Swan Creek Village Homeowners Ass'n v. Warne

2006 UT 22
This opinion is subject to revision before final
publication in the Pacific Reporter.
IN THE SUPREME COURT OF THE STATE OF UTAH
----oo0oo----
Swan Creek Village Homeowners No. 20040884
Association,
Plaintiff and Appellee,
v.
Alicia Warne, a minor, appearing F I L E D
through her father, Jeff Warne,
Defendant and Appellant. April 4, 2006
---
Third District, Salt Lake
The Honorable William B. Bohling
No. 010903931
Attorneys: Craig G. Adamson, Eric P. Lee, Debra G. Griffiths,
Salt Lake City, for plaintiff
J. Craig Smith, D. Scott Crook, R. Christopher
Preston, Salt Lake City, for defendant
---
PARRISH, Justice:
¶1 In this appeal, we are asked to determine the validity
of an assessment levied by a homeowners association. Swan Creek
Village Homeowners Association brought this action against Alicia
Warne for failure to pay an assessment on lots in Swan Creek
Village that she purchased at a tax sale. The district court
granted Swan Creek’s motion for summary judgment. Alicia Warne
appeals, arguing that the summary judgment should be vacated
because (1) the district court abused its discretion when it
allowed Swan Creek to amend its complaint to substitute her (in
place of her father) as the real party in interest; (2) she was
not given the requisite notice of the assessment; (3) Swan
Creek’s claims were barred by the statute of limitations;
(4) Swan Creek lacked authority to assess her property; and
(5) the assessment was not authorized because it was an attempt
to revive a prior assessment that had been extinguished by the
tax sale at which she acquired the lots. Because we agree with
Alicia Warne that the assessment was not authorized, we vacate

1 Utah Code section 16-6-99(4) (1986), which took effect
just three days prior to Bryner’s application, barred
consideration of a reinstatement application made more than one
year after a homeowners association’s dissolution. This
provision corresponds to current Utah Code section 16-6a-1412
(Supp. 2005).
No. 20040884 2
the summary judgment entered by the district court and enter
judgment in her favor.
FACTUAL AND PROCEDURAL BACKGROUND
¶2 Swan Creek Village, located in Rich County, Utah, was
designed as a 500-plus home development to be completed in
multiple phases. In 1979, the developer incorporated the Swan
Creek Village Homeowners Association (the “Original Association”)
and thereafter recorded with Rich County a “Declaration of
Reservations, Restrictions and Covenants of Swan Creek Village”
(the “Declaration”). The Declaration recognized that the
Original Association had been created for the purpose of
furthering the community welfare of the property owners in the
Swan Creek subdivision, and it bestowed upon the Original
Association the power to perform many functions as an agent of
the lot owners, including the power to impose, collect, and
disburse assessments.
¶3 The developer declared bankruptcy and pulled out of
Swan Creek midway through its development. Abandoned by the
developer, the Original Association failed to file its annual
report or pay its filing fee and was involuntarily dissolved on
March 31, 1986. Mark Bryner, a lot owner, attempted to have the
Original Association reinstated. But his attempt failed because
his application to reinstate the Original Association was filed
more than one year from the time of its dissolution.1
¶4 In a continued effort to secure a vehicle for the
collective governance of Swan Creek, Bryner incorporated a new
homeowners association (the “HOA”), using the identical name and
articles of incorporation used by the Original Association. A
certificate of incorporation for the HOA was issued on April 28,
1988. Shortly thereafter, Bryner called a meeting of all Swan
Creek lot owners. More than 100 people, representing almost half
of the lot owners, attended the meeting and elected a board of
directors for the HOA.
¶5 Alicia Warne now disputes whether there were sufficient
votes at the meeting to authorize the HOA and whether those
voting understood that the HOA was a new entity and not merely a

