Court Opinion

ID: 4908670
Source: CourtListenerOpinion
Date Created: 2021-09-07 15:04:22.052006+00
Date Added: 2024-06-11T08:13:16.918804
License: Public Domain

IN THE
             ARIZONA COURT OF APPEALS
                             DIVISION ONE

                     RAY AND LINDSAY - 11, LLC,
                          Plaintiff/Appellant,

                                    v.

                          TOWN OF GILBERT,
                           Defendant/Appellee.

                          No. 1 CA-CV 20-0443
                            FILED 9-7-2021

          Appeal from the Superior Court in Maricopa County
                         No. CV2018-011285
                The Honorable Pamela S. Gates, Judge

                                 AFFIRMED

                                 COUNSEL

Berry Riddell, LLC, Scottsdale
By Jeffrey D. Gross, Michael W. Zimmerman
Counsel for Plaintiff/Appellant

Gust Rosenfeld, PLC, Phoenix
By Charles W. Wirken
Counsel for Defendant/Appellee
                    RAY AND LINDSAY v. GILBERT
                         Opinion of the Court

                                OPINION

Judge David D. Weinzweig delivered the opinion of the Court, in which
Presiding Judge David B. Gass and Judge Michael J. Brown joined.

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

¶1           In 2016, Ray and Lindsay, LLC (“RL”) acquired vacant land
on the corner of Ray and Lindsay Roads. Eleven years earlier, in 2005, the
prior owner of the land had entered a development reimbursement
agreement with the Town of Gilbert under A.R.S. § 9-500.05, which
expressly bound all successors and ran with the land. Under the agreement,
the Town promised to construct certain public improvements required for
a proposed development of the land, the landowner promised to reimburse
the Town for a proportionate share of the resulting costs, and the Town
would receive a lien on the land to ensure payment.

¶2            RL later insisted it need not reimburse the Town and sued for
a declaratory judgment recognizing that the development reimbursement
agreement was an assessment, which had abated under A.R.S. § 9-243(C),
and the Town must remove its lien. Recognizing the distinct statutory basis
of these municipal development tools, the superior court held the
development agreement was not an assessment and dismissed the lawsuit.
We affirm because development agreements are authorized and governed
by A.R.S. § 9-500.05, and not circumscribed as assessments under A.R.S. §
9-243.

             FACTS AND PROCEDURAL BACKGROUND

¶3           Because the superior court granted a motion to dismiss on the
pleadings under Arizona Rule of Civil Procedure 12(c), we accept and thus
recount the well-pleaded “allegations of the complaint as true.” Muscat by
Berman v. Creative Innervisions LLC, 244 Ariz. 194, 197, ¶ 7 (App. 2017).

                       2005 Development Agreement

¶4          Greater Phoenix Income Properties (“GPI”) owned and
intended to develop a vacant parcel (“Property”) in the Town. GPI
understood the development would require construction of “certain
improvements,” including streets and sidewalks.

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                    RAY AND LINDSAY v. GILBERT
                         Opinion of the Court

¶5            GPI and the Town entered into a development
reimbursement agreement (“Agreement”) in April 2005. The Agreement
expressly bound all successors and was recorded to notify prospective
purchasers of its obligations. The Town promised “to construct” certain
improvements for the Property, and GPI promised to reimburse the Town
for nearly $760,000 towards roadway improvements, design fees,
construction management fees, irrigation costs and power costs. According
to the Agreement, the Town would not record “the final plat for any portion
of the Property and [would] withhold[] permits and municipal services to
the Property until the funds [were] fully received.” A lien was recorded on
the Property to ensure payment, which the Town promised to release once
paid.

¶6            The Town approved the Agreement by resolution, citing
A.R.S. § 9-500.05 for its power to enter “development agreements relating
to the development of property in the Town,” and seek reimbursement of
construction costs for public infrastructure and streets.

                RL Acquires the Property and Sues the Town

¶7             RL purchased the Property from GPI in December 2016.
Around 13 months later, RL demanded the Town release the lien. It argued
the Agreement’s reimbursement obligation was an assessment that abated
under A.R.S. § 9-243(C) because the Property was not “developed within
ten years of the assessment.” The Town refused to release the lien. RL then
sued the Town for a declaratory judgment establishing that the
reimbursement obligation had abated and the lien had expired.

¶8            The superior court granted the Town’s motion for judgment
on the pleadings, holding “[t]he agreement for reimbursement in this case
was not an assessment under A.R.S. § 9-243,” but “was an agreement for
reimbursement under A.R.S. § 9-500.05,” to which the abatement
limitations on assessments did not apply. The court also awarded attorney
fees to the Town. RL timely appeals. We have jurisdiction. See A.R.S. § 12-
2101(A)(1).

                             DISCUSSION

¶9             We review de novo an order granting judgment on the
pleadings and will affirm if the order is correct for any reason. Muscat by
Berman, 244 Ariz. at 197, ¶ 7. We also interpret statutes de novo. Duff v.
Lee, 250 Ariz. 135, 138, ¶ 11 (2020).

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                     RAY AND LINDSAY v. GILBERT
                          Opinion of the Court

       I.     Assessments and Development Agreements

¶10          Although the reimbursement requirement here was in a
development agreement authorized by § 9-500.05, RL argues it was an
involuntary assessment under § 9-243. As a result, we begin by describing
and comparing assessments and development agreements.

                                Assessments

¶11            An assessment under § 9-243 is a targeted mechanism for
Arizona towns to finance public improvements by shifting the construction
costs for streets and sidewalks from public coffers to the local businesses
and landowners that benefit from the improvements. See A.R.S. § 9-243(B)
(“If the council determines that such streets are necessary before the
development of the property, the council may order these improvements to
be constructed by the town at its expense and the expense shall be assessed
against the property.”); A.R.S. § 9-243(A) (sidewalk construction).

¶12            These assessments are compulsory and do not require the
assent of a business or landowner. See A.R.S. § 9-243(A), (B). The legislature
imposed various limitations on the assessment power, including a limited
shelf life to protect businesses and landowners from having to pay for
streets and sidewalks they never need or use: “Any assessment under this
section shall abate if the property has not been developed within ten years
of the assessment.” A.R.S. § 9-243(C). And the legislature established a
mechanism for businesses and landowners to appeal the assessments to the
superior court. See A.R.S. § 9-243(D) (“The determination of necessity by
the council resulting in the assessing of property under this section may be
appealed by any aggrieved party to the superior court.”).

                          Development Agreements

¶13           By contrast, a development agreement under § 9-500.05 is a
contract between a developer and local government. “By authorizing cities
and towns to enter development agreements, the legislature expanded the
land-use toolbox of local governments to attract large investments from
developers who demand more certainty and less risk—sheltering the
developers from oscillating public preference and unpredictable political
winds.” Town of Florence v. Florence Copper Inc., __ Ariz. __, 2021 WL 1099043
at *4 (Ariz. App. Mar. 23, 2021). As relevant here, Arizona cities and towns
may negotiate and enter broad development agreements on the
“[c]onditions, terms, restrictions and requirements for public infrastructure
and the financing of public infrastructure and subsequent reimbursements
over time.” A.R.S. § 9-500.05(H)(1)(g).

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                      RAY AND LINDSAY v. GILBERT
                           Opinion of the Court

¶14          Unlike an assessment, mutual assent is needed to enter and
amend a development agreement. See A.R.S. § 9-500.05. And unlike an
assessment, the legislature did not limit the permissible duration of
development agreements; the burdens and benefits of development
agreements inure to “successors in interest and assigns,” and they cannot
be terminated without mutual assent. A.R.S. § 9-500.05(A), (C), (D).

       II.    Abatement

¶15          Returning     here,   RL    contends     the development
reimbursement agreement was really an assessment under § 9-243. And
because the Property had “not been developed within ten years of the
assessment,” RL contends the reimbursement obligation abated in 2015
under § 9-243(C), before RL even acquired the Property.

