Tag: supreme court

The Collected Writings TOC 1

Announcing “HOA Constitutional Government: the continuing battle,” is now available on Amazon as a Kindle eBook. See https://www.amazon.com/dp/B0CSC5LCY8. Paperback to follow.

I have included a table of contents of 56-issues reflecting perspectives, views, opinions, and documentation that point the way to HOA substantive reforms.  Readers may not agree, accept, or like what is stated in these issues that have been essentially avoided over the years; they are of immense educational value  and necessary for a realistic picture of HOA-Land. Part 2 of the TOC to follow.

See: HOA Constitutional Government: collected posts.

I.  On Reform Legislation . . .

d.  Decl. of Indep. from HOA government — 2000 . . .

e.  A united, national front to HOA reform legislation (2023)      . . .

f.   Two distinct levels for HOA legislation (2019)   . . .

g.  Analysis of The Homes Association Handbook (2006) . . .

h.  America’s homeland: HOA law vs. Home rule law (2022)        . . .

i.   Preface to HOA Common Sense (2021)    . . .

j.   HOA Common Sense, No. 1: The New America of HOA-Land (2013) . . .

k.  the NJ Supreme Court opinion in the Twin Rivers HOA case (2008) . . .

l.   CAI firmly supports the New America of HOA-Land (2011)     . . .

m. Authoritarianism in America; authoritarianism in HOA-Land (2022) . . .

l.   AZ bill, SB 1148, seeks to restore OAH adjudication of HOA disputes (2011) . . .

m. Arizona’s new “Take That George!” law: defend HOA statutes (2010)           . . .

n.  AZ Rep. explains failure of HOA reform legislation (2013)      . . .

o.  The Florida (HB 1397): police powers and the loss of fundamental rights (2009)  

p.  Landmark FL HOA law imposes criminal conduct (2023)       . . .

q.  Colorado senator’s guide to effective HOA legislation (2013)  . . .

r.  NC reform bills need your support (2023)          . . .

s.  North Carolina: second battleground for people’s rights in HOAs (2013) .  .

t.  CA bill AB 1410 –  a step backwards for HOA homeowner rights (2022)       .  .

u.  Substantive SC HOA reform bill – end foreclosure (2019)       . . .

v.  Effective HOA reform legislation (2023) . . .

w. HOA member Declaration of US and State citizenship (2015) . . .

Supreme Court finds taking excess foreclosure funds unconstitutional

The Supreme Court landmark decision in Tyler v. Hennepin County (No. 22-166, May 23, 2023), addressed an appeal by a  non-HOA homeowner in Minnesota who was foreclosed on by the state.  She brought “claims under the Takings Clause of the Fifth Amendment and the Excessive Fines Clause of the Eighth Amendment.” It has an immense impact on the constitutionality of HOA foreclosures. The Takings Clause is applicable to the action of states by means of the 14th Amendment.

(These claims of unconstitutional foreclosures and excess fines as a punished were argued in my 2013 pamphlet, HOA Common Sense: rejecting private government, No. 8, “Draconian punishment and intimidation.”)

In Tyler, the Court maintained that while states have imposed property  taxes,

“Such taxes are not themselves a taking, but are a mandated “contribution from individuals . . . for the support of the government . . . for which they receive compensation in the protection which government affords.”

And it posed, “The question is whether that remaining value is property under the Takings Clause, protected from uncompensated appropriation by the State.”  The Court answered,  “Our precedents have also recognized the principle that a taxpayer is entitled to the surplus in excess of the debt owed.” 

The Court’s reasoning extended the Takings Clause to other arenas beyond taxes,

“Finally, Minnesota law itself recognizes that in other contexts a property owner is entitled to the surplus in excess of her debt. Under state law, a private creditor may enforce a judgment against a debtor by selling her real property, but “[n)o more shall be sold than is sufficient to satisfy” the debt, and the creditor may receive only “so much [of the proceeds) as will satisfy” the debt. . . . Likewise, if a bank forecloses on a home because the homeowner fails to pay the mortgage, the homeowner is entitled to the surplus from the sale.”

The Supreme Cout concluded,

“Because we find that Tyler has plausibly alleged a taking under the Fifth Amendment, and she agrees that relief under “the Takings Clause would fully remedy [her] harm,” we need not decide whether she has also alleged an excessive fine under the Eighth Amendment.”

