Court Opinion

ID: 9892726
Source: CourtListenerOpinion
Date Created: 2023-10-24 18:05:24.96589+00
Date Added: 2024-06-11T08:37:47.899390
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  UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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

     THOMPSON THRIFT DEVELOPMENT, INC., Plaintiff/Appellee,

                                         v.

        LELAND C. ALBERTSON, JR., et al., Defendants/Appellants.

                              No. 1 CA-CV 23-0082
                                FILED 10-24-2023

            Appeal from the Superior Court in Maricopa County
                           No. CV2020-007328
                  The Honorable Scott A. Blaney, Judge

                                   AFFIRMED

                                    COUNSEL

Gammage & Burnham PLC, Phoenix
By Cameron C. Artigue
Counsel for Plaintiff/Appellee

Gust Rosenfeld PLC, Phoenix
By Charles W. Wirken
Counsel for Defendants/Appellants

Shaw & Lines LLC, Phoenix
By Mark E. Lines
Counsel for Amicus Curiae Community Associations Institute
               THOMPSON THRIFT v. ALBERTSON, et al.
                      Decision of the Court

                      MEMORANDUM DECISION

Judge Cynthia J. Bailey delivered the decision of the Court, in which
Presiding Judge James B. Morse Jr. and Judge Brian Y. Furuya joined.

B A I L E Y, Judge:

¶1             We consider whether a 2020 amendment to the original
Declaration of Restrictions (“Declaration”) for Tally Ho Farms Unit No. 2
(“Tally Ho”), a Tempe subdivision, is valid under Kalway v. Calabria Ranch
HOA, LLC, 252 Ariz. 532 (2022). We conclude that it is. We also affirm the
superior court’s ruling declining to consider arguments Appellants
incorporated by reference into their operative summary judgment motion,
violating a standing order barring incorporation by reference.

                 FACTS AND PROCEDURAL HISTORY

¶2             The Declaration, recorded in 1965, provides that all Tally Ho
lots “are residential lots only.” This and other covenants contained in the
Declaration were to remain in effect until January 1, 1980, when they would
“be automatically extended for successive periods of ten years each, unless
by vote of a majority of the then owners of the said lots . . . it is agreed to
change the said covenants in whole or in part.”

¶3         In mid-2020, a majority of the Tally Ho owners consented to
an amendment that would exclude Lots 1 and 2 and the southern half of
Lot 3 (the “Excluded Lots”) from the Declaration’s covenants (the
“Amendment”). The then-owners of the Excluded Lots consented to the
Amendment.

¶4           Thompson Thrift Development, Inc. (“Thompson”)
contracted to buy the Excluded Lots with plans to pursue commercial
development. It then sued those Tally Ho owners who had not consented
to the Amendment (the “Dissenting Owners”) seeking a declaratory
judgment that the Amendment was valid. The Dissenting Owners
counterclaimed, contending the Amendment was improper because (1) it
did not apply to all lots, and (2) it could not take effect until the next ten-
year renewal period ended on January 1, 2030. They also filed a third-party
complaint against the former Excluded Lot owners.

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              THOMPSON THRIFT v. ALBERTSON, et al.
                     Decision of the Court

¶5          Both Thompson and the Dissenting Owners moved for
summary judgment. Thompson contended the Amendment was valid
under Arizona Revised Statutes (“A.R.S.”) section 33-440(C)(2) and (C)(4),
which provides that:

      2. An amendment to a declaration may apply to fewer than
      all of the lots or less than all of the property that is bound by
      the declaration and an amendment is deemed to conform to
      the general design and plan of the community, if both of the
      following apply:

             (a) The amendment receives the affirmative vote or
             written consent of the number of owners or eligible
             voters specified in the declaration, including the assent
             of any individuals or entities that are specified in the
             declaration.

             (b) The amendment receives the affirmative vote or
             written consent of all of the owners of the lots or
             property to which the amendment applies.

      ...

      4. Notwithstanding any provision in the declaration that
      provides for periodic renewal of the declaration, an
      amendment to the declaration is effective immediately on
      recordation of the instrument in the county in which the
      property is located.

A.R.S. § 33-440(C)(2), (4). The Dissenting Owners contended these
subsections, which were enacted in 2016, violated the Contract Clause of
the Arizona Constitution and could not retroactively obstruct their
preexisting rights under the Declaration. They also contended the
Amendment constituted a private taking.

