Swan Creek Village Homeowners v. Warne

• Decision Date: 04 April 2006
• Docket Number: No. 20040884.,20040884.
• Citation: 134 P.3d 1122,2006 UT 22
• Parties: SWAN CREEK VILLAGE HOMEOWNERS ASSOCIATION, Plaintiff and Appellee, v. Alicia WARNE, a minor, appearing through her father, Jeff Warne, Defendant and Appellant.
• Court: Utah Supreme Court

Page 1122

134 P.3d 1122

2006 UT 22

SWAN CREEK VILLAGE HOMEOWNERS ASSOCIATION, Plaintiff and Appellee, v. Alicia WARNE, a minor, appearing through her father, Jeff Warne, Defendant and Appellant.

No. 20040884.

Supreme Court of Utah.

April 4, 2006.

COPYRIGHT MATERIAL OMITTED

Craig G. Adamson, Eric P. Lee, Debra G. Griffiths, Salt Lake City, for plaintiff.

J. Craig Smith, D. Scott Crook, R. Christopher Preston, Salt Lake City, for defendant.

PARRISH, Justice:

¶ 1 In this appeal, we are asked to determine the validity of an assessment levied by a homeowners association. Swan Creek Village Homeowners Association brought this action against Alicia Warne for failure to pay an assessment on lots in Swan Creek Village that she purchased at a tax sale. The district court granted Swan Creek's motion for summary judgment. Alicia Warne appeals, arguing that the summary judgment should be vacated because (1) the district court abused its discretion when it allowed Swan Creek to amend its complaint to substitute her (in place of her father) as the real party in interest; (2) she was not given the requisite notice of the assessment; (3) Swan Creek's claims were barred by the statute of limitations; (4) Swan Creek lacked authority to assess her property; and (5) the assessment was not authorized because it was an attempt to revive a prior assessment that had been extinguished by the tax sale at which she acquired the lots. Because we agree with Alicia Warne that the assessment was not authorized, we vacate the summary judgment entered by the district court and enter judgment in her favor.

FACTUAL AND PROCEDURAL BACKGROUND

¶ 2 Swan Creek Village, located in Rich County, Utah, was designed as a 500-plus home development to be completed in multiple phases. In 1979, the developer incorporated the Swan Creek Village Homeowners Association (the "Original Association") and thereafter recorded with Rich County a "Declaration of Reservations, Restrictions and Covenants of Swan Creek Village" (the "Declaration"). The Declaration recognized that the Original Association had been created for the purpose of furthering the community welfare of the property owners in the Swan Creek subdivision, and it bestowed upon the Original Association the power to perform many functions as an agent of the lot owners, including the power to impose, collect, and disburse assessments.

¶ 3 The developer declared bankruptcy and pulled out of Swan Creek midway through its development. Abandoned by the developer, the Original Association failed to file its annual report or pay its filing fee and was involuntarily dissolved on March 31, 1986. Mark Bryner, a lot owner, attempted to have the Original Association reinstated. But his attempt failed because his application to reinstate the Original Association was filed more than one year from the time of its dissolution.¹

¶ 4 In a continued effort to secure a vehicle for the collective governance of Swan Creek, Bryner incorporated a new homeowners association (the "HOA"), using the identical name and articles of incorporation used by the Original Association. A certificate of incorporation for the HOA was issued on April 28, 1988. Shortly thereafter, Bryner called a meeting of all Swan Creek lot owners. More than 100 people, representing almost half of the lot owners, attended the meeting and elected a board of directors for the HOA.

¶ 5 Alicia Warne now disputes whether there were sufficient votes at the meeting to authorize the HOA and whether those voting understood that the HOA was a new entity and not merely a reinstatement of the Original Association. No such questions were raised at the time, however, and the new HOA immediately began to act under the terms of the Declaration.

¶ 6 On May 13, 1989, the board of directors voted to levy a special assessment of $5,900 (the "1989 Assessment") against each lot to cover the cost of certain improvements that had been made to Swan Creek. This 1989 Assessment was levied against all lots in Swan Creek; however, credits were given to those lot owners who had already contributed to the improvements in question.

¶ 7 In the early 1990s, the HOA was party to litigation in the First Judicial District Court for Rich County, State of Utah. One of the issues raised by the litigation was the authority of the HOA to levy assessments pursuant to the terms of the Declaration. The court ruled in favor of the HOA, concluding that the HOA was properly formed and had the authority to impose assessments on the owners of lots in Swan Creek. However, the court limited its holding to the action before it. Swan Creek Vill. Homeowners Ass'n v. Cook-Rex Darrington Sorenson Trust, Civil No. 1568, Findings of Fact and Conclusions of Law (1st Dist.Ct.Utah, July 20, 1992).