3 No. 20040884
reinstatement of the Original Association. No such questions
were raised at the time, however, and the new HOA immediately
began to act under the terms of the Declaration.
¶6 On May 13, 1989, the board of directors voted to levy a
special assessment of $5,900 (the “1989 Assessment”) against each
lot to cover the cost of certain improvements that had been made
to Swan Creek. This 1989 Assessment was levied against all lots
in Swan Creek; however, credits were given to those lot owners
who had already contributed to the improvements in question.
¶7 In the early 1990s, the HOA was party to litigation in
the First Judicial District Court for Rich County, State of Utah.
One of the issues raised by the litigation was the authority of
the HOA to levy assessments pursuant to the terms of the
Declaration. The court ruled in favor of the HOA, concluding
that the HOA was properly formed and had the authority to impose
assessments on the owners of lots in Swan Creek. However, the
court limited its holding to the action before it. Swan Creek
Vill. Homeowners Ass’n v. Cook-Rex Darrington Sorenson Trust,
Civil No. 1568, Findings of Fact and Conclusions of Law (1st
Dist. Ct. Utah, July 20, 1992).
¶8 When certain lot owners failed to pay the 1989
Assessment, the HOA placed liens on the corresponding lots. Rich
County owned four of these lots, having earlier been issued fee
simple title by the Rich County Auditor in payment of general
taxes, interest, costs, and penalties. Jeff Warne purchased
these four lots at a May 24, 1994 tax sale on behalf of his then
two-year-old daughter Alicia.
¶9 Shortly thereafter, the HOA sent Jeff Warne and other
lot owners a letter demanding payment of the 1989 Assessment.
After certain lot owners argued that the 1994 tax sale had
extinguished any obligation for the 1989 Assessment, the HOA
imposed a new assessment (the “1996 Assessment”) and issued the
following statement:
The Homeowners association of Swan Creek
Village levied an improvement assessment in
the amount of $5,900 on May 13, 1989. There
have been questions on the legality of this
assessment on lots purchased at tax sale
after this date. In order to remove any
question concerning the validity of this
assessment and lien after tax sale, a new
assessment is being made at this time.

No. 20040884 4
¶10 The 1996 assessment was identical to the 1989
Assessment and, like the 1989 Assessment, was levied against all
lots constructed in the first two phases of the development.
Like the 1989 Assessment, the 1996 Assessment gave credits to
those who had already contributed to the improvements for which
the 1996 Assessment was levied. Swan Creek directed notice of
the 1996 Assessment to Jeff Warne, who refused to pay.
¶11 The HOA filed suit against Jeff Warne on May 3, 2001,
seeking to enforce and collect the 1996 Assessment. During
initial discovery, Jeff Warne notified the HOA that he was not
the real party in interest. According to the HOA, it requested
clarifying information from Jeff Warne’s attorney regarding the
identity of the proper party, but never received a response.
¶12 The issue resurfaced when Jeff Warne moved for summary
judgment, arguing that the case should be dismissed because the
lots in question were actually owned by his minor daughter Alicia
Warne. In response, Swan Creek indicated that it was prepared to
substitute Alicia Warne as defendant in the action. It noted,
however, that the amendment would have no practical effect
because Alicia Warne would be required to be represented by a
general guardian or guardian ad litem who, in either case, would
likely be Jeff Warne.
¶13 After taking the matter under advisement, the district
court allowed the HOA to amend its complaint for the purpose of
substituting Alicia Warne as defendant. Jeff Warne thereafter
continued defending the litigation on her behalf.
¶14 The HOA then moved for summary judgment. The district
court granted the HOA’s motion, awarding judgment in its favor.
It held that while the HOA was a new entity, distinct from the
Original Association, it was properly incorporated and acting
within its power, as granted in the Declaration, in levying and
collecting the 1996 Assessment. It also held that the six-year
statute of limitations on the 1996 Assessment did not begin to
run until 1996 and therefore had not expired at the time the HOA
filed suit. Alicia Warne now appeals. We have jurisdiction
pursuant to Utah Code section 78-2-2(3)(j) (2002).
STANDARD OF REVIEW
¶15 We review the district court’s decision allowing the
HOA to amend its complaint to substitute Alicia Warne as
defendant for abuse of discretion. Jones v. Salt Lake City
Corp., 2003 UT App 355, ¶ 7, 78 P.3d 988.

