Case Summary
| Case ID | 22F-H2221005-REL |
|---|---|
| Agency | ADRE |
| Tribunal | OAH |
| Decision Date | 2021-10-25 |
| Administrative Law Judge | Tammy L. Eigenheer |
| Outcome | The Petitioner's petition alleging the HOA violated conflict of interest statutes (A.R.S. § 33-1811) was dismissed because the Petitioner failed to sustain the burden of proof, as the conflict was deemed sufficiently disclosed prior to the board action. |
| Filing Fees Refunded | $0.00 |
| Civil Penalties | $0.00 |
Parties & Counsel
| Petitioner | Richard E Jewell | Counsel | — |
|---|---|---|---|
| Respondent | Casa Fiesta Townhouses Corp. | Counsel | Nicole Payne and Carlotta L. Turman |
Alleged Violations
A.R.S. § 33-1811
Outcome Summary
The Petitioner's petition alleging the HOA violated conflict of interest statutes (A.R.S. § 33-1811) was dismissed because the Petitioner failed to sustain the burden of proof, as the conflict was deemed sufficiently disclosed prior to the board action.
Why this result: Petitioner failed to sustain the burden of proof on the alleged violation.
Key Issues & Findings
Board Member Conflict of Interest Disclosure
Petitioner alleged the HOA violated the statute regarding conflict of interest when the board hired the board president as a paid office assistant and the conflict was not disclosed by the president. The ALJ found that while the president did not disclose the conflict, the conflict was made known by another attendee prior to discussion and action, fulfilling the statutory purpose.
Orders: Petitioner’s petition be dismissed.
Filing fee: $0.00, Fee refunded: No
Disposition: respondent_win
- A.R.S. § 33-1811
- A.R.S. § 33-1243(c)
- A.R.S. Title 32, Ch. 20, Art. 11
- Arizona Administrative Code R2-19-119
- A.R.S. § 1-211(B)
- Gutierrez v. Industrial Commission of Arizona, 226 Ariz. 395, 249 P.3d 1095 (2011)
- State v. McFall, 103 Ariz. 234, 238, 439 P.2d 805, 809 (1968)
- BLACK’S LAW DICTIONARY 1373 (10th ed. 2014)
Analytics Highlights
- A.R.S. § 33-1811
- A.R.S. § 33-1243(c)
- A.R.S. Title 32, Ch. 20, Art. 11
- Arizona Administrative Code R2-19-119
- A.R.S. § 1-211(B)
- Gutierrez v. Industrial Commission of Arizona, 226 Ariz. 395, 249 P.3d 1095 (2011)
- State v. McFall, 103 Ariz. 234, 238, 439 P.2d 805, 809 (1968)
- BLACK’S LAW DICTIONARY 1373 (10th ed. 2014)
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Decision Documents
22F-H2221005-REL Decision – 920344.pdf
22F-H2221005-REL Decision – 920344.pdf
This summary pertains to the Administrative Law Judge Decision in the case of *Richard E Jewell, Petitioner, vs. Casa Fiesta Townhouses Corp., Respondent* (No. 22F-H2221005-REL), heard on October 7, 2021.
Concise Legal Summary
Key Facts and Issues
Petitioner Richard E. Jewell, a homeowner and member of the Respondent, Casa Fiesta Townhouses Corp. (an Arizona homeowners association or HOA), alleged that the HOA board violated Arizona Revised Statutes (A.R.S.) § 33-1811. The central issue was whether the Board of Directors improperly handled a conflict of interest when voting to hire the sitting Board President, George Pavia, as a salaried office assistant.
The Board voted on July 15, 2021, to employ Mr. Pavia for 40 hours a week at a wage of $15.00 per hour. Petitioner asserted that his only issue was that the Board President failed to personally disclose the conflict of interest prior to the action being taken.
Key Legal Points and Arguments
The relevant statute, A.R.S. § 33-1811, stipulates that if a contract or action for compensation benefits a board member, that member "shall declare a conflict of interest" in an open meeting before discussion or action. A contract entered in violation of this section is void and unenforceable.
During the hearing, the Administrative Law Judge reviewed evidence, including a recording of the July meeting. The evidence showed:
- At the outset of the virtual meeting, Mr. Pavia indicated he would recuse himself from the discussion.
- An individual attending the meeting raised the possibility of a conflict of interest.
- The conflict was discussed at length during the board meeting prior to any vote.
- Mr. Pavia refrained from participating in the vote.
The Administrative Law Judge concluded that the purpose of A.R.S. § 33-1811 is to ensure HOA members are aware of conflicts prior to discussion. Interpreting the statute to achieve a "fair and sensible result", the Judge determined that the conflict was, in fact, made known and discussed prior to action. The statute's requirement was satisfied, as the fact that Mr. Pavia was not the individual who disclosed the conflict did not negate that the conflict was discussed at length and known to those voting.
