State v. foothills/hanke

IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE

STATE OF ARIZONA, et al., Plaintiffs/Appellants,

v.

FOOTHILLS RESERVE MASTER OWNERS ASSOCIATION, INC.,
Defendant/Appellee.

DIETMAR HANKE, et al., Intervenors/Appellees.

No. 1 CA-CV 22-0371
FILED 12-7-2023

Appeal from the Superior Court in Maricopa County
No. CV2017-010359
The Honorable Timothy J. Thomason, Judge (Retired)

REVERSED IN PART AND REMANDED

COUNSEL

Arizona Attorney General’s Office, Phoenix
By Michelle Burton, Joe Acosta, Jr.
Counsel for Plaintiffs/Appellants

Zeitlin & Zeitlin, PC, Phoenix
By Dale S. Zeitlin, Casandra C. Markoff
Counsel for Defendant/Appellee
 STATE, et al. v. FOOTHILLS/HANKE, et al.
Opinion of the Court

OPINION

Judge David D. Weinzweig delivered the opinion of the Court, in which
Presiding Judge Cynthia J. Bailey and Judge Jennifer B. Campbell joined.

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

¶1 Arizona courts and juries must ascertain and award
severance damages in condemnation actions when the property to be
condemned is part of a larger parcel. We must decide whether 589
homeowners were entitled to “proximity damages,” a form of severance
damages, when the state condemned their positive and negative easements,
but did not condemn their homes. Because an easement is not a parcel of
land, the homeowners deserved no severance damages.

¶2 The State of Arizona appeals the superior court’s entry of
partial summary judgment in favor of Foothills Reserve Master Owners
Association, Inc. (“HOA”), which represents 589 homeowners in the
Foothills Reserve subdivision. We reverse in part and remand for the court
to enter a new judgment without severance damages.

FACTS AND PROCEDURAL BACKGROUND

¶3 Nestled at the base of South Mountain, the Foothills Reserve
subdivision has 590 single-family homes. When formed in 2001, the
subdivision was flanked by South Mountain to the north and two desert
parcels to the east and west. The HOA owned both desert parcels as
common areas (“Common Areas”) for use by all the homeowners.

¶4 Each homeowner enjoyed a positive and negative easement
over the Common Areas. They acquired a positive easement to use the
Common Areas under the Declaration of Covenants, Conditions,
Restrictions and Easements for Foothills Reserve (“CCRs”), which
recognized that each homeowner had “a nonexclusive easement for the use
and enjoyment in and to the Common Areas.” The homeowners also held
a negative easement (or restrictive covenant) under a recorded plat
dedication. The negative easement declared that the Common Areas were
to remain “open space” and “owned and maintained by the Foothills
Reserve Community Association for landscaping and maintenance
purposes.” Both easements ran with the land and “passed with the title to
every lot.”

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 STATE, et al. v. FOOTHILLS/HANKE, et al.
Opinion of the Court

¶5 The Arizona Department of Transportation (“ADOT”) filed a
condemnation action to acquire all the Common Areas in 2017, intending
to pave an extension for the South Mountain Freeway. As the owner of the
Common Areas, the HOA pressed a takings claim against the State. ADOT
and the HOA settled that claim when the State agreed to pay and the HOA
agreed to accept the fair market value for the Common Areas.

¶6 But the settlement agreement did not resolve, and indeed
preserved, the homeowners’ claims for proximity damages arising from
“factors such as noise, pollution, loss of view, and unsightliness as a result
of the South Mountain Freeway.”

¶7 And so, the homeowners sought compensation from the State
for a complete taking of their positive easements to use the land and
negative easements to preserve the open space.1 The parties cross-moved
for summary judgment on whether the homeowners could recover
proximity damages stemming from the post-condemnation distance of
their homes to the freeway. ADOT “conceded that compensation was due
for the value of the easement interests lost, measured by the market value
of the home before (with the easement) and after (without the easement),”
but argued that the homeowners could not claim proximity damages
because they had no possessory interest in the Common Areas.

¶8 After briefing and oral argument, the superior court found the
homeowners were entitled to proximity damages. Later, ADOT and the
homeowners entered a stipulated final judgment to resolve all pending
issues. That judgment preserved the State’s “right to appeal only the
Court’s legal decision that the 589 Owners are entitled to proximity
damages.” The judgment identified two possible damage awards
depending on the outcome of this appeal. If the 589 homeowners “are not
entitled to proximity damages” on appeal, the State is only liable for 6
million dollars, plus statutory interest, to compensate the homeowners for
the value of their condemned positive and negative easements. If proximity
damages are available, however, the State must pay another 12 million
dollars, plus statutory interest.

