STATE OF FLORIDA DEPARTMENT OF BUSINESS AND PROFESSIONAL REGULATION DIVISION OF FLORIDA CONDOMINIUMS, TIMESHARES AND MOBILE HOMES

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1 STATE OF FLORIDA DEPARTMENT OF BUSINESS AND PROFESSIONAL REGULATION DIVISION OF FLORIDA CONDOMINIUMS, TIMESHARES AND MOBILE HOMES IN RE: PETITION FOR ARBITRATION Sam Wild, Petitioner, v. Case No Polo Trace Homeowners Association, Inc., Respondent. / SUMMARY FINAL ORDER Statement of Issues The issues in this case arise from an election of directors at the membership meeting on December 2, The first issue is whether the election chose directors to fill the proper number of vacant seats. This issue evolved from: bylaws providing for staggered two-year terms; failure to conduct elections in and 2007; resignations and appointments of replacement directors by the board of directors; and a dispute whether appointed directors serve until the next annual meeting or for the unexpired term of the seat to which they were appointed. The second issue is whether certain candidates were ineligible because their spouses had served on the association s election committee. A final issue is presented as to the appropriate relief to be ordered in this arbitration proceeding. Pleadings and Procedure The Petition for Arbitration was filed on December 1, 2008, by the former 1

2 president of the board of directors who had resigned in November 2008 over alleged improper plans and notices for the upcoming election. An Order Requiring Answer was issued on December 17, After an extension of time was granted, an Answer was filed on February 3, On February 5, 2009, an Order on Affirmative Defenses and Requiring Supplemental Filings was entered, determining that Petitioner had standing to bring the Petition and requiring documentation for all association meetings since September On March 2, 2009, Respondent filed the required documents. On March 4, 2009, Respondent filed a pleading identifying all sitting directors as of November 1, 2008, specifying whether they were elected or appointed, the date of such election or appointment and the alleged dates for the term of office for each. This Summary Final Order is based on the pleadings and exhibits filed by the parties. FINDINGS OF FACT 1. The board of the Association consists of seven directors. The governing documents provide that the directors will each serve two-year terms. The plan of the bylaws provided that four would be elected in December of a given year and three would be elected in December of the following year. 2. As of September 2006, the board of directors had seven directors. In October 2006, the board voted to reduce the number of seats to five. Two of the seven directors resigned in the following month. Of the remaining directors, four had terms expiring in 2006, so a notice for election of their replacements was sent out, calling for candidates to submit applications by November 7, The board decided that three of the new directors would serve two-year terms, with the fourth serving a one year 2

3 term. 3. On November 14, 2006, the board voted not to hold an election in December because only four candidates had submitted applications, and one of those volunteered to take the one-year term. 4. Because there was no election, there was no annual meeting of the membership in 2006, so the attempted reduction of the board did not comply with the governing documents. However, the board functioned with only five members during After notice of the 2007 election went out, notifying members of a vote for two replacement candidates, the board recognized that the correct number of directors should be seven. Thus, the number of vacant seats was four. Again, when only four candidates submitted applications, the board voted not to hold an election. 6. In September 2008, the association sent out notice of election in December for three seats on the board, seeking applications from candidates. 7. As of November 1, 2008, none of the directors of the association had been seated as a result of an actual election. Three directors had been seated as the only candidates for the non-election of 2007, with assumed two-year terms ending in December 2009 Marianne Weisman, Michael Berezin and Sam Wild. Three directors had been appointed by the board over the previous two years, with terms assumed to expire in December 2008 Michael Cohen, Howard Zolin and Martin Grossman. One director had been appointed by the board with a term assumed to expire in December 2009 Don Raison. 8. In November 2008, Sam Wild resigned and the board appointed Bob 3

