Blog Post #6

Violating our by-laws … and paying dearly for it (Part 2):

In my last blog post, I described how a carefully-developed proposal intended to protect members from unscrupulous contractors was derailed by a lawyer and two board officers utilizing arguments that I felt made no sense, but were of sufficient weight to bamboozle the rest of the board into rejecting my proposal. Below is a narration of how the issue continued to fester. But first, let me tell you a horror story that was playing out at the very time that I was pressing for adoption of my Contractor Proposal.

Mr. and Mrs. [let’s call them “Chan”] purchased an L-21 apartment on Paseo del Lago, inside Gate 10, and immediately hired a contractor to do a full-on rehab of a manor that had not been touched for decades. I am not privy to their arrangement with the contractor, but the job could not have been for less than $50,000.00. The alterations permit listed almost every modification possible . . . except one: removal and replacement of the old asphalt floor tiles in the kitchen. Since the contract was to rehab the entire manor but the permit did not include replacement of the kitchen tiles, the contractor knew doing the complete job as promised required exceeding the permitted work.

Any experienced contractor – which this guy was – would have known that the floor tile mastic almost surely contained asbestos; so their replacement would have required testing and (expensive) professional remediation. But since the contractor was working on a fixed fee basis, he would have had to eat that substantial additional cost. Clearly therefore, the contractor intended from day one to remove and replace the tiles in violation of both state construction codes and the Village’s permit. And that is exactly what he did.

And no one would have been the wiser . . . except that the contractor created a mess, some neighbors complained, and a follow-up inspection found traces of asbestos on the patio and in the mail room, requiring VMS to test every manor in the building! The violation was reported to Compliance; and the Chans were billed the cost of the testing: $12,294.99.

At an Executive Committee hearing, the Chans argued that VMS had overdone the testing: that once a few manors tested negative, the testing should have concluded. But that argument justifiably fell on deaf ears: Laguna Woods Village takes their inspections and environmental procedures seriously.

But there was a much better defense to Compliance’s charge, one that I made in closed session after the hearing was concluded. It was my position that had the board been enforcing our rules as required by our by-laws (i.e., enforcing our rules directly against guests and invitees . . . terms that included contractors), it is likely that this guy would not have tried to cut corners in the first place. In the best of all possible worlds, the contractor – knowing that he would be on the hook if his violation was discovered – would have properly listed the work specification in the permit application; and adjusted the price accordingly.

But my argument did not win the day: after much heated argument, the Committee voted (I believe, 3-2) to pin the entire cost on the owners, despite knowing full well that Third was violating its own by-laws, by not enforcing those by-laws against contractors violating our rules.

With that occurring in real time, let me return to my campaign for the adoption of my Contractor Proposal. You may recall that, after the board rejected my proposal, I emailed the lawyer (Sandra Gottlieb), seeking clarification of her claim that my proposal conflicted with our governing documents (CC&Rs and the Davis-Stirling Act). When she declined my request, I had a series of arguments with our president, who strongly urged me to drop the matter, something I was not prepared to do. And following a hastily-called officers’ meeting, I finally got their agreement to ask the lawyer to just answer my simple question: what was the basis for her claim that my proposal violated Davis-Stirling and was therefore illegal?

But then things got truly weird: In her response, Gottlieb did not even attempt to answer my question (the only thing she was asked to do). Instead what I got was a 3-page letter that (1) changed the facts (she actually changed the facts in my proposal!), and then (2) set forth 13 new objections to my proposal, not one of which made any sense. If an attorney in my (New York City) law firm ever made one of those nonsensical arguments, I would have fired them on the spot. That is how truly absurd I viewed her objections. But you needn’t take my word for it: my contractor proposal (and a statutory analysis) is reprinted at the foot of Blog Post #5; and relevant correspondence (including her ludicrous objections) will be found at the foot of this post as an addendum. You decide for yourself.

I immediately wrote back, taking apart every objection; and once again inviting her to just answer the damned question: how my proposal conflicted with our CC&Rs or Davis-Stirling. Not only did I receive no answer; our board president instructed her not to respond at all! (And she didn’t.)

The idea that our board president would go out of her way to defeat (no, destroy) a proposal whose sole purpose was to protect members who were (and remain) extremely vulnerable to exploitation (and without offering an alternate solution) was mean-spirited and constituted, in my mind, the worst sort of violation of her fiduciary duty to every member in our mutual. Her conduct seemed more an effort to protect the attorney’s apparently-ruffled feathers than to protect the membership. Shame on her!

Why the members remain at the mercy of an unscrupulous contractor

Since the member – as seen above – is always responsible for damage caused by their contractor – there is really no defense available to the member to a claim for reimbursement. Based on apparently uncontested evidence, the Executive Committee will find that (1) the contractor violated our rules; and (2) the member is liable for their contractor’s violation. Period! So the member is left with no alternative but to file suit against the contractor in our state courts. They will have to hire a lawyer who will draft and file a complaint; take “discovery” (depositions, interrogatories, notices to admit, expert testimony), and ultimately take the case to trial, a process that would clearly cost more than the recovery the member could hope to obtain. So no member in their right mind would even consider filing a lawsuit. At present, therefore, the member is without a remedy.

