B of A/swartz v. Avwga ( 2019 )

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UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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.
IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE
BANK OF AMERICA NA, Plaintiff/Appellee,
v.
ASPEN VALLEY WOMEN’S GOLF ASSOCIATION, an unincorporated
Association; PAM CAHAL, an individual, Defendants/Appellants.
CAROLE SWARTZ, Defendant/Appellee.
No. 1 CA-CV 18-0771
FILED 12-24-2019
Appeal from the Superior Court in Coconino County
No. S0300CV201700588
The Honorable Cathleen Brown Nichols, Judge
AFFIRMED IN PART; VACATED AND REMANDED IN PART
COUNSEL
John Trebon PC, Flagstaff
By John J. Trebon
Counsel for Defendants/Appellants
Collins & Collins LLP, Phoenix
By C. Robert Collins
Counsel for Defendant/Appellee
B OF A/SWARTZ v. AVWGA, et al.
Decision of the Court
MEMORANDUM DECISION
Judge Michael J. Brown delivered the decision of the Court, in which
Presiding Judge Jennifer B. Campbell and Judge Lawrence F. Winthrop
joined.
B R O W N, Judge:
¶1 Aspen Valley Women’s Golf Association (“the Association”)
challenges the superior court’s decision not to award punitive damages,
attorneys’ fees, or taxable costs as part of a default judgment against
Appellee Carole Swartz. We affirm the court’s ruling relating to punitive
damages and attorneys’ fees, but we vacate and remand as to costs.
BACKGROUND
¶2 Bank of America (the “Bank”) filed an interpleader complaint
in December 2017 alleging the Association, its former president, Swartz,
and its current president, Pam Cahal, disputed ownership of $6,341.33 in
account funds. The Association and Cahal answered the complaint, and
the Association asserted a cross-claim against Swartz, alleging Swartz
“willfully, purposefully and maliciously” interfered with its business
relationships with its members and its “banking contract” with the Bank by
“inducing [the] Bank . . . not to perform . . . by ‘freezing’ the account.” The
Association sought to recover general and punitive damages.
¶3 Swartz answered the Bank’s complaint. The Association
moved for the entry of default, contending Swartz’s answer did not address
the cross-claim. Swartz took no action to prevent default from becoming
effective but later moved to set it aside. The Association moved for default
judgment against Swartz and filed an application for attorneys’ fees and a
statement of costs.
¶4 Following an evidentiary hearing, the court entered default
judgment on the Association’s cross-claim and awarded it the account
funds. The court declined to award punitive damages, attorneys’ fees, or
costs, and the Association filed a timely notice of appeal.
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DISCUSSION
A. Punitive Damages
¶5 The Association contends the superior court erred in
declining to award punitive damages as part of the default judgment.
Generally, courts should award punitive damages only in “the most
egregious of cases, where there is reprehensible conduct combined with an
evil mind over and above that required for commission of a tort.” Linthicum
v. Nationwide Life Ins. Co., 150 Ariz. 326, 332 (1986). A plaintiff establishes
an “evil mind” by showing the defendant acted with the intent to injure,
was motivated by spite or ill will, or acted to serve his own interests,
consciously disregarding a substantial risk of significant harm to others.
Ranburger v. S. Pac. Transp. Co., 157 Ariz. 551, 553 (1988); see also Medasys
Acquisition Corp. v. SDMS, P.C., 203 Ariz. 420, 424, ¶ 15 (2002) (noting that
punitive damages are generally available where the defendant “’pursued a
course of conduct knowing that it created a substantial risk of significant
harm to others’ and its conduct was guided by evil motives.”) (citation
omitted). An award of punitive damages must be established through clear
and convincing evidence. Mendoza v. McDonald’s Corp., 222 Ariz. 139, 158,
¶ 63 (App. 2009).
¶6 The Association contends the cross-claim and Cahal’s
testimony “at the default hearing established a solid basis for awarding
punitive damages.” While the entry of default constitutes a judicial
admission of liability, it is not an admission of the amount of recovery on
an unliquidated claim. Dungan v. Superior Court, 20 Ariz. App. 289, 290
(1973). In such cases, the superior court must hold a damages hearing, after
which it has discretion to determine the appropriate amount of damages to
award. Daou v. Harris, 139 Ariz. 353, 361 (1984); Tarnoff v. Jones, 17 Ariz.
App. 240, 245 (1972).
¶7 The cross-claim alleged in conclusory fashion that Swartz
“willfully, purposefully, and maliciously interfered with the Bank of
America account with an evil mind in a vindictive manner to harm [the
Association].” That allegation alone does not entitle the Association to
punitive damages. Shepherd v. Costco Wholesale Corp., 246 Ariz. 470, 479,
¶ 37 (App. 2019); see also Smith & Wesson Corp. v. Wuster, 243 Ariz. 355, 358,
¶ 14 (App. 2017) (“If a complaint does not include well-pleaded facts for a
required showing, entry of default does not mean that required showing
has been made.”). And Cahal’s testimony was conclusory and vague:
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Decision of the Court
Q. . . . In our Complaint, we asked -- we alleged that what
[Swartz] had done was malicious and vindictive, correct?
