They rejected my petition :-(

For two years now our HOA has not held it's annual meeting because of quorum issues. I have made repeated requests to the current board to reschedule the meeting. They rejected my requests.

Since all board seats are expired I created a petition for a special meeting for the purpose of holding elections to fill all expired board seats. I got the required number of signatures per Texas code (10%).

The management company sent my petition to the association law man and after 2 weeks I got a rejection letter today. They state that they are rejecting me because of 2 issues.

First is that our bylaws state that you must have 25% of the members signatures to call a special meeting.

Second is that somewhere in the bylaws it states that election shall be via secret ballot at the annual meeting. Their point being that you can't hold elections at a special meeting.

I'm no law dude. What wins Texas code or bylaws? How should I respond to their second point? They are stating that we can hold a special meeting, if I get the 25% signatures but we can't hold elections.

Kurt,

State law doesn't always trump your governing documents. Sometimes they defer control to the governing documents. Often the governing documents can be stricter. With the expectation that you got your 10% number from Texas Non-Profit Corporation Codes, Section 22:155 specifies that members can call a meeting with "not less than one-tenth of the votes entitled to be cast at the meeting".

Therefore, even though you did meet the 10% requirement of the State law, you still needed to also comply with your Bylaws which require the 25%.

To comment on Janet's reply, I'm not sure that that section of law would apply. Per your posting, the Board did call an annual meeting. However, due to lack of a quorum, no business could be done. This would typically allow the option of holding another meeting or to have the board members fill the vacancies by appointment. TX non-profit corporate law, 22:212 would typically apply (expecting that you are incorporated under this section) which states:

Sec. 22.212. VACANCY. (a) Unless otherwise provided by the certificate of formation or bylaws of the corporation, a vacancy in the board of directors of a corporation shall be filled by the affirmative vote of the majority of the remaining directors, regardless of whether that majority is less than a quorum. A director elected to fill a vacancy is elected for the unexpired term of the member's predecessor in office.

However, since the that section of law defers to your governing documents, it will also depend on what they say on how vacancies would be filled.

Kurt, I offer the following advise:

1) What does your documents say can be done if no quorum exists?

Some documents allow the members at the meeting to vote on holding another meeting within x days. However, that vote must be done at the annual meeting (as it's the only business that can be completed). If your documents provide such a section, then at the next annual meeting, you can make a motion that this happens.

2) Gather proxies for the next annual meeting.

Proxies do not have to designate the Board as the representative. If you were able to collect signatures equaling 10% of the membership, you should be able to collect at least that many in proxies. This may allow you to have a quorum at your next annual meeting.

Without having access to your governing documents, this is the best advise I can offer.

Hope it helps,

Tim

Kurt, I highlighted the one word in what your bylaws say as it is what the board is going to place the argument on (and rightfully so). The word "may" indicates an option. They may do this or not. It is very different from the word "shall" which required them to do something.

Basically, they don't have to call another meeting. However, they do have the option to.


When did you make the demands? Had you suggested it (or made a motion) to have another meeting called at the annual meeting it would be much harder for the Board to say they don't want to. Especially if the membership wants one. If you are making the demands (request) after the meeting, it is much easier for the board to refuse the request. Legally, they did meet their obligation and called a meeting. It's not the Boards fault that the membership chose not to attend. The Board chose not to exercise the option offered in the bylaws which is a decision that is legally the Boards to make.

Mind you I'm not saying I agree with the decision your Board made. I'm just pointing out that they did have the right to make it.


Per what you posted, your Association must comply with the TX corporation code. This code, see links in other postings in this thread, specifies that elections will be as outlined in your governing documents. You posted that, per the Associations attorney, they state that the directors will be elected at the annual meeting.

Without reading the actual section in your documents about how directors are elected/appointed, I would would expect that if the Board chose to hold a special election to elect directors, there would be no real problem with it. However, it appears that the Board has chosen to take a strict interpretation of the Bylaws and State Law.

