MacLeod v. Mogollon

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UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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

MAGNUS LD MACLEOD, Appellant,

v.

MOGOLLON AIRPARK INC., Appellee.

No. 1 CA-CV 22-0012
FILED 3-21-2023

Appeal from the Superior Court in Maricopa County
No. LC2020-000268-001
The Honorable Daniel J. Kiley, Judge, Retired

AFFIRMED IN PART; VACATED IN PART AND REMANDED

COUNSEL

Jeffrey M. Proper, PLLC, Phoenix
By Jeffrey M. Proper
Counsel for Appellant

Carpenter Hazlewood Delgado & Bolen, LLP, Tempe
By Gregory A. Stein, Ember Van Vranken
Counsel for Appellee
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Decision of the Court

MEMORANDUM DECISION

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

B A I L E Y, Judge:

¶1 Magnus LD MacLeod appeals from the superior court’s
judgment affirming in part a final administrative decision of the Arizona
Department of Real Estate (“AZDRE”).1 The superior court upheld the
administrative dismissal of MacLeod’s petition, finding that a 2018
Amendment to the Mogollon Airpark Unit IVB covenants, conditions and
restrictions (“CC&Rs”) was valid and that MacLeod violated the
Amendment. The superior court also granted Mogollon Airpark Inc.,
(“Association”) its reasonable attorneys’ fees incurred in responding to
MacLeod’s motion to reconsider.

¶2 Though we affirm the superior court’s award of attorneys’
fees to the Association, we vacate AZDRE’s final administrative decision
and the superior court’s judgment affirming in part, reversing in part, and
remanding AZDRE’s final administrative decision. We remand to AZDRE
to enter judgment for MacLeod and against the Association on their
competing petitions, consistent with this decision.

FACTS AND PROCEDURAL HISTORY

¶3 The Airpark is a planned community consisting of a common-
area aircraft runway and residential lots and tracts. The Airpark was
developed in phases, with a separate CC&R declaration recorded for each
phase. Within the Airpark many residential lots have direct access to the
common runway, allowing the owner to move a plane directly from a lot
onto the runway. But some lots in the Unit IVB development phase do not
have direct access to the runway. To allow these lot owners access to the

1 The superior court also reversed the determination that MacLeod’s
affirmative defenses could not be considered and remanded for
consideration of those defenses. No party challenges this decision on
appeal.

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runway from their property, these lots were first sold with an associated
tract that did have runway access.

¶4 MacLeod bought Tract G in Unit IVB from his brother in
February 2017. At first MacLeod did not own an associated lot, but he later
bought an undeveloped lot that lacked runway access, though this was not
the lot originally sold with Tract G. When MacLeod bought Tract G it had
a 1600 square foot aircraft hangar on it. After buying Tract G, MacLeod
made improvements to the hangar, including adding a kitchen and
building a second story deck inside the hangar. He then began living in the
hangar full time.

¶5 In October 2018, property owners in Unit IVB approved and
recorded the Amendment to the Unit IVB CC&Rs. The Amendment was
not approved unanimously by Unit IVB lot owners but was passed by
three-fourths of the lot owners, the required number of votes under the
CC&Rs. The original CC&Rs contained the land use provision:

No more than one single-family structure may be erected on
any individual lot, provided, however, a separate guest
quarter may be constructed without cooking facilities on lots
which are 30,000 square feet and above. For purposes of this
provision, a guest house may be constructed as part of an
aircraft storage hangar on the lot or on Tracts E through M,
inclusive. Every residential structure shall have an area
devoted to living purposes, exclusive of porches, terraces,
garages, and guest quarters of not less than 1,200 square feet.

¶6 As relevant here, the Amendment added the following
language to the CC&Rs:

Only one single family structure or combination
hangar/house may be erected on a residential lot. A separate
aircraft storage hangar may be erected on lots with access to
the airport taxiway system. A guest house or recreational
vehicle storage garage may also be constructed on lots which
are 30,000 square feet or more. . . . Tracts E through M are for
aircraft storage hangars only. Guest quarters may be
constructed as part of an aircraft storage hangar on these
Tracts. Guest houses on residential lots, and guest quarters in
aircraft storage hangars are for temporary living only and in
no case will be used as a permanent residence. For purposes

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of this provision, “temporary” means not longer than four
months per calendar year.

