Eddie Wade, heading north from Fayetteville, was stopped at a roadblock, where he was arrested for driving drunk. The trial judge dismissed the charges, and the sheriff appealed to the Arkansas Supreme Court. The dismissal was upheld. Not because Eddie Wade was sober, but because the Benton County Sheriff set up his roadblock in Washington County.

Eldon Bugg befriended an elderly woman at church and borrowed money from her, signing a promissory note. He created a false paper to show that his debt had been repaid. Her estate sued him for the debt and got a judgment. He refused to pay, though the court found that he had the ability to pay. Citing him for contempt of court, the judge ordered him to be locked up. The Missouri Court of Appeals ordered his release. As every American knows (or knew during the week that they studied the Constitution) the U. S. Constitution abolished imprisonment for debts.

These appellate decisions, handed down this week–Wade v. Benton County Sheriff and Estate of Downs v. Bugg– show that constitutional principles are still at work to restrain sheriffs and judges from acting outside their powers to brand people as criminals or to take away their liberty. These opinions are short and worth reading.

Sometimes the government officials seem oblivious. The Benton County Sheriff knew the location of the county line and surely knew that his power to stop cars without probable cause extended only to Benton County. Roadblocks can be lawful. Because they tread on the constitutional protections against arrest without probable cause and unreasonable searches and seizures, roadblocks must follow rules.

The judge who sent Bugg to the clink was probably annoyed by Bugg’s apparently awful treatment of Laura Downs and his defiance of various court orders. But the judge crossed a line by jailing someone who failed to pay a private loan made between consenting adults. In contrast, failure to pay a debt that exists as a matter of law, such as a judgment to pay child support, can lawfully result in jail time as punishment.

We may think that Eddie Wade and Eldon Bugg behaved badly and should be punished. If sheriffs and judges aren’t held to constitutional limits, any of us could be locked up for doing anything that offended a sheriff, a  judge or another governmental official intoxicated with power.

Elbert and Irma got married. Irma already had a daughter, Deborah. Elbert had a favorite nephew, Robert.

As is often the case, in 1958 Elbert and Irma signed the same will. Not knowing who would die first, their will had to account for both possibilities.

• If Elbert died first, half of their jointly-owned real estate would go to nephew Robert, who would essentially step into Elbert’s shoes, owning that joint property with Irma.
• If Irma died first, all her property would be entirely owned by Elbert, until his death, when it would pass in equal shares to Robert and Deborah.

Some time later, Elbert and Irma were blessed with a son, Mark. But the joint will was never changed.

Elbert died in 2005. Robert found the will. Irma petitioned the Carroll County (Arkansas) circuit court to name her as personal representative, but asked the court to disregard the will and determine that her son Mark receive all Elbert’s property.

Elbert’s nephew Robert objected, arguing that Irma had signed the joint will with Elbert, leaving Elbert’s half of their joint property to Robert. The joint will it was a contract between Irma and Elbert, and she shouldn’t be allowed to claim otherwise.

Like many states, Arkansas has an after-b0rn child statute. The purpose of such statutes is to “guard against testamentary thoughtlessness,” according to the opinion of the Arkansas Court of Appeals in  Robert Dotson v. Irma Dotson.

The “testamentary thoughtlessness” the court referred to is the unintentional omission of a child in the making of a will. A “testament” is a statement made in contemplation of death. The term “last will and testament” is somewhat redundant, because a will is a testament.  Elbert and Irma had no children together when they made their will, and the terms of their will showed that they gave no thought to having a child in the future.

If a child is not named in a will in Arkansas (and many other states), the child has a right to claim the same share that the child would inherit if there was no will.

The law generally requires strong evidence of intent to disinherit a child. To show intent to disinherit, the will must identify the child and specifically state that the child gets nothing or only something of little value.  Simply omitting a child from the will is not enough to show the intent to disinherit. If a child was not born when the will was made, there is not likely to be any evidence of intent to disinherit that unborn child, and the after-born child statute will come to that child’s rescue.

As is often the case, the appellate court was asked to resolve a situation in which each party’s claim had firm legal basis.

Courts are relied upon to enforce contracts, including wills, and the common understanding that courts will do so gives great stability to American economic activities.

