Utah Case Law
Park West Condominium Association v. Deppe, 2006 UT App 507
Park West Condominium Association, Inc., Plaintiff and
Appellee, v. Lawrence K. Deppe, Judith S.) Deppe, and Bryan
T. Morgan, Defendants and Appellants. No. 20050800-CA.
Utah Court of Appeals. Filed December 21, 2006.
Appeal from the Third District, Silver Summit Department,
010500391 The Honorable Bruce C. Lubeck.
Attorneys: Steven R. McMurray, Bradley L. Tilt, and Joan M.
Andrews, Salt Lake City, for Appellants Denver C. Snuffer
Jr. and Bret W. Reich, Sandy, for Appellee
Before Judges Davis, Orme, and Thorne.
OPINION
GREGORY K. ORME, Judge
¶ 1 This is an interlocutory appeal from the trial
court’s summary judgment rulings resolving a dispute
regarding who must pay a special assessment levied by a
condominium association against one of its condominium
units. We reverse.
BACKGROUND
¶ 2 Plaintiff Park West Condominium Association,
Inc. (the Association) is a nonprofit corporation, duly
organized and existing under the laws of the State of Utah,
that acts as the administrative body that controls and
manages the Park West Condominiums Project in Park City,
Utah. The Association is comprised of members who own units
within the Park West Condominiums Project. And the
Association operates under the “Condominium Declaration for
Park West Condominiums” (the Condominium Declaration),
which the project’s developer recorded with the county
recorder in 1977 and which has been amended in various
respects since it was originally recorded.
¶ 3 In the fall of 2000, the Association sought to
obtain its members’ approval of a proposal to levy a
special assessment to fund substantial improvements and
renovations to the Park West Condominiums Project. There is
no dispute that at the time the Association sought approval
of the proposed special assessment, the Condominium
Declaration provided that the special assessment could not
be levied without “having been first voted on and approved
by at least a majority of the Project’s undivided ownership
interest.” It is also undisputed that, concerning
membership approval of the special assessment, the
Condominium Declaration provided:
In any case in which the [Utah Condominium Ownership] Act
or this Declaration requires the vote of a stated
percentage of the Project’s undivided ownership interest
for authorization or approval of a transaction, such
requirement may be fully satisfied by obtaining, with or
without a meeting, consents in writing to such
transaction from Unit Owners who collectively hold at
least the stated percentage of undivided ownership
interest.
Pursuant to the Condominium Declaration’s provisions, the
Association chose to seek majority approval of the proposed
assessment through a mail-in ballot procedure, in lieu of
taking a vote at an annual or special meeting. Accordingly,
the Association sent each of its members a ballot package
in October 2000 and encouraged its members to vote and
return the completed ballot by November 15, 2000.
¶ 4 The returned ballots were tallied on November
19, 2000. The results revealed that 64% of the members
entitled to vote had approved the special assessment, with
19% of the members voting against the special assessment
and 17% of the members not voting. Given the majority
approval of the special assessment, the Association levied
the assessment and recorded a “Notice of Special
Assessment” on December 15, 2000. The Association also sent
copies of the notice to its members in January 2001. The
assessment was to be paid in two installments, due on
February 28, 2001, and June 28, 2001.
¶ 5 Defendants Lawrence K. and Judith S. Deppe owned
a condominium unit in the Park West Condominiums Project
when the Association sought to obtain approval of the
special assessment. [fn1] On December 13, 2000-two days
before the Association recorded the Notice of Special
Assessment-the Deppes entered into a “Real Estate Purchase
Contract” to sell their condominium unit to Bryan T.
Morgan. Later, on January 2, 2001, the Deppes gave Morgan a
warranty deed to the condominium unit, and on January 5,
2001, Morgan and the Deppes executed an “Assumption
Agreement,” which was “in favor and for the benefit of” the
Association. In spite of the terms of the Assumption
Agreement,[fn2] the special assessment in the amount of
$32,965 on the Deppes’ — now Morgan’s —
condominium unit was not paid by either the Deppes or
Morgan on the designated due dates.
