Note: A Rehearing was requested for this case. The dashboard statistics reflect the final outcome of the rehearing process.
Case Summary
Case ID
19F-H1918001-REL
Agency
ADRE
Tribunal
OAH
Decision Date
2019-03-25
Administrative Law Judge
Jenna Clark
Outcome
total
Filing Fees Refunded
$500.00
Civil Penalties
$250.00
Parties & Counsel
Petitioner
Jay A. Janicek
Counsel
Jake Kubert
Respondent
Sycamore Vista No. 8 Homeowners Association
Counsel
Evan Thompson
Alleged Violations
ARIZ. REV. STAT. § 33-1804(B); Association Bylaws Article III, Sections 3 & 4; Association Bylaws Article VIII, Section 1
Outcome Summary
The ALJ granted the petition, concluding that the HOA Board’s unilateral amendment of the Bylaws on November 20, 2017, was an invalid action taken without the required vote of the Association members and without statutory notice, violating ARIZ. REV. STAT. § 33-1804(B) and the Association’s governing documents. The amendment was invalidated, and the Respondent was ordered to refund the Petitioner's filing fee and pay a $250.00 civil penalty.
Key Issues & Findings
Whether Sycamore Vista No. 8 Homeowners Association (Respondent) violated Association Bylaws Article III, Sections 3 & 4 and Article VIII, Section 1 in an action taken by the board on November 20, 2017.
The Board of Directors attempted a third amendment to the Bylaws on November 20, 2017, specifically changing the requirements for the Association's financial review (audit, review, or compilation). The ALJ concluded that this action was invalid because it was taken in the absence of a quorum of Association members voting in favor of the amendment, violating both the Bylaws and statutory notice requirements.
Orders: The petition was granted. The third amendment to the Association Bylaws taken on November 20, 2017, was invalidated. Respondent was ordered to pay the Petitioner the filing fee required by ARIZ. REV. STAT. § 32-2199.01 and pay a civil penalty of $250.00 to the Planned Community Hearing Office Fund.
Briefing Document: Janicek v. Sycamore Vista No. 8 Homeowners Association
Executive Summary
This document synthesizes the findings and legal conclusions from the administrative hearings regarding a dispute between Jay A. Janicek (“Petitioner”) and the Sycamore Vista No. 8 Homeowners Association (“Respondent” or “the Association”). The central issue was whether the Association’s Board of Directors acted outside its authority by unilaterally amending the Association’s Bylaws during a Board meeting on November 20, 2017, without a vote from the general membership.
The Administrative Law Judge (ALJ) determined that the Board’s action violated both the Association’s governing documents and Arizona Revised Statutes (A.R.S. § 33-1804). The ruling emphasized that the term “members” in the Bylaws refers specifically to the body of property owners, not the Board of Directors. Consequently, the third amendment to the Bylaws was invalidated, and the Association was ordered to pay a civil penalty and refund the Petitioner’s filing fees. A rehearing in March 2019 reconfirmed these findings, underscoring the necessity of transparency and membership participation in homeowners’ association governance.
The Department of Real Estate referred the matter to the Office of Administrative Hearings (OAH) following a petition filed by Mr. Janicek on July 25, 2018. The Respondent initially declined to present witnesses or exhibits, choosing to rely on a dispute over textual interpretation. Following an initial ruling in favor of the Petitioner, the Respondent requested a rehearing, which was granted but ultimately resulted in the same conclusion.
The Core Dispute: Bylaw Amendment Authority
The conflict arose from a Board meeting held on November 20, 2017. During this meeting, the Board voted to approve a third amendment to the Association’s Bylaws.
The Specific Amendment
The Board modified Article VIII, Section 6(d). The original text required the Board to:
• “…cause an annual audit of the Association books to be made by a public accountant at the completion of each fiscal year.”
The Board replaced this with language allowing for:
• “…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.”
Conflicting Interpretations of “Members”
The primary legal dispute centered on the interpretation of Bylaws Article XIII, Section 1, which 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.” (Emphasis added).
• Petitioner’s Position: “Members” refers to the general membership of the Association (property owners), as defined in Article II, Section 7 and the Declaration. Petitioner argued that the use of “proxy” in this section further proves it refers to members, as Board Directors are not permitted to vote by proxy.
• Respondent’s Position: “Members” refers to the members of the Board of Directors. The Association argued that because the word was not capitalized in Article XIII, it authorized the Board to amend Bylaws at their own meetings, provided a quorum of Directors was present.
Legal Analysis and Evidence
Governing Statutes and Case Law
The ALJ’s decision was informed by Arizona law and established legal principles:
• A.R.S. § 33-1804 (Open Meeting Law): This statute requires that notice of any meeting where a bylaw amendment is proposed must be sent to all members 10 to 50 days in advance. It also mandates that meetings of the board and association be open to all members.
• A.R.S. § 33-1804(F): The legislative intent of the Open Meeting Law is to promote transparency. Petitioner cited a message from Governor Ducey stating that such laws “provide residents the opportunity to resolve issues as a community rather than seek government intervention.”
• Powell v. Washburn (2006): The Arizona Supreme Court held that restrictive covenants (including Bylaws) must be interpreted to give effect to the intention of the parties based on the document in its entirety.
Findings of Fact regarding Authority
The ALJ identified several factors that invalidated the Board’s unilateral action:
1. Differentiated Terminology: The Bylaws consistently use “Directors” when referring to the Board and “Members” when referring to the homeowners. Article VI, Section 3 explicitly uses “Directors” to define a quorum for the Board, while Article XIII uses “members.”
2. Absence of Express Power: Article VII, which outlines the “Powers and Duties of the Board of Directors,” does not expressly grant the Board the authority to amend Bylaws. This power is reserved for the membership.
3. Lack of Notice: No Association members were present at the November 20, 2017, meeting, and no notice was provided to the general membership regarding a proposed amendment to the Bylaws as required by A.R.S. § 33-1804(B).
Conclusions of Law
The ALJ concluded that the Petitioner sustained the burden of proof by a preponderance of the evidence. The final legal determinations were:
• Avoidance of Absurdity: Bylaws must be construed to avoid an absurdity. The ALJ stated, “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: The Board’s action violated A.R.S. § 33-1804(B) due to the lack of transparency and failure to provide notice of a bylaw amendment.
• Violation of Governing Documents: The Board acted outside the authority granted to it by the Bylaws, specifically Article III and Article XIII.
Final Order and Penalties
The Administrative Law Judge issued the following orders:
1. Invalidation: The third amendment to the Association Bylaws, enacted on November 20, 2017, is null and void.
2. Restitution of Fees: The Respondent must pay the Petitioner the cost of his filing fee.
3. Civil Penalty: The Respondent was ordered to pay a sum of $250.00 to the Planned Community Hearing Office Fund as a penalty for the violations.
4. Binding Nature: Following the rehearing, the order became binding, with the only further recourse being judicial review in the Superior Court within 35 days.
Study Guide – 19F-H1918001-REL-RHG
Study Guide: Janicek v. Sycamore Vista No. 8 Homeowners Association
This study guide provides a comprehensive review of the legal proceedings between Jay A. Janicek and the Sycamore Vista No. 8 Homeowners Association. It examines the interpretation of governing documents, the application of Arizona Revised Statutes regarding homeowners’ associations, and the limits of a Board of Directors’ authority to amend bylaws.
——————————————————————————–
Part I: Short-Answer Quiz
Instructions: Answer the following questions in two to three sentences based on the provided legal documents.
1. Who are the primary parties involved in this administrative hearing, and what is their relationship?
2. What specific action taken by the Board of Directors on November 20, 2017, triggered this dispute?
3. How did the Petitioner define the term “member” according to the Association’s governing documents?
4. What was the Respondent’s primary argument regarding the interpretation of Article XIII, Section 1 of the Bylaws?
5. According to ARIZ. REV. STAT. § 33-1804(B), what must a notice of a membership meeting include if a bylaw amendment is proposed?
6. Why did the Petitioner argue that the use of the word “proxy” in the Bylaws supported his interpretation that only general members could amend the Bylaws?
7. What is the legal significance of the Covenants, Conditions, and Restrictions (CC&Rs) in the context of the relationship between an HOA and a property owner?
8. What was the “preponderance of the evidence” standard used by the Administrative Law Judge to reach a decision?
9. What specific penalties and orders were issued against the Respondent in the final decision?
10. What reason did the Administrative Law Judge give for concluding that the Board’s interpretation of the Bylaws was incorrect?
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Part II: Answer Key
1. Who are the primary parties involved in this administrative hearing, and what is their relationship? The Petitioner is Jay A. Janicek, a property owner and member of the Sycamore Vista subdivision. The Respondent is the Sycamore Vista No. 8 Homeowners Association, the entity responsible for governing the residential development where the Petitioner’s property is located.
2. What specific action taken by the Board of Directors on November 20, 2017, triggered this dispute? The Board voted to approve a third amendment to the Association’s Bylaws during a regular meeting. This amendment replaced a requirement for a full annual audit by a public accountant with a choice of an audit, review, or compilation to be completed within 180 days of the fiscal year-end.
3. How did the Petitioner define the term “member” according to the Association’s governing documents? The Petitioner asserted that “Member” refers to those persons entitled to membership as defined in the Declaration, specifically every lot owner. He argued that this definition distinguishes general property owners from the “Directors” who serve on the Board.
4. What was the Respondent’s primary argument regarding the interpretation of Article XIII, Section 1 of the Bylaws? The Respondent argued that the term “members” in Article XIII referred specifically to members of the Board of Directors rather than the general membership. They contended that since the word was not capitalized, it authorized the Board to amend Bylaws at any meeting where a quorum of directors was present.
5. According to ARIZ. REV. STAT. § 33-1804(B), what must a notice of a membership meeting include if a bylaw amendment is proposed? The statute requires that notice be sent to every owner 10 to 50 days in advance of the meeting, stating the date, time, and place. Crucially, the notice must also state the purpose of the meeting, including the general nature of any proposed amendments to the declaration or bylaws.
6. Why did the Petitioner argue that the use of the word “proxy” in the Bylaws supported his interpretation that only general members could amend the Bylaws? The Petitioner noted that the Bylaws allow for voting by “proxy,” a mechanism defined in Article III as applying to votes of the general membership. He argued that because Board members are legally prohibited from voting by proxy, the inclusion of the term in the amendment section proved the section applied to general members.
7. What is the legal significance of the Covenants, Conditions, and Restrictions (CC&Rs) in the context of the relationship between an HOA and a property owner? The CC&Rs constitute an enforceable contract between the Association and each individual property owner. By purchasing a residential unit within the development, the buyer agrees to be bound by the terms, powers, and restrictions outlined in these recorded documents.
8. What was the “preponderance of the evidence” standard used by the Administrative Law Judge to reach a decision? This standard requires the Petitioner to prove that his contention is “more probably true than not.” It is defined as the greater weight of the evidence or evidence that possesses the most convincing force, rather than the absolute removal of all doubt.
9. What specific penalties and orders were issued against the Respondent in the final decision? The Administrative Law Judge invalidated the third amendment to the Bylaws and ordered the Respondent to pay a $250.00 civil penalty to the Planned Community Hearing Office Fund. Additionally, the Respondent was ordered to reimburse the Petitioner for his initial filing fee.
10. What reason did the Administrative Law Judge give for concluding that the Board’s interpretation of the Bylaws was incorrect? The Judge ruled that bylaws must be construed to avoid “absurdity” and that the “voices of few cannot speak for all” without express authority. The governing documents clearly differentiated between “members” (owners) and “directors,” and the Board lacked the power to act where authority was reserved for the membership.
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Part III: Essay Questions
Instructions: Use the provided source context to develop comprehensive responses to the following prompts.
1. The Distinction Between “Members” and “Directors”: Analyze how the specific terminology used in the Sycamore Vista No. 8 Bylaws (Articles II, III, VI, and XIII) influenced the Administrative Law Judge’s decision. How does the consistent use of these terms throughout the document prevent the Board from claiming the powers of the general membership?
2. Statutory Compliance and Transparency: Discuss the importance of ARIZ. REV. STAT. § 33-1804 (the Open Meeting Law) as it relates to this case. Use Governor Ducey’s message regarding H.B. 2411 to explain the legislative intent behind ensuring transparency and participation in HOA governance.
3. The Role of the Office of Administrative Hearings (OAH): Explain the procedural path of this dispute, from the initial petition to the Department of Real Estate to the final rehearing. What is the scope of the OAH’s authority in interpreting contracts between homeowners and associations?
4. Contractual Interpretation and the “Powell v. Washburn” Precedent: Discuss the significance of the Arizona Supreme Court’s holding in Powell v. Washburn regarding restrictive covenants. How does the requirement to give effect to the “intention of the parties” apply to the interpretation of HOA Bylaws?
5. Limits of Board Authority: Based on the Findings of Fact and Conclusions of Law, evaluate the boundaries of a Board of Directors’ power. Under what circumstances can a Board exercise “all powers, duties, and authority” of the Association, and what serves as the definitive limit to that power?
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Part IV: Glossary of Key Terms
Definition
Administrative Law Judge (ALJ)
A presiding officer who hears evidence and issues decisions in contested cases involving state agencies.
ARIZ. REV. STAT. § 33-1804
The Arizona statute governing open meetings, notice requirements, and transparency for planned community associations.
Bylaws
The internal rules and regulations that govern the administration and management of an association.
Covenants, Conditions, and Restrictions; the recorded legal documents that establish the rules for a planned community and create a contract between owners and the HOA.
Civil Penalty
A financial fine imposed by a government agency or tribunal as a punishment for a violation of statutes or regulations.
Declarant
The original developer or entity that established the residential subdivision and its governing documents.
Declaration
The primary governing document that defines membership and property rights within a homeowners’ association.
Member
Defined in the source context as a property owner within the Sycamore Vista subdivision who is entitled to membership in the Association.
The Office of Administrative Hearings; an independent state agency that conducts evidentiary hearings for contested cases.
Petitioner
The party who initiates a legal action or petition (in this case, Jay A. Janicek).
Preponderance of the Evidence
The legal standard of proof required in this case, meaning a contention is “more probably true than not.”
A written authorization allowing one person to act or vote on behalf of another, specifically used by Association members.
Quorum
The minimum number of members or directors required to be present at a meeting to legally transact business.
Respondent
The party against whom a legal action or petition is filed (in this case, Sycamore Vista No. 8 HOA).
Restrictive Covenants
Provisions in a deed or other recorded document that limit the use of property and are interpreted to give effect to the intention of the parties.
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“case”: {
“docket_no”: “19F-H1918001-REL-RHG”,
“case_title”: “Jay A. Janicek, Petitioner, vs. Sycamore Vista No. 8 Homeowners Association (FKA New Tucson Unit No. 8 Homeowners Association, Inc.), Respondent.”,
“decision_date”: “March 25, 2019”,
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“individuals”: [
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“name”: “Jay A. Janicek”,
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{
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{
“name”: “Becky Nutt”,
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{
“name”: “Caleb Rhodes”,
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{
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{
“name”: “Judy Lowe”,
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{
“name”: “Andrew F. Vizcarra”,
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“notes”: “Listed as representative for service of process for Respondent HOA.”
},
{
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{ “case”: { “agency”: “ADRE”, “tribunal”: “OAH”, “docket_no”: “19F-H1918001-REL”, “case_title”: “Jay A. Janicek vs. Sycamore Vista No. 8 Homeowners Association”, “decision_date”: “2019-03-25”, “alj_name”: “Jenna Clark” }, “parties”: [ { “party_id”: “P1”, “role”: “petitioner”, “name”: “Jay A. Janicek”, “party_type”: “homeowner”, “email”: null, “phone”: null, “attorney_name”: “Jake Kubert”, “attorney_firm”: “Dessaules Law Group”, “attorney_email”: null, “attorney_phone”: null }, { “party_id”: “R1”, “role”: “respondent”, “name”: “Sycamore Vista No. 8 Homeowners Association”, “party_type”: “HOA”, “email”: null, “phone”: null, “attorney_name”: “Evan Thompson”, “attorney_firm”: “Thompson Krone, P.L.C.”, “attorney_email”: null, “attorney_phone”: null } ], “issues”: [ { “issue_id”: “ISS-001”, “type”: “statute_and_bylaws”, “citation”: “ARIZ. REV. STAT. § 33-1804(B); Association Bylaws Article III, Sections 3 & 4; Association Bylaws Article VIII, Section 1”, “caption”: “Whether Sycamore Vista No. 8 Homeowners Association (Respondent) violated Association Bylaws Article III, Sections 3 & 4 and Article VIII, Section 1 in an action taken by the board on November 20, 2017.”, “violation(s)”: “Violation of ARIZ. REV. STAT. § 33-1804(B) and Association Bylaws Article III by amending the Bylaws on November 20, 2017, without proper notice and a vote of the Association membership.”, “summary”: “The Board of Directors attempted a third amendment to the Bylaws on November 20, 2017, specifically changing the requirements for the Association’s financial review (audit, review, or compilation)12. The ALJ concluded that this action was invalid because it was taken in the absence of a quorum of Association members voting in favor of the amendment, violating both the Bylaws and statutory notice requirements34.”, “outcome”: “petitioner_win”, “filing_fee_paid”: 500.0, “filing_fee_refunded”: true, “civil_penalty_amount”: 250.0, “orders_summary”: “The petition was granted. The third amendment to the Association Bylaws taken on November 20, 2017, was invalidated. Respondent was ordered to pay the Petitioner the filing fee required by ARIZ. REV. STAT. § 32-2199.01 and pay a civil penalty of $250.00 to the Planned Community Hearing Office Fund56.”, “why_the_loss”: null, “cited”: [ “ARIZ. REV. STAT. § 33-1804(B)”, “Association Bylaws Article III” ] } ], “money_summary”: { “issues_count”: 1, “total_filing_fees_paid”: 500.0, “total_filing_fees_refunded”: 500.0, “total_civil_penalties”: 250.0 }, “outcomes”: { “petitioner_is_hoa”: false, “petitioner_win”: “total”, “summarize_judgement”: “The ALJ granted the petition, concluding that the HOA Board’s unilateral amendment of the Bylaws on November 20, 2017, was an invalid action taken without the required vote of the Association members and without statutory notice, violating ARIZ. REV. STAT. § 33-1804(B) and the Association’s governing documents47. The amendment was invalidated, and the Respondent was ordered to refund the Petitioner’s filing fee and pay a $250.00 civil penalty56.”, “why_the_loss”: null }, “analytics”: { “cited”: [ “ARIZ. REV. STAT. § 33-1804(B)”, “ARIZ. REV. STAT. § 32-2199.02(A)”, “ARIZ. REV. STAT. § 32-2199.05”, “Powell v. Washburn, 125 P.3d 373 (Ariz. 2006)”, “Tierra Ranchos Homeowners Ass’n v. Kitchukov, 216 Ariz. 195, 165 P.3d 173 (App. 2007)” ], “tags”: [ “HOA Governance”, “Bylaws Amendment”, “Open Meeting Law”, “ARS 33-1804”, “Membership Vote”, “Filing Fee Refund” ] } }
{ “rehearing”:{ “is_rehearing”:true, “base_case_id”:”19F-H1918001-REL”, “original_decision_status”:”affirmed”, “original_decision_summary”:”The original ALJ decision, issued on September 25, 2018, granted the Petitioner’s request, finding that the Sycamore Vista No. 8 Homeowners Association Board violated ARIZ. REV. STAT. § 33-1804(B) and Association Bylaws by unilaterally amending the Bylaws on November 20, 2017, without first calling for a vote by the Association members1,2,3. The order invalidated the amendment, required the Respondent to refund the Petitioner’s filing fee, and imposed a civil penalty of $250.004,5.”, “rehearing_decision_summary”:”The Department granted Respondent’s request for a rehearing, which was held on March 5, 20196,7. The ALJ affirmed the original decision, concluding that the Board’s action on November 20, 2017, violated ARIZ. REV. STAT. § 33-1804(B) and Article III of the Association Bylaws because the action was taken in the absence of a quorum of Association members voting in favor of the proposed amendment8. The rehearing order re-granted the petition, invalidated the third amendment, and reaffirmed the orders for the filing fee refund and the $250.00 civil penalty8,9.”, “issues_challenged”:[ { “issue_id”: “ISS-001”, “summary”: “Whether the HOA Board violated Association Bylaws Article III, Sections 3 & 4 and Article VIII, Section 1, and ARIZ. REV. STAT. § 33-1804(B) in an action taken to amend the Bylaws on November 20, 201710.”, “outcome”: “affirmed_petitioner_win” } ] } }
The matter, Jay A. Janicek vs. Sycamore Vista No. 8 Homeowners Association (Case No. 19F-H1918001-REL-RHG), involves a dispute over the validity of a Bylaw amendment passed by the homeowners’ association (HOA) Board of Directors12. The inclusion of ‘RHG’ in the case number confirms that the final decision resulted from a rehearing requested by the Respondent Association23.
Procedural History: The initial evidentiary hearing was held on September 5, 201824. The Administrative Law Judge (ALJ) issued a decision on September 24, 2018, granting the Petitioner’s request35. The Respondent requested and was granted a rehearing by the Department of Real Estate on November 7, 201836. The rehearing was held on March 5, 2019, where no new evidence was introduced, and the parties presented legal briefs and closing arguments2….
Key Facts and Core Issue: The dispute centered on the validity of the Board’s third amendment to the Association Bylaws, approved on November 20, 2017910. This amendment changed the financial oversight requirement from an annual audit by a public accountant to an annual audit, review, or compilation of financial records1112.
