Willowmere Cmty. Ass'n, Inc. v. City of Hous.
Willowmere Cmty. Ass'n, Inc. v. City of Hous.
Opinion
**554 In this appeal we consider the extent to which a corporate entity must affirmatively demonstrate compliance with its internal bylaws and governance procedures before it may invoke the jurisdiction of the General Court of Justice. The Court of Appeals held that plaintiffs lacked standing because they failed to strictly comply with their corporate bylaws in bringing this suit. We agree with plaintiffs that a showing of strict compliance is not necessary to satisfy the requirements of our standing jurisprudence. Accordingly, we reverse the decision of the Court of Appeals.
Plaintiffs Willowmere Community Association, Inc. (Willowmere) and Nottingham Owners Association, Inc. (Nottingham) are non-profit corporations representing homeowners in the residential communities of Willowmere and Nottingham located in Charlotte. Plaintiffs instituted this litigation on 14 March 2014 by filing a Petition for Review in the Nature of Certiorari in Superior Court, Mecklenburg County, challenging the validity of a zoning ordinance enacted by the City of Charlotte and seeking a declaratory judgment that the zoning ordinance is invalid. 1 The challenged zoning ordinance permits multifamily housing on **555 parcels of land abutting property owned by plaintiffs. Defendants each filed a response in which they denied the material allegations in the petition and moved to dismiss the action under *560 Rules 12(b)(1) and 12(b)(6) of the North Carolina Rules of Civil Procedure. With leave of the trial court, on 9 July 2014, plaintiffs amended their initial filing under Rule 15(a) of the North Carolina Rules of Civil Procedure to restyle it as a complaint for declaratory judgment, alleging the same causes of action and requesting the same principal relief-that the court invalidate the zoning ordinance. Defendant CHMP answered plaintiffs' amended complaint on 17 October 2014, and defendant City of Charlotte filed its new answer on 22 October 2014. Plaintiffs and defendants each filed cross-motions for summary judgment on the issue of the ordinance's validity.
The trial court granted defendants' motions for summary judgment and denied plaintiffs' motion for summary judgment based on the court's conclusion that it lacked subject matter jurisdiction to adjudicate plaintiffs' claims. Specifically, the trial court reasoned that plaintiffs lacked standing to bring the instant suit because they each failed to comply with various provisions in their corporate bylaws when their respective boards of directors decided to initiate this litigation. 2 The trial court relied on the evidence submitted at the summary judgment hearing, which established that neither plaintiff explicitly authorized filing the present suit during a meeting with a quorum of directors present, either in person or by telephone. The trial court concluded that plaintiff Willowmere lacked standing because its board of directors agreed to initiate the lawsuit in an e-mail conversation, which was not an expressly authorized substitute for the board's written consent to take action without a formal meeting under Willowmere's corporate bylaws. Similarly, as to plaintiff Nottingham, the trial court concluded that its decision to institute this litigation was defective under its bylaws which require, inter alia , a formal meeting with a quorum of directors present (either in person or by telephone), recorded minutes of the meeting reflecting the proceedings of the board of directors, the board's written consent for any action outside of a formal meeting, and an explanation of its action posted by the board within three days after its decision. The trial **556 court's view was that, "[w]hile Plaintiffs' bylaws each permit their directors to sue regarding matters affecting their planned communities, the directors can only act through a meeting or a consent action without a meeting," and "[n]either Willowmere nor Nottingham has met their burden to show that their directors acted to initiate this litigation through one of these means in this case." 3
Plaintiffs timely appealed to the Court of Appeals, which affirmed the trial court's award of summary judgment to defendants.
Willowmere Cmty. Ass'n, Inc. v. City of Charlotte
, --- N.C. App. ----, ----,
This Court reviews a trial court's decision dismissing a case for lack of subject matter jurisdiction and a trial court's award of summary judgment de novo.
Mangum v. Raleigh Bd. of Adjust.
,
"As a general matter, the North Carolina Constitution confers standing on those who suffer harm: 'All courts shall be open; [and] every person for an injury done him in his lands, goods, person, or reputation shall have remedy by due course of law ....' "
Mangum
, 362 N.C. at 642, 669 S.E.2d at 281-82 (alterations in original) (quoting N.C. Const. art. I, § 18 ). "The rationale of [the standing] rule is that only one with a genuine grievance, one personally injured by a statute, can be trusted to battle the issue."
Stanley v. Dep't of Conservation & Dev.
,
"The 'gist of the question of standing' is whether the party seeking relief has 'alleged such a personal stake in the **557 outcome of the controversy as to assure that concrete adverseness which sharpens the presentation[s] of issues upon which the court so largely depends for illumination of difficult constitutional questions.' "
Id. at 28,
"Legal entities other than natural persons may have standing."
River Birch Assocs. v. City of Raleigh
,
[A]n association has standing to bring suit on behalf of its members when: (a) its members would otherwise have standing to sue in their own right; (b) the interests it seeks to protect are germane to the organization's purpose; and (c) neither the claim asserted nor the relief requested requires the participation of individual members in the lawsuit.
Id.
at 130,
The Court of Appeals decision below and defendants' arguments to this Court are not based on plaintiffs' failure to meet the elements of associational standing described in
River Birch
or on the contention that plaintiffs have not "alleged ... a [sufficient] personal stake in the
**558
outcome of the controversy."
4
Stanley
,
In
Peninsula
, the Court of Appeals held that the property owners' association lacked standing to commence legal proceedings against Crescent Resources, LLC ("Crescent"), the previous developer of the community, because the association failed to comply with an explicit provision in its bylaws that required any litigation against Crescent to be approved by a two-thirds majority vote of all association members entitled to vote.
