Minutes of the July 28, 2016 board of directors of the Diamondhead Country Club and Property Owners Association have been obtained from a source inside the Mississippi nonprofit corporation.
DIAMONDHEAD COUNTRY CLUB & PROPERTY OWNERS ASSOCIATION, INC.
7610 COUNTRY CLUB CIRCLE DIAMONDHEAD, MS 39525
SPECIAL BOARD MEETING JULY 28, 2016 4 P.M.
Call to order at 4 pm
ROLL CALL: Present were Pres. Laird, VP Finley, Sec. Blakeney, Treas. Allen, Dir. Ertel, Dir. Harvey, Dir. Montjoy, Dir. Nolan, Dir. Tullier. We have a quorum. Also present were GM Boyd, M. Kyger, Atty. R. Tubertini and Mr. Carl Joffe. Absent were Ex-Officio Fletcher and Dir. Silcio.
APPROVAL OF MINUTES: Finley made Motion to accept Minutes. Second by Nolan. Vote unanimous.
Marshall Kyger introduced Attorney Ric Tubertini, from Haley, McNamara our POA Attorney on most matters, and Mr. Carl Joffe, Attorney for Purcell,he has a lot squirreled away in his head because he has been with Purcell since the Stone Age.
Kyger: Our purpose today is to bring the new Board up to speed on the Covenants Committee where we are today, and how we got to where we are today, and what we see down the road. You have a couple of documents on the table in front of you. One is thicker and it’s got the Haley, McNamara letterhead on it, that is the kind of stuff you don’t have time to read it now, but it has the kind of research in it that we are going to talk about. So we are going to use the other document, which is a printout of an e-mail which has in it 2 sets of questions that was forwarded to us by Dick Nolan. One by the e-mail that you all saw, Ithink you all were copied on it, the other was a handout he gave at the Covenants Committee a couple weeks ago. They are good questions; I will talk about the answers which mostly came from Ric Tubertini about the background history. This whole process, and it’s a process, started 10 years ago when Lloyd Ramirez was President, he will be here at 3 and will talk about all of POA’s governing documents. You can ask him about this too. That is when all of this started and the POA first started to actively look at what to do about it. They started Committees and got several legal opinions over the years.
This 1st Phase cumulated when in June 2010 at an Annual Meeting when Mario Feola was President, had
a Proposition put on the Annual Ballot to incorporate the language of the Covenants into the Bylaws. This Proposition passed with something like an 83% favorable vote. At that point in time, and Ric can elaborate on this, there was a nominal 3 year statute of limitations which members could have challenged that vote in court. Amongst other things, we were waiting for that statute of limitations to expire.
When I was President in the spring of 2013, we started 2 more looks at the whole Covenant situation. One was a Committee chaired by Mario Feola and Paul Newton was the attorney who first started looking at it the Covenant expiration issue. And a second group that Ric chaired that began to look at the issue to and Ric’s conclusions are in this letter. Everybody agreed that one, what we did in 2010 was the right thing to do and the best thing we could do. But, if you really what to be sure about it you need to go ask for a judgment.
But we got a little side tracked right then, the beloved Mr. Fletcher and others got the ACLU and sued the POA over the sign covenant, which took up Mr. Tubertini’s time and the Board’s time. As you know ultimately, we won that decision in Federal Court by defeating the lawsuit.
But then I got out of office, then last fall Mr. Fletcher finally re-formed the Covenant Committee. We looked at where we were, and we came back to the Board in early winter, and said here is what we think we ought to do, and they said okay continue.
On March 11,2016, the Committee came to the Board with specific proposal saying we want to go file a petition for a judgment in Chancery Court and having done that. The Board authorized the 1st Phase of a multi-phased process and the Budget of $18,000 to get the 1st Phase done. That 1st Phase ends when the court tells us how we must serve notice to our members that will be a requirement that we will have to meet. There is a bunch of ways that the court can tell us and the worst way can be that we have to have a process server serve every member that would be very expensive. Or you could send them a 1st class letter, of course that would be like we do election materials. Hopefully, it would come down more like that than the other. Once that happens, we will know what happens next.
At that time, the Committee will come back to the Board. The Covenant Committee itself has no authority at all,we can’t spend money unless you appropriate it, and we can’t make a commitment unless we are specifically authorized to do so. We are an Advisory Committee we are an extension of you that is where we are.
We are asking the Court to determine if something that has already been done, by a member vote back in June 2010 has yea verily correct and proper and has in fact extended the covenants. If the Court says we agree with you, and then we’re done, we’re home free, and then we can all party.
The second thing in the Petition is that if they don’t agree then there is a Statute out there that gives the Association the right to continue to collect dues from the membership. It goes into some length in Section 2 of the Haley, McNamara epistle. If they don’t like that either, we want to find out now because there are some other alternatives out there, and we would have time before 2020 to review some of them.
It’s theoretically possible we could turn everything over to the City, it’s not clear that the City would accept it, or has any interest in accepting it. Secondly, unless you believe that government is more efficient than a private corporation, you got to believe that your taxes are going to go up by at least as much as any reduction in POA dues. For people that live here and pay taxes, your taxes would go up more than any reduction in dues. For people that don’t live and own vacant lots their property, because it’s just based on millage, their taxes will go way down. Well anyway, the moral of the story is, you just move it from one side to the other. I’m not for big government guys, I’m for the POA. We are better off just staying with the POA.
We do have other options: One of them is discussed in here; there are a couple more legislative options. There is an option potentially to form a Recreation District, which would have an independently elected kind of Board, kind of like the Water & Sewer board, appointed by the City Council. It would be an independent entity with its own taxing authority. Its taxes would be collected by Jimmie Ladner, Tax Assessor. There would be some millage associated with it, basically it would be and independent Park and Recreation Department for the City of Diamondhead. There are some other options out there. If this doesn’t work, we need some time to go pursue our other options. So basically this is how we got here over the last 10 years. We have 4 years left before 2020, where we are still trying to get there.
Again, the actual question Mr. Nolan ask, Dick ask was, What was the necessity of rushing to court the day before Election of the new Board? Well that turned out to be an unfortunate situation, March 11th, the Board gave us the authority to proceed with the file and in April we got word from the Schaffer/Weber lawsuit that they might be ready to settle the lawsuit, they filed against us, so we put this on the back burner temporarily while, we got that taken care of. Some things turned out to be more complicated in terms of finding some of the exhibits that are attached to the petition. So it just happened that a week before the election is when we got the papers filed in court.
As far as use and cost of this committee, we can only do what you authorize us to do, only spend what you allocate for us to spend. I explained why it, if this Board for some reason, decides to terminate the project, before you do that. You guys are in charge now, and you need to make your own determination. But, time keeps marching on,that’s what we intend to do unless you decide to stop us. Then another question is the 6 year old vote to the current community thinking. Ric says he can’t comment on current community thinking. But, Iwill other than a small number of people, I believe there is a huge movement of people out there that doesn’t want the Covenants extended, and don’t want our amenities protected for us and our future generations. Someone may disagree with that, but again what we have asked the court to do is to rule on something that has already been done, and was done by a vote of the majority of the membership.
Lloyd is going to talk about the Covenants, City Ordinances and he has a, did you hand that out Pat? A Comparison. No, but Ido have a copy of it.
Dick Nolan has 12 copies of comparisons of the Covenants and City Ordinances. He passed out to everyone.
Lloyd has done a comparison of details of Covenants and the City Ordinances. A lot of the stuff, certainly the vast majority of the stuff that is in the Covenants is in the City Ordinances. Not everything, for example, the signs the City can control the signs, because government can’t do that. But a private corporation can. The United States Court can. The rational the 85% vote to amend, 1. Not every set of Covenants have the 85% threshold. There are a couple that have less. Two that even have 4or 5 sets that run for pertuatity, which most modern covenants do. It’s a mess, but the reason is that 85% means that for each of the sets of Covenants, which are more than 30, you would have to get first of all eligible voters to turn out and vote. And then vote yeah. And we believe that is impossible, first of all is to get them to turn out, and then get everyone to vote yeah. We can never get even 50% of the eligible voters to vote in any POA election from my recollection. And yeah, you couldn’t get 85% of the people to vote in favor of anything. It is just an unattainable threshold in our way of thinking,and it’s been that way since 2006.
Allen: Is that members in good standing or all members? I think ink its members in good standing.
Tullier – Ithought it was changed in the most recent Bylaws to say, you have to be a member in good standing if you are going to declare candidacy for a position on the Board,an Officer or Director. But you just have to be a member to cast a vote in the elections.
Harvey – No you have to be a member; anybody can cast a vote for Officer. You have to be a member in good standing to vote for a Director or Proposition.
Tullier– Thank you, I knew there was something in there, I just wasn’t exactly sure on the details, thank you.
Allen -They took out the numbers no in good standing? Tullier – Just to get people to show up.
Kyger -We’ve got members that live overseas, they are not real likely to turn up and vote. So that I think is pretty much the synopsis. There are some more questions on here, but you can see the answers. That is kind of where we are, Ric can talk about what he sees and can define that right now. Then we will certainly take any questions.
