Bilanko v. Barclay Court Owners Ass'n

Opinion

IN THE SUPREME COURT OF THE STATE OF WASHINGTON

CAROLYN ROBBS BILANKO, an ) individual, ) No. 91247-5 ) Respondent, ) ) v. ) EnBanc ) BARCLAY COURT OWNERS ) ASSOCIATION, a Washington non-profit ) Corporation, ) Filed APR 2 8 2016 ) Appellant. ) ___________________________ )

GoNZALEz, J.-The Barclay Court Owners Association amended its

condominium declaration to restrict the number of units that could be leased

at one time. After this amendment was passed and recorded, Carolyn

Bilanko purchased a condo at Barclay Court. Four years later, Bilanko

challenged the amendment as improperly passed. We must decide whether

Bilanko's challenge is timely under the Washington Condominium Act

(WCA), chapter 64.34 RCW. We hold that it is not timely and reverse. Bilanko v. Barclay Court Owners Ass 'n, No. 91247-5

BACKGROUND

Barclay Court is a condominium owners' association for a 28-unit

residential condominium development in Seattle, Washington. Barclay

Court was organized under the WCA, chapter 64.34 RCW, 1 and recorded its

residential condominium declaration (Declaration) on May 2, 2001. Section

9.2 of the 2001 Declaration stated that there was "no restriction on the right

of any [o]wner to lease or otherwise rent its [u]nit." Clerk's Papers (CP) at

111.

Seven years later, Barclay Court amended its Declaration to limit

leasing with the stated intent of "preserving and enhancing the value of the

Condominium and of the individual units." Id. at 204, 206. This

amendment, "Amendment No. 1," provided that only seven units could be

leased at any time. Under the Declaration, the "imposition of any

restrictions on leasing of [u]nits" required only a 67 percent vote to pass. Id.

at 194. 2 However, any changes to the "uses to which any [u]nit is restricted"

required a 90 percent vote to pass. Id. at 194. The Declaration does not

define the term "use," and it is not immediately apparent which vote total

1 The Washington Condominium Act governs condominium complexes created after July 1, 1990. Filmore LLLP v. Unit Owners Ass 'n of Centre Pointe Condo., 184 Wn.2d 170, 171-72,355 P.3d 1128 (2015) (citing Shorewood W. Condo. Ass'n v. Sadri, 140 Wn.2d 47, 52, 992 P.2d 1008 (2000)). 2 Section 5.5 of the Declaration indicates voting is allocated equally to each unit, with each unit entitled to one vote. 2 Bilanko v. Barclay Court Owners Ass'n, No. 91247-5

was needed to approve the amendment. 3 We do know that the amendment

received at least 67 percent of the vote on October 27, 2008. 4 The

association treated the amendment as effective. It was properly recorded on

November 3, 2008.

A year later, Bilanko purchased a two-bedroom unit in Barclay Court.

Her recorded statutory warranty deed indicated the property was subject to

Barclay Court's Declaration and Amendment No. 1. At some point, Bilanko

decided she wanted to lease her unit. Unfortunately, seven units were

already being leased at the time. In March 2013, Bilanko asked to be put on

the leasing waiting list. She was number five on the waiting list. In

September 2013, Bilanko requested a hardship waiver under section 9.2.6.5

of the amendment to allow her to lease her unit. Barclay Court denied

Bilanko's request. Bilanko persisted. She notified Barclay Court in October

2013 that she intended to lease her unit beginning in November and would

sue unless Barclay Court revised Amendment No. 1. Counsel for Barclay

Court responded that Bilanko would violate the Declaration if she leased out

3 We are aware of the recurring, unsettled question of whether the definition of "use" in the WCA includes the leasing or renting of a unit. The legislature may well wish to clarify the WCA on this point. 4 While the exact vote count is not in the record before us, the amendment, as signed by the President of Barclay Court, states it passed with at least 67 percent of the vote. 3 Bilanko v. Barclay Court Owners Ass 'n, No. 91247-5

her unit and that Barclay Court had the right to evict any unauthorized

tenants.

