Case Summary
| Case ID | 18F-H1818050-REL |
|---|---|
| Agency | ADRE |
| Tribunal | OAH |
| Decision Date | 2018-10-11 |
| Administrative Law Judge | Tammy L. Eigenheer |
| Outcome | loss |
| Filing Fees Refunded | $500.00 |
| Civil Penalties | $0.00 |
Parties & Counsel
| Petitioner | Brent J. Mathews | Counsel | — |
|---|---|---|---|
| Respondent | American Ranch Community Association | Counsel | Lynn Krupnik and Timothy Krupnik |
Alleged Violations
American Ranch Bylaws, Article 3.11
Outcome Summary
The Administrative Law Judge dismissed the Petition because the Petitioner failed to prove the Respondent Board violated the Bylaws. The Board was found to have the necessary authority under Bylaws Section 3.11 to enter into the Well Agreement 2 as a variance, and this action did not constitute an improper amendment of the CC&Rs.
Why this result: The Board was authorized to grant a variance to the CC&Rs regarding the well on Lot 2, a power delegated to the Association, meaning the Board did not exceed its authority under the Bylaws.
Key Issues & Findings
Alleged violation of the American Ranch Bylaws, Article 3.11, when the Board entered into the 'Well Agreement' (Well Agreement 2).
Petitioner asserted that the Board violated the Bylaws by entering into Well Agreement 2, claiming the Board lacked the authority to grant exceptions or variances to the CC&Rs regarding the use of a private water well on Lot 2. The Board agreed the well existed in violation of CC&Rs Section 3.26, but argued Well Agreement 2 constituted a variance, not an amendment.
Orders: The Petition was dismissed.
Filing fee: $500.00, Fee refunded: No
Disposition: petitioner_loss
- A.R.S. § 41-2198.01
- A.R.S. § 41-1092.07(G)(2)
- A.A.C. R2-19-119(A)
- A.A.C. R2-19-119(B)(1)
- A.A.C. R2-19-119(B)(2)
- A.R.S. § 32-2199.02(B)
- A.R.S. § 32-2199.04
- A.R.S. § 41-1092.09
Analytics Highlights
- A.R.S. § 41-2198.01
- A.R.S. § 41-1092.07(G)(2)
- A.A.C. R2-19-119(A)
- A.A.C. R2-19-119(B)(1)
- A.A.C. R2-19-119(B)(2)
- A.R.S. § 32-2199.02(B)
- A.R.S. § 32-2199.04
- A.R.S. § 41-1092.09
Video Overview
Audio Overview
Decision Documents
18F-H1818050-REL Decision – 664186.pdf
Briefing Document: Mathews v. American Ranch Community Association
Executive Summary
This briefing document outlines the findings and decision in case number 18F-H1818050-REL, a dispute between Petitioner Brent J. Mathews and the American Ranch Community Association (HOA). The Administrative Law Judge dismissed the petition, concluding that Mr. Mathews failed to prove his allegations by a preponderance of the evidence.
The central issue was whether the HOA’s Board of Directors violated Article 3.11 of its Bylaws by entering into a “Well Agreement” with the owners of Lot 2 on August 9, 2016. The Petitioner argued that this agreement constituted an unauthorized amendment to the community’s Covenants, Conditions, and Restrictions (CC&Rs) because the Board does not have the power to grant exceptions.
The judge found this argument “faulty,” determining that the agreement was not an amendment but a variance. The CC&Rs explicitly grant the authority to issue variances to the Architectural Review Committee. Per the Bylaws, the Board is empowered to exercise any authority delegated to the Association that is not specifically reserved for the general membership. Therefore, the judge concluded that the Board acted within its authority when it executed the agreement. The decision was based on the Board’s need to resolve a problematic prior agreement under time-sensitive circumstances related to a property sale.
1. Case Overview
Case Number
18F-H1818050-REL
Petitioner
Brent J. Mathews
Respondent
American Ranch Community Association
Hearing Date
September 21, 2018
Decision Date
October 11, 2018
Presiding Judge
Administrative Law Judge Tammy L. Eigenheer
The dispute originated from a petition filed by Brent J. Mathews on May 16, 2018, with the Arizona Department of Real Estate. The core of the complaint was an alleged Open Meeting Violation concerning an “Action Outside of Meeting” that resulted in a “Well Agreement” between the Association and homeowners Mark and Diane Kaplan.
