Court Opinion

ID: 9364451
Source: CourtListenerOpinion
Date Created: 2023-01-19 17:01:59.415173+00
Date Added: 2024-06-11T17:15:38.280209
License: Public Domain

NOTICE: NOT FOR OFFICIAL PUBLICATION.
  UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL
                  AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.

                                     IN THE
              ARIZONA COURT OF APPEALS
                                 DIVISION ONE

                      R. L. WHITMER, Plaintiff/Appellant,

                                         v.

HILTON CASITAS HOMEOWNERS ASSOCIATION, Defendant/Appellee.

                              No. 1 CA-CV 22-0202
                                FILED 1-19-2023

            Appeal from the Superior Court in Maricopa County
                           No. CV2021-050888
                    The Honorable Sara J. Agne, Judge

                                   VACATED

                                APPEARANCES

R. L. Whitmer, Scottsdale
Plaintiff/Appellant

Carpenter Hazelwood Delgado & Bolen LLP, Tempe
By Edith I. Rudder, Maria G. McKee
Counsel for Defendant/Appellee
                     WHITMER v. HILTON CASITAS
                         Decision of the Court

                      MEMORANDUM DECISION

Judge Michael J. Brown delivered the decision of the Court, in which
Presiding Judge Jennifer M. Perkins and Judge James B. Morse Jr. joined.

B R O W N, Judge:

¶1             R.L. Whitmer appeals the superior court’s orders awarding
attorneys’ fees in favor of Hilton Casitas Homeowners Association
(“Association”). Because Whitmer’s lawsuit against the Association did not
arise out of contract under A.R.S. § 12-341.01, we vacate the fee awards.

                             BACKGROUND

¶2            The Hilton Casitas Condominium development was created
in 1972 upon recordation of the Declaration of Horizontal Property Regime
for Hilton Casitas (“Declaration”). The Association is subject to the Arizona
Condominium Act, and because Whitmer co-owns a unit in the
development he is a member of the Association. See A.R.S. § 33-1201,
-1241.

¶3             In March 2021, Whitmer sued the Association, requesting a
contempt finding and injunctive relief because the Association allegedly
failed to (1) comply with a 2015 administrative order addressing statutory
budgeting requirements, (2) adopt a budget for 2021 as required by A.R.S.
§ 33-1243(D); (3) adopt an annual assessment, based on a timely adopted
budget, under A.R.S. § 33-1255(A); and (4) conduct appropriate audits for
the 2015 to 2019 fiscal years under A.R.S. § 33-1243(J).

¶4             The Association moved to dismiss Whitmer’s complaint for
failure to state a claim. As to the first claim, the Association argued the
administrative order was a product of an unconstitutional administrative
process and § 33-1243(D)’s requirements were not applicable because a
budget had not yet been adopted. On the second claim, the Association
argued that nothing in § 33-1255(A) specifies the timing for adoption of an
annual budget, other than “at least annually.”             The Association
acknowledged there may be “non-statutory provisions” which require a
more specific timeline, but Whitmer “explicitly state[d] his claims are
exclusively limited to statutory compliance.” Addressing the third claim,
the Association contended the statute of limitations barred at least a portion

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                     WHITMER v. HILTON CASITAS
                         Decision of the Court

of his claim. It also argued Whitmer ignored the language of § 33-1243
governing audits, noting in part that Whitmer brought “his claims purely
on statutory compliance such that the Association’s governing documents
are inapplicable to the requested relief.”

¶5             After further briefing and additional filings, the superior
court granted the motion to dismiss. The Association filed an application
for attorneys’ fees under § 12-341.01. In response, Whitmer argued
§ 12-341.01 was not applicable because his claims “concern[ed] the
enforcement of statute and [did] not arise out of contract,” relying in part
on this court’s analysis in Brown v. Terravita Community Association, Inc., No.
1 CA–CV 14–0455, 2015 WL 4600032, at *1–2 (Ariz. App. July 30, 2015)
(mem. decision). The superior court granted the Association’s request,
awarding $16,592.50 in attorneys’ fees under § 12-341.01 because Whitmer
brought his action under the Declaration, which is a contract.

