Opinion
No. COA10-1206
Filed 17 May 2011 This case not for publication
Appeal by Plaintiffs from judgment entered 9 March 2010 by Judge Dennis J. Winner in Superior Court, Transylvania County. Heard in the Court of Appeals 21 February 2011.
Donald H. Barton for Plaintiffs-Appellants. Ball, Barden Bell, P.A., by Ervin L. Ball, Jr.; Van Winkle, Buck, Wall, Starnes Davis, P.A., by Esther E. Manheimer, for Defendants-Appellees.
Transylvania County No. 07 CVS 481.
Plaintiffs, property owners in the Whiskey Creek II Subdivision (Whiskey Creek), filed a complaint on 16 October 2007 against the Whiskey Creek II Property Owners Association (the Association) and its Board of Directors (the Board) (collectively, Defendants). In their complaint, Plaintiffs contended that Defendants violated restrictive covenants for Whiskey Creek that were filed on 29 June 1988 (the covenants). Plaintiffs alleged that Defendants assessed, collected, and disbursed funds in a manner inconsistent with the covenants and that Plaintiffs were injured by Defendants' actions. Plaintiffs sought monetary damages, injunctive relief, and issuance of a temporary restraining order prohibiting Defendants from continuing acts that Plaintiffs alleged were in violation of the covenants. Plaintiffs alleged that the covenants restricted the Association to assessing, collecting, and disbursing funds solely for the purpose of road maintenance within Whiskey Creek. Specifically, Plaintiffs alleged that the Association had assessed, collected, and disbursed funds for other purposes, such as utilities, insurance, tax preparation and taxes, postage, copies, supplies, social committee, and attorney's fees.
Plaintiffs purchased their real properties subject to the covenants, which state, in relevant part:
10. ROAD MAINTENANCE FOR INTERIOR LOTS. It is understood and agreed that the developer has provided certain interior roads as a means of ingress and egress to the lots within the Whiskey Creek II Subdivision; that Line Runner Ridge Associates, II shall maintain said roads in passable condition or better condition until fifty (50%) percent of the interior lots are sold; at that time all owners of interior tracts or lots hereinabove referred to shall organize, join and participate in a Property Owners Association which shall thereafter have the responsibility to maintain all interior roads located in the Whiskey Creek II Subdivision.
11. ROAD MAINTENANCE FOR INTEROR LOTS. Each interior lot owner shall pay One Hundred Twenty Dollars ($120.00) per year to Line Runner Ridge Associates, II for maintenance of the roads, said sum being paid in advance; it is further understood and agreed that once the Property Owners Association takes over the maintenance of said roads as provided above, the obligation of Line Runner Ridge Associates, II shall terminate and then each property owner shall pay One Hundred Twenty Dollars ($120.00) per year or such other amount that may be deemed to be reasonable by the Property Owners Association for road maintenance.
Amendments to the covenants (the amendments) were filed with the Transylvania County Register of Deeds on 15 August 2001. Relevant to this appeal, the amendments altered Paragraph 10 of the covenants, and added a Paragraph 15. Paragraph 10 was changed to add the following: "All lot owners . . . shall pay all special assessments, and regular assessments, including road maintenance fees levied by the Association within 30 days of becoming due." Paragraph 15 stated: "There shall be a nonprofit corporation known as [the] Association which shall be in charge of assessing and collecting assessments and which shall see to the general welfare of the subdivision, and which may promulgate rules to enforce the rules of the subdivision and collect assessments." Before the Association was created, the responsibility for road maintenance was stated in the covenants as: "Line Runner Ridge Associates, II shall maintain [the] roads . . . until fifty (50%) percent of the interior lots are sold; at that time all owners of interior tracts or lots . . . shall thereafter have the responsibility to maintain all interior roads located in [Whiskey Creek]." The covenants further stated:
Each interior lot owner shall pay One hundred Twenty Dollars ($120.00) per year to Line Runner Ridge Associates, II for maintenance of the roads, said sum being paid in advance; . . . and . . . once the . . . Association takes over the maintenance of said roads . . . then each property owner shall pay One Hundred Twenty Dollars ($120.00) per year or such other amount that may be deemed to be reasonable by the . . . Association for road maintenance.
We note it is unclear when fifty percent of the interior lots of Whiskey Creek were sold and when the owners took over responsibility for road maintenance. It is also unclear whether there was an organization calling itself the Whiskey Creek II Property Owners Association, or something similar, before the amendments to the covenants. To the extent we refer to the Association concerning acts prior to the amendments, the Association shall mean whatever entity was then responsible for assessing, collecting, and disbursing funds for Whiskey Creek.