The main legal issue was whether the Board had the authority to unilaterally amend the Bylaws without a vote of the general membership and whether the Board violated ARIZ. REV. STAT. § 33-1804(B), concerning notice requirements for member meetings3…. The determination hinged on the interpretation of Bylaws Article XIII, Section 1, which permits amendments “by a vote of a majority of a quorum of members present in person or by proxy”1617.
Key Arguments: Petitioner Jay Janicek argued that the term “members” in Article XIII referred exclusively to the Association owners, as supported by the Bylaws’ definition of “Member” and the use of the term “proxy” (which applies to owners, not directors)14…. Petitioner asserted that since the Board acted without calling for a member vote and without statutory notice of the proposed amendment, the action was invalid and violated A.R.S. § 33-1804(B)14….
The Association argued that, based on reading the Bylaws in their entirety, the term “members” in Article XIII referred to the Board of Directors, particularly since the amendment was to occur at a meeting of the Board of Directors24….
Rehearing Decision and Outcome: In both the original decision and the rehearing decision, the ALJ reached the same conclusion, finding that the Petitioner sustained the burden of proof2728. The ALJ determined that the Association’s governing documents clearly differentiate between “members” (the body of owners) and “directors” (the elected Board)28…. The Board lacked the power to amend the Bylaws when that authority was delegated to the membership2930.
The ALJ concluded that the Board’s action on November 20, 2017, violated ARIZ. REV. STAT. § 33-1804(B) and Article III of the Association Bylaws because the amendment was adopted in the absence of a quorum of Association members voting in favor3132.
The final outcome of the rehearing was that the Petitioner’s petition was granted32. The Board’s third amendment to the Bylaws was invalidated532. Additionally, the Respondent Association was ordered to pay the Petitioner’s filing fee and a civil penalty of $250.00 for the violation533.
Case Participants
Petitioner Side
Jay A. Janicek(petitioner) Appeared on own behalf at initial hearing; Observed at rehearing.
Jake Kubert(petitioner attorney) Dessaules Law Group
Note: A Rehearing was requested for this case. The dashboard statistics reflect the final outcome of the rehearing process.
Case Summary
Case ID
19F-H1918001-REL
Agency
ADRE
Tribunal
OAH
Decision Date
2019-03-25
Administrative Law Judge
Jenna Clark
Outcome
total
Filing Fees Refunded
$500.00
Civil Penalties
$250.00
Parties & Counsel
Petitioner
Jay A. Janicek
Counsel
Jake Kubert
Respondent
Sycamore Vista No. 8 Homeowners Association
Counsel
Evan Thompson
Alleged Violations
ARIZ. REV. STAT. § 33-1804(B); Association Bylaws Article III, Sections 3 & 4; Association Bylaws Article VIII, Section 1
Outcome Summary
The ALJ granted the petition, concluding that the HOA Board’s unilateral amendment of the Bylaws on November 20, 2017, was an invalid action taken without the required vote of the Association members and without statutory notice, violating ARIZ. REV. STAT. § 33-1804(B) and the Association’s governing documents. The amendment was invalidated, and the Respondent was ordered to refund the Petitioner's filing fee and pay a $250.00 civil penalty.
Key Issues & Findings
Whether Sycamore Vista No. 8 Homeowners Association (Respondent) violated Association Bylaws Article III, Sections 3 & 4 and Article VIII, Section 1 in an action taken by the board on November 20, 2017.
The Board of Directors attempted a third amendment to the Bylaws on November 20, 2017, specifically changing the requirements for the Association's financial review (audit, review, or compilation). The ALJ concluded that this action was invalid because it was taken in the absence of a quorum of Association members voting in favor of the amendment, violating both the Bylaws and statutory notice requirements.
Orders: The petition was granted. The third amendment to the Association Bylaws taken on November 20, 2017, was invalidated. Respondent was ordered to pay the Petitioner the filing fee required by ARIZ. REV. STAT. § 32-2199.01 and pay a civil penalty of $250.00 to the Planned Community Hearing Office Fund.
Briefing Document: Janicek v. Sycamore Vista No. 8 Homeowners Association
Executive Summary
This document synthesizes the findings and legal conclusions from the administrative hearings regarding a dispute between Jay A. Janicek (“Petitioner”) and the Sycamore Vista No. 8 Homeowners Association (“Respondent” or “the Association”). The central issue was whether the Association’s Board of Directors acted outside its authority by unilaterally amending the Association’s Bylaws during a Board meeting on November 20, 2017, without a vote from the general membership.
The Administrative Law Judge (ALJ) determined that the Board’s action violated both the Association’s governing documents and Arizona Revised Statutes (A.R.S. § 33-1804). The ruling emphasized that the term “members” in the Bylaws refers specifically to the body of property owners, not the Board of Directors. Consequently, the third amendment to the Bylaws was invalidated, and the Association was ordered to pay a civil penalty and refund the Petitioner’s filing fees. A rehearing in March 2019 reconfirmed these findings, underscoring the necessity of transparency and membership participation in homeowners’ association governance.
The Department of Real Estate referred the matter to the Office of Administrative Hearings (OAH) following a petition filed by Mr. Janicek on July 25, 2018. The Respondent initially declined to present witnesses or exhibits, choosing to rely on a dispute over textual interpretation. Following an initial ruling in favor of the Petitioner, the Respondent requested a rehearing, which was granted but ultimately resulted in the same conclusion.
The Core Dispute: Bylaw Amendment Authority
The conflict arose from a Board meeting held on November 20, 2017. During this meeting, the Board voted to approve a third amendment to the Association’s Bylaws.
The Specific Amendment
The Board modified Article VIII, Section 6(d). The original text required the Board to:
• “…cause an annual audit of the Association books to be made by a public accountant at the completion of each fiscal year.”
The Board replaced this with language allowing for:
• “…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.”
Conflicting Interpretations of “Members”
The primary legal dispute centered on the interpretation of Bylaws Article XIII, Section 1, which 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.” (Emphasis added).
• Petitioner’s Position: “Members” refers to the general membership of the Association (property owners), as defined in Article II, Section 7 and the Declaration. Petitioner argued that the use of “proxy” in this section further proves it refers to members, as Board Directors are not permitted to vote by proxy.
• Respondent’s Position: “Members” refers to the members of the Board of Directors. The Association argued that because the word was not capitalized in Article XIII, it authorized the Board to amend Bylaws at their own meetings, provided a quorum of Directors was present.
Legal Analysis and Evidence
Governing Statutes and Case Law
The ALJ’s decision was informed by Arizona law and established legal principles:
• A.R.S. § 33-1804 (Open Meeting Law): This statute requires that notice of any meeting where a bylaw amendment is proposed must be sent to all members 10 to 50 days in advance. It also mandates that meetings of the board and association be open to all members.
• A.R.S. § 33-1804(F): The legislative intent of the Open Meeting Law is to promote transparency. Petitioner cited a message from Governor Ducey stating that such laws “provide residents the opportunity to resolve issues as a community rather than seek government intervention.”
• Powell v. Washburn (2006): The Arizona Supreme Court held that restrictive covenants (including Bylaws) must be interpreted to give effect to the intention of the parties based on the document in its entirety.
Findings of Fact regarding Authority
The ALJ identified several factors that invalidated the Board’s unilateral action:
1. Differentiated Terminology: The Bylaws consistently use “Directors” when referring to the Board and “Members” when referring to the homeowners. Article VI, Section 3 explicitly uses “Directors” to define a quorum for the Board, while Article XIII uses “members.”
2. Absence of Express Power: Article VII, which outlines the “Powers and Duties of the Board of Directors,” does not expressly grant the Board the authority to amend Bylaws. This power is reserved for the membership.
3. Lack of Notice: No Association members were present at the November 20, 2017, meeting, and no notice was provided to the general membership regarding a proposed amendment to the Bylaws as required by A.R.S. § 33-1804(B).
Conclusions of Law
The ALJ concluded that the Petitioner sustained the burden of proof by a preponderance of the evidence. The final legal determinations were:
• Avoidance of Absurdity: Bylaws must be construed to avoid an absurdity. The ALJ stated, “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: The Board’s action violated A.R.S. § 33-1804(B) due to the lack of transparency and failure to provide notice of a bylaw amendment.
• Violation of Governing Documents: The Board acted outside the authority granted to it by the Bylaws, specifically Article III and Article XIII.
Final Order and Penalties
The Administrative Law Judge issued the following orders:
1. Invalidation: The third amendment to the Association Bylaws, enacted on November 20, 2017, is null and void.
2. Restitution of Fees: The Respondent must pay the Petitioner the cost of his filing fee.
3. Civil Penalty: The Respondent was ordered to pay a sum of $250.00 to the Planned Community Hearing Office Fund as a penalty for the violations.
4. Binding Nature: Following the rehearing, the order became binding, with the only further recourse being judicial review in the Superior Court within 35 days.
Study Guide – 19F-H1918001-REL-RHG
Study Guide: Janicek v. Sycamore Vista No. 8 Homeowners Association
This study guide provides a comprehensive review of the legal proceedings between Jay A. Janicek and the Sycamore Vista No. 8 Homeowners Association. It examines the interpretation of governing documents, the application of Arizona Revised Statutes regarding homeowners’ associations, and the limits of a Board of Directors’ authority to amend bylaws.
——————————————————————————–
Part I: Short-Answer Quiz
Instructions: Answer the following questions in two to three sentences based on the provided legal documents.
1. Who are the primary parties involved in this administrative hearing, and what is their relationship?
2. What specific action taken by the Board of Directors on November 20, 2017, triggered this dispute?
3. How did the Petitioner define the term “member” according to the Association’s governing documents?
4. What was the Respondent’s primary argument regarding the interpretation of Article XIII, Section 1 of the Bylaws?
5. According to ARIZ. REV. STAT. § 33-1804(B), what must a notice of a membership meeting include if a bylaw amendment is proposed?
6. Why did the Petitioner argue that the use of the word “proxy” in the Bylaws supported his interpretation that only general members could amend the Bylaws?
7. What is the legal significance of the Covenants, Conditions, and Restrictions (CC&Rs) in the context of the relationship between an HOA and a property owner?
8. What was the “preponderance of the evidence” standard used by the Administrative Law Judge to reach a decision?
9. What specific penalties and orders were issued against the Respondent in the final decision?
10. What reason did the Administrative Law Judge give for concluding that the Board’s interpretation of the Bylaws was incorrect?
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Part II: Answer Key
1. Who are the primary parties involved in this administrative hearing, and what is their relationship? The Petitioner is Jay A. Janicek, a property owner and member of the Sycamore Vista subdivision. The Respondent is the Sycamore Vista No. 8 Homeowners Association, the entity responsible for governing the residential development where the Petitioner’s property is located.
2. What specific action taken by the Board of Directors on November 20, 2017, triggered this dispute? The Board voted to approve a third amendment to the Association’s Bylaws during a regular meeting. This amendment replaced a requirement for a full annual audit by a public accountant with a choice of an audit, review, or compilation to be completed within 180 days of the fiscal year-end.
3. How did the Petitioner define the term “member” according to the Association’s governing documents? The Petitioner asserted that “Member” refers to those persons entitled to membership as defined in the Declaration, specifically every lot owner. He argued that this definition distinguishes general property owners from the “Directors” who serve on the Board.
4. What was the Respondent’s primary argument regarding the interpretation of Article XIII, Section 1 of the Bylaws? The Respondent argued that the term “members” in Article XIII referred specifically to members of the Board of Directors rather than the general membership. They contended that since the word was not capitalized, it authorized the Board to amend Bylaws at any meeting where a quorum of directors was present.
5. According to ARIZ. REV. STAT. § 33-1804(B), what must a notice of a membership meeting include if a bylaw amendment is proposed? The statute requires that notice be sent to every owner 10 to 50 days in advance of the meeting, stating the date, time, and place. Crucially, the notice must also state the purpose of the meeting, including the general nature of any proposed amendments to the declaration or bylaws.
6. Why did the Petitioner argue that the use of the word “proxy” in the Bylaws supported his interpretation that only general members could amend the Bylaws? The Petitioner noted that the Bylaws allow for voting by “proxy,” a mechanism defined in Article III as applying to votes of the general membership. He argued that because Board members are legally prohibited from voting by proxy, the inclusion of the term in the amendment section proved the section applied to general members.
7. What is the legal significance of the Covenants, Conditions, and Restrictions (CC&Rs) in the context of the relationship between an HOA and a property owner? The CC&Rs constitute an enforceable contract between the Association and each individual property owner. By purchasing a residential unit within the development, the buyer agrees to be bound by the terms, powers, and restrictions outlined in these recorded documents.
8. What was the “preponderance of the evidence” standard used by the Administrative Law Judge to reach a decision? This standard requires the Petitioner to prove that his contention is “more probably true than not.” It is defined as the greater weight of the evidence or evidence that possesses the most convincing force, rather than the absolute removal of all doubt.
9. What specific penalties and orders were issued against the Respondent in the final decision? The Administrative Law Judge invalidated the third amendment to the Bylaws and ordered the Respondent to pay a $250.00 civil penalty to the Planned Community Hearing Office Fund. Additionally, the Respondent was ordered to reimburse the Petitioner for his initial filing fee.
10. What reason did the Administrative Law Judge give for concluding that the Board’s interpretation of the Bylaws was incorrect? The Judge ruled that bylaws must be construed to avoid “absurdity” and that the “voices of few cannot speak for all” without express authority. The governing documents clearly differentiated between “members” (owners) and “directors,” and the Board lacked the power to act where authority was reserved for the membership.
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Part III: Essay Questions
Instructions: Use the provided source context to develop comprehensive responses to the following prompts.
1. The Distinction Between “Members” and “Directors”: Analyze how the specific terminology used in the Sycamore Vista No. 8 Bylaws (Articles II, III, VI, and XIII) influenced the Administrative Law Judge’s decision. How does the consistent use of these terms throughout the document prevent the Board from claiming the powers of the general membership?
2. Statutory Compliance and Transparency: Discuss the importance of ARIZ. REV. STAT. § 33-1804 (the Open Meeting Law) as it relates to this case. Use Governor Ducey’s message regarding H.B. 2411 to explain the legislative intent behind ensuring transparency and participation in HOA governance.
3. The Role of the Office of Administrative Hearings (OAH): Explain the procedural path of this dispute, from the initial petition to the Department of Real Estate to the final rehearing. What is the scope of the OAH’s authority in interpreting contracts between homeowners and associations?
4. Contractual Interpretation and the “Powell v. Washburn” Precedent: Discuss the significance of the Arizona Supreme Court’s holding in Powell v. Washburn regarding restrictive covenants. How does the requirement to give effect to the “intention of the parties” apply to the interpretation of HOA Bylaws?
5. Limits of Board Authority: Based on the Findings of Fact and Conclusions of Law, evaluate the boundaries of a Board of Directors’ power. Under what circumstances can a Board exercise “all powers, duties, and authority” of the Association, and what serves as the definitive limit to that power?
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Part IV: Glossary of Key Terms
Definition
Administrative Law Judge (ALJ)
A presiding officer who hears evidence and issues decisions in contested cases involving state agencies.
ARIZ. REV. STAT. § 33-1804
The Arizona statute governing open meetings, notice requirements, and transparency for planned community associations.
Bylaws
The internal rules and regulations that govern the administration and management of an association.
Covenants, Conditions, and Restrictions; the recorded legal documents that establish the rules for a planned community and create a contract between owners and the HOA.
Civil Penalty
A financial fine imposed by a government agency or tribunal as a punishment for a violation of statutes or regulations.
Declarant
The original developer or entity that established the residential subdivision and its governing documents.
Declaration
The primary governing document that defines membership and property rights within a homeowners’ association.
Member
Defined in the source context as a property owner within the Sycamore Vista subdivision who is entitled to membership in the Association.
The Office of Administrative Hearings; an independent state agency that conducts evidentiary hearings for contested cases.
Petitioner
The party who initiates a legal action or petition (in this case, Jay A. Janicek).
Preponderance of the Evidence
The legal standard of proof required in this case, meaning a contention is “more probably true than not.”
A written authorization allowing one person to act or vote on behalf of another, specifically used by Association members.
Quorum
The minimum number of members or directors required to be present at a meeting to legally transact business.
Respondent
The party against whom a legal action or petition is filed (in this case, Sycamore Vista No. 8 HOA).
Restrictive Covenants
Provisions in a deed or other recorded document that limit the use of property and are interpreted to give effect to the intention of the parties.
{
“case”: {
“docket_no”: “19F-H1918001-REL-RHG”,
“case_title”: “Jay A. Janicek, Petitioner, vs. Sycamore Vista No. 8 Homeowners Association (FKA New Tucson Unit No. 8 Homeowners Association, Inc.), Respondent.”,
“decision_date”: “March 25, 2019”,
“tribunal”: “OAH”,
“agency”: “ADRE”
},
“individuals”: [
{
“name”: “Jay A. Janicek”,
“role”: “petitioner”,
“side”: “petitioner”,
“affiliation”: null,
“notes”: “Appeared on his own behalf at initial hearing; observed rehearing.”
},
{
“name”: “Jenna Clark”,
“role”: “ALJ”,
“side”: “neutral”,
“affiliation”: “OAH”,
“notes”: null
},
{
“name”: “Evan Thompson”,
“role”: “HOA attorney”,
“side”: “respondent”,
“affiliation”: “Thompson Krone, P.L.C.”,
“notes”: null
},
{
“name”: “Dennis Legere”,
“role”: “observer”,
“side”: “unknown”,
“affiliation”: null,
“notes”: “Observer present at initial hearing.”
},
{
“name”: “Becky Nutt”,
“role”: “observer”,
“side”: “unknown”,
“affiliation”: null,
“notes”: “Observer present at initial hearing.”
},
{
“name”: “Caleb Rhodes”,
“role”: “observer”,
“side”: “unknown”,
“affiliation”: null,
“notes”: “Observer present at initial hearing.”
},
{
“name”: “Jake Kubert”,
“role”: “petitioner attorney”,
“side”: “petitioner”,
“affiliation”: “Dessaules Law Group”,
“notes”: “Appeared on behalf of Petitioner at rehearing.”
},
{
“name”: “Judy Lowe”,
“role”: “Commissioner”,
“side”: “neutral”,
“affiliation”: “ADRE”,
“notes”: null
},
{
“name”: “Andrew F. Vizcarra”,
“role”: “property manager”,
“side”: “respondent”,
“affiliation”: “Tucson Realty & Trust Co. Management”,
“notes”: “Listed as representative for service of process for Respondent HOA.”
