CONLEYS CREEK LIMITED PARTNERSHIP, a North Carolina limited Partnership, and MARSHALL CORNBLUM, Plaintiffs,
SMOKY MOUNTAIN COUNTRY CLUB PROPERTY OWNERS ASSOCIATION, INC., a North Carolina nonprofit corporation, Defendant, Counterclaimant, WILLIAM SPUTE, RONALD SHULMAN, and CLAUDETTE KRIZEK, Defendants, AND MICHAEL CORNBLUM, MADELINE CORNBLUM, M&D CREEK, INC., a North Carolina corporation, CORNDERMAY PARTNERS, by and through its general partners, M&D Creek, Inc. and other unknown partners, and SMCC CLUBHOUSE, LLC, a North Carolina limited liability company, Counterclaim Defendants, AND ROBERT YOUNG, Defendant in Counterclaim of SMCC Clubhouse.
in the Court of Appeals 8 June 2017. 
by Smoky Mountain Country Club Property Owners Association
from two orders entered in Swain County Superior Court: (1)
order entered 30 July 2015 by Judge Tanya T. Wallace and (2)
order entered 26 January 2016 by Judge Marvin P. Pope, Jr.
Cross-appeal by SMCC Clubhouse, LLC, from summary judgment
order entered 26 January 2016 by Judge Marvin P. Pope, Jr.,
in Swain County Superior Court No. 14 CVS 238.
Law, PLLC, by Mark R. Sigmon and Sanford L. Steelman, Jr.,
for Conleys Creek Limited Partnership, Marshall Cornblum,
Michael Cornblum, Madeline Cornblum, M&D Creek, Inc.,
Corndermay Partners, Counterclaim
Defendants/Plaintiffs-Appellees, and SMCC Clubhouse, LLC,
W. Kilbourne, Jr., for Smoky Mountain Country Club Property
Owners Association, Inc.,
Mountain Country Club (the "Planned Community") is
a residential planned community located in Swain County. This
matter involves a dispute between the Planned Community's
developer (the "Developer") and the Planned
Community's homeowners association (the
"Association"). The Developer consists of members
of the Cornblum family and entities they control and are
listed above the "v." in the caption. The
Association includes the homeowners association and certain
members of its board of directors and are listed below the
"v." in the caption.
Planned Community is located on 195 acres (the
"Property"). It was established in 1999 pursuant to
a declaration (the "1999 Declaration") recorded by
the Developer. Prior to 1999, the Developer had developed two
residential communities on different portions of the
Property. The Planned Community consolidated these
communities along with the Property's undeveloped
portions into a new single community.
Association's board was initially controlled by the
Developer. This dispute arose shortly after the homeowners
gained control of the board in 2014.
after the homeowners took control of the Association board,
the board voted to disregard certain provisions in the 1999
Declaration. In response to the board action, the Developer
commenced this action against the Association. The
Association responded by asserting a number of counterclaims
against the Developer. In a series of orders, the trial court
has dismissed a number of the claims and counterclaims from
which this appeal arises.
appeal, the Association seeks review of two orders in which
the trial court dismissed its counterclaims against the
Developer. The Developer seeks review of a summary judgment
order which dismissed many of its claims against the
brief, the Association contests trial court rulings
concerning three different areas of dispute. The
Developer's cross-appeal contests a trial court ruling
concerning one of these areas. We address each area of
dispute in turn.
Status of the Planned Community's Condo Units
first area of dispute concerns the legal status of the
Planned Community's condominium-style residential units
which were established, developed, and sold by the Developer
in accordance with the 1999 Declaration.
the Planned Community includes single-family residences and
townhomes, separated from adjacent residences by vertical
property boundaries. The Planned Community also includes
multi-story buildings with residences (the "condo
units") located on each floor. Each condo unit is
separated by vertical boundaries from other condo units on
the same floor and by horizontal boundaries from condo units
located on different floors.
to the 1999 Declaration, each condo unit owner acquired an
interest in real estate which does not fit the technical
definition of "condominium" found in our
Condominium Act. More specifically, the condo unit owners own
the air space and interior walls within their respective
units, but the Association owns the common areas of the condo
buildings and condo building lots. In contrast, the
Condominium Act states that property is not a
"condominium" as defined by that Act
unless the common areas are owned by the unit
owners, in common, rather than owned by an association. N.C.
