Two Seal Beach Leisure World residents have filed a lawsuit against Mutual 2. Their complaint: they believe Mutual 2 is an association as defined by a state law regulating homeowners associations called the Davis-Stirling Act.
The Mutual 2 board of directors does not agree. Mutual 2 is one of 16 non-profit corporate entities that make up the Seal Beach retirement community.
The plaintiffs in the case are seeking the cost of the lawsuit, including attorney’s fees and any “further relief as the court deems just and proper,” according to the complaint.
The lawsuit was filed with the Orange County Superior Court on Sept. 19 by Carol Franz and Edmund Loritz.
The suit also includes 25 as-yet-unidentified co-defendants in the case.
Mutual 2 President Margarita Bahr said that there has always been a majority of board members—five out of nine—who do not believe Mutual 2 is an association.
Bahr said the majority of the board members takes their position based on the advice of two attorneys.
“If you are a responsible person, you go by what your attorneys tell you , not by what two people want,” Bahr said.
Bahr said the issue should have been taken to court with all the mutuals, not just Mutual 2.
According to the complaint, filed by attorney Steven P. Rice, Franz and Loritz have made repeated demands—both verbal and written—that Mutual 2 acknowledge it is an association. “GRF (Golden Rain Foundation) has already been adjudicated to be an ‘association,’” the complaint said.
Attorney Rice cited the court ruling in Golden Rain Foundation versus Franz in support of the new lawsuit. As previously reported in the Sun, that lawsuit ended with a superior court judge ruling that the Golden Rain Foundation is a homeowners association as defined by the Davis-Stirling Act.
According to the complaint filed by Franz and Loritz, the two plaintiffs want the court to determine whether Mutual 2 is an association as defined by both the California Civil Code and the Davis-Stirling Act.
However, Bahr said that two attorneys have advised the Mutual 2 board that they cannot stipulate to what Franz and Loritz want because of the language in Mutual 2’s governing documents. According to the complaint, Franz and Loritz have filed the suit for the benefit of Mutual 2 residents.
However, Bahr said it was unneighborly and self-serving of Franz and Loritz to file the lawsuit.
She said the case could cost the mutual up to $120,000. She said Mutual 2 is not a wealthy mutual.
Bahr also said that lawyers were making a lot of money by saying that either mutuals are covered by Davis-Stirling or they are not.
