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socrateaser
socrateaser, Attorney
Category: Business Law
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Experience:  Retired (mostly)
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To Socrateaser: Facts: The BODs of a HOA filed a enforcement

Resolved Question:

To Socrateaser:

Facts:

The BODs of a HOA filed a enforcement lawsuit against one of the members of the HOA (a homeowner) for violations of the HOA’s covenants (erecting of an unallowed fence). Since the filing of the suit in October, one member of the five member BODs resigned. An election was held in February and four of the members of the BODs were reelected and one member of the HOA was elected to the Board thereby bringing the total number of directors to five.

To date, six thousand dollars have been expended in prosecuting the enforcement law suit and the HOA’s demur to the defendant’s counterclaim was upheld and the trial date is set for June 2012 and the HOA should easily prevail on the merits.

Since the filing of the law suit, the defendant has brow beat two of the HOA’s BODs and persuaded them to try to discontinue the lawsuit. The new member of the BOD (who is the swing vote) apparently has also been persuaded to discontinue the lawsuit by the defendant’s arm twisting. However, the overwhelming majority of the members of the HOA are in favor of continuing the lawsuit.

All three of the five member BODs who wish to discontinue the law suit have met privately with the defendant of the lawsuit (the defendant, up to this point is defending the lawsuit himself-pro se). The remaining two members of the BOD are adamantly in favor of prosecuting the law suit to a conclusion.

I, myself, am the adjoining neighbor of the defendant and the illegal fence abuts my property line.

Questions::

Since the three members of the BOD, who now wish to drop the lawsuit, have met privately (one at a time) with the defendant who is representing himself, is it a valid argument to raise the issue of ex parte communication?

If the three members of the BOD go against the majority of the members of the HOA and vote to drop the lawsuit what issues are raised, if any (ultra vires acts, breach of fiduciary relationship, etc.)?

What remedy, if any, would a member of the HOA have against the members of the BOD for their willful failure to continue the lawsuit and/or their failure to enforce the covenants of the HOA?
Submitted: 2 years ago.
Category: Business Law
Expert:  socrateaser replied 2 years ago.
Since the three members of the BOD, who now wish to drop the lawsuit, have met privately (one at a time) with the defendant who is representing himself, is it a valid argument to raise the issue of ex parte communication?

A: Ex parte communication is between a party and the judge -- not between parties. So, this is not a valid complaint.

If the three members of the BOD go against the majority of the members of the HOA and vote to drop the lawsuit what issues are raised, if any (ultra vires acts, breach of fiduciary relationship, etc.)?

A: None. The board is empowered to act in what the directors believe is in the HOA's best interests. The rule requires only that the board members act in good faith and based on well-informed business judgment in making any decisions. If the board thinks that terminating the lawsuit will save money, then the board can do so.

What remedy, if any, would a member of the HOA have against the members of the BOD for their willful failure to continue the lawsuit and/or their failure to enforce the covenants of the HOA?

A: If the board fails to enforce the covenants, an HOA member could sue the directors for breach of loyalty to the HOA, to the extent of damages suffered by the individual member. Once again, the defense is good faith and well-informed business judgment -- and it pretty much boils down to the value of the uniformity in fence regulation vis-a-vis the cost of litigation. It's not an easy issue, because while one has a measurable financial component, the other would require an appraiser to consider the value of the member's home with and without the fence -- and, the value of the entire community with and without enforcement oft fence/aesthetic guidelines. This is not a case I would be jumping to try to represent, on either side -- it's too gray.

Hope this helps.

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socrateaser, Attorney
Category: Business Law
Satisfied Customers: 33376
Experience: Retired (mostly)
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