ALJDEC decisions subject to certification as final
21F-H2120002-REL-RHG · Department of Real Estate - H/C · 2021-08-09
IN THE OFFICE OF ADMINISTRATIVE HEARINGS
Clifford Burnes and Maria Burnes,
Petitioners,
vs.
Saguaro Crest Homeowners Association, Inc.,
Respondent.
No. 21F-H2120002-REL-RHG
FINAL ADMINISTRATIVE LAW JUDGE DECISION
HEARING: July 20, 2021 at 1:00 PM.
APPEARANCES: Cynthia F. Burnes, Esq. appeared on behalf of Clifford and Maria Burnes (“Petitioners”). John Crotty, Esq. appeared on behalf of Saguaro Crest Homeowners Association (“Respondent”). Petitioners 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 Final 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 homeowners’ associations in the State of Arizona.
On or about July 17, 2020, Petitioners filed a 4-issue petition with the Department which alleged that (1) the Association allowed construction to take place on Lot 7 of the Saguaro Crest Community without the submission of required documents to the Association’s Architectural Review Committee for approval in violation of section 5.5. of the Covenants, Conditions and Restrictions (“CC&Rs”); (2) the Association allowed construction to take place on Lot 7 of the Saguaro Crest Community without the required Construction Compliance Deposit in violation of section 4.0 of the Association’s Architectural Design Guidelines; (3) the Association’s Board of Directors conducted an unnoticed meeting to consider matter relevant to Petitioner Norm Burns on or about May 20, 2020, in violation of Arizona Revised Statute (“Ariz. Rev. Stat.”) § 33-1804(A), (D), and (E)(1); and (4) the Association failed to fulfill Petitioners’ records request in violation of Ariz. Rev. Stat. § 33-1805.
On or about August 11, 2020, Respondent returned its Answer to the Department whereby it denied all 4 of Petitioners’ claims.
On August 19, 2020, the Department referred this matter to the Office of Administrative Hearings (“OAH”), an independent state agency, for an evidentiary hearing on October 14, 2020, to determine whether the following violations occurred:
Issue 1 – Alleged violation of CC&Rs Section 5
Issue 2 – Alleged violation of Community Agricultural Design Guidelines Section 4.0
Issue 3 – Alleged violation of A.R.S. § 33-1804(A), (D), and (E)
Issue 4 – Alleged violation of A.R.S. § 33-1805
On March 22, 2021, the undersigned Administrative Law Judge issued an Administrative Law Judge Decision (“Decision”) to the Commissioner of the Department.
On April 28, 2021, the Department received a Dispute Rehearing Request from Petitioners on the grounds that there was alleged “Newly discovered material evidence that could not with reasonable diligence have been discovered and produced at the original hearing” and because “[t]he findings of fact or decision is arbitrary, capricious, or an abuse of discretion.”
On May 21, 2021, Petitioner’s rehearing request was granted by the Commissioner of the Department.
On May 27, 2021, the Department issued a Notice of Rehearing, and referred this matter back to OAH for an evidentiary hearing on July 20, 2021, regarding the same issues as the previous hearing.
The Parties and Governing Documents
Respondent is a homeowners’ association whose members own properties in the Saguaro Crest residential real estate development located in Tucson, Arizona. Membership for the Association is compromised of the Saguaro Crest subdivision.
Petitioner is a Saguaro Crest subdivision property owner and a member of the Association.
The Association is governed by its Covenants, Conditions, and Restrictions (“CC&Rs”), and overseen by a Board of Directors (“the Board”). The CC&Rs empower the Association to control certain aspects of property use within the development. When a party buys residential property 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.
An architectural committee is typically charged by an Association’s CC&Rs with the exclusive task of implementing Architectural Guidelines in order to maintain aesthetic standards within the community, and preserving the value of the development. These Architectural Guidelines establish an association's policies and procedures for alterations, modifications and improvements to an owners' property, common areas, and exclusive use common areas. Having governing rules and bylaws in place, including established architectural rules, helps ensure that an Association meets its fiduciary duty to care for and act in the best interests of the Association.
The Association’s Amended CC&Rs were recorded with the Pima County Recorder’s Office on August 15, 2006.
