1. Appeal and Error--appealability--homeowner's association dismissed from
suit--substantial right affected
An order dismissing a homeowner's association but not an individual from
an action involving a fence across a road was interlocutory but appealable
because a substantial right was affected.
2. Standing--homeowner's association--case by case analysis
The North Carolina Planned Community Act (NCPCA), N.C.G.S. Chapter 47F,
does not automatically confer standing upon homeowners' associations in every
case, and questions of standing should be resolved by the courts in the
context of the specific factual circumstances presented and with reference to
the principles of law and equity as well as other North Carolina statutes
that supplement the NCPCA.
3. Standing--homeowner's association--representative capacity
A homeowner's association lacked standing to bring suit as the
representative of individual members of the association in an action arising
from a fence placed across a road where, under Hunt v. Washington State
Apple Advertising Commission, 432 U.S. 333, individual members would have
standing to bring individual suits and the alleged injury was germane to the
organization's purpose, but the participation of individual members was
necessary because the financial impact of the fence upon individuals could
vary from minimal to substantial. The association may have had standing in
its representative capacity if it had sought only declarative or injunction
relief and not monetary damages.
4. Standing--homeowner's association--injury to the association
A homeowner's association had standing to pursue claims alleging injury
to the association itself from a fence placed across a road where the
covenants stated that it had a duty to maintain the private roads within the
development. The presence of a fence across a subdivision road clearly
injures the association's ability to carry out this duty, the injury is
causally connected to defendant's alleged behavior, and the injury likely
would be redressed by a favorable verdict.
5. Parties--joinder motions granted--additional motions considered
The trial court did not err in an action arising from the placement of
a fence across a road by considering a motion to dismiss the homeowner's
association's claims “after” joining other homeowners as necessary parties.
Both rulings were part of orders issued at the conclusion of a hearing andthe court took no actions affecting the resolution of the issues
to be tried.
The cases cited by the association all addressed situations in which
substantive matters were determined in the absence of necessary parties.
Judge Walker concurring in part and dissenting in part.
Appeal by plaintiff from order entered 21 March 2000 by Judge Arnold O.
Jones in Pamlico County Superior Court. Heard in the Court of Appeals 14
March 2001.
Harris, Shields, Creech and Ward, P.A., by C. David Creech, for
plaintiff-appellant.
McCotter, McAfee, & Ashton, PLLC, by Charles K. McCotter, Jr., for
defendant-appellee.
Chesnutt, Clemmons, Thomas & Peacock, P.A., by Gary H.
Clemmons for third party defendant-appellee.
BIGGS, Judge.
Plaintiff, Creek Pointe Homeowner's Association, Inc., appeals from the
trial court's dismissal of its claims for lack of standing, pursuant to
N.C.R. Civ. P. 12(b)(6). This matter arises out of a dispute over a fence
that Richard Happ (defendant), a resident of the Creek Pointe subdivision,
placed across Deep Creek Road, in Creek Pointe. We reverse the decision of
the trial court.
The pertinent facts are as follows: Defendant owns lots 27 through 31
in Creek Pointe, which is located in Pamlico County, about sixteen miles from
New Bern, North Carolina. His lots comprise over 200 acres, and lie on
either side of Deep Creek Road. This land includes the entire eastern
portion of Creek Pointe subdivision. His lots are contiguous; they are
bordered by Deep Creek Road, by Goose Creek, and by a small triangular
portion of lot 22. Defendant purchased the lots in 1994, and erected the
fence shortly thereafter. In November, 1999, the Creek Pointe Homeowner's Association
(association) and individual plaintiff Kenneth C. Kremer (Kremer), one of the
owners of lot 22, brought suit against defendant, seeking an injunction to
require the defendant to remove the fence across Deep Creek Road, and to bar
him from replacing it with another fence. The plaintiffs asked for
compensatory and punitive damages and for attorneys' fees. In their
complaint, plaintiffs alleged that the fence violated a restrictive covenant
granting an easement in favor of all Creek Pointe residents and entitling
them to the use of all roads in Creek Pointe, including Deep Creek Road.
Defendant's answer asserted that permission to erect a fence had been a
condition of his contract of sale with Weyerhaeuser Real Estate Co., Inc.
(developer), and also that the Creek Pointe Homeowner's Association
previously had consented to the fence.
