State of Arizona v. Mabery Ranch, Co., L.L.C. – 8/16/2007

August 28, 2007

Arizona Court of Appeals Division One Holds that a Plaintiff Is Not Required to Comply With the Arizona Notice of Claims Statute to Maintain Suit Against a Public Entity for Injunctive Relief.

A lawsuit between the Arizona State Parks Board (“State Parks”) and a private limited liability company (“Mabery”) over disputed rights to an easement near Dead Horse Park in Yavapai County proceeded to a jury trial. The jury found that State Parks had unconstitutionally taken Mabery’s property and had interfered with Mabery’s right to the use of Tuzigoot Road. The jury awarded damages against State Parks for violation of A.R.S. § 33-420(improper recording of an interest in real property), which damages the trial court trebled pursuant to § 33-420(A). The jury declined to award any damages for State Parks’ interference with Mabery’s use of Tuzigoot Road. State Parks appealed on numerous issues, and Mabery cross-appealed.

State Parks argued that the trial court had erred by failing to dismiss Mabery’s claim regarding its use of Tuzigoot Road because Mabery failed to comply with the notice of claims statute, A.R.S. § 12-821.01 (requiring formal notice before bringing suit against a public entity). Deciding an issue of first impression in Arizona, the Court of Appeals rejected State Parks’ argument, concluding that the statute applies only to claims for damages. Because the jury declined to award damages in connection with this claim, the statute was not implicated by the injunctive relief awarded by the trial court. Cf. Martineau v. Maricopa County, 207 Ariz. 332 (App. 2004) (holding § 12-821.01 inapplicable to a claim for declaratory judgment).

The trial court erred, however, by granting summary judgment to Mabery on its claimed interpretation of its ambiguous Easement Agreement with State Parks. Factual disputes precluded summary judgment on the issue, and the trial court incorrectly resolved any ambiguity in Mabery’s favor under the mistaken belief that construing the Easement Agreement in favor of State Parks would amount to a taking of Mabery’s property rights. Likewise, the trial court improperly denied State Parks’ motion to dismiss Mabery’s counterclaim for inverse condemnation allegedly resulting from State Parks’ filing of a declaratory judgment action for interpretation of the Easement Agreement. Because a declaratory judgment action by definition seeks only a determination of existing property rights, it cannot as a matter of law constitute a taking. The Court of Appeals, therefore, directed that judgment be entered in favor of State Parks on this counterclaim.

Other counterclaims were time-barred for failure to comply with A.R.S. § 12-821 (providing that an action against a public entity must be brought within one year after the cause of action accrues). The Court of Appeals reversed judgment and directed a verdict for State Parks on the improper recording claim brought by Mabery under § 33-420. Mabery’s argument that it was not aware of its damages until a later date was contradicted by a March 3, 2000 letter that it had sent threatening to sue for damages based on the alleged improper recording. The Court of Appeals rejected Mabery’s argument that § 33-420 contemplated a new claim accruing each day for statute of limitations purposes.

The Court of Appeals also reversed portions of the judgment establishing and delineating a prescriptive easement in favor of Mabery because the trial court erred by not instructing the jury to interpret the Easement Agreement in deciding the scope and location of the easement providing access to Tuzigoot Road. The trial court also erred in awarding an easement along Tuzigoot Road because the jury chose not to delineate such an alignment, a decision inconsistent with the jury’s finding that Mabery had established its right to a prescriptive easement “to use” Tuzigoot Road.

Judge Johnsen wrote the opinion for the unanimous panel; Judges Orozco and Snow concurred.