Briefing Doc – 17F-H1717032-REL
Briefing Document: Brown v. Terravita Country Club, Inc.
Executive Summary
This briefing document analyzes the administrative case of William M. Brown v. Terravita Country Club, Inc., focusing on a homeowner association’s (HOA) obligation to provide records to a member under Arizona law. The core issue was the interpretation of the “pending litigation” exemption within A.R.S. § 33-1805, which allows an association to withhold certain records.
Terravita Country Club, Inc. (“Terravita”) denied a records request from its member, William M. Brown, citing a pending criminal case against him. However, Terravita was not a party to this criminal litigation. Mr. Brown contended this denial violated state law, arguing the exemption only applies when the association itself is a party to the litigation. Terravita argued for a broader interpretation, claiming the statute did not require the association to be a party.
The Administrative Law Judge (ALJ) ruled decisively in favor of Mr. Brown. The judge concluded that Terravita’s interpretation would lead to an “absurd result,” effectively allowing any HOA to deny records related to any litigation anywhere. The judge established that the sensible and plain meaning of the statute is that the exemption for “pending litigation” applies only to legal disputes between the association and the member.
The Arizona Department of Real Estate adopted the ALJ’s decision in a Final Order. Terravita was found in violation of A.R.S. § 33-1805, ordered to produce the requested records, and mandated to reimburse Mr. Brown’s $500 filing fee.
Case Timeline and Factual Background
The dispute followed a clear sequence of events, beginning with the records request and culminating in a final administrative order.
February 6, 2017
William M. Brown, a member of Terravita, formally requests records from the association.
February 14, 2017
Terravita sends an email to Mr. Brown denying the request. The denial cites a “pending criminal litigation” against him and invokes A.R.S. § 33-1805(B)(2) as justification.
Post-Feb. 6, 2017
Terravita fails to fulfill the records request within the statutory 10-business-day deadline.
April 13, 2017
The Arizona Department of Real Estate receives a Petition for Hearing from Mr. Brown, alleging Terravita’s failure to timely respond.
May 2, 2017
Terravita files its response, formally asserting as an affirmative defense that it was not required to disclose the records due to the pending criminal litigation against Mr. Brown.
May 3, 2017
The Department issues a Notice of Hearing, setting the matter for June 26, 2017, before the Office of Administrative Hearings.
June 26, 2017
The administrative hearing is conducted. Both parties present their arguments.
July 14, 2017
Administrative Law Judge Velva Moses-Thompson issues a decision finding in favor of the Petitioner, Mr. Brown.
July 24, 2017
Judy Lowe, Commissioner of the Department of Real Estate, issues a Final Order adopting the ALJ’s decision in its entirety.
Core Dispute: Interpretation of A.R.S. § 33-1805
The central conflict was the proper application of Arizona Revised Statute § 33-1805, which governs a member’s right to access association records. Subsection (A) mandates that records be made available for examination within 10 business days. Subsection (B) provides exemptions, including for records related to “pending litigation.”
Petitioner’s Position (William M. Brown)
Mr. Brown’s argument was straightforward and focused on a narrow interpretation of the statutory exemption.
• Violation of A.R.S. § 33-1805(A): Terravita failed to fulfill his February 6, 2017 records request within the legally mandated 10 business days.
• Limited Scope of Exemption: He contended that the exemption for “pending litigation” under A.R.S. § 33-1805(B)(2) applies only to litigation in which the association itself is a party.
• Factual Basis: Since Terravita was not a party to the criminal case brought against him by the City of Scottsdale, the exemption was inapplicable.
• Legislative Intent: Mr. Brown noted that the statute had been amended to remove the phrase “contemplated litigation,” suggesting the legislature intended to narrow, not broaden, the scope of the exemption.
Respondent’s Position (Terravita Country Club, Inc.)
Terravita argued for a broader interpretation of the statute, asserting that its non-party status was irrelevant.
• “Plain Meaning” of the Statute: Terravita’s position was that the plain meaning of A.R.S. § 33-1805(B)(2) does not explicitly require the association to be a party to the pending litigation.
• Relevance of the Litigation: The association argued the criminal case was germane because it was “based upon an allegation that Mr. Brown threated Terravita’s board members and property.”
Administrative Law Judge’s Decision and Rationale
The ALJ’s decision provided a comprehensive legal analysis, ultimately rejecting Terravita’s interpretation of the law and finding that Mr. Brown had established his case by a preponderance of the evidence.
Statutory Interpretation and the “Absurd Result” Doctrine
The decision hinged on the principle that legislation must be given a “sensible construction that avoids absurd results.” The judge analyzed the consequences of Terravita’s interpretation:
“Terravita’s interpretation of A.R.S. § 33-1805(B)(2) would allow the association to deny records request of documents that relate to pending litigation between any parties. Such an interpretation would lead to the absurd result of denying records requests of all documents that relate to pending litigation anywhere, between any two parties.”
Based on this reasoning, the judge rejected Terravita’s argument and established a clear standard for applying the exemption.
The Correct Interpretation of the Law
The ALJ articulated the “plain meaning” of the statute, establishing a critical precedent for its application:
“The plain meaning of A.R.S. § 33-1805(B)(2) is that while homeowners’ associations must provide access to financial and other documents to its members within 10 business days, an association may withhold documents that relate to pending litigation between the association and the member.”
Final Conclusion
The judge applied this correct interpretation to the undisputed facts of the case:
1. At the time of Mr. Brown’s request, he was facing criminal charges initiated by the City of Scottsdale.
2. Terravita was not a party to that criminal case.
3. Therefore, the exemption did not apply, and Terravita violated A.R.S. § 33-1805 by failing to fulfill the records request within 10 business days.
Final Order and Mandates
The decision issued by the ALJ on July 14, 2017, became the basis for the Final Order issued by the Arizona Department of Real Estate on July 24, 2017. The Commissioner accepted and adopted the ALJ’s decision, making its mandates binding and effective immediately.
The key directives of the order were:
• Prevailing Party: Petitioner William M. Brown was formally deemed the prevailing party.
• Compliance: Terravita was ordered to comply with the applicable provisions of A.R.S. § 33-1805 regarding the records request within 10 days of the order.
• Reimbursement of Fees: Terravita was ordered to pay Mr. Brown his filing fee of $500.00 directly within 30 days of the order.
• No Civil Penalty: The judge found that a civil penalty was not appropriate in the matter.
