Brock v. Tellurian

NOTICE: NOT FOR OFFICIAL PUBLICATION.
UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL
AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.

IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE

BROCK FAMILY PARTNERSHIP, LLP, et al., Plaintiffs/Appellants,

v.

TELLURIAN DEVELOPMENT COMPANY, Defendant/Appellee.

No. 1 CA-CV 21-0419
FILED 3-8-2022

Appeal from the Superior Court in Maricopa County
No. CV2020-095704
The Honorable Danielle J. Viola, Judge

AFFIRMED

COUNSEL

Brooks & Affiliates PLC, Mesa
By David P. Brooks
Counsel for Plaintiffs/Appellants

Burch & Cracchiolo PA, Phoenix
By Ralph D. Harris, Andrew Abraham
Counsel for Defendant/Appellee
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Decision of the Court

MEMORANDUM DECISION

Presiding Judge Jennifer B. Campbell delivered the decision of the Court,
in which Judge Randall M. Howe and Judge James B. Morse Jr. joined.

C A M P B E L L, Judge:

¶1 Brock Family Partnership, LLP and Brock Properties II, LLC
(collectively, Brock) challenge the dismissal of their complaint seeking to
enforce an amended agreement between Tellurian Development Company
(Tellurian) and the City of Tempe (the City) under which Tellurian agreed
to “use its commercial best efforts to work with other owners to include a
circulation plan for connectivity to benefit all parcels adjacent to the
Tellurian Properties.” The superior court determined that Brock is not a
third-party beneficiary of the amended agreement and therefore cannot sue
to enforce its terms. We agree and affirm.

BACKGROUND

¶2 Because Brock appeals from the dismissal of its complaint, we
state the relevant fact allegations and assume they are true for purposes of
this appeal. Sullivan v. Pulte Home Corp., 232 Ariz. 344, 345, ¶ 2 (2013).

¶3 Miravista Holdings, LLC (Miravista) and the City entered
into land development agreements in 2003 and 2009. The 2009
Development Parcel Agreement (Development Agreement) provided that
Miravista would develop and improve certain land and enter lease
agreements with the City that would provide Miravista with property tax
abatements.

¶4 Tellurian acquired properties within the scope of these
agreements and assumed Miravista’s rights, duties, and obligations under
the Development Agreement in a 2014 Assumption and Modification
Agreement (the Assumption Agreement). Tellurian and the City amended
the Assumption Agreement in 2015 (the First Amendment) and again in
2016 (the Second Amendment). As relevant to this appeal, paragraph 5 of
the Second Amendment provides:

Section 7.1 of the [Development Agreement] is hereby
amended to add the following to the last sentence thereof:
“Without limiting the foregoing, Tellurian specifically

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acknowledges and agrees that it shall use its commercial best
efforts to work with other owners to include a circulation plan
for connectivity to benefit all parcels adjacent to the Tellurian
Properties.”

Paragraph 6.4, however, disclaims any intention to make any “other
owners” third-party beneficiaries of the agreement:

No term or provision of this Second Amendment is intended
to be for the benefit of any person, firm, organization, or
corporation not a party hereto, and no other person, firm,
organization, or corporation may have any right or cause of
action hereunder.

Paragraph 5.4 of the Assumption Agreement contains the same language.
Similar language also appears in paragraph 7.15 of the Development
Agreement:

[N]o person is bound by (or entitled to) the burdens and
benefits of this Agreement unless such burdens are expressly
assumed by or such benefits are expressly assigned to such
person.

¶5 Brock owns two parcels adjacent to Tellurian’s properties.
Brock sued Tellurian in 2020, contending that Tellurian breached the
Second Amendment by not making “commercial best efforts . . . to provide
for connectivity to [Tellurian’s property] by [Brock].” Upon Tellurian’s
motion, the superior court dismissed Brock’s complaint under Arizona
Rule of Civil Procedure (Rule) 12(b)(6), finding that the disclaimers quoted
above barred Brock from suing to enforce the Second Amendment.

¶6 Brock timely appealed from the superior court’s final
judgment.

DISCUSSION

I. The Superior Court Did Not Abuse Its Discretion in Addressing
Tellurian’s Noncompliance with Rule 12(j).

¶7 Brock contends the superior court should have summarily
denied Tellurian’s motion for noncompliance with Rule 12(j), which states
that “[a] good faith consultation certificate complying with Rule 7.1(h) must
accompany any motion brought under (b)(3), (b)(6), (c), or (f) of [Rule 12].”
A “good faith consultation certificate” is “a separate statement certifying

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and demonstrating that the movant has tried in good faith to resolve the
issue by conferring with—or attempting to confer with—the party or
person against whom the motion is directed.” Ariz. R. Civ. P. 7.1(h).
Tellurian did not file any such statement. After Brock noted the omission,
Tellurian filed a reply in which it apologized and advised the court that
counsel for the parties had attempted to resolve the matter and further
consultation would have been futile.