¶9 The State timely appealed. We have jurisdiction. See A.R.S.
§§ 12-120.21(A)(1) and -2101(A)(1).

1
Owners of one home chose not to join the class of homeowners and
are not parties to this appeal.

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 STATE, et al. v. FOOTHILLS/HANKE, et al.
Opinion of the Court

DISCUSSION

¶10 Although eminent domain is embedded in our state and
federal constitutions, this appeal turns on an issue of statutory
interpretation, which we review de novo. See State v. Patel, 251 Ariz. 131,
134, ¶ 10 (2021); Ariz. Elec. Power Coop. v. DJL 2007 LLC, 246 Ariz. 534, 538,
¶ 13 (App. 2019). “[T]he best and most reliable index of a statute’s meaning
is its language and, when the language is clear and unequivocal, it is
determinative of the statute’s construction.” See Ariz. Biltmore Hotel Villas
Condos. Ass’n v. Conlon Grp. Ariz., LLC, 249 Ariz. 326, 332, ¶ 25 (App. 2020)
(citing State v. Hansen, 215 Ariz. 287, 289, ¶ 7 (2007)).

I. Eminent Domain.

¶11 Our state and federal constitutions limit the government’s
exercise of eminent domain. Ariz. Const. art. 2, § 17; U.S. Const. Amend. 5.
The Arizona Constitution directs that “[n]o private property shall be taken
or damaged for public or private use without just compensation having first
been made.” Ariz. Const. art. 2.

¶12 At issue here are easements. An easement is a form of
“private property . . . subject to be taken for public use.” A.R.S. § 12-1113(2);
see also Federoff v. Pioneer Title & Tr. Co. of Ariz., 166 Ariz. 383, 387–88 (1990).
Thus, an easement cannot be taken, destroyed or substantially impaired
without just compensation. State ex rel. Morrison v. Thelberg, 87 Ariz. 318,
324 (1960).

¶13 Arizona law has nearly 20 statutes that govern the right of
eminent domain. See A.R.S. § 12-1111, et seq. Section 12-1122(A) describes
how to calculate just compensation, which has two components—valuation
and severance damages. A.R.S. § 12-1122.

¶14 Under the valuation component, a court or jury must
“ascertain and assess” the market “value of the property sought to be
condemned and all improvements on the property pertaining to the realty,
and of each and every separate estate or interest in the property, and if it
consists of different parcels, the value of each parcel and each estate or
interest in the parcel separately.” A.R.S. § 12-1122(A)(1). Section 12-1122(C)
then instructs that “[v]alue shall be determined by ascertaining the most
probable price . . . the property would bring if exposed for sale in the open
market, with reasonable time allowed in which to find a purchaser, buying
with knowledge of all of the uses and purposes to which it was adapted
and for which it was capable.” A.R.S. § 12-1122(C).

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Opinion of the Court

¶15 Under the second component, severance damages are
available:

If the property sought to be condemned constitutes only a part of a
larger parcel, [a court or jury shall assess] the damages that will
accrue to the portion not sought to be condemned by reason
of its severance from the portion sought to be condemned,
and the construction of the improvement in the manner
proposed by the plaintiff.

A.R.S. § 12-1122(A)(2) (emphasis added).

¶16 Proximity damages are a form of severance damages that
compensate homeowners for the loss in value to their remaining parcel due
to its proximity to a newly constructed freeway. See State ex rel. Miller v.
Wells Fargo Bank of Ariz., N.A., 194 Ariz. 126, 129–30, ¶¶ 13–18 (App. 1998)
(citing State ex rel. Miller v. J.R. Norton Co., 158 Ariz. 50, 52 (App. 1988)).

¶17 In this case, the parties stipulated to the amount of just
compensation due under the valuation component, but disagreed on
whether homeowners were entitled to proximity damages under the
severance damages component.

¶18 The homeowners raise two arguments on appeal. They first
argue that their positive and negative easements represented the “property
sought to be condemned” and their homes represented the larger parcel.
The plain language of the statute defeats that argument.

