Tag: Arizona

Advocate files AZ supreme court amicus brief fighting unjust laws

We must make the injustice visible.

We must provoke until they respond and change the laws.

(Mahatma Gandhi)

An AZ supreme court amicus brief was filed by Jonathan Dessaules on behalf of the Arizona Homeowners Coalition in CAO v. Dorsey (CA-CV 21-0275) (Waiting for the Court’s decision).  Dessaules argues that the statute in question, ARS 33-1228, conflicts with the Arizona Constitution, Article 2, Section 17, and “a statute cannot circumvent or modify constitutional requirements”.

The intricate legality and constitutionality of private entities—the HOA — taking of another party’s property rights – a homeowners — is discussed in detail.  I frequently quote the brief to ensure accuracy in my review.

ARS 33-1228 “allows condominium associations to force the sale of a nonconsenting owner’s property for someone else’s private use” and is the justification for investors to shut down the HOA. However, “When a state statute conflicts with Arizona’s Constitution, the constitution must prevail.” Furthermore, it is argued that “The legislature may not enact a statute which is in conflict with a provision of the Arizona Constitution.” Consequently, the Legislature lacked the authority to enact 33-1228.

(Stay with it!) The brief goes on to say that ARS 12-1131 provides that “eminent domain may be exercised only if the use of eminent domain is authorized by this state, whether by statute or otherwise, and for a public use as defined in this article.” Public use does not allow for “forcing the sale of a holdout owner’s property to be used by the investor who owners a majority of the other units within the condominium.”

The HOA, Dorsey, counterclaimed that it wasn’t a sovereign and § 1231 doesn’t apply to private organizations, ignoring § 12-1111 that permits individuals the right of eminent domain takings. Consequently, again, it is argued that 12-1228 is invalid.

An additional powerful argument is raised that the Declaration is an adhesion contract. “A declaration is generally a ‘standardized form offered to consumers on essentially a take it or leave it basis.’” And to my long awaited legality, the brief states that “Without the contract even being presented to the purchaser for their signature,” the contract is imposed on the buyer.

Again, we see the  doctrine of “reasonable expectations” as applied to adhesion contracts. “Contracts of adhesion will not be enforced unless they are conscionable and within the reasonable expectations of the parties.” Dessaules maintains that including unconstitutional  statutes in the Condo Act is “substantively unconscionable.” Furthermore, as I have argued many times, “a waiver of a constitutional right is not within reasonable expectations of the parties.”

This is a solid amicus brief by an advocate fighting for HOA reforms to protect members’ rights and privileges.  It does not pretend to accept unjust laws.

* * * *

I would like to thank Dennis Legere, Arizona Homeowners Coalition,  for hiring attorney Jonathan Dessaules to file this important, to the point, excellent amicus brief.

CAI is worried about homeowner reasonable expectations

I am confused by two CAI Arizona supreme court briefs in defense of the HOA in CAO v. Dorsey;[i] one by Scott Carpenter and the other by Krupnik,  a former Carpenter attorney and, along with Scott, a member of the CAI attorney’s group, the College of Community Associations Lawyers (CCAL).  In my view dealing with CAI over 23 years in several states, it reflects the awareness by CAI of the potential loss of its dominance over HOA boards and state legislatures.

The CAI Krupnick brief

In Krupnick’s brief, she argues that condos are a creature of state law otherwise they could not exist. We all know that state HOA laws and Acts favor the HOA against member rights.

“Sui generis presents a view of HOAs as private government principalities supported by your state legislature and is used to justify special laws for a special organization, the HOA. But the condominium is a unique form of real property ownership and . . . are created and governed by specific statutory schemes that deal with ownership, administration, transfer, and termination of commonly held property interests. More fundamentally, it is that statutory scheme, not the common law, that frames the issues in this controversy”[ii]

Does that make them state actors —  arms of the state?[iii] Existing constitutional law is inadequate to support this model of local governance [sui generis] and so, in violation of US and state constitutions,  we see all those HOA/PUD/condo “Acts” in almost every state.  These Acts constitute a parallel supreme law of the land with sharp contrasts to the US Constitution.

Krupnik stresses state laws control and “reasonable expectations”[iv] is not involved. “the amendment to A.R.S. § 33-1228 . . . does not significantly impinge on the parties’ reasonable expectations.” Her argument is that it would create problems for the administration of the HOA to have so many grandfathered clauses as the governing documents are amended from time-to-time. Gee, for over 247 years we have lived with the protection of grandfathered clauses in the public domain. What’s the problem?  The fear mongered survival of the HOA and CAI’s member income stream, that’s what!!

In my early days a CAI member emailed me saying: “What are you doing, George? We have a good thing going here.”

The CAI Carpenter brief

I focus on an important aspect of this brief.

Carpenter follows Krupnick’s argument on the need for uniformity, citing a precedent which held that “majority and minority owners alike were subject to a uniform set of rules which were consistent with the parties’ collective expectations at the time of contract.” Adding, “If left unchecked, the Opinion will very quickly leave Arizona community associations struggling to discern which versions of the state’s robust statutory  schemes apply to which owners in their communities.”

