Opinion
No. COA02-547
Filed 1 July 2003 This case not for publication
Appeal by plaintiff from order entered 22 January 2002 by Judge Albert A. Corbett, Jr., in Lee County District Court. Heard in the Court of Appeals 12 February 2003.
The Yarborough Law Firm, by Garris Neil Yarborough and Barry K. Simmons, for plaintiff-appellant. Ragsdale Liggett PLLC, by Melissa Dewey Brumback, for defendant-appellee.
Lee County No. 00-CVD-746.
Patricia Zumkehr ("plaintiff") appeals from an order of the trial court granting summary judgment in favor of Hidden Lakes Property Owners Association, Inc. ("defendant"). For the reasons stated herein, we affirm in part and reverse in part the judgment of the trial court.
The pertinent facts of the instant appeal are as follows: On 17 August 2000, plaintiff filed a complaint against defendant in Lee County District Court alleging that defendant had wrongfully suspended plaintiff's status as a member in good standing in the property owners' association and illegally assessed fees against her. Plaintiff further alleged that defendant wrongfully suspended plaintiff's right to vote on matters affecting the community, and that these actions constituted unfair and deceptive trade practices. Plaintiff sought a declaratory judgment to remove the members of defendant's board of directors and architectural review committee and to declare null and void certain amendments to the defendant's covenants, conditions, reservations and restrictions. Plaintiff moreover sought compensatory damages and treble damages pursuant to Chapter 75. Plaintiff filed an amended complaint on 9 March 2001. Defendant thereafter filed a motion for summary judgment, contending there were no genuine issues of material fact and that defendant was entitled to judgment as a matter of law.
Defendant's motion for summary judgment came before the trial court on 10 December 2001, at which time the following evidence was presented: Plaintiff and her husband are property owners in the Hidden Lakes subdivision ("Hidden Lakes") located in Sanford, North Carolina. In 1995, plaintiff learned that Hidden Lakes maintained a community garden for the use of subdivision residents. In 1997-98, plaintiff and her husband purchased and built a new home on two lots in Hidden Lakes adjacent to the community garden in order to better pursue their gardening hobby.
In January of 1997, plaintiff assumed office as a member of the defendant's board of directors ("the Board"). Defendant's stated responsibilities, as undertaken by the Board, were to "own, manage, maintain, and operate the common areas and improvements located upon the common areas" and "to enforce the covenants, conditions, reservations, and restrictions" of the Hidden Lakes subdivision. During her tenure on the Board, plaintiff often objected to Board practices and procedures she considered to be irregular, and conflict frequently arose between plaintiff and other Board members as a result. On 9 June 1998, plaintiff resigned from her position on the Board.
At the September 1998 and January 1999 meetings of the Board, the Board voted to discontinue maintenance of the community garden and approved a motion to return the garden area to its natural state. The stated reasons for the Board's decision were that the "[g]ardening committee decided [the] garden was not wanted by [the] community" in that "[o]nly 2 people [were] using [the] garden." The Board informed the subdivision residents of its decision to discontinue the garden by letter dated 18 January 1999.
In July of 1999, the Board notified plaintiff of a special assessment of $150.00 against her. Defendant asserts that the special assessment was levied after the Board sought legal advice concerning plaintiff's dispute with the Board over its decision to discontinue the community garden. According to a memorandum of record of the monthly meeting of the Board dated 16 September 1999, plaintiff and her husband "were charged by Board approval referencing a Garden violation and an [unpaid] special assessment of $150.00. The charge was made [because] they did not stop gardening for four days after the charge date sent by the Board to the [plaintiff and her husband]." In her deposition, plaintiff testified that the letter of notification concerning the special assessment did not identify the basis for the fine. Plaintiff refused to pay the fine, which she considered to be unlawfully imposed, and contested its validity to the Board. On 1 August 1999, the Board sent plaintiff's husband a letter stating the following:
Your special assessment stands. The reason for your special assessment is your violation (per Section 4d of the [filed statement of the defendant association's covenants, conditions, reservations and restrictions]). This assessment would be the same for any resident making this violation.
