Court Opinion

ID: 3162489
Source: CourtListenerOpinion
Date Created: 2015-12-15 13:05:37.737114+00
Date Added: 2024-06-11T11:47:45.094303
License: Public Domain

IN THE COURT OF APPEALS OF NORTH CAROLINA

                                  No. COA14-1337

                              Filed: 15 December 2015

Wake County, No. 13 CVS 12558

LANDOVER HOMEOWNERS ASSOCIATION, INC., Plaintiff,

            v.

THOMAS B. SANDERS; ANNA B. SANDERS; SANDERS EQUIPMENT
COMPANY, INC.; and SANDERS DEVELOPMENT COMPANY, L.L.C., Defendants.

      Appeal by plaintiff from order entered 1 July 2014 by Judge Michael R. Morgan

in Wake County Superior Court. Heard in the Court of Appeals 11 August 2015.

      Harris & Hilton, P.A., by Nelson G. Harris, for plaintiff-appellant.

      Law Offices of F. Bryan Brice, Jr., by Matthew D. Quinn, for defendant-
      appellees.

      BRYANT, Judge.

      Where ambiguities exist in the language of a declaration which create an issue

of material fact, the trial court erred in granting summary judgment to defendants,

and we reverse.

      Defendants Thomas B. Sanders and Anna B. Sanders are husband and wife,

who together own 95% of defendant Sanders Equipment Company, Inc. (“SEC”). The

Sanders’ two adult daughters, Deborah and Barbara, own the remaining 5%. The

remaining defendant is Sanders Development Company, LLC (“SDC”), which was
                      LANDOVER HOMEOWNERS ASS’N, INC. V. SANDERS

                                        Opinion of the Court

formed in 1997 for the purpose of buying property for development. Its sole members

are Thomas, Deborah, and Barbara, with each owning a one-third membership

interest.

       Sanders Landover, LLC (“Sanders Landover”) was formed on 12 April 2000.

Like SDC, Sanders Landover was created and organized to buy, develop, and sell

property, with Thomas Sanders and his two daughters each owning one-third of its

membership interest. On 14 April 2000, two days after it was formed, Sanders

Landover purchased a 56.63 acre tract of land in Wake County, paying approximately

$700,000, which Sanders Landover had borrowed from SEC without any security. In

early 2002, Sanders Landover recorded a plat for a portion of the 56.63 acre tract

identified as “Landover Sections 1–3, 7–9.”

       Landover Homeowners Association, Inc. (alternatively, “HOA” or “plaintiff-

Association”) was formed on 10 May 2002 with the initial board consisting of Thomas,

Deborah, and Barbara.1 On 27 May 2002, Sanders Landover recorded a subdivision

declaration in the Wake County Registry (“the 2002 declaration”).                        The 2002

declaration defines “Declarant” as

               Sanders Landover L.L.C., its successors and assigns, if
               such successors or assigns should acquire more than one
               undeveloped Lot from the Declarant for the purpose of
               development or if such successors or assigns should acquire

       1 Landover Homeowners Association, Inc. has since been turned over to the property owners
within Landover Subdivision (“Q: So before it was transferred, who were the Directors of Landover
Homeowners Association? A: I guess it would be the same; all of us that were in the – in the Landover,
LLC.”).

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                         LANDOVER HOMEOWNERS ASS’N, INC. V. SANDERS

                                            Opinion of the Court

                  more than one Lot, whether developed or undeveloped,
                  pursuant to foreclosure or a deed in lieu of foreclosure.

          The 2002 declaration further subjected Sanders Landover’s “Landover

Sections 1–3, 7–9” to various covenants and conditions, including a requirement to

pay annual and special assessments as levied by the HOA. Article VI, section 17 of

the 2002 declaration stated, in pertinent part:

                  During the Declarant Control Period, the Declarant shall
                  pay annual and special assessments for all vacant Lots at
                  an amount equal to one-half (1/2) of the applicable
                  assessment. These assessments may be enforced against
                  Declarant and collected by the [Homeowners] Association
                  in the same manner as annual assessments applicable to
                  other Owners.

