Trailhead v. Phoenix

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UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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

TRAILHEAD RESTRICTION, LLC, Plaintiff/Appellant,

v.

CITY OF PHOENIX, et al., Defendants/Appellees.

No. 1 CA-CV 22-0735
FILED 10-3-2023

Appeal from the Superior Court in Maricopa County
No. CV2020-009035
The Honorable Joan M. Sinclair, Judge

AFFIRMED

COUNSEL

McGill Law Firm, Scottsdale
By Gregory G. McGill
Counsel for Plaintiff/Appellant

Burch & Cracchiolo, P.A., Phoenix
By Casey S. Blais, Andrew Abraham, Daryl Manhart
Counsel for Defendant/Appellee City of Phoenix

Fidelity National Law Group, Phoenix
By Nathaniel B. Rose
Counsel for Defendant/Appellee Fidelity National Title Insurance Company
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MEMORANDUM DECISION

Judge Daniel J. Kiley delivered the decision of the Court, in which Vice
Chief Judge Randall M. Howe and Judge Jennifer M. Perkins joined.

K I L E Y, Judge:

¶1 Trailhead Restriction, LLC (“Trailhead”) appeals the grant of
summary judgment on its claims against the City of Phoenix (the “City”)
and Fidelity National Title Insurance Company f/k/a Lawyers Title of
Arizona, Inc. (“Lawyers Title”). For the following reasons, we affirm.

FACTS AND PROCEDURAL HISTORY

¶2 This dispute arises out of a decades-old land swap transaction
involving property in the Laveen area of the foothills of South Mountain in
Phoenix. Viewed in the requisite light most favorable to Trailhead as the
party against whom summary judgment was entered, see Kim v. Wong, 253
Ariz. 247, 248, ¶ 9 (App. 2022), the evidence shows that Trailhead’s
predecessor-in-interest Barbara Nerison (“Nerison”), along with her now-
deceased husband James Nerison, entered into a land swap transaction
with the City in 1977. As part of the transaction, the Nerisons sold 6.13 acres
of hillside land (the “hillside property”), located in what the parties refer to
as “South Mountain Preserve Lot 13,” to the City for $17,100 while the City
simultaneously sold 4.4 acres of nearby land to the Nerisons for $22,600.
According to Trailhead, this exchange allowed the Nerisons to acquire
developable land in the South Mountain foothills to be subdivided into
“buildable lots” for resale while the City acquired “pristine hillside
property” in its “natural state” to add to the South Mountain Preserve.

¶3 The terms of the parties’ agreement also required the
Nerisons to purchase, from third parties John and Ila Christensen, a parcel
of land (the “Christensen property”) located between the hillside property
and the 4.4 acres the Nerisons acquired from the City. As Nerison later
explained, she and her husband “had to agree,” as “part of the [land swap]
deal,” that the Christensen property would be added to the property they
bought from the City and then subdivided for resale. According to Nerison,
this arrangement gave the buyers of the subdivided lots “additional square
footage” to help meet “setback and permitting requirements” while
generating additional property tax revenue for the City.

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¶4 The deeds to the properties that the Nerisons and the City
exchanged, signed by the Nerisons and a representative of the City, contain
identical language to the effect that the conveyance of the deeded property
was subject to “[r]eservations in patents and all easements, rights of way,
covenants, conditions, and restrictions as may appear of record.”

¶5 The deed to the Christensen property, signed by the Nerisons
and the Christensens, similarly provides that the conveyance of the deeded
property was subject to “[c]urrent taxes and other assessments, reservations
in patents and all easements, rights of way, encumbrances, liens, covenants,
conditions, restrictions, obligations and liabilities as may appear of record.”

¶6 The deed to the Christensen property also contains the
following development restriction, which does not appear in the deeds to
the other properties involved in the land swap:

RESTRICTIONS: That this land remain in its natural state forever.
This restriction prohibits construction of any kind or type of
buildings, structures, walls, fences, improvements or any roads
in or upon the property above described.

IT IS UNDERSTOOD that the above restrictions cannot be
removed without a written agreement from all the property
owners that adjoin the restricted area, stating they have no
objection to its removal.

(Emphasis added.)

¶7 The deeds for all properties involved in the land swap,
including the Christensen property, were recorded on the same day, May
17, 1977.

