Court Opinion

ID: 4020663
Source: CourtListenerOpinion
Date Created: 2016-08-02 12:07:10.905173+00
Date Added: 2024-06-11T12:18:58.088139
License: Public Domain

IN THE COURT OF APPEALS OF NORTH CAROLINA

                              No. COA15-1301

                            Filed: 2 August 2016

McDowell County, No. 12 CvS 787

KAY I. KIMLER, CARY F. KIMLER, LOIS K. ADAMS, LAURA R. NOTTINGHAM,
as Trustee of THE NOTTINGHAM JOINT TRUST OF OCTOBER 25, 2005,
RONALD E. MACK, JUSTAMONA MACK, JAMES C. DAVIDSON, POLLY P.
DAVIDSON, ALMOND E. SHEW, ELISABETH A. SHEW, JAMES C. HORNE, SR.,
HELEN A. HORNE, LANCE COTTRELL, NORIKA COTTRELL, TOMMY R.
PENSON, EDNA S. PENSON, KENNETH F. HODGE, DONNA B. BENTLEY,
BARBRA M. BUTLER, MARK S. WILSON, and EUGENIA L. SEXTON, Petitioners,

           vs.

THE CROSSINGS AT SUGAR HILL PROPERTY OWNER'S ASSOCIATION, INC.,
DONALD F. ASKEY, JR., SHELLY C. ASKEY, WILLIAM B. LYNN, JAMES R.
FRAMPTON, ELIZABETH A. FRAMPTON, GORDON L. JOHNSON, JANINA F.
JOHNSON, HASKELL S. DAWSON, CARNEY N. DAWSON, a/k/a Helen Carney
Dawson Living Trust, DENNIS E. BROWN, PATRICIA A. BROWN, BARRY E.
HOUGH, ANNE S. HOUGH, THOMAS P. STIVES, NORMA P. STIVES, JANE F.
HUMPHREYS, PHILLIP W. TATLER, JR., SALLY L. TATLER, RONNIE
MANGUM, MELODY MANGUM, CAROL C. THOMAS, GINA R. DICICCO,
WENDY D. RHODES, DAVID W. VERMILYEA, JOYCE A. VERMILYEA, JOSHUA
DELL OLIVER, KRISTEN GREEN OLIVER, ANTOINETTE WILLIAMS, PEYTON
A. FOSTER, CAROLYN D. FOSTER, DENISE C. AMMONS, RICHARD G.
KOHLER, DAVID M. VINTON, ELIZABETH D. VINTON, BLAND WAGERS,
JANET W. COUNTS, GEARY B. MILLS, DEBORAH A. MILLS, LARRY K.
BRADHAM, KATHY G. BRADHAM, RANDY GREER, RALPH S. TEAL, BETTY W.
TEAL, ROBERT R. TYLER, JR., ROBERT KELLEY, LESLIE KELLEY, ALAN C.
NEDRICH, SUZETTE R. NEDRICH, LYLE D. MALZAHN, CHRISTINE L.
MALZAHN, LAWRENCE M. LOMONACO, STEVEN COPE, OLGA CADILLA-
SAYRES, ROLANDO PRIETO-SOLIS, JEANETTE GONZALEZ, WILLIAM L.
LITTLE, BARBARA B. LITTLE, FRANK GODZIK, SANDRA GODZIK, CARL D.
KICKERT, KATHY P. KICKERT, JOHN G. MASSARO, CRAIG E. METZ, PAMELA
A. METZ, FREDDIE M. SETTLEMYRE, ELIZABETH O. SETTLEMYRE, RICHARD
E. LEE, CAROL L. LEE, JON A. MAZEY, ELENA V. MAZEY, ERNEST
SANTIUSTE, ANTONIA SANTIUSTE and RICHARD M. GETTY, Respondents.
                        KIMLER V. THE CROSSINGS AT SUGAR HILL

                                    Opinion of the Court

       Appeal by Petitioners from orders entered 3 February 2015 and 6 May 2015 by

Judge Alan Z. Thornburg in McDowell County Superior Court. Heard in the Court

of Appeals 12 May 2016.

       Johnson Law Firm, P.A., by Gene B. Johnson, for the Petitioners-Appellants.

