Judicial error regarding HOAs as mini-governments and state actors

Two cases directly dealing with HOAs as mini or quasi governments by means of state actions tests have come to my attention: Brock v. Watergate and Westphal v. Lake Lotawana.[1] (The question of an HOA being a state actor is not raised, but that a specific act of the HOA is a state action. The questions are fundamentally different.) The decisions were based on the public functions (company town) test and one of the US Supreme Court criteria, the “close nexus” test.[2]

Here the question of an HOA being a municipality is linked to showing a comparison with company towns (established by corporations to provide housing for their employees) under the public functions test, which was held to be a municipality. The Court then makes the giant leap to hold that since the HOA was not a company town, and therefore not a municipality, none of its actions can be considered a state action. The Court’s illogical conclusion is that no act of a private entity can be considered a state action, because the entity is not a municipality! This attitude makes a mockery of state action/actors laws that protect citizens from quasi-governments. (Think about this after reading the excerpt below.)

The 1987 Florida Brock opinion, just 4 years after the court quoted Wayne Hyatt’s opposing view in Cohen Hill (see note 2), held that:

A homeowner’s association lacks the municipal character of a company town. In the case of an association, the homeowners own their property and hold title to the common areas pro rata. Moreover, the services provided by a homeowners association, unlike those provided in a company town, are merely a supplement to, rather than a replacement for, those provided by local government. As such, it cannot be said that the homeowners association in this case acts in a sufficiently public manner so as to subject its activities to a state action analysis. Moreover, the association’s maintenance, assessment, and collection activities are not sufficiently connected to the State to warrant a finding of state action. The state cannot be implicated in the association’s activities solely because the association is subject to State law. We conclude that the association in this case does not stand in the position.

(The Court did not realize that most HOA common areas and facilities are not owned by the members, but by the HOA corporation. The members are third-party beneficiaries. The second sentence above is not accurate.)

In further shocking dicta (unsupported legal authority for statements) in the above quote (see To Be in note 2), the Court declared that HOA services are merely a supplement to local government and that as a supplement its acts are insufficiently municipal in nature. Say what?

Well, I got news for the Court. Applying the “common meaning of the word doctrine” shows that “to supplement” means “to complete, add to, or extend by a supplement” and a “supplement” means “something added to complete a thing, supply a deficiency, or reinforce or extend a whole.”  With this definition the HOA would be a part of local government to complete it or supply a deficiency.  The HOA is a municipality!

Sadly, the narrow focus on individual and separate acts and actions to determine the involvement of the state in the functions and activities of the HOA is misguided.  Rather, it is the collection of the numerous acts of the HOA that should be used to determine whether or not the HOA is an arm of the state and stands in place of the state.  Consider for example, does local government supplement state government?  Does town local government stand in the place of state government?

However, based on the irrational argument used in Brock, as quoted above, the Court ruled that the HOA “does not stand in the position of a government.”

 

In the 2003 Missouri Lake Lotawana opinion, the Court reversed the trial court’s ruling, asking for a declaratory judgment, using the irrational opinion in Brock and held that the plaintiff’s allegations “require state action, and that, here, there is no state action because the Association is not a state agent. . . . the trial court is effectively saying that Mr. Westphal can have no claim because the Association is not a state actor.”

On the other issues the plaintiff directly alleged state action, arguing that,

[T]hat the Association’s conduct is state action because the Association is a quasi-governmental entity.  He maintains that the Association ‘operates as a ‘mini-government’ because it raises money through dues, has an elected governing body, enacts rules and regulations, and enforces such rules through the court system. In support of this argument, Mr. Westphal relies on [Chesus and Terre du Lac].[3]

Referring to the two cases, the Court concluded,

While both cases discuss how a homeowner’s association operates as a “quasi-governmental entity,” neither is authority for the concept that an association’s “quasi-governmental” actions are state actions. Mr. Westphal fails to cite any authority to support his argument that the action of a quasi-governmental entity is state action.

First, the Court selectively only used the term “quasi” and ignored “mini” as in stated Chesus. “Mini,” of course, speaks of a small municipality, yet a municipality. Both cases simply, without further ado, quote the same Wayne Hyatt statements as I quoted in To Be (see note 2) that contain both words.

And the Court is technically correct with regard to a lack of a court finding, but taking such a view makes a mockery of the law and is highly illogical. As argued since “quasi” means “like,” then any action of a quasi-government must be, a quasi-state action. The degree of “quasi” must extend to state actions, too. Stop the “word games”!

“Quasi” must be defined, but not in terms of the public functions test or private entity devise. It must be defined in accordance with our constitutional system of government that cannot allow for outlaw governments to stand alongside constitutional local government.

This commentary, somewhat technical at times, demonstrates the failure of the courts to address the fundamental issues that HOAs are mini-governments, and that by the collective functions and actions of HOAs there is clear and convincing evidence to make the case that they are indeed state actors. The whole is greater than the sum of its parts.

(As a reminder, I am not a lawyer and I simply offer my views on HOA-Land.)

Notes

[1] Brock v. Watergate, 502 So.2d 1380 (Fla. 4 Dist. App. (1987); Westphal v. Lake Lotawana, 95 S.W.3d 144 (Mo. App. 2003).

[2] See in general, To be or not to be a mini or quasi government? Hyatt said ‘yes’; Do state HOA Statutes Establish HOAs as State Actors?

[3] Chesus v. Watts, 967 S.W.2d 97 (MO. APP. 1998);  Terre du Lac Assn v. Terre du Lac, Inc., 737 S.W.2d 206 (MO. App. 1987)

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2 CommentsLeave a comment

  1. George–very clear explanation. Thank you. For point of reference, aren’t there a few court cases that determine they are quasi or mini governments? At least in function?

    • Yes there are. Here’s a link to a non-exhaustive list, some are not HOA related. See

      “HOA Case History: state actors or mini/quasi government” at

      https://pvtgov.wordpress.com/2011/01/09/hoa-case-history-state-actors-or-miniquasi-government/

      The fundamental issues are complex and go deep into whether or not this country is still under the US Constitution. Topics include bona fide contractual agreement, exclusive state functions or “public functions”, restrictive covenants dominating the Constitution, the purpose of federal and state constitutions, etc.

      CAI says the only exclusive public function by the government is throwing people in jail, which will soon come to HOAs as the courts are permitting more and more police powers. However, the US and state constitutions spell out a different story prohibiting legislative activities and a separation of powers. But, playing word games, as done with state actors and mini-governments, the Evil Empire would only argue that these constitutions pertain only to state entities and not to the people, ala Brock.


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