Sudden Valley Community Association, App v. Curt Casey, Dave Scott, Barbara Volkov, Resps ( 2014 )

The Court ofAppeals
of the DIVISION 1
RICHARD D. JOHNSON,
Court Administrator/Clerk
State of Washington One Union Square
600 University Street
Seattle, WA
98101-4170
(206) 464-7750
TDD: (206)587-5505
July 10, 2014
Richard Allen Davis, III D Murphy Evans
Chmelik, Sitkin & Davis Brownlie Evans Wolf & Lee LLP
1500 Railroad Ave 230 E Champion St
Bellingham, WA, 98225-4542 Bellingham, WA, 98225-4548
rdavis@chmelik.com murphy@brownlieevans.com
CASE #: 70329-3-I
Sudden Valley Community Association. App v.
Curt Casey. Dave Scott, Barbara Volkov. Resps
Counsel:
Enclosed please find a copy of the order granting motion to publish opinion entered by this court
in the above case today.
Sincerely,
Richard D. Johnson
Court Administrator/Clerk
emp
enclosure
c: The Honorable Ira J. Uhrig
Reporter of Decisions
UUUh i oi" Mri-'.c.m.i Ui" .
SWE CF WASHINGT0:1
ZOIUUL 10 AH S: 2U
IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
CURT CASEY, DAVE SCOTT, NO. 70329-3-1
BARBARA VOLKOV, Washington
residents, DIVISION ONE
Respondents,
v.
SUDDEN VALLEY COMMUNITY ORDER GRANTING MOTION
ASSOCIATION, a Washington TO PUBLISH OPINION
homeowners' association,
Appellant.
Appellant Sudden Valley Community Association moved on June 10, 2014, to
publish the opinion filed May 27, 2014, and the respondents have no objection. The
court has determined that the motion should be granted. Therefore, it is
ORDERED that the motion to publish opinion is granted.
DATED this \0~ day of July 2014.
FOR THE PANEL:
IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
CURT CASEY, DAVE SCOTT, NO. 70329-3-1
BARBARA VOLKOV, Washington
residents, DIVISION ONE
Respondents,
v.
SUDDEN VALLEY COMMUNITY PUBLISHED OPINION
ASSOCIATION, a Washington
homeowners' association, FILED: May 27, 2014
Appellant.
Lau, J. —This case involves a dispute over the process governing approval of
homeowner association dues and assessment increases. Sudden Valley Community
Association (Association) appeals the trial court's declaratory judgment order in favor of
several Association members. The Association contends that the trial court erred in
concluding that (1) its procedure for approving increases in annual homeowners'
assessments and (2) its process of adopting "spending plans" to adjust expenditures
due to decreased revenues violates the homeowners' association act (Act), chapter
64.38 RCW. Because the Act prohibits neither action, we reverse and remand with
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instructions to enter declaratory relief and judgment in the Association's favor consistent
with this opinion. We also reverse the trial court's award of attorney fees to plaintiffs
and award the Association its appellate attorney fees as the prevailing party under the
Act's attorney fees provision.
FACTS
Association's Budget and Assessment Policies under Bylaws and
RCW 64.38.025
Sudden Valley Community Association is a nonprofit corporation and
homeowners' association in Whatcom County. The Association is comprised of 3,204
lots, plus a variety of common amenities, including a golf course, community center,
marina, swimming pools, and a fitness facility.
The Association is governed by its restrictive covenants, articles of incorporation,
bylaws, and Washington state laws. A nine-member board of directors is responsible
for its affairs, including adoption of annual budgets subject to ratification by the
Association's members. The board is elected by the Association's members at the
annual general meeting. Members have one vote for each Sudden Valley lot they own,
meaning there are 3,204 possible votes at any membership meeting. A majority of the
possible votes at a membership meeting is 1,603.
The Association derives revenue from a variety of sources, including annual dues
and assessments1 levied on its members, leases of building space to third parties, and
usage fees for the swimming pools, fitness center, golf course, and marina. Since its
incorporation in 1973, Association bylaws provided that annual dues and assessments
1The parties refer to the terms "dues" and "assessments" interchangeably.
