Weekly Law Resume - August 15, 2013: A Homeowner’s Lawyer May Not Attend HOA Meetings Without HOA Approval

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SB Liberty, LLC v. Isla Verde Association, Inc.
Court of Appeal, Fourth Appellate District, Division One (May 22, 2013)

In 2006, Gregg and Janet Short purchased a home in the Isla Verde residential community located in Solana Beach, California. They transferred the title to themselves as trustees of their family trust. Defendant, Isla Verde Association, Inc. is a nonprofit mutual benefit corporation that is comprised of the Isla Verde homeowners association (“HOA”).

The Shorts submitted architectural plans to the HOA for the remodel of their house. The plans led to a dispute between the Shorts and the HOA regarding scope of construction. Litigation ensued and the Shorts retained counsel, Peter Lepiscopo (“Lepiscopo”), who notified the HOA’s attorney, William Budd (“Budd”), that he represented the Shorts. Lepiscopo informed Budd that he would attend the September, 2011 Board meeting as the Shorts attorney.

Budd advised Lepiscopo that he would not attend the September, 2011 Board meeting and requested that Lepiscopo refrain from attending, noting that the Rules of Professional Conduct prohibit communications with a represented party without permission from that party’s attorney. Lepiscopo persisted and went to the September, 2011 Board meeting. He was told to leave and refused. The Board meeting was adjourned and held at a Board member’s private residence.

The next day, the Shorts, as trustees of the family trust, recorded a grant deed conveying ownership of their residence to SB Liberty LLC (“SBL”). SBL was owned by the Shorts and managed by Gregg Short, the sole manager. A week later, the Shorts, as trustees of their trust, and Gregg Short as manager of SB Liberty, executed a power of attorney giving Lepiscopo the right to present motions and requests to the Board and participate at Board meetings on the Shorts’ behalf.

Lepiscopo notified Budd that he would attend the Board’s October 2011 meeting on the Shorts behalf. Budd replied that the power of attorney did not allow Lepiscopo to make motions because he was not a “member” of the HOA. Lepiscopo also was not granted the power to vote by proxy. Nevertheless, Budd forwarded Lepiscopo’s request to attend the October board meeting to the HOA to consider during a closed executive session. The Board voted to exclude Lepiscopo’s attendance at the membership meeting and he left.

In late October, 2011, SBL filed a complaint against the HOA seeking injunctive relief, refund of alleged unlawful increases in annual dues, civil penalties and declaratory relief. SBL then sought a preliminary injunction restraining and enjoining the HOA and its Board from preventing SBL’s legal counsel, Mr. Lepiscopo, from (1) presenting motions to the HOA prior to meetings; and (2) attending the November, 2011 and all future Board meetings.

SBL argued that the HOA was a quasi-governmental entity and that SBL’s loss of HOA and membership rights via exclusion of their attorney representative would cause irreparable harm. The HOA argued that there was no legal basis for allowing a member’s legal counsel to appear before the Board without the Shorts present or the HOA’s attorney present. Lepiscopo was not an officer or member of SBL and SBL’s power of attorney did not grant Lepiscopo rights of membership or ownership in SBL’s real property.

The trial court denied SBL’s motion for preliminary injunction. It was undisputed that SBL became a member of the HOA when the Shorts transferred ownership of their lot to SBL. However, Lepiscopo was not a member of SBL. The parties failed to point to a provision of the HOA Articles or by-laws that would allow transfer of membership rights from member SBL to Lepiscopo. The court rejected SBL’s claim that exclusion of Lepiscopo violated SBL’s First Amendment rights because SBL, via its manager or owners (the Shorts), was free to appear at the meetings.

SBL appealed. The Court of Appeal affirmed the trial court’s order denying SBL’s motion for a preliminary injunction. Pursuant to Civil Code section 1363.05 and the governing documents, only “members” may attend Board meetings. Although SBL was a member of the HOA as the owner of the Shorts’ lot, SBL was not entitled to send its non-member legal counsel to Board meetings on its behalf. Here, Greg Short was the sole manager of SBL and Lepiscopo was not a member of SBL. Therefore, SBL and/or its manager could not delegate management authority to him.

The PC&R’s also prohibited SBL from transferring its membership rights to Lepiscopo except for the right to vote by proxy. Here the Shorts did not expressly give Lepiscopo the right to vote on SBL’s behalf. The Board held the authority to determine how to conduct its meetings and the power to exclude a non-member from attending. SBL failed to show it would suffer irreparable harm or violation of its First Amendment rights by the exclusion of Lepiscopo from the Board meetings. Rather, SBL was free to attend and participate at Board meetings through its members or its manager, Gregg Short.

COMMENT

An HOA’s governing documents will dictate whether and to what extent non-members may participate at HOA’s Board meetings. Counsel representing a particular HOA member may not participate at HOA meetings unless expressly authorized by HOA governing documents and/or HOA board approval.

For a copy of the complete decision see:

http://www.courts.ca.gov/opinions/documents/D061261A.PDF

Topics:  HOA, Legal Representatives

Published In: Business Organization Updates, Civil Procedure Updates, Civil Remedies Updates, Residential Real Estate Updates, Wills, Trusts, & Estate Planning Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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