IN THE CHANCERY COURT OF SHELBY COUNTY TENNESSEE

THIRTIETH JUDICIAL DISTRICT AT MEMPHIS

PART ___________

THOMAS KRAJENTA, )(
in his capacity as an incumbent member
of the Board of Directors of )(
Riverwood Farms Association, Inc.,
et al, )(

Petitioners, )( No: __________________

VS. )(

RIVERWOOD FARMS )(
ASSOCIATION, INC.,
A Tennessee non-profit corporation )(

Respondent )(

VERIFIED PETITION TO APPOINT A RECEIVER TO ADMINISTER

THE AFFAIRS OF RIVERWOOD FARMS ASSOCIATION, INC.
__________________________________________________________________

Petitioners are a group of incumbent members of the Board of Directors, a former Board

member and general members of Riverwood Farms Association, Inc., a Tennessee mutual

benefit non-profit corporation, who allege that past and present actions and inactions by the

Board of Directors of the Riverwood Farms Association, Inc. require the appointment of a

receiver to manage the affairs of the corporation, and would show the following:

NATURE OF THE ACTION

1. This is an action brought by three (3) out of seven (7) incumbent members of the

Board of Directors (the Board) of Riverwood Farms Association, Inc., a/k/a/ Riverwood Farms

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Home Owners’ Association, (RFHOA) who are joined in this action by a former member of the

Board, and by several general members of RFHOA who are interested in promoting good

governance and sound management and operation of RFHOA.

2. The Petitioners are identified and described more fully in the Parties section

below. The Respondent is a mutual benefit non-profit corporation.

3. This action is brought as a result of a history of inadequate governance and

management dysfunction, the persistent failure or refusal of the Board or members to comply

with the laws of the State of Tennessee in a number of particulars, probable ultra vires acts of the

Board in a number of instances, and general incompetence and indifference by some former and

incumbent members of the Board.

4. This action has become necessary due to a significant split between two factions

of the members of RFHOA, which is primarily caused by the Board’s repeated use of annual

maintenance assessment funds for a private protective services company for the subdivision, at

very significant expenditures for that purpose, (possibly as much as $1,600,000 over the years

and usually about 35% or more of the annual operating expenses) when there is no express grant

of authority to do so in any of the governing documents of RFHOA.

5. The RFHOA has annual income of approximately $500,000 from annual

maintenance assessments of its members. It has assets in the range of $6,000,000 to $8,000,000,

which are comprised of approximately eighty-five (85) acres, including a Category 1 hazard dam

(highest hazard rating possible given by the state), a thirty-five (35) acre lake, a creek the lake

drains into, two retention ponds, a .3 mile drainage culvert, and other improvements, all of which

warrant sound and professional governance and management of the RFHOA.

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 6. The Board members are not paid for their services, and although the Board has

purportedly had scheduled meetings once a month for many years, in actuality, for the last four

or five years, it has averaged far fewer meetings than twelve per year, usually due to its inability

to have a consistent quorum. This trend is continuing into 2018.

7. Relief is requested by the appointment of a receiver pursuant to the general

receiver statute, Tenn. Code Ann. § 29-1-103. Further relief is requested under the ultra vires

section of the Tennessee Nonprofit Corporation Act, Tenn. Code Ann. § 48-53-103, which also

allows for a receiver in ultra vires situations. Declaratory relief is also requested under Tenn.

Code Ann. 48-53-101, et. seq. .

8. This is the first application for a receivership.

9. This is a legitimate case or controversy. There is nothing theoretical about it. It is

ripe for adjudication.

JURISDICTION, VENUE AND SERVICE OF PROCESS

10. This court has subject matter jurisdiction pursuant to Tenn. Code Ann. §§ 29-1-

101, et seq., §§ 29- 14-101, et seq., and §§ 48-53-101, et. seq.

11. Riverwood Farms (the Development) is a single family dwelling, residential

subdivision primarily located within the City of Memphis, with a small parcel in unincorporated

Shelby County. The Development is located in the Cordova area of Shelby County, Tennessee,

in the U.S. Postal District of 38016.

12. Thus, venue is proper in the Chancery Court of Shelby County.

13. The Defendant may be served by serving its registered agent for service, Joyce

Spiecha, at Keith S. Collins Company LLC, 3036 Centre Oak Way, Germantown, TN 38138.

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 THE PARTIES

14. The Petitioners are three different groups of people: (1) incumbent Board

members who bring this action as a derivative action under Tenn. Code Ann. § 48-56-401, (2) a

former Board member, and (3) two (2) interested members who bring this action under the

Declaration of Covenants, Conditions and Declarations (DCCRs) of the development, Exhibit

“A”, which permits any member to sue RFHOA to enforce the DCCRs.

15. The names of the incumbent Board members who bring this action are Thomas

Krajenta, Johnny Pulliam and Michael Pickens.

16. The name of the former Board member is David Mills.

17. The names of the interested members are Terry Coggins, and Kim Wagner.

18. Interested parties are the incumbent Board members Volker Paul Westphal, Karen

Taylor, Michael Poindexter and Janice Tankson.

LEGAL GROUNDS JUSTIFYING THE APPOINTMENT OF A RECEIVER

19. Tenn. Code Ann. § 29-1-101 states:

“The courts are all vested with power to appoint receivers for the safekeeping,
collection, management, and disposition of property in litigation in such court, whenever
necessary to the ends of substantial justice, in like manner as receivers are appointed by
courts of chancery.”

20. In the instant case, due to the historical ineffective governance and

mismanagement of the RFHOA and the continued dissension among Board members and

members of the RFHOA, court supervision of the estate of the RFHOA is a necessity and thus

the appointment of a receiver is the only effective means by which to conserve funds, spend

funds of the RFHOA appropriately and legally, and for overall governance, management and

operation of the RFHOA.

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 21. Tenn. Code Ann. § 48-53-104 states:

“A corporation's power to act may be challenged in a proceeding against an incumbent or

former director, officer, employee or agent of the corporation. The proceeding may be

brought by a director, the attorney general and reporter, or the corporation, directly,

derivatively, or through a receiver, a trustee or other legal representative.”

22. As will be shown with more particularity below, the Board for many years has

contracted with a private protective services company, euphemistically called a courtesy patrol,

to patrol the Development and to provide private protective services for property not owned by

RFHOA. There is no provision in the DCCRs which specifically states that the Board may use

maintenance assessment funds to provide the entire Development with a security patrol, a

courtesy patrol or private protective services for members’ private dwellings. Such a contract,

especially one which consumes a huge percentage of the annual operating expenses, if not

authorized by the DCCRs, constitutes an ultra vires act, and may be challenged by a Director or a

receiver.

GENERAL ALLEGATIONS

23. Development of the Riverwood Farms subdivision (the Development) started in

the 1980s with a small parcel of property then in unincorporated Shelby County. Additional

parcels were added to the Development through about the mid 2000s when the last parcel was

added.

24. After full development, the Development now comprises approximately 450 to

500 acres.

25. There are approximately 1,125 single family dwellings, with about 2,700 to 3,000

individuals, residing in the Development.

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 26. Home prices in the Development range between $150,000 to almost $400,000.

Approximately twenty (20) to twenty-five (25) vacant lots are still available for construction of

homes.

27. Once homes are built on these few remaining lots there will be no physical

increase in the size of the Development as it is surrounded by other subdivisions and public

roadways.

28. Demographics reflect a diverse mix of ethnicities and races.

29. The residents include singles, young and middle age couples with children,

couples with no children, and elderly working and retired individuals.

30. Although most of the dwellings are owner occupied, the number of investor

owned, rental dwellings, has steadily increased and is now approximately between one hundred

(100) to one hundred twenty-five (125) dwellings.

31. In addition, there are approximately eighty (80) to eighty-five (85) home-based

businesses operating from dwellings within the Development as a result of technological,

employment and workplace changes.

32. As aforementioned, the Development has a homeowners association, (RFHOA),

which is run by a Board of Directors, seven (7) in number, which is elected by the property

owners at an annual meeting.

33. Directors serve for one year terms without pay.

34. During construction and development of the subdivision the developer set aside

several parcels, totaling approximately eighty-five (85) acres, known as the common area, for the

exclusive benefit and use of the property owners.

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 35. The common area is owned by RFHOA and it is the responsibility of the RFHOA

to operate it and maintain it.

36. Improvements made by the developer to the common area make the Development

extremely unique and attractive; but, due to the size and complexity of the common area,

RFHOA faces very unique challenges for a home owners association in terms of the complexity

and costs of: risk assessment, management and mitigation; ongoing maintenance, periodic

repairs and replacement of capital assets as these assets age; and providing improvements to the

Development when deemed appropriate and necessary.

Charter, By-laws,
Declaration of Covenants, Conditions, Restrictions and Fee Assessments
37. RFHOA is a nonprofit mutual benefit corporation chartered in 1986 (Instruments

Y6-4524, Y4-7215 and subsequent amendments) (the Governing Documents) operating pursuant

to the Tennessee Nonprofit Corporation Act (TCA §§ 48-51-101 et.seq) (the Act) as a

homeowners association.

38. RFHOA is governed in accordance with the Governing Documents which were

made and recorded over a number of years.

39. Two classes of RFHOA members existed pursuant to the DCCR’s during the

development and construction phase of the subdivision.

40. Class A Members are owners who hold a fee simple title to any lot within the

Development excluding those who hold title merely as performance of an obligation. Class A

Members are entitled to one (1) vote for each lot owned. Class A Members also own an equal

proportionate share of the assets of the Association.

41. Class B Members were the developer who was entitled to ten (10) votes for each

lot owned.

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 42. The developer had absolute control over governance, policies, fiscal management

and management and operation of RFHOA until ninety percent (90%) of the lots were sold. A

Board of Directors, controlled by the developer, established an annual maintenance assessment

which was paid by Class A Members but not by Class B Members, the developer.

43. The annual maintenance assessment was maintained below $200 per lot through

the time RFHOA was controlled by the developer, but was subsequently increased. For 2017 the

annual maintenance assessment was $400 per lot but, between 2013 through 2016 it was $500

per lot.

The Dam, The Lake, The Creek, The Ponds and Drainage Canal
And Statutes Applicable Thereto
44. These improvements include a man-made thirty-five (35) acre lake (constructed in

1986), initially thirty-five (35) feet in depth, created by a man-made earthen dam approximately

thirty (30) to forty (40) feet tall with a paved roadway across the dam of about .2 mile in length..

Surface and rain water from the city streets and grounds collects in street drains which drain via

storm culverts into the lake.

45. The dam is subject to all laws and regulations pertaining to the Tennessee Safe

Dams Act, Tenn. Code Ann. §§ 69-11-101, et.seq.

46. The earthen dam has a regular spillway, an emergency spillway, and a drawdown

drain.

47. The earthen dam is inspected annually by the state inspector, due to the fact that it

is classified by the state, pursuant to the Safe Dam Act regulations, as a Category 1 hazard, the

highest hazard rating of dams.

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 48. The Tennessee Department of Environment and Conservation makes and enforces

the rules and regulations of the Tennessee Safe Dam Act. Its Rules and Regulations define a

Category 1 dam thusly:

“Category I dams are located where failure would probably result in any of the following:
loss of human life, excessive economic loss of downstream properties; excessive
economic loss, public hazard, or public inconvenience due to loss of impoundment and/or
damage to roads or any public or private utilities.” Safe Dam Act Rules and Regulations,
Rule 0400-45-07-05.

49. The earthen dam was last inspected in May of 2017; it passed the inspection, and

its state certificate of operation is in full force and effect.

50. However, the annual inspections are visual only and thus limited to what the

inspector can actually see. Obviously one side of the dam is covered with water -- except for the

top five (5) to ten (10) feet.

51. It is somewhat disconcerting that the inspector does not check for the integrity of

the inside structure, which would seem to be prudent given its Category 1 status.

52. To a trained inspector, there will be visual signs of some loss of internal integrity

in most cases, but obviously not in every single one.

53. Although the dam has passed a visual inspection each year, there has been no

structural integrity study by a qualified and certified engineer since the dam was constructed in

1986.

54. The applicable law that would pertain to a dam breech is well stated in Zollinger

v. Carter, 837 S.W.2d 613,615 (Tenn. App. 1992), thusly,

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 “The law regarding a change in natural drainage is well-settled in this jurisdiction. If the
owner of higher lands alters the natural condition of his property so that surface waters
collect and pour in concentrated form or in unnatural quantities upon lower lands, he will
be responsible for all damages caused thereby to the possessor of the lower lands.”

55. It seems clear the RFHOA would be strictly liable for all damages resulting from

a dam breech.

56. Only a very few developments face the potential liability of a Category 1 dam

breech.

57. Recently, Riverwood Elementary School was built not far from the dam, and one

access street to the school is directly in the floodway of the dam and which is often backed up

with cars during school days especially around 8:00 AM and 3:00 PM.

58. Of course many homes are also in the floodway of the dam. So extreme care is

justified in ensuring the dam remains safe.

59. Proper maintenance is critical to ensure safety.

60. Periodic upgrades of the dam, to meet new dam safety requirements are

absolutely justified, even if not required by the pertinent dam regulations, because of the strict

liability that would be imposed on the RFHOA.

61. The scope of potential damages and, therefore, the liability risks for the RFHOA

caused by a dam breech are not known because there has not been an engineering study or risk

assessment of such a catastrophic event.

62. More disturbingly, what is known is that the RFHOA general liability insurance

and umbrella insurance policies exclude coverage of the lake and the dam.

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 63. Petitioners seem certain that no such lake or dam coverage exists in a separate

policy, putting RFHOA and its members at significant liability risk and leaving the general

public at risk as well of having no insurance to pursue.

64. Failure to seek a thorough and adequate inspection, establish the potential liability

risk, and secure lake and dam insurance is a risk management failure of the highest order.

65. Below the dam are two retention ponds of about an acre each which catch water

not caught by the dam.

66. Water from the lake and other sources is directed via a creek and a network of

ditches.

67. The water from the lake, the creek, ditches, ponds empty into a large drainage

canal that is .3 mile in length, partially lined with concrete.

68. These assets serve a crucial function of preventing surface water flooding

throughout the Development and in other surrounding areas.

69. The lake, ponds, and canal all drain into what is known as the Fletcher Creek

Drainage basin, which is so well known to be flood prone that the City of Memphis and Shelby

County have a set of regulations just for it, and no other basin in Shelby County does.

70. Essentially the flood control project in the Development is a combination of city

streets collecting the surface water, which flows through city conduits, into a private lake and

ponds via private ditches into a private canal and back into the city or county Fletcher Creek

drainage system.

71. All of RFHOA’s private collection, retention and discharge of surface water is

also subject to the laws and regulations pertaining to the Water Quality Control Act, Tenn. Code

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Ann. §§ 69-3-101 and 69-5-716 regarding control of water into a main drain, ditch or

watercourse to prevent silt or sand from reaching the main ditch, drain or watercourse.

72. In addition to the safety issues of the dam, there have been and is still another

significant issue of the lake regarding silt and sand.

73. The Development is now old enough that vegetation prevents most of the erosion

and silting that was a problem when homes were being built. (The lake needed some silt and

sand removal years ago during the construction phase of the Development).

74. Nevertheless, there is some erosion that continues to cause silting in the lake.

75. Often after heavy rains the lake is turbid, indicating that silt and sediment are

coming from somewhere.

76. Moreover, the frequent rise and fall of the lake level (called bounce) has eroded

and continues to erode the shoreline.

77. This erosion causes trees around the shoreline to continually fall into the lake, at

the rate of several per year, and in some places the shoreline may have cut back fifteen (15) feet

or more from when the lake was built.

78. The lake surface is continuing to get larger, but overall the lake is likely more

shallow than it was originally, as it continues to collect silt.

79. At some point in time, the lake may need dredging and any removal of silt will be

subject to laws and regulations regarding silt capture.

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 80. The lake was built with a drain/drawdown and a report to the 2013 Board

disclosed that the drain/drawdown might not operate and that repairs to fix it could require a

huge expense.

81. Without a properly working drain/drawdown, the only way to drain the lake is by

pumping it.

82. To determine whether it works or not requires taking the chance that if it is

opened and cannot be shut, the lake is drained unintentionally or unexpectedly.

83. An operating drain/drawdown, according to experts is highly recommended to

have an emergency drawdown to prevent breech, and of course would help with procuring dam

insurance as it would limit risk. The drawdown/drain needs to be operable.

84. Moreover, periodic draining of the lake from the bottom, might legally remove

silt from the lake if the discharge was held in a sediment basin before being allowed into the

main watercourse of the Fletcher Creek Drainage Basin.

85. Only minimal attempts have been made to reduce runoff and erosion, and the lake

is silting up, which at some point will most likely require dredging of the lake as occurred in a

nearby Rockcreek/Countrywood area subdivision, which is also part of the Fletcher Creek

Drainage basin.

86. The combination of having no drawdown/drain and limited erosion management

makes dredging if the lake a future likelihood.

87. Dredging the lake will be a major capital expense and require a large special

assessment of the members unless the Board is proactive and begins to immediately fund

sufficient reserves.

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 88. There have already been issues of sediment blocking the drainage canal, and a

major project was required to remove the sediment and trees and other vegetation that had

accumulated from sediment build-up in the canal.

89. Although sedimentation in the canal has been a known issue since 2012 the only

attempt to mitigate its continued occurrence (at a cost of $250,000 or more) has proven to be

minimally effective.

90. Unfortunately, the canal was not designed with a sediment basin for collection

and easy removal of sediment.

91. The Board has chosen to delay dealing with this issue which will inevitably result

in greater costs for the RFHOA.

92. Moreover, the creek below the dam is the outlet for the emergency spillway and

for the drawdown/drain.

92. This creek is just inside the RFHOA property line and on the other side of the

property line is the relatively new Riverwood Farms Elementary school.

93. In places, the creek is more than ten feet deep and during a major rain is very

swift.

94. This creek was also responsible for most, if not all, of the sediment in the canal.

95. After the school was constructed no barrier was built around the creek to protect

the school children and others from this hazard.

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 96. And, no attempts were made to stop the erosion of the creek (such as spillways) to

prevent further sedimentation build up in the canal.

97. Inattention to this creek is a further serious risk management failure that has now

existed for several years.

98. Then there are issues with the lake’s wildlife which is stocked with fish and has a

large permanent duck and geese population. Excess turtles are now a problem, and in the past

beavers were a problem and required removal.

99. The lake is well known for its fishing, which is permitted exclusively to members

and their guests.

100. Tenn. Code Ann. § 70-2-102 requires a license to fish, with very few exceptions

none which are applicable to the RFHOA lake. There appears to be minimal enforcement of

proof of fishing licenses and minimal enforcement of non-authorized fishing by non-members.

101. Unauthorized fishermen and probably non-licensed fishermen, as well, have at

times negatively impacted the fishing on the lake.

102. The Board has also permitted boats to be stored on the shores and in the water of

the lake.

103. All of these issues pose liability risks for the Association and are not being

properly addressed or managed.

104. The trees in the common areas, of which there are many, seldom seem to get

attention. Trees continue to fall in the lake.

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 105. Cypress trees, which are a water hardy species, were recommended to be planted

around the lake to secure the shoreline and they were never planted despite the cost of planting

such trees would have been easily affordable.

106. Low cost terracing and other low cost anti-runoff suggestions have also not been

implemented.

107. In addition, other improvements to the common area include: two (2) to three (3)

miles of paved walking paths around the lakes and ponds, a number of small wooden bridges

over the walking paths, (6) to seven (7) miles of hardwood split rail fencing, two (2) gazeboes,

eight (8) public entrances to the subdivision of which six (6) include brick walls and other

structures delineating the subdivision’s boundaries, a .3 mile in length paved alleyway; an

asphalt driveway on the top of the dam, a parking lot for vehicles and boat trailers, a boat ramp

and a pier, and several other natural and manicured common areas all of which are owned by the

RFHOA.

108. The walkway around the lake is in need of new asphalt, and a number of bridges

need repair or replacement.

109. In summary; risk assessment, management and mitigation of the RFHOA

liabilities and project management especially for complex, long-term, and large projects have

been awful and have produced less than satisfactory results.

Lack Of Employees and a Clubhouse or Building For Meetings

110. RFHOA has no employees and, as a result, there is no consistent management

due to high turnover of the Board.

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 111. Importantly, the Board of RFHOA has never hired anyone specifically dedicated:

to the management and maintenance of the dam, the lake, the creek, the ponds, or the drainage

culvert; to manage or maintain the natural areas surrounding them; and to manage and coordinate

contractor activities though there have been suggestions that RFHOA hire someone specifically

for these purposes.

112. One suggestion that could have provided security for the lake and other common

areas and simultaneously could have helped with maintenance and administration of the common

areas was the employment of park rangers, urban foresters, and/or game wardens or a similar

professional. Although that suggestion was recommended to the Board in 2013, it was not

adopted, and has never received any support by any subsequent Board.

113. Absent from the RFHOA owned property, which some homeowners associations

of similar size do have, is any enclosed, secure and air conditioned and heated structure suitable

for Board meetings, any facility suitable for storage of RFHOA records, or any facility suitable

for employees to work should any be hired.

114. Over the years Board meetings have usually been held at a Board member’s

home, or at some other location.

115. As aforementioned, the fact that Board members have to meet in a Board

member’s home, or at some other location, has also proved to be problematical, often resulting in

Board members not attending when things get contentious or when the meetings are held some

place not particularly convenient, such as at the Management Company.

116. There is adequate income (particularly if funds were used appropriately and

within the provisions of the DCCRs) for hiring dedicated employee (s) and renting a facility

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(such as a home in the Development) that would be a convenient meeting place for the Board

and for storing RFHOA records.

117. The RFHOA needs to seriously consider; hiring dedicated employee (s) and

renting, acquiring or constructing an adequate on-site facility to conduct the business affairs of

the RFHOA and store its records for easy inspection by its Board or members.

118. The fact that RFHOA has no meeting place is also an impediment to hiring

employees which may be part of the reason RFHOA has always used independent contractors to

perform whatever work the Board deemed necessary.

119. For some time after the Developer conveyed the RFHOA to the members, the

president of the Board was also the chief engineer for the Development, but he was voted out in

2013.

120. Since then, the Board has had minimal engineering guidance by anyone truly

familiar with the engineering challenges regarding the dam, the creek, the ponds, and drainage

canal.

121. To summarize, the RFHOA has no one with the overall necessary knowledge,

skills and expertise who is specifically dedicated to properly manage the RFHOA, and it has no

place to conduct its business, although it has the funds (if used appropriately) to afford very

competent people and an adequate facility to conduct its business affairs.

The 2012 Engineering and Maintenance Study

122. In 2012 the Board engaged an engineering firm to determine the short and long

term maintenance, repair and replacement needs and estimated costs for RFHOA.

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 123. That study revealed that there was a need for between $1,200,000 to $1,500,000

in maintenance, repairs and replacement of assets, some of which were considered urgent

because of potential liability risks.

124. Despite Petitioners’ attempts to determine what has been done as this study

recommended, Petitioners are not certain how many of these items have been completed.

Petitioners are, however, certain that many new matters have arisen since, in particular, issues

that need attention as a result of construction of Riverwood Elementary School.

RFHOA Website, Communication With Residents and Transparency

125. Although RFHOA does maintain a website for property owners, its design has

changed at least three (3) times since 2013 and it has a history of being poorly maintained and

not being particularly, informative.

126. Information such as financial statements and Board meeting minutes are

frequently not current or posted. In addition, no Board adopted operating polices, resolutions or

motions is available on the website.

127. Furthermore, the Board does not regularly communicate with members via the

website, email or other available technologies.

128. RFHOA does no research and development, holds no patents, does not

manufacture or produce any products, does not market or sell any services, has no competitors,

and does not possess any trade or business secrets that if known by its members would or should

harm RFHOA. Yet, its transparency has been awful.

129. Requests by RFHOA members, including Board members, are often met with

denials for documents and records based on claims of confidentiality, which do not exist, by

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independent contractors and which are often downright in violation of the Tennessee Nonprofit

Corporation Act.

130. Pursuant to Tenn. Code Ann. §§ 48-58-301(f) and 48-66-108(a) Board members

are both, compelled to make information available to other Board members and Board members

have a statutory right to review and copy RFHOA information, documents and records, including

contracts.

131. Members also have a statutory right to inspect and copy RFHOA information,

records, and documents pursuant to Tenn. Ann. Code § 48-66-102.

132. Furthermore, provisions of the RFHOA DCCRs require that RFHOA provide

adequate insurance, management and administration, and repairs and maintenance for the

common area of which each property owner (RFHOA member) owns an equal, undivided pro

rata share.

133. The basis for independent contractors to withhold RFHOA information,

documents, records, contracts with vendors, and insurance policies from RFHOA members and

Board members is, therefore, unfounded.

134. Yet, securing the documentation necessary to determine and establish the factual

basis for this petition has been quite difficult for the Petitioners.

135. Petitioners who are incumbent Board members have been “informed” by

independent contractors that disclosure to “non-Board members” of information deemed

“confidential” by these independent contractors may result in their removal from the Board.

Public Property and Public Services

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 136. The Development is not a gated community and has eight public entrances and

exits including an entrance and exit to Riverwood Elementary School.

137. Except the alley and roadway over the dam, all of the approximately seventeen

(17) miles of paved, two lane streets in the Development are public property. So are the

sidewalks which accompany most streets. The areas within the City of Memphis have light poles

erected by the city.

138. Local law enforcement is provided by the City of Memphis Police Department

and Shelby County Sheriff’s Department. There is only one (1) Neighborhood Watch program

in a small area of the Development.

139. There are no surveillance cameras anywhere in the Development although

contractors have said they would be easy to install, given the access to city light poles and

utilities.

140. Some members of the community want camera surveillance at strategic locations

within the Development as a crime deterrence measure in collaboration with local law

enforcement agencies.

The Independent Contractors

141. The independent contractors are paid out of the annual maintenance assessment

funds.

142. Over the years, the Board has primarily hired four (4) groups of contractors: for

administration and property management, for grounds maintenance, for security/courtesy patrol,

and for legal work. Each contractor has, in its own right, created dissension within the

membership to varying degrees.

The Management Company

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 143. For approximately fourteen (14) years Keith S. Collins Company, LLC (the

Management Company) located at 3036 Centre Oak Way Germantown, TN 38138-6302 has

provided association and property management services to RFHOA.

144. These services include: accounting and financial management, maintaining and

storing official RFHOA records, communicating with members, vendor contract management,

coordination of vendor activities, procurement of insurance, and Board support.

145. RFHOA paid the Management Company $31,200 for these services plus

approximately $8,000 for other expenses and office fees for a total of approximately $40,000 in

2017.

146. Ms. Joyce Speicha has been the Management Company representative for most, if

not all of that time.

147. Performance of the Management Company has been a source of concern within

the Development.

148. In particular, there has not been an audit of RFHOA’s financial records and

accounting practices by an independent third-party accounting firm for at least five (5) years,

probably much longer.

149. Ms. Speicha has also unilaterally withheld RFHOA records and information from

members and most recently from a 2018 Board member.

150. Ms. Speicha has claimed numerous times over the years, that RFHOA members

are not entitled to the RFHOA records or information; usually the reason given for withholding

information is that, according to her, the information requested is confidential.

151. Regarding withholding information from a 2018 Board member, she claimed that

the Board member was not briefed regarding protecting confidential information, the RFHOA

22
president had not reviewed the information before releasing it and the Board member was not

sufficiently trustworthy to receive confidential RFHOA information.

152. The Board member had requested contracts for all major RFHOA vendors

including for the Management Company.

153. Even after the RFHOA’s attorney at a Board meeting, specifically stated that all

RFHOA documents should be made available for review and copying by Board members, Ms.

Speicha supported by other Board members refused to provide copies of RFHOA documents to

the Petitioner incumbent Board members.

154. Why these contracts are deemed by the Management Company as too confidential

for a Board member, who is required to vote to approve vendor contracts, remains unclear.

155. If the RFHOA had a dedicated employee (s) with a designated place of business,

and retained its own records, perhaps many of these issues regarding records handling, and

records disclosure would not arise. But, as stated earlier, RFHOA has no dedicated employee (s)

or designated place to conduct its business affairs.

156. The contract between RFHOA and the Management Company includes

provisions for Collins to; “prepare for the Board’s review and approval a budget for replacement

reserve items,” “monitor the work of all service contractors,” and “furnish insurance

professionals information needed to prepare insurance specifications and proposals for the

Board’s review and approval”.

157. The Management Company’s performance of these provisions of the contract has

been exceedingly inadequate and ineffective.

158. On November 1, 2017, the contract between RFHOA and the Management

Company was renewed by the president of RFHOA, Mr. Casey Newport.

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 159. Mr. Newport had listed his home in the Development for sale in August, 2017,

did not attend any Board meetings after July 2017 and sold his Riverwood Farms property on

October 26, 2017.

160. Election of new RFHOA Board members was scheduled for November 14, 2017,

just thirteen (13) days after Mr. Newport signed the agreement with the Management Company.

161. Notably and disturbingly, nothing in any Board meeting minutes indicate that the

Board authorized Mr. Newport to execute the contract with the Management Company.

162. Furthermore, general liability insurance and indemnification terms of the

agreement overwhelmingly favor the Management Company.

163. In summary, the Management Company has withheld or encumbered access to

RFHOA information, records, documents and contracts from members and Board members

without statutory authority and without authority from the Board. The Management Company

has performed poorly in coordinating long-term projects and contractor activities and providing

long-term fiscal management alternatives to the Board.

164. However, by far the Management Company’s biggest failure has been its inability

to recognize RFHOA liability risks and the potential harm to people as a result.

165. The Management Company failed: to secure an adequate risk assessment related

to the lake, the dam, and the creek adjacent to the elementary school’s property; to recommend

actions to mitigate or mediate the risks; and to procure adequate liability insurance coverage at

the most reasonable premium for the RFHOA.

The Grounds and Landscaping Company

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 166. Routine grounds keeping and landscaping are provided by Echo Systems located

at 4926 Old Summer Rd, Memphis, TN 38122 under a two (2) year maintenance contract.

RFHOA pays approximately $67,000 for grounds keeping and landscaping.

167. Echo also provides maintenance and repair services on a project basis.

Approximately, $150,000 was spent in 2017 primarily for split-rail fence replacement.

168. Noticeably absent from the contract are provisions that Echo provide general

liability insurance coverage, workmen’s compensation coverage for its employees, and

indemnification of RFHOA related to Echo’s and its employees’ activities while working in

the Development.

169. This too, represents another potential liability risk for the RFHOA that has not

been addressed by the Management Company or the Board for years.

Security/Courtesy Patrol Company

170. By far, the largest repetitious annual expense has been for the private protective

services company, and the security/courtesy patrol is by far the most contentious matter.

171. In approximately 2002 or 2003, the Board, which was still then controlled by the

developer, on behalf of RFHOA entered into a contract with Phelps Security Service, a private

protective services company, to provide a “courtesy patrol” throughout the development.

172. The term “courtesy patrol” has been a source of confusion and contention for

members of the community, since the term seems to be nothing but a euphemism for “security

service or security patrol.”

173. At the time Phelps was hired, there was significant construction activity in the

area surrounding the Development as well as a large amount of construction traffic flowing

through the Development.

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 174. In contracting with Phelps, the developer provided a visible deterrence to theft of

construction materials and supplies for construction contractors who the developer needed to

complete the Development without using the developer’s funds.

175. Instead, annual maintenance assessment funds, which were paid by property

owners and construction contractors, were used for this purpose.

176. Phelps did not provide any private protective services for property not owned by

the RFHOA nor was it intended for Phelps to do so.

177. In 2006, the contract for the “courtesy patrol” was awarded to Ambassador

Worldwide Protection Agency, Inc. (Ambassador) with its primary and likely only business

operation located at 8111 Walnut Run Road, Suite 101, Cordova, TN.

178. From the beginning, Ambassador’s President, Mr. Thomas W. Bolling, adopted

an aggressive approach in fulfilling the duties of a courtesy patrol in a residential community. (It

should be noted that Mr. Bolling is also a resident of the development, but not a homeowner.)

179. The Board, which was still controlled by the developer, received complaints

regarding Mr. Bolling’s overly zealous, overly aggressive and confrontational style from

residents and non-residents.

180. Some residents legitimately questioned Mr. Bolling’s common assertion that he

had law enforcement authority throughout the Development including on public and private

property, since he was not a policeman or sheriff.

181. Mr. Bolling unilaterally expanded the scope of activities including providing

private protective services for property not owned by the RFHOA, specifically for public streets

and for private dwellings.

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 182. No actions were taken by the developer or by subsequent Boards to curtail Mr.

Bolling’s activities which included responding to residents’ calls for law enforcement services.

183. These “courtesy patrols” have cost RFHOA approximately $1,600,000 since the

inception of them.

184. In 2017 Ambassador was paid $135,000 about thirty-five percent (35%) of the

Association’s annual operating expenses.

185. The courtesy /security patrols, their cost, and the behavior and actions of security

guards have been the primary source of conflict among RFHOA members; and the conflict has

only worsened over time, especially since Ambassador became the vendor.

The Law Firm

186. The law firm Dinkelspiel, Rasmussen and Mink (DRM) located at 1669 Kirby

Parkway, Suite 106, Memphis, TN 38120 provides legal services to the Association including

collection of past due annual assessment fees.

187. The attorneys assigned to RFHOA are Mr. Peter D. Baskind and Mr. Brandon

McNary. DRM is not on a retainer but is rather paid for services rendered which represents

approximately $45,000 annually.

188. DRM has advised the members that RFHOA is legally responsible for

maintaining the lake, the dam, the ponds, the canal and all other common area assets and it has

advised the members that it is not the city’s or the county’s responsibility to do so. Furthermore,

DRM advised the membership on the need for maintenance and repairs and the needed increase

in maintenance assessments.

The Board of Directors, and a History of Its Actions and Inactions,

Poor Decisions, and Troubles With Its Contractors

27
 189. The Board of RFHOA has had an interesting history. As aforementioned, initially

the Board was controlled by the Developer and had seven (7) members, only three (3) of which

were lot owners.

190. In 2008 or 2009 the ninety percent (90%) threshold of sold lots occurred,

requiring the developer to relinquish control of the RFHOA to the property owners. At that time

all seven (7) directors were property owners elected to serve a one (1) year term by RFHOA

members pursuant to the Governing Documents.

191. This new Board included three (3) property owners who had served as directors

for some time while the RFHOA was controlled by the developer.

192. The Board is tasked with governing RFHOA including establishing policy, and

managing and operating the business affairs of the RFHOA within the Board’s authority to act

pursuant to the Governing Documents (Charter, By-laws and DCCRs), the Tennessee Nonprofit

Corporation Act, and other applicable local ordinances, state statutes, and federal laws and

regulations.

193. Pursuant to the Governing Documents, the major legal and fiduciary

responsibilities of RFHOA, through its elected Board, are to maintain and preserve the common

area and its value, and the architectural integrity of dwellings within the development.

194. Given the value and complexity of its assets, the number of dwellings and the

annual budget, RFHOA is among the largest homeowners associations in Shelby County.

195. Through 2012 successive Boards continued operating as had been done during the

time that the developer controlled RFHOA.

196. These successive Boards did not adopt, by written resolution, any customary

governance practices, such as: (1) designating officer positions and defining their authority,

28
duties and responsibilities; (2) establishing policies for documenting and maintaining Board

decisions; (3) defining and implementing a code of conduct for directors; (4) codifying the

number of directors; (5) establishing policies and procedures for removing directors or

appointing individuals to vacant director positions; (6) defining and implementing rules for

conducting Board meetings; or (7) any other necessary governance policies to effectively fulfill

their duties and obligations as a Board of a large homeowners association.

197. The Boards essentially continued the same fiscal policies as the developer but,

over time, more and more of the RFHOA annual maintenance assessments were not used for

maintenance, but instead were used for “courtesy patrols/security service.”

198. For years, property owners and some Board members continued to question the

Board’s authority to contract and pay for courtesy patrol/security services (the major annual

expense) using RFHOA maintenance assessment funds when the money should have been used

to maintain the lake, the dam, the ponds and the drainage canal, fences, walkways, bridges and

other things badly needing maintenance.

199. In 2012, the aforementioned Engineering and Maintenance Study was performed.

Having spent the money on other things, primarily on the security/courtesy patrol, the RFHOA

did not have the much needed funds.

200. Consequently, in early 2013, the Board increased the annual assessment from

$300 to $500 and announced that the increase would continue for at least three (3) years. Many

homeowners were quite unhappy about the significant increase and at a special members meeting

attempted to have the increase rescinded or remove the Board.

201. The year 2013 turned out to be a pivotal year for the Board and Members of the

Association. Not only were the members hit with a substantial increase in annual maintenance

29
assessment fees to pay for past neglected maintenance, but Mr. Bolling became much more

aggressive in his approach and began acting much more like a policeman.

202. Given his conduct, the Board began receiving complaints regarding Mr. Bolling’s

assertions that he had a contract through the Association with every property owner to provide

security for their private property.

203. Mr. Bolling claimed that he was contractually obligated, and had the statutory

authority to respond to residents’ requests to enforce laws on public and private property within

the boundaries of the Development.

204. Complaints about his conduct were ignored by successive Boards until mid-2013.

205. In 2013, Mr. Bolling was involved in two (2) incidents that were brought to the

attention of the Board that were significant enough that these incidents were scheduled to be

discussed at a Board meeting in August, 2013.

206. However, before that meeting occurred Mr. Bolling was involved in another even

more confrontational and serious incident with the twenty-five (25) year old daughter of a

property owner, whose mother was coincidentally a Board member.

207. During this confrontation on public property in front of the young woman’s home,

Mr. Bolling used a taser weapon on the young woman.

208. At the scheduled August, 2013 meeting, the Board voted unanimously to

terminate the agreement with Ambassador.

209. However, there was an alleged irregularity with the Board’s proceedings. There

were some claims that the mother of the young woman involved in the incident, who was a

Board member, should have recused herself.

210. Even so, the Board vote would have been the same.

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 211. The termination action by the Board was within the terms of the agreement

between the RFHOA and Ambassador and was, therefore, done legally.

212. The Board agreed to take steps to immediately hire another private protective

services company and did not let the community know of its decision to terminate Ambassador

or of its intent to immediately replace Ambassador.

213. However, before the Board could contract with another company, Mr. Bolling,

late at night, placed his written version of the incident, which some property owners thought was

a police report, in the mailboxes of almost all property owners within the Development. His

action generated complaints by a small group of property owners to some but not all Board

members.

214. As a result, these few Board members insisted on reconsidering their previous

action terminating Ambassador. In a subsequent vote by a small majority (no actual meeting was

held; instead voting was done by email) Ambassador was temporarily reinstated, pending a more

thorough investigation.

215. By that time, however, the Board had already solicited and received three (3) bids

from other private protective services companies and a fourth was to follow two or three days

later. These bids were never considered by the Board due to the effects of the distribution by

Bolling and subsequent actions by him and his employees.

216. An Executive Session of the Board was scheduled for September, 2013 to provide

Mr. Bolling an opportunity to speak to the Board. Ambassador was subsequently reinstated and

no thorough investigation occurred as the contract with Ambassador was to be reviewed and

renegotiated.

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 217. Upon the advice of DRM a letter was sent to every property owner that

Ambassador had been reinstated upon unanimous vote of the Board, which was not an entirely

accurate statement, since one of the members was recused who was opposed, and another was

opposed to any permanent reinstatement.

218. In November 2013, at the Association’s Annual Members Meeting, all except one

(1) of the incumbent directors were replaced by vote of the members. Ambassador handed out a

list of candidates it wanted on the board. Every new director elected for 2014 supported

retaining Ambassador.

219. In March 2014, lawsuits were filed by the young woman involved in the tasing

incident and her parents against Ambassador and the RFHOA.

220. The Ambassador lawsuit alleged that Bolling had committed assault, battery and

false imprisonment of the young woman who was tazed, had been negligent, and had

intentionally inflicted emotional distress on the young woman and her parents.

221. In early to mid-2015, the tasing lawsuit against the RFHOA was settled for a sum

never disclosed to the members of the community.

222. The lawsuit against Ambassador was subsequently settled in late 2015 or early

2016.

223. The Management Company was the liaison between the Board and the attorneys

representing the RFHOA’s insurance carrier.

224. There is no indication in any Board meeting minutes of any meaningful briefings

of the Board related to this serious matter.

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 225. In particular, there is no indication of any concern or interest by the Board of

identifying any needed actions required by the Board to mitigate or prevent such an incident

from occurring in the future in order to protect the RFHOA and its members.

226. Not only was the lawsuit payment not disclosed to the members of the

community, to the consternation of many, members of RFHOA were never even informed that

the lawsuit had been settled. Many members may not have even known there was a lawsuit

against the RFHOA regarding the tasing incident.

227. Had members been apprised of settlement payouts, perhaps they would have

reconsidered Bolling’s version of the tasing incident.

228. To make matters worse, especially to those who did not support the reinstatement

of Ambassador, in 2015 the Board declared that the Development was a “no solicitation

community” and sent no soliciting stickers to all property owners to be attached to their homes

with instructions that Ambassador could and would respond to calls regarding unwanted

solicitors.

229. RFHOA annual maintenance assessment funds were used to purchase stickers for

placement on property not owned by the RFHOA and signs placed at every entrance indicating

no trespassing and no soliciting.

230. Ambassador evicted solicitors under threat of trespassing charges from the

Development.

231. Questions of the Board, the Management Company and DRM regarding the

Board’s authority to declare the Development a no solicitation community in conflict with local

itinerant vendor ordinances were not answered or ignored.

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 232. Ambassador continued to respond to an unknown number of RFHOA members’

calls for security services for their private property of which an unknown number involved

providing law enforcement services.

233. Although the Board has had a member be a liaison between the Board and

Ambassador, none of these individuals has any experience or knowledge in public safety, law

enforcement, security, or risk assessment.

234. Furthermore, the Board, the Management Company and DRM have refused to

provide information to property owners concerning Ambassador’s activities within the

Development and no such information is included in Board meeting minutes for the past three

(3) years, possibly much longer.

235. Through mid-2016 Ambassador continued operating under the initial contract

with RFHOA executed in August 2006.

236. The Board continued to permit Ambassador to use armed security guards in the

Development, even though the contract was specifically for unarmed security guards and

RFHOA had settled a lawsuit as a result of the use of a weapon by Bolling on a member’s

daughter. Once again, the liability risk to RFHOA was ignored.

237. In May 2016, after the aforementioned lawsuit was settled, the Board approved a

new contract with Ambassador.

238. This new contract which is for unarmed and armed security guards was, according

to the February 2016 Board meeting minutes, prepared by DRM. This is in stark contrast to the

advice given to the Board at the February 2018 Board meeting by Mr. McNary (a DRM attorney)

who strongly encouraged the Board not to contract for armed private protective security services

because of the extraordinary liability risk to RFHOA.

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 239. Provisions in the contract which are unfavorable to the Association include: an

automatic annual renewal unless notice is provided within ninety (90) days prior to expiration; a

guaranteed three percent (3%) increase in the annual rate upon each anniversary date; limited

time to submit billing disputes; limited performance standards, monitoring and reporting; and an

extraordinary financial penalty for early termination.

240. Essentially, the contract with Ambassador is perpetual particularly since the

Management Company, DRM and certain members of the Board have determined that it is

confidential.

241. This new contract includes the use of armed security guards, as well as, language

that Ambassador provides private protective services for all property within the Development

including property not owned by the RFHOA, specifically the private dwellings of RFHOA

members.

242. Although the contract indemnifies the RFHOA up to $1,000,000 it does not

indemnify the over 1,125 Riverwood Farms property owners.

243. Furthermore, by executing this contract the Board may have reduced the

RFHOA’s liability somewhat. However, for all 1,125 property owners (which includes

approximately one-hundred (100) to one-hundred twenty-five (125) rental properties owned by

individuals, real estate investment trusts, limited liability corporations and other legal entities),

the renters of said rental properties and the eighty (80) to eighty-five (85) small home–based

businesses within Riverwood Farms the liability risk of using a private protective services

company, especially with armed security guards, has increased due to the failure to indemnify

them.

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 244. The Board has never provided property owners with notice of their liability risk

by using Ambassador as this fact has been deemed confidential.

245. In fact, the Board approved renewal of the contract in May 2017 and without

extraordinary relief, as requested in this petition, RFHOA cannot terminate the contract without

severe financial penalties.

246. The RFHOA can terminate this contract if a receiver is appointed by the express

language of the contract itself.

247. Beginning with the class of directors in 2014 the number of regular Board

meetings declined from eleven (11) or twelve (12) in prior years to nine (9) in 2014, five (5) in

2015, eight (8) in 2016 and six (6) in 2017. Furthermore, even with fewer Board meetings,

attendance by elected or duly appointed directors (those appointed to fill vacancies of elected

directors) also declined from an eighty-nine percent (89%) attendance rate in 2013 to seventy-

eight (78%) in 2017.

248. In 2015 through 2017 it was a frequent occurrence for Board meetings to be

cancelled because of an insufficient number of directors to constitute a quorum.

249. At the April 2017 Board meeting the Board appointed an individual from three (3)

candidates to a director position that had been vacant since January. The Board then appointed

the other two (2) candidates as “non-voting directors”, a position that does not exist in

RFHOA’s Governing Documents or the Act.

250. These non-voting directors attended the few Board meetings throughout the year

and participated in Board deliberations even though they were not elected by the RFHOA

members pursuant to the Governing Documents.

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 251. Suffice it to say, the last several years of Board leadership has been woefully

inadequate. And, the Boards have repeatedly refused to address the concerns of those RFHOA

members who thought maintenance assessment funds designated for desperately needed common

area maintenance were being diverted to pay for private protective services for property not

owned by RFHOA as the May 2016 contract with Ambassador confirms.

252. Of the $135,000 paid to Ambassador in 2017 between eighty percent (80%) to

eighty-five (85%) was related to private protective services for property not owned by the

RFHOA or approximately $108,000 to $115,000.

253. Of the forty-one (41) projects (which were the basis for the maintenance

assessment increase in 2013) identified by Ledford Engineering for the common area, it is not

known how many have been completed and of those remaining how many have either not been

scheduled or have been ignored.

254. There has been and continues to be a major difference of opinion between past

and current Board members and various RFHOA members as to whether the Governing

Documents should be very broadly interpreted to justify using annual maintenance assessment

funds for private protective services for property not owned by the RFHOA and/or for courtesy

or security patrols based on the very general wording of a provision in RFHOA’s DCCRs which

states: “Purpose of Assessment: The assessments levied by the Association shall be used

exclusively for the purpose of promoting the recreation, health, safety and welfare of residents in

the property….”

255. The terms courtesy patrol, security, security service, private protective services do

not appear in the DCCRs.

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 256. There is nothing specifically in the DCCRs empowering the Board to contract for

and use annual maintenance assessment funds to provide and pay for courtesy patrols/security

service for the entire development or private protective services of any type for private property,

such as the dwellings owned by RFHOA members.

257. Provisions of the DCCRs do, however, specifically state in two different places

that annual maintenance assessment funds are to be used for: (1) “maintenance, improvements,

insurance, administration and repairs” and (2) “for the improvement and maintenance of the

property, its services and facilities including, utility costs for lighting and watering as related to

the use of the Common Area.”

258. In a letter dated May 24, 2017, in response to a RFHOA member’s questions

regarding the Board’s authority to contract for courtesy patrol/security service, RFHOA’s

attorney, Mr. Peter D. Baskind stated that the Tennessee Nonprofit Corporation Act “is very

clear all powers are vested in the Board. Thus, the Board of Directors may enter into contracts

that it deems in the interest of its Members.”

259. Of course, it is quite evident that when the statute says the Board “may enter into

contracts,” it doesn’t mean the statute gives the Board the right to do so if the Governing

Documents specifically or impliedly suggest otherwise.

260. The DCCR’s “restrictions” apply to the Board as well as to the members.

261. Contracting when specifically disallowed, or when impliedly disallowed, would

be an ultra vires act when the Board has no such authority.

262. Furthermore, given the number of rental properties owned by other legal entities,

the number of renters occupying said rental properties, and the number of home-based small

businesses operating within the Development the question of the Board’s legal authority to

38
contract for private protective services for property not owned by the RFHOA is even more

crucial to resolve.

263. Yet, at no time did the attorneys for the RFHOA ever file a declaratory action to

determine whether a court thought such an action was authorized and whether the potential

liability risk of said action could be withheld from all of those affected.

264. If the Board has this broad authority to use annual maintenance assessment funds

under the generalized catch-all clause, “promoting the recreation, health, safety and welfare of

residents,” then the question arises as to whether the Board can also use annual maintenance

assessment funds, to provide other things.

265. For example could the board provide boats or other recreational devices for use

on the lake (promoting recreation), or things like day care services, flu shots, health clinics, yoga

classes or health club memberships (any of which could promote the health, safety and general

welfare of the residents)?

266. Additionally, this particular provision of the DCCRs could be read to permit the

Board to provide members with even greater benefits to individual members: i.e., utilities,

landscaping, lawn care, pest control, home intrusion alarm, home repair, or even health insurance

or any number of other services.

267. Such an interpretation seems ludicrous, but is definitely plausible under Mr.

Baskind’s global analysis.

268. Past Boards, the Management Company, and DRM either cannot, or have never

been willing to adequately or satisfactorily explain the basis for the Board’s legal authority to

contract with Ambassador to provide courtesy patrols/security services for the entire

39
Development on public streets and for private protective services for property not owned by the

RFHOA.

269. It has never been satisfactorily determined if the Board has the authority to

contract for services of any type on behalf of all property owners for their private property.

270. It appears the assessment fees are for the common areas and not for the property

members as a whole, but patrolling the entire Development and providing security services for

property not owned by the RFHOA goes way beyond the common area.

271. Despite good faith efforts by property owners and some Board members to

secure answers as to the difference between a courtesy patrol and a security patrol on public

streets, the difference has never been explained by the Board, the Management Company, or

DRM.

272. This seems critical, since the Board has insisted these patrols be called courtesy

patrols, not security patrols, raising the question as to how a courtesy patrol could promote the

health, safety, or welfare of the residents, justifying the use of annual maintenance assessment

funds for this general purpose.

273. It’s a security patrol when convenient, and not one, when it isn’t.

274. The Board, the Management Company and DRM cannot or will not with certainty

explain the range and scope of services provided by Ambassador and if those services include

security services for private property, which is implied since Mr. Bolling has mentioned

numerous times that he patrols every street in the Development and the streets accessing the

common areas cover less than ten percent (10%) of the Development.

275. The Board has never provided comprehensive information detailing the services

provided by Ambassador to property owners and has repeatedly refused to do so.

40
 276. The Management Company, Ambassador and some Board members claim that

Ambassador provides 24 hour/7 day coverage within the Development. However, no

explanation has ever been provided to all members explaining what 24 hour/7 day coverage

includes or how often or frequently Ambassador is actually in the neighborhood.

277. 24 hour/7 day coverage is not necessary for the common areas so this also

confirms that the patrols are for property not owned by the RFHOA.

278. The extent to which Ambassador responds to property owners’ requests for law

enforcement or security services also confirms that the RFHOA is contracting for entire

Development patrols and security services for property not owned by RFHOA.

279. The Management Company and those who may know have refused to answer

questions.

280. Ambassador operates with impunity within Riverwood Farms without reasonable

oversight, scrutiny, or review because pertinent information is hidden from the members.

281. Attempts by members to have the Board promote and encourage Neighborhood

Watch or consider installing surveillance cameras in collaboration with local law enforcement

have been ignored or rejected.

282. The lake was constructed for the exclusive use of RFHOA members. Yet,

Ambassador does not seem to be primarily engaged in keeping non-member trespassers off the

lake, which defeats the primary reason for keeping the lake private.

283. If the RFHOA has the right to hire a security firm for the common areas, as part

of maintaining them and administering them, then Ambassador is not doing a good job of it

while it is patrolling the rest of the neighborhood.

41
 284. The Management Company has also been subject to its share of member

complaints.

285. Efforts to have RFHOA financial records, accounting practices and fiscal policies

audited by an outside independent accounting firm have been met with resistance by the Ms.

Spiecha and some directors.

286. The Management Company controls the flow of information between vendors and

the Board and has possession of RFHOA official documents and records which are also tightly

controlled. Virtually all communications between the Board and members is controlled by the

Management Company and has been limited to two (2) mailings each year; one (1) in March to

inform members of the annual maintenance assessment, another in October to announce the date

of the Annual Members Meeting.

287. This lack of communication between the Board and members has resulted in the

view by many that RFHOA is not operated with openness and transparency.

288. Ms. Speicha has unilaterally withheld RFHOA information, records and

documents from members claiming that RFHOA members were not entitled to this information.

289. What activities or actions that Ms. Speicha and the Board could be engaged in of

such a confidential nature that this information should be hidden from RFHOA members is

unknown.

290. Ms. Speicha conducted the Annual Members Meeting in November 2017 instead

of an outgoing Board member. Both, she and Mr. Bolling consumed the majority of the time

instead of permitting candidates for Board positions to answer questions from members.

42
 291. Absent Board leadership the Management Company and Ambassador have

assumed far greater influence in governance, making policy decisions, and in the use of RFHOA

funds.

292. In November 2017 a new class of directors was elected: Mr. Paul Westpahl, Ms.

Karen Grider, Ms. Janice Tankson, Mr. Michael Poindexter, Mr. Tom Krajenta, Mr. Michael

Pickens and Mr. Johnny Pulliam.

293. Of the over 1,125 RFHOA members less than one hundred (100) participated in

2018 Board member elections.

294. Three members of the 2017 Board, Mr. Krajenta, Mr. Pulliam and Mr. Pickens,

have attempted to address issues related to security, the lack of a financial audit and other vendor

contracts including with the Management Company, Ambassador and Echo Systems.

295. They have attempted to no avail to have the Board meet to to adopt policies to

improve Board management and operation of the Association’s business affairs.

296. Their efforts have been met with resistance by the other four (4) Board members.

297. Mr. Westphal and Ms. Speicha withheld Association records, contracts and other

information and refused to answer questions making it difficult for these three (3) Board

members and the others to make informed, fact-based decisions.

298. These three Board members are entitled to inspect and copy this information

pursuant to Tenn. Code Ann.§48-66-108.

299. As previously mentioned, there has never been a declaratory judgment action

asking a court to address the question of whether the Board has the authority pursuant to

RFHOA’s Governing Documents to use annual maintenance assessment funds for much more

general purposes.

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 300. There is a deep split between RFHOA members who believe that the annual

maintenance assessment funds were assessed for the maintenance of the common areas but, are

not being used for that purpose and between those between those who think otherwise.

301. Sincere efforts to resolve this serious and fundamental matter of the Board’s

authority to use annual maintenance assessment funds have been futile as have been efforts to

resolve the matter of members and Directors access to and rights to review RFHOA records

including contracts with vendors.

ALLEGATIONS OF CONDUCT WARRANTING RECEIVERSHIP

Count I – The Dam, The Lake, The Creek, The Ponds, The Canal and the Other
Improvements and Assets Are Being Neglected And Mismanaged From Both a Risk
Perspective and a Maintenance Perspective and Are Improperly and Grossly Uninsured

302. Tenn. Code Ann. § 29-1-101 states that “The courts are all vested with power to

appoint receivers for the safekeeping, [and] management … of property in litigation in such

court, whenever necessary to the ends of substantial justice.”

303. It is clear to all petitioners that the property owned by the Association is being

neglected and that maintenance is being put off on many projects far longer than need be.

304. It is unknown how many of the forty-one (41) projects identified in the 2013

engineering report have been completed.

305. It is clear to the petitioners that funds that could or should be used for

maintenance are being used for courtesy/security patrols throughout the Development for private

protective services for property not owned by the RFHOA.

306.. Even if it is legal and legitimate for the Board to contract for courtesy/security

patrols for private protective services for property not owned by the RFHOA, prudence and

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reasonable management requires that proper maintenance and risk management of these critical

common area assets take priority over courtesy/security patrols.

307. Both the law and the DCCRs requires proper maintenance of and insurance for

these assets and the law does not require courtesy/security patrols for private protective services

for property not owned by the RFHOA.

308. These assets could pose a huge public safety risk if not maintained properly and if

not insured properly and adequately.

309. The RFHOA has clearly not conducted an adequate risk assessment to determine

the safety risk to the public and/or potential liability to the RFHOA and its members related to

the lake and the dam.

310. A catastrophic dam failure could potentially result in significant loss of life and

enormous liability assessment against the RFHOA, which is not insured for such an event and

which has apparently never even been insured for such an event.

311. Such an assessment against the RFHOA, without adequate insurance, would

likely cause derivative liability to all RFHOA members that could cause a huge financial burden

on them.

312. Proper management by a receiver could eliminate these concerns.

313. RFHOA has the funds, or can raise it through assessment increases, to do proper

maintenance and risk assessment and get proper and adequate insurance and mitigate liability

exposure.

314. The problem is that RFHOA has spent its funds on other things, primarily on

courtesy/security patrols throughout the Development for private protective services for property

not owned by the RFHOA.

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 315. Use of these funds for private protective services for members’ private property

can in no way be justified as contributing to fulfillment of the RFHOA’s legal obligation to

maintain the common area.

316. RFHOA has also had poor service from the Management Company and DRM

who failed to recognize liability risks to RFHOA, its members, other legal entities and

individuals who are not members (school children and their parents, grounds keepers, and

renters).

317. Petitioners believe a receiver is absolutely necessary to break this cycle of

independent contractors running the RFHOA and running it poorly.

318. Petitioners are well aware that this action could be unpopular with a large number

of members and they could well be voted out next November and the status quo continue.

Count II – The Board’s Contract with Ambassador is An Ultra Vires Act

319. Tenn. Code Ann. §48-53-104 states that “A corporation's power to act may be

challenged in a proceeding against an incumbent or former director …. The proceeding may be

brought by a director …. derivatively, or through a receiver, a trustee or other legal

representative.”

320. As mentioned previously, there is nothing in the DCCR’s that expressly

authorizes the Board to contract with a private protective services company to patrol the entire

subdivision or to provide private protective services for members’ private property.

321. The assessments are for maintenance of the common areas of the Development.

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 322. Only a twisted, tortious interpretation of the DCCR’s could authorize the Board to

spend maintenance assessments funds intended and needed for the upkeep and improvements on

the common areas to instead be used on private protective services for members’ private

property.

323. Consequently the contract with Ambassador should be terminated immediately as

being an ultra vires act and warrants appointment of a receiver to ensure that the contract is

terminated and funds are spent in accordance with the DCCR’s.

ALLEGATIONS WARRANTING A DECLARATORY JUDGMENT

324. As previously mentioned, at issue and the main reason for the differing opinions

and actions between the Petitioners and the incumbent and past board members is the differing

interpretations between the two regarding how maintenance assessment funds are to be spent,

and specifically whether they can be spent to pay for a courtesy/security patrol throughout the

Development for private protective services for property not owned by the RFHOA.

325. Petitioners allege that these assessments should not be used in that manner and

ask the court for a declaratory judgment to that effect. Petitioners would request that a receiver

be appointed to do whatever is necessary to present this matter to the court to settle this dispute

between Petitioners and their adversaries.

ALL OTHER REMEDIES ARE INADEQUATE

326. The current circumstances and conditions detailed in the aforementioned have

occurred over many years as a result of; changing Board composition, a lack of governance and

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management continuity, a general lack of understanding by Board members of their duties, and

inappropriate influence of vendors.

327. The composition of the Board is subject to and has changed every year since

control of the RFHOA was conveyed to the members. Consequently, there has been no

continuity of governance to effectively manage and operate the business affairs of the RFHOA to

fulfill its legal obligations pursuant to the DCCRs.

328. Some RFHOA members, including past and current Board members, are of the

opinion that members may dictate to the Board how maintenance assessment funds are used,

including using these funds for services for their private property or for their personal preference,

without regard to provisions of the DCCRs. This opinion has been supported by both, the

Management Company, Ambassador, and DRM.

329. Successive Boards have, implicitly and explicitly, permitted the Management

Company and Ambassador to directly and indirectly establish policies, make decisions that

should have been made by the Board, influence Board election proceedings, and determine how

RFHOA maintenance assessment funds are used.

330. Petitioners assert that there are no other remedies available to prevent the

continued misappropriation of funds by Boards whose members continue to be elected due to the

strong influence of independent contractors, such as Ambassador and Collins.

331. No other remedy is adequate to prevent the members from electing Directors who

do not understand Director’s obligations and duties, and who think they are elected to do what

the majority of the members desire, regardless of whether the Directors have the authority to do

so within the DCCRs or within applicable statutes, ordinances, laws or regulations.

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 332. No other remedy is adequate to prevent boards from contracting with independent

contractors to do things that are not authorized by the RFHOA’s Governing Documents.

333. No other remedy is adequate to provide the continuity of governance and

management and operation of the business affairs of the RFHOA over a period of time, probably

several years, to adequately address all of the issues.

334. No other remedy is adequate to resolve the inordinate and inappropriate influence

of independent contractors over the RFHOA’s governance and management and operation of its

business affairs.

335. The Petitioners do not have the funds to finance protracted litigation, especially

litigation that involves matters that affect them personally in such a minor way. Moreover,

incumbent Board members serve, and past Board members served, voluntarily without pay.

336. Conversely, the RFHOA has the capital to adequately fund a receivership and the

work of the receiver directly benefits the RFHOA.

337. Substantial justice requires that the RFHOA be required to pay the costs of its

own receiver, especially when it has the money to do so.

PRAYER

Petitioners pray that the court do the following:

(a) If, after notice and a hearing, should the court determine that there is no genuine

opposition to the court declaring that the Board does not have the authority to contract

for courtesy/security patrols for anything other than the common areas which are

owned by the RFHOA, declare that the Board has no such authority;

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(b) appoint a receiver for RFHOA to govern and manage the affairs of the RFHOA until

it is deemed by this court to have stable, sound and prudent governance and

management of its affairs;

(c) should there be any genuine legal opposition to having the court declare that the

Board does not have a right to contract for courtesy/security patrols for anything other

than common areas, appoint the receiver to represent the Petitioner’s position in this

matter, and to obtain, if the court decides in favor of Petitioners’ position, a

declaratory judgment holding that RFHOA maintenance assessments cannot be used

for security/courtesy patrols for the Development;

(d) should the court determine that the board has the right to contract for

courtesy/security patrols for private protective service for property not owned by the

RFHOA, order that all maintenance and necessary improvements, including adequate

liability insurance coverage and any other matters required by law take priority over

paying for said security patrols and authorize and order the receiver to prioritize

payments according to what is legally required over what is not legally required;

(e) the receiver have the power to manage the affairs of RFHOA until such time as the

receiver and court conclude that governance and management of the corporation is

conducted in a sound and proper way without the necessity of a receiver;

(f) to authorize the receiver to collect delinquent maintenance assessments in a way the

receiver deems appropriate, in order to better pay for the maintenance of the RFHOA

assets and to set up necessary reserves;

(g) to authorize the receiver, after adequate study, to determine and set proper

maintenance fees for RFHOA and for proper reserves;

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(h) to authorize the receiver to hire or appoint officers who are not directors and to hire

other employees to help manage the corporation if the receiver concludes that proper

management requires employees of particular experience, talent or skill;

(i) to authorize the receiver to establish a convenient principal place of business where

the Board, the officers employees, members and independent contractors can meet to

conduct the business and affairs of the RFHOA;

(j) to require the RFHOA to pay for the services of the receiver ;

(k) the court order the RFHOA or the receiver to reimburse Petitioners for any costs they

have expended in bringing this petition; and

(l) Grant such other legal or equitable relief that the court deems necessary, appropriate

or just and proper.

Respectfully submitted,

______________________________
Thomas Krajenta, pro se
8852 Toth Cove
Cordova, TN 38016
(901) 210-7175

______________________________
Michael Pickens, pro se
8760 Stablemill Lane
Cordova, TN 38016
(901) 406-5740

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 ________________________________
Johnny Pulliam, pro se
1363 Cedar Hollow
Cordova, TN 38016
(901) 864-0732

______________________________
Terry Coggins, pro se
8904 Linell Lane
Cordova, TN 38016
(901) 755-0409

______________________________
David Mills, pro se
1403 Cedar Run
Cordova, TN 38016
(901) 827-6458

______________________________
Kim Wagner, pro se
1615 Wood Mills
Cordova, TN 38016
(901) 634-9820

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