Pend Oreille View Estates Homeowners' Association v. T.T. LLC and Farner

IN THE SUPREME COURT OF THE STATE OF IDAHO
Docket No. 42538-2014
PEND OREILLE VIEW ESTATES, )
OWNERS’ ASSOCIATION, INC., ) Moscow, September 2016 Term
)
Plaintiff/Respondent, ) 2016 Opinion No. 112
)
v. ) Filed: November 1, 2016
)
T.T. LLC, an Idaho limited liability ) Stephen W. Kenyon, Clerk
company; NADIA BEISER; DAVID M. )
RICHARDS; MARY BETH GIACOMO; )
and MATTHEW A. FARNER, )
)
Defendants/Appellants, )
_______________________________________ )
)
MATTHEW A. FARNER and MARY BETH )
GIACOMO, )
)
Third-Party Plaintiffs/Appellants )
)
v. )
)
THERESA ZIRWES, )
)
Third-Party Defendant/Respondent. )
)
Appeal from the District Court of the First Judicial District of the State of Idaho,
in and for Bonner County. Hon. Barbara A. Buchanan, District Judge.
The judgment of the district court is affirmed.
Brent C. Featherston, Featherston Law Firm Chtd., Sandpoint, argued for
appellants.
Peter C. Erbland, Lake City Law Group PLLC, Coeur d’Alene, argued for
respondent.
EISMANN, Justice.
This is an appeal out of Bonner County from a judgment upholding money judgments
against lot owners in phase two of a subdivision for assessments made for the cost of paving a
road across phase one of the subdivision that provides access from the county road to phase two.
We affirm the judgment of the district court.
I.
Factual Background.
This lawsuit involves a subdivision named Pend Oreille View Estates, which was
developed in two phases. The first phase (“Phase I”) consisted of 20-acre tracts, and the second
phase (“Phase II”) consisted of 60-acre tracts. On July 26, 1994, the developer recorded the
declaration of covenants, conditions, and restrictions for Phase I (“Phase I CC&Rs”), and an
amendment to the Phase I CC&Rs was recorded on January 20, 1995.
On February 15, 1995, Pend Oreille View Estates Owner’s Association, Inc.
(“Association”), was incorporated. Its stated powers were to “provide for the acquisition,
construction, management, operation, administration, maintenance, repair, improvement,
preservation, insurance, and architectural control of Association property within that certain
subdivision in Bonner County, Idaho, commonly known as Pend Oreille View Estates, Phase I.”
On January 25, 1995, the developer recorded the declaration of covenants, conditions,
and restrictions for Phase II (“Phase II CC&Rs”), and an amendment to the Phase II CC&Rs was
recorded on May 31, 2005. The Phase II CC&Rs required that each owner of property in Phase
II must be a member of the Association.
The Association desired to pave the roads that went from the public road, across Phase
I, to Phase II because of the dust created by vehicles on the roads and the cost of maintaining
unpaved roads. It sent its members notice of a special meeting to be held on July 24, 2012, to
vote on an amendment to the bylaws to permit a special assessment on the members to pay for
the paving of the roads. On February 17, 1995, the members of the Association voted to adopt
an amendment to the bylaws, which provided for special assessments on the members to pave the
roads in Phase I. The Association decided to pave the roads that went from the public road,
across Phase I, to Phase II. On July 24, 2012, the members voted to adopt the proposed
amendment, which stated as follows:
2
4.02.01 One Time Road Paving Assessment. There will be a one-time
assessment assigned to each tract owned by the members of POVE I [Phase I] and
POVE II [Phase II] to facilitate the paving of Turtle Rock Road, Redtail Hawk
Road and Destiny Lane. Billing will be assessed by distance from Baldy
Mountain Road to the P.O.V.E. Member’s property. Invoices were mailed July
25, 2012 and payment is due Sept. 23, 2012. Paving to commence in late
September, 2012.
After the amendment, the Association sent notices of assessments to all of its members
who owned property in Phases I and II. T.T., LLC, Nadia Beiser, David M. Richards, Mary Beth
Giacomo, and Matthew A. Farner (collectively “the Defendants”) all owned real property in
Phase II. The Association sent them bills for their respective assessments. When they did not
pay the assessments, the Association recorded liens against their properties.
On November 12, 2013, the Association filed this action seeking foreclosure of the liens
and money judgments against the Defendants for the amounts of their respective assessments.
