Sanchez v. Cobblestone Homeowners Association of Clayton, Inc. (North Carolina)
Defendant-Appellant Cobblestone Homeowners Association of Clayton, Inc. ("Cobblestone") intends to appeal five (5) companion cases with substantially similar facts to the North Carolina Supreme Court. At some point in early 2014, Cobblestone's former legal counsel discovered that a prior error in Cobblestone's legal documents resulted in a number of homes within Cobblestone being excluded from Cobblestone membership. On or about 30 July 2 014, former counsel for Cobblestone prepared and sent a letter to approximately twenty-six (26) homes in Cobblestone, including all of the Plaintiffs-Appellees in the Companion Cases, which informed the owners of the mistake, and stated that the owners were not subject to the applicable declaration.
It appears undisputed that prior to the 30 July 2014 letter, all of the Plaintiff-Appellees thought they were members of Cobblestone, had access to the amenities whether actually used, and had the use of the property management company for communication and community concerns, among other things. Generally, all of the Plaintiffs-Appellees paid quarterly assessments as they became due and payable since the purchase of their respective homes roughly between 2001 and 2004. Cobblestone ceased invoicing Plaintiffs-Appellees for quarterly assessments following the 30 July 2014 letter.
The 30 July 2014 letter led Plaintiffs-Appellees to file separate small claims complaints seeking a refund for all assessments ever paid to Cobblestone by Plaintiffs-Appellees. The Small Claims Actions resulted in judgments against Cobblestone for all prior assessments paid by Plaintiffs-Appellees. Cobblestone appealed the Small Claims Actions to Johnston County District Court. Generally, the Plaintiffs-Appellees testified that they consciously availed themselves of multiple benefits and services within Cobblestone from the time of purchasing their respective homes until the 30 July 2014 letter. Plaintiffs-Appellees testified that they used the amenities on occasion; complained about community concerns to the property manager; attended and voted in community elections; and otherwise believed they were members of Cobblestone and obligated to pay assessments.
The Johnston County District Court awarded judgment again in favor of Plaintiffs-Appellees for the assessments paid, concluding that no contract ever existed between Cobblestone and Plaintiffs-Appellees; that Plaintiffs-Appellees unjustly enriched Cobblestone by payment of assessments; and that Plaintiffs-Appellees were entitled to a refund of all assessments paid (the "District Court Judgments"). The District Court Judgments, like the results in the Small Claims Actions, resulted in money judgments roughly in the amount of $4,000.00 for each of the Plaintiffs-Appellees.
The North Carolina Court of Appeals, in a 2-1 decision, affirmed the trial court judgments against Cobblestone. Judge Dillon, dissenting, concluded otherwise. Based upon Judge Dillon's dissent, Cobblestone has a right of appeal to the North Carolina Supreme Court on at least the following issues:
1. WHETHER THE COURT OF APPEALS ERRED IN CONCLUDING THAT NO CONTRACT IMPLIED IN FACT EXISTED AS BETWEEN COBBLESTONE AND PLAINTIFFS-APPELLEES; and
2. WHETHER THE COURT OF APPEALS ERRED IN CONCLUDING THAT COBBLESTONE WAS UNJUSTLY ENRICHED BY PLAINTIFFS-APPELLEES.
The impact of an unfavorable decision at the North Carolina Supreme Court would be potentially devastating to community associations, not only in North Carolina, but throughout the United States. First of all, an opinion affirming the North Carolina Court of Appeals would be contrary to long-standing North Carolina law on the issue of implied contracts and the obligation to pay assessments where there is no clear express legal obligation to do so. North Carolina case law has found contracts implied in fact existed between the homeowners associations and owners where the owners received benefits and services to their properties and were on notice that those benefits were being incurred. Established North Carolina case law has also concluded that the homeowners, not the homeowners' association, would be unjustly enriched if no such implied contract existed. Additionally, Reidy v. Whitehart Ass'n, Inc., held that where a party accepts a benefit or transaction, and then later attempts to take a position contrary or inconsistent therewith, the party is estopped from doing so. In other words, if the homeowners acknowledged or recognized the validity of the homeowners' association, the homeowners would be estopped from taking a different position later.
Importantly, an unfavorable opinion in the Cobblestone matter would contradict the nationwide majority view that upholds the establishment of an implied contract in circumstances directly on point with the facts in the Cobblestone case now on appeal. As stated succinctly by the Supreme Court of Colorado, "When faced with this issue, a substantial number of states have arrived at the conclusion that homeowner associations have the implied power to levy dues or assessments even in the absence of express authority." Evergreen Highlands Ass'n v. West, 73 P.3d 1, 7 (Colo. 2003).
Amicus Brief
Prior Ruling: Court of Appeal Opinion
Brief Authors: Adam M. Beaudoin, Esq. and Alexander C. Dale, Esq.
CAI Amicus Brief Review Committee: Robert Diamond, Esq., Chair of Amicus Committee, Stephen M. Marcus, Esq. (MA), Jennifer Jacobsen, Esq. (CA)