},
{
“name”: “Maxwell T. Riddiough”,
“role”: “HOA attorney”,
“side”: “respondent”,
“affiliation”: “Thompson Krone, P.L.C.”,
“notes”: null
}
]
}
{ “case”: { “agency”: “ADRE”, “tribunal”: “OAH”, “docket_no”: “19F-H1918001-REL”, “case_title”: “Jay A. Janicek vs. Sycamore Vista No. 8 Homeowners Association”, “decision_date”: “2019-03-25”, “alj_name”: “Jenna Clark” }, “parties”: [ { “party_id”: “P1”, “role”: “petitioner”, “name”: “Jay A. Janicek”, “party_type”: “homeowner”, “email”: null, “phone”: null, “attorney_name”: “Jake Kubert”, “attorney_firm”: “Dessaules Law Group”, “attorney_email”: null, “attorney_phone”: null }, { “party_id”: “R1”, “role”: “respondent”, “name”: “Sycamore Vista No. 8 Homeowners Association”, “party_type”: “HOA”, “email”: null, “phone”: null, “attorney_name”: “Evan Thompson”, “attorney_firm”: “Thompson Krone, P.L.C.”, “attorney_email”: null, “attorney_phone”: null } ], “issues”: [ { “issue_id”: “ISS-001”, “type”: “statute_and_bylaws”, “citation”: “ARIZ. REV. STAT. § 33-1804(B); Association Bylaws Article III, Sections 3 & 4; Association Bylaws Article VIII, Section 1”, “caption”: “Whether Sycamore Vista No. 8 Homeowners Association (Respondent) violated Association Bylaws Article III, Sections 3 & 4 and Article VIII, Section 1 in an action taken by the board on November 20, 2017.”, “violation(s)”: “Violation of ARIZ. REV. STAT. § 33-1804(B) and Association Bylaws Article III by amending the Bylaws on November 20, 2017, without proper notice and a vote of the Association membership.”, “summary”: “The Board of Directors attempted a third amendment to the Bylaws on November 20, 2017, specifically changing the requirements for the Association’s financial review (audit, review, or compilation)12. The ALJ concluded that this action was invalid because it was taken in the absence of a quorum of Association members voting in favor of the amendment, violating both the Bylaws and statutory notice requirements34.”, “outcome”: “petitioner_win”, “filing_fee_paid”: 500.0, “filing_fee_refunded”: true, “civil_penalty_amount”: 250.0, “orders_summary”: “The petition was granted. The third amendment to the Association Bylaws taken on November 20, 2017, was invalidated. Respondent was ordered to pay the Petitioner the filing fee required by ARIZ. REV. STAT. § 32-2199.01 and pay a civil penalty of $250.00 to the Planned Community Hearing Office Fund56.”, “why_the_loss”: null, “cited”: [ “ARIZ. REV. STAT. § 33-1804(B)”, “Association Bylaws Article III” ] } ], “money_summary”: { “issues_count”: 1, “total_filing_fees_paid”: 500.0, “total_filing_fees_refunded”: 500.0, “total_civil_penalties”: 250.0 }, “outcomes”: { “petitioner_is_hoa”: false, “petitioner_win”: “total”, “summarize_judgement”: “The ALJ granted the petition, concluding that the HOA Board’s unilateral amendment of the Bylaws on November 20, 2017, was an invalid action taken without the required vote of the Association members and without statutory notice, violating ARIZ. REV. STAT. § 33-1804(B) and the Association’s governing documents47. The amendment was invalidated, and the Respondent was ordered to refund the Petitioner’s filing fee and pay a $250.00 civil penalty56.”, “why_the_loss”: null }, “analytics”: { “cited”: [ “ARIZ. REV. STAT. § 33-1804(B)”, “ARIZ. REV. STAT. § 32-2199.02(A)”, “ARIZ. REV. STAT. § 32-2199.05”, “Powell v. Washburn, 125 P.3d 373 (Ariz. 2006)”, “Tierra Ranchos Homeowners Ass’n v. Kitchukov, 216 Ariz. 195, 165 P.3d 173 (App. 2007)” ], “tags”: [ “HOA Governance”, “Bylaws Amendment”, “Open Meeting Law”, “ARS 33-1804”, “Membership Vote”, “Filing Fee Refund” ] } }
{ “rehearing”:{ “is_rehearing”:true, “base_case_id”:”19F-H1918001-REL”, “original_decision_status”:”affirmed”, “original_decision_summary”:”The original ALJ decision, issued on September 25, 2018, granted the Petitioner’s request, finding that the Sycamore Vista No. 8 Homeowners Association Board violated ARIZ. REV. STAT. § 33-1804(B) and Association Bylaws by unilaterally amending the Bylaws on November 20, 2017, without first calling for a vote by the Association members1,2,3. The order invalidated the amendment, required the Respondent to refund the Petitioner’s filing fee, and imposed a civil penalty of $250.004,5.”, “rehearing_decision_summary”:”The Department granted Respondent’s request for a rehearing, which was held on March 5, 20196,7. The ALJ affirmed the original decision, concluding that the Board’s action on November 20, 2017, violated ARIZ. REV. STAT. § 33-1804(B) and Article III of the Association Bylaws because the action was taken in the absence of a quorum of Association members voting in favor of the proposed amendment8. The rehearing order re-granted the petition, invalidated the third amendment, and reaffirmed the orders for the filing fee refund and the $250.00 civil penalty8,9.”, “issues_challenged”:[ { “issue_id”: “ISS-001”, “summary”: “Whether the HOA Board violated Association Bylaws Article III, Sections 3 & 4 and Article VIII, Section 1, and ARIZ. REV. STAT. § 33-1804(B) in an action taken to amend the Bylaws on November 20, 201710.”, “outcome”: “affirmed_petitioner_win” } ] } }
The matter, Jay A. Janicek vs. Sycamore Vista No. 8 Homeowners Association (Case No. 19F-H1918001-REL-RHG), involves a dispute over the validity of a Bylaw amendment passed by the homeowners’ association (HOA) Board of Directors12. The inclusion of ‘RHG’ in the case number confirms that the final decision resulted from a rehearing requested by the Respondent Association23.
Procedural History: The initial evidentiary hearing was held on September 5, 201824. The Administrative Law Judge (ALJ) issued a decision on September 24, 2018, granting the Petitioner’s request35. The Respondent requested and was granted a rehearing by the Department of Real Estate on November 7, 201836. The rehearing was held on March 5, 2019, where no new evidence was introduced, and the parties presented legal briefs and closing arguments2….
Key Facts and Core Issue: The dispute centered on the validity of the Board’s third amendment to the Association Bylaws, approved on November 20, 2017910. This amendment changed the financial oversight requirement from an annual audit by a public accountant to an annual audit, review, or compilation of financial records1112.
The main legal issue was whether the Board had the authority to unilaterally amend the Bylaws without a vote of the general membership and whether the Board violated ARIZ. REV. STAT. § 33-1804(B), concerning notice requirements for member meetings3…. The determination hinged on the interpretation of Bylaws Article XIII, Section 1, which permits amendments “by a vote of a majority of a quorum of members present in person or by proxy”1617.
Key Arguments: Petitioner Jay Janicek argued that the term “members” in Article XIII referred exclusively to the Association owners, as supported by the Bylaws’ definition of “Member” and the use of the term “proxy” (which applies to owners, not directors)14…. Petitioner asserted that since the Board acted without calling for a member vote and without statutory notice of the proposed amendment, the action was invalid and violated A.R.S. § 33-1804(B)14….
The Association argued that, based on reading the Bylaws in their entirety, the term “members” in Article XIII referred to the Board of Directors, particularly since the amendment was to occur at a meeting of the Board of Directors24….
Rehearing Decision and Outcome: In both the original decision and the rehearing decision, the ALJ reached the same conclusion, finding that the Petitioner sustained the burden of proof2728. The ALJ determined that the Association’s governing documents clearly differentiate between “members” (the body of owners) and “directors” (the elected Board)28…. The Board lacked the power to amend the Bylaws when that authority was delegated to the membership2930.
The ALJ concluded that the Board’s action on November 20, 2017, violated ARIZ. REV. STAT. § 33-1804(B) and Article III of the Association Bylaws because the amendment was adopted in the absence of a quorum of Association members voting in favor3132.
The final outcome of the rehearing was that the Petitioner’s petition was granted32. The Board’s third amendment to the Bylaws was invalidated532. Additionally, the Respondent Association was ordered to pay the Petitioner’s filing fee and a civil penalty of $250.00 for the violation533.
Case Participants
Petitioner Side
Jay A. Janicek(petitioner) Appeared on own behalf at initial hearing; Observed at rehearing.
Jake Kubert(petitioner attorney) Dessaules Law Group
Note: A Rehearing was requested for this case. The dashboard statistics reflect the final outcome of the rehearing process.
Case Summary
Case ID
18F-H1818052-REL-RHG
Agency
ADRE
Tribunal
OAH
Decision Date
2019-01-17
Administrative Law Judge
Thomas Shedden
Outcome
loss
Filing Fees Refunded
$0.00
Civil Penalties
$0.00
Parties & Counsel
Petitioner
Lawrence M. Stewart
Counsel
—
Respondent
Canyon Gate Condominium Association, Inc.
Counsel
Nicolas C. S. Nogami
Alleged Violations
Association Bylaws section 5.4
Outcome Summary
The Administrative Law Judge dismissed Petitioner Lawrence M. Stewart's petition and deemed the Respondent, Canyon Gate Condominium Association, Inc., to be the prevailing party.
Why this result: Petitioner failed to prove the Association violated Bylaws Section 5.4 or acted unreasonably or in bad faith when denying his request for a variance. The Bylaw section cited was determined to be a liability shield for the Board, not a source of duty owed to the homeowner.
Key Issues & Findings
Alleged failure of HOA Board to act in good faith when denying Petitioner's request for a variance for unauthorized common area changes
Petitioner made changes to the common area without permission and the Board denied his subsequent request for a variance. Petitioner alleged the Board violated Bylaws Section 5.4 by failing to act in good faith and showing bias. The ALJ found that Section 5.4 is a liability shield for the Board, not a duty imposed upon them, and Petitioner failed to meet the burden of proof to show bad faith or unreasonableness.
Orders: Petitioner Lawrence M. Stewart’s petition is dismissed. Respondent is deemed to be the prevailing party in this matter.
Filing fee: $0.00, Fee refunded: No
Disposition: respondent_win
Cited:
ARIZ. REV. STAT. Title 32, Ch. 20, Art. 11
ARIZ. ADMIN. CODE § R2-19-119
McNally v. Sun Lakes Homeowners Ass’n #1, Inc., 241 Ariz. 1, 382 P.3d 1216 (2016 App.)
Tierra Ranchos Homeowners Ass'n v. Kitchukov, 216 Ariz. 195, 165 P.3d 173 (App. 2007)
Analytics Highlights
Topics: HOA governance, variance denial, common area modifications, good faith requirement, board liability shield, prevailing party
Additional Citations:
ARIZ. REV. STAT. Title 32, Ch. 20, Art. 11
ARIZ. ADMIN. CODE § R2-19-119
McNally v. Sun Lakes Homeowners Ass’n #1, Inc., 241 Ariz. 1, 382 P.3d 1216 (2016 App.)
Tierra Ranchos Homeowners Ass'n v. Kitchukov, 216 Ariz. 195, 165 P.3d 173 (App. 2007)
Briefing Document: Stewart v. Canyon Gate Condominium Association, Inc.
Executive Summary
This document synthesizes the findings and conclusions from an administrative legal case involving Petitioner Lawrence M. Stewart and Respondent Canyon Gate Condominium Association, Inc. The core of the dispute revolves around Mr. Stewart’s unauthorized modifications to a common area, for which the Association’s Board of Directors denied a retroactive variance. Mr. Stewart alleged the Board violated its bylaws by acting in bad faith, that a specific Board member was biased against him, and that he was subjected to unfair treatment compared to other homeowners.
The Administrative Law Judge, in both an initial hearing and a subsequent rehearing, consistently ruled against Mr. Stewart. The judge determined that the specific bylaw cited (Section 5.4) was an indemnification clause that shields the Board from liability and does not impose a duty of action. Crucially, Mr. Stewart failed to meet the legal burden of proving his claims by a “preponderance of the evidence.” The Board’s rationale for the denial—to avoid setting a precedent, or “opening a Pandora’s Box”—was deemed a reasonable position for a condominium association. Evidence presented to support claims of bias and unequal treatment was found to be insufficient or not probative. Ultimately, Mr. Stewart’s petition was dismissed in its entirety.
Case Overview
This matter, designated as No. 18F-H1818052-REL, was adjudicated by the Office of Administrative Hearings under the authority of the Arizona Department of Real Estate. The case centered on a petition filed by Mr. Stewart on May 21, 2018, alleging a violation of the Association’s Bylaws by the Board of Directors.
Parties Involved
Name / Entity
Representation
Petitioner
Lawrence M. Stewart
On his own behalf
Respondent
Canyon Gate Condominium Association, Inc.
Mark K. Sahl, Esq. & Nichols C. S. Nogami, Esq.
Administrative Law Judge Thomas Shedden
Case Chronology
• November 15, 2017: The Association’s counsel informs Mr. Stewart in a letter that he is in violation of section 5.1 of the CC&Rs for making unapproved changes to a common/limited common area.
• Post-November 15, 2017: Mr. Stewart, then a member of the Board, requests a variance for the changes.
• December 27, 2017: The Association’s attorney sends a letter stating an understanding that Mr. Stewart had recused himself and that the other two Board members (Sandra Fernandez and David Larson) had required the area to be restored.
• January 4, 2018: Mr. Stewart writes to the other Board members, refuting that he had agreed to recuse himself and requesting a formal meeting to consider his variance request.
• February 18, 2018: At a Board meeting, Mr. Stewart resigns from the Board. The remaining two members vote to deny his variance request and require him to restore the area to its original condition.
• May 21, 2018: Mr. Stewart files his petition with the Arizona Department of Real Estate.
• September 6, 2018: The initial administrative hearing is conducted.
• September 14, 2018: The Administrative Law Judge (ALJ) issues a decision dismissing Mr. Stewart’s petition.
• January 2, 2019: A rehearing is conducted.
• January 17, 2019: The ALJ issues a final decision following the rehearing, again dismissing the petition.
Petitioner’s Central Allegations
Mr. Stewart’s case rested on four primary claims against the Association’s Board.
1. Violation of Bylaws Section 5.4
The formal petition alleged a violation of Association Bylaws Article V, Section 5.4 (Liability), which states in part:
“So long as he/she has acted in good faith on the basis of information actually possessed, neither the Board nor any member of the Board nor any officer of the ASSOCIATION shall be liable to the ASSOCIATION, any OWNER, or to any other party for any damage, loss, or prejudice suffered or claimed on account of: (i) the approval or disapproval of any plans, drawings, or specifications, whether or not defective…or (v) any act or failure to act by the ASSOCIATION, or Board.”
Mr. Stewart cited this section because it was the only part of the governing documents he could find that included a “good faith” requirement.
2. Lack of Good Faith by the Board
Mr. Stewart asserted that the Board did not act in good faith when it denied his variance request. He based this claim on several points:
• He resigned from the Board during the February 18, 2018 meeting because he “got the sense ‘right away’ that the other Board members’ minds were made up and that they would not approve his request.”
• He presented unrebutted testimony that the Board members were unwilling to physically look at the changes he had made and only gave a “cursory look” at photographs he provided.
• The Board’s decision appeared to have been made prior to the meeting, as evidenced by the attorney’s December 27, 2017 letter which erroneously stated he had recused himself.
3. Bias of Board Member David Larson
A significant portion of Mr. Stewart’s argument was that Board member David Larson was personally biased against him. The evidence presented to support this included:
• Initial Hearing Evidence:
◦ A biography of Mr. Larson prepared by the property manager. When questioned, Mr. Stewart could not identify specific information showing bias but stated the “entire document coupled with the other statements shows a bias.”
◦ Notes from a November 28, 2017 Board meeting where Mr. Larson informed members that enforcement actions (towing, violation notices) would begin immediately and that he was “too busy to talk to people about Board business in driveways.”
• Rehearing Evidence:
◦ A letter dated October 3, 2018, from Mr. Larson to Association members urging them not to vote for Mr. Stewart in an upcoming election.
4. Unfair and Unequal Treatment
Mr. Stewart claimed he was treated unfairly because other units in the condominium were also not in conformity with the CC&Rs.
• He presented photos of units he believed were out of compliance.
• He testified that he had verified with the Association that none of these units had received a variance in the last two years.
• However, he acknowledged he did not know if variances had been granted more than two years prior or if the changes had received pre-approval, which would not require a variance.
Respondent’s Position and Legal Arguments
The Canyon Gate Condominium Association, represented by counsel, did not present witnesses but argued on legal grounds.
• Inapplicability of Bylaws Section 5.4: The Association’s core argument was that Section 5.4 was not applicable to Mr. Stewart’s complaint. They contended the section is an indemnification clause designed to act as a “shield” to protect Board members from liability when they act in good faith, not a “sword” that imposes an affirmative duty on them that can be violated.
• Reasonableness of Board Decision: The Association maintained that the Board’s decision was reasonable. According to Mr. Stewart’s own testimony, the Board’s basis for denial was the fear that granting his variance would “open a Pandora’s Box where other unit owners would request variances.”
Administrative Law Judge’s Rulings and Conclusions
The ALJ’s decisions in both the initial hearing and the rehearing were consistent, ultimately finding in favor of the Respondent.
Legal Framework
• Burden of Proof: The ALJ established that Mr. Stewart, as the petitioner, bore the burden of proof. The standard of proof was a “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.”
• Board’s Duty: The judge noted that while the Bylaws are a contract, the Association, in exercising its authority, must “act reasonably.”
Analysis of Bylaws Section 5.4
• The judge agreed entirely with the Association’s interpretation, concluding that Section 5.4 “does not impose any duty on the Board members, but rather merely shields them from liability if they act in good faith.”
• In the initial hearing, the judge noted Mr. Stewart “appeared to acknowledge that section 5.4 acts as a ‘shield’ and not a ‘sword.'”
• By the rehearing, this was solidified, with the finding that “Mr. Stewart acknowledges that the Association has not violated Bylaws Section 5.4.”
Assessment of ‘Good Faith’ and Bias Claims
• The ALJ concluded that even if Section 5.4 were applicable, Mr. Stewart “has not shown by a preponderance of the evidence that the Board did not act in good faith, that it had a bias against him, or that it treated him unfairly.”
• The judge found the Board’s reasoning for the denial—the “Pandora’s Box” concern—was “not an unreasonable position for the Board of a condominium association.”
• Given this reasoning, the judge stated that “the specifics of the changes Mr. Stewart made would not be germane to the decision,” thereby neutralizing the claim that the Board failed to properly inspect the modifications.
Evaluation of Unfair Treatment Claim
• The evidence of other non-compliant units was deemed “not probative of the issue at hand.”
• The judge reasoned that there was “no evidence to show that they had requested that the Board grant variances,” meaning their situations were not comparable to Mr. Stewart’s, who had made unapproved changes and was subsequently denied a variance.
Final Disposition
• Initial Decision (September 14, 2018): IT IS ORDERED that Petitioner Lawrence M. Stewart’s petition is dismissed. This order was subject to a request for rehearing within 30 days.
• Rehearing Decision (January 17, 2019): IT IS ORDERED that Petitioner Lawrence M. Stewart’s petition is dismissed. This final order was noted as binding on the parties, with any further appeal requiring judicial review filed with the superior court within 35 days.
Study Guide – 18F-H1818052-REL-RHG
Study Guide: Stewart v. Canyon Gate Condominium Association, Inc.
This guide provides a review of the administrative case Lawrence M. Stewart, Petitioner, vs. Canyon Gate Condominium Association, Inc., Respondent (No. 18F-H1818052-REL), including the initial hearing and a subsequent rehearing.
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Short-Answer Quiz
Instructions: Answer the following questions in two to three sentences, based on the provided case documents.
1. What action by Petitioner Lawrence M. Stewart initiated the dispute with the Canyon Gate Condominium Association?
2. What specific provision of the Association Bylaws did Mr. Stewart allege was violated in his petition?
3. Why did Mr. Stewart resign from the Association’s Board during the February 18, 2018 meeting?
4. What was the Board’s stated reason for denying Mr. Stewart’s request for a variance?
5. Explain the legal interpretation of Bylaws Section 5.4 as a “shield” and not a “sword.”
6. List two pieces of evidence Mr. Stewart presented at the initial hearing to support his claim that Board member David Larson was biased against him.
7. What was the legal standard of proof in this case, and which party was required to meet it?
8. How did Mr. Stewart attempt to prove he was being treated unfairly in comparison to other unit owners, and why did the judge find this evidence unconvincing?
9. At the rehearing, what new evidence did Mr. Stewart present regarding Mr. Larson’s alleged bias?
10. What was the final outcome of both the initial administrative hearing and the subsequent rehearing?
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Answer Key
1. Mr. Stewart initiated the dispute by making changes to the common area and/or limited common area around his unit without first receiving permission from the Association. The Association informed him in a letter dated November 15, 2017, that this was a violation of section 5.1 of the CC&Rs.
2. Mr. Stewart alleged in his petition that the Association violated Bylaws Section 5.4. He later acknowledged this section was not technically violated but cited it because it was the only provision in the governing documents he could find that included a “good faith” requirement.
3. Mr. Stewart resigned from the Board because he “got the sense ‘right away’ that the other Board members’ minds were made up” and that they would not approve his request for a variance, regardless of the details.
4. The Board denied Mr. Stewart’s request on the basis that approving it would “open a Pandora’s Box” where other unit owners would then also request variances. The Administrative Law Judge found this was not an unreasonable position for a condominium association board to take.
5. The interpretation of Section 5.4 is that it acts as a “shield” to protect, or indemnify, Board members from liability for damages, loss, or prejudice, provided they have acted in good faith. It is not a “sword” that imposes an affirmative duty on the Board that Mr. Stewart could use to compel a certain action or claim a violation.
6. At the initial hearing, Mr. Stewart presented two of the following: (1) a biography of Mr. Larson; (2) notes from a November 28, 2017 meeting where Mr. Larson stated that enforcement actions would begin immediately; and (3) a letter from the Association’s attorney that erroneously stated Mr. Stewart had recused himself, suggesting the matter was decided without him.
7. The standard of proof was a “preponderance of the evidence.” The burden of proof rested entirely on the petitioner, Mr. Stewart, to show that the Association had acted improperly.
8. Mr. Stewart presented testimony and photos of other units that he believed were not in conformity with the CC&Rs. The judge found this evidence was not probative because Mr. Stewart provided no evidence that those owners had requested and been denied variances, and he acknowledged he did not know if they had received variances more than two years prior or had received preapproval.
9. At the rehearing, Mr. Stewart entered into evidence an October 3, 2018 letter from Mr. Larson to the Association’s members. In this letter, Mr. Larson urged the members not to vote for Mr. Stewart in an upcoming election.
10. In both the initial decision (September 14, 2018) and the decision following the rehearing (January 17, 2019), the Administrative Law Judge ordered that Mr. Stewart’s petition be dismissed. The Respondent, Canyon Gate Condominium Association, Inc., was deemed the prevailing party in the matter.
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Essay Questions
Instructions: The following questions are designed for a more in-depth analysis of the case. Formulate a comprehensive response for each prompt, citing specific facts and legal conclusions from the case documents.
1. Analyze the Administrative Law Judge’s reasoning for concluding that Bylaws Section 5.4 was not applicable to Mr. Stewart’s petition. How did Mr. Stewart’s own testimony during the legal proceedings support this conclusion?
2. Discuss the concept of “preponderance of the evidence” as defined in the case documents. Evaluate the evidence Mr. Stewart presented across both hearings and explain why the judge found it insufficient to meet this standard regarding his claims of bias, bad faith, and unfair treatment.
3. Examine the Canyon Gate Board’s justification for denying the variance request (the “Pandora’s Box” argument). Based on the legal principles cited in the decisions, why was this considered a reasonable position for a condominium association board to take, and why did it render the specifics of Mr. Stewart’s changes non-germane?
