Schaefer v. Eastman Community Ass'n
150 N.H. 187 (2003)
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Rule of Law:
A homeowners' association's board of directors acts within its authority when making a decision that does not contravene an express provision of the governing declaration or a right reasonably inferable therefrom. The powers granted in such declarations are to be interpreted broadly, and general grants of authority to act in the best interest of the association are sufficient to authorize actions not explicitly detailed, such as closing a recreational amenity.
Facts:
- Eastman is a planned, private, four-season recreational community governed by the Eastman Community Association (ECA) through a Declaration of Covenants and Restrictions.
- The community's amenities included a golf course, tennis courts, a lake, and a downhill ski area known as Snow Hill.
- Residents of Eastman own their homes and hold indivisible, equal interests in the common properties, including the recreational amenities.
- For years, beginning as early as 1984, the community and its governing bodies debated the continued operation of the Snow Hill ski area.
- Surveys conducted in 1994 and 1998 indicated that a majority of residents placed little importance on or never used the Snow Hill ski area.
- On September 17, 1999, following recommendations from lower governing bodies, the ECA Board of Directors voted eight to one to close Snow Hill and sell its chairlift.
Procedural Posture:
- A group of homeowners (plaintiffs) sued the Eastman Community Association (ECA) in the New Hampshire Superior Court (trial court) seeking to block the closure of the Snow Hill ski area.
- In the first part of a bifurcated trial, the Superior Court ruled for the plaintiffs, finding ECA's vote to close the amenity was ultra vires (beyond its authority) and issued an injunction.
- ECA then amended its declaration to explicitly create a procedure for closing an amenity, and following that procedure, voted a second time to close Snow Hill.
- In the second part of the trial, the Superior Court again ruled for the plaintiffs, holding that the amendment and subsequent vote were invalid, and awarded the plaintiffs damages and attorney's fees.
- ECA (appellant) appealed the Superior Court's judgment to the New Hampshire Supreme Court.
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Issue:
Does a homeowners' association board of directors act beyond its authority (ultra vires) by closing a major recreational amenity when the governing declaration does not expressly authorize such a closure, but grants the board broad powers to protect the association's assets and act in its best interests?
Opinions:
Majority - Duggan, J.
No. The board did not act beyond its authority. A homeowners' association board's action is valid if it is within the scope of its authority and is a reasoned, not arbitrary, decision. The scope of authority is determined by the association's governing documents, which are to be interpreted broadly. An action is within the board's authority provided it does not contravene an express provision of the declaration or a right reasonably inferable therefrom. The Eastman declaration granted the board broad authority to 'protect the Association’s assets and insure its financial stability,' 'buy and sell property when deemed in the best interests of the Association,' and 'take such other action as it may deem necessary... to be in the best interests of this Association.' The decision to close an underutilized and potentially costly amenity falls squarely within these general powers. The plaintiffs' reliance on promotional materials and general preamble statements about preserving amenities does not limit the specific, broad powers granted to the board in the declaration's operative articles.
Analysis:
This decision significantly strengthens the authority of homeowners' association boards by endorsing a broad interpretation of their powers under governing declarations. It establishes that general grants of authority to act in the 'best interests' of the community are sufficient to permit major decisions, like closing amenities, even if not explicitly enumerated. The ruling clarifies that marketing materials and general purpose statements do not override the specific powers granted in the declaration, thereby limiting the grounds on which homeowners can challenge board actions. The case directs dissatisfied homeowners to the association's political process (e.g., elections) rather than the courts as the primary remedy for decisions they disagree with, provided the board acts within its authority and reasonably.
