No. 04-168
IN THE SUPREME COURT OF THE STATE OF MONTANA
2004 MT 342
EUGENE J. BORDAS, JR., and PAULINE K. BORDAS,
Husband and Wife,
Plaintiffs and Respondents,
v.
THE VIRGINIA CITY RANCHES ASSOCIATION,
a Montana Nonprofit Corporation,
Defendant and Appellant.
APPEAL FROM: District Court of the Fifth Judicial District,
In and for the County of Madison, Cause No. DV 29-2002-17
The Honorable Loren Tucker, Judge presiding.
COUNSEL OF RECORD:
For Appellants:
Wayne E. Jennings, Angel Coil & Bartlett, Bozeman, Montana
For Respondents:
Jeanette Ellen Berry, Attorney at Law, Bozeman, Montana
Submitted on Briefs: August 18, 2004
Decided: December 7, 2004
Filed:
__________________________________________
Clerk
Justice Patricia O. Cotter delivered the Opinion of the Court.
¶1 The Virginia City Ranches Association (“Association”) appeals from a Decision and
Order granting summary judgment to respondents Eugene J. Bordas, Jr., and Pauline K.
Bordas1 (“Bordas”), husband and wife, and joint tenants of the real property which is the
subject of this action. We affirm.
ISSUE
¶2 Did the District Court err when it granted summary judgment to Eugene J. Bordas,
Jr., and Pauline K. Bordas after concluding that they were not required to be members of the
Virginia City Ranches Association?
FACTUAL AND PROCEDURAL BACKGROUND
¶3 This matter was submitted to the District Court and to this Court with an agreed
statement of facts, which we restate below.
¶4 Bordas are husband and wife who own in joint tenancy and reside upon certain real
property located in a subdivision known as the Virginia City Ranches Subdivision
(“Subdivision”), located in Madison County. The Association is a Montana nonprofit
corporation with its principal place of business in Madison County.
¶5 The creation of the Association was authorized by the Protective Covenants (“Original
Covenants”) for the Subdivision, which were recorded at the Madison County Clerk and
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Pauline K. Bordas was a party to this case until she passed away in November 2003,
shortly after trial. The Bordas’ property was held in joint tenancy and transferred to Eugene
Bordas upon his wife’s death, and thus the parties have not substituted her estate as a real party in
interest in this case.
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Recorder on April 27, 1973, at Book 237, page 773. The Association was organized for the
purpose of enforcing the Original Covenants and for the purpose of performing the powers
and duties set forth in its Articles of Incorporation, issued May 21, 1973, and Bylaws,
adopted July 26, 1982.
¶6 Bordas purchased Lots 29 and 30 on July 21, 1988, “SUBJECT to easements and
restrictive covenants and reservations of record and easements visually discernable upon the
premises.” The northern boundary of Lot 30 abuts the Old Virginia City Highway, with
access to Bordas’ property by private driveway off that road. The Old Virginia City
Highway is a county road, but at times, the Association and private abutting landowners have
performed maintenance on it. The Association has sought to recover some of its
maintenance expenses, together with other amounts, by way of assessments.
¶7 The Bylaws were revised on July 29, 1995, at an Annual Meeting of the Association.
The Original Covenants were amended on August 26, 1999, at an Annual Meeting of the
Association. These amendments were recorded in a document entitled “Protective Covenants
with Addenda” (“Amended Covenants”) at the office of the Madison County Clerk and
Recorder on July 6, 2002.
¶8 Bordas objected to any requirement for mandatory membership in the Association and
refused to pay the annual assessments the Association levied. The Association placed a lien
for these assessments against Bordas’ property, recorded in the office of the Madison County
Clerk and Recorder, for each year from 1997 to date. Bordas repeatedly demanded that the
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Association release all liens and encumbrances placed upon their real property. The
Association refused.
¶9 Bordas brought this action seeking a declaratory judgment that Bordas’ membership
in the Association was not mandatory and that assessed liens upon Bordas’ real property
were not valid, and further that the Amended Covenants were not valid and enforceable. The
Association conceded that the changes to the covenants which imposed new conditions not
contemplated in the Original Covenants were not valid. However, whether the liens against
Bordas’ property were valid under the Original Covenants depended upon whether Bordas
were required to be Association members. This issue was submitted to the District Court on
the above agreed statement of facts and was argued on a motion for summary judgment.
