Lake Forest Property Owners' Ass'n, Inc. v. Smith
Citation | 571 So.2d 1047 |
Parties | LAKE FOREST PROPERTY OWNERS' ASSOCIATION, INC. v. James C. SMITH, et al. 89-1285. |
Decision Date | 26 October 1990 |
Court | Supreme Court of Alabama |
Robert S. Edington, Mobile, for appellant.
Jeffrey W. Crabtree, Daphne, for appellees.
Lake Forest Property Owners' Association, Inc. ("the Association"), appeals from a declaratory judgment in favor of James C. Smith, Diane Millar, James Childs, and Susan D. Bedford, all members of the Association holding that the Association's board of directors was without authority to cast certain "residual" votes at its annual meeting.
The stipulated facts pertinent to this appeal are as follows: From 1971 until 1979, Lake Forest, Inc., developed and operated a "planned unit development" in Baldwin County, Alabama, that consisted of approximately 4,200 lots as well as a sewer system, water system, roads, and recreational facilities, including a country club, a golf course, a yacht club, and other amenities. On July 1, 1971, Lake Forest, Inc., granted the Association an option to purchase all of the common facilities in the development. Those common facilities consisted of the country club, the yacht club, the marina, the golf course, the lake, any facilities or area for the common use of Lake Forest members, and the guard and security service. The Association was incorporated on July 29, 1971, at which time it adopted its by-laws.
On October 19, 1978, at a special meeting of the Association, the membership voted to exercise the option. At that time, the Association also elected its board of directors. On February 2, 1979, Lake Forest, Inc., sold the common facilities to the Association. In November 1988, Lake Forest, Inc., merged with its parent corporation, Purcell Company, Inc. ("Purcell").
On October 16, 1989, the Association held its annual meeting, for the primary purpose of electing four members to the board of directors. The by-laws required that at least two people be nominated for each vacancy; consequently, the nominating committee recommended eight persons for the four available positions in the proxy it sent with the notice of the meeting. Prior to the meeting, several members, referred to as the "reform group," circulated a proxy proposing its own slate of directors.
The applicable section of the Association's by-laws dealing with voting states, in part:
(Emphasis added.)
Two weeks prior to the annual meeting, the Association's board of directors adopted a resolution that instructed the president to cast a total of 1,227 votes for its nominees. Of those votes, 1,184, the "residual" votes, represented each 1/4 acre of real property referred to in section 3.7 of the by-laws (the common areas), while 43 of the votes represented lots the Association owned. Pursuant to the resolution, the president also cast the same number of votes, 1,227, in favor of two amendments to the by-laws and in favor of a dues increase from $27.50 to $35.00 a month. 1 The results of the board of directors election were as follows:
The trial court entered an order based on the stipulated facts and made the following conclusions of Law:
The Association argues that, by virtue of its purchase of the common amenities and its assumption of the obligations of Lake Forest, Inc., it is the "successor" to Lake Forest, Inc., as that term is used in section 3.7 of the by-laws. The reform group nominees argue that Purcell, rather than the Association, is the successor to Lake Forest, Inc.
We recognize initially that because the facts below were undisputed, the ore tenus rule is inapplicable in this case. Instead, "the appellate court shall sit in judgment on the evidence de novo, indulging no presumption in favor of the trial court's application of the law to the facts." Justice v. Arab Lumber & Supply, Inc., 533 So.2d 538, 542 (Ala.1988) (citations omitted).
It is generally acknowledged that there is no precise legal definition of "successor" that would be applicable in all contexts. Safer v. Perper, 569 F.2d 87, 95 (D.C.Cir.1977). Rather, the determination of whether an entity is a "successor" is made on a case-by-case basis according to the facts. Howard Johnson Co. v. Detroit Local Joint Executive Board, 417 U.S. 249, 256, 94 S.Ct. 2236, 2240, 41 L.Ed.2d 46 (1974).
Although there are no Alabama cases dealing with the definition of "successor" in the precise factual context presented here, First National Bank of Birmingham v. Adams, 281 Ala. 404, 410, 203 So.2d 124, 129 (1967), supports the reform group's argument that Purcell, by virtue of the merger with Lake Forest, Inc., is, in fact, the successor to Lake Forest, Inc.:
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