Workman v. Verde Wellness Ctr., Inc.

• Decision Date: 18 October 2016
• Docket Number: No. 2 CA–CV 2016–0008,2 CA–CV 2016–0008
• Parties: Melinda S. Workman, Plaintiff/appellant, v. Verde Wellness Center, Inc., an Arizona Nonprofit Corporation, dba The Downtown Dispensary, Defendant/appellee.
• Court: Arizona Court of Appeals

240 Ariz. 597

382 P.3d 812

750 Ariz. Adv. Rep. 17

Melinda S. Workman, Plaintiff/appellant,

v.Verde Wellness Center, Inc., an Arizona Nonprofit Corporation, dba The Downtown Dispensary, Defendant/appellee.

No. 2 CA–CV 2016–0008

Court of Appeals of Arizona, Division 2.

Filed October 18, 2016

Sanders & Parks, P.C., Phoenix, By G. Gregory Eagleburger, Anoop Bhatheja, and Amanda M. Breemes, Counsel for Plaintiff/Appellant

Loose, Brown, Hobkirk & Callahan, P.C., Tucson, By Donald A. Loose and Jesse R. Callahan, Counsel for Defendant/Appellee

Presiding Judge Vásquez authored the opinion of the Court, in which Chief Judge Eckerstrom and Judge Espinosa concurred.

OPINION

VÁSQUEZ, Presiding Judge:

¶ 1 In this action for judicial dissolution of a nonprofit corporation, Melinda Workman appeals from the trial court's order granting appellee Verde Wellness Center, Inc.'s motion to dismiss. She argues the court erred by considering matters outside the pleadings and by finding Workman had lost her standing to maintain this action when Verde removed her from its board of directors. She also argues the court erred when it denied her motion to amend the complaint and awarded fees to Verde as a sanction. For the following reasons, we reverse the court's dismissal order, vacate its denial of the motion to amend and award of fees, and remand for further proceedings.

Factual and Procedural Background¹

¶ 2 Verde, a marijuana dispensary authorized under the Arizona Medical Marijuana Act, was incorporated in May 2012. Workman joined the board of directors in May 2013. On June 17, 2015, Workman filed this action requesting a receiver and judicial dissolution of Verde because “[t]he directors ... have acted, are acting or will act in a manner that is illegal, oppressive or fraudulent” and “corporate assets [were] being wasted, misapplied or diverted for non-corporate purposes.”

¶ 3 Verde filed a motion to dismiss pursuant to Rule 12(b)(6), Ariz. R. Civ. P., arguing Workman lacked standing because, within hours after she had filed her complaint, the board held a special meeting and removed her as a director. In her response, Workman noted that the exhibits attached to Verde's motion did not show the board had voted to remove her during the special meeting. Instead, the board purported to adopt resolutions and amend bylaws after “dispens[ing] with the formality of a Special Meeting.” Workman also argued she had standing to bring the lawsuit “despite [the] illegal and ineffective removal” because her “standing to bring a judicial dissolution action is expressly granted by statute” and “[n]o [c]ourt would ever sustain the notion that a wrongdoer could eliminate a claim by engaging in yet more oppressive conduct to eliminate the suit.” Apparently in response to Workman's arguments, another special meeting was held in August 2015, and the board again voted to remove Workman as a director.

¶ 4 At a hearing on the motion in September 2015, Workman acknowledged the board had voted in August to remove her as a director. However, she asserted that “the motion to dismiss should be denied [because] the defendants [were] attempting to ... deprive [her] of standing to hide their misdeeds.” Workman also filed a motion to amend her complaint on the day of the hearing, raising claims for breach of contract, breach of good faith and fair dealing, breach of fiduciary duty, civil conspiracy, and alter ego.

¶ 5 At the conclusion of the hearing, the trial court denied Workman's request for a receiver. And on September 3, 2015, the court entered an order granting Verde's motion to dismiss and ruling the motion to amend was “moot.” Approximately three months later, the court granted Verde's request for attorney fees, finding Workman “interposed claims lacking legal or factual basis in violation of Rule 11, Ariz. R. Civ. P.” Workman filed a notice of appeal from this order. Because the order did not include language pursuant to Rule 54(c), Ariz. R. Civ. P., this court revested jurisdiction in the trial court “for an appropriate final judgment,” and Workman filed a supplemental notice of appeal.

Jurisdiction

¶ 6 Verde argues this court lacks jurisdiction to consider Workman's appeal because she did not directly appeal from the trial court's original order granting the motion to dismiss. Because our jurisdiction is defined by statute, we have an obligation to examine whether we have jurisdiction over an appeal and, if lacking, to dismiss. See Grand v. Nacchio , 214 Ariz. 9, ¶ 12, 147 P.3d 763, 769 (App. 2006)

; Davis v. Cessna Aircraft Corp. , 168 Ariz. 301, 304, 812 P.2d 1119, 1122 (App. 1991).

