Hales Location lawsuits twist, turn through clear-cuts, fairways

By David Carkhuff

It almost takes a scorecard to trace the progress of lawsuits in Hales Location.Dismissed as cranks by their critics but waging a legal battle as reformers, a group of homeowners at Hales Location has filed half a dozen lawsuits against the developer of their upscale residential development, against their homeowners association and against the central attraction at Hales Location, White Mountain Hotel.Here is a breakdown (updated as of Jan. 13, with description of each suit, filing party, defendant and status provided by the plaintiffs): Requiring that meetings of the Hales Location Owners Association be open to all members. Plaintiff: R.J. Makaitis. Defendant: Hales Location Owners Association board. Status: Pending.A petition for temporary restraining order and temporary and permanent injunction reads: "On or about December 12, (2003), a notice was posted at the association post office indicating that 'until further notice, the board meetings will be closed. ...' The notice was thereafter mailed to all owners. ... There is no provision in the association Declaration of Covenants, Restrictions and Easements nor in the by-laws that gives the board of directors, let alone the president/chairman alone, the authority to close all meetings of the board."Makaitis said he drafted a resolution about how open meetings should be conducted and contested the "excuse that people will cause a nuisance, so meetings should be closed.""You have to deal with the nuisance; you can't just say that one person caused a nuisance so we don't have town meetings anymore," he said.Gary Sullivan, owner of the White Mountain Hotel and member of the board, said, "The board did vote to close the meetings, but there was a reason for that. The open meetings tend to be dominated by the group that are known as the Gang of Twelve."Sullivan referred to Makaitis, Jack Shearing, Dick McClure and other residents who are critical of the hotel's influence on the board."The annual meeting is not closed," Sullivan pointed out, but monthly meetings were closed, he acknowledged."The reason that the board voted to close them was that the Gang of Twelve was coming to the meetings and becoming verbally abusive and threatening," he said. "They were screaming and hollering, and we simply couldn't get any work done."Shearing wrote in a Jan. 13 press release, "We love living at Hales Location as it's a beautiful place to live. However, in this 'live free or die' state of New Hampshire, we homeowners have a right to an open dialog with our board. There's a long list of questionable management tactics that the board HLOA has put in place and these tactics have put homeowners potentially at risk from a legal and quality of life perspective. Board meetings should be open, so that homeowners have a voice in the future direction of the community."Sullivan said he would be willing to resolve their lawsuits."We're open to settlement, but as far as the meetings staying closed, yes, they're going to stay closed for the foreseeable future," he said. Shut down one of the fairways on the development's nine-hole golf course until an adjacent home is protected against damage from errant golf balls.Plaintiff: Vera Westhall. Defendants: Hales Location Owners Association board, developer Robert Carleton, Hales Location Golf Course Inc. Status: Pending.A petition to abate a private nuisance and calling for a permanent injunction reads: "High velocity flying golf balls pose a substantial and ongoing threat to person and property, constitute a nuisance impairing the use and enjoyment of plaintiff's property" and have caused injuries or damages, including injury to a workman in July 2000 when a golf ball struck him in the head while he was installing screens on the porch of the home. The lawsuit states that he had to be taken to the hospital for treatment. "In the early summer of 2000, a golf ball struck a dish in the hands of plaintiff's husband as he was eating while seated on the patio, smashing the dish and scattering shards from said dish, and scattering food in his face, over his body, as well as the table, patio and the wall of the house behind the patio," the lawsuit alleges.Seven other alleged incidents involving golf balls striking the house are listed in the lawsuit. Question legal status of hotel in association, as a means to protect the association's tax-exempt status. Plaintiff: Frank Kenison. Defendant: Gary Sullivan. Status: Court-ordered mediation.Dick McClure, the chief executive officer of a machine company in Pennsylvania and a Hales Location homeowner, said reform-minded board members brought in a new accountant who tried to straighten out the association's books. The association filed provisionally for three years with the Internal Revenue Service as a 501c4, a status for a benevolent association which qualifies as tax-exempt."Within a month or two the IRS came back and asked questions about the status of the hotel, the number of votes they had and how that was set up. Gary Sullivan was upset with that line of inquiry, decided to pull the application which meant that we reverted to a for-profit corporation, which means that our provisional tax returns