Briefing Document: Schmidt v. Catalina Ridge Community Association, Inc.

Executive Summary

This document synthesizes the key facts, arguments, and legal proceedings in the dispute between homeowner Steven Schmidt (Petitioner) and the Catalina Ridge Community Association, Inc. (Respondent), case number 22F-H2222040-REL. The central conflict revolves around the interpretation of the term “Dwelling Unit” within the Association’s Covenants, Conditions, and Restrictions (CC&Rs) for the purpose of calculating the maximum allowable size of an accessory structure.

The Petitioner contended that “Dwelling Unit” encompasses the total square footage of his home, including livable space, attached garage, and covered porches, which would permit his proposed 1,441-square-foot detached garage. The Respondent argued that the CC&Rs define “Dwelling Unit” as only the livable square footage, explicitly excluding garages and porches from the calculation, making the proposed structure too large.

Following an evidentiary hearing on June 23, 2022, Administrative Law Judge Jenna Clark issued a decision on July 13, 2022, denying the petition. The ruling sided with the Respondent, concluding that a holistic reading of the CC&Rs, particularly its definition section, establishes that a “Dwelling Unit” is distinct from garages and patios. The decision affirmed the Association’s methodology, rendering the Petitioner’s project non-compliant with the community’s governing documents.

Case Overview

Parties Involved

Name / Entity

Representation

Petitioner

Steven Schmidt

Appeared on his own behalf

Respondent

Catalina Ridge Community Association, Inc.

Michael S. Shupe, Esq., Goldschmidt Shupe, PLLC

Case Details

Detail

Case Numbers

ADRE: HO22-22/040
OAH: 22F-H2222040-REL

Presiding Judge

Administrative Law Judge (ALJ) Jenna Clark

Hearing Location

Office of Administrative Hearings, Phoenix, Arizona

Hearing Date

June 23, 2022

Final Decision Date

July 13, 2022

Timeline of Key Events

• May 15, 2019: Petitioner submits his initial Architectural Review Committee (ARC) application for a detached garage.

• July 25, 2019: The Association issues its first denial letter, stating, “The Committee believes that the square footage of a home does not include garage area or patio.”

• January 10, 2020: Following a request for reconsideration, the Association issues a second denial letter.

• February 7, 2020: After Petitioner attends an ARC meeting to appeal, the Association issues a third and final denial letter.

• March 21, 2022: The Arizona Department of Real Estate (ADRE) receives the Petitioner’s formal petition.

• April 22, 2022: Respondent, through counsel, files a response denying all complaint items and requesting a hearing.

• June 8, 2022: A telephonic pre-hearing conference is held to clarify issues and set deadlines.

• June 23, 2022: An evidentiary hearing is conducted before ALJ Jenna Clark.

• July 13, 2022: The ALJ issues a final decision and order denying the Petitioner’s petition.

The Central Dispute: Interpretation of “Dwelling Unit”

The core of the dispute is a question of contract interpretation regarding the CC&Rs. The parties agreed that the facts were not in dispute, only the legal meaning of key terms used to calculate the maximum size of an accessory structure.

Governing Documents and Key Clauses

The disagreement centered on the following provisions from the Association’s CC&Rs and Design Guidelines:

• CC&Rs Article VII, Section 7.7 (Accessory Structures): “Accessory structures shall include, but are not limited to, detached garages and guest homes… Accessory structures shall be limited to 5% of the lot area or forty percent (40%) of the main Dwelling Unit, whichever is less.”

• CC&Rs Article VII, Section 7.6 (Minimum Dwelling Unit Size): “Any Dwelling unit erected, permitted or maintained on any Lot shall have a minimum livable square footage, excluding garage, porches or guest house, and patios, of two thousand five hundred (2500) square feet.”

• Design Guidelines Section 3.2.2 (Building Size): “The minimum livable square footage of any Dwelling Unit on a Lot shall be 2,500 square feet. This minimum requirement shall be exclusive of garages, porches, Guest Houses, and patios.”

• CC&Rs Article I, Section 1.15 (Definition of “Dwelling Unit”): “‘Dwelling Unit’ means any building or portion of a building situated upon a Lot designed and intended for use and occupancy as a Residence by a Single Family.”

• CC&Rs Article I, Section 1.29 (Definition of “Residence”): “‘Residence’ means any subdivided Lot shown on the Plat, together with the residential Dwelling Unit, garage, patio and other Improvements thereon…”

Competing Square Footage Calculations

The two parties applied these clauses to the Petitioner’s property dimensions, resulting in conflicting maximums for the proposed 1,441 sq. ft. garage.

Calculation Metric

Petitioner’s Interpretation (Total Structure)

Respondent’s Interpretation (Livable Space Only)

Livable Square Footage

2,820 sq. ft.

2,820 sq. ft.

Covered Front Porch

289 sq. ft.

0 sq. ft. (excluded)

Covered Rear Porch

327 sq. ft.

