PARKER v. FIGURE "8" BEACH HOMEOWNERS' ASS'N

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Docket Number

No. COA04-661

Attorney(S)

Johnson Johnson, P.A., by Rebecca J. Davidson, for plaintiff-appellant. Patterson, Dilthey, Clay, Bryson Anderson, L.L.P., by Stuart L. Egerton, for defendant-appellee Figure "8" Beach Homeowners' Association, Inc. E. Holt Moore, III, for defendant-appellee New Hanover County.

Judges

HUDSON, Judge.

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Smart Summary

Factual and Procedural Background

This case arises from a dispute between plaintiff Raymond Clifton Parker, a property owner on Figure 8 Island, and defendants Figure "8" Beach Homeowners' Association, Inc. ("HOA") and New Hanover County concerning the HOA's authority to levy a special assessment for dredging and maintaining a waterway. Plaintiff challenged the validity of the vote approving the assessment, the assessment itself, and a contract between the county and the HOA, alleging these were ultra vires and void. The trial court granted summary judgment in favor of defendants and denied plaintiff's summary judgment motion. Plaintiff appealed the judgment entered on May 16, 2003. The Court of Appeals heard the case on February 15, 2005, and affirmed the trial court's decision.

Legal Issues Presented

Whether the HOA had the authority under the restrictive covenants to levy a special assessment for dredging and maintenance of waterways, including areas not immediately adjacent to Figure 8 Island.
Whether the plaintiff was prejudiced by the trial court’s procedures regarding access to ballots in the HOA special assessment election.

Arguments of the Parties

Plaintiff's Arguments

The plaintiff argued that the HOA lacked authority to levy the special assessment because the area to be maintained was not specifically identified or depicted in the restrictive covenants.
Plaintiff contended that he was prejudiced by being denied full access to the ballots used in the HOA special assessment vote, alleging possible fraud in the signatures.
Plaintiff challenged the trial court’s denial of his motion for summary judgment and the granting of the defendants’ motions.

Defendants' Arguments

The defendants argued that the covenants clearly authorized assessments for channel dredging, maintenance of marshes and waterways, and payment of governmental charges, supported by maps and reasonable construction of the covenants.
Defendants maintained that the area at the confluence of Mason Creek and the Atlantic Intracoastal Waterway, though not adjacent or depicted on maps, was reasonably included because it directly affected the island’s boating community.
Defendants asserted that plaintiff was given bifurcated access to the ballots to protect voter secrecy, and plaintiff’s failure to review the ballots or raise further objection waived his claim of prejudice.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
McGinnis Point Owners Ass'n v. Joyner, 135 N.C. App. 752, 522 S.E.2d 317 (1999)	Standard for summary judgment: whether genuine issues of material fact exist and whether the moving party is entitled to judgment as a matter of law.	The court applied this standard to affirm the trial court’s grant of summary judgment to defendants and denial of plaintiff’s motion.
Allen v. Sea Gate Assn., 119 N.C. App. 761, 460 S.E.2d 197 (1995)	Requirements for enforcing covenants imposing affirmative obligations: clear, unambiguous, sufficiently definite language; ascertainable standards for assessments; identification of property to be maintained.	The court used this precedent to interpret the restrictive covenants and to determine that the HOA had authority to levy the assessment.
Figure Eight Beach Homeowners' Ass'n, Inc. v. Parker and Laing, 62 N.C. App. 367, 303 S.E.2d 336 (1983)	Support for strict construction of covenants and standards for enforcement.	Cited as part of the legal framework for interpreting restrictive covenants.
Beech Mountain Property Owners Assoc. v. Seifart, 48 N.C. App. 286, 269 S.E.2d 178 (1980)	Standards for assessing liability and enforceability of covenants.	Used to support the principle that covenants must have ascertainable standards.
Hultquist v. Morrow, 169 N.C. App. 579, ___ S.E.2d ___ (2005)	Restrictive covenants are strictly construed but not unreasonably or in a manner defeating their plain purpose.	The court relied on this to uphold a reasonable interpretation of the covenants including areas not explicitly named or depicted.
Cumberland Homes, Inc. v. Carolina Lakes Prop. Owners' Ass'n, 158 N.C. App. 518, 581 S.E.2d 94 (2003)	Supports interpretation principles for restrictive covenants.	Quoted to reinforce the principle that covenants should be construed to effectuate their obvious purpose.

Court's Reasoning and Analysis

The court first applied the summary judgment standard, finding no genuine issue of material fact and that defendants were entitled to judgment as a matter of law. It then analyzed the restrictive covenants under established North Carolina law, requiring clear and unambiguous language with ascertainable standards to enforce affirmative obligations such as assessments.