¶16           Our primary goal when interpreting a statute is to discern and
accomplish the legislature’s intent, J.D. v. Hegyi, 236 Ariz. 39, 40, ¶ 6 (2014),
which is best expressed by the statute’s plain language, Premier Physicians
Grp., PLLC v. Navarro, 240 Ariz. 193, 195, ¶ 9 (2016). Arizona towns cannot
exceed or extend their powers beyond those granted by the legislature.
Florence Copper, 2021 WL 1099043 at *4.

¶17           RL’s argument fails under the plain language of the statutes
governing assessments and development agreements. First, the legislature
expressly limited the abatement restriction in § 9-243(C) to “any assessment
under this section.”     A.R.S. § 9-243(C) (emphasis supplied).            But
development agreements are covered in a different section—§ 9-500.05. At
a minimum, if the legislature intended abatement to apply to development
agreements, it could and would have stated that it applies to all
reimbursement obligations “under this title.” State ex rel. Fox v. New Phoenix
Auto Auction, Ltd., 185 Ariz. 302, 308 (App. 1996) (citing A.R.S. § 1-213)
(recognizing the importance of “the legislature express[ing] itself using its
own technical terms,” like “section”).

¶18           Second, the Town neither “require[d]” nor “order[ed]” GPI
and RL to reimburse the construction costs and described under § 9-243(A)
and (B). Instead, the Town and GPI voluntarily negotiated and mutually
agreed to the reimbursement requirement as a “condition[], term[],
restriction[] [or] requirement for public infrastructure” under § 9-
500.05(H)(1)(g). And RL does not allege the development agreement is void
or voidable as the product of duress or otherwise.

¶19           Third, unlike a time-limited assessment under § 9-243(C), the
legislature recognized that parties to a development agreement may agree

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                     RAY AND LINDSAY v. GILBERT
                          Opinion of the Court

on “[t]he duration of the development agreement.”                 A.R.S. § 9-
500.05(H)(1)(a).

¶20            RL counters that our supreme court “held A.R.S. § 9-500.05
does not give cities unfettered authority to enter into ‘voluntary’
agreements free from other statutory limitations,” citing Achen-Gardener,
Inc. v. Superior Court, 173 Ariz. 48 (1992). RL’s reliance on Achen-Gardener is
misplaced. There, our supreme court held the City of Chandler must
comply with competitive bidding laws when constructing public
improvements described in a development agreement because the
improvements fell “within the scope of the competitive bidding laws.” Id.
at 52 (state procurement laws protect taxpayers against “favoritism, fraud
and corruption”). Here, the development reimbursement agreement is not
governed by the assessment laws because it is not an assessment under
A.R.S. § 9-243.

¶21        Because the reimbursement agreement was a development
agreement under § 9-500.05, and not an assessment under § 9-243, we
affirm.

       III.   Attorney Fees

¶22          RL also contends the superior court lacked authority to award
the Town its attorney fees under A.R.S. § 12-341.01, which we review de
novo. Bennett Blum, M.D., Inc. v. Cowan, 235 Ariz. 204, 205, ¶ 5 (App. 2014).

¶23           The superior court has discretion under A.R.S. § 12-341.01(A)
to award reasonable attorney fees to the successful party in a “contested
action arising out of a contract.” The development agreement is a contract
and the Town prevailed in a lawsuit arising from that contract. See Florence
Copper, 2021 WL 1099043 at *6. Beyond that, the Agreement itself provided
that “the prevailing party shall be awarded his reasonable attorney[] fees
and costs and collection costs incurred” if required to litigate. That
provision is enforceable. Bennett Blum, 235 Ariz. at 206, ¶ 8 (quoting
McDowell Mountain Ranch Cmty. Ass’n v. Simons, 216 Ariz. 266, 269, ¶ 14
(App. 2007)). Finding no error, we affirm.

¶24          Both parties seek their attorney fees on appeal under A.R.S. §
12-341.01. The Town also requests fees under the Agreement. We award
the Town, as the prevailing party, its reasonable attorney fees upon
compliance with ARCAP 21 and deny RL’s request.

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            RAY AND LINDSAY v. GILBERT
                 Opinion of the Court

                       CONCLUSION

¶25   We affirm.

                   AMY M. WOOD • Clerk of the Court
                   FILED: AA

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