Defendants filed an answer on 18 December 2007 and moved to dismiss, or in the alternative, for judgment on the pleadings. In their answer, Defendants included as a defense the fact that the covenants had been amended. Defendants argued that the amendments expressly granted them the authority to assess, collect, and disburse funds for all the items complained of in Plaintiffs' complaint. After a number of filings in the matter, the parties agreed to a bench trial. By judgment entered 9 March 2010, the trial court denied all relief requested by Plaintiffs and dismissed the action.
Chapter 47F of the North Carolina General Statutes, the North Carolina Planned Community Act (the Act), "applies to all planned communities created within this State on or after January 1, 1999." N.C. Gen. Stat. § 47F-1-102(a) (2009). Certain provisions of the Act apply to planned communities created before that date. N.C.G.S. § 47F-1-102(c). There is no contention that Whiskey Creek is not a "planned community" as defined in the Act. Among the conclusions of law made in support of the trial court's judgment was the following:
3. Under the provisions of G.S. § 47F-1-102(c) [of the Act], G.S. § 47F-3-107 and [G.S.] § 47F-3-115 are applicable to Whiskey Creek . . . even without an amendment to the restrictions. All of the expenditures by the Association and assessments therefore are reasonably within the provisions of those two statutes.
Plaintiffs appeal.
"The standard of appellate review for a decision rendered in a non-jury trial is whether there is competent evidence to support the trial court's findings of fact and whether the findings support the conclusions of law and ensuing judgment." Sessler v. Marsh, 144 N.C. App. 623, 628, 551 S.E.2d 160, 163 (2001). If there is competent evidence to support the findings of fact, they are binding on appeal. Id. "While a trial court's findings of fact are binding if supported by sufficient evidence, its conclusions of law are reviewable de novo on appeal." Starco, Inc. v. AMG Bonding and Ins. Services, 124 N.C. App. 332, 336, 477 S.E.2d 211, 215 (1996).
Because we hold that Defendants' actions were proper pursuant to N.C.G.S. § 47F-1-102, we affirm the trial court's judgment.
N.C.G.S. § 47F-1-102 states in relevant part:
(a) This Chapter applies to all planned communities created within this State on or after January 1, 1999, except as otherwise provided in this section.
. . . .
(c) Notwithstanding the provisions of subsection (a) of this section, G.S. 47F-3-102(1) through (6) and (11) through (17) (Powers of owners' association), . . . G.S. 47F-3-107(a) . . . (Upkeep of planned community; responsibility and assessments for damages), . . . [and] G.S. 47F-3-115 (Assessments for common expenses) . . . apply to all planned communities created in this State before January 1, 1999, unless the articles of incorporation or the declaration expressly provides to the contrary[.]
We are unable to find in the record the exact date Whiskey Creek was created, but the parties agree that it was created prior to 1 January 1999, and the 29 June 1988 filing date for the covenants confirms this fact. Therefore, N.C.G.S. § 47F-1-102(c) controls this matter. Plaintiffs do not argue that the Association did not exist prior to the amendment of the covenants and we therefore assume that a valid property owners' association existed at all times relevant to this appeal.
N.C. Gen. Stat. § 47F-3-107 (2009) states in relevant part:
Upkeep of planned community; responsibility and assessments for damages.
(a) . . . the association is responsible for causing the common elements to be maintained, repaired, and replaced when necessary and to assess the lot owners as necessary to recover the costs of such maintenance, repair, or replacement except that the costs of maintenance, repair, or replacement of a limited common element shall be assessed as provided in G.S. 47F-3-115(c)(1).
N.C. Gen. Stat. § 47F-3-115 (2009) states in relevant part:
Assessments for common expenses.
(a) Except as otherwise provided in the declaration, until the association makes a common expense assessment, the declarant shall pay all common expenses. After any assessment has been made by the association, assessments thereafter shall be made at least annually.
(b) Except for assessments under subsections (c), (d), and (e) of this section, all common expenses shall be assessed against all the lots in accordance with the allocations set forth in the declaration.
Plaintiffs' argument does not rely on any of the statutes referenced by the trial court. Instead, Plaintiffs contend that N.C. Gen. Stat. § 47F-3-102 supports their position. N.C. Gen. Stat. § 47F-3-102 (2009) states in relevant part:
Powers of owners' association.
Unless the articles of incorporation or the declaration expressly provides to the contrary, the association may:
(1) Adopt and amend bylaws and rules and regulations;
(2) Adopt and amend budgets for revenues, expenditures, and reserves and collect assessments for common expenses from lot owners;
(3) Hire and discharge managing agents and other employees, agents, and independent contractors;
(4) Institute, defend, or intervene in litigation or administrative proceedings on matters affecting the planned community;
(5) Make contracts and incur liabilities;
(6) Regulate the use, maintenance, repair, replacement, and modification of common elements;
. . . .
