COUNSEL
Schreiber & Schreiber, Inc., Edwin C. Schreiber and Eric A. Schreiber for Defendant and Appellant.
Domine Adams, Jeffrey B. Domine and Ryan P. Sheahan for Plaintiffs and Respondents.
OPINION
WILLHITE, J.
Defendant La Villa
Grande Homeowners Association (the Association) appeals from an order
directing the Association to conduct an election for the board of
directors. The order was issued in a case filed by several members of
the Association (plaintiffs)
1
seeking declaratory and injunctive relief, as well as costs and
expenses incurred in enforcing the documents governing the Association.
The Association contends that (1) the trial court erred by granting a
preliminary injunction that provides the ultimate relief sought in the
complaint; (2) the order was improper because plaintiffs did not bring a
claim under Corporations Code section 7510
2
(hereafter section 7510); (3) plaintiffs' action was premature; and (4)
the order was too vague. While it may have been preferable — and
certainly more efficient — for plaintiffs to have sought an order
mandating an election through the summary procedure authorized in
section 7510, subdivision (c), the procedure used here gave the
Association sufficient notice and an adequate opportunity to be heard,
and therefore the order (which we find was not impermissibly vague) was
proper. Accordingly, we affirm the order.
BACKGROUND3The Association was
formed in 1980 to manage La Villa Grande, a 19-unit condominium project.
According to the Declaration of Covenants, Conditions and Restrictions
(Declaration), the original board of directors was named in the articles
of incorporation for the Association; subsequent boards were to be
elected at the annual meetings in accordance with the Association's
bylaws. Under the bylaws, the annual meeting is to be held on the first
day of March each year for the purpose of electing the board of
directors and conducting other business. In practice, however, the
Association typically held its annual meeting (and elected the board) in
July or August.4
In 2007, the
elections were held in August. Three of the plaintiffs — Steven Samii,
Penny Altman, and Azar Sotoudeh — were among the board members elected
to serve until August 2008. However, the entire board was recalled by a
special vote of the Association members on April 29, 2008. On May 1,
2008, Tammy Gamblin, the property manager for the Association, sent a
letter to all homeowners, informing them of the recall and the election
to be held in June 2008 to elect a new board. The letter stated, "This
new Board will sit for the remainder of the term which ends in August
'08."
No election or
annual meeting was held in August 2008. On December 22, 2008, Jeffrey B.
Domine, an attorney representing plaintiffs and two other homeowners,
wrote to the board, noting that the election was not held in August 2008
as required, and requesting that the board schedule an election within
30 days. Domine also noted that, under section 7510, a court may
summarily order an election and that plaintiffs would file a petition
requesting such an order if no election was conducted within 30 days.
Domine did not
receive a response to his letter. On February 5, 2009, plaintiffs filed
their complaint, alleging three causes of action. The first cause of
action alleged that the Association breached the Declaration by failing
to hold the annual meeting and election in August 2008, and that this
breach also violated section 7510. Plaintiffs alleged that they "have
incurred and will continue to incur attorney fees, costs, and expenses
in connection with enforcement of the governing documents" as a result
of this breach. In the second cause of action for declaratory relief,
plaintiffs sought a declaration that the Association's governing
documents, which require annual elections, are enforceable equitable
servitudes, that under section 7510 the court can summarily order that
the election be held, and that the Association must give notice of and
hold the annual election on February 7, 2009. The third cause of action
for injunctive relief sought an injunction ordering the Association to
hold the annual election on February 7, 2009.
On February 10,
2009, plaintiffs moved ex parte for a temporary order and order to show
cause re: preliminary injunction. The trial court denied plaintiffs'
request, and plaintiffs filed a petition for writ of mandate in this
court. We denied the petition, noting that plaintiffs were not precluded
from filing a noticed motion for a preliminary injunction or seeking an
order to show cause in the trial court.
Following our denial
of the writ petition, plaintiffs filed another ex parte application for
an order to show cause re: preliminary injunction and for a temporary
restraining order enjoining the Association from entering into any
binding contracts pending the hearing on the order to show cause. The
trial court denied immediate relief, but set a hearing on the order to
show cause, giving the Association a week to file a response to
plaintiffs' moving papers.
Plaintiffs' moving
papers included, among other things, declarations from Domine
(plaintiffs' counsel), Gamblin (the property manager at the time of the
recall of the previous board), and each of the plaintiffs. According to
Domine, when he received no response to his December 22, 2008 letter, he
called the current property manager, Tom Jackman. Jackman told Domine
that he had spoken to Meir Cohen, the president of the board, who told
Jackman that the Association would not hold the requested election.
Jackman, who said he agreed with plaintiffs that an election was
required, told Domine that he would contact all of the members of the
board to emphasize the seriousness of the situation. Shortly thereafter,
one of the board members contacted Domine and told him that the
Association had already held an election and did not have to hold
another one.
