Tag Archives: Bylaw Amendment

Briefing Document: West v. Desert Sage Two Homeowners Association (Case No. 19F-H1919065-REL)

Executive Summary

This document provides a comprehensive analysis of the Administrative Law Judge (ALJ) Decision in the matter of Jason West (Petitioner) versus the Desert Sage Two Homeowners Association (Respondent), Case No. 19F-H1919065-REL. The petition, filed on May 20, 2019, was ultimately denied in a decision issued on October 1, 2019.

The central issue was the Petitioner’s allegation that the Respondent’s Board of Directors violated Arizona statute A.R.S. § 33-1804(B) and its own Bylaw 1.5 by refusing to add his proposed bylaw amendment to the agenda for the annual members’ meeting. The proposed amendment sought to ban directors from serving for five years if their actions resulted in a paid claim against the Association.

The ALJ’s ruling was decisive: the Petitioner failed to meet the burden of proof. The decision rested on a strict interpretation of the relevant statute and bylaws. The ALJ concluded that neither A.R.S. § 33-1804(B) nor the Association’s bylaws compel the Board to place a member-initiated proposal on the agenda of a Board-scheduled meeting. Critically, the bylaws provide a distinct and available remedy for members: Bylaw 2.2 allows members to force a special meeting for any purpose, including bylaw amendments, by gathering the support of 25% of the voting membership. The record showed the Petitioner was aware of this option but did not attempt to use it. Consequently, the petition was dismissed. The Respondent’s request for attorney’s fees was also denied, as the presiding body (the Office of Administrative Hearings) lacks the statutory authority to award them in such proceedings.

1. Case Overview

Case Name

Jason West v. Desert Sage Two Homeowners Association

Case Number

19F-H1919065-REL

Jurisdiction

Office of Administrative Hearings (OAH), Arizona

Presiding Judge

Administrative Law Judge Diane Mihalsky

Hearing Date

September 26, 2019

Decision Date

October 1, 2019

Petitioner

Jason West, appearing on his own behalf

Respondent

Desert Sage Two Homeowners Association, represented by Bradley R. Jardine, Esq.

Core Allegation: The Petitioner alleged that the Respondent’s Board violated state law and its governing documents by refusing to include his proposed bylaw amendment on the agenda and ballot for the annual meeting held in June 2019.

2. The Proposed Bylaw Amendment (Bylaw 3.13)

The Petitioner submitted a proposal to add a new Bylaw 3.13 to the Association’s governing documents. The full text of the proposed amendment is as follows:

Directors whose actions result in a paid claim

In an effort to reduce liability to the Association, any current or former director whose actions have resulted in a paid claim by the Association or its insurance carrier, is banned from serving as a director for a period of five years from the date of the final payment. This five year directorship ban also applies to any other individual co-owning an Association lot with the director. This Amendment is retroactive.

The stated purpose of the amendment was to reduce the Association’s liability. The decision notes that some of the current Board members may have been serving when the Association’s insurance carrier paid legal fees and other costs associated with a previous petition filed by the Petitioner.

3. Chronology of the Dispute

• December 23, 2018: The Petitioner first sent his proposed Bylaw 3.13 amendment to Joanelize Morales, the Association’s property manager.

• January 3 & 4, 2019: The Petitioner emailed Mickey Latz, owner of the management company, demanding the proposal be added to the next meeting’s agenda and ballot. In this correspondence, the Petitioner explicitly stated his awareness of the alternative process, writing, “I can also force the Board to call a Special Meeting of the Members at any time with 10 signatures from members of our Association. This is Article 2.2 of our Bylaws.”

• January – June 2019: Mr. Latz repeatedly informed the Petitioner that the Board, based on legal advice, had decided not to add the proposal to the agenda of a Board-scheduled meeting.

• April 17, 2019: Notice was sent to members for the annual meeting scheduled for June 4, 2019. The agenda was limited to (1) Election of Directors and (2) Approval of 2018 Annual Meeting Minutes. On the same day, the Petitioner re-sent his proposed amendment.

• May 14, 2019: The Petitioner attended a Board meeting and threatened to file a petition with the Department of Real Estate if his amendment was not placed on the agenda.

• May 20, 2019: The Petitioner filed the formal petition that led to this hearing.

