Poling/Lightwave v. Paterno

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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 MICHAEL and KARI POLING, husband and wife; ALLEN and KAREN ROBERTSON, husband and wife; CARL GROVES, a single individual; LIGHTWAVE TECHNOLOGIES, LLC, an Arizona limited liability company; NEW SOURCES INVESTMENTS, LLC, an Arizona limited liability company, ) ) ) ) ) ) ) ) ) ) Plaintiffs/Counter) Defendants/Appellees, ) ) v. ) ) ) GREG and ANNA PATERNO, husband ) and wife; GARY PATERNO, JR.; HOLLY PATERNO; GARY PATERNO SR.; ) ) MICROGROUP MANUFACTURING, INC., ) an Arizona corporation, ) ) Defendants/CounterClaimants/Appellants. ) ) 1 CA-CV 10-0472 DIVISION ONE FILED: 06/23/2011 RUTH A. WILLINGHAM, CLERK BY: DLL DEPARTMENT D MEMORANDUM DECISION (Not for Publication Rule 28, Arizona Rules of Civil Appellate Procedure) Appeal from the Superior Court in Maricopa County Cause No. CV2007-052861 The Honorable Stephen J.P. Kupiszewski, Judge Pro Tempore AFFIRMED Broening Oberg Woods & Wilson By Robert T. Sullivan Brian W. Purcell Attorneys for Appellee Lightwave Technologies, LLC Phoenix Tiffany & Bosco, P.A. Phoenix By Robert A. Royal Matthew McKinney Former Counsel for Plaintiffs/Counter-Defendants/Appellees Rhoads & Associates, PLC By Douglas C. Rhoads And D. Thomas Law Offices LTD By Douglas E. Thomas Attorneys for Defendants/Counter-Claimants/Appellants Phoenix Phoenix O R O Z C O, Judge ¶1 This is an appeal from a judgment and award of attorneys fees in favor of Michael and Kari Poling, Allan and Karen Robertson, Carl Groves, Lightwave Technologies, LLC, and New Sources Investments, LLC (Plaintiffs). For the following reasons, we affirm the judgment and award of attorneys fees. FACTUAL AND PROCEDURAL BACKGROUND ¶2 and Plaintiffs initially filed a complaint against Greg Anna Paterno, Gary Paterno, Jr., Holly Paterno, Gary Paterno, Sr., and MicroGroup Manufacturing, Inc. (MicroGroup) arising out of an agreement between the parties. MicroGroup answered and filed a counter-claim against Plaintiffs. One of the claims in the counter-claim alleged intentional interference with a third-party contract by Plaintiffs and Plaintiffs former attorney, Jeffrey Hernandez (Hernandez). ¶3 MicroGroup alleged that Hernandez misrepresented the status of their contractual relationship between Plaintiffs 2 and MicroGroup in an email to a potential buyer of MicroGroup. MicroGroup claimed that this interfered with the sales agreement between motion MicroGroup to dismiss and the the third-party. action against Hernandez him. The filed trial a court treated Hernandez motion as a motion for summary judgment and dismissed all claims against Hernandez with prejudice.1 ¶4 Plaintiffs then filed a motion for partial summary judgment arguing that if Hernandez, as their agent, was not liable to MicroGroup, then Plaintiffs, as the principals, could not be liable for any claims that sought to impute liability based on Hernandez actions. The trial court granted Plaintiff s motion for partial summary judgment without comment. 1 The trial court did not state any reasons for its decision. The court also awarded attorneys fees to Hernandez after finding no legal or factual basis for MicroGroup s claims against Hernandez and that the claims were pursued in bad faith. MicroGroup appealed from this judgment in a separate appeal, 1 CA-CV 10-0131. A different panel of this court affirmed the award of attorneys fees. Paterno v. Hernandez, 1 CA-CV 10-0131 (Ariz. App. April 26, 2011). After Hernandez was dismissed from the case, Plaintiffs filed a motion to assert a third-party complaint against Hernandez for any liability being asserted against them as a result of his conduct. The trial court denied this motion, finding a third-party complaint against Hernandez would not involve issues crucial to determining the liability between Plaintiffs and MicroGroup. The court expressed no opinion as to whether Hernandez is currently or prospectively liable to [Plaintiffs]. 