All they found were a letter and billing from the then HOA lawyer about incorporating non-profit corporation, and minutes from the 1995 and 1996 annual meetings which lacked a quorum. What they did not find was any board resolution authorizing the non-profit as the new HOA, or any action of the homeowners authorizing the substitution. Even without any solid evidence that the non-profit became the new HOA, the State Farm lawyers proceeded to object to the substitution by fraudulently asserting that the boards of the non-profit and they were identical and that somehow substituted for homeowners approval.
While waiting for Judge Gordon to rule on the HOA identity, the State Farm lawyers cooked up the “vote by pen” time warp defense. That despite the Willett 2011 judgment invalidating the homeowners voting on January 18, 2006 to approve the rent allocation as proposed by the sublessor, that somehow the homeowners had a “vote by pen” in 2006 without holding a meeting after the original vote was invalidated in 2011. Obviously the homeowners had been transported back in time in the State Farm time-machine. Even the sublessor objected claiming that the State Farm lawyer were bared from claiming it because it was not raised in the 2006 lawsuit.
As a means of shoring up the State Farm lawyers’ “vote by pen” legal/time warp theory, on July 18, 2014 the HOA president Karatz, using the name of the non-profit for the first time, sent out a mail-in ballot request that the homeowner approve her spending $9,000 of the HOA’s reserves to fix the landscaping. After refusing to hold a meeting, as required by law, to discuss her “vote by pen” proposal was rejected, and the landscaping was fixed for a few hundred dollars. Mrs. Karatz had on problem ignoring state law or the truth.
On August 6, 2014 Judge Gordon based no board resolution, nor homeowners’ authorization, and without any finding of fact or conclusions of law, ruled that the non-profit had succeeded the unincorporated Council of Co-Owners. In effect making the Hilton Casitas’ ground sublease defective.
On February 4, 2015 Judge Gordon ruled that “that Procaccianti cannot rescind the 1999 Amendment and recover CPI-based rent”… and “[s]upermajority or not, the 2006 Amendment was not ratified by all casita owners and the effect of the signing remains a question of fact.” Questions of fact are left to a jury to determine based conclusions of law supplied by a Judge.
In the spring of 2015, the State Farm Lawyers file a motion for summary judgment with Gordon based on the Elis’ failing to disclose damages, although goofy Gordon had in an earlier ruling said they had. Gordon was rotated out and Judge Hannah rotated in. Judge Hannah’s first act was to rule on the State Farm lawyers’ motion, to which was invited back to testify as a witness in the case that he was judge. Based on goofy Gordon’s testimony, Judge Hannah blindly struck down the Elis’ damages even though they had been disclosed in previous filings. Incompetence or corruption? Who can say. In preparing for the February 1, 2016 jury trial, Judge Hannah engineered a railroad job by preventing the jury from hearing about the Elis’ request for a receiver to select an appraisal as demanded by Procaccianti in September 2014.
After much lawyers’ prattle and pettifogging from the State Farm and Procaccianti lawyers, in November 2013 the Eli and Shaffer plaintiffs asked for a receiver to assist in the Procaccianti 2012 rent setting demand. Only this time, it was Procaccianti first out of the box in adopting the State Farm lawyers’ defective sublease defense. Also in November 2013 Procaccianti, the sublessor, taking advantage of the State Farm lawyers’ defective sublease defense asked the Court to invalidate the 1999 sublease amendment and go back to the 1972 CPI based rent and escalators which would set the rent in 2013 at around $1,400 a month.
In February 2014, I learn about Procaccianti’s 2012 demand/offer to reset the ground rent based on appraisal, just before Judge Goofy Gordon denied the request for the receiver and found the 1999 sublease amendment enforceable. Wondering if Procaccianti demand/offer was in good faith and would they still honor it, now that it was disclosed to the casita owners, I wrote to Procaccianti’s general counsel. They have never responded.
