Opinion
No. 2 CA-CV 2017-0083
02-16-2018
ST. PHILIP'S PLAZA LLC, AN ARIZONA LIMITED LIABILITY COMPANY, Plaintiff/Appellant, v. NF II TUCSON LLC, A DELAWARE LIMITED LIABILITY COMPANY, Defendant/Appellee.
COUNSEL Law Offices of Dennis A. Rosen, Tucson By Dennis A. Rosen and Gayle D. Reay Counsel for Plaintiff/Appellant Hinderaker Rauh & Weisman, P.L.C. By Adam Weisman Counsel for Defendant/Appellee
THIS DECISION DOES NOT CREATE LEGAL PRECEDENT AND MAY NOT BE CITED EXCEPT AS AUTHORIZED BY APPLICABLE RULES.
NOT FOR PUBLICATION
See Ariz. R. Sup. Ct. 111(c)(1); Ariz. R. Civ. App. P. 28(a)(1), (f). Appeal from the Superior Court in Pima County
No. C20160002
The Honorable Jeffrey T. Bergin, Judge
REVERSED AND REMANDED
COUNSEL Law Offices of Dennis A. Rosen, Tucson
By Dennis A. Rosen and Gayle D. Reay
Counsel for Plaintiff/Appellant Hinderaker Rauh & Weisman, P.L.C.
By Adam Weisman
Counsel for Defendant/Appellee
MEMORANDUM DECISION
Chief Judge Eckerstrom authored the decision of the Court, in which Judge Brearcliffe and Judge Kelly concurred. ECKERSTROM, Chief Judge:
The Hon. Virginia C. Kelly, a retired judge of this court, is called back to active duty to serve on this case pursuant to orders of this court and our supreme court.
¶1 St. Philip's Plaza LLC ("the Plaza") appeals the trial court's grant of summary judgment in favor of NF II Tucson LLC ("the Hotel"), asserting multiple claims of error. For the following reasons, we reverse and remand for further proceedings.
Factual and Procedural History
¶2 "In reviewing a grant of summary judgment, we view the facts in the light most favorable to the party against whom judgment was entered." Timmons v. Ross Dress For Less, Inc., 234 Ariz. 569, ¶ 2 (App. 2014). The Plaza is a multi-use commercial development including shops, business offices, and several restaurants and bars. In 1990, Trendwest Management Company, the predecessor in interest to the Hotel, conveyed a negative easement to St. Philip's Plaza Ltd., predecessor to the Plaza, prohibiting any portion of hotel land from being used for "a restaurant, cafe, bar, cocktail lounge, or other full-scale facility for the service of food and alcoholic beverages . . . exclusive of any catered functions and/or vending machines and complimentary breakfasts." In December 2014, the Hotel, pursuant to a branding agreement, began serving "the Evening Social," a "beer and wine get-together with limited . . . food items that is provided to hotel guests at no charge . . . Monday through Thursdays from 5:00 p.m. to 7:00 p.m."
¶3 In January 2016, the Plaza initiated this action for breach of the negative easement, seeking damages and a permanent injunction prohibiting the Hotel from "offering or serving beer, wine, and food" during the Evening Social. After hearing argument on cross-motions for summary judgment, the trial court determined the Hotel was "not using the property for a restaurant, café, bar, cocktail lounge, or other full-scale facility in a manner that would violate the [negative easement]," and granted summary judgment in favor of the Hotel. After the court denied its motion for new trial, the Plaza appealed. We have jurisdiction. A.R.S. §§ 12-120.21(A)(1), 12-2101(A)(1), (5)(a).
Negative Easement
¶4 A deed containing a negative easement, the equivalent of a restrictive covenant, see Allied American Investment Co. v. Pettit, 65 Ariz. 283, 291 (1947), is a contract. Powell v. Washburn, 211 Ariz. 553, ¶ 8 (2006). The interpretation of contracts is a matter of law we review de novo. Id. We also review a grant of summary judgment de novo, "viewing the evidence and all reasonable inferences in the light most favorable to the non-moving party." McCleary v. Tripodi, 243 Ariz. 197, ¶ 20 (App. 2017).
¶5 "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." Powell, 211 Ariz. 553, ¶ 9. Accordingly, our courts apply an "intent-based analysis" considering "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." Id. ¶ 10.
¶6 Here, the manifest purpose of the negative easement is to protect the Plaza's own food and drink establishments from direct competition by the Hotel. See id. To that end, the negative easement prohibits any portion of the Hotel from being used for "a restaurant, cafe, bar, cocktail lounge, or other full-scale facility for the service of food and alcoholic beverages . . . exclusive of any catered functions and/or vending machines and complimentary breakfasts." The negative easement also contains a clause suspending this prohibition for any period during which the Plaza does not have "at least one first-class[,] full-service restaurant with full liquor service . . . that is regularly open and serving food and . . . alcoholic beverages during customary breakfast, lunch, and dinner hours each day."
The parties also dispute whether the suspension clause had been triggered and, if so, whether the Evening Social violated certain exclusive rights given to bars and restaurants in the Plaza. However, the trial court did not resolve these issues and therefore we do not address them. See Jett v. City of Tucson, 180 Ariz. 115, 123-24 (1994).
¶7 In its order granting summary judgment, the trial court interpreted the negative easement "in conjunction with the suspension provision," and determined "full-scale facility" bore the same meaning as the "first-class[,] full-service restaurant" described therein. Finding the Hotel offered its guests "a limited menu of food and alcohol items during two hours on only four days of the week," the court determined the Hotel was "not using the property . . . in a manner that would violate the [negative easement]."
