How attorneys saved a Miami Gardens
HOA — before getting it $11 million
Daily Business Review
17 July 2017
and John Arrastia
When bankruptcy trustee Barry Mukamal took over administration of
Majorca Isles in 2012, the Miami Gardens homeowners' association was in
such dire financial straits that its board struggled to fund trash
collection. The community had no cash, no system for collecting
association fees and attorneys say the developer had misled owners
about their accounts receivables.
This month, a 180-degree turnaround: A hard-fought suit against Majorca
Isles developer D.R. Horton Inc. yielded an $11 million settlement that
will fully repay all creditors, bolster the association's financial
reserves and fund repairs.
But the real story of Majorca's path from bankruptcy goes beyond the
eight-figure windfall to more modest numbers: $10,000 or $15,000 per
month—the surplus Mukamal and his attorneys helped create for the
beleaguered community—while maintaining litigation against D.R. Horton.
"As an absolute number, that doesn't mean very much," Mukamal said.
"But what it meant was that all the essential services were being
D.R. Horton is a publicly traded company whose marketing material
describes it as the nation's largest homebuilder.
It lost at trial in October against Majorca Isles Master Association
Inc. on claims it violated Florida's Deceptive and Unfair Trade
Practices Act by padding the association's financial records to deceive
new homebuyers into believing the community had enough funds to cover
operating expenses. Once it turned over the property to homeowners, the
new board of directors claimed it soon learned it had inherited
financial statements that inflated the association's assets to make it
"It was funny money," said John Arrastia, the Genovese Joblove &
Battista partner who represented Mukamal in his suit against D.R.
Horton as part of the bankruptcy proceeding.
After a three-day trial, the group won a $16.3 million judgment,
including $3.8 million in compensatory damages and a $12.5 million
award meant to punish the homebuilder.
D.R. Horton appealed, and the parties settled for $11 million. Its
attorney, Vincent E. Damian Jr., did not respond to requests for
comment by deadline.
Mukamal said the association had a roughly $20,000 monthly deficit in
the early days of its bankruptcy reorganization. Despite what Mukamal
called a "bare-bones budget," Majorca's revenue still couldn't cover
repairs, trash pickup or pool maintenance.
It meant a revamp on multiple fronts: dissecting the budget,
renegotiating contracts, replacing service providers, keeping
contemporaneous books and records, monitoring the property management
company to efficiency and implement a legal collection protocol.
By the time U.S. Bankruptcy Judge Jay Cristol approved the settlement
with D.R. Horton on July 6, Majorca Isles Master Association had
amassed its own small fortune: about $426,460 on reserve in a Wells
Fargo Bank N.A. checking account, according to the trustee's financial
report for May.
"We pursued parallel paths for litigation and administration," Mukamal
said. "We righted the ship on an ongoing basis on a wartime budget."