¶ 8 When certain lot owners failed to pay the 1989 Assessment, the HOA placed liens on the corresponding lots. Rich County owned four of these lots, having earlier been issued fee simple title by the Rich County Auditor in payment of general taxes, interest, costs, and penalties. Jeff Warne purchased these four lots at a May 24, 1994 tax sale on behalf of his then two-year-old daughter Alicia.

¶ 9 Shortly thereafter, the HOA sent Jeff Warne and other lot owners a letter demanding payment of the 1989 Assessment. After certain lot owners argued that the 1994 tax sale had extinguished any obligation for the 1989 Assessment, the HOA imposed a new assessment (the "1996 Assessment") and issued the following statement:

The Homeowners association of Swan Creek Village levied an improvement assessment in the amount of $5,900 on May 13, 1989. There have been questions on the legality of this assessment on lots purchased at tax sale after this date. In order to remove any question concerning the validity of this assessment and lien after tax sale, a new assessment is being made at this time.

¶ 10 The 1996 assessment was identical to the 1989 Assessment and, like the 1989 Assessment, was levied against all lots constructed in the first two phases of the development. Like the 1989 Assessment, the 1996 Assessment gave credits to those who had already contributed to the improvements for which the 1996 Assessment was levied. Swan Creek directed notice of the 1996 Assessment to Jeff Warne, who refused to pay.

¶ 11 The HOA filed suit against Jeff Warne on May 3, 2001, seeking to enforce and collect the 1996 Assessment. During initial discovery, Jeff Warne notified the HOA that he was not the real party in interest. According to the HOA, it requested clarifying information from Jeff Warne's attorney regarding the identity of the proper party, but never received a response.

¶ 12 The issue resurfaced when Jeff Warne moved for summary judgment, arguing that the case should be dismissed because the lots in question were actually owned by his minor daughter Alicia Warne. In response, Swan Creek indicated that it was prepared to substitute Alicia Warne as defendant in the action. It noted, however, that the amendment would have no practical effect because Alicia Warne would be required to be represented by a general guardian or guardian ad litem who, in either case, would likely be Jeff Warne.

¶ 13 After taking the matter under advisement, the district court allowed the HOA to amend its complaint for the purpose of substituting Alicia Warne as defendant. Jeff Warne thereafter continued defending the litigation on her behalf.

¶ 14 The HOA then moved for summary judgment. The district court granted the HOA's motion, awarding judgment in its favor. It held that while the HOA was a new entity, distinct from the Original Association, it was properly incorporated and acting within its power, as granted in the Declaration, in levying and collecting the 1996 Assessment. It also held that the six-year statute of limitations on the 1996 Assessment did not begin to run until 1996 and therefore had not expired at the time the HOA filed suit. Alicia Warne now appeals. We have jurisdiction pursuant to Utah Code section 78-2-2(3)(j) (2002).

STANDARD OF REVIEW

¶ 15 We review the district court's decision allowing the HOA to amend its complaint to substitute Alicia Warne as defendant for abuse of discretion. Jones v. Salt Lake City Corp., 2003 UT App 355, ¶ 7, 78 P.3d 988.

¶ 16 We review the district court's decision to grant summary judgment "for correctness, granting no deference to the [district] court." Pugh v. Draper City, 2005 UT 12, ¶ 7, 114 P.3d 546. In reviewing the summary judgment, we recognize that "[s]ummary judgment is appropriate only when there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law." Norman v. Arnold, 2002 UT 81, ¶ 15, 57 P.3d 997.

ANALYSIS

¶ 17 We begin by addressing Alicia Warne's procedural claim that the district court abused its discretion when it allowed the HOA to amend its complaint. Finding the amendment proper, we move to her substantive claims. We first address Alicia Warne's claim that the HOA lacks authority to levy assessments on the Swan Creek lots. Concluding that it does have such authority, we turn to Alicia Warne's specific challenges to the 1996 Assessment. These challenges include her claim that the HOA cannot enforce the 1996 Assessment because it failed to provide her with the requisite notice of its imposition and her claim that the HOA's lawsuit was barred by the statute of limitations. We finally address Alicia Warne's claim that the 1996 Assessment was invalid because it constituted an improper attempt to resuscitate the 1989 Assessment, which had been extinguished by the tax sale.

I. THE DISTRICT COURT DID NOT ABUSE ITS DISCRETION BY ALLOWING THE HOA TO SUBSTITUTE ALICIA WARNE AS DEFENDANT

¶ 18 Alicia Warne argues that the district court erred when it allowed the HOA to amend its complaint to substitute her as defendant in place of her father Jeff Warne. We review a district court's decision to grant an amendment of the...