Fort Pierce Industrial Park Phases II, III, & IV Owners Ass'n v. Shakespeare

This opinion is subject to revision before
publication in the Pacific Reporter
2016 UT 28
IN THE
SUPREME COURT OF THE STATE OF UTAH
FORT PIERCE INDUSTRIAL PARK PHASES II, III & IV OWNERS ASSOCIATION,
Appellant and Cross-Appellee,
v.
THOMAS A. SHAKESPEARE; GLORIA J. SHAKESPEARE;
GLOCO, LC; ATLAS TOWER, LLC,
Appellees and Cross-Appellants.
No. 20140137
Filed June 22, 2016
On Direct Appeal
Fifth District, St. George
The Honorable Thomas M. Higbee
No. 100500378
Attorneys:
Linda M. Jones, Troy L. Booher, Clemens A. Landau, Salt Lake City,
Robert D. Mitchell, St. George, for appellant
David L. Elmont, M. Eric Olmstead, St. George, for appellees
JUSTICE HIMONAS authored the opinion of the Court, in which
CHIEF JUSTICE DURRANT, ASSOCIATE CHIEF JUSTICE LEE,
and JUSTICE DURHAM joined.
JUSTICE JOHN A. PEARCE became a member of the Court on
December 17, 2015, after oral argument in this matter,
and accordingly did not participate.
JUSTICE HIMONAS, opinion of the Court:
FORT PIERCE v. SHAKESPEARE
Opinion of the Court
INTRODUCTION
¶ 1 This case is about the authority of the Board of Trustees
(Board) of the Fort Pierce Industrial Park Phases II, III & IV Owners
Association (Association) to deny an application to construct a cell
phone tower on a specific lot in the Fort Pierce Industrial Park. The lot
in question is located along River Road, which is “the most aesthetically
sensitive area of the” industrial park. In 2009, Gloria and Thomas
Shakespeare; GLOCO, LC; and Atlas Tower, LLC (collectively,
Shakespeares) applied for permission from the Board to construct a cell
phone tower on that lot. Despite the denial of their application, the
Shakespeares proceeded to construct the cell phone tower. The
Association then brought suit against the Shakespeares in district court
for breach of the CC&Rs. 1
¶ 2 Following a bench trial, the district court held that the
Shakespeares breached the CC&Rs by constructing the cell phone
tower without permission from the Board. However, the district court
also applied a presumption that “restrictive covenants are not favored
in the law and are strictly construed in favor of the free and
unrestricted use of property” and held that the Board did not have the
right to limit the number of cell phone towers in the industrial park.
Additionally, the district court found that the Board could consider
aesthetics and the two-business limit but held that the Board did not
“reasonably consider” these factors in making its decision.
¶ 3 As explained below, we hold that the court erred in strictly
construing the CC&Rs rather than applying neutral principles of
contract construction. Thus, we reverse the district court’s holding
regarding the Board’s authority to deny the Shakespeares’ application
and instead hold that the Board had sufficient authority under the
CC&Rs to deny that application. We also affirm the district court’s
grant of summary judgment regarding the timeliness of the Board’s
denial, and we strike the attorney fees award and remand for a
determination of attorney fees in light of this decision.
1 The covenants, conditions, and restrictions (CC&Rs) of the Fort
Pierce Industrial Park are restrictive covenants set forth in the Fourth
Amendment to and Restatement of the Declaration of Covenants,
Conditions and Restrictions of Fort Pierce Industrial Park Phases II, III
& IV.
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BACKGROUND
¶ 4 The Fort Pierce Industrial Park was created as “an attractive
development option for companies seeking to start or expand
businesses.” It is a “very nice industrial park” in Washington County,
Utah, and is “intended . . . to be a cut above the norm.” The Board has
authority to “enforce and administer the [CC&Rs],” which bind owners
and operators within the industrial park. The purpose of the CC&Rs is
to “establish a general plan for the improvement and development of
the [Fort Pierce Industrial Park] Property[,] to [e]nsure adherence
thereto so as to avoid improper development and use of the Property[,]
and to provide adequately for consistent quality of improvement and
use.” Among other things, the CC&Rs “require that external equipment
be shielded” and impose “maintenance requirements, prohibitions
against hazards, and parking and signage requirements.”
¶ 5 Under the CC&Rs, property owners in the industrial park
must apply to the Board for written approval “[b]efore commencing the
construction or alteration of any buildings . . . or any other structures or
permanent improvements.” After the owner has submitted the required
plans, the Board has “the right to refuse to approve any such plans and
specifications.” In making its determination, the Board may consider
the following factors: “the suitability of the proposed structure, the
materials of which it is to be built, the site upon which it is proposed to
be erected, the harmony thereof with the surroundings, and the effect
of said building, or other planned structure, on the outlook from
adjacent or neighboring property.” The Board is “guided by [the
CC&Rs], the ordinances of the City of St. George, including the
Uniform Building Code as adopted, and other applicable rules and
regulations” and has “the power to enforce its decision.”
