Tag: CAI

Analysis of AZ HB 2441, the HOA minority control bill

 

Opinion

This bill should not be heard in any committee!  

It is contradictory and confusing, and ideal for attorney involvement in the expected challenges to the interpretations of the statutes. Also, it is definitely aimed at destroying any vestige of democratic governance in homeowner and condo associations. This bill denies access to the courts.

Introduction

The Carpenter Hazlewood Delgado & Wood blog of Jan. 18, 2011, written by Scott Carpenter, “HB2441 – CC&R Amendments,” argues: “This change would enable community association to change their documents without onerous approval requirements that count a failure to participate as a ‘no’ vote.” (Emphasis added).  The exercise of the democratic right to vote and to protect one’s private property is considered “onerous” by the CAI Legislative Action Committee co-chair, Scott Carpenter.

Carpenter’s Dec. 17, 2010 letter, titled  “Bad Documents,”  to CAI lobbyist DeMenna proposed a change in the laws.  The letter includes HB 2441, verbatim, under the title “Easier to Amend Bad Documents.”  This bill did not originate with the bill’s sponsors, but from the CAI lobbying organization that supports not you, the homeowner, but that legal corporate person known as the HOA.   The Sponsors are just the vehicle doing CAI’s bidding.

The title of the bill itself simply  reads:  “homeowners’ associations; declaration amendments,”  and the bill extends well beyond just changing the voting requirements to amend the CC&Rs.  Some of these changes are good for homeowner protection, but are offset by the draconian attack on homeowner property rights. CAI argues, in Carpenter’s letter to DeMenna, that the proposed voting procedure is just like public voting laws, but fails to provide the necessary public government protections, and ignores the legal fact of the private contract in operation here, the CC&Rs agreement. HB2441 is another top-down imposition of government interference, which otherwise in instances involving the protection of homeowner rights, is vehemently opposed by CAI.

As you read this bill, remember that the courts take the everyday meaning of the words used, and if not clear, or seemingly contradictory, the court will look to intent.  Courts have held that if word “x” was  not actually stated, then the drafters should have included word “x” if that was their meaning or intent.  Read the bill carefully as written, and think how your opponent could challenge the wording in the courts.

 

Analysis

The full document with its  detailed, 10-point analysis can be found at HB 2441.

AZ bill reasserts state supremacy over HOAs

For several years at the Arizona Legislature bills with a very limited restatement, or reminder, that civil government controls public streets were proposed.  Each year they were defeated by the special interests —  read that to include the HOA boards acting as representatives not of the homeowners, but of the legal fictitious person, the HOA.

 
This year we see Arizona’s CAI LAC co-chair Scott Carpenter writing in his Arizona Legislative Session blog – surrounded by his firm’s advertising, links and buttons to pay fines, but speaking for himself, says he – about intrusions into the government of the independent HOA principalities.  He objects to Sen. Harper’s HB 2140, a bill to prohibit HOAs from denying homeowners their second amendment rights to carry arms, or more correctly, from prohibiting HOA interference with all those rights protected under Article II of the Arizona Constitution.  Article II is Arizona’s Declaration of Rights, the state’s version of the Bill of Rights, which all states have in one form or another.
 
Carpenter’s law firm had also fought to have the statutes providing for an independent tribunal to hear HOA disputes by DFBLS/OAH, which provided due process protections with fair and just hearings, declared in violation of the Arizona Constitution.  He now stands in opposition to and objects to the recourse to the Arizona Constitution to protect all the rights of homeowners.  Apparently he sees the Constitution as working solely on behalf of the HOA principality, but not for the homeowner— as it secedes from our constitution and from our system of democratic governance.  Welcome to the New America of HOA-Lands.
 
Carpenter continues his plunge into the secession from local government by HOAs, echoing as Robert H. Nelson discussed in Chapter 20, “Neighborhood Secession”, Private Neighborhoods: the transformation of local government (Urban Inst. Press 2005), while seeking the protection of the Arizona courts to enforce the HOA “constitution.”   (Interestingly, Private Neighborhoods references this writer’s 2000 statement to the Arizona Legislature on a Homeowners Bill of Rights, p. 102).  Carpenter cannot have it both ways!  He cannot deny constitutional protections for homeowners and then seek those protections for the HOA!   Such a position would be a repudiation of what this country stands for, and his oath to support the Constitution that he took when he was admitted to the State Bar:  “The Oath of Admission to the Bar:  I, (state your name), do solemnly swear that I will support the Constitution of the United States and the Constitution of the State of Arizona;”
  
What a sad state this country has come to when the legitimate political government of the state must reassert itself as the supreme law of the land.
 
Congratulations to Sen. Harper for this long awaited bill in support of the people.

