                                    IN THE
              ARIZONA COURT OF APPEALS
                                  DIVISION ONE


          PAWN 1ST, LLC, an Arizona limited liability company,
                          Plaintiff/Appellant,

                                     v.

  CITY OF PHOENIX, a political subdivision of the State of Arizona;
BOARD OF ADJUSTMENT OF THE CITY OF PHOENIX; and BOB FORD;
   EMILIO GAYNOR; PATRICK PAUL; ALEX TAUBER; YVONNE
  HUNTER; BETTINA NAVA; and EMILY RYAN, as members of and
     constituting the Board of Adjustment of the City of Phoenix,
                         Defendants/Appellees,

               WILLIAM JACHIMEK dba CENTRAL PAWN,
                     Real Party in Interest/Appellee.

                             No. 1 CA-CV 14-0500
                              FILED 4-12-2016


           Appeal from the Superior Court in Maricopa County
                        No. LC 2010-000701-001
                The Honorable Lisa Daniel Flores, Judge

                      REVERSED AND REMANDED


                                   COUNSEL

Baker & Baker, Phoenix
By Thomas M. Baker
Counsel for Plaintiff/Appellant
Phoenix City Attorney’s Office, Phoenix
By Daniel L. Brown, Robert A. Hyde, Paul M. Li, Brad Holm
Counsel for Defendants/Appellees

Spiess & Bell, PC, Phoenix
By James O. Bell
Counsel for Real Party in Interest/Appellee


                                  OPINION

Judge Patricia A. Orozco delivered the opinion of the Court, in which
Presiding Judge Margaret H. Downie and Judge Maurice Portley joined.


O R O Z C O, Judge:

¶1             Pawn 1st, LLC (Pawn) appeals from the superior court’s
judgment dismissing its complaint for special action review of a decision
by the Board of Adjustment of the City of Phoenix (City) and its members
(collectively, the Board) granting a variance to real party in interest
William Jachimek, doing business as Central Pawn (Jachimek). Because
we conclude that Jachimek’s application for a variance to operate a pawn
shop within 500 feet of a residential district does not meet the necessary
requirements established by statute and ordinance, we reverse the ruling
and remand.

              FACTS AND PROCEDURAL BACKGROUND

¶2            The underlying facts and procedural history of this case
were stated in Pawn 1st, L.L.C. v. City of Phoenix, 231 Ariz. 309 (App. 2013)
(Pawn I). Briefly, Jachimek entered into a lease with an option to purchase
commercial property (the Property) zoned C-3 on the southwestern corner
of McDowell Road and 32nd Street, intending to operate a pawn shop. Id.
at 310, ¶ 2. The City of Phoenix Zoning Ordinance (Zoning Ordinance)
requires that the exterior walls of a pawn shop business in a C-3 district be
located at least 500 feet from a residential district. PHX., ARIZ., ZONING
ORDINANCE § 623.D.132.b (2016). The City’s Zoning Administrator denied
Jachimek’s request for a variance from the 500-foot distance requirement,
but on appeal, the Board approved the variance. Pawn I, 231 Ariz. at 310,
¶¶ 4–5. Pawn, a competing pawn shop business, filed a complaint in
superior court for special action review of the Board’s decision. Id. at 310,
¶ 7.



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                       PAWN 1ST v. PHOENIX et al.
                          Opinion of the Court

¶3           In Pawn I, we reversed the superior court’s determination
that Pawn lacked standing to bring a statutory special action challenging
the Board’s grant of a variance to Jachimek and we remanded for
consideration of the special action. Id. at 313, ¶ 25. On remand, the
superior court denied Pawn’s requested relief, finding that:

       the variance granted to Jachimek was an area variance and
       not a use variance. The variance at issue was a deviation
       from the zoning ordinance that imposed a dimensional
       requirement for pawn shops, i.e. that the exterior walls of
       the building in which the pawn shop is located shall be at
       least five hundred (500) feet from a residential street.
       Section 623(D)(132) of the Phoenix Zoning Ordinance. This
       zoning ordinance did not prohibit pawn shops; for that
       reason, granting a variance was not a “use variance.”
       Because the Board of Adjustment is authorized to consider
       area variances, its decision to grant the area variance to
       Jachimek was not ultra vires.

              For reasons fully stated in the written and oral
       arguments of Defendant City of Phoenix and Real Party in
       Interest Jachimek, the Court finds that there is evidence to
       support the Board’s decision to grant the area variance.

