PER CURIAM.
In this dispute relating to the enforcement of condominium bylaws, plaintiff appeals
Tuscany Grove Condominium (hereafter "Tuscany Grove") is a condominium complex established in Shelby Township, Michigan in 2001 under the Condominium Act, MCL 559.101 et seq. Plaintiff, the Tuscany Grove Association, which has responsibility for administration and management of the condominium complex, is incorporated as a nonprofit corporation under the Nonprofit Corporation Act, MCL 450.2101 et seq. Defendant, Kimberly Peraino, owns one of the condominium units in Tuscany Grove. Plaintiff filed the present lawsuit against defendant in an effort to compel defendant's compliance with certain fencing-related restrictions contained within the condominium bylaws. However, the trial court granted defendant's motion for summary disposition because plaintiff lacked authority to initiate the present suit. In particular, the trial court concluded that plaintiff itself had violated the condominium bylaws by failing to obtain the requisite approval of a supermajority of owners before incurring legal expenses involved with litigation. Plaintiff now appeals as of right.
At issue on appeal is the application of a provision in the condominium bylaws requiring plaintiff to obtain approval from 662/3% of co-owners before incurring any legal expenses incident to litigation. Plaintiff disputes the applicability of this provision on appeal. In particular, plaintiff contends that, as a matter of contract interpretation, application of this clause leads to absurd results when the bylaws are considered as a whole and that, in these circumstances, the provision should not be applied. In addition, plaintiff contends that the clause is void because it impermissibly conflicts with the Condominium Act and the Nonprofit Corporation Act. Finally, plaintiff argues that the trial court should not have granted defendant's motion for summary disposition because plaintiff complied with the supermajority requirement, albeit after filing suit, by obtaining the approval of 73.7% of owners by way of petitions. Given this approval from co-owners, plaintiff maintains that it would be contrary to the statutory schemes as well as the bylaws themselves to prevent the co-owners from choosing to ratify the litigation against defendant. We disagree with each of these arguments.
On appeal, we review de novo a trial court's decision to grant a summary disposition motion. Groves v. Dep't of Corrections, 295 Mich.App. 1, 4, 811 N.W.2d 563 (2011). Likewise issues involving statutory interpretation, as well as contract interpretation, present issues of law that are reviewed de novo. Johnson v. QFD, Inc., 292 Mich.App. 359, 364, 807 N.W.2d 719 (2011).
Pursuant to the Condominium Act, the administration of a condominium project is governed by the condominium bylaws. MCL 559.153. Bylaws are attached to the master deed and, along with the other condominium documents, the bylaws dictate the rights and obligations of a co-owner in the condominium. See MCL 559.103(9) and (10); MCL 559.108. Condominium bylaws are interpreted according to the rules governing the interpretation of a contract. See Rossow v. Brentwood Farms Dev., Inc., 251 Mich.App. 652, 658, 651 N.W.2d 458 (2002). Accordingly, this Court begins by examining
In this case, the provision at issue states:
By its clear and unambiguous terms, this provision makes plain that plaintiff's board of directors lacks authority "to incur any expense or legal fees with respect to any litigation" without first obtaining approval from a supermajority of co-owners. The only exception to this rule is for cases involving "collection of delinquent assessments," which is not the underlying issue in the present lawsuit. By virtue of this provision, the board of directors was without authority to hire an attorney or incur any other expenses related to litigation against defendant aimed at the enforcement of fencing restrictions. Given the legal expenses necessarily incident to litigation, the effect of this provision is to prevent the board of directors from filing suit without supermajority approval. Consequently, the trial court properly granted defendant's motion for summary disposition because plaintiff lacked the authority to file suit.
In contesting the application of this provision, plaintiff does not dispute that the clause plainly prevents the board of directors from pursuing the present litigation against defendant. Instead, plaintiff argues that absurd results will arise if this provision is enforced because, for example, it will effectively prevent the board of directors from enforcing the bylaws, thereby essentially enabling a minority of owners to amend the bylaws by thwarting litigation aimed at enforcement. Contrary to these various arguments, there is nothing absurd about requiring approval before permitting the board of directors to incur potentially extensive legal expenses on behalf of the owners. Such a clause functions as nothing more than a reasonable effort to protect the owners' financial interests.
Aside from the assertion that application of the supermajority provision would lead to absurd results, plaintiff argues that the provision cannot be enforced because it conflicts with the Nonprofit Corporation Act and the Condominium Act. First, regarding the Nonprofit Corporation Act, as noted, the plaintiff has been organized as a nonprofit corporation under MCL 450.2101 et seq. As a nonprofit corporation, plaintiff generally has the power under MCL 450.2261 to sue and be sued in the same manner as an individual. In particular, at all times relevant to the present dispute,
Given this provision, plaintiff now claims that any limitation on its power to sue must be contained in plaintiff's articles of incorporation and that, therefore, the supermajority prelitigation provision in the condominium bylaws is not enforceable.
