And The Check Bounced*

On January 31, 2001, the Edgewater Isle Master Association sued the Edgewater Isle Edgewater Isle North Homeowners Association for $34,221. Master Association maintained for years that Edgewater Isle Edgewater Isle North Homeowners Association owed the duty of collecting dues and reimbursing for that and other items. Edgewater Isle North Homeowners Association maintained that Master Association never provided documentation detailing why that amount was owed.

excerpt from lawsuit complaint filed with court

Wasteful spending at its most creative, but maybe Edgewater Isle Master had to make up for some of that $100,000 they spent settling an assault lawsuit. Instead, the boards each lawyered up, and the lawyers collected fees. It's a great deal for the lawyers, but every North homeowner should have been outraged to pay two law firms that both pretend to "represent the homeowners" in this most riduculous of lawsuits. Outright scandalous. How much did all of these attorneys make, and those North homeowners had to foot both ends of the bill on that one?

Do you all of you Boards of Directors play nice in the same sandbox yet? (Hint: no. Another hint: no, again.)

EDITORIAL COMMENT: The best part: after Edgewater Isle North agreed it owed money, they paid with a check that bounced. *Twice.


Edgewater Isle North bounced check

 

Law Office of
JOHN D. GARVIC
520 S. EI Camino Real, Suite 700
San Mateo, CA 94402-1775 (650) 342-0873
(State Bar No. 055653)

Attorney for Plainliff EDGEWATER ISLE MASTER ASSOCIATION

 

Filed San Mateo County January 31, 2001


Summons Issued

SUPERIOR COURT OF THE STATE OF CALIFORNIA
COUNTY OF SAN MATEO

EDGEWATER ISLE MASTER
CORPORATION, INC. a California
nonprofit mutual benefit corporation,

Plaintiff

vs.

 

EDGEWATER ISLE HOMEOWNERS
ASSOCIATION, a California nonprofit
mutual benefit corporation, and DOES
1-20, inclusive

 

Defendants.

Case No. CIV415687

COMPLAINT FOR DAMAGES FOR BREACH OF CONTRACT, OPEN BOOK ACCOUNT, COMMON COUNT, AND BREACH OF FIDUCIARY DUTY AND ESTABLISHMENT OF A CONSTRUCTIVE TRUST

Plaintiff EDGEWATER ISLE MASTER ASSOCIATION, INC alleges that:

GENERAL ALLEGATIONS

Plaintiff EDGEWATER ISLE MASTER ASSOCIATION, INC (hereinafter referred to as the "Master Association") is, and was from December 21, 1983, to the date of the filing of this complaint, a nonprofit mutual benefit corporation duly organized and existing under and by virtue of the laws of the State of California, with its principal office located in the City of San Mateo, County of San Mateo, State of California,

2. Plaintiff Master Association is informed and believes, and thereon alleges, that defendant EDGEWATER ISLE HOMEOWNERS ASSOCIATION

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is, and was from December 21, 1983, to the date of the filing of this complaint, a nonprofit mutual benefit corporation duly organized and existing under and by virtue of the laws of the State of California, with its principal office located in the City of San Mateo, County of San Mateo, State of California.

3. The true names and capacities, whether individual, corporate, associate or otherwise, of defendants named herein as DOES 1 through 20, inclusive, are unknown to plaintiff, who therefore sues these defendants by such fictitious names. Plaintiff Master Association is informed and believes, and thereon alleges, that each of the defendants designated herein as a DOE is legally responsible in some manner for the acts and omissions herein alleged, and are responsible to plaintiff for damages as hereinafter alleged.

4. Whenever in this complaint reference is made to any act or omission of a corporate defendant, such allegation shall be deemed to mean that that corporate defendant, its officers, directors, stockholders, agents, employees and representatives did or authorized such act or omission while actively engaged in the management, direction and control of the affairs of that corporate defendant, and while acting within the course and scope of their agency and employment.

5. The Edgewater Isle Development (hereinafter referred to as the "Development"), located in the City of San Mateo, County of San Mateo, State of California, includes two separate residential common interest subdivisions, Edgewater Isle North and Edgewater Isle South, with each having an owners association, the Edgewater Isle North Homeowners Association and the Edgewater Isle South Owners' Association.

