by Brenda Grantland, 1/12/2018
This is Part III of a series of blog posts about a local nonprofit I am a member of – Tamalpais Valley Improvement Club. (http://truthandjusticeblog.com/tvic-3)
Nonprofit organizations’ boards of directors can’t just do whatever they want to do. The California Corporations Code imposes extensive legal requirements on nonprofit organizations. Nonprofits also have to obey their “governance documents” — Articles of Incorporation and Bylaws.
Corporations are required to file their current Articles of Incorporation with the Secretary of State. The Articles tell what kind of organization it is, its purpose, powers, any restrictions on its activities, etc.
Nonprofit organizations are also required to promulgate bylaws, which govern how the nonprofit is run, the number of directors and their terms, voting rights of members, and the powers of the board of directors. Bylaws are not filed in the Secretary of State’s office, but must be kept in the business records of the organization and made available for inspection by members, upon request. Bylaws, once adopted by an organization, are binding on the organization and the board unless and until they are amended.
When this controversy arose about the TVIC board’s actions, I wanted to see if they had the authority to do what they did. I ordered the TVIC articles of incorporation from the Secretary of State and asked the TVIC board for the bylaws. The board sent me the bylaws and the “Amended Articles of Incorporation” that the TVIC board had passed in secret in July 2016. They were stamped filed by the Secretary of State on December 14, 2016.
In reviewing the meeting minutes, the amendments to the articles of incorporation and bylaws, I found a number of apparent legal problems with the board’s actions.
1. Term limits of directors
One or more of the directors appear to have exceeded their term limits.
Initially in 2015 there were five directors on the board. When Kevin Kearney resigned in 2015, they never filled his seat, leaving only 4 directors. Of these four directors, all of them except Roberta Ricketts was on the board when I was on the board in 2001-2002.
The most recent bylaws, which I got from Curry Eckelhoff (downloadable below), say board members serve 2-year terms with a maximum of 2 consecutive terms. (Bylaws Art. V. Sec. 3). The directors are elected by the members at the annual meeting of members (Bylaws Art. V Sec. 3). There is supposed to be a minimum of 7 directors and maximum of 9 (Bylaws Art. V Sec. 1). If vacancies occur the existing directors are supposed to appoint a temporary directors who will serve until the annual meeting, when directors are elected to fill vacated seats by directors whose terms have ended. (Bylaws Art. V Sec. 3).
The TVIC Board minutes for 2015 – 2017 show that the board never had 7 directors during that period. Five was the most it ever had. For most of this time it had only 4 directors. When Kevin Kearney resigned in 2015, the board made no move to fill the vacancy. (See Minutes 8-26-2015). The minutes show they decided to delay filling a vacancy until after the transfer of the Community Center to TCSD. (See Minutes for 5-7-2015).
Any director who had exceeded the maximum of two consecutive two-year terms did not qualify for reelection and had no right to vote on the board actions – the transfer of the Community Center and the amendment of the articles of incorporation. That defect can’t be cured. Their signatures on the documents transferring title were invalid in transferring title.
2. The 2016 amendments of the Articles of Incorporation
The TVIC board minutes show that the board thought it was urgent to amend the Club “bylaws” (as they originally called it) or “articles of incorporation” (as they later called it) before they could complete the transaction with the community center. (See minutes for 5-7-2015). I haven’t found out why they thought that.
What they ended up doing was merging the bylaws into the articles of incorporation, and omitting or changing the bylaws they didn’t like.
It is not done that way. Bylaws and Articles of Incorporation are two separate things.
To the extent the combo document modifies existing bylaws it is void. Under the existing bylaws, which govern the board’s actions and powers, amending the bylaws requires a 2/3 majority vote of the members (Bylaws Art. VIII). The TVIC board didn’t even tell members about their attempt to amend them, much less allow the members to vote on it.
Curry and Olivia made false statements under penalty of perjury in the affidavit they submitted to the Secretary of State when they said the Articles had been approved by the required vote of the members. (See page 1 of the document TVIC_Amended ArticlesofIncorporation.pdf, which you can download below.)
Members also have a right to vote on any amendment of the Articles of Incorporation that changes the character of the organization. Their amended articles changed TVIC from a public benefit organization (a phrase that still appears on the minutes) which was restricted to activities permitted to 501(c)(3) organizations – to a general nonprofit. They took out the language in the Articles of Incorporation that said the property was irrevocably dedicated to charitable (IRS Sec. 501(c)(3) purposes). The TVIC board’s lawyer told me that giving the community center to a public agency does not violate that clause. She may be right, but if so, why did they take out that clause which has been in the Articles of Incorporation for decades?
3. Conflicts of interest between the two boards involved in giving away the community center
TVIC director and board secretary Olivia Jacobs is the wife of TCSD board member Jim Jacobs.
