Stanislaus County Superior Court Judge Timothy Salter ordered July 11 that Homeowners for the Betterment of Diablo Grande must pay a combined $55,953 to Diablo Grande development company World International and the Diablo Grande Residential Association.
The nonprofit Betterment group formed last year with the stated goal of lowering homeowners association dues “by weeding out corruption and getting rid of wasted expenditures and wages.”
Salter also ruled in favor of the defendants in 2011. The defendants reopened the lawsuit April 2, seeking about $170,000 in attorney fees for World International and about $70,000 for the homeowners association resulting from the Betterment group’s May 2011 suit.
Carmen Millan, World International’s chief financial officer, said the defendants hoped to receive more money but were still pleased with the outcome. Millan also serves as general manager of Diablo Grande and is a homeowners association board member named in the suit
“Of course, we would like to recover more, because we spent a lot of money, and they hurt our reputation by badmouthing us,” Millan said, “…but at least the court recognized something — that their action was wrong in the first place.”
Under Salter’s ruling, the Betterment group must pay $23,998 for fees that World International paid for the law firm it used; $25,573 for fees that the homeowners association paid law firm Neumiller & Beardslee; and $6,382 for expenses incurred by the Lavelle Law Group, which helped both parties obtain the attorney’s fees.
A complex affair
Salter ruled in October in favor of World, the homeowners association and its previous members, agreeing that the nonprofit itself was not a member of the homeowners association and had no right to sue over the elections.
Defendants named in the suit were former association board president Gary Chase and board member Guillermo Marrero, who also serves as general counsel for World International, as well as the homeowners association board of directors they appointed: Ruby Beltran, Charles Seefeldt and Millan.
The Diablo Grande Residential Association itself was later named as a defendant at the request of Salter in August 2011. Slater made the request because World attorneys had argued there would be no board left to govern if Homeowners for the Betterment of Diablo Grande succeeded in its elections challenge, and the court could not order the association on how to proceed without it being a party in the case.
Salter stated this month that the plaintiff had failed to comply with state civil code requirements to seek mediation before filing its suit. He did not think the defendants acted unreasonably in avoiding mediation later on, however, when he recommended it in July 2011, after defense attorneys argued in court it was impossible to mediate with a “faceless entity.”
At the same time, Salter wrote that some of the legal fees that the attorneys charged were excessive, and he granted far less than defendants had requested.
Marrero wrote in a prepared statement on the homeowners association website that World hoped that Homeowners for the Betterment of Diablo Grande would comply with the court order and pay the attorneys’ fees, but he expected they would refuse.
“We will continue to prosecute until the Betterment Group is required to reveal who they were and make good on the fees awarded,” he wrote. “The Betterment Group was offered numerous opportunities to resolve through dialogue, declined and choose (sic) the past of most resistance — the filing of a lawsuit. Having chosen that path they will now be held to account for their actions.”
Michael Thomas, an attorney for Homeowners for the Betterment of Diablo Grande, said this week that his clients may seek an appeal, though he said they could have fared much worse.
“All things being equal, the nonprofit is not happy about the award, but it is happy that the award got reduced,” Thomas said.
Regardless of whether the case is appealed, it is unclear who will pay the fees. Defense attorneys claimed all along that they do not know specifically who belongs to Betterment, and specific representatives of the nonprofit are not named in the suit.
“This is a nonprofit versus a nonprofit, so there is no individual member who has any responsibility for the court-ordered attorney’s fees,” said Richard Mowery, a Southern California attorney whose fiancée lives in Diablo Grande and who has spoken on behalf of Betterment in the past, though he is not an official member.
While individuals behind the suit have chosen to remain anonymous, Millan said World officials know who many of the Betterment group members are, as many of them had identified themselves in homeowners association meetings.
It just can be difficult to prove that from a legal standpoint, she said.
Joe Lavelle, a San Diego attorney who worked on behalf of defendants, said he will find individual members and pursue them for attorney fees if the Betterment group fails to comply with the court order.
Speaking up, hiding out
A few members of the Betterment group reached by phone this week would not comment on the case, saying they feared retaliation from World. Mowery contended in the past that homeowners association board members have singled out residents when they formally requested documents from the association, releasing their names to the public. As a result, some members of the nonprofit are wary of making their membership known.
However, a newsletter that the group is sending residents this week disputed World’s claim that the defendants had challenged the Betterment group’s claims and prevailed on all counts. The newsletter — which doesn’t list a specific author— claimed that defendants spent more than $200,000 to keep evidence from being presented at trial.
Defense attorneys have flatly denied all the Betterment group’s claims in court filings, but both Mowery and the newsletter noted that the court has never addressed the group’s specific allegations.
“There was never any determination by any court that there was no election fraud in that case,” Mowery said. “The Betterment group was never given an opportunity to have their day in court.”
Betterment representatives also anonymously claimed in the newsletter that there was no need for mediation, contrary to what Salter stated, arguing that mediation is unnecessary in cases of elections fraud. Defense attorneys sought to avoid mediation for fear that evidence would be revealed, the newsletter alleges.
The Betterment group also accused Marrero and World of using intimidation tactics, referring to Marrero’s statement on the homeowners association website.
“Threatening homeowners is not a way to gain support and peace. It only shows dictator attributes,” the newsletter reads.
“(Marrero) wants to know who HBDG members are. Well, we are members of the community who fight against fraud, mismanagement, embezzlement and excessive waste of our dues. We want to make sure our HOA is always solvent.”
Marrero said this week that the Betterment group’s entire lawsuit was baseless and lacked merit. Salter’s court order holds them to account, he said.
“The court had an opportunity to consider merits of the case, and (the Betterment group) didn’t have a case,” he said. “The court easily saw through that.”
Mowery said he is happy to see a change in the makeup of the homeowners association board, with more members who are not connected to World. As a result, there is no longer a steady trend of 3-1 votes on association matters, he said.
“The good news, at the end of the day, is that the homeowners are getting their HOA back,” he said.
The board has undergone several changes since the nonprofit filed its suit. Chase and Seefeldt were replaced in an August 2011 election by newcomers Fred Fowler, a self-acknowledged member of Betterment, and Enrique Olalia.
Lavelle said he hoped the Betterment group would pay the required fees and that homeowners could move on.
He thought Salter did the best he could to reach a fair judgment to both sides, noting tat there was a huge amount of information to review in the case filings from both sides.
“I think it was like taking a drink from a fire hose,” he said.
• Contact Jonathan Partridge at 892-6187, ext. 26, or email@example.com.
AT A GLANCE: WHAT THE SUIT ALLEGED
Homeowners for the Betterment of Diablo Grande alleged in a May 2011 lawsuit that both Carmen Millan and Gary Chase were fraudulently elected to the homeowners association board in 2010. The suit further claimed that John Ramos — a member of the nonprofit who was first runner-up in that election — should have been the board president.
It specifically alleged that Millan was elected because of votes from World International and building company D.R. Horton, both of which were delinquent in assessment payments on Diablo Grande lots that they owned.
The Betterment group’s suit also alleged that a ballot reportedly received on behalf of Diablo Grande resident Vin Rover contained eight votes for Chase, though Rover owned only four lots and never submitted a ballot or a proxy in the election.
World officials have flatly denied all of the group’s claims and have noted that they had inspectors examine the election, though defense attorneys never specifically addressed the group's claims in case filings.
Defense attorneys focused on a procedural argument, making the case that the Betterment group could not legitimately be a plaintiff because the group, as an entity, was not a member of the Diablo Grande Residential Association. Judge Timothy Salter ultimately agreed with the defense's argument, deciding to dismiss the case in October.