Dunes South Homeowners Ass'n, Inc. v. First Flight Builders, Inc.

• Decision Date: 28 July 1995
• Docket Number: No. 3A95,3A95
• Citation: 459 S.E.2d 477,341 N.C. 125
• Court: North Carolina Supreme Court
• Parties: DUNES SOUTH HOMEOWNERS ASSOCIATION, INC. v. FIRST FLIGHT BUILDERS, INC.

Page 477

459 S.E.2d 477

341 N.C. 125

DUNES SOUTH HOMEOWNERS ASSOCIATION, INC. v. FIRST FLIGHT BUILDERS, INC.

No. 3A95.

Supreme Court of North Carolina.

July 28, 1995.

Aycock, Spence & Butler by Charlie Aycock and Betsy Butler, Nags Head, for plaintiff-appellant.

Defendant-appellee did not file a brief.

Michael F. Easley, Atty. Gen. by Thomas R. Miller, Sp. Deputy Atty. Gen., and Blackwell M. Brogden, Jr., Chief Deputy Legal Counsel, on behalf of N.C. Real Estate Com'n, Raleigh, amicus curiae.

FRYE, Justice.

Plaintiff presents two issues on this appeal: (1) whether defendant, the developer of a condominium project subject to the provisions of Chapter 47A of the North Carolina General Statutes as it existed in 1980, ¹ may exempt itself from the payment of its pro rata share of maintenance assessments for units it owns; and (2) whether all or a portion of plaintiff's claim for assessments for the years 1986 through 1993 is barred by the statute of limitations. We conclude that the provisions of Chapter 47A of the General Statutes prohibit defendant from unilaterally exempting itself from the payment of its pro rata share of maintenance assessments. Furthermore, we conclude that no portion of plaintiff's claim is barred by the statute of limitations. Accordingly, we reverse the decision of the Court of Appeals and remand this case to that court for further remand to Superior Court, Dare County, for reinstatement of the order granting plaintiff's motion for summary judgment.

Dunes South is a condominium development in which units are sold by time-share weeks. Defendant is the original developer of the Dunes South project and at the time of the institution of this action owned a number of units within the development, some of which had been previously conveyed by defendant and later reacquired, as well as some which had not previously been conveyed by defendant. On 7 August 1980, in accordance with Chapter 47A of the North Carolina General Statutes, defendant filed the original "Declaration of Covenants and Restrictions" (Declaration). This Declaration provided that defendant, as well as other unit owners in the development, would pay annual, per-unit maintenance assessments to plaintiff homeowners association. The Declaration further provided that it could be amended at any time with approval of two-thirds of the membership in plaintiff homeowners association. Subsequently, on 21 January 1983, defendant, as holder of two-thirds of the votes in the association, filed a "Dunes South Supplemental Declaration of Covenants and Restrictions" (Supplemental Declaration). This Supplemental Declaration purported to exempt defendant from the obligation to pay annual per-unit maintenance assessments on units "remaining unsold" and instead provided that defendant would pay for any operating expenses in excess of the per-unit assessments collected from other unit owners.

On 17 February 1993, plaintiff homeowners association filed this action for money judgment and to foreclose upon a lien for unpaid maintenance assessments on Dunes South units owned by defendant. In its answer, defendant did "not admit the validity of the liens claimed against such units for unpaid assessments nor the validity of the assessment amount." Plaintiff then filed a motion for summary judgment supported by an affidavit listing seventy-six units previously conveyed and then reacquired by defendant and setting out the amount of maintenance assessments allegedly owed by defendant on these units for the years 1986 through 1993. On 24 November 1993, defendant filed a motion for leave to amend its answer to allege that at least a portion of plaintiff's claim was barred by N.C.G.S. § 1-52(1), the three-year statute of limitations for filing an action based on contract. On that same day, Mr. Gerald Friedman, president of defendant corporation, filed an affidavit stating, in pertinent part:

5. Pursuant to the terms of the Supplemental Declaration of Covenants and Restrictions, First Flight Builders, Inc. was only responsible for the actual operating expenses incurred by plaintiff in excess of the collections of assessments on units within Dunes South and was not responsible for paying per unit annual assessments on unit[s] owned by First Flight Builders, Inc.

On 29 November 1993, the trial court entered an order allowing defendant to amend its answer. However, on 30 November 1993, Judge Watts entered an order allowing plaintiff's motion for summary judgment, from which defendant appealed.

