Opinion
No. 1 CA-CV 14-0127
02-24-2015
INFINITY MESA, L.L.C., a California limited liability company, Plaintiff/Appellant, v. STR FUND VIII, L.L.C., an Arizona limited liability company; SINGLE TENANT RETAIL, L.L.C., an Arizona limited liability company, Defendants/Appellees.
COUNSEL Meyer Hendricks PLLC, Phoenix By Ed Hendricks, W. Douglas Lowden Counsel for Plaintiff/Appellant Kercsmar & Feltus PLLC, Scottsdale By Gregory B. Collins, Christopher M. Goodman Counsel for Defendants/Appellees
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 UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL AND MAY BE CITED ONLY AS AUTHORIZED BY RULE. Appeal from the Superior Court in Maricopa County
No. CV2013-010429
The Honorable Douglas Gerlach, Judge
ORDER REVERSED IN PART; REMANDED
COUNSEL Meyer Hendricks PLLC, Phoenix
By Ed Hendricks, W. Douglas Lowden
Counsel for Plaintiff/Appellant
Kercsmar & Feltus PLLC, Scottsdale
By Gregory B. Collins, Christopher M. Goodman
Counsel for Defendants/Appellees
MEMORANDUM DECISION
Judge Lawrence F. Winthrop delivered the decision of the Court, in which Presiding Judge Kent E. Cattani and Judge Peter B. Swann joined. WINTHROP, Judge:
¶1 Plaintiff/Appellant, Infinity Mesa, L.L.C. ("Infinity") appeals the trial court's order denying its application for attorneys' fees from Defendants/Appellees, STR Fund VIII, L.L.C. and Single Tenant Retail, L.L.C. (collectively, "STR Fund"). For the following reasons, we reverse that portion of the order denying Infinity's attorneys' fees application in its entirety and remand for the trial court to determine a reasonable attorneys' fees award for Infinity.
FACTS AND PROCEDURAL HISTORY
¶2 The Power Square Mall development in Mesa, Arizona ("the Property") was subject to an Amended and Restated Declaration of Covenants, Conditions, and Restrictions ("CC&Rs") recorded in September 1988. The CC&Rs bound every lot within the defined Property, ran with the land, and were effective for twenty-six years from the date of recording. Among other use restrictions and improvement regulations, the CC&Rs provided for a minimum setback line (the "Setback Provision"):
4.1 Minimum Setback Lines. No buildings of any kind erected on the Property shall be located within 45 feet of an Interior Property Line.
¶3 In June 2005, Infinity purchased the primary retail building in the commercial development portion of the Property. In 2012, STR Fund sought to purchase a lot on the Property ("Lot 4") for the purpose of building a retail tire store. STR Fund spent several months working with the City of Mesa ("the City") to obtain design and development approvals for construction of the store. As designed and ultimately approved by the City, the tire store was to be situated thirty feet south of the northern boundary line of the Property.
¶4 Infinity became aware of the proposed sale and construction, and concluded that, if the construction followed the building plans submitted to and approved by the City, it would violate the 45-foot Setback Provision. Infinity voiced its concerns and objection to both the seller of the commercial lot and STR Fund, but escrow closed and STR Fund acquired title to Lot 4 in June 2013.
¶5 Although Infinity maintained the CC&Rs continued to be effective, STR Fund contested their enforceability, maintaining in part they had been abandoned. In June and July 2013, Infinity and STR Fund attempted to negotiate a resolution to their differences regarding the Setback Provision. During the week of July 29, 2013, however, STR Fund commenced groundbreaking on Lot 4, ostensibly using the building plans previously approved by the City and contested by Infinity.
¶6 On August 1, 2013, Infinity sent a cease and desist demand letter to STR Fund, warning it to immediately stop any construction or Infinity would pursue any available remedies, including those enumerated under § 9.1 of the CC&Rs, seek an injunction, and apply for a temporary restraining order ("TRO"). STR Fund responded in part that it currently had no building within forty-five feet of the Property line and again challenged Infinity's ability to enforce the CC&Rs.
¶7 On August 2, 2013, Infinity filed a complaint, seeking an injunction, damages for breach of contract, and a declaratory judgment against STR Fund for its anticipated violation of the Setback Provision. Infinity also filed an application for a TRO. On August 5, 2013, the trial court issued a TRO prohibiting STR Fund from conducting any construction activity in violation of the Setback Provision. A return hearing on the TRO was set for August 9, 2013.
¶8 The afternoon before the return TRO hearing, STR Fund filed a sworn declaration of one of its members, Todd A. Sergi, who asserted STR Fund had not violated the Setback Provision of the CC&Rs and avowed that, despite the approved building plans, STR Fund would not construct the tire store in violation of that provision while the CC&Rs were "still in legal effect." Sergi further asserted STR Fund's belief that the CC&Rs "have been abandoned and/or waived" and reserved the right to challenge their validity and enforceability in a future declaratory action.
