EZELL v. QUON

• Court: Arizona Court of Appeals
• Writing for the Court: HALL.
• Decision Date: 17 June 2010
• Docket Number: Cause No. CV 2007-4245,1 CA-CV 09-0297
• Citation: Ezell v. Quon, 1 CA-CV 09-0297, Cause No. CV 2007-4245 (Ariz. App. Jun 17, 2010)
• Parties: BRIAN M. EZELL,Plaintiff/Appellee,v.JEFF QUON,Defendant/Appellant.

BRIAN M. EZELL, Plaintiff/Appellee,

v.JEFF QUON, Defendant/Appellant.

1 CA-CV 09-0297

Cause No. CV 2007-4245

Court Of Appeals State Of Arizona Division One

FILED: June 17, 2010

Keith S. Knochel Bullhead City Attorney for Defendant/Appellant

Paul Lenkowsky Bullhead City Attorney for Plaintiff/Appellee

OPINION

Appeal from the Superior Court in Mohave County The Honorable Charles W. Gurtler, Jr., Judge

AFFIRMED

HALL, Judge

¶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 Arizona Rules of Civil Procedure (Rule) 60(c). For the reasons that follow, we affirm the trial court's ruling. We further deny Ezell's request for attorneys' fees on appealbecause he failed to cite a basis for his request as required by Arizona Rule of Civil Appellate Procedure 21(c).

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. Garder, 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 ofdefault 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 reveal Ezell's status as a partner at a later date, after the new partnership had been well-established. Ezell testified that he worked at the store without pay from April 2006 until July 2007. At that time, out of concern that he had not yet received any profits, Ezell disclosed to David the nature of his partnership interest in the store. David informed Ezell that Quon had actually purchased Delgado's partnership interest for $20,000.00.

¶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 handleddistribution 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 Rule 60(c). Quon argued that: (1) thetrial court's award of punitive damages is invalid because Ezell failed to sufficiently plead punitive damages in his complaint;

(2) the trial court's award of punitive damages is invalid because Ezell failed to sufficiently plead and prove that Quon acted with "an evil mind" as required for punitive damages; and

(3) the trial court's divesting Quon of any partnership interest and granting Ezell the opportunity to purchase the remainder of Delgado's interest is invalid because (a) Ezell had unclean hands and therefore is not entitled to equitable relief, (b) the other partners were not parties to the litigation and have not provided the requisite consent, and (c) Ezell failed to

sufficiently plead for this relief.

¶11 The trial court denied Quon's motion for Rule 60(c)

relief, stating in relevant part:

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 towardsthe 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. Defendantfailed 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 Arizona Revised Statutes (A.R.S.) section 12-2101(B) (2003).

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...