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must be established by the Board and approved by the members. Article III, section 19
of the bylaws requires approval of annual dues and assessments or special
assessments by 60 percent of the members voting at a meeting.
No bylaws govern the process for adoption of the annual budget. The
Association holds its annual general membership meeting in November and special
general meetings as needed. Each year the Association presents to its members a
budget for ratification under RCW 64.38.025(3),2 which provides that the budget is
ratified unless a majority of votes in the Association reject it.
The Association has historically viewed the bylaws' article III, section 19 as the
exclusive means to increase the annual dues and assessments. According to the
Association, RCW 64.38.025(3)'s budget ratification procedure applies only to budget
adoption and not to dues and assessment increases. The proposed budget contains
the Association's projected expenses and projected revenues from all sources,
including annual dues and assessments. See Clerk's Papers (CP) at 312-13 (2009
proposed operating budget); CP at 348 (2010 recommended annual operating budget);
CP at 381 (2011 proposed operating budget). If the Board proposes an increase in the
annual dues and assessments for the following year, the Association offers a separate
measure for the membership to approve under article III, section 19 of the bylaws. The
board includes the additional revenue from that increase in the proposed budget. If,
however, the members ratify the budget but reject the increase measure, the projected
revenue in the budget is overstated. This occurred in years 2010, 2011, and 2012. The
board dealt with the revenue shortfall by adopting a "spending plan" for each of those
2 As discussed below, this provision is part of the Act, chapter 64.38 RCW.
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years. This was an orderly method for the board to adjust expenditures to ensure that
annual expenditures did not exceed actual revenues.
Due to article III, section 19's elevated (60 percent) approval threshold, most
efforts to increase annual dues and assessments have failed. In August 2011, the
board passed a motion rejecting the article III, section 19 voting procedures. It
implemented a new process to increase the approval chances at the 2011 annual
membership meeting. The August 22 meeting minutes state the rationale for the motion
and quote the motion itself:
Our experience at our last several AGM [annual membership meetings] has been
consistent. Each year our budget is approved but the dues proposal is defeated.
Something like 50% of the members vote. Since approval of the dues under our
Bylaws requires a super majority of 60% of those voting, 20% of the membership
can and has blocked all dues increases, except one small one for the pools. To
prevent this from happening at the coming AGM, I move:
That at the AGM, the results of the vote on the regular budget for
Operations, Road and Capital be increased in the Operations Budget to
subsidize the cost of the pools and the Special Budget for the Capital
Repair, Replacement, Reserve Fund be determined in accordance with
Washington State Law, RCW 64.38.025, which provides that the Budget,
including the Dues to support it is approved unless a majority of the
membership rejects it.
(Emphasis added.) The board combined the vote on dues and assessments with the
vote on the budget. The result was an overwhelming rejection of the combined
measure, based on fewer than 50 percent of the total possible votes in the Association.3
Under the new process, the board achieved its goal of increasing dues and
assessments despite the members' overwhelming vote to reject it.
3 Voting results: 658 approved and 1249 rejected the increase. Under RCW
64.38.025(3), 1605 votes were needed to reject.
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Following the election of new board members, the board voted to rescind the
August 22, 2011 motion and to reinstate the article III, section 19 procedure for voting
on dues and assessment increases. The Board also treated the dues and assessment
increase as invalid because a 60 percent voting majority failed to approve it as required
under article III, section 19. The Association continued to assess and collect annual
dues and assessments at the level established by the membership's March 2008 vote.
The Association submitted no updated 2012 budget to the membership for ratification,
but it adopted a 2012 "spending plan" instead.
