Pawn 1st LLC v. City of Phoenix/jachimek

IN THE
SUPREME COURT OF THE STATE OF ARIZONA
PAWN 1ST, LLC, AN ARIZONA LIMITED LIABILITY COMPANY,
Plaintiff/Appellant,
v.
CITY OF PHOENIX, A POLITICAL SUBDIVISION OF THE STATE OF ARIZONA;
BOARD OF ADJUSTMENT OF THE CITY OF PHOENIX; AND BOB FORD; EMILIO
GAYNOR; PATRICK PAUL; ALEX TAUBER; YVONNE HUNTER; BETTINA NAVA;
AND EMILY RYAN, AS MEMBERS OF AND CONSTITUTING THE BOARD OF
ADJUSTMENT OF THE CITY OF PHOENIX,
Defendants/Appellees,
WILLIAM JACHIMEK DBA CENTRAL PAWN,
Real Party in Interest/Appellee.
No. CV-16-0107-PR
Filed August 10, 2017
Appeal from the Superior Court in Maricopa County
The Honorable Lisa Daniel Flores, Judge
No. LC2010-000701
AFFIRMED
Opinion of the Court of Appeals, Division One
239 Ariz. 539 (App. 2016)
VACATED
COUNSEL:
Thomas M. Baker, Baker & Baker, Phoenix, Attorney for Pawn 1st, LLC
Brad Holm, Phoenix City Attorney, Les S. Tuskai (argued), Paul Li,
Assistant City Attorneys, Phoenix, Attorneys for City of Phoenix, Board of
Adjustment of the City of Phoenix, Bob Ford, Emilio Gaynor, Patrick Paul,
Alex Tauber, Yvonne Hunter, Bettina Nava and Emily Ryan
PAWN 1ST, LLC V. CITY OF PHOENIX, ET AL.
Opinion of the Court
Claudio E. Iannitelli, John C. Marcolini (argued), Cheifetz Iannitelli
Marcolini, P.C., Phoenix, Attorneys for William Jachimek dba Central Pawn
Nicholas J. Wood, Adam E. Lang, Brianna L. Long, Snell & Wilmer, L.L.P.,
Phoenix, Attorneys for Amicus Curiae American Planning Association,
Arizona Chapter
JUSTICE LOPEZ authored the opinion of the Court, in which CHIEF
JUSTICE BALES, VICE CHIEF JUSTICE PELANDER, and JUSTICES
BRUTINEL, TIMMER, BOLICK, and GOULD joined.
JUSTICE LOPEZ, opinion of the Court:
¶1 This case concerns the standards a municipal zoning board
applies in considering an application for a zoning variance. We hold that
to obtain an area variance, an applicant must show that strictly applying a
zoning ordinance will cause “peculiar and exceptional practical
difficulties” that deprive a property of privileges enjoyed by other similarly
zoned properties. We also clarify that the applicant’s desire to use the
property for purposes allowed on other similarly zoned properties does not
in itself constitute a self-imposed special circumstance justifying denial of
an area variance.
BACKGROUND
¶2 The dispute here concerns the City of Phoenix Board of
Adjustment’s (the “Board”) grant of a variance on a parcel of land (the
“Property”) at the southwest corner of McDowell Road and 32nd Street in
Phoenix. The area in which the Property sits is zoned as a “Commercial C-3
District—General Commercial.” Such districts have 141 specific permitted
uses plus all uses permitted in properties zoned C-1 and C-2, and several
residential uses. C-3 districts are designed to provide areas for “intensive
commercial uses.” Phx., Ariz., Zoning Ordinance § 624(A) (hereinafter
“Ordinance”).
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PAWN 1ST, LLC V. CITY OF PHOENIX, ET AL.
Opinion of the Court
¶3 The Property boasts a conspicuous history. For many
decades, it was home to an “adult theatre” operated under various names.
In 1973, the City of Phoenix completed an eminent domain action that
altered the Property’s dimensions and resulted in several unique
characteristics, all of which limited its commercial viability. First, the action
reduced the Property to only 12,000 square feet, smaller than any of the
twelve surrounding C-3-zoned corner parcels. Second, it eliminated the
frontage area around the building on the Property, resulting in its direct
abutment of a public sidewalk. Third, it restricted parking spaces.
