Justice Holdings, LLC v. Glade Springs Village Property Owners Association, Inc. ( 2023 )

FILED
June 15, 2023
No. 22-0002, Justice Holdings, LLC v. Glade Springs Village Property Owners released at 3:00 p.m.
EDYTHE NASH GAISER, CLERK
Association SUPREME COURT OF APPEALS
OF WEST VIRGINIA
Armstead, Justice, joined by Judge Howard, concurring, in part, and dissenting, in part:
This matter involves a complex series of contracts and declarations, spanning
several years, a review of the complexities of the Uniform Common Interest Ownership
Act (“UCIOA”), and numerous orders issued by the circuit court interpreting the parties’
rights and obligations related to Glade Springs Village (“GSV”). While the majority
opinion adeptly navigates the numerous assignments of error raised by the parties in the
current appeal, and I agree with many of the conclusions reached by the majority, I write
separately because I believe the majority has misapplied the term “without penalty” as
provided for in the UCIOA, and accordingly, I dissent as to the majority’s determination
that such phrase permits the Glade Springs Village Property Owners Association,
(“Association”), to escape certain of its obligations related to the repayment of the July 1,
2001 loan agreement, (“Utilities Loan”), between Cooper Land Development (“Cooper
Land”), predecessor in interest to Justice Holdings, LLC (“Justice Holdings”), and the
Association.
It is clear that the Utilities Loan was entered into for the purpose of “funding
the construction and installation of the water, wastewater, and electric utilities” to serve
GSV. While I concur with the majority’s determination that the UCIOA provided the
Association the right to terminate the Utilities Loan, which the circuit court correctly
determined that the Association did on February 16, 2020, I disagree as to the majority’s
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conclusion that such termination relieved the Association of any obligation to repay the
remaining amounts due pursuant to the Utilities Loan.
The pertinent portion of the UCIOA provides:
If entered into before the executive board elected by the
unit owners pursuant to section 3-103(f) takes office, (i) any
management contract, employment contract, or lease of
recreational or parking areas or facilities, (ii) any other
contract or lease between the association and a declarant or
an affiliate of a declarant, or (iii) any contract or lease that is
not bona fide or was unconscionable to the unit owners at the
time entered into under the circumstances then prevailing, may
be terminated without penalty by the association at any time
after the executive board elected by the unit owners pursuant
to section 3-103(f) takes office upon not less than ninety days’
notice to the other party. This section does not apply to: (i) Any
lease the termination of which would terminate the common
interest community or reduce its size, unless the real estate
subject to that lease was included in the common interest
community for the purpose of avoiding the right of the
association to terminate a lease under this section, or (ii) a
proprietary lease.
W. Va. Code § 36B-3-105 (1986) (emphasis added). In this matter, it is clear this statute
applies to the Utilities Loan extended to the Association by Cooper Land and assumed by
Justice Holdings, as Cooper Land’s successor in interest. Once Justice Holdings
transformed its membership in the Association from Class B to Class A, thereby
relinquishing control of the Association, the reconstituted Association elected a new
executive board and promptly terminated the Utilities Loan, as allowed by the provisions
of West Virginia Code § 36B-3-105. Again, I have no reservations with such cancellation.
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However, the question remains – what does the phrase “without penalty” in
West Virginia Code § 36B-3-105 mean? The majority opinion concludes that it means
that, once the Utilities Loan was terminated, the Association was absolved from any
obligation to pay back the principal or interest on the loan. The complete exoneration
granted the Association by the majority opinion includes any and all responsibility to repay
money ostensibly extended to the Association to construct utilities. However, such holding
essentially results in a gift or windfall to the Association of approximately $11 million in
utility improvements. A clear reading of West Virginia Code § 36B-3-105 simply does not
support the majority’s determination that the Legislature intended such interpretation of
the phrase “without penalty.”
