Dreamland Villa Cmty. Club Inc v. Raimey

• Decision Date: 07 June 2010
• Docket Number: No. 1 CA-CV 08-0388.,1 CA-CV 08-0388.
• Citation: 226 P.3d 411,224 Ariz. 42
• Parties: DREAMLAND VILLA COMMUNITY CLUB, INC., an Arizona nonprofit corporation, Plaintiff/Counterdefendant/Appellant/Cross-Appellee,v.Daryle G. RAIMEY and Carolyn E. Raimey, husband and wife; Kathryn Pugnier and Vincent Pugnier, wife and husband; Joseph Kuka and Arylynne Kuka, husband and wife; Edward Bernal and Bertha J. Bernal, husband and wife; Philip Morgan and Glynda M. Morgan, husband and wife; Dorothy Norris and John Doe Norris, wife and husband; Deannalee C. Plant and John Doe Plant, wife and husband; Frank S. Ponio and Ellen J. Ponio, husband and wife; Harold G. Robinson and Anita R. Robinson, husband and wife; Jose Segura and Rosalina Segura, husband and wife; James Shields and Eileen Shields, husband and wife; Arthur H. Sprandel and Janice E. Sprandel, husband and wife; Robert D. Wimsett and Carolyn Wimsett, husband and wife; Frank B. Wolgan and Betty J. Wolgan, husband and wife; James H. Anhorn and Jane Doe Anhorn, husband and wife; Harold M. Britton and Janet E. Britton, husband and wife; Howard R. McKillip and Debra McKillip, husband and wife; Nelson J. Dean and R. Shirley Dean, husband and wife; Evangelina Demarbiex, Beneficiary of the Evangelina Demarbiex Trust; Harold L. Geivett and Ruby Geivett, husband and wife; Mabelle Lerstad and John Doe Lerstad, wife and husband; Roy Don Fields and Susan Fields, husband and wife, Defendants/Counterclaimants/Appellees/Cross-Appellants,andEdward L. Young and Joann Young, husband and wife; W.T. Tiller and Norma J. Tiller, husband and wife; Roger Breyfogle and Maria Breyfogle, husband and wife, Defendants/Counterclaimants/Appellees.
• Court: Arizona Court of Appeals

224 Ariz. 42

226 P.3d 411

DREAMLAND VILLA COMMUNITY CLUB, INC., an Arizona nonprofit corporation, Plaintiff/Counterdefendant/Appellant/Cross-Appellee,v.Daryle G. RAIMEY and Carolyn E. Raimey, husband and wife; Kathryn Pugnier and Vincent Pugnier, wife and husband; Joseph Kuka and Arylynne Kuka, husband and wife; Edward Bernal and Bertha J. Bernal, husband and wife; Philip Morgan and Glynda M. Morgan, husband and wife; Dorothy Norris and John Doe Norris, wife and husband; Deannalee C. Plant and John Doe Plant, wife and husband; Frank S. Ponio and Ellen J. Ponio, husband and wife; Harold G. Robinson and Anita R. Robinson, husband and wife; Jose Segura and Rosalina Segura, husband and wife; James Shields and Eileen Shields, husband and wife; Arthur H. Sprandel and Janice E. Sprandel, husband and wife; Robert D. Wimsett and Carolyn Wimsett, husband and wife; Frank B. Wolgan and Betty J. Wolgan, husband and wife; James H. Anhorn and Jane Doe Anhorn, husband and wife; Harold M. Britton and Janet E. Britton, husband and wife; Howard R. McKillip and Debra McKillip, husband and wife; Nelson J. Dean and R. Shirley Dean, husband and wife; Evangelina Demarbiex, Beneficiary of the Evangelina Demarbiex Trust; Harold L. Geivett and Ruby Geivett, husband and wife; Mabelle Lerstad and John Doe Lerstad, wife and husband; Roy Don Fields and Susan Fields, husband and wife, Defendants/Counterclaimants/Appellees/Cross-Appellants,andEdward L. Young and Joann Young, husband and wife; W.T. Tiller and Norma J. Tiller, husband and wife; Roger Breyfogle and Maria Breyfogle, husband and wife, Defendants/Counterclaimants/Appellees.

