North & Co. v. Kohner/Polese

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NOTICE: THIS DECISION DOES NOT CREATE LEGAL PRECEDENT AND MAY NOT BE CITED EXCEPT AS AUTHORIZED BY APPLICABLE RULES. See Ariz. R. Supreme Court 111(c); ARCAP 28(c); Ariz. R. Crim. P. 31.24 IN THE COURT OF APPEALS STATE OF ARIZONA DIVISION ONE NORTH & CO., INC., formerly an Arizona corporation; GERALD D.W. NORTH; SHERMAN BROOK, as Trustee of the David North II Trust; and CERES INVESTMENTS LIMITED PARTNERSHIP, Plaintiffs/Appellants, v. STEPHEN A. KOHNER and JANE DOE KOHNER, Husband and Wife; JAMES F. POLESE and JANE DOE POLESE, Husband and Wife, Defendants/Appellees ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) No. DIVISION ONE FILED: 07-13-2010 PHILIP G. URRY,CLERK BY: GH 1 CA-CV 09-0652 DEPARTMENT D MEMORANDUM DECISION (Not for Publication Rule 28, Arizona Rules of Civil Appellate Procedure) Appeal from the Superior Court in Maricopa County Cause No. CV2007-092319 The Honorable Louis Araneta, Judge The Honorable Karen A. Potts, Judge AFFIRMED Guzman PLC Higley By David Guzman Attorney for Plaintiffs/Appellants North & Co., Inc., Brook, Ceres Investments Limited Partnership Tiffany & Bosco PA By Dow Glenn Ostlund Attorneys for Defendant/Appellee Kohner Phoenix Meagher & Geer PLLP By Kevin T. Minchey, Kurt M. Zitzer and Thomas H. Crouch Attorneys for Defendant/Appellee Polese Scottsdale B R O W N, Judge ¶1 North & Co., Inc., Gerald North, Sherman Brook, and Ceres Investment Limited Partnership (collectively North ) appeal the trial court s dismissal of their complaint against Stephen Kohner and James Polese (collectively Defendants ) for failure to join an indispensable party. For the following reasons, we affirm. BACKGROUND ¶2 North & Co., an Arizona corporation that held title to 206 acres of property in Bullhead City, was administratively dissolved in 1993. In 2000, Bullhead City acquired the 206 acres, plus an additional 31 acres (the Property ), as a result of unpaid assessments. Gerald North, the David North II Trust, and Ceres Investment Limited Partnership are former shareholders of North & Co. or otherwise claim an interest in the Property. ¶3 In May 2004, Bullhead City filed an action in Mohave County to quiet title to the Property. Bullhead City obtained a Stipulation for Entry of Default and Order (the Stipulation ) from Kohner, against North in & which Kohner agreed Co. Polese, as 2 to an Kohner s entry of attorney, default assisted Kohner in providing Bullhead City with the Stipulation. Mohave County Superior Court ultimately entered The judgment in favor of Bullhead City. ¶4 In 2007, North filed a complaint against Defendants, alleging tortuous advantage and interference fraud. North with alleged prospective that economic Kohner, a former president of North & Co., misrepresented himself as a current officer of North & Co. and represented North & Co. in misrepresentation and acts. North also North s interests Polese, the encouraged asserted in the past, Kohner that an was to despite Property, attorney who of the aware undertake knowing Bullhead had City wrongful of Gerald improperly served Kohner with the quiet title action and filed a fraudulent affidavit of service. North further alleged Bullhead City undertook the action to quiet title maliciously, in order to wrongfully sanitize the transaction by which Bullhead City acquired the Property in 2000-2001 and to wrongfully deprive [North] of their interest in the Property. As a result of these alleged acts, North claimed that Bullhead City, Kohner, and Polese deprived it of its rights to the Property, which it estimated to be valued at approximately $12 million at the time of the complaint. ¶5 stated North did not name Bullhead City as a defendant, but that it had filed or will 3 file a separate action against Bullhead City in federal district court. North had in fact already filed an action against Bullhead City, along with Defendants, North in sought the a United States determination Bankruptcy that title Court to 2006. 206 the in acres automatically transferred to the shareholders of North & Co. upon its dissolution in 1993 and therefore Bullhead City s quiet title action was null and void. The bankruptcy court dismissed North s claims in 2007 for lack of jurisdiction. the dismissal as to Bullhead City, but did North appealed not appeal the dismissal of the proceeding against Defendants. 1 ¶6 City Polese moved to dismiss for failure to join Bullhead as an indispensable party. Polese argued that, under Arizona Rule of Civil Procedure 19(a), no final judgment could be entered against Polese and Kohner affecting the rights of Bullhead City. that he and Kohner would be without injuriously Further, Polese argued prejudiced and subject to inconsistent results if Bullhead City was not joined as a party, and that the case could not proceed conscience without Bullhead City. motion to dismiss. argument joint was that in equity and good Kohner joined in Polese s In response, North s only substantive legal because tortfeasors or Defendants and Bullhead co-conspirators, 1 According to North, the Ninth Circuit upheld the decision of the bankruptcy court. 