McVicker v. Bogue Sound Yacht Club, Inc.
257 N.C. App. 69
| N.C. Ct. App. | 2017Background
- Plaintiffs Joseph and Susan McVicker are lot owners in the Bogue Sound Yacht Club subdivision governed by recorded Covenants and an Architectural Control Committee (ACC).
- Plaintiffs hired contractors in Oct. 2013 to remove trees/brush without submitting an ACC application; the Association sent a stop/violation notice demanding a completed application and a $250 refundable construction bond.
- Plaintiffs completed the work, later tendered the application and (under protest) the $250 bond; the Association retroactively approved the application, returned the bond, but assessed fines ($1,400, later reduced to $1,050) for failure to submit the bond within a seven-day period.
- Plaintiffs sued seeking declaratory relief (challenging the Association’s authority to require the bond and the Association’s compliance with the Planned Community Act (PCA) for imposing fines) and alleged breach of fiduciary duty (later dismissed).
- The trial court granted summary judgment to the Association; the Court of Appeals reversed and remanded with instructions to enter summary judgment for Plaintiffs, concluding the Covenants did not authorize the bond and the fines were unlawful.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Authority to require $250 construction bond with ACC application | Covenants contain no express authority for a bond; bond is unauthorized | Bond requirement is authorized by Covenants (rules/fees for common areas) and by Association governance | Court: No express or implied authority in the Covenants to require a bond; bond requirement invalid |
| Validity of fines imposed for failure to post bond | Fines unlawful because based on an unauthorized bond; even if procedure followed, imposing fines for noncompliance with void requirement is unreasonable | Association followed Covenants/PCA procedure and gave notice/hearing; fines were within Association powers | Court: Fines unlawful—Association fined Plaintiffs solely for failing to post an unauthorized bond; imposing such fines is not authorized/reasonable under PCA |
| Mootness of bond claim | Not moot because Association’s bond requirement is intertwined with fine and the issue is capable of repetition yet evading review | Moot because bond was refunded so no practical effect remains; court may decline declaratory relief | Court: Not moot; controversy has practical effect on fines and falls within repetition exception |
| Sufficiency of notice/procedure under PCA for fines | Plaintiffs also argued notice was insufficient under G.S. 47F-3-107.1 | Association contended it provided notice, hearing opportunity, and complied with statute | Court did not rest decision solely on notice; but held fines invalid because based on an unauthorized requirement (analysis focused on bond authority and reasonableness of fines) |
Key Cases Cited
- Callaham v. Arenson, 239 N.C. 619 (restrictive covenants must be enforced as written and not extended by implication)
- Long v. Branham, 271 N.C. 264 (rule of strict construction for restrictive covenants; ambiguities resolved in favor of unrestricted use)
- J.T. Hobby & Son, Inc. v. Family Homes of Wake Cty., 302 N.C. 64 (each part of covenant given natural meaning)
- Hultquist v. Morrow, 169 N.C. App. 579 (ambiguities in covenants resolved to least restrict property use)
- Wise v. Harrington Grove Cmty. Ass’n, Inc., 357 N.C. 396 (planned communities governed by PCA; association powers under statute)