Whitestone v. Jade Palace

NOTICE: NOT FOR OFFICIAL PUBLICATION.
UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL
AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.

IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE

WHITESTONE SHOPS AT PINNACLE PEAK, L.L.C. a Delaware limited
liability company, Plaintiff/Appellant,

v.

JADE PALACE, INC., a dissolved Arizona corporation; DAVLEN MEI
and JANE DOE MEI, husband and wife; JOHN DOES I-X, JANE DOES I-
X; ABC PARTNERSHIPS I-X; and XYZ CORPORATIONS OR OTHER
ENTITIES I-X; UNKNOWN HEIRS AND DEVISES OF THE ABOVE-
NAMED DEFENDANTS, IF DECEASED; and DMEI MILLER, LLC, an
Arizona limited liability company, Defendants/Appellees.

No. 1 CA-CV 16-0035
FILED 8-22-2017

Appeal from the Superior Court in Maricopa County
No. CV2013-007298
The Honorable John Rea, Judge

AFFIRMED

COUNSEL

MouerHuston PC, Houston, TX
By Penn C. Huston
Co-Counsel for Plaintiff/Appellant admitted Pro Hac Vice

Ballard Spahr LLP, Phoenix
By Joseph A. Kanefield and Chase A. Bales
Co-Counsel for Plaintiff/Appellant
Beus Gilbert PLLC, Phoenix
By Franklyn D. Jeans and Cassandra H. Ayers
Counsel for Defendants/Appellees DMEI Miller and Davlen Mei and Yee Siu

MEMORANDUM DECISION

Judge Michael J. Brown delivered the decision of the Court, in which
Presiding Judge Diane M. Johnsen and Judge Jennifer B. Campbell joined.

B R O W N, Judge:

¶1 Whitestone Shops at Pinnacle Peak, L.L.C. (“Whitestone”)
appeals a judgment in favor of Jade Palace, Inc., Davlen Mei, and DMEI
Miller, LLC (collectively “DMEI”). Whitestone argues the trial court erred
in (1) granting summary judgment on its breach of contract claim, (2)
granting a directed verdict on the issue of reasonableness, and (3) denying
its request for injunctive relief. For the following reasons, we affirm.

FACTS AND PROCEDURAL BACKGROUND

¶2 In 2012, DMEI purchased vacant commercial property located
in the City of Scottsdale (“City”), where it intended to build a restaurant
(“Restaurant Parcel”). The Restaurant Parcel shares a parking lot with an
adjacent shopping center, which Whitestone purchased the same year. In
1999, when the two properties were an undeveloped single parcel, the
owner entered an agreement (“Parking Agreement”) with the City to
address parking requirements for the shopping center. The Parking
Agreement stated the shared parking lot would contain no fewer than 305
parking spaces and listed the size of the restaurant to be built on the
Restaurant Parcel as “± 6,281” square feet. The Restaurant Parcel later was
split off from the shopping center, and in 2004, the then-owners of the two
parcels entered an agreement for a reciprocal easement of access and use of
the shared parking lot (“Declaration”). In pertinent part, the Declaration
provides:

2.1 Access and Parking Easement.

Each Owner of a Parcel grants to the other Owner . . . a
nonexclusive, perpetual and reciprocal easement in . . . the
Easement Areas of the Parcels for purposes of reasonable
pedestrian and vehicular access, ingress and egress . . . as well
as parking in designated parking areas on the Parcels.

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* * *

2.3 Reasonable Use of Easements.

The easements granted herein shall be used and enjoyed by
each Owner . . . in such a manner as not to unreasonably
interfere with . . . the conduct and operations of the business
of any other Owner . . . .

(Emphasis added.) The Declaration incorporated by reference the Parking
Agreement. Whitestone and DMEI, as subsequent owners, are therefore
bound by the Parking Agreement and the Declaration (collectively the
“Contracts”).