          Sanders Landover, as the original Declarant, was given wide latitude to assign

its Declarant rights: “Declarant specifically reserves the right, in its sole discretion .

. . [to] assign any or all of its rights, privileges and powers under this Subdivision

Declaration or under any Supplemental Declarations.”

          Article I, section m of the 2002 declaration specifies that the “Declarant

Control Period” will end no later than when the first one of three specified conditions

occurs.2 The only one of the three specified conditions which has been met is the

2   The three specified conditions are as follows:

                  “Declarant Control Period is defined as the period of time beginning at
                  the time of recording of this Declaration in the Registry and ending on
                  the first to occur of the following:

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                     LANDOVER HOMEOWNERS ASS’N, INC. V. SANDERS

                                      Opinion of the Court

arrival of “5:00 p.m. on the date that is seven (7) years following the date of

recordation” of the 2002 declaration. Thus, under the terms of the 2002 declaration

recorded on 4 June 2002, the Declarant Control Period ended no later than 5:00 p.m.

on 4 June 2009.

      On 9 September 2002, Sanders Landover conveyed to SDC a 9.71-acre portion

(“the townhome tract”) of the original 56.63 acre tract. On 11 September 2003, a plat

for the 9.71-acre townhome tract was recorded, and designated as “Landover

Subdivision, Phases 4–6,” thereby making it subject to the 2002 declaration

containing covenants, conditions, and requirements imposed by the HOA. By 24

February 2004, all 9 sections or phases of Landover Subdivision were subject to the

2002 declaration. On 2 November 2005, SDC recorded a plat for the townhome tract

             (i)      the later of 5:00 p.m. on the date that is seven (7) years
                      following the date of recordation of this Declaration in the
                      Registry.

             (ii)     the date on which the total number of votes entitled to be
                      cast by the Class A Members and the Class B Members
                      of the Association equal the total number of votes entitled
                      to be cast by the Declarant, as the Class C Member of the
                      Association (the total number of votes of either of the three
             classes of membership in the Association may be          increased     or
             decreased by the annexation of Additional        Property or withdrawal
             of portions of the Property as provided herein); and in such instances
             Class C Membership may be reinstated.

             (iii)    the date specified by the Declarant in a written notice to
                      the Association.

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                      LANDOVER HOMEOWNERS ASS’N, INC. V. SANDERS

                                         Opinion of the Court

showing 81 lots. On 5 December 2005, SDC conveyed Lots 1–16 of the townhome

tract to Ross Construction (“Ross”).

       On 31 March 2006, Deborah signed and filed Articles of Dissolution for Sanders

Landover, effective 31 December 2005.3 Therefore, Sanders Landover is not a party

       3 Nowhere in the record or briefs before this Court is there any indication of what happened to

the remaining 46.92 acres owned by Sanders Landover after it sold the 9.71 acre townhome tract to
SDC and prior to its dissolution on 31 December 2005. However, there is evidence that Sanders
Landover, despite having been dissolved, was still listed as the title owner to some property:

               Plaintiff’s Attorney: . . . [C]an you tell me why Sanders Landover, LLC
               was dissolved effective December 31st, 2005?

               Thomas B. Sanders: Well, we were through with that particular
               section.

               Plaintiff’s Attorney: Did Sanders Landover, LLC have title to any of
               the property that you’re aware of?

               Thomas B. Sanders: You mean after that time?

               Plaintiff’s Attorney: As of December 31st of 2005?

               Thomas B. Sanders: I don’t – I think all land – all – the lots had been
               sold. Everything had been sold and transferred to other people.

               ...

               Plaintiff’s Attorney: Well, would it surprise you to learn that Sanders
               Landover, LLC continued to have title to property after December the
               31st of 2005?

               Thomas B. Sanders: I don’t know where it would be.

               Plaintiff’s Attorney: Okay. All right. Well, were you aware that it had
               title to – well, were you aware that to this day it still has title to the
               common areas?