But if the contractor had agreed to its jurisdiction, the Executive Committee – without hearing a bit of additional evidence – would be able to make a third finding: (3) that the contractor is liable to the member for his violation of our rules . . . and a breach of the contract with the member. Remember, my proposal includes a contract under which the contractor specifically agrees to be liable. That ruling technically is an arbitration ruling, and the law provides a simple procedure for judicial confirmation of arbitration rulings, a procedure that would have cost peanuts. Of course, if the contractor knew he was liable for any violation of our rules, he might not have tried to cut corners in the first place. That’s logic.

So the failure of the board to adopt my simple Contractor Proposal – or any alternative – means that even now, years after presenting this proposal, our members are still left to the mercy of any contractor they hire. And our members aren’t even aware of their vulnerability. The only ones who were aware of that vulnerability were the 10 other members of my board . . . and they did nothing.

Actually, let me correct that last paragraph: Mr. And Mrs. Chan are aware of that vulnerability. It cost them over $12,000.00 to learn that painful lesson. And there was nothing that they could do, because it would have cost them more than they could possibly have recovered to sue their contractor.

But then things got more bizarre: Being reminded (by me) that they had recently rejected a procedure that would have protected the member in that precise situation, the full board nevertheless upheld the Executive Committee’s ruling (fining the Chans more than $12,000.00). Got it? Fully aware that they had rejected (and for years earlier boards had failed to initiate) a procedure that could have avoided the entire fiasco, they voted to uphold the fine anyway. (And guess who attended and supported that board decision?) By rejecting my proposal – and failing to seek an alternate remedy – the board threw the cost of their own negligence, their own by-law violation, onto the backs of completely innocent members.

Why I Resigned From The Board

Still hoping to salvage something from that fiasco, I then commenced discussions with 6 directors individually, and believed I had finally obtained the agreement of a board majority to adopt my procedure … or some procedure. But as soon as I re-distributed the proposal to the entire board, several erstwhile supporters melted away. It was clear to me that someone had gotten to them. (To his credit, current board president Steve Parsons remained supportive, but sadly he was in the minority.)

Having abandoned any hope of ever seeing this board acting in a responsible (truly fiduciary) manner, I quickly resigned.

* * *

The Third Board should quickly adopt the Contractor Proposal!

I do not know how the current board would respond to my bringing this proposal back for reconsideration. However, the proposal’s logic is so overwhelming, its benefits so appealing, that they really don’t need me – or anyone else – to sell it to them. All they have to do is use their good common sense. And if they need any further convincing, they should compare their lawyer’s nonsensical letter and my response. As noted above, the Contractor Proposal (along with a complete statutory analysis) can be found at the foot of Blog Post #5; the relevant correspondence can be found at the foot of this Blog Post.

The reader might also wish to spend some time trying to figure out why the board was encouraged – by their then-president and secretary – to reject the proposal in the first place. Also how to explain their lawyer’s knee-jerk objections to my proposal. What could have possessed her to make what to me appeared to be such clearly false statements? Was it simple hostility to anything that sounded “legal” that came from someone else? Was she worried about a lawyer on the board showing some creativity? Was it necessary to resist anything that came from that lawyer? An entertainment lawyer from New York at that? That would seem to me to be a bit . . . off the wall, don’t you think? Your guess is as good as mine.

But while you ponder that question, ponder this:

* * *

Hypocrisy on Display:

Remember that in 2017 Sandra Gottlieb rejected the Contractor Proposal, and told the Third board that it violated both our CC&Rs and Davis-Stirling.

Yet at their November, 2019 meeting, the Third board adopted a resolution that governed co-occupancy in the mutual, a resolution approved by Sandra Gottlieb or her firm.

It is impossible for Gottlieb to reconcile those two positions. If one of them is right, the other one must be wrong. Let’s follow the logic:

1) Under the new co-occupancy resolution, co-occupants must now agree in writing to comply with all mutual rules (and therefore be subject to Executive Committee jurisdiction):

“Co-occupant shall be subject to the same rules [and] regulations … applicable to the member ….” (Application form that must be signed by the co-occupant)

2) The Contractor Proposal urges (but does not obligate) members to require their contractors to agree in writing to comply with all of Third’s rules and regulations (and therefore be subject to Executive Committee jurisdiction).

“I agree [to] … respect the rules and regulations of Laguna Woods Village, as well as all state and local construction and other codes.” (Contractor Proposal’s 1-page agreement)

3) A “contractor … [is] a is a business invitee of the owner ….” [Kinsman v. Unocal Corp., 37 Cal.4th 659, 675 (2005)] Business invitees and guests are treated the same under California law. [Fullerton v. Conan, 87 Cal.App.2d 354, 356 (Cal. Ct. App. 1948)]

4) Third’s disciplinary rules apply equally to members, guests and co-occupants. [By-law §§4.5.2, 4.6] So long as guests and co-occupants agree in writing to be subject to Third’s disciplinary procedures, logically Third’s Executive Committee must treat members, guestsand co-occupants exactly the same.

