Tag: Arizona

HOA attorney seeks homeowner arrest for not attending attorney fee meeting

In this instance, how does the court, in its obligation to do justice, determine if there has been dishonesty or grossly negligent behavior without an opportunity for the homeowner to examine the HOA’s affidavit?  Here, both judges protected the HOA as incapable of doing any evil, sua sponte (on its own).

Essentially, in my view, failing to allow the homeowner to question the signed affidavit of an HOA manager is not conducive to homeowner justice.  The liberal interpretation of the business judgment rule taken here is that, as I’ve indicated elsewhere, the board can do no wrong because average people become angels when they become an HOA board member.[1]

In order to understand the events in this situation leading to the request for the arrest of the homeowner for failing to attend a meeting, you need to understand the background of the case.  It’s lengthy, but needs to be read through.

Case History

The Arizona ALJ (Brian Brendan Tully) at OAH granted summary judgment (October 2012) for Terravita in regard to a request for minutes to an alleged executive meeting.[2] The order further states that the judge “concludes that . . . there are no issues contained in the Petition that require an evidentiary hearing.”  However, without an evidentiary hearing, where the homeowner could contest the allegation that it was indeed an executive meeting, the judge essentially took the word of the HOA’s attorney, the CAI member, Curtis Ekmark. In his discussion, the judge once again assumes the validity of Ekmark’s assertion that it was indeed an executive meeting, and argues that the homeowner did not show he had a legal right to executive minutes.

In Arizona, the court operates on a notice basis, that is, just give sufficient information that the complaint is valid, and then present your detailed evidence before the court.  That was not allowed in this case.

Homeowner filed superior court appeal[3] contesting the ALJ’s decision as “contrary to law, an abuse of discretion, arbitrary and capricious.”  

6. Administrative Law Judge Brian Brendan Tully’s October 4, 2012 Decision in 12F -H 12120 14-BFS, based exclusively upon certain “statements, claims and contentions (sic)” made by Respondent, Terravita Community Association, Inc., in its pleadings, denied Petitioner (Plaintiff) a hearing which would have brought forward the facts of the contested matter based upon evidence, witnesses’ sworn testimony and argument upon the merits of the matter’s facts and the planned community statutes relevant to those facts, instead, Tully vacated the matter from the calendar of the Office of Administrative Hearings.

 The homeowner further argued

 Plaintiff [homeowner] will timely request this Court hold an evidentiary hearing that will adduce evidence, present sworn witness testimony and offer argument in furtherance of the Court reversing the decision in 12F-H1212014-BFS and the agency’s action based upon the Court’s reviewing the administrative record (no hearing/no transcript) and evidence to be presented at an evidentiary hearing denied Petitioner at the OAH

Terravita’s relevant Answer was a reliance on the business judgment rule, which states that the court will defer the judgment of a corporation’s board as they know more than the judge.  In its reply to a request for an evidentiary hearing, Ekmark says homeowner must show the evidence that was already rejected by the ALJ as irrelevant.  (Remember the issue was a declaration that the meeting was an executive meeting and the ALJ didn’t want to hear anymore).   Ekmark concludes with, “Mr. Brown [homeowner] has had ample opportunities to present facts contrary to the Association’s position; yet, he has completely failed to do so.”  Did he???

Brown’s reply, beyond a criticism of Ekmark’s arguments about new evidence and failure to show evidence, got to the obvious legal question of the faithful acceptance of a statement without the right to a hearing on the validity of the statement:

[T]he presentation of evidence is necessary to the Court’s findings of fact and conclusions of law in furtherance of a just decision to include, but not limited to, the veracity of the affiant’s affidavit, an affidavit prepared under the supervision of  the Defendant-Appellee’s attorney, submitted with the Defendant-Appellee’s Answer (Pollock, a credentialed community manager, PCAM, CAAM, attended the March 27, 2012 meetings [Executive Session and Regular Meeting] of the board of directors and knew, or should have known, the “e-session” violated the planned community statutes).

However, the superior court appeal found no error and upheld the ALJ’s summary judgment decision.  “TCA has provided to this Court authorities and arguments in support of its position. This Court concludes the authorities and arguments provided by TCA are well-taken, and this Court adopts those authorities and arguments in support of its decision.”  (Judge McClennen of 11-22-2013). The judge apparently, like the ALJ, ignored the homeowner’s allegations.