               Thomas B. Sanders: No, I have no idea.

               Plaintiff’s Attorney: And were you aware that it did have title to some

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                   LANDOVER HOMEOWNERS ASS’N, INC. V. SANDERS

                                      Opinion of the Court

to this action. On 13 June 2006, SDC conveyed 11 additional townhome lots to Ross,

such that Ross owned 27 townhome lots and SDC owned the remaining 54 townhome

lots.

        On 25 July 2006, a second supplemental declaration (“the 2006 second

supplemental declaration”) for the subdivision was recorded, purportedly by Sanders

Landover, plaintiff-association, and Ross. The 2006 second supplemental declaration

recited, inter alia, that Sanders Landover owned certain lots subject to the

declaration. This was incorrect on two accounts. First, as noted supra, Sanders

Landover had conveyed the entire 9.71-acre townhome tract to SDC on 9 September

2002 (which in turn had conveyed some of the lots to Ross).                     Second, Sanders

Landover had been dissolved since 31 December 2005. The 2006 second supplemental

declaration also amended Article VI, section 17 of the 2002 declaration to read as

follows: “Declarant has no obligation for payment of Annual and Special Assessments.

During the Declarant Control Period, the Declarant shall not pay any annual or

special assessments for vacant recorded Lots.”

        On 6 September 2011, SDC conveyed Lots 75–81 to SEC. On 6 March 2012,

SEC conveyed the same lots to Thomas and Anna Sanders. On the same date, SDC

conveyed lots 64–66 and 71–74 of the townhomes to the Sanders. Thus, on 6 March

             of the lots in the original development as of December the 31st of 2005?

             Thomas B. Sanders: I didn’t – at the times we dissolved it, I thought
             we were – had transferred all the properties.

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                       LANDOVER HOMEOWNERS ASS’N, INC. V. SANDERS

                                        Opinion of the Court

2012, the Sanders purported to own townhome lots 64–66 and 71–81 (“the Sanders

lots”).       On 27 December 2012, almost seven years after its dissolution, Sanders

Landover recorded an “Assignment of Declarant Rights” purporting to assign its

rights under the 2002 declaration and the supplemental declarations to SDC,

retroactive to 20 January 2007.             On the same date, SDC recorded a second

“Assignment of Declarant Rights” which purported to assign SDC’s rights to Thomas

and Anna Sanders. On 9 May 2013, the Sanders conveyed the Sanders lots (lots 64–

66 and 71–81) to SEC, without consideration. On 26 July 2013, the Sanders recorded

a third “Assignment of Declarant Rights”4 which purported to assign their rights to

SEC.

          Plaintiff, Landers Homeowners Association, imposed annual assessments from

2009–2012 and four quarterly assessments in 2013. None of these assessments were

paid by the owners of the Sanders lots—SEC—who had acquired them from the

Sanders for no consideration. On 16 September 2013, plaintiff filed a complaint

seeking payment of the unpaid assessments with interest, as well as costs and

attorneys’ fees. Plaintiff sought to pierce the corporate veil as regards SDC and SEC

for failure to observe corporate formalities. Both sides moved for summary judgment.

          4
         The “first” Assignment of Declarant Rights was made by Sanders Landover to assignee-SDC
on 20 January 2007, however it was not recorded in the Office of the Register of Deeds of Wake County
as required by statute. The “second” Assignment of Declarant Rights was made by Sanders Landover
to assignee-SDC and recorded on 27 December 2012, with an effective date of 20 January 2007.

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                  LANDOVER HOMEOWNERS ASS’N, INC. V. SANDERS

                                  Opinion of the Court

      Defendants asserted various defenses, including estoppel, statute of

limitations, and that the language of the second supplemental declaration—

“Declarant has no obligation for payment of Annual and Special Assessments. During

the Declarant Control Period, the Declarant shall not pay any annual or special

assessments for vacant recorded Lots”—made clear that the owners of the Sanders

lots (during the pertinent years, SDC, the Sanders, and SEC) as Declarants, had no

obligation to pay any assessments. On 1 July 2014, the trial court granted summary

judgment in favor of all defendants. Plaintiff appealed.

