Court Opinion

ID: 9894050
Source: CourtListenerOpinion
Date Created: 2023-10-31 16:04:26.596362+00
Date Added: 2024-06-11T09:05:12.736851
License: Public Domain

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  UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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.

                                     IN THE
              ARIZONA COURT OF APPEALS
                                 DIVISION ONE

                COLIN PRESTON, et al., Plaintiffs/Appellants,

                                         v.

 LAS SENDAS COMMUNITY ASSOCIATION, INC., Defendant/Appellee.

                              No. 1 CA-CV 22-0761
                                FILED 10-31-2023

            Appeal from the Superior Court in Maricopa County
                           No. CV2022-010280
                  The Honorable John R. Hannah, Judge

                                   AFFIRMED

                                    COUNSEL

Fowler St. Clair, PLLC, Scottsdale
By Brian Locker
Counsel for Plaintiffs/Appellants

Carpenter, Hazlewood, Delgado & Bolen, LLP, Tempe
By Curtis S. Ekmark
Counsel for Defendant/Appellee
                      PRESTON, et al. v. LAS SENDAS
                          Decision of the Court

                       MEMORANDUM DECISION

Presiding Judge D. Steven Williams delivered the Court’s decision, in
which Judge Samuel A. Thumma and Judge Paul J. McMurdie joined.

W I L L I A M S, Judge:

¶1             Plaintiff Colin Preston and several other property owners
(“the Plaintiffs”) appeal from the denial of their requests for injunctive relief
against the defendant, Las Sendas Community Association, Inc. (“the
HOA”). For the following reasons, we affirm.

            FACTUAL AND PROCEDURAL BACKGROUND

¶2           Las Sendas is a planned community with certain covenants,
conditions, and restrictions (“the CC&Rs”) enforced by the HOA. The
CC&Rs enumerate ten land use classifications, including, among others,
single family residential, apartment, condominium, common area, and
commercial. Each Plaintiff owns a single-family home in Las Sendas subject
to the CC&Rs.

¶3            In 2009, the HOA Board (“the Board”) adopted a rule barring
leases of fewer than six months duration (“the six-months rule”). See
CC&Rs, § 5.3 (“The Board may, from time to time, adopt, amend and repeal
rules and regulations pertaining to . . . restrictions on the use of Lots and
Parcels.”). Several years later, in 2014, the legislature enacted A.R.S.
§ 33-1806.01(A), which governs planned communities like Las Sendas and
expressly allows property owners to “use [their] property as [] rental
property unless prohibited” in the governing CC&Rs, so long as they abide
by the CC&Rs’ “rental time period restrictions.” 2014 Ariz. Sess. Laws, ch.
83, § 15.

¶4             Concerned that the statute might invalidate the six-months
rule, in July 2021, the Board announced a proposed amendment to prohibit
Las Sendas homeowners from both leasing their properties for 31 days or
less and advertising their properties as “vacation rentals” (“the short-term
rental amendment”). The HOA opened voting on the short-term rental
amendment in November 2021 and sent the Las Sendas property owners a
letter in June 2022 declaring that voters had approved the amendment with
more than 75% of owners’ support (2,604 of 3,090 votes approved the

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                     PRESTON, et al. v. LAS SENDAS
                         Decision of the Court

proposed amendment – 84.3%) - satisfying the amendment procedure
threshold in the CC&Rs. See CC&Rs, § 9.3.1 (“[T]he [CC&Rs] may only be
amended by the written approval or the affirmative vote, or any
combination thereof, of Owners representing not less than seventy-five
percent (75%) of the total votes in the Association.”).

¶5           The short-term rental amendment, as recorded in June 2022
and in relevant part, added the following language to the CC&Rs:

       No Residential Unit or Residential Lot may be used as a
       Timeshare, or leased, subleased, licensed, occupied for
       consideration, or advertised for lease for vacation rental,
       Timeshare, hotel, or any other transient purposes.