4. Trace the procedural timeline of this case from the Association’s initial notice of violation on November 15, 2017, to the final binding order issued on January 17, 2019. Identify the key events, arguments, and decisions at each stage of the administrative process.
5. Mr. Stewart argued that he was treated unfairly because other units were also out of compliance with the CC&Rs. Deconstruct this argument and explain why the judge dismissed this line of reasoning as not being probative to the issue at hand in both the initial hearing and the rehearing.
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Glossary of Key Terms
Definition
Administrative Law Judge (ALJ)
The official (Thomas Shedden) who presides over hearings at the Office of Administrative Hearings and issues a decision on the matter.
Association
The Canyon Gate Condominium Association, Inc., the entity responsible for enforcing the Bylaws and CC&Rs. In this case, it is the Respondent.
The governing body of the Association, which at the time of the variance request included Lawrence M. Stewart, Sandra Fernandez, and David Larson.
Burden of Proof
The obligation to prove one’s assertion. In this case, the burden of proof was on the Petitioner, Mr. Stewart.
Bylaws
A contract between the Association and its members. The parties are required to comply with its terms, and the Association must act reasonably in exercising its authority under them.
Covenants, Conditions, and Restrictions. Mr. Stewart was found to be in violation of section 5.1 of the CC&Rs for making unapproved changes.
Common Area / Limited Common Area
The property around a condominium unit that is shared or has restricted use. Mr. Stewart made unauthorized changes to this area.
Good Faith
A standard of conduct mentioned in Bylaws Section 5.4. It protects Board members from liability so long as they act in good faith based on information they possess. Mr. Stewart claimed the Board failed to meet this standard.
Indemnification
The act of compensating for loss or damage. Bylaws Article V, which contains Section 5.4, pertains to indemnification.
Petitioner
The party who files a petition initiating a legal case. In this matter, the petitioner was Lawrence M. Stewart.
Preponderance of the Evidence
The standard of proof required in this case, defined as “The greater weight of the evidence… sufficient to incline a fair and impartial mind to one side of the issue rather than the other.”
Rehearing
A second hearing granted in a legal matter. A rehearing was conducted on January 2, 2019, after which the judge issued a final, binding order.
Respondent
The party against whom a petition is filed. In this matter, the respondent was Canyon Gate Condominium Association, Inc.
Variance
An official exception or deviation from a rule. Mr. Stewart requested a variance to allow the unapproved changes he had made, which the Board denied.
Blog Post – 18F-H1818052-REL-RHG
A Homeowner Sued His HOA and Lost—The Surprising Reasons Why Might Save You Thousands
Introduction: The Perennial Battle Between Homeowner and HOA
For many homeowners, the relationship with their Homeowners’ Association (HOA) can feel like a constant source of friction. From landscaping rules to paint colors, the potential for disputes is endless. But what happens when a homeowner feels so strongly wronged that they take the ultimate step of suing their association? More importantly, what happens when they lose?
This is the story of a homeowner who was also a board member. After making unauthorized changes to his property, he was denied his request for a variance to approve the changes he had already made. Believing the Board had acted in bad faith, he sued the association. His case failed, not on a minor technicality, but due to fundamental misunderstandings of how HOA law and governing documents function.
This outcome highlights a common, and costly, misconception about HOA governance. We will explore the surprising legal realities revealed in the case of Lawrence M. Stewart vs. Canyon Gate Condominium Association, Inc., offering several crucial takeaways for any homeowner before they decide to challenge their HOA.
1. A “Good Faith” Clause Can Be a Shield, Not a Sword
Mr. Stewart based his entire case on the claim that the Board violated Section 5.4 of the bylaws by not acting in “good faith,” as this was the only section in the governing documents he could find that mentioned the phrase.
This is where the case pivots on a crucial legal distinction. The court found that this clause was not intended to impose a duty on the board that a homeowner could sue over (a “sword”). Instead, its function was to protect board members from liability if they acted in good faith (a “shield”). Legally, this is an indemnification clause. Think of it as a form of insurance, designed to protect volunteer board members from being personally sued for making reasonable decisions, not a weapon for homeowners to attack those decisions.
In his testimony, Mr. Stewart even acknowledged this “shield” versus “sword” distinction but proceeded with the argument anyway. The lesson for homeowners is unequivocal: you must understand the precise legal function of a clause within your governing documents, not just its keywords.
2. The “Pandora’s Box” Defense Is a Powerful Argument
The Board’s primary reason for denying Mr. Stewart’s variance request was its fear that approval “would open a Pandora’s Box where other unit owners would request variances.” While a homeowner might hear “Pandora’s Box” and think it’s a lazy excuse, the court viewed it as the board performing its fundamental duty.
The judge stated this reasoning “was not an unreasonable position for the Board of a condominium association.” This validation is incredibly impactful because it shifts the focus from the merits of one homeowner’s request to the Board’s overarching fiduciary duty to uphold the rules consistently for the entire community. It shows that an HOA’s duty to maintain consistent enforcement and avoid setting a messy precedent is a legally sound basis for a decision, making the specific details of one homeowner’s changes irrelevant.
3. Being on the Board Won’t Give You a Pass
In a surprising twist, Mr. Stewart was a member of the HOA Board at the very time he made the unauthorized changes and requested the variance. This created a clear conflict of interest and ultimately did not help his case.
The situation culminated in Mr. Stewart resigning from the Board during the meeting where his request was considered. He stated he resigned because he felt “the other Board members’ minds were made up” and they would not approve his request. This incident serves as a stark reminder: holding a position on the board does not grant special privileges or exceptions to the rules. In fact, it can complicate personal matters and highlight a direct conflict between a board member’s duties to the association and their personal interests.
4. “Whataboutism” Is Not a Legal Strategy
Like many homeowners in a dispute, Mr. Stewart argued that he was being treated unfairly because other units in the community were also out of compliance with the CC&Rs. This is a common defense, but its legal failure in this case is a masterclass in what courts actually require for proof.
Mr. Stewart’s effort was commendable but legally insufficient. He presented photos of other non-conforming units and even “verified with the Association that none of these units had received a variance in the last two years.” However, his evidence collapsed under cross-examination when he “acknowledged… he did not know if any of these units had received variances more than two years ago or whether preapproval for the changes had been granted.”
The judge dismissed his evidence entirely. This transforms the lesson from a simple “don’t point fingers” to a much more sophisticated legal principle: to prove selective enforcement, you must prove others in the identical procedural situation were treated differently, and incomplete evidence is no evidence at all.
5. The Burden of Proof Is Everything
Perhaps the most stunning fact from the case is that the Association “presented no witnesses” at either the initial hearing or the subsequent rehearing. They won the case without putting a single person on the stand to testify.
They could do this because the legal system placed the “burden of proof” squarely on Mr. Stewart. As the petitioner, it was his job to prove his claims of bad faith, bias, and unfair treatment by a “preponderance of the evidence.” The Association didn’t have to prove it acted in good faith; Mr. Stewart had to prove it acted in bad faith. He failed to meet this standard. In other words, he had to prove that his claims were more likely to be true than not—even if only by a 51% to 49% margin.
The court document formally defines this legal standard as:
The greater weight of the evidence, not necessarily established by the greater number of witnesses testifying to a fact but by evidence that has the most convincing force; superior evidentiary weight that, though not sufficient to free the mind wholly from all reasonable doubt, is still sufficient to incline a fair and impartial mind to one side of the issue rather than the other.
In a legal dispute with your HOA, the case is not about who is morally right or wrong. It’s about who can meet their required burden of proof with convincing, relevant evidence.
Conclusion: Know the Rules Before You Fight the Rulers
The case of Lawrence M. Stewart is a cautionary tale that every homeowner should internalize. His failed lawsuit, which likely became a five-figure mistake when factoring in legal fees for both sides, underscores that HOA governing documents are a binding contract. Challenging the Board requires more than a sense of unfairness. It demands a precise, evidence-backed legal argument that aligns with the specific terms of that contract and the applicable legal standards.
Before you declare war on your HOA, ask yourself: are you prepared to prove your case with irrefutable evidence, or are you just banking on a feeling of being wronged?
Case Participants
Petitioner Side
Lawrence M. Stewart(petitioner) Also served as a Board member for Respondent until resigning during the variance request consideration.
Respondent Side
Mark K. Sahl(attorney) CARPENTER, HAZLEWOOD, DELGADO & BOLEN LLP Represented Respondent in the initial hearing.
Nicolas C. S. Nogami(attorney) CARPENTER, HAZLEWOOD, DELGADO & BOLEN LLP Represented Respondent in both the initial hearing (listed as 'Nichols C. S. Nogami') and the rehearing.
Sandra Fernandez(board member) Canyon Gate Condominium Association, Inc. Voted to deny Petitioner's variance request.
David Larson(board member) Canyon Gate Condominium Association, Inc. Voted to deny Petitioner's variance request; Petitioner alleged he was biased.
Neutral Parties
Thomas Shedden(ALJ) Office of Administrative Hearings
Judy Lowe(commissioner) Arizona Department of Real Estate Recipient of the decision copies.
F. Del Sol(administrative staff) Office of Administrative Hearings Signed the transmission of the decision copies.
Note: A Rehearing was requested for this case. The dashboard statistics reflect the final outcome of the rehearing process.
Case Summary
Case ID
18F-H1818052-REL-RHG
Agency
ADRE
Tribunal
OAH
Decision Date
2019-01-17
Administrative Law Judge
Thomas Shedden
Outcome
none
Filing Fees Refunded
$0.00
Civil Penalties
$0.00
Parties & Counsel
Petitioner
Lawrence M. Stewart
Counsel
—
Respondent
Canyon Gate Condominium Association, Inc.
Counsel
Nicolas C. S. Nogami, Esq.
Alleged Violations
Bylaws section 5.4
Outcome Summary
The Administrative Law Judge dismissed the petition filed by homeowner Lawrence M. Stewart against Canyon Gate Condominium Association, Inc., finding that the Petitioner failed to prove the Association violated its Bylaws concerning good faith in denying his request for a variance.
Why this result: The Petitioner failed to meet the burden of proof, as Bylaws Section 5.4 was determined to be a shield protecting the Board from liability rather than a provision imposing a duty of good faith that could be violated by denying a variance.
Key Issues & Findings
Alleged failure of the HOA Board to act in good faith when denying a variance request
Petitioner alleged the Board failed to act in good faith when denying his request for a variance to changes he made, and asserted bias and unfair treatment. The ALJ concluded that Section 5.4 acts as a shield from liability for Board members, not a duty imposed upon them, and Petitioner failed to meet the burden of proof.
Orders: Petitioner Lawrence M. Stewart's petition is dismissed. Respondent is deemed to be the prevailing party in this matter.
Filing fee: $0.00, Fee refunded: No
Disposition: respondent_win
Cited:
ARIZ. REV. STAT. Title 32, Ch. 20, Art. 11
ARIZ. ADMIN. CODE § R2-19-119
McNally v. Sun Lakes Homeowners Ass’n #1, Inc., 241 Ariz. 1, 382 P.3d 1216 (2016 App.)
Tierra Ranchos Homeowners Ass'n v. Kitchukov, 216 Ariz. 195, 165 P.3d 173 (App. 2007)
ARIZ. REV. STAT. section 32-2199.02(B)
Analytics Highlights
Topics: HOA governance, bylaw violation, good faith, variance denial, board liability
Additional Citations:
ARIZ. REV. STAT. Title 32, Ch. 20, Art. 11
ARIZ. ADMIN. CODE § R2-19-119
McNally v. Sun Lakes Homeowners Ass’n #1, Inc., 241 Ariz. 1, 382 P.3d 1216 (2016 App.)
Tierra Ranchos Homeowners Ass'n v. Kitchukov, 216 Ariz. 195, 165 P.3d 173 (App. 2007)
Briefing Document: Stewart v. Canyon Gate Condominium Association, Inc.
Executive Summary
This document synthesizes the findings and conclusions from an administrative legal case involving Petitioner Lawrence M. Stewart and Respondent Canyon Gate Condominium Association, Inc. The core of the dispute revolves around Mr. Stewart’s unauthorized modifications to a common area, for which the Association’s Board of Directors denied a retroactive variance. Mr. Stewart alleged the Board violated its bylaws by acting in bad faith, that a specific Board member was biased against him, and that he was subjected to unfair treatment compared to other homeowners.
The Administrative Law Judge, in both an initial hearing and a subsequent rehearing, consistently ruled against Mr. Stewart. The judge determined that the specific bylaw cited (Section 5.4) was an indemnification clause that shields the Board from liability and does not impose a duty of action. Crucially, Mr. Stewart failed to meet the legal burden of proving his claims by a “preponderance of the evidence.” The Board’s rationale for the denial—to avoid setting a precedent, or “opening a Pandora’s Box”—was deemed a reasonable position for a condominium association. Evidence presented to support claims of bias and unequal treatment was found to be insufficient or not probative. Ultimately, Mr. Stewart’s petition was dismissed in its entirety.
Case Overview
This matter, designated as No. 18F-H1818052-REL, was adjudicated by the Office of Administrative Hearings under the authority of the Arizona Department of Real Estate. The case centered on a petition filed by Mr. Stewart on May 21, 2018, alleging a violation of the Association’s Bylaws by the Board of Directors.
Parties Involved
Name / Entity
Representation
Petitioner
Lawrence M. Stewart
On his own behalf
Respondent
Canyon Gate Condominium Association, Inc.
Mark K. Sahl, Esq. & Nichols C. S. Nogami, Esq.
Administrative Law Judge Thomas Shedden
Case Chronology
• November 15, 2017: The Association’s counsel informs Mr. Stewart in a letter that he is in violation of section 5.1 of the CC&Rs for making unapproved changes to a common/limited common area.
• Post-November 15, 2017: Mr. Stewart, then a member of the Board, requests a variance for the changes.
• December 27, 2017: The Association’s attorney sends a letter stating an understanding that Mr. Stewart had recused himself and that the other two Board members (Sandra Fernandez and David Larson) had required the area to be restored.
• January 4, 2018: Mr. Stewart writes to the other Board members, refuting that he had agreed to recuse himself and requesting a formal meeting to consider his variance request.
• February 18, 2018: At a Board meeting, Mr. Stewart resigns from the Board. The remaining two members vote to deny his variance request and require him to restore the area to its original condition.
• May 21, 2018: Mr. Stewart files his petition with the Arizona Department of Real Estate.
• September 6, 2018: The initial administrative hearing is conducted.
• September 14, 2018: The Administrative Law Judge (ALJ) issues a decision dismissing Mr. Stewart’s petition.
• January 2, 2019: A rehearing is conducted.
• January 17, 2019: The ALJ issues a final decision following the rehearing, again dismissing the petition.
Petitioner’s Central Allegations
Mr. Stewart’s case rested on four primary claims against the Association’s Board.
1. Violation of Bylaws Section 5.4
The formal petition alleged a violation of Association Bylaws Article V, Section 5.4 (Liability), which states in part:
“So long as he/she has acted in good faith on the basis of information actually possessed, neither the Board nor any member of the Board nor any officer of the ASSOCIATION shall be liable to the ASSOCIATION, any OWNER, or to any other party for any damage, loss, or prejudice suffered or claimed on account of: (i) the approval or disapproval of any plans, drawings, or specifications, whether or not defective…or (v) any act or failure to act by the ASSOCIATION, or Board.”
Mr. Stewart cited this section because it was the only part of the governing documents he could find that included a “good faith” requirement.
2. Lack of Good Faith by the Board
Mr. Stewart asserted that the Board did not act in good faith when it denied his variance request. He based this claim on several points:
• He resigned from the Board during the February 18, 2018 meeting because he “got the sense ‘right away’ that the other Board members’ minds were made up and that they would not approve his request.”
• He presented unrebutted testimony that the Board members were unwilling to physically look at the changes he had made and only gave a “cursory look” at photographs he provided.
• The Board’s decision appeared to have been made prior to the meeting, as evidenced by the attorney’s December 27, 2017 letter which erroneously stated he had recused himself.
3. Bias of Board Member David Larson
A significant portion of Mr. Stewart’s argument was that Board member David Larson was personally biased against him. The evidence presented to support this included:
• Initial Hearing Evidence:
◦ A biography of Mr. Larson prepared by the property manager. When questioned, Mr. Stewart could not identify specific information showing bias but stated the “entire document coupled with the other statements shows a bias.”
◦ Notes from a November 28, 2017 Board meeting where Mr. Larson informed members that enforcement actions (towing, violation notices) would begin immediately and that he was “too busy to talk to people about Board business in driveways.”
• Rehearing Evidence:
◦ A letter dated October 3, 2018, from Mr. Larson to Association members urging them not to vote for Mr. Stewart in an upcoming election.
4. Unfair and Unequal Treatment
Mr. Stewart claimed he was treated unfairly because other units in the condominium were also not in conformity with the CC&Rs.
• He presented photos of units he believed were out of compliance.
• He testified that he had verified with the Association that none of these units had received a variance in the last two years.
• However, he acknowledged he did not know if variances had been granted more than two years prior or if the changes had received pre-approval, which would not require a variance.
Respondent’s Position and Legal Arguments
The Canyon Gate Condominium Association, represented by counsel, did not present witnesses but argued on legal grounds.
• Inapplicability of Bylaws Section 5.4: The Association’s core argument was that Section 5.4 was not applicable to Mr. Stewart’s complaint. They contended the section is an indemnification clause designed to act as a “shield” to protect Board members from liability when they act in good faith, not a “sword” that imposes an affirmative duty on them that can be violated.
• Reasonableness of Board Decision: The Association maintained that the Board’s decision was reasonable. According to Mr. Stewart’s own testimony, the Board’s basis for denial was the fear that granting his variance would “open a Pandora’s Box where other unit owners would request variances.”
Administrative Law Judge’s Rulings and Conclusions
The ALJ’s decisions in both the initial hearing and the rehearing were consistent, ultimately finding in favor of the Respondent.
Legal Framework
• Burden of Proof: The ALJ established that Mr. Stewart, as the petitioner, bore the burden of proof. The standard of proof was a “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.”
• Board’s Duty: The judge noted that while the Bylaws are a contract, the Association, in exercising its authority, must “act reasonably.”
Analysis of Bylaws Section 5.4
• The judge agreed entirely with the Association’s interpretation, concluding that Section 5.4 “does not impose any duty on the Board members, but rather merely shields them from liability if they act in good faith.”
• In the initial hearing, the judge noted Mr. Stewart “appeared to acknowledge that section 5.4 acts as a ‘shield’ and not a ‘sword.'”
• By the rehearing, this was solidified, with the finding that “Mr. Stewart acknowledges that the Association has not violated Bylaws Section 5.4.”
Assessment of ‘Good Faith’ and Bias Claims
• The ALJ concluded that even if Section 5.4 were applicable, Mr. Stewart “has not shown by a preponderance of the evidence that the Board did not act in good faith, that it had a bias against him, or that it treated him unfairly.”
• The judge found the Board’s reasoning for the denial—the “Pandora’s Box” concern—was “not an unreasonable position for the Board of a condominium association.”
• Given this reasoning, the judge stated that “the specifics of the changes Mr. Stewart made would not be germane to the decision,” thereby neutralizing the claim that the Board failed to properly inspect the modifications.
Evaluation of Unfair Treatment Claim
• The evidence of other non-compliant units was deemed “not probative of the issue at hand.”
• The judge reasoned that there was “no evidence to show that they had requested that the Board grant variances,” meaning their situations were not comparable to Mr. Stewart’s, who had made unapproved changes and was subsequently denied a variance.
Final Disposition
• Initial Decision (September 14, 2018): IT IS ORDERED that Petitioner Lawrence M. Stewart’s petition is dismissed. This order was subject to a request for rehearing within 30 days.
• Rehearing Decision (January 17, 2019): IT IS ORDERED that Petitioner Lawrence M. Stewart’s petition is dismissed. This final order was noted as binding on the parties, with any further appeal requiring judicial review filed with the superior court within 35 days.
Study Guide – 18F-H1818052-REL-RHG
Study Guide: Stewart v. Canyon Gate Condominium Association, Inc.
This guide provides a review of the administrative case Lawrence M. Stewart, Petitioner, vs. Canyon Gate Condominium Association, Inc., Respondent (No. 18F-H1818052-REL), including the initial hearing and a subsequent rehearing.
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Short-Answer Quiz
Instructions: Answer the following questions in two to three sentences, based on the provided case documents.
1. What action by Petitioner Lawrence M. Stewart initiated the dispute with the Canyon Gate Condominium Association?
2. What specific provision of the Association Bylaws did Mr. Stewart allege was violated in his petition?
3. Why did Mr. Stewart resign from the Association’s Board during the February 18, 2018 meeting?
4. What was the Board’s stated reason for denying Mr. Stewart’s request for a variance?
5. Explain the legal interpretation of Bylaws Section 5.4 as a “shield” and not a “sword.”
6. List two pieces of evidence Mr. Stewart presented at the initial hearing to support his claim that Board member David Larson was biased against him.
7. What was the legal standard of proof in this case, and which party was required to meet it?
8. How did Mr. Stewart attempt to prove he was being treated unfairly in comparison to other unit owners, and why did the judge find this evidence unconvincing?
9. At the rehearing, what new evidence did Mr. Stewart present regarding Mr. Larson’s alleged bias?
10. What was the final outcome of both the initial administrative hearing and the subsequent rehearing?
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Answer Key
1. Mr. Stewart initiated the dispute by making changes to the common area and/or limited common area around his unit without first receiving permission from the Association. The Association informed him in a letter dated November 15, 2017, that this was a violation of section 5.1 of the CC&Rs.