                ________________________________________________

      On appeal, plaintiff argues that the trial court erred in denying its motion for

summary judgment and granting defendants’ motion for summary judgment.

Specifically, plaintiff argues that (I) the various defendants who owned the Sanders

lots during 2009–2013 were not “Declarants” and (II) even if defendants were

“Declarants,” the language of the 2006 second supplemental declaration is clear in

not exempting them from paying assessments, or, in the alternative, is ambiguous in

its requirements such that a genuine issue of material fact remains and summary

judgment was improper. We agree.

                                           I

      Plaintiff argues that Sanders Landover’s rights under the declaration were not

assigned to defendants. Specifically, plaintiff argues that defendants should not be

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                   LANDOVER HOMEOWNERS ASS’N, INC. V. SANDERS

                                   Opinion of the Court

considered “declarants,” as that term is defined in Article 1(1) of the Declaration (the

2002 declaration), for purposes of determining their liability for assessments.

      Plaintiff contends that Sanders Landover cannot assign its rights as a

declarant with an effective date over a year after Sanders Landover was dissolved,

by instrument which was not reduced to writing and recorded for another seven and

a half years. Despite the fact that plaintiff offers no authority or case law to otherwise

support its proposition that a purportedly dissolved company may not assign its

rights to another entity seven years after that assignor company’s dissolution, we

agree that declarant Sanders Landover’s rights were not validly assigned to

defendants.   In the First Assignment, by which Sanders Landover as declarant

purportedly assigned its rights to SDC, this assignment was only recorded on 27

December 2012, almost seven years after Sanders Landover’s dissolution.

              A dissolved corporation continues its corporate existence
              but may not carry on any business except that appropriate
              to wind up and liquidate its business and affairs, including:

                    (1)    Collecting its assets;
                    (2)    Disposing of its properties that will not be
                           distributed in kind to its shareholders;
                    (3)    Discharging or making provision for
                           discharging its liabilities;
                    (4)    Distributing its remaining property among its
                           shareholders according to their interests; and
                    (5)    Doing every other act necessary to wind up
                           and liquidate its business and affairs.

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                         LANDOVER HOMEOWNERS ASS’N, INC. V. SANDERS

                                      Opinion of the Court

N.C. Gen. Stat. § 55-14-05(a) (2013) (emphasis added). There is nothing in the record

to indicate that Sanders Landover’s purported assignment of Declarant rights was

related to any winding up of the corporation, nor does the law support such an

assignment following a company’s dissolution.                See S. Mecklenburg Painting

Contractors, Inc. v. Cunnane Grp., Inc., 134 N.C. App. 307, 314–15, 517 S.E.2d 167,

170–71 (1999) (holding that where a corporation was dissolved on 9 March 1993, there

remained no legal basis upon which to validate an alleged contract made with another

party on 22 May 1997 so as to permit suit upon the alleged contract); Piedmont & W.

Inv. Corp. v. Carnes-Miller Gear Co., Inc., 96 N.C. App. 105, 107–08, 384 S.E.2d 687,

688 (1989) (“At the time of the attempted conveyance the plaintiff corporation was

dissolved and had no legal existence. . . . Because the plaintiff corporation had no

legal existence on the date of the conveyance the deed could not operate to convey

title to plaintiff.”).

       Furthermore, while the First Assignment recites that it was retroactive to 20

January 2007, that retroactive application date is well after both the 31 December

2005 effective date of Sanders Landover’s dissolution and the 31 March 2006

recording date of the Articles of Dissolution.           Accordingly, Sanders Landover’s

declarant rights were never effectively assigned to defendant SDC and to the extent

that the trial court granted summary judgment in favor of defendants because it

considered defendants to be entitled to declarant status, it erred.