       ....

       No Residential Unit or Residential Lot may be leased,
       sub-leased, licensed, occupied for consideration, or
       advertised for lease for a term of less than thirty-one (31)
       consecutive days.

¶6              Shortly after the HOA recorded the short-term rental
amendment, the Plaintiffs filed this case against the HOA, alleging the
amendment “lessens, prejudices, and interferes with the value and
marketability” of their Las Sendas properties. Among other things, the
Plaintiffs sought an injunction “permanently enjoining” the HOA from: (1)
interfering with their “ability to solicit rentals of their property,” and (2)
imposing any penalty for a violation of the short-term rental amendment.
The Plaintiffs also requested a preliminary injunction “to protect [their]
right to continue to use and market their properties” during the litigation.
The Plaintiffs attached signed declarations to their preliminary-injunction
request, avowing that they purchased their Las Sendas properties before
the passage of the short-term rental amendment and “relied on the CC&Rs
in effect” at the time of their purchases “[i]n deciding whether and how” to
rent their homes.

¶7             In response, the HOA answered that the validity of the short-
term rental amendment defeated the Plaintiffs’ claims and moved for
summary judgment on that basis. The Plaintiffs, in turn, moved for partial
summary judgment on their claim for permanent injunctive relief. After
oral argument on the motions, the superior court denied the Plaintiffs’
request for a preliminary injunction, denied the Plaintiffs’ motion for partial
summary judgment on their claim for permanent injunctive relief, and

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                      PRESTON, et al. v. LAS SENDAS
                          Decision of the Court

granted summary judgment in favor of the HOA on the permanent
injunction claim.1

¶8              The Plaintiffs timely appealed the superior court’s denial of
their requests for both preliminary and permanent injunctive relief. We
have jurisdiction over the appeal of a superior court order “refusing to
grant . . . an injunction” under A.R.S. § 12-2101(A)(5)(b). See also Brumett v.
MGA Home Healthcare, L.L.C., 240 Ariz. 420, 430, ¶ 19 (App. 2016)
(explaining that interlocutory orders, such as the refusal to grant an
injunction, need not comply with Arizona Rules of Civil Procedure (Rule)
54(b) or 54(c) “to be appealable”).

                                DISCUSSION

¶9            The Plaintiffs challenge the short-term rental amendment’s
validity, arguing the original CC&Rs did not provide them with sufficient
notice that such a restriction could be imposed. On that basis, they contend
the superior court improperly denied their requests for injunctive relief.2

¶10            A superior court has broad discretion to grant or withhold
injunctive relief, and we will uphold a court’s decision absent an abuse of
that discretion. Swain v. Bixby Vill. Golf Course Inc., 247 Ariz. 405, 413,
¶ 33 (App. 2019) (reviewing a superior court’s ruling on a permanent
injunction request for an abuse of discretion); Fin. Assocs., Inc. v. Hub Props.,
Inc., 143 Ariz. 543, 545 (App. 1984) (reviewing a superior court’s ruling on
a preliminary injunction request for an abuse of discretion). But we “review
questions of law, including the interpretation of CC&Rs and the grant of

1      Plaintiffs alleged other counts against the HOA that are not a part of
this appeal.

2      In its answering brief on appeal, the HOA argues for the first time
that the Plaintiffs lacked standing to challenge the short-term rental
amendment, asserting that such a claim must be brought under A.R.S. § 10-
3631(A)(1) (establishing that any action on behalf “of a corporation that has
members” must be brought by “members having twenty-five per cent or
more of the voting power or by fifty members, whichever is less”) as a
derivative action on behalf of the HOA. By failing to raise any standing
objection in the superior court, the HOA waived the issue on appeal. Odom
v. Farmers Ins. Co. of Ariz., 216 Ariz. 530, 535, ¶ 18 (App. 2007) (“[A]rguments
raised for the first time on appeal are untimely and deemed waived.”).

