ALJDEC decisions subject to certification as final

20F-H2019012-REL · Department of Real Estate - H/C · 2020-01-02

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Larry Kline,

Petitioner,

vs.

The Foothills Community Association,

Respondent.

No. 20F-H2019012-REL

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: December 19, 2019 at 8:30 AM.

APPEARANCES: Larry Kline (“Petitioner”) appeared on his own behalf. Austin Baillio, Esq. appeared on behalf of the Foothills Community Association (“the Association” and “Respondent”) with Patricia Ann Wontor as a witness. Joe Robinson and Sandra Salvo observed.

ADMINISTRATIVE LAW JUDGE: Jenna Clark.

_____________________________________________________________________

After review of the hearing record in this matter, the undersigned Administrative Law Judge makes the following Findings of Fact and Conclusions of Law, and issues this Order to the Commissioner of the Arizona Department of Real Estate (“Department”).

FINDINGS OF FACT

Background and Procedure

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.

On or about September 20, 2019, Petitioner filed a single-issue petition with the Department which alleged that the Association failed to repair a retaining wall, per an easement agreement, in violation of CC&R Article IV, Section 4.2(p). Petitioner tendered $500.00 to the Department with his petition.

On or about October 18, 2019, the Association filed its Answer with the Department whereby it denied all complaint items in the petition.

Per the October 25, 2019, Notice of Hearing, the Department referred this matter to the Office of Administrative Hearings (“OAH”), an independent state agency, for an evidentiary hearing on March 21, 2019, regarding the following issues based on Petitioner’s petition:

Whether Foothills Community Association (Respondent) violated Association Bylaws Article IV, Section P.

The Parties and Governing Documents

Respondent is a homeowners’ association whose members own properties in a residential real estate development located in Phoenix, Arizona. Membership for the Association is compromised, in part, by the Club House Estates subdivision.

Petitioner is a Club House Estates subdivision property owner and a member of the Association.

The Association’s Declaration of Covenants, Conditions and Restrictions (“Declaration” or “CC&Rs”) were recorded with the Maricopa County Recorder’s Office on April 10, 1987. The CC&Rs empower the Association to control certain aspects of property use within the development. When a party buys a residential unit in the development, the party receives a copy of the CC&Rs and agrees to be bound by their terms. Thus, the CC&Rs form an enforceable contract between the Association and each property owner.

Bylaws Article I, Definitions, Section N states, in pertinent part, that “Common Area and Common Areas” shall mean (a) all Association Land; (b) all land within The Foothills which the Declarant, by this Declaration or other Recorded instrument, makes available for use by Members of the Association and evidences its intent to convey to the Association at a later date; and (e) areas on a Lot or Parcel within easements granted to the Association or its Members for the location, construction, maintenance, repair and replacement of a wall or fence or of landscaping, which easement may be granted or created on a Recorded subdivision plat or Tract Declaration or by a Deed or other conveyance accepted by the Association.

Bylaws Article I, Definitions, Section R states that “Declarant” shall mean and refer to the Foothills Joint Venture, an Arizona general partnership, its successors and any person to whom any part or all of Declarant’s rights under this Declaration are assigned by a written, Recorded instrument.

Bylaws Article IV, Land Use Classifications; Permitted Use and Restrictions, Section 4.2(p) states, in pertinent part, that the rights and duties of Owners with respect to Party Walls between Lots and Parcels or Party Fences between Lots and Parcels shall be as follows: (i) The Owners of contiguous Lots or Parcels who have a Party Wall or Party Fence shall both equally have the right to use such wall or fence, provided that such use by one (1) Owner does not interfere with the use and enjoyment of same by the other Owner; and (vi) In the case of Party Fences (1) between Common Areas and Lots or Parcels, or (2) constructed by the Declarant or the Association on Common Areas within a Lot of Parcel, the Association shall be responsible for all maintenance thereof, subject to the provisions of Article 10, Sections 10.3 and 10.4, except that each Owner of a Lot or Parcel shall be responsible for painting the portion of the Party Fence facing his Lot or Parcel or the portion thereof which is not a portion of the Common Area.

Bylaws Article IV, Land Use Classifications; Permitted Use and Restrictions, Section 4.5 states, in pertinent part, that the Golf Course Land shall not be part of the Common Area, and no Owner shall acquire any right, title or interest whatsoever in the Golf Course Land or the use of the Golf Course Land solely by reason of owning any Lot, Parcel or other property in The Foothills.

Bylaws Article XV, Miscellaneous, Section 15.7 states that any reference in this Declaration to Declarant shall include any successors or assignees of Declarant’s rights and powers hereunder provided that Declarant’s rights and powers may only be assigned by a written, Recorded instrument expressly assigning such rights and powers.

Hearing Evidence

Petitioner testified on his own behalf and submitted one exhibit. Respondent called Patricia Ann Wontor as a witness and submitted five exhibits. The Department’s electronic file was also admitted into the record.

Petitioner’s testimony

Petitioner is the Owner of Lot 22 located within the Club House Estates Unit 1 at The Foothills.

There is a retaining wall along the back perimeter of Petitioner’s property, which separates Petitioner’s property from the Foothills Golf Course.

Per Petitioner, the retaining wall at issue has sustained significant water damage due to a latent defect caused by a flaw in its design. Specifically, the anchors in the wall are failing and the wall is leaning towards the golf course as a result.

After consulting with a local engineering firm, Petitioner was advised to secure the assistance of a geotechnical engineer to evaluate soil conditions prior to moving forward with a proposed “shotcrete wall” reinforcement/incorporation remediation project.

The approximate cost to repair the retaining wall is between $30,000.00 and $40,000.00.

