Johnston v. Johnston ( 2015 )

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UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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
In re the Marriage of:
URSULA M. JOHNSTON, Petitioner/Appellant,
v.
JOHN D. JOHNSTON, Respondent/Appellee.
No. 1 CA-CV 14-0451 FC
FILED 7-16-2015
Appeal from the Superior Court in Maricopa County
No. FN2013-090099
The Honorable Paul J. McMurdie, Judge
AFFIRMED IN PART; VACATED AND REMANDED IN PART
COUNSEL
Richard G. Neuheisel, P.L.L.C., Tempe
By Richard G. Neuheisel
Counsel for Petitioner/Appellant
The Murray Law Offices, P.C., Scottsdale
By Stanley David Murray
Counsel for Respondent/Appellee
JOHNSTON v. JOHNSTON
Decision of the Court
MEMORANDUM DECISION
Judge Peter B. Swann delivered the decision of the court, in which Presiding Judge
Kent E. Cattani and Judge Lawrence F. Winthrop joined.
S W A N N, Judge:
¶1 Ursula Johnston (“Wife”) appeals the trial court’s order denying her
motion to set aside the parties’ Decree of Dissolution of Marriage. Wife argued
that John Johnston (“Husband”) committed fraud when he failed to disclose
certain financial information to her, thereby voiding the parties’ Rule 69 agreement
and the Decree of Dissolution that resulted. Because we find that there was
sufficient evidence in the record to support the trial court’s decision, we affirm the
trial court’s order but remand for recalculation of attorney’s fees.
FACTS AND PROCEDURAL HISTORY
¶2 Husband and Wife engaged in mediation of their dissolution
proceeding and settled all issues relating to the division of their assets in an
agreement under ARFLP 69.
¶3 Shortly thereafter, under the terms of the Rule 69 agreement,
Husband drafted a Decree of Dissolution of Marriage and Property Settlement
Agreement. Wife refused to sign the proposed agreement and Husband then
requested that the court adopt the proposed agreement as its formal order. Wife
objected, asserting that the division of property was unfair and inequitable. She
argued that during the mediation, Husband presented a revised calculation of his
business accounts to the mediator without her knowledge, and that she would not
have entered the Rule 69 agreement had she seen the calculation.
¶4 Meanwhile, Wife also filed a motion to set aside the Rule 69
agreement under ARFLP 85(C)(1)(a) and (c), in which she asserted that Husband
had incorrectly stated the amount of funds in his business bank account as
$126,630 when the true balance of the account was $209,661.10. In the motion, Wife
stated that she first noticed the discrepancy when she reviewed the account
statement after the mediation concluded, and contended that the mediator
acknowledged that he knew of the discrepancy but chose not to inform her during
the mediation. Wife argued that her own failure to confirm the account balance
during mediation constituted mistake or excusable neglect under ARFLP
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JOHNSTON v. JOHNSTON
Decision of the Court
85(C)(1)(a) and that the settlement agreement was not fair because she did not
have full knowledge of the property involved.
¶5 Husband moved to dismiss Wife’s motion to set aside. He argued
that Wife’s failure to review the account statements that Husband had disclosed
to her did not constitute mistake or excusable neglect within the meaning of
ARFLP 85(C)(1)(a). Husband also argued that sound reason existed for the slightly
uneven division of this asset because there was an unequal division of other assets
in Wife’s favor, most notably more than $30,000 in liquid assets to which Husband
had waived any claim.
¶6 The trial court signed Husband’s proposed Decree of Dissolution of
Marriage, which included the Property Settlement Agreement that resulted from
the Rule 69 agreement, and invited Husband to apply for attorney’s fees relating
to the various post-decree motions.
¶7 Wife then filed a motion to set aside the Dissolution Decree and the
order inviting Husband to apply for attorney’s fees and costs. Wife asserted that
“[f]raud and concealment existed throughout this divorce proceeding,” that
Husband failed to disclose accurate financial information to Wife, that there was
no valuation or determination for Husband’s consulting company and a bank
account connected to that company, and that Husband had used a fake birth
certificate and driver’s license to create an alias used in conducting business
activity and had concealed this information from Wife.1
¶8 Husband filed another motion to dismiss, arguing that Wife had
ample opportunity to engage in formal discovery and failed to do so. Husband
argued that even assuming Wife’s allegations were true, she could not show fraud
because she had all of Husband’s financial information available to her.
