Shaffer v. Procaccianti ( 2018 )

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UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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
DIANA R. SHAFFER, et al., Plaintiffs/Appellants,
v.
PROCACCIANTI AZ II, L.P., et al., Defendants/Appellees.
R.L. WHITMER, et al., Plaintiffs/Appellants,
v.
HILTON CASITAS COUNCIL OF CO-OWNERS, et al.,
Defendants/Appellees.
PROCACCIANTI AZ II, L.P., Intervenor/Appellee.
COLLEEN LONDON, et al., Plaintiffs/Appellants,
v.
HILTON CASITAS COUNCIL OF HOMEOWNERS, Defendant/Appellee.
Nos. 1 CA-CV 16-0628
1 CA-CV 16-0629
1 CA-CV 16-0654
(Consolidated)
FILED 5-22-2018
Appeal from the Superior Court in Maricopa County
Nos. CV2012-000363
CV2012-051066
(Consolidated)
No. CV2015-053091
No. CV2016-050379
The Honorable John R. Hannah, Judge
AFFIRMED
COUNSEL
Porter Law Firm, Phoenix
By Robert S. Porter
Counsel for Plaintiffs/Appellants Diana R. Shaffer, LPM Holdings, LLC, Zadok
and Hana Eli, Colleen London, R.L. Whitmer
Spencer Fane, LLP, Phoenix
By Andrew M. Federhar, Jessica Anne Gale
Counsel for Defendant/Appellee/Intervenor Procaccianti AZ II, L.P.
Hill, Hall & DeCiancio, PLC, Phoenix
By R. Corey Hill, Ginette M. Hill, Christopher Robbins
Counsel for Defendant/Appellee Hilton Casitas Council of Homeowners
Chester & Shein, P.C., Scottsdale
By David E. Shein, Sonia M. Phanse
Co-Counsel for Plaintiff/Appellant DRL Enterprises, Inc.
Roeser Bucheit & Graham, LLC, Chicago, Illinois
By Charles S. Bergen, John E. Bucheit, both appearing Pro Hac Vice
Co-Counsel for Plaintiff/Appellant DRL Enterprises, Inc.
MEMORANDUM DECISION
Judge Lawrence F. Winthrop delivered the decision of the Court, in which
Presiding Judge James B. Morse Jr. and Judge Kent E. Cattani joined.
SHAFFER, et al. v. PROCACCIANTI, et al.
Decision of the Court
W I N T H R O P, Judge:
¶1 Diana R. Shaffer (“Shaffer”), LPM Holdings, LLC (“LPM
Holdings”), Zadock and Hana Eli (the “Elis”), R.L. Whitmer (“Whitmer”),
Colleen London (“London”), and DRL Enterprises, Inc., (“DRL”)
(collectively, “Appellants”) raise numerous arguments on appeal against
Procaccianti AZ II, L.P. (“Procaccianti”) and Hilton Casitas Council of Co-
Owners and Hilton Casitas Council of Homeowners (the “HOA”).1 For the
following reasons, we affirm.
FACTS AND PROCEDURAL HISTORY
¶2 This consolidated appeal arises from a 1970 ground lease and
sublease of twenty acres (the “Property”) between the Small Family Trust
and the predecessor-in-interest to Procaccianti (the “Hotel”).2 The Hotel
subsequently divided the Property into a 12-acre resort and an 8-acre
condominium complex. The condominium complex was further divided
into 29 tracts and sold as 29 individual casitas. In 1972, the casita owners
entered a sublease (the “Sublease”) with the Hotel, which required the
casita owners to pay a ground rent (calculated on the consumer price index)
on the casitas. The Sublease additionally provided that after 1975, the
ground rent be recalculated every five years.
¶3 In 1999, the Hotel wanted to redevelop and rezone the resort
portion of the Property, and accordingly sought to amend the Sublease (the
“1999 Amendment”). The 1999 Amendment proposed to fix the casita
owners’ ground rent at $323 per month. The 1999 Amendment additionally
authorized the HOA to act for and represent the casita owners in ground
rent negotiations, and changed the method of ground rent calculation by
providing that if the HOA and the Hotel could not agree on the amount of
1 Although in various motions before the superior court, as well as on
appeal, the HOA has been referred to as the Hilton Council of Co-Owners
and the Hilton Casitas Council of Homeowners, for the purposes of this
appeal, the Hilton Council of Co-Owners and the Hilton Casitas Council of
Homeowners are the same entity and shall be referred to as the HOA.