In addition, defendant filed a motion under N.C.R. Civ. P. 19,
“Necessary Joinder of Parties,” seeking dismissal for failure to join all
individual homeowners as necessary parties, and a motion under Rule 12(b)(6),
seeking dismissal of all claims of the association for lack of standing or
interest. Defendant also filed a third party complaint against the
developer. In January, 2000, the defendant filed a motion for summary
judgment against both plaintiffs. This was followed by the developer's
February, 2000, motion for summary judgment, and by the association's motion
of 15 February 2000 seeking an injunction to prohibit defendant from
harassing its members.
All motions were heard on 25 February 2000, at which time the trial
judge issued the following orders:
1. Granted defendant's 12(b)(6) motion, dismissing all claims as to theassociation based on lack of standing or int
erest.
2. Ordered that plaintiff Kremer's wife, all other Creek Pointe
homeowners, and the developer, all must be joined as necessary parties to the
suit.
3. Ordered the fence moved so that it did not block any part of lot 22.
4. Denied the injunction regarding harassment of association members.
5. Denied the developer's motion for summary judgment.
6. Denied defendant's motion for summary judgment.
On 27 March 2000, the association filed notice of appeal from the
dismissal of their claims for lack of standing or interest. It is this
appeal that is presently before this Court. The other orders entered by the
trial court in this matter are not before this Court.
[1]We first note that the trial court did not dismiss the case as to
plaintiff Kremer. Thus, its ruling that the association lacked standing is
an interlocutory order. See Jenkins v. Wheeler, 69 N.C. App. 140, 316 S.E.2d
354, disc. review denied, 311 N.C. 758, 321 S.E.2d 136 (1984) (order
dismissing claims against one defendant is interlocutory where other
defendants remain in suit). Interlocutory orders generally are not
immediately appealable. Bailey v. Gooding, 301 N.C. 205, 270 S.E.2d 431
(1980); Mabrey v. Smith, 144 N.C. App. 119 , 548 S.E.2d 183 (2001). However,
an interlocutory order may be appealed before final judgment under two
circumstances: (1) there is a certification by the trial court that there is
no just reason to delay the appeal, or (2) the ruling affects a substantial
right. Evans v. United Servs. Auto. Ass'n, 142 N.C. App. 18, 541 S.E.2d 782,
cert. denied, 353 N.C. 371, 547 S.E.2d 810 (2001); Smith v. Young Moving &Storage, Inc., 141 N.C. App. 469, 540 S.E.2d 38
3 (2000), aff'd, 353 N.C. 521,
546 S.E.2d 87 (2001); Norris v. Sattler, 139 N.C. App. 409, 533 S.E.2d 483
(2000).
The determination of whether a substantial right is affected is made on
a case by case basis. Collins v. Talley, 135 N.C. App. 758, 522 S.E.2d 794
(1999); Stafford v. Stafford, 133 N.C. App. 163, 515 S.E.2d 43, aff'd, 351
N.C. 94, 520 S.E.2d 785 (1999). The reviewing court must determine whether
denial of immediate review exposes a party to multiple trials with the
possibility of inconsistent verdicts. Murphy v. Coastal Physician Grp.,
Inc., 139 N.C. App. 290, 533 S.E.2d 817 (2000); Moose v. Nissan of
Statesville, 115 N.C. App. 423, 444 S.E.2d 694 (1994). In the present case
we find that, although there was no certification by the trial judge, the
order dismissing all claims as to the association affects a substantial right
of appellants and is, therefore, appealable. See Jenkins, 69 N.C. App 140,
316 S.E.2d 354 (substantial right affected where order dismissed claims
against one of several defendants, thus raising the possibility of multiple
trials against different members of the same group). See also Bernick v.
Jurden, 306 N.C. 435, 293 S.E.2d 405 (1982).
[2]The issue before this Court is whether the trial court erred in its
conclusion that the Creek Pointe Homeowner's Association lacked standing to
join Kremer as a plaintiff in this action. The pertinent features of the
association are as follows: The creation of the association was contemplated
by the developer, who stated in the Declaration of Covenants, Conditions, and
Restrictions that, upon the sale of 75% of the lots in Creek Pointe, “[t]here
shall be created, . . . The Creek Pointe Homeowner's Association.” The
association was incorporated in November, 1989. Its membership consists ofthe owners of all lots in Creek Pointe. Its Articles of Incorpo
ration state
that “the specific purposes for which it is formed are to provide for
maintenance, preservation and architectural control of the residence lots and
roads within [Creek Pointe.]” The Articles also state that the association
has “any and all powers, rights, and privileges which a corporation organized
under the Non-Profit Corporation Law of the State of North Carolina by law
may now or hereafter have or exercise.”
