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Hellmann v. Sparks

Court of Appeals of Missouri, Southern District, Second Division

March 6, 2015

ROBERT J. HELLMANN, and DEBRA S. HELLMANN, Petitioner-Appellants/Respondents,
v.
RANDY SPARKS, EXECUTIVE VACATION GET-A-WAYS, LLC, JAMES C. RESTELLI, KAREN A. RESTELLI, MITCH'S GREENTHUMB LANDSCAPING CORP., JEFFREY M. LOWE, KATHLEEN E. LOWE, JAMES RESTELLI, JEFFREY M. LOWE, and ROGER L. FULTON, AS PUTATIVE DIRECTORS OF THE GRAND POINT ISLAND HOMEOWNERS ASSOCIATION, INC., UNKNOWN PERSONS OR ENTITIES THAT CLAIM AN INTEREST IN THE BOAT DOCK KNOWN AS THE

APPEAL FROM THE CIRCUIT COURT OF CAMDEN COUNTY Honorable Bruce E. Colyer, Associate Circuit Judge

MARY W. SHEFFIELD, P.J.

This case involves certain waterfront real estate located on Lake of the Ozarks in Camden County, Missouri. The property is part of a planned, gated community called Grand Point Island ("the subdivision"). The subdivision is located on an island connected to the mainland by a causeway. From the time the subdivision was created, the subdivision has had a park reserved by deed restrictions for the recreational use of all lot owners in the subdivision and a community dock which is attached to the park. In 2008, Robert Hellmann and his wife Debra Hellmann (collectively "the Hellmanns") purchased some lots in the subdivision. They also acquired the causeway and the park. Thereafter, a dispute arose regarding the location of the community dock and control of the subdivision's homeowners' association, Grand Point Island Homeowners Association, Inc. ("GPI"). A lawsuit followed. In that lawsuit, the Hellmanns asked the trial court to find there was a valid agreement to move the community dock and to find that the current board of directors of GPI did not have authority to act on behalf of GPI. The trial court found against the Hellmanns on all counts, and they appeal. Two other parties, Health Care Resources, LLC ("HCR"), and Robert and Debra Bull ("the Bulls"), cross-appeal.

The Hellmanns raise 17 points on appeal which fall into four major groups: points regarding the authority of GPI, points regarding the interpretation of the subdivision's governing documents, points regarding an alleged agreement to move the community dock, and points regarding the appointment of an attorney for unknown parties during the litigation. HCR joins in many of those points and raises four additional points of its own. HCR's four additional points challenge the authority of GPI. The Bulls raise three points related to an easement associated with the agreement to move the dock. For ease of analysis, the points have been grouped together by topic, and we address each topic separately. We affirm the trial court's judgment in toto.

Standard of Review

"On review of a court-tried case, an appellate court will affirm the circuit court's judgment unless there is no substantial evidence to support it, it is against the weight of the evidence, or it erroneously declares or applies the law." Ivie v. Smith, 439 S.W.3d 189, 198-99 (Mo. banc 2014). "When reviewing whether the circuit court's judgment is supported by substantial evidence, appellate courts view the evidence in the light most favorable to the circuit court's judgment and defer to the circuit court's credibility determinations." Id. at 200. Questions of law such as contract interpretation are reviewed de novo. G.H.H. Invs., L.L.C. v. Chesterfield Mgmt. Assocs., L.P., 262 S.W.3d 687, 691 (Mo. App. E.D. 2008).

Points Regarding the Authority of GPI

The first group of conceptually related points involved the authority of GPI and the board of directors of GPI. These points include the Hellmanns' Point I, Point II, Point III, Point IV, and Point V, as well as HCR's Point I, Point II, and Point III. The following facts are relevant to the resolution of these points.

GPI was created in January 2001. In June of the same year, Bayberry Development Company II, Inc. ("Bayberry") filed a declaration of restrictions ("the declaration") for the subdivision. GPI was named the governing body for the subdivision. The declaration gave Bayberry the power to appoint the board of directors of GPI until October 1, 2016, or until Bayberry voluntarily relinquished that right. The declaration further empowered GPI to maintain the subdivision's facilities, i.e., items or things owned or leased by GPI, and levy assessments against the property owners for maintaining and improving the facilities.