4 Bermack to his seat. In November 2008, Michael Berezin resigned and the board appointed Norton Fletcher to his seat. 9. On November 5, 2008, the association conducted a Meet the Candidates Meeting. At this meeting the Election Committee advised that applications had been received for three candidates Sidney Wartel, Michael Cohen and Richard Gray. At this meeting, the association also took nominations from the floor. Nominations were made and seconded for two candidates Warren Reed and Robert Cuskaden. The spouses of candidates Reed and Cuskaden had served on the Election Committee until shortly before the meeting. 10. On November 10, 2008, the association sent out a Second Notice of Annual Meeting. This notice advised that the election would fill three vacancies caused by the expiration of terms of office. Along with the Second Notice the association sent out a form for a limited proxy to authorize voting for three out of five named candidates. 11. At the election on December 2, 2008, three candidates were elected for two-year terms Richard Gray, Sidney Wartel and Michael Cohen. 12. On January 2, 2009 the newly elected directors joined the carryover directors, Marianne Weisman, Bob Bermack and Don Raison. At that time Warren Reed appears to have replaced Norton Fletcher. CONCLUSIONS OF LAW Sections and , Florida Statutes, provide that the department shall conduct mandatory binding arbitration of election disputes between a member and a homeowners association. Florida Administrative Code, Rule 61B (2) provides: 4

5 Election disputes include a controversy relating to the conduct of a regular, special, or runoff election; the qualification of candidates for the board; the filling of a vacancy caused by any reason other that the recall of one or more directors of the board; and other disputes regarding an association election. Because there are no material facts left in dispute after the filings provided to date by the parties, this case is appropriate for summary disposition pursuant to Rule 61B , Florida Administrative Code. Term of Office for Appointed Replacement Board Members The initial dispute in this case is whether board members appointed by the board of directors to fill vacancies shall occupy the replacement seat only until the next annual election, or shall serve out the full term of the board member who is replaced. Section 5.16 of the bylaws of the association provides, in pertinent part: Vacancies in the BOARD may be filled by a majority vote of the directors then in office, though less than a quorum, or by a sole remaining director, and a director so chosen shall hold office until the next annual election and until his successor is duly elected, unless sooner replaced. Respondent s board appears to have been guided by section (2), Florida Statutes, which provides, in pertinent part: (2) A director elected or appointed to fill a vacancy shall be elected or appointed for the unexpired term of his or her predecessor in office. Any directorship to be filled by reason of an increase in the number of directors may be filled by the board of directors, but only for a term of office continuing until the next election of directors by the members,... The right to vote of members of a homeowners association is created and governed by Chapter 720, Florida Statutes. Chapter 617, Florida Statutes, controls the legal existence of corporations not for profit, generally, and applies to homeowners associations when Chapter 720 is silent on an issue. Section (6), F.S., states 5

6 explicitly that its provisions as to voting by members do not apply to a corporation that is an association as defined in s Section (1), F.S., provides, in part, The powers and duties of an association include those set forth in this chapter, and except as expressly limited or restricted in this chapter, those set forth in the governing documents. Section (9), F.S., governs election of directors for homeowners associations. It provides: (9) ELECTIONS. Elections of directors must be conducted in accordance with the procedures set forth in the governing documents of the association. All members of the association shall be eligible to serve on the board of directors, and a member may nominate himself or herself as a candidate for the board at a meeting where the election is to be held. Except as otherwise provided in the governing documents, boards of directors must be elected by a plurality of the votes cast by eligible voters. Any election dispute between a member and an association must be submitted to mandatory binding arbitration with the division. Such proceedings shall be conducted in the manner provided by s and the procedural rules adopted by the division. Section (10), Florida Statutes, provides that, in the event a vacancy on the board occurs as a result of a recall, and less than a majority of the board members are removed, the vacancy may be filled by a majority vote of the remaining directors. Thus, chapters 617 and 720 expressly yield control of elections to the provisions of the governing documents. Chapter 720 further provides authority of the board of directors to appoint replacement directors. The voting rights of members are then carried out through procedures set forth in the governing documents of the association. As recognized in the definition of an election dispute in Rule 61B (2), supra, filling a vacancy on the board, other than by a membership election, impacts the right and power of homeowners to elect board members. 6

