law – Page 43 – HOA Constitutional Government

awarding HOA attorney fees and public policy

This Maryland Court of Appeals (equivalent to other states’ supreme court) case[i] discuses the topic of awarding reasonable HOA attorney fees, public policy, and when exorbitant fees may be awarded. “In each case, the Associations won affidavit judgments against the Residents in ‘largely uncontested’ proceedings. The Associations also sought attorneys’ fees from the Residents in those courts, calculated according to the ‘lodestar method.'” (Emphasis added). Note the HOA’s arguments to justify their attorney’s fees.

First, the generally accepted method to determine attorney fees is known as the Lodestar Method as set forth by the US Supreme Court:

(1) the time and labor required; (2) the novelty and difficulty of the questions; (3) the skill requisite to perform the legal service properly; (4) the preclusion of other employment by the attorney due to acceptance of the case; (5) the customary fee; (6) whether the fee is fixed or contingent; (7) time limitations imposed by the client or the circumstances; (8) the amount involved and the results obtained; (9) the experience, reputation, and ability of the attorneys; (10) the “undesirability” of the case; (11) the nature and length of the professional relationship with the client; and (12) awards in similar cases.

Second, there is the underlying premise, presumption, of “fee-shifting” that holds, as stated by the Court (emphasis added),

[T]hat the lodestar method of calculating attorneys’ fees was generally appropriate in the context of fee-shifting statutes. This holding is justified by the public policy underlying most statutes that allow for fee-shifting. Fee-shifting provisions frequently apply in “complex civil rights litigation involving numerous challenges to institutional practices or conditions.”

A court’s application of the lodestar method in these cases “is designed to reward counsel for undertaking socially beneficial litigation in cases where the expected relief has a small enough monetary value that [other methods] would provide inadequate compensation.

However, the Court saw it as inappropriate, stating (emphasis added),

The policy considerations mentioned above do not apply here because these cases do not involve a fee-shifting statute . . . . It is by contract, not because of public policy, that the Residents are obligated to pay attorneys’ fees to the Associations.

But, the HOA responded with (emphasis added),

[These cases] are sufficiently related to advancing the public interest to justify use of the lodestar method in determining reasonable attorneys’ fees. [And] that “[h]olding delinquent owners accountable for paying their share of association assessments supports social benefits that extend far beyond the association itself.” . . . [H]omeowners associations provide public services such as street maintenance and security, thus relieving local governments of those obligations.

The Court’s rebuttal said,

We are unpersuaded [sic] that any tangential benefit the Associations may provide to local government or to the public is sufficient to justify use of the lodestar method in awarding the fees for their attorneys. . . . The fact remains that this litigation arises from disputes between private parties over breaches of contract.

Our rejection of the lodestar approach does not mean that the time spent by the lawyers and a reasonable hourly rate should not be an important component of a court’s analysis.

Courts should use the factors set forth in Rule 1.5 [MD Rules of Professional Conduct on reasonable attorney fees] as the foundation for analysis of what constitutes a reasonable fee when the court awards fees based on a contract entered by the parties authorizing an award of fees

Rule 1.5 does not carry with it the notion that the importance of the right vindicated will justify an expenditure of attorney time that is hugely disproportionate to the dollar amount at issue in the case.

Trial courts are not bound by the monetary amounts in such contracts [that state an amount for the attorney fee] , however, and need not cleave to the contracts at all if they improperly influence the fee award.

[i] Monmouth Meadows HOA v. Hamilton, Nos. 43, (Md, July 27, 2010). (Three consolidated cases decided in this decision.) See Leagle.com http://www.leagle.com/unsecure/page.htm?shortname=inmdco20100727254.

