“Approval by (or approval of) a majority of all members” means approval by an affirmative vote (or written ballot in conformity with Section 5513, Section 7513, or Section 9413) of a majority of the votes entitled to be cast. Such approval shall include the affirmative vote of a majority of the outstanding memberships of each class, unit, or grouping of members entitled, by any provision of the articles or bylaws or of Part 2, Part 3, Part 4 or Part 5 to vote as a class, unit, or grouping of members on the subject matter being voted upon and shall also include the affirmative vote of such greater proportion, including all, of the votes of the memberships of any class, unit, or grouping of members if such greater proportion is required by the bylaws (subdivision (e) of Section 5151, subdivision (e) of Section 7151, or subdivision (e) of Section 9151) or Part 2, Part 3, Part 4 or Part 5.
Tag Archives: Voting Procedures
Corporations Code Section 601. Notice of Membership Meeting; Adjournment.
(a) Whenever shareholders are required or permitted to take any action at a meeting a written notice of the meeting shall be given not less than 10 (or, if sent by third-class mail, 30) nor more than 60 days before the date of the meeting to each shareholder entitled to vote thereat. That notice shall state the place, date and hour of the meeting, the means of electronic transmission by and to the corporation (Sections 20 and 21), electronic video screen communication, conference telephone, or other means of remote communication, if any, by which shareholders may participate in that meeting, and (1) in the case of a special meeting, the general nature of the business to be transacted, and no other business may be transacted, or (2) in the case of the annual meeting, those matters that the board, at the time of the mailing of the notice, intends to present for action by the shareholders, but subject to the provisions of subdivision (f) any proper matter may be presented at the meeting for that action. The notice of any meeting at which directors are to be elected shall include the names of nominees intended at the time of the notice to be presented by the board for election.
(b)
(1) Notice of a shareholders’ meeting or any report shall be given personally, by electronic transmission by the corporation, or by first-class mail, or, in the case of a corporation with outstanding shares held of record by 500 or more persons (determined as provided in Section 605) on the record date for the shareholders’ meeting, notice may also be sent third-class mail, or other means of written communication, addressed to the shareholder at the address of that shareholder appearing on the books of the corporation or given by the shareholder to the corporation for the purpose of notice, or if no address appears or is given, at the place where the principal executive office of the corporation is located or by publication at least once in a newspaper of general circulation in the county in which the principal executive office is located. The notice or report shall be deemed to have been given at the time when delivered personally, sent by electronic transmission by the corporation, deposited in the mail, or sent by other means of written communication. Notwithstanding the foregoing, the notice of a shareholder’s meeting or any report may be sent by electronic communication or other means of remote communication if the board determines it is necessary or appropriate because of an emergency, as defined in paragraph (5) of subdivision (i) of Section 207. An affidavit of mailing or electronic transmission by the corporation, or electronic communication or other means of remote communication as permitted because of an emergency, of any notice or report in accordance with the provisions of this division, executed by the secretary, assistant secretary, or any transfer agent, shall be prima facie evidence of the giving of the notice or report.
(2) If any notice or report addressed to the shareholder at the address of that shareholder appearing on the books of the corporation is returned to the corporation by the United States Postal Service marked to indicate that the United States Postal Service is unable to deliver the notice or report to the shareholder at that address, all future notices or reports shall be deemed to have been duly given without further mailing if the same shall be available for the shareholder upon written demand of the shareholder at the principal executive office of the corporation for a period of one year from the date of the giving of the notice or report to all other shareholders.
(3)
(A) Notice given by electronic transmission by the corporation under this subdivision shall be valid only if it complies with Section 20. Notwithstanding the foregoing, notice shall not be given by electronic transmission by the corporation under this subdivision after either of the following:
(i) The corporation is unable to deliver two consecutive notices to the shareholder by that means.
(ii) The inability to so deliver the notices to the shareholder becomes known to the secretary, any assistant secretary, the transfer agent, or other person responsible for the giving of the notice.
(B) This paragraph shall not apply if notices are provided by electronic communication or other means of remote communication as permitted because of an emergency.
(c) Upon request in writing to the corporation addressed to the attention of the chairperson of the board, president, vice president or secretary by any person (other than the board) entitled to call a special meeting of shareholders, the officer forthwith shall cause notice to be given to the shareholders entitled to vote that a meeting will be held at a time requested by the person or persons calling the meeting, not less than 35 nor more than 60 days after the receipt of the request. If the notice is not given within 20 days after receipt of the request, the persons entitled to call the meeting may give the notice or the superior court of the proper county shall summarily order the giving of the notice, after notice to the corporation giving it an opportunity to be heard. The procedure provided in subdivision (c) of Section 305 shall apply to that application. The court may issue orders as may be appropriate, including, without limitation, orders designating the time and place of the meeting, the record date for determination of shareholders entitled to vote, and the form of notice.