The court examined the covenant language, which expressly allowed assessments for channel dredging, maintenance of marshes and waterways, and governmental charges. The 1993 amendment specifically added "channel dredging; beach renourishment" as authorized purposes. Although some areas to be dredged, such as the confluence of Mason Creek and the Atlantic Intracoastal Waterway, were not depicted on the covenants’ maps and were not adjacent to Figure 8 Island, the court found a reasonable construction included these areas because they directly affect the boating community on the island.

The trial court’s factual finding that the dredging benefits the entire boating community was supported by evidence including aerial photographs and environmental reports. The court also noted that HOA members were adequately informed via the ballot about the location, cost, and duration of the special assessment.

Regarding plaintiff’s claim of prejudice from limited ballot access, the court reviewed the hearing transcript and found plaintiff was granted bifurcated access to protect voter secrecy. Plaintiff’s counsel agreed to review the ballots under these conditions but failed to do so or raise further objections. Consequently, the court held that plaintiff waived this issue on appeal.

Holding and Implications

The Court of Appeals affirmed the trial court’s grant of summary judgment in favor of defendants.

The court held that the HOA was lawfully authorized under the restrictive covenants to levy the special assessment for dredging and maintenance of the waterway, including areas not immediately adjacent to Figure 8 Island. The plaintiff’s procedural complaints regarding ballot access were deemed waived due to his failure to pursue the issue at trial. This decision directly resolves the parties’ dispute without establishing new precedent beyond the application of existing covenant interpretation principles.

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RAYMOND CLIFTON PARKER, Plaintiff v. FIGURE "8" BEACH HOMEOWNERS' ASSOCIATION, INC., and THE COUNTY OF NEW HANOVER, Defendants.

2. Appeal and Error — failure to pursue remedy at trial — not heard on appeal

1. Deeds — restrictive covenants — assessment for dredging waterway

The trial court did not err by granting defendants' motion for summary judgment in an action by a member of a coastal homeowner's association challenging the association's authority to levy a special assessment for dredging and maintaining a waterway. The standards for interpreting covenants imposing affirmative obligations include the identification of the property to be maintained with particularity and the existence of sufficient standards by which to measure liability for assessments. The language involved here clearly provides that assessments may be used for channel dredging, maintenance of marshes and waterways, and payment of governmental charges, and the covenants included maps. The court reasonably construed the covenants to include an area not covered by the maps and not adjacent to the island because it directly affects the island's boating community. Additionally, the members who voted were informed of the location of the area to be maintained, the cost, and the duration of the commitment.

Plaintiff could not pursue on appeal the issue of access to ballots in a homeowner's association assessment election where he was granted bifurcated access to protect the secrecy of the vote, he agreed to review the ballots at a break on the assumption that he could raise the issue again, and he did neither.

HUDSON, Judge.

This case concerns a dispute between a coastal homeowner's association and one of its members about the association's authority to levy a special assessment for dredging and maintenance of a waterway. On 21 February 2002, plaintiff Raymond Clifton Parker sued for judgment declaring that a vote on the assessment, the assessment itself, and a contract between defendant New Hanover County ("the county") and defendant Figure "8" Beach Homeowners' Association, Inc. ("HOA") were ultra vires, inappropriately obtained, and null and void. Both defendants moved for summary judgment, and by consent of all parties, plaintiff was deemed to have moved for summary judgment. The court denied plaintiff's motion and granted defendants' motions by order entered 16 May 2003. Plaintiff appeals. We affirm.

Plaintiff owns property on Figure 8 Island ("Figure 8"), a privately owned island of 563 lots in New Hanover County. Mason Inlet runs along the south end of the island, separating it from the Town of Wrightsville Beach. Figure 8 is governed pursuant to the HOA bylaws and applicable restrictive covenants. Figure 8 property owners, including plaintiff, are members of the HOA. On 29 January 1993, the covenants were amended to add "channel dredging; beach renourishment" as purposes for which annual assessments could be used. Until 12 April 1993, there were three versions of restrictive covenants on Figure 8 lots, based on their date of sale. On 12 April 1993, the HOA made the 1978 version of the restrictive covenant applicable to all lots. This covenant obligates property owners to pay an annual assessment in an amount fixed by the HOA board, which can also levy additional assessments as it deems necessary. Any assessment for new capital improvements costing more than $60,000 requires approval by a majority of HOA members eligible to vote.

