[WSBARP] Bilanko v. Barclay Court Owners Association
Rob Wilson-Hoss
rob at hctc.com
Thu Apr 28 13:33:41 PDT 2016
Doug,
Yes. I did not get into Fillmore because my email was too long
already, but the veering off into void/voidable is the real takeaway here.
And if what happened in Bilanko was just voidable, and not void, then that
is a pretty low bar. Apparently it is within the general power of a
corporation to ignore a statute unless the statute specifically says it is
not. There are lots and lots of void/voidable cases out there in many
different contexts, many of which I think would have been very useful to
discuss, but I guess not.
I have always wondered how Chiwawa could ignore Fillmore. Fillmore
said that an amendment changing use from owner-occupied to leasing was a
change in use, and then Chiwawa said that a VRBO is obviously not a
different use from owner-occupied.
Um, ok. Works for me. I just won a hotly-contested LUPA arguing
that a VRBO is not regulated by Mason County differently from
owner-occupied.
Rob
Robert D. Wilson-Hoss
Hoss & Wilson-Hoss, LLP
236 West Birch Street
Shelton, WA 98584
360 426-2999
www.hossandwilson-hoss.com
rob at hctc.com
This message is intended solely for the use of the addressee and may contain
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From: wsbarp-bounces at lists.wsbarppt.com
[mailto:wsbarp-bounces at lists.wsbarppt.com] On Behalf Of Doug Schafer
Sent: Thursday, April 28, 2016 1:05 PM
To: WSBA Real Property Listserv
Subject: Re: [WSBARP] Bilanko v. Barclay Court Owners Association
Interesting indeed. In Filmore LLLP v. Unit Owners Ass'n of Centre Pointe
Condominiums, 184 Wash.2d 170 (2015), the court held invalid an amendment,
adopted by 67% vote, to a condo declaration that limited the leasing of
units, since RCW 64.34.264(4) required a 90% vote for amendments altering
the use of a unit. The court of appeals opinion stated that the amendment
was recorded Oct. 20, 2011. The plaintiff filed suit to challenge it in
October 2012, presumably before Oct. 20, since the 1-year statute of
limitations was not addressed in either appellate opinion.
Considering today's Bilanko v. Barclay Court opinion, perhaps a condo
declaration could be amended by a mere majority vote at a meeting attended
by barely a quorum of unit owners so long as no owner files suit to
challenge it within a year of its recording. The amendment would be
voidable for one year, but not void ab initio (though arguably void if
notice of the meeting was not properly given). Nothing I see in the statute
requires the COA officers to notify owners that the amendment was adopted
and recorded, so owners who might challenge it might not even get actual
notice of it within a year, though the recording is constructive notice.
Doug Schafer
On 4/28/2016 10:11 AM, Rob Wilson-Hoss wrote:
Warning: this is only for people infected with HOA disease. Others
are advised to ignore the following.
OK, campers, in a continuing effect to understand how to advise
our clients what the Supreme Court will do about amendments to covenants, we
now take a look at today's Bilanko case, filed one hour ago (at least one
hour before I started this).
You will perhaps remember Chiwawa, the case that said lots of very
interesting things about covenant amendments. Such as, (1) amendments have
to comply with the general plan of the community, (2) they can't create
undue burdens, (3) they can't address new subjects unless the original ones
say they can, (4) they have to follow the covenant amendment rules of the
covenants themselves, and (5) the Supreme Court will interpret the language
of the existing pre-amendment covenants in ways that the 4-vote minority
thought were completely irrational, and totally unpredictable. And, I
suspect, those involved with dealing with lots of sets of covenants from the
50s and 60s would agree with the dissent. Attributing certain intent to
developers who wrote their covenants decades ago ignores the reality that
most of them, in my experience, were just copying something they had seen,
or had a surveyor copy something he or she had seen, or used some title
company form, and really had no thought at all except sell as many lots as
possible. Of course, some developments have covenants that were entirely
intentional in every aspect. And everything in between.
