ALJDEC decisions subject to certification as final

20F-H2019021-REL · Department of Real Estate - H/C · 2020-01-12

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Olga Carnahan,

Petitioner,

vs.

White Mountain Lake Vistas,

Respondent.

No. 20F-H2019021-REL

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: December 26, 2019

APPEARANCES: Olga Carnahan, Petitioner, appeared on her own behalf. Edward O’Brien, attorney, appeared on behalf of White Mountain Lake Vistas, Respondent.

ADMINISTRATIVE LAW JUDGE: Antara Nath Rivera

_____________________________________________________________________

FINDINGS OF FACT

On or about October 14, 2019, Petitioner filed a Homeowners Association (HOA) Dispute Process Petition (Petition) with the Arizona Department of Real Estate (Department). Petitioner filed a single issue Petition and asserted a violation of Respondent’s Declaration of Covenants, Conditions, and Restrictions (CC&Rs) Article 12.3. Petitioner attached a statement to her Petition which alleged that Respondent violated the CC&Rs when it purchased two lots without majority homeowner approval.

On or about November 20, 2019, the Department issued a Notice of Hearing in which it set forth the issue for hearing as follows:

The Petitioner alleges that White Mountain Lake Vistas is in violation of community documents CC&Rs Article 12.3 in a single issue petition.

HEARING EVIDENCE

At the hearing, Petitioner testified on her own behalf and submitted three exhibits.

Petitioner testified that she purchased lot #43 on or about June 30, 2017. She was not on Respondent’s Board of Directors (Board), during the entirety of her ownership of lot #43. Petitioner alleged that the Board improperly purchased lots #54 and #65 without holding a vote. Petitioner argued that the acquisition of these lots was supposed to be discussed, and voted upon, at the October 11, 2019, meeting. Petitioner was not present at that meeting. Petitioner learned of the sale on or about October 11, 2019. Petitioner presented the Navajo County Recorder of Deeds Special Warranty Deeds as proof that the lots were purchased by Respondent.

Petitioner argued that Respondent violated the CC&Rs Article 12.3 when it purchased the lots without a 2/3 membership vote because Article 12.3 addressed a 2/3 membership vote and amendment of a Plat. Petitioner further argued that the purchase of the lots resulted in an immediate loss of money for Respondent because Respondent did not collect any homeowner’s association fees from these vacant lots.

Respondent presented the testimony of Rose Thomas, Respondent’s Secretary and Treasurer of the Board, and Joyce Dick, Respondent’s President, and submitted eight exhibits.

Ms. Thomas testified that on or about July 2, 2019, the CC&Rs were amended by a 2/3 membership vote per Article 12.3 in the CC&Rs. Article 12.3 set forth the requirement of a 2/3 membership vote to amend the CC&Rs but it did not require a vote for the purchase of property by the Board. Article 12.3.2 addressed the amendment of the Plat and authorized Respondent to amend the Plat without obtaining approval or consent of any Owner or even majority consent.

The purchase of lots #54 and #65 were addressed at the September 20, 2019 meeting. At that meeting, a drainage issue that affected lots #54 and #65 was discussed. When Respondent presented the idea of purchasing the lots, the members agreed with the idea. Petitioner was present at that meeting and agreed with the idea but requested that the membership vote on it. Respondent informed Petitioner that the CC&Rs did not require a vote for the purchase. Based on the members’ reactions, the Board unanimously decided to purchase the two lots, per Article 12.3.

Respondent never intended to hold a vote for the purchase because it was not required to hold a vote. The Board asked the members for their opinions during the meetings and everyone agreed that purchasing the lots was a good idea. Respondent did not violate any of the CC&Rs when they purchased the lots because there were no provisions authorizing it to have a 2/3 membership vote.

Both Ms. Thomas and Ms. Dick opined that Petitioner’s Petition was premature. Respondent bought the lots to address drainage issues but had not made any definitive plans. Not only were there were no amendments proposed with respect to the CC&Rs, there were no changes to the Plats that would invoke Article 12.3, or any Article that authorized or required votes.

CONCLUSIONS OF LAW

Arizona statute permits an owner or a planned community organization to file a petition with the Department for a hearing concerning violations of planned community documents or violations of statutes that regulate planned communities. Arizona Revised Statutes (A.R.S.) § 32-2199 et seq. That statute provides that such petitions will be heard before the Office of Administrative Hearings.

Petitioner bears the burden of proof to establish that Respondent committed the alleged violations by a preponderance of the evidence. Respondent bears the burden to establish affirmative defenses by the same evidentiary standard.

“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.”

Article 12.3 of the CC&Rs, entitled “Amendments” provides that:

12.3.1 This Declaration may be amended by the written approval or affirmative vote, or any combination thereof, of two-thirds (2/3) of the Membership.

12.3.2 The Board may amend this Declaration or the Plat, without obtaining the approval or consent of any Owner of Fist Mortgagee, in order to conform this Declaration or the Plat to the requirements or guidelines of the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, the Federal Housing Administration (FHA), the Veterans Administration (VA) or any federal, state, or local governmental agency whose approval of the Project, the Plat, or the Project Documents is required by law or requested by the Declarant or the Board.

12.3.3 Any amendment approved pursuant to this Declaration or by the Board pursuant to Subsection 12.3.2 of this Declaration shall be signed by the President or Vice President of the Association and shall be recorded with the County recorder of Navajo County, Arizona. Any such amendment shall certify that the amendment has been approved as required by this Article.

Petitioner argued that Respondent violated the CC&Rs Article 12.3 when it purchased lots #54 and #65 without a vote. According to the Article 12.3, a vote is only required for any amendments to the CC&Rs, not for the purchase of property or amendments to the Plats. Petitioner failed to establish that the CC&Rs required a 2/3 membership vote for the purchase of lots #54 and #65.

Lastly, the Petition is not ripe. Although Petitioner alleged one violation in her single issue Petition, Petitioner alleged a second issue at the hearing. She argued that the purchase of the lots would adversely affect the finances of Respondent in the future and introduced Respondent’s financial statements. This argument did not establish an immediate violation by Respondent.

Respondent established that the CC&Rs did not authorize the Board to obtain votes to purchase lots. Moreover, after purchasing the lots, the lots remained vacant. Respondent did not make any amendments to the Plat. There was only testimony that Respondent researched its options regarding the conversion and merging of the lots.

Petitioner failed to establish by a preponderance of the evidence that Respondent lacked the authority to purchase the lots without a vote. Thus, Petitioner failed to sustain her burden to establish that Respondent violated Article 12.3 of the CC&Rs.

ORDER

In view of the foregoing,

IT IS ORDERED that the Petition be dismissed.

NOTICE

Pursuant to A.R.S. §32-2199.02(B), this Order is binding on the parties unless a rehearing is granted pursuant to A.R.S. § 32-2199.04. Pursuant to A.R.S. § 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, January 13, 2020.

/s/ Antara Nath Rivera

Administrative Law Judge

Transmitted electronically to:

Judy Lowe, Commissioner

Arizona Department of Real Estate

-54864001

001

-137160-45720000Transmitted US Mail to:

Olga Carnahan

66093 E. Peregrine Pl

Tucson, Arizona 85739

Edward D. O’Brien

Carpenter, Hazlewood, Delgado & Bolen LLP

1400 E. Southern Avenue, Suite 400

Tempe, Arizona 85282