2. Mr. Stewart alleged in his petition that the Association violated Bylaws Section 5.4. He later acknowledged this section was not technically violated but cited it because it was the only provision in the governing documents he could find that included a “good faith” requirement.
3. Mr. Stewart resigned from the Board because he “got the sense ‘right away’ that the other Board members’ minds were made up” and that they would not approve his request for a variance, regardless of the details.
4. The Board denied Mr. Stewart’s request on the basis that approving it would “open a Pandora’s Box” where other unit owners would then also request variances. The Administrative Law Judge found this was not an unreasonable position for a condominium association board to take.
5. The interpretation of Section 5.4 is that it acts as a “shield” to protect, or indemnify, Board members from liability for damages, loss, or prejudice, provided they have acted in good faith. It is not a “sword” that imposes an affirmative duty on the Board that Mr. Stewart could use to compel a certain action or claim a violation.
6. At the initial hearing, Mr. Stewart presented two of the following: (1) a biography of Mr. Larson; (2) notes from a November 28, 2017 meeting where Mr. Larson stated that enforcement actions would begin immediately; and (3) a letter from the Association’s attorney that erroneously stated Mr. Stewart had recused himself, suggesting the matter was decided without him.
7. The standard of proof was a “preponderance of the evidence.” The burden of proof rested entirely on the petitioner, Mr. Stewart, to show that the Association had acted improperly.
8. Mr. Stewart presented testimony and photos of other units that he believed were not in conformity with the CC&Rs. The judge found this evidence was not probative because Mr. Stewart provided no evidence that those owners had requested and been denied variances, and he acknowledged he did not know if they had received variances more than two years prior or had received preapproval.
9. At the rehearing, Mr. Stewart entered into evidence an October 3, 2018 letter from Mr. Larson to the Association’s members. In this letter, Mr. Larson urged the members not to vote for Mr. Stewart in an upcoming election.
10. In both the initial decision (September 14, 2018) and the decision following the rehearing (January 17, 2019), the Administrative Law Judge ordered that Mr. Stewart’s petition be dismissed. The Respondent, Canyon Gate Condominium Association, Inc., was deemed the prevailing party in the matter.
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Essay Questions
Instructions: The following questions are designed for a more in-depth analysis of the case. Formulate a comprehensive response for each prompt, citing specific facts and legal conclusions from the case documents.
1. Analyze the Administrative Law Judge’s reasoning for concluding that Bylaws Section 5.4 was not applicable to Mr. Stewart’s petition. How did Mr. Stewart’s own testimony during the legal proceedings support this conclusion?
2. Discuss the concept of “preponderance of the evidence” as defined in the case documents. Evaluate the evidence Mr. Stewart presented across both hearings and explain why the judge found it insufficient to meet this standard regarding his claims of bias, bad faith, and unfair treatment.
3. Examine the Canyon Gate Board’s justification for denying the variance request (the “Pandora’s Box” argument). Based on the legal principles cited in the decisions, why was this considered a reasonable position for a condominium association board to take, and why did it render the specifics of Mr. Stewart’s changes non-germane?
4. Trace the procedural timeline of this case from the Association’s initial notice of violation on November 15, 2017, to the final binding order issued on January 17, 2019. Identify the key events, arguments, and decisions at each stage of the administrative process.
5. Mr. Stewart argued that he was treated unfairly because other units were also out of compliance with the CC&Rs. Deconstruct this argument and explain why the judge dismissed this line of reasoning as not being probative to the issue at hand in both the initial hearing and the rehearing.
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Glossary of Key Terms
Definition
Administrative Law Judge (ALJ)
The official (Thomas Shedden) who presides over hearings at the Office of Administrative Hearings and issues a decision on the matter.
Association
The Canyon Gate Condominium Association, Inc., the entity responsible for enforcing the Bylaws and CC&Rs. In this case, it is the Respondent.
The governing body of the Association, which at the time of the variance request included Lawrence M. Stewart, Sandra Fernandez, and David Larson.
Burden of Proof
The obligation to prove one’s assertion. In this case, the burden of proof was on the Petitioner, Mr. Stewart.
Bylaws
A contract between the Association and its members. The parties are required to comply with its terms, and the Association must act reasonably in exercising its authority under them.
Covenants, Conditions, and Restrictions. Mr. Stewart was found to be in violation of section 5.1 of the CC&Rs for making unapproved changes.
Common Area / Limited Common Area
The property around a condominium unit that is shared or has restricted use. Mr. Stewart made unauthorized changes to this area.
Good Faith
A standard of conduct mentioned in Bylaws Section 5.4. It protects Board members from liability so long as they act in good faith based on information they possess. Mr. Stewart claimed the Board failed to meet this standard.
Indemnification
The act of compensating for loss or damage. Bylaws Article V, which contains Section 5.4, pertains to indemnification.
Petitioner
The party who files a petition initiating a legal case. In this matter, the petitioner was Lawrence M. Stewart.
Preponderance of the Evidence
The standard of proof required in this case, defined as “The greater weight of the evidence… sufficient to incline a fair and impartial mind to one side of the issue rather than the other.”
Rehearing
A second hearing granted in a legal matter. A rehearing was conducted on January 2, 2019, after which the judge issued a final, binding order.
Respondent
The party against whom a petition is filed. In this matter, the respondent was Canyon Gate Condominium Association, Inc.
Variance
An official exception or deviation from a rule. Mr. Stewart requested a variance to allow the unapproved changes he had made, which the Board denied.
Blog Post – 18F-H1818052-REL-RHG
A Homeowner Sued His HOA and Lost—The Surprising Reasons Why Might Save You Thousands
Introduction: The Perennial Battle Between Homeowner and HOA
For many homeowners, the relationship with their Homeowners’ Association (HOA) can feel like a constant source of friction. From landscaping rules to paint colors, the potential for disputes is endless. But what happens when a homeowner feels so strongly wronged that they take the ultimate step of suing their association? More importantly, what happens when they lose?
This is the story of a homeowner who was also a board member. After making unauthorized changes to his property, he was denied his request for a variance to approve the changes he had already made. Believing the Board had acted in bad faith, he sued the association. His case failed, not on a minor technicality, but due to fundamental misunderstandings of how HOA law and governing documents function.
This outcome highlights a common, and costly, misconception about HOA governance. We will explore the surprising legal realities revealed in the case of Lawrence M. Stewart vs. Canyon Gate Condominium Association, Inc., offering several crucial takeaways for any homeowner before they decide to challenge their HOA.
1. A “Good Faith” Clause Can Be a Shield, Not a Sword
Mr. Stewart based his entire case on the claim that the Board violated Section 5.4 of the bylaws by not acting in “good faith,” as this was the only section in the governing documents he could find that mentioned the phrase.
This is where the case pivots on a crucial legal distinction. The court found that this clause was not intended to impose a duty on the board that a homeowner could sue over (a “sword”). Instead, its function was to protect board members from liability if they acted in good faith (a “shield”). Legally, this is an indemnification clause. Think of it as a form of insurance, designed to protect volunteer board members from being personally sued for making reasonable decisions, not a weapon for homeowners to attack those decisions.
In his testimony, Mr. Stewart even acknowledged this “shield” versus “sword” distinction but proceeded with the argument anyway. The lesson for homeowners is unequivocal: you must understand the precise legal function of a clause within your governing documents, not just its keywords.
2. The “Pandora’s Box” Defense Is a Powerful Argument
The Board’s primary reason for denying Mr. Stewart’s variance request was its fear that approval “would open a Pandora’s Box where other unit owners would request variances.” While a homeowner might hear “Pandora’s Box” and think it’s a lazy excuse, the court viewed it as the board performing its fundamental duty.
The judge stated this reasoning “was not an unreasonable position for the Board of a condominium association.” This validation is incredibly impactful because it shifts the focus from the merits of one homeowner’s request to the Board’s overarching fiduciary duty to uphold the rules consistently for the entire community. It shows that an HOA’s duty to maintain consistent enforcement and avoid setting a messy precedent is a legally sound basis for a decision, making the specific details of one homeowner’s changes irrelevant.
3. Being on the Board Won’t Give You a Pass
In a surprising twist, Mr. Stewart was a member of the HOA Board at the very time he made the unauthorized changes and requested the variance. This created a clear conflict of interest and ultimately did not help his case.
The situation culminated in Mr. Stewart resigning from the Board during the meeting where his request was considered. He stated he resigned because he felt “the other Board members’ minds were made up” and they would not approve his request. This incident serves as a stark reminder: holding a position on the board does not grant special privileges or exceptions to the rules. In fact, it can complicate personal matters and highlight a direct conflict between a board member’s duties to the association and their personal interests.
4. “Whataboutism” Is Not a Legal Strategy
Like many homeowners in a dispute, Mr. Stewart argued that he was being treated unfairly because other units in the community were also out of compliance with the CC&Rs. This is a common defense, but its legal failure in this case is a masterclass in what courts actually require for proof.
Mr. Stewart’s effort was commendable but legally insufficient. He presented photos of other non-conforming units and even “verified with the Association that none of these units had received a variance in the last two years.” However, his evidence collapsed under cross-examination when he “acknowledged… he did not know if any of these units had received variances more than two years ago or whether preapproval for the changes had been granted.”
The judge dismissed his evidence entirely. This transforms the lesson from a simple “don’t point fingers” to a much more sophisticated legal principle: to prove selective enforcement, you must prove others in the identical procedural situation were treated differently, and incomplete evidence is no evidence at all.
5. The Burden of Proof Is Everything
Perhaps the most stunning fact from the case is that the Association “presented no witnesses” at either the initial hearing or the subsequent rehearing. They won the case without putting a single person on the stand to testify.
They could do this because the legal system placed the “burden of proof” squarely on Mr. Stewart. As the petitioner, it was his job to prove his claims of bad faith, bias, and unfair treatment by a “preponderance of the evidence.” The Association didn’t have to prove it acted in good faith; Mr. Stewart had to prove it acted in bad faith. He failed to meet this standard. In other words, he had to prove that his claims were more likely to be true than not—even if only by a 51% to 49% margin.
The court document formally defines this legal standard as:
The greater weight of the evidence, not necessarily established by the greater number of witnesses testifying to a fact but by evidence that has the most convincing force; superior evidentiary weight that, though not sufficient to free the mind wholly from all reasonable doubt, is still sufficient to incline a fair and impartial mind to one side of the issue rather than the other.
In a legal dispute with your HOA, the case is not about who is morally right or wrong. It’s about who can meet their required burden of proof with convincing, relevant evidence.
Conclusion: Know the Rules Before You Fight the Rulers
The case of Lawrence M. Stewart is a cautionary tale that every homeowner should internalize. His failed lawsuit, which likely became a five-figure mistake when factoring in legal fees for both sides, underscores that HOA governing documents are a binding contract. Challenging the Board requires more than a sense of unfairness. It demands a precise, evidence-backed legal argument that aligns with the specific terms of that contract and the applicable legal standards.
Before you declare war on your HOA, ask yourself: are you prepared to prove your case with irrefutable evidence, or are you just banking on a feeling of being wronged?
Case Participants
Petitioner Side
Lawrence M. Stewart(petitioner) Also served as a Board member for Respondent until resigning during the variance request consideration.
Respondent Side
Mark K. Sahl(attorney) CARPENTER, HAZLEWOOD, DELGADO & BOLEN LLP Represented Respondent in the initial hearing.
Nicolas C. S. Nogami(attorney) CARPENTER, HAZLEWOOD, DELGADO & BOLEN LLP Represented Respondent in both the initial hearing (listed as 'Nichols C. S. Nogami') and the rehearing.
Sandra Fernandez(board member) Canyon Gate Condominium Association, Inc. Voted to deny Petitioner's variance request.
David Larson(board member) Canyon Gate Condominium Association, Inc. Voted to deny Petitioner's variance request; Petitioner alleged he was biased.
Neutral Parties
Thomas Shedden(ALJ) Office of Administrative Hearings
Judy Lowe(commissioner) Arizona Department of Real Estate Recipient of the decision copies.
F. Del Sol(administrative staff) Office of Administrative Hearings Signed the transmission of the decision copies.
ARIZ. REV. STAT. § 33-1804(B); Association Bylaws Article III, Sections 3 & 4; Association Bylaws Article VIII, Section 1
Outcome Summary
The ALJ granted the petition, concluding that the HOA Board’s unilateral amendment of the Bylaws on November 20, 2017, was an invalid action taken without the required vote of the Association members and without statutory notice, violating ARIZ. REV. STAT. § 33-1804(B) and the Association’s governing documents. The amendment was invalidated, and the Respondent was ordered to refund the Petitioner's filing fee and pay a $250.00 civil penalty.
Key Issues & Findings
Whether Sycamore Vista No. 8 Homeowners Association (Respondent) violated Association Bylaws Article III, Sections 3 & 4 and Article VIII, Section 1 in an action taken by the board on November 20, 2017.
The Board of Directors attempted a third amendment to the Bylaws on November 20, 2017, specifically changing the requirements for the Association's financial review (audit, review, or compilation). The ALJ concluded that this action was invalid because it was taken in the absence of a quorum of Association members voting in favor of the amendment, violating both the Bylaws and statutory notice requirements.
Orders: The petition was granted. The third amendment to the Association Bylaws taken on November 20, 2017, was invalidated. Respondent was ordered to pay the Petitioner the filing fee required by ARIZ. REV. STAT. § 32-2199.01 and pay a civil penalty of $250.00 to the Planned Community Hearing Office Fund.
Topics: HOA Governance, Bylaws Amendment, Open Meeting Law, ARS 33-1804, Membership Vote, Filing Fee Refund
Additional Citations:
ARIZ. REV. STAT. § 33-1804(B)
ARIZ. REV. STAT. § 32-2199.02(A)
ARIZ. REV. STAT. § 32-2199.05
Powell v. Washburn, 125 P.3d 373 (Ariz. 2006)
Tierra Ranchos Homeowners Ass'n v. Kitchukov, 216 Ariz. 195, 165 P.3d 173 (App. 2007)
Video Overview
Audio Overview
Decision Documents
19F-H1918001-REL Decision – 661797.pdf
Uploaded 2026-01-23T17:25:37 (143.2 KB)
19F-H1918001-REL Decision – 696205.pdf
Uploaded 2026-01-23T17:25:40 (169.8 KB)
Briefing Doc – 19F-H1918001-REL
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.
Study Guide – 19F-H1918001-REL
Study Guide: Janicek v. Sycamore Vista No. 8 Homeowners Association
Short-Answer Quiz
1. Who were the primary parties in the case No. 19F-H1918001-REL-RHG, and what were their respective roles?
2. What specific action taken by the Respondent on November 20, 2017, prompted the Petitioner to file a complaint?
3. According to the Petitioner, what was the crucial difference in meaning between the terms “members” and “directors” as used in the Association’s Bylaws?
4. What was the Respondent’s central argument for why the Board of Directors had the authority to amend the Bylaws at its regular meeting?
5. What is Arizona’s Open Meeting Law, and how did the Petitioner argue that the Respondent violated it?
6. What was the financial concern that the Petitioner argued could potentially impact him as a homeowner due to the Board’s amendment?
7. Describe the procedural history of this case after the initial Administrative Law Judge (ALJ) Decision on September 25, 2018.
8. What case did the Petitioner cite regarding the interpretation of restrictive covenants, and what principle did it establish?
9. What is the legal standard of proof required in this proceeding, and how is it defined in the document?
10. What was the final outcome of the case, including the specific orders issued by the Administrative Law Judge?
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Answer Key
1. The primary parties were Jay A. Janicek, the Petitioner, and the Sycamore Vista No. 8 Homeowners Association, the Respondent. The Petitioner is a property owner and member of the Association who brought the legal action, while the Respondent is the homeowners’ association governed by a Board of Directors.
2. On November 20, 2017, the Respondent’s Board of Directors held a regular meeting where they voted to approve a third amendment to the Association’s Bylaws. This amendment changed the requirement for an “annual audit…by a public accountant” to an “annual audit, review, or compilation” of financial records.
3. The Petitioner argued that the term “members” in Article XIII of the Bylaws refers to the entire body of property owners in the Association, not the Board of Directors. He contended that if the drafter had intended to give amendment power to the Board, the specific word “directors” would have been used, as it was in other sections of the Bylaws.
4. The Respondent argued that its actions were proper because the Bylaws empower the Board to manage the Association’s affairs at regular monthly meetings. They contended that since a quorum of three directors was present at the November 20, 2017 meeting, the Board was empowered to transact business, which they interpreted to include amending the bylaws as described in Article XIII.
5. Arizona’s Open Meeting Law is ARIZ. REV. STAT. § 33-1804, which requires meetings of a homeowners’ association’s board and members to be open to all members. The Petitioner argued the Respondent violated this by amending a bylaw without proper notice to the full membership, which is required for any proposed bylaw amendment, thus undermining the law’s legislative intent of transparency.
6. The Petitioner was concerned that the amendment weakened the financial oversight of the Association. It modified a requirement for a third-party audit to a less stringent “review, or compilation,” creating a risk that the Association could perform its own financial checks, and as a homeowner, he had an interest in ensuring the Association’s financials were correct.
7. After the initial decision in the Petitioner’s favor on September 25, 2018, the Respondent submitted a Request for Rehearing on October 23, 2018. The Department of Real Estate granted this request on November 7, 2018, and the matter was referred back to the Office of Administrative Hearings for a rehearing, which ultimately took place on March 5, 2019.
8. The Petitioner cited Powell v. Washburn. This case established the principle that restrictive covenants should be interpreted to give effect to the intention of the parties, as determined from the language of the entire document and the purpose for which the covenants were created.
9. The legal standard of proof was a “preponderance of the evidence.” The document defines this as “such proof as convinces the trier of fact that the contention is more probably true than not” and as evidence with the most “convincing force” that inclines an impartial mind to one side of an issue.
10. The final outcome was a ruling in favor of the Petitioner. The ALJ granted the petition, invalidated the third amendment to the Bylaws that was passed on November 20, 2017, and ordered the Respondent to pay the Petitioner’s filing fee and a civil penalty of $250.00.
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Essay Questions
1. Analyze the Administrative Law Judge’s reasoning in differentiating between the terms “members” and “directors.” How did the principle of avoiding absurdity and considering the drafter’s intent, as seen throughout the Bylaws, contribute to the final decision?
2. Discuss the interplay between the Association’s governing documents (CC&Rs and Bylaws) and state law (ARIZ. REV. STAT. § 33-1804). Explain which authority took precedence in this case and why the Board’s actions were found to violate both.
3. Evaluate the legal strategy employed by the Petitioner, Jay A. Janicek. Consider his use of specific Bylaw articles, the citation of Powell v. Washburn, and his argument regarding the legislative intent of the Open Meeting Law.
4. Examine the arguments presented by the Respondent, Sycamore Vista No. 8 Homeowners Association. Why did the Judge find their interpretation of the Bylaws unconvincing, despite their claims that the Board was empowered to transact business with a quorum present?
5. Based on the text, discuss the broader implications of this ruling for homeowners’ associations in Arizona. How does this decision reinforce the principles of transparency and the limitations of a Board’s power relative to the association’s general membership?
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Glossary of Key Terms
Definition
Administrative Law Judge (ALJ)
An independent judge, in this case Jenna Clark, who presides over administrative hearings at the Office of Administrative Hearings (OAH).
ARIZ. REV. STAT. § 33-1804
A section of the Arizona Revised Statutes, also known as Arizona’s Open Meeting Law, which mandates that meetings of an HOA’s members and board of directors must be open to all members and requires specific notice for meetings where bylaw amendments will be considered.
Bylaws
A set of rules that govern the internal operations of the homeowners’ association. In this case, key articles discussed include Article VI (Meeting of Directors), Article VII (Powers of the Board), and Article XIII (Amendments).
Covenants, Conditions, and Restrictions. These are governing documents that form an enforceable contract between the Association and each property owner, empowering the Association to control certain aspects of property use.
Member
As defined in the Association’s documents, a person entitled to membership by virtue of being a property owner within the Sycamore Vista subdivision. The Judge concluded this term refers to the body of owners, not the Board of Directors.
Office of Administrative Hearings (OAH)
An independent state agency in Arizona, unaffiliated with the parties, responsible for conducting evidentiary hearings and making legal decisions in disputes like this one.
Petitioner
The party who files a petition initiating a legal case. In this matter, the Petitioner was Jay A. Janicek, a homeowner in the Association.
Preponderance of the evidence
The burden of proof in this case. It is defined as evidence that is more likely true than not and has the most convincing force, sufficient to incline a fair and impartial mind to one side of an issue.
The authority to represent someone else, especially in voting. The document notes that the term “proxy” applies to votes of the members, as members of the Board are not permitted to vote by proxy.
Quorum
The minimum number of members of a deliberative assembly necessary to conduct the business of that group. For the Respondent’s Board of Directors, a quorum is defined as a majority of the number of Directors.
Respondent
The party against whom a petition is filed. In this matter, the Respondent was the Sycamore Vista No. 8 Homeowners Association.
Restrictive Covenants
Legal obligations imposed in a deed to real property to do or not do something. The Petitioner argued this term included the CC&Rs, Bylaws, and rules of the Association.
Tribunal
A body established to settle certain types of dispute. In this document, it refers to the Administrative Law Judge at the Office of Administrative Hearings.