(d) When a shareholders’ meeting is adjourned to another time or place, unless the bylaws otherwise require and except as provided in this subdivision, notice need not be given of the adjourned meeting if the time and place thereof (or the means of electronic transmission by and to the corporation or, electronic video screen communication, conference telephone, or other means of remote communication, if any, by which the shareholders may participate) are announced at the meeting at which the adjournment is taken. At the adjourned meeting the corporation may transact any business that might have been transacted at the original meeting. If the adjournment is for more than 45 days or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each shareholder of record entitled to vote at the meeting.
(e) The transactions of any meeting of shareholders, however called and noticed, and wherever held, are as valid as though had at a meeting duly held after regular call and notice, if a quorum is present either in person or by proxy, and if, either before or after the meeting, each of the persons entitled to vote, not present in person or by proxy, provides a waiver of notice or consent to the holding of the meeting or an approval of the minutes thereof in writing. All those waivers, consents, and approvals shall be filed with the corporate records or made a part of the minutes of the meeting. Attendance of a person at a meeting shall constitute a waiver of notice of and presence at the meeting, except when the person objects, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened and except that attendance at a meeting is not a waiver of any right to object to the consideration of matters required by this division to be included in the notice but not so included, if the objection is expressly made at the meeting. Neither the business to be transacted at nor the purpose of any regular or special meeting of shareholders need be specified in any written waiver of notice, consent to the holding of the meeting or approval of the minutes thereof, unless otherwise provided in the articles or bylaws, except as provided in subdivision (f).
(f) Any shareholder approval at a meeting, other than unanimous approval by those entitled to vote, pursuant to Section 310, 902, 1152, 1201, 1900, or 2007 shall be valid only if the general nature of the proposal so approved was stated in the notice of meeting or in any written waiver of notice.
Corporations Code Section 600. Annual Meeting; Failure to Meet; Petitions.
(a) Meetings of shareholders may be held at any place within or without this state as may be stated in or fixed in accordance with the bylaws. If no other place is stated or so fixed, shareholder meetings shall be held at the principal executive office of the corporation. Subject to any limitations in the articles or bylaws of the corporation, if authorized by the board of directors in its sole discretion, and subject to those guidelines and procedures as the board of directors may adopt, shareholders not physically present in person or by proxy at a meeting of shareholders may, by electronic transmission by and to the corporation (Sections 20 and 21), electronic video screen communication, conference telephone, or other means of remote communication, participate in a meeting of shareholders, be deemed present in person or by proxy, and vote at a meeting of shareholders, subject to subdivision (e).
(b) An annual meeting of shareholders shall be held for the election of directors on a date and at a time stated in or fixed in accordance with the bylaws. However, if the corporation is a regulated management company, a meeting of shareholders shall be held as required by the Federal Investment Company Act of 1940 (15 U.S.C. Sec. 80a-1, et seq.). Any other proper business may be transacted at the annual meeting. For purposes of this subdivision, “regulated management company” means a regulated investment company as defined in Section 851 of the federal Internal Revenue Code.
(c) If there is a failure to hold the annual meeting for a period of 60 days after the date designated therefor or, if no date has been designated, for a period of 15 months after the organization of the corporation or after its last annual meeting, the superior court of the proper county may summarily order a meeting to be held upon the application of any shareholder after notice to the corporation giving it an opportunity to be heard. The shares represented at the meeting, either in person or by proxy, and entitled to vote thereat shall constitute a quorum for the purpose of the meeting, notwithstanding any provision of the articles or bylaws or in this division to the contrary. The court may issue any orders as may be appropriate, including, without limitation, orders designating the time and place of the meeting, the record date for determination of shareholders entitled to vote, and the form of notice of the meeting.
(d) Special meetings of the shareholders may be called by the board, the chairperson of the board, the president, the holders of shares entitled to cast not less than 10 percent of the votes at the meeting, or any additional persons as may be provided in the articles or bylaws.
(e) A meeting of the shareholders may be conducted, in whole or in part, by electronic transmission by and to the corporation, electronic video screen communication, conference telephone, or other means of remote communication if the corporation implements reasonable measures: (1) to provide shareholders and proxyholders a reasonable opportunity to participate in the meeting and to vote on matters submitted to the shareholders, including an opportunity to read or hear the proceedings of the meeting concurrently with those proceedings, (2) if any shareholder or proxyholder votes or takes other action at the meeting by means of electronic transmission to the corporation, electronic video screen communication, conference telephone, or other means of remote communication, to maintain a record of that vote or action in its books and records, and (3) to verify that each person participating remotely is a shareholder or proxyholder. A corporation shall not conduct a meeting of shareholders solely by electronic transmission by and to the corporation, electronic video screen communication, conference telephone, or other means of remote communication unless either: (A) all of the shareholders consent; or (B) the board determines it is necessary or appropriate because of an emergency, as defined in paragraph (5) of subdivision (i) of Section 207.