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                     LANDOVER HOMEOWNERS ASS’N, INC. V. SANDERS

                                      Opinion of the Court

                                               II

       Plaintiff next argues that the 2006 second supplemental declaration subjects

the Landover Townhome Property to the declaration and that plaintiff is owed

assessments imposed and owing, during the relevant periods. Because we agree with

plaintiff that declarant’s rights under the declaration were not validly assigned to

defendants, the declaration accordingly does not relieve defendants from their

obligations to pay assessments, as stated above. However, defendants argue that

since SDC, the owner of the Landover Townhome Property, did not sign the 2006

second supplemental declaration, rather Sanders Landover did, the Landover

Townhome Property was not made subject to the Declaration and, therefore, no

assessments are owing by defendants to plaintiff.

       Plaintiff, on the other hand, contends that the use of “Sanders Landover”

instead of “Sanders Development” in the 2006 second supplemental declaration was

simply sloppy draftsmanship caused by the closeness of the Sanders’ entities names

and that, furthermore, the error was not caught because the same individuals who

would have signed the 2006 second supplemental declaration for “Sanders

Development, LLC” were the ones who signed on behalf of “Sanders Landover,

L.L.C.”5 It would appear, then, that the intent of the 2006 second supplemental

       5  SDC, formed in 1997, was owned by Thomas Sanders and his two daughters, Deborah and
Barbara, each owning a one-third membership interest. Sanders Landover, which was formed in 2000,
was identically owned by Thomas Sanders and his two daughters, Deborah and Barbara, each owning
a one-third membership interest.

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                    LANDOVER HOMEOWNERS ASS’N, INC. V. SANDERS

                                    Opinion of the Court

declaration was for Sanders Development Company—not Sanders Landover—along

with plaintiff and Ross to subject the Landover Townhome Property to the

declaration.

      Defendants’ contention that the 2006 second supplemental declaration is not

binding because Sanders Landover signed it and SDC did not own any of the property

being subjected to the declaration is barred by the equitable doctrine of quasi-

estoppel.

               The essential purpose of quasi-estoppel is to prevent a
               party from benefitting by taking two clearly inconsistent
               positions . . . . [Q]uasi-estoppel is directly grounded . . .
               upon a party’s acquiescence or acceptance of payment or
               benefits, by virtue of which that party is thereafter
               prevented from maintaining a position inconsistent with
               those acts.

Smith v. DenRoss Contracting, U.S., Inc., 224 N.C. App. 479, 487, 737 S.E.2d 392,

398 (2012) (quotation marks and citations omitted).

      Here, SDC accepted the benefit of the 2006 second supplemental declaration

by thereafter making conveyances of lots that it owned subject to its terms. On 12

January 2007, SDC conveyed “Lots 20, 21, 22, 31, 32, 34, 35, 36, 40, 41 and 42

Landover Town Homes as recorded on those plats entitled ‘Landover Town Homes,

Owners, Sanders Development Company’ ” to Ross Construction.                   The deed

specifically provided that the conveyance was subject to “[r]estrictive covenants

recorded in Book 12079, Page 434 and Book 9443, Page 484, Wake County Registry.”

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                  LANDOVER HOMEOWNERS ASS’N, INC. V. SANDERS

                                  Opinion of the Court

The restrictive covenants recorded in Book 12079, Page 434 comprise the 2006 second

supplemental declaration.

      Thus, SDC made conveyances of property reciting that the property conveyed

was subject to the 2006 second supplemental declaration, and defendants are barred

by quasi-estoppel from asserting otherwise. Defendants cannot now argue that, while

Ross is bound by the 2006 second supplemental declaration following SDC’s

conveyance of property to Ross, which was subject to the 2006 second supplemental

declaration, SDC is somehow not likewise bound by the 2006 second supplemental

declaration with regards to property it still owns.

      Even assuming arguendo that the former Sanders Landover principals could

have validly assigned Sanders Landover’s rights as a Declarant to defendants after

its dissolution effective 31 December 2005, the language in the 2006 second

supplemental declaration is too ambiguous to support an order granting summary

judgment in favor of defendants.        The language in the second supplemental

declaration states as follows: “Declarant has no obligation for payment of Annual and

Special Assessments. During the Declarant Control Period, the Declarant shall not

pay any annual or special assessments for vacant recorded Lots.”