¶4            The superior court affirmed the Board’s decision and
entered judgment dismissing Pawn’s complaint with prejudice. Pawn
appealed. We have jurisdiction pursuant to Article 6, Section 9, of the
Arizona Constitution, and Arizona Revised Statutes (A.R.S.) sections
12-120.21.A.1 and -2101.A.1 (West 2016).1

                               DISCUSSION

I.     Standard of Review

¶5            We review de novo issues involving the interpretation of a
statute or a city ordinance. See Whiteco Outdoor Advert. v. City of Tucson,
193 Ariz. 314, 316–17, ¶ 7 (App. 1998). We generally defer to the Board’s
decision and presume it to be correct unless it is “not supported by
substantial evidence, is contrary to law, is arbitrary and capricious or is an
abuse of discretion.” A.R.S. § 12-910.E; see also Whiteco, at 317, ¶ 7. If the

1    We cite the current version of applicable statutes and ordinances
when no revisions material to this decision have since occurred.



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                      PAWN 1ST v. PHOENIX et al.
                         Opinion of the Court

record contains credible evidence to support the Board’s decision, it must be
affirmed. See Austin Shea (Ariz.) 7th St. and Van Buren, L.L.C. v. City of
Phoenix, 213 Ariz. 385, 392, ¶ 29 (App. 2006); Murphy v. Town of Chino
Valley, 163 Ariz. 571, 574 (App. 1989).

¶6            However, as to issues of statutory interpretation, we are free
to draw our own conclusions as to whether the Board properly applied
the law. See Murphy, 163 Ariz. at 574. Further, we may “substitute [our]
judgment for the Board’s assessment of the legal effect of the underlying
facts.” Whiteco, 193 Ariz. at 317, ¶ 7. “[We] may substitute our opinion for
that of the superior court since we are reviewing the same record.”
Arkules v. Bd. of Adjustment of Town of Paradise Valley, 151 Ariz. 438, 441
(App. 1986).

II.   In Granting the Variance, the Board Did Not Make a Change in
      Permitted Usage

¶7            The Board or its Zoning Administrator “may not [m]ake any
changes in the uses permitted in any zoning classification or zoning
district.”    A.R.S. § 9-462.06.H.1; PHX., ARIZ., ZONING ORDINANCES
§§ 303.B.2.a, 307.A.10.a. Pawn argues that Jachimek’s request for a
variance is not an “area” variance as found by the superior court, but an
unauthorized “use” variance because it allows the Property to be
developed for an impermissible use; namely, the operation of a pawn
shop within 500 feet of a parcel zoned residential. In contrast, the City,
the Board and Jachimek argue the variance is a permissible “area”
variance.

¶8             All parties cite out-of-state cases in support of their
respective arguments about whether a distance separation limitation, such
as the 500-foot requirement here, constitutes a “use” or “area” variance.
Although the terms “use variance” and “area variance” are not embodied
in the statutes or ordinances, we find those terms helpful in exploring and
explaining the relevant distinctions.

¶9            The distinctions between “area” and “use” variances stem
from Ivancovich v. City of Tucson Bd. of Adjustment, in which this court
addressed the propriety of a 1968 variance request and discussed the
distinction at length. 22 Ariz. App. 530, 531-32 (1974). In Ivancovich, we
stated:

      A ‘use’ variance is one which permits a use of land other
      than that allowed by the zoning ordinance. Thus, a variance
      which permits a commercial use in a residential district is a


                                     4
                        PAWN 1ST v. PHOENIX et al.
                           Opinion of the Court

       ‘use’ variance. ‘Area’ variances involve such matters as
       setback line, frontage requirements, height limitations, lot
       size restrictions, density regulations and yard requirements.

Id. at 536 (internal citation omitted).

¶10          Even though A.R.S. § 9-462.06.H.1 went into effect on
January 1, 1974, it was not addressed in Ivancovich. The issue in this case
is whether, in approving the variance requested by Jachimek, the Board
made a change in the use permitted in the zoning.

¶11            Here, the Property is zoned as a C-3 commercial district, and
the Zoning Ordinance allows all uses permitted in a C-2 commercial
district in a C-3 commercial district. PHX., ARIZ., ZONING ORDINANCE
§ 624.D; see also Desruisseau v. Isley, 27 Ariz. App. 257, 261 (1976) (stating
that “it is true that a C-3 district allows all uses permitted in a C-2
district”) (disapproved of on other grounds by Armory Park Neighborhood
Ass’n v. Episcopal Cmty. Servs. in Ariz., 148 Ariz. 1, 9 (1985)). Permitted
uses in a C-2 commercial district include: “Pawn Shop. Subject to the
following limitations . . . [t]he exterior walls of the building in which the
use is located shall be at least five hundred (500) feet from a residential
district.” PHX., ARIZ., ZONING ORDINANCE § 623.D.132.b. Under the plain
language of the Zoning Ordinance, operation of a pawn shop is a
permitted use in a C-2 commercial district, subject only to a distance
limitation. Id. The Board’s decision to grant the variance to operate a
pawn shop within 500 feet of a residential district in a C-3 commercial
district did not allow a use not permitted in the zoning classification.

