London v. Karatz ( 2016 )

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UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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
COLLEEN LONDON and R. LAMAR WHITMER,
Plaintiffs/Appellants,
v.
ESTHER SUE KARATZ, solely in her capacity as President
of the named Defendant Entity, and not personally;
HILTON CASITAS HOMEOWNERS ASSOCIATION,
a non-profit corporation, Defendants/Appellees.
No. 1 CA-CV 15-0070
FILED 10-4-2016
Appeal from the Superior Court in Maricopa County
No. CV2014-054346
The Honorable John R. Hannah, Judge
AFFIRMED
COUNSEL
Porter Law Firm, Phoenix
By Robert S. Porter
Counsel for Plaintiffs/Appellants
Hill, Hall & Deciancio, PLC, Phoenix
By R. Corey Hill, Ginette M. Hill, Christopher Robbins
Counsel for Defendants/Appellees
LONDON et al. v. KARATZ et al.
Decision of the Court
MEMORANDUM DECISION
Judge Randall M. Howe delivered the decision of the Court, in which
Presiding Judge Kenton D. Jones and Judge Donn Kessler joined.
H O W E, Judge:
¶1 Colleen London and R. Lamar Whitmer (collectively,
“Homeowners”) appeal the trial court’s award of attorneys’ fees to Hilton
Casitas Council of Homeowners (“Council of Homeowners”), arguing that
the Council was not a party to the lawsuit. For the following reasons, we
affirm.
FACTS AND PROCEDURAL HISTORY
¶2 The Homeowners own one of twenty-nine casitas on a parcel
of land subleased from a Hilton hotel. The Homeowners and the owners of
the remaining casitas are members of their homeowners’ association, which
was founded in May 1972 and governed by a board of directors. The
association’s declaration, bylaws, and articles of incorporation refer to it as
the “Council” and “Council of Co-Owners.” The declaration states that its
membership comprises the owners of the casitas and exists for the
operation and management of the declaration.
¶3 In August 1994, the presiding board of directors incorporated
the association as a non-profit organization under the name “Hilton Casitas
Council of Homeowners.” The articles of incorporation specifically
incorporated the 1972 declaration, stated that its membership and purpose
were the same as set forth in the declaration, and named the same board of
directors. At a members’ meeting a few months later, the board informed
the casita owners that it had incorporated “to cover individual liabilities,”
after noting that “most associations of this kind have become
incorporated.” Upon incorporating, the association kept its same federal tax
information, including its employer identification number.
¶4 On August 1, 2014, the Homeowners sued the association.
They named the “Council of Co-Owners, also known as Hilton Casitas
Council of Co-Owners, also known as Scottsdale Hilton Casitas
Homeowners Association, an unincorporated association” and its
president, Esther Karatz, as the defendants. The Homeowners alleged that
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LONDON et al. v. KARATZ et al.
Decision of the Court
the Council of Co-Owners failed to hold proper elections pursuant to its
bylaws and enforce a 2000 management agreement that existed between
itself and the hotel. They also alleged that Karatz failed to follow the
approved association budget and wrongfully sought money from its
reserve for expenses that were not the association’s responsibility. The
Homeowners sought the appointment of a receiver to act in the
association’s place.
¶5 The Hilton hotel moved to intervene, arguing that the
Homeowners’ lawsuit raised questions of the hotel’s rights and obligations
under its management agreement with the association. On August 15, 2016,
the “Council of Homeowners” joined the hotel’s motion and moved to
dismiss the case. In both motions, the Council of Homeowners altered the
caption to reflect it as the proper defendant. In a footnote, the Council of
Homeowners explained that the trial court in CV2012-051066, a separate
contemporaneous litigation by other casita-owning plaintiffs against the
same defendant, had ruled on August 6 that as a matter of law, the
non-profit Council of Homeowners was the proper party. That ruling
denied those plaintiffs’—represented by the same attorney as the
Homeowners here—motion to substitute the defendant Council of
Homeowners with the Council of Co-Owners as the real party in interest.
The trial court in the 2012 case specifically stated that it found that “the
corporate entity [Council of Homeowners] was the successor entity to the
unincorporated association as a matter of law and is the proper party in this
litigation.”
