Nickerson v. Green Valley Recreation – 11/30/2011
Arizona Court of Appeals Division Two Holds That a Deed Restriction Mandating Membership in Community Recreation Facilities May Apply Even To Homes Outside the Subdivision Primarily Served by the Facilities.
Green Valley Recreation, Inc. (GVR) is a nonprofit corporation that provides recreation facilities to homeowners. The vast majority of GVR’s members own homes in subdivisions where the CC&Rs require membership, but a small number live outside the subdivision. Those homeowners outside the subdivisions face mandatory membership due to membership agreements signed with the current or previous homeowner and recorded in a Master Deed Restriction (MDR) that applies to their properties.
The plaintiffs, all of whom are among the minority of GVR members who are subject to membership by the MDR, filed suit alleging (among other things) that MDR did not run with the land because recreation membership does not touch and concern the land, and because the agreements creating the deed restrictions were unconscionable. The trial court denied an application for a preliminary injunction on the grounds that the MDR and the membership agreements were enforceable as equitable servitudes. The court then granted GVR’s motion for summary judgment on the grounds that the preliminary injunction ruling was the law of the case, among other reasons. Plaintiffs appealed, and GVR cross-appealed the trial court’s denial of its request for attorneys’ fees.
The court of appeals agreed with the plaintiffs that the preliminary injunction phase does not create law of the case, but affirmed the decision on other grounds. Without deciding whether Arizona still retains the requirement that a servitude touch and concern the land to be enforceable, the court held that the MDR does touch and concern the land because GVR membership confers benefits to the homeowners. Although those homes located in the subdivisions may have more convenient access to the recreational facilities, the MDR members were not so inconvenienced that the benefits of membership did not accrue to their land.
The court also rejected the plaintiffs’ contention that the MDR is unconscionable. The deed restriction is not procedurally unconscionable because the plaintiffs all had actual notice and constructive notice from the recording of the MDR. Nor is the MDR substantively unconscionable for the alleged “unilateral” power to raise fees on the MDR members; fee increases require a vote of the membership, and a lack of voting power does not by itself make a majority vote process unconscionable.
The court upheld the trial court’s denial of attorneys’ fees on the grounds that the plaintiffs presented novel claims with the appearance of merit that were unlikely to be settled in alternative dispute-resolution processes. Granting attorneys’ fees in this case could have a chilling effect on future plaintiffs who seek to determine their rights with respect to servitudes. The court did, however, grant attorneys’ fees on appeal.
Judge Espinosa authored the opinion; Judges Vásquez and Eckerstrom concurred.