¶12          Pawn also argues that an area variance only deals with intra-
property issues or intra-property dimensional requirements. Specifically,
“the variance at issue does not seek to modify set-back lines, frontage
requirements, height limitations, lot-size restrictions, density regulations,
or yard requirement.” Thus, the distance separation setback in this case
cannot be an area variance. However, as the City contends, the setback
under PHX., ARIZ., ZONING ORDINANCE § 623.D.132:

       is measured from the walls of the pawn shop . . . to another
       parcel. [T]his 500 foot distance separation is not materially
       different than the setback requiring a house to be 35 feet
       from the property line of the neighboring parcel: each sets a
       particular distance between the exterior walls of a lawful use
       within the parcel to the property line of another lawful use.




                                          5
                      PAWN 1ST v. PHOENIX et al.
                         Opinion of the Court

We agree with the City that, “either the property owner’s intended use is
allowed within the zoning district where the property is found, or it is
prohibited within the zoning district. There are no degrees of prohibition
on the uses.” Therefore, we reject Pawn’s argument that the requested
variance is a “use variance” because a pawn shop is an allowed use within
a C-3 zoning district, irrespective of the 500-foot distance requirement.

III.   The Board Improperly Granted the Variance

¶13           Pawn also argues the Board exceeded its jurisdiction and
authority in failing to find the necessary criteria required by statute and
ordinance before approving the variance. We agree.

¶14           The Board “has no powers except those granted by the
statutes creating it” and “its power is restricted to that granted by the
zoning ordinance in accordance with the statute.” Arkules, 151 Ariz. at
440. The Board has no jurisdiction to act contrary to law. Id. If the
Board’s decision exceeds the scope of its powers, it is “ultra vires and
void.” Id. (quoting Applestein v. Osborne, 156 Md. 40, 42 (App. 1928)).

¶15          Pursuant to A.R.S. § 9-462.06, which created the Board:

       G.    A board of adjustment shall:

                                    ...

             2.     Hear and decide appeals for variances from the
                    terms of the zoning ordinance only if, because
                    of special circumstances applicable to the
                    property, including its size, shape, topography,
                    location, or surroundings, the strict application
                    of the zoning ordinance will deprive the
                    property of privileges enjoyed by other
                    property of the same classification in the same
                    zoning district.     Any variance granted is
                    subject to conditions as will assure that the
                    adjustment authorized shall not constitute a
                    grant of special privileges inconsistent with the
                    limitations upon other properties in the
                    vicinity and zone in which the property is
                    located.

                                    ...



                                    6
                      PAWN 1ST v. PHOENIX et al.
                         Opinion of the Court

      H.     A board of adjustment may not:

                                   ...

             2.     Grant a variance if the special circumstances
                    applicable to the property are self-imposed by
                    the property owner.

See also PHX., ARIZ., ZONING ORDINANCES §§ 303.B.2, 307.A.10.b.

¶16         Further, the Zoning Ordinance provides that a Zoning
Administrator shall:

      9.     Authorize upon application and hearing such
             variance from the terms of this ordinance as will not
             be contrary to the public interest, when owing to
             special conditions, a literal enforcement of any
             provisions of the ordinance would result in
             unnecessary property hardship.

             A variance shall not be authorized unless the Zoning
             Administrator shall find upon sufficient evidence:

             a.     That there are special circumstances or
                    conditions applying to the land, building, or
                    use referred to in the application and which do
                    not apply to other properties in the district;
                    and

             b.     That such special circumstances were not
                    created by the owner or applicant; and

             c.     That the authorizing of the variance is
                    necessary for the preservation and enjoyment
                    of substantial property rights; and

             d.     That the authorizing of the application will not
                    be materially detrimental to persons residing
                    or working in the vicinity, to adjacent
                    property, to the neighborhood, or to the public
                    welfare in general.

Id. § 307.A.9. The word “shall” as used in the ordinance “is mandatory
and not permissive.” Id. § 201.



                                    7
                      PAWN 1ST v. PHOENIX et al.
                         Opinion of the Court

¶17           The Board’s “power and authority to grant a variance is to
be exercised sparingly and under exceptional circumstances, if the
integrity of the zoning code is to be maintained. To permit any other
course would render naught and useless the legislative purpose in
enacting the zoning code.” Ivancovich, 22 Ariz. App. at 535.

