Tag: supreme court

Final Order: HOA management firm engaged in unauthorized practice of law

Every state has rules regarding the unauthorized practice of law governing what activities constitute acting like a lawyer.  The certified Legal Document Preparer Board of the Arizona Supreme Court found AAM, LLC, both a CAI and Arizona Association of Community Managers (AACM) member, had engaged in such activities, which are commonly found in many other HOAs and with many other management firms/managers. (In Arizona, it’s Supreme Court Rule 31). 

In regard to AAM, many of the State Bar’s Hearing Officer  findings were dismissed and overturned in the Board’s May 24, 2012 Findings of Fact and Conclusions of Law (LDP-NFC –09-L094 and LDP-NFC-10-L026,   not to be found on the State Bar or Supreme Court websites).  The Board found AAM had exceeded its authority as a certified document preparer and violated Rule 31 in that, among other things,

  1. represented the HOA in violation of Rule 31, including signing and submitting lien documents as such were not incidental to its regular business activities;
  2. submitted documents that it had prepared to third-parties, such as collection letters, and filing court motions and complaints;
  3. represented HOAs in small claims court;
  4. although there existed a contract between AAM and the HOA to act as a representative of the HOA, such a contractual arrangement is subject to Rule 31, which cannot be overridden by private agreements;
  5. offered legal advice when it gave, through newsletter statements, made statements about “possible  legal rights, remedies, defenses, options or strategies;”
  6. through its offers to “coordinate payment plans” debt payment plans, AAM was not giving general information but was offering to negotiate with the HOA on behalf of the homeowner;
  7. “offered to negotiate homeowners” legal rights, remedies, defenses, options or strategies;”

 

It is interesting to note that former Arizona Supreme Court Chief Justice Zlaket was called as a witness by AAM.  He stated that “the purpose of the certified legal document preparer rules as protection of the public from charlatans who didn’t know what they were doing, from document prepares who were harming customers by preparing the wrong documents.”

 

 The full, detailed, 55 page Board document can be found at Legal Document

CC&Rs and waivers of constitutional rights in HOA-Land

This June 13th extremely important NJ Supreme Court opinion in Mazdabrook deals with the fundamental constitutional question that the homeowner had waived his rights when he agreed to the CC&Rs  covenants, which are broadly stated, vague, or implied. I have repeatedly argued that homeowners do not!  This opinion will have national impact as other states will follow suit.

Mazdabrook involved  the right of a homeowner to place political signs on his  private property.  The NJ Supreme court said there was no waiver of free speech rights.

Moreover, Khan did not waive his constitutional right to free speech. To be valid, waivers must be knowing, intelligent, and voluntary, and a waiver of constitutional rights in any context must, at the very least, be clear. Khan was not asked to waive his free speech rights; he was asked — by different rules in three documents — to waive the right to post signs before getting Board approval, without any idea about what standards would govern the approval process. That cannot constitute a knowing, intelligent, voluntary waiver of constitutional rights. . . . . Instead, the exercise of those rights can be subject to reasonable time, place, and manner restrictions. Finally, covenants that unreasonably restrict speech may be declared unenforceable as a matter of public policy.  (P. 5).

In other words, that  waiver must meet specific requirements, including an explicit statement of a waiver rather than an broad interpretation or implied waiver as is the current status of CC&Rs.  However, understand that rights can be waived if these requirements are met.

Waiver is the “intentional relinquishment or abandonment of a known right or privilege.” Although rights may be waived, courts “indulge every reasonable presumption against waiver of fundamental constitutional rights.” To be valid, waivers must be knowing, intelligent, and voluntary.

The NJ Supreme Court seemed to have educated itself about the spread of CC&Rs with its boiler-plate wording that imply or are interpreted as a waiver, and takes a slap at comment h under § 3.1, Validity of Covenants (Restatement (Third) Property: Servitudes), that argued for the doctrine of equitable servitudes (covenants) to be held superior to the Constitution.

 The proliferation of residential communities with standard agreements that restrict free speech would violate the fundamental free speech values espoused in our Constitution — the “highest source of public policy” in New Jersey. (P.11).