No. 1 CA-CV 08-0388.

Court of Appeals of Arizona,

Division 1, Department A.

March 16, 2010.

Reconsideration Denied June 7, 2010.

Maxwell & Morgan, PC By Charles E. Maxwell, Brian W. Morgan, Mesa, Attorneys for Plaintiff/Counterdefendant/Appellant/Cross-Appellee.

Cheifetz Iannitelli Marcolini, PC By Steven W. Cheifetz, Stewart F. Gross, Matthew A. Klopp, Phoenix, Attorneys for Defendants/Counterclaimants/Appellees/Cross-Appellants.

OPINION

THOMPSON, Presiding Judge.

¶ 1 This appeal and cross-appeal concern the validity of amendments to deed restrictions creating a homeowners' association and requiring homeowners within the community to pay assessments as well as the trial court's decision not to award attorneys' fees to the prevailing party in the matter. For the following reasons, we reverse and remand.

FACTUAL AND PROCEDURAL HISTORY

¶ 2 Dreamland Villa is a residential community comprised of eighteen sections. Each section contains a different number of residential lots. The first section was created in 1958, and the last section was constructed in 1972. Every residence within Dreamland Villa must be occupied by at least one person age fifty-five or older. Dreamland Villa does not have any common areas.

¶ 3 Dreamland Villa Community Club, Inc. (DVCC) was incorporated in 1961 as a nonprofit corporation by volunteer members to provide recreational facilities to those who joined the club. Those recreational facilities included clubhouses, a recreational center with swimming pools, shuffleboard courts, and a ballroom. DVCC also organized planned activities for its members.

¶ 4 Each Dreamland Villa section is governed by a separate set of deed restrictions called “Declaration of Restrictions” (Declarations), which were recorded in the 1960s and 1970s.¹ With the exception of section 18, all of the Declarations contain similar provisions concerning the appearance and maintenance of residences within the relevant section.² There are no provisions about DVCC. Regarding amendments, the Declarations provide that “said covenants and restrictions may at any time be changed in whole or in part or revoked in their entirety by a vote of the owners of a majority of the lots.” ³

¶ 5 The Declarations for section 18 contain similar restrictions but provide additional restrictions not included in the Declarations for the other sections. Specifically, the Declarations for section 18 provide, in relevant part:

Each residential unit in DREAMLAND VILLA EIGHTEEN is hereby subjected to the initial and annual assessments herein described in favor of DREAMLAND VILLA COMMUNITY CLUB.... The assessments are for the purpose of aiding the CLUB to acquire, maintain, improve and operate recreational and other facilities, and to exercise, carry on and conduct any and all of its corporate activities.

The annual assessment, however, was only to be imposed on nonmembers of DVCC. Members were to pay a membership fee.

¶ 6 In 2003 and 2004, DVCC recorded a Second Amended Declaration of Restrictions (Second Amended Declarations) for each section within Dreamland Villa. Each Second Amended Declaration requires lot owners to pay annual assessments and special assessments levied by DVCC “to promote the recreation, health, safety and welfare of the residents ... and for the improvement, maintenance, and replacement of the Common Areas.” Except as to section 18, no previous Declaration required the payment of assessments or even mentioned DVCC or common areas.

¶ 7 Beginning in December 2006, DVCC filed a number of lawsuits against various sets of homeowners ⁴ within Dreamland Villa for failing to pay annual assessments. Certain sets of homeowners filed identical answers and counterclaims, maintaining that the Second Amended Declarations were void and that they could not be forced to become members of a nonprofit corporation or pay assessments. These homeowners reside in sections 7, 14, 15, 16, 17, and 18 of Dreamland Villa. The homeowners successfully moved to consolidate the lawsuits filed by DVCC.