Gen. Stat. § 47C-1-103(7) ("Real estate is not a
condominium unless the undivided interests in the common
elements are vested in the unit owners.").
on the inconsistency between the 1999 Declaration and the
Condominium Act, the Association sought (1) a declaratory
judgment stating that the form of ownership held by the
Planned Community's condo unit owners is illegal under
North Carolina law and (2) a reformation of the provisions of
the 1999 Declaration concerning the condo units to conform
with our Condominium Act.
trial court granted the Developer's Rule 12(b)(6) motions
with respect to these counterclaims, without stating its
reasoning. For the reasons stated below, we reverse the trial
court's dismissal of the Association's declaration
counterclaim. We affirm, however, the trial court's
dismissal of the Association's reformation counterclaim.
Declaratory Counterclaim---Validity of Form of Ownership
condo units established by the 1999 Declaration - where the
common areas within the condo buildings and condo building
lots are owned by the Association and not by the
condo unit owners in common - would be permissible under
the common law:
At common law, the holder of a fee simple also owned the
earth beneath and the air above - "cujus est solum,
ejus usuqe ad coelom et ad inferos". This law applies
in North Carolina. Plaintiffs concede that air rights are
thus a part of land ownership, but they argue that absent
specific authority, the holder of a fee simple may not divide
his fee horizontally. . . . It appears[, ] [however, ] to be
the general rule that absent some specific
restraint, the holder of a fee simple may divide his fee
in any manner he or she chooses.
Cheape v. Chapel Hill, 320 N.C. 549, 563, 359 S.E.2d
792, 800 (1987) (emphasis added) (internal citations
omitted). The General Assembly, however, has abrogated the
common law by establishing a "specific restraint"
against the form of ownership established by the 1999
Declaration through the passage of the Planned Community Act.
Specifically, the Planned Community Act requires
that residential real estate with horizontal boundaries and
located within a planned community "shall" meet the
definition of "condominium" as set forth in the
Condominium Act, as explained below.
1985, thirteen years before enacting the Planned Community
Act, the General Assembly enacted the Condominium Act. By its
terms, the Condominium Act regulates those properties which
fit the Act's definition of "condominium."
Properties with horizontal boundaries which do not fit the
Act's definition of "condominium" are not
expressly forbidden by the Act; rather, such properties are
simply not subject to the provisions of the
1998, thirteen years after the Condominium Act became law,
the General Assembly passed the Planned Community Act to
govern planned communities. The Planned Community Act allows
properties within a planned community to have horizontal
boundaries but forbids the type of ownership established by
the 1999 Declaration. Specifically, the North Carolina
Comment to N.C. Gen. Stat. § 47F-1-101 expresses the
General Assembly's intent that residences within a
planned community which has horizontal boundaries must be a
"condominium" as defined by the Condominium Act:
It is understood and intended that any [planned community]
development which incorporates or permits horizontal
boundaries or divisions between the physical portions of the
planned community designated for separate ownership or
occupancy will be created under and governed by the North
Carolina Condominium Act and not this Act.
N.C. Gen. Stat. § 47F-1-101 cmt. 2 (emphasis
on the foregoing, we conclude that the Association is
entitled to an order declaring that the 1999 Declaration
establishes a form of property ownership in the Planned
Community's condo units not recognized in North Carolina.
Therefore, we reverse the order of the trial court dismissing
the Association's counterclaim and remand the matter to
enter judgment for the Association on this counterclaim. Such
judgment, of course, would not affect the rights of those not
parties to this action.
Association's counterclaim seeking reformation of the
1999 Declaration provisions relating to the condo units was
properly dismissed. Any reformation order would necessarily
affect the ownership interests of these condo unit owners in
certain common areas; and, therefore, they are necessary
parties. See NCDOT v. Fernwood Hill, 185 N.C.App.
633, 636-37, 649 S.E.2d 433, 436 (2007); NCDOT v.
Stagecoach Village, 174 N.C.App. 825, 622 S.E.2d 142
(2005); N.C. Gen. Stat. § 1A-1, Rule 19(a)(2015). Also,
any reformation order would decide whether the condo units
would be subject to a single condominium association or
whether each condo building would be governed by a separate
association. Without all necessary parties, the trial court
and this Court lack the authority to decide the reformation
claim. See Rice v. Randolph, 96 N.C.App. 112, 113,
384 S.E.2d 295, 297 (1989). Therefore, we affirm Judge
Pope's order dismissing the Association's reformation
that the Planned Community Association may own the common
elements of the Planned Community at large. The common
elements of the condominium portion of the Planned Community,
however, may not be owned by the Association but must be held
in common by the condo unit owners in common. The condo unit
owners are still part of the Planned Community and subject to
the 1999 Declaration pertaining to common elements of the
Planned Community, see N.C. Gen. Stat. §
47F-1-103 (providing that real estate comprising a
condominium may be part of a planned community),
notwithstanding the fact that they are also ...