Case Summary
| Case ID | 18F-H1817003-REL |
|---|---|
| Agency | ADRE |
| Tribunal | OAH |
| Decision Date | 2017-11-22 |
| Administrative Law Judge | Velva Moses-Thompson |
| Outcome | partial |
| Filing Fees Refunded | $500.00 |
| Civil Penalties | $0.00 |
Parties & Counsel
| Petitioner | David B. Carr | Counsel | — |
|---|---|---|---|
| Respondent | Sunset Plaza Condo Association | Counsel | Paige Marks, Esq. |
Alleged Violations
Ariz. Rev. Stat. section 33-1248
Ariz. Rev. Stat. section 33-1248
Article XI of Sunset Plaza’s Bylaws
Outcome Summary
Petitioner was deemed the prevailing party only regarding the Respondent's violation of Ariz. Rev. Stat. section 33-1248 (failure to provide notice for hiring Mulcahy and Kinney). Respondent was ordered to refund the Petitioner's $500.00 filing fee. All other claims, including the alleged Bylaws violation and the violation related to hiring Osselaer, were dismissed.
Why this result: Petitioner failed to establish the Bylaws violation. The HOA successfully argued that the hiring of Osselaer was conducted during a valid emergency board meeting, exempting it from open meeting notice requirements.
Key Issues & Findings
Violation of Open Meeting Law (Hiring Kinney and Mulcahy)
Sunset Plaza decided to hire Kinney Management and Mulcahy Law Firm at board meetings without informing its members of those meetings.
Orders: Respondent Sunset Plaza must pay Petitioner his filing fee of $500.00.
Filing fee: $500.00, Fee refunded: Yes
Disposition: petitioner_win
- Ariz. Rev. Stat. section 33-1248
Violation of Open Meeting Law (Hiring Osselaer)
Petitioner alleged violation regarding the hiring of Osselaer Management Company, but the ALJ found the association was exempt because the decision was made at a valid emergency board meeting.
Orders: Petition dismissed in this respect.
Filing fee: $0.00, Fee refunded: No
Disposition: respondent_win
- Ariz. Rev. Stat. section 33-1248
Failure to keep correct and complete books and records of account
Petitioner alleged Sunset Plaza failed to keep accurate financial records, pointing out discrepancies and an unexplained reserve deficit between 2015 and 2016 balance sheets.
Orders: Petition dismissed in all other respects.
Filing fee: $0.00, Fee refunded: No
Disposition: respondent_win
- Article XI of Sunset Plaza’s Bylaws
Analytics Highlights
- Ariz. Rev. Stat. section 33-1248
- Ariz. Rev. Stat. section 41-2198.01
- Article XI of Sunset Plaza’s Bylaws
Video Overview
Audio Overview
Decision Documents
18F-H1817003-REL Decision – 605735.pdf
Administrative Hearing Briefing: Carr v. Sunset Plaza Condo Association
Executive Summary
This briefing document analyzes the Administrative Law Judge’s decision in the case of David B. Carr versus the Sunset Plaza Condo Association (Case No. 18F-H1817003-REL). The central conflict involved a petition filed by Mr. Carr, a condominium owner, alleging that the Association’s Board of Management violated Arizona’s open meeting law and engaged in financial mismanagement.
The final ruling was a partial victory for the petitioner. The judge found that Sunset Plaza violated Ariz. Rev. Stat. § 33-1248 by failing to provide members with proper notice of board meetings where decisions were made to hire Kinney Management Services and the Mulcahy Law Firm. The Association admitted to this failure, citing a misunderstanding of the law, and pledged future compliance. As the prevailing party on this specific issue, Mr. Carr was awarded reimbursement for his $500 filing fee.
