Powell v. Washburn

• Decision Date: 05 January 2006
• Docket Number: No. CV-05-0186-PR.,CV-05-0186-PR.
• Citation: Powell v. Washburn, 125 P.3d 373, 211 Ariz. 553 (Ariz. 2006)
• Parties: Edward POWELL and Bonnie Powell; Arthur Anderson and Edith Anderson; Gerald Breeyear and Judith Breeyear; Richard Brehm and Lucrecia Brehm; Clifford G. Brekhus and Lavonne Brekhus; Jesse Bryan and Elizabeth Bryan; Harry Grape; Scotty Griffin; Eddie D. Haynes; James Holmberg and Carolyn Holmberg; John Hong and Suzanne Hong; David Jewell and Kathleen Jewell; Robert Kembel and Joanne Kembel; Eldon McDaniel; Charles Schilder and Allene Schilder; Ronald Skites and Marjorie A. Skites; Howard Smith and Marjorie Smith; Larry Sullivan and Beverly Sullivan, Plaintiffs-Appellees, v. Thomas WASHBURN, individually, and in his capacity as President of K.R.C. Company, an Arizona corporation, and Rose Washburn, his wife; K.R.C. Company, an Arizona corporation; Robert M. Bumgardner and Teri Bumgardner, husband and wife; Earnest and Vera Wright, husband and wife; John and Jean Neville, husband and wife; Forrest and Jan Phillips, husband and wife; Neal Fivecoat, an unmarried man, Defendants-Appellants.
• Court: Arizona Supreme Court

125 P.3d 373

211 Ariz. 553

Edward POWELL and Bonnie Powell; Arthur Anderson and Edith Anderson; Gerald Breeyear and Judith Breeyear; Richard Brehm and Lucrecia Brehm; Clifford G. Brekhus and Lavonne Brekhus; Jesse Bryan and Elizabeth Bryan; Harry Grape; Scotty Griffin; Eddie D. Haynes; James Holmberg and Carolyn Holmberg; John Hong and Suzanne Hong; David Jewell and Kathleen Jewell; Robert Kembel and Joanne Kembel; Eldon McDaniel; Charles Schilder and Allene Schilder; Ronald Skites and Marjorie A. Skites; Howard Smith and Marjorie Smith; Larry Sullivan and Beverly Sullivan, Plaintiffs-Appellees, v. Thomas WASHBURN, individually, and in his capacity as President of K.R.C. Company, an Arizona corporation, and Rose Washburn, his wife; K.R.C. Company, an Arizona corporation; Robert M. Bumgardner and Teri Bumgardner, husband and wife; Earnest and Vera Wright, husband and wife; John and Jean Neville, husband and wife; Forrest and Jan Phillips, husband and wife; Neal Fivecoat, an unmarried man, Defendants-Appellants.

No. CV-05-0186-PR.

Supreme Court of Arizona. En Banc.

January 5, 2006.

Law Offices of John Churchill by John Churchill, Parker and Law Offices of John A. Shannon, Jr. by John A. Shannon, Jr., Parker, Attorneys for Powell et al.

Law Offices of Robert D. McCoy by Robert D. McCoy, Wickenburg, Attorney for Washburn and K.R.C. Company.

Law Offices of Keith S. Knochel, P.C. by Keith S. Knochel, Bullhead City, Attorney for Wright, Neville, Phillips and Fivecoat.

Law Offices of Toby Zimbalist by Toby Zimbalist, Phoenix, Attorney for Amicus Curiae National Institute of Community Management.

OPINION

RYAN, Justice.

¶ 1 This case requires us to interpret real property restrictive covenants. One approach has been to construe such covenants narrowly, to favor the free use of land. We today adopt the approach of the Restatement (Third) of Property: Servitudes ("Restatement") and hold that restrictive 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.

I

A

¶ 2 In November 1988, Thomas Washburn, President of K.R.C. Corporation, recorded the Declaration of Covenants, Conditions, and Restrictions ("CC & Rs") for Indian Hills Airpark, an aviation-related planned community. The CC & Rs incorporate, by reference, the La Paz County zoning ordinances.¹ The document creating the CC & Rs declared that its purpose was to develop the property "as an aviation related residential and commercial center" and that the CC & Rs "are intended to benefit the owners and their successors in interest who hold an ownership interest in all or any portion of the property."

¶ 3 The Airpark is zoned as a manufactured home subdivision. At the time the CC & Rs were adopted, the zoning ordinances permitted only three residential uses in such a subdivision: manufactured homes, low density residential (R-1-6 district),² and mobile homes. La Paz County, Ariz., The Zoning Ordinance Land Use Regulations ("Zoning Ord.") art. VI, § 606.11 (Jan.1983). Hangar-houses (homes incorporating an airplane hangar) were added to the CC & Rs as a permissible use in 1992. In 1996, La Paz County amended the zoning ordinances to permit the use of recreational vehicles as residences in a manufactured home subdivision. La Paz County, Ariz., Zoning Regulations ("Zoning Reg.") Appendix A, § VI (July 31, 1996); Zoning Reg. art. III, § III-2(F) (as amended Aug. 17, 1998).³ When the CC & Rs were adopted, the ordinances defined a recreational vehicle as

[a] vehicular type of dwelling unit thirty-five (35) feet or less in length and eight (8) feet or less in width primarily designed as temporary living quarters for recreational, camping or travel use, which either has its own motive power or is mounted on or drawn by another vehicle.

Zoning Ord. art. II, § 201.63.⁴

B

¶ 4 In August 2002, Edward Powell, along with several other property owners in the Airpark ("Powell"), filed suit in superior court against Thomas Washburn and others ("Washburn") requesting an injunction prohibiting the use of RVs as single family residences within the Airpark. The parties filed cross-motions for partial summary judgment. The trial court granted Powell's motion, finding that the CC & Rs did not permit the use of RVs as residences.

