Present: Carrico, C.J., Compton, Stephenson, Lacy, Hassell, 

Koontz, JJ., and Whiting, Senior Justice 

LAKE MONTICELLO OWNERS' ASSOCIATION 

 OPINION BY 

v. Record No. 950256 SENIOR JUSTICE HENRY H. WHITING 

 November 3, 1995 

JARED L. LAKE 

FROM THE CIRCUIT COURT OF FLUVANNA COUNTY 

F. Ward Harkrader, Jr., Judge 

 This appeal involves the validity, construction, and 

application of bylaw provisions of a nonstock corporation that is 

subject to the Property Owners' Association Act. 

 Lake Monticello, a large residential community in Fluvanna 

County, is an essentially self-controlled community with its own 

private utilities, roads, security force, and common amenities, 

including a lake, golf course, swimming pool, and tennis courts. 

 Access to the community is controlled by private security 

officers at the main gate and by magnetic cards at other gates. 

 Control of these facilities is vested in Lake Monticello 

Owners' Association (LMOA), a nonstock corporation that is 

subject to the provisions of the Property Owners' Association 

Act, Code §§ 55-508 to -516.2. By its very terms, this Act has 

restricted and limited application. 

 The Act does not apply 

 to the (i) provisions of documents of, (ii) operations 

of any association governing, or (iii) relationship of 

a member to any association governing condominiums 

created pursuant to the Condominium Act ([Code] § 55-

79.39 et seq.), cooperatives created pursuant to the 

Virginia Real Estate Cooperative Act ([Code] § 55-424 

et seq.), time-shares created pursuant to the Virginia 

Real Estate Time-Share Act ([Code] § 55-360 et seq.), 

or membership campgrounds created pursuant to the 

Virginia Membership Camping Act ([Code] § 59.1-311 et 

seq.). 
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Code § 55-508(B). Additionally, this Act does not apply "to any 

nonstock, nonprofit, taxable corporation with nonmandatory 

membership which, as its primary function, makes available golf, 

ski, and other recreational facilities both to its members and 

the general public." Id.

 LMOA's corporate purpose is set out in the various documents 

that create and regulate LMOA and the community it controls. The 

declaration provides that LMOA "shall operate and maintain the 

club, lake, roads, parks, and other recreational facilities." 

The declaration also subjects each lot owner, as a member of 

LMOA, to LMOA's "Articles [of Incorporation] and By-laws, 

including the payment of such charges and levys as may properly 

be made by the Association." 

 The articles of incorporation charge LMOA with 

responsibility for the "common welfare and safety of the 

residents of Lake Monticello." The bylaws charge LMOA to 

"provide for the necessary operation, administration, and 

government of Lake Monticello . . . and . . . to provide 

machinery for the interpretation, application, administration and 

enforcement of certain restrictions and covenants affecting all 

lots." LMOA's published "policy manual" contains its rules, 

regulations, and policies and states that "LMOA Rules and 

Regulations are defined in LMOA Documents (Covenants and 

Restrictions, Articles of Incorporation, By-Laws, Policies, Rules 

and Regulations). "Pursuant to LMOA's articles of incorporation 
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and bylaws, each lot owner is a member of LMOA with voting rights 

in the election and removal of directors and in the amendment, 

alteration, or repeal of its bylaws. 

 Additionally, the Property Owners' Association Act vests in 

a majority of LMOA members, as members of a property owners' 

association, the right to "repeal or amend any rule or regulation 

adopted by the board of directors" if such rule or regulation has 

been adopted by the board "with respect to use of the common 

areas [or] such other areas of responsibility assigned to the 

association by the declaration." Code § 55-513(A).1

 There is no 

similar statutory right given to shareholders, under the Virginia 

Stock Corporation Act, Code §§ 13.1-601 to -800, or to members, 

under the Virginia Nonstock Corporation Act, Code §§ 13.1-801 to 

-980. See Code §§ 13.1-624, -662, -823, and -846. 

 Jared L. Lake and some other members in LMOA were 

dissatisfied with a number of the bylaws, rules, regulations, and 

policies adopted by LMOA's board of directors and contained in 

LMOA's policy manual. Section 4.08 of the bylaws gives LMOA 

 

 1Code § 55-513(A) provides in pertinent part: 

 The board of directors of the association shall 

have the power to establish, adopt, and enforce rules 

and regulations with respect to use of the common areas 

and with respect to such other areas of responsibility 

assigned to the association by the declaration . . . . 

 A majority of votes cast, in person or by proxy, at a 

meeting convened in accordance with the provisions of 

the association's bylaws and called for that purpose, 

shall repeal or amend any rule or regulation adopted by 

the board of directors. 
 -4- 

members the right to make proposals "appropriate for member 

action" for inclusion in the proxy statement and notice for an 

annual meeting. Acting pursuant to this bylaw provision, Lake 

and those other property owners filed a number of proposals to 

amend certain of LMOA's bylaws, rules, regulations, and policies 

at the next annual meeting of LMOA members. 

 A summary of the proposed amendments pertinent to this 

appeal follows: 

 1. Repeal of a requirement that a lot owner's 

invitee obtain a guest card or pass before entering the 

subdivision, even though they possess one of the lot 

owner's magnetic cards. 