Validity of CC&Rs to bind

Not addressed and unanswered in this opinion is the fundamental question, by extension of what constitutes a waiver, is the question of the validity of the CC&Rs. Is the doctrine of constructive notice sufficient for the CC&Rs to be held as a binding contract?   If the  CC&Rs are held as invalid, then the question of the waivers of rights becomes moot.

How can the simple notice to the county clerk bind anybody to anything, and be considered a waiver of any right or an agreement to be bound in general?  Especially when it is required that, “To be valid, waivers must be knowing, intelligent, and voluntary.”  There is not even a warning in bold, capitalized, large font stating, at purchase time, that the “Taking this deed alone binds you to the CC&Rs sight unseen, without having to read, sign or agree to it.”

Background information.  This case made references to the Twin Rivers free speech case of 2007, the controlling NJ Schmidt case (as did Twin Rivers), and was also based on violations of the NJ Constitution.  Once again, ACLU and The Rutgers Constitutional Law Clinic, Frank Askin Director, filed an amicus curiae brief.  NJ CAI filed an amicus in opposition.  Both were allowed to present oral arguments on the question of  waivers of constitutional rights under HOA CC&Rs.  It is legal, but not binding precedent outside of NJ.

See HOA member Declaration of US and State citizenship.

The sounds of silence: failing to publish legal opinion on illegal acts by HOA managers

If the guardians,  those disciplinary and oversight entities  protecting the integrity of the Arizona Supreme Court, which itself is the guardian of the integrity of the State of Arizona, fail in their duties and responsibilities under the Arizona Rules of the Supreme Court, what becomes of us?

Many of you are familiar with the old teaser, “If a tree falls in the middle of the woods, and there’s no one around, does it make a sound?”   Then, if a CAI member firm— an HOA attorney or manager — violates the law and the public is not noticed, did they really violate the law?  And, if there are events leading to the conclusion of abuse and a gross defect in the HOA legal concept, and the media fails to report them to the public, are there really serious defects in the HOA legal scheme? 

Readers of these Commentaries are aware of the serious charges made against a CAI member attorney in DC Lot Owners v. Maxwell & Morgan.  An awareness brought to the public’s attention not by public disclosure, as the records have been sealed by court order, but by a few individuals. 

Readers are now being made aware of the recent State Bar UPL Opinion, 12-01, issued in March 2012, relating to the legal acts that may be performed by HOA managers.  (This supersedes the 2004 UPL opinions previously reported here, and directly applies to HOA managers.  The opinion is based on an interpretation of Rule 31, Regulation of the Practice of Law, of the AZ Supreme Court Rules.)   

I am told that the UPL opinion is available, but not on the State Bar’s web page for UPL opinions, or on any State Bar web page.  Yet, its UPL opinion web page proudly declares,

The State Bar’s UPL (unauthorized practice of law) Advisory Committee now provides attorneys and consumers with non-binding written advisory opinions. The opinions interpret the UPL Supreme Court Rules and the Certified Legal Document Preparer Code.

These are the sounds of silence in HOA-Land.  These are the acts and omissions by the members of that unspoken alliance of No Negatives About HOAs.  These revelations are not the result of public disclosure, but by the efforts of a few individuals.   And these few individuals do not include members of the media.  

One can only conclude that the State Bar also has a public policy of protecting HOAs, and their attorneys and managers.

Judicial misconduct complaint filed for sealing records in AZ case against HOA attorney

A complaint was filed against a Pinal County, AZ judge for the sealing of records in this civil case in violation of the Arizona Rules of the Supreme Court, Rule 123(d) that requires a statement to be made giving the reasons for the sealing of case records.  The case involved charges of aiding and abetting and disgorgement, among others, filed by a court appointed Receiver looking for some missing $650,000 in HOA funds. The charges were against a well-known CAI member attorney.

There is no record of this case on the Pinal County Superior Court official public website, not even an entry that the case was sealed, and not even an entry that the case was dismissed.   This very disturbing act recalls the secret proceedings of Star Chamber justice with its own version of doing justice.  A motion asking the judge to unseal the records was denied by the county clerk, leading to this complaint of judicial misconduct.

The complaint of judicial misconduct was two-fold:  a black-letter violation of law in regard to Rule 123(d), which simple states, “Upon closing any record the court shall state the reason for the action, including a reference to the statute, case, rule or administrative order relied upon;”   and a complaint that the entire record of this case has been denied public access.

