Pawn 1st, LLC v. City of Phx.

399 P.3d 94

PAWN 1ST, LLC, an Arizona limited liability company, Plaintiff/Appellant,

v.CITY OF PHOENIX, a political subdivision of the State of Arizona; Board of Adjustment of the City of Phoenix; and Bob Ford ; Emilio Gaynor; Patrick Paul ; Alex Tauber; Yvonne Hunter; Bettina Nava; and Emily Ryan, as members of and constituting the Board of Adjustment of the City of Phoenix, Defendants/Appellees,William Jachimek dba Central Pawn, Real Party in Interest/Appellee.

No. CV-16-0107-PR

Supreme Court of Arizona.

Filed August 10, 2017

Thomas M. Baker, Baker & Baker, Phoenix, Attorney for Pawn 1st, LLC

Brad Holm, Phoenix City Attorney, Les S. Tuskai (argued), Paul Li, Assistant City Attorneys, Phoenix, Attorneys for City of Phoenix, Board of Adjustment of the City of Phoenix, Bob Ford, Emilio Gaynor, Patrick Paul, Alex Tauber, Yvonne Hunter, Bettina Nava and Emily Ryan

Claudio E. Iannitelli, John C. Marcolini (argued), Cheifetz Iannitelli Marcolini, P.C., Phoenix, Attorneys for William Jachimek dba Central Pawn

Nicholas J. Wood, Adam E. Lang, Brianna L. Long, Snell & Wilmer, L.L.P., Phoenix, Attorneys for Amicus Curiae American Planning Association, Arizona Chapter

JUSTICE LOPEZ authored the opinion of the Court, in which CHIEF JUSTICE BALES, VICE CHIEF JUSTICE PELANDER, and JUSTICES BRUTINEL, TIMMER, BOLICK, and GOULD joined.

JUSTICE LOPEZ, opinion of the Court:

¶ 1 This case concerns the standards a municipal zoning board applies in considering an application for a zoning variance. We hold that to obtain an area variance, an applicant must show that strictly applying a zoning ordinance will cause "peculiar and exceptional practical difficulties" that deprive a property of privileges enjoyed by other similarly zoned properties. We also clarify that the applicant's desire to use the property for purposes allowed on other similarly zoned properties does not in itself constitute a self-imposed special circumstance justifying denial of an area variance.

BACKGROUND

¶ 2 The dispute here concerns the City of Phoenix Board of Adjustment's (the "Board") grant of a variance on a parcel of land (the "Property") at the southwest corner of McDowell Road and 32nd Street in Phoenix. The area in which the Property sits is zoned as a "Commercial C–3 District—General Commercial." Such districts have 141 specific permitted uses plus all uses permitted in properties zoned C–1 and C–2, and several residential uses. C–3 districts are designed to provide areas for "intensive commercial uses." Phx., Ariz., Zoning Ordinance § 624(A) (hereinafter "Ordinance").

¶ 3 The Property boasts a conspicuous history. For many decades, it was home to an "adult theatre" operated under various names. In 1973, the City of Phoenix completed an eminent domain action that altered the Property's dimensions and resulted in several unique characteristics, all of which limited its commercial viability. First, the action reduced the Property to only 12,000 square feet, smaller than any of the twelve surrounding C–3–zoned corner parcels. Second, it eliminated the frontage area around the building on the Property, resulting in its direct abutment of a public sidewalk. Third, it restricted parking spaces.

¶ 4 In January 2010, the Property's owners evicted their tenants, discontinued the Property's use as an adult theatre (a non-conforming use), and leased the Property to William Jachimek, doing business as Central Pawn, with an option to purchase. When Jachimek entered the lease, he intended to operate a pawn shop. A pawn shop is a permitted use in a C–2–zoned parcel, provided the building's exterior walls are at least 500 feet from a residential district and the owner obtains a use permit from the zoning administrator. Jachimek applied for both a use permit for his pawn business and, because the Property is within 500 feet of a residential district, a variance from the 500–foot residential setback requirement.

¶ 5 After the zoning administration hearing officer denied his applications, Jachimek appealed to the Board. At the Board hearing, Pawn 1st, LLC ("Pawn"), a competing pawn shop, opposed the variance. The Board conditionally approved the variance, requiring Jachimek to operate the pawn shop only during specified hours, to not buy or sell guns or pornography, and to apply for building permits for a promised remodel of the building within one year. The Board's minutes from its July 1, 2010 meeting memorialize its findings:

[S]pecial circumstances ... appl[y] to the land, namely the unique nature of the discontinuance of the non-conforming use on the property [the adult theatre use], the fact that it was substantially impacted by prior [eminent] domain activities in a manner that was dissimilar to other properties in a reasonably close radius, including setbacks, and the fact that there [is] less than 12,000 total square feet available and there [are] restrictive parking requirements, that these special circumstances were not created by the owner or applicant, and were rather created in part by growth in the city itself, that it was necessary for the preservation and enjoyment of substantial property rights given the restrictions and the property and current dormancy of any other business on the site, this particular place on the site, that authorizing it would not be materially detrimental to persons residing or working in the vicinity, to adjacent property, the neighborhood or public welfare in general.