Anyway, today the setting is a new act condo amendment; both the
covenants and 64.34.264(2) specify that amendments to covenants can only be
challenged within one year : "(2) No action to challenge the validity of an
amendment adopted by the association pursuant to this section may be brought
more than one year after the amendment is recorded."
Here, the original covenants allowed for unrestricted renting of
the apartments; the amendment limited rentals to seven apartments, and if
you weren't already in the seven, you went on a waiting list. An owner sued
because she was on the waiting list and it was pretty long. She said that
the amendment was not valid. They did not follow the 90% majority
requirement in both the original covenants and in the condo statute.
Under Chiwawa, of course, except for the statute of limitations
issue, this amendment would be stricken in a heartbeat. At the minimum,
additional burden, general plan of community, and then maybe also that you
have to follow your own rules for amendments.
So, does the statute of limitations apply here? Was the question
about the validity of the amendment? Here, the amendment was passed with
two-thirds, but changes in use needed 90%, under the existing covenants and
the statute. The member thought that was the issue - does the 90%
requirement apply to a restriction on leasing as a change in use, and if so,
it wasn't met.
Justice Gonzalez, writing for a unanimous court, worked his way
through the reasoning, kind of like a kayaker on a Class IV rapid. He did
not agree that this was the issue. He thought the issue was, statute of
limitations, and is this a void or voidable act, this amendment of the
covenants. Statutes of limitations bar claims as to voidable acts, not void
ones. So, this is what he said:
1. A previous case, Club Envy, 184 Wash App. 593, told some
of us that a challenge to an amendment that was not properly passed is not
barred by the one-year limitation. The member in Bilanko said this means
that the time bar only applies to amendments that are passed in compliance
with the part of the statute that says how they have to be passed, and this
one did not comply with that part of the statute.
2. The Court said "invalid" in the statute meant "legally
sufficient; binding." Not, out of compliance with the statutory requirement
for how an amendment is passed.
3. The Court said that the previous Club Envy case was
infected by really bad facts, including fraud (probably no vote was ever
held in the first place), and that this meant that the Club Envy vote was
void ab initio. The president there had recorded an amendment that he did
not have the legal right to record because no other members had agreed to
it, sort of. This is a sharp deviation from the general void ab
initio/voidable discussions that we are used to seeing. Void ab initio
means, didn't have the legal right to do it in the first place. Period.
Outside the authority of the association. Not, yes, the association can
amend its covenants, but it did it wrong. That would usually be, voidable,
not void.
4. Since the Club Envy action was void, and not voidable,
the time bar did not prevent challenges to it. That reasoning is standard.
5. In the new case, Bilanko, the Court said that an action
of a corporation is voidable, not void, if it fails to observe some
statutory requirement while still acting within its corporate powers. If a
statute includes language that says that failure to comply makes an act
void, then it is void; otherwise, the issue is, is the action within the
general powers of the corporation, and if it is, it is just voidable. Can't
argue with that.
6. Then the Court in Bilanko said the test for whether a
corporation's action is void and not merely voidable is whether it committed
fraud, seriously offended public policy, or exceeded its legal authority.
7. Then the conclusion: regardless of whether or not the
corporation needed 90% or the two-thirds was enough, the amendment was
voidable, not void, because an amendment was within the powers of the
corporation.
8. And get this: "Challenges to voidable amendments must be
made within the one-year time bar set out in 64.34.264(2) Nothing restricts
this to the statute of limitations in 64.34.264(2). To hold otherwise would
render the time bar meaningless, for unit owners could challenge amendments
years after passage. A statutory time bar is a 'legislative declaration of
public plicy which the courts can do no less than respect,' with rare
equitable exceptions." THIS HAS TO APPLY TO ALL STATUTES OF
LIMITATIONS, INCLUDING THE SIX YEAR STATUTE THAT APPLIES TO WRITTEN
INSTRUMENTS (and other associations beyond the new act condo statute, such
as HOAs) - CHALLENGES TO COVENANT AMENDMENTS ARE TIME-BARRED AFTER SIX YEARS
AS VOIDABLE, NOT VOID, SO LONG AS THE ACTION IS WITHIN THE GENERAL POWER OF
THE ASSOCIATION, PUBLIC POLICY IS NOT SERIOUSLY OFFENDED, OR FRAUD IS NOT
INVOLVED.