¶ 6 The Association commenced legal action against
the Deppes and Morgan to collect the past due assessment,
plus interest. The Deppes answered, denying any liability
for the assessment on several grounds, and a default
judgment was entered against Morgan. After discovery, the
remaining parties then filed cross-motions for summary
judgment. The Association asked the court to enforce the
special assessment against the Deppes, arguing that despite
the Real Estate Purchase Contract the Deppes had entered
into with Morgan, the Deppes were the owners of the
condominium unit at the time the assessment was levied, that
the Deppes were jointly and severally liable for the unpaid
assessment, and that under the terms of the Assumption
Agreement the Deppes had acknowledged their liability for
the assessment.
¶ 7 The Deppes asked the trial court to rule, as a
matter of law, that the assessment was void because the
mail-in ballot procedure failed to comply with the
requirements of the Utah Nonprofit Corporation and
Co-Operative Association Act (the Nonprofit Corporations
Act) and Utah’s Condominium Ownership Act (the Condominium
Act). The Deppes asserted that under those statutes a
mail-in vote must be unanimous and, thus, that approval by
majority vote was not sufficient to render the assessment
valid. Alternatively, the Deppes argued that they were not
personally liable for the assessment because (1) equitable
title to the condominium unit shifted to Morgan upon his
signing the real estate contract, which occurred before the
assessment was recorded, and (2) the Assumption Agreement
itself was unenforceable.
¶ 8 The trial court granted the Association’s motion
for summary judgment and denied the Deppes’ cross-motion
for summary judgment. The court ruled that the special
assessment was valid, as a matter of law, because the
Association’s mail-in ballot procedure was expressly
permitted by the Association’s own Condominium Declaration.
The court reasoned that because the Condominium Act
authorizes the Association to promulgate a comprehensive
declaration and because the Condominium Declaration
provided for majority approval by mail-in ballot, the
Condominium Declaration controlled and neither the
Condominium Act nor the Nonprofit Corporations Act came
into play on the question of mail-in voting. The court also
ruled that although the Deppes had entered into a purchase
agreement with Morgan before the special assessment was
recorded, the Deppes remained in possession of the unit and
bore the risk of loss until the sale closed, thus making
them responsible for paying the claimed assessment. The
court further concluded that the Assumption Agreement did
not affect or alter their obligation to pay the assessment.
The Deppes now appeal.
ISSUE AND STANDARD OF REVIEW
¶ 9 The pivotal issue on appeal is whether the trial
court correctly concluded that the special assessment was
validly approved by majority vote or whether, as the Deppes
contend, the assessment is void because Utah law required
that the Association’s mail-in vote garner the unanimous
consent of its members before the assessment could be
validly imposed. Because the trial court decided the issue
on summary judgment, and because “[b]y definition, a
summary judgment is based solely on conclusions of law[,] .
. . we review a summary judgment for correctness, without
deferring to the trial court’s legal determinations.” Allen
v. Prudential Prop. & Cas. Ins. Co., 839 P.2d 798, 800
(Utah 1992).[fn3]
ANALYSIS
¶ 10 To resolve the dispute concerning whether the
special assessment was validly levied after being approved
via mail-in ballot by the majority of the Association’s
members — or whether unanimous consent to the
assessment was required — we must first determine
what authority controls the mail-in ballot procedure the
Association used to seek approval of the assessment. The
Association asserts that in order to decide whether the
special assessment in this case needed to be approved by
majority vote or by the unanimous consent of its members,
this court need not look beyond the Condominium Declaration
that the Association adopted pursuant to the Condominium
Act. See Utah Code Ann. §§ 57-8-10,-34(1)
(2000). The Association urges us to conclude, as did the
trial court, that the provisions of the Association’s
Condominium Declaration control and that under the
Condominium Declaration, the Association was duly
authorized to gain its members’ approval of the assessment
by a majority vote obtained by way of a mail-in ballot.
¶ 11 The Deppes, on the other hand, assert that
statutory provisions are controlling and that although the
Condominium Act is silent concerning mail-in ballot voting,
other applicable provisions of Utah law fill the gap and
dictate the proper mail-in voting procedure. The Deppes
specifically argue that in addition to being subject to the
Condominium Act, the Association is also subject to the
Nonprofit Corporations Act, see Utah Code Ann.
§§ 16-6-18 to-112 (1999), which provides that
a mail-in vote must be unanimous to approve a proposed
action. See id. § 16-6-33.
