G. Christian Corcoran and Peggy Corcoran v. Atascocita Community Improvement Association, Inc. ( 2013 )

Affirmed and Memorandum Opinion filed October 31, 2013.
In The
Fourteenth Court of Appeals
NO. 14-12-00982-CV
G. CHRISTIAN CORCORAN AND PEGGY CORCORAN, Appellants
V.
ATASCOCITA COMMUNITY IMPROVEMENT ASSOCIATION, INC.,
Appellee
On Appeal from the 125th District Court
Harris County, Texas
Trial Court Cause No. 2009-41594A
MEMORANDUM OPINION
In two issues, appellants, G. Christian Corcoran and Peggy Corcoran,
challenge the trial court’s summary judgment in favor of appellee, Atascocita
Community Improvement Association, Inc. (“ACIA”). We affirm.
I. BACKGROUND
ACIA is non-profit corporation whose members are certain property owners
in Atascocita. ACIA is governed by a board of trustees. ACIA’s purpose is to
maintain and preserve properties subject to covenants, conditions, and restrictions
and promote health, safety, and welfare of residents. The Architectural Control
Committee (“ACC”) is a separate entity created to review and approve or
disapprove plans for new structures and additions or alterations to existing
structures in light of applicable restrictions, minimum construction requirements,
and the overall character and aesthetics of the properties. The heart of this appeal
concerns the relationship between ACIA and ACC.
Appellants reside in the single-family-home neighborhood of Pinehurst,
Section 11, a subdivision subject to the authority of ACIA and ACC. Appellants’
next-door neighbors are the Joneses. A dispute arose between appellants and the
Joneses, based in part on the Joneses’ desire to erect a basketball court, lighting,
and other structures on their property. In March 2009, the Joneses submitted an
application with ACC requesting approval to add certain structures to their
property. On March 24, 2009, ACC denied the application on grounds that the
proposed structures might be a nuisance, result in noise, and “do not fit into
ambiance of neighborhoods.” The Joneses appealed the denial to the ACIA Board.
On May 19, 2009, the ACIA Board sent the Joneses a letter approving their
application.
On June 30, 2009, the Joneses filed suit against appellants for defamation,
nuisance, invasion of privacy, and intentional infliction of emotional distress, and
sought injunctive relief. Appellants counterclaimed and asserted similar claims.
They also filed a third-party action against ACIA seeking, among other relief, a
declaration that ACIA lacked authority to overturn ACC’s denial of the Joneses’
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application. After several bouts of summary-judgment pleadings, ACIA filed a
“Second Amended Motion for Summary Judgment on [Appellants’] Request for
Declaratory Relief” and a supplement to that motion, seeking traditional summary
judgment. The trial court granted ACIA’s motion and severed from the suit all of
appellants’ claims dismissed by the summary judgment, rendering a final judgment
on these claims.
II. SUMMARY JUDGMENT
In two issues, appellants challenge the trial court’s grant of summary
judgment.
A. Standards of Review and Construction of Governing Documents
We review summary judgments de novo. Joe v. Two Thirty Nine Joint
Venture, 145 S.W.3d 150, 156–57 (Tex. 2004). When the trial court grants
summary judgment without specifying on what grounds, we will affirm if any of
the independent grounds presented is meritorious. FM Props. Operating Co. v.
City of Austin, 22 S.W.3d 868, 872–73 (Tex. 2000). We take as true all evidence
favorable to the nonmovant and indulge every reasonable inference and resolve
any doubts in the nonmovant’s favor. Joe, 145 S.W.3d at 157.
A party moving for traditional summary judgment must establish there is no
genuine issue of material fact and it is entitled to judgment as a matter of law. See
Tex. R. Civ. P. 166a(c); Provident Life & Accident Ins. Co. v. Knott, 128 S.W.3d
211, 215–16 (Tex. 2003). If the movant establishes a right to summary judgment,
the burden shifts to the nonmovant to present evidence raising a material fact issue.
See M.D. Anderson Hosp. & Tumor Inst. v. Willrich, 28 S.W.3d 22, 23 (Tex. 2000)
(per curiam); Centeq Realty, Inc. v. Siegler, 899 S.W.2d 195, 197 (Tex. 1995).
3
We interpret restrictive covenants and corporate bylaws using the general
rules of contract construction. See Wiese v. Heathlake Comm. Ass’n, Inc., 384
S.W.3d 395, 400 (Tex. App.—Houston [14th Dist.] 2012, no pet.); In re
Aguilar, 344 S.W.3d 41, 49–50 (Tex. App.—El Paso 2011, no pet.). We also
apply general rules of contract construction, as expressed in Texas case law, to
interpret a Texas corporation’s articles of incorporation. See Highland Crusader
Offshore Partners, L.P. v. Andrews & Kurth, L.L.P., 248 S.W.3d 887, 891 (Tex.
