delegation of legislative power – HOA Constitutional Government

Fines: unconstitutional delegation to HOAs

This question of HOA fines, in 2 cases, was brought to my attention in my early years by Shu Bartholomew. It is a prime example of how constitutional issues can perk down and affect members in HOA-Land. It is important to understand that they apply to just 2 states, RI and VA. Why not in other states? Because legal doctrine holds that all bills are deemed constitutional unless challenged in court. If people do not raise these issues in court, like I did in Arizona in 2013, you can see HOAs fining away in violation of the laws of the land.

A 1982 VA supreme court in Gillman (292 S.E. 378) overturned imposed fines and a lien, holding,

“We find no language in the Condominium Act which authorizes the executive or governing body of a condominium to levy fines, impose penalties, or exact forfeitures.”

“The imposition of a fine is a governmental power. The sovereign cannot be preempted of this power, and the power cannot be delegated or exercised other than in accordance with the provisions of the Constitutions of the United States and of Virginia. Neither can a fine be imposed disguised as an assessment.”

NOTE: Current VA POA statutes speak only of “charges” and liens for non-compliance, nothing about fines. No violation of fundamental rights.

In Foley (RI, 1999), the question of the constitutionality of HOA fines was answered after 4 decisions. The issue involved whether the Condominium Act of 1982 violated the RI Constitution of “an unconstitutional delegation of power to a private entity.” The RI Supreme Court remanded to the superior court, outlined below, to decide the constitutionality question.

The key factor involved the enforcement of fines by means of foreclosure. Only recently have the courts and legislatures looked at the validity and fairness of the HOA foreclosure process. The owner’s equity is wiped out and raises the question of a cruel and unusual punishment in violation of the 8^th Amendment. The supreme court and remanded trial court decisions are presented.

Foley v. Osborne, 724 A.2d 436 (R.I. 1999)

2. Improper Delegation Claim

The plaintiff argued on appeal that the actions taken by the committee pursuant to provisions in the 1982 act were illegal because they stemmed from an improper delegation of article 10 judicial power to a private entity. R. I. Const., art. 10. We are of the opinion that plaintiff properly presented his claim that there was an unconstitutional delegation of power to a private entity.

In his opening statement, plaintiff argued at length — again without objection — that the 1982 act allowed an unconstitutional delegation of police power to the committee, a private entity. . . . . The trial justice, however, subsequently issued a bench decision and judgment that failed to rule on plaintiffs argument that the 1982 act unconstitutionally delegated judicial power.

Consequently, we remand this case to the Superior Court with our instruction that the trial justice consider and rule on whether in this case the 1982 act represents an unconstitutional delegation of judicial or police power to the condominium association, a private entity.

If the trial justice finds that the delegation is unconstitutional, then within the time permitted for appeals, the defendants may seek appellate review of the trial justice’s ruling; alternatively, as a consequence of the trial justice’s ruling, the defendants may bring “an action to recover sums due for damages or injunctive relief or both” in accordance with the condominium association’s bylaws.

If the delegation is found to be constitutional, the trial justice must then find whether any conflicts between the provisions of the 1982 act significantly modify the relation between an owner and an association where, as here, the bylaws provided for a judicial procedure prior to foreclosure.

If the trial justice finds no conflict and affirms the previous judgment, the plaintiff may seek review of the ruling. If the trial justice finds such a conflict, the defendants may appeal pursuant to the rules of appellate procedure.

Foley v Osborne, 1999 R.I. Super. LEXIS 50 (Newport Superior Ct on remand)

[Decision on remand from RI Supreme Court (724 A.2d 436)]

The Superior court held the following.

Although other statutes permit debt collection without court intervention, none authorizes private entities to impose fines. It is the authority to impose fines and to enforce them that distinguishes the 1982 Act from other legislation. Finally, the act empowers the association with the ability to enforce its orders by depriving a violator of his property by foreclosure. In this capacity, the association acts as a tribunal exercising judicial power.

For the foregoing reasons, the Court finds that the 1982 Act represents an unconstitutional delegation of judicial or police power to the condominium association, a private entity.

“Rules of Engagement” apply to CAI

Many may feel from all my criticism that I unjustifiably have it in for CAI. Well folks, you decide whether the CAI propaganda statements and publications that are PR releases is in conflict with its numerous acts before state legislators and the courts. These contradictory stances are revealed in CAI’s amicus briefs — what I say I don’t do [1].

Advocates have failed to apply the Rules of Engagement to such Doubletalk[2] from CAI allowing the legislators, the media and the BODs to see no evil, hear no evil speak no evil. These Rules are a very important weapon to discredit CAI and stop the policymakers from trusting their misleading statements; to start believing in the validity of the positions and arguments for HOA reforms coming from homeowners and homeowner advocates.

