Brian M. EZELL, Plaintiff/Appellee, v. Jeff QUON, Defendant/Appellant.
No. 1 CA-CV 09-0297
Court of Appeals of Arizona, Division 1, Department E
June 17, 2010
233 P.3d 645
¶26 For the foregoing reasons, we affirm the trial court‘s grant of New Falls’ motion to dismiss AMC Trust‘s garnishment proceedings.
CONCURRING: JON W. THOMPSON, Judge and PETER B. SWANN, Judge.
Paul Lenkowsky, Bullhead City, Attorney for Plaintiff/Appellee.
HALL, Judge.
OPINION
¶1 Jeff Quon appeals from the trial court‘s denial of his motion for relief from a default judgment in favor of Brian Ezell pursuant to
FACTS AND PROCEDURAL HISTORY
¶2 We view the facts in the light most favorable to upholding the trial court‘s ruling on a motion to set aside a default judgment. Goglia v. Bodnar, 156 Ariz. 12, 20, 749 P.2d 921, 929 (App.1987) (citing Camacho v. Gardner, 104 Ariz. 555, 559, 456 P.2d 925, 929 (1969)). Quon and Ezell entered into an oral partnership agreement in late 2005 or early 2006 in which they agreed to purchase, together, a one-half interest in the “Channel Island Market” convenience store. Under the terms of their agreement, Quon and Ezell would each tender $15,000.00 to purchase Ralph Delgado‘s one-half interest in the store. Quon and Ezell agreed, however, that Ezell would remain a “silent partner” and neither Delgado nor the other one-half interest holder, Kathleen David, would know that Ezell contributed one-half of the purchasing funds. Pursuant to the oral agreement, Quon and Ezell would split equally all profits distributed to Quon. On January 31, 2006, Ezell gave Quon a cashier‘s check made payable to Delgado in the amount of $15,000.00.
¶3 Without Ezell‘s knowledge, Quon entered into an agreement with Delgado to purchase Delgado‘s one-half interest in the store for only $20,000.00. Quon tendered Ezell‘s $15,000.00 check to Delgado, but requested $1,000.00 cash back. Quon then signed a promissory note to pay Delgado the remaining $6,000.00 owed under their purchase agreement. Quon did not pay any monies owed to Delgado on the note.
¶4 On September 10, 2007, Ezell formally demanded that Quon disclose an accounting of profits and losses from the partnership and a distribution of all profits. Quon did not comply with the demand.
¶5 On November 16, 2007, Ezell filed a complaint against Quon alleging breach of fiduciary duties, fraudulent misrepresentation, unjust enrichment, and conversion. On December 12, 2007, after Quon failed to respond to the complaint, Ezell filed an application for default judgment. On the same day, the clerk of the court entered default against Quon and a default hearing was scheduled with the court.
¶6 On January 16, 2008, Ezell filed a motion to vacate the default hearing, explaining that the parties had agreed to extend the time for defendant‘s answer until January 31, 2008. On February 11, 2008, however, Ezell requested that the default hearing be rescheduled because Quon failed to file an answer by the extension date. On February 14, 2008, Quon filed an answer. Ezell moved to strike the answer as untimely, which the trial court denied. Instead, the trial court confirmed the entry of default and ordered that Quon was entitled to appear at the default hearing and cross-examine Ezell‘s witnesses, but he was precluded from presenting any substantive testimony.
¶7 Ezell and Kathleen David testified at the default hearing. Confirming the allegations set forth in his complaint, Ezell testified that he and Quon orally agreed to jointly purchase Delgado‘s interest in the convenience store for $30,000.00, with each paying $15,000.00 cash and receiving an equal distribution of all profits. When asked about his status as a “silent” partner, Ezell testified that Quon told him that Kathleen David did not want two partners, so their plan was to
¶8 David testified that she was informed of and consented to Delgado‘s sale of his interest in the business to Quon. At that time, she had no knowledge that Ezell was involved in the new partnership agreement. David testified that she handled distribution of the business‘s profits and that she distributed $6,300.00 in profits to Quon between April 2007 and August 2007. She had no record of the time period before April 2007, but believed Quon only received $1,000.00 before that time. She also testified that the business paid Quon‘s cellular phone bill between January 2006 and August 2007, totaling approximately $3,000.00.
¶9 After taking the matter under advisement, the trial court entered judgment in favor of Ezell. The trial court awarded Ezell: (1) compensatory damages in the amount of $7,400.00; (2) punitive damages in the amount of $12,800.00; (3) an equitable right to purchase the remaining fifteen percent interest in the business from Delgado for $6,000.00 “to divest [Quon] of any interest in the business as [Quon] has converted [Ezell‘s] contribution, has been unjustly enriched through the use of [Ezell‘s] money, has breached fiduciary duties to [Ezell], and has made fraudulent misrepresentations to induce [Ezell] to purchase an interest in the business“; and (4) his attorneys’ fees attributable to the unjust enrichment claim.
