Lozano v. Pacco Props., LP

• Decision Date: 15 October 2020
• Docket Number: No. 1 CA-CV 19-0560,1 CA-CV 19-0560
• Parties: DANIEL M. LOZANO, as Trustee of THE DANIEL M. LOZANO LIVING TRUST, DATED FEBRUARY 12, 2002, Plaintiff/Appellee, v. PACCO PROPERTIES, LP, et al., Defendants/Appellants.
• Court: Arizona Court of Appeals

DANIEL M. LOZANO,as Trustee of THE DANIEL M. LOZANO LIVING TRUST, DATED FEBRUARY 12, 2002, Plaintiff/Appellee, v. PACCO PROPERTIES, LP, et al., Defendants/Appellants.

No. 1 CA-CV 19-0560

ARIZONA COURT OF APPEALS DIVISION ONE

October 15, 2020

NOTICE: NOT FOR OFFICIAL PUBLICATION. UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.

Appeal from the Superior Court in Maricopa County

No. CV2016-016509

The Honorable Joseph C. Welty, Judge

The Honorable Michael W. Kemp, Judge

AFFIRMED

COUNSEL

Fennemore Craig, P.C., Phoenix

By Joseph A. Schenk and Heather A. Macre

Counsel for Plaintiff/Appellee

Snell & Wilmer L.L.P., Phoenix

By Kevin J. Parker and Benjamin W. Reeves

Counsel for Defendants/Appellants

MEMORANDUM DECISION

Judge Paul J. McMurdie delivered the Court's decision, in which Presiding Judge James B. Morse Jr. and Judge Maria Elena Cruz joined.

McMURDIE, Judge:

¶1 Pacco Properties, LP and Daniel Matthew Horwits and Jacqueline Robin Horwits, as Trustees of The 2002 Horwits Family Trust Dated October 7, 2002, (collectively, "Appellants") appeal the superior court's order denying their combined motion to clarify or set aside a judgment entered according to an offer of judgment accepted by Daniel M. Lozano, as Trustee of The Daniel M. Lozano Living Trust dated February 12, 2002 (collectively, "Lozano"). For the following reasons, we conclude we lack jurisdiction to address the issues raised by Appellants concerning the motion to clarify the judgment and affirm the court's order denying Appellants' motion to set aside.

FACTS AND PROCEDURAL BACKGROUND

¶2 Before the events underlying this case, Richard Thurman, the general partner of Pacco Properties, LP, Daniel Horwits, Lozano, and non-party Jeffrey Borris were equal shareholders in Beverly Hills Sports Council, Inc. ("Beverly Hills"). They worked together as sports agents representing professional baseball players. In 2002, the parties and Borris as Trustee of the Borris Family Trust, dated June 2, 1999 (collectively, "Borris") formed RJ&2D LLC (the "Company"), a member-managed Arizona limited liability company with its principal place of business in Maricopa County. Each member owned a 25% membership interest in the Company. Through the Company, the parties and Borris purchased properties in Arizona and Florida.

¶3 In February 2016, Borris sent an email to the other members of the Company requesting to dissolve it. In the email, Borris asserted that it would be "impracticable for the 4 members to co-exist" because he now worked for a competing sports agency and Lozano had left Beverly Hills to form a competing agency in 2010. After several meetings, the members of the Company were unable to reach an agreement concerning its dissolution. Borris and Lozano agreed that the Company should be dissolved, whileThurman and Horwits contended there was no basis for dissolving the Company.

¶4 As attempts to negotiate the Company's dissolution broke down, Lozano filed this action in the superior court. In his complaint, Lozano alleged that the Company's other members denied him access to the Arizona and Florida properties and other personal property owned by the Company since his departure in 2010. He further alleged that the members were deadlocked concerning the Company's management. Lozano asserted five causes of action: (1) judicial dissolution of the Company; (2) breach of contract; (3) breach of the covenant of good faith and fair dealing; (4) unjust enrichment; and (5) accounting and constructive trust. While this action was pending, Borris sold his interest in the Company to Appellants, and Lozano amended his complaint to remove Borris as a named party.

¶5 In January 2019, Appellants sent Lozano an offer of judgment according to Arizona Rule of Civil Procedure ("Rule") 68. Appellants proposed that judgment be entered in favor of Lozano and against them for the total amount of $320,000, "inclusive of all damages, taxable court costs, interest, and attorneys' fees." Approximately two weeks later, Lozano accepted the offer of judgment and submitted a proposed form of judgment to the superior court. The proposed judgment contained the following language:

IT IS HEREBY ORDERED, ADJUDGED, and DECREED awarding Plaintiff Lozano Judgment against Defendants RJ & 2D, L.L.C., Pacco Properties, LP, and Daniel Matthew Horwits and Jacqueline Robin Horwits, as Trustees of the 2002 Horwits Family Trust, dated October 7, 2002, jointly and severally, in the amount of Three Hundred Twenty Thousand Dollars ($320,000).

