STATE OF WISCONSIN CIRCUIT COURT ROCK COUNTY

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ROCK RIVER LEISURE ESTATES

HOMEOWNERS ASSOCIATION, INC.,

Plaintiffs,

vs MEMORANDUM DECISION

Case No. 84 CV 412

ROBERT ELLIOTT & PATRICIA

ELLIOTT,

Defendants.

(001) This case is before the court for decision following trial.

(002) At the close of the evidence, the court took the matter under advisement and directed that the defendants submit a brief to the court within 3 weeks and that the plaintiffs have an additional 3 weeks to respond.

(003) The deadline for briefing has expired and only the brief of the plaintiffs has been received.

(004) The court is rendering this decision without the benefit of brief from the defense.

(005) This action was initiated by the Plaintiff Association to enforce its covenants and rules governing the erection of sheds and decks on premises allegedly owned by the defendants Robert and Patricia Elliott.

(006) Omnibus defenses were raised by the defendants and those concerned with the status of the Board of Directors and its authority to act were resolved on motion prior to trial in a Memorandum Decision issued April 16, 1985.

(007) There are no issues of status before the court at this time.

(008) A multitude of written exhibits were presented and admitted into the evidence at the time of trial.

(009) Only those most pertinent to resolution of the ultimate issues will be referred to in this decision.

(010) Massey Schlenz, the Executive Vice-President of the Plaintiff Association was one of its principal witnesses.

(011) In the course of her testimony she identified plaintiff's exhibit #16 designated ARCHITECTURAL COMMITTEE SPECIFICATIONS FOR IMPROVEMENTS dated October 18, 1982.

(012) She testified that the specifications for improvement were brought before the Board of Directors by the Architectural Committee and the Rules Committee in October of 1982 and that they were approved by the Board on March 12, 1983.

(013) She additionally identified Plaintiff's Exhibit #17, a document captioned "REVIEW IN PART OF THE COVENANTS & RULES" dated March 12, 1983 which document was approved by the Board of Directors of which she was a member and sent to all property owners.

(014) The essence of her testimony was that the materials set forth in Plaintiff's Exhibit #16 was adopted as part of the covenants and rules governing the Association on March 12, 1983 and circulated to the membership as part "VI. Architectural & Building Requirements" set forth in Plaintiff's Exhibit #17.

(015) The covenants and rules most pertinent to the issues before the court as shown in the exhibits read as follows:

(016) "B. Wood storage sheds cannot exceed 100 square feet and be a maximum of 8 feet high from the floor to peak of the roof.

(017) Basic foundations should be no more than 6 inches above ground.

(018) Length or width cannot exceed 12 feet.

(019) Minimum size may not be less than 64 square feet (8' x 8').

(020) Roof overhand cannot exceed 12 inches.

(021) They are to be constructed with rough sawn board and batten or reverse board and batten.

(022) The design should be one of the three established patterns already in use, or comparable.

(023) Two dark brown stains have been approved - cabot mission brown #0134 & Olympic russet stain, or equivalent.

(024) The roof should be Flintkote 4379 Char-brown or equivalent”.

(025) "D. Wood decks must have wooden supports and cannot exceed 300 square feet, with 1 dimension not to exceed 30 feet.

(026) One elevation must begin at grade level, and may not exceed 8" to top of deck surface or 8" below RV unit.

(027) They are to be stained with Olympic #708 semi-transparent (non-ruboff) or equivalent.

(028) Railings may not exceed 48" in height and nothing can be built above the top of the railing.

(029) Below the railing must look open.

(030) The back porch entrance of a tip-out / slide-out RV unit shall not exceed 32 square feet for the top landing.

(031) If there is no 'main deck' now, the dimensions may be divided so that there is not an excess of 300 square feet between the two decks."

(032) The testimony of Ms. Schlenz is lacking in detail on the formalities involved in the process of rule adoption by the Board of Directors.

(033) On the other hand, Plaintiff's Exhibit #17 which was circulated and sent to all property owners clearly represents itself to be at least a partial statement of the "covenants and rules" then in effect and circulated for information purposes to the membership.

BY-LAWS

(034) Sec.18l.13 Stats., governing corporate by-laws provides that after the initial by-laws of a corporation have been adopted by the Board of Directors, by-laws may be adopted either by the members or the Board of Directors provided, however, that no by-law adopted by the members may be amended or repealed by the Directors unless the by-laws adopted by the members shall have conferred such authority upon the Directors.

(035) ARTICLE 10 of the ARTICLES OF INCORPORATION provides that "The Board of Directors may adopt, amend, or repeal By-laws within the authority of Sec. 181.13 of the Wisconsin Statutes."

(036) Thus the Board of Directors authority is limited to the statutory authority.

