ALJDEC decisions subject to certification as final

19F-H1918028-REL-RHG · Department of Real Estate - H/C · 2019-04-30

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

REHEARING: April 22, 2019, at 1:00 p.m. APPEARANCES: Patricia Wiercinski (“Petitioner”) appeared on her own behalf; Long Meadow Ranch East Property Owners Association, Inc. (“Respondent”) was represented by Ashley N. Moscarello, Esq., Goodman Law Group. 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 property and/or residences in Long Meadow Ranch East development in Prescott, Arizona. Petitioner and her husband, Wayne Coates, own property in Long Meadow Ranch East on Puntenney Rd. on which they have built a house. Most of the lots on Puntenney Rd. have not been developed. Petitioner is a member of Respondent. On or about October 18, 2018, Petitioner filed a single-issue petition with the Department that alleged that Respondent had violated A.R.S. § 33-1805 by failing to produce documents regarding its deliberations, decisions, and actions with respect to an incident that occurred on or about June 19, 2017, that allegedly involved Mr. Coates being belligerent and cursing at a potential buyer of the vacant property across the street from Petitioner’s house.[1] Respondent filed a written answer to the petition, denying that it had violated any statute by refusing to produce any records. The Department referred the petition to the Office of Administrative Hearings, an independent state agency, for an evidentiary hearing. A hearing was held on January 10, 2019. Petitioner submitted an email chain among members of Respondent’s Board and others, whose names were redacted, concerning the June 19, 2017 incident, which Respondent had voluntarily produced after she filed the petition with the Department. Petitioner acknowledged that Respondent had not taken any action regarding the June 19, 2017 incident, but argued that the Board must have more documents because it was required to memorialize in writing a formal decision not to do anything about any incident that Board members may have discussed. On January 22, 2018, the undersigned Administrative Law Judge (“ALJ”) issued a decision, finding that Petitioner had not established that Respondent violated A.R.S. § 33-1805 because the email chain was an informal communication among neighbors, not a document that Respondent maintained in the course of its business, and Petitioner did not establish that Respondent had generated any official documents about the incident that it had failed to produce. The ALJ also noted that Petitioner had not cited any statute that required HOA Board to make a formal written decision about items that they do not take any action on. Petitioner requested a rehearing, alleging misconduct by the judge. The Commissioner of the Department granted the request. The Commissioner did not note any specific misconduct by the Administrative Law Judge or state why such misconduct should have changed the result in this case. A rehearing was held on April 22, 2019. Complainant submitted eight exhibits and testified on her own behalf. Respondent submitted one exhibit and presented the testimony of two witnesses: (1) Michael Olson, Respondent’s Board’s president; and (2) Kathryn (“Kathy”) Andrews, who was employed by Respondent’s management company, Hoamco, as Respondent’s community manager. Hearing Evidence John Allen owned property on Puntenney Rd. that he was trying to sell in 2017 that was located across the street from Petitioner and Mr. Coates’ house. On June 19, 2017, Mr. Allan received an email from a purchaser about someone threatening the potential purchaser and his real estate agent. Mr. Allan subsequently shared the email with members of Respondent’s Board. The email string that Respondent voluntarily provided as a courtesy after Petitioner filed the petition with the Department is in reverse chronological order, as follows: On June 20, 2017, at 8:41 AM, [Redacted] wrote:

Thank you so much for informing me of the situation you encountered yesterday with your family and Architect. Again, I apologize.

I wrote an e-mail last night to the out-of-state owner and this morning I received an e-mail back. He knows this person, Wayne Coates, and said he has been an issue in the neighborhood before. He has contacted Hoamco and is seeking legal [counsel] to stop this menace.

The owner, John Allen is asking a favor of you. Can you please write something to me explaining what you told me on the phone of his belligerent and obnoxious behavior yesterday? He would like to have “proof” to show the HOA that they need to put a stop to this behavior.

Also, Here is a map of his property and position as it relates to the lot.

John will be coming into town this coming weekend (Sunday), and we are meeting at the lot, probably Monday. We could coordinate a meeting with you, your wife and Architect next week when you return and see if it is a good fit for you.

From Joe Zielinski Subject: Re: LMR Problem Date June 20, 2017 at 7:33:41 AM To: Gregg Arthur, Mike Olson, Boris Biloskirka, Kathy Andrews, Jim Robertson

Gregg and all, The YCSO [Yavapai County Sheriff’s Office] may file charges against Wayne for disorderly conduct/harassment, based on what happened to Mr. Allan and the others in attendance, given Wayne’s arrest record and prison term and criminal history. It would involve a trip/call by Mr. Allan to YCSO and an Incident Report. It would involve testimony at . . . trial, since I don’t believe Wayne would ever plead guilty or accept a plea. The Arizona disorderly conduct statute is 13-2904. Sub Paragraphs 1.3, and 4 seem applicable. Unfortunately, I am familiar with the routine, because of Wayne’s actions against me. I don’t believe Wayne (and Patricia’s) aggressive and disruptive behavior will stop.

