OAH-023: the effect of a reneged settlement

Please see earlier posts on OAH-023 for background information.  At this point, the status of the settlement agreement as a result of the HOA’s refusal to abide by its terms remains unclear. 

It appears that the agreement, prepared and initiated by the HOA CAI member attorney, Caroline Goldschmidt, could not be complied with since its conditions would violate local ordinances. 

A threat to re-open the case,  by the HOA attorney,  to force the homeowner into complying with the HOAs’ alleged violation did not materialize, and the homeowner’s attempt to do so resulted in a statement by the ALJ that it was out of his hands and no longer an OAH petition, by joint agreement of the parties.

The OAH case cannot be reopened since the settlement agreement (stipulation) included a provision to dismiss the OAH case, which the ALJ was all too willing to do. 

The Nolo self-help publication, Everybody’s Guide to Small Claims Court,  suggests that any settlement contain a provision that it be entered as part of the judge’s order decision. In this way, any failure to comply by any party to can be brought back into the court/hearing.

So, if the HOA “gave up” and is doing nothing, the homeowner need not do anything.  The issue can be revisited if the HOA starts to fine the homeowner for violations, which would force the homeowner into re-opening the case.

Case No.: 07F-H067034-BFS

Complaint:                    landscaping, interpreting and variances from the guidelines;

  Source of Law:             CC&Rs

Discussion:                   On September 13, 2006, Petitioner wrote a letter to the Committee requesting a formal appeal of its decision and explaining why Petitioner felt that the Committee should reconsider the request to allow artificial turf.  Exhibit P3.  In addition to environmental and health concerns associated with natural turf, Petitioner indicated his belief that a precedent had been set to allow artificial turf because Respondent had previously allowed artificial turf to be substituted for natural turf at another residence within the planned community.

At the hearing on this Petition, Respondent acknowledged that there was one homeowner in the community that had been allowed to install artificial turf in her front yard due to health reasons.  That exception, however, was granted by the previous Board of Directors and was believed to have been a response to an Americans with Disabilities Act (ADA) claim presented to that Board by the homeowner.

The authority for the Committee to exercise such broad discretion in approving or disapproving landscape features is found in Article VII, Section 7.2 of the Declaration . . . .

The Committee did not approve Petitioner’s request to use artificial turf.  Clearly, the Declaration gives the Committee broad discretion to deny such a request.  The only limitation on the Committee’s exercise of that broad discretion is found in the sentence “Approval shall not be unreasonably withheld.”

Finally, the fact that there had been a variance from a strict application of the Guidelines in the past does not create a legally sufficient basis to justify Petitioner’s position that the Declaration and Guidelines can no longer be used to prohibit future use of artificial turf. 

A variance granted by the Board to a single homeowner does not meet the “frequent violations” standard cited by the court in Burke, supra.  Consequently, that previous, lone variance does not preclude the Committee from denying Petitioner’s request.

  Holding:                        For all the reasons stated above, the Petition is denied.

Comments:                   none.

OAH: 07F-H067029-BFS

Complaint:                    the HOA board, upon advice of attorney, interpreted CC&Rs with an uncommon meaning;

  Source of Law:             CC&Rs; case history.

 Discussion:                   Following the discussion in executive session, the Board, upon recommendation of its attorneys, [emphasis added] passed a Resolution interpreting Section 11.02 to mean that, rather than requiring an affirmative vote of at least 80% of the entire membership of the Association to amend the Declaration, only an affirmative vote of at least 80% of the members voting, either in person or by absentee ballot, at a meeting to amend the Declaration would be required.  

Although testimony at the hearing made for a compelling argument that homeowner associations should be wary of making the ability to amend their governing documents too strenuous, it does not obviate the fact that the existing Declaration represents a contract between the Association and its 1,322 members – a contract upon which each of those individual owners had a right to rely.  Furthermore, the Board’s “interpretation” of Section 11.02 had the effect of allowing as few as 106 members of the association to make significant changes to the contract governing all 1,322 of its members.  That was a dramatic change from the Board’s belief, prior to the passage of the Resolution, that an affirmative vote of at least 1,058 members of the Association would have been necessary to amend the contract which governed all the Association’s members.                                    