6. Each of the residential common interest subdivisions was established with the recording of a declaration of covenants, conditions and restrictions.

7. The declaration of covenants, conditions and restrictions for the Edgewater Isle North subdivision provides in part that the Edgewater Isle North Homeowners Association may levy and collect

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assessments from each unit owner in the Edgewater Isle North subdivision for the management, maintenance and repair of the Edgewater Isle North subdivision, and the declaration of covenants, conditions and restrictions for the Edgewater Isle South subdivision provides in part that the Edgewater Isle South Owners Association may levy and collect assessments from each unit owner in the Edgewater Isle South subdivision for the management, maintenance and repair of the Edgewater Isle South subdivision.

8. Throughout the Development arc a number of common facilities, such as private streets, driveways, alleyways and bike paths, private storm sewers, private storm sewer lift pumps, private levee areas, private bulkheads for storm sewers, private sanitary sewer trunk lines, outfalls, side sewers and sewer connections, recreational vehicle storage areas; private water mains, water meters, private street lights, private fire hydrants, private garbage receptacles, and landscaping, all benefitting the two residential subdivision, as well as a senior housing project and a commercial project, in the Development, and all managed, maintained and operated by the Master Association.

9. In a declaration of covenants, conditions and restrictions, entitled "Enabling Declaration Establishing Master Association" recorded in the Recorder's Office for the County of San Mateo, State of California, on January 4, 1984, document number 84000928 (hereinafter referred to as the "Master Declaration"), which Master Declaration encumbers both the Edgewater Isle North subdivision and the Edgewater Isle South subdivision, the Master Association was given the duty and responsibility to manage, maintain and operate the common facilities referred to in paragraph 8, supra, of this complaint, as well as the authority to levy and collect assessments (hereinafter referred to as the "Master Unit Assessment") for that purpose from, among others, the unit owners of both the Edgewater Isle North subdivision and the Edgewater Isle South subdivision.

10. Plaintiff Master Association is informed and believes, and thereon alleges that, approximately from the time of the formation of each of the associations, Master, North and South, to and through June 30,1999, (hereinafter referred to as the "Payment

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Period"), both the Edgewater Isle North Homeowners Association and the Edgewater Isle South Owners Association orally agreed to collect from their respective unit owners a monthly assessment amount that would include the Master Assessment amount that each unit owner was obligated to pay to the Master Unit Association, which Master Unit Assessment amount would then be paid to the Master Association by both the Edgewater Isle North Homeowners Association and the Edgewater Isle South Owners Association as those Associations were invoiced on a monthly basis, according to an open book account; in exchange for which the Master Association agreed not to assess the unit owners of the North Association separately for the Master Unit Assessment, but rather to provide the monthly invoices directly to the Edgewater Isle North Homeowners Association (said agreement hereinafter referred to as the "Collection Agreement").

11. As a result of the Collection Agreement, a fiduciary relationship existed between the Master Association, as principal, and the Edgewater Isle North Homeowners Association, as agent.

12. Plaintiff Master Association is informed and believes and thereon alleges that over the Payment Period, the Edgewater Isle North Homeowners Association levied and collected Master Unit Assessments, as agent for the Master Association, from their unit owners and held them in trust to be paid to the Master Association pursuant to monthly invoices from the Master Association to the Edgewater Isle North Homeowners Association.

13. Plaintiff Master Association is infonned and believes, and thereon alleges that over the Payment Period, the Edgewater Isle North Homeowners Association did not always pay the total amount that was invoiced by the Master Association to the Master Association, with the result that a running receivable balance began to accrue.

14. Plaintiff Master Association is informed and believes, and thereon alleges that as of December 31, 1997, the principal receivable balance owed by the Edgewater Isle North Homeowners Association to the Master Association was $63,303.29; that as of December 31, 1998, the principal receivable balance owed by the Edgewater Isle North Homeowners Association to the Master Association had been reduced to $54,829.05; and that as of October 31, 1999, the principal receivable balance owed by the Edgewater Isle North Homeowners Association to the Master Association had been reduced to

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$34,221.26.