5 No. 20040884
¶16 We review the district court’s decision to grant
summary judgment “for correctness, granting no deference to the
[district] court.” Pugh v. Draper City, 2005 UT 12, ¶ 7, 114
P.3d 546. In reviewing the summary judgment, we recognize that
“[s]ummary judgment is appropriate only when there is no genuine
issue as to any material fact and the moving party is entitled to
a judgment as a matter of law.” Norman v. Arnold, 2002 UT 81,
¶ 15, 57 P.3d 997.
ANALYSIS
¶17 We begin by addressing Alicia Warne’s procedural claim
that the district court abused its discretion when it allowed the
HOA to amend its complaint. Finding the amendment proper, we
move to her substantive claims. We first address Alicia Warne’s
claim that the HOA lacks authority to levy assessments on the
Swan Creek lots. Concluding that it does have such authority, we
turn to Alicia Warne’s specific challenges to the 1996
Assessment. These challenges include her claim that the HOA
cannot enforce the 1996 Assessment because it failed to provide
her with the requisite notice of its imposition and her claim
that the HOA’s lawsuit was barred by the statute of limitations.
We finally address Alicia Warne’s claim that the 1996 Assessment
was invalid because it constituted an improper attempt to
resuscitate the 1989 Assessment, which had been extinguished by
the tax sale.
I. THE DISTRICT COURT DID NOT ABUSE ITS DISCRETION BY
ALLOWING THE HOA TO SUBSTITUTE ALICIA WARNE AS DEFENDANT
¶18 Alicia Warne argues that the district court erred when
it allowed the HOA to amend its complaint to substitute her as
defendant in place of her father Jeff Warne. We review a
district court’s decision to grant an amendment of the pleadings
for abuse of discretion resulting in prejudice. Jones v. Salt
Lake City Corp., 2003 UT App 355, ¶ 8, 78 P.3d 988. Upon
examining the relevant facts, we are convinced that the district
court did not abuse its discretion in allowing the HOA to amend
its complaint.
¶19 Rule 15(a) of the Utah Rules of Civil Procedure states
that, after the responsive pleadings have been filed, “a party
may amend his [or her] pleading[s] only by leave of court or by
written consent of the adverse party; and leave shall be given
when justice so requires.” On review, we give considerable
deference to the district court, as it is “best positioned to
evaluate the motion to amend in the context of the scope and

No. 20040884 6
duration of the lawsuit.” Smith v. Grand Canyon Expeditions Co.,
2003 UT 57, ¶ 32, 84 P.3d 1154.
¶20 In Kelly v. Hard Money Funding, Inc., 2004 UT App 44,
¶ 26, 87 P.3d 734, the Utah Court of Appeals summarized the law
regarding rule 15(a), as it has been interpreted by this court.
See also Reg’l Sales Agency, Inc. v. Reichert, 830 P.2d 252 (Utah
1992). The court of appeals observed that this court has
generally focused on three factors in deciding whether a district
court properly granted a motion for leave to amend:
(1) timeliness; (2) prejudice; and (3) justification. Kelly,
2004 UT App 44, ¶ 26. Explaining the first factor, the Kelly
court noted that “motions to amend are typically untimely when
they are filed in the advanced procedural stages of the
litigation process.” Id. ¶ 29. The rationale for this factor is
that “the ongoing passage of time makes it increasingly difficult
for the nonmoving party to effectively respond to the new
allegations.” Id. ¶ 30 (emphasis added).
¶21 The general rule regarding prejudice is that an
amendment should be denied when “the opposing side would be put
to unavoidable prejudice by having an issue adjudicated for which
he [or she] had no time to prepare.” Kasco Servs. Corp. v.
Benson, 831 P.2d 86, 92 (Utah 1992) (emphasis added) (internal
quotation marks omitted). We have been careful to limit the
scope of “prejudice” within this rule, requiring that there be
“undue or substantial prejudice, because almost every amendment
of a pleading will result in some ‘practical prejudice’ to the
opposing party.” Kelly, 2004 UT App 44, ¶ 31.
¶22 The justification factor focuses on “whether the moving
party had knowledge of the events that are sought to be added.”
Id. ¶ 32. Utah courts have generally adopted the United States
Supreme Court’s narrow rule focusing on whether the motion to
amend was filed as the result of a dilatory motive, bad faith, or
unreasonable neglect on the part of the movant. Foman v. Davis,
371 U.S. 178, 182 (1962). While the requirements for finding a
dilatory motive, bad faith, or unreasonable neglect have not been
expressly defined, the Utah Court of Appeals has correctly noted
that “where the party’s prior knowledge was minimal, or where it
was instead based on suspicious or inconclusive evidence, the
party’s decision to hold off on pleading those allegations until
reliable confirmation could be obtained should not serve as
grounds for procedural default.” Kelly, 2004 UT App 44, ¶ 38.
¶23 Here, although the HOA’s motion for leave to amend came
three years into litigation and right before trial, the tardiness
of the HOA’s amendment does not strike a chord with the harm
contemplated by the timeliness factor, nor did the tardiness of

