McA Financial Group, Ltd. v. Enterprise Bank & Trust

IN THE
ARIZONA COURT OF APPEALS
DIVISION TWO
MCA FINANCIAL GROUP, LTD.,
Appellant,
v.
ENTERPRISE BANK & TRUST,
Plaintiff/Appellee.
No. 2 CA-CV 2014-0007
Filed December 30, 2014
Appeal from the Superior Court in Santa Cruz County
No. CV2010000422
The Honorable Anna M. Montoya-Paez, Judge
VACATED
COUNSEL
Snell & Wilmer L.L.P., Tucson
By Christopher H. Bayley, Jonathan M. Saffer, and Katherine V. Foss
Counsel for Appellant
Minkin & Harnisch PLLC, Phoenix
By Ethan B. Minkin and Andrew A. Harnisch
Counsel for Plaintiff/Appellee
MCA FINANCIAL GROUP v. ENTERPRISE BANK & TRUST
Opinion of the Court
OPINION
Judge Espinosa authored the opinion of the Court, in which
Presiding Judge Miller and Judge Brammer1 concurred.
E S P I N O S A, Judge:
¶1 MCA Financial Group, Ltd. (MCA) appeals from an
order requiring it to disgorge over $118,000 in fees paid to it by
Enterprise Bank & Trust (Enterprise), arguing that, because MCA
was not a party to the underlying proceeding, it was not subject to
the trial court’s jurisdiction. It also contends the court erred by
failing to hold an evidentiary hearing on the merits of the
disgorgement claim and by failing to conclude Enterprise had
waived any objection to MCA’s fees. Because we agree the court
lacked jurisdiction, its order must be vacated.
Factual and Procedural Background
¶2 “We view the facts in the light most favorable to
upholding the trial court’s ruling.” Hammoudeh v. Jada, 222 Ariz. 570,
¶ 2, 218 P.3d 1027, 1028 (App. 2009). In April 2009, Enterprise
agreed to loan $4,182,000 to Americana Nogales, LLC (Americana)
to acquire a hotel in Santa Cruz County. The following year,
Enterprise filed a lawsuit alleging that Americana had defaulted on
its loan obligations by failing to remit payments as required under
the loan agreement and promissory note.2 In addition to seeking
1The Hon. J. William Brammer, Jr., a retired judge of this
court, was called back to active duty to serve on this case pursuant
to orders of this court and the supreme court.
2Enterprise initiated the action as successor in interest to the
Federal Deposit Insurance Corporation, which was acting as receiver
for the original lender, Valley Capital Bank, N.A. The named
defendants included the borrower, Americana, the guarantor,
Michael A. Clausen, and several parties believed to possess
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MCA FINANCIAL GROUP v. ENTERPRISE BANK & TRUST
Opinion of the Court
monetary relief, Enterprise requested that a receiver be appointed
pursuant to a provision in the deed of trust that Americana had
executed to secure the loan.
¶3 In January 2011, the trial court appointed “Robert Itkin
of MCA Financial Group, Ltd.” as receiver in an order that directed
him to, among other things, “operate, manage, maintain, preserve
and protect the Receivership Property; . . . employ any person or
firm to collect, manage, lease, maintain and operate the Receivership
Property[; and] hire . . . consultants, property management
companies, brokers and any other personnel or employees which the
Receiver deems necessary to assist it in the discharge of its duties.”
Enterprise subsequently filed an “Oath of Receiver,” in which Itkin
swore to “faithfully discharge the duties of receiver” and “obey all
orders of the Court.” Itkin executed this oath on a line designated
for his signature.
¶4 From January to October 2011, MCA on a monthly basis
submitted bills to Enterprise for “professional services” rendered by
several of its employees, including Itkin. Enterprise paid the
invoices by checks made out to “MCA Financial Group.” In
October, Enterprise filed a “Notice of Receiver’s Change of Firm,” in
which it stated that Itkin, who had been “appointed as Receiver over
the subject collateral pursuant to this Court’s Order,” had become a
managing director at Simon Consulting Group, LLC. Following
Itkin’s departure, both he and MCA continued to perform
management and consulting services, but MCA ceased billing for
Itkin’s services. In November 2012, the trial court granted
Enterprise’s application to appoint a new receiver, Resolute
Commercial Services, LLC (Resolute), and an amended order of
appointment was filed to reflect this change.