Blog Post – 19F-H1918001-REL
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19F-H1918001-REL-RHG
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The provided text is an Administrative Law Judge Decision from the Office of Administrative Hearings regarding a dispute between Jay A. Janicek (Petitioner) and the Sycamore Vista No. 8 Homeowners Association (Respondent). The core issue of the case, designated No. 19F-H1918001-REL-RHG, revolves around whether the Homeowners Association violated its Bylaws and Arizona state statute (§ 33-1804) when its Board of Directors unilaterally amended the Bylaws on November 20, 2017. The Administrative Law Judge determined that the Board’s action was invalid because the power to amend the Bylaws was delegated to the Association’s general membership, not the Board of Directors, and the Board failed to provide the required notice for such an amendment. Consequently, the Petitioner’s request was granted, the amendment was invalidated, and the Association was ordered to pay the Petitioner’s filing fee and a civil penalty.
What central conflict drove the administrative hearing and subsequent rehearing process?
How did governing documents and Arizona statutes shape the final legal decision?
What ultimate implications does this ruling have for homeowners association governance and member rights?
Based on 1 source
Case Participants
Petitioner Side
Jay A. Janicek(petitioner) Appeared on his own behalf at initial hearing; Observed rehearing
Jake Kubert(petitioner attorney) Dessaules Law Group Appeared at rehearing
The ALJ granted the petition, finding that the HOA Board violated ARIZ. REV. STAT. § 33-1804(B) and the Association Bylaws by amending the Bylaws on November 20, 2017, without a quorum of Association members voting in favor and without proper notice. The amendment was invalidated, and the HOA was fined $250.00 and ordered to refund the Petitioner's filing fee.
Why this result: The Board lacked the authority to amend the Bylaws without the vote of the Association membership, and failed to provide required notice for the proposed amendment, violating ARIZ. REV. STAT. § 33-1804(B) and the Association Bylaws.
Key Issues & Findings
Whether Sycamore Vista No. 8 Homeowners Association violated Association Bylaws Article III, Sections 3 & 4 and Article VIII, Section 1 in an action taken by the board on November 20, 2017.
The Respondent HOA Board amended Association Bylaws on November 20, 2017, without proper notice to the members and without a vote by a majority of Association members, which violated the statutory notice requirement and the Bylaws. The Board action was consequently invalidated.
Orders: The Petitioner's petition was granted. The Respondent's third amendment to the Association Bylaws, dated November 20, 2017, was invalidated. Respondent was ordered to pay the Petitioner's filing fee and pay a civil penalty of $250.00 to the Planned Community Hearing Office Fund.
Tierra Ranchos Homeowners Ass'n v. Kitchukov, 216 Ariz. 195, 165 P.3d 173 (App. 2007)
Mail Boxes v. Indus. Comm’n of Ariz., 181 Ariz. 119, 122, 888 P.2d 777, 780 (1995)
Video Overview
Audio Overview
Decision Documents
19F-H1918001-REL Decision – 661797.pdf
Uploaded 2025-12-09T10:04:41 (143.2 KB)
19F-H1918001-REL Decision – 696205.pdf
Uploaded 2025-10-09T03:33:14 (169.8 KB)
Briefing Doc – 19F-H1918001-REL
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.
Study Guide – 19F-H1918001-REL
Study Guide: Janicek v. Sycamore Vista No. 8 Homeowners Association
Short-Answer Quiz
1. Who were the primary parties in the case No. 19F-H1918001-REL-RHG, and what were their respective roles?
2. What specific action taken by the Respondent on November 20, 2017, prompted the Petitioner to file a complaint?
3. According to the Petitioner, what was the crucial difference in meaning between the terms “members” and “directors” as used in the Association’s Bylaws?
4. What was the Respondent’s central argument for why the Board of Directors had the authority to amend the Bylaws at its regular meeting?
5. What is Arizona’s Open Meeting Law, and how did the Petitioner argue that the Respondent violated it?
6. What was the financial concern that the Petitioner argued could potentially impact him as a homeowner due to the Board’s amendment?
7. Describe the procedural history of this case after the initial Administrative Law Judge (ALJ) Decision on September 25, 2018.
8. What case did the Petitioner cite regarding the interpretation of restrictive covenants, and what principle did it establish?
9. What is the legal standard of proof required in this proceeding, and how is it defined in the document?
10. What was the final outcome of the case, including the specific orders issued by the Administrative Law Judge?
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Answer Key
1. The primary parties were Jay A. Janicek, the Petitioner, and the Sycamore Vista No. 8 Homeowners Association, the Respondent. The Petitioner is a property owner and member of the Association who brought the legal action, while the Respondent is the homeowners’ association governed by a Board of Directors.
2. On November 20, 2017, the Respondent’s Board of Directors held a regular meeting where they voted to approve a third amendment to the Association’s Bylaws. This amendment changed the requirement for an “annual audit…by a public accountant” to an “annual audit, review, or compilation” of financial records.
3. The Petitioner argued that the term “members” in Article XIII of the Bylaws refers to the entire body of property owners in the Association, not the Board of Directors. He contended that if the drafter had intended to give amendment power to the Board, the specific word “directors” would have been used, as it was in other sections of the Bylaws.
4. The Respondent argued that its actions were proper because the Bylaws empower the Board to manage the Association’s affairs at regular monthly meetings. They contended that since a quorum of three directors was present at the November 20, 2017 meeting, the Board was empowered to transact business, which they interpreted to include amending the bylaws as described in Article XIII.
5. Arizona’s Open Meeting Law is ARIZ. REV. STAT. § 33-1804, which requires meetings of a homeowners’ association’s board and members to be open to all members. The Petitioner argued the Respondent violated this by amending a bylaw without proper notice to the full membership, which is required for any proposed bylaw amendment, thus undermining the law’s legislative intent of transparency.
6. The Petitioner was concerned that the amendment weakened the financial oversight of the Association. It modified a requirement for a third-party audit to a less stringent “review, or compilation,” creating a risk that the Association could perform its own financial checks, and as a homeowner, he had an interest in ensuring the Association’s financials were correct.
7. After the initial decision in the Petitioner’s favor on September 25, 2018, the Respondent submitted a Request for Rehearing on October 23, 2018. The Department of Real Estate granted this request on November 7, 2018, and the matter was referred back to the Office of Administrative Hearings for a rehearing, which ultimately took place on March 5, 2019.
8. The Petitioner cited Powell v. Washburn. This case established the principle that restrictive covenants should be interpreted to give effect to the intention of the parties, as determined from the language of the entire document and the purpose for which the covenants were created.
9. The legal standard of proof was a “preponderance of the evidence.” The document defines this as “such proof as convinces the trier of fact that the contention is more probably true than not” and as evidence with the most “convincing force” that inclines an impartial mind to one side of an issue.
10. The final outcome was a ruling in favor of the Petitioner. The ALJ granted the petition, invalidated the third amendment to the Bylaws that was passed on November 20, 2017, and ordered the Respondent to pay the Petitioner’s filing fee and a civil penalty of $250.00.
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Essay Questions
1. Analyze the Administrative Law Judge’s reasoning in differentiating between the terms “members” and “directors.” How did the principle of avoiding absurdity and considering the drafter’s intent, as seen throughout the Bylaws, contribute to the final decision?
2. Discuss the interplay between the Association’s governing documents (CC&Rs and Bylaws) and state law (ARIZ. REV. STAT. § 33-1804). Explain which authority took precedence in this case and why the Board’s actions were found to violate both.
3. Evaluate the legal strategy employed by the Petitioner, Jay A. Janicek. Consider his use of specific Bylaw articles, the citation of Powell v. Washburn, and his argument regarding the legislative intent of the Open Meeting Law.
4. Examine the arguments presented by the Respondent, Sycamore Vista No. 8 Homeowners Association. Why did the Judge find their interpretation of the Bylaws unconvincing, despite their claims that the Board was empowered to transact business with a quorum present?
5. Based on the text, discuss the broader implications of this ruling for homeowners’ associations in Arizona. How does this decision reinforce the principles of transparency and the limitations of a Board’s power relative to the association’s general membership?
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Glossary of Key Terms
Definition
Administrative Law Judge (ALJ)
An independent judge, in this case Jenna Clark, who presides over administrative hearings at the Office of Administrative Hearings (OAH).
ARIZ. REV. STAT. § 33-1804
A section of the Arizona Revised Statutes, also known as Arizona’s Open Meeting Law, which mandates that meetings of an HOA’s members and board of directors must be open to all members and requires specific notice for meetings where bylaw amendments will be considered.
Bylaws
A set of rules that govern the internal operations of the homeowners’ association. In this case, key articles discussed include Article VI (Meeting of Directors), Article VII (Powers of the Board), and Article XIII (Amendments).
Covenants, Conditions, and Restrictions. These are governing documents that form an enforceable contract between the Association and each property owner, empowering the Association to control certain aspects of property use.
Member
As defined in the Association’s documents, a person entitled to membership by virtue of being a property owner within the Sycamore Vista subdivision. The Judge concluded this term refers to the body of owners, not the Board of Directors.
Office of Administrative Hearings (OAH)
An independent state agency in Arizona, unaffiliated with the parties, responsible for conducting evidentiary hearings and making legal decisions in disputes like this one.
Petitioner
The party who files a petition initiating a legal case. In this matter, the Petitioner was Jay A. Janicek, a homeowner in the Association.
Preponderance of the evidence
The burden of proof in this case. It is defined as evidence that is more likely true than not and has the most convincing force, sufficient to incline a fair and impartial mind to one side of an issue.
The authority to represent someone else, especially in voting. The document notes that the term “proxy” applies to votes of the members, as members of the Board are not permitted to vote by proxy.
Quorum
The minimum number of members of a deliberative assembly necessary to conduct the business of that group. For the Respondent’s Board of Directors, a quorum is defined as a majority of the number of Directors.
Respondent
The party against whom a petition is filed. In this matter, the Respondent was the Sycamore Vista No. 8 Homeowners Association.
Restrictive Covenants
Legal obligations imposed in a deed to real property to do or not do something. The Petitioner argued this term included the CC&Rs, Bylaws, and rules of the Association.
Tribunal
A body established to settle certain types of dispute. In this document, it refers to the Administrative Law Judge at the Office of Administrative Hearings.
Blog Post – 19F-H1918001-REL
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19F-H1918001-REL-RHG
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The provided text is an Administrative Law Judge Decision from the Office of Administrative Hearings regarding a dispute between Jay A. Janicek (Petitioner) and the Sycamore Vista No. 8 Homeowners Association (Respondent). The core issue of the case, designated No. 19F-H1918001-REL-RHG, revolves around whether the Homeowners Association violated its Bylaws and Arizona state statute (§ 33-1804) when its Board of Directors unilaterally amended the Bylaws on November 20, 2017. The Administrative Law Judge determined that the Board’s action was invalid because the power to amend the Bylaws was delegated to the Association’s general membership, not the Board of Directors, and the Board failed to provide the required notice for such an amendment. Consequently, the Petitioner’s request was granted, the amendment was invalidated, and the Association was ordered to pay the Petitioner’s filing fee and a civil penalty.
What central conflict drove the administrative hearing and subsequent rehearing process?
How did governing documents and Arizona statutes shape the final legal decision?
What ultimate implications does this ruling have for homeowners association governance and member rights?
Based on 1 source
Case Participants
Petitioner Side
Jay A. Janicek(petitioner) Appeared on his own behalf at initial hearing; Observed rehearing
Jake Kubert(petitioner attorney) Dessaules Law Group Appeared at rehearing
The Administrative Law Judge dismissed Petitioner Lawrence M. Stewart's petition and deemed the Respondent, Canyon Gate Condominium Association, Inc., to be the prevailing party.
Why this result: Petitioner failed to prove the Association violated Bylaws Section 5.4 or acted unreasonably or in bad faith when denying his request for a variance. The Bylaw section cited was determined to be a liability shield for the Board, not a source of duty owed to the homeowner.
Key Issues & Findings
Alleged failure of HOA Board to act in good faith when denying Petitioner's request for a variance for unauthorized common area changes
Petitioner made changes to the common area without permission and the Board denied his subsequent request for a variance. Petitioner alleged the Board violated Bylaws Section 5.4 by failing to act in good faith and showing bias. The ALJ found that Section 5.4 is a liability shield for the Board, not a duty imposed upon them, and Petitioner failed to meet the burden of proof to show bad faith or unreasonableness.
Orders: Petitioner Lawrence M. Stewart’s petition is dismissed. Respondent is deemed to be the prevailing party in this matter.
Filing fee: $0.00, Fee refunded: No
Disposition: respondent_win
Cited:
ARIZ. REV. STAT. Title 32, Ch. 20, Art. 11
ARIZ. ADMIN. CODE § R2-19-119
McNally v. Sun Lakes Homeowners Ass’n #1, Inc., 241 Ariz. 1, 382 P.3d 1216 (2016 App.)
Tierra Ranchos Homeowners Ass'n v. Kitchukov, 216 Ariz. 195, 165 P.3d 173 (App. 2007)
Analytics Highlights
Topics: HOA governance, variance denial, common area modifications, good faith requirement, board liability shield, prevailing party
Additional Citations:
ARIZ. REV. STAT. Title 32, Ch. 20, Art. 11
ARIZ. ADMIN. CODE § R2-19-119
McNally v. Sun Lakes Homeowners Ass’n #1, Inc., 241 Ariz. 1, 382 P.3d 1216 (2016 App.)
Tierra Ranchos Homeowners Ass'n v. Kitchukov, 216 Ariz. 195, 165 P.3d 173 (App. 2007)
Video Overview
Audio Overview
Decision Documents
18F-H1818052-REL Decision – 660026.pdf
Uploaded 2025-10-09T03:33:02 (91.5 KB)
18F-H1818052-REL Decision – 720468.pdf
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This is a concise summary of the administrative law proceedings concerning Lawrence M. Stewart's petition against the Canyon Gate Condominium Association, Inc., drawing from the original hearing (September 6, 2018) and the subsequent rehearing (January 2, 2019).
Summary of Administrative Law Case: Stewart v. Canyon Gate Condominium Association, Inc.
Key Facts
The Petitioner, Lawrence M. Stewart, an owner and former Board member, made changes to the common or limited common area around his unit without prior permission, violating section 5.1 of the CC&Rs. After being informed of the violation, Mr. Stewart requested a variance from the Association Board while he was still a member. At a Board meeting on February 18, 2018, Mr. Stewart resigned, and the two remaining Board members (Sandra Fernandez and David Larson) voted to deny his variance request, requiring him to restore the areas to their original condition.
Main Issues and Petitioner's Arguments
Mr. Stewart filed a petition with the Arizona Department of Real Estate alleging the Association violated Bylaws section 5.4. His central argument was that the Board did not act in good faith when denying the variance request. He asserted that Board member David Larson was biased against him and that the denial was unfair because other units were also non-conforming with the CC&Rs. Mr. Stewart cited Bylaws Section 5.4 because he testified it was the only section referring to a “good faith” requirement in the governing documents.
Key Legal Points and Analysis
Burden of Proof: Mr. Stewart bore the burden of proof by a preponderance of the evidence. The Bylaws are considered a contract, and the Respondent (Association) is required to act reasonably in exercising its authority.
Applicability of Section 5.4: The Administrative Law Judge (ALJ) concluded that Bylaws Article V, Section 5.4 (Liability/Indemnification) does not impose any duty on the Board members; rather, it merely shields them from liability if they act in good faith. Mr. Stewart eventually acknowledged that the Association had not technically violated Section 5.4.
Reasonableness of Board Action: The Board's stated reason for denying the variance was fear of "open[ing] a Pandora’s Box" where other unit owners would request variances. The ALJ found this concern to be a not unreasonable position for a condominium association board.
Lack of Evidence for Bias/Unfairness: The ALJ found that Mr. Stewart did not demonstrate by a preponderance of the evidence that the Board lacked good faith, was biased against him, or treated him unfairly. Regarding the assertion of other non-conforming units, there was no evidence that those owners had requested variances, making that testimony not probative of the issue at hand.
Outcome
The Administrative Law Judge determined that Mr. Stewart failed to meet his burden of proof. Consequently, Petitioner Lawrence M. Stewart’s petition was dismissed in both the initial decision (September 14, 2018) and the binding order issued after the rehearing (January 17, 2019). The Respondent, Canyon Gate Condominium Association, Inc., was deemed the prevailing party.
Study Guide – 18F-H1818052-REL
Study Guide: Stewart v. Canyon Gate Condominium Association, Inc.
This study guide provides a review of the administrative legal case Lawrence M. Stewart v. Canyon Gate Condominium Association, Inc. (Case No. 18F-H1818052-REL). It covers the key facts, legal arguments, and outcomes of the initial hearing and subsequent rehearing as detailed in the decisions issued by the Arizona Office of Administrative Hearings.
Short-Answer Quiz
Answer the following ten questions based on the provided case documents. Each answer should be approximately two to three sentences long.
1. What initial action taken by Lawrence M. Stewart prompted the Canyon Gate Condominium Association to contact him with a notice of violation?
2. What specific section of the Association Bylaws did Mr. Stewart allege was violated in his petition to the Department of Real Estate?
3. What was Mr. Stewart’s position within the Association at the time he requested a variance for the changes he had made?
4. According to Mr. Stewart, what was the Board’s primary reason for denying his variance request?
5. Why did Mr. Stewart ultimately resign from the Association’s Board during the February 18, 2018 meeting?
6. In the initial hearing, what three pieces of evidence did Mr. Stewart present to support his allegation that Board member David Larson was biased against him?
7. What is the legal standard of proof required in this matter, and which party bears the burden of meeting that standard?
8. How did the Administrative Law Judge interpret the function of Bylaws Section 5.4, characterizing it as either a “shield” or a “sword”?
9. During the rehearing, what new piece of evidence did Mr. Stewart introduce to support his claim of bias from Mr. Larson?
10. What was the final ruling in both the initial hearing (September 14, 2018) and the rehearing (January 17, 2019)?
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Quiz Answer Key
1. Mr. Stewart made changes to the common area and/or limited common area around his condominium unit without first getting permission from the Association. This action was a violation of section 5.1 of the CC&Rs, leading the Association’s counsel to send him a letter on November 15, 2017.
2. Mr. Stewart’s petition alleged that the Association violated Bylaws Section 5.4. He later clarified that he cited this specific section because it was the only one in the governing documents that included a “good faith” requirement, which he believed the Board had failed to meet.
3. At the time he requested a variance to approve the changes he had made, Mr. Stewart was an active member of the Association’s Board of Directors. The other two members were Sandra Fernandez and David Larson.
4. The Board denied his request because they feared it would “open a Pandora’s Box,” leading other unit owners to request variances for changes to the common area. The judge found this was not an unreasonable position for a condominium association board to take.
5. Mr. Stewart resigned from the Board because he got the sense “right away” that the other two board members, Ms. Fernandez and Mr. Larson, had already made up their minds to deny his request and would not approve it.
6. To support his bias claim, Mr. Stewart relied on: (1) a biography of Mr. Larson prepared by the property manager, (2) statements Mr. Larson made in notes from a November 28, 2017 Board meeting, and (3) his belief that the other members had already decided the matter without his input.
7. The standard of proof is a “preponderance of the evidence.” The burden of proof to meet this standard rests entirely on the Petitioner, Mr. Stewart.
8. The judge concluded that Section 5.4 acts as a “shield” to protect Board members from liability when they act in good faith. It does not impose a duty on them and cannot be used as a “sword” by an owner to force a particular action from the Board.
9. At the rehearing, Mr. Stewart entered into evidence an October 3, 2018 letter written by Mr. Larson to the Association’s members. In the letter, Mr. Larson urged the members not to vote for Mr. Stewart in an upcoming election.
10. In both the initial hearing and the rehearing, the Administrative Law Judge ordered that Mr. Stewart’s petition be dismissed. The Respondent, Canyon Gate Condominium Association, Inc., was deemed the prevailing party in the matter.
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Essay Questions
1. Analyze the legal reasoning behind the Administrative Law Judge’s conclusion that Bylaws Section 5.4 was not applicable to Mr. Stewart’s claim. How did Mr. Stewart’s interpretation of the section as a “sword” versus a “shield” contribute to this outcome?
2. Discuss the concept of “preponderance of the evidence” as defined in the case documents. Evaluate the evidence Mr. Stewart presented to prove bias and unfair treatment, and explain why the judge found it insufficient to meet this standard.
3. Examine the Board’s justification for denying the variance request (the “Pandora’s Box” argument). Based on the court’s conclusions, discuss why this was considered a “reasonable position” for a condominium association board, even without a detailed inspection of Mr. Stewart’s specific changes.
4. Trace the evolution of Mr. Stewart’s arguments and evidence from the initial hearing on September 6, 2018, to the rehearing on January 2, 2019. What new evidence was introduced, and did it fundamentally change the core issues or the final outcome of the case?
5. Explore the principle established in the “Conclusions of Law” that Association Bylaws function as a contract between the parties. How does this principle require both homeowners and the Association Board to act, and how did it influence the judge’s final decision in this matter?
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Glossary of Key Terms
Definition in the Context of the Case
Administrative Law Judge (ALJ)
The official, Thomas Shedden, who presided over the hearings, reviewed the evidence, and issued the final decisions in this matter.
Bylaws
A contract between the Association and its members. The parties are required to comply with its terms, and the Association must act reasonably in exercising its authority under them. Mr. Stewart alleged a violation of Bylaws Section 5.4.
