Indian Hills Civic Ass'n v. Indian Lake Prop. Owners Ass'n, Inc.

• Decision Date: 22 November 2021
• Docket Number: No. SD 36800,SD 36800
• Parties: INDIAN HILLS CIVIC ASSOCIATION, Dale Brunts, James O'Fallon, Randy Williams and Diana Wideman, Appellants, v. INDIAN LAKE PROPERTY OWNERS ASSOCIATION, INC., Respondent.
• Court: Missouri Court of Appeals

637 S.W.3d 622

INDIAN HILLS CIVIC ASSOCIATION, Dale Brunts, James O'Fallon, Randy Williams and Diana Wideman, Appellants,

v.INDIAN LAKE PROPERTY OWNERS ASSOCIATION, INC., Respondent.

No. SD 36800

Missouri Court of Appeals, Southern District, Division One.

Filed: November 22, 2021

Rehearing and/or Transfer Denied December 15, 2021

Application for Transfer Denied February 8, 2022

Appellants’ Attorney: Steven A. Levy, of Cuba, Missouri.

Respondent's Attorney: Bianca L. Eden, of Hillsboro, Missouri.

WILLIAM W. FRANCIS, JR., P.J.

Indian Hills Civic Association (the "IHCA"),¹ Dale Brunts, James O'Fallon, Randy Williams and Diana Wideman (collectively "Appellants") appeal from the trial court's judgment in favor of Indian Lake Property Owners Association, Inc. (the "ILPOA"). In four points relied on, Appellants argue that the trial court erred in not granting various relief to them in connection with the ILPOA's levy of special assessments. Finding no merit to any of Appellants’ four points, we deny the same and affirm the judgment of the trial court.

Facts and Procedural History

This case concerns five, of approximately 1,000 members of the ILPOA, who enjoy the benefits of ILPOA special assessment expenditures and who have paid such assessments, but who now object to the method used by the ILPOA to determine voter approval on two special assessments for the design and reconstruction of the subdivision's Cove 9 bridge.

Parties

Appellants are lot owners in the Indian Hills Subdivision. The ILPOA is a not-for-profit corporation. It contains approximately 1,800 lots (of which the ILPOA owns 40 to 60 lots), and has approximately 1,000 voting members. The ILPOA also regulates certain reserved common areas, such as the Indian Hills Lake Basin, a dam (constructed to impound the lake), common boat docks, the Cove 9 bridge, and all streets and roads within the Indian Hills Subdivision.

Powers and Authority of the ILPOA

On July 11, 1962, Indian Hills Development Corporation executed Building and Use Restrictions ("BURs")² for the Indian Hills Subdivision that were to "be considered as covenants running with the land[.]"

On August 13, 1962, Articles of Incorporation were filed for the ILPOA, and bylaws adopted—both of which were subsequently amended on multiple occasions. Significantly, we observe that the bylaws submitted to this Court as a part of the record on appeal—and upon which Appellants’ arguments in this appeal are premised—indicate that the bylaws are effective as of January 1, 2020. As discussed more fully infra , the bylaws in effect in 2018 (that governed the matters challenged in the instant appeal) were not included in the record on appeal.

History

From 1993 to 2017, the ILPOA attempted to pass various assessments to fund upgrades for the Cove 9 bridge, roads, security and the lake, pursuant to the BURs’ two-third super-majority requirement (i.e. , requiring a two-third affirmative vote from all lot owners), but many of these attempts suffered from poor voter turnout and failed.

In April 2017, Cochran Engineering performed an inspection of the Cove 9 bridge and several serious problems with the bridge were found: (1) erosion of bridge supports as a consequence of the bridge being undersized and unable to accommodate the amount of water flowing through; (2) deterioration of timber pilings; (3) a cracking of the concrete deck allowing water to infiltrate the underlying steel pan causing significant rust; and (4) insufficient guard rails. The bridge was also 50 percent undersized for being the main entrance and exit to the subdivision. Cochran also recommended that the length of the bridge be extended from 24 feet to 44 feet. Cochran indicated that repairs would not solve these problems long term, and recommended that the bridge be replaced. Cochran also recommended that a consulting engineer experienced in bridge design be retained to design the replacement structure to ensure that the new bridge fit the current site.

In February 2018, the ILPOA sent a "Petition for Change to Building & Use Restrictions (Warranty Deed)" to all lot owners, seeking to amend the BURs from requiring a vote of at least two-thirds of lot owners, to requiring a "Simple Majority (>50%) of said lots who vote[.]"

