Scherer v. Steel Creek Prop. Owners Ass'n

WILLIAM R. SCHERER and ANNE SCHERER, Plaintiffs, v. STEEL CREEK PROPERTY OWNERS ASSOCIATION, PAUL IOOSS,and STEPHEN IOOSS, Defendants.

CIVIL CASE NO. 1:13-cv-00121-MR-DLH

UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF NORTH CAROLINA ASHEVILLE DIVISION

March 30, 2016

MEMORANDUM OF DECISION AND ORDER

THIS MATTER is before the Court on the Defendant Paul Iooss' Motion for Summary Judgment [Doc. 146]; the Plaintiffs' Motion for Summary Judgment [Doc. 150]; the Defendant Steel Creek Property Owners Association's Motion for Summary Judgment [Doc. 152]; the Plaintiffs' Motion to Appoint Receiver [Doc. 154]; and the Plaintiffs' Motion for Leave to file supplemental briefing. [Doc. 181].

BACKGROUND

The following facts are not in dispute. Plaintiffs purchased three platted lots in the Steel Creek Development in 2000-01, and a fourth lot in 2006, consisting of a total of 81.09 acres. [Doc. 5 at 9-11]. They proposed constructing a horse farm on the property. [Id. at 2].

In 2008 Plaintiffs recorded plats further subdividing their property from four into sixteen lots. [Doc. 147-12 at 3-5]. This was done with the approval of the Board of the Defendant Steel Creek Property Owners Association (POA). [Doc. 147-12 at 2]. The purpose of the re-subdivision was for the Plaintiffs to obtain refinancing for their project. [Doc. 147-5 at 48].

Plaintiffs thereafter built new roads on their property that were not platted on the original Steel Creek plats, and erected gates across the roads to limit access to their property. [Doc. 147-5 at 62-65, 180-81]. They submitted for the POA's approval rudimentary plans for a barn and storage buildings on the property. From there things deteriorated quickly. Plaintiffs proceeded with construction without first obtaining POA approval. Approval was thereafter denied and the Plaintiffs were threatened with fines for having commenced without approval. [Docs. 5-16, 5-17, 5-18]. At this point the lawyers got involved and the overall relationship became acrimonious. [e.g., Docs. 47-19, 5-8, 21-7].

The POA then began charging the Plaintiffs road assessments based on their having sixteen platted lots, rather than four. [Doc. 5-20]. For this the POA relied on the restrictive covenant that reads "The pro-ration [of roadmaintenance costs] shall be calculated according to the number of platted lots in Steel Creek." [Doc. 5-1 at 2] (emphasis added). These assessments were made retroactive to the time of the Plaintiffs' re-platting of their property. Interest at the rate of eighteen percent was charged on the prior years' assessments, thus increasing the total demand upon the Plaintiffs to $23,693.70. [Doc. 5-20]. Plaintiffs paid this amount under protest and filed this suit. [Doc. 153-7].

Based on these facts the Plaintiffs present five claims against the POA: 1) pursuant to the North Carolina Debt Collection Act (NCDCA) for the attempt to collect the assessments (Count II), 2) for unjust enrichment (Count IV), 3) for breach of the covenant of quiet enjoyment (Count V), 4) for conversion, regarding the assessments (Count VI), and 5) seeking various declaratory judgments (Count III). Plaintiffs also make a claim against Defendant Paul Iooss, a member of the POA Board, for interference with contract (Count VIII).¹ [Doc. 5].

STANDARD OF REVIEW

The parties have submitted cross-motions for summary judgment under Federal Rule of Civil Procedure 56, wherein each party contends that there are no factual issues for trial and that judgment may be rendered as a matter of law based upon the record. Summary judgment is proper "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). A fact is "material" if it "might affect the outcome of the case." N&O Pub. Co. v. RDU Airport Auth., 597 F.3d 570, 576 (4^th Cir. 2010). A "genuine dispute" exists "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). Upon review of the record before the Court, the Court concludes that the facts are adequately presented therein, and that no genuine dispute as to any material fact exists. Accordingly, summary judgment is an appropriate means by which to resolve the issues presented by the parties.

DISCUSSION

I. Propriety of the Assessments

The threshold question in this matter is whether the Plaintiffs owed the assessments that they paid under protest.

The Plaintiffs do not present this issue in a straight forward manner. It is buried in a 78-page Complaint in the context of a claim pursuant to theNorth Carolina Debt Collection Act (Count II) and a claim for conversion (Count VI). Nonetheless, giving the Plaintiffs the benefit of a liberal construction of their allegations, the Court begins with this issue.

