Ortego et al v Lummi Island Scenic Estates Community Club, Inc et al

Filing 80

ORDER Granting Defendants' 48 Motion for Summary Judgment Regarding Bound Lots Claims, by Judge Robert S. Lasnik. (KERR)

1
2
3
4
5

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WASHINGTON
AT SEATTLE

6
7
8
9
10
11
12
13

_______________________________________
)
CHARLES E. ORTEGO, et al.,
)
)
Plaintiff,
)
v.
)
)
LUMMI ISLAND SCENIC ESTATES
)
COMMUNITY CLUB, INC., et al.,
)
)
)
Defendant.1
_______________________________________)

No. C14-1840RSL

ORDER GRANTING DEFENDANTS’
MOTION FOR SUMMARY
JUDGMENT REGARDING BOUND
LOTS CLAIMS

14

This matter comes before the Court on “Defendants’ Motion for Partial Summary
15

Judgment Regarding Bound Lots Claims.” Dkt. # 48. Defendant Lummi Island Scenic Estates
16

Community Club (“LISECC”) allows members who have combined – or bound – contiguous
17

non-buildable lots into a single lot to pay dues or assessments for only one lot. Plaintiffs assert a
18

number of claims arising from this policy, arguing that it exceeds LISECC’s authority under the
19

recorded instruments that created the Lummi Island Scenic Estates subdivision (“LISE”) and/or
20

Washington law. Defendants seek summary judgment on these bound lots claims.
21

Summary judgment is appropriate when, viewing the facts in the light most favorable to
22

the nonmoving party, there is no genuine issue of material fact that would preclude the entry of
23

judgment as a matter of law. The party seeking summary dismissal of the case “bears the initial
24
25
26

1

Counsel are instructed to utilize this abbreviated form of caption in all future papers and to
refrain from listing each and every moving party when filing documents in CM/ECF.
ORDER GRANTING DEFENDANTS’ MOTION FOR
PARTIAL SUMMARY JUDGMENT

1

responsibility of informing the district court of the basis for its motion” (Celotex Corp. v.

2

Catrett, 477 U.S. 317, 323 (1986)) and “citing to particular parts of materials in the record” that

3

show the absence of a genuine issue of material fact (Fed. R. Civ. P. 56(c)). Once the moving

4

party has satisfied its burden, it is entitled to summary judgment if the non-moving party fails to

5

designate “specific facts showing that there is a genuine issue for trial.” Celotex Corp., 477 U.S.

6

at 324. The Court will “view the evidence in the light most favorable to the nonmoving party . . .

7

and draw all reasonable inferences in that party’s favor.” Krechman v. County of Riverside, 723

8

F.3d 1104, 1109 (9th Cir. 2013). Although the Court must reserve for the jury genuine issues

9

regarding credibility, the weight of the evidence, and legitimate inferences, the “mere existence

10

of a scintilla of evidence in support of the non-moving party’s position will be insufficient” to

11

avoid judgment. City of Pomona v. SQM N. Am. Corp., 750 F.3d 1036, 1049 (9th Cir. 2014);

12

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986). Factual disputes whose resolution

13

would not affect the outcome of the suit are irrelevant to the consideration of a motion for

14

summary judgment. S. Cal. Darts Ass’n v. Zaffina, 762 F.3d 921, 925 (9th Cir. 2014). In other

15

words, summary judgment should be granted where the nonmoving party fails to offer evidence

16

from which a reasonable jury could return a verdict in its favor. FreecycleSunnyvale v. Freecycle

17

Network, 626 F.3d 509, 514 (9th Cir. 2010).

18
19
20
21

Having reviewed the memoranda, declarations, and exhibits submitted by the parties in
the light most favorable to plaintiffs,2 the Court finds as follows:
The plats by which LISE came into being state that “Ownership in any lot carries the

22

ownership of one membership in [LISECC or its predecessor] subject to the Articles and By-

23

Laws thereof.” Dkt. # 65-1 and 65-2. The Articles of Incorporation that were filed with the

24
25
26

2

The Court finds that this matter can be decided on the papers submitted. Plaintiffs’ request for
oral argument is DENIED.
ORDER GRANTING DEFENDANTS’ MOTION FOR
-2PARTIAL SUMMARY JUDGMENT

1

Secretary of State on June 14, 1962, provide that LISECC is a non-profit corporation whose

2

business will “not be carried on for profit either to itself or for the benefit of its members,” that