However, the judge dismissed all of Mr. Carr’s other allegations. The claim that a meeting to hire Osselaer Management Company violated the open meeting law was rejected, as the judge deemed it a valid emergency meeting exempt from notice requirements. Furthermore, Mr. Carr’s claims of financial mismanagement and inaccurate record-keeping in violation of the Association’s bylaws were not substantiated. The judge accepted the Association’s defense that alleged financial discrepancies stemmed from a change in accounting practices by a new management company, not from an actual deficit. No civil penalty was imposed on the Association.
I. Case Overview
• Case Number: 18F-H1817003-REL
• Forum: Office of Administrative Hearings, Phoenix, Arizona
• Petitioner: David B. Carr
• Respondent: Sunset Plaza Condo Association
• Administrative Law Judge: Velva Moses-Thompson
• Hearing Date: November 21, 2017
• Decision Date: November 22, 2017
• Core Dispute: A petition filed by a condo owner alleging the association’s board violated state statutes and its own bylaws concerning open meetings, financial record-keeping, and the execution of contracts.
II. Petitioner’s Allegations (David B. Carr)
On August 14, 2017, Mr. Carr filed a petition outlining two primary grievances against the Sunset Plaza Condo Association.
A. Violation of Open Meeting Law (Ariz. Rev. Stat. § 33-1248)
Mr. Carr alleged that the Association’s Board of Management took official action without holding properly authorized and noticed board meetings. This resulted in unapproved contracts and expenditures.
Direct Quotation from Petition:
“SUNSET PLAZA CONDOMINIUM ASSOCIATION BOARD OF MANAGEMENT TAKES ACTION WITHOUT HOLDING AUTHORIZED BOARD MEETING IN VIOLATION OF AZ STATUTE 33-1248. THESE UNAUTHORIZED MEETINGS HAVE RESULTED IN CONTRACTS WITH MANAGEMENT FIRMS AND ATTORNEYS. THESE CONTRACTS HAVE RESULTED IN EXPENSES NOT APPROVED OR REVIEWED BY CONDO OWNERS.”
• Specific Contracts Cited:
◦ Kinney Management (October 2016)
◦ Osselaer Real Estate (September 2016)
◦ Mulcahy Law Firm (May 2016)
• Requested Remedy: Cancellation of all contracts entered into without a properly called board meeting and personal repayment of all related expenditures by the signatory.
B. Violation of Bylaws and Financial Mismanagement (Article XI)
Mr. Carr contended that the Association violated Article XI of its bylaws, which requires it to “keep correct and complete books and records of account.” He identified specific financial discrepancies based on his analysis of the Association’s financial statements.
• Alleged Reserve Fund Discrepancy: Mr. Carr claimed an “unexplained reserve deficit of $10,295.09” based on the following figures, noting there were no reported reserve expenses in 2016.
Financial Statement Item
Amount
2015 Year-End Reserve Equity
$10,295.09
2016 Income Statement Reserve Deposit
$9,180.00
2016 Year-End Balance Sheet Reserve Total
$2,295.44
• Additional Discrepancies:
◦ The 2016 year-end balance sheet failed to identify prior and current year operating equity.
◦ An “expanded 2016 balance sheet” calculation revealed a discrepancy of $2,808.42.
• Requested Remedy: A formal audit of the 2016 and 2017 financial statements and improved future reporting to identify reserve balances and homeowner equity.
III. Respondent’s Defense (Sunset Plaza Condo Association)
The Association, represented by Paige Marks, Esq., and through the testimony of board member Marilyn Gelroth, presented a defense against both allegations.
A. Response to Open Meeting Allegations
• Admission: The Association conceded that it “did not provide notice of its board meetings when it decided to hire Kinney and the Mulcahy firm.”
• Justification: This failure was attributed to the board’s misunderstanding of the open meeting law. The Association represented to the judge that it would abide by the law in the future.
• Emergency Meeting Exemption: The Association argued that the decision to hire Osselaer Management was made at a valid emergency board meeting on September 21, 2016.