As a prime example, and there are many others found in the numerous CAI briefs dealing with constitutional HOA issues, is the NJ Supreme Court case in Dublirer.[3] It involved the free speech rights of a homeowner to equal access the HOA facilities in order to distribute BOD election materials to his neighbors – an exercise of his rights in a democracy. Allow me to repeat my quotes[4] from CAI’s NJ Supreme Court amicus brief in Dublirer.[5]

CAI-NJ’s concern is the attempt to convert private communities into constitutional actors and to open such communities to access not only to speakers from within the community but also to the public, while ignoring contractual agreements and non-constitutional protections.

The relationship between the plaintiff and the defendants here is that of a business corporation and so is similar to that involved in any other business corporation. A shareholder who wishes to run for a position on a corporate board has no right to post campaign signs on the corporation’s property. . . . He has no constitutional right to distribute his campaign materials within the cooperative’s property simply because mailing them to the other tenant/shareholders may cost him money”.

In plain English, this is secessionist and a rejection of the Constitution. CAI’s position says the people in an HOA will decide what laws to follow or not to follow. It is an incredulous statement from the organization that claims to be the one and only voice on HOAs, but apparently does not understand or simply ignores constitutional law. The CAI position is in opposition to the long-standing legal doctrine on the delegation of legislative (lawmaking) powers to private persons.

In order to win, advocates must muzzle CAI’s lack of “candor to the tribunal.”[6] Judicial and legislative doctrines hold that an allegation or argument that goes unanswered is held to be true. That’s why, it seems, advocates are viewed as unbelievable, because of their repeated silence resulting from a lack of knowledge on how to respond. This must change!

References

[1] See in general, Will the real CAI standup: its contradictory beliefs, pronouncements and goals.

[2] From George Orwell’s novel, 1984, where a person holds two contradictory statements at the same time.

^[3] Dublirer v. 2000 Linwood Avenue, 103 A.3d 249 (NJ 2014).

[4] See my Commentary for additional quotes: CAI: the HOA form of government is independent of the US Constitution.

^[5] Dublirer CAI Amicus.pdf.

[6] Attorney Rules of Professional Conduct, Rule 42, E.R. 3.3

Supreme Court says corporations cannot be used to evade Constitution

The recent non-HOA decision by the US Supreme Court in DOT v. Assn American Railroads[i] has a direct bearing on the constitutionality of the HOA legal scheme. This case dealt with the legal status of AMTRAK — is it or is it not a government entity — and was there an unconstitutional delegation of legislative authority. While I have argued that HOAs are de facto private governments based on their powers, authority and functions, I now make the argument that as a de jure (according to the law) private corporation, HOAs have been unconstitutionally delegated legislative powers. “[R]ecognizing that the power to fashion legally binding rules is legislative.”[ii]

Implicit delegations of legislative powers are described in The Restatement Servitudes[iii] and numerous state statutes carry implicit delegations of legislative powers.[iv]

With respect to violations of the Constitution, the Supreme Court decision in DOT held 1) that private parties cannot draft agreements to circumvent the Constitution by declaring that an entity, specifically a corporation, is a private organization, 2) that such a determination is made by the courts based on the corporation’s functions, powers and authority, and 3) that in order for a private entity’s delegation of legislative authority to be constitutional, there must be control, supervision and accountability to the state.

I have presented my case that, in the absence of explicit enabling acts, there is implicit unconstitutional delegation of legislative power to private HOAs, particularly in regard to legally binding rules, without accountability.

Read the complete paper at Delegation.

[i] Dept. of Transportation v. Assn American Railroads, 135 S.Ct. 1225 (2015)

[ii] Supra 1, p. 17.

[iii] Restatement Third, Property (Servitudes), Susan F. French, Reporter, p. ix (American Law Institute 2000).

[iv] For a sample of implied rulemaking statutes by state, see: Arizona: ARS 33-1803(A) and (B) for HOAs; 33-1242(A)(1) for condos. California: Civil Code §§ 4340-4370 (Part 5, Chapter 3, Article 5, Operating Rules). Florida HOAs: Title XL, § 720 et seq. do not explicitly address rules per se, but speak to enforceable “guidelines” and “standards”; Florida Condos: Title XL, § 718 et seq. (in particular, § 718.1035, the general statement on “association rules”). Nevada: “NRS 116.31065 Rules. The rules adopted by an association” (with 5 “musts” imposed on the HOA).