are no longer valid, so if the IRS ever focused on it, we owe $60,000 right now," McClure said.The bottom line: "If we aren't able to become eligible for the 501c4 status, we will owe a $60,000 tax bill with interest and penalties," he said.Sullivan disputed these claims."That's incorrect. Our accountants have said that's incorrect," he said. "We're going by the advice of our accountant now."When a new board took over, they fired the reformers' accountant, which he said charged exorbitantly, and hired an accounting firm from California for about $6,000, Sullivan said."The IRS has never looked into it," he said. "We have subsequently filed an application for a tax status called 501c4. ... It hasn't been looked at. The IRS has made no opinion whatever."The lawsuit, however, argues: "The designation of the hotel as a member of HLOA with its aforementioned voting rights not only jeopardizes HLOA's non-profit and tax-exempt status, but also effectively precludes the HLOA from taking any action to amend the covenants without the hotel's assent." Remove White Mountain Hotel directors from the association board on basis of "fiduciary irresponsibility, inherent conflict of interest." Plaintiff: Jack Shearing. Defendant: Gary Sullivan. Status: Filed.A raft of complaints against Sullivan some related to the tax status dispute include allegations that he was guilty of: "concealing from the members of the association an unlawful agreement with the developer to pay the hotel's assessment of $80,000 from the greens fees" of the golf course; "misrepresenting the tax status of the association to the board"; "filing inaccurate materials with the Internal Revenue Service"; and "unilaterally voting proxies for association directors at the annual meeting in violation of the covenants."Sullivan said the charges are unfounded. Association board member Herb Duane added that covenants provided two directors for the hotel."There's nothing underhanded, it's all above board," he said."These covenants were accepted by the state and accepted by the court. ... This is what we all bought into," Duane added.Sour grapes might account for complaints about a board weighted toward the hotel, he said."These people say it's stacked, but it's because they don't have the votes," Duane said. Prohibit developer Robert Carleton from landing a helicopter in Hales Location or adjacent parts of the development. Order restitution from Carleton for clear-cutting his property for the helicopter-landing pad, allegedly in violation of a prior settlement agreement. Plaintiff: Board of directors (2003) and homeowner intervenors. Defendant: Robert Carleton. Status: In different stages. Proceedings regarding helicopter operations are scheduled to resume in March.Makaitis said Carleton clear-cut a parcel of land in Hale's Location adjacent to association property for helicopter access. "Because the board consisted of the commercial interests and he was the commercial developer and Gary (Sullivan) wanted to do a favor for him, they were going to allow him so many flights a day and they were going to basically rubberstamp and approve allowing the helicopters to fly in there," Makaitis said. "The board is gutless. They should say we should ban all helicopters. There shouldn't be any helicopters flying into this subdivision, period. Rather than doing the right thing, the board chose to say, 'I'm going to help my buddy out.'"Shearing added, "There is no commercial reason for the hotel backing helicopter flights."Efforts to contact Carleton were unsuccessful, but Carleton's motion for summary judgment as cited in an objection filed by the homeowners refers to his basis for conducting logging of the future helipad site.In his motion for summary judgment, Carleton argued that his commercial clear-cutting on 26 acres (which generated about $20,000, according to the objection) was conducted without notification of the homeowners association because he was "opening up views" and did not constitute "timber stand improvement." Assess Carleton for membership fees, find the association board liable for failing to collect assessments, and find breaches of financial record keeping and other accounting. Plaintiff: Jack Shearing. Defendant: Robert Carleton and board of directors. Status: Judgment in Shearing's favor. Carleton ordered to pay lot assessments, pay hotel assessments he failed to collect, reimburse management fees paid to himself and reimburse Shearing's legal fees. Under appeal.Sullivan noted that this case, decided by Justice Gary Hicks, represented the only win for the plaintiffs."There's been no ruling against the association, and that decision anyway is in abeyance because it's being appealed," he said of the Hicks decision.Also, Hicks denied several requests from Shearing, such as a request for an accounting of financial transactions of past years. "Contractual and fiduciary misdoings aside, Carleton is an honest witness," Hicks wrote. "He built enhancements and extended courtesies throughout the development of Hales Location for the benefit of all. There presently exists no persuasive evidence that Carleton converted association funds to his own use. ... The more appropriate remedy for all parties to this litigation would be to end it."