¶3 In March 2013, DMEI submitted a site plan to the City’s
Development Review Board seeking approval for a 9,214 square-foot two-
story building (“First Restaurant”) on the Restaurant Parcel. By email dated
May 6, Whitestone advised DMEI that if it would reduce the size of the
proposed restaurant to a single story of no more than 6,281 square feet,
Whitestone would “raise no objection to the reduced size of the restaurant”
and would grant DMEI “a temporary construction easement to permit
construction access and construction staging in a specified area of the
parking lot.” Whitestone’s email stated its offer would expire on May 10;
the record is not clear whether DMEI responded by that date. On May 14,
Whitestone filed a complaint seeking to enjoin DMEI from developing the
Restaurant Parcel and alleging breach of contract, or, alternatively, seeking
rescission of the Contracts. In July, DMEI submitted a revised application
to the City requesting approval of a restaurant of 6,280 square feet plus a
covered patio of 636 square feet (“Second Restaurant”), which the City
eventually approved.

¶4 During the same time frame, Whitestone amended its
complaint, seeking (1) a declaratory judgment that the footprint of the
building to be developed on the Restaurant Parcel may not exceed ± 6,281
square feet and that no portion of the parking easement may be used for
construction access, staging, or storage of construction materials (Count 1);
(2) a temporary restraining order, preliminary injunction, and permanent
injunction in accordance with the declaratory judgment (Count 2); (3)
alternatively, rescission of the Contracts (Count 3); and (4) breach of
contract, anticipatory repudiation, and breach of the covenant of good faith
and fair dealing (Count 4).

¶5 DMEI later moved for summary judgment on all counts,
arguing (1) Whitestone’s claims were not ripe and no justiciable issue

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existed because DMEI did not plan to construct the restaurant for at least
two years; (2) Whitestone’s claims for declaratory relief were barred by the
plain language of the Contracts; (3) Whitestone’s requests for injunctive
relief were moot because the balance of hardships, injustice, and public
policy favored DMEI; and (4) DMEI had not breached the Contracts,
anticipatorily or otherwise, or acted in bad faith, and any alleged damages
were speculative, remote, and uncertain.

¶6 Following briefing and oral argument, the trial court granted
summary judgment in favor of DMEI on Count 3 (rescission) and Count 4
(breach of contract, anticipatory repudiation, and breach of good faith and
fair dealing), but denied the motion as to Count 1 (declaratory judgment)
and Count 2 (injunction).1 The court found that the “dispute is over two
matters – the size of the restaurant proposed by [DMEI] and whether the
[Declaration] allows any construction related use of the common parking
area.” The court explained that as to Counts 1 and 2, the Contracts were
ambiguous because the phrase “± 6,281” in the Parking Agreement “clearly
contemplates a range” and the Declaration was silent as to construction-
related use of the parking area. The court reasoned, depending upon how
the jury decided the Contracts should be interpreted, Count 4 would either
be moot (if Whitestone prevailed on its declaratory judgment and
injunction claims) or without merit (if DMEI’s proposed restaurant design
did not violate the Contracts and the Contracts did not bar use of the
parking lot for construction purposes).

¶7 A four-day jury trial was held on Count 1 (declaratory
judgment) and Count 2 (injunction). The jury found that although the First
Restaurant initially proposed by DMEI exceeded the square-foot
specifications in the Parking Agreement, the Second Restaurant did not
exceed such specifications, and DMEI was permitted to use the common
parking lot for construction staging and storage.

¶8 After Whitestone unsuccessfully moved for a new trial, the
trial court found that DMEI was the prevailing party, awarding attorney
fees and costs in the amount of $230,011.54. The court entered final
judgment and Whitestone timely appealed.

1 On appeal, Whitestone does not argue the trial court erred in
granting summary judgment in favor of DMEI on its rescission claim
(Count 3). Thus, we do not address it.

