Brooks v. Northglen Ass'n

• Decision Date: 25 June 2004
• Docket Number: No. 02-0492.,02-0492.
• Citation: 141 S.W.3d 158
• Parties: Geneva BROOKS, et al, Petitioners, v. NORTHGLEN ASSOCIATION, Respondent.
• Court: Texas Supreme Court

141 S.W.3d 158

Geneva BROOKS, et al, Petitioners, v. NORTHGLEN ASSOCIATION, Respondent.

No. 02-0492.

Supreme Court of Texas.

Argued September 3, 2003.

Decided June 25, 2004.

Rehearing Denied September 3, 2004.

Appeal from the 129th Judicial District Court, Harris County, Patrick W. Mizell, J Sue Auclair, Houston, TX, pro se.

David Alfred Kahne, Law Office of David A. Kahne, Robin Rankin Willis, P.C., Houston, for Petitioner.

John Bradley Mitchell, Clayton Rowland Hearn, Marc D. Markel, Stephanie Lee Quade, Roberts Markel Guerry, P.C., Houston, for Respondent.

Justice JEFFERSON delivered the opinion of the court.

This is a declaratory judgment action involving eight property owners' challenge to their homeowners association's attempt to increase and accumulate annual assessments and impose late fees. The trial court held that chapter 204 of the Texas Property Code¹ authorized the Board to raise assessments unilaterally. The court of appeals affirmed the trial court's judgment in part and reversed in part. Both parties petitioned this Court for review. We granted the petitions to review the interplay between Texas Property Code chapter 204 and Northglen Association's deed restrictions. We affirm the court of appeals' judgment in part, vacate in part, and reverse and render judgment in part.

I Background

Northglen Association ("Northglen") is the homeowners association for six Harris County subdivisions or "sections" encompassing more than 1600 single-family residences. Each section is governed by a separate set of deed restrictions through which every property owner is a member of the Association. The restrictions subject each homeowner to an annual assessment that is deposited into a maintenance fund for such services as maintaining common areas, contracting for garbage disposal, and constructing parks.

In 1994, Northglen's Board of Directors amended the deed restrictions to expand the Board and to assess late fees on unpaid assessments. Geneva Brooks and other Northglen property owners ("Brooks") organized a committee, called the Committee to Remove the Board, to remove certain Board members who, they complained, acted outside the bounds of the deed restrictions by adopting the amendments. Northglen responded by suing for injunctive and declaratory relief. Northglen sought an order enjoining the eight homeowners from conveying the false impression that Brooks's committee was formed pursuant to Northglen's bylaws and from other conduct designed to disrupt the Board's activities. Northglen also sought a judgment declaring that its actions in electing the Board and assessing late fees were valid exercises of its authority. Brooks counterclaimed for a declaratory judgment that Northglen had no authority to raise assessments or charge late fees without a vote of the property owners. Northglen eventually nonsuited its claims, and the case proceeded on Brooks's declaratory judgment action.

The trial court granted summary judgment for Northglen, declaring that, without a vote of the homeowners, Northglen had the authority to: (1) raise the assessment for Sections One, Two, and Three; (2) raise the assessment for Sections Four, Five, and Six by ten percent each year or accumulate and assess the increase after a number of years; and (3) charge delinquent homeowners a $35 late fee. Finding that both parties had pursued legitimate interests, the trial court elected not to award attorney's fees.

The court of appeals affirmed the trial court's judgment in part and reversed in part. 76 S.W.3d 162, 176. It reversed as to Sections One, Two, and Three, holding that the deed restrictions did not permit annual assessments exceeding $120. As to Sections Four, Five, and Six, the court of appeals held that because the deed restrictions contained no language expressly forbidding accumulation, Northglen could accumulate previous assessments under Property Code section 204.010(16). Id. at 167. The court also held that section 204.010(10) gave Northglen the right to assess a $35 late fee in addition to the interest charge permitted by the deed restrictions. Id. at 174. Because the property owners did not have prior notice of the late fee, the court of appeals held that Northglen could not foreclose on any homesteads to collect those fees. Id. at 175. The court of appeals affirmed the trial court's denial of attorney's fees. Id. at 176.

We hold that Northglen cannot accumulate unassessed fee increases because the language in the deed restrictions prevails over chapter 204, and we reverse that portion of the court of appeals' judgment. We affirm the portion of the court of appeals' judgment restricting increases in assessments to $120 and holding that Northglen has the authority to assess late charges for unpaid fees, in addition to the interest charges described in the deed restrictions. We conclude, however, that Northglen may not foreclose on the property if late charges are not paid. Finally, we affirm the court of appeals' judgment regarding attorney's fees.