In North Carolina, homeowners' associations historically have enjoyed
the general right to participate in litigation. Our appellate courts have
considered suits brought by homeowners' associations on a case-by-case basis,
and have permitted such associations, when appropriate, to pursue their
claims in court. See, e.g., Village Creek Prop. Owners' Ass'n, Inc. v. Town
of Edenton, 135 N.C. App. 482, 520 S.E.2d 793 (1999) (property owners'
association held to have standing to challenge rezoning of neighboring
property); McGinnis Point Owners Ass'n v. Joyner, 135 N.C. App. 752, 522
S.E.2d 317 (1999) (homeowners' association successfully sues to enforce
restrictive covenant requiring property owners to pay annual assessment).
The association asserts standing under the North Carolina Planned
Community Act (NCPCA), N.C.G.S. Chapter 47F. Their argument is based
primarily upon the following provision of the statute:
Subject to the provisions of the articles of
incorporation or the declaration and the declarant's
rights therein, the [homeowners'] association may: . . .
(4) Institute, defend, or
intervene in litigation or administrative proceedings on
matters affecting the planned community[.]
N.C.G.S. 47F-3-102 (1999), Powers of owners' association, 102(4). The
association's argument is that this is a matter “affecting the planned
community,” and thus that the statute assures them of standing to bring suit. However, we do not read the NCPCA as conferring an autom
atic right upon
homeowners' associations, but rather as reiterating the common law rule that,
when otherwise proper, a homeowners' association may participate in a
lawsuit. Moreover, the statute makes no further attempt to resolve questions
of jurisdiction or standing. It does not define the phrase “affecting the
planned community,” or otherwise restrict the potential range of litigation.
The statute does not employ the term 'standing' in its recitation of an
association's rights; nor does it address issues of standing in any of its
other provisions. We conclude that, although the NCPCA clearly authorizes
homeowners' associations as a general class to institute, defend, or
intervene in litigation, this statute does not diminish our judicial
responsibility to evaluate whether the association has standing to bring this
suit under the specific fact situation presented. In this regard, we note
another relevant provision of NCPCA, N.C.G.S. § 47F-1-108 (1999),
“Supplemental general principles of law applicable,” which states:
The principles of law and equity as well as other North
Carolina statutes . . . supplement the provisions of this
Chapter, except to the extent inconsistent with this
Chapter. When these principles or statutes are
inconsistent or conflict with this Chapter, the
provisions of this Chapter will control.
We find nothing in the NCPCA that is inconsistent with our common and
statutory law regarding issues of jurisdiction and standing. Therefore, we
hold that the NCPCA does not automatically confer standing upon homeowners'
associations in every case, and that questions of standing should be resolved
by our courts in the context of the specific factual circumstances presented
and with reference to the “principles of law and equity as well as other
North Carolina statutes” that supplement the NCPCA. Accordingly, we will
examine the case sub judice in this manner. [3]Jurisdiction in North Carolina depends on the existence of a
justiciable case or controversy. Town of Ayden v. Town of Winterville, 143
N.C. App. 136, 544 S.E.2d 821 (2001); Town of Pine Knoll Shores v. Carolina
Water Service, 128 N.C. App. 321, 494 S.E.2d 618 (1998). Standing is a
necessary prerequisite to the court's proper exercise of subject matter
jurisdiction. Peacock v. Shinn, 139 N.C. App. 487, 533 S.E.2d 842, disc.
review denied, 353 N.C. 267, 546 S.E.2d 110 (2000); Transcontinental Gas Pipe
Line Corp. v. Calco Enter., 132 N.C. App. 237, 511 S.E.2d 671, disc. review
denied, 351 N.C. 121, 540 S.E.2d 751 (1999). “Standing” refers to the issue
of whether a party has a sufficient stake in an otherwise justiciable
controversy that he or she may properly seek adjudication of the matter.
