contract interference – HOA Constitutional Government

Important AZ case on CC&Rs interpretation

While this case deals specifically with Arizona statutes, the legal doctrine applies across all states. The issue involved amending the CC&Rs by means of consent forms. Learn how the courts look at HOA complaints on interpretating CC&Rs — not what you probably think. So learn!

Your declaration probably has the misleading statement that the board has the right to interpret the governing document. Not so! The courts have that sole right.

Please note that on important cases affecting HOA board authority and powers, you may well find CAI filing an amicus brief as in Mountz.[1] For those with some legal understanding, the following will make sense. If you don’t understand, post questions here.

The case

A number of owners sued seeking a declaratory decision that the amendment was unenforceable, and the lower court agreed. The HOA had sent a letter indicating “that owners could approve the Amendment by signing and returning an attached consent form.” The result was announced at the subsequent annual meeting, and the VP “certified that the Amendment was adopted by at least 50% of the lot owners.”

Now pay attention to my warnings of word games and expansionist interpretations. The lower court held “the Amendment invalid because it was not executed by at least half of the owners,” because

“the CC&Rs authorize an amendment “by Instrument executed by the [o]wners of at least fifty percent (50%) of the Lots . . . and such amendment shall not be effective until the recording of such Instrument.” (Emphasis added.) The Court said that “Because it was not done in this manner, the Amendment is invalid.”

Mountain Gate argued “when the approving owners signed and returned their consent forms, they gave the Board actual authority to execute the Amendment on their behalf.” The key issue came down to, what is the meaning of “execute.”

CC&Rs contract Court interpretation principles

My annotations are in square brackets [].

A restrictive covenant is a contract [The courts have not clarified that by “contract” they meant under Contract Law, which the CC&Rs would fail to meet. Instead, one court held that the CC&Rs are interpretated as a contract, again missing application of Contract Law.]

When we interpret them, as with any contract, we strive to give words their ordinary, common-sense meaning to carry out the parties’ intent. [As with the argument over the meaning and use of the word “execute”].

Restrictive covenants “should be interpreted to give effect to the
intention of the parties. . . . We look to the “language used in the instrument, . . . the circumstances surrounding the creation of the [instrument], and . . . the purpose for which it was created.”

Enforcing the intent of the parties is the “cardinal principle” for interpretating restrictive covenants. . . . We will not read a covenant in a way that defeats the plain and obvious meaning of the restriction. [the Amendment, and it was executed by only one lot owner, a Board member.] The plain language of Section 11(E) does not authorize one individual to amend the CC&Rs by “written consent”

we will not add provisions that were not originally included because doing so would defeat the intent of the amendment provision. . . . [the HOA] broadly reads those definitions to allow the execution of a document through an agent. But the Association cites no authority supporting its argument that agency principles may trump the plain language of a restrictive covenant. [The HOA argued the interpretation of the word “execute” but the Court rejected this expansive meaning of the word within the intent of the CC&Rs. Also understand the need for supporting evidence to back any argument you make.]

Contracts are read to incorporate applicable statutes, but a statute governs only when the contract is incompatible with the statute. [This is a strong statement of no interference with contracts].

Notes

[1] Mountz v. Mountain Gate, No. CA-CV 21-0656 (App. Div. 1, from Navajo County,11-10-2022).

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 24^th, 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:

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

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.

Attorney Rebuttals of Goldwater Institute reform legislation as contract interference

The Goldwater Institute, a public interest firm that believes in protecting individual property rights, opposed Arizona HOA reform legislation SB1162 on the basis of contract interference. The Nick Dranias opinion stated:

This bill runs afoul of freedom of contract, the principle that the government should not interfere with agreements reached by willing parties. This principle recognizes that the state should not superintend the wisdom of contractual relationships.

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