NO. 91-309
IN THE SUPREME COURT OF THE STATE OF MONTANA
TERRY N. TRIEWEILER,
Plaintiff and Respondent,
WILLIAM R. S P I C H E R and
EMILY SPICHER, husband and wife,
Defendants and Appellants.
APPEAL FROM: District Court of the Eleventh Judicial District,
In and For the County of Flathead,
The Honorable Robert S, Keller, presiding.
COUNSEL OF RECORD:
For Appellant:
Steven E. Cummings; Murphy, Robinson, Heckathorn, &
Phillips, Kalispell, Montana.
For Respondent:
Brian Bulger, Attorney at Law, Great F a l l s , Montana
D
Submitted on Briefs: December 5 , 1991
Honorable Edward P. McLean, District Judge, delivered the Opinion
of the Court.
Defendants, William R. Spicher and Emily Spicher (Spichers),
appeal from the judgment of the Eleventh Judicial District,
Flathead County, granting summary judgment in favor of Plaintiff,
Terry N. Trieweiler (Trieweiler). We affirm in part and reverse
and remand in part.
We restate the dispositive issues as follows:
(1) Did the District Court err in finding as a matter of law
that the Board of Directors appointed by the developer on July 17,
1990, was not validly appointed and had no authority to appoint
members to a new Architectural Committee?
(2) Did the District Court err in finding that the
Architectural Committee was reasonable in its determination not to
approve Spichers' choice in roofing tile and exterior color?
In May 1989, Spichers purchased Lot 64 in the Grouse Mountain
Subdivision in Whitefish, Montana, subject to a number of covenants
including provisions for review by the Architectural and
Environmental Control Committee (Committee) of any plans for new
construction. The Committee was made up of five persons appointed
by the Board of Directors of the Grouse Mountain Home Owners
Association (Homeowners Association). The Committee operated under
a set of Minimum Guidelines for Architectural Review in Grouse
Mountain, Phase I (Guidelines), adopted in 1988 by the Homeowners
Association, which set minimum requirements for new construction.
The Spichers contracted with Scott Ping (Ping), a Whitefish
contractor, to construct a home on Lot 64. In August 1989, Ping
and the pich hers submitted a building plan to Trieweiler, who was
a member of the Committee. The Committee (Committee I) approved
the plan, with the following three exceptions: (1) the proposed
siding material, (2) the proposed roofing tile, and (3) the
proposed exterior color. After further efforts by Ping to gain
Committee 1's approval for these three items, Spichers retained an
attorney who requested an appearance before Committee I.
Trieweiler replied appearance before Committee I was not necessary
and Committee I would not reconsider its determinations. At this
point Spichers conceded to the wishes of Committee I on the siding
material but continued to attempt to negotiate with Trieweiler for
approval on the Spichers' choice of roofing tile and exterior
color. In September 1989, Ping gave Committee I, through
Trieweiler, samples of roofing tiles promoted as superior in
quality to the tiles called for in the Guidelines. Committee I
agreed to one of the samples which resembled cedar shakes.
Spichers subsequently discovered the manufacturer did not recommend
that specific tile for cold climates. The manufacturer did
recommend the style Spichers had originally chosen. At that point
Trieweiler told Ping he did not have time to deal with the problem
further and was washing his hands of the entire matter. In light
of Trieweilerls statement Spichers instructed Ping to roof the
house with the tile recommended by the manufacturer and to stain
the home with the exterior color of their choice.
On November 15, 1989, Trieweiler filed, as a property owner in
the subdivision, a complaint for injunctive relief alleging
Spichers were applying roofing tile in violation of the minimum
requirements in the Guidelines and were staining the home a gray
color which had been specifically disapproved by Committee I.
On May 23, 1990, the Homeowners Association held its annual
meeting and elected a new Board of Directors which appointed a new
Committee (Committee 11). Committee I1 granted Spichers an
appearance before the Committee but chose not to take any action at
that time. Because Committee I1 would not act, the original
developer of the subdivision appointed a new Board of Directors on
July 17, 1990. The new Board designated its own members as the new
Committee (Committee 111) and invited Spichers and Trieweiler to
attend a meeting to resolve the controversy. Trieweiler declined
to attend. Spichers did attend the meeting on July 30, 1990, and
Committee I11 approved the Spicher residence as built.