Sierra Club v. Morton, 405 U.S. 727, 31 L. Ed. 2d 636 (1972). The
relationship between standing and the requirement of a justiciable
controversy has been expressed as follows: “Judicial intervention in a
dispute is normally contingent upon the presence of a justiciable
controversy. Standing is that aspect of justiciability focusing on the party
seeking a forum rather than on the issue he wants adjudicated.” Bremner v.
City & County of Honolulu, 96 Haw. App. 134, 28 P.3d 350 (2001). “The gist
of standing is whether there is a justiciable controversy being litigated
among adverse parties with substantial interest affected so as to bring forth
a clear articulation of the issues before the court.” Texfi Industries v.
City of Fayetteville, 44 N.C. App. 268, 269-270, 261 S.E.2d 21, 23 (1979),
aff'd, 301 N.C. 1, 269 S.E.2d 142 (1980).
An association may have standing to bring suit either as a plaintiff, to
redress injury to the organization itself, or as a representative of injured
members of the organization. The leading case on the authority of anassociation to bring suit on behalf of its members is Hunt v. Washi
ngton
State Apple Advertising Commission, 432 U.S. 333, 53 L. Ed. 2d 383 (1977).
In Hunt, the United States Supreme Court established three prerequisites for
an association to sue in a representative capacity:
[A]n association has standing to bring suit on behalf of
its members when: (a) its members would otherwise have
standing to sue in their own right; (b) the interests it
seeks to protect are germane to the organization's
purpose; and (c) neither the claim asserted, nor the
relief requested, requires the participation of
individual members in the lawsuit.
Hunt, 432 U.S. at 343, 53 L. Ed. 2d at 394. The Court expanded on the third
requirement, addressing the significance of the type of relief sought as
follows:
[W]hether an association has standing to invoke the
court's remedial powers on behalf of its members depends
in substantial measure on the nature of the relief
sought. If in a proper case the association seeks a
declaration, injunction, or some other form of
prospective relief, it can reasonably be supposed that
the remedy, if granted, will inure to the benefit of
those members of the association actually injured.
Indeed, in all cases in which we have expressly
recognized standing in associations to represent their
members, the relief sought has been of this kind.
Id. The criteria articulated in Hunt v. Washington State have been applied
several times by our appellate courts. See, e.g., River Birch Associates v.
City of Raleigh, 326 N.C. 100, 388 S.E.2d 538 (1990) (applying Hunt to issue
of whether homeowners' association had standing); Northeast Concerned
Citizens, Inc. v. City of Hickory, 143 N.C. App. 272, 545 S.E.2d 768, disc.
review denied, 353 N.C. 526, 549 S.E.2d 220 (2001) (citizens' association
lacked standing to challenge zoning ordinance where not all members had
individual standing to sue); Landfall Group v. Landfall Club, Inc., 117 N.C.
App. 270, 450 S.E.2d 513 (1994) (association lacked standing to bring suitbecause one of its members would not have had standing as an indi
vidual to
bring action). Therefore, this Court will consider the trial court's ruling
in the context of the requirements for standing to sue in a representative
capacity articulated in Hunt v. Washington State, as these criteria have been
interpreted by our state courts.
We find that the association meets the first prong of the Hunt test, in
that the individual members of the Creek Pointe Homeowner's Association would
have standing to bring suit as individuals. The suit alleges violation of
the “Declaration of Covenants and Restrictions” filed by the developer with
the Pamlico County Register of Deeds. The declaration was filed in 1989, and
was incorporated by reference as part of the “Articles of Incorporation” of
the Creek Pointe Homeowner's Association. The pertinent restriction
establishes an easement granting access to subdivision roads in favor of all
landowners in Creek Pointe. “[G]enerally, grantees in a subdivision are
beneficiaries of any and all restrictive covenants imposed upon the
subdivision so as to give them standing to challenge alleged violations of
the restrictive covenants.” Taylor v. Kenton, 105 N.C. App. 396, 401, 413
S.E.2d 576, 579 (1992) (plaintiffs had standing to enforce covenant, although
the document setting out covenants did not specifically grant this right).
See also Hawthorne v. Realty Syndicate, Inc., 300 N.C. 660, 268 S.E.2d 494
(1980) (affirming Court of Appeals' holding that plaintiff landowners in
subdivision had standing to enforce restrictive covenant applicable to
neighborhood).