¶ 7 “Generally, this court's jurisdiction is limited to appeals from final judgments which dispose of all claims and parties.” Baker v. Bradley , 231 Ariz. 475, ¶ 9, 296 P.3d 1011, 1015 (App. 2013)

. A final judgment dismissing an action with prejudice is appealable pursuant to A.R.S. § 12–2101(A)(1). See

Thiele v. City of Phoenix , 232 Ariz. 40, ¶¶ 8–9, 301 P.3d 206, 208 (App. 2013). In contrast, an order dismissing without prejudice is not a final judgment because the plaintiff can refile the action and therefore “ha [s] nothing to appeal.” Osuna v. Wal–Mart Stores, Inc. , 214 Ariz. 286, ¶ 9, 151 P.3d 1267, 1270 (App. 2007), quoting

Mesa v. United States , 61 F.3d 20, 21 (11th Cir. 1995) ; seeMcMurray v. Dream Catcher USA, Inc. , 220 Ariz. 71, ¶ 4, 202 P.3d 536, 539 (App. 2009)

.

¶ 8 In this case, the final judgment entered by the trial court did not indicate whether the action was dismissed with or without prejudice. But because the dismissal was involuntary, we treat it as “an adjudication upon the merits.” Ariz. R. Civ. P. 41(b); Phillips v. Ariz. Bd. of Regents , 123 Ariz. 596, 597–98, 601 P.2d 596, 597–98 (1979)

. As explained below, the court considered matters outside the pleadings, thereby converting the motion into one for summary judgment, see Ariz. R. Civ. P. 12(b), and effectively held that Verde was entitled to judgment as a matter of law. See

Chevron U.S.A. Inc. v. Ariz. Dep't of Revenue , 238 Ariz. 519, ¶ 5, 363 P.3d 136, 137 (App. 2015) (grant of summary judgment appealable pursuant to § 12–2101(A)(1) ).

¶ 9 Verde, however, argues that Workman, instead of appealing from the final judgment, should have immediately appealed from the September 3 order dismissing the action pursuant to § 12–2101(A)(3)

. See

Brumett v. MGA Home Healthcare, LLC , No. 1 CA–CV 15–0047, 2016 WL 4045308 (Ariz. Ct. App. July 28, 2016) (consol. opinion) (order appealable under § 12–2101(A)(3) immediately appealable without Rule 54(c) language). Section 12–2101(A)(3) grants jurisdiction over an order that “in effect determines the action and prevents judgment from which an appeal might be taken,” such as when a claim is dismissed without prejudice but refiling is barred by the statute of limitations. See

McMurray , 220 Ariz. 71, ¶ 4, 202 P.3d at 539 (applying § 12–2101 prior to renumbering). But as we have said, here, the court ultimately granted summary judgment, thus the dismissal order clearly did not “prevent[ a] judgment from which an appeal might be taken” so § 12–2101(A)(3) does not apply. Accordingly, we have jurisdiction to consider Workman's arguments on appeal pursuant to § 12–2101(A)(1).

Conversion Rule

¶ 10 The parties dispute whether the trial court improperly treated Verde's motion as one for summary judgment by considering matters outside the pleadings and, in turn, what standard of review we should apply on appeal. Generally, we review a motion to dismiss for an abuse of discretion. See Toy v. Katz , 192 Ariz. 73, 83, 961 P.2d 1021, 1031 (App. 1997)

. However, Rule 12(b) directs that a motion to dismiss for failure to state a claim shall be treated as a motion for summary judgment pursuant to Rule 56, Ariz. R. Civ. P., when “matters outside the pleading are presented to and not excluded by the court.” Two exceptions may apply: First, “[a] complaint's exhibits, or public records regarding matters referenced in a complaint,” are not considered matters outside the pleading. Coleman v. City of Mesa , 230 Ariz. 352, ¶ 9, 284 P.3d 863, 867 (2012) ; see

Moretto v. Samaritan Health Sys. , 190 Ariz. 343, 346, 947 P.2d 917, 920 (App. 1997). Second, it is unnecessary to treat the motion as one for summary judgment when “the extraneous materials were neither considered in the [trial] court's ruling nor necessary to support its rationale for dismissal.” Belen

Loan Inv'rs, LLC v. Bradley , 231 Ariz. 448, ¶ 7, 296 P.3d 984, 988 (App. 2012).

¶ 11 In this case, Workman's complaint included allegations of improper corporate governance, poor recordkeeping, and diversion of corporate assets. But Verde premised its motion to dismiss on events that occurred after Workman filed the complaint, including the action taken at the June 17 special meeting and the other resolutions and amended bylaws adopted after that meeting. Verde attached to its motion copies of those documents and, during the hearing on the motion to dismiss, made arguments based on the second board meeting held in August as well. Thus, the trial court necessarily considered matters outside the pleadings when it granted Verde's motion, and we must review the motion as one for summary judgment. See Coleman , 230 Ariz. 352, ¶ 9, 284 P.3d at 867

.

¶ 12 Verde nevertheless argues that “the exhibits to the Motion to Dismiss regarding the prior ... meeting turned out to be immaterial” because Workman acknowledged below that the board had voted to remove her as a director in August. Thus, Verde suggests it was not necessary for the trial court to actually consider the exhibits attached to its motion to dismiss, and the motion did not convert to one for summary judgment. But that is not the test. Instead, we must ask whether the court considered matters outside Workman's initial pleading. See id.

(“If ‘matters outside the pleading’ are considered, the motion must be treated as one for summary judgment.”); see also Ariz. R. Civ. P. 12(b). And for...