¶ 6 Both the St. George city ordinances and the CC&Rs emphasize
aesthetic considerations at the planning stage. Chapter 22 of the city
ordinances is titled “Wireless Telecommunication Facilities” and
addresses “planning issues, particularly aesthetic concerns, brought on
by the demand for wireless communication facilities.” ST. GEORGE,
UTAH, CITY CODE § 10-22-1(A) (2016). The regulations in that chapter
“are intended to minimize the visual impact of wireless communication
facilities.” Id. § 10-22-1(B). They include a city policy “to encourage
collocation of facilities wherever feasible,” with up to three providers
permitted in a single tower; if collocation is not feasible, the burden is
on the applicant to demonstrate infeasibility. Id. § 10-22-7(B). As to the
CC&Rs, in addition to the considerations already listed, they restrict
permitted uses of the property to “selected industrial, manufacturing
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Opinion of the Court
and marketing enterprises that are compatible with the development”
and to “aesthetically attractive and harmonious structures.” The
CC&Rs seem to pay particular attention to River Road, indicating that
“to provide for an overall aesthetic project, Lots that face River Road
may be subject to additional specific landscaping standards.” The
CC&Rs also limit the number of businesses per lot, requiring “specific
written consent of the Board” for more than two simultaneous tenants
or users or for more than two businesses to be conducted
simultaneously on a single lot.
¶ 7 The events giving rise to this case transpired after the Board
learned of “a problem with cell phone coverage” in the industrial park
in early 2008 and was approached by a couple of cell phone service
providers. Before the Shakespeares applied for permission to construct
the cell phone tower at issue in this case, two other cell phone tower
developers had sought permission to build cell phone towers in the
Fort Pierce Industrial Park. At the beginning of 2008, Alltel
Communications’ (Alltel) cell phone tower proposal was approved by
the Planning Commission of St. George, 2 but Alltel “abandoned the
project for cost reasons” without submitting a plan to the Board for
approval. A few months later, InSite Towers, LLC, (InSite) approached
the Board and inquired about constructing a cell phone tower in the
industrial park. InSite and the Board discussed possible locations for
several months; InSite suggested a couple of locations along River
Road, but the Board discouraged InSite from locating a cell phone
tower there because of concerns about visibility, aesthetics, and the
two-business limit and because that area “was just very sensitive.” The
Board finally approved a non–River Road location on the west
boundary of the industrial park where InSite’s cell phone tower “would
not be along the ridge line” and would be “kind of concealed.”
¶ 8 In 2009, the Shakespeares applied to construct a cell phone
tower on their lot, which is located on River Road. The lot is
comparatively small and already had two businesses on it. The
Shakespeares first obtained approval from the city and then sought
approval from the Board. The district court found that the Board
denied the application because it wanted to limit the number of cell
2Applicants are required to submit a Wireless Master Plan to the
Planning Commission of St. George and to obtain a Conditional Use
Permit, as well as receive Board approval, in order to build a cell phone
tower in the Fort Pierce Industrial Park.
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Opinion of the Court
phone towers “to the minimum number necessary to meet the
community needs” and for “other reasons . . . including primarily the
aesthetics and the two-business limit.” Despite the Board’s denial,
Gloria and Thomas Shakespeare and GLOCO, LC, permitted Atlas
Towers (their lessee) to construct a cell phone tower on the lot, without
notifying the Board. In early January 2010, the Board discovered that
construction of a cell phone tower had begun on the Shakespeares’ lot,
and the Board filed a lawsuit against the Shakespeares. The
Shakespeares counterclaimed, seeking injunctive relief, damages, and
attorney fees.
¶ 9 The district court held that constructing the cell phone tower
without Board approval constituted a breach of the CC&Rs. But
because the district court found the Board’s denial to be “unreasonable
and arbitrary,” it held that “[t]he tower is approved and allowed to
remain.” In finding the denial “unreasonable and arbitrary,” the district
court presumed that restrictive covenants, such as the CC&Rs, are
disfavored and should be “strictly construed in favor of the free and
unrestricted use of property.” According to the district court, the Board
breached the CC&Rs “by basing its denial of the Shakespeares’
application on use limits not found in the [CC&Rs], and by otherwise
unreasonably and arbitrarily denying the application.” Specifically, the
district court indicated that “Fort Pierce does not have the right under
the Restrictive Covenants to limit the number of cell towers within the
industrial park.” The district court found that the Board acted in good
faith and that other concerns factored into the decision, “including
primarily the aesthetics and the two-business limit.” However, the
district court found that the testimony “establishe[d] that the dominant
factor in the decision was the preference of one site [InSite’s] over the
other [the Shakespeares’].” Because the district court, based on its strict
construction of the CC&Rs, believed that the Board lacked the authority
to limit the number of cell phone towers, and because it found that such
a limitation was the main reason for the Board’s denial of the
application, the district court concluded that the denial was improper.
The district court also granted partial summary judgment to the
Association, holding that the Board’s denial was issued within sixty
days, as required by the CC&Rs. The district court awarded the
Shakespeares 50 percent of their attorney fees.
¶ 10 The Association appealed the judgment to the Utah Supreme
Court. The Shakespeares cross-appealed the grant of summary
judgment regarding the timeliness of the Board’s denial and also cross-
appealed the part of the final judgment finding breach by the
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Shakespeares and the subsequent “reduc[tion] [of] the grant of the
Shakespeares’ attorney[] fees by 50%.”
