Appeal by defendants from judgment dated 8 February 2001 by
Judge Ronald K. Payne in Superior Court, Buncombe County. Heard in
the Court of Appeals 17 April 2002.
McGuire, Wood & Bissette, P.A., by T. Douglas Wilson, for
plaintiff-appellee.
Dungan & Mitchell, P.A., by Robert E. Dungan and Shannon
Lovins, for defendant-appellants.
McGEE, Judge.
The Crowfields Condominium development (Crowfields
development) in Asheville, North Carolina consists of 34 separate
"cluster" buildings with a total of 192 individual units. A
Declaration of Condominium dated 11 May 1973 was recorded for each
cluster and unit within each cluster. The condominium bylaws for
each cluster and unit were attached to the Declaration of
Condominium. The Cluster C Declaration of Condominium and Bylaws
were recorded at Deed Book 1080, Page 573, of the Buncombe County
Registry. The Declaration of Condominium states that in order to revoke
or amend any provision of the Declaration of Condominium "all
'family units' in the Cluster and the holders of all mortgages or
deeds of trust covering the same [must] unanimously agree to such
revocation or amendment by duly recorded instruments." The
Declaration of Condominium further provides that each unit owner
automatically becomes a member of his or her individual cluster
association.
The bylaws for each cluster described the method for electing
members of a board of directors and officers; the bylaws included
a requirement that each owner pay any annual assessments imposed by
the individual cluster associations, as well as monthly assessments
for the maintenance and upkeep of the common grounds and the
individual cluster buildings. Further, Article XI of the bylaws
stated that an umbrella association "may be created and enlarged
from time to time to include representatives from [each individual
cluster] Association" for the purpose of "provid[ing] uniformity of
management and to reduce the costs of administration to owners of
individual units." The umbrella association was to be called
Crowfields Cluster Association.
Additionally, Article XIV of the individual cluster bylaws
described the manner by which the bylaws could be amended:
(a) Notice of the subject matter of a
proposed amendment shall be included in the
notice of any meeting at which a proposed
amendment is considered.
(b) . . . Except as elsewhere provided,
such approvals must be either by:
(1) Not less that 66-2/3% of the entire
membership of the Board of Directors and
by not less than 66-2/3% of the votes of
the entire membership of the Association;
or
(2) not less than 80% of the votes of the
entire membership of the Association; and
(3) Prior to January 1, 1997, by and with
the consent and approval of the
Developer.
The Crowfields Community Association was created effective 31
December 1974 for the purpose of owning, operating, and maintaining
recreational facilities and common grounds developed in conjunction
with the Crowfields development. All unit owners accepting
membership in Crowfields Community Association were deemed members
of that association until they conveyed ownership to another
person. Members were required to pay annual assessments. O.
Claude Smith and Linda Smith (defendants) purchased unit four in
Cluster C of the Crowfields development on 15 June 1989. At that
time, Crowfields development was operating under the original
bylaws. Defendants signed the Crowfields Community Association's
Certificate and Agreement of Membership, specifying the obligation
to pay assessments.
In 1992, ballots were sent to unit owners requesting votes on
proposed amendments to the bylaws. One amendment proposed the
creation of the Crowfields Umbrella Association (formerly
Crowfields Cluster Association), to be created pursuant to Article
XI of the bylaws. Another proposed amendment stated that for
purposes of amending the bylaws, it would be necessary for not less
than 66-2/3% of the entire membership of the Board of Governors andnot less than 66-2/3% of the unit owners of the cluster association
to vote for the measures by written ballot, thus changing the
voting procedures from a vote of the Board of Directors of each
cluster to the Board of Governors of the proposed Crowfields
Umbrella Association. Defendants voted affirmatively for the
amendments and the creation of Crowfields Umbrella Association on
13 December 1992 and the measures passed overwhelmingly. The
amendments to the bylaws were to become effective on 1 January 1993
and were recorded in the Buncombe County Registry, but not as an
amendment to the Declaration of Condominium. In 1997, the bylaws
were properly recorded as an amendment to the Declaration of
Condominium in the Buncombe County Registry.
A bylaws committee was appointed in 1996 by the Board of
Governors to consider possible new changes to the bylaws. The
committee recommended to the executive committee, which was
comprised of the officers, that the bylaws of the individual
cluster associations, the Crowfields Community Association, and the
Crowfields Umbrella Association be combined into one set of bylaws
and rules and regulations to simplify and streamline the
administration of the Crowfields development.