Bilanko sued Barclay Court on July 14, 2014, alleging that the leasing

amendment was invalid because it had not received sufficient votes to

change the "uses to which any [u]nit is restricted" under RCW 64.34.264

and the Declaration. CP at 1-7. Barclay Court moved for partial summary

judgment, arguing that Bilanko's action was barred by the one-year statute

of limitations under RCW 64.34.264(2) and an identical one-year limit in the

Declaration. Bilanko moved for declaratory relief, arguing that the

amendment was not correctly adopted, that it was void ab initio, and that her

challenge was not barred by the statute of limitations. The trial court judge

initially granted Barclay Court's motion and denied Bilanko's. It found that

although Bilanko would have prevailed on the merits had she filed a timely

challenge, the statute of limitations under RCW 64.34.264(2) barred her

claim. Shortly afterward, the trial judge stayed its order and certified the

case for interlocutory review under RAP 2.3(b )(4).

Meanwhile, Division Three of the Court of Appeals held that a

challenge to an amendment that was not properly passed under the WCA is

not barred by the one-year limitation in RCW 64.34.264(2). Club Envy of

Spokane, LLC v. Ridpath Tower Condo. Ass 'n, 184 Wn. App. 593, 601, 337

4 Bilanko v. Barclay Court Owners Ass 'n, No. 91247-5

P.3d 1131 (2014). After the Club Envy decision, Bilanko moved the trial

court to vacate its previous orders and enter judgment for her. Based on

Club Envy, the trial court granted her motion, declared Barclay Court's

amendment invalid, and entered summary judgment for Bilanko. The

parties stipulated to dismissal of the remaining claims without prejudice

under CR 41(a)(l)(A) to facilitate review.

Barclay Court timely sought direct review in this court under RAP

4.2(a)(4) as a fundamental and urgent issue of broad public importance. We

granted review.

ANALYSIS

Barclay Court argues that Bilanko's challenge to Amendment No. 1 is

time barred under RCW 64.34.264(2). We agree. Under a plain reading of

the statute, a challenge to an allegedly invalid amendment cannot be brought

more than one year after the amendment is recorded. Unlike in Club Envy,

equity does not demand the time limit for this challenge be tolled.

Whether a claim is time barred is a legal question we review de novo.

Goodman v. Goodman, 128 Wn.2d 366, 373, 907 P.2d 290 (1995). RCW

64.34.264(2) provides that "[n]o action to challenge the validity of an

amendment adopted by the association pursuant to this section may be

brought more than one year after the amendment is recorded." Section 25.1

5 Bilanko v. Barclay Court Owners Ass 'n, No. 91247-5

of the Declaration contains nearly identical language as the WCA barring

challenges more than one year after the recording of an amendment.

The plain language ofRCW 64.34.264(2) bars challenges to the

validity of an amendment brought more than one year after recording the

amendment. 5 Since the statute does not define "validity," we look to a

dictionary to determine its ordinary meaning. State v. Gonzalez, 168 Wn.2d

256, 263, 226 P .3d 131 (20 10) (citing Estate ofHaselwood v. Bremerton Ice

Arena, Inc., 166 Wn.2d 489, 498, 210 P.3d 308 (2009)). "Valid" is defined

as "[l]egally sufficient; binding." BLACK'S LAW DICTIONARY 1784 (10th ed.

2009). This time bar, then, is intended to prevent challenges to whether an

amendment is legally sufficient or binding that are brought more than a year

after recording the amendment.

Here, Bilanko is challenging the legal sufficiency of the amendment.

She argues that the amendment is "invalid because it did not receive the

level of owner approval required under the WCA." Resp't Bilanko's

Appellate Br. at 10. Under RCW 64.34.264(2), Bilanko had one year from

5 The parties dispute whether this time bar operates as a statute of limitations or a statute of repose. A statute of limitation bars a plaintiff from bringing an already accmed claim after a specific period of time has passed; a statute of repose, however, terminates a right of action after a specified time, even if an injury has not yet occurred. 1000 Virginia Ltd. P'ship v. Vertecs Corp., 158 Wn.2d 566, 574-75, 146 P.3d 423 (2006) (quoting Rice v. Dow Chern. Co., 124 Wn.2d 205, 211-12, 875 P.2d 1213 (1994)). We need not decide between the two as the result is the same in this case. 6 Bilanko v. Barclay Court Owners Ass 'n, No. 91247-5

November 3, 2008, when Barclay Court recorded the amendment, to bring

her challenge. Bilanko did not challenge the validity of the amendment until

2014. Bilanko 's challenge is time barred under the plain language of RCW

64.34.264(2).

