As I wrote earlier, OAH is spending more time with pre-conference hearings and responding to HOA summary judgment motions. In the Esquire Village Petition, 11F-H1112004-BFS, the ALJ once again clarifies the role of OAH and the rules for subpoenas of documents.  This move toward a more formalized process is necessary and benefits the homeowners who have filed 100% of the Petitions.

Much too often homeowners act as if they are at Starbucks having coffee or having a beer at a barbeque, and complaining about their HOA.  This is not the judicial process, of which OAH is a more “relaxed” process. But OAH still must follow a basic set of procedural rules. And homeowners, to their benefit, must understand and follow these rules if they expect to get a favorable decision at OAH.

By statute OAH can only hear complaints relating to the statutes in Title 33, Chapters 9 and 16, and the HOA‘s governing documents. It cannot hear complaints involving Title 10, Corporations, nor common law violations as stated in the Restatement (Third) of Property: Servitudes.  Sadly, that means, among others, that many of the more common abuses by HOAs cannot be heard by OAH  — good faith and “prudent man” obligations of directors, ARS 10-3830, and invalid covenants due to violations of public policy or are arbitrary and capricious or are unreasonable. The Restatement of Servitudes, Sec. 3.1 is not within the jurisdiction of OAH.

In the Esquire Village Petition the homeowner sought the production of documents relating to issues not relevant to the nature of the complaint.  As the ALJ wrote,

The parties are advised that this matter involves whether Respondent has appropriately acted in accordance with the laws and community document provisions cited in the Petition that was filed with the Department of Fire Building and Life Safety, namely, by issuing notice of violations for Petitioners’ displaying the Gadsden flag . . . .

However, in the request, the subpoena, the

Petitioner stated the reason for the subpoena request was to show: (i) selective treatment of homeowners; (ii) how Respondent fines homeowners; and (iii) how Respondent finds violations. . . . The issues of selective enforcement, how Respondent has determined violations by homeowners, and how fines have been generally assessed are not issues that fall within the scope of the hearing.

What the ALJ seems to be saying is that the subpoena is related to an arbitrary and capricious, or an unreasonable, decision by the HOA not to allow the Gadsden flag to be flown, and not on the right to fine the homeowner.  OAH cannot hear such complaints.

( I am at a loss to understand why, if not, the Petition did not state a plain and straight-forward violation of ARS 33-1808(A)(5), which permits flying this flag as of July 2011. While there are 4 versions of this law which is very confusing as to just what the law is, flying the flag is contained in all of them.  Only version 4 is effective as of 1/1/12.)

Restricting OAH to the Title 33  statutes placed a severe restriction on justice for homeowners, as the HOA attorneys who opposed the statutes and its constitutionality well know.  We must demand that the Legislature amend the statutes to include Title 10, nonprofit corporations, and the Restatement of Servitudes with its very important Section 3.1, Validity of Covenants and Chapter 6, HOAs.  These sections amount to some 33% of the Restatement.

Demand in the upcoming session, in January, that your legislators amend the OAH statutes accordingly.

Complaint:              HOA removed entry way fountain in violation of the CC&Rs.

Source of Law:      Sec. 10.2, Hunters Pointe, Mesa, AZ  CC&Rs.

Discussion:             Motion to Dismiss filed by HOA attorney firm, Maxwell & Morgan, in place of the usual Response/Answer to the Petition.  For a motion to dismiss to be upheld, there must not be any areas of contention as to the facts. A difference in interpreting seemingly conflicting provisions of the CC&Rs arose and, on the face of it, would appear that a disagreement as to the interpretation of the CC&Rs is a bona fide question of material facts.

The HOA insists it has authority for the “alteration”, “augmentation,” and “disposal” of the Property.  As a result of diminished assessments leading to needed repairs and the Mesa requirement to add a fence around the fountain, the board decided to demolish the fountain.  The board voted to replace the fountain with a garden.

The HOA attorney makes the misleading claim that the CC&Rs state that the board’s interpretation of the CC&Rs is binding (which is contrary to Arizona case law that state that it is the court who interprets contracts), and it interpreted the CC&Rs in its favor.

The Petitioner responded to the motion to dismiss pointing out to the ALJ wordings in the same provisions that were partially quoted by the HOA attorney, and that supported his claim for the restoration of the fountain and not its destruction and replacement.  Petitioner alleges that the HOA knew that the fountain had to be repaired, and that he, and other homeowners, was not aware of any decision to remove the fountain until work began.  Allegations of bad faith conduct by the board were offered regarding the board’s failure to discuss the issue.

Holding:                 Denied by ALJ, Oct. 13, 2011.

HOA attorney:     Maxwell & Morgan

Comments:              In my view, the ALJ properly decided to dismiss the motion.  It is quite obvious that there were controversies as to the facts in this situation, and a motion to dismiss was not warranted.  I presume that there will be an Answer filed by the HOA attorney – another step and more documents.

The Petitioner responded to the motion as required by the rules, with facts and evidence.

In my view, the homeowner didn not rise to the issue of a valid claim under the OAH jurisdiction as alleged by the HOA attorney. Example: the homeowner produced no evidence in support of her arguments, while the attorney had in her possession a copy of the deed showing that homeowner did not own the property and the time of filing.  The judge focused on this issue, and if true, then all other claims would not be addressed.

As to homeowner’s motion for default judgment, homeowner claimed that HOA failed to respond in time to Petition and she is entitled to a default judgment. Karr pointed out that the rules of court permit a motion to dismiss serves as a valid Answer to a Petition.  ALJ said he made no decision to deny motion, as the records clearing indicate.  This was well handled by the ALJ.  If the motion is denied, the HOA can then have time to file an Answer.

Is this just a coincidence or a new plan to defeat homeowners? The Motion to Dismiss is a forceful “counter-attack” by the HOA as it imposes a Response with detailed facts and evidence. (Arizona is a “notice” state, which means a detailed compliant need not be filed, just a plausible statement of facts. The details coming forth in discovery during the trial.)

A granting of the motion kills the case right there, without any other hearing, without the Petitioner able to “get his act together.” Most Pro Per homeowners don’t realize that they can seek more time to respond to this quick onslaught by the HOA.

The burden is on the homeowner to establish that there is a controversial issue at hand, and that that issue falls within the jurisdiction of DFBLS/OAH – a violation of the statutes or governing documents. He must specifically refer to a statute(s) or a governing document provision(s) with proof that it has been violated. Failure to overcome the motion to dismiss ends the case.

Under R. Civ. P. 12(b) a motion to dismiss can substitute for a pleading Answer.

BUT, in Wozniak v. North Slopes POA, OAH No. 11F-H1112001-BFS, this did not stop Karen Karr of the national firm of Lewis Brisbois Bisgaard & Smith from an opening barrage against the constitutionality of the old statute — old news and moot – and the claims that the new statute is also unconstitutional. She is a labor management attorney.

The attorney spends 1 1/2 pages (of 7) on reciting history, not applicable to the new statute, and fails to state the fact that the AZ Supreme Court did not allow the appellate case of Gelb to serve as precedent when it declined to hear an appeal. In another 1/2 page, unsupported allegations are made as to the constitutionality of the new statute – no case law, no constitutional law, no administrative agency law. Why on earth bring constitutionality up in such a feeble manner?

 My guess is that we will see another attempt, maybe more, to unseat justice for homeowners in HOAs. I mean, it took Carpenter Hazlewood 4 tries before it won the appellate court, but not precedent, decision in Gelb.

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