Court of Appeals of Missouri, Western District, First Division
ROGER J. DAVIS, et al., Appellants,
LAKEWOOD PROPERTY OWNERS ASSOCIATION, INC., Respondent.
FROM THE CIRCUIT COURT OF JACKSON COUNTY The Honorable Jack
R. Grate, Judge.
Before: James E. Welsh, Presiding Judge, Lisa White Hardwick
and Anthony Rex Gabbert, Judges.
WHITE HARDWICK, JUDGE.
J. Davis, Robert Kronschnabel, and Timothy McCraw
(collectively, "Appellants") appeal from the
circuit court's judgment declaring that the calculation
of assessments by the Lakewood Property Owners Association,
Inc.'s ("Lakewood") Board of Directors
("Board") is protected by the business judgment
rule. Appellants contend that the Board's calculation of
assessments is ultra vires and, therefore, not
protected by the business judgment rule. For reasons
explained herein, we reverse and remand the cause for entry
of judgment in accordance with this opinion.
AND PROCEDURAL HISTORY
subdivision is a real estate development in Lee's Summit.
In August 1973, a Declaration of Covenants, Conditions, and
Restrictions ("the Declaration") pertaining to the
development was filed. Article VI, Section 4 of the
Declaration provides for annual assessments on lots and sets
out a procedure for determining the amount to assess.
Specifically, the Declaration provides for the Board to
calculate a maximum annual assessment amount and then to set
an actual annual assessment in an amount not in excess of the
maximum annual assessment. After stating that the initial
maximum annual assessment through January 1, 1974, would be
$200 for each lot, the Declaration explains how to calculate
the maximum annual assessment and the actual annual
assessment going forward:
(a) From and after January 1, 1974, the maximum annual
assessment in each of the heretofore enumerated categories
may be increased effective January 1 of each year without a
vote of the membership in an amount equal to 150% of the
rise, if any, of the Consumer Price Index (published by the
Department of Labor, Washington, D.C.) for the preceding
month of July.
(b) From and after January 1, 1974, the maximum annual
assessment for any or all categories may be increased without
regard to the Consumer Price Index formula by a vote of the
members for the next succeeding year, and at the end of each
such period of one year, for each succeeding year, provided
that any such change shall have the assent of a majority of
the votes of Class A, B and D members and the approval of all
Class D members who are voting in person or by proxy at a
meeting duly called for this purpose, written notice of which
shall be sent to all members not less than 30 days nor more
than 60 days in advance of the meeting setting forth the
purpose of the meeting. The limitations hereof shall not
apply to any change in the maximum and basis of the
assessments undertaken as an incident to a merger or
consolidation in which the Association is authorized to
participate under its Articles of Incorporation.
(c) After consideration of current maintenance costs and
future needs of the Association, the Board of Directors may
fix the annual assessment at any amount not in excess of the
maximum, provided, however, the actual assessments for each
of the heretofore identified categories must bear the same
ratio to the assessments imposed in other categories as the
maximum annual assessment for each such category bears to the
maximum annual assessments for other categories.
these provisions, the Board is permitted to increase the
maximum annual assessment in an amount equal to 150% of the
rise, if any, of the Consumer Price Index ("CPI")
for the preceding month of July without a vote of the
membership. If the Board wishes to increase the maximum
annual assessment without regard to the CPI, it must obtain a
vote of the membership. After calculating the maximum annual
assessment and considering the current maintenance costs and
future needs, the Board may then fix the actual annual
assessment in an amount that does not exceed the maximum
Board held its first meeting in September 1973. During that
meeting, the Board adopted Bylaws. The Bylaws address many of
the topics set forth in the Declaration, including the
calculation of assessments. The Bylaws specifically state,
however, that, in the case of conflict between the
Declaration and the Bylaws, the Declaration controls.
XI, Section 5 of the Bylaws explains how to calculate the
increase in the maximum annual assessment subject to the
"applicable provision of the Declaration:"
The Consumer Price Index for All Urban Consumers, U.S. City
Average for July 1967 (U.S. Department of Labor, Bureau of
Labor Statistics) was 125.5; this will be the base rating. To
determine the maximum annual assessment for each ...