Wilchester West Concerned Homeowners LDEF, Inc. v. Wilchester West Fund, Inc.

Opinion issued August 11, 2005

In The

Court of Appeals

For The

First District of Texas

NO. 01-03-00436-CV

____________

WILCHESTER WEST CONCERNED HOMEOWNERS LDEF, INC. ,

Appellant

V.

WILCHESTER WEST FUND, INC., WILCHESTER CLUB, AND

WILCHESTER OWNERS COMMITTEE, Appellee s

On Appeal from the 11th District Court

Harris County, Texas

Trial Court Cause No. 2001-55866

OPINION ON MOTION FOR REHEARING

We grant appellant’s motion for rehearing, withdraw our opinion dated June

17, 2004, and substitute this opinion in its place.

In this suit for declaratory relief, which concerns a dispute between a group of

homeowners and the homeowners’ associations of two neighboring subdivisions,

appellant, Wilchester West Concerned Homeowners LDEF, Inc. (WWCH),

challenges the trial court’s rendition of summary judgment in favor of appellees,

Wilchester West Fund, Inc., Wilchester Club, and Wilchester Owners Committee, on

all of WWCH’s claims.

WWCH is a non-profit organization of homeowners from the Wilchester West

subdivision, which is located in Harris County. The Wilchester West Fund, Inc.

(Wilchester West HOA) is the homeowners’ association for the Wilchester West

subdivision. The Wilchester Owners Committee (Wilchester HOA) is the

homeowners’ association for the neighboring Wilchester subdivision.

The

Wilchester Club (the Club) is a separate, non-profit corporation that owns and

maintains recreational swimming and tennis facilities at two locations adjacent to the

two subdivisions.

In three issues, WWCH argues that the trial court erred in granting the joint

motion for summary judgment filed by the Club and the homeowners’ associations

and in denying WWCH’s motion for summary judgment because (1) in the absence

of amendments to the homeowners’ deed restrictions, the homeowners’ associations

did not have the authority to enter into a contract with the Club to obtain use

privileges for all homeowners in exchange for an increase in the amount of the

homeowners’ annual assessments; (2) a petition circulated by the homeowners’

associations seeking approval from a majority of the homeowners to amend the

homeowners’ deed restrictions was insufficient because it contained “material non-disclosures or misrepresentations”; and (3) as a matter of law, the homeowners’

associations did not obtain authority to enter into a contract with the Club or to “force

all homeowners to join” the Club.

We affirm.

Factual and Procedural Background

In August 1999, the trustees of Wilchester HOA, Wilchester West HOA, and

the Club formed the “Wilchester Club Resolution Committee” (the Resolution

Committee) to study and to prepare recommendations concerning the financial future

of the Club and its relationship with the subdivisions. At that time, membership in

the Club was voluntary, and its members were required to pay an initiation fee and

annual membership dues in exchange for the privilege of using the Club’s facilities.

The Resolution Committee subsequently prepared and circulated, to the homeowners

of both subdivisions, a letter and a “White Paper” setting forth its conclusion that the

Club was “not financially viable given its present membership base, the market

clearing price of neighborhood club memberships in West Houston, normal pool and

tennis facility operating costs, and the maintenance cost requirements for two

facilities that are approximately 35 years old.” The Resolution Committee

recommended that, to preserve the viability of the Club and to provide funds needed

to improve and to maintain its facilities, the homeowners’ associations vote either to

merge with the Club or to increase the homeowners’ annual assessments and to

segregate such funds for the use of the Club.

The Resolution Committee’s recommendations were presented and discussed

at subsequent meetings of the Wilchester West HOA. At a special meeting of the

Wilchester West HOA in December 1999, a majority of the homeowners from that

subdivision, appearing in person or by proxy, voted against a proposal that would

have granted membership in the Club to all homeowners and would have increased

the homeowners’ annual assessment by $160, with such increase to have been

dedicated for the use of the Club .

