Willowmere Cmty. Ass'n

IN THE COURT OF APPEALS OF NORTH CAROLINA
No. COA15-977
Filed: 1 November 2016
Mecklenburg County, No. 14 CVS 4758
WILLOWMERE COMMUNITY ASSOCIATION, INC., a North Carolina non-profit
corporation, and NOTTINGHAM OWNERS ASSOCIATION, INC., a North Carolina
non-profit corporation, Plaintiffs,
v.
CITY OF CHARLOTTE, a North Carolina body politic and corporate, and
CHARLOTTE-MECKLENBURG HOUSING PARTNERSHIP, INC., a North
Carolina non-profit corporation, Defendants.
Appeal by plaintiffs from order entered 14 April 2015 by Judge Forrest D.
Bridges in Superior Court, Mecklenburg County. Heard in the Court of Appeals 27
January 2016.
Kenneth T. Davies, for plaintiff-appellants.
Assistant City Attorney Thomas E. Powers III and Senior Assistant City
Attorney Terrie Hagler-Gray, for defendant-appellee City of Charlotte.
Moore & Van Allen, PLLC, by Anthony T. Lathrop and Glenn E. Ketner, III, for
defendant-appellee Charlotte-Mecklenburg Housing Partnership, Inc.
STROUD, Judge.
Plaintiffs appeal the trial court’s order allowing defendants’ motion for
summary judgment. The trial court correctly granted summary judgment dismissing
plaintiffs’ lawsuit based upon lack of standing to file the suit because neither plaintiff
complied with their respective bylaws to authorize initiating litigation.
WILLOWMERE CMTY. ASS’N, INC. V. CITY OF CHARLOTTE
Opinion of the Court
I. Background
In September of 2013, defendant Charlotte-Mecklenburg Housing Partnership,
Inc. (“CMHP”) sought and obtained rezoning of about 7.23 acres abutting portions of
the residential subdivisions represented by plaintiffs Willowmere Community
Association, Inc. (“Willowmere”) and Nottingham Owners Association, Inc.
(“Nottingham”) (collectively “plaintiff HOAs”). Defendant CMHP planned to develop
up to 70 multifamily housing units on the property which had been previously
approved for development as a child care center. The rezoning was hotly contested
by local residents and plaintiffs at the public hearing in December of 2013, but
ultimately the City Council approved the rezoning application. Plaintiffs then filed
this lawsuit challenging the rezoning. This appeal does not involve the substance of
plaintiffs’ challenges to the propriety of the rezoning but only plaintiffs’ legal standing
to bring the claim, so we will address only the relevant background regarding the
issues before this Court.
In October of 2014, plaintiff HOAs requested summary judgment in the action
they had brought against defendants. Later in October, defendant CMHP filed a
cross-motion for summary judgment. In November of 2014, defendant City also filed
a cross-motion for summary judgment.
After a two-day hearing on the summary judgment motions, the trial court
entered an order in April of 2015 agreeing with all the parties “that there is no
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Opinion of the Court
genuine issue of material fact” and ultimately resolving the legal issue of standing in
favor of defendants, determining that plaintiffs did not have standing to bring the
action because “they failed to follow the requirements in their respective bylaws with
regard to their decisions to initiate this litigation.” Though findings of fact are not
required in a summary judgment order, see generally N.C. Gen. Stat. § 1A-1, Rule
56(c) (2013), the trial court made 14 findings of fact “[i]n order to explain the Court’s
reasoning in reaching its conclusion[.]” The trial court noted the findings it had made
were uncontested, including:
2. Willowmere admitted, in the deposition of its
corporate representative, Michael J. Kelley, that its Board
of Directors decided to initiate the lawsuit without a formal
meeting. Willowmere produced an email string among the
directors that it claimed was sufficient to serve as written
consent to action outside a meeting under Article III,
Section 18 of its bylaws.
3. An email consent of this type is not expressly
authorized by Willowmere’s bylaws to satisfy the
requirement of written consent, signed by all of the
Directors of Willowmere.
4. Although N.C.G.S. § 55A-1-70 permits North
Carolina non-profit corporations to agree to conduct
transactions through electronic means, the undisputed
evidence is that Willowmere has not taken any action
permitting it to invoke this statute. Consequently, there is
no authorization for the email string to serve as a written
consent to action without a formal meeting.
