ALJDEC decisions subject to certification as final

21F-H2120029-REL · Department of Real Estate - H/C · 2021-06-24

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Daniel J. Coe,

Petitioner,

vs.

Maricopa Meadows Homeowners Association,

Respondent.

No. 21F-H2120029-REL

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: June 08, 2021 at 9:00 AM.

APPEARANCES: Daniel Coe (“Petitioner”) appeared on his own behalf. Ed O’Brien, Esq. appeared on behalf of Maricopa Meadows Homeowners (“Respondent”) with Michael LaPoint as a witness. Randy Eilts, Andrea Chin, and Summer Wierth 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 Decision and Order to the Commissioner of the Arizona Department of Real Estate (“the Department”).

FINDINGS OF FACT

Procedure and Background

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 December 21, 2020, Petitioner filed a single-issue petition with the Department that alleged that the Association was in violation of Article III Section 3.6 of the Association’s Bylaws. Specifically, Petitioner alleged “The Association failed to acknowledge newly elected board members and that quorum was met at November 04, 2020 meeting.” [sic] In terms of relief, Petitioner requested that the Association “[R]ecognize quorum was met and to order the association to recognize Alicia Chin, [Petitioner], Randy Eilts, Summer Wierth, and Albert Barnes as Board Members Elect” at the next scheduled Board meeting.

On December 29, 2020, Petitioner tendered a $500.00 payment to the Department for the petition fee in this matter.

On December 31, 2020, the Department provided Respondent with notice of Petitioner’s petition, and advised that a response was due no later than January 25, 2021.

On January 25, 2021, Respondent submitted its Answer whereby it denied all of the complaint items in the underlying petition. Respondent also submitted a Motion to Dismiss to the Department pursuant to Ariz. Rev. Stat. § 32-2199.01(C) and Ariz. R. Civ. P. 12(b)(6-7).

On January 28, 2021, the Department referred this matter to the Office of Administrative Hearings (“OAH”), an independent state agency, for an evidentiary hearing on August 18, 2020. Per the Notice of Hearing the issue to be determined is as follows:

Whether Respondent violated Bylaws Article III Section 3.6.

The Parties and Governing Documents

Respondent is a homeowners’ association whose members own properties in a residential real estate development located in Maricopa, Arizona. Membership for the Association is compromised of the Maricopa Meadows subdivision.

Petitioner is a Maricopa Meadows 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 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. The Association’s bylaws delineate the structure of day-to-day governance and contain information on voting processes, quorum requirements, meeting provisions, and other operating guidelines.

The Association is also regulated by Title 33, Chapter 16, Article 1 of the Arizona Revised Statutes (“Ariz. Rev. Stat.”).

Bylaws Article III – Meeting of Members, Section 2.3, Quorum, states, in pertinent part, that “[A]t any meetings of the Members, one-tenth (1/10) of the votes in each class of Members entitled to vote at the meeting, whether present in person or represented by proxy, shall constitute a quorum for the transaction of business.” (Emphasis added.)

Hearing Evidence

Petitioner testified on his own behalf. Respondent called Michael LaPoint as a witness and submitted Exhibits 1-9 and a Prehearing Memo into the record. The Department’s electronic file, including the Notice of Hearing, were also admitted into the record. The substantive facts of record are as follows:

There are 1,626 residential lots that comprise the Association’s Class A Members.

An election to vote for new Board of Directors was placed on the Association’s November 04, 2020, Board meeting agenda. As noticed, the Bylaws required that one-tenth of the Members participated to establish a quorum for the vote.

10% of 1,626 is 162.6; when rounded to the nearest whole number, however, is 163.

Historically, the total number of lots has always been used by the Association to calculate the number of voting Members to reach quorum.

Per election rules, five (5) candidates would be elected to the Board of Directors whereby the top three (3) candidates receiving the most votes would be elected for 2yr terms, while next two (2) candidates receiving the highest votes would be elected for 1yr terms.

All lots were provided notice of the Association’s November 04, 2020, Board meeting. Members could vote through postal mail, electronically, or via absentee ballot. However, 222 lots were deemed ineligible to cast votes in the Board of Directors election due to lot owners’ delinquent account statutes.

The Association hired a company, TXT 2VOTE, to collect, tabulate, and report the election results to the Association. Ultimately, TXT 2VOTE determined that 147 votes had been received for the Board of Directors vote; specifically, 122 electronic ballots and 25 mail-in ballots were collected.

Although Alicia Chin received 109 votes, Randy Eilts received 103 votes, Petitioner received 103 votes, Summer Wierth received 102 votes, and Albert Barnes received 100 votes, none were elected to the Board of Directors because the Association determined that quorum had not been met.

In closing, Petitioner argued that quorum was met at 140 voting Members because the number of voting Class A Members the Association used to calculate quorum should have been reduced by the 222; the number of ineligible Members, to 1404. Petitioner further argued that the Association’s failure to dully appoint him, and the other top four (4) candidates receiving the most election votes, on the Board of Directors constituted a violation of Bylaws Article III Section 3.6.

In closing, Respondent argued that the Association’s issuance of 1,404 ballots for the November 04, 2020, Board of Directors election did not have any impact on the minimum number of voters required to establish a quorum, because the number was determined by the Association’s Bylaws to be 10% of homeowners; which was 163. Respondent further argued that no one, including Petitioner, was elected as a result of the vote because quorum had not been met.

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 matter was properly brought before OAH pursuant to ARIZ. REV. STAT. §§ 41-1092 et seq.

A homeowner 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 also 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.”

The issues in this matter is whether the Association violated Article III Section 3.6 of its Bylaws by determining that quorum was not met a meeting to elect board members on November 04, 2020. The Tribunal concludes that the Board acted within the scope of its statutory authority.

Bylaws must be construed to avoid an absurdity. The voices of few cannot speak for all, unless all have bestowed those few with the power and authority to speak on their behalf. In the case at bar, the governing documents for the Association are clear: one-tenth (e.g. 10%) of Members entitled to vote must be present in order for a quorum to be established. The record clearly reflects that 163 homeowners who were eligible to vote needed to cast their ballots in the November 04, 2020, Board of Directors election in order for quorum to be met. The record further reflects that only 147 votes were cast, which does not constitute a quorum.

Petitioner’s argument that because only 1,404 Members were eligible to vote, that quorum was established at 140 voting Members is erroneous. Moreover, Petitioner provided no statute, regulation, governing document, or other binding case law to support his contention. Here, the clear authority lies within the plain text of Article III Section 3.6. No other evidence in the record circumvents its jurisdiction.

Therefore, the Administrative Law Judge concludes that because the record does not establish violation(s) of Article III Section 3.6 by a preponderance of the evidence, it must be concluded that Petitioner failed to sustain his burden of proof in this matter. Therefore, his petition must be denied.

ORDER

Based on the foregoing,

IT IS ORDERED that Petitioner’s petition, and requested relief, 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, June 24, 2021.

Office of Administrative Hearings

/s/ Jenna Clark

Administrative Law Judge

Transmitted electronically to:

Judy Lowe, Commissioner

Arizona Department of Real Estate

[email redacted]

Daniel Coe, Petitioner

[email redacted]

Lydia A. Peirce Linsmeier, Esq.

Carpenter, Hazelwood, Delgado & Bolen LLP, Counsel for Respondent

[email redacted]

[email redacted]