We note the CC&Rs contain a non-waiver provision. Under § 9.4 of the CC&Rs, the failure to enforce any requirement, restriction, or standard contained in the CC&Rs "shall in no event be deemed to be a waiver of the right to do so thereafter or in other cases, nor of the right to enforce any other restriction." Typically, CC&R provisions remain enforceable under a non-waiver provision unless "a complete abandonment of the entire set of Restrictions has occurred." Burke v. Voicestream Wireless Corp. II, 207 Ariz. 393, 399, ¶ 26, 87 P.3d 81, 87 (App. 2004).
¶9 At the August 9 hearing, after considering STR Fund's declaration and the representations of its attorney in open court that STR Fund was no longer challenging the CC&Rs and would not build in violation of the Setback Provision without first seeking a declaratory judgment, the trial court determined there was no longer a viable claim and dismissed the case, without prejudice to either side requesting attorneys' fees. The court ordered the parties to brief "the issue of entitlement, explaining why attorneys' fees are appropriate in this instance."
¶10 Infinity applied for costs in the amount of $804.50 and attorneys' fees in the amount of $26,947.50 under § 9.3 of the CC&Rs and Arizona Revised Statutes ("A.R.S.") section 12-341.01, arguing that fees were mandated because Infinity had prevailed in a contested action. STR Fund also filed an application for attorneys' fees, arguing in part the CC&Rs had been abandoned and therefore no legal support existed for an attorneys' fees award, but further arguing that, if the court disagreed with STR Fund on the viability of the CC&Rs, the court should award attorneys' fees to STR Fund as the prevailing party because no case or controversy existed and Infinity's claims had been dismissed. STR Fund maintained there was nothing "wrongful or improper about beginning construction prior to reaching a resolution," and at the time the TRO and complaint were filed, STR Fund "had done nothing wrong." (Emphasis omitted.) STR Fund also maintained Infinity should be precluded from an award of attorneys' fees because Infinity had failed to comply with § 9.1 of the CC&Rs by not waiting at least thirty days before filing its lawsuit.
Section 9.3 provides as follows:
9.3 Attorneys' Fees. In any legal or equitable proceeding for the enforcement of the provisions of this Declaration, whether for damages, declaratory or injunctive relief, or any other action, the losing party or parties shall pay all costs and fees involved, including without limitation the reasonable attorneys' fees of the prevailing party or parties and all other expenses of the proceeding, in such amount as shall be fixed by the court and not by the jury. The prevailing party shall be entitled to all costs and fees, including without limitation reasonable attorney's fees, even though the proceeding is settled prior to judgment.
We cite the current version of all applicable statutes unless changes material to our decision have occurred since the relevant date(s) forming the basis for the cause of action.
¶11 After considering the applications for attorneys' fees and the parties' responses, the trial court denied both parties' applications, ruling in pertinent part as follows:
The record establishes that [STR Fund] conducted themselves in ways that made this a contested action and, in any event, in ways that warrant denial of their application. The record fails to establish that [Infinity's] request for an award of attorney's fees in excess of $25,000.00 is reasonable in the circumstances.The court awarded costs to Infinity in the amount of $449.00.
¶12 This court has jurisdiction over Infinity's timely appeal pursuant to A.R.S. § 12-2101(A)(1).
ANALYSIS
¶13 Infinity argues the trial court erred in denying its application for attorneys' fees under § 9.3 of the CC&Rs and A.R.S. § 12-341.01.
¶14 We review for an abuse of discretion a trial court's ruling on a request for attorneys' fees, but review de novo issues of law, including contract interpretation. Charles I. Friedman, P.C. v. Microsoft Corp., 213 Ariz. 344, 350, ¶ 17, 141 P.3d 824, 830 (App. 2006).
¶15 The parties dispute whether this was a contested action, and STR Fund argues that, before filing suit, Infinity did not adhere to the prior notice provisions in § 9.1 of the CC&Rs. Although § 9.1 provides for prior notice to persons violating provisions of the CC&Rs, that section also contains a non-limitation provision, which allows a plaintiff to pursue legal and equitable remedies beyond those specifically enumerated. Moreover, Infinity provided STR Fund with notice Infinity would seek to enforce the Setback Provision before STR Fund ever completed the purchase of Lot 4. And by commencing construction without either a building plan that complied with the Setback Provision or a prior resolution with Infinity, STR Fund bore the risk that Infinity would seek to enforce the CC&Rs through court action, see Burke, 207 Ariz. at 400, ¶ 33, 87 P.3d at 88, and the trial court implicitly found Infinity was entitled to bring this action, concluding STR Fund "conducted themselves in ways that made this a contested action." This was a contested action that was dismissed only after STR Fund's ultimate concession that it would comply with the CC&Rs, resulting in a judicial determination that there was no longer a controversy. See Vicari v. Lake Havasu City, 222 Ariz. 218, 224-25, ¶¶ 26-27, 213 P.3d 367, 373-74 (App. 2009).