5. It follows that Willowmere did not act in
accordance with its bylaws with regard to its decision to
initiate this litigation. Therefore, Willowmere lacks
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Opinion of the Court
standing.
6. To establish the propriety of the decision by
Nottingham to initiate this lawsuit, Nottingham relies on
the deposition testimony of its representative, Mr. Kenneth
S. Anthonis, who testified that he had a telephone
conversation with at least one other director. The record
does not reveal a meeting with a quorum of directors
present either in person or by phone at which the filing of
the litigation was authorized. The record also does not
reveal that the Board filed written consents or minutes
reflecting the proceedings of the Board, nor that the Board
posted the explanation of the action taken within three (3)
days after the written consents of the Board were obtained,
as required under Article 5, Section 5 of Nottingham’s
Bylaws.
7. Mr. Anthonis testified in his deposition, as the
corporate representative of Nottingham, that there had
been no formal meeting of the Nottingham Board of
Directors at any time to decide to file this lawsuit. In his
deposition transcript, Mr. Anthonis stated affirmatively
that there were no written consents or minutes
memorializing the decision to proceed with the lawsuit.
8. The failure to comply with Article 5, Section 5
of Nottingham’s bylaws concerning action by directors
taken without a meeting, discussed above with respect to
Willowmere, is also present for Nottingham, which,
therefore, also lacks standing.
9. While Plaintiffs’ bylaws each permit their
directors to sue regarding matters affecting their planned
communities, the directors can only act through a meeting
or a consent action without a meeting. Neither Willowmere
nor Nottingham has met their burden to show that their
directors acted to initiate this litigation through one of
these means in this case.
10. Defendants’ arguments regarding Plaintiffs’
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Opinion of the Court
standing present a challenge to the jurisdiction of the
Court. Under N.C. Rule 12(h)(3), a challenge to
jurisdiction may be brought at any time.
11. For the reasons discussed above, the Court
concludes that Plaintiffs lack standing, and consequently
that the Court lacks jurisdiction to hear their challenge to
Ordinance 5289-Z adopted by the City.
Plaintiffs appeal.
II. Standing
The only issue before this Court on appeal is regarding whether plaintiffs have
standing to bring this action; none of the underlying issues which led to this action
are before this Court. Plaintiffs make three arguments regarding standing: (1)
defendants do not have standing to challenge plaintiffs’ standing on the basis
asserted; (2) plaintiffs have standing because they complied with their bylaws in
approving filing the lawsuit; and (3) even if they failed to comply with their bylaws,
these violations are non-jurisdictional, and thus they still have standing.
A. Raising the Issue of Standing
Plaintiffs first contend that “defendants lack both statutory standing to
challenge the validity of the associations’ actions, and contractual standing to enforce
the associations’ bylaws.” (Original in all caps.) Essentially plaintiffs contend that
since defendants are not parties to the bylaws, they do not have standing to raise a
standing issue based upon any alleged violation of plaintiffs’ bylaws.
Standing is a necessary prerequisite to a court’s
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Opinion of the Court
proper exercise of subject matter jurisdiction. As the party
invoking jurisdiction, plaintiffs have the burden of
establishing standing. . . .
....
Our standard of review on appeal of a trial court’s dismissal
on the grounds of lack of standing is de novo.
Marriott v. Chatham Cty., 187 N.C. App. 491, 494, 654 S.E.2d 13, 16 (2007) (citation
and quotation marks omitted).
Although defendants do argue in support of the trial court’s conclusion that
plaintiffs lack standing, defendants did not initially raise standing as a defense;
standing was not raised in defendants’ motions to dismiss, answers, or motions for
summary judgment. Unfortunately, the second day of the hearing on 12 March 2015
was not recorded, but by plaintiffs’ own characterization,
[f]ollowing a hearing on the parties’ cross-Motions for
Summary Judgment on 14 January 2014, the Honorable
Forrest D. Bridges took the matter under advisement. The
parties reconvened before Judge Bridges on 12 March 2015
to receive his decision, at which time Judge Bridges
unexpectedly requested further argument on the issue of the
Associations’ standing.
(Emphasis added).