¶5 The following month, Itkin filed a receivership report
“containing, among other things, all receivership expenses, fees, and
a narrative description of [his] performed duties and related
subordinate interests in the loan collateral. The trial court granted
default judgments against Americana and the guarantor in early
2011 after both failed to appear.
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MCA FINANCIAL GROUP v. ENTERPRISE BANK & TRUST
Opinion of the Court
information for the period of [his] appointment as Receiver.” In
response, Enterprise filed a motion objecting to Itkin’s receivership
report and requesting disgorgement of fees it had paid to MCA on
the ground the fees were excessive. MCA, not having been joined
by Enterprise as a party for purposes of its disgorgement motion or
any other matter, entered a special appearance “for the limited
purpose of responding to the allegations and arguments contained
in [Enterprise’s motion],” and argued that such a motion for relief
from a non-party who had “never served as the receiver” was
“procedurally improper” and should be summarily denied on that
basis. In the alternative, MCA requested an evidentiary hearing to
determine whether the fees charged were, in fact, excessive. The
trial court heard argument on the motion in September 2013, and
took the issues raised by the parties, including the necessity of an
evidentiary hearing, under advisement. In October, the court issued
a ruling that determined a reduction of fees was warranted because
“MCA did not[] execute their duties appropriately.” Implicitly
denying MCA’s request for an evidentiary hearing on the matter, the
court granted Enterprise’s motion and ordered MCA to disgorge
$118,185.93. Its order expressly referred to the period when “MCA
served as receiver.”
Discussion
¶6 On appeal, MCA argues the trial court lacked
jurisdiction to enter the disgorgement order because MCA was a
“third-party vendor” that was “never appointed receiver” or “joined
as a party to the case.” Relying on precedents in which we have
declined to uphold rulings against non-parties who were not given
“a full opportunity to contest” their liability, Heinig v. Hudman, 177
Ariz. 66, 71, 865 P.2d 110, 115 (App. 1993); see also Spudnuts, Inc. v.
Lane, 139 Ariz. 35, 37, 676 P.2d 669, 671 (App. 1984), MCA argues
that the court’s ability to approve the receiver’s expenses did not
obviate the joinder requirement because “the only party over whom
the trial court had jurisdiction relevant to this dispute was [Itkin].”
In support of its factual claim that Itkin served as the receiver in an
individual capacity, MCA relies on the court’s order designating
“Robert Itkin of MCA Financial Group, Ltd.” as receiver, and points
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Opinion of the Court
to Itkin’s departure from MCA as evidence that the receiver role was
filled by Itkin in his personal capacity.
¶7 Enterprise responds that, although Itkin was the
receiver “in a very technical sense,” the agency relationship between
Itkin and MCA “bound MCA to the terms of the Receivership Order,
including the court oversight provisions” that allowed the trial court
to exercise control over compensation.3 In support of its agency
theory, Enterprise points to evidence that MCA transmitted bills and
collected fees for Itkin’s receiver services. Observing that MCA
posted the receiver’s bond and performed certain receivership tasks,
Enterprise also argues the court had the ability to exercise control
over fees and expenses directed to both Itkin and MCA. We review
the court’s exercise of personal jurisdiction de novo. Desarrollo
Immobiliario y Negocios Industrialies De Alta Tecnologia De Hermosillo,
S.A. De C.V. v. Kader Holdings Co., 229 Ariz. 367, ¶ 10, 276 P.3d 1, 5
(App. 2012); Arizona Tile, L.L.C. v. Berger, 223 Ariz. 491, ¶ 8, 224 P.3d
988, 990 (App. 2010).
