HOA - ALJDEC decisions

23F-H058-REL · Department of Real Estate - H/C · 2023-10-04

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

In the Matter of

John R. Ashley

PETITIONER,

Rancho Reyes II Community Association, Inc.

No. 23F-H058-REL

ADMINISTRATIVE LAW JUDGE DECISION

RESPONDENT.

HEARING: September 14, 2023

APPEARANCES: Petitioner John R. Ashley represented himself. James Brewer, Esq. represented Respondent Rancho Reyes II Community Association.

ADMINISTRATIVE LAW JUDGE: Velva Moses-Thompson

_____________________________________________________________________

FINDINGS OF FACT

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. Homeowners’ associations and their members are governed by the Chapter 16 of Title 33, the Planned Communities Act, A.R.S. §§ 33-1801 to 33-1818.

Respondent Rancho Reyes II Community Association is a homeowners’ association whose members own single-family houses or lots in the Rancho Reyes II development in Tucson, Arizona.

Petitioner is a member of Respondent.

In 2022, Respondent had two board members: Sherry Ortega and Maria Ruelas.

In January of 2023, five board members were elected.

Respondent’s community manager suspected that the election was not a fair process and that certain individuals used fraudulent tactics to influence the election. After consulting with Respondent’s attorney, the community manager along with

Ms. Ortega decided to hold a new election in March of 2023.

In March of 2023, five board members were elected to the Board.

On or about May 2, 2023, Petitioner John R. Ashley filed a single-issue Petition with the Department. Through the Petition, Petitioner alleged that Respondent violated Article IV, Section 1 of Respondent’s Bylaws. The Petition provided, in relevant part, as follows “The violation of Article IV, Section 1: Number, was conducted by 2 Board Directors of RRII HOA (on or about 1/19/2023) dismissing and ordering a redo of the 1/9/2023 Annual Membership Meeting for 3/7/2023; instead of the required 3 Directors to properly handle the Association’s affairs.”

The matter was referred to the Office of Administrative Hearings for an evidentiary hearing.

On June 15, 2023, the Department issued a Notice of Hearing setting the Petition for hearing on July 27, 2023. The Notice of Hearing provided that the dispute was as follows:

Petitioner alleges Respondent violated Article IV Section 1 of the Community Bylaws by “dismissing and ordering a redo of the 1/9/2023 Annual Membership Meeting for 3/7/2023.”

A hearing was held on September 14, 2023.

At hearing, Petitioner testified on behalf of himself. Respondent presented the testimony of Kimberly Schone, the chief operating officer of Respondent’s community manager, and Sherry Ortega, Vice President of the Board.

Section 4.1 of Respondent’s Bylaws provides:

The affairs of the Association will be managed by not less than three (3) no more than nine (9) directors.

Petitioner contended that Respondent violated Section 4.1 of the Bylaws because the March election was managed by less than three board members. Petitioner also alleged that there were no duly elected Board members in 2022. Petitioner alleged that Sherry Ortega and Maria Ruelas were not duly elected. Petitioner also stated that three of Respondents members wanted to serve on the Board but were not given the opportunity. Petitioner did not dispute that there are currently at least three duly elected members of the Board.

Ms. Schone stated that Petitioner was not allowed to serve on the Board for several years pursuant to a court order.

Ms. Ortega has been the Vice President of the Board since March of 2023. Prior to March of 2023, Ms. Ortega served as the President of the Board since December of 2021. Prior to December of 2021, Ms. Ortega served as the Secretary for the Board. Ms. Ortega explained that there were only two people on the Board from 2020 to March of 2023 because Respondent’s homeowners were not interested in serving on the Board by. Ms. Ortega explained that she would ask her neighbors to serve the Board. Ms. Ortega explained that the Board would ask if anyone was willing to serve on the Board at the board meetings. See Ms. Ortega’s testimony on the Hearing Audio Record and Respondent’s Exhibit 2. However, the homeowners did not express interest in serving on the Board. See id.

CONCLUSIONS OF LAW

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.

Petitioners bear the burden of proof to establish that Respondent violated Article IV, Section 1 of its Bylaws, by a preponderance of the evidence. Respondent bears the burden to establish affirmative defenses by the same evidentiary standard.

“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.”

In Arizona, if a restrictive covenant is unambiguous, it is enforced to give effect to the intent of the parties. “Restrictive covenants must be construed as a whole and interpreted in view of their underlying purposes, giving effect to all provisions contained therein.”

“It is well settled that when, due to circumstances beyond the control of the parties the performance of a contract is rendered impossible, the party failing to perform is exonerated.” See Garner v. Ellingson, 18 Ariz. 181, 182 (App. 1972) citing Whelan v. Griffith Consumers Company, 170 A.2d 229, 230 (D.C. App., 1961).

6. It is undisputed Article IV, Section 1 of the Bylaws requires that Respondent’s affairs be managed by no less than 3 board members. However, the preponderance of the evidence shows that Respondent actively sought the participation of a third board member. However, there was no interest by any of the members. Despite the Board’s efforts, it was unable to comply with Article IV, Section 1 of the Bylaws. Petitioner failed to provide sufficient evidence to rebut Respondent’s claim that it actively sought a third board member. Moreover, it is undisputed that Respondent currently has at least three board members and there is no longer a dispute regarding the Board’s compliance with Article IV, Section 1 of the Bylaws.

7. Accordingly, because the preponderance of the evidence has shown that Respondent was unable to comply with Article IV, Section 1 of the Bylaws and compliance with Article IV, Section 1 of the Bylaws is no longer in dispute, the Petition must be dismissed.

RECOMMENDed order

IT IS ORDERED that Petitioner John R. Ashley’s petition against Respondent Rancho Reyes II Community Association, Inc. is dismissed.

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, October 4, 2023.

/s/ Velva Moses-Thompson

Administrative Law Judge

Transmitted by either mail, e-mail, or facsimile October 4, 2023 to:

Susan Nicolson

Commissioner

Arizona Department of Real Estate

100 N. 15th Avenue, Suite 201

Phoenix, Arizona 85007

Attn:

[email redacted]

John R. Ashley

[email redacted]

Lynn M. Allen, Esq.

Leah M. McKeever, Esq.

James Brewer, Esq.

Tyson & Mendes, LLP

[email redacted]

By: OAH Staff