As neither defendant had raised the issue of standing in the answers or
substantive motions and as “Judge Bridges unexpectedly requested further argument
on the issue of the Associations’ standing[,]” it appears that the trial court raised the
issue of standing ex mero motu. Since “[s]tanding is a necessary prerequisite to a
court’s proper exercise of subject matter jurisdiction[,] id., “a court has inherent
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Opinion of the Court
power to inquire into, and determine, whether it has jurisdiction and to dismiss an
action ex mero motu when subject matter jurisdiction is lacking.” Reece v. Forga, 138
N.C. App. 703, 704, 531 S.E.2d 881, 882 (2000). Furthermore, even assuming
arguendo that defendants did raise the issue of standing, once the issue was raised
and appeared to have merit it was appropriate for the trial court to consider the issue
on its own motion.1 See generally Fort v. Cnty. of Cumberland, 218 N.C. App. 401,
404, 721 S.E.2d 350, 353 (2012) (“Whether a party has standing to maintain an action
implicates a court’s subject matter jurisdiction and may be raised at any time, even
on appeal.” (citation and quotation marks omitted)). Therefore, whether raised by
defendants or by the trial court’s own motion, the trial court properly considered
plaintiffs’ standing to bring this action, and we likewise must consider the issue.
B. Plaintiffs’ Compliance with Bylaws
Plaintiffs next contend that they had standing to bring this action because “the
associations did, in fact, each comply with the requirements of their respective bylaws
to initiate litigation.” (Original in all caps.)
1. Plaintiff Willowmere
Plaintiff Willowmere argues that “Willowmere’s Board, acting without a
meeting, unanimously authorized litigation through a chain of emails.” Plaintiff
1 The trial court found “[d]efendants’ arguments regarding [p]laintiffs’ standing present a
challenge to the jurisdiction of the Court.” It is unclear from this sentence whether defendants initially
raised the issue of standing, but even if they did not, they obviously argued that plaintiffs did not have
standing once the trial court raised and requested argument on the issue.
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Opinion of the Court
Willowmere notes that its bylaws provide:
Section 18. Action Without a Formal Meeting. Any action
to be taken at a meeting of the Directors or any action that
may be taken at a meeting of the Directors may be taken
without a meeting if a consent in writing, setting forth the
action so taken, shall be signed by all the Directors. An
explanation of the action taken shall be posted at a
prominent place or places within the Common Area within
three (3) days after the written consents of all the Board
members have been obtained.
Plaintiff Willowmere argues that its emails “comply with the requirements of [its]
bylaws to initiate litigation.” (Original in all caps.)
But even if we assume that plaintiff Willowmere’s interpretation of its bylaws
is correct and it could use email in compliance with North Carolina statutes, those
emails are not part of our record on appeal. “As the party invoking jurisdiction,
plaintiffs have the burden of establishing standing.” Marriott, 187 N.C. App. at 494,
654 S.E.2d at 16. Without the emails which plaintiff Willowmere claims establish its
compliance with its bylaws to initiate litigation, plaintiff Willowmere has not carried
its burden. In addition, even if the emails did authorize the filing of the action, there
is no evidence that “an explanation of the action taken” was “posted at a prominent
place or places within the Common Area within three (3) days after the written
consents of all the Board members” were obtained by email. Plaintiff Willowmere’s
board’s action was not taken in compliance with its bylaws.
2. Plaintiff Nottingham
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Opinion of the Court
Plaintiff Nottingham argues that its board “authorized litigation via a
telephone conversation” so it was not required that the board hold an actual meeting
to authorize initiation of litigation. Plaintiff Nottingham argues that telephone
conversations qualified as the board’s meeting and argues that defendants
“misconstru[ed]” their president’s statements made during his deposition that there
was no meeting held. Plaintiff Nottingham then quotes the president’s deposition
with the following bold, italics, and underlining emphasis inserted by plaintiffs:
Q. Was there an official meeting of the board at which
the decision was taken?
A. It was phone conversation, so not an official board
meeting.
...
Q. Did you have a three-way telephone conversation
between – or maybe a four-way between the
members of the board who participated and the
management company?
A. No. I talked with the management company and
then talked separately with the board.
Turning to the actual deposition though, and not merely plaintiff’s quoted
portions, it is clear that plaintiff Nottingham’s president did not consult the relevant
bylaws:
Q. And was input on that decision sought from the
members of the association?