¶7 Seeking to enforce the Amendment, in December 2018, the
Association sent MacLeod a notice that he violated the Amendment by
living full-time in the Tract G residence. MacLeod sent a written response
contesting the alleged violation. Five months later, the Association sent
MacLeod a second violation notice. Then, in October 2019, MacLeod filed
a petition with AZDRE, alleging the Association could not enforce the
Amendment because it “substantially altere[d]” the CC&Rs and was not
adopted with unanimous lot owner approval. The Association denied the
allegations in MacLeod’s petition and filed a petition with AZDRE alleging,
as relevant here, MacLeod violated the CC&Rs and Amendment because
he lived full-time in his Tract G residence.

¶8 The two petitions were consolidated, and a hearing was
scheduled before an Administrative Law Judge (“ALJ”). At the hearing,
MacLeod, two current Association board members, and a former
Association board member testified. Following the hearing, the ALJ issued
a ruling finding the Amendment was properly adopted and enforceable
and MacLeod was living full-time in his Tract G residence in violation of
the Amendment.

¶9 MacLeod appealed the ALJ’s decision to the superior court.
See Ariz. Rev. Stat. (“A.R.S.”) § 12-905(A). After full briefing and oral
argument, the superior court affirmed that the Amendment was validly
adopted and that the Association had proven MacLeod violated the
Amendment by living in his Tract G residence full time. MacLeod then
timely filed a notice of appeal with this court. Almost 80 days after the
superior court entered its judgment, MacLeod moved in this court to
suspend his appeal and revest jurisdiction with the superior court so that
he could file a motion to reconsider. This court granted his motion to
suspend and revested jurisdiction with the superior court. MacLeod then
moved to reconsider in superior court. After responsive briefing, the court
denied the motion, awarded the Association its attorneys’ fees incurred in
responding to the motion and entered a final judgment.

¶10 MacLeod timely appealed, and we have jurisdiction under
A.R.S. §§ 12-913 and -2101(A).

DISCUSSION

¶11 “In reviewing the superior court’s decision affirming an
administrative order, we engage in the same process as the superior court,

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which is to assess whether ‘the agency’s action is contrary to law, is not
supported by substantial evidence, is arbitrary and capricious or is an abuse
of discretion.’” Holcomb v. Ariz. Dep’t of Real Est., 247 Ariz. 439, 443, ¶ 9
(App. 2019) (quoting A.R.S. § 12-910). In our review, we “decide all
questions of fact without deference to any previous determination that may
have been made on the question by the agency.” A.R.S. § 12-910(F). The
interpretation of CC&Rs is a question of law we review de novo. Powell v.
Washburn, 211 Ariz. 553, 555, ¶ 8 (2006).

I. The Amendment’s temporary living restriction is invalid as a
matter of law.

¶12 MacLeod argues the Amendment is invalid because the
original CC&Rs did not provide sufficient notice that the amendment could
be imposed. Just before the superior court issued its decision denying
MacLeod’s motion for reconsideration, our supreme court decided Kalway
v. Calabria Ranch HOA, LLC, 252 Ariz. 532, 537, ¶ 10 (2022) which directed
that an amendment to CC&Rs is invalid when the original CC&Rs did not
provide adequate notice of the amendment.

¶13 Under Kalway, even if an amendment to CC&Rs was properly
adopted under A.R.S. § 33-1817(A)(1) and the CC&Rs’ amendment
procedure, it was none the less invalid without the consent of all owners if
it was not reasonable and foreseeable considering the original CC&Rs.
Kalway v. Calabria Ranch HOA, LLC, 252 Ariz. 532, 537, ¶ 10 (2022). That is,
the original CC&Rs must give sufficient notice of the possibility of the
amendment. Id.

¶14 To determine whether the original CC&Rs gave sufficient
notice of an amendment, we “apply an objective inquiry” to determine
whether the amendment was within “a homeowner’s reasonable
expectations” based on the language of the original CC&Rs. Id. at 538-39,
¶¶ 15-16 (citation omitted). When interpreting CC&Rs, our primary
purpose is “to give effect to the original intent of the parties.” Id. at 539,
¶ 16 (quoting Armstrong v. Ledges Homeowners Ass’n, Inc., 633 S.E.2d 78 (N.C.
2006)).