In November 2018, the ILPOA sent out an "Official Ballot" setting forth a proposed amendment to the bylaws to allow for a "certified engineered design of the cove 9 Bridge" that would allow the ILPOA to obtain funding of $62,000 for the bridge design by rendering a one-time assessment of $62 per each lot owner. The amendment would require a two-thirds majority of all "[m]embers in good standing who cast votes[.]"

On November 9, 2018, the Board of Directors passed a motion directing that if the "bridge design ballot gets more than 50%", members would be billed for the assessment along with the annual dues as of January 1, 2019. The motion further indicated that any member with an outstanding balance as of March 1, 2019, would no longer be considered a member in good standing, and a two percent fee on all unpaid balances would be assessed as of March 31, 2019.

On November 13, 2018, the ILPOA sent a summary of the "lake infrastructure and major repair" of the Cove 9 bridge to all lot owners. The document also set out past voter results by lot location in the subdivision (specifically, members on the lake, members of undeveloped lots, part-time members, members owning lots on the east side of the bridge, and members owning lots on the west side of the bridge). The ILPOA indicated that this was an indication that the majority of the membership wanted to see and "vote for these projects 67-64%," but in order to "deliver to the majority of our memberships vote and voice," they needed to "move from a super majority 67% to a simple majority of 51% for special assessments."

On December 14, 2018, the Board of Directors adopted a "special assessment strategy" to address voting and assessment restrictions in the BURs, which in the past hindered the Board's ability to maintain critical infrastructure needs. The Board reported in its minutes that the $62 bridge design assessment had passed, based on "bylaw requirements of needing 2/3 of voting members[,] [p]assed by 67.9%[,]" and the "Bridge Assessment went out with the annual dues."

In mid-2019, the ILPOA sent members an "Official Ballot" proposing an amendment to the bylaws for a special, one-time assessment for the construction of the Cove 9 bridge in the amount of $376 per member. The ballot designated that a "greater than 50% (Simple Majority) vote of all Members in good standing who exercise their right votes [sic] shall be required to proceed with this project and proposed By-Law addition." The assessment and amendment passed—503 members voted, with 349 (69 percent of participating lot owners) voting in favor of the measure.

On January 29, 2019, Appellants filed their "Petition for Enforcement of Restrictive Covenants, for Injunctive Relief, for Declaratory Relief and Damages." A five-count Second Amended Petition was filed on October 21, 2019. Count I contained 116 allegations common to all counts, but sought no relief; Count II sought declaratory judgment as to the assessments and rights of homeowners and the ILPOA;³ Count III sought injunctive relief to restrain the ILPOA from future acts not authorized by the BURs; Count IV sought relief under the Missouri Merchandizing Practices Act ("MMPA"); and Count V asserted common law fraud claims against the ILPOA.

A bench trial was held on May 29, 2020 as to Counts II and III in Appellants’ amended petition.⁴ Appellants argued that the ILPOA's authority for passing bylaws and creating special assessments was strictly governed by the provisions of the ILPOA's authorizing documents, i.e. , the "Warranty Deed and BURs," and that the ILPOA failed to follow the authorized procedures in passing the special bridge assessments. The trial court heard evidence and argument from both parties.

On June 9, 2020, the trial court entered judgment in favor of the ILPOA on Appellants’ Counts II and III. As relevant here, the judgment stated:⁵

The Court, having heard and considered all the pleadings, having heard and considered all of the evidence, including all trial exhibits and the reasonable inferences arising therefrom, having in mind the applicable burdens of proof, having had the benefits of briefs from counsel and now being fully apprised in the premises does enter the Judgment and Decree as set out below.

As to Count II Petition for Declaratory Judgment, IT IS HEREBY ADJUDGED AND DECREED that:

1. Annual Assessments as set forth in the Building and Use Restrictions may only be amended by two-thirds of the property owners in writing and are the only assessments to which the automatic lien upon the real estate is applicable.

2. The by-law special assessments for the Cove 9 bridge design and construction were passed by the requisite number of members pursuant to the bylaws of Defendant and were within the corporate powers of the Defendant as set forth in Chapter 355 RSMo. The by-law special assessments have been paid by the vast majority of the members of Defendant, and said assessment was for preservation of the common property owned by Defendant, and as such are enforceable against the individual members of the corporation.

3. That the boat registration fee and fines provisions under the rules and regulations of Defendant are not assessments as contemplated by the Building and Use Restrictions and are valid rules and regulations of Defendant regarding the use of the common areas under the control of Defendant, as set forth in the Building and Use Restrictions, which were passed by the requisite number of members pursuant to Chapter 355 and the by-laws of Defendant.

4. That the interest provision is not an assessment as contemplated by the Building and Use Restrictions and was adopted by the members of the corporation pursuant to the by-laws of Defendant and was within the

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