The after-born child statute is also important, so that children won’t be deprived of the inheritances that they would otherwise be entitled to because of a parent forgetting to change his will each time a child is born, though a well-drafted will provides for afterborn children, so revision is not required with the birth of a child.

The Arkansas Court of Appeals decided that the statutory right applicable to this situation should win over the more general principle that a contract be enforced according to its terms. The afterborn child statute was specifically  intended by the Arkansas legislature to be applied in such cases. Until Elbert died, Robert had only an expectancy. But from the time Mark was born, he had a statutory right to be the heir of his parents, displacing Robert’s expectancy.

How can you tell when somebody has lost the ability to understand a simple transaction? In Ashton Trust v Caraway, an Arkansas court considered an 86- year-old womans’s penmanship in in determining that she knew what she was doing in selling land, even though her son contended that she had Alzheimer’s. Who knew that penmanship could be an important part of determining whether a person has the legal ability to enter into a contract to sell real estate?

There are five million Americans over the age of 85, and they own lots of real estate and other assets. The transfer of assets from elderly people poses a difficult problem for buyers, lenders, heirs and courts, all of whom need to know that the person parting with property is doing so with understanding.

Lillian Brooks was living in California in 2007 when the phone rang. It was Kohl Caraway, and he wanted to buy 80 acres that the Ashton  Trust owned in Izard County, Arkansas. Mrs. Brooks was the trustee of the Ashton Trust. According to Caraway’s trial testimony, she said she wanted a few days to think about it and asked Caraway to call her back. He called her back and she said that she would sell and asked Caraway to make an offer. He offered $1,000 an acre. Caraway testified that she told him that $1,000 an acre sounded like a fair price.

After a conference call with the Caraways and Mrs. Brooks, the Caraways’ lawyer faxed the signed contract to Mrs. Brooks who dated it, signed it, put the word “trust” under her signature, and faxed it back to the lawyer on April 10, 2007. The lawyer did not deposit the $5,000 check, but kept it in the file.

Two days later, the lawyer received a fax containing a handwritten letter from Mrs. Brooks,  stating, “I hereby rescind the offer and acceptance signed by me for the sale of the Arkansas property dated by me, Lillian A. Brooks, April 11, 2007.”  With this letter was a letter from Mrs. Brooks’s son, stating that he held a power of attorney from her and that he was rescinding the contract. The son also accused the Caraways of taking unfair advantage of an 85-year-old incompetent and incapacitated woman, by attempting to purchase the property far below its actual value.

The Caraways filed suit against the Ashton Trust that owned the 80 acres and against Mrs. Brooks as trustee. The suit asked for specific performance, seeking a court order to require the seller to perform the contract by closing on the sale of the property. The Ashton Trust and Mrs. Brooks answered by claiming that Mrs. Brooks lacked the legal capacity to enter into the contract and was under duress and coercion.

The trial court ordered Mrs. Brooks to sign the deed and close the deal.

The court of appeals looked at the earnest money clause in the contract and found no language requiring that the earnest money check be deposited. Nor was there evidence in the trial record to suggest that the check was no good.

Next the court of appeals reviewed the testimony offered at trial concerning Mrs. Brooks’s legal competency and the trial judge’s findings. The trial judge noted that none of the three doctors testified as to Mrs. Brooks’s actual mental capacity or state of mind at the time she signed the  contract. The judge went on:

First, Mrs. Brooks drafted and caused to be faxed to Izard County Abstract Company a well written, and in beautiful handwriting, letter purporting to ‘rescind’ the subject contract. Secondly, Mrs. Brooks drafted, again in beautiful handwriting, a power of attorney for her son….I find that in order to be able to even contemplate documents of this nature, her mental abilities had to be such that she was aware of the contract, that she had signed said contract, that that she owned land in Arkansas that the contract purported to sell. In addition, Mrs. Brooks insisted upon an increase in the amount of earnest money from $1,000.00 to $5,000.00, and she personally noted that increase in the amount of earnest money on the face of the contract.

The court of appeals deferred to the trial judge’s “superior position to determine the credibility of the witnesses and the weight to be accorded to their testimony,” also noting the lack of any evidence of duress or coercion, affirming the order of specific performance.

