Is this a contract violation?

Todd,

Giving it a first read, I agree with you.

The term "may" which is the defining point for the Board in calling a second meeting, is correct. It is the Boards option to call a second meeting. The term "shall" is the defining point for your argument.

Even though the Board has an option to call a second meeting, and may chose not to, they still must elect a board of directors at the annual meeting. Texas non-profit corporation law does not help clarify the issue, available at:
http://www.statutes.legis.state.tx.us/Docs/CV/htm/CV.32.9.htm

Texas law says that In the absence of a provision in the articles of incorporation or the by-laws fixing the term of office, a director shall hold office until the next annual election of directors and until his successor shall have been elected, appointed, or designated and qualified (Art. 1396-2.15 paragraph B).

To summarize (as I see it):

An Annual Meeting must be held (done)
Directors shall be elected at the annual meeting (willing to do but no quorum)
If there is no quorum, Board may hold another meeting (chose not to)
Per law, Directors serve until replaced or resigned (Existing Board continues)

Todd, I've got to say that this is tricky and in my layman's opinion, depending on how it is presented to a court, could be ruled either way.

Various Ways to approach:

1. Take them to court and get a ruling (50/50 chance plus your expenses)
2. Send letter siting Art. 1396-2.23 of Texas non-profit corp. law (citing law usually gets a Boards attention), and ask to review the records of the meeting. If refused you could take them to court (90/10 chance in your favor plus your expenses).
3. Get a petition together to amend the bylaws and change the quorum requirement.
4. Request a copy of the membership list and send a letter to each member. Identify the fact that there has been no elections due to failure to have a quorum at the annual meetings. Include a proxy form and request that they send the form to you or give it to a neighbor so a quorum can be obtained and a proper election held. Don't say anything more in the letter, just a simple statement of the fact. (better than 50/50 - but participation is fickle sometimes - plus expense for printing and mailing).

If I was the one involved, I would approach the issue by using methods 2 & 4.

Hope this helps,

Tim

Sorry, my mistake. Your posted 3.04 refers to all meetings so delete the word special from my statement that "3.04 refers to special meetings".

So are we to ignore 7.3 and 3.01? Isn't it clear that the intention of the annual meeting was to have a completed election and as such an incomplete election is a violation of the covenants?

Todd,

I, and others, agree with you that one of the intents of the annual meeting was to elect a Board of Directors. The problem is, the intent of governing documents (and various laws) does not always correspond to the language used when expressing the intent. You can look at almost every loophole found in various laws as a demonstration of this point.

Even if everyone agreed that it is a violation of the agreement between the Association and the member, I tried to give an example of how the Board may have technically upheld it's obligation when I summarized the issue in my earlier post. Robert pointed out that the membership who attended the meeting; could have voted to suspend the meeting (and call neighbors to try and get a quorum), can make a motion for the Board to call a second meeting.

For the sake of argument, lets say everyone agrees and the Board didn't find a loophole and by failing to hold a second meeting to elect a new Board of Directors. What are your options (some of these were stated earlier):

1. Notify the Board that they are in violation and to explain their actions (Based on your posting, I expect that this was already done).

2. Since you believe the quorum to be in question, send a certified letter to the Board, citing Art. 1396-2.23 of Texas non-profit corp. law, and ask to review the proxy appointments and documentation of how the quorum was determined. If the Board agrees, you will have to make time available to review the records and there may or may not be a small cost associated with this (as allowed by law). If the Board refuses, you may file a claim with the local courts. This will cost you time, energy and expenses.

3. File a complaint with the local courts to order the Board to hold more than one meeting until a quorum is met and an election is held. - This will cost you time, energy and money if you win. It will also cost you time, energy, money and possibly the Associations legal fees if you lose. Win or Lose - your lot and actions will possibly be under the microscope for any infractions.

4. Start a petition, as outlined in your bylaws and Texas law, to recall the existing Board. This will cost you time and energy as you go door to door but could have positive results in the ability to meet your neighbors and inform the membership. Depending on the personality of the Board your lot and actions will possibly be under the microscope for any infractions. If the Board refuses to accept your petition you might have to file a claim with the local courts.

5. Send a letter to each member. Identify the fact that there has been no elections due to failure to have a quorum at the annual meetings. Include a proxy form and request that they send the form to you or give it to a neighbor so a quorum can be obtained and a proper election held. Don't say anything more in the letter, just a simple statement of the fact. Members participation is fickle sometimes so this may or may not work. Depending on the personality of the Board your lot and actions will possibly be under the microscope for any infractions.

6. Start a petition to call a special meeting to amend the bylaws and change the quorum requirement. This will cost you time and energy as you go door to door but could have positive results in the ability to meet your neighbors and inform the membership. Depending on the personality of the Board your lot and actions will possibly be under the microscope for any infractions. If the Board refuses to accept your petition you might have to file a claim with the local courts.

Personally, I believe the larger picture is apathy with the membership vs. the Board finding loopholes in the documents. Had a quorum been met, an election would have been held and it's possible the same people would still be serving on the Board.

I stated that if I were in your shoes I would opt for a petition to change the quorum requirement and the mailing to members about proxy appointments in order to achieve a quorum. This would bring an issue to the members that might have them concerned enough to attend the meetings and it provides an option to those members who can't (or won't) attend to assign a proxy. It also achieves the same goal (of having an election) while minimizing financial risk to both myself and the Association. The reason why I would also want to minimize the risk to the Association is because I am part of the Association and would have a share of that risk (financial, public/realtor opinion, etc.) no matter the outcome.

