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

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1 STATE OF FLORIDA DEPARTMENT OF BUSINESS AND PROFESSIONAL REGULATION DIVISION OF FLORIDA LAND SALES, CONDOMINIUMS, AND MOBILE HOMES IN RE: PETITION FOR ARBITRATION ALICE L. SHOLTY, Petitioner, v. Case No THE VILLAGES OF EMERALD BAY CONDOMINIUM ASSOCIATION, INC., Respondent. / FINAL ORDER This order is entered pursuant to Rule 61B , Florida Administrative Code, which permits the arbitrator to enter a summary order where there are no disputed issues of material fact. This order is based on the parties joint stipulation of facts and affidavits filed by both parties. The petition for arbitration alleges that the associat ion failed to properly conduct a vote of the unit owners on amendments to the condominium documents. The petitioner seeks an order determining that the amendments were improper and that the meeting and the notice of the meeting at which these amendments were allegedly passed were improper; further, the petitioner seeks an order requiring the respondent to properly set and notice a meet ing of the unit owners to consider the amendments and to forward full copies of all of the proposed amendments to the owners. The respondent contends that it fully complied with the documents and Chapter 718 and that the petitioner is estopped from raising this issue as it has already been decided adversely to the petitioner by the Department of Business and Professional Regulation. The respondent had sued the petitioner relating to a separate issue in the Circuit Court of the 1

2 Twentieth Judicial Circuit in and for Collier County, Florida and petitioner made this claim as a counterclaim in that action. The circuit court stayed that counterclaim action until arbitration could be pursued. On March 17, 1997, the association mailed a letter dated March 12, 1997, to all unit owners. The letter contained proposed amendments to specific sections of the amended and restated declaration of condominium and bylaws and proposed amended and restated articles of incorporation (not all packets contained a complete copy of all of the amendments as more fully set forth below). The letter also contained a ballot to approve or disapprove each amendment, a limited proxy, the condominium newsletter, the second quarter assessment fee invoice, and a self-addressed envelope to return the ballot, proxy and assessment fee. The letter indicated that ballots had to be received or postmarked no later than April 10, 1997 to be valid and that if a limited proxy was used to vote on the proposed amendments the proxyholder would have to be present at the April 16, 1997 board meeting for the vote to be valid. The letter also notified unit owners of a board of directors meeting, as follows: Notice is hereby given that a Board of Directors Meeting for the Villages of Emerald Bay will convene on Wednesday, April 16, 1997, at 7:00 p.m. in the Clubhouse to conduct regular association business and to determine the vote for the proposed amendments to the Declaration of Condominium and Bylaws and Restated and Amended Articles of Incorporation of the Villages of Emerald Bay Condominium Association, Inc. On March 20, 1997, Kenneth Purdy, president of the association, executed an Affidavit of Mailing of Notice to unit owners with a copy of the March 12, 1997 letter attached. The letter, with all of the enclosures, was copied and collated by a printing company. After mailing the letter, the board of directors received approximately five or six telephone calls from unit owners stating that they had not received copies of proposed amendments (I) and (J). 2

3 The unit owners that contacted the association subsequently received, by hand-delivery, a copy of the proposed amendments. Jerry Cattrell, a member of the board of directors at the time in question, stated in his affidavit that shortly after the March 12, 1997 packet was mailed, proposed amendments (I) and (J) were posted on the condominium property, at least 14 days prior to the April 16, 1997 meeting. However, petitioner Alice Sholty states in her affidavit that while she was aware that a notice was posted on the condominium property notifying the unit owners that they would be missing copies of proposed amendments (I) and (J), she did not see anywhere on the condominium property, prior to the April 16, 1997 meeting, copies of any of the proposed amendments. A second Notice of Meeting for the April 16, 1997 meeting was posted on the condominium property on April 14, The April 14, 1997 Notice of Meeting of the board of directors contained the date, time, and place of the meeting and the agenda for the meeting. The notice indicated that the meeting was a board of directors meeting. The agenda included the following matters: reading and approval of minutes, treasurer s report, committee reports and amendment to documents vote count. Cattrell further states in his affidavit that on April 16, 1997, a meeting was held of the board of directors of the association. While the letter of March 12, 1997 indicated that the ballots had to be received or postmarked no later than April 10, 1997, the board had been advised by counsel that valid ballots could be accepted until the April 16, 1997 meeting was called to order. Thus, the board accepted valid ballots until the April 16, 1997 meeting was called to order. At no time during the April 16, 1997 meeting were the unit owners allowed to vote on the proposed amendments to the condominium documents. Rather, the vote was conducted solely by the mail-in ballot. In order for the mail-in ballot to be valid, the board required that a proxy be included alo ng with the ballot. If the 3

