IQTUNHEIMR v. VAL VISTA LAKES

IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE

IQTUNHEIMR, LLC,
Plaintiff/Appellant,

v.

VAL VISTA LAKES COMMUNITY ASSOCIATION, et al.,
Defendants/Appellees.

No. 1 CA-CV 25-0095
FILED 02-10-2026

Appeal from the Superior Court in Maricopa County
No. CV2024-002225
The Honorable Jennifer C. Ryan-Touhill, Judge

AFFIRMED

COUNSEL

CHDB Law, LLP, Tempe
By Kyle Banfield, Joshua M. Bolen
Counsel for Appellees

Denton Peterson Dunn, PLLC, Mesa
By Larry A. Dunn
Co-Counsel for Appellant

Brown Patent Law, Scottsdale
By Nathan Brown
Co-Counsel for Appellant
Dessaules Law Group, Phoenix
By Jonathan A. Dessaules, Thomas E. Raccuia
Counsel for Amicus Curiae Arizona Homeowners Coalition

Lisa Marx, Sun City
Amicus Curiae

Jeremy Whittaker, Gilbert
Amicus Curiae

OPINION

Vice Chief Judge David D. Weinzweig delivered the opinion of the Court,
in which Presiding Judge Jennifer M. Perkins and Judge Cynthia J. Bailey
joined.

W E I N Z W E I G, Vice Chief Judge:

¶1 When a homeowner sues a homeowners’ association for
failing to maintain common areas (the community pool, the clubhouse or
the shared parks), the claim is derivative and does not belong to the
individual homeowner. Arizona law restricts who may assert derivative
claims to members who (1) number at least 50 or hold at least 25% of the
association’s voting power (whichever is less), and (2) make a written
demand on the association before suing. A.R.S. §§ 10-3631, -3632. Because
the homeowner satisfied neither requirement here, the superior court
properly dismissed the claims.

FACTS AND PROCEDURAL BACKGROUND

¶2 This lawsuit involves Val Vista Lakes, a master planned
community located in Gilbert with more than 2,200 homes and members.
The community is governed by a homeowners’ association, Val Vista Lakes
Community Association (“Association”), under a Declaration of
Covenants, Conditions, Restrictions, Assessments, Charges, Servitudes,
Liens, Reservations and Easements (“Declaration”). The Association is a
non-profit corporation. See A.R.S. § 33-1802(1)(a). Iqtunheimr, LLC
(“Homeowner”) owns one home in Val Vista Lakes.

¶3 In 2024, Homeowner sued the Association and Timothy
Hedrick, a board member, for breach of contract and breach of the implied

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covenant of good faith and fair dealing. Homeowner alleged the
Association and Hedrick breached the Declaration by failing to maintain
common areas and amenities, including the clubhouse, fences, outdoor
shower, plumbing, electric wires, paving, community waterfall,
community parks, greenbelts, community walls, fountains, pools and lakes.

¶4 The Association and Hedrick moved to dismiss under
Arizona Rule of Civil Procedure 12(b)(6), arguing Homeowner failed to
state a claim upon which relief could be granted. The superior court
granted the motion because Homeowner “has not complied with the
mandatory statutory requirements for a derivative claim.” The court
awarded the Association its attorney fees and costs as the prevailing party,
and sanctioned Homeowner $5,000 for bringing and pursuing claims
without substantial justification. Homeowner timely appealed. We have
jurisdiction. A.R.S. §§ 12-2101(A)(1), -120.21(A)(1).

DISCUSSION

I. Homeowner lacked standing to assert a derivative lawsuit under
Arizona law.

¶5 A motion to dismiss should be granted only if the plaintiff
cannot obtain relief under any interpretation of the facts. Swift Transp. Co.
of Ariz. v. Ariz. Dep’t of Revenue, 249 Ariz. 382, 385, ¶ 14 (App. 2020).
“Arizona courts assume the truth of all well-pled, material allegations in
the complaint, but ‘do not accept as true allegations consisting of
conclusions of law, inferences or deductions that are not necessarily
implied by well-pleaded facts, unreasonable inferences or unsupported
conclusions from such facts, or legal conclusions alleged as facts.’” Id.
(quoting Jeter v. Mayo Clinic Ariz., 211 Ariz. 386, 389, ¶ 4 (App. 2005)).