¶8 The Nerisons later subdivided the 4.4 acres they acquired
from the City into lots zoned for single-family residences, which they then
sold to Gordon Dysthe and other buyers.

¶9 In 2019, the City began constructing trails for hiking and
horseback riding on part of the hillside property it purchased from the
Nerisons in 1977. Concerned that the presence of hikers and riders on the
hillside property would lead to “increased litter,” “noise,” and “reduc[ed]
privacy and . . . property values,” Nerison, Dysthe, and the owners of the
other subdivided lots formed Trailhead to “facilitate their joint interests in
maintaining the natural surroundings in the South Mountain Preserve
area.” Trailhead requested that the City cease construction of the trails,

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asserting that the development prohibition in the deed to the Christensen
property also applies to the hillside property that was conveyed to the City
as part of the same land swap. Responding that the hillside property is
subject to no development restrictions, the City continued constructing the
trails.

¶10 Trailhead then sued the City and Lawyers Title for breach of
contract and breach of the implied-in-law covenant of good faith and fair
dealing, asserting that the deed and escrow instructions for the 1977 land
swap transaction constitute an enforceable contract that prohibits the
construction of trails on the hillside property. Trailhead also asserted a
claim for promissory estoppel, arguing that its members purchased the
subdivided lots in reasonable reliance on the defendants’ assurances to the
Nerisons that the hillside property would remain undeveloped. In the
alternative, Trailhead asserted tort claims against the City, including
fraudulent concealment and negligent misrepresentation, and against
Lawyers Title for breach of fiduciary duty, alleging that the absence of a
development restriction in the deed to the hillside property is attributable
to the defendants’ negligent or otherwise wrongful conduct.

¶11 The City and Lawyers Title each moved for summary
judgment, arguing that the hillside property is subject to no development
restrictions and that, in any event, various defenses, including the statute
of limitations and the statute of frauds, apply to bar Trailhead’s claims.

¶12 Trailhead responded that the parties to the 1977 land swap
transaction intended that the development prohibition set forth in the deed
to the Christensen property also apply to the hillside property. Trailhead
sought to establish the intent of the parties to the land swap through
extrinsic evidence in the form of an affidavit (the “Nerison affidavit”) that
Nerison signed in 2019 and a declaration (the “Dysthe declaration”) that
Dysthe signed in 2022.

¶13 The superior court granted summary judgment on all of
Trailhead’s claims. After denying Trailhead’s subsequent motion for a new
trial and granting the defendants’ applications for attorney fees and costs,
the court entered the final judgment from which Trailhead appeals. We
have jurisdiction under A.R.S. § 12-2101(A)(1).

DISCUSSION

¶14 Trailhead argues that the court erroneously granted summary
judgment to the City and Lawyers Title. Summary judgment is appropriate
when “there is no genuine dispute as to any material fact and the moving

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party is entitled to judgment as a matter of law.” Ariz. R. Civ. P. 56(a). The
moving party is entitled to summary judgment “if the facts produced in
support of the [non-movant’s] claim or defense have so little probative
value . . . that reasonable people could not agree with the conclusion
advanced by the [non-movant].” Kim, 253 Ariz. at 248, ¶ 9 (cleaned up). We
review the grant of summary judgment de novo, id., and we will affirm the
judgment if it “is correct for any reason, even if that reason was not
considered by the court,” Melendez v. Hallmark Ins. Co., 232 Ariz. 327, 330,
¶ 9 (App. 2013) (cleaned up).

I. The Contract for the Sale of the Hillside Property Is Not
Ambiguous, and the Court Properly Interpreted It as a Matter of
Law.

¶15 Trailhead argues that issues of fact surrounding the 1977 land
swap transaction barred the court from construing the parties’ agreement
as a matter of law. The court erred, Trailhead maintains, in granting
summary judgment instead of allowing a jury to determine whether “the
restrictive language” in the deed to the Christensen property was also
“intended for the deed to the hillside property but [was] mistakenly
omitted.”

