September 2005
In This Issue:
Home Renovation Must Not Unreasonably Obstruct View
Authority to Amend Covenants Is Not Power to Add New Burdens
Owners Can Enforce Restriction Against Building Home on Lot
Association Not Allowed to Collect Attorney Fees Via Foreclosure
Investor Owners Can Amend Declaration
Altering Check Used as Evidence Warrants Dismissal of Case
Association Not Liable for Failure to Sell Lots
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Home Renovation Must Not Unreasonably Obstruct View
Zabrucky v. McAdams, 129 Cal. App. 4th 618, 28 Cal. Rptr.3d 592 (2005)
Covenants Enforcement/Architectural Control: An appeals court interpreted a prohibition against view obstruction to include landscaping and structures that unreasonably obstructed another owner's view.

John and Jaylene Zabrucky's property adjoins property owned by Lloyd McAdams and Heather Baines in the Marquez Knolls subdivision in the Pacific Palisades area of California. The Zabruckys said their primary reason for purchasing their home in 1993 was its unobstructed ocean view. McAdams and Baines purchased their home in 1994, and in 1995, they began plans for an addition to their house. Their plans incorporated two levels, with one level tucked under the main level for an overall one-story effect. When the Zabruckys learned of the addition, they met with McAdams and Baines and objected, saying it would obstruct the view from the Zabruckys' property. After the meeting, McAdams and Baines consulted with the Marguez Knolls Property Owners Association ("association") for advice and, consequently, reduced the size of their planned addition. 
 
The Zabruckys sued McAdams and Baines in November 2001, alleging that their landscaping encroached on the Zabruckys' view, violating Paragraph 11 of the covenants, and that the planned renovation would further obstruct the view from their property. McAdams and Baines filed an answer and a cross-complaint. In December 2002, the parties filed a joint stipulation of facts stating that the controversy between them was over application of Paragraph 11 to McAdams and Baines' landscaping and proposed addition.
 
During trial, the court conducted an inspection of the property and indicated that McAdams and Baines' addition to their residence would obstruct a portion of the view from the Zabruckys' lot. The court determined, however, that it would have been impractical for the drafters of the covenants to have intended that no house be built that obstructed any other owner's view. The court interpreted Paragraph 11's prohibition against erecting a structure that obstructs a view as referring only to landscaping and not dwellings. The court found that neither the planned addition nor the landscaping on McAdams and Baines' property violated Paragraph 11, and ruled in their favor, but denied relief on their cross-complaint. The court denied the Zabruckys' motion for reconsideration or a new trial. 
 
The Zabruckys appealed, challenging the court's interpretation of the declaration. The appeals court reviewed the following relevant paragraphs of the covenants: 

Paragraph 1:  All said lots shall be known and described as residential lots, no structure shall be erected, altered, placed, or permitted to remain on any building plot other than one detached single-family dwelling not to exceed one story in height and a private garage, for not more than three cars; except where, in the judgment of the Declarant and approved by the Architectural Committee, one two-story, single-family dwelling may be erected where said dwelling will not detract from the view of any other lot.

Paragraph 2: No building shall be erected, placed, or altered on any building plot in this subdivision until the building plans, specifications, and plot plan showing the location of such building have been approved in writing as to conformity and harmony of exterior design with existing structures in the subdivision, and as to location of the building with respect to topography and finished ground elevation by an Architectural Committee....

Paragraph 11: No fences or hedges exceeding three feet in height shall be erected or permitted to remain between the street and the front setback line, nor shall any tree, shrub, or other landscaping be planted or any structures erected that may at present or in the future obstruct the view from any other lot, and the right of entry is reserved by the Declarant to trim any tree obstructing the view of any lot.

The appeals court concluded that main dwelling structures in the subdivision were governed by Paragraph 1, not Paragraph 11. It agreed with the trial court that the reference to structures in Paragraph 11 referred to fences, hedges, and landscaping, not main dwellings. The Zabruckys maintained that the trial court misinterpreted Paragraph 11 and should have used the plain meaning of "structure."
 
The court considered that, although the general rule in interpreting restrictive covenants is that they be construed against the party attempting to enforce them, the intent of the parties and the object of the restriction should govern, giving the document as a whole a just and fair interpretation. From reading the covenants as a whole, the court found that one purpose was to protect owners' ocean views. The court recognized that, as with most coastline housing in Southern California, Marquez Knolls marketed its property to prospective homeowners by emphasizing a beautiful ocean view, and much of the value of any property within the subdivision depended on the quality of the view. To significantly obstruct a homeowner's view would depreciate the economic worth of the property—often by several hundred thousand dollars—as well as drastically reduce enjoyment of the home.
 
