Opinion
No. COA12–327.
2013-03-5
Barbara L. POHLMAN and Ann L. Garrou, Plaintiffs, v. MAGEN'S BAY HOMEOWNERS ASSOCIATION, INC., Defendant.
Ward and Smith, P.A., by Alexander C. Dale and Jeremy M. Wilson, for plaintiff-appellants. Harvell and Collins, P.A., by Russell C. Alexander and Wesley A. Collins, for defendant-appellee.
Appeal by plaintiffs from judgments entered 2 September 2011 by Judge Arnold O. Jones, II, in Carteret County Superior Court. Heard in the Court of Appeals 29 August 2012. Ward and Smith, P.A., by Alexander C. Dale and Jeremy M. Wilson, for plaintiff-appellants. Harvell and Collins, P.A., by Russell C. Alexander and Wesley A. Collins, for defendant-appellee.
BRYANT, Judge.
Where there were no genuine issues of material fact concerning quorum and voting with regard to defendant homeowner association's annual meetings, we affirm the order of the trial court granting partial summary judgment in favor of defendant. Where the trial court's findings of fact are supported by competent evidence, and where those findings of fact uphold its conclusions of law with regard to the rejection of plaintiffhomeowner's erection of a fence and defendant's imposition of fines, we affirm the judgment of the trial court.
Facts and Procedural History
On 25 February 2010, plaintiffs Barbara L. Pohlman and Ann L. Garrou filed a complaint against defendant Magen's Bay Homeowners Association, Inc., a non-profit corporation governing the residential subdivision, Magen's Bay, located in Carteret County, North Carolina. The complaint alleged the following: Plaintiffs are owners of real property described as Lot 92 in the Magen's Bay Subdivision. Prior to 22 October 2009, plaintiffs erected a fenced trash enclosure (“the fence”)—which measures three feet wide by ten feet long and six feet high—to screen from public view the trash cans used on their property. On 23 October 2009, plaintiffs received a letter from defendant indicating that the fence was “unauthorized.” Plaintiffs filed a request for approval of the fence with the Architectural Control Committee (ACC) appointed by defendant's Board of Directors (BOD). Plaintiffs also requested from the ACC, any published rules and regulations concerning the fence. On 31 October 2009, the ACC voted to disapprove plaintiffs' fence noting that “the materials used, color and height of the fence were considered inappropriate as they do not preserve and enhance property values and maintain a harmonious relationship with the homes in the subdivision.”
Plaintiffs appealed the decision of the ACC to the BOD. At a hearing before the BOD, plaintiffs' evidence was rejected and their appeal was denied on 13 November 2009. The BOD offered no explanation for its denial. The BOD informed plaintiffs that unless the fence was removed within seven days, that a daily fine of $50.00 would be imposed and a lien be filed against plaintiffs' property.
Since 14 November 2009, plaintiffs have requested a copy of the minutes of the ACC where their request for approval of the fence was denied as well as requested the BOD to provide them with a copy of the minutes of the meetings where their appeal was denied. Plaintiffs allege that no valid meeting of its members was conducted by defendant in 2008, 2009 or 2010 and therefore, no directors were validly elected and no ACC was validly appointed. Accordingly, plaintiffs allege that the actions of the ACC and the BOD were arbitrary and capricious, not based on law or fact, not done in good faith, and not exercised in a reasonable manner. Plaintiffs sought a declaratory judgment requesting that the acts of the ACC and BOD in denying their application for approval of their fence be declared invalid and void, that the trial court issue an injunction preventing defendant from filing a lien or imposing any fines upon plaintiffs, and that the trial court issue an order granting plaintiffs' approval for their fence. Defendant answered, denying material allegations of the complaint and alleging the following affirmative defenses: Waiver & Estoppel; Notice; Assumption of Risk; Defendant's Compliance with Applicable Law. Defendant also moved to dismiss per Rule 12(b)(6).
On 12 July 2011, defendant moved for summary judgment. On 2 September 2011, the trial court entered partial summary judgment in favor of defendant. The judgment concluded in pertinent part the following:
18. There is no genuine issue of material fact as to whether a quorum existed at any of the relevant annual meetings of the Association. Therefore, summary judgment is granted in favor of the Defendant as a matter of law on that issue.