• June 3, 2019: A notice was sent rescheduling the meeting to June 20, 2019, with the agenda unchanged.

• June 20, 2019: At the annual meeting, the Petitioner, whose name was on the ballot, was not elected to the Board of Directors.

4. Governing Authorities and Bylaws

The ALJ’s decision centered on the interpretation of one state statute and two specific Association bylaws.

• A.R.S. § 33-1804(B): This Arizona statute governs homeowners’ association meetings. It requires annual meetings and specifies notice requirements. It explicitly provides a mechanism for members to call special meetings: “Special meetings of the members’ association may be called by the president, by a majority of the board of directors or by members having at least twenty-five percent, or any lower percentage specified in the bylaws, of the votes in the association.”

• Bylaw 1.5 (Amendment Process): This bylaw states that amendments can be made “at a regular or special meeting of the Members, by a vote of the Members having a majority (more than 50%) of the votes.” The ALJ found that this bylaw is permissive, allowing for votes on amendments, but does not obligate the Board to place any specific proposal on an agenda.

• Bylaw 2.2 (Special Meetings): This bylaw mirrors the state statute, allowing members to compel a meeting. It states: “Special meetings of the Members may be called at any time … upon written request signed by Members having at least one-fourth (1/4) of the authorized votes… which request shall be delivered to the President or Secretary.”

5. Summary of Key Testimony

The hearing included testimony from the Petitioner and six witnesses he subpoenaed, including property managers and the three current Board members.

• Board Members (Bryan Selna, David Epstein, Linda Seidler): All testified that they consulted with the Association’s attorneys and property management company. Based on the advice received, they collectively decided not to add the Petitioner’s proposal to the agenda.

• Mickey Latz (Property Management Co. Owner): Testified that the Board as a whole, not the secretary, determines the meeting agenda. He affirmed that counsel had advised the Board it was not obligated to add member-requested items. Mr. Latz testified that he explicitly pointed the Petitioner to the process outlined in Bylaw 2.2, which allows members to call their own meetings directly.

• Joanelize Morales (Property Manager): Confirmed that she prepares meeting agendas based on the Board’s instructions. She also testified that the Petitioner never attempted to use the Bylaw 2.2 process to gather the support of his neighbors to schedule a meeting to consider his proposed amendment.

6. Historical Context and Prior Litigation

The decision provides context regarding the Petitioner’s previous interactions with the Association.

• Prior Petition (OAH Case No. 17F-H1716031-REL): In April 2017, the Petitioner filed a petition concerning the Board’s failure to fill vacant positions. On June 28, 2017, an ALJ dismissed that petition, concluding that the Board had done all it could and that vacancies were due in part to the Petitioner’s “obstructionist tactics.”

• Successful Amendment (Bylaw 3.12): In April 2017, the Petitioner proposed a different amendment regarding director resignations. The Board at that time agreed to submit it to a vote, and it was passed by the membership in May 2017.

7. Administrative Law Judge’s Decision and Rationale

The ALJ’s conclusions of law methodically dismantled the Petitioner’s claims, leading to the dismissal of the petition.

• Burden of Proof: The decision established that the Petitioner bore the burden of proving, by a preponderance of the evidence, that the Respondent had violated the statute and bylaw.

• Statutory and Bylaw Interpretation: The ALJ applied a plain-language reading to the governing authorities.

◦ The court found that nothing in the language of A.R.S. § 33-1804(B) requires an HOA board to add an item to an agenda at a member’s request. Instead, it provides the remedy for members to call a meeting themselves.

◦ Similarly, the court concluded that Bylaw 1.5 allows for bylaw amendments to be considered at meetings but does not compel the Board to include such proposals on the agenda of a meeting it has noticed.

◦ The ALJ found that Bylaw 2.2 provides the explicit and proper procedure for a member to bring an issue to a vote when the Board declines to do so: gather support from 25% of the members to call a special meeting.

• Final Ruling: Because the Petitioner failed to establish a violation of any cited statute or bylaw, the petition was ordered to be denied.

• Attorney’s Fees: The Respondent’s request for attorney’s fees was denied. The decision cited legal precedent establishing that administrative bodies like the Department of Real Estate and the OAH are not empowered by the legislature to award attorney’s fees in these types of disputes.

