Debaliviere Place Ass'n v. Veal

• Decision Date: 12 April 2011
• Docket Number: No. SC 91138.,SC 91138.
• Citation: 337 S.W.3d 670
• Parties: DeBALIVIERE PLACE ASSOCIATION, Respondent,v.Steven VEAL, Appellant.
• Court: Missouri Supreme Court

337 S.W.3d 670

DeBALIVIERE PLACE ASSOCIATION, Respondent,

v.Steven VEAL, Appellant.

No. SC 91138.

Supreme Court of Missouri, En Banc.

April 12, 2011.

Elkin L. Kistner, Bick & Kistner PC, St. Louis, for Veal.

Ira M. Berkowitz, Marvin J. Nodiff, Law Office of Marvin J. Nodiff PC, St. Louis, for Association.Anthony J. Soukenik, Sandberg, Phoenix & von Gontard PC, St. Louis, for Community Associations Institute, which filed a brief as a friend of the Court.MICHAEL A. WOLFF, Judge.

Introduction

This appeal raises two questions:

(1) Does a neighborhood association—a nonprofit corporation—have the authority to assign its rights to enforce assessments on properties in the neighborhood 14 years after the secretary of state dissolved the corporation?

(2) Does a new neighborhood association with the same name have the right to enforce a covenant running with the land (a) before assignment from the former association and (b) after the former association's assignment of its rights to the new association?

Facts and Proceedings in the Circuit Court¹

The secretary of state in 1992 dissolved the DeBaliviere Place Association, a nonprofit corporation with the right to collect assessments on property within a neighborhood in the west end of St. Louis, for failing to file its annual registrations. A new DeBaliviere Place Association was incorporated 11 years later. The former association assigned its rights and obligations—to collect the assessments and other fees that are in the declaration—to the new association in June 2006, about 14 years after the former association's corporation was dissolved.

This appeal arises from a judgment in two consolidated actions in which the new DeBaliviere Place Association filed legal actions to foreclose on the liens the association had filed against properties owned by Steven Veal on which he had not paid the assessments.

The former DeBaliviere Place Association was incorporated in 1977 as a neighborhood association responsible for “collecting and disbursing the assessments and charges ... and promoting the recreation, health, safety and welfare of the residents of DeBaliviere Place.” The declaration said that all properties under the authority of DeBaliviere Place Association were subject to certain covenants and restrictions, which were recorded in the deed of each property in the area covered by the association.

Veal acquired apartment buildings at 5621–5623 Delmar Blvd., 5540–5548 Delmar Blvd. and 5621–5623 Delmar Blvd. in 1997. These properties are subject to numerous easements, restrictions, covenants, provisions and building lines, including provisions in the deeds making the properties subject to DeBaliviere Place Association's declaration. The declaration requires Veal, as a property owner, to pay assessments, special assessments, costs, interest and attorneys' fees for collection of unpaid assessments.² The declaration and other provisions are covenants that run for 50 years and are renewed automatically. An owner may not waive or otherwise avoid liability for the assessments due to nonuse of the common areas or by abandonment of the property.

Veal never has paid any assessments for these Delmar Boulevard properties, though he has paid assessments for other properties he owns that are subject to the DeBaliviere Place Association.

After the new DeBaliviere Place Association was formed in 2003, it billed Veal for his annual general assessments from 1998 forward for each of his units. Veal refused to pay, claiming that he had received no services from either the former or new DeBaliviere Place Association. The new DeBaliviere Place Association filed liens against the properties for the assessments, interest, late fees and attorneys' fees. When the amounts billed went unpaid, the new DeBaliviere association filed an action in the circuit court in February 2006 to foreclose on the liens and recover the amounts claimed or, alternatively, the value of services provided under quantum meruit.³

After the February 2006 lawsuit was filed, the former DeBaliviere association in June 2006 assigned all its rights, titles, interests, powers, duties and obligations under the declaration and its amending documents to the new DeBaliviere Place Association. Neither the declaration nor the articles of incorporation specify any particular procedure for assigning rights or liabilities. The former DeBaliviere Place Association and the new association with the same name executed an agreement signed by the president of each organization. The agreement assigned all rights and all duties in the original declaration in favor of the former association to the new DeBaliviere Place Association.

