Study Guide:Pointe Tapatio Community Association v. Wilkey

This guide provides a comprehensive overview of the administrative law case Pointe Tapatio Community Association v. Wilkey, Case No. 19F-H1919044-REL, heard before the Arizona Office of Administrative Hearings. It details the central conflict, the arguments presented by both parties, the legal standards applied, and the final judgment.

Case Summary

The Pointe Tapatio Community Association (Petitioner) filed a complaint against homeowners Layne C. Wilkey and Devin E. Wilkey (Respondent), alleging that they were violating the community’s Covenants, Conditions, and Restrictions (CC&Rs) by operating a business, Devau Human Resources, from their residential unit. The Association argued that the business, which employed two individuals who commuted to the property, generated traffic and parking, explicitly prohibited by the CC&Rs for non-residential activities. The Wilkeys contended they had received verbal permission years prior and that the business was not disruptive. The Administrative Law Judge found in favor of the Association, ruling that the Wilkeys were in clear violation of the community’s governing documents.

Key Parties & Entities

Name / Entity

Key Actions & Involvement

Pointe Tapatio Community Association

Petitioner

The homeowners’ association that filed the petition alleging a CC&R violation. Represented by Lauren Vie, Esq.

Layne C. Wilkey & Devin E. Wilkey

Respondent

Mother and son, co-owners of the unit at 720 E. North Lane, Unit 1. Operators of Devau Human Resources. Represented by Joseph Velez, Esq.

Thomas Shedden

Administrative Law Judge (ALJ)

Presided over the hearing, made findings of fact, drew conclusions of law, and issued the final order.

Arizona Department of Real Estate

Regulatory Body

Issued the initial Notice of Hearing and has legal authority over such disputes under ARIZ. REV. STAT. Title 32, Ch. 20, Art. 11.

Paula Duistermars

Board Member, Pointe Tapatio

Testified on behalf of the Association, detailing the Board’s position and interactions regarding the violation.

Howard Flisser

Property Manager (Former or Current)

Named by the Wilkeys as the source of verbal permission to operate their business; Flisser denied recalling this.

Devau Human Resources

Business Entity

A payroll processing company owned by the Wilkeys, operating out of the residential unit and a commercial site in Tempe.

Office of Administrative Hearings

Adjudicative Body

The venue for the hearing, located at 1740 West Adams Street, Lower Level, in Phoenix, Arizona.

Case Timeline

• Late 2009: The Wilkeys move their business, Devau Human Resources, from a commercial location into their unit at Pointe Tapatio.

• August 8, 2018: Pointe Tapatio sends a letter informing the Wilkeys they are out of compliance with the CC&Rs and must comply by August 31, 2018.

• January 17, 2019 (approx.): Pointe Tapatio files a petition with the Arizona Department of Real Estate.

• February 28, 2019: The Arizona Department of Real Estate issues a Notice of Hearing.

• April 26, 2019: The administrative hearing is held before ALJ Thomas Shedden.

• May 7, 2019: ALJ Thomas Shedden issues the final decision and order.

Central Conflict: CC&R Article 3, Section 3.1

The core of the dispute revolved around the interpretation and enforcement of a specific restrictive covenant within the community’s governing documents.

• The Allegation: Pointe Tapatio alleged that the Wilkeys were using their unit as an office for a “gainful occupation,” which is not a “first class residential use.”

• The Specific Provision: Article 3, Section 3.1 of the CC&Rs states:

• The Triggering Condition: The prohibition is not absolute. It applies specifically to non-residential uses that create traffic or parking.

