Daily Development for
Tuesday, April 23, 1999

by: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri

ASSOCIATIONS; ASSESSMENTS; NON MEMBERS: A cooperative organization that provides services to nonmembers has a right to recover the reasonable value of the benefits conferred to those nonmembers.

Okoboji Camp Owners CoOp v. Carlson, 578 N.W.2d 652 (Iowa 1998).

A cooperative of property owners within a subdivision brought an action against two lot owners who were not members of the cooperative to collect fees for services provided by the cooperative to the nonmembers. The nonmembers admitted responsibility for the value of utility services actually used, but challenged the cooperative's right to recover assessments for roads and recreational facilities the nonmembers claimed they did not use. There was no written agreement between the cooperative and the nonmembers and no covenants or servitude running with the land that expressly required the nonmembers to accept or pay for serves provided by the cooperative. The court held that the cooperative was nevertheless entitled to recover the reasonable value of services provided plus the value of services offered under the following principles of quasicontract:

If a person or organization acts to confer benefits on another in a setting in which the actor is not acting officiously, the benefited party may be required to make restitution to the actor. 578 N.W.2d 652 at 654, citing Restatement of Restitution §§ 1, 2.

An officious act is "interference with the affairs of others not justified by the circumstances under which the interference occurs." Id.

The court found that cooperative was entitled to recover not only for utility services actually used but also for the roads and recreational facilities the nonmembers did not use because the availability of those facilities conferred added value to the nonmember property, whether or not they used the facilities.

In an extraordinarily broad ruling on the scope of the reimbursement obligation, the court indicated that an organization that undertakes responsibility for provision of vital services may also recover in restitution to benefitted parties (without contract) for other services that it provides as a package:

"Defendants are the victims of practical reality. When persons are beholden to a cooperative service provider for major quality-of-life services such as water, sewer and sold waste removal, and that provider offers other services, the users may not be in a position to pick and choose as to the services they will accept. As long as billing for all services as a package is not unreasonable, it should not be rejected."
Comment 1: This strikes the editor as a truly extraordinary ruling. Special circumstances in the case, however, may limit its impact somewhat. First, at least some of the services were fundamental, vital services that admittedly were beneficial to the property owners. Second, the facilities were already existing and providing services before the creation of the cooperative. Those providing the services earlier elected not to continue to do so. The cooperative did not form and elect to begin providing these services without the knowledge or consent of the recipients.

The editor is familiar with a case or two here in Missouri in which parties benefitted by repairs to a dam serving a subdivision were held responsible to pay their pro rata cost of the repairs even though there was no association or assessment system in place to provide for such burdens. But in those cases, the costs arose from a "one shot" emergency response to a shared problem. The notion that an association can set itself up to provide those services that it chooses to provide and announce that anyone benefitted by them are legally liable to pay an assessment is a singular step beyond the dam cases.

Comment 2: The "taxation without representation" concept strikes the editor as a real problem here. Although the approach taken by the court may be acceptable for an emergency, isn't this an approach that should be reserved only for the most extreme circumstances?

Items in the Daily Development section generally are extracted from the Quarterly Report on Developments in Real Estate Law, published by the ABA Section on Real Property, Probate & Trust Law. Subscriptions to the Quarterly Report are available to Section members only. The cost is nominal. For the last six years, these Reports have been collated, updated, indexed and bound into an Annual Survey of Developments in Real Estate Law, volumes 1 - 6, published by the ABA Press. The Annual Survey volumes are available for sale to the public. For the Report or the Survey, contact Maria Tabor at the ABA. (312) 988 5590 or mtabor@staff.abanet.org

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