Nottingham Village Condominium Association v. John Pensom, 333311

Background

Nottingham Village Condominium Association’s board approved litigation against the developer and levied a $3,000 "litigation special assessment" payable in installments; unit owners Pensom did not pay and Association recorded a lien.
Association sued Pensom seeking foreclosure of the lien and collection, alleging it had "duly assessed" the unit for expenses of administration and common-element repair.
Pensom defended that the assessment violated Article XXIII of the bylaws, which required a membership litigation-evaluation meeting and owner approval (including approval of any litigation assessment).
The trial court initially granted summary disposition to the Association, but the Court of Appeals reversed, holding Article XXIII valid and that the assessment was a litigation special assessment; the Supreme Court vacated the award-remand portion and left fee claims to the trial court.
On remand the trial court found the Association’s complaint frivolous (MCL 600.2591 / MCR 2.114) because the Association knew the assessment was levied specifically to fund litigation without owner approval, awarded fees and costs to Pensom, and denied Association’s motion to amend.
The Court of Appeals affirmed: (1) the trial court did not clearly err in finding the complaint frivolous and awarding fees; and (2) amendment was properly denied as futile (unjust-enrichment claim barred by express contract; ratification allegation did not allege approval of the assessment).

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the complaint was frivolous warranting fees under MCL 600.2591/MCR 2.114	Association argued claims were not frivolous because it had authority to assess and sue	Pensom argued Association knew assessment was for litigation and lacked owner approval, so allegation that it "duly assessed" was baseless	Held: Not frivolous standard met; trial court did not clearly err — fees and costs awarded to Pensom
Whether trial court had authority to allow amendment after appellate remand	Association argued remand did not preclude amendment and sought to add unjust-enrichment and ratification allegations	Pensom argued amendment was improper and would not cure the defect	Held: Trial court erred in thinking it lacked authority, but denial upheld because amendments would be futile
Whether unjust-enrichment claim could survive given bylaws	Association argued Pensom was unjustly enriched by benefiting from litigation without paying	Pensom argued bylaws constitute an express contract governing assessments, precluding unjust-enrichment relief	Held: Futile — unjust-enrichment barred by express contract (bylaws)
Whether ratification allegation (66 2/3% vote) would validate assessment	Association asserted a later membership vote ratified the Board’s decision and thus validated assessment/filing	Pensom noted the ratification evidence did not show approval of levying an assessment	Held: Futile — offered ratification did not show approval of the assessment and therefore would not cure the complaint

Key Cases Cited

Bronson Health Care Group, Inc. v. Titan Ins. Co., 314 Mich. App. 577 (Mich. Ct. App.) (standard of review for finding a claim frivolous)
Lawrence v. Burdi, 314 Mich. App. 203 (Mich. Ct. App.) (clear-error review for factual findings; de novo review for rule interpretation)
Ormsby v. Capital Welding, Inc., 471 Mich. 45 (Mich.) (requirement to permit amendment under MCR 2.116(I)(5) unless amendment unjustified)
Diem v. Sallie Mae Home Loans, Inc., 307 Mich. App. 204 (Mich. Ct. App.) (abuse-of-discretion review for motions to amend)
Pirgu v. United Services Auto Ass’n, 499 Mich. 269 (Mich.) (trial court abuses discretion when it makes an error of law)
ATF Michigan v. Michigan, 303 Mich. App. 651 (Mich. Ct. App.) (unjust-enrichment claim barred where express contract governs subject matter)
Allied Supermarkets, Inc. v. Grocer’s Dairy Co., 45 Mich. App. 310 (Mich. Ct. App.) (bylaws constitute binding contract between corporation and shareholders)
Tuscany Grove v. Peraino, 311 Mich. App. 389 (Mich. Ct. App.) (formalities for authorization also required for ratification)