State ex rel. Miller v. CUTTY'S CAMPING, 03-0934.
| Decision Date | 01 April 2005 |
| Docket Number | No. 03-0934.,03-0934. |
| Parties | STATE of Iowa ex rel. Thomas J. MILLER, Attorney General of Iowa, Appellant, v. CUTTY'S DES MOINES CAMPING CLUB, INC., Appellee. |
| Court | Iowa Supreme Court |
Thomas J. Miller, Attorney General, and Kathleen Keest and Benjamin Bellus, Assistant Attorneys General, for appellant.
David A. Tank of Davis, Brown, Koehn, Shors & Roberts, P.C., Des Moines, for appellee.
A Des Moines area campground club waged a tough campaign to compel hundreds of ex-campers to pay it dues. The Attorney General, claiming the campground club was engaging in an "unfair practice" in violation of Iowa's Consumer Fraud Act, filed suit to stop the collection efforts. The district court dismissed the Attorney General's case on the campground club's motion for summary judgment, and the court of appeals affirmed. We conclude dismissal was not proper. We vacate the decision of the court of appeals, reverse the district court judgment, and remand for further proceedings.
In 1980, Cutty's Incorporated ("the Developer") developed a private recreational vehicle park and campground resort ("campground") on approximately eighty acres of land near Des Moines. For six years, the Developer purported to sell "1/3000 undivided interests" in the property to prospective campers. Although we adopt the "undivided interests" terminology in the remainder of this opinion, we do not decide the precise nature of what the buyers actually purchased. Compare Kovach v. Erie Islands Resort & Marina, 93 Ohio App.3d 11, 637 N.E.2d 382, 383 (Ohio Ct.App.1994)
(), with All Seasons Resorts, Inc. v. Abrams, 68 N.Y.2d 81, 506 N.Y.S.2d 10, 497 N.E.2d 33, 38 (1986) ().
Each buyer paid the Developer between $3000 and $5700 for the "1/3000 undivided interest," depending upon whether the buyer paid the Developer up front or financed the purchase through an installment sales contract. The typical installment sales contract stated that upon payment in full, the Developer would deliver to the buyer a deed conveying title to the undivided interest as a tenant in common with all the owners of the other undivided interests.
The undivided interests were subject to a Declaration of Restrictions ("the Restrictions") on the campground property. The Restrictions, which the Developer recorded in 1980, were variously referred to as "covenants," "conditions," and "easements and cross-easements in fee." By their own terms, the Restrictions ran with the land. The Restrictions were "binding upon the present title holder[s] ... and their respective heirs, assigns, and successors...."
Ownership of an undivided interest gave the buyer access to the campground and use of the campground's amenities, which included an indoor pool, whirlpool, sauna, miniature golf course, tennis courts, various "play areas," and a fishing lake with paddle boats. Buyers did not own a specific campsite. Partition of the property was restricted, and some buyers' contracts prohibited them from recording their undivided interests. On the other hand, owners of undivided interests were permitted to sell, give, or devise them to others, so long as they paid a fee to a third party, Cutty's Des Moines Camping Club, Incorporated.
At the same time the Developer recorded the Restrictions and began selling undivided interests, it simultaneously created Cutty's Des Moines Camping Club, Incorporated ("the Club"). The Club was set up to manage and operate the campground. It also had the sole power to assess, collect, enforce, and spend dues for the benefit of the property.
The Club claims the purchase of an undivided interest automatically made a buyer a member of the Club and obligated the buyer, as well as the buyer's grantees and heirs, to pay the Club dues each year for the upkeep of the property.1 Dues were also necessary because the Restrictions required the Club to pay all property taxes levied on the campground.
The Restrictions and the Club's bylaws contemplated various measures for members who did not pay their annual dues. The Restrictions stated those who did not pay their dues were personally liable for failing to do so. The Restrictions also stated that unpaid dues "shall be a lien upon said Membership and Undivided Interest until paid." Lastly, the Restrictions granted the Club the right to purchase an undivided interest at a discounted price if a membership were "terminated" for failing to pay dues. The Club, however, has never perfected a lien upon an undivided interest and has not purchased a "terminated" member's interest.
The Club did not send out "delinquent member" notices as required in its bylaws. Nor did it ever avail itself of this termination procedure.2 The Club's longtime manager testified the Club has not terminated anyone's undivided interest in decades, if ever.
In the early to mid-1980s, the Developer sold 2100 of the 3000 undivided interests it had created. In 1986, the Developer stopped selling undivided interests. Today the Developer retains 900. The Club owns another 400 undivided interests. (The Club received most of these interests from former members.) Should the campground ever be sold, proceeds will be divided proportionately based upon the number of undivided interests owned.
Dues are not insignificant. Although in 1980 the dues were $96 per year, today they are nearly $400 per year. For reasons that are not clear in the record, the Developer does not pay dues. The Club's 400 shares do not pay dues, either.
A five-member Board of Directors runs the Club. The Developer controls the Board. (In another lawsuit in California, the owner of the Developer conceded he controlled the Des Moines Club.) Although each owner of an undivided interest is entitled to one "voting membership" in the Club, every election the Developer votes its block of 900 shares by proxy. Because the Club holds 400 non-voting shares and many individual campers do not or cannot vote, the Board is perpetually run by three directors nominated by the Developer. These three Board Members, one of whom is the Developer's owner, live out-of-state and rarely, if ever, visit the campground. Two local campers round out the remaining seats on the Board.
In October 2001, the Club initiated an aggressive collection campaign against owners of undivided interests who had not paid their dues over the years. Many of the owners targeted by the campaign had never visited the campground or stopped using it long ago. They stopped paying dues anywhere from four to sixteen years ago, and some heard nothing after they quit paying. Matters of proof were complicated by the fact that a fire in 2000 destroyed the vast majority of the Club's records — including copies of dues statements it claims it sent to owners.
The Club maintained the purchase of an undivided interest obligated the buyer to pay annual club dues for life, unless the buyer found someone to purchase (or accept as a gift or devise) the undivided interest. Although some owners have managed to dispose of their undivided interests over the years, others have not been able to do so. At least one owner found a buyer only to have the Club prevent him from selling it; there is also evidence the Club has waged a campaign to stop "cheap membership sales" so as not to bring "undesirable" owners to the RV park and campground. Some owners have tried to give their undivided interests to the Club for free, but the Club would not accept them.3
Some owners of undivided interests who purchased from another owner in a resale (as opposed to directly from the Developer) claim they were never told by their seller they could not cancel their memberships and were not provided the documents other owners received that allegedly spelled out their purported obligations. At least one ex-camper, however, claims her undivided interest was "terminated" only to have the Club later seek payment for dues that accrued after that date.
The collection campaign began with an amnesty program. The Club briefly offered to settle some of its claims against certain buyers (some of which were alleged to owe as much as $4000 in unpaid dues) if the buyer paid the Club $350 within thirty days. In exchange for payment, the Club would forgive all past dues and accept a quitclaim deed for the undivided interest, thus canceling all alleged future obligations. Some buyers took advantage of this program, others did not. Not all buyers received notice of the amnesty program.
The Club then sued buyers who still owed dues. The record contains a number of small-claims decisions and appeals in which the Club obtained judgments against owners of undivided interests. The judgments were almost uniformly grounded on the theory that the owner of an undivided interest subject to the Restrictions was akin to an owner of a condominium with a...
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