Simms v. Lakewood Village Property Owners Ass'n, Inc.

• Decision Date: 02 February 1995
• Docket Number: No. 13-93-382-CV,13-93-382-CV
• Citation: 895 S.W.2d 779
• Parties: Mary E. SIMMS, et al., Appellants, v. LAKEWOOD VILLAGE PROPERTY OWNERS ASSOCIATION, INC., et al., Appellees.
• Court: Texas Court of Appeals

Page 779

895 S.W.2d 779

Mary E. SIMMS, et al., Appellants, v. LAKEWOOD VILLAGE PROPERTY OWNERS ASSOCIATION, INC., et al., Appellees.

No. 13-93-382-CV.

Court of Appeals of Texas Corpus Christi.

Feb. 2, 1995.

Rehearing Overruled March 9, 1995.

Denis A. Downey, Downey & Sullivan, Brownsville, for appellants.

Jeffrey D. Roerig, Roerig, Oliveira & Fisher, Brownsville, for appellees.

Before DORSEY, DALLY ¹ and SMITH, ² JJ.

OPINION

SMITH, Justice (Assigned).

Subdivision property owners ³ filed two separate law suits against the appellee, Lakewood Property Owners Association, Inc., to enjoin enforcement of restrictive covenants and assessment of fees, declare the covenants void, and ask for compensatory and punitive damages and attorneys fees. The association answered and countersued for delinquent assessment fees, interest, and attorneys fees. The two causes of action were consolidated, and in a non-jury trial, the court held the subdivision covenants, conditions, and restrictions to be valid and enforceable against all the plaintiffs. The court awarded judgment against named plaintiffs for specific amounts of delinquent assessment fees, plus interest and attorneys fees.

In six points of error the plaintiffs, appellants herein, attack the trial court's findings, conclusions of law, and holdings.

To better understand the issues in this appeal, we set forth a history of the facts leading to this litigation.

In October 1983, a developer filed in Cameron County, Texas an amended map for a subdivision to be named Lakewood Village, Unit 1, "A Planned Development District." This was to be a subdivision for mobile homes, modular homes, and recreation vehicles.

In January 1984, the developer commenced selling lots in the subdivision. On the face of each contract of conveyance was typed, "purchaser has read and accepted the restrictions, rules, regulations and property owner's responsibilities, a copy of which is attached hereto." The attachment had a provision for the payment of annual assessments, payable monthly, to cover expenses incurred in maintaining certain facilities common to owners in the subdivision.

In that same year, the developer requested the homeowners to form an advisory board to advise and assist him in the management of the subdivision. The advisory board was formed and not long thereafter, began to handle the collection of assessment fees and the management of common areas, i.e. clubhouse, pool, shuffleboard courts, two lakes, etc.

In February 1987, the restrictive covenants of the subdivision were recorded and in November of that year the name of the advisory board was changed to the Lakewood Village Property Owners Association.

In January 1988, the Harlingen National Bank took over the ownership of the subdivision after the developer advised the bank, which bank had financed the development of the Lakewood subdivision, that he was "all done". Several days later on January 11, the bank informed the property owners association that it had taken over the ownership of the subdivision. It also offered the board of the association the management and ownership of the property in the subdivision known as the "common areas."

On January 20, after prior notice to the subdivision property owners of a called general meeting, the property owners accepted the bank's offer by a 45 to 6 vote.

Shortly thereafter, the homeowners association applied for incorporation and on April 3, 1988, the Articles of incorporation were signed. An election was called, and new officers and a board of directors were elected for the corporation.

In 1989, a lawsuit was filed by a homeowner against the homeowner's corporation alleging that assessments were being made incorrectly. He alleged that the covenants, conditions, and regulations of the subdivision required assessments against each lot and that some owners whose residences were on two or more lots were only being assessed for one lot. The association contested the suit, but in January 1990, an agreed judgment was entered requiring the association to make assessments against each lot as long as the original covenants, conditions, and restrictions were in effect.

In February 1990, the corporation commenced making its monthly assessments against each lot. This new method of assessment caused dissatisfaction among some of the homeowners and apparently brought about the present litigation.

Appellant's contentions are basically divided into four categories, (1) the homeowners' corporation was illegal and void because it was not formed in accordance with the covenants, (2) the association had no authority to accept the management and ownership of the common areas because it did not comply with the covenants, (3) the association had no authority to levy assessments because the declarant bank had not given up its authority to assess, and (4) the appellants who purchased their property prior to the recordation of the covenants were not liable for assessments or attorney fees because they had no actual notice of the covenants.