¶10 On March 28, 2003, the District Court issued a Decision and Order Regarding
Summary Judgment, in which it granted summary judgment to Bordas and denied the
Association’s cross-motion for summary judgment on a different issue which is not a subject
of this appeal. The District Court concluded that Bordas were not required to be Association
members. The Association timely appeals the District Court’s grant of summary judgment
to Bordas.
STANDARD OF REVIEW
¶11 We review a district court’s grant of summary judgment de novo, applying the same
evaluation under Rule 56, M.R.Civ.P., as the district court. Glacier Tennis Club at the
Summit, LLC v. Treweek Constr. Co., Inc., 2004 MT 70, ¶ 21, 320 Mont. 351, ¶ 21, 87 P.3d
431, ¶ 21 (citations omitted). In other words, the party moving for summary judgment has
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the initial burden of proving that there are no genuine issues of material fact that would
permit a non-moving party to succeed on the merits of the case, and if the moving party
meets that burden, then the non-moving party must provide substantial evidence that raises
a genuine issue of material fact in order to avoid summary judgment in favor of the moving
party. Glacier, ¶ 21 (citations omitted). Once it is established that no genuine issues of
material fact exist, the district court must then determine whether the moving party is entitled
to judgment as a matter of law, and this Court reviews that determination to determine
whether the district court erred. Glacier, ¶ 21 (citations omitted).
DISCUSSION
¶12 Did the District Court err when it granted summary judgment to Eugene J. Bordas,
Jr., and Pauline K. Bordas after concluding that they were not required to be members of the
Virginia City Ranches Association?
¶13 The Association argues that the District Court erroneously concluded that the Articles
of Incorporation, Bylaws, Original Covenants, and Amended Covenants did not create an
obligation for Bordas to belong to the Association. While the Association concedes that the
documents at issue were not “artfully worded,” it claims that by narrowly focusing on
language in the Bylaws which stated that each owner or subsequent purchaser of real
property within the Subdivision “shall be eligible to belong to the Association,” (hereinafter
referred to as the “Eligibility Clause”) the District Court “ignored many other sentences,
words and phrases that suggest another meaning.”
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¶14 The Association also argues that, although the Original Covenants do not refer to
Association membership, people owning property within the Subdivision nonetheless have
a duty to pay their share of Association expenses. The Association maintains that all the
documents governing the Subdivision and the Association must be taken together as a whole.
The Association explains that the purpose stated in the Articles of Incorporation includes the
power to fix, levy, collect, and enforce assessments, and thus, regardless of whether Bordas
are Association members, they are still liable for the assessments levied against the property
owners within the Subdivision. The Association argues that the District Court’s decision that
Association membership is not compulsory negates the Association’s power and ability to
assess and enforce assessments. “It is only through compulsory membership in the
Association,” it argues, “that an owner within the subdivision can be compelled to pay
assessments and it is only if the owners can be compelled that the Association can enforce
assessments.” The Association argues that it is not reasonable to interpret the relevant
documents in a way that allows a property owner to avoid paying assessments by simply
declining Association membership.
¶15 Bordas respond that the binding and determining document is the Original Covenants
which run with the land, and that while the rules of contract interpretation apply to this
document, they apply only to its four corners. Moreover, Bordas point out, Montana law
requires strict construction of restrictive covenants. Town & Country Estates Association v.
Slater (1987), 227 Mont. 489, 492, 740 P.2d 668, 670-71. Bordas claim that the District
Court correctly determined that the Original Covenants contained no requirement for
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Association membership and that the Eligibility Clause made membership permissive only.
Bordas further point out that the Original Covenants contained no provision for amendment,
and thus, the Amended Covenants are ineffective without unanimous consent of the property
owners.
¶16 Finally, Bordas concede that the Original Covenants bind all Subdivision property
owners; however, they claim those covenants merely provided for the creation of the
Association to be formed for administrative purposes. Nothing in these covenants, they
claim, compels Subdivision property owners to become Association members.
¶17 The relevant language in the Bylaws states,
Each original owner or owners or subsequent purchaser . . . in the above
described subdivision shall be eligible to belong to the Association. Upon
payment of assessments levied by the Board of Directors during a fiscal year
said owner or owners shall be considered paid members of the Association and
shall be entitled to one (1) vote for each parcel of land owned.
