HOA - ALJDEC decisions

23F-H036-REL · Department of Real Estate - H/C · 2023-07-10

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

In the Matter of

R.L. Whitmer

Petitioner

Hilton Casitas Council of Homeowners

Respondent

No. 23F-H036-REL

ADMINISTRATIVE LAW JUDGE

DECISION

Pending before the Office of Administrative Hearings is Respondent’s Motion to Dismiss (Motion to Dismiss), Petitioner’s Response to Respondent’s Motion to Dismiss (Response to Motion to Dismiss), and Respondent’s Reply in Support of Motion to Dismiss and Motion to Strike Certain Allegations and Arguments of Petitioner’s Response Thereto (Reply in Support of Motion to Dismiss).

Also pending before the Office of Administrative Hearings is Petitioner’s Motion for Summary Judgment and Request for Order to Comply with Section 17.1 of the Declaration of Horizontal Property Regime for Hilton Casitas (Motion for Summary Judgment), Respondent’s Response to Petitioner’s Motion for Summary Judgment and Request for Order to Comply with Section 17.1 of the Declaration of Horizontal Property Regime for Hilton Casitas (Response to Motion for Summary Judgment), and Petitioner’s Reply in Support of to Petitioner’s Motion for Summary Judgment (Reply in Support of Motion for Summary Judgment).

Having reviewed the filings, the Administrative Law Judge makes the following Findings of Fact, Conclusions of Law, and Order.

FINDINGS OF FACT

The Parties and Governing Documents

Respondent, an association of 29 condominium owners in Scottsdale, Arizona, is an Arizona non-profit corporation governed under the Condominium Act and the Nonprofit Corporation Act.

Respondent and its members are governed by Respondent’s Declaration for Horizontal Property Regime (Declaration) recorded in 1972, the Bylaws for Hilton Casitas Council of Co-Owners (Bylaws), and the Articles of Incorporation.

Section 1.4 of the Declaration provides as follows:

“Council” shall mean the Council of Co-owners as defined in the Horizontal Property Regime Act, and consists of all of the Owners of the Casitas.

Emphasis added.

Section 1.8 of the Declaration provides as follows: “‘Owner’ shall mean the record owner of a Casita.”

Section 6.6 of the Declaration provides, in pertinent part, as follows:

Council’s Rights and Powers as Set Forth in Bylaws: In addition to the rights and powers of the Council set forth in this Declaration, the Council shall have such rights and powers as are set forth in its Bylaws and any Articles of Incorporation which may be adopted.

Section 17.1 of the Declaration provides, in pertinent part, as follows:

Employment: The Council may employ a responsible individual, corporation, partnership or other entity as Manager to manage and control the General Common Elements, with all the administrative functions and such other powers and duties and for such fees as the Council may establish, subject to prior approval of any such management contract by a majority of the Owners. . . .

Emphasis added.

With respect to voting, the Declaration provides as follows:

Section 6.4. Voting: Each Owner of a Casita shall have one vote. In the event any Casita is owned by two or more persons, whether by joint tenancy, tenancy in common, community property, or otherwise, the membership as to such Casita shall be joint and a single membership for such Casita shall be in the names of all, and they shall designate to the Council, in writing, one of the number who shall hold the membership and have the power to vote said membership, and, in the absence of such designation and until such designation is made, the Board at any time, or from time to time, shall make such designation.

Section 6.5. Suspension of Voting Rights: In the event any Owner shall be in arrears in the payment of any amount due under any of the provisions in this Declaration or any amount legally imposed by the Council upon the Owners for a period of fifteen (15) days, or shall be in default in the performance of any of the terms of this Declaration for a period of fifteen (15) days, said Owner’s right to vote as a member of the Council shall be suspended and shall remain suspended until all payments are brought current and all defaults cured.

Emphasis added.

Article III, Section 1 of the Bylaws provides that Membership is limited to Owners as the term is defined in the Declaration.

Article III, Section 6 of the Bylaws provides, in pertinent part, as follows:

Quorum. The presence at any meeting in person or by proxy of a majority of members shall constitute a quorum, and the acts of a majority of the members at any meeting at which a quorum is present shall be the acts of the Council except as otherwise provided herein.

Emphasis added.

