IB Property Holdings, LLC v. Rancho Del Mar Apartments Limited Partnership – 8/23/2011

August 29, 2011

Arizona Court of Appeals Divison One Holds That Despite Change In Federal Law, Arizona Law Governing The Issuance of A Preliminary Injunction Remains That The Requesting Party Must Show That Irreparable Harm is Possible.

The parties owned parts of a multi-phase apartment complex.  Rancho Del Mar owns Phase 1; IB Property Holdings now owns Phase 2.  Years ago, Rancho granted an easement to the former owners of Phase 2, who built security gates across the easement and kept one of them locked.  After acquiring Phase 2, IB unlocked the gate.  Rancho re-locked the gate.  After IB opened it again, Rancho closed it and built a fence blocking access to the area.  That action prompted IB to seek an injunction.  The trial court granted IB a preliminary injunction and then denied Rancho’s motion to dissolve the injunction.  Rancho appealed.

The Court of Appeals affirmed unanimously.  In deciding whether to issue the injunction, the trial court followed the standard approved in Shoen v. Shoen, 167 Ariz. 58, 63 804 P.2d 787, 792 (App. 1990).  Shoen adopted a federal standard which the United States Supreme Court later overturned in Winter v. National Resources Defense Council, Inc., 555 U.S. 7, 20-21 (2008).  Under Winter, the party seeking an injunction must show that irreparable injury is “likely, rather than merely possible.”  Rancho argued that the trial court should have applied Winter.  The Court affirmed the trial court, holding that the Shoen standard was still good law in Arizona.  The Arizona Supreme Court has adopted the Shoen standard and the Court of Appeals has applied the standard since the Winter decision.

Next, Rancho argued that the evidence did not support a finding of irreparable harm.  In Rancho’s view, the possible harms to IB were remediable by money damages and thus no injunction was needed.  The Court, however, held that injunction was appropriate because the evidence indicated that any estimate of losses would have been speculative.

Rancho also contended that the trial court improperly excluded parol evidence when determining that IB had a “strong likelihood of success on the merits.”  The easement stated that it was for the purpose of allowing “pedestrian” and “passenger vehicle” access, and also stated that the “sole purpose” was “limited ingress and egress.”  Rancho offered evidence to buttress its claim that by saying “limited” the parties meant to limit access to emergency vehicles.  The Court held that the extrinsic evidence was inadmissible because Rancho offered it merely to contradict the terms “pedestrian” and “passenger vehicle,” not to assist in the interpretation of unclear language.

Finally, the Court rejected Rancho’s argument that IB was not entitled to an injunction because “abandonment, waiver, or estoppel.”  The owner of an easement abandons it if there is an “intent to abandon coupled with an act or a failure to act that carries out the intent to abandon.”  Likewise, “waiver” is the “voluntary and intentional relinquishment of a known right.”  Rancho contended that the previous owner kept the gate locked to prohibit public access.  Noting prior case law and the Restatement, the Court explained that the installation of a gate that “could be unlocked and opened” does not establish abandonment or waiver.  Furthermore, the Court would not find that the former owner’s actions prevented IB from taking an inconsistent position.  The fact that Rancho would have behaved differently had it known IB would attempt to enforce the easement was insufficient to establish the showing of “detrimental reliance” needed to prove an estoppel theory.

Judge Brammer authored the unanimous opinion; Judges Eckerstrom and Howard concurred.