In a broad, extended view of this decision, one can say that any state law that does not allow excess funds from foreclosure to belong to the debtor, by public or by private foreclosures, would be deemed unconstitutional.  And that goes for HOA foreclosures!  No longer need we address the opposition that HOAs are private contracts and the Constitution and laws of the land do not apply.  This momentous Supreme Court decision has knocked down the doors for homeowners in HIOAs.  

State supreme court cases favor member rights and freedoms over HOA

I would like to thank Deborah Goonan on her post[1] covering two especially important state supreme court HOA cases, and her excellent reporting and analysis of the issues. My review and comments follow.

WDIS, LLC v. Hi-Country Estates Homeowners Ass’n, Phase II, 2022 UT 17 (Utah 2022)

Raised in this landmark case, but not directly addressed, is the constitutional validity of the CC&Rs that contain implicit waivers and surrenders of fundamental rights and freedoms that are available to and protect all Americans under the Constitution. At issue, as stated by the Utah SC in WDIS,

“More relevant to this case, future owners of parcels or homes within the jurisdiction of any HOA are not required to formally sign onto the restrictive covenants when they are first created. Instead, consumers (be they buyers, heirs, or lenders) are merely entitled to a take-it-or-leave-it option to accept ownership of the property, subject to whatever covenants and restrictions are on file in County records. By taking possession of the property, an owner is presumed to have accepted the restrictions as valid and enforceable.”

The “Landowners” raised the especially prominent issue of freedom of contract, raising the charge of CC&Rs as an unconstitutional contract. The Utah Supreme Court concluded:

“The protective covenants at issue were not contractual” because “they did not involve two parties agreeing to perform acts in relation to each other. We conclude that applying the presumption is appropriate.”

“The freedom to contract is implicated because the question we are resolving is whether parties “of full age and competent understanding” are free either to accept or reject those covenants later on. And there are other reasons, beyond the freedom of contract, to apply the presumption.”  

* * * *

Belmont Ass’n v. Farwig,  No. 214A21, 2022 NCSC 64 (N.C. 2022)

First, with respect to outwardly friendly HOA member legislation let me point out what we see here,  the bill/law usually contains an offsetting exception or exclusion that renders the homeowner benefits questionable or negates them under practical application. Obviously, anybody seeing solar panels on roofs know that they will be seen by the public. How can a court ignore that?

Also, watch out for Rules that cannot be supported by the CC&Rs and are invalid as the SC pointed out regarding an ARC rule. HOAs cannot add restrictions or conditions not specified or prohibited by the CC&Rs without a CC&Rs amendment.

Second, as I’ve repeatedly stated, state legislatures favor the HOA over member rights and constitutional protections. Thank God there are some courts who do seek justice like the NC  Supreme Court in this case that saw, in plain English, the subterfuge of “friendly” HOA member law.

Read the full post here:

  1.  HOA Lawsuits: Property owner challenges to HOA boards (Part 2) – Independent American Communities, Deborah Goonan, Aug. 5, 2022.

Business judgment rule; understanding the courts

The intent of this title is to highlight the need to carefully read and understand legal documents –  knowing what is said and what is not said in statutes, in court decisions and opinions, and in contracts.  It is human nature for people to hear, see, or read what they want to and miss the real message.

Tutorial

If you seek to analyze, not merely read, a legal document then attentions must be paid to what I refer to as “word games.”  By that I mean the modification and extension of  the traditional meaning of words to support an argument or position; the parsing of sentences involving the effect of punctuations – commas, semi-colons, etc., — on phrases and clauses.

A simple example:

“I saw that she was busy and prepared to leave.
“I saw that she was busy, and prepared to leave.

“Without a comma, the reader is liable to think that “she” was the one who was prepared to leave.”

In the real world, documents can contain mult-line sentences with many commas and semi-colons, where your opponent will argue for one interpretation and you the other. In our example, who is right? The first or the second choice?  With many legal documents written by “writers,” the publicized author may not know at all. This happens often in complex legislative bills.

Business judgment rule (BJR)

(See below for an explanation of BJR).

Applying the above, let’s look at the wording of the WA Supreme Court’s recent opinion in Bangerter v. Hat Island that sidestepped the question of applying the business judgment rule to HOAs. 