 2. Imposition of a limitation on the boards' 

discretion in fixing annual green fees by exempting 

property owners who do not play golf from payment of 

such fees, and by specifying the minimum green fees to 

be fixed by the board. 

 3. Repeal of a provision for LMOA's compliance 

committee's assessment of "penalties, including the 

assessing of charges and similar sanctions," by 

transferring that function to the courts. 

 4. Repeal of a provision authorizing the 

appointment of members of LMOA's security force as 

special policemen under the provisions of Code § 15.1-

144. 
 -5- 

 5. Amendment of provisions restricting access by 

prospective purchasers of properties in Lake Monticello 

by providing for a two-hour pass to be issued by the 

guards at the main gate. 

 Bylaw § 4.08(c)(1) and (6), respectively, provide that a 

member proposal "may be disqualified" from inclusion in LMOA's 

proxy statement and notice of meeting if "it is not a proper 

subject for action by members" or if "it deals with a matter 

relating to the ordinary business operations of the Association." 

 Relying on these bylaw provisions and on other bylaw provisions 

which LMOA has since waived, the board ruled that the proposals 

"d[id] not qualify for inclusion on the LMOA proxy/ballot" and 

refused to include them in the proxy. 

 Lake filed this action as a motion for declaratory judgment 

seeking a construction of the provisions of Code § 55-513 and 

§ 4.08 of the bylaws and a declaration that the proposals were 

proper for inclusion in LMOA's proxy statement.2

 Following an 

ore tenus hearing, the trial court invalidated the provisions of 

§ 4.08(c)(1) and (6) because they were "overly broad, arbitrary 

and in violation of [Code] § 55-513." Thereafter, the court 

ruled that the association members were entitled to have these 

proposed amendments included in the proxy statement for 

 

 2LMOA stipulated that Lake was a proper party to bring the 

action. 
 -6- 

appropriate action at the next LMOA members' meeting. We granted 

LMOA an appeal.3

 LMOA contends that the trial court erred in invalidating 

§ 4.08(c)(1) and (6) of the bylaws. Specifically LMOA argues 

that those provision are not inconsistent with Code § 55-513. We 

agree. 

 A settled rule of statutory construction is that "[i]f 

apparently conflicting statutes can be harmonized and effect 

given to both of them, they will be so construed." Albemarle 

County v. Marshall, 215 Va. 756, 761, 214 S.E.2d 146, 150 (1975); 

Blue v. Virginia State Bar, 222 Va. 357, 359, 282 S.E.2d 6, 8 

(1981). We think that this rule is equally applicable when there 

could be a conflict between a statute and corporate bylaws, and 

the bylaws may be construed to avoid that conflict. Thus, in the 

context of this case, we construe the imprecise bylaw phrases 

"proper subject for action by members" and "relating to the 

ordinary business operations of the Association" to limit the 

board's disqualification right to those proposals which relate to 

matters within the exclusive control of the board. 

 Accordingly, we conclude that the trial court erred in 

holding that Code § 55-513 invalidated § 4.08(c)(1) and (6) of 

LMOA's bylaws. Since we find that these subsections are valid, 

 

 3Lake filed no reply brief and thus did not make an oral 

argument. Rule 5:33. 
 -7- 

we must now decide whether the proposals were properly 

disqualified by the board. 

 LMOA contends that we need not inquire into the correctness 

of LMOA's decision since Lake failed to introduce any evidence 

showing that LMOA's board of directors acted in bad faith in 

making its decision. This, according to LMOA, is a prerequisite 

for judicial review of LMOA's construction of its rule because a 

corporate board's decision is subject to a presumption of 

correctness under the "business judgment rule." 

 Under this rule, a corporate director ordinarily has no 

individual liability for business decisions made "in accordance 

with his good faith judgment of the best interests of the 

corporation." Code § 13.1-870(A); see Izadpanah v. The Boeing 

Joint Venture, 243 Va. 81, 83, 412 S.E.2d 708, 709 (1992) 

(transfer of corporate assets); Giannotti v. Hamway, 239 Va. 14, 

24, 387 S.E.2d 725, 731 (1990) (payment of compensation to 

corporate officers and directors). And in an action to review 

the directors' business decision, the decision itself is also 

entitled to the same presumption. Gottlieb v. Economy Stores, 

199 Va. 848, 857, 102 S.E.2d 345, 352 (1958) (expulsion of member 

of nonstock grocers' cooperative marketing corporation for 

misleading advertising reflecting upon integrity of corporation); 

Penn v. Pemberton & Penn, 189 Va. 649, 661, 53 S.E.2d 823, 829 

(1949) (continuance of corporate existence). 

 As the name implies, a necessary predicate for the 
 -8- 

application of the business judgment rule is that the directors' 

decision be that of a business judgment and not a decision, such 

as that in this case, which construes and applies a statute and a 

corporate bylaw. In the latter instance, a trial court reviews 

the decision just as it would review a similar decision by any 

other party. See Gottlieb, 199 Va. at 857-58, 102 S.E.2d at 352-

53 (even under business judgment rule, action of corporation must 

be in accordance with law and corporate powers); cf. Bank of 

Giles County v. Mason, 199 Va. 176, 181-82, 98 S.E.2d 905, 908 

(1957) (court determines whether shareholder's exercise of 

common-law right to inspect corporate documents is made in good 

faith after corporation rejects request). 