2 For ease of reference both Procaccianti and Procaccianti’s
predecessor-in-interest are referred to as the Hotel.
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SHAFFER, et al. v. PROCACCIANTI, et al.
Decision of the Court
ground rent, they would use an appraiser to calculate the ground rent. The
1999 Amendment was approved by the Hotel and the casita owners.
¶4 Pursuant to the 1999 Amendment the first rent adjustment
was to take effect on October 1, 2003; however, the Hotel and the Small
Family Trust continued to dispute the Property’s total ground rent, and the
rent adjustment for the casitas did not go into effect. In 2005, the Small
Family Trust and the Hotel went to arbitration, and an arbitrator
determined the total amount of ground rent and the appropriate division
of ground rent between the Hotel and the casita owners. The arbitrator
provided that the Hotel would pay 52.7% and the casita owners pay 47.3%
of the Property’s total ground rent. After arbitration, however, the Hotel
and the HOA came to a new agreement, which provided that the Hotel pay
60% and the casita owners pay 40% of the total ground rent. Pursuant to
this agreement, each casita owner would owe $8,502.00 per year, dating
back to 2003, resulting in a $708.50 per month ground rent obligation. On
January 12, 2006, the HOA held a special meeting for the casita owners to
approve the new ground rent allocation (setting each individual unit’s
monthly ground rent at $708.50). Twenty-four out of twenty-nine casita
owners voted to approve the amended Sublease.
¶5 Shaffer, LPM Holdings, and DRL (collectively, “Shaffer
Appellants”) subsequently sued the HOA, alleging that, for procedural
reasons, the January meeting was invalid (the “2011 litigation”). At the
same time, the Hotel sent the casita owners a second amended sublease (the
“2006 Amendment”), memorializing the agreement from the January 2006
special meeting. The 2006 Amendment provided that the casita owners
would pay 40% of the total ground rent on the Property, resulting in a
monthly ground rent of $708.50 per unit. Twenty-four out of twenty-nine
casita owners, voting by mail, signed and approved the 2006 Amendment.
¶6 During the 2011 litigation, Shaffer Appellants entered a
settlement agreement with the HOA. The settlement agreement provided
that, contrary to the 1999 Agreement, which assigned sole authority to the
HOA to negotiate ground lease issues, the HOA would not interfere with
Shaffer Appellants’ individual negotiations regarding ground rent with the
Hotel. The settlement agreement also provided for a release of all claims
against the HOA. Pursuant to the settlement agreement, Shaffer Appellants
and the HOA entered a stipulated final judgment, in which the superior
court (Judge Eileen Willett) found:
The Court finds from the undisputed facts set forth by the
parties that the actions of the purported Board of Directors
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SHAFFER, et al. v. PROCACCIANTI, et al.
Decision of the Court
taken at the January 12, 2006 meeting of the Scottsdale Hilton
Casitas Homeowners Association (the “Association”[]) were
not in compliance with the Declaration and Bylaws. The
Court finds as a matter of law that the Declaration and Bylaws
constituted the governing authority over the actions of the
Association. A quorum was not present on January 12, 2006
for the meeting nor were all the votes cast by record owners.
Absentee ballots are not the legal equivalent of votes by proxy
and therefore were not in compliance with the requirements
of the Declaration and Bylaws. The Association consequently
did not have legal authority to take the action it did, and
Plaintiffs are not bound by the Association’s decision to
execute the Second Amendment to the Sublease as a matter of
law. Nor can a subsequent majority of owners cure by
ratification as to Plaintiffs the void vote of January 12, 2006.
Defendants have no authority to bind Plaintiffs in this
instance. . . . the January 12, 2006 meeting, and any action
taken at that meeting, was void, invalid and unenforceable.
