Crosby v. Mesa

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UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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

GARY B. CROSBY, et al., Plaintiffs/Appellants,

v.

MESA DESERT HEIGHTS HOMEOWNERS ASSOCIATION,
Defendant/Appellee.

No. 1 CA-CV 24-0003
FILED 10-10-2024

Appeal from the Superior Court in Maricopa County
No. CV2021-095577
The Honorable Peter A. Thompson, Judge

VACACTED AND REMANDED IN PART; AFFIRMED IN PART

COUNSEL

Harper Law PLC, Gilbert
By Kevin Harper
Counsel for Plaintiffs/Appellants

Fletcher Barnes Law PLC, Phoenix
By Don C. Fletcher, Timothy H. Barnes, Sheryl L. Andrew
Counsel for Defendant/Appellee
 CROSBY, et al. v. MESA
DECISION OF THE COURT

MEMORANDUM DECISION

Judge Jennifer M. Perkins delivered the decision of the Court, in which
Presiding Judge Michael S. Catlett and Vice Chief Judge Randall M. Howe
joined.

P E R K I N S, Judge:

¶1 Gary B. Crosby appeals the superior court’s entry of summary
judgment in favor of Mesa Desert Heights Homeowners Association
(“Association”). For the following reasons, we reverse in part.

FACTS AND PROCEDURAL BACKGROUND

¶2 Mesa Desert Heights is a residential community subject to the
1985 Declaration of Covenants, Conditions, and Restrictions (“CC&Rs”).
Consistent with the CC&Rs, the Association regulated the neighborhood’s
aesthetics by adopting Design Guidelines. The Design Guidelines restrict
structure height to a maximum of 21 feet from the highest natural point of
the lot. Gary and Innette Crosby purchased an unimproved lot in Mesa
Desert Heights, intending to quickly build and sell a house.

¶3 Gary Crosby asked the Association for feedback on his
preliminary architectural sketches. The Association designated the corner
of the lot as its highest point, concluded that the proposed plans would
violate the height restriction, and indicated the Association would prohibit
any variance. Crosby disputed the conclusion because he thought an
outcropping of boulders provided the highest point on the lot.

¶4 Crosby believed the Association arbitrarily enforced the
Design Guidelines, so he asserted that the Design Guidelines no longer
applied because the Association had not applied the Guidelines
consistently. After arguing with the Association for a month, Crosby
submitted final architectural plans contemplating a structure height of 25
and one-half feet to the Association for review. The Association rejected
those plans in June 2021.

¶5 After the Association’s rejection, Crosby retained counsel
who sent a letter asking the Association to reconsider its position before
litigation became necessary. The Association retained its own counsel,
maintained its rejection of Crosby’s proposal, and demanded in a letter that

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DECISION OF THE COURT
he pay an estimated $2,000 in legal fees. Crosby refused to pay. Crosby
submitted revised architectural plans that complied with the Association’s
understanding of the 21-foot rule in the Design Guidelines.

¶6 Later that month, the Association notified Crosby that it
placed a $2,500 Special Assessment on his lot to cover “legal costs”
associated with the exchange of letters about his preliminary plans. The
Association cited Section 12.09 of the CC&Rs as its sole authority for the
assessment; as explained below, that section enables recovery of attorney
fees associated with a lawsuit. The notice informed Crosby that he could
contact the Association’s law firm to request a breakdown of the legal fees.
Crosby demanded the Association remove the Special Assessment because
he did not think Section 12.09 applied.

¶7 The Association refused to remove the Special Assessment
from Crosby’s Association account, and he sued to challenge the
Assessment. Crosby claimed the Association lacked authority to impose the
Special Assessment on his lot, that the Association breached its duty of
good faith and fair dealing, and that the Special Assessment was an
improper lien.

¶8 Both parties moved for summary judgment. The court
granted the Association’s motion, finding the Special Assessment valid
under the CC&Rs and implicitly rejecting Crosby’s other claims. Crosby
appeals the grant of summary judgment to the Association. We have
jurisdiction. A.R.S. § 12-2101(A)(1).