In March 2000, a majority of the homeowners of the Wilchester subdivision

voted by petition in favor of amending their deed restrictions to provide that each

homeowner, by virtue of his lot ownership, would become a voting member of the

Club and would pay a $160 increase in their annual homeowners’ assessment, with

such increase to be paid by the Wilchester HOA to the Club. That same month, the

board of trustees of the Wilchester West HOA circulated a letter proposing a similar

amendment to the deed restrictions for homeowners in the Wilchester West

subdivision. Petitions were circulated to the homeowners in the Wilchester West

subdivision, and a majority of the homeowners voted in favor of amending their deed

restrictions as proposed.

In April 2000, representatives of the Club and of the homeowners’ associations

executed a “Use Agreement” memorializing the Club’s agreement to extend

membership to homeowners of both subdivisions in exchange for a $160 increase in

the homeowners’ annual assessments, to be paid by the homeowners’ associations to

the Club. The Club also agreed to amend its by-laws so that the Club’s board of

directors would be comprised of 10 homeowners, with five elected from each

subdivision. The Use Agreement, as well as the amended deed restrictions for both

subdivisions, were subsequently filed among the Harris County public property

records.

In October 2001, WWCH sued the Club and the homeowners’ associations,

alleging that (1) the Wilchester West HOA had failed to comply with “the deed

restrictions and applicable law” in conducting the petition drive to amend the deed

restrictions, and (2) the Use Agreement reached between the homeowners’

associations and the Club violated the deed restrictions for homes within the

Wilchester West subdivision. In its petition, WWCH characterized the basis for its

suit as “a dispute about whether one group of homeowners can commence taxing their

neighbors—indefinitely, on pain of foreclosure—to subsidize a private pool club that

the neighbors do not want to join.” As enumerated in its petition, WWCH sought a

judgment from the trial court declaring that:

a.Wilchester West homeowners retain full authority to amend their

annual assessment by majority vote as provided in the deed

restrictions;

b.Wilchester West homeowners retain full authority to amend any

provision of their deed restrictions, or to eliminate their deed

restrictions entirely, by majority vote as provided in the deed

restrictions;

c.trustees of the [Wilchester West HOA] never obtained authority

to reduce homeowner powers specifically reserved in the deed

restrictions;

d.neither trustees of the [Wilchester West HOA] nor any group of

Wilchester West homeowners ever obtained authority to force

unwilling homeowners in Wilchester West to join [the Club], or

any organization except the [Wilchester West HOA]; and

e.trustees of the [Wilchester West HOA] never obtained authority

to enter into the Use Agreement, and so the Use Agreement is

void.

WWCH also sought recovery of its attorney’s fees and costs. The homeowners’

associations and the Club answered WWCH’s lawsuit and generally denied its

allegations.

WWCH subsequently filed a motion for summary judgment, based on the

claims in its lawsuit. In its motion, WWCH asserted that

[b]y this motion, [WWCH] seeks declaratory judgments that [Wilchester

West HOA] could not force homeowners to join the private club, and

could not adopt the Use Agreement. As an alternative basis for relief,

even if somehow [Wilchester West HOA] could make such an

agreement, this motion seeks declaratory judgments that [Wilchester

West HOA] did not properly obtain such authority.

The homeowners’ associations and the Club responded to WWCH’s motion for

summary judgment and filed a joint motion for summary judgment, in which response

and motion they argued that the Wilchester West HOA (1) had the authority, under

the provisions of the applicable deed restrictions, to amend the deed restrictions by

agreement of a majority of the homeowners; (2) as a non-profit corporation, had the

authority to enter into a contract with an outside party such as the Club; and (3) made

sufficient disclosures to Wilchester West subdivision homeowners to inform them of

the purposes and effects of the amendments to the deed restrictions. The

homeowners’ associations and the Club also argued that the requested relief “would

significantly impact the property rights of every owner in both subdivisions” but that

the additional homeowners in the subdivisions had not been joined in the lawsuit.

Without stating the basis for its rulings, the trial court denied WWCH’s motion

for summary judgment and granted the joint summary judgment motion filed by the

homeowners’ associations and the Club.