Under R  Civ. P. 43(a), an affidavit is a written statement by a witness in lieu of the witness appearing in court in person. The opposing party must stipulate to the acceptance of an affidavit to be accepted by the court as evidence.  Rules of Evidence, Rule 609, allows for the impeachment of a witness. This did not allowed to occur here.

An appeal was filed by Brown on 7-14-2014, CA-CV14-0455, Div.1.

Arrest Warrant

Apparently, the HOA attorney firm of Ekmark & Ekmark wants their fees paid as per the court ruling. On August 8, 2014 it filed several documents with Judge McClennen for contempt of court for failing to submit to a subpoena to attend a debtor’s meeting (to discover how the attorney would collect its fees), and the arrest of Mr. Brown for contempt.  All over a question of the legitimacy of an executive board meeting.

According to the homeowner, who apparently did get access the Terravita’s financials and moneys spent on attorney fees for this litigation, the attorney fees amounted to $57,344.10.  Of course, the HOA has no cause for alarm since it won the case and does not have to pay this amount.  But, if it loses in the appellate court, what then?  HOA litigation is a gamble in favor of the HOA, and joy to the attorneys cause they get paid win or lose.

BTW, Judge McClennen washed his hands of jurisdiction on August 11, 2014 after receiving the filings from Ekmark.  “This Court no longer has jurisdiction and will take no further action in this matter.”

References

[1] Business judgment rule misinterpretation. In my commentary on the business judgment rule, Illinois appellate court awards punitive damages for reckless indifference by condo, I quoted the court’s reminder about what this rule means:

 “The rule protects directors who have been careful and diligent in performing their duties from being subjected to liability for honest mistakes of judgment. . . . [But where there is] evidence of bad faith, fraud, illegality, or gross overreaching, courts are . . . at liberty to interfere with the exercise of business judgment by corporate directors.”

 [2] Brown v. Terravita, No. 12F-H1212014-BFS, Administrative Law Judge Decision, Office of Administrative Hearings, October 4, 2012.

[3] Brown v. Terravita, LC2012-000699, Maricopa County.

AZ amicus brief seeking answers to constitutional HOA questions denied

A constitutionality challenge[1] was made to Arizona’s SB 1482 “HOA Omnibus Bill” (ominous bill), the 2014 version of SB 1454 from last year.[2]   Although the law has become effective this past July 24th, the case is still active.  Yours truly filed an amicus curiae brief in superior court on behalf of the Pro Se plaintive, Dave Russell, to which the Arizona Attorney General, lawyer for the State of Arizona, found objectionable. The judge denied my motion to file the brief.

The AG objected under a too one-sided against Arizona argument (complete objection).

Defendant, State of Arizona, opposes George K. Starapoli’s Motion for Leave to File Amicus

Brief in this matter for the following reasons:

  1. There is no authority to file an Amicus Brief in this matter in the superior court.

  1. It would be prejudicial to the State to allow the brief to be filed at this time. The State has responded to the Plaintiffs Motion for Expedited Preliminary Injunction, and that Motion could be considered based on the documents already filed by the parties. To allow the brief to be filed would prolong the process, require additional response, and potentially confuse the issues.

 

I did not refer to the Injunction, but the complaint itself, so what gives??  What does “potentially confuse the issues” mean?  Too much for the AG or judge to handle???

On the 28th, the judge ruled (complete minute entry),

 

On July 11, 2014, George Staropoli filed a “Motion for Leave to File an Amicus Curiae Brief in Support of the Plaintiff”. The Court has reviewed this motion and considered the circumstances. Under the circumstances,

IT IS ORDERED denying the above-identified motion.

What does “under the circumstances mean?????    Was it too confusing for the court to handle????

 

I was informed that a leading public interest nonprofit that has argued before the Arizona Supreme Court has had its amicus briefs to the Superior Court also denied.  I expected as much, but I had hoped for a dissertation as to why the denial beyond “under the circumstances.”

 

The issues that I raised in my amicus brief were:

 

  • Is a bill allowing HOA managers to represent HOAs while prohibiting the homeowner to engage an unlicensed and untrained third-party to speak for them in small claims court an unconstitutional special law in violation of the equal protection of the law under the US and Arizona Constitutions? (SB 1482, Section 7).