2. Petitioner’s Core Allegation
After being directed to clarify his petition to a single issue, Mr. Mathews submitted the following statement on August 23, 2018:
“When the Board entered into the ‘Well Agreement’ they may have assumed they had the power to grant exceptions to the CC&R’s. The American Ranch Community Association Bylaws do not empower the Board to grant exceptions to the CC&R’s. Therefore the single complaint is an alleged violation of the American Ranch Bylaws, Article 3.11.”
The Petitioner’s legal argument was that the Board’s action in creating the “Well Agreement 2” was effectively an amendment of the CC&Rs. According to Section 9.3.1 of the CC&Rs, amendments require the written approval or affirmative vote of 75 percent of the total owners. Since this did not occur, the Petitioner concluded the Board lacked the authority to enter into the agreement.
3. Factual Background and Chronology of Events
The case revolves around a water well on Lot 2 of the American Ranch community, which was installed in violation of the governing documents.
A water well is installed on Lot 2. This installation violates Section 3.26 of the CC&Rs, which prohibits wells on all lots except Equestrian Lots and, even then, only with prior approval from the Architectural Review Committee (ARC) for specific purposes.
June 2011
The owners of Lot 2 and the HOA Board enter into the first “Well and Easement Agreement” (Well Agreement 1). This agreement permitted the continued use of the well for irrigation but required the owners to install a water meter and pay the HOA for water usage at the same rate as the local water district.
November 23, 2013
Lot 2 is sold to Steven and Frances Galliano.
July 30, 2016
Mark and Diane Kaplan, who are in escrow to purchase Lot 2, email the Community Manager, Tiffany Taylor. They express concern over Well Agreement 1 and state they cannot proceed with the purchase without clarity on the HOA’s position. They also note that the Gallianos told them they had never been charged for water from the well.
August 2016
Facing a time-sensitive situation due to the pending property sale, the HOA Board decides to enter into a new agreement to invalidate Well Agreement 1. The Board’s decision was based in part on the belief that it lacked the authority to enter into the original agreement, specifically because it had no power to bill residents for water usage—a function of the water district.
August 9, 2016
The HOA Board and the Kaplans execute a new “Well Agreement” (Well Agreement 2). This agreement permits the continued use of the well for irrigation purposes but explicitly states the owners will not be billed for the water used.
4. Administrative Law Judge’s Findings and Legal Reasoning
The Judge’s decision rested on a critical distinction between a CC&R amendment and a variance, and a detailed analysis of the powers granted to the Board by the governing documents.
A. Burden of Proof
The Petitioner, Brent J. Mathews, bore the burden of proof to establish that the HOA committed the alleged violation by a “preponderance of the evidence.” This standard requires proof that a contention is more probably true than not.
B. Variance vs. Amendment
The central point of the Judge’s legal conclusion was the rejection of the Petitioner’s argument.
• Petitioner’s Argument: Well Agreement 2 was an amendment to the CC&Rs.
• Judge’s Finding: The argument is “faulty.” The decision states, “A variance granted to an individual owner from a restriction under the CC&Rs does not constitute an amendment of the CC&Rs.”
The Judge found that the CC&Rs themselves, in Section 3.31, provide a specific mechanism for granting variances. The ARC is authorized to grant variances in “extenuating circumstances” if a restriction creates an “unreasonable hardship or burden” and the variance does not have a “substantial adverse effect” on the community.
C. The Board’s Delegated Authority
The Judge established a clear chain of authority that empowered the Board to act as it did:
1. CC&R Section 3.31: Delegates the power to grant variances to the Architectural Review Committee.
2. Bylaw Section 3.11.8: States the Board shall have the power to “Exercise for the Association all powers, duties and authority vested in or delegated to the Association and not reserved to the membership by other provisions of the Project Documents.”
3. Conclusion: Because the power to grant variances was delegated to the ARC (and thus to the Association) and not reserved for the membership, the Board had the authority to grant the variance embodied in Well Agreement 2.
5. Final Order
Based on the foregoing analysis, the Administrative Law Judge issued the following order:
• Decision: The Petition filed by Brent J. Mathews is dismissed.
• Reasoning: “Petitioner failed to establish by a preponderance of the evidence that the Board of Directors lacked the authority to enter into Well Agreement 2. Thus, Petitioner failed to sustain his burden to establish a violation of Section 3.11 of the Bylaws.”
The order was finalized and transmitted to the parties on October 11, 2018.
Study Guide: Mathews v. American Ranch Community Association (Case No. 18F-H1818050-REL)
This guide provides a comprehensive review of the Administrative Law Judge Decision in the case between Petitioner Brent J. Mathews and Respondent American Ranch Community Association. It is designed to test and deepen understanding of the facts, legal arguments, and final ruling presented in the source document.