¶4 In January 2010, the Property’s owners evicted their tenants,
discontinued the Property’s use as an adult theatre (a non-conforming use),
and leased the Property to William Jachimek, doing business as Central
Pawn, with an option to purchase. When Jachimek entered the lease, he
intended to operate a pawn shop. A pawn shop is a permitted use in a
C-2-zoned parcel, provided the building’s exterior walls are at least 500 feet
from a residential district and the owner obtains a use permit from the
zoning administrator. Jachimek applied for both a use permit for his pawn
business and, because the Property is within 500 feet of a residential district,
a variance from the 500-foot residential setback requirement.
¶5 After the zoning administration hearing officer denied his
applications, Jachimek appealed to the Board. At the Board hearing, Pawn
1st, LLC (“Pawn”), a competing pawn shop, opposed the variance. The
Board conditionally approved the variance, requiring Jachimek to operate
the pawn shop only during specified hours, to not buy or sell guns or
pornography, and to apply for building permits for a promised remodel of
the building within one year. The Board’s minutes from its July 1, 2010
meeting memorialize its findings:
[S]pecial circumstances . . . appl[y] to the land, namely the
unique nature of the discontinuance of the non-conforming
use on the property [the adult theatre use], the fact that it was
substantially impacted by prior [eminent] domain activities in
a manner that was dissimilar to other properties in a
reasonably close radius, including setbacks, and the fact that
there [is] less than 12,000 total square feet available and there
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PAWN 1ST, LLC V. CITY OF PHOENIX, ET AL.
Opinion of the Court
[are] restrictive parking requirements, that these special
circumstances were not created by the owner or applicant,
and were rather created in part by growth in the city itself,
that it was necessary for the preservation and enjoyment of
substantial property rights given the restrictions and the
property and current dormancy of any other business on the
site, this particular place on the site, that authorizing it would
not be materially detrimental to persons residing or working
in the vicinity, to adjacent property, the neighborhood or
public welfare in general.
¶6 After the Board rejected a reconsideration motion, Pawn filed
a special action in superior court challenging the Board’s variance decision.
The superior court ruled in Jachimek’s favor, finding that Pawn lacked
standing to challenge the Board’s decision. The court of appeals reversed,
finding that Pawn had standing. Pawn 1st, LLC v. City of Phoenix, 231 Ariz.
309 (App. 2013) (Pawn I). On remand, the superior court ruled in Jachimek’s
favor and dismissed Pawn’s complaint, finding that the variance was an
area variance and not a use variance; that the Board’s decision to grant
Jachimek’s area variance was not ultra vires because the Board is
authorized to consider area variances; and that sufficient evidence
supported the Board’s variance decision.
¶7 The court of appeals again reversed. Pawn 1st, LLC v. City of
Phoenix, 239 Ariz. 539, 545 ¶ 28 (App. 2016) (Pawn II). It agreed with the
superior court that Jachimek sought an area variance because a pawn shop
is an allowed use within a C-3 zoning district, irrespective of the 500-foot
distance requirement. Id. at 542 ¶ 11. But it disagreed that the Board acted
within its authority and therefore remanded for entry of a judgment
declaring the area variance invalid. Id. at 545 ¶ 28.
¶8 We granted review because the standards a municipal zoning
boards of adjustment must apply when considering an application for a
zoning variance present recurring issues of statewide importance. We have
jurisdiction pursuant to article 6, section 5(3), of the Arizona Constitution
and A.R.S. § 12-120.24.
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PAWN 1ST, LLC V. CITY OF PHOENIX, ET AL.
Opinion of the Court
DISCUSSION
¶9 We review issues of statutory interpretation de novo, Baker v.
Univ. Physicians Healthcare, 231 Ariz. 379, 387 ¶ 30 (2013), and we presume
the validity of the Board’s determination unless it is “against the weight of
the evidence, unreasonable, erroneous, or illegal as a matter of law.”
Mueller v. City of Phoenix ex rel. Phoenix Bd. of Adjustment II, 102 Ariz. 575,
581 (1967); see also A.R.S. § 12-910(E) (“The court shall affirm the agency
action unless . . . the court concludes that the action is not supported by
substantial evidence, is contrary to law, is arbitrary and capricious or is an
abuse of discretion.”).
