For
Plaintiff: John O. Mancini, Esq.
For
Defendant: Jeffrey H. Gladstone, Esq.; Cale P. Keable, Esq.;
John Deacon, Esq.; Americo M. Scungio, Esq.; Catherine V.
Eastwood, Esq.; Erich J. Hasselbacher, Esq.
For
Special Master: William M. Russo, Esq. John A. Dorsey, Esq.
DECISION
STERN,
J.
Before
this Court is a motion for partial summary judgment filed by
Defendants/Plaintiffs in Counterclaim/Third Party Plaintiffs
James Courter (Courter) and Sorgenfrei, LLC (Sorgenfrei),
together with Involuntary Plaintiffs in
Counterclaim/Involuntary Third Party Plaintiffs JVLV Realty,
Inc. (JVLV), Howard L. Haronian, M.D. (Dr. Haronian), James
Vallides and Lynn Vallides (collectively, the Vallideses),
and Sally Merry (Merry) (collectively with Courter,
Sorgenfrei, and the Vallides, the Unit Owners). The Unit
Owners move for partial summary judgment against
Plaintiff/Counterclaim-Defendant W.H.I., Inc. (W.H.I., Inc.
or Declarant) and Third Party Defendant Peter V. Catalano
(Catalano) on their claims seeking a determination that (1)
W.H.I., Inc.'s declarant rights under the Condominium
Act, G.L. 1956 §§ 34-36.1 et seq., expired
and, as such, Declarant's ability to unilaterally control
the Watch Hill Inn Condominium Association's (WHICA)
executive board expired; (2) the actions of the Declarant in
effectuating certain changes to the Amended and Restated
Declaration of Condominium were ultra vires and
therefore void ab initio; and (3) certain changes to
the Amended Declaration were not made in conformance with the
Condominium Act and therefore void ab initio.
Plaintiff/Counterclaim Defendant W.H.I., Inc.; Third Party
Defendant Catalano; Third Party Plaintiff Watch Hill
Properties, LLC (WHP); and Involuntary Counterclaim/Third
Party Plaintiff HJM, LLC (collectively, WHI) object to the
Unit Owners' Motion for Partial Summary Judgment and have
filed a cross-motion requesting that partial summary judgment
be entered in WHI's favor on the same issues. This
Court's jurisdiction is pursuant to Super. R. Civ. P. 56
and G.L. 1956 § 9-30-1.
I
Facts[1] and Travel
The
instant matter involves a historic condominium development
located at 38 Bay Street, Westerly, Rhode Island, currently
known as Watch Hill Inn Condominium.[2] Watch Hill Inn Condominium
was originally built in 1845 under the name Narragansett Inn.
See Catalano Aff. ¶¶ 6-7. On December 23,
1985, the property was purchased by W.H.I., Inc. and renamed
"Watch Hill Inn." See id. at ¶ 7.
Between 1986 and 2005, W.H.I., Inc. renovated and upgraded
Watch Hill Inn to include sixteen efficiency hotel units, one
residential apartment, a banquet facility, an indoor/outdoor
restaurant, and sixteen on-site compact parking spaces
primarily for staff use. Id. at ¶ 8. After the
Rhode Island Fire Codes were amended as a result of the
Station Nightclub fire of 2005 so as to require that
structures exceeding twenty-five years of age conform to the
new Rhode Island Fire Regulations, Watch Hill Inn was cited
with sixty-five violations, forced to shut down, and given a
deadline to conform to the new regulations. Id. at
¶ 9. W.H.I., Inc. appealed the violations to the State
of Rhode Island Rehab Board for an administrative approval
permitting W.H.I., Inc. to perform a complete rehabilitation
by granting an approval for a continued, non-conforming
"mixed-use status." Id. at ¶ 10.
W.H.I., Inc. was eventually approved for eleven units
consisting of ten residential dwelling units and one
restaurant. Id. at ¶ 11.
