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The Germantown Manor Homeowners Association, Inc. v. GGAT Development Corp.

Court of Appeals of Tennessee, Jackson

August 24, 2017

THE GERMANTOWN MANOR HOMEOWNERS ASSOCIATION, INC.
v.
GGAT DEVELOPMENT CORP., ET AL.

          June 28, 2017 Session

         Appeal from the Circuit Court for Shelby County No. CT-000239-15 Felicia Corbin Johnson, Judge

         Appellee, homeowner's association, filed suit against Appellants, owners of lots in the development, to collect association fees. The trial court held that Appellee, a non-profit corporation, was not authorized to formally assess association fees until it elected a board of directors. Tenn. Code Ann. § 48-58-101. The trial court charged Appellants' with association fees accruing after the election of the board and also denied Appellants' counter-complaint for quantum meruit damages allegedly accrued for upkeep of certain common areas, which remained under Appellants' ownership. Discerning no error, we affirm and remand.

         Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court Affirmed and Remanded

          Robert W. Reid and Eugene G. Douglass, Jr., Bartlett, Tennessee, for the appellants, GGAT Development Corporation, and Charleston II Builders, Inc.

          Brandon F. McNary and Peter D. Baskind, Memphis, Tennessee, for the appellee, The Germantown Manor Homeowners Association, Inc.

          Kenny Armstrong, J., delivered the opinion of the court, in which J. Steven Stafford, P.J., W.S., and Brandon O. Gibson, J., joined.

          OPINION

          KENNY ARMSTRONG, JUDGE.

         I. Background

         Germantown Manor consists of 29 lots, which were all initially owned by William Tagg, who is the sole shareholder of Charleston II Builders, Inc. ("Charleston II") and GGAT Development Corporation ("GGAT, " and together with Charleston II, "Appellants"). Charleston II owns two of the 29 Germantown Manor lots; GGAT owns twelve lots and certain common areas. The original plat for Germantown Manor was filed with the Shelby County Registrar on November 14, 2005; the plat contains the following, relevant provision:

19. All lot owners shall become members of the Germantown Manor Homeowners Association and shall pay dues as set by its members and shall comply with the Germantown Manor Home Owners Association's bylaws and regulations. The holder or holders of fee simple title of each lot in this subdivision shall be a fee simple "owner" with one vote.

         From approximately 2004 to 2008, Bud Hurley, a Germantown Manor homeowner, informally collected association fees from other homeowners (not lot owners).[1] In 2008, Mr. Hurley moved from Germantown Manor, and the task of collecting association fees fell to another homeowner, Misty Patel. It was at this time that the homeowners decided to formally organize the Germantown Manor Homeowners Association ("Association, " or "Appellee"). To this end, Ms. Patel met with a local attorney, and the Association filed its Corporate Charter with the Tennessee Secretary of State on March 25, 2008. The Charter was filed pursuant to Tennessee Code Annotated Section 48-52-102; however, no board members were identified in the Charter. On or about April 23, 2008, after the Charter was filed, Ms. Patel sent a letter to the homeowners (not lot owners), stating that the Association had been incorporated and calling for a meeting on April 26, 2008. The meeting was subsequently rescheduled for May 3, 2008.

         On or about August 15, 2008, a second letter was sent to the homeowners (not lot owners), inviting them to attend a special meeting called for August 25, 2008. The purpose of the August 25, 2008 meeting was to discuss proposed bylaws and a proposed declaration of covenants, restrictions, and conditions for the Association. The meeting notice made no mention of establishing an annual assessment to be paid by all lot owners. At the August 25, 2008 meeting, Wayne Mink (an attorney) discussed proceeding with the enactment of formal bylaws, covenants, assessments, and liability issues related to the common areas. At the August 25, 2008 meeting, the homeowners voted to begin collecting homeowner association assessments in the amount of $750.00 per year effective January 1, 2009. Importantly, the Association members did not hold an election of board members at either of the 2008 meetings.

         In September of 2008, Attorney Mink sent a letter to Mr. Tagg discussing issues with the development, including the possibility of an arrangement by which Charleston II could be exempt from assessments under the new covenants, conditions, and restrictions for Germantown Manor. Mr. Mink testified that Mr. Tagg contacted him shortly after he received the letter to discuss his concerns. Mr. Mink sent Mr. Tagg a second letter on or about September 24, 2008, referencing the discussion. The second letter included proposed covenants, conditions and restrictions, and indicated that the documents would, inter alia, exempt Mr. Tagg and his related entities from assessments. The letter also included a quit claim deed for conveyance of the common areas (held by GGAT) to the Association. Mr. Tagg allegedly did not agree with the proposed covenants, conditions, and restrictions, and did not execute and return the quit claim deed.

         In January of 2009, the Association began to collect assessments formally. Despite allegedly receiving bills for assessments, neither Mr. Tagg nor his entities paid association fees. The Association did not hold a meeting in 2009, 2010, 2011, 2012, or 2013. On June 23, 2014, the Association mailed notice of a June 23, 2014 meeting to its members. It was not until the June 23, 2014 meeting that a quorum of the Association members elected a board of directors.

         On January 20, 2015, the Association filed, in the Circuit Court for Shelby County ("trial court"), a complaint for breach of contract against GGAT, seeking damages for unpaid association fees. On January 29, 2015, the Association filed a civil warrant in the Shelby County General Sessions Court against Charleston II. The Association received a judgment against Charleston II in the general sessions court and appealed the judgment to the trial court. On September 14, 2015, the trial court entered a consent order, consolidating the two cases into the present action. By its complaint, the Association sought damages, against GGAT and Charleston II, for unpaid homeowners association fees dating back to 2009. On April 4, 2015, GGAT filed an answer and counter-complaint, seeking compensation for amounts it claimed were incurred in maintaining certain common areas at Germantown Manor.

         The trial was held on April 29 and May 3, 2016. By order of June 20, 2016, the trial court awarded the Association a judgment against Charleston II in the amount of $1, 800 and awarded the Association a judgment against GGAT in the amount of $10, 800. The trial court awarded the Association its assessments dating no earlier than 2014, concluding that the Association's board of directors was not empowered to act before that time. The trial court denied GGAT's counterclaims, finding that it had failed to satisfy the requirements for recoupment of quantum meruit damages.

         II. Issues

         Appellants appeal, raising nine issues as stated in their brief:

1. Whether the trial court erred in assessing dues from January 2015 up to and including January 2016 against Charleston II in the amount of $1, 800.00?
2. Whether the trial court erred in assessing dues from January 2015 up to and including January 2016 against GGAT in the amount of $10, 800.00?
3. Whether the trial court erred in finding that The Germantown Manor Homeowners Association was properly incorporated and organized?
4. Whether the trial court erred in finding that Charleston II and GGAT are members of The Germantown Manor Homeowners Association by virtue of Paragraph 19 of the Plat?
5. Whether the trial court erred in finding that The Germantown Manor Homeowners Association elected a valid board of directors on June 23, 2014?
6. Whether the trial court erred in finding that Charleston II received notice of meetings and bills beginning in 2008?
7. Whether the trial court erred in finding that GGAT received notice of meetings and bills beginning in 2008?
8. Whether the trial court erred in finding that GGAT received inquiry notice by virtue of the fact that a separate and distinct corporate entity, Charleston II, received notice of bills and meetings?
9. Whether the trial court erred in dismissing Appellants' Counter-Complaint for recoupment based ...

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