15. In the first half of the year 1999, the Edgewater Isle North Homeowners Association notified the Master Association that the Edgewater Isle North Homeowners Association would, after June 30, 1999, no longer levy and/or collect from the unit owners of the Edgewater Isle North Homeowners Association the Master Unit Assessment, and that the Master Association would thereafter have to levy and assess this amount directly from those unit owners.

16. Although the Edgewater Isle North Homeowners Association continued to make payments on it~ outstanding balance owed to the Master Association, the Edgewater Isle North Homeowners Association as of October 31, 1999, owed to the Master Association the principal receivable balance of $34,221.26 (hereinafter referred to as the "Principal Balance").

l7. Although the Master Association continues to invoice the Edgewater Isle North Homeowners Association for the Principal Balance together with other charges owed by the Edgewater Isle North Homeowners Association, the Edgewater Isle North Homeowners Association has only paid the other charges billed and has not, since October 31 J 1999, made any further payments to reduce the Principal Balance.

18. Plaintiff Master Association is informed and believes, and thereon alleges that, although the Edgewater Isle North Homeowners Association has and continues to acknowledge that it owes at least a portion of the Principal Balance to the Master Association, the Edgewater Isle North Homeowners Association now disputes the amount owed.

19. Although the Master Association has made available to representatives of the Edgewater Isle North Homeowners Association the raw data upon which the monthly invoices from the Master Association to the Edgewater Isle North Homeowners Association were based, and provided to representatives of the Edgewater Isle North Homeowners Association a financial review of the invoices by a Certified Public Accountant, the Edgewater Isle North Homeowners Association continues to dispute the amount of the Principal Balance and has failed and/or refused to indicate to the Master Association the amount in dispute.

 

FIRST CAUSE OF ACTION (Breach of Contract)

20. Plaintiff Master Association incorporates in this First Cause of Action paragraphs 1 through 19, inclusive, of the General Allegations of this complaint as though fully

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set forth herein.

21. Plaintiff Master Association has performed all of the conditions, covenants and promises required on its part to he performed in accordance with the terms and conditions of the Collection Agreement.

22. Plaintiff Master Association is informed and believes, and thereon alleges that, pursuant to the Collection Agreement, defendants agreed to and were obligated to levy and assess the Master Unit assessment, collect said amount from each afthe unit owners in the Edgewater Isle North Homeowners Association and'pay said amounts collected to the Master Association. pursuant to monthly invoice submitted to the Master Association to the Edgewater Isle North Homeowners Association.

23. Plaintiff Master Association is informed and believes, and thereon alleges that defendants breached the Collection Agreement in that said defendants represented to the unit owners of the Edgewater Isle North Homeowners Association that a portion of each of their monthly assessments was to cover the cost of the monthly Master Unit Assessment, and thereafter levied and collected from the unit owners of the Edgewater Isle North Homeowners Association on a monthly basis over the Payment Period the Master Unit Assessment, but thereafter failed to pay from those collected sums the full amount of the invoiced amounts submitted to the Edgewater Isle North Homeowners Association by the Master Association.

24. Plaintiff Master Association is informed and believes, and thereon alleges that defendants further breached the Collection Agreement in that said defendants, long after being invoiced by the Master Association, challenged the amount of the invoices and have now failed to pay any further amounts to tbe Master Association so as to reduce the Principal Balance in spite of the fact that the Edgewater Isle North Homeowners Association has acknowledged that it does owe to the Master Association at least a portion of the Principal Balance.

25. As a direct and proximate result of the acts and omissions of said defendants, plaintiff Master Association has sustained and continues to sustain damage in that plaintiff Master Association has not been paid the Principal Balance, nor any portion

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thereof, and has not had the use of those funds to pay its operating expenses and adequately fund its reserves, since said Principal Amount became due and owing to plaintiff Master Association.

26. As a direct and proximate result of the acts and omissions of said defendants, plaintiff Master Association has been required to consult with and retain legal counsel to institute this action to the sums due to plaintiff which defendants refuse to pay. WHEREFORE, plaintiff prays for judgment against defendants, and each of them, as hereinafter set forth.