Nolan– I have a question. Idid review this thing that you gave me the other day, Lloyd’s comparison of Covenants to City Ordinances. Every one of them looks to me like it’s covered. I’m not sure why we are worried about being covered by the Covenants, when the City Ordinances cover everything.
Kyger -Well Lloyd is probably better at answering this, but there are 2 things that the City can’t do.
Nolan- Well I it see it says same, same, same, same, stipulates, more restrictive, almost same about same, about same, more restrictive, more specific and restrictive, slightly more restrictive, more restrictive than Covenants, certainly more clear, at least as restrictive as Covenants.
Kyger – But Dick there are some things that aren’t on here. One is the whole sign thing. The City can’t ban signs, we can. The other thing is the City can’t ban appearance, colors, do you want to build a new house right next door to you, and as far as the City is concerned that could paint it florescent fuchsia. They couldn’t say no.
Nolan – Did he leave that Covenant out of here or what?
Kyger – I guess he didn’t have a City Ordinance to compare it to, so I guess he didn’t put it on here, I don’t know why, but that’s one reason the existence of the POA Architectural Committee we can say no we don’t do fluorescent fuchsia.
Nolan – I did read something in here, but I can’t find it right now, because I didn’t highlight it.
Tubertini– But Dick what it’s telling us is that if we don’t corporate put the Covenants into the Bylaws and that it is valid, grounds upon which the court grants us declaratory judgement this body is not going to have the authority to access members for its 60 something dollars or 80 something dollars a month dues and if that faithful day get here, and this organization has no more money coming in, I expect that Mark and the others aren’t going to come to work and these buildings are going to deteriote and you are going to have quite the mess here.
Nolan– Unless, he awards you alternate Plan B?
Tubertini – But we’ve got two grounds which we are asking the court to grant this organization the authority to assess.
Nolan – And this alternate Plan B, whatever it is, is a state statue so we have that right.
Tubertini – No it’s not a state statue, I’ve heard you and the others say that. But it’s not, it’s based on we call it wrong in other jurisdictions, Mississippi has not addressed that. It’s our understanding that we are going to have to get to that alternate, we are going to have to talk about this to whatever extent you want but what happens in 2010 is consistent with this case that goes Perry vs Bridgestone, Bridgewater, where the MS Supreme Court recognized that particular case that this body implemented in 2010 and rested that it was valid. It’s a risk, if we do nothing the risk is the day before that 2020 day hits someone could file suit against this organization ask the court could immediately declare that this organization can’t assess dues any more. If that happens, you are going to have the problem I just mentioned, no income, buildings, facilities, pools; it’s going to be nasty. And your assets, this groups assets are simply going to deteriorate it won’t be good for this community. You have these things sitting right here in the middle of your city.
Montjoy– On that same line, let me ask you. I’ve always thought there was a difference between the right to charge dues and the authority to put a lien on a property if you don’t collect it. Pass Christion Isle and a whole bunch of other people charge dues, they didn’t go through this, there is a difference, I’m just trying to be sure, and you’re saying that we charge dues.
Tubertini– if there is no Covenants, If they determine that incorporating the Covenants into the Bylaws was done improperly and has no effect, and if the court denies alternate grounds, which we say gives us the implied right to assess dues, then there is no dues assessment.
Montjoy – All right, I just want to be sure.
Tullier – Without pursuing a legislative act.
Tubertini – Oh yeah,
Harvey – trying to get it declared a recreational d I strict
Tullier – right
Harvey – you don’t have to put a lien on anybody, it’s called tax
Harvey – Which means that 18% of the people that elect not to pay their dues will have to pay their taxes or, it means the state would take their house. The down side is now everybody in the community pays the same thing, Igot a little house, Iwouldn’t have to pay that much. Marshall has a big house as I suspect most of you do; you would have to pay a lot more. It’s the tax base, that’s the difference of how it comes out in the end.
Tubertini -This will take me a moment, by pursuing declaratory judgement we control litigation, instead of being sued at the last minute and having to undo something that was thrust upon us, it was the Schaffer, Weber and then Fletcher lawsuit and I do remember that it was Sept. 11 last year I was in my final days of closing arguments of trial and I got a phone call that said we’ve been sued. There is a motion that has been filed for injunctive relief to stop the previous board from meeting to do whatever it was they were going to do, it cost the group a lot of money in attorney fees to undo that. That went on for 8 to 10 months; I don’t remember how long it was, so we fought a battle, we won it for all intents and purposes. But if we do nothing,even though we think we are right in what we recommended to the previous board back in 2010, where the vote was held in 2010,and the Covenants were incorporated into the Bylaws. Marshall took the position when he was President that we needed to pursue this and the decision was made not to wait. And Marshall mentioned the 3 year statute of limitations we did give the opinion that if somebody wanted to object to this thing,they probably should have done it when it was put on the ballot. Apparently, someone didn’t want to pay an attorney, or didn’t feel like it was worth it. The vote was had and the proposition passed and your covenants were incorporated into your Bylaws.
The Board, we think there is a 3 year Statute of Limitations to file suit within 3 years, you are probably in really, really good shape. Those 3 years has passed. We think you are in really, really good shape. But since then you have had lawsuits filed against you and there is nothing that to say that someone can’t do that at the last minute and I’m in closing arguments somewhere. Or they go to the Judge asking this and gets some kind of declaration that dues can no longer be charged. You are going to be in a heap of a mess really and it’s going to be expensive if we don’t control litigation. So what we filed this petition for declaratory relief typically you hear a lawsuit has been filed. Somebody is asking somebody else for money. Whether it’s a car accident, or what, there is a provision in the rules that says even if someone is not asking someone to do something or to pay money, there is this little provision called declaratory relief or declaratory judgement, the parties have a contract with each other and essentially or a matter has occurred and the parties aren’t quite sure if have the rights they think they have under this contract or they go through 2010. You are not asking for money, you are not asking for a victory over anything, can the court declare that what you did is valid. If the court does that for us next spring,if there is no is no significant issue, then you are done. Ifeel like you are done, if we prevail on this it’s been locked and the key has been thrown away. And it gives you that protection, and then you can be sure that ain’t nothing happening in 2020 that’s going to stop this group from assessing dues and maintaining these amenities.
Nolan – Can I go back to my question? Why then we have Lloyd’s comparison, by the way #14 on the color of roof, architectural,design all that kind of stuff could we agree that these Covenants, since they are covered by the City are not why we are doing this lawsuit. Because we are going to be covered by the City no matter what happens on these pages.
Tubertini – That would be the Cities can change their minds and who knows what councils down the road will do, they may not mind down the road what else occur. They may not mind what color the house next door to you is.
Allen – Cities care more about zoning issues.
Nolan – Covenants are zoning issues.
Allen – There are so much more issues with the Covenants than the zoning. We have this Covenant thing that has been filed. So what if somebody comes up now sues the Board to withdraw that is that possible?
Tubertini -What I’m thinking they would do is to file an objection. Very good question, lets kind of go through it, if anybody files an objection, whether It’s one for money damages, where you ran a red light. Or a lawsuit for declaratory judgement where we are asking the court to declare what we did is valid. We’ve got to notify all members that this has been done and we’ve got to notify Purcell that this has been done. And the court typically gives anybody that wants to object to these 30 days to respond. If nobody responds, we spend another 7, 8, 9 thousand dollars for a judgement for the court to execute, making sure we’ve done all our research, judge signs off on it, we’re done. But is somebody says we disagree with what was done in 2010, and is valid, because of whatever reason they want to give, then the alternative is we give this body has the implied authority to collect dues. And that’s the forum that the party would properly use to object. So I think I know your question, no nobody would need to file suit to demand the petition be withdrawn, they could but they could, but it would be crazy expensive, it would be a bizarre way to do it procedurally but if somebody wants to do it and hires a lawyer, they could file an objection,we appear in court and answer to the court why Tubertini is wrong and why we are right. See that is the next thing, we filed suit 40 days ago Iguess, the rules gives us 120 days to serve notice on others, the court can extend that. On a typical lawsuit, a process server, use to be a sheriff’s deputy, any one over the age of 18 to deliver it. But you try to do this with 40 something hundred people and pay some process some discounted rate of 25 bucks per person is ridiculous. Well,the court is going to say, well we get it, the court is going to say we hope and the court might say that 1st class mail is good enough. Or the court might say that e-mail is good enough,that would be even less expensive for this group. But that’s the next step we can ask the court for that special permission and do it the old fashion way, do it the way the court says, well this is prohibitory expensive, well that is why we go and say look here is the authority that you have here is the law that you have to give us this streamlined procedure. Hopefully the court will agree with us. There is this person that hasn’t waited until he’s been given notice of this complaint, he’s already filed objection to how he gets this streamlined notice procedure Ithink. This McCossen (sic), so based on his filing, we’ve got to notify him on whatever a few weeks from now if you decide to go forward with this, we’ve got to notify everybody and he is going to have however many days the court decides to give him, so we are going to know that not only is someone going to not only object to the substance of what we are asking the court to eventually do, but we’ve already got someone objecting to the streamline procedure to notify. I don’t know why, I don’t know why if he successfully objects to streamline, and we have to hand deliver, if he knows how much it will cost his POA. I don’t know. Maybe he really wants to object to the substance of what we are doing. We do already know that we do have one objector out there.