App.—Dallas 2008, no pet.) (construing charter of Delaware corporation under
ordinary principles of contract construction under Delaware law).
When construing such documents, our primary goal is to ascertain and give
effect to the intent of its drafters, using the language of the documents as our guide.
See Wiese, 384 S.W.3d at 400; Aguilar, 344 S.W.3d at 50. We examine the
documents as a whole in light of the circumstances present when it was written,
affording words and phrases their commonly accepted meanings. See Wiese, 384
S.W.3d at 400; Aguilar, 344 S.W.3d at 50. We review the trial court’s
interpretation of the documents de novo. See Wiese, 384 S.W.3d at 400;
Aguilar, 344 S.W.3d at 50. A document is ambiguous when its meaning is
uncertain and doubtful or is reasonably susceptible to more than one interpretation.
Heritage Res., Inc. v. NationsBank, 939 S.W.2d 118, 121 (Tex. 1996). Whether
the documents are ambiguous is a question of law. See Wiese, 384 S.W.3d at 400;
Aguilar, 344 S.W.3d at 50. The documents are not ambiguous simply because the
parties disagree over the documents’ interpretation. See Wiese, 384 S.W.3d at 400;
Aguilar, 344 S.W.3d at 50.
B. Governing Documents
The summary-judgment record contains numerous documents governing
ACIA over a forty-year period. In 1973, “ARTICLES OF INCORPORATION OF
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[ACIA]” were filed with the Texas Secretary of State. Among the stated purposes
of ACIA were the following:
1. exercise all of the powers and privileges and to perform all of the
duties and obligations of [ACIA] as set forth in that certain
Declaration of Covenants, Conditions and Restrictions . . . applicable
to the property . . . and as the same may be amended from time to time
as therein provided . . . .
...
3. have and exercise any and all powers, rights and privileges which a
corporation organized under the Non-Profit Corporation Act of the
State of Texas may by law now or hereafter have or exercise . . . .
Also in 1973, the ACIA Board adopted bylaws (“the Bylaws”). Article VI
of the Bylaws addressed the powers and duties of ACIA, including “to exercise
such other rights and powers granted to [ACIA] under the Declaration, the Articles
of Incorporation of [ACIA], or these Bylaws,” and the duty to “supervise all
officers, agents, and employees of [ACIA], and to see that their duties are properly
performed.”
In 1974, the owner of a subdivision in Atascocita executed
“DECLARATION OF COVENANTS AND RESTRICTIONS,” with the purpose
of providing for the preservation of properties in the residential community. This
document provided that the owner would cause to be incorporated a non-profit
corporation, governed by a board of trustees, to enforce the covenants and
restrictions—this provision referred to ACIA. The 1974 Declaration expressly
provided that other subdivisions may later be “brought within the scheme of this
Declaration” via supplemental declarations.
In 1983, ACIA signed “SUPPLEMENTAL DECLARATION OF
COVENANTS, CONDITIONS AND RESTRICTIONS FOR PINEHURST OF
ATASCOCITA, SECTION ELEVEN (A RESIDENTIAL SUBDIVISION),”
5
bringing the subdivision that is the subject of this litigation within the scheme of
the 1974 Declaration. Both the 1974 and 1983 Declarations contain similar
versions of Article VIII, regarding ACC, providing that no improvements or
additions shall be made to properties within the subdivisions without having been
submitted to and approved by ACC. According to Article VIII, ACC
shall have full power and authority to reject any plans and
specifications that do not comply with the restrictions herein imposed
or meet its minimum construction requirements or architectural design
requirements or that might not be compatible, in the sole discretion of
[ACC], with the design or overall character and aesthetics of the
Properties.
Article VIII further provided ACC will be initially composed of a committee of
three persons and
[ACC] shall remain independent of [ACIA]. That is, [ACC] shall in
no way be controlled by or obligated to approve any recommendations
or requests of the membership of [ACIA]. In the event of the death or
resignation of any member or members of [ACC], the remaining
member or members shall appoint a successor member or members[.]
Pertinent to this litigation, article VIII, section 4 provided,
Transfer of Authority to [ACIA]. The duties, rights, powers, and
authority of [ACC] constituted hereby may be assigned at any time, at
the sole election of a majority of the members of the [ACC], to the
Board of Trustees of [ACIA], and from and after the date of such
assignment, and the acceptance thereof by such Trustees, the Board of
Trustees of [ACIA] shall have full right, authority and power, and
shall be obligated, to perform the functions of [ACC] as provided
herein, including the right to designate a representative or
representatives to act for it.
Therefore, ACC had the express authority to assign its architectural control
authority to ACIA, after which ACIA was obligated to perform ACC’s functions
but could designate a representative to perform this duty.