Bayberry subsequently began to develop the subdivision and sell lots for residential purposes. Around this time, Bayberry attached the community dock to the park. In 2004, Bayberry sold all the lots in the subdivision which had not already been purchased to Care Investments, LLC ("Care"). On January 5, 2006, GPI was administratively dissolved for failing to file a correct and current annual report. On August 29, 2006, Bayberry was administratively dissolved for failing to file a correct and current annual report.

In early 2008, the Hellmanns began negotiating with Care to purchase a number of lots on the island. The Hellmanns purchased lots 1, 12, and 13, as well as the park and the causeway from Care on April 19, 2008. During this time frame, disagreements arose regarding a plan to relocate the community dock.

Also in April 2008, a second Missouri non profit corporation named Grand Point Island Homeowners Association, Inc. ("Second GPI") was incorporated. After that time, Second GPI spent money on snow removal, storm sewer repair, and some attorneys' fees associated with starting Second GPI. Second GPI also opposed the plan to relocate the community dock.

On May 21, 2010, Robbie Marley, president and sole remaining member of Bayberry, signed a document ratifying the current board membership of the Grand Point Island Homeowner's Association, Inc., to include James Restelli ("Restelli") as President, Jeffery Lowe ("Lowe") as Vice-President, and Roger Fulton ("Fulton") as Secretary/Treasurer. That document did not designate whether the association referred to was GPI or Second GPI.

At some point, Second GPI discovered the existence of GPI. To clarify the situation, the members voted to reinstate GPI and to merge GPI with Second GPI. On April 13, 2011, GPI was restored to good standing with the Office of the Missouri Secretary of State. On May 25, 2011, the board of directors recommended the homeowners merge GPI with Second GPI. On November 14, 2011, the Missouri Secretary of State issued a Certificate of Merger combining the two homeowners' associations leaving GPI as the surviving entity.

In their seventh amended petition, the Hellmanns requested a declaratory judgment stating, among other things, that: (1) Second GPI had no authority to govern the subdivision; (2) all actions taken by Second GPI were void; (3) Bayberry had voluntarily relinquished its rights to appoint directors so the Bayberry consent to the appointment of the board of directors had no force or effect; (4) all actions taken by the board of directors were void; and (5) the reinstatement of GPI was void because Restelli did not have the authority to act on behalf of GPI. In the judgment, the trial court found Bayberry had not relinquished its right to appoint directors, so Restelli, Fulton, and Lowe had been properly appointed directors of GPI. The trial court further found GPI's actions were authorized. In their first group of points on appeal, the Hellmanns challenge these rulings.

No Assignment or Ratification Was Necessary

In their first point, the Hellmanns argue the trial court erred in finding Second GPI "was a validly existing homeowners' association with authority to govern the Subdivision" because Second GPI never received an assignment of rights from GPI. In their third point, the Hellmanns argue the trial court erred when it found the actions of Second GPI were valid. In support of this claim, the Hellmanns state there was no evidence GPI ratified the acts of Second GPI and reiterate their argument that Second GPI had no authority to act because it had never received an assignment. These arguments are incorrect because Second GPI merged into GPI.

Both GPI and Second GPI were corporations organized under the Missouri Nonprofit Corporation Law. They merged in 2011. Thus, the applicable rule is stated in Section 355.636, [1] which governs the effect of mergers of corporations in Missouri. That section provides as follows:

When a merger takes effect:
(1) Every other corporation party to the merger merges into the surviving corporation and the separate existence of every corporation except the surviving corporation ceases;
(2) The title to all real estate and other property owned by each corporation party to the merger is vested in the surviving corporation without reversion or impairment subject to any and all conditions to which the property was subject prior to the merger;
(3) The surviving corporation has all liabilities and obligations of each corporation party to the merger;
(4) A proceeding pending against any corporation party to the merger may be continued as if the merger did not occur or the surviving corporation may be substituted in the proceeding for the corporation whose existence ceased; and
(5) The articles of incorporation and bylaws of the surviving corporation are amended to the extent provided in the plan of merger.

Id.

Here, GPI and Second GPI were merged in 2011 with GPI as the surviving corporation. Consequently, under the plain language of Section 355.636, Second GPI ceased to exist. § 355.636(1). The only existing corporation was GPI, which, as the trial court correctly found, had authority to maintain the subdivision facilities.