4 City were was not North Court of Appeals obligated to pursue its claims against all of them in the same lawsuit. ¶7 Following oral argument, the trial court found that, under Rule 19(a), Bullhead City, as an absent party, is conditionally necessary to this action because without Bullhead City there is a substantial risk that the existing parties may be subject noted to that inconsistent North alleged obligations. that Kohner The and court Polese further assisted Bullhead City in its improper taking of the property in the quiet title action. that does Therefore, no final judgment can be entered justice Bullhead City. between the parties in [the] absence of The court thus determined that Bullhead City could be joined as a party and ordered North to do so no later than August 19, 2008. but the appeal Defendants objected was submitted and North appealed the ruling to this court, moved dismissed a proposed for for lack judgment, reconsideration of of jurisdiction. to the which North court s prior ruling compelling North to join Bullhead City as a party. The court the denied the motion complaint with prejudice. and entered judgment dismissing North timely appealed. DISCUSSION ¶8 North argues that the trial court erred in ruling that Bullhead City was an indispensable party and that it could be added as a defendant. Defendants counter that complete relief 5 cannot be accorded without Bullhead City being made a party. They assert that a finding of liability against them would necessarily mean that Bullhead City did not properly acquire the land and that Defendants, controversy. it committed Bullhead City fraud. has a Thus, strong according interest in to the Additionally, Defendants contend that they would be subject to inconsistent results if Bullhead City is sued in federal court and the outcome is different from this litigation. ¶9 In reviewing the grant of a motion to dismiss, we accept the truth of all claims pleaded in the complaint and resolve all inferences in favor of the plaintiff. Mohave Disposal, Inc. v. City of Kingman, 186 Ariz. 343, 346, 922 P.2d 308, 311 (1996). We review legal issues de novo. Dressler v. Morrison, 212 Ariz. 279, 281, ¶ 11, 130 P.3d 978, 980 (2006). ¶10 Pursuant to Rule 19(a), a person should be joined as a party if: (1) in the person s absence complete relief cannot be accorded among those already parties, or (2) the person claims an interest relating to the subject of the action and is so situated that the disposition of the action in his absence may (i) as a practical matter impair or impede the person s ability to protect that interest (ii) leave any of the persons already parties subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations by reason of the claimed interest. 6 As explained by our supreme court, the test of indispensability in Arizona is whether the absent person s interest in the controversy is such that no final judgment or decree could be entered, doing justice between the parties actually before the court and without injuriously affecting the rights of others not brought into the action. Town of Gila Bend v. Walled Lake Door Co., 107 Ariz. 545, 549, 490 P.2d 551, 555 (1971). ¶11 Citing Temple v. Synthes Corp., Ltd., 498 U.S. 5, 7 (1990), North argues that Bullhead City is a joint tortfeasor or co-conspirator and therefore not an indispensable party. Temple, a plate and screw device, manufactured by In Synthes Corp., Ltd., was surgically implanted in the plaintiff s lower spine by a physician. Id. at 5. After the surgery, the screws from the device broke off inside plaintiff s back. The plaintiff filed separate suits: (1) against Id. at 6. Synthes in federal district court for defective design and manufacture of the device; and (2) against malpractice and negligence. the Id. physician and hospital for The district court ordered the plaintiff to add the physician and doctor to the suit against Synthes, based principally on the court s finding that joinder was [in] the interest of judicial economy. Id. The plaintiff failed to join the physician and the hospital and the case was dismissed with prejudice. Id. The United States Supreme Court 7 reversed, finding that the hospital, physician, and Synthes were joint tortfeasors. Id. at 7. The Court recognized that [i]t has long been the rule that it is not necessary for all joint tortfeasors to be named as defendants in a single lawsuit. Id. The Court found that the physician and hospital were merely permissive parties, and should not have been required to be joined as parties to the suit against Synthes. ¶12 Id. at 8. Unlike Temple, here there are no separate allegations against various parties, such as the defective design allegation against Synthes and the malpractice and negligence claim against the physician and hospital; instead, all claims relate to an allegation of a fraudulent acquisition of real property through a quiet title action. Synthes and the physician were not alleged to have worked together to commit a tort, and Synthes could have been found liable for defective design regardless of whether the physician and hospital were guilty of negligence. Here, as repeatedly alleged in the complaint, Defendants assisted Bullhead City in fraudulently obtaining the Property and therefore Defendants liability depends on whether Bullhead City committed wrongdoing, unlike the situation in Temple. A finding on liability on behalf of Defendants necessarily means that Bullhead City improperly acquired the Property. ¶13 In its reply brief, North contends that it is entitled to pursue its claims against Defendants because their conduct 8 was independent of any (Emphasis in original). wrong committed by Bullhead City. North therefore asserts that a finding of liability against Defendants would not necessarily establish the wrongfulness of Bullhead City s conduct, and a ruling that Bullhead City s original acquisition of the property was lawful would not absolve them of liability. us to any allegation or claim But North does not direct in the complaint against Defendants which is not tied to the alleged improper conduct of Bullhead City. Our reading of the complaint confirms that North repeatedly ties together the alleged wrongful acts committed by Defendants and Bullhead City. For example, North asserted that Bullhead Property City acquired the through a series of improper and unlawful acts and had help from Kohner and Polese in accomplishing that goal. North also alleged that Bullhead City perpetrated a fraud against Mohave County Superior Court in pursuing the quiet title action, because, even though Bullhead City knew that Kohner was not in fact an officer of North & Co.