ALJDEC decisions subject to certification as final

21F-H2120006-REL · Department of Real Estate - H/C · 2020-10-30

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Douglas E Kupel,

Petitioner,

vs.

Hidden Valley Association,

Respondent.

No. 21F-H2120006-REL

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: October 22, 2020

APPEARANCES: Petitioner Douglas E. Kupel appeared via Google Meet on his own behalf. Respondent Hidden Valley Association was represented by Timothy Butterfield, Esq. appearing via Google Meet. Hidden Valley Ranch Association Board President, Gary Freed also appeared via Google Meet.

ADMINISTRATIVE LAW JUDGE: Adam D. Stone

______________________________________________________________________

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 August 3, 2020, Petitioner filed a single-issue petition against the Association with the Department, and tendered the required $500.00 payment.

On or about August 26, 2020, the Hidden Valley Ranch Association (HVA) filed its Answer with the Department.

Per the Notice of Hearing, the Department referred this matter to the Office of Administrative Hearings (“OAH”), an independent state agency, for an evidentiary hearing on October 22, 2020, regarding whether HVA violated Ariz. Rev. Stat. § 33-1805 by failing to fulfill Petitioner’s records request.

The Parties and Governing Documents

HVA is a homeowners’ association whose members own properties in a residential real estate development located in Prescott, Arizona. Membership for the Association is compromised of the Hidden Valley Ranch subdivision.

Petitioner is a Hidden Valley Ranch subdivision property owner and a member of the Association.

HVA is governed by its Covenants, Conditions, and Restrictions (“CC&Rs”), and overseen by a Board of Directors (“the Board”). The Association is also regulated by Title 33, Chapter 16, Article 1 of the Arizona Revised Statutes (“Ariz. Rev. Stat.”)

Hearing Evidence

Petitioner testified on his own behalf and submitted four exhibits. HVA called Gary Freed as a witness and submitted eight exhibits. The Agency Record from the Department and Notice of Hearing were also admitted into the evidentiary record.

Petitioner’s testimony

Petitioner testified that on June 22, 2020, he submitted a records request to the Board of HVA, as follows:

Please provide a copy of the records retention policy for the Hidden Valley Association adopted by the Board of Directors on January 15, 2020.

Please provide copies of all communications written to or from current and former Hidden Valley Association Board and committee members, including electronic communications via email or hard copy communications, regarding any mention of information requests or open meeting law compliance, including but not limited to the use of cell phones for Board business from July 2019 to the present.

Please provide copies of all communications written to or from current and former Hidden Valley Association Board and committee members, including electronic communications via email or hard copy communications, regarding any changes to the Association bylaws that were proposed, discussed, considered, or adopted by the Board of Directors from January 2019 to the present.

Please provide copies of any invoice, billing statement, or account record showing fees charged for legal services associated with revisions or changes to the Association bylaws from the period January 2019 to the present. Please provide copies of any records associated with the payment of legal fees to any attorney or law firm that provided legal work on revisions or changes to the Association bylaws from January 2019 to the present. This request for records associated with the bylaws includes legal fees billed by or paid to lawyers regarding procedures to adopt the Association bylaws includes but is not limited to legal work associated with the suggested recusal of any Board officer or Board member from voting on proposed changes to the Association bylaws from January 2019 to the present.

Petitioner then testified that on June 24, 2020, he received an e-mail from HOAMCO which served as the Community Manager for HVA. HOAMCO requested that Petition re-submit his records request using their specific form. Petitioner promptly completed the same.

Petitioner testified that on July 1, 2020, he received a partial response to the request. Petitioner testified that he received the records retention policy and the legal invoices, but did not received the two sets of communications requests.

Petitioner testified that according to HOAMCO and HVA Board President, Gary Freed, that the communications requested were not subject to disclosure under Ariz. Rev. Stat. § 33-1805(B).

Petitioner accused HVA of willfully failing to fulfill his request. Specifically, Petitioner alleged that HVA had records that were not protected by Ariz. Rev. Stat. § 33-1805(B), and those should have been disclosed.

Petitioner testified in support of his position, by presenting several e-mail messages from Mr. Freed to Petitioner (and other HVA members), stating, “[t]his communication has been received, and will be filed as an HVA business record in the files maintained by HOAMCO for the benefit of HVA” or something substantially similar.

Petitioner testified that these e-mails proved that there were communications which existed that did not meet the exclusions under the statute and therefore, HVA failed to fully respond to his records request.

At the close of his testimony, Petitioner prayed for an Order to be issued in his favor which required the Association to abide by Ariz. Rev. Stat. § 33-1805, a reimbursement of his filing fee, and impose a civil penalty against the Association under Ariz. Rev. Stat. § 32-2199.01(A)..

Gary Freed’s testimony

Mr. Freed testified that he was the Board President of HVA.

Mr. Freed testified that as to the communications which were not disclosed to Petitioner. He testified that based upon HVA’s records retention policy as well as his experience and training with the open meeting laws, no records existed which were subject to disclosure.

Mr. Freed also testified that neither he nor any other Board member went through every single e-mail one-by-one.

