The Truth About Peters & Freedman, L.L.P.

A California case provides for liability for half-truths.

In the Wilbanks v. Wolk case, Wilbanks operated a viatical brokerage (dying person’s seller of life insurance for cash) which Wolk criticized in her web site. Wolk accused Wilbanks of being unethical and being investigated by the California Department of Insurance. Wolk’s web site also referenced a judgment obtained against Wilbanks and questioned how many other viators had been injured but did not do anything about it.

Wilbanks filed a defamation and unfair business practices complaint. The Court found that Wolk’s web site statements implied a provably false factual assertion by stating some truths, however omitting significant facts. The Court went on to state that it is not determinative that implied assertions of incompetence or lack of ethics could be viewed as statements of opinion. A statement of opinion may be actionable if it implies the allegation of undisclosed defamatory facts as the basis for the opinion.

The Court of Appeal noted that Wolk’s report omitted significant facts.

While it does appear that a viator won a judgment against plaintiffs, Wolk did not report that the judgment was entered in the Small Claims Court. Wolk did not disclose the nature of the viator’s grievance, whether plaintiffs appeared, or if they by some means attempted, unsuccessfully, to defend themselves from the viator’s suit . . . By omitting the facts that the Department of Insurance investigates every complaint, Wolk suggested that the Department had formed an opinion that the viator’s claim was worthy of investigation.

Wolk claimed that her statements were protected as privileged publications made by a fair and true report in, or a communication to, a public journal. The court dispensed with this argument by noting that her statements were more than a fair and true report of an official proceeding; they were express and implied assertions that plaintiff’s business practices were incompetent and unethical. Finally, the court held that the single publication rule did not apply because it was clear that Wolk had altered her statements from time to time.

The similarities between the Wolk web site and the McMahons’ web site are striking. According to this case, defamation can even be based on what is not said, the modus operandi of AHRC.

In a court ruling filed on May 31, 2005, a California Court of Appeal agreed with a Trial Court ruling holding Elizabeth McMahon in contempt of court for not appearing for her deposition and imposing sactions in the amount of $5,000.00. However, the same Court reversed the Trial Court’s ruling holding Arnold McMahon in contempt of Court. The Court of Appeal ruled that because Arnold McMahon had submitted medical evidence indicating he was unable to attend his deposition and stated that the “record does not contain substantial evidence from which the Court could conclude beyond a reasonable doubt that Arnold was able to attend his deposition.” The Court of Appeal then reversed the order holding Arnold McMahon in contempt.

The First Amendment guarantees the right of freedom of speech. This right is not absolute. While everybody has the right of freedom of speech, this right does not include yelling “fire” in a crowded theater or “this is a hijack” on an airplane. This right does not also insulate that party from damages caused by that party making intentionally false and/or malicious statements.

AHRC’s owners and operators, Elizabeth and Arnold McMahon’s hatred for homeowners associations is self evident as is their one-sided reporting of events. They attack homeowners associations, public officials and any vendor who support associations with mean-spirited, vitriolic and often plain false allegations. Under the guise of freedom of speech they encourage homeowners to mount similar challenges to their homeowners association. Some individual owners following AHRC advice become emboldened by this rhetoric and take their hard-earned savings and challenge homeowners associations, often to no avail. Unfortunately, AHRC intentionally chooses not to publish these adverse results. Set forth below are a few examples.

Such is the recent case with Sonny Bass. AHRC issued their press release, worked hard with Fox 6 News and other media, and encouraged the Basses to file counter claims against the Association, the management company and the law firm. This resulted in several AHRC news articles extolling the virtue of these bold moves against the Basses’ homeowners association. The problem is that these action were ill-advised. The Basses have since lost. The association, the management company and the law firm are out of the case. AHRC will either not print this story, or twists the results to conclude that the poor owners were picked on by the association, the management company and the law firm. The truth is that the Basses, with the advice of counsel and of AHRC, turned a simple case between the association and the Basses regarding a simple architectural issue into a multi-faceted ill-advised cross complaint against the association, and the Basses are now facing significant adverse attorneys’ fees as a result.

When the majority of homeowners at Desert Crest wanted to amend their CC&Rs to maintain the dues structure that had been followed for the last 35 years, the developer and their counsel were lambasted by AHRC for “elder abuse” and other alleged terrible conduct. Three justices of the Court of Appeal agreed with the developer. The California Supreme Court denied the request of the vocal minority and refused to hear the case. The result? These homeowners will now face an attorneys’ fees bill in excess of $30,000.00.

Let’s not forget Mr. and Mrs. McMahon. The Court of Appeal has just unanimously upheld the lawsuit filed many years ago against them. That lawsuit confirmed that they have never once attempted to comply with their own CC&Rs and labeled the McMahon’s claim “the height of hypocrisy.” Their own attorney withdrew because she believed her clients were attempting to prosecute a claim they had already received substantial compensation on. Where, oh, where are the AHRC news articles on this debacle?