Ms. Giacomo and Mr. Farner filed a counterclaim against the Association for slander of title,
quiet title, an injunction, and a declaratory judgment, and they filed a third party complaint
alleging the same claims against Theresa Zirwes, the Association’s secretary/treasurer who
signed and recorded the lien claims.
On May 19, 2014, the Association moved for summary judgment, and on June 11, 2014,
the Defendants moved for summary judgment. After the motions were briefed and argued, the
district court granted the Association’s motion and denied the Defendants’ motion. On July 23,
2014, the court entered a judgment awarding the Association the sum of $41,540.34 against T.T.,
LLC, Nadia Beiser and David M. Richards on count one; the sum of $23,740.17 against Beth
Giacomo and Matthew A. Farner on count two; and the sum of $23,740.17 against Beth
Giacomo and Matthew A. Farner on count three, and it dismissed the counterclaims and third
party claims with prejudice. On August 6, 2014, the Defendants filed a motion to reconsider.
After argument and briefing, the court denied that motion. On January 20, 2015, the court
entered an amended judgment which added an award against the Defendants in the sum of
$46,176 for court costs and attorney fees. The Defendants then timely appealed.
II.
Did the District Court Err in Granting the Association’s Motion for Summary Judgment?
3
A trial court may grant a motion for summary judgment “if the pleadings, depositions,
and admissions on file, together with the affidavits, if any, show that there is no genuine issue as
to any material fact and that the moving party is entitled to a judgment as a matter of law.”
I.R.C.P. 56(c). In an appeal from a summary judgment, this Court’s standard of review is the
same as the standard used by the trial court in ruling on a motion for summary judgment.
Infanger v. City of Salmon, 137 Idaho 45, 46–47, 44 P.3d 1100, 1101–02 (2002). All disputed
facts are to be construed liberally in favor of the non-moving party, and all reasonable inferences
that can be drawn from the record are to be drawn in favor of the non-moving party. Id. at 47, 44
P.3d at 1102.
On appeal, the Defendants contend that the paving project was an improvement of the
roads, not the maintenance of the roads, and that the Phase II CC&Rs do not permit the
association to levy assessments for road improvements. They also contend that the Phase II
CC&Rs only permit assessments for the maintenance of roads that the Association is required to
maintain, and the Phase I CC&Rs do not require the Association to maintain any roads in Phase
I. As will be shown, the issue in this case is whether the amendment to the bylaws prevails over
certain provisions in the Phase II CC&Rs.
The applicable provisions in the Phase II CC&Rs are:
Phase II CC&Rs:
2.03. Powers of the Association. The association shall have the power to
do all the things enumerated in the CCR’s for Phase I as recorded as Instrument
No. 449457, records of Bonner County, Idaho. PROVIDED HOWEVER, that
except to the extent the Association has the right to enforce the payment of the
lawful assessments of the Association pertaining directly to the maintenance of
roads that the CCR’s for Phase I, recorded as Instrument No. 449457, records of
Bonner County, Idaho, require the Association to maintain, including the right to
any lien on any Tract for failure to pay any assessment(s) lawfully due the
Association, the powers of the Association shall not extend to the Phase II
property herein described.
2.04. Limitation on Powers. . . . The Association shall not have the
power to levy any assessments against owners in Phase II except such
assessments as pertain directly to the maintenance of roads as referred to in the
CCR’s, recorded as Instrument No. 449457, records of Bonner County, Idaho,
require said Association to maintain.
Section 2.03 of the Phase II CC&Rs provides that the powers of the Association do not
extend to the Phase II property, except to the extent that the Association “has the right to enforce
4
the payment of the lawful assessments of the Association pertaining directly to the maintenance
of roads that the CCR’s for Phase I . . . require the Association to maintain,” which includes the
right to lien any tract in Phase II “for failure to pay any assessment(s) lawfully due the
Association.” (Emphasis added.) The Phase I CC&Rs do not require the Association to
maintain any roads. They only permit it to do so. Section 2.04(d) of the Phase I CC&Rs states:
Phase I CC&Rs:
2.04 Powers of Association. The Association, in its sole and absolute
discretion, and as more fully set forth in its Articles and By-Laws, shall have the
power to perform the following acts:
....
d) The Association has the right and power to contract for the purchase of
tools, equipment, materials, supplies and other personal property and
services for the maintenance and repair of the private road(s) and/or to
contract for and pay for reconstruction of any portion or portions of the
private road(s), damaged or destroyed;
Thus, the Defendants contend that the paving of the roads in Phase I constituted an improvement
of the roads, not the maintenance of the roads, and that the Association could not assess Phase II
property owners for the improvement of the roads in Phase I because it was not required to
maintain those roads.