Relying on Club Envy, Bilanko argues that the time bar only applies

to amendments that were passed "pursuant to," or "in compliance with" the

requirements ofRCW 64.34.264. Resp't Bilanko's Appellate Br. at 31

(citing Club Envy, 184 Wn. App. at 593). Adopting her approach would

require us to consider the merits of a challenge before determining whether

the time bar applies-an approach we are reluctant to adopt in this case. In

contrast, it is easy to see why the court took that approach in Club Envy.

There, the unit owners alleged the condo association president, who had

been convicted of fraud in unrelated cases at the time of summary judgment,

had fraudulently filed amendments decreasing the allocated interests of each

unit owner. Club Envy, 184 Wn. App. at 597-98. Nothing in the opinion

suggests that any vote was held, and the unit owners were not aware of the

amendment until after the amendment was recorded. !d. at 602. While not

specifically reaching (but hinting strongly) whether in fact the amendments

had been fraudulently filed, the Court of Appeals held that a challenge to the

"validity of the amendment as not being properly passed by the association

7 Bilanko v. Barclay Court Owners Ass'n, No. 91247-5

pursuant to the WCA is not barred by RCW 64.34.264(2)'s one-year

limitation." Id. at 601.

Club Envy dealt with a strikingly different issue than what is present

in this case. There, it appears the condo association president committed

fraud by recording an amendment that he did not have the legal authority to

record without the consent of any of the other unit owners. The court

concluded the amendment was void ab initio, 6 or "void from its inception."

Club Envy, 184 Wn. App. at 600-01. Actions that exceed the decision

maker's authority are generally void. See, e.g., S. Tacoma Way, LLC v.

State, 169 Wn.2d 118, 123, 233 P.3d 871 (2010) (indicating that a

government contract is void only where the government entity "had no

authority to enter the contract in the first place"); see In re Pers. Restraint of

Thompson, 141 Wn.2d 712,719-23, 10 P.3d 380 (2000) (holding judgment

and sentence invalid where court had no authority to convict defendant of a

nonexistent crime); cf In re Disciplinary Proceeding Against

Hammermaster, 139 Wn.2d 211, 219, 985 P.2d 924 (1999) (discussing

municipal judge's lack of authority to impose unauthorized sentences).

These types of challenges can generally be made outside of a statutory time

6 An agreement or contract is "void ab initio" if it "seriously offends law or public policy, in contrast to a contract that is merely voidable at the election of one party to the contract." BLACK'S, supra, 1805 (lOth ed. 2009). 8 Bilanko v. Barclay Court Owners Ass 'n, No. 91247-5

bar. Club Envy, 184 Wn. App. at 601; accordS. Tacoma Way, 169 Wn.2d at

124 ("If the transaction was truly void, as our cases recognize, it would be

subject to challenge and invalidation at any time, perhaps years later."); see

also Allstate Ins. Co. v. Khani, 75 Wn. App. 317, 323-24, 877 P.2d 724

(1994) ("Void judgments may be vacated regardless of the lapse of time."

(citing In reMarriage ofLeslie, 112 Wn.2d 612, 618-19, 772 P.2d 1013

(1989))).

In essence, Bilanko asks us to hold that any legal error committed by a

condominium association that changes a declaration renders the change void

and challenges exempt from the WCA time bar. It is true that condominium

associations are organized as corporations, and corporations must act in

accordance with any formalities "prescribed by its charter, or by the general

law." Twisp Mining & Smelting Co. v. Chelan Mining Co., 16 Wn.2d 264,

294, 133 P.2d 300 (1943); RCW 64.34.300. It is also true that when a

corporation acts beyond its corporate powers or its actions offend public

policy, those actions are void. Twisp, 16 Wn.2d at 293-94. But if a

corporation fails to observe some statutory requirement while acting within

its corporate powers, the act is "voidable only, and is valid until avoided, not

void until validated." Id. at 294 (quoting 19 C.J.S. Corporations§ 968

(1940)). Actions that fail to comply with statutory requirements are

9 Bilanko v. Barclay Court Owners Ass 'n, No. 91247-5

generally not void unless the legislature has authorized such a penalty. See

Way v. Pac. Lumber & Timber Co., 74 Wash. 332, 333, 133 P. 595 (1913)

