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Shepherd v. Conde

Supreme Court of Virginia

April 13, 2017

KENNETH M. SHEPHERD, ET AL.
v.
RACHELLE CONDE, ET AL.

          FROM THE CIRCUIT COURT OF FAUQUIER COUNTY Jeffrey W. Parker, Judge

          OPINION

          WILLIAM C. MIMS, JUSTICE

         In this appeal, we consider whether an unincorporated association is a "property owners' association" within the meaning of the Virginia Property Owners' Association Act, Code §§ 55-508 to 55-516.2 ("the Act").

         I. BACKGROUND AND MATERIAL PROCEEDINGS BELOW

         In 1988, Sentry Realty, Inc. ("Sentry") recorded a declaration of protective covenants and restrictions ("the Declaration") for Saddle Ridge Farms ("the Subdivision"). The Subdivision comprises six lots cumulatively encompassing approximately 86.7 acres in Fauquier County. The lots are owned as follows: Lot 1 by David W. Emerick, Sr. and Sandra E. Emerick; Lot 2 by Rachelle Conde and Norman Conde; Lot 3 by Kenneth M. Shepherd and Patricia E. Shepherd; Lot 4 by Anita L. Rau and Morton D. Rau; Lot 5 by John S. Schlenker, Jr. and Elizabeth M. Schlenker; and Lot 6 by George P. Kinsey, III and Cheryl A. Kinsey. The lots are served by a private road, North Saddle Ridge Court ("the Road").

         The Declaration created an Architectural Control Committee ("the Committee"), an unincorporated association, to "have full authority to enforce" the Declaration. The Committee comprises the owners of the Subdivision's lots, with one vote for each lot.

         In April 2014, a putative amendment to and restatement of the Declaration ("the First Amendment") was recorded in the name of all the lot owners and the Saddle Ridge Farm Home Owners Association ("the Association").[1] The First Amendment asserted that the Association was "governed in all respects by the HOA Act." The First Amendment also asserted that the Declaration could be amended by two-thirds of the owners of the Subdivision's lots, and that the First Amendment had been adopted by more than that number. The First Amendment was signed by all the lot owners except the Condes.

         In June 2014, the Condes filed a complaint against the other lot owners and the Association. They asserted that the Declaration could be amended only with the unanimous consent of all the lot owners. They also asserted that the Association was not a party to or created by the Declaration or the First Amendment and that it had no authority under either of them. They further asserted that the Committee was not a valid "property owners' association" under the Act because the Committee did not meet the qualifications for such an association under Dogwood Valley Citizens Ass'n. v. Winkelman (Dogwood I), 267 Va. 7, 590 S.E.2d 358 (2004), and Anderson v. Lake Arrowhead Civic Ass'n, 253 Va. 264, 483 S.E.2d 209 (1997). They therefore sought a declaratory judgment that neither the Association nor the Committee had any authority under the Act, and that the First Amendment was invalid.

         The defendants filed a counterclaim and a first amended counterclaim in August 2014. In October 2014, a putative second amendment and restatement ("the Second Amendment") was recorded in the name of the Association. The Second Amendment asserted that the Association was created by the Declaration.[2] Like the First Amendment, the Second Amendment was signed by all the lot owners except the Condes. The Condes subsequently amended their complaint to seek a declaratory judgment that the Second Amendment also was invalid.

         The defendants filed a second amended counterclaim. They asserted that the Road was a common area, and that the Declaration both obligated the Committee to maintain it and authorized the Committee to collect assessments for its maintenance. They further asserted that the Committee therefore was a "property owners' association" within the meaning of the Act. Repeating the Second Amendment's false assertion, they asserted that the Declaration created the Association. In addition, they alleged that the First Amendment and Second Amendment had each been adopted by a two-thirds majority vote as required by the Declaration and the First Amendment, respectively. They asserted that under the amendments, the Association was required to maintain the Road and authorized to collect assessments for its maintenance. They sought a declaratory judgment that the amendments had been validly adopted and that the Declaration, First Amendment, and Second Amendment were binding on all of the lot owners.

         After trial and post-trial briefing, the circuit court entered a final order ruling that the Declaration was not a "declaration" within the meaning of Code § 55-509, that the Declaration did not create the Association, that neither the Committee nor the Association had authority under the Act, that all parties and their lots were bound by the Declaration, and that only the defendants and their lots were bound by the First Amendment and Second Amendment.

We awarded the defendants this appeal on the following assignments of error[3]:
1. The trial court erred in finding that the Association has no powers under the [Act] even though the Declaration and Declaration as amended provide the power to impose assessments for road maintenance and impose a duty to perform such maintenance.
2. The trial court erred in holding that the Declaration did not create an association under Virginia law.
3. The trial court erred in finding that a 100% majority is required in order to amend the Declaration of the Association.

         II. ANALYSIS

         The gist of the defendants' challenge to the circuit court's judgment is that the court erred by ruling that the Declaration does not create a "property owners' association" within the meaning of the Act. Alternatively, if the court ruled correctly on that point, they assert that it erred by ruling that the 2014 amendments to the Declaration did not cure the defect(s) so that the Association qualified as a "property owners' association" within the meaning of the Act.

         To evaluate whether either unincorporated association in this case (i.e., the Committee or the Association) qualifies as a "property owners' association" within the meaning of the Act, we must determine first whether the Declaration conferred the necessary attributes, then whether the amendments were validly adopted, and finally, if the amendments were valid, what effect they had. We therefore consider the defendants' three assignments of error in chronological order. We review the circuit court's interpretations of statutes and restrictive covenants de novo. Luttrell v. Cucco, 291 Va. 308, 313, 784 S.E.2d 707, 710 (2016) (statutes); Fein v. Payandeh, 284 Va. 599, 605, 734 S.E.2d 655, 658-59 (2012) (restrictive covenants). We also are mindful that restrictive covenants are disfavored and "construed most strictly against the grantor and persons seeking to enforce them." Fein, 284 Va. at 606, 734 S.E.2d at 659.

         A. WHETHER THE DECLARATION CREATES A "PROPERTY OWNERS' ASSOCIATION"

         In their second assignment of error, the defendants assert that the circuit court erred by ruling that the Declaration did not create a "property owners' association" within the meaning of the Act. They make this assertion in two parts. First, they assert that the circuit court erred by ruling that the Declaration was not a "declaration" within the meaning of Act. Second, they assert that the Declaration creates a "property owners' association" within the meaning of the Act based on the statutory language of Code § 55-509. We consider each of these arguments in turn.

         1. WHETHER THE DECLARATION IS A "DECLARATION" WITHIN THE MEANING OF THE ACT

         The defendants assert that the circuit court erred by ruling that the Declaration does not qualify as a "declaration" within the meaning of the Act. They argue that the court relied on our decision in Dogwood Valley Citizens Ass'n v. Shifflett (Dogwood II), 275 Va. 197, 654 S.E.2d 894 (2008). They assert that we held in Dogwood II that a "declaration" qualifies under the Act if it creates an association that is obligated both to (1) maintain roads or common area and (2) assess fees to pay for such maintenance. They argue that this holding does not correctly reflect the provisions of the Act because Code § 55-509 defines a "declaration" disjunctively as a recorded instrument that "either (i) imposes on the association maintenance or other operational responsibilities for the common area or (ii) creates the authority in the association to impose on lots, or on the owners or occupants of such lots, or on any other entity any mandatory payment of money." (Emphasis added.) They argue ...


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