Briefing Document: Janicek v. Sycamore Vista No. 8 Homeowners Association

Executive Summary

This document provides a comprehensive analysis of the Administrative Law Judge (ALJ) Decision in the case of Jay A. Janicek v. Sycamore Vista No. 8 Homeowners Association (No. 19F-H1918001-REL-RHG). The central issue was the validity of a bylaw amendment enacted by the Association’s Board of Directors on November 20, 2017, without a vote of the general homeowner membership.

The ALJ ruled decisively in favor of the Petitioner, Jay Janicek, finding that the Board’s action was invalid. The decision hinged on a critical interpretation of the Association’s governing documents, concluding that the term “members” in the context of bylaw amendments unambiguously refers to the homeowner membership, not the Board of Directors. The ruling established that the Board does not have the authority to amend bylaws where that power is reserved for the membership.

Furthermore, the ALJ concluded that the Board’s action violated Arizona’s Open Meeting Law (A.R.S. § 33-1804) by failing to provide the required notice to homeowners for a meeting concerning a proposed bylaw amendment. As a result, the amendment was invalidated, and the Association was ordered to pay the Petitioner’s filing fee and a civil penalty of $250.

Case Background and Procedural History

Parties and Jurisdiction

• Petitioner: Jay A. Janicek, a property owner within the Sycamore Vista subdivision and a member of the Respondent Association.

• Respondent: Sycamore Vista No. 8 Homeowners Association (“the Association”), a homeowners’ association in Tucson, Arizona, governed by its Covenants, Conditions, and Restrictions (CC&Rs) and overseen by a Board of Directors.

• Adjudicating Body: The Arizona Office of Administrative Hearings (OAH), an independent state agency, which received the case on referral from the Arizona Department of Real Estate.

The Central Dispute

The core of the dispute was an action taken by the Association’s Board of Directors during a regular meeting on November 20, 2017. At this meeting, the Board, with three of five directors present, voted to approve a third amendment to the Association’s Bylaws. The amendment altered Article VIII Section 6(d), changing the requirement for an annual financial check from:

“cause an annual audit of the Association books to be made by a public accountant at the completion of each fiscal year”

“cause an annual audit, review, or compilation of the Associations financial records to be made by a public accountant within 180 days after the end of the HOA’s fiscal year.”

The Petitioner contended this action was invalid because it was undertaken without a vote of the general Association membership, as he believed the governing documents required.

Timeline of Adjudication

1. July 25, 2018: Petitioner files a petition with the Arizona Department of Real Estate.

2. September 05, 2018: An initial evidentiary hearing is held before the OAH.

3. September 25, 2018: The OAH issues an ALJ Decision in the Petitioner’s favor.

4. October 23, 2018: The Respondent submits a Request for Rehearing.

5. November 07, 2018: The Department grants the rehearing request and refers the matter back to the OAH.

6. March 05, 2019: A rehearing is conducted, based on legal briefs and closing arguments without new evidence.

7. March 25, 2019: The final ALJ Decision is issued, reaffirming the initial ruling in favor of the Petitioner.

Analysis of Governing Documents and Statutes

The case decision rested on the interpretation of specific articles within the Association’s Bylaws and relevant Arizona state statutes.

Key Bylaw Provisions

Article

Section

Description

Article IV

Section 1

States that the “affairs of this Association shall be managed by a Board of not less than three (3) nor more than five (5) directors.”

Article VI

Section 1

Establishes that regular meetings of the Board of Directors shall be held monthly without notice.

Article VI

Section 2

Governs special meetings of the Board, requiring not less than three days’ notice to each Director.

Article VI

Section 3

Defines a quorum for Board meetings as “a majority of the number of Directors.”

Article VII

Section 1

Outlines the Powers and Duties of the Board of Directors. This section does not explicitly grant the Board the power to amend the Bylaws.

Article XIII

Section 1

(The central provision in the dispute) States: “These Bylaws may be amended at a regular or special meeting of the Board of Directors of the Association by a vote of a majority of a quorum of members present in person or by proxy.”

Relevant Arizona Statutes

• A.R.S. § 33-1804 (Open Meeting Law): This statute was central to the Petitioner’s argument and the ALJ’s final decision.