¶ 5 Washburn appealed, arguing that the trial court erred by not interpreting the restrictive covenants strictly in favor of the free use of land. In a memorandum decision, the court of appeals agreed, and reversed and remanded.

¶ 6 Powell petitioned for review, arguing that rules of contract construction, such as giving effect to all portions of the contract and enforcing the intent of the parties, supersede any policy in favor of strict construction of restrictive covenants. Powell also argues that changes in social policy toward equitable servitudes suggest abandoning the policy favoring strict construction and free use of land and adopting the Restatement rule, which requires giving effect to the intent of the parties. He contends that under the Restatement approach the CC & Rs forbid the use of RVs as residences in the Airpark.

¶ 7 We accepted review because of the widespread use of restrictive covenants in planned communities and the accompanying need for a clear statement of how to interpret such covenants. We have jurisdiction under Article 6, Section 5(3), of the Arizona Constitution, Arizona Revised Statutes ("A.R.S.") section 12-120.24 (2003), and Arizona Rule of Civil Appellate Procedure ("ARCAP") 23.

II

¶ 8 A deed containing a restrictive covenant that runs with the land is a contract. Ahwatukee Custom Estates Mgmt. Ass'n v. Turner, 196 Ariz. 631, 634, ¶ 5, 2 P.3d 1276, 1279 (App.2000); Ariz. Biltmore Estates Ass'n v. Tezak, 177 Ariz. 447, 448, 868 P.2d 1030, 1031 (App.1993). The interpretation of a contract is generally a matter of law. Hadley v. Sw. Props., Inc., 116 Ariz. 503, 506, 570 P.2d 190, 193 (1977); Biltmore Estates, 177 Ariz. at 448, 868 P.2d at 1031. At oral argument, the parties agreed there were no disputed facts concerning the creation of the CC & Rs or the meaning of the language used in the document; therefore our review is de novo. See Andrews v. Blake, 205 Ariz. 236, 240, ¶ 12, 69 P.3d 7, 11 (2003).

A

¶ 9 In Arizona, the traditional rule has been that when a restrictive covenant is unambiguous, it is enforced so as to give effect to the intent of the parties. Biltmore Estates, 177 Ariz. at 449, 868 P.2d at 1032 ("[T]he cardinal principle in construing restrictive covenants is that the intention of the parties to the instrument is paramount.") (citing Riley v. Stoves, 22 Ariz.App. 223, 225-26, 526 P.2d 747, 749-50 (1974)); Sky Mountain Ranch Subdiv. Prop. Owners Ass'n v. Williams, 12 Ariz.App. 244, 246, 469 P.2d 478, 480 (1970) ("`[T]he intent of the parties and the object of the deed or restriction should govern, giving the instrument a just and fair interpretation.'") (quoting R & R Realty Co. v. Weinstein, 4 Ariz.App. 517, 522 n. 2, 422 P.2d 148, 153 n. 2 (1966)).

¶ 10 Arizona's rule that courts should enforce the intent of the parties to a restrictive covenant in the absence of ambiguity reaches back to the 1930s. In Ainsworth v. Elder, this Court adopted an intent-based analysis (without calling it such) when it stated that "courts should consider not only the strict and technical meaning of the particular words of restriction, but also the surrounding circumstances, the general purpose of the restrictions, and the manner in which they have been interpreted by the property owners." 40 Ariz. 71, 74-75, 9 P.2d 1007, 1008 (1932).

¶ 11 This general principle of looking beyond the mere words of a restrictive covenant to the surrounding circumstances and the general purpose of the restriction has been repeated in subsequent decisions. See, e.g., Duffy v. Sunburst Farms E. Mut. Water & Agric. Co., 124 Ariz. 413, 416, 604 P.2d 1124, 1127 (1979) ("This court has previously recognized that in determining the meaning of restrictive covenants, the surrounding circumstances will be looked to as well as the meaning of particular words.") (citations omitted); Whitaker v. Holmes, 74 Ariz. 30, 32, 243 P.2d 462, 463 (1952) (stating that when interpreting restrictive covenants "the courts not only look to the meaning of the particular words but also to other surrounding circumstances") (citation omitted).

¶ 12 Arizona decisions, however, have also posited a countervailing principle of interpreting restrictive covenants when a court perceives that a restrictive covenant is ambiguous or does not expressly prohibit a particular use of the property. A number of opinions state that a court must strictly construe the terms of the restrictive covenant in favor of the free use of land and against the restriction. See, e.g., Duffy, 124 Ariz. at 417, 604 P.2d at 1128; Burke v. Voicestream Wireless Corp. II, 207 Ariz. 393, 396, ¶ 13, 87 P.3d 81, 84, (App.2004) (stating that "[i]f the language of a restrictive covenant is judged to be ambiguous, it should be construed in favor of the free use of the land") (citing Duffy, 124 Ariz. at 417, 604 P.2d at 1128); Grossman v. Hatley, 21 Ariz.App. 581, 583, 522 P.2d 46, 48 (1974) ("Restrictive covenants are to be strictly construed against persons seeking to enforce them and any ambiguities or doubts as to their effect should be resolved in favor of the free use and enjoyment of the property and against restrictions.") (citations omitted).

¶ 13 Because a restrictive covenant is a contract, Ahwatukee Custom Estates Mgmt. Ass'n, 196 Ariz. at 634, ¶ 5, 2 P.3d at 1279, the doctrine of strict construction has been criticized as being too restrictive. See Restatement § 4.1 cmt. a (2000). Rather, "the function of the law is to ascertain and give effect to the likely intentions and legitimate expectations of the parties who create servitudes, as it does with...