Article Courtesy of The
Daily Business Review
By Samantha Joseph
Published July 21, 2017
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
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 supplied."
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 appear solvent.
"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
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
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
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."