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Subject: Conflict Between Declaration and State HOA Statute?
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AugustinD


Posts:0


02/17/2021 7:13 AM  
A HOA Declaration states that any Owner filing suit against the HOA and who loses shall pay the HOA's costs of defending itself in court.

The state HOA statute says that when an Owner files suit against the HOA and loses to the HOA, a Court "may" order the Owner to pay the HOA's costs of defending itself. The statute is clear that the judge has discretion regarding who pays the HOA's attorney fees.

Both the Declaration and the state HOA statute state that, in the event of a conflict between either (1) governing documents (e.g. a conflict between the Declaration and the Bylaws) or (2) any governing document and state law (e.g. the Declaration and the state HOA statute), the following hierarchy "shall" determine what document prevails:

State HOA statute
Declaration
Articles of Incorporation
Bylaws
Rules and Regulations


1.
With regard to who will pay the HOA's attorney feees when a HOA owner files suit against the HOA and loses, is there a conflict between the Declaration and the state HOA statute?

2.
Owner Jones files suit against his HOA and loses. The HOA argues its Declaration is a contract and so Owner Jones must pay the HOA's attorney fees. Owner Jones says the state HOA statute and the Declaration conflict, and that both the Declaration and the state HOA statute say that, when such a conflict arises, the state HOA statute prevails. Owner Jones claims the court may, but does not have to, order Jones to pay the HOA's attorney fees. Is Jones correct?



I know the answers folks may provide here are only as good as the assumptions I list above.
ChrisE8


Posts:0


02/17/2021 7:15 AM  
Jones is correct. Even if an agreement says that someone must do something, a court can decide to enforce that obligation or not.
SheilaJ1
(South Carolina)

Posts:220


02/17/2021 7:38 AM  
Court decides. Who cares what the declaration says. State laws already have provisions for this.
AugustinD


Posts:0


02/17/2021 8:03 AM  
I believe this is about the law on assignment of attorney fees. The American Rule provides that each party is responsible for paying its own attorney's fees, unless specific authority granted by statute or contract allows the assessment of those fees against the other party. The Declaration is a contract. The state HOA statute also happens to speak to attorney fees. So the American Rule pretty much does not apply (except maybe to influence the judge in a general way?).

ChrisE8, your bottom line is the bottom line at which I arrived, but by different reasoning. I sure appreciate the input.

I welcome further input, as a test of whether my reasoning here (or just my bottom line) is pretty bulletproof.
JohnC46
(South Carolina)

Posts:10607


02/17/2021 8:17 AM  
I say Jones has a valid argument. Covenants can be "tougher" than the law but cannot override the law and the law says the court "may" order Jones to pay. The HOA saying Jones must pay is overriding the state laws "may".
CathyA3
(Ohio)

Posts:1612


02/17/2021 8:29 AM  
I lean toward agreeing with Chris and Sheila, but I don't like it.

The CC&Rs say that Jones pays the HOA's costs, period. State law does not contradict this, it only says the court may choose to order Jones to pay but does not have to. This is not a conflict. If I were designing an expert system to produce the correct result, it would say that Jones pays.

However, if the state law actually says that the court has discretion in deciding who pays the HOA's fees, that's a different thing. In fact, the hierarchy of laws doesn't matter in this case - the court is the final arbiter. In which case, my expert system would pause at the previous step and look for input from the court before producing its answer.

