Petitioner, Lynne Fisher, owns a home within Turtle Rock III Association (“Association"). Fisher was in violation of several provisions of the Association's Declaration of Covenants, Conditions and Restrictions (“CC&Rs"). Specifically, she was failing to maintain her lot in a clean and attractive condition (including storing items in her front window that prohibited her blinds from closing properly) and failing to maintain the landscaping. The Association sent multiple violation notices beginning in January 2014 through December 2015. Starting in February 2014, fines were imposed for the recurring violations (first, $25, second and third $50 each, and $100). Fisher never objected to the violation notices or the imposition of fines.
On November 4, 2015, the Association filed a lawsuit against Fisher to compel her compliance with an injunction, and to collect the monetary penalties and attorneys' fees. At the trial court level, the court held an evidentiary hearing as a trial on the merits. Fisher failed to attend, but her counsel appeared on her behalf. A Director on the Board testified as to Fisher's violations and the monetary penalties. The Court granted an injunction in favor of the Association and required Fisher to cure her ongoing violations. The Court also awarded a portion of the requested monetary penalties and attorneys' fees and costs. Fisher appealed, and argued that the injunction was invalid, as it controlled the use of the inside of her home, and that the fines were invalid because no written schedule of penalties was introduced into evidence, and the penalties are unreasonable and inconsistent with Arizona Law (A.R.S. 33-1803(B)). The Court of Appeals reversed the judgment for monetary penalties, reasoning that the lack of a schedule of fines is unreasonable. Further, the court held that even if a fee schedule was in place, the Association had the burden to prove its damages.
The issues in this appeal are issues of both state and national importance. The Court of Appeals' published opinion in this case changes the law for over 9,000 Arizona community associations. This appeal centers on what these associations must do to assess owners monetary penalties for violations of their governing documents.
In summary, the Opinion held that in order to assess fines, an association must first (1) promulgate a fee schedule with fine amounts, and (2) prove damages. The Opinion judicially legislates two new elements into law and overrules over eighty years of Arizona precedent, starting with the Arizona Supreme Court. Since 1931, parties have enforced deed restrictions merely by proving that to tolerate a violation would diminish the protection provided to all owners by the deed restrictions. To that end, Arizona law authorizes fines after notice and an opportunity to be heard. Neither case law or the statute require damages. Enforcement actions are on the rise. Because the Opinion creates two new elements with little to no insight on either, Associations, owners, and the judiciary will have to guess what it all means. It may mean the end of an association's fining power because damages rarely exist. Without this key power, owners will be less motivated to live by the community's requirements. Well-settled blackletter jurisprudence will become null and void.
Amicus Brief
Prior Rulings:
Brief Authors: Scott B. Carpenter, Esq., Brian Morgan, Esq., Lynne Krupnik, Esq., Mark Lines, Esq.
CAI Amicus Review Committee: Robert Diamond, Esq. (VA), Chair of Amicus Committee, Karyn Kennedy-Branco, Esq. (NJ), Tom Moriarity, Esq. (MA), Steven Sugarman, Esq. (PA).