STARR PASS RESORT DEVELOPMENTS, LLC, A DELAWARE LIMITED LIABILITY COMPANY v. PIMA COUNTY, A POLITICAL SUBDIVISION OF THE STATE OF ARIZONA; 3800 WSPB BUYER, LLC, A FOREIGN LIMITED LIABILITY COMPANY; CREF3 SP A PARTICIPATION, LLC, A FOREIGN LIMITED LIABILITY COMPANY
No. 2 CA-CV 2023-0082
ARIZONA COURT OF APPEALS DIVISION TWO
May 22, 2024
SWVP STARR PASS, LLC, Intervenor. Appeal from the Superior Court in Pima County, No. C20212971, The Honorable Michael J. Butler, Judge. AFFIRMED.
By G. Lawrence Schubart
Counsel for Plaintiff/Appellant
COUNSEL
Rusing Lopez & Lizardi P.L.L.C, Tucson
By Pat Lopez III, Matthew A. Bailey, and Alexander P. Valentine
Counsel for Defendant/Appellee Pima County
By Brian Schulman and Craig C. Hoffman
Counsel for Defendants/Appellees 3800 WSPB Buyer LLC and CREF3 SP A Participation LLC and Intervenor SWVP Starr Pass, LLC
OPINION
Judge Sklar authored the opinion of the Court, in which Vice Chief Judge Staring and Judge O‘Neil concurred.
SKLAR, Judge:
¶1 Under
¶2 The developer‘s assignee is appellant Starr Pass Resort Developments, LLC (“SPR Developments“). The buyer is appellee WSPB Buyer, LLC (“Buyer“). After SPR Developments filed this lawsuit and alleged that it was entitled to the fee, Buyer and appellee Pima County moved to dismiss for failure to state a claim under
¶3 The trial court followed that requirement by allowing each party to present seven-page supplemental memoranda and additional exhibits. SPR Developments argues that the court should have required the defendants to answer the complaint and allowed for discovery. We
¶4 We also reject SPR Developments’ substantive challenge to the summary-judgment ruling. SPR Developments pledged its right to the Enhancement Fee as collateral for a loan upon which it defaulted. That default led to the receivership and the ultimate transfer to Buyer. As such, there is no genuine dispute of material fact and, as a matter of law, SPR Developments retains no right to the Enhancement Fee. We therefore affirm the trial court‘s grant of summary judgment.
FACTUAL AND PROCEDURAL BACKGROUND
¶5 We view the evidence and all reasonable inferences in the light most favorable to SPR Developments, the party against whom summary judgment was entered. See Duncan v. Scottsdale Med. Imaging, Ltd., 205 Ariz. 306, ¶ 2 (2003). The facts arise out of a series of agreements. Although many of the versions in our record are not executed, the parties do not dispute their authenticity or validity. We therefore treat all the agreements as operative.
I. Developer and Pima County enter into the Development Agreement
¶6 In 1998, Starr Pass Resort LLC (“Developer“) entered into the Development Agreement with Pima County. Among other things, Developer agreed to convey to Pima County 213 acres of property adjoining a planned resort. That property was intended to “expand[] Tucson Mountain Park.” The Developer also agreed to convey certain property constituting a “Biological Corridor Core.”
¶7 Developer wished to recover the costs it incurred to acquire the property it conveyed. In the Development Agreement, it therefore agreed with Pima County that the eventual resort manager would collect the Enhancement Fee. That fee would equal two percent of room-rental charges and other purchases. The fee‘s stated purpose was to “defray[] the costs of the acquisition of the Biological Corridor and the costs of managing, maintaining, preserving and enhancing open space and trails ... and in acquiring real property to add to or increase the size of Tucson Mountain Park.” The fee was to be collected for twenty years and allocated between Pima County and Developer, as set forth in ancillary agreements. The Development Agreement states that it “shall inure to the benefit of and be binding upon the successors and assigns of the Parties,” and it specifies an assignment process.
¶8 When the Development Agreement was entered, the resort property was outside the Tucson city limits. However, in 2002, the Developer and the City of Tucson entered into a Pre-Annexation Development Agreement (the “Pre-Annexation Agreement“). That agreement allowed the resort property to be annexed into the city.
¶9 After consenting to the annexation, Pima County entered into an Intergovernmental Agreement with the City of Tucson. That agreement facilitated the annexation and addressed the Enhancement Fee‘s collection and distribution. It provided that the City of Tucson—which would become entitled to receive the Enhancement Fee from the resort—must pay Pima County an amount equal to the fee. Those payments would satisfy and “offset” Developer‘s obligation under the Development Agreement to pay the Enhancement Fee to Pima County.
¶10 To allow for the annexation, the Development Agreement was amended in 2002 (“2002 Amendment“). The amendment conformed the Enhancement Fee provisions to the Intergovernmental Agreement.