¶6 The Homeowners did not respond to the motion to dismiss,
but did object to the Council of Homeowners’ joinder, arguing that because
the Homeowners did not name the Council of Homeowners in their
complaint, it had no standing to join in the hotel’s motion to intervene. After
hearing argument, the trial court granted the hotel’s motion and permitted
it to intervene. Believing that the hotel’s intervention would cause delay in
the lawsuit and make the requested relief untimely, the Homeowners
voluntarily dismissed their lawsuit pursuant to Arizona Rule of Civil
Procedure 41(a)(1) on August 25, 2014.
¶7 The Council of Homeowners subsequently applied for
attorneys’ fees and costs, to which the Homeowners objected. The
Homeowners again argued that the Council of Co-Owners, which they
named as the defendants, and the Council of Homeowners were distinct
entities. They reasoned, among other things, that because it only had a
contractual relationship with the unincorporated Council of Co-Owners
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LONDON et al. v. KARATZ et al.
Decision of the Court
and not the Council of Homeowners, the latter was not eligible for fees
under A.R.S. § 12–341.01.
¶8 The Homeowners also moved for sanctions under Arizona
Rule of Civil Procedure 11 against the defense attorneys, arguing that the
attorneys impermissibly amended the caption on their own accord and that
the attorneys were precluded from asserting that the Council of
Homeowners was the correct defendant in the case. But the trial court
denied the motion “in light of [the trial court’s] ruling dated August 6,
2014” in the 2012 case. Accordingly, the trial court here advised that a
response to the Rule 11 motion was unnecessary.
¶9 That same day, the trial court also issued its ruling granting
the Council of Homeowners attorneys’ fees and costs. The trial court
ordered that “[t]his award runs in favor of all defendants represented by
[defense counsel] in this case, without regard to the identity or legal form
of the proper party to the suit.” The court further ordered that judgment be
entered in favor of Karatz, the Council of Homeowners, the Council of
Co-Owners, and the Scottsdale Hilton Casitas Homeowners Association,
jointly and severally.
¶10 The Homeowners then moved for a new trial pursuant to
Arizona Rule of Civil Procedure 59(a)(8), arguing, as relevant here, that the
trial court lacked the authority to grant fees to the “Defendant Association”
because the association did not vote to authorize defense counsel to
represent them pursuant to the 1972 declaration. The trial court denied the
motion, finding that the Homeowners waived the arguments by failing to
raise them in the response to the Council of Homeowners’ fee application.
The Homeowners then timely appealed the judgment and the denial of
their motion for new trial.
¶11 As the case was pending appeal in this Court, the
Homeowners, then proceeding pro se, moved to stay the appeal and re-vest
jurisdiction in the trial court so that they could move to set aside or vacate
the judgment under Rule 60(c). This Court granted that motion. The
Homeowners alleged in their Rule 60(c) motion that newly discovered
evidence showed that defense counsel engaged in “misconduct and fraud”
in procuring the judgment awarding them attorneys’ fees by
misrepresenting to the trial court that the Council of Homeowners replaced
the Council of Co-Owners. The Homeowners also moved to compel defense
counsel to produce several documents that they believed were necessary to
prove that the Council of Co-Owners authorized the Council of
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Decision of the Court
Homeowners to merge, or to alternatively file an affidavit “confirming the
nonexistence” of that information. The trial court denied the motions.
¶12 The Council of Homeowners then applied for attorneys’ fees
and moved for Rule 11 sanctions against the Homeowners relating to the
litigation of the Rule 60(c) motion. After subsequent briefing and an
opposing motion for sanctions, the trial court denied the requests for
sanctions and awarded the Council of Homeowners an award of fees
significantly lower than what it requested, stating that much of its
arguments “reflected a personal feud on which this Court declines to spend
more time.” The Homeowners timely appealed the trial court’s awards of
fees and costs.
DISCUSSION
¶13 The Homeowners argue on appeal that the Council of
Homeowners is not a party to the lawsuit and that the trial court therefore
erred by awarding it attorneys’ fees as the successful party under A.R.S.
§ 12–341.01. We review the trial court’s award of attorneys’ fees for an abuse
of discretion. Bennet Blum, M.D., Inc. v. Cowan, 235 Ariz. 204, 205 ¶ 5, 330
P.3d 961, 962 (App. 2014). We defer to the trial court regarding any factual
findings and infer that the court found every fact necessary to sustain the
judgment. John C. Lincoln Hosp. & Health Corp. v. Maricopa Cty., 208 Ariz.