¶ 12 If, as the Association contends, the
Condominium Declaration controls in this case, the
Condominium Declaration clearly authorizes the mail-in
ballot method the Association used to obtain approval of
the special assessment. The Deppes’ point is well-taken,
however, that the Condominium Declaration and Condominium
Act do not constitute the exclusive source of authority
concerning the Association and its unit owner members. The
Condominium Act clearly and specifically acknowledges that
its provisions “shall be in addition and supplemental to all
other provisions of law, statutory or judicially declared.”
Utah Code Ann. § 57-8-35(1) (2000) (emphasis added).
¶ 13 In most instances the Condominium Act will
provide the definitive answer to issues that arise out of
the operation of condominium associations. See Reedeker v.
Salisbury, 952 P.2d 577, 584 (Utah Ct.App. 1998) (“The
Condominium Act provides significant guidance as to the
operation of condominium associations.”). The same might
also be said of the direction that a declaration, adopted
pursuant to the Condominium Act, provides an association.
Yet the Condominium Act makes it abundantly clear that
other layers of controlling Utah law continue to govern the
operation of condominium associations to the extent that
such other provisions do not conflict with those expressed
in the Condominium Act. See Utah Code Ann. §
57-8-35(1).
¶ 14 The Reedeker case is illustrative of how other
provisions of Utah law apply to condominium associations.
In Reedeker, this court was required to decide what
standard of care applied to trustees of a condominium
association and under what circumstances trustees could be
held personally liable for actions taken on behalf of the
association. See 952 P.2d at 583. Noticeably absent in the
Condominium Act, however, was any provision “defining the
personal liability of condominium association trustees.”
Id. at 584. Guided by the Condominium Act’s “clear and
unambiguous” indication that “[t]he provisions of [the
Condominium] Act ‘shall be in addition and supplemental to
all other provisions of law,'” id. at 585 (quoting Utah
Code Ann. § 57-8-35(1) (Supp. 1997)) (emphasis in
original), this court turned to other provisions of law
applicable to the condominium association to determine the
applicable standard of care. See id. at 586.
¶ 15 In Reedeker, this court ultimately concluded
that the Nonprofit Corporations Act provided the proper
standard despite the plaintiffs’ insistence that the
Business Corporations Act’s less rigorous standard of care
governing for-profit corporations ought to apply. See id.
at 585-86. This court decided that the Nonprofit
Corporations Act appropriately applied to the condominium
association because the association was not organized for
the object of receiving pecuniary gain and had in fact
incorporated as a nonprofit corporation under the Nonprofit
Corporations Act. See id. at 585-86. Reedeker instructs,
then, that in the case of a condominium association formed
as a nonprofit corporation under the laws of Utah, the
Nonprofit Corporations Act supplements the Condominium Act
and controls the association on matters where the
Condominium Act is silent.
¶ 16 The Association aptly points out, however, that
the instant matter is in one respect distinguishable from
Reedeker. The Association’s Condominium Declaration here
specifically provides that the Association may seek
approval of measures by a majority vote conducted by
mail-in ballot, while the condominium association’s
declaration in Reedeker was silent concerning the standard
of trustee liability. The Association contends that the
declaration’s silence — in addition to the
Condominium Act’s silence — forced the Reedeker
court to turn to and rely on the Nonprofit Corporations
Act. A second case — which presented this court with
a fact pattern involving a mail-in ballot procedure
somewhat similar to the facts in the present matter
— suggests, however, that the statutory provisions
of the Nonprofit Corporations Act would have been held to
apply in Reedeker even if the association included a
provision in its declaration concerning trustee liability
that was at odds with the one in the Nonprofit Corporations
Act. See Levanger v. Vincent, 2000 UT App 103, 3 P.3d 187.
¶ 17 In Levanger, the plaintiffs cried foul when the
homeowners association approved amendments to the
association’s covenants, conditions, and restrictions by
mail-in ballot rather than at an annual or special meeting.
The plaintiffs argued that the association was subject to
the Nonprofit Corporations Act, which required that any
action taken by a mail-in ballot vote be by unanimous
consent of the members. See id. at ¶ 14. The
plaintiffs further argued that approval of the amendments,
which in that case had been by a majority rather than
unanimously, was also ineffectual because the amendments had
not been approved at an annual or special meeting in
accordance with the association’s own bylaws. See id. at
¶ 10. This court agreed with both of the plaintiffs’
arguments and concluded that the association had not
“strictly compl[ied] with the [Nonprofit Corporations] Act’s
requirement of unanimous written consent,” id. at ¶
15, and that such voting procedures were “mandatory rather
than directory.” Id. at ¶ 19. The court also
concluded that the mail-in ballot procedure was ineffectual
because it did not square with the association’s bylaws. As
the court observed, the association’s bylaws were designed
to protect its members’ rights the same way the unanimous
consent requirement of the Nonprofit Corporations Act did
“by requiring that member actions be taken at member
meetings where free discussion and dissent can be heard.