¶7 The superior court additionally noted that the HOA had been
known as the Hilton Casitas Council of Co-Owners, and had been
incorrectly identified during the litigation as the Hilton Casitas Counsel of
Homeowners. The court then found that the “Scottsdale Hilton Casitas
Homeowners Association” was the correct designation for the subject
HOA. No appeal was taken from this final judgment (the “Willett
Judgment”).
1 CA-CV 16-0628
¶8 In January 2012, Shaffer Appellants sued the Hotel (CV2012-
051066), arguing the Hotel breached the 1999 Amendment by failing to
appoint an appraiser to determine the ground rent. The Hotel
counterclaimed for breach of contract and unjust enrichment. The Elis also
filed a similar but separate lawsuit against the Hotel and the HOA for
breach of contract (CV2012-000363). At the Hotel’s request, the two cases
were consolidated. The parties cross-moved for summary judgment and
the court heard oral arguments on the motions. The court granted
summary judgment in favor of the Hotel against the Shaffer Appellants,
finding that, by entering the 2011 settlement agreement prohibiting the
HOA from negotiating the casita owners’ share of the ground rent, the
Shaffer Appellants breached the express terms of the 1999 Amendment.
The court, however, declined to rule on the Hotel’s claims for declaratory
judgment and the question of the HOA’s authority, leaving these issues to
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SHAFFER, et al. v. PROCACCIANTI, et al.
Decision of the Court
be tried by a jury. The court additionally denied the Hotel’s motion for
summary judgment as it related to the Elis, finding there were questions of
fact to be tried.
¶9 The case proceeded to trial in February 2016, in order for the
jury to determine whether the 2006 Amendment was valid,3 whether the
HOA was authorized to act on behalf of the casita owners, and, if
applicable, the amount of damages.4 The jury found in favor of the Hotel
on all claims and determined that Appellants were required to pay a
monthly ground rent of $708.50, implicitly finding the 2006 Amendment
was valid. The jury also calculated separate damage awards in favor of the
Hotel for back rent.5 The court awarded the Hotel its attorneys’ fees in the
amount of $459,000.00 and held Shaffer, LPM Holdings, DRL, and the Elis
jointly and severally liable for the fee award.
1 CA-CV 16-0629
¶10 In separate litigation (CV2015-053091), Whitmer, London,
and Shaffer (collectively, “Whitmer Appellants”) in August 2015 sued the
HOA, and requested the superior court appoint a receiver to act in place of
the HOA. The Hotel moved to intervene and transfer the case to the judge
who was presiding over the 2012 case. The court granted the Hotel
intervenor status and transferred the case. The court ultimately denied
Whitmer Appellants’ request to appoint a receiver, finding the HOA was
not incapacitated, and, alternatively, even if it were, the remedy would not
be to appoint a receiver, but for the Hotel to assume control and
3 The superior court’s minute entry states that “while Hilton Casitas
is not barred by issue preclusion to assert that a ‘vote by pen’ is a valid
procedure, the intent and effect of the putative vote(s) are questions of fact.
Toward that end, the Court finds that the 1999 Amendment is enforceable
under this doctrine because all casita owners signed it. Supermajority or
not, the 2006 Amendment was not ratified by all casita owners and the effect
of the signing remains a question of fact.” The Final Jury Instructions also
included an instruction on the vote by pen.
4 The court had previously resolved all claims involving the HOA.
Accordingly, the jury only reviewed the consolidated claims against the
Hotel and the Hotel’s cross-claims against Shaffer Appellants and the Elis.
5 The jury assessed damages against Shaffer in the amount of
$80,662.12; against LPM Holdings in the amount of $62,998.90; against DRL
in the amount of $60,535.76; and against the Elis in the amount of $42,510.00.
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SHAFFER, et al. v. PROCACCIANTI, et al.
Decision of the Court
management of the HOA. The court then dismissed Whitmer Appellants’
claims with prejudice and awarded the Hotel its attorneys’ fees and costs.
