Patrician Towers Owners, Inc. v. Fairchild
Patrician Towers Owners, Inc. v. Fairchild
Opinion of the Court
This is a suit on behalf of the owners of units in a condominium, constructed at Rehoboth Beach, Delaware, to recover costs of making allegedly necessary repairs to the condominium due to defects in the original construction as well as to recover assessments levied against the builder as the owner of certain unsold units.
Federal jurisdiction rests on diversity.
After a trial without a jury, the District Court granted judgment in favor of the plaintiffs and the defendant has appealed. We vacate the judgment and remand for more specific and detailed findings in conformity with Rule 52(a), Rules of Civil Procedure, 28 U.S.C.
The initial issue is the threshold one of jurisdiction and standing. An understanding of this issue requires some elaboration of the facts.
The condominium, which is the subject of this controversy, began initially as a project of a partnership composed of the defendant Fairchild and another. A few months after construction had commenced but not before the partnership had entered into a number of sales contracts with prospective unit owners with a warranty of “the building and the mechanical equipment therein for a period of one year from completion,” the partnership secured a charter for a Delaware corporation, Patrician Towers, Inc. All the stock in the corporation was owned by the partnership. The condominium property was thereupon transferred to the corporation and the building of the condominium proceeded in the ^ame of the corporation as owner. When the corporation thereafter executed sales contracts, it, unlike the partnership, included therein no express warranty.
At some point during the construction, the defendant Fairchild purchased the interests of his co-partner and became the sole general partner in the partnership and the owner of all the stock in the corporation Patrician Towers, Inc.
The purchasers of units in the condominium early constituted themselves an unincorporated association under the authority of the Delaware Unit Property Act,
When construction of the condominium was completed in 1970 and the unit owners entered into possession of their respective units, a number of complaints quickly developed because of leaks throughout the building. After the defendant failed to correct the alleged defects, the Council retained counsel, and through such counsel, notified the defendant that unless the alleged defects in the building were corrected, it would proceed “to have the defects corrected and would look to defendant for reimbursement.” The plaintiffs claimed the builder failed to correct the defects as requested. By reason of the builder’s failure, the Council claims it was forced to contract for the correction of the “defects in the buildings” and in so doing
This suit was instituted to recover the expenses incurred by the Council, in making the repairs to the common areas of the condominium. In addition, recovery was sought for the assessments made by the Council against defendant, as owner of six units which had been retained by the defendant, for its pro rata share of common operating expenses. Though filed to recover items which were thus clearly recoverable by the Council, the action named three plaintiffs and recovery was sought jointly on their behalf.
The defendant, named in the complaint, is alleged to be a citizen of Virginia.
With the issues as made by the answer of the defendant, the representative plaintiffs were placed under the burden of establishing their standing to maintain the action under Rule 23.2.
In their proposed findings of fact and conclusions of law, counsel for the plaintiffs, and the District Court in its original findings and conclusions, however, made no reference whatsoever to the material issues of standing and jurisdiction but dealt exclusively with the substantive merits of the case. It was only after the defendant moved for a “New Trial and to Amend or Alter the Judgment” given, that the District Court took any note of the challenge either to standing or jurisdiction. In dismissing that motion, the Court did state as to standing:
“The arguments relative to the standing of the plaintiffs are answered by reference to Rule 23.2, F.R.Civ.P., the Court finding that the named individual plaintiffs will fairly and adequately protect the interests of the plaintiff association and its members. While there may be some uncertainty, as among the plaintiffs, which plaintiff is entitled to the award in this case, collectively the plaintiffs comprise all the entities which could have an interest in that award.”