Article III, Section 7 of the Bylaws provides, in pertinent part, as follows:

Voting. . . . In the event any Casita is owned by two or more persons, by a corporation, partnership or other entity having more than one person as a member, whether by joint tenancy, tenancy in common, community property, or otherwise, the membership as to such Casita shall be joint and a single membership for such Casita shall be issued in the names of all, and they shall designate to this Council, in writing, at the time of issuance, one of their number who shall have the power to vote said membership, and, in the absence of such designation and until such designation is made, the Board of Directors of the Council shall make such designation.

Article IV, Section 2 of the Bylaws provides, in pertinent part, as follows:

Powers. The Board of Directors shall have all powers necessary for the administration of the affairs of the Council and may do all such acts and things therefor as are not by law, the Declaration or these Bylaws directed to be exercised or done only by the members.

Article XI, Section 1 of the Bylaws provides that the Bylaws are set forth to comply with the provisions of the Declaration and that, “[i]n case any of the provisions of these Bylaws conflict with the provisions of said Declaration, the provisions of said Declaration shall control.”

Background and Procedure

During an October 9, 2020 board meeting, Respondent’s board voted to enter into a contract with Arizona Community Management Services, LLC (AZCMS). The three board members voted unanimously to approve the contract with a start date of December 1, 2020.

AZCMS continued to serve as the management company for Respondent through the filing of the instant petition.

On or about December 27, 2022, Petitioner filed the instant petition asserting that Respondent acted in violation of the Declaration when it failed to make any request for approval by a majority of the Owners of the contract with AZCMS.

On or about January 26, 2023, the Owners ratified Respondent’s management contract with AZCMS during an open meeting via absentee ballots.

Party Arguments

Petitioner argued that, pursuant to Section 17.1 of the Declaration, a majority of Owners had to give prior approval of a management contract.

Respondent argued, however, that because the majority of Owners ratified the contract on January 26, 2023, that demonstrated that “the community is content, and always has been content, with the AZCMS management contract and its work.”

CONCLUSIONS OF LAW

Petitioner is entitled to summary judgment when the pleadings shows the absence of any factual issues to be resolved at hearing.

An association’s governing documents constitute a contract between the association and the owners. When interpreting contractual provisions, the Office of Administrative Hearings should not construe or interpret a contract if the intent of the parties is clear and unambiguous from its plain language.

A contract is interpreted with the purpose of determining and enforcing the intent of the parties.

“Intent is interpreted by examining the plain meaning of the words in the context of the contract as a whole” and “in the context of the surrounding circumstances.”

“Language in a contract is ambiguous only when it can reasonably be construed to have more than one meaning.”

The Administrative Law Judge concludes that, the plain language of the Declaration requires prior approval of a management contract by a majority of the Owners.

It is uncontested that a majority of Owners did not provide approval of the AZCMS contract prior to its effective date of December 1, 2020.

The January 26, 2023 approval of the management contract does not constitute prior approval of a contract that was entered into more than two years before the vote occurred.

Because a majority of the Owners did not provide prior approval of the AZCMS contract, Respondent failed to comply with Section 17.1 of the Declaration.

ORDER

IT IS ORDERED granting Petitioner’s Motion for Summary Judgment and Petitioner’s petition is affirmed.

IT IS FURTHER ORDERED denying Respondent’s Motion to Dismiss.

IT IS FURTHER ORDERED that Respondent reimburse Petitioner his $500.00 filing fee.

IT IS FURTHER ORDERED denying Petitioner’s request for a civil penalty.

IT IS FURTHER ORDERED Respondent is directed to comply with the requirements of Section 17.1 of the Declaration going forward.

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

001

-137160-45720000Done this day, July 10, 2023.

/s/ Tammy L. Eigenheer

Administrative Law Judge

Transmitted by either mail, e-mail, or facsimile July 10, 2023 to:

Susan Nicolson, Commissioner

Arizona Department of Real Estate

100 N. 15th Avenue, Suite 201

Phoenix, Arizona 85007

Attn:

[email redacted]

Edith Rudder

Carpenter, Hazlewood, Delgado & Bolen, PLC

[email redacted]

R.L. Whitmer

[email redacted]

By: OAH Staff