Carpenter raises a valid question, one that I concluded with in my commentary on CAO, should the HOA need to ask each owner if he agrees to be bound by  state law? And also asked for agreement to reasonably expected future amendments to forced sale in a takeover scenario. How can one agree to something ill defined?   This is a question to mislead the focus of the lawsuit.  Carpenter ignores contract law that requires a bona fide meeting of the minds and an  understanding of the explicit terms, and any assertion to be bound by iffy amendments in the future is without validity.

Obviously, contract law implicitly raises the question of surprises and a true meeting of the minds. No putting one past the other party in a violation of good faith. We know that there is wide misrepresentation in the selling process!

“By focusing on the amorphous concept of an owners’ reasonable expectations at the time they took title subject to an association’s declaration, the Court of Appeals has ignored an important reality: the statutes which apply to owners and associations must be applied uniformly, unless they contradict a pre-existing express term of the contractual covenants.”

He is arguing that ex post facto HOA amendments are valid, and the constitutional protections  do not apply to private contracts. After all, according to CAI HOAs are sui generis and have their own “constitution” outside the US Constitution. Carpenter makes the anguished plea — my interpretation –

“By creating an untenable and unworkable rule which deeply burdens associations and the owners who comprise them, the Court of Appeals’ Opinion will make it nearly impossible for any future association to effectively terminate their condominium.”

Poor baby! It’s a cost of doing business under the HOA legal scheme, but CAI wants more favorable treatment.  It’s an HOA defect because of the limited number of payees to support the HOA —  the members who are severally and jointly responsible for the viability of the HOA. (If Pete can’t pay, we’ll get it from Joe or Mary who can pay).  Is that a reasonable expectation of members?? I don’t think that have any idea of their financial obligations.

Please note that five other amicus briefs were filed in favor of the homeowner, CAO, including one by the Cato Institute and one by Arizona’s Goldwater Institute.  Only CAI opposed the appellate decision.

Notes

[i] CAO v. Dorsey, CA-CV 21-0275 (Ariz. App. Div.1, 2022).

[ii] Why aren’t HOAs held as state actors based on USSC criteria? (2019).

[iii] Id. The US Supreme Court has held state laws  that are “supportive”, “cooperating,” “encouraging,” and “entwined” in both public policy . . . and in the “management and control” of the HOA create state actors.

[iv] See HOA constitutional “takings” and reasonable amendments.

HOA constitutional “takings” and reasonable amendments

Awaiting an Arizona Supreme Court decision is a case involving a fairly common event in which investors buy up a majority of the condo units and vote to dissolve the condo. The owners are then subject to a forced sale against their will. In Cao v. Dorsey[1] investors owned 90 of 96 units but a homeowner challenged this forced sale under constitutional grounds.[2]  I address one constitutional issue here.

With respect to the governing AZ statute on these “takeovers,” the Court  held,

[We] hold that the statute [ARS 33-1228] is constitutional when applied to condominium owners who bought a condominium unit subject to terms that incorporate the statute. We also hold, however, that if there have been substantive post-purchase changes to the statute, the version of the statute in place at the time of purchase controls.

The statute allows for amendments to the CC&Rs, as commonly stated in the CC&Rs, based simply on the vote of the required approval percentage of owner votes, which the investor controls. The plaintiff argued that  the statute “is an unconstitutional taking of private property.” The Court clarified the law,

“Generally, ‘[t]aking one person’s property for another person’s private use is plainly Prohibited’. . . . Without an exception to the general rule, A.R.S. § 33-1228 is unconstitutional on its face.”

The meaning of “takings” refers to the constitutional prohibition of eminent domain takings of property interests when the property owner contests to the taking by the government. My argument criticizing the HOA’s right to take personal property with no compensation to the objecting owner can be found in HOA principalities where there’s no ex post facto or eminent domain protections (2009) and  Homeowners do not have HOA ‘eminent domain’ protection (2022).

A discussion followed as to what version of the law applied as it was amended after the plaintiff’s purchase.  Getting to the heart of the matter, the Court stated,

“[W]e will not ‘allow substantial, unforeseen, and unlimited amendments’ to the Declaration, as that ‘would alter the nature of the covenants to which the homeowners originally agreed.’ . . . We ‘will not subject a minority of landowners to unlimited and unexpected restrictions on the use of their land merely because the covenant agreement permitted a majority to make changes to existing covenants.’”

In short, no surprises and no adding new elements to the Declaration – CC&Rs without member approval. Future amendments, however, “cannot be ‘entirely new and different in character, otherwise they would exceed the reasonable expectations of the owners.’”  Furthermore, statutory amendments do not apply when, 

“the statutory amendments did not merely refine the statutes, correct errors, or fill in gaps, but substantively altered owners’ property rights beyond the “owners’ expectations of the scope of the covenants. . . . And substantive amendments to the Condominium Act cannot later be incorporated into the agreement without renewed consent.”