¶11 Around the same time, Developer transferred its rights under the Development Agreement to SPR Developments. It did so through a written and recorded Assignment and Assumption of Starr Pass Resort Hotel Development Agreement (“2002 Assignment“). In 2005, the resort opened, and Pima County began receiving the Enhancement Fee.
III. SPR Developments defaults on its loan obligations, leading to years of litigation and a foreclosure
¶12 In 2006, SPR Developments paid off its construction loan and obtained a new $145 million loan secured by a deed of trust. U.S. Bank N.A. ultimately became the note-holder and secured party.
¶13 Important to this dispute is the deed of trust‘s description of the collateral. The collateral includes all
agreements [and] contracts . . . pertaining to . . . any business or activity conducted in, at or on the Land and any part thereof or any Improvements and all right, title and interest of [SPR Developments] therein and thereunder,
including . . . the right, upon the happening of any default hereunder, to receive and collect any sums payable to [SPR Developments].
It also includes “all rents, additional rents, hotel room rentals, other hotel services revenue, other revenues, issues and profits . . . from the Land and the Improvements . . . .”
¶14 In October 2011, U.S. Bank sued SPR Developments for defaulting on its loan obligations. As authorized by the loan documents, the trial court ordered the appointment of a receiver for the resort and “all other collateral relating thereto.” The order also vested the receiver “with complete and exclusive control and possession of the Property and all other collateral securing the indebtedness owed to [U.S. Bank].” We take judicial notice of that order, though it is not in the record before us. See
¶15 Upon SPR Developments’ request, Pima County then stopped disbursing the Enhancement Fee. Pima County retained the fees that continued accruing through the eight years of litigation.
¶16 In August 2017, the trial court entered a judgment in favor of U.S. Bank for more than $192 million. We affirmed the court‘s judgment on appeal. U.S. Bank Nat‘l Ass‘n v. Starr Pass Resort Developments LLC, No. 2 CA-CV 2018-0030, 2019 WL 2237471 (Ariz. App. May 22, 2019) (mem. decision).
¶17 In April 2019, U.S. Bank assigned its rights and interest in the deed of trust to CREF3 SP A Participation, LLC (“CREF3“), another appellee. Two months later, the real property was sold at a trustee‘s sale to Buyer for more than $85 million. The receiver and Buyer also entered into an Assignment and Assumption of Starr Pass Resort Hotel Development Agreement (“Receiver‘s Assignment“). Under the Receiver‘s Assignment, the receiver transferred all the receiver‘s “right, title and interest in, to and under the Development Agreement” to Buyer.
¶18 Pima County, CREF3, and Buyer amended the Development Agreement in June 2020 (“2020 Amendment“). That amendment authorized Pima County to pay Buyer the Enhancement Fee that had accrued since approximately 2011, totalling $3,784,397.50. The 2020
IV. SPR Developments files this litigation, seeking to recover the Enhancement Fee
¶19 In June 2021, SPR Developments filed this action against Pima County, later adding CREF3 and Buyer as defendants. SPR Developments alleged that Pima County breached the Development Agreement by disbursing the accrued Enhancement Fee to Buyer without SPR Developments’ consent. SPR Developments sought a declaratory judgment that SPR Developments remains entitled to receive the Enhancement Fee.
¶20 Although Pima County filed an answer, Buyer and CREF3 filed a motion to dismiss under
¶21 After oral argument, the trial court ruled that it would apply
¶22 SPR Developments moved for reconsideration. It asked the trial court to deny the motion to dismiss and allow discovery. The court denied the motion.
¶23 After receiving the supplemental memoranda, the trial court granted summary judgment in favor of CREF3, Buyer, and Pima County. SPR Developments filed a motion to vacate the ruling, which the court denied. The court then entered judgment dismissing SPR Developments’ claims with prejudice and awarding Pima County $70,170 in attorney fees and $3,269.26 in taxable costs. This appeal followed.
CONVERSION OF MOTION TO DISMISS
¶24 We first address whether the trial court complied with
I. Rule 12(d)‘s “reasonable opportunity” standard does not compel courts to require an answer, discovery, or statements of facts
¶25 When a motion to dismiss relies on matters “outside the pleadings” that the trial court has not excluded, the motion must be converted to one for summary judgment.
¶26 The complaint in this case attached no exhibits. It did reference many public records, but at least some of the exhibits to the motion to dismiss and responses are not public record and arguably are not “matters referenced in the complaint.” The trial court therefore properly converted the motion to dismiss to a summary-judgment motion.
¶27 Conversion triggers
¶28 SPR Developments’ argument that an answer is required is at odds with the Arizona Rules of Civil Procedure. A motion to dismiss tolls the deadline for an answer.
¶30 SPR Developments’ next argument, that conversion is improper without allowing discovery, is also inconsistent with the rules.