I. Zoning Boards of Adjustment
¶10 Arizona law authorizes cities and towns to establish boards
of adjustment by ordinance. A.R.S. § 9-462.06(A). The boards decide
appeals from zoning administrators’ decisions concerning zoning
ordinance enforcement. A.R.S. § 9-462.06(G)(1). Primarily, the boards
determine whether “special circumstances” exist to relieve owners of
property with unique characteristics from strict application of zoning laws.
See A.R.S. § 9-462.06(G)(2).
¶11 The boards’ authority to modify zoning decisions is
statutorily limited. Boards of adjustment may not: (1) change the uses
permitted in a zoning district; or (2) “[g]rant a variance if the special
circumstances applicable to the property are self-imposed by the property
owner.” A.R.S. § 9-462.06(H); cf. Arkules v. Bd. of Adjustment of Paradise
Valley, 151 Ariz. 438, 440 (App. 1986) (holding that a board has “no powers
except those granted by the statutes creating it,” and “its power is restricted
to that granted by the zoning ordinance in accordance with the statute”).
Consequently, a board’s grant of a variance in excess of its statutory
authority is ultra vires and invalid as a matter of law. Arkules, 151 Ariz. at
440.
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PAWN 1ST, LLC V. CITY OF PHOENIX, ET AL.
Opinion of the Court
II. The Phoenix Zoning Ordinance
¶12 Consistent with § 9-462.06, the Phoenix Zoning Ordinance
authorizes a zoning administrator to issue a variance when “a literal
enforcement of any provisions of the [O]rdinance would result in
unnecessary property hardship.” Ordinance § 307(A)(9). A variance,
however, is authorized only if the applicant can establish that (a) special
circumstances apply to the land, building, or use referenced in the
application which do not apply to other district properties; (b) the owner
did not create the special circumstances; (c) the variance is necessary for the
“preservation and enjoyment of substantial property rights”; and (d) the
variance will not be materially detrimental to the area. Ordinance
§ 307(9)(a)–(d).
¶13 If a zoning administrator denies a variance, an applicant may
appeal to the Board, but the Board’s authority to modify a zoning decision
is limited in that it may not (a) change the uses permitted in a zoning
classification or district; or (b) grant a variance if the property owner self-
imposes the special circumstances applicable to the property. Ordinance
§ 303(B)(2).
III. Area and Use Variances
¶14 Arizona law distinguishes area variances from use variances.
See Ivancovich v. City of Tucson Bd. of Adjustment, 22 Ariz. App. 530, 536
(1974) (noting that “the distinction between ‘area’ and ‘use’ variances, and
the imposition of separate requirements for the granting of each type, are
inventions of the court”). An area variance relieves the duty to comply with
a zoning ordinance’s technical requirements, such as “setback line, frontage
requirements, height limitations, lot size restrictions, density regulations
and yard requirements,” while a use variance permits a use not expressly
allowed by a zoning ordinance. Id. The Arizona Legislature prohibits
boards of adjustment from changing the “uses permitted,” thus confining
their authority only to area variances. See Cardon Oil Co. v. City of Phoenix,
122 Ariz. 102, 103 n.1 (1979) (“[Section] 9-462.06(H)(1) now specifically
prohibits a board of adjustment from changing any of the uses permitted in
a zoning classification.”).
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PAWN 1ST, LLC V. CITY OF PHOENIX, ET AL.
Opinion of the Court
¶15 In Ivancovich, the court of appeals explained the different
variance standards: an area variance requires a showing of “peculiar and
exceptional practical difficulties,” while a use variance requires a showing
of “exceptional and undue hardship.” 22 Ariz. App. at 538 (noting that
“[t]he difference between exceptional and undue hardship and peculiar
and exceptional practical difficulties is one of degree”). One reason for
requiring a “less stringent” showing of encumbrance for an area variance
than a use variance is because it does not affect the character of the
community. Id. at 536.
