Ledger War at Leisure World

Seal Beach retirement community's governing body plans suit to keep financial records secret.

By David Reyes
Times Staff Writer

August 14, 2004

The battle between a determined cadre of Leisure World residents and managers of their Seal Beach retirement community escalated Friday after management lawyers vowed to sue to keep financial records secret.

Seven residents — who are members of the nonprofit foundation that runs Leisure World — went to small-claims court in June to compel the foundation to open its books, saying that because they pay monthly dues, they have the right to inspect the books to see where the money is going.

But in a small courtroom Friday, attorneys for the Golden Rain Foundation said they would preempt the residents' argument and file their own Superior Court lawsuit to keep the books out of the residents' hands.

"We wanted this to be settled today. We believe the judge had jurisdiction and should have made a decision," said Leisure World resident Carol Franz, who carried a copy of the California Civil Code in her purse and came prepared to argue.

"If the foundation sues, this just delays things. They hope we're going to die in the meantime," she said.

Leisure World has 9,000 residents with an average age of 77. It is divided into 16 geographical areas run by nonprofit "mutual corporations," each headed by elected residents. Any resident can run for the Golden Rain Foundation Board, an umbrella group that governs the entire community.

The dissident residents are seeking answers to a number of questions about foundation finances. In particular, they want to know why monthly fees increased $30 this year, why fees are charged to cover a mortgage they say has been paid, how much chief administrator Harbir "Bill" Narang and other administrators are paid and how much the foundation pays contractors, such as the company that maintains the landscaping.

Golden Rain lawyers — who have declined to comment on the case — say residents have no legal right to financial information. The legal question is whether the foundation is a homeowners association, as residents contend. If so, by state law, its managers must make the books available for inspection by members.

Earlier this year, Judge Kirk H. Nakamura sided with the seven plaintiffs and awarded them $200 each in fines levied against the Golden Rain Foundation Board for failing to provide the financial information. The foundation appealed, which led to Friday's court hearing.

Acting as a small-claims court judge, Superior Court Judge Derek Hunt said Friday that the matter should be heard in Superior Court. After lawyers for the foundation said they would file a suit of their own as early as Monday, Hunt consolidated the seven cases into one and stayed Nakamura's ruling until the Golden Rain case is resolved.

The delay frustrated the Leisure World residents, who have been fighting since April to examine the records of the foundation, said Franz, who was supported by more than two dozen senior citizens, including some who hobbled into court with canes.

"We wanted to avoid paying an attorney — that's why we went to small claims in the first place. Now we probably have to get an attorney," said Edmund Loritz, another Leisure World resident.

Attorneys and experts in the property management field said the issue may come down to how Leisure World, in its property holdings, is legally structured.

Karen Conlon, president of the California Assn. of Community Managers, which certifies property managers, said she was unfamiliar with Leisure World's legal organization but that if it is a homeowners association, it would be subject to the Davis-Stirling Act, a state law that requires — among other things — disclosure of financial information to residents.

But if Golden Rain operates as a "governmental structure over co-operatives," Golden Rain could prevail, Conlon said. The Davis-Stirling Act does not include such organizations, and therefore no disclosure provision would apply, she said.

Stanley Feldsott, whose Newport Beach law firm has handled many homeowner association cases, said it doesn't matter whether Golden Rain is a homeowners group. An organization that functions like a homeowners association probably would be required by the courts to meet the requirements of the Davis-Stirling Act, he said.

"If it's a nonprofit, mutually beneficial corporation and the people who want to see the records are members, they are entitled to examine the books and records," Feldsott said.



Copyright 2004 Los Angeles Times
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