AHRC is free to continue to lobby the legislature with misinformation, espouse their opinions regarding CAI, its vendors, and yes, their lawyers – that is their right. Encouraging homeowners to take a very aggressive and unwise course of action because it furthers AHRC’s goals is plain wrong. AHRC’s conscious choice not to advise its readers of its own experience only further demonstrates the one-sided biased nature of their reporting. AHRC holds itself out to be an association authority, renders counsel and advice. AHRC should be held responsible for their advice.

Lawyers who practice homeowners association law will always receive a certain amount of negative comment for prosecuting violations against owners. Within reasonable bounds, receiving such comment is part and parcel of representing associations. Encouraging innocent homeowners with relatively minor disputes to elevate their disputes into major items of litigation should not be condoned.

AHRC holds itself out as an authority, provides advice that sometimes has devastating effects on homeowners who do not have such expertise. AHRC should be liable for the damage caused to people who rely to their detriment upon AHRC’s advice, and should disclose truthfully and honestly its own experience in the California Courts.

American Homeowners Resource Center’s owners recently attempted to have a lis pendens expunged from property which they attempted to “sell.” The Court’s opinion denying their request states:

It appears that the sale was intended to hinder, delay or defraud creditors in violation of CC 3439.04. It is undisputed that there was an underlying lawsuit by the Homeowners Association against the parent owners [Elizabeth and Arnold McMahon] for breach of CC&Rs which was ultimately won by the Homeowners Association in the Trial Court and on Appeal. It is undisputed that at the time the judgment in the underlying lawsuit issued (10/2000), the parent sold the property to their children and other property upon which a judgment could be collected to alleged insiders.

The McMahon’s continue to accuse everyone of fraud and wrongdoings yet fail to bring to anyone’s attention their egregious actions which the Court ruled appeared to be intended to “defraud” others. Those living in glass houses (even if they transfer ownership to their children) should not cast stones.

American Homeowners Resource Center’s “article” dated April 3, 2004, classifies California Attorney General, Bill Lockyer, as “apparently unscrupulous.” Why? Because he “continuously compels homeowners to go to civil court.”

It is not hard to understand American Homeowners Resource Center’s owners and operators Elizabeth and Arnold McMahon’s frustration with civil court – they keep losing! Unlike their AHRC website, civil court provides an opportunity for both sides to present evidence. This process invariably reveals that the claims, defenses and representations of Arnold and Elizabeth McMahon are, as one Judge put it: “The height of hypocrisy.”

A second favorite remark in the comment is that “Prosecutors who know that somebody is committing a crime and do nothing about it are therefore criminals themselves.” AHRC, of course, is the self-proclaimed determining entity for when a crime has occurred.

A cursory review of American Homeowners Resource Center’s website reveals that these individuals should be (according to their website) prosecuted:

American Homeowners Resource Center’s hatred for Associations and anybody who serves them is evident. AHRC’s owner Elizabeth and Arnold McMahon have tried civil court and lost. Amazingly, they continue to campaign for others to do the same. Following the advice of AHRC has proven to have devastating effects on hard working people who have relatively minor disputes with their association which likely could have been resolved quite simply.

Now AHRC lambasts California public officials, the attorney general and prosecutors for not criminally enforcing their perverted version of justice.

The basis for this lawsuit was that McMillon dared to commence foreclosure proceedings against the McMahons due to non payment of mortgage by Elizabeth McMahon.

No wonder why the McMahons are campaigning against foreclosures! For more information, see Los Angeles Court File No. BC113881.

A review of Court records reveails that Robert Cherno sought a restraining order against Elizabeth McMahon and Arnold McMahon. The petition states as follows:

Elizabeth Joan McMahon attempted to run over me with her car. Police Report attached. Arnold McMahon has shown support for his wife’s actions and I am concerned that if a restraining order only covers Elizabeth McMahon, I will experience acts . . . from Arnold McMahon. Los Angeles Court File No. C620945.

Is violence really the answer?

The Court of Appeals’ opinion states that AHRC’s Elizabeth and Arnold McMahon threw valve boxes at their association’s landscaper. The opinion states: “Elizabeth had confronted a worker attempting to work in the LMA [the association's Landscape Maintenance Area], demanding that he cease work and leave. After she threw valve boxes into the street, hitting his truck, the landscaper retreated.”

AHRC is dedicated to convincing homeowners to challenge the authority of homeowners association’s everywhere by whatever means – including physical violence.

In this case, the Court awarded over $134,000.00 in attorneys fees and costs against Elizabeth and Arnold McMahon. Yet the McMahons continue in their attempt to convince owners to make similar challenges. It appears that misery loves company.