Lawsuit
In September 2012, several individual Association members ("plaintiffs") filed a
complaint against the Association seeking declaratory and injunctive relief. Plaintiffs
requested the court to declare that (1) "RCW 64.38.025 governs [the Association's]
adoption of any proposed dues assessment and overrides Article III, Section 19 of the
Bylaws," (2) "RCW 64.38.025 governs [the Association's] adoption of any budget or
special budget," (3) "RCW 64.38.025 requires that any proposed budget submitted to
the membership for ratification must include any proposed dues assessments for the
time period covered by the proposed budget," (4) "RCW 64.38.025 prohibits [the
Association] board from adopting a revised budget or 'spending plan' that has not been
previously ratified or approved by the membership." Plaintiffs also requested injunctive
relief corresponding to the relief quoted above.
The Association's answer denied that the spending plans were revised budgets
requiring ratification. It requested declaratory relief and specifically asked the court to
declare, among other things, that (1) article III, section 19 of the bylaws governs the
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voting approval threshold for increases in dues and assessments, (2) RCW 64.38.025's
ratification threshold does not apply to approval of increases in the Association's dues
and assessments, (3) the Board's approval of a spending plan does not constitute
adoption of a regular or special budget requiring ratification under RCW 64.38.025,
(4) "On those occasions when anticipated revenues in the budget ratified by the
membership are not met because of the failure of the membership to approve an
increase in dues and assessments, the Board may adopt and follow a spending plan
without submitting the spending plan to the membership for ratification," and (5) "That
the Board of [the Association] has the authority under the Bylaws to govern the
Association which includes, inter alia, making financial decisions which vary from the
budget ratified by the membership."
In February 2013, both parties moved for summary judgment. Each party asked
the court to enter a declaratory judgment adopting its respective position on whether
RCW 64.38.025 or article III, section 19 governed the Association's adoption of dues
and assessment increases. The court heard oral argument. On May 7, 2013, the court
issued an amended declaratory judgment ruling in plaintiffs' favor. The court
determined:
1. Any dues and assessment measure proposed by the Sudden Valley
Community Association must be ratified by membership vote in accordance with
the requirements of RCW 64.38.025. To the extent that RCW 64.38.025 (the
"statute["] and Article III, Section 19 of the [Association] Bylaws are inconsistent,
the statute governs.
2. RCW 64.38.025 requires [the Association] to submit to its membership
for ratification vote a unified budget proposal that includes both proposed
expenditures and proposed revenues in a single measure.
3. The [Association] Board's practice of adopting "spending plans" without
submitting such plans to a ratification vote of the membership violates RCW
64.38.025.
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The court also awarded attorney fees to plaintiffs under RCW 64.38.050. The
Association appeals.
ANALYSIS
Standard of Review
Where, as here, the facts are undisputed and the only issues are questions of
law, the standard of review is de novo. Shafer v. Bd. of Trustees of Sandy Hook Yacht
Club Estates. Inc.. 76 Wash. App. 267, 273, 883 P.2d 1387 (1994). Questions of statutory
construction are reviewed de novo. State v. Votava. 149 Wash. 2d 178, 183, 66 P.3d 1050
(2003). "The primary goal of statutory interpretation is to ascertain and give effect to the
legislature's intent and purpose." In re Condemnation Petition of Seattle Popular
Monorail Auth.. 155 Wash. 2d 612, 627, 121 P.3d 1166 (2005). We read the statute as a
whole to give effect to all language used. In re Pers. Restraint of Skvlstad. 160 Wash. 2d
944, 948, 162 P.3d 413 (2007).
Bylaws and the Act
The Association contends that article III, section 19's 60 percent approval
requirement governs the establishment and approval of annual dues and assessments.
Plaintiffs claim that the Act controls the process for imposing dues and assessments.
Plaintiffs rely mainly on RCW 64.38.025(3)'s budget approval process.4
RCW 64.38.025(3) provides:
4 At its core, plaintiffs' contention depends on the unsupported claim that the
budget approval process is synonymous with the process for imposing dues and
assessments.
