Linda W. SWAIN, et al., Plaintiffs/Appellees,
BIXBY VILLAGE GOLF COURSE INC, et al., Defendants/Appellants.
[Copyrighted Material Omitted]
from the Superior Court in Maricopa County, No.
CV2014-051035, The Honorable John R. Hannah, Judge. AFFIRMED
H. Barnes PC, Phoenix, By Timothy H. Barnes, Counsel for
Cronin, Erickson, Curran & Reiter PLC, Phoenix, By Daniel D.
Maynard, Counsel for Defendants/Appellants
Angle, Hallam, Jackson & Formanek PLC, Phoenix, By Chris R.
Baniszewski Counsel for Defendant/Appellant/Counter-Claimant
Judge Randall M. Howe delivered the opinion of the Court, in
which Judge Jennifer M. Perkins and Judge David D. Weinzweig
TTLC Ahwatukee Lakes Investors, LLC ("TTLC")
appeals a final judgment granting a permanent injunction
enforcing a covenant requiring the operating of a golf course
on particular property. TTLC contends, among other arguments,
that because the covenant was restrictive rather than
affirmative, it should be interpreted to permit, but not
require, the operating of a golf course on the property in
The Arizona Supreme Court has made clear in Powell v.
Washburn, 211 Ariz. 553, 125 P.3d 373 (2006), however,
that whether a covenant is deemed restrictive or affirmative,
it must be interpreted according to its enactors intent. In
this case, the circumstances surrounding the creation of the
covenant and the covenants language demonstrate that its
enactors intended to require the operation of a golf course
on the property. Because this Court rejects TTLCs argument
and the other arguments discussed below, this Court affirms
the trial courts ruling granting the injunction.
FACTS AND PROCEDURAL HISTORY
Ahwatukee is a "master planned community" in
Phoenix, Arizona, composed of some 5,200 homes built around
the Ahwatukee Country Club Golf Course and the now-closed
Ahwatukee Lakes Golf Course. Several of the homes either
border or feature prominent views of at least one of the golf
courses. Linda W. Swain and Eileen T. Breslin each own
property abutting the Lakes Golf Course.
Chicago Title Agency of Arizona, Inc. (the
"Declarant"), was the original owner of the Lakes
Golf Course and at some point, acquired the Country Club Golf
Course. In 1986, it recorded a deed restriction on the Lakes
Golf Course. The deed restriction was made "pursuant to
A.R.S. § 42-125.01, restricting the use of [the] property
to use as a golf course, facilities, and improvements
thereto, for ten (10) years[.]" The restriction further
recited that it could be "amended, revoked or extended
for any time at the discretion of the then owner of the
property, subject to the provisions of A.R.S. §
42-125.01." Pursuant to this provision, the Declarant
recorded two amendments to the deed restriction. The First
Amendment extended the deed restrictions term one more year
and the Second Amendment extended it five more years.
In November 1992, the Declarant recorded a Declaration of
Covenants, Conditions, Restrictions and Easements covering
both golf courses. The Declaration restated the 1986 deed
restriction, along with the First and Second Amendments. It
also stated that the Covenants, Conditions, and Restrictions
("CC&Rs") were established for the mutual benefit
of the "Declarant and all present and future
owners" and "any owner of property located within
the Ahwatukee master planned community"— the
"Benefitted Persons." It stated that "[b]y
Declaration, the Declarant intends to comply with the
requirements and obtain the benefits of Arizona Revised
Statute 42-146"— a tax valuation statute that
applied a special valuation method to any property that
constituted a "golf course." The Declaration
provided that the property could be developed for purposes
other than a golf course only if 51% of the 5,200 Ahwatukee
homeowners approved of removing the deed restriction or if a
court found a "material change in conditions or
circumstances" that justified removing the restriction.
In June 2006, Bixby Village Golf Course, Inc.— with
Wilson Gee as its president— and a group of investors
purchased both golf courses for $5.6 million. Around this
same time, Bixby leased the two properties to Ahwatukee Golf
Properties, LLC ("AGP")— a limited liability
company Gee and his wife owned. The lease agreement required
AGP to operate the golf courses. It also provided, however,
that Gee would receive a 30% bonus share of any net proceeds
if the Lakes Golf Course sold for more than $4.2 million.
With an eye to redeveloping the Lakes Golf Course, Gee met
with the umbrella homeowner association for the Ahwatukee
master-planned community— the Ahwatukee Board of
Management ("ABM")— in fall 2008, and with a
Phoenix City Councilman the following year.
In May 2013, Bixby closed and dismantled the Lakes Golf
Course. It placed a barbed-wire fence around the perimeter,
drained the lakes, shut off all power, stripped the sod off
the greens, and removed hundreds of irrigation heads. Because
of these actions, Swain and Breslin sued Bixby in October
2014, claiming that closing the course violated the CC&Rs.
While the lawsuit was pending, Bixby entered a contract to
sell the Lakes Golf Course property to TTLC in March 2015.
The contract conditioned the sale on the successful
completion of a feasibility study into converting the golf
course property to a residential community. Satisfied by its
study, TTLC completed the transaction in June 2015, buying
the property for $9 million, the value it placed on the
property without the deed restriction. Under the terms of the
contract, TTLC paid Bixby a $750,000 down payment and
executed a non-recourse promissory note, promising to pay
Bixby the remaining $8.25 million on the earlier of June 19,
2018, or 90 days "after Final Approval by the City of
the Final Plat of the Real Property." The parties
negotiated a non-recourse loan to protect TTLC from any
substantial monetary liability if the deed restriction was
not removed. The contract acknowledged that Bixby had stopped
using the property as a golf course and that a lawsuit about
that decision was pending.
Thereafter, Swain, Breslin, and Bixby stipulated to dismiss
Bixby from the case. The trial court consequently dismissed
all claims against Bixby— except for an attorneys fees
claim— without prejudice. Swain and Breslin then
amended their complaint to name TTLC as the defendant and to
add claims for injunctive relief, breach of contract, and
breach of the covenant of good faith and fair dealing.
TTLC immediately moved for summary judgment, asserting that
the Declaration did not require the owner of the Lakes Golf
Course to affirmatively operate a golf course on the
property. Swain and Breslin opposed the motion and
cross-moved for partial summary judgment, countering that the
Declaration did require a golf course. At the hearing on the
motions, TTLC not only reiterated its argument that the
Declarations plain language did not require it to operate a
golf course, but added that interpreting the Declarations
language to so require would violate the Thirteenth
Amendments prohibition against slavery. The court denied
TTLCs motion and granted Swain and Breslins cross-motion,
finding that the Declaration requires the operation of a golf
course for the benefit of those the Declaration ...