¶16 In construing a deed, the court “must give effect to the
contracting parties’ intent.” Paulden Indus. LLC v. Big Chino Materials LLC,
249 Ariz. 442, 444, ¶ 9 (App. 2020). “If the deed is unambiguous,” the court
must discern the parties’ intent “from the four corners of the document.”
Id. (citation omitted). Trailhead argues that “logic and common sense”
compel the conclusion that the Nerisons would not have agreed to restrict
development of the Christensen property without insisting on a reciprocal
restriction barring development of the adjacent hillside property. But the
deed to the hillside property contains no nondevelopment provision, and
we “may not add something” to the deed “that is not there.” Id. at 446, ¶ 23.

¶17 Noting that a contract “regarding real estate may be broader
than the deed,” Trailhead asserts that the “concurrent escrow documents”
form part of the contract for the sale of the hillside property. According to
Trailhead, the escrow documents are “not a model of clarity,” and the
“ambiguities” therein create factual issues regarding the intent of the
contracting parties that should have been left to a jury to determine.

¶18 The escrow instructions for Nerison’s sale of the hillside
property to the City and for the City’s sale of 4.4 acres to the Nerisons
provide that the two closings were to be concurrent. The escrow

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instructions for Nerison’s sale of the hillside property also provide in part,
“This Escrow is also subject to Deed restrictions (per attached suplemental
[sic] instructions.).” The attached supplemental instructions, in turn,
provide:

It has been agreed by and between the parties hereto that the
above numbered escrow instructions be amended as follows:

The closing of this escrow is subject to the Seller placing Deed
restrictions on the property on or before this escrow closes as
described in Exhibit “C” attached and such restrictions being that
land so described in Exhibit “C” shall remain in its natural state
forever, prohibiting construction of any kind or type of
buildings, structures, walks, fences, improvement or any
roads in or upon said described property. The restrictions
may not be removed without the consent of all adjoining
property owners.

(Emphasis added.) Exhibit C attached to the escrow instructions is the legal
description to the Christensen property.

¶19 Read as a whole, the escrow instructions make clear that
(1) the City would not sell the 4.4-acre parcel to the Nerisons unless they
concurrently sold the hillside property to the City; and (2) neither sale
would close unless the Nerisons simultaneously acquired, and placed a
development restriction on, the Christensen property. In other words, to
complete their intended purchase of the 4.4 acres they sought to develop
for resale, the Nerisons were required to agree to prohibit development of
the Christensen property. As the City correctly notes, the escrow
instructions establish that the Christensen property was to be an
undevelopable “buffer between the land the Nerisons wanted to develop
and the land the City protects in the Mountain Preserve.”

¶20 Nothing in the escrow instructions indicates, however, that
the development prohibition set forth in the deed to the Christensen
property also applied to any of the other property involved in the land
swap. The escrow instructions do not support Trailhead’s position that the
parties intended the hillside property to be subject to a development
restriction that appears only in the deed to the Christensen property.

¶21 Trailhead cites Burkons v. Ticor Title Ins. Co., 168 Ariz. 345
(1991), for the proposition that contracts should be construed using a
“common sense approach” that takes into account “all surrounding
circumstances” rather than “only the text of the agreement.” In Burkons, the

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Arizona Supreme Court held that the agreement between parties to a real
property purchase transaction could not be construed as a matter of law in
view of conflicting provisions among various documents the parties signed
to complete the transaction. Id. at 349-50. Among other things, the Burkons
court noted, the escrow instructions provided that the seller’s security
interest “was to be a first lien” while a separate document subordinated the
seller’s security interest to that of the lender. Id. at 348, 350. In light of these
conflicting provisions, the Court held, “the documents cannot as a matter
of law be interpreted as an unconditional agreement that [the lender’s] lien
is to take first position over [the seller’s] purchase money lien.” Id. at 351.

¶22 Unlike the documents that formed the agreement in Burkons,
the relevant documents here contain no conflicting provisions that preclude
interpreting the parties’ agreement as a matter of law. The absence of a
development restriction in the deed to the hillside property, coupled with
the absence of any indication in the relevant escrow instructions that the
parties intended to include such a restriction in the deed, warranted
summary judgment on Trailhead’s contract claims. Paulden Indus., 249 Ariz.
at 444, ¶ 9 (noting that an “unambiguous” deed is construed “from the four
corners of the document”); see also Shattuck v. Precision-Toyota, Inc., 115 Ariz.
586, 588 (1977) (“Where the intent of the parties is expressed in clear and
unambiguous language, there is no need or room for construction or
interpretation and a court may not resort thereto.”) (citation omitted).