◦ Timeline of Events: Kinney Management Services retracted its offer to manage the property on September 15, 2016, after receiving notice of a complaint Mr. Carr had filed against them with the Attorney General’s Office.
◦ Urgency: This retraction created an urgent need for a new management company. Ms. Gelroth testified that the board “needed to move quickly because members needed to know where to send payments.” This situation, they argued, constituted an emergency under the law.
B. Response to Financial Allegations
• Flawed Comparison: The Association contended that Mr. Carr’s financial analysis was fundamentally flawed because he “erroneously compared Sunset Plaza’s 2015 year end balance statement to its 2016 income statement,” which are two different types of financial records.
• Change in Accounting Methods: The primary reason for the apparent discrepancies was a change in how financial data was categorized.
◦ The previous management company, Kolby, separated reserve amounts in its financial statements.
◦ The new management company, Osselaer, “does not separate reserve amounts” and is not required by law to do so. This difference in reporting style accounted for the changes Mr. Carr identified as a deficit.
IV. Administrative Law Judge’s Decision and Rationale
The judge, Velva Moses-Thompson, found Ms. Gelroth’s testimony credible and issued a split decision, upholding one of Mr. Carr’s claims while dismissing the other.
A. Finding on Financial Mismanagement Allegation
Conclusion: Petition Dismissed The judge ruled that Mr. Carr “failed to establish by a preponderance of the evidence that Sunset Plaza violated Article XI of Sunset Plaza’s Bylaws.” The Association’s explanation regarding the different accounting methods used by Kolby and Osselaer, and the flawed comparison of financial documents, was accepted as a valid defense.
B. Finding on Open Meeting Law Allegations
Conclusion: Partial Violation Confirmed
• Hiring of Osselaer Management (No Violation): The judge concluded that Sunset Plaza did not violate Ariz. Rev. Stat. § 33-1248 in this instance. The decision was made at a legitimate emergency board meeting, which exempts the board from the 48-hour notice requirement. The minutes of the meeting stated the reason for the emergency.
• Hiring of Kinney Management and Mulcahy Law Firm (Violation Confirmed): The judge found that Mr. Carr “established by preponderance of the evidence that Sunset Plaza violated Ariz. Rev. Stat. 33-1248” when it decided to hire these two firms. The Association did not dispute that it failed to inform members of these board meetings, which was a key factor in the ruling.
C. Final Order
Based on the findings and conclusions of law, the judge issued the following order:
1. Prevailing Party: Petitioner David B. Carr is deemed the prevailing party solely with regard to the violation of Ariz. Rev. Stat. § 33-1248.
2. Reimbursement: Sunset Plaza is ordered to pay Mr. Carr his filing fee of $500.00 within thirty (30) days of the order.
3. Dismissal: All other aspects of Mr. Carr’s petition are dismissed.
4. Penalty: No Civil Penalty is found to be appropriate in the matter.
Study Guide: Carr v. Sunset Plaza Condo Association (No. 18F-H1817003-REL)
This study guide provides a review of the Administrative Law Judge Decision in the case of David B. Carr versus the Sunset Plaza Condo Association. It includes a short-answer quiz, an answer key, suggested essay questions, and a glossary of key terms to facilitate a comprehensive understanding of the case’s facts, legal arguments, and final judgment.
Short-Answer Quiz
Answer each question in 2-3 sentences based on the information provided in the source document.
1. What were the two primary allegations David B. Carr made against the Sunset Plaza Condo Association in his petition?
2. Identify the three specific contracts Mr. Carr claimed resulted from unauthorized board meetings.
3. Why did Kinney Management Services retract its offer to manage Sunset Plaza in September 2016?
4. What justification did Sunset Plaza provide for holding an emergency board meeting to hire Osselaer Management Company?
5. According to Sunset Plaza, why did Mr. Carr mistakenly believe there was a financial discrepancy in the association’s records?
