GARDEN LAKES COMMUNITY ASSOCIATION, INC. v. Madigan

Citations: 62 P.3d 983; 204 Ariz. 238; 393 Ariz. Adv. Rep. 9; 2003 Ariz. App. LEXIS 20Docket: 1 CA-CV 00-0570

Court: Court of Appeals of Arizona; February 18, 2003; Arizona; State Appellate Court

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The Garden Lakes Community Association, Inc. (the Association) governs homeowners in the Garden Lakes subdivision of Avondale, Arizona, through a recorded Declaration of Covenants, Conditions, Restrictions, and Easements established for community planning. The Declaration, which applies to homeowners who purchased lots after January 28, 1986, requires that any exterior changes, including solar energy installations, must receive prior approval from the Architectural Review Committee (ARC). 

The Association implemented specific guidelines for solar energy devices, stipulating that any visible installations must be approved by the ARC, must integrate into the roof design without breaking the roof ridge line, and must be screened from public view and neighboring properties. Additionally, roof-mounted systems and tracker-type solar devices are subject to visibility restrictions. The guidelines also require that any screening for solar panels be architecturally integrated with the building's design and structurally stable.

Homeowners William and Joan Madigan and Henry and LaVonne Speak contested these restrictions, arguing they effectively prohibited the installation of solar devices, citing Arizona Revised Statutes A.R.S. § 33-439(A) (2000). The trial court ruled in favor of the homeowners, a decision that was upheld on appeal.

The Madigans and the Speaks installed solar energy devices (SEDs) on their homes without obtaining approval from the Architectural Review Committee (ARC) or the Association. The Association initiated separate lawsuits against them, claiming violations of guidelines and the Declaration, seeking permanent injunctions for removal of the SEDs, monetary penalties, and recovery of attorneys' fees. In defense, the homeowners cited A.R.S. 33-439, which declares any covenant that prohibits the installation of solar energy devices to be void and unenforceable.

The cases were consolidated, and prior to trial, the Association waived approximately $100,000 in fines. William Madigan died before the trial, while Joan Madigan removed the solar equipment. The trial was conducted without specific findings of fact or conclusions of law from the court. The court ruled in favor of the Madigans, and the Association's case against the Speaks was presented to an advisory jury. Ultimately, the court issued a judgment favoring both the Speaks and the Madigans, concluding that the Association's guidelines effectively prohibited the installation of SEDs, thereby making them unenforceable under A.R.S. 33-439(A). The court awarded attorneys' fees and costs to the homeowners.

Both parties acknowledged that the homeowners had not complied with architectural guidelines or received approval for their SEDs. On appeal, the Association argued that the trial court erred in its conclusion regarding the enforceability of the guidelines. The court’s findings are presumed correct in the absence of requested detailed findings, and any reasonable evidence supporting the judgment will affirm it. An abuse of discretion standard applies for reviewing the denial of injunctive relief, while a de novo standard is used for the interpretation of A.R.S. 33-439(A).

The Declaration serves as a binding contract between property owners in the subdivision and individual lot owners, establishing enforceable restrictive covenants and architectural guidelines, as affirmed by case law. However, Arizona law, specifically A.R.S. 33-439(A), provides an exception that invalidates restrictions preventing the installation or use of solar energy devices. The Association argues that the Speaks must demonstrate that the Declaration and guidelines "inevitably precluded" solar installation, a burden they contend the Speaks did not meet. The Speaks counter that the Association's installation requirements either rendered solar heating unfeasible or prohibitively expensive, leading homeowners to choose alternative heating methods.

To resolve the case, the interpretation of A.R.S. 33-439(A) is essential, focusing on the legislative intent, which is discerned from the statute's plain language, context, and historical background. The Arizona legislature has a long-standing goal of promoting solar energy use, dating back to 1974, with A.R.S. 33-439(A) enacted in 1980 to further this aim. While the law encourages solar energy adoption, the phrase "effectively prohibits" lacks a clear definition, allowing for a flexible, case-by-case evaluation of restrictions rather than a strict rule. This aligns with a California precedent that treats the reasonableness of homeowners association guidelines regarding solar installations as a factual determination.

