ALJDEC decisions subject to certification as final

18F-H1817017-REL · Department of Real Estate - H/C · 2018-02-02

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

William Travis,

Petitioner

vs.

The Val Vista Lakes Community Association

Respondent

No. 18F-H1817017-REL

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: January 26, 2018

APPEARANCES: William Travis on his own behalf; Mark K. Sahl, Esq. and Nicholas C. Nogami, Esq. for Respondent

ADMINISTRATIVE LAW JUDGE: Thomas Shedden

_____________________________________________________________________

FINDINGS OF FACT

On December 16, 2017, the Arizona Department of Real Estate issued a Notice of Hearing setting the above-captioned matter for hearing on January 26, 2018 at the Office of Administrative Hearings in Phoenix, Arizona.

The Notice of Hearing shows that Petitioner William Travis alleged that Respondent Val Vista Lakes Community Association violated Association Bylaws Article IV, Sections 1, 2 and 3, Bylaws Article VIII, and CC&R Article V, Section 3.

Mr. Travis appeared and testified on his own behalf. The Association presented the testimony of Simone McGinnis the Association’s on-site manager.

On or about October 29, 2017, Mr. Travis filed with the Department the petition that gave rise to this matter. In his petition, Mr. Travis indicated that there was a single issue and he paid the fee for a single-issue petition.

Through an Order dated December 15, 2017, the undersigned Administrative Law Judge informed the parties that he read the petition to encompass more than one issue. Mr. Travis subsequently paid to the Department the requisite fee for three issues and filed with the tribunal a statement of his issues for hearing.

As amended, Mr. Travis’s petition raises three issues all involving a Nominating Committee’s actions relating to nominations for the Board election that was held on November 16, 2017: (1) the Committee disregarded a September 29, 2017 deadline by which parties were to submit applications to nominate themselves to be placed on the ballot in violation of Bylaws Article VIII; (2) the Committee exceeded its authority by asking candidates questions that had the effect of imposing qualification requirements for the Board’s Directors that exceed those set out in the Bylaws in violation of Bylaws Article VIII; and (3) by failing to include on the election-ballot members who had submitted “self-nominations,” the Committee violated Ariz. Rev. Stat. sections 33-1812(A), (A)(1), and (A)(2).

Bylaws Article IV (Board of Directors), Section 3 (Nomination) provides in pertinent part:

Nominations for election to the Board of Directors shall be made by a Nominating Committee.... The Nominating Committee shall consist of a Chairperson, who shall be a member of the Board of Directors who is not running for election, and two or more persons .... The Nominating Committee shall make as many nominations for election to the Board of Directors as it shall in its discretion determine, but not less than the number of vacancies that are to be filled.

Mr. Travis acknowledged that the Bylaws do not include a provision allowing an association member to “self-nominate” for election to the Board, but he noted that there was no prohibition against it either.

At a Board meeting on August 17, 2017, the Board voted to appoint Cheryl Peterson-McCoy as the Nominating Committee Chairperson for the November 16th election.

Through an email dated September 12, 2017, the Association, through its management company, informed residents that there were three openings on the Board that would be filled at the November 16, 2017 election. In that email, the Association informed members that the application deadline was September 29, 2017.

With the email, the Association included a “Board Candidate Questionnaire and Nomination Application” that also shows that the applications were due by September 29, 2017, and added a 5:00 p.m. deadline. The Questionnaire includes the following: “I _________, hereby submit my name for consideration for nomination to the Board of Directors... for the election ... to be held ... on November 16, 2017.”

As of September 29th, the Association had received four applications for consideration for nomination for the Board election. As of that date, the members of the Nominating Committee had not been selected. The Association accepted four applications for nomination after the September 29th deadline, including one from Mr. Travis. No one sent to the Association membership a new or revised notice informing the members that applications were being taken after September 29th.

Through an email dated October 5, 2017, Mr. Travis, who was a Board member at that time, made a motion calling for the Board to extend until October 16th the deadline for submitting candidate applications. About thirty minutes later Ms. McCoy responded “No,” which under the rules for email motions, was sufficient to render it denied.

