewood circumstances, refers to only pos t - foreclosure assessments. Thus, NHHFA foreclosure assessments, the phrase “all assessments,” under these foreclosure extinguished Pinewood’s claim against the unit for unpaid pre restored upon payment of all assessments.” NHHFA argues that, because the condominium assessments, “[a]ny terminated services and privileges sh all be association terminates common services because a unit owner fails to pay pre - foreclosure assessment debt is paid. RSA 356 - B:46, IX provides that if an the unit, see RSA 4 p. 7 79:26, III, Pinewood can re fuse to restore services until the We next address whether, despite NHHFA’s “free and clear” ownership of

assessments. takes title to the unit free and clear of Pinewood’s claim for the pre - foreclosure p. 8 8

DALIANIS, C.J.