We first note that there is no contention that the covenants involved are ambiguous. Thus, there being no ambiguity, construction of the written covenants in the present case is a question of law for the court. Westwind Exploration, Inc. v. Homestate Savings Association, 696 S.W.2d 378, 381 (Tex.1985); Pinehurst v. Spooner Addition Water Co., 432 S.W.2d 515, 518 (Tex.1968).

In their first point of error, appellants contend that the corporate appellee is not the entity contemplated by the covenants and the trial court erred in so holding. It is uncontested that it was the intent of the developer (declarant in the covenants) that at some period in time, either before all lots were sold or after all lots were sold, the developer would transfer the management and ownership of the common areas from himself to a property owners association.

Article VIII of the covenants entitled "Management of Subdivision" sets forth who shall have the responsibility and authority to manage the subdivision. The following portions of Article VIII are pertinent to our factual situation:

Section 8.1 DECLARANT shall have responsibility and the sole authority to prescribe Rules and Regulations covering use of the COMMON AREAS, streets, utilities and any other portions of the subdivision until such time as a Property Owners' Association is formed as hereinafter provided.

Section 8.2 When all of the lots in the subdivision (including any future additions thereto) are sold, the management of the COMMON AREA and all rights and duties of DECLARANT herein shall be assumed by the Property Owner's Association.

Section 8.3 The Property Owners' Association shall be formed according to By-Laws and Regulations to be adopted by a majority of the OWNERS of lots with the OWNER OR OWNERS entitled to one (1) vote for each lot owner.

Section 8.5 Should DECLARANT elect to form a Property Owners' Association prior to the sale of all of the lots as herein provided, DECLARANT may submit By-laws and Regulations to the OWNERS of the lots at that time and such Associations may be formed by a majority vote of the OWNERS prior to the sale of all lots by DECLARANT.

Because it is uncontested that all lots had not been sold when this case was heard by the trial court, and because section 8.5 addresses that factual situation, we compare the terminology and verbage used therein with that used in the other sections.

In section 8.5 the word "may" is used two times to indicate action by the parties. In sections 8.1, 8.2, and 8.3, the word "shall" is used to indicate action by the "Declarant" and "Property Owners Association."

The word "may" has been defined as (1) have the ability to, (2) be free, (3) used to indicate possibility or probability. Merriam-Webster's Collegiate Dictionary 718-719 (10th ed. 1994).

As a general rule the word "may" will not be treated as a word of command unless there is something in context or subject matter to indicate that it was used in such sense. Bloom v. Texas State Bd. of Examiners of Psychologists, 475 S.W.2d 374, 377 (Tex.Civ.App.--Austin 1972), rev'd on other grounds, 492 S.W.2d 460 (Tex.1973). In reversing Bloom, the Texas Supreme Court said "The correct meaning of the word 'may' is ... discretion." Bloom v. Texas State Bd. of Examiners of Psychologists, 492 S.W.2d 460, 462 (Tex.1973).

The word "shall" in its common usage has been defined as (1) will have to (2) used to express a command ... (3) used to express what is inevitable. Merriam-Webster's Collegiate Dictionary 1075-76 (10th ed. 1994). In law, the word "shall", as used in statutes, contracts or otherwise, generally means "imperative" or "mandatory." Black's Law Dictionary 1233 (5th ed. 1979).

The above definitions of the words "may" and "shall" are mere general guidelines because they must be read in context of the written instrument where they are used to ascertain the true intention of the party or parties. See, Garcia v. RC Cola, 7-Up Bottling Co., 667 S.W.2d 517, 520 (Tex.1984).

There is no question about who had the covenants prepared or who chose the terminology, therein; it was the developer J.C. Loehr. Loehr is the "declarant" in the covenants and could have chosen to use the word "shall" in section 8.5, but he did not. Instead, he elected to use the word "may", which indicates to us that he wanted to have discretion in deciding when he would relinquish the management and ownership to a property owners association. Furthermore, he left discretion in how the homeowners association would be created by stating "... such association may be formed by a majority vote of the owners." By the use of the word "may" in this covenant, the declarant chose not only not to bind himself but also not to bind the property owners to one method and only one method of forming a property owners association prior to the time all lots in the subdivision had been sold. In other words, he left himself the discretion...