In 1999, the county, the HOA, and several other homeowner associations in the Wrightsville Beach area had been considering measures to deal with erosion, channel dredging and other beach-related maintenance matters. The homeowner associations formed a coalition called the Mason Inlet Preservation Group ("MIPG"), which undertook a project to relocate Mason Inlet. The sand dredged from the project would be used to renourish Figure 8's beaches. The county commissioners voted to sponsor the project and pay for it through a special assessment on the property owners of Wrightsville Beach and Figure 8. Over the next two years, the project moved through the permitting and planning process, and in November 2001, the county obtained from the U.S. Army Corps of Engineers a permit to relocate Mason Inlet. The permit required that the county maintain the relocated inlet for thirty years through regular dredging. On 5 November 2001, the county commission voted 3-2 against the project based on concerns about the cost of maintaining the relocated inlet.

The Figure 8 HOA board quickly developed a plan to seek reversal of the commissioners' vote. Having determined that the costly maintenance was a capital improvement, the board approved immediate solicitation of a vote by HOA members to approve a special assessment covering the maintenance costs of the relocated inlet. On 14 November 2001, the board mailed letters and ballots to all eligible HOA voters. A majority of the ballots returned voted in favor of the special assessment associated with the project.

Plaintiff first argues that the court erred in denying plaintiff's motion for summary judgment and in allowing defendants' motion for summary judgment. We disagree.

"The test to be applied by the trial court in ruling on a motion for summary judgment [is] whether the pleadings, depositions, answers to interrogatories, admissions of file or affidavits established a genuine issue as to any material fact." McGinnis Point Owners Ass'n v. Joyner, 135 N.C. App. 752, 754, 522 S.E.2d 317, 319 (1999) (citing N.C.R. Civ. P. 56(c)). "If no such issue exists, the trial court must then determine whether the moving party is entitled to judgment as a matter of law." Id. This Court has set forth the following standard for interpreting covenants imposing affirmative obligations:

Covenants that impose affirmative obligations on property owners are strictly construed and unenforceable unless the obligations are imposed in clear and unambiguous language that is sufficiently definite to assist courts in its application. To be enforceable, such covenants must contain some ascertainable standard by which a court can objectively determine both that the amount of the assessment and the purpose for which it is levied fall within the contemplation of the covenant. Assessment provisions in restrictive covenants (1) must contain a sufficient standard by which to measure . . . liability for assessments, . . . (2) must identify with particularity the property to be maintained, and (3) must provide guidance to a reviewing court as to which facilities and properties the . . . association . . . chooses to maintain.

Allen v. Sea Gate Assn., 119 N.C. App. 761, 764, 460 S.E.2d 197, 199 (1995) (internal quotation marks omitted) (citing Figure Eight Beach Homeowners' Ass'n, Inc. v. Parker and Laing, 62 N.C. App. 367, 376, 303 S.E.2d 336, 341 (1983) and Beech Mountain Property Owners Assoc. v. Seifart, 48 N.C. App. 286, 295-96, 269 S.E.2d 178, 183-84 (1980), disc. review denied, 309 N.C. 320, 307 S.E.2d 170 (1983)).

We first consider whether the covenants "contain a sufficient standard by which to measure" the HOA's liability for assessments, and whether the covenants "identify with particularity the property to be maintained," and provide us guidance as to which facilities and properties are to be maintained. Regarding annual assessments, the covenant provides:

8(c) The funds arising from such assessment or charges or additional assessment may be used for any or all of the following purposes: Maintaining, operating, improving or replacing the bridges; protection of the property from erosion; collecting and disposing of garbage, ashes, rubbish and the like; maintenance, improvement and lighting of the streets, roads, drives, rights of way, community land and facilities, tennis courts, marsh and waterways; employing watchmen; enforcing these restrictions; paying taxes, indebtedness to the Association, insurance premiums, governmental charges of all kinds and descriptions and, in addition, doing any other things necessary or desirable in the opinion of the Association to keep the property in neat and good order and to provide for the health, welfare and safety of owners and residents of Figure Eight Island.

(Emphasis supplied). The 29 January 1993 amendment added the language "channel dredging; beach renourishment" to paragraph 8(c). Taken together, the language of this paragraph provides for assessments to be used for channel dredging and maintenance of marshes and waterways and for payment of governmental charges of all kinds and descriptions. Maps included in the covenants depict and refer to several of the areas which the assessment would be used to dredge and maintain.

