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18F-H1818052-REL · Department of Real Estate - H/C · 2019-07-03

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Lawrence M. Stewart, No. 18F-H1818052-REL Petitioner, vs. ADMINISTRATIVE LAW JUDGE Canyon Gate Condominium Association, DECISION Inc., Respondent.

HEARING: September 6, 2018 APPEARANCES: Lawrence M. Stewart on his own behalf; Mark K. Sahl, Esq. and Nichols C. S. Nogami, Esq. for Respondent ADMINISTRATIVE LAW JUDGE: Thomas Shedden _____________________________________________________________________ FINDINGS OF FACT 1. On June 25, 2018, the Arizona Department of Real Estate issued a Notice of Hearing setting the above-captioned matter for hearing on July 27, 2018 at the Office of Administrative Hearings in Phoenix, Arizona. The matter was continued and the hearing was conducted on September 6, 2018. 2. The Notice of Hearing shows that Petitioner Lawrence M. Stewart alleges that Respondent Canyon Gate Condominium Association, Inc. violated Association Bylaws section 5.4. 3. Mr. Stewart appeared and testified on his own behalf. The Association was represented by counsel but presented no witnesses. 4. On or about May 21, 2018, Mr. Stewart filed with the Department the petition that gave rise to this matter. 5. Mr. Stewart made changes to the common area and/or limited common area around his unit without getting permission to do so. In a letter dated November 15, 2017, the Association, through counsel, informed Mr. Stewart that he was in violation of section 5.1 of the CC&Rs. The letter informed Mr. Stewart that he was required to request in writing that the Board approve the changes he had made and that if he failed to do so, the Association could bring a civil lawsuit against him.

Office of Administrative Hearings 1740 West Adams Street, Lower Level Phoenix, Arizona 85007 (602) 542-9826 6. Mr. Stewart did request that the Board approve a variance to allow the changes he had made. 7. At the time of his request, Mr. Stewart was on the Board. The other Board members were Sandra Fernandez and David Larson. 8. In a letter to Mr. Stewart dated December 27, 2017, the Association’s attorney wrote that it was his understanding that Mr. Stewart had recused himself from voting on the matter and that the other two Board members had confirmed that he was required to return the areas in question to the original condition. 9. Mr. Stewart had not agreed to recuse himself and he informed the other Board members of that fact in a letter dated January 4, 2018. In that letter, Mr. Stewart also requested that the Board meet to, among other things, consider his request for a variance. 10. Mr. Stewart’s request was considered during a Board meeting on February 18, 2018. At that meeting Mr. Stewart resigned from the Board and the other two members voted to deny his request for a variance and to have Mr. Stewart restore the areas to the original condition. 11. Mr. Stewart resigned because he got the sense “right away” that the other Board members’ minds were made up and that they would not approve his request. 12. According to Mr. Stewart, the Board denied his request on the basis that it would open a Pandora’s Box where other unit owners would request variances. 13. Mr. Stewart asserts that the Association did not act in good faith when it denied his request for a variance and that Mr. Larson was biased against him. Mr. Stewart also asserts that he has been treated unfairly because there are other units that are not in conformity with the CC&Rs. 14. Mr. Stewart presented unrebutted testimony that the Board members were unwilling to look at the changes he had made and to the effect that they took only a cursory look at the photographs he provided them. 15. Regarding the allegation that Mr. Larson was biased, Mr. Stewart relied on: (1) a biography of Mr. Larson that was prepared the Association’s property manager using information supplied by Mr. Larson; (2) on statements Mr. Larson included in notes he prepared about the November 28, 2017 Board meeting; and (3) that the other two members had apparently decided the matter without his involvement prior to February 18, 2018 (as evidenced by the letter showing erroneously that he had recused himself from the matter) and his belief that they did not want to look at the specifics of the changes he had made. 16. When asked what in Mr. Larson’s biography showed bias, Mr. Stewart could not identify any particular information, but he stated that the entire document coupled with the other statements shows a bias. 17. The notes from the November 28, 2017 meeting show that Mr. Larson had informed members who were in violation of the CC&Rs that the meeting was “Fair Notice” that actions such as towing vehicles, violations notices and the like would begin at the close of the meeting. In addition, Mr. Larson informed the membership that he was too busy to talk to people about Board business in driveways. 18. Mr. Stewart testified to the effect that the changes he had made would not affect any other member because his unit is not in an area that is readily seen by others. 19. Bylaws Article V (Indemnification), Section 5.4 (Liability) provides in pertinent part: “So long as he/she has acted in good faith on the basis of information actually possessed, neither the Board nor any member of the Board nor any officer of the ASSOCIATION shall be liable to the ASSOCIATION, any OWNER, or to any other party for any damage, loss, or prejudice suffered or claimed on account of: (i) the approval or disapproval of any plans, drawings, or specifications, whether or not defective…or (v) any act or failure to act by the ASSOCIATION, or Board.” 20. The Association argues to the effect that Section 5.4 is not applicable to Mr. Stewart’s situation because neither the Board nor any member has been charged with an act for which indemnity is required. 21. Mr. Stewart appeared to acknowledge that section 5.4 acts as a “shield” and not a “sword,” but he testified to the effect that that was the only section that included a “good faith” requirement. CONCLUSIONS OF LAW 1. The Department of Real Estate has authority over this matter. ARIZ. REV. STAT. Title 32, Ch. 20, Art. 11. 2. Mr. Stewart 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. 3. 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). 4. 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). 5. Mr. Stewart has not shown that Section 5.4 is applicable to his issue because that section does not impose any duty on the Board members, but rather merely shields them from liability if they act in good faith. 6. Even if Section 5.4 is applicable, Mr. Stewart has not shown by a preponderance of the evidence that the Board did not act in good faith, that it had a bias against him, or that it treated him unfairly. 7. According to Mr. Stewart, the Board disapproved his changes because they were fearful of opening a Pandora’s Box of people requesting changes to the common area. This was not an unreasonable position for the Board of a condominium association. And, given the Board’s reason for denying Mr. Stewart’s request for a variance, the specifics of the changes Mr. Stewart made would not be germane to the decision. 8. Regarding the testimony that others may also be in violation of the CC&Rs, there was no evidence to show that they had requested that the Board grant variances, so this evidence is not probative of the issue at hand. 9. Mr. Stewart’s petition should be dismissed and the Respondent be deemed to be the prevailing party in this matter. ORDER IT IS ORDERED that Petitioner Lawrence M. Stewart’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, September 14, 2018 /s/ Thomas Shedden Thomas Shedden Administrative Law Judge Transmitted by either mail, e-mail, or facsimile September 14, 2018 to: Judy Lowe, Commissioner Arizona Department of Real Estate 100 N. 15th Avenue, Suite 201 Phoenix, Arizona 85007 Attn: [email redacted] [email redacted] [email redacted] [email redacted] [email redacted] [email redacted]

Lawrence M. Stewart 7887 N. 16th St., #132 Phoenix, AZ 85020 Mark K. Sahl, Esq. Nichols C. S. Nogami, Esq. CARPENTER, HAZLEWOOD, DELGADO & BOLEN LLP 1400 E. Southern Ave, Suite 400 Tempe, AZ 85282 By f Del Sol