6. Did the Sunset Plaza board admit to violating the open meeting law? If so, what was their explanation?
7. What authority do the association’s Declaration and Bylaws grant the Board of Management regarding contracts?
8. How does Ariz. Rev. Stat. § 33-1248 define the requirements for an “emergency meeting” of a board of directors?
9. What was the Administrative Law Judge’s final conclusion regarding Sunset Plaza’s hiring of the Osselaer Management Company?
10. What specific orders were issued against Sunset Plaza as a result of the judge’s decision?
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Answer Key
1. David B. Carr alleged that the Sunset Plaza Condo Association violated Ariz. Rev. Stat. § 33-1248 by holding unauthorized board meetings to enter into contracts. He also alleged the association violated Article XI of its bylaws by failing to keep correct and complete books and records, citing an unexplained deficit in reserve accounts.
2. Mr. Carr’s petition identified contracts with Kinney Management (October 2016), Osselaer Real Estate (September 2016), and the Mulcahy Law Firm (May 2016). He argued these contracts were entered into without a properly called board meeting and resulted in unapproved expenses.
3. Kinney Management Services retracted its acceptance of Sunset Plaza’s offer after receiving a complaint that Mr. Carr had filed against Kinney with the Attorney General’s Office. This information was stated in a letter from Kinney to Sunset Plaza on September 15, 2016.
4. The board held an emergency meeting because after Kinney retracted its offer, they needed to move quickly to hire a new management company. Board member Marilyn Gelroth testified it was important to have a single company handle all affairs and that members needed to know where to send payments without delay.
5. Sunset Plaza contended that Mr. Carr erroneously compared two different types of financial records: the 2015 year-end balance sheet and the 2016 income statement. Furthermore, the association argued that the new management company, Osselaer, categorized financials differently than the previous company, Kolby, and did not separate out reserve amounts.
6. Yes, Sunset Plaza conceded that it did not provide notice to its members of the board meetings when it decided to hire Kinney Management and the Mulcahy Law Firm. The association contended that it did not understand the open meeting law at the time and represented to the Tribunal that it would abide by the law in the future.
7. The Declaration grants the Board the power to “enter into contracts” and generally have the powers of an apartment house manager. Article VII, section 11 of the Bylaws states the Board of Management “shall enter into contracts on behalf of the association.”
8. The statute allows an emergency meeting to be called to discuss business or take action that cannot be delayed for the required forty-eight hours’ notice. At such a meeting, the board may only act on emergency matters, and the minutes must state the reason necessitating the emergency.
9. The judge concluded that Sunset Plaza did not violate Ariz. Rev. Stat. § 33-1248 when it hired Osselaer. The decision was made at a legitimate emergency board meeting, which exempted the board from the standard open meeting notification requirements.
10. The judge ordered that the Petitioner, David Carr, be deemed the prevailing party regarding the violation of the open meeting law. It was further ordered that Sunset Plaza pay Mr. Carr his filing fee of $500.00 within thirty days, and his petition was dismissed in all other respects.
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Suggested Essay Questions
1. Analyze the concept of “preponderance of the evidence” as it was applied in this case. How did David B. Carr meet this burden for his claim about the open meeting law but fail to meet it for his claim about financial mismanagement?
2. Discuss the legal requirements and exceptions for board meetings under Ariz. Rev. Stat. § 33-1248. Use the board’s decisions to hire Kinney Management, the Mulcahy Law Firm, and Osselaer Management Company as distinct examples to illustrate the application of this law.
3. Evaluate Sunset Plaza’s defense regarding the financial discrepancies alleged by Mr. Carr. Why was this defense successful, and what does it reveal about the potential for confusion when an association changes management companies and accounting methods?
4. Examine the powers and duties of the Sunset Plaza Board of Management as outlined in its Declaration and Bylaws. How do these documents support the board’s authority to enter into contracts, and how does that authority intersect with the procedural requirements of state law?