In her declaration,
Gamblin stated that in 2007, the Association members agreed to hold the
election on August 28, 2007, and that the board members would serve for
one year. However, after the members of the Association recalled the
board on April 29, 2008,5
she sent each Association member a notice that an election would be
held to elect board members to serve the remainder of the recalled board
members' terms, i.e., until August 28, 2008. That election was held at a
meeting conducted on June 24, 2008, during which the fact that the new
board members would serve out the remainder of the term ending on August
28, 2008 was discussed.
Each of the
plaintiffs stated in his or her declaration that each of them understood
that the board members elected in June 2008 would serve only for the
remainder of the term ending in August 2008, that no election has taken
place since June 2008, and that they each have repeatedly requested that
the board hold the required election.
The Association
filed an opposition to plaintiffs' motion, supported by the declaration
of Cohen, the president of the board. Cohen acknowledged that the
previous board had been recalled in April 2008 and the new board was
elected in June 2008. He also acknowledged that the bylaws of the
Association state that the annual meeting and elections were to be held
in March, but that the meeting and elections generally were held in July
or August. He stated, however, that the board "was of the opinion that
the appointment [of the board members who were elected in the June 2008
special election] was not only a two-month appointment, but rather,
should continue up and until the next voting period, which is scheduled
for July of 2009." The Association opposed plaintiffs' motion on the
grounds that (1) the court cannot issue a preliminary injunction because
it would grant plaintiffs all of the relief they seek without a trial;
(2) plaintiffs must proceed under section 7510 rather than by means of
common law causes of action; (3) elections cannot be ordered summarily,
but must be conducted in accordance with the Davis-Stirling Common
Interest Development Act (Civ. Code, § 1350, et seq.); (4) the lawsuit
and motion were premature because the bylaws do not require an election
until the March annual meeting;6
and (5) a preliminary injunction was unnecessary because by the time an
injunction would be issued and enforced, the annual meeting and
elections would have taken place.
After hearing the
parties' arguments on May 12, 2009, the trial court took the matter
under submission. It issued its ruling a month later, on June 15, 2009.
The court began by citing two provisions of the Corporations Code
governing non-profit mutual benefit corporations such as the
Association: Corporations Code section 7515, subdivision (a), which
provides that a superior court may, upon petition of a member of a
non-profit mutual benefit corporation, order that a written ballot be
authorized in such a manner as the court finds fair and equitable under
the circumstances; and section 7510, subdivision (c), which allows the
court to summarily order an election to be conducted, upon application
by a member and after the corporation is provided an opportunity to be
heard. The court noted the Association's contention that plaintiffs did
not file a petition under these sections, but concluded that the
procedure used in this case was sufficient to allow the court to
determine whether an election was warranted. Finally, the court
determined that an election was warranted because the Association did
not dispute that the notice of the June 2008 special election stated
that the term of the board members elected in that special election
would expire in August 2008, and the Association presented no evidence
or bylaw citation to support the authority for the board's decision (as
described in Cohen's declaration) to extend their terms beyond August
2008. Thus, the court granted plaintiffs' motion and ordered the
Association to conduct an election in compliance with Civil Code section
1363.03, subdivision (e), i.e., the provision of the Davis-Sterling
Common Interest Development Act governing the use of ballots.7
The Association timely filed a notice of appeal from the trial court's order.
DISCUSSIONMost of the
arguments the Association raises on appeal are procedural. First, it
argues that the trial court's order was improper because it was a
mandatory preliminary injunction that awarded plaintiffs all of the
relief they sought in their complaint. Next, it argues that plaintiffs
are not entitled to an order directing that an election be held because
they brought common law claims rather than a petition under section
7510. It also argues that, if section 7510 controls, plaintiffs' lawsuit
and motion were filed prematurely because plaintiffs were required to
wait to file until 60 days passed after the Association failed to hold
an election required by the bylaws, and the Association contends that
the bylaws required the election to be held on March 1, 2009. While
there is some merit to the Association's assertion that the way in which
plaintiffs obtained the election order was procedurally unusual, the
trial court nonetheless was authorized to order an election and the
Association suffered no prejudice by the unusual procedure.
We begin with the
Association's second argument — that the complaint itself was improper,
because the proper procedure is to bring a petition under section 7510.
Section 7510, subdivision (c) provides that, if a mutual benefit
corporation fails to hold a regular meeting or written ballot in
accordance with its bylaws, and fails to do so "for a period of 60 days
after the date designated therefor, then the superior court of the
proper county may summarily order the meeting to be held or the ballot
to be conducted upon the application of a member or the Attorney
General, after notice to the corporation giving it an opportunity to be
heard." There is no procedure specified in the Corporations Code
regarding how such an application is to be made. But what is clear is
that section 7510 contemplates a summary procedure that simply provides notice to the corporation and gives it an opportunity to be heard.