Article 5 of the CC&Rs pertains to architectural and landscape control and is divided into 8 subsections regarding the Association’s Architectural Committee, Purpose, Architectural Standards, Building Envelope, Approval of Plans for Improvements or Alteration, Decision of the Architectural Committee; Approval or Disapproval, Variances, and General Provisions.
The Associations Architectural Design Guidelines were adopted by the Association’s Board of Directors on May 12, 2018.
Section 4.0 of the Architectural Design Guidelines states that a refundable $5,000.00 Construction Compliance Deposit is required.
Rehearing Evidence
The Department’s electronic rehearing file; including the Notice of Rehearing, Petitioners’ Rehearing Exhibit A, Petitioner’s Brief on Rehearing, Respondent’s Defendant Prehearing Memorandum, and the 21F-H2120002-REL hearing record; including Petitioner Exhibits A-HH and Respondent Exhibits 1-6, were admitted into the evidentiary record.
Respondent declined to call any witnesses.
Initially, the parties were permitted to be heard regarding Petitioner’s Motion to Continue Hearing and Complete Record and Refiled Motion to Record Google Meets Hearing received by OAH on July 20, 2021. Petitioners’ motion for continuance was denied for lack of good cause and untimeliness, and Petitioners’ motion to record was denied as moot.
After opening remarks, Petitioners were required to make offers of proof regarding their disclosed witnesses and exhibits before the Tribunal regarding alleged “newly discovered material evidence that could not with reasonable diligence have been discovered and produced at the original hearing.”
Petitioners offered no “new” evidence and instead conceded that they wished to present evidence which they had in their possession during the prior hearing, that they markedly had decided not to present prior to the closing 21F-H2120002-REL’s evidentiary record. Petitioners also conceded their proposed additional exhibits had not “newly discovered” but again had not been offered during the prior hearing as a part of their presentation strategy for their case-in-chief and rebuttal.
Because Petitioners did not provide satisfactory offers of proof, as they conceded they were not in possession of any “new material evidence,” Petitioners were precluded from recalling Mr. Burns or Mrs. Martinez as witnesses, or offering additional exhibits.
Therefore, the only substantive evidence of record is that which was entered in 21F-H2120002-REL as follows:
Issue #1 - Alleged violation of CC&Rs Section 5
The Association is an Arizona non-profit corporation created on June 18, 2009. The subdivision consists of 18 Lots.
As of the date of the hearing the Board of Directors was comprised of three persons: Esmerelda Martinez – President, Dave Madill – Vice President, and Julie Stevens – Treasurer. All Board positions are voluntary and unpaid.
Esmerelda Martinez (“President Martinez”) began her tenure on December 02, 2017. Dave Madill began his tenure on January 20, 2018. Julie Stevens began her tenure on January 20, 2018.
On January 27, 2018, the Board of Directors executed a document naming Jamie Argueta, Joseph Martinez, and Norm Burnes (“Petitioner”) to serve as Architecture Review Committee (“ARC”) Members, effective December 05, 2017. ARC Members were advised that the committee’s main goal “is to make the new home look like it belongs in the neighborhood – both in style and colors.”
The ARC Members had previously been provided a copy of construction plans for Lot 7, owned by Raul and Ramona Martinez, on December 16, 2017, for their review.
On January 03, 2018, the ARC Members unanimously approved of the new home construction on Lot 7.
On October 16, 2017, Mr. Martinez submitted site plans and building specifications to the ARC. On October 23, 2017, the ARC responded to Mr. Martinez regarding issues with his proposed home placement, septic and driveway location, and color scheme.
At an unknown time in 2018 additional construction plans were reviewed by the ARC.
On May 04, 2018, the construction plans for Lot 7 were approved by Pima County.
Construction of Lot 7 began on an unknown date in 2018. Contraction has not been completed.
Petitioners own Lot 6, which is next door to Lot 7.
On October 21, 2018, Petitioner notified the Board of his concerns regarding the development of Lot 7. Petitioner included several photos depicting the view he believed he was “going to lose” and the build that would “be in my backyard.”