DISCUSSION

¶9 As an initial matter, we note that Crosby raised for the first
time on appeal the Association’s failure to establish a factual basis for the
amount of the Special Assessment. And the Association for the first time on
appeal relied on Section 11.03.01 of the CC&Rs as support for the Special
Assessment. The parties waived both issues. Cont’l Lighting & Contracting,
Inc. v. Premier Grading & Utils., LLC, 227 Ariz. 382, 386, ¶ 12 (App. 2011)
(“Legal theories must be presented timely to the [superior] court. If the
argument is not raised below, it is waived on appeal.”).

¶10 Summary judgment is proper when the moving party is
entitled to judgment as a matter of law and no genuine issues of material
fact remain. Ariz. R. Civ. P. 56(a). We review entry of summary judgment
de novo. McCaw v. Ariz. Snowbowl Resort, 254 Ariz. 221, 225, ¶ 9 (App. 2022).
We view the facts and reasonable inferences from those facts in the light
most favorable to the party against whom judgment was entered. Id.

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I. The Lot Complied

¶11 The CC&Rs allow the Association to place three types of
assessments on the lots in the neighborhood: Regular, Capital
Improvement, and Special. Regular and Capital Assessments must
distribute the cost of operating and maintaining the neighborhood evenly
between all lot owners. When the Association incurs costs that benefit only
individual lots or arise from the behavior of an individual lot owner, the lot
that caused the additional expense must pay the entire bill, which the
Association levies on the owner as a Special Assessment. Specifically,
Section 5.07 of the CC&Rs authorizes the Board to levy “Special
Assessments . . . against a Lot and its Owner to reimburse the Association
for[] costs incurred in bringing an Owner and his Lot into compliance with
the provisions of this Declaration, the Bylaws, or Association Rules.”

¶12 We note that the Association did not rely on Section 5.07 when
imposing the Special Assessment here, and failed to cite this provision in
any of its pre-litigation notices demanding that Crosby pay its legal fees.
Nor did the Association identify Section 5.07 in its Answer and
Counterclaim or in its litigation disclosures to Crosby. It appears the
Association first identified Section 5.07 as authority for this Special
Assessment in its motion for summary judgment. We nonetheless evaluate
this post-hoc rationalization because the superior court did so in granting
summary judgment.

¶13 The parties dispute whether the Association, within the
meaning of Section 5.07, brought Crosby into compliance with the Design
Guidelines by rejecting his initial plans. The Association asserts that Crosby
“came into compliance with the Declaration by submitting plans” that
satisfied the height restriction after initially submitting plans that would
have violated the Design Guidelines. But the lot always complied with the
height restriction because no structure on the lot ever exceeded 21 feet—
there was no structure on the lot at all when Crosby sought approval. The
Association cannot “bring[]”a compliant lot into compliance. The
Association cannot rely on Section 5.07 as authority for recovering its legal
fees.

II. Pre-litigation Dispute

¶14 Section 12.09 of the CC&Rs reads: “In the event any action is
instituted to enforce any of the provisions contained in this Declaration, the
Bylaws, or Association Rules, the party prevailing in such action shall be
entitled to recover from the other party thereto as part of the judgment
reasonable attorneys’ fees and costs of suit.” The parties dispute whether

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Crosby initiated an “action” by hiring counsel who advocated for Crosby’s
initial plans in communications with the Association.

¶15 “CC&Rs constitute a contract.” Ahwatukee Custom Ests. Mgmt.
Ass’n, Inc. v. Turner, 196 Ariz. 631, 634, ¶ 5 (App. 2000). “Our purpose in
interpreting a contract is to ascertain and enforce the parties’ intent” for
which we look “to the plain meaning of words as viewed in the context of
the contract as a whole.” ELM Retirement Center, LP v. Callaway, 226 Ariz.
287, 291, ¶ 15 (App. 2010). We do not defer to an association’s interpretation
of its covenants. Johnson v. Pointe Cmty. Ass’n, Inc., 205 Ariz. 485, 490, ¶ 23
(App. 2003).

¶16 The language surrounding the term “action” within Section
12.09 demonstrates the parties’ intent that the term references litigation in
court, and not just any dispute. The referenced “action” will result in a
“prevailing party” entitled to “recover” pursuant to a “judgment” and
related “attorneys’ fees and costs of [law]suit.” There was no recoverable
judgment, nor was there a lawsuit resulting in attorney fees and costs at the
time of the Special Assessment.