7 No. 20040884
the amendment prejudice Alicia Warne. The amendment introduced
no new substantive issues that would require more time for
preparation. Indeed, as a practical matter, the only change
effectuated by the amendment was that Jeff Warne began defending
the suit in his capacity as an agent for his minor daughter
rather than in his personal capacity. And although Alicia Warne
argues that the amendment forced her to examine issues of agency,
these issues do not go to the substance of the dispute.
¶24 We next turn to the justification prong. Although the
HOA’s initial belief that Jeff Warne was the record title holder
was understandable, it is unclear why the HOA was not more
diligent in attempting to identify the correct defendant,
especially when Jeff Warne notified the HOA early in the
litigation that he was not the real party in interest. The HOA
suggests that it never received a response to its request for
additional information regarding the identity of the real party
in interest, that it believed Jeff Warne to be the appropriate
party, and that it was not required to name Alicia Warne because
she was a minor. It does not appear that the HOA’s failure to
amend was the result of “a dilatory motive, bad faith, or
unreasonable neglect,” Foman, 371 U.S. at 179. We therefore
conclude that the delay in seeking to substitute Alicia Warne as
defendant was not unjustified.
¶25 Having considered the factors of timeliness, prejudice,
and justification, we cannot conclude that the district court
abused its discretion in allowing the amendment. We therefore
affirm the order granting the HOA leave to amend and move to the
substantive issues.
II. THE HOA GAVE ALICIA WARNE SUFFICIENT
NOTICE OF THE ASSESSMENTS
¶26 The Declaration requires that the HOA furnish each lot
owner with “written notice” of all assessments. Alicia Warne
points out that the HOA addressed all correspondence regarding
the assessments to her father. Because she never received the
requisite notice, she argues that she should be excused from
responsibility for the assessments. We disagree because the
notice received by Jeff Warne was properly imputed to Alicia
Warne.
¶27 Under Utah law, “the knowledge of an agent concerning
the business which he is transacting for his principal is to be
imputed to his principal.” Wardley Better Homes & Gardens v.
Cannon, 2002 UT 99, ¶ 16, 61 P.3d 1009 (internal quotation marks
and brackets omitted). It is undisputed that Jeff Warne acted as

No. 20040884 8
Alicia Warne’s agent when he purchased the lots for her, a
relationship that has continued to this day, as demonstrated by
his payment of the property taxes on the lots and his defense of
this lawsuit. Indeed, considering her age at the time Jeff Warne
purchased the lots on her behalf, Alicia Warne probably was
unaware that she owned the lots at all. We are therefore
comfortable imputing the notice received by Jeff Warne to Alicia
Warne.
III. THE STATUTE OF LIMITATIONS DOES NOT BAR THE HOA’S CLAIM
¶28 We next turn to Alicia Warne’s contention that the
HOA’s claim is barred by the applicable statute of limitations.
This case is an action on a “contract . . . founded upon an
instrument in writing” governed by the six-year limitations
period of Utah Code section 78-12-23(2) (2002).
¶29 Alicia Warne asserts that the statute of limitations
began running in 1989 because the 1996 Assessment was merely an
attempt to revive the 1989 Assessment. We disagree. Even if the
1996 Assessment represented an effort to collect amounts unpaid
from earlier assessments, it was still a new assessment. In so
concluding, we do not decide whether the 1996 Assessment was
valid, an issue we address below. Rather, our holding is limited
to the conclusion that the statute of limitations did not begin
running on the 1996 Assessment until 1996, the year in which it
was levied by the HOA.
IV. THE SWAN CREEK HOMEOWNERS ASSOCIATION HAS
ASSESSMENT AUTHORITY OVER LOT OWNERS IN THE SUBDIVISION
¶30 We now turn to Alicia Warne’s claim that the HOA lacks
authority to impose assessments on property owners in the Swan
Creek subdivision. Although Alicia Warne recognizes that the
Original Association would have had authority to levy such
assessments, see Utah Code Ann. § 57-3-102(1) (2000) (indicating
that duly recorded documents “impart notice to all persons of
their contents”), she claims that the HOA lacked this authority
because it is not the association contemplated under the
Declaration and because an insufficient number of lot owners
voted to ratify its authority. In essence, she urges us to
conclude that the assessment power terminated with the defunct
Original Association, thereby leaving the HOA without assessment
authority.
¶31 We agree with Alicia Warne that the record fails to
establish any formal amendment of the Declaration recognizing the
HOA. We similarly agree that there appear to be disputed issues