Arguments and Evidence

Arguments & Evidence Presented

Petitioner (Pointe Tapatio)

• Employee Activity: The Wilkeys acknowledged two employees drive to the unit to work Monday through Friday, creating traffic and parking on community streets.
• Public Information: Devau’s website and Google Maps listed the residential unit as an office address with set business hours (9:00 a.m. to 5:00 p.m.).
• Owner Admission: Ms. Wilkey acknowledged during testimony that they consider the unit to be an office.
• Lack of Authority: Board member Paula Duistermars testified that property manager Howard Flisser did not have the authority to grant permission for a business; only the Board could. She also testified that Flisser could not recall giving permission and had volunteered that he never did.

Respondent (The Wilkeys)

• Verbal Permission: The Wilkeys claimed they received verbal permission from property manager Howard Flisser in 2009. They admitted they never spoke to him directly and had nothing in writing.
• Implied Permission: Mr. Wilkey argued his father would not have taken the risk of moving the payroll business without permission, implying it must have been granted.
• No Direct Complaints: It was acknowledged that the Association was not aware of specific complaints filed against the Wilkeys for traffic, parking, or noise issues.
• Residential Use: Mr. Wilkey testified that he considers the unit one of his two primary residences, though he did not provide a responsive answer when asked how often he stayed there.

The Judge’s Decision & Legal Reasoning

ALJ Thomas Shedden concluded that the Wilkeys were in violation of the CC&Rs based on a “preponderance of the evidence.”

• The Wilkeys operate Devau Human Resources, a payroll processing company, from the unit.

• Two employees commute to the unit for work and sometimes park on community streets.

• The business is publicly listed at the residential address.

• The Wilkeys’ claim of verbal permission from Howard Flisser was not substantiated. Testimony from Paula Duistermars indicated Flisser could not recall, and in fact denied, giving such permission.

• The Association does permit some home businesses (e.g., telecommuting, online teaching) that do not create traffic or parking and do not require Board permission.

1. CC&Rs as a Contract: The CC&Rs constitute a binding contract between the homeowners and the Association.

2. Unambiguous Language: The language in Article 3, section 3.1 is clear and unambiguous. It prohibits businesses that create traffic or parking.

3. Violation Proven: The evidence clearly showed the Wilkeys’ business created both traffic and parking due to its two commuting employees. This is a direct violation of the unambiguous terms of the CC&R.

4. No Other Violation Needed: The fact that no other rules (e.g., specific parking ordinances) were broken is irrelevant. The creation of any traffic or parking by the business is sufficient to trigger the violation as written.

1. Cease Operations: The Wilkeys were ordered to comply with CC&R Article 3, section 3.1 by ceasing business operations at the unit within 35 days.

2. Civil Penalty: The Wilkeys were ordered to pay a civil penalty of $500.00 to the Department of Real Estate within 60 days.

3. Filing Fee Request Denied: The Association’s request to have its filing fee refunded was denied because it cited no legal authority showing the judge had the power to grant it.

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Answer the following questions in 2-3 complete sentences based on the information in the case file.

1. Who were the petitioner and the respondents in this case, and what was their relationship?

2. What specific activity led the petitioner to claim the respondents were violating the CC&Rs?

3. According to Article 3, section 3.1, what condition makes a non-residential use of a property a violation?

4. What was the respondents’ primary defense for operating their business from the unit?

5. Why did the Administrative Law Judge find the respondents’ primary defense unconvincing?

6. What two specific pieces of evidence demonstrated that the business created traffic and parking?

7. What is the legal standard of proof required in this type of administrative hearing, and what does it mean?

8. What two penalties were imposed on the Wilkeys in the final order?

9. Does the Pointe Tapatio Community Association prohibit all home-based businesses? Explain.

10. Who was Howard Flisser, and what was his significance to the respondents’ case?

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Answer Key

1. The petitioner was the Pointe Tapatio Community Association. The respondents were Layne C. Wilkey and Devin E. Wilkey, who were homeowners within the community and co-owners of the unit in question.

2. The Wilkeys were operating their payroll processing company, Devau Human Resources, out of their residential unit. This included having two employees commute to the property to work during business hours.