¶10 Quon timely appealed from the trial court‘s judgment and this court dismissed the appeal for lack of jurisdiction. On November 20, 2008, Quon filed a motion to set aside the judgment pursuant to
¶11 The trial court denied Quon‘s motion for
Defendant was on notice as to the status of the partnership issue. The allegations in the Complaint, as well as the testimony, established that there was a partnership between [Ezell] and [Quon] concerning an additional partnership interest in the business.
The testimony further established that [Ezell] had tendered funds towards the purchase of the business interest and [Quon] did not. [Quon] had further kept funds out of [Ezell‘s] initial cash contribution to the partnership. [Quon] received a loan from a third party, Mr. Delgado, to complete the purchase of Mr. Delgado‘s partnership interest. Said loan has not been repaid. Hence, [Quon] has not contributed towards the partnership interest in the business that was purchased.
In Count 1 of the Complaint, [Ezell] alleged a breach of fiduciary duty. [Ezell] requested an accounting of the business, his share of profits, and specifically requested a Declaration that [Ezell] held an interest in the business, but that [Quon] would be barred and estopped from claiming any such interest.
Additionally, [Quon] was placed on notice of the request for punitive damages given the prayers within the Complaint. [Quon‘s] counsel did not object to the request for punitive damages, and the same is deemed waived. Additionally, the Complaint itself can be amended to conform to the testimony produced in open Court. [Ezell] introduced testimony concerning [Quon‘s] breach of the fiduciary duty, the
fraudulent misrepresentations, and the conversion. ....
Additionally, the unclean hands were specifically the dealings between [Quon] and [Ezell]. The conduct of [Quon] that gave rise to the Judgment was testified to by [Ezell] and [Ezell‘s] witnesses, and again [Quon] had the opportunity to have counsel cross-examine them. To the extent that both parties had unclean hands towards the non-party business partners, it was ultimately established that [Ezell] came clean to the partners and [Quon] did not.
....
It is hard pressed for [Quon] to claim that he was not on notice of the relief requested nor the factual allegations that gave rise to the cause of action and the relief requested in [Ezell‘s] prayer. Defendant failed to move to vacate the Entry of Default. Defendant litigated the matter and failed to raise the objections now stated on the record. As [Ezell] gave adequate notice he was seeking punitive damages, and provided factual allegations that would give rise to an award of punitive damages, as well as the pleading can be amended to conform to the proof, the Court cannot find that there is a basis for relief to [Quon] under
Rule 60(c) .
¶12 Quon timely appealed. We have jurisdiction pursuant to
DISCUSSION
¶13 At the outset of his appeal, Quon contends that this court incorrectly dismissed his initial appeal for lack of jurisdiction. Although he acknowledges that a party seeking relief from a default judgment generally must move to set aside the default judgment before filing an appeal, see Hirsch v. Nat‘l Van Lines, Inc., 136 Ariz. 304, 311-12, 666 P.2d 49, 56-57 (1983) (holding that a direct appeal from a default judgment is not permitted unless the default judgment “was not authorized by Rule 55 or if there is a question regarding either personal or subject matter jurisdiction“), he argues that this general rule does not apply in this case because the issue “is solely whether the default judgment exceeded the scope of the pleadings and was without notice.”
¶14 Here, there is no claim that the trial court failed to comply with
¶15 Generally, we uphold a trial court‘s denial of a motion for relief under
¶16 As set forth in
¶17 Although Quon referenced
¶18 “A judgment by default shall not be different in kind from or exceed in amount that prayed for in the demand for judgment.”
¶19 As explained by the supreme court, however, “a complaint need not be technically sufficient” to support a default judgment. Cockerham, 127 Ariz. at 234, 619 P.2d at 743. Rather, it need only “contain a plain and concise statement of the cause of action and give defendants fair notice of the allegations as a whole.” Id. The supreme court further explained that an “erroneous” judgment is not necessarily “void” and only errors that undermine jurisdiction render a judgment void under
I. Award of Punitive Damages
¶20 Quon contends that the trial court‘s award of punitive damages was beyond the scope of the complaint. He argues that Ezell failed to allege conduct that would warrant an award of punitive damages and that the relief requested in the complaint did not adequately place him on notice that such relief may be awarded.1 These claims are without merit.
