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Subject: HOA Holding Up My Escrow over Legal Fees
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AugustinD


Posts:1886


07/06/2019 11:54 AM  
Posted By WendyP5 on 07/06/2019 11:02 AM
I noticed that commentary on code discusses what happens when a plaintiff voluntarily dismisses their law suit, in order to avoid a judgment. In my case the dismissal isn't voluntary. Having sold my property I will no longer have legal standing.


Let's assume you do not withdraw the lawsuit before selling. Instead, you sell the lot, and you are no longer a member of the HOA. Assume that, after the sale, the HOA motions to dismiss the suit, because you now lack standing. The judge grants the motion to dismiss. Under California law, it appears to me that the HOA is now the prevailing party.

You and I appear to agree that, to the extent either statute or contract provides, the HOA is entitled to legal fees. The Davis-Stirling statute Section 5975 does have a provision regarding attorney's fees: "In an action to enforce the governing documents, the prevailing party shall be awarded reasonable attorney’s fees and costs."

Where I am uncertain is whether your lawsuit was brought under the provisions of the Davis-Stirling Act. It seems to me it is a bit of a conundrum: On the one hand, your suit argues the HOA is subject to Davis-Stirling. On the other hand, I am not sure this is the same as bringing the lawsuit under the provisions of Davis-Stirling. On the third hand, didn't your suit also allege the HOA had violated numerous sections of the Davis-Stirling statute?

I just turned to the web site you linked and read its case law. So far it appears a 2015 California Supreme Court case is exactly on point: https://www.davis-stirling.com/HOME/Case-Law/Tract-19051-v-Kemp . I bet you read this. The plaintiffs brought suit, first, to obtain a ruling that the HOA is subject to Davis-Stirling (a.k.a. the "Common Interest Development Act") and second, to enforce restrictions from Davis-Stirling against the defendant. The defendant won on the merits, with the court ruling the HOA is not subject to Davis-Stirling. Subsequently the defendant sought an order that the plaintiff pay the defendant's attorney's fees. Ultimately, the California Supreme Court ruled that the plaintiff had to pay the defendant's attorney's fees, and yes, on account of Davis-Stirling Section 5975.

Surely your attorney knows about this case?

In view of this 2015 case, and if you sell; lose standing; and so the HOA becomes the "prevailing party," I do not like your chances of avoiding paying the HOA attorney's fees.

I appreciate your cogent discussion of this. If you think I am missing something, do let me know.
AugustinD


Posts:1886


07/06/2019 12:13 PM  
Posted By WendyP5 on 07/06/2019 11:34 AM
AugustinD, This:
[From the Davis-Stirling statute -- ]

"(1) The common area is owned either by the association or in common by the owners of the separate interests who possess appurtenant rights to the beneficial use and enjoyment of the common area."

...applies to our development. The CC&Rs define the homeowners' "LOT" as their parcel, including the "common area", and stipulates that the walkways are established throughout the community for the common use and enjoyment of the membership and residents of the development.


I hear you. You and your attorney may be right. I just do not have enough information to opine. I do know the HOA has fought this for what, four years now? And the HOA attorney is well-versed in Davis-Stirling? I would like to read the response of the HOA to your initial filing in court.

The membership could vote to have those areas conveyed to each separate interest owner, but in 1998 they voted for CC&Rs that declared the association subject to Davis Storing, ensured the "common interest" status of the walkways, the lots and the nature of the HOA's authority.


I continue to doubt that a mere membership vote to make a HOA subject to Davis-Stirling does legally make the HOA subject to Davis-Stirling.

A vote that changed the CC&Rs to "convey" the walkways to the HOA also raises concerns for me. We are talking about either conveying title to land or creating easements yada, aren't we? I think it takes more than an amendment to the CC&Rs to convey title or create easements yada.

I do look at some of the disputes posted here at hoatalk and can often come to an opinion about who I think is right. But here, I need more information.


MelissaP1
(Alabama)

Posts:8396


07/06/2019 12:53 PM  
Think need to put it this way. Whether your right or they are wrong, legal expenses occurred. The HOA did what they did legal or not legal. You found fault with what they did. So you hire a lawyer to pursue it in court. The HOA has to consult an attorney. They need advice and/or to hire one to defend them in court. They may have gotten legal advice on if insurance claim or not. Which you say it did not qualify. (But I also think it's not an insurance claim until court case is won.)

Now their lawyer most likely told them during their "advice/strategy" meeting that they could get their legal fees paid by you. Well they probably paid the lawyer a retainer and then their additional expense. The lawyer did have to file a response to the lawsuit. That would cost money. Money the lawyer would charge the HOA. The HOA of course thinking they could get that money from you.


What basically has happened is you caused "damage" to the HOA by the means of costing it legal fees. They also call it "frivolous" because they weren't doing anything until they got slapped with a lawsuit. Think of it this way. You just sitting in your living room and a knock comes to your door. Someone serves you a lawsuit because you cut them off in traffic. Are you not going to contact your lawyer? The lawyer charging money to consult and respond. Would you not want to pass on those charges to that person?


The HOA doesn't want to eat these charges. Their lawyer told them they didn't have to. You just happened have gotten "free" advice on your end of the suit. It doesn't mean it didn't cause damage you have to pay for on the other.

Former HOA President
WendyP5
(California)

Posts:43


07/06/2019 12:54 PM  
We filed for injunctive relief under the Davis Stirling statutes, and my attorney listed 60 examples of how I, as a homeowner, has been harmed by their failure to comply with the act.

