## Facts

- A planned unit development in Baldwin County, Alabama, was created and operated by Lake Forest, Inc., consisting of thousands of residential lots and various common facilities (including recreational amenities and security services).
- The property owners’ association was incorporated in 1971 and adopted bylaws governing member voting and association governance.
- The bylaws granted ordinary voting members one vote per lot owned (if dues and assessments were current).
- The bylaws also granted Lake Forest, Inc., “or its successor,” additional voting power equal to one vote per quarter-acre of property it owned in the development (the disputed “residual” votes).
- In 1978–1979, the association exercised an option and purchased the development’s common facilities from Lake Forest, Inc.
- In 1988, Lake Forest, Inc., merged into Purcell Company, Inc.
- At the 1989 annual meeting to elect directors, the association’s board sought to cast the residual votes on the theory that the association became the developer’s “successor” by buying the common facilities.
- Several association members contested this, asserting that Purcell (as the corporate successor by merger) was the developer’s “successor,” and that the association’s purchase did not transfer the developer’s reserved voting block.
- The trial court entered a declaratory judgment for the members, concluding the board lacked authority to cast the residual votes.

## Issues

1. Whether the association’s acquisition of the common facilities made it the developer’s “successor” under the bylaws, authorizing it to cast the developer’s acreage-based residual votes.
2. Whether, under the governing documents and corporate succession principles, the board had authority to cast those residual votes at the annual meeting.

## Decision

- The Supreme Court of Alabama affirmed the declaratory judgment for the association members.
- The court held the association was not the developer’s “successor” within the meaning of the bylaws’ special voting provision.
- The court concluded the association’s board therefore lacked authority to cast the disputed residual votes.

## Legal Principles

- Contractual terms in bylaws and related agreements are interpreted according to their text and the structure of the governing instruments.
- A purchaser of specified assets (such as common facilities) does not become a corporation’s “successor” for reserved governance rights absent language showing that intent.
- When a corporation merges into another entity, the surviving entity is the corporate successor and ordinarily succeeds to the merged corporation’s rights and status.
- A bylaw provision granting the developer (or its successor) votes tied to acreage “it owns” links the special voting power to ownership of the developer’s retained property, not to later ownership of common facilities by the association.

## Conclusion

The court ruled that the association’s purchase of common facilities did not make it the developer’s “successor” for purposes of acreage-based voting rights; those reserved “residual” votes could not be cast by the association’s board at the annual meeting.


Lake Forest Prop. Owners’ Ass’n, Inc. v. Smith, 571 So. 2d 1047 (Ala. 1990)