The Court vacated the trial court decision in favor of the HOA and sent the case back to the superior court based on its holdings. The decision has been appealed to the Supreme Court and we are waiting for its opinion.

What does this case mean?  What is all the hullabaloo about?  How important is a favorable supreme court decision? TEMENDOUSLY IMPORTANT! That’s why CAI is not only the HOA’s attorney but has also filed an amicus brief.  The holding of homeowner reasonable expectations regarding amendments opens the door to further challenges as to just what is reasonable in today’s HOA land agreements.  The opposition can say, “well, it is common that a development can be expected to be bought out, and therefore the holding is mute, not applicable anymore.”

The broader issue for advocates is to apply reasonable expectations to misrepresentations in the selling process that is intentionally designed to hide not only takings by the HOA but violations of the equal protection of the law. In the case of CAI, has its conduct over the years amounted to a coercive monopoly to keep control over the HOA-Land? How about the real estate agents and department looking the other way and concealing the facts?

It’s up to the homeowners and advocates to pursue these challenges that will open the doors to HOA reforms of substance.

Notes

[1]  CAO v. Dorsey, CA-CV 21-0275 (Ariz. App. Div.1, 2022). I would like to thank Dennis Legere, Arizona Homeowners Coalition,  for bringing this case to my attention and for providing me with the court filings. He has filed an AZ supreme court amicus brief  with attorney Jonathan Dessaules.

[2] This is the first of several planned reviews and case memoranda addressing the appellate court decision. To follow will be  reviews of the amicus briefs by AZ Homeowners Coalition,  The Goldwater Institute for the homeowner), and CAI (for the HOA), and the eventual supreme court decision.

Beware settlement agreements and gag orders

In reality, Life does not go according to Hoyle.

We are all quite aware that many lawsuits are settled with a gag order attached, especially when CAI is involved (not in this lawsuit).  To my surprise and disbelief, in Arizona, a gag order is not material to an agreement between to parties in a lawsuit.

A recent Arizona appellate decision involved a court ordered settlement conference in which the parties verbally agreed to the terms of the settlement and a written agreement was prepared to be submitted to the court. The homeowners removed the HOA’s version with respect to a gag order, informing the HOA they did not agree to the gag order. The court was informed that the digital recording of the settlement conference was not available for an unknown reason, whereupon the court then ordered litigation and a hearing as to the settlement agreement.  H’mmmm!

The trial court held that the HOA’s version was valid, which not surprisingly was appealed. Following Arizona’s precedent, the court would support the trial court’s ruling “if the trial court’s disposition is correct for any reason.” It seems that the judicial system back’s its own kind – judges make no mistakes. The justification for upholding the HOA’s version was found in Rule 80(a) of the rules of civil procedure.  

First, the fact that the parties agreed to put the agreement in writing doesn’t count if there is an agreement.  Second,

The law “favors enforcement when it is clear that the parties intended themselves to be bound,” and “absent or uncertain terms are not fatal to the enforceability of an otherwise binding contract.

In other words, picky, picky no matter what impact it has on the parties. How can the court hold that an agreement was reached when there are 2 versions and only one party signed? Yes, the judicial system has its flaws!  BEWARE! 

Source: Robertson v. Sierra Pines, CA-CV 23-0069 (ARIZ. App. Div1 (9-14-2023).

Never, ever say this to the court

In this Arizona appellate decision [1], the plaintiff, Danko, failed to follow the Rules of Civil Procedure that every state has.  The defendant, Leavitt,  filed for dismissal due to a deficient brief, upon which the plaintiff begged the court for leniency for failing to comply with the Rules. He claimed that he was filing pro per, without a lawyer.   Plaintiff further asserted that “his claims should not be dismissed because of “meaningless” rules.” The court “found Danko had not sufficiently pleaded facts to support any of his other claims and dismissed them with prejudice as well” as required by the Rules.

The terse reply by the court makes the point that rules are rules.   

“In furtherance of these goals, we have “a responsibility to see that litigants conform to an acceptable, minimal level of competency and performance and we owe this responsibility to the judiciary, the bar and, more importantly, to all litigants and the people as a whole. An appellant who fails to make a bona fide and reasonably intelligent effort to comply with the rules will waive issues and arguments.”  

“Waived” means the party surrenders all rights to continue.

The court made a strong statement on not granting any leniency to pro per litigants;

Further, we hold litigants like Danko who choose to proceed without representation to the same standards as attorneys. Indeed, requiring a reviewing court to expend significant time and effort to make a party’s arguments for them not only wastes finite judicial resources, but is additionally improper because it trespasses dangerously close to the realm of impermissible advocacy.

Take heed!  Rules are rules. Learn the rules before going to court.

Notes

1.  Danko v. Leavitt, No. 1 CA-CV 22-0525 (Ariz. App. Div.1, 8-17-2023).