Appellate Jurisdiction
¶8 Because MCA was neither named as a party to
Enterprise’s disgorgement request nor ever served with process, we
first examine our own jurisdiction to consider the merits of this
appeal.4 See Musa v. Adrian, 130 Ariz. 311, 312, 636 P.2d 89, 90 (1981)
3In a section titled “Payment of Receiver,” the order of
appointment stated the “Receiver’s fees and administrative expenses
paid shall be submitted to the Court for final approval and
confirmation.”
4Although MCA filed an “Emergency Motion to Intervene”
after the trial court issued its ruling, that motion had not yet been
decided at the time this appeal was filed. Regardless, it would not
affect our jurisdictional analysis because MCA’s motion was based
on its belief that it could “not properly appeal the disgorgement
order” unless it became a party to the action. See Nat’l Homes Corp.
v. Totem Mobile Home Sales, Inc., 140 Ariz. 434, 437, 682 P.2d 439, 442
(App. 1984) (issue of waiver turns on whether party “has manifested
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MCA FINANCIAL GROUP v. ENTERPRISE BANK & TRUST
Opinion of the Court
(appellate court has independent duty to consider its jurisdiction).
“Generally, a person who is not a party to an action is not aggrieved
and cannot appeal from findings adverse to him.” Wieman v.
Roysden, 166 Ariz. 281, 284, 802 P.2d 432, 435 (App. 1990); see also
Ariz. R. Civ. App. P. 1 (limiting right of appeal to “any party
aggrieved by the judgment”). However, this court has held that a
non-party with a “direct, substantial and immediate” interest who
“would be benefitted by reversal of the judgment” is entitled to
appeal under Rule 1, Ariz. R. Civ. App. P. Wieman, 166 Ariz. at 284,
802 P.2d at 435 (attorney permitted to appeal attorney fee award
imposed against him), quoting Abril v. Harris, 157 Ariz. 78, 81, 754
P.2d 1353, 1356 (App. 1987) (same). MCA is clearly an aggrieved
non-party with a direct and substantial interest in the trial court’s
disgorgement order. We also, however, must determine whether
that order is one that may be appealed. See A.R.S. § 12-2101
(enumerating “[j]udgments and orders that may be appealed”).
¶9 Under § 12-2101(A)(4), appeal may be taken from “a
final order affecting a substantial right made in a special proceeding
or on a summary application in an action after judgment.” Our
supreme court has held that a court order requiring a receiver to pay
a claim is “appealable as a final judgment.”5 In re Prescott State Bank,
36 Ariz. 419, 424, 286 P. 189, 191 (1930); see also Johnson v. Superior
Court, 68 Ariz. 68, 72, 199 P.2d 827, 830 (1948) (where court order
allows or disallows claim to moneys from receivership or estate
“order is not intermediate but final”); cf. Ross v. White, 46 Ariz. 304,
306-07, 50 P.2d 12, 13 (1935) (court’s denial of petition for payment
an intent to be subject to the jurisdiction of the court, even though it
has raised jurisdictional defects”).
5In re Prescott State Bank distinguished between a situation
where a receiver initiated a proceeding to pay a debt and one in
which a third party petitioned the court for an order for a receiver to
pay a claim, and found the latter appealable. 36 Ariz. 419, 422-24,
286 P. 189, 190-91 (1930), citing Ritter v. Ariz. Cattle Co., 34 Ariz. 278,
286, 271 P. 25, 28 (1928) (court orders approving accounts of receiver
or authorizing his expenditures reviewable only on appeal from
final judgment approving or disapproving final accounting).
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MCA FINANCIAL GROUP v. ENTERPRISE BANK & TRUST
Opinion of the Court
of legal services on behalf of insolvent bank not an “interlocutory
order,” but “final judgment of the court” and “final order”).6 Here,
the contested matter was not the receiver’s conduct, which would
not be appealable until the final accounting, see Ritter v. Ariz. Cattle
Co., 34 Ariz. 278, 286, 271 P. 25, 28 (1928), but rather the trial court’s
order directing MCA, a non-party, to pay the receivership. As such,
the order was the converse of, but similar to, an order that the
receiver pay a third party and, logically, also a final order. Stated
differently, the order “was clearly final on all of [MCA’s] rights in
the affected property.” Kemble v. Porter, 88 Ariz. 417, 419, 357 P.2d
155, 156 (1960); see Huston v. F.D.I.C., 800 S.W.2d 845, 847 (Tex. 1990)
(trial court order “that resolves a discrete issue in connection with
any receivership has the same force and effect as any other final
adjudication of a court, and thus, is appealable”).