Some of those include violations of their own governing documents, including violations of the Open Meeting Act, Due Process, election laws and fiduciary responsibility.

I really haven't been kept in the loop of the arguments between my lawyer and the HOA's new lawyer, that they hired after the suit was filed. It was their last lawyer that got them into this mess. Boy, was he a piece of sleazy work! Hopefully, their new lawyer can get them out of it, after I'm gone.

WendyP5
(California)

Posts:43


07/06/2019 1:04 PM  
Melissa,

An unelected board held a secret meeting, while adjourned for summer vacation. And, without consulting or informing the membership, without a quorum or minutes, it decided to cross out all references to a law that provides sweeping authority, protections and rights to the homeowners through the powers it bestows on an elected board of directors, from the governing documents, essentially gutting homeowners rights to protect their neighborhood and property values.

Think about it that way.
AugustinD


Posts:1886


07/06/2019 1:13 PM  
Posted By WendyP5 on 07/06/2019 12:54 PM
We filed for injunctive relief under the Davis Stirling statutes... [snip for brevity] Some of those include violations of their own governing documents... [snip for brevity]


From the 2015 California Supreme Court decision, the plaintiffs, "... further alleged that, pursuant to [the Davis-Stirling statute], there were valid restrictions applicable to defendant Kemp’s property that were violated... "

Should you sell and then the HOA wins a dismissal due to your lack of standing, I think the 2015 decision points to a statutorily mandatory award of attorney's fees to the HOA.

I really haven't been kept in the loop of the arguments between my lawyer and the HOA's new lawyer, that they hired after the suit was filed. It was their last lawyer that got them into this mess. Boy, was he a piece of sleazy work! Hopefully, their new lawyer can get them out of it, after I'm gone.


Interesting about the lawyers changing. Especially since the new attorney appears to have wasted no time getting the escrow dispute cleared up, and in your favor. To me, this recent development points to the new attorney being 'on the ball.'

my attorney listed 60 examples of how I, as a homeowner, has been harmed by their failure to comply with the act.


But I expect the harm alleged was harm to the corporation. In other words, your claims are what is known as "derivative." Nothing wrong with this, except it again translates to no [monetary] damages. This means that, without direct legal harms to yourself, I think it is pretty clear you lose standing once you sell.

I hope you have a long talk with your attorney about whether, if you sell, Davis-Stirling Section 5975 and the 2015 California Supreme Court decision translate to your ultimately having to pay some or all of the HOA's attorney's fees.
MelissaP1
(Alabama)

Posts:8396


07/06/2019 1:16 PM  
No. I am not thinking of their actions. I am thinking of who is going to pay their lawyer bill to respond to your case. Again irrelevant about what the case is for or what they did/did not do. What did happen? A legal bill was created. Lawyer told them most likely that if hired, their expenses would be past onto you to pay. So that is what they are doing because the lawyer told them this is how it works.



Former HOA President
WendyP5
(California)

Posts:43


07/06/2019 1:22 PM  
"But I expect the harm alleged was harm to the corporation. In other words, your claims are what is known as "derivative." Nothing wrong with this, except it again translates to no [monetary] damages. This means that, without direct legal harms to yourself, I think it is pretty clear you lose standing once you sell. "

Well, I'll guess we'll just have to wait and see. The property is selling, unless there's some other unforeseen issue, escrow will close soon. We were never seeking monetary damages.

It seems to me there was harm to the corporation, but that harm was caused by the illegal actions of an unelected board.



WendyP5
(California)

Posts:43


07/06/2019 1:31 PM  
Posted By MelissaP1 on 07/06/2019 1:16 PM
No. I am not thinking of their actions. I am thinking of who is going to pay their lawyer bill to respond to your case. Again irrelevant about what the case is for or what they did/did not do. What did happen? A legal bill was created. Lawyer told them most likely that if hired, their expenses would be past onto you to pay. So that is what they are doing because the lawyer told them this is how it works.






I'm sure their lawyer told them that they had to win, first.






AugustinD


Posts:1886


07/06/2019 1:33 PM  
Posted By WendyP5 on 07/06/2019 1:22 PM
It seems to me there was harm to the corporation, but that harm was caused by the illegal actions of an unelected board.


For what it is worth, and from general reading, I believe that illegal actions by a board (properly elected or not) is probably the number one reason plaintiffs file a derivative lawsuit. It's a big deal in corporate America (including HOA corporations). Lots of law on the subject. It's called "derivative" because the plaintiffs' right to bring suit "derives" from the legal rights of the corporation.
MelissaP1
(Alabama)

Posts:8396


07/06/2019 3:15 PM  
No.. You don't have to win to be charged. When a HOA files a lien it includes the legal fees for filing the lien plus what is owed. So if it costs the HOA $400 to file a lien, then that $400 is added to the lien as amount owed. Same with Foreclosures. Legal costs and filing charges are passed on to the member.

There are legal expenses OUTSIDE of the award costs. The HOA never had to hire a lawyer or incur any legal expenses if you had not filed.

The good news is that they may not have to include the retainer expense if they fired that lawyer. That may have been returned. Putting a lawyer on retainer may not be an legal expense you may need to incur. However, the other expenses like consultation and response charges may be.

Former HOA President
RichardP13
(California)

Posts:3764


07/06/2019 3:18 PM  
Wendy

Don't lose any sleep, you won't have to pay a dime, to the dismay or Melissa and Augie. Think they need to get a room!

Been there, Done that
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