3 ¶5 Plaintiffs filed a proposed form of judgment and an attorneys fees application seeking fees pursuant to Arizona Revised Statutes (A.R.S.) sections 12-341.01.A., C. (2003) and 12-349 (2003). certification Plaintiffs proposed form of judgment included a that there was no just reason for delay in entering the judgment pursuant to Rule 54(b), Arizona Rules of Civil Procedure (Rule 54(b)). MicroGroup objected to the proposed judgment including Rule 54(b) language, arguing that a claim for respondeat superior liability remained in the counterclaim. ¶6 The Plaintiffs trial on the court entered intentional judgment interference in with favor of third-party contract claim and any other claims arising from Hernandez alleged conduct. The judgment awarded attorneys fees and costs to Plaintiffs based on MicroGroup pursuing these claims in bad faith. The judgment included language pursuant to Rule 54(b), stating that there was no just reason for delay in the entry of judgment. MicroGroup filed a motion for new trial, which the trial court denied. of appeal. We have MicroGroup filed a timely notice jurisdiction 120.21.A.1. (2003). 4 pursuant to A.R.S. § 12- DISCUSSION Rule 54(b) Certification ¶7 On appeal, MicroGroup alleges the trial court: abused its discretion by including language pursuant to Rule 54(b), certifying that the judgment was final and appealable; erred in entering partial summary judgment in favor of Plaintiffs; and abused its discretion in awarding attorneys fees to Plaintiffs. ¶8 MicroGroup contends that the trial court erred by including a Rule 54(b) certification in the judgment because there were still unresolved claims that would require the appellate court to decide the same issue more than once in a subsequent appeal. We review the trial court s decision that a judgment is final as to one of several claims under an abuse of discretion standard. See Cont l Cas. v. Superior Court, 130 Ariz. 189, 191, 635 P.2d 174, 176 (1981). ¶9 In this case, the complaint and several of the counterclaims remain unresolved by the judgment now on appeal. Thus, the judgment is not final as to all claims. However, Rule 54(b) allows the trial court to render appealable an otherwise interlocutory judgment upon an express determination that there is no just reason for delay and upon an express direction for the entry of judgment. Rule 54(b). Certification under Rule 54(b), however, does not give this court jurisdiction to 5 decide an appeal if the judgment in fact is not final, i.e., did not dispose of at least one separate claim of a multi-claim action. Davis v. Cessna Aircraft Corp., 168 Ariz. 301, 304, 812 P.2d 1119, 1122 (App. 1991). [A] claim is separable from others remaining to be adjudicated when the nature of the claim already determined is such that no appellate court would have to decide the same issues more than once even if there are subsequent appeals. Cont l Cas. v. Superior Court, 130 Ariz. 189, 191, 635 P.2d 174, 176 (1981), quoting Curtiss-Wright Corp. v. Gen. Elec. Co., 446 U.S. 1, 8 . . . (1980). Grand v. Nacchio, 214 Ariz. 9, 16, ¶ 17, 147 P.3d 763, 770 (App. 2006). ¶10 factual The counts in Plaintiffs complaint do not raise any or legal issues judgment on appeal. similar to those resolved by the MicroGroup argues that count two in its counterclaim alleged that Plaintiffs were vicariously liable for Hernandez actions under the theory of respondeat superior. ¶11 claims Plaintiffs seeking Hernandez to actions. sought impute This partial liability would summary to judgment Plaintiffs include both on all based on intentional interference with third-party contracts and respondeat superior. The trial court granted the motion without limitation as to a specific claim; it dismissed all claims that sought to impute liability to Plaintiffs for Hernandez acts. We agree with Plaintiffs that the prior grant of partial summary judgment was 6 for all claims seeking to impute liability to Plaintiffs based on Hernandez actions, including respondeat superior. ¶12 respondeat Because the superior partial and summary intentional judgment resolved interference with the third- party contract claims, the remaining unresolved counterclaims will not require an appellate court to revisit these issues in any subsequent appeal.2 Therefore, the trial court did not abuse its discretion in including Rule 54(b) language. The judgment was final and appealable pursuant to A.R.S. § 12-2101.B. (2003).3 Partial Summary Judgment for Plaintiffs ¶13 respondeat MicroGroup superior alleged and that Plaintiffs intentional were interference liable with for third- 2 The remaining counterclaims are for joint venture among the original plaintiffs, breach of implied duty of good faith and fair dealing, breach of contract, declaratory relief, violation of A.R.S. § 47-9625.B. (2005), conversion, abuse of process, fraudulent conveyance, and punitive damages. 