9 No. 20040884
of fact with respect to whether a majority of the lot owners
formally approved the substitution of the HOA following the
involuntary dissolution of the Original Association. But we
disagree that these facts are material. Indeed, we need not
decide these issues because we find that the HOA’s authority to
impose assessments on Swan Creek lot owners pursuant to the terms
of the Declaration has been repeatedly ratified by the lot owners
over a period of many years. Therefore, using our equitable
powers, we declare the HOA to be a valid association authorized
to impose assessments pursuant to the terms of the Declaration.
¶32 Our equitable powers extend to situations where their
invocation is necessary to correct mistakes and oversights and to
protect the public interest. In the spirit of this principle, we
call on our equitable powers to affirm the HOA’s authority to
levy assessments here. Where property owners have treated an
association as one with authority to govern and impose
assessments contemplated under the terms of a duly recorded
governing declaration, they ratify its authority to act.
¶33 Although we have not previously addressed ratification
in the context of homeowners associations, such an exercise of
our equitable powers is consistent with over a hundred years of
Utah case law in similar contexts. From early in this state’s
existence, we have relied on the doctrine of ratification in
cases raising questions regarding corporate authority. In Marsh
v. Mathias, 56 P. 1074, 1076 (Utah 1899), we considered the
validity of a corporation’s amendment to its bylaws. In order to
amend the bylaws, two-thirds of the stockholders had to vote for
the amendment. Id. But it was not clear from the record whether
the requisite percentage of stockholders had attended the
meeting. Id. Despite the lack of evidence on this point, other
evidence supported the notion that the amendment had been validly
adopted. For instance, the amended bylaw was “found in the
records of the corporation, and [had] been acted upon and
acquiesced in for a period of more than eleven years.” Id.
Additionally, stockholders had been given statements each year,
and the amended bylaw had “been uniformly acted upon and enforced
since its adoption.” Id. In view of “all these circumstances,
we . . . presume[d] that [the amendment] was regularly and duly
adopted.” Id. In other words, the subsequent acts of
stockholders ratified the amendment’s existence.
¶34 The basic, equitable principle articulated by this
court in Marsh is still valid today and has been applied often in
more recent cases, albeit in different contexts. The
availability of equitable relief helps to ensure that justice is
met and prevents parties from avoiding valid obligations due to

No. 20040884 10
technicalities. Particularly in contract cases, we have relied
on the principle of ratification to establish the validity of an
act even though certain, express formalities have not been met.
See Aggeller & Musser Seed Co. v. Blood, 272 P. 933, 937 (Utah
1928) (indicating that “acceptance of services rendered with full
knowledge of the contract under which rendered is a ratification
of such contract”). We have found ratification “under
circumstances of acquiescence or where a duty to disaffirm is not
promptly exercised.” Lowe v. April Indus., Inc., 531 P.2d 1297,
1299 (Utah 1974) (holding that “delay in repudiation gives rise
to an implied or de facto ratification of [a] contract”); Cache
Valley Banking Co. v. Logan Lodge No. 1453, B.P.O.E., 56 P.2d
1046, 1047-48 (Utah 1936) (“Ratification may be implied by
acquiescence in, or recognition of, the act of the officers by
the corporation or by acts tending to show an acceptance or
adoption of the contract.”).
¶35 We have also called on other equitable principles to
achieve substantial justice. For example, equitable estoppel
allows us to modify a contract or prevent a party from denying
the validity of a contract when one party has relied on another
party’s conduct. See, e.g., Blackhurst v. Transamerica Ins. Co.,
699 P.2d 688, 691 (Utah 1985) (listing the elements of equitable
estoppel); Tanner v. Provo Reservoir Co., 289 P. 151, 154 (Utah
1930) (“It has been repeatedly held that a person by acceptance
of benefits may be estopped from questioning the existence,
validity and effect of a contract.”). Additionally, we have
adopted a principle “where a party recovering a judgment or
decree [who] accepts the benefits thereof, voluntarily and
knowing the facts . . . is estopped to afterwards reverse the
judgment or decree on error.” Ottenheimer v. Mountain States
Supply Co., 188 P. 1117, 1118 (Utah 1920) (internal quotation
marks omitted).
¶36 Other courts have called on such equitable principles
in affirming the authority of homeowners associations. For
example, in Evergreen Highlands Ass’n v. West, 73 P.3d 1, 7
(Colo. 2003), the Colorado Supreme Court held that even though a
homeowners association may not have “an express covenant imposing
mandatory assessments, it has the implied power to collect
assessments from its members.” It reasoned that to promote
efficient property management, it is necessary that “homeowner
associations have the implied power to levy dues or assessments
even in the absence of express authority.” Id.; see also Seaview
Ass’n v. Williams, 510 N.E.2d 793, 794 (N.Y. 1987) (indicating
that homeowners have an implied-in-fact contract with the
association when they buy property knowing that the association
manages it); Perry v. Bridgetown Cmty. Ass’n, 486 So. 2d 1230,