In reality, the trial judge’s discussion of penmanship was irrelevant musing.  Mrs. Brooks and her son lost their case because they didn’t produce convincing  medical testimony about her mental capacity. I’m sure all the judges would admit that many sane people have terrible handwriting, and that it’s conceivable that a calligrapher could be unable to understand a simple business transaction.

Property taxes in Missouri and most states apply to all property that isn’t exempted by a provision of the state constitution or statutes. The exemptions from Missouri real estate taxes are listed in section 137.100 of the Revised Statutes of Missouri, which includes government property and

All property, real and personal, actually and regularly used exclusively for religious worship, for schools and colleges, or for purposes purely charitable and not held for private or corporate profit….

Note that the exemption is based on use not ownership.

A recent opinion of the Missouri court of appeals, M’Shoogy Animal Rescue v. Andrew County Assessor, reversed the determination of the State Tax Commission, which had indicated that rescue and medical treatment of  animals was not the kind of charitable use that would exempt a facility from property tax.

The Andrew County assessor and board of equalization and the State Tax Commission all argued that Missouri law had never allowed property tax exemptions for facilities devoted to charitable activities other than those charities that help humans.

Indeed, the court of appeals had to turn to cases from other states, many of which had reasoned that humans benefit from charity to animals, to find precedents for recognizing charity to animals as an activity benefiting humans, thereby justifying a charitable tax exemption.

Is this legislation from the bench? If so, should we agree with it?

Donald Harington was much on my mind last Saturday, November 7, as I attended a wedding in the vicinity of Murray, Arkansas, a place well off the paved roads, southwest of Jasper, the county seat of Newton County. On this spectacular day–an outdoor wedding in November!–I watched Julie Brown and Dan Osterkamp start their married life in the midst of family and friends, against a stunning limestone bluff, to the accompaniment of a gurgling stream.

On this lovely day, Donald Harington died of pneumonia, ending of a long battle with cancer, in Fayetteville, where he had lived and worked for many years as a professor of art history at the University of Arkansas. The New York Times obituary of Donald Harington is as thoughtful as any I’ve read. If you know of others, please add them below.

Harington is well-known in the Ozarks for his novels that are set in Newton County, Arkansas, around the community he called Staymore. The quality of Harington’s fiction seems erratic to me, except that it is always endearing and often hilarious. He created characters who settled Staymore, or were born there, leaving and returning, over the last few hundred years. He gives them ideas appropriate for their times, houses them in a variety of structures, and links them to one another in many ways, genetic, financial, sexual, and political.

One branch of my ancestry, led by Ezekiel and Talitha Shaddox, homesteaded in Newton County in the 1850s, just below Pruitt, where Mill Creek spills into the Buffalo River. Harington’s ability to evoke what Newton County was like in times past adds color and detail to my own mental pictures of the lives and surroundings of my forebears.

The fiction of the Ozarks is rich but not deep.

Harold Bell Wright’s novels, such as The Shepherd of the Hills (1907), are the prototypes of romance novels, immensely popular but without great characterization. Thames Williamson’s short novel The Woods Colt (1933) tells a gripping story of a family involved with an illegal distillery and rough characters in northern Arkansas and is enhanced by Williamson’s great ear for dialect and dialog. The finely-crafted novels of Douglas Jones describe the Civil War in the Ozarks.

Wilson Rawls’s Where the Red Fern Grows (1961), set in the Oklahoma Ozarks near Tahlequah, is a powerful story, up there with and in the genre of Shane and Old Yeller: I’ve been told that the 1973 movie version was shown at a local coonhunters’ association meeting, after which all the coonhunters walked out to their trucks without speaking or exchanging glances, keeping their tears to themselves.

More recently, Daniel Woodrell’s novels depict rural poverty and social disintegration in the modern Ozarks. I have not read Gary Blackwood’s well-regarded novels, such as Moonshine (1999).

Dee Brown, whose historical fiction and non-fiction occasionally touched the Ozarks, consistently wrote at a high level, including in Way to Bright Star (1998), which describes a couple of young men who were hired to take a couple of camels through northwestern Arkansas and southern Missouri during the Civil War. Brown’s 1993 memoir When the Century Was Young: A Writer’s Notebook includes the comedic tale of Brown and a friend being thrown in the Newton County jail for a crime they didn’t commit. Brown is most famous for Bury My Heart at Wounded Knee (1970), which is a collection of essays about the U. S. government’s execution of Native Americans, and his best-selling novel Creek Mary’s Blood (1980), which is the fictionalized story of several Cherokee families (including several of my maternal ancestors and collateral kin) from the sixteenth through the 20th centuries. Some of the scenes in Creek Mary’s Blood take place in the Ozarks.