¶ 11 We hold that the district court erred in strictly construing the
CC&Rs. We reject strict construction of restrictive covenants and hold
that restrictive covenants should be construed under the same
principles used to interpret contracts. Based on our analysis of the
CC&Rs, we reverse the district court’s holding that the Board’s denial
of the Shakespeares’ application was improper; instead, we hold that
the Board acted within its authority in denying the Shakespeares’
application. We affirm the grant of summary judgment regarding the
timeliness of the denial. And we strike the attorney fees award and
remand for a determination of attorney fees in light of our decision.
PRESERVATION
¶ 12 The Shakespeares assert that the question of “whether the trial
court erred in finding restrictive covenants to be disfavored” was “not
properly preserved on appeal.” The Shakespeares also claim that this
question “is subject to the invited-error doctrine.”
¶ 13 The issue of “whether the trial court erred in finding
restrictive covenants to be disfavored” may properly be considered on
appeal in this case. An issue is preserved by “present[ing] [it] to the
trial court in such a way that the trial court has an opportunity to rule
on that issue.” In re Adoption of Baby E.Z., 2011 UT 38, ¶ 25, 266 P.3d 702
(citation omitted). However, there are “some limited exceptions to our
general preservation rule.” Patterson v. Patterson, 2011 UT 68, ¶ 13, 266
P.3d 828. Because “[o]ur preservation requirement is self-imposed and
is therefore one of prudence rather than jurisdiction[,] . . . we exercise
wide discretion when deciding whether to entertain or reject matters
that are first raised on appeal.” Id. “The two primary considerations
underlying the [preservation] rule are judicial economy and fairness.”
Kell v. State, 2012 UT 25, ¶ 11, 285 P.3d 1133 (alteration in original)
(citation omitted). In Kell v. State, we pointed out that the “district court
not only had an opportunity to rule on the issue [that the State argued
was not preserved]” but in fact “did rule on it.” Id. We indicated that
“[t]he district court’s decision to take up the question . . . conclusively
overcame any objection that the issue was not preserved for appeal.” Id.
This is likewise the case here. The district court began its analysis by
discussing “several overarching principles of construction” and
specifically considered restrictive covenants, citing to St. Benedict’s
Development Co. v. St. Benedict’s Hospital, 811 P.2d 194, 198 (Utah 1991),
for the proposition that “restrictive covenants are not favored in the law
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and are strictly construed in favor of the free and unrestricted use of
property.” Here, as in Kell v. State, the district court’s decision to take
up the question conclusively overcame any objection that the issue was
not preserved for appeal.
¶ 14 Nor does the invited-error doctrine preclude consideration of
the issue of “whether the trial court erred in finding restrictive
covenants to be disfavored” in this case. The invited-error doctrine is
intended to “ensure[] that parties cannot entice the court into
committing an error and then reap the benefit of objecting to that error
on appeal.” State v. Moa, 2012 UT 28, ¶ 25, 282 P.3d 985; see also State v.
McNeil, 2016 UT 3, ¶ 17, 365 P.3d 699 (“[A]n error is invited when
counsel encourages the trial court to make an erroneous ruling. The
rule discourages parties from intentionally misleading the trial court so
as to preserve a hidden ground for reversal on appeal . . . .” (internal
quotation marks omitted)). The Shakespeares appear to argue that the
Association enticed the court into committing an error because the
Shakespeares “have been unable to identify any instance in the
proceedings below . . . where [the Association] cited any legal authority
or provided any meaningful explanation of the proper standard the
trial court should apply in interpreting the plain language of the
CC&Rs.” The Shakespeares’ approach confuses the concepts of
preservation and invited error. Moreover, as we recently expressed,
inaction is not a basis for finding invited error. McNeil, 2016 UT 3, ¶ 21
(“The State claims that the invited error doctrine is triggered by the fact
that defense counsel ‘did not dispute’ that the statement was not
hearsay. The State also terms counsel’s conduct as an ‘affirmative
acquiescence.’ . . . The State’s argument is unpersuasive because an
error of this sort by the trial court is not invited but merely
unpreserved, and thus remains subject to plain error review. Because
the State’s understanding of invited error would erode the doctrine of
plain error review and is contrary to our present caselaw, we reject this
broad definition of invited error.” (citation omitted)). Thus, the invited-
error doctrine does not preclude us from reaching the issue regarding
the construction of restrictive covenants on appeal.
STANDARD OF REVIEW
¶ 15 Three standards of review are implicated by the issues raised
in this case. First, we review the district court’s conclusions of law for
correctness. State v. Tiedemann, 2007 UT 49, ¶ 11, 162 P.3d 1106. This
includes “questions of contract interpretation.” Holladay Towne Ctr.,
L.L.C. v. Brown Family Holdings, L.L.C., 2011 UT 9, ¶ 18, 248 P.3d 452;
Fairbourn Commercial, Inc. v. Am. Hous. Partners, Inc., 2004 UT 54, ¶ 6, 94
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P.3d 292 (“‘[Q]uestions of contract interpretation not requiring resort to
extrinsic evidence’ are matters of law, which we review for
correctness.” (citation omitted)).