They called a meeting of the members to elect directors.
A quorum at that meeting was not met - hence, no election.
The Board had an option to call another meeting but chose not to.


Let me try and explain it this way:

A meeting was called but due to quorum requirements, elections were not held.
The Board chose the option of not calling another meeting
The person serving as Director can only serve for their elected term and then must be re-elected or appointed to fill a vacant seat.
When the Directors term ended, the seat became vacant.
Because the Board chose not to hold another meeting TX law requires them to fill the vacancy by appointment (a majority vote by the Board). The person they appoint can only fill that seat for the remainder of the term.

Again, I'm not saying it's the moral thing to do. However, it does appear to be legally correct.


Notice requirements are a time line for the meeting. If a notice that a meeting would be held was properly given to each member, in a manner identified in your bylaws, then they met the meeting requirement.

One can claim anything but you would need proof that it actually happened.

Additionally, it sounds like you have staggered elections (1 Dir. serving 1 year another serving 2 years, etc. vs the entire board being elected at one time). When the board appoints someone to fill a vacancy, per TX law they fill the seat for the remainder of the term. Therefore, just because someone wasn't elected the year before doesn't require that that seat would be up for election again the next year. Suggest you verify the # of Directors required to be elected at any one meeting.


What do your documents say about amending the bylaws? It's possible that the Board did not have that authority.

Sec 22:102 of TX corporate code says [emphasis added]:

Sec. 22.102. BYLAWS.
(c) The board of directors may amend or repeal the bylaws, or adopt new bylaws, unless:

(1) this chapter or the corporation's certificate of formation wholly or partly reserves the power exclusively to the corporation's members;

(2) the management of the corporation is vested in the corporation's members; or

(3) in amending, repealing, or adopting a bylaw, the members expressly provide that the board of directors may not amend or repeal the bylaw.

Therefore, they may or may not have been allowed to change the quorum requirement on their own.


Have you threatened any legal action? If you have, the Association typically doesn't have to allow access unless you obtain a court order (the discovery process).

However, if you never threatened legal action then TX law give you the right to inspect the records:

Sec. 22.351. MEMBER'S RIGHT TO INSPECT BOOKS AND RECORDS. A member of a corporation, on written demand stating the purpose of the demand, is entitled to examine and copy at the member's expense, in person or by agent, accountant, or attorney, at any reasonable time and for a proper purpose, the books and records of the corporation relevant to that purpose.

I would recommend sending a certified letter citing this passage and identify what records you wish to inspect. NOTE: Do not threaten any legal action as this could prevent you access.

If they still refuse, then you would probably have to file legal action to make the Association comply.

TX HOA or Condo laws (whichever would apply) may mirror those rights. You should check them as well.


Yes they can appoint whomever they desire to fill the vacancies.

A better option would be one I pointed out to you earlier:

Solicit proxies for the next annual meeting. If you walk-in with 25% of the membership proxies there would be a quorum. Additionally, you would have a huge block of votes and may actually be the one deciding who is elected to the Board.

Hope this helps,

Tim

Kurt,

I appreciate the thanks, but I'm just doing what others on this forum have done for me.

I wouldn't worry too much about the MC. They work for the Board. If there is a new board, there will probably be new expectations and the MC will tow the line or quit. Either way, the new Board can solicit bids.

As for the Bylaws, based on your posting, the Board would have had the authority to amend them and possibly may have. You will need to go over the minutes to see if it's mentioned or find a copy that was published with the new requirement. This sort of takes the steam out of the Boards response that it was "impossible to change them".

Technically the appointments should be mentioned in the minutes. Unfortunately, minutes are only as good as the person keeping them and the people approving them. The Reality is that sometimes things are left out. Even if they are not recorded, that really wouldn't change anything as the Board could just agree to amend past minutes or make formal appointments at the next meeting. That is just the reality of the situation you are in.

