Case Law Update: Nottingham Village Condo Ass’n v. Pensom: Litigation Evaluation Meetings

In some condominium governing documents, there are provisions that require a co-owner vote before the association can file a lawsuit.  These provisions range from the rather mundane to extremely onerous.

In Nottingham Village Condominium Association v. Pensom, unpublished per curiam opinion of the Michigan Court of Appeals, No. 333311, Dated December 12, 2017, the Michigan Court of Appeals just upheld a bylaw provision that stated, before any civil lawsuit was filed, “the Board shall call a special meeting of the members of the Association (‘litigation evaluation meeting’) for the express purpose of evaluating the merits of the proposed civil action.”  According to this provision, 66 and 2/3% of the co-owners had to vote to approve the filing of the lawsuit.  The Court of Appeals found that the association later ratified the filing of the lawsuit, however the association never ratified the assessments to fund the litigation.

In addition, the Court of Appeals held that “[t]he bylaws of a corporation . . . constitute a binding contract between the corporation and its shareholders.” Nottingham Village, unpub op at 3, quoting Allied Supermarkets, Inc v Grocer’s Dairy Co, 45 Mich App 310, 315; 206 NW2d 490 (1973).  Thus, an unjust enrichment claim, which implies a contract when one individual has been inequitably enriched at the expense of another, will not stand where there is an express contract governing the same subject matter. ATF Michigan v  Michigan, 303 Mich App 651, 661; 846 NW2d 583 (2014).

This area of community association law is a hot topic among Michigan community association law attorneys.  Michigan condominium associations should be aware of these types of provisions and review whether to amend the governing documents to remove such provisions or modify them to be less onerous.  Similarly, associations should note that any vote to authorize litigation may also need to include a vote to authorize assessments related to the lawsuit if the governing documents require such a vote.

 

Joe Wloszek is a Member of Hirzel Law, PLC where he focuses his practice on condominium and homeowner’s association law, commercial litigation, commercial real estate, large contractual disputes, and related real estate matters. Mr. Wloszek has been a Super Lawyers Rising Star in Real Estate Law from 2013-2018, an award given to only 2.5% of the attorneys in Michigan each year.  He was also named a Top Lawyer in commercial law by DBusiness Magazine in 2014, a Michigan Top Lawyer in real estate law by Michigan Top Lawyers in 2016 and the Pro Bono Volunteer Attorney of the Year in 2014 by Michigan Community Resources.  He is a Certified Real Estate Continuing Education Instructor through the State of Michigan and the past Chair of the Oakland County Bar Association Real Estate Committee.  He can be reached at (248) 478-1800 or jwloszek@hirzellaw.com.