For these reasons, the court was sympathetic to the association's joining the action amicus curiae to enforce the covenants, which formed the only safeguard against expansions of existing residences that would obstruct views and depreciate land values throughout the entire subdivision. The court deemed it highly unlikely that the framers of the covenants intended to limit their protection to fences, hedges, and landscaping, and not include other kinds of structures that might significantly destroy the views and values of existing homes. In the court's opinion, since the subdivision was built out and the architectural committee had been disbanded, Paragraph 11 was the only remaining restriction against what otherwise might be unlimited structural additions to existing residences at the expense of views enjoyed by other homeowners.
 
The court agreed with the trial court that it would have been impractical for the drafters to have intended that no house be built that obstructed another owner's view. However, it concluded it would be in keeping with the drafters' intent to read into Paragraph 11 a provision that the view may not be unreasonably obstructed. The court did not address the Zabruckys' contention that the trial court erred in finding the addition was not a two-story structure because there was no substantial evidence presented at trial that the addition was only one story high. The court reversed the trial court's judgment and awarded costs on appeal to the Zabruckys.
 
In a dissenting opinion, Judge P.J. Perluss acknowledged that the arguments presented by both sides were closely balanced and that the majority of the court had fashioned a practical and fair resolution of the problem by determining that McAdams and Baines could proceed with their remodeling project to the extent that it did not unreasonably obstruct the Zabruckys' view. Judge Perluss, however, contended that Paragraph 11, upon which the Zabruckys and the majority relied, did not support the majority's findings.  Judge Perluss determined that if Paragraph 11 applied, its terms were absolute: No new construction or renovation of an existing dwelling is permissible if it obstructs a neighbor's view to any extent. The judge felt that the majority's attempt to introduce the "reasonableness" test into its interpretation of Paragraph 11 was not justified by the plain language of the covenants.
 
The judge found that Paragraph 1 of the covenants imposed a specific one-story limit on the height of houses unless the architectural committee gave prior consent to a two-story home; that Paragraph 2 imposed a requirement that the architectural committee approve building plans for renovations to homes previously approved; and that Paragraph 2 further provided that all building plans be reviewed for "location" and "elevation."
 
In Judge Perluss' opinion, the majority view did not attempt to reconcile the provisions of Paragraph 2 with those of Paragraph 11. He determined that Paragraph 11's absolute prohibition of structures that would obstruct the view from any other lot could not be interpreted to preclude only "unreasonable" obstructions of view. Perluss felt that the majority's effort to mitigate the impact of the view provisions, an argument advanced by the association, was commendable but constituted an impermissible rewriting of the express terms of the covenants. He expressed his intention that he would have affirmed the trial court's decision.

©2005 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.

Authority to Amend Covenants Is Not Power to Add New Burdens
Bumm v. Olde Ivy Development LLC, 142 S.W.3d 895 (Mo. App. 2004)

Covenants Enforcement:  Association members may change, repeal, or supplement existing covenants but may not add new burdens or additional restrictions by majority vote. Only a unanimous vote allows major changes to covenants.

In 1955, then-owners Joe and Mabel Hayes executed nine restrictive covenants ("1955 covenants") affecting their property in the Southern Hills subdivision. Covenant 1 stated: "No lot or any part thereof shall be used except for residential purposes. No building shall be erected, altered, placed, or permitted to remain on any lot other than one detached single-family dwelling not to exceed two-and -one-half stories in height and a private garage for not more than two cars and then necessary accessory buildings well constructed." Covenant 8 stated: "These Protective Covenants may be amended, repealed, or added at any time by the owners of a majority of the lots in said addition." The Hayeses sold all of their lots, including three to the James and Vera Fowler Trust, which later conveyed the land to Olde Ivy Development LLC ("developer").
 
Prior to May 2001, the developer submitted a preliminary plat of the Olde Ivy subdivision ("Olde Ivy") for review to the City of Springfield, Missouri. The preliminary plat included a partial replat of their lots in Southern Hills. On May 30, 2001, the Springfield development department recommended approval of the preliminary plat as long as the developer agreed to dedicate an additional street for public use to facilitate future development. The planning and zoning commission approved the preliminary plat, and the Springfield City Council accepted the preliminary plat, contingent upon the developer filing and recording a final plat with the city.
       