A. No.
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Opinion of the Court
....
Q. Was there a formal board meeting of Nottingham at
any time at which the decision to initiate this
lawsuit was discussed?
A. No.
Q. Did you and Ms. Tomljanovic and possibly Mr.
Viscount refer to any specific provisions in the
governing documents of Nottingham to determine
whether you had the power to make that decision?
A. We sought advice from the management company.
Q. So you did not refer to the documents?
A. We did not refer to the documents, no.
....
Q. All right. Did the management company identify
any specific provision in the bylaws or any other
governing document to grant the board the power to
make those two decisions we were just talking
about?
A. Not that I recall, no.
Q. Let me refer you back to Exhibit 10-B, which is the
bylaws. After the decision that you talked about –
or the two decisions that you talked about to initiate
the lawsuit and to pay for counsel, did the board or
the management company produce written consents
memorializing that decision?
A. No.
Q. Is there any provision that you’re aware of in this
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Opinion of the Court
bylaws document, Exhibit 10-B, that grants either
the association or the board of the association the
power to initiate lawsuits?
A. Not that I’m aware of, no. I’ll clarify that and say
there may be, but I don’t know off the top of my head
that there is.
Q. One of the topics for your deposition today that you
were to be prepared for was to talk about the
governing documents of the organization, correct?
A. Yes.
Q. And you’re not aware of any provision in there that
permits the organization or the board acting for the
organization to initiate a lawsuit, correct?
A. Correct.
Based upon plaintiff Nottingham’s president’s deposition, the trial court correctly
noted as an undisputed fact that plaintiff Nottingham’s board did not hold a meeting
open to members, as contemplated by the bylaws, at which they approved initiation
of the lawsuit.
Defendants contend that the trial court correctly determined that plaintiff
Nottingham did not hold a meeting either pursuant to article 7, section 1 of plaintiff
Nottingham’s bylaws for “Regular Meetings” or pursuant to article 7, section 2 for
“Special Meetings[,]” both of which by the plain language of the provisions require
prior written notice. Defendants argue that the only way for plaintiffs to properly
take action without a meeting is pursuant to article 5, section 5 of plaintiff
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Opinion of the Court
Nottingham’s bylaws entitled “Action Taken Without a Meeting.” However, article
5, section 5 requires “written consent of all of the Directors[,]” and it is uncontested
that there was no written memorialization, so this section cannot apply. Nonetheless,
plaintiff Nottingham contends that its bylaws do not prohibit holding a meeting of
the board by teleconference and that “Board was permitted to hold a regular meeting
through a simultaneous teleconference.” (Emphasis added.) Plaintiff Nottingham
also argues that this type of meeting is permissible under North Carolina General
Statute § 55A-8-20, which provides:
(a) The board of directors may hold regular or
special meetings in or out of this State.
(b) Unless otherwise provided by the articles of
incorporation, the bylaws, or the board of directors, any or
all directors may participate in a regular or special meeting
by, or conduct the meeting through the use of, any means
of communication by which all directors participating may
simultaneously hear each other during the meeting. A
director participating in a meeting by this means is deemed
to be present in person at the meeting.
(c) Unless the bylaws provide otherwise, special
meetings of the board of directors may be called by the
president or any two directors.
N.C. Gen. Stat. § 55-8-20 (2013).
But even if plaintiff Nottingham’s board could hold a teleconference meeting
under the bylaws and North Carolina General Statute § 55-8-20, the bylaws require
more than simply a conversation among some of the directors, whether in person or
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Opinion of the Court
by telephone. For example, both “Regular Meetings[,]” the type plaintiff Nottingham
argues was conducted, and “Special Meetings” have specific requirements regarding
advance notice of the time and location of the meeting. In addition, all meetings,
regular and special, “shall be open to all members of the Association; provided,
however, that Members who are not Directors may not participate in any deliberation
or discussion unless expressly so authorized by the vote of a majority of a quorum of
the Board.” The Board is also required to “[c]ause to be kept a complete record of all
its acts and corporate affairs” pursuant to article 8, section 3, and the secretary is to
“keep minutes of all meetings of the Board” pursuant to article 9, section 8(c), so there
should be a written memorialization for any meeting, whether in person or by phone.