In support of their arguments to the contrary, the Hellmanns rely on DeBaliviere Place Ass'n v. Veal, 337 S.W.3d 670 (Mo. banc 2011), and Valley View Village South Imp. Ass'n, Inc. v. Brock, 272 S.W.3d 927 (Mo. App. S.D. 2009), for the proposition that since Second GPI did not exist at the time the declaration was filed, it needed an assignment from GPI for authority to act.

This argument fails because DeBaliviere and Valley View involved different factual situations. It is true that in each of those cases, as in the present case, a second homeowners' association began managing a subdivision after a first homeowners' association lapsed. DeBaliviere, 337 S.W.3d at 672; Valley View, 272 S.W.3d at 928. However, those cases are different from the present case because neither of those cases involved a merger of the first homeowners' association with the second homeowners' association. In DeBaliviere, the second homeowners' association received authority via an assignment, and in Valley View no attempt was made to revitalize the first homeowners' association. DeBaliviere, 337 S.W.3d at 672; Valley View, 272 S.W.3d at 932. While the second homeowners' associations in those cases were found not to have the necessary authority because they did not receive an assignment of the correct rights from the first homeowners' associations, nothing in those cases requires the conclusion that the only way a successor homeowners' association may acquire rights to govern a subdivision is by assignment. Here, Second GPI was merged into GPI. Through that merger, GPI, which did have authority to govern the subdivision, assumed all liabilities and obligations of Second GPI, thus implicitly ratifying all of Second GPI's actions. See § 355.636(3).

The Hellmanns' Points I and III are denied.[2]

Directors' Authority

In their second point, the Hellmanns argue the trial court erred in finding GPI was a validly existing homeowners' association because it had never been properly reinstated or merged with Second GPI because "no authorized representative of [GPI] approved these actions." In their fourth point, the Hellmanns argue the trial court erred when it found "Bayberry did not voluntarily relinquish its rights to appoint directors[.]" In their fifth point, the Hellmanns argue the trial court erred when it found GPI's actions between 2008 and 2011 were valid because the directors were not elected. All three of these points fail because Bayberry did not voluntarily relinquish its rights to appoint directors for GPI, so Restelli, Fulton, and Lowe had authority to act on behalf of GPI.

As with so many of the points in this case, the analysis begins with the declaration of covenants for the subdivision. Generally speaking, a declaration of covenants for a subdivision "regulates the relationship of the real estate developer to its subdivision, as well as the purchasers of property." Woodglen Estates Ass'n v. Dulaney, 359 S.W.3d 508, 513 (Mo. App. W.D. 2012) (quoting Marshall v. Pyramid Dev. Corp., 855 S.W.2d 403, 406 (Mo. App. W.D. 1993)). That document "is a restrictive covenant between the [d]eveloper, the [a]ssociation, and its members." Id. (quoting Wildflower Cmty. Ass'n v. Rinderknecht, 25 S.W.3d 530, 534 (Mo. App. W.D. 2000)). "The rules governing construction of restrictive covenants on realty are generally the same as those applicable to any covenant or contract." Stolba v. Vesci, 909 S.W.2d 706, 708 (Mo. App. S.D. 1995). Thus, the "primary rule" in interpreting such documents "is to ascertain the intent of the parties and to give effect to that intent." Marshall, 855 S.W.2d at 406. "Where there is no ambiguity in the contract, the intent of the parties is to be gathered from it alone and the court will not resort to construction where the intent of the parties is expressed in clear and unambiguous language as there is nothing to construe." Id.

Therefore, to determine this point, we turn to the language of the declaration. With respect to the number and qualification of directors, the declaration at issue in this case provides as follows:

The Board shall consist of three (3) Directors.
(a) Until October 1, 2016, all three directors shall be appointed by Declarant and may, but need not be, a member of the Association.
(b) Upon Declarant voluntarily relinquishing its right of appointment or after October 1, 2016 whichever event first occurs, then all directors shall be elected annually by the Class B members at the annual meeting as set from time to time by the previous Board of Directors.

The declaration defines "Declarant" as Bayberry. Bayberry appointed Restelli, Lowe, and Fulton as directors in 2010. Consequently, the trial court did not err in finding Restelli, Lowe, and Fulton were properly exercising authority as directors of GPI.

In support of their argument to the contrary, the Hellmanns rely on Forst v. Bohlman, 870 S.W.2d 442 (Mo. App. E.D. 1994). Forst is not applicable here. The issue in Forst involved the rights of subsequent purchasers of the land. Here, in contrast, Bayberry was the original developer of the subdivision. The facts of Forst ar ...


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