Outcome
At the conclusion of the Petitioner’s presentation of evidence, Respondent moved for a directed verdict, arguing the Petitioner failed to sustain his burden of proof. The motion was granted.
The Administrative Law Judge ruled that the Petitioner failed to establish, by a preponderance of the evidence, that Respondent acted in violation of A.R.S. § 33-1811. The Petitioner’s petition was dismissed.
Questions
Question
Can an HOA board member also be a paid employee of the association?
Short Answer
Yes, provided the conflict of interest is properly declared.
Detailed Answer
A board member can be hired for compensation, but they must declare the conflict of interest in an open meeting before the board discusses or acts on the issue. In this case, the Board President was hired as an office assistant.
Alj Quote
If any contract, decision or other action for compensation taken by or on behalf of the board of directors would benefit any member of the board of directors . . . , that member of the board of directors shall declare a conflict of interest for that issue.
Legal Basis
A.R.S. § 33-1811
Topic Tags
- conflict of interest
- board compensation
- hiring
Question
Does a conflicted board member have to personally announce their own conflict of interest?
Short Answer
Not necessarily, as long as the members are made aware of the conflict.
Detailed Answer
The ALJ ruled that the purpose of the law is to ensure members are aware of conflicts. If the conflict is discussed and known to attendees, it does not matter if the specific board member was not the one to voice the disclosure.
Alj Quote
The purpose of A.R.S. § 33-1811 is to ensure that the members of a homeowners association are aware of all conflicts of interest prior to any discussion… not to require that a specific board member announce to those members that such a conflict of interest exists.
Legal Basis
A.R.S. § 33-1811
Topic Tags
- conflict of interest
- procedural requirements
- meetings
Question
Can a board member vote on a contract that benefits them financially?
Short Answer
Yes, after declaring the conflict.
Detailed Answer
State law allows a board member to vote on an issue benefiting them, provided they have declared the conflict in an open meeting before discussion or action is taken.
Alj Quote
The member shall declare the conflict in an open meeting of the board before the board discusses or takes action on that issue and that member may then vote on that issue.
Legal Basis
A.R.S. § 33-1811
Topic Tags
- voting rights
- conflict of interest
- board powers
Question
What is the burden of proof for a homeowner filing a complaint against their HOA?
Short Answer
Preponderance of the evidence.
Detailed Answer
The homeowner (petitioner) is responsible for proving their claim. They must show that their version of events is more likely true than not (the greater weight of the evidence).
Alj Quote
At an administrative hearing, the party asserting a claim, right, entitlement, or affirmative defense has the burden of proof, and the standard of proof on all issues in this matter is that of a preponderance of the evidence.
Legal Basis
Arizona Administrative Code R2-19-119
Topic Tags
- legal standards
- burden of proof
- administrative hearing
Question
Which specific law covers conflict of interest for HOAs (Planned Communities) versus Condominiums?
Short Answer
A.R.S. § 33-1811 for HOAs; A.R.S. § 33-1243 for Condominiums.
Detailed Answer
It is important to cite the correct statute based on the type of community. The petitioner initially cited the condo statute (§ 33-1243) but had to correct it to the planned community statute (§ 33-1811).
Alj Quote
Petitioner indicated that he erroneously cited to A.R.S. § 33-1243(C) in his petition as that statute relates to condominium associations rather than homeowner associations. Rather, Petitioner should have referenced A.R.S. § 33-1811…
Legal Basis
A.R.S. § 33-1811
Topic Tags
- statutes
- jurisdiction
- legal definitions
Question
Is a contract void if the technical requirements of declaring a conflict weren't perfectly followed?
Short Answer
Likely not, if the conflict was known and discussed.
Detailed Answer
Statutes are interpreted to produce sensible results. If the conflict was discussed at length and everyone was aware, a technical failure (like the wrong person announcing it) may not constitute a violation.
Alj Quote
The fact that Mr. Pavia was not the board member to disclose the conflict does not negate that the conflict was made known prior to any discussion and that the conflict was discussed at length during the board meeting prior to any vote.
Legal Basis
Case Law (Gutierrez v. Industrial Commission)
Topic Tags
- contract validity
- statutory interpretation
- enforcement
Case
- Docket No
- 22F-H2221005-REL
- Case Title
- Richard E Jewell vs. Casa Fiesta Townhouses Corp.
- Decision Date
- 2021-10-25
- Alj Name
- Tammy L. Eigenheer
- Tribunal
- OAH
- Agency
- ADRE
Questions
Question
Can an HOA board member also be a paid employee of the association?
Short Answer
Yes, provided the conflict of interest is properly declared.