       Roberts & Stephens, P.A., by Ann-Patton Hornthal and Phillip T. Jackson, for
       Respondent-Appellee, The Crossings at Sugar Hill Property Owners’
       Association, Inc.

       DILLON, Judge.

       The Crossings at Sugar Hill (“Sugar Hill”) is a residential subdivision in

McDowell County. The Respondent-Appellee is Sugar Hill’s homeowners’ association

(“Sugar Hill HOA”). The Petitioners-Appellants are owners of lots within Sugar Hill.

       Sugar Hill was developed in the 1990’s by Mountain Creek Land Company,

Inc.   (“Developer”).       Prior    to    development,    the   Developer    recorded

declarations/covenants (the “Declaration”), which provided for the formation of the

Sugar Hill HOA and stipulated that certain owners of multiple lots would only be

required to pay dues on one lot. This civil action involves a dispute concerning

whether the Sugar Hill HOA acted within its authority when it amended the

Declaration in 2012 (the “2012 Amendment”). The Declaration originally provided

that any individual purchasing more than one contiguous lot from the Developer

would only be obligated to pay dues on a single lot so long as the “exempt” lot was not

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                      KIMLER V. THE CROSSINGS AT SUGAR HILL

                                  Opinion of the Court

sold or occupied by a dwelling or camping unit. For the first fifteen years, from 1997-

2012, the Sugar Hill HOA, not only billed those purchasing multiple contiguous lots

from the Developer for one lot, but also only billed multiple lot owners who did not

purchase all their lots from the Developer for one lot. In 2012, the Sugar Hill HOA

began billing the second group on a per-lot basis, and some in that group strongly

objected.   These objections prompted the Sugar Hill HOA to enact the 2012

Amendment to the Declaration to clarify that it was authorized to bill those who

owned multiple contiguous lots not purchased from the Developer on a per-lot basis

(rather than only for a single lot), as it should have been doing all along. The trial

court concluded that the Sugar Hill HOA acted within its authority in enacting the

2012 Amendment. For the following reasons, we affirm.

                               I. Factual Background

      In 1996, the Developer recorded the Declaration which provided, in part, the

following: (1) that any one person/entity purchasing more than one contiguous lot

from the Developer be initially required to pay dues on only one lot; (2) that the

Developer could modify, change, or amend any provision in the Declaration at any

time while the Declaration remained in effect; and (3) that the Declaration would

remain in effect until 2021 and would continue beyond 2021, “unless prior [to the

2021 renewal date] an instrument signed by the owners of a majority of lots subject

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                      KIMLER V. THE CROSSINGS AT SUGAR HILL

                                  Opinion of the Court

to this Declaration agreeing to terminate, amend, or modify the Declaration shall

have been recorded[.]”

      The Declaration provided that the Sugar Hill HOA would be set up with “the

power to enforce” the collection of dues and compliance with covenants and

restrictions. The Declaration, however, did not contain any provision conferring on

the Sugar Hill HOA the authority to amend the Declaration. The Declaration further

provided that the Sugar Hill HOA would be initially controlled by the Developer until

either the Developer decided to turn governing power over to the lot owners or when

75% of the lots were sold, at which time control of the Sugar Hill HOA would

automatically vest in the lot owners.

      In February 1997, the Developer signed the Articles of Incorporation for the

Sugar Hill HOA. The Articles did not contain any provision conferring authority on

the Sugar Hill HOA to amend the Declaration.

      In September 1997, the Developer recorded a document turning over control of

the Sugar Hill HOA to the lot owners. This document, however, did not contain any

provision transferring to the Sugar Hill HOA the Developer’s authority to amend the

Declaration. Shortly after the document was filed, the Sugar Hill HOA held its first

meeting. The minutes from the meeting reflect that a statement was made that more

burdensome restrictions could not be placed on the property except by agreement of

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                      KIMLER V. THE CROSSINGS AT SUGAR HILL

                                  Opinion of the Court

100% of the lot owners. However, there was no motion made or vote recorded as to

this “statement.”

      In 1999, the General Assembly enacted the Planned Community Act (the

“PCA”), which applies to some planned communities. The PCA provides in part that,

except in certain situations, the declaration of a planned community covered by the

PCA could be amended by the vote of 67% of the owners.

