Heritage Vill. II Homeowners Ass'n v. Norman

• Court: Arizona Court of Appeals
• Writing for the Court: MORSE, Judge
• Citation: Heritage Vill. II Homeowners Ass'n v. Norman, 246 Ariz. 567, 443 P.3d 964 (Ariz. App. 2019)
• Decision Date: 21 May 2019
• Docket Number: No. 1 CA-CV 18-0193,1 CA-CV 18-0193
• Parties: HERITAGE VILLAGE II HOMEOWNERS ASSOCIATION, Plaintiff/Appellee, Richard Weinberg, et al., Defendants/Appellees-Cross-Appellants, v. John L. NORMAN ; Gerry Molotsky, Intervenors/Appellants-Cross-Appellees.

246 Ariz. 567

443 P.3d 964

HERITAGE VILLAGE II HOMEOWNERS ASSOCIATION, Plaintiff/Appellee,

Richard Weinberg, et al., Defendants/Appellees-Cross-Appellants,

v.John L. NORMAN ; Gerry Molotsky, Intervenors/Appellants-Cross-Appellees.

No. 1 CA-CV 18-0193

Court of Appeals of Arizona, Division 1.

FILED May 21, 2019

AS AMENDED May 22, 2019

Dickinson Wright, PLLC, Phoenix, By Scott A. Holcomb, David J. Ouimette, Counsel for Plaintiff/Appellee

Mandel Young, PLC, Phoenix, By Taylor C. Young, Robert A. Mandel, Counsel for Defendants/Appellees-Cross-Appellants

Fennemore Craig, P.C., Phoenix, By Douglas C. Northup, Emily Ayn Ward, Counsel for Intervenors/Appellants-Cross-Appellees

Presiding Judge James B. Morse Jr. delivered the opinion of the Court, in which Judge Jon W. Thompson and Vice Chief Judge Peter B. Swann joined.

MORSE, Judge:

¶1 John L. Norman and Gerry Molotsky ("Movants") appeal the superior court's denial of their motion to intervene and corresponding award of attorneys' fees to Heritage Village II Homeowners' Association ("Heritage") and Richard and Laine Weinberg. The Weinbergs cross-appeal the court's partial denial of their application for attorneys' fees. The superior court denied intervention for two reasons: (1) Movants did not seek intervention in a timely manner, and (2) Movants' ability to protect their interests would not be impaired or impeded because they could pursue a separate cause of action. For the reasons set forth below, we conclude that Movants were not untimely and that the availability of a separate cause of action does not create a per se prohibition to intervention of right. Accordingly, we reverse the superior court's order denying the motion to intervene and vacate the orders awarding fees and dismissing the lawsuit. We remand for further proceedings.

FACTS AND PROCEDURAL HISTORY

¶2 The Weinbergs own a home located in Heritage Village II, which is part of the McCormick Ranch master-planned community in Scottsdale. In July 2014, Heritage sued the Weinbergs alleging they violated the applicable covenants, conditions, and restrictions ("CC&Rs") in building their new home. The complaint included claims for declaratory relief, breach of contract, and breach of the duty of good faith and fair dealing.

¶3 After a three-day hearing, the superior court granted declaratory relief, concluding the Weinbergs had violated the CC&Rs and ordering them to bring their home into compliance. Thereafter, the court awarded Heritage $111,711.53 in attorneys' fees and $3,932.22 in costs.¹

¶4 The superior court then entered an order directing the Weinbergs to take specific remedial measures to bring their home into compliance with the CC&Rs. Nine months later, Heritage moved to compel compliance with the order. Granting the motion in part, the superior court noted that the parties were still unable to agree on modifications necessary to bring the Weinbergs' home into compliance with the CC&Rs.

¶5 Meanwhile, Heritage's Board of Directors (the "Board") began to disagree on litigation strategy, dividing into a four-member majority and a three-member minority. In July 2017, the Board majority voted to settle with the Weinbergs, who agreed to make minor changes to their home in exchange for Heritage's promise to release them from liability for all attorneys' fees, including the $111,711.53 already awarded. The majority reasoned that there was "no end in sight" to the litigation and that Heritage was not financially able to further pursue the litigation.

¶6 Movants are homeowners and members of Heritage. One day before Heritage and the Weinbergs filed their notice of settlement, Movants filed an emergency motion to intervene pursuant to Arizona Rule of Civil Procedure ("Rule") 24(a)(2), and filed an independent lawsuit in superior court against the Weinbergs. See generally Maricopa County Superior Court Case No. CV2017-009249.

¶7 Heritage and the Weinbergs opposed Movants' intervention motion. Following oral argument, the superior court denied the motion to intervene and awarded Heritage and the Weinbergs some, but not all, of their attorneys' fees incurred in responding to the motion. The court then entered final judgment approving the settlement and dismissing all claims.

¶8 Movants appealed, and the Weinbergs cross-appealed from the partial denial of their request for attorneys' fees. We have jurisdiction pursuant to Arizona Revised Statutes sections 12-2101(A)(1) and (A)(3). See McGough v. Ins. Co. of N. Am ., 143 Ariz. 26, 30, 691 P.2d 738, 742 (App. 1984) ("[A]n order denying intervention is an appealable order ....").