¶6            Whitmer then filed a motion to alter the judgment, which the
court denied after additional briefing. The court reasoned that it was “not
required to interpret statutes, nor were they a factor that caused the
dispute.” Instead, Whitmer’s lawsuit required the court to “interpret the
Declaration.” After the Association filed a supplemental application, the
court granted the Association’s request and awarded $3,669 more in
attorneys’ fees. Whitmer timely appealed and we have jurisdiction under
A.R.S. § 12-2101(A)(1).

                               DISCUSSION

¶7             Section 12-341.01(a) states that “[i]n any contested action
arising out of a contract, express or implied, the court may award the
successful party reasonable attorney fees.” The application of § 12-341.01
is a question of statutory interpretation, which we review de novo. Ramsey
Air Meds, L.L.C. v. Cutter Aviation, Inc., 198 Ariz. 10, 13, ¶ 12 (App. 2000).
“The statute does not apply if the contract is only a factual predicate to the
action but not the essential basis of it.” Kennedy v. Linda Brock Auto. Plaza,
Inc., 175 Ariz. 323, 325 (App. 1993). A court must consider “the nature of
the action and surrounding circumstances” and decide whether the
contract is the “cause or origin of the dispute.” Keystone Floor & More, LLC
v. Ariz. Registrar of Contractors, 223 Ariz. 27, 30, ¶ 10 (App. 2009).

¶8           Whitmer argues the superior court erred in awarding fees
under § 12-341.01 because he did not seek any enforcement of the
Declaration or allege it was breached. The Association counters that
Whitmer’s claims arose out of contract because without his status as a unit

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                      WHITMER v. HILTON CASITAS
                          Decision of the Court

owner, he would lack standing and thus could not properly allege a
violation of the Condominium Act.

¶9           We assume, without deciding, that only members of a
condominium association may bring a statutory claim against the
association under the Condominium Act. But that does not mean, as the
Association seems to contend, that any lawsuit against the Association
under the Condominium Act brings into play § 12-341.01.

¶10           As an initial matter, the Association’s reliance on § 12-341.01
fails to account for its repeated assertions that Whitmer was only pursuing
statutory relief. In its motion to dismiss, the Association analyzed A.R.S.
§§ 33-1258, -1255(A), and -1243(J), and expressly stated (1) that because
Whitmer argued his claims were limited to statutory relief, any non-
statutory provisions were irrelevant; and (2) that the Association’s
governing documents were “inapplicable to the requested relief.”
Notwithstanding those assertions, the Association requested attorneys’ fees
under § 12-341.01, relying on a “contractual” relationship theory, but again
acknowledged that “Plaintiff pled his Complaint as purely a matter of
statutory compliance.” (Emphasis added.) Thus, the record supports only
one reasonable conclusion—that even if the Declaration served as a factual
predicate for Whitmer’s claims, it was not the essential basis of those claims.
See Kennedy, 175 Ariz. at 325.

¶11           The Association argues nonetheless that Whitmer’s claims
and requested relief arise out of contract “because of the contractual nature
of the relationship between the parties.” It cites several cases for the
proposition that if “the defendant would not have a duty of care in the
absence of the underlying contract, the claim arises out of contract.” The
duties as alleged by Whitmer, however, arise solely from the statutory
provisions cited in his complaint; none of his claims arise out of the
Declaration. See Sparks v. Republic Nat’l Life Ins. Co., 132 Ariz. 529, 544 (1982)
(holding that although an action for misrepresentation under A.R.S. § 20-
433 would normally arise in the context of an insurance contract, a tort
committed by an insurer “would not involve a breach of the actual contract;
therefore, it would not be an action arising from a contract” under § 12-
341.01); Kennedy, 175 Ariz. at 325–26 (reversing fee award under § 12-341.01
because the “essential basis of the action was a statutory remedy designed
to protect purchasers of new vehicles” and the “action did not arise out of
the lease contract”).