      In January 2012, with 71% of lot-owner approval, the Sugar Hill HOA passed

the 2012 Amendment, which stated that only those owners of contiguous lots who

purchased their contiguous lots directly from the Developer would be allowed to pay

dues on a single lot, while those multiple-lot owners who did not purchase all their

contiguous lots from the Developer would be required to pay dues for each lot owned.

                             II. Procedural Background

      In August 2012, Petitioners-Appellants commenced this action seeking (1)

declaratory relief to the effect that all individuals owning contiguous lots were

exempt from paying dues on more than one lot by virtue of the Declaration, and (2)

injunctive relief to enjoin the Sugar Hill HOA from collecting dues on a per-lot basis

from owners of contiguous lots not purchased from the Developer.

      On 3 February 2015, after a bench trial on the matter, the trial court entered

an order which declared, in relevant part, that the statement made at the initial

Sugar Hill HOA meeting in 1997 regarding a requirement unanimity to amend the

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                          KIMLER V. THE CROSSINGS AT SUGAR HILL

                                         Opinion of the Court

Declaration was not legally binding; and that the 2012 Amendment (authorizing the

Sugar Hill HOA to bill on a per-lot basis those contiguous lots who did not purchase

their lots from the Developer) was valid and enforceable. On 6 May 2015, the trial

court denied Petitioners-Appellants’ motion to amend the first order. Petitioners-

Appellants timely appealed from both orders.

                                           III. Analysis

        A. The PCA Authorizes the Sugar Hill HOA To Amend the Declaration

       The PCA was enacted in 1999 by our General Assembly. It applies to most

“planned communities”1 created within North Carolina after 1999. N.C. Gen. Stat. §

47F-1-102(a) (2015).

       Additionally, certain provisions of the PCA apply to planned communities

created prior to 1999, “unless the articles of incorporation or the declaration expressly

provides to the contrary.” N.C. Gen. Stat. § 47F-1-102(c) (2015). Two such provisions

of the PCA which apply to pre-1999 created planned communities are found in N.C.

Gen. Stat. § 47F-2-103 (2015), which deals with the construction and validity of a

declaration, and in N.C. Gen. Stat. § 47F-2-117 (2015), which deals with the process

of amending a declaration. Based on these two provisions and the language in the

       1 “Planned community” is defined by the PCA in N.C. Gen. Stat. § 47F-1-103(23) as real estate
whereby a person’s ownership of a lot expressly obligates that person by a declaration “to pay real
property taxes, insurance premiums, or other expenses to maintain, improve, or benefit other lots or
other real estate described in the declaration.” Sugar Hill falls within this definition. For instance,
the Declaration provides that lot owners are obligated to pay dues for the “maintenance of roads,
common areas,” etc.

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                      KIMLER V. THE CROSSINGS AT SUGAR HILL

                                   Opinion of the Court

Declaration, we conclude that the Sugar Hill HOA – though formed prior to 1999 – is

authorized to amend the Declaration, as otherwise allowed by law, by agreement of

lot owners representing 67% of the votes.

      N.C. Gen. Stat § 47F-2-103(a) states that “[t]o the extent not inconsistent with

the provisions of this Chapter, the declaration, bylaws, and articles of incorporation

form the basis for the legal authority for the planned community to act as provided

in [those documents], and [those documents] are enforceable by their terms.” The

interpretation of the Declaration in the present case is one for the courts, and not for

a jury, see Runyon v. Paley, 331 N.C. 293, 305, 416 S.E.2d 177, 186 (1992), and

therefore is reviewable de novo on appeal.

      Here, the Declaration provides that it may be amended by the Developer. The

Declaration does not provide that it may be amended by the Sugar Hill HOA, but only

that the Declaration may expire in 2021 by vote of the Sugar Hill HOA.

      However, we must read N.C. Gen. Stat. § 47F-2-103 in conjunction with N.C.

Gen. Stat. § 47F-2-117, which provides for the process by which a declaration may be

amended. Specifically, subsection (a) provides, in pertinent part, as follows:

             Except in cases of amendments that may be executed by a
             declarant under the terms of the declaration . . . , the
             declaration may be amended only by affirmative vote or
             written agreement signed by lot owners of lots to which at
             least sixty-seven percent (67%) of the votes in the
             association are allocated, or any larger majority the
             declaration specifies or by the declarant if necessary for the
             exercise of any development right.