Friars Village Homeowners Assn. v. Hansing
(2013) 220 Cal. App. 4th 405
[Election Rules; Director Qualifications] Court upheld association’s authority to adopt election rules which prohibited closely-related members from being nominated to serve as directors.
Charles I. Hansing, in pro. per., for Plaintiff, Defendant and Appellant.
Community Legal Advisors Inc., Mark T. Guithues and Edward W. Burns, for Plaintiff, Defendant and Respondent.
HUFFMAN, Acting P. J.
OPINION
This appeal arises from a judgment issued after a bench trial in these two consolidated cases, on a stipulated record, (1) granting declaratory relief at the request of a homeowners association of a common interest development, that an election rule it adopted is valid and enforceable; and (2) denying an owner’s request in his small claims case to challenge that rule as inconsistent with the development’s governing documents.
Plaintiff, defendant and appellant Charles I. Hansing is an owner of two units, together with his wife (not a party to this action), in the Friars Village common interest development, and they reside in one unit and are members of its homeowners association (Association), the plaintiff, defendant and respondent in this case. The development is subject to the provisions of the Davis-Stirling Common Interest Development Act (the Act), which establishes standards for [409] governance of such associations. (Civ. Code,[1] § 1350 et seq.) The Association operates under amended articles of incorporation and bylaws (“governing documents”), which specify that residents and members of the Association in good standing may be nominated for or nominate themselves for office on the board of directors (the Board).
Through its nine-member Board, the Association enacted an operating rule in the rules for elections and voting, that prevents a person from seeking a position on the Board, if that prospective candidate is related by blood or marriage to any current Board member, or to any current candidate for such office. (Rule 3.2.2(e) (the relationship rule).)[2]
According to Hansing, the adoption of this relationship rule violates his right as a homeowner to nominate himself to the Board, a right to self-nomination that is arguably guaranteed by section 1363.03, subdivision (a)(3) of the Act (hereafter § 1363.03(a)(3)). In toto, § 1363.03(a)(3) requires the Association to specify the qualifications for candidates for the Board or other elected positions, and provides that such qualifications must be consistent with the governing documents. Further, it provides that “[a] nomination or election procedure shall not be deemed reasonable if it disallows any member of the Association from nominating himself or herself to the board of directors.” (§ 1363.03(a)(3).)
Hansing also contends the relationship rule violates the provisions of section 1357.100 et seq., which establish standards for operating rules for associations. “Operating rules” are regulations adopted by the Board that apply to the management and operation of the development, or to the Association’s business and affairs. (§ 1357.100.) Operating rules are enforceable and valid only if they are “not inconsistent” with governing law and the governing documents (here, amended articles of incorporation and bylaws). (§ 1357.110, subd. (c).) Hansing argues the minimal standards set forth in the Association’s governing documents (residency and membership in the Association) cannot properly be altered by an operating rule such as the relationship rule, so that the Board exceeded its authority in enacting it. (§ 1357.110, subd. (b).)
[410] On de novo review, we agree with the trial court that the Association’s board was authorized to enact the relationship rule, in light of the language of the governing documents and the relevant statutes.
I
INTRODUCTION AND LITIGATION
Pursuant to its obligations under the governing documents, the Association’s Board enacted operating rules for the management and operation of the development, and for the conduct of the business and affairs of the Association. (§ 1357.100, subd. (a).) These include a set of rules for elections and voting, adopted in 2006. Section 3.0 et seq. of these rules deals with the qualifications and nominations of directors and repeats the requirement that a Board director shall be a member of the Association and resident of the development, who is in good standing with respect to payment of assessments and other obligations. Nominations for the Board may be made by a nominating committee, from the floor at the annual meeting, or by self-nomination.
As relevant here, rule 3.2.2 was amended in 2009, to add the relationship rule as its subdivision (e). Hansing’s wife, also an Association member and resident, was then serving as a member of the Board. In a letter dated September 3, 2010, Hansing requested that the Board place his name on the slate for Board office, and he objected to the relationship rule as setting a qualification which he believed to be illegal. The Association’s counsel responded that the Board had made a policy decision to enact the rule, since the bylaws and CC&R’s were silent on the issue, and that his request would be refused.[3]
After Hansing was denied a place on the ballot, he sued the Association and some of its personnel in small claims court for damages, which he proposed to use for “properly revising and adopting an updated version of governing documents.”
