RSS Feed

Missouri appeals court reverses trial court, slaps down bank that manipulated HOA


After the real estate bubble burst, many Missouri banks ended up owning a majority of lots in subdivisions, standing in the shoes of the developers–the banks’ previous customers. Banks face many challenges in their effort to sell the lots that they had to take through foreclosure; not the least is high-end architectural standards imposed by the original developer that seem unworkable in this more austere era.

Jefferson Bank & Trust found itself in this fix after it became the owner of 13 of the 18 lots in the Arbors at Sugar Creek subdivision. In 2005, the developer had recorded covenants that gave the board of the homeowners’ association (HOA) approval rights over any new construction. The owners of the five existing homes  protested when the bank and its new partner proposed to build what the homeowners characterized as “tract houses.”

Because the original HOA had been dissolved by the Missouri Secretary of State for failing to file annual reports, the bank formed a new HOA and recorded a new declaration of covenants, since it had more than 67% of the voting power, as required by the old declaration for amendment. The new declaration eliminated the old declaration’s requirement that HOA board members be residents, and the bank appointed its executives to be the new board.

After a bunch of wrangling in court, the trial court ruled that the new HOA was legitimate, that the new board acted reasonably in approving the new building plans, asking that the HOA reimburse the bank for subdivision maintenance costs paid by the bank, and awarding other damages against the lot owners.

The appeals court in this October 28, 2014 decision, agreed that the new HOA was the successor to the old HOA, but threw out the rest of the trial court’s judgment, to find that the bank acted in bad faith, having

  • relied on its acquisition of majority voting power to unilaterally deny homeowners the benefit of self-governance that they received under the original declaration
  • used its command of the subdivision’s affairs to advance in own financial interest in redeveloping the subdivision in a manner contrary to the wishes of the newly disenfranchised residents
  • violated the implied covenant of good faith and fair dealing by amending the declaration and removing the residency requirement for board members so it could appoint its own executives to the board.

Having stacked the board of the new HOA, the appeals court ruled “all the board’s subsequent actions are null and void,” including the approval of development plans submitted by the bank’s partner.

The critical factor here is the requirement of the original declaration that the HOA board members be residents. The overreaching on this issue tainted everything else that the bank did.

It’s unusual to see a court roll over a bank in favor of homeowners. My guess is that the Missouri Supreme Court will be asked to review this decision.

About these ads

Quitclaim deed to living trust can terminate title insurance coverage and trigger legal malpractice claim


When my clients discovered that a neighbor’s deed included a strip of land across their driveway, I advised them to make a claim on their title insurance policy. The claim was denied, not because it wasn’t real, but because my clients had inadvertently terminated their policy of title insurance by conveying their land to their living trust by quitclaim deed rather than by warranty deed.

Title insurance in the United States is usually issued on policy forms created by the American Land Title Association (ALTA), which are adapted for each state. Before the adoption of the 2006 ALTA title insurance form, when the insured conveys all its interest in the real estate without warranty, the owner’s policy of title insurance terminates.

The primary way of conveying title insurance without warranty is by quitclaim deed, which is a common way of conveying property when payment is not made. How this custom developed, I don’t know, but it can be devastating if there is an ownership dispute.

The 2006 ALTA owner’s policy form includes living trusts as insureds under the title insurance policy, but most owner’s policies of title insurance are made on pre-2006 forms.

A lawyer setting up a living trust–or preparing a conveyance of a gift of real estate to a relative, a church or another charity–has two choices to avoid potential malpractice liability:

  • review the existing owner’s policy of title insurance to make sure that the conveyance won’t leave the the client unprotected if an ownership dispute pops up.
  • avoid using quitclaim deeds except with respect to property that the client never owned and other very limited circumstances.

 

Damming the Osage


Damming the Osage: The Conflicted Story of Lake of the Ozarks and Truman Reservoir by Leland and Crystal Payton.
Published by Lens & Pen Press, 4067 Franklin, Springfield MO 65807, $25 postpaid.
See http://www.dammingtheosage.com

dto-cover-720Leland and Crystal Payton, prolific authors of books with lots of photographs about the history and culture of the Ozarks and about American culture generally, have tackled the history of human use and transformation of the Osage River. Their focus is on the political and financial machinations which resulted in the construction of Bagnell Dam and Truman Dam and their impoundments in the along the northwestern boundary of the Missouri Ozarks. Their original photographs and reproductions of graphics from newspapers, maps, magazines and advertising materials, provide a collage of images of the area before and after its transformation, as well as the images created by promoters of how it might look.