This statement is, however, no more than a bare conclusory finding in the language of the Rule itself. Expressed in absolute terms, it is predicated on no articulated subsidiary findings or reasoning. In their complaint the plaintiffs seemingly would have justified a finding that the representative plaintiffs could “fairly and adequately protect the interests of the plaintiff association and its members” under Rule 23.2 — the conclu-sory finding made by the District Court — on the fact that the representative plaintiffs were members of the Council. But the trial court did not allude to this circumstance in its concluso-ry declaration and we have no reason to assume that such fact influenced in any way the conclusion reached by the District Court. Perhaps, but this is only conjecture, the District Court was prompted to disregard this fact because of evidence in the record contradictory of the allegation that both representa
Beyond the absence of any factual statement in support of its finding of standing is the failure of the District Court to express the legal basis for its conclusion. It will be observed that, in its opinion, the District Court refers to the representative plaintiffs as constituting proper representatives to protect the “plaintiff association and its members.” (Italics added) It thus recognizes that the unincorporated association through its elected Council is a party plaintiff, capable of suing on behalf of its members; in fact, it is the jural entity declared entitled under Delaware law to maintain this cause of action. But if the association is a proper party plaintiff entitled to recover for expenses it has incurred from the defendant, the conclusion of the District Court is contradictory of the construction of Rule 23.2, as phrased in Suchem, Inc. v. Central Aguirre Sugar Co. (D.C.Puerto Rico, 1971) 52 F.R.D. 348, 355, which would deny class representation under Rule 23.2 on behalf of any unincorporated association if the association is legally empowered to sue on its own behalf. In Suchem the Court declared that:
“ * * * when the law of the state in a particular case does not provide an unincorporated association with capacity as a jural person to sue or to be sued, then and only then does the mechanism of Rule 23.2 come into operation and is available as a way of overcoming this lack of capacity by suing the individual representatives of the unincorporated association.”
It is true that the construction of Rule 23.2, as declared in Suchem, has been viewed with some skepticism by both Moore
Under neither construction, however, could it be argued that the representa
It follows that we have neither factual findings nor legal reasoning to support the District Court’s finding of standing. Rule 52(a), as we have observed, demands that the District Court set forth its factual and legal basis for its final conclusion on standing in such detail that the appellate court may understand the basis for the District Court’s conclusion. The single con'clusory sentence in the order dismissing defendant’s motion for a new trial will manifestly not satisfy the mandates of the Rule. It provides this Court with mere conjectures as to the reasoning, both factually and legally, used by the District Court in reaching its conclusion. The cause must be remanded for more specific and detailed findings and conclusions on the issue of standing.
Even if the findings and conclusions on standing could be approved as meeting the requirement of Rule 52(a), we could not affirm the judgment below on the record now before us or find compliance on the part of the District Court with Rule 52(a). There is no ruling of any kind on the defendant’s denial of jurisdiction and this issue remains, whether the representative parties have standing or not. If, for instance, the representative plaintiffs have standing, that would mean simply that the citizenship of those representatives would be considered for diversity purposes.
Normally, the absence of any finding that would warrant disregarding the Association as a plaintiff might be ground for dismissing the action on jurisdictional grounds, provided it is conceded that there is not complete diversity between all the members of the Association and the defendant. We prefer, however, to remand in order that the District Court may make specific and detailed findings on jurisdiction and standing, with the right on the part of any of the parties to offer any additional testimony deemed relevant by the trial court and with the right on the part of the District Court to enter any other and further orders as justice may demand.
We have foregone any discussion of the merits of the controversy, regarding their consideration premature until the issues of standing and jurisdiction are resolved.
Remanded with directions.
. § 220X et seq., Title 25, Delaware Laws.
. 25 DeLLaws, § 2202(5).
. 25 Del.Laws, § 2211.
. 25 DetLaws, § 2234.
. The defendant argues that the plaintiffs seek recovery also for damages due to leakage sustained by the individual unit owners in their separate units. The plaintiffs deny any such intention and assert that their claims relate exclusively to damage to common areas of the condominium, in which all unit owners have an indivisible common interest. A hasty review of the record suggests that the plaintiffs are correct. It seems that all the bills for which recovery is sought have to do with the common areas. There is, however, some language in the amended complaint which would give support to the argument that recovery for damage to the individual units is sought. In any event, on remand the District Court might well clarify this issue and make clear whether any claims for damages other than the common areas are pressed.
If the plaintiffs should be found to be advancing claims for damages to individual units, it would be necessary in ascertaining whether or not such claims meet the test of the jurisdictional amount to consider them in the light of Snyder v. Harris (1969) 394 U.S. 332, 89 S.Ct. 1053, 22 L.Ed.2d 319 and Zahn v. International Paper Co. (1973) 414 U.S. 291, 94 S.Ct. 505, 38 L.Ed.2d 511.
. This is actually an amended complaint. The first complaint, we were told in argument, named the corporation formed by the defendant and his co-partner as a co-defendant but the corporation was dropped to avoid dismissal on jurisdictional grounds.