¶ 16 Second, we review the district court’s findings of fact for clear
error. Brown v. State, 2013 UT 42, ¶ 37, 308 P.3d 486 (“We will set aside a
district court’s factual finding as clearly erroneous only if it is ‘against
the clear weight of the evidence, or if [we] otherwise reach[] a definite
and firm conviction that a mistake has been made.’” (alterations in
original) (citation omitted)). In this case, the district court’s application
of an erroneous legal standard (i.e., strict construction of restrictive
covenants) and incorrect conclusion about what the CC&Rs allowed for
(i.e., that the CC&Rs did not permit the Board to limit the number of
cell phone towers) caused the district court’s “entire approach to [its]
analysis” and many of its factual findings to be “unavoidably tainted
by [those] misperception[s].” Those factual findings are clearly
erroneous, and we owe them no deference.
¶ 17 Third, we review the district court’s grant of summary
judgment for correctness, with “the facts and all reasonable inferences
drawn therefrom [being viewed] in the light most favorable to the
nonmoving party,” the Shakespeares. R & R Indus. Park, L.L.C. v. Utah
Prop. & Cas. Ins. Guar. Ass’n, 2008 UT 80, ¶ 18, 199 P.3d 917 (citation
omitted).
ANALYSIS
¶ 18 We begin our analysis by addressing the proper interpretation
of restrictive covenants; we reject strict construction of restrictive
covenants in favor of applying the rules of construction used for
contracts. Then we analyze the CC&Rs for the Fort Pierce Industrial
Park and hold that they provided the Board with sufficient authority to
deny the cell phone tower application. We discuss the business
judgment rule but decline to adopt a precise business judgment
standard in this case. We also consider the summary judgment
determination regarding the timeliness of the Board’s denial of the
Shakespeares’ application and hold that the denial was timely. Finally,
we strike the award of attorney fees to the Shakespeares and remand
for a determination of what attorney fees to award the Association.
I. INTERPRETATION OF RESTRICTIVE COVENANTS
¶ 19 The district court erred in applying strict construction to the
CC&Rs. Restrictive covenants are a “method of effectuating private
residential developmental schemes” and give property owners in such
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developments the right to enforce those covenants against others in the
development. Swenson v. Erickson, 2000 UT 16, ¶ 21, 998 P.2d 807. In
Swenson v. Erickson, we indicated that “interpretation of [restrictive]
covenants is governed by the same rules of construction as those used
to interpret contracts” and that, “[g]enerally, unambiguous restrictive
covenants should be enforced as written.” Id. ¶ 11; see also View Condo.
Owners Ass’n v. MSICO, L.L.C., 2005 UT 91, ¶ 21, 127 P.3d 697 (“We
interpret the provisions of the Declaration [of CC&Rs] as we would a
contract. If the Declaration is not ambiguous, we interpret it according
to its plain language.” (citation omitted)). 3 Thus, restrictive covenants
“should be interpreted to give effect to the intention of the parties
3 The district court cited Express Recovery Services, Inc. v. Rice, 2005
UT App 495, ¶ 3 n.1, 125 P.3d 108, for the rule that “[w]hen there is an
ambiguity in contract language, we turn first to extrinsic evidence in
order to determine the intent of the parties. But in the absence of such
extrinsic evidence, which is commonly lacking in the non-negotiated
terms of form contracts, we construe the lingering ambiguities against
the drafter as a last resort.” We note, however, that even if some
specific terms may appear ambiguous when interpreted in isolation,
that is not sufficient for a finding of ambiguity. See, e.g., State v.
Rasabout, 2015 UT 72, ¶ 22, 356 P.3d 1258 (“A statute is ambiguous
when its terms remain susceptible to two or more reasonable
interpretations after we have conducted a plain language analysis.”
(emphasis added) (internal quotation marks omitted)); Anadarko
Petroleum Corp. v. Utah State Tax Comm’n, 2015 UT 25, ¶ 11, 345 P.3d 648
(“[W]e do not interpret statutory provisions in isolation. We . . .
construe terms in each part or section of a statute in connection with
every other part or section so as to produce a harmonious whole. The
meaning of seemingly unclear or ambiguous provisions is often clear
when read in context of the entire statute.” (internal quotation marks
omitted)). We do not interpret words in a contract in isolation but
instead interpret them “in light of the [contract] as a whole.” Utah Farm
Bureau Ins. Co. v. Crook, 1999 UT 47, ¶ 5, 980 P.2d 685 (“Policy terms are
harmonized with the [contract] as a whole . . . .”). When the CC&Rs are
reviewed as a whole, they clearly provide the Board with the authority
and discretion to limit the number of cell phone towers in the industrial
park. Therefore, there are no lingering ambiguities to be construed
against the drafter of the CC&Rs, and the rule permitting the use of
extrinsic evidence and construction of ambiguities against the drafter is
not applicable here.
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ascertained from the language used in the instrument, or the
circumstances surrounding creation of the servitude, and to carry out
the purpose for which it was created.” RESTATEMENT (THIRD) OF PROP.
(SERVITUDES) § 4.1(1) (AM. LAW INST. 2000). The Restatement indicates
that
[t]he rule that servitudes should be interpreted to carry
out the intent of the parties and the purpose of the
intended servitude departs from the often expressed
view that servitudes should be narrowly construed to
favor the free use of land. It is based in the recognition
that servitudes are widely used in modern land
development and ordinarily play a valuable role in
utilization of land resources.
Id. cmt. a. This analysis applies to CC&Rs, which are used in modern
land development and play a valuable role in establishing and
enforcing plans for the improvement and development of properties
such as the Fort Pierce Industrial Park. The district court, however,
incorrectly believed itself to be bound by the earlier proposition, which
appears as dicta in St. Benedict’s Development Co. v. St. Benedict’s
Hospital, that “restrictive covenants are not favored in the law and are
strictly construed in favor of the free and unrestricted use of property.”