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Short-Answer Quiz
Instructions: Answer the following questions in 2-3 complete sentences based on the information provided in the case document.
1. Who were the primary parties involved in this case, and what were their respective roles?
2. What was the initial, overarching subject of Brent J. Mathews’s complaint filed on May 16, 2018?
3. After being asked to clarify, what single issue did the Petitioner choose to proceed with for the hearing?
4. According to the CC&Rs, what are the specific rules regarding the use of water wells on lots within American Ranch?
5. What were the key terms of “Well Agreement 1,” established in June 2011 with the original owners of Lot 2?
6. Why did the American Ranch Board of Directors believe they lacked the authority to enforce “Well Agreement 1”?
7. What were the terms of “Well Agreement 2,” which was executed on August 9, 2016, with the new owners of Lot 2, the Kaplans?
8. What was Petitioner Mathews’s primary legal argument against the Board’s authority to enter into “Well Agreement 2”?
9. How did the Administrative Law Judge distinguish between a “variance” and an “amendment” to the CC&Rs in the final decision?
10. What was the final order issued by the Administrative Law Judge on October 11, 2018?
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Answer Key
1. The primary parties were Petitioner Brent J. Mathews, who filed the complaint, and Respondent American Ranch Community Association (HOA), which was the subject of the complaint. Mathews represented himself, while the Association was represented by Lynn Krupnik and Timothy Krupnik.
2. The initial complaint’s subject was an “Open Meeting Violation regarding an ‘Action Outside of Meeting’” that took place on August 6, 2016. This action concerned the Association entering into a “Well Agreement” with Mark and Diane Kaplan.
3. The Petitioner clarified his single issue was an alleged violation of the American Ranch Bylaws, Article 3.11. He argued that the Board entered into the “Well Agreement” assuming they had the power to grant exceptions to the CC&Rs, a power he claimed the Bylaws did not grant them.
4. Section 3.26 of the CC&Rs prohibits water wells on all lots except Equestrian Lots. On Equestrian Lots, wells are permitted only with prior written approval from the Architectural Review Committee and must be used solely to irrigate pasture land and provide drinking water for horses.
5. “Well Agreement 1” acknowledged that the owners of Lot 2 were using their well for irrigation in violation of the CC&Rs. The agreement allowed them to continue this use, provided they installed a water meter and paid the Association the same per-gallon charge as other owners paid to the water district.
6. The Board of Directors believed they did not have the authority to enter into “Well Agreement 1” because they had no ability or authority to bill the lot owners for water used from a private well. They reasoned that billing for water was the responsibility of the water district, not the HOA.
7. “Well Agreement 2” stated that the private water well on Lot 2 would continue to be used for irrigation purposes. Crucially, it specified that the owners (the Kaplans) would not be billed for the water used from this well.
8. Petitioner Mathews argued that “Well Agreement 2” constituted an amendment of the CC&Rs. He contended that under Section 9.3.1 of the CC&Rs, an amendment requires the written approval or affirmative vote of 75 percent of the total owners, and therefore the Board acted outside its authority.
9. The Judge ruled that “Well Agreement 2” was a variance granted to an individual owner, not an amendment to the CC&Rs. The CC&Rs specifically provide a method for granting variances via the Architectural Review Committee, and this power is delegated to the Association and thus exercisable by the Board.
10. The final order, issued on October 11, 2018, was that the Petition be dismissed. The Judge concluded that the Petitioner failed to establish by a preponderance of the evidence that the Board of Directors lacked the authority to enter into “Well Agreement 2.”
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Essay Questions
Instructions: The following questions are designed for a more in-depth, essay-style response. Use the case document to construct a thorough and well-supported argument for each prompt. Answers are not provided.
1. Analyze the evolution of the dispute, from the initial installation of the well on Lot 2 to the final Administrative Law Judge Decision. Discuss the key events and agreements (Well Agreement 1 and Well Agreement 2) and explain how each contributed to the legal conflict.
2. Explain the legal reasoning used by the Administrative Law Judge to dismiss the Petitioner’s claim. Detail the specific sections of the Bylaws and CC&Rs cited (3.11, 3.26, 3.31, 9.3.1) and explain the distinction the Judge made between a “variance” and an “amendment.”
3. Discuss the concept of “burden of proof” as it applies to this case. Who held the burden of proof, what was the required standard (“preponderance of the evidence”), and why did the Petitioner ultimately fail to meet this standard?
