Harbor Village Homeowners Assoc. V. , 2016 MT 13N ( 2016 )

January 14 2016
DA 15-0337
Case Number: DA 15-0337
IN THE SUPREME COURT OF THE STATE OF MONTANA
2016 MT 13N
HARBOR VILLAGE HOMEOWNERS ASSOCIATION,
INC., a Montana Corporation,
Petitioner and Appellee,
v.
SAM WALDENBERG and SHIRLEEN WEESE,
individually and as Trustees of the S&SW TRUST,
Respondents and Appellants.
APPEAL FROM: District Court of the Eleventh Judicial District,
In and For the County of Flathead, Cause No. DV-12-1190C
Honorable Heidi J. Ulbricht, Presiding Judge
COUNSEL OF RECORD:
For Appellants:
Richard De Jana, Richard De Jana & Associates, PLLC, Kalispell, Montana
For Appellee:
Paul A. Sandry, Johnson, Berg & Saxby, PLLP, Kalispell, Montana
Submitted on Briefs: December 2, 2015
Decided: January 14, 2016
Filed:
__________________________________________
Clerk
Justice Patricia Cotter delivered the Opinion of the Court.
¶1 Pursuant to Section I, Paragraph 3(c), Montana Supreme Court Internal Operating
Rules, this case is decided by memorandum opinion and shall not be cited and does not serve
as precedent. Its case title, cause number, and disposition shall be included in this Court’s
quarterly list of noncitable cases published in the Pacific Reporter and Montana Reports.
¶2 Sam Waldenberg and Shirleen Weese appeal the Eleventh Judicial District Court’s
order dismissing their claims against the Harbor Village Homeowners Association (HVHOA
or Association). We affirm.
¶3 In 1997, a developer established the residential Eagle Bend West Subdivision in Big
Fork, Montana. The residential properties within Eagle Bend were subject to specific
covenants established by the Eagle Bend homeowners association. These 1997 covenants as
well as Articles of Incorporation and Bylaws for Eagle Bend West Community Association
were filed and recorded with the Flathead County Clerk and Recorder but the Articles were
never filed with the Montana Secretary of State. In 1998, husband and wife Waldenberg and
Weese (Homeowners) purchased two lots located on Harbor Drive in the Eagle Bend
subdivision. In 2001, the members of the homeowners association (HOA), including
Waldenberg and Weese, approved changing the name of the HOA to Harbor Village
Homeowners Association. The HVHOA amended its covenants in both 2002 and 2011.
¶4 In 2011, Homeowners sought approval from the Design Review Committee of the
HVHOA for the construction of a fence around the perimeter of their property. In June
2012, the HVHOA approved their design and the submitted application for construction. In
August 2012, after construction was underway, the HVHOA determined the fence was not in
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compliance with the application and issued a Notice of Non-Compliance. Homeowners
disregarded the notice. In October 2012, in reliance upon the 2011 covenants, the HVHOA
petitioned for a temporary restraining order and injunctive relief to prohibit further
construction and to require removal of the non-compliant fence. Homeowners
counterclaimed seeking in part a declaratory judgment that the HVHOA was not a valid
homeowners association and therefore had no governance authority over Homeowners’
property. Homeowners further sought restitution of the membership fees they had paid to
HVHOA since 2002, plus interest.
¶5 The District Court ruled on summary judgment that the 2011 amended covenants
were void because they had not been amended properly under the terms of the original 1997
covenants. Consequently, the court held that HVHOA could not proceed with its petition
under the 2011 covenants. The court offered the HVHOA the option of amending its
complaint to proceed under either the 2002 or 1997 version of the covenants but the
Association declined, electing instead to simply defend against the Homeowners’
counterclaims. The District Court also ruled that Homeowners could not receive attorney
fees under the void 2011 covenants.
¶6 Homeowners amended their counterclaims to include a claim for abuse of process,
malicious prosecution, and interference with quiet enjoyment. A bench trial was held
October 27 through 29, 2014. In May 2015, the District Court issued its Findings of Fact,
Conclusions of Law and Judgment. The court determined that the 1997 covenants created
and established a valid and lawful homeowners association. Additionally, it held that while
the 2002 amendments to the covenants were not adopted in compliance with the terms of the
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1997 covenants, the HVHOA was nonetheless a legitimate homeowners association having
been ratified by its members, including Homeowners, all of whom had accepted the
Association and its governance since 2002. The court concluded that the Association had
not properly amended the covenants in 2002 or 2011; therefore, the 1997 covenants
remained in effect.