The Association responded in superior court with its complaint for declaratory and injunctive relief and damages, requesting an order that Hansing [411] refrain from challenging the governing documents regarding the Board election, and abate his nuisance-like conduct. The small claims court judge transferred that case to superior court.
Hansing answered the complaint and raised numerous contentions, including the Association’s alleged failure to abide by its own standards and procedures or to show that they were fair and reasonable.
The trial court decided the matter upon a stipulated record, which included documentary exhibits and the Association’s declaration from its former Board president, Matthew Boomhower, who was in office when the relationship rule was implemented. He explained the reason for the relationship rule was to protect the Board from the possible wrongdoing of two Board members from the same household, and to prevent a situation in which two members would constitute a substantial voting bloc within the nine-member Board.
The court issued a judgment declaring the relationship rule was properly adopted, is valid, and may be enforced. The court awarded no damages and ruled against Hansing on his small claims action. No statement of decision was issued, since the request for one was untimely. Hansing appeals.
II
GOVERNING LEGAL PRINCIPLES
A. Review
On appeal, Hansing bears the burden of overcoming the presumption that an appealed judgment or order is correct. (Ekstrom v. Marquesa at Monarch Beach Homeowners Assn. (2008) 168 Cal.App.4th 1111, 1121.) “Generally, the trial court’s decision to grant or deny [declaratory or injunctive relief] will not be disturbed on appeal unless it is clearly shown its discretion was abused.” (Ibid.)
The parties do not dispute that a de novo review standard applies, since the decisive underlying facts are undisputed, raising only questions of law regarding the submitted issues. (Dolan-King v. Rancho Santa Fe Assn. (2000) 81 Cal.App.4th 965, 974 (Dolan-King I).) These questions of law are addressed de novo, on interpretation of the statutes and governing documents. (Chinn v. KMR Property Management (2008) 166 [412] Cal.App.4th 175, 186; Fourth La Costa Condominium Owners Assn. v. Seith (2008) 159 Cal.App.4th 563, 575-577 (Fourth La Costa).) When a provision can be interpreted in a manner that makes it legal, rather than unenforceable, that interpretation is preferred. (See Roman v. Superior Court (2009) 172 Cal.App.4th 1462, 1473; § 1643.)
B. Policies of the Act
As stated by the California Supreme Court, “`anyone who buys a unit in a common interest development with knowledge of its owners association’s discretionary power accepts “`”the risk that the power may be used in a way that benefits the commonality but harms the individual.”‘ [Citation.] A prospective homeowner who purchases property in a common interest development should be aware that new rules and regulations may be adopted by the homeowners association either through the board’s rulemaking power or through the association’s amendment powers.” (Villa De Las Palmas Homeowners Assn. v. Terifaj (2004) 33 Cal.4th 73, 85; see Lamden v. La Jolla Shores Clubdominium Homeowners Assn. (1999) 21 Cal.4th 249, 253, 264 [adopting a rule of judicial deference to community association board maintenance-related decisionmaking].)
Where a court considers issues concerning unrecorded rules and regulations, “such unrecorded restrictions are not accorded a presumption of reasonableness, but are viewed under a straight reasonableness test `so as to “somewhat fetter the discretion of the board of directors.”‘ [Citations.] We understand this distinction to primarily impact the respective burdens of proof at trial.” (Dolan-King I, supra, 81 Cal.App.4th at p. 977.)
Association regulations are generally evaluated as “reasonable” if they are “`rationally related to the protection, preservation and proper operation of the property and the purposes of the Association as set forth in its governing instruments,’ and [are] `fair and nondiscriminatory.'” (Fourth La Costa, supra, 159 Cal.App.4th at p. 577.) An unreasonable regulation is one that is “arbitrary and capricious, violates the law or a fundamental public policy or imposes an undue burden on property. . . .” (Id. at pp. 577-578.) An “operating rule must be tethered to reasonableness,” which is defined as a standard for the development as a whole, not for an individual homeowner. (Sui v. Price (2011) 196 Cal.App.4th 933, 939 (Sui) [recently adopted parking rule did not single out the individual, offending plaintiff, and was equally applicable to all homeowners].)
[413] Where an Association sues a homeowner to enforce its CC&Rs and enacted rules, it bears the burden of showing it followed its own standards and procedures before pursuing such a remedy. It must demonstrate that its procedures were fair and reasonable, its substantive decision was made in good faith and was reasonable, and its action was not arbitrary or capricious. (Ironwood Owners Assn. IX v. Solomon (1986) 178 Cal.App.3d 766, 772; Dolan-King I, supra, 81 Cal.App.4th 965, 979.)