On July 30, 2001, one of the developer's managing partners attended a meeting of the landowners in Southern Hills. He proposed an amendment to Southern Hills' original protective covenants, removing from their scope the lots to be included in Olde Ivy and making these lots subject only to Olde Ivy's covenants. The proposed amendment did not pass.
       
On Jan. 10, 2002, a majority of the landowners in Southern Hills (excluding the developer) signed the Additional Protective Covenants Affecting Southern Hills Unit No. 2 ("2002 covenants"). Covenant 10 stated: "No lot, nor any part of any Lot, may be 'replatted' as a separate Subdivision, nor as a portion of another Subdivision. No lot, nor any part of any Lot, may be used, deeded, nor dedicated in any manner for the purpose of a public street, except for street and drainage maintenance and improvement of existing streets within Southern Hills, Unit No. 2." On Jan. 14, 2002, the 2002 covenants were filed at the Greene County recorder's office. That same day, the city council accepted the developer's final plat, which included the dedication of a public street.
 
On April 5, 2002, some owners of lots in Southern Hills sued the developer to prevent it from using portions of its lots as a public street and from replatting those lots as part of Olde Ivy. The trial court ruled in favor of the developer. The lot owners appealed, arguing that the trial court erred in failing to declare that the 1955 covenants and the 2002 covenants precluded the developer from using any portion of its three lots for a residential street. They also argued that these covenants prohibited the developer from replatting its lots.
       
In determining the developer's rights, the appeals court found Covenant 1 to be nearly identical to other restrictive covenants previously interpreted by Missouri courts. Accordingly, it held that the language "No lot or any part thereof shall be used except for residential purposes" was not ambiguous, as asserted by the lot owners. The court found that the language restricted only the type of structure that could be erected on the three lots and did not affect the use of the land; therefore, the court concluded that Covenant 1 did not prohibit the developer's use of the land as a residential street.
       
In addition to arguing that the developer could not use its property as a street, the lot owners argued that the developer could not replat its property in accordance with Covenant 10. The court noted that in the absence of a contractual provision to the contrary, a restrictive covenant may be amended at any time with the unanimous consent of all lot owners; however, when a new restrictive covenant is not unanimously adopted, different considerations apply. Covenant 8 explained the rules for amending: "These Protective Covenants may be amended, repealed, or added to at any time by the owners of a majority of the lots in said addition." The court strictly construed this language to mean that owners of land in Southern Hills may, by majority vote, change, repeal, or supplement existing covenants but may not add new burdens or different covenants. Only a unanimous vote would allow major changes to the covenants.
       
Since Covenant 10 constituted a new burden on Southern Hills residents because it specifically prohibited what the original restrictive covenants permitted -- and because it was not adopted by unanimous consent of all the landowners -- the court found Covenant 10 invalid and unenforceable against the developer. Additionally, the court concluded that neither Covenant 10 nor Covenant 1 prohibited the developer from using its lots as a public street or replatting them as a part of Olde Ivy.  The court affirmed the trial court's decision.

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Owners Can Enforce Restriction Against Building Home on Lot
Chervets v. Dockson, No. B173237, Cal. App. Ct., May, 2, 2005
Use Restrictions:  In an unpublished opinion, a California appeals court affirmed a trial court's decision that property owners in a subdivision can enforce a restriction against another owner and that the subdivision's restrictions were not inequitable merely because the original association no longer existed.

Maryana Chervets bought a vacant lot in a housing development. At the time of purchase, she knew that the lot was subject to a declaration of restrictions, and that the restrictions limited the use of the lot to the growth of plants and prohibited the construction of buildings. However, she wanted to build a house on the lot and sued Robert Dockson and other property owners in the development, asking the court to determine that the restrictions were invalid because the association that originally enforced them did not exist and because the restrictions were inequitable. The trial court ruled in favor of Dockson and the other owners, and the appeals court affirmed that decision.
       
Citing Citizens for Covenant Compliance v. Anderson, 12 Cal. 4th 345 (1995, CALR June 1996), the court began its discussion with a quotation from that case that pointed out, "the law of easements...and equitable servitudes is the most complex and archaic body of American property law remaining in the twentieth century…. The Law in this area is an unspeakable quagmire…."  
       