One area covered by the assessment which is not immediately adjacent to Figure 8, and thus not depicted in the maps, is that where the to-be-opened Mason Creek would flow into the Atlantic Intracoastal Waterway ("AIW"). This area was of concern to the Army Corp of Engineers and the HOA because the planned relocation of Mason Inlet and the reopening of Mason Creek could create problems with sand build up at this juncture with the AIW. Plaintiff contends that because this area is neither named nor depicted in the covenants, it is not specifically identified and could not have been intended for inclusion in the covenants' maintenance provisions. Our courts have stated that "[r]estrictive covenants are strictly construed, but they should not be construed `in an unreasonable manner or a manner that defeats the plain and obvious purpose of the covenant.'" Hultquist v. Morrow, 169 N.C. App. 579, 582, ___ S.E.2d ___, ___ (2005) (quoting Cumberland Homes, Inc. v. Carolina Lakes Prop. Owners' Ass'n, 158 N.C. App. 518, 521, 581 S.E.2d 94, 97 (2003)).

Concerning this location the trial court noted in finding 14:

14. Figure Eight Island has a boating community, with a marina near its main clubhouse and with several private docks on the back, or "sound side," of the island. Boating access to the AIW has been enhanced for residents on the southern back side of the island with the dredging and reopening of Mason's Creek, and the entire island's boating community is benefitted by once again having a navigable inlet on the southern end to the Atlantic Ocean. Periodic dredging of shoaling sands within the intersection of Mason's Creek and the AIW, occurring at a location some 4,500 feet from the southern end of the island proper, nevertheless directly benefits the navigability of channels for the Figure Eight Island boating community and the boaters' access to Mason Inlet, Wrightsville Beach and points both south and north on the AIW.

This finding is supported by the exhibits before the trial court, such as the aerial photo of the island and the environmental assessment report created by the U.S. Army Corp. of Engineers. As several aspects of the overall Mason Inlet relocation plan would have an impact on the confluence of AIW and Mason Creek, we believe that the court's construction of the covenants was reasonable and that the evidence adequately supports this finding, which in turn supports the legal conclusion that the "authority of the Figure 8 HOA to assess its property owners/members upon a vote of the membership is lawfully authorized."

In addition, the HOA ballot clearly specified the possible cost involved and the period of time dredging maintenance could be required. The ballot states, in pertinent part:

The Board of Directors of the Figure "8" Beach Homeowners' Association, Inc. proposes a Special Assessment to be submitted to a vote of the members. The Assessment is for the purpose of funding the costs of maintenance dredging of the Atlantic Intracoastal Waterway (AIW) in the vicinity of the confluence of the AIW and Mason Creek, but only at times when maintenance of this area is required to be done by New Hanover County as a condition of federal or state permits authorizing the relocation of Mason Inlet. The assessment is not to be used when dredging of this area is being done in connection with the Mason Inlet Relocation Project by New Hanover County. The assessment will not be levied if the Mason Inlet Relocation Project is not constructed by July 1, 2003. The Board is authorized to assess up to $350,000 in any year. The assessment may be levied at such times and in such amounts as the Board deems appropriate for up to thirty years from the date of approval.

HOA members who voted were informed of the location of the area to be maintained as well as the cost involved and the duration of the commitment upon which they were voting.

Plaintiff also argues that rulings at the hearing and in settling the record prejudiced plaintiff in his appeal. We disagree.

Plaintiff contends that he was prejudiced by his inability to review the actual ballots submitted by HOA members during the vote on the special assessment. Plaintiff alleged that some of the signatures on ballots might be fraudulent. However, the transcript of the hearing on the parties' summary judgment motions reveals that plaintiff was not denied such access. Defendants' counsel stated:

We are not wanting to deny access to the entire ballots to Mr. Parker and his attorney. We simply want to maintain the secrecy of how the members voted and we've offered some means by which — I've already folded 55 no votes where we could first let them count the no votes without seeing the names, the names are folded under. Mr. Parker's name is among these. We could also allow them to inspect the ballots which were determined to be invalid. Most of them simply weren't marked. People signed their names and then forgot to vote on the top half of the page.

The trial court then undertook an in camera inspection of the ballots to look for signs of tampering. After this inspection, the court told plaintiff he could examine the ballots in a bifurcated process in order to preserve the secrecy of HOA members' votes. Plaintiff could see all of the signatures first, then could see the portion of the ballots indicating the vote cast. Plaintiff's counsel objected to this process, stating that he believed there was no expectation of privacy regarding the ballots, but then stated:

I will review the ballots at a break and. . . . And then we'll move forward. And I assume that at some point in time, if I feel like we need to open this issue up, we can do it.

Plaintiff's counsel never raised the issue again. Having failed even to avail himself of the opportunity to review the ballots as described at the hearing and to raise this issue further with the trial court, plaintiff may not now complain that the access he was granted was insufficient and unduly prejudicial to him.

Affirmed.

Judges TIMMONS-GOODSON and STEELMAN concur.