This Court finds also that the association meets the second criteria
enunciated in Hunt for standing: that the alleged injury be “germane to the
organization's purpose.” The stated purpose of the Creek Pointe Homeowner'sAssociation is to “provide for maintenance, preservat
ion and architectural
control of the residence lots and roads within [Creek Pointe].” Plaintiff's
suit seeks to regain access to one of the private roads within Creek Pointe.
The controversy over defendant's fence is one that implicates the core
functions of the association.
The third prerequisite for representational standing is that “neither
the claim asserted nor the relief requested requires the participation of
individual members in the lawsuit.” We will evaluate the plaintiffs' claims
and the remedies sought, to determine whether any of the association's
members are necessary parties to the suit. The complaint seeks “just
compensation for their property rights” for Creek Pointe residents, asking
specifically for “damages in an amount in excess of [$10,000,]” as well as
“punitive damages against Happ in a sum in excess of [$10,000,]” and
attorney's fees. Thus, the suit seeks both compensatory and punitive money
damages, while Hunt contemplated situations in which only injunctive or
declarative relief was sought. The calculation of damages would require
consideration of the homeowners' individual circumstances. Plaintiff Kremer
alleged that the fence actually prevents access to part of his land; another
homeowner might assert that the fence reduced the value of his property,
spoiled the view from the front porch, or prevented the use of the road
itself.
An organization generally lacks standing to sue for money damages on
behalf of its members if the damage claims are not common to the entire
membership, nor shared equally, so that the fact and extent of injury would
require individualized proof. Warth v. Seldin, 422 U.S. 490, 45 L. Ed. 2d
343 (1975). “[W]here an association seeks to recover damages on behalf ofits members, the extent of injury to individual members and
the burden of
supervising the distribution of any recovery mitigates against finding
standing in the association.” River Birch Associates v. City of Raleigh, 326
N.C. 100, 130, 388 S.E.2d 538, 555 (1990) (citing Hunt for its holding that
homeowners' association lacked standing where it sought money damages for
some of its members). Indeed, “damages claims usually require significant
individual participation, which fatally undercuts a request for associational
standing.” Pennsylvania Psychiatric Society v. Green Springs Health
Services, Inc., 280 F.3d 278, 284 (2002). In the case sub judice, any
monetary damages owed to plaintiffs would call for “individualized proof,”
and would not necessarily be common to all. The financial impact of the
fence upon various members of the association could vary from significant to
minimal. Therefore, we find that the participation of individual homeowners
is necessary to the suit.
If plaintiffs had sought only declarative or injunctive relief, the
association may have had standing to sue in its representative capacity. The
assertion by Creek Pointe homeowners of a right to unfettered access to all
roads within the subdivision rests upon their ownership of a lot in Creek
Pointe and their membership in the association. Thus, “[t]he interest of
[individual homeowners] in the [Creek Pointe roads] is indirect. Any
interest the home owners have in [the roads] derives through their membership
in the Homeowners' Association. . . . [which can] adequately represen[t]
such interest[.]” River Birch, 326 N.C. at 128-129, 388 S.E.2d at 554.
However, having determined that this suit's pursuit of monetary damages
requires the participation of individual homeowners, we necessarily find that
the association does not meet the third criteria for standing under Hunt v.Washington State to bring suit as the representative of i
ts members.
Consequently, we hold that the homeowners' association lacked standing, under
the criteria articulated in Hunt and followed in subsequent cases, to bring
suit as the representative of individual members of the association.
[4]We next consider whether the association has standing to join Kremer
as a separate plaintiff, rather than as the representative of homeowners. To
bring suit on its own behalf, an association need only meet the “irreducible
constitutional minimum” of a sufficient stake in a justiciable case or
controversy. Lujan v. Defenders of Wildlife, 504 U.S. 555, 119 L. Ed. 2d 351
(1992) (the “irreducible constitutional minimum” of Article III of the U.S.
Constitution requires plaintiff who wishes to pursue claim in federal court
to demonstrate (1) injury in fact, (2) causal relationship between injury and
conduct complained of, and (3) likelihood that injury would be redressed by
favorable verdict); Transcontinental Gas Pipe Line, 132 N.C. App. 237, 511
S.E.2d 671, (reiterating holding of Lujan in concurring opinion).