¶19 By using the words “part of a larger parcel,” the statute
implies that the “property sought to be condemned” must be a smaller
parcel. See Antonin Scalia & Bryan A. Garner, Reading Law: The
Interpretation of Legal Texts 107 (2012) (“The expression of one thing implies
the exclusion of others”). And the word “parcel” means a parcel of land.
Indeed, related provisions in the eminent domain article clarify that a
“parcel” is a “parcel of land.” See A.R.S. § 12-1144 (“Any number of parcels
of land, whether owned by the same or different persons and whether
contiguous or not, may be included and condemned in one action, if the
parcels are to be used for a single public works project.”) (emphasis added);
A.R.S. § 12-1116(H) (using “parcel of land” and “parcel” interchangeably).
We presume a word or phrase “to bear the same meaning throughout a
text.” Scalia & Gardner, Reading Law at 170.

¶20 That interpretation is confirmed by popular dictionaries.
“Words are to be understood in their ordinary, everyday meanings.” Scalia

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Opinion of the Court

& Gardner, Reading Law at 69. According to Black’s Law Dictionary, a
“larger parcel” means “[a] portion of land that is not a complete parcel, but
is the greater part of a bigger tract,” while a “parcel” is defined as “a
continuous tract or plot of land in one possession.” See Black’s Law
Dictionary (11th ed. 2019). According to the American Heritage Dictionary,
the word “parcel” means “a plot of land, usually a division of a larger area.”
See American Heritage Dictionary (5th ed. 2020).

¶21 Applied here, the homeowners are not entitled to proximity
damages because their easements were not parcels of land. A positive
easement creates “a nonpossessory right to enter and use land in the
possession of another and obligates the possessor not to interfere with the
uses authorized by the easement.” Restatement (Third) of Property
(Servitudes) § 1.2 (2000). A negative easement is a restrictive covenant,
which “limits permissible uses of land.” Restatement (Third) of Property
(Servitudes) § 1.3(3) (2000). Because an easement is not a parcel of land, the
homeowners were not entitled to severance damages. See State ex rel.
Ordway v. Buchanan, 154 Ariz. 159, 164 (1987) (“Severance damages are
proper when the land condemned is part of a larger parcel”) (emphasis
added).

¶22 The parties also spar over a unity of interests inquiry, but that
argument ignores the statute’s plain language. It also ignores Arizona
decisional law, which has only applied a unity of interests analysis to
determine the relationship between tracts of land. See Ariz. State Land Dept.
v. State ex rel. Herman, 113 Ariz. 125 (1976) (discussing the unity of interests
where privately owned land was condemned); State ex rel. Morrison v. Jay
Six Cattle Co., 88 Ariz. 97, 107 (1960) (discussing unitary value of property
where tracts of land were condemned); State ex rel. LaPrade v. Carrow, 57
Ariz. 429 (1941) (discussing the “larger parcel” principle in an action where
tracts of land were taken); Ordway, 154 Ariz. at 164–65 (discussing whether
condemned land and remaining tract of land constituted one “whole
parcel”). Because an easement is not a parcel of land, we need not
undertake a unity of interests analysis.

¶23 The homeowners next argue that severance damages are
available because their homes were severed from the Common Areas,
which represented a “larger parcel” and caused a partial taking. But
severance damages are available only if the claimant owns the larger parcel
from which a smaller parcel is condemned. See Wells Fargo Bank, 194 Ariz.
at 129–30, ¶¶ 16–17 (explaining that homeowners cannot obtain severance
damages when none of their land is taken). Here, the HOA owned the
Common Areas, not the individual homeowners. The homeowners

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 STATE, et al. v. FOOTHILLS/HANKE, et al.
Opinion of the Court

possessed no title to or ownership interest in the Common Areas. Instead,
they owned only two easements—one positive and one negative—giving
them a right to use or limit development of the Common Areas. See
Restatement (Third) of Property (Servitudes) § 1.2 (2000); Restatement
(Third) of Property (Servitudes) § 1.3(3) (2000).

II. The State and Federal Constitutions.

¶24 We emphasize that the legislature may expand, but never
constrict, any rights guaranteed under the state constitution. See State v.
Lamberton, 183 Ariz. 47, 50 (1995) (“[S]tatutes and [court] rules cannot
eliminate or narrow rights guaranteed by the state constitution.”). But the
homeowners have not raised a constitutional challenge to Arizona’s
eminent domain laws on appeal or before the superior court, and we are
reluctant to tackle a question of constitutional dimension without briefing
and argument.

CONCLUSION

¶25 We reverse in part and remand for the court to enter a new
judgment without severance damages.

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

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