5) But Gottlieb’s position seems to be that it is legal to enforce our by-laws against co-occupants, but it is illegal to enforce our by-laws against business invitees/guests. The illogic – the absurdity, the total nonsense – of that position is simply breathtaking!

Third’s lawyer is thus seen to have provided completely inconsistent legal advice on an important topic: protecting members from unscrupulous contractors. I don’t think there is any doubt that she falsely represented that the Contractor Proposal (a procedure substantively identical to the co-occupant procedure she or her firm approved) was illegal. And one of our members actually was fined over $12,000.00 when enforcing our by-laws might have prevented the rules violation in the first place.

Why – you might ask – would Gottlieb champion such incompatible positions? I don’t think the answer will be flattering to her.

* * *

Is that the quality of legal advice Third is willing to stomach? Someone who intentionally (in my opinion) misrepresents the state of the law applicable to a serious membership issue? And while you’re ruminating over that question, why do you think she took that position in the first place? Why indeed!

If you’ve read this far, you should have realized by now that Sandra Gottlieb has not been an asset to Third Laguna Hills Mutual. And if – knowing this – the Third board doesn’t promptly replace her, what would that say about their judgment?

* * *

Addendum: Contractor Proposal Correspondence
(between Gottlieb and Zalon)

In the addendum at the foot of Blog Post #5, I set out my entire contractor proposal and a statutory analysis (previously distributed to the entire board and the board’s attorney, Sandra Gottlieb).

Below I set out all relevant correspondence with Gottlieb, on which I ultimately copied board president Rosemarie diLorenzo and board secretary Burt Baum.

This material is not posted for the casual reader. It is presented solely to document what transpired between Rosemarie, Third’s lawyer (Sandra Gottlieb) and me, should anyone be truly interested.

* * *

Zalon December 21, 2017 email to Gottlieb:

Sandra: When you first looked at my disciplinary rules proposal (allowing members to contractually require lessees, contractors, etc. to submit to our disciplinary procedures), you said that the procedure violated our CC&Rs. At our last monthly meeting, you indicated that they appeared to be in violation of Davis-Sterling. Clearly I did not agree with either of those comments, as I think I made clear at Tuesday’s session. Since you seemed so confident in your opinion – and I in mine – could I impose upon you to explain the reasoning on which you base your opinion?

I am asking this solely as a lawyer who is trying to get his head around a position that I simply cannot understand. So please do not consider this client business; and do not charge for your answer. If you are unable to separate the two areas, you don’t have to respond at all. Happy New Year, Sandra, Jules

Gottlieb December 27, 2017 email to Zalon:

Hi Jules, I hope the holiday season is ongoing for you and that you have been able to get some down time. As I am required to do, I forwarded your email to Burt and Rosemarie to obtain direction on whether I had permission to respond to your email. Burt opined that I did not but that he wanted Rosemarie to weigh in after she returns from her mini vacation. I will let you know when I hear back from her. I am not able to separate out my roles as you referenced in your original email however I have not chosen to not “respond”. I will get back to you when I hear from Rosemarie. I wish you a happy, healthy and prosperous new year. Sandra

Gottlieb January 23, 2018 letter to Zalon:

Jules, I have been authorized to respond to your questions about my position on your proposal for a rule/policy that you believe would allow the Mutual’s Board of Directors (“Board”) to take disciplinary action against a member’s lessee or contractor (or any other invitee or licensee) who violates the Mutual’s rules and regulations rather than going after the “innocent owner” and my authority for my opinion.

As you acknowledged, members of the Mutual are bound by the Mutual’s CC&Rs by virtue of their ownership interest, (Civil Code § 5975), while lessees, contractors, and other third parties are not. Upon reviewing your document titled “Undertaking of Personal and Financial Responsibility” and the accompanying “Explanation” documents, it is my understanding that you are proposing that the Board adopt a rule requiring members to compel their lessees or contractors to enter into a separate agreement under which said lessees or contractors agree to submit to the Mutual’s disciplinary procedures. I understand that you believe that this will allow the Mutual to take disciplinary action (e.g., violation fines, compliance assessments and special assessments for damage to the common area) directly against a member’s lessee or contractor who violates the Mutual’s rules and regulations as referenced as examples immediately above, especially in cases where “perfectly innocent members . . .ha[d] no power to prevent the infraction.” For the reasons stated below, I cannot, as legal counsel, advise the Board to adopt your proposed rule. I acknowledge that the Board has in fact already voted on this issue which only had one “yes” vote, yours, and the proposed motion to implement same failed.