(13) Impose reasonable charges in connection with the preparation and recordation of documents, including, without limitation, amendments to the declaration or statements of unpaid assessments;
(14) Provide for the indemnification of and maintain liability insurance for its officers, executive board, directors, employees, and agents;
. . . .
(16) Exercise all other powers that may be exercised in this State by legal entities of the same type as the association; and
(17) Exercise any other powers necessary and proper for the governance and operation of the association.
(Emphasis added).
Plaintiffs argue that, because the covenants expressly provide for the Association to assess, collect, and disburse funds for the purpose of road maintenance but do not expressly grant the Association power to assess, collect, or disburse funds for other purposes, N.C.G.S. § 47F-3-102 does not grant additional authority to the Association. However, N.C.G.S. § 47F-1-102(c) states that "G.S. 47F-3-102(1) through (6) and (11) through (17) . . . apply to all planned communities created in this State before January 1, 1999, unless the articles of incorporation or the declaration expressly provides to the contrary." (Emphasis added). N.C.G.S. § 47F-3-102(2) states that the association may "[a]dopt and amend budgets for revenues, expenditures, and reserves and collect assessments for common expenses from lot owners[.]" The association may also "[p]rovide for the indemnification of and maintain liability insurance for its officers, executive board, directors, employees, and agents[.]" N.C.G.S. § 47F-3-102(14). Common expenses are defined as "expenditures made by or financial liabilities of the association, together with any allocations to reserves." N.C. Gen. Stat. § 47F-1-103(5) (2009).
Therefore, these provisions of the Act apply to planned communities created before 1 January 1999 unless the communities expressly opt out. Bodine v. Harris Village Property Owners Assoc., ___ N.C. App. ___, ___, 699 S.E.2d 129, 135 (2010). The imposition of "`fees, charges, late charges and other charges imposed pursuant to G.S. §§ 47F-3-102, 47F-3-107, 47F-3-107.1 and 47F-3-115' [are] enforceable as `assessments,' unless the restrictive covenants or bylaws provide[] to the contrary." Id. at ___, 699 S.E.2d at 137 (citation omitted). There is nothing in the Whiskey Creek bylaws or covenants that expressly states that the Association cannot assess, collect, or disburse funds for legal costs, accounting costs, insurance costs, utility costs, and the cost of renting a place to have an annual meeting. "[U]nless [a property owners' association] opt[s] out of the statutory scheme, any enforcement mechanism contained in the restrictive covenants is independent of the statutory procedures discussed [in the Act]." Id. at ___, 699 S.E.2d at 138. "The converse is also true. The statutory procedures of [the Act] are [also] independent from the procedures required by the . . . covenants." Id.
When the legislature amended N.C. Gen. Stat. § 47F-3-102, it removed the permissive words "subject to" and replaced them with explicit language stating that a homeowners' association may exercise the listed powers unless its articles of incorporation or declaration expressly provides to the contrary. N.C. Gen. Stat. § 47F-3-102 (2005). It appears that the legislature's intent was to address the concerns raised by the Supreme Court in Wise and clarify that homeowners' associations have the enumerated powers unless their documents expressly provide to the contrary.
RiverPointe Homeowners Ass'n v. Mallory, 188 N.C. App. 837, 841, 656 S.E.2d 659, 661 (2008) (emphasis added).
This means that the Association in the case before us was not obligated to adhere strictly to its bylaws or covenants because the statute independently authorized it to assess, collect, and disburse funds for the items in question. Therefore, even though the bylaws and covenants do not explicitly state that the above expenditures are appropriate, N.C.G.S. § 47F-1-102 authorizes the Association to assess, collect, and disburse funds for these items. There is nothing in the covenants expressly stating that the Association may not assess, collect, and disburse funds for purposes other than road maintenance. Contrary to Plaintiffs' argument, failure to grant a specific power to the Association in the covenants is not the same as expressly forbidding the Association from exercising that power. Without any express provisions in the covenants forbidding the actions taken by the Association, the provisions in N.C.G.S. § 47F-3-102 apply, and Defendants acted within their authority in collecting fees and disbursing payments for non-road maintenance expenses. Our analysis also applies to N.C.G.S. § 47F-1-102 as well, and therefore the Association also had the authority to assess fees and make expenditures pursuant to N.C.G.S. §§ 47F-3-107 and 47F-3-115. We hold that the actions taken by the Association were authorized by N.C.G.S. §§ 47F-1-102, 47F-3-102, 47F-3-107, and 47F-3-115. Therefore, the trial court did not err in dismissing Plaintiffs' action.
In light of our holding that Defendants were authorized by the Act to take the actions which are the subject of this appeal, we do not address Plaintiffs' other arguments.
Affirmed.
Chief Judge MARTIN and Judge McCULLOUGH concur.
Report per Rule 30(e).