¶31 Parties seeking discovery after a motion to dismiss is converted already have a mechanism for doing so—
¶32 We also see no basis for SPR Developments’ third proposed requirement, that parties submit separate statements of facts. See
II. Trial courts have discretion in providing a “reasonable opportunity” to present pertinent material, and the court did not abuse its discretion here
¶33 Rather than imposing requirements not set forth in the rule, we conclude that
¶34 The nature of the procedures necessary to satisfy
¶35 In this case, the trial court exercised its broad discretion by allowing the parties to file seven-page memoranda and exhibits after converting the motion. SPR Developments has not shown that the seven-page limit was error. As the court noted, the timeline and relevant documents were not in dispute. The court also considered a 16-page motion to vacate and numerous arguments and pieces of evidence presented by SPR Developments. These included eighty-two pages of exhibits attached to SPR Developments’ motion for reconsideration of the order converting the motion. Those exhibits included a two-page affidavit by SPR Developments’ president regarding the relevant agreements’ purpose and intent. In addition, the court considered a supplemental objection attaching seventy pages of exhibits. These included another affidavit by SPR Developments’ president, this one totaling eight pages, that provided additional context and information about the agreements.
¶36 Notably, SPR Developments did not file a
SUMMARY-JUDGMENT RULING
¶37 We turn next to whether the trial court properly granted summary judgment. SPR Developments argues that there were genuine issues of material fact as to whether it was entitled to the Enhancement Fee. We review a trial court‘s grant of summary judgment de novo. Glazer v. State, 237 Ariz. 160, ¶ 29 (2015). Summary judgment is appropriate “if the moving party shows that there is no genuine dispute as to any material fact
I. The Enhancement Fee was among the collateral transferred through the receivership to Buyer
¶38 This case turns on the proper interpretation of the agreements. Contract interpretation is a question of law we review de novo. Grosvenor Holdings, L.C. v. Figueroa, 222 Ariz. 588, ¶ 9 (App. 2009). The purpose of contract interpretation is to determine and enforce the parties’ intent. Id. In doing so, courts “must first consider the plain meaning of the words . . . in the context of the[] contract as a whole.” Id. When the terms of a contract are clear and unambiguous, a court must give effect to the contract as written. Id. The court may consider extrinsic evidence only if contractual language is reasonably susceptible to the interpretation asserted by the proponent of the evidence. See Taylor v. State Farm Mut. Auto. Ins. Co., 175 Ariz. 148, 154 (1993).
¶39 Here, the parties do not dispute that the Development Agreement initially granted Developer the right to collect its portion of the Enhancement Fee. Nor do they dispute that this right passed to SPR Developments through the 2002 Assignment. They do, however, dispute what happened next.
¶40 SPR Developments argues that a genuine dispute of material fact exists as to whether it maintained the right to the Enhancement Fee through the annexation, loan, default, litigation, receivership, trustee‘s sale, and Receiver‘s Assignment. Pima County, Buyer, and CREF3 argue, by contrast, that the right passed to Buyer. They argue that they acquired the rights as part of the collateral that had been pledged by SPR Developments and was transferred through the receivership. They also argue that under the Development Agreement‘s terms, the right to the Enhancement Fee inured to Buyer as a successor or assignee.
¶41 We first address whether the developer‘s share of the Enhancement Fee was among the collateral, which was ultimately transferred to Buyer. The most relevant contractual provision is the deed of trust‘s description of the collateral. The Enhancement Fee fits within at least two categories. First is the provision that the collateral includes the right to “receive and collect any sums payable” under any “contracts pertaining to . . . any business or activity conducted” at the resort. The Development Agreement is such a contract, and the Enhancement Fee is payable under it. Second is the provision that the collateral includes “all
¶42 As part of the collateral, the right to the developer‘s share of the Enhancement Fee was also included in the prior litigation‘s receivership estate. This was consistent with the deed of trust, which granted U.S. Bank broad authority to seek a receiver upon SPR Developments’ default. Specifically, it provided that the receiver could be appointed over the resort, hotel revenues, and accounts, as well as all “agreements” relating to the resort. This necessarily included the Development Agreement.
¶43 Consistent with this authority, the order appointing a receiver placed the receiver over the resort and “all other collateral relating thereto.” The receiver was also “vested with complete and exclusive control and possession of the Property and all other collateral securing the indebtedness owed to [U.S. Bank].” Exercising these powers and pursuant to court order, the receiver transferred the right to the Enhancement Fee to Buyer through the Receiver‘s Assignment. This was a valid exercise of the receiver‘s authority.