¶9 The trial court denied Wife’s motion and awarded attorney’s fees
and costs to Husband.
DISCUSSION
¶10 “We will not disturb the trial court’s decision on a motion to set aside
a judgment absent an abuse of discretion.” Tovrea v. Nolan, 178 Ariz. 485, 490-91
1 Husband asserts that Wife was aware that these documents were for a fake
ID Husband used when he was 19 years old to date an older woman and that the
photo on the driver’s license was clearly of Husband when he was 19.
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JOHNSTON v. JOHNSTON
Decision of the Court
(App. 1993).2 “The court abuses its discretion when it makes an error of law in
reaching a discretionary conclusion or ‘when the record, viewed in the light most
favorable to upholding the trial court’s decision, is devoid of competent evidence
to support the decision.’” Michaelson v. Garr, 234 Ariz. 542, 544, ¶ 5 (App. 2014)
(citation omitted).
¶11 Wife argues on appeal that the trial court abused its discretion when
it denied her motion to set aside the decree, drafted pursuant to the Rule 69
agreement, because the agreement arose from Husband’s fraud. We disagree.
¶12 The parties voluntarily proceeded to private mediation, and reached
a binding agreement. Wife has not demonstrated that the Rule 69 agreement or
the resulting decree was procured by fraud. Indeed, she acknowledges that she
received from Husband the information concerning the bank account, but
contends that she received it late because Husband “mismailed” it. She also
acknowledges that Husband provided accurate information to the mediator.
¶13 The failure to conduct adequate discovery or to ensure that
disclosure is complete before voluntary resolution of a case constitutes neither
excusable neglect nor fraud by an adversary.
¶14 Overall, trial courts enjoy broad discretion when deciding whether
to set aside a judgment for fraud or misrepresentation. Woodbridge Structured
Funding, LLC v. Ariz. Lottery, 235 Ariz. 25, 29, ¶ 21 (App. 2014). Here, there was
evidence in the record that Husband provided Wife with all required financial
documents through informal disclosure and that Wife simply failed to review
them. There was also evidence that Husband could not have disclosed many of
the documents Wife references in her motion to set aside because they were not in
existence at the time the parties executed their Rule 69 agreement. The trial court
did not abuse its discretion when it denied Wife’s motion to set aside the Decree
of Dissolution.
2 Wife argues that “[i]f a trier of fact can find in favor of wife, husband’s
motion must fail.” Her reference to the standard governing motions to dismiss
highlights the impropriety of such motions in this context. But Husband has not
effectively changed the standard of review on appeal by filing a motion to dismiss
instead of a response to Wife’s motion to set aside. The trial court did not grant
Husband’s motions to dismiss -- it correctly denied Wife’s motions.
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JOHNSTON v. JOHNSTON
Decision of the Court
ATTORNEY’S FEES
¶15 The trial court awarded attorney’s fees in connection with the post-
decree briefing of Wife’s motions, concluding that she had taken unreasonable
positions. We vacate this award.
¶16 Husband was entitled to respond to Wife’s motions. But he chose
instead to move to “dismiss” them. We disapprove of this type of motion practice.
The tactic was calculated to expand the number of filings beyond those
contemplated by ARFLP 35(A), and in fact did so. By filing replies in support of
his motions to dismiss, Husband effectively filed sur-replies that the rules do not
allow. The court would have been justified had it rejected the motions to dismiss
on that ground.
¶17 We do not quarrel with the trial court’s finding that Wife took
unreasonable positions in this litigation. But Husband’s counsel’s disregard of
ARFLP 35 unreasonably expanded the very work for which he was awarded fees,
and Wife should not bear the burden of Husband’s counsel’s abuse of the rules.
¶18 We hold that Husband is not entitled to attorney’s fees resulting
from his improper post-decree briefing. Accordingly, we remand for a
recalculation of Husband’s fee award.
¶19 Husband also requests an award of attorney’s fees on appeal. In our
discretion, we deny his request.
CONCLUSION
¶20 For the foregoing reasons, we affirm the denial of Wife’s motion to
set aside, but vacate the award of attorney’s fees and remand for recalculation of
the award.
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