Absent a meeting, the homeowners’ consent must be
unanimous.” Id. at ¶ 18.
¶ 18 Importantly, the Levanger court determined that
“by incorporating into a homeowners association, the
homeowners bound themselves to the requirements of Utah’s
Nonprofit Corporations statute.” Id. at ¶ 13. In
other words, because the homeowners association enjoyed its
corporate form of government by having incorporated as an
association under the Nonprofit Corporations Act, it was
bound by provisions of the very law that authorized its
existence. See id. (citing Village of Brown Deer v. City of
Milwaukee, 114 N.W.2d 493, 497 (Wis.), cert. denied, 371
U.S. 902 (1962)). Thus, the association in Levanger could
not skirt the requirements of the Nonprofit Corporations
Act concerning voting and was required to strictly comply
with the Act’s provisions.
¶ 19 The Association, however, contends that
Levanger is distinguishable from the instant case and,
consequently, is of little assistance in answering the
question presented. The Association points out that in
Levanger the homeowners association’s controlling documents
were silent on mail-in voting and specified that amending
actions must be taken at member meetings, see id. at
¶¶ 13, 16, whereas the Condominium
Declaration in this case is not silent and specifically
allows the Association to obtain approval of proposed
measures by a majority vote via mail-in balloting. But we
are not convinced that Levanger would have turned out any
differently even if the association’s bylaws did provide
for the amendments to be approved by a majority of the
members using a mail-in ballot. The Levanger court used
strong and precise language concerning the “mandatory
rather than directory” nature of the voting procedures
included in the Nonprofit Corporations Act, and concluded
that the association was required to “comply strictly” with
those voting procedures. Id. at ¶ 19. It would
appear, therefore, that even if the association’s voting
procedure had complied with specific provisions in its own
bylaws that were at odds with the Act’s requirements, the
court still would have determined that the vote was
ineffectual given the association’s failure to strictly
comply with the Nonprofit Corporations Act’s unanimous
written consent requirement.
¶ 20 The statutes under which a corporation is
formed constitute the preeminent authority governing the
corporation, making other sources of corporate authority
and governance — e.g., resolutions, bylaws, and
declarations — inferior to and subject to the
controlling statutes. See Utah Code Ann. §
16-6-22(12) (1999) (stating that nonprofit corporations
have power “[t]o make and alter bylaws, or resolutions, not
inconsistent with . . . the laws of this state”). See also
Harding v. Heritage Health Prods. Co., 98 P.3d 945, 948
(Colo.Ct.App.) (holding corporation’s bylaw amendment void
because it was inconsistent with state law), cert. denied,
No. 045SC531, 2004 Colo. LEXIS 829 (Colo. Oct. 18, 2004);
Lange v. Lange, 520 N.W.2d 113, 118 (Iowa 1994) (stating
that corporations are “restricted to by-laws that are not
inconsistent with the law”); Swanger v. National Juvenile
Law Ctr., 714 S.W.2d 170, 171-72 (Mo.Ct.App. 1986) (stating
that “a corporation’s bylaw if repugnant to a statute must
give way to the statute’s superior authority”). As a
result, we conclude that the Nonprofit Corporations Act’s
provisions concerning mail-in voting apply and trump the
inconsistent provisions of the Association’s Condominium
Declaration.
¶ 21 It is undisputed here that the Association
chose to incorporate under the laws of Utah as a nonprofit
corporation. The fact that the Association has also
subjected itself to the Condominium Act and adopted a
Condominium Declaration pursuant to that Act does not,
however, diminish the controlling effect the Nonprofit
Corporations Act continues to have on the Association to
the extent the Nonprofit Corporations Act’s provisions are
not in conflict with those of the Condominium Act. See Utah
Code Ann. § 57-8-35(1) (2000). See also Levanger v.
Vincent, 2000 UT App 103,¶ 13, 3 P.3d 187; Reedeker
v. Salisbury, 952 P.2d 577, 585 (Utah Ct.App. 1998).