As a note of hope, I will offer that I recall reading in a different thread in this forum that someone had a very similar issue as yours. They waited for the annual meeting. Asked about the calling an additional meeting, was told that nothing could be done. The individual stood up with their copy of the governing documents and politely replied that it's possible that the property manager was mixing up Associations and would they please read the section of the Bylaws to the group to verify that another meeting could not be called.

Basically, the Board was caught and the membership (as a whole) demanded another meeting. The new meeting was held and the old board was removed. If someone can find that thread perhaps they can post a link to it for you.

Do you have candidates to run? Having the votes to not elect someone only works if there are candidates to replace them. Serving on the Board does take some time and energy, so everyone usually isn't stepping forward.

Tim

Damn good idea. I'll take a copy of all the governing documents to all future meetings I attend. I'll also review them prior to the meeting.

As far as other members being upset, most of them don't know there's a problem but I didn't have any problem getting the signatures on the petition. There is a group of people that are more supportive in my quest. We have a large number of Asian and Indians in the community; when you talk to them directly they have the same concerns but they are not going to raise a fuss.

We still had an informal meeting after they announced we didn't make quorum. In years past, under the old management company, we got a financial report with an income statement, prior year actuals, prior year budget and current year budget. This detail of financials is required by our bylaws. This year we got a 7 line summarized budget with no income statement or prior year amounts. I told them that a summarized budget was useless. They told me they would email me a copy of the financials.

I obtained a financial statement for the association and reconciled all the line items back to the summarized buget provided at the annual meeting. I'm of the opinion that they were trying to hide the increase in fees for the new management company and that they intentionally misled the membership that was at the meeting.

I've questioned the board President about the process for selecting a new management company. They led me on and on about how much work it was and how they got quotes from all these companies and really did their due diligence. As soon as I asked to review the RFQ and the returned bids everyone stopped talking to me. The management company stopped returning emails. I contacted a couple of the management companies they said they got bids from and none were asked to bid. Through the grapevine I heard that the new company was selected off a recommendation from friend of a board member and that the contract was not bid at all. That would explain why they can't provide the bid documents, because they don't exist.

Hi Janet,

Thank you for the kind words.

I agree with what you are saying about State Statutes controlling unless they say otherwise but I understand it a little differently. Therefore, I wanted to explain my reasoning on the need to meet the 25% of membership signatures stated in the bylaws.

I understand that State/Federal Statutes control if the governing documents are silent or the governing documents are in conflict with the statute unless the statute defers to the governing document or specifically takes control.

Examples:

FCC Satellite Regs specifically took control
State Laws define commercial vehicles - HOA's can expand that definition

For the petition issue:

Had the law said a flat percentage rate I would have said that the TX law and bylaws were in conflict with each other and the State law would have control. However, since TX law used the words "not less than" when they stated the 10% requirement. This implies that it can be more than 10%. Since the Bylaws state 25% is needed there is no conflict between the two.

I suspect that if Kurt wanted to challenge the petition in court, this would be the Associations defense.

Granted, I'm not an attorney and I do not work in the legal profession so this understanding could be in error.

Tim

Tim and Janet, I really appreciate your time and help. I think I found an attorney in our neighborhood that is willing to help. As soon as we get a chance to meet and go over things, I'll update the post to let you know what he thinks.

After taking all this in, I think he's going to say that I DO have to get the number of signatures required by the bylaws. I'm almost certain that the notion of not being able to hold an election in a special meeting of the members is not valid.

BTW, I finally got a response yesterday to my request to view the bids returned for the management contract. They are claiming that the bids were discussed as part of an executive session and that they are not required to make them available.

Kurt,

Typically, in a sealed bid process, those bids would be considered confidential. Therefore, although, based on your postings, I agree that it's possible that your Board did not solicit bids, they are probably protected from sharing them with you if they did.

I would recommend that you just stick to the issue of elections. One thing at a time, so to say.

Tim