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DISCUSSION

A. Summary Judgment on Breach of Contract Claim (Count 4)

¶9 Whitestone argues the trial court erred in granting summary
judgment on its breach of contract claim. Specifically, it contends DMEI
breached the Parking Agreement because the First Restaurant plan
submitted to the City exceeded the square-foot specifications. In support
of its claim, Whitestone focuses on the jury’s verdict that the First
Restaurant proposal exceeded the Parking Agreement’s square-foot
limitation, asserting the same finding would have allowed Whitestone to
prevail on its breach of contract claim at trial and recover as damages the
consultation and legal fees incurred in challenging the First Restaurant
development application.

¶10 Entry of summary judgment is proper “if the moving party
shows that there is no genuine dispute as to any material fact and the
moving party is entitled to judgment as a matter of law.” Ariz. R. Civ. P.
56(a). We determine de novo whether any genuine issue of material fact
exists and whether the trial court erred in applying the law, and we will
uphold the court’s ruling if correct for any reason. Logerquist v. Danforth, 188 Ariz. 16, 18 (App. 1996). We construe the evidence and reasonable
inferences in the light most favorable to the non-moving party. Wells Fargo
Bank v. Ariz. Laborers, Teamsters & Cement Masons Local No. 395 Pension Tr.
Fund, 201 Ariz. 474, 482, ¶ 13 (2002).

¶11 To avoid summary judgment on its breach of contract claim,
Whitestone had the burden of providing sufficient evidence to establish a
genuine dispute of material fact concerning the existence of a contract, its
breach, and resulting damages. See Goodman v. Physical Res. Eng’g, Inc., 229
Ariz. 25, 28, ¶ 7 (App. 2011). Whitestone’s amended complaint, however,
alleged only a prospective breach – “if [DMEI] develops a building in excess
of [± 6281] square feet or fails to develop the area of the [Restaurant Parcel]
for purposes other than parking and access, it will have breached its
obligations as successor under the Parking Declaration and Parking
Agreement.” (Emphasis added.) Whitestone cites no authority supporting
the proposition that a party may be assessed damages for a future breach
of a property development. Because Whitestone alleged only a prospective
breach, the claim fails as a matter of law.2 See City of Tucson v. Superior Court,

2 Whitestone’s breach of contract claim, as amended, also included
general allegations of anticipatory repudiation and breach of the covenant

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116 Ariz. 322, 324 (App. 1977) (“[T]o state a claim in contract, the complaint
must disclose an agreement, a right thereunder in the party seeking relief
and a breach by the defendant.”)

¶12 The practical effect of the jury’s verdict is that DMEI would
be in breach of the Parking Agreement if DMEI proceeded with the
development outlined in the First Restaurant submission to the City; the
jury’s verdict did not establish that DMEI breached the Parking Agreement
simply because it submitted the development proposal. Cf. Canyon del Rio
Inv’rs, L.L.C. v. City of Flagstaff, 227 Ariz. 336, 341, ¶ 18 (App. 2011)
(Arizona’s declaratory judgment act allows a court to determine legal rights
“before the occurrence of a breach or injury necessary to sustain a coercive
action (one seeking damages or injunctive relief).”); Elkins v. Vana, 25 Ariz.
App. 122, 126 (1975) (“An action for a declaratory judgment is intended to
serve as an instrument of preventive justice . . . to permit adjudication of
rights or status without the necessity of a prior breach.”). The trial court
did not err in granting summary judgment on Whitestone’s breach of
contract claim.3

of good faith and fair dealing. In its reply brief, Whitestone contends its
claim was not limited to a prospective breach because the amended
complaint used the present tense (“is a material breach because it destroys
the entire purpose of the cross easement”). (Emphasis added.) At most,
those allegations might have supported Whitestone’s anticipatory
repudiation and good faith and fair dealing claims. Because Whitestone
failed to raise any argument as to either claim in its opening brief, it waived
those arguments. See City of Tucson v. Clear Channel Outdoor, Inc., 218 Ariz.
172, 195, ¶ 88 (App. 2008) (noting that an appellate court will not address
issues or arguments waived by party’s failure to develop them adequately);
see also ARCAP 13(a)(7)(A) (stating that the opening brief must include an
“[a]ppellant’s contentions concerning each issue presented for review, with
supporting reasons for each contention, and with citations of legal
authorities and appropriate references to the portions of the record on
which the appellant relies”).