On December 21, 1990, the District Court concluded Committee
I11 was invalidly appointed and did not have authority to approve
the Spicher residence as built. As a result Spichers did not have
valid Committee approval for the roofing tile and exterior color
used on the home and the home was in violation of the Guidelines.
In light of these findings the District Court granted summary
judgment for Trieweiler, and ordered Spichers to remove and replace
the roofing tile with a tile known as Spectile No. 122, to execute
an agreement to replace the new roofing if it is damaged due to
weather or incorrect application, and to repaint the exterior of
the house. Spichers appeal.
I.
Subsequent to appeal Spichers filed with this Court a Motion
to Permit Supplementation of Record on Appeal asking this Court to
take into account circumstances occurring subsequent to the appeal
on the issue of reasonableness of the Committee's determinations.
Rule 9 (f), M.R.App.P., permits supplementation of the record on
appeal when something is omitted from the record ". . . by error or
accident or is misstated therein . . ." Such is not the case here
and Spichers' motion is denied.
11.
Did the District Court err in finding as a matter of law that
the Board of Directors appointed by the developer on July 17, 1990,
was not validly appointed and had no authority to appoint members
to a new Architectural Committee?
On May 23, 1990, the Homeowners Association held its annual
meeting and elected a new Board of Directors which appointed a new
Committee (Committee 11). Committee I1 granted Spichers an
appearance before the Committee but chose not to take any action at
that time. Because Committee I1 would not act, the original
developer of the subdivision appointed a new Board of Directors on
July 17, 1990. The new Board designated its own members as the new
Committee (Committee 111) and invited the Spichers and Trieweiler
to attend a meeting to resolve the controversy. Trieweiler
declined to attend. The Spichers did attend the meeting on July
30, 1990, and Committee I11 approved the Spicher residence as
built.
The District Court found as a matter of law that "the Board of
Directors that was appointed by the developer on July 17, 1990, was
not validly appointed, or in excess of the number of directors
provided for, and as such, the July Board of Directors had no
authority to appoint anyone, much less themselves, as members of
[Committee 1111. § 35-2-402(2), (3), and (4), MCA [I9891 ."
Spichers argue the developer had the right under the Articles of
Incorporation to appoint a Board of Directors. Article VII of the
Articles of Incorporation provides:
The affairs of the Corporation shall be managed by
a Board composed of at least five (5) directors but not
more than seven (7) directors who need not be members of
the Corporation. The initial Board shall be composed of
five (5) members. A change in the number of directors
may be made by amendment to the Bylaws of the
Corporation. Until such time as ninety percent (90%) of
the lots or units of present and future phases of Grouse
Mountain have been sold by the Developer, the directors
shall be selected by the incorporator, or his successor
or assign. All directors shall be elected annually for
a term of one (1) year unless otherwise provided in the
Bylaws. The names and addresses of the persons who are
to act in the capacity of directors until the election of
their successors are: ...
Article V of the Articles provides that Itevery person or
entity who is a record owner of a fee or an undivided interest in
a lot or unitFFis a member of the Corporation. Article VI of the
Articles provides that IF[i]n all elections for directors, every
member entitled to vote shall have the right to cumulate his vote
and to give one candidate a number of votes equal to his vote
multiplied by the number of directors to be elected or by
distributing such votes on the same principal [sic] among any
number of such candidates."
The members of the Association had the authority under the
Articles to elect the new Board of Directors at its annual meeting
on May 23, 1990. That Board had the authority under Article VIII
of the Bylaws of Grouse Mountain Homeowners, Inc., to "appoint
committees as deemed appropriate in carrying out its purpose." The
Architectural Review Committee was a committee that had been formed
by a prior Board under the authority of that provision to review
plans for new construction to enforce the Minimum Guidelines for
Architectural Review in Grouse Mountain, Phase I, which had been
adopted by the Association membership.
