Fort Pierce Industrial Park Phases II, III, & IV Owners Ass'n v. Shakespeare ( 2016 )


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  •                    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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                              Opinion of the Court
    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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    FORT PIERCE v. SHAKESPEARE
    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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    FORT PIERCE v. SHAKESPEARE
    Opinion of the Court
    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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                              Opinion of the Court
    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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    FORT PIERCE v. SHAKESPEARE
    Opinion of the Court
    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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                              Opinion of the Court
    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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    FORT PIERCE v. SHAKESPEARE
    Opinion of the Court
    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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                              Opinion of the Court
    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.
    11
    FORT PIERCE v. SHAKESPEARE
    Opinion of the Court
    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.
    12
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                              Opinion of the Court
    ¶ 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.
    13
    FORT PIERCE v. SHAKESPEARE
    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
    Cite as: 
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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
    Cite as: 
    2016 UT 28
                               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
    Cite as: 
    2016 UT 28
                             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.”
    19
    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
    

Document Info

Docket Number: Case No. 20140137

Judges: Himonas, Durrant, Lee, Durham, Pearce

Filed Date: 6/22/2016

Precedential Status: Precedential

Modified Date: 3/2/2024