3

LISECC shall exercise its powers “for the purpose of doing, serving and applying the things [set

4

forth in the Articles] for the benefit of all property . . . subject to the jurisdiction of the

5

corporation,” and that membership in the corporation “shall be inseparately [sic] appurtenant to

6

tracts owned by its members.” Dkt. # 65-4 at 4, 9, and 10. The original corporate By-Laws

7

provided as follows:

8
9
10
11
12
13
14
15
16
17
18
19
20
21
22

! “Each owner or purchaser shall have one membership regardless of the number
of lots so owned or purchased . . . .” Dkt. # 65-6 at 3 (Art. II, § 2);
! Membership in the corporation “shall be inseparably appurtenant to lots owned
by the members” which “shall ipso facto be deemed to be transferred” to any new
owner or purchaser Dkt. # 65-6 at 3 (Art. II, § 4);
! “The annual dues may not be suspended for any reason.” Dkt. # 65-6 at 4 (Art.
II, § 5);
! “The members of the Community Club shall be liable for the payment of such
annual dues as may from time to time be fixed and levied by the Board of
Directors pursuant to the Articles of Incorporation and these By-Laws” with a cap
of $30.00 per lot per annum unless a majority of the membership votes for a
special assessment Dkt. # 65-6 at 8-9 (Art. IX, § 1);
! “Dues against members or the land . . . shall be levied by the Board of Directors
on an equitable basis without distinction or preference of any kind.” Dkt. # 65-6 at
4 (Art. IX, § 2);
! “[E]ach member with respect to the land or interests therein to which his
membership is appurtenant shall pay” any dues, assessments, interest, fines, or
penalties levied by the Community Club. Dkt. # 65-6 at 4 (Art. IX, § 5); and

23
24
25

! “These By-Laws may be amended at any time by a majority vote of those
members of the Community Club present at any regular meeting or present at any
special meeting called for that purpose.” Dkt. # 65-6 at 10 (Art. X).

26
ORDER GRANTING DEFENDANTS’ MOTION FOR
-3PARTIAL SUMMARY JUDGMENT

1

In 1973, the membership voted to amend Art. IX, § 2 to create a distinction for bound lots. The

2

requirement that dues be levied by the Board of Directors “on an equitable basis without

3

distinction or preference of any kind” was modified by the addition of the clause “except that in

4

cases where a member uses more than one contiguous lot as a single building site, dues or

5

assessments shall be levied on only one lot.” A similar provision exists in the current By-Laws:

6
7
8
9

4.5.1.2. Dues against members or the land . . . shall be levied by the Board of
Directors on an equitable basis without distinction or preference of any kind,
except that in cases where a member uses two (2) or more contiguous lots as a
single building site, dues (only) may be levied at the Board’s discretion on only
one lot.

10

Dkt. # 65-7 at 24. The membership has consistently rejected efforts to restrict or remove the

11

bound lots provision in the By-Laws.3

12

Plaintiffs raise a number of challenges to the bound lots provision. First, they argue that

13

the membership acted outside its authority when it amended the By-Laws in 1973 to create an

14

exemption for bound lots. In making this argument, they rely on a truncated and misleading

15

quotation from the instruments that created LISE to suggest that each lot owned gives rise to a

16

separate membership in LISECC and that each membership carries with it the obligation to pay

17

dues and assessments. Dkt. # 63 at 1 and 17. The plats do not mention dues or assessments at all,

18

however. The actual quotation states that “Ownership in any lot carries the ownership of one

19

membership in [LISECC or its predecessor] subject to the Articles and By-Laws thereof.” Dkt.

20

# 65-1 and 65-2 (emphasis added). The Articles and By-Laws, in turn, provide that an owner has

21

only one membership in LISECC regardless of how many lots he or she owns and that

22

contiguous lots combined into a single building site are eligible for a reduction in dues. A plain

23

reading of the recorded instruments show that they specifically referenced and incorporated the

24
25
26

3

Plaintiff Ortego’s efforts to revoke or otherwise make unenforceable the bound lots exemption
were ultimately unsuccessful.
ORDER GRANTING DEFENDANTS’ MOTION FOR
-4PARTIAL SUMMARY JUDGMENT

1

Articles and By-Laws when defining the relationship between lot ownership and membership in

2

LISECC. The relationship described in the referenced documents cannot, therefore, be a breach

3

of any promise or covenant in the recorded land records.