¶6           The superior court postponed oral argument on the parties’
cross-motions multiple times. In March 2022, while argument was still
pending, our supreme court issued its opinion in Kalway. The superior
court determined that Kalway’s “impact . . . must be evaluated before
proceeding with Oral Argument” and directed the parties to confer on a
“replacement briefing and a schedule for same.” It included the following
paragraph in its order:

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               THOMPSON THRIFT v. ALBERTSON, et al.
                      Decision of the Court

      This Division requires that all motions, responses, replies and
      other Court filings in this case must be submitted
      individually. Counsel shall not combine any motion with a
      responsive pleading. All motions are to be filed separately
      and designated as such. No filing will be accepted if filed
      in combination with another. Additionally, all filings shall
      be fully self-contained and shall not “incorporate by
      reference” other separate filings for review and
      consideration as part of the pending filing.

(Emphasis in original.) This paragraph also had appeared in several prior
orders. And when the court later approved the parties’ proposed briefing
schedule, it stated that the new briefing would “replace[ ] in full” the
parties’ briefs on their earlier motions.

¶7             In its replacement motion, Thompson reasserted its
arguments from its original motion and further contended that Kalway
“does not apply to amendments that remove obligations” such as the
Amendment. The Dissenting Owners contended in their replacement
motion that Kalway “unequivocally prohibits CC&R amendments . . . that
are not anticipated by the language in the CC&Rs, regardless of whether
[A.R.S. § 33-440(C)] permits such an amendment.” They did not, however,
reassert any arguments from their prior motion. They instead incorporated
by reference their entire original motion and accompanying statement of
facts in a footnote.

¶8             The superior court granted Thompson’s motion and denied
the Dissenting Owners’ motion. While the court did not mention the
Dissenting Owners’ attempt to incorporate their prior motion by reference,
it stated that “[t]he only question remaining in this case – and the reason
that the parties engaged in ‘replacement’ briefing – arises from the Arizona
Supreme Court’s recent opinion in Kalway.” The court determined that “the
language of Kalway is broad enough to support either [side’s]
interpretation” but favored Thompson’s reading, concluding that Kalway
was inapplicable because the Amendment did not impose any “new
restrictions or affirmative obligations.”

¶9           The Dissenting Owners moved for reconsideration,
contending the superior court “did not consider the constitutional
arguments . . . in their original cross motion for summary judgment,
incorporated in the replacement briefing in footnote one of both the
replacement motion and response.” The court denied the motion, finding
their attempt at incorporation by reference was “an end-run around the

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               THOMPSON THRIFT v. ALBERTSON, et al.
                      Decision of the Court

page limitations set forth in the Arizona Rules of Civil Procedure and this
Court’s orders” that, if permitted, would have “force[d] the responding
party to violate the same page-limit rules while substantively responding
to the present motion and all previous motions ‘incorporated by
reference.’”

¶10           The superior court then entered two Arizona Rule of Civil
Procedure (“Rule”) 54(b) judgments. The first granted Thompson’s
declaratory relief claim and permanently enjoined the Dissenting Owners
from enforcing the Declaration’s covenants against the Excluded Lots. The
second awarded Thompson attorneys’ fees and costs.

¶11            Shortly thereafter, one of the Dissenting Owners—Shirley D.
Albertson, as trustee of the Albertson Family Trust (“Albertson”)—moved
for a new trial, asserting both Kalway and non-Kalway arguments. The court
denied that motion in a certified Rule 54(c) order. Albertson and five other
Dissenting Owners (collectively, “Appellants”) appealed. We have
jurisdiction under A.R.S. § 12-2101(A)(1), (5)(a).

                               DISCUSSION

I.     The superior court did not abuse its discretion by enforcing its orders
       prohibiting incorporation by reference.

¶12            The Dissenting Owners contend the superior court erred in
denying their motion for reconsideration, arguing broadly that cases
should be resolved on their merits. See, e.g., MRF Const. Co. v. Indus.
Comm’n, 111 Ariz. 466, 469 (1975). There is, however, “a limit to which
judicial leniency can be stretched.” Adams v. Valley Nat. Bank of Ariz., 139
Ariz. 340, 342 (App. 1984).

¶13           As discussed above, the motion for reconsideration re-
asserted non-Kalway arguments the Dissenting Owners tried to incorporate
by reference into their replacement summary judgment motion. We review
the court’s denial of a motion for reconsideration for an abuse of discretion.
Worldwide Jet Charter, Inc. v. Christian, 255 Ariz. 67, 70, ¶ 10 (App. 2023).

