ALJDEC decisions subject to certification as

21F-H2121046-REL · Department of Real Estate - H/C · 2021-09-20

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Arthur Fisenko & Viktoriya Tkach-Fisenko,

Petitioners,

vs.

Bellvue Homeowners Association,

Respondent.

No. 21F-H2121046-REL

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: August 30, 2021 at 9:00 AM.

APPEARANCES: Laurence Stevens, Esq. appeared on behalf of Arthur Fisenko and Viktoriya Tkach-Fisenko (“Petitioners”). Jamie Palfai, Esq. appeared on behalf of Bellvue Homeowners Association (“Respondent”) with Samuel Truett as a witness.

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 homeowners’ associations in the State of Arizona.

On or about April 23, 2021, the Department received a two-issue petition from Petitioner which alleged that the Association was in violation of Arizona Revised Statutes (“Ariz. Rev. Stat.”) § 33-1817(B)(3) and Article VII, Section 2 of the Association’s its Covenants, Conditions, and Restrictions (“CC&Rs”). Specifically, Petitioners alleged that the Association’s Architectural Committee arbitrarily and capriciously rejected Petitioner’s landscaping modification request(s) to (a) move and extend a block wall, (b) install pavers, and (c) install artificial grass.

On April 23, 2021, Petitioner tendered a $500.00 payment for the petition fee in this matter to the Department.

On April 26, 2021, the Department provided Respondent with notice of Petitioner’s petition, and advised that a response was due no later than May 21, 2021.

On May 19, 2021, the Department received Respondent’s Answer whereby it denied all of the complaint items in the underlying petition. On May 28, 2021, the Department received a Supplemental Answer from Respondent which provided further clarifications and context for its denials.

On May 24, 2021, the Department referred this matter to the Office of Administrative Hearings (“OAH”), an independent state agency, for an evidentiary hearing on July 21, 2021. Per the Notice of Hearing the issue to be determined is as follows:

Whether the Association violated Ariz. Rev. Stat.” § 33-1817(B)(3) and/or CC&Rs Article VII, Section 2.

On or about July 30, 2021, Petitioners filed notice to amend their issues as follows:

“[Respondent] will be litigating the issue of Respondent’s denial of their Architectural Request for approval of their plan to move their garage-side yard wall eight feet (8’) forward on their property. The new wall would be made of the same materials, and have the same appearance, as the existing wall, except that the existing single-wide gate will be replaced by the double-wide gate previously approved by Respondent. The issue regarding Respondent’s denial of Petitioner’s Architectural Request for approval of their plan to install pavers and artificial grass in their front yard became moot when Respondent reversed its denial on July 15, 2021.”

The Parties and Governing Documents

Respondent is a homeowners’ association whose members own properties in a residential real estate development located in Phoenix, Arizona 85023. Membership for the Association is compromised of the Bellvue subdivision.

Petitioner is a Bellvue subdivision property owner and a Member of the Association.

The Association is governed by its 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 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 Ariz. Rev. Stat.

CC&Rs Article VII, Section 2 – Review by Committee (Non-Developer Improvements), states, in pertinent parts, that “The Committee shall have the right to refuse to approve any Alteration which is not suitable or desirable in their opinion for aesthetic or other reasons, and they shall have the right to take into consideration ... (iv) the harmony thereof with the surroundings (including color and quality of materials and workmanship).

Hearing Evidence

Arthur Fisenko testified on behalf of Petitioners and submitted 9 exhibits into the record. Respondent called no witnesses but did submit 1 exhibit into the record. The Department’s electronic file, including the Notice of Hearing, were also admitted into the record. The substantive facts are as follows:

On February 08, 2021, Petitioners submitted an Architectural Request to the Association’s Architectural Review Committee (“ARC”). The request noted, in pertinent parts, that the project was the installation of “a wall with 8’ gage on the north side of the house.” Dimensions were listed as “11’x37’ front south & 22’x25’ front nort.” [sic] The materials to be used was identified as “concrete blocks,” with the color to be used identified as “wall (match existing wall).” Attached to the form was as photograph of Petitioner’s home with handwritten drawings and notes.

On February 09, 2021, the ARC issued a letter to Petitioners, acknowledging receipt of their request(s).

On February 17, 2021, the ARC issued a letter to Petitioners advising of its disapproval of their request(s). In an attached memorandum dated February 15, 2021, the ARC provided the following reasons for the basis of its denial: (i) the length of the wall was not defined in the request and the ARC had concerns about the impact to Petitioners’ neighbor to the north, and (ii) the 8ft gate would be approved on the west end of the existing wall, but not in the location identified in the request.

