Heritage Vill. II Homeowners Ass'n v. Weinberg

HERITAGE VILLAGE II HOMEOWNERS ASSOCIATION, Plaintiff/Appellee, v. RICHARD WEINBERG, et al., Defendants/Appellees.

No. 1 CA-CV 20-0637

Court of Appeals of Arizona, First Division

October 26, 2021

Not for Publication - Rule 111(c), Rules of the Arizona Supreme Court

Appeal from the Superior Court in Maricopa County No. CV2014-009229 The Honorable M. Scott McCoy, Judge.

Dickinson Wright, PLLC, Phoenix By Scott A. Holcomb, Emily Jeffries Counsel for Plaintiff/Appellee

Taylor Young Appeals, PLLC, Phoenix By Taylor C. Young Counsel for Defendants/Appellees

Fennemore Craig, PC, Phoenix By Douglas C. Northup, Emily Ayn Ward, Taylor N. Burgoon Counsel for Intervenors/Appellants

Judge James B. Morse Jr. delivered the decision of the Court, in which Presiding Judge D. Steven Williams and Judge David B Gass joined.

MEMORANDUM DECISION

MORSE JUDGE.

¶1 John Norman and Gerry Molotsky (together, "Intervenors") appeal the dismissal of their suit against Richard and Laine Weinberg for alleged violations of Heritage Village II's Amended and Restated Declaration of Covenants, Conditions & Restrictions ("CC&Rs"). For the following reasons, we affirm the dismissal, but vacate and remand the award of attorneys' fees.

FACTS AND PROCEDURAL BACKGROUND

¶2 The Weinbergs own a home located in Heritage Village II ("Heritage"), which is part of the McCormick Ranch master-planned community in Scottsdale. Beginning in 2013, the Weinbergs undertook to replace their home with a larger dwelling. In July 2014, Heritage sued the Weinbergs, alleging the changes to their lot violated the CC&Rs. The superior court concluded the Weinbergs had violated the CC&Rs, granted declaratory relief, and ordered the Weinbergs to take specific remedial measures to bring their home into compliance.

¶3 Months later, the superior court noted that the parties remained unable to agree on necessary modifications for the Weinbergs' home to comply with the CC&Rs. Meanwhile, the membership on Heritage's Board of Directors (the "Board") changed and the Board debated whether to continue the litigation. In July 2017, the Board voted to settle with the Weinbergs.

¶4 Intervenors are homeowners and members of Heritage. Before Heritage and the Weinbergs filed their notice of settlement, Intervenors filed an emergency motion to intervene. Heritage and the Weinbergs opposed Intervenors' motion. The superior court denied the motion and awarded Heritage and the Weinbergs attorneys' fees. Intervenors appealed. This Court reversed the superior court's ruling on the motion to intervene, vacated the attorneys' fees award, and denied the Weinbergs' and Heritage's requests for fees and costs on appeal. Heritage Vill. II Homeowners Ass'n v. Norman ("Heritage I "), 246 Ariz. 567, 573, ¶ 26 (App. 2019).

¶5 After the appeal, Intervenors filed a complaint in intervention, naming only the Weinbergs as defendants. The Weinbergs filed a motion to dismiss for failure to state a claim, which Heritage joined. The superior court granted the motion and awarded Heritage and the Weinbergs attorneys' fees. Intervenors timely appealed, and we have jurisdiction under A.R.S. § 12-2101(A)(1).

DISCUSSION

¶6 We review a dismissal for failure to state a claim de novo. Coleman v. City of Mesa, 230 Ariz. 352, 355, ¶ 7 (2012). Dismissal for failure to state a claim is appropriate if "as a matter of law . . . plaintiffs would not be entitled to relief under any interpretation of the facts susceptible of proof." Fid. Sec Life Ins. Co. v. Ariz. Dep't of Ins., 191 Ariz. 222, 224, ¶ 4 (1998). In reviewing the dismissal, we "look only to the pleading itself" and "assume the truth of the well-pled factual allegations" contained within. Cullen v. Auto-Owners Ins. Co., 218 Ariz. 417, 419, ¶ 7 (2008). "However, we 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." Jeter v. Mayo Clinic Ariz., 211 Ariz. 386, 389, ¶ 4 (App. 2005).

