HOA attorney seeks homeowner arrest for not attending attorney fee meeting

In this instance, how does the court, in its obligation to do justice, determine if there has been dishonesty or grossly negligent behavior without an opportunity for the homeowner to examine the HOA’s affidavit?  Here, both judges protected the HOA as incapable of doing any evil, sua sponte (on its own).

Essentially, in my view, failing to allow the homeowner to question the signed affidavit of an HOA manager is not conducive to homeowner justice.  The liberal interpretation of the business judgment rule taken here is that, as I’ve indicated elsewhere, the board can do no wrong because average people become angels when they become an HOA board member.[1]

In order to understand the events in this situation leading to the request for the arrest of the homeowner for failing to attend a meeting, you need to understand the background of the case.  It’s lengthy, but needs to be read through.

Case History

The Arizona ALJ (Brian Brendan Tully) at OAH granted summary judgment (October 2012) for Terravita in regard to a request for minutes to an alleged executive meeting.[2] The order further states that the judge “concludes that . . . there are no issues contained in the Petition that require an evidentiary hearing.”  However, without an evidentiary hearing, where the homeowner could contest the allegation that it was indeed an executive meeting, the judge essentially took the word of the HOA’s attorney, the CAI member, Curtis Ekmark. In his discussion, the judge once again assumes the validity of Ekmark’s assertion that it was indeed an executive meeting, and argues that the homeowner did not show he had a legal right to executive minutes.

In Arizona, the court operates on a notice basis, that is, just give sufficient information that the complaint is valid, and then present your detailed evidence before the court.  That was not allowed in this case.

Homeowner filed superior court appeal[3] contesting the ALJ’s decision as “contrary to law, an abuse of discretion, arbitrary and capricious.”  

6. Administrative Law Judge Brian Brendan Tully’s October 4, 2012 Decision in 12F -H 12120 14-BFS, based exclusively upon certain “statements, claims and contentions (sic)” made by Respondent, Terravita Community Association, Inc., in its pleadings, denied Petitioner (Plaintiff) a hearing which would have brought forward the facts of the contested matter based upon evidence, witnesses’ sworn testimony and argument upon the merits of the matter’s facts and the planned community statutes relevant to those facts, instead, Tully vacated the matter from the calendar of the Office of Administrative Hearings.

 The homeowner further argued

 Plaintiff [homeowner] will timely request this Court hold an evidentiary hearing that will adduce evidence, present sworn witness testimony and offer argument in furtherance of the Court reversing the decision in 12F-H1212014-BFS and the agency’s action based upon the Court’s reviewing the administrative record (no hearing/no transcript) and evidence to be presented at an evidentiary hearing denied Petitioner at the OAH

Terravita’s relevant Answer was a reliance on the business judgment rule, which states that the court will defer the judgment of a corporation’s board as they know more than the judge.  In its reply to a request for an evidentiary hearing, Ekmark says homeowner must show the evidence that was already rejected by the ALJ as irrelevant.  (Remember the issue was a declaration that the meeting was an executive meeting and the ALJ didn’t want to hear anymore).   Ekmark concludes with, “Mr. Brown [homeowner] has had ample opportunities to present facts contrary to the Association’s position; yet, he has completely failed to do so.”  Did he???

Brown’s reply, beyond a criticism of Ekmark’s arguments about new evidence and failure to show evidence, got to the obvious legal question of the faithful acceptance of a statement without the right to a hearing on the validity of the statement:

[T]he presentation of evidence is necessary to the Court’s findings of fact and conclusions of law in furtherance of a just decision to include, but not limited to, the veracity of the affiant’s affidavit, an affidavit prepared under the supervision of  the Defendant-Appellee’s attorney, submitted with the Defendant-Appellee’s Answer (Pollock, a credentialed community manager, PCAM, CAAM, attended the March 27, 2012 meetings [Executive Session and Regular Meeting] of the board of directors and knew, or should have known, the “e-session” violated the planned community statutes).

However, the superior court appeal found no error and upheld the ALJ’s summary judgment decision.  “TCA has provided to this Court authorities and arguments in support of its position. This Court concludes the authorities and arguments provided by TCA are well-taken, and this Court adopts those authorities and arguments in support of its decision.”  (Judge McClennen of 11-22-2013). The judge apparently, like the ALJ, ignored the homeowner’s allegations.

Under R  Civ. P. 43(a), an affidavit is a written statement by a witness in lieu of the witness appearing in court in person. The opposing party must stipulate to the acceptance of an affidavit to be accepted by the court as evidence.  Rules of Evidence, Rule 609, allows for the impeachment of a witness. This did not allowed to occur here.

An appeal was filed by Brown on 7-14-2014, CA-CV14-0455, Div.1.

Arrest Warrant

Apparently, the HOA attorney firm of Ekmark & Ekmark wants their fees paid as per the court ruling. On August 8, 2014 it filed several documents with Judge McClennen for contempt of court for failing to submit to a subpoena to attend a debtor’s meeting (to discover how the attorney would collect its fees), and the arrest of Mr. Brown for contempt.  All over a question of the legitimacy of an executive board meeting.

According to the homeowner, who apparently did get access the Terravita’s financials and moneys spent on attorney fees for this litigation, the attorney fees amounted to $57,344.10.  Of course, the HOA has no cause for alarm since it won the case and does not have to pay this amount.  But, if it loses in the appellate court, what then?  HOA litigation is a gamble in favor of the HOA, and joy to the attorneys cause they get paid win or lose.

BTW, Judge McClennen washed his hands of jurisdiction on August 11, 2014 after receiving the filings from Ekmark.  “This Court no longer has jurisdiction and will take no further action in this matter.”

References

[1] Business judgment rule misinterpretation. In my commentary on the business judgment rule, Illinois appellate court awards punitive damages for reckless indifference by condo, I quoted the court’s reminder about what this rule means:

 “The rule protects directors who have been careful and diligent in performing their duties from being subjected to liability for honest mistakes of judgment. . . . [But where there is] evidence of bad faith, fraud, illegality, or gross overreaching, courts are . . . at liberty to interfere with the exercise of business judgment by corporate directors.”

 [2] Brown v. Terravita, No. 12F-H1212014-BFS, Administrative Law Judge Decision, Office of Administrative Hearings, October 4, 2012.

[3] Brown v. Terravita, LC2012-000699, Maricopa County.

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