And this final paragraph is why I said I don't like it. It allows the court to override contract and other laws as they see fit. Your opinion of this depends in part on whether you believe courts should upload the laws as written, or if they should achieve "justice" (or at least their notion of justice).
AugustinD


Posts:0


02/17/2021 8:30 AM  
Thank you, JohnC46. This is my reasoning, so far. Also the fact that both the Declaration and the state HOA statute have explicit provisions on resolving conflicts (between Declaration and the HOA statute) to me seems like powerful support for Jones's position.
AugustinD


Posts:0


02/17/2021 8:45 AM  
Posted By CathyA3 on 02/17/2021 8:29 AM
The CC&Rs say that Jones pays the HOA's costs, period. State law does not contradict this, it only says the court may choose to order Jones to pay but does not have to. This is not a conflict. If I were designing an expert system to produce the correct result, it would say that Jones pays.
Interesting. I think ideally, the statute would have that popular qualifying phrase and read something like, "Unless the Declaration provides otherwise, when an Owner files suit against the HOA and loses to the HOA, a Court may order the Owner to pay the HOA's costs of defending itself." But the statute does not say this.

In short, I think your argument has merit, and maybe a lot of merit, so that my argument above is far from bullet-proof. I am pondering it.

I am also wondering whether this is a bona fide ambiguity in this statute section when this statute section comes up against a Declaration with a provision like the one I named in my first post.

I am betting there is case law on the use of "may" here, buried deep in the online repository of case law and which I do not look forward to attempting to extract.

However, if the state law actually says that the court has discretion in deciding who pays the HOA's fees, that's a different thing. In fact, the hierarchy of laws doesn't matter in this case - the court is the final arbiter. In which case, my expert system would pause at the previous step and look for input from the court before producing its answer.

And this final paragraph is why I said I don't like it. It allows the court to override contract and other laws as they see fit. Your opinion of this depends in part on whether you believe courts should upload the laws as written, or if they should achieve "justice" (or at least their notion of justice).
For this issue and I think most HOA issues, I am in the camp that the courts should follow the laws (including laws on contract) as written. Granted ambiguities arise now and then.

I am not sure there is an ambiguity in the statute here, but on account of your post, I am a lot closer to thinking there is.

Thank you.
CathyA3
(Ohio)

Posts:1612


02/17/2021 9:09 AM  
I think there is an ambiguity. Since the state statute says that a court *may* override the CC&Rs, it makes the hierarchy of laws kinda wobbly. It's especially true if the state law doesn't specify what things should be considered in order to override.

FWIW, I don't like it when courts can override the terms of an HOA's governing docs, because homeowners and board members don't know where they stand. For example:

* Jones files his lawsuit, loses, and the court overrides the CC&Rs, making the HOA pay its own costs.

* Some years later Smith files a lawsuit against the same HOA, loses, but this time the court does not override the CC&Rs, so Smith has to pay the HOA's fees.

I think Mr. Smith can make a good argument that he was treated differently from Mr. Jones, even though the two of them are subject to the same CC&Rs and same state laws.

This sort of thing undermines the integrity and enforceability (is that a word?) of the CC&Rs. It can also lead to contradictory case law and unintended consequences. I believe that if a court truly believes that the terms of the CC&Rs are unjust, then the CC&Rs should be amended by the membership or addressed by state lawmakers, not by courts in a hit-or-miss fashion. The latter is akin to selective enforcement.
AugustinD


Posts:0


02/17/2021 9:36 AM  
Posted By CathyA3 on 02/17/2021 9:09 AM
I think there is an ambiguity.
I am still pondering, of course.

I should have said in my prior post that you do indeed have me thinking there may be *no* conflict between the statute section and the Declaration section. Jones will likely argue there is a conflict, but I may likely argue for him to cool his jets. (I have told Jones I am helping him only to the extent I think he is in the right. I am not on some law firm's payroll, prostituting myself because I just lo-ove the adversarial system and its Quixot-ian existential explorations. Jones knows he can go hire an attorney. I remind him thusly often.)

Since the state statute says that a court *may* override the CC&Rs,
It says the Court *may* order the Owner to pay the HOA's costs of defending itself.

it makes the hierarchy of laws kinda wobbly. It's especially true if the state law doesn't specify what things should be considered in order to override.

FWIW, I don't like it when courts can override the terms of an HOA's governing docs, because homeowners and board members don't know where they stand.
Assuming there really is no conflict between statute and the gov docs, I agree with you. If there is no conflict, then courts should not override the HOA's governing docs (a contract).