Tullier – You can say that, Ithink you can say that once they are served,someone will object. They will garner enough money, pull cash together, hire legal representation, and file an objection. That would probably be a safe bet.
Harvey – What we need to talk about now, is do we force that issue, today or do we wait till the day before 2020? It’s no different, it’s going to happen. It’s a given, when do you want to do it? You want to do it on our time, or someone else’s time? That’s what we are talking about, do we want to do it now, when we can control cost or when we have to, and you start losing control.
Allen – Proactive vs reactive
Tubertini – And you have the safety net that if the judge denies our petition you still have a year or two to go to the legislature on it.
Nolan – to me this is the most important thing facing Diamondhead right now and Isee no reason why we can’t have a little time to study it, why do we have to streamline, we’ve got to 2020.
Harvey– We don’t have till 2020 that’s just it. The other thing,the alternative, if the judge shoots it down, we can’t just walk into the legislature and say hey we need some help. Potentially, it’ll take 18 months to get something through the Senate and on to the Docket. Right now we may already be out of time. That’s the Fact. That this didn’t start today, this started in 2010, it has accumulated up to here. This board summarily has taken, let’s just say, every Board before us was a blooming idiot. Didn’t know what they were doing they were wasteful, fraudful, go to Skips website us all the adjectives you want. Or you can say there has been due diligence already. Our goal now was to bring you all up to speed, to give you everything we have done in the last 8 months. All of you have volunteered to administer this organization, and that’s our job to administer this Board.
Kyger – we brought Mario Feola and Lloyd Ramirez into this to give us all that experience, since he put it in the Bylaws.
Blakeney – What was wrong with it being put into the Bylaws?
Harvey – We don’t think there was anything wrong with it being put into the Bylaws. We just filed the suit to get them to tell us that what we did was right.
Blakeney -then why can’t the judge just tell us that?
Harvey – we have asked the judge to tell us.
Blakeney -that’s all we’ve done is ask him
Harvey– That’s what we have done, is ask him, now waiting for him to say you were right, you are good. Blakeney -That’s it
Harvey – That’s it
Harvey – I think the misunderstanding that’s out there is that this declaratory judgement is actually making a decision that wasn’t voted on and the decision actually was voted on. As far as Ican tell they think we are asking the court to say you can force this without your voting membership. When in fact what we are actually asking the judge to say is when the membership voted on this, is it in fact what we thought they were voting on. Is that a simple way to put it?
Blakeney – It is a misunderstanding
Kyger – I will have an article in the DH News Sept. issue. This will be exactly one of the things we will address here is what we are asking the court to do.
Blakeney – It’s in the Bylaws already, so you just need the Judge to approve what’s already it in the Bylaws.
Tubertini – it’s in the Bylaws based on a particular MS Supreme Court case pretty much approved that same thing in a different situation,so basically, your lawyers took that case and said, we think that what happened in that vote works, can work in your case. Well that’s great to have your lawyer tell you that, that’s great to do it, and it’s really great that the 3 year statute of limitations has run, but it’s not so good in a litigious community that you have that at the last minute for someone to file suit against you and you not have
Tullier – we would be without dues for 2 years while it’s in litigation.
Montjoy– well, let’s take it that everything goes along and we get the judgement, right now everybody that owns a piece of property here, when they bought the piece of property, signed a contract effectively, that’s their deal and they and Article 15. The difference between us as a POA and any other Country Club is that they voluntarily belong to the Country Club, in that organization just like the POA, can charge dues but those people can get out and you can’t just get out. Let’s say we pass and everything is fine and then you have the Bylaws then is there any, the Covenants per se then are completely dead and they don’t apply to a unit and section that might have opted those Covenants anymore, so no group other than the entire group could they come back and create a vote and say we don’t want dues. It would take the whole vote a majority or what is required in the Bylaws. Right now we have Purcell, then they control all the votes, down where the sewer and water plant is going, they removed all the covenants so it could go commercial. They had 85% so they did it that was fine, so they did it. I understand.
Tubertini – Let’s say even with opposition, we prevail we are in July 2016 this could go well into, with some strong opposition, could go well into the fall of 2017 and let’s say we win, they have a right to an appeal. An appeal could take a year and a half, so we are already into 2018 if not 2019 on an appeal, so the clock is ticking. We really don’t have this unlimited amount of time.
Nolan – how much money are we talking about?
Laird – Let’s wait a minute. Does anyone else have anything to say?
Tullier – Regardless if there is an objection or not, and the judge does declare that yes what is real is real. Iwould assume then even if there was litigation that or would there be an avenue for additional litigation to come against the POA, to say that that Judge’s ruling was not correct, the Chancery Judge did not rule correctly. We believe that with our representation that that’s not right. That would be the appeals process?
Tubertini – Yes, it would have to be on an appeal. It wouldn’t be through a separate avenue through a separate lawsuit, there is a doctrine of race Judi can or some Latin word from back from law school a rule that says once it’s done it’s done.
Tullier – Ijust wanted to make sure the appeal was the only avenue, not additional litigation. Thank you.
Laird – Ric, you got a fee schedule? Phase 1,Phase 2, Phase 3, and all that?
Tubertini – I think our original estimate provided for you regarding the court and issuing notice was $15- 16,000. We thought we could file a. petition spending no more than $11,000, but I actually ended up spending over 14 close to $15,000 there were some last minute issues and delays frankly that caused us not to file until Thursday or Friday, before the Election. Actually, while we are on that subject, my obligation is to you, as a Board. My obligation before the Election was to the previous Board to do what I was instructed to do. Whether I got it done in April, May or June I was given the instruction to get it done. Regardless of the fact that it was 2 or 3 days before the Election, so I don’t want anybody to think there was something sinister there. I was given Marching Orders to get it done, there were some delays, the Fletcher issue, plus there were issues with the Oaks, Highland Villa, something else their Covenants were kind of different than what we thought, we were 3 weeks away from filing. That was another legal obstacle that we didn’t realize was there, as happens when you are working on a complicated lawsuit. It took a few weeks to get that done and I think it is even addressed in the complaint order too. I can’t really remember. It caused us to create more fees than expected. The previous Board approved $18,000. Am I right, though this 1st Phase? I have used 15, I’ve got 3,000 left. We estimated this next Phase to be 3-4 thousand dollars, now that Mr. McCrossen has filed an opposition, so that is going to cost a little more, so if he opposes it. The Judge might ask for hearings the Judge might ask for briefs. So at this point we’re thinking maybe 6 or 7,000 dollars. We put 15 maybe that’s why we need 21. Once the court orders the streamlined procedure, there is going to be a cost to us either way. Mark actually or whoever will actually issue the notice. What happens next, let’s say that Mr. McCrossen, regardless of whether or not the Judge requires us to hand deliver notices to everybody vs 1st class mail vs e-mailing everybody. What comes next? If there is no opposition and there probably is, if there is no opposition,really it’s only just a few more thousand dollars because the bulk of the work has already been done as far as the research, because we are not going to throw together some petition,and throw it in front of the Judge and say we want you to do this Judge and we will get back to you later on after we do the research. We go ahead and do the research and that is the right way to do it. So if there is no opposition, we have an appointment with the Judge and say Judge by this date we will put together an order for you. Contrary to popular belief, Judges at least in the State Court and all they don’t draft their own judgements, our State Court Judges really don’t have staffs, so the lawyers, the prevailing lawyer the lawyer who wins is the one who prepares the brief for the Judge to sign. You will see lawyers in the Court room who submit a motion, they will argue and argue and argue and then the say you win Tubertine, will you prepare me an order. Yes sir! But they are in that ordinance.
Montjoy – But Ric, on quick, the municipal order goes out, it says you have to respond within so many days? It’s not open ended, whoever didn’t respond that day doesn’t get to later.
Tubertini -That is correct. So only a couple thousand dollars over the $22,000 over the amount I’ve asked for to get through the notice Phase, that I’ve ask for, just a few more thousand dollars. If there is opposition there is a whole different deal,I remember from, let’s see, if there is no opposition, a few thousand dollars, but the Judge may require some type of briefing. Think about this Judges want to be right, Judges don’t care so much what the parties or lawyers think about their ruling. But they care a hell of a lot what the Appeals Court think about their ruling. If their ruling is appealed, the Appellant Court is going to look at it and decide whether they were right, they will either enforce it or they will overrule it. The Judge just wants to be careful that what they are ruling is, is the correct ruling. It’s very possible that the Judge might ask us to prepare a brief the issues, even if there is no opposition.
Allen – What does that mean brief the issue?
Tubertini -What that means is- the last 2 paragraphs of the petition- the 1st paragraph says- Judge tell us what we did in 2010 was right, because we think we were right. Number 2 says, and if we were wrong,we want you to rule that this organization has the implied right to assess dues. Those are 2 paragraphs in that petition. But there is a heck of a lot of law behind those 2 paragraphs. This judge who happens to be Sandy Steckler right now in Biloxi if he doesn’t recluse himself, which means, if he stays on the case, he might say Ithink you are right, but Iwant you to prepare a brief. Explaining all the law to me in writing,why you think you are right, because Iwant that in the court file, because if I rule in your favor I want to base my ruling on good solid law. Ithink the chance of the judge doing that is probably maybe only 30 – 40 % because we are going to make sure we put all the law in the judgement itself, but that is just a just in case, because you are asking how much it is going to cost. The judge might require us to do that.