At a Board meeting on October 19, 2017, the Board unanimously approved appointing six members to the Nominating Committee. At that meeting, Mr. Travis made a motion for the Board to extend that deadline for submission of candidate applications, but the motion failed for lack of a second (and was not voted on).

Mr. Travis is of the opinion that because the Association had received four “self-nominations” on or before September 29, 2017, and there were only three spots open on the Board, there was no need for the Nominating Committee to make any nominations (and the Committee should not have even been formed).

The Nominating Committee considered all the applications that were received, including those received after September 29th. The Committee scheduled interviews with all eight applicants, at which time they asked questions including whether the applicant had ever filed a lawsuit against the Association, whether the applicant was considering filing a lawsuit, and whether the applicant had any compliance violations.

After the interviews, the Nominating Committee nominated four of the applicants to be placed on the ballot for the November 16, 2017 election. Of these four, two had submitted their applications on or before September 29 and two after that date.

Bylaws Article VIII (Committees), which provides for the formation of the Nominating Committee, also provides that “no committee may take action which exceeds its responsibilities. Each committee shall operate in accordance with any terms, limitations, or rules adopted by the Board.”

Mr. Travis argues to the effect that the September 29th deadline was a “term[ ], limitation[ ], or rule[ ] adopted by the Board of Directors,” and as such, the Nominating Committee violated Article VIII by accepting applications after September 29th.

Ms. McGinnis testified that the Board did not impose the September 29th deadline, but rather it was an administrative deadline imposed by the Association management with the intention being to allow sufficient time for the Nominating Committee to act on the applications and to then get the ballots printed.

Mr. Travis presented no evidence to show that the September 29th deadline was a “term[ ], limitation[ ], or rule[ ] adopted by the Board of Directors.”

Bylaws Article IV (Board of Directors), Section 1 provides that those serving on the Board of Directors must be members of the Association. There are no other qualifications for the Directors.

Mr. Travis argues that by asking the applicants questions, the Nominating Committee imposed qualifications for the Board’s Directors that exceed the single qualification of Association membership set out in Article IV.

The Association takes the position that asking the applicants questions was an exercise of the Nominating Committee’s discretion in making its nominations.

During the hearing, Mr. Travis had played a video showing a portion of the Board meeting held on November 16, 2017. In that video, the Board (and its attorney) responded to questions about why only four of the applicants were on the ballot and under what authority the Nominating Committee had acted. The video shows that the Board’s position is that the only way to get on the ballot is to be nominated by the Nominating Committee (although write-ins are allowed during any election). The Board acknowledged that it was only in the last two years that it had been following the requirement to use a Nominating Committee as required by Bylaws Article IV and that for the thirty years prior to that strict adherence to the Bylaws had not been observed.

During the November 16th meeting, the Board acknowledged that each year the Nominating Committee might apply its discretion differently than in prior years, but it took the position that the solution for that was to amend the bylaws. Similarly, the Board also acknowledged that the Committee’s opinion as to the best candidates may not match each member’s opinion.

When asked whether the Committee could decline to nominate an applicant because she had red hair for example, the Board’s attorney explained that the Committee members had a duty to act reasonably. In this matter, Mr. Travis has not asserted that the Committee acted unreasonably, but rather that it has no discretion to ask the applicants questions and must nominate (or place on the ballot) all members who applied.

As pertinent to this matter, by Ariz. Rev. Stat. section 33-1812 provides that:

A. Notwithstanding any provision in the community documents, after termination of the period of declarant control, votes allocated to a unit may not be cast pursuant to a proxy. The association shall provide for votes to be cast in person and by absentee ballot and, in addition, the association may provide for voting by some other form of delivery, including the use of e-mail and fax delivery. Notwithstanding section 10-3708 or the provisions of the community documents, any action taken at an annual, regular or special meeting of the members shall comply with all of the following if absentee ballots or ballots provided by some other form of delivery are used:

1. The ballot shall set forth each proposed action.

2. The ballot shall provide an opportunity to vote for or against each proposed action.

Mr. Travis asserts that because the members were not allowed to vote for or against the four applicants who the Nominating Committee did not nominate, the Committee engaged in proxy voting.

