Court Opinion

ID: 4670514
Source: CourtListenerOpinion
Date Created: 2021-03-23 16:02:23.421467+00
Date Added: 2024-06-11T08:02:01.017993
License: Public Domain

IN THE
              ARIZONA COURT OF APPEALS
                                  DIVISION ONE

                           TOWN OF FLORENCE,
                             Plaintiff/Appellant,

                                       v.

                         FLORENCE COPPER INC.,
                            Defendant/Appellee.

                             No. 1 CA-CV 19-0504
                                  FILED 3-23-2021

           Appeal from the Superior Court in Maricopa County
                          No. CV2015-000325
               The Honorable Roger E. Brodman, Judge

                                   AFFIRMED

                                   COUNSEL

Sims Mackin, Phoenix
By Catherine M. Bowman
Counsel for Plaintiff/Appellant

Osborn Maledon, PA, Phoenix
By Colin F. Campbell, Timothy J. Eckstein, Payslie M. Bowman
Counsel for Defendant/Appellee

Jones, Skelton & Hochuli, P.L.C., Phoenix
By Eileen Dennis GilBride
Co-Counsel for Amicus Curiae League of Arizona Cities and Towns

League of Arizona Cities and Towns, Phoenix
By Christina Estes-Werther
Co-Counsel for Amicus Curiae League of Arizona Cities and Towns
                  FLORENCE v. FLORENCE COPPER
                       Opinion of the Court

                                OPINION

Presiding Judge David D. Weinzweig delivered the opinion of the Court, in
which Judge Jennifer M. Perkins and Judge James B. Morse Jr. joined.

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

¶1            The Town of Florence (“Town”) annexed a large parcel of
property in 2002 and entered a development agreement with its owner,
granting him and his successors in interest a vested right to operate a
copper mine on the parcel. By its terms and under Arizona law, the
development agreement could be amended only with both parties’ consent.
The Town later rezoned the property to allow the owner to build more
homes on the property. Then, no longer happy with the prospect of a
copper mine within city limits, the Town sued Florence Copper, Inc. (“FC”),
the successor in interest, asking the superior court to declare mining a
prohibited use. The court ruled against the Town, which then appealed
from the final judgment and attorney fee award in favor of FC. We affirm.

             FACTS AND PROCEDURAL BACKGROUND

¶2            In 2000, a real estate developer named W. Harrison Merrill
bought over a thousand acres of unincorporated land near the Town from
a mining company (the “Mining Parcel”), along with mining infrastructure
and mineral rights to an adjacent leased parcel (the “Leased Parcel”).
Geologists first discovered copper beneath the Mining Parcel in the 1960s,
and it had since been studied, drilled and developed. Between the Mining
and Leased Parcels, Merrill acquired the right to mine an estimated 1.7
billion pounds of recoverable copper. Merrill also acquired another several
thousand acres outside the Town, where he intended to build a master-
planned community named Merrill Ranch. In all, Merrill acquired around
7,500 acres of unincorporated land (the “Property”). He intended to first
extract the copper with a mining partner and then develop Merrill Ranch
on the Property.

         Annexation, the Development Agreement and the 2003 Plan

¶3           In 2002, the Town expressed interest in annexing the
Property. Arizona law required Merrill’s consent. See A.R.S. § 9-471(A)(4)
(annexation requires consent of “more than one-half of the persons owning
real and personal property” in the unincorporated area “that would be

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                   FLORENCE v. FLORENCE COPPER
                        Opinion of the Court

subject to taxation [following] annexation”). During negotiations, Merrill
said he would not consent to annexation unless the Town assured him
“maximum flexibility in the development” of his Property. The Town
agreed and Merrill consented.

¶4            The Town and Merrill entered a 35-year agreement in
November 2003, formalized in a Pre-Annexation Development Agreement
(“Development Agreement”) and a Planned Unit Development Plan (“2003
Plan”), which was attached to and incorporated into the Development
Agreement.      In December 2003, the Town Council approved the
Development Agreement and the 2003 Plan, annexed the Property, and
adopted a corresponding amendment to the zoning map. Under A.R.S. §
9-500.05(D), the Town filed the Development Agreement and the 2003 Plan
with the Pinal County Recorder.

¶5           The Development Agreement recited that (1) the
“development of the Property is a major undertaking for [Merrill] and the
marketing, economic and investment conditions and magnitude of the
development require the development to be constructed in phases over a
period of years,” and (2) Merrill had “require[d] certain assurances and
protection of rights in order that [he] will be allowed to complete the
development of the Property in accordance with the [2003] Plan over the
period of years permitted by this Agreement.”