6
ACIA presented several documents, particularly from 1992, which it argues
establish that ACC assigned its architectural control authority to ACIA. However,
on appeal, the parties primarily focus on documents from 1997. On March 5,
1997, a single person signed on behalf of ACC a “NOTICE OF FULL
ASSIGNMENT OF ARCHITECTURAL CONTROL FOR PINEHURST OF
ATASCOCITA, SECTION 11” (“the 1997 Assignment”), whereby ACC
purported to assign all of its rights, powers, duties, and obligations to ACIA. No
other member of ACC signed, or was mentioned in, the 1997 Assignment.
Effective March 24, 1997, all members of ACIA and ACC jointly
promulgated “ARCHITECTURAL GUIDELINES AND PROCEDURES” (“the
1997 Guidelines”), which applied to Pinehurst 11. The 1997 Guideless expressly
replaced and superseded previous guidelines. The 1997 Guidelines begin with
provisions explaining ACC’s role as set out in the Declarations, including that
ACC shall have discretion to approve or disapprove architectural plans. Provisions
also express that the ACIA Board and ACC desire to establish procedures for
submission of architectural proposals and that the “guidelines shall supplement the
applicable restrictive covenants set forth in the Declarations.” The 1997
Guidelines then contained the following pertinent sections:
240.2 RESPONSIBILITY. [ACC] and its function established in the
Declaration of Covenants and Restrictions for the various subdivisions
within [ACIA] was assigned by the Developer to [ACIA] for all
phases of Architectural control.
The Board appoints members to [ACC] and monitors [ACC’s]
performance through the Trustee with responsibility for [ACC].
[ACIA’s] Manager provides the communication link between member
property owners and [ACC] (and vise versa) and provides the
administrative function for [ACC].
240.3 APPROVAL OF PLANS. No building, structure, fence, wall,
or other improvements shall be commenced, erected, constructed,
7
placed or maintained upon the properties, nor shall any exterior
addition to or change or alteration therein be made until the detailed
plans and specifications therefor shall have been submitted to and
approved in writing as to compliance with minimum structural and
mechanical standards, location and situation on the lot, and as to
harmony or external design or location in relation to property lines,
buildings lines, easements, grades, surrounding structures, walks, and
topography (including the orientation of the front and rear of any such
building with respect to the lot lines), by [ACC.]
240.4 ARCHITECTURAL CONTROL COMMITTEE AND
SUBCOMMITTEE – PROJECT REVIEW. [ACC] is composed of
five members, each having a three (3) year term with no more than
two (2) members[’] terms expiring in any one year. As each term
expires, an appointment will be recommended by the responsible
Board member to the [ACIA] Board. A replacement for any person
who resigns will also require approval of the [ACIA] Board to finish
out the term. The five committee members, along with the
responsible Board member, will select one of the committee members
to be the Chairmen and two of the committee members to comprise a
subcommittee called the Project Review Committee (PRC), which is
responsible for physical inspection and verification that residents and
home builders have followed the plans submitted and approved by
[ACC] during and after the construction phase.
Section 240.5 of the 1997 Guidelines contained the following administrative
procedures pertaining to how ACC reviews applications for construction approval:
A property owner seeking to improve or modify his property submits certain
forms to “the Manager” who forwards them to ACC members. “The
Manager” is not defined in the document, but previous documents described
the Manager as an agent of ACIA.
The Manager generally is not to make evaluative decisions. However, the
ACC chairman and the Manager are authorized to approve or disapprove
applications that clearly comply or do not comply with certain restrictions
and requirements.
ACC members have specific deadlines to rule on the application. If a
majority of ACC members accept the request, it is accepted, although the
8
ACC chairman must reevaluate projects when a member disapproves the
project.
“The Manager will advise the resident of [ACC’s] disposition by means of
an [ACC] DISPOSITION SHEET, following any additional or special
procedure prescribed by [ACC].”
“All disapproved requests are to have the box checked: ‘If you wish
additional review . . .’. Disapproved requests where construction is initiated
or approved requests which have been deviated from, will become deed
restriction violations[.]” However, nothing in the record elaborates on what
is meant by, or what language follows, “If you wish additional review. . .”.
After approval, the property owner then has a certain amount of time to
begin and complete his addition. Members of the ACC Project Review
Committee are tasked with physically observing construction to ensure
compliance with the approved plans.
At the end of section 240.5 is the following provision: “Final Determination.
In instances where compliance with architectural control procedures and
decisions cannot be achieved, the matter shall be referred to the Board for a
determination of whether or not legal action should be initiated.”
There is no specific provision in the 1997 Guidelines authorizing
homeowners to appeal ACC disapproval to ACIA. Furthermore, approved
application forms attached to the 1997 Guidelines do not mention an ability to
appeal to ACIA.
