Carefree prevails in third Peloquin lawsuit over SUP

By Linda Bentley | September 30, 2009

peloquin signCAREFREE – On Sept. 23, U.S. District Court Judge Earl H. Carroll, ruled in favor of the town of Carefree, members of council seated in 2005, and their wives, defendants in the third lawsuit filed by Michael Peloquin’s GP Properties LLC.

Carroll stated in his opinion a federal district court “does not have subject matter jurisdiction to hear a direct or de facto appeal of a state court’s judgment … A party disappointed by a state court decision should appeal to a higher state court, not a federal district court.”

In conclusion, Carroll wrote, “All of the plaintiff’s claims fail as a matter of law because they rely on a legal theory that the court of appeals rejected and superior court orders that the court of appeals expressly vacated.”

Peloquin’s claims were all based on the premise that town council’s review of his special use permit (SUP) application was a non-discretionary, administrative act.

GP Properties filed its first lawsuit against the Town of Carefree, its council members and their spouses in March 2001 after Carefree passed a new general plan that made it more difficult for Peloquin’s company to develop a resort on a 12-acre residentially zoned (R-70 - one home per 2.5 acres) parcel on the northwest corner of Carefree Highway and Tom Darlington Drive.

The 1988 general plan would have allowed for a resort to be built with a special use permit (SUP) requiring approval from Carefree Town Council.

The town later rescinded that general plan and entered into a development agreement on Nov. 8, 2001 with GP Properties to allow the property to be used to build a resort, providing Carefree approved a SUP.

GP Properties applied for a SUP, completing all the requirements to obtain a SUP. The application then went before the planning commission, citizens of Carefree and the town council.

However, before the town council voted on the SUP application, Carefree filed a lawsuit in November 2004 in superior court seeking a declaratory judgment that SUP approval is a legislative rather than administrative act and Carefree has discretion to issue or deny a SUP based on “public welfare” and “matter of grace” standards.

On Jan. 6 2005, both the 2001 and 2004 cases were consolidated and both parties moved for summary judgment.

peloquin signOn April 29, 2005, the superior court granted summary judgment in favor of GP and held that a SUP application was an administrative act and a denial of the SUP application would be a violation of the parties’ development agreement and the town’s zoning ordinance, if the resort met the requirements for an R-5 zone.

On June 3, 2005, Carefree was ordered to hold a June 28 council meeting to consider GP’s SUP application.

On June 20, Carefree filed a motion with the court to reconsider its ruling. However, their request was denied and the court reaffirmed its April 29, 2005 order.

During the June 28, 2005 meeting, council voted unanimously to deny GP’s SUP application.
GP then contested the denial on July 27, 2005 in superior court, which Carefree filed to remove to U.S. District Court on Aug. 26, 2005.

While that action was pending, Carefree appealed the superior court’s decision in the consolidated action to the Arizona Court of Appeals.

Carroll stayed the 2005 action in his court pending the completion of the related appellate proceedings.

In May 2008, the court of appeals reversed the superior court’s opinion and held that a decision whether or not to grant a SUP is a discretionary, legislative act.

In December 2008, the Arizona Supreme Court denied GP’s petition for review.

After terminating the stay and ordering the parties to file supplemental memoranda, Carroll held a hearing on April 23, 2009 to consider the effect of the court of appeals decision on the parties’ pending motions for summary judgment, which were filed prior to the court of appeals’ decisions.

The court of appeals found, just because the zoning ordinance enumerated possible special uses, it “did not legislatively predetermine that the laundry list of special uses necessarily met the standards for any zoned district (here, R-70) … simply if they met the standards for a district already zoned for that use (here, R-5).”

Explaining the zoning ordinance merely listed numerous special uses and expressly reserved the right to the town council whether to issue any SUP based solely on public health, safety and welfare standards, the court of appeals added, “even if the applicant met the objective standards in a zone in which it was already permitted to build without a SUP.”

After reviewing the parties’ development agreement stating the SUP application would proceed through the administrative review process and ultimate determination by the town council, the court of appeals found it did not necessarily mean the town council’s decision was administrative in nature but rather the process would include administrative review by the planning and zoning commission and then the town council’s decision.

The court of appeals held that the public welfare and matter of grace standards applied and the decision whether to grant a SUP is a legislative one.

Photos: As the town of Carefree and Michael Peloquin’s GP Properties threaded their way through the legal system, which ultimately concluded a special use permit is a discretionary legislative act rather than an administrative act, Peloquin displayed his humorous side with “For Sale” signs on the 12-acre parcel.
Photos by Linda Bentley