811 P.2d 194, 198 (Utah 1991). We continue to reject strict construction
of restrictive covenants and make it clear that restrictive covenants are
to be interpreted using the same rules of construction that are used to
interpret contracts.
II. BOARD AUTHORITY UNDER THE CC&RS TO
LIMIT THE NUMBER OF CELL PHONE
TOWERS AND BUSINESSES
¶ 20 In applying the wrong standard, the district court erroneously
determined that the CC&Rs “did not provide the Board discretion to
limit the number of cell towers [in the Fort Pierce Industrial Park], and
. . . did not provide the Board discretion to deny the Shakespeares’
application based upon either the aesthetic impact of the location of the
cell tower or the density restrictions for the lot.” 4 When analyzed under
4 The district court also found that the Board’s denial of the
Shakespeares’ application was unreasonable, arbitrary, and capricious
because the Board “based its decision on [the] fundamentally incorrect
premise” that it can limit the number of cell phone towers in the
con’t.
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principles of contract construction, however, the CC&Rs clearly
provided the Board with sufficient authority and discretion to deny the
cell phone tower proposal. 5 The CC&Rs allow the Board discretion to
consider the need for an additional cell phone tower and the possibility
for collocation of such facilities, the aesthetic impact of the cell phone
industrial park. However, the district court clearly erred in making this
determination, because the district court “based its [finding] on a
fundamentally incorrect premise.” Contrary to the district court’s
contention, the Board does have such authority and discretion. See infra
¶¶ 20–23.
5 The Shakespeares seek to discount the Association’s contract
interpretation arguments by claiming that the Board’s application of the
CC&R provision would be relevant only if the language of the CC&Rs
were ambiguous. According to the Shakespeares, the question of
whether the CC&Rs are ambiguous was not preserved. However, the
question of ambiguity was in fact preserved for the same reasons the
restrictive covenant question was preserved. See supra ¶¶ 12–14. The
district court directly addressed the question of ambiguity, starting its
analysis by first discussing the construction of ambiguity in contract
language. Kell v. State, 2012 UT 25, ¶ 11, 285 P.3d 1133 (“The district
court’s decision to take up the question . . . conclusively overcame any
objection that the issue was not preserved for appeal.”). Thus, because
the court took up the question of ambiguity, the Association had no
need to take separate action in order to preserve that question for
appeal.
Whether that question was preserved, however, is irrelevant to our
analysis. In our analysis, it is not a question of whether the CC&Rs are
ambiguous but of whether the language of the CC&Rs is broad enough
to allow the Board to exercise its discretion to deny the Shakespeares’
cell phone tower application. And when interpreting the language in
harmony with all the provisions in the CC&Rs, it is clear that the Board
had authority to deny the application. The CC&Rs explicitly grant the
Board the authority and duty “to approve or disapprove
building plans, specifications, [and] site plans,” and nothing in the
CC&Rs suggests that the individual property owners are granted
maximum freedom to use their property in the industrial park as they
desire. To the contrary, the CC&Rs focus on the broad authority of the
Board and restrictions on the property owners. See, e.g., supra ¶¶ 5–6;
infra ¶¶ 20–25.
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tower, and the two-business limit, which support the Board’s decision
to deny the Shakespeares’ proposal.6
¶ 21 Under the CC&Rs, the Board had authority to consider the
need for an additional cell phone tower and the possibility for
collocation. The CC&Rs indicate that the Board has the right to consider
a number of factors, including “the suitability of the proposed
structure.” Furthermore, as noted, the CC&Rs indicate that it is the
intent of the CC&Rs “to protect the character of the Property” and that
the Board should be guided by the St. George city ordinances. Chapter
22 of the city ordinances, “Wireless Telecommunication Facilities,” is
particularly pertinent here. The regulations in that chapter include a
city policy “to encourage collocation of facilities wherever feasible,”
with up to three providers permitted in a single tower. ST. GEORGE,
UTAH, CITY CODE §§ 10-22-4, 10-22-7(B) (2016). The testimony of
Mr. Jennings, a Board member, shows that these provisions were
indeed taken into consideration in the Board’s decision-making
process. Mr. Jennings testified that “there was a community
development concern about proliferation of towers” and that “he
understood the community policy, primarily originating with
St. George City, to be one of restraint in communication tower
approval.” Clearly, under the CC&Rs, the Board has authority to
consider the city ordinances, and clearly those ordinances seek to
prevent unnecessary proliferation of cell phone towers and promote
collocation. 7
6 Our interpretation of the Board’s authority under the CC&Rs is
further buttressed by section 7.5 of the CC&Rs, which provides that the
“provisions . . . shall be liberally construed to effect all of their intended
purposes.” The Board is tasked with “protect[ing] the character of the
Property” and has the right to consider the suitability of any structures
proposed for any lot in the industrial park. Thus, a liberal construction
to effect these and other intended purposes of the CC&Rs clearly
supports the Board’s authority to deny the cell phone tower application
at issue in this case. While section 7.5 buttresses our conclusion, liberal
construction is not necessary to reach our conclusion; standard contract
interpretation alone shows the Board to have acted within its authority
in limiting the number of cell phone towers to those actually needed.