3 Whitestone’s claim also fails because the amended complaint did not
allege a breach or damages arising from DMEI’s submittal of a development
application for the First Restaurant. DMEI submitted plans for the First
Restaurant in March 2013 and Whitestone filed its original complaint in
May 2013. DMEI then submitted the Second Restaurant application in July
2013, effectively revoking its submission concerning the First Restaurant.

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B. Denial of Proposed Verdict Forms

¶13 Whitestone argues it proved that both restaurants proposed
by DMEI would breach the provisions in the Declaration that limit the
parties’ use of parking to what is “reasonable.” It argues that although the
trial court recognized the claim presented triable issues when it denied
DMEI’s summary judgment motion, the court later erred by granting
judgment as a matter of law in favor of DMEI.

¶14 As an initial matter, Whitestone alleged no “reasonableness”
claim in its complaint or amended complaint. However, because
Whitestone raised the reasonableness of the possible parking demands for
both proposed restaurants in the joint pretrial statement and it was tried
without objection, DMEI impliedly consented to the trial court’s
consideration of the claim. See Ariz. R. Civ. P. 15(b)(2) (“When an issue not
raised by the pleadings is tried by the parties’ express or implied consent,
it must be treated in all respects as if it had been raised in the pleadings.”);
see also Elec. Adver., Inc. v. Sakato, 94 Ariz. 68, 71 (1963) (“When evidence is
presented at trial which presents a new o[r] different theory from that
alleged in the pleadings, and the adverse party does not object to the
introduction thereof, that issue is then tried by implied consent.”).
Nevertheless, Whitestone has not shown it is entitled to a new trial.

¶15 Whitestone argues the trial court effectively entered
judgment in favor of DMEI as a matter of law when it declined to give
verdict forms to the jury that would have allowed it to find that the
restaurants violated the parking restrictions in the Declaration. “Failure to
give a requested verdict form is not reversible error unless the omission was
prejudicial to the moving party.” Lohmeier v. Hammer, 214 Ariz. 57, 61-62, ¶
13 (App. 2006) (citing State v. Garcia, 102 Ariz. 468, 471 (1967)). Prejudice
“will not be presumed but must affirmatively appear from the record.”
Walters v. First Fed. Sav. & Loan Ass’n, 131 Ariz. 321, 326 (1982).

¶16 As pertinent here, the joint pretrial statement included
Whitestone’s contention that DMEI’s restaurant submissions to the City
breached the Declaration “because the planned restaurant unreasonably
interfered with [Whitestone’s] operations on the Shopping Center Parcel.”

Thus, any alleged damages Whitestone incurred based on the First
Restaurant would have accrued no later than July 2013. Whitestone did not
allege a breach and resulting present damages relating to the First
Restaurant application in its amended complaint, nor did it seek any further
amendment to add such an allegation.

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At trial, the crux of testimony from Whitestone’s representatives revealed
that Whitestone sought to constrain DMEI’s construction of a restaurant
according to Whitestone’s objectives, not based on what the Contracts
allowed DMEI to build. For example, Christine Mastandrea, Vice President
of Corporate Strategy at Whitestone, testified that if DMEI constructed the
planned restaurant, DMEI would either need to add more parking spaces
on its own property (she did not know how many) or reduce the size of the
restaurant to under 6280 square feet. She reasoned that otherwise, “at some
point it’s going to impact other users in the [shopping center]. And the land
that [it] is using, the parking, is on Whitestone’s land.” Likewise, Daniel
Kovacevic, Regional Vice President for Whitestone, testified that if DMEI
were to build a smaller restaurant, “maybe a 4,000-square-foot size
restaurant . . . more of a quick-service type restaurant,” then there would
be adequate parking for everyone.