The 2006 lawsuit
In the 2006 lawsuit, the State Farm lawyers represented the insured Scottsdale Hilton Casitas HOA. After losing a motion for summary judgment in January 2011, the parties settled in 2011 with the State Farm lawyer signing a Rule 80(D) settlement agreement on behalf of Hilton Casitas Council of Homeowners, an AZ non-profit corporation. However, in the stipulated judgment the State Farm lawyers had the HOA president sign as the Council of Co-Owners, an unincorporated association, as reflected in Judge Willett’s finding for summary judgment and the August 2011 stipulated judgment:
“The [Scottsdale Hilton Casitas Homeowners] Association is also known as the Hilton Casitas Council of Co-Owners, and, at times, has been incorrectly identified as the Hilton Casitas Council of Homeowners.”
Unlike a Good Neighbor...
Scottsdale Hilton Casitas - the HOA from Hell!!
The 2012 Lawsuits
In answering the Eli 2012 complaint, the State Farm Lawyers disavowed that the purported HOA that they represented in 2006 was a party to the 2006 lawsuit and the stipulated judgment. For the first time the State Farm lawyers proffered the non-profit corporation defective sublease defense that: “Hilton Casitas [Council of Homeowners, an Arizona nonprofit corporation] was not a party to the 1999 subleases and never assumed any obligation under those subleases; nor could it have assumed any such obligation pursuant to its governing documents and Arizona law, as the subleases involve privately owned property and not HOA property.”
At March 2014 annual HOA meeting, when the HOA president was confronted with Procaccianti's, the Sublessor, September 2012 demand/offer, she told the owners that State Farm lawyers had instructed her not discuss the lawsuit with anyone, but that owners could speak with the State Farm lawyers. We called the State Farm lawyer and he admitted he had instructed her not to discuss rent reset demand/offer and the lawsuit.
Curious about what the State Farm lawyers were keeping from the casita owners, I began researching the 2006 and 2012 lawsuits. After finding out about their defective sublease defense in their filings, I dug deeper and found that the HOA had never conducted business as the non-profit. To protect our casita from having a defective ground sublease, I provided the 2012 plaintiffs an affidavit of my research. Then after reading ARS § 33-1215, the state law regulating condominiums, which requires that the name of the HOA to be in the recorded Declaration that governs the condominium. A search of Maricopa County Recorders shows that there is only one Declaration and it names of the unincorporated “Council of Co-Owners” (https://recorder.maricopa.gov/UnOfficialDocs2/pdf/19720127763.pdf), as do the bylaws.
In May 2014 the Plaintiffs filed a motion to substitute the unincorporated “Council of Co-Owners” for the State Farm’s purported client the non-profit. In lieu producing a recorded Declaration naming the non-profit as the real HOA, the State Farm Lawyer and HOA president Karatz spent three hours searching the HOA storage locker for a defense to the substitution motion.
The identity switcharoo and defective sublease defense was cooked up by the State Farm lawyers and State Farm during the 2006 lawsuit:
“[I]n exchange for assuming and paying for the defense, the carrier acquires the right to control the defense, including making tactical and strategic decisions, identifying defenses to be asserted and deciding what discovery to undertake, what experts to retain, what motions to file, etc. Even before the Eli lawsuit was served, as the 2006 litigation was winding down (which Hilton Casitas had also tendered to State Farm to defend), State Farm and I anticipated that the Eli lawsuit was coming. We actually started planning out the defense of that lawsuit before it was ever served…”
In response to the Eli and the Shaffer 2012 lawsuits, the sublessor’s lawyer send a demand letter to the State Farm lawyers that the HOA begin the appraisal process to set the ground rent. The State Farm Lawyers, instead of advising the HOA to perform the appraisal process and ending the litigation right there, they wrote:
“This letter responds to yours of September 6, 2012, I only represent Hilton Casitas Council of Co-Owners/Homeowners with respect to certain pending litigation. I do not presently represent this entity with respect to matters outside of that litigation and therefore cannot assist you with your request.”
Procaccianti (http://www.prochotelreit.com/ ), the sublessor, on September 11, 2012 sent their own demand letter to the HOA president, Sue Karatz. The HOA president took no action having been instructed by the State Farm lawyers not to discuss the case with any of the casita owners.
On September 13, 2012 the State Farm lawyers once again forwarded the position that the non-profit is not named, not a party and is barred by law from performing the rent setting function in the sublease (Note: The Council of Co-Owners is named in the sublease and is not prevented by law from performing the rent setting).