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Within thirty days after adoption by the board of directors of any proposed regular
or special budget of the association, the board shall set a date for a meeting of
the owners to consider ratification of the budget not less than fourteen nor more
than sixty days after mailing of the summary. Unless at that meeting the owners
of a majority of the votes in the association are allocated or any larger
percentage specified in the governing documents reject the budget, in person or
by proxy, the budget is ratified, whether or not a Quorum is present. In the event
the proposed budget is rejected or the required notice is not given, the periodic
budget last ratified by the owners shall be continued until such time as the
owners ratify a subsequent budget proposed by the board of directors.
(Emphasis added.) Plaintiffs do not argue this section is ambiguous. Indeed, the
statute's plain language addresses the process for approving the budget,5 not the
process for imposing dues and assessments. Nowhere is "assessment" mentioned.
We decline to read into this plainly written clause a meaning the legislature never
intended.
Other provisions of the Act6 govern assessments. The Act defines "assessment"
as "all sums chargeable to an owner by an association in accordance with RCW
64.38.020." RCW 64.38.010(1). RCW 64.38.020(2) empowers the association to
5 The Act provides no definition for "budget." When a statute fails to define a
term, a court may rely on the ordinary meaning of the word as stated in a dictionary.
See Budget Rent A Car Corp. v. Dep't of Licensing. 144 Wash. 2d 889, 899, 31 P.3d 1174
(2001). "Budget" is ordinarily defined as "[a] statement of an organization's estimated
revenues and expenses for a specified period, [usually] a year" or "[a] sum of money
allocated to a particular purpose or project." Black's Law Dictionary 221 (9th ed.
2009). "Budget" means "1. an estimate, often itemized, of expected income and
expense for a given period in the future. 2. a plan of operations based on such an
estimate. 3. an itemized allotment of funds, time, etc., for a given period. 4. the total
sum of money set aside or needed for a purpose: the construction budget."
Dictionary.com (last visited May 12, 2014) (emphasis omitted).
6 The Act was enacted in 1995 and addresses the rights and responsibilities of
homeowners' associations. The Act is based on the Uniform Common Interest
Ownership Act (UCIOA) as drafted by the National Conference of Commissioners on
Uniform State Laws in 1994.
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"[a]dopt and amend budgets for revenues, expenditures, and reserves, and impose and
collect assessments for common expenses from owners." (Emphasis added). And
under RCW 64.38.020(11), the association may "[i]mpose and collect charges for late
payments of assessments ...." That section further provides for the levy of fines
following notice and an opportunity to be heard.7 None of the provisions governing
assessments mentions or requires dues and assessments to be approved under RCW
64.38.025(3)'s budget ratification process. The Act's statutory scheme treats budgets
and assessments as distinct subjects. See, e.g.. RCW 64.38.020.
Plaintiffs also argue that because the proposed budgets included the proposed
revenues from dues and assessment increases, RCW 64.38.025's budget ratification
procedure also applies to the projected dues and assessment revenue. As discussed
above, the Act's plain language undermines this assertion.
The Act also neither prohibits nor limits the Association's authority
to levy dues and assessments under a process outlined in its governing documents.
RCW 68.34.020 enumerates the powers that a homeowners' association may exercise
"[u]nless otherwise provided in the governing documents," including the power to
"[a]dopt and amend bylaws, rules, and regulations;" "[a]dopt and amend budgets for
revenues, expenditures, and reserves, and impose and collect assessments for
7 Section 3-102 of the UCIOA provides for "Powers of Unit Owners' Association"
and contains language similar to that in RCW 64.38.020. Section 3-102 states that the
association may "adopt and amend budgets for revenues, expenditures, and reserves
and collect assessments for common expenses from unit owners." Section 3-102(a)(2).
The association may also "exercise any other powers conferred by the declaration or
bylaws." Section 3-102(a)(15). The commentary to the UCIOA states, "The declaration
may limit the right of the association to exercise any of the listed powers, except in a
manner which discriminates in favor of a declarant." Comment 4 to Section 1-104
(discussing Section 3-102 (Powers of the Association)).
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common expenses from owners;" "[e]xercise any other powers conferred by the
bylaws;" and "[e]xercise any other powers necessary and proper for the governance and
operation of the association." RCW 64.38.020(1), (2), (12), (14). The Act's definition of
"governing documents" is broad and expressly includes covenants and bylaws. RCW
64.38.010(10). Here, the bylaws authorize the Association's process for establishing
and increasing dues and assessments.