Detailed Answer
A board member can be hired for compensation, but they must declare the conflict of interest in an open meeting before the board discusses or acts on the issue. In this case, the Board President was hired as an office assistant.
Alj Quote
If any contract, decision or other action for compensation taken by or on behalf of the board of directors would benefit any member of the board of directors . . . , that member of the board of directors shall declare a conflict of interest for that issue.
Legal Basis
A.R.S. § 33-1811
Topic Tags
- conflict of interest
- board compensation
- hiring
Question
Does a conflicted board member have to personally announce their own conflict of interest?
Short Answer
Not necessarily, as long as the members are made aware of the conflict.
Detailed Answer
The ALJ ruled that the purpose of the law is to ensure members are aware of conflicts. If the conflict is discussed and known to attendees, it does not matter if the specific board member was not the one to voice the disclosure.
Alj Quote
The purpose of A.R.S. § 33-1811 is to ensure that the members of a homeowners association are aware of all conflicts of interest prior to any discussion… not to require that a specific board member announce to those members that such a conflict of interest exists.
Legal Basis
A.R.S. § 33-1811
Topic Tags
- conflict of interest
- procedural requirements
- meetings
Question
Can a board member vote on a contract that benefits them financially?
Short Answer
Yes, after declaring the conflict.
Detailed Answer
State law allows a board member to vote on an issue benefiting them, provided they have declared the conflict in an open meeting before discussion or action is taken.
Alj Quote
The member shall declare the conflict in an open meeting of the board before the board discusses or takes action on that issue and that member may then vote on that issue.
Legal Basis
A.R.S. § 33-1811
Topic Tags
- voting rights
- conflict of interest
- board powers
Question
What is the burden of proof for a homeowner filing a complaint against their HOA?
Short Answer
Preponderance of the evidence.
Detailed Answer
The homeowner (petitioner) is responsible for proving their claim. They must show that their version of events is more likely true than not (the greater weight of the evidence).
Alj Quote
At an administrative hearing, the party asserting a claim, right, entitlement, or affirmative defense has the burden of proof, and the standard of proof on all issues in this matter is that of a preponderance of the evidence.
Legal Basis
Arizona Administrative Code R2-19-119
Topic Tags
- legal standards
- burden of proof
- administrative hearing
Question
Which specific law covers conflict of interest for HOAs (Planned Communities) versus Condominiums?
Short Answer
A.R.S. § 33-1811 for HOAs; A.R.S. § 33-1243 for Condominiums.
Detailed Answer
It is important to cite the correct statute based on the type of community. The petitioner initially cited the condo statute (§ 33-1243) but had to correct it to the planned community statute (§ 33-1811).
Alj Quote
Petitioner indicated that he erroneously cited to A.R.S. § 33-1243(C) in his petition as that statute relates to condominium associations rather than homeowner associations. Rather, Petitioner should have referenced A.R.S. § 33-1811…
Legal Basis
A.R.S. § 33-1811
Topic Tags
- statutes
- jurisdiction
- legal definitions
Question
Is a contract void if the technical requirements of declaring a conflict weren't perfectly followed?
Short Answer
Likely not, if the conflict was known and discussed.
Detailed Answer
Statutes are interpreted to produce sensible results. If the conflict was discussed at length and everyone was aware, a technical failure (like the wrong person announcing it) may not constitute a violation.
Alj Quote
The fact that Mr. Pavia was not the board member to disclose the conflict does not negate that the conflict was made known prior to any discussion and that the conflict was discussed at length during the board meeting prior to any vote.
Legal Basis
Case Law (Gutierrez v. Industrial Commission)
Topic Tags
- contract validity
- statutory interpretation
- enforcement
Case
- Docket No
- 22F-H2221005-REL
- Case Title
- Richard E Jewell vs. Casa Fiesta Townhouses Corp.
- Decision Date
- 2021-10-25
- Alj Name
- Tammy L. Eigenheer
- Tribunal
- OAH
- Agency
- ADRE
Case Participants
Petitioner Side
- Richard E Jewell (petitioner)
Jewell Company Inc.
Respondent Side
- Nicole Payne (respondent attorney)
Carpenter Hazlewood Delgado & Bolen LLP - Carlotta L. Turman (respondent attorney)
Carpenter Hazlewood Delgado & Bolen LLP - George Pavia (HOA board president/employee)
Casa Fiesta Townhouses Corp.
Subject of conflict of interest allegation
Neutral Parties
- Tammy L. Eigenheer (ALJ)
Office of Administrative Hearings - Louis Dettorre (ADRE Commissioner)
Arizona Department of Real Estate - AHansen (ADRE staff)
Arizona Department of Real Estate
Recipient of transmission - djones (ADRE staff)
Arizona Department of Real Estate
Recipient of transmission - DGardner (ADRE staff)
Arizona Department of Real Estate
Recipient of transmission