The Court of Appeals, in its unpublished opinion in Tuscany Grove v. Gasperoni (June 24, 2014), affirmed the lower court’s dismissal of claims by a condominium association against one of the condominium owners, where the association failed to follow its bylaws in filing a claim against the owner.
Condominium associations govern the policies of the condominium project, allocate expenses for maintenance, and collect monthly, quarterly or annual association fees that each owner pays for building, insurance and community maintenance.
The condominium association also ensures that the owners are in compliance with the condominium’s bylaws. Michigan law permits condominium associations to file suit to enforce the bylaw restrictions on property owners. However, as the Court of Appeals held in Tuscany Grove, the authority to file suit by the condominium association on behalf of the owners is subject to any limitation placed on the filing of lawsuits by the condominium’s bylaws.
In Tuscany Grove, in what the condominium association referred to as “either scrivener’s error, a bad miscalculation by an otherwise competent draftsman, or simply a bad joke,” the condominium’s bylaws required 66 2/3% of the condominium owners to approve before any lawsuit could be filed.
The defendant condominium owner in Tuscany Grove had allegedly built up his backyard in violation of the condominium’s bylaws, including fencing in his entire property and adding a pizza oven and fireplace. When the condominium association filed suit to force compliance with the bylaws, the property owner pointed to a provision in the bylaws that required the association to get 66 2/3% of the owners to vote in favor of filing suit. Since this wasn’t done, the property owner argued that the claims should be dismissed and the lower court agreed.
On appeal, the condominium association made several pleas as to why the vote should not be required, including that it would amount to a tyranny of the minority, was against public policy, conflicts with the Michigan Nonprofit Corporation Act, and that such a provision is very unusual. The Court of Appeals rejected all of these arguments and held that the bylaws are a contract between the association and the owners and that the contractual language must be given its “ordinary and plain meaning if such would be apparent to a reader of the instrument.”
The Court found that the bylaws bound the association to the same extent that the owners were bound. Furthermore, because the bylaws were plain and unambiguous, they had to be interpreted as written. Therefore, a vote of 66 2/3% of the owners in conformity with the voting requirements under the bylaws was necessary before suit could be brought.
Precise drafting of bylaws and other corporate documents is mandatory to avoid problems like those faced by the condominium association in Tuscany Grove. If you are a corporation and need help drafting bylaws or any other corporate documents, please contact the attorneys at Demorest Law Firm.