In this case, the parties agreed that the restrictions in the declaration were equitable servitudes, not covenants running with the land. Restrictions that do not reach the specific requirements for a covenant to run with the land may still be enforced as equitable servitudes, "provided the person bound by the restriction had notice of their existence." Citing Nahrstedt v. Lakeside Village Condominium Association, 8 Cal. 4th 361 (1994, CALR October 1994), the court noted that, "under the law of equitable servitudes, courts may enforce a promise about the use of land even though the person who made the promise has transferred the land to another." If a land owner promises to refrain from a particular activity pertaining to his or her land, he or she creates in the beneficiary of that promise "an equitable interest in the land of the promisor." Courts use the doctrine chiefly to enforce uniform restrictions under a general plan for an entire tract of land.
       
In this case, the association that originally had the authority and responsibility for covenant enforcement was suspended in 1972 and ultimately dissolved in 1999, before Chervet bought her lot. She did not dispute that the declaration applied to her property. In buying lots, several homeowners had relied upon the restrictions placed on Chervet's lot, and those owners considered it important that the lot would not be developed except for growing plants. The general plan of development for a community is reflected in recorded instruments, marketing materials, and the way a development is uniformly developed and used. It is the basis upon which original purchasers as well as their successors rely, and it provides them the assurance that what they have bought into will remain consistent with the "general plan."
       
Chervets made two arguments. The first was that the declaration had expired; however, the court noted that the declaration contained renewal provisions that called for it to be continued automatically for a period of 20 years and, thereafter, for an additional 20 years unless a written agreement signed by at least 60 percent of the owners determined that it should be allowed to expire. This had not happened, and because the property owners did not execute an expiration agreement, the declaration was deemed to continue automatically. Chervets then argued that because the association dissolved in 1999, the declaration was no longer enforceable. She also asserted that the only means of extinguishing the restrictions on her lot was by judicial decree. 

The court pointed out that neither point was valid. Because the declaration was still enforceable, the court looked to see if there were others who had the power to enforce it. The court stated that the other affected owners had the power to enforce the restriction in the declaration, and that they had the authority -- by the vote set out in the declaration -- to grant Chervets permission to build on her lot. In other words, the owners had the ability to determine whether or not her construction would be permitted or, in the absence of such permission, to enforce the covenant to ensure that it was not.
       
The court summarized the debate by pointing out that this was not a case where property restrictions prevented the construction of a commercial building in an area that was once primarily residential but was now predominantly commercial. Instead, it concerned a restriction that designated a few vacant lots to be used as open space for natural growth, vegetation, and planting. Chervets bought one of these lots and sought to change its use from planting plants to building a home. She asserted that the requirements were now obsolete, thus requiring the court to invalidate the restriction.
       
The court disagreed. That the declaration sets aside property, including Chervet's lot, to be used as a "natural area" does not violate public policy or constitute an arbitrary or irrational limitation. It also found that the restrictions were not so disproportionate to their benefits as to be oppressive or inequitable, and, in short, that the law does not force a developer to permit construction on every parcel in a planned community.

 ©2005 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.

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Association Not Allowed to Collect Attorney Fees Via Foreclosure
Andres v. Indian Creek Phase III-B Homeowners Association, 901 So. 2d 182 (Fla. Dist. Ct. App. 2005)

Attorney Fees: A properly recorded covenant that runs with the land may create a lien that dates back to the filing of the covenants. However, a continuing lien for attorney fees associated with the enforcement of covenants does not exist unless it is expressly included in the association documents.

George and Anna Andres erected a flagpole on their property to fly the American flag, in violation of the Indian Creek Phase III-B Homeowners Association ("association") covenants. The association sued the Andreses and prevailed, forcing them to remove the flagpole. The association then tried to foreclose on the Andreses' house to pay for the attorney's fees incurred in the original suit. The Andreses asserted that the foreclosure was preempted by the Florida Constitution, which protects most homestead property from forced sale.
       
The association sought to overcome the constitutional barrier by arguing that the Andreses purchased their property in 1998 subject to a lien because the association documents, which were first recorded in 1982, imposed a lien to collect attorney's fees. To support its argument, the association relied on Bessemer v. Gersten, 381 So. 2d 1344 (Fla. 1980, CALR February 1980), which stated that a properly recorded covenant that runs with the land may create a lien that dates back to the filing of the covenants.
       
In deciding the case, the court focused on the distinction between attorney's fees accrued to collect unpaid assessments and attorney's fees accrued to enforce covenant violations. Reading the covenants in conjunction with the association's bylaws, the court interpreted the documents to mean that the only continuing lien available to the association was for collection of assessments and attorney's fees associated with assessment collection. Since the documents did not explicitly allow the association to recoup attorney's fees associated with enforcement of covenants, they did not create a continuing lien that could overcome the protections of the state constitution. 
       