Texas & Arizona: the different meanings of ‘standing to sue’ an HOA

The question on appeal was a question of a legal standing to bring this suit against the defendants. In general, the Texas appellate court in Webb clarified the legal status of “standing” (emphasis added),

Standing deals with whether a litigant is the proper person to bring a lawsuit. . . . To establish standing, one must show a justiciable interest by alleging an actual or imminent threat of injury peculiar to one’s circumstances and not suffered by the public generally. . . . As stated by the United States Supreme Court, the question of standing is whether the party invoking jurisdiction has “a personal stake” in the outcome of the controversy.

Traditionally, courts have held that this “personal stake” must exist at the commencement of the litigation and continue throughout the lawsuit’s existence.

With respect to the Webb decision, the Court noted (emphasis added), “Accordingly, unless Webb is an owner of a lot within Glenbrook Estates, she does not have standing to seek a declaration whether the Association waived enforcement of certain Covenants.” Webb was not the recorded owner of the lot, only her husband’s name appeared on the deed, and Webb could not establish any fiduciary relationship or other representation for her husband. Webb’s case was dismissed due to a lack of standing to sue.

See Webb v. Voga, No. 05-09-00074-CV, Tex. App. Dist. 5, July 15, 2010. (Glenbrook Owners Assn was a defendant).

NOW, TURNING OUR ATTENTION TO ARIZONA’S MOCKERY OF JUSTICE, where the Office of Administrative Hearings adjudication of HOA disputes was declared unconstitutional by the Maricopa County Superior Court (Meritt v. Phoenix Townhouse HOA, LC2008-000740, January 29, 2009), we find an unaddressed issue of standing to sue. In short, after the decision and after a denial of this writer’s right to file a Motion to Intervene by Judge Murdock, an attempt was made to bring the issue of a lack of standing to the attention of the court. The fact that the homeowner, who initiated the case, was no longer a member of the Phoenix Townhosue Assn. On Feburary 23, 2009 I wrote Judge McMurdie, providing the evidence and saying,

Petitioner and real party in interest, Ron Merrit (sic), had quitclaimed his deed to his co-owned property in the Phoenix Townhouse subdivision on October 10, 2008, prior to the superior court special appeal of October 23. (Exhibit 1). I believe this issue became moot at that point.

I reminded the judge,

If I had been permitted to intervene, these facts, discovered subsequent to filing the Motion to Intervene, would have been presented appropriately. Rule 60(c)(6) “does not limit the power of a court to entertain an independent action to relieve a party from judgment, order . . . or to set aside a judgment for fraud upon the court.”

On March 2, 2009 Judge McMurdie responded with the following Minute Entry (emphasis added),

The Court has received Intervener’s, George Staropoli, miscellaneous filings.

IT IS ORDERED striking these filings.

IT IS FURTHER ORDERED that the Clerk of Court shall not accept any filings from George Staropoli in this case.

Apparently, the Arizona courts have a different take on this doctrine of standing to sue when it comes to HOAs. The decision and harsh attitude of the Judge, and the absence of any government agency or official to defend the statute, allows a paraphrasing of Carl von Clausewitz’s, “War is the continuation of policy by other means” (On War):

“The judicial system is the continuation of policy by another means!”

Read the complete story of OAH constitutionality at

The State of Arizona will not protect buyers of HOA homes!

De facto NJ private HOA governments granted liability immunity

While reading the NJ Superior Court case, Fernicola v. Pheasant Run HOA[i], I was surprised to find that New Jersey statutes grant an HOA greater immunity than granted to public entities. In this case, a homeowner was injured as a result of tripping on an uneven section of common ground sidewalk. One adjacent slab was 2 inches above the other, of which the HOA was well aware. But, this was just one such incidence of an uneven sidewalk. The HOA was not found guilty of gross negligence.

Negligence is a wrong under a duty of care doctrine, to which HOAs and public governments are held accountable. In short, from my lay knowledge of the law, a complaint must show that a duty of care existed, and that the accused violated that duty resulting in damage to another caused by this failure of care. In general, public entities are granted either absolute or partial immunity from such liability[ii], under the logic that who would work for the government if all employees were made liable for their actions. Apparently, to even a higher degree of protection, this logic was applied to de facto, private, contractual government HOAs.