I’ve been trying to get an appointment with Shelia Polk’s office, either with her or one of her Assistant AGs to discuss my own ongoing problems with Wayne and Patricia. . . . .

From Gregg Arthur To: Mike Olson, Joe Zielinski, Boris Biloskirka, Kathy Andrews, Jim Robertson Cc: John Allan Sent Tuesday, June 20, 2017 6:34 AM Subject: FW: LMR Problem

Dear LMR Board and HOAMCO

I was hoping that this would not be a situation we would have to encounter with Wayne Coates and Patricia however here it is on our door step. Many owners at LMR have waited long and patiently for the market to recover so that they can sell their properties or build the home that they may have postponed until retirement and the timing was right. In the Real Estate World, this is about as bad as it gets . . For a property owner the same.

Wayne thru his actions appears to have interfered with and destroyed a property sale. We need to meet and take action on this matter as it will have a broad and chilling effect amongst the realtor community (effecting us all) not to mention the property owners. I feel Mr. Allen has been harmed by Wayne Coates in this matter and we could not sit by, action needs to be taken and quickly to prevent this from happening again. . . . .

From: John Allan Date: Tuesday, June 20, 2017 at 6:11 AM To: Gregg Arthur Subject: LMR Problem

Good Morning Gregg

My wife and I are coming to Prescott and will arrive late Saturday night. Will be there for 3 days or so. Wondering if you would like to get together for lunch so as to finally have a chance to meet. Please let me know. I would like to meet with my LMR friend.

As you know, I have been trying to sell our other lot at LMR with what I thought was little or no action. Yesterday, I rec’d an e-mail from my realtor whom I had prodded into action only to find that there is a major problem with a neighbor who is apparently going out of his way to scare potential buyers off. I am attaching the e-mail from my realtor and ask that you share it with the BOD in that from my point of view, an owner should not be allowed to interfere with a potential sale of another owner’s property. Would appreciate your thoughts on the matter. Plan to send this to HOAMCO as well and will employ legal action if necessary. . . . .

Mon 6/19/2017 9:36 PM From: [Redacted] To: John Allen

Something really weird just happened. [Redacted] the Builder went out with his wife and architect and son to look at the property again. The neighbor across the street on the west side of Puntenney came out of his house and was belligerent and cursing at t hem telling them nothing was for sale around here and they shouldn’t be snooping around. His wife said there were for sale signs right there and they were there to look at a lot and he was very verbally abusive to them. He called to let me know as a courtesy and said they are not sure if they are interested in the lot now since they would have to go by that house every day…

I just wanted to let you guys know and I’ll keep you posted if anyone else has similar complaints. I planned on going out tomorrow to check on Flyers and add more flyers to the boxes. So I’ll let you know if I hear from the guy.

From: [Redacted] Jun 20, 2017 at 10:30 AM Subject: Re: Puntenny Property To: [Redacted]

Date: June 19th 2017, at approximately 5:00 pm. . . . .

We entered the subdivision with notification of 3 realtors that we wanted to look at the property they had listed. Gate code was provided and in 2 vehicles we entered.

At the intersection of the lot Easement from the west entrance to said property listed by [redacted] my wife [redacted] and my Son were parked at entrance on Puntenney Dr, when an elderly man came out of a home to the west and began to yell and scream questioning why [we] were on premises.

The individual was verbally abusive and extremely confrontational. Making rude remarks while cussing.

My wife told the individual that we were looking at property and that we had notified realtors that we would be looking today.

The individual continue[d] to display extreme aggressive behavior, to include stating that there is not any properties for sale on the area and that we needed to leave immediately.

In an attempt to explain our situation the man continued to display more aggressive behavior. So my wife and son drove up to meet with myself in the other vehicle, in which myself and my architect were told us what had occurred.

In closing when we returned one thing that stands out is would we want to live next to this type of behavior of [a] neighbor? The answer is no, this lot was one that we had in our top 2 Lots as a consideration for purchase but due to the volatile potential of this man, we have decided at this point to remove it from our list.

[In] addition any property that would require us to drive past or have the chance of contact with this individual.

We are seeking a quiet, peaceful, and neighborly place to retire. Not a place with hostility and confrontation. . . . .