When Petitioner raised his concerns regarding the retaining wall with the Association, he was rebuffed and told to provide an indicia of evidence to establish the Association’s maintenance and repair liability for the retaining wall.

Petitioner presented the Association with copies of the CC&Rs, a Reservation of Easement (“Easement Agreement”) recorded with the Maricopa County Recorder on June 15, 1988, and a Special Warranty Deed (“Deed”) recorded with the Maricopa County Recorder on December 20, 1995, but was unable to convince the Association to cover the costs of remediations for the retaining wall.

Petitioner testified that he understood the Easement Agreement to have been conveyed to the Association in perpetuity.

Petitioner conceded that he was unsure whether the Association was a successor or assign of Dell E. Webb. Petitioner also conceded that the Lot 22 was not located on Tract A, that Association did not own any of the land located underneath the underlying retaining wall, and that the retaining wall was not located in a Common Area. Petitioner further conceded that he did not have an engineer investigate a possible underground water leak because he did not notice any abnormal increases to his monthly water bill.

Overall, Petitioner’s position at the hearing was that, pursuant to the Easement Agreement and the Deed, that the Association is liable for the maintenance of the retaining wall to the rear border of Petitioner’s residence.

Ms. Wontor’s testimony

Ms. Wontor is the Association’s onsite Community Manager. Her job duties include, but are not limited to: overseeing the daily operations and finances of the Association, implementing Board rules, maintaining Common Areas, issuing assessments, and reviewing reports.

The Club House Estates subdivision is defined in the CC&Rs, Tract Declaration, and Plat Map.

Petitioner’s property is identifiable per Maricopa County Assessor photographs. The photos illustrate that the retaining wall at issue runs along Petitioner’s backyard. The wall itself separates Petitioner’s property from the neighboring golf course.

Tract A is a Common Area owned and maintained by the Association. Tract A is a throughway that carries surface water from the street to the golf course. Tract A is located between Lots 8 and 9; thirteen lots away from Petitioner’s residence on Lot 22. The Dedication section of the Plat Map shows that Foothills Management Corporation is listed as the Owner, and that Tract A is dedicated to the public. No easement is listed for Lot 22. Tract A became owned by the Association through the Deed. There is no legal or physical relationship between Tract A and Lot 22’s retaining wall.

No obligation exists pursuant to Bylaws Article IV section 4.2(p) for the Association to maintain or repair the retaining wall, as that responsibility falls to the owners of the related Lots and golf course.

Ms. Wontor testified that Lot 22 has an in-ground pool, and opined that said pool may have leaked water and impacted the retaining wall’s anchor support system, which would compromise the structure’s integrity. The engineering report that Petitioner presented the Association with conceded that it did not perform an underground inspection of the area between the edge of Petitioner’s pool and the retaining wall.

The Deed does not subject Tract A to any easements.

The Tract Declaration makes no mention of easements for Lot 22.

Overall, Respondent’s position at the hearing was that the parties had different interpretations of the language contained in the Bylaws and Easement Agreement, and that the matter would be resolved however the tribunal chose to settle their dispute regarding the interpretation of relevant portions of the governing texts.

Conclusions of Law

This matter lies within the Department’s jurisdiction pursuant to Ariz. Rev. Stat. §§ 32-2102 and 32-2199 et seq., regarding a dispute between an owner and a planned community association. The owner or association may petition the department for a hearing concerning violations of community documents or violations of the statutes that regulate planned communities as long as the petitioner has filed a petition with the department and paid a filing fee as outlined in Ariz. Rev. Stat. § 32-2199.05.

Pursuant to Ariz. Rev. Stat. §§ 32-2199(2), 32-2199.01(A), 32-2199.01(D), 32-2199.02, and 41-1092 et seq. OAH has the authority to hear and decide the contested case at bar. OAH has the authority to interpret the contract between the parties. See Tierra Ranchos Homeowners Ass'n v. Kitchukov, 216 Ariz. 195, 165 P.3d 173 (App. 2007).

In this proceeding, Petitioner bears the burden of proving by a preponderance of the evidence that Respondent violated a community document.

“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.”

The material facts in the record are clear.

Based upon a review of the credible and relevant evidence in the record, Petitioner has failed to sustain his burden of proof.

Petitioner has not established that the Association is a successor or assign of the Declarant who signed the Easement Agreement.

Here, the Deed conveys Tract A to the Association but does not convey an easement.

It is undisputed that the retaining wall at issue is located on property owned by Petitioner and an adjoining golf course, which is not owned by the Association.

In this case, there has not been sufficient evidence presented to establish the existence of a recorded instrument that imparts a maintenance and/or repair requirement of the retaining wall on the Association.

Therefore, the undersigned Administrative Law Judge concludes that because Petitioner failed to sustain his burden of proof that the Association violated Bylaws Article IV section 4.2(p), his petition must be denied.

ORDER

Based on the foregoing,

IT IS ORDERED that Petitioner’s petition be denied.

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.

NOTICE

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

Done this day, January 02, 2020.

Office of Administrative Hearings

/s/ Jenna Clark

Administrative Law Judge

Transmitted by either mail, e-mail, or facsimile January 2, 2020 to:

Judy Lowe, Commissioner

Arizona Department of Real Estate

100 N. 15th Avenue, Suite 201

Phoenix, Arizona 85007

Attn:

[email redacted]

Larry Kline

2109 E Clubhouse

Phoenix, AZ 85048

Foothills Community Association

c/o B. Austin Baillo, Esq.

Maxwell & Morgan, P.C.

4854 E. Baseline Rd., Suite 104

Mesa, AZ 85206