II. Trailhead’s Proffered Extrinsic Evidence Cannot Be Admitted To
Vary the Meaning of the Unambiguous Deed to the Hillside
Property.

¶23 Trailhead argues that the court erred in refusing to consider
the Nerison affidavit and the Dysthe declaration when construing the
parties’ agreement, insisting that those sworn statements support its
position that the prohibition on development “was not intended solely for
the [Christensen property]” but “was also intended for the hillside parcel.”

¶24 “[T]he parol evidence rule bars admission of extrinsic
evidence” to interpret a written contract if such evidence “varies or
contradicts the terms of [the] written contract.” Aztar Corp. v. U.S. Fire Ins.
Co., 223 Ariz. 463, 478, ¶ 52 (App. 2010). The court may consider parol
evidence when interpreting a written agreement only if “the court finds the
writing is ‘reasonably susceptible’ to the interpretation suggested by the
proponent of the extrinsic evidence.” Long v. City of Glendale, 208 Ariz. 319,
328, ¶ 28 (App. 2004). The proponent of parol evidence cannot, in other
words, offer extrinsic evidence under the guise of “interpreting” a written

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agreement “if the resulting ‘interpretation’ unavoidably changes the
meaning of the writing.” Id. at 329, ¶ 34.

¶25 Courts have long applied the parol evidence rule to bar the
use of extrinsic evidence to show that real property was conveyed subject
to use or ownership restrictions that do not appear in the conveyance
instrument. See IB Prop. Holdings, LLC v. Rancho Del Mar Apartments Ltd.
P’ship, 228 Ariz. 61, 67-68, ¶¶ 20-21 (App. 2011) (rejecting affidavits offered
to show that easement granted for “pedestrian and passenger” vehicles was
intended for emergency vehicles only because “the contract language [was]
not reasonably susceptible to the interpretation” set forth in the affidavits)
(cleaned up); Valento v. Valento, 225 Ariz. 477, 484, ¶¶ 21-22 (App. 2010)
(holding that, where the deed’s language was “unambiguous in that [the
grantors] conveyed the property interest to [their son] and [his wife]
jointly,” the parol evidence rule prohibited testimony that the grantors
intended the property to be gifted to their son alone).

¶26 Because, as the superior court correctly found, the deed to the
hillside property is unambiguous, accepting Trailhead’s proffered extrinsic
evidence would “unavoidably change[]” the deed’s meaning by adding a
use restriction. See Long, 208 Ariz. at 329, ¶ 34. The parol evidence rule
therefore precluded the court from considering the proffered extrinsic
evidence when construing the deed.

¶27 Asserting that “[m]isrepresentation and mistake can provide
a basis for rescission,” Trailhead argues that “in a rescission case, . . . the
parol evidence rule” does not “bar evidence establishing misrepresentation
or mistake.” This contention, even if true, is irrelevant because Trailhead
never asserted a rescission claim.

III. In Any Event, Trailhead’s Proffered Extrinsic Evidence Is
Insufficient To Defeat Summary Judgment.

¶28 Even if the parol evidence rule did not preclude the court
from considering Trailhead’s proffered extrinsic evidence, that evidence
would not help Trailhead. An affidavit offered to support or defeat
summary judgment must “set out facts that would be admissible in
evidence.” Ariz. R. Civ. P. 56(c)(5). Statements lacking in foundation are not
admissible, nor are speculative or conclusory assertions about another
party’s state of mind. Florez v. Sargeant, 185 Ariz. 521, 527 (1996) (holding
psychologist’s affidavit insufficient to withstand summary judgment on
statute of limitations grounds because, when affidavit stated, in conclusory
terms, that plaintiff was of “unsound mind” without identifying “facts to

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support [that] opinion,” it raised no triable issue of fact about whether
plaintiff’s cause of action was tolled due to plaintiff’s unsound mind).

