Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_08-cv-01508/USCOURTS-azd-2_08-cv-01508-1/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Breach of Contract

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WO

NOT FOR PUBLICATION

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Dillon Real Estate Co., Inc., a Kansas

corporation; and Smith Food & Drug

Centers, Inc., an Ohio corporation, 

Plaintiffs, 

vs.

American National Insurance Co., a Texas

corporation; and Dollar Tree Stores, Inc.,

a Virginia corporation, 

Defendants. 

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No. CV-08-01508-PHX-FJM

ORDER

Dillon Real Estate Co., Inc. (“Dillon”) and Smith Food & Drug Centers, Inc.

(“SFDC”) bring this action to enforce a restrictive covenant. We have before us defendant

Dollar Tree Stores, Inc.’s (“Dollar Tree”) motion for summary judgment and statement of

facts (docs. 79 & 80), defendant American National Insurance Co.’s (“ANICO”) response

(doc. 95), plaintiffs’ response and documents in support (docs. 96, 97, 98, 99 & 100), and

Dollar Tree’s reply (doc. 111). 

I

Dillon and ANICO are joint owners of the Heatherwood Plaza shopping center

(“shopping center”) in Glendale, Arizona, and are parties to a declaration creating a number

of restrictive covenants and easements that run with the land on which the shopping center

Case 2:08-cv-01508-FJM Document 125 Filed 07/17/09 Page 1 of 5
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1

The shopping center was originally owned by Dillon and W.M. Grace Development

Co. (“Developer”). ANICO is the successor to Developer’s interest, and all references in this

order to Developer apply to ANICO. 

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was built.1

 The declaration provides SFDC, which does business as Fry’s Food & Drug

Store, the exclusive right to operate a grocery store in the shopping center. Specifically, the

declaration provides that:

A prime inducement to Dillon for its purchase of the Dillon Parcel from

Developer was and is the representation by Developer that Fry’s will have the

exclusive right to operate a grocery supermarket in the Shopping Center.

Developer covenants and agrees that it shall not permit or suffer the use or

operation of any building in the Shopping Center, or any space therein, other

than the Fry’s Building, for the sale of groceries, package liquor, beer or wine,

(provided, however, that Developer or any tenant of Developer may, at its

option, sell or cause to be sold package liquor, beer or wine in a drug store

operated in the Shopping Center), or for convenience store, meat market,

supermarket or similar food purposes, or for a delicatessen or similar food

operation larger than 2,000 square feet in size.

DSOF, Ex. 3 § 1.4. 

Dollar Tree leases space in the shopping center from ANICO in which it operates a

store selling various merchandise, including snack and other food items. Plaintiffs allege that

Dollar Tree sells grocery items in violation of the restrictive covenant and seek compensatory

damages and injunctive relief. Dollar Tree moves for summary judgment on the grounds that

it does not have any obligations under section 1.4 of the declaration.

II

Dollar Tree argues that, as a tenant, it cannot be liable under section 1.4 of the

declaration because that section imposes a duty exclusively on ANICO. We agree. The clear

intent of section 1.4 is to prevent stores in the shopping center, other than SFDC, from selling

groceries. The issue before us, however, is who is liable under the words of section 1.4 – a

tenant, ANICO, or both. Section 1.4 expressly states that “Developer covenants and agrees

that it shall not permit or suffer the use or operation of any building in the Shopping Center,

or any space therein, other than the Fry’s Building, for the sale of groceries.” Id. The

unambiguous terms, therefore, state that responsibility falls to ANICO alone. See Duffy v.

Sunburst Farms E. Mut. Water & Agric. Co., 124 Ariz. 413, 416, 604 P.2d 1142, 1127 (1979)

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2

Plaintiffs’ argument regarding section 14.1 of the declaration fails for the same

reason. As discussed by our order on plaintiffs’ motion for judgment on the pleadings (doc.

37), section 14.1(a) states that the declaration applies to tenants “except as otherwise

expressly provided herein.” Because we have determined that section 1.4 expressly provides

that it only applies to ANICO, section 14.1 does not create liability for Dollar Tree under

section 1.4. We have not seen anything that changes our initial reading of this section. 