¶14             The superior court’s orders prohibiting incorporation by
reference were clear. After the Dissenting Owners notified the court of
Kalway, court staff e-mailed both sides and asked them “to review and
determine what modified or replacement filings need to be made . . . before
the motions can be entertained.” The court then ordered the parties to
“inform themselves of Kalway, confer and consult with one another and file
. . . a Joint Notice proposing replacement briefing and a schedule for same

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                THOMPSON THRIFT v. ALBERTSON, et al.
                       Decision of the Court

for the Court’s consideration.” That order included the blanket prohibition
of incorporation by reference quoted in paragraph 6, supra. The court
included the same prohibition in its order setting oral argument.
Appellants concede they “disregarded” that prohibition.

¶15           The superior court also ordered that the parties’ new motions
and responses would “replace[ ] in full the briefing” on the original cross-
motions. The Dissenting Owners nonetheless twice chose to incorporate by
reference their prior motion, response, and reply: once in their replacement
cross-motion and again in their response to Thompson’s replacement
motion.

¶16            While Rule 10(c) allows adoption by reference of statements
in a pleading “in any other pleading or motion,” the Dissenting Owners cite
no rule or case that allows adoption of an entire motion by reference. Ariz.
R. Civ. P. 10(c); see Wilson v. Pauling, 457 F. Supp. 3d 965, 978 n.2 (D. Colo.
2020) (finding no authority under the identical language of Fed. R. Civ. P.
10(c) that would allow “incorporation of a party’s prior motion into a later
motion”); Flynn v. Campbell, 243 Ariz. 76, 80, ¶ 9 (2017) (“[U]niformity in
interpretation of our rules and the federal rules is highly desirable.”)
(quoting Orme Sch. v. Reeves, 166 Ariz. 301, 304 (1990)). And as the superior
court observed, permitting incorporation by reference would have allowed
the Dissenting Owners to file two summary judgment motions on different
grounds and significantly exceed the page limitation on supporting
memoranda. Ariz. R. Civ. P. 7.1(a)(2); see Johns Hopkins Univ. v. 454 Life Scis.
Corp., 183 F. Supp. 3d 563, 572 (D. Del. 2016) (stating that litigants cannot
“rely on ‘incorporation by reference’ in order to evade the Court’s page
limits”); Herrera v. Santa Fe Pub. Sch., 41 F. Supp. 3d 1188, 1239 n.75 (D.N.M.
2014) (treating a party’s attempt to incorporate by reference its earlier
response to a separate motion as an improper “end run around page
limits”).

¶17           On this record, we cannot say the superior court abused its
discretion in denying the Dissenting Owners’ motion for reconsideration.
We therefore do not reach those arguments the Dissenting Owners
attempted to incorporate by reference from their original summary
judgment motion.

II.    We reject Appellants’ Kalway arguments.

¶18          We can, however, address the Kalway arguments the
Dissenting Owners briefed in their replacement motion. In determining
whether either party is entitled to summary judgment on cross-motions, we

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               THOMPSON THRIFT v. ALBERTSON, et al.
                      Decision of the Court

review questions of law de novo and view the facts in a light most favorable
to the party against whom summary judgment was granted. In re Est. of
Podgorski, 249 Ariz. 482, 484, ¶ 8 (App. 2020). Summary judgment is
warranted only if there are no genuine issues of material fact and one party
is entitled to judgment as a matter of law. Ariz. R. Civ. P. 56(a). The parties
agreed there were no material fact disputes that would preclude summary
judgment. We remain mindful that summary judgment should not be
granted if the undisputed facts would allow reasonable minds to differ.
Nelson v. Phoenix Resort Corp., 181 Ariz. 188, 191 (App. 1994).

¶19            In Kalway, our supreme court considered amendments to a
declaration that “change[d] some definitions and add[ed] others, create[d]
new restrictions, and enact[ed] new enforcement measures against owners
for violating the covenants.” Kalway, 252 Ariz. at 536, ¶ 4. The amendments
also added restrictions “limiting owners’ ability to convey or subdivide
their lots, restricting the size and number of buildings permitted on each
lot, and reducing the maximum number of livestock permitted on each lot.”
Id. at 537, ¶ 4. The non-consenting owners sued to invalidate these new
restrictions. Id. at ¶ 5.