¶6            The Development Agreement preserved Merrill’s “vested
right to develop and use the Property in accordance with th[e] Agreement
and the [2003] Plan,” and directed that associated burdens and benefits
would run with the land for 35 years. A.R.S. § 9-500.05(c). To advance those
vested rights, the Agreement barred the Town from imposing zoning
ordinances or land use regulations “that would change, alter, impair,
prevent, diminish, delay or otherwise impact the development or use of the
Property as set forth in the [2003] Plan,” unless Merrill “specifically
agree[d]” in writing.

¶7            The 2003 Plan memorialized the land use requirements
Merrill needed for his proposed development, including zoning and design
specifications. The Property was zoned “light industrial,” which prohibited
mining. Still, much of the Property was subject to a non-conforming
historical use of copper mining called the BHP Copper Mine Overlay (the
“Mine Overlay”), and the 2003 Plan ensured the Mine Overlay would be
preserved until the mine was “closed.” The 2003 Plan also specified that
the developer’s right to any non-conforming use would cease if not used
for more than 180 days. Because Merrill did not immediately intend to

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                   FLORENCE v. FLORENCE COPPER
                        Opinion of the Court

mine, however, the 2003 Plan expressly excepted copper mining from that
requirement.

¶8           Finally, the Development Agreement specified that any
amendment to the Agreement must be in writing, executed by both parties
and filed within ten days with the Pinal County Recorder. See A.R.S. § 9-
500.05(C) (“A development agreement may be amended, or cancelled in
whole or in part, by mutual consent of the parties to the development
agreement or by their successors in interest or assigns.”). Since 2003, Merrill
and the Town twice amended the Development Agreement per its terms
and § 9-500.05(C). Neither amendment related to copper mining on the
Property.

                  The 2007 Plan and the Rezoning Ordinance

¶9            Real estate values soared and copper prices plummeted in the
first few years after Merrill and the Town entered the Development
Agreement. Recognizing these market dynamics, Merrill focused his
business efforts on developing homes in 2005 and 2006, and asked the Town
to increase the residential density allowed on the Property, as the Town had
done for other developers.

¶10           After extensive negotiations, Merrill and the Town agreed to
the 2007 Merrill Ranch Master Development Plan (“2007 Plan”), which,
among other things, rezoned the Mining Parcel from light-industrial to
residential. The Town Council then passed Ordinance No. 460-07
(“Rezoning Ordinance”), amending the Town’s zoning map to conform to
the 2007 Plan.

¶11           The 2007 Plan was not incorporated into the Development
Agreement or recorded with the county recorded—unlike the 2003 Plan—
and only appears in the Town’s zoning book. In their protracted 2007
negotiations, Merrill and the Town never talked about mining rights. The
Rezoning Ordinance did not identify mining as a non-conforming use or
purport to amend or supersede the Development Agreement. The
Ordinance generally stated, however, that the 2007 Plan “supersede[d] any
previously accepted development Plan” on the Property.

¶12           For his part, Merrill continued to believe the Development
Agreement’s mining rights were valuable. To that end, between 2006 and
2009, he tried to sell the Mining Parcel, searching for and negotiating with
prospective buyers, including FC’s parent company. In the meantime, the
record evidence shows Merrill did not close the mine, never began formal
closure procedures, and continued performing the required environmental

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                  FLORENCE v. FLORENCE COPPER
                       Opinion of the Court

monitoring activity. And later, after the Property fell into foreclosure,
Merrill touted the Parcel’s mining value to prospective purchasers.

                      Foreclosure and Florence Copper

¶13           After the 2008 housing market collapse, Merrill lost the
Property in foreclosure. FC’s parent company purchased the Mining Parcel
at an auction in 2009 for $8.5 million and later acquired mineral rights to
the Leased Parcel for $3 million.

¶14           By August 2010, however, the Town no longer supported a
mine within its Town limits and insisted the Property’s zoning did not
allow FC to mine on the site. FC disagreed, but thought it best to work
cooperatively and, therefore, formally applied to the Town for rezoning
and a special use permit. The superior court later found “[t]his was a
reasonable business decision borne out of necessity and was not a waiver
or intentional relinquishment of the right to mine.”