However, the Phase II CC&Rs state that the Association “shall have the power to do all
the things enumerated in the CCR’s for Phase I.” The Phase I CC&Rs permit the Association to
levy and collect assessments, which constitute a lien on the tract, and to enforce the bylaws and
articles of incorporation. The applicable provisions of the Phase I CC&Rs are as follows:
Phase I CC&Rs:
2.04 Powers of Association. The Association, in its sole and absolute
discretion, and as more fully set forth in its Articles and By-Laws, shall have the
power to perform the following acts:
a) The Association shall have the right and power to levy and collect
assessments, which levy shall constitute a lien on said Tract, enforceable
as by law provided;
b) The Association shall have the right and power to enforce the
provisions of this Declaration, the By-Laws and the Articles of
Incorporation: nothing, however, contained in this paragraph shall be
construed to prohibit enforcement of same by an Owner;
....
g) The duties and powers of the Association are those set forth in this
Declaration, its Articles of Incorporation and By-Laws, together with its
general implied powers as a non-profit corporation, generally to do any
5
and all things that a corporation authorized under the laws of the State of
Idaho may lawfully do which are necessary and proper in operating for the
peace, health, comfort, safety and general welfare of its members, subject
only to the limitations upon the exercise of such powers prohibited by law;
Thus, the Phase II CC&Rs permit the Association to “do all the things enumerated in the CCR’s
for Phase I,” and the Phase I CC&Rs state that the Association has the right and power to enforce
the articles of incorporation and the bylaws.
The articles of incorporation of the Association state that its purpose is to “provide for the
. . . maintenance, repair, [and] improvement . . . of Association property.” The articles also state
that the Association shall have the power to “fix, levy, collect and enforce the assessments and
fines as may be set forth in the Declarations and by-laws” and that “[t]he membership of the
Association shall be governed by its by-laws, duly adopted.” The articles also provide that
assessments may be levied against the members as set forth in the bylaws and that the
assessments may be secured by a lien. That provision states:
Assessments may be levied upon the membership as set forth in the by-
laws. The manner of assessment and collection of such levies shall be determined
by the directors, and as provided in the by-laws, provided that assessments may
be secured by a lien in the real property to which the membership is appurtenant,
and may be enforceable by action and/or forfeiture of membership as by law
provided.
The bylaws were amended to permit the Association to make a one-time assessment
against each tract in Phases I and II for the paving of the roads in Phase I. There is no contention
that corporate bylaws cannot be amended, and the Association clearly had the right to do so. I.C.
§ 30-3-97 (2013). Thus, the issue is whether that bylaw amendment overrides the contrary
provisions in the Phase II CC&Rs, particularly where all the members can vote on the
amendment but only owners of tracts in Phase II could vote on an amendment to the Phase II
CC&Rs. The Defendants did not present any argument or authority on that issue. They merely
state:
The [District] Court never explains from where the Association derives its
authority to make this special assessment in excess of the limits in § 4.02. If the
Trial Court assumed that the powers to amend the Bylaws, as provided therein,
also empowered this One Time Road Paving Assessment, the Court failed to
explain how the authority in an unrecorded Bylaw could override the Phase II
CC&Rs and their limits on the Phase I Association.
6
It is insufficient to merely state that the trial court did not provide authority for its ruling.
“Error will not be presumed on appeal, it must be clearly shown. The burden is upon the
appellant to show prejudicial error.” Burgess v. Salmon River Canal Co., 119 Idaho 299, 306,
805 P.2d 1223, 1230 (1991). The appellant also has the burden of providing in the opening brief
argument and authority showing such error. Bolognese v. Forte, 153 Idaho 857, 866, 292 P.3d
248, 257 (2012). Because the Defendants did not present argument and authority regarding the
issue of whether the bylaws amendment could override the provisions in the CC&Rs, we will not
consider this issue on appeal. Because the bylaws amendment permitted a one-time assessment
for paving the roads in Phase I, the failure to raise the issue of whether the amendment prevailed
over contrary provisions in the Phase I and II CC&Rs also renders moot any issue as to whether
the paving constituted maintenance or an improvement.
The Defendants assert that the original bylaws prohibited the amendment. They rely
upon the following provisions in the original bylaws:
SECTION 4: MEMBERSHIP ASSESSMENTS AND LIEN RIGHTS.