¶20           Our supreme court first considered whether the original
declaration provided adequate notice of the prospective amendments. Id.
at ¶ 8. Citing Dreamland Villa Community Club, Inc. v. Raimey, 224 Ariz. 42
(App. 2010), the court stated that a declaration “must give sufficient notice
of the possibility of a future amendment; that is, amendments must be
reasonable and foreseeable.” Id. at ¶ 10. And though the declaration at
issue allowed amendment “at any time by an instrument executed and
acknowledged by the [m]ajority [v]ote of the owners,” the court held the
association could not “create new affirmative obligations where the original
declaration did not provide notice to the homeowners that they might be
subject to such obligations.” Id. at 536, 538, ¶¶ 3, 14.

¶21           The supreme court then explained what level of notice is
required:

       The restriction itself does not have to necessarily give notice
       of the particular details of a future amendment; that would
       rarely happen. Instead, it must give notice that a restrictive
       or affirmative covenant exists and that the covenant can be
       amended to refine it, correct an error, fill in a gap, or change
       it in a particular way. But future amendments cannot be
       “entirely new and different in character,” untethered to an
       original covenant. Otherwise, such an amendment would

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                THOMPSON THRIFT v. ALBERTSON, et al.
                       Decision of the Court

       infringe on property owners’ expectations of the scope of the
       covenants.

Id. at 539, ¶ 17 (internal citations omitted). On this basis, the court rejected
or blue-penciled most of the new restrictions. Id. at 539–42, ¶¶ 18–41.

       A.     The Declaration complied with Kalway’s notice requirement.

¶22          The Dissenting Owners contended the Declaration did “not
provide any notice that the residential restriction . . . may be lifted or that
any amendment may apply to less than all the lots.” They rely on Kalway’s
introductory paragraph, which states that “a general-amendment-power
provision may be used to amend only those restrictions for which the
HOA’s original declaration has provided sufficient notice.” Id. at 536, ¶ 1.

¶23           The notice provided in the Declaration appears to meet
Kalway’s “sufficient notice” requirement. For example, the Kalway court
allowed an amendment that defined “garage” because “the original
declaration referenced a ‘garage,’” which meant that “a later amendment
defining the term was reasonably foreseeable.” Id. at 540, ¶ 24. Here, the
Declaration references the residential-use-only restriction and provides that
its covenants can be “change[d] . . . in whole or in part” by majority vote.
The residential-use-only covenant is not excluded from this provision. As
such, later amendments, including elimination of the residential covenant,
would seem to be reasonably foreseeable.

¶24           The Dissenting Owners also contend the Declaration did not
give notice “that amendments could affect less than all the lots within Tally
Ho Farms” or that the amendment could become effective before “the
subsequent renewal cycle.” But the Declaration explicitly provides that a
majority of the then-Tally Ho lot owners could agree to “change the said
covenants . . . in part.” The Declaration thus gave reasonable notice that
later amendments could affect less than all of the lots. And Kalway does not
require that the restriction “give notice of the particular details of a future
amendment.” Id. at 539, ¶ 17. We thus need not discern whether the
original declarant contemplated or anticipated that this specific
amendment would arise more than forty years later.

       B.     Kalway did not invalidate A.R.S. § 33-440(C)(2) or (C)(4).

¶25          The Dissenting Owners rely on common law predating the
current version of A.R.S. § 33-440(C) to contend the Amendment cannot
remove restrictions only as to the Excluded Lots or become effective
immediately in light of the Declaration’s renewal-period provision. See La

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                THOMPSON THRIFT v. ALBERTSON, et al.
                       Decision of the Court

Esperanza Townhome Ass’n, Inc. v. Title Sec. Agency of Ariz., 142 Ariz. 235
(App. 1984) (uniform application); Scholten v. Blackhawk Partners, 184 Ariz.
326 (App. 1995) (renewal-period provision).             The changes in the
Amendment are expressly permitted by A.R.S. § 33-440(C)(2) and (C)(4),
and we presume a statutory amendment changes the prior law. Enter.
Leasing Co. of Phoenix v. Ariz. Dep’t of Revenue, 221 Ariz. 123, 126, ¶ 10 (App.
2008).