1 CA-CV 16-0654
¶11 In January 2016, Whitmer and London (collectively, “London
Appellants”) sued the HOA (CV2016-050379), seeking a declaration that the
“Hilton Casitas Council of Homeowners,” an Arizona non-profit
corporation, did not replace the “Hilton Casitas Council of Co-Owners,”
which was established in 1972. The court denied the motion, finding
London Appellants had previously raised this claim numerous times, and
that the Hilton Casitas Council of Homeowners was lawfully organized and
had lawful authority to act on the behalf of the casita owners. The court
then dismissed the action with prejudice.
¶12 Appellants appeal from the 2012, 2015, and 2016 cases. We
consolidated these cases, and 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) (2016) and 12-2101(A)(1) (2016).6
ANALYSIS
¶13 Appellants raise numerous issues related to the 2012, 2015,
and 2016 cases on appeal. We address each argument in turn. 7
6 We cite the current versions of all applicable statutes because no
revisions material to this decision have occurred.
7 As an initial matter, the HOA argues that we lack jurisdiction to
review Appellants’ arguments because they are challenging the sufficiency
of the evidence. See A.R.S. § 12-2102(C) (Supp. 2017). We disagree.
7
SHAFFER, et al. v. PROCACCIANTI, et al.
Decision of the Court
I. Claims Raised by Appellants Shaffer, LPM Holdings, the Elis,
Whitmer, and London8
a. Preclusive Effect of the August 2011 Judgment (“Willett
Judgment”)
¶14 Appellants initially argue that the superior court erred by
refusing to give preclusive effect to the August 22, 2011 Willett Judgment.
Appellants construe the Willett Judgment as conclusively deciding two
issues: (1) the status of the HOA, and whether the incorporated HOA was
authorized to act on behalf of the casita owners, and (2) the validity of the
2006 Amendment. We disagree.
¶15 We review de novo whether a certain issue is precluded by a
previous judgment. Campbell v. SZL Props., Ltd., 204 Ariz. 221, 223, ¶ 8
(App. 2003). If applicable, issue preclusion binds a party to a previously
rendered decision. Id. at ¶ 9. Issue preclusion, however, only applies if:
“(1) the issue was actually litigated in the previous proceedings, (2) the
parties had a full and fair opportunity and motive to litigate the issue, (3) a
valid and final decision on the merits was entered, (4) resolution of the issue
was essential to the decision, and (5) there is common identity of the
parties.” Id. (citing Garcia v. Gen. Motors Corp., 195 Ariz. 510, 514, ¶ 9 (App.
1999)). We construe the application of issue preclusion narrowly, and
confine our application of issue preclusion to “situations where the matter
raised in the second suit is identical in all respects with that decided in the
first proceeding.” S. Point Energy Ctr., LLC v. Ariz. Dep’t of Revenue, 241
Ariz. 11, 14, ¶ 9 (App. 2016) (citation omitted).
¶16 Appellants have failed to prove the first requirement for issue
preclusion—that the status of the HOA and the validity of the 2006
Amendment—were “actually litigated and determined by a valid and final
judgment.” Food for Health Co., Inc. v. 3839 Joint Venture, 129 Ariz. 103, 105
(App. 1981) (citation omitted).
¶17 The Willett Judgment focused on the narrow question of
whether the January 2006 special meeting between the HOA and the casitas
8 Appellants Shaffer, LPM Holdings, the Elis, Whitmer, and London
are represented by the same counsel. DRL separately appeals, but joins the
pertinent arguments raised by Shaffer, LPM Holdings, the Elis, Whitmer,
and London. Given this, we refer generally to “Appellants” to encompass
the arguments that counsel raises on appeal without specifically referring
to which Appellants are implicated by which arguments.
8
SHAFFER, et al. v. PROCACCIANTI, et al.