¶21 To obtain punitive damages, a plaintiff must demonstrate that the defendant either “intended to injure the plaintiff” or “consciously pursued a course of conduct knowing that it created a substantial risk of harm to others.” Gurule v. Ill. Mut. Life and Cas. Co., 152 Ariz. 600, 602, 734 P.2d 85, 87 (1987) (internal quotation omitted). The plaintiff may meet this burden of proof by showing that the defendant‘s conduct “was motivated by spite, actual malice, or intent to defraud.” Id. at 602-03 n. 3, 734 P.2d at 87-88 n. 3.
¶22 Here, Ezell alleged that Quon fraudulently induced him to tender $15,000.00 to purchase a partnership interest and that Quon deceptively “pass[ed] off [Ezell‘s] contribution money as his own.” Thus, the facts as set forth in the complaint demonstrate that Quon intended to defraud Ezell, as well as David and Delgado, and that
¶23 Ezell also requested an award of punitive damages “to be determined at trial” in his prayer for relief. Contrary to Quon‘s argument,2 “[c]laims for punitive damages carry no special pleading requirements: ‘a general prayer for punitive damages is sufficient ... to put the defendant on notice’ that punitive damages may be awarded.” Kline v. Kline, 221 Ariz. 564, 572, ¶ 29, 212 P.3d 902, 910 (App.2009) (quoting Tarnoff, 17 Ariz. App. at 245, 497 P.2d at 65). Therefore, the complaint sufficiently alleged conduct and requested relief to support the trial court‘s award of punitive damages.
II. Award of Partnership Interest
¶24 Quon argues that the trial court lacked the “jurisdiction” to divest him of his partnership interest, to declare Ezell a partner with a thirty-five percent ownership interest, and to award Ezell the right to purchase the remainder of Delgado‘s ownership interest for the $6,000.00 owed under the terms of the Quon/Delgado purchase agreement. Specifically, Quon claims that he was not on notice that such relief could be granted. He also claims that Ezell is barred from such equitable relief because he has unclean hands and because David and Delgado did not consent to Ezell‘s purchase of the partnership interest as required pursuant to their partnership agreement. We disagree.
¶25 Pursuant to
¶26 As to Quon‘s claim that Ezell had unclean hands, we note that Ezell, by his own admission, intended to deceive David and Delgado about the true nature of his interest in the convenience store. Quon has not alleged, however, that Ezell acted with unclean hands toward him in this business endeavor. “In order for the doctrine of clean hands to bar a claim for equitable relief, any acts of bad faith or unconscionable conduct by [the plaintiff] must relate to the same activity that is the basis for [the] claim.” Phoenix Orthopaedic Surgeons, Ltd. v. Peairs, 164 Ariz. 54, 59, 790 P.2d 752, 757 (App.1989), disapproved on other grounds by Valley Med. Specialists v. Farber, 194 Ariz. 363, 982 P.2d 1277 (1999). Therefore, Ezell‘s unethical conduct toward David and Delgado does not act as a bar to his claim for equitable relief against Quon. Likewise, with regard to his assertion that the court lacked the “jurisdiction” to award Ezell a partnership interest because Delgado and David did not provide the requisite consent, Quon is not a partner in the business and he therefore lacks standing to challenge the trial court‘s judgment on such grounds. See Goglia, 156 Ariz. at 18, 749 P.2d at 927 (explaining that “standing to raise an appeal is not equivalent to standing to raise a particular argument on appeal. When an error applies to only one party who does not appeal, another party cannot make that argument on its own behalf“).
III. Attorneys’ Fees in the Trial Court
¶27 Quon requests that we set aside the trial court‘s award of attorneys’ fees to Ezell as the successful party pursuant to
Footnotes:
IV. Attorneys’ Fees On Appeal
¶28 Both parties request an award of attorneys’ fees on appeal. Quon cites no basis for his request. In any event, he did not prevail on appeal and we deny his request.
¶29 Ezell likewise cites no authority to support his request for attorneys’ fees. He simply asks that we “issue an order granting attorney‘s [sic] fees and costs [] incurred on this appeal.”
¶30 A party‘s request for attorneys’ fees on appeal must be made pursuant to
When attorneys’ fees are claimed pursuant to statute, decisional law or contract, a request for allowance of attorneys’ fees in connection with the prosecution or defense of the appeal or the prosecution or defense of the case in the superior court shall be made in the briefs on appeal, or by written motion filed and served prior to oral argument or submission of the appeal.
¶31 As our supreme court has recognized,
¶32 Relying on the circumstance that Ezell requested and was awarded attorneys’ fees in the trial court pursuant to
¶33 Our colleague is also concerned that
¶34 As the successful party on appeal, Ezell is entitled to his taxable costs incurred on appeal upon compliance with
Footnotes:
CONCLUSION
¶35 For the foregoing reasons, we affirm the trial court‘s denial of Quon‘s motion to set aside the default judgment.