¶ 8 DVCC filed separate motions for summary judgment against each set of homeowners. The motions for summary judgment and supporting statements of facts set forth each homeowner's outstanding assessments, including late charges, finance charges, and attorneys' fees. The homeowners filed a consolidated response to DVCC's motions for summary judgment, arguing that they never consented to become members of DVCC and that there were factual issues regarding the validity of the Second Amended Declarations. The homeowners also requested relief pursuant to Arizona Rule of Civil Procedure 56(f).

¶ 9 In May 2007, certain homeowners filed a motion for summary judgment, ⁵ arguing that DVCC could not impose membership in DVCC without the homeowners' consent and that the original Declarations could not be amended to require membership in DVCC. The trial court later ordered DVCC to file a responsive brief to address certain issues raised in the homeowners' reply, including whether (1) the Second Amended Declarations were ever validly recorded, (2) the petitions used to obtain votes informed lot owners that they were voting to create a homeowners' association, (3) DVCC intentionally misled lot owners to obtain the requisite number of votes needed to amend the Declarations, and (4) DVCC obtained a majority of the signatures needed to amend the Declarations in some sections.

¶ 10 In September 2007, the trial court denied the homeowners' request for Rule 56(f) relief and ruled, in relevant part:

At the heart of this dispute is the issue of whether the Second Amended Declaration of Restrictions, which, in effect, made membership in the Plaintiff non-profit corporation mandatory for all subject homeowners, is valid.

Dreamland Villa consists of eighteen sections of homeowners, each subject to differing Declarations of Restrictions. A review of these reveals that the Declaration of Restrictions applicable to the homeowners in sections 18 and 19 ^[[[^6] allows mandatory membership in a nonprofit corporation such as Plaintiff. Thus, as to those homeowners, there is no real dispute-they can be required to be members of Plaintiff corporation and pay assessments or fees related thereto.

As to the parties to this case which are homeowners in five of the remaining sixteen sections, there was a vote of homeowners in 2003 to determine whether the Declaration of Restrictions should be amended to make membership in Plaintiff corporation mandatory.... As to all five relevant sections (7, 14, 15, 16 and 17) a majority of homeowners voted in favor of allowing the amendment.

Membership in a nonprofit corporation requires a person's express or implied consent. [Arizona Revised Statutes (A.R.S.) ] § 10-3601(B) [2004]. Our appellate courts have held that when a homeowner takes a deed containing [a] deed restriction that allows for amendment by the vote of a majority of homeowners, that homeowner implicitly consents to the subsequent majority vote to make membership in a homeowner association mandatory. Shamrock v. Wagon Wheel Park Homeowners Assn., 206 Ariz. 42, 75 P.3d 132 (App.2003).

Defendants' [sic] make several challenges to the validity of the 2003 vote on the Second Amended Declarations of Restrictions. None of the arguments are persuasive.

For these reasons, all [DVCC's] Motions for Summary Judgment are granted and Defendants' Motion for Summary Judgment is denied.

¶ 11 DVCC lodged proposed forms of judgment for all the cases ⁷ resolved by the ruling. DVCC also submitted applications for attorneys' fees, statements of costs, and China Doll⁸ affidavits for each case. The homeowners filed a consolidated objection to DVCC's proposed forms of judgment, objecting to the inclusion of attorneys' fees that had not been decided as well as the inclusion of late charges and prejudgment interest. DVCC replied that the granting of the motions for summary judgment resolved all issues. The homeowners then filed an objection to the application for attorneys' fees, arguing that the trial court had discretion not to award fees. The homeowners further argued that the fees requested were excessive and unreasonable.

¶ 12 The trial court declined to award DVCC attorneys' fees “[i]n the exercise of its discretion, and for the reasons listed on page 2, line 11 through page 3, line 7 in Defendants' October 24, 2007 pleadin...