Decision of the Court
owners, and the subsequent vote to approve the amendments to the
Sublease at that special meeting, was valid. The Willett Judgment
determined, by stipulation, that the special meeting was invalid and voided
the casita owners’ vote at such meeting. Cf. In re Bowen, 198 B.R. 551, 556
(B.A.P. 9th Cir. 1996) (finding that stipulated judgments generally are not
entitled to preclusive effect unless there was “substantial participation in
an adversary contest in which the party is afforded a reasonable
opportunity to defend himself on the merits but chooses not to do so”
(citation omitted)). The litigation subsequent to the Willett Judgment did
not seek to readdress the effect of the January special meeting nor seek to
reinstate the casita owners’ vote at that meeting. Moreover, the narrow
findings of the Willett Judgment are irrelevant to the parties’ subsequent
litigation and did not bar the court from entering findings regarding the
status and authority of the HOA and the validity of the 2006 Amendment
in the 2012, 2015, and 2016 cases.
b. Interpretation of the Willett Judgment
¶18 Alternatively, Appellants argue that the superior court
misinterpreted the Willett Judgment, and, urge their own interpretation—
that the Willett Judgment voided the 2006 Amendment, and thus,
Appellants are not required to pay $708.50 per month in ground rent.
¶19 We review de novo the interpretation of a stipulated judgment.
Citibank (Ariz.) v. Bhandhusavee, 188 Ariz. 434, 435 (App. 1996). A stipulated
judgment functions as a contract between two parties; thus, in interpreting
a stipulated judgment, we look to principles of contract interpretation. See
ASH, Inc. v. Mesa Unified Sch. Dist. No. 4, 138 Ariz. 190, 192 (App. 1983). In
general, we interpret contract terms consistent with their plain and
ordinary meaning. Am. Cas. Co. of Reading, PA v. D.L. Withers Constr., L.C.,
204 Ariz. 382, 384, ¶ 7 (App. 2003).
¶20 The Willett Judgment, in relevant part, stated that:
The [HOA] consequently did not have legal authority to take
the action it did, and Plaintiffs are not bound by the [HOA’s]
decision to execute the Second Amendment to the Sublease as
a matter of law. Nor can a subsequent majority of owners
cure by ratification as to Plaintiffs the void vote of January 12,
2006. Defendants have no authority to bind Plaintiffs in this
instance. . . . the January 12, 2006 meeting, and any action
taken at that meeting, was void, invalid and unenforceable.
(emphasis added).
9
SHAFFER, et al. v. PROCACCIANTI, et al.
Decision of the Court
¶21 The terms of this judgment are clear by their plain and
ordinary meaning. The HOA and the casita owners were not allowed to
approve the amendments to the Sublease at the January 12, 2006 meeting
because there was no legal quorum. Thus, the actions taken at the January
meeting were void. The Willett Judgment, however, did not make any
findings as to the potential validity of future actions that the HOA and the
casita owners might take relative to amending the Sublease. Contrary to
Appellants’ contention, the Willett Judgment did not conclusively void the
casita owners’ obligations to pay ground rent, and did not preclude or
otherwise impact the HOA’s subsequent actions to approve a valid
amendment to the Sublease.
c. Status of the HOA
¶22 Appellants argue that the superior court erred in finding that
the pre-1994, unincorporated HOA was the same entity as the post-1994,
incorporated HOA.9 In support of this argument, Appellants rely on a
footnote in the Willett Judgment, which states that “[t]he Association
[referring to the Scottsdale Hilton Casitas Homeowners Association] is also
known as the Hilton Casitas Council of Co-Owners, and, at times, has been
incorrectly identified as the Hilton Casitas Counsel of Homeowners.”
Appellants argue that this statement clearly shows that the incorporated,
non-profit HOA did not replace the initial HOA. We disagree.
¶23 In a 2016 memorandum decision, we previously considered
Appellants’ argument that the pre-1994, unincorporated HOA and the post-
1994, incorporated HOA were different entities. See London v. Karatz, 1 CA-
CV 15-0070, 2016 WL 5746236 (Ariz. App. Oct. 4, 2016) (mem. decision). In
that decision we not only recognized that Appellants had previously and
unsuccessfully litigated the status of the HOA in 2012, but also found that
the superior court did not abuse its discretion in finding that the post-1994,
incorporated HOA was the successor to the pre-1994, unincorporated HOA.
Id. at *4, ¶ 17. This court further found that, although the previous records
contained several names by which the HOA was known, the post-1994
HOA incorporated the pre-1994 HOA’s declaration, membership purpose,
and board of directors. Id. at *3, ¶ 16. Moreover, the post-1994,
incorporated HOA used the same identifying information as the pre-1994,
9 Appellants have raised this argument at least three other times
before the superior court and once previously before this court.