CONCURRING: SHELDON H. WEISBERG, Presiding Judge.
GEMMILL, Judge, Concurring in part and dissenting in part.
¶36 For the reasons explained by my colleagues in the majority decision, I concur in affirming the trial court‘s denial of Quon‘s motion to set aside the default judgment. But I respectfully dissent from the majority‘s refusal to award the prevailing party, Ezell, an amount of reasonable attorneys’ fees on appeal pursuant to
¶37 From the time he filed this contract action until now, Ezell has sought attorneys’ fees based solely on § 12-341.01, and the record reveals a persistent and unequivocal focus on § 12-341.01 with respect to attorneys’ fees. Section 12-341.01 is specifically cited by Ezell in his complaint. In his untimely answer, Quon requested an award of fees based on § 12-341.01. Following trial, both parties submitted written closing arguments. Ezell again specifically requested fees under § 12-341.01. Quon argued that Ezell should not be awarded fees under § 12-341.01. The trial court concluded that Ezell was entitled to an award of attorneys’ fees for his unjust enrichment claim. Ezell in his application for fees again cited § 12-341.01. The trial court awarded a portion of Ezell‘s requested attorneys’ fees. Later, when the trial court denied Quon‘s motion to set aside the default judgment, the court noted that Quon‘s counsel appeared at the damages hearing and contested the damages, and the court specifically concluded that attorneys’ fees were therefore available in accordance with § 12-341.01.
¶38 Thus, Ezell has consistently sought attorneys’ fees solely on the basis of § 12-341.01. On appeal, we also focused on § 12-341.01 as we considered and rejected Quon‘s request that we set aside the trial court‘s award of fees to Ezell based on § 12-341.01. See ¶ 27 supra.
¶39 Ezell timely requested an award of fees on appeal by making the request in his answering brief, and he complied with the pertinent language of
When attorneys’ fees are claimed pursuant to statute, decisional law or contract, a request for allowance of attorneys’ fees in connection with the prosecution or defense of the appeal or the prosecution or defense of the case in the superior court shall be made in the briefs on appeal, or by written motion filed and served prior to oral argument or submission of the appeal.
¶40 The language of the rule does not specifically require that the basis for awarding fees must be stated in the briefs or by motion prior to argument or submission of the appeal. The majority relies on a requirement not stated in the Rule. In contrast, I submit that we should apply the plain meaning of our rules of procedure. See State v. Aguilar, 209 Ariz. 40, 47, ¶ 23, 97 P.3d 865, 872 (2004) (court rules are normally interpreted by their plain meaning); Ariz. Dep‘t of Revenue v. Superior Court, 189 Ariz. 49, 52, 938 P.2d 98, 101 (App.1997) (same). We should not interpret
¶41 Moreover,
¶42 The majority cites only one supreme court opinion—Roubos—in support of denying fees to Ezell. The Roubos court did write, in dicta, that a party requesting fees “must state the statutory or contractual basis for the award.” 214 Ariz. at 420, ¶ 21, 153 P.3d at 1049. But the court denied fees because the request was untimely, not because the applicant failed to reiterate an obvious statutory basis for the award. Id. And the court did not undertake to explain why
¶43 Several Arizona Court of Appeals opinions have denied fees because the appellate litigant did not state the statutory or other basis for an award of fees. The majority cites thirteen such cases in footnote 3 supra. In none of these opinions, however, does the court explain why the language of
¶44 In my view we should pause and determine if the basis for fees is readily ascertainable, as it is here. I agree that it is the duty of the party seeking fees—not the court‘s duty—to identify the basis for an award of fees. And I agree that Rule 21(c) provides only the procedure for requesting fees and not the legal basis for such an award. See Malad, Inc. v. Miller, 219 Ariz. 368, 373, ¶ 28, 199 P.3d 623, 628 (App.2008). But when, as here, the legal basis for the request of fees is abundantly clear and readily ascertainable, we should exercise our discretion to consider an award of fees. See
¶45 This is not an appeal in which the basis for awarding fees is in doubt. Nor could there be any surprise to Quon if we awarded fees as we should, because the trial court awarded Ezell an amount of attorneys’ fees based on § 12-341.01, we are affirming that award of fees, and Ezell has timely sought fees on appeal. These are factors we should consider in determining whether to award fees when the successful party has not stated a statutory basis for an award. See Prendergast v. City of Tempe, 143 Ariz. 14, 22, 691 P.2d 726, 734 (App.1984) (affirming trial court‘s award of attorneys’ fees when no “surprise” or “prejudice” resulted from failure to identify statutory basis for fees).
¶46 On this record and in accordance with the language of
Footnotes:
