Scope and Purpose of the Davis-Sterling Act

“In 1985, the Legislature enacted the Davis–Stirling Act as division 2, part 4, title 6 of the Civil Code, ‘Common Interest Developments' (Secs. 1350–1376; Stats.1985, ch. 874, Sec. 14, at 2774–2787), which encompasses community apartment projects, condominium projects, planned developments and stock cooperatives (Sec. 1351(c)). ‘A common interest development shall be managed by an association which may be incorporated or unincorporated. The association may be referred to as a community association.’ (Sec. 1363(a).)” (Diamond v. Super. Ct. of Santa Clara Cnty. (2013) 217 Cal.App.4th 1172, 1183-84 citing Lamden v. La Jolla Shores Clubdominium Homeowners Assn. (1999) 21 Cal.4th 249, 253, fn. 1.)

The Act “applies and a common interest development is created whenever a separate interest coupled with an interest in the common area or membership in the association is, or has been, conveyed, provided, all of the following are recorded: [¶] (a) A declaration. [¶] (b) A condominium plan, if any exists. [¶] (c) A final map or parcel map....” (Id., Sec. 1352.)

A planned development is one “having either or both of the following features:

1. The common area is owned either by . . . the association or in common by the owners of the separate interests who possess appurtenant rights to the beneficial use and enjoyment of the common area. [¶]
2. A power exists in the association to enforce an obligation of an owner of a separate interest with respect to the beneficial use and enjoyment of the common area by means of an assessment which may become a lien upon the separate interests in accordance with Section 1367.”

(Civ. Code, Sec. 1351(k).)

A ‘separate interest’ is ‘a separately owned lot, parcel, area, or space.’ (Id., 1351(l)(3).) A ‘[c]ommon area’ is ‘the entire common interest development except the separate interests therein. The estate in the common area may be a fee, a life estate, an estate for years, or any combination of the foregoing. However, the common area for a planned development specified in paragraph (2) of subdivision (k) may consist of mutual or reciprocal easement rights appurtenant to the separate interests.’ (Id., subd. (b).) (Committee to Save v. Beverly Highlands (2001) 92 Cal.App.4th 1247, 1262.)

Davis-Sterling Act, Corporations Code, and Elections

Where a “[t]rial court ruled that the [nonprofit mutual benefit corporation's ownership and governance of non-buildable lots] was a common interest development within the meaning of the Davis-Stirling Act[,]... under Corporations Code section 8724, therefore, the approval of 100 percent of the members was required for dissolution of the Association and a transfer of the Association's assets. (Committee to Save v. Beverly Highlands (2001) 92 Cal.App.4th 1247, 1262-63)

Relevant Sections of the Corporations Code

Corporations Code section 8724 provides: “Without the approval of 100 percent of the members, . . . so long as there is any lot, parcel, area, apartment or unit for which an owners association (as defined in Section 11003.1 of the Business and Professions Code and created in connection with any of the forms of development referred to in Section 11004.5 of the Business and Professions Code) is obligated to provide management, maintenance, preservation or control:

1. The owners association or any person acting on its behalf shall not:
1. Transfer all or substantially all of its assets; or
2. File a certificate of dissolution
2. No court shall enter an order declaring the owners association duly wound up and dissolved.”

(Committee to Save v. Beverly Highlands (2001) 92 Cal.App.4th 1247, 1263 n. 6; see also Corp. § 8724.)

Election Validity and the Courts

Corporations Code Section 7527 provides:

"An action challenging the validity of any election, appointment or removal of a director or directors must be commenced within nine months after the election, appointment or removal. If no such action is commenced, in the absence of fraud, any election, appointment or removal of a director is conclusively presumed valid nine months thereafter."

“Section 7616 of the Corporations Code refers to "Judicial determination of validity of election or appointment." It appears in chapter 6, part 3, division 2, title 1 of the Corporations Code. Chapter 6 addresses voting of memberships. Section 7616 provides, in pertinent part, that "[u]pon the filing of an action therefor by any director or member or by any person who had the right to vote in the election at issue, the superior court of the proper county shall determine the validity of any election or appointment of any director of any corporation." (Subd. (a).) The section does not contain a limitations period.” (Committee to Save v. Beverly Highlands (2001) 92 Cal.App.4th 1247, 1264.)

“Section 7527 refers to "any election, appointment or removal of a director or directors." (Subd. (a).) It appears in an article on provisions relating to the election of directors. The language of the section, as well as the context in which it appears, suggests that the only elections to which it applies are elections "of a director or directors.” (Committee to Save v. Beverly Highlands (2001) 92 Cal.App.4th 1247, 1264-66 citing California Mfrs. Assn. v. Public Utilities Com. (1979) 24 Cal.3d 836, at 844.)

“Section 7616 refers to ‘election or appointment of any director of any corporation.’ (Subd. (a).) ... Subdivision (c) of section 7616 requires ‘a copy of the complaint to be served upon the corporation and upon the person whose purported election or appointment is questioned.’ In other words, subdivision (c) presupposes that the election is of a person, i.e., a director. Therefore, section 7616 does not mandate the interpretation of the term "election" in section 7527 as applying to any election, not merely an election for directors.” (Committee to Save v. Beverly Highlands (2001) 92 Cal.App.4th 1247, 1264-66 citing Lungren v. Deukmejian (1988) 45 Cal.3d 727, California Mfrs. Assn. v. Public Utilities Com., supra, 24 Cal.3d at p. 844.)