AZ CAI attorney maintains that “the law cannot fix” abusive board problems

CAI lobbyist and LAC co-chair in Arizona, Scott Carpenter, made it quite clear in his 2011 Legislative Preview blog post, Jan. 11, 2011, that:  “Community associations function worst when the elected directors act out of self-interest, play favorites, and work for their own political purposes” (see, there are indeed serious  problems in HOA-Lands).  And then declares, “The law cannot fix this problem directly any better than the law is capable of fixing conflict in families or marriages.”  Let me repeat that:  “The law cannot fix this problem directly any better than the law is capable of fixing conflict in families or marriages.”  Has he ever read the Constitution, the Bill of Rights or the Declaration of Independence?
 
Sarah Palin, in her video on the Arizona shooting this past Saturday, made reference to the Founding Fathers understanding of man’s  imperfect nature.  She quoted James Madison (Federalist Papers #10), “If men were angels there would be no need for government.”  (See Constitutional Local Government website, http://pvtgov.org).  It was that awareness by the Founding Fathers that led to the adoption of checks and balances and of a separation of powers.  But when there is no accountability, no check on private HOA governments by state government, one can only assume that those who become directors are blessed with perfection in all that they do.  And that the wise and learned legislators have the exceptional ability to see these angelic persons, and find it only fair and just to leave HOA matters to the HOA board.  Perhaps this is the real reason for the hands-off policy of the legislature.
 
It should be noted, however,  that Carpenter, in an about face,  fails to mention his Dec. 17, 2010 letter to the CAI lobbyist, DeMenna, that it’s a good idea for  a law that gives a minority of members the power to alter your CC&R contract at the time of purchase – 2/3 of 50% quorum =  33.5% of all the members. HOAs are contractual and are not public governments.  If Carpenter wants the HOA to function like a public government with its election laws, his justification for this proposed change in law, then he should argue for the modification the CC&Rs contract by member vote and not by legislative fiat.  Apparently legislative interference is a swinging door, depending on which side of the fence Carpenter is on.  He now seeks legislative interference that he otherwise rejects.  (While Carpenter takes pains to inform the reader that he speaks for himself, not CAI and not for the firm, the letter is signed by Carpenter “for Carpenter, Hazlewood, Delgado & Wood, PLC.”  Nor does he mention the fact that he remains co-chair for Arizona Central CAI chapter as he writes.) 
 
Carpenter closes with a strong statement that control of the HOA belongs with the members and directors, in contradiction of his above proposed changes by legislative fiat.  What is quite clear is:  Carpenter is opposed to the democratic functioning by the people, the members alone, within the HOA subdivision, with no recourse to state oversight of its operations to protect you, the homeowner. He  is strongly opposed to accountability to the civil government by private governments functioning under  an authoritarian form of government.  In fact, his law firm, Jason E. Smith the attorney of record,  has trice opposed the delegation of  authority by the legislature to a state agency (DFBLS/HOA) to hear HOA disputes. (See, in general,  https://pvtgov.wordpress.com).  He appears to want HOAs to be treated as independent principalities.
 
Carpenter has made his position quite clear. He is opposed, like CAI Central, to constitutional protections for homeowners.  He seems to be arguing that HOAs are a special class of utopian government that require no oversight by the state.  And sadly, like many other political statements on the national level, there are those true believers who see no wrong because it would not sit well with their own personal agendas. Or, they are declaring their preference for dogmatic principles, like a misguided support for “individual rights,” which they interpret to mean, “we can do anything the majority wants with no constitutional constraints.”
 
This secession from constitutional government must stop!

Court appointed Receiver files punitive damages against HOA attorney

In 2008 the DC HOA in Casa Grande, AZ ran into huge debts.  It had relied on the advice of its attorney, CAI member Charles Maxwell. In 2009  a homeowner filed  for and was granted receivership by the Pinal County court.  The court found that an unauthorized removal of some $665,000 from the HOA’s bank and ordered Receivership to protect the assets of the HOA.  Now, the HOA is being run under the court ordered Receiver.
 
Last month, the Receiver filed charges of breach of fiduciary duty, breach of ethical duties, disgorgement, professional negligence, aiding and abetting, and breach of contract against the Maxwell & Morgan law firm as well as against Maxwell and his wife, personally.
 
“Aiding and abetting” is like colluding.  “Disgorgement” is asking that the wrong-doers give up their illegally gained profits.
 
Except for the breach of contract,  the above charges are torts — wrongful actions — permitting a claim for punitive damages, which the Receiver is seeking.   Filing tort claims and seeking punitive damages against the HOA and the individual directors is the only effective means today that homeowners have against abusive boards. 
 
Gee,  maybe the legislature will see the wisdom of providing its own penalties for wrong doing by abusive HOA boards.  Maybe CAI will think this is the smart way to go. 
File!  File!  File tort actions and seek punitive damages before it’s too late!

 

Will AZ Supreme Court do justice for 1 million HOA members?