7 We recognize that St. George had already granted the Shakespeares
its approval to construct the cell phone tower. See supra ¶ 8. The
Shakespeares argue that the Board, in taking the St. George city
con’t.
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¶ 22 Because the Board had approved a suitable site for another
provider, InSite, to build a cell phone tower, it was reasonable and
within the Board’s discretion for the Board to consider whether the
industrial park needed another cell phone tower and whether
collocation was feasible, 8 when considering the Shakespeares’
application. Nothing in the record suggests that more than one
provider was expected to use InSite’s cell phone tower at the time.
Under these facts, the Board acted reasonably and within its discretion
in deciding that an unneeded second cell phone tower was unsuitable
for the industrial park and therefore denying the application. The
district court erroneously held that the Board cannot “limit the number
of cell towers within the industrial park” and that the proposed project
should be “reviewed on the merits as if there were no other
communications tower in the industrial park.” This holding does not
appear to comport with the city ordinances’ encouragement of
collocation of wireless communication facilities. If the Board were
required to ignore the InSite cell phone tower when considering the
Shakespeares’ proposal, it would be impossible for the Board to be
ordinances into account in its decision to deny the Shakespeares’
proposal, “reject[ed] the lawful determinations of a relevant government
authority” and sought to “override the effect of the government
authority’s determination.” The Shakespeares’ characterization of the
Board as acting as a “private board of adjustment” or a “private appeal
authority” is erroneous. The Board did not review the city’s
determination to approve the Shakespeares’ proposal and did not
override the effect of that determination. Instead, the Board considered
whether to grant the separate Board approval that is also required for
such projects in the industrial park. See supra ¶ 7 n.2. Contrary to the
Shakespeares’ contention, the city’s decision does not constitute
binding precedent for the Board. The CC&Rs require that the Board
“will be guided by . . . the ordinances of the City of St. George,” and the
Board was free to interpret and be guided by those ordinances
regardless of whether the city, also guided by those ordinances, chose
to grant its approval for the project.
8 The St. George city ordinances provide that if collocation is not
feasible, the burden is on the applicant to demonstrate infeasibility.
ST. GEORGE, UTAH, CITY CODE § 10-22-7(B) (2016). Nothing in the
briefing or the district court’s decision indicates that the Shakespeares
met that burden.
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Opinion of the Court
guided by the city ordinances’ collocation preference when exercising
its discretion in deciding whether to approve or deny the proposal,
which would contravene the CC&Rs.
¶ 23 Section 6.4(i) of the CC&Rs further underscores the Board’s
broad authority to limit the use of properties in the industrial park. The
CC&Rs give the Board authority to “approve or disapprove building
plans, specifications, or site plans.” Section 6.4 emphasizes the breadth
of that authority by listing certain uses that are “expressly prohibited.”
Section 6.4(i) prohibits “the manufacturing, storage, or sale of milk
products or milk substitutes” and provides an exception to this express
prohibition by permitting such operations on one specific lot. This
prohibition of a specific type of business, combined with the exception
for a single lot, recognizes the Board’s broad authority: the Board has
broad discretion, and section 6.4(i) limits that discretion in regard to
dairy businesses. The district court considered this prohibition but got
the analysis exactly backwards. According to the district court, if the
Board’s authority to approve or deny plans “[w]ere . . . as broad as [the
Association] claims it to be, Section 6.4(I) [sic] would be unnecessary.
Had the Restrictive Covenants been intended to limit the number of
communication towers in the industrial park, it could have been done
specifically, as it was with dairy products.” The district court’s reliance
on this section to support its view of more limited Board authority is
entirely misplaced. As already indicated, section 6.4(i) prohibits a
particular type of business and provides a specific exception to that
prohibition. If section 6.4(i) were not included in the CC&Rs, the Board
would have as broad discretion in approving or denying plans for
dairy operations as it has in approving or denying plans for any
business not prohibited by the CC&Rs. Thus, rather than showing the
Board’s overall authority to be limited, this section emphasizes the
broad discretion of the Board to approve or deny proposals such as the
Shakespeares’. 9
9 Because the district court and the Shakespeares misapprehend the
significance of section 6.4(i), the Shakespeares’ reliance on that section
for an inclusio unius argument is erroneous. Under inclusio unius, the
“expression of one term or limitation is understood as an exclusion of
others.” Nevares v. M.L.S., 2015 UT 34, ¶ 31, 345 P.3d 719. The
Shakespeares argue that since “[s]ection 6.4(i) . . . limits the number of
dairy product operations in the industrial par[k] to one[,] . . . [t]he
absence of a 6.4(i)-equivalent provision for cell towers or other types of
con’t.
14
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Opinion of the Court
¶ 24 The Board also had discretion to consider the aesthetic impact
of the cell phone tower and the two-business limit. Of these two
considerations, we address only the two-business limit, which provides
a particularly clear basis for the Board’s denial. 10 The CC&Rs require
“specific written consent of the Board” for more than two simultaneous
tenants or users or for more than two businesses to be conducted
simultaneously on a single lot. As the district court correctly
recognized, this rule means that “you can only have two businesses on
any lot. To have more than two, the Board has to grant approval.” The
Shakespeares’ lot already had two businesses on it. Supra ¶ 8. Because
the cell phone tower constituted a third business on their comparatively
small lot, the Shakespeares needed the written consent of the Board
business indicates the absence of any ‘general plan’ prohibiting
duplicates.” However, since section 6.4(i) is actually an exception to the
Board’s otherwise broad authority to approve and disapprove plans,
the Shakespeares’ inclusio unius argument fails.