For example:

* Jones files his lawsuit, loses, and the court overrides the CC&Rs, making the HOA pay its own costs.

* Some years later Smith files a lawsuit against the same HOA, loses, but this time the court does not override the CC&Rs, so Smith has to pay the HOA's fees.
Ya but trial courts often disagree on the same principle of law. It's practical reality that one trial court judge is not bound by the decision of another trial court judge.

On the other hand, if your point is that both the trial courts above ought to abide by the same rule, then sure. On the third hand, this is why appeals courts exist. (I know you know this. Call me a wise guy.)


I think Mr. Smith can make a good argument that he was treated differently from Mr. Jones, even though the two of them are subject to the same CC&Rs and same state laws.

This sort of thing undermines the integrity and enforceability (is that a word?) of the CC&Rs. It can also lead to contradictory case law and unintended consequences. I believe that if a court truly believes that the terms of the CC&Rs are unjust, then the CC&Rs should be amended by the membership or addressed by state lawmakers, not by courts in a hit-or-miss fashion. The latter is akin to selective enforcement.
I know the background of the judge involved here. I believe he is absolutely going to rule based on what state law (including case law) and the governing documents say. This includes what state law and the governing documents say about identifying conflicts and, if there is a conflict, following the law on resolving the conflict. This judge is not going to "make up" justice as he goes, because of his own politics or philosophy. The judge's approach happens to be my preference, even if it means Owner Jones has to pay attorney fees. (To be more exact, the HOA attorney fees, that I think Jones may very well have to pay, would be on a failed counterclaim by Jones. Anyone boo-hissing on my failure to elaborate: You will have to trust me it would not make a difference. I know the responses here are only as good as the assumptions I provide.)
CathyA3
(Ohio)

Posts:1612


02/17/2021 9:44 AM  
Posted By JohnC46 on 02/17/2021 8:17 AM
I say Jones has a valid argument. Covenants can be "tougher" than the law but cannot override the law and the law says the court "may" order Jones to pay. The HOA saying Jones must pay is overriding the state laws "may".




This hasn't been sitting right with me and I think I've figured out why.

The word *may* doesn't apply to something Jones must do: ie, Jones "may" have to pay court costs vs. Jones "shall" pay court costs.

Instead *may* applies to the court's actions, not Jones's.

Lawmakers may (ha!) have intended the law to read the way John is doing, but I believe that's not what the law actually does say (assuming Augustin's summary is close to verbatim).

Which is why I say that the state law as written is not actually contradicting the CC&Rs in this case. The law would have to say something like "owners who lose the court case *may* have to pay the defendant's court costs".

Jones pays.

CathyA3
(Ohio)

Posts:1612


02/17/2021 9:51 AM  
Posted By CathyA3 on 02/17/2021 9:44 AM
Posted By JohnC46 on 02/17/2021 8:17 AM
I say Jones has a valid argument. Covenants can be "tougher" than the law but cannot override the law and the law says the court "may" order Jones to pay. The HOA saying Jones must pay is overriding the state laws "may".




This hasn't been sitting right with me and I think I've figured out why.

The word *may* doesn't apply to something Jones must do: ie, Jones "may" have to pay court costs vs. Jones "shall" pay court costs.

Instead *may* applies to the court's actions, not Jones's.

Lawmakers may (ha!) have intended the law to read the way John is doing, but I believe that's not what the law actually does say (assuming Augustin's summary is close to verbatim).

Which is why I say that the state law as written is not actually contradicting the CC&Rs in this case. The law would have to say something like "owners who lose the court case *may* have to pay the defendant's court costs".

Jones pays.





In other words, Jones has to pay the HOA's court costs, as prescribed by the CC&Rs, *unless the court intervenes" and assigns those costs to the HOA.