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(“The words themselves, within a restrictive covenant are the primary evidence of the

meaning of such words.”) (citation omitted). Plaintiffs make several arguments why this

provision should apply to Dollar Tree despite its express language, but none are availing. 

First, plaintiffs rely on the Restatement of Property for the proposition that a

restrictive covenant applies to all tenants “except as otherwise provided by the terms of the

servitude.” Restatement (Third) of Property § 5.2 (2000). While this is a correct statement

of the law, it does not help plaintiffs in this case. Section 1.4 explicitly provides that

“Developer covenants and agrees that it shall not permit or suffer” the sale of groceries by

tenants other than SFDC. If the parties intended this provision to apply equally to tenants,

they could have omitted the specific reference to Developer, or they could have added the

word “tenants.” However, the language used applies only to Developer, and we must give

effect to all terms in an agreement where possible. See Weatherguard Roofing Co., Inc. v.

D.R. Ward Constr. Co., Inc., 214 Ariz. 344, 350, 152 P.3d 1227, 1233 (Ct. App. 2001)

(citation omitted).2

 

Plaintiffs also argue that section 1.4 as a whole applies to Dollar Tree because the

provision allows “Developer or any tenant of Developer” to sell liquor, beer, or wine in a

drug store. The inclusion of tenants in the exception for the sale of alcohol does not,

however, support plaintiffs’ position. If tenants were not included in the exception, ANICO

would be allowed to sell alcohol, but would still be bound not to permit or suffer the sale of

alcohol by tenants. The inclusion of tenants to the exception was necessary, therefore, to

give it meaning, but does create liability for tenants under section 1.4. The express inclusion

of tenants in the alcohol exception also demonstrates that, in drafting section 1.4, the parties

were cognizant of the distinction between Developer and tenants. 

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Plaintiffs also contend that they are entitled to injunctive relief against Dollar Tree

under section 14.4 of the declaration. Section 14.4 provides that “[a]ny Owner may

prosecute any proceedings at law or in equity against any person or entity violating or

attempting to violate any of the agreements, covenants, conditions and restrictions herein.”

DSOF, Ex. 3 § 14.4. Under section 14.4, plaintiffs are entitled to bring an action for damages

or injunctive relief for any provision to which Dollar Tree is bound, but section 14.4 does not

by its terms expand the obligations created by other provisions of the agreement. Because

Dollar Tree is not bound by section 1.4, section 14.4 does not apply here.

Plaintiffs also argue that Dollar Tree’s course of performance indicates that it is bound

by section 1.4 of the declaration. They rely primarily on correspondence between Dennis

Barr, director of real estate for SFDC, and Alex Clark, ANICO’s broker and agent, in which

Barr made clear that SFDC expected that Dollar Tree would not sell groceries in accordance

with the declaration. Barr Declaration, Ex. A. First, there is no indication that Dollar Tree

ever received or was involved with these communications; they were made directly to

ANICO, not Dollar Tree. Second, if it did receive these communications, Dollar Tree never

indicated assent. Plaintiffs argue that Dollar Tree’s failure to contest Barr’s assertion

indicates acquiescence. This action is based, however, on allegations that Dollar Tree has

continuously sold groceries in violation of the declaration. Dollar Tree’s alleged course of

performance would indicate, if anything, that Dollar Tree did not believe itself bound by

section 1.4. 

Finally, plaintiffs argue that usage of trade creates a factual issue because it would not

make commercial sense for the shopping center’s owners to agree to restrict the sale of

groceries without applying that to tenants. We disagree. The effect of section 1.4 is that

tenants would be limited in what they could sell through their individual leases with the

owners of the plaza. The owners of the shopping center agreed not to permit their tenants

to sell groceries; they then have a responsibility not to lease space to tenants that will violate

the terms of the agreement. Individual liability for tenants is not necessary to give effect to

section 1.4. Plaintiffs have failed to show any genuine issue of material fact. 

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III

IT IS THEREFORE ORDERED GRANTING Dollar Tree’s motion for summary

judgment (doc. 79). 

DATED this 17th day of July, 2009.

Case 2:08-cv-01508-FJM Document 125 Filed 07/17/09 Page 5 of 5