The Shakespeares’ reliance on another canon of construction,
ejusdem generis, is likewise misplaced. “[T]his canon posits that general
catchall terms appearing at the beginning or end of an exemplary
statutory list are understood to be informed by the content of the terms
of the list.” State v. Bagnes, 2014 UT 4, ¶ 18, 322 P.3d 719. The
Shakespeares argue that the phrase “protect the character of the
Property” at the end of section 2.2 of the CC&Rs, which sets forth the
purpose and intent of the CC&Rs, is subject to ejusdem generis. They
argue that “[t]he specific provisions in section 2.2 do not at all address
competitive concerns about the ‘need’ for any particular number of
businesses of a particular type.” However, the “specific provisions”
listed before the “protect the character of the Property” provision are,
for the most part, contained in a sentence that is separate and apart
from that provision and do not constitute an exemplary list that limits
its meaning. Thus, the Shakespeares’ ejusdem generis argument fails.
10 Because we conclude that the district court misinterpreted the
CC&Rs and that the Board acted within its authority in limiting the
number of cell phone towers in the industrial park and in enforcing the
two-business limit, we need not and do not reach the question of
aesthetics.
15
FORT PIERCE v. SHAKESPEARE
Opinion of the Court
granting an exception to the two-business limit. Id. The Board acted
within its authority in choosing not to grant the exception. 11
¶ 25 Thus, when analyzing the CC&Rs as a contract, rather than
strictly construing them “in favor of the free and unrestricted use of
property,” it is clear that the Board acted within its authority in
denying the Shakespeares’ cell phone tower proposal. The Board
considered the need for an additional cell phone tower and the
possibility for collocation of such facilities, the aesthetic impact of the
cell phone tower, and the two-business limit, and the Board acted
within its discretion in denying the Shakespeares’ proposal based on
these considerations.
III. BUSINESS JUDGMENT RULE
¶ 26 The parties have argued extensively over the precise
formulation of the business judgment standard applicable to this case,
and the district court considered the business judgment rule in its
judgment below. However, we agree with the Shakespeares that “the
adoption of a precise business judgment standard is not actually
necessary in order to decide this case.” Regardless of the formulation of
that standard, it is clear that the district court erred in its determination
that the Board’s decision failed to satisfy the business judgment rule.12
The district court provided two reasons in support of its determination.
11 In its decision, the district court indicated that “[i]n their
testimony, Mr. Jennings and Mr. Pasley [two of the Board members]
both discussed the purposes for the two-business limit, but only
generally.” The district court also recognized that “Mr. Jennings
pointed out that the [Shakespeares’] lot is comparatively small at three
acres.” However, the district court concluded that “[n]one of the
general concerns raised even remotely apply to this use” and that
therefore the decision was not reasonably considered. As discussed in
this opinion, the district court’s reasoning is suspect, and the district
court appears to have placed the burden of proof on the wrong party.
See infra ¶ 28.
12 We also note that the district court correctly recognized that
“[t]here is considerable room for debate on what is reasonable and
what is not reasonable in a business context” and that “the court . . .
must be careful not to substitute its judgment for that of [the Board].”
See, e.g., Paramount Commc’ns Inc. v. QVC Network Inc., 637 A.2d 34, 45
(Del. 1994) (“[C]ourts will not substitute their business judgment for
con’t.
16
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Opinion of the Court
¶ 27 First, the district court held that the Board “based its decision
on a fundamentally incorrect premise,” namely “the improper notion
that it had the right to limit the number of cell towers.” Therefore, the
district court concluded that “the action was unreasonable, arbitrary,
and capricious.” However, as already discussed, the district court
misinterpreted the CC&Rs. See supra ¶¶ 20–23. The CC&Rs do in fact
give the Board the right to limit the number of cell phone towers.
Therefore, the Board’s basing its decision on the premise that it has that
right does not make the Board’s decision unreasonable, arbitrary, and
capricious.
¶ 28 Second, the district court determined that the Board did not
act reasonably in making its decision based on aesthetics and the two-
business limit. However, the district court’s reasoning is suspect
because the district court determined that the Board’s decision was
based on the desire to limit the number of cell phone towers and stated
that “[t]he[] other reasons [i.e., aesthetics and the two-business limit]
for the denial . . . are essentially just cover for a decision already made.”
Since the district court believed that aesthetics and the two-business
limit were simply “cover” for the Board’s decision, it is doubtful that
the district court gave those factors due weight. Furthermore, the
characterization of these reasons as “just cover for a decision already
made” conflicts with the district court’s express finding that the Board’s
actions were in good faith. The district court also appears to have failed
to apply the proper presumption under the business judgment rule
when analyzing the two-business limit. In applying the business
judgment rule, courts generally apply a presumption of reasonableness.