4

Second, plaintiffs argue that the recorded covenants must be interpreted in a way that

5

protects the homeowners’ collective interests, citing Fawn Lake Maint. Comm’n v. Abers, 149

6

Wn. App. 318 (2009). Interpretation is not necessary, however, where the drafter’s intent is clear

7

from the ordinary and common meaning of the words. Wilkinson v. Chiwawa Cmtys. Ass’n, 180

8

Wn.2d 241, 249-51 (2014); Hollis v. Garwall, Inc., 137 Wn.2d 683, 696 (1999). The plats’

9

limited description of the relationship between lot ownership and membership is “subject to”

10

LISECC’s Articles and By-Laws. Plaintiffs do not acknowledge the “subject to” language or

11

identify an ambiguous term that requires interpretation. The drafter’s intent to give the

12

community flexibility in determining how lot ownership translates into a membership interest in

13

LISECC is clear. The court will not interpret the covenant in a way that ignores its plain and

14

obvious meaning.

15

In the fact section of their opposition, plaintiffs argue that individual Board members

16

(and/or their family and friends) are benefitting from the bound lots exemption and should have

17

exercised their discretion under the current version of the By-Laws to kill the program. No case

18

law or other authority is offered in support of this argument.

19

Fourth, plaintiffs maintain that the bound lots exemption is a terrible idea that benefits a

20

handful of lot owners at the majority’s expense. The argument seems to be that the Court should

21

preclude LISECC from making any decisions that would increase the relative burdens on a

22

majority of the homeowners. The bound lots exemption came into existence through an

23

amendment to the By-Laws and in accordance with LISECC’s established decisionmaking

24

processes, however. Plaintiffs fail to acknowledge that the exemption has enjoyed the consistent

25

support of the vast majority of the members every time the issue has been put to a vote.

26
ORDER GRANTING DEFENDANTS’ MOTION FOR
-5PARTIAL SUMMARY JUDGMENT

1

Although this argument is couched in language suggesting that a hostile majority has victimized

2

a vulnerable minority, in reality the majority of LISECC members voted against their own

3

interests in order to protect the minority from a perceived unfairness. Plaintiffs may disagree

4

with the decision on its merits, but it is not per se unreasonable and plaintiffs have not identified

5

any procedural defect that would invalidate the exemption.

6

Fifth, plaintiffs rely on a “Notice to the Public of Assessment on Real Property” that

7

LISECC recorded in 1968. The documents puts owners and future purchasers in LISE on notice

8

that “an annual assessment for maintenance and improvements against each and every Lot” will

9

be made in accordance with the original plats. The plats are quoted in the Notice, including the

10

reference incorporating LISECC’s Articles of Incorporation and By-Laws. As discussed above,

11

the By-Laws were amended in 1973 to provide a reduction in dues for bound lots. Because the

12

1968 Notice incorporates the plats, which incorporates the By-Laws, there is no violation of this

13

recorded document.

14

Finally, plaintiffs argue that it would be improper to grant summary judgment on the

15

bound lots claims because the collection of dues under that program is simply one prong of a

16

larger profiteering scheme through which funds are collected from all homeowners for the

17

benefit of a few. If there is something wrong with the way LISECC allocates its funds, plaintiffs

18

will have an opportunity to establish that fact as the case moves forward. Even if the Court

19

assumes, for purposes of this argument, that certain expenditures violate the governing Articles

20

and/or By-Laws, that does not mean that each and every income stream flowing into LISECC’s

21

coffers is unlawful simply because the money is used for an allegedly unlawful purpose.

22

Plaintiffs have not shown that LISECC is barred from collecting dues or from establishing a

23

bound lots exemption from dues. Thus, the dues collected under the program are legitimate

24

income to LISECC, even if they are subsequently used for an impermissible purpose.

25
26
ORDER GRANTING DEFENDANTS’ MOTION FOR
-6PARTIAL SUMMARY JUDGMENT

1

For all of the foregoing reasons, the Court finds that plaintiffs have failed to raise a

2

genuine issue of material fact regarding the lawfulness of the bound lots exemption. The bound

3

lots claims – whether asserted under RICO, the CPA, or common law doctrines – are hereby

4

dismissed, and defendants’ motion for partial summary judgment (Dkt. # 48) is GRANTED.

5
6

Dated this 29th day of April, 2016.

7

A
Robert S. Lasnik

8

United States District Judge

9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
ORDER GRANTING DEFENDANTS’ MOTION FOR
-7PARTIAL SUMMARY JUDGMENT