Landover Homeowners Ass'n, Inc. v. Sanders

244 N.C.App. 429

781 S.E.2d 488

LANDOVER HOMEOWNERS ASSOCIATION, INC., Plaintiff,

v.Thomas B. SANDERS; Anna B. Sanders; Sanders Equipment Company, Inc.; and Sanders Development Company, L.L.C., Defendants.

No. COA14–1337.

Court of Appeals of North Carolina.

Dec. 15, 2015.

Harris & Hilton, P.A., Raleigh, by Nelson G. Harris, for plaintiff-appellant.

Law Offices of F. Bryan Brice, Jr., Raleigh, by Matthew D. Quinn, for defendant-appellees.

BRYANT, Judge.

Where ambiguities exist in the language of a declaration which create an issue of material fact, the trial court erred in granting summary judgment to defendants, and we reverse.

Defendants Thomas B. Sanders and Anna B. Sanders are husband and wife, who together own 95% of defendant Sanders Equipment Company, Inc. ("SEC"). The Sanders' two adult daughters, Deborah and Barbara, own the remaining 5%. The remaining defendant is Sanders Development Company, LLC ("SDC"), which was formed in 1997 for the purpose of buying property for development. Its sole members are Thomas, Deborah, and Barbara, with each owning a one-third membership interest.

Sanders Landover, LLC ("Sanders Landover") was formed on 12 April 2000. Like SDC, Sanders Landover was created and organized to buy, develop, and sell property, with Thomas Sanders and his two daughters each owning one-third of its membership interest. On 14 April 2000, two days after it was formed, Sanders Landover purchased a 56.63 acre tract of land in Wake County, paying approximately $700,000, which Sanders Landover had borrowed from SEC without any security. In early 2002, Sanders Landover recorded a plat for a portion of the 56.63 acre tract identified as "Landover Sections 1–3, 7–9."

Landover Homeowners Association, Inc. (alternatively, "HON" or "plaintiff-Association") was formed on 10 May 2002 with the initial board consisting of Thomas, Deborah, and Barbara.¹ On 27 May 2002, Sanders Landover recorded a subdivision declaration in the Wake County Registry ("the 2002 declaration"). The 2002 declaration defines "Declarant" as

Sanders Landover L.L.C., its successors and assigns, if such successors or assigns should acquire more than one undeveloped Lot from the Declarant for the purpose of development or if such successors or assigns should acquire more than one Lot, whether developed or undeveloped, pursuant to foreclosure or a deed in lieu of foreclosure.

The 2002 declaration further subjected Sanders Landover's "Landover Sections 1–3, 7–9" to various covenants and conditions, including a requirement to pay annual and special assessments as levied by the HOA. Article VI, section 17 of the 2002 declaration stated, in pertinent part:

During the Declarant Control Period, the Declarant shall pay annual and special assessments for all vacant Lots at an amount equal to one-half (1/2) of the applicable assessment. These assessments may be enforced against Declarant and collected by the [Homeowners] Association in the same manner as annual assessments applicable to other Owners.

Sanders Landover, as the original Declarant, was given wide latitude to assign its Declarant rights: "Declarant specifically reserves the right, in its sole discretion ... [to] assign any or all of its rights, privileges and powers under this Subdivision Declaration or under any Supplemental Declarations."

Article I, section m of the 2002 declaration specifies that the "Declarant Control Period" will end no later than when the first one of three specified conditions occurs.² The only one of the three specified conditions which has been met is the arrival of "5:00 p.m. on the date that is seven (7) years following the date of recordation" of the 2002 declaration. Thus, under the terms of the 2002 declaration recorded on 4 June 2002, the Declarant Control Period ended no later than 5:00 p.m. on 4 June 2009.

On 9 September 2002, Sanders Landover conveyed to SDC a 9.71–acre portion ("the townhome tract") of the original 56.63 acre tract. On 11 September 2003, a plat for the 9.71–acre townhome tract was recorded, and designated as "Landover Subdivision, Phases 4–6," thereby making it subject to the 2002 declaration containing covenants, conditions, and requirements imposed by the HOA. By 24 February 2004, all 9 sections or phases of Landover Subdivision were subject to the 2002 declaration. On 2 November 2005, SDC recorded a plat for the townhome tract showing 81 lots. On 5 December 2005, SDC conveyed Lots 1–16 of the townhome tract to Ross Construction ("Ross").

On 31 March 2006, Deborah signed and filed Articles of Dissolution for Sanders Landover, effective 31 December 2005.³ Therefore, Sanders Landover is not a party to this action. On 13 June 2006, SDC conveyed 11 additional townhome lots to Ross, such that Ross owned 27 townhome lots and SDC owned the remaining 54 townhome lots.