In addition, Mr. Freed testified as to the statements he wrote in the e-mail correspondence, that he mistakenly believed at first, that all communications needed to be retained, which he why he responded with the language that he did in Exhibits, 8, 9, 12 and 13.

Further, Mr. Freed testified that all HVA business was conducted via open meetings and there were no meetings conducted solely by e-mail but for one emergency situation.

Finally, Mr. Freed testified that he may have scanned his personal e-mail for any other communications, and that he did not dismiss Petitioner’s request “out-of-hand”.

Conclusions of Law

This matter lies within the Department’s jurisdiction. Pursuant to Ariz. Rev. Stat. §§ 32-2102 and 32-2199 et al., 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(D), 32-2199.02, and 41-1092, OAH has the authority to hear and decide the contested case at bar.

In this proceeding, Petitioner bears the burden of proving by a preponderance of the evidence that Respondent violated Ariz. Rev. Stat. § 33-1805.

“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.”

Ariz. Rev. Stat. § 33-1805 provides, in relevant part, as follows:

A. 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. The association shall not charge a member or any person designated by the member in writing for making material available for review. The association shall have ten business days to fulfill a request for examination. On request for purchase of copies of records by any member or any person designated by the member in writing as the member's representative, the association shall have ten business days to provide copies of the requested records. An association may charge a fee for making copies of not more than fifteen cents per page.

B. Books and records kept by or on behalf of the association and the board may be withheld from disclosure to the extent that the portion withheld relates to any of the following:

1. Privileged communication between an attorney for the association and the association.

2. Pending litigation.

3. Meeting minutes or other records of a session of a board meeting that is not required to be open to all members pursuant to section 33-1804.

4. Personal, health or financial records of an individual member of the association, an individual employee of the association or an individual employee of a contractor for the association, including records of the association directly related to the personal, health or financial information about an individual member of the association, an individual employee of the association or an individual employee of a contractor for the association.

5. Records relating to the job performance of, compensation of, health records of or specific complaints against an individual employee of the association or an individual employee of a contractor of the association who works under the direction of the association.

C. The association shall not be required to disclose financial and other records of the association if disclosure would violate any state or federal law.

“In applying a statute . . . its words are to be given their ordinary meaning unless the legislature has offered its own definition of the words or it appears from the context that a special meaning was intended.” Each word, phrase, clause, and sentence must be given meaning so that no part of the legislation will be void, inert, or trivial. Stein v. Sonus USA, Inc., 214 Ariz. 200, 204, ¶ 17 (App. 2007). Legislation must also be given a sensible construction that avoids absurd results. State v. Gonzales, 206 Ariz. 469, 471, ¶12 (App. 2003). If the words do not disclose the legislative intent, the court will scrutinize the statute as a whole and give it a fair and sensible meaning. Luchanski v. Congrove, 193 Ariz. 176, 178, ¶ 9.

The material facts in this matter are not in dispute.

Petitioner’s June 22, 2020, records request was timely complied with by HVA/HAOMCO as to the records retention policy and the copies of the legal bills. However Petitioner has failed established by a preponderance of the evidence that the HVA was in violation of Ariz. Rev. Stat. § 33-1805 for failing to provide him with copies of the communications he requested. Essentially, Petitioner is claiming that there must be other records in existence because of the language that Mr. Freed used in Exhibits 8, 9, 12 and 13. This is not persuasive as there was no evidence presented by Petitioner to prove that the records were in existence. Mr. Freed testified that he was mistaken as to the types of records he believed needed to be kept. Further, HVA’s own record retention policy specifically outlines which communications are to be kept as official records. This policy was adopted six months prior to the request at was voted on at an open meeting, at which time Petitioner could have voiced his objections to the adoption of the policy. Mr. Freed testified that all meetings, like the meeting at which the records retention policy was approved, was an open meeting thus there were no e-mails or other correspondence regarding the same. Mr. Freed testified that he believed that all documents that would been in existence were subject to the exceptions enumerated in Ariz. Rev. Stat. § 33-1805(B).

Therefore, the Administrative Law Judge concludes that the Association’s conduct, as outlined above, did not violate the charged provisions of Ariz. Rev. Stat. § 33-1805.

ORDER

IT IS ORDERED that Petitioner’s petition in this matter be denied.

IT IS FURTHER ORDERED that Petitioner’s request to levy a civil penalty against Respondent is denied.

IT IS FURTHER ORDERED pursuant to Ariz. Rev. Stat. § 32-2199.02(A), Respondent shall not reimburse Petitioner’s filing fee as required by Ariz. Rev. Stat. § 32-2199.01.

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 Department of Real Estate within thirty (30) days of the service of this Order upon the parties.

-54864001

001

-137160-45720000Done this day, October 30, 2020.

/s/ Adam D. Stone

Administrative Law Judge

Transmitted electronically on November 3, 2020 to:

Judy Lowe, Commissioner

Arizona Department of Real Estate

-54864001

001

-137160-45720000Transmitted through US Mail on November 3, 2020 to:

Douglas E. Kupel

PO Box 878

Phoenix, AZ 85001

Mark K. Sahl, Esq.

CARPENTER, HAZLEWOOD, DELGADO & BOLEN LLP

1400 E. Southern Ave, Suite 400

Tempe, AZ 85282