FROM THE GARLAND COUNTY CIRCUIT COURT [NO. 26CV-14-746]
HONORABLE LYNN WILLIAMS, JUDGE
Law Group, by: Bryan J. Reis and Philip B. Montgomery, for
Quattlebaum, Grooms & Tull PLLC, by: E.B. Chiles IV and
Justice J. Brooks I, for appellees.
an appeal arising out of a declaratory-judgment action.
Appellants Gene Garner and Lynda Narug sued appellees Hot
Springs Village Property Owners' Association (HSVPOA) and
its board of directors regarding measures taken by those
entities that affected appellants as residents and members of
the property owners' association. Following a bench
trial, the circuit court dismissed appellants' complaint
with prejudice. Appellants raise four arguments in support of
reversal-namely, whether the circuit court erred in finding
that (1) the two-tier assessment system was reasonable, (2)
the board had the authority to amend the protective covenants
and that the amendment allowing for the creation of overlay
zones was reasonable, (3) the board could vote its nonpaying
inventory lots to establish a quorum, and (4) moneys raised
from the annual assessment could be used to fund the master
plan and other development. Finding no error, we affirm.
Background and Issues on Appeal
Springs Village is a residential and commercial community
located in Saline and Garland Counties. It is the largest
gated community in the United States. Appellants are
residents of Hot Springs Village and members in good standing
of HSVPOA. HSVPOA is a nonprofit corporation that serves as
the administrator of Hot Springs Village. HSVPOA owns the
common property as well as many amenities and is governed by
a board of directors. HSVPOA and its board of directors were
formed in 1970 in conjunction with Cooper Communities, Inc.,
and are governed by a declaration, bylaws, and protective
are 34, 418 lots in Hot Springs Village. Of these lots, 8,
476 are improved, and 25, 083 are unimproved-lots are
differentiated as improved and unimproved based on the
presence or absence of a water meter. There are an additional
2, 354 inventory lots-these lots are controlled by HSVPOA and
are not subject to the payment of dues. Each member of HSVPOA
has voting rights and gets one vote per lot regardless of
whether the lot is improved. For many years, all lot owners
paid assessments of $36.68 per lot.
inception of Hot Springs Village in 1970, lot sales and
profits were steady. From 2003 to 2008, National Recreational
Properties, Inc. (NRPI) accumulated many lots and began to
pay assessments on these lots and to resell them. After the
recession, NRPI stopped paying assessments on the lots it
owned in 2008. NRPI abandoned its lots, and other property
owners abandoned and turned over their lots to HSVPOA as
well. This negatively affected the financial soundness of
2013, HSVPOA experienced a $3.2 million budget shortfall, and
the HSVPOA board president appointed a group known as the
Future Financial Task Force (FFTF) to research potential
revenue options to maintain HSVPOA's financial viability.
From October 2013 to July 2014, the FFTF evaluated new
funding options and ultimately recommended the adoption of a
two-tier assessment. The two-tier assessment would require
owners of improved lots to pay $65 a month to HSVPOA while
owners of unimproved lots would continue to pay $36.68 a
board considered the FFTF's recommendation and eventually
decided to send this initiative to a vote of the members of
HSVPOA. The vote was to take place in November 2014.
the vote, appellants and Cathy Rudder filed a lawsuit against
appellees in the Garland County Circuit Court seeking an
injunction against the November 2014 election and declaratory
relief that the proposed two-tier assessment was
unreasonable. Appellants and Rudder also moved for a
November 2014 vote occurred, but a quorum was not
established, and the vote was of no effect. Thereafter, the
board voted to resubmit the issue to HSVPOA members for a
vote in February 2015.
the November 2014 vote, appellants amended their complaint
multiple times, including to drop Rudder as a plaintiff and
to account for the November 2014 and upcoming February 2015
votes. The circuit court also held a hearing on the motion
for preliminary injunction in January 2015. The circuit court
denied the request for a preliminary injunction, and
appellants did not appeal from the denial.
February 2015 election, a full quorum was achieved, and the
voters approved the two-tier assessment.
appellants amended their complaint a fourth and final time.
In their fourth amended complaint, they sought a declaration
that certain amendments to the protective covenants were
void. Specifically, they challenged the board's authority
to amend protective covenants to create overlay zones. In May
2014, the board had amended the protective covenants to
create overlay zones-areas where the zoning restrictions
could be modified. The board took this action to attempt to
create development in Hot Springs Village.
circuit court held a bench trial on the matter in June 2015.
The primary focus of the litigation was whether the
establishment of the two-tier assessment system in which
owners of improved lots paid higher assessments than those
with unimproved lots was reasonable. In July 2015, the
circuit court entered a thorough judgment with ...