The book covers the history of the residents of Osage basin, from prehistory to the present. From its origin in eastern Kansas to Bonnots Mill, the Osage flows through prairies along the northern Ozarks border into the Missouri River, at a point seven miles east of Jefferson City. Many and diverse primary sources, such as the writings of explorers and newspaper accounts, as well as the work of archaeologists, historians and other social scientists, make the book a rich trove.

The theme of book is consistent with my own take on the history of the development of North America over the past five centuries, which is that development has been driven by the opportunities created by government investment for private investors seeking wealth through the subdivision of real estate and exploitation of natural resources. George Washington was a land surveyor, as was Thomas Jefferson’s father Peter. The Washingtons, the Jeffersons and other promoters–working hand in hand with the government–used every public and private resource they could muster to carve up the Appalachian frontier and beyond into reservations, territories and states for private and public gain. Eventually, the whole country became subdivided. In the case of the valley of the Osage River, the land was divided into lake lots and condo units and multi-purpose reservoirs.

Bagnell Dam and Lake of the Ozarks

The Paytons identify Ralph Street, an “obscure Kansas City lawyer,” and Walter Craven, a mortgage banker also from Kansas City, as the fathers of Lake of the Ozarks. Street and Craven wangled a construction permit from the Federal Power Commission for the Bagnell Dam in 1924 and began acquiring options to buy land. The FPC and the Missouri Public Service Commission awarded permanent licenses for the project in 1926 to Craven, who transferred the licenses to Union Electric in 1929, after Craven failed to obtain construction financing.

Unlike other popular accounts of dam-building in the Ozarks, the Paytons pay careful attention to what existed at various times before the construction destroyed towns (Linn Creek) and roads that connected towns, cutting off neighbors from one another. The occupation by Osage Indians is described, as well as the vain attempts to modify the river to enhance navigation in the steamboat era. Later, the valley was the pathway of railroads, many of them unsuccessful. Some sites, such a Monegaw Springs in St. Clair County and Ha Ha Tonka in Camden County, were beautiful places that captured the dreams of real estate salesmen and promoters of tourism.Caplinger Mills

Once Bagnell Dam was completed in 1931, a particular flavor of tourist development was created around Lake of the Ozarks, remnants of which may be seen along the old parts of Missouri Highway 7 and US Highway 54 that have been bypassed by newer roads. The Paytons give us color and black-and-white reproductions of tourist pottery, wood carvings, fieldstone cabins, and garish billboards, as well as the intense condo development that came in the past two decades.

Truman Dam and Truman Lake

Though the Corps of Engineers had opposed the construction of dams, including Bagnell Dam, by private companies, the Corps did not have a clear legislative mandate to build dams for flood control, hydropower, and irrigation, though it had always been engaged in construction and maintenance of levees and drainage of wetlands. In 1926, Congress asked the Corps to study 180 rivers and their tributaries to examine the feasibility of federal construction of reservoirs. The Corps’ report on the Osage basin, delivered in 1933, proposed dams on Pomme de Terre, the Osage River above Osceola, and the Grand River just north of its confluence with the Osage. In 1944, FDR approved the Pick-Sloan Plan for development of the Missouri River basin, and the dams on the upper Osage were among the 107 dams authorized.

Pointing out that “Civic organizations in Warsaw, Clinton and Osceola were convinced that a dam, any dam, anywhere on the Osage would guarantee prosperity,” the Paytons designate Haysler A. Poague, a judge in Clinton, as the “stepfather” of the Truman Dam. Poague became an advocate of one large dam at Kaysinger Bluff near Warsaw, rather than the two smaller dams proposed by the Corps in 1933.

A massive flood in 1951 convinced Congress and the public that spending money to put people to work and to control and store water was worth doing; the Paytons do not point out that the most severe drought in recorded history followed the 1951 flooding, which surely added to the public support for a water project. However, funding of the project was delayed other priorities—the Vietnam War and the War on Poverty, according to the Paytons—but the land acquisition and construction began in the mid-1960s. In 1972, just as work was beginning on the dam, the Environmental Defense Fund, the Missouri chapter of the Wildlife Society, and several other organizations and citizens, including Leland Payton, filed suit in federal court seeking to stop the construction of the project.

