HOA - ALJDEC decisions

23F-H063-REL · Department of Real Estate - H/C · 2023-09-20

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

In the Matter of

John W. Gray

PETITIONER.

Mesa Coronado III Condominium Association

No. 23F-H063-REL

ADMINISTRATIVE LAW JUDGE DECISION

RESPONDENT.

HEARING: August 31, 2023

APPEARANCES: John W. Gray appeared on behalf of himself. Chad M. Gallacher, Esq. appeared on behalf of the Respondent Mesa Coronado III Condominium 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 condominium unit owners’ associations and from unit owners’ associations in Arizona.

Respondent Mesa Coronado III Condominium Association (Respondent or Association) is a condominium unit owners’ association whose members own the condominiums in Mesa Coronado III in Gilbert, Arizona.

Petitioner John W. Gray is a member of Respondent.

On or about May 15, 2023, Mr. Gray filed a three-issue petition with the Department alleging that Respondent violated Arizona Revised Statutes (A.R.S.) §§ 33-1248(B), 33-1243(B), and 33-1258(B). Petitioner also alleged that Respondent violated sections 1.6, 2.1, and 3.2 of its Bylaws. The petition provided, in relevant part, as follows:

No meeting of the HOA at Mesa Coronado III was held in 2020, 2021, or 2022. Violation of ARS 33-1248 paragraph B, and bylaws Article 2.1.

The people claiming to be the Board of MC III are not legitimate, not duly elected, and have appointed themselves to successive terms of office. Violation of ARS 33-1243 paragraph B, and Bylaws Article 3.2.

I have received no response to multiple requests for information, violation of ARS 33-1258.

Respondent filed a response to the petition.

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

On July 14, 2023, the Department issued a Notice of Hearing (NOH) setting the Mr. Gray’s Petition for hearing on August 31, 2023. The NOH provided that the issues set for determination were:

ARS § 33-1248(B) and Bylaw Article 2.1 by stating, No meeting was held in 2020, 2021, or 2022 (Issue 1).

ARS § 33-1258 and Bylaw Article 1.6 by stating, Petitioner has received no response to multiple requests for information (Issue 2).

ARS § 33-1243(B) and Bylaw Article 3.2 by stating the people claiming to be the Board of [Respondent] are not legitimate, not duly elected, and have appointed themselves to successive terms of office (Issue 3).

A hearing was held on August 31, 2023. At hearing, Petitioner testified on behalf of himself. Respondent presented the testimony of Adriana Lacombe, the Association’s community manager.

Hearing Evidence

In the years of 2020, 2021, and 2022, Respondent’s Board of Directors (Board) did not hold an annual board meeting due to health concerns related to the COVID-19 pandemic. Respondent presented evidence at hearing that in May of 2023, the Director-General of the World Health Organization determined that COVID-19 was “an established and ongoing health issue which no longer constitutes a public health emergency of international concern [ ].”

From 2020 to July 2022, the Board members held successive terms each year because no board meeting was held during that time period.

On September 28, 2021, Mr. Gray requested a copy of the following from the Board: “Respondent’s 2019, 2020, and 2021 budgets, Notice of Annual meeting and Board of Directors election 2020, results of directors election 2020, Notice of Annual Meeting and Board of Directors election 2021.”

On September 28, 2021, the Board provided copies of the 2019 and 2020 budgets. Ms. Lacombe explained to Mr. Gray that the 2021 budget was not yet approved. Ms. Lacombe further explained that no meetings were held in 2020 and that no meeting was held in 2021.

On October 13, 2022, Mr. Gray requested from the Board the names and unit numbers of the current board of directors and the dates the board of directors were elected or appointed (hereinafter October 13, 2022 request) . Mr. Gray did not request to examine Board records nor copies of records through the October 13, 2022 request.

On February of 2023, Mr. Gray’s attorney sent a letter to Respondent regarding Mr. Gray’s concerns and complaints related to the Association. Mr. Gray’s attorney also notified Respondent that Mr. Gray was unaware of the current members of the Board and how to direct a complaint, grievance, or inquiry. Mr. Gray’s attorney requested that the Board respond in within 30 days of receipt of the letter. However, the letter did not include a request to examine records or to make copies of records.

On March 20, 2023, Mr. Gray requested the following records:

Copies of all invoices from Metro fire Equipment or any other vendor for all work performed at MC III related to the fire suppression/sprinkler systems, including inspection reports, any and all repairs for the time period beginning Jan 1 2014 and ending March 1, 2023.

Copies of invoices for the stucco repair from 2022, at the sprinkler control boxes on all buildings made necessary by the replacement of main control valves.

On March 15, 2023, the Board appointed Cassandra Miller to the Board due to a vacancy.

On April 11, 2023, Mr. Gray requested from the Board copies of the minutes “for all HOA meetings for Mesa Coronado III beginning January 1, 2018 to April 11, 2023”.

On July 18, 2023, Respondent conducted an annual board meeting and new board of directors were elected.