The new DeBaliviere Place Association recorded two new liens in 2007 against the 5560–5564 Delmar Blvd. and 5540–5548 Delmar Blvd. properties to recover the assessments owed from 1998 forward, including interest, late fees and attorneys' fees. The new association filed an action in circuit court in 2007 to foreclose on these 2007 liens and enforce these alleged obligations. The circuit court consolidated the 2006 and 2007 actions. The new DeBaliviere Place Association moved for summary judgment.

The circuit court held that there was a valid assignment from the former DeBaliviere Place Association to the new DeBaliviere Place Association and that the new association had the right to enforce the declarations in Veal's deeds. In granting summary judgment in the consolidated cases, the court determined that Veal owed $70,856 for the assessments, plus interest and attorneys' fees. After opinion in the court of appeals, this Court granted transfer. Mo Const. Art. V, sec. 10.

Standard of Review

The Court reviews the record in the light most favorable to the party against whom summary judgment was entered. Zafft v. Eli Lilly, 676 S.W.2d 241, 244 (Mo. banc 1984). Summary judgment is appropriate when there is no genuine issue of material fact. Daugherty v. City of Maryland Heights, 231 S.W.3d 814, 818 (Mo. banc 2007). A genuine issue exists when the record shows two plausible but contradictory accounts of essential facts. Id. The movant bears the burden of establishing a legal right to judgment and the absence of any genuine issue of material fact. Id. “The propriety of summary judgment is purely an issue of law. As the trial court's judgment is founded on the record submitted and the law, an appellate court need not defer to the trial court's order granting summary judgment.” ITT Commercial Fin. Corp. v. Mid–Am. Marine Supply Corp., 854 S.W.2d 371, 376 (Mo. banc 1993).

1. Did the former DeBaliviere association have authority to assign its rights to the new association?⁴

Veal does not dispute that his property deeds contain restrictions making his use of the property subject to the former DeBaliviere Place Association's declaration. It also is undisputed that the declaration mandates the payment of assessments, interest and attorneys' fees and authorizes the DeBaliviere association to file liens and collect the amounts due by filing an action to foreclose.

But the threshold question is whether the new DeBaliviere association is the appropriate party to enforce the declaration. To answer this question requires the Court, first, to determine whether the former association had the authority to assign its rights to the new DeBaliviere association and, second, if it did have such authority, to analyze and apply the language of the deeds' declaration at two different times—before the June 2006 assignment and after the assignment.

When the former DeBaliviere association executed the agreement assigning its rights and delegating its duties under the declaration to the new DeBaliviere association in June 2006, the former association no longer was incorporated and was in the winding-up process. The new DeBaliviere association argues that it was authorized to enforce the declaration because the former DeBaliviere association properly assigned its rights and delegated its duties to the new DeBaliviere association.⁵ For the assignment to be valid, the former DeBaliviere association must have authority to execute an assignment pursuant to its winding-up process and must have executed the assignment properly.

a. Assignment of rights and delegation of duties are appropriates part of the winding-up process

The validity of the former DeBaliviere association's assignment is determined by section 355.691, RSMo 2000, which specifies the permissible activities of a dissolved corporation:

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

(1) Preserving and protecting its assets and minimizing its liabilities;

(2) Discharging or making provision for discharging its liabilities and obligations;

(3) Disposing of its properties that will not be distributed in kind;

(4) Returning, transferring or conveying assets held by the corporation upon a condition requiring return, transfer or conveyance, which condition occurs by reason of the dissolution, in accordance with such condition;

(5) Transferring, subject to any contractual or legal requirements, its assets as provided in or authorized by its articles of incorporation or bylaws;

...

(8) Doing every other act necessary to wind up and liquidate its assets and affairs.

Assignment of rights under a contract is within the bounds of “winding-up and, therefore, is a permissible activity.” Smith v. Taylor–Morley, Inc., 929 S.W.2d 918, 923 (Mo.App.1996).

Veal argues that, according to his reading of the declaration, the assessments are to be used only for purchasing additional property for the development area. Enforcement of the assessments is not a proper winding-up activity, he argues, because by collecting a general assessment, the new association is doing so to add property to the land subject to the declaration.

But the question is whether the former association had the...