“Ratification Trumps Procedure” – Fourth Circuit Clarifies that Homeowners May Cure an Unauthorized Referendum by Subsequent Vote

1. Introduction

In Jill K. Jinks v. Community Services Associates Inc., Nos. 22-2013 & 22-2056 (4th Cir. Aug. 12 2025), the United States Court of Appeals for the Fourth Circuit confronted a common but under-litigated dilemma in homeowner-association law: What happens when the wrong entity initiates an amendment referendum, but the right entity overwhelmingly approves it afterwards? The dispute arose in Sea Pines Plantation, a large planned community on Hilton Head Island, South Carolina. Jill K. Jinks, a property owner and trustee, sought to invalidate a new $600 annual infrastructure assessment on the ground that the organization that called the referendum—Community Services Associates, Inc. (CSA)—lacked authority under the 1974 Covenants.

The District Court granted summary judgment to CSA, Sea Pines Resort, LLC, and the Association of Sea Pines Plantation Property Owners, Inc. (ASPPPO), holding that even if CSA’s call was unauthorized, the participating property owners (PPOs) validly ratified the referendum by voting for it. The Fourth Circuit affirmed, producing a precedent that squarely holds: Where community covenants authorize owners themselves to act, their informed vote can ratify and thus cure a procedural defect committed by an agent lacking prior authority.

2. Summary of the Judgment

Key holdings of the unpublished per curiam opinion (with Judge Wynn concurring in the judgment) are:

• The Court did not decide whether CSA possessed initial authority; instead, it affirmed on the alternative ground of owner ratification.
• Under South Carolina law, ratification requires (1) acceptance of benefits, (2) full knowledge of material facts, and (3) conduct indicating intent to adopt the act. All three were satisfied when 88% of voting PPOs approved the amendment with the essential terms—amount, purpose, duration—fully disclosed.
• Facts about CSA’s lack of authority were not material to the owners’ decision.
• ASPPPO’s endorsement of the referendum did not breach its bylaws because it fell within the corporation’s purpose and was protected by the business-judgment rule.
• Because all substantive claims failed, Jinks’s request for permanent injunctive relief also failed.

3. Detailed Analysis

3.1 Precedents Cited and Their Influence

• Lincoln v. Aetna Cas. & Sur. Co., 386 S.E.2d 801 (S.C. Ct. App. 1989) — The Court adopted Lincoln’s three-element framework for ratification, anchoring its analysis in South Carolina agency law.
• Mortgage & Acceptance Corp. v. Stewart, 140 S.E. 804 (S.C. 1927) — Early articulation that a principal may validate an unauthorized act by later approval.
• Anthony v. Padmar, Inc., 465 S.E.2d 745 (S.C. Ct. App. 1995) — Cited for the fiduciary duty of an agent to disclose all material facts; the Court distinguished “material” from “procedural” facts.
• Certus Bank, N.A. v. Bennett, 2016 WL 757501 (S.C. Ct. App. 2016) — Quoted for the proposition that ratification assumes no prior authority and validates acts ab initio.
• Fisher v. Shipyard Village Council, 760 S.E.2d 121 (S.C. Ct. App. 2014) & Dockside Ass’n, Inc. v. Detyens, 352 S.E.2d 714 (S.C. Ct. App. 1987) — Provided the contours of the business-judgment rule shielding association decisions.

By relying on these state authorities, the Fourth Circuit avoided any Erie problem; it simply predicted (and arguably strengthened) South Carolina law on ratification and the business-judgment doctrine in the HOA context.

