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CCOC Decision Summary

#218-G, Montgomery Village Foundation v. Ryan (October 7, 1993) (Panel: Stevens, Chester, Glancy)

The homeowner association (HOA) complained that the homeowner (HO) had installed a new front door in defiance of an HOA decision rejecting the door as incompatible with the community's architectural standards.  The HO responded that the HOA's decision was arbitrary and unreasonable.

The facts at the hearing showed that the HOA's governing documents prohibited all changes to the exteriors of the houses without the permission of the HOA.  The HO had applied for permission to install a "Victorian" front door and sidelights, which included ornate stained-glass window designs and natural wood finishes.  After various meetings, the HOA eventually rejected the proposal on the grounds that the door style was in conflict with the "Colonial" design of the HO's house and the rest of the community.  The HO's appealed to the Executive Committee, claiming that other non-conforming doors existed in the community, but the Committee rejected the appeal, noting that the doors involved had never been approved by the HOA.  The HO then installed the door in spite of the HOA's decision.  The HOA staff testified that they were unaware of the non-conforming doors until the HO pointed them out in his appeal to the Executive Committee.  In one case, the HOA had approved a door with a stained-glass window, but only subject to its removal when the house was sold and because the window design was a simple one and there were no sidelights.

The panel ruled that the issue was one of the "business judgment" of the HOA's board of directors, citing Black v. Fox Hills North Community Association, 90 Md.App.75 (1992), in which the Court of Special Appeals held that the courts should not interfere in the internal affairs of a corporation except in very limited circumstances.  The panel found that the HOA had the authority to regulate changes to the homes and that it properly followed its own procedures in this case.  The panel held that the record in this case did not show that the HOA acted unreasonably, in bad faith, or fraudulently, and therefore the panel upheld the HOA's ruling.

However, the panel also held that the HOA's enforcement of its rules was inconsistent and not reasonable.  It referred to the HOA's decision to tolerate the other non-conforming door with a stained glass window and to grant it an exception until such time as the house was sold.  The HOA had failed to give a reasonable explanation why that door could remain but the HO's door must be immediately removed.  The panel therefore ordered that the HOA must either grant the HO a similar exception, or else take enforcement action against the other non-conforming door similar to what it attempted to do to the HO in this case.

The HO then appealed the decision.  The Circuit Court upheld the panel ruling but the Court of Special Appeals, in an unreported decision,  reversed, and remanded the dispute to the panel for further consideration.  The Court of Special Appeals held that the proper test was not the "business judgment" rule of the Fox decision but the older decision of Kirkley v. Seipelt, 212 Md. 127 (1957), setting out a test of "reasonableness".    On remand, the hearing panel held that the applicable HOA rules were clear and reasonable on their face.  The panel further held that although the HOA's notices to the HO gave different details to explain the rejection of the application, the notices were all consistent in their overall message that the proposed door was not harmonious with the overall design of the community.  This reason is consistent with the requirements of the declaration of covenants.  The HOA's action had a reasonable foundation, and there was no evidence that the HOA acted in bad faith.  Therefore the HOA decision to reject the door and to order that it be removed must be upheld.

The Panel ordered the HO to remove the door within 90 days and to replace it with a door of the approved styles.

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