326 P.3d 335
Ariz. Ct. App.2014Background
- Mirehandanis appeal dismissal of their complaint against BMO Harris Bank and TradeCor Desert Sky II, LLC.
- Mirehandanis are managing members of SS Quality Fuels, LLC, which borrowed over $2,000,000 from M&I (now BMO) secured by deeds of trust and personal guarantees.
- Quality defaulted in 2009; forbearance extended to 2010; BMO sold its security interests to TradeCor in 2010.
- TradeCor sued Mirehandanis in a prior case for breach of the personal guarantees; judgment entered against Mirehandanis in 2011.
- Present action filed in 2011 asserts various claims against BMO and TradeCor; trial court held TradeCor claims were compulsory counterclaims barred by res judicata and extended to BMO.
- Arizona Court of Appeals affirmed dismissal of TradeCor but reversed as to BMO, remanding for further proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Were Mirehandanis' TradeCor claims compulsory counterclaims in the prior case? | Claims arise from same transaction/occurrence as prior suit. | TradeCor claims were not pled in prior case; no compulsory counterclaims against TradeCor. | TradeCor claims were compulsory counterclaims and barred. |
| Is BMO an 'opposing party' under Rule 13(a) for purposes of compulsory counterclaims? | BMO is in privity with TradeCor via assignment and is entitled to res judicata protections. | BMO was not a party to the prior action and not an 'opposing party'; Rule 13(a) does not reach it. | BMO is not an opposing party; cannot be treated as compulsory counterclaim defendant. |
| Did the trial court err in applying claim preclusion to bar Mirehandanis' present claims against TradeCor? | Claims are not compulsory counterclaims; preclusion does not apply. | Compulsory counterclaim doctrine and related preclusion apply; claims barred. | Yes; as to TradeCor, the claims were properly barred as compulsory counterclaims. |
Key Cases Cited
- Lansford v. Harris, 174 Ariz. 413 (App. 1992) (definitive rule on compulsory counterclaims and claim preclusion)
- Technical Air Products, Inc. v. Sheridan-Gray, Inc., 103 Ariz. 450 (1968) (transaction/occurrence test for compulsory counterclaims)
- Occidental Chem. Co. v. Connor, 124 Ariz. 341 (1979) (policy favoring efficiency of Rule 13(a))
- Transamerica Occidental Life Ins. Co. v. Aviation Office of Am., Inc., 292 F.3d 384 (3d Cir. 2002) (broadening concept of 'opposing party' in some contexts)
- Coleman v. City of Mesa, 230 Ariz. 352 (2012) (de novo standard for reviewing dismissal; proper legal standards applied)
- Fidelity Sec. Life Ins. Co. v. State, 191 Ariz. 222 (1998) (pleading standards and public records consideration on Rule 12(b)(6))