On 25 July 2006, a second supplemental declaration ("the 2006 second supplemental declaration") for the subdivision was recorded, purportedly by Sanders Landover, plaintiff-association, and Ross. The 2006 second supplemental declaration recited, inter alia, that Sanders Landover owned certain lots subject to the declaration. This was incorrect on two accounts. First, as noted supra, Sanders Landover had conveyed the entire 9.71–acre townhome tract to SDC on 9 September 2002 (which in turn had conveyed some of the lots to Ross). Second, Sanders Landover had been dissolved since 31 December 2005. The 2006 second supplemental declaration also amended Article VI, section 17 of the 2002 declaration to read as follows: "Declarant has no obligation for payment of Annual and Special Assessments. During the Declarant Control Period, the Declarant shall not pay any annual or special assessments for vacant recorded Lots."

On 6 September 2011, SDC conveyed Lots 75–81 to SEC. On 6 March 2012, SEC conveyed the same lots to Thomas and Anna Sanders. On the same date, SDC conveyed lots 64–66 and 71–74 of the townhomes to the Sanders. Thus, on 6 March 2012, the Sanders purported to own townhome lots 64–66 and 71–81 ("the Sanders lots"). On 27 December 2012, almost seven years after its dissolution, Sanders Landover recorded an "Assignment of Declarant Rights" purporting to assign its rights under the 2002 declaration and the supplemental declarations to SDC, retroactive to 20 January 2007. On the same date, SDC recorded a second "Assignment of Declarant Rights" which purported to assign SDC's rights to Thomas and Anna Sanders. On 9 May 2013, the Sanders conveyed the Sanders lots (lots 64–66 and 71–81) to SEC, without consideration. On 26 July 2013, the Sanders recorded a third "Assignment of Declarant Rights"⁴ which purported to assign their rights to SEC.

Plaintiff, Landers Homeowners Association, imposed annual assessments from 2009–2012 and four quarterly assessments in 2013. None of these assessments were paid by the owners of the Sanders lots—SEC—who had acquired them from the Sanders for no consideration. On 16 September 2013, plaintiff filed a complaint seeking payment of the unpaid assessments with interest, as well as costs and attorneys' fees. Plaintiff sought to pierce the corporate veil as regards SDC and SEC for failure to observe corporate formalities. Both sides moved for summary judgment.

Defendants asserted various defenses, including estoppel, statute of limitations, and that the language of the second supplemental declaration—"Declarant has no obligation for payment of Annual and Special Assessments. During the Declarant Control Period, the Declarant shall not pay any annual or special assessments for vacant recorded Lots"—made clear that the owners of the Sanders lots (during the pertinent years, SDC, the Sanders, and SEC) as Declarants, had no obligation to pay any assessments. On 1 July 2014, the trial court granted summary judgment in favor of all defendants. Plaintiff appealed.

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On appeal, plaintiff argues that the trial court erred in denying its motion for summary judgment and granting defendants' motion for summary judgment. Specifically, plaintiff argues that (I) the various defendants who owned the Sanders lots during 2009–2013 were not "Declarants" and (II) even if defendants were "Declarants," the language of the 2006 second supplemental declaration is clear in not exempting them from paying assessments, or, in the alternative, is ambiguous in its requirements such that a genuine issue of material fact remains and summary judgment was improper. We agree.

I

Plaintiff argues that Sanders Landover's rights under the declaration were not assigned to defendants. Specifically, plaintiff argues that defendants should not be considered "declarants," as that term is defined in Article 1(1) of the Declaration (the 2002 declaration), for purposes of determining their liability for assessments.

Plaintiff contends that Sanders Landover cannot assign its rights as a declarant with an effective date over a year after Sanders Landover was dissolved, by instrument which was not reduced to writing and recorded for another seven and a half years. Despite the fact that plaintiff offers no authority or case law to otherwise support its proposition that a purportedly dissolved company may not assign its rights to another entity seven years after that assignor company's dissolution, we agree that declarant Sanders Landover's rights were not validly assigned to defendants. In the First Assignment, by which Sanders Landover as declarant purportedly assigned its rights to SDC, this assignment was only recorded on 27 December 2012, almost seven years after Sanders Landover's dissolution.

A dissolved corporation continues its corporate existence but may not carry on any business except that appropriate to wind up and liquidate its business and affairs, including:

(1) Collecting its assets;

(2) Disposing of its properties that will not be distributed in kind to its shareholders;

(3) Discharging or making provision for discharging its liabilities;

(4) Distributing its remaining

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