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                      PRESTON, et al. v. LAS SENDAS
                          Decision of the Court

summary judgment, de novo.” Kalway v. Calabria Ranch HOA, LLC, 252 Ariz.
532, 537, ¶ 9 (2022).

¶11           We generally enforce contracts “as written.” Id. at 536, ¶ 1. But
when construing CC&Rs—a “special type” of contract—we will not enforce
an amendment, even if properly adopted under A.R.S. § 33-1817(A)(1)
(providing that CC&Rs may be amended by a majority vote if such a voting
scheme is specified in the CC&Rs) and the CC&Rs’ amendment procedure,
unless the original CC&Rs “provided sufficient notice” of the possibility of
the amendment. Kalway, 252 Ariz. at 536, 537-38, ¶¶ 1, 10, 14 (explaining
that A.R.S. § 33-1817(A) does not displace the common law prohibition on
unforeseen amendments). In other words, we will strike down any
“unforeseen” amendment that “would alter the nature of the covenants to
which the homeowners originally agreed.” Id. at 536, 537-38, ¶¶ 1, 8, 15.

¶12            To determine whether the Plaintiffs had sufficient notice of
the short-term rental amendment, we objectively examine the original
CC&Rs and assess whether the amendment falls within the Plaintiffs’
“reasonable expectations . . . at the time of purchase.” Id. at 536, 538-39,
¶¶ 1, 15-16. Under this reasonable-expectations standard, the original
CC&Rs “need not provide notice of the precise details of the [short-term
rental] amendment,” but they must make clear that a restriction exists and
that it could “be amended to refine it, correct an error, fill in a gap, or change
it in a particular way.” Cao v. PFP Dorsey Invs., LLC, 253 Ariz. 552, 556, ¶ 20
(App. 2022) (quoting Kalway, 252 Ariz. at 539, ¶ 17). In other words, to be
valid and enforceable, the short-term rental amendment “cannot be entirely
new and different in character, untethered” to existing restrictions but must
be a foreseeable modification or extension of the restrictions enumerated in
the original CC&Rs. Kalway, 252 Ariz. at 539, ¶ 17 (internal quotation
omitted). Given this notice requirement, neither a general-purpose
statement nor a general-amendment provision can provide sufficient notice
of a future amendment. Id. at 539, ¶¶ 18, 21.

¶13             When interpreting a restriction in CC&Rs, our primary
purpose “is to give effect to the original intent of the parties with any doubts
resolved against the validity of a restriction.” Id. at 539, ¶ 16 (internal
quotation omitted). To interpret the language used, we give words their
plain and ordinary meaning “in the context of the contract as a whole.”
Grosvenor Holdings, L.C. v. Figueroa, 222 Ariz. 588, 593, ¶ 9 (App. 2009); see
also Riley v. Stoves, 22 Ariz. App. 223, 226 (1974) (“Restrictions which are not
absolutely clear are to be interpreted in the ordinary and popular sense,
related to circumstances under which they were used, having in mind their
purpose and general situation.”). To that end, as a contract, a CC&R must

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                       PRESTON, et al. v. LAS SENDAS
                           Decision of the Court

“be interpreted, if at all possible, in a way that does not render parts of it
superfluous.” Taylor v. State Farm Mut. Auto. Ins. Co., 175 Ariz. 148, 158 n.9
(1993).

¶14           Applying these principles, we start with the original CC&Rs.
Recorded in 1995,3 the original CC&Rs state that “[a]ll Residential Units
shall be used, improved and devoted exclusively to residential use by a
Single Family.” CC&Rs, § 3.12. The original CC&Rs contain numerous other
use restrictions, including a prohibition on any “business” or “trade”
within a residential unit unless:

    (i)     the existence or operation of the business activity is not apparent
            or detectable by sight, sound or smell from outside the
            Residential Unit;

    (ii)    the business activity conforms to all applicable zoning
            ordinances or requirements[;]

    (iii)   the business activity does not involve persons coming on to the
            [Residential] Lot or the door-to-door solicitation of Owners or
            other Residents[;] and

    (iv)    the business activity is consistent with the residential character of
            the [community] and does not constitute a nuisance or a
            hazardous or offensive use or threaten [the] security or safety of
            other Residents . . . as may be determined from time to time in the sole
            discretion of the Board.