This argument is without merit in light of the plain statutory language. In particular, the statute obviously envisions the possibility of limitations on a corporation's power to sue and it specifies that those limitations may be imposed in the corporation's articles of incorporation, by another statute of this state, or "otherwise by law." MCL 450.2261(1)(b). Further, from the statute's plain language, it is clear that a corporation's ability to sue may only be exercised in "furtherance of its corporate purposes." MCL 450.2261(1).
In this case, as plaintiff notes, the articles of incorporation do not expressly place any limits on plaintiff's ability to sue.
From these purposes, it appears plain that the limitations on the power to sue expressed in the condominium bylaws are enforceable under the corporate articles of incorporation because plaintiff's corporate purpose is to "enforce" the bylaws and do those things "permitted to it" by the bylaws. Indeed, given these express purposes, allowing plaintiff to sue without requiring the supermajority approval demanded in the bylaws would be contrary to plaintiff's obligation to enforce the bylaws and therefore not "in furtherance" of plaintiff's corporate purposes as required by MCL 450.2261(1)(b). In sum, the supermajority requirement is a permissible limitation on plaintiff's power to sue, and it does not impermissibly conflict with MCL 450.2261(1)(b).
Turning to consideration of the Condominium Act, plaintiff argues that any limitation on its authority to sue a co-owner for violation of the bylaws directly conflicts with MCL 559.206(a), which states:
Contrary to plaintiff's arguments, while this provision recognizes that an association might pursue an action for damages or injunctive relief against a co-owner, it does not prohibit co-owners from choosing to limit this authority to instances in which a supermajority of owners deem the litigation worth pursuing. That is, the statute mandates that an owner's failure to comply with condominium documents "shall be grounds for relief," but it does not dictate under what circumstances an association must pursue that relief. For example, the statute does not require plaintiff to pursue relief, it does not specify who should make the determination to pursue litigation, and it certainly does not prohibit the adoption of a supermajority requirement designed to protect owners from the potentially expensive risks involved with litigation.
Finally, plaintiff asserts that the trial court should not have granted defendant's motion for summary disposition because plaintiff complied with the supermajority requirement by obtaining the approval of 73.7% of owners by way of petitions.
As a general principle, when an actor exceeds his or her authority, his or her actions may be ratified after the fact. See David v. Serges, 373 Mich. 442, 443-444, 129 N.W.2d 882 (1964). "Ratification is the affirmance by a person of a prior act which did not bind him but which was done or professedly done on his account, whereby the act, as to some or all persons, is given effect as if originally authorized by him." Id. (quotation marks and citation omitted). To be ratified, the act must be one that might have been legally authorized in the first instance. See Barrow v. Detroit Election Comm., 305 Mich.App. 649, 675, 854 N.W.2d 489 (2014). "If formalities are required for the authorization of an act, the same formalities are required for ratification." 1 Restatement Agency, 3d, § 4.01, comment e, p. 308.
In this case, the prelitigation voting provision in the bylaws requires "approval, by affirmative vote, of not less than 66-% of all Co-owners in value and in number." (Emphasis added.) Typically, as discussed in Article VIII of the condominium bylaws, the bylaws envision voting at a meeting at which a quorum of co-owners is present. Action may be taken outside a meeting, provided that it occurs as set forth in Article IX, § 8 of the bylaws, which states:
Considering these requirements for action without a meeting, the petitions collected by plaintiff did not serve to ratify the litigation against defendant because the petitions did not satisfy the formalities necessary to authorize litigation through an affirmative vote. In particular, there was no meeting in this case and, contrary to the requirements for taking action without a meeting, the petitions circulated in this case did not indicate "(a) the number of responses needed to meet the quorum requirements; (b) the percentage of approvals necessary to approve the action; and (c) the time by which ballots must be received in order to be counted." Further, the petitions simply had a space for owners to sign their names in approval, they were not ballots that afforded owners "an opportunity to specify a choice between approval and disapproval of each matter," and they did not state that "where the member specifies a choice, the vote shall be cast in accordance therewith." Moreover, there is no indication regarding how the petitions were circulated or whether the method of soliciting the petitions complied with § 5 of Article IX of the bylaws.
In sum, plaintiff failed to comply with the formalities necessary to obtain an affirmative vote as required by the prelitigation supermajority requirement. Because plaintiff failed to comply with these formalities, the belated petitions were not sufficient to ratify the litigation against defendant. See Restatement, § 4.01, comment e, p. 308. Thus, because plaintiff lacked authority to pursue this litigation, the trial court properly granted defendant's motion for summary disposition.
Affirmed.
HOEKSTRA, P.J., and JANSEN and METER, JJ., concurred.