First, your proposal is based on an inaccurate premise: that members who are unable to prevent their lessees or contractors from violating the Mutual’s governing documents are “perfectly innocent.” Contrary to your position, there is no such thing as a member “who may have no power to prevent [their contractor’s or lessee’s] infraction.” Among other things, each and every member has the power and obligation to inform their lessees or contractors that there are rules and regulations that they must abide by on the Mutual properties, the power to require such lessees or contractors to indemnify the member for any liability arising out of their lessees or contractors action, and the power to refuse to enter into a lease or contract in which the lessee or contractor does not agree to abide by the Mutual rules. In other words, what you were essentially suggesting is that a member who cannot physically restrain their lessee or contractor from committing a violation, which can be an intentional rule violation or damaging of Association common area, has no power to prevent a violation and is therefore a “perfectly innocent member”—this is an incorrect assumption. Each and every member of the Mutual is always responsible for the conduct of their lessee, contractor, guest, or any other invitee or licensee. (See Civil Code § 5855(a) [allowing association boards to, subject to a noticed hearing, “impose a monetary charge [e.g., a violation fine] as a means for reimbursing the association for costs incurred by the association in the repair of damage to common area and facilities caused by a member or the member’s guest or tenant”]; see also Bylaws § 4.6; Resolution No. 03-14-44; Resolution No. 03-11-49; Resolution No. 03-15-101.) No separate third party contract, such as the one you are proposing, can circumvent that.

Second, your proposed rule would be burdensome to both the Mutual and the membership. The burden on the membership is clear. Your proposed rule would require members to have their contractors be subject to disciplinary action by a third party, i.e., the Mutual, which will undoubtedly result in making it more difficult and more expensive for members to secure contractors to perform work in their unit. Even more burdensome is that you are suggesting that members be required to have their invitees sign a contract upon entering the Mutual premises. Will the UPS driver or pizza delivery person be required to sign such a contract as well? What happens if the UPS driver loses control of the vehicle and damages common area? What happens if the owner says go after the third party and leave me alone? What happens when the homeowner says that the Board is harassing or discriminating against him/her/them by selectively deciding in some cases to go after the owner and in other cases to go after their contractor/vendor/invitee?

As to the burden on the Mutual that would be imposed by your proposed rule, it is simply incorrect to state there would be “no additional work by our staff, other than the simple act of mailing a copy of the violation notice and hearing date to the contractor” or other third party. First, mailing violation notices is not a “simple act”, especially given the size and population of the Mutual community. Second, there is much more work that would be required of the Mutual under your proposed rule, including preparing and reviewing the third-party contract that you are proposing, identifying and obtaining contact information for these third parties, reviewing insurance documentation to confirm that the contractor’s policies will provide coverage to the Mutual as a third party beneficiary of the policies and/or having the Association be a named insured providing the Association first party insured position, and the potential liability for the Mutual by establishing (or purporting to establish) privity with third party contractors, lessees, guests, and other invitees or licensees. Taking this line of reasoning to the absurd, once privity is established, could the Association be held responsible for unpaid invoices or be sued for damages sustained by the contractor/invitee when hurt on the Association’s premises?

I hope I have provided you with insight into my reasoning and why, in my opinion, the Mutual will be exposed to significant costs and expenses if it were to approve and follow your proposed scheme. The Association can always go after the owner for the violations of his/her tenant, contractor, or other invitees. Moreover, keep in mind that there are other legal remedies available to the Mutual against third parties engaging in improper conduct or causing nuisances in the community that do not involve establishing privity with said third parties, such as nuisance actions, trespass and ejectment actions, and negligence actions for property damage. (See, e.g., Civil Code § 3479 [nuisance], Allred v. Harris (1993) 14 Cal.App.4th 1386, 1390 [trespass], Civil Code § 1714(a) [negligence in general].)

Please let me know if you have any questions regarding this correspondence.

Sincerely, s/Sandra L. Gottlieb

Zalon January 24, 2017 to Gottlieb:

Dear Sandra: On December 21, 2017, I emailed you the following question:

“When you first looked at my disciplinary rules proposal (allowing members to contractually require lessees, contractors, etc. to submit to our disciplinary procedures), you said that the procedure violated our CC&Rs. At our last monthly meeting, you indicated that they appeared to be in violation of Davis-Sterling. Clearly I did not agree with either of those comments, as I think I made clear at Tuesday’s session. Since you seemed so confident in your opinion – and I in mine – could I impose upon you to explain the reasoning on which you base your opinion?” [My 12/21/17 email]

On January 8th, Burt Baum emailed you the following request:

“Hi Sandra: [Rosemarie and I] met with Jules Zalon on Thursday and he expressed a strong desire to be further educated and find out the reasons you had for saying his proposal on contractors violated both our CC&R’s and Davis–Stirling. He said that he did not need a detailed treatment of the issues. We agreed to accede to his request. I am therefore asking you on behalf of the Board to answer him. Our objective is to put this whole matter to rest and move on. Thank you.”

You have now responded with your letter of January 23rd, which provides a laundry list of reasons why you (personally) object to the proposal, but you ignored both my request and that of Burt and Rosemarie: that you explain why my proposal “violated both our CC&R’s and Davis–Stirling.” Given the amount of time that has passed, and the exhaustive treatment you provided, I assume – unless disabused – that you have now concluded that the procedure does not, in fact, violate either of those documents. Can I therefore assume that you will so advise the Board?