Article 11, Section 11.02 of the Declaration was not ambiguous on its face.  Its meaning was clear, even to the Board prior to October 16, 2006.  It was not a proper subject for interpretation under Article 14, Section 14.01, and the Resolution changing the interpretation of Section 11.02 was an invalid exercise of the Board’s authority under the Declaration.  

The pertinent portion of Section 11.02 provides:…

the Declaration may be amended by the affirmative vote of owners holding at least eighty percent (80%) of the total voting power in the Association at a meeting duly called pursuant to the Articles and Bylaws for the adoption of the amendment.                                               

Petitioner argued that the meaning of Section 11.02 is clear.  Respondent argued that Section 11.02 is ambiguous because inclusion of the phrase “at a meeting” suggests that only 80% of the total voting power represented at that meeting would be required to amend a provision of the Declaration.  In support of that position, Respondent argued that “The ‘total voting power at a meeting’ is quite different from ‘total voting power.’”   

Holding:                        IT IS ORDERED vacating the Board’s Resolution of October 16, 2006, by which the Board interpreted the meaning of Article 11, Section 11.02 of the Declaration.                                   

IT IS FURTHER ORDERED vacating any amendments to the Declaration, passed after the Board’s Resolution of October 16, 2006, and which were based upon the affirmative votes cast by 80% of the members, either in person or by absentee ballot at a meeting called for the purpose of amending the Declaration.                                   

IT IS FURTHER ORDERED that Respondent shall reimburse the filing fee paid by Petitioner in the amount of $2,000.00.   

Comments:                   This is an important case reflecting 1) HOA attorney “collusion” with the HOA board, and 2) the meaning of contracts and everyday understanding of contractual terms.  I say “collusion” because the attorneys fully know the law and how the courts interpret the contractual meanings of the terms therein, yet, regardless of the above, they appear to assist the HOA in its aims and goals.

                                  

The initial HOA attorney, Ekmark Law firm, prematurely filed a motion to dismiss forgetting to count the 5-day mailing allowance that is standard for court filing – 5 days are tacked on to specified 5 day response time to allow for delivery of mail.  Did these learned, CAI lobbyist attorneys forget the law?

 

The new law firm for the  HOA  was Carpenter, Hazelwood.  Carpenter is, and has been, the other long-time CAI lobbyist in Arizona.

 

First-year OAH statistics on HOA cases

The unfounded fears of massed Office of Administrative Hearings, OAH,  complaints by disgruntled homeowners that resulted in the legislature imposing a $550 filing fee, raised to $2,000 5 months later and then lowered for a single case back to $550 in April, have been proven just  that —  completely unfounded.  The results after the first year “in business” reveals:

HOA cases:            38

decisions:                  32

Homeowners won:            10

HOAs won:                      14

split decisions:                     4

vacated decisions:               4

The homeowners won not 5% of the cases, as would be expected if the wild claims that “95% of the HOAs are good”, as alleged by HOA attorneys and lobbyists over the years were indeed true, but 42% of the cases. The first year statistics revealed that in most cases the homeowner was  a Pro Per facing an HOA attorney, and that ALL cases were filed by homeowners and not one by an HOA.  Bear in mind that the decisions are based on the adhesion contract nature of the HOA governing documents, the general lack of legal knowledge by the homeowner petitioner, and the HOA supportive state laws – all serving to create a “playing field” that is not level.

The miniscule HOA cases that were filed, in contrast to some  7,360 cases heard by OAH in 2006 (that’s a mere 1.7%), does not warrant the imposition of a $550 or $2,000 fee.  The legislature must remove this requirement that treats homeowners in HOAs as second class citizens. Research into OAH fees for agency filings shows that over 78% (top 4 agencies) paid no fee whatsoever.  