CC&Rs, § 3.12 (emphasis added). Although Section 3.12 broadly defines the
terms “business” and “trade” to include any “activity undertaken on an
ongoing basis which involves the provision of goods or services to persons
other than the provider’s family and for which the provider receives a fee,
compensation or other form of consideration,” it carves out one exception:
“The leasing of a Residential Unit by the Owner thereof shall not be
considered a trade or business” (“the lease exemption”). CC&Rs, § 3.12.

¶15          Pointing to the absence of any lease duration restriction in the
lease exemption, the Plaintiffs contend that the original CC&Rs failed to
provide prospective purchasers (including Plaintiffs before they made their
purchases) with reasonable notice that a future amendment could impose a
durational limit. Applying the plain and ordinary meaning of lease, the

3      The 1998, 2004, and 2005 amendments to the CC&Rs did not alter the
provisions relevant to this appeal.

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                      PRESTON, et al. v. LAS SENDAS
                          Decision of the Court

lease exemption, read in isolation, neither imposes a durational limit nor
suggests that a future amendment may do so. But as an exception to Section
3.12’s general prohibition on commercial activity in residential units, the
lease exemption has no meaning in and of itself, only in relation to the rest
of the provision and, more broadly, the CC&Rs as a whole.

¶16           To determine the contours of reasonableness and
foreseeability, we must consider whether the original CC&Rs in their
entirety, not the lease exception by itself, provided sufficient notice to
prospective purchasers that a durational limit on leases could later be
imposed by amendment. Powell v. Washburn, 211 Ariz. 553, 554, 556-57,
¶¶ 1, 13 (2006) (“[R]estrictive covenants should be interpreted to give effect
to the intention of the parties as determined from the language of the
document in its entirety and the purpose for which the covenants were
created.”) (adopting Restatement (Third) of Property: Servitudes § 4.1(1)
(2000)). As noted, under the original CC&Rs, Section 3.12 restricts all Las
Sendas residential units to “residential use by a [s]ingle [f]amily.” CC&Rs,
3.12. The original CC&Rs define a residential unit as “any building . . .
designed and intended for independent ownership and for use and
occupancy as a residence,” CC&Rs, § 1.48 (emphasis added), and a single
family as “a group of one or more persons each related to the other by
blood, marriage or legal adoption, or a group of not more than three (3)
persons not all so related, who maintain a common household in a Residential
Unit,” CC&Rs, § 1.49. Defining a residential unit as a building occupied “as
a residence”—rather than a building used for residential purposes—suggests
continuing occupancy, not transient occupancy. More clearly, by limiting
permissible use to those persons who “maintain” a common household in a
residential unit, the original CC&Rs’ use restriction encompasses a
temporal component, such that use of a residential unit by individuals who
do not reside together for a substantial period in the residential unit is
restricted.4

4       To the extent the Plaintiffs support their claim that short-term rentals
qualify as residential use by relying on A.R.S. § 9-500.39, which generally
limits municipal regulation of “vacation rentals or short-term rentals” but
precludes use of such rental spaces for “nonresidential” activities—such as
retail—we note that the statute, and other related statutes enacted in 2016,
after the rise of the “[o]nline lodging marketplace,” A.R.S. § 42-5076(E)(1),
did not inform the meaning of the term “residential” as used in the original
CC&Rs. 2016 Ariz. Sess. Laws, 208, §§ 1-15. Moreover, the various cases the
Plaintiffs cite for the general proposition that a “’dwelling’ is simply a