It is in no way meant to be harassment.
Section 4d of the covenants, conditions, reservations and restrictions governing the subdivision, entitled "Special Assessments" reads as follows:
In addition to the annual assessments authorized herein, the Property Owners Association may levy in any assessment year a special assessment applicable to that year only for the purpose of defraying in whole or in part the costs of any construction or reconstruction, unexpected repair or replacement of a capital improvement upon the common areas, provided any such assessment shall have the assent of majority of the votes of all voting members who are voting in person or by proxy at a meeting duly called for such purpose. Written notice of such meeting shall be sent to all members at least thirty days in advance and shall set forth the purpose of the meeting. At the first such meeting, the members or their proxies entitled to cast 51 percent of all the votes of the membership shall constitute a quorum. If the required quorum is not forthcoming at such first meeting, another meeting may be called subject to the notice requirements set forth herein and the required quorum shall be one-half (1/2) of the required quorum at the preceding meeting. Furthermore, special assessments maybe assessed against specific lots and owners by the Board of Directors of the Property Owners Association in the event the owner of a lot fails to comply with any [of] the restrictions and covenants provided in this Statement and the By-laws of the Property Owners Association whereby the Property Owners Association may perform such tasks or remedy such matter and levy the cost of such performance against the owner of such lot and such lot as a special assessment.
In his response to the Board's letter, plaintiff's husband noted that the Board had failed to follow the procedural requirements set forth in section 4d. The Board replied that it had acted legally and stated that "[i]f [plaintiff and plaintiff's husband] would like to discuss your violation with the Board, we will be happy to set up an appointment to meet with you, as we always have been."
Because plaintiff refused to pay the special assessment levied against her by the Board, she lost her status as a "member in good standing" in the defendant association. The subdivision covenants authorized the Board to suspend the voting rights of any member not in good standing. The Board informed plaintiff that she could regain her status as a member in good standing when she paid the special assessment. Plaintiff refused to do so and was therefore barred from voting at the 16 November 1999 annual meeting of the defendant association. At the 16 November 1999 meeting, a majority of the property owners voted to substantially amend the governing covenants, conditions, reservations and restrictions of the subdivision. Notably, section 4d was amended to add the following language:
In the event that the Board of Directors deems it advisable to secure legal representation to represent the Board, its officers or directors, in any controversy with any lot owner, such lot owner shall pay the costs of the Board's legal fees or other consultants. Such costs shall be itemized and assessed against the member and the specific lot or lots owned by the member as a Special Assessment.
On 9 April 2000, the Board accepted an anonymous donation of $150.00 for the special assessment against plaintiff, thereby restoring her status as a "member in good standing" in the defendant association.
Upon consideration of the evidence, the trial court granted summary judgment in favor of defendant. From this judgment, plaintiff appeals.
Plaintiff argues that the trial court erred in granting summary judgment in favor of defendant on each of plaintiff's claims. For the reasons stated herein, we reverse in part the judgment of the trial court.
In reviewing a motion for summary judgment, the trial court must determine whether the pleadings, depositions, answers to interrogatories, admissions of file or affidavits establish a genuine issue as to any material fact. See N.C. Gen. Stat. § 1A-1, Rule 56(c) (2001); McGinnis Point Owners Ass'n v. Joyner, 135 N.C. App. 752, 754, 522 S.E.2d 317, 319 (1999). If no such issue exists, the trial court must then determine whether any party is entitled to judgment as a matter of law. See id. We therefore examine the record in the instant case to determine whether defendants were entitled to summary judgment on each of plaintiff's claims, including her claim for (1) damages; (2) declaratory judgment; and (3) unfair and deceptive trade practices.
Damages
Plaintiff argues that the trial court erred in granting summary judgment to defendant on the issue of compensatory damages to plaintiff arising from the following: (1) the special assessment of $150.00 against plaintiff; (2) discontinuation of the community garden; (3) denied access to community amenities; (4) lost voting rights; and (5) loss of peaceful enjoyment of her property. We examine plaintiff's arguments in turn.