 

  • Do the renter documentation requirements and restrictions constitute an unconstitutional interference with private agreements as it creates more harm to the homeowners than the benefits of an unstated government interest?  (SB1482, Sections 11 and 15).

 

The court must still decide on the injunction to not enforce the bill (or the part dealing with HOA managers in small claims court), which it cannot do because Rule 31 of the Arizona Supreme Court forbids non-lawyers from representing anyone in court, including small claims court.  And the Constitution says the SC controls its procedures and not the legislature!  So, folks, what’s the fuss all about?

 

What this incident has demonstrated is the use of the law by the AG and an eagerly cooperative court.  Was my brief so harmful to the State of Arizona’s case that the truth must be hidden?  Or was my brief valid because the overwhelming facts and background presented made a strong case for the tyranny of the legislature that resulted in an unconstitutional law, a law which was motivated by domineering HOA stakeholders, the special interests?

What my little exercise has demonstrated is the silence on the part of our government.  Why?  Because like an HOA they don’t have too!  A law is constitutional because the ‘sovereign,’ the legislature, has spoken and can do no wrong.   Like an HOA, the state well knows it cannot make a valid and compelling justification for the bill in question, SB 1482.  Any such attempt would demonstrate to all that the State of Arizona was defending the indefensible.  So, mum’s the word.

How does a citizen successfully argue his case when the State’s defense is, “Because I can!”

 

 

References

[1] See the complaint, Russell v. State of Arizona, CV2014-093-052 (Maricopa County Superior Court).

[2] See in general: A lesson in HOA reforms and power politics in AZ; AZ legislature fails to remove invalid statutes from its ARS web page.

HOA laws that fail to protect the people from harm

I have written many times about the loss in the protections of individual rights, freedoms, privileges and immunities that continues in our country.  I wrote about the presumption that all laws passed by the legislature are constitutional, because, apparently, the sovereign can do no wrong.  After all, the legislature is the voice of the people, isn’t it?

BUT, this false analogy to the king can do no wrong ignores the fact that the king was not bound by any constitution or charter, and was free to do as he pleased.  But, we have, or are supposed to have, a constitution with restrictions on government.  We also have the doctrine of judicial review of legislation, subjecting the laws to pass judicial scrutiny.

Of the three levels now part of the doctrine of judicial scrutiny, the peoples’ rights fall into one of three categories. The least protective is a legitimate, rational government interest (basically anything the government says is important to the people goes); the strictest is a compelling and necessary interest, reserved for explicit fundamental rights violations.

I have always been bothered about many HOA laws purported to be in the best interest of the people, yet deprive or deny a category of people, those living in HOAs, of their constitutional rights (free speech in many forms, due process protections) and the equal protection of the laws. In Arizona, for example, the horrendous SB 1482 omnibus (read ‘ominous’) bill did just that: granted special rights to HOA managers and left homeowners with unequal legal representation; rejected a private agreement to prevent crimes to allow real estate agents to be able to rent homes in HOAs, a long time frowned upon right.

In the recent Arizona appellate opinion in Vong v. Aune (non-HOA case that explains judicial scrutiny), the court held that, “Courts have found a legitimate purpose lacking where a regulation fails to protect the public from harm.” ¶ 18.  Did I miss something?  Did the Rules Committee that has the duty to check for constitutionality miss something?

Of course the game is still in favor of the government where the burden is put on the homeowner challenger.  He must show that the alleged good for the community is overwhelmingly overridden by the damage to the HOA homeowner public class, and is contrary to public policy. It raises the question of one class of people losing constitutional protections so that others may . . . . may what?

Sadly, public policy as shaped by court and legislative decisions seems to be on the side of the HOA.

When do majority CC&R amendments trample minority rights?

 

The generally accepted legal doctrine upheld by the courts in many states is that any CC&Rs amendment validly passed by the amendment procedures in the CC&Rs is binding on non-consenting homeowners.  This doctrine ignores the content and relevancy of the amendment to the intent and purposes of the drafters, the developer.

The questionable word game involved in this issue deals with the meaning and use of ‘modify’ or ‘change’ as compared to ‘new.’  Does your CC&RS say modify or change, or does it also include the words add or new?  Some courts make no distinction and thereby unconstitutionally modify the CC&Rs contract by depriving non-consenting homeowners of their property rights that they believed they possessed at the time of purchase.