In the instant case, the Declaration of Covenants, Conditions, and
Restrictions, and the By-laws of the association, state that the association
has a duty to maintain the private roads within Creek Pointe. Clearly, the
presence of a fence across one of the subdivision's roads injures the
association in its ability to carry out this duty. The injury is causally
connected to the defendant's alleged behavior, and likely would be redressed
by a favorable verdict in this action. Therefore, we hold that on the facts
of this case, the association had standing to bring this suit on its own
behalf. See District Council 20, American Federation of State, County and
Municipal Employees, 150 F.Supp.2d 136 (U.S. Dist. Ct., D.C., 2001) (court
finds that Hunt precludes plaintiff organization from suing in representativecapacity, but allows association to remain in suit for
purpose of litigating
claims for declaratory and injunctive relief). Accordingly, we reverse the
trial court's ruling that the Creek Pointe Homeowner's Association lacks
standing to participate in this action, and hold that the association has
standing to pursue claims alleging injury to the association itself.
[5]The association also argues that the trial court erred in
considering the defendant's motion to dismiss the association's claims for
lack of standing “after” it had entered an order joining other homeowners as
necessary parties. We disagree. Both rulings were part of the orders issued
at the conclusion of the hearing on 25 February 2000. Further, the cases
cited by plaintiff for the proposition that after ordering necessary parties
joined, no actions may be taken that are “determinative of a claim arising in
the action,” all address situations in which substantive matters were
determined in the absence of necessary parties. In the case sub judice, the
court took no actions affecting the resolution of the issues to be tried.
The parties raise several other issues in their briefs, including
arguments about whether it is significant that the appellant is Creek Pointe
Homeowner's Association Inc., while the original declaration referred to the
Creek Pointe Homeowner's Association (emphasis added). We do not find it
necessary to resolve these questions.
For the reasons discussed above, we hold that the trial court erred by
dismissing all claims as to the Creek Pointe Homeowner's Association, and
hold that the association has standing to pursue claims against this
defendant on its own behalf. Accordingly, we reverse its order dismissing
all claims of the Creek Pointe Homeowner's Association.
Reversed. Judge SMITH concurs.
Judge Walker concurring in part and dissenting in part.
WALKER, Judge, concurring in part and dissenting in part.
I respectfully dissent from that part of the majority opinion which
holds that while the North Carolina Planned Community Act (NCPCA) authorizes
homeowners' associations as a general class to institute, defend or intervene
in litigation, the statute does not abrogate the common law by advancing “a
new right upon homeowners' associations” to representative standing. I agree
with the position taken by both plaintiffs and third-party defendant
Weyerhaeuser Real Estate Company, Inc. (Weyerhaeuser) that the NCPCA confers
representative standing upon the Creek Pointe Homeowner's Association (Creek
Pointe) to enforce the easement right of lot owners to Deep Creek Road
consistent with its declaration, articles of incorporation and bylaws. See
N.C. Gen. Stat. § 47F-3-102(4)(1999).
The NCPCA provides that homeowners' associations may “[i]nstitute,
defend, or intervene in litigation or administrative proceedings on matters
affecting the planned community.” Id. This section applies retroactively to
homeowners' associations formed prior to the NCPCA's effective date of 1
January 1999. See N.C. Gen. Stat. § 47F-3-102(4), commentary (1999); see
also Patrick K. Hetrick, Of “Private Governments” and the Regulation of
Neighborhoods: The North Carolina Planned Community Act, 22 Campbell L. Rev.
1, 18 (1999). The majority concludes that this language “simply reiterates”
the common law rule regarding homeowners' association standing. However, the
language of N.C. Gen. Stat. § 47F-3-102(4) must be considered in conjunction
with the overall scheme of planned communities and the objectives of theNCPCA. Admittedly, the statute does not automatically confer repre
sentative
standing upon a homeowners' association in every case.
(See footnote 1)
Nevertheless, I
construe the NCPCA to allow a homeowners' association, both as a real party
in interest and in a representative capacity, to pursue litigation in matters
affecting the common areas within the planned community; provided such
actions are consistent with its declaration, articles of incorporation and
bylaws.
Practically speaking, a homeowners' association assures lot owners that
basic needs such as ground care and street maintenance are fulfilled.