C. Summary Judgment Disposing of Appellants’ Claims
In their first issue, appellants contend the trial court erred by granting
summary judgment against appellants on their claims. The parties focus on the
1997 documents, apparently because these were the last relevant documents
executed before ACIA overruled ACC’s disapproval of the Joneses’ application.
In the 1997 Assignment, ACC ostensibly assigned all of its architectural control
authority to ACIA. However, appellants point out that this assignment was signed
by only one member of ACC—not a majority of ACC members as required by
article VIII, section 4 in the Declarations.
9
Regardless, in the 1997 Guidelines, all members of the ACIA Board and all
members of ACC unanimously adopted the guidelines and procedures outlined
therein. The 1997 Guidelines contained the following provision:
240.2 RESPONSIBILITY. [ACC] and its function established in the
Declaration of Covenants and Restrictions for the various subdivisions
within [ACIA] was assigned by the Developer to [ACIA] for all
phases of Architectural control.
The Board appoints members to [ACC] and monitors [ACC’s]
performance through the Trustee with responsibility for [ACC].
[ACIA’s] Manager provides the communication link between member
property owners and [ACC] (and vise versa) and provides the
administrative function for [ACC].
ACIA argues the first paragraph of this provision indicates that ACC’s
architectural control authority had been assigned to ACIA. This paragraph is
confusing because it appears to say ACC’s authority was transferred by “the
Developer” to ACIA. The term “the Developer” is not defined, nor was “the
Developer” given power in the Declarations to transfer ACC’s authority to ACIA.
Nevertheless, ACIA argued in its motion for summary judgment that, via the
1997 Guidelines, the ACC board members ratified an assignment of ACC’s
authority to ACIA. The elements of ratification are (1) approval by act, word, or
conduct, (2) with full knowledge of the facts of the earlier act, and (3) with the
intention of giving validity to the earlier act. White v. Harrison, 390 S.W.3d 666,
672 (Tex. App.—Dallas 2012, no pet.) A party ratifies an agreement when—after
learning all of the material facts—he confirms or adopts an earlier act that did not
then legally bind him and that he could have repudiated. Id. One may ratify the
acts or contract of another, purporting to be performed or made on his behalf,
whether the other was his agent and exceeded his authority as such or was not his
agent at all. Willis v. Donnelly, 118 S.W.3d 10, 26 (Tex. App.—Houston [14th
10
Dist.] 2003), rev’d on other grounds, 199 S.W.3d 262 (Tex. 2006); La Strada-San
Felipe, Ltd. v. ATW Plumbing Services, Inc., No. 01-03-00547-CV, 2004 WL
1277580, at *4 (Tex. App.—Houston [1st Dist.] June 10, 2004, no pet.) (mem.
op.).
It is clear in the 1997 Guidelines that ACC intended to cede its power to
ACIA. As noted above, in the Declarations, ACC members were responsible for
appointing their own successor members when a member died or resigned.
Additionally, the Declarations expressly stated that ACC shall remain independent
of, and not be controlled by, ACIA. Contrarily, the 1997 Guidelines provided that
ACIA is responsible for appointing successor members of ACC and monitoring
ACC, and ACIA and ACC jointly promulgated procedures for architectural
control. Moreover, notwithstanding inclusion of the term “the Developer,” section
240.2 indicates that “[ACC] and its function . . . was assigned by the Developer to
[ACIA] for all phases of Architectural control.” Additionally, the 1997 Guidelines
state that all members of ACIA and ACC unanimously adopted the guidelines and
procedures of the 1997 Guidelines.
Construing these provisions together, we conclude the 1997 Guidelines
unambiguously established that ACC ratified an assignment of its authority to
ACIA. In the 1997 Guidelines, each member of ACC acknowledged (1) that all of
ACC’s architectural control authority had been assigned to ACIA, (2) ACIA had
power to appoint successor members of ACC, and (3) ACIA had power to monitor
ACC. Given that ACC initially had full, independent power over architectural
control decisions and its own membership, ACC’s acknowledgments in the 1997
Guidelines are reasonably viewed as approval of an assignment of ACC’s authority
to ACIA. A few weeks earlier, a single person signed on behalf of ACC the 1997
Assignment in which ACC purportedly assigned “to [the ACIA Board] all rights
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and powers, if any, along with the duties and obligations of [ACC] for lots within
Pinehurst of Atascocita.” This is the only evidence that, prior to the 1997
Guidelines, ACC attempted to assign all of its authority regarding the relevant
subdivision to ACIA.1 Accordingly, we hold that, pursuant to 1997 Guidelines,
ACC ratified the 1997 Assignment.2
Appellants argue that, even if ACC ratified assignment of its authority to
ACIA, the 1997 Guidelines establish that ACIA reassigned this authority to ACC.