Plaintiff contends that the Board unlawfully assessed the $150.00 fine against her, and that she is therefore damaged in such amount. We disagree. The undisputed record shows that an anonymous donor paid the special assessment, and that upon such payment, plaintiff was restored to her status as a member in good standing in the defendant association. Plaintiff therefore did not incur any monetary damages from the special assessment levied against her by defendant.
Plaintiff further argues that the discontinuation of the community garden caused diminution of her property value and loss of enjoyment of her home. Plaintiff admitted in her deposition, however, that continuation of the garden was subject to the Board's discretionary approval, and that she understood this fact before purchasing the two lots adjacent to the community garden. Under the governing restrictive covenants, the Board had discretionary authority over use of the community property in the subdivision and could properly decide to discontinue the garden. Plaintiff therefore had no vested property right in the garden or other reasonable expectation of its continuance. As such, she cannot show damages related to its loss.
As further evidence for her damages, plaintiff asserts that she suffered losses arising from her refusal to pay the special assessment against her. Because of plaintiff's refusal to pay the special assessment, the Board determined that plaintiff was not a "member in good standing" in the defendant association and did not allow her to vote at the 16 November 1999 property owners' meeting. Plaintiff also contends she was denied access to community amenities, such as the tennis court and swimming pool, during this time. Plaintiff maintains she is entitled to damages for her loss of voting and property rights.
Plaintiff has shown no actual damages resulting from the denial of her voting rights and access to community property, and she is therefore not entitled to compensatory damages. She may, however, be entitled to nominal damages. See Title Ins. Co. of Minn. v. Smith, Debnam, Hibbert and Pahl, 119 N.C. App. 608, 611, 459 S.E.2d 801, 804 (1995) (noting that, where a plaintiff shows only legal injury with no associated actual damages, she may nevertheless recover nominal damages), affirmed as modified, 342 N.C. 887, 467 S.E.2d 241 (1996). We must therefore determine whether there exist genuine issues of material fact concerning the propriety of the special assessment levied against plaintiff. Under the North Carolina Planned Community Act, a homeowners' association may "[a]fter notice and an opportunity to be heard, impose reasonable fines or suspend privileges or services provided by the association (except rights of access to lots) for reasonable periods for violations of the declaration, bylaws, and rules and regulations of the association[.]" N.C. Gen. Stat. § 47F-3-102(12) (2001). Furthermore,
[u]nless a specific procedure for the imposition of fines or suspension of planned community privileges or services is provided for in the declaration, a hearing shall be held before an adjudicatory panel appointed by the executive board to determine if any lot owner should be fined or if planned community privileges or services should be suspended pursuant to the powers granted to the association in G.S. 47F-3-102(11) and (12). If the executive board fails to appoint an adjudicatory panel to hear such matters, hearings under this section shall be held before the executive board. The lot owner charged shall be given notice of the charge, opportunity to be heard and to present evidence, and notice of the decision. If it is decided that a fine should be imposed, a fine not to exceed one hundred fifty dollars ($150.00) may be imposed for the violation and without further hearing, for each day after the decision that the violation occurs. Such fines shall be assessments secured by liens under G.S. 47F-3-116. If it is decided that a suspension of planned community privileges or services should be imposed, the suspension may be continued without further hearing until the violation or delinquency is cured.