 

Case No.: 07F-H067035-BFS

Complaint:                    Terravita voting delegate system violates AZ law prohibiting proxy voting;

 Source of Law:             ARS 33-1812; governing documents

Discussion:                   Respondent [HOA] also argues that prohibiting delegate voting would be an unconstitutional impairment of the contractual rights of the Association and its Members.  Setting aside the obvious fact that an association’s governing documents are hardly products of the typical give-and-take contract negotiation that ordinarily occurs between a buyer and seller, it is nevertheless difficult to argue that a ruling that expands a member’s right to participate in his association impairs the contractual rights of either the association or its members.  The association is its members.  The association and its members both possess the same rights and, presumably, the same interests.  How could those rights and interests be compromised by requiring important association decisions to be based on a vote of all of its members?

Respondent’s attempt to differentiate the delegate voting system from the use of proxies is a classic “distinction without a difference.”  The voting delegates were “proxies,” and, as such, violate the clear language and intent of A.R.S. §33-1812A. (p.6).

 Holding:                       Based upon the foregoing,             IT IS ORDERED that Respondent abide by A.R.S. §33-1812A, which prohibits votes cast pursuant to a proxy.  IT IS FURTHER ORDERED that Respondent reimburse the filing fee paid by Petitioner in the amount of $550.

In footnote 5 to this order: “Pursuant to A.R.S. §41-2198.04A, this Order is the final administrative decision and is not subject to a request for a rehearing.  It is enforceable through contempt of court proceedings pursuant to A.R.S. §41-2198.02B.”  [Emphasis added].

 Comments:                   This case reflects the extent to which CAI member attorneys will go to back their HOA client regardless of R. of Civil P. 11(a) that requires that “and belief formed after reasonable inquiry it is well grounded in fact and is warranted by existing law . . . and is not inter-posed for any improper purpose“.  I believe that the HOA law firm, Ekmark, had to defend its decisions to allow or not oppose the HOA’s decision to proceed with the election in question in spite of its public statements concerning proxy voting. 

At the hearing, there were 4 HOA attorneys present, and 2 management firm employees, although only one attorney ever spoke to the judge.  Did the HOA foot the bill for these attendees?

The homeowner complaint simply stated: After termination of the period of declarant control, votes allocated to a unit (Lot) were cast in the association’s election for 3 board members were cast pursuant to a (one or more) proxy.  HOA attorneys responded with a 2-¾ inch filing with the captioned case number relating to another OAH case.

Questionable actions related to delayed and incorrect OAH postings. HOA filed papers with BFLS department rather than with OAH, yet they were forwarded to OAH.  HOA used long-term resident petitioner’s incorrect zip code.  HOA’s motion for summary judgment was entered as “motion for summary suspension” and petitioner did not receive the document for over 2 weeks.  Other filings by Ekmark law firm had to be requested by petitioner at the hearing since he had not received them.

The Terravita HOA President was twice subpoenaed to appear, but failed to appear.  Court action for the failure was avoided by the ALJ declaring that her testimony was not really needed.  Petitioner, Bill Brown, filed his objection to not being able to having this witness not testify.  When questioned by the ALJ, the HOA attorney merely replied, “She’s his witness not ours. It’s his responsibility.”  The attorney did not offer any excuse that they were aware of the witness’ reluctance to appear and had homeowner failed to maintain her yard — gazebo strongly advised her to appear.

As occurred in other cases, the HOA attorney filed, at the end of the hearing, a legal memorandum with the ALJ to help him understand the issues. Petitioner also received the 9-page memorandum at this time, but he insisted on time to respond to the memo before the judge decided.  He was granted 20 days.

 On any appeal, whether at OAH or in Superior Court, the trial record is sent to the appeals court to be used in its determination of the appeal. In its determination, the appeals process will examine whether or not parties raised or objected to issues at the trial court that are now being raised in the appeal court, and if not, they cannot be considered on appeal.  Homeowners must respond in answer to any HOA filing. 

The ALJ decision is must reading since the judge, in my opinion, is wondering why the attorneys did not concede, as a matter of straightforward law, that the election violated the law.  And why the HOA spent this time and money on such a case.  See Discussion above for examples of such analysis by the judge.

HOA attorneys were from the Ekmark law firm – Krupnick was not the lead attorney.