3.2 Court’s Legal Reasoning

1. Strategy of Affirmance on Narrow Grounds. The panel elected not to decide the contested agency-authority issue. Instead, it assumed arguendo that CSA lacked authority, then examined whether ratification cured the defect. This approach aligns with the judicial principle of constitutional and prudential avoidance—deciding a case on the narrowest, non-constitutional ground sufficient to resolve it.
2. Application of the Ratification Elements.
   a. Acceptance of Benefits. By approving the assessment and later paying it, owners accepted the benefit of improved infrastructure.
   b. Knowledge of Material Facts. The Court defined “material” as facts relating to the obligations created (the assessment) rather than to the procedural authority of the caller. Because all owners received the referendum package explaining the size, purpose, and duration of the assessment, the knowledge element was satisfied.
   c. Intent to Adopt. An 88% affirmative vote (far beyond the 75% covenant threshold) unmistakably signaled intent.
3. Distinguishing “Authority” from “Material Fact.” The Court’s most significant doctrinal move was to declare that the agent’s lack of authority is not a material fact when the principal has explicit power to do the same act. This draws a line between void acts (ones the principal could never do) and voidable acts (procedurally defective but within the principal’s competence).
4. ASPPPO and the Business-Judgment Rule. The Court affirmed that nonprofit association boards enjoy broad discretion under South Carolina’s version of the Model Nonprofit Corporation Act unless they act ultra vires, in bad faith, or for corrupt motives. Endorsing the referendum was intra vires and community-oriented.
5. Summary-Judgment Framework. Because defendants moved for summary judgment, the burden shifted to Jinks to show a genuine factual dispute on ratification. The Court held she failed to identify any record evidence that knowledge of CSA’s authority would have altered voting behavior.

3.3 Potential Impact on Future Litigation

• HOA Governance. Boards and management companies can rely on owner ratification to cure certain procedural defects, promoting flexibility in community governance.
• Agency Law. The decision clarifies that in the principal-agent relationship, who may act is not necessarily a material fact for ratification if the principal itself has independent power to perform the act.
• Litigation Strategy. Plaintiffs attacking covenant amendments will now face the hurdle of disproving ratification, not merely demonstrating procedural irregularity.
• Business-Judgment Rule Expansion. By reaffirming Fisher and Dockside, the Court signals robust deference to HOA boards absent clear ultra-vires behavior or bad faith.
• Risk Allocation. Developers, management entities, and boards can proceed with greater confidence that substantial owner approval will insulate amendments from later challenge—potentially reducing transactional risk and insurance exposure.

4. Complex Concepts Simplified

• Ratification. Think of it as a parent signing a permission slip after a child has already gone on the field trip. If the parent approves afterwards, the trip becomes authorized as if permission had existed all along.
• Agent vs. Principal. An agent acts on someone else’s behalf (the principal). Here, CSA was the agent; PPOs were the principal.
• Ultra Vires. Latin for “beyond the powers.” An ultra-vires act is one the entity has no lawful authority to perform under any circumstances and thus cannot be ratified. The Court implicitly found the referendum call was merely unauthorized, not ultra vires, because the owners themselves had power to call it.
• Business-Judgment Rule. Courts defer to board decisions that are (1) within authority, (2) made in good faith, and (3) rationally related to the corporation’s best interests—much like a referee refrains from second-guessing a coach’s strategy absent foul play.
• Summary Judgment. A procedural device allowing a court to decide a case without trial when no real dispute of material fact exists—comparable to dismissing a sports match because the scoreboard and rules already dictate the outcome.

5. Conclusion

The Fourth Circuit’s decision in Jinks v. Community Services Associates Inc. cements a pragmatic rule for community-association governance: Substantive owner approval can legitimize an amendment even if the initiating entity blundered procedurally. By focusing on the owners’ knowledge of material obligations rather than on arcane procedural details, the Court aligned corporate agency law with the practical realities of large-scale communities.

Furthermore, the ruling fortifies the business-judgment shield for homeowner-association boards, encouraging proactive yet good-faith governance. For practitioners, the case underscores the importance of (1) fully disclosing the terms and effects of proposed amendments, and (2) documenting robust owner participation. For litigants, mere procedural missteps—absent bad faith or ultra-vires conduct—will rarely suffice to unwind a democratically endorsed covenant change.

In the broader legal landscape, ratification overrules procedure when the principals themselves knowingly choose the path forward. That principle, now endorsed by the Fourth Circuit, will likely echo well beyond the confines of Hilton Head Island.