Real Property – Condominium Declaration – Amendment – Boat Slip Assignment – Civil Practice – Res Judicata & Collateral Estoppel – UOA & NCCA

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Bowers v. Temple (Lawyers Weekly No. 12-16-0171, 22 pp.) (Ann Marie Calabria, J.) Appealed from Carteret County Superior Court. (Paul L. Jones, J.) N.C. App. Click here for full-text opinion.

Holding: In a prior lawsuit, the court struck down an amendment to a condominium declaration because it was not properly recorded. Even though the court went on to opine that unanimous consent by owners was required to amend the declaration and to delineate the amendment’s effect on owners’ rights, these statements were not material, relevant, necessary or essential to the judgment, so they do not collaterally estop the litigation of these issues in the present lawsuit.

We affirm summary judgment for defendants.

Facts

The declaration for Leeward Harbor condominiums was filed in 1985, and Art. IV, § D gave the Leeward Harbor Board of Directors (BOD) the authority to assign a boat slip to each unit owner. It also permitted unit owners to exchange slips with BOD approval.

In 1986, Art. IV, § D was amended to eliminate the owner-exchange provision and to add, “The use of [the assigned] slip shall thereafter be controlled by the Board of Directors. At the discretion of the Board, any slip may subsequently be reassigned.”

The 1986 amendment was in effect when plaintiffs purchased their units.

The declaration did not restrict unit owners from leasing their units. In the spring of 2008, based on the 1986 amendment, the BOD ruled that lessees were denied the use of the boat slips.

Plaintiff Bowers filed suit seeking an injunction and declaratory judgment. The trial court found the Leeward Harbor Homeowners’ Association (HOA) was without authority to deny lessees the use of boat slips and awarded Bowers $2,400 in damages. The trial court also declared the 1986 amendment void because it “lack[ed] an adequate acknowledgment and therefore was unlawfully recorded and said document [wa]s without validity and fail[ed] to provide notice to the public.” (“2009 judgment”) Neither judgment was appealed.

In 2010, the HOA amended Art. IV, § D, again giving the BOD control over slip assignments. The 2010 amendment only applied to unit owners who voted in favor of the amendment and to future owners. Those who voted against the 2010 amendment were exempt from the terms of the amendment unless they voluntarily accepted it or conveyed or transferred their unit.

Plaintiffs filed this action seeking a declaratory judgment that the 2010 amendment was void. The trial court upheld the validity of the 2010 amendment.

Analysis

Even though the 1986 amendment and the 2010 amendment both gave the BOD power to assign boat slips, the 2010 amendment does not apply to owners – like plaintiffs – who voted against the amendment. Where the amendments are different, and where the validity of the 2010 amendment was not determined in the prior action, res judicata does not apply in this case.

When a second action involves a different claim, collateral estoppel bars re-litigation of issues actually litigated and determined in the original action.

In both actions, the issues to be concluded were the validity of the amendment, the nature of the owners’ interests in the boat slips, and the actions necessary for the HOA to change those interests. Plaintiffs sought determination of whether the declaration can be amended without unanimous consent of the owners and whether the 2010 amendment destroyed ownership interests in their property. The issues in both actions are identical, and both were raised and litigated in the first action.

However, for collateral estoppel to apply, the issues must also have been material, relevant, necessary and essential in the prior action.

In the 2009 judgment, the judge declared the 1986 purported amendment void because it was improperly recorded. Once the court found that the 1986 amendment was void on the basis that it was improperly recorded, it was unnecessary for the court to determine the merit of Bowers’s other arguments.

Although the court said unanimous consent by the owners was required and stated the 1986 amendment’s effect on owners’ rights, the trial court’s statements in the 2009 judgment were superfluous to its finding that the 1986 amendment was void due to improper recordation.

Therefore, the only issue in the first action that was material and relevant to the disposition and necessary and essential to the resulting judgment was whether or not the 1986 amendment was properly recorded.

In the second action, the recording of the 2010 amendment is not an issue. Plaintiffs have failed to prove that the issues in the second action were material and relevant and necessary and essential to the 2009 judgment. Therefore, collateral estoppel does not bar the issues presented in the second action.

Leeward Harbors was built in 1985, and its declaration was created pursuant to the Unit Ownership Act (UOA). However, the 2009 judgment indicated that amendments to the declaration were governed by the North Carolina Condominium Act (NCCA).

Since neither res judicata nor collateral estoppel applies in this case, the court is free to use the appropriate statute to determine the validity of the 2010 amendment.

Under G.S. § 47C-1-102(b) of the NCCA, an owners’ association may amend its declaration so as to conform to NCCA provisions, even if the amendments would not have been permitted under the UOA. Therefore, when a conflict occurs, the NCCA trumps the UOA even though the condominiums were enacted under the UOA. Nevertheless, amendments to declarations enacted under the UOA must still be “adopted in conformity with the procedures and requirements specified by those instruments and by [the UOA].” G.S. § 47C-1-102(b).

The 2010 amendment does not alter the percentage of ownership of the marina common area or boat slips. Each owner is still allocated one boat slip and has full use of the marina common area under both the original declaration and the 2010 amendment.

Since the 2010 amendment maintained equal ownership in the marina facilities, it did not change the allocated interest of a unit. Therefore, the NCCA requirement that 100 percent of unit owners must approve changes to the allocated interest of a unit does not apply in the instant case.

Since the 2010 amendment does not alter the percentage ownership in the common areas and facilities, in order to enact the 2010 amendment, 66 percent approval was required. The 2010 amendment was approved by members of Leeward Harbor owning 69.44 percent of the condominium units.

The 2010 amendment meets the requirements set forth in the declaration and therefore complies with G.S. Chapter 47A. Consequently, Leeward Harbor and its members had the authority to enact the 2010 amendment, and there is no reason for this court to reverse the trial court and render it void.

We affirm the trial court’s grant of summary judgment for defendants.