Tober v. Civano 1: Neighborhood Ass'n, Inc.

• Decision Date: 12 March 2013
• Docket Number: 2 CA-CV 2012-0129
• Citation: Tober v. Neighborhood Ass'n, Inc., 2 CA-CV 2012-0129 (Ariz. App. Mar 12, 2013)
• Parties: JOAN TOBER, Plaintiff/Appellant, v. CIVANO 1: NEIGHBORHOOD ASSOCIATION, INC., an Arizona nonprofit corporation; and RICK HANSON, MARK LEVINE, GEORGE LUIS, LEE RAYBURN, BOB SMALL, CHRIS SHIPLEY, and LES SHIPLEY, Defendants/Appellees.
• Court: Arizona Court of Appeals

JOAN TOBER, Plaintiff/Appellant, v. CIVANO 1: NEIGHBORHOOD ASSOCIATION, INC., an Arizona nonprofit corporation and RICK HANSON, MARK LEVINE, GEORGE LUIS, LEE RAYBURN BOB SMALL, CHRIS SHIPLEY, and LES SHIPLEY, Defendants/Appellees.

2 CA-CV 2012-0129

COURT OF APPEALS STATE OF ARIZONA DIVISION TWO DEPARTMENT B

FILED: March 12, 2013

NOTICE: THIS DECISION DOES NOT CREATE LEGAL PRECEDENT AND MAY NOT BE CITED EXCEPT AS AUTHORIZED BY APPLICABLE RULES. See Ariz. R. Supreme Court 111(c); ARCAP 28(c); Ariz. R. Crim. P. 31.24

MEMORANDUM DECISION

Not for Publication

Rule 28, Rules of Civil

Appellate Procedure

APPEAL FROM THE SUPERIOR COURT OF PIMA COUNTY

Cause No. C20113384

Honorable Scott Rash, Judge

AFFIRMED

Elizabeth D. Bushell, P.L.C.

By Elizabeth D. Bushell

Tucson

Attorney for Plaintiff/Appellant

Monroe, McDonough, Goldschmidt

& Molla, P.L.L.C.

By Carolyn B. Goldschmidt

Tucson

Attorneys for Defendants/Appellees

ESPINOSA, Judge.

¶1 Joan Tober appeals the entry of summary judgment in favor of Civano 1: Neighborhood Association, Inc. ("Civano") and members of its board of directors (collectively, "the board") on her claim of breach of statutory obligation. She challenges the annual election held in 2011, asserting the board was required to allow members to vote in person and by absentee ballot, instead of exclusively by mail-in ballot, citing A.R.S. § 33-1812(A). For the following reasons, we affirm the trial court's summary-judgment ruling.

Factual Background and Procedural History

¶2 Civano, a nonprofit corporation, manages a planned community in Tucson and holds annual elections of its board of directors.¹ Tober is a mandatory member of Civano by virtue of owning property within the community. Her allegations arise from the 2011 Civano board-of-directors election.

¶3 On March 1, the board sent election ballots to all members, with a formal notice of the annual membership meeting, ballot instructions, and the election timeline. Members were advised to return the ballots by mail or hand delivery to Civano's office by March 21 at five o'clock p.m. On March 15, the board adopted an administrativeresolution applicable to the 2011 election to authorize, apparently exclusively, the use of written mail-in ballots to elect board members. In conformity with the election timeline, the Civano election committee counted all ballots on March 21 and certified the results to the board. At the annual meeting the next day, the results were announced. Tober mailed her ballot to Civano, attended the annual meeting, and does not contend her ballot was not counted.

¶4 Over a month after the election was finalized, Tober brought an action against Civano and the board members, alleging breach of contract, breach of fiduciary duty, and breach of statutory obligation arising from, inter alia, the mail-in ballot procedure. Tober amended her complaint to add several requests for injunctive relief pursuant to A.R.S. § 10-3304: to force the board to conduct elections in accordance with § 33-1812, to mandate the board conduct annual elections at the annual meeting, and to enjoin the board from amending the community documents election procedures pending resolution of the dispute. She also included a claim for election tampering, but does not pursue that claim on appeal. She withdrew her breach-of-contract and breach-of-fiduciary-duty claims after conceding she had suffered no individual damages, she had not been disenfranchised by the board's actions, and the election results would have been the same absent the board's bylaw violations.

¶5 Following a hearing on the parties' cross-motions for summary judgment, the trial court determined the ballot provisions in the Arizona Nonprofit Corporation Act,see A.R.S. § 10-3708,² and the planned communities statutes, see § 33-1812,³ were not inconsistent and did not prohibit the board from holding elections exclusively by mail-in ballot in advance of the annual meeting. The parties agreed those findings effectively disposed of Tober's statutory claim, and the court issued a final judgment in favor of Civano and the board, including an award of attorney fees and costs.⁴ See A.R.S. §§ 12-341, 12-341.01; see also Ariz. R. Civ. P. 54(b). On appeal, Tober challenges onlythe entry of judgment on her claim of breach of statutory duty. We have jurisdiction over her appeal pursuant to A.R.S. §§ 12-120.21(A)(1) and 12-2101(A)(1).

