Powell v. Washburn – 1/10/2006

January 10, 2006

Arizona Supreme Court adopts Restatement approach for interpreting restrictive covenants, holding that a restrictive covenant must be interpreted to give effect to the intention of the parties and to carry out the purpose for which it was created.

Edward Powell, along with several other property owners in the Indian Hills Airpark (“Airpark”) sought an injunction against Thomas Washburn and others prohibiting the use of RVs as single-family residences within the Airpark. Powell argued that the Airpark’s CC&Rs prohibited such use.

The declared purpose of the CC&Rs for the Airpark was to develop the property “as an aviation-related residential and commercial center.” When recorded in 1988, the CC&Rs incorporated, by reference, the La Paz County zoning ordinances. As a manufactured home subdivision, RVs were not permitted as residences in the Airpark at that time under the zoning ordinances. In 1996, however, the zoning ordinances were amended to permit the use of RVs as residences in manufactured home subdivisions. The CC&Rs themselves were silent as to the residential use of RVs in the Airpark.

On cross-motions for summary judgment, the trial court granted summary judgment to Powell, finding that the CC&Rs for the Airpark did not permit the use of RVs as residences. Washburn appealed, arguing that the trial court erred by not strictly interpreting the CC&Rs in favor of the free use of land. In a memorandum decision, Division One of the Court of Appeals agreed and reversed and remanded. Powell then petitioned for review, arguing that the Supreme Court should eschew the approach of strictly interpreting CC&Rs in favor of an approach based on the rules of contract construction.

In a unanimous decision, the Supreme Court vacated the decision of the court of appeals and affirmed the trial court’s judgment. In so holding, the court adopted the approach of the Restatement (Third) of Property: Servitudes (“Restatement”), which provides that [a] servitude should be interpreted to give effect to the intention of the parties 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 § 4.1(1). Although the Court recognized that certain Arizona decisions referred to a policy of strictly construing restrictive covenants in favor of free use of land, the Court found that all such references had been in dicta. Moreover, the Court noted that the Restatement approach reinforces a “contemporary judicial trend of recognizing the benefits of restrictive covenants.”

Applying the Restatement, the Court “conclude[d] that although the CC&Rs neither expressly prohibit nor permit RVs as residences, the plain intent and purpose of the restrictions was to limit residences in the Airpark to mobile or manufactured homes, constructed homes, or hangar-homes. [The Court] base[d] this conclusion on the language used in the CC&Rs and the purpose for which the restrictions were created.”

Justice Ryan authored the unanimous opinion.