19. There is no genuine issue of material fact as to whether the “ballots” apparently used by the Defendant at any of the relevant annual meetings of the Association were improper or whether any such use of “ballots” ultimately affected the outcome of any voting at any such meeting. Therefore, summary judgment is granted in favor of the Defendant as a matter of law on that issue.
20. There remains a genuine issue of material fact as to whether the Plaintiffs' claims are barred by the business judgment rule. Therefore, summary judgment is denied as to that issue.
Following a bench trial on the remaining issues, the trial court entered judgment concluding the following:
19. The Plaintiffs failed to show that the Defendant acted unreasonably or in bad faith in enforcing the covenants.
20. The Plaintiffs failed to show that the Defendant acted arbitrarily or capriciously in enforcing the covenants.
21. The Plaintiffs failed to show that the Defendant did not follow the proper procedure and law when enforcing the covenants.
The trial court upheld the decision made by the ACC and BOD that plaintiffs' fence violated defendant's covenants and that a fine of $50.00 per day until the fence is removed was proper. From the partial summary judgment order and the judgment following a bench trial, both entered 2 September 2011, plaintiffs appeal.
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Plaintiffs advance the following issues on appeal: whether the trial court erred (I) by making findings of fact in its order for summary judgment; by granting summary judgment in favor of defendant (II) on the issue of a quorum and (III) on the issue of balloting; whether the trial court erred by upholding defendant's decision (IV) when the BOD failed to follow corporate formalities and statutory requirements for the imposition of fines, (V) when it was arbitrary, capricious, unreasonable, and made in bad faith, (VI) when defendant's purported standards are void for vagueness, and (VII) when the judgment relies on the existence of valid corporate actions.
Standard of Review
Summary Judgment
“[Summary] judgment is appropriate only when the record shows that there is no genuine issue as to any material fact and that any party is entitled to a judgment as a matter of law.” Unitrin Auto & Home Ins. Co. v. McNeill, –––N.C.App. ––––, ––––, 716 S.E .2d 48, 50 (2011) (citation omitted).
A party may prevail on summary judgment if (1) it can prove that an essential element of the opposing party's claim is nonexistent, or (2) it can demonstrate through discovery that the opposing party has failed to produce evidence supporting an essential element of its claim.
Page v. Bald Head Ass'n, 170 N.C.App. 151, 154, 611 S.E.2d 463, 465 (2005) (citation omitted).
“We review a trial court's order granting or denying summary judgment de novo. Under a de novo review, th[is] court considers the matter anew and freely substitutes its own judgment for that of the lower tribunal.” Ginsberg v. Bd. of Governors of the Univ. of N.C., ––– N.C.App. ––––, ––––, 718 S.E.2d 714, 715–16 (2011) (citation omitted).
Bench Trial Judgment
“The applicable standard of review on appeal where, as here, the trial court sits without a jury, is whether competent evidence exists to support its findings of fact and whether the conclusions reached were proper in light of the findings.” Lewis v. Edwards, 159 N.C.App. 384, 388, 583 S.E.2d 387, 390 (2003) (citation omitted). “The trial court's conclusions of law are reviewable de novo on appeal.” In re Schiphof, 192 N.C.App. 696, 700, 666 S.E.2d 497, 500 (2008) (citation and quotation marks omitted).
I
First, Plaintiffs rely on Capps v. Raleigh, 35 N.C.App. 290, 241 S.E.2d 527 (1978), and argue that the trial court erred by making findings of fact in its summary judgment order.
In Capps, our Court stated that
it is not a part of the function of the court on a motion for summary judgment to make findings of fact and conclusions of law. As we have pointed out on previous occasions, finding the facts in a judgment entered on a motion for summary judgment presupposes that the facts are in dispute.
Id. at 292, 241 S.E.2d at 528 (citations and quotation marks omitted). Our Court went on to state that “in rare situations it can be helpful for the trial court to set out the undisputed facts which form the basis for his judgment.” Id. at 292, S.E.2d at 529 (emphasis in original). Although the trial court's judgment did not indicate whether or not the fact were undisputed, the Capps Court concluded that the material facts found by the trial court were not in dispute. Id.