Appellants contend that section 240.3 (quoted above) established that ACIA
“delegated exclusive and sole authority to the ACC to approve all improvements to
residential lots” because the section expresses that no improvements shall be made
unless “submitted to and approved in writing . . . by [ACC].” Appellants correctly
assert that section 240.5, outlining procedures for ACC to review property owners’
applications, did not express that a property owner may appeal ACC’s decision to
ACIA. Appellants also note section 240.5 ends with a provision related to the
ACIA Board’s right to make a final determination:
Final Determination. In instances where compliance with
architectural control procedures and decisions cannot be achieved, the
matter shall be referred to the Board for a determination of whether or
not legal action should be initiated.
Appellants argue the foregoing provisions establish that ACC had sole authority to
1
In 1992, a single person on behalf of ACC ostensibly assigned part of ACC’s authority
to ACIA, and guidelines signed by ACC a few weeks later expressed that ACIA had received a
partial assignment. The 1997 Assignment and 1997 Guidelines are the only documents
referencing a full assignment of ACC’s rights to ACIA.
2
Appellants contend we may not consider ACIA’s ratification ground because the trial
court did not mention ratification in its summary-judgment order. However, even if the trial
court limited the grounds upon which it granted summary judgment, we still may affirm the
judgment on other grounds raised in ACIA’s motion for summary judgment. West Houston
Airport, Inc. v. Millennium Ins. Agency, Inc., 349 S.W.3d 748, 751 n.2 (Tex. App.—Houston
[14th Dist.] 2011, pet. denied).
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disapprove the Joneses’ request, and ACIA did not reserve any authority to
reconsider ACC’s ruling.
ACIA responds that the procedures adopted in the 1997 Guidelines did not
mean ACC had sole architectural control authority, but merely meant ACC was
acting as a representative of ACIA. ACIA supports this contention with article
VIII, section 4 of the Declarations:
. . . from and after the date of such assignment [on architectural-
control authority from ACC to ACIA], and the acceptance thereof by
such Trustees, the Board of Trustees of [ACIA] shall have full right,
authority and power, and shall be obligated, to perform the functions
of [ACC] as provided herein, including the right to designate a
representative or representatives to act for it.
(emphasis added). ACIA cites the Bylaws provision providing that ACIA has the
duty to “supervise all officers, agents, and employees of [ACIA], and to see that
their duties are properly performed” and a provision of the 1997 Guidelines stating
the ACIA Board “appoints members to the [ACC] and monitors [ACC’s]
performance.” (emphasis added). ACIA also refers to section 204.011 of the
Property Code, entitled “Architectural Control Committee,” which provides, “the
architectural control committee authority automatically vests in the property
owners’ association when . . . the architectural control committee assigns, in
writing, authority to the property owners’ association.” Tex. Prop. Code Ann. §
204.011(b)(3) (West Supp. 2012).3
In sum, ACIA contends that when construing the 1997 Guidelines in
conjunction with section 204.011(b)(3) and other provisions in the Governing
Documents—particularly article VIII, section 4 of the Declarations—it is clear
3
Appellants contend section 204.011(b)(3) is inapplicable because ACC never assigned
its authority to ACIA. However, we have determined that ACC ratified an assignment of its
authority to ACIA. Thus, section 204.011(b)(3) does apply.
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ACIA merely designated ACC as an agent regarding architectural control review,
but that ACIA retained supervisory authority and could veto ACC’s decisions.4
In their brief, appellants argue ACIA had power to reassign architectural
control authority to ACC because article VIII, section 4 of the Declarations gave
ACIA a “right to designate a representative or representatives to act for it”
regarding architectural control decisions. Thus, in arguing ACIA had power to
reassign authority to ACC, appellants rely on the same provision which ACIA
argued meant that ACC was a representative of ACIA.
We reject appellants’ argument because ACIA’s ability to designate a
representative to make architectural control decisions does not mean ACIA had
power to assign full authority to another person. This is particularly true here
because the Bylaws expressly provided that ACIA had the duty to “supervise all
officers, agents, and employees of [ACIA], and to see that their duties are properly
performed.” Appellants cite no other section in the governing documents or any
statutory provision supporting their contention that ACIA had power to reassign
architectural control authority to ACC.
Accordingly, ACIA did not reassign all of its architectural control authority
4
In their opening brief, appellants assert that ACIA had power to reassign architectural
control authority to ACC. In their reply brief, appellants argue we must take this assertion as
true because ACIA did not contradict it. See Tex. R. App. P. 38.1(g) (“In a civil case, court will
accept as true the facts stated [in the statement of facts section of appellant’s brief] unless
another party contradicts them.”). We disagree because ACIA did contradict this assertion
several times in its appellate brief.
Appellants also argue ACIA asserts in its appellate brief that the 1997 Guidelines were
not a reassignment of architectural control authority to ACC whereas they argued in their motion
for summary judgment that the 1997 Guidelines provided procedures for review of architectural-
modification requests. Appellants contend ACIA has improperly reversed its position on appeal.