Under section 1357.140, subdivision (b), a homeowner may challenge an adopted rule by requesting a special membership meeting to dispute it, within 30 days of notification of the rule change. Due to an admitted lack of any record on whether this procedure was invoked or litigated here, we decline to apply any waiver principles from it, as respondent’s brief now suggests. (See Fourth La Costa, supra, 159 Cal.App.4th at p. 585 [waiver rule].)
III
APPLICATION
A. Self-Nomination Claim
Under section 1363.03(a)(3), the Association shall adopt election rules, in accordance with the procedures prescribed by section 1357.100 et seq., that do all of the following: “Specify the qualifications for candidates for the board of directors and any other elected position, and procedures for the nomination of candidates, consistent with the governing documents. A nomination or election procedure shall not be deemed reasonable if it disallows any member of the association from nominating himself or herself for election to the board of directors.” (Italics added.) The Association refers in its brief on appeal to unspecified legislative history that suggests this italicized language was mainly directed toward allowing qualified people to run for such office, even if the existing leadership at a particular development did not think such a person was “good enough” to serve.[4]
[414] Hansing wants to nominate himself to the Board and merely assumes he is “qualified” to do so, consistent with the governing documents and any appropriate rules requirements, because he is a resident and Association member in good standing. He claims any additional election restriction would be unreasonable, and since section 1363.03(a)(3) says some election procedures shall not be deemed reasonable if they interfere with self-nomination, this too must be an unreasonable rule that is not valid or enforceable. (See also § 1357.110, subd. (e) [an operating rule must be reasonable].)
Hansing’s arguments and assumptions erroneously disregard the statutory language of the same subdivision he is relying upon, which prior to the self-nomination provision, allows and requires the Association to specify board candidate “qualifications.” (§ 1363.03(a)(3).) This right of self-nomination impliedly applies to a “qualified” candidate.
By comparison to use regulations, an association’s operating or election rules are “reasonable” if they are “`rationally related to the protection, preservation and proper operation of the property and the purposes of the Association as set forth in its governing instruments,’ and [are] `fair and nondiscriminatory.'” (Fourth La Costa, supra, 159 Cal.App.4th at p. 577; Sui, supra, 196 Cal.App.4th 933, 940.)
In this election context, the Association and its Board are not only required by statute to specify Board qualifications (§ 1363.03(a)(3)), they are also given related duties by the governing documents to protect the interests of the Association, and they must act consistently with those dictates. Pursuant to the amended articles of incorporation, the Association has the primary purposes of promoting and managing a safe and healthful development and providing for the maintenance and preservation of the property. To further its purposes, the Association is given powers and privileges ordinarily allowed a corporation, to be managed by its Board.
Next, under the bylaws, the Board has certain enumerated powers and duties to manage the affairs of the Association, including adopting and publishing rules and regulations governing the use of the common area and facilities in the development, and the personal conduct of the members and guests, not inconsistent with the governing documents. The bylaws allow the Board to fill all vacancies until a successor is elected by Association members. Qualifications of board members are not further described by the bylaws.
[415] The rationales for the basic requirements in the governing documents for Board candidacy (residency and Association membership) are evidently to ensure that Board members have the necessary interests and stakes in the outcome to carry out their duties for the overall benefit of the development. The same is true of the operating rule requirement that a board candidate may not have any outstanding debts for assessments or penalties. (Advising Cal. Common Interest Communities, supra, § 2.7, pp. 52-53.) Hansing does not acknowledge the underlying purposes of those basic requirements for service as a Board member.
Pursuant to the duties and powers of the Board prescribed by the bylaws, and the purposes of the Association stated in the articles, it is reasonable to interpret section 1363.03(a)(3) to allow the Board to enact an election rule specifying this qualification for directors, in pursuit of its policy decision to minimize the chance that candidates for office might have a potential conflict of interest, such as when married persons or related persons seek to serve together on the Board and conduct its business, possibly in their own favor. Such a qualification rule is consistent with the interests of the Association as outlined in the governing documents. The provisions of section 1363.03(a)(3), regarding self-nomination, grant no additional protections to an otherwise unqualified or disqualified candidate.
B. Scope of Board’s Authority to Enact Rules
“Operating rules” are regulations adopted by the Board that apply to the management and operation of the development or to the business and affairs of the Association. (§ 1357.100, subd. (a).) According to Hansing, the relationship rule was enacted in excess of the Board’s power, because it is inconsistent with law and the governing documents.
Of the five provisions in section 1357.110 which set forth requirements for the validity and enforceability of an operating rule, Hansing focuses mainly on subdivisions (b) and (c) (and does not dispute that the rule is in writing, as subd. (a) requires). Under section 1357.110, subdivision (b), an operating rule must be “within the authority of the board of directors of the association conferred by law or by the [governing documents].” Likewise, under section 1357.110, subdivision (c), an operating rule is enforceable and valid only if it is “not inconsistent with governing law” and the governing documents.