Article VII of the Articles of Incorporation provides for a
one-year tern for elected directors on the Board. Section 35-2-
403, MCA (1989), provides that "a director may be removed from
office pursuant to any procedure therefor provided for in the
articles of incorporation." There are no provisions in the
Articles of Incorporation of Grouse Mountain Homeowners, Inc.,
giving the developer the authority to remove a duly-elected Board
of Directors prior to the end of the one-year t e n of office
provided for in the Articles. Since the developer did not have the
authority to remove the Board to appoint a new Board, any actions
taken by the new Board and Committee I11 which was created by the
new Board are invalid and unenforceable. We hold that the District
Court did not err in finding as a matter of law that the Board of
Directors appointed by the developer on July 17, 1990, was not
validly appointed and had no authority to appoint members to a new
Architectural Committee.
111.
Did the District Court err in finding that the Architectural
Committee was reasonable in its determination not to approve
Spichers' choice in roofing tile and exterior color?
Both parties cite Gosnav v. Bis Sky Owners Ass'n (1983), 205
Mont. 221, 666 P.2d 1247, in support of their legal arguments.
Spichers also cite Hisdem v. Whitham (1975), 167 Mont. 201, 536
P.2d 1185; Town & Country Estates Ass1n v. Slater (1987), 227 Mont.
489, 740 P.2d 668; and Hillcrest Homeowners Assln v. Wiley (1989),
239 Mont. 54, 778 P.2d 421. These four cases represent Montana
case law on the issue of validity and enforceability of restrictive
covenants. None of the Montana cases address the issue currently
before the Court dealing with reasonableness of determinations of
a committee empowered with the right to approve or reject building
plans.
It is clear the well-established rule in most jurisdictions is
that a committee's power of approval must be governed by the
applicable covenants and guidelines and must be reasonably
exercised. This Court cited the rule in Gosnav v. Biq Skv Owners
Ass'n (1983), 205 Mont. 221, 227, 666 P.2d 1247, 1250; however, the
issue of reasonable exercise of power of approval was not before
the Court at that time. The Court hereby adopts this rule and
applies it to the case now before the Court.
The majority of cases in other jurisdictions deal with the
issue of validity and enforceability of covenants. There are few
cases addressing the issue of reasonableness of the exercise of
power of approval. Most of the cases that exist merely state the
reasonableness rule, followed by a conclusive statement that the
committee did (or did not) reasonably exercise its power of
approval, with little or no discussion or analysis of how either
the trial court or the appellate court reached its conclusion. We
conclude that the better reasoned cases consider the determination
of whether the exercise of power to approve construction plans was
reasonable or arbitrary is a factual question to be determined in
light of the circumstances. LaVielle v. Seay (Ky. 1966), 412
S.W.2d 587. Also see LaBlanc v. Webster (Kan. 1972), 483 S.W.2d
647; Donoqhue v. Prvnnwood Corp. (Mass. 1970), 255 N.E.2d 326; Rhue
v. Chevenne Homes, Inc. (Colo. 1969), 449 P.2d 361; Otwell v. West
(Ga. 1964), 137 S.E.2d 291; Bramwell v. Kuhle (1960), 183
Cal.App.2d 767, 6 Cal.Rptr. 839; Shields v. Welshire Develo~ment
Co. (Del. 1958) 144 A.2d 759; Allieqro v. Home Owners of Edqewood
Hills, Inc. (Del. 1956), 122 A.2d 910 (examined the evidence to
determine if the facts support finding power of approval was
reasonably or arbitrarily exercised).
Summary judgment is proper when there are no genuine issues of
material fact and the moving party is entitled to judgment as a
matter of law. Rule 56(c), M.R.Civ.P. When the facts contained in
the record are considered against the background of the rule that
power of approval must be reasonably exercised, we conclude there
are material issues of fact. Therefore the District Court erred in
finding that the Architectural Committee was reasonable in its
determination not to approve Spichers' choice in roofing tile and
exterior color.
The Minimum Guidelines for Architectural Review in Grouse
Mountain, Phase I, provide:
The following are minimum requirements that have
been applied by the Architectural Review Committee to new
construction in Grouse Mountain, Phase I.
5. Stain. If wood siding or shingles are used on
the exterior surface of the residence, they must be
stained in a color or shade approved by the Architectural
Committee. Translucent stain is permitted on redwood or
cedar exteriors. However, opaque stain is required on
fir exteriors.