On April 14, 2020, after construction on Lot 7 began, Petitioner issued the following letter of concern about the placement of the Martinez’s residence with the Board of Directors and the ARC:
Having the house in Lot 7 house so close to my back yard is a constant source of stress for my family. Every day there are vehicles with their headlights pointing directly into the back windows of my house. That will never end. A large part of the value to me for my house was the view from the back patio. That's gone now. The view from my kitchen and bedroom windows are destroyed. People in the house on Lot 7now have a direct view into our family member's windows. I feel our privacy is violated / gone. We are not happy living in this house. During the approval process for the Lot 7 home Jamie mentions how the house placement was originally further back and that "once the home was shown as moved lower and closer to the street, it was approved per the ARC request." Mr. Martinez did not honer the approved plan and has placed the house in the original position. Jamie was correct when he said In that original plan, the building itself would have obstructed an even more significant portion of the direct view from your backyard. That is what happened. When the frame for the foundation was laid out I reported the error to Joseph. The purpose of the ARC is to make sure the houses here are within harmony, to look like they belong in the neighborhood. Because of the (mis) placement of the house on lot 7, From my point of view (Literally) the house is not harmonious and does not "look like it belongs". I am asking the home owners association and the ARC to help rectify this error.
(All errors in original.)
On May 05, 2020, the Association responded to Petitioner that, “The construction location of the home on Lot 7 cannot be held accountable by referencing an aerial map. The construction location of the home should be held accountable by onsite survey verification per construction drawing dimensions.”
Issue 2 – Alleged violation of Community Agricultural Design Guidelines Section 4.0
On an unknown date in 2013, the Martinez family bought Lots 7 and 13 from Jamie Argueta. At the time of the sale, Mr. Argueta was a member of the Association’s ARC.
In a meeting held on May 03, 2020, the Board of Directors decided, pursuant to Ariz. Rev. Stat. § 10-3821, to honor a Construction Compliance Deposit Waiver previously granted to the Martinez family.
The discretionary waiver was originally granted during an economic turndown to incentivize purchases in the subdivision.
However, the Association does not possess a corporate record that any such Construction Compliance Deposit Waiver was previously granted to the Martinez family.
Issue 3 – Alleged violation of A.R.S. § 33-1804(A), (D), and (E)
On April 18, 2020, Petitioner requested a meeting with the Board of Directors to discuss the placement of the Martinez residence on Lot 7. That same day, President Martinez agreed to hold a meeting with Petitioner and the Board the following day at 10:00 a.m.
During his meeting with the Board on April 18, 2020, Petitioner complained to the Board that the construction on Lot 7 was obscuring the mountain views from his home, specifically from his backyard. Petitioner asked the Board to require Mr. Martinez (1) pay to construct a wall tall enough block his home’s view from Petitioners’ property, (2) place the exterior lighting on the home below said wall to prevent reflection into Petitioners’ home, (3) relocate the portable bathrooms on site outside of Petitioners’ view, and (4) remit a $5,000.00 payment to the Association as a construction deposit.
Petitioner was advised that his lighting concern was the only item of contention within the purview of the Association’s jurisdiction. Petitioner was also reminded that neither he nor any of his other ARC Members had required a deposit as a requirement of ARC approval. The Board noted that it would be unfair for Officers to ask for a deposit after-the-fact because it would be unfair to the Martinez family. The Board did, however, agree to convey Petitioners’ wishes to Mr. Martinez, but asked Petitioner to recuse himself from the discussion. Jesus Carranza served as a substitute ARC Member for the meeting with Mr. Martinez whereby Petitioner’s lists of request was delineated.
Neither Petitioner nor Mr. Martinez agreed to pay for the cost of a wall to be erected between their property lines, nor did either party agree to split the associated costs.
On May 20, 2020, acting under authority enumerated in Ariz. Rev. Stat § 10-3821, the Association restricted Petitioner’s participation as an ARC Member regarding all issued related to the construction of Lot 7. Specifically, the Board notes, in pertinent part, that “[T]he Board of Directors hereby unanimously agree that [Petitioner] be removed as an ARC Member for all ARC related matters concerning Lot 7.”
The Association, through its Board of Directors, obtained individual signatures as unanimous consent in order to move forward with the unnoticed closed meeting.
On May 21, 2020, during a meeting between Petitioner and the Board, a copy of the meeting notes were delivered to Petitioner. Petitioner was advised that the lights he was concerned about were temporary, and that Mr. Martinez would have the portable bathroom relocated out of Petitioner’s line of sight. Petitioner was further advised that Mr. Martinez declined to pay for a wall between the parties’ property lines, and that he had also received a Construction Compliance Deposit waiver from the ARC Members that preceded Petitioner.