Disagreement exists regarding the interpretation of "effectively prohibit" in relation to restrictions on solar energy devices (SEDs). The determination of whether a restriction effectively prohibits SEDs is factual and must be evaluated on a case-by-case basis. Various factors may be considered, including the specific language and content of the restrictions, the homeowners association's conduct, the practicality of existing architectural requirements for SEDs, the availability of alternative solar energy designs, costs, and the property's suitability for modifications. This list is intended to guide trial courts and litigants without predetermining relevance for specific cases.

The homeowners bear the burden of proof to demonstrate that the Declaration and guidelines effectively barred them from installing SEDs. The court concluded that the homeowners met this burden. Testimony during the trial highlighted two proposed alternative designs from the homeowners association, including constructing a patio cover and erecting a screening wall for the solar panels. 

Evidence for the patio cover indicated significant issues: it would need to be large enough to accommodate the solar panels but would encroach on pool setback areas, violating city regulations. Additionally, the cost of constructing this cover would be approximately $5,000, not including the solar panel installation.

The alternative of building a screening wall to conceal the solar panels was also discussed. This wall would be designed with adjustable louvers, potentially causing some shading and reduced efficiency for the solar panels at certain times of the year. The materials for the screen would be aesthetically crafted to match the subdivision's appearance.

The Association's expert had no prior experience with the specific type of screening device proposed for residential roofs, and two additional witnesses confirmed they had not seen a screen wall of the suggested dimensions on a residence. A member of the Association's Architectural Review Committee (ARC) expressed a dislike for screening walls and noted that any such screen would need to match the house's stucco to comply with guidelines. The court was justified in considering the increased costs associated with these aesthetic requirements, despite the Association's argument that cost should not influence homeowners' decisions regarding solar energy devices (SEDs). The Association contended that imposing cost considerations could create disparities between wealthy and less affluent homeowners, potentially preventing the latter from installing solar devices.

While cost alone is not determinative, it can be a significant factor if compliance costs are prohibitively high. The court focused on the average homeowner's motivation to install SEDs in light of financial burdens and possible reductions in solar efficiency due to restrictions. Factors such as housing type, location, and community home values are relevant in this context. 

Evidence presented included testimony from a solar pool heater distributor indicating that most consumers in the Phoenix and Tucson areas would not invest in solar systems costing over $4,500 due to the need for a recoupment period of three to five years. If the recoupment period exceeds five years, potential buyers are likely discouraged from purchasing solar systems.

The trial court's finding that the Association's guidelines effectively prohibited SEDs was supported by substantial evidence. The proposed patio cover was deemed unviable due to high costs discouraging homeowners and violating city restrictions. Additionally, the proposed screen was characterized as impractical, with decreased solar efficiency and increased costs further substantiating the court's conclusion.

The Association also invoked precedents from various cases regarding enforceability of restrictions on pets, antennas, and stored vehicles. However, these cases were distinguished by the absence of a public policy favoring such restrictions, unlike the applicable statute, A.R.S. 33-439(A), which nullifies enforcement of deed restrictions that effectively prohibit SED installation and use. This statute allows homeowners associations to impose aesthetic restrictions but prohibits explicit or effective bans on SEDs.

Substantial evidence supported the trial court's ruling that the Association's restrictions prohibited the installation and use of solar energy devices, contravening A.R.S. 33-439(A). As a result, these restrictions are deemed unenforceable, and the Association is denied relief, affirming the judgment in favor of the homeowners. The homeowners' request for attorneys' fees incurred during the appeal was granted by the trial court under A.R.S. section 12-341.01(A). The court also awarded fees to the homeowners, with the exact amount to be determined upon their compliance with Arizona Rule of Civil Appellate Procedure 21(c). 

Key findings from the advisory jury indicated that the homeowners accepted the property deed subject to the Declaration but did not obtain prior approval for their solar panel installation. While the jury found that the Association's guidelines did not effectively prohibit solar energy devices, the trial court interpreted this finding as resulting from a poorly worded interrogatory and deemed the jury's findings non-binding. The excerpt notes that Arizona taxpayers can receive a tax credit of 25% of the cost of solar energy devices, capped at $1,000. It also clarifies that the statute does not apply retroactively to existing deed restrictions at its enactment, and that cost alone should not determine the feasibility of installing solar energy devices, depending on the property values in the subdivision.