Kell v. Bella Vista Village Property Owners Ass'n, 75--143

• Decision Date: 27 October 1975
• Docket Number: No. 75--143,75--143
• Citation: 258 Ark. 757,528 S.W.2d 651
• Parties: George C. KELL, Jr., et ux., Appellants, v. BELLA VISTA VILLAGE PROPERTY OWNERS ASSOCIATION, Appellee.
• Court: Arkansas Supreme Court

Page 651

528 S.W.2d 651

258 Ark. 757

George C. KELL, Jr., et ux., Appellants, v. BELLA VISTA VILLAGE PROPERTY OWNERS ASSOCIATION, Appellee.

No. 75--143.

Supreme Court of Arkansas.

Oct. 27, 1975.

Ralph C. Williams, Bentonville, for appellants.

Little, Lawrence, McCollum & Mixon by Clayton N. Little, Bentonville, Smith, Williams, Friday, Eldredge & Clark by Herschel H. Friday, John C. Echols and Thomas P. Leggett, Little Rock, for appellee.

BYRD, Justice.

This litigation arises out of the covenant assessments contained in the bill of assurance of a planned community development for the maintenance and operation of specified common properties developed for the use and benefit of all property owners in the platted area. The litigants are the appellants, George C. Kell, Jr. and Sharon A. Kell, his wife, property owners, and the appellee, Bella Vista Village Property Owners Association, a non profit corporation organized to act as trustee for the property owners. The matter was submitted to the trial court upon the pleadings and the testimony of John A. Cooper, Jr. and James A. Hatcher. The trial court held the assessments valid and secured by a continuing lien upon the land. Based upon that holding the trial court entered a judgment foreclosing the delinquent and unpaid assessments in favor of appellee. For reversal, the appellants raise the issues hereinafter discussed.

POINT 1. Appellants here contend that since the property constituted their homestead under Article 9, § 3 of the Constitution of Arkansas, their property is not subject to the lien of the assessments. The particular section of the declaration in the bill of assurance, which is challenged, provides:

'. . . The annual and special assessments, together with such interest thereon and costs of collection thereof as hereinafter provided, shall be a charge on the land and shall be a continuing lien upon the property against which each such assessment is made.'

The foregoing language is equally as strong and specific as a mortgage provision extending the lien thereof to future advances, and we can see no reason why the language employed should not be considered as creating a continuing lien on the property for future assessments.

POINT 2. The appellants here argue that they are not bound to pay the annual assessments because the covenant does not run with the land. We find no merit in this contention. See Neponsit Property Owners' Ass'n v. Emigrant Industrial Sav. Bank, 278 N.Y. 248, 15 N.E.2d 793, 118 A.L.R. 973 (1938). Furthermore, the proof here shows that the common properties to be maintained add a value of each lot or living unit subject to the covenants.

POINT 3. Even though the record shows that the lien created by the bill of assurance was recorded, the appellants argue that they are not bound by the lien created thereby because they were not orally advised that such a lien existed. We find no merit to this contention. See Ark.Stat.Ann. § 16--114 (Repl.1968), which makes the recording of such instruments constructive notice to all persons.

POINT 4. Appellants contend that the covenant constitutes a perpetuity contrary to Article 2, § 19 of the Constitution of Arkansas. The bill of assurance provides that the assessment covenant will remain outstanding for a term of 26 years and for successive ten year periods thereafter, until an instrument is signed and recorded by the then owners of two-thirds of the lots or living units. We find no merit to this contention. See Lowry v. Norris Lake Shores Development Corporation, 231 Ga. 549, 203 S.E.2d 171 (1974). There is nothing here which keeps the property from vesting.

POINT 5. Under Article III, Section 2 of the declaration in the bill of assurance, the developer is classified as the only Class 'B' member of the property owners association, and as such, it is entitled to ten votes for each lot or living unit of which it is the record owner. However, in so far as any action to increase the annual assessments is concerned, the Class 'B' member only has a veto over such assessments, and its votes are not counted against the Class 'A' members, such as appellants. Such class distinctions are ordinarily upheld among corporate shareholders, and in the absence of authority to the contrary, we can see no reason why such a veto power over increased assessments should be prohibited in matters involving private contract rights.

POINT 6. The allegation that the assessments amount to an unlawful delegation to tax in violation of Article 2, § 23 of the Constitution of Arkansas overlooks the fact that the assessments here arise out of contract and that they constitute a benefit to the property owner. Other courts recognize that such assessments are not an unlawful delegation of the State's taxing power, Henlopen Acres v. Potter, 36 Del.Ch. 141, 127 A.2d 476 (1956).

POINT 7. Appellants contend that the purposes for which the assessments are made are so vague and indefinite that they amount to a restraint on alienation. The 'Covenant for Maintenance Assessments' in so far as here applicable provides:

'ARTICLE X

Covenant For Maintenance Assessments

Section 1. Creation of Lien. The Developer for each Lot and Living Unit owned by it within The Properties hereby covenants and each Owner of any Lot or Living Unit by acceptance of a deed therefor, or by entering into a contract of purchase with the Developer, whether or not it shall be so expressed in any such deed, contract of purchase, or other conveyance, shall be deemed to covenant and agree to pay to the Club: (1) annual assessments of charges; (2) special assessments for capital improvements, such assessments to be fixed, established and collected from time to time as hereinafter provided. The annual and special assessments, together with such interest thereon and costs of collection thereof as hereinafter provided, shall be a charge on the land and shall be a continuing lien upon the property against which each such assessment is made.

Section 2. Purpose of Assessments. The assessments levied hereunder by the Club shall be used exclusively for the purpose of promoting the recreation, health, safety, and welfare of the residents in The Properties and in particular for the improvement and maintenance of properties, services and facilities devoted to this purpose and related to the use and enjoyment of the Common Properties and the improvements situated upon The Properties, including, but not limited to, the payment of taxes and insurance thereon, and repair, replacement, and additions thereto, and for the cost of labor, equipment, materials, management and supervision thereof. The limitation aforesaid shall not preclude the use of assessments levied hereunder for maintenance of roads and streets within The...