However, the association also provides its lot owners with common emotional,
psychological, and social advantages. See Harvey Rishikof and Alexander Wohl,
Private Communities or Public Governments: “The State Will Mark the Call,” 30
Val. U. L. Rev. 509, 513 (1996). Agreed to rules regarding the use of common
areas and restrictions on what the lot owners are allowed to display or
include in their individual units provide a feeling of conformity that many
find reassuring. Id. The creation of this sense of commonality requires lot
owners, in forming a planned community, to make a collective assignment to
the homeowners' association of certain interests enabling the lot owners to
collectively take action in matters affecting the common areas. I believe
that, upon the formation of a planned community, the NCPCA envisions that the
lot owners collectively assign to the homeowners' association their real
property interests in the common areas. Thus, when a matter arises, as in
the case sub judice, affecting the use and control of a common area, the
homeowners' association, in accordance with N.C. Gen. Stat. § 47F-3-102(4)is conferred with representative standing to institute liti
gation on behalf
of the lot owners.
My reading of N.C. Gen. Stat. § 47F-3-102(4) is compatible with other
statutory language dealing with real property interests found elsewhere in
the NCPCA. For example, under N.C. Gen. Stat. § 47F-3-112, a homeowners'
association, upon approval of eighty percent (80%) of the lot owners, may
convey, encumber or otherwise voluntarily transfer portions of any common
area within the planned community. See N.C. Gen. Stat. § 47F-3-112(a)(1999).
Such transfers become “free and clear of any interest of any lot owner or the
association in or to the common [area] conveyed or encumbered, including the
power to execute deeds or other instruments.” N.C. Gen. Stat. § 47F-3-
112(b)(1999)(emphasis added). The NCPCA's official commentary notes this
section was included to “clarify that if conveyance or encumbrance is
authorized by the required percentage of owners, common [areas] may be
conveyed or encumbered free and clear of any easements, rights of way or
claims which might be asserted by individual lot owners in or to that common
area by virtue of their ownership of lots.” N.C. Gen. Stat. § 47F-3-112,
commentary (1999).
Other provisions within the NCPCA demonstrate that upon formation the
lot owners assign to the homeowners' association their real property interest
in common areas. In an eminent domain proceeding affecting a common area,
the NCPCA requires that the portion of an award attributable to the common
area taken is to be paid to the association, rather than distributed pro rata
to the lot owners. See N.C. Gen. Stat. § 47F-1-107 (1999). This statutory
requirement ensures that all the lot owners in a planned community receive
compensation for the taking. Consequently, if a body with eminent domainauthority seeks to acquire a common area the court would be requir
ed to
disperse any monetary compensation to the homeowners' association regardless
of the disparate impact the eminent domain might have on the individual lot
owners. Therefore, in an eminent domain proceeding, only the homeowners'
association need be named as a party defendant. In such a case the
homeowners' association's evidence establishing the damages may include
testimony from individual lot owners.
The same rationale applies to the case sub judice. In order to receive
compensatory or punitive damages, Creek Pointe would have to present evidence
demonstrating how Happ's erection of a fence has damaged the planned
community; including all the individual lot owners. Thus, permitting Creek
Pointe representative standing ensures the protection of all the lot owners'
interests.
The NCPCA's recognition of representative standing is also reflected in
the statutory language dealing with the termination of a homeowners'
association. In the event the lot owners decide to terminate the planned
community, the NCPCA requires that upon termination the remaining common
areas vest in the lot owners as tenants in common. See N.C. Gen. Stat. §
47F-2-118(e)(1999). This vesting of remaining common areas results in the
return to the lot owners of the real property interest assigned to the
homeowner's association at its inception.
Based on my analysis of the NCPCA, I must disagree with the majority's
conclusion that the third prong of Hunt has not been satisfied. I conclude
that neither the claim asserted nor the relief requested requires the
participation of the individual lot owners in this lawsuit. See Hunt v.
Washington State Apple Advertising Commission, 432 U.S. 333, 343, 53 L. Ed.2d 384, 394 (1977). Weyerhaeuser as a third-party defendant
supports the
position of the plaintiffs in this action. Additionally, Weyerhaeuser
created this subdivision and formed the homeowners' association. Obviously,
evidence from Weyerhaeuser will be crucial in establishing the common areas
within Creek Pointe, including Deep Creek Road. Notwithstanding defendant
Happ's contention as to standing, he elected to assert a counterclaim against
the homeowners' association alleging a superior right to this road which
enables him to close it. Therefore, the individual lot owners are not
pursuing a claim or relief for which their participation would be required.
I concur with the majority opinion that the homeowners' association has
standing to pursue claims for declaratory and injunctive relief.
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