6. Roofinq. Roofing materials must be cedar shake
shingles or dimensional cut Class A fire-rated asphalt-
fiberglass shingles. If the latter type of shingle is
used, the color is subject to approval by the
Architectural Committee.
. .. [Emphasis in original.]
The roofing material selected by Spichers was neither a cedar
shake shingle nor a dimensional cut Class A fire-rated asphalt-
fiberglass shingle. Committee I originally rejected Spichers'
choices but eventually did approve one of two samples of tile
presented to the Committee. Spichers subsequently discovered the
approved tile was not recommended for cold climates and told their
contractor to use the roofing tile that was their first choice.
Spichers argue they did not violate the Guidelines because the tile
they used was superior in quality. The Guidelines set forth
"minimum requirements, one of which is the [r]oofing materials
must be cedar shake shingles or dimensional cut Class A fire-rated
asphalt-fiberglass shingles. 'I There is a material question of fact
whether this requirement limits the roofing material to only those
two choices or whether the minimum requirement only sets a minimum
standard for quality. his factual question must be determined by
the trier of fact in light of the intent of the Association in
drafting the Guidelines and in light of the fact that Committee I
eventually approved a tile that was not one of those two choices.
There are also factual questions whether Committee I was reasonable
in approving a tile not suitable for cold climates and whether
Committee I had knowledge of the unsuitability of the tile at any
time during its determination whether to approve the tile. These
factual questions are in dispute and are material questions of fact
precluding summary judgment in this case.
Committee I specifically disapproved the gray color Spichers
chose to paint the exterior of their home stating that seven out of
the last ten homes built in the neighborhood had been painted with
some variation of gray, including the home immediately adjacent to
the Spichers' home. Committee I did approve two shades of brown.
Spichers respond that more brown homes than gray homes exist in the
subdivision and therefore Committee I acted arbitrarily in its
rejection of gray. The power of refusal must be exercised
objectively, honestly and reasonably. Donoqhue v. Prmnwood Corp.
(Mass. 1970), 255 N.E.2d 326, 329. A committee may not
subjectively impose its whims or aesthetic tastes on lot owners.
Therefore a material question of fact exists regarding the
objectivity and reasonableness of the Committee's refusal to
approve the gray color preferred by Spichers.
In light of the foregoing, we find there are material
questions of fact which must be determined by the jury in this
case, and the District Court erred in concluding that the
Architectural Committee acted reasonably in its determination not
to approve Spichers' choice in roofing tile and exterior color. We
remand to the District Court for further proceedings consistent
with this Opinion.
Affirmed in part; reversed and remanded in part.
Judge, sitting in place of Chief
Justice J. A. Turnage
We concur:
n
Honorable Russell K. Fillner,
District Judge, sitting in place
of Justice R . C. McDonough
.
of Justice
n, District
~de--
ug,g in place of Justice
Fred J. Weber
H o n o r a b l e T h o m a s M. M c K i t t r i c k , d i s s e n t i n g :
I dissent from the Majority opinion.
This case is about homeowners and their right to organize
to establish reasonable standards for the aesthetic preservation
and architectural consistency of their neighborhood and then rely
on those standards when they are objected to by someone who is
fully aware of their existence prior to purchasing his property.
This case is also about whether developers can establish a
self-governing group of directors elected from among the homeowners
rho reside in the neighborhood developed and then, contrary to the
Articles of Incorporation, Bylaws, and Restrictive Covenants, throw
those people out of office when their decisions are inconvenient or
contrary to the wishes of one of the developers.
In addition, this case is about whether a developer can impose
restrictive covenants on other homeowners who purchase lots and
build homes in his development, even though many of those homeowners
incurred additional expense to comply with these requirements, and
then arrogantly and deliberately ignore the requirements when he
decides to build his own home in the same neighborhood.
Triewelier is a homeowner who filed an Injunction to enforce
an intentionally violated covenant at the Grouse Mountain Develop-
ment (Development), a subdivision near Whitefish, Montana.
In 1979, the general partner of the Development, Brian T.