Respondent’s attorney responded to Mr. Gray’s October 13, 2022 request and provided the names of the board members from 2018 to 2023. Mr. Gray alleged at hearing that he was present for the board meeting 2018 and a quorum was not met.

Mr. Gray also state that a person named Andrea West was present, however, she was not reflected on the response from Respondent’s attorney. Mr. Gray also stated that quorum was not present for the 2019 board meeting. Mr. Gray contended that the board members were not properly elected under the law.

20. At hearing, Ms. Lacombe explained that while board meetings were held in 2018 and 2019, an insufficient number of persons attended the hearing and a quorum was not met. Because no quorum was met, the existing board members continued to serve for an additional year.

21. Ms. Lacombe stated that she did not provide the records requested by Mr. Gray related to the fire sprinkler system because it is time consuming and she was unsure whether all of the requested records existed. Ms. Lacombe explained that an annual inspection of the sprinkler system is required by law. After required the annual inspection, she is provide with a list of repairs. The repairs are then scheduled. Some years there were no required corrections. In the past two years there were necessary repairs. Ms. Lacombe explained that she is still working on Mr. Gray’s request for the records related the sprinkler system.

22. At hearing, Respondent’s counsel contended that the Board was required under A.R.S. § 33-1250(C) to allow homeowners to vote in person. Therefore, it was reasonable for the Association to believe that the annual board meetings must be conducted in person.

23. Article 1.6 of the Respondent’s Bylaws provides:

Books and Records. The Condominium Documents and all other books, records, financial statements, and papers of the Association shall be available for inspection by any Member of First Mortgagee during reasonable business hours at the principal office of the Association where copies may be purchased at reasonable cost. The Association may withhold from inspection those books, records and papers designated in A.R.S. § 33-1258.

24. Article 2.1 of the Respondent’s Bylaws provides:

Annual Meeting. The first annual meeting of the Members shall be held within one (1) year of the date on which the Association is incorporated, and an annual meeting of the Members shall be held during each calendar year thereafter. The date, time and place of each annual meeting of the Members shall be determined shall be determined by the Board of Directors.

25. Article 3.2 of the Respondent’s Bylaws provides:

Term of Office. All directors elected by the Unit Owners shall be elected for a term of one (1) year or until their successors are elected and qualified.

CONCLUSIONS OF LAW

1. A.R.S. § 32-2199(1) permits a condominium unit owner to file a petition with the Department for a hearing concerning the condominium association’s alleged violations of the Condominium Act set forth in Title 33, Chapter 9. This matter lies within the Department’s jurisdiction.

2. Petitioner bears the burden of proof to establish that Respondent violated the Association’s Bylaws and applicable statutes 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. 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.”

5. Directors of a non-profit organization may be elected for successive terms, unless otherwise provided for in the articles of incorporation or bylaws.

See A.R.S. § 10-3805(B).

6. The preponderance of the evidence shows that there is no current dispute regarding the Board’s failure to hold annual board meetings. The weight of the evidence shows that the Board failed to hold in person board meetings from 2020 to 2022, due to the pandemic. The Board was required by law to allow members to vote in person. Although the Board could have conducted the meetings virtually, the evidence shows that the Board held an annual board meeting in 2023. Because there is no current dispute regarding the failure to hold an annual board meeting, the issue is now moot.

7. The preponderance of the evidence shows that Respondent failed to provide copies of records requested by Mr. Gray on March 20, 2023 and April 11, 2023. The weight of the evidence shows that Mr. Gray requested copies of the minutes of the Association meetings from 2018 through April of 2023. Although there were no board meetings from 2020-2022, Respondent provide no evidence to justify its failure to provide copies of the minutes of Association meetings from 2018 to 2019.

8. Mr. Gray provided insufficient evidence to establish that Board members were not legitimate and or duly elected. Mr. Gray failed to establish by a preponderance of the evidence that Respondent violated A.R.S. § 1243(B) and Bylaw Article 3.2.

order

IT IS ORDERED that Petitioner be deemed the prevailing party in this matter regarding Petition Issue 2.

IT IS FURTHER ORDERED that Respondent be deemed the prevailing party in this matter regarding Petition Issues 1 and 3.

IT IS FURTHER ORDERED that Respondent pay Petitioner his filing fee of $500.00, to be paid directly to Petitioner within thirty (30) days of this Order.

IT IS FURTHER ORDERED Respondent is directed to comply with the

requirements of A.R.S. § 33-1258 and Bylaw Article 1.6 going forward.

No Civil Penalty is found to be appropriate in this matter.

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, September 20, 2023.

/s/ Velva Moses-Thompson

Administrative Law Judge

Transmitted by either mail, e-mail, or facsimile September 20, 2023 to:

Susan Nicolson,

Commissioner

Arizona Department of Real Estate

[email redacted]

John W. Gray

1406 W Emerald Ave. #122

Mesa, AZ 85202

[email redacted]

Chad M. Gallacher, Esq.

[email redacted]

Jim Reid

70 S Val Vista Drive A-3 #516

Gilbert AZ 85296

[email redacted]

By: OAH Staff