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Leahy McLean Fjelstad
NON-CONFIDENTIAL LETTER
NO ATTORNEY-CLIENT PRIVILEGED ADVICE IS CONTAINED HEREIN
August 22, 2014
Board of Directors
Clearwood Community Association
21603 North Clear Lake Blvd SE
Yelm, WA 98597
RE: Concerns Regarding Annual Meeting and Election
Dear Members of the Board of Directors:
The letter responds to the request that we provide a non-confidential letter, distributable to non-Board
members without waiving the attorney-client privilege, which addresses certain questions that have
been raised about events surrounding the Annual Meeting. Because this letter does not contain
confidential advice and is not intended to be confidential, it may be distributed to owners if you so
decide.
1. The Association may Adjourn the Annual Meeting Until August 23 and Continue to Collect
Ballots, Pursuant to Section Vl(4) of the Bylaws.
The Annual meeting was originally scheduled for August 16. At the meeting, the Association was five
votes short of a quorum. It needed 227 ballots, but received only 222 ballots. Accordingly, the Board
called a recess until Saturday, August 23, relying on Section Vl(4) of the Bylaws, which states in pertinent
part:
Once established at the beginning of a meeting a quorum shall be considered present
throughout the meeting. However, should a quorum not be present at any meeting, the
members attending said meeting shall have power to adjourn it from time to time until a
quorum can be secured.
The question has come up whether the Association may temporarily suspend or recess the Annual
Meeting under that provision, or whether instead the Association must start the notice process over and
schedule a new Annual Meeting.
The first part of the inquiry into answering that question is to determine what the word adjourn
means in the Bylaws. Courts have said that, unless a specific definition is provided, the usual and
ordinary 1meaning of a word should be used. Honeywell, Inc. v. Babcock, 68 Wn.2d 239, 243 (1966). The
Oxford English Dictionary defines the term adjourn to mean: Break off (a meeting, legal case, or
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game) with the intention of resuming it later. The Merriam-Webster Dictionary defines the term as: To
suspend indefinitely or until a later stated time.
These dictionary definitions indicate that the Bylaws provision permits the Association to suspend the
meeting indefinitely or until a later-specified date for the purpose of obtaining a quorum. That
conclusion also matches up with the likely intent of the Bylaws provisionto allow the Association to
temporarily stop the meeting with the purpose of resuming it later, so that there is more time to obtain
a quorum without having to start the notice process all over again.
Here, the Association recessed the meeting for one week. There is no need to re-start the original notice
process set forth in Section Vl(3) of the Bylaws, since the Saturday, August23 gathering is a continuation
of the original Annual Meeting pursuant to Section VI. Although the Bylaws do not require mailing
formal notice of the date to which the meeting has been adjourned, informal notice of the recess was
emailed out to those who are members of the Associations broadcast-messages list, and posted at the
office and also at both gates to the community.
Another question is whether the Association may continue to collect ballots up until a given time on
Saturday, August 23. The answer to that question is yes. Section Vl(4) was intended to permit the
Association to suspend and resume the Annual Meeting. The primary purpose of that Annual Meeting is
the voting process. Given that the Annual Meeting may be suspended pursuant to Section Vl(4), the
voting process may continue until that Annual Meeting is resumed. To conclude otherwise would negate
the purpose of Section Vl(4).
Further, Section Vl(1) of the Bylaws, as amended, states in pertinent part that:
Member ballots shall be received at the CCA office or at the Annual Meeting no later than the
close of the voting period on the date of the Annual Meeting. Ballots will be registered and
counted at the annual Meeting. (Emphasis added.)
Here, pursuant to Section Vl(4), the Annual Meeting has been suspended and will resume on August 23.
Accordingly, the close of the voting period on the date of the Annual Meeting contemplated in Section
Vl(1) is on August 23.
2. All Owners Who are In Good Standing At the Time of the Annual Meeting (Scheduled to
Resume August 23) May Vote.
The Bylaws permit owners to become members in good standing up until the date and time of the
Annual Meeting. Here, the Annual Meeting is scheduled to resume August 23 at 9:00 a.m. Accordingly,
owners may still become members in good standing until that time. Section Vl(5)(a), as amended by
Resolution approved by the membership on August 18, 2012, states:
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Elections at the Annual Meetings shall soley be by mail or drop-in ballots received no later than
the close of the voting period on the date of the Annual meeting from members [ml good
standing, or their authorized agents. (Emphasis added.)