Harington’s contribution to Ozarks literature is substantial.

If you haven’t read Donald Harington’s fiction, you might want to start with The Architecture of the Arkansas Ozarks (1987), and work through the twelve other novels. I’m also a fan of Let Us Build a City, a non-fictional exploration of eleven places in the Ozarks with “city” in their names, with special attention to the aspirations of the promoters of these towns that never grew. This essay by Steve Reed describes Harington’s distinct skills as a storyteller and gives an overview of his fiction.

If you want to see a lawyer cringe, ask how he or she likes property line disputes or fights over trees near property lines.

The case of Lau v. Pugh shows why lawyers (including trial judges and appellate judges) hate such cases. After all the fighting and expense, nobody is happy. Here’s how it often plays out.

Happy new neighbors

The Laus and the Pughs each bought adjoining small acreages in Texas County, Missouri, and enjoyed sharing dinners and playing cards with one another. Mr. Lau asked Mr. Pugh to teach him how to safely fell a tree, and Mr. Pugh was apparently happy to help, and Mrs. Pugh pitched in, as they took down three trees in May 2006.

The Laus hired Mr. Davis to take down some more trees, and Davis took took the trunks for lumber and added the limbs from the trees in to an existing pile near the boundary line of the Lau and Pugh tracts.

The demand letter

The Pughs thought that the brush pile was on their land, so they asked the Laus to move it in a letter. After the letter, the neighbors met at the brush pile and argued.

The Laus hired a guy with a bulldozer to push the pile onto the Lau tract and asked him to place a line of logs on what Mr. Lau thought was the property line. In September 2006, Mr. Pugh sent the Laus an invoice and “statement of mechanics’ lien” for his work in helping Mr. Lau fell three trees a few months earlier, charging him $150 per tree.

The Laus ordered a survey and found that the trees that Davis had removed and the brush pile that Davis added to were actually on the Pugh property.

The lawsuit and trial

Knowing that they had cut trees from the Pughs’ land, the Laus didn’t apologize, but sued Mr. Pugh, challenging the validity of his claim to a mechanics’ lien, asserting that the lien claim slandered the title to their property. Mr. Pugh counterclaimed for money for restoration of the damage to his land from the removal of trees by the Laus’ contractor, for the scraping of his land by the bulldozer and for the value of his labor in assisting Mr. Lau with the removal of the three trees.

At trial, a horticulturist testified that the replacement of trees removed from the Pugh parcel and other revegetation would cost about $15,000. A real estate appraiser concluded that the damage to the Pugh tract reduced its value by about $2,200.

The trial court determined that Mr. Pugh’s mechanics’ lien was no good, because his assistance with felling three trees with Mr. Lau was a friendly gesture, not done for pay. The trial court also awarded the Laus $1,815 to compensate them for the slander of title (the filing of an invalid mechanics’ lien) and related court costs. But the trial court also found for Mr. Pugh on his claim for damage to his property by the removal of trees and the dozing, awarding him $3,100 and costs.

After a year of litigation and a trial, the judge essentially awarded Mr. Pugh $1,285 ($3,100 minus $1,815). And nobody was happy.

The court of appeals reviews

Mr. Pugh appealed, claiming that he had released the mechanics’ lien so that he shouldn’t be liable for the $1,815 damages, most of which consisted of the legal fees for the attorney for Mr. and Mrs. Lau. Mr. Pugh also claimed that the judge made a mistake by not awarding treble damages for the removal of trees and scraping of his property.

The court of appeals reviewed the case law from around the country and concluded that attorney fees should be recoverable as special damages in a slander of title action, even though there was no Missouri appellate case or statute giving any guidance on the question. Ordinarily, attorney fees may not be recovered in the absence of a contract provision or statute authorizing a court to award attorney fees to the successful party. The appellate court noted that the Laus had spent nearly $6,000 in the litigation, and that the trial court was competent to have determined that $1,815 of this total was justified for the slander of title portion of the lawsuit.