¶10 We also must determine, however, whether the
disgorgement proceeding was a “special proceeding” pursuant to
6In both In re Prescott State Bank and Ross, jurisdiction was
found under the former version of § 12-2101(A)(1), which provided
that an appeal may be taken “[f]rom a final judgment entered in an
action or special proceedings commenced in a superior court.” Ariz.
Rev. Code, § 3659, subd. 1 (1928); see In re Prescott State Bank, 36 Ariz.
at 423-24, 286 P. at 191 (trial court’s order reviewable under Ariz.
Rev. Code, § 3659, subd. 1 (1928)); Ross, 46 Ariz. at 307, 50 P.2d at 13
(same); see also In re Sullivan’s Estate, 38 Ariz. 387, 390, 300 P. 193, 194
(1931) (quoting Ariz. Rev. Code, § 3659, subd. 1 (1928) as granting
right to appeal “from a final judgment entered in an action or special
proceeding commenced in a superior court . . . .”). Given that “‘[a]
final judgment’” has since been defined to mean an order that
“‘decides and disposes of the cause on its merits, leaving no
question open for judicial determination,’” Ruesga v. Kindred Nursing
Centers, L.L.C., 215 Ariz. 589, ¶ 10, 161 P.3d 1253, 1257 (App. 2007),
quoting Props. Inv. Enters., Ltd. v. Found. For Airborne Relief, Inc., 115
Ariz. 52, 54, 563 P.2d 307, 309 (App. 1977), and the receivership in
this case appears to be ongoing, subsection (A)(4) provides the
jurisdictional basis here rather than (A)(1).
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MCA FINANCIAL GROUP v. ENTERPRISE BANK & TRUST
Opinion of the Court
§ 12-2101(A)(4). Our supreme court has held that where a party
“institutes a proceeding against the person in charge of the funds to
obtain moneys from the receivership or estate, . . . such action is a
separate proceeding in the same sense that it would have been had
an independent suit been filed.” Johnson, 68 Ariz. at 72, 199 P.2d at
830; see also Black’s Law Dictionary (9th ed. 2009) (defining “special
proceeding” as “[a] proceeding that can be commenced
independently of a pending action and from which a final order may
be appealed immediately”). Thus, a court order allowing or
disallowing a claim for moneys from a receivership or estate “is the
final action of the court in a special proceeding in the case.” Johnson,
68 Ariz. at 72, 199 P.2d at 830. Similarly, a proceeding to order a
third party to pay the receivership is of the same species and finality.
See Huston, 800 S.W.2d at 847.
¶11 Having determined that the subject order here satisfies
the first clause of § 12-2101(A)(4) as “a final order affecting a
substantial right made in a special proceeding,” we last consider
whether it also must satisfy the latter portion of § 12-2101(A)(4)
referring to an order entered “in an action after judgment.” A plain
reading of the statute would suggest that subsection (A)(4) pertains
to two separate types of final orders: (1) one “affecting a substantial
right made in a special proceeding”; and (2) a final order made “on a
summary application in an action after judgment.” In applying
subsection (A)(4), our supreme court has determined that an order
was appealable without considering whether it was “after
judgment.” Miller v. Superior Court, 88 Ariz. 349, 351-52, 356 P.2d
699, 700 (1960) (removal of trustee appealable as affecting substantial
rights of parties to removal proceeding). And we note that other
states with similar jurisdictional statutes have separate provisions
for the two types of final orders. See, e.g., State v. Jacques, 570 N.W.2d
331, 335 (Neb. 1997) (three types of final orders reviewable on appeal
including “(2) an order affecting a substantial right made during a
special proceeding, and (3) an order affecting a substantial right
made on summary application in an action after judgment is
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MCA FINANCIAL GROUP v. ENTERPRISE BANK & TRUST
Opinion of the Court
rendered”);7 Ross v. Ross, 640 N.E.2d 265, 268 (Ohio Ct. App. 1994)
(noting statutory guideline for determining final order includes:
“(2) An order (a) affecting a substantial right, and (b) made in (i) a
special proceeding, or (ii) upon a summary application in a motion
after judgment, is final.”).8 We conclude we have jurisdiction over
MCA’s appeal under § 12-2101(A)(4), and we have amended the
caption to accurately reflect the proper parties to this appeal.
