Why Should an HOA Hire a Bankruptcy Lawyer?

Check out this scenario and see if you know what to do (if you even understand it):

A member of an HOA hasn’t paid assessments for a long time. The association records a lien and files a lawsuit to enforce the lien by foreclosure. The association gets a judgment, and wants to force an auction sale to get the money.

But what just happened to the lien?

One court in California has ruled that the lien disappears when the judgment is entered and unless the association records an abstract of the judgment it can’t finish the foreclosure with a sale!

It’s only one case - a very badly decided one - but it’s there. And if you just go ahead and record an abstract everything will be okay, right?

But then the delinquent homeowner files bankruptcy. Now you’re in a different world!

Under bankruptcy law the delinquent homeowner can avoid an abstract. He or she can’t however avoid a lien.

But what happened to the lien? According to one court, it’s gone, and by the same logic, once the abstract gets avoided, you lose the right to sell the delinquent owner’s property to recover the unpaid assessments which, by now, have probably become a very big number!

Confused? Well you’re in good company. Ninety percent (90%) of the lawyers in California - who don’t actively practice bankruptcy law are probably right there with you!

This is only one of a dozen or more things that can happen when a delinquent owner files bankruptcy. And it’s a shame, because when an association hires a lawyer who is skilled in bankruptcy law, the association can survive the bankruptcy and collect its money more than seventy-five percent (75%) of the time!

How do I know this? As a bankruptcy lawyer for over thirty years I’ve handled over 10,000 bankruptcy and collected millions of dollars for my clients that many associations just wrote off and walked away from.

No intelligent Board would hire an unlicensed contractor. But having even the most skilled collection lawyer who doesn’t specialize in bankruptcy is roughly equal to doing the same.

Just so you are not left in the lurch, there is an answer to the problem set forth above. But it’s only found in the bankruptcy law.

Wouldn’t you rather have someone who knows that - and all the other twists and turns of bankruptcy law - than someone who doesn’t?

James Judge (james@thejudgefirm.com)

Unpublished California Appellate Decision (Fourth District, Third Division)

MICHAEL MOJTAHEDI v. GREG CARPENTER  (September 14, 2022) [HOA director loses SLAPP motion]

Plaintiffs Michael Mojtahedi and Mojdeh Mojtahedi along with defendant Greg Carpenter are homeowners in Laguna Sands, a condominium complex in Laguna Beach, California. Plaintiff Mojdeh Mojtahedi and defendant concurrently served on the homeowners association's board of directors. Plaintiffs sued defendant, the homeowners association, and other individual board members for breach of written contract, enforcement of equitable servitudes, breach of fiduciary duty, declaratory relief, and injunctive relief. Among other things, the complaint alleges defendant wrongfully used funds from the homeowners association for projects and repairs benefiting his units and failed to disclose his personal interests. The complaint also alleges defendant misrepresented some of the improvements as emergency repairs. The relevant repairs occurred when defendant was president of the board of directors. Defendant filed a special motion to strike (anti-SLAPP motion) under Code of Civil Procedure section 425.16. He asserted plaintiffs' claims arose, in part, from protected activity because some of the allegations concerned his statements or voting at board meetings. He also argued plaintiffs could not establish a likelihood of success on their claims. The court denied the anti-SLAPP motion, finding plaintiffs' claims did not arise from the protected conduct of voting. Instead, the court found plaintiffs' claims arose from defendant's "failure to disclose a number of material facts to benefit himself, and the spending of large sums of the Association's money and reserves in violation of the project documents, state law, or based upon [his] fiduciary duty to members of the association." The court concluded any voting allegations were incidental to the alleged wrongdoing. Defendant appealed.  After reviewing the record de novo, the Court of Appeals concluded that the trial court properly denied the anti-SLAPP motion as plaintiffs' claims did not arise from protected activity.