Issue 4 – Alleged violation of A.R.S. § 33-1805
On June 04, 2020, Petitioners issued the following records request, in pertinent part, to the Association:
I am requesting to review ALL of the documents of the HOA, including financial documents. Additionally, I am requesting a copy of all HOA documents to be provided to me regarding the following items. As per the statute, the review should be fulfilled, and the copies should be provided within ten (10) days.
1. Any meetings where my family or I were discussed, or decisions were made regarding me or my family.
2. Any meetings where issues that I addressed were discussed, or decisions were made regarding any issues that I addressed.
3. I understand that Raul and Jaime have both stated that there is no documentation regarding the CCD waiver on Lot 7. Please confirm that there are no HOA records about that matter. If such records do exist, please provide me with a copy of those records.
4. Any meetings where any activity regarding Lot #7 were discussed or decisions were made.
5. All current insurance policies. Please see Art 13 of the CC&Rs.
6. All past and present ARC guidelines and the paperwork showing how those guidelines were adopted. Please provide the minutes of any meetings where the Members approved those ARC guidelines. Also provide evidence that the Amended Architectural Guidelines were recorded in Pima county.
7. A copy of all of the Project Documents as defined in Section 1.19 of the CC&Rs.
8. A copy of all documents submitted regarding Lot 7.
9. A copy of all final documents approved by the county for Lot 7.
10. The construction drawings for Lot 7 with dimensions showing the placement of the structure on the lot.
11. A copy of all actions taken by the Board of Directors under ARS Section 10-3821
12. A copy of all discussions and approvals by the ARC or the Board of Directors regarding Lot 7.
13. A copy of all documents showing written approval of new construction on any of the lots as required by ARS 33-1817 (B)(2)(b).
14. A copy of written reports following on-site formal reviews for the purpose of determining compliance with the approved plans of all new construction on any of the lots as required by ARS 33-1817 (B)(2)(c) and 33-1817 (B)(2)(d).
15. All notes, minutes, and findings, regarding the complaint filed by Norm and Maria Burnes on April 18, 2020.
16. On May 21, 2020, an “HOA Violation Complaint Form” was sent to Norm Burnes.
Please provide a copy of all records where that form was adopted by the HOA.
17. Please provide a copy of all complaints filed on the form listed in 16 above.
(All errors and emphases in the original.)
On June 8, 2020, Petitioners received an email from the Association about reviewing the requested documents. Specifically, Petitioners were advised that the requested documents, excluded from nondisclosure, would be available for review on June 16, 2020, from 10:00 a.m. until 11:00 a.m.
On June 16, 2020, the Association met with Petitioners. Petitioners were presented with a 40-item outline identifying which documents fulfilled each of Petitioner’s enumerated records requests. A total of 342 pages were identified. Petitioners were permitted to review all 40 documents. Petitioners brought their own scanning machine but were prohibited from using it. Alternatively, Petitioners requested copies of all 40 documents.
On June 17, 2020, Petitioner made another request for a copy of the documents.
On June 21, 2020, Petitioner again requested copies of the documents from the Association.
On June 23, 2020, the Association instructed Petitioner to submit a formal written request using the Association’s Request for Review of the Association’s Records form. The Association also provided Petitioner with 2 pick-up options for the documents.
On June 24, 2020, Petitioner paid $51.30 to the Association, signed his acknowledgement accepting review of the documents, and purchase agreement for the copies.
Later that day, Petitioner notified the Association that “[S]ome of the attachments for some emails are not included within in this package from this documentation.” [sic]
On June 30, 2020, the Board confirmed their receipt of Petitioner’s June 04, 2020, and June 21, 2020, letters. Petitioner was advised that due to the nature and volume of Petitioner’s requests, and their concerns regarding statutory and community document compliance, the Board needed to schedule an open meeting to discuss how to proceed.
Additional Evidence
The Association does not have the authority to halt construction that has begun after it has been approved by the local building authority, not does the Association have the authority to inspect or issue a citation to a construction site for alleged code compliance violations.
The ARC was not afforded an opportunity to approve or deny changes or modifications made to Lot 7 plans, if any, after January 03, 2018, and was not made aware that any changes or modifications had taken place.
