Illinois court spells out HOA BOD fiduciary duties

First, let me point out to many HOA directors that the HOA is not a social club, but is a binding contractual relationship between the BOD and the members.

BOUCHER v. 111 EAST CHESTNUT CONDOMINIUM ASSOCIATION, INC., 2018 IL App (1st) 162233 (Appellate Court) concerning the fining of a member while withholding material facts.

¶ 35 Directors of a condominium association owe fiduciary duties to unit owners similar to the duties corporate directors owe to shareholders, insofar as the unit owners trust the directors to use the owners’ money for maintenance, repair, and improvements to the building. The unit owners and residents also entrust the board to make decisions on behalf of all members of the association concerning the conduct of association members in and around their homes. . . . The high degree of trust the members must accord to the association imposes on the directors very strict fiduciary duties, particularly with respect to decisions concerning the unit owners’ and residents’ conduct in their home.

¶ 36 Thus, each board member here has strict duties to treat the unit owners “with the utmost candor, rectitude, care, loyalty, and good faith—in fact to treat [them] as well as [he] would treat himself.” . . . . When investigating charges of misconduct against a unit owner, the duty of candor imposes on the board members an obligation “of full, fair, complete, and timely disclosure of material facts.”

¶ 38 The Anderson court found that a condominium association did not properly assess fines upon a unit owner because the association failed to provide the unit owner with an opportunity to be heard in a fair manner. The Anderson court held that before imposing fines, the association had a duty to give the accused unit owner “an opportunity to know the facts on which the agency is asked to act, to cross-examine witnesses and to offer rebuttal evidence.”

¶ 48 The business judgment rule permits a trier of fact to presume that a corporate board made its decisions “on an informed basis, in good faith and in an honest belief that the actions taken are in the best interest of the company.”

¶ 52 While the declaration may limit liability for business decisions made in good faith, it cannot limit liability for violations of the duties of honesty, candor, full disclosure, loyalty, and good faith.

Published in: on August 22, 2018 at 12:11 pm  Comments (1)  

AZ HOA due process by OAH being challenged once again

After 7 years in effect, Arizona’s OAH adjudication of HOA disputes is once more under challenge as an unconstitutional statute, violating the separation of powers doctrine.  Carpenter Hazlewood tried 3 times in 2008 – 2011 and eventually had the old statutes declared unconstitutional.  After the decision, the statutes were changed to accommodate the court’s decision.  (SB 1148, Ch. 185 2011).

The case is CBS-136 HOA v. Cohen, LC 2018-00316 in Maricopa Superior Court.  My fear, as with the earlier cases, no one from the Legislature or DFBLS (now ADRE) or the AG will come to the defense of the statutes.  So, we can expect another defeat with another “in your face” to homeowners —  we don’t really care!

However, this time being too big may work in our favor.  It’s my understanding that if a statute is declared unconstitutional means that it was never law.  That would make the OAH petitions over the past 7 years without effect, or not legal, since no law existed at the time.  It would be like a dirty prosecutor whose cases are now subject to appeal and reexamination to see if they survive scrutiny.  What havoc that would create!

Very interesting!

Published in: on August 21, 2018 at 7:53 am  Comments (3)  

AZ Rules of Judicial Conduct & Turtle Rock HOA

I thought it would be of general interest for all to know that all states have a code of judicial conduct.  Here are excerpts from the Arizona code as applied to the SC order not to publicize the Turtle Rock HOA appellate opinion, which favored the membership on due process protections.

For more information on Turtle Rock see, AZ Supreme Court Prohibits publication of decision on HOA notice of fines; AZ SC ‘improvident’ decision in Turtle Rock HOA petition; and Turtle Rock CAI brief urged depublication.

In addition, since most people do not understand the meaning of “improvident” as used in the SC’s order and used to justify the order, here’s the highly respected Black’s Law Dictionary definition:

A judgment, decree, rule, Injunction, etc., when given or rendered without adequate consideration by the court, or without proper information as to all the circumstances affecting it, or based upon a mistaken assumption or misleading information or advice, is sometimes said to have been “improvidently” given or issued. (2nd Ed.).

Of or relating to a judgment arrived at by using misleading information or a mistaken assumption.(7th Ed.).

 

Arizona Code of Judicial Conduct

Arizona Rules of the Supreme Court, Rule 81.

(relevant excerpts; “comments” are part of the Rule)

Preamble

An independent, fair, and impartial judiciary is indispensable to our system of justice.

Judges should maintain the dignity of judicial office at all times, and avoid both impropriety and the appearance of impropriety in their professional and personal lives. They should aspire at all times to conduct that ensures the greatest possible public confidence in their independence, impartiality, integrity, and competence.

Terminology

Impropriety” includes conduct that violates the law, court rules, or provisions of this Code, and conduct that undermines a judge’s independence, integrity, or impartiality.

“Judge” means any person who is authorized to perform judicial functions within the Arizona judiciary, including a justice or judge of a court of record.

CANON 1, Rule 1.2

A judge shall act at all times in a manner that promotes public confidence in the independence, integrity, and impartiality of the judiciary, and shall avoid impropriety and the appearance of impropriety.

Comments

  1. Conduct that compromises or appears to compromise the independence, integrity, and impartiality of a judge undermines public confidence in the judiciary.
  2. The test for appearance of impropriety is whether the conduct would create in reasonable minds a perception that the judge violated this code or engaged in other conduct that reflects adversely on the judge’s honesty, impartiality, temperament, or fitness to serve as a judge.

