PINETOP-LAKESIDE — Back in 2007, the Ponderosa Domestic Water Improvement District (Ponderosa) wanted to sink a well on a lot it had bought in the Bent Oaks subdivision in Pinetop-Lakeside. Ponderosa had lost the use of three wells it operated elsewhere because of drought conditions and wanted to drill a new well on Lot 27 in Bent Oaks.
Not so fast, said the Pinetop Lakes Association, the homeowner’s group covering Bent Oaks, because when Ponderosa bought the lot, it had agreed that the lot was for “residential use only” and prohibited “business activity of any kind whatsoever,” according to its Declaration of Reservations, Restrictions, Covenants and Conditions. (CC&Rs)
Ponderosa asked for a variance of the rules, but the association’s board declined. It is unknown if all Bent Oaks residents get their water from Ponderosa, but court records imply that that some do, that Ponderosa needed new water sources “to supply its water users, including those in Bent Oaks,” reads a court decision.
Ponderosa had already drilled a well on Lot 27 to test water samples. Ponderosa then claimed that because it is a Domestic Water Improvement District established in 1984 by Navajo County Board of Supervisors and under Arizona State Law, that it didn’t need a variance anyway, because it had the power to “condemn” or nullify the CC&Rs through its power of “eminent domain.”
Anticipating a lawsuit by Ponderosa, the HOA sued Ponderosa first to make them comply with the CC&Rs and to quit drilling in Bent Oaks. In response, Ponderosa sued nine individuals and a construction company, seeking to “condemn” the CC&Rs and the whole mess ended up in a consolidated case in the Navajo County Superior Court in 2007.
In a nutshell, the HOA argued that according to Navajo County Special Development Zoning Ordinance (approved by the Navajo County Planning Commission and the board of supervisors) CC&Rs are actually enforceable zoning laws at any particular subdivision in Navajo County. Ponderosa argued that its condemnation powers trumped the county ordinance that makes CC&Rs zoning laws.
The superior court agreed with the association and dismissed Ponderosa’s condemnation claims. Ponderosa appealed.
The Arizona Court of Appeals took a deep dive into the murky laws and case precedent relied on by the parties. It ruled that the superior court had called it wrong, and that Ponderosa, having been legally formed as an improvement district, did indeed have powers of eminent domain and can rightfully condemn the CC&Rs and build its well.
The case was sent back to superior court, but there was little to fight about since the Court of Appeals had clarified the legal issues. There was however, one more fight over who pays the other’s attorney fees and costs (filing fees, expert witness fees, deposition costs, subpoena and service costs, etc.). Ponderosa asked for $162,706 in attorney fees and $18,765 in costs. The judge awarded Ponderosa just $6822.06 in costs and denied the request for attorney’s fees.