Now if there is opposition, there is no doubt we are going to have to do that briefing that I was talking about that could cost $7-9,10,000 perhaps in briefing. There may even be some discovery required in this case if there is opposition. Discovery is a fancy word for finding out what the other party knows and what the other party’s position is. In that car wreck case, written questions, who are you going to call as a witness, what doctor are you going to bring to say that you have a whip lash or you need surgery, how much are your medical bills, how bad did it hurt? And it would include production of documents, medical bills, all those sorts of things, depositions, asking questions across the table months before trial under oath, what are you going to say at trial when I ask you this question, that’s a deposition. Maybe if there is some opposition and you get a lawyer who wants to spend a lot of money or a lawyer who for whatever reason thinks he has got to take your deposition, Ramirez’s deposition, your deposition, maybe some of you, don’t know really why he would, maybe Carl’s.
Joffe – for sure.
Tubertini -Just a transcript of a deposition is $8-900, the attorney’s time, if you take 2 attorneys at 5 hours plus another 5 hours to prepare you got 20 hours take at least 200 dollars an hour you’re talking, do the math, that’s one deposition, and you do 3,4,5 depositions. Depositions, and there are documents, who knows if we have to produce to the other side the entirety of the Covenants, and they are that thick. You know just producing paper cost money. Discovery was wonderful when it came on the scene in the 70’s because there is no more Perry Mason, you don’t have someone walking into the court room saying Idid it. If you do your job as a lawyer, everyone knows who Perry Mason, but regardless if you do your job as a lawyer you are going to know what the other person is going to testify to at trial. There are no surprises anymore, but, it is just so expensive, because lawyers abuse the system. So did I put a number down here, I put $10,000 down here, I can’t believe I just put $10,000 down here for discovery, but probably more than that. I put down another category down here if there is opposition, for pretrial motions we have a ton of those in one of the cases. Anyway, questions of what evidence can be presented, questions of whether or not they can dispose Carl, you know Carl might get his lawyer and say I don’t anything relevant to testify to, I’m filing a motion for protective order. Oh great everybody, gets to go file a brief and then we get to go argue that for a while. Pretrial motions, we can’t even anticipate what those motions might be. Bottom line, complex, expensive lawsuit if somebody puts up a tough opposition. And I tell you what I’ve been faced with a number of times over the years, and especially representing Diamondhead over the last twenty plus years, folks like to file a lawsuit without a lawyer. Sounds like that would be the kind of guy I would like to go up against, or it wouldn’t be quite as expensive but that is just not the case. I would much rather try a case against a good lawyer or any lawyer, rather than against someone that is not represented by a lawyer. That’s tough, they don’t know the rules, the judge essentially holds their hand to the extent that he can and it gets to the point to you start eventually start banging your head on the table. Because it proceeds in a slow pace, it’s just not fun. So I really can’t give you an answer to the question, except for those numbers I’ve just thrown out there. And actually I put 15 – 20,000 for pretrial motions. So $20, 30, 40, SO, 60,000 it could be that kind of money. And what should happen in a case where there is opposition, is that this case really should not get to trial, there is a rule, rule 56 that it’s a summary judgment rule that says, if there is no genuine issue, any material fact, the moving party’s entitled to judgement as a matter of law, then the judgement should be granted and there is no need for a trial. Basically what that means is that everybody agrees on the facts, and there is no genuine issue regarding that fact. Or somebody might say they disagree on the issue, it’s not fact and it’s genuine. Then it’s not worth the judgement, then it won’t get any creditability, then the judge can rule, see all juries do this it’s not a jury trial, but regardless, under a fact, if there are no facts to find, nothing to determine whether it’s true or false, there is no reason to have a trial, there is no reason to have testimony at trial. After 3 or 4 days of trial the judge can rule what the law is based on the facts that everybody has essentially agreed to. So motion for summary judgement I put $9-11thousand, if we get back to that point. Then finally I put trial unlikely, but if required, I put another $10 to $15,000,I haven’t done the math,but it could easily get up to another $100,000 if you’ve got to get all the way through. Hopefully we won’t have to do that. Hopefully, if there is some opposition we could squash it pretty quick. There is something else I’ve been thinking about. When we had our committee meeting a couple of weeks ago now, we said, who is McCrossen? Does anyone know who he is?
Laird – I understand he is an attorney out of New Orleans, also there is another objection too, a lady named Pat Keesen. I forwarded you that e-mail.
Montjoy – Who is that guy that keeps saying we will be sued for criminal liability individually, and stuff like that, he keeps sending out. Yeah, some guy keeps sending it out, saying his friend the lawyer, he doesn’t say who he is, and his friend the lawyer is, something.
Laird – I don’t know, I had heard that he is on Residents of Diamondhead Facebook page.
Montjoy – I don’t know his name, but that’s part of his e-mail.
Finley – I responded to that.
Nolan – Ric, can you tell me again,why the Board shouldn’t have a little time to get some time to consider this? Is it that critical?
Tubertini – No, It’s not critical. Let’s say you give me authority today, it’s going to take us 10 days to get the petition together and take it to the judge that will take us into August. And Mr. Mccrossen is goingto have 30 days perhaps to respond. And that is going to take us into September, and he could get an extension of time. Then take it to late September or October, we would probably get a hearing date in October, November, the middle of October our 120 days runs, I really don’t think there is going to be any issue, if there is an objection by Mr. Mccrossen I really don’t think there is going to be any issue of going to the judge and asking for an extension of 120 days. It’sjust going to cost you a couple thousand more dollars because we got to create paper and we got to schedule a hearing with the judge and Igot to sit there 3 hours while every other case is being handled and we are waiting our turn,itjust cost money to do the smallest of things. Look if you want to take a week or so Icompletely get that, this is brand new to this board it makes perfect sense to me.
Allen – Phase 1was done, the first part of the judgement was filed are we looking at something else.
Harvey – we are a couple thousand dollars short of the judge telling us how we ought to handle this. Or should we choose to proceed? 3- 4 thousand dollars that is what he needs to proceed
Tubertini – I’ve already spent 18, I have incurred and it is probably going to take around 6 or so to battle Mr. Mccrossen. And convince the judge hopefully that we can do this by a streamlined procedure. Let me, if you all don’t mind,stand up, I’ve had to back surgeries, I can’t sit for an extended length of time, it may be na’ive on my part, I have been na’ive before, but in our meeting a couple of weeks ago and Iask if anyone know Mr. McCrossen, typically what we do when there are lawyers on the other side, even if they are jackasses, you try to talk to them and get some feel for what they want, why they are concerned, and why they intend to object. I’ve been doing this for 30 years and I have had success in litigating for clients by taking the highroad, there is no reason to be a jerk, there is just really no reason to be a jerk, and it’s just not in me. I would much rather sit across the table from Mr. McCrossen, preferably his lawyer, but that’s probably not going to happen,he is probably a lawyer, and that is not going to happen. But I would go to New Orleans if need be, I would sit down and talk to him. That is what I told Marshall, go talk to the guy. I think too often,we know there is going to be an objection and by McCrossen let’s do all we can do, let’s file a 25 page motion for the Judge, you know asking for some kind of a relief and really lay it on him, make it hard for him. Well you know, maybe a phone call, maybe McCrossen, like you said Jerome, this is the first time some of them have heard a lot of this stuff. Maybe you just need to be brought up to date, maybe it is just that simple. Maybe he doesn’t know, Maybe I’m na”ive.
Allen – I don’t think a lot of people understand the back part of this where in 2010 and in 2013 that the Covenants went into the Bylaws, and some of the people we’ve gotten e-mails from are like wow the community has now changed. Aright now yes, it has changed over the years, it has changed since 2013 but you just can’t suddenly stop what has already been in progress because 5 people moved out and 10 new people moved in. I mean that I don’t know that the community in large understands.
Kyger– I agree with you,I have seen McCrossen’s published material and the petition, it sounds to me like he doesn’t understand that what we are asking for is a ruling on something that has already been done and been done by the members.
Allen – Right, I don’t think people understand that part of it.
Harvey – One of the things we approved on at the last Board was a Public Information Campaign. Which would have followed this step, but everything got delayed, with the lawsuit and everything that has been going on. That is something that is still something that needs to happen. We still need to have a Campaign Public Forum where we can bring everyone up to date on what is going on. What we have are people campaigning that don’t have the facts that are campaigning as if they do have the facts. That’s why there are 127 people on that petition. Half those are going to go away as soon as they find out that we are not asking for something new we are just asking that what was done was correct.
Tubertini – and those who were on that petition are saying you are taking away our right to vote. The Bylaws say 85%, is what it takes, let us vote. Well, this Board realized back in 2006, 2007 that you were not going to get 85%, because 25 and 30 is all that show up in the first place, so this board is admitting 85% is not going to happen.
Allen – but the people that signed the petition, don’t realize that they already voted.
Tullier – right, but they had the opportunity.
Allen – but there are some of them that say, well we weren’t here then, so let’s start over. Marshall – I wasn’t here when they wrote the Constitution either.
