Dye v. Diamante
2017 Ark. 42
| Ark. | 2017Background
- Diamante is a privately owned golf club serving a planned Hot Springs Village development; supplemental Declarations filed in 1997 made every lot owner a "Full Golf Member," required monthly dues, imposed transfer fees on sales, and granted the Club lien/foreclosure rights.
- The Declarations referenced the Club’s Articles, By‑Laws, and Rules & Regulations and contemplated the Club creating other, lesser membership categories and public memberships.
- Plaintiffs (class representatives of property owners) sued in 2012 seeking declaratory relief that the Declarations (transfer fees, mandatory dues/membership, incorporation of bylaws/rules, etc.) were unenforceable and seeking disgorgement and other relief; class of 450 owners was certified.
- The trial court upheld the Declarations as enforceable, denied disgorgement, and rejected plaintiffs’ claims on statute‑of‑limitations and merits grounds; plaintiffs appealed eight points.
- The Arkansas Supreme Court affirmed on all points: transfer fees survived because recorded in 1997 (pre‑2011 statute), tie‑in dues and transfer provisions were not an unreasonable restraint on alienation, bylaws and rules were validly incorporated by reference, deferment and creation of public memberships were time‑barred or permissible, and no material course‑maintenance breach invalidated the covenants.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Validity of transfer‑fee covenant | Transfer fee violates Ark. Code § 18‑12‑107 | Declarations recorded in 1997 (pre‑2011) so statute does not invalidate them | Transfer fees enforceable (recorded pre‑2011) |
| Restraint on alienation (tie‑in dues/membership) | Mandatory dues and transfer fee unreasonably restrain alienation | Dues are for club use/maintenance and limited by that purpose; provision not direct prohibition | Not an unlawful restraint; enforceable as reasonably related servitude |
| Incorporation of bylaws and rules & regulations | Bylaws/rules not recorded; many purchasers had no notice; recording statutes require recording to affect land | Declarations expressly referenced bylaws/rules; incorporation by reference valid; purchasers put on inquiry notice | By‑laws and rules/regulations incorporated by reference and enforceable |
| Deferment of dues / statute of limitations | Club deferred collection for many lots; inequitable and abrogates covenants; limitations do not bar defenses | Known deferment by 2003; five‑year limitations on written covenant claims; alternative: declarations permit staggered commencement | Claims time‑barred; deferment not a breach or was allowed by plain language |
| Creation of non‑appurtenant (public) memberships | Allowing non‑owners access breaches tie‑in and undermines covenants | Declarations and early rules allowed creation of other membership categories not running with the land; practice existed since 1998 | Club authorized to create other membership categories; related claims time‑barred |
| Course maintenance / material breach | Club withheld funds and failed to maintain bunkers — material breach rendering covenants unenforceable | No provision requiring specific spending; evidence showed course generally well maintained; alleged defects not material | No material breach; covenants remain enforceable |
Key Cases Cited
- McSparrin v. Direct Ins. Co., 373 Ark. 270 (bench‑trial clear‑error standard)
- Kell v. Bella Vista Vill. Prop. Owners Ass’n, 258 Ark. 757 (upholding assessments with ascertainable purpose/formula)
- Broach v. City of Hampton, 283 Ark. 496 (restraints on alienation—reasonableness analysis)
- Ingersoll‑Rand Co. v. El Dorado Chem. Co., 373 Ark. 226 (incorporation by reference principle)
- Eagle Mortg. Corp. v. Johnson, 244 Ark. 765 (amendment of recorded restrictive covenants)
- White v. McGowen, 364 Ark. 520 (plain‑language interpretation of covenants)