7 The foregoing analysis requires the conclusion that, in light of the explicit provisions of chapters 617 and 720, Florida Statutes, with respect to elections, and legislative direction in chapter 720 for some appointments of replacement directors, section (2), Florida Statutes does not apply to homeowners associations. Consequently, the provisions of governing documents of a homeowners association will control the authority and procedures for appointment of replacement directors. Thus, when the board of directors of Polo Trace Homeowners Association, Inc., appoints a director to fill a seat vacated as a result of resignation, death or change of eligibility, the new director shall hold office only until the next annual election, pursuant to section 5.16 of the bylaws of the association. Attempt to Change Number of Directors During the three years before this arbitration proceeding, the board attempted to change the number of directors, but then, apparently, acknowledged that the board did not follow the bylaws sufficiently to make such a change. Section 5.1 of the association s bylaws does provide that the number of directors may be changed at any meeting where the members are to elect any directors. Because no annual meetings of the membership were held in 2006 and 2007, the number of board members never changed, but remained at seven. Failure to Hold Annual Meetings Respondent made a mistake by failing to hold annual membership meetings. Section (2), Florida Statutes provides that, The association shall hold a meeting of its membership annually for the transaction of any and all proper business at a time, date, and place stated in, or fixed in accordance with, the bylaws. 7

8 As quoted above, section (9), Florida Statutes, provides that, [A] member may nominate himself or herself as a candidate for the board at a meeting where the election is to be held. Because of this provision, a homeowners association may not cancel an election when the number of pre-filed declarations of candidacy is equal to or less than the number of vacancies. 1 In a homeowners association, there must be an annual meeting, and there must be an election at the annual meeting in any year during which any term of office expires for a board member. Because of the failure to hold election meetings in 2006 and 2007, it must be concluded that the slates of directors who assumed seats on the board were not validly elected or appointed. Consequently, there were no terms of office to be filled if one of those directors was replaced by board appointment. Election of December 2, 2008 As a matter of law, each of the seven seats on the board of directors should have been subject to election on December 2, As it was, a membership election was held for three positions on the board, from more candidates than open seats, complete with nominations from the floor at the meeting. Arguably, the election was not perfect and, perhaps, some potential candidates did not run, because of the complex history described above. However, the arbitrator will not enter an empty order that voids the December 2, 2008 election, only to have the result that the previous board would act as a holdover, and, if that board were challenged, then to the next previous board, and so on back to 1 This statement is not true for condominium associations because section (2)(d)3. F.S., provides, in part, [A]n election is not required unless more candidates file notices of intent to run or are nominated than board vacancies exist. 8

9 the last legally chosen board. Additionally, there is no authority or precedent to allow the arbitrator to declare the Association is without a board of directors. The three directors elected on December 2, 2008, Richard Gray, Sidney Wartel and Michael Cohen, represent the choice of the membership and should be allowed to serve the two-year terms for which they were elected. Candidates with Spouses on Election Committee Because the membership did not elect either candidate whose spouse was on the Election Committee before the Meet the Candidates Meeting, and no losing candidate has raised this issue, there is no active current dispute as to this issue, and so, it will not be addressed. Relief Allowing the results of the 2008 election to stand provides the association with three board members. Based on the foregoing, it is ORDERED: 1. The election of Richard Gray, Sidney Wartel and Michael Cohen to serve two-year terms on the board of directors of the association is confirmed. 2. The positions on the board of directors nominally occupied by Marianne Weisman, Don Raison, Bob Bermack and Warren Reed are declared to be vacant. 3. Pursuant to paragraph of the bylaws of Polo Trace Homeowners Association, Inc., within 20 days of this Order, Richard Gray, Sidney Wartel and Michael Cohen shall select board members to serve until December 2009 for the four seats declared to be vacant. 9

10 4. The four individuals removed from board seats by this Order shall not be disqualified from the appointments described in paragraph 3 above. DONE AND ORDERED this 9th day of March, 2009, at Tallahassee, Leon County, Florida. Bruce A. Campbell, Arbitrator Dept. of Bus. & Prof. Reg. Arbitration Section 1940 North Monroe Street Tallahassee, Florida Certificate of Service I hereby certify that a copy of the foregoing Summary Final Order was furnished by U.S. Mail on March 9th 2009, to the following: Sam Wild 7746 Edinburough Lane Delray Beach, FL Emanuel Galimidi, Esq. Lydecker Lee 1201 Brickell Avenue Fifth Floor Miami, FL Bruce A. Campbell 10