A meeting was held on 2 February 1998 for comments regarding
possible changes in the bylaws. On 21 April 1998 the president of
the executive committee sent a memorandum with a committee report
and ballots to all unit owners concerning the recommendation that
the rules by which the Crowfields development was governed be
simplified and consolidated. The balloting was halted and at leastone additional meeting was held for residents to discuss the
changes in the bylaws. Ballots again were distributed.
Of the thirty-four clusters, thirty-three voted in favor of
the 1998 amendments, with Cluster C not having the necessary
percentage voting for approval. The Board of Governors voted
twenty-seven to three in favor of the amendments. The individual
unit owners voted 173 in favor and three opposed. Seventeen unit
owners did not vote, including defendants. The 1998 amendments to
the bylaws were approved and recorded as an amendment to the
Declaration of Condominium on 26 August 1998 and made applicable to
all clusters and units, except Cluster C. The new bylaws created
Crowfields Condominium Association (plaintiff), replaced all other
bylaws at Crowfields development, and stated that all unit owners
were members of the new association.
Defendants ceased payment of monthly assessments beginning in
November 1998. Cluster C later voted to approve the 1998
amendments. The vote was duly recorded as an amendment to the
Declaration of Condominium on 3 March 1999.
Plaintiff filed a claim of lien and complaint for unpaid
assessments against defendants on 28 October 1999. Defendants
filed an answer, a counterclaim requesting a declaratory judgment
that plaintiff's alleged assessments be deemed illegal and
unenforceable, and a motion to dismiss pursuant to N.C. Gen. Stat.
§ 1A-1, Rule 12(b)(6) on 19 January 2000. The trial court denied
defendants' motion to dismiss in an order dated 22 March 2000.
This matter was heard at a trial without a jury beginning 30October 2000. In a pre-trial memorandum, defendants argued that
plaintiff was an unincorporated association and had no capacity or
standing to sue because it had failed to allege it had filed an
assumed name certificate pursuant to N.C. Gen. Stat. § 1-69.1; thus
the trial court did not have jurisdiction to rule on plaintiff's
claims. Defendants also made an oral motion to dismiss before
trial for lack of jurisdiction. The trial court reserved ruling on
defendants' motion until the close of all the evidence. At the
close of all the evidence, the trial court did not rule on
defendants' motion but instructed the parties to submit to the
court proposed findings of fact, conclusions of law, and judgments,
as well as any arguments on relevant issues, including defendants'
motion to dismiss.
The record shows that plaintiff submitted proposed findings of
fact and conclusions of law, a memorandum in support of the
proposed findings and conclusions, and a "response to defendants'
motion for directed verdict" for lack of jurisdiction. The record
also shows that defendants submitted a proposed judgment, which
included proposed findings of fact and conclusions of law.
The trial court, in a judgment dated 8 February 2001, ordered
defendants to pay to plaintiff the sum of $7,783.00 plus interest
from 1 November 1998 to date of payment and dismissed defendants'
counterclaims. The trial court did not rule in its judgment on
defendants' motion to dismiss for lack of jurisdiction. Defendants
appeal.
I.
Defendants first argue the trial court erred in denying their
motion to dismiss because plaintiff's complaint failed to allege
the location of an assumed name certificate, and plaintiff offered
no evidence of the certificate.
Plaintiff alleged in paragraph one of its complaint that
[p]laintiff is an unincorporated association
of homeowners organized pursuant to a
Declaration of Condominium under North
Carolina Unit Ownership Act recorded at Deed
Book 1080, page 573, of the Buncombe County
Registry, as amended in those amendments
recorded in . . . Deed Book 1995, page 554,
Deed Book 2044 page 583, Deed Book 2080, Page
396 and Deed Book 2171, page 108 of the
Buncombe County Registry.
In their answer, defendants denied this allegation.
"At common law . . . an unincorporated association could not
sue or be sued as a legal entity since it had no existence separate
and distinct from its members."
Highlands Township Taxpayers
Assoc. v. Highlands Township Taxpayers Assoc., Inc., 62 N.C. App.
537, 538, 303 S.E.2d 234, 235 (1983) (citing
Youngblood v. Bright,
243 N.C. 599, 91 S.E.2d 559 (1956)). However, unincorporated
associations may now
sue or be sued under the name by which they
are commonly known and called, or under which
they are doing business, to the same extent as
any other legal entity established by law and
without naming any of the individual members
composing it. . . . Any unincorporated
association . . . bringing a suit in the name
by which it is commonly known and called must
allege the specific location of the
recordation required by G.S. 66-68.