N.C. Gen. Stat. § 47F-3-107.1 (2001) (emphasis added). Thus, unless the Hidden Lakes covenants provided a specific procedure for the imposition of the special assessment, plaintiff was entitled to a hearing on the matter pursuant to section 47F-3-107.1. Under the Hidden Lakes covenants, conditions, reservations and restrictions, the Board is authorized to
levy in any assessment year a special assessment applicable to that year only for the purpose of defraying in whole or in part the costs of any construction or reconstruction, unexpected repair or replacement of a capital improvement upon the common areas, provided any such assessment shall have the assent of majority of the votes of all voting members who are voting in person or by proxy at a meeting duly called for such purpose. Written notice of such meeting shall be sent to all members at least thirty days in advance and shall set forth the purpose of the meeting. At the first such meeting, the members or their proxies entitled to cast 51 percent of all the votes of the membership shall constitute a quorum. If the required quorum is not forthcoming at such first meeting, another meeting may be called subject to the notice requirements set forth herein and the required quorum shall be one-half (1/2) of the required quorum at the preceding meeting. Furthermore, special assessments may be assessed against specific lots and owners by the Board of Directors of the Property Owners Association in the event the owner of a lot fails to comply with any [of] the restrictions and covenants provided in this Statement and the By-laws of the Property Owners Association whereby the Property Owners Association may perform such tasks or remedy such matter and levy the cost of such performance against the owner of such lot and such lot as a special assessment.
Plaintiff asserts that, under the above-stated governing covenants and statutory law, the Board was required to hold a meeting before making the special assessment. Defendant contends that no meeting was required, because the special assessment arose over plaintiff's failure to abide by the restrictions and covenants of the defendant association. Because the governing covenants allow the Board to levy a special assessment whenever "the owner of a lot fails to comply with any [of] the restrictions and covenants provided in this Statement and the By-laws of the Property Owners Association," defendant argues that the Board had no obligation to provide plaintiff with notice or an opportunity to be heard. We disagree.
Even if defendant's interpretation of the governing covenants is correct and no meeting was required, the governing covenants provide no procedure for the Board to follow in cases where the owner of a lot fails to comply with the restrictions and covenants. Under the North Carolina Planned Community Act, a homeowners' association may impose fines or suspend community privileges only after providing notice and an opportunity to be heard. See N.C. Gen. Stat. § 47F-3-102(12). Unless a definite procedure is otherwise specified in the governing covenants, the Board must hold a hearing before imposing fines or suspending community privileges. See N.C. Gen. Stat. § 47F-3-107.1. Plaintiff was therefore entitled to notice and an opportunity to be heard before the Board could properly impose the special assessment.
Defendant argues that plaintiff received adequate notice and an opportunity to be heard, contending that plaintiff "received requests to discuss the situation with at least one member of the Board." After carefully reviewing the evidence in the record before us, we conclude that there exist genuine issues of material fact concerning (1) the basis for the special assessment; (2) notice of the special assessment; and (3) plaintiff's opportunity to be heard on the matter. Plaintiff presented evidence tending to show that she was unaware of any violation, and the letter to her from the Board did not reveal the factual basis for the alleged violation. There was conflicting evidence in the record as to whether the special assessment arose over plaintiff's threatened or actual continued use of the community garden after the Board voted to return the property to a natural state, or whether the fines arose in connection with legal fees incurred by the Board. Notably, the governing covenants did not specifically allow the Board to charge a lot owner for legal fees until after the 1999 amendments. Because there are genuine issues of material fact regarding whether the Board lawfully imposed the special assessment, there arise additional issues of material fact whether the Board properly suspended plaintiff's privileges in the community and denied her right to vote. Although plaintiff has not shown actual injury, she may be entitled to nominal damages on her claims. As such, we conclude that the trial court erred in granting summary judgment to defendant on plaintiff's claim of damages arising from the suspension of her access to community amenities and the denial of her right to vote. We otherwise overrule plaintiff's assignment of error regarding her claim to damages.
Declaratory Judgment
Plaintiff argues that the trial court erred in granting summary judgment on her claim for a declaratory judgment. In her claim, plaintiff sought to have (1) defendant's amended covenants and bylaws declared null and void; (2) members of the Board declared illegally elected and their positions vacated; (3) defendant's proxy system of voting declared void; and (4) defendant's architectural committee declared illegally elected and their positions vacated. Plaintiff concedes, however, that the members of the Board and the architectural committee elected in 1998 are no longer in office, and that this issue is therefore moot. We therefore limit our review to the propriety of summary judgment for plaintiff's claims concerning the amended covenants and the proxy system of voting.