¶18 Both parties also tender arguments based upon the Montana Nonprofit Corporation
Act (MNCA). Section 35-2-113, et seq., MCA. However, they note that the District Court
did not rely upon the MNCA in its Decision and Order and we do not do so here.
¶19 The Association replies that Bordas incorrectly rely on the four corners of the Original
Covenants as the language which controls this case. The Association asserts that, while the
law requires strict interpretation of covenants which restrict the free use of land, this tenet
is not applicable here, as the issue in this case has nothing to do with land use, but rather has
to do with whether Bordas must pay a share of the maintenance expenses of the Subdivision.
The Association points out that the cases which Bordas cite involved restrictions on
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improvements which property owners were prohibited from building because of covenants.
In the case at hand, requiring membership in the Association would not infringe upon how
Bordas actually use their property or what improvements are made to it. Finally, the
Association notes that, while the Original Covenants lack clarity, to conclude both that they
do not allow for an amendment process and that Association membership is not mandatory
would negate much of the covenants’ contents and take away the power of the Association
to collect funds for Subdivision maintenance.
¶20 Because the parties agree as to the facts of this case, we need only consider whether
the District Court was correct when it determined that Bordas were entitled to judgment as
a matter of law. Glacier, ¶ 21 (citations omitted). As a preliminary matter, we note that the
District Court relied upon a prior Madison County case which it found to be factually similar
to the case at hand. The parties to this appeal both addressed this case in their Briefs to this
Court. From the record before us, it appears that this case was never appealed after the
District Court made its ruling. It is axiomatic that a District Court case is not binding
precedent upon this Court. Furthermore, we have not received a record of the previous case
which would allow us to be persuaded as to its applicability. Thus, we decline to consider
it in our analysis.
¶21 The District Court determined that the crucial covenants were those which were in
place and of record at the time Bordas purchased their property. Whether those Original
Covenants are sufficient to require Bordas to become Association members controls the
outcome of this case. The District Court found no language within the Original Covenants
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which required Bordas to become Association members. Moreover, it construed the
Eligibility Clause within the Bylaws to mean that Subdivision property owners had a choice
as to whether to join the Association. “There would be no need to insert the term ‘eligible’
if all owners are required to be members. To reach that conclusion, this Court would be
required to ignore the phrase regarding eligibility,” it noted.
¶22 We empathize with the Dissent’s concern that, without the power to assess, the
Association cannot provide the benefits promised by the Covenants. However, the
precondition to mandatory payment of assessments is mandatory membership. Because the
Covenants did not make membership mandatory, the Association cannot compel the payment
of assessments from those who exercise the right to decline membership. That our ruling
may undermine the Association’s ability to serve its members is unfortunate, but not
determinative.
¶23 The District Court further found that there was no language within the Original
Covenants which provides for amendment, and noted that the Association conceded this as
well. Thus, the District Court concluded that the only way in which to amend the Original
Covenants would be to secure the unanimous vote of the existing property owners. The
District Court distinguished Windemere Homeowners Association, Inc. v. McCue, 1999 MT
292, 297 Mont. 77, 990 P.2d 769, upon which the Association relied, on the grounds that its
covenants provided for amendments, unlike the covenants at issue in this case. The District
Court further found little support for the Association’s contention that one must look at the
language from all the various documents put forth in this case, noting that the Articles of
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Incorporation and the Bylaws apply to the Association and its members only. Thus, they
come into play only if membership is mandatory. Finally, the District Court concluded that
the Association could neither force property owners to become members nor force non-
members to pay assessments levied by the Association, and thus, the Association is not
entitled to place liens against Bordas’ property.
¶24 Restrictive covenants are construed under the same rules of construction as other
contracts: courts read declarations of covenants on their four corners as a whole, and terms
are construed in their ordinary or popular sense. Windemere, ¶ 13 (citation omitted).
Applying these rules of construction to the Original Covenants and the Bylaws, we are
constrained to agree with the District Court. Although the Association would like us to find
the Eligibility Clause ambiguous and the amendment process implicit in the Original
Covenants, we cannot do either, as we cannot insert in the documents something which is
not there. Thus, we conclude that summary judgment was correctly granted to Bordas.
