AZ Appeals Court Affirms Original Development Agreement Preserves Current Owner’s Vested Right to Mine and Trumps the Rezoning Ordinance and Amendment to Development Plan

This post was authored by Amanda Ritchie, Touro College Jacob D. Fuchsberg Law Center

This past March, the Arizona Court of Appeals, affirmed the summary judgment granted to Florence Copper Inc., by the Superior Court of Maricopa County, declaring that the separation of powers doctrine did not compel the trial court to defer to the Town of Florence’s rezoning decision; the rezoning ordinance and amendment to development plan did not alter the Florence Copper Inc.’s vested right, under development agreement, to operate copper mine on property.

In 2000, a real estate developer named W. Harrison Merrill bought over a thousand acres of unincorporated land near the Town of Florence from a mining company, along with mining infrastructure and mineral rights to an adjacent leased parcel. The intention was to first extract the copper with a mining partner and then develop Merrill Ranch on the Property. In 2002, the Town expressed interest in annexing the Property but pursuant to Arizona law, they required Merrill’s consent.To ensure flexibility in development,Merrill entered a 35-year agreement in November 2003, formalized in a Pre-Annexation Development Agreement and a Planned Unit Development Plan. The following year both were approved by the Town Council, adopted a corresponding amendment to the zoning map and filed with the recorder’s office pursuant to Arizona Law A.R.S.§9-500.05(c).

The Development Agreement preserved Merrill’s vested right to develop and use the Property in accordance with the Agreement and the 2003 Plan, and directed that associated burdens and benefits would run with the land for 35 years. Moreover, to advance the vested rights, the Agreement barred the Town from imposing zoning ordinances or land use regulations that would change or otherwise impact the development or use of the Property as set forth in the Plan. The Property was subject to a non-conforming historical use of copper mining called the BHP Copper Mine Overlay and the 2003 Plan ensured the Mine Overlay would be preserved until the mine was “closed” aka if not used for more than 180 days. However, because Merrill did not immediately intend to mine, the 2003 Plan expressly excepted copper mining from that requirement. Finally and most importantly, the Development Agreement specified that any amendment to the Agreement must be in writing, executed by both parties and filed within ten days with the Pinal County Recorder pursuant to Arizona Law A.R.S.§9-471(A)(4).

In 2007, Merrill and the Town agreed to a new Development Agreement which, among other things, rezoned the Mining Parcel from light-industrial to residential. The Town Council then passed a rezoning ordinance, amending the Town’s zoning map to conform to that Plan. It is important to note that the new Plan was not incorporated into the Development Agreement or recorded with the county recorder—unlike the 2003 Plan—and only appears in the Town’s zoning book. In their negotiations, neither Merrill nor the Town mentioned mining rights. The Rezoning Ordinance did not identify mining as a non-conforming use or purport to amend or supersede the Development Agreement.

In 2008, following the financial crisis, Merrill lost the Property in foreclosure and Florence Copper’s parent company purchased the Mining Parcel. Then in 2010, the Town decided they no longer supported the mine and ultimately pursued litigation against Florence Copper Inc.

The Town and Merrill voluntarily entered into a 35-year binding development agreement so their rezoning decision to prohibit mining on the land subject to pre-annexation development agreement which granted parcel owner and his successors a vested right to operate a copper mine is contradictory. They could have negotiated further concessions from Merrill if they so desired in 2007. Moreover, local governments do not possess absolute power over zoning decisions; those decisions are subject to judicial review and the Superior Court enforced the plain terms of development agreement, which itself was a product of legislative action.

The rezoning ordinance and amendment to development plan did not alter owner’s vested right under pre-annexation development agreement, as successor to developer, to operate copper mine on property; agreement required that amendments to agreement be in writing, signed by the parties, and filed with the county recorder within ten days, those events did not occur, neither the amended plan nor the rezoning ordinance purported to amend the agreement, and there was no indication that the developer intended to amend or abandon the right to mine when negotiating with town to rezone the property. The record includes substantial evidence showing that Merrill never intended to amend or abandon his right to mine on the Property when he requested and then renegotiated the zoning change in 2007. He wanted to maximize the value of his investment, including the residential development rights and the mining rights. Moreover, the Town offered no evidence showing that Merrill intended to abandon his valuable mining rights.

The Court’s decision supports developer’s demand’s for more certainty and less risk when entering into development agreements with cities and towns. A city or town is able to set definite conditions that govern the process of development, thus limiting the potential negative impacts from the development on neighboring land and the community and here the Town negotiated and mutually agreed to an agreement that provided the owner and its successors vested rights to mine that ran with the land. An attempt to violate the terms set forth would not only be a breach of contract but an overreach by the Town that could be considered an illegal regulatory taking.

Town of Florence v. Florence Copper Inc., 251 Ariz. 464, 493 P.3d 891 (Ct. App. 2021), as amended (Mar. 24, 2021)