The homeowner (HO) filed a complaint alleging that his homeowner association (HOA) improperly adopted a unified trash collection program. He argued that the Declaration of Covenants prohibited such a program unless the membership properly adopted an amendment to the Declaration. He also argued that a majority vote of 2/3rds of all the unit owners was necessary to raise the assessment in order to pay for the new program.
The evidence at the hearing showed that the Declaration did not refer to trash collection procedures at all, only the house rules did so; and the governing documents gave the board of directors the right to change the house rules; that at a special meeting, the members adopted the increased assessment by a vote of 2/3rds of those present at the meeting.
The panel held that since the Declaration did not specifically govern the trash collection procedures, it was not necessary to amend the Declaration at all; and the board of directors had the authority to amend the rules under its general grant of authority and under its specific authority to protect the health, safety and welfare of the residents. As a result, the vote of the membership was not required. The panel further held that the board properly amended the HOA's rules and that under the "business judgment" rule, the board's decision must be upheld unless there was evidence to show bad faith, fraud, or incompetence, none of which was shown. The panel excluded a witness proposed by the HO, who was to testify about the wisdom and availability of other methods of trash control, on the grounds that under the "business judgment" rule "the panel need not inquire into the wisdom of the decision of the Board of Directors or the association, merely as to whether the procedure followed in deciding and implementing the change was within the authority of the board in exercising its good faith discretion in accordance with the association documents and with applicable law." As to the adoption of the assessment increase, the panel held that under the governing documents, a 2/3rd majority of those present and voting was sufficient, and that the HOA had in fact obtained such a majority vote.
The panel ordered that the complaint be dismissed.