Petittioner changed her theory of the case on rehearing. She did not argue that the Board must have made a formal decision to decide that the alleged threat by the person on Puntenney Rd. was not a matter that was anything that Respondent could or should do anything about and did not argue that the Board had refused to produce an official record upon her request. Instead, she argued that the email string was an official record of Respondent’s business and that A.R.S. § 33-1805 required Respondent to produce an un-redacted copy of the email at her request. Petitioner argued that since some of her neighbors knew the names of the non-members referenced in the email string, she and Mr. Coates had a right to know who was accusing Mr. Coates of belligerence and threatening persons in the neighborhood. Mr. Olson again testified that the names of the potential purchasers and real estate agent were redacted because Mr. Coates had a history of bullying and intimidating people. Otherwise, Respondent had produced to Complainant the complete private communications that discussed the incident. Mr. Olson testified that all the un-redacted names on the email string were all members of Respondent. John Allen owned the property across the street from Petitioner and Mr. Coates’ property and Kathy Andrews was the property manager. All of the other named persons to whom the email was sent were Board members, except for Boris Biloskirka, who was a former Board member. Mr. Olson testified that the Board had never addressed the June 19, 2017 incident formally or in its official capacity and never voted to take any action because the alleged incident did not violate Respondent’s CC&Rs, bylaws, or anything else that it was authorized or empowered to enforce. Petitioner submitted Respondent’s January 18, 2012 Resolution for Electronic Storage of Documents, which required “the management company [to utilize] a comprehensive filing system designed to electronically manage and store all Association documents . . . .”[2] Petitioner argued that, since the Board voluntarily produced the e-mail string after she filed a petition with the Department, it must be an association document. Ms. Andrews testified that Respondent’s records include anything that is a matter of record regarding the Association’s business, such as governing documents, architectural guidelines, Board and general meeting minutes, and anything submitted to the Board for action. Because the Board did not take any action regarding the June 19, 2017 incident, the email was not included in Respondent’s archived records. Ms. Andrews acknowledged that she keeps the emails that she is copied on that do not involve Respondent’s business in her personal emails. Ms. Andrews testified that no compliance report was prepared about the June 19, 2017 incident and Petitioner and Mr. Coates’ file did not include anything about the incident. Ms. Andrews testified that Respondent has no authority to become involved in a personal dispute between neighbors. The Enforcement Resolution that Petitioner offered into evidence that required the Board to remain fair and impartial in enforcing the governing documents applied only to disputes involving the Architectural Committee’s approval of exterior improvements,[3] not allegations of personal threats made by someone in the community against someone outside the community. CONCLUSIONS OF LAW A.R.S. § 32-2199(B) permits an owner or a planned community organization to file a petition with the Department for a hearing concerning violations of Title 33, Chapter 16. This matter lies with the Department’s jurisdiction. Petitioner bears the burden of proof to establish that Respondent violated A.R.S. § 33-1805 by a preponderance of the evidence.[4] Respondent bears the burden to establish affirmative defenses by the same evidentiary standard.[5] “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[6] 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.”[7] A.R.S. § 33-1805(A) provides as follows: Except as provided in subsection B of this section, all financial and other records of the association shall be made reasonably available for examination by any member or any person designated by the member in writing as the member's representative . . .

(Emphasis added.) A.R.S. § 33-1804(E)(4) provides that “[a]ny quorum of the board of directors that meets informally to discuss association business, including workshops, shall comply with the open meeting and notice provisions of this section without regard to whether the board votes or takes any action on any matter at that informal meeting.” (Emphasis added.) Petitioner did not establish that the Board ever took any action regarding the June 19, 2017 incident. Although the Board members informally discussed the event in private emails, which were provided to Appellant as a courtesy, the mere fact that a quorum of Board members may discuss a topic does not make it official Board business, especially if they do not end up taking any action to make a matter board business. Mr. Olson’s testimony that he redacted the email because he feared that Mr. Coates would harass the real estate agent and potential purchaser who declined to purchase the property after the incident does not appear unreasonable, especially given Mr. Coates’ role in causing Petitioner to prosecute this petition at the original hearing and rehearing. Because the email string is not a record of the association, A.R.S. § 33- 1805(A) does not require Respondent to provide an un-redacted version of the email to Petitioner. Petitioner’s petition must therefore be dismissed. order IT IS ORDERED that Petitioners’ petition is dismissed because she has not established that Respondent violated A.R.S. § 33-1805(A) by or failing to produce an un-redacted version of the email string concerning the June 19, 2017 incident. Done this day, May 1, 2019.

/s/ Diane Mihalsky Administrative Law Judge

Transmitted electronically to:

Judy Lowe, Commissioner Arizona Department of Real Estate 100 N. 15th Avenue, Suite 201 Phoenix, Arizona 85007

Ashley N. Moscarello, Esq. Goodman Law Group 3654 N. Power Rd., Ste. 132 Mesa, AZ 85215

Patricia Wiercinski 13250 N Puntenney Rd. Prescott, AZ 86305

By: Felicia Del Sol

----------------------- [1] The petition generally alleges Respondent’s failure to produce records responsive to Petitioner’s records request that did not provide any specific description of the records sought. The Administrative Law Judge bases her statement of the issue on the evidence that the parties presented at the hearing. Petitioner acknowledged that her records request was for documents showing the response to the June 19, 2017 incident. [2] See Exhibit 4. [3] See Exhibit 2. [4] See A.R.S. § 41-1092.07(G)(2); A.A.C. R2-19-119(A) and (B)(1); see also Vazanno v. Superior Court, 74 Ariz. 369, 372, 249 P.2d 837 (1952). [5] See A.A.C. R2-19-119(B)(2). [6] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [7] Black’s Law Dictionary at page 1220 (8th ed. 1999).

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Office of Administrative Hearings 1740 West Adams Street, Lower Level Phoenix, Arizona 85007 (602) 542-9826