¶7 The District Court also determined that Homeowners were not entitled to
reimbursement of the HVHOA dues they had paid since 2002 because they had over the
years accepted the benefits of the Association in exchange for the payment of dues. The
court concluded that Homeowners had ratified the “possibly” voidable contract with the
HVHOA by subsequent consent through participation with the HOA and acceptance of its
benefits.
¶8 The District Court also addressed the Homeowners’ claims of unjust enrichment,
abuse of process, and malicious prosecution and concluded that Homeowners had not
established recoverable claims under these legal theories. Lastly, the court concluded that
Homeowners were not entitled to punitive damages because the HVHOA’s challenged
actions were not motivated by actual malice. The District Court dismissed Homeowners’
claims against the HVHOA with prejudice and ordered both parties to bear their own
attorneys’ fees and costs.
¶9 Homeowners appeal claiming the District Court erred in concluding the HVHOA was
a valid homeowners association and that Homeowners were not entitled to their attorneys’
fees.
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¶10 Homeowners assert that because HVHOA was not the homeowners association
created by and named in the 1997 covenants it could not assume the authority granted in
those covenants. They claim that the court erred by basing its judgment on HVHOA’s
articles and by-laws rather than the 1997 covenants and erred in concluding that they are
estopped from challenging HVHOA’s authority. We are unpersuaded and conclude the
District Court did not err in applying the doctrine of ratification.
¶11 In Erler v. Creative Fin. & Invs., 2009 MT 36, 349 Mont. 207, 203 P.3d 744, we
discussed the “robust history” of the doctrine of ratification within our State’s jurisprudence,
noting that “[r]atification appeared even before statehood.” Erler, ¶ 25 (citing Schnepel v.
Mellen, 3 Mont. 118 (1878)). Ratification is defined as “the confirmation of a previous act
done either by the party himself or by another.” Erler, ¶ 25. Ratification is a form of
equitable estoppel and is applied both in the agency context as well as in contracts. A
previously formed voidable contract may be ratified by subsequent actions of the parties
which in turn bind the parties to the terms of the contract and entitle them to the proper
benefits of the contract. Erler, ¶ 26 (quoting In Audit Servs. v. Francis Tindall Constr., 183
Mont. 474, 477-78, 600 P.2d 811, 813 (1979)). Section 28-2-304, MCA, provides “A
contract which is voidable solely for want of due consent may be ratified by a subsequent
consent.”
¶12 In the case before us, the creation of HVHOA was not in compliance with the
covenant amendment provisions of the 1997 covenants. However, the members of the
HVHOA, including Homeowners, began paying dues to the Association in 2002 and most
members still continue to do so. Additionally, HVHOA, since its creation, has used
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membership dues to secure goods and services to the benefit of its membership. HVHOA
members have accepted these benefits of membership and many, including Homeowners,
have actively participated in HVHOA as board members and officers. While HVHOA may
not have been lawfully created in 2001 under the 1997 covenants, its actions have
nonetheless been repeatedly ratified by the Association members, including Homeowners,
since 2002.
¶13 We affirm the District Court’s application of ratification and its determination that
HVHOA was a valid homeowners association with enforcement authority over its members.
We also affirm the court’s refusal to grant Homeowners’ request for restitution of their
HVHOA membership dues. We therefore need not address the additional claims for relief
presented by Homeowners, as these claims are premised upon Homeowners’ assertion that
the HVHOA was not a valid HOA. We further affirm the District Court’s denial of
Homeowners’ request for attorneys’ fees under the 1997 covenants.
¶14 We have determined to decide this case pursuant to Section I, Paragraph 3(c) of our
Internal Operating Rules, which provides for noncitable memorandum opinions. The
District Court’s findings of facts are supported by substantial evidence and the legal issues
are controlled by settled Montana law which the District Court correctly interpreted.
¶15 Affirmed.
/S/ PATRICIA COTTER
We concur:
/S/ MIKE McGRATH
/S/ LAURIE McKINNON
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/S/ MICHAEL E WHEAT
/S/ JAMES JEREMIAH SHEA
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