¶15         The Town—joined by local developers—continued to object
to the mine. FC ultimately withdrew its rezoning applications and
prepared to commence mining operations under the Development
Agreement.

                             Litigation Ensues

¶16            In October 2013, the Town sued FC for a declaratory
judgment that the 2007 Plan and the Rezoning Ordinance barred mining on
the Property. FC answered and counterclaimed. After discovery, both
sides moved for summary judgment. The Town argued the Rezoning
Ordinance and the 2007 Plan replaced, superseded and rescinded the 2003
Plan, eliminating any right to mine on the Mining Parcel. FC argued the
Development Agreement granted Merrill and FC (as Merrill’s successor in
interest) a vested right to mine, apart from the 2003 Plan. The Development
Agreement was unchanged by the Rezoning Ordinance.

¶17           The superior court granted partial summary judgment to FC
and denied the Town’s motion. The court held that the Development
Agreement “unambiguously provided the Owner a vested right” to mine
copper in the Mine Overlay area as a permissible non-conforming use, and
the Town could not “unilaterally change the Development Agreement or
unilaterally derogate vested rights established by the Development
Agreement.”

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                    FLORENCE v. FLORENCE COPPER
                         Opinion of the Court

¶18          The superior court set a six-day bench trial to determine
whether the mining rights still existed or Merrill and the Town had
“mutually agreed” to amend the Development Agreement and eliminate
the non-conforming mining rights. After hearing from fourteen witnesses,
including Town officials and Merrill, the court held that copper mining
rights under the Development Agreement had not been eliminated,
modified, limited, amended, waived or abandoned.

¶19           The court ultimately granted declaratory relief to FC, finding
that FC had “the available election of judicial remedies for breach of
contract, including specific performance or contract damages.” The court
also awarded $1.7 million in attorney fees to FC under A.R.S. § 12-341.01(A),
along with $32,365.55 in costs. The Town timely appealed. We have
jurisdiction. See A.R.S. §§ 12-120.21(A)(1) and -2101(A)(1).

                                DISCUSSION

¶20            We review de novo the interpretation of statutes, ordinances
and contracts, see Contreras Farms Ltd. LLC v. City of Phoenix, 247 Ariz. 485,
488, ¶ 7 (App. 2019) (statutes and ordinances); Grosvenor Holdings, L.C. v.
Figueroa, 222 Ariz. 588, 593, ¶ 9 (App. 2009) (contracts), but sustain the
superior court’s factual findings unless they are clearly erroneous, Kocher v.
Dep’t of Revenue, 206 Ariz. 480, 482, ¶ 9 (App. 2003). We also view the facts
on appeal from a bench trial in the light most favorable to upholding the
judgment. Home Builders Ass’n of Cent. Ariz. v. City of Maricopa, 215 Ariz.
146, 148, ¶ 2 (App. 2007).

     I.       Binding Contract and Separation of Powers

¶21            The Town contends the superior court erred for several
reasons. First, the Town argues the superior court “was compelled under
the separation of powers doctrine to defer to the Town’s laws and
procedure in determining the zoning for the Property” because the Arizona
legislature delegated the Town its zoning authority under A.R.S. §§ 9-462
to -462.08. See Transamerica Title Ins. Co. v. City of Tucson, 157 Ariz. 346, 350
(1988). We are not persuaded. Local governments do not possess absolute
power over zoning decisions; those decisions are subject to judicial review.
See, e.g., Cardon Oil Co. v. City of Phoenix, 122 Ariz. 102, 104 (1979) (“When
zoning power is used in such a way that the attempted regulation amounts
to a ‘taking’ of property, the zoning ordinance runs into direct conflict with
[Ariz. Const. art. 2, § 17.]”); see also City of Tucson v. Whiteco Metrocom, Inc.,
194 Ariz. 390, 394, ¶ 10 (App. 1999) (cities do “not have vested rights in
[their] zoning powers, and the state can reduce or condition those powers”).

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                   FLORENCE v. FLORENCE COPPER
                        Opinion of the Court

¶22            What is more, development agreements—like the Town’s
zoning authority—are the product of legislative action. The legislature
empowered cities and towns to enter development agreements, instructed
that their burdens and benefits inure to “successors in interest and assigns,”
and directed that they cannot be amended or cancelled without mutual
consent. A.R.S. § 9-500.05(A), (C), (D). All powers delegated by the
legislature to the Town must be exercised consistent with Arizona statutes
and the Arizona Constitution. White Mountain Health Ctr., Inc. v. Maricopa
Cty., 241 Ariz. 230, 248-49, ¶ 65 (App. 2016).

