Numerous complaints (20): HOA election process violations and eligible to vote; failed to maintain; sloppy minutes and HOA records, etc.
Source of Law:
declaration; bylaws
Discussion:
The Petition contains 20 allegations of wrongdoing by Respondent, with multiple subsets under most of the allegations.
1. The tribunal granted Respondent’s motion for summary judgment as to Petitioner’s allegations number 7, 15, 18, and the first bullet point of 20, which reads: “Frank Frangul pushed Barry Smith out the door at the January 11, 2005 Board Meeting.”
2. Respondent was not required to provide Petitioner with a lawyer in this matter under its Directors and Officers Liability insurance policy (“D&O insurance”).
3. Respondent did obtain proper D&O insurance.
4. A multiple property owner is not totally disenfranchised for voting purposes for being in arrears for a specific lot. A multiple property owner may still vote via their lots in good standing.
5. Respondent was not required to conduct a runoff election for the 2006 election. The ballot for Lot 351 did not change the election results.
6. Respondent is found to maintain Respondent’s common areas in a reasonable manner.
7. Respondent’s board did not fail to uphold their fiduciary duties relative to the property management contract. Further, Respondent is not required to have a comprehensive landscaping contract as alleged by Petitioner.
8. Respondent is found to have given proper notice of special board meeting as required.
9. Petitioner failed to establish his right to record board meetings using a tape recorder.
10. Petitioner failed to establish that Respondent was required to publish articles he authored in its newsletter. While Petitioner may feel that his articles are helpful, Respondent should be able to control the content of its newsletter.
11. Respondent’s property management company is found to have failed to timely provide Petitioner with requested documents in December 2006.
Holding:
1. Respondent violated by provisions of Bylaws Section 2 by not properly and timely counting the ballot for Lot 351, which did not affect the outcome of the 2006 board election.
2. Respondent violated the provisions of Bylaws Article IX by failing to allow Petitioner to timely review the delinquency report used for the 2006 board election.
3. The Administrative Law Judge concludes that Petitioner failed to sustain his burden of proof on the remaining issues set forth in his Petition.
4. The Administrative Law Judge concludes that Petitioner is not the prevailing party in this matter and that he is not entitled to reimbursement of his $550.00 filing fee paid to the Department from Respondent, pursuant to A.R.S. § 41-2198.02(A).
IT IS ORDERED that Respondent be admonished that it must assure that future election ballots are properly counted so that no member eligible to vote is disenfranchised, regardless of whether it will affect the outcome of the election, and must assure that CPMC, or any successor property management company, timely complies with Article IX of the Bylaws.
Comments:
In my opinion, this was not a proper and effective use of OAH. The petitioner should have filed separate petitions on non-related charges against the HOA, rather than make a hodge-podge petition.
HOA attorney filed a motion to dismiss on certain counts in the complaint, and a motion for summary judgment for other counts, each 8 pages. Summary judgment was denied. Apparently, the case is still alive.
ALJ informed parties that the Rules of Civil Procedure, while not required by OAH, nevertheless could serve as guidance for the ALJ. What we are seeing is CAI attorneys bringing civil court tactics to AOH as part of their very strong desire to win regardless of a fair hearing, or whether or not justice would be best served.
Petitioner was outspoken critic if board and decided, as pro-HOA interests advise, to run for the board. He challenged the election procedures and results, and other “wrongs”.
HOA attorney opening argument: lectured the ALJ about how the ALJ was required to reach his decision – burden of proof. Also, that the petitioner was not harmed, or the breach was not material in nature, and that the statutes (ARS 10-3830 and 3842, nonprofit corporations) presume that the board acts in good and with the best interest of the association in mind. The directors are not professionals, just volunteers, and are not expected to be perfect.
Attorney then stated the equivalent of seeking a directed verdict, that is, the petitioner failed to show any of the claimed violations and that the complaint be dismissed.
HOA attorney could not stay to cross-examine a witness and asked for a continuance, at the additional expense of the witness who took a vacation day, and at the additional expense to OAH. If the witness could not return, then her testimony was asked to be stricken from the record. Well, talk about heavy handedness! A continuance was granted.
At the continuance, the Rossmar & Graham property manager, who testified that in her opinion the HOA failed to act to protect property values or to act in good faith toward the homeowners, failed to show. Sadly, the petitioner failed to subpoena this very important witness. Since she was not crossed examined by HOA attorney, all her testimony was stricken.
As to why she failed to appear, the petitioner informed the ALJ of a call from Curtis Ekmark to Rossmar Pres. Henly (?) 2 days prior to the hearing, and that prior to that the witness was prepared to attend during her lunch break time period. Petitioner reports that, “for business reasons and stuff that she wasn’t going to be here.” The Ekmark attorneys at the hearing only said that they were not personally aware, but heard from some third party that this did indeed occur. “I don’t know anything about it. I know there were discussions between them, but they talk all the time,” replied HOA Ekmark attorney, who added, “ I don’t know anything particular about that.” Petitioner had to proceed by calling the HOA’s property manager witness as a hostile witness.
Petitioner was advised that he could not raise issues or represent the interests of other homeowners unless he was the attorney for those other homeowners. He did raise questions of the correctness of certain HOA document submissions by the HOA, questioning their authenticity. In closing arguments, petitioner listed a number of instances where the HOA and Rossmar ran a loose operation violating governing procedures and state laws.
HOA attorney closed with admission of some errors and the law doesn’t requires boards to be perfect, but that these errors were not arbitrary and capricious, or willful, or continually performed (she covered the legal requirements for negligence and breach of director conduct). She asked that the 17 counts in the complaint not at all addressed by petitioner in the hearing be dismissed (petitioner disagreed). The HOA should not be regarded as required to by law to be perfect.
Ms. Krupnick of Ekmark law firm, was one of the two attorneys representing HOA. This hearing lasted just short of 9 hours on 2 separate days, with a substantial amount of time devoted to sorting out the 100 plus exhibits.
In my view, if this were one of the 2 cases used by DFBLS as a justification for the $2,000 fee increase, it was presumptuous and premature. This case is a unique case that does not warrant a hasty, ill conceived, generalized response to a perceived potential huge increase costs for HOA adjudication.