Declaratory Judgment

As noted above, WWCH sought declaratory relief from the trial court, as well

as attorney’s fees. However, in its petition, WWCH did not expressly identify its suit

as a declaratory judgment action brought under the Uniform Declaratory Judgments

Act. See Tex. Civ. Prac. & Rem. Code Ann . §§ 37.001–.011 (Vernon 1997 & Supp.

2004–2005) (DJA). The DJA provides

A person interested under a deed, will, written contract, or other writings

constituting a contract or whose rights, status, or other legal relations are

affected by a statute, municipal ordinance, contract, or franchise may

have determined any question of construction or validity arising under

the instrument, statute, ordinance, contract, or franchise and obtain a

declaration of rights, status, or other legal relations thereunder.

Id . at § 37.004(a). The subjects enumerated by the DJA are not exclusive. Bonham

State Bank v. Beadle , 907 S.W.2d 465, 468 (Tex. 1995). Because the record indicates

that the nature of the relief sought by WWCH was declaratory,

we treat WWCH’s

suit as having been brought within the provisions of the DJA.

Joinder of Affected Homeowners

In their joint response to WWCH’s motion for summary judgment and in their

own joint motion for summary judgment, the homeowners’ associations and the Club

noted that the relief requested by appellant would “significantly impact the property

rights of every owner in both subdivisions ” and that these homeowners had not been

made parties to the lawsuit. The homeowners’ associations and the Club assert that

summary judgment against WWCH on all of its claims was proper, in part, because

WWCH had failed to join all affected homeowners as parties to the suit.

In our original opinion, we held that all other homeowners in the subdivisions

whose property rights and interest were directly at stake were “indispensable parties,”

and WWCH’s failure to join these parties deprived the trial court of subject matter

jurisdiction over WWCH’s declaratory judgment action. This holding was based on

section 37.006 of the DJA, which provides that “[w]hen declaratory relief is sought,

all persons who have or claim any interest that would be affected by the declaration

must be made parties.” Tex. Civ. Prac. & Rem. Code Ann. § 37.006 (Vernon 1997).

In its motion for rehearing, WWCH argues that in light of two recent Texas Supreme

Court opinions, Simpson v. Afton Oaks Civic Club , 145 S.W.3d 169 (Tex. 2004) and

Brooks v. Northglen Ass’n , 141 S.W.3d 158 (Tex. 2004), the trial court had subject

matter jurisdiction over the dispute without joinder of all affected homeowners, and

thus we should adjudicate the dispute on the merits.

In Brooks , a homeowners’ association amended its subdivision’s deed

restrictions to expand the association’s board and to charge late fees on unpaid

assessments. 141 S.W.3d. at 161. A group of homeowners complained that the board

acted outside the bounds of the deed restrictions by adopting these amendments. Id .

The association filed suit, seeking, in part, a declaration that its actions were valid.

Id . The homeowners counterclaimed for a declaratory judgment that the association

had no authority to take the disputed actions. Id . The trial court granted the

association’s summary judgment on the merits, and the court of appeals affirmed in

part and reversed in part. Id . At the supreme court, the association argued for the

first time that the trial court lacked subject matter jurisdiction over the case because

the plaintiffs failed to join all affected homeowners as parties. Id. at 162 .

The supreme court rejected the association’s jurisdictional argument, noting

that the DJA provided the trial court with jurisdiction to declare the rights, status, and

other legal relations for homeowners who were interested under a deed or written

contract. Id . (citing Tex. Civ. Prac. & Rem. Code Ann. §§ 37.003(a), 37.004(a)

(Vernon 1997)). The court concluded that the question was not whether jurisdiction

was lacking, but rather “whether the trial court should have refused to enter a

judgment when a subset of the homeowners was not joined in the lawsuit.” Id .

(Emphasis added.).

Similarly, in Simpson , a homeowner sought to enjoin a subdivision from

creating mandatory assessments and membership to a property owner’s association.

141 S.W.3d at 170 . The court of appeals dismissed the case for lack of subject matter

jurisdiction because the plaintiff failed to join all property owners in his subdivision.

Id . The supreme court, citing its decision in Brooks , reversed and remanded the case

to the court of appeals.