The court also concluded that Bessemer did not apply because association documents did not provide for a continuing lien that preexisted the homestead for attorney's fees associated with enforcement of covenants. The court noted that the association was not precluded from seeking other ways of collecting on its judgment for attorney's fees, but foreclosure on the Andreses' home was prohibited under the Florida Constitution.

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Investor Owners Can Amend Declaration
Brockway v. Harkleroad, No. A05A0252, Ga. App. Ct., May 20, 2005

Documents: If a declaration is amended in compliance with amendment provisions in the recorded declaration, is agreed to by a sufficient majority of lot owners, and applies uniformly to all lots in the subdivision, it is valid despite lack of consent from all owners.

Surrey Farms was developed in 1987 as a 112-lot residential community. The declaration of covenants and restrictions was recorded in 1988 and applied uniformly to every lot sold in the subdivision. The declaration restricted the community to residential development and provided that the covenants and restrictions would run with the land for an initial 20-year period. After the initial period, the declaration was to be automatically extended for successive 10-year periods unless 75 percent of lot owners terminated the covenants prior to commencement of any such 10-year period. The declaration also provided that the covenants and restrictions could be amended during the first 20 years if at least 90 percent of lot owners agreed to the amendment.
 
Surrey Farms never developed as planned. By 2000, only 18 homes were built, there was no homeowner association, and the common facilities -- such as the pool and clubhouse -- were closed.  The developer abandoned the development, and the Harkleroads and other investors purchased the undeveloped lots. By 2000, investors owned all but three lots and comprised well over 90 percent of lot owners.
 
Between 2000 and 2001, 90 percent of lot owners attempted to amend the declaration to exempt only their lots from the restriction against commercial development. In Licker v. Harkleroad, 558 S.E.2d 31 (Ga. App. 2001, CALR April 2002), which was the first appearance of the case, the appeals court ruled that the amendment was void. It found that even though the declaration provided it could be amended by agreement of at least 90 percent of the lot owners, the attempted amendment did not apply uniformly to all lots in the subdivision. Also influencing the court's decision was the fact that the declaration did not specifically allow the non-uniform amendment, and the fact that the amendment did not have the consent of all adversely affected lot owners.
 
On May 16, 2003, more than 90 percent of lot owners in the subdivision amended the declaration to provide for a duration period of 15 years instead of 20 years, with no provision for automatic extensions. The effect of the amendment was to establish an earlier termination date for the covenants and restrictions on all the lots, and, therefore, remove the restriction against commercial development.  A trial court subsequently approved this amendment to the declaration, and the case was appealed by the Brockways, the only lot owners still opposed to the amendment.
       
The court affirmed the trial court's order in favor of the amendment to the declaration despite the lack of consent from all lot owners. The reasons were threefold: The declaration complied with the amendment provisions in the recorded declaration; it was modified by a sufficient majority of lot owners; and it uniformly applied to all lots in the subdivision.

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Altering Check Used as Evidence Warrants Dismissal of Case
Andrews v. Palmas De Majorca Condominium, 898 So. 2d 1066 (Fla. Dist. Ct. App. 2005)

Assessments: Dismissal is an available remedy in both trial and appeals court cases for knowingly submitting forged or altered documents with the intent to deceive the court, but should only be used where the defaulting party's misconduct is correspondingly egregious, such as altering a check utilized as evidence in a case.

Palmas De Majorca Condominium Association ("association") sued Anthony and Tracy Andrews to foreclose a lien on the Andrewses' condominium unit based on their alleged failure to pay a special assessment the board had levied. The primary issue at trial was whether the special assessment could be properly levied by a vote of the directors or whether unit owners had the right to vote on it. The trial court concluded that the assessment required the vote of a majority of unit owners, but found that the Andrewses acquiesced to the special assessment by tendering a $1,000 check to Palmas that represented the first installment of the assessment.
       
At trial, the association offered a photocopy of Tracy Andrews' check as evidence to support its position that the Andrewses acquiesced to the assessment by making a partial payment. The photocopy of the check was smaller than an actual check, and some of the writing on the check was not clearly visible.  The parties agreed that the check was an important piece of evidence in the case, since the trial judge relied on it to reach his conclusions. 
       