Nolan – There was one big that happened since 2010, 2013, that was the City Incorporated,that’s a big deal.
Allen – and I know that some people were promised this and some people were promised that
Nolan – and the City took care of the Covenants
Kyger – Not all of them
Harvey – Not Architectural,they currently take care of most of the Covenants, but they can change that at any given meeting,it doesn’t take a city vote, it doesn’t take 85% or 50% that City Council can change those ordinances any day they want.
Allen – What portion of the vote was by Purcell?
Joffe – I thought, my recollection is would have passed without our vote
Tubertini – I think it may have been in the high 70s or low 80s without Purcell votes, I had to do the math 2 or 3 times because it made no sense to me, the numbers with Purcell’s vote. Idon’t know how many percent it was that actually passed. But even when you took Purcell votes out it was still way up there.
Kelly – I think there was some misconception.
Blakeney -This should be put on the front page of the newspaper.
Kyger -yes, I’ve ask Pat to hold that
Blakeney – explaining all this. Like, it’s in the Bylaws, we just need the judge to approve that what we did was correct.
Nolan – I saw an e-mail from you discussing a possible lawsuit between you and Purcell, so I invited Carl, tentatively invited him until the Board approved it. And he hasn’t had a chance to talk yet. Can you tell us about it?
Tubertini – Idon’t know anything about a possible lawsuit, but what Ido know is that the lawyer who works with me talked with Carl and Carl expressed some potential concern if certain things happen. And that’s about all I know.
Montjoy – Let me ask one quick question, did we, there can be such big issues here, we don’t like what we are trying to get done, forget the money, if Iwas to write a check for the whole thing tomorrow, which I don’t have any money at all,it’s easy to say. But let’s say it’s a nickel to get this done, would you still want to do it, or is this simply a question of money and if it’s a question of money. Let’s discuss it, that’s just one thing to talk about. Ithink a $100,000 is cheap, not that having to go through all the other stuff. But we need to get it down to where it’s such a business thing or money is the issue. Then we can talk more clearly about it.
Nolan – Ric you said in this e-mail that Purcell would strenuously object to this attempted absorption.
Joffe – I don’t believe that Purcell voted. We were consulted prior to the 2010 vote, to incorporate the Covenants, we may not enthusiastically believe that the legal opinions will have their intended outcome, but Purcell thought there was no other reasonable alternative, the best chance to preserve Diamondhead as it was originally envisioned for the benefit of its property owners and for the benefit of Purcell. Would be to have those Covenants extended and if going to the Bylaws, having bootstrapping these into the POA Bylaws could be effective, Purcell agreed to support it, with the kind of language that’s in your Bylaws now as it was adopted. There have been questions that have been asked they also wanted to renew to extend this Supplemental Agreement which doesn’t necessarily have to be extended from Purcell’s standpoint. People have this misconception that our exemption from paying dues was established in this Supplemental Agreement, the Takeover Agreement, in 1985, that is not the case; the exemption was rooted in the Restrictive Covenants themselves in Article 15, which says the dues would not the due and owing until a person accepts a deed from Purcell that’s basically the trigger.
In order to avoid confusion because that language in those Covenants is pretty obtuse and a layman reading that, you could read those Covenants over and over and not get that message. We in order to avoid litigation, over our exemption to pay dues on developer lots incorporated that language into the Supplemental Agreement, and the POA agreed to recognize that exemption, basically an existing agreement in the Covenants. At that same, go back to 1985 in the Supplemental Agreement, at the time, the original agreements to the Supplemental Agreement there were Exhibits to the Supplemental Agreements, agreements were made that Purcell agreed to turnover these amenities, in 1969 or 1972.to the POA at the time Purcell was the POA. Purcell signed both sides of the Agreement. So in 85 or 84 when that time was coming due, Glen Smith and the existing POA Board and Purcell both represented by Council, hammered out the Supplemental Agreement and tried to take care of loose ends, things that had not been addressed, you know things that had changed considerably in 15 years, from 1970 to 1985 and we ended up with that Supplemental Agreement. Purcell still is probably going to be willing to extend the Supplemental Agreement if that is what the POA wants, under pretty much the same conditions in the same form that presently exists or if they don’t want to extend it, that’s perhaps fine as well. But depending on how this shakes out. Basically, if the POA tries to eliminate Purcell’s right to vote on matters other than the Election of Officers and Directors and attempts to set up a mechanism where Purcell could be assessed dues on its developer lots, then you would trigger litigation from Purcell. We have done this before in 1998, Cronvich’s Board and Sibley’s Board they decided Purcell couldn’t vote anymore, which unilaterally said that the Bylaws were this parenthetically said that other than exempt developer lots, they just jerked it. And 6 years of litigation ensued, lawsuits filed on both sides, after 6 years and several $100,000 on both sides. Everybody decided that maybe we should go back to the way we were and that is what happened the litigation was not resolved it was just dismissed, without prejudice on both sides. We’ve got, Purcell has no axe to grind with the Association, our right to vote now is less significant than it has ever been, down to barely 400 votes granted that is a lot of votes, I think the only time we have voted without the request and at the best of the sitting POA Board was when Sibley and Cronvich tried to take our vote away. Other than that we have not independently objected to anything,as a matter of fact, we prefer not to get involved with the affairs of the Association, unless it doesn’t adversely effect’s us. Generally, if you went back and asked every President that sat on the Board from the beginning of time until the current date, you would find that they were all happy to find that they had Purcell proxy in their pocket, if they were facing something they thought would not be in the best interest of the Community, and that is kind of where we are at there.
Nolan – Carl, why is it you want to continue to vote after 2020?
Joffe – Well, you can take for one thing to do is amend these Covenants, with 85% you can amend the form of these Covenants
Nolan – Can’t get 85% everybody has agreed to that
Joffe – well,that’s hypothetical,we got 2/3’s in Lake Arrowhead, GA when our Covenants, when our Covenants could only extend for 20 years, our Covenants didn’t call for 85% it was 66 2/3 so I’m not saying it’s impossible. Particularly if the issue was Darth Vader, developer is not paying on his dues and you could probably get 100% of the people you could get to agree to that. In that instance, we are a little nervous about that provision. If for no other reason we would like to retain our effort in that regard.
Harvey – Let’s assume that we did not extend the takeover agreement, so by Article 15 you still don’t have to pay dues. What really changes then is you don’t get to vote is that right?
Joffe – No, You have to amend your Bylaws to change our vote, again, you could do that. That would take 85%
Joffe – No it wouldn’t take 85 it would take 2/3’s of your vote to take our right to vote away. 2/3’s of t those voting
Joffe – 2/3’s of a quorum. Once you establish a quorum, it’s 2/3’s of a quorum it’s 2/3’s of those voting, present, in person and by proxy and there is another reason and of course
Montjoy -you had to have the Purcell vote to have a quorum, of course back in the old days you had to have the Purcell vote to have a quorum. In the early 90’s we were really sweating to get a quorum.
Joffe – I have a different opinion on what your quorum requirement should be, but maybe that is a different subject. There is a bifurcated quorum system, or two quorum standards, one quorum for the election of Officers and Director and one quorum for voting and other matters than Officers and Directors. The definition of a quorum is that required percentage of a party entitled to vote and Purcell is not entitled to vote in the election of Officers and Directors, and I think there forth should not have their votes counted toward the quorum for that purpose. I don’t know what ya’ II are actually doing,or if ya’II have an opinion from somebody else that’s different. But that’s just another issue. Some of these things get pretty complicated. Just to get this straight, the amendment requires 2/3rds of the vote cast at an Annual or Special Meeting,or the majority of the voting power, whichever is less and the approval of the Board of Directors.
Joffe -you need 2/3rds of those people present by quorum or proxy, or 50% of the total voting power, doesn’t matter if they are there or not, that means all the people of Diamondhead. If you had 5000 members you could have the lesser of 50% of the voting power or
Tullier – Mr. Carl in your opinion if the POA, if the judge comes back and says yes you did approve what you thought you approved. Does Purcell think that the takeover agreement extends with that? Or does Purcell believe the takeover agreement is something completely separate in its entirety, Ijust need to clarify. Does Purcell believe that if the Covenants were voted on and accepted into the Bylaws and the judge upholds that, do we not need the Covenants to continue to collect dues and so on and so on?
Does Purcell believe that the Takeover Agreement is therefore part of the Bylaws?
Joffe – I hadn’t really given any thought to that because it is an Exhibit, Iwould not really think so. Tullier – Mr. Tubertini?
Tubertini – No Idon’t think so, we have not ask the court for that relief. The Takeover Agreement is an Exhibit but that petition is a detailed history of how we got to where we are for the benefit of the judge. Telling him where we come from, where we been, and how we got to where we are today. There is nothing in that Petition that asked the Court to rule in any way regarding the Takeover Agreement, which as far as I’m concerned is a contract between 2 parties.
Tullier – That it. That expires in 2020.
Allen -The Takeover Agreement does expire in 2020. So it’s not a Covenant, it does expire in 2020. The Covenants is what gets you to put the lien on the property.
Joffe – Right
Tullier – Mr. Nolan is asking about a statement here in Section 6.1 of the Bylaws that states; To the extent any such declaration is not listed on Appendix A, the omitted declaration is incorporated in full as a permanent section of these Bylaws the same as if it were listed on Appendix A, except that any provision of the omitted declaration purporting to set forth a date for the expiration of the omitted declaration or part thereof, is not incorporated into these Bylaws.