(037) The By-laws in ARTICLE IV, Sec. 2, provide that the membership have the authority to vote upon the following matters:

"(a) Changes in the covenants by a three-fourths (3/4) vote of the membership of the Association" and

"(b) Changes in the rules by a two-thirds (2/3) vote of the membership of the Association."

(038) In reconciling the statute with the ARTICLES OF INCORPORATION and the By-laws it appears that:

(1) The Board of Directors may adopt by-laws.

(2) The Board of Directors may not amend or repeal by-laws adopted by the members since no authority to do so has been granted by the members.

(3) The members may adopt by-laws.

(4) The members may change covenants and rules only by the majority votes set forth in the by-laws.

(039) The power to adopt by-laws carries with it the power to repeal and amend unless that power is limited by the Articles, By-laws or Statute.

(040) The only limitation is on the directors by Sec. 181.13.

COVENANTS AND RULES

(041) Apparently the "Covenants and Rules" are not by-laws.

(042) They are given special treatment in the by-laws and are defined in Sec. 8. "Covenants" are a legal promise that land may be used or may not be used in a certain way, and is particularly an express agreement between the Developers and Lot Purchasers.

(043) These Covenants shall become a part of the plat by reference in a recorded document with the plat.

(044) Provisions of ARTICLES I through V of the Declaration of Covenants & Rules shall be deemed to be Covenants.

(045) Thus because of their special status the Covenants & Rules are not to be treated as by-laws under either the Statute, the Articles of Incorporation, or the By-laws.

(046) The original declaration of covenants, rules and additional covenants is set forth in Plaintiff's Exhibit 9.

(047) They are similar in many respects to the by-laws.

(048) They, too, contain a provision for change.

(049) In ARTICLE V. Sec. I(q) it is provided that “Covenants may be added to or removed from this declaration by a three-fourths (3/4) vote of the membership of the association and rules by a two-thirds (2/3) vote.

(050) While the term "covenants" is defined in the original by-laws and again given the same definition in the Covenants & Rules, the word "rule" is not.

(051) On the other hand since the word "covenants" is defined as a “legal promise that land may be used or may not be used in a certain way, and is particularly an express agreement between the developers and the lot purchasers . . . " it appears from examination of the declaration that the "Covenants" are directed principally to individual lot usage and practices by members while the Rules are designed to have all encompassing effect applicable to all properties whether controlled and maintained by the association as well as the individual properties.

(052) Regardless, the Covenants and Rules are given special treatment under the original declaration as set forth in Plaintiff's Exhibit #9 and can only be changed in the manner specified by ARTICLE V, Sec. l(q).

ADOPTION OF ADDITIONAL COVENANTS & RULES

(053) As indicated earlier in this decision, the action of the Board of Directors shown by Plaintiff’s Exhibits #16 & 17 purports to be a change in the “Covenants & Rules”.

(054) In adopting the provisions set forth in the documents the Board did not purport to adopt new by-laws nor did it purport to amend existing by-laws, if it in fact had the authority to do so.

(055) The record is devoid of any evidence that the Covenants under discussion were voted upon by the membership of the association.

(056) The declarations relating to wood storage sheds and decks, although not specifically denominated in the documents, appear to be "covenants" rather than "rules" but regardless whether a "covenant" or a "rule", action by the membership was necessary and no such action has been shown.

(057) Plaintiff's Exhibit #14 bearing a date of June 4, 1977 was admitted into the evidence containing provisions similar to those dealt with above.

(058) Once again in connection with this exhibit, there is no evidence to show that a Covenant or Rule was ever adopted by a vote of the membership.

(059) Similarly, exhibits admitted into the evidence as improvement permits showing the issuance of such documents substantially prior to the defendant's shed and deck improvements have no particular effect because it was not established that the Covenants & Rules were properly adopted.

(060) The defendant’s answer denied the Board of Directors had authority to adopt rules and regulations governing sheds and other construction and put the plaintiff to its proof.

(061) The affirmative defenses assert the changes in rules and covenants were not in compliance with Article 5, Sec. 1(2) of the declarations of covenants and rules.

(062) There is no evidence of action by the membership adopting the covenants and rules under consideration.

(063) The plaintiff has the burden of proving the validity of the regulations being enforced.

(064) Absent such proof, they are void.

(065) Consistently, the court finds the covenants and rules set forth in plaintiff's Exhibit #16 void and because the original Covenants & Rules contain no reference to decks, the allegations of the complaint contending a violation arising out of construction of the walk-way on the sundeck must be dismissed and the defendants discharged thereunder.

(066) The original Declaration of Covenants, Rules and Additional Covenants (Plaintiff's Exhibit #9) provides in ARTICLE V, Sec. l(i) that "Storage of boats, snowmobiles, toboggans, cycles, all Terrain vehicles, garden, lawn and similar equipment shall be in approved storage sheds."

(067) Plaintiff's Exhibit #12 captioned, "Amendment to Declaration of Covenants and Rules for Wisconsin's Rock River Leisure Estates and Additions Thereto, Rock County, Wisconsin" was admitted into the evidence.