The judicial complaint set forth grounds for unsealing the records.

On behalf of the American public, and in light of the public’s strong interest in the judicial treatment of homeowner association attorneys and the longstanding public policy in favor of open access to judicial records, the undersigned, George K. Staropoli, hereby moves the Court to unseal all court records in this case.

 Staropoli has operated two nonprofit internet websites to provide nationwide information, news, legal actions, and commentary on events, incidents and developments pertaining to homeowners associations for over twelve years.  They are a blog, HOA Constitutional Government, and an informational site, Citizens for Constitutional Local Government, in support of homeowner rights and in opposition to the inequities of the existing HOA legal scheme. Staropoli has been acknowledged in several legal texts and treatises, and quoted in other books and in the news media.

And in further support of public access,

Rule 123(c), Public Access to the Judicial Records of the State of Arizona, of the Arizona Rules of the Supreme Court pertaining to Judicial Conduct, states that all court records are presumed to be open to the public, except “some court records” for confidentiality, privacy or if in the best interests of the state.  Rule 123(d) requires the court to show cause for sealing “some court records,” including the legal basis for such action.

The Arizona Rules of Judicial Conduct, Rule 81, emphasizes that “an independent, fair, and impartial judiciary is indispensable to our system of justice” and that the judiciary is to preserve the “principles of justice and the rule of law.”  Judges “should aspire at all times to conduct that ensures the greatest possible public confidence.”  It is inconceivable as to what state interests exist that would overwhelmingly override these precepts, and not to inform the public accordingly.

It was then argued that the attorney, Charles Maxwell, comes with unclean hands having been subject to serious sanctions regarding “fraud upon the court” and filing a frivolous suit.  And it was also argued that Maxwell is a public persona as a result of providing seminars and classes in the law to the public regarding HOAs, and as a highly respected member of CAI and its College of Community Association Lawyers. 

Speaking in judicial lingo, the heavy burden falls to the party seeking to hide the records to overcome all of the above.

The Arizona Commission on Judicial Conduct will conduct an investigation of the complaint, No. 12-148, in due order.

For more reading, see,

1.  Allegations filed against AZ HOA attorneys in sealed case

2.  What happened to the AZ lawsuit against HOA attorney for aiding & abetting missing $650,000?

CAI continues to ignore the Constitution for the HOA constitution

CAI continues its stand against HOAs being held to the US and state constitutions.  This is a second case, the first being CBTR v. Twin Rivers, 929 A.2d 1060 (2007). Sort of an argument for secession to an independent principality status where all residents would be regarded as “expats” (expatriates).

In the Twin Rivers case, the CAI amicus brief to the NJ appellate court warned about “the unwise extension of constitutional rights to the use of private property by members [in HOAs].”

Here’s what CAI had to say in this more recent NJ case, 4 years later. Note that it’s a “putative” brief. Aside for being paid by a party, not indicated here, a putative amicus brief can bring up arguments not raised by the parties for the “edification” of the court. This appears to be CAI – NJ’s position.

Excerpts from the “Putative Amicus Curiae Brief” by CAI – NJ to NJ Supreme Court, July 27, 2011

Whatever rights common interest association members have to express themselves regarding association issues arise not from the State Constitution but rather from statute, from contractual provisions of the association’s governing documents, from the fiduciary duty owed by the association trustees, and from concepts of fundamental fairness.

The ability of members to communicate with each other thus may be said to be an implied covenant in the By-Laws, a fiduciary obligation of the organization, and/or due to fundamental fairness to enable members to participate in community affairs and governance.

A governing board’s regulations are enforceable only if they satisfy the business judgment rule, that is, they are authorized by statute or the governing documents and the board’s action is not fraudulent, self-dealing or unconscionable. [citing Twin Rivers].

Because the unit owners have other statutory, contractual and legal remedies to protect them from overreaching by the Association, there is no need to apply the constitutional free speech clause. For that reason as well, the appellate majority opinion should be reversed.

Mazdabrook Commons v. Kahn, No. 67,094, (NJ 2011) (Not yet decided).

In other words, who needs the Constitution? We have our top-down, business profiteer’s CC&Rs private contract, and laws that mimic and are almost identical to the CC&Rs. Who needs the NJ Constitution, too.

See Twin Rivers and NJ HOA free speech rights, redux.