The two issues for review sought in the Gelb OAH constitutionality Petition to the Arizona Supreme Court are, in my layman’s view: 1) a legal procedural issue centering on the appellate rules of court, ARCAP 13(b)(3), and 2) the real issue at hand of the constitutionality of OAH adjudication of HOA disputes (technically, the authority of DFBLS to receive complaints that are forwarded to an ALJ at OAH). In both the Gelb appellate opinion and the earlier Meritt superior court ruling the basis for the decisions was the identical analysis of the same two Arizona cases, Hancock and Cactus Wren.

 

My commentary will focus on the first issue: ARCAP 13(b)(3) that relates to the procedure for filing a cross-appeal. It involves some contradictory or vague wording as to when a party must file a cross-appeal. A cross-appeal is just an appeal brought by the other party, the appellee, raising its own issues for review. Gelb maintains that the HOA had to file a cross-appeal and it didn’t. The rule in question, ARCAP 13(b), reads:

 

3. The brief of the appellee may, without need for a cross-appeal, include in the statement of issues presented for review and in the argument any issue properly presented in the superior court. The appellate court may affirm the judgment based on any such grounds. The appellate court may direct that the judgment be modified to enlarge the rights of the appellee or to lessen the rights of the appellant only if the appellee has cross-appealed seeking such relief.

 

The Petitioner/Appellant believes that the appellate court enhanced the HOA’s rights above than was specified in the superior court decision, and the HOA had violated the rule. Therefore, the decision was invalid, without force. The Petition points out that the HOA raised the constitutionality issue not in its appeal of any issue in the OAH decision, but in its motion to dismiss. The HOA’s authority was simply to cite that a lower court, a trial court that does not set precedent for other cases, had decided the unconstitutionality of DFBLS. (Presumably, the Meritt superior court case, which was a default decision based on an even earlier superior court case, Waugaman, all brought by Carpenter et al. The appellate court accepted this argument.) Furthermore, in the Petition, Gelb pointed out that the issue of constitutionality was never subject to a presentation or discussion of legal arguments (much like the Meritt case) and was an abuse of discretion by the court.

 

It is interesting to note the time frame during which the Carpenter Hazlewood law firm attempted to get an opinion of unconstitutionality – all for the good of its clients, three different HOAs. (See The State of Arizona will not protect buyers of HOA homes! for links to documentation supporting the following). It is interesting to note that in Gelb, the HOA had won the DFBLS case, so why would it want to vacate that decision by filing a constitutionality challenge?

 

On Aug. 4, 2008 Meritt filed a complaint with DFBLS. On Aug. 8, 2008, Gelb filed an appeal of its OAH/DFBLS ruling. However, since nobody, but nobody, including Meritt, the AG, or the legislature responded to defend DFBLS it was decided rather quickly. In Meritt, on Oct. 10th, after the OAH decision on Oct. 3, 2008, Meritt had quit claimed his deed to Big Henge, but that didn’t stop Carpenter Hazlewood from filing an appeal to the superior court on Oct. 23rd. Meritt no longer had standing to sue, and the case was moot. Although Carpenter Hazlewood added John Hernandez as a co-plaintiff in the appeal, Hernandez did not file a complaint with DFBLS — he was not a DFBLS petitioner — only Meritt did, and so Hernandez also had no standing to sue.

 

This raises strong questions of violations of professional conduct rule 42, Candor to the Tribunal, E. R. 3.3. David Dodge, former Chair of the Disciplinary Commission for the Arizona Supreme Court, wrote about “Perjury Pitfalls” in the January 2006 issue of the Arizona attorney: “There are lines that lawyers cannot cross in their endeavor to increase ‘the bottom line,’ and their duty of candor toward the court cannot be sacrificed to please a client.”

 

Other events at DFBLS/OAH provide insights into the attempt by Carpenter Hazlewood to stop OAH adjudication of HOA disputes, where 42% of the complaints were won by the homeowner. On the same day of the ALJ decision, Oct 3rd, Carpenter sought an expansive order — the one he obtained in Meritt that applied the ruling to all HOAs — which was denied on Oct. 10th, the same day Meritt quit claimed his deed.

 

On Jan. 28, 2009, in the superior court appeal, Judge McMurdie ruled DFBLS unconstitutional, and upon request by Carpenter Hazlewood, reaffirmed on Feb. 24, 2009 that his decision applied to all HOAs. Ten days later, on Mar. 6, 2009, Carpenter Hazlewood filed its Motion to Dismiss in Gelb citing the trial court Meritt decision. (It was too late to file an amended complaint). Carpenter could not raise the constitutionality argument at the time the appeal was filed, back on Aug. 8, 2008. The Gelb appeal was necessary in order to obtain the elusive opinion that could serve as precedent in future cases.

 

 _____________

The supreme court has yet to accept the Petition for a decision. If it does and finds in favor of Gelb on the above issue, it will probably not entertain the real issue of the constiutionality of OAH adjudication. Its opinion would vacate the appeallate court holding and DFBLS/OAH would then be required, under law, to hear HOA disputes once again.