But this letter would be incomplete without my responding to that “laundry list” of objections, so here – in the order you presented – are my responses:

1. You write that my proposal

“[requires] contractors to enter into a separate agreement under which said lessees or contractors agree to submit to the Mutual’s disciplinary procedures.” [Emphasis added]

Clearly, Sandra, you are in error. My proposal (copy attached) states in so many words that the procedure I champion is completely voluntary:

“A member can compel their contractor (for example) . . . to agree to submit to our disciplinary procedures, something our by-laws already authorize. . . .
* * *
“And if the member chooses not to require the contractor to agree, the member will have no one to blame but themselves in the event of such a violation.”

2. You write that

“. . . your proposal is based on an inaccurate premise: that members who are unable to prevent their lessees or contractors from violating the Mutual’s governing documents are “perfectly innocent.” Contrary to your position, there is no such thing as a member “who may have no power to prevent [their contractor’s or lessee’s] infraction.” . . . Each and every member of the Mutual is always responsible for the conduct of their lessee, contractor, guest, or any other invitee or licensee. . . . No separate third-party contract, such as the one you are proposing, can circumvent that.”

I submit, Sandra, that you are playing with words. As a lawyer, you must have come across the word “innocent” on more than one occasion. To me, the word indicates someone who is “free from guilt or sin especially through lack of knowledge of evil: blameless.” (Citation omitted.) The examples I offered showed members who were non-negligent, and thus, innocent. [Foot note: Coincidentally, at yesterday’s disciplinary hearing, Bunny Carpenter – out of the blue – commenting on a recent case in which the member was held liable, described her as being “completely innocent.” Her words, not mine!]

But this is a non-issue, since a person can be completely innocent and still be legally liable. I only used that term to highlight the fact that we should be leaning over backwards to protect our members’ interests, especially innocent members. So it strikes me as a bit mean-spirited to reject a procedure that allows our (still legally liable) members to hold the actual miscreants to account.

You go on to say that my procedure “circumvents” the member’s ultimate responsibility for the conduct of their guests, a comment which is flatly contradicted in my very specific statement (in the “Protect Yourself …” handout: p. 2 of 4):

“While members remain liable for the conduct of all their guests, this new procedure allows the Board to directly discipline the person who actually commits the infraction.” (Zalon handout)

But while we’re on the subject, I cannot think of a better way of compelling lessees and contractors to obey our rules than to get them to agree in writing to do just that. Can you?

Moreover, the issue, lest you forget, is not the guilt or innocence of the member, but (a) whether the member has the power to require a contractor (or a lessee or guest) to agree in writing to respect our rules, and (b) whether our Executive Committee can act as an arbitration panel between a consenting third party and the Mutual. And as to that, there can be no dispute. See our charter Article III and especially III(b).

3. On page 2, you claim that the procedure would be burdensome to both the Mutual and the membership, but once again you base that on the mistaken belief that my procedure:

“. . . would require members to have their contractors be subject to disciplinary action by. . . the Mutual . . . .” [Emphasis added]

Of course, that is not the case: my proposal is voluntary. All I am doing is offering our members a simple way to protect themselves against contractors that take advantage of (mostly) little old ladies, contractors who – illogically – are presently being insulated from real risk by a board whose primary obligation should be the protection of those little old ladies against those very predators. Does that make sense?

But even your argument is flawed. You claim that the procedure “will undoubtedly result in making it more difficult and more expensive for members to secure contractors to perform work in their unit.” Since the procedure is totally voluntary, your argument (and really, that is all it is; it certainly is not legal advice) does not hold water.

I will agree that a UPS driver is not likely to sign such an undertaking . . . but what is even less likely is that a member would have the gall, the chutzpah to ask a UPS driver to sign it. Again, this is a voluntary process which merely suggests to the members a way of protecting themselves. So while a member could – I suppose – ask even an Uber driver to sign the undertaking, the only time a member is likely to ask for a signature is when the invitee (contractor, lessee, long-term guest) has the potential of costing the member a lot of money in a disciplinary proceeding.

But since you presented a whole bunch of (intentionally?) absurd examples, I will play the straight man and answer each of them:

4. * What happens if the UPS driver loses control of the vehicle and damages common area?

Answer: Whether or not the UPS driver signed the undertaking (of course they would not), UPS would be liable under the legal theory of respondeat superior. So signing the undertaking would have no legal effect. On the other hand, if the Executive Committee decided to hold the member liable for the damage caused, then the undertaking would allow us to also hold the driver liable as well. But if you think that in that situation, Compliance would serve a NOV on the member and that the Executive Committee would actually fine the member [!], we have more differences than I thought.

5. * What happens if the owner says go after the third party and leave me alone?

Answer: Nothing happens that would not have already happened. This procedure does not exculpate the member, as I clearly noted on page 2 of my (attached) hand-out (and mentioned on page 3, above):

“While members remain liable for the conduct of all their guests,this new procedure allows the Board to directly discipline the person who actually commits the infraction.” (Zalon handout) [Emphasis added]

To reiterate, the member will still receive a NOV, and be personally liable for any fine imposed. All my procedure does is to allow the member to protect themselves by requiring a contractor (for example) to submit to our rules (and our disciplinary procedures) in order to obtain a renovation deal possibly worth upwards of $40,000.00. Frankly if I were a member holding out that sort of carrot and a contractor refused to agree, I wouldn’t go near that guy for all the tea in China. As you can see, this procedure merely allows us to punish the miscreant.