Todd,

Again, lets say everyone agrees. Which option do you want to pursue?

Tim

Todd, Do I read the developer is still in control? If so, you don't have an HOA yet. I suggest you look at the possibility of forming a Homeowners group external from the Controlling interests. You may be held to the contrtact you signed at closing but that does not mean conditions don't change and if anyone is causing you damage (loss of property values) don't you have the right to intervene?

I did not read all the posts here, but i believe you should get support of the other owners. Maybe it will end up a lost cause, I don't know, but if youi get twenty people together with vested interests you are going to make an impression and you will have that twenty people talent pool to draw on. Here it seems you are in a technical interprtation of some legal documents and the solution probably is to hire an attorney to figure out the language. All the while you feel your property values are going in the tank. Will your situation improve if the wording of these documents change? Won't the developer still have control, something you may not be able to change. I am not sure I offer much, other than look for another way to skin the cat.

Since you are a member and thus partially responsible for how the HOA is run/operated, you can not "drop" out of the HOA. YOU are the HOA.

An Annual Meeting must be held (done)
Directors shall be elected at the annual meeting (willing to do but no quorum)

"""""""""If there is no quorum, Board may hold another meeting (chose not to)"""""""""

Per law, Directors serve until replaced or resigned (Existing Board continues)

I would think they would have a fiduciary responsibility to the members to have a second meeting and reduce the quorum to one half. Plus its a meeting of the members, not the board.

Am I wrong????

Fred,
regards your comment about it being a meeting of members.

My position below, I have not received much support on this when it has been discussed in the past.
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It is called an Owners meeting, I take that seriously. I do not believe the Board HAS to conduct the meeting, I believe any member can call a Point of Order at the start of the meeting and (with a vote of those present) replace the Front table with a group of owners to conduct the meeting. I expect they would have to appoint a quorum of the Board number, appoint a secretary to keep minutes and conduct the meeting under common rules of order.

That is just me, and if I had my way, the concerned owners would have informed the sitting Board they were going to do this, ask for their cooperation, hold the members meeting and close it, then ask the Board to hold a Board meeting to discuss association Board business. I have no idea if this would work and the plan could be changed if necessary, but the documents call it a members meeting and it calls the other meetings, Board meetings. Why if not for some variation of the above.

In a practical sense, it doesn't seem that this is something you would want to do every year. For obvious reason and as long as business is being conducted to please everyone, why do it. I also support the Board should have an opportunity to address the membership at the annual meeting, in any fashion they wish. Certainly, treasurers reports, long range plans, assessments, etc, all fall under Board control.

Fred,

On the surface, I would agree with you in that a second meeting should have been called with a reduced quorum. However, you have not provided us with enough info to determines if there were other circumstances that caused the board to act in the manner in which they did. Mainly, were there more candidates than vacancies, or were there only enough candidates to replace the existing vacancies? Are nominations taken from the floor? If so, are there generally people who are willing to be nominated this way?

The term "may" which is the defining point for the Board in calling a second meeting, is correct. It is the Boards option to call a second meeting. The term "shall" is the defining point for your argument

The members shall elect a board at the first annual meeting.

That seems to state the members control the elections from the first election and there on after.

Tim seems to state that after the first election the board controls the process.

Roberts Rules of Parliamentary Procudure seems to state for the members.

anything else?

Any member of the Association can preside over the Annual meeting provided the chair (usually the BOD president) turns it over to them, which IMO would be a rare occurrence. As to who presides at a special meeting, I can only go by our CC&R's but if correct % of H/O's call for a special meeting and the BOD fails to call it within X number of days, then and only then would the homeowners and not the BOD notice the meeting and preside over it.

Mary,
This whole HOA business is crazy (in my opinion), the only thing that keeps it from flying off into outer space is a little glue provided by a few clear thinking people. Like many things now a days I suspect we are heading more and more to professional management. It's a mess.
Your comments as all good comments should raise other questions. I had a discussion recently about the duties of the President and was of the opinion that in SC law the President of the association acts the same as a CEO of a private business. It says so in our documents. But if you read further that statement is not defined in our documents and if you go read the duties of a President of a non-profit association, there is little specific direction there. Now, Robert's Rules may expand on the presidents duties regarding conduct at a meeting, and if Robert's is adopted by the non-profit, I suppose they have to abide. But look for specific duties of the president in our documents and state documents and it is not there. There is practically no ,"The president has blah blah authority to do such and such." It is more like, "The president shall guide and consult the Board when conducting association business." Maybe other documents are different, but that seems to be the posture the President is directed to assume. No pushing, no pulling, no unilateral decisions and in fact the only action taken by the association has to be with a consensus of the Board. We normally accept the president is the spokesperson for an association and we would expect the president of the board to represent the association in any contract signing, but has this authority been assigned by the documents? All our says is that this as an option, for the most part.

Michele,
Your thoughts are well posed and probably close to the legal truth. Have we had this discussion about the Power of the president before? Is this Rule by Board majority true in all states or does the power of the Presidents vary?
I suppose it may be relevant to this thread if the President is selecting a company to a contract and he signs the agreement. But then I am not sure the Board members all or majority sign the contract. Not here where I am anyway.
You both have posted enough here to realize some Presidents do have an "iron glove" and do rule unilaterally in fact some treasurers and secretary seem to come across as bigger than life and refuse to answer to their fellow board members.
Oh well, I also agree there is much we don't know here, and I have am happy to see what is posted next.