ARIZONA VIEW OBSTRUCTION LITIGATION
Pima County Superior Court Case: C2004 4596
An Editorial
PRETRIAL DISCOVERY
WHERE IT ALL BEGAN…
The Plaintiffs were traveling in Canada between 6-17-03 and 7-01-03. During that time, a neighbor took down four sections of 5 foot high wrought iron fencing and replaced it with concrete masonry unit (CMU) wall panels. Upon their return home, plaintiffs expressed concerns to the Homeowner’s Association about the view obstruction.
Additional investigation revealed the following construction defects:
(1) The wall sections required a town building permit prior to construction due to the height. No permit was obtained before construction was completed.
(2) The neighbor / contractor failed to comply with the 2000 International Residential Code requiring metal reinforcing to be installed during construction. A metal scan revealed none was installed during construction.
(3) A licensed contractor was required by the Registrar of Contractors (ROC) to construct the wall panels and the contractor failed to meet ROC workmanship standards.
(4) The masonry wall was out-of-plumb and out-of level. The wall was 1/2 inch out of vertical plumb (twice the allowed deviation) and leaning in the direction of the plaintiff’s property.
(5) The mortar joints were not straight and plumb – and within the required 3/16 inch in adjacent courses. The deviation error progressively increased from bottom to top until it became 2 inches at the top course. The CMU wall panels were 2 inches higher than the existing CMU posts.
(6) There were no interlocking or metal connections between the block wall panels and the existing block posts. The wall panels were, in essence, free standing.
THE GOVERNING DOCUMENT…
CC&R’s SECTION 11.23 View Obstruction:
Pertinent statements of Section 11.23:
(1) "No walls, fences, trees, shrubs, or other structure or landscaping, shall be placed, located, or constructed on any Lot if the Architectural Committee, as the sole and final judge of the matter, determines that such improvements would reasonable interfere with or impede a material view available on another Lot and that other more reasonable alternatives exist in design and construction with causing undue hardship or expense to the Resident Owner requesting the approval in question".
Comments:
The Architectural Committee was required to make a determination that such improvements would not interfere or impede a material view available on another Lot… The plaintiffs stated for the record that no person from the Architectural Committee, staff person, or Board member ever made such a determination from the plaintiff’s lot. The CC&R’s did not define what constituted a material view and the Judge required the HOA to defend that statement.
The Mission, Vision and Goals / Objectives of the Architectural Committee distributed to the homeowners at a town meeting stated:
"The committee must be sensitive to all concerns. Committee members must follow the CC&R’s and Design Guidelines, not just personal preferences".
"The committee must consider all views of a property, including views from the golf course".
(2) "Each Owner shall indemnify the Architectural Committee against any action or complaint arising out of or related to such Owner’s construction or placement of any landscaping or structures approved by the Architectural Committee pursuant to its powers under that Declaration."
Comments:
The HOA Board of Directors did not comply with the provisions of this section by failing to require the lot owner to indemnify the HOA. (The lot owner was the neighbor and also a member of the Board of Directors).
ATTEMPTS TO DISCUSS AND RESOLVE THE ISSUE…
For three months, the Plaintiff made several verbal and written attempts to discuss and resolve the issue with the Architectural Committee, the HOA General Manager, Board of Directors President and other officers of the Declarant. None of those attempts produced a movement toward resolution.
(1) The HOA General Manager responded with one letter that, for the most part, contained false, inaccurate, immaterial statements and offered no settlement interest or options.
(2) The HOA Attorney responded with one letter that, again for the most part, contained no substantive comments and offered no settlement interest or options.
(3) There was no response from the Architectural Committee, the Board President or the other Board officers of the Declarant.
Finally, the Plaintiffs advised the Board of Directors they would file a lawsuit if they were unwilling to discuss and resolve this issue. There was no response.
LAWSUIT C 20044596 WAS FILED IN PIMA SUPERIOR COURT IN DECEMBER 2004
(1) The following information was reported in court petitions, exhibits and depositions.
(2) The Board of Directors (Board) referred to was the Declarant Board.
(3) The General Manager (GM) referred to was the first General Manager.
DISFUNCTIONAL GOVERNANCE…
Testimony presented to the court disclosed numerous governance irregularities.
(1) Approval Process Step 1. The original request for approval of the block wall construction to the Member Architectural Review Committee from the neighbor was in form of a letter to the HOA General Manager. The required Change Request Form was then filled out by the HOA staff and later signed by the neighbor.
(2) The form contained a signature block for the Committee members to sign and indicate approval (or disapproval). There were no signatures in the block and no indication of approval.
