Steele v. Diamond Farm Homes Corp., 211 A.3d 411

Background

Diamond Farm Homes Corp. is a homeowners association (Association) whose 1969 Declaration caps annual assessments and requires a two‑thirds member vote to increase them.
Assessments were increased in 2003, 2007, 2011, and 2014; only the 2003 increase expressly showed the two‑thirds vote.
In 2016 a homeowner (Larry Lucas) discovered and notified members that the 2007, 2011, and 2014 increases lacked evidence of the required two‑thirds approval.
Diane Steele calculated she had overpaid and withheld quarterly assessments beginning late 2016 as an offset.
Association sued Steele in District Court for unpaid assessments and fees; District Court entered judgment for Steele for failure to prove amounts, but on de novo appeal the Circuit Court entered judgment for the Association for $1,257.60 plus $4,200 in attorney’s fees.
The Court of Appeals affirmed, holding Steele’s offset defense was precluded by Maryland’s ultra vires statute and by equitable estoppel, and that the attorney‑fee award was not an abuse of discretion.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Ultra vires defense (whether Steele could offset unpaid dues because increases violated the Declaration)	Steele argued the increases violated the Declaration (contract) so she had overpaid and could set off amounts due.	Association argued Steele’s claim effectively challenged corporate power/capacity and therefore was barred unless brought under the ultra vires procedures in Corps. & Ass’ns §1‑403 (derivative/enjoining proceeding).	Court held the Declaration is a governing document defining the Association’s capacity; Steele’s claim implicated lack of corporate power and thus, because she did not pursue the statutory ultra vires procedure, her defense was precluded.
Equitable estoppel / laches (whether delay barred Steele’s offset)	Steele said statute of limitations and laches are affirmative defenses and thus inapplicable to her offset; she only raised a contract‑based claim.	Association argued that Steele’s long delay and continued payments constituted conduct inducing reliance and prejudice, so estoppel or laches bar her claim.	Court held equitable estoppel applies: Steele had voluntary conduct (failed to timely contest), Association reasonably relied on payments to budget and provide services, and Association would be prejudiced by refunding or widespread setoffs; estoppel precluded Steele’s defense.
Attorney’s fees (reasonableness of $4,200 award against Steele)	Steele argued Association offered insufficient evidence and sought only $850 in District Court; $4,200 was excessive relative to the amount in controversy.	Association relied on Declaration’s fee‑shifting clause and submitted manager testimony and billing records; court should assess reasonableness under Rule 2‑703(f)(3) and Monmouth Meadows.	Court held trial court did not abuse discretion: it applied Rule 2‑703 factors and Monmouth Meadows, discounted the Association’s requested $26,589.13 to $4,200 as reasonable given amount in controversy and case circumstances.

Key Cases Cited

Monmouth Meadows Homeowner’s Ass’n v. Hamilton, 416 Md. 325, 7 A.3d 1 (2010) (trial courts must assess reasonableness of contractual attorney‑fee requests using fee‑reasonableness factors)
Lipitz v. Hurwitz, 435 Md. 273, 77 A.3d 1088 (2013) (equitable estoppel elements: voluntary conduct, reliance, detriment; applies at law and equity)
City of Frederick v. Pickett, 392 Md. 411, 897 A.2d 228 (2006) (discussion of ultra vires concept as acts beyond powers in charter/statutes)
River Walk Apartments, LLC v. Twigg, 396 Md. 527, 914 A.2d 770 (2007) (ultra vires analysis in Maryland context)
Inlet Associates v. Assateague House Condominium Ass’n, 313 Md. 413, 545 A.2d 1296 (1988) (municipal charter/ultra vires comparison)
Greenbelt Homes, Inc. v. Nyman Realty, Inc., 48 Md. App. 42, 426 A.2d 394 (1981) (definition and scope of ultra vires acts)
Poole v. Miller, 211 Md. 448, 128 A.2d 637 (1957) (ratification/acquiescence principles discussed)