Grattan, filed with the Clerk and Recorder's Office of Flathead
County, Montana, a Declaration of Conditions, Covenants and
Restrictions. In relevant part paragraph 15 reads:
"Architectural Control. . . . that no building shall be
Page
commenced upon the property until the plans and specifications
were submitted and approved by the committee."
Pursuant to paragraph 15, the a c t i n g Board of D i r e c t o r s
appointed an Architectural Committee. At the 1989 Annual Home-
owners Meeting, Committee I submitted to the homeowners, for
their approval, minimum Architectural Standards (Guidelines). The
homeowners unanimously approved the guidelines at the meeting.
Prior to the guidelines approval, Committee I had mailed a
copy of the guidelines to every owner of every lot in the develop-
ment.
William R. Spicher (Spichers) was an original partner in the
development, and in fact was one of its largest investors. As
such, he was a partner of Grattans and was aware of t h e Articles
of I n c o r p o r a t i o n , Bylaws and R e s t r i c t i v e Covenants. S p i c h e r s
owned lot 64 in the development and had bought the land subject to
the restrictive covenants. In late summer of 1989, Spicher con-
tracted with Ping Construction (Ping) to build a home.
There is no dispute that all parties, including Spichers and
Ping, knew of paragraph 15 (the covenant) and the guidelines.
Yet, the Spichers, through Ping, chose to disregard t h e guidelines
by submitting plans to build their home with an imitation-tile
roofing - Material I - and stain their house a gray color.
Committee I rejected:
(1) Material I because it was an imitation-tile concrete
composition roofing material that did not meet t h e guidelines and
had never been used in the development before; and
( 2 ) the gray color stain because seven of the last ten homes
built in the neighborhood were of some gray variation, including
a home next to Spicher's lot.
P a g e 15
Committee I, in a letter to the Spichers, stated that
"Committee I [was] willing to consider a broad spectrum of earth
tone colors." Committee I "want[ed] to avoid [a] predominance of
one or two colors [in an area] and the construction of homes in a
row [of] the same color."
The Spichers through their contractor resubmitted three new
colors and roofing material (Material 11). Committee I again
rejected a gray color but approved a mushroom and Aspen tan color
and as a compromise approved Material I1 on the condition the
Spichers sign a written agreement to replace the roof if damaged
by the weather. The Spichers were insulted and tried to meet with
Committee I members without Trieweiler present. Trieweiler not
wanting to waste any more of his time trying to hammer out a
compromise with the Spichers, never again acted as an intermediary
between the Spichers and Committee I.
The Spichers then retained an attorney who wrote a letter to
Committee I. Committee I wrote back saying the Spicher's actions
destroyed any chance for compromise and that a meeting with the
Spichers would not benefit either party. Contrary to Committee 1's
decision, the Spichers did what they "wanted to do in the first
place . . ." and built their home with the rejected imitation-tile
Material I and stained the house a gray color.
In May of 1990 the homeowners held a meeting to elect a new
Board of Directors. Mr. Spicher's former partner and original
developer (Grattan) approached the homeowners with a deal. Grattan
proposed that he would not invoke his power to appoint a new Board
of Directors under Article VII of the Articles of Incorporation,
but would assign it to the homeowners at the meeting if the home-
owners would allow him to vote his unassessed eleven lots. The
deal was struck and the homeowners elected a new Board of Directors
who in turn appointed a new Architectural Committee (Committee 11).
Page 16
Spichers went before Committee I I seeking approval. Committee 11,
largely a result of Grattan's and Spicher's v o t e s at the May meeting,
refused to approve Spicher's home. For that reason, and that reason
only, Grattan broke his promise to the homeowners and unilaterally
terminated the Board of Directors. He appointed himself and four
others to the new Board. Prior to Grattan's appointment of the new
Board, Mr. Spicher contacted each new director and asked them if
they would serve on his "New Board of Directors". The new Board
appointed Committee 111. Committee I11 approved Spicher's home
"as built".