* * *

IT IS FURTHER ORDERED that no further matters remain pending before this court and that this Judgment is entered pursuant to Rule 54(c), Arizona Rules of Civil Procedure.

On March 19, 2019, without objection from Appellants, the court approved, signed, and entered the proposed form of judgment verbatim.

¶6 On May 24, 2019, 66 days after the court issued the judgment, Appellants moved to clarify the March 2019 judgment, stay its enforcementunder Rule 62, and, in the alternative, set it aside under Rule 60. Appellants alleged that when they attempted to tender a check for the full value of the judgment, a dispute arose over whether the judgment extinguished Lozano's 25% membership interest in the Company. Appellants requested the court stay the judgment's enforcement until the dispute was resolved. Appellants asked the court to confirm that by resolving all claims made in the action—including Lozano's claim for dissolution of the Company—the judgment had extinguished Lozano's membership interest.

¶7 Assuming their interpretation concerning the scope of the offer of judgment was incorrect, Appellants argued in the alternative that they were entitled to relief from the judgment under Rule 60(b)(1) or (b)(6) based upon the "lack of a meeting of the minds and/or mutual mistake." Appellants also requested a hearing on the motion. In response, Lozano argued the judgment did not cover his membership interest in the Company, and that Appellants' alleged mistake in misunderstanding the scope of the offer of judgment was, at best, a unilateral mistake which did not justify setting the judgment aside.

¶8 On June 19, 2019, the superior court issued an order denying Appellants' combined motion. The court explained:

The Judgment rendered in this matter was the result of an accepted offer of judgment from [Appellants]. A proposed form of Judgment was submitted to the Court by [Lozano]. There was no objection filed to the submitted form of Judgment. The Judgment was signed by the Court.

The executed Judgment speaks for itself.

Appellants filed a notice of appeal 28 days later. In the notice, Appellants specified that they intended to appeal the court's June 2019 order denying the combined motion and "all orders and rulings of the Court necessary to or supportive of the [order]."

¶9 Meanwhile, Lozano filed a new action against Appellants in the superior court alleging the Company had sold the Arizona and Florida properties, and that he was entitled to 25% of the proceeds of the sales perhis membership interest and the Company's operating agreement.¹ Appellants moved to dismiss the action, arguing the doctrine of claim preclusion barred Lozano's new action due to the March 2019 judgment. After a hearing, the court denied Appellants' motion to dismiss. Appellants filed a petition for special action in this court, arguing the superior court erred by failing to apply claim preclusion and dismiss Lozano's new action. This court declined to accept jurisdiction over the special action and dismissed the petition in a summary order.

¶10 The parties then filed cross-motions for summary judgment. Within both their motion for summary judgment and response, Appellants again argued that the March 2019 judgment barred Lozano's action under the claim-preclusion doctrine. On July 23, 2020, the superior court held a hearing on the respective motions and took the matter under advisement. In an order filed on September 23, 2020, the court granted Appellants' summary judgment motion, ruling that (1) the offer of judgment dissolved Lozano's 25% membership interest in the Company and (2) the doctrine of claim preclusion barred Lozano's action. A final judgment based upon that ruling remains pending.²

DISCUSSION

¶11 On appeal, Appellants argue the superior court erred by failing to confirm that the March 2019 judgment extinguished Lozano's 25% membership interest in the Company. Appellants contend the accepted Rule 68 offer of judgment constitutes a judgment for all claims raised in Lozano's lawsuit, including those claims predicated on his membership interest, and the doctrine of claim preclusion now bars any claim that has arisen or could arise from that interest. Appellants urge this court to endorse this position and, by doing so, to declare that "Lozano can makeno further claim for any additional funds due and owing to him under the [Company's] operating agreement." Should we conclude otherwise, Appellants argue in the alternative that the superior court abused its discretion by not finding that contract-avoidance principles justified setting aside the March 2019 judgment under Rule 60(b)(1). We address each argument in turn.

A. This Court Lacks Jurisdiction to Address the Superior Court's Order Denying Appellants' Motion to Clarify the March 2019 Judgment.

1. The Order Denying Appellant's Motion to Clarify the March 2019 Judgment Is Not Appealable.

¶12 At the outset, Appellants do not dispute that their notice of appeal was untimely regarding the March 2019 judgment but assert their arguments concerning the scope and effect of that judgment stem instead from the court's June 2019 order denying their motion to clarify. Appellants cite to Arizona Revised Statutes ("A.R.S.") section 12-2101(A)(2), which permits an appeal "[f]rom any special order made after final judgment," and A.R.S. § 12-2101(A)(4), which allows an appeal "[f]rom a final order affecting a...