¶18           At the public hearing on Jachimek’s variance application,
Jachimek’s representative told the Board that the Property had been used
for many years as a strip club, a non-conforming use, and that the owners
of the Property wanted to “get rid of this non-conforming use.”
Jachimek’s representative also told the Board that because of “eminent
domain proceedings on this particular property, the corner has been
reduced to 12,000 square feet, they have lost significant parking and
access, and the property will have no setbacks, all of which create a
significant deleterious affect [sic] to this property and occur by virtue of
this condemnation.” Jachimek’s representative told the Board that a
survey “of twelve surrounding intersections” showed that “[n]one of the
C-3 corner parcels was less than 12,000 square feet. The size of the parcel
severely limited the types of uses they can locate on the property.”

¶19          Further, Jachimek’s representative stated that

      [e]minent domain took away a substantial portion of the
      property along McDowell Road and 32nd Street resulting in
      that building having zero setbacks directly abutting the
      public sidewalk. . . .

             The proximity of those sidewalks creates esthetic [sic]
      drawbacks as well as security risks and no other C-3 of the
      ones that I’m showing you [referring to the survey] had that
      kind of situation.

Jachimek’s representative urged that the discontinuation of the non-
conforming use and the effects of the eminent domain action constituted
“special circumstances” warranting a variance from the distance
limitation applicable to pawn shops.

¶20           A representative from the City advised the Board that there
were no special circumstances in this case because Jachimek chose this
location on which to operate a pawn shop, despite the ordinance distance
limitation, and, therefore, recommended the Board deny the variance.




                                     8
                      PAWN 1ST v. PHOENIX et al.
                         Opinion of the Court

¶21          After hearing from the parties and members of the public,
the Board’s chairman moved to overturn the Zoning Administrator’s
ruling and approve the variance, finding that:

      [T]here are special circumstances that apply to the land,
      namely unique nature of the discontinuance of the non-
      conforming use on the property, the fact that it is
      substantially impacted by prior eminent domain activities in
      a manner that is dissimilar to other properties in a
      reasonably close radius including set back and the fact that
      there’s less than 12,000 total feet available, there are
      restrictive parking requirements; that these special
      circumstances were not created by the owner/applicant and
      were rather in part created by growth in the city itself; that it
      is necessary for the preservation and enjoyment of
      substantial property rights given the restrictions of the
      property and the current dormancy of any other business on
      the site, this particular place on the site, that authorizing it
      will not be materially detrimental to persons residing or
      working in the vicinity to adjacent property, neighborhood,
      or public welfare in general.

The Board approved the motion.

¶22           Pawn argues the Board could not grant the variance unless
special circumstances or hardships applying to the Property (1) “prevent
reasonable use of the property in the absence of a variance,” (2) the
“zoning ordinance preclude[s] the use of the property in question for any
purpose for which it is reasonably adapted,” and (3) the “situation or
condition of the property in question[] is extraordinary and exceptional
and application of the zoning requirement would cause peculiar and
exceptional practical difficulties or exceptional and undue hardship.”

¶23           To grant a variance, the Board must find that “because of
special circumstances applicable to the property, including its size, shape,
topography, location, or surroundings, the strict application of the zoning
ordinance will deprive the property of privileges enjoyed by other
property of the same classification in the same zoning district.”
A.R.S. § 9-462.06.G.2; see also Haynes v. City of Tucson, 162 Ariz. 509, 510
(App. 1989) (stating, “we are required to find that strict application of the
zoning ordinance would deprive the property of privileges enjoyed by
other property of the same class in the same district”). Under the Zoning
Ordinance, a variance is not authorized unless “there are special


                                     9
                      PAWN 1ST v. PHOENIX et al.
                         Opinion of the Court

circumstances or conditions applying to the land, building, or use referred
to in the application and which do not apply to other properties in the
district.”   PHX., ARIZ., ZONING ORDINANCE § 307.A.9.a.            Neither
A.R.S. § 9-462.06.G.2 nor § 307.A.9.a of the Zoning Ordinance defines
“special circumstances,” but Arizona case law notes that the “term ‘special
circumstances’ as used in the zoning ordinance is the functional
equivalent of the word ‘hardship.’” Burns v. SPA Auto., Ltd., 156 Ariz. 503,
505 (App. 1988).

