ALJDEC decisions subject to certification as final

22F-H2222049-REL · Department of Real Estate - H/C · 2022-08-01

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

In the Matter of:

John Zumph

Petitioner

Sanalina Homeowners Association

Respondent

No. 22F-H2222049-REL

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: July 19, 2022.

APPEARANCES: Petitioner John Zumph appeared on his own behalf. Respondent Sanalina Homeowners Association was represented by Nick Eicher, Esq.

ADMINISTRATIVE LAW JUDGE: Adam D. Stone

_____________________________________________________________________

FINDINGS OF FACT

1. The Arizona Department of Real Estate (“Department”) is authorized by statute to receive and to decide Petitions for Hearings from members of homeowners’ associations and from homeowners’ associations in Arizona.

2. Respondent Sanalina Homeowners Association (“Sanalina”) is a homeowners’ association whose members own single-family houses on lots in Surprise, Arizona.

3. Petitioner John Zumph owns a house in and is a member of Sanalina.

4. On or about April 28, 2022, Mr. Zumph filed a petition with the Department that alleged that Sanalina had violated Sanalina’s Bylaws Article VII Section 1(d) by removing him from the Board of Directors (“Board”).

On or about May 19, 2022, Sanalina filed a written answer to the petition, denying that it had violated the Bylaws.

6. A hearing was held on July 19, 2022, at the Office of Administrative Hearings, an independent state agency.

At hearing Mr. Zumph testified that after serving seven years on the Board, he was removed from his position on March 10, 2022.

Mr. Zumph testified that he became frustrated because two members of the six member Board were from one household. To that end, he sent an e-mail in early July before the regularly scheduled bi-monthly meeting, which stated the following:

As only 3 board members attended the emergency executive meeting, we are upset and in disbelief of the other board members whooping not to attend. The inaction of the current president is unethical and need to be removed. As stated in the previous meeting, Joe, Pete, and I, John will not be attending any further board meeting this year. We will attend the annual board meeting in February or March.

We are willing to meet if the following conditions are met.

One of the residents from the same household needs to resign.

The current president needs to relinquish his post.

If these concessions are met we will consider returning to board meetings. If they are not met we will continue to remain absent from all future meetings.

(All errors contained in original).

Mr. Zumph testified that he missed the July meeting, the September meeting because he was recovering from back surgery, and the November meeting.

Mr. Zumph testified that he was wrongfully removed from the Board, as he did not miss three consecutive meetings. Mr. Zumph argued that because there was no quorum at those three meetings, there was no meeting to miss. Mr. Zumph testified that he was not contesting that a quorum existed during the meeting in which he was removed.

Respondent presented the testimony of Lisa Terror and offered seven exhibits into evidence.

Ms. Terror was the Secretary of the Board. She testified that meetings were held in July, September, and November, but no business or votes could be conducted because there was no quorum. Ms. Terror testified that homeowners were present at the meetings, and were given community updates by the Community Manager, thus she believed that meetings properly occurred.

Ms. Terror also testified that because of Mr. Zumph’s failure to appear as well as the other two Board members, many homeowner’s issues were delayed such as architectural appeals and other disputes. Further, Ms. Terror testified that because of the delays caused by the absences, the cost to paint the walls increased to $9,000.00 because no vote could timely occur and the price had gone up since the initial proposal.

CONCLUSIONS OF LAW

1. A.R.S. § 32-2199(B) permits an owner or a planned community organization to file a petition with the Department for a hearing concerning violations of planned community documents under the authority Title 33, Chapter 16. Such petitions will be heard before the Office of Administrative Hearings, an independent state agency.

2. Petitioner bears the burden of proof to establish that Respondent violated Bylaws Section VII Section 1(d) by a preponderance of the evidence. Respondent bears the burden to establish affirmative defenses by the same evidentiary standard.

3. “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.”

4. Article VII in the Sanalina bylaws established the powers and duties of the Board. Section 1(d) states in pertinent part,

The Board of Directors shall have the power to:...(d) declare the office of a member of the Board of Directors to be vacant in the event such member shall be absent from three (3) consecutive regular meetings of the Board of Directors...

5. Article VI was entitled, “Meetings of Directors”, and states in pertinent part:

Section 1. Regular Meetings. Regular meetings of the Board of Directors may be held without notice, at such place and hour as may be fixed from time to time by the Board...

. . .

Section 3. Quorum. A majority of the number of Directors shall constitute a quorum for the transaction of business. Every act or decision done or made by a majority of the Directors preset at a duly held meeting at which a quorum is present shall be regarded as the act of the Board.

Mr. Zumph does not challenge that he was removed during a meeting at which a quorum existed. He does challenge however, that because there was no quorum at the July, September, and November meetings, the meetings did not exist, and therefore he did not miss three consecutive meetings. The tribunal believes this argument is unpersuasive. The tribunal finds that a meeting can exist without a quorum, but no business (votes) can occur. That is what happened here. Board members were present at a regularly scheduled meeting along with homeowners and the Community Manager. Issues were discussed and updates were given, but no business could be transacted.

Further, Mr. Zumph intentionally missed the meetings to try to get the make-up of the Board to change. Because of this, numerous issues could not be voted on by the Board thus harming the rest of the homeowners. This was probably why Article VII Section (1)(d) was enacted. It is not fair or just to homeowners to wait over eight months to have their concerns/appeals voted on. For Mr. Zumph and his cronies to “hijack” the process and stop association business from being transacted was unacceptable and not in good faith nor in the spirit of the bylaws.

8. Therefore, Petitioner did not establish that Respondent violated the Bylaws Article VII(1)(d).

order

IT IS ORDERED that Petitioners’ petition is denied.

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.

-54864001

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-137160-45720000Done this day, August 1, 2022.

/s/ Adam D. Stone

Administrative Law Judge

Transmitted electronically to:

Louis Dettorre, Commissioner

Arizona Department of Real Estate

Nick Eicher

1400 E. Southern Ave., Suite 400

Tempe, Arizona 85282

[email redacted]

John Zumph

15164 W. Ventura St.

Surprise, AZ 85379

[email redacted]

By Miranda Alvarez

Legal Secretary -54864001

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-137160-45720000