¶17 As noted, supra ¶ 2, the Declaration provides a reciprocal
easement for “reasonable” access and parking, which is to be used “in such
a manner as not to unreasonably interfere with” each other party. On the
third day of trial, Whitestone filed a bench brief arguing it had presented
extensive evidence showing how the restaurant might interfere with others’
use of parking on the property in violation of the Declaration and, thus, the
jury should decide if the “proposed restaurants violate the Declaration.”
Whitestone then requested proposed verdict forms that would have
directed the jury to decide whether the First Restaurant and/or the Second
Restaurant violate the “reasonableness requirement in sections 2.1 and 2.3
of the [Declaration].” Addressing the proposed forms, the court engaged
in the following exchange with counsel for Whitestone:

THE COURT: Okay. First, you have to show where in the
[D]eclaration you get to say what [DMEI does] with their
property.

MR. CLARK (Whitestone’s counsel): In the [D]eclaration.

THE COURT: So what you’re saying is that a year from now
if [DMEI] decides [a different restaurant in the shopping
center] is way [too] successful and is using [an] unfair share
of the parking, [it] can file a lawsuit to seek a declaration to
say they have to take 200 square feet off their restaurant.

MR. HUSTON (Whitestone’s counsel): [DMEI] can file a
lawsuit that says that [a different restaurant is] violating the
easement. Yes, absolutely.

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THE COURT: Right. But at that point [DMEI would] know
how much is used and how much. I mean, there could be a
lot of ways that a 6280 square foot restaurant does not pose
an unreasonable burden on the parking.

MR. CLARK: We’re only seeking a declaration as to this 6,280
square foot restaurant and the 10,000.

THE COURT: You don’t get to tell them what to do there. You
don’t get to tell them they have to do a takeout restaurant. What
you can do is if there is an unreasonable parking burden, you can
tell them they have to do something to cure that unreasonable
parking burden, but you can’t tell them . . . you got to take 2,000
square foot off their property or do business in a different way.

MR. CLARK: We believe that the evidence shows . . . that the
restaurant as proposed both the 6,000 square foot plus patio
and 10,000 square foot restaurant do impose an unreasonable
burden on the party.

THE COURT: Well, how can that be when they don’t have
any cars parking there at all right now?

MR. CLARK: Because the evidence shows that that is what
will happen with this restaurant.

THE COURT: What if [DMEI] finds offsite parking and hires
valets?

MR. HUSTON: There’s been no evidence that that’s possible
or doable. That would have been probative evidence if they
had introduced it. But the record, as it exists right now . . .
supports an instruction to the jury on whether the proposed
restaurant complies with the [D]eclaration.

THE COURT: No. The [D]eclaration declares what [DMEI] can
do in the shared common area, not what they can do on their
property. If what they are doing on their property poses an
unreasonable burden on the shared parking area, you can tell
them they have to stop posing an unreasonable burden on the
shared parking, and at that point, they have to decide how to
do that. I mean, you don’t get to tell them how to run their
business. Nothing in the [D]eclaration gives you that right. At this

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point, it’s pure speculation as to whether this restaurant will
pose an undue burden on the parking area.

MR. HUSTON: I don’t believe that it is. . . . [T]he evidence
that was presented at trial would support a conclusion by the
jury that it will unreasonably interfere . . . .

THE COURT: I think for two reasons. One is a matter . . .
based on the evidence and the other is based on a matter of
law that the requested verdict forms on reasonableness will
not be given. One is that the [D]eclarations themselves don’t give
the plaintiff any right to impose restrictions on what is done on [the
Restaurant Parcel], and as a matter of fact, the evidence is
purely speculative as to what the parking requirements will
be of that building.

(Emphasis added.)