(In general, the dictionaries define ‘modify’ as a change, and ‘change’ to mean ‘to make different,’ but excluding any reference to ‘new.’)

With this presumption in favor of the HOA, these courts fail to determine if this is what the unsuspecting home buyer understands, and that he has been given appropriate notice. Is he aware that ‘change’ also means ‘new’ or ‘add’?  Simply said, we are dealing the ex post facto CC&Rs amendments that deprive a homeowner of his rights without his consent and without any compensation.

In the April 2014, the Washington State Supreme Court opinion in Wilkinson v. Chiwawa,[i] said, wait a minute with respect to rentals.  ‘Change’ or ‘modify’ does not mean ‘add’ or ‘new.’  It held that,

While Chiwawa homeowners knew that existing restrictive covenants could be changed by majority vote so long as the changes were consistent with the general plan, they did not buy into the creation of new restrictions unrelated to existing ones. . . . When the governing covenants authorize a majority of homeowners to create new restrictions unrelated to existing ones, majority rule prevails “provided that such power is exercised in a reasonable manner consistent with the general plan of the development.”

This rule protects the reasonable, settled expectation of landowners by giving them the power to block “`new covenants which have no relation to existing ones'” and deprive them of their property rights.

The Association could not adopt the restriction without unanimous consent. This is the contract into which the parties bought and the expectation that we must uphold.

One of the most notorious examples of this type of amendment occurred in OSCA[ii] where mobile homeowners were forced to pay dues for a country club, owned by the developer and not owned by the HOA, and open to the public on a fee basis.  It helped increase the value of the HOA, was the justification for the amendment.

What does your CC&Rs say?  Watch for those CAI attorney rewrites that sneak these words into your CC&Rs without proper notice, as for example, Arizona requires.

And remember, who writes these state laws?   The  HOA stakeholders that do not include the homeowners!

References

[i] Wilkinson v. Chiwawa, Wn.  No.86870-1, p. 6,7 (April 17, 2014). The issue was an amendment that prohibited short-term rentals when the CC&Rs were silent on duration.  Was it a new covenant or a modification to the one that simple said renting was allowed.

[ii] OSCA Development v. Blehm, No. E320843 (Cal. App. Dist. 4 1999).

A lesson in HOA reforms and power politics in AZ

 

For those who still believe that HOA reform legislation is not political, and in particular not power politics, take heed from the following analysis of events at the Arizona Legislature.  It deals with SB 1454 reborn as SB 1482 this year and substituted for the identical bill, HB 2695.

It begins at the start of the session when no bills were introduced to repeal the statutes found invalid in last year’s SB 1454 by the court.  Calls to the Senate President and Speaker of the House, and Secretary of State, to correct this seemingly oversight went unheeded. That was puzzling to say the least.

First, SB 1482 was introduced by Senator Griffin and amended, and passed unanimously by the Senate. It sat in the House for an unheard of 7 weeks until this week.  It past the deadline for being heard in a committee of the House, per the rules, and was presumed dead.

Second, HB 2695 was introduced by Rep. Ugenti for the fourth incarnation of the “omnibus HOA bill.” It was also amended and made identical to SB1482. It passed the House Committee of the Whole (COW) over 4 weeks ago, but was not put on the final vote agenda giving the illusion that it was dead. It passed the deadline to be heard in the Senate.

Neither bill could be heard in the other branch, according to the usual rules.

Finally, after the budget negotiations were resolved this week, a few bills were attended to that included the presumed dead HB 2695. It was ready for the final vote this week.  Why now?  That wouldn’t help because it could not be sent to the Senate for a vote since that deadline, too, had past.

So, the clever plot unfolded when SB 1482 was substituted HB 2695, in compliance with the legislative rules, because it had already passed out of the Senate and there was no need to go back to be voted on all over again.

All in time to withstand a possible Governor’s veto as the session will not end before any veto. This allows the legislature to override the veto because it has more than a 2/3 approval of both houses.  It was all carefully planned out and timed!  The bill was passed 49-6 with 5 NV.

Why the theatrics is not clear.  Didn’t have the votes and had to wait?  I believe that the timing is too coincidental, and reflects a successful plot that demonstrated the power of the HOA stakeholders over the legislature. You know, let them think they won and we will stick it to them for last year’s law suit.  We will show them who’s boss!  Not unexpected based on Ugenti’s prior behavior and attitude.