      When an ambiguity exists because a provision of an agreement or contract is

unclear, it creates an issue of material fact, and summary judgment should not be

granted. See Crider v. Jones Island Club, Inc., 147 N.C. App. 262, 267, 554 S.E.2d

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                  LANDOVER HOMEOWNERS ASS’N, INC. V. SANDERS

                                  Opinion of the Court

863, 867 (2001) (holding the trial court erred in granting summary judgment where

ambiguity existed with respect to a plaintiff’s hunting rights because it was unclear

from the agreement as to how to apply the words of the hunting rights provision); see

also Schenkel & Schultz, Inc. v. Hermon F. Fox & Assocs., P.C., 362 N.C. 269, 274–

75, 658 S.E.2d 918, 922–23 (2008) (holding that where the language of a subprime

agreement was “susceptible to differing yet reasonable interpretations, one broad, the

other narrow, the contract is ambiguous and summary judgment was inappropriate”

and remanding to the superior court in order to resolve the ambiguity).            “An

ambiguity exists in a contract if the ‘language of a contract is fairly and reasonably

susceptible to either of the constructions asserted by the parties.’ ” Crider, 147 N.C.

App. at 267, 554 S.E.2d at 866–67 (quoting Barrett Kays & Assocs., P.A. v. Colonial

Bldg. Co., Inc. of Raleigh, 129 N.C. App. 525, 528, 500 S.E.2d 108, 111 (1998)).

      Here, the parties plainly disagree regarding the meaning of the provision of

the 2006 second supplemental declaration at issue. The ambiguity here arises from

the intended scope of the 2006 second supplemental declaration. Plaintiff argues

that, reading the Declaration as a whole, it is clear that, at the time the Declarant

Sanders Landover recorded the Declaration in 2002, the intent was that all lot owners

would be liable for assessments with respect to the lots that they owned, except that

Declarant would only be liable for one-half the amount of the assessments during the

Declarant Control Period. As the Declarant Control Period is now over—it began on

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                  LANDOVER HOMEOWNERS ASS’N, INC. V. SANDERS

                                 Opinion of the Court

4 June 2002, the day the 2002 Declaration was recorded and ended no later than

seven years later on 4 June 2009—plaintiff contends that the Declaration does not

completely relieve Declarant from its obligation to pay assessments; it simply

provides that Declarant loses the right granted under Article VI, Section 17 of the

Declaration to pay only one-half of the regular assessments.

      Defendants would have us read the disputed language in the second

supplemental declaration as cumulative—that declarant owed no annual or special

assessments during the Declarant Control Period, nor does it owe any annual or

special assessments following the end of the Declarant Control Period.         Again,

plaintiff would have us read the second sentence as modifying the first and read the

language as indicating no intent to change Declarant’s obligations to pay assessments

accruing after the Declarant Control Period. Because the language in the second

supplemental declaration “is fairly and reasonably susceptible to either of the

constructions by the parties,” the language is sufficiently ambiguous to create an

issue of material fact, and the trial court erred in granting summary judgment in

favor of defendants. See Crider, 147 N.C. App. at 267, 554 S.E.2d at 866–67.

      Accordingly, to the extent the trial court granted summary judgment in favor

of defendants because it considered defendants to be entitled to “declarant” status,

and believed the Landover Townhome Property was not subject to the 2006 second

supplemental declaration, we disagree and reverse the trial court’s grant of summary

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                 LANDOVER HOMEOWNERS ASS’N, INC. V. SANDERS

                                 Opinion of the Court

judgment. Likewise, to the extent the trial court granted summary judgment because

it found no issue of material fact based on a lack of ambiguity, we reverse.

Accordingly, we remand this matter for further proceedings.

      REVERSED AND REMANDED.

      Judges STEPHENS and DIETZ concur.

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