6. * What happens when the homeowner says that the Board is harassing or discriminating against him/her/them by selectively deciding in some cases to go after the owner and in other cases to go after their contractor/vendor/invitee?

Answer: There is zero chance that this procedure could be viewed as “discriminatory.” This is a simple contractual arrangement between the member and the contractor, which names the Mutual as a third party beneficiary. [Foot note: And such contracts are recognized and enforceable in California: “A contract, made expressly for the benefit of a third person, may be enforced by him at any time before the parties thereto rescind it.” Cal. Civ. Code § 1559 (West)]

That means that the Mutual would also enforce the agreement directly against the contractor. But the procedure is automatic. Here is precisely how I explained it at the closed session (when it was voted down):

“Staff will have already investigated and determined that a lessee, or a contractor, committed a violation and will have cited the member for the violation. However, if the member has obtained the undertaking I propose, the member will show it to staff; and staff will then simply send the “undertaker” a copy of the citation and notice of the hearing. It’s that simple. The sole change from current practice is that staff will send a copy of the citation and notice to the alleged culprit.”

As you can see, the Board is not involved in determining whether to hale a contractor before the Executive Committee. It is solely determined by whether the member got the contractor to agree to submit to our disciplinary procedures. That is not discrimination; it is simple contract law.

7. * As to the burden on the Mutual . . . mailing violation notices is not a “simple act”, especially given the size and population of the Mutual community.

Answer: I beg to differ, Sandra. What could be simpler than making a copy of an existing NOV [Notice Of Violation] and mailing it to the contractor? The undertaking provides an address for mailing the NOV. Once the member notifies Staff of the undertaking, all Staff has to do is mail that one single NOV to the contractor. What on earth does the “size and population” of our community have to do with it? What if we were 100,000-strong? Or a million? Staff would still send out one copy of the same notice.

8. * Second, there is much more work that would be required of the Mutual under your proposed rule, including preparing and reviewing the third-party contract that you are proposing . . . .

Answer: The “third-party contact” is a simple one-pager that you have had on your desk now for over a month. I scribbled it off in roughly ten minutes, and am confident that it would be upheld by any judge in the country . . . even in California. But if you think it needs tinkering, be my guest. In any event, that would be the agreement we would use. I suppose that the member and the contractor could alter it, but it’s difficult to foresee what sort of alteration would require counsel to get involved. The only provisions that are important in that document are the 2nd and 3rd paragraphs.(But again, this is policy, not legal advice; and that is not your brief, here.)

9. * identifying and obtaining contact information for these third parties,

Answer: All that information is provided in the Undertaking (a copy of which you have had for over a month). There is no additional work that Staff has to do.

10. * reviewing insurance documentation to confirm that the contractor’s policies will provide coverage to the Mutual as a third party beneficiary of the policies and/or having the Association be a named insured providing the Association first party insured position . . . .

Answer: No one need review any insurance documentation, Sandra. Since my procedure places the contractor (or other invitee) in the same position as the member, your analysis would necessarily apply to the member as well. Of course there is nothing that compels us – in any Executive Hearing – to review the member’s insurance documentation, of all things. And I’m sure we never have. By the same token, there is no need to examine the contractor’s. If they agree to be liable for their defalcations, they are liable, full stop.

I will not respond substantively to the comment about being named on the contractor’s insurance policy, because it is too absurd (to borrow a term you use in your argument). Just consider – for the moment – what sort of response you would get from our board if you told us we had to examine our members’ insurance documents (and be designated “named insureds” on their insurance policies!) for every person appearing at our Executive Hearings. Yet, the logic of your hypothetical demands that that is precisely what would occur, since members and contractors would have to be treated precisely the same at those hearings.

11. * the potential liability for the Mutual by establishing (or purporting to establish) privity with third party contractors, lessees, guests, and other invitees or licensees. Taking this line of reasoning to the absurd, once privity is established, could the Association be held responsible for unpaid invoices or be sued for damages sustained by the contractor/invitee when hurt on the Association’s premises?

Answer: I completely agree with you: The hypotheticals you present are certainly absurd . . . just not in the manner you intended. This is a very simple but ironclad contract. It does nothing more than subject a willing contractor (or other invitee) to our rules and regulations. It does not expose us to any liability, except in the unlikely event that someone trips over a loose floor tile while walking through our hallways, or tripped on an uneven sidewalk, of which we have many!

12. * I hope I have provided you with insight into my reasoning and why, in my opinion, the Mutual will be exposed to significant costs and expenses if it were to approve and follow your proposed scheme.

Response: As you can see from my treatment of your objections, I do not agree with a thing you say . . . for the reasons expressed. My proposed procedure will not add any cost to the Mutual, other than, I suppose, the cost of a first class stamp and the time it takes for Staff to make a copy of the NOV and drop it in the mail.

13. * Moreover, keep in mind that there are other legal remedies available to the Mutual against third parties engaging in improper conduct or causing nuisances in the community that do not involve establishing privity with said third parties, such as nuisance actions, trespass and ejectment actions, and negligence actions for property damage.