. Cf. Kramer v. Caribbean Mills, Inc. (1969) 394 U.S. 823, 829-830, 89 S.Ct. 1487, 23 L.Ed.2d 9; Ferrara v. Philadelphia Laboratories, Inc. (D.C.Vt. 1967) 272 F.Supp. 1000, 1014-1015, aff. 393 F.2d 934.
. Cook County College Teachers U., Loc. 1600, A.F.T. v. Byrd (7th Cir. 1972) 456 F.2d 882, 885, cert. denied 409 U.S. 848, 93 S.Ct. 56, 34
. McNutt v. General Motors Acceptance Corp. (1936) 298 U.S. 178, 190, 56 S.Ct. 780, 80 L.Ed. 1135.
. Mosley v. United States (4th Cir. 1974) 499 F.2d 1361, 1363; Servo Corporation of America v. General Electric Company (4th Cir. 1968) 393 F.2d 551, 556. It is true that, as the Court said in Commissioner v. Duberstein (1960) 363 U.S. 278, 292, 80 S.Ct. 1190, 1200, 4 L.Ed.2d 1218, “conciseness is to be strived for, and prolixity avoided, in findings; ” they must be stated “in such detail and exactness” on all material issues that the reviewing court may understand clearly the factual basis for the trial court’s findings and conclusions. See, Kelley v. Everglades District (1943) 319 U.S. 415, 420, 63 S.Ct. 1141, 87 L.Ed. 1485, reh. denied 320 U.S. 214, 63 S.Ct. 1444, 87 L.Ed. 1851.
In short, “ ‘[T]here must be such subsidiary findings of fact as will support the ultimate conclusion reached by the court. * * * ’” Kweskin v. Finkelstein (7th Cir. 1955) 223 F.2d 677, 678-9, rev. on other grounds 232 F.2d 801.
For an excellent statement of the purposes of the Rule, see Lemelson v. Kellogg Company (2d Cir. 1971) 440 F.2d 986, 988:
“ * * * The requirement embodied in that Rule serves many masters. It aids ‘the appellate court by affording it a clear understanding of the ground or basis of the decision of the trial court,’ Barron & Holtzoff, Federal Practice and Procedure, § 1121 (Wright Revision 1961), see Fuchstadt v. United States, 434 F.2d 367 (2 Cir. 1970); it makes definite what was decided by the case, Wright, Federal Courts (1963) § 96; and it serves to evoke ‘care on the part of the trial judge in ascertaining the facts.’ ”
. 3B Moore, Federal Practice, 1974 Supp., p. 145.
. 7A Wright and Miller, Federal Practice and Procedure, § 1861, pp. 459-60 (1972).
This text states the purpose of Rule 23.2 as “a procedural device that provides a supplementary method for unincorporated associations to litigate in a federal court * *
. See Note, 14 A.L.R.Fed. 849, at p. 854:
“ * * * Indeed, the notes of the Advisory Committee on the 1966 amendments to the Federal Rules of Procedure following 23.2 (which was added in 1966) point out that although an action by or against representatives of the membership of an unincorporated association has often been viewed as a class action, the real or main purpose of this characterization has been to give ‘entity treatment’ to the association, when, for formal reasons, it could not sue or be sued as a jural person under Rule 17(b), which restricts the capacity of unincorporated associations, when suing or being sued, to the capacity given them by the law of the state where the District Court is held.”
. Steelworkers v. Bouligny, Inc. (1965) 382 U.S. 145, 149-53, 86 S.Ct. 272, 15 L.Ed.2d 217.
. Calagaz v. Calhoun (5th Cir. 1962) 309 F.2d 248, 251-53; Boesenberg v. Chicago Title & Trust Co. (7th Cir. 1942) 128 F.2d 245, 246, 141 A.L.R. 565; McGarry v. Lentz (D.C.Ohio 1925) 9 F.2d 680, 683, aff. 13 F.2d 51, cert. denied 273 U.S. 716, 47 S.Ct. 108, 71 L.Ed. 855.
. Steelworkers v. Bouligny, Inc., supra, at p.153, 86 S.Ct. 272.
Reference
- Full Case Name
- PATRICIAN TOWERS OWNERS, INC., a Delaware Corporation v. Charles M. FAIRCHILD (Individually and as general partner, Patrician Towers limited partnership)
- Cited By
- 13 cases
- Status
- Published