¶12           This court’s decision in Brown, 2015 WL 4600032, at *1 is also
persuasive in addressing the Association’s argument. There, a homeowner

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                     WHITMER v. HILTON CASITAS
                         Decision of the Court

appealed from an administrative ruling rejecting his claim that his
homeowner’s association had violated A.R.S. § 33-1805(A) (the Planned
Community Act) by failing to produce certain records. Id. at *2, ¶ 5. The
superior court affirmed the ruling and awarded the association its
attorneys’ fees. Id. This court vacated the fee award, reasoning that “in this
case the administrative proceeding and judicial review action concerned
the Association’s statutory obligation to produce records under A.R.S. § 33-
1805(A).” Id. at *2, ¶ 5. Like the homeowner in Brown, Whitmer alleged
that the Association failed to comply with certain duties arising under
statutes that govern condominiums; he did not allege the Association failed
to comply with its duties under the Declaration.

¶13            The Association contends this case is similar to A.H. By and
Through White v. Arizona Property and Casualty Insurance Guaranty Fund, 190
Ariz. 526 (1997). In that case, our supreme court held that although the
dispositive legal issue was resolved by statutory interpretation, the action
arose out of contract. See A.H. By & Through White, 190 Ariz. at 529. The
court explained that when it had previously examined A.R.S. § 20-673(C),
it determined the statute was “the functional equivalent of an ‘other
insurance’ clause typical in insurance contracts.” A.H. By & Through White,
190 Ariz. at 530. Thus, the court concluded that § 20-673(C) was a legislated
contractual provision imputed into “every insurer’s written contract.” A.H.
By & Through White, 190 Ariz. at 530.

¶14           In Brown, this court rejected the association’s reliance on A.H.
By & Through White, stating that it found “no authority—including the plain
language of the statute—to support the notion that the Legislature intended
to integrate § 33-1805 as part of the declarations . . . of all planned
communities.” 2015 WL 4600032, at *2, ¶ 6. Similarly, nothing in the
statutes Whitmer cited as the basis for his claims support the Association’s
argument that the statutes were designed to operate as “other declaration
clauses.” See A.R.S. §§ 33-1258, -1255(A), -1243(J). Unlike A.H. By & Through
White, the statutory provisions Whitmer relied on apply only when the
declaration does not state otherwise. See e.g., A.R.S. § 33-1243(D) (stating
the procedure for a proposed budget “[e]xcept as provided in the
declaration”). Nothing in the Condominium Act indicates the Legislature
intended to integrate the Act’s provisions as part of condominium
declarations, which supports our determination that Whitmer’s claims do
not arise out of contract. See A.H. By & Through White, 190 Ariz. at 529
(explaining that when a lawsuit is based on a statute rather than a contract,
“the peripheral involvement” of a contract does not support applying § 12-
341.01).

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                    WHITMER v. HILTON CASITAS
                        Decision of the Court

¶15           The Association also argues that the obligations in the
Condominium Act do not create duties apart from the Declaration, citing
Mountain View Condominiums Homeowners Association, Inc. v. Scott, 180 Ariz.
216, 219 (App. 1994). But in that case, this court explained that
condominium owners’ rights and obligations “may be found in three
sources—the statute, the declaration, and the bylaws[,]” which “must be
read together, in relation to each other, and harmonized, if possible.” Id.
Here, the Declaration and the Condominium Act are separate sources of
law, and Whitmer sought relief only under the Act, as the Association
affirmatively asserted in its motion to dismiss. The superior court erred in
finding that Whitmer’s claims arose out of contract under § 12-341.

¶16           The Association also requested attorneys’ fees under A.R.S.
§ 12-349, but nothing in this record shows that the superior court awarded
fees on that basis. And the Association has made no assertion on appeal
that we should affirm the court’s fee awards under § 12-349.

                              CONCLUSION

¶17          Because the essential basis of Whitmer’s claims against the
Association was statutory enforcement, the superior court erred in
awarding attorneys’ fees. We therefore vacate the court’s fee awards and
deny the Association’s request for the fees it incurred on appeal. As the
successful party on appeal, Whitmer is awarded taxable costs subject to
compliance with ARCAP 21.

                         AMY M. WOOD • Clerk of the Court
                         FILED: AA

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