Arbors at Sugar Creek Homeowners Ass'n v. Jefferson Bank & Trust Co.
2015 Mo. LEXIS 103
Mo.2015Background
- Evolution Development recorded an Indenture creating The Arbors subdivision and a homeowners association (original HOA); Evolution later went bankrupt and the original HOA was administratively dissolved.
- Jefferson Bank foreclosed on 13 of 18 lots, obtained declarant rights, and partnered with McKelvey to complete homes on the remaining lots.
- Homeowners formed a replacement HOA (plaintiffs’ HOA) and filed suit claiming McKelvey’s plans and Jefferson Bank’s actions violated the Indenture (seeking declaratory/injunctive relief and damages); plaintiffs also recorded a lis pendens.
- Jefferson Bank convened a lot-owners meeting, voted its 13 lot votes to create ASC HOA, appointed its employees to ASC’s board, and used its majority to amend the Indenture (removing residency requirement for board members) and to approve McKelvey’s plans.
- The trial court granted summary judgment on various claims for both sides, held a bench trial on declaratory relief, entered judgment for Jefferson Bank and McKelvey approving ASC HOA’s actions, and awarded Jefferson Bank a small pro rata reimbursement; homeowners appealed and Jefferson Bank cross-appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether ASC HOA became the authorized association without an assignment from the original HOA | Homeowners: successor association needed assignment from original HOA to govern | Jefferson Bank: Indenture permitted amendment by 67% vote; bank owned >67% and validly substituted ASC HOA | Held: ASC was properly authorized by amendment approved by bank’s >67% votes |
| Whether bank violated implied covenant of good faith by amending residency requirement to seat non-resident directors | Homeowners: amendment was bad-faith, opportunistic circumvention of self-governance and should be void | Jefferson Bank: amendment followed express Indenture procedure and gave notice; no subterfuge | Held: No breach—amendment valid under Indenture; summary judgment for defendants on this issue (dissent would reverse) |
| Whether ASC HOA’s approval of McKelvey’s plans violated Article X (architectural standards) | Homeowners: McKelvey’s plans contravened design review and community uniformity in Indenture | Jefferson Bank/McKelvey: ASC board reasonably reviewed plans, relied on architect/appraiser, and found harmony with community | Held: Trial court’s findings that board acted reasonably are supported by substantial evidence; declaratory relief for Jefferson Bank/McKelvey affirmed |
| Whether Jefferson Bank could collect pro rata reimbursement for upkeep directly from owners without ASC HOA assessment process | Homeowners: bank lacked authority; only the HOA can impose assessments via adopted budget | Jefferson Bank: sought reimbursement for upkeep expenses it incurred | Held: Reimbursement order was error; only ASC HOA could impose assessments—trial court’s reimbursement award reversed |
Key Cases Cited
- DeBaliviere Place Ass’n v. Veal, 337 S.W.3d 670 (Mo. banc 2011) (successor HOA claims and effect of assignments under restrictive instruments)
- Rocky Ridge Ranch Prop. Owners Ass’n v. Areaco Inv. Co., 993 S.W.2d 553 (Mo. Ct. App. 1999) (amendment used to subvert covenant benefits can violate good faith)
- Rouner v. Wise, 446 S.W.3d 242 (Mo. banc 2014) (standard for reviewing bench-tried declaratory judgments)
- Pearson v. Koster, 367 S.W.3d 36 (Mo. banc 2012) (deference to trial court findings where facts contested)
- Ritterbusch v. Holt, 789 S.W.2d 491 (Mo. banc 1990) (elements and pleading required for abuse of process)