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Conkey v. Sleepy Creek Forest Owners Association, Inc.

Supreme Court of West Virginia

April 11, 2018

ARTHUR L. CONKEY, Jr., and JO CAROL CONKEY, Defendants Below, Petitioners
v.
SLEEPY CREEK FOREST OWNERS ASSOCIATION, INC., Plaintiff Below, Respondent

          Submitted: April 3, 2018

          Appeal from the Circuit Court of Morgan County The Honorable Christopher C. Wilkes, Judge Civil Action No. 16-C-29

          Michael L. Scales, Esq. Michael L. Scales, P.L.L.C. Martinsburg, West Virginia Counsel for the Petitioners

          Charles S. Trump IV, Esq. Trump & Trump, L.C. Berkeley Springs, West Virginia Counsel for the Respondent

          JUSTICE KETCHUM delivered the Opinion of the Court. JUSTICE WALKER concurs and reserves the right to file a Concurring Opinion.

         SYLLABUS BY THE COURT

         1."Where the terms of a contract are clear and unambiguous, they must be applied and not construed." Syl. pt. 2, Bethlehem Mines Corp. v. Haden, 153 W.Va. 721, 172 S.E.2d 126 (1969).

         2. "The plain language of W.Va. Code § 36B-3-116(f) (1986) (Repl. Vol. 2005) requires a judgment or decree in any action brought under W.Va. Code § 36B-3-116 to include an award of costs and reasonable attorney's fees for the prevailing party." Syl. pt. 5, United Bank, Inc., v. Stone Gate Homeowners Ass'n, Inc., 220 W.Va. 375, 647 S.E.2d 811 (2007).

          KETCHUM, JUSTICE.

         This action concerns the Sleepy Creek Forest Subdivision, a residential community located in Morgan County. Arthur L. Conkey, Jr., and Jo Carol Conkey, lot owners in the Subdivision, appeal from the December 22, 2016, order of the Circuit Court of Morgan County. Pursuant to the order, summary judgment was granted for the Subdivision's Association and against the Conkeys for $1, 215.00 in delinquent residential assessments and related charges. The Conkeys also appeal from the circuit court's order entered on February 13, 2017, awarding the Association $10, 061.25 in attorney's fees.

         The Conkeys contend that the delinquent assessments represent certain increases in annual assessments which were never properly voted on by the Association. According to the Conkeys, the increases were, therefore, ultra vires with respect to the Subdivision's covenants and restrictions. In addition, the Conkeys contend that the Association's efforts to collect the delinquent assessments violated the West Virginia Consumer Credit and Protection Act and that the Association's imposition of 10% interest on the delinquent assessments was usurious. The Conkeys ask this Court to reverse the summary judgment, grant them partial summary judgment on the Association's liability under the Consumer Credit and Protection Act, and remand this action for a determination of the Conkeys' damages and attorney's fees.

         The Association contends that the assessments were expressly authorized and properly imposed by the required vote pursuant to the Subdivision's covenants and restrictions. The Association further contends that the imposition of the assessments and other charges were consistent with the law and that attorney fees were warranted.

         Upon review, we find that the circuit court reached the correct result. Consequently, we affirm the December 22, 2016, order granting summary judgment in favor of the Association and the February 13, 2017, order awarding the Association attorney's fees.

         I. Factual Background

         The Sleepy Creek Forest Subdivision, located in Morgan County, consists of residential lots managed by an Association of lot owners and governed by a Board of Directors. From 1969 forward, each lot in the Subdivision was subject to the restrictions and covenants set forth in the Subdivision's Declaration of Restrictions. The Declaration included a provision that certain maintenance and improvement costs would be paid by the lot owners.

         On September 21, 1982, an amended Declaration of Restrictions was recorded in Morgan County. The amended Declaration provided in relevant part:

The Declarant hereby declares that all of the property comprising all of the Sections of The Sleepy Creek Forest Subdivision shall be held, sold and conveyed subject to the following easements, restrictions, covenants, reservations and conditions, all of which are for the purpose of enhancing and protecting the value and desirability of real property, and which shall run with the real property, and be binding on all parties having any right, title or interest in the above described property or any part thereof, their heirs, successors and assigns, and shall inure to the benefit of each and every owner thereof.