¶8 The Plaza asserts the trial court's determination rendered "cafe, bar, [and] cocktail lounge" surplusage inasmuch as those establishments ordinarily do not possess all the attributes of a first-class, full-service restaurant as defined in the suspension clause. It correctly observes that when "a first-class, full service restaurant [is] operating in [the] Plaza," the easement nevertheless prohibits the Hotel "from operating [a] café and/or bar even though [that café or bar] would not be a 'other full-scale facility' under the trial court's ruling."
¶9 Relying on the suspension clause, the Plaza also argues that "[t]he express wording of the [n]egative [e]asement . . . bars the Hotel from serving food and alcohol in the evenings." But, as the Hotel observes, if the parties had intended such a blanket prohibition, they easily could have included language to that effect. See Desarrollo Immobiliario y Negocios Industriales de Alta Tecnologia de Hermosillo, S.A. de C.V. v. Kader Holdings Co., 229 Ariz. 367, ¶ 29 (App. 2012). Although we agree the trial court did not correctly construe the easement's language because it rendered certain language surplusage, we do not agree the negative easement absolutely prohibits the Hotel from serving food and drink outside the exempted activities. Accordingly, we now turn to the proper interpretation of "full-scale facility" and whether a question of fact remains as to its meaning or its application on the facts in the record.
Although we agree the suspension clause informs the easement's underlying purpose to curtail competition, we do not agree the parties intended that any and all competition would violate the negative easement. Rather, the negative easement only prohibits the Hotel from competing in the form of a "full-scale facility" and it specifically exempts some forms of Hotel activity which compete, albeit more obliquely, with Plaza establishments.
¶10 Applying the canon of construction ejusdem generis, we interpret the general term "full-scale facility" to mean a facility of the same kind or class as "restaurant, cafe, bar, [or] cocktail lounge." In other words, the easement does not prevent the Hotel from serving food and drinks, generally; rather, it prohibits the Hotel from operating cognizable establishments serving food, drink, or both. Further, that prohibition extends not only to those specifically enumerated, but also, for example, to a gastropub, bakery, cantina, or night club.
Under ejusdem generis, when a list of specific terms ends with a general term, that term is limited to "the same general kind or class" as those specifically enumerated. Antonin Scalia & Bryan A. Garner, Reading Law: The Interpretation of Legal Texts, § 32 (2012) ("If one speaks of 'Mickey Mantle, Rocky Marciano, Michael Jordan, and other great competitors,' the last noun does not reasonably refer to . . . Napoleon Bonaparte (a great competitor on the battlefield)," but rather to other professional athletes). --------
¶11 But mere operation of a cognizable facility that serves food, drink, or both is not sufficient to violate the negative easement; the easement only prohibits facilities that have the character of a "full-scale" restaurant, café, bar, or cocktail lounge. The parties dispute both whether "full-scale" is a term of art and its consequent meaning. Trendwest's attorney, who participated in the negotiation resulting in the negative easement, avowed that "'[f]ull-scale' is a term of art in the hotel and restaurant industry meaning a top-flight, for-profit restaurant with a chef, table service by wait staff that serves a full menu of courses and has full liquor service." Relying on its expert, the Plaza insists "full-scale" concerns the size and capabilities of the Hotel's kitchen and dining area rather than the level of service. As a preliminary matter, we determine "full-scale facility" cannot mean full-service restaurant as defined by the Hotel, because that definition does not encompass establishments the negative easement explicitly prohibits; namely, cafés, bars, and cocktail lounges. See supra ¶¶ 8-9. Rather, we construe "full-scale facility" according to its ordinary meaning, as informed by the general purpose of the easement.
¶12 As a starting point, "full-scale" means "[e]mploying all resources; not limited or partial." The American Heritage Dictionary 709 (5th ed. 2011). Additionally, because the parties expressly exempted complimentary breakfasts, they signaled that when the Hotel provides a meal it could, in certain circumstances, offend the easement, even if it does not charge an additional cost. Thus, from the four corners of the easement, we interpret "full-scale facility" to mean a facility that possesses all the essential characteristics of a recognized type of food-service establishment, except that such facility need not charge an additional cost.
¶13 The Hotel argues those essential characteristics a facility must possess to be considered "full-scale" are informed by the very establishments actually operating in the Plaza. Accordingly, it urges that the dispositive factors include days and hours of operation, breadth of the menu, employment of a chef or cook, and whether the kitchen is thoroughly equipped. Relying on the manifest purpose of the negative easement—to prevent direct competition with its own food and drink establishments, the Plaza contends the key characteristics of a "full-scale facility" are those that produce any pronounced competitive effect. It argues such competition occurs here given that guests are discouraged from walking across the parking lot to the Plaza's bars and restaurants to pay for what the Hotel provides for free.
¶14 Notwithstanding the well-reasoned arguments of the parties, the language of the negative easement itself is not sufficiently clear to permit construction as a matter of law using the criteria advanced by either party. The precise meaning of "full-scale facility" in the context of this case, and whether, by offering the Evening Social, the Hotel is operating such a facility, remain questions for the trier of fact to resolve. Accordingly, neither party is entitled to summary judgment in its favor.
Attorney Fees and Costs
¶15 Both parties request attorney fees and court costs pursuant to A.R.S. §§ 12-341 and 12-341.01. In our discretion, we deny attorney fees on appeal and leave the question of fees to the trial court, "pending resolution of the matter on the merits." Tierra Ranchos Homeowners Ass'n v. Kitchukov, 216 Ariz. 195, ¶ 37 (App. 2007). We award the Plaza its costs on appeal.
Disposition
¶16 Because material questions of fact remain outstanding, we determine summary judgment was not warranted. Accordingly, we reverse the judgment of the trial court and remand for further proceedings consistent with this decision.