It is undisputed that there was no written advance notice of the place or time of the
alleged phone meeting and there are no minutes from the alleged phone meeting.
Thus, even if the Board could have held a meeting by telephone, it would still have to
comply with the other requirements of the bylaws for meetings, particularly notice,
so that members would at least have the opportunity to be aware of the board’s
actions. In summary, plaintiff Nottingham’s evidence shows, at most, that the
president and some directors discussed initiating this lawsuit by phone, without prior
notice to anyone of the time or place, and no written memorialization of either the
meeting or the decision to initiate litigation were kept. Nottingham has failed to
show that it held a regular meeting or a special meeting in accordance with its bylaws
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Opinion of the Court
at which the directors could authorize initiating litigation.
C. Non-Jurisdictional Violations
Lastly, plaintiffs argue that even if they did violate their own bylaws in filing
their lawsuits without first obtaining proper authorization, these violations are
merely technical, non-jurisdictional violations and would not affect their standing to
bring this action. Plaintiffs make two specific arguments regarding why they should
still have standing even without compliance with their bylaws.
First, plaintiffs contend that “[t]he plain language of the Bylaws do not
evidence any jurisdictional limitations or a prelitigation requirement[.]” But
plaintiffs misapprehend the meaning of jurisdiction. Jurisdiction is neither granted
nor taken away by private bylaws since parties themselves cannot confer subject
matter jurisdiction upon a court, even by consent:
Subject matter jurisdiction refers to the power of the
court to deal with the kind of action in question and is
conferred upon the courts by either the North Carolina
Constitution or by statute. Subject matter jurisdiction
rests upon the law and the law alone. It is never dependent
upon the conduct of the parties. Specifically, subject
matter jurisdiction cannot be conferred by waiver or
consent of the parties.
Mosler v. Druid Hills Land Co., 199 N.C. App. 293, 295, 681 S.E.2d 456, 458 (2009)
(citations, quotation marks, and brackets omitted).
The trial court granted summary judgment in favor of defendants not due to
general subject matter jurisdiction but due to a lack of plaintiffs’ standing.
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Opinion of the Court
Parties without standing to bring a claim, cannot invoke
the subject matter jurisdiction of the North Carolina courts
to hear their claims.
. . . The Courts in our state use the term ‘standing’
to refer generally to a party’s right to have a court decide
the merits of a dispute. A court may not properly exercise
subject matter jurisdiction over the parties to an action
unless the standing requirements are satisfied.
Teague v. Bayer AG, 195 N.C. App. 18, 22-23, 671 S.E.2d 550, 554 (2009) (citations
and quotation marks omitted).
In Laurel Park Villas Homeowners Assoc. v. Hodges, property owners sued
under the name of their homeowners association, and this Court affirmed the decision
to dismiss the suit for lack of standing:
Plaintiff argues that the corporate bylaws expressly
give it the power to bring this action. We agree that there
is a provision in plaintiff’s Articles of Incorporation that
purports to give the corporation that power. However, a
provision of the bylaws indicates that all powers of the
corporation shall be exercised by the board of directors, and
allows the board to designate officers. There is nothing in
the articles or the bylaws authorizing persons other than
the board, its officers, or the membership to act on behalf
of the corporation, and nothing in the record suggesting
that any of these authorized this action. In any event, the
bylaws also provide that they are established in accordance
with G.S. Chapter 47A, and that in case of conflict the
statute shall control. Since the statute specifically
designates who may sue to enforce the restrictions, it
controls. We therefore hold that the court correctly
determined that plaintiff lacked standing to prosecute this
action.
82 N.C. App. 141, 143–44, 345 S.E.2d 464, 466 (1986). Here too plaintiffs failed to
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Opinion of the Court
comply with their own bylaws in bringing this action. See id.
Plaintiffs’ final argument is that “[a]dministrative and procedural provisions,
such as those contained in the Bylaws of the Associations, are nonjurisdictional, and
do not bear upon the authority of the courts to hear and adjudicate [p]laintiff’s
claims.” Plaintiffs contend that requiring compliance with bylaws is a “mere
techincalit[y]” that “elevat[es] form over substance[.]” Although plaintiffs’ boards of
directors have more power to make decisions on behalf of the associations than just a
general member, the members and the bylaws confer that power of each board of
directors. The very purpose of plaintiffs’ boards is to act on behalf of its members; a
rogue board of directors taking actions outside of its bylaws is no more representative
of the entity than a rogue member who has taken the same actions. For example, in
Beech Mountain Property Owners’ Assoc v. Current, property owners sued under the
name of their homeowners association to enforce restrictive covenants. 35 N.C. App.