The unconstitutional delegation of implied rulemaking powers to HOAs

Here I present evidence of the explicit and implicit delegation of rulemaking powers to HOAs, which, if not unconstitutional, would alone establish HOAs as state actors.

In an earlier Commentary[1] I discussed the implied delegation of legislative functions to HOA private governments. Putting the issue in simple terms, I quoted Stephen Wermiel’s comments on a constitutional delegation case before the US Supreme Court,

The dispute before the [Supreme] Court . . . [involves] the even less well-known principle that Congress may not delegate legislative authority to private entities. . . . [T]he Justices must decide if the authority given to Amtrak by federal law is legislative in nature, and whether Amtrak is a private corporation or a public entity.[2]

“Rulemaking” is a term that deals with the grant of legislative powers to state agencies and, in a more restrictive mode, to private entities. It is the authority to adopt rules that have the effect of law, which can be found in the federal and state Administrative Procedures Acts (APA)[3]. The point is that the term “rulemaking” is a state agency process and is not found in the nonprofit corporation law even though these nonprofits have rules.

However, it has been applied to the supposedly nongovernmental, private nonprofit HOA corporation. In Tierra Rancho [4] the court quoted The Restatement (3^rd) Servitudes (the common law legal authority in the absence of statutory law) § 6.13(1)(b) and (c) in paragraph 25, “[the HOA has] the duty to ‘act reasonably in the exercise of its discretionary powers including rulemaking, enforcement, and design-control powers.’” The HOA rulemaking powers are set forth in detail in § 6.7.

“§ 6.7 Power to Adopt Rules Governing Use of Property [my emphasis],

(1) Except as limited by statute or the governing documents, a common-interest community has an implied power to adopt reasonable rules to

(b) govern the use of individually owned property to protect the common property.”

Comment “b” to 6.7 (p. 141, second paragraph) goes even further,

Even in the absence of an express grant of authority, an association enjoys an implied power to make rules in furtherance of its power over the common property. The association has no inherent power to regulate use of individually owned properties, however, except as implied by its responsibility for management of the common property.

And finally, examples of implied delegation of rulemaking powers can be found in state statutes.[5]

It is quite evident that the public policy of every state contains an implied delegation of legislative rulemaking powers to private HOA corporations.

Stephen Wermiel explained the non-delegation doctrine in Amtrak (my emphasis),

“[I]n theory delegation to the private sector can never be constitutional. . . . The Solicitor General argues that there is no unconstitutional delegation to a private entity because government officials retained control . . . . The Association of American Railroads (AAR) argues that the delegation to Amtrak is for actual rule-making authority and that Amtrak is . . . a private entity for purposes of the nondelegation doctrine.”[6]

In regard to the Solicitor General’s argument, we know this is not true with HOA statutes. As there is no oversight, no enforcement, and no effective penalties against HOAs that violate the law, there is no government control.[7] Having the homeowner enforce the HOA laws does not constitute government control or oversight. In regard to AAR’s argument, the above evidence supports an unconstitutional delegation of legislative rulemaking powers to private HOA entities.

No matter how you view the private entity non-delegation doctrine, HOA rulemaking is unconstitutional and the covenants are thereby invalid. (The Restatement, § 3.1, Validity of Servitudes, General Comments.)

References

[1] Unconstitutional delegation of power to HOAs.

[2] Stephen Wermiel, SCOTUS for Law Students: Non-delegation doctrine returns after long hiatus. (SCOTUSblog Dec. 4, 2014)

[3]See federal Administrative Procedure Act (5 U.S.C. Subchapter II, § 551(4) and § 553).

[4] Tierra Ranchos HOA v. Kitchukov, 165 P.3d 173 (Ariz. App. Div. 1 2007).

[5] A sample of implied rulemaking statutes by state. Arizona: ARS 33-1803(A) and (B) for HOAs; 33-1242(A)(1) for condos. California: Civil Code §§ 4340-4370 (Part 5, Chapter 3, Article 5, Operating Rules). Florida HOAs: Title XL, § 720 et seq. do not explicitly address rules per se, but speak to enforceable “guidelines” and “standards”; Florida Condos: Title XL, § 718 et seq. (in particular, § 718.1035, the general statement on “association rules”). Nevada: “NRS 116.31065 Rules. The rules adopted by an association” (with 5 “musts” imposed on the HOA).

[6] Supra, note 2.

[7] In regard to the delegation of legislative powers to private entities, a review of the fuzzy case history of the Non-delegation doctrine indicates a constitutional requirement for governmental control or oversight of the private entity’s decisions and rules. See “ A New Private Delegation Doctrine?”.