0 sq. ft. (excluded)

Attached Garage

1,002 sq. ft.

0 sq. ft. (excluded)

Total “Dwelling Unit” Base

4,438 sq. ft.

2,820 sq. ft.

Max Accessory Structure (40%)

1,775 sq. ft.

1,128 sq. ft.

Compliance of Proposed Garage

Compliant (1,441 < 1,775)

Non-Compliant (1,441 > 1,128)

Petitioner’s Position (Steven Schmidt)

The Petitioner’s case was built on a direct, plain-language reading of the rules governing accessory structures, asserting his interpretation was that of a reasonable homeowner.

• Core Argument: The term “Dwelling Unit” in Section 7.7, which governs accessory structures, refers to the entire physical structure of the main home. He argued, “Somehow the ARC has wrongly concluded that the entire area of a dwelling unit is… only the livable square footage. This is simply not correct.”

• Supporting Points:

◦ The provision establishing a minimum of 2,500 sq. ft. (Section 7.6) explicitly excludes garages and porches, but its purpose is only to ensure a minimum standard of living space, not to define the total size of the dwelling for all other purposes.

◦ He contended that Section 7.7, the most relevant clause, “does not say 40% of the livable square footage, but rather 40% of the dwelling unit.”

◦ He pointed to other CC&R sections regarding architectural design (7.5), solar panels (7.10), and antennas (7.40) to argue that for those rules to be logical, “Dwelling Unit” must include the garage and porches, as they are part of the building’s exterior.

◦ During his closing argument, he stated, “The clear intent of the CCNR is to treat a dwelling unit as an entire structure, including the garage and porches.”

• Requested Relief: Petitioner requested an order directing the Association “to correctly apply section 7.7 of the H&Rs by including the square footage of the entire dwelling unit in the computation of the allowable size of an accessory structure.” He did not request a civil penalty.

Respondent’s Position (Catalina Ridge Community Association, Inc.)

The Respondent’s position relied on principles of contract law, arguing that the CC&Rs must be interpreted as a whole, with special attention given to the explicit definitions provided within the document.

• Core Argument: The CC&Rs’ own definitions create a clear distinction between the “Dwelling Unit” (the livable portion) and other improvements like “garage” and “patio.” The ARC’s denial was a correct application of these defined terms.

• Supporting Points:

◦ Counsel Michael Shupe argued that Section 1.29, by listing “residential Dwelling Unit, garage, patio” as separate items, unambiguously proves they are not the same thing. He stated, “there is no ambiguity that dwelling unit is listed separately from garages, patios, and other improvements thereon.”

◦ He emphasized that legal principles require that “the entire contract be looked at and that the court takes steps to ensure that the contract can be read as a whole as to render no provision meaningless or contrary.”

◦ The Respondent argued this interpretation ensures community continuity and prevents situations where accessory structures could be disproportionately large compared to the actual living area of a home.

• Requested Relief: The Association requested that the court uphold the ARC’s decision.

Administrative Hearing Proceedings (June 23, 2022)

The hearing focused entirely on the legal arguments, as the underlying facts were agreed upon in advance.

• Stipulated Evidence: The parties submitted 17 stipulated facts (one of which was later struck due to a date discrepancy) and 9 stipulated exhibits, which streamlined the hearing.

• Demonstrative Evidence: The Petitioner appeared in person and utilized two easels displaying large-format plans of his home to illustrate his square footage calculations. The ALJ noted these were demonstrative aids and not formally admitted into the evidentiary record.

• Evidentiary Rulings:

◦ The Petitioner requested that his marked-up floor plan (Petitioner’s Exhibit A) be admitted as evidence. The Respondent objected on the grounds that its labeling of a “total dwelling unit” figure constituted a legal conclusion, which is the central issue of the case. The ALJ sustained the objection.

◦ The Respondent’s Pre-Hearing Memorandum was admitted into the record without objection from the Petitioner.

Final Decision and Order (July 13, 2022)

The Administrative Law Judge’s decision provided a definitive legal interpretation of the disputed terms, finding in favor of the Respondent.

• Outcome: “IT IS ORDERED that Petitioner’s petition is denied.”

• Legal Rationale:

◦ The ALJ concluded that the Petitioner failed to carry his burden of proving a violation by a preponderance of the evidence.

◦ The decision states: “It is clear from the record that a ‘Dwelling Unit’ can only consist of a portion of a building that is distinct from other structures and improvements like garages and patios.”

◦ It further clarifies: “Hence, the calculation of the relevant square footage of a main Dwelling Unit under CC&Rs 7.7 excludes any non-livable portion of a building, structure, or improvement (attached or otherwise).”

◦ The order affirmed the Association’s calculation, noting that the maximum allowable square footage for an accessory structure on the Petitioner’s property is capped at 1,141.2 square feet, making the proposed 1,441-square-foot garage non-compliant.

• Binding Nature: The order is binding on the parties unless a request for rehearing is filed with the Commissioner of the ADRE within 30 days of the order’s service.