¶8 To date, no Arizona court has interpreted Rule 12(j). When
interpreting a civil procedure rule, we seek to give effect to our supreme
court’s intent in promulgating it. In re Restated Trust of Crystal H. W., 249
Ariz. 355, 357-58, ¶ 7 (App. 2020). If a rule is clear and unambiguous, we
will not look beyond its language to determine that intent. Id. at 358, ¶ 7.

¶9 Brock contends the filing of a good faith consultation
certificate is mandatory based on the use of “must” in Rule 12(j). The rule
does not, however, set forth any specific consequences of noncompliance,
and Brock cites no authority suggesting denial of a motion is mandatory if
a party fails to file a good faith consultation certificate with any other
motion for which one is required. See Ariz. R. Civ. P. 5.4(d)(3), 11(c)(2)(A),
11(c)(3)(c), 26(i), 37(a)(1), 37(f)(1)(B), 45.2(d)(2), 45.2(e)(1)(A).

¶10 Brock also cites Crystal H. W. for the proposition that the filing
of the good faith consultation certificate is mandatory. But Crystal H. W. did
not involve a good faith consultation certificate; it instead interpreted Rule
54(g)(1), which requires a party seeking attorneys’ fees to give notice of its
claim either in the pleadings or in a Rule 12 motion filed before its
responsive pleading. 249 Ariz. at 358, ¶ 8. This court held the noncompliant
party forfeited its fee claim by not giving proper notice that attorneys’ fees
would be sought, thus defeating “the rule’s purpose of encouraging [the
opposing party] to settle to avoid the risk of a fee assessment.” Id. at 359,
¶ 15. No such concerns are present here, as Brock had a full and fair
opportunity to respond to Tellurian’s motion.

¶11 The superior court also found that Brock “ha[d] not requested
an opportunity for leave to amend based on the failure to meet and confer”
and had “identif[ied] no prejudice based on the lack of compliance.” Brock
does not dispute these findings. Under these facts, any error was harmless,
and the court was not obligated to summarily deny Tellurian’s motion. See
Creach v. Angulo, 189 Ariz. 212, 214-16 (1997) (finding harmless error in
failing to attach required affidavits when appellants “have shown no
prejudice and merely demand compliance with a technical rule”); see also
Schwab v. Ames Constr., 207 Ariz. 56, 60, ¶ 17 (App. 2004) (applying abuse of

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discretion review to rulings under Rule 7.1). We therefore address the
motion’s merits.

II. Brock Is Not a Third-Party Beneficiary of the Second Amendment.

¶12 We review the dismissal of a complaint under Rule 12(b)(6)
de novo. CVS Pharmacy, Inc. v. Bostwick, 251 Ariz. 511, 516, ¶ 10 (2021). We
accept all well-pleaded facts as true and give Brock the benefit of all
inferences arising therefrom. Botma v. Huser, 202 Ariz. 14, 15, ¶ 2 (App.
2002). We will affirm only if Brock would not have been entitled to relief
under any interpretation of the facts susceptible of proof as a matter of law.
Mesnard v. Campagnolo, 251 Ariz. 244, 248, ¶ 11 (2021).

¶13 Brock contends it was a third-party beneficiary of the Second
Amendment because paragraph 5, quoted above, “reflects an intent to
benefit adjacent parcel owners” by contemplating “a connectivity plan . . .
to benefit adjacent property owners.” Under Arizona law, a party outside
of a contract may recover as a third-party beneficiary only if (1) an intention
to benefit the claimant is indicated in the contract; (2) the contemplated
benefit is both intentional and direct; and (3) it definitely appears the parties
intended to recognize the third party as the primary party in interest.
Nahom v. Blue Cross & Blue Shield of Ariz., Inc., 180 Ariz. 548, 552 (App. 1994)
(internal quotation omitted). Whether a third party is an intended or
incidental beneficiary of a contract is a question of law. Sherman v. First
American Title Ins. Co., 201 Ariz. 564, 566-67, ¶ 5 (App. 2002).

¶14 The complaint sufficiently alleges that the Second
Amendment, if carried out, could benefit Brock. But merely showing a
possible benefit does not confer third-party beneficiary status. Nahom, 180
Ariz. at 552. Read in its entirety, the Second Amendment expressly and
unambiguously disclaims any intent to benefit anyone other than the
named parties and precludes any non-contracting party from maintaining
a cause of action seeking to enforce its terms.