Hansing also seems to argue that section 1357.110, subdivision (d) was violated (i.e., that the rule was NOT adopted or amended “in good faith and in substantial compliance with the requirements of this article”), and/or that section 1357.110, subdivision (e) was not complied with (i.e., the rule is NOT reasonable). Overall, he claims the relationship rule is invalid because it [416] amounted to the Board’s attempted amendment of the governing documents, to further restrict them, whereas any such amendment of the articles and the bylaws would have required membership approval by the Association, not just Board approval. (See Rancho Santa Fe Association v. Dolan-King (2004) 115 Cal.App.4th 28, 37; MaJor v. Miraverde Homeowners Association (1992) 7 Cal.App.4th 618, 627.)
In response, the Association says its Board can “augment” the provisions of the governing documents, and it is not “inconsistent” to add this Board qualification, based upon its assertedly legitimate policy reasons, such as the avoidance of spouses’ or relatives’ potential conflicts of interest regarding Board business.
As we read this record, the relationship rule is “not inconsistent’ with governing law and the governing documents, in light of its asserted purpose and effect. (§ 1357.110, subd. (c).) Nor, under section 1357.110, subdivision (b), does it exceed the authority of the Board, as that is conferred by law or governing documents, to make rules about candidacy for Board office that are intended to improve and are reasonably related to the performance of the Board and will serve to protect its overall mission — protecting the best interests of the Association. Elections of Board directors are clearly important elements of the business and affairs of the Association as a whole, and this relationship rule passes the test of “reasonableness,” as “`rationally related to the protection, preservation and proper operation of the property and the purposes of the Association as set forth in its governing instruments,’ [and] `fair and nondiscriminatory.'” (Fourth La Costa, supra, 159 Cal.App.4th at p. 577; Sui, supra, 196 Cal.App.4th 933, 940.)
Accordingly, the Board was granted the statutory power to adopt rules about the management and operation of the development, and “the conduct of the business and affairs of the association.” (§ 1357.100, subd. (a).) The record supports a conclusion that the relationship rule was a legitimate response to business concerns among Association members that allowing a voting bloc on the Board would not be in the best interests of the Association. The Board’s policy decision to enact the relationship rule constitutes a reasonable attempt to balance the respective interests, and is “consistent” with the nature of the specific requirements in the governing documents and other rules, i.e., residency and membership in good standing in the Association. Such requirements legitimately promote the ability of the Board members to impartially conduct the business affairs of the development. We agree with the trial court’s conclusions of law that the relationship rule is valid, enforceable and not inconsistent with the governing documents.
[417] DISPOSITION
Affirmed. Costs are awarded to Respondent.
NARES, J. and AARON, J., concurs.
ORDER CERTIFYING OPINION FOR PUBLICATION
THE COURT:
The opinion filed September 20, 2013, is ordered certified for publication.
[1] All further statutory references are to the Civil Code unless otherwise indicated.
[2] These parties refer to the relationship rule as the “anti-nepotism rule.” Black’s Law Dictionary (9th ed. 2009) at page 1138, column 2, defines nepotism as “bestowal of official favors on one’s relatives, especially in hiring.” Merriam-Webster’s Collegiate Dictionary (11th ed. 2006) at page 831, column 2, defines nepotism as “favoritism (as in appointment to a job based on kinship).” We designate the contested rule simply as the relationship rule.
[3] The development is subject to a declaration of covenants, conditions and restrictions (CC&R’s), which is not in the appellate record. At times, trial counsel for the Association seemed to use the term CC&R’s as synonymous with the Association’s amended articles of incorporation. We need only discuss the terms of the amended articles of incorporation and bylaws, and we granted Hansing’s request to augment the record to include full copies of them.
[4] Under section 1363.03, subdivision (n), if this section conflicts with the provisions of the Nonprofit Mutual Benefit Corporation Law (Corp. Code, § 7110 et seq., relating to elections), the provisions of this section in the Act shall prevail. No arguments are raised about any such conflict. Further, director eligibility requirements are discussed in a practice guide in this area, which suggests that Corporations Code section 7151, subdivision (c)(3) permits corporate bylaws to specify the qualifications of directors, and that such provisions are impliedly valid and may legitimately restrict the right to be a candidate for election to such a board. (Advising Cal. Common Interest Communities (Cont.Ed.Bar 2012) § 2.7, pp. 52-53.)
Davis-stirling Act
Civil Code Section 5115. Ballot and Voting Procedure.
(a) An association shall provide general notice of the procedure and deadline for submitting a nomination at least 30 days before any deadline for submitting a nomination. Individual notice shall be delivered pursuant to Section 4040 if individual notice is requested by a member. This subdivision shall only apply to elections of directors and to recall elections.