Discussion

¶6 Tober asserts the trial court erred in determining she lacked standing to sue for breach of statutory obligation under § 33-1812 unless she brought her claims in the form of a derivative action, reasoning that the community documents and § 10-3304 grant her standing.⁵ "In reviewing a summary judgment in a case involving undisputed material facts, we independently review the trial court's application of the law to the facts." Vales v. Kings Hill Condo. Ass'n, 211 Ariz. 561, ¶ 9, 125 P.3d 381, 384 (App. 2005), abrogated on other grounds by Powell v. Washburn, 211 Ariz. 553, 125 P.3d 373 (2006). Capacity to sue is a question of law reviewed de novo. Gemstar Ltd. v. Ernst & Young, 185 Ariz. 493, 499, 917 P.2d 222, 228 (1996).

Standing to Assert Statutory Claim against Board of Directors

¶7 As for Tober's claim against the board,⁶ an action brought by an association member is derivative "'if the gravamen of the complaint is injury to the corporation, or to the whole body of its stock or property without any severance or distribution among individual holders.'" Albers v. Edelson Tech. Partners L.P., 201 Ariz. 47, ¶ 17, 31 P.3d 821, 826 (App. 2001), quoting Funk v. Spalding, 74 Ariz. 219, 223, 246 P.2d 184, 186(1952). A derivative lawsuit may be brought only if a member meets certain standing requirements and follows a statutorily defined demand process. A.R.S. §§ 10-3631, 10-3632. But a member may bring a direct action against an alleged wrongdoer without following the derivative lawsuit procedures if (1) the member has a relationship with the alleged wrongdoer, in this case the board, apart from the member's interest in the association, (2) the wrongdoer owes a duty to the member for a reason other than membership status, or (3) the injuries or damages sustained are unique to the individual member and not the association. See Albers, 201 Ariz. 47, ¶ 18, 31 P.3d at 826. The derivative lawsuit statutory provisions contained in §§ 10-3631 and 10-3632 govern member lawsuits against nonprofit planned community boards of directors because there is no conflict between the two bodies of law with respect to derivative lawsuit limitations. See Restatement (Third) of Property (Servitudes) § 6.13 cmt. a (2000) (in event of conflict between servitudes law and law applicable to association form, servitudes law controls).

¶8 Tober lacks capacity to sue the board by bringing a direct action. She claims no special relationship with the board, alleges no individual injury, and does not assert the board owed her a duty for any reason other than her membership status. Instead, Tober merely asserts that she sued based on a "personal stake in how her community is run." The gravamen of her claim of breach of statutory obligation is that Civano members as a whole were disadvantaged by the mail-in ballot procedures; thus, the action is derivative. Moreover, a member lawsuit against the board is not authorized by either the community documents or by § 10-3304, which permits member lawsuitsagainst planned community associations. See Ariz. Biltmore Estates Ass'n v. Tezak, 177 Ariz. 447, 448, 868 P.2d 1030, 1031 (App. 1993) (planned community documents constitute contract between members and subdivision owners as a whole); see also Johnson v. Pointe Cmty. Ass'n, 205 Ariz. 485, ¶¶ 23-24, 73 P.3d 616, 620-21 (App. 2003) (planned community association must comply with planned community documents). Consequently, because Tober failed to follow the derivative-lawsuit procedures to bring her claim of breach of statutory obligation against the board, the trial court properly dismissed it.

Civano's Declaration of Covenants, Conditions, and Restrictions

¶9 As to her allegations against Civano, Tober contends her statutory claim was authorized by the Declaration of Covenants, Conditions, and Restrictions ("CC&Rs"),⁷ which comprises a contract between Civano and its members. See Ariz. Biltmore Estates Ass'n, 177 Ariz. at 448, 868 P.2d at 1031. The interpretation of a restrictive declaration is generally a question of law that we review de novo, giving effect to the "plain intent and purpose" of the parties as determined from the language used in the instrument. Powell, 211 Ariz. 553, ¶¶ 8, 13, 18, 125 P.3d at 375-76, 377, 378. According to § 16.1 of the CC&Rs, "Each Owner . . . has the right and authority, but not the obligation, to enforce the provisions of [the CC&Rs]." The plain language of § 16.1 provides a cause of action to Civano members to enforce community governingdocuments. But Tober concedes the breach-of-statutory-obligation claim was "independent of the contract between the parties," "neither intrinsic to nor dependent upon the existence of the contract." And § 33-1812 could not be deemed part of the CC&Rs because it was not in effect when the CC&Rs were executed. See Higginbottom v. State, 203 Ariz. 139, ¶ 11, 51 P.3d 972, 975 (App. 2002) (contract incorporates statutes in force when contract formed); see also 2005 Ariz. Sess. Laws, ch. 269, § 8 (enacting § 33-1812). Thus, the CC&Rs do not authorize Tober's statutorily based action because it was not brought to enforce the community documents.

A.R.S. § 10-3304

¶10 Tober nevertheless asserts she may bring a claim against Civano under § 10-3304 to enforce the provisions of § 33-1812. "[W]e review the interpretation and application of statutes de novo," Vales, 211 Ariz. 561, ¶ 9, 125 P.3d at 384, and seek to determine and effectuate the legislative intent behind the statute. Cypress on Sunland Homeowners Ass'n v. Orlandini, 227 Ariz. 288, ¶ 30, 257 P.3d 1168, 1177 (App. 2011). "If...