(3) The Plaintiffs testified in a petition that construction of the block wall was complete by the date on the form that was submitted for approval.
(4) Approval Process Step 2. The minutes submitted in court filings, and offered as evidence of approval by the Advisory Council, showed no submittal or disposition for the neighbor’s construction request.
(5) No disposition of the construction request was shown in subsequent Council minutes granting approval for the project, in documents submitted to the Court.
(6) Approval Process Step 3. The minutes submitted in court filings showed the neighbor’s construction request to the Board Architectural Review Committee was put on hold pending further discussion.
(7) No disposition of the request was shown in subsequent Board Committee meeting minutes granting approval for the project.
(8) The HOA General Manager wrote a letter to the neighbor granting approval for the construction project. The height of the block wall was not to exceed 5 feet. It measured 5.5 feet and was never challenged by the HOA.
DEFENDANT TESTIMONY UNDER OATH…
The HOA General Manager testimony disclosed:
(1) Falsified Evidence. The former GM took existing evidence – the Board minutes and changed them without Board consent. At the bottom of the disclosed document, a section was added favorable to the Plaintiff’s position. The Judge pro tem who conducted the later mediation sessions told the Plaintiffs’ the GM's action was a felony.
Noticing the change in font, Plaintiff’s counsel demanded the GM appear at deposition with the original file. The added language was not present on the original documentation, only on the copies turned over as disclosure. The Board President later testified that the changes to the minutes were not authorized.
(2) The ‘blinder test’. The ‘blinder test’ considered only a view directly out of the back of a person’s house without glancing to the left or the right. The first time this test was mentioned was during the GM’s deposition. There was nothing disclosed that set forth the ‘blinder’ test. There was nothing disclosed which showed the blinder test being used on any other property. There were no written rules setting forth the test.
One of the duties requires a homeowner’s association "to act reasonably in the exercise of its discretionary powers including rulemaking, enforcement and design-control powers". Here, when it benefits a Board member in a dispute with the Plaintiffs, the ARC decided to ignore its own written guidelines calling for the ARC to respect and protect "all views of a property".
THE PROCESSION OF DEFENSE ATTORNEYS…
During the course of discovery, the Board hired three different law firms to try to defend their actions:
(1) The beginning law firm was terminated several months into the process - after representing the GM and the Board President at their depositions.
(2) A second law firm was engaged and implications surfaced that they did not want to defend the case at trial.
(3) The Board then engaged a third law firm to act as chief defense counsel.
RESIGNATION OF THE DECLARANT BOARD…
In a rather unprecedented move and nearing a projected trial date, the Declarant Board resigned in total and turned over the Board duties to over to the appointed Advisory Council. This was more than a year prior to the projected build-out by the Declarant and 7 months until a member board could be elected at the next Annual Meeting.
ATTEMPTS TO REACH A SETTLEMENT…
Two years after the lawsuit was filed, the Plaintiffs made a settlement offer that was rejected by the Defendants. During subsequent mandatory Court supervised Settlement Conference, the Plaintiffs made a second settlement offer that was rejected by the Defendants. During a second mandatory Court supervised Settlement Conference requested by the Plaintiffs, and with the new Board in place, the parties reached a settlement agreement.
THE SETTLEMENT AGREEMENT…
The Settlement Agreement provided for the following:
(1) One of four sections of the CMU wall sections was to be removed and replaced with wrought iron fencing, as originally constructed.
(2) The remaining three wall sections were to be reduced in height (to return some of the Plaintiff’s view) and the remainder of the 5 foot required height to be wrought iron.
(3) The Defendant was required to pay the Plaintiffs a five figure sum of money.
(4) The neighbor received an additional bonus - all of their wrought iron fencing was repainted, at no cost to the neighbor.
THE COSTS TO LITIGATE…
The Defendants have never provided a written breakdown of costs to the Association members. Based on the known costs to the Plaintiffs and a projection of both direct and indirect costs to the Defendant, the total costs to both parties is estimated to approach, if not exceed, $100,000. The Defense costs include modifying the neighbor’s block wall, all costs being voluntarily borne, not by the neighbor, but by the HOA Defendant.
None of these costs could be capitalized by the Defendant to increase the asset values of the Association. The litigation expenses provided no year end tax benefit to the Association because of depreciation write offs. If the costs were allocated to the block wall, the cost per lineal foot increases from approximately $20.00 to an estimated $2,000.00 per lineal foot.
In the final analysis, did the Board of Directors breach their fiduciary duties to the members by not trying to settle this matter before it developed into an expensive lawsuit? You be the judge.