3. A non-residential use becomes a violation if it “creates traffic [or] parking.” The rule does not require a certain amount of traffic or parking, only that it is created by the business activity.

4. The respondents’ primary defense was that they had received verbal permission to operate the business from the community’s property manager, Howard Flisser, back in 2009.

5. The judge found the defense unconvincing because the Wilkeys had no written proof, had not spoken to Mr. Flisser directly, and testimony from a board member indicated Mr. Flisser could not recall—and later denied—ever giving such permission. Furthermore, the property manager likely lacked the authority to grant it.

6. The evidence was the Wilkeys’ own acknowledgement that two of their employees drive to the unit to work on a weekly basis. This commuting by non-resident employees necessarily creates traffic and, at times, requires them to park on community streets.

7. The standard of proof is a “preponderance of the evidence.” This means the greater weight of the evidence must be sufficient to incline a fair and impartial mind to one side of the issue over the other, even if it does not remove all reasonable doubt.

8. The Wilkeys were ordered to cease all business operations at the unit within 35 days. They were also ordered to pay a civil penalty of $500.00 to the Department of Real Estate within 60 days.

9. No, the association does not prohibit all home-based businesses. It allows for activities like telecommuting and teaching online classes, which do not require board permission because they do not create traffic or parking.

10. Howard Flisser was the property manager whom the Wilkeys claimed gave them verbal permission to run their business. His significance was central to their defense, but his alleged permission was unsubstantiated and contradicted by later testimony.

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Essay Questions

The following questions are designed for longer-form analysis. No answers are provided.

1. Analyze the concept of “preponderance of the evidence” as applied in this case. How did the evidence presented by Pointe Tapatio meet this standard, while the Wilkeys’ evidence did not?

2. Discuss the legal principle that CC&Rs are treated as contracts. Explain how Judge Shedden applied contract law principles, particularly regarding “unambiguous” language, to reach his conclusion.

3. Evaluate the Wilkeys’ defense strategy, focusing on their claim of verbal permission from Howard Flisser. Why was this argument legally insufficient? What kind of evidence would have been necessary to make it successful?

4. Examine the distinction the Pointe Tapatio Community Association makes between permissible home-based businesses (like telecommuting) and impermissible ones (like Devau Human Resources). What is the key factor in this distinction according to the CC&Rs, and how does it relate to the core purpose of residential covenants?

5. Based on the judge’s order, discuss the remedies available to a homeowner’s association in Arizona when a CC&R violation is proven. What penalties were imposed, and what penalty was requested but denied?

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Glossary of Key Terms

• Administrative Law Judge (ALJ): A judge and trier of fact who presides over administrative hearings, such as disputes handled by the Office of Administrative Hearings. The ALJ renders decisions, called orders, based on evidence and legal arguments.

• CC&Rs (Covenants, Conditions, and Restrictions): The governing legal documents that set out the rules for a planned community or subdivision. In this case, they are treated as a legally binding contract between the association and the homeowners.

• Civil Penalty: A monetary fine levied by a government agency or administrative court for a violation of a statute or rule. In this case, a $500 penalty was imposed on the Wilkeys for violating the community documents.

• Conclusions of Law: The section of a judicial decision where the judge applies legal principles and statutes to the established facts of the case to reach a judgment.

• Findings of Fact: The section of a judicial decision that formally lists the factual determinations made by the judge based on the evidence presented at the hearing.

• Order: The final ruling or judgment issued by an Administrative Law Judge that directs the parties on what actions they must take.

• Petitioner: The party who initiates a legal action or files a petition seeking a legal remedy. In this case, the Pointe Tapatio Community Association.

• Preponderance of the Evidence: The standard of proof in most civil and administrative cases. It requires the trier of fact to believe that it is more likely than not that a claim is true, based on the evidence presented.

• Respondent: The party against whom a petition is filed or an appeal is brought. In this case, Layne C. Wilkey and Devin E. Wilkey.