¶15 A general amendment provision in the original CC&Rs, with
nothing more, cannot provide proper notice. Id. at ¶ 19. The original
CC&Rs need not “give notice of the particular details of a future
amendment,” but must provide “notice that a restrictive or affirmative
covenant exists and that the covenant can be amended to refine it, correct
an error, fill in a gap, or change it in a particular way.” Id. at ¶ 17 (citation

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omitted). An amendment cannot be “entirely new and different in
character.” Id. (quoting Lakeland Prop. Owners Ass’n v. Larson, 459 N.E.2d
1164, 1167 (Ill. App. Ct. 1984)). “[A]ny doubts [are] resolved against the
validity of a restriction.” Id. at ¶ 16 (citing Armstrong, 633 S.E.2d at 85). “If
an amendment is invalid, we ‘blue pencil’ the amended CC&Rs, striking
severable provisions.” Id. at 537, ¶ 8 (quoting Valley Med. Specialists v.
Farber, 194 Ariz. 363, 372, ¶ 30 (1999)).

¶16 The original CC&Rs provided guest houses could be built on
tracts but only guest quarters without a kitchen could be built on larger lots.
The Amendment flips this terminology and refers to guest quarters on
tracts and guest houses on lots, but it does not specifically address whether
a kitchen is now prohibited in tract guest quarters. MacLeod argues the
Amendment prohibits him from having a kitchen and this change was not
foreseeable considering the original CC&Rs.2 MacLeod failed to make this
argument in his opening brief to the superior court, raising it for the first
time in his reply brief. The argument is therefore waived. See State v.
Lindner, 227 Ariz. 69, 70, ¶ 3, n. 1 (App. 2010), and we do not address it.

¶17 MacLeod contends the original Unit IVB CC&Rs failed to give
sufficient notice of the possibility of the Amendment’s temporary living
restriction. The Association concedes that the original “CC&Rs may not
have been sufficient to explicitly limit occupancy of such structures to no
more than ‘four month per calendar year’” but claims that the original
CC&Rs’ use of the words “guest houses” and “guest quarters” “necessarily
impl[ies] a temporal limitation on the occupancy of such structures” and
the amendment’s restriction is merely a refinement, explaining the
temporal restriction.

¶18 The original CC&Rs allowed guest houses and quarters to be
built on certain lots and tracts. The Amendment continues to allow guest
houses and quarters but provides that “[g]uest houses on residential lots
and guest quarters in aircraft storage hangars are for temporary living only
and in no case will be used as a permanent residence” and defines
temporary living as “not longer than four months per calendar year.”

¶19 The original CC&Rs do not define guest house or quarters,
but a guest house is generally “a small house near a larger one, where
guests who are invited to the larger house can stay,” Guesthouse, Cambridge
Dictionary,

2 We note that the Association has conceded that the Amendment does not
limit MacLeod’s right to have a kitchen in his Tract G residence.

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https://dictionary.cambridge.org/us/dictionary/english/guesthouse
(last visited March 13, 2023). And guest generally means “[s]omeone who
is entertained or to whom hospitality is extended.” Guest, Black’s Law
Dictionary (11th ed. 2019). These definitions do not include a temporal limit
on guest home occupancy. Guest instead describes the type of structure,
reflecting that a guest house is secondary to the main structure. While a
guest may come to stay and use the guest house temporarily, there is
nothing in the definition of guest house or the original CC&Rs to suggest
this is the only permissible use of a guest house. The original CC&Rs did
not prohibit a guest house’s use as long-term or permanent housing for a
family member or as a long-term or permanent rental property; no
restrictions existed on the use of guest houses. The Association also argues
that because under the original CC&Rs an owner’s primary single-family
residence was to be separate from a guest home built as part of an aircraft
hangar, the original CC&Rs did not intend guest houses to be for
permanent full-time occupancy. But this design scheme merely
contemplated that guest houses would be a secondary structure and placed
no limit on the use of the guest house.

¶20 Because the original CC&Rs did not provide sufficient notice
of the possibility of a future restriction limiting the use of guest houses or
quarters to temporary living, and MacLeod did not consent to the
amendment, we strike the following language from the Amendment:
“Guest houses on residential lots and guest quarters in aircraft storage
hangars are for temporary living only and in no case will be used as a
permanent residence. For purposes of this provision, ‘temporary’ means
not longer than four months per calendar year.” We thus vacate AZDRE’s
final administrative decision and the superior court’s judgment affirming
in part, reversing in part, and remanding that decision. Given our
resolution of this issue we do not address MacLeod’s other challenges to
the Amendment.