The National Environmental Policy Act of 1969 (NEPA) required federally funded projects to be preceded by meaningful environmental impact statements, giving environmentalists a tool to challenge the adequacy of the investigation of ecological impacts of projects. In the case of the Truman Dam, the opponents were concerned about the fate of the paddlefish, among other issues, and could also point out that the cost-benefit analysis provided by the Corps strained to show net economic benefits.

The final third of Damming the Osage depicts the political and legal wrangling over whether Truman Dam and its impoundment would be completed.
Missouri’s congressional delegation led by Senator Stuart Symington, members of the state legislature, and virtually all local officials, as well as chambers of commerce, supported the project, even though biologists and many farmers opposed it.

While the town of Clinton seems to have held its own, most of the Truman Lake area has continued to decline. Missourians have had to cope with the negatives. The Missouri Department of Conservation learned to raise paddlefish in hatcheries, so that they would not be extirpated in the Osage basin. Engineering oversights resulted in fish kills below Truman Dam and massive erosion below Stockton Dam on the Sac River, a major tributary of the Osage, which required additional land acquisition and bank stabilization.

During the same era, the Corps of Engineers’ will and ability to marshal support for dam projects seems to have ended. The Endangered Species Act of 1973 provided environmentalists with stronger arguments. After tremendous fights, Congress deauthorized dam projects on the Meramec River in Missouri and the Buffalo River in Arkansas, as elected officials listened to a broader swath of their constituents and began to question the wisdom of destroying the last few free-flowing rivers.

The Paytons have captured the spirit of the times the book covered. The text is thorough and the images are vivid. While Leland Payton was clearly opposed to the construction of Truman Dam, the positions of the proponents are fairly explained. Damming the Osage is an essential chronicle of how dams and reservoirs gain momentum and get built, even though they make sense perhaps for only a minority.Truman Dam

Obtaining copies of Missouri surveys and plats online


Wilsons Lake plat

Getting a copy of an old subdivision plat or survey isn’t difficult, but it can require a visit to a county recorder’s office, which may or may not have the ability to print the plat or survey on one sheet of paper or to give it to you in electronic form.

Thanks to a website managed by the Missouri Department of Agriculture, called the “Land Survey Index,” https://apps.mda.mo.gov/molandsurveyindex/, anybody with an internet connection can search for recorded surveys and plats of land anywhere in Missouri and download the documents for a dollar each, plus a one dollar processing fee.

If you need a certified copy, you will still need to visit with the county recorder.

Timeshare resale scam uses my name. Ugh.


I received a call today from a man who claimed I advised him a few days ago send $800 to a timeshare resale company called Timeshare Concepts.

I told the man that I didn’t remember having spoken to him. He claimed that I had answered the phone and identified myself as Counselor Harry Styron when he called a number that Timeshare Concepts gave to him. Turns out the number he called was not my number. Today, he found my actual office number on the internet, dialed it, and got the real me.

My partner called the imposter’s number and a recording answered with “Counselor Harry Styron,” and promised to return the call. She didn’t leave a message, but has received several callback attempts.

I checked with the Missouri Attorney General’s consumer division and learned that scammers, some of them outside the US, are using names of individuals and businesses to gain credibility. I’m not flattered.

I wish I knew a legitimate timeshare resale company or some other option for disposal of timeshares by people who are unhappy with timeshare ownership.

 

Shooting on a Meramec gravel bar draws attention to uncertain property rights


The July 20 shooting on a gravel bar along the Meramec River,  downstream from the Highway 19 bridge south of Cuba, Missouri, has drawn attention to the uncertainties of the rights of floaters to be on gravel bars and areas adjacent to the river.  This section of the Meramec River, downstream from Maramec Spring, carries thousands of canoes, rafts and kayaks every year.

The reports of the shooting incident recount an argument between James Robert Crocker, apparently the owner of land along the river, and a group of floaters who had stopped on a gravel bar for the usual reasons. Crocker confronted the group of floaters. An argument ensued over whether the floaters were trespassing, according to Crocker’s statement to the police. Crocker shot one of the floaters, Paul Dart, who died on the way to the hospital.

