Harlan v. Frawley Ranches Pud Homeowners Ass'n
2017 SD 54
| S.D. | 2017Background
- Robert and Geneieve Harlan own a parcel subject to a Declaration of Covenants recorded in 1993 that automatically renews (originally 20-year terms) unless 90% of members vote to terminate or amend at an election.
- The HOA has 35 voting interests; Frawley Ranch, Inc. held five of those votes and membership/voting rules limit one vote per lot.
- At an annual meeting (June 5, 2013) the HOA decided to amend the Declaration to change renewals from 20 years to 5 years and to conduct the vote by email; Secretary Todd Knutson emailed instructions that non-reply would be treated as a NO vote.
- The HOA tallied replies and recorded a certificate of renewal/amendment on September 20, 2013, asserting a 90%+ affirmative vote; the Harlans sued seeking declaratory relief and quiet title contesting the validity of the email vote and the tally.
- The circuit court upheld the email vote, found 32 yes / 3 no (91.43%), and applied affirmative defenses (waiver, laches, estoppel); the Supreme Court affirmed that email voting was permitted but reversed the finding that 90% voted in favor because several counted affirmative votes did not comply with the HOA’s adopted email-only voting rule.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Declaration/bylaws required an in-person/member meeting election to amend covenants | Harlan: Amendment vote must occur at an annual or special member meeting; email vote invalid | HOA: Declaration is silent on meeting requirement; bylaws do not mandate meeting-only voting; HOA may adopt rules and used email | Court: Declaration and bylaws do not require an in-person meeting; email election permitted |
| Whether affirmative defenses (waiver, laches, estoppel) bar Harlan’s challenge | Harlan: Lacked material knowledge; could not have waived or been estopped | HOA: Harlans participated in email vote and thus waived right to insist on meeting vote | Court: Declined to decide after resolving statutory/contractual issue; affirmed lower court on these defenses but said resolution unnecessary given other holdings |
| Whether Frawley Ranch’s corporate votes required proxies/resolutions | Harlan: Propp needed proxy or corporate resolution to cast Frawley Ranch’s five votes | HOA: Propp, as President, could cast votes for lots owned by Frawley Ranch | Court: No proxy required here (bylaws proxy rule applies to meetings, not this email election); Propp validly exercised those votes |
| Whether the recorded tally met the 90% affirmative-vote threshold under HOA’s adopted voting rules | Harlan: Several counted yes votes didn’t comply with the email-reply rule (Roth via daughter’s email, Billings by text, Knutson’s unemailed mental vote), so 90% threshold not met | HOA: Members’ intent to vote yes suffices; spreadsheet tally reflected required percentage | Court: The HOA adopted a clear email-reply rule binding on members; votes not cast by reply email must be treated as NO; circuit court erred in counting noncompliant yes votes; remanded to address recorded amendment |
Key Cases Cited
- Halls v. White, 715 N.W.2d 577 (S.D. 2006) (covenant interpretation is reviewed de novo using contract rules)
- Countryside South Homeowner’s Ass’n v. Nedved, 737 N.W.2d 280 (S.D. 2007) (restrictive covenants are contractual and bind both association and lot owners)
- St. John’s Hosp. Med. Staff v. St. John Reg. Med. Ctr., Inc., 245 N.W.2d 472 (S.D. 1976) (bylaws and rules bind both an association and its members)