CONCLUSIONS OF LAW

The Department of Real Estate has authority over this matter. Ariz. Rev. Stat. Title 32, Ch. 20, Art. 11.

Mr. Travis bears the burden of proof, and the standard of proof on all issues in this matter is that of a preponderance of the evidence. Ariz. Admin. Code § R2-19-119.

A preponderance of the evidence is:

The 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.

Black’s Law Dictionary 1373 (10th ed. 2014).

Statutes should be interpreted to provide a fair and sensible result. Gutierrez v. Industrial Commission of Arizona, 226 Ariz. 395, 249 P.3d 1095 (2011)(citation omitted).

The Bylaws are a contract between the parties and the parties are required to comply with its terms. See McNally v. Sun Lakes Homeowners Ass’n #1, Inc., 241 Ariz. 1, 382 P.3d 1216 (2016 App.). In exercising its authority under the Bylaws, Respondent must act reasonably. See Tierra Ranchos Homeowners Ass'n v. Kitchukov, 216 Ariz. 195, 165 P.3d 173 (App. 2007).

Ariz. Rev. Stat. section 33-1812 provides in pertinent part:

1. The ballot shall set forth each proposed action.

2. The ballot shall provide an opportunity to vote for or against each proposed action.

There was no substantial evidence adduced showing that the September 29, 2017 deadline for the submission of applications for nomination was a “term[ ], limitation[ ], or rule[ ] adopted by the Board of Directors.” To the contrary, the evidence shows that this was an administrative deadline set by the Association’s management company. As such, the Nominating Committee did not violate Bylaws Article VIII when it accepted applications after September 29th.

Bylaws Article IV Section 3 requires that nominations for election to the Board of Directors be made by the Nominating Committee and it grants the Committee discretion to make as many nominations as it determines is appropriate. There is no provision in the bylaws or governing documents allowing members to nominate themselves for election to the Board. Mr. Travis’s position that the Committee was required to nominate anyone who applied is not consistent with the plain language of Article IV Section 3. It was not unreasonable for the Nominating Committee to question the applicants while exercising the explicit grant of discretion allowing the Committee to choose the number of nominees.

Because Bylaws Article IV Section 3 requires that nominations for election to the Board of Directors be made by the Nominating Committee, nominations are not “votes allocated to a unit” and Ariz. Rev. Stat. section 33-1812 is not applicable.

Mr. Travis’s petition should be dismissed and the Respondent be deemed to be the prevailing party in this matter.

ORDER

IT IS ORDERED that Petitioner William Travis’s petition is dismissed.

NOTICE

Pursuant to Ariz. Rev. Stat. section 32-2199.02(B), this Order is binding on the parties unless a rehearing is granted pursuant to Ariz. Rev. Stat. section 32-2199.04. Pursuant to Ariz. Rev. Stat. section 41-1092.09, a request for rehearing in this matter must be filed with the Commissioner of the Department of Real Estate within 30 days of the service of this Order upon the parties.

Done this day, February 2, 2018

/s/ Thomas Shedden

Thomas Shedden

Administrative Law Judge

Transmitted by either mail, e-mail, or facsimile ____, 2018 to:

Judy Lowe, Commissioner

Arizona Department of Real Estate

2910 North 44th Street, Room 100

Phoenix, AZ 85018

Attn:

[email redacted]

William Travis

1750 E Coco Palm Ct.

Gilbert AZ 85234

[email redacted]

Mark K. Sahl, Esq.

Nicholas C. Nogami, Esq.

Carpenter, Hazelwood, Delgado & Bolen, PLC

1400 E. Southern Ave, Suite 400

Tempe, AZ 85282

[email redacted]