4. Evaluate the actions of the American Ranch Community Association Board of Directors regarding Lot 2’s well. Discuss their reasoning for invalidating Well Agreement 1 and creating Well Agreement 2, and analyze whether their actions were consistent with the powers granted to them by the community’s governing documents.
5. Based on the procedural history outlined in the “Findings of Fact,” describe the process of an HOA dispute in this jurisdiction, from the initial filing of a petition to the final order from the Office of Administrative Hearings.
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Glossary of Key Terms
Definition
Administrative Law Judge (ALJ)
An official (Tammy L. Eigenheer) who presides over administrative hearings and issues a decision on the matter.
A.R.S. (Arizona Revised Statutes)
The statutory laws of the state of Arizona, sections of which regulate planned communities and the administrative hearing process.
Architectural Review Committee
A body within the Association delegated the authority by the CC&Rs (Section 3.31) to grant variances from certain restrictions in extenuating circumstances.
Board of Directors
The governing body of the American Ranch Community Association, which has the powers and duties necessary for administering the Association’s affairs.
Burden of Proof
The obligation of a party in a legal case to prove their claims. In this case, the Petitioner had the burden to establish the alleged violations.
Bylaws
The rules governing the internal administration of the Association. Petitioner alleged a violation of Bylaw 3.11, which outlines the powers and duties of the Board.
Covenants, Conditions, and Restrictions. These are the governing documents that set rules for properties within the community, such as the prohibition of certain water wells (Section 3.26).
Department
Refers to the Arizona Department of Real Estate, the agency with which the initial Homeowners Association Dispute Process Petition was filed.
Office of Administrative Hearings
An independent state agency to which the Department refers HOA dispute cases for a formal hearing.
Petition
The formal document filed by Brent J. Mathews to initiate the HOA dispute process with the Arizona Department of Real Estate.
Petitioner
The party who brings the legal action or complaint. In this case, Brent J. Mathews.
Preponderance of the Evidence
The standard of proof required in this hearing. It is defined as proof that convinces the trier of fact that a contention is “more probably true than not.”
Respondent
The party against whom the petition is filed. In this case, the American Ranch Community Association.
Variance
An officially granted exception from a restriction in the CC&Rs for an individual owner. The Judge determined Well Agreement 2 was a variance, not an amendment.
Well Agreement 1
A June 2011 agreement that allowed the owners of Lot 2 to use a non-compliant well for irrigation, provided they paid the Association for the water.
Well Agreement 2
An August 2016 agreement that invalidated Well Agreement 1 and allowed the new owners of Lot 2 (the Kaplans) to continue using the well for irrigation without being billed for the water.
Your HOA Board Might Be More Powerful Than You Think: 3 Lessons from a Legal Showdown
1.0 Introduction: The Predictable Fight with an Unpredictable Outcome
It’s a scenario familiar to many homeowners: you suspect your Homeowners Association (HOA) board is playing favorites, bending the rules for one resident while holding everyone else to the letter of the law. This feeling of frustration often leads to heated disputes, but what happens when a homeowner decides to take that fight to court? You might expect a simple verdict based on the community’s clear, written rules.
That’s exactly what homeowner Brent J. Mathews thought. He discovered his HOA board had made a special agreement with a neighbor, allowing a water well that clearly violated the community’s governing documents. He filed a formal complaint, arguing the board had illegally overstepped its authority.
The case that followed, however, didn’t turn on one obvious rule. Instead, the judge’s decision hinged on how different governing documents—the CC&Rs and the Bylaws—interact. The outcome reveals some surprising and counter-intuitive truths about where power really lies within an HOA, offering critical lessons for every homeowner.
2.0 Takeaway 1: A Special Exception Isn’t the Same as Changing the Rules for Everyone
Mr. Mathews’ central argument was straightforward and, on its face, perfectly logical. He contended that the board’s “Well Agreement 2” with his neighbor was effectively an amendment to the community’s Covenants, Conditions, and Restrictions (CC&Rs).
According to the community’s CC&Rs (Section 9.3.1), amending the rules is a serious undertaking that requires the written approval of 75 percent of all homeowners. The board clearly did not have this approval, so it seemed to be a clear-cut case of an illegal action. Many homeowners would have made the same reasonable assumption: the board can’t just change the rules on its own.
However, the judge found a critical distinction. The board’s action was not an “amendment”—a permanent change to the rules for the entire community. Instead, it was legally considered a “variance”—a one-time exception granted to a single homeowner. Because the CC&Rs contained a separate, specific process for granting variances (Section 3.31), the board was not illegally rewriting the rulebook; it was simply using a different, pre-existing tool in the governing documents.
