Goodsell v. Eagle-Air Estates Homeowners Ass'n

278 P.3d 133, 249 Or. App. 639, 2012 WL 1611574, 2012 Ore. App. LEXIS 601
CourtCourt of Appeals of Oregon
DecidedMay 9, 2012
Docket10CV0207MA; A147007
StatusPublished
Cited by4 cases

This text of 278 P.3d 133 (Goodsell v. Eagle-Air Estates Homeowners Ass'n) is published on Counsel Stack Legal Research, covering Court of Appeals of Oregon primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Goodsell v. Eagle-Air Estates Homeowners Ass'n, 278 P.3d 133, 249 Or. App. 639, 2012 WL 1611574, 2012 Ore. App. LEXIS 601 (Or. Ct. App. 2012).

Opinion

*641 IIASELTON, C. J.

In the latest installment of long-running serial litigation, 1 plaintiffs appeal from the dismissal of this action seeking judicial removal, pursuant to ORS 65.327(1), of the defendant individual directors of a homeowners association, and defendants cross-appeal from the trial court’s denial of their request for attorney fees. In moving to dismiss under ORCP 21 A(8), defendants argued, and the trial court agreed, that plaintiffs’ invocation of ORS 65.327(1) impermissibly conflicted with the association’s bylaw provision pertaining to removal of directors, as well as with other provisions of ORS chapter 65 and ORS chapter 94. We conclude that the trial court erred in that regard — and, specifically, that the bylaw and statutory removal provisions to which defendants and the trial court referred are nonexclusive and that ORS 65.327(1) supplements, without contradiction, those provisions. Accordingly, we reverse and remand on appeal and dismiss the cross-appeal as moot.

A detailed description of the underlying dispute would be gratuitous. It suffices to say that plaintiffs and the individual defendants are all members of the defendant homeowners association and planned community subdivision, consisting of 12 lots. Plaintiff Goodsell was also a developer of the subdivision. The defendant association was established as a nonprofit corporation in 1991, and, at various times, both the individual plaintiffs and the individual defendants have served as members of the association’s three-member board of directors. Even more to the point, the relationship between the individual plaintiffs and the individual defendants has been mutually antagonistic. For example, when the individual plaintiffs were serving as directors of the association, defendant Morgan asserted, in the course of litigating derivative claims, that those plaintiffs had abused their authority and discretion as directors, and Morgan unsuccessfully sought an order removing them as directors.

*642 The individual plaintiffs’ terms as directors of the association expired in 2006, and the individual defendants succeeded those plaintiffs as directors. In March 2010, plaintiffs brought this action, alleging that the individual defendants had breached their fiduciary duties as directors in a variety of particulars, including engaging in impermissible self-dealing, and seeking their removal pursuant to ORS 65.327(1). That statute, which is set out more fully below, provides, in part:

“(1) The circuit court of the county where a corporation’s principal office is located, or if the principal office is not in this state where its registered office was last located, may remove any director of the corporation from office in a proceeding commenced either by the corporation, at least 10 percent of the members of any class entitled to vote for directors, or the Attorney General in the case of a public benefit corporation if the court finds that:
“(a) The director engaged in fraudulent or dishonest conduct, or gross abuse of authority or discretion, with respect to the corporation, or the director has violated a duty set forth in ORS 65.357 to 65.367; and
“(b) Removal is in the best interest of the corporation.”

Defendants moved under ORCP 21 A(8) to dismiss the complaint. They asserted, essentially, that judicial removal under ORS 65.327(1) was inapposite to directors of homeowners associations, by virtue of ORS 94.640(6), 2 and that the provisions of the association’s bylaws pertaining to removal of directors were exclusive and preclusive. In particular, defendants invoked Article III, section 5, of the bylaws, which states, in pertinent part:

*643 “At any regular special meeting of the Association duly called, any one or more of the members of the Board of Directors may be removed, with or without cause, by a majority vote of the Owners of Lots, and a successor may then and there be elected to fill the vacancy thus created. A director whose removal has been proposed by the Owners of Lots shall be given at least ten (10) days’ notice of the calling of the meeting and the purpose thereof and shall be given an opportunity to be heard at the meeting.”

Plaintiffs remonstrated that “the provisions of ORS Chapter 65 [including ORS 65.327(1)] apply to all non-profit corporations, including [the defendant association], unless they conflict with provisions of the Planned Community Act” in ORS chapter 94 and that there was no such conflict because,

“[a]lthough ORS 94.640(6)(a) and Article III, § 5 of [the association’s] bylaws both provide that a director may be removed, with or without cause, by a vote of a majority of owners, there is nothing in those provisions that provides that removal of directors can be accomplished exclusively through a membership vote. ORS Chapter 60 on private corporations and ORS Chapter 65 on non-profit corporations both contain provisions for shareholder or member removal of directors, ORS 60.324 and 65.324, as well as judicial removal of directors, ORS 60.327 and 65.327. It is disingenuous to argue that a court can remove a board member of a private or non-profit corporation for gross abuse of authority or discretion, ORS 60.327 and 65.327, but that a board member of a homeowners association that is a non-profit corporation cannot be removed by a court for the same misconduct.”

Ultimately, the trial court agreed with defendants and dismissed the action. In so ruling, the court explained:

“From the Court’s perspective the parties have requested and they’re asking and specifically 327 and — I believe it’s 65.327, the application of that and asking the Court to get involved in the Homeowners Association for purposes of determining who can and can’t be on the board * * * delineates exactly why the Court should not be involved. This is an issue that is left to the parties to decide. The board — the homeowners’ members to decide.

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Related

Goodsell v. Eagle-Air Estates Homeowners Ass'n
383 P.3d 365 (Court of Appeals of Oregon, 2016)
Eagle-Air Estates Homeowners Ass'n v. Haphey
354 P.3d 766 (Court of Appeals of Oregon, 2015)
WSB INVESTMENTS, LLC v. Pronghorn Development Co.
344 P.3d 548 (Court of Appeals of Oregon, 2015)

Cite This Page — Counsel Stack

Bluebook (online)
278 P.3d 133, 249 Or. App. 639, 2012 WL 1611574, 2012 Ore. App. LEXIS 601, Counsel Stack Legal Research, https://law.counselstack.com/opinion/goodsell-v-eagle-air-estates-homeowners-assn-orctapp-2012.