4.01. Regular Assessments. The initial annual assessment of $50.00 per
Tract will start in calendar year 1996. The Board may not, without a vote of a
majority of the Tracts, increase the regular annual assessments during any
calendar year of the Association by more than twenty percent (20%) above the
regular annual assessment for the preceding year. Declarant shall pay all
assessments levied by the Association against any Tract owned by it at the same
time and in the same manner as any other Owner.
4.02. Special Assessments. Any special assessment must be
recommended by the Board and be approved by a vote of a majority of the voting
power of each member. In any year, a special assessment may not exceed one
hundred percent (100%) of an annual assessment.
4.03. Assessments a Lien. All assessments, together with interest on
unpaid assessments at the rate of ten percent (10%) per annum, shall be a charge
on the land and a continuing lien upon the Tract until paid. All assessments shall
also be a personal obligation of each Tract Owner. Interest shall not accrue on
any assessments that are paid within thirty (30) days of the due date.
In support of this assertion, the Defendants state: “The District Court makes no
explanation for how the ‘one-time assessment’ is an exception permitted by § 4.02. Presumably,
the Court deems this an amendment to the bylaw as provided in Section 10 of the Bylaws.” The
Defendants along with the other owners of tracts in Phases I and II were given notice of a special
meeting to amend the bylaws to permit the one-time assessment, and that amendment was
approved at such meeting. The amendment obviously created an exception to section 4.02.
7
Finally, the Defendants contend that the liens were not authorized by Idaho Code section
45-810. They contend that subsection (1) of the statute only authorizes liens for assessments
levied to pay the costs incurred for maintenance and that the paving constituted an improvement,
not maintenance. Subsection (1) of that statute provides:
Whenever a homeowner’s association levies an assessment against a lot
for the reasonable costs incurred in the maintenance of common areas consisting
of real property owned and maintained by the association, the association, upon
complying with subsection (2) of this section, shall have a lien upon the
individual lot for such unpaid assessments accrued in the previous twelve (12)
months.
The district court did not enter a judgment foreclosing the liens or holding that the liens
were valid. It only entered monetary judgments for the amounts of the unpaid assessments. If
we accept the Defendants’ argument that the statute did not authorize liens for assessments
levied to pay for the paving, it would not justify setting aside the monetary judgments. It would
only justify setting aside the dismissal of the counterclaim and third party claim filed by Ms.
Giacomo and Mr. Farner. However, the Association alleged in its amended complaint that
levying the assessments and recording the liens were authorized by the statute and by the
CC&Rs and bylaws. The Defendants’ argument that the paving was an improvement and that
the statute did not authorize liens for improvements would justify setting aside the dismissal of
the counterclaim and third party claim only if the statute invalidated any provision in the CC&Rs
and bylaws that authorized recording liens to enforce assessments levied to pay for
improvements. In their opening brief on appeal, the Defendants did not present argument and
authority supporting a contention that the statute invalidated such provisions in the CC&Rs and
bylaws. Therefore, we will not address on appeal the Defendants’ proposed interpretation of the
statute because it would not justify setting aside any part of the judgment. Bolognese, 153 Idaho
at 866, 292 P.3d at 257.
III.
Is Either Side Entitled to an Award of Attorney Fees on Appeal?
The Defendants seek an award of attorney fees on appeal pursuant to Idaho Code section
12-121 and an attorney fee provision in the Phase II CC&Rs. Both the statute and the attorney
fee provision only provide for the awarding of attorney fees to the prevailing party. Because the
8
Defendants are not the prevailing party on appeal, they are not entitled to an award of attorney
fees on appeal.
The Association also seeks an award of attorney fees on appeal pursuant to Idaho Code
section 12-121, the attorney fee provision in the Phase II CC&Rs, and the attorney fee provision
in the bylaws. The bylaws provide that “in any action for enforcement of this provision
[regarding assessments that remain delinquent for more than thirty days], the Association shall
be entitled to its costs and reasonable attorney’s fees, so long as the Association is the prevailing
party in such action.” The Association is the prevailing party in this appeal, and it is therefore
entitled to an award of attorney fees on appeal. Because we award attorney fees under this
bylaws provision, we need not address the other two bases for the award.
IV.
Conclusion.
We affirm the amended judgment of the district court, and we award Respondent costs
and attorney fees on appeal.
Chief Justice J. JONES and Justices BURDICK, W. JONES and HORTON CONCUR.
9