3 Although we are affirming certification under Rule 54(b), we do so because of the principles announced by our supreme court. We do not encourage the certification of a judgment as final in a partial summary judgment as was done in this case, because it resolves only a portion of the entire case; does not dismiss or eliminate any party from the litigation; and certification as final under Rule 54(b), as was done here, results in piecemeal litigation. Piecemeal litigation is not only costly to the parties as it requires them to litigate issues arising out of the same background transaction or events in two different courts but is disruptive to the orderly administration of justice as it requires these courts to repeatedly master these same matters. We affirm this trial court s Rule 54(b) ruling only because of our deferential standard of review. 7 party contract based on Hernandez potential buyer of MicroGroup. misrepresentations to a These claims are not based on any independent acts of Plaintiffs themselves; only Hernandez actions. ¶14 The law is clear that where one defendant would be liable for committing the act and the other [liable] solely by operation of law, a finding that the first is not requires that the second be free from liability. liable Wiper v. Downtown Dev. Corp. of Tucson, 152 Ariz. 309, 311, 732 P.2d 200, 202 (1987) (citing Rosenzweig & Son Jewelers, Inc. v. Jones, 50 Ariz. 302, 310, 72 P.2d 417, 420 (1937)); see also Ford v. Revlon, Inc., 153 Ariz. 38, 42, 734 P.2d 580, 584 (1987) (recognizing that when the master s liability is based solely on the negligence of his servant, a judgment in favor of the servant is a judgment in favor of the master. ) judgment was entered in favor of Hernandez on The fact that these claims compels the entry of judgment in favor of Plaintiffs as the principals of Hernandez. ¶15 We reject MicroGroup s argument that judgment was improper because Hernandez, as an attorney, had immunity which the Plaintiffs do not. its reasons for Although the trial court did not state granting judgment in favor of Hernandez, Hernandez did not raise the issue of immunity in his motion to 8 dismiss. Hernandez only argued that he was entitled judgment on the intentional interference with the third-party contract claim because he acted properly. Immunity was not an issue in his case. ¶16 Equally unavailing is MicroGroup s argument that the doctrine of because the issue circumstances. preclusion claims is against unavailable Hernandez to Plaintiffs involved different The judgment in favor of Plaintiffs was properly entered based on the legal principle that when a principal s liability is based solely on the acts of his agent, a judgment in favor principal. of the agent compels a judgment in favor of the See Ford, 153 Ariz. at 42, 734 P.2d at 584; see also Wiper, 152 Ariz. at 311, 732 P.2d at 202. ¶17 actions MicroGroup allegedly seems fell to argue that the course outside because and Hernandez scope of his authority, Plaintiffs were somehow independently liable to them and could only seek indemnity from Hernandez. complaint did not allege any independent bases However, the under which Plaintiffs could be liable for intentional interference with a third-party contract. See Restatement (Third) of Agency § 7.03 (2006).4 4 A principal may be following circumstances: liable 9 to a third-party under the ¶18 entered Therefore, judgment in we find favor that of the Plaintiffs trial on court all properly claims that sought to impute liability to Plaintiffs based on Hernandez actions, which include the intentional interference third-party contract and the respondeat superior counts. Attorneys Fees Award (1) A principal is subject to direct liability to a third party harmed by an agent's conduct when (a) as stated in § 7.04, the agent acts with actual authority or the principal ratifies the agent's conduct and (i) the agent's conduct is tortious, or (ii) the agent's conduct, if that of the principal, would subject the principal to tort liability; or (b) as stated in § 7.05, the principal is negligent in selecting, supervising, or otherwise controlling the agent; or (c) as stated in § 7.06, the principal delegates performance of a duty to use care to protect other persons or their property to an agent who fails to perform the duty. (2) A principal is subject to vicarious liability to a third party harmed by an agent's conduct when (a) as stated in § 7.07, the agent is an employee who commits a tort while acting within the scope of employment; or (b) as stated in § 7.08, the agent commits a tort when acting with apparent authority in dealing with a third party on or purportedly on behalf of the principal. Restatement (Third) of Agency § 7.03. 10 with a ¶19 The trial court awarded attorneys fees to Plaintiffs based on A.R.S. §§ 12-341.01.A., C., and -349. discretionary award of attorneys fees 341.01.A., for an abuse of discretion. under We review a A.R.S. § 12- See Fulton Homes Corp. v. BBP Concrete, 214 Ariz. 566, 569, ¶ 9, 155 P.3d 1090, 1093 (App. 2007). However, an award of fees under A.R.S. §§ 12- 341.01.C., and -349 is mandatory and we review such an award under a clearly erroneous standard. See Phoenix Newspapers, Inc. v. Dep t of Corr., 188 Ariz. 237, 243, 934 P.2d 801, 807 (App. 1997). ¶20 to On appeal, and in the trial court, MicroGroup objected the award of attorneys fees pursuant to A.R.S. § 12- 341.01.A., which authorizes an award of fees to the successful party in a contract action. However, the judgment specifically found that MicroGroup pursued these claims in bad faith. supports the award pursuant to A.R.S. § 12-341.01.C. This MicroGroup does not allege that the court erred or abused its discretion in awarding fees pursuant to this section.5 The only argument MicroGroup raises regarding the award of attorneys fees is that the intentional interference with a third-party contract is a 5 A party s failure to object to the lack of findings at the trial court precludes the party from raising the argument on appeal. In re Marriage of Pownall, 197 Ariz. 577, 583, ¶ 27, 5 P.3d 911, 917 (App. 2000). 11 tort, not a contract action, so fees were not appropriate under A.R.S. § 12-341.01.A. We conclude MicroGroup has waived any objection to the fee award under A.R.S. §§ 12-341.01.C. or -349.6 ¶21 MicroGroup states that Plaintiffs ongoing liability . . . refutes an award under A.R.S. § 12-349. tort To the extent this constitutes an objection to the award pursuant to A.R.S. § 12-349, we reject it. First, there is objection to the award under A.R.S. § 12-341.01.C. still no Second, the fact that MicroGroup thinks it raised a correct argument to dispute the award of attorneys fees does not establish that the claims were not harassing, groundless, and brought in bad faith. We agree with the trial court s implicit conclusion that once the claims against Plaintiffs attorney were dismissed, it constituted harassment and bad faith to continue to assert the same groundless claims against Plaintiffs. Accordingly, we affirm the award of attorneys fees. Attorneys Fees on Appeal 6 Plaintiffs argue that this court should also find waiver based on MicroGroup s failure to respond to Plaintiffs fee application. However, MicroGroup objected to the award of fees in its objection to Plaintiffs form of judgment and again in their motion for new trial. As noted above, neither of these objections disputed the appropriateness of the award under A.R.S. §§ 12-341.01.C. or -349. 12 ¶22 MicroGroup requests an award of their attorneys fees on appeal pursuant to ARCAP 21. We find no basis upon which to award fees to MicroGroup on appeal and deny the request. CONCLUSION ¶23 We affirm the Rule 54(b) judgment in favor of Plaintiffs on the intentional interference with a third-party contract and respondeat superior claims as well as the award of attorneys fees. Each party shall pay its own attorneys fees on appeal. /S/ ___________________________________ PATRICIA A. OROZCO, Judge CONCURRING: /S/ ____________________________________ PATRICIA K. NORRIS, Presiding Judge /S/ ____________________________________ JOHN C. GEMMILL, Judge 13

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