In the case before us, the summary judgment order contains fifteen findings of fact and five conclusions of law. Although it was improper for the trial court to enter these findings of fact and conclusions of law, “it is helpful to the parties and the courts for the trial judge to articulate a summary of the material facts which he considers are not at issue and which justify entry of judgment.” Moore v. Galloway, 35 N.C.App. 394, 397, 241 S.E.2d 386, 387–88 (1978). “The [f]indings of [f]act entered by the trial judge, insofar as they may resolve issues as to a material fact, have no effect on this appeal and are irrelevant to our decision. We therefore do not consider the findings of fact made by the trial court but will review de novo whether summary judgment was properly granted.” Collier v. Collier, 204 N.C.App. 160, 162, 693 S.E.2d 250, 252 (2010) (citations and quotation marks omitted). In the instant case, as in Collier, we do not consider the findings of fact by the trial court, we review de novo the trial court's grant of summary judgment.
II and III
Next, plaintiffs argue the trial court erred by granting summary judgment in favor of defendant on the issues of voting and on whether a quorum existed at defendant's 2008 or 2009 annual meeting. Plaintiffs argue that because there was no quorum at any relevant membership meetings, and because they raise an issue regarding the propriety of ballots used at relevant membership meetings, the BOD was not validly elected, and thus, the BOD that “allegedly disapproved the fence and imposed fines on Plaintiffs had no authority to act.” We disagree.
Article IV of defendant's by-laws governs the meeting of members. Section 2 states that an annual meeting will be held for the purpose of electing members of the BOD and for the transaction of other business. Pursuant to section 7, there must be a quorum—presence in person or by proxy constituting 51% of the total votes of the Association—for any action.
Article VI of defendant's by-laws governs the meeting of directors. Section 5 states that “[a] majority of the number of Directors fixed by these By–Laws shall be required for and shall constitute a quorum for the transaction of business at any meeting of the [BOD].” Section 6 governs the “manner of acting” and provides that “the act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the [BOD] .”
Article 7 of the Nonprofit Corporation Act sets out numerous voting requirements. “A corporation having members with the right to vote for directors shall hold a meeting of such members annually.” N.C. Gen.Stat. § 55A–7–01 (2011). “Unless the articles of incorporation or bylaws prohibit or limit proxy voting, a member may vote in person or by proxy. A member may appoint one or more proxies to vote or otherwise act for the member by signing an appointment form[.]” N.C.G.S. § 55A–7–24 (2011) (emphasis added).
The Nonprofit Corporation Act also provides that actions by written ballots may be used in the following circumstance:
[u]nless prohibited or limited by the articles of incorporation or bylaws ..., any action that may be taken at any annual, regular, or special meeting of members may be taken without a meeting if the corporation delivers a written ballot to every member entitled to vote on the matter. Any requirement that any vote of the members be made by written ballot may be satisfied by a ballot submitted by electronic transmission, including electronic mail[.]
N.C.G.S. § 55A–7–08 (2011) (emphasis added).
The record indicates that defendant, the moving party, produced the following evidence: Affidavits from Randy Roseboro, Rocky Allen, and Charlie Denmead—all members of the BOD during October and November 2009—demonstrate that there was a quorum at the 2006 annual meeting. At the 2006 annual meeting, those validly elected to the BOD include Randy Roseboro, Charlie Denmead, Rocky Allen, Brad Lanto, John Zimmerman, and Warren Chestnutt. Somewhere between 2006 and the meeting in 2009 in which the BOD disapproved plaintiffs' fence, Brad Lanto, John Zimmerman, and Warren Chestnut resigned from the BOD. Charlie Denmead, Rocky Allen, and Randy Roseboro continued to serve on the BOD at least through 2009, along with three other BOD members for a total of six BOD members.
