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e-Journal Summary
Opinion Date: 08/07/2012
e-Journal Date: 09/10/2012
Full Text Opinion

Practice Area(s):   Litigation
Real Property

Issues: Process for approving the defendant-condo association's annual budget and the levying of assessments; Whether the Consolidating Master Deed and 2010 Bylaws were void; Whether removing the requirement that co-owners approve the annual budget was a "material alteration or change" in the co-owners' rights; Contract interpretation; Rossow v. Brentwood Farms Dev.; Construing the contract as a whole; Smith v. Smith; Avoiding an interpretation that would render a provision nugatory; Woodington v. Shokoohi; Injunctive relief; Whether the requested injunctive relief was "moot"; Tenneco, Inc. v. Amerisure Mut. Ins. Co.; Whether the trial court should have held an evidentiary hearing; Campau v. McMath; Whether the injunctive order met the requirements of MCR 3.310(C); "Harmless error"; MCR 2.613(A); Failure to preserve an issue; Booth Newspapers, Inc. v. University of MI Bd. of Regents; Fast Air, Inc. v. Knight; Resolution of an issue necessary to a proper determination of the case; Laurel Woods Apts. v. Roumayah; Abandoning an issue; Woods v. SLB Prop. Mgmt., LLC
Court: Michigan Court of Appeals (Unpublished)
Case Name: Pole v. Sterling Woods Condo. Ass'n
e-Journal Number: 52398
Judge(s): Per Curiam – K.F. Kelly, Wilder, and Boonstra

The court held, inter alia, that by removing the requirement that the co-owners approve the annual budget, the developer took away their check on the defendant-condo association's power. Thus, the amendment to the Bylaws "materially altered the rights of the co-owners and needed to be approved by two thirds of all co-owners as required by the Master Deed." The court concluded that the trial court properly granted the plaintiffs-co-owners summary disposition. However, the court vacated the trial court's order in two respects because the requested relief was moot. The dispute centered on the process for approving the association's annual budget and the levying of assessments. The 2000 Bylaws were recorded with the Master Deed. Article II, § 3(a)(2) of the 2000 Bylaws provided that the co-owners must approve the association's proposed annual budget "by an affirmative vote of at least two-thirds of all Co-owners of Units in the Project, before an annual assessment may be levied or collected by the Association." However, on 2/26/10, the developer recorded a document entitled "Consolidating Master Deed," which stated that it superseded and replaced the Master Deed and the 2000 Bylaws. A new set of Bylaws (the 2010 Bylaws) recorded with the Consolidating Master Deed removed the requirement that co-owners approve the annual budget before the association can levy and collect assessments. In 5/10, plaintiffs sued for injunctive relief. They alleged, inter alia, that the association's board of directors failed to obtain co-owner approval of the 2010 budget, was trying to forgo approval of the 2011 budget, and despite not having a properly approved budget, the association spent money, incurred debt, and tried to levy assessments against the co-owners. The court noted that the Master Deed and 2000 Bylaws were governed by the rules of contract interpretation. While Article II, § 3(c) supported the association's argument that the co-owners' rights were not materially altered because the board always had the authority to levy assessments without co-owner approval, that provision had to be read together with Article II, § 3(a). "Section 3(a)(2) specifically states that the annual budget must be approved by the co-owners 'before an annual assessment may be levied or collected by the Association.'" Accepting the association's argument would render Article II, § 3(a) nugatory, and such an interpretation must be avoided. "A more reasonable interpretation that harmonizes the competing provisions is that co-owner approval of the annual budget is required as provided for in Article II, section 3(a) of the 2000 Bylaws." If the assessments levied pursuant to the approved budget prove to be insufficient to cover the condo project's operational costs, then the association has the authority to levy additional assessments as needed. However, the starting point "must be a co-owner approved budget to determine what maintenance and improvements will be undertaken by the Association. This provides a check on the Association's power and only allows it to undertake projects that were budgeted for." The court vacated the trial court's order to the extent that it required the association to (1) hold a meeting for the purpose of approving the 2010 and 2011 budgets and (2) hold a special meeting for the purpose of removing the board of directors elected in 2009. The association was no longer operating under the 2010 budget and a new board was elected before the trial court issued its opinion and order.

Full Text Opinion

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