Two Seal Beach Leisure World residents and the board of Mutual Two recently reached a settlement in a lawsuit that was filed over a year ago.
The two parties have agreed that Mutual Two is an association as defined by the Davis-Stirling Act, a California law that regulates homeowners associations.
The judgment, signed in early October by Judge Kirk Nakamura, said that the plaintiffs (Carol Franz and Edmund Loritz) and the defendants (Mutual Two) agreed that Mutual Two was an association as defined under the Davis-Stirling Act and that the board of directors was not required to amend or change its articles of incorporation or bylaws to comply with the act.
Judge Nakamura was no stranger to Leisure World lawsuits. Franz was one of several residents who went to small claims court 10 times, and won 10 suits in a row, in an effort to obtain financial records from the Golden Rain Foundation under Davis-Stirling.
According to Franz, Judge Nakamura was one of the small claims judges at the time. She quoted him as saying that if the Foundation did not provide the documents in 10 days, she and the other litigants should file yet another small claims case.
Mutual President Bahr said the settlement provides residents with consumer protection.
“For many of us, the importance of being under D-S protection is that M-2 is a prime piece of real estate,” wrote Bahr in an e-mail to the Sun. “It is about the only mutual which can be cut off from the rest of Leisure World and be developed. Some laugh at this comment, but with what goes on in our world today who knows and it is best to be prepared. We now have some consumer protection with this judgment.”
In 2008, the California appellate court ruled that the Golden Rain Foundation was an association subject to the Davis-Stirling Act. The California Supreme Court refused to hear an appeal file by Golden Rain Foundation attorneys. Since then, some of Leisure World’s mutual corporations have taken the position that they are also subject to Davis-Stirling—while other mutuals have taken the position they are not.
In October 2011, Bahr told the Sun that five of nine Mutual Two board members did not believe Mutual Two was a homeowners association.
At the time, Bahr said the board was acting on the advice of two attorneys.
Bahr also said it was unneighborly and self-serving of Franz and Loritz to file the suit.
Franz and Loritz’ lawyer, Steven P. Rice, wrote in the original complaint that Franz and Loritz had filed the lawsuit to benefit residents of Mutual Two.
According to Bahr, the court case changed course following a June 2012 election of new board members. She said a new majority of five board members now believed the mutual was under Davis-Stirling.
The board hired a new law firm which took them through mediation over two months and two days. Following a meeting with a retired judge, three previously anti-Davis-Stirling board members signed with the other five members.
“The other legal firm desired to take the case to court, which would have had the same outcome in our opinion, but would have provided much in the way of billable hours for that firm,” Bahr said.
“I hung in with the board for over eight years as the only D-S person at times, but we never had the majority until this year to make the proper change,” Bahr said.
She said Leisure World was a strange place.
She said if you ask someone’s opinion, they may not know anything about the subject, but they will give an opinion and know they are correct. “Maybe this is a sign of old age,” she said.
