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<font face="Times New Roman, Times, serif">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.<br>
<br>
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.<br>
<br>
Doug Schafer<br>
</font><br>
<div class="moz-cite-prefix">On 4/28/2016 10:11 AM, Rob Wilson-Hoss
wrote:<br>
</div>
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<p class="MsoNormal"><span
style="font-size:14.0pt;font-family:"Times New
Roman","serif""> Warning: this is
only for people infected with HOA disease. Others are
advised to ignore the following. <o:p></o:p></span></p>
<p class="MsoNormal"><span
style="font-size:14.0pt;font-family:"Times New
Roman","serif""><o:p> </o:p></span></p>
<p class="MsoNormal"><span
style="font-size:14.0pt;font-family:"Times New
Roman","serif""> 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). <o:p></o:p></span></p>
<p class="MsoNormal"><span
style="font-size:14.0pt;font-family:"Times New
Roman","serif""><o:p> </o:p></span></p>
<p class="MsoNormal"><span
style="font-size:14.0pt;font-family:"Times New
Roman","serif""> 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.<o:p></o:p></span></p>
<p class="MsoNormal"><span
style="font-size:14.0pt;font-family:"Times New
Roman","serif""><o:p> </o:p></span></p>
<p class="MsoNormal"><span
style="font-size:14.0pt;font-family:"Times New
Roman","serif""> 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 </span><span
style="font-size:14.0pt;font-family:"Times New
Roman","serif"">:<span style="color:#212121">
<b>"(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."<o:p></o:p></b></span></span></p>
<p class="MsoNormal"><span
style="font-size:14.0pt;font-family:"Times New
Roman","serif";color:#212121"><o:p> </o:p></span></p>
<p class="MsoNormal"><span
style="font-size:14.0pt;font-family:"Times New
Roman","serif";color:#212121"> 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. <o:p></o:p></span></p>
<p class="MsoNormal"><span
style="font-size:14.0pt;font-family:"Times New
Roman","serif";color:#212121"><o:p> </o:p></span></p>
<p class="MsoNormal"><span
style="font-size:14.0pt;font-family:"Times New
Roman","serif";color:#212121"> 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.<o:p></o:p></span></p>
<p class="MsoNormal"><span
style="font-size:14.0pt;font-family:"Times New
Roman","serif";color:#212121"> <o:p></o:p></span></p>
<p class="MsoNormal"><span
style="font-size:14.0pt;font-family:"Times New
Roman","serif";color:#212121"> 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. <o:p></o:p></span></p>
<p class="MsoNormal"><span
style="font-size:14.0pt;font-family:"Times New
Roman","serif";color:#212121"><o:p> </o:p></span></p>
<p class="MsoNormal"><span
style="font-size:14.0pt;font-family:"Times New
Roman","serif";color:#212121">
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:<o:p></o:p></span></p>
<p class="MsoNormal"><span
style="font-size:14.0pt;font-family:"Times New
Roman","serif";color:#212121"><o:p> </o:p></span></p>
<p class="MsoNormal"><span
style="font-size:14.0pt;font-family:"Times New
Roman","serif";color:#212121">
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. <o:p></o:p></span></p>
<p class="MsoNormal"><span
style="font-size:14.0pt;font-family:"Times New
Roman","serif";color:#212121">
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. <o:p></o:p></span></p>
<p class="MsoNormal"><span
style="font-size:14.0pt;font-family:"Times New
Roman","serif";color:#212121">
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. <o:p></o:p></span></p>
<p class="MsoNormal"><span
style="font-size:14.0pt;font-family:"Times New
Roman","serif";color:#212121">
4. Since the Club Envy action was void, and not
voidable, the time bar did not prevent challenges to it.