We disagree that the portions of ACIA’s trial and appellate arguments noted by appellants reflect
a change in position. Moreover, ACIA has consistently maintained that it has authority to
overrule ACC’s decisions.
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to ACC but merely designated ACC as ACIA’s agent regarding such authority.
Although section 240.3 of the 1997 Guidelines expresses that no architectural
modification “shall be” made until approved by ACC, because ACC was ACIA’s
agent, ACC’s decisions were made on behalf of ACIA. A primary concept of
agency is that the principal has control over its agent. See Walker Ins. Servs. v.
Bottle Rock Power Corp., 108 S.W.3d 538, 549 (Tex. App.—Houston [14th Dist.]
2003, no pet.) (“An agent is one who consents to the control of another, the
principal, who has manifested consent that the agent shall so act.”). Contrary to
appellants’ position, the absence of an express provision providing ACIA power to
overrule ACC’s decisions does not mean ACIA lacked such control over its agent.
When ACC disapproved a resident’s construction plans, ACC was not binding
ACIA to any agreement for which ACIA would be responsible but was simply
disapproving certain plans on ACIA’s behalf. We can conceive of no reason why
ACIA, as the principal, did not have authority to review and overrule such a
decision. Cf. Garret v. Giblin, 940 S.W.3d 408, 409–11 (Tex. 1997, no writ)
(concluding client’s (principal) decision not to file suit against doctor, despite
lawyers’ (agents) determination that client had a potential claim against doctor and
the failure of which to bring might reduce client’s recovery, precluded client from
suing lawyers—client was ultimate decision maker).
Contrary to appellants’ contention, the provision affording ACIA final
authority to determine whether to take legal action when “compliance with
architectural control procedures and decisions cannot be achieved” does not mean
ACIA lacked authority to reverse ACC’s denials. In fact, this provision indicates
ACIA had ultimate power to disregard architectural violations, meaning a resident
could maintain non-complying modifications despite ACC’s disapproval if ACIA
so chose. This further supports a conclusion that ACC’s architectural control
15
decisions were not meant to be unassailable.
Finally, appellants contend language in the 1997 Guidelines providing that
the ACIA Board “monitors” ACC’s performance did not give ACIA any power to
overrule ACC’s decisions because “monitor” means “to watch, observe, listen to,
or check (something) for a special purposes over a period of time.” See Monitor,
Merriam-Webster.com, http://www.merriam-webster.com/dictionary/monitor (last
visited October 2013). However, the Bylaws obligate ACIA to “supervise all
officers, agents, and employees of [ACIA], and to see that their duties are properly
performed.” “Supervise” means “to be in charge of (someone or something) : to
watch and direct (someone or something).” See Supervise, Merriam-Webster.com,
http://www.merriam-webster.com/dictionary/supervise (last visited October 2013).
Considering these provisions in light of the nature of ACIA and ACC’s agency
relationship, we conclude it would be unreasonable to hold that ACIA was bound
by, and without authority to overrule, ACC’s disapprovals.5 Therefore, the trial
court properly determined that ACIA had authority to overrule ACC’s decision
regarding the Joneses’ architectural projects. We overrule appellants’ first issue.
D. Summary Judgment Awarding Attorney’s Fees Against Appellants
In their second issue, appellants contend the trial erred by awarding ACIA
$120,196.14 in attorney’s fees. The trial court awarded ACIA attorney’s fees
pursuant to section 37.009 of the Declaratory Judgments Act, under which, “In any
proceeding under this chapter, the court may award costs and reasonable and
necessary attorney’s fees as are equitable and just.” Tex. Civ. Prac. & Rem. Code
5
Appellants also argue portions of the Articles of Incorporation and Bylaws cited by the
trial court in its summary-judgment order do not provide ACIA with power to veto ACC’s
decisions but merely recite ACIA’s general powers afforded under the Governing Documents
and statutes pertaining to certain corporations. We need not address this argument because we
hold ACIA had authority to overrule ACC’s architectural plan disapprovals under principles of
agency.
16
Ann. § 37.009 (West 2012); see also Edwards Aquifer Auth. v. Chem. Lime, Ltd.,
291 S.W.3d 392, 405 (Tex. 2009) (expressing award of fees under section 37.009
must be “equitable and just”).