CONCLUSION
¶25 For the foregoing reasons, we affirm the District Court.
/S/ PATRICIA O. COTTER
We Concur:
/S/ KARLA M. GRAY
/S/ JAMES C. NELSON
/S/ JIM REGNIER
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Justice Jim Rice dissenting.
¶26 I agree with the Court’s implicit conclusion that the subdivision’s Protective
Covenants are determinative of the dispute here. However, I believe a close review of the
Covenants requires a different outcome.
¶27 The introductory paragraph of the Covenants states that “all” of the sites and lands
within the subdivision are subject to “the protective covenants, conditions, restrictions and
reservations hereinafter set forth.” No one contests that the Bordas property was subject to
each and every condition and requirement set forth in the Covenants.
¶28 In the second introductory paragraph of the Covenants, these concepts are expanded
further. This provision states that “with prime consideration for the ecology and esthetics
of the property,” the developer has established a plan for the “protection, maintenance,
development and improvement of said land,” and therefore, the Covenants were for the
“mutual benefit of all sites” and shall run with the land and be applicable to all “owners, their
successors and assigns.” The question then becomes what conditions were imposed upon
every site and every owner by these Covenants in order to fulfill the developer’s plan to
maintain and improve the property.
¶29 Paragraph 2 of the Covenants provides as follows:
Declarant has caused a non-profit corporation to be formed, The
Shining Mountains Virginia City Ranches Assoc., to administer all matters
regarding surface water rights; location and procedures applicable to the
drilling of water wells within the various easements; overseeing and
maintaining of all common areas, including the upkeep, grading and
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maintenance of the major traverse roads, the existing ranch fencing around the
perimeter of the property, and the exterior lighting at each residence or
outbuilding, overseeing, maintaining and stocking the lakes, streams and other
water bodies within the property with trout; the receipt and expenditures of
monies through such entity; and architectural approval after January 1, 1985,
or if sooner provided.
Further provisions of the Covenants require that The Shining Mountains Virginia City
Ranches Association (“Association”) be responsible for approval of ancillary buildings
(Paragraph 5) and for time of construction (Paragraph 8).
¶30 Thus, the Covenants established, for purposes of the subdivision, the Association and
its role. The Covenants imposed, as a condition upon all property and owners, the power and
duty of the Association, “for the mutual benefit of all sites,” to administer all water matters,
all easement and drilling matters, oversee the water bodies and trout stocking, to maintain
all common areas, roads, fencing and each residence’s exterior lighting, and to exercise
architectural approval. In other words, this was the developer’s plan mentioned above–that
the Association would, for all owners, ensure an ecological and esthetic environmental
setting. To carry out this plan, the Covenants enabled the Association to receive and make
expenditures.
¶31 It is correct that assessments are not mentioned in the Covenants. That omission has
given rise to the conflict today. However, despite that omission, it cannot be denied that the
existence of the Association and its functions within the subdivision are Covenants which
run with the Bordas property and which bind the Bordases. They are subject to the
Association’s authority, but further, they have received the benefits the Association provides
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because of those Covenants: the roads, fences, common areas, bodies of water, fish, and even
the exterior lighting at the Bordas property. This enhances their property. The Covenant
which allows the Association to collect revenues may be ambiguous, but it can have only one
logical interpretation: to authorize the Association to collect the revenues from the owners
necessary to fulfill its duty to provide benefits to those same owners. Any other
interpretation is an absurdity.
¶32 Affirming the District Court binds the Bordases and their property to the Association
and its authority, and mandates that the Association provide the Bordases with the benefits
of ownership provided by the Covenants, but bars the Association from collecting revenue
from the owners it must serve, even though the power to collect is granted by the Covenants.
However, this Court has rejected the use of narrow, technical rules for construction of real
estate instruments, and has declared instead that such instruments “must be considered as a
whole, in order to ascertain the intention of the parties.” Johannes v. Dwire (1933), 94
Mont. 590, 593, 23 P.2d 971, 972. I believe the intent of the parties here, given the
Covenants as a whole, was clear. The Bordases are to be paying the Association for the
benefits they are receiving. I would reverse.
/S/ JIM RICE
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