DISCUSSION

¶9 In reviewing the denial of a motion to intervene, we accept the allegations of the motion as true. Saunders v. Superior Court , 109 Ariz. 424, 425, 510 P.2d 740, 741 (1973). We review de novo the superior court's ruling on an applicant's right to intervene under Rule 24(a)(2). Dowling v. Stapley , 221 Ariz. 251, 269-70, ¶ 57, 211 P.3d 1235, 1253-54 (App. 2009). We review the court's ruling on the motion's timeliness, however, for an abuse of discretion. State ex rel. Napolitano v. Brown & Williamson Tobacco Corp. , 196 Ariz. 382, 384, ¶ 5, 998 P.2d 1055, 1057 (2000).

I. Denial of Motion to Intervene

¶10 A third party's ability to intervene as a matter of right is governed by Rule 24(a)(2). Under this rule, the superior court must permit intervention when four conditions are satisfied: (1) the motion is timely; (2) the movants claim an interest relating to the subject of the action; (3) the movants show that disposition of the action may, as a practical matter, impair or impede their ability to protect their interests; and (4) the movants show that existing parties do not adequately represent their interests. Woodbridge Structured Funding, LLC v. Ariz. Lottery , 235 Ariz. 25, 28, ¶ 13, 326 P.3d 292, 295 (App. 2014) ; Ariz. R. Civ. P. 24(a)(2).

¶11 Movants satisfy condition two and four. As homeowners and members of Heritage, they have an interest in ensuring the Weinbergs comply with the CC&Rs, which expressly provide that any owner "shall have the standing and right to enforce" the restrictions against other owners.² Likewise, Movants contest the settlement agreement between Heritage and the Weinbergs and allege that the settlement permits violations of the CC&Rs to go forward unremedied. We must accept these allegations as true, and agree that Heritage no longer adequately represents Movants' interest in enforcing the CC&Rs against the Weinbergs. See Woodbridge, 235 Ariz. at 27, ¶ 3, 326 P.3d at 294 ("[W]e take the allegations of [the] motion to intervene as true ....").

¶12 The superior court found that Movants failed to satisfy conditions one and three. We address these conditions in turn.

A. Timeliness of the Motion

¶13 Intervention as a matter of right requires a "timely motion." Ariz. R. Civ. P. 24(a). Timeliness hinges on two discrete questions: "the stage at which the action has progressed before intervention is sought and whether the applicant was in a position to seek intervention at an earlier stage of the proceedings." Winner Enterprises, Ltd. v. Superior Court (Hancock) , 159 Ariz. 106, 109, 765 P.2d 116, 119 (App. 1988).

¶14 Movants argue that timeliness is measured "not from the inception of the case, but from when the movant has notice that its interests are no longer being adequately represented." Both the text of the Rule and the relevant case law support their position.

¶15 The Rule does not allow intervention of right where "existing parties adequately represent" the interest of the proposed intervenor. Ariz. R. Civ. P. 24(a)(2). Because Movants could not seek intervention of right until their interests diverged from those of Heritage, the Rule implicitly provides that timeliness must be measured from the stage in the proceedings at which Heritage no longer represented Movant's interests.

¶16 Our supreme court reached the same conclusion in interpreting an earlier version of the Rule. See John F. Long Homes, Inc. v. Holohan , 97 Ariz. 31, 396 P.2d 394 (1964). In that case, a home builder obtained a use permit from the City of Phoenix Board of Adjustment to construct a mobile home park. Id . at 32, 396 P.2d 394. A third party then petitioned the superior court to review the Board's decision, and the superior court entered a judgment finding the permit void. Id. The builder asked the City of Phoenix, a party to the superior court action, to appeal the court's judgment, but the City refused. Id . The builder moved to intervene after receiving notice from the City that it would not appeal. Id. Our supreme court found the builder's motion was timely:

[A]n application to intervene in the lower court under Rule 24(a) is improper where arguments presented by the city are those which would be presented by the applicant. Thus, applicant was in no position to intervene under Rule 24(a) prior to judgment and the receipt of notice by the city that it did not intend to prosecute the appeal. Upon receipt of this notice petitioner made application to intervene within three hours. We are of the opinion that an application made to intervene within three hours after the first time an application could be entertained has been timely made.

Id . at 34-35, 396 P.2d 394 ; see also United States v. Carpenter , 298 F.3d 1122, 1125 (9th Cir. 2002) (concluding that a motion to intervene was timely because movants "acted as soon as they had notice that the proposed settlement was contrary to their interests"); Smith v. Marsh , 194 F.3d 1045, 1052 (9th Cir. 1999) ("The crucial date for assessing the timeliness of a motion to intervene is when proposed intervenors should have been aware that their interests would not be adequately protected by the existing parties.").

¶17 Here, the majority of the Board voted to accept the Weinbergs' settlement offer on July 7, 2017. Movants filed their emergency motion to intervene only five days later, before the Weinbergs and Heritage even filed their notice of...