¶ 22 At the time this dispute arose, the Nonprofit
Corporations Act clearly provided:
Any action required by this act to be taken at a meeting
of the members or trustees of a nonprofit corporation, or
any action which may be taken at a meeting of the members
or trustees may be taken without a meeting if a consent in
writing, setting forth the action so taken, shall be
signed by all of the members entitled to vote with respect
to the subject matter thereof, or all of the trustees, as
the case may be.
Utah Code Ann. § 16-6-33 (1999) (emphasis added).
The Association chose to conduct a vote on the special
assessment via mail-in ballot instead of holding a vote at
a meeting of its members, and it is undisputed that the
assessment did not pass by unanimous vote. We therefore
determine that the special assessment in this case was not
validly approved by the mail-in ballot and, thus, not
validly levied. Accordingly, we reverse the trial court’s
summary judgment ruling concerning the validity of the
assessment and conclude that the Association failed to
properly obtain its members’ approval of the special
assessment, thus rendering the assessment invalid.[fn4]
CONCLUSION
¶ 23 We reverse the trial court’s summary judgment
order holding that the Nonprofit Corporations Act did not
apply to the Association’s mail-in ballot approval of the
special assessment. We conclude that where the Condominium
Act is silent concerning the proper procedure for obtaining
member approval of measures via mail-in ballot, provisions
in the Nonprofit Corporations Act apply to the Association.
The Nonprofit Corporations Act and its provisions requiring
unanimity where approval is sought by mail-in ballot are
superior to the provisions of the Association’s Condominium
Declaration, which only requires majority approval of the
assessment. As a result, the assessment was not validly
approved by the mail-in ballot procedure implemented by the
Association and is not enforceable against the Deppes. We
remand for such proceedings as may now be in order.[fn5]
¶ 24 WE CONCUR:
James Z. Davis, Judge
William A. Thorne Jr., Judge
[fn1] The Deppes were part of the 17% of the Association’s
membership who did not vote on the proposed special
assessment.
[fn2] Among other things, the Assumption Agreement stated
that the Deppes, as the sellers of the condominium unit,
“are personally obligated to pay the special assessment.”
While the Assumption Agreement specifically provided that
Morgan was to “assume[] all of [the Deppes’] obligations to
[the Association]” upon the transfer of the condominium
unit, the Assumption Agreement also clearly stated that it
“does not release the [Deppes] from liability to the
[Association] for the special assessment.” We nevertheless
determine that the effect of the Assumption Agreement
hinges on the validity of the assessment itself because, as
the trial court correctly noted, “the Deppes[‘] obligation
is not derived from the assumption agreement” alone, but
from their membership in the Association as owners of a
condominium unit at the time of the assessment.
[fn3] Because we reverse the trial court’s conclusion
concerning the validity of the assessment, we need not
reach the remaining issue decided on summary judgment,
i.e., whether the Deppes were the owners of the condominium
unit at the time the special assessment was levied.
[fn4] We recognize the difficulty the Association faced in
trying to find the best way to obtain its members’ approval
of the proposed assessment. The seasonal use of
condominiums located near a ski resort, combined with the
reality that many of the condominium owners live
out-of-state, would perhaps make it nearly impossible for
the Association to gather a majority of its members for an
annual-not to mention a special-meeting to seek approval of
proposals. Given these difficulties, implementing a
procedure to obtain member approval by mail-in ballot
certainly provides a realistic alternative to the dilemma
posed by the annual or special meeting requirement. Yet,
requiring a mail-in vote to pass by unanimous consent,
rather than by the majority vote that would be sufficient
at a meeting, lessens the appeal of a mail-in vote as a
realistic alternative since there will likely be at least
one naysayer among the members when it comes to spending
money for improvements.
Perhaps our Legislature had such difficulties in mind when
it amended the Nonprofit Corporations Act to no longer
require unanimous consent to actions taken without
meetings, see Utah Code Ann. § 16-6a-707 (2005), and
to specifically address the use of mail-in ballots to
approve corporate actions. See id. § 16-6a-709. With
such changes to Utah law, condominium associations will not
likely continue to face the same problem addressed in this
case when measures are approved by a majority of their
members using a properly authorized mail-in ballot
procedure.
[fn5] It follows that the Association’s request for attorney
fees incurred on appeal is unavailing.