Tubertini – sounds like a lawyer wrote that. So I guess, when we went to the Court House and found all the Covenants and missed one it’s still incorporated into the Bylaws. Except the part that says it’s got to be renewed by 85% of the vote.
Nolan – is there anythingthat says not incorporated by that 85% of the vote?
Tubertini – not that we know of
Nolan – nothing is exempted from being incorporated?
Tullier – so that’s exclusive to the Covenants
Nolan -the Takeover has nothing to do with the Covenants, and Lloyd is going to explain that to us I guess.
Tubertini – if you have any more questions, don’t hesitate to call, those of you Idon’t know yet, I look forward to getting to know.
Laird– one other thing Mr. Tubertini,you need 3 or 4 thousand dollars?
Tubertini – yes sir.
Harvey – I move that we authorize, not to exceed $4,000 to get to the next stopping point, when the judge tells us how we have to notify.
Laird -that’s a good idea
Laird – We have a motion we have a second on the floor, any discussion.
Nolan – does the money stop at that point?
Laird – not necessarily
Harvey – it stops at that until we come back
Laird – what I’m trying to do is get Mr. Tubertini paid,we’ve run up a bill, and we owe him, so do we want to make it a max of $4000 or a max of $5,000
Harvey – you want me to amend it to 5
Laird – amend it to 5
Harvey – I’ll amend the motion to $5,000
Allen – second
Laird – Roll call votes I guess
Blakeney – Laird yes, Finley yes, Blakeney yes, Allen yes, Ertel yes, Harvey yes, Montjoy yes, Nolan abstain, Tullier yes. Motion passed.
Laird – Motion passed, Mr. Tubertini go get them.
Tubertini -Thank you very much.
Finley – as far as Mr. McCrossen, I can’t agree more I sent this to Mr. Harvey and to the rest of the Board, it’s not so much as what’s going on as it’s what they think is going on in here, when we close those doors what they think we are doing is the problem. And I totally agree with getting Mr. McCrossen, Mr. & Ms. Keesen, and Ms. Shannon more involved as I’ve asked them. Get these people give them all the information that we have and if we don’t have what they want let’s get it to them. Let’s find out and lastly clarity, what is our clear purpose, makes that clear. Get that in the Diamondhead News, 100 words or less, razor sharp, pen point what our goals are how we got here, where we are going.
Harvey – sounds like a public information forum
Tullier -That’s what I was thinking about, before you said it.
Allen – has to be factual before it’s put in that newsletter
Tullier – 100%
Harvey – I think the same way Marshall did when he did the Casino public information. Get the presentation, have our representation, have it in the big room and put it all out there. Basically, do the same briefing that we just did, and explain why we are doing what we are doing. There is going to be people that are not rational,but at large a rational person is going to understand.
Allen – about being in the barroom and putting that information out there Blakeney – In the newspaper
Harvey – I think we do it all
Allen -That’s fine as long as it’s done the right way. If it’s presented to the public, the people come in and they are going to get their answers right then and there, or are it just a public information session where they are going to be given information. It just has to be advertised as what it’s going to be.
Kyger – I will get the article out in the September Diamondhead News. We will follow it up with a schedule.
Boyd – News Media.
Tubertini – I may be speaking out of turn Mr. President, if Imay based on more than 20 years working with this Board, sometime on and off, what is seen is and I think today confirms that as well, you’ve got an association that’s got what $20million worth of amenities and $100thousands running through this organization a year, I don’t know how much you take in or spend. You are a substantial operation, I have never pushed to attend your Board meetings, but what I’ve seen over the years, is that there are members who sit on this Board who have in the past who don’t fully appreciate a particular subject that comes up and they will go talk to their lawyer who did their divorce and ask their opinion. Or go talk to another lawyer who was their friend in high school,and they end up and it puts a lot of tension on this Board, I want to say I have been paid for lawsuits over the years that never should have been filed It’s just about to the point that I would attend your meetings for free. It would save you a ton of money over the years if this Board was fully advised by somebody who represents all of you and has and ethical obligation to advise all of you on whatever subject you are talking about. So that you are comfortable when you walk out of this room, I’m sorry I’m on my soap box. I just felt like I had to share that with you. That is probably something ya’II would want to consider. And even if you did pay me to attend the meetings, dinner’s fine. Have a meeting at 4 drinks at 5. That’s fine. I apologize
Laird – we meet every 3rd Wednesday at 7 pm.
Nolan – we are looking for comfort in our meetings
Laird -you are totally welcome
Blakeney -There is something else, the Code of Ethics that I ask everyone to sign
Allen – I turned mine into the POA office
Blakeney -Thank you
Joffe Take a short break -At this time Harvey said he moved to adjourn and Teresa seconded
Lloyd Ramirez presented his instruments
As I left the Board they ask me to do two things, one is to look at the Covenants because at that time we had this vague notion that the Covenants were maybe in 2020 going to go away, and we had to save the Covenants. And the second thing was to that we are talking about, we had too many people on the Board that had no idea what the Covenants were and probably hadn’t even read the Covenants and they had been setting there for 3 to 4 years so Iwas asked to put together a workshop. Iended up putting both of those together. Because it turned out that it fit together pretty well. It wasn’t intended that way but turned out that way. The first thing Idid was, once Icleared the Board, Igot with Paul Newton and we tore into these Covenants to find out what these Covenants meant. And kind of to our surprise, and by the way, this report is floating around somewhere around in your belly wake called Recommendations to prepare for long term issues to deal with the Expiring of the Covenants.
Isuspect my former Secretary may know where that is. But, let me just read you what we found, that surprised us, there are 27 separate Covenants. They cover 8,000 parcels of land, 19 Covenants expire within the nine year period 2020 – 2029, one of the Covenant does not expire it goes in perpetuity it might be 3 by now, but I’m not sure, Ithink I heard it one or two more in Glen Eagle. Seven of the Covenants have no expiration date stated. Each Covenant applies to one portion of Diamondhead residential area. We have about 13; 14 square miles we got 27 little fissions all over Diamondhead.
What do you think is going to happen,when we start trying to get that renewed,when two over here and one over here does and the rest of them don’t. You can see the problems coming. Most of the Covenant provisions are common,probably about 75% of them are boilerplate, the rest are unique, 25 of the Covenants can be amended presumably by securing 85% of the property owners consent, 2 require 75% and 66%,and one believe it or not require 75% of the Board of Directors and 75% of the members of the Association to change. That’s kind of interesting isn’t it?
Don’t ask me why, when Iask Carl,he couldn’t explain it to me either.
When I talk Covenants that’s the report, that’s what we found out, Covenants if you get them stacked, and Betty got them for me. It’s a stack about that high. Tubertini has those things. And I guess we have them around our shop too. This report is also recommended,we didn’t see when we did this, anyway 6 years ago that we were going to get 85%,and when you do this it has to be by a Covenant. So we didn’t see any way we were going to do that, as you were discussing it while ago. So what we recommended doing was rolling the Covenants into the Bylaws, that was 6 years ago and we ended up doing that in 2010 if I remember right. Now remember, we did that because none of us wanted to see Diamondhead without Covenants, we knew that, because if they go away we know what would happen, we would get the county Covenants. And all you have to do is go back to Fenton and see if you want the County Covenants. Idon’t know who would want to look like Fenton, but anyway another story.
So we decided to recommend rolling them into the Bylaws, and we ended up doing that. My point is this all happened before we had a City. Since then the City has come into effect and they have actually rolled the Bylaws into their ordinances, and I’ve got a Comparison, if anybody wants it, Iseen Shane had one while ago. Excuse me they have rolled the Covenants into the Ordinances. They are actually pretty good. But the point Iwant to make is if the Covenants get into the Bylaws so we can gain Architectural Control. Which is one of the main purposes of the POA would we do it today, we didn’t even think about the dues, when we rolled it in,we rolled it in to protect the Architectural side of the business.
Which is one side, the second part of your business is to protect all these wonderful facilities. Whether they were 30 million are whatever they are worth, when they turned them over. Purcell said they had spent 11 or 12 million in 85 when they turned them over they said they we worth 20 million,Idon’t know if they are worth 30,40 million, depends if you are talking about replacement cost, sale cost, depreciated cost, I don’t know. The point is you’ve got your hands around a big bunch of millions of dollars of stuff. That’s the point.
Nolan – One question,it came up on the comparison you did,Covenants to Ordinances, what was missing from that, because we kept hearing there was more.
Ramirez – I didn’t see anything major was because Iwent through the ordinances. Unless it was the Master Covenants, the only one Idid was the Phase 1because that is theoretically called the Master Covenants, which by the way is a misnomer, because there is no master covenants, that’s generally what’s called the master covenants.
Blakeney – It was the Architectural they do not take are of
Nolan – #14 covers what it looks like
Ramirez they’ve got some, they didn’t take it the way we did, anything you build,kind of looks like it ought to fit in. That’s the way I took it.
Montjoy – signs would be the only thing.