¶16 A use variance, however, requires a more stringent showing
that compliance with the zoning regulations precludes any reasonable use
of the property. Id. at 538 (stating that “[i]t must be shown that the zoning
ordinances preclude the use of the property in question for any purpose to
which it is reasonably adapted”). A legislative body, rather than a zoning
board, may authorize a use variance. A.R.S. § 9-462.01(A)(1) (“[T]he
legislative body of any municipality by ordinance may . . . [r]egulate the use
of buildings, structures and land as between agriculture, residence,
industry, business and other purposes.”); A.R.S. § 9-462.06(H)(1) (A board
of adjustment may not “[m]ake any changes in the uses permitted in any
zoning classification or zoning district, or make any changes in the terms of
the zoning ordinance . . . .”); Ivancovich, 22 Ariz. App. at 535 (“The Board
cannot amend or repeal any zoning ordinance for this power belongs to the
City Council.”). “An inability to put the property to a more profitable use
or loss of economic advantage is not sufficient to constitute undue
hardship” justifying a use variance. Ivancovich, 22 Ariz. App. at 538. This
“no reasonable use” standard is limited to use variances. Id. (holding that
“[s]uch a showing need not be made in the case of area variances”).
¶17 The reasons for this distinction are sound. Two examples
illustrate the point. Permitting an adult bookstore (a C-3 use) in a
residential district would require a use variance—with its attendant higher
“exceptional and undue hardship” standard—and the city legislative
body’s approval through rezoning because it may fundamentally alter the
neighborhood. On the other hand, a decision regarding the number of
parking spaces for a use permitted in a particular district, such as a
restaurant, would require an area variance because it would not produce
the type of neighborhood-altering impact that requires legislative approval.
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PAWN 1ST, LLC V. CITY OF PHOENIX, ET AL.
Opinion of the Court
¶18 The area variance provisions protect property owners where
strict application of the Ordinance would “deprive the property of
privileges enjoyed by other property of the same classification in the same
zoning district,” A.R.S. § 9-462.06(G)(2), and “result in unnecessary
property hardship.” Ordinance § 307(A)(9). They serve as a “safety valve
against excessive regulation.” James A. Kushner, 2 Subdivision Law and
Growth Mgmt. § 8:13 (2d ed. 2017).
IV. Jachimek’s Variance
¶19 Here, we consider first whether Jachimek applied for an area
or use variance, and second whether the Board acted within its discretion
in granting the variance. The court of appeals held that Jachimek’s variance
was an area variance because a pawn shop is a permitted use in a C-3
zoning district, irrespective of the 500-foot distance requirement. Pawn II,
239 Ariz. at 542 ¶ 12. We agree.
¶20 The distinction between area and use variances centers on the
nature of the variance. A pawn shop is a permitted use in the zoning
classification here: the Property is zoned as a C-3 commercial district; all
C-2 commercial district uses are allowed in a C-3 district; and a pawn shop
is a permitted use in a C-2 district, provided the exterior walls of the
building are at least 500 feet from a residential district. Ordinance
§ 623(D)(132)(b). Contrary to Pawn’s argument, the 500-foot requirement
is akin to a setback or frontage requirement, not a use regulation; it is a
technical requirement of an established commercial area. A variance
allowing a pawn shop in an existing commercial district does not
fundamentally alter the nature of the area. The Board granted Jachimek an
area variance, not a use variance, and it did not exceed its authority under
A.R.S. § 9-462.06(H)(1).
V. Special Circumstances
¶21 Boards of adjustment may grant area variances only if, due to
special circumstances, “the strict application of the zoning ordinance will
deprive the property of privileges enjoyed by other property of the same
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PAWN 1ST, LLC V. CITY OF PHOENIX, ET AL.
Opinion of the Court
classification in the same zoning district.” A.R.S. § 9-462.06(G)(2). “The
term ‘special circumstances’ as used in the zoning ordinance is the
functional equivalent of the word ‘hardship.’” Burns v. SPA Auto., Ltd., 156
Ariz. 503, 505 (App. 1988).
¶22 We agree with the Board, superior court, and court of appeals
that special circumstances apply to the Property. The Board reasoned, after
comparing the Property to twelve surrounding C-3-zoned corner parcels,
that prior eminent domain activities rendered the Property “dissimilar to
other properties in a reasonably close radius.” The Board explained that
the special circumstances arose from the Property’s physical characteristics.
The record supports the Board’s findings that the lot size, the building’s
limited setback from the public sidewalk, and the parking restrictions
constitute special circumstances justifying an area variance, because the
Property’s unique characteristics create exceptional practical difficulties.