¶6 A “derivative claim” is an action brought by a shareholder or
member of a corporation to enforce the corporation’s claim against its
officers and directors or third parties. Judson C. Ball Revocable Tr. v. Phx.
Orchard Grp. I, L.P., 245 Ariz. 519, 521, ¶ 3 n.3 (App. 2018) (applying
corporate derivative law in limited partnership context). An action 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, or if it seeks to recover assets for the
corporation or to prevent the dissipation of its assets.” Albers v. Edelson
Tech. Partners L.P., 201 Ariz. 47, 52, ¶ 17 (App. 2001) (quoting Funk v.
Spalding, 74 Ariz. 219, 223 (1952)).

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¶7 Arizona law restricts who may bring a derivative lawsuit.
A.R.S. §§ 10-3631, -3632. Members must (1) have standing, and (2) make a
written demand on the corporation to take action (unless the demand
would be futile). A.R.S. §§ 10-3631, -3632. And because the Association
here has members, standing is limited to “any member or members having
twenty-five per cent or more of the voting power or by fifty members,
whichever is less.” A.R.S. § 10-3631(A)(1). Each complainant must have
been “a member or director, as applicable, of the corporation at the time of
the act or omission complained of,” and must “[f]airly and adequately
represent the interests of the corporation in enforcing the right of the
corporation.” A.R.S. § 10-3631(B).

¶8 These restrictions are meaningful—they stop a flood of
duplicative lawsuits, they ensure that the complainant represents the
homeowners and they protect the association from the drain of endless
litigation. Funk, 74 Ariz. at 225 (“One of the primary purposes of bringing
the action in the corporate name is to prevent a multiplicity of actions.”);
Cohen v. Beneficial Indus. Loan Corp., 337 U.S. 541, 549 (1949) (noting that
plaintiff pressing a derivative claim “sues, not for himself alone, but as
representative of a class comprising all who are similarly situated”).
Imagine if every homeowner in a 2,200-home community could file a
separate lawsuit over the same pool maintenance issue—the courts would
be flooded with redundant litigation, and the association would be
burdened defending identical claims. The derivative claim rules prevent
exactly this scenario by channeling such grievances through proper
representative procedures.

¶9 Individual shareholders may still file a direct suit against the
corporation when “(1) the relationship between the shareholders and a
wrongdoer is separate from the shareholders’ status as shareholders or
their ownership interest in the corporation, (2) the wrongdoer owes a duty
to the shareholders for some reason other than their status as shareholders,
or (3) the injuries or damages were sustained by individual shareholders
rather than by the corporation.” Albers, 201 Ariz. at 52, ¶ 18.

¶10 Homeowner insists it filed a direct action against the
Association, not a derivative claim. But the facts say otherwise. The
Association is a non-profit corporation under § 33-1802(1)(a) and
Homeowner was a member of the Association when the lawsuit was filed.
What is more, Homeowner alleges only derivative harm in its complaint—
namely, that the Association breached the Declaration by failing to
maintain the common areas, including the community parks, pools,
greenbelts and clubhouse. Because the alleged harms are to the common

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areas, the claims are derivative and belong to the community as a whole,
not to Homeowner as an individual. See Judson C. Ball Revocable Tr., 245
Ariz. at 521, ¶ 3 n.3.

¶11 Homeowner did not meet the requirements for standing to
pursue a derivative action. Homeowner never secured consent from
enough homeowners to assert a derivative claim under § 10-3631(A)(1), and
did not make a written demand on the Association under § 10-3632.

¶12 Homeowner also argues that “any attempt by the trial court
to depict [Homeowner] as suing on behalf of the corporation[] is contrary
to the rule that the facts must be construed in favor of the [Homeowner].”
Not so. Whether Homeowner sued on behalf of the corporation is a
question of law, not fact. See Gemstar Ltd. v. Ernst & Young, 185 Ariz. 493,
499 (1996) (“The issue of . . . capacity to sue is a question of law, which this
court reviews de novo.”) (citation modified).

CONCLUSION

¶13 Homeowner failed to meet Arizona’s statutory requirements
for derivative suits and lacked standing to pursue its claims. The superior
court properly dismissed the complaint.

MATTHEW J. MARTIN • Clerk of the Court
FILED: JR

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