Posted by: Patricia Salkin | October 25, 2012

Supreme Court of North Dakota finds Land Owner in PUD must Pay Assessments

Wheeler purchased property within a planned unit development (hereinafter “PUD”) and paid assessments for the first few years for snow removal and lawn care.  Dissatisfied with these services, Wheeler refused to pay, which resulted in liens on her property.  She filed suit for relief from the fines, dues and liens, and also for slander of title.  Southport was granted summary judgment on its counter claim to recover unpaid fees, as well as on Wheeler’s claims for severance from or the disbandment of the PUD.  After a bench trial, the court ruled for Southport, dismissing Wheeler’s claims, granting unpaid funds, and enjoining Wheeler from stopping Southport from performing services.  Wheeler claims the trial court erred in dismissing her motion for summary judgment on two grounds, that Southport lacked authority to impose assessments and that the assessments were by joint agreement and thus were nonbinding on her.

PUD’s are a unique construct that permits the covered land to be regulated by contract between the developer and the municipality, rather than by ordinances enacted in advance.  The court explained that although PUD’s are not ordinances, the contracts are akin to covenants, with the benefits and burdens running with the land.  In that sense, these contracts that form PUD’s have the effect of variances granted by the local government.  Under North Dakota law, covenants that require the payment of assessments are valid affirmative covenants and run with the land.

Wheeler purchased her property in 2005 by way of warranty deed that states the property is located within Southport and subject to the covenants.  The covenants, as contained in an amended declaration, were filed with the municipality at the time of Wheeler’s purchase, providing Wheeler with constructive notice.  The declaration provides that Southport has the authority to remove snow and care for the grass, whether it be on common or non-common areas, and to charge assessments for these services.  Thus, the Supreme Court found no error in this part of the trial court’s ruling, affirming the branch of appeal challenging Southport’s authority.

Next, the court addressed whether Wheeler should be bound to the covenants in the declaration, thereby requiring the payment of the assessments.  Wheeler questioned whether there was a contract, its scope, and whether it was unconscionable, as well as claiming that she did not have actual notice of the covenants.  The court affirmed the trial court’s ruling, finding Wheeler failed to raise any material fact issue.

The Supreme Court then reviewed the trial court’s ruling concerning fees owed and Wheeler’s affirmative defense of accord and satisfaction.  An accord is an agreement by one party to accept return consideration that is different or less than originally provided for.  Satisfaction is the acceptance of this modified return consideration and it extinguishes the parties’ obligations.

The trial court found Wheeler’s check for the 2007 snow removal services satisfied the requirements of an accord and satisfaction, given the intent of Wheeler, that the check stated it was payment in-full, and Southport’s endorsement and cashing of the check.  Wheeler was no longer obligated to pay the difference between the check and the amount due for the 2007 snow removal.  This amount was then credited to Wheeler and deducted from Southport’s total claim, which the trial court ordered that Wheeler then pay, finding that Wheeler’s liability for the periodic fees endured.  The Supreme Court affirmed this ruling, finding it non-erroneous and supported by the record.  The Court further affirmed the trial court’s award of an injunction against Wheeler, the award of costs in favor of Southport, and the dismissal of Wheeler’s claims.

Wheeler v. Southport Seven Planned Unit Development, 2012 WL 4450891 (S.Ct. N.D., Sept. 27, 2012).

The opinion can be accessed here.

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