Happ v. Creek Pointe Homeowner's Ass'n, COA10–1159.

• Decision Date: 16 August 2011
• Docket Number: No. COA10–1159.,COA10–1159.
• Parties: Richard HAPP, Plaintiff, v. CREEK POINTE HOMEOWNER'S ASSOCIATION, Defendant.
• Court: North Carolina Court of Appeals

717 S.E.2d 401

Richard HAPP, Plaintiff,

v.CREEK POINTE HOMEOWNER'S ASSOCIATION, Defendant.

No. COA10–1159.

Court of Appeals of North Carolina.

Aug. 16, 2011.

Appeal by Plaintiff from Judgment entered 1 April 2010 by Judge Benjamin G. Alford in Pamlico County Superior Court. Heard in the Court of Appeals 24 March 2011.

Wheatly, Wheatly, Weeks & Lupton, PA, Beaufort, by Claud R. Wheatly, III and Chadwick I. McCullen, for Plaintiff-appellant.

Cranfill Sumner & Hartzog LLP, Raleigh, by Katie Weaver Hartzog, for Defendant-appellee.

HUNTER JR., ROBERT N., Judge.

Plaintiff Richard Happ (“Happ”) appeals from a Judgment denying his Motion for Summary Judgment and granting summary judgment and declaratory relief in favor of Defendant Creek Pointe Homeowner's Association (the “Association”). Happ alleges the trial court erred as genuine issues of material fact exist as to his claims and as to the Association's counterclaims. We affirm the trial court's Judgment.

I. Facts & Procedural History

This appeal arises out of a dispute over the Association's disbursement of the balance of a litigation fund to its members and its construction of a security gate at the entrance of the Creek Pointe Subdivision, which is located near New Bern, N.C. Happ, a resident of the Creek Pointe subdivision, brought this action alleging, inter alia, the Association's disbursement of funds and construction and maintenance of the security gate were ultra vires acts.

In the late 1980s, Weyerhaeuser Real Estate Company (“Weyerhaeuser”) developed the Creek Pointe subdivision (“Creek Pointe”) in Pamlico County, North Carolina. Previously, Weyerhaeuser used the property for forest management and timber harvesting. Creek Pointe consists of 34 wooded lots at the end of Creek Pointe Road, a six-mile dirt road. There are also numerous dirt roads located within Creek Pointe, developed at a higher grade than Creek Pointe Road for residential use.

On 14 November 1989, Weyerhaeuser filed a Declaration of Covenants, Conditions, and Restrictions (the “Declaration”) applicable to the 33 lots comprising Creek Pointe “in order to provide enforceable standards for improvements and development whereby aesthetics, living conditions and property values may be enhanced.” The Declaration established the Creek Pointe Homeowner's Association and requires all lot owners to be members of the Association. The Declaration further requires all members to pay annual dues of $500 per lot owned for the maintenance of Creek Pointe Road and the interior roads of Creek Pointe. These yearly assessments must be deposited into a common fund account, the “Creek Pointe Maintenance Fund,” and must be used solely for: “(A) Road maintenance expenses, and (B) Administration cost[s] for enforcement thereof, including, but not limited to, accounting, attorney's fees, and court costs, and shall not be subject to partition by any individual lot owner.”

Additionally, the Association's Articles of Incorporation (“AIC”) state that the Association was formed to “provide for maintenance, preservation and architectural control” of the residential lots and roads within the Association and “to promote the health, safety, and welfare of the residents.” In so doing, the AIC provides the Association may exercise all powers, rights, and privileges of a corporation organized under the Non–Profit Corporation Law of North Carolina. The AIC also explicitly grants to the Association the power to improve and build upon the real property of the Association.

The Association's by-laws permit the Board of Directors to use assessments collected from the residents to “employ attorneys, accountants and other professionals as the need arises.” The Board of Directors may also make special assessments, subject to the provisions of the Declaration. The Board of Directors may further “adopt additional rules relating to utilization of any Lots or any common property (including any street).”

Approximately fifteen years ago, Happ purchased five lots in Creek Pointe from Weyerhaeuser. Upon purchasing the property, Happ requested permission to erect a gate, consisting of two posts connected by a chain and padlock, across the dirt road leading to his property because he lived out-of-state and wanted to deter trespassers. The Association approved Happ's request, thinking it a temporary measure until Happ moved to North Carolina. When Happ moved to North Carolina, he informed the Association that he planned to maintain the gate permanently. Due to Happ's placement of his gate, other Association members were unable to utilize the road in accordance with an easement permitting all members use of all the roads within the subdivision. Kenneth Kremer, a lot-owner and member of the Association, was also unable to access part of his property due to Happ's padlocked gate.