Allen -the City allow signs, but the POA does not
Ramirez -that’s correct
Ramirez -this is in chronological order, in 2020 they start disappearing,the disappearing stops in 2029 and you see the line of course and that is Glen Eagle. The reason that might be important down the road is that if something happens down the road someone might say ah the POA is going to go away. Well you have a problem this perpetually actually requires the POA to keep Architectural Control. Not a major problem,so if you get rid of the POA you’ve got to kind of figure out how you are going to get around this perpetual requirement from Glen Eagle. That’s just the minor things. Okay let’s go ahead,lawyers can fix that.
So Covenants started under Purcell back in 1970, POA chart started in 1970 and the Charter goes forever until the day that the people of Diamondhead decides to get rid of all these things and then the laws of Mississippi say then you can get rid of the POA. You are allowed to get rid of the POA. Iwill talk about that if we’ve got time. So the Charter goes forever, by the way when we were doing this, this study that we began to understand and start to try to piece all this stuff together and that’s where we discovered 2020. Takeover Agreement and you heard Carl say while ago in 1984 they turned over all of that stuff to the POA. And if you read the Agreement it say until June 18th or 19th of 2020 or until the Master Covenants expire. Well the Master Covenants start expiring in 2020. So this and this is back together. Let’s go back to the Chart for a second and let me mention something. That chart give you lots of leeway, the Charter says that your civic improvement society devoted to the improvement of the Diamondhead Community and the operation, maintenance and having and the guard security duty, which you have turned over the roads. It gives you the right to manage operate and buy and sell trade deal in cafes, Clubs, bars, restaurants, marinas, yachts clubs, roads, which you have given to the City, and so forth. It has defined you as non-profit corporation. Why do you think we are a non-profit? Can somebody tell me?
Tax – Exactly, we do not have to pay tax on 30 -40 million,that Jimmie Ladner will appraise you at. By my opinion that little envelope, by not having to pay tax, we keep the dues down by 40 to 60 dollars a month. So there is a pretty good reason to remain a non-profit. This is why sometimes I shudder, when someone says, oh the POA has to make a profit. All I can tell you guys if you are going to make a profit make a big profit. Because if you don’t make $2 or $3 thousand worth of profit and you do it every year, we will lose our tax exempt status. And first of all you don’t get it back in 3-4 years. You don’t get it back the next year automatically. #2 if all you did was make $50,000 profit, and it ends up costing you 2 or 3 thousand in taxes, I don’t think you came out ahead. Typically, it’s ad valorum on the property. All the churches are non-profit for exactly the same reason. So if anyone wants to know why you are a non profit, be careful about profit. Hold the cost down by all means. Kelly needs to look in and stay close to that, I suggest you talk to John List about that, because he has hit me over the head with it many times. He has some good words of wisdom, about staying non-profit. So, we talked about the Charter goes forever.
Remember I said the chart had a lot to do. That Take-Over Agreement takes a lot back. Now let me explain why. Let me read you the things that limit the POA in this Take-Over Agreement, requires the POA to meet standards when operating and maintaining the amenities, if this goes away you don’t have anything else there to tell you, it’s not in the Bylaws. So there is one thing you need to be careful of.
So there is one piece you want to be aware of, it obligates the POA to increase dues to keep the amenities up to standard, I don’t see anything in the Bylaws it says that. It is sure not anything in the Covenants that says that, well the Covenants are going away anyway. It permits Purcell not to have to pay dues, unless the POA accepts the property, it allows Purcell to vote, well we don’t know about that. Provides the common facilities are for the exclusive use of the property owners. Yes, we have kind of played the game for a long time, I know Paul knows about that where we invite people in and even do a little side advertising,but for a long time the POA could not advertise at all. Unless you just went and asked them. Well you weren’t supposed to, yet anyway, well these days I don’t think Purcell cares anyway. It allows Purcell one vote for each lot and basically he still has 470 lots. He still basically controls the vote. If this goes away he doesn’t control them, but so I’m telling you where you have a lot of power here, you lose a lot of power here. So I’m telling you it means something if this thing goes away. So you want to be careful if you want to renew it.
Nolan -Carl told us, and you weren’t here, that they don’t want to pay dues but they want to keep their vote.
Harvey – After he said that the not paying dues is part of the Covenants, he said that Article 15, so no matter what, they are not paying dues. Whether, this is in effect and he said if we let that expire they do in fact lose their vote. That is not guaranteed. The right to vote is in the Bylaws.
Montjoy – Article 1 5 states – that until the developer transfer a lot then the buyer will pay dues.
Ramirez – I personally would not accept that the Covenants gives them the right not to pay dues. If you want to accept it then go right ahead.
Montjoy – it says it right here – each purchaser of a lot in the subdivision done by the acceptance of a deed shall begin blah, blah, blah to pay all assessments and charges .
Ramirez – if you accept a piece of property you are going to pay the dues.
Blakeney – Purcell has developed the lots.
Montjoy – and they never got sold, so they never sold them.
Ramirez – so that only covers it when you sell it. He gives us all this stuff for a $1. Then in return he wants all this stuff.
Montjoy – All the Take-Over Agreement says is that it confirms what the Covenants say.
Ramirez – you can do what you want, but I’m telling you, you better stay close to Tubertini,because I don’t think that is the way it is, that’s my opinion. I’m not going to argue, I’m an engineer, not a lawyer. The Bylaws, of course are the things that give you more power and limit your power. Just to mention real briefly, by the way, do you guys have a copy of this? These are the Instruments this is what I put together when I left the Board.
Blakeney – the new Board is supposed to get one. Where did you get one?
Blakeney – the POA Office – Mark should have brought them and gave them out. The Notebook.
Ramirez – All I’m saying is this is the best workbook/reference book you can have, this got put together when I left the Board. That is another piece of the things, when I left the Board and we put together one of these things and provided a workshop. That is when this piece of paper came into existence, that first workshop lasted 4 hours, I’m just trying to give you an overview in just 30 minutes, because we went into detail of all these things. The things is if you haven’t got it, get it. At least thumb through it.
The Bylaws empowers and limits you, the Board. The Rules and Regulations you guys do those, but you can’t change the Bylaws unilaterally. The county has told us that our Bylaws are legally enforceable as a document in the records of the POA that says the Bylaws are legally enforceable.
The county will back our Bylaws, if someone tries to sues us over something in our Bylaws, they will, like I want to vote that way, I don’t want to do this, not the rules and regulations, just the Bylaws. They said they will defend the Bylaws.
What was the little guy that was there, the lawyer before, that little guy, Ronnie Artigues. He sent us a letter to that effect. We’ve got it in a file to that effect. As once the CEO and one time President, your dues and dollar you shall act as a Board,you shall convene, you shall act as a quorum, that’s where your power comes from. I’ve been on Boards when the meeting was over and a guy went out and tried to tell somebody how to cut the greens. In fact, Paul probably remembers that, he certainly got out of that screwed up part of the greens, played most of the winter on that, needless to say we got rid of the guy. It was a mess, please don’t go around telling the greenskeeper, how to cut the greens, and we have had people on the Board go out there and tell people how to set a table, if Eli or somebody doesn’t know how to set a table, then we will train somebody. You don’t go and tell them how to do that. This is my opinion and I’m trying to keep you guys from getting too much flack. You will get flack.
Laird – I believe that is pretty much what I said in the first meeting.
Lloyd – it is for your benefit,you really should be in kind of overseeing position. The real thing is somebody is not doingtheirjob. It is their job, but don’t you go do their job. You have enough to do, and that’s my opinion.
The Court system, I’m sure you all are well aware that you are required to have a Violations Committee. You have to have 2 committees, the Violations Committee and the Architectural Committee, which is the Pres, Vice Pres and the Secretary. You know all about it, you’ve got $5 million at least in your indemnification and it is a very big section in the thing. One thing to be aware of is this thing will stand behind you as long as you make decisions you base it on fact, you base it on common sense, you base it on law, or legality, and if there is any question, you get a legal opinion,an engineering opinion, or whatever kind you need. You do those 4 things, nobody can touch you. Nobody can touch you don’t let nobody tell you different. My advice particularly on a touchy subject is to cover your bases. Once you do that then this $5, I raised it to 5; Idon’t know what it is now. Iwould check on that Kelly. Let them know what it is.
But you do have a fiduciary responsibility, to keep this stuff up, which means you have to look after this stuff as well as you look at the stuff at your own house. By the way that’s legal,in my opinion, we don’t have any lawyers here, and Ithink it is a legal necessity that you do your fiduciary responsibility.
The Notebook, Idon’t know if it’s still there, but the first thing in this book was a description of your fiduciary responsibility. Do you know if it’s still there? Yes. Read it closely. That is for a POA, and I categorized that for a purpose, because they didn’t know that.
The Rules and Regs, read that anything you don’t like you can change, anything you want to add you can do that. That is your business, nobody else’s.
The Mississippi Non-Profit Book. Probably no reason for you to have this, but it needs to be somewhere up there. Somewhere it is there, we put this place back after Katrina, and I spent a lot of time with this book. But it’s the Mississippi Non-Profit Law.
Blakeney -There is one in the Office.
Lloyd – I put together a file and I think you put it into a binder for me of all the lawsuits so that we would have an opinion if something came up we wouldn’t go get a lawyer for something we had already gotten an opinion on.
