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

Executive Summary

This document synthesizes the findings of the Administrative Law Judge (ALJ) Decision in the matter of Jason West (Petitioner) versus the Desert Sage Two Homeowners Association (Respondent), Case No. 19F-H1919065-REL, decided on October 1, 2019. The Petitioner’s case was denied in its entirety.

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

The ALJ’s decision rested on a clear interpretation of the relevant statute and bylaws. The ruling concluded that the Petitioner failed to demonstrate by a preponderance of the evidence that the HOA Board was legally obligated to add a member-initiated item to a Board-scheduled meeting agenda. The decision affirmed that the proper procedure for a member to compel consideration of a bylaw amendment is to call a special meeting, which requires the support of at least 25% of the association’s members as stipulated in both A.R.S. § 33-1804(B) and the HOA’s Bylaw 2.2. Evidence showed the Petitioner was aware of this option but did not utilize it. The Respondent’s request for attorney’s fees was also denied, as the Office of Administrative Hearings (OAH) is not statutorily empowered to grant such awards in these proceedings.

Case Overview

• Parties:

◦ Petitioner: Jason West, a homeowner within the Desert Sage Two development and a member of the Respondent association.

◦ Respondent: Desert Sage Two Homeowners Association (HOA), represented by Bradley R. Jardine, Esq.

• Forum: Arizona Office of Administrative Hearings (OAH).

• Presiding Judge: Administrative Law Judge Diane Mihalsky.

• Hearing Date: September 26, 2019.

• Core Allegation: The Petitioner filed a single-issue petition on May 20, 2019, alleging the HOA Board improperly refused to add his proposed bylaw amendment, Bylaw 3.13, to the agenda and ballot for the annual meeting.

The Proposed Bylaw Amendment: Bylaw 3.13

The Petitioner proposed the addition of a new bylaw intended to “reduce liability to the Association.” The full text of the proposed amendment is as follows:

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

Central Arguments and Positions

Petitioner’s Position

The Petitioner argued that the HOA’s refusal to place his proposed bylaw on the annual meeting agenda was a violation of state law and the association’s own governing documents.

• Legal Basis:

◦ A.R.S. § 33-1804(B): This statute governs HOA meetings and requires that the notice for any meeting state its purpose, including “the general nature of any proposed amendment to the… bylaws.”

◦ Bylaw 1.5: This bylaw states that bylaws “may be amended, at a regular or special meeting of the Members, by a vote of the Members having a majority (more than 50%) of the votes…”

Respondent’s Position

The HOA denied any violation, asserting that its Board of Directors acted appropriately and upon the advice of legal counsel and its property management company.

• Legal Basis and Defense:

◦ The Board is not obligated by statute or its bylaws to add agenda items at the request of a single member for a Board-scheduled meeting.

◦ The proper and available remedy for the Petitioner was to utilize Bylaw 2.2, which allows members to call a special meeting directly.

◦ Bylaw 2.2 (“Special Meetings”): States that special meetings may be called “upon written request signed by Members having at least one-fourth (1/4) of the authorized votes… which request shall be delivered to the President or Secretary.”

◦ The Petitioner acknowledged his awareness of this procedure in a January 4, 2019 email, where he stated, “I can also force the Board to call a Special Meeting of the Members at any time with 10 signatures from members of our Association.” Despite this knowledge, he did not pursue this option.

Historical Context and Previous Litigation

The dispute did not occur in isolation. The decision references a history of interactions between the Petitioner and the HOA.

• Petitioner’s Prior Board Service: Jason West was elected to the HOA Board in August 2016 but subsequently resigned.

• Previous Bylaw Amendment (2017): In April 2017, the Petitioner successfully proposed a different amendment (Bylaw 3.12) which banned directors who resign or are removed from serving for one year. At that time, the Board agreed to submit it for a membership vote, and it passed.

• Previous Petition (2017): In April 2017, the Petitioner filed a petition (OAH Case No. 17F-H1716031-REL) against the HOA regarding the Board’s failure to fill vacant positions.

◦ Outcome: The petition was dismissed on June 28, 2017. The presiding ALJ concluded that the Board had done all it could to fill vacancies and noted that the Petitioner’s own “obstructionist tactics” were partly to blame for members being unwilling to serve.

• Motivation for Current Bylaw: The current HOA Board members were first elected in July 2017. The ALJ decision notes that some of these members may have been on the Board when the HOA’s insurance carrier paid costs related to the Petitioner’s previous petition and other potential litigation, suggesting a motive for the proposed retroactive ban.

Key Testimony and Findings of Fact

The ALJ decision was informed by testimony from the Petitioner, HOA Board members, and property management personnel.

Witness

Key Testimony

Joanelize Morales

Current Property Manager

Testified that she prepares meeting agendas based on the Board’s instructions. Confirmed that the Petitioner attended a May 14, 2019 Board meeting and threatened to file a petition if his proposal was not added to the agenda. Confirmed the Petitioner had not attempted to use Bylaw 2.2 to call a special meeting.

Michael (“Mickey”) Latz

Owner, Property Mgmt. Co.

Testified that agenda-setting is a decision for the entire Board, not the secretary. Stated that legal counsel advised the Board it was not obligated to add the Petitioner’s item. Confirmed he repeatedly informed the Petitioner that Bylaw 2.2 was the available option for members to call meetings directly.

Bryan Selna (VP)
David Epstein (Pres.)
Linda Seidler (Sec.)

HOA Board Members

All testified that their decision not to add the Petitioner’s proposed amendment to the agenda was based on advice received from the HOA’s attorneys and property management company.

ALJ Conclusions of Law and Final Order

The ALJ’s legal analysis led to a definitive ruling in favor of the Respondent HOA.

1. Burden of Proof: The Petitioner bore the burden of proving his allegations by a “preponderance of the evidence,” defined as evidence that is more probably true than not.

2. Statutory Interpretation (A.R.S. § 33-1804(B)): The ALJ found the statute’s language to be “clear and unambiguous.” Nothing in the text requires an HOA Board to add an item to an agenda at a single member’s request. It merely provides the mechanism for 25% of members to call a special meeting themselves.

3. Bylaw Interpretation (Bylaw 1.5 & 2.2): The analysis of the bylaws yielded a similar conclusion.

◦ Bylaw 1.5 permits bylaws to be amended at a regular or special meeting but does not compel the Board to add a member’s proposal to the ballot.

◦ Bylaw 2.2 explicitly provides the method for a member to call a meeting for their own purposes, provided they have sufficient support from their neighbors.

4. Final Ruling: Because the Petitioner failed to establish that the Respondent violated any statute or bylaw, his petition was ordered to be denied and dismissed.

5. Attorney’s Fees: The Respondent’s request for attorney’s fees was denied. The decision cited case law establishing that the OAH is not empowered by the legislature to award attorney’s fees in administrative proceedings of this nature.

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NOTICE: As stated in the decision, this order is binding unless a rehearing is granted pursuant to A.R.S. § 32-2199.04. A request for rehearing must be filed with the Commissioner of the Department of Real Estate within 30 days of the service of the order.