Application of our well-established rules of statutory construction belie the
conclusion reached by the majority. “The primary rule of statutory construction is to
ascertain and give effect to the intention of the Legislature.” Syl. Pt. 8, Vest v. Cobb, 138
W.Va. 660, 76 S.E.2d 885 (1953). “It is a cardinal rule of statutory construction that a
statute should be construed as a whole, so as to give effect, if possible, to every word,
phrase, paragraph and provision thereof, but such rule of construction should not be
invoked so as to contravene the true legislative intention.” Syl. Pt. 9, Vest. Further, “[i]t
is always presumed that the legislature will not enact a meaningless or useless statute.”
Syl. Pt. 4, State ex rel. Hardesty v. Aracoma - Chief Logan No. 4523, Veterans of Foreign
Wars of U.S., Inc., 147 W.Va. 645, 129 S.E.2d 921 (1963). Therefore, given these
guidelines:
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A statute should be so read and applied as to make it
accord with the spirit, purposes and objects of the general
system of law of which it is intended to form a part; it being
presumed that the legislators who drafted and passed it were
familiar with all existing law, applicable to the subject matter,
whether constitutional, statutory or common, and intended the
statute to harmonize completely with the same and aid in the
effectuation of the general purpose and design thereof, if its
terms are consistent therewith.
Syl. Pt. 5, State v. Snyder, 64 W.Va. 659, 63 S.E. 385 (1908).
Rather than limit the phrase “without penalty” to its plain meaning under the
statute, the majority conflates the term “penalty” with the term “obligation” and concludes
that West Virginia Code § 36B-3-105 requires abrogation of both penalties and
obligations. Indeed, the majority specifically says as much when it states: “[t]o terminate
without penalty, then, means to terminate without any further costs or loss to the
Association. When a contract is terminated without penalty, the obligations that were based
upon the existence of that contract necessarily end.” (Emphasis added). The majority
emphasizes this view in Syllabus Point 3 of the majority opinion, which provides: “[b]ased
on the plain language of the statute, when an association terminates a contract ‘without
penalty’ under West Virginia Code § 36B-3-105, that termination ends the parties’ rights
and responsibilities at the time of the termination.” (Emphasis added). Respectfully, the
“plain language of the statute” provides no such thing.
Our Legislature has used the phrase “without penalty” throughout the West
Virginia Code in approximately twenty different provisions and in a variety of contexts.
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Of those references, including the provisions of West Virginia Code § 36B-3-105 at issue
here, thirteen simply use the phrase “without penalty” absent any modifying words.1
Significantly, of the remaining seven references, three use the phrase “without penalty or
further obligation” See W. Va. Code § 46A-6H-5(a) (1999) (Providing a nonwaivable right
to rescind a transfer agreement to a consumer “without penalty or further obligation” within
five days of closing the transfer.); W. Va. Code § 46A-6N-3(2) (2019) (Allowing
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See W. Va. Code § 46A-3-110(1) (1996) (A “consumer may repay in full
the unpaid balance of a consumer credit sale or a consumer loan, refinancing or
consolidation at any time without penalty.” (Emphasis added)); W. Va. Code § 18B-4-
10(b)(3)(A) (2013) (Causing a rule to be implemented allowing higher education students
called to military duty to withdraw from courses “without penalty.”) (Emphasis added); W.
Va. Code § 36B-4-101(b)(6) (1994) (Disposition of a property in a common interest
community restricted to non-residential use does not require a public offering statement or
resale certificate when the “disposition … may be cancelled at any time and for any reason
by the purchaser without penalty.”) (Emphasis added); W. Va. Code § 36B-4-108(b) (1994)
(A purchaser may cancel a contract within fifteen days after receiving a public offering
statement “without penalty, and all payments made by the purchaser before cancellation
must be refunded promptly.”) (Emphasis added); W. Va. Code §§ 18B-10-14(h)(2) and
18B-10-14(k)(2)(B) (2023) (Providing students the opportunity to withdraw from courses
“without penalty” because course materials were not selected and establishing the date of
course withdrawal “without penalty” as the date by which a student may opt out of certain
charges.) (Emphasis added); W. Va. Code § 47-24-4(f) (1996) (Prepayment of reverse
mortgages “shall be permitted without penalty at any time during the period of the loan.”)
