David Hannemann v. William McFarland

THIS OPINION HAS NO PRECEDENTIAL VALUE. IT SHOULD NOT BE
CITED OR RELIED ON AS PRECEDENT IN ANY PROCEEDING
EXCEPT AS PROVIDED BY RULE 268(d)(2), SCACR.

THE STATE OF SOUTH CAROLINA
In The Court of Appeals

David Hannemann, as President of the Live Oak Village
Homeowner's Association, Inc., Respondent,

v.

William McFarland, Appellant.

Appellate Case No. 2020-001029

Appeal From Dorchester County
James E. Chellis, Master-in-Equity

Unpublished Opinion No. 2023UP306
Heard May 4, 2023 – Filed September 6, 2023

VACATED

Russell Grainger Hines, of Clement Rivers, LLP, of
Charleston, for Appellant.

James Bernard Hood and Virginia Rogers Floyd, both of
Hood Law Firm, LLC, of Charleston, for Respondent.

PER CURIAM: In this declaratory judgment action, Appellant William McFarland
challenges an order of the master-in-equity granting summary judgment to
Respondent David Hannemann and declaring Hannemann to be the duly elected
President of the Live Oak Village Homeowners Association (HOA). Among many
other arguments in his brief, McFarland maintains that Hannemann was required to
obtain the authorization of the HOA's Board of Directors (Board) to initiate this
action. We agree.

Initially, we note that the master did not directly rule on this argument, despite
McFarland's request in his Rule 59(e), SCRCP, motion for such a ruling. However,
in responding to McFarland's judicial estoppel argument, the master stated that the
HOA was "not a party to the present lawsuit." Carrying this statement to its logical
conclusion, the master did not consider the Board's approval necessary in order for
Hannemann to file this action. As we explain below, the failure to file this action on
the HOA's behalf precluded the master's declaratory judgment from having any
binding effect.

Hannemann argues he was not required to obtain the HOA's approval in order
to bring this action because he did not bring it on the HOA's behalf. He argues that
he brought this action "as President, individually." Yet, he seeks a judgment
declaring him to be the duly elected President of the HOA, which undoubtedly would
affect the rights of the HOA and its constituent members. The requested declaratory
judgment requires a determination of the validity of the HOA's election of Board
members and the Board's election of officers. It logically follows that the same
Declaratory Judgments Act that authorizes such a determination—one that strikes at
the very heart of HOA activity—also requires conferring party-status on the HOA
in order for the determination to bind the HOA. See S.C. Code Ann. § 15-53-80
(2005) ("When declaratory relief is sought[,] all persons shall be made parties who
have or claim any interest [that] would be affected by the declaration, and no
declaration shall prejudice the rights of persons not parties to the proceeding."
(emphases added)); see also S.C. Dep't of Soc. Servs. v. Wilson, 352 S.C. 445, 452,
574 S.E.2d 730, 734 (2002) ("The fundamental requirement of due process is the
opportunity to be heard at a meaningful time and in a meaningful manner.").
Likewise, Hannemann's request to compel McFarland to convey HOA records to
Hannemann, which undoubtedly affects the HOA, cannot be fulfilled by an order
that does not bind the HOA due to its non-party status.

Hannemann's position is that it is impossible to name the HOA as a party and
obtain the Board's authorization to do so because the judicial declaration of the
validity of elections must precede any official Board action such as authorizing a
lawsuit. We reject this argument. Hannemann cannot credibly argue that the HOA
was functional for the purpose of validly electing him as a Board member and as
President yet dysfunctional for the purpose of allowing the Board to authorize this
lawsuit on the HOA's behalf. The true non sequitur before this court is Hannemann's
request for a declaration purporting to bind an entity that is not a party to this action.

Therefore, Hannemann was required to obtain the Board's authorization to file
this action on the HOA's behalf. Section 4(E) of the By-laws, entitled "Action Taken
Without a Meeting," states:

The directors shall have the right to take any action in the
absence of a meeting of the directors which they could
take at a meeting by obtaining the written approval of all
the directors. Any action so approved shall have the same
effect as though taken at a meeting of the directors.

(emphasis added). 1 Hannemann's other options would have been to obtain the vote
of one other director at either a regular Board meeting or a special meeting, with at
least three days' advanced notice being given to the other directors for the special
meeting. See By-laws § 4(A) (providing for the HOA's affairs to be managed by a
board of three directors); By-laws § 5 (providing for regular monthly meetings
without notice and special meetings after at least three days' notice; defining a
quorum as a majority of the directors; and requiring a majority vote at a meeting at
which a quorum is present for an act or decision to be regarded as an act of the
Board).

Based on the foregoing, the master erred by entertaining this action without
prior authorization from the Board to file this action on the HOA's behalf. In the
absence of the HOA as a party to this action, the master's order has no binding effect
and must be vacated.

1
Likewise, section 6(D) of the By-laws, entitled "Actions without Meetings," states:

To the extent now or from time to time hereafter permitted
by the law of South Carolina, the directors may take any
action which they might take at a meeting of directors
without a record of any such action so taken, signed by
each director, to be retained in the [HOA's] minute book
and given equal dignity by all persons with the minutes of
meetings led and held.
CONCLUSION

Accordingly, we vacate the master's order granting summary judgment to
Hannemann.

VACATED.

WILLIAMS, C.J., and GEATHERS and VERDIN, JJ., concur.