¶18 The trial court did not abuse its discretion in interpreting
Whitestone’s proposed jury verdict forms as a question of whether
Whitestone had the power under the Declaration to unilaterally decide that
the Declaration barred both proposed restaurants. Consistent with the trial
court’s explanation of its ruling, the plain language of the Declaration
provides for reasonable use of the shared parking area. The reasonableness
of a potential use cannot be determined until the use actually exists, and
nothing in the record indicates that as of the date of trial, DMEI had used
the shared parking area for any purpose, much less an unreasonable one.
Moreover, simply because the parties disputed whether a future restaurant
might unreasonably burden the parking lot did not establish an ambiguity
in the Declaration that was required to be submitted to the jury. See
Grossman v. Hatley, 21 Ariz. App. 581, 585 (1974) (“Whether a contract is
ambiguous or uncertain is a question of law and the mere fact that the
parties disagree as to the meaning of its terms does not, in and of itself,
establish its ambiguity.”). Even if the Declaration’s reference to
reasonableness might require interpretation, in the absence of facts
concerning the size and nature of the restaurant actually built, and its actual
parking demands, the question Whitestone wanted the court to ask the jury
to decide was a matter of pure speculation. Thus, the court did not err in
rejecting Whitestone’s proposed verdict forms.

C. Denial of Injunction on First Restaurant (Count 2)

¶19 Whitestone argues the trial court erred in denying its request
for an injunction prohibiting DMEI from building the First Restaurant.

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Whitestone contends the injunction was consistent with the jury’s finding
on Count 1, and the court improperly denied the request when it entered
DMEI’s proposed form of judgment as final.

¶20 “We review a trial court’s order granting or denying an
injunction for a clear abuse of discretion.” Kromko v. City of Tucson, 202 Ariz.
499, 501, ¶ 4 (App. 2002). A court abuses its discretion when it commits an
error of law or fails to consider evidence in reaching a discretionary
conclusion or, if upon review, “the record fails to provide substantial
evidence to support the trial court’s finding.” Flying Diamond Airpark, LLC
v. Meinberg, 215 Ariz. 44, 50, ¶ 27 (App. 2007).

¶21 Whitestone has failed to establish that an injunction is
appropriate because there is no evidence DMEI has any intention of
renewing its plans for the First Restaurant. Thus, the trial court did not
abuse its discretion in declining to grant an injunction.

D. Attorney Fees

¶22 Without citation to authority or any analysis of the record,
Whitestone requests an award of fees and costs in all trial proceedings
under Arizona Revised Statutes (“A.R.S.”) section 12-341.01 and the
Declaration, asserting it was the prevailing party. In awarding attorney fees
and costs to DMEI, and denying Whitestone’s corresponding request, the
trial court reasoned as follows:

The Court rejects [Whitestone’s] deconstruction of the case.
The case went to trial because [Whitestone] sought to prevent
[DMEI] from constructing the building proposed and
approved by the City of Scottsdale. [Whitestone] sought to
prevent [DMEI] from using any of the common parking area
owned by Whitestone for any construction activity.
[Whitestone] sought even stronger restrictions on [DMEI’s]
ability to use and conduct business on the [Restaurant Parcel]
but that effort was rejected as a matter of law by the Court.
[Whitestone] had the ability to dismiss this case at any time
and chose to go to trial. [Whitestone] lost in every meaningful
way.

Based on the jury verdicts, and the entire record, the court did not abuse its
discretion in finding that DMEI, and not Whitestone, was the prevailing
party at trial and thus eligible for a fee award. See Sanborn v. Brooker & Wake
Prop. Mgmt., Inc., 178 Ariz. 425, 430 (App. 1994) (stating that a
determination of prevailing party for “purposes of awarding attorneys’ fees

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is within the sole discretion of the trial court, and will not be disturbed on
appeal if any reasonable basis exists for it”).

¶23 Additionally, both parties request attorney fees and costs
incurred on appeal pursuant to A.R.S. § 12-341.01(A), which gives a court
discretion to award reasonable attorney fees to a prevailing party “[i]n any
contested action arising out of a contract.” In the exercise of our discretion,
as DMEI is the prevailing party on appeal, we award DMEI its taxable costs
under § 12-341 and its reasonable attorney fees under § 12-341.01 incurred
on appeal upon DMEI’s compliance with ARCAP 21.

CONCLUSION

¶24 Based on the foregoing, we affirm the trial court’s judgment.

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

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