Appellants do not contend the evidence is insufficient to support the trial
court’s finding that the fees awarded were “reasonable and necessary.” Instead,
appellants contend the trial court erred by determining the fees awarded were
“equitable and just.” We review for abuse of discretion the trial court’s “equitable
and just” determination under section 37.009. Ridge Oil Co., Inc. v. Guinn Invs.,
Inc., 148 S.W.3d 143, 163 (Tex. 2004); Bocquet v. Herring, 972 S.W.2d 19,
21 (Tex. 1998). The award of attorney’s fees in a declaratory-judgment action is
within the trial court’s discretion and is not dependent upon a finding that a party
substantially prevailed. Bank of N.Y. Mellon v. Soniavou Books, LLC, 403 S.W.3d
900, 907 (Tex. App.—Houston [14th Dist.] 2013, no pet.). The trial court abuses
its disrection if it acts in an arbitrary or unreasonable manner. Worford v. Stamper,
801 S.W.2d 108, 109 (Tex. 1990) (per curiam).
Appellants first contend ACIA presented no specific evidence that its
attorney’s fees were equitable and just nor mentioned the terms “equitable” and
“just” in its attorney’s fees affidavit. According to appellants, because ACIA
sought fees under section 37.009 in the summary-judgment context, ACIA was
required to prove conclusively that its fees were equitable and just. We reject this
argument because, unlike the issues of whether fees are reasonable and necessary,
whether fees are equitable and just are not fact issues but questions of law the trial
court considers from all surrounding circumstances. See Ridge Oil Co., 148
S.W.3d at 161–62; Approach Res. I, L.P. v. Clayton, 360 S.W.3d 632, 639–
40 (Tex. App.—El Paso 2012, no pet.) (“Whether it is ‘equitable and just’ to award
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attorney’s fees depends, not on direct proof, but on the concept of fairness, in light
of all the circumstances of the case.” (citing Ridge Oil Co., 148 S.W.3d at 162)).6
Appellants also contend the trial court’s award of fees to ACIA was not
equitable or just for the following reasons:
Appellants and ACIA were both pursuing resolution of an issue that is
important to all property owners subject to ACIA governance, namely,
whether ACIA or ACC has final authority to approve architectural
modifications. In fact, this issue is so important, that in 2012, ACIA filed a
separate suit against the Joneses, partially involving the same issue as the
current case, and in which ACIA is relying on ACC’s decision as the final
authority on disapproval of a property-modification application.
Furthermore, deposition testimony from this suit proves that ACIA has
informed the Joneses that ACIA will not rule on any of the Joneses’ other
applications until resolution of the underlying suit. Thus, by bringing this
suit, appellants have actually helped ACIA resolve uncertainties.
By seeking declaratory relief against ACIA, appellants were “pursuing a
legitimate interest” by attempting to prevent “nuisance” structures from
being erected in their neighborhood. At a 2011 meeting of the ACIA Board,
the ACIA Board declared that late-night noise coming from the Joneses’
property was a nuisance and ordered the manager to escalate pursuit of the
violation. Accordingly, appellants attempted to remedy a real problem and
had a reasonable basis in law and fact to challenge ACIA’s overruling of
ACC.
6
Appellants cite Cantu v. Texas Workforce Commission, in which the Austin Court of
Appeals considered whether the evidence was legally sufficient to support the claimants’
argument that, even though they lost, they were entitled to fees under section 37.009 because
their case served as a catalyst for a governmental agency to change its interpretation of a statute.
145 S.W.3d 236, 244–45 (Tex. App.—Austin 2004, no pet.). Nevertheless, despite reference to
the legal-sufficiency standard, the Austin court ultimately held that the trial court did not abuse
its discretion by refusing to award fees.
Although consideration of evidence presented by parties may certainly be part of the trial
court’s consideration in determining the equity and justness of section 37.009 fees, the court also
considers all circumstances of the case. Because the trial court may consider matters outside the
summary-judgment record, this is not an element for which the summary-judgment movant need
present conclusive evidence.
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The issues involved were complicated, as shown by the trial court’s twice
granting continuances of the motion for summary judgment to allow for
additional discovery. In its January 9, 2012 supplemental motion for
summary judgment containing purported assignments of ACC’s authority to
ACIA, ACIA stated that the assignments had been unknown but recently
found. Appellants cannot be held responsible for knowing or anticipating
the contents of assignments ACIA located late in the pretrial stage of
litigation. Thus, any award of fees should be based on fees ACIA incurred
after January 9, 2012, and because ACIA’s attorney’s fees affidavit includes
fees only through August 2011, ACIA is not entitled to any fees.
Appellants raised, and presented evidence supporting, these issues for the
first time in their post-summary-judgment motion entitled, “Motion for
Rehearing/Motion to Reconsider/Motion for Clarification/Motion for New Trial.”
Assuming without deciding that appellants could raise new arguments regarding
why an award of attorney’s fees was not equitable and just after the trial court had
already awarded the fees, we nevertheless disagree that these facts establish the
trial court abused its discretion by awarding the fees. First, the reasonableness and
necessity of the amount of fees is not in question—appellants have not challenged
these fact issues. Thus, for our purposes, the amount of fees awarded is reasonable
and necessary.