Response: Are we talking about the same kind of hearing? Aren’t you aware of what goes on in our disciplinary hearings? Mostly members are fined anywhere between $50.00 and a few hundred dollars. When we find an egregious series of violations, we will slam the member with a substantial fine, but even then it is rare to fine someone over a grand. So filing a lawsuit against any contractor would be a fool’s errand.

The only time we impose a really hefty monetary sanction is in damage reimbursement cases . . . and then it is only to get back what we already paid out. Actually, that is the perfect example of why my procedure should be adopted: when a contractor causes damage to the premises. We had two such incidents in the past two hearings: one where the contractor cut a water line by accident; the second when the contractor accidentally pulled a water line out of the wall, causing it to break. Both situations resulted in substantial water damage, requiring dry-down and reconstruction . . . and which resulted in awards (of several thousand dollars) against the “innocent” members. Yet, filing a lawsuit to seek reimbursement for even a couple of thousand dollars might not be financially worthwhile for the member. I suspect that in most cases, members simply take it on the chin (if the contractor did not voluntarily pay up), something that would occur a lot less often if my procedure were in place.

Having satisfactorily responded to all your policy objections and noting that you failed to explain – or even address – how my proposal violated our CC&Rs or Davis-Stirling, can I conclude that you agree that there is no legal (as opposed to policy) obstacle to adopting that procedure? And that you will so advise the Board?[Emphasis added]

And while you are thinking it over, how do you explain that our Traffic Hearings regularly involve [Notices Of Violations] against lessees, invitees . . . anyone caught violating our rules?

And not to beat a dead horse, but you have not mentioned our by-laws, which provide – and therefore require – disciplining a “Qualifying Resident, Co-occupant, Lessee or Guest or invitee [e.g., contractor] of [the] Mutual Member” [§2,2,3, §4.5.2 and §4.6]. Given your ardor for meticulously following our rules, shouldn’t you have given some deference to a series of existing by-laws that our current practices clearly violate? Adopting my proposal would bring us back into compliance with those by-laws. Just to make sure you have all the documentation you need to reconsider your “advice,” I am attaching the material I originally submitted back in December.

* * *

If you haven’t had enough of my argument yet, let me point out that, thus far, I have only responded to your (new) objections. Let me now take the offensive and provide a few positive reasons why TLHM should have eagerly adopted the procedure:

First, it would enable our members to protect themselves (when they are helpless right now). And the members – to whom we owe a fiduciary obligation – would thank us for looking out for their interests. (They would know this when they received the Notice at the permits window)

Second, it would enable us to go after the real culprit, avoiding the situation where the executive committee substantially reduces a fine because we felt sorry for the innocent member. I know this to be true: We did that on many panels that I sat on. We gave up money we should have asked our members to pay.

Third, and even more importantly, the simple act of someone agreeing to respect our rules almost guarantees that they will respect our rules. It’s simply human nature for folks to do what they say they will do. Especially when they concede in writing that they will be responsible for a violation. And in the final analysis, isn’t that what all these rules are for anyway? We want everyone to voluntarily respect our rules. The alternative is the equivalent of a police state: an increase in violations; an increase in disciplinary hearings; and an increase in hostility (from an innocent but still liable member). So this procedure only has good things to say for itself.

And if you wanted further authority for adoption of my proposed procedure, I am attaching a little analysis of the statutory basis for disciplining third parties, something I wrote intending to discuss at the closed session on December 19th. [Note: That analysis can be found in the Addendum at the foot of Blog Post #5] However, my proposal was not distributed along with the agenda (despite being sent in a week prior to distribution); it was late in the day; and everyone was eager to finish up; so I was forced to squeeze my presentation into just a couple of minutes, leaving that little philosophical lecture on the cutting room floor. Since the vote was preceded by your Davis-Stirling objection, and no one likely had a chance to read the material finally distributed (only as I began making my presentation), the ultimate vote was never in doubt, don’t you agree?

* * *

So now that I have unloaded on you – or at least on what I consider your erroneous arguments – can I expect to see you advising Burt and Rosemarie that your objections based on the CC&Rs and Davis-Stirling were in error? I truly hope that that will settle the issue. Whether the board wants to reconsider the matter is something best left for another day; but that decision should be made on its own merits . . . and not be based on [what I deem to be] faulty legal advice, if you’ll pardon my bluntness.

Sorry for the length of this tome, but I wanted to address every objection fully. And it only took me around 4 hours . . . not two weeks. (OK, I could not miss taking that shot! Sorry, Sandra.)

Regards, s/Jules D. Zalon
[I have an essential tremor, so even my signature is unrecognizable]

(No Copies)

PS: While I believe I have answered every one of your objections, there is another potential obstacle that I have not yet researched: whether there would be an irreconcilable conflict due to the fact that VMS’ Compliance Department would be prosecuting a disciplinary hearing at which TLHM’s executive committee would be the deciding entity. It doesn’t make sense that we could not enforce our rules of conduct on folks entering our property, but I still have this nagging sense about it all.