4 unit owner brought the ballot to the meeting, the unit owner was required to sign in at the meeting for the ballot to be valid. A total of 172 ballots were received by the board prior to the time that the April 16, 1997 meeting was called to order. Of the 172 ballots received, 12 were voided for noncompliance (i.e., there was no proxy or the unit owner did not sign in at the meeting). At the April 16, 1997 meeting, the ballots were counted. There were 12 proposed amendments and the proposed Restated and Amended Articles of Incorporation. Five of the 12 proposed amendments passed by the required two-thirds vote. The Amended and Restated Articles of Incorporation also passed by the required two-thirds vote. The vote count for the amendments that passed was as follows: Amendment A 151 votes Amendment I 145 votes Amendment J 151 votes Amendment K 154 votes Amendment L 156 votes Amended and Restated Articles of Incorporation-154 votes Copies of the proposed amendments were available at the April 16, 1997 meeting. Following the meeting, an additional six ballots were received by the association; these were deemed void as untimely. The petitioner attended the meeting on April 16, 1997 and objected to the procedure being followed by the association. The amendment to Section 7.10 of the amended and restated declaration that was recorded gives the association the option of furnishing unit owners with annual financial statements instead of a financial report. The amendments to the amended and restated bylaws that were recorded give the president the power to take emergency action without approval of the board of directors under certain conditions (Section 5.2); provide that the proposed budget must include reserve accounts for any item for which the deferred maintenance expenses or replacement costs exceeds $10,

5 (Section 6.3); prohibit co-mingling of reserve and operating funds (Section 6.11) and provide that the disputes subject to arbitration are those defined by Chapter 718, Florida Statutes (Section 8.3). The parties agree that there was no written notice characterizing the April 16, 1997 meeting as a unit owner meeting and that the March 12, 1997 Notice of Meeting and April 14, 1997 Notice of Meeting mailed to the unit owners and posted on the condominium property did not characterize the meeting as a special meeting of the unit owners. The association recorded on November 7, 1997 at Official Records Book 2361, Page 2045, Public Records of Collier County, Florida, a certificate of amendment containing amendments to Section 7.10 of the Amended and Restated Declaration of Condominium; Sections 5.2, 6.3, 6.11 and 8.3 of the Amended and Restated Bylaws; and Amended and Restated Articles of Incorporation. The certificate of amendment indicated that the amendments and the amendment and restatement of the articles were passed at a special meeting of the members held on April 16, Section 21.1 of the declaration of condominium provides that amendments to the declaration may be accomplished if the amendment is approved by not less than sixty-six and two-thirds percent (66 2/3%) of the voting interests present, in person or by proxy, at any annual or special meeting. Section 9.3 of the bylaws provides that amendments to the bylaws may be accomplished by concurrence of two-thirds (2/3) of the voting interests present and voting at any annual or special meeting provided that notice of any proposed amendment has been given to all the members in accordance with Florida law. Section 4.1 of the bylaws provides that amendments to the declaration, bylaws and articles of incorporation require approval of the unit owners and may not be taken by the Board of Directors acting alone. Section 4.3 provides that written notice which notice must include an agenda, shall 5

6 be mailed or delivered to each unit owner at least 14 days prior to the annual meeting or any special meeting... Section (2)(d), Florida Statutes, provides in pertinent as follows: Unit owner meetings. * * * 4. Any approval by unit owners called for by this chapter or the applicable declaration or bylaws including, but not limited to, the approval requirement in s (5), shall be made at a duly noticed meeting of unit owners and shall be subject to all requirements of this chapter or the applicable condominium documents relating to unit owner decisionmaking, except that unit owners may take action by written agreement, without meetings, on matters for which action by written agreement without meetings is expressly allowed by the applicable bylaws or declaration or any statute which provides for such action. (Emphasis supplied). There are 216 voting interests in the association, thus 109 votes constitute a quorum (a majority) and 144 votes constitutes two-thirds of the total voting interests. DISCUSSION In the instant case, the association notified most of the unit owners of the proposed amendments to the bylaws, articles and declaration, but did not provide notice of either a regular or special meeting of unit owners or convene a meeting of unit owners. The notice provided by the association was for a meeting of the board of directors; in addition, the notice did not contain an agenda as required by Section 4.3 of the bylaws (written notice which notice must include an agenda, shall be mailed or delivered to each unit owner at least 14 days prior to the annual meeting or any special meeting... ). While the association posted notice of the meeting, including an agenda, 48 hours prior to the board of directors meeting on April 16, the notice is inadequate to meet the requirements of 14-day notice required by the bylaws. In addition, the 14-day notice given to the unit owners was inadequate in that it failed to contain an agenda or to designate the meet ing as a unit owner meeting. In that the statute and condominium documents requires that amendments to the 6

