ALJDEC decisions subject to certification as final
17F-H1717026-REL · Department of Real Estate - H/C · 2017-06-19
IN THE OFFICE OF ADMINISTRATIVE HEARINGS
Tom Pyron,
Petitioner,
vs.
Cliffs at North Mountain Condominium Association, Inc.,
Respondent.
No. 17F-H1717026-REL
ADMINISTRATIVE LAW JUDGE DECISION
HEARING: June 12, 2017, at 8:30 a.m.
APPEARANCES: Tom Pyron (“Petitioner”) appeared on his own behalf; Cliffs at North Mountain Condominium Association, Inc. (“Respondent”) was represented by B. Austin Baillio, Esq., Maxwell & Morgan, P.C.
ADMINISTRATIVE LAW JUDGE: Diane Mihalsky
_____________________________________________________________________
FINDINGS OF FACT
Background and Procedure
The Arizona Department of Real Estate (“the Department”) is authorized by statute to receive and to decide Petitions for Hearings from members of homeowners’ associations and from homeowners’ associations in Arizona.
Respondent is a homeowners’ association whose members own the condominiums in the Cliffs at North Mountain development.
Petitioner owns a condominium in and is a member of Respondent.
On or about March 16, 2017, Petitioner filed a single-issue petition with the Department that alleged that Respondent had violated Respondent’s Bylaws, Article III, §§ 3.02 and 3.06, and Article IV, § 4.06, by informing Respondent’s members in January and February 2017, that only one Board of Director’s position was up for election for a one-year term when, in fact, two positions on the Board were up for election for, respectively, a one-year term and a two-year term.
In response to the concerns and petition, Respondent twice rescheduled the 2017 annual meeting and re-issued ballots for the meeting to include all of its members who had submitted a completed Board of Directors Candidate Application for the one open position. Because the ballots did not include all candidates who had completed a candidate application, Respondent offered to pay Petitioner’s $500 single-issue filing fee if he was satisfied with the proposed resolution.
Respondent also submitted a written answer to the petition, denying that it had violated any Bylaws. The Department referred the petition to the Office of Administrative Hearings, an independent state agency, for an evidentiary hearing.
Because Petitioner believed that two positions should have been up for election in 2017, not one, he did not withdraw his petition. A hearing was held on June 12, 2017. Petitioner submitted sixteen exhibits and presented the testimony of four witnesses: (1) Anne Fugate, who had been elected to the Board in 2012; (2) Barbara Ahlstrand, who was elected to the Board in 2015; (3) Kevin Downey, who had completed a candidate application for the 2017 election but was not included on the first two ballots that Respondent issued; and (4) Himself. Respondent submitted three exhibits and presented the testimony of Cynthia Quillen, the Community Manager current employed by Respondent’s management company, Associated Property Management.
The parties agreed that, due to the pending petition, no general membership meeting or election had yet been held in 2017.
Referenced Bylaws
Article III, § 3.01 of the Bylaws provides in relevant part as follows:
Number of Directors. The affairs of this Association will be managed by a Board of Directors. Except for the initial members of the Board of Directors that are designated under the Articles, the Board of Directors will be elected by the Members. . . . [T]he Board will be comprised of three Directors or any greater, odd number as may be determined by the Board in accordance with the Articles.
Section 3.02 of the Bylaws provides in relevant part as follows:
Board Term of Office. So long as the Board of Directors is comprised of three persons, the Directors will hold office in staggered terms for one year, two years, and three years, respectively, and until their successors are appointed and qualified. The first term of the Director with a one year term will end as of the date of the first annual meeting of the Members, and each subsequent term will end on the date of each subsequent annual meeting of the Members. The first term of the Director with a two year term will end as of the date of the second annual meeting of the members, and all subsequent terms will end on the date of the fourth, sixth, eighth, tenth, etc. annual meeting of the Members. The first term of the Director with a three year terms will end on the date of the third annual meeting of the Members, and all subsequent terms will end on the date of the sixth, ninth, twelfth, fifteenth, etc. annual meeting of the Members. At any meeting where multiple Directors are elected, the person receiving the most votes will become the Director with the longest term and so on until all vacant spots are elected. . . .
Section 3.3 of the Bylaws provides in relevant part as follows:
Removal and Resignation. . . . Any Director may resign at any time by giving written notice to the Board, the President, or the Secretary . . . .
Section 3.6 of the Bylaws provides in relevant part as follows:
Vacancies on the Board. Vacancies on the Board . . . will be filled by a majority vote of the remaining Directors at the first regular or special meeting of the Board held after the occurrence of the vacancy . . . . Each person so elected will serve the unexpired portion of the prior Director’s term.
Article IV, § 4.06 of the Bylaws provides in relevant part as follows:
Vacancies in Offices. A vacancy in any office may be filled by appointment by the Board. The officer appointed to the vacancy will serve for the remainder of the term of the officer replaced.
Additional Hearing Evidence
The parties agreed that the Board has never been expanded beyond three members.