A. Yes, it was.
Q. All right. And you believe it was?
A. Absolutely.
Cahal admitted she did not see Swartz do anything vindictive, other than
these proceedings, and could not identify any specific malicious or
vindictive acts Swartz undertook after resigning as president. Given this
threadbare record, the superior court did not abuse its discretion in
declining to award punitive damages. See Kline v. Kline, 221 Ariz. 564, 572,
¶ 29 (App. 2009) (“[T]he amount of punitive damages awarded must find
some reasonable support in the record even when judgment is entered by
default.”) (citation omitted); S. Ariz. Sch. for Boys, Inc. v. Chery, 119 Ariz. 277,
282 (App. 1978) (“It is proper for [defaulted defendants] to dispute the
amount of damages even to the point of showing their nonexistence”).
B. Attorneys’ Fees in Superior Court
¶8 The Association also contends the court erred in declining to
award attorneys’ fees under A.R.S. § 12-341.01(A), which authorizes an
award to the successful party “[i]n any contested action arising out of a
contract.” US Bank, N.A. v. JPMorgan Chase Bank, N.A., 242 Ariz. 502, 507,
¶ 22 (App. 2017). Whether the statute applies is a question of law we review
de novo. Assyia v. State Farm Mut. Auto. Ins. Co., 229 Ariz. 216, 220, ¶ 10
(App. 2012).
¶9 The Association relies on its conclusory allegation in the
cross-claim that “[t]his matter arises from a contract.” But “[t]he duty not
to interfere with the contract of another arises out of law, not contract. In
fact, the tort may be committed even where the plaintiff has no contractual
rights but simply the prospect of a contractual relationship.” Bar J Bar Cattle
Co. v. Pace, 158 Ariz. 481, 486 (App. 1988). Because § 12-341.01(A) does not
authorize fees in this case, the superior court did not err in declining the
Association’s request.
C. Costs in Superior Court
¶10 The Association also contends the court erred in declining to
award taxable costs. The court has discretion to determine who is the
successful or prevailing party for purposes of awarding costs under
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§ 12-341. McEvoy v. Aerotek, Inc., 201 Ariz. 300, 302, ¶ 9 (App. 2001). But
once the court has determined a successful party, a cost award is
mandatory. Id. The Association was successful on its cross-claim; it
therefore was entitled to recover taxable costs.
D. Attorneys’ Fees on Appeal
¶11 The Association requests its attorneys’ fees under
§ 12-341.01(A). For the reasons stated above, supra ¶¶ 8–9, we deny its
request.
¶12 Swartz requests her attorneys’ fees incurred in this appeal
pursuant to Arizona Rule of Civil Procedure (“Rule”) 11, Arizona Rule of
Civil Appellate Procedure (“ARCAP”) 25, and A.R.S. § 12-349(A)(1). We
decline to award fees under Rule 11 because it is not a proper basis for a fee
award on appeal. Villa de Jardines Ass’n v. Flagstar Bank, FSB, 227 Ariz. 91,
99, ¶ 26 n.10 (App. 2011).
¶13 ARCAP 25 authorizes us to sanction an appellant who brings
a frivolous appeal “to discourage similar conduct in the future.” ARCAP
25; Johnson v. Brimlow, 164 Ariz. 218, 221–22 (App. 1990). An appeal is not
frivolous if it raises issues supportable by any reasonable legal theory or a
colorable legal argument on which reasonable attorneys could differ. In re
Levine, 174 Ariz. 146, 153 (1993). We consider ARCAP 25 sanctions with
great caution. Price v. Price, 134 Ariz. 112, 114 (App. 1982). In our discretion,
we decline to award ARCAP 25 fees.
¶14 Swartz also contends the Association brought this appeal
without substantial justification. See A.R.S. § 12-349(A)(1). An appeal lacks
substantial justification if it “is groundless and is not made in good faith.”
A.R.S. § 12–349(F). Swartz does not show that either element is met; she
simply contends the Association based its appeal on “allegations.” We
decline to award fees under § 12-349(A)(1).
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B OF A/SWARTZ v. AVWGA, et al.
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CONCLUSION
¶15 We affirm the court’s entry of default judgment but remand
for entry of a modified judgment awarding the Association its taxable costs
incurred in superior court in pursuing the cross-claim. Because we remand
for entry of judgment in a greater amount, the Association also may recover
its taxable costs incurred on appeal upon compliance with ARCAP 21. See
A.R.S. § 12-342(B).
AMY M. WOOD • Clerk of the Court
FILED: AA
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