II. SPR Developments’ counterarguments are unavailing
¶44 SPR Developments, however, argues that “the intent regarding the rights to the [Enhancement Fee] is separate and apart from . . . the collateral foreclosed at the Trustee‘s sale.” When the resort property was annexed into the City of Tucson in 2002, SPR Developments argues, “the [Enhancement Fee] was no longer covered directly by the Development Agreement; it was instead controlled” by the Pre-Annexation Agreement, which allowed Pima County to consent to the property‘s annexation.
¶45 We are unpersuaded, for two reasons. First, nothing in the Pre-Annexation Agreement purported to replace the Development Agreement. Instead, the Pre-Annexation Agreement required the City of Tucson to pay Pima County “the amounts [the county] would receive as the Environmental Enhancement Fee under the County Development Agreement.” That agreement further provided for disbursement by the City of Tucson “as provided in the County Development Agreement.” The Intergovernmental Agreement between the City of Tucson and Pima County, which accompanied the Pre-Annexation Agreement, imposed similar terms. It provided that the City of Tucson‘s payment would “satisfy
¶46 Second, as we have explained, the Enhancement Fee was not part of the collateral simply because it arose under the Development Agreement. It was also part of the collateral because it arose out of “agreements” and “contracts” relating to the resort, which included the Pre-Annexation Agreement and Intergovernmental Agreement. As a result, it is also irrelevant whether, as SPR Developments argues, the City of Tucson collected the Enhancement Fee as a “tax” after the annexation. Even if the fee were best understood as a “tax,” it would be payable under the Development Agreement and therefore part of the collateral. In addition, as we have explained, the Enhancement Fee is part of the collateral as a “rent[]” and “revenue[]” arising from the resort.
¶47 SPR Developments also makes an argument under a declaration of covenants, conditions and restrictions that secures the resort manager‘s obligation to collect the Enhancement Fee. Those CC&Rs provided that the Enhancement Fee “shall be a continuing lien upon the Resort Property.” They further provided that the CC&Rs “shall run with the Resort Property” and bind successors and assigns. In light of that language, SPR Developments argues that the CC&Rs had higher priority than the deed of trust. But the CC&Rs simply secured the resort manager‘s obligation to Developer and Pima County to collect the Enhancement Fee, not assignment of the right to receive the Enhancement Fee. The CC&Rs have no relevance here.
¶48 Finally, SPR Developments disputes whether the right to the Enhancement Fee inured to Buyer under the terms of the Development Agreement itself. We need not address this issue. Nothing in the Development Agreement precluded SPR Developments from pledging its right to the Enhancement Fee as collateral.
III. Given our resolution, we need not address SPR Developments’ argument that the prior litigation did not resolve the parties’ rights to the Enhancement Fee
¶49 The parties next dispute the extent to which the prior litigation resolved the right to the Enhancement Fee. SPR Developments argues that the litigation did not resolve the issue. It points to a July 2020 ruling ordering the release of certain deeds to Pima County and making “no determination with respect to the alleged rights, claims, and potential entitlement of any party to the Environmental Enhancement Fees.” The
¶50 SPR Developments also argues that Buyer is judicially estopped from arguing that the Enhancement Fee was within the receiver‘s power to transfer. It points to a statement from Buyer and CREF3 in the prior litigation that the Enhancement Fee was “[n]ever part of the receivership estate.” Judicial estoppel prevents a party that has taken a position in a judicial proceeding from taking an inconsistent position in a subsequent case involving the same parties and questions. In re Marriage of Thorn, 235 Ariz. 216, ¶ 27 (App. 2014). A party is estopped from asserting inconsistent positions only if it was successful in the prior proceeding. Id.
¶51 Read in context, Buyer‘s assertion in the prior proceeding is not inconsistent with its position here. The prior statement described the Enhancement Fee as “a certain sum that was held by Pima County.” As Buyer explained at oral argument, this was a reference to the accrued fees being inaccessible to the receiver because Pima County was holding them. It does not follow, though, that the right to the fees was outside the collateral. Nor does it follow that the receiver lacked the power to transfer the fees or the right to receive them, at least upon court order. Thus, judicial estoppel does not apply.
TRIAL COURT ATTORNEY FEES
¶52 The trial court awarded attorney fees to Pima County under
¶53 SPR Developments argues that: (1) the affidavit in support of Pima County‘s fee application did not disclose whether the county has actually paid or agreed to pay that amount; (2) the county‘s counsel engaged in block-billing; and (3) the county‘s affidavit did not sufficiently explain how its counsel avoided duplication, given that five lawyers worked on the matter. Additionally, SPR Developments argues that the trial court erred in granting Pima County‘s fee request without Pima County first filing a reply to SPR Developments’ objection.
DISPOSITION
¶55 We affirm the trial court‘s grant of summary judgment and award of attorney fees and costs. None of the appellees request their attorney fees or costs on appeal. However, as the prevailing parties, they are entitled to recover their appellate costs upon compliance with
CHRISTOPHER P. SKLAR
JUDGE