Having
been issued the necessary permits, W.H.I., Inc. employed the
legal services of Marc Gertsacov, Esq. in January 2006 to
draft a public offering statement, a declaration, and bylaws
so as to create a condominium complex. Id. at ¶
15. Pursuant to the Declaration of Condominium Watch Hill Inn
Hotel Condominium, recorded at Book 1504, Page 174
(Declaration), Watch Hill Inn Hotel Condominium was created
on February 17, 2006, with the Declarant listed as W.H.I.,
Inc. See W.H.I., Inc., Catalano, WHP and HJM,
LLC's Objection to Motion for Partial Summary Judgment
and Cross Motion for Summary Judgment, Ex. 3 (hereinafter,
WHI Motion).
On June
1, 2006, Declarant entered into a Management Agreement with
WHP, which named WHP as the property manager for WHICA.
See WHI Motion, Ex. 5. Thereafter, WHP entered into
a Rental Management Agreement with Carmen Courter, Katrina
Courter, and Donica Dohrenwend (collectively, the Courter
Parties) nine days later, which provided in part:
"The Watch Hill Inn is a commercial hotel and as such is
considered to be an income producing property. In order to
participate in the [Rental Management] Program and derive
rent income from the Unit, the Unit Owner authorizes the
Agent to rent the Unit to the general public in accordance
with the Watch Hill Inn Rate Schedule and Policies as
published in its website and publications." WHI Motion,
Ex. 6.
Subsequently,
amendments to the Declaration were formalized in the Amended
and Restated Declaration of Condominium, which was recorded
in the Town of Westerly Land Records on July 7, 2006 at Book
1550, page 187 (First Amended Declaration). In part, the
First Amended Declaration provided:
"ARTICLE VII:
RESTRICTIONS ON
USE AND ALIENABILITY
"Section 7.1. Commercial Hotel and Restaurant
Use.
"The following restrictions shall apply to the use of
the Condominium:
"a) The Units in the Condominium (with the exception of
any Units during the time period when they are being used by
the Declarant as a sample, model or sales office) are
restricted to Hotel / Commercial restaurant use and may not
be used for any other purpose other than as Hotel Unit with
an efficiency kitchen or a restaurant in the case of the
Restaurant Unit. . . .
"h) It is intended that the Hotel Units may be used for
transient and/or hotel rentals. As such, leasing of Units or
portions thereof, shall not be subject to the approval of the
Association and/or the Hotel Unit Owner and/or any other
limitations, other than as expressly provided herein.
However, all leasing of Units or portions thereof shall be
made in accordance with any applicable zoning designation
and/or state codes, ordinances, and regulations. In no way or
fashion may a Unit Owner continually occupy the premises for
ten (10) consecutive weeks."[3] WHI Motion, Ex. 7.
After
the First Amended Declaration was put into place, Declarant
sold the first unit of the Watch Hill Inn to the Courter
Parties on July 17, 2006. See WHI Motion, Ex. 8.
Declarant then sold the second unit to Merry on August 11,
2006. See WHI Motion, Ex. 11. In addition, on
November 22, 2006, the third unit was sold from Declarant to
William and Carol Reudgen (the Reudgens) and, on February 16,
2007, the fourth unit was sold from Declarant to the
Vallideses. See WHI Motion, Exs. 13, 16. On August
15, 2007, Dr. Haronian entered into an option to purchase one
unit from WHI. See WHI Motion, Ex. 20.
Over
the course of the following two years, the First Amended
Declaration was amended four times. See supra note
3. As is relevant to the issues presently before the Court,
the Third Amendment to the First Amended Declaration altered
the language of § 7.1, and stated in its entirety:
"This Third Amendment to the [First Amended Declaration]
. . . is being recorded to remove the word 'Hotel' in
all instances with regard to the Declaration of Condominium,
and all exhibits thereto. In every instance the words
'Hotel Unit' shall be replaced with 'Residential
Unit' in the Declaration, and all exhibits thereto.