¶16 The parties also dispute whether Infinity was the prevailing party. The trial court, however, awarded costs to Infinity, indicating the court found Infinity to be the prevailing, or "successful," party. See A.R.S. § 12-341; Motzer v. Escalante, 228 Ariz. 295, 296-97, ¶ 7, 265 P.3d 1094, 1095-96 (App. 2011); see also Fulton Homes Corp. v. BBP Concrete, 214 Ariz. 566, 572, ¶¶ 23-24, 155 P.3d 1090, 1096 (App. 2007) (recognizing adjudication on the merits is not a prerequisite to recovering fees in a contract dispute). Further, Infinity obtained its principal objective, a result "equal to or more favorable" than what it had requested, A.R.S. § 12-341.01, after STR Fund withdrew from positions it had asserted in order to end the litigation. Because a reasonable basis exists for the trial court's implicit determination of a prevailing party, we defer to the trial court. See Murphy Farrell Dev., LLLP v. Sourant, 229 Ariz. 124, 133, ¶ 31, 272 P.3d 355, 364 (App. 2012).
¶17 Section 9.3 of the CC&Rs mandates that reasonable attorneys' fees be awarded to the prevailing party "[i]n any legal or equitable proceeding for the enforcement of the provisions of" the CC&Rs, even if the proceeding settles before judgment. In general, courts enforce contractual fee provisions according to their terms. Geller v. Lesk, 230 Ariz. 624, 627, ¶ 10, 285 P.3d 972, 975 (App. 2012). For purposes of this action, STR Fund withdrew its position that the CC&Rs could not be applied in its declaration and at the return hearing. Moreover, the attorneys' fees provision in § 9.3 is not conditioned on compliance with the preliminary notice provisions contained in § 9.1 of the CC&Rs.
¶18 Given the provision for reasonable attorneys' fees contained in § 9.3 of the CC&Rs, the trial court abused its discretion in wholly denying Infinity's attorneys' fees request. See id.; McDowell Mountain Ranch Cmty. Ass'n v. Simons, 216 Ariz. 266, 269, ¶ 14, 165 P.3d 667, 670 (App. 2007); Heritage Heights Home Owners Ass'n v. Esser, 115 Ariz. 330, 333-34, 565 P.2d 207, 210-11 (App. 1977). Instead, the trial court should have determined and awarded an amount of fees that was reasonable under the circumstances. See Geller, 230 Ariz. at 628, ¶ 10, 285 P.3d at 976; McDowell Mountain Ranch, 216 Ariz. at 270, ¶ 16, 165 P.3d at 671. Accordingly, we reverse the trial court's denial of attorneys' fees and remand for consideration of Infinity's application.
¶19 Of course, the trial court retains broad discretion to limit any such award to a reasonable level, may consider the abbreviated nature of the proceedings engaged in by the parties, and is not required to simply accept Infinity's affidavits and invoices as conclusive proof of reasonableness. See McDowell Mountain Ranch, 216 Ariz. at 270, ¶¶ 16-17, 165 P.3d at 671; Chase Bank of Ariz. v. Acosta, 179 Ariz. 563, 574-75, 880 P.2d 1109, 1120-21 (App. 1994). Further, because the trial court previously limited the parties' briefing to the issue of entitlement, STR Fund should be afforded the opportunity to assert specific objections challenging the reasonableness of Infinity's attorneys' fees request. See Nolan v. Starlight Pines Homeowners Ass'n, 216 Ariz. 482, 490-91, ¶ 38, 167 P.3d 1277, 1285-86 (App. 2007).
Because we remand for the trial court to determine reasonable attorneys' fees under § 9.3 of the CC&Rs, we need not and do not address the parties' arguments regarding A.R.S. § 12-341.01.
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¶20 Both sides request an award of attorneys' fees on appeal pursuant to A.R.S. § 12-341.01, and Infinity also cites § 9.3 of the CC&Rs. STR Fund is not the successful party on appeal, and we deny its request. Pursuant to § 9.3 of the CC&Rs, Infinity is entitled to reasonable attorneys' fees on appeal. Therefore, upon compliance with Rule 21, ARCAP, we award Infinity its taxable costs on appeal, as well as reasonable attorneys' fees as determined by this court.
CONCLUSION
¶21 We reverse that portion of the trial court's order denying attorneys' fees to Infinity and remand for the court to exercise its broad discretion in determining a reasonable attorneys' fees award.