Covenants, Conditions, and Restrictions. Mr. Stewart was found to be in violation of section 5.1 of the CC&Rs for making unapproved changes to a common area.
Common Area
An area around a condominium unit that is not privately owned. Mr. Stewart made unauthorized changes to the common and/or limited common area around his unit.
Good Faith
A standard of conduct mentioned in Bylaws Section 5.4, which shields Board members from liability if they act accordingly. Mr. Stewart’s core argument was that the Board did not act in good faith when denying his variance request.
Indemnification
The subject of Article V of the Bylaws. Section 5.4, titled “Liability,” falls under this article and serves to protect, or indemnify, the Board from liability.
Petitioner
The party who initiates a legal action by filing a petition. In this case, the Petitioner was Lawrence M. Stewart.
Preponderance of the Evidence
The standard of proof required for the Petitioner to win the case. It is defined as “The greater weight of the evidence… sufficient to incline a fair and impartial mind to one side of the issue rather than the other.”
Recuse
To formally withdraw from a decision-making process due to a conflict of interest. The Association’s attorney incorrectly stated in a letter that Mr. Stewart had recused himself from voting on his own variance request.
Respondent
The party against whom a petition is filed. In this case, the Respondent was Canyon Gate Condominium Association, Inc.
Variance
A formal request for an exception to the established rules (the CC&Rs). Mr. Stewart requested a variance to gain approval for the changes he had already made to the common area.
Blog Post – 18F-H1818052-REL
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4 sources
These documents consist of Administrative Law Judge Decisions from the Office of Administrative Hearings in Arizona, detailing a dispute between Petitioner Lawrence M. Stewart and the Canyon Gate Condominium Association, Inc. The core issue revolves around Mr. Stewart making unauthorized changes to the common area of his unit and his subsequent failed attempt to obtain a variance from the Association’s Board. The sources include an initial decision (dated September 14, 2018) and two decisions stemming from a rehearing (both dated January 17, 2019, though one is more detailed), all concluding that Mr. Stewart’s petition must be dismissed. The Administrative Law Judge determined that Mr. Stewart failed to prove by a preponderance of the evidence that the Association acted in bad faith or was biased against him when it denied his request, despite his reliance on a Bylaws section regarding indemnity which the court found acted as a “shield” for the Board rather than a source of duty.
Based on 4 sources
Case Participants
Petitioner Side
Lawrence M. Stewart(petitioner) Was also a board member during the variance request period, but resigned prior to the vote to deny his request
Respondent Side
Mark K. Sahl(Respondent Attorney) CARPENTER, HAZLEWOOD, DELGADO & BOLEN LLP
Nicolas C. S. Nogami(Respondent Attorney) CARPENTER, HAZLEWOOD, DELGADO & BOLEN LLP Also appears as 'Nichols C. S. Nogami'
Sandra Fernandez(board member) Canyon Gate Condominium Association, Inc. Voted to deny Petitioner's variance request
David Larson(board member) Canyon Gate Condominium Association, Inc. Voted to deny Petitioner's variance request; Petitioner alleged bias against him
Neutral Parties
Thomas Shedden(ALJ) Office of Administrative Hearings
Judy Lowe(Commissioner) Arizona Department of Real Estate
F. Del Sol(Administrative Staff) Transmitted copies of the decision
The Administrative Law Judge dismissed Petitioner Lawrence M. Stewart's petition and deemed the Respondent, Canyon Gate Condominium Association, Inc., to be the prevailing party.
Why this result: Petitioner failed to prove the Association violated Bylaws Section 5.4 or acted unreasonably or in bad faith when denying his request for a variance. The Bylaw section cited was determined to be a liability shield for the Board, not a source of duty owed to the homeowner.
Key Issues & Findings
Alleged failure of HOA Board to act in good faith when denying Petitioner's request for a variance for unauthorized common area changes
Petitioner made changes to the common area without permission and the Board denied his subsequent request for a variance. Petitioner alleged the Board violated Bylaws Section 5.4 by failing to act in good faith and showing bias. The ALJ found that Section 5.4 is a liability shield for the Board, not a duty imposed upon them, and Petitioner failed to meet the burden of proof to show bad faith or unreasonableness.
Orders: Petitioner Lawrence M. Stewart’s petition is dismissed. Respondent is deemed to be the prevailing party in this matter.
Filing fee: $0.00, Fee refunded: No
Disposition: respondent_win
Cited:
ARIZ. REV. STAT. Title 32, Ch. 20, Art. 11
ARIZ. ADMIN. CODE § R2-19-119
McNally v. Sun Lakes Homeowners Ass’n #1, Inc., 241 Ariz. 1, 382 P.3d 1216 (2016 App.)
Tierra Ranchos Homeowners Ass'n v. Kitchukov, 216 Ariz. 195, 165 P.3d 173 (App. 2007)
Analytics Highlights
Topics: HOA governance, variance denial, common area modifications, good faith requirement, board liability shield, prevailing party
Additional Citations:
ARIZ. REV. STAT. Title 32, Ch. 20, Art. 11
ARIZ. ADMIN. CODE § R2-19-119
McNally v. Sun Lakes Homeowners Ass’n #1, Inc., 241 Ariz. 1, 382 P.3d 1216 (2016 App.)
Tierra Ranchos Homeowners Ass'n v. Kitchukov, 216 Ariz. 195, 165 P.3d 173 (App. 2007)
The Administrative Law Judge granted the Petitioner's request for relief, finding that the Respondent HOA violated ARIZ. REV. STAT. section 33-1804(F) by failing to provide adequate notice and agenda information regarding the proposed CC&R amendment to prohibit short term rentals. The Respondent was ordered to pay the filing fee to the Petitioner.
Key Issues & Findings
Violation of open meeting and notice requirements regarding CC&R amendment
The Board violated ARIZ. REV. STAT. section 33-1804(F) when it failed to provide notice or an agenda to all of its members of information that was reasonably necessary to inform the members that an amendment to the CC&Rs to prohibit short term members would be discussed at its special board of directors meetings held on November 8, 2017 and November 20, 2017.
Orders: Petitioner's petition was granted. Respondent was ordered to pay Petitioner the filing fee required by ARIZ. REV. STAT. section 32-2199.01.
Filing fee: $500.00, Fee refunded: Yes
Disposition: petitioner_win
Cited:
ARIZ. REV. STAT. section 33-1804
ARIZ. REV. STAT. section 33-1804(B)
ARIZ. REV. STAT. section 33-1804(E)(1)
ARIZ. REV. STAT. section 33-1804(F)
ARIZ. REV. STAT. section 41-2198.01
ARIZ. REV. STAT. section 32-2199.02(A)
ARIZ. REV. STAT. section 32-2199.01
Analytics Highlights
Topics: Open Meetings, HOA Governance, Notice Requirements, CC&R Amendment, Short Term Rentals
Additional Citations:
ARIZ. REV. STAT. section 33-1804
ARIZ. REV. STAT. section 33-1804(B)
ARIZ. REV. STAT. section 33-1804(E)(1)
ARIZ. REV. STAT. section 33-1804(F)
ARIZ. REV. STAT. section 41-2198.01
ARIZ. REV. STAT. section 32-2199.02(A)
ARIZ. REV. STAT. section 32-2199.01
Video Overview
Audio Overview
Decision Documents
18F-H1817020-REL Decision – 629473.pdf
Uploaded 2025-10-09T03:32:20 (46.2 KB)
18F-H1817020-REL Decision – 629515.pdf
Uploaded 2025-10-09T03:32:20 (51.9 KB)
18F-H1817020-REL Decision – 636989.pdf
Uploaded 2025-10-09T03:32:20 (139.8 KB)
Briefing Doc – 18F-H1817020-REL
Administrative Law Judge Decision Briefing: Smith vs. Desert Isle Homeowners Association, Inc.
Executive Summary
This document provides a comprehensive analysis of the legal dispute between Petitioner Lewis Smith and Respondent Desert Isle Homeowners Association, Inc. The core of the case revolves around allegations that the HOA’s Board of Directors violated Arizona’s open meeting laws.
The Administrative Law Judge (ALJ) ultimately ruled in favor of the Petitioner, finding that the Desert Isle HOA violated ARIZ. REV. STAT. § 33-1804(F). The decision established that the Board failed to provide its members with agendas containing information “reasonably necessary to inform the members” about discussions concerning a proposed amendment to the Covenants, Conditions, and Restrictions (CC&Rs) that would prohibit short-term rentals. This failure occurred during Board of Directors meetings held on November 8 and November 20, 2017.
As a result of this finding, the Petitioner’s petition was granted, and the Respondent was ordered to pay the Petitioner’s filing fee. The ruling underscores the state’s policy that planned community meetings must be conducted with transparency, and agendas must provide sufficient detail for members to understand the matters to be discussed or decided.
Case Overview
Case Number
18F-H1817020-REL
Tribunal
Office of Administrative Hearings (Phoenix, Arizona)
Petitioner
Lewis Smith
Respondent
Desert Isle Homeowners Association, Inc.
Administrative Law Judge
Velva Moses-Thompson
Hearing Date
April 16, 2018
Decision Date
May 29, 2018
Central Allegation
On or about December 5, 2017, Petitioner Lewis Smith filed a petition with the Arizona Department of Real Estate alleging that the Desert Isle HOA violated ARIZ. REV. STAT. § 33-1804. The petition contended that the Board of Directors discussed and advanced a significant CC&R amendment without proper notification to the association members.
The petition states, in part:
“All Board members have been meeting to discuss and add an amendment to the CC&R’s [sic] Prohibiting short term renters. These meetings have not been conducted openly and no notice or agenda were provided containing information necessary to inform members of the association of the matters to be discussed… At no time was the issue to add an amendment for short term rentals properly noticed or on an agenda for discussion before it became a ballot vote.”
Chronology of Events
October 23, 2017:
• Lewis Smith, William H. Winn, Kevin Barnett, and Chester Jay submit a formal request to the Board for a special members’ meeting.
• The stated purposes of the meeting were to:
1. Select and fund an attorney to update the HOA’s bylaws and CC&Rs to comply with current Arizona law.
2. Discuss obtaining a reserve study for the association’s capital needs.
3. Discuss a separate attorney letter regarding HOA governance.
October 24, 2017:
• Board President Doug Robinson responds to the request, expressing support for a meeting but stating that more than 30 days would be needed to gather supporting documentation.
October 31, 2017:
• A second group of homeowners, including Board members Greg Yacoubian, Doug Robinson, Curt Carlson, and Mike Andrews, submits a request to add an item to the agenda of the forthcoming special meeting.
• Their request was to “amend the CC&Rs by adding a section prohibiting ‘Short Term Rentals’ and defining minimum time allowed for Rentals.”
November 5, 2017:
• The Board provides an agenda for a Board of Directors meeting scheduled for November 8, 2017. The agenda did not include any item related to the proposed amendment to prohibit short-term rentals.
November 8, 2017:
• The Board of Directors meeting is held.
• The Board votes to call a special members’ meeting before November 23, 2017, to address the two petitions.
• During the “BOARD INPUT” section, member Curt Carlson “spoke of past issues about short term renting,” but this was not a formal agenda item for discussion or action.
November 10, 2017:
• The Board emails Lewis Smith, acknowledging his petition and requesting a “narrative explanation from you on each of your subjects” by November 17, 2017, to prepare the meeting information package for all homeowners.
November 18, 2017:
• The Board sends an agenda for another Board of Directors meeting scheduled for November 20, 2017.
• The agenda lists “Review/approval of special meeting mailing package” as a topic but provides no specific details regarding the proposed amendment on short-term rentals.
December 1, 2017:
• Board President Doug Robinson emails all homeowners to explain the upcoming special meeting on December 16, 2017.
• The email states: “To avoid cost and time we put both petitions together and are having one meeting that will required [sic] all owners to vote for or against these two petitions.”
• The agenda for the December 16 meeting is attached, which explicitly lists a vote on prohibiting short-term rentals.
December 16, 2017:
• The special members’ meeting is held. A vote is taken on the proposed amendment to prohibit short-term rentals.
• Vote Result: 9 homeowners in favor, 6 homeowners against.
Legal Framework and Analysis
The case centered on the interpretation and application of Arizona Revised Statutes related to planned communities.
Key Statute: ARIZ. REV. STAT. § 33-1804
This statute governs meetings and notices for planned communities. The judge’s decision rested heavily on the policy outlined in subsection (F).
• § 33-1804(B): Requires that notice for any special meeting of members must state the purpose, including “the general nature of any proposed amendment to the declaration or bylaws.”
• § 33-1804(E)(1): Requires that the agenda for a Board of Directors meeting be made available to all members in attendance.
• § 33-1804(F): This subsection contains the state’s declaration of policy, which was central to the judge’s conclusion. It states:
Burden of Proof
The Petitioner, Lewis Smith, bore the burden of proving that the Respondent violated the statute by a “preponderance of the evidence.” This standard is defined as evidence that is sufficient “to incline a fair and impartial mind to one side of the issue rather than the other.”
Findings and Conclusion of the Court
The Administrative Law Judge found that the Petitioner successfully met the burden of proof. The decision concludes that the agendas for the November 8 and November 20 Board of Directors meetings were legally insufficient.
Conclusion of Law #4:
“Petitioner established by a preponderance of the evidence that the Board violated ARIZ. REV. STAT. section 33-1804(F) when it failed to provide notice or an agenda to all of its members of information that was reasonably necessary to inform the members that an amendment to the CC&Rs to prohibit short term members would be discussed at its special board of directors meetings held on November 8, 2017 and November 20, 2017.”
Final Order
• The Petitioner’s petition in the matter was granted.
• Pursuant to ARIZ. REV. STAT. § 32-2199.02(A), the Respondent (Desert Isle HOA) was ordered to pay the Petitioner the filing fee.
• The Order is legally binding unless a rehearing is requested with the Commissioner of the Department of Real Estate within 30 days of the service of the Order.
Parties and Legal Representation
Address
Legal Counsel
Petitioner
Lewis Smith 5459 E. Sorrento Dr. Long Beach, CA 90803
Mark J. Bainbridge, Esq. The Bainbridge Law Firm LLC 2122 E. Highland Ave. Ste. 250 Phoenix, AZ 85016-4779
Respondent
Desert Isle Homeowners Association, Inc. 411 Riverfront Dr. #7 Bullhead City, AZ 86442
William D. Condray, Esq. 2031 Highway 95 Ste. 2 Bullhead City, AZ 86442-6004
Study Guide – 18F-H1817020-REL
Study Guide: Smith v. Desert Isle Homeowners Association, Inc.
This guide provides a detailed review of the administrative case No. 18F-H1817020-REL between Petitioner Lewis Smith and Respondent Desert Isle Homeowners Association, Inc. It includes a short-answer quiz, an answer key, suggested essay questions, and a comprehensive glossary of key terms and entities involved in the matter.
Short-Answer Quiz
Answer the following questions in 2-3 sentences based on the information provided in the case documents.
1. Who are the primary parties in case No. 18F-H1817020-REL, and who represented them legally?
2. What was the three-part purpose of the special meeting requested by Lewis Smith and other homeowners on October 23, 2017?
3. A second petition was submitted on October 31, 2017. What was its purpose and who were the petitioners?
4. What key actions were taken regarding officers and a special meeting during the Board of Directors meeting on November 8, 2017?
5. What did the Desert Isle HOA Board demand from Lewis Smith in its email on November 10, 2017, to proceed with the special meeting?
6. What was the central allegation Lewis Smith made in his petition to the Arizona Department of Real Estate on December 5, 2017?
7. What was the outcome of the vote on the proposed amendment to prohibit short-term rentals at the December 16, 2017 special meeting?
8. Which specific section of the Arizona Revised Statutes did the Administrative Law Judge find the Board had violated?
9. According to the case documents, what is the definition of “preponderance of the evidence”?
10. What was the final ruling issued by Administrative Law Judge Velva Moses-Thompson on May 29, 2018?
Answer Key
1. The primary parties were the Petitioner, Lewis Smith, and the Respondent, Desert Isle Homeowners Association, Inc. Lewis Smith was represented by Mark J. Bainbridge, Esq., and the Desert Isle HOA was represented by William D. Condray, Esq.
2. The purpose of the meeting was threefold: to select and fund an attorney to update the HOA’s bylaws and CC&Rs to comply with current Arizona law; to discuss obtaining a reserve study for the association’s capital needs; and to discuss an attorney letter regarding HOA governance.
3. Greg Yacoubian, Doug Robinson, Curt Carlson, and Mike Andrews submitted a request to amend the CC&Rs by adding a section to prohibit “Short Term Rentals.” They requested this subject be added to the agenda of the special meeting already requested by Lewis Smith’s group to save time and money.
4. At the November 8, 2017 meeting, a motion passed unanimously to remove the existing VP, treasurer, and secretary. New officers and assistants were elected, and another motion passed to call the special meeting requested by the two groups of owners before November 23, 2017.
5. The Board requested a “narrative explanation” from Lewis Smith for each of his proposed subjects. The Board stated it would expect four narratives plus any referenced attorney engagement letters and needed the materials by November 17, 2017, to prepare the special meeting package.
6. Lewis Smith alleged that the Desert Isle HOA Board members met to discuss and add an amendment prohibiting short-term rentals without conducting the meetings openly. He stated that no proper notice or agenda was provided to inform members of the matters to be discussed before the issue became a ballot vote.
7. At the December 16, 2017 meeting, the proposed amendment to prohibit short-term rentals was voted on by homeowners. Nine homeowners voted in favor of the amendment, and six homeowners voted against it.
8. The Judge found that the Board violated ARIZ. REV. STAT. section 33-1804(F). The violation occurred when the Board failed to provide an agenda with information reasonably necessary to inform members that an amendment to the CC&Rs prohibiting short-term rentals would be discussed at the board meetings on November 8 and November 20, 2017.
9. The documents provide two definitions. The first is “such proof as convinces the trier of fact that the contention is more probably true than not.” The second, from Black’s Law Dictionary, is “The greater weight of the evidence… sufficient to incline a fair and impartial mind to one side of the issue rather than the other.”
10. The Administrative Law Judge granted the Petitioner’s petition. The Judge’s order required the Respondent (Desert Isle HOA) to pay the Petitioner the filing fee required by statute.
Essay Questions
1. Construct a detailed timeline of events from the initial petition by Lewis Smith on October 23, 2017, to the final Administrative Law Judge Decision on May 29, 2018. Include all key meetings, communications, and legal filings mentioned in the documents.
2. Analyze the ways in which the Desert Isle Homeowners Association Board failed to comply with the open meeting policies outlined in ARIZ. REV. STAT. section 33-1804. Use specific examples from the meeting agendas and communications to support the analysis.
3. Discuss the concept of “burden of proof” as it applies to this case. Explain who held the burden of proof for the violation and any affirmative defenses, and how the “preponderance of the evidence” standard was met by the Petitioner.
4. Compare and contrast the two petitions submitted by homeowners in October 2017. Evaluate how the Board handled each request and the procedural steps it took that ultimately led to the legal dispute.
5. Based on the findings of fact, evaluate the communication between the Desert Isle HOA Board and its members. Discuss the effectiveness and legality of the Board’s notices, agendas, and email correspondence regarding the special meeting and the proposed CC&R amendment.
Glossary of Key Terms
Term / Entity
Definition
Administrative Law Judge (ALJ)
The official who presides over administrative hearings, in this case, Velva Moses-Thompson. The ALJ hears evidence and issues a decision based on findings of fact and conclusions of law.
ARIZ. REV. STAT. section 33-1804
An Arizona state statute governing meetings in planned communities. It requires open meetings, proper notice to members (between 10 and 50 days prior), and agendas that are reasonably necessary to inform members of matters to be discussed or decided.
ARIZ. REV. STAT. section 41-2198.01
An Arizona state statute that permits an owner or planned community organization to file a petition with the Department of Real Estate for a hearing concerning violations of community documents or relevant statutes.
Board of Directors (Board)
The governing body of the Desert Isle Homeowners Association, Inc. At the time of the events, key members included Doug Robinson (President), Curt Carlson, and Mike Andrews.
Burden of Proof
The obligation to prove one’s assertion. In this case, the Petitioner bore the burden of proof to establish the violation, and the Respondent bore the burden for any affirmative defenses.
CC&Rs (Covenants, Conditions, and Restrictions)
The governing documents of the Desert Isle planned community. The petitions submitted by homeowners sought to amend these documents.
Desert Isle Homeowners Association, Inc.
The Respondent in the case; the planned community organization and non-profit corporation responsible for managing the Desert Isle community.
Lewis Smith
The Petitioner in the case; a homeowner in the Desert Isle community who filed a petition against the HOA.
Notice of Hearing
A formal notification issued by the Department of Real Estate setting the date and location for an administrative hearing. In this case, it was issued on January 22, 2018.
Office of Administrative Hearings
The state tribunal where the hearing for this case was conducted.
Petitioner
The party who files a petition initiating a legal action. In this case, Lewis Smith.
Post-hearing Briefs
Written legal arguments submitted by parties after a hearing has concluded. The record in this case was held open until May 9, 2018, to receive these briefs.
Preponderance of the Evidence
The standard of proof required in this administrative hearing. It is defined as evidence that is sufficient to convince the trier of fact that a contention is more probably true than not.
Reserve Study
A study to determine an association’s long-term capital needs for its common areas. Lewis Smith’s petition requested a discussion about obtaining one.
Respondent
The party against whom a petition is filed. In this case, Desert Isle Homeowners Association, Inc.