II. The superior court did not err in denying MacLeod’s motion for
reconsideration and awarding the Association its attorneys’ fees
incurred in responding to the motion.

¶21 MacLeod also challenges the superior court’s denial of his
motion for reconsideration and the court’s award of attorneys’ fees to the
Association under A.R.S. § 12-349 for its reasonable fees incurred in
responding to MacLeod’s motion to reconsider. We review the superior
court’s denial of a motion for reconsideration for an abuse of discretion.
Tilley v. Delci, 220 Ariz. 233, 238, ¶ 16 (App. 2009). We review the
application of A.R.S. § 12-349 de novo, but we accept the superior court’s

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findings of fact unless they are clearly erroneous. City of Casa Grande v. Ariz.
Water Co., 199 Ariz. 547, 555, ¶ 27 (App. 2001).

¶22 MacLeod’s motion for reconsideration pressed an argument
raised for the first time in his reply brief to the superior court. Because it
was not raised in his opening brief, the argument was waived. See Lindner,
227 Ariz. at 70, ¶ 3, n. 1. The superior court did not abuse its discretion in
denying MacLeod’s motion for reconsideration because it raised a waived
argument. C.f. Ramsey v. Yavapai Fam. Advoc. Ctr., 225 Ariz. 132, 137, ¶ 18
(App. 2010) (“Generally, we do not consider arguments raised for the first
time in a motion for reconsideration.”). While there is no time limit to file
a motion for reconsideration, see Ariz. R. Civ. P. 7.1, the superior court
found that motion unreasonably expanded or delayed the proceeding and
awarded the Association its attorneys’ fees incurred in responding to the
motion. See A.R.S. § 12-349(A)(3). MacLeod waited almost 80 days after
the superior court entered its final judgment to move to stay his pending
appeal and file the motion. MacLeod reasoned the delay occurred because
“he ha[d] not actually recognized the grounds for the motion until more
recently” and he was “awaiting [an] imminent decision from the Arizona
Supreme Court.” We agree with the superior court that these explanations
are unreasonable, and that MacLeod unreasonably expanded or delayed
the proceedings. The superior court thus properly imposed attorneys’ fees
under A.R.S. § 12-349(A)(3).

¶23 MacLeod also argues the superior court failed to properly
consider the factors outlined in A.R.S. § 12-350. Section 12-350 requires a
court to provide its specific reasons for the award when making an award
of attorneys’ fees under A.R.S. § 12-349 and provides that the court may
include the listed factors in its analysis. The superior court made detailed
written findings on the reasons for the fee award and though it did not
address the factors listed in § 12-350, it was not required to do so.

III. We award MacLeod his reasonable attorneys’ fees and costs on
appeal.

¶24 Both MacLeod and the Association request their attorneys’
fees and costs incurred on appeal under paragraph 31 of the CC&Rs and
A.R.S. § 12-341.01. Paragraph 31 of the CC&Rs provides that when the
Association enforces the CC&Rs against a violating owner, the owner of a
lot must pay “all costs incurred in the enforcement” of the CC&Rs. Because
we strike a portion of the Amendment and vacate AZDRE and the superior
court’s finding that MacLeod violated the Amendment, the Association has

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not “enforced” the CC&Rs and is therefore not entitled to its attorneys’ fees
and costs on appeal under paragraph 31.

¶25 Paragraph 31 of the CC&Rs does not apply to an owner who
challenges the validity of the CC&Rs. MacLeod is thus also not entitled to
his attorneys’ fees and costs on appeal under paragraph 31. But as this is
an “action arising out of contract” and MacLeod is the successful party, see
A.R.S. § 12-341.01(A), upon his compliance with Rule 21, ARCAP, we
award him his reasonable attorneys’ fees and costs incurred on appeal.

CONCLUSION

¶26 For the above reasons, we affirm the superior court’s award
of attorney’s fees to the Association for its costs incurred in responding to
MacLeod’s motion to reconsider. But we vacate AZDRE’s final
administrative decision and vacate the superior court’s judgment affirming
in part, reversing in part, and remanding AZDRE’s final administrative
decision. We remand to AZDRE to enter judgment for MacLeod and
against the Association on their competing petitions, consistent with this
decision.

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

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