Workman v. Brighton Properties, Inc., 1999 UT 30, 976 P.2d 1209 (paying assessments when no benefit received).

976 P.2d 1209 (1999)
1999 UT 30

H. Ross WORKMAN, Plaintiff and Appellant,
BRIGHTON PROPERTIES, INC., Henry D. Moyle, Richard Moyle Marsh, James H. Moyle, II, David D. Creer, Linda N. Burbidge, Karin N. Brown, Adrienne L. Aldous, Allan Murphy, Christopher M. Madsen, Elizabeth M. Greer, Suzanne M. Scott, Gilbert D. Moyle, Marie M. Wangeman, John R. Moyle, James Light, Dorian L. Shaw, Tmar, Ltd., Sally Grant, Alice C. Young, Caroline C. Pinney, Helen Claire Moyle Jones, Janet M. Nielson, Scott R. Madson, and Tippyune, Inc., Defendants and Appellees.

No. 980056.
Supreme Court of Utah.
April 2, 1999.

In this case, a lot owner, Workman, argued it is fundamentally inequitable to assess an owner for a service that does not directly benefit his or her property.  The court

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Thomas R. Vuksinick, Salt Lake City, for plaintiff.  Paul D. Veasy, Salt Lake City, for defendants.

*1210 ZIMMERMAN, Justice:

¶ 1 H. Ross Workman ("Workman") sued to prevent Brighton Properties, Inc. ("Brighton") from levying an assessment against him for purposes of developing a water system in Silver Lake Estates Subdivision No. 1 that did not benefit Workman's property in Silver Lake Estates Subdivision No. 2, and to invalidate a $300 assessment made against him for costs relating to a study of the water system within all of Silver Lake Estates. The district court denied Workman's motion for summary judgment, and effectively granted sua sponte judgment for Brighton, concluding that Brighton was authorized, pursuant to its bylaws and restrictive covenants, to levy assessments against Workman and that the $300 assessment was valid. We affirm.

¶ 2 The parties to this appeal do not contend that there are any factual disputes. The only question, therefore, is whether, as a matter of law, the trial judge was correct in granting judgment for Brighton. As to legal questions, "[w]e review the trial court's conclusions for correctness, granting them no deference." Lopez v. Union Pac. R.R. Co.,932 P.2d 601, 603 (Utah 1997) (citation omitted); see also State v. Pena, 869 P.2d 932, 936 (Utah 1994) ("Controlling Utah case law teaches that 'correctness' means the appellate court decides the matter for itself and *1211 does not defer in any degree to the trial judge's determination of law." (citation omitted)).

¶ 3 We first recite the facts. Silver Lake Estates consists of two noncontiguous subdivisions located about one mile apart in the Brighton area of Big Cottonwood Canyon in the Wasatch mountain range. Subdivision No. 1 is made up of thirty-one lots, and Subdivision No. 2 is made up of ten lots. Brighton is a non-profit corporation originally formed in 1974 to provide services to the owners of Silver Lake Estates No. 1 and No. 2. The shareholders of Brighton are the owners of lots in Silver Lake Estates. Each lot owner, other than Brighton itself or a governmental agency, is issued one share of stock. Both subdivisions are governed by a single set of documents including articles of incorporation, bylaws, and restrictive covenants.

¶ 4 In August of 1986, Workman and his wife entered into an agreement to purchase lot three in Silver Lake Estates No. 2. This agreement provided that purchase of the property was "subject to any restrictive covenants." In October of 1986, lot three was conveyed to Workman and his wife by a warranty deed "subject to," among other things, "[c]ovenants, [c]onditions, [r]estrictions[,] [r]ights of [w]ay, [e]asements and [r]eservations of record or enforceable in law or equity." A short time thereafter, Workman and his wife were issued a certificate for one share of stock in Brighton.