The Bylaws specifically define the term members in good standing. Section 1(5) of the Bylaws states
that the term means:
Assessments, special assessments, and all fines caused by violators are paid in full prior to
registration at a meeting or electio, and payments are current on a promissory note, submitted
at least 30 days prior to a meeting or election, which pays off all assessments by December 1st of
the year of the meeting or election. (Emphasis added.)
While the Annual Meeting was scheduled for August 16, the Association selected July 31 at the cutoff
for determining whether an owner was a member in good standing. However, technically the cutoff
date is the date of the Annual Meeting, whether or not the meeting was suspended pursuant to Section
Vl(4). This is because Section 1(5) states that paying in full prior to registration at a meeting or election
is sufficient to become a member in good standing, and Section Vl(1), as amended, states that ballots
are registered at the Annual Meeting. Accordingly, even if an owner was delinquent on July 31, they may
still vote if they become current by August 23rd.
3. The Owners Whose Accounts Showed Interest Owning In Connection With Gate-Card
Purchases Were In Good Standing and May Vote.
The Association replaced the gate-card system, which required owners to purchase new gate cards.
Some members opted to place the purchase of the cards on their lot accounts, to be billed in July and
due July 31st. On July 7, the Associations automated accounting system improperly added interest on
the accounts of those who placed the card purchase on their accounts. This made it appear that 94
Association members owed small amounts such as .52 cents even after they paid their bill.
The question was asked whether those owners affected by the accounting glitch were not in good
standing and accordingly were not entitled to vote. The answer is that their votes should count, for
various reasons set forth below.
The interest was technically not owed by the owners who placed the cards on their lot accounts.
The accounting scenario was discovered before the Annual Meeting and corrected. As explained
above, an owner may be in good standing so long as he is current on payments on the day of
the Annual Meeting.
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The owners who had interest placed on their accounts did not have delinquent accounts
because they never even received notice of the interest. Per Section lV(2) of the Bylaws,
payments are due and accounts are delinquent 30 days after notice of assessment.
Even if the cut-off for becoming a member in good standing was July 31, per Section IV(2), the
earliest the interest could have been due is August 6, assuming notice was hypothetically given
the same day that interest was placed on the account (July 7).
The interest does not qualify as an assessment, special assessment, or fine that must be paid
in order to be a member in good standing under the definition of the phrase in Section 1(5) of
the Bylaws. The governing documents do not define the term assessment. But the
Homeowners Association Act, RCW 64.38, which applies to the Association, does. It states that
an Assessment means all sums chargeable to an owner by an association in accordance with
RCW 64.38.020. Meanwhile, RCW 64.38.020, which lists an associations powers under that
statute, does not list interest as an amount that can be charged to an owner. Instead, the
authority to charge interest comes from the Bylaws, at Section IV(2).
4. Owners Who Have Not Yet Paid the $10 Sheriffs Stipend Assessment Before Registration of
Ballots on August 23 May Not VoteS
In July, owners received a water billing breakdown for the June billing cycle. The notices were
mailed out on July 1, and received by owners a day or two later. On that breakdown, the total
amount owing for the water billing was listed at the bottom in bold font. They also received a
statement on a second piece of paper, on which a $10 Sheriff Stipend was added to the water billing
total. This $10 assessment was overlooked by many owners, especially owners who had paid all of
their assessments up front for the year in January. In fact, about 30 percent of the January
assessment payers did not pay the $10 assessment. Assessments such as the $10 assessment are
not typically billed in July off cycle, so it was relatively easy to overlook. As a result, several owners
did not pay the $10 assessment until after the July 31 cut-off. Many have since paid the $10.
The question has come up regarding whether the Association should count the votes of those
owners who did not pay the $10 assessment by July 31. The answer is yes, but that the Association
should not count the votes of owners who do not pay the $10 assessment by August 23. This is for a
couple of reasons:
Per Section IV(2) of the Bylaws, payments are due and accounts are delinquent 30 days
after notice of assessment. Notices were not received until July 2 at the earliest.
Accordingly, the accounts for owners who did not pay would not have become delinquent
until August 1, 2014the day after the July 31st cut-off.
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Under Section 1(5) of the Bylaws, an owner has until registration at a meeting or election
to pay assessments, special assessments, and fines to be in good standing. Accordingly,
owners have until August 23 to pay the $10 if they have not already done so.