II Jurisdiction

We first consider Northglen's contention that the trial court lacked subject matter jurisdiction because Brooks did not join all Northglen property owners as parties. Northglen argues that Brooks was required to join all property owners in each affected section before the trial court could render a declaratory judgment and, alternatively that the trial court was without jurisdiction to render a declaratory judgment interpreting the deed restrictions for Sections Three and Six because property owners from those sections were not represented in the lawsuit.

We do not have the benefit of the lower courts' views on jurisdiction because Northglen did not raise the issue either in the trial court or the court of appeals. Northglen contends that the doctrine of fundamental error excuses it from "the usual requirements of preservation of the error or briefing of the ... argument" because the absence of jurisdiction may be raised for the first time on appeal. We disagree that the absence of parties within the represented sections deprived the court of jurisdiction and therefore reject Northglen's contention as to Sections One, Two, Four and Five; however, because no property owners in Sections Three or Six were joined in the suit, we agree with Northglen that any judgment affecting those sections would be advisory.

A

No one disputes that the trial court had jurisdiction to declare the "rights, status, and other legal relations" for the named homeowners, who are "interested under a deed, ... written contract, or other writings constituting a contract or whose rights, status, or other legal relations are affected by a statute...." Tex. Civ. Prac. & Rem.Code §§ 37.003(a) and 37.004(a). The question, then, is not "whether jurisdiction is lacking," as Northglen asserts, but whether the trial court should have refused to enter a judgment when a subset of the homeowners was not joined in the lawsuit. See Cooper v. Tex. Gulf Indus., Inc., 513 S.W.2d 200, 204 (Tex.1974) ("[the] concern is less that of the jurisdiction of a court to proceed and is more a question of whether the court ought to proceed with those who are present"). To answer that prudential question, we turn to Rule 39, which governs joinder of persons under the Declaratory Judgment Act. Tex.R. Civ. P. 39; Clear Lake City Water Auth. v. Clear Lake Util., 549 S.W.2d 385, 390 (Tex.1977) (applying Rule 39 to actions under the Declaratory Judgment Act).

Rule 39, like the Declaratory Judgment Act, mandates joinder of persons whose interests would be affected by the judgment. See Tex. Civ. Prac. & Rem.Code § 37.006 ("When declaratory relief is sought, all persons who have or claim any interest that would be affected by the declaration must be made parties.") (emphasis added); Tex.R. Civ. P. 39(a) ("A person who is subject to service of process shall be joined as a party in the action if ... he claims an interest relating to the subject of the action ....") (emphasis added). Rule 39 determines whether a trial court has authority to proceed without joining a person whose presence in the litigation is made mandatory by the Declaratory Judgment Act. Clear Lake City Water Auth., 549 S.W.2d at 390.

Rule 39(a)(1) requires the presence of all persons who have an interest in the litigation so that any relief awarded will effectively and completely adjudicate the dispute. In this case, nothing in the rule precluded the trial court from rendering complete relief among Northglen and the eight homeowners who had sued for a declaration of rights. Although the parties continue to litigate its correctness, the trial court's judgment represents a final and complete adjudication of the dispute for the parties who were before the court. See Caldwell v. Callender Lake Prop. Owners Improvement Ass'n, 888 S.W.2d 903, 907 (Tex.App.-Texarkana 1994, writ denied). Rule 39(a)(2) relates to situations in which the absent party:

[C]laims an interest relating to the subject of the action and is so situated that the disposition of the action in his absence may (i) as a practical matter impair or impede his ability to protect that interest or (ii) leave any of the persons already parties subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations by reason of his claimed interest.

Tex.R. Civ. P. 39.

Section 37.006(a) of the Declaratory Judgment Act, which provides that a trial court's declaration does not prejudice the rights of any person not a party to the proceeding, dispenses with the first of these concerns. See Tex. Civ. Prac. & Rem.Code § 37.006(a). Any non-joined homeowner would be entitled to pursue individual claims contesting Northglen's authority to raise assessments or impose fees, notwithstanding the trial court's judgment in the current case.² See Cooper, 513 S.W.2d at 204 ("[I]t would be rare indeed if there were a person whose presence was so indispensable in the sense...