The Court of Appeals vacated the trial court's order, concluding that summary judgment for plaintiff was improper since the term "remaining unsold" in the Supplemental Declaration was ambiguous and therefore created a question for the jury as to whether defendant was liable to plaintiff for the maintenance assessments on units previously conveyed and then reacquired by defendant. Dunes South Homeowners Assn. v. First Flight Builders, 117 N.C.App. 360, 368, 451 S.E.2d 636, 640-41 (1994). In addition, the Court of Appeals held that plaintiff's claim for assessments for the years 1986 through 1990 was barred by the statute of limitations for actions based on contract, N.C.G.S. § 1- 52(1) (1983). Dunes South, 117 N.C.App. at 366, 451 S.E.2d at 640. Judge Eagles dissented, concluding that the terms of the Supplemental Declaration were not ambiguous and that the trial court properly granted plaintiff's motion for summary judgment as to those assessments not barred by the statute of limitations. Id. at 369, 451 S.E.2d at 641. Plaintiff appeals to this Court based on Judge Eagles' dissent. Additionally, plaintiff's petition for discretionary review as to an additional issue was allowed by this Court on 9 February 1995.

Plaintiff first contends that the Court of Appeals erred in ignoring the provisions of Chapter 47A of the North Carolina General Statutes when it reversed the trial court's grant of summary judgment in plaintiff's favor. Plaintiff argues that under the provisions of Chapter 47A, more specifically N.C.G.S. § 47A-12, defendant developer was bound to contribute its pro rata share of the maintenance expenses for the common areas of the condominium project and was prohibited from unilaterally exempting itself from the payment of the maintenance assessments at issue in this case. Accordingly, plaintiff argues that, regardless of the language of the Supplemental Declaration, defendant is obligated to pay the maintenance assessments at issue here. We agree.

By executing and recording a declaration of unit ownership, defendant submitted its condominium project to the provisions of Chapter 47A of the General Statutes. N.C.G.S. §§ 47A-2, -4 (1976). N.C.G.S. § 47A-12 provides, in pertinent part:

The unit owners are bound to contribute pro rata, in the percentages computed according to G.S. 47A-6 of this Chapter, toward the expenses of administration and of maintenance and repair of the general common areas and facilities and, in proper cases of the limited common areas and facilities, of the building and toward any other expense lawfully agreed upon. No unit owner may exempt himself from contributing toward such expense by waiver of the use or enjoyment of the common areas and facilities or by abandonment of the unit belonging to him.

N.C.G.S. § 47A-12 (1976) (emphasis added). A "unit owner" is defined as "a person, corporation, partnership, association, trust or other legal entity, or any combination thereof, who owns a unit within the building." N.C.G.S. § 47A-3(14) (1976). Neither the definition of "unit owner" nor the provisions of N.C.G.S. § 47A-12 makes any distinction between a developer and any other unit owner. Defendant developer, as a corporation owning several units within the condominium project, qualified as a "unit owner" under section 47A-3(14). Thus, defendant was "bound to contribute pro rata ... toward the expenses of administration and of maintenance and repair of the general common areas and facilities." N.C.G.S. § 47A-12. Consistent with this statutory requirement, defendant covenanted, in its original Declaration, to pay annual, per-unit maintenance assessments for each unit it owned.

The crucial issue then becomes whether defendant may, through provisions in the Supplemental Declaration, exempt itself from its statutory obligation as a unit owner to pay its pro rata share of the maintenance expenses for common areas. Having submitted the project to the provisions of Chapter 47A, defendant's obligation, as a unit owner, to contribute its pro rata share of maintenance expenses derived not only from its Declaration, but also from the provisions of N.C.G.S. § 47A-12. Section 47A-12 is but one of several sections within Chapter 47A which evidence the legislature's intent to ensure the orderly, reliable and fair government of condominium projects and to protect each owner's interest in his or her own unit as well as the common areas and facilities. For example, N.C.G.S. § 47A-6(b) protects the unit owners' interests in the common areas, providing that the ratio of the undivided interest of each unit owner in the common areas shall have a permanent character and shall not be altered except with the unanimous consent of all unit owners expressed in an amended declaration. N.C.G.S. § 47A-6(b) (1976). Likewise, we believe that the provisions of section 47A-12 are designed to protect unit owners from shouldering a disproportionate share of the maintenance expenses for common areas when other unit owners, including the developer, attempt to unilaterally exempt themselves from contributing their pro rata share of maintenance expenses.

Section 47A-12 explicitly states that each unit owner is "bound to contribute" pro rata toward maintenance expenses for the common areas. N.C.G.S. § 47A-12 (emphasis added). In addition, this section also addresses two methods by which an individual unit owner might attempt to unilaterally exempt itself from...