Brooks provides the proper framework for the jurisdictional analysis in this

case. As stated in Brooks , rule 39 governs joinder of persons under the DJA and “like

the [DJA], mandates joinder of persons whose interests would be affected by the

judgment.” 141 S.W.3d at 162 ; see also Tex. R. Civ. P. 39 ; Tex. Civ. Prac. & Rem.

Code Ann. § 37.006. “Rule 39 determines whether a trial court has authority to

proceed without joining a person whose presence in the litigation is made mandatory

by the [DJA].” Brooks , 141 S.W.3d at 162 . Rule 39(a) states:

A person who is subject to service of process shall be joined as a party

in the action if (1) in his absence complete relief cannot be accorded

among those already parties, or (2) he claims an interest relating to the

subject of the action and is so situated that the disposition of the action

in his absence may (i) as a practical matter impair or impede his ability

to protect that interest or (ii) leave any of the persons already parties

subject to a substantial risk of incurring double, multiple, or otherwise

inconsistent obligations by reason of his claimed interest.

Tex. R. Civ. P. 39(a).

Rule 39(a)(1) “requires the presence of all persons who have an interest in the

litigation so that any relief awarded will effectively and completely adjudicate the

dispute.” Brooks , 141 S.W.3d at 162 . Here, rule 39(a)(1) would not have precluded

the trial court from reaching the merits because nothing prevented the trial court from

rendering complete relief between the Wilchester West HOA and WWCH. Likewise,

rule 39(a)(2)(i) would not have precluded consideration of the merits because a

declaratory judgment does not prejudice the rights of any person that is not a party to

the proceeding, and any non-joined homeowner would be able to pursue individual

claims challenging the associations’ authority to take the disputed actions,

notwithstanding a ruling in this case. Id . at 163; see also Tex. Civ. Prac. & Rem.

Code Ann. § 37.006(a) (stating “[a] declaration does not prejudice the rights of a

person not a party to the proceeding.”).

We recognize that the Club and the homeowners’ associations may be subject

to the possibility of inconsistent judgments since not all of the homeowners in the

subdivision have been joined. However, as in Brooks , this possibility was caused by

their “own inaction.” Brooks , 141 S.W.3d at 163 . The Club and the homeowners’

associations “could have sought relief at trial by urging the court, among other things,

to abate the case, join absent homeowners, or grant special exceptions.”

See id. ; see

also Truong v. City of Houston , 99 S.W.3d 204, 216 (Tex. App.—Houston [1st Dist.]

2002, no pet.) (stating “proper procedural tool used to raise an issue of a defect in

parties is a motion to abate” and finding that challenge to defect in parties contained

in summary judgment response was insufficient to preserve issue for review); Dahl

v. Hartman , 14 S.W.3d 434, 436 (Tex. App.—Houston [14th Dist.] 2000, pet. denied)

(holding that trial court did not abuse its discretion in abating suit and ordering

joinder of all property owners because declaratory judgment action seeking

invalidation of deed restrictions would affect property interests of all owners) .

The Club and the homeowners’ associations argue that this case is

distinguishable from Brooks and Simpson because in those cases the associations

presented jurisdictional arguments for the first time on appeal . While it is true that

the Brooks court concluded that the association waived its complaint about the

absence of non-joined persons, Brooks also indicates that the failure to join all other

homeowners in the subdivision does not deprive the trial court of jurisdiction.

Brooks , 141 S.W.3d at 162-63 . In light of Brooks and Simpson , we must reject the

argument that a court does not have jurisdiction to hear a case similar to the one

presented here unless all property owners are joined . Instead, under Brooks , the Club

and the homeowners’ associations should have sought abatement or joinder to protect

their interests, and if the trial court denied such relief, then they should have sought

review of the trial court’s denial of their efforts to seek such relief. See id . The Club and the homeowners’ associations also argue in their response to

WWCH’s motion for rehearing that WWCH is not an owner of property in Wilchester

or Wilchester West and that WWCH did not present any evidence of its authority to

represent owners in these subdivisions. We interpret this argument as a challenge to

WWCH’s organizational or associational standing. The Texas Supreme Court has set

forth a three-prong test to determine whether an organization has standing to bring

suit: (1) its members have standing to sue on their own behalf, (2) the interests the

organization seeks to protect are germane to the organization’s purpose, and

(3) neither the claim nor the relief requested requires the participation of individual

members in the lawsuit. Tex. Ass’n of Bus. v. Tex. Air Control Bd. , 852 S.W.2d 440 ,

447–48 (Tex. 1993); Hays County v. Hays County Water Planning P’ship , 106

S.W.3d 349, 357 (Tex. App.—Austin 2003, no pet.).

