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Prieve v. Flying Diamond Airpark, LLC - 10/13/2021

The Court of Appeals Division Two holds that deciding whether to clear all vegetation over a large area of land falls outside the “normal day to day management” of a planned community.

An airpark lies on property subject to multiple easements as well as recorded covenants, conditions, and restrictions (CC&Rs).  The property is owned and operated by members of a planned community, with a small group of managing members carrying out the “normal day to day management” pursuant to an operating agreement.  The dispute arose when the managers made an executive decision to clear out native vegetation on a portion of an easement overlaying a member’s property as part of a five-year development plan to improve the airstrip.

The member obtained a preliminary injunction and sued the planned community, claiming the managers lacked authority to make this decision because they had not held a proper vote.  The planned community admitted the vote was improper, but insisted the operating agreement nevertheless granted the managers the requisite authority.

The trial court granted the member’s motion for summary judgment—finding the managers had not obtained proper authorization from the membership body—and denied the planned community’s cross-motion for summary judgment.  The trial court found the operating agreement did not grant the managers authority because clearing out the vegetation was not a “day to day” activity.  The trial court awarded the member discretionary attorney fees under statute and mandatory fees under the terms of the CC&Rs.  The planned community appealed. 

The Court of Appeals affirmed.  The appellate court explained that both the operating agreement and the CC&Rs expressly limited the scope of the managers’ authority to day-to-day management and budgeting.  Thus, the issue of whether the managers had authority, depended on whether the clear-cutting was a day-to-day task.  The Court found it was not.  The Court explained that such analysis is inherently case and fact specific but found “thematic transformation[s] to the establishment”—such as the large-scale clear cutting of long-established landscape—are outside the scope.

The Court also held that although the member’s complaint did not allege a breach of contract, the dispute nevertheless “arose out of contract” for purposes of attorney fees, because interpreting the CC&Rs and operating agreement was necessary to resolve the central issue of the managers’ authority.

Judge Espinosa authored the opinion of the Court, in which Vice Chief Judge Staring and Judge Eckerstrom concurred.

Posted by: Payslie M. Bowman

Posted On: 11/3/2021