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18F-H1818052-REL-RHG · Department of Real Estate - H/C · 2019-03-11

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

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

HEARING: January 2, 2019 APPEARANCES: Lawrence Stewart on his own behalf; Nicolas C. S. Nogami, Esq. for Respondent ADMINISTRATIVE LAW JUDGE: Thomas Shedden

FINDINGS OF FACT 1. On November 16, 2018, the Arizona Department of Real Estate issued a Notice of Rehearing setting the above-captioned matter for hearing on January 2, 2019 at the Office of Administrative Hearings in Phoenix, Arizona.1 2. Petitioner Lawrence M. Stewart appeared at the rehearing and testified on his own behalf. The Association was represented by counsel but presented no witnesses. 3. On or about May 21, 2018, Mr. Stewart filed with the Department the petition that gave rise to this matter. 4. The original Notice of Hearing shows that Mr. Stewart alleges that Respondent Canyon Gate Condominium Association, Inc. violated Association Bylaws section 5.4.

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

The Notice has a typographical error and shows the rehearing date as January 2, 2018. Office of Administrative Hearings 1740 West Adams Street, Lower Level Phoenix, Arizona 85007 (602) 542-9826 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.

6. Mr. Stewart did request that the Board approve a variance to allow the

changes he had made. At the time of his request, Mr. Stewart was on the Board. The

other Board members were Sandra Fernandez and David Larson.

7. 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.

8. 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. 9. 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. 10. Mr. Stewart acknowledged that the Board had not violated section 5.4, and he explained that his position is that the Board did not act in good faith when it denied his request for a variance and that Mr. Larson was biased against him. 11. Mr. Stewart testified to the effect that he cited section 5.4 in his petition because he could find no other reference to “good faith” in the governing documents. 12. Mr. Stewart also asserts that he has been treated unfairly because there are other units that are not in conformity with the CC&Rs. 13. Regarding Mr. Steward’s allegation that Mr. Larson was biased against him, Mr. Stewart had entered into evidence an October 3, 2018 letter from Mr. Larson to the Association’s members urging them not to vote for Mr. Stewart in an upcoming

election.2

14. Regarding his allegation that other units are not in conformity with the

CC&Rs, Mr. Stewart had entered into evidence photos of units that he believes are out

of compliance. Mr. Stewart testified to the effect that he had verified with the

Association that none of these units had received a variance in the last two years.

15. Mr. Stewart acknowledged however that he did not know if any of these

units had received variances more than two years ago or whether preapproval for the

changes had been granted (in which case no variance would be required).

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

Mr. Stewart also sought to have admitted into evidence an October 12, 2018 letter he sent to Mr. Larson rebutting Mr. Larson’s letter and demanding a retraction, but an objection to that letter was sustained. Bylaws, Respondent must act reasonably. See Tierra Ranchos Homeowners Ass'n v. Kitchukov, 216 Ariz. 195, 165 P.3d 173 (App. 2007). 5. Bylaws Section 5.4 does not impose any duty on the Board members, but

rather shields them from liability if they have acted in good faith. Mr. Stewart

acknowledges that the Association has not violated Bylaws Section 5.4.

6. 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 This administrative law judge order, having been issued as a result of a rehearing, is binding on the parties. ARIZ. REV. STAT. section 32-2199.02(B). A party wishing to appeal this order must seek judicial review as prescribed by ARIZ. REV. STAT. section and title 12, chapter 7, article 6. Any such appeal must be filed with the superior court within thirty-five days from the date when a copy of this order was served upon the parties. ARIZ. REV. STAT. section 12-904(A). Done this day, January 17, 2019. /s/ Thomas Shedden Thomas Shedden Administrative Law Judge Copy mailed/e-mailed/faxed January 17, 2019 to:

Judy Lowe, Commissioner Arizona Department of Real Estate Mark K. Sahl, Esq. 100 N. 15th Avenue, Suite 201 Nicolas C. S. Nogami, Esq. Phoenix, Arizona 85007 CARPENTER, HAZLEWOOD, DELGADO & BOLEN LLP Lawrence M. Stewart 1400 E. Southern Ave, Suite 400 7887 N. 16th St., #132 Tempe, AZ 85282 Phoenix, AZ 85020

By F. Del Sol