Jones pays (unless the judge says otherwise). The laws do not contradict each other.

(I love it when we debate "shall" vs. "may". Wait 'til we start arguing punctuation...) :-)
AugustinD


Posts:0


02/17/2021 10:01 AM  
Posted By CathyA3 on 02/17/2021 9:44 AM
The word *may* doesn't apply to something Jones must do: ie, Jones "may" have to pay court costs vs. Jones "shall" pay court costs.

Instead *may* applies to the court's actions, not Jones's.

[snip to keep my focus]

Which is why I say that the state law as written is not actually contradicting the CC&Rs in this case. The law would have to say something like "owners who lose the court case *may* have to pay the defendant's court costs".

Jones pays.
Thank you. This helps enormously. As you may be aware, who pays attorney fees in litigation is a topic covered extensively in the case law.

The covenant says Jones "shall" pay. The statute says the court "may" do xyz. The "shall" means there is not a conflict. As far as complying with the law goes, the HOA would rightly and understandably be suing to enforce the "shall" covenant (contractual term) here.
SheliaH
(Indiana)

Posts:3805


02/17/2021 11:22 AM  
Well, first, I'd like to know when this statute went into effect. In my state our HOA statute (such as it is) went into effect after July 2009 and applied to HOAs created or or after that date. Older HOAs (like mine) could choose to be covered by the statute - I think the homeowners would have to vote on that and documents would probably need to be changed.

For me, the hierarchy you listed is how this normally works, but I always tell people to note the effective date of these statutes. Sometimes there are rules for condos vs. detached single-family communities, so that also plays a role - what if Jones lives in a townhouse and for some strange reason, their rules fall under the condo statute?

Usually people request that attorneys' fees and legal expenses be reimbursed by the plaintiff if they win, regardless of what the lawsuit is about.
In this case, if Jones' community was established before the HOA statute took effect, he or she may be out of luck. On the other hand, the judge might order the parties to split the costs, depending on what the issue was. If either side felt it shouldn't have to pay, this question would be part of the appeal, if not the whole thing, and this would go on and on.

Another issue is discretion - Jones filed the lawsuit against the HOA and lost, and if the judge may order the losing side to pay up, I'd expect Jones to provide a compelling reason why he or she SHOULDN'T pay the HOA's expenses. That's how it is with lawsuits - they're easy to file, but if you're going that route, you should have a better than 50% chance you'll win, and a 90% chance of the other side satisfying the judgement. None of this stuff is guaranteed of course, and that's why I'm an advocate of alternative dispute resolution. Ideally, the mediator can get both sides to meet in the middle and save everyone time and money.



AugustinD


Posts:0


02/17/2021 11:33 AM  
SheliaH, thank you for your input. The HOA statute in question does apply to the HOA in question. Alternate dispute resolution was attempted and failed. I agree this is a hard lesson for both sides in this dispute. I think it's possible the HOA attorney may be facilitating the HOA inappropriately, all for the almighty buck; or the HOA Board refuses to listen to the advice of the HOA attorney and is choosing alternatives the HOA attorney does not recommend, on account of ego and incompetence. Ultimately of course, and as the veterans here popularly say, the main facilitator of the bad relations and litigation is the membership, for letting this Board do this. I am confident over half the members (many of whom are out-of-town landlords) could care less. They are happy someone else is willing to serve on the board.

"Our Town"
SheliaH
(Indiana)

Posts:3805


02/17/2021 4:33 PM  
That's the other thing about disputes - some (many?) are little more than pissing contests with people becoming more interested in being right than resolving the problem. It may be the HOA attorney is in it for the money (ultimately they always win) or the board is wanting to prove once more that they are the board and therefore they are.

