Two Greene County residents appealed to the Virginia Supreme Court this month an earlier 16th Judicial Circuit ruling that says they are personally liable regarding actions taken by a homeowner’s association in Greene, according to court records.
The Dogwood Valley Citizen’s Association (DVCA), which has faced numerous court battles since its incorporation in the late 1970s, was shuttered in May 2019 by Judge Dale Durrer. Last April he upheld his previous ruling from Oct. 3, 2019, stating that Stanardsville Mayor Gary Lowe and Dogwood Valley resident Matthew Brown were personally accountable for funds collected through DVCA and awarding the defendant $9,750 by Brown and Lowe for the defendant’s attorney fees.
The case stems from a 2016 warrant in debt filed against Samuel Miller for unpaid fees and assessments. In April 2019 the court dissolved DVCA. Brown and Lowe were the only members of the DVCA board of directors from 2010-2018, when they both resigned in December.
Brown’s and Lowe’s petition to appeal, filed by their attorney Joseph W. Wright III of Dygert Wright Hobbs & Hernandez of Charlottesville, claims three assignments of error by the lower court:
1. The trial court erred in ruling that each lot owner is a member of DCVA and entitled to a vote. That membership to the DVCA was voluntary and not automatic. Wright said only the corporate documents, not the bylaws of DVCA or the articles of incorporation, state who is a member. The corporate documents stated that Brown and Lowe “voluntarily” came together to form DVCA. Article V of that document said: “every person or entity who is a record owner of a fee or undivided fee interest in any lot which is subject to covenants of record to assessment by the association … shall be a member of the association.” Wright notes that all members must be lot owners, but not all lot owners are members, also noting previous court decisions in Greene County Circuit Court.
2. The trial court erred in ruling to dissolve DVCA because Miller lacked standing to sue for judicial dissolution and evidence failed to support the conclusions Judge Durrer reached as grounds for dissolution. Wright notes that only a member or director of the non-stock corporation can file for dissolution. He said that the title examiner called during the Aug. 7, 2019, hearing said that nothing in the chain of title on Miller’s lot “reflects a specific assignment of the right to collect that assessment to DVCA,” thus Miller could never be a member of DVCA and has no standing to request dissolution.
3. The trial court erred in piercing the corporate veil and imposing monetary sanctions on Brown and Lowe. Wright notes that while the bylaws state five directors manage DVCA and only members vote on the election, Brown and Lowe noted that not all lot owners in Dogwood were automatically members of DVCA. Judge Durrer noted there was “no effort to maintain the roads in the subdivision,” however in a previous Virginia Supreme Court case involving DVCA it held “there was no express authority in the declaration requiring DVCA to maintain the roads.” However, DVCA continued to collect annual assessments and “attempted to fund maintenance of the roads and commons areas” as funds allowed. Wright notes Virginia code protects officers of non-stock corporations who receive no compensation from being held liable “unless the officer or director engaged in willful misconduct or a knowing violation of criminal law.” Wright said there was no evidence presented that either Brown or Lowe ever received any compensation. He noted that while witnesses testified about a fee that there was no evidence that Brown was ever at the meetings. Additionally, Wright notes Lowe and Brown were acting on advice from their attorney at that time that membership was voluntary and while a membership fee was entertained, no one ever applied.
Lowe and Brown are asking for the Virginia Supreme Court to overrule the lower court’s decision, entered on June 3, 2021.
In a brief in opposition and assignment of cross-error, entered by Miller’s attorney, J. Michael Sharman of Culpeper, Sharman said the trial court erred in not granting Miller the full costs of attorney fees—which at the time of the de novo appeal in December 2019 had risen to $52,008.45. In his cross-error assignment, Sharman notes that has risen much higher since that time and asks the Virginia Supreme Court to assess whether it was “an abuse of discretion to award (Miller) only a very small fraction of his fees and costs as sanctions?”
Miller’s argument against the assignment of errors listed in Brown and Lowe’s appeal include:
1. Miller was listed as a member on two “Dogwood Valley Membership Lists—one from January 2013 and one from 2016. Judge Durrer ruled earlier this year that each lot owner possessed a vote and only Lowe and Brown had voted for the previous decade. Judge Durrer noted that only membership to the board of directors was voluntary.”
2. The membership lists note that Miller is a member of DVCA and as such had standing to file the motion for judicial dissolution. Six homeowners testified that they’d asked how to become members and Brown and Lowe told them they’d have to pay $5,000 to become one or $300,000 to purchase DVCA. When Judge Durrer asked during the April 2021 hearing “what authority would (Brown and Lowe) have to promulgate that fee,” Wright, Brown and Lowe’s attorney said, “I don’t know that they were authority for that at all.”
3. To pierce the corporate veil it must be proved that a corporation is the “alter ego, alias, stooge or dummy of the individuals sought to be held personally accountable and that the corporation was a device or sham used to disguise wrongs, obscure fraud or conceal crime,” Miller’s argument states. Judge Durrer said in his April 23, 2019, decision that the “attempted sale of board positions and the DVCA rises to the level of a violation of several criminal statutes.” Additionally, he noted “evidence the court received in previous hearings indicated that Brown and Lowe prominently represented the alter egos of DVCA.” The comingling of funds between personal accounts and DVCA also is a factor when considering the piercing of the corporate veil, Judge Durrer noted.
Miller, in his response to the Virginia Supreme Court, not only asks the court to deny the petition to appeal, but also to grant the cross-error that would increase the fees required by Lowe and Brown to the proper amount.
Greene County Circuit Court Judge Claude Worrell II entered an order in late June for a special prosecutor to investigate any possible criminal charges against Lowe and Brown. He assigned it to Rockingham County’s Commonwealth Attorn-ey Marsha L. Garst, who had not returned phone calls regarding the case by press time, and no charges had been filed.
At press time no hearing date had been set in the Virginia Supreme Court regarding the appeal.