¶17 To the extent we view “action” as reasonably susceptible to
more than one meaning despite this context, external sources confirm that
“action” here means litigation. In Arizona, we use the technical meaning of
a word if the word has a peculiar meaning in law. A.R.S. § 1-213. We may
consider statutes and dictionaries to assist in determining the ordinary
meaning of words. See Centerpoint Mech. Lien Claims, LLC v. Commonwealth
Land Title Ins. Co., 255 Ariz. 261, 270, ¶ 45 (App. 2023).

¶18 Arizona law defines “action” as “any matter or proceeding in
a court, civil or criminal.” A.R.S. § 1-215(1). A technical definition of
“action” is “the exercise of a claim before a judge.” Action, Black’s Law
Dictionary (12th ed. 2024). Both definitions are consistent with how the
CC&Rs use “action.” The pre-litigation dispute was not an action because
neither party had any proceeding before a court until Crosby sued to
remove the Special Assessment. The Association cannot recover attorney
fees under Section 12.09.

¶19 The superior court thus erred in granting summary judgment
to the Association regarding the Special Assessment.

III. Good Faith

¶20 In his Complaint, Crosby claimed that the Association
breached the covenant of good faith and fair dealing when it refused to

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remove the Special Assessment from his lot. And he sought associated
damages. The superior court did not explicitly rule on this claim, but
impliedly rejected it by granting the Association’s motion for summary
judgment and denying Crosby’s. Given our conclusion that the superior
court erred in part in granting summary judgment to the Association, we
consider here whether Crosby should be entitled to pursue this claim on
remand. He should not.

¶21 Crosby’s only basis for alleging a breach of the covenant of
good faith and fair dealing is his claim that the Association breached the
CC&Rs. Arizona law implies a covenant of good faith and fair dealing in
every contract. Coulter v. Grant Thornton, LLP, 241 Ariz. 440, 448, ¶ 30 (App.
2017). But a breach of this duty entails something beyond a breach of
contract. See FL Receivables Tr. 2002-A v. Ariz. Mills, LLC, 230 Ariz. 160, 169,
¶ 42 (App. 2012) (one party’s attempt to enforce an incorrect interpretation
of a contract is not enough to establish a breach of the covenant of good
faith and fair dealing). Without more, Crosby failed to allege the required
elements of breach of good faith and fair dealing. The superior court did
not err in granting summary judgment to the Association on this claim.

IV. Improper Lien

¶22 Crosby also claimed the Association violated A.R.S. § 33-420.
This statute allows a plaintiff to recover from a person who “causes a
document asserting [a lien or interest] to be recorded in the office of the
county recorder, knowing or having reason to know that the document is
. . . groundless [or] contains a material misstatement or false claim.” A.R.S.
§ 33-420(A). We need not address whether the Association placed an invalid
lien on the lot because Section 33-420 applies only to documents “recorded
in the office of the county recorder.” A.R.S. § 33-420(A). The Association
recorded no document and Section 33-420 does not apply here. The superior
court did not err in granting summary judgment to the Association on
Crosby’s Section 33-420 claim.

CONCLUSION

¶23 We affirm the superior court’s grant of summary judgment
against Crosby on the claims for breach of good faith and fair dealing and
violation of Section 33-420. We reverse the superior court’s grant of
summary judgment in favor of the Association on the validity of the Special
Assessment, and we remand for the entry of summary judgment for Crosby
on that issue. See Taser Int’l, Inc. v. Ward, 224 Ariz. 389, 393–94, ¶ 14 (App.
2010) (when both parties moved for summary judgment at the superior
court and we reverse the court’s grant of summary judgment for one party,

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we are authorized to direct judgment for the other party). As a result, we
vacate the superior court’s award of attorney fees and costs to the
Association.

¶24 Both parties request their attorney fees on appeal. This is an
“action arising out of contract.” In our discretion, and upon his compliance
with ARCAP 21, we award Crosby his reasonable attorney fees and costs
incurred on appeal. See A.R.S. §§ 12-341 and 12-341.01.

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

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