Jeff Brown, who is on the TCSD board, is the current director of the (TVIC) Rhubarb Revue.
TVIC director Roberta Ricketts also serves on the TCSD Parks and Recreation Board.
The board minutes for 1-7-2016 show the TVIC board is looking for new board members “with a knowledge of the valley and the interests of the TVIC” and purposely sought members with TCSD ties. Of the three names suggested, one was on TCSD Parks and Rec, and one had applied for a job with the TCSD.
4. Consideration for transfer of the community center
In contracts law, “consideration” is a legal term for the value party A gives to party B in exchange for what party B is giving party A. TVIC was giving away ownership of the community center, in exchange for $1 and TCSD’s promise to pay “up to $75,000” to build or erect a storage room for TVIC historical archives.
The TVIC board may have decided that was enough for them, but some of the Club’s members would adamently disagree.
Although it happened before my time as a Tam Valley resident, I know from my research that the community center was purchased and built by community members who donated land, labor, and money to the TVIC. Andy Allen’s father Joe Allen was the architect who designed the community center. Many people including my friends and former neighbors Keith and Jeanne Jensen, and the late Joe and Esther Allen, donated many hours of uncompensated labor building it and improving it. These people and their descendants have a stake in the property as TVIC members. What did this deal give the members that was adequate to compensate for what the members would be giving up?
TCSD’s promise to pay “up to $75,000” on an archives storage structure is vague and possibly illusory. Spending a mere $350 on the structure would meet the definition of “up to $75,000.”
How do the club members benefit from a storage structure for TVIC historic archives? Any documents or photos could easily and inexpensively be scanned and stored on the website.
5. Were there really any duly elected board members on the board when they did this?
I asked TVIC’s lawyer whether the board called a special meeting of the TVIC members to approve the amendment of the Articles/Bylaws and transfer of the community center. She answered “Brenda, yes, correct, no member meetings. I think there was confusion as to what exactly was required for these various steps. So, I am advising TVIC to now schedule one or more member meetings to raise the issues and permit the members to discuss and vote on them. Obviously not ideal to do this after the transfer of the property, but I think that is the best we can do right now. Of course, you as one of the members will get the notices etc and are encouraged to participate. You can also arrange with TVIC to send communications to other members ahead of the meeting.” (12/12/2017 email from Ingrid Mittermaier to Brenda Grantland).
I took that to mean there were no member meetings throughout this period.
The bylaws require an annual meeting of the members in September of every year. (TVIC Bylaws, Article III Section 3). Looking at the minutes, I see that the September meetings were all cancelled in 2015 through 2017. I have not found a member who remembers there being an annual meeting in recent years — but then, I only know the names of a few current members because the board is refusing to let me see the membership list.
One essential component of every annual meeting is the election of directors. (Bylaws Art. III Sec. 3 subsection (2)).
If the annual meetings of the members were not held in 2015 – 2017, how did they hold the required election of directors?
Under Article V Section 3 of the TVIC Bylaws, directors’ 2-year terms were staggered. Half of the director seats would be up for election every year. When a director’s seat came up for election and no election was held, that seat became vacant. Unless TVIC somehow validly held elections in 2015 and 2016, and filled the seats with candidates who had not been disqualified by exceeding 2 consecutive 2-year terms, as of the first Friday in September 2016 (the day after the date for the annual meeting) the board would have no duly elected directors left on it.
The two TVIC members that I know who were current on their dues during this period say they do not remember any elections or member meetings in recent years. That may be why the board is refusing to give me the membership list even though they are required by law to let members see them.
If it turns out that there were no elections in 2015 and 2016, the board’s actions on September 20, 2017 in voting to transfer the community center to TCSD, and the TVIC board’s signatures on the title documents were invalid and the transfer of the community center was void.
I request that a special meeting of the members be called to address these issues. The bylaws say that a special meeting of the members shall be called at the written request of 10 members. (Bylaws Art. VI Sec. 3). I don’t know 10 members and the board is still stalling on my request for the membership list. As soon as I have amassed a list of 10 current members I will send a letter to the board.
If anyone who reads this is a member or knows a member, please contact me – preferably by email as this is my work number.
Download the supporting documents below
TVIC_ByLaws.pdf (44 downloads) – TVIC Bylaws
TVIC_AmendedArticlesofIncorporation.pdf (39 downloads) – TVIC Amended Articles of Incorporation (2016 combination document)
TVIC-Minutes-2015.pdf (40 downloads) – TVIC board minutes for 2015
TVIC-Minutes-2016.pdf (39 downloads) – TVIC board minutes for 2016
TVIC-Minutes-2017.pdf (54 downloads) – TVIC board minutes for 2017
TVIC-3.pdf (26 downloads) – a print-ready pdf of this page