(b) For elections of directors and for recall elections, an association shall provide general notice of all of the following at least 30 days before the ballots are distributed:
(1) The date and time by which, and the physical address where, ballots are to be returned by mail or handed to the inspector or inspectors of elections.
(2) If the association allows for voting in an election by electronic secret ballot as provided for in Section 5105, the date and time by which electronic secret ballots are to be transmitted to the internet-based voting system and preliminary instructions on how to vote by electronic secret ballot upon commencement of the voting period.
(3) The date, time, and location of the meeting at which a quorum will be determined, if the association’s governing documents require a quorum, and at which ballots will be counted.
(4) The list of all candidates’ names that will appear on the ballot.
(5) Individual notice of the above paragraphs shall be delivered pursuant to Section 4040 if individual notice is requested by a member.
(6)
(A) If the association’s governing documents require a quorum for an election of directors, a statement that the association may call a reconvened meeting to be held at least 20 days after a scheduled election if the required quorum is not reached, at which time the quorum of the membership to elect directors will be 20 percent of the association’s members, voting in person, by proxy, or by secret ballot.
(B) This paragraph shall not apply if the governing documents of the association provide for a quorum lower than 20 percent.
(c) Ballots and two preaddressed envelopes with instructions on how to return ballots shall be mailed by first-class mail or delivered by the association to every member not less than 30 days prior to the deadline for voting, unless an association conducts an election by electronic secret ballot as provided for in Section 5105, in which case only members who will vote by written secret ballot pursuant to Section 5105 shall be mailed or delivered the ballots and envelopes. In order to preserve confidentiality, a voter may not be identified by name, address, or lot, parcel, or unit number on the ballot. The association shall use as a model those procedures used by California counties for ensuring confidentiality of vote by mail ballots, including both of the following:
(1) The ballot itself is not signed by the voter, but is inserted into an envelope that is sealed. This envelope is inserted into a second envelope that is sealed. In the upper left hand corner of the second envelope, the voter shall sign the voter’s name, indicate the voter’s name, and indicate the address or separate interest identifier that entitles the voter to vote.
(2) The second envelope is addressed to the inspector or inspectors of elections, who will be tallying the votes. The envelope may be mailed or delivered by hand to a location specified by the inspector or inspectors of elections. The member may request a receipt for delivery.
(d)
(1) A quorum shall be required only if so stated in the governing documents or other provisions of law. If a quorum is required by the governing documents, each ballot received by the inspector or inspectors of elections shall be treated as a member present at a meeting for purposes of establishing a quorum.
(2) For an election of directors of an association, and in the absence of meeting quorum as required by the association’s governing documents or Section 7512 of the Corporations Code, unless a lower quorum for a reconvened meeting is authorized by the association’s governing documents, the association may adjourn the meeting to a date at least 20 days after the adjourned meeting, at which time the quorum required for purposes of a reconvened meeting to elect directors shall be 20 percent of the association’s members, voting in person, by proxy, or by secret ballot.
(3) No less than 15 days prior to the date of the reconvened meeting described in paragraph (2), the association shall provide general notice of the reconvened meeting, which shall include:
(A) The date, time, and location of the meeting.
(B) The list of all candidates.
(C) Unless the association’s governing documents provide for a lower quorum, a statement that 20 percent of the association’s members, voting in person, by proxy, or secret ballot will satisfy the quorum requirements for the election of directors at that reconvened meeting and that the ballots will be counted if a quorum is reached, if the association’s governing documents require a quorum.
(e) An association shall allow for cumulative voting using the secret ballot procedures provided in this section, if cumulative voting is provided for in the governing documents.
(f) Notwithstanding any contrary provision in the governing documents, except for the meeting to count the votes required in subdivision (a) of Section 5120, an election may be conducted entirely by mail, electronic secret ballot, or a combination of mail and electronic secret ballot, pursuant to Section 5105.
(g)
(1) Except as provided in paragraph (2), in an election to approve an amendment of the governing documents, the text of the proposed amendment shall be delivered to the members with the ballot.
(2) Notwithstanding paragraph (1), if an association conducts an election to approve an amendment of governing documents by electronic secret ballot, the association may deliver, by electronic means, the text of the proposed amendment to those members who vote by electronic secret ballot, pursuant to Section 5105. The association shall also deliver a written copy of the text of the proposed amendment to those members upon request and without charge. If a member votes by written secret ballot, pursuant to Section 5105, the association shall deliver a written copy of the text of the proposed amendment to the member with the ballot.
Related Links
The New State of HOA Election Laws – Article published by Tinnelly Law Group
Davis-stirling Act
Civil Code Section 4275. Court Petition for Amendments.