(Emphasis added); W. Va. Code § 46A-2-105(1) (2017) (Certain balloon payments can be
refinanced “without penalty.”) (Emphasis added); W. Va. Code § 31G-4-5(b) (2020)
(Allows electric utilities to submit feasibility studies of a proposed broadband project by a
date certain. Late feasibility studies may be submitted “without penalty.”) (Emphasis
added); W. Va. Code § 33-8-2(11) (2004) (Part of the definition of “cash equivalents” is
“short-term, highly rated and highly liquid investments or securities readily convertible to
known amounts of cash without penalty and so near maturity that they present insignificant
risk of change in value.”) (Emphasis added); W. Va. Code § 59-1-2(i) (2021) (Customers
of the Secretary of States’ Prepaid Fees and Services Account “may request the return of
any moneys maintained in the account at any time without penalty.”) (Emphasis added);
W. Va. Code § 17A-3-4(b)(14)(E) (2017) (Allowing payment without penalty of certain
fees for motor vehicle title and registration fees during a three-month period in 2007.)
(Emphasis added).
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consumers a right of recission to cancel litigation finance contracts “without penalty or
further obligation,” in certain situations.); W. Va. Code § 46A-6N-5(b)(1)(J) (2019)
(Specific language must be contained in litigation finance contracts allowing cancellation
“without penalty or further obligation,” in certain situations).
Two statutory provisions use the phrase “without penalty or other
assessment.” See W. Va. Code §§ 33-8-12(e)(5) & 33-8-25(e)(5) (2004) (Withdrawals
from an insurer investment pool “may be made on demand without penalty or other
assessment.”). The remaining two references are to two different phrases. One utilizes
the phrase, “without penalty or monetary obligation.” See W. Va. Code § 46A-6M-3(4)
(2015) (Roofing contractors have duty to disclose to a consumer that a contract for repair
or replacement may be cancelled “without penalty or monetary obligation” if the
consumer’s insurer does not cover the cost of repairs or replacement). In another, the
Legislature used the phrase “without penalty, fees or costs to the borrower.” See W. Va.
Code § 33-4-23 (2018) (“‘Free look period’ means the period of time from the effective
date of the guaranteed asset protection waiver until the date the borrower may cancel the
contract without penalty, fees or costs to the borrower.”).
Clearly, the Legislature meant the simple phrase “without penalty” to mean
something different than the other terms that contain words that modify or add to the words
“without penalty.” These varying phrases employed by the Legislature show
unequivocally that the phrase “without penalty” standing alone does not encompass prior
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“obligations,” “fees” or “costs.” If it did, there would be no reason for the Legislature to
add those phrases in the circumstances in which it has done so. Here, the plain language
refers to “penalties” only. Where such language is plain, we apply the subject statutory
language as written without any further interpretation. See Syl. Pt. 2, State v. Elder, 152
W. Va. 571, 165 S.E.2d 108 (1968) (“Where the language of a statute is clear and without
ambiguity the plain meaning is to be accepted without resorting to the rules of
interpretation.”); Syl. Pt. 5, State v. Gen. Daniel Morgan Post No. 548, V.F.W., 144 W. Va.
137, 107 S.E.2d 353 (1959) (“When a statute is clear and unambiguous and the legislative
intent is plain, the statute should not be interpreted by the courts, and in such case it is the
duty of the courts not to construe but to apply the statute.”).