CANON 2, Rule 2.4 External Influences on Judicial Conduct

(C) A judge shall not convey or permit others to convey the impression that any person or organization is in a position to influence the judge.

Comment.  An independent judiciary requires that judges decide cases according to the law and facts, without regard to whether particular laws or litigants are popular or unpopular with the public, the media, government officials, or the judge’s friends or family. Confidence in the judiciary is eroded if judicial decision making is perceived to be subject to inappropriate outside influences.

 

 

Published in: on July 17, 2018 at 2:59 pm  Comments (1)  

Here’s why HOA statutory power to fine must be outlawed

Deborah Goonan does an excellent ‘story telling’ of the events surrounding the Arizona Turtle Rock litigation. It is a story to be spread about all states since the AZ SC acted to prevent its favorable publication for use as precedent. MUST READ!

Independent American Communities

Do we really need or want HOAs to be The Enforcers?

Arizona Constitutional Rights advocate George K. Staropoli recently published a few posts on an important appellate court opinion in Turtle Rock III HOA vs. Lynne Fisher, involving a homeowners,’ condominium, or cooperative association‘s statutory right to impose monetary fines upon members who violate covenants, restrictions, rules, and regulations.

In brief, the homeowner, Fisher, appealed a lower court’s ruling that Turtle Rock HOA was entitled to collect fines and penalties of more than $3,800. Fisher argued that the fines were excessive, that her rule violation did not result in any measurable damage to the associations, and that she was denied due process in the form of proper notice by way of a written schedule of fines to be imposed for specific violations.

While the appellate court upheld the lower court’s order for Fisher to clean up the interior…

View original post 1,002 more words

Published in: on July 16, 2018 at 7:16 pm  Leave a Comment  

Turtle Rock CAI brief urged depublication

Thanks to the vast amount of information found on the Internet I was able to get a copy of the 23 Page CAI brief.  It was filed by 3 Arizona CAI law firms, Maxwell & Morgan, Krupnik & Speas, and Carpenter Hazlewood under the umbrella of Community Associations Institute.  Recall that the HOA attorney, Goodman Law, is also CAI.

Going directly to the question of depublication, in its Conclusion,  

“CAI urges this Court to grant review and consider depublication of the Opinion . . . so that it cannot be cited as binding authority in any future case affecting community associations.” (My emphasis).

 Now think for a moment. Why is CAI asking for depublication before a decision is rendered by the SC that could vacate the appellate court’s opinion?  Is it because CAI doesn’t expect to win and its brief is just hot air, except for the depublication request?

Surprisingly, it seems that the Justices bought this CAI request and ordered depublication.  I have seen several cases where the appellate courts had also adopted CAI’s request outright.

I will skip any analysis of the legalities  as  argued by CAI as they are irrelevant because the appellate opinion was allowed to stand, also part of CAI’s request. Was this some sort of compromise to get the depublication order issued? I wonder. Nothing surprises me anymore.

Misrepresentation and misleading information

Since the SC admitted to being misled or on a mistaken assumption, as “improvident” is defined, I will address CAI misinformation and misrepresentation that seemed to skip notice of the Justices.  CAI starts with the usual implication that it is an educational organization with no mention that as of 1993 it had become a business trade nonprofit heavily lobbying state legislatures across the land.   And that it has no HOA as members as of 2005 since HOAs are consumers of HOA member services.

“CAI is a national nonprofit research and education organization.  Its members include community associations and board members, other community volunteer leaders. CAI regularly expresses its position on issues of potentially national concern and advocates on behalf of community associations and their residents before legislatures, regulatory bodies and the courts.”

CAI claims to represent “not only itself, but also its tens of thousands of members on this important issue.”  The SC is not told that its membership is drawn from less than 9.6% of all HOAs. (See  CAI 2016 Factbook: looking into the ‘facts’).

CAI Reasons for Depublication

Playing the authority on HOA-Land, CAI agrees with me that this case is of

“general importance and statewide but also national concern, as the impact on community associations is certainly substantial and states look to other states for guidance in this developing area of law.”

No wonder it wants the opinion shutdown with its depublication request. It could not deal with a strong measure of due process of law as applied to HOAs.

CAI then makes its pitch to defer to the legislature,

 “The Arizona Supreme Court has long held that the determination for what is ‘good public policy’ ” is for the executive and legislative departments and that the courts must base their decisions on the law as it appears in the constitution and statutes.”

 “This is an area of law that the legislature should control whenever possible- not the courts.”

 In other words, the Supreme Court has no place in interpreting and applying the laws as it is charged to do. CAI repeatedly informs the SC that the legislature set all of this out in the statutes and why is the SC making new law, in CAI’s mind.  We know why CAI insists on letting the legislature do it. Because it controls HOA legislation by its in depth lobbying.

Once again I urge Arizonans to express their outrage by writing the SC Clerk, Janet Johnson at  scclerk@courts.az.gov, and ask that the order be reconsidered.   I urge the media, who tell their viewers that they can be trusted to tell the truth and to ask hard questions, to ask hard questions now.  Ask the Justices to explain just why!

 

Published in: on July 14, 2018 at 9:21 pm  Comments (5)