During the appeals process, the Andrewses alleged that they had discovered a photocopy of the check on which the words "Under Protest" were clearly visible. Since Tracy Andrews' delivery of the check to the association was the sole basis for the trial court's finding that the Andrews acquiesced to the special assessment, the Andrewses filed a motion for relief from the trial court's judgment. Just prior to the hearing on the Andrewses' motion, the court allowed testimony by Karen Knox, a records custodian for SunTrust Bank. Knox produced an image of the Andrews' check that had cleared SunTrust Bank. The words "Under Protest" were not on the original check that was processed by the bank, indicating that the Andrewses had committed fraud by forging the words "Under Protest" on a copy of the check submitted into evidence. The trial court held that the Andrewses perpetrated a fraud upon the court, and, as a result, awarded to the association all attorney's fees and costs incurred due to the Andrewses' motion for relief from judgment.
       
Subsequently, jurisdiction for the case returned to the appeals court in order to determine if the Andrewses' appeal could go forward. The court dismissed the appeal based on the attempt to defraud the trial court. Since the court found the Andrewses' misconduct to be egregious and a threat to the integrity of the judicial process, it dismissed the appeal with prejudice and granted the association additional attorney's fees it had expended as a result of the appeal. The court also granted permission to the trial court to impose additional sanctions on the Andrewses.

©2005 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.

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Association Not Liable for Failure to Sell Lots
Carey Station Village Home Owners Association, Inc. v. Carey Station Village, Inc., 268 Ga. App. 461, 602 S.E.2d 233 (2004)

Contracts:  An association is not liable for tortious interference with contractual or business relations claims when the association is a party to the contract.

Carey Station Village Inc., a developer, purchased property on Lake Oconee, Georgia, for development as the residential subdivision Carey Station Village. The subdivision contained 227 lots. Even though it owned some lots, the developer turned control of the development over to the Carey Station Village Home Owners Association Inc. ("association") in 1994. The developer subsequently sold several remaining lots and offered owner financing to purchasers. Despite selling more than half of its remaining lots in a three-month period, there were foreclosures on 16 out of 21 lots sold.
       
In 2002, the association sued the developer to recover dues and assessments it owed for the remaining 16 lots. Pursuant to an earlier lawsuit, the developer forgave a promissory note from the association in exchange for a release of liability for dues and assessments through 1999. The developer paid charges for 2000 but defaulted in 2001 and 2002. The developer filed a counterclaim, asserting tortious interference with contractual or business relations and breach of contract. In its claim, the developer asserted that the association was responsible for purchaser default and the developer's inability to sell its remaining lots.
       
The trial court ruled in favor of the association on the breach-of-contract claim, but sent the claim for tortious interference with contractual or business relations to the jury. The jury ruled in favor of the association on its claim that the developer owed assessments, and in favor of the developer on its claim for tortious interference. The trial court denied the association's request for a new trial, and the association appealed the trial court's decision.
       
On appeal, the association asserted that the trial court erred in not granting a directed verdict in favor of the association on the tortious-interference claim. The association averred it was not liable because it had privilege and was not a stranger to the relationship between the developer and any purchaser.
       
The appeals court stated that, to prove tortious interference with contractual or business relations, the following elements must be proved: 1) improper act without privilege; 2) purposeful action with malice and intent to injure; 3) such action induced breach or caused the party to fail to enter into an anticipated relationship; and 4) such action must be the proximate cause of the resulting damage. In this context, the term "privilege," means a legitimate, bona fide interest or legitimate relationship with the contract that caused the developer not to be considered a stranger, interloper, or meddler to the contract.
 
In its analysis, the court noted that each lot in Carey Station Village is subject to the declaration, and that both the developer and the association signed the declaration. Under the terms of the declaration, the association possessed the authority to enforce covenants and collect dues and assessments.
       
The court determined that the association acted with privilege when it tried to collect dues and assessments. The developer argued that the association exceeded its privilege, but the court noted that if the association did exceed its privilege, the tortious-interference claim failed because the association is not a stranger to the relationship between the developer and any purchaser. In order to be liable under a tortious-interference claim, the association must have been a stranger to the contract and the business relationship that gave rise to the contract.
       
The court determined that the association was not a stranger to the contract or the relationship between the developer and any purchaser because all parties are subject to a "comprehensive interwoven set of contracts." Therefore, the court reversed the trial court's decision and ruled that the association was not liable under the tortious-interference with contract or business-relations claim. The court declined to address the other issues the association raised on appeal.

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