Cal X-Tra v. W.V.S v. Holdings, L.L.C.
229 Ariz. 377
| Ariz. Ct. App. | 2012Background
- 10K LLC and related entities engaged in a Sun Valley real estate development; Phoenix Holdings controlled 10K’s affairs as manager under an operating agreement.
- 2002 Mangum Judgment and 2002 Breycliffe Agreement set terms for closing; 10K later contested these, alleging fiduciary breaches and improper conduct by Phoenix Holdings.
- Brecycliffe/WVSV assigned interests to WVSV; WVSV began paying Breycliffe obligations and sought to enforce the 2002 Mangum Judgment in 2003.
- Taylor documents (a secret disk) surfaced in 2006 showing possible ties between Phoenix Holdings, Breycliffe, and WVSV, prompting 10K to seek relief from judgments under Rule 60(c).
- Trial court in 2007–2008 vacated the Galati Judgments (2003 action) as products of extrinsic fraud and awarded restitution; court also awarded and then re-evaluated attorneys’ fees under §29-833(A).
- Arizona Court of Appeals consolidated the 2006 and 2003 actions; held extrinsic fraud invalidated the Galati Judgments, but §29-833(A) fee award was improper as a fee-sharing rather than fee-shifting provision.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Extrinsic fraud and Rule 60(c) relief | 10K asserts Galati Judgments were procured by extrinsic fraud. | WVSV argues law-of-the-case and finality bar relief; no fraud shown. | Galati Judgments vacated due to extrinsic fraud; Rule 60(c) relief proper. |
| Law of the case | Taylor documents reveal fraud not considered earlier; law of the case should not bar relief. | Prior decision foreclosed new challenges to Galati Judgments. | Law of the case did not bar relief given new fraud evidence. |
| Election of remedies | 10K did not voluntarily elect an inconsistent remedy and may pursue remand relief. | 10K elected damages by pursuing 2003 action; thus cannot unwind at will. | No voluntary election shown; remand possible for remedy determination. |
| Constructive trust | Constructive trust over Sun Valley Property appropriate to unwind unjust enrichment. | Equitable relief premature; balancing of equities contingent on case posture. | No summary judgment on constructive trust; remand for further consideration. |
| Attorneys' fees under A.R.S. § 29-833(A) | § 29-833(A) authorizes reasonable fees in derivative actions; 10K entitled to fees. | § 29-833(A) is a fee-sharing statute, not fee-shifting; WVSV should not pay. | Statutory interpretation favors fee-sharing; trial court erred in awarding § 29-833(A) fees to 10K. |
Key Cases Cited
- Dockery v. Cent. Ariz. Light & Power Co., 45 Ariz. 434 (1935) (extrinsic fraud may justify vacating a judgment)
- Vazquez v. Dreyfus, 34 Ariz. 184 (1928) (fraud vitiates everything touched; fraud may be attacked anytime)
- Lockett v. Drake, 43 Ariz. 357 (1934) (fraud vitiates transactions; relief may be pursued to correct)
- Steer v. Eggleston, 202 Ariz. 523 (2002) (derivative-fee sharing analogy for § 29-833 analysis)
- In re Thurston, 199 Ariz. 215 (App. 2000) (fiduciary duty breach may support extrinsic fraud findings)