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                          KIMLER V. THE CROSSINGS AT SUGAR HILL

                                         Opinion of the Court

N.C. Gen. Stat. § 47F-2-117(a) (2015). For those planned communities to which this

statutory provision applies, even if not authorized by the declaration, an owners’

association may amend the declaration by a sixty-seven percent (67%) vote2 and a

declarant may amend the declaration if necessary to exercise a development right. 3

This grant of authority to an owners’ association to amend the declaration applies to

the Sugar Hill HOA in the present case, though the HOA was formed prior to 1999,

because there is nothing in the Declaration or articles of incorporation which

“expressly provides to the contrary.” N.C. Gen. Stat. § 47F-1-102(c) (2015) (emphasis

added) (providing for the application of N.C. Gen. Stat. § 47F-2-117 to pre-1999

formed planned communities). Specifically, there is nothing in the Declaration which

expressly states that the Sugar Hill HOA is not authorized to amend the Declaration.4

       2   We note that N.C. Gen. Stat § 47F-2-117(a) provides that the declaration may provide that a
larger supermajority than 67% be required to amend. Here, however, the Declaration does not contain
any provision which even addresses the Sugar Hill HOA’s authority to amend the Declaration. There
is evidence that a statement was made at the Sugar Hill HOA’s 1997 initial meeting that a 100% vote
would be required. However, this statement is not part of the Declaration, and we affirm the trial
court’s conclusion that this “statement” is unenforceable.
         3 Under N.C. Gen. Stat. § 47F-2-117, a developer’s authority to amend the declaration is

limited to those amendments deemed necessary for the exercise of any development right unless the
declaration itself authorizes the developer to amend the declaration affecting other matters.
         4 We note that even if the declaration of a planned community formed prior to 1999, expressly

prohibits the owners’ association from amending the declaration, the PCA allows the owners’
association to amend the declaration to make all of the provisions of the PCA applicable to its planned
community by affirmative vote of 67%. This rules applies even if the declaration prohibits the
association from making any amendments to the declaration. N.C. Gen. Stat. § 47F-1-102(d).
Therefore, where a declaration in a planned community formed prior to 1999 expressly prohibits its
owners’ association from amending the declaration, the association may still vote to amend the
declaration to adopt the provisions of the PCA. Id. And once the provisions of the PCA are so adopted,
the association may then amend the declaration in other ways pursuant to its authority under N.C.
Gen. Stat. § 47F-2-117.

                                                 -8-
                     KIMLER V. THE CROSSINGS AT SUGAR HILL

                                  Opinion of the Court

      Therefore, in conclusion, N.C. Gen. Stat. § 47F-2-117 applies to pre-1999

formed planned communities where (1) either the terms of the declaration or articles

of incorporation do not expressly provide to the contrary pursuant to N.C. Gen. Stat.

§ 47F-1-102(c), or (2) the association has adopted the terms of the PCA pursuant to

N.C. Gen. Stat. § 47F-1-102(d). Here, although the Sugar Hill HOA has not adopted

the PCA pursuant to N.C. Gen. Stat. § 47F-1-102(d), there is nothing in the

Declaration or the Articles of Incorporation which expressly prohibit the application

of N.C. Gen. Stat. § 47F-2-117. Accordingly, the Sugar Hill HOA is authorized to

amend the Declaration by a vote of at least 67%.

                         B. The 2012 Amendment Is Valid

      Sugar Hill HOA’s authority to amend the Declaration is not unlimited. Rather,

our Supreme Court has held that an owners’ association’s authority to amend a

declaration is limited to those amendments which are “reasonable[.]” Armstrong v.

Ledges Homeowners Ass’n, 360 N.C. 547, 548, 633 S.E.2d 78, 81 (2006).

“Reasonableness may be ascertained from the language of the declaration, deeds, and

plats, together with the other objective circumstances surrounding the parties’

bargain, including the nature and character of the community.” Id.

      Here, the Sugar Hill HOA enacted an amendment by 71% vote that amended

paragraph 8(c) of the Declaration, which dealt with the assessment of dues when one

owns multiple contiguous lots. The original provision stated as follows:

                                         -9-
                          KIMLER V. THE CROSSINGS AT SUGAR HILL

                                    Opinion of the Court

             Any one person(s), or entity purchasing and owning two (2)
             or more contiguous lots in [Sugar Hill] (whether in a single
             deed, or in separate deeds, and whether such purchases are
             simultaneous or otherwise) will be required to pay
             Association dues on only one lot per year, as provided in
             this Declaration; provided, however, that the deed from the
             [Developer] shall designate which lot or lots in excess of one
             are the exempt lot or lots, and such exempt lot or lots will
             maintain an exempt status unless or until (a) the lot is sold,
             or (b) a living or camping unit is placed upon it, and in the
             event of either (a) or (b) above the exemption will be lost
             forever.

As stated above, it is the duty of the courts to construe the terms of the Declaration.

See Runyon, 331 N.C. at 305, 416 S.E.2d at 186. Our Supreme Court has further

instructed that we are to construe the declaration based on the intent of the parties.

Id. We conclude that paragraph 8(c) was intended to provide that anyone buying

contiguous lots from the Developer would only be initially obligated to pay dues based

on one of the lots and that the other lots would be exempt until sold or occupied by a

living or camping unit. We also conclude that it was not intended that the exemption

be lost simply because the Developer failed to state in the conveyance which lots were

to be exempt, but that in such case the lot on which the buyer initially built would be

the lot to be assessed.

      In practice, in most instances where a buyer purchased more than one

contiguous lot from the Developer, the Developer failed to designate which lot(s)

would initially be exempt from dues. Further, the evidence shows and the trial court

found that for the first fifteen years (until 2012), the Sugar Hill HOA billed all owners

                                           - 10 -
                     KIMLER V. THE CROSSINGS AT SUGAR HILL

                                 Opinion of the Court

of contiguous lots for only a single lot, even those who did not acquire their lots

directly from the Developer. Beginning in 2012, the Sugar Hill HOA began collecting

dues on a per-lot basis from those multi-lot owners whose contiguous lots were not

conveyed to them by the Developer. Several such owners refused to comply, which

prompted the Sugar Hill HOA to amend paragraph 8(c) to provide as follows:

            Any one person(s) or entity purchasing two or more
            contiguous lots originally conveyed from [the Developer]
            (whether in a single deed, or separate deeds, and whether
            such purchases are simultaneous or otherwise) will be
            required to pay Association dues on only one lot per year as
            provided for in this Declaration and such exempt lot or lots
            will remain exempt unless and until (a) the lot is sold, or
            (b) a living or camping unit is placed upon it, and in the
            event of either (a) or (b) the above exemption will be lost
            permanently.

            All contiguous lots that were not conveyed by [the
            Developer] shall not be designated as exempt from
            association dues henceforth.

We conclude that the intent of the 2012 Amendment was largely to clarify paragraph

8(c) as originally written, but without the requirement that the deed from the

Developer recite which lot(s) would be exempt. We do not believe that the change is

unreasonable based on our Supreme Court’s decision in Armstrong. Accordingly, the

2012 Amendment is valid and enforceable.

      We do not believe that the Sugar Hill HOA is barred by estoppel or laches from

enacting the 2012 Amendment to collect dues on a per-lot basis from owners of

multiple contiguous lots that were not conveyed by the Developer.          It is of no

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                      KIMLER V. THE CROSSINGS AT SUGAR HILL

                                  Opinion of the Court

consequence that the Sugar Hill HOA did not collect dues from these owners on a per-

lot basis prior to the passage of the 2012 Amendment. The Sugar Hill HOA is not

currently collecting dues in accordance with the original 1997 provision that it failed

to enforce, but rather in accordance with the more recent 2012 Amendment, which

we have held the Sugar Hill HOA was empowered to enact.

                                   IV. Conclusion

      We affirm the trial court’s conclusion that the statement recorded in the

minutes of the 1997 Sugar Hill HOA meeting, requiring a 100% vote to amend the

Declaration, is unenforceable.    We affirm the trial court’s conclusion that the

provisions of N.C. Gen. Stat. § 47F-2-117 apply to the Sugar Hill HOA, empowering

the Sugar Hill HOA to amend the Declaration by a 67% vote. And we affirm the trial

court’s conclusion that the 2012 Amendment is valid and enforceable.

      AFFIRMED.

      Judges DAVIS and ZACHARY concur.

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