I. Alleged CC&Rs Violations.

¶7 We consider on appeal whether Intervenors failed to state a claim that the Weinbergs are in violation of the CC&Rs. Covenants and deed restrictions constitute a contract between a subdivision's property owner and individual lot owners. Ariz. Biltmore Estates Ass'n v. Tezak, 177 Ariz. 447, 448 (1993). The interpretation of a contract is a matter of law that we review de novo. Id. ¶8 Pertinent here, Article III of the CC&Rs provides that "no addition, improvement, or any modification which alters the exterior appearance of the Lot, whether a building, fence, wall, or other structure shall be commenced, erected or maintained on any Lot until the plans . . . have been submitted to and approved in writing by the Architectural Committee, and the Board of Directors." The Board and Architectural Committee ("Committee") have discretion to approve or deny these requests. The Board and Committee can consider "the harmony and conformity of the building with the surrounding area and the effect of such structure or building as seen from adjacent or neighboring properties" and "deny approval of any plans or specifications which are not, in its opinion suitable or desirable for aesthetic or any other reasons."

¶9 The CC&Rs warn that "[a]ny exterior changes, modifications additions or deletions must have the approval of the Architectural Committee and Board of Directors or be subject to removal or change at the Owner's expense." In July 2017, the Board approved a settlement agreement with the Weinbergs. The settlement agreement required the Weinbergs to make changes to their home, pay for cosmetic modifications to the adjoining lot, and consent to various provisions. Upon completion of these requirements, the Weinbergs' lot would be "deemed in compliance" with the CC&Rs.

¶10 Intervenors argue that, despite the settlement agreement, the Weinbergs' home will not comply with the CC&Rs because: (1) the changes were not properly approved; and (2) the Board may not approve home modifications that are expressly prohibited by the CC&Rs.

A. Approval of the Weinbergs' Home.

¶11 The CC&Rs give the Board final approval of home modifications, providing that "[t]he Architectural Committee shall make its recommendations to the Board of Directors for final approval or disapproval." The Board voted and approved the settlement agreement. Upon compliance with the terms of the settlement agreement, the Weinbergs' lot would be "deemed in compliance" with the CC&Rs. The Weinbergs have complied with the settlement agreement. Therefore, the superior court properly found that the Board approved the Weinbergs' home and deemed it compliant with the CC&Rs.

B. The Weinbergs' Home Does Not Violate Article II Section 6(A) of the CC&Rs.

¶12 The Board has "the right and duty" to enforce the restrictions in the CC&Rs and does not have discretion to approve a violation of the CC&Rs. Thus, the Board's approval would be invalid if the Weinbergs' home violates the CC&Rs. See Gfeller v. Scottsdale Vista N. Townhomes Ass'n, 193 Ariz. 52, 54, ¶ 11 (App. 1998) ("[Whichever means [of enforcement] it chooses, the Association may not forsake its express duty to enforce the CC & Rs."). Intervenors allege the Weinbergs' home violates Article II Section 6(A) of the CC&Rs, ^[1] which states:

Except in the individual patio areas, no individual planting or gardening shall be done. No hedges or walls shall be erected or maintained upon said premises, except such as were installed in accordance with the original construction of the buildings. Any exterior changes, modifications additions or deletions must have the approval of the Architectural Committee and Board of Directors or be subject to removal or change at the Owner's expense.

¶13 This provision restricts individual planting or gardening outside individual patio areas as well as the erection or maintenance of hedges or walls that were not installed in accordance with the original construction of the buildings. The Weinbergs tore down the original building on their property and reconstructed their new home to be larger than the old structure. Because the rear perimeter wall of their new home is approximately one foot beyond the rear perimeter wall of the original building, Intervenors argue it is not "in accordance with the original construction" of the building.

¶14 We disagree that Section 6(A) of the CC&Rs provides the categorical prohibition urged by Intervenors. The "cardinal principle in construing restrictive covenants is that the intention of the parties to the instrument is paramount." Tezak, 177 Ariz. at 449. The intention of the parties is determined by construing the document as a whole. Newmont Expl. Ltd. v. Siskon Corp., 125 Ariz. 267, 269 (App. 1980). And "a covenant should not be read in such a way that defeats the plain and obvious meaning of the restriction." Tezak, 177 Ariz. at 449. Further, where provisions are conflicting, those "apparently conflicting provisions must be reconciled, if possible by any reasonable interpretation." Employer's Liab. Assur. Corp. v. Lunt, 82 Ariz. 320, 327 (1957); see also Gfeller, 193 Ariz. at 54, ¶ 13 ("We will, if possible, interpret a contract in such a way as to reconcile and give meaning to all of its terms, if reconciliation can be accomplished by any reasonable interpretation.").

¶15 Article II of the CC&Rs contains various use restrictions. The restrictions fall into two categories. Some restrictions provide that certain activities and actions are prohibited without exception. For example, Section 4 prohibits the display of "clotheslines, equipment service yards, [and] woodpiles" and does...