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Ackerman v. Sudden Valley Community Association

April 14, 1997

JOHN F. ACKERMAN AND NANCY LYN ACKERMAN, HUSBAND AND WIFE, HINLOR TRADING COMPANY, A FLORIDA CORPORATION, AND SVH ENTERPRISES, INC., A WYOMING CORPORATION, PLAINTIFFS, AND KATHERINE YURICA, INTERVENING PLAINTIFF, APPELLANT,
v.
SUDDEN VALLEY COMMUNITY ASSOCIATION, A WASHINGTON NON-PROFIT CORPORATION, RESPONDENT, AND GILBERT A. JONES, RESPONDENT, CROSS-APPELLANT.



Appeal from Superior Court of Whatcom County. Docket No: 94-2-00928-8. Date filed: 06/02/95. Judge signing: Hon. Michael F. Moynihan.

Authored by Allendoerfer, J.p.t.,* Visiting Judge. Concurring: Faye C. Kennedy, Ronald E. Cox.

The opinion of the court was delivered by: Allendoerfer

ALLENDOERFER, J.P.T.* - In this case we are asked to review the governing documents of the Sudden Valley Community Association (SVCA) to determine whether the documents, as written, permit the implementation of a dues structure that differentially assesses association members based upon whether or not a member's lot is improved or unimproved. We affirm the trial court and hold that a multi-tiered dues structure is conceptually permissible under the Covenants, provided that it is implemented equitably.

We reverse the trial court, however, on the related issue of whether such a dues structure is permissible under the Articles of Incorporation. Whereas the trial court found that differential assessments impermissibly create two classes of members, we find no such conceptual connection, and hold that a multi-tiered dues structure is permissible without the necessity of amending any governing documents.

FACTS

Sudden Valley began in the early 1970s as a recreational and residential development. SVCA is a non-profit corporation charged by the governing documents with responsibility for maintaining the common properties and facilities, which it holds in trust for the benefit of all lot owners. All lot owners are voting members of SVCA.

In 1994 the Board of Directors of SVCA proposed an amended dues structure under which the owners of improved lots would pay annual dues of $475, and the owners of unimproved lots would pay $340. *fn1 Three lot owners filed suit to prevent SVCA from holding an election of its members to approve this proposed change. The owners' motions for preliminary injunctive relief were denied. The dues proposal was then approved by the membership by a 71 percent majority vote.

In August 1994 the trial court granted another owner, Katherine Yurica, appellant herein, leave to intervene. In September 1994 the owners and Yurica filed amended complaints seeking a declaratory ruling that the two-tiered dues structure (as approved by the membership) violated the Covenants and Articles of Incorporation of SVCA, and seeking a permanent injunction against the two-tiered dues structure and a decree invalidating any assessments made thereunder.

On December 1, 1994, Yurica filed a motion for summary judgment against SVCA. On December 6, 1994, the claims of the other owner-plaintiffs were voluntarily dismissed with prejudice, but the claims of Yurica remained. SVCA filed a cross-motion for summary judgment against Yurica.

On January 13, 1995, the trial court granted Yurica's motion for summary judgment "to the extent that the court finds that SVCA's Articles of Incorporation require that dues be assessed equally against all lot and condominium owners". In his oral decision, the Judge found that a two-tiered dues structure created two classes of members, in violation of the Articles of Incorporation. He indicated that the Articles would have to be amended to create two classes of members before there could be a distinction between dues for improved and unimproved lots.

SVCA filed a motion seeking clarification regarding whether the court's ruling included a determination that the two-tiered dues structure also violated the Covenants. By supplemental order on summary judgment the court ruled that the Covenants do not require that dues be assessed equally against all lot owners and do not prohibit SVCA members from adopting a multi-tiered dues structure provided that it is equitable. Yurica's motion for reconsideration was denied and the court ultimately issued a declaratory judgment concluding in relevant parts:

It is the judgment of this Court that this Covenant [Covenant 16] does not require that dues and/or assessments levied against members be equal in amount but rather, requires that dues and/or assessments be "equitable." The word "equitable" as used in this Covenant, means "fair." As such, the Covenants do not prohibit SVCA's members from adopting a multi-tiered dues structure provided that it is equitable.

It is the judgment of this Court that these provisions of the Articles of Incorporation [Article III(2), Article V] require that dues and/or assessments be levied against members in equal amounts. The two-tiered dues structure adopted by the members of SVCA on June 11, 1994, creates two classes of members in violation of these provisions of the Articles of Incorporation.

In order for a multi-tiered dues structure to be valid, the Articles of Incorporation must be amended to create more than one class of members for the purposes of dues and/or assessments. *fn2

Following entry of the declaratory judgment, SVCA reverted to a uniform dues structure and made the appropriate ...


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