To be sure,
plaintiffs made this case more complicated than need be by bringing a
complaint alleging three causes of action followed by an ex parte
application for an order to show cause re: preliminary injunction to
obtain an election order, when a simple application and an opportunity
to be heard would suffice. But the fact that plaintiffs filed a
complaint with common law causes of action — in which they also asserted
section 7510 — rather than an application under section 7510 did not
render their request for relief defective. Nor does the fact that they
styled their ex parte application as a request for an order to show
cause re: preliminary injunction warrant reversal of the trial court's
order mandating an election. The complaint and ex parte application
provided notice to the Association that plaintiffs sought an order
mandating an election, and the Association was given an opportunity to
be heard on that request. Thus, plaintiffs' complaint and ex parte
application were sufficient for the purposes of section 7510. (Civ.
Code, § 3528 ["The law respects form less than substance"].)
Our resolution of
the Association's second argument also resolves the Association's first
argument, that the issuance of a preliminary injunction that grants all
of the relief requested in the complaint was improper. The Association
is correct that ordinarily a trial court does not have the power to
decide the merits of an action on an application for a preliminary
injunction. (See, e.g., Paul v. Allied Dairymen, Inc. (1962) 209 Cal.App.2d 112.) But that rule does not apply when there is a "`satisfactory showing' which warrants `submitting the cause on the merits.'" (Camp v. Board of Supervisors (1981) 123 Cal.App.3d 334,
358.) In light of section 7510's contemplation of a summary procedure
for issuing an election order, we find that the ordinary rule does not
apply here.
We turn next to the
Association's argument that plaintiffs' lawsuit and motion were
premature under section 7510 because they were filed less than 60 days
after the date designated in the bylaws for the annual meeting and
election — i.e., March 1, 2009. It could be argued that the relevant
date is the date designated as the next annual meeting in the notice of
the special election in which the current board was elected — i.e.,
August 28, 2008 — and therefore the complaint filed in February 2009 was
filed more than 60 days after the designated date. But we need not
decide which is the correct date because the Association misreads the
statute. The time period set forth in section 7510 relates to when a
court may order an election rather than when a member of the corporation
may apply for such an order — it states that the court may order an
election if one has not been held on the designated date or for a period
of 60 days after the designated date. (Corp. Code, § 7510, subd. (c).)
The order in this case was issued on June 15, 2009, more than 90 days
after the date designated in the bylaws. Therefore, regardless of which
date is the relevant date, the trial court's order complied with section
7510.
Finally, the
Association argues that the order mandating the election is defective
because it is too vague to be enforceable. The order states, "Thus, the
Court grants the motion and orders an election in compliance with Civil
Code section 1363.03(e)." The Association contends the order is not
enforceable because it "fails to state when the election must occur, or
how it must be done." Not so. The order that the election must be
conducted in compliance with Civil Code section 1363.03, subdivision
(e), resolves any question the Association might have about when and how
the election is to be conducted. That statute provides that ballots and
two preaddressed envelopes and instructions must be delivered to every
member of the Association at least 30 days before the voting is to take
place, and that the ballot is to be returned by the members to an
inspector of elections, who will tally the votes. Thus, while it may
have been beneficial (considering the history of the parties) if the
order had provided dates by which certain tasks should be accomplished,
the order may reasonably be understood to require the Association to
deliver the ballots to members immediately, with the vote to take place
approximately 30 days after delivery.
DISPOSITIONThe order is affirmed. Plaintiffs shall recover their costs on appeal.
We concur:
EPSTEIN, P. J.
MANELLA, J.
Footnotes
1.
The plaintiffs are Steven Samii, Penny Altman, Katherine Christopher,
Yasmin Ghadimi, Shabnam Vaziri, Vitaly Leonov, Lana Leonov, and Azar
Sotoudeh.
2.
The Association also cites to Corporations Code section 12460, which
governs consumer cooperative corporations and is virtually identical to
section 7510. Because the Association was formed as a nonprofit mutual
benefit corporation under the Nonprofit Mutual Benefit Corporation Law
(Corp. Code, § 7110 et seq.), we will refer only to section 7510.
3.
The facts in this case are largely undisputed; where differences in the
parties' recitation of the facts arise, they will be noted.
4.
There is some dispute about when the annual meeting typically took
place. Although the president of the current board states that the
meeting usually took place in July or August, the property manager for
the Association from January 2004 to June 2008 states that, until 2007,
the annual meeting took place in May. The parties agree that the meeting
typically did not take place in March.
5.
There is a typographical error in Gamblin's declaration; although the
declaration states that the recall took place on April 29, 2007, it is
clear that the recall took place in 2008.
6.
We note that the Association's opposition was filed on May 5, 2009,
more than two months after the date set forth in the bylaws for the
annual meeting and election.
7.
Although the court granted plaintiffs' request for an order mandating
an election, it denied their request to enjoin the current board from
entering into binding contracts, finding that the motion lacked
sufficient argument to support the latter request. That part of the
trial court's ruling is not at issue in this appeal.