7 bylaws and declaration be voted on at a meeting of unit owners, and no such meeting was properly noticed or held, the association acted improperly by recording the amendments and representing them as having been approved by the unit owners at a meeting. Written agreement to the amendments by not less than two-thirds of the voting interests was obtained, however. According to the undisputed facts, each unit owner who participated in the vote submitted a ballot indicating whether the owner approved or disapproved of each proposed change, and the ballot was signed by the unit owner. Common sense demands consideration of the question of whether submission of these ballot documents was sufficient to effect the amendments. 1 Section (2)(d)4., Florida Statutes, which permits unit owners to take action by written agreement, applies only where such action is expressly allowed by the applicable bylaws or declaration or any statute which provides for such action. For the purpose of this inquiry, it is determined that the ballots, signed by the voting members, collectively evince the unit owners agreement to amend the documents as described in the ballots. Neither the declaration or the articles of incorporation provide that amendments may be approved by written agreement. Therefore, the amendment to Section 7.10 of the declaration, and the amended and restated articles of incorporation, are invalid. The bylaws do provide for written agreement, however, for changes. Section 3.9 of the bylaws provides as follows: Action by Members Without Meeting. Any action required or permitted to be taken at a meeting of the members may be taken without a meeting if a written agreement, setting forth the action to be taken, is signed by the members having not less than the minimum number of votes that would be necessary to take such action at a meeting, or a majority of the total votes of the entire membership, whichever is greater. Nothing in this paragraph shall be construed in derogation of members rights to call a special meeting of the 1 The respondent did not raise this issue in its answer; however, the arbitrator may properly consider it, especially in light of the fact that this matter is being decided without the filing of legal arguments. 7

8 membership, as elsewhere provided in these By-Laws. Thus, the amendments to the bylaws are valid. Prior to the filing of the petition for arbitration, the division investigated a complaint concerning the instant dispute. On April 16, 1998, Cardinal Mills, Enforcement Specialist with the Bureau of Condominiums, closed his investigative file indicating that the investigation has not disclosed any information on which to base any conclusions of the association s violation of the Statutes or rules. The respondent argues that the petitioner is estopped from raising this issue as it has already been decided adversely to the petitioner by the division. As a preliminary matter, it does not appear that the divisio n has taken any agency action with reference to the complaint filed. The division has merely closed its investigation file; there is no final order finding that the association has not violated the statute. Thus, it does not appear that a basis for finding estoppel has been established. Second, the action taken for the division by Mills does not bind the arbitrator. As pointed out by the petitioner, the division may not have had complete information concerning the dispute and may have decided to drop the case based on this lack of information. Finally, even if the division investigator and the arbitrator had the same information at their disposal, Section (4), Florida Statutes, provides that the arbitrator s decisions shall be final; however, such a decision shall not be deemed final agency action. Accordingly, the argument of estoppel is rejected. RELIEF AND REMEDY The evidence shows indisputably that the association failed to properly notice and conduct a meeting of unit owners for the purpose of amending the condominium documents. Therefore, the amendment to Section 7.10 of the declaration and the amendment and restatement of the articles of incorporation are invalid. However, the vote conducted constituted a written agreement of the 8

9 owners to amend the bylaws and this method of amending the bylaws is permitted. Based on the foregoing, it is ORDERED: 1. The amendment of Section 7.10 of the declaration, and the amended and restated articles, recorded on November 7, 1997 at Official Records Book 2361, Page 2045, Public Records of Collier County, Florida, are declared invalid. If the association wishes to amend the declaration and articles, it shall provide adequate notice and conduct a meet ing of unit owners as required by the declaration, articles, and Chapter 718, Florida Statutes. 2. The amendments to the bylaws are declared valid. DONE AND ORDERED this 28th day of April 1999, at Tallahassee, Leon County, Florida. Patricia A. Draper, Arbitrator Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida RIGHT OF APPEAL In accordance wit h Section , Florida Statutes, a part y adversely affected by this final order may appeal from the order by filing, within 30 days of entry and mailing of the order, a complaint for trial de novo with a court of competent jurisdiction within the circuit in which the condominium is located. This order does not constitute final agency action and is not appealable to the district courts of appeal. CERTIFICATE OF MAILING I HEREBY CERTIFY that a true and correct copy of the foregoing was mailed by U.S. mail, postage prepaid, to Robert E. Murrell, Esq., 2375 Tamiami Trail North, Suite 308, Naples, Florida 9

10 34103 and Michael K. Kiernan, Esq. and Kimberly A. Staffa, Esq., P.O. Box 1511, St. Petersburg, FL this the 28th day of April Patricia A. Draper, Arbitrator 10