Plaintiffs also rely on RCW 64.38.025(4)8 and RCW 64.38.0359 to argue that
these provisions indicate the legislature intended that approval of a budget
8 RCW 64.38.025(4) provides:
"As part of the summary of the budget provided to all owners, the board of directors
shall disclose to the owners:
"(a) The current amount of regular assessments budgeted for contribution to the
reserve account, the recommended contribution rate from the reserve study, and the
funding plan upon which the recommended contribution rate is based;
"(b) If additional regular or special assessments are scheduled to be imposed,
the date the assessments are due, the amount of the assessments per each owner per
month or year, and the purpose of the assessments;
"(c) Based upon the most recent reserve study and other information, whether
currently projected reserve account balances will be sufficient at the end of each year to
meet the association's obligation for major maintenance, repair, or replacement of
reserve components during the next thirty years;
"(d) If reserve account balances are not projected to be sufficient, what additional
assessments may be necessary to ensure that sufficient reserve account funds will be
available each year during the next thirty years, the approximate dates assessments
may be due, and the amount of the assessments per owner per month or year;
"(e) The estimated amount recommended in the reserve account at the end of
the current fiscal year based on the most recent reserve study, the projected reserve
account cash balance at the end of the current fiscal year, and the percent funded at the
date of the latest reserve study;
"(f) The estimated amount recommended in the reserve account based upon the
most recent reserve study at the end of each of the next five budget years, the projected
reserve account cash balance in each of those years, and the projected percent funded
for each of those years; and
"(g) If the funding plan approved by the association is implemented, the projected
reserve account cash balance in each of the next five budget years and the percent
funded for each of those years."
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automatically means approval of dues and assessments. In other words, a favorable
vote to ratify a budget also results in approval of a dues and assessment increase.
The plain language of RCW 64.38.025(4) fails to support plaintiffs' argument.
The "summary of the budget" that homeowners' associations provide to members has
nothing to do with whether the budget ratification process automatically imposes a
binding assessment obligation on members. The purpose of the summary is to explain
a capital reserve document—which makes 30-year projections—in terms easily
understood by its members. It informs members whether the association can fund its
capital projects in the coming years and how it plans to do so. Legislative history10 also
shows that RCW 64.38.025(4) is a disclosure requirement.11 RCW 64.38.025(4) fails to
support plaintiffs' argument.
9 This provision states in relevant part:
"(1) A meeting of the association must be held at least once each year. Special
meetings of the association may be called by the president, a majority of the board of
directors, or by owners having ten percent of the votes in the association.
(3) The notice of any meeting shall state the time and place of the meeting and
the business to be placed on the agenda by the board of directors for a vote by the
owners, including the general nature of any proposed amendment to the articles of
incorporation, bylaws, any budget or changes in the previously approved budget that
result in a change in assessment obligation, and any proposal to remove a director."
RCW 64.38.035(1) (emphasis added). Subsection (3) addresses voting on (1) budgets
and (2) proposed changes to a previously approved budget that result in a change in
assessment obligation. See RCW 64.38.035(3).
10 Legislative history may be of some interest even where the court concludes
that the statute's plain language is unambiguous. Scott v. Cascade Structures. 100
Wash. 2d 537, 544, 673 P.2d 179 (1983). "This is particularly so where the
contemporaneous record of a bill's progress bolsters the plain meaning." Lane v. Port
of Seattle. 178 Wash. App. 110, 119 n.3, 316 P.3d 1070 (2013).
11 See Final B. Rep. on Engrossed Substitute H.B. 1309, at 3, 62d Leg., Reg.
Sess. (Wash. 2011) ("Homeowners' associations are encouraged to establish reserve
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Plaintiffs rely on RCW 64.38.035 for the first time on appeal. Nonetheless,
RCW 64.38.035(3) does not apply here. It merely makes RCW 64.38.025(3)'s budget
ratification procedure applicable to changes in a previously approved budget that result
in a change in assessments—an unremarkable requirement given the Act's strong
emphasis on notice and protecting members.
