Ayres v. Red Cloud Mills, Ltd.

• Decision Date: 27 November 1990
• Docket Number: No. 1,CA-CV,1
• Citation: 808 P.2d 1226,167 Ariz. 474
• Parties: James AYRES and Michael Pirtle, Cross Appellants, v. RED CLOUD MILLS, LTD., an Arizona limited partnership; Red Cloud Mining & Milling Corporation; Yuma Metals, Inc., an Arizona corporation; John Does 1-10; Jane Does 1-10; ABC Corporation, XYZ Partnership, Cross Appellees, Lila McCall, Intervenor, Cross Appellee. 8956.
• Court: Arizona Court of Appeals

Page 1226

808 P.2d 1226

167 Ariz. 474

James AYRES and Michael Pirtle, Cross Appellants, v. RED CLOUD MILLS, LTD., an Arizona limited partnership; Red Cloud Mining & Milling Corporation; Yuma Metals, Inc., an Arizona corporation; John Does 1-10; Jane Does 1-10; ABC Corporation, XYZ Partnership, Cross Appellees Lila McCall, Intervenor, Cross Appellee.

No. 1 CA-CV 8956.

Court of Appeals of Arizona Division 1, Department D.

Nov. 27, 1990.

Review Denied May 7, 1991.

[167 Ariz. 475] Engler, Engler, Weil & Nelson by John A. Weil, Yuma, for cross appellants.

O'Connor, Cavanagh, Anderson, Westover, Killingsworth & Beshears, P.A. by Redfield T. Baum, Phoenix, for intervenor appearing for cross appellees.

OPINION

TAYLOR, Judge.

This appeal primarily concerns whether a miner's lien under A.R.S. § 33-989 can include treble damages for unpaid wages pursuant to A.R.S. § 23-355. Other issues raised include the validity of the judgment in light of the various defendants' bankruptcies, whether an intervenor on appeal has standing to defend the appeal, and whether the trial court abused its discretion by refusing to award the cross-appellants their attorney's fees. For the reasons explained below, we affirm.

FACTUAL AND PROCEDURAL BACKGROUND

The facts must be viewed most favorably to upholding the judgment. McFarlin v. Hall, 127 Ariz. 220, 224, 619 P.2d 729, 733 (1980). The Red Cloud Mine ("Mine") is a silver mine located near Yuma, Arizona, that was acquired by Donald L. McDaniel in the early 1950's. The Mine occupies a mining claim and a mill site claim, both patented real property. In June, 1975, McDaniel incorporated Yuma Metals, Inc. (Yuma Metals), to which he transferred title to the Mine. McDaniel was the president and sole shareholder of Yuma Metals.

In September, 1979, McDaniel incorporated Red Cloud Mining & Milling Corporation (Red Cloud Mining). Again, he was the president and sole shareholder. In 1981, Yuma Metals leased the Mine to Red Cloud Mining, which constructed milling and processing equipment at the Mine.

In July, 1982, Red Cloud Mills, Ltd. (Red Cloud Limited), a limited partnership, was created. ¹ Red Cloud Mining was the general partner and Lila McCall (McCall) one of several limited partners. Red Cloud Mining subleased the Mine to Red Cloud Limited to operate it, and the Mine went into production in February, 1983.

James Ayres (now deceased) was hired to work at the Mine that same month. Michael Pirtle was hired in August of that year. Both Ayres and Pirtle ("plaintiffs") worked the Mine until it was closed approximately July 1, 1984.

On July 13, 1984, plaintiffs filed suit in Yuma County Superior Court seeking in excess of $16,000 in unpaid wages, as well as treble damages pursuant to A.R.S. § 23-355 and attorney's fees. Named as defendants in the complaint were Yuma Metals, Red Cloud Mining and Red Cloud Limited. On August 17, 1984, plaintiffs recorded a Notice of Claim of Lien against the Mine under A.R.S. § 33-989. The notice claimed a miner's lien in the amount of the unpaid wages. Defendants filed an answer denying every allegation in the complaint and also filed a counterclaim seeking damages of $30,000 on the premise that plaintiffs "converted, abscounded and embezzled" certain Mine assets. Plaintiffs denied the counterclaim.

Trial to the court was held on May 8, 1985. The court found for plaintiffs on their complaint and against defendants on their counterclaim. The trial court entered an order on July 30, 1985, finding plaintiffs entitled to their claimed unpaid wages from sublessee Red Cloud Limited, and that they were also entitled to treble damages plus costs against Red Cloud Limited and its general partner, lessee Red Cloud Mining. ² Plaintiffs' request for attorney's fees was later denied without explanation. The final judgment, entered on April 21, 1986, expressly limited the amount of plaintiffs' miner's lien against the Mine to their unpaid wages, excluding the treble damages. Defendants timely appealed and plaintiffs filed a timely cross-appeal shortly thereafter.