Trial Court Jurisdiction
¶12 Enterprise’s failure to include or join MCA as a party
below, however, remains relevant to our analysis of MCA’s due
process argument. Although collaterally involved in the underlying
receivership through its performance of services in connection with
the management of the receivership estate, MCA never was served
with process, or named in either Enterprise’s lawsuit, the
receivership proceedings, or the disgorgement motion as a party
against whom relief was sought. Therefore, under basic principles
7Nebraska statutes define “final order” as:
An order affecting a substantial right in an action, . . .
and an order affecting a substantial right made in a
special proceeding, or upon a summary application
in an action after judgment, is a final order which
may be vacated, modified or reversed.
Neb. Rev. Stat. § 25-1902.
8Ohio Rev. Code Ann. § 2505.02 (West 2013) specifies:
B) An order is a final order that may be reviewed,
affirmed, modified, or reversed, with or without
retrial, when it is one of the following:
....
(2) An order that affects a substantial right
made in a special proceeding or upon a
summary application in an action after
judgment . . . .
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MCA FINANCIAL GROUP v. ENTERPRISE BANK & TRUST
Opinion of the Court
of due process and in personam jurisdiction, it was not subject to the
trial court’s jurisdiction. See Safeway Stores, Inc. v. Ramirez, 99 Ariz.
372, 379, 409 P.2d 292, 297 (1965) (“For the court to have personal
jurisdiction over a defendant . . . [the] party being served must
clearly be given notice that he is being served as a defendant in the
case.”); Barlage v. Valentine, 210 Ariz. 270, ¶ 4, 110 P.3d 371, 373
(App. 2005) (“Proper, effective service on a defendant is a
prerequisite to a court’s exercising personal jurisdiction over the
defendant.”); see also Sec. & Exch. Comm’n v. Ross, 504 F.3d 1130, 1138
(9th Cir. 2007) (noting “‘[s]ervice of process is the mechanism by
which the court [actually] acquires’ the power to enforce a judgment
against the defendant’s person or property”), quoting United States v.
2,164 Watches, More or Less Bearing a Registered Trademark of Guess?,
Inc., 366 F.3d 767, 771 (9th Cir. 2004) (alterations in Ross).
¶13 Here, the trial court did not address the issue of
personal jurisdiction in its ruling, nor, as MCA points out, has
Enterprise cited any authority to support its contention that a court
may order a non-party to disgorge compensation merely because
such compensation had been paid in connection with a receivership.
This absence of authority is not surprising, however, in light of our
prior decisions concerning the imposition of non-party liability.
¶14 In Spudnuts, for example, the trial court had granted a
post-judgment motion to amend the pleadings to add an additional
party-defendant. 139 Ariz. at 35, 676 P.2d at 669. On appeal, we
observed that “‘[t]he part[y] to be added must be properly brought
before the court or no judgment can be entered or enforced.’” Id. at
36, 676 P.2d at 670, quoting Sarne v. Fiesta Motel, 79 F.R.D. 567, 570
(E.D. Pa. 1978). We reversed the judgment, concluding the
additional defendant could not be subjected to liability without
violating due process because “the court does not obtain jurisdiction
over the person” where “service of process does not comply with the
statutory requirements.” Id. at 37, 676 P.2d at 671.