Plaintiffs repeatedly refer to RCW 64.38.005 for support. It provides, "The intent
of this chapter [the Act] is to provide consistent laws regarding the formation and legal
administration of homeowners' associations." RCW 64.38.005. The House Bill Report
for the Act states:
The bill is needed to deal with common complaints received from members of
homeowners' associations. The bill provides a set of basic rules and procedures
by which homeowners' associations must operate in order to protect individual
association members. The board of directors of some homeowners' associations
currently do not provide members notice of their actions and imposition of
assessments. The board needs to be accountable to the members of the
association and needs to make decisions based on the association's interests.
H.B. Rep. on H.B. 1471, 54th Leg., Reg. Sess. (Wash. 1995). Plaintiffs argue that the
legislature's use of the term "consistent laws" in the intent statement means the
legislature intended all homeowners' associations to impose dues in a uniform manner.
But neither the Act's language nor its legislative history suggest the legislature was
attempting to create comprehensive procedural rules. The legislature was concerned
accounts, supplemental to the annual operating budget, to fund major maintenance,
repair, and replacement of common elements.... HOAs must disclose information to
owners regarding reserve accounts and reserve studies with the summary of the annual
budget.") (emphasis added)); H.B. Rep. on Engrossed Substitute H.B. 1309, at 4, 62d
Leg., Reg. Sess. (Wash. 2011) (same); S.B. Rep. on Engrossed Substitute H.B. 1309,
at 3, 62d Leg., Reg. Sess. (Wash. 2011) (same).
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with protecting members from lack of information. Nothing indicates the legislature
intended to go further.
Plaintiffs also rely on provisions from the closely related Condominium Act,
chapter 64.34 RCW. They cite RCW 64.34.308(3) and (4)12—which are nearly identical
12 These subsections provide:
"(3) Within thirty days after adoption of any proposed budget for the
condominium, the board of directors shall provide a summary of the budget to all the
unit owners and shall set a date for a meeting of the unit owners to consider ratification
of the budget not less than fourteen nor more than sixty days after mailing of the
summary. Unless at that meeting the owners of units to which a majority of the votes in
the association are allocated or any larger percentage specified in the declaration reject
the budget, the budget is ratified, whether or not a quorum is present. In the event the
proposed budget is rejected or the required notice is not given, the periodic budget last
ratified by the unit owners shall be continued until such time as the unit owners ratify a
subsequent budget proposed by the board of directors.
"(4) As part of the summary of the budget provided to all unit owners, the board
of directors shall disclose to the unit owners:
"(a) The current amount of regular assessments budgeted for contribution to the
reserve account, the recommended contribution rate from the reserve study, and the
funding plan upon which the recommended contribution rate is based;
"(b) If additional regular or special assessments are scheduled to be imposed,
the date the assessments are due, the amount of the assessments per each unit per
month or year, and the purpose of the assessments;
"(c) Based upon the most recent reserve study and other information, whether
currently projected reserve account balances will be sufficient at the end of each year to
meet the association's obligation for major maintenance, repair, or replacement of
reserve components during the next thirty years;
"(d) If reserve account balances are not projected to be sufficient, what additional
assessments may be necessary to ensure that sufficient reserve account funds will be
available each year during the next thirty years, the approximate dates assessments
may be due, and the amount of the assessments per unit per month or year;
"(e) The estimated amount recommended in the reserve account at the end of
the current fiscal year based on the most recent reserve study, the projected reserve
account cash balance at the end of the current fiscal year, and the percent funded at the
date of the latest reserve study;
"(f) The estimated amount recommended in the reserve account based upon the
most recent reserve study at the end of each of the next five budget years, the projected
reserve account cash balance in each of those years, and the projected percent funded
for each of those years; and
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to RCW 64.38.025(3) and (4) quoted above—as well as RCW 64.34.360(1 )'s
requirement that "After any assessment has been made by the association,
assessments must be made against all units, based on a budget adopted by the
association." Plaintiffs contend that the Act "was clearly based on [the Condominium
Act]." Resp't's Br. at 27.
