The Germantown Manor Homeowners Association, Inc. v. GGAT Development Corp.
W2016-01461-COA-R3-CV
| Tenn. Ct. App. | Aug 24, 2017Background
- Germantown Manor subdivision has 29 lots; William Tagg (sole shareholder of Charleston II Builders and GGAT) owned 14 lots and certain common areas; Charleston II owned 2 lots and GGAT owned 12 plus common areas.
- Original plat (Paragraph 19) declared: "All lot owners shall become members of the Germantown Manor Homeowners Association and shall pay dues as set by its members."
- Homeowners informally collected dues 2004–2008; Association incorporated March 25, 2008, but initial charter listed no board and no bylaws were adopted until 2014.
- Homeowners voted to begin charging $750/year effective Jan. 1, 2009, but the Association did not elect a board until a June 23, 2014 meeting where a quorum elected directors; assessments were formally collected beginning in 2009 and billing notices went to Tagg’s entities.
- Association sued (2015) GGAT and Charleston II for unpaid assessments dating to 2009; trial court held lot owners are members under Paragraph 19 but assessments imposed before a valid board election were invalid; awarded assessments from Jan. 2015 onward and denied GGAT’s quantum meruit counterclaim for maintaining common areas.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Applicability of Paragraph 19 (membership/obligation to pay) | Paragraph 19 makes all lot owners automatic members and obligated to pay dues | Owners argued they were not bound without adequate notice or further action | Court: Paragraph 19 plainly makes lot owners members; Charleston II and GGAT are members and potentially liable for dues when properly set |
| When assessments could be validly imposed (board authority) | Association asserted it began assessing in 2009 after member vote | Defendants argued assessments before a valid board election were invalid | Court: Under Tenn. Nonprofit Corp. Act board must exercise corporate powers; actions before valid board election were invalid; assessments enforceable only after board empanelment (June 23, 2014) and court awarded post-2014 assessments claimed |
| Challenge to board actions/notice (procedural remedy) | Association relied on collection and member vote to validate fees | Defendants claimed lack of notice and improper empanelment that nullified board action | Court: Challenges to corporate power/board validity require a derivative suit following statutory rules; defendants did not bring a proper derivative action, so they could not nullify assessments on that ground |
| Quantum meruit counterclaim for maintenance of common areas | GGAT sought reimbursement for grass-cutting/maintenance it alleged it performed since 2008 | Defendants argued they (or Tagg) performed maintenance and expected compensation; Association argued common areas were Association responsibility | Court: Denied GGAT’s claim—record shows Tagg voluntarily maintained areas (often using personal resources) and common areas remained owned by GGAT/Charleston II; GGAT failed to prove expectation of compensation and other quantum meruit elements |
Key Cases Cited
- Maples v. Homeowners’ Ass’n v. T & R Ltd. P’ship, 933 S.W.2d 36 (Tenn. Ct. App.) (covenants run with the land and restrictions are construed as contracts)
- McGarity v. Jerrolds, 429 S.W.3d 562 (Tenn. Ct. App.) (standard of review for bench trials: factual findings de novo with presumption of correctness)
- Doe v. HCA Health Servs. of Tenn., Inc., 46 S.W.3d 191 (Tenn.) (elements for quantum meruit recovery)
- Lewis on Behalf of Citizens Sav. Bank & Trust Co. v. Boyd, 838 S.W.2d 215 (Tenn. Ct. App.) (requirements for derivative suits: particularized demand and verification)