Zalon February 2, 2018 letter to Gottlieb:

Dear Sandra: Your January 31st email claims that my letter of the 24th contains “baseless attacks and vitriol”? Are we speaking the same language, Sandra? I’m beginning to wonder.

[Foot note: Perhaps you viewed my wise-acre parenthetical “4-hour” comment as evidence of vitriol? If so, you were mistaken: I was being a bit irreverent, having a little fun at your expense, for which I apologized. For goodness sake, Sandra, loosen up!]

You initially told us — at our closed session on October 17 — that my proposal was prohibited by our CC&Rs; and at our December 19th closed session you stated that it violated Davis-Stirling. All I wanted to know (by my December 21st email) was why you believed it did so. I did not copy anyone in on that simple little note; I kept it as a professional exchange between lawyers. Lawyers do it all the time. I respected your position and did not wish to make a big deal of it. I had on numerous earlier occasions privately discussed legal concepts with you, and each time, I recall, you quickly provided a clear response. (I may not have agreed — actually I often didn’t — but I accepted your answers, because you were our attorney.)

And that is all I expected from my original email: a quick, clear response. I should have thought it would have taken a sentence or two to fully answer my question. (And, if your advice had been in error, a simple sentence to that effect would have also been in order.) Instead, you changed the subject entirely, providing 13 new reasons why the proposal should not — as opposed to could not — be adopted; but you failed utterly to answer my question, a question reiterated by Burt in his January 8th email, when he asked you to provide “the reasons you had for saying [my] proposal on contractors violated both our CC&R’s and Davis–Stirling.” Once again, out of respect for your position as our attorney, and not wanting to embarrass you, my January 24th letter was sent only to you.

Frankly I do not know what else I could have done to avoid coming right out and telling you that (1) you misread (and therefore misunderstood) my proposal and that (2) your arguments were specious.

[Foot note: My December 21st email began: “When you first looked at my disciplinary rules proposal (allowing members to contractually require … contractors, etc…” Yet your January 23rd letter repeatedly assumed that the procedure was mandatory: “you are proposing that the Board adopt a rule requiring members to compel … contractors ….” (p. 1); “Your proposed rule would require members …. to have their contractors ….” (p. 2); “Even more burdensome is that you are suggesting that members be required to have their invitees sign a contract upon entering the Mutual premises.” (p. 2) [Emphasis added]]

You now have doubled down, once again refusing to even address the two reasons you gave for rejecting my proposal, then justifying your refusal on the grounds that you have not been authorized to charge us for the pleasure. Good grief, Sandra, have you no sense of modesty? You made clearly erroneous statements in what I believe to be a frivolous opinion letter (in pursuit of an obviously indefensible position), and you are charging us for . . . THAT? I don’t wish to set myself up as a paragon of virtue, but in my more than 50 years as a practicing lawyer, I have never once charged a client a red cent for defending – or even explaining – a legal position I had previously taken. (Truth be told, I cannot recall a single situation where I had to.)

I am truly sorry that a modest, private little dialogue has morphed into a particularly unpleasant exchange that has now drawn in two of our most respected directors . . . and threatens to engulf all 11 of us. Had you done what lawyers generally do (I ask a simple question; you provide a simple answer; finis), that would have ended this discussion before Christmas. But your tenacious defense of your indefensible position continues to raise the stakes on what should have been a non-issue. Just to make my position clear, my rules proposal is no longer my concern. What is of concern is that our lawyer has given us dubious legal advice; and then charged us for the privilege of explaining it.

And talking about your charges, you write:

“The cost to evaluate all three documents and prepare a response with the “citations” you are likely looking without regard to your baseless attacks and vitriol will take many hours.” (sic) [Emphasis added]

The three documents attached to my covering email were (1) my 1/24 letter (addressing the errors in your 1/23 letter); (2) a copy of my original proposal, which you already had; and (3) a short 2-pager citing the legal basis for our boards’ exercise of power (something that was clearly not necessary, and surely not something you could argue over).

A quick look back at my letter shows that I also mentioned (4) a statute recognizing the validity of third party beneficiary contracts, and (5) three of our by-laws (which authorize – and therefore require – the very procedure I was proposing). Surely you don’t plan on spending any time at all disputing items 2 – 5, do you? Of course, the only reason for mentioning any of those items – and the sole reason for my letter – was to respond to your almost entirely irrelevant arguments.

Before this gets totally out of hand, don’t you think you should finally answer the simple question Burt and I asked that started this brouhaha? What were your reasons for saying my rules proposal violated both our CC&R’s and Davis–Stirling? And if — upon reflection — you now agree that it doesn’t, just say so! [Foot note: Had you done that in the first place, you would not have had to read past the first paragraph on page 2 of my 11-page January 24th letter, as it would have brought this dispute to a screeching halt.]

s/Jules D. Zalon

Copy recipients: Rosemarie diLorenzo and Burt Baum

PS: Now that you have expanded the audience for our squabble (by adding Rosemarie and Burt), and to make sure we all are talking about the same things, I take the liberty of attaching all the documents previously exchanged, along with a print-out of the three currently-existing by-laws, by-laws that we are presently violating by failing to discipline third parties.

[End of correspondence]