¶ 5 In August of 1996, Brighton notified all owners of a $300 assessment to fund an engineering feasibility study to be conducted on Brighton's water source and distribution system. Workman refused to pay the assessment, and on November 12, 1996, filed a complaint against Brighton in Third District Court, seeking declaratory and injunctive relief. Workman alleged that the assessment was for the purpose of evaluating the feasibility of making improvements in the water system that would exclusively benefit Silver Lake Estates No. 1. He asserted that Brighton had no authority to make an assessment that did not benefit a party against whom the assessment was made. Workman moved for summary judgment. The district court denied Workman's summary judgment motion and sua sponte entered judgment in favor of Brighton. Workman now appeals.

¶ 6 The determinative issue on appeal is whether the district court correctly held that Brighton could properly levy the $300 assessment against Workman. Workman makes a number of arguments, but they all involve the claim that the assessment is not within Brighton's power. Brighton responds that the governing documents permit the assessment, and, therefore, the district court's decision should be upheld.

¶ 7 We begin with the relevant documents. Article III of Brighton's articles of incorporation sets out the purposes of the corporation, including the development of water for the "two subdivisions":

The purposes for which this corporation is organized as a non-profit corporation are...
1. To own water rights and to engage in water development, diversion, storage, distribution and/or use for the benefit of two subdivisions ... known as Silver Lake Estates Subdivision # 1 and Silver Lake Estates Subdivision # 2.
2. To engage in ... improvements ....
3. To do all and everything necessary, suitable and proper for the accomplishment of the purposes or attainment of the objects hereinabove set forth....

Article V, of the articles of incorporation, provides that stock in the corporation "shall have one vote per share, and shall be subject to such assessment as may from time to time be levied by the Board of Trustees." (Emphasis added.)

¶ 8 Article VIII of Brighton's bylaws elaborates on the power to assess:

Pursuant to Article V of the Articles of Incorporation of the corporation, from time to time as the board of trustees direct, each issued and outstanding share of stock of the corporation shall be assessed such amounts as the board determines necessary to carry out the purposes for which the corporation was organized. Failure to promptly pay any assessment when due *1212 shall constitute a lien against the applicable share of the corporation. The corporation may enforce payment of said assessment by denial of the right to use water owned and controlled by the corporation.

¶ 9 Workman's warranty deed is subject to "any restrictive covenants." Section 15 of Brighton's restrictive covenants addresses in even greater detail the relationship between assessments and water development:

To construct, maintain and improve water system, drainage, private streets, roads, general planning and all common community services within the two subdivisions for the general benefit of all the lot owners, every lot owner, in accepting a deed or contract for the purchase of any lot, agrees to acquire the former owner's membership in [Brighton], a Utah non-profit corporation, and shall become a member (shareholder) of and be subject to the obligations and regulations of said corporation, and agrees to pay assessments as ordered by the Board of Trustees of [Brighton]. Such assessment shall be paid promptly when it becomes due and in the event of failure of an owner to pay such an assessment promptly when due, for which the owner shall be personally liable, the amount of the unpaid assessment shall constitute a lien upon the lot owned by said owner, as well as a lien against the share of [Brighton]. The corporation may enforce payment of said assessment of denial of the right to use water owned and controlled by [Brighton]. Said lien may be enforced in equity, as would a real estate mortgage lien foreclosure, by [Brighton]. The foreclosure judgment shall award to [Brighton] reasonable attorneys' fees and court costs incurred in connection with the foreclosure.

¶ 10 The binding nature of these article, bylaw, and covenant provisions is settled under Utah law. "'It is well established precedent that the bylaws of a corporation, together with the articles of incorporation, the statute under which it was incorporated, and the member's application, constitute a contract between the member and the corporation.'" Turner v. Hi-Country Homeowners Ass'n, 910 P.2d 1223, 1225 (Utah 1996) (citation omitted). Similarly, recorded restrictive covenants are enforceable against property owners who purchased land "subject to" those covenants. Fink v. Miller, 896 P.2d 649, 652 (Utah Ct.App.1995).

¶ 11 Workman does not dispute that his ownership of lot three makes him a member of Brighton, nor does he dispute that Brighton's bylaws, articles of incorporation, and restrictive covenants

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