To the extent RCW 64.34.360(1) requires assessments to be ratified at the same
time and by the same process under the Condominium Act,13 the legislature did not use
the same language in the homeowners' association act. It did not say—as it did for
condominiums in RCW 64.34.360—that assessments must be based on the budget.14
"(g) If the funding plan approved by the association is implemented, the projected
reserve account cash balance in each of the next five budget years and the percent
funded for each of those years." RCW 64.34.308(3), (4).
13 We question this premise, as the language cited does not appear to require
that conclusion and plaintiffs cite no legislative history or other support for this
argument.
14 Further, like the homeowners' association act, the Condominium Act was
based on the UCIOA. The UCIOA contains a provision nearly identical to RCW
64.34.360(1): "Until the association makes a common expense assessment, the
declarant shall pay all common expenses. After an assessment has been made by the
association, assessments must be made at least annually, based on a budget adopted
at least annually by the association." Section 3-115(a). The UCIOA commentary
indicates this provision was intended to ensure fairness in assessments against all
units: "[0]nce an assessment is made against any unit, all units, including those owned
by the declarant, must be assessed for their full portion of the common expense
liability." Comment 1 to Section 3-115. The official comments to RCW 64.34.360
contain identical language. See Washington Condominium Act Official Comments to
RCW 64.34.360; see also opening comments to the Washington Condominium Act
("These comments are not part of the statute itself, but were published by the committee
to help explain the intentions of the statute drafters as an aid to interpretation of the
statute."). Even if the legislature had included a similar provision in the homeowners'
association act, nothing in the commentary supports plaintiffs' position.
We also note that even outside the context of RCW 64.34.360 discussed above,
nothing in the official comments to the Condominium Act or the commentary to the
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Where the legislature expressly includes a provision in one statute but not another, we
may presume that the exclusion was intentional. See, e.g.. State v. Delgado. 148
Wash. 2d 723, 728-29, 63 P.3d 792 (2003); In re Pet, of Williams. 147 Wash. 2d 476, 491, 55
P.3d 597 (2002). We conclude that the Act conveys a plain meaning. It contains no
requirement that dues and assessments imposed by the Association must be approved
in accordance with RCW 64.38.025(3)'s budget ratification process.
"Spending Plans"
The Association argues the court erred in determining that the adoption of
"spending plans" without a membership vote violates RCW 64.38.025. It contends the
spending plans merely reflect reductions in expenditures necessitated by underfunded
budgets. Plaintiffs respond that the spending plans are essentially revised budgets that
must be submitted to the membership for ratification.
Plaintiffs "do not deny that the board has authority to adjust spending to deal with
changes in circumstances that take place during the fiscal year after the budget is
UCIOA supports plaintiffs' position. Both documents express legislative intent to permit
an association's declaration to limit the right of the association to exercise any of its
listed powers. See Comment 4 to UCIOA Section 1-104 ("The declaration may limit the
right of the association to exercise any of the listed powers, except in a manner which
discriminates in favor of a declarant.") (discussing Section 3-102 ("Powers of the
Association")); Washington Condominium Act Official Comments to RCW 64.34.030
(same; discussing RCW 64.34.304 ("Powers of Unit Owners' Association")). Both
confer great leeway as to what is included in the bylaws. See Comment 4 to Section 1-
104 ("Subject to the provisions of the declaration, the bylaws may contain any matter in
addition to that required by the Act.") (discussing Section 3-106 ("Bylaws")); Washington
Condominium Act Official Comments to RCW 64.34.030 (same; discussing RCW
64.34.324 ("Bylaws")). Thus, to the extent the Condominium Act is useful here, it
supports the Association's argument rather than plaintiffs' interpretation.