Special Meeting
A meeting of association members called for a specific purpose outside of regularly scheduled meetings. Both petitions in this case requested a special meeting.
Blog Post – 18F-H1817020-REL
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18F-H1817020-REL
3 sources
The provided documents are related to a legal dispute between Lewis Smith and the Desert Isle Homeowners Association, Inc., heard by the Office of Administrative Hearings. The first two sources, 629473.pdf and 629515.pdf, are identical “Order Holding Record Open” documents dated April 18, 2018, which mandated that the parties submit post-hearing briefs by specific deadlines and required the Homeowners Association to clarify its objection to a specific exhibit. The final source, 636989.pdf, is the “Administrative Law Judge Decision” issued on May 29, 2018, which found that the Homeowners Association violated Arizona law by failing to properly inform members that they would be discussing a proposed amendment to prohibit short-term rentals at two special board meetings. Ultimately, the judge granted Lewis Smith’s petition and ordered the Homeowners Association to pay the required filing fee.
Based on 3 sources
Case Participants
Petitioner Side
Lewis Smith(petitioner)
Mark J. Bainbridge(petitioner attorney) The Bainbridge Law Firm LLC
William H. Winn(homeowner) Submitted petition with Petitioner
Kevin Barnett(homeowner) Submitted petition with Petitioner
Chester Jay(homeowner) Submitted petition with Petitioner
Mike Sharp(homeowner/representative) Representative for Kevin Barnett
Kim Sharp(homeowner/representative) Representative for Kevin Barnett
Respondent Side
William D. Condray(respondent attorney)
Doug Robinson(board member) Desert Isle Homeowners Association, Inc. Board President
Curt Carlson(board member) Desert Isle Homeowners Association, Inc.
Mike Andrews(board member) Desert Isle Homeowners Association, Inc.
Greg Yacoubian(homeowner/board member) Desert Isle Homeowners Association, Inc. Replaced Mike Andrews on 11/20/17
Judy Carlson(HOA officer) Desert Isle Homeowners Association, Inc. Treasurer
Terri Robinson(HOA officer) Desert Isle Homeowners Association, Inc. Secretary
Jamie Kelly(HOA attorney) Consulted on Special Meeting package
Neutral Parties
Velva Moses-Thompson(ALJ)
Judy Lowe(Commissioner) Arizona Department of Real Estate
M.Aguirre(Clerk/Admin) Transmitting agent
LDettorre(ADRE Staff) ADRE Recipient of transmission
AHansen(ADRE Staff) ADRE Recipient of transmission
djones(ADRE Staff) ADRE Recipient of transmission
DGardner(ADRE Staff) ADRE Recipient of transmission
The Administrative Law Judge granted the Petitioner's request for relief, finding that the Respondent HOA violated ARIZ. REV. STAT. section 33-1804(F) by failing to provide adequate notice and agenda information regarding the proposed CC&R amendment to prohibit short term rentals. The Respondent was ordered to pay the filing fee to the Petitioner.
Key Issues & Findings
Violation of open meeting and notice requirements regarding CC&R amendment
The Board violated ARIZ. REV. STAT. section 33-1804(F) when it failed to provide notice or an agenda to all of its members of information that was reasonably necessary to inform the members that an amendment to the CC&Rs to prohibit short term members would be discussed at its special board of directors meetings held on November 8, 2017 and November 20, 2017.
Orders: Petitioner's petition was granted. Respondent was ordered to pay Petitioner the filing fee required by ARIZ. REV. STAT. section 32-2199.01.
Filing fee: $500.00, Fee refunded: Yes
Disposition: petitioner_win
Cited:
ARIZ. REV. STAT. section 33-1804
ARIZ. REV. STAT. section 33-1804(B)
ARIZ. REV. STAT. section 33-1804(E)(1)
ARIZ. REV. STAT. section 33-1804(F)
ARIZ. REV. STAT. section 41-2198.01
ARIZ. REV. STAT. section 32-2199.02(A)
ARIZ. REV. STAT. section 32-2199.01
Analytics Highlights
Topics: Open Meetings, HOA Governance, Notice Requirements, CC&R Amendment, Short Term Rentals
Additional Citations:
ARIZ. REV. STAT. section 33-1804
ARIZ. REV. STAT. section 33-1804(B)
ARIZ. REV. STAT. section 33-1804(E)(1)
ARIZ. REV. STAT. section 33-1804(F)
ARIZ. REV. STAT. section 41-2198.01
ARIZ. REV. STAT. section 32-2199.02(A)
ARIZ. REV. STAT. section 32-2199.01
Video Overview
Audio Overview
Decision Documents
18F-H1817020-REL Decision – 629473.pdf
Uploaded 2026-01-23T17:22:47 (46.2 KB)
18F-H1817020-REL Decision – 629515.pdf
Uploaded 2026-01-23T17:22:50 (51.9 KB)
18F-H1817020-REL Decision – 636989.pdf
Uploaded 2026-01-23T17:22:54 (139.8 KB)
Briefing Doc – 18F-H1817020-REL
Administrative Law Judge Decision Briefing: Smith vs. Desert Isle Homeowners Association, Inc.
Executive Summary
This document provides a comprehensive analysis of the legal dispute between Petitioner Lewis Smith and Respondent Desert Isle Homeowners Association, Inc. The core of the case revolves around allegations that the HOA’s Board of Directors violated Arizona’s open meeting laws.
The Administrative Law Judge (ALJ) ultimately ruled in favor of the Petitioner, finding that the Desert Isle HOA violated ARIZ. REV. STAT. § 33-1804(F). The decision established that the Board failed to provide its members with agendas containing information “reasonably necessary to inform the members” about discussions concerning a proposed amendment to the Covenants, Conditions, and Restrictions (CC&Rs) that would prohibit short-term rentals. This failure occurred during Board of Directors meetings held on November 8 and November 20, 2017.
As a result of this finding, the Petitioner’s petition was granted, and the Respondent was ordered to pay the Petitioner’s filing fee. The ruling underscores the state’s policy that planned community meetings must be conducted with transparency, and agendas must provide sufficient detail for members to understand the matters to be discussed or decided.
Case Overview
Case Number
18F-H1817020-REL
Tribunal
Office of Administrative Hearings (Phoenix, Arizona)
Petitioner
Lewis Smith
Respondent
Desert Isle Homeowners Association, Inc.
Administrative Law Judge
Velva Moses-Thompson
Hearing Date
April 16, 2018
Decision Date
May 29, 2018
Central Allegation
On or about December 5, 2017, Petitioner Lewis Smith filed a petition with the Arizona Department of Real Estate alleging that the Desert Isle HOA violated ARIZ. REV. STAT. § 33-1804. The petition contended that the Board of Directors discussed and advanced a significant CC&R amendment without proper notification to the association members.
The petition states, in part:
“All Board members have been meeting to discuss and add an amendment to the CC&R’s [sic] Prohibiting short term renters. These meetings have not been conducted openly and no notice or agenda were provided containing information necessary to inform members of the association of the matters to be discussed… At no time was the issue to add an amendment for short term rentals properly noticed or on an agenda for discussion before it became a ballot vote.”
Chronology of Events
October 23, 2017:
• Lewis Smith, William H. Winn, Kevin Barnett, and Chester Jay submit a formal request to the Board for a special members’ meeting.
• The stated purposes of the meeting were to:
1. Select and fund an attorney to update the HOA’s bylaws and CC&Rs to comply with current Arizona law.
2. Discuss obtaining a reserve study for the association’s capital needs.
3. Discuss a separate attorney letter regarding HOA governance.
October 24, 2017:
• Board President Doug Robinson responds to the request, expressing support for a meeting but stating that more than 30 days would be needed to gather supporting documentation.
October 31, 2017:
• A second group of homeowners, including Board members Greg Yacoubian, Doug Robinson, Curt Carlson, and Mike Andrews, submits a request to add an item to the agenda of the forthcoming special meeting.
• Their request was to “amend the CC&Rs by adding a section prohibiting ‘Short Term Rentals’ and defining minimum time allowed for Rentals.”
November 5, 2017:
• The Board provides an agenda for a Board of Directors meeting scheduled for November 8, 2017. The agenda did not include any item related to the proposed amendment to prohibit short-term rentals.
November 8, 2017:
• The Board of Directors meeting is held.
• The Board votes to call a special members’ meeting before November 23, 2017, to address the two petitions.
• During the “BOARD INPUT” section, member Curt Carlson “spoke of past issues about short term renting,” but this was not a formal agenda item for discussion or action.
November 10, 2017:
• The Board emails Lewis Smith, acknowledging his petition and requesting a “narrative explanation from you on each of your subjects” by November 17, 2017, to prepare the meeting information package for all homeowners.
November 18, 2017:
• The Board sends an agenda for another Board of Directors meeting scheduled for November 20, 2017.
• The agenda lists “Review/approval of special meeting mailing package” as a topic but provides no specific details regarding the proposed amendment on short-term rentals.
December 1, 2017:
• Board President Doug Robinson emails all homeowners to explain the upcoming special meeting on December 16, 2017.
• The email states: “To avoid cost and time we put both petitions together and are having one meeting that will required [sic] all owners to vote for or against these two petitions.”
• The agenda for the December 16 meeting is attached, which explicitly lists a vote on prohibiting short-term rentals.
December 16, 2017:
• The special members’ meeting is held. A vote is taken on the proposed amendment to prohibit short-term rentals.
• Vote Result: 9 homeowners in favor, 6 homeowners against.
Legal Framework and Analysis
The case centered on the interpretation and application of Arizona Revised Statutes related to planned communities.
Key Statute: ARIZ. REV. STAT. § 33-1804
This statute governs meetings and notices for planned communities. The judge’s decision rested heavily on the policy outlined in subsection (F).
• § 33-1804(B): Requires that notice for any special meeting of members must state the purpose, including “the general nature of any proposed amendment to the declaration or bylaws.”
• § 33-1804(E)(1): Requires that the agenda for a Board of Directors meeting be made available to all members in attendance.
• § 33-1804(F): This subsection contains the state’s declaration of policy, which was central to the judge’s conclusion. It states:
Burden of Proof
The Petitioner, Lewis Smith, bore the burden of proving that the Respondent violated the statute by a “preponderance of the evidence.” This standard is defined as evidence that is sufficient “to incline a fair and impartial mind to one side of the issue rather than the other.”
Findings and Conclusion of the Court
The Administrative Law Judge found that the Petitioner successfully met the burden of proof. The decision concludes that the agendas for the November 8 and November 20 Board of Directors meetings were legally insufficient.
Conclusion of Law #4:
“Petitioner established by a preponderance of the evidence that the Board violated ARIZ. REV. STAT. section 33-1804(F) when it failed to provide notice or an agenda to all of its members of information that was reasonably necessary to inform the members that an amendment to the CC&Rs to prohibit short term members would be discussed at its special board of directors meetings held on November 8, 2017 and November 20, 2017.”
Final Order
• The Petitioner’s petition in the matter was granted.
• Pursuant to ARIZ. REV. STAT. § 32-2199.02(A), the Respondent (Desert Isle HOA) was ordered to pay the Petitioner the filing fee.
• The Order is legally binding unless a rehearing is requested with the Commissioner of the Department of Real Estate within 30 days of the service of the Order.
Parties and Legal Representation
Address
Legal Counsel
Petitioner
Lewis Smith 5459 E. Sorrento Dr. Long Beach, CA 90803
Mark J. Bainbridge, Esq. The Bainbridge Law Firm LLC 2122 E. Highland Ave. Ste. 250 Phoenix, AZ 85016-4779
Respondent
Desert Isle Homeowners Association, Inc. 411 Riverfront Dr. #7 Bullhead City, AZ 86442
William D. Condray, Esq. 2031 Highway 95 Ste. 2 Bullhead City, AZ 86442-6004
Study Guide – 18F-H1817020-REL
Study Guide: Smith v. Desert Isle Homeowners Association, Inc.
This guide provides a detailed review of the administrative case No. 18F-H1817020-REL between Petitioner Lewis Smith and Respondent Desert Isle Homeowners Association, Inc. It includes a short-answer quiz, an answer key, suggested essay questions, and a comprehensive glossary of key terms and entities involved in the matter.
Short-Answer Quiz
Answer the following questions in 2-3 sentences based on the information provided in the case documents.
1. Who are the primary parties in case No. 18F-H1817020-REL, and who represented them legally?
2. What was the three-part purpose of the special meeting requested by Lewis Smith and other homeowners on October 23, 2017?
3. A second petition was submitted on October 31, 2017. What was its purpose and who were the petitioners?
4. What key actions were taken regarding officers and a special meeting during the Board of Directors meeting on November 8, 2017?
5. What did the Desert Isle HOA Board demand from Lewis Smith in its email on November 10, 2017, to proceed with the special meeting?
6. What was the central allegation Lewis Smith made in his petition to the Arizona Department of Real Estate on December 5, 2017?
7. What was the outcome of the vote on the proposed amendment to prohibit short-term rentals at the December 16, 2017 special meeting?
8. Which specific section of the Arizona Revised Statutes did the Administrative Law Judge find the Board had violated?
9. According to the case documents, what is the definition of “preponderance of the evidence”?
10. What was the final ruling issued by Administrative Law Judge Velva Moses-Thompson on May 29, 2018?
Answer Key
1. The primary parties were the Petitioner, Lewis Smith, and the Respondent, Desert Isle Homeowners Association, Inc. Lewis Smith was represented by Mark J. Bainbridge, Esq., and the Desert Isle HOA was represented by William D. Condray, Esq.
2. The purpose of the meeting was threefold: to select and fund an attorney to update the HOA’s bylaws and CC&Rs to comply with current Arizona law; to discuss obtaining a reserve study for the association’s capital needs; and to discuss an attorney letter regarding HOA governance.
3. Greg Yacoubian, Doug Robinson, Curt Carlson, and Mike Andrews submitted a request to amend the CC&Rs by adding a section to prohibit “Short Term Rentals.” They requested this subject be added to the agenda of the special meeting already requested by Lewis Smith’s group to save time and money.
4. At the November 8, 2017 meeting, a motion passed unanimously to remove the existing VP, treasurer, and secretary. New officers and assistants were elected, and another motion passed to call the special meeting requested by the two groups of owners before November 23, 2017.
5. The Board requested a “narrative explanation” from Lewis Smith for each of his proposed subjects. The Board stated it would expect four narratives plus any referenced attorney engagement letters and needed the materials by November 17, 2017, to prepare the special meeting package.
6. Lewis Smith alleged that the Desert Isle HOA Board members met to discuss and add an amendment prohibiting short-term rentals without conducting the meetings openly. He stated that no proper notice or agenda was provided to inform members of the matters to be discussed before the issue became a ballot vote.
7. At the December 16, 2017 meeting, the proposed amendment to prohibit short-term rentals was voted on by homeowners. Nine homeowners voted in favor of the amendment, and six homeowners voted against it.
8. The Judge found that the Board violated ARIZ. REV. STAT. section 33-1804(F). The violation occurred when the Board failed to provide an agenda with information reasonably necessary to inform members that an amendment to the CC&Rs prohibiting short-term rentals would be discussed at the board meetings on November 8 and November 20, 2017.
9. The documents provide two definitions. The first is “such proof as convinces the trier of fact that the contention is more probably true than not.” The second, from Black’s Law Dictionary, is “The greater weight of the evidence… sufficient to incline a fair and impartial mind to one side of the issue rather than the other.”
10. The Administrative Law Judge granted the Petitioner’s petition. The Judge’s order required the Respondent (Desert Isle HOA) to pay the Petitioner the filing fee required by statute.
Essay Questions
1. Construct a detailed timeline of events from the initial petition by Lewis Smith on October 23, 2017, to the final Administrative Law Judge Decision on May 29, 2018. Include all key meetings, communications, and legal filings mentioned in the documents.
2. Analyze the ways in which the Desert Isle Homeowners Association Board failed to comply with the open meeting policies outlined in ARIZ. REV. STAT. section 33-1804. Use specific examples from the meeting agendas and communications to support the analysis.
3. Discuss the concept of “burden of proof” as it applies to this case. Explain who held the burden of proof for the violation and any affirmative defenses, and how the “preponderance of the evidence” standard was met by the Petitioner.
4. Compare and contrast the two petitions submitted by homeowners in October 2017. Evaluate how the Board handled each request and the procedural steps it took that ultimately led to the legal dispute.
5. Based on the findings of fact, evaluate the communication between the Desert Isle HOA Board and its members. Discuss the effectiveness and legality of the Board’s notices, agendas, and email correspondence regarding the special meeting and the proposed CC&R amendment.
Glossary of Key Terms
Term / Entity
Definition
Administrative Law Judge (ALJ)
The official who presides over administrative hearings, in this case, Velva Moses-Thompson. The ALJ hears evidence and issues a decision based on findings of fact and conclusions of law.
ARIZ. REV. STAT. section 33-1804
An Arizona state statute governing meetings in planned communities. It requires open meetings, proper notice to members (between 10 and 50 days prior), and agendas that are reasonably necessary to inform members of matters to be discussed or decided.
ARIZ. REV. STAT. section 41-2198.01
An Arizona state statute that permits an owner or planned community organization to file a petition with the Department of Real Estate for a hearing concerning violations of community documents or relevant statutes.
Board of Directors (Board)
The governing body of the Desert Isle Homeowners Association, Inc. At the time of the events, key members included Doug Robinson (President), Curt Carlson, and Mike Andrews.
Burden of Proof
The obligation to prove one’s assertion. In this case, the Petitioner bore the burden of proof to establish the violation, and the Respondent bore the burden for any affirmative defenses.
CC&Rs (Covenants, Conditions, and Restrictions)
The governing documents of the Desert Isle planned community. The petitions submitted by homeowners sought to amend these documents.
Desert Isle Homeowners Association, Inc.
The Respondent in the case; the planned community organization and non-profit corporation responsible for managing the Desert Isle community.
Lewis Smith
The Petitioner in the case; a homeowner in the Desert Isle community who filed a petition against the HOA.
Notice of Hearing
A formal notification issued by the Department of Real Estate setting the date and location for an administrative hearing. In this case, it was issued on January 22, 2018.
Office of Administrative Hearings
The state tribunal where the hearing for this case was conducted.
Petitioner
The party who files a petition initiating a legal action. In this case, Lewis Smith.
Post-hearing Briefs
Written legal arguments submitted by parties after a hearing has concluded. The record in this case was held open until May 9, 2018, to receive these briefs.
Preponderance of the Evidence
The standard of proof required in this administrative hearing. It is defined as evidence that is sufficient to convince the trier of fact that a contention is more probably true than not.
Reserve Study
A study to determine an association’s long-term capital needs for its common areas. Lewis Smith’s petition requested a discussion about obtaining one.
Respondent
The party against whom a petition is filed. In this case, Desert Isle Homeowners Association, Inc.
Special Meeting
A meeting of association members called for a specific purpose outside of regularly scheduled meetings. Both petitions in this case requested a special meeting.
Blog Post – 18F-H1817020-REL
Select all sources
629473.pdf
629515.pdf
636989.pdf
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18F-H1817020-REL
3 sources
The provided documents are related to a legal dispute between Lewis Smith and the Desert Isle Homeowners Association, Inc., heard by the Office of Administrative Hearings. The first two sources, 629473.pdf and 629515.pdf, are identical “Order Holding Record Open” documents dated April 18, 2018, which mandated that the parties submit post-hearing briefs by specific deadlines and required the Homeowners Association to clarify its objection to a specific exhibit. The final source, 636989.pdf, is the “Administrative Law Judge Decision” issued on May 29, 2018, which found that the Homeowners Association violated Arizona law by failing to properly inform members that they would be discussing a proposed amendment to prohibit short-term rentals at two special board meetings. Ultimately, the judge granted Lewis Smith’s petition and ordered the Homeowners Association to pay the required filing fee.
Based on 3 sources
Case Participants
Petitioner Side
Lewis Smith(petitioner)
Mark J. Bainbridge(petitioner attorney) The Bainbridge Law Firm LLC
William H. Winn(homeowner) Submitted petition with Petitioner
Kevin Barnett(homeowner) Submitted petition with Petitioner
Chester Jay(homeowner) Submitted petition with Petitioner
Mike Sharp(homeowner/representative) Representative for Kevin Barnett
Kim Sharp(homeowner/representative) Representative for Kevin Barnett
Respondent Side
William D. Condray(respondent attorney)
Doug Robinson(board member) Desert Isle Homeowners Association, Inc. Board President
Curt Carlson(board member) Desert Isle Homeowners Association, Inc.
Mike Andrews(board member) Desert Isle Homeowners Association, Inc.
Greg Yacoubian(homeowner/board member) Desert Isle Homeowners Association, Inc. Replaced Mike Andrews on 11/20/17
Judy Carlson(HOA officer) Desert Isle Homeowners Association, Inc. Treasurer
Terri Robinson(HOA officer) Desert Isle Homeowners Association, Inc. Secretary
Jamie Kelly(HOA attorney) Consulted on Special Meeting package
Neutral Parties
Velva Moses-Thompson(ALJ)
Judy Lowe(Commissioner) Arizona Department of Real Estate
M.Aguirre(Clerk/Admin) Transmitting agent
LDettorre(ADRE Staff) ADRE Recipient of transmission
AHansen(ADRE Staff) ADRE Recipient of transmission
djones(ADRE Staff) ADRE Recipient of transmission
DGardner(ADRE Staff) ADRE Recipient of transmission