Accordingly, the Board acted within its discretion in finding sufficient
special circumstances unique to the Property to justify Jachimek’s variance.
VI. Prohibition against Self-Imposition
¶23 A finding of special circumstances does not justify a variance,
however, if the circumstances are self-imposed by the property owner.
A.R.S. § 9-462.06(H)(2); Ordinance §§ 303(B)(2)(b), 307(A)(9)(a)–(b), -(10)(b).
A board of adjustment exceeds its statutory jurisdiction and authority, and
its decision is “ultra vires and void,” if it grants a variance in violation of
the prohibition against self-imposition. See Arkules, 151 Ariz. at 440.
¶24 In this case, although it acknowledged that special
circumstances impacted the Property, the court of appeals held that any
special circumstances “were created by Jachimek and/or the Property
owner by selecting this particular property to use as a pawn shop, in
violation of the prohibition against self-imposition,” and, consequently,
“the Board’s decision to grant Jachimek a variance was ‘ultra vires and
void.’” Pawn II, 239 Ariz. at 545 ¶ 27. We disagree.
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PAWN 1ST, LLC V. CITY OF PHOENIX, ET AL.
Opinion of the Court
¶25 The court of appeals relied on three Arizona cases in
concluding Jachimek created the Property’s special circumstances: Arkules,
Burns, and Rivera v. City of Phoenix, 186 Ariz. 600 (App. 1996). These cases
are factually distinguishable.
¶26 In Arkules, neighbors challenged a variance allowing a
homeowner to paint his house a color inconsistent with a zoning regulation
requiring it to “blend [in] with the mountain background.” 151 Ariz. at 439.
The court of appeals ruled in the neighbors’ favor because, under zoning
law, “[t]he color of a house is not a factor pertaining to the real property or
which would deprive the property of uses or privileges enjoyed by other
property of the same zoning classification.” Id. at 441. The owner’s house
color preference did not constitute a cognizable hardship because the
statutory provisions and zoning ordinance “specifically state that any
hardship must relate to the use of the land as opposed to the owner” and,
therefore, “[a] personal hardship does not justify a variance.” Id. at 442.
¶27 Similarly, in Burns, a car dealership owner created his own
zoning hardship by contracting with three car manufacturers that required
him to display the manufacturers’ logos on a larger sign than the city’s
zoning rules allowed. 156 Ariz. at 504. The superior court reversed the
board of adjustment’s decision allowing a variance to display a non-
compliant sign. Id. The court of appeals upheld the superior court,
reasoning that the special circumstances “were self-inflicted by [the
owner’s] decision to be a three-car dealership,” and that special
circumstances may be considered only if they arise out of “circumstances
or conditions beyond the control of the party involved.” Id. at 505. Unlike
Jachimek’s decision to operate a pawn shop, a use denied to him but
permitted to other similarly situated property owners in the same zoning
district, the owner in Burns sought relief from signage restrictions applied
uniformly to comparable properties.
¶28 In Rivera, a homeowner obtained a building permit to expand
his residence. 186 Ariz. at 602. Following inspection of the completed
work, the city discovered that the improvements exceeded a zoning
limitation on the square footage of residential improvements. Id. The
Board ordered the homeowner to demolish the non-compliant portion of
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PAWN 1ST, LLC V. CITY OF PHOENIX, ET AL.
Opinion of the Court
his residence and he sought a variance. Id. The court of appeals affirmed
the Board’s denial of the variance, reasoning that the homeowner created
the special circumstances because he provided the city with an erroneous
site plan. Id. at 603.
¶29 Arkules, Burns, and Rivera are distinguishable because in each
case the owner created the special circumstances; they did not arise from
applying the zoning ordinance to circumstances or conditions beyond the
owners’ control. In contrast, here the special circumstances arose from
factors beyond Jachimek’s control. The City’s eminent domain action, not
Jachimek’s intended use, altered the Property’s dimensions and created the
special circumstances, including the Property’s comparatively small lot
size, absence of frontage area around the building, direct abutment of a
public sidewalk, and onerous parking restrictions. These characteristics
and the strict application of the zoning regulations uniquely diminish the
Property’s commercial viability as compared to “other property of the same
classification in the same zoning district,” A.R.S. § 9-462.06(G)(2), and have
nothing to do with Jachimek’s personal preference.