Arguably, the notice of the $10 fine was insufficient, given that a large percentage of
owners did not see the $10 amount in the July mailing. The individuals who did not pay
were predominantly those who had paid all other assessments up front in January, so they
were expecting only to pay the July water bill. These individuals were disproportionately
affected by the arguably insufficient notice. It would be improper to prevent this group
from being able to vote based on the small amount at issue and the fact that the failure to
pay was almost certainly inadvertent.
Based on the foregoing, the Association should count the votes of all owners who have paid the $10
assessment up to the voting cut-off time on August 23. Owners who have not paid by that time should
not be entitled to vote.
5. If Necessary, the Board May Be Made Up of Fewer Than Seven Members (But No Less Than
Three); However, the Current Seven Board Members May Continue To Serve For Now.
There is an inquiry about whether it would be permissible for the Board to operate with only five
members, given that there are questions about election validity and whether a quorum will be reached.
There are five continuing Board members at present, and two open seats, for which there were three
candidates. Article 5 of your Articles of Incorporation state that the Board shall consist of not less than
three (3) persons. The Bylaws, at Section 1(2), states that the number of directors who shall manage
the Association shall be seven; at any annual meeting or at any special meeting called therefore the
members may increase or decrease the number of directors to any number not more than nine nor less
than three.
As a practical matter, it is probably best if all seven seats are filledassuming the Association would
prefer to have seven Board members at any one time. This is because elections for certain seats are
staggered so that there is never a large influx of new, inexperienced Board members at any one time,
per Section V(2) of the Bylaws. Based on this consideration, the Bylaws state that Board members
continue to serve beyond three years if no new Board member is properly elected. Section V(2) of the
Bylaws states that Board members serve three years or until their successors are duly elected.
Accordingly, the current seven board members may continue to serve until the two open seats are filled
by election. (Similarly, RCW 24.03.100, a provision of the Nonprofit Corporation Act, states that each
Board member director shall hold office for the term for which the director is elected or appointed and
until the directors successor shall have been selected and qualified.)
If the two Board members whose seats are up for election this year would prefer not to continue to
serve until an election occurs, they may resign. In that event, the seats may remain open until the next
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election. Pursuant to Section 1(2), the Annual Meeting will serve as the meeting at which members chose
to decrease the number of directors to five by failing to elect two new members.
6. What Steps Should the Association Take Next?
It is common in a community in which an election has become emotionally charged that some subset of
the entire membership will object to and find fault with any decision a board makes. Accordingly, the
best option is typically to make a decision that appears to best comply with the governing documents
pursuant to a reasonable interpretation of them, and to take steps that appear in the boards judgment
to be in the best interest of the community.
Here, the Association needs two new board members. It has three people on the ballot who are ready
and willing to serve. Proper notice of the Annual Meeting was provided. At the August 16 meeting, the
election was stymied merely by missing the quorum by five votes. There were also some member
concerns about whether there were some owners who were not in good standing who nevertheless
voted. The Association may address these issues as follows:
The Association may remedy the quorum issue by resuming the Annual Meeting on August 23rd
as plannedassuming that it is able to obtain enough votes to reach quorum.
The Association may address the in good standing inquiry by counting the votes of all
members who are current in their assessments, special assessments, and fines by 10 a.m. on
August 23rd.
o This means counting the votes of those owners whose accounts improperly included
interest for the gate cards.
o This means counting the votes of those owners who owed the $10 assessment, so long
as they have paid the assessment by August 23rd.
If there is no quorum obtained by August 23rd, the seven current Board members may continue
to serve until a Board member decides to step down. If this is one of the Board members whose
seat was up for election this year, that seat remains vacant until the next election.
Assuming a quorum is obtained and an election occurs, owners who do not believe the election
was valid may propose to remove one or both of those new Board members pursuant to Section
V(7) of the Bylaws.
If the Association believes that it would be in the best interest of the Association to call a brand-new
Annual Meeting, that option is available as well. However, the time and expense of doing so would be
significant. And you may have to confront arguments from owners who content that the August Annual
Meeting involved a valid election under the Bylaws. Accordingly, we recommend that you move forward
with the August 23rd meeting as scheduled.
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Please let us know if there are any other questions we can answer for you. Due to time and expense
constraints, we cannot answer individual owner questions. But we would be open to speaking with a
lawyer representative of any owner with the Boards approval about the issues addressed in this letter.
Sincerely,
Leahy McLean Fjelstad

ison N. Peryea
Terrence A. Leahy
Attorneys for Clearwood Community Association
cc: Board of Directors, Clearwood Community Association.