¶23            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. Home Builders, 215
Ariz. at 154, ¶ 28 (“[D]evelopers would be loathe to enter into agreements
requiring them to provide for part of the public infrastructure knowing that
the governing authority could still require a larger contribution toward the
public infrastructure in the future or that a successor in interest entity
would not be bound by the agreement. The agreement would simply be
too uncertain.”); 3 Rathkopf’s The Law of Zoning and Planning § 44:16 (4th ed.
2020) (“Development agreements can reduce this risk, especially when both
the developer and the local government agree that a project would benefit
the community.”). The Town points to no authority that local governments
may enter and then flout their statutorily authorized contracts—all without
judicial review.

¶24            Second, the Town argues the superior court erroneously
“substituted [its] judgment for that of the legislative bodies responsible for
passing zoning regulations,” and criticizes the 2003 Development
Agreement and 2003 Plan as a “developer utopia” that “undercut[s] the
health, safety and welfare component of zoning.” But the court only found
the Town and Merrill voluntarily entered into a 35-year binding
development agreement, and then ordered the Town to perform its
contractual promises, citing both A.R.S. § 9-500.05 and the Contract Clause
of Arizona Constitution. Ariz. Const., art. 2, § 25. And the Town’s current
description of the 2003 Development Agreement contradicts the terms of
that agreement, which characterizes the 2003 Plan as “in the best interest of
the Town and the health, safety and welfare of its residents,” and as
promising “significant benefits to [the] Town.”

¶25         Arizona law does not foist development agreements on local
governments, A.R.S. § 9-500.05(A), and the Town could have negotiated

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                   FLORENCE v. FLORENCE COPPER
                        Opinion of the Court

further concessions from Merrill if so desired. See Shelby D. Green,
Development Agreements: Bargained-For Zoning That is Neither Illegal Contract
Nor Conditional Zoning, 33 Cap. U.L.Rev. 383, 394, 407 (2004) (“[A]
municipality is able to set definite conditions that govern the process of
development, thus limiting the potential negative impacts from the
development on neighboring land and the community.”). Whatever its
current opinion, the Town fully and formally embraced the Development
Agreement and 2003 Plan in 2003. See Rathkopf’s, § 44:16 (“Development
agreements are authorized by state legislation in order to promote the
general welfare by allowing a reasonable balancing of the public and the
private interest in ascertaining with reasonable certainty the requirements
that must be met for a specific development project.”).

¶26           The Town also contends the superior court disregarded
Arizona law that requires municipalities to enlist public participation in the
zoning processes. See A.R.S §§ 9-462.03, -462.04. We disagree. The court
simply enforced the plain terms of a development agreement, itself the
product of Arizona law. We do not discount the tension between
yesterday’s binding promises and today’s public opinion, but having
agreed to the Development Agreement in 2003, the Town must comply with
its terms.

    II.       Amendment and Abandonment

¶27           The Town next contests the superior court’s contractual
interpretation. First, the Town argues the court erroneously “determined
that the 2003 [Plan] could not be amended without amending the
[Development Agreement].” That overstates the court’s holding, however,
which found (1) Merrill acquired certain vested rights under the
Development Agreement as described in the 2003 Plan and (2) the Town
could not amend those vested rights without amending the Development
Agreement.

¶28          Second, the Town contends it permissibly amended the 2003
Plan “by ordinance.” But the 2003 Plan was not a stand-alone contract; it
was attached to and incorporated in the Development Agreement, which
expressly required that amendments be in writing, signed by the parties,
and filed with the Pinal County Recorder within ten days. See A.R.S. § 9-
500.05(C). The Town could not amend the 2003 Plan absent a writing
signed by both parties and recorded, especially in a way that would violate
the Development Agreement’s terms.

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                   FLORENCE v. FLORENCE COPPER
                        Opinion of the Court

¶29            Third, the Town argues the court erroneously recognized
inconsistent development plans (2003 Plan versus 2007 Plan) as
simultaneously operable. But that misstates the court’s holding. The court
held (1) the 2003 Plan controls to the extent it established vested rights
protected by the Development Agreement, and (2) the 2007 Plan and
Rezoning Ordinance control to the extent they do not interfere with those
vested rights.