¶30 We are also unpersuaded by the court of appeals’ reliance on
Minney v. City of Azusa, 330 P.2d 255 (Cal. Dist. Ct. App. 1958), for the
proposition that “[o]ne who purchases property in anticipation of
procuring a variance to enable him to use it for a purpose forbidden at the
time of sale cannot complain of hardship ensuing from a denial of the
desired variance.” Pawn II, 239 Ariz. at 545 ¶ 26. In Minney, the California
Court of Appeals upheld the denial of a variance where an owner
purchased a lot in a residential zone and sought to construct a church. 330
P.2d at 257. Because Minney involved a use variance, it is inapposite. See
Arden H. Rathkopf et al., 3 Rathkopf’s The Law of Zoning and Planning
§ 58.22 (4th ed. 2017) (noting that classification of prior knowledge of
special circumstances as a self-imposed hardship arose in the context of use
variances). Unlike Minney’s use variance, Jachimek’s proposed use was
permissible and the area variance would not alter the character of the
neighborhood.
¶31 Arizona zoning statutes and local ordinances require boards
of adjustment to consider special circumstances applicable to the property,
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PAWN 1ST, LLC V. CITY OF PHOENIX, ET AL.
Opinion of the Court
not the property owner. See, e.g., Burns, 156 Ariz. at 504 (explaining that a
variance “is a legal status granted to a certain parcel of realty without
regard to ownership,” and “[p]ersonal hardships, regardless of how
compelling or how far beyond the control of the individual applicant, do
not provide sufficient grounds for the granting of a variance” (citation
omitted)); Julian Conrad Juergensmeyer et al., Land Use Planning and
Development Regulation Law § 5.17 (3d ed. 2017) (“Most courts consider
the transfer of title irrelevant . . . [because] the zoning, not the person,
creates the hardship.”). Thus, in the context of area variances, we consider
whether strictly applying the zoning requirements would deprive an owner
of the same privileges owners of other similarly zoned property enjoy.
Special circumstances are not “self-imposed” when the owner wants to use
the property in a way permitted to other similarly situated properties, but
cannot do so because of externally imposed circumstances like those
involved here. Although it is fair to say that Jachimek voluntarily acquired
the Property subject to the special circumstances, he certainly did not create
them.
¶32 The court of appeals’ rule would impose an undue restraint
on alienation, as anyone purchasing a property with knowledge of the
restriction would have no ability to obtain an area variance. This approach
would give purchasers fewer property rights than sellers and, thus, would
contravene our case law and longstanding legal tradition in favor of
alienation. See, e.g., Tovrea v. Umphress, 27 Ariz. App. 513, 517 (1976) (noting
that “[r]estraints on alienation are generally disfavored”); see also Lamb v.
Zoning Bd. of Appeals of Taunton, 923 N.E.2d 1078, 1081 (Mass. App. Ct. 2010)
(citing Arden H. Rathkopf et al., 3 Rathkopf’s The Law of Zoning and
Planning § 58.22 at 141–148 (1991), stating “because a purchaser of property
acquires no greater right to a variance than his predecessor, he should not
be held to acquire less” and finding that “[t]o hold otherwise would
discourage the free alienability of real property and the efficient use of
land” (citations omitted)). Accordingly, we reject the court of appeals’ rule
and hold that an applicant or owner’s selection of a property, even with
knowledge that an area variance is required for an intended use allowed on
other similarly zoned properties, does not itself constitute a self-imposed
special circumstance precluding an area variance.
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PAWN 1ST, LLC V. CITY OF PHOENIX, ET AL.
Opinion of the Court
CONCLUSION
¶33 The Board acted within its discretion in finding that special
circumstances applied to the Property; that the variance required was an
area variance; that Jachimek did not create the special circumstances; that
the variance was necessary for the preservation and enjoyment of
substantial property rights; and that the variance would not be materially
detrimental to the surrounding area. Accordingly, we vacate the court of
appeals’ opinion and affirm the superior court’s judgment upholding the
Board’s variance and granting summary judgment in Jachimek’s favor. We
deny Pawn’s request for attorney fees because it is not the prevailing party.
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