Plaintiff argues that defendant was without authority to amend the covenants, conditions, reservations and restrictions at the 16 November 1999 meeting. Plaintiff contends that, under the governing covenants, such amendment could only occur on 14 August 2000. Plaintiff bases her argument on the following language contained in the filed 1990 amended statement of the governing covenants for Hidden Lakes:
The covenants and restrictions herein are to run with the land and shall be binding on all parties acquiring title to lots in Hidden Lakes up to and including the 14th day of August, 2000, at which time said covenants shall be automatically extended for successive periods of ten years unless by vote of a majority of the then owners of the residential building sites covered by these or substantially identical covenants, it is agreed to change said covenants in whole or in part.
At the 16 November 1999 meeting, the Hidden Lakes property owners voted to amend the covenants, with an effective date of 14 August 2000. Plaintiff asserts that, because the 1990 governing covenants allow amendment every ten years by "the then owners," the vote for amendment could not take place prior to 14 August 2000. According to plaintiff, the 14 August date controls, because only on that date would it be possible to ascertain who the "then owners" in the subdivision would be. Plaintiff stresses "the importance of assuring deed grantees that language purporting to be binding for at least ten years is truly binding" for that length of time. Plaintiff therefore argues that the trial court erred in declining to issue a declaratory judgment declaring defendant's amended covenants null and void. We disagree. There is no indication in the present case that the 1990 governing covenants were not binding for ten years. Although the property owners voted to amend the covenants on 16 November 1999, such amendments were not effective until 14 August 2000.
In her next argument, plaintiff asserts that the present proxy system of voting in the subdivision is illegal, and that the trial court erred in refusing to declare it null and void. Plaintiff bases her argument on the following: (1) the governing covenants do not refer to proxy voting except in the context of annual and special assessments; (2) a proxy system was approved by the Board based on allegedly inaccurate and misleading information; (3) this proxy system was utilized at a November 1998 meeting, during which the voters approved the present proxy system; and (4) the voters were not informed of the details of the present proxy system until February of 1999. Plaintiff asserts that this evidence supports her contention that the present proxy system utilized by the defendant association is illegal and should have been declared null and void by the trial court. Plaintiff further argues that, because the current bylaws of the subdivision were approved by use of the present proxy system, such bylaws should be declared equally invalid. We disagree.
Under applicable statutory law, "[u]nless the articles of incorporation or bylaws prohibit or limit proxy voting, a member may vote in person or by proxy." N.C. Gen. Stat. § 55A-7-24(a) (2001). There is no indication in the present case that the articles of incorporation of the defendant association prohibit proxy voting; indeed, the 1993 amended bylaws expressly allow proxy voting. Proxy voting is therefore clearly allowed in the Hidden Lakes subdivision, and the trial court did not err in declining to declare such proxy voting illegal. We overrule this assignment of error.
Unfair and Deceptive Trade Practices
Plaintiff argues that defendant committed unfair and deceptive trade practices, and that the trial court erred in granting summary judgment on this claim. Given our conclusion, however, that plaintiff has shown no actual injury, her claim for unfair and deceptive trade practices cannot stand. See Bailey v. LeBeau, 79 N.C. App. 345, 352, 339 S.E.2d 460, 464 (noting that, as an essential element of a cause of action for unfair and deceptive trade practices, the plaintiff must prove that she suffered actual injury as a proximate result of the defendant's misrepresentations) modified and affirmed, 318 N.C. 411, 348 S.E.2d 524 (1986). We therefore overrule plaintiff's final assignment of error.
In conclusion, we hold that there are genuine issues of material fact regarding whether defendant properly suspended plaintiff's privileges as a property owner in the defendant association, including her right of access to community amenities and her right to vote at the 16 November 1999 property owners' meeting. Although plaintiff has not shown actual injury, she may be able to show legal injury, which would entitle her to nominal damages. The trial court therefore erred in granting summary judgment to defendant on this claim, and we reverse that portion of the judgment and remand this case to the trial court. We otherwise affirm the judgment of the trial court.
Affirmed in part, reversed in part, and remanded.
Judges WYNN and LEVINSON concur.
Report per Rule 30(e).