Case No.: 07F-H067035-BFS Appeal Decision

The Arizona Administrative Law Judge’s decision of in favor of the Petitioner/homeowner was appealed by the HOA on September 19, 2007 to the Maricopa Superior Court (LC2007-000588).  On March 25, 2008, a Ruling Minute Entry was filed reversing the OAH decision, but attorneys’ fees were not awarded to either party. (The homeowner acted in Pro Per, for himself, while the HOA relied on insurance coverage).

In short, the court held

  1. that the contested board election was a vote of delegates and not “unit owners” and therefore, the prohibition on proxies statute ARS 33-1812(A) did not apply;

  1. “A delegate system of governance is not synonymous with a proxy vote”;

  1. “Nothing in the record reflects that any of Terravita’s elected delegates cast their votes by proxy in the May 2007 election”;

     4. “[T]he legislature  distinguishes between delegates and proxies and knows how to draw that distinction in its enactments. The legislature has prohibited proxies as a form of vote-casting in planned communities, but not the use of delegates as a form of corporate governance.” 

However, the judge’s short discussion is disturbing.  About 2 pages, in length, of these 5 pages contain double-spaced recitations of three statutes, ARS 10-3640 (the functions of a delegate) and 10-3726 (how delegates can be used to elect directors (the heart of the issue), from corporate law, and ARS 33-1812 (the HOA statute in question).  Yet, while the judge invites a comparison between delegates and proxies statutes under Arizona law, 10-3640 and 10-3724, she explicitly cites only the delegate statute.  The “on point” corporation statute defining “proxy”, 10-3724, is not cited at all.  Furthermore, ARS 10-3410 is cited (paragraph 17, defining “delegate”) in a footnote.   

This is particularly disturbing since 10-3724 is in paria material, or “on point”, which clarifies and amplifies that a proxy is a person and not a form, was not cited!  For example, 10-3724(B) gets to the issue in favor of the homeowner rather quickly, but is not cited or referenced in the judge’s discussion (emphasis added): 

B. Unless the articles of incorporation or bylaws prohibit or limit proxy voting, a member may appoint a proxy to vote or otherwise act for the member by signing an appointment form, either personally or by the member’s attorney-in-fact.

span style=”font-size: 10pt”> See the opening phrases from (C) and (D), “An appointment of a proxy”, and the reference to people in (D)(1), (2), etc, “A pledgee”, “A person”, “A creditor”, “An employee”, also not cited. 

How can a form be appointed?  Even Paragraph 17 of 10-3140 reads: “Delegates” means those persons elected or appointed to vote in a representative assembly for the election of a director or directors or on other matters” (emphasis added). 

The judge’s own cite of 33-1812 contains (emphasis added),  

A. Notwithstanding any provision in the community documents, after termination of the period of declarant control, votes allocated to a unit may not be cast pursuant to a proxy.The association shall provide for votes to be cast in person and by absentee ballotand may provide for voting by some other form of delivery.

Finally, the judge cites Washburn v. Pima County in footnote 5 that the legislature is presumed to know about prior statutes (knowledge of what the corporate statutes say about proxies and delegates), and if it meant to exclude voting delegates from being used in HOA voting it would have added additional wording to that effect. This selected reference by the judge to Washburn carries with it the assumption that the issue is one of redefining “proxy” to include “delegate”, but this is not the case with 33-1812(A). 

This apparent confusion between the meaning of proxy as a person or form of voting — an authorization on how to vote — is easily clarified by simply going to the generally accepted legal dictionary, Black’s Law Dictionary, where “proxy” is defined both as a person under (1), and as authorization under (2), or a form under (3).   

Now, what about forms of governance and voting in any form of governance?  It is quite clear that the delegate voting system, regardless of whether it is a form of governance or not, uses persons to vote for others, and that the governing documents are, in effect, null and void by virtue of 33-1812.  In other words, these people, these delegates who are appointed to vote, can only vote as a representative of others and are proxies.  To hold that they are people independent of any election to so appoint them to vote at board meetings, among other things, becomes ludicrous.   

By definition, delegates can only vote as a proxy for others. Even if we look at the governing documents where it states that these delegates can vote any which way they like, delegates are not free of the fact that they hold their power only as a result of the election by unit owners. The amount of power granted to a delegate, or any conditions for voting, is immaterial to the issue.   

The Defendant homeowner (since the HOA brought the appeal suit, the homeowner is now the defendant) is strongly urged to appeal this decision to the Appeals Court. 

See OAH –

 Appeal decision

OAH decision

OAH complaint 

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Published in: on March 30, 2008 at 9:57 am  Comments (1)  

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