Second, the trial court was not required to view appellants’ decision to bring
suit against ACIA as a benefit to all property owners. Instead, the trial court could
have believed appellants’ decision to bring ACIA into a feud between neighbors
needlessly expended time and ACIA’s resources.
Third, in its 2012 suit against the Joneses, ACIA seeks injunctive relief
ordering the Joneses to complete their modifications upon written approval from
ACC. However, ACIA also alleges the Joneses’ current modification does not
comply with the relevant restrictive covenants and the Joneses have disregarded
ACIA’s numerous requests to bring their property into compliance. Hence, in this
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separate suit, ACIA is not conceding that ACC has final authority to approve or
disapprove architectural-modification applications. The trial court could have
viewed ACIA’s decision to withhold ruling on the Joneses’ requests until after the
underlying suit is resolved as an exercise in prudence, not an admission that ACC
may have final architectural control authority.
Fourth, the fact that ACIA discovered the assignments late in the pretrial
proceedings does not automatically render it unjust to assess fees against
appellants. Appellants contend they should not be held responsible for ACIA’s
fees incurred prior to production of the assignments because appellants obviously
did not know during that period what the assignments contained. Nevertheless,
even after the assignments were produced, appellants maintained that ACC never
assigned its power to ACIA or, even if it did, ACIA reassigned this power to ACC.
Hence, the trial court could have reasonably believed ACIA’s production of the
assignments had no effect on appellants’ position in this litigation.
Appellants next contend that the trial court applied an incorrect standard in
awarding fees. In its summary-judgment order, the trial court awarded ACIA
$120,196.14 “for its reasonable and necessary attorney’s fees incurred in defending
against [appellants’] declaratory judgment action.” Appellants argue that the trial
court made “no reference to any guiding principles or law nor [did] it make any
findings that an award of attorneys fees here was just and equitable.” We reject
this argument. As noted above, whether fees are equitable and just are not fact
issues and thus not subject to being memorialized in findings of fact. Moreover,
appellants cite no authority for the proposition that the trial court was required to
recite in its order that the fees award is “equitable and just.” In its motion for
summary judgment, section 37.009 was the only basis ACIA cited for an award of
fees, and ACIA quoted the “equitable and just” requirement. Accordingly, we
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assume the trial court followed the requirements of section 37.009, including
determining the amount of fees awarded was equitable and just.
Finally, appellants argue that the trial court’s award of fees to ACIA violates
the Open Courts provision of the Texas Constitution. Tex. Const. art. 1, § 13 (“All
courts shall be open, and every person for an injury done him, in his lands, goods,
person or reputation, shall have remedy by due course of law.”). The Open Courts
provision includes three separate constitutional rights: (1) courts must actually be
available and operational; (2) the Legislature cannot impede access to the courts
through unreasonable financial barriers; and (3) meaningful remedies must be
afforded, so that the legislature may not abrogate the right to assert a well-
established common law cause of action unless the reason for its action outweighs
the litigants’ constitutional right of redress. Barshop v. Medina County
Underground Water Conservation Dist., 925 S.W.2d 618, 637 (Tex. 1996).
Appellants contend the court’s award will “have a stifling effect on the
ability of homeowners to question arbitrary and capricious actions taken by their
community association . . . [and will] create a fear that even though a litigant has a
good faith belief in bringing a cause of action they will be punished for the same if
the other side simply incurs attorney’s fees.” At its core, appellants’ complaint is
about the trial court’s decision to award fees in this case, not a statute that hinders
appellants’ access to court. Appellants have not cited authority indicating judicial
action, as opposed to legislation, may violate the Open Courts provision.
Presuming without deciding that judicial action may violate the Open Courts
provision, we disagree that the trial court’s award of attorney’s fees in this case
will have a stifling affect on homeowners’ declaratory actions against community
associations. A trial court’s discretionary choice of whether to award fees under
section 37.009 is based on the specific facts and circumstances of each case. Thus,
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homeowners considering legal action should weigh the potential merits and
equities of their own unique claims against the possibility of being held liable for
their opponents’ attorney’s fees and not base the decision solely on the trial court’s
award of fees in this isolated case. We reject appellants’ Open Courts complaint.
In sum, taking as true that the trial court’s $120,196.14 award of attorney’s
fees was reasonable and necessary, appellants have not directed us to any
circumstances proving that the trial court abused its discretion by determining it
was equitable and just to award ACIA its reasonable and necessary fees. See
Chambers v. First United Bank & Trust Co., No. 02-11-00047-CV, 2012 WL
1556091, at *12 (Tex. App.—Fort Worth May 3, 2012, no pet.) (mem. op.)
(concluding circumstances supported trial court’s decision that award of fees under
section 37.009 against losing parties was equitable and just). Accordingly, we
overrule appellant’s second issue.
We affirm the trial court’s judgment.
/s/ John Donovan
Justice
Panel consists of Chief Justice Frost and Justices Boyce and Donovan.
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