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SHAFFER, et al. v. PROCACCIANTI, et al.
Decision of the Court
unincorporated HOA on its tax returns and had the same employer
identification number. Id.
¶24 As previously noted, the question of the HOA’s status, and its
authority to act on behalf of the casita owners, has already been litigated
and decided numerous times. Thus, we decline to further review this issue.
Cf. State v. Astorga, 26 Ariz. App. 260, 261 n.1 (1976) (finding “[a] court may
take judicial notice of the record in another action tried in the same court”
(citation omitted)); accord State v. Lynch, 115 Ariz. 19, 23 (App. 1977).10
d. Vote by Pen
¶25 Appellants argue the superior court erred by applying A.R.S.
§ 10-3704 (2013) to determine that the casita owners could ultimately
approve the 2006 Amendment in a “vote by pen.” Appellants contend the
court was barred from applying A.R.S. § 10-3704 because it is inconsistent
with A.R.S. §§ 33-1248 (Supp. 2017) and 33-1250 (Supp. 2017)—the statutes
governing condominiums. See also A.R.S. § 10-3701(F) (2013)
(“Notwithstanding this chapter, a condominium association shall comply
with title 33, chapter 9 . . . to the extent that this chapter is inconsistent with
the title 33, chapters.”). Appellants’ argument largely depends on the
already-rejected assertion that the HOA is not an incorporated non-profit
entity. In response, the HOA argues that the “vote by pen” was authorized
and proper under either the statutes governing non-profit corporations or
condominiums, and that Appellants waived this claim by failing to raise it
before the superior court. Appellants, however, raised their concerns
regarding the vote by pen at oral argument before the superior court and
the validity of the 2006 Amendment was a question raised before the jury.11
Thus, we review this issue on appeal.
¶26 We review de novo questions of statutory interpretation. See
Nordstrom, Inc. v. Maricopa Cty., 207 Ariz. 553, 556, ¶ 9 (App. 2004). The
statute codifying a corporation’s ability to approve measures through a
vote by pen provides that “members may approve any action that . . .
10 Appellants additionally argue that the HOA failed to comply with
A.R.S. § 33-1201 (2014) et seq. in incorporating as a non-profit and replacing
the pre-1994, unincorporated HOA. As found above, Appellants have
already litigated the question of the HOA’s status, and this question has
been decided against Appellants.
11 Appellants additionally argued that a vote by pen was improper in
their response to the Hotel’s motion for reconsideration.
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SHAFFER, et al. v. PROCACCIANTI, et al.
Decision of the Court
requires the members’ approval without a meeting of members if the action
is approved by members holding at least a majority of the voting power[,]”
and is evidenced by the members’ signed, written consent. A.R.S. § 10-
3704(A). Section 10-3704(A) applies to non-profit corporations, like the
HOA, so long as the HOA’s governing documents do not contain contrary
provisions. See A.R.S. § 10-3701. The record does not reflect, nor have
Appellants argued, that the HOA’s governing documents prohibit a vote
by pen. In the absence of conflicting language in the HOA’s governing
documents, we defer to the statutory provisions which allow a vote by pen.
¶27 Moreover, whether the casita owners could approve the 2006
Amendment by a subsequent vote by pen was a question of fact explicitly
raised and tried to the jury. We view “the evidence in the light most
favorable to sustaining the [jury’s] verdict,” and we will affirm the verdict
“if any substantial evidence could lead reasonable persons to find the
ultimate facts sufficient to support the verdict.” Gonzales v. City of Phoenix,
203 Ariz. 152, 153, ¶ 2 (2002). At trial, the parties presented the HOA’s
governing documents, information surrounding the 2006 Amendment, and
had the opportunity to argue as to the respective validity of the vote by pen
action. After considering the evidence, the jury by its verdict ultimately
implicitly found that the casita owners validly approved the 2006
Amendment through a vote by pen. On this record, there was sufficient
evidence to support the jury’s verdict.
e. Claim for Damages
¶28 Appellants argue that the superior court erred in dismissing
the Elis’ separate claim for damages. In 2013, the Hotel and the HOA
moved to dismiss Elis’ claim for damages, but the court denied the motion.