(articulating rule that "a contract which violates a statutory regulation of

business is not void unless made so by the terms of the act"); see also

Yakima Lodge No. 53 v. Schnieder, 173 Wash. 639, 642-43,24 P.2d 103

( 193 3) ("The ordinance did not provide that contracts made in violation

thereof should be void."); accord Allison v. Medicab Int'l, Inc., 92 Wn.2d

199, 203, 597 P.2d 380 (1979) (noting failure to comply with statutory

requirements to register franchise did not render franchise agreement void).

In this case, however, there is nothing in the record to suggest that

Barclay Court committed fraud, seriously offended public policy, or

exceeded its legal authority in passing the amendment. Accordingly, the

amendment is not void ab initio. Barclay Court followed the procedures set

out in article 25 of its Declaration: a majority of the board of directors voted

to submit the amendment for owner approval, all owners were notified of the

proposed amendment in writing, and at least 67 percent of the owners

approved the amendment. Barclay Court acted within the statutory authority

it has under RCW 64.34.264(5) to prepare, execute, record, and certify the

amendment. Nothing in RCW 64.34.264 suggests that the legislature

intended to make amendments not passed with the required supermajority

10 Bilanko v. Barclay Court Owners Ass'n, No. 91247-5

void and subject to challenge at any time. It strains credulity to believe that

it would not make such a draconian consequence explicit in the statute.

We need not decide what vote threshold was necessary to enact

Amendment No. 1. Regardless of the percent required to pass the

amendment, it was, at most, voidable. Challenges to voidable amendments

must be made within the one-year time bar set out in RCW 64.34.264(2). To

hold otherwise would render the time bar meaningless, for unit owners could

challenge amendments years after passage. A statutory time bar is a

"'legislative declaration of public policy which the courts can do no less

than respect,"' with rare equitable exceptions. Cost Mgmt. Servs., Inc. v.

City ofLakewood, 178 Wn.2d 635, 651, 310 P.3d 804 (2013) (quoting J.M

Arthur & Co. v. Burke, 83 Wn. 690, 693, 145 P. 974 (1915)); Millay v. Cam,

135 Wn.2d 193,206,955 P.2d 791 (1998) (discussing predicates for

equitable tolling of statutory time limits).

Unlike in Club Envy, where it appears the amendments were

fraudulently filed, no grounds for equitable tolling appear here. Bilanko

purchased her condo with Barclay Court over a year after the amendment

had been voted on by the unit owners, passed, and recorded. She was on

constructive, if not actual, notice at the time of purchase that her condo unit

11 Bilanko v. Barclay Court Owners Ass 'n, No. 91247-5

was subject to a leasing restriction. 7 Bilanko did not have to purchase a

condo subject to a leasing restriction. As the Declaration does not impose

any restraints on alienation, Bilanko is free to sell her unit at any time.

Accordingly, we hold that Bilanko's challenge to the amendment is

time barred under RCW 64.34.264(2). 8

CONCLUSION

We hold that Bilanko' s challenge to the declaration amendment is

barred by the one-year limitation under RCW 64.34.264(2). We reverse the

trial court's summary judgment ruling in favor of Bilanko and remand the

case back to the trial court for further proceedings consistent with our

opmwn.

7 Washington Practice is instmctive on this point: "Obviously the purchaser of a condominium unit should review in detail the existing use restrictions .... The investigation is an important one for the purchaser, but it is mainly a practical and personal, and not a legal, problem." 18 WILLIAM B. STOEBUCK.AND JOHN W. WEAVER, WASHINGTON PRACTICE: REAL ESTATE§ 12.10, at 53 (2d ed. 2004). 8 RCW 64.34.455 grants courts the discretion to award attorney fees to the "prevailing party." Barclay Court is the prevailing party, and we therefore award them reasonable attorney fees under RAP 18 .1. 12 Bilanko v. Barclay Court Owners Ass'n, No. 91247-5

WE CONCUR:

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