Pawn 1st LLC v. City of Phoenix/jachimek

Citations: 242 Ariz. 547; 399 P.3d 94; 771 Ariz. Adv. Rep. 10; 2017 Ariz. LEXIS 204; 2017 WL 3428093Docket: CV-16-0107-PR

Court: Arizona Supreme Court; August 10, 2017; Arizona; State Supreme Court

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The Supreme Court of Arizona addressed the standards for obtaining a zoning variance in the case of Pawn 1st, LLC v. City of Phoenix. The court ruled that an applicant must demonstrate that rigidly enforcing a zoning ordinance would lead to "peculiar and exceptional practical difficulties" that prevent the property from benefiting similarly to other properties in the same zone. The court clarified that merely wanting to use the property for purposes allowed in similarly zoned areas does not qualify as a self-imposed hardship for denying a variance.

The case originated from the City of Phoenix Board of Adjustment granting a variance for a property at the intersection of McDowell Road and 32nd Street, which is zoned as a Commercial C-3 District. This zoning permits a wide range of commercial uses, but the property had unique characteristics due to a historical eminent domain action that reduced its size to 12,000 square feet, limited its commercial viability, and restricted parking. In 2010, the property's former use as an adult theatre ceased, and William Jachimek sought to operate a pawn shop on the site, which would require a variance due to its proximity to a residential district.

Jachimek appealed to the Board after the zoning administration hearing officer denied his applications for a variance. During the Board hearing, Pawn 1st, LLC, a competing pawn shop, opposed the variance. The Board conditionally approved the variance but imposed restrictions, including limited operating hours, a prohibition on buying or selling guns or pornography, and a requirement to apply for building permits for a remodel within one year. The Board's findings highlighted special circumstances surrounding the property, including its prior non-conforming use as an adult theater, impacts from eminent domain, limited square footage under 12,000, and restrictive parking requirements. These conditions were not created by Jachimek but were exacerbated by city growth, necessitating the variance for property rights preservation without detriment to the surrounding area.

After the Board denied a reconsideration motion, Pawn filed a special action in superior court, which initially ruled in Jachimek’s favor, stating Pawn lacked standing. The court of appeals reversed this decision, affirming Pawn's standing. Upon remand, the superior court again ruled for Jachimek, categorizing the variance as an area variance and validating the Board's authority to grant it. However, the court of appeals reversed once more, declaring the area variance invalid, although it acknowledged that Jachimek was seeking an area variance as a pawn shop is permitted in a C-3 zoning district despite a 500-foot distance requirement.

The case was reviewed due to the statewide significance of the standards applied by municipal zoning boards of adjustment when considering variance applications. The jurisdiction is affirmed under the Arizona Constitution and relevant statutes, with a focus on the presumption of validity for agency determinations unless proven otherwise. Arizona law permits cities to establish boards of adjustment to handle appeals concerning zoning ordinance enforcement, primarily to assess the existence of special circumstances for property owners with unique characteristics.

The authority of zoning boards to modify zoning decisions is limited by statute. Specifically, boards of adjustment cannot change permitted uses within a zoning district or grant variances for self-imposed special circumstances. This limitation is established under A.R.S. §9-462.06(H) and reinforced by case law, indicating that any variance granted beyond statutory authority is considered ultra vires and invalid.

The Phoenix Zoning Ordinance aligns with A.R.S. §9-462.06, permitting a zoning administrator to issue a variance to alleviate unnecessary property hardship, provided the applicant demonstrates that special circumstances exist that do not apply to other properties, that these circumstances are not self-imposed, that the variance is necessary for substantial property rights, and that it will not harm the surrounding area.

If a variance is denied, an applicant can appeal to the Board, which also cannot change permitted uses or grant variances based on self-imposed circumstances. Arizona law distinguishes between area variances, which address technical compliance issues, and use variances, which allow uses not explicitly permitted. Boards of adjustment are prohibited from altering permitted uses, limiting their authority to area variances only.

The standards for granting these variances differ: area variances require proof of "peculiar and exceptional practical difficulties," while use variances need evidence of "exceptional and undue hardship." The distinction is based on the varying impact these variances have on community character, with area variances requiring a less stringent standard.