"Accordingly, the amended name of the Condominium is now
the 'Watch Hill Inn Condominium' and the amended name
of the condominium association shall now be 'Watch Hill
Inn Condominium Association'.
"Further, the following revisions shall also be made:
"Section 7.1 (a) shall be deleted in its entirety and
shall now read:
"The Units in the Condominium (with the exception of any
Units during the time period when they are being used by the
Declarant as a sample, model or sales office) are restricted
to Residential/ Commercial restaurant use and may not be used
for any other purpose other than as Residential Unit with an
efficiency kitchen or a restaurant in the case of the
Restaurant Unit.
"Section 7.1 (h) shall be deleted in its entirety and
shall now read:
"It is intended that the Residential Units may be used
for transient, hotel rentals and/or as residential dwellings.
As such, leasing of Units or portions thereof, shall not be
subject to the approval of the Association and/or the Hotel
Unit Owner and/or any other limitations, other than as
expressly provided herein. However, all leasing of Units or
portions thereof shall be made in accordance with any
applicable zoning designation and/or state codes, ordinances
and regulations." WHI Motion, Ex. 21.[4]
Subsequently,
Declarant sold the fifth unit of the Watch Hill Inn to Watch
Hill Design, LLC on July 25, 2008. See WHI Motion,
Ex. 31. At that time, Dr. Haronian was the only member of
Watch Hill Design, LLC. See WHI Motion, Ex. 32.
Further
amendments to the First Amended Declaration as amended were
formalized in the Second Amended and Restated Declaration,
which was recorded on October 8, 2009 at Book 1839, Page 24
of the Town of Westerly Land Records Office (Second Amended
Declaration). The Second Amended Declaration further revised
the language of § 7.1:
"ARTICLE VII:
RESTRICTIONS ON
USE AND ALIENABILITY
"Section 7.1. Mixed Use.
"The building has a pre-existing non-conforming
'Mixed Use' status, and as contemplated by the
Declarant, such Mixed Use shall continue for Residential and
Commercial Restaurant. The following restrictions shall apply
to the use of the Condominium:
"a) The Units in the Condominium (with the exception of
any Units during the time period when they are being used by
the Declarant as a sample, model or sales office) are
restricted to Residential and Commercial restaurant use; and
as such, may not be used for any other purpose other than as
Residential Unit with kitchen, or a restaurant in the case of
the Restaurant Unit which may be converted to a Residential
Unit at a later date. . . .
"(h) Residential Units may be rented to a third party on
a monthly basis or through the preapproved Rental Program
operated by the Property Management. As such, leasing of
Units or portions thereof shall not be subject to the
approval of the Association and/or the Unit Owner, and/or any
other limitations, other than as expressly provided herein.
However, all leasing of Units or portions thereof shall be
made in accordance with any applicable zoning designation
and/or state codes, ordinances and regulations." WHI
Motion, Ex. 44.
Thereafter,
on December 16, 2009, Dr. Haronian purchased Watch Hill
Design, LLC's unit directly from Watch Hill Design, LLC.
See WHI Motion, Ex. 49. In addition, the unit owned
by the Reudgens was foreclosed on by the mortgagee on or
about April 5, 2010. See WHI Motion, Ex. 50.
Subsequent
amendments to the Second Amended Declaration were thereafter
formalized via the Third Amended and Restated Declaration of
Condominium, which was recorded in the Town of Westerly Land
Evidence Records on December 14, 2010 at Book 1883, Page 50
(Third Amended Declaration). See WHI Motion, Ex. 62.
The Third Amended Declaration converted Unit W204, the
restaurant unit owned by Declarant, to a residential unit.
See id. In addition, the Third Amended Declaration
revised the language of § 7.1 of the Second Amended
Declaration to read as follows:
"ARTICLE VII:
RESTRICTIONS ON
USE AND ALIENABILITY
"Section 7.1. Mixed Use.
"The building has a pre-existing non-conforming
'Mixed Use' status, and as contemplated by the
Declarant, such Mixed Use shall continue for Residential and
Commercial Restaurant. The following ...