¶26           The Dissenting Owners contend, however, that A.R.S. § 33-
440(C) did not displace the common law, citing Kalway’s statement that a
similar statute for planned communities, A.R.S. § 33-1817(A), did not do so.
Kalway, 252 Ariz. at 537, ¶ 10. Kalway only addressed that part of A.R.S.
§ 33-1817(A) that allows “amendment of CC&Rs by a majority vote if such
voting scheme is specified in the original declaration.” Id. And the supreme
court did not address a non-uniform application nor a renewal-period
provision. Id. at 539–42, ¶¶ 22–41. The Kalway court thus did not consider
whether A.R.S. § 33-440(C)(2) and (C)(4), or similar provisions in A.R.S.
§ 33-1817(A), displaced the common law.

¶27           This does not end our analysis. While the legislature can
modify or abrogate common law, it must do so either expressly or by
necessary implication. Owner-Operator Indep. Drivers Ass’n v. Pac. Fin. Ass’n,
Inc., 241 Ariz. 406, 413, ¶ 27 (App. 2017). We conclude that the statutes
implicitly modify common law. Section 33-440(C)(2) states that an
amendment “may apply to fewer than all of the lots or less than all of the
property that is bound by the declaration” if it meets the voting
requirements of the declaration and the owners to whom the amendment
applies vote affirmatively or consent in writing.1 Similarly, A.R.S. § 33-
440(C)(4) states that amendments are “effective immediately on
recordation” “[n]otwithstanding any provision in the declaration that
provides for periodic renewal of the declaration.” These provisions clearly
indicate changes to the common law, which we assume the legislature was

1 The Dissenting Owners contend the Amendment requires unanimous

approval because commercial development on the Excluded Lots “with its
accompanying employee and customer traffic, noise, lights, and cooking
odors will affect the Tally Ho neighborhood as a whole” and the
Amendment therefore “applied” to all lots under A.R.S. § 33-440(C)(2)(b).
The Dissenting Owners did not raise this argument in superior court.
Albertson instead raised it for the first time in her motion for new trial. We
therefore do not address it. Conant v. Whitney, 190 Ariz. 290, 293 (App.
1997).

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               THOMPSON THRIFT v. ALBERTSON, et al.
                      Decision of the Court

aware of when it enacted A.R.S. § 33-440(C). Wareing v. Falk, 182 Ariz. 495,
500 (App. 1995).

¶28          For these reasons, we reject the Dissenting Owners’
contention that Kalway rendered A.R.S. § 33-440(C)(2) and (C)(4) ineffective.
See Lake Havasu City v. Mohave County, 138 Ariz. 552, 558 (App. 1983)
(“[W]hen the legislature amends a statute we must presume they intended
to change existing law rather than perform a futile act.”).

III.   The superior court did not abuse its discretion in denying
       Albertson’s motion for new trial.

¶29          The Dissenting Owners also challenge the denial of
Albertson’s motion for new trial. We review that ruling for an abuse of
discretion. Am. Power Prods., Inc. v. CSK Auto, Inc., 239 Ariz. 151, 154, ¶ 10
(2016).

¶30            Albertson’s new trial motion reasserted multiple arguments
the Dissenting Owners tried to incorporate by reference into their
replacement summary judgment motion. Albertson also reasserted the
Kalway arguments discussed above, broadly contending that “the ruling on
the cross-motions for summary judgment is contrary to law and the denial
of the . . . motion for reconsideration was an abuse of discretion.” As we
affirm the denials of those motions, we also affirm the denial of Albertson’s
motion for new trial.

IV.    The Amicus Curiae Brief

¶31            Community Associations Institute (“CAI”) filed an amicus
curiae brief requesting “clarification” and possible “limitation” of Kalway.
Whether Kalway should be clarified or limited is a question for our supreme
court. See Sell v. Gama, 231 Ariz. 323, 330, ¶ 31 (2013) (“The lower courts are
bound by our decisions, and this Court alone is responsible for modifying
that precedent.”). We therefore decline CAI’s invitation to reach beyond
the specific facts of this case to provide “direction and guidance.”

V.     Attorneys’ Fees and Costs on Appeal

¶32            Both sides request their attorneys’ fees and taxable costs
incurred in this appeal under A.R.S. §§ 12-341 and 12-341.01(A). Thompson
is the successful party on appeal and may recover reasonable attorneys’ fees
and taxable costs upon compliance with Arizona Rule of Civil Appellate
Procedure (“ARCAP”) 21. We deny Appellants’ request for ARCAP 25 and
A.R.S. § 12-349 sanctions against CAI.

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       THOMPSON THRIFT v. ALBERTSON, et al.
              Decision of the Court

                     CONCLUSION

¶33   We affirm.

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

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