2 In arguing against the result we reach, Alicia Warne
relies upon Dansie v. Hi-Country Estates Homeowners Ass’n, 1999
UT 62, ¶ 18, 987 P.2d 30. Dansie is distinguishable because the
lot at issue there was not explicitly covered by the terms of the
association’s declaration. In contrast, the language of the
Declaration in this case specifically covers the lots owned by
Alicia Warne.
11 No. 20040884
1234 (Miss. 1986) (stating that “the declaration gives rise to
review in law or equity”).
¶37 These cases illustrate the wide variety of equitable
remedies on which courts rely to validate the authority of a
corporation or association. We employ just such equitable
principles in rejecting Alicia Warne’s assertion that the HOA
lacked authority to assess the property in Swan Creek because of
the technicality that it is a different association from the one
identified in the Declaration.
¶38 In reaching this conclusion, we rely on the fact that
the HOA has acted as a valid association for almost twenty years,
during which time the lot owners have collectively accepted its
management. Lot owners have paid their dues to the HOA, it has
managed the property in Swan Creek, and no competing association
has emerged. In fact, in 1994, only 24 of the 538 lot owners had
not paid the $5,900 assessment levied by the HOA. We also rely
on the fact that the HOA’s articles of incorporation and the
Declaration were on file and had been on file for years before
Alicia Warne acquired her lots. Moreover, in a lawsuit resolved
before Alicia acquired her lots, the First Judicial District
Court for Rich County specifically held that the HOA was
“properly formed” and had the power to levy and to “collect the
past due assessments.” Swan Creek Vill. Homeowners Ass’n v.
Cook-Rex Darrington Sorenson Trust, Civil No. 1568, Findings of
Fact and Conclusions of Law (1st Dist. Ct. Utah July 20, 1992).
While this holding was specifically limited to that action, id.,
it was a matter of public record, therefore putting Alicia Warne
on notice that the HOA was acting in the capacity of the
association contemplated under the Declaration.
¶39 Under these circumstances, and with this pattern of
acquiescence by the lot owners, we exercise our equitable power
to hold that the HOA possesses the authority delegated to the
homeowners association by the Declaration.2 Such was the case at
the time Alicia Warne acquired her lots, and it is the case now.
V. THE VALIDITY OF THE 1996 ASSESSMENT DEPENDS ON THE
TERMS OF THE DECLARATION AND THE NATURE OF THE IMPROVEMENTS

No. 20040884 12
¶40 Having determined that the HOA has authority to levy
assessments on the Swan Creek property owners, we address whether
Alicia Warne was required to pay the 1996 Assessment. Warne
argues that the 1996 Assessment was invalid because it was, in
reality, an attempt to resuscitate the 1986 Assessment that had
been extinguished by the tax sale. We agree.
¶41 It is well-settled that liens on real property are
extinguished by a tax sale. See A.C. Fin. v. Salt Lake County,
948 P.2d 771, 776 (Utah 1997); Hanson v. Burris, 46 P.2d 400, 406
(Utah 1935), aff’d by Ingraham v. Hanson, 297 U.S. 278 (1936). A
similar rule applies to foreclosure sales. See Restatement
(Third) of Property § 6.5 cmt. 9 (2000). This is necessary in
order “to provide a means whereby a party with no interest in the
property can pay delinquent taxes in exchange for clear title to
the property.” Buchanan v. Hansen, 820 P.2d 908, 909 (Utah
1991). We therefore conclude that the lien securing the 1989
Assessment was extinguished by the tax sale and that Alicia Warne
had no obligation to pay the 1989 Assessment.
¶42 Although the tax sale extinguished the 1989 Assessment,
it did not extinguish the HOA’s authority to levy new assessments
on property purchased at the sale. See Restatement (Third) of
Property § 6.5 cmt. 9 (2000). We must therefore confront the
thorny issue presented here--whether an association may levy on
property purchased at such a sale a new assessment for previously
incurred obligations. While this is an issue of first impression
in Utah, courts from other jurisdictions have addressed it. See,
e.g., Kingsmill Vill. Condo. Ass’n v. Homebanc Fed. Sav. Bank,
420 S.E.2d 771 (Ga. Ct. App. 1992).
¶43 In Kingsmill Village, a bank acquired a condominium at
a foreclosure sale, and the court held that it was not solely
responsible for an unpaid assessment levied on the property prior
to the bank’s assuming title. Id. at 773. The court reasoned
that after the foreclosure sale, the unpaid assessment became
part of the common expenses. Therefore, the court suggested that
the association could require the bank to pay only a pro rata
portion of the assessment. Id. Reasoning that the “substance”
of the claim was a “recoupment of past assessments,” the court
refused to allow “[a] party [to] do indirectly what the law does
not allow to be done directly.” Id. at 773 (citation omitted);
see also First Fed. Sav. Bank v. Eaglewood Court Condo. Ass’n,
367 S.E.2d 876, 877 (Ga. Ct. App. 1988) (holding that mortgagee
which foreclosed condominium unit was not liable for an unpaid
assessment but rather a pro rata amount of the unpaid share
according to statute); Lakes of the N. Ass’n v. Twiga Ltd.
P’ship, 614 N.W.2d 682, 687 (Mich. Ct. App. 2000) (indicating
that “parties agree that a lien for past due assessments . . .