The parties also agreed that in the 2012 election, Ms. Fugate was elected to a three-year term, John Haunschild was elected to a two-year term, and Ron Cadaret was elected to a one-year term.
The parties also agreed that in the 2013 election, Mr. Cadaret was re-elected to a one-year term.
Respondent submitted a chart that showed that under Bylaw § 3.02, the one-year and two-year positions should have been up for election in 2014. Respondent submitted the ballot for the 2014 election, which showed Mr. Haunschild’s and Sandra Singer’s names, as well as space for write-in candidates.
Petitioner submitted minutes from the March 19, 2014 general meeting that stated that “[t]he election of Sandra Singer was unanimously passed by acclamation.” Petitioner took the position that in 2014, Ms. Singer was elected to a one-year term, but that no other officers were elected at the 2014 election.
Respondent submitted the minutes of the February 18, 2015 annual meeting, showing that at that time, Ms. Fugate was president, Mr. Haunschild was treasurer, and Ms. Singer was a director. Ms. Quillen testified that based on the composition of the Board in 2015 and Bylaw § 3.02, in 2014, Mr. Haunschild must have been re-elected to a two-year term, which would expire in 2016, and Ms. Singer was elected to a one-year term, which would expire in 2015.
The parties agreed that Ms. Singer and Ms. Ahlstrand were elected to the Board in the 2015 election and that because she got the most votes, Ms. Singer was elected to a three-year term.
Ms. Ahlstrand testified that, based on the number of votes and the fact that the two-year term was open, she believed that she had been elected to a two-year term.
Ms. Ahlstrand resigned from the Board on August 3, 2015, and the Board appointed Jeff Oursland to serve the remainder of her term.
Petitioner took the position that since Ms. Ahlstrand was elected to a two-year term, Mr. Oursland’s term would expire in 2017.
Respondent took the position that under Bylaw § 3.02, Ms. Ahlstrand was elected to a one-year term in 2015. Therefore, Mr. Oursland would serve the remainder of the term, which would expire in 2016.
Petitioner acknowledged that at the 2016 election, Mr. Oursland was elected to a two-year term and Steve Molever was elected to a one-year term.
Respondent took the position that under Bylaw § 3.02, in 2017, there was only one Board position up for election, the one-year term that Mr. Molever had completed.
Petitioner took the position that, since Mr. Oursland assumed Ms. Ahlstrand’s two-year term, he should not have been on the ballot in 2016, because his two-year term would not expire until 2017. Petitioner argued that in 2017, the Board should have noticed that two Board positions were up for election, the two-year term and the one-year term.
CONCLUSIONS OF LAW
A.R.S. § 41-2198.01 permits an owner or a planned community organization to file a petition with the Department for a hearing concerning violations of planned community documents or violations of statutes that regulate planned communities. That statute provides that such petitions will be heard before the Office of Administrative Hearings.
Petitioner bears the burden of proof to establish that Respondent violated Bylaw §§ 3.02, 3.06, or 4.06 by a preponderance of the evidence. Respondent bears the burden to establish affirmative defenses by the same evidentiary standard.
“A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.” A preponderance of the evidence is “[t]he greater weight of the evidence, not necessarily established by the greater number of witnesses testifying to a fact but by evidence that has the most convincing force; superior evidentiary weight that, though not sufficient to free the mind wholly from all reasonable doubt, is still sufficient to incline a fair and impartial mind to one side of the issue rather than the other.”
In applying a bylaw, its words are to be given their ordinary meaning unless the bylaws provide a different definition. The Bylaws provide that if a Board member resigns, the remaining Board members may appoint someone else to fill out the remainder of the term of the member who resigned. No evidence was offered that the Board ever appointed anyone other than Mr. Oursland to fill a vacancy. Mr. Oursland was only appointed to serve the remainder of Ms. Ahlstrand’s term.
Under the plain language of Bylaw § 3.02, only the one-year and three-year terms were up for election in 2015. The Bylaws do not allow their plain language to be modified or amended by a member’s understanding. Because the parties agree that Ms. Singer was elected to a three-year term in 2015, Ms. Ahlstrand must have been elected to the one-year term. After Ms. Ahlstrand resigned and the Board appointed Mr. Oursland to serve the remainder of her term, his term expired in 2016, and he was properly elected to a two-year term at that time, which will expire in 2018.
Because only the one-year term on the Board was up for election in 2017, Petitioner’s petition should be dismissed.
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RECOMMENDed order
In view of the foregoing, it is ORDERED that Petitioner’s petition in this matter is denied. Pursuant to A.R.S. § 32-2199.02(B), this Order is binding on the parties unless a rehearing is granted pursuant to A.R.S. § 32-2199.04 based on a petition setting forth the reasons for the request for rehearing, in which case the order issued at the conclusion of the rehearing would be binding on the parties.
In the event of certification of the Administrative Law Judge Decision by the Director of the Office of Administrative Hearings, the effective date of the Order will be five days from the date of that certification.
Done this day, June 19, 2017.
/s/ Diane Mihalsky
Administrative Law Judge
Transmitted electronically to:
Judy Lowe, Commissioner
Arizona Department of Real Estate