Article Courtesy of The Real Deal
By Ina Cordle
Published October 28, 2016
The nation’s largest homebuilder, D.R. Horton, engaged in
deceptive practices that forced the bankruptcy of the homeowners association for
Majorca Isles in Miami Gardens, a U.S. bankruptcy judge in Miami ruled.
Following a three-day trial, Judge A. Jay Cristol of the U.S. Bankruptcy Court
for the Southern District of Florida entered a judgment against D.R. Horton and
its employees for $16.3 million in damages, including $12.5 million in punitive
damages, and said the company violated Florida’s Deceptive and Unfair Trade
The court found that Fort Worth, Texas-based D.R. Horton and its employees
engaged in “immoral, unethical, oppressive, and unscrupulous” trade practices
its financial benefit, conspiracy, and breaches of fiduciary duty. “These
actions by D.R. Horton can only be classified somewhere between not nice and
evil,” the judge said, referring to the actions as “a modern day story of David
and Goliath.” He said he awarded the punitive damages of $12.5 million to punish
and deter future “unlawful, malicious” conduct.
Bankruptcy Trustee Barry Mukamal of KapilaMukamal, and his counsel John Arrastia
of Genovese Joblove & Battista, worked for more than four years on the case,
representing the Majorca Isles Master Association, a homeowners association
created by D.R. Horton as part of the planned 681-unit community Majorca Isles
in Miami Gardens.
Mukamal called it a wake-up call” for developers. “This time the system worked
for everyone, including the low-to-middle income homeowners at Majorca Isles
that felt they did not have a voice,” Mukamal said in a statement.
A spokesperson for D.R. Horton did not immediately respond to requests for
comment via phone and email.
Mukamal told The Real Deal he “fully” expects D.R. Horton to appeal.
According to Mukamal, D.R. Horton appointed its employees as the board of
directors of the Majorca Isles Master Association until the association was
turned over to the homeowners. During that time, D.R. Horton allegedly did not
make a serious effort to collect assessments from the unit owners, and because
it had failed to keep useful financial records, was unable to identify which
units had paid or not. Instead, D.R. Horton allegedly shifted the collections
from the Master Association to other condominium associations, in a breach of
the directors’ breaches of duty and loyalty, the bankruptcy trustee said in a
At the same time, D.R. Horton allegedly cut amenities to cut costs and allegedly
deceived existing and prospective homeowners by publishing association budgets
that understated the uncollectable assessments and amount necessary to run the
association. Then it allegedly created false financial statements that inflated
the assets to make the master association look solvent, even though it did not
have enough money to pay its bills, the bankruptcy trustee said.
“They played around with the budget, they cooked the books,” Mukamal told TRD.
“And the judge ruled that they cooked the books.”