135, 135, 240 S.E.2d 503, 505 (1978). This Court addressed other matters unrelated
to the issues in this case but also ultimately determined that
[w]e are of the opinion that a strict construction of
the provisions in the present case compels the conclusion
that the plaintiff lacks the capacity to raise the issues in
this suit. The plaintiff is a corporation and, as such, must
be viewed as an entity distinct from its individual
members.
Id. at 139, 240 S.E.2d at 507. The Court determined that the property owners had
the right to sue, not the association, because the covenants in that case granted
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Opinion of the Court
the right of enforcement of the restrictions to the owners of
lots or any of them jointly or severally[.] And we must
assume that if the grantor had intended to authorize the
plaintiff [association] to enforce the provisions as an agent
of the property owners, it would have expressed such
intent.
Id. (quotation marks and ellipses omitted).
Here, plaintiffs failed to hold a meeting or take other action in accordance with
their bylaws to authorize the filing of this lawsuit. In Beech Mountain Property
Owners’ Assoc., and Laurel Park Villas Homeowners Assoc., property owners sued on
behalf of an association without the proper authorization of that association to take
that action. See Beech Mountain Property Owners’ Assoc., 35 N.C. App. at 135, 240
S.E.2d at 505; Laurel Park Villas Homeowners Assoc., 82 N.C. App. at 143-44, 345
S.E.2d at 466. Here, two boards sued on behalf of the associations also without the
proper authorization to take that action. Such actions go far beyond “mere
technicalities” and “elevating form over substance” as essentially a small portion of
the association has taken the steps to speak for the whole. Both plaintiffs had specific
bylaw provisions for how to handle issues such as this, and both ignored those
provisions. In addition, plaintiffs have not presented any evidence that the boards
took action in accord with their bylaws to ratify the filing of the lawsuit after the issue
of standing was raised. This Court has no way of knowing the position the members
of the homeowners’ associations would actually take in this case as their
representatives acted beyond the scope of their authority in disregarding their
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Opinion of the Court
bylaws. Therefore, we affirm the trial court’s decision to dismiss for lack of standing.
III. Conclusion
For the foregoing reasons, we affirm.
AFFIRMED.
Judge ELMORE concurs.
Judge DIETZ concurs in a separate opinion.
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No. COA15-977 – Willowmere Cmty. Ass’n, Inc. v. City of Charlotte
DIETZ, Judge, concurring.
I am not persuaded that an association’s failure to comply with the
authorization steps in its bylaws before bringing suit should be treated as a
jurisdictional defect that can be raised by an opposing party at any time as a means
to dismiss the action. Whether the procedural steps to authorize the suit were
followed or not, these homeowners’ associations appear to possess a “sufficient stake
in an otherwise justiciable controversy” to confer jurisdiction on the trial court to
adjudicate this legal dispute. Peninsula Prop. Owners Ass’n, Inc. v. Crescent Res.,
LLC, 171 N.C. App. 89, 92, 614 S.E.2d 351, 353 (2005). Moreover, the General
Statutes and the association’s bylaws provide means for association members harmed
by the improper commencement of this suit to seek redress from the courts if they
wish to do so—either by seeking to stay or dismiss the action, or by pursuing a
separate action against the appropriate parties for the unauthorized filing of the
lawsuit.
Permitting a defendant to question the association’s standing to bring suit
where no member of the association has objected is “akin to letting the proverbial fox
protect the interests of the chickens.” Port Liberte II Condo. Ass'n, Inc. v. New Liberty
Residential Urban Renewal Co., LLC, 86 A.3d 730, 740 (N.J. Super. Ct. App. Div.
2014). But I am unable to distinguish this case from our Court’s earlier holding in
Peninsula Property Owners Association, which compels us to affirm the dismissal of
this action for lack of jurisdiction. I therefore concur in the majority opinion.