¶15 Similarly, in Heinig v. Hudman, we rejected appellant’s
argument that a judgment against one party could be converted into
a judgment against his wife where it was clear from the record that
she never had been a party to the underlying proceeding. 177 Ariz.
at 70, 865 P.2d at 114. We were not persuaded by the fact that she
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Opinion of the Court
had “sat through the arbitration hearing” and “may have assisted in
presenting [her husband’s] case.” Id. Rather, the spouse was
entitled to “a full opportunity to contest . . . liability” in a subsequent
action against her as a named defendant in order to satisfy the
strictures of due process. Id. at 71, 865 P.2d at 115. We thus agree
with MCA that the trial court was precluded from asserting
jurisdiction over it when there had been no service of process in the
underlying action or a full opportunity to contest the allegations
against it.
¶16 Enterprise contends, however, that the trial court’s
order nevertheless was sanctioned by its authority over the actions
of the receiver. See Mashni v. Foster ex rel. Cnty. of Maricopa, 234 Ariz.
522, ¶ 17, 323 P.3d 1173, 1178 (App. 2014) (receiver’s authority
derived “‘solely from the act of the court’”; receiver is “‘subject of its
order only’”), quoting Sawyer v. Ellis, 37 Ariz. 443, 448, 295 P. at 322,
324 (1931); Cauble v. Osselaer, 150 Ariz. 256, 258, 722 P.2d 983, 985
(App. 1986) (fixing of receiver’s fee within court’s discretion). This
argument rests on the court’s finding that MCA served as court-
appointed receiver—a determination we review for clear error. See
Mashni, 234 Ariz. 522, ¶ 17, 323 P.3d at 1178 (interpretation of
appointment order question of fact); Gravel Res. of Ariz. v. Hills, 217
Ariz. 33, ¶ 14, 170 P.3d 282, 287 (App. 2007) (appellate court will
affirm factual findings unless clearly contrary to evidence).
¶17 As noted above, the trial court’s appointment order
states: “It is hereby ordered, adjudged and decreed that . . . Robert
Itkin of MCA Financial Group, Ltd., is hereby appointed Receiver.”
In contrast, the court’s order designating Resolute as receiver reads:
“It is hereby ordered, adjudged and decreed that . . . Resolute
Commercial Services, LLC, acting by and through its principal,
Jeremiah Foster, is hereby appointed Receiver in this action.”
Moreover, the oath of receiver was signed “Robert J. Itkin,” with no
reference to MCA. See Focus Point Props., LLC v. Johnson, 689 Ariz.
Adv. Rep. 4, ¶¶ 32-33 (Ct. App. June 19, 2014) (relying on signature
block as evidence of capacity in which signator bound); Ferrarell v.
Robinson, 11 Ariz. App. 473, 475, 465 P.2d 610, 612 (App. 1970)
(same).
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MCA FINANCIAL GROUP v. ENTERPRISE BANK & TRUST
Opinion of the Court
¶18 On this record, we cannot conclude that Itkin was
appointed receiver in conjunction with MCA. Had that been the
case, Enterprise would have had to amend the order of appointment
when Itkin left MCA to join Simon Consulting Group, LLC, just as it
did when Resolute later was appointed to replace Itkin. See Sawyer,
37 Ariz. 443, 448, 295 P. 322, 324 (receiver’s authority “derived solely
from the act of the court appointing him”). Instead, Enterprise
merely submitted a “Notice of Receiver’s Change of Firm” that listed
his new mailing address. Indeed, even Enterprise acknowledges
that MCA’s contention regarding the identity of the receiver is “true
in a very technical sense,” echoing the position it took in
correspondence immediately before Itkin’s departure from MCA:
“the receiver is in the name of the individual (Rob[ert Itkin]) not the
company (MCA).” Consequently, because the evidence in the
record contravenes the trial court’s finding on this point, we cannot
uphold its order requiring MCA to disgorge compensation on this
ground.9
¶19 Finally, we reject Enterprise’s argument that an agency
relationship between Itkin and MCA operated to confer personal
jurisdiction over MCA. We are unaware of any authority for the
proposition that a plaintiff can expand the trial court’s jurisdiction
merely by alleging an agency relationship between a court-
appointed receiver and an unserved third party. Were this the case,
the strictures of due process could be avoided altogether to reach the
assets of a stranger to the underlying proceeding without providing
9We recognize that the schedule of fees attached to the
receivership order and the bond filed by MCA may have caused
confusion regarding the receiver’s identity. Nevertheless, the
undisputed facts in the record do not reasonably support the trial
court’s ruling. See Davis v. Zlatos, 211 Ariz. 519, ¶ 18, 123 P.3d 1156,
1161 (App. 2005) (findings clearly erroneous if they lack evidence
that “‘permit[s] a reasonable person to reach the trial court’s
result’”), quoting In re United States Currency in the Amount of
$26,980.00, 199 Ariz. 291, ¶ 9, 18 P.3d 85, 89 (App. 2000).