3.0 Takeaway 2: The Board Can Wield Powers Given to Its Own Committees
This distinction raised another logical objection. The CC&Rs (Section 3.31) explicitly state that the power to grant variances belongs to the “Architectural Review Committee” (ARC), not the Board of Directors. It appeared Mr. Mathews had found his checkmate: even if the action was a variance, the wrong body had granted it.
This is where the case took its most surprising turn. The judge looked beyond the CC&Rs and consulted a different governing document: the Bylaws. This document contained a foundational clause about the board’s authority that proved decisive.
According to Bylaw 3.11.8, the Board of Directors is empowered to exercise any authority of the Association that is not specifically and exclusively reserved for the members themselves. Since the power to grant variances was delegated to a committee (the ARC) and not reserved for a vote by the general membership, the Board had the authority to step in and exercise that power itself. The judge’s decision made this clear.
“As the power to grant variances was delegated to the Architectural Review Committee and was not reserved to the membership, the Board had the authority to grant such a variance.”
This finding reveals a crucial principle of HOA governance: powers delegated to a committee are not the same as powers reserved for the entire membership. Unless a power is explicitly reserved for a member vote, the Bylaws can grant the Board ultimate authority over it.
4.0 Takeaway 3: A Messy History Can Justify an Unusual Solution
While the legal arguments are complex, the context behind the board’s decision is equally important. The board wasn’t making a special deal out of the blue; it was trying to solve a messy problem it had inherited.
The well on Lot 2 was originally installed around 2007 in violation of Section 3.26 of the CC&Rs. The board’s first attempt to fix this, “Well Agreement 1” in or about June 2011, allowed the well’s use but required the owner to pay the association for the water consumed. This arrangement, however, was deeply flawed.
When new buyers (the Kaplans) were in escrow to purchase the property in 2016, the situation came to a head. The Kaplans discovered the unusual agreement and informed the board they would be “unable to proceed with the purchase” unless its status was clarified. With the real estate deal on the line, the board recognized that “time was of the essence.”
The board’s decision to execute “Well Agreement 2” was driven by two realities. First, they believed the original agreement was legally invalid, as the board had no authority to bill a resident for water. Second, the agreement was a failure in practice; the Kaplans had been told by the prior owners that “they had never been charged for the water used from the well.” Facing an unenforceable and un-enforced agreement that was now threatening a home sale, the board acted pragmatically to resolve the decade-old violation once and for all.
5.0 Conclusion: Know the Rules—And Who Has the Power to Bend Them
The core lesson from this case is that HOA governance is a complex web of interlocking documents. The rules you read in the CC&Rs might not tell the whole story. Power and authority can be defined, and even transferred, by provisions buried in the Bylaws or other governing texts. What may seem like an obvious violation can be justified by a clause a homeowner might easily overlook.
This case is a powerful reminder for every homeowner. It’s not enough to know the rules of your community. You also need to understand the system of governance that enforces, interprets, and sometimes, grants exceptions to them. It prompts a critical question: Do you know not just the rules in your community, but who really has the authority to grant exceptions?
Case Participants
Petitioner Side
- Brent J. Mathews (petitioner)
Appeared on his own behalf
Respondent Side
- Lynn Krupnik (attorney)
Krupnik & Speas, PLLC
Represented Respondent - Timothy Krupnik (attorney)
Krupnik & Speas, PLLC
Represented Respondent - Tiffany Taylor (community manager)
American Ranch Community Association
Testified for Respondent - Brad Baker (board member)
American Ranch Community Association
Respondent Vice President; testified at hearing
Neutral Parties
- Tammy L. Eigenheer (ALJ)
OAH - Judy Lowe (commissioner)
Arizona Department of Real Estate - Felicia Del Sol (administrative staff)
Signed transmission page - LDettorre (ADRE staff)
Arizona Department of Real Estate
Decision recipient - AHansen (ADRE staff)
Arizona Department of Real Estate
Decision recipient - djones (ADRE staff)
Arizona Department of Real Estate
Decision recipient - DGardner (ADRE staff)
Arizona Department of Real Estate
Decision recipient - ncano (ADRE staff)
Arizona Department of Real Estate
Decision recipient
Other Participants
- Mark Kaplan (owner)
Lot 2
Executed Well Agreement 2 - Diane Kaplan (owner)
Lot 2
Executed Well Agreement 2 - Steven Galliano (former owner)
Lot 2 - Frances Galliano (former owner)
Lot 2