Closing Arguments
Respondent’s closing argument
In closing, Respondent opined that Petitioners’ presented “nothing new” and argued that the Tribunal’s prior ruling was just, proper and supported by the already filed evidence and already received testimony. Respondent beseeched to the Tribunal to sustain and reassert its prior Order.
Petitioners’ closing argument
In closing, regarding Issue 1, Petitioners argued that sections 5.2 and 5.4 of the CC&Rs define the authority of the HOA’s Architectural Committee, and that said committee may halt construction once they have begun as provided by sections 5.11 and 12.1 of the CC&Rs.
Regarding Issue 2, Petitioners argue that the burden of proof was on Respondent to establish that a waiver had been issued; the evidence of such was not a part of the underlying hearing record. Petitioners also argue that the testimony of their witness, Ms. Brown, should have been greater weight on this issue.
Regarding Issue 3, Petitioners argue that the burden of proof was improperly shifted regarding the “porch meeting”; identified as occurring on May 20, 2020, and also argued that the recognized exception was not clearly identified in the underlying decision. Moreover, Respondent argued that the Board failed to provide notice of the “emergency meeting” after the fact, or at the next duly scheduled meeting for their Members.
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.
In this proceeding, Petitioner bears the burden of proving by a preponderance of the evidence that Respondent violated Ariz. Rev. Stat. § 33-1243.
“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.”
Here, the material facts remain unchanged.
Based upon a review of the credible and relevant evidence in the record, Petitioners did no sustain their burden of proof regarding Issues 1 through 3. Petitioners sustained their burden of proof as to Issue 4.
Additionally, Petitioners did not introduce any evidence or provide compelling arguments tending to suggest that “[t]he findings of fact or decision is arbitrary, capricious, or an abuse of discretion” as it related to Issues 1-3 of the underlying decision.
Therefore, the undersigned Administrative Law Judge must again conclude that because Petitioners failed to sustain their burden of proof that the Respondent violated section 5 of the Association’s CC&Rs, section 4.0 of the Association’s Agricultural Design Guidelines, and Ariz. Rev. Stat. § 33-1804(A), (D), and (E), their petition must be denied, in part. Because Petitioners sustained their burden of proof that Respondent violated Ariz. Rev. Stat. § 33-1805 their petition must be granted, in part.
FINAL ORDER
Based on the foregoing,
IT IS ORDERED that the March 22, 2021, Decision holding Petitioners’ petition regarding Issue 4 be granted, and Petitioners’ petition regarding Issues 1-3 be denied is affirmed.
IT IS FURTHER ORDERED that the Decision holding Respondent reimburse 1⁄4 of Petitioners’ filing fee (e.g. $500.00) in certified funds is affirmed.
IT IS FURTHER ORDERED that Decision ordering Respondent to henceforth comply with Ariz. Rev. Stat. § 33-1805 is affirmed.
IT IS FURTHER ORDERED that Respondent provide Petitioners with the aforementioned missing email attachments related to Petitioner’s June 04, 2020, records request within 10-business days of the effective date of the Final Order in this matter.
NOTICE
This Administrative Law Judge Order, having been issued as a result of a rehearing, is binding on the parties. A party wishing to appeal this order must seek judicial review as prescribed by Ariz. Rev. Stat. § 41-1092.08(H) and Title 12, Chapter 7, Article 6. Any such appeal must be filed with the Superior Court within thirty-five (35) days from the date when a copy of this Order was served upon the parties.
Done this day, August 09, 2021.
Office of Administrative Hearings
/s/ Jenna Clark
Administrative Law Judge
Transmitted by either mail, e-mail, or facsimile August 09, 2021 to:
Judy Lowe, Commissioner
c/o Dan Gardener
Arizona Department of Real Estate
100 N. 15th Ave., Ste. 201
Phoenix, AZ 85007
[email redacted]
Cynthia F. Burnes, Esq., Counsel for Petitioners
6657 Williams Road,
Cross Plains, TN 37049
[email redacted]
[email redacted]
Saguaro Crest Homeowners’ Association, Inc., Respondent
Law Offices of Farley, Choate & Wood, Counsel for Respondent
c/o John T. Crotty, Esq.
23800 Farmers Way
Phoenix, AZ 85085
[email redacted]
By c. serrano