5. Based on the judge’s decision, critique the actions and governance of the Sunset Plaza board. What were their key procedural mistakes, what was their stated reason for these errors, and what were the ultimate consequences of their violation of the open meeting law?
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Glossary of Key Terms
Definition
Administrative Law Judge (ALJ)
The official, in this case Velva Moses-Thompson, who presides over hearings at the Office of Administrative Hearings and renders a decision based on evidence and law.
Ariz. Rev. Stat. § 33-1248
An Arizona statute, also known as the open meeting law, which requires that meetings of a unit owners’ association and its board of directors be open to all members. It outlines requirements for meeting notices, member participation, and exceptions for emergency meetings.
Bylaws
The rules and regulations adopted by an association to govern its internal management. In this case, Article XI requires the association to keep correct and complete books, records, and minutes.
Conclusions of Law
The section of the decision where the judge applies the relevant statutes and legal principles to the established facts of the case to reach a legal judgment.
Declaration
The legal document that creates a condominium or planned community. The Sunset Plaza Declaration grants the Board of Management the power to enter into contracts and manage the association’s affairs.
Emergency Meeting
A type of board meeting that can be called without the standard 48-hour notice to discuss business that cannot be delayed. Action at such a meeting is limited to emergency matters only.
Findings of Facts
The section of the decision that outlines the factual history of the dispute as determined by the judge based on testimony and evidence presented at the hearing.
The final, binding ruling of the Administrative Law Judge. In this case, the Order declared Mr. Carr the prevailing party, required Sunset Plaza to refund his filing fee, and dismissed the other parts of his petition.
Petitioner
The party who initiates a legal action or files a petition seeking a legal remedy. In this case, the Petitioner was David B. Carr.
Preponderance of the evidence
The standard of proof required in this civil administrative hearing. It is defined as “such proof as convinces the trier of fact that the contention is more probably true than not.”
Prevailing Party
The party who wins the legal case or a significant issue within it. The judge declared Mr. Carr the prevailing party regarding the violation of Ariz. Rev. Stat. § 33-1248.
Respondent
The party against whom a petition is filed. In this case, the Respondent was the Sunset Plaza Condo Association.
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18F-H1817003-REL
1 source
This source is the Administrative Law Judge Decision resulting from a hearing held on November 21, 2017, between Petitioner David B. Carr and the Respondent Sunset Plaza Condo Association. Mr. Carr brought a petition alleging that the Condo Association violated Arizona Revised Statutes (Ariz. Rev. Stat. section 33-1248) and its own bylaws by taking action without authorized board meetings and exhibiting financial discrepancies, specifically concerning reserve funds. The decision found that the Condo Association did violate the open meeting law when hiring Kinney and the Mulcahy law firms but was exempt from the open meeting requirement for the emergency meeting that resulted in hiring Osselaer Management Company. Ultimately, the Petitioner was deemed the prevailing party regarding the statutory violation and was awarded a filing fee of $500.00, though all other aspects of the petition were dismissed.
Case Participants
Petitioner Side
- David B. Carr (petitioner)
Sunset Plaza Condo Association (member)
Respondent Side
- Paige Marks (attorney)
Sunset Plaza Condo Association
Appeared on behalf of Respondent - Marilyn Gelroth (board member)
Sunset Plaza Condo Association
Testified at hearing - Beth Mulcahy (HOA attorney)
Mulcahy Law Firm, PC
Decision transmitted to her firm; firm hired by Respondent
Neutral Parties
- Velva Moses-Thompson (ALJ)
OAH - Judy Lowe (commissioner)
ADRE - LDettorre (ADRE staff)
ADRE
Received electronic transmission - AHansen (ADRE staff)
ADRE
Received electronic transmission - djones (ADRE staff)
ADRE
Received electronic transmission - DGardner (ADRE staff)
ADRE
Received electronic transmission - ncano (ADRE staff)
ADRE
Received electronic transmission