On March 18, 2021, Petitioners emailed the head of the ARC to plead their case and ask for a meeting with all ARC members at their property to discuss their request. On March 23, 2021, Petitioners received a response that instructed them to submit a new Architectural Request Form that included (i) a complete and signed form, (ii) a plot plan, (iii) elevation plans, and (iv) specifications.

Petitioners did not provide the ARC with any additional information or specifications regarding their request. Instead, on April 01, 2021, counsel for Petitioners issued a demand for satisfaction letter to the Association.

On April 22, 2021, counsel for the Association issued a letter to Petitioners which asked for Petitioners submit their Architectural Request Form “in compliance with the Declaration and/or the Rules and Regulations for review and/or consideration.” The letter closed by noting that failure for Petitioners to comply would result in disapproval of their request(s).

Because no supplemental information was received by or on behalf of Petitioners, their Architectural Request was denied.

Petitioners filed their petition with the Department as a result.

In closing, Respondent argued that Petitioners’ Architectural Request Form was deficient as incomplete because pertinent and relevant information was missing, which meant that the ARC was unable to approve it. Respondent opined that Petitioners could have avoided the entire administrative hearing process had they provided the supplemental information as directed so that the ARC could approve their request.

In closing, Petitioners argued that because Respondent approved the paver/artificial grass portion of its request without supplemental information, the Association could have and should have approved the wall portion of its request as well. Petitioners argued that their Architectural Request Form had been filled out without the assistance of counsel, to the best of their abilities, and any omissions or ambiguities were excusable errors.

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, Petitioners bear the burden of proving by a preponderance of the evidence that Respondent violated Ariz. Rev. Stat. § 33-1817(B)(3) and/or Article VII, Section 2 of the CC&Rs.

“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. § 33-1817(B)(3) states, specifically regarding Declaration amendment; design, architectural committees, that “Notwithstanding any provision in the community documents, approval of a construction project's architectural designs, plans and amendments shall not unreasonably be withheld.”

The issues in this matter is whether the Association improperly denied Petitioners’ landscaping request. Specifically, whether the Association was arbitrary and capricious in its denial of Petitioners’ request to move their garage-side yard wall eight (8) feet forward on their property, using the same materials as the existing wall so that it bears the same appearance as exiting wall, except that the existing single-wide gate will be a double-wide gate as previously approved by Respondent.

Here, the material facts are clear.

Regarding the wall portion of the Architectural Request at issue, Petitioners have not established by a preponderance of the evidence that the ARC acted outside of its authority or jurisdiction by refusing to grant Petitioners’ request(s) in violation of Article VII, Section 2, of the CC&Rs. Additionally, there is nothing in the record to support a determination that Respondent violated Ariz. Rev. Stat. § 33-1817(B)(3) by “unreasonably” refusing to grant Petitioners’ request(s). The credible and relevant evidence of record establishes that Petitioners’ did not provide sufficient and/or requisite information necessary for the ARC to make a reasonably objective determination. The record also reflects that Petitioners did not attempt to cure their application by providing the ARC with the supplemental information it requested. Not only were Petitioners permitted to provide the ARC with additional information to support their request(s), they were also specifically told what information to provide. Given the totality of the circumstances, Respondent’s refusal to grant Petitioners’ Architectural Request was neither arbitrary nor capricious.

Because the record does not establish violation(s) of Ariz. Rev. Stat. § 33-1817(B)(3) or CC&Rs Article VII, Section 2, by a preponderance of the evidence, the undersigned Administrative Law Judge must conclude that Petitioners failed to sustain their burden of proof in this matter. Therefore, their petition must be denied.

ORDER

Based on the foregoing,

IT IS ORDERED that Petitioners’ 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, September 20, 2021.

Office of Administrative Hearings

/s/ Jenna Clark

Administrative Law Judge

Transmitted electronically to:

Judy Lowe, Commissioner

Arizona Department of Real Estate

[email redacted]

Bellvue Homeowners Association, Respondent

Jamie B. Palfai, Esq.

O’Hagan Meyer LLC, Counsel for Respondent

[email redacted]

Arthur Fisenko & Viktoriya Tkach-Fisenko, Petitioners

c/o Laurence B. Stevens, Esq.

Stevens & Van Cott, PLLC, Counsel for Petitioners

[email redacted]