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approved by the membership."15 Resp't's Br. at 30. However, citing RCW
64.38.035(3)'s notice requirement for "any budget or changes in the previously
approved budget that result in a change in assessment obligation," they argue that
spending plan approval requires notice and a vote. Plaintiffs contend only
"unanticipated changes in circumstances," such as a tenant defaulting on its lease, a
downturn in the economy, or other necessary budget changes "that are unrelated to the
level of dues assessed by the association," are excluded from RCW 64.38.035(3)'s
notice requirement. Resp't's Br. at 30. They acknowledge that "RCW 64.38.035 does
not require the association to give its membership notice of a change in the budget that
is not related to a change in assessments." Resp't's Br. at 30. However, they claim that
here, the spending plans were caused by changes in the dues and assessment
obligation because the members rejected the proposed increases, resulting in
underfunded budgets.
Plaintiffs' assertion is undermined by the notice requirement's plain language.
The statute requires no notice of changes to the budget that result from a change in
assessment obligation. It requires notice of changes to the budget that result in a
change in assessment obligation. It is undisputed that none of the Association's
"spending plans" resulted in changes in the assessment obligation. The spending plans
outlined expenditure cuts resulting from a dues and assessment increase rejection. The
15 Indeed, "[association management must perform its budgeting and set and
collect its assessments with such potential future developments in mind. No one can
know in advance what costs will be demanded, or when. It is inescapable that some
exigencies will arise and that the association must be able to respond with urgently
needed cash while keeping itself fiscally sound." James L. Winokur, Critical
Assessment: The Financial Role of Community Associations, 38 Santa Clara L. Rev.
1135,1162(1998).
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70329-3-1/17
dues and assessment obligation remained the same as it was in 2008, the last time the
members approved an increase.
Plaintiffs also rely on RCW 64.38.025(3), which specifies that if a budget is
rejected, the Association must revert to the budget last ratified by the membership.
Plaintiffs claim that "[the Association] should have reverted to the budget last ratified by
membership vote" rather than adopting "spending plans." Resp't's Br. at 33. The
statute's plain language defeats plaintiffs' argument. This provision applies only if
members reject a proposed budget. It is undisputed that the members did not reject
any of the proposed budgets here. Instead, they ratified the budgets but rejected dues
and assessment increases that partially funded the budgets, thus requiring the
Association to adjust spending to account for the shortfall.
The trial court erred in determining that the Association's spending plans violate
the Act. Nothing in the Act requires the Association to obtain member approval for
spending adjustments in these circumstances.
Attorney Fees
Both parties request attorney fees under RCW 64.38.050, which states, "Any
violation of the provisions of this chapter entitles an aggrieved party to any remedy
provided by law or in equity. The court, in an appropriate case, may award reasonable
attorneys' fees to the prevailing party." The Association is entitled to attorney fees as
the prevailing party.16
16 Plaintiffs argue this is not an "appropriate case" for the Association to recoup
its attorney fees for the sole reason that "it is not appropriate that associations who
successfully defend against allegations that they have violated the Act should recover
their attorney's fees from the members, because the Act is not intended to protect
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CONCLUSION17
For the reasons discussed above, the trial court erred when it granted
declaratory relief in plaintiffs' favor. We reverse the trial court's declaratory judgment
order and remand with instructions to enter declaratory relief and judgment in the
Association's favor consistent with this opinion. We also reverse the trial court's award
of attorney fees to plaintiffs and award appellate attorney fees to the Association subject
to its compliance with RAP 18.1.
WE CONCUR:
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associations from their members, and awarding associations their attorney's fees
whenever they successfully defend would only discourage such suits and reduce the
likelihood that the Act will be enforced." Resp't's Br. at 43. They cite no authority for
this argument, and they misconstrue the statute. On its face, RCW 64.38.050 does not
limit an award of fees to aggrieved homeowners but does allow fees to the "prevailing
party." This allows homeowners' associations, which are funded by the community as a
whole, to recoup expenses incurred in defending against nonprevailing homeowners.
17 We decline to address plaintiffs' past dues collected assertion. This is a
declaratory judgment action and the assertion is raised for the first time on appeal.
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