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                     PRESTON, et al. v. LAS SENDAS
                         Decision of the Court

¶17             Turning to the original CC&Rs’ restrictions on business and
trade conducted in a residential unit, any commercial activity that is
“detectable by sight, sound or smell from outside” the residential unit or
“involve[s] persons coming on to” the residential unit is forbidden. CC&Rs,
§ 3.12. In fact, the original CC&Rs permit the Board, in its “sole discretion,”
to bar any commercial activity it deems a nuisance, even if that activity
otherwise does not violate the enumerated restrictions. CC&Rs, § 3.12.
Although the original CC&Rs specifically exempt leases from the general
category of business and trade, the breadth and scope of Section 3.12
reasonably places prospective purchasers on notice that their properties
could be regulated by extensive use restrictions, including substantial
limitations on commercial activity, subject to Board discretion and future
amendment.

¶18            Apart from the use restrictions imposed under Section 3.12,
another provision of the original CC&Rs gives notice to prospective
purchasers that durational limits could be imposed on leases. The original
CC&Rs impose use restrictions not only on residential units, such as those
owned by the Plaintiffs, but on apartment units. CC&Rs, § 1.3. Under the
original CC&Rs, the Las Sendas “Rental Apartments,” internally defined as
“buildings consisting of four or more commercial integrated dwelling
units,” may not be used “as a hotel or [on] some other transient basis.”5
CC&Rs, § 1.44. This use restriction largely tracks the substantive language
of the short-term rental amendment. Although no such language appeared
in the lease exception when the Plaintiffs purchased their properties, a
prospective purchaser would have been on notice and could have
reasonably anticipated that the HOA may amend the original CC&Rs to
impose an express durational restriction on the leasing of residential units
like that imposed on apartment units.

¶19            Viewed in their entirety, the original CC&Rs provided
sufficient notice of the possibility of the short-term rental amendment. The
existing use restrictions—limiting residential units to single family,
residential use—are inconsistent with short-term rentals. And the existing

house” have no bearing on the meaning of “residential” as specifically used
within the context of the original CC&Rs.

5       As defined in A.R.S. § 42-5070(F), governing the taxation of transient
lodging, “’transient’ means any person who either at the person’s own
expense or at the expense of another obtains lodging space or the use of
lodging space on a daily or weekly basis, or on any other basis for less than
thirty consecutive days.”

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                     PRESTON, et al. v. LAS SENDAS
                         Decision of the Court

limits on business and trade reasonably placed prospective purchasers on
notice that any commercial activity would be extensively regulated and
even curtailed in the Board’s discretion. Given these substantial use
restrictions on residential units and the express durational limit on
apartment rentals, we conclude that upholding the short-term rental
amendment does not alter the original CC&Rs in any substantial and
unforeseen way. In other words, prospective purchasers would have
reasonably anticipated the possibility of further restrictions on leases as
falling within the scope of the original CC&Rs’ regulation. Therefore,
because the short-term rental amendment is valid and enforceable, the
superior court properly denied the Plaintiffs’ requests for injunctive relief.6

                               CONCLUSION

¶20           For the foregoing reasons, we affirm. Both parties request an
award of attorneys’ fees under A.R.S. § 12-341.01, which authorizes the
award of attorneys’ fees to “the successful party” in any action “arising out
of a contract.” The HOA also requests an award of attorneys’ fees under
CC&Rs, § 9.1, which entitles “the prevailing party” in an action to enforce
the CC&Rs “to recover from the other party all attorney fees incurred.” As
the prevailing party, we award the HOA its reasonable attorneys’ fees and
costs incurred on appeal upon compliance with ARCAP 21.

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

6      The record does not reflect when the Plaintiffs purchased their Las
Sendas properties, other than before the HOA announced the prospective
short-term rental amendment. Therefore, on this record, we do not consider
the extent to which the Board’s adoption of the six-months rule may have
provided additional notice of a durational limitation on leases.

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