Arizona Court of Appeals Division One holds that town may not eliminate vested rights in a contractual development agreement by rezoning the property, when the contract provides that the developer’s assent must be obtained to modify the contractual development agreement.

A town and a property owner agreed to a 35-year contractual development agreement in 2003, which allowed the town to annex the property.  The agreement provided that the property would be zoned light industrial pursuant to a 2003 zoning plan, and that the property would be allowed a non-conforming use of copper mining until a mine on the property was closed.  It also specified that a right to any non-conforming use would cease if not used for 180 days.  Since the copper mine was not open, however, it was exempted from this latter limitation.  The contract also provided that any amendment to the contract would need to be in writing, executed by both parties, and recorded with the county recorder within ten days.  Due to changes in market circumstances, the town and the owner negotiated a 2007 plan that rezoned the property to residential but did not incorporate the 2003 contract and was not recorded.  The property later went into foreclosure and was purchased by a mining company in 2009; by August 2010, the town began insisting that mining was not allowed.  After trying to work with the town to reach an agreement, the company began mining without the town’s approval.  The town filed a declaratory action, arguing that the 2007 plan superseded the 2003 plan, regardless of the 2003 contract.  The superior court granted partial summary judgment, determining that the company had a vested right to mine, and held a bench trial on whether there had been a mutual agreement to modify the 2003 contract.  After the trial, the superior court granted judgment and attorneys’ fees to the company, and the town appealed.

The Court of Appeals affirmed.  The Court rejected the town’s argument that the superior court was required to defer to the town on zoning matters because the town had voluntarily entered a contractual development agreement, as authorized by A.R.S. § 9-500.05 instead.  The Court further rejected the town’s argument that the 2003 plan could not be enforced to the extent the 2003 contract created vested rights in it, despite the 2007 plan.  Finally, the Court held that because the mining rights were never mentioned, let alone negotiated over during the development of the 2007 plan, and the owner acted as if he still had mining rights when marketing the land, the mining rights were not abandoned.  The Court further rejected the town’s argument the action did not rise out of contract and affirmed the fee award.

Presiding Judge Weinzweig delivered the unanimous opinion of the court.  Judge Perkins and Judge Morse joined.