The absence of language adding to or modifying “without penalty” means
we are to apply its plain meaning. Clearly, West Virginia Code § 36B-3-105 does not
permit Justice Holdings to impose any additional penalty, in the form of increased interest
or cancellation fees on the Association due to its decision to cancel the Utilities Loan. The
majority, without citing any statutory authority to do so, would erroneously extend this
protection against additional penalties to apparently include the repayment of the original
principal of the loan itself. There are simply no legal grounds on which to extend the
meaning of “without penalty” to the principal of the loan used to fund construction of
infrastructure and utility facilities for the Association. We have previously addressed, in
the context of our state’s Consumer Credit and Protection Act, West Virginia Code,
Chapter 46A, the question of whether the inclusion of unconscionable terms in a loan
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agreement permits a court to absolve the party victimized by such terms from repayment
of the principal of such loan. See Quicken Loans, Inc. v. Brown, 230 W. Va. 306, 737
S.E.2d 640 (2012). We determined in that case that it did not. See id., 230 W. Va. at 328,
737 S.E.2d at 662.
In Quicken Loans, the circuit court found, inter alia, that the lender in that
case had included unconscionable terms in the loan agreement, including improper loan
discount points without corresponding benefit to the borrower, a $107,015.71 balloon
payment that was not properly disclosed and an inflated value of the property used to secure
the loan. See id., 230 W. Va. 315-6, 737 S.E.2d 649-50. Following a bench trial, the circuit
court found, inter alia, that the lender had committed fraud, violated various provisions of
the West Virginia Consumer Credit and Protection Act, and violated applicable law related
to illegal appraisals. See id., 230 W. Va. 318, 737 S.E.2d 652. In addition to declaring the
note and deed of trust unenforceable and awarding restitution of payments made by the
borrower to the lender, the court further enjoined the lender from attempting to collect any
future payments under the loan, “effectively cancelling Plaintiff’s loan obligation.” Id.We reversed the circuit court’s order to the extent it effectively forgave repayment of the
principal of the loan, finding that the Legislature, under the provisions of the West Virginia
Consumer Credit and Protection Act, had not provided for forgiveness of the loan in the
circumstances present in the case. See id., 230 W. Va. 327, 737 S.E.2d 661. Indeed,
although the consumer was relieved of certain future obligations under the unconscionable
loan agreement, the borrower was still required to repay the principal of the debt obligation.
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See id. 230 W. Va. at 327-8, 737 S.E.2d 661-2. Likewise, in this case, the UCIOA does
not provide for forgiveness of the underlying loan principal, but simply permits the party
canceling the loan agreement to avoid penalties for its cancellation.
The plain meaning of “without penalty” is simply that there can be no
penalties or liquidated damages required for the Association to cancel the loan agreement.
“Without penalty” clearly does not mean the Association gets $11 million in utilities
funding for nothing. The comments to the Restatement (Third) of Property: Servitudes
illustrate this point as to the purpose of the statutory cancellation provisions. As outlined
by the majority, the relevant comment provides:
The developer’s duty to turn over control can be thwarted if the
developer obligates the association to long-term arrangements
that effectively deprive the owners of control of the common
property. By the same token, the value of the members’
investments can be significantly devalued by long-term leases
or other arrangements that commit them to pay potentially
exorbitant costs for services or facilities. While the association
is under the developer’s control, the members have little
opportunity to protect themselves. Accordingly, modern
statutes permit the association to terminate certain contracts
that are likely to be critical to the members’ enjoyment of their
rights after the developer has relinquished control.