N.C. Gen. Stat. § 1-69.1 (2001).
N.C. Gen. Stat. § 66-68 "requires that a business operatingunder an assumed name file a certificate, stating the name of the
business and name and address of the owner(s), in the office of the
register of deeds of the county in which business is conducted."
Highlands Township at 538-39, 303 S.E.2d at 235.
See also N.C.
Gen. Stat. § 66-68 (2001).
Defendants argue that plaintiff never complied with the
requisites of N.C.G.S. §§ 1-69.1 and 66-68. Plaintiff responds
that defendants failed to timely raise this issue in a pleading
prior to trial, and the trial court therefore did not err in not
granting defendants' oral motion at trial.
A party desiring to raise the issue of capacity shall
negatively aver its nonexistence and support that averment. N.C.
Gen. Stat. § 1A-1, Rule 9(a) (2001). A negative averment is "[a]n
averment that is negative in form but affirmative in substance and
that must be proved by the alleging party." Black's Law Dictionary
132 (7th ed. 1999).
Defendants contend they "made sufficient allegations to raise
the issue of Plaintiff's capacity in their Answer." We disagree.
First, the general denial filed by defendants in their answer as to
plaintiff's allegations in paragraph one of the complaint is not a
negative averment and therefore did not, by itself, place
plaintiff's legal existence in issue. Defendants argue, however,
that paragraphs two, three and nine in their answer sufficiently
raised the issue of plaintiff's capacity. The paragraphs at issue
read as follows:
2. Defendant . . . is an unincorporated
association which purports to represent thehomeowners at Crowfields Condominiums under a
document[] entitled, Declaration of
Condominium, which was recorded at Deed Book
1995, Page 554, Deed Book 2044, Page 583, Deed
Book 2080, Page 396 and Deed Book 2171, Page
108 of the Buncombe County Registry.
. . .
3. This is a proceeding for declaratory
judgment as to [defendants'] rights and for a
permanent injunction enjoining [plaintiff]
from claiming assessments or filing liens on
the [defendants'] properties for alleged
unpaid assessments.
. . .
9. In the immediate action, [plaintiff]
has supposedly filed this action 'by and
through the Executive Committee of the Board
of Directors.' However, [plaintiff] has not
alleged that it owns any property or that the
action is actually maintained by its board of
directors or manager. Further, the 'current
ByLaws of the Association,' as referred to in
[plaintiff's] Complaint, do not provide for
the [plaintiff] to act on behalf of its
membership and do not authorize anyone other
than the board of directors or manager to act
on its behalf. As such, [plaintiff] does not
have authority to maintain this action or to
file the Claim of Lien on [defendants'] real
property.
We fail to discern how these paragraphs put into issue whether or
not plaintiff appropriately complied with N.C.G.S. §§ 1-69.1 and
66-68. Furthermore, we note that defendants filed a counterclaim
against plaintiff in its capacity as an unincorporated association,
thus admitting plaintiff's existence as an unincorporated
association suing in the name of "Crowfields Condominium
Association."
See Truck Service v. Hill, 53 N.C. App. 443, 449,
281 S.E.2d 61, 66 (1981).
Finally, we note that although the trial court did notexplicitly deny defendants' motion to dismiss, defendants did not
file objection to the 8 February 2001 order, or move the trial
court to amend or modify its order to determine defendants' motion
to dismiss on the record. Defendants bear the burden of seeking a
determination by the trial court on their motion to dismiss.
This assignment of error is overruled.
II.
Defendants next contend the trial court erred in failing to
grant defendants' motion for declaratory judgment because the
documents recorded by plaintiff or its predecessor entity
purporting to amend the declarations and bylaws are invalid and
should be declared null and void.
Crowfields development was formed under Chapter 47A of our
General Statutes, the Unit Ownership Act. N.C. Gen. Stat. § 47A-
13(9) (2001) states that a declaration creating unit ownership
shall contain the method by which the declaration may be amended.
N.C. Gen. Stat. § 47A-19(8) (2001) states that the bylaws shall
provide for "[t]he percentage of votes required to amend the
bylaws, and a provision that such amendment shall not become
operative unless set forth in an amended declaration and duly
recorded." Thus, the bylaws must set forth voting procedures and
any amendments to those procedures must be recorded as an amendment
to the declaration.