¶ 6 After the Board rejected a reconsideration motion, Pawn filed a special action in superior court challenging the Board's variance decision. The superior court ruled in Jachimek's favor, finding that Pawn lacked standing to challenge the Board's decision. The court of appeals reversed, finding that Pawn had standing. Pawn 1st, LLC v. City of Phoenix , 231 Ariz. 309, 294 P.3d 147 (App. 2013) ( Pawn I ). On remand, the superior court ruled in Jachimek's favor and dismissed Pawn's complaint, finding that the variance was an area variance and not a use variance; that the Board's decision to grant Jachimek's area variance was not ultra vires because the Board is authorized to consider area variances; and that sufficient evidence supported the Board's variance decision.

¶ 7 The court of appeals again reversed. Pawn 1st, LLC v. City of Phoenix , 239 Ariz. 539, 545 ¶ 28, 373 P.3d 556 (App. 2016) ( Pawn II ). It agreed with the superior court that Jachimek sought an area variance because a pawn shop is an allowed use within a C–3 zoning district, irrespective of the 500–foot distance requirement. Id. at 542 ¶ 11, 373 P.3d 556. But it disagreed that the Board acted within its authority and therefore remanded for entry of a judgment declaring the area variance invalid. Id. at 545 ¶ 28, 373 P.3d 556.

¶ 8 We granted review because the standards a municipal zoning boards of adjustment must apply when considering an application for a zoning variance present recurring issues of statewide importance. We have jurisdiction pursuant to article 6, section 5(3), of the Arizona Constitution and A.R.S. § 12–120.24.

DISCUSSION

¶ 9 We review issues of statutory interpretation de novo, Baker v. Univ. Physicians Healthcare , 231 Ariz. 379, 387 ¶ 30, 296 P.3d 42, 50 (2013), and we presume the validity of the Board's determination unless it is "against the weight of the evidence, unreasonable, erroneous, or illegal as a matter of law." Mueller v. City of Phoenix ex rel. Phoenix Bd. of Adjustment II , 102 Ariz. 575, 581, 435 P.2d 472, 478 (1967) ; see also A.R.S. § 12–910(E) ("The court shall affirm the agency action unless ... the court concludes that the action is not supported by substantial evidence, is contrary to law, is arbitrary and capricious or is an abuse of discretion.").

I. Zoning Boards of Adjustment

¶ 10 Arizona law authorizes cities and towns to establish boards of adjustment by ordinance. A.R.S. § 9–462.06(A). The boards decide appeals from zoning administrators' decisions concerning zoning ordinance enforcement. A.R.S. § 9–462.06(G)(1). Primarily, the boards determine whether "special circumstances" exist to relieve owners of property with unique characteristics from strict application of zoning laws. See A.R.S. § 9–462.06(G)(2).

¶ 11 The boards' authority to modify zoning decisions is statutorily limited. Boards of adjustment may not: (1) change the uses permitted in a zoning district; or (2) "[g]rant a variance if the special circumstances applicable to the property are self-imposed by the property owner." A.R.S. § 9–462.06(H) ; cf. Arkules v. Bd. of Adjustment of Paradise Valley , 151 Ariz. 438, 440, 728 P.2d 657 (App. 1986) (holding that a board has "no powers except those granted by the statutes creating it," and "its power is restricted to that granted by the zoning ordinance in accordance with the statute"). Consequently, a board's grant of a variance in excess of its statutory authority is ultra vires and invalid as a matter of law. Arkules , 151 Ariz. at 440, 728 P.2d 657.

II. The Phoenix Zoning Ordinance

¶ 12 Consistent with § 9–462.06, the Phoenix Zoning Ordinance authorizes a zoning administrator to issue a variance when "a literal enforcement of any provisions of the [O]rdinance would result in unnecessary property hardship." Ordinance § 307(A)(9). A variance, however, is authorized only if the applicant can establish that (a) special circumstances apply to the land, building, or use referenced in the application which do not apply to other district properties; (b) the owner did not create the special circumstances; (c) the variance is necessary for the "preservation and enjoyment of substantial property rights"; and (d) the variance will not be materially detrimental to the area. Ordinance § 307(9)(a)–(d).

¶ 13 If a zoning administrator denies a variance, an applicant may appeal to the Board, but the Board's authority to modify a zoning decision is limited in that it may not (a) change the uses permitted in a zoning classification or district; or (b) grant a variance if the...