532, 540 ¶ 23, 96 P.3d 530, 538 (App. 2004). We will not reverse the trial court
unless its findings are clearly erroneous. City of Tucson v. Clear Channel
Outdoor, Inc., 218 Ariz. 172, 182 ¶ 27, 181 P.3d 219, 229 (App. 2008). We
review any questions of law, however, including the trial court’s authority
to award fees, de novo. Bennet Blum, 235 Ariz. at 206 ¶ 5, 330 P.3d at 962.
Because the trial court’s finding that the Council of Homeowners succeeded
the unincorporated association was not clearly erroneous, it did not err in
awarding the Council of Homeowners attorneys’ fees as the successful
party under A.R.S. § 12–341.01.
¶14 For contested actions arising out of a contract, A.R.S.
§ 12–341.01(A) permits a trial court to “award the successful party
reasonable attorney fees.” A “party” is one who has a right to appeal and
contest any litigated issue in court. Chalpin v. Mobile Gardens, Inc., 18 Ariz.
App. 231, 234, 501 P.2d 407, 410 (1972), superseded by statute on other grounds
as stated in Switzer v. Superior Court, 176 Ariz. 285, 288, 860 P.2d 1338, 1341
(App. 1993). This includes someone who is directly interested in the subject
matter of the suit or some part thereof and who has a right to make
defenses, control proceedings, and examine witnesses. Helge v. Druke, 136
Ariz. 434, 437, 666 P.2d 534, 537 (App. 1983).
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Decision of the Court
¶15 The trial court’s finding that the Council of Homeowners was
a party to the lawsuit and thus eligible for fees was not clearly erroneous
because the Council of Homeowners had the right to contest the litigation
and was directly interested in the subject matter of the suit. The
Homeowners’ complaint alleged a failure to comply with the bylaws’
election procedures and to enforce a management agreement between it
and its lessor, the hotel. Similarly, the Homeowners sued Karatz in her
capacity as president of the association. If the Homeowners continued and
succeeded on their claim and received the sought-after relief, the Council
of Homeowners would have to relinquish some of its authority to an
appointed receiver. This potential loss of management authority reflects a
direct interest in the suit and creates a right to litigate the alleged
wrongdoings.
¶16 This finding was also supported by the record. Although the
association has had and still has several names, the record shows that the
original association, which was known as the Council of Co-Owners and
the Scottsdale Hilton Casitas Homeowners Association, incorporated in
1994 under the Council of Homeowners name. This action was approved
and executed by the then-board of directors, which informed the
association members about the change at a subsequent meeting. The
Council of Homeowners’ incorporation paperwork specifically adopted the
1972 declaration, membership, purpose, and same board of directors. After
its incorporation, the association continued to use the same information on
its tax returns, including its unique employer identification number.
¶17 Moreover, the question of the correct defendant’s status was
fully briefed and decided by the trial court in the 2012 case. Although the
lawsuits involved different plaintiffs, the substantive issue was the same in
both cases’ motions. Cf. Reidy v. O’Malley Lumber Co., 92 Ariz. 130, 132–33,
374 P.2d 882, 884 (1962) (stating that a court may take judicial notice of the
record in another action in the same court, and concluding that the trial
court in a specific performance action properly took into consideration a
prior disposition in another case when the cases dealt with identical
questions of entitlement to proceeds and the same property). The trial court
thus did not err in adopting the other court’s ruling in the 2012 case that the
Council of Homeowners was the successor entity of the previously
unincorporated Council of Co-Owners. Because the Council of
Homeowners is the successor to the Council of Co-Owners, it is a “party”
to this lawsuit. Accordingly, the trial court did not err by awarding it fees
under A.R.S. § 12–341.01(A).
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LONDON et al. v. KARATZ et al.
Decision of the Court
¶18 The Council of Homeowners requests attorneys’ fees incurred
on appeal pursuant to A.R.S. § 12–341.01(A). We grant its request and will
award reasonable fees upon timely compliance with Arizona Rule of Civil
Appellate Procedure 21.
CONCLUSION
¶19 For the foregoing reasons, we affirm.
AMY M. WOOD • Clerk of the Court
FILED: AA
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