(a) If in order to amend a declaration, the declaration requires members having more than 50 percent of the votes in the association, in a single class voting structure, or members having more than 50 percent of the votes in more than one class in a voting structure with more than one class, to vote in favor of the amendment, the association, or any member, may petition the superior court of the county in which the common interest development is located for an order reducing the percentage of the affirmative votes necessary for such an amendment. The petition shall describe the effort that has been made to solicit approval of the association members in the manner provided in the declaration, the number of affirmative and negative votes actually received, the number or percentage of affirmative votes required to effect the amendment in accordance with the existing declaration, and other matters the petitioner considers relevant to the court’s determination. The petition shall also contain, as exhibits thereto, copies of all of the following:
(1) The governing documents.
(2) A complete text of the amendment.
(3) Copies of any notice and solicitation materials utilized in the solicitation of member approvals.
(4) A short explanation of the reason for the amendment.
(5) Any other documentation relevant to the court’s determination.
(b) Upon filing the petition, the court shall set the matter for hearing and issue an ex parte order setting forth the manner in which notice shall be given.
(c) The court may, but shall not be required to, grant the petition if it finds all of the following:
(1) The petitioner has given not less than 15 days written notice of the court hearing to all members of the association, to any mortgagee of a mortgage or beneficiary of a deed of trust who is entitled to notice under the terms of the declaration, and to the city, county, or city and county in which the common interest development is located that is entitled to notice under the terms of the declaration.
(2) Balloting on the proposed amendment was conducted in accordance with the governing documents, this act, and any other applicable law.
(3) A reasonably diligent effort was made to permit all eligible members to vote on the proposed amendment.
(4) Members having more than 50 percent of the votes, in a single class voting structure, voted in favor of the amendment. In a voting structure with more than one class, where the declaration requires a majority of more than one class to vote in favor of the amendment, members having more than 50 percent of the votes of each class required by the declaration to vote in favor of the amendment voted in favor of the amendment.
(5) The amendment is reasonable.
(6) Granting the petition is not improper for any reason stated in subdivision (e).
(d) If the court makes the findings required by subdivision (c), any order issued pursuant to this section may confirm the amendment as being validly approved on the basis of the affirmative votes actually received during the balloting period or the order may dispense with any requirement relating to quorums or to the number or percentage of votes needed for approval of the amendment that would otherwise exist under the governing documents.
(e) Subdivisions (a) to (d), inclusive, notwithstanding, the court shall not be empowered by this section to approve any amendment to the declaration that:
(1) Would change provisions in the declaration requiring the approval of members having more than 50 percent of the votes in more than one class to vote in favor of an amendment, unless members having more than 50 percent of the votes in each affected class approved the amendment.
(2) Would eliminate any special rights, preferences, or privileges designated in the declaration as belonging to the declarant, without the consent of the declarant.
(3) Would impair the security interest of a mortgagee of a mortgage or the beneficiary of a deed of trust without the approval of the percentage of the mortgagees and beneficiaries specified in the declaration, if the declaration requires the approval of a specified percentage of the mortgagees and beneficiaries.
(f) An amendment is not effective pursuant to this section until the court order and amendment have been recorded in every county in which a portion of the common interest development is located. The amendment may be acknowledged by, and the court order and amendment may be recorded by, any person designated in the declaration or by the association for that purpose, or if no one is designated for that purpose, by the president of the association. Upon recordation of the amendment and court order, the declaration, as amended in accordance with this section, shall have the same force and effect as if the amendment were adopted in compliance with every requirement imposed by the governing documents.
(g) Within a reasonable time after the amendment is recorded the association shall deliver to each member, by individual delivery, pursuant to Section 4040, a copy of the amendment, together with a statement that the amendment has been recorded.
Related Links
Voter Apathy Not a Required Showing in a Petition to Reduce Percentage of Affirmative Votes Required to Amend CC&Rs – Published on HOA Lawyer Blog (April 2019)
Davis-stirling Act
Civil Code Section 4270. Amendment Procedural Requirements.
(a) A declaration may be amended pursuant to the declaration or this act. Except where an alternative process for approving, certifying, or recording an amendment is provided in Section 4225, 4230, 4235, or 4275, an amendment is effective after all of the following requirements have been met:
(1) The amendment has been approved by the percentage of members required by the declaration and any other person whose approval is required by the declaration.
(2) That fact has been certified in a writing executed and acknowledged by the officer designated in the declaration or by the association for that purpose, or if no one is designated, by the president of the association.
(3) The amendment has been recorded in each county in which a portion of the common interest development is located.
(b) If the declaration does not specify the percentage of members who must approve an amendment of the declaration, an amendment may be approved by a majority of all members, pursuant to Section 4065.
(Amended by Stats. 2016, Ch. 714, Sec. 6. Effective January 1, 2017.)