(068) It provides for an amendment of ARTICLE V., stating: "(3) Sec. 1, paragraph (i) is amended to read as follows: Storage of boats, snowmobiles, and all Terrain vehicles shall be stored in approved storage areas.

(069) Cycles, garden, lawn and similar equipment shall be stored in approved storage sheds.”

(070) The foregoing was executed on the 25th day of May, 1982, by the President and Executive Vice-President of the Association.

(071) The court takes judicial notice that the 26th day of May, 1979, the date on which the amendment purports to have been made effective, was the 4th Saturday of the month of May and therefore the date of the regular annual meeting of members that year.

(072) Therefore it appears that the document was voted on by the membership and absent a showing to the contrary, the court will presume the covenants and rules existing at that time were followed and the appropriate vote cast.

(073) Neither the original declaration of covenants, rules and additional covenants (Plaintiff's Exhibit #9) nor the amendment (Plaintiff's Exhibit #12) contains a blanket prohibition against the erection of storage sheds.

(074) Only the nature of the use of such sheds is controlled.

(075) As already indicated herein, the Covenants and Rules purporting to control the size of storage sheds were not validly adopted and are void.

(076) Consequently, the maintenance of the storage shed on the premises owned by the defendants is not per se violative of the original Covenants and Rules or the Amendment.

(077) The defendants executed an Acknowledgement of Membership in Wisconsin's Rock River Leisure Estates Homeowner's Association, Inc., as shown by Plaintiff's Exhibit #32.

(078) By that document they agreed to be bound by and comply with the Articles, By-laws, and Declaration of Covenants and Rules of the Association.

(079) The document was apparent in 1981 and did not bind them to Covenants and Rules although it may have contractually bound them to Covenants and Rules that may have been adopted invalidly before that time if they had knowledge of such invalid Covenants and Rules and intended to be bound by them at the time the document was executed.

(080) On the other hand, there are no Covenants and Rules presented that appear to have been adopted before June 1, 1981 except as already specifically dealt with herein.

(081) Consequently, as indicated, the shed does not stand in violation of the Covenants and Rules by virtue of its size.

(082) The original structure of the shed was erected before ownership was transferred to the Elliotts.

(083) The complaint alleges that it was constructed without a permit and that it is not one of the three approved architectural styles and exceeds the dimensions for length, width, and square feet.

(084) Since the court has already determined that the Covenants and Rules purporting to control shed dimensions are void the only remaining issues concern whether or not the shed is one of the three approved architectural styles and whether or not it was constructed without a permit.

(085) The shed was erected prior to transfer of ownership to the defendants.

(086) No contention has been made that the style did not originally conform to established standards and was not approved.

(087) No claim has been made that the "style" of the structure as it now exists, other than its size, fails to conform to acceptable standards.

(088) Accordingly, the court cannot find the shed in violation of approved architectural styles.

(089) The remaining allegation concerns itself with failure to obtain a permit.

(090) This was not an original construction but rather an addition.

(091) A principal purpose of permits is to put the governing authority on notice of construction so it can take necessary steps to inspect and be sure the construction comports to controlling standards.

(092) Another purpose is to provide revenue.

(093) No issue relating to revenue has been raised.

(094) The only question concerning the failure to acquire the permit is whether or not the same constitutes a material breach of the defendant's agreement to abide by the Covenants and Rules of the Association so as to entitle the latter to some form of relief.

(095) As already indicated, storage sheds per se are not prohibited by the declaration of Covenants and Rules and Additional Covenants.

(096) (Plaintiff's Exhibit #9) or the Amendment to Declaration of Covenants and Rules (Plaintiff's Exhibit #12).

(097) The court has also determined that the Covenants and Rules purporting to control the dimensions of sheds are void and that the shed comports to approved architectural styles so that the failure to obtain a permit does not constitute a material breach of the rule requiring an improvement permit before commencement of architectural improvements.

(098) The court does not consider it necessary to determine whether or not the rule requiring a permit and the rule requiring that sheds comport to the three established patterns already in use," or comparable as shown by Plaintiff's Exhibit #14 were validly enacted.

(099) Consistent with the foregoing, the court finds that the deck modification was not violative of a validly adopted Covenant and Rule;

that the shed dimensions are not violative of a validly enacted Covenant or Rule;

that the shed is in conformity with the three approved architectural styles and

that the failure to obtain a permit before enlarging the shed did not constitute a material breach of the membership agreement.

(100) Accordingly, the court directs dismissal of the Plaintiff's complaint and discharge of the defendants thereunder.

(101) The court does not herein decide whether or not Plaintiffs are entitled to enjoin particular usage of the shed.

(102) The defendant is directed to prepare Findings of Fact, Conclusions of Law and a Judgment for the signature of the Court, consistent with this decision.

Dated this____day of July. 1985.