But don't forget the homeowner - they aren't always the put upon putz people think they are. Some people think rules only apply to everyone but them and they want what they want, not listening to reason and then scream "I'm gonna sue!" After all someone's responsible dammit, and they want satisfaction, no matter how much scorched earth ensues.
AugustinD


Posts:0


02/17/2021 4:46 PM  
Posted By SheliaH on 02/17/2021 4:33 PM
But don't forget the homeowner - they aren't always the put upon putz people think they are. Some people think rules only apply to everyone but them and they want what they want, not listening to reason and then scream "I'm gonna sue!"
From your lips to every HOA/condo member's ears.
NpS
(Pennsylvania)

Posts:4041


02/17/2021 6:05 PM  
Interesting as a hypothetical question.

But in the real world, I don't think you will get the answer you seek.

As a matter of common sense, a judge who decides against Jones will base her decision on the fact that she has discretion, not based on what the HOA docs say. A decision based on the statute cannot be overruled on appeal. A decision based on the docs can be overruled. No judge likes to be overruled, and the real world judge on this case will craft her opinion to avoid it. She will rely on "may" even if she is thinking "must." You will never know.

If the judge decides for Jones, please realize that the judge always has discretion to decide both the facts and the law. Rest assured that the judge will describe the facts of the case so as to fit to the legal decision she make. Makes no difference what your factual description is.

At the end of the day, the judge will be looking at whether the lawsuit is frivolous or has some underlying merit. Once again, you may never learn the true reason for the judge's decision.




Sikubali jukumu. Read all posts at your own risk.
AugustinD


Posts:0


02/18/2021 5:12 AM  
Posted By NpS on 02/17/2021 6:05 PM
Interesting as a hypothetical question.
I do not post hypotheticals. I minimize the details when the condo/HOA involved has a reputation of retaliation. The owner of this site seems to support, in general terms, not posting identifying information.

But in the real world, I don't think you will get the answer you seek.
The answers that I seek are interpretations based on well-read layperson's understanding of the law as a whole here, including of course the covenants.

To your other assertions, from my experience:

-- As a matter of reality, I think it's fair to say one never knows which way a trial court judge will rule.

-- Yet from what I have seen, it's still clear to me that the key to success is to be on the correct side of the law and massively prepare for everything that the opposition will throw at you.

-- This judge clearly seeks what the law says. I have observed trials as a HOA member, uninvolved per se as a party to the suit; as an H.O.A. director, involved as a party to the suit; as a member of the public, observing say a dispute between the City and a non-profit, non-HOA organization; as a sometime friend to someone who brought a suit out of spite, and with a lousy, frivolous IMO attorney, not involving an HOA but involving real estate nonetheless. In my experience, trial court judges strive to ensure their decisions comport with the law, both statutes and case law and any other law (including the law of covenants and contracts). They strive to be impartial. They will upbraid each side early and often as needed. I am impressed with what I have seen at length at the trial court level (civil cases only) on at least four occasions with at least four judges over about 15 years now.

-- From what I have seen, by striving to comport with the law, judges are of course doing all they can not to be overturned on appeal.

-- Many jurisdictions require trial court judges to publish their reasoning. If this reasoning seems bent by bias, so be it. Even the Justices of the U. S. Supreme Court are said by many to shape their legal reasoning by their bias. It's human. Or they have an axe to grind. Whatever. 'It's a terrible system but I cannot think of a better one.'



NpS
(Pennsylvania)

Posts:4041


02/18/2021 5:04 PM  
Posted By AugustinD on 02/18/2021 5:12 AM
-- Many jurisdictions require trial court judges to publish their reasoning.


My point is that the published reasoning will of course be written in such a way that the judge is not likely to be overturned. Yet, there may be some aspects of the judge's reasoning that will never be revealed in the written opinion.

I don't call that bias. I call it practical reality. As you said, there's no telling which way a judge will go. Sometimes it's a crapshoot.

Be sure to let us know how the judge rules.

Thanks.




Sikubali jukumu. Read all posts at your own risk.
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Forums > Homeowner Association > HOA Discussions > Conflict Between Declaration and State HOA Statute?



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