Opinion ID: 2629390
Heading Depth: 2
Heading Rank: 4

Heading: the swan creek homeowners association has assessment authority over lot owners in the subdivision

Text: ¶ 30 We now turn to Alicia Warne's claim that the HOA lacks authority to impose assessments on property owners in the Swan Creek subdivision. Although Alicia Warne recognizes that the Original Association would have had authority to levy such assessments, see Utah Code Ann. § 57-3-102(1) (2000) (indicating that duly recorded documents impart notice to all persons of their contents), she claims that the HOA lacked this authority because it is not the association contemplated under the Declaration and because an insufficient number of lot owners voted to ratify its authority. In essence, she urges us to conclude that the assessment power terminated with the defunct Original Association, thereby leaving the HOA without assessment authority. ¶ 31 We agree with Alicia Warne that the record fails to establish any formal amendment of the Declaration recognizing the HOA. We similarly agree that there appear to be disputed issues of fact with respect to whether a majority of the lot owners formally approved the substitution of the HOA following the involuntary dissolution of the Original Association. But we disagree that these facts are material. Indeed, we need not decide these issues because we find that the HOA's authority to impose assessments on Swan Creek lot owners pursuant to the terms of the Declaration has been repeatedly ratified by the lot owners over a period of many years. Therefore, using our equitable powers, we declare the HOA to be a valid association authorized to impose assessments pursuant to the terms of the Declaration. ¶ 32 Our equitable powers extend to situations where their invocation is necessary to correct mistakes and oversights and to protect the public interest. In the spirit of this principle, we call on our equitable powers to affirm the HOA's authority to levy assessments here. Where property owners have treated an association as one with authority to govern and impose assessments contemplated under the terms of a duly recorded governing declaration, they ratify its authority to act. ¶ 33 Although we have not previously addressed ratification in the context of homeowners associations, such an exercise of our equitable powers is consistent with over a hundred years of Utah case law in similar contexts. From early in this state's existence, we have relied on the doctrine of ratification in cases raising questions regarding corporate authority. In Marsh v. Mathias, 19 Utah 350, 56 P. 1074, 1076 (1899), we considered the validity of a corporation's amendment to its bylaws. In order to amend the bylaws, two-thirds of the stockholders had to vote for the amendment. Id. But it was not clear from the record whether the requisite percentage of stockholders had attended the meeting. Id. Despite the lack of evidence on this point, other evidence supported the notion that the amendment had been validly adopted. For instance, the amended bylaw was found in the records of the corporation, and [had] been acted upon and acquiesced in for a period of more than eleven years. Id. Additionally, stockholders had been given statements each year, and the amended bylaw had been uniformly acted upon and enforced since its adoption. Id. In view of all these circumstances, we. . . presume[d] that [the amendment] was regularly and duly adopted. Id. In other words, the subsequent acts of stockholders ratified the amendment's existence. ¶ 34 The basic, equitable principle articulated by this court in Marsh is still valid today and has been applied often in more recent cases, albeit in different contexts. The availability of equitable relief helps to ensure that justice is met and prevents parties from avoiding valid obligations due to technicalities. Particularly in contract cases, we have relied on the principle of ratification to establish the validity of an act even though certain, express formalities have not been met. See Aggeller & Musser Seed Co. v. Blood, 73 Utah 120, 272 P. 933, 937 (1928) (indicating that acceptance of services rendered with full knowledge of the contract under which rendered is a ratification of such contract). We have found ratification under circumstances of acquiescence or where a duty to disaffirm is not promptly exercised. Lowe v. April Indus., Inc., 531 P.2d 1297, 1299 (Utah 1974) (holding that delay in repudiation gives rise to an implied or de facto ratification of [a] contract); Cache Valley Banking Co. v. Logan Lodge No. 1453, B.P.O.E., 88 Utah 577, 56 P.2d 1046, 1047-48 (1936) (Ratification may be implied by acquiescence in, or recognition of, the act of the officers by the corporation or by acts tending to show an acceptance or adoption of the contract.). ¶ 35 We have also called on other equitable principles to achieve substantial justice. For example, equitable estoppel allows us to modify a contract or prevent a party from denying the validity of a contract when one party has relied on another party's conduct. See, e.g., Blackhurst v. Transamerica Ins. Co., 699 P.2d 688, 691 (Utah 1985) (listing the elements of equitable estoppel); Tanner v. Provo Reservoir Co., 76 Utah 335, 289 P. 151, 154 (1930) (It has been repeatedly held that a person by acceptance of benefits may be estopped from questioning the existence, validity and effect of a contract.). Additionally, we have adopted a principle where a party recovering a judgment or decree [who] accepts the benefits thereof, voluntarily and knowing the facts... is estopped to afterwards reverse the judgment or decree on error. Ottenheimer v. Mountain States Supply Co., 56 Utah 190, 188 P. 1117, 1118 (1920) (internal quotation marks omitted). ¶ 36 Other courts have called on such equitable principles in affirming the authority of homeowners associations. For example, in Evergreen Highlands Ass'n v. West, 73 P.3d 1, 7 (Colo.2003), the Colorado Supreme Court held that even though a homeowners association may not have an express covenant imposing mandatory assessments, it has the implied power to collect assessments from its members. It reasoned that to promote efficient property management, it is necessary that homeowner associations have the implied power to levy dues or assessments even in the absence of express authority. Id.; see also Seaview Ass'n v. Williams, 69 N.Y.2d 987, 517 N.Y.S.2d 709, 510 N.E.2d 793, 794 (1987) (indicating that homeowners have an implied-in-fact contract with the association when they buy property knowing that the association manages it); Perry v. Bridgetown Cmty. Ass'n, 486 So.2d 1230, 1234 (Miss.1986) (stating that the declaration gives rise to review in law or equity). ¶ 37 These cases illustrate the wide variety of equitable remedies on which courts rely to validate the authority of a corporation or association. We employ just such equitable principles in rejecting Alicia Warne's assertion that the HOA lacked authority to assess the property in Swan Creek because of the technicality that it is a different association from the one identified in the Declaration. ¶ 38 In reaching this conclusion, we rely on the fact that the HOA has acted as a valid association for almost twenty years, during which time the lot owners have collectively accepted its management. Lot owners have paid their dues to the HOA, it has managed the property in Swan Creek, and no competing association has emerged. In fact, in 1994, only 24 of the 538 lot owners had not paid the $5,900 assessment levied by the HOA. We also rely on the fact that the HOA's articles of incorporation and the Declaration were on file and had been on file for years before Alicia Warne acquired her lots. Moreover, in a lawsuit resolved before Alicia acquired her lots, the First Judicial District Court for Rich County specifically held that the HOA was properly formed and had the power to levy and to collect the past due assessments. Swan Creek Vill. Homeowners Ass'n v. Cook-Rex Darrington Sorenson Trust, Civil No. 1568, Findings of Fact and Conclusions of Law (1st Dist.Ct.Utah July 20, 1992). While this holding was specifically limited to that action, id., it was a matter of public record, therefore putting Alicia Warne on notice that the HOA was acting in the capacity of the association contemplated under the Declaration. ¶ 39 Under these circumstances, and with this pattern of acquiescence by the lot owners, we exercise our equitable power to hold that the HOA possesses the authority delegated to the homeowners association by the Declaration. [2] Such was the case at the time Alicia Warne acquired her lots, and it is the case now.