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MCA FINANCIAL GROUP v. ENTERPRISE BANK & TRUST
Opinion of the Court
such third party either notice or an opportunity to be heard.10 This
notion is flatly inconsistent with established jurisprudence on the
limits of jurisdiction; as a result, it cannot serve to support the
challenged ruling. Cf. Planning Grp. of Scottsdale, L.L.C. v. Lake
Mathews Mineral Props., Ltd., 226 Ariz. 262, ¶ 14, 246 P.3d 343, 347
(2011) (exercise of jurisdiction must comport with “‘traditional
notions of fair play and substantial justice’”), quoting Int’l Shoe Co. v.
Washington, 326 U.S. 310, 316 (1945).
Attorney Fees and Costs
¶20 MCA has requested an award of its attorney fees and
costs for both the trial court action and this appeal pursuant to
A.R.S. § 12-341.01(A), which governs recovery of attorney fees in an
“action arising out of a contract.” MCA contends “its fees for its
work as a vendor were received in accordance with its contract
directly paid by Enterprise.” Despite this assertion, MCA has not
identified such a contract nor does it appear in the record. More
importantly, neither the disgorgement motion nor the resulting
order was predicated on any contractual considerations but rather
on the court’s mistaken view of MCA as the receiver in the
proceeding. See Cauble v. Osselaer, 150 Ariz. at 260-61, 722 P.2d at
987-89 (claim for reduction in receivership charges does not “arise
out of a contract”). Thus, any agreement relating to MCA’s services
was not the “essential basis” of the disgorgement action. See
Chaurasia v. Gen. Motors Corp., 212 Ariz. 18, ¶ 25, 126 P.3d 165, 173
10Although an agency relationship might provide, in part, a
basis for the exercise of jurisdiction, service of process is the
mechanism by which the court acquires the power to enforce a
judgment. S.E.C. v. Ross, 504 F.3d 1130, 1138 (9th Cir. 2007) (“The
familiar ‘minimum contacts’ test, coupled with statutory
authorization, provides a basis for an exercise of jurisdiction, but
‘[s]ervice of process is the mechanism by which the court [actually]
acquires’ the power to enforce a judgment against the defendant’s
person or property.”), quoting 2,164 Watches, More or Less Bearing a
Registered Trademark of Guess?, Inc., 366 F.3d at 771. Here, it is
unknown what would have transpired had MCA been made a party
and we express no opinion on it.
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Opinion of the Court
(App. 2006); see also Lewin v. Miller Wagner & Co., Ltd., 151 Ariz. 29,
37, 725 P.2d 736, 744 (1986) (mere existence of contract does not
justify fees award where contract only “peripherally involved in a
cause of action”); In re Larry’s Apartment, L.L.C., 249 F.3d 832, 836
(9th Cir. 2001) (where contract “merely somewhere within the
factual background,” fees under § 12–341.01(A) not awardable).11
Accordingly, we deny MCA’s attorney fees request. But, as the
prevailing party on appeal, MCA is entitled to a cost award upon
compliance with Rule 21. See A.R.S. § 12-341; Assyia v. State Farm
Mut. Auto. Ins. Co., 229 Ariz. 216, ¶ 32, 273 P.3d 668, 675 (App. 2012)
(cost award mandatory in favor of successful party).
Disposition
¶21 For all of the foregoing reasons, the trial court’s order
requiring MCA to disgorge $118,185.93 in fees is vacated.
11We are not asked to decide and express no opinion as to
whether a fees award pursuant to § 12-341.01 may be available in a
receivership action.
14