Then, in 2014, the court (Judge Michael Gordon) granted the HOA’s and
Hotel’s motion to strike the Elis’ claim for unpled and undisclosed
damages. After the case was subsequently transferred to a different judge
(Judge John Hannah), the Elis argued that the court’s order to strike the
unpled and undisclosed damages did not entirely dismiss the Elis’ claim
for damages. The court held oral argument on the issue, and at Judge
Hannah’s request and over Appellants’ objection, Judge Gordon
participated. At the hearing, the Elis again argued that their disclosure of
the amount of damages was sufficient and timely. The HOA’s attorney
argued that although the Elis’ initial disclosure generally referenced
damages, the Elis never calculated the damages nor provided an
itemization of damages, as specifically required pursuant to Arizona Rules
of Civil Procedure 26.1. At the end of the hearing, Judge Gordon clarified
the scope of his earlier ruling, stating his express intention was to dismiss
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the Elis’ entire claim for damages. After considering the arguments of
counsel, the superior court affirmed the dismissal of the Elis’ claim for
damages.
¶29 We review a superior court’s Rule 26.1 ruling for an abuse of
discretion. Jimenez v. Wal-Mart Stores, Inc., 206 Ariz. 424, 426, ¶ 5 (App.
2003). A claimant who brings a claim for damages must timely disclose “a
computation and measure of each category of damages . . . the documents
and testimony on which such computation and measure are based, and the
name, address, and telephone number of each witness whom the disclosing
party expects to call at trial to testify on damages.” Ariz. R. Civ. P.
26.1(a)(7). This disclosure requirement is to allow parties a “reasonable
opportunity to prepare” for trial. Waddell v. Titan Ins. Co., 207 Ariz. 529, 537,
¶ 33 (App. 2004).
¶30 We cannot say, on this record, that the court abused its
discretion in dismissing the Elis’ claim for damages. The Elis had ample
time to comply with Rule 26.1 and, at a minimum, supplement their initial
claim for damages and provide itemized damages and/or a method of
calculating their proposed damages. The court determined that the Elis
failed to make a timely disclosure. Moreover, while the superior court
engaged in a unique procedure to clarify the previous judge’s intent in his
ruling to dismiss the Elis’ claim for damages, this does not require that we
reverse the dismissal on appeal. Even without that judge’s clarification, the
record provides a sufficient basis to dismiss the Elis’ claim for damages.
f. Summary Judgment
¶31 Appellants argue that the superior court erred in granting the
Hotel’s motion for summary judgment. In particular, Appellants argue that
they did not breach the Sublease by entering the 2011 settlement agreement,
which provided that the HOA would not interfere with negotiations
between Appellants and the Hotel, and that they never made “a positive
and unequivocal manifestation that they would not comply with the 1999
Agreement.”
¶32 Summary judgment is proper if there is no genuine dispute as
to any material fact, and the moving party is entitled to judgment as a
matter of law. Ariz. R. Civ. P. 56(a); Orme Sch. v. Reeves, 166 Ariz. 301, 305
(1990). We review the grant of summary judgment de novo, and view the
evidence in the light most favorable to the party opposing the motion. Wells
Fargo Bank v. Ariz. Laborers, Teamsters & Cement Masons Local No. 395 Pension
Tr. Fund, 201 Ariz. 474, 482, ¶ 13 (2002). Rulings regarding contract
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interpretation are matters of law, which we review de novo. Miller v. Hehlen,
209 Ariz. 462, 465, ¶ 5 (App. 2005).
¶33 Regardless of how we classify Appellants’ decision to create
a right to separately negotiate the ground rent without the HOA, we find
that Appellants are not entitled to relief on the Hotel’s breach of contract
claims. In the 1999 Amendment, Appellants explicitly authorized the HOA
to act for and represent all the casita owners in negotiations regarding the
ground rent. However, in the 2011 settlement agreement between
Appellants and the HOA, the parties agreed that the HOA will not interfere
with separate negotiations between the casita owners and the Hotel
regarding ground rent and that the HOA was not authorized or obligated
to negotiate the terms of Appellants’ subleases.