The court of appeals found no evidence in the record that Mr. Pugh had released his mechanics’ lien claim.

Most interesting is the court of appeal’s discussion of the question of the proper measure of damages for the cutting down of 10 trees on the Pugh tract. The Missouri statute on cutting down trees on the property of another (section 537.340 RSMo) gets people, including some lawyers, very excited, because it provides for treble damages and does not require proof of negligence or intent.

But the court of appeals didn’t read section 537.340 by itself.  The court also looked at section 537.360, which states that only single damages may be awarded if the person who removed the trees had “probable cause” to believe that he was on his own property when he cut down the trees. Looking at the trial evidence, the appellate court didn’t find any evidence relating to probable cause on which the trial court could have based an award of treble damages. Moreover, the appellate court noted that Mr. Pugh gave up the right to treble damages by testifying that he was “not asking for anything for the trees that were moved,” but merely “asking that the injury to the land be restored.”

What was accomplished?

If you winnow all the facts as they appear in the court of appeals opinion, here’s what you find:

• 10 trees were removed from a wooded tract that probably had several hundred trees.
• A real estate appraiser had to strain to find that the tract was devalued at all by the removal of the 10 trees.
• Friendly neighbors spent three years fighting and may never be friendly again.
• Together the neighbors probably spent well over $10,000 in legal fees and expert witness fees.
• In the end, the Laus owed Mr. Pugh the sum of $1,285.

That’s why lawyers cringe when clients want to file lawsuits over property lines and damage to trees. They know that it is unlikely that the parties will be happy in the end, and they’ll blame the lawyers and the legal system for wasting the parties’ time and money.

The blog Caveat Emptor is a great source of information for lawyers and non-lawyers about some of the issues that vex most of us, such as:

• credit card companies
• bank practices that seem to cost way too much
• telemarketing
• aggressive debt collectors

If you don’t have the money to hire a lawyer, or you want to have a better understanding of an issue before you write a letter, make a phone call or see a lawyer or credit counselor,  Caveat Emptor is a good resource.

Sounds funny. But it’s not.

Moore Equipment sells John Deere farming equipment in Chillicothe, Missouri. Moore sold Sholten a big tractor with a warranty on the drive train. Moore’s warranty to the buyer was backed by PRS, an insurance company. If Moore had to make the warranty good, PRS would pay Moore.

Sholten sold the tractor to Callen, with the warranty transferred to Callen. The tractor’s drive train failed and it was taken to another mechanic–not Moore– for repairs, and a claim was filed with PRS. PRS reviewed the claim and sent a check to Moore for nearly $20,000. Moore cashed the check. PRS notified Moore that the check was sent to Moore by mistake.

Callen paid its mechanic and sued Moore and PRS for the money that should have gone to Callen’s mechanic. Callen alleged that Moore had “converted” the check and that PRS and Moore each owed Callen the cost of the repairs. The trial court granted summary judgment for Callen, and Moore appealed.

“Summary judgment” is a procedure in which a party persuades a court that there are no important facts in dispute, so that the court can make a decision based on a statement of facts and application of  legal rules. The opposing party has an opportunity to argue that there are important questions of fact that require a trial and that the other party’s legal arguments don’t make sense.

Moore claimed that PRS owed Moore money on two other jobs, and also claimed that Callen failed to properly comply with the warranty claim procedures (my guess is that  Moore would rather that Callen had hired Moore to do the warranty work).

“Conversion” is a legal term for unjustified interference with another person’s right to possess property.  Moore didn’t convert the check by receiving it, but by refusing to return the value of the check after demand was made.

Moore’s attorneys raised two technical arguments, arguing that conversion applies only to chattels (tangible objects), not money, and that Callen would be able to collect from PRS and from Moore. The trial court and the appellate court were not impressed.

The Court of Appeals for the Western District of Missouri, in Moore v. Callen WD70011,  affirmed the trial court’s summary judgment in favor of Callen (most summary judgments in Missouri’s state courts, if appealed, are reversed by the court of appeals, because the standard for showing a dispute about facts is very low).

The court of appeals noted that a check is a “specific chattel” because it is a “representative of value.” PRS’s check to Moore was numbered and could be traced to repairs for Callen’s tractor, not the other accounts for which PRS owed money to Moore. The court of appeals also dispensed with the double-recovery argument, stating that there may be only one satisfaction for one injury, so that Callen has the option to collect from either PRS or Moore.

