Arizona Court of Appeals Publishes Barage of Cases in Favor of HOA's.
SIGNIFICANT RECENT HOA CASE LAW
By Charles E. Maxwell, Esq.
As a practitioner who has limited his practice to homeowner association law and litigation for many years, and who has been involved in numerous appeals, I have noticed that the Arizona appellate courts have been reluctant to publish opinions concerning homeowner associations and restrictive covenant issues. While opinions have been published in the past, the published opinions reflect a very small percentage of all decisions rendered by Arizona’s appellate courts. While the reasoning behind the limited number of published homeowner association decisions has fueled much speculation, no articulated reason has been identified.
Nevertheless, and despite the foregoing, Arizona appellate courts recently published three significant decisions in favor of homeowner associations and enforcement of restrictive covenants. These cases are: Flying Diamond Airpark, LLC v. Meienberg, Ariz. , 156 P.3d 1149 (App. 4/30/07), Tierra Ranchos Homeowners Ass’n v. Kitchukov, Ariz. , 165 P.3d 173 (App. 8/9/07), and McDowell Mountain Ranch Community Ass’n, Inc. v. Simons, Ariz. _, 165 P.3d 667 (App. 8/9/07). Each of these cases and the impact they have on homeowner associations and enforcement of restrictive covenants are addressed below.
Flying Diamond concerns an association and property owners governed by recorded restrictive covenants (“CC&Rs”). The CC&Rs contained a specific height limit on structures of no more than twenty-two feet. Meienberg owned a lot in the community subject to the CC&Rs. Meienberg built an airplane hangar on his lot that exceeded the twenty-two foot “height restriction by only eight-and-three-quarter to ten-and-three-quarter inches.” During the construction process, another property owner noticed the violation and encouraged Meienberg to bring the hangar into compliance with the CC&Rs. Meienberg refused, even though the portions of the hangar in violation of the height restriction consisted of three roof exhaust vents. As result of Meienberg’s refusal to comply, the association sought an injunction “to bring the hangar into compliance with the height restriction.” Meienberg claimed the association “was estopped from seeking injunctive relief, and that the hardship on Meienberg in complying with an injunction would outweigh any benefit to” the association. Following an evidentiary hearing and briefing on the issues, the trial court found that Meienberg was aware of the restriction and intentionally violated the same and, therefore, he “could not claim hardship or estoppel as defenses”. Accordingly, the trial court granted the injunction and awarded the association attorney fees and costs. The Court of Appeals affirmed and concluded that a person who has “actual or constructive notice of a restriction, knows or is informed prior to actually violating the restriction that his action will violate the restriction, and then in violation of the restriction, ... may not claim the benefit of relative hardships.” Under the circumstances, the Court of Appeals also upheld the trial court’s rejection of the estoppel defense. In other words, Flying Diamond makes it clear that an intentional violator of restrictive covenants has forfeited certain significant defenses in a subsequent enforcement action.
Tierra Ranchos deals with CC&Rs and unrecorded “Design Guidelines”. Tierra Ranchos concerned a dispute between an association and the Kitchukovs regarding violations of setback requirements imposed by the architectural committee pursuant to its design guidelines. Unlike Meienberg in Flying Diamond, however, the Kitchukovs submitted plans for the construction of a guest house and attached garage to the architectural committee, which plans included specific setback requirements pursuant to the association’s design guidelines. The plans were approved in writing by the architectural committee and the Kitchukovs were advised that any changes or modifications would require re-submission. Nevertheless, the Kitchukovs modified their plans and altered the setbacks without seeking new approval. As a result, the association declared the Kitchukovs in violation and began assessing fines at $500.00 per day. The association subsequently filed suit. In response to the lawsuit, the Kitchukovs claimed the association acted unreasonably with respect to the location of the detached garage. The trial court agreed. The Court of Appeals disagreed and reversed. Citing the Restatement (Third) of Property: Servitudes (2000), the Court of Appeals rejected the Kitchukovs’ reasonableness standard stating, in part: “Under the Restatement approach, a member challenging an action of the association bears the burden of proving that the association breached its duty.” “In addition, when the action is one within the association’s discretion, the member bears “the additional burden of proving that the breach has caused, or threatens to cause, injury to the member individually or to the interests of the common-interest community.” The Court further stated: “The Restatement requires the member challenging the association to establish that its actions were unreasonable.” The Court in Tierra Ranchos, therefore, took away one more defense routinely asserted by offending homeowners in an attempt to justify violations of an association’s governing documents.
Last, but certainly not least, is the case McDowell Mountain Ranch. Despite significant case law regarding the absence of any discretion to deny attorney fees to a homeowner association following a successful enforcement action when the CC&Rs specifically mandate an award of attorney fees, trial courts have routinely denied associations attorney fees claiming a right to a discretionary analysis pursuant to A.R.S. § 12-341.01(A). In McDowell Mountain Ranch the association successfully pursued an action for injunctive relief, only to have the trial court subsequently claim it possessed the discretion to deny an award of attorney fees. The trial court did so despite specific language in the CC&Rs (the contract between the parties) obligating the offending owner to pay all attorney fees and costs incurred by the association. The trial court’s decision was reversed on appeal, with the Court of Appeals reaffirming the long established principle in Arizona that “contracts for payment of attorneys’ fees are enforced in accordance with the terms of the contract”, eliminating any possible application of A.R.S. § 12-341.01. The McDowell Mountain Ranch court further stated that, when such an attorney fees provision is found in CC&Rs, the trial court must award all attorney fees requested, except those attorney fees that are proven to be “clearly excessive”. With respect to fees claimed to be “clearly excessive”, however, the McDowell Mountain Ranch Court held that the unsuccessful homeowner in such litigation bears the burden of showing which fees “were clearly excessive”.
The cases of Flying Diamond and Tierra Ranchos eliminated several defenses previously raised by intentional violators. McDowell Mountain Ranch prevents trial courts from circumventing a successful association’s entitlement to attorney fees and costs if the CC&Rs provide for the same. All three cases are beneficial to associations in enforcement actions and should encourage compliance hereafter short of judicial involvement.
