Daily Development for
Monday, August 25, 1997

by: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law

ASSOCIATIONS; AMENDMENTS TO DECLARATION; VOTING POWER: Declaration language that permits amendment by "majority of Owners of all lots in the subdivision," is inherently ambiguous where developer retains a large number of lots, and court will interpret the phrase to mean "one lot, one vote" where Developer has substantial investment in unsold lots.

Sky View Financial, Inc. v. Bellinger, 554 N.W.2d 694 (Iowa 1996)

Comment 1: The court cites cases in other jurisdictions that it claims have established two lines of authority on such language. By finding an inherent ambiguity, the court does not commit itself to any particular constructional approach, but "retains jurisdiction" over the issue so that it may review future cases based upon all the facts and equities.

Comment 2: Many would argue that common interest declarations are contracts that ought to be interpreted and enforced according to standard contract doctrine. Where it is unlikely that the original document was bargained out, or for that matter even read, by many of the people bound by it, broad judicial discretion in seeking out the original scheme of the parties seems appropriate.

In this case, the court's intervention resulted in a judgment for the developers - successors to parties who probably should have read the documents and against whom ambiguity should be construed. Nevertheless, once the court undertakes the role of interpretation "based upon all the facts and circumstances," it is inevitable that the court will indulge the presumption that the parties to the original instrument intended a "reasonable" construction of their language. The editor has no quarrel with this reasoning, although the editor would confine the focus of such an inquiry to the facts and circumstances existing at the time the Declaration became effective. The editor is critical of courts that, in order to achieve "substantial justice" in light of subsequent events, "rethink" clear allocations of risk or right in a Declaration .

Notwithstanding the editor's comments above, the editr agrees with the court's interpretation of the contract here. The language is ambiguous; and, based upon all the facts and circumstances in existence when the Declaration was drafted, the interpretation the court makes the most sense. .

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