[,] it still chose to serve the action upon Kohner. Polese was alleged to have been aware of the Further, efforts of Bullhead City to obtain [a] fraudulent Stipulation from Kohner. Regarding the Stipulation, North alleged that Bullhead City, Kohner, and Polese knew North & Co. had been dissolved in 1993 and Kohner had no authority whatsoever to act on behalf of North & Co. North also asserted that Bullhead City, Polese, and 9 Kohner intended conduct to deprive [North] of [its] interests in the Property. City, Polese, Additionally, and Kohner North knowingly believed failed that to Bullhead disclose [] information to the Mohave County Superior Court, intending to deceive the court into signing the judgment and decree quieting title. ¶14 These specific allegations made by North separate this case from the usual joint-and-several liability situation such as that presented in Temple. See 498 U.S. at 7; Ariz. R. Civ. Proc. 19 State Bar Committee Note to 1966 Amendment (recognizing the settled principle that a tortfeasor with the usual jointand-several liability is merely a permissive party). On the record before us, we conclude that the trial court correctly determined that Bullhead City was a party that shall be joined under Rule 19(a). 2 ¶15 If a person should be joined as a party under Rule 19(a), but cannot be . . . the court shall determine whether in equity and good conscience the action should proceed among the parties before it, or should be dismissed, the absent person 2 We note that North did not provide us with a transcript of the hearing on the motion to dismiss. See Rancho Pescado, Inc. v. Nw. Mut. Life Ins. Co., 140 Ariz. 174, 189, 680 P.2d 1235, 1250 (App. 1984) ( It is, of course, the duty of the appealing party to insure that all necessary transcripts of evidence find its way to this court. ). In the absence of a transcript, we presume it would support the trial court s findings. See Baker v. Baker, 183 Ariz. 70, 73, 900 P.2d 764, 767 (App. 1995). 10 being thus regarded as indispensable. Ariz. R. Civ. P. 19(b). Here, we need not address the Rule 19(b) factors, as North has never disputed the trial court s conclusion that it could be joined as a party. ¶16 On appeal, North suggests that adding Bullhead City as a party would be improper because of the bankruptcy court case. Citing Pacesetter Systems, Inc. v. Medtronic, Inc., 678 F.2d 93 (9th Cir. 1982), North argues that because the federal case was filed first, it created a presumption of priority for the first-filed suit in order to avoid duplicative litigation and protect a plaintiff s choice of forum. that Arizona s venue statutes, North also suggests Arizona Revised Statutes ( A.R.S. ) section 12-401(1), (12), (15), (16) (2003), would affect whether Bullhead City could be joined, as venue would be proper only in Mohave County, the county in which the municipality is located. ¶17 Neither of these presented to the trial court. arguments, however, was timely North raised them for the first time in its motion for reconsideration, which was filed more than a year after the court issued its minute ordering Bullhead City to be joined as a party. entry ruling Generally we do not consider arguments on appeal that were raised for the first time at the trial court in a motion for reconsideration. 11 Evans Withycombe, Inc. v. W. Innovations, Inc., 215 Ariz. 237, 240, ¶ 15, 159 P.3d 547, 550 (App. 2006). ¶18 do Even assuming North timely raised these arguments, we not find them persuasive. Regarding the bankruptcy litigation, the first-filed presumption discussed in PaceSetter applies to federal courts of concurrent jurisdiction, not state and federal court cases. 678 F.2d 93, 94-95 ( There is a generally recognized doctrine of federal comity which permits a district court to decline jurisdiction over an action when a complaint involving the same parties and issues has already been filed in another correctly noted, district. ). the Moreover, bankruptcy court as the trial litigation and court this litigation do not necessarily involve the same issues. ¶19 As to venue, while the statute permits the suit to be brought within the county in which the plaintiff resides, it does not County. venue preclude Bullhead City See A.R.S. § 12-401. after being joined as from being sued in Maricopa If Bullhead City objected to a party, then the court could evaluate whether venue was improper, and the appropriate remedy under Rule 19(a). The question of venue is determining whether a party shall be joined. irrelevant to Ariz. R. Civ. Proc. 19(a) ( A person who is subject to service of process and whose joinder will not deprive the court of jurisdiction over the subject matter of the action shall be joined as a party in 12 the action[.] ). At this point, North s arguments as to what obstacles could lay ahead with regard to proper venue are purely speculative. CONCLUSION ¶20 order For the foregoing reasons, we affirm the trial court s dismissing North s complaint for failure to join an indispensable party. /s/ _________________________________ MICHAEL J. BROWN, Presiding Judge CONCURRING: /s/ ______________________________ JON W. THOMPSON, Judge /s/ ______________________________ SHELDON H. WEISBERG, Judge 13

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