3 Although not in effect at the time of this action, such
an approach is also consistent with the Community Association
Act, which provides that the amount and timing of any assessments
must be “in accordance with the terms of the . . . declaration.”
Utah Code Ann. § 57-8a-201(2) (Supp. 2005).
13 No. 20040884
does not survive a tax sale,” but legislative intent was that
covenants do subsist); Micheve, L.L.C. v. Wyndham Place at
Freehold Condo. Ass’n, 851 A.2d 743, 746-47 (N.J. Super. Ct. App.
Div. 2004) (indicating that a condominium statute did not permit
an association to collect back maintenance fees from buyer after
sheriff’s sale).
¶44 Many of these decisions are premised on state statutes
that bear on the validity of reassessments following
foreclosures. See id. But at the time the HOA filed this
action, Utah had no such statute. We therefore decline to follow
the rules adopted by these courts. Instead, we conclude that
basic principles of contract law govern the validity of the 1996
Assessment. Specifically, we hold that the validity of the
assessment against Alicia Warne turns upon the specific
provisions of the Declaration establishing the homeowners
association and conferring its assessment authority. We choose
this approach because both Utah statutes and case law recognize
that such associations are controlled by their governing
documents, which in fact constitute a contract between the
association and the property owners.3
¶45 Statutes in effect at the time Alicia Warne acquired
the lots contemplated that she would be subject to the HOA’s
governing documents. For example, one statute provided that duly
recorded documents “impart notice to all persons of their
contents.” Utah Code Ann. § 57-3-102(1) (1986). Although not
directly applicable, the Utah Condominium Ownership Act, Utah
Code Ann. §§ 57-8-1 to -36 (1986), similarly provided that
“[e]ach unit owner shall comply strictly with the covenants,
conditions, and restrictions as set forth in the declaration.”
Id. § 57-8-8.
¶46 Utah case law similarly recognizes the importance of an
organization’s governing documents. In fact, “[i]t is well
established precedent that the bylaws of a corporation, together
with the articles of incorporation . . . constitute a contract
between the member[s] and the corporation.” Turner v. Hi-Country
Homeowners Ass’n, 910 P.2d 1223, 1225 (Utah 1996) (internal
quotation marks omitted); see also Workman v. Brighton Props.,
Inc., 1999 UT 30, ¶ 10, 976 P.2d 1209 (“The binding nature of
these article, bylaw, and covenant provisions is settled under

No. 20040884 14
Utah law.”). This contractual authority is broad and requires
landowners to pay a full assessment if “the terms of the
governing documents” allow for such an assessment, even if the
individual landowners do not benefit from it. Id. ¶ 14.
¶47 Because the Declaration governs the obligations of the
lot owners, see Fairbourn Commercial, Inc. v. Am. Hous. Partners,
Inc., 2004 UT 54, ¶ 10, 94 P.3d 292, we look to its terms in
determining the validity of the 1996 Assessment. This is
consistent with how our courts, as well as courts across the
country, typically defer to the language of the governing
documents when determining an association’s right to levy
assessments, reapportion unpaid assessments following tax or
foreclosure sales, and collect attorney fees. See, e.g.,
Johannsen v. Canyon Rd. Towers Owners Ass’n, 2002 UT App 332,
¶¶ 19, 28, 57 P.3d 1119 (indicating that an agreement between
unit owner and association to lower monthly assessment violated
the Condominium Ownership Act and the declaration, which required
consent of all unit owners); Citicorp Sav. v. Bhatti, 527 N.E.2d
424 (Ill. Ct. App. 1988) (holding that the terms of a declaration
rendered the mortgagee liable for an amount equal to unpaid
common and special assessments); Lion Square Phase II & III
Condo. Ass’n v. Hask, 700 P.2d 932 (Colo. Ct. App. 1985)
(indicating that a condominium declaration provided recovery of
costs and attorney fees for action to foreclose liens and
nonpayment of assessments).
¶48 In summary, because the HOA was a valid association
operating pursuant to a duly recorded Declaration, those
purchasing property in Swan Creek were contractually bound to its
terms. When Alicia Warne acquired her lots, she bound herself to
the terms of the Declaration. She is therefore obligated to pay
the 1996 Assessment to the extent that it was authorized under
the Declaration.
¶49 In granting summary judgment in favor of the HOA, the
trial court ruled that the 1996 Assessment was “levied pursuant
to express authority provided [in the Declaration], and was made
in accordance with [its] requirements.” Alicia Warne challenges
that conclusion, arguing that the Declaration neither authorized
the HOA to impose assessments on selected lot owners nor
empowered the HOA to revive assessments extinguished by tax or
foreclosure sales. In so arguing, Warne points to the HOA’s
admission that the 1996 Assessment was not a new assessment.
Rather, it was an admitted attempt to reimpose on selected lot
owners the 1989 Assessment that had been extinguished by the tax
sale.

