Smith v. Sierra Foothills Condominium Association: A Briefing on the Monument Sign Dispute

Executive Summary

This briefing document synthesizes two Administrative Law Judge (ALJ) decisions concerning a dispute between Keith D. Smith, a commercial condominium unit owner, and the Sierra Foothills Condominium Association. The core of the dispute is a rule enacted by the Association on June 10, 2020, which restricts the use of a common element monument sign exclusively to unit owners in one of the property’s two buildings.

Mr. Smith filed a petition alleging two primary violations:

1. Unreasonable Discrimination: The sign rule violated the Association’s Covenants, Conditions, and Restrictions (CC&Rs) by unfairly discriminating against owners in his building.

2. Open Meeting Law Violation: The Association’s Board violated state open meeting laws by allegedly deciding on the rule via email before the public meeting and calling for a vote without discussion.

The Administrative Law Judge dismissed Mr. Smith’s petition in an initial decision on November 16, 2020, and again after a rehearing in a final decision on June 3, 2021. The judge concluded that Mr. Smith failed to meet his burden of proof on both claims. The sign rule was deemed a reasonable measure to address the differing visibility and street frontage of the two buildings. The allegation of an open meeting law violation was dismissed due to a lack of substantial evidence from the petitioner and credible contradictory testimony from the Association’s representatives.

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Case Overview

This matter was adjudicated by the Office of Administrative Hearings for the Arizona Department of Real Estate. The case involves a petition filed by a unit owner against his condominium association regarding rules governing common elements.

Detail

Description

Case Numbers

21F-H2120003-REL (Original)
21F-H2120003-REL-RHG (Rehearing)

Petitioner

Keith D. Smith (Owner in Building A)

Respondent

Sierra Foothills Condominium Association

Presiding Judge

Administrative Law Judge Thomas Shedden

Key Dates

July 24, 2020: Petition filed by Keith D. Smith.
October 26, 2020: Original hearing conducted.
November 16, 2020: Initial decision issued, dismissing the petition.
June 3, 2021: Rehearing decision issued, reaffirming dismissal.

Central Issues and Allegations

The dispute centered on a monument sign with space for only five businesses at a commercial condominium property consisting of two buildings, Building A and Building B.

1. The Monument Sign Rule (CC&R Violation)

At a meeting on June 10, 2020, the Association’s Board adopted a rule limiting the use of the monument sign to unit owners in Building B. Mr. Smith, an owner in Building A, alleged this violated the Association’s governing documents.

• Petitioner’s Allegations:

◦ The rule violates CC&R Section 7.1(C), which states that rules “shall not unreasonably discriminate among Owners and Occupants.”

◦ The rule violates the principle of CC&R Section 6.26(a), which requires use restrictions within Article 6 of the CC&Rs to be applicable to all occupants.

◦ As an owner, Mr. Smith holds an undivided interest in the common elements, meaning no owner should have exclusive use of the sign. He argued the rule amounted to an improper “partition” of a common element.

• Respondent’s Position:

◦ The rule is reasonable and non-discriminatory because it addresses a fundamental inequity in property layout: Building A has street frontage for signage, while Building B does not.

◦ The limited space on the monument sign (five slots) necessitates a managed approach to its use.

◦ While initially questioning if the sign was a common element, the Association waived this argument by acknowledging it as such in its official answer.

2. The June 10, 2020 Board Meeting (Open Meeting Law Violation)

Mr. Smith alleged that the Board’s conduct during the meeting at which the rule was passed violated Arizona’s open meeting law, specifically ARIZ. REV. STAT. section 33-1248.

• Petitioner’s Allegations:

◦ The Association’s president called for a vote on the new rule “without discussion,” implying a decision had already been made.

◦ Mr. Smith asserted that Board members must have “Obviously communicated with each other via email and reached their decision without ever hearing my argument.”

• Respondent’s Position:

◦ Association President Stuart Rayburn and witness Harold Bordelon provided “credible testimony” that a “protracted discussion lasting about an hour and a half” occurred before the vote.