 Therefore, we reject LMOA's contention that the presumption 

set forth in the business judgment rule should be applied when 

deciding whether LMOA properly construed its bylaws in 

disqualifying the proposals. This brings us to a consideration 

of the correctness of LMOA's construction of § 4.08(c)(1) and (6) 

in disqualifying these proposals. In deciding this issue, we are 

not concerned with the advisability or wisdom of the proposals, 

but only with whether Code § 55-315 and § 4.08 of the bylaws give 

Lake the right to submit these proposals to a vote of his fellow 

members of LMOA. 

 LMOA asserts a number of contentions in support of its 

argument that its board correctly rejected these proposals. For 

the reasons which follow, we find no merit in any of these 
 -9- 

contentions. 

 First, LMOA asserts that the members' right to amend LMOA's 

bylaws is "confined to matters such as conduct of meetings, 

elections of directors and officers, duties of officers and 

committees and other matters of internal concern" and does not 

include "any mundane detail relating to the day-to-day activities 

of the Association" or "the making of corporate policy and 

management decisions (such as, whether the security guards are 

deputized or setting green fees for the golf course.)" In this 

case, however, we are not dealing with bylaw amendments of an 

ordinary corporation; rather, we are faced with specific 

statutory rights allowing LMOA members to amend or repeal LMOA's 

rules and regulations "with respect to use of the common areas 

and with respect to such other areas of responsibility assigned 

to the association by the declaration." Code § 55-513(A). 

 With the exception of the third proposal herein that seeks 

to amend § 10.03 of the bylaws, the remaining proposals all seek 

to amend rules and regulations of LMOA. These rules and 

regulations either restrict the future conduct of members and 

their invitees in the exercise of their rights in the community 

(guest cards or passes, green fees, and display of their homes 

for future sale) or subject their conduct to the control of 

LMOA's employees or agents (appointment of LMOA's security 

officers as special policemen). As such, the proposals either 

deal with the members' use of parts of the common area or LMOA's 
 -10- 

responsibilities in enforcing the declaration-imposed obligations 

upon each member to comply with LMOA's articles and bylaw 

provisions or suffer the penalties imposed by LMOA.4

 

Accordingly, we think that Code § 55-513 authorizes members to 

suggest these proposals. 

 LMOA next argues that some of the proposals seek to amend 

its statements of policy, not its rules and regulations. 

However, if a policy of a governing body is binding upon the 

future conduct of its members, it is treated as a rule or 

regulation. See Columbia Broadcasting System, Inc. v. United 

States, 316 U.S. 407, 422 (1942) (order promulgating policy 

announcement, accompanied by statement that administrative agency 

would "follow" order is regulation within meaning of federal 

statute); cf. Pacific Gas & Electric Co. v. Federal Power Comm'n, 

506 F.2d 33, 38 (D.C. Cir. 1974) ("A general statement of policy 

. . . does not establish a 'binding norm.' . . . A policy 

 

 4To the extent that LMOA's duly adopted rules and 

regulations expressly so provide, Code § 55-513(B) gives LMOA's 

board of directors the right to assess charges against members 

for violation of LMOA's rules and regulations. Since the part of 

LMOA's policy manual that is in the record contains a schedule of 

charges and penalties for violations of LMOA's rules and 

regulations, we assume that LMOA's rules and regulations provide 

for imposition of such charges and penalties. 
 -11- 

statement announces the agency's tentative intentions for the 

future"). Because these alleged policies bind the future conduct 

of LMOA's members and provide penalties for their violation, we 

conclude that each proposal at issue here seeks to amend a rule 

or regulation within the meaning of Code § 55-513. 

 Nevertheless, citing Kaplan v. Block, 183 Va. 327, 332, 31 

S.E.2d 893, 895 (1944), LMOA contends that such proposals cannot 

divest the board of its duty of management and control by 

creating a "sterilized board of directors." Importantly, Kaplan

is inapposite because it involved a stock corporation, not a 

nonstock corporation that is subject to the Property Owners' 

Association Act. Moreover, in contrast to Kaplan, the present 

proposals do not create a "sterilized board" in which every

action of the board has to be approved by the members. Id. at 

335, 31 S.E.2d at 896. 

 Given the language of Code § 55-513 and the fact that LMOA 

members must submit to these rules, regulations, and binding 

policies as long as they own homes in Lake Monticello, we think 

the proposals, if enacted by majority vote, would merely impose 

limitations upon the board's powers authorized by this code 

section. Accordingly, we conclude that the board of directors 

erred in excluding these proposals from the proxy statement. 

Although we will reverse that part of the trial court's judgment 

finding bylaw § 4.08(c)(1) and (6) invalid, we will enter a 

declaratory judgment in favor of Lake consistent with this 
 -12- 

opinion. 

 Affirmed in part,

reversed in part,

and final judgment.