Nothing in our jurisprudence on standing requires a corporate litigant to affirmatively plead or prove its compliance with corporation bylaws and internal rules relating to its decision to bring suit.
Cf.
Mangum
, 362 N.C. at 644, 669 S.E.2d at 283 ("We ... note that North Carolina is a notice pleading jurisdiction, and as a general rule, there is no particular formulation that must be included in a complaint or filing in order to invoke jurisdiction or provide notice of the subject of the suit to the opposing party." (citing
Mangum v. Surles,
There is no evidence in this case suggesting that any member of the communities of Willowmere or Nottingham opposed plaintiffs' prosecution of this suit. We decline to permit a defendant who is a stranger to an association to invoke the association's own internal governance procedures as an absolute defense to subject matter jurisdiction in a suit filed by the association against that defendant. If a member of either plaintiff association disagrees with the decision to file suit, the proper vehicle to challenge the association's failure to comply with its respective bylaws in making that decision is a suit against the nonprofit corporation brought by the aggrieved member or members of the association or, in certain circumstances, a derivative action.
Cf.
N.C.G.S. § 55A-3-04 (2017) (providing that, "the validity of [a] corporate action shall not be challenged on the ground that the [nonprofit] corporation lacks or lacked power to act" except in a proceeding brought against the corporation "by a member or a director" of the corporation, "the Attorney General," or "[i]n a proceeding by the corporation, directly, derivatively, or through a receiver, trustee, or other legal representative, against an incumbent or former director, officer, employee, or agent of the corporation");
ibr.US_Case_Law.Schema.Case_Body:v1">7
This holding also comports with the reasoning of other jurisdictions that have considered the issue.
See
Lake Forest Master Cmty. Ass'n v. Orlando Lake Forest Joint Venture
,
Accordingly, we hold that, despite plaintiffs' failure to strictly comply with their respective bylaws and internal governance procedures in their decision to initiate this suit, they nonetheless "possess a 'sufficient stake in an otherwise justiciable controversy' to confer jurisdiction on the trial court to adjudicate this legal dispute."
Willowmere
, --- N.C. App. at ----,
REVERSED AND REMANDED.
Plaintiffs argued to this Court that defendants are precluded under N.C.G.S. § 55A-3-04 from challenging "the validity of corporate action" to bring this suit because defendants are not listed among the classes of parties authorized to bring such a challenge in section 55A-3-04(b). Because plaintiffs failed to raise this argument before the trial court, it is not properly preserved for our review.
See
N.C. R. App. P. 10(a) ;
Dogwood Dev. & Mgmt. Co. v. White Oak Transp. Co., Inc.
,
Plaintiffs' filing originally named the City of Charlotte and Charlotte-Mecklenburg Housing Partnership, Inc. (CMHP) as well as New Dominion Bank, the owner of the parcels subject to the zoning ordinance, as defendants. New Dominion Bank is not a party to this appeal.
While none of defendants' motions or pleadings to the trial court explicitly raised the issue of plaintiffs' standing to bring suit, the trial court was permitted to consider the threshold question of its own subject-matter jurisdiction in ruling on the parties' cross-motions for summary judgment.
Lemmerman v. A.T. Williams Oil Co.
,
The trial court also stated that, if it had subject-matter jurisdiction over this matter, it would have invalidated the zoning ordinance because the ordinance was adopted in a manner inconsistent with the requirements of N.C.G.S. § 160A-383 (2015). That issue is not before us, and we express no opinion on the merits of plaintiffs' claim for declaratory judgment or the validity of the zoning ordinance. See N.C. R. App. P. 16(a) (limiting this Court's review to the issues presented in the petition for discretionary review and properly presented in the parties' briefs to this Court).
In their briefs to the Court of Appeals, defendants additionally argued that plaintiffs lacked standing because they failed to establish an injury in fact stemming from the zoning ordinance and failed to meet the associational standing elements discussed in River Birch . However, defendants did not obtain a ruling from the trial court on this issue to preserve it for appellate review, and defendants did not include this issue in the list of issues for discretionary review pursuant to N.C. R. App. P. 15(d). As a result, that issue is not before us, and we decline to address it now. See N.C. R. App. P. 16(a).
Though not emphasized in the Court of Appeals' analysis in
Peninsula
, the fact that the defendant, Crescent Resources, LLC, owned property in the community governed by the association was noted in the opinion, clear from the record, and briefed by the parties.
See
Peninsula
,
The plaintiff homeowners' association in
Laurel Park
argued that it had standing to enforce the restrictive covenants against the defendants under N.C.G.S. § 47A-10, which expressly permitted the manager or board of directors of a condominium homeowners' association to sue on the association's behalf against a unit owner to enforce,
inter alia
, the association's "bylaws," "administrative rules and regulations," and "covenants, conditions and restrictions" in deeds.
The Court of Appeals in
Laurel Park
went on to address, in dicta, the plaintiff's further argument that its corporate bylaws gave it authority to bring suit on behalf of the unit owners.
Id. at 143-44,
Reference
- Full Case Name
- WILLOWMERE COMMUNITY ASSOCIATION, INC., a North Carolina Non-Profit Corporation, and Nottingham Owners Association, Inc., a North Carolina Non-Profit Corporation v. CITY OF CHARLOTTE, a North Carolina Body Politic and Corporate, and Charlotte-Mecklenburg Housing Partnership, Inc., a North Carolina Non-Profit Corporation
- Cited By
- 27 cases
- Status
- Published
- Syllabus
- Whether the trial court erred in dismissing an action brought by plaintiff homeowners' associations seeking to invalidate the City's rezoning of adjacent property whether the failure of plaintiffs' boards of directors to comply with association bylaws authorizing them to initiate litigation on behalf of the members deprived plaintiffs of legal standing to sue.