◦ Subsection (A): Requires that all meetings of the members’ association and the board of directors be open to all members of the association.

◦ Subsection (B): Mandates specific notice requirements for any meeting of the members, stating that notice “shall also state the purpose for which the meeting is called, including the general nature of any proposed amendment to the declaration or bylaws.”

◦ Subsection (F): The ALJ noted that this section codifies the legislative intent of the statute, which, as cited from a Governor’s message, is to “promote transparency and participation for all residents in homeowners’ association governance.”

Arguments of the Parties

Petitioner’s Position (Jay Janicek)

The Petitioner’s case was built on a textual interpretation of the Bylaws and adherence to state law.

• Interpretation of “Members”: The Petitioner argued that the word “members” in Article XIII, Section 1 refers to the general homeowner membership of the Association, not the members of the Board of Directors.

• Textual Differentiation: The drafters of the Bylaws intentionally used the words “members” and “directors” distinctly throughout the document. Where the intent was to refer to the Board, the word “Director” was specifically used (e.g., Article VI).

• Proxy Voting: The inclusion of the term “proxy” in Article XIII supports the argument that the vote is for the general membership, as Board members are not permitted to vote by proxy.

• Lack of Explicit Power: Article VII, which details the Board’s powers, does not grant the authority to amend the Bylaws, implying such power is reserved for the membership.

• Statutory Violation: The Board’s action violated A.R.S. § 33-1804 because the required notice for a meeting concerning a bylaw amendment was not provided to the general membership.

• Legal Precedent: The Petitioner cited Powell v. Washburn, an Arizona Supreme Court case holding that restrictive covenants (which he argued include the Bylaws) should be interpreted to give effect to the intention of the parties as determined from the entire document.

Respondent’s Position (Sycamore Vista No. 8 HOA)

The Association argued that its actions were a valid exercise of the Board’s authority.

• Broad Authority: The Respondent cited Article IV, which states the “affairs of this Association shall be managed by a Board,” to assert its general authority.

• Valid Board Meeting: The amendment occurred at a regular monthly Board meeting as allowed by Article VI. The meeting had three directors present, which constituted a valid quorum for transacting business.

• Interpretation of Article XIII: The Respondent argued that the phrase “at a regular or special meeting of the Board of Directors” in Article XIII indicates that the Board is the body empowered to make the amendment, and the word “members” in that context refers to the members of the Board.

• No Open Meeting Law Violation: The Respondent contended its conduct was not a violation because the action occurred during a regular Board meeting with a proper quorum of directors.

Administrative Law Judge’s Decision and Rationale

The ALJ’s conclusions were unequivocal, fully adopting the Petitioner’s interpretation of the governing documents and state law.

Conclusions of Law

• Burden of Proof: The ALJ found that the Petitioner successfully sustained his burden of proving by a preponderance of the evidence that the Respondent violated A.R.S. § 33-1804.

• Interpretation of “Members” vs. “Directors”: The decision states that the governing documents are clear: “‘members’ refers to the body of owners who make up the membership of the Association, and ‘directors’ refers to the few who are elected to the membership’s Board.” The ALJ found the differentiation to be intentional by the drafters.

• Avoiding Absurdity: The decision holds that construing the Bylaws to allow the Board to amend them would create an absurdity. The ALJ wrote, “The voices of few cannot speak for all, unless all have bestowed those few with the power and authority to speak on their behalf.”

• Violation of Statute and Bylaws: The ALJ concluded that the Board’s action on November 20, 2017, violated both A.R.S. § 33-1804(B) due to a lack of notice and Article III of the Association Bylaws.

• Rejection of Respondent’s Argument: The decision explicitly states, “The Tribunal is not swayed by Respondent’s closing arguments.”

Final Order

Based on the findings and conclusions, the ALJ issued the following binding order:

1. Petition Granted: The Petitioner’s petition was officially granted.

2. Amendment Invalidated: The third amendment to the Association Bylaws, as enacted on November 20, 2017, was invalidated.

3. Fees and Penalties: The Respondent was ordered to pay the Petitioner’s filing fee and a civil penalty of $250.00 to the Planned Community Hearing Office Fund.