Following is the appropriate section of the N.J. statutes. Note that, once again, the law defers to, and makes legal, privately drafted contractual provisions. The presumption is that all members to these CC&R servitude contracts agreed to each and every surrender of rights and protections. Note, too, the deliberately awkward wording of subsection (b), which obscures the fact that the HOA has immunity except from any of the enumerated factors. N.J.S.A. 2A:62A-13 provides as follows:

a. Where the bylaws of a qualified common interest community specifically so provide, the association shall not be liable in any civil action brought by or on behalf of a unit owner to respond in damages as a result of bodily injury to the unit owner occurring on the premises of the qualified interest community.

b. Nothing in this act shall be deemed to grant immunity to any association causing bodily injury to the unit owner on the premises of the qualified common interest community by its willful, wanton or grossly negligent act of commission of omission.

Under real property tort law liability[iii], there are three categories of a duty of care toward others by property owners. We would expect this common law doctrine to apply to HOAs were it not for special laws for private organizations. Under tort law, there is not duty of care for trespassers — they enter at their own risk. Licensees are people you invite on to your property, such as social guests. With this class, the owner must only inform of conditions that he is aware of. The last class, Invitees are those whom the owner invites on to the property to conduct business, or that has public services, such as a public phone, etc. The owner has a duty to inspect and to inform this class of people of any situations that might prove harmful, such as faulty construction, etc. However, given the above special statute, the HOA has almost no accountability to its member-owners; they would get a better deal from belonging to de jure public government.

IT SHOULD BE CLEARLY UNDERSTOOD that these grants of special privileges to private organizations, as the various state HOA and condo laws can be described, occur without any justifications or consideration being offered to the homeowners as to enhanced rights to deal with any abuse of these special grants.

AND LET US NOT FORGET the wisdom of the NJ Supreme Court in Twin Rivers[iv] that homeowners are protected by the business judgment rule, and not to worry about constitutional protections. The Court failed to note the this rule was also designed to protect the HOA entity and not the people from abuse, in contradiction to the principles found in the Constitution and Bill of Rights.

Notes

[i] Fernicola v. Pheasant Run HOA, No. A-2027-08T1, N.J. Super. App. Div., July 2, 2010.

[ii] Under the Federal Tort Claims Act, the government can be sued for negligent acts or omissions that need not rise to the level of willful or gross negligence. See Tort Law for Legal Assistants, Linda L. & J. Stanley Edwards, eds. p. 218 0 219(Thomsom-Delmar Learning, 3rd ed. 2004).

[iii] Id, p. 86-88.

[iv] See generally A choice for Americans: the US Constitution or authoritarian, private HOA government.

CAI attorney advises negotiate payments in HOA short sales

Arizona’s Ekmark & Ekmark (CAI/CCAL member) has joined the blog world. It’s chosen vehicle is a Bog provider called Posterous, and his blog is simply http://ekmark.posterous.com — easily confused with preposterous.

In its blog, advice is given to HOA boards to be realistic and negotiate for partial payments of debts, as any other organization would do when facing financial problems with a small chance of getting any money out of debtors. In short sales situations, Ekmark informs the HOA that it must act quickly to get at least some money out of a losing situation, even though it is complicated negotiating process.

I have written repeatedly about the short-sighted, self-defeating, hardnosed position that the HOA does not negotiate and does not give in one inch. That posture stems from the great fear of a slippery-slope path to a loss in absolute power over homeowners — it would be a seen as a sign of weakness. How true that is — asking the HOA to face reality rather than to foreclose themselves out of business as the CAI lawyers have been exhorting HOAs to do over the years.