A. The Nerison Affidavit

¶29 In her affidavit, Nerison asserts that she and her husband
“were assured by the [C]ity that Lot 13 would forever remain undisturbed
in any way.” Because this vague statement does not indicate who gave this
purported assurance on behalf of the City or when the assurance was given,
the statement is inadmissible for lack of foundation and thus insufficient to
defeat summary judgment. See Holcomb v. Ariz. Dep’t of Real Est., 247 Ariz.
439, 446, ¶ 24 (App. 2019) (“Hearsay is unreliable,” and therefore
inadmissible in administrative proceeding, if “the speaker is not identified,
when no foundation for the speaker’s knowledge is given, or when the
place, date and time, and identity of others present is unknown.”) (citation
omitted); see also Lindenbaum v. Realgy, LLC, 606 F. Supp. 3d 732, 742 (N.D.
Ohio 2022) (holding plaintiff’s affidavit insufficient to defeat summary
judgment because “plaintiff laid no foundation to show that the
anonymous” speaker, who made the actionable statement, “was authorized
to speak on defendant’s behalf”).

¶30 The Nerison affidavit also states that the City’s “interest” in
the land swap transaction “was to keep the higher area from any
development or disturbance,” and “[i]t was completely understood that Lot
13 would remain as a natural and undisturbed part of the South Mountain
Park Preserve.” Nerison’s conclusory assertions about the City’s interest in,
and understanding of, the land swap transaction, unaccompanied by any
specific facts, do not constitute admissible evidence, and so cannot defeat
summary judgment. See Florez, 185 Ariz. at 527; see also People v. Sanchez, 375
P.3d 812, 850 (Cal. 2016) (“A lay witness generally may not give an opinion
about another person’s state of mind, but may testify about objective
behavior.”).

¶31 Moreover, the law is clear that a single municipal official—
even a member of the municipal governing body—is not competent to
testify about the municipality’s intent in engaging in a particular
transaction. Long, 208 Ariz. at 331, ¶ 42 n.8 (observing that city council
member would not “be allowed to testify as to the intent of the City in its
dealings with [plaintiff]”). If an individual City official could not properly
testify about the City’s understanding and intent in entering the land swap
transaction, then Nerison is certainly not competent to do so. For these
reasons, the assertions in the Nerison affidavit are inadmissible and thus

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insufficient to create a triable fact issue regarding the intent of the parties to
the 1977 land swap transaction.

B. The Dysthe Declaration

¶32 The Dysthe declaration states that Dysthe purchased his lot
from the Nerisons in 1978 in reliance on the Nerisons’ assurance that the
nearby hillside property “was restricted from development” and would
remain “pristine desert land.” Dysthe’s recitation of statements Nerison
made in 1978, even if accurate, do not establish the City’s intent in entering
the land swap transaction the year before.

¶33 The Dysthe declaration also states that in 1988, Dysthe
requested, and the City approved, a variance “to forego [sic] street
construction re 3-lots” that were sold by the Nerisons “in order to avoid
construction that would scar the mountain.” Although it is not entirely
clear, the Dysthe declaration appears to indicate that in 1988, the City
agreed, at Dysthe’s behest, to forgo street construction in the area of the
subdivided lots so as not to disturb the desert’s natural condition. This
assertion, too, is of no help to Trailhead; the City’s willingness to forgo
street construction in the vicinity of the subdivided lot in 1988 sheds no
light on the City’s intent in entering the land swap transaction in 1977.

¶34 Even if, therefore, the parol evidence rule did not bar the
admission of Trailhead’s proffered extrinsic evidence, that evidence is
insufficient to withstand summary judgment.

IV. Trailhead’s Tort Claim Against Lawyers Title Is Time-Barred.

¶35 Trailhead further argues that the court erred in granting
summary judgment on its breach of fiduciary duty claim against Lawyers
Title because, Trailhead contends, Lawyers Title should not have
proceeded with closing without first alerting the parties to the absence of a
nondevelopment provision in the deed to the hillside property. Trailhead
maintains that, upon realizing that the relevant deeds provided that the
Christensen property “was restricted to its natural state” but “the hillside
property” was not, Lawyers Title should have requested “clarification”
from all of the property owners “before proceeding with the concurrent
escrows.” Its failure to “stop the transaction and ask for clarification,”
Trailhead asserts, breached the duty that Lawyers Title, as escrow agent,
owed to the Nerisons.