If the court had ruled for Moore, Moore would have received a windfall as a result of PRS’s mistake.  PRS would still owe Callen on the warranty claim. Seems like a no-brainer.

Homeowner associations (HOAs) generally have fiscal years that correspond to calendar years, which means that it’s time for HOA boards to begin work on their 2010 budgets, so that the new budget–which establishes the HOA board’s authority to collect assessments and spend money–is in place before the start of 2010.

Missouri HOAs, other than condominium owners associations (COAs), don’t have any special statutes to follow. Instead, they are governed by corporation statutes and by their recorded covenants and by their bylaws, which are often not recorded.

Here’s an overview of the sources of general and financial powers of HOAs and COAs:

Statutory powers

A.        HOA existence

Most HOAs in Missouri are non-profit corporations, whose existence is based on Missouri’s corporation laws and whose powers are established and governed by Missouri’s corporation laws, the relevant subdivision covenants, and the HOA’s bylaws.

COAs also are given specific and general powers by the Condominium Property Act (for those few condominiums created before 1983) and Missouri Uniform Condominium Act. A COA is a type of HOA. The Condominium Property Act and the Missouri Uniform Condominium Act are both found in chapter 448 of the Missouri Revised Statutes. The Missouri Uniform Condominium Act follows the Condominium Property Act, beginning with section 448.1-101.

HOAs and COAs are usually created around the time the subdivision or condominium developer files a plat and declaration to create the community; creation of an HOA is not required by law unless the community created is a condominium. A certificate of incorporation issued by the Missouri Secretary of State is legal evidence of a corporation’s existence.

All Missouri corporations are subject to the General and Business Corporation Law of Missouri, which is chapter 351 of the Missouri Revised Statutes. Non-profit corporations such as HOAs and COAs are also subject to the Missouri Non-Profit Corporation Law, chapter 355 of the Missouri Revised Statutes.

A few HOAs are not incorporated, and are “unincorporated associations,” which are governed pretty much by the common law of Missouri. The “common law” is a set of rules that are derived from opinions of appellate courts in Missouri and elsewhere. The coverage of these rules is spotty, so there are many questions that do not have answers.

Frequently, an HOA’s corporate charter is “dissolved” by the Missouri Secretary of State, generally for failing to file one or more annual reports. In most cases, the charter can be reinstated, unless ten years have passed since the date of dissolution. The process of reinstatement is made difficult if the HOA has not filed state income tax returns (even though generally no tax is due), because obtaining a tax clearance letter from the Missouri Department of Revenue will require the preparation and filing of tax returns.

B.        Financial powers of HOAs

1.         Power to assess and borrow

The Missouri Non-Profit Corporation Law, specifically section 355.131, lists the powers of non-profit corporations, including the power to impose assessments and the power to borrow, as well as the general power “to do all things necessary or convenient, not inconsistent with law, to further the activities and affairs of the corporation.”

2.         Authorization of assessments and borrowing

For a lender to make a loan to an HOA, the power to impose assessments and borrow money to be repaid from those assessments is not enough. The assessments and indebtedness must be properly authorized. The procedures for authorization are generally set out in the declaration of the subdivision or condominium and the bylaws. For COAs, however, borrowing secured by a lien on the common elements requires approval of at least 80% of the voting power.

Unless a specific provision of governing documents states otherwise, a board of directors or a majority of the voting power of a non-profit can authorize assessments and indebtedness.

Lenders who are making loans secured by a pledge or other security interest in the HOA’s assessment revenue will want a legal opinion on the legality and propriety of the imposition of assessments and the grant of the security interest in the HOA’s funds. Such a legal opinion will be premised on

• the HOA having properly adopted a budget or special assessment, and
• the valid election of officers who sign the loan documents, and
• the proper procedure having been followed to obtain the approval of the loan by the board or the members.

Budget Procedures

A.            Non-condominium HOAs

The budget procedure for most HOAs is found in the declaration and bylaws. Often it is sketchy, so a lender will be interested in the history of collections and the delinquency rate.