15 No. 20040884
¶50 Had the Declaration authorized selective imposition of
assessments under circumstances such as those presented here, we
would be constrained to uphold them. Such an approach would be
consistent with the principle that the Declaration constitutes a
contract between the HOA and its members and with the fact that a
recorded Declaration imparts notice of its contractual terms to
all who acquire property subject to it. In the absence of such
explicit authorization, however, we must agree with Alicia Warne
that the HOA lacks authority to revive assessments extinguished
by tax sale.
¶51 We therefore turn to the terms of the Declaration.
They support Alicia Warne’s contention that assessments are to be
uniform and that each property owner is responsible for only a
proportionate share of expenses. Paragraph 17(d) of the
Declaration, which outlines the powers of the association, states
that the association has “the power to assess and collect from
every member of the association a uniform monthly charge per
single-family residential lot within the sub-division” (emphasis
added). Paragraph 9 of the Declaration states that “[e]ach lot
owner shall pay the management committee or association his
allocated portion of the cash requirement deemed necessary . . .
to manage and to meet the expenses incident to the running of the
association and upkeep of the development” (emphasis added). And
paragraph 10 defines the cash requirement as the “aggregate sum”
to be paid by “all the owners then in existence.”
¶52 Nothing in the Declaration suggests that the HOA may
impose nonuniform assessments or levy assessments on only
selected lot owners or that it may achieve that result by
purporting to impose a new assessment on all lot owners and then
relieving certain lot owners from responsibility for the
assessment by crediting them for payments made toward prior
assessments. Indeed, paragraph 17(d)(2) of the Declaration
provides that every person acquiring a lot thereby is “held to
have agreed to pay the association all charges that the
association shall make” (emphasis added). It is significant that
the Declaration uses the future tense--it does not provide that
those acquiring lots are liable for prior assessments. This
interpretation is consistent with paragraph 11 of the
Declaration, which states that “[e]ach monthly assessment and
each special assessment shall be separate, distinct and personal
to the owners of the lot against which the same is assessed.”
¶53 We accordingly vacate the summary judgment entered in
favor of the HOA and enter judgment in favor of Alicia Warne.
Because this result may initially appear unfair to those lot
owners who paid the assessment at issue, we note that the HOA

No. 20040884 16
could have prevented this result by foreclosing on its lien prior
to the tax sale or by appearing at the tax sale and bidding on
the lots. Moreover, Alicia Warne will not be entirely relieved
from responsibility for the assessment because the HOA retains
the authority to levy assessments for the common expenses of the
association. Any revenue shortfall resulting from the unpaid
assessments will presumably contribute to the common expenses of
the association, and it remains within the authority of the HOA
to impose a new assessment on all lots (including those owned by
Alicia Warne) requiring lot owners to pay their pro rata share of
those expenses.
CONCLUSION
¶54 We conclude that the district court acted within its
discretion when it allowed Swan Creek to amend its complaint to
substitute Alicia Warne as defendant in place of her father.
Similarly, because Jeff Warne acted as Alicia’s agent, his notice
of the 1996 Assessment was appropriately imputed to Alicia. We
also conclude that the HOA’s claim was filed within the
applicable statute of limitations.
¶55 We rely on our equitable power to hold that the HOA
possesses the authority to levy assessments on property in the
Swan Creek subdivision because the lot owners collectively
ratified its authority to act as the association contemplated by
the Declaration and it was operating in that capacity at the time
Alicia Warne acquired her interest in the lots. Although the HOA
possesses the authority to levy assessments, the district court
erred by entering summary judgment in favor of the HOA because
the Declaration does not authorize the HOA to selectively
reimpose assessments extinguished by tax sales. We therefore
vacate the summary judgment entered by the district court and
remand for the entry of judgment in favor of Alicia Warne, the
parties to bear responsibility for their own costs and fees.
---
¶56 Chief Justice Durham, Associate Chief Justice Wilkins,
Justice Nehring, and Judge Thorne concur in Justice Parrish’s
opinion.
¶57 Having disqualified himself, Justice Durrant does not
participate herein; Court of Appeals Judge William A. Thorne sat.