As to the first prong, WWCH has alleged that its members have suffered an

injury as a result of the actions taken by the Wilchester West HOA, and thus its

members would be able to bring suit in their own right. See Hays County , 106

S.W.3d at 357 (finding individual members of community partnership who owned

property in area impacted by disputed transportation plan had standing to sue on their

own behalf). In satisfaction of the second prong, WWCH presented evidence that

it was formed by a group of homeowners to challenge the amendments to the deed

restrictions at issue in this case and the actions taken by Wilchester West HOA

pursuant to those amended restrictions. See id .; Save Our Springs Alliance, Inc. v.

Lowry , 934 S.W.2d 161, 163 (Tex. App.—Austin 1996, orig. proceeding [leave

denied]) (finding suit brought by alliance to protect water quality in a certain

geographic region reflected alliance’s expressed purpose). Specifically, in support

of its summary judgment motion, WWCH filed the affidavit of Bob Lemer, who

testified that he was a homeowner in Wilchester West and the president of WWCH

and that, in his capacity as president of WWCH, he represented 40 homeowners in the

Wilchester West subdivision. Lemer further stated that WWCH’s purpose was “to

challenge the Use Agreement and resulting Pool Tax . . . .” Finally, as to the third

prong, because WWCH sought declaratory relief, WWCH was not required to prove

the individual circumstances of its members to obtain relief as it reasonably could be

ascertained that any declaration provided would benefit the members of WWCH who

were injured. See Hays County , 106 S.W.3d at 357–58 (stating that it could be

reasonably ascertained that injunction would benefit members of community

partnership who were actually injured by disputed transportation plan) ; Anderson v.

New Prop. Owners’ Ass’n of Newport, Inc. , 122 S.W.3d 378, 385 (Tex.

App.—Texarkana 2003, pet. denied) (stating “[w]hen, as here, an association seeks

declaratory or injunctive relief, it is reasonable to suppose that the relief sought will

inure to the benefit of the injured members.”). Thus, we hold that WWCH has

standing to bring this action and that we may adjudicate the dispute on the merits.

Amendment to Deed Restrictions

In three issues, WWCH contends that the trial court erred in granting the

Clubs’ and the homeowners’ associations’ joint motion for summary judgment and

in denying its own summary judgment motion. In its first issue, WWCH argues that,

in the absence of the amendments to the homeowners’ deed restrictions, the

homeowners’ associations did not have authority to enter into the Use Agreement

with the Club. In its second issue, WWCH argues that the amendments to the deed

restriction were not effective because they failed for lack of notice and because the

petition circulated by the homeowners’ associations seeking approval of the

amendments contained material non-disclosures that rendered the amendments

invalid. In its third issue, WWCH challenges the association’s authority to enter into

the Use Agreement with the Club.

A party moving for summary judgment must conclusively prove all of the

elements of its cause of action or defense as a matter of law. Tex. R. Civ. P . 166a(c);

Holy Cross Church of God in Christ v. Wolf , 44 S.W.3d 562, 566 (Tex. 2001);

Rhone-Poulenc, Inc. v. Steel , 997 S.W.2d 217 , 222–23 (Tex. 1999).