Restatement (Third) of Property: Servitudes § 6.19 cmt. d (Am. L. Inst. 2000) (emphasis
added). Interestingly, the majority omits the remaining portion of comment d, including
the next sentence which provides that “[t]he greatest abuses have occurred in contracts for
maintenance and management services to the association and leases for recreational and
parking facilities.” Id. (emphasis added). Based on this comment, when read in its
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complete context, it is clear that the protections allowing for cancellation of agreements
are primarily designed to prevent an association from being tied to long-term service
agreements or leases which would require ongoing payments for services after the
association elects to cancel the agreement. In this case, the Utilities Loan is not a long-
term agreement requiring the future payment of a management fee, a resort fee, a parking
fee, or a facility fee. See Ainslie at Century Vill. Condo. Ass’n, Inc. v. Levy, 626 So. 2d
229, 230 (Fla. Dist. Ct. App. 1993) (Cancellation of maintenance, management, and
recreational contracts was proper because “[t]he purpose of the statute was to prevent a
developer from entering into long term operation and management agreements which
would prove onerous to the unit owners.”); Energy Center, LLC v. Falls and Pinnacle
Owners’ Ass’n, No. A11-1023, 2012 WL 254500 at *4 (Minn. Jan. 30, 2021) (Minnesota
UCIOA allows cancellation of a 20-year service agreement for heating, cooling, and
domestic hot water services entered into during period of declarant control). Here, we are
considering a past loan agreement that appears to have funded the expenditure of $11
million to construct utilities throughout GSV, resulting in a direct benefit to the
Association. Thus, West Virginia Code § 36B-3-105 gave the Association the right to
cancel the contract but did not absolve the Association of the obligation to repay past
monies loaned to it, expended by it and from which it continues to benefit after the
cancellation of the Utilities Loan.2
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The majority opinion also holds that: “[t]o the extent that the circuit court,
in its later assessments order, determined that the effect of the termination of the Loan was
to erase its creation and the legal effect was to reverse prior payments under the Loan, we
find that the court erred.” This finding seems inconsistent with the majority’s
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Significantly, not only did the Association benefit from the proceeds of the
Utilities Loan prior to its cancellation, but as the majority notes, the seventh and final
amendment to the loan provided that the loan would mature on June 30, 2019, a date prior
to the Association’s termination of the Utilities Loan. The circuit court held, and the
majority opinion affirms, that the Utilities Loan was terminated by the Association on
February 16, 2020, more than seven months after the loan became due and payable. In
fact, as outlined in the majority opinion, Justice Holdings sued the Association on
November 6, 2019, for non-payment of the Utilities Loan, asserting that the Association
failed to pay the balance due on the loan on June 30, 2019, or fifteen days thereafter. It
was only after the initiation of the lawsuit seeking payment of the loan balance that the
Association sent Justice Holdings a notice that it terminated the Utilities Loan. Even if the
cancellation of the Utilities Loan absolved the Association of any obligation it would have
had after the cancellation, it is clear from the record that its obligation under the Utilities
Loan became due and payable on June 30, 2019, months before it cancelled the loan.
In summary, I believe that the phrase “without penalty” contained in West
Virginia Code § 36B-3-105 does not relieve the Association from repaying the principal
determination that the Association may simply walk away from its obligations under the
Utilities Loan. If the effect was not to “erase its creation,” the majority’s holding
essentially unilaterally forgives the remaining payment obligations of one party to the
Utilities Loan, the Association, while providing the other party no avenue to collect
repayment of funds it provided to the Association for utility construction.
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amounts loaned to it and expended for improvements to GSV. Accordingly, I respectfully
dissent as to the majority opinion’s affirmation of the circuit court’s order absolving the
Association of its obligation to repay the loan proceeds provided to it pursuant to the
Utilities Loan. Moreover, the majority opinion remands this matter to the circuit court for
further findings regarding the issue of back assessments the Association maintains are
owed to it by Justice Holdings. While I concur in this finding, I also believe the record
before us is not clear as to what proceeds of the Utilities Loan were distributed to the
Association and used to install utilities for its benefit, and what, if any, of such amounts
have already been repaid to Justice Holdings. I would, therefore, remand on this issue as
well, and direct the circuit court to conduct a review of the amounts, if any, distributed,
utilized and repaid in accordance with the Utilities Loan.3
I am authorized to state that Judge Gregory L. Howard, Jr., joins me in this
separate opinion.
3
While Justice Holdings also asserts that it is entitled to repayment of the
Utilities Loan proceeds pursuant to equitable remedies, we need not address such issue
because resorting to equitable relief is unnecessary. The Utilities Loan entitled Justice
Holdings to its repayment and, as outlined herein, West Virginia Code § 36B-3-105 does
not relieve the Association from repaying the amounts loaned to it.
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