Schaefer v. Eastman Community Association

New Hampshire Supreme Court · 2003 · Property

Propertyplanned communityhomeowners associationdeclaration of covenantsboard of directorsultra viresamenitiescommon property

Facts

Eastman is a planned private recreational community governed by Eastman Community Association under articles and a declaration of covenants and restrictions. The board of directors has numerous enumerated powers under Article 7.6, including taking steps necessary to protect the association's assets and financial stability, buying and selling property when deemed in the association's best interests, and taking other action necessary to further the declaration's purposes or the association's best interests. After studies and recommendations from a recreation committee and the Association Council, the board voted on September 17, 1999, to close the Snow Hill ski area and sell its chairlift. Homeowners challenged that action as beyond the board's authority under the declaration.

Issue

Whether ECA's board of directors acted within the scope of its authority under the declaration when it voted to close the Snow Hill ski area. More specifically, the question was whether the declaration's grant of broad powers authorized closure of an amenity even though the declaration did not expressly mention amenity closure.

Rule

An association's governing documents are construed as a contract and, because the association is a corporation, it may not act beyond authority granted by its articles or declaration. But the declaration should be construed broadly, not narrowly, and the association through its proper governing body may exercise all community powers except those reserved to members; accordingly, board action is within its authority if it does not contravene an express provision of the declaration or a right reasonably inferable from it, even if the action is not expressly listed.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

Pine Crest Association governs a planned community outside Burlington, Vermont. Its declaration authorizes the board to take measures necessary to protect association assets, ensure financial stability, sell property when in the association's best interests, and take other action it deems necessary for the declaration's purposes, but it does not specifically mention closing amenities. After years of operating losses, the board votes to shut down the community's ice rink for an indefinite period.

On a homeowner's claim that the shutdown is ultra vires solely because the declaration does not expressly authorize closing amenities, how should a court rule?

Explanation. The majority held that association governing documents are construed broadly, not narrowly, and that a board may exercise community powers not reserved to members. An action need not be expressly listed to be authorized. If the action does not contravene an express provision of the declaration or a right reasonably inferable from it, it falls within board authority. A separate question would be reasonableness, but the mere lack of an express closure clause does not make the action ultra vires. (Derived from Schaefer v. Eastman Community Association (2003).)