¶30           Beyond that, neither the 2007 Plan nor Rezoning Ordinance
alter the mining rights of the Development Agreement and 2003 Plan. The
2007 Plan only mentions mining to explain the site’s historical use “for
mining and agricultural purposes.” The Rezoning Ordinance only states
that the parties “agree[d] to work together in good faith to modify any
applicable portions of the . . . Development Agreement that may . . . conflict
with this [Plan] Amendment approval.” It does not identify mining as a
non-conforming use or purport to amend or supersede the 2003
Development Agreement.

¶31           Alternatively, the Town argues that Merrill abandoned his
vested mining rights under the Development Agreement by negotiating the
Rezoning Ordinance and 2007 Plan. We are not persuaded. The superior
court rejected this argument, and the record includes substantial evidence
showing that Merrill never intended to amend or abandon his right to mine
on the Property when he requested and then renegotiated the zoning
change in 2007. See Kocher, 206 Ariz. at 482, ¶ 9 (“A finding of fact is not
clearly erroneous if substantial evidence supports it, even if substantial
conflicting evidence exists.”).

¶32            During their protracted 2007 negotiations, Merrill and the
Town never mentioned, much less negotiated, the mining rights established
by the Development Agreement and the 2003 Plan. Merrill testified that he
did not intend to abandon the mining rights. To the contrary, he wanted to
maximize the value of his investment, including the residential
development rights and the mining rights. To that end, Merrill continued
searching for and negotiating with potential suitors to purchase his mining
rights—after the 2007 Plan and Rezoning Ordinance. He also continued to
pay “to monitor and maintain environmental permits for the mine,” and he
signed a long-term lease to enter the Property “for the purposes of mining
exploration.”      By contrast, the Town offered no documents or
communications showing that Merrill intended to abandon his valuable
mining rights. The court also found Merrill credible. See Castro v.
Ballesteros-Suarez, 222 Ariz. 48, 51, ¶ 11 (App. 2009) (this court “giv[es] due

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                    FLORENCE v. FLORENCE COPPER
                         Opinion of the Court

regard to the opportunity of the [superior] court to judge the credibility of
witnesses”).

   III.       Judgment and Remedies

¶33           The Town argues the superior court improperly issued an
advisory opinion when it held that FC could obtain specific performance if
the Town were to breach the Development Agreement because FC did not
even claim the Town has breached the Agreement. We find no error. On
summary judgment, the Town argued that FC could not obtain specific
performance if the Town breached the Development Agreement. FC
disagreed. The Declaratory Judgment Act permits courts to construe
contracts “either before or after there has been a breach,” A.R.S. § 12-1833.

   IV.        Attorney Fees

¶34            And last, the Town challenges the superior court’s award of
$1.7 million in attorney fees to FC as the prevailing party under A.R.S. § 12-
341.01. The Town argues that A.R.S. § 12-341.01 did not apply because the
lawsuit was not a contested action arising out of a contract, adding that any
award should have been capped at $10,000 under A.R.S. § 12-348. Contrary
to the Town’s argument, this lawsuit did arise out of a contract—the
Development Agreement—and FC sued the Town to enforce the terms of
that contract. See ML Servicing Co., Inc. v. Coles, 235 Ariz. 562, 570, ¶ 31 (App.
2014). Moreover, A.R.S. § 12-348 does not bar an award under A.R.S. § 12-
341.01. Kadish v. Ariz. State Land Dep’t, 177 Ariz. 322, 328 (App. 1993).

¶35           The Town also contests the fee award as excessive. We find
no abuse of discretion. See Modular Mining Sys., Inc. v. Jigsaw Techs., Inc.,
221 Ariz. 515, 521, ¶ 21 (App. 2009). The superior court used high-stakes or
bet-the-company litigation as a barometer to determine the amount of
reasonable fees and discounted FC’s request by 10 percent. Although some
of the awarded fees related to an eminent domain claim and other
counterclaims, the court found these claims were “interwoven” with the
claims under the Development Agreement; it thus properly included them
in the fee award. See id. at 522, ¶ 23. Lastly, we are mindful that the superior
court—given its long history with this case and these parties—is far better
suited than this court to determine the amount of reasonable attorney fees.

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                   FLORENCE v. FLORENCE COPPER
                        Opinion of the Court

                              CONCLUSION

¶36           We affirm the superior court’s judgment in all respects. We
grant FC’s request for attorney fees and costs on appeal under A.R.S. §§ 12-
341.01 and 12-341, contingent on compliance with ARCAP 21.

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

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