Assuming arguendo that plaintiffs are correct in that a quorum did not exist at the 2007, 2008, and 2009 meetings as alleged in their complaint, then the only remaining, validly-elected BOD members would include three members: Charlie Denmead, Randy Roseboro, and Rocky Allen. Further, because all three of these members stated in their affidavits that they voted to disallow plaintiff's fence in 2009, an act that would constitute a majority vote by the BOD, defendant's evidence establishes that its acts were valid under the bylaws. Plaintiffs argue that the voting process for directors at the annual meetings were invalid and therefore, that they had no authority to act. However, there is nothing in the record to indicate that the bylaws prohibit defendant from voting in person or by proxy. Therefore, plaintiffs' argument cannot be sustained as a matter of law. Accordingly, defendant was able to establish that the issues of voting and quorum in 2007, 2008, and 2009 were not material to the case. We hold that where the record supports the trial court's conclusion that the BOD had authority to act as a matter of law, the trial court did not err by granting summary judgment in favor of defendant on the issues of balloting and quorum. Plaintiffs' argument is overruled.
Although defendant's bylaws require the initial BOD to include six members, the bylaws are silent as to the number of members required for subsequent boards.
IV
Plaintiffs argue that the trial court erred in its 2 September 2011 judgment by upholding the decision made by the BOD to fine plaintiffs $50.00 per day until the fence is removed. We disagree.
First, plaintiffs rely on Purser v. Heatherlin Props., 137 N.C.App. 332, 527 S.E.2d 689 (2000), for the contention that defendant is estopped from imposing fines on plaintiffs because it failed to keep detailed records as required pursuant to Article XI of the Bylaws, § 55A–16–01 of the Nonprofit Corporation Act, and § 47F–3–118 of the Planned Community Act. Without deciding whether these statutory provisions apply to the case before us, we hold that plaintiffs' argument is without merit. Purser dealt with the doctrine of estoppel in terms of denying liability of a worker's compensation claim for an employee who was injured during the scope of his employment. Id. Plaintiffs fail to cite to any other authority supporting their argument that a party like defendant should be estopped from imposing fines based on deficiencies in record-keeping.
Next, plaintiffs argue that defendant did not follow the statutory requirements as set out pursuant to section 47F–3–107.1 of the North Carolina General Statutes.
Section 47F–3–107.1 provides that
Unless a specific procedure for the imposition of fines or suspension of planned community privileges or services is provided for in a declaration, a hearing shall be held before the executive board or an adjudicatory panel appointed by the executive board to determine if any lot owner should be fined .... Any adjudicatory panel appointed by the executive board shall be composed of members of the association who are not officers of the association or members of the executive board. The lot owner charged shall be given notice of the charge, opportunity to be heard and to present evidence, and notice of the decision. If it is decided that a fine should be imposed, a fine not to exceed one hundred ($100.00) may be imposed for the violation and without further hearing[.]
N.C. Gen.Stat. § 47F–3–107.1 (2011) (emphasis added).
Plaintiffs contend that the ACC did not have the authority to act as an adjudicatory panel or to impose any fine and that as a result, the BOD “sustained” an invalid fine such that the fines were void ab initio. Plaintiffs also contend that Charlie Denmead's role on the ACC is forbidden because he was a BOD member. Plaintiffs' arguments mischaracterize the facts. We note that numerous findings of fact were entered by the trial court following the bench trial. An unchallenged finding of fact clearly explains that on 12 November 2009, a hearing was held by the BOD and plaintiffs were given an opportunity to present evidence. It was the act of the BOD and not the ACC who voted unanimously to impose a fine of $50.00 per day. Accordingly, because the imposition of fines was an act of the BOD, plaintiff's argument regarding Charlie Denmead's role as a member of the ACC is overruled.
Furthermore, a review of the record indicates that the trial court's judgment, following the bench trial, to uphold defendant's decision is supported by the following unchallenged findings: The covenants of Magens Bay Subdivision require the submission of plans and prior consent before the erection of fences within the subdivision. The ACC discussed plaintiffs' 27 October 2009 request to retroactively approve the fence they had erected on their property and unanimously determined to deny plaintiffs' application for retroactive approval. After denial by the ACC, plaintiffs appealed the decision to the BOD. The entire BOD held a duly called meeting on 12 November 2009. Plaintiffs were provided proper notice of the meeting, an opportunity to present evidence, and plaintiff Pohlman presented evidence in support of their appeal. After consideration, the BOD voted unanimously to deny the appeal and imposed a fine of $50.00 per day.
Based on the foregoing, we decline to find the trial court erred in upholding the fine imposed. Plaintiffs' argument is overruled.