 

SECOND CAUSE OF ACTION (Breach of Open Book Account)

27. Plaintiff hereby incorporates by reference in this Second Cause of AC~lon each and every allegation set forth in paragraphs I through 19, inclusive, and paragraphs 21 through 26, inclusive, as though fully set forth herein.

28. Within four years last past, defendants became indebted to plaintiff on an open book account for money due in the sum of $34.221.26 together with interest thereon at the legal rate, as a result of the Collection Agreement.

29. Plaintiff has repeatedly demanded payment of this amount from defendants, who have refused and failed to pay.

WHEREFORE, plaintiff prays for judgment against defendants, and each of them, as hereinafter set forth.

THIRD CAUSE OF ACTION  (Common Count)

30. Plaintiff hereby incorporates by reference in this Third Cause of Action each and every allegation set forth in paragraphs 1 through 19, inclusive, and paragraphs 21 through 26, inclusive, as though fully set forth herein.

31. Within four years last past, defendants became indebted to plaintiff in the sum of $34,221.26, together with interest thereon at the legal rate.

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32. Plaintiff has repeatedly demanded payment oflhis amount from defendants, who have refused and failed to pay.

WHEREFORE, plaintiff prays for judgment against defendants, and each of them, as hereinafter set forth.

 

FOURTH CAUSE OF ACTION (Breach of Fiduciary Duty)

33. Plaintiff hereby incorporates by reference in this Fourth Cause of Action each and every allegation set forth in paragraphs I through 19, inclusive, and paragraphs 21 through 26, inclusive, as though fully set forth herein.

34. Plaintiff Master Association is informed and believes, and thereon alleges that defendants breached their fiduciary obligation to plaintiff in that said defendants represented to the unit owners of the Edgewater Isle North Homeowners Association that a portion of each of their monthly assessments was to cover the cost of the monthly Master Unit Assessment, and thereafter levied and collected from the unit owners of the Edgewater Isle North Homeowners Association on a monthly basis over the Payment Period the Master Unit Assessment, but thereafter failed to pay from Ihose collected sums the full amount of the invoiced amounts submitted to the Edgewater Isle North Homeowners Association by the Master Association.

35. Plaintiff Master Association is informed and believes, and thereon alleges that defendants further breached their fiduciary obligation 10 plaintiff in that said defendants, long after being invoiced by the Master Association, challenged the amount of the invoices and have now failed to pay any further amounts to the Master Association so as to reduce the Principal Balance in spite of the fact that the Edgewater Isle North Homeowners Association has acknowledged that it does owe to the Master Association at least a portion of the Principal Balance. WHEREFORE, plaintiff prays for judgment against defendants, and each of them, as hereinafter set forth.

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FIFTH CAUSE OF ACTION (Constructive Trust)

36. Plaintiff hereby incorporates by reference in this Fifth Cause of Action each and every allegation set forth in paragraphs 1 through 19, inclusive, paragraphs 21 through 26, inclusive, and paragraphs 34 and 35, inclusive, as though fully set forth herein.

37. By virtue of defendants' violation of its fiduciary relationship with plaintiff, defendants have collected Master Unit Assessments for the unit owners of the Edgewater Isle North subdivision and retained said funds who now holds said funds as a constructive trustee for the benefit of plaintiff.

WHEREFORE, plaintiff prays for judgment against defendants, and each of them, as hereinafter set forth.

PRAYER FOR RELIEF

1. For damages in the principal amount of $34,221.26, together with interest thereon at the legal rate from the date that each payment became due and owing to plaintiff;

2. For an order declaring that defendants hold $34,221.26, together with interest thereon at the legal rate from the date Ihat each payment became due and owing to plaintiff, in trust for plaintiff;

3. For reasonable attorneys fees, costs and expenses of litigation, according to proof; and

4. For such other and further relief as the court may deem just and proper.

 

Dated: January 31, 2001

Respectfully submitted,

LAW OFFICE OF JOHN D. GARVIC

John Garvic, Attorney for Plaintiff Edgewater Isle Master Association

 

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