         The amended Declaration of Restrictions designated every owner of a lot within the Subdivision a member of the Association and noted that the initial assessment for each lot would be up to $50.00 per year for the maintenance of roads, rights-of-way and common areas. The amended Declaration provided further:

Any assessment made pursuant to this paragraph, including late fee of Five ($5.00) Dollars, interest at the rate of ten (10%) percent per annum from the date of delinquency, and reasonable attorney's fees incurred in the collection thereof, shall constitute a lien on thie [sic] property until paid and all grantees do bind themselves, their heirs and successors in title to this lien and to the covenants herein written. * * * This assessment may not be raised by more than ten (10%) percent per year without the written affirmative vote of two-thirds (2/3) of the members of the Association entitled to vote.

(emphasis added)

         The Conkeys became lot owners in the Subdivision after the September 21, 1982, amended Declaration of Restrictions was recorded. The Conkeys purchased four lots between 1988 and 2002 which made up their personal residence. Each conveyance to the Conkeys was subject to the Subdivision's covenants and restrictions.

         The Association operated on a fiscal year basis, beginning on November 1 and ending on October 31. Bills for assessments for the coming year were ordinarily sent to lot owners in August and were due by November 1. The controversy between the Association and the Conkeys in this action concerns fiscal years 2002-03, 2005-06 and 2015-16. In each of those fiscal years, the Association voted to raise the assessment by more than 10%.

         For 2002-03, the minutes of the Association show that the assessment was raised from $75.00 per lot to $100.00 per lot for road maintenance. The result was a 33 1/3% increase by a vote of 30 to 12 (71%). For 2005-06, the minutes show that the assessment was raised from $100.00 per lot to $115.00 per lot to cover the cost of a liability insurance bill in the amount of $889.81. The result was a 15% increase by a vote of 31 to 2 (94%).

         Finally, for 2015-16, the assessment was raised from $125.00 per lot to $165.00 per lot, a 32% increase. That increase occurred in two steps. First, the assessment was raised by the Association from $125.00 per lot to $150.00 per lot (a 20% increase) by a vote of 31 to 2 (94%). Second, the Subdivision's Board of Directors raised the assessment by an additional 10% per lot to obtain "needed funds for road repairs / maintenance and delinquent assessments." The result was a $165.00 assessment per lot beginning with the 2015-16 year.

         II. Procedural Background

         In April 2016, the Association filed an action in the Morgan County magistrate court against the Conkeys to recover unpaid Subdivision assessments, late fees, interest and costs. The Conkeys removed the action to the Circuit Court of Morgan County and filed an answer and counterclaim.[1] According to the Conkeys, none of the increases in assessments of more than 10% per year had been obtained by the required "written affirmative vote" of two-thirds of the Association's members. The Conkeys asserted that, as a result, they did not owe the Association any assessment in excess of the original $50.00 per year. The Conkeys further asserted that the Association's debt collection efforts violated the West Virginia Consumer Credit and Protection Act, W.Va. Code, 46A-1-101 [1974], et seq., and that the Association's imposition of 10% interest on their alleged delinquent assessments was usurious.

         The Association filed a motion for summary judgment in July 2016 alleging, inter alia, that the assessments and other charges were expressly authorized and correctly imposed pursuant to the Subdivision's 1982 amended Declaration of Restrictions. The Conkeys also filed a motion for summary judgment. In that motion, the Conkeys sought recovery from the Association under the Consumer Credit and Protection Act for improper debt collection practices.

         On December 22, 2016, the circuit court granted summary judgment in favor of the Association. The Association was awarded $1, 215.00, consisting of the delinquent assessments, a late fee, and interest. Summary judgment was also granted in favor of the Association on the Conkeys's counterclaim.[2] In addition, the Association was awarded reasonable attorney's fees to be determined at a later date.

         The circuit court's rulings were primarily based on the Subdivision's amended Declaration of Restrictions. The circuit court rejected the Conkeys' assertion that the increased assessments were never properly voted on by the Association. The circuit court concluded: "The records show that any increases in any single year which exceeded 10% over the assessments for the previous year were approved by the affirmative vote of more than two-thirds of the members voting." The circuit court thus found the increases consistent with the requirements of the amended Declaration of Restrictions.

         The circuit court further concluded that, although the Consumer Credit and Protection Act applied to the Association's debt collection efforts, [3] no violations occurred because the late charges on the delinquent assessments were authorized by agreement and by statute. The agreement was the Subdivision's 1982 amended Declaration of Restrictions, and the statute cited by the circuit court was W.Va. Code, 36B-3-116 [1986], of the West Virginia Uniform Common Interest Ownership Act.[4] Subsection (a) of W.Va. Code, 36B-3-116 [1986], provides an association with a lien for any assessment (including late charges and interest) from the time the assessment becomes due. In ...


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