And by the way, what about all that abdication to the HOA attorney to run up attorney fees on homeowners facing financial problems, rather than advising the board to sit and negotiate a sensible payment plan? What advice can be given HOA boards on how to negotiate a plan. A failure to undertake this effort would raise questions as to the real intent of the above advice on accepting partial payments. A person may get the feeling that it’s just another attempt to keep at least a part of the attorney fees coming in, since these fees are generally the bulk of the money owed by the homeowner. And they don’t go to help the HOA! Don’t you think HOA attorneys should cut their fees, and help be a good corporate citizen?

What do you say CAI attorneys? What does your corporate conscience have to say?

NOW that I’ve said the above, let us not forget that the HOA has no legal standing in the lender/mortgage contract. There’s really no reason for the lender to give away even more of its money in this short sale transaction. The homeowner may still be personally obligated to the HOA for its past debts, but that’s no concern of the lender, is it? So why would it even care about the HOA’s attempt to negotiate a piece of the action? And if the homeowner attempts to bargain for a larger piece of the pie to payoff the HOA, even partially, he risks losing the short sale.

No, it appears once again that the CAI attorneys are silently ascribing de jure public government attributes as if the HOA assessments were indeed equivalent to taxes. You know, taxes must be paid! But, the HOA is not a recognized legal form of civil government. It cannot claim such attributes; it cannot demand payment of assessments from the short sale. Especially without even offering to be bound to the 14th Amendment as all public entities are subject.

So, I ask, what is the real motivation behind this interference into short sales advice?

HOAs and unauthorized practice of law

I just received a copy of a letter from a homeowner in which the HOA manager explains the rights of the homeowner under the CC&Rs. This is not an uncommon occurrence, where untrained and uneducated managers, even if they are a Certified Legal Document Preparer (independent paralegal), make such statements in response to a homeowner’s request “to know”. The average homeowner is not familiar with the law and usually doesn’t understand what the rules mean or say. And, obviously, the same goes for these HOA managers, including those with those CAI “certified” as to training designations — PCAM, AAMC, etc.

The manager, in defense of a board rule change, had misdirected the homeowner by quoting a section of the CC&Rs that grants the board to the right to create rules and regulations. However, the issue at hand and pointed out to the manager, limiting the number or dogs, is not specified in the CC&Rs, which simple says dogs may be kept. Consequently, the CC&Rs would have to be modified accordingly to specify any limitation, not by a vote of the board, but by the members. This is both unethical and an outrageous unauthorized practice of law, which I shall say once more, occurs all too frequently under HOA regimes.

The letter did not contain a disclaimer that, “I am not giving legal advice or opinion, and I am not an attorney nor employed by an attorney. You should seek independent legal advice from a competent attorney.” (Remember that the HOA attorney is just that, the attorney for the fictitious HOA and not for the opposing party, the homeowner.) This simple disclaimer never appears on statements made by HOA managers, in violation of Arizona, and all other state UPL (Unauthorized practice of law’) restrictions. Under the Arizona Rules of the Supreme Court, R 31(a)(2)(A), “‘Practice of law’ means providing legal advice or services to or for another by: (5) negotiating legal rights or responsibilities for a specific person or entity.”

Rule 31(a)(2)(B) states: “‘Unauthorized practice of law’ includes but is not limited to: (1) engaging in the practice of law by persons or entities not authorized to practice pursuant to paragraphs (b) or (c)”

Subsections (b) and (c) state that UPL occurs when a person is not a member of the State Bar, including a disbarred or restricted Bar member.

IMPORTANT

If you receive any such letter from a manager or management firm employee, and that letter does not contain a disclaimer, please file a UPL complaint against the manager. This is the only way to stop this practice. It is a small thing you can do to help yourself and all other people living in an HOA. If a director writes such a letter, then he risks personal liability for his error since he did not consult an attorney. If he claims “acting on the advice of the attorney”, demand to see it in writing! If he does not provide it, then he is not acting in good faith as required of directors of nonprofit corporations.

Qui Pro Domina Justitia Sequitur

(“who prosecutes on behalf of Lady Justice?“, DOJ seal)

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