At issue was plaintiff’s interpretation of the covenant for assessments that allowed the BOD “to charge and assess its members on an equitable basis.”  Bangerter said “equitable basis” meant at a rate based on home value, like your real estate tax; the BOD interpreted “equitable basis”  to mean the same assessment for all members.  The court held that the BOD’s interpretation was valid, deferring to the BOD as consistent with the BJR.

But here’s how the judges presented their decision:

Whether, and if so to what extent, the business judgment rule applies to homeowners’ associations is a thorny question. Given that we can affirm on any grounds, we decline to resolve that question here and wait for a case that more squarely presents it.

While courts do not owe deference to a homeowners’ association’s interpretation of its governing documents, courts do owe appropriate deference to their reasonable discretionary decisions. . . . Accordingly, there is no cause to consider whether the business judgment rule applies.

The first paragraph is, essentially, a “punt” — not going to deal with the issue.

Yet the first sentence of the second paragraph seems to be a rejection of the BJR.    What is the fine point that the court is making, the “hair splitting”? What is the effect of, the difference, in all practicality  between no “deference . . . [to] interpretations” and “deference to . . . discretionary decisions”?  

But wait! The court upheld the BJR with its deference to BOD decisions without saying so!  WOW! Go figure.

The second sentence is an astonishing declaration that the Court is not talking about the business judgment rule!  No wonder the average homeowner has a problem understanding what goes on in the mind of judges.  Confusing?  You bet!  On purpose, I wonder!

Business judgment rule explanation

The business judgment rule helps to guard a corporation’s board of directors (B of D) against frivolous legal allegations about the way it conducts business. A legal staple in common law countries, the rule states that boards are presumed to act in “good faith”—that is, within the fiduciary standards of loyalty, prudence, and care directors owe to stakeholders. Absent evidence that the board has blatantly violated some rule of conduct, the courts will not review or question its decisions. (Investopedia).

Related reading

If you wish to pursue a more detailed understanding of the pros and cons of BJR, please read   HOAs and the Business Judgment Rule: Bad Law and Reorienting the HOA board: business judgment rule

The writing is on the wall for HOA reforms

Although the Arizona Supreme Court has not yet decided to hear Tarter v. Bend (CV 21-0049), my 44 page Pro Se amicus curiae brief is a matter of public record, regardless.  The case about a defamation suit by the HOA president, also an attorney and a limited-purpose public figure, raised constitutional issues of public speech with respect to questions of HOA governance. 

Selected excerpts follow.

As with the issue in Dombey (Dombey v. Phoenix Newspapers, Inc) . . . failing to present the question of Tarter’s status as a possible public figure denied the jury from considering the issues of protected free speech on public issues.

Kosor (NV) was sued on the basis of his criticism  and distribution of a pamphlet and letter at a board meeting seeking a seat on the board of directors.

“Because we conclude that each of Kosor’s statements was “made in direct connection with an issue of public interest in a place open to the public or in a public forum,” we reverse the district court’s decision to the contrary and remand for further proceedings consistent with this opinion.”

The impetus behind this view can be laid to the heavy lobbying of state legislators, judges, the public and the media by the Community Associations Institute (CAI). From its 2016 white paper,

“Most legislators do not thoroughly understand common-interest communities or who their patchwork legislation is actually protecting. . . . Legislative responses to individual constituents contribute to community associations being perceived as over-restrictive micro-governments focused on covenant enforcement.”

In response to my Arizona Supreme Court pro se amicus brief in Gelb v. DFBLS (CV-10-0371-PR) CAI attorney Jason Smith wrote,

“It is clear from the that the amicus curiae [referring to me] simply wants to impose constitutional protections on members in homeowners associations. The law has never supported that proposition.”

[I called to the Court’s attention a question of a SLAPP lawsuit against Brendt.]  The issue of an HOA SLAPP lawsuit against a member is in the interest of general public and of statewide importance, and also of national concern, the impact on community associations is certainly substantial. This Court should, sua sponte, consider Tarter’s legal action as a HOA politically motivated strategic lawsuit  against member participation.

I urge the Court to apply the long overdue correction  of  Plessy v. Ferguson by Brown v. Bd of Education to the long overdue and needed corrections to the unconstitutional HOA legal scheme.  As with Brown, America’s culture and environment has changed dramatically from 1964’s Homes Association Handbook and the formation in 1973 of Community Associations Institute (CAI) to deal with rising HOA problems and constitutional concerns after only 9 years.