When, as here,

both sides move for summary judgment, and the trial court grants one motion but

denies the other, a reviewing court should review both sides’ summary judgment

evidence, determine all questions presented, and render the judgment that the trial

court should have rendered. FM Props. Operating Co. v. City of Austin , 22 S.W.3d

868, 872 (Tex. 2000). When a summary judgment does not specify or state the

grounds on which the trial court relied, the non-movant on appeal must negate any

grounds on which the trial court could have relied, and we will affirm the summary

judgment on appeal if any of the grounds presented in the motion is meritorious. See

Harwell v. State Farm Mut. Auto. Ins. Co. , 896 S.W.2d 170, 173 (Tex. 1995); Mellon

Serv. Co. v. Touche Ross & Co. , 17 S.W.3d 432, 435 (Tex. App.—Houston [1st Dist.]

2000, no pet.) . In other words, a non-movant is required to show that each ground

alleged in the motion for summary judgment was insufficient to support summary

judgment. Star-Telegram, Inc. v. Doe , 915 S.W.2d 471, 473 (Tex. 1995).

We begin our analysis by considering whether the amendments to the deed

restrictions are valid. In order to amend deed restrictions, three conditions must be

met. Dyegard Land P’ship v. Hoover , 39 S.W.3d 300, 313 (Tex. App.—Fort Worth

2001, no pet.); Hanchett v. E. Sunnyside Civic League , 696 S.W.2d 613, 615 (Tex.

App.—Houston [14th Dist.] 1985, writ ref’d n.r.e.). First, the instrument creating the

original restrictions must establish both the right to amend and the method of

amendment. Id . Second, the right to amend implies only those changes

contemplating a correction, improvement, or reformation of the agreement rather than

its complete destruction. Id . Third, the amendment must not be illegal or against

public policy. Id .

The Texas Property Code provides that an extension, addition to or

modification of restrictions proposed by a property owners’ association may be

adopted by a number of methods, including “a method permitted by the existing

restrictions.” Tex. Prop. Code Ann. § 204.008(4) (Vernon Supp. 2004–2005).

Paragraph 8.01 of Wilchester West’s restrictions states:

8.01. Term. These restrictions and covenants shall run with the land

and shall be binding upon all parties and all persons claiming under

them . . . unless at any time an instrument, executed by the then Owners

of a majority of the Lots within the Property, has been filed for record

agreeing to change these restrictions in whole or in part. (emphasis

added).

A restrictive covenant should be liberally construed “to give effect to its

purposes and intent.” Tex. Prop. Code Ann . § 202.003(a) (Vernon 1995); Samms

v. Autumn Run Cmty. Improvement Ass’n, Inc. , 23 S.W.3d 398, 402 (Tex.

App.—Houston [1st Dist.] 2000, pet. denied); Candlelight Hills Civic Ass’n, Inc. v.

Goodwin , 763 S.W.2d 474, 477 (Tex. App.—Houston [14th Dist.] 1988, writ denied).

Restrictive covenants should be interpreted using the general rules of contract

construction, and words contained in restrictions should be given their commonly

accepted meanings. Pilarcik v. Emmons , 966 S.W.2d 474, 478 (Tex. 1998).

Applying these rules, paragraph 8.01 unambiguously provides the homeowners in

Wilchester West with the right and the means to amend the restrictions by written

consent of a simple majority of the homeowners in Wilchester West filed of record.

The summary judgment evidence establishes that this right was exercised by the

circulation of a petition to the homeowners in Wilchester West , that a majority of the

homeowners executed consents to the amendments to the restrictions, and that the

amendments and consents were filed of record.

WWCH argues that the amendments are invalid for lack of notice. However,

there is no specific notice requirement contained in the restrictions. Rather, the

restrictions expressly permit an amendment by filing an instrument executed by the

majority of homeowners. When homeowners represented by WWCH purchased

homes in Wilchester West, they were on notice that the restrictions could be changed

through majority vote and that there were no specific notice requirements in order for

the restrictions to be amended. See Inwood N. Homeowners’ Ass’n v. Harris , 736

S.W.2d 632, 635 (Tex. 1987); Simms v. Lakewood Vill. Prop. Owners Ass’n, Inc. , 895

S.W.2d 779, 788 (Tex. App.—Corpus Christi 1995, no writ). Because the restrictions

do not contain any specific notice requirement of a proposed amendment to the

restrictions, WWCH’s notice argument fails.