A. The Parties' History of Litigation

Happ's construction of this gate in 1994 resulted in litigation between the Association and Happ. Creek Pointe Homeowner's Ass'n v. Happ, 146 N.C.App. 159, 161, 552 S.E.2d 220, 222 (2001), disc. rev. denied, 356 N.C. 161, 568 S.E.2d 191 (2002). The Association alleged Plaintiff's fence violated a restrictive covenant that granted an easement for use of the road to all subdivision residents, and filed a claim seeking an injunction requiring Plaintiff to remove the fence. Id. On appeal, the matter before this Court was whether the trial court properly dismissed the Association's claims for lack of standing. Id. at 163, 552 S.E.2d at 224. We concluded the Association did have standing to bring their claim and reversed the trial court's order. Id. at 169, 552 S.E.2d at 228.

The Association incurred legal bills in excess of $90,000 as a result of the litigation. The costs were paid with special assessments levied on each lot in the subdivision, including Plaintiff's lots, and through voluntary contributions from Association members; these funds were maintained in an account separate from the regular Association dues. The Association's members were not, however, willing to pay for additional litigation and the Association reached a settlement with Happ and third-party defendant Weyerhaeuser. Pursuant to the terms of the settlement, Weyerhaeuser paid $7,500 to the Association and $7,500 to Happ, and all parties dismissed all claims with prejudice.

Upon receiving the settlement proceeds from Weyerhaeuser, the Board of Directors of the Association used these funds to pay the Association's attorneys' fees. They voted to disburse the remaining funds—approximately $3,000—to the members of the Association in proportion to each member's contribution to the litigation fund. Happ accepted a refund in the amount of $139.72. Some of the Association members elected to donate their refund to the Association for the construction of the security gate at the entrance of the subdivision. Happ did not donate his refund to the Association and has complained that he should have received a larger refund.

B. Creek Pointe Security Gate

For a number of years, the Association alleges numerous problems with trespassers entering the interior roads of Creek Pointe. This unauthorized access resulted in substantial damage to the roads by all-terrain vehicles and property damage resulting from campfires, unauthorized parties, and littering.

In 2006, the Association constructed a security gate with lights at the entrance of Creek Pointe. To open the gate, the Association provided numeric codes to each Association member, including Happ; members also had the option of purchasing a remote control to open the gate. Happ never attempted to use the code to open the gate. Rather, upon his first encounter with the gate Happ dismantled the gate and tied it in an open position. Happ complained to other members of the Association that he did not want the gate blocking access to the subdivision; Happ was concerned that friends would not be able to visit him and couriers would not be able to make deliveries. When the Association fixed the security gate, Happ disassembled the gate again, removing additional parts to make it more difficult to reassemble. In 2008, the Association's Board of Directors voted to fix the gate and install a camera to monitor the gate. When the Association reassembled the gate, Happ used a saw to “destroy” it and threatened that if the Association repaired the gate he would destroy it again.

C. Plaintiff's Lawsuit

Happ filed suit against the Association in Pamlico County Superior Court on 26 January 2009 seeking: (1) involuntary dissolution of the Association for the alleged misuse of corporate assets; (2) a declaratory judgment that the Association may only use assessments collected for road maintenance, not for the installation of the gate, light, and camera; (3) if the Association is not dissolved, an injunction compelling the Association to use assessments collected for road maintenance solely for that purpose; and (4) a declaratory judgment that the covenants which created the Association are unenforceable due to the Association's radical changes to the conditions and character of the subdivision.

The Association filed a counterclaim seeking declaratory relief that the AIC, Declarations, and by-laws of the Association allow the Association's Board of Directors to expend funds for, but not limited to, the installation and maintenance of a gate and security system at the entrance of the subdivision.

On 4 March 2010, Plaintiff filed a Motion for Summary Judgment alleging there was no genuine issue of material fact. The Association filed a Motion for Summary Judgment alleging the same, or in the alternative, a Motion to Dismiss for failure to join necessary parties. The Motions came on for hearing on 18 March 2010 in Pamlico County Civil Superior Court, Judge Benjamin G. Alford presiding. Judge Alford entered summary judgment on 1 April 2010 in favor of the Association on all claims asserted by Plaintiff and the counterclaim asserted by...