New Unpublished Opinion - ORANGECREST COUNTRY COMMUNITY ASSOCIATION v. BURNS

ORANGECREST COUNTRY COMMUNITY ASSOCIATION v. BURNS,  California Court of Appeals, Fourth District, Division Two, (June 9, 2022) 

Defendant Sandra Burns sought approval to build a wall across her front yard, and when her homeowners association said no, she built it anyway. After multiple attempts to get her to stop construction (and later to mediate the issue) failed, the association sued Burns, seeking a permanent injunction requiring her to remove the wall. Following a two-day bench trial, the judge found Burns had willfully violated her community's declaration of covenants, conditions, restrictions and reservations (CC&R's) and issued the injunction ordering Burns to remove the wall and to submit an application to restore the landscaping that had been removed to construct the wall. Burns filed an appeal. On appeal, Burns asserts two grounds for reversal. She argues the trial judge erred by failing to find that: (1) the affirmative defense of equitable estoppel applied to justify her construction of the wall, and (2) the association acted unfairly and discriminatorily because they have allowed other homeowners to build walls in their front yards.  The appellate court found that equitable estoppel did not apply as the association did not mislead her.  Rather, the association was clear that she could not build the wall and further the association made it abundantly clear that it had flatly denied the wall when  they contacted Burns through multiple media to ask her to stop construction and reiterate that she did not have approval for the wall. With respect to the discriminatory conduct, the court found that the association demonstrated they followed their own standards and procedures, but Burns failed to provide evidence that the association had allowed another wall like hers to stand. The committee reviewed Burns’ application under the rules and criteria contained in the CC&R's and Architectural Guidelines and denied her wall proposal based on the setback rule in section 4.11 of the Architectural Guidelines.  The appellate court thus affirmed the trial court’s judgment on both grounds.

STEPHEN M. LEVINE JOINS THE JUDGE LAW FIRM AS OF COUNSEL

The Judge Law Firm is pleased to announce that Stephen M. Levine has joined the firm as Of Counsel.   Mr. Levine regularly acts as general and litigation counsel to community associations, working closely with boards of directors and community association management companies.  He provides advice with respect to all aspects of community associations, including preparation of new governing documents, enforcement and interpretation of governing documents, relevant State and Federal laws, injunction issues, nuisance actions, governmental agency issues, challenges, requirements, compliance matters  and the entire spectrum of association disputes.  Mr. Levine has experience with complex trials, arbitrations, and mediations in both State and Federal courts. He also practices real estate law and provides corporate and legal advice to non-association clients. Mr. Levine is a magician member of the Academy of Magical Arts located at the World Famous Hollywood Magic Castle.  He is the Legal Advisor to the International Brotherhood of Magicians and volunteers his time as a magician to community events that benefit children and other causes.  He also was President of two 501(c)(3) corporations that benefitted local communities and magicians and people in need.

Mr. Levine was named a Superlawyer in Southern California in 2013 through 2016, and 2020 through 2022.  He has received awards from the American Bar Association and the Beverly Hills Bar Association.  He was President of the California Young Lawyers Association, and served on the State Bar Board of Governors, The Board of Trustees for the Lawyers Club of San Francisco and the Board of Trustees for the San Fernando Valley Bar Association.  Mr. Levine is a member of the Orange County and Greater Los Angeles Chapters of the Community Association Institute.   

"The opportunity to work with James Judge and The Judge Law Firm’s talented and versatile legal team, provides a perfect opportunity for me to serve my clients’ needs and to assist The Judge Firm in servicing their five hundred plus Southern California Association clients," said Mr. Levine.

Mr. Levine comes to The Judge Law Firm from Wolf, Rifkin, Shapiro, Schulman & Rabkin, LLP,  where he was a partner for seventeen years.  He earned his Juris Doctor degree from New York University School of Law in 1988 where he was awarded the Vanderbilt Medal of Honor and the Chancellor’s Service Award and his B.A. in Political Science from The Johns Hopkins University in 1985.

ABOUT THE JUDGE LAW FIRM  

The Judge Law Firm was founded in 1992 and is a recognized leader in the Community Association legal field specializing in common interest development law, general and litigation counsel to community associations, judicial/non-judicial foreclosures, judicial collections, debt purchases, evictions, and commercial real estate law.  The firm currently represents over 500 Southern California community associations. James Judge, the firm’s founder, is a member of the Orange County chapter of the Community Association Institute (CAI) and the California Association of Community Managers (CACM) Teaching Faculty.  Mr. Judge also served on the Legal Steering Committee, the Professional Standards Committee and the Legislative Committee for CACM, was a speaker at many of their annual law seminars, and has written for and edited the CACM Law Journal.  Currently, Mr. Judge’s “specialty” with CACM is ethics.  He is the chair of the Ethics Study Group Review Committee, which supplies materials for all three ethics offerings:  Foundational, Advanced, and Mastery.

For more information please contact The Judge Law Firm at (949) 833-8633 or e-mail  info@thejudgefirm.com

Please look at the Case Blog and HOA Blog

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