In 2013, Defendant Steel Creek POA retroactively assessed Plaintiffs for their sixteen lots as platted in their re-subdivision of their property that they undertook in 2008. Plaintiffs paid this $23,693.70 ($15,400 assessments plus $8,293.70 interest) under protest. Plaintiffs now seek reimbursement of the amounts improperly charged.

To determine the propriety of these assessments, the Court must turn to the restrictive covenants that call for the assessments. The interpretation of the language of a restrictive covenant is a question of law. Erthal v. May, 223 N.C. App. 373, 378, 736 S.E.2d 514, 517 (2012).

The language at issue herein is contained in Covenant number 13 of the Declaration. That Covenant states in full:

13. ROAD MAINTENANCE FEES. Each lot owner shall be responsible for a pro-rata share of the cost of maintaining the roads within Steel Creek and their continuation to Highway 276, and for the cost of carrying out the lawful purposes of the Property Owners Association. The pro-ration shall be calculated according to the number of platted lots in Steel Creek. The share of a vacant lot shall be one-half the rate of an improved lot. The Developer, after road construction has been completed, will pay a road maintenance fee based on the number of platted lots unsold. The minimum and initial annual fee is $300. During any period in which the Association undertakes primary responsibility for maintaining thecontinuation of the access road through the adjoining Springbrook Subdivision, the Association shall collect from the property owners in Springbrook an equitable share of those costs. The contribution from each Springbrook property owner should be at least one third of the then prevailing per lot assessment in Steel Creek. The road maintenance fee shall be paid in advance for each year on the first day of January, and shall become overdue on the first day of March. Unpaid assessments shall bear interest at the legal rate, and shall be a lien upon the lot, which may be filed and enforced in the same manner as is provided by law for mortgages. In any litigation arising under these Covenants, the prevailing party shall recover from the other party all expenses incurred, including reasonable attorneys fees, calculated without regard to the amount in controversy.

[Doc. 5-1 at 2] (emphasis added).

The meaning of this covenant is plain from its text. A lot is subject to assessment when it is platted. The Plaintiffs' property was originally platted as four lots, but they chose to have it re-platted as sixteen. They sought the approval of the POA for the re-platting of the property, [Doc. 147-12 at 1], which was granted. [Id. at 2]. The Plaintiffs undertook this re-platting in order to obtain financing for their horse farm project. [Doc. 147-5 at 48]. Therefore, when the POA assessed the Plaintiffs based on their property being platted as sixteen lots, this assessment was correct. The Plaintiffs contend that the "only reasonable interpretation" of that covenant is that "the number of lots for assessment purposes increases only when subdivided lots are sold off." [Doc. 150 at 12 n.4]. The covenant, however, contains no languagewhatsoever linking a lot's assessment to its date of sale. It states that "The pro-ration shall be calculated according to the number of platted lots in Steel Creek." The further subdivision of Plaintiffs' property occurred pursuant to a "Final Plat for the Ridges of Steel Creek" dated October 30, 2008. [Doc. 147-12 at 3-5]. Therefore, the assessment by Defendant Steel Creek POA based on Plaintiffs having sixteen lots is valid and first became due January 1, 2009. ("The road maintenance fee shall be paid in advance for each year on the first day of January, and shall become overdue on the first day of March"). [Doc. 5-1 at 2]. This is precisely what the POA did. The Plaintiffs have presented no forecast of evidence that the amount of the assessment is incorrect. In fact, the Plaintiffs assert in their Amended Complaint that the amount of the assessment is for one improved lot and fifteen unimproved lots. [Doc. 5 at 61]. For these reasons the Court will conclude as a matter of law that the assessments charged by the POA were proper and the Plaintiffs are not entitled to any refund thereof.

The POA's charges for interest, however, present a different issue. It is undisputed that the POA charged the Plaintiffs interest on the assessments at the rate of 18% per year. Again, the language of the covenant is clear. It states that "unpaid assessments shall bear interest at the legal rate." [Doc. 5-1 at 2] (emphasis added). The legal rate, however,is eight percent, not eighteen. N.C. Gen. Stat. § 24-1. A property owners association is authorized to charge up to eighteen percent interest on assessments, but is limited by the rate that the association establishes. N.C. Gen. Stat. § 47F-3-115(b). Regarding Steel Creek, the restrictions limit the interest rate to the legal rate, which is eight percent. [Doc. 5-1 at 2]. Therefore, the Plaintiffs have been overcharged by the difference between eighteen percent and eight...