A use variance requires a stringent demonstration that zoning regulations entirely preclude any reasonable use of the property, necessitating legislative body approval. In contrast, a board of adjustment cannot alter zoning classifications or terms, as this authority rests solely with the City Council. Economic disadvantage or inability to achieve higher property use does not constitute undue hardship for a use variance. The distinction between use and area variances is critical, with the former subject to a higher hardship standard due to their potential impact on neighborhoods, while area variances address technical requirements that do not fundamentally change the nature of an area.

In this case, Jachimek applied for an area variance for a pawn shop, deemed a permitted use in a C-3 zoning district, despite a 500-foot distance requirement from residential areas. The court supports the view that this requirement is a technical measure rather than a use restriction. The variance granted by the Board was appropriate under A.R.S. §9-462.06(H)(1) since it did not exceed its authority. For area variances, special circumstances must exist that prevent property owners from enjoying privileges available to similar properties in the same zoning district, where "special circumstances" equate to hardship.

Special circumstances justify the granting of a variance for the Property, as confirmed by the Board, superior court, and court of appeals. The Board determined that prior eminent domain actions rendered the Property unique when compared to twelve nearby C-3-zoned corner parcels, noting its distinctive physical characteristics, including lot size, limited building setback from the sidewalk, and parking restrictions. These factors create exceptional practical difficulties, allowing the Board to exercise its discretion in granting Jachimek’s variance.

However, a variance cannot be granted if the special circumstances are self-imposed by the property owner, as outlined in A.R.S. §9-462.06(H)(2) and relevant ordinances. The court of appeals ruled that Jachimek's special circumstances were self-created by choosing to use the Property as a pawn shop, rendering the Board's decision "ultra vires and void." This conclusion was based on precedents from three Arizona cases: Arkules, Burns, and Rivera v. City of Phoenix, which were deemed distinguishable from Jachimek’s case.

In Arkules, a variance was denied because the homeowner’s color preference did not relate to the land’s use, indicating that personal hardships do not warrant a variance. Similarly, in Burns, a car dealership owner created a zoning hardship through his business decisions, with the court emphasizing that special circumstances should arise from factors beyond the owner’s control. Unlike those cases, Jachimek's situation involved a use—operating a pawn shop—that was legally denied to him but permitted for others in the same zoning area.

A homeowner in Rivera received a building permit for a residence expansion, but after inspection, the city found the improvements exceeded zoning limits. The Board mandated demolition of the non-compliant area, and when the homeowner sought a variance, the court of appeals upheld the denial, concluding the homeowner had created the special circumstances by submitting an inaccurate site plan. Unlike Rivera, the special circumstances in Jachimek's case stemmed from factors beyond his control, specifically the city's eminent domain action which altered the property dimensions, resulting in a small lot size, lack of frontage, proximity to a sidewalk, and strict parking requirements. These factors impaired the property’s commercial viability compared to similar properties within the same zoning district and were unrelated to Jachimek’s preferences.

The court of appeals' reference to Minney v. City of Azusa was deemed inappropriate because it involved a use variance, whereas Jachimek sought an area variance for a permissible use that would not change the neighborhood's character. Arizona zoning laws require that special circumstances be assessed based on the property itself, not the owner, and that personal hardships alone do not justify variance approval. Courts typically view the transfer of property title as irrelevant to the hardship, emphasizing that zoning regulations, rather than personal circumstances, create the hardship. Therefore, special circumstances are not considered self-imposed when an owner is unable to utilize the property as allowed for similarly zoned properties due to external factors, despite voluntarily acquiring the property with those circumstances.

The court rejected the court of appeals’ rule that would limit property purchasers' rights by preventing them from obtaining area variances if they were aware of existing restrictions. This rule would grant sellers more rights than buyers, contradicting established legal principles favoring alienation of property. The court cited case law, emphasizing that restraints on alienation are generally disfavored and that purchasers should not acquire fewer rights than their predecessors. The court concluded that a property owner's awareness of the need for a variance does not equate to a self-imposed special circumstance that would prevent granting the variance. The Board appropriately determined that special circumstances applied to the property, that the requested variance was necessary to protect substantial property rights, and that it would not harm the surrounding area. The court vacated the court of appeals’ opinion, affirmed the superior court’s ruling in favor of Jachimek, and denied Pawn’s request for attorney fees as it was not the prevailing party.