Elizabeth and Arnold McMahon, the owners and operators of AHRC, argued that they were not required to submit plans for architectural review for prior approval, nor submit plans after the fact for improvements already built. The Court of Appeals’ opinion stated “they were mistaken.”

The Court of Appeals ruled that Elizabeth and Arnold McMahon’s interpretation of the governing documents would reward the violator and allow him or her to rewrite the governing documents to his or her own liking.

The Court of Appeals is spot on. American Homeowners Resource Center’s owners violated the governing documents of their association and then expected the rest of the association to rewrite the documents to their liking. In essence, AHRC’s owners wanted to continue to reside in their castle and shut out the rest of the world. One trial judge, and now three appellate justices have all disagreed.

If AHRC’sowners want to spend their personal assets challenging the function of their own association this is their choice. What is disturbing is AHRC constantly advocating to owners to make ill advised challenges against their associations. What they do not disclose is that these challenges are not based in the law and that the poor unsuspecting homeowner who relies on their advice is likely to lose much of their hard earned savings.

Finally, Elizabeth and Arnold McMahon will be responsible for the attorneys’ fees that their association incurred on appeal. We sincerely doubt this will make it to the so-called AHRC “news” section.

“Your Home is Not Necessarily Your Castle” – Ben Franklin Did Not Live in a Homeowners Association

In the 21th Century, we all live in a regulated society. The AHRC web-site went to great pains to castigate Attorney David Peters for making a statement that when one lives in a planned development their home is not necessarily their castle. This article itself demonstrates the thinking of the AHRC group and its supporters. They appear to want to revert back to the 15th Century and live in a castle surrounded by a moat where they can pull up the drawbridge and shut off the world. That may have worked in the 15th Century, it does not work in the 21st Century; welcome to the 21st Century.

Every home we live in is required to be built according to Building Codes. There are numerous codes that must be followed regarding the installation of shear walls and structural support, seismic codes, electrical codes, plumbing codes and a host of other rules and regulations designed to ensure the proper construction of a “castle” that is safe for its occupants. For example, in San Diego County if someone wants to re-roof, that person can no longer install a shake roof similar to those that were so popular in the 70s.

In the 21st Century you cannot conduct criminal activity in your home with impunity. In the 21st Century you cannot pull out the “rack” and torture a confession out of someone in your dungeon. In the 21st Century, living within a homeowners association is becoming more and more the norm.

AHRC wants to turn back the clock some six hundred years. One need look no further than the recent court decision in front of Judge Chaffee where the American Homeowners Resource Center owners Elizabeth and Arnold McMahon stipulated that while living in a planned development subject to a set of CC&Rs they knowingly made multiple changes to the exterior of their unit without once submitting an application to the architectural control committee. The McMahons’ former attorney stated that these are very well educated people who know exactly what they are doing. Their actions can be summarized in one word: defiance.

Even though the AHRC web-site took great umbrage at the comments of Mr. Peters, no lesser authorities than the California Courts of Appeal and California Supreme Court have recognized that when one moves into a planned development certain freedoms are, by necessity, surrendered for the common good of the all.

One of the first cases involving a homeowners association is Hidden Harbour Estates, Inc. v. Basso. The language within this case has been quoted by Courts throughout the United States and can be found in virtually all of the major California decisions involving homeowner associations.

Every man may justly consider his home his castle and himself as the king thereof; nonetheless his sovereign fiat to use his property as he pleases must yield, at least in degree, where ownership is in common or cooperation with others. . . The individual ought not be permitted to disrupt the integrity of the common scheme through his desire for change, however laudable that change might be.

. . . to promote the health, happiness, and peace of mind of the majority of the unit owners since they are living in such close proximity and using facilities in common, each unit owner must give up a certain degree of freedom of choice which he might otherwise enjoy in separate, privately owned property.

The California Supreme Court case of Nahrstedt v. Lakeside Village Condominium Association, quoting Hidden Harbour v. Norman states:

Thus, subordination of individual property rights to the collective judgment of the owners association together with restrictions on the use of real property comprise the chief attribute of owning property in a common interest development.

Living in an association is not for everyone. Within an Association, the king’s sovereignty to do what he or she pleases, regardless of the affect on the community and neighbors, is subordinated to the overall interest of the community. If it is your intent to keep many more cars and trucks than fit into your garage, paint your house bright purple or otherwise be free from the restrictions contained within an association governing documents, you probably would be better off not living in an association.

The owners and supporters of AHRC took tremendous glee in personally attacking Attorney David Peters for accurately paraphrasing the language of cases which have shaped the legal landscape of homeowners associations over the years. Perhaps their criticism is better directed at the California Supreme Court or the many other Courts which have made the same statement made by Attorney David Peters.