On Monday, I received the first of several calls from the media. Kim Bell, a reporter for the St. Louis Post-Dispatch told me that somebody at the Missouri Department of Conservation told her that I was knowledgeable about issues relating to rights of property owners and persons using streams for recreation. The story that Kim Bell wrote for the Post-Dispatch’s online edition has been widely copied, and my flippant remark that Missouri doesn’t yet have a stand-your-gravel-bar law became the basis for a Post-Dispatch editorial that has also circulated around the internet and appeared in several newspapers.

Kim Bell accurately reported what I said, but part of my remarks appear to be a misstatement of law. I said, “You are on private property, but you have a right to be there if it’s a navigable stream and as long as you are on a gravel bar that is submerged during parts of the year, because it’s part of the stream bed.”

I should have also explained that the public’s right to be on a stream doesn’t depend solely on whether the stream is navigable. In Elder v. Delcour (1954), the Missouri Supreme Court held that the public has an easement over the Meramec River, even though it was not navigable:

we must and do hold that the waters of the Meramec River are public waters and the submerged area of its channel over and across appellant’s farm is a public highway for travel and passage by floating and by wading, for business or for pleasure, and that in traveling the course of the stream by canoe or wading, respondent was not a trespasser on the property of appellant.

Even though the Meramec River in Dent and Crawford counties has been determined to be non-navigable by the Missouri Supreme Court, it is still a public highway as a matter of law. A trespass does not occur by canoeing or wading on it. The issue of navigability has to do with ownership of the stream bed, not the right to be in a the bed of a stream. Neither the Missouri Supreme Court or the legislature have given us any clear way to determine whether any other stream’s waters are “public waters.”

To get to the heart of the dispute between Crocker and the floaters, what about the right to be on a gravel bar?  In Elder v. Delcour, the court cites another case for idea that the right to float on a stream includes other incidental rights:

The right to float is but a right of passage, and includes only such rights as are incident to the use of the stream for that purpose, and necessary to render such use reasonably available.

If people could not stop on a gravel bar to dump water out of a swamped boat, eat lunch or attend to calls of nature, the rights of passage would be greatly inhibited if not denied. But permissible incidental rights do not ordinarily include the right to walk outside the course of a stream  into pastures and woods,  dump litter, broadcast music, shoot fireworks, cut firewood, pilfer outbuildings and disturb livestock and human residents.

My essay on Missouri stream law is here.

Chasing manufacturing jobs? Good luck.


Every civic-minded American believes that prosperity is simply a matter of a factory coming to his town. Not one one that belches pollution, but “light industry” or “clean manufacturing.”

While a few such factories exist and a new one will come to the Ozarks once in a while, I’m doubtful that a policy directed at reeling in these factories should be a major part of an economic development strategy.

In his very brief essay, “Fetish for making things ignore real work,” John Kay breaks down the purchase price of an iPhone, which (ignoring the carrier subsidy, or what Verizon or ATT discounts it to you to get you to sign a contract) is about $700. He says the valuable parts–the camera and flash drive, not likely to be made by Ozarks labor–account for about $200. The assembly and the cheap parts amount to about $20. Most of the rest of the purchase price is returned to those brilliant people who designed the iPhone, its operating system, and its advertising and their shareholders.

Kay’s main argument is relevant to the local economic development director and chamber of commerce committee:

Where will the jobs come from in a service-based economy, manufacturing fetishists ask?

From doing here the things that cannot be done better elsewhere, either because of the particularity of the skills they require, or because these activities can only be performed close to home.

Manufacturing was once a principal source of low-skilled employment but this can no longer be true in advanced economies.

Most unskilled jobs in developed countries are necessarily in personal services. Workers in China can assemble your iPhone but they cannot serve you lunch, collect your refuse or bathe your grandmother.

If you’re wondering where in the USA the good technical jobs are, and which regions are experiencing growth, check out “The emerging technical, professional and scientific sector” by Rob Sentz. Missouri and Arkansas are losers, though the Kansas City area has significant growth.

If we want to have good jobs in the Ozarks, we have to invest our own money and energy. A big and difficult part of this challenge lies in raising expectations of our children, our schools, our civic and business organizations and our elected officials.

Otherwise, the best that many of our children can hope for is a job serving lunches, collecting refuse and bathing their elderly parents and grandparents.

Follow

Get every new post delivered to your Inbox.

Join 404 other followers

%d bloggers like this: