Case No. 07F-H067012-BFS / 07F-H067013-BFS (consolidated case)

Complaint:

Source of Law:

Discussion:

Holding:

Additional Remarks:
Pre-conference hearing. Either party may request a pre-conference hearing to settle or clarify aspects relating how the hearing will proceed; such as date for exchanging documents and list of witnesses.

In response to a late filing by HOA of a 17-page motion -- with legal memorandum containing HOA arguments -- to limit scope of the hearing, the ALJ said that he would give Petitioner time to respond. HOA attorney said that he just files papers with respect to the topic of the pre-hearing, but ALJ pointed out that he filed a motion, and as such, Petitioner is permitted time to respond. ALJ set a 10-day response period.

HOA attorney subpoenaed documents from Petitioner. Cannot ask other party to prepare new documents, or to do interrogatories (submit written questions to other party) or depositions (ask direct questions of other party).

With respect to a settlement agreement, ALJ properly advised parties that this is a matter outside the OAH.

Tucson case to be heard late in April.

Case No 07F-H067004-BFS

Preliminary summary

Complaint:

Source of Law:

Discussion: .

Holding: .

Additional Remarks:
Homeowner sought punitive damages and restitution for alleged damages from HOA. HOA filed a motion to dismiss, which was denied with respect to petitioner seeking restitution, but held that punitive damages were not applicable.

Case No 07F-H067006-BFS

Complaint:
1. discrimination by landscaping
2. threats of additional assessments

Source of Law:
Declaration; by-laws; case law

Discussion:

Holding:

Additional Remarks:
In this dispute over the height and size of a homeowner’s fence/gate, the HOA attorney found it necessary to submit a 10-page legal memorandum on the Friday before the Monday Hearing. Legal memoranda present arguments and contain biased points of view, with or without supporting authority. They are not evidence. This, in my opinion, was a CAI HOA attorney playing hardball and attempting to apply their legalese to thwart homeowner justice.

OAH has no procedures or rules governing the submission of legal memoranda, which are arguments on some motion before the judge (or an appellate court argument), except that a brief may be filed as part of the docket (record), R2-19-108, or as a supplement to closing arguments, R2-19-116(G) and (H), and as a pre-conference agreement, R2-19-112. (As a guide, when memoranda are submitted with a motion or appellate procedure, the opposing party gets 10 - 20 days to respond -- see Rules of Civil Proc).

Accepting the current OAH rules that a memorandum may be accepted, these rules violate the impartiality doctrine of the courts and impartial adjudication process of OAH. They do not inform the parties that written arguments are permissible in addition to the evidentiary hearing process. In short, knowledgeable attorneys understand that a memorandum is a legal argument, but this is not made clear to the public who is told that a lawyer is not necessary, and any references to submitting memorandum as part of the adjudication is avoided on the OAH materials provided to the public on its website. This silence seems to reflect an attitude, that, well. the average person doesn't understand legal memos anyway, so why bother to inform him.

Petitioner requested a 20-day continuance to respond to the HOA attorney memorandum, which he described as “ambush tactics”. Koepke responded that, all that they were doing was “advising the court about the substantive issues of law on the topics before it”. Without explanation, the ALJ denied the motion for continuance. Then, the ALJ asked petitioner, “Did you have a chance to look at it? “Yes”, replied petitioner. “Well, then you are ahead of me, I just got it this morning and haven’t had a chance to look at it. I will look at it later.”

Petitioner has not had a chance to respond, as a matter of fairness and court impartiality, so the ALJ would see both positions. As it stands, the ALJ violated its impartiality by accepting the memorandum, by not granting a continuance, nor even advising the Petitioner that he could submit a memorandum as a supplement to the closing arguments, as per R2-19-108.

HOA attorney is Penny Koepke at Ekmark.

Case No 07F-H067010-BFS & 07F-H067011-BFS

Complaint:
violations of CC&Rs and ACC; failure of HOA to respond within in specified time.

Source of Law:
Declarations.

Discussion:

Holding:

Additional Remarks:
This is a consolidated case, which generally occurs when more than one complaint deals with the same legal issues. More than one homeowner is involved -- one for each case.

Took HOA 72-days to respond to ACC request; CC&Rs specified a 45 day response time. Failure to respond constituted an automatic approval. (This was a 4-hour plus hearing!) Petitioner’s wanted to install a private gate on for their custom homes with 300-foot driveways. Homeowners were not allowed to remain in ACC committee during its supposed approval.

HOA claimed an incomplete submission was made -- needed a waiver from neighbors. Yet, there is no waiver requirement by neighbors in the CC&Rs or rules and regulations.

Second issue raised by Mulcahy, again not reason for the denial, gates were not aesthetically appropriate – denial was required within 45 days as per the written contract, “black-letter law”. It was the custom of ACC to get waivers, although not in the governing documents.

A decision against homeowners would, once again, demonstrate that when it comes to protecting homeowners, the CC&Rs are not worth the paper it’s written on. We are well aware of court opinions referring to the written contract and the meaning of the provisions as stated, unless ambiguous. (No case history was mentioned in the opening arguments by either lawyer).

ALJ said, “I always forget what CC&Rs stand for.” And to Ms. Mulcahy, “I saw your firm and recognized it.”

Beth Mulcahy for the HOA. Mr. Lynch for homeowners. Also asked for attorney fees.

Case No 07F-H067008-BFS

Complaint:
enforce the architectural standards (allow petitioner’s changes)

Source of Law:
declaration; bylaws; Rules & Regs

Discussion:

Holding:

Additional Remarks:
Homeowner sought to cover driveway with concrete to prevent drainage runoff from eroding front yard in this desert-landscaped community. HOA considered this to be a structure and subject to its prior approval. No Cave Creek ordnance violation. Cement addition existed for some time period, about a month, before HOA insisted that it be removed, and threaten fines if homeowner did not comply. Cement composition was same as used on existing driveway. Other properties have extensions – what was allowed leads to the meanings of the rules.

HOA notice referred to a violation that in reality did not exist – “driveway must extend to garage”. Homeowner seeks approval; HOA seeks removal.

Homeowner attorney stated that the restriction was a rule and not a covenant in the CC&Rs, and that HOA could not add to CC&Rs by means of rules. [Cases exist relating to the meaning of “to amend” – to modify or to change, but not to add]. There is no mention of driveways in CC&Rs, but only in the Rules & Regs. HOA claims general powers under ”abiding by ACC decisions”.

HOA attorney clarifies that “going to the city for approval is not the same as going to the HOA for approval.” Furthermore, he argued that it was irrelevant what other properties looked like since HOA can change the rules, unless it could be shown that other properties were subject to same set of rules or CC&Rs. Homeowner failed to get prior approval of ACC for any appearance or landscaping changes. Portrays HOA as really cooperative, helpful and willing to resolve the issue.

HOA board has broad discretionary powers, as granted by the CC&Rs, in regard to concerns relating to appeal of community.

Morgan of Maxwell & Morgan, representing HOA. James Tanner of Jackson, White, representing homeowner. HOA is Rancho Manana in Cave Creek.

Case No 07F-H067002-BFS

Complaint:

Source of Law:
ARS 41-2198.01 relating to OAH authority.

Discussion:
Dismissed; no jurisdiction.

Holding:
Because Petitioner Mr. Wojtowicz admitted that his dispute is against the successor in interest to the original developer, Voyager at Juniper Ridge, L.L.C. and its principal N.E. Isaacson, regarding their amendments to the original declarations of Covenants, Conditions, and Restrictions (“CC&Rs”) when they took over development of the planned community rather than against Respondent Voyager at Juniper Ridge Homeowners’ Association for any alleged violation of valid CC&Rs.

IT IS FURTHER ORDERED allowing Respondent leave to file an application for attorney’s fees and costs and affidavit on or before February 9, 2007. As the Administrative Law Judge stated on the record, she does not believe that attorney’s fees and costs are available as a matter of right to a Homeowners’ Association in an administrative proceeding, even if, as here, it prevails on the merits. The statutes and regulations governing procedure in the Office of Administrative Hearings do not provide for counterclaims in this type of proceeding. Respondent has not paid any filing fee or filed any petition for affirmative relief against Petitioner under the CC&Rs, which A.R.S. § 41-2198.01(B) allowed it to do. Moreover, an administrative proceeding such as this one is not an “action” such as to make attorney’s fees available under either A.R.S. §§ 33-1807(H) or 12-341.01. The Administrative Law Judge requests Respondent to address these concerns in its application for attorney’s fees and costs.


Additional Remarks:
The Holding above relates to a third party, the developer and not the HOA. Only complaints against the HOA are permitted.

HOA is not entitled to fees if HOA wins as in civil court case, but attorney must argue why it should be paid fees and costs.

HOA filed a response seeking to declare the new law, ARS 33-2198.01 as unconstitutional and that OAH lacks jurisdiction. OAH replied that constitutional challenges are not within its jurisdiction and must be filed in Superior Court. It further advised parties that OAH "will not rule of Respondent's constitutional argument, but merely notes that the argument was properly preserved for purposes of any appeal ..." (An appeal must specify goings on at the trial level, and if an issue was not raised there, it cannot be raised on appeal).

From material provided to me to my petitioner, this seems to be a case where a developer declared himself Declarant, by means of amendments and proceeded to create his own personal fiefdom, solely controlling amendments without member approval, and exempting Declarant from all restrictions.

Original CC&Rs make it clear from its wording that no amendments were permitted until after the initial 30 year period. The amendments violated Arizona law with respect to uniformity of covenants. La Esparanza Town Home Association, Inc. v. Title Security Agency of Arizona, 142 Ariz. 235, 689 P.2d 178 (App. 1984).

Finally, petitioner's attorney wrote Respondent in 2005 that there is no documentation on record showing that alleged declarant, the Respondent, was the legal successor or assignee assigned of the original declarant. The property, the lots still owned by Developer were purchased through bankruptcy sales, but this alone does not make the original lot purchaser the Declarant. We have, thereby, a broken and invalid chain of subsequent property owners claiming to be the Developer’s assigns or successor’s in interest. Consequently, Respondent has no standing as declarant and no control of HOA board.

Property is in the Pinetop, AZ area, northeast of Phoenix.

Case No 07F-H067001-BFS

Complaint:
violated rights under CC&Rs

Source of Law:
Declaration and Amendment

Discussion:
The 1987 Declaration superseded the 1971 Declaration. The 1987 Declaration governs, among other things, the “replacement of an existing mobile home.” Therefore, it is concluded that Petitioner is subject to the provisions of the 1987 Declaration, which was approved by a majority of the association’s homeowners as required by the 1971 Declaration.

Petitioner failed to obtain Committee approval of his proposed replacement of his existing mobile home prior to purchasing it as required by both the 1987 and 1971 Declarations. Respondent did not abuse its discretion to grant Petitioner a hardship variance to the replacement age limitation under the 1987 Declaration.

Holding:
Denied petition. Homeowner is subject to new CC&RS.

Additional Remarks:
Petitioner sought variance from amended CC&Rs that prohibited replacing mobile homes with homes more than 5 years old. He claimed financial hardship if he had to buy a home 5-years or less.

Ex post facto “laws” are valid in HOAs.

Case No 07F-H067005-BFS

Complaint:
ACC prohibition of backyard playground

Source of Law:
Declaration; case history relating to CC&Rs

Discussion:
The record in this matter shows that Architectural Committee and the San Marcos Manor HOA board refused to consider Mr. Ketchum’s requests to approve the play structure until he reduced its height to 6’ or less. The board did not even suggest that it might approve a structure that was higher than 6’ until its August 14, 2006 letter to Mr. Ketchum, which was written after the board had consulted counsel and after fines had started to accrue under the notice policy. At that point, it offered to approve the play structure if its height was reduced to within 18” of the perimeter wall. This requirement is not found in the CC&Rs or Architectural Guidelines.

Mr. Ketchum is correct when he points out that neither the CC&Rs nor the Architectural Guidelines absolutely prohibited improvements higher than 6’ in members’ backyards. The Architectural Committee and HOA Board both refused to approve the play structure unless it was lowered to less than 6’, which would not have required any approval under the CC&Rs and Architectural Guidelines. Their refusal to exercise discretion was arbitrary and capricious.


Holding:
IT IS ORDERED granting Petitioner’s Petition and requiring Respondent to exercise its discretion under the CC&Rs and Architectural Guidelines to consider Petitioner’s request for approval of the play structure in his backyard.


Additional Remarks:
This is a usual case where board refuses to OK variances from ACC, gives verbal assurances, and then issues a decision that is inconsistent with CC&Rs. It arbitrarily decided a 6 foot height or less would be approved.

Mulcahy law firm represented HOA.

Case No 07F-H067003-BFS

Complaint:
breach of fiduciary duty; failure to enforce CC&Rs

Source of Law:
Declaration and Amendment XII

Discussion:
Article XVII of the Eleventh Amended and Restated Declaration granted exclusive authority to Respondent’s Board of Directors to construe and interpret the document.

Petitioners’ complaint that Respondent failed to enforce the provisions of the Eleventh Amended and Restated Declaration is untimely, due to it having been amended and superseded by the Twelfth Amended and Restated Declaration and their failure to timely prosecute a civil claim while the Eleventh Amended and Restated Declaration was effective. Petitioners’ complaints are now moot because of the Twelfth Amended and Restated Declaration.

[Amendment XII reads, “[l]andscaping of Common Areas and Lots bordering the Golf Course shall be maintained to avoid undue obstruction of views of the Golf Course.”]

It is concluded that Respondent has maintained the landscaping of the common areas to avoid undue obstruction of Petitioners’ views of its golf course.

Holding:
Denied petition.

Additional Remarks:
Homeowners bought property under amendment XI and its restrictions on obstruction of views of golf course. Homeowners paid for premium lot on golf course.

Another instance where the alleged HOA contract is meaningless as a result of broad CC&R amendment provision to allow any validly passed amendment to be binding on all homeowners, regardless whether or not CC&Rs were not in effect at time of purchase. The courts have upheld equitable servitudes provision for a single set of covenants for all homeowners over the Constitution and state laws.

This power, alone, granted by the courts gives HOA principalities more powers than accorded to public governments. Public government does not permit ex post facto laws; nor can property rights be taken without just compensation. Under US Supreme Court criteria, state court decisions upholding unconstitutional laws -- unequal application of the laws for homeowners in HOAs as apparent here - is a state action.

Case No 07F-H067009-BFS

Complaint:
1: involves HOA purchase of a $723,000 building without member vote.
2: involves 2005 increase of Transfer Fee on property from $300 to $950 to create a discretionary fund for making major purchases, thus avoiding a special assessment and avoiding a vote of the homeowners.
3. Validity of transfer fee upon sale of property for application to purchase.

Source of Law:
Divizio v. Kewin Enterprises; declarations and bylaws.

Discussion:
The Administrative Law Judge concludes that by virtue of the Board’s authority to run the business activities of the Apache Wells, the provision in the Bylaws that Apache Wells can purchase real estate, and the credible evidence of record that Apache Wells needed to obtain additional office space and meeting rooms, it was not unreasonable for Apache Wells to purchase the Building to satisfy its business needs.

The evidentiary record reflects that the determination as to the amount of the increase of the transfer fee was arbitrarily and capriciously selected and not reasonably related to specific expenses that are anticipated. Under the circumstances, the Administrative Law Judge concludes that the increase of the transfer fee was not authorized and was not reasonable related to expense.

Holding:
[I]t is concluded that with respect to Issue 1, Apache Wells acted appropriately with respect to the purchase of the Building and no action is required of Apache Wells with respect to that issue;

It is concluded that with respect to Issue 2, Apache Wells acted arbitrarily, capriciously and unreasonably in increasing the transfer fee from $300.00 to $950.00. Therefore, the increase of the transfer fee is voided and the transfer fee shall be $300.00;

IT IS ORDERED that within forty days from the date of this Order, Apache Wells shall pay to Mr. Stromme his filing fee of $550.00.


Additional Remarks:
Other issues are not properly before me if not related to governing documents or statutes regulating planned communities or the governing documents. Issues are not related unless they are tied into the statutes or governing documents ... cannot address these issues without additional legal authority.

ALJ also advised parties that although documents were submitted as evidence, the parties must speak to the relevant parts of those documents for the record – do not assume ALJ will understand whatever point trying to be made without specifically speaking to those concerns. Homeowner basically argued that his interpretation does count, when he reads any HOA document of budget entry.

Attorneys submitted “legal memoranda”, which are their written arguments to the ALJ with supporting authorities – laws, case history, declaration, bylaws, etc. (Big dollars at stake here since assessments are being used to fund building purchase).

Important legal authority cited by homeowner was: Divizio v. Kewin Enterprises, 666 P.2d 1085 (Ariz. App. Div. 2 1983)(fiduciary duty; interpretation of covenants; CC&Rs as contract). (listed in my HOA case history file posted to website). This case held that maintenance assessments could not be used to purchase property.

In closing, HOA attorney called HOA's decision valid under the business judgment rule.

In this case, the HOA insisted that the transfer fee was not part of a general assessment or member fee, but imposed on the BUYER at closing. The homeowner attorney demanded to know how the HOA can impose a payment on the buyer who is not an HOA member? (Implication is extortion of buyer, or interference with title company duties by not allowing closing to go ahead. In reality, transfer fees must be a member obligation, and all member fees must be uniformly applied to all members. A transfer fee is transactional, applied on a case by case basis).

HOA answered that "It's widely done". HOA tells title company to collect, even though their is no legal basis for title company action -- there is no recorded lien. HOA maintained that bylaws give HOA authority to collect a transfer fee, yet provided no basis in bylaws and declarations to do so.

In cross, HOA president is asked, "What happens if the buyer refuses to pay?" He responded, "Property wouldn't go through . . . seller doesn't have qualified buyer, like with a qualified buyer under a mortgage."

Current president said the board passed such an obligation, as to a transfer fee about a year ago. Transfer fee was for a number of reasons, as a result of a budget shortage. Transfer fees benefit the community, therefore justified. "Contributions from purchasers", argued the HOA attorney, for existing amenities -- "only fair

HOA attorney repeatedly objected on the basis of “foundation”, meaning that the petitioner has no knowledge of what went on. He did not participate in the board decisions regarding declarations or in the preparation of the budget. The impression given was that the poor homeowner is not allowed to have any input or interpretation of what he receives from the HOA – he must just accept it unquestioningly and does as ordered. While the courts operate on the basis that words are to be interpreted as to their common meanings, but somehow HOA seems to be arguing that their words meant other things. Was this an attempt to discredit the witness who “is inexperienced” in HOA matters?

HOA attorney argued purchase of building within “community” to benefit the community as an administrative facility. A 15-year loan in the amount of some $600,000 was entered into. $9,000 per month, plus interest. HOA admitted payment was from general assessment funds.

Both parties represented by lawyers. HOA by Jackson of Jackson, White.


OAH File:
Files

Case No 07F-H067007-BFS

Complaint:
1. CC&R amendment not in good faith; fundamentally changed nature of community.
2. HOA violated ARS33-1805 with respect to access to HOA records.

Source of Law:
ARS 33-1805; Declaration

Discussion:
ALJ did not hear evidence relating to the substance of the amendment, which related to violations of good faith and fundamental changes in character of community. Declaration provision alleged being violated only dealt with vote required to pass amendment.

Holding:
1. Amendment was validly passed.
2. HOA ordered to provide requested records.

Additional Remarks:
The amendment permitted HOA to appropriate homeowner sidewalk property without homeowner consent and without a signed deed. Raises issue of cloud on homeowner property since Arizona law requires a signed and notarized deed with explicit wording.

Ekmark firm was HOA attorney, but not repesenting HOA at Hearing.

For more details, see Sidewalks.

OAH Files:
File