¶36 Irrespective of the merits (which we do not address) of
Trailhead’s breach of fiduciary claim against Lawyers Title, the claim

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accrued in 1977 when the deed was signed and recorded. See Ader v. Estate
of Felger, 240 Ariz. 32, 39, ¶ 19 (App. 2016) (“A cause of action accrues, and
the statute of limitations commences, when one party is able to sue
another.”) (cleaned up). As a result, the two-year limitations period has
long since run. See A.R.S. § 12-542; Coulter v. Grant Thornton, LLP, 241 Ariz.
440, 444, ¶ 9 (App. 2017) (“A two-year limitations period applies to claims
for breach of fiduciary duty.”).

¶37 Trailhead contends that the accrual of its claims was tolled
until the City began constructing the trails in 2019, asserting that until then
Nerison “had no reason to believe” that the hillside property deed “omitted
the restrictive language.” But Nerison and her husband personally signed
the deed to the hillside property, and so had notice of its contents. Mut.
Benefit Health & Accident Ass’n v. Ferrell, 42 Ariz. 477, 489 (1933) (“A person
cannot sign a paper in ignorance of its contents and thereafter excuse such
ignorance by the mere plea that he was busy or that he is habitually
neglectful in such circumstances.”), overruled in part on other grounds by
Occidental Life Ins. Co. v. Bocock, 77 Ariz. 51 (1954). Because Nerison knew or
should have known that the deed lacked a development restriction when
she signed it in 1977, any breach of fiduciary duty claim against Lawyers
Title arising out of a purported defect in the deed accrued at that time and
ran two years later. See Vaughn-Leavitt Ltd. P’ship v. U.S. Bank Nat’l Ass’n, 1
CA-CV 22-0040, 2023 WL 2377711, at *4, ¶ 18 (Ariz. App. Mar. 23, 2023)
(mem. decision) (finding that a “lienholder’s cause of action for the
wrongful release of its lien . . . [was] not delayed until the property [was]
sold and the lienholder left empty-handed” but rather accrued once the
unauthorized release was recorded); see also Cosgrove v. Cade, 468 S.W.3d 32,
34-35, 37, 40 (Tex. 2015) (holding that property sellers’ claims against buyer,
which were brought five years after sale and which arose out of
purportedly erroneous omission from deed of sellers’ reservation of
mineral rights, accrued on “the date of [the deed’s] execution” and so were
barred by four-year limitations statute, noting that a “grantor who signs an
unambiguous deed is presumed as a matter of law to have immediate
knowledge of material omissions”).

¶38 Although the court did not grant summary judgment on
limitations grounds, we may affirm the judgment if it “is correct for any
reason, even if that reason was not considered by the court.” See Melendez,
232 Ariz. at 330, ¶ 9 (cleaned up). We hold that Trailhead’s breach of
fiduciary duty claim against Lawyers Title is time-barred, and so affirm
summary judgment on that claim.

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¶39 Because Trailhead does not address, on appeal, the claims it
asserted below for promissory estoppel, fraudulent concealment, and
negligent misrepresentation, we deem those claims abandoned. See Torrez
v. Knowlton, 205 Ariz. 550, 552, ¶ 3 n.1 (App. 2003) (considering claim not
argued on appeal to be abandoned). And because we affirm summary
judgment on Trailhead’s contract and breach of fiduciary duty claims for
the reasons set forth above, we need not address the defendants’ alternative
arguments in support of the court’s ruling.

¶40 The City and Lawyers Title request an award of attorney fees
on appeal under A.R.S. § 12-341.01 and sanctions under A.R.S. § 12-2106.
We find no basis for an award of sanctions. In our discretion, we award the
City and Lawyers Title reasonable attorney fees under A.R.S. § 12-341.01.
As the prevailing parties, the City and Lawyers Title may recover their
taxable costs on appeal as well.

CONCLUSION

¶41 The superior court correctly interpreted the deed to the
hillside property, which contains no development restriction, in accordance
with its terms, and correctly rejected the extrinsic evidence Trailhead
offered to vary the deed’s terms. Further, any claim arising out of the
omission of restrictive language from the deed accrued when the deed was
signed and recorded in 1977, and any such claim is therefore time-barred.
Accordingly, we affirm.

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

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