The delinquency rate indicates whether the budgeted assessments are accepted as valid and enforceable. Most HOAs have the rights to impose liens and suspensions of privileges for non-payment, so that and HOA that has high delinquencies and a historic unwillingness to enforce the payment of assessments will not be a good candidate for a loan.

B.             COAs

The Missouri Uniform Condominium Act has a very practical procedure for adoption of budgets. At least annually, the board proposes a budget to the memberships and mails a budget summary to each member at least 14 days but not more than 30 days in advance of a meeting at which a vote on the budget may be held. Unless a majority of the voting power (in person or by proxy) of the COA votes the budget down at that meeting, it is deemed approved, whether or not a quorum is in attendance.

This procedure is suitable for incorporation into the bylaws of non-condominium HOAs that do not have a budget procedure.

The United States is a fairly friendly and respectful federation, at least when it comes to enforcing judgments so that creditors can get paid. This arrangement encourages commerce.

If a lender gets a judgment in one state, that judgment can be registered with the court of another state, and the lender can use the local court and sheriff to apply the tools of debt collection: garnishment of bank accounts and accounts receivable and asking the sheriff to seize and sell the debtor’s property.

If the judgment from the other state is not premised on personal jurisdiction over the out-of-state defendant, then the court where the defendant or his property is located may not be obligated to enforce it. Such was the case in Peoples Bank v. Frazee, where a Missouri court refused to enforce an Oklahoma court’s default judgment against a Missouri resident,  H. L. Frazee.

Mr. Frazee had signed a guaranty at the request of Peoples Bank, of Tulsa, Oklahoma, for his relatives in Oklahoma who had already defaulted on a loan. Frazee didn’t ask to sign the guaranty, didn’t go to Oklahoma to sign it, and had no property or business interests in Oklahoma. He merely signed the guaranty at the request of the bank, so that the bank would reinstate the loan to Frazee’s relatives.

When the relatives failed to repay the loan, the bank sued Frazee and his relatives in Tulsa, none of whom appeared in court. The court entered judgment for the bank, and the bank registered its default judgment in Wright County, Missouri.

The Missouri legislature has enacted the Uniform Enforcement of Foreign Judgments Act, which describes the procedure for registering and enforcing a “foreign judgment” in a Missouri court. A “foreign judgment” is “any judgment, decree or order of a court of the United States or of any state or territory which is entitled to full faith and credit in this state.”

The key words are “which is entitled to full faith and credit.” All judgments are based on the proper jurisdiction of the court that makes the judgment. Jurisdiction has two parts:  jurisdiction over the person and jurisdiction over the subject matter. Without jurisdiction, a judgment is not entitled to full faith and credit.

State courts, in Missouri and elsewhere, are courts of general jurisdiction and can handle most kinds of cases, except for the few subjects reserved exclusively to federal courts by the United States Constitution. Subject matter jurisdiction is rarely an issue in state courts.

Jurisdiction over a person by a state has at least a couple of elements in a collection case. First, there must be a constitutional basis for jurisdiction over the person. Second, the person must be served with notice of the lawsuit by service of a summons. Sometimes it’s fairly easy to have a sheriff or private process server find and serve the defendant with a summons, but the facts that create a constitutional basis for jurisdiction have to be present before the lawsuit is filed.

The federal constitutional law of state court jurisdiction over a person involves two concepts: “minimum contacts” and “purposeful availment.” The analysis of these two concepts requires a careful examination of the facts at hand.

Mr. Frazee didn’t go to Oklahoma. He received no benefit from signing the guaranty or from the loan to his relatives. He didn’t ask the courts of Oklahoma to do anything for him. He received no protection from the statutes of Oklahoma. Talking to the bank by telephone and mailing back the signed guaranty were not sufficient minimum contacts required to make him subject to the power of an Oklahoma court. The guaranty agreement that he signed did not contain the usual statement that the guarantor submits to the jurisdiction of the state where the bank was located. He did nothing to avail himself of the benefits of the state of Oklahoma’s resources or laws, having no interest in an Oklahoma business or Oklahoma property.

The Missouri Court of Appeals upheld the decision of Wright County associate circuit judge Lynette Veenstra, reciting her conclusion, “Based on the totality of the facts and circumstances in this case, it cannot be said that Mr. Frazee purposely availed himself of the privilege of conducting activities within the State of Oklahoma.”