This case was a really good chance for the Court to explain what
the real difference is between void and voidable, and it could have, just by
discussing previous Washington law. It did not do so. If there is a statute
that says that you need 90% approval for a vote changing the use of an
apartment, and you vote to change the use from rental to owner-occupied,
then under Chiwawa, that is the same thing, and not really a change of use.
The Court could at least have said that. But what is the broader rule? What
is within a corporation's powers? My reading of the cases is that it is very
rare to see a ruling that an act was outside the corporate powers, but it is
possible. What about direct violations of statutes? Not here - the statute
may have been directly violated, but according to this Court unless the
statute says, if I am directly violated by a corporation, then the
corporation is acting outside its powers, then a direct statutory violation
is within the powers of a corporation.
Yikes. I don't think it really means that.
As Firesign Theater famously said, What Does This Mean? For The
Straight Poop:
1. If your client has amended its covenants and the
amendments do not seriously violate public policy, are not infested with
equitable diseases, or are without the general authority of the association,
then the amendment is subject to a statute of limitations, whichever one
applies. If you are a HOA, it will be six years.
2. Under Chiwawa, even though the Court sharply concluded
that association had no ability whatsoever to restrict rentals, under
Bilanko, restricting rentals is within the authority of the association, so
the statute of limitations applies. I can find no discussion of the statute
of limitations in Chiwawa, and think this means that the claim was filed
within six years of the amendment.
3. Previously a way around Chiwawa was ratification - did
the member pay dues, serve on the Board or committees, and so on, after
knowledge of the change, and if so, did he or she ratify so that he or she
is subject to the changes regardless; but ratification is personal, so it
does not apply across the board to everyone, it does not apply to subsequent
purchasers, it is case by case, and so it is a real mess from that
perspective;
4. But now an answer to Chiwawa is the statute of
limitations. How long ago was the covenant changed.
And here is the larger, more interesting question: what about all
those other rules, regulations, guidelines to interpretations of rules,
resolutions and so on that associations have passed over the years that are
not very specifically authorized by the covenants? Look at any website for
an older HOA and you will find these everywhere. Are they subject to a
six-year statute of limitations? or are they outside the authority of the
association, because they are not specifically allowed by the covenants,
even given the HOA powers section of RCW 64.38.020? Can the Court read the
covenants to include as within the authority of the association, direct
violations of covenant and statutory provisions, as Bilanko did, and at the
same time, read them to not include within their authority matters within
the statutory powers of associations?
After Chiwawa, I thought that all these rules that were arguably
new rules because they did not directly relate to something in the existing
covenants were at risk. Now, after six years, who knows?
Arf.
Rob
Robert D. Wilson-Hoss
Hoss & Wilson-Hoss, LLP
236 West Birch Street
Shelton, WA 98584
360 426-2999
www.hossandwilson-hoss.com
rob at hctc.com
This message is intended solely for the use of the addressee and may contain
information that is privileged, confidential, and exempt from disclosure
under applicable law. If you are not the addressee, you are hereby notified
that any use, distribution, or copying of this message is strictly
prohibited. If you received this message in error, please notify us by
reply e-mail or by telephone (call us collect at the number listed above)
and immediately delete this message and any and all of its attachments.
Thank you.
This office does debt collection and this e-mail may be an attempt to
collect a debt, Any information obtained will be used for that purpose. To
the extent the Federal Fair Debt Collection Practices Act (15 U.S.C. § 1692)
applies this firm is acting as a debt collector for the
condominium/homeowners' association named above to collect a debt owed to
it. Any information obtained will be used for collection purposes. You have
the right to seek advice of legal counsel.
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