¶15 Despite the Second Amendment’s clear language, Brock
contends third-party beneficiary status can be found “where recognition of
the right to performance in the beneficiary is appropriate to effectuate the
intention of the parties, and the circumstances indicate that the promisee
intended to give the beneficiary the benefit of the promised performance,”
citing Supplies for Industry, Inc. v. Christensen, 135 Ariz. 107, 109 (App. 1983).
In Christensen, we determined that Supplies for Industry (SFI) was an
intended third-party beneficiary because the agreement at issue named SFI
as “the subsidiary or subsidiaries or division or divisions of the Company

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which from time to time in the future operate the business conducted by
[SFI].” Id. at 108-09. As such, “[t]he obvious purpose of the covenant not to
compete was to protect the business operated by SFI even if SFI should
change its name.” Id. at 109.

¶16 Christensen also relied on Restatement (Second) of Contracts §
302(1) (1982) (Restatement), which provides:

Unless otherwise agreed between promisor and promisee, a
beneficiary of a promise is an intended beneficiary if
recognition of a right to performance in the beneficiary is
appropriate to effectuate the intention of the parties and . . .

(b) the circumstances indicate that the promisee
intends to give the beneficiary the benefit of the
promised performance.

See Christensen, 135 Ariz. at 109. Here, Tellurian and the City “otherwise
agreed” that no unnamed parties had rights under the Second Amendment.

¶17 Citing Restatement § 308, Brock argues that “[i]t is not
essential to the creation of a right in an intended beneficiary that he be
identified when a contract containing the promise is made,” contending
that the Second Amendment more generally identifies owners of “parcels
adjacent” as the primary parties in interest. Brock also relies on Nahom, in
which we stated that “[i]t is sufficient for third-party status to show that the
beneficiary is a member of a class of beneficiaries intended by the parties.”
180 Ariz. at 552 (emphasis omitted). But there, we found a clear intent to
provide a direct benefit to an identified class:

The class of Blue Cross subscribers, including Nahom and his
wife, is named numerous times throughout the agreement.
The effect of the participation agreement is to prevent
Scottsdale Memorial from looking to a subscriber for amounts
in excess of the DRG amount. The result is a direct, not merely
incidental, benefit to the subscribers.

Id. at 553. While paragraph 5 of the Second Amendment, if carried out,
would confer a benefit on adjacent parcel owners, paragraph 6.4 expressly
denies any intent to confer third-party beneficiary status on those owners
or anyone else.

¶18 Brock next contends that “[t]he specific contract language—
paragraph 5 of the Second Amendment—should be given greater weight

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than the general language in paragraph 6.4.” See, e.g., Autonumerics, Inc. v.
Bayer Indus., Inc., 144 Ariz. 181, 188 (App. 1984) (“Where there is
inconsistency in a contract, specific provisions qualify the meaning of
general provisions.”). But paragraph 6.4 is more specific regarding whether
the Second Amendment confers third-party beneficiary rights, as it plainly
bars third parties from enforcing the Second Amendment. Paragraph 5, in
contrast, only states that Tellurian would use “commercial best efforts to
work with other owners to include a circulation plan;” it does not say
whether the “other owners” can sue to enforce that promise.

¶19 In any event, we do not construe one contract term in a way
that would render another term essentially meaningless. Aztar Corp. v. U.S.
Fire Ins. Co., 223 Ariz. 463, 478, ¶ 56 (App. 2010). Construing paragraph 5 to
grant Brock and other adjacent landowners third-party beneficiary status
would render meaningless not only paragraph 6.4 but also similar
provisions in the Development Agreement and Assumption Agreement.

¶20 Lastly, Brock contends that “since paragraph 5 of the Second
Amendment added new language to [paragraph] 7.1 of the Development
Agreement, that language was retroactively inserted into the Development
Agreement itself and obligated Appellee to comply with it through all the
agreement iterations thereafter.” Again, paragraph 6.4, which appears on
the same page as paragraph 5, disclaims any intent to make any “other
owners” third-party beneficiaries of the Second Amendment. If Tellurian
and the City wanted to grant these owners third-party beneficiary status,
they easily could have done so. See Grubb & Ellis Mgmt. Services, Inc. v.
407417 B.C., L.L.C., 213 Ariz. 83, 86, ¶ 12 (App. 2006) (“[W]hen parties bind
themselves by a lawful contract the terms of which are clear and
unambiguous, a court must give effect to the contract as written.”). They
did not. For these reasons, we conclude the superior court did not err in
dismissing Brock’s complaint seeking relief under the Second Amendment.

III. Attorneys’ Fees on Appeal

¶21 Both sides request their attorneys’ fees incurred in this appeal
pursuant to A.R.S. § 12-341.01, which permits a discretionary award to the
successful party in an action arising out of a contract. This dispute arises
out of the Second Amendment, and Tellurian is the successful party on
appeal. Tellurian therefore may recover reasonable attorneys’ fees and
taxable costs incurred in this appeal upon compliance with ARCAP 21.

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CONCLUSION

¶22 We affirm the dismissal of Brock’s complaint.

AMY M. WOOD • Clerk of the Court
FILED: AA

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