That reasoning is standard. <o:p></o:p></span></p>
<p class="MsoNormal"><span
style="font-size:14.0pt;font-family:"Times New
Roman","serif";color:#212121">
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.<o:p></o:p></span></p>
<p class="MsoNormal"><span
style="font-size:14.0pt;font-family:"Times New
Roman","serif";color:#212121">
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. <o:p></o:p></span></p>
<p class="MsoNormal"><span
style="font-size:14.0pt;font-family:"Times New
Roman","serif";color:#212121">
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.<o:p></o:p></span></p>
<p class="MsoNormal"><span
style="font-size:14.0pt;font-family:"Times New
Roman","serif";color:#212121">
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." </span><b><span
style="font-size:14.0pt;font-family:"Times New
Roman","serif";color:red">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.</span></b><b><span
style="font-size:14.0pt;font-family:"Times New
Roman","serif";color:#212121"> <o:p></o:p></span></b></p>
<p class="MsoNormal"><b><span
style="font-size:14.0pt;font-family:"Times New
Roman","serif";color:#212121"><o:p> </o:p></span></b></p>
<p class="MsoNormal"><b><span
style="font-size:14.0pt;font-family:"Times New
Roman","serif";color:#212121">
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</span></b><b><span
style="font-size:14.0pt;font-family:"Times New
Roman","serif";color:red">. 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.</span></b><b><span
style="font-size:14.0pt;font-family:"Times New
Roman","serif";color:#212121"><o:p></o:p></span></b></p>
<p class="MsoNormal"><b><span
style="font-size:14.0pt;font-family:"Times New
Roman","serif";color:#212121"><o:p> </o:p></span></b></p>
<p class="MsoNormal"><b><span
style="font-size:14.0pt;font-family:"Times New
Roman","serif";color:#212121">
Yikes. I don't think it really means that.</span></b><span
style="font-size:14.0pt;font-family:"Times New
Roman","serif""><o:p></o:p></span></p>
<p class="MsoNormal"><span
style="font-size:14.0pt;font-family:"Times New
Roman","serif""><o:p> </o:p></span></p>
<p class="MsoNormal"><span
style="font-size:14.0pt;font-family:"Times New
Roman","serif""> As Firesign Theater
famously said, What Does This Mean? For The Straight Poop:<o:p></o:p></span></p>
<p class="MsoNormal"><span
style="font-size:14.0pt;font-family:"Times New
Roman","serif""><o:p> </o:p></span></p>
<p class="MsoNormal"><span
style="font-size:14.0pt;font-family:"Times New
Roman","serif""> 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. <o:p></o:p></span></p>
<p class="MsoNormal"><span
style="font-size:14.0pt;font-family:"Times New
Roman","serif""> 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. <o:p></o:p></span></p>
<p class="MsoNormal"><span
style="font-size:14.0pt;font-family:"Times New
Roman","serif""> 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;<o:p></o:p></span></p>
<p class="MsoNormal"><span
style="font-size:14.0pt;font-family:"Times New
Roman","serif""> 4. But now an
answer to Chiwawa is the statute of limitations. How long
ago was the covenant changed.<o:p></o:p></span></p>
<p class="MsoNormal"><span
style="font-size:14.0pt;font-family:"Times New
Roman","serif""><o:p> </o:p></span></p>
<p class="MsoNormal"><span
style="font-size:14.0pt;font-family:"Times New
Roman","serif""> 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?<o:p></o:p></span></p>
<p class="MsoNormal"><span
style="font-size:14.0pt;font-family:"Times New
Roman","serif""><o:p> </o:p></span></p>
<p class="MsoNormal"><span
style="font-size:14.0pt;font-family:"Times New
Roman","serif""> 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?<o:p></o:p></span></p>
<p class="MsoNormal"><span
style="font-size:14.0pt;font-family:"Times New
Roman","serif""><o:p> </o:p></span></p>
<p class="MsoNormal"><span
style="font-size:14.0pt;font-family:"Times New
Roman","serif"">Arf.<o:p></o:p></span></p>
<p class="MsoNormal"><span
style="font-size:14.0pt;font-family:"Times New
Roman","serif""><o:p> </o:p></span></p>
<p class="MsoNormal"><span
style="font-size:14.0pt;font-family:"Times New
Roman","serif"">Rob<o:p></o:p></span></p>
<p class="MsoNormal"><span
style="font-size:14.0pt;font-family:"Times New
Roman","serif""><o:p> </o:p></span></p>
<p class="MsoNormal" style="text-autospace:none"><span
style="font-size:14.0pt;font-family:"Times New
Roman","serif"">Robert D. Wilson-Hoss <br>
Hoss & Wilson-Hoss, LLP <br>
236 West Birch Street <br>
Shelton, WA 98584 <br>
360 426-2999<o:p></o:p></span></p>
<p class="MsoNormal"><span
style="font-size:14.0pt;font-family:"Times New
Roman","serif""><a moz-do-not-send="true"
href="www.hossandwilsonhoss.com"><span style="color:blue">www.hossandwilson-hoss.com</span></a><br>
<a class="moz-txt-link-abbreviated" href="mailto:rob@hctc.com">rob@hctc.com</a></span><o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
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