See, e.g., Plumbers Local No. 137 Pension Fund v. Davis, Civ. No. 03:11-
633-AC, 2012 WL 104776, at *6 (D. Or. Jan. 11, 2012) (“In order to
overcome the presumption afforded a board’s business judgment, the
plaintiff must establish, generally, a reasonable doubt that the
challenged action was the result of reasonable business judgment.”);
Bender v. Schwartz, 917 A.2d 142, 153 (Md. Ct. Spec. App. 2007) (“‘The
burden is on the party challenging the decision to establish facts
rebutting the presumption’ that the directors acted reasonably and in
the best interests of the corporation.” (citation omitted)). In this case,
that of the directors, but will determine if the directors’ decision was,
on balance, within a range of reasonableness.”). However, the district
court appears to have erred in not actually applying the standard it set
forth.
17
FORT PIERCE v. SHAKESPEARE
Opinion of the Court
however, rather than requiring the Shakespeares to overcome a
presumption of reasonableness, the district court appears to have
placed the burden on the Association to demonstrate the
reasonableness of the Board’s action. See supra ¶ 24 n.11.
¶ 29 Thus, the reasons supporting the district court’s
determination that the Board’s decision did not satisfy the business
judgment rule were fatally flawed, and the district court’s
determination that “the action was unreasonable, arbitrary, and
capricious” cannot stand. As discussed in this opinion, the Board acted
within its discretion, and the district court found that the Board acted in
good faith. Therefore, even under the formulation of the business
judgment standard supported by the Shakespeares (i.e., that decisions
“must be reasonable and made in good faith and must not be arbitrary
or capricious”), the Board’s decision passes muster. Fink v. Miller, 896
P.2d 649, 655 n.7 (Utah Ct. App. 1995) (citation omitted).
IV. TIMELINESS OF THE BOARD’S DECISION
¶ 30 The district court correctly held that the Board’s decision was
issued within sixty days as required by the CC&Rs. According to
section 5.1 of the CC&Rs, the Board has sixty days to “approve or
disapprove building plans, specifications, or site plans,” and if the
Board does not act within that time period, “such approval will not be
required.” The Board denied the Shakespeares’ application on
December 10, 2009. The issue is when the application was submitted,
starting the sixty-day clock. The Shakespeares argue that everything
required for the application was submitted on October 7, 2009, more
than sixty days before the Board denied the application. 13 However, the
Shakespeares submitted additional materials at a meeting of the Board
on October 15, 2009. The district court held that even if the application
“were ‘submitted’ under section 5.1 on October 7,” the sixty-day clock
“was triggered anew when, at the October 15, 2009 meeting,
Mr. Shakespeare presented a previously unsubmitted photograph” and
that, therefore, the December 10, 2009 denial was within sixty days. In
13 The Shakespeares provided testimony suggesting that the Board’s
secretary felt “that their application was sufficient” after the October 7,
2009 submission. This testimony is beside the point, however, because
the Shakespeares elected to supplement their application later, on
October 15, 2009, which, for reasons discussed herein, reset the sixty-
day clock.
18
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Opinion of the Court
construing the CC&Rs, we deem them to grant the Board sixty days to
act on such applications. If the sixty-day clock were deemed to start
when materials are initially submitted and not restart when the final
supplemental materials have been submitted, applicants could
supplement or alter their applications at any time after the initial
submission and thus deprive the Board of the opportunity to review
the application as a whole and make its decision over a period of sixty
days. We hold that the application was finally submitted for purposes
of section 5.1 of the CC&Rs when the additional materials were
submitted on October 15, 2009. Thus, we affirm the district court’s
holding that the application was denied within sixty days.
V. ATTORNEY FEES
¶ 31 Due to the district court’s errors as discussed above, the grant
of 50 percent attorney fees to the Shakespeares is erroneous. The
Association was denied its attorney fees because of the district court’s
erroneous holding that “the Board acted arbitrarily and unreasonably
in denying the Shakespeares’ application,” but as detailed above, the
Board acted within its proper authority in denying the application. The
Shakespeares were awarded attorney fees due to the “incorrect denial
of their application” (but denied full attorney fees because of their
“deliberate[] violat[ion] [of] the Restrictive Covenants in constructing
the tower”), but again, the Board’s denial was not incorrect. Therefore,
we strike the attorney fees awarded to the Shakespeares by the district
court and remand for a determination of attorney fees in accordance
with this opinion. 14
CONCLUSION
¶ 32 We reject strict construction of restrictive covenants and hold
that restrictive covenants should be interpreted according to the same
principles as contracts. Based on our analysis of the CC&Rs for the Fort
Pierce Industrial Park under the correct standard, we reverse the
district court’s holding and instead hold that the Board’s denial of the
14 We note that the district court awarded the Shakespeares “50% of
the attorney[] fees incurred, plus chargeable costs, and no attorney[]
fees to [the Association]” because the Shakespeares “largely prevail
under [the district court’s] decision.” Upon appeal, however, the
Association prevails. The district court correctly indicated that if the
Association “prevailed, Section 7.4 [of the CC&Rs] would most
certainly control, and [the Association] would be entitled to recover.”
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FORT PIERCE v. SHAKESPEARE
Opinion of the Court
cell phone tower application at issue in this case was authorized under
the CC&Rs. We affirm the district court’s grant of summary judgment
regarding the timeliness of the Board’s denial, holding that it was
timely. Finally, we strike the district court’s award of attorney fees to
the Shakespeares and remand for a determination of what attorney fees
to award the Association.
20