Four 3's v. Scott ( 2021 )

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UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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
FOUR 3'S LLC, an Arizona Limited Liability Company,
Plaintiff/Appellant/Cross-Appellee,
v.
JAMES D. SCOTT and MICHELLE SCOTT, Husband and Wife,
Defendant/Appellee/Cross-Appellant.
No. 1 CA-CV 20-0281
FILED 4-6-2021
Appeal from the Superior Court in Coconino County
No. S0300CV201500361
The Honorable Ted Stuart Reed, Judge
AFFIRMED IN PART; REVERSED IN PART; AND REMANDED
COUNSEL
Law Offices of Adam B. Decker, PLLC, Mesa
By Adam B. Decker
Counsel for Plaintiff/Appellant/Cross-Appellee
Aspey Watkins & Diesel, PLLC, Flagstaff
By Jason J. Bliss, John W. Carlson
Counsel for Defendant/Appellee/Cross-Appellant
FOUR 3'S v. SCOTT, et al.
Decision of the Court
MEMORANDUM DECISION
Judge James B. Morse Jr. delivered the decision of the Court, in which
Presiding Judge D. Steven Williams and Judge Jennifer B. Campbell joined.
M