Blakeney -yes, at least 3 Legal Opinion Books.
Ramirez -You guys need to know that if you don’t. You in particular.
Allen – Is it upkept? Is it kept up or what?
Blakeney – Well I don’t know now, if it’s being kept up or not, there were at least 3.
Ramirez – I only had 1,if there is 3, it’s been a lot of stuff going on since I left. I just wanted you to make sure before you went out and got a lawyer to do something. Because we’ve got a lot of opinions on a lot of things.
Blakeney – and there is a Policy & Procedures Book if you need to know anything else that is kept down there that you can also look at?
Ramirez – is the Delegation of Authority still in there?
Ramirez – For example, this Board theoretically, if you need somebody to go cut the grass, you’ve got to meet and hire them, well that’s silly, you are not going to do that. So what we did when I was there was authorize a Delegation of Authority to Mark, actually down to his people and they can go hire and we don’t have to go meet. Well there is a whole lot of stuff like that that you really need to delegate downward. Now it’s going to happen automatically, unless you change the delegation, that’s why you need to see it.
Blakeney -they are in the Book
Ramirez -They are in the Book? Take a look at them, see what you are delegating,you may or may not want to. But on the other hand, it relieves you of a lot of time and effort, to keep you from getting involved in stuff you don’t want to get involved in.
Getting back to the Mississippi Non-Profit Law all non-profits shall have necessary and convenient to effect any and all purposes for which the corporation is already and including the right of limitation and power and then as da da and getting down to …the corporation, you,to impose dues, assessments, admissions and transfer fees upon the members, Iam going to read that again,to impose dues, assessments, admissions and transfer fees upon the members. Me and Ric Tubertini have a big fight over that, to me an engineer Idon’t know how much clearer it can get. This POA has a right to collect dues. Now he tells me because this is tied to land and land has special dues may apply to us and maybe it doesn’t which leads us to why we are in court right now. But dumb old Ramirez here, to me this is clear as a bell.
Montjoy – if you have a voluntary membership, it is absolutely clear, but the membership is not voluntary and because it is tied to land then that is where the issue is
Ramirez – but there is nothing in here that says unless you own land, that it ties to land. Montjoy – Land is tied
Ramirez – I’m not arguing,I’m saying it’s not in here. Blakeney – and we charge transfer fees.
Ramirez – I just wanted to point it out to you,it is in black and white. There is no condition on it. There are some Board Functions, those that are set up in the Bylaws, a quorum, you have to have that, and we’ve already talked about that. You do have the right to have sub-committees, and I’ve been on one since the day I left the Board and I’m still on a Committee. It’s kind of like flypaper; you can’t get rid of the Board.
A Director shall discharge his duties and hers as a director and as a member of a committee in accordance and a good faith belief that is acting in the best interest of the corporation. And I think that is possibly one of the best pieces of advice you can have. It goes on and says in section 259 and talks about conflict of interest you may have a conflict of interest, if somebody like, who is the guy that works on the alarm system, Donald Silcio, if you guys voted on something that had to do with alarms
Harvey -we did and he abstained
Ramirez – Good, you already know about it. You want to keep him out of trouble by doing that. Harvey – he did the right thing,by keeping himself out of trouble.
Ramirez – Records – you can wait 6 weeks to give somebody records, and even then you can’t give them personnel and loss and stuff like that.
Amendments – the way to amend the Bylaws, in here is exactly as it is in there, and that is interesting, this law didn’t come into effect until 1988 and our Bylaws began in 1986. You remember he was talking about a lawsuit, one of the things happening in that lawsuit, ties our hands as this lawsuit says this is the law you have to follow, and one of the things you have to do is amend this. The way to amend in here is exactly as it is in your Bylaws. That is because the Court said you have to do it this way that is what the court said. So that’s already been decided. Even though it came after the Bylaws, this is the Bible.
Make sense Dick?
Nolan – Yes, I’ve agreed with everything you’ve said so far.
Ramirez – the last thing I will mention here is the most concrete because people from time to time mention getting rid of the POA. Ifyou go by what’s in here and the lawyers may do it, there are 2 ways to go about it, get rid of the property, a few small pieces at a time, in the regular course of activities. There is also this thing that’s called if you are going to go out of business, how do you get rid of it, the difference is, if you are going to go out of business, the members have to vote on it. If you are just going to get rid of one piece, you decide to maybe just give the airport over to the county or whatever you do, or want to do that is questionable, whether or not, it is not clear, if it needs to be done or not, when we did the roads to the City we did go to the members, I do think personally it was a good idea. Ithink it’s a good idea to go to them whatever you do. But the point I’m trying to make is it’s a little bit fuzzy if you try to get rid of the Airport or any piece of this you could make a case that the Board could do that, but I suggest that you talk to a lawyer before you do that.
Nolan – if we decide to do that, and we extend the Covenants, does Purcell have a right to say no to that?
Ramirez – Purcell’s right to object to anything is in the Take-Over Agreement. So if you don’t extend the Take-Over Agreement then as far as Ican see you’re unshackled,in fact, this is what really hit me between the eyes, when I started looking at the Charter gave you a lot of freedom, but the Take-Over Agreement took it back. The Take-Over Agreement is going to go out of agreement unless we redo it. And so suddenly you are back to having more power in my opinion.
Nolan – the way they wrote the Bylaws with this catch-all phrase that says anything not listed any agreement anywhere can be absorbed past its expiration date.
Montjoy – who could make that happen?
Laird – can make what happen?
Montjoy – Everybody we have talked to says that
Lloyd – did Carl say no?
Tullier even Purcell’s lawyer didn’t agree with what you are saying.
Montjoy – who is the person that would come up and say, we think it does apply to the Take-Over Agreement?
Nolan – I’m talking like if someone gave me a contract as a business man Iwould never allow something like that
Allen – well the Take-Over Agreement expires in 2020
Montjoy -there is a little catch-all phrase in here, you can interpret it anyway you want it – basically it says anything,but it does say anything
Harvey – that’s in the Bylaws, that’s an easy fix. We can write a proposition,and if everybody is pulling on the same rope and not being continuous, we can get it passed the membership.
Tullier- to that point Craig,I agree. Some of the headache I ‘ve heard from some of the misinformed people is that exact thing,that they are ready for Purcell’s Take-Over Agreement, in essence that is what they are talking about, Purcell’s authority. If the Covenants are extended then the Take-Over Agreement is extended, the people don’t realize that they are 2 separate documents.
Harvey – we are going to have a whole bunch of things we are goingto have to patch once the election committee comes back and we get the election fixed. There are a whole bunch of propositions we are going to have to put forth.
Ramirez -the Mississippi Non-Profit Act strongly suggests you have an emergency plan,you don’t have to. One of the things I did for Shell was put together their emergency plan for offshore. I brought it back here and the POA has plagiarized Shell’s emergency plan, at one time you had one, I have no idea if it has been kept up. I would suggest with the Hurricane Season coming that you know, because Ilived through Katrina and that emergency plan we had was better than nothing,but not all that good. In fact after Katrina, so since Katrina I put together a pretty good plan. Do you happen to know if it’s still around Betty?
Blakeney Lloyd -you need to haul it out, because everybody has something to do, better to know ahead of time, and you really need to know what is in there.
Allen -wouldn’t it more of a City issue? We weren’t a City when Katrina hit, we are now a City.
Ramirez – we still have 20-30 million dollars’ worth of stuff. We spent just at about 14 million; this place we are sitting at was about 3 to 4 million dollars. But the real problem is we had a horrible time, we all thought cell phones would work, all the cell phones went dead, and we were lost in the water.
Blakeney – mine worked.
Ramirez – By the way guys, this lady right here house got destroyed in Katrina, and 2 days later was back working her butt off. The staff in Diamondhead really did an incredible job after Katrina, getting this place back, I have nothing but good words to say but Butch and that gang,Mark and the whole gang did a great job and this lady did too. That’s not bad, you go through that and you are at work a couple of days later. She wasn’t worth a damn other than that but she was good at that.
Blakeney – Would you have Mark make us some Emergency Plans? It’s called Disaster Plans.
Allen -They probably needs to be updated every year.
Blakeney -They were. They were last year I know.
Ramirez – see there is stuff to do before the season starts, pre-season, and after the season. It’s a year round thing you never stop paying attention, because you have always got something you need to do. Last thing I want to say is this Architectural transfer was 5 years after the Take-Over Agreement, just so you are aware of it’s not really clear of the end date of the Architectural Transfer from Purcell to you. The second piece is it says you cannot give that duty to someone else that is this thing. Coming into play is one day the POA disappears but still because of that perpetuity that Glen Eagle is in perpetuate in regards to the POA just let them do a contract.
Montjoy – Why don’t we let the City do it?
Ramirez – that’s the issue right now. You can’t give that to somebody. Guys I have given you a tremendous amount in shortly more than 25 minutes. If you have any questions, please let me know. If you got somebody that you think needs this. I put this thing on pretty regularly. They are going to throw rocks at you if you don’t know some of this stuff.
July 28th Minutes
Editor’s note: Below is the actual copy of these minutes presented by the secretary of the Diamondhead Country Club and Property Owners Association, Inc. in PDF format.