SEABROOK ISLAND PROPERTY OWNERS ASSN v. PELZER
292 S.C. 343 (1987)
356 S.E.2d 411
John P. Algar
, of Pelzer & Algar
, of Charleston, for appellant.
Gedney M. Howe, III
, and David B. Wheeler
, of Holmes & Thomson, of Charleston, for respondent. [
292 S.C. 345
Seabrook Island Property Owners Association
instituted this action against J. Randolph Pelzer to collect an unpaid
annual assessment for 1984 on two lots owned by Pelzer at Seabrook
Island. Pelzer counterclaimed, alleging the assessment was invalid. He
also sought a refund of assessments he had previously paid for the years
1976 through 1983, alleging that they, too, were invalid. The
Association replied to the counterclaim, raising the defense of estoppel
as to past assessments. The circuit court entered judgment for the
Association in the sum of $992.25, representing the unpaid 1984
assessment and dismissed Pelzer's counterclaim with prejudice. Pelzer
appeals. We affirm in part and reverse in part.
The Association is a non-profit corporation
organized under the laws of South Carolina. Its purpose is to preserve
the amenities of Seabrook Island and to maintain roads, open spaces, and
landscaping for all property owners of the Seabrook Island development.
Its membership is composed of all property owners on Seabrook Island.
The Association is governed by protective
covenants and bylaws. These authorize it to collect from each property
owner and annual maintenance charge. The authority to assess and the
method of assessment are prescribed in Paragraph 7 of the protective
covenants and in Article VIII, Section 1, of the bylaws. Paragraph 7 of
the protective covenants provides, in pertinent part:
Each lot and lot owner in the subdivision shall
be subject to an annual maintenance charge based upon the assessed
valuation of the premises and any improvements thereon as fixed each
year by the Tax Assessor of Charleston County, South Carolina, for
County taxation purposes.
Article VIII, Section 1, of the bylaws states:
The Board of Directors ... shall have the right
and power to subject the property situated on Seabrook Island ... to an
annual maintenance charge. * * * * The annual charge may be increased,
adjusted or reduced from year to year by the Board of Directors ... [
292 S.C. 346
] and such maintenance charge may be set at a fixed rate for unimproved
property and a fixed rate for improved property. After reassessment of
all the property on Seabrook Island by the Tax Assessor of Charleston
County, the annual charge may be increased, adjusted or reduced from
year to year by the Board of Directors... based on the dollar [sic] of
the assessed valuation of the premises and any improvements constructed
thereon... as fixed each year by the Tax Assessor of Charleston County,
South Carolina, for County taxation purposes.
In 1984, Plezer received two bills for
maintenance charges on his improved and unimproved lots, respectively.
Although he had paid previous assessments from 1976 through 1983 without
protest, he investigated the manner in which the assessments were fixed
in connection with litigation for clients challenging special
assessments for beach renourishment and bridge repair.1
As a result of his investigation, Pelzer concluded the Association had
been improperly assessing his properties, because the annual maintenance
charge was not based upon assessed valuation for taxation purposes as
required by the restrictive covenants and bylaws. He, therefore,
requested the Association in writing to reassess the property on a valid
basis and refused to pay the annual maintenance charges for which he
had been billed.
The Association admits it has been assessing
all property owners on a fixed fee basis without regard to the value of
their property. Owners of improved lots are assessed at one uniform fee,
regardless of the value of their lots; owners of unimproved lots are
assessed at another uniform fee, regardless of the value of their lots.
The flat fee for improved property for 1984 was $610.00; and fee for
unimproved property was $315.00.
The Association defends this flat fee system of assessment as a "business judgment" of the Board of Directors. It [
292 S.C. 347
contends a flat fee is authorized under the clause in Article VIII,
Section 1, which says "such maintenance charge may be set at a fixed
rate for unimproved property and a fixed rate for improved property." We
reject this argument.
In Lovering v. Seabrook Island Property Owners Association, 291 S.C. 201, 352 S.E.2d 707
(1987), our Supreme Court construed the Association's bylaws to provide
that "adjustments to the annual maintenance charge are to be based on
the assessed value of the property as fixed by the county tax assessor."
Id. at 203, 352 S.E. (2d) at 708. This is the plain import of both the restrictive covenants and the bylaws.
The authorization to set the maintenance charge
at a "fixed rate" does not permit a "flat fee" system of charges. A
"rate" is a proportional charge based on value, not a flat fee. A "fixed
rate" is a fixed amount of assessment per stated amount of valuation.
The "rate" of assessment is the proportion or ratio the maintenance
charge bears to the assessed value of the property. Typically, it is
expressed as a percentage or millage of the property's assessed value:
i.e., so many cents or mills per dollar of value.
Under the bylaws, the Board of Directors may
set one rate for improved property and another rate for unimproved
property. For example, improved property might be assessed at 1.5% of
value while unimproved property is assessed at 1% of value. This does
not, however, authorize the Board to fix the annual maintenance charge
on some basis other than assessed value for county tax purposes.
The Association argues that its flat fee system
of charges is reasonable and was adopted in good faith in the exercise
of business judgment. This argument misses the point. Restrictive
covenants are contractual in nature and bind the parties thereto in the
same manner as any other contract. Palmetto Dunes Resort v. Brown, 287 S.C. 1, 336 S.E.2d 15
(Ct. App. 1985). Moreover, a corporation may exercise only those powers
which are granted to it by law, by its charter or articles of
incorporation, and by any bylaws made pursuant thereto; acts beyond the
scope of the powers so granted are ultra vires. Lovering v. Seabrook Island Property Owners Association, 289 S.C. 77, 344 S.E.2d 862 (Ct. App. 1986), aff'd as modified, 291 S.C. 201, 352 S.E.2d 707
[ 292 S.C. 348 ] (1987). The "business judgment" rule applies to intra vires action of the corporation, not to ultra vires acts. See Dockside Association, Inc. v. Detyens, 291 S.C. 214, 352 S.E.2d 714 (Ct. App. 1987).
The restrictive covenants and the bylaws
require annual maintenance charges to be based on property values. A
system of charges that violates this requirement cannot be defended on
the ground that it is a reasonable alternative. The Association is bound
to follow the covenants and its own bylaws.
Since the flat fee annual maintenance charge
violates the restrictive covenants and the bylaws, we reverse the
judgment against Pelzer for the 1984 charges on his two lots.
In his first counterclaim, Pelzer also sought a
refund of all assessments paid in excess of what was due under a proper
method of assessment for the years 1976 through 1983. The circuit court
held Pelzer was estopped to assert his claim for a refund and dismissed
the counterclaim with prejudice. We affirm.
As regards refund of payments from 1976 through
1983, the equities clearly favor the Association. The annual charges
for those years were assessed in good faith. Pelzer had constructive
knowledge that the maintenance charges were not being assessed in
accordance with the restrictive covenants and bylaws. Nevertheless, he
acquiesced in the method of assessment and paid the charges. The
Association expended the moneys for purposes authorized by the bylaws.
Pelzer received the benefit of those expenditures. He cannot now return
the benefits or restore the Association to its former position.
For these reasons, the circuit court correctly
held Pelzer is estopped to claim a refund. If a party stands by and sees
another dealing with his property in a manner inconsistent with his
rights and makes no objection while the other changes his position, his
silence is acquiescence and it estops him from later seeking relief. McClintic v. Davis, 228 S.C. 378, 90 S.E.2d 364 (1955).
Affirmed in part, reversed in part.
GARDNER, and SHAW, JJ., concur.