¶24            The eminent domain proceedings that reduced the
Property’s size, parking, and setback did “deprive the property of
privileges enjoyed by other property of the same classification in the same
zoning district” as required by A.R.S. § 9-462.06.G.2 and “do not apply to
other properties in the district” as required by § 307.A.9.a of the Zoning
Ordinance.        The Board considered statements by Jachimek’s
representative that the eminent domain proceedings affected the Property
in a manner dissimilar to the “twelve surrounding intersections” and the
Board’s Chairman found that the property had been “substantially
impacted by prior eminent domain activities in a manner that is dissimilar
to other properties in a reasonably close radius.” The Board’s comparison of
the Property to other C-3 properties at twelve surrounding intersections
was an appropriate comparison.2 Thus, the variance application satisfied
the threshold comparison required by statute and ordinance to other
property within the same district. See A.R.S. § 9-462.06.G.2; PHX., ARIZ.,
ZONING ORDINANCE § 307.A.9.a.

¶25           Jachimek argues that “the discontinuance of a non-
conforming use through the approval of a use permit and variance for a
pawn shop has previously been recognized by the City of Phoenix as a
special circumstance that satisfies this element of the variance test.”
Discontinuation of a non-conforming use, however, is not a special
circumstance that would “deprive the property of the same privileges as
any other property of the same classification in the same zoning district”
or that does “not apply to other properties in the district.”
A.R.S. § 9-462.06.G.2; PHX., ARIZ., ZONING ORDINANCE § 307.A.9.a. Rather,
the discontinuation merely brings property rights and privileges in line

2      We ordered supplemental briefing addressing the “district” the
Board was required to consider in evaluating the variance application and
whether the Board focused on the appropriate property comparisons. We
find the City’s brief persuasive that the “district” here encompassed other
C-3 properties that do not suffer a hardship.



                                    10
                       PAWN 1ST v. PHOENIX et al.
                          Opinion of the Court

with other properties in the same district. PHX., ARIZ., ZONING ORDINANCE
§ 903.A (upon abandonment of non-conforming use, “any subsequent use
of the parcel of land or structure shall conform to the regulations of the
zoning district in which it is located”). Moreover, it is immaterial if other
properties received variances due to the discontinuation of non-
conforming use. Haynes, 162 Ariz. at 511 (“That some other such
properties may have received variances is immaterial else each grant of a
variance would effect a city-wide zoning change.”).

¶26            Additionally, the statute and the Zoning Ordinance require
that the special circumstances cannot be created by the owner or
applicant, but rather must relate to the property, the land, building or use,
as opposed to any personal hardship suffered by the owner or applicant.
See A.R.S. § 9-462.06.H.2; PHX., ARIZ., ZONING ORDINANCES §§ 303.B.2.b,
307.A.9.b, 10.b; see also Arkules, 151 Ariz. at 441 (stating that the board has
“no authority to grant a variance to allow [applicant’s] personal
preference for a color which would enhance the design he chose for his
house”); Burns, 156 Ariz. at 505 (holding that variance applicant’s decision
to be a three-car dealership necessitating sign large enough to
meaningfully display three manufacturers’ logos in excess of sign size
permitted by city ordinance was a special circumstance or hardship that
was self-inflicted); Rivera v. City of Phoenix, 186 Ariz. 600, 603 (App. 1996)
(finding that variance applicant “created his own problem” by providing
city with erroneous size plan); Minney v. City of Azusa, 164 Cal. App. 2d 12,
31–32 (Cal. Dist. Ct. App. 1958) (“One who purchases property in
anticipation of procuring a variance to enable him to use it for a purpose
forbidden at the time of sale cannot complain of hardship ensuing from a
denial of the desired variance.”).

¶27           Any special circumstances here were created by Jachimek
and/or the Property owner by selecting this particular property to use as
a pawn shop, in violation of the prohibition against self-imposition. Thus,
the Board exceeded its statutory jurisdiction and authority in granting the
application for a variance that did not meet the criteria set forth in A.R.S.
§§ 9-462.06.G.2, H.2, and PHX., ARIZ., ZONING ORDINANCES §§ 303.B.2.b,
307.A.9.a–b, and 10.b. Therefore, the Board’s decision to grant Jachimek a
variance was “ultra vires and void.” See Arkules, 151 Ariz. at 440.

                              CONCLUSION

¶28           The Board proceeded without legal authority and, therefore,
we reverse the judgment of the superior court and remand with
instructions to enter judgment declaring the variance invalid. We award


                                      11
                     PAWN 1ST v. PHOENIX et al.
                        Opinion of the Court

Pawn its costs pursuant to A.R.S. § 12-342 and attorney fees pursuant to
A.R.S. §§ 12-348.A.2 and -348.I.1 upon compliance with Rule 21, Arizona
Rules of Civil Appellate Procedure.




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