V
Next, plaintiffs challenge the trial court's conclusions of law number 19 and 20 which states that
19. The Plaintiffs failed to show that the Defendant acted unreasonably or in bad faith in enforcing the covenants.
20. The plaintiffs failed to show that the Defendant acted arbitrarily or capriciously in enforcing the covenants.
Plaintiffs contend that the trial court “apparently based” these conclusions of law on its finding of fact number 12, which they argue is not supported by competent evidence. Finding of fact number 12 states that “[b]ased on the evidence presented, there does not exist a common scheme or plan within Magens Bay Subdivision of fences similar to the one erected by the Plaintiffs.”
Plaintiffs argue that because their fence was nearly identical to a fence located on the Vrablic property (“Vrablic fence”), defendant's decision to disapprove plaintiffs' fence was arbitrary and capricious. A review of the record indicates that plaintiff presented evidence that over thirty-five lots within Magens Bay Subdivision contained fences. Although defendant conceded that the Vrablic fence was similar in size and construction to plaintiffs' fence, several factors of the Vrablic fence were distinguishable from plaintiffs' fence: The Vrablic fence was submitted to the ACC for approval prior to construction. The Vrablic fence included a plan in an attempt to shield the fence with landscaping while plaintiffs' fence was more visible to the neighborhood and does not include landscaping plans. The Vrablic fence is located in a much less conspicuous area in the subdivision than plaintiffs' fence. Further, several BOD members testified that they took several factors into consideration when deciding to disapprove plaintiffs' fence: materials used, color, size, location within the subdivision, landscaping plan, whether prior approval was sought, conspicuousness of the fence, etc. Based on the foregoing, finding of fact number 12 was supported by competent evidence.
Next, our review of conclusions of law 19 and 20 indicates that they are supported by several unchallenged findings of fact which are deemed binding on appeal. See Peters v. Pennington, 210 N.C.App. 1, 13, 707 S.E.2d 724, 735 (2011). Plaintiffs erected a commercial grade fence without approval of the ACC. The covenants of Magens Bay subdivision require the submission of plans and prior consent before the erection of fences and also vest broad discretionary power to the Architectural Review Committee. The relevant portion of Magens Bay's Declaration of Covenants, Restrictions, and Easements provides that
(d) Required Approval. No improvements, alterations, repairs or excavations, nor any maintenance which requires or would result in a change in appearance (such as a change in color), or any other activity which would noticeably and visibly change the exterior appearance of a house or a Lot, or any improvement located thereon, shall be made or done without the prior approval of the Committee. No building, fence, wall, residence, ... or other structure shall be commenced, erected, maintained, improved, altered or otherwise modified, without the prior approval of the Committee[.]
Plaintiffs were given notice of the charge, an opportunity to be heard and to present evidence and notice of the final decision after the hearing on their appeal to the BOD.
The foregoing findings of fact support the conclusions of law made by the trial court that plaintiffs failed to show that defendant acted unreasonably, in bad faith, arbitrarily, or capriciously in enforcing the covenants of Magens Bay subdivision.
VI
Plaintiffs challenge the validity of defendant's covenant requiring approval of plaintiffs' fence. Plaintiffs argue that because the covenant is “not based on any objective or measurable standard for approval or compliance” they are void for vagueness.
We note that
[i]n order to preserve an issue for appellate review, a party must have presented to the trial court a timely request, objection, or motion, stating the specific grounds for the ruling the party desired the court to make[.] It is also necessary for the complaining party to obtain a ruling upon the party's request, objection, or motion.
N.C. R.App. P. 10(a)(1) (2013).
Plaintiffs' argument is not properly preserved for appellate review because they failed to present this argument and obtain a ruling from the trial court regarding this issue. Therefore, plaintiffs' argument is dismissed.
VII
Lastly, plaintiffs argue that the trial court's judgment “necessarily relies on the existence of valid corporate actions” and that therefore, the trial court's judgment which upholds defendant's decision to reject the fence and impose fines, was made in error. Because the substance of plaintiffs' argument has already been addressed above, plaintiffs' argument is overruled.
Affirmed. Judges ELMORE and STEELMAN concur.
Report per Rule 30(e).