¶34 Appellants’ arguments on appeal largely focus on their
incorrect assumptions that the HOA was never properly formed and/or
incorporated and that the Willett Judgment prohibited the HOA and the
casita owners from approving a subsequent amendment to the Sublease.
As previously noted, we reject these arguments, affirming the HOA was the
proper entity to represent the casita owners and that the 2006 Amendment,
establishing the new ground rent, was properly adopted by the casita
owners through their subsequent vote by pen.
¶35 On this record, the court’s grant of summary judgment in
favor of the Hotel was proper. There was no genuine issue as to whether
in the 2011 settlement agreement Appellants expressly reneged on their
contractual promise to allow the HOA to exclusively negotiate the ground
rent obligation. The jury subsequently found damages flowing out of
Appellants’ unjustified refusal to pay the ground rent negotiated by the
HOA in 2006 and legally apportioned to the casita owners.
g. Appointment of a Receiver
¶36 The Appellants argue the superior court erred by denying
their request to appoint a receiver. We defer to the discretion of the superior
court in deciding whether to appoint a receiver and will only overturn the
court’s decision if its ruling amounts to an abuse of discretion. Gravel Res.
of Ariz. v. Hills, 217 Ariz. 33, 36, ¶ 6 (App. 2007). A court abuses its discretion
if it commits an error of law. Id. (quotation omitted).
¶37 After reviewing the parties’ briefing and hearing oral
argument, the superior court ultimately ruled that a receivership was not
an appropriate remedy. The court specifically found that the HOA was
governed by a properly elected board of directors and officers, was
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Decision of the Court
operating pursuant to a valid set of Bylaws, and was not incapacitated.
Moreover, the court found that even if the HOA were incapacitated, the
HOA’s declaration provided for a remedy different than that of a receiver—
that the Hotel take over control and management of the HOA’s
responsibilities. The record supports the court’s ruling and we find no
abuse of discretion.
h. Dismissal of Cases 1 CA-CV 16-0629 and 1 CA-CV 16-
0654
¶38 Appellants argue that the superior court erred by dismissing
Appellants’ lawsuit requesting the appointment of a receiver (Case No. 1
CA-CV 16-0629) and that the court erred in dismissing their subsequent
lawsuit requesting declaratory judgment that the Hilton Casitas Council of
Homeowners was not the HOA (Case No. 1 CA-CV 16-0654). We have
already reviewed these arguments and ruled against Appellants. The
superior court’s dismissal of these actions was proper.
II. DRL’s Claims
¶39 DRL separately appeals the superior court’s June 8, 2016
judgment holding DRL jointly and severally liable for the attorneys’ fees
awarded to the Hotel. DRL concedes that it failed to raise this argument
before the superior court, but argues that we should review its claims
because the question of whether DRL can be jointly and severally liable
presents a question of general public interest and because it would be
unreasonable, as a matter of law, to hold DRL liable.
¶40 Because DRL did not raise this issue before the superior court,
DRL has waived these arguments. See Van Loan v. Van Loan, 116 Ariz. 272,
274 (1977) (finding “[t]he failure to raise an issue either at the trial level or
in briefs on appeal constitutes a waiver of the issue”) (citation omitted);
accord James v. State, 215 Ariz. 182, 191, ¶ 34 (App. 2007). Contrary to DRL’s
argument, this matter does not present a sufficient question of public
interest and is not so inherently unreasonable to require that we review
DRL’s claims despite its waiver.
III. Attorneys’ Fees
¶41 The Hotel and the HOA request attorneys’ fees on appeal
pursuant to A.R.S. § 12-341.01 (2016). In our discretion, we award the Hotel
and the HOA, as the prevailing parties, their reasonable attorneys’ fees and
taxable costs, to be determined upon compliance with ARCAP 21.
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SHAFFER, et al. v. PROCACCIANTI, et al.
Decision of the Court
CONCLUSION
¶42 We affirm the superior court’s rulings in these consolidated
appeals.
AMY M. WOOD • Clerk of the Court
FILED: AA
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