The Majority has trouble following Gosnay v. Big Sky Owners
Assn., 205 Mont. 221, 566 p.2d 1247. The case is clearly on point
but the Majority chooses to create a different result. In Gosnay,
the Supreme Court reversed the District Court and enforced a similar
restrictive covenant as a matter of law, against an owner with a
"jackleg" fence. 205 Mont. at 227. The "construction of a fence
requirekdl prior approval by the Architectural Committee. . . . The
Architectural Committee refused Gosnays permission to build their
fence [since the] Gosnay's fence [was] contrary to Big Sky's overall
plan for openness." - The Court went on to state that although
Id.
some fences had been approved, a jackleg fence had never been
approved.
Similarly, here, Committee I needed to approve all plans to
build in the development. Committee I rejected the Spichers plans
because the imitation-tile Material I failed to meet the guidelines
or overall plan for uniform roofing and had never been used in the
subdivision before. Rejection of the color gray was based on the
overall plan to protect the property owners' investments.
This Court, as a matter of law, should have followed its prior
decision in Gosnay and enforced the restrictive covenant against
the Spichers. But they did not.
Page 17
Instead the Majority uses creative reasoning when it states
that "whether the exercise of power to approve construction plans
was reasonable or arbitrary is a factual question to be determined
in light of the circumstances." The Majority, however, seems to
conveniently forget to consider the question of reasonableness in
light of - the circumstances. Spichers built their home the way
all
they "wanted to build it in the first place." They used imitation-
tile Material I for their roof and stained their home gray, thus
violating:
(1) the restrictive covenant because they did not get prior
approval from any legally appointed committee to use Material I or
the color gray;
(2) the guidelines because the imitation-tile Material I
violated the overall plan for uniform roofing as well as fire and
weather safe roofs, and the gray color because the overall plan
allowed the Committee to control the color of exterior materials
used on homes. The Committee felt that che domination of one
color would give the homes in the development the appearance of
tract housing. The Committee rejected the color to protect the
neighborhood's property values. See Gosnay v. B i g Sky Owners
Assoc., 205 Mont. 221, 666 p.2d 1247, 1250 (1983).
The Majority found a q u e s t i o n of fact in the guidelines.
They asked, does the roofing guideline mean only two choices or
does it mean that superior material can be used? There is a
question of fact here only if the guidelines are read alone.
The facts, however, should come to this Court's rescue and clear
the muddied waters. Committee I has answered the Court's and
Spicher's question. There are more than two choices, but Committee
I, or at least a legally appointed committee, had to approve the
choices that were not spelled out in the guidelines. Further,
Committee I specifically rejected Material I and sent a message to
the Spichers not to use Material I. Spichers ignored that message
Page 1 8
and so has the Majority of this Court. Spichers could have used
a listed roofing material, but chose to use Material I after
Committee I vehemently rejected Material I because it was imitation-
tile never used in the subdivision. Committee I supplied the
answer to the question - Material I did not meet the guidelines -
no question of fact exists as to Material I - it did not meet the
guidelines.
Next the Majority finds a question of fact in whether or not
Committee I objectively and reasonably rejected the gray color.
Again, the Majority seems to ignore the facts. The facts clear
the path to show, as a matter of law, the Committee acted. object-
ively and reasonably.
Seven of the last ten homes built in the neighborhood were of
some gray variation, including a home adjacent to Spichers. The
Committee felt another gray home in the area would give the
appearance of tract housing which would devalue the neighborhood
properties. In trying to protect property owners' values, the
Committee precluded Spichers use of the gray color. See Rhue v.
Cheyenne Homes Inc., 449 p.2d 361, 363 (Colo. 1969). The
Committee did not, as the Majority suggests, impose its whims or
aesthetic tastes on the Spichers. See Donoghue v. Prynnwood Corp.,
255 NE2d 326, 40 ALR3d 858 (Mass. 1970). To the contrary,
Committee I objectively and reasonably followed the overall plan
and tried to protect the investment of home and lot owners. No
question of fact existed. The Committee acted reasonably for the
protection of all owners within the development.
Since there are no questions of fact, the Gosnay decision
should control and the District Court's Summary Judgment ruling
should be uphela by this Court. Instead the Majority chooses to
be creative and in their rush to achieve their desired result
Page 19
and keep this litigation alive have failed to consider the
repercussions which will s e ~ i o u s l yimpair the rights o f property
owners to establish and control architectural development and
aesthetic preservation in their neighborhoods.
Page 20