◦ They testified that Mr. Smith himself spoke for approximately twenty minutes during this discussion.

Evidence and Proposed Solutions

• Petitioner’s Evidence: Mr. Smith testified on his own behalf and submitted an email from the City of Phoenix regarding signage rules. He also presented two estimates for altering the monument sign to accommodate more businesses—one by reducing the size of existing signs (which he offered to fund) and another by enlarging the monument itself.

• Respondent’s Evidence: The Association presented testimony from its president, Stuart Rayburn, and Harold Bordelon. They submitted Section 705 of the City of Phoenix’s Zoning Ordinance, which they argued showed flexibility in the sign code. Mr. Bordelon testified that some of Mr. Smith’s proposed alterations to the sign did not comply with the city code.

Administrative Law Judge’s Rulings and Rationale

The ALJ’s decisions in both the original hearing and the rehearing were consistent, leading to the dismissal of Mr. Smith’s petition. The core rationale rested on the petitioner’s failure to meet the required burden of proof.

Original Decision (November 16, 2020)

The initial ruling found decisively in favor of the Association.

• On the CC&R Violation: The ALJ concluded that Mr. Smith did not prove a violation of CC&R Section 7.1(C) for two primary reasons:

1. The rule was not unreasonable, as it rationally addressed the physical disadvantage of Building B, which “does not have street frontage,” compared to Building A, which does.

2. Mr. Smith’s reliance on CC&R Section 6.26(a) was misplaced, as “by its express terms, CC&R section 6.26 applies only to CC&R Article 6, and not Article 7,” where the Board’s authority to make rules resides.

• On the Open Meeting Law Violation: The ALJ found the allegation unsupported.

◦ Mr. Smith “offered no substantial evidence” for his claim of pre-meeting communication.

◦ His testimony that the Board called for a vote “without discussion is proven to be in error” based on credible opposing testimony.

Rehearing Decision (June 3, 2021)

Mr. Smith requested a rehearing on several grounds, including alleged irregularities, errors of law, and claims that the findings were arbitrary or not supported by evidence. The ALJ granted the rehearing but ultimately reaffirmed the original decision.

• Scope of the Rehearing: The judge clarified that the rehearing was limited to the two original issues and could not consider new evidence or allegations not raised in the initial petition.

◦ Evidence that Mr. Smith claimed to have (an email supporting the open meeting violation) was not considered because it was not offered at the original hearing.

◦ Arguments related to new statutes (e.g., ARIZ. REV. STAT. section 33-1217 on partitioning common elements) were dismissed as they were not part of the original petition.

• Reaffirmation of Rulings:

◦ The judge reiterated that CC&R Section 6.26(a) explicitly limits its effect to Article 6. He noted that Mr. Smith himself had argued the CC&Rs “should be read and applied as one continuous document unless the document clearly states otherwise,” which it did in this case.

◦ The conclusion that the sign rule was reasonable was upheld.

◦ The dismissal of the open meeting law claim was reaffirmed, as Mr. Smith still presented no substantial evidence, instead relying on a “rhetorical question” about how a vote could be called without prior communication.

Key Legal Standards Applied

The ALJ’s decisions were guided by specific legal principles and administrative codes.

Standard

Application in the Case

Burden of Proof

The Petitioner, Keith D. Smith, bore the burden to prove his allegations by a “preponderance of the evidence.” The ALJ concluded this standard was not met.

Preponderance of the Evidence

Defined as evidence with the “most convincing force” that is sufficient to “incline a fair and impartial mind to one side of the issue rather than the other.”

Substantial Evidence

The standard required for an ALJ’s decision, defined as evidence a “reasonable mind would use to reach a conclusion.”

Scope of Adjudication

The hearing and subsequent decisions were strictly limited to the issues formally raised and paid for in the original petition, pursuant to ARIZ. REV. STAT. § 41-1092.07(F)(6).

Admissibility of Evidence

Evidence not presented at the original hearing cannot be considered in a rehearing, as established by ARIZ. ADMIN. CODE § R2-19-115.