See also N.C. Gen. Stat. § 47A-18 (2001)
(stating that "[n]o modification of or amendment to the bylaws
shall be valid, unless set forth in an amendment to the declaration
and such amendment is duly recorded"). Defendants first argue that the documents recorded in 1997 are
invalid because the Declaration of Condominium requires changes to
the bylaws to be unanimously agreed upon. Defendants claim that
the voting provisions in the Declaration of Condominium and in the
bylaws conflict; therefore, because the bylaws are made a part of
the Declaration of Condominium, it follows that "to amend the
bylaws as part of the declaration would require unanimous
agreement." In interpreting a contract, a court must ascertain the
intent of the parties at the time the contract was executed. To do
so, the court must look at the circumstances surrounding the
execution including "the language used, the situation of the
parties, and objects to be accomplished. Presumably the words which
the parties select were deliberately chosen and are to be given
their ordinary significance."
Briggs v. Mills, Inc., 251 N.C. 642,
644, 111 S.E.2d 841, 843 (1960) (citations omitted).
The trial court found, and we agree, that the bylaws are a
document independent from the Declaration of Condominium, with
their own specifications and requirements for amendment. Although
the Declaration of Condominium states that the bylaws are "made a
part of th[e] Declaration," it does not state that the bylaws were
subject to the Declaration of Condominium to the extent of
rendering meaningless the provisions of the bylaws.
The Declaration of Condominium in this case clearly states
that to amend
the Declaration there must be a unanimous vote. The
Declaration of Condominium does not state any procedures or
requirements for amending the bylaws. The original bylaws clearlystate that to amend
the bylaws there must be a vote of not less
than 66-2/3% of the entire membership of the board of directors and
not less than 66-2/3% of the entire membership of the Association.
In amending the bylaws in 1992, plaintiff complied with its
obligations pursuant to the bylaws provisions ensuring that at
least two-thirds of the membership of each cluster association
voted in favor of the amendments, as well as two-thirds of the
entire membership and two-thirds of the board of directors.
Defendants themselves affirmatively voted for the measures at issue
in 1992 and received the benefits of the changes to the bylaws
without protest until 1998.
Defendants also argue that because the 1992 amendments to the
bylaws were not properly recorded until 1997, said amendments are
void. Although we agree that the amendments adopted in 1992 did
not become effective until 1997 when they were properly recorded as
an amendment to the Declaration of Condominium, the trial court did
not err in failing to declare these amendments void since they were
in fact properly recorded in 1997.
See Cornerstone Condominium
Association, Inc. v. O'Brien, 336 N.C. 307, 307, 442 S.E.2d 321,
322 (1994) (standing for the principle that bylaws become effective
as of the date of proper recordation).
Defendants next argue that the documents recorded in 1998 are
invalid because no duly recorded instrument shows the unanimous
written agreement of the unit owners and mortgagees, and because no
notices were sent out and no meetings were held as required by the
bylaws. As determined above, the bylaws do not require a unanimousvote in order to properly be amended. The trial court found, and
we agree, that plaintiff substantially complied with it obligations
pursuant to the bylaws of the cluster organizations, requiring
that: a written ballot be distributed to unit owners, a vote of the
Board of Governors representing the votes of each cluster located
in the development be taken and at least two-thirds of the
membership of each cluster association vote in favor of the
amendments to the bylaws.
The record shows that notices were sent to unit owners and
defendant O. Claude Smith testified that at least one meeting was
held on the issues. Specifically, he testified at trial that in
1998, "I asked for open discussion, and there was one meeting set
up on a date that I had a business obligation, and I figured,
'Well, I'll go to one of the others.'" Defendants' failure to
attend a scheduled meeting does not render plaintiff's balloting
process void.
Defendants additionally argue that the documents recorded in
1999 are invalid because no duly recorded instrument shows the
unanimous written agreement of the unit owners and mortgagees, and
because defendants never consented to the document and no meetings
were held. We disagree that the documents are invalid; rather, the
documents duly recorded in 1999 simply made the bylaws that were
properly passed and duly recorded in 1998 applicable to Cluster C.
Thus, no additional notices, votes or meetings were required.
Defendants' remaining assignments of error are overruled.
We affirm the judgment of the trial court. Affirmed.
Judges WALKER and CAMPBELL concur.
Report per Rule 30(e).
*** Converted from WordPerfect ***