Canyon Del Rio Investors, L.L.C. v. City of Flagstaff (5/24/2011)

May 27, 2011

Arizona Court of Appeals Division One Holds That Damages Claims Arising from Zoning Decisions Do Not Ripen, and the Statute of Limitations Does Not Accrue, Until the Plaintiff Exhausts Administrative Remedies, but That Declaratory Judgment Claims May Be Brought Before Damages Claims Ripen, and the Statute of Limitations Does Not Run Until Administrative Remedies Have Been Exhausted.

Plaintiff purchased property in Flagstaff and developed an Initial Platting Proposal covering both residential and commercial portions of the property.  When Plaintiff submitted the proposal to the City of Flagstaff in 2002, the City stated that the plan needed to be reworked.  Plaintiff withdrew the proposal.  Plaintiff submitted a new commercial development plan in April 2004, but the City stated that it “would not be considered or approved.”  Plaintiff never demanded that the City issue a final decision, however.  In May 2004, Plaintiff submitted a Notice of Claim to the City but did not sue.  In April 2007, Plaintiff again met with City staff to discuss a new master development plan, but the City refused to accept Plaintiff’s application for concept review.  As in 2004, Plaintiff did not request a final decision and pursued no administrative remedies.  In April 2008, Plaintiff filed suit against the City, asserting three declaratory judgment claims relating to the application of zoning ordinances, and two constitutional claims for damages, and a misrepresentation claim for damages.  On the City’s motion, the trial court dismissed the complaint.  Plaintiff timely appealed.

The Arizona Appeals Court affirmed in part, vacated in part, and remanded.  The Court first addressed whether Plaintiff timely asserted its declaratory judgment claims pursuant to Arizona’s Uniform Declaratory Judgments Act, which allows adjudication of rights before the occurrence of a breach or injury necessary to sustain a coercive action.  Because Arizona has no statute of limitations applicable to declaratory judgment actions, courts determine the appropriate limitations period by “examining the substance of [an] action to identify the relationship out of which the claim arises and the relief sought.”  Declaratory judgment claims filed within the relevant analogous limitations period are treated as timely.  Furthermore, because Plaintiffs may assert declaratory judgment claims concerning invalid zoning ordinances without first exhausting administrative remedies, the Court held that such claims are not untimely if brought before a related damage action accrues.  A contrary holding would encourage unnecessary litigation because a plaintiff faced with discouraging comments about a development would be forced to bring a swift action for declaratory judgment or else face a limitations bar.  Applying these principles, the Court held that Plaintiff’s declaratory judgment claims were timely because it never obtained a final decision from the City, and thus a damages claim never accrued.

Turning to Plaintiff’s § 1983 damages claims for constitutional violations, the Court held that they were not ripe because although there is no requirement that a plaintiff exhaust administrative remedies, Plaintiff failed to obtain a final decision.  Accordingly, the trial court properly dismissed these claims.  The Court nonetheless vacated a portion of the trial court’s ruling dismissing the claims with prejudice because the claims were unripe.  

Finally, the Court affirmed the dismissal of Plaintiff’s misrepresentation claim because Plaintiff did not file a notice of claim pursuant to A.R.S. § 12-821.01 alleging such a claim.

Judge Swann authored the opinion; Presiding Judge Hall and Judge Weisberg concurred.