Red Cloud Limited had been placed in involuntary bankruptcy proceedings on November 2, 1983, more than three months after this lawsuit was filed. Red Cloud Mining filed a voluntary bankruptcy petition on March 11, 1986, after the trial but shortly before final judgment was entered. Yuma Metals filed for voluntary bankruptcy on June 23, 1986, after judgment was entered and the notices of appeal were filed.

As a result of Yuma Metals' bankruptcy filing, this appeal was stayed from August, 1986 to May, 1988. The appeal was reinstated upon the receipt in this court of a United States Bankruptcy Court order allowing plaintiffs to prosecute this appeal and cross-appeal to a final conclusion.

Defendants subsequently moved to dismiss their appeal, and on August 25, 1988, this court dismissed the direct appeal. Plaintiffs then filed their opening brief for the cross-appeal. After the time expired for defendant cross-appellees to file their answering brief, McCall petitioned this court to intervene and appear on their behalf on the grounds that she was a creditor and major limited partner in sublessee Red Cloud Limited, that she and others had invested several million dollars in the Mine, and that defendants apparently did not intend to defend the cross-appeal. She argued that plaintiffs could conceivably expand the amount of their lien against the Mine by default of defendants.

The request to intervene was strenuously opposed by plaintiffs. That issue was heard by another department of this court, which on January 31, 1989, issued an order granting McCall's motion to intervene.

ISSUES ON APPEAL

Plaintiffs raise the following issues on appeal:

(1) Whether their lien against the Red Cloud Mine should include the treble damages awarded pursuant to A.R.S. § 23-355;

(2) Whether the trial court abused its discretion when it refused to award plaintiffs their attorney's fees, and whether an award of attorney's fees should be included in the lien; and,

(3) Whether this court erred in allowing McCall to intervene and whether she has standing to defend this appeal. ³

In addition to responding to the first two issues, McCall argues that the judgment is void because of Red Cloud Limited's bankruptcy, and that lessor Yuma Metals is not liable for the acts of sublessee Red Cloud Limited, the entity which actually hired plaintiffs.

INTERVENTION AND STANDING

We first address plaintiffs' argument that McCall should not have been permitted to intervene and that she does not have standing to defend this appeal.

The propriety of intervention under the facts and circumstances of this case was raised and argued by the parties when the motion to intervene was considered by another department of this court. That department resolved the issue on its merits when it issued an order granting the motion. We decline to reconsider that decision.

Plaintiffs also assert that McCall lacks standing to defend this appeal because she was not a party to the action in the trial court, and although she may be affected by an appellate decision in plaintiffs' favor, she will not be directly affected. This court has previously explained that standing "focuses on the parties and requires that each party possess an interest in the outcome of the litigation." Chambers v. United Farm Workers Organizing Com., 25 Ariz.App. 104, 106, 541 P.2d 567, 569 (App.1975). Applying that standard to this case, we conclude that McCall, as a judgment creditor of defendants, does possess an interest in the outcome of this litigation. Her rights as a creditor to the sole asset of substance, the Mine itself, will be adversely affected if plaintiffs increase the amount of their lien threefold, plus attorney's fees, as they seek on appeal. An increase of this magnitude will significantly lessen the amount of assets potentially available to other creditors such as McCall. We therefore conclude that McCall, having been previously granted the status of party to this appeal, would be substantially aggrieved if plaintiffs prevail in their arguments, and thus she has standing to defend.

BANKRUPTCY ISSUES

McCall asserts this appeal is improper because all trial court proceedings were subject to the automatic stay imposed when sublessee Red Cloud Limited entered Chapter 11 bankruptcy proceedings after the commencement of this case. See generally Y11 U.S.C. § 362(a)(1). All proceedings in the trial court, she concludes, are therefore void. According to McCall, because only the sublessee had the right to operate the Mine and hire employees such as plaintiffs, any relief as to plaintiffs' lien rights should have been pursued in bankruptcy court. She suggests that the right to operate the Mine is an essential element of miner's lien liability under A.R.S. § 33-989.

Plaintiffs do not respond directly to this argument. Instead, they simply state that they obtained relief from the automatic stay in Yuma Metals' bankruptcy in order to allow this appeal to proceed. They do assert that the parties initially agreed that relief would be sought only against lessee Red Cloud Mining and lessor Yuma Metals, in light of the sublessee's bankruptcy. When Red Cloud Mining filed for bankruptcy before formal judgment was entered, the parties then agreed that judgment would be entered only against Yuma Metals. Yuma Metals filed for bankruptcy after final judgment was entered and the various notices of appeal filed.

When the trial court found for plaintiffs on their complaint after trial on May 8, 1985, it expressly declined at that time to find "as from whom the plaintiffs may recover." At that point, only sublessee Red Cloud Limited was in bankruptcy. The trial court entered findings on July 30, 1985, against lessee Red Cloud Mining only and ordered judgment to follow for treble damages plus costs in favor of plaintiffs. Red Cloud Mining then filed for bankruptcy. The final judgment entered...