WWCH also argues that the amendments are invalid because the petition

circulated by the Wilchester West HOA seeking approval of the amendments

contained material non-disclosures.

However, the petition circulated to the

homeowners of Wilchester West expressly set forth the proposed amendments to the

restrictions. For example, the petition specifically stated that the restrictions would

be amended to provide that (1) one of the “purposes” of the Wilchester West HOA

would be the “payment of an Annual Member Fee” to the Club; (2) a portion of the

annual maintenance charge would be used for payment of annual fees to the Club on

behalf of all homeowners; (3) such payment would be “mandatory by virtue of the

agreement” between the Club and the association; and (4) annual maintenance

charges would be increased by $160.00.

The trustees of the Wilchester West HOA also stated in a cover letter

accompanying the petition circulated to the Wilchester West homeowners that if the

petition was approved by the homeowners, the homeowners would increase their

annual maintenance charge by $160.00 and the Wilchester West HOA would enter

into a “contract” with the Club whereby the association would be obligated to pay

annual fees to the Club on behalf of each member of the association. Thus, the

petition provided the Wilchester West homeowners with the opportunity to review

the exact language of the proposed amendments, and there is no evidence that the

petition contained material non-disclosures or misrepresentations concerning the

language of the amendments themselves.

Because we conclude that the proper procedures were invoked to amend the

restrictions, we now consider whether the substance of the amended restrictions and

the actions taken by the Wilchester West HOA pursuant to those amendments were

lawful. Deed restrictions governing residential property are “generally enforceable

when their language is clear, they are confined to a lawful purpose, and they are

written within reasonable bounds.” Samms , 23 S.W.3d at 402 (citing Gunnels v. N.

Woodland Hills Cmty. Ass’n , 563 S.W.2d 334, 338 (Tex. App.—Houston [1st Dist.]

1978, no writ)). Under the Texas Property Code, “[a]n exercise of discretionary

authority by a property’s owner’s association concerning a restrictive covenant is

presumed reasonable unless the court determines by a preponderance of the evidence”

that such exercise was “arbitrary, capricious or discriminatory.” Tex. Prop. Code

Ann. § 202.004 (Vernon 1995).

WWCH asserts that the amendments are illegal and against public policy.

WWCH further asserts that the association’s entry into the Use Agreement was

“arbitrary, capricious and unreasonable.” However, in Candelight Hills Civic Ass’n ,

our sister court found that an association’s purchase of a neighborhood recreational

facility with the association’s maintenance fund was neither unreasonable nor

prohibited by law. 763 S.W.2d at 480 . Similarly, in this case, we find nothing in the

amendments to be illegal or against public policy. Nor do we find the associations’

decision to enter into the Use Agreement with the Club to be arbitrary, capricious or

discriminatory.

The association’s decision to enter into the Use Agreement is supported by

both the pre-amended and amended restrictions. The pre-amended restrictions stated

that maintenance charges should be used “to promote the health, safety, welfare, and

common benefit of the residents” and for “other things necessary or desirable, in the

opinion of the Corporation, to maintain or improve the Property or which is

considered of benefit to the Owners.” (Emphasis added.) The amended restrictions

retained this broad language, generally permitting the association to use the

maintenance fees for purposes benefitting the owners, but also specifically authorized

the use of maintenance charges for payment of annual fees to the Club. Construing

these restrictions liberally, as we are required to do, we hold that it was well within

Wilchester West HOA’s discretion to enter into the Use Agreement to mandate

membership in and financial support of neighborhood recreational facilities.

Our holding that the Wilchester West HOA was authorized to enter into the

Use Agreement with the Club is also supported by relevant provisions of the Texas

Non-Profit Corporation Act and the Property Code. The Non-Profit Corporation Act

grants a corporation the power to, among other things, “make contracts and incur

liabilities,” and “have and exercise all powers necessary or appropriate to effect any

or all of the purposes for which the corporation is organized.” Tex. Rev. Civ. Stat.

Ann. art. 1396-2.02(A)(8), (15) (Vernon Supp. 2004–2005). Furthermore, the

Property Code states that an association is entitled to, among other things, “make

contracts and incur liabilities relating to the operation of the subdivision and the

property owners’ association.” Tex. Prop. Code Ann. § 204.010(5) (Vernon Supp.

2004–2005). Here, after the restrictions were amended in accordance with the

required procedures, the Wilchester West HOA entered into the Use Agreement.

Wilchester West, an incorporated property owners’ association operating with all the

general rights and benefits of a such an entity was empowered to enter into this

agreement pursuant to the deed restrictions and the relevant provisions of the

Property Code and Non-Profit Corporation Act.

In support of their argument that the Wilchester West HOA’s decision to enter

into the Use Agreement was arbitrary, capricious, and discriminatory , WWCH points

to specific terms of the Use Agreement and also complains that powers granted to the

Wilchester West HOA and the Club are completely unrestricted. In regard to the

specific terms of the Use Agreement, WWCH complains about the amount of the

increased assessment, the duration of the Use Agreement, and the termination

provisions contained in the Use Agreement. However, the amount of the increased

assessment was disclosed to the Wilchester West homeowners before a majority of

the homeowners voted to amend the restrictions. Additionally, Wilchester West

HOA’s entry into a long-term contract with restrictive termination provisions is

compatible with the goals of the amendments, including long-term and continued

operation of the Club and improvement of the Club’s facilities .

WWCH argues that,

absent disclosure of the specific termination clause, homeowners were entitled to

assume that Wilchester West would only enter into an agreement with the Club that

was terminable at the will of a simple majority of homeowners. However, there is no

contractual or other legal basis for this assertion. Furthermore, accepting WWCH’s

assertion would restrict Wilchester West HOA and other homeowners’ associations

to entering into contracts that are terminable at will by a simple majority of their

homeowner members.

In regard to the alleged unconditional nature of the Use Agreement, WWCH

complains that there are no provisions regulating the Club’s expenditure of fees

generated from the residents of Wilchester West and that the Club has no obligation

to act in the interest of the residents of Wilchester West. WWCH notes that since the

Use Agreement imposes no conditions on the Club’s expenditures, the Club could

open locations far from Wilchester West, stockpile fees paid by residents of

Wilchester West, or build an “overly luxurious” club house. However, the Use

Agreement contains several limiting provisions. For example, the Use Agreement

provides that the annual membership fee of $160.00 may not be increased without the

prior written approval of Wilchester West HOA’s trustees, who are elected by

residents of Wilchester West. The Use Agreement also requires that the board of

directors of the Club, who would be involved in making decisions related to the

expenditure of fees generated from the residents of Wilchester West, consist of

homeowners in the Wilchester and Wilchester West subdivisions. Additionally, as

discussed above, the restrictions themselves contain several limitations on the

discretionary authority of the Wilchester West HOA and require that annual

maintenance fees be used to promote the common benefit of the homeowners.

Moreover, we note that the directors of the Wilchester West HOA are required, by

law, to discharge their duties in good faith and in the best interest of the association.

See Tex. Rev. Civ. Stat. Ann. art. 1396-2.28 (Vernon 2003). While it is clear that

at least some residents of Wilchester West do not wish to pay a portion of their annual

maintenance fees to support the neighborhood recreational facilities operated by the

Club, Wilchester West HOA was authorized to enter into the Use Agreement pursuant

to the deed restrictions approved by a majority of homeowners in Wilchester West,

and we do not find Wilchester West HOA’s decision to enter into the Use Agreement

to be arbitrary, capricious or discriminatory.

Because the amended deed restrictions are valid and are not illegal or against

public policy and because the Wilchester West HOA did not exercise its discretionary

authority under these restrictions in an arbitrary, capricious or discriminatory manner,

we overrule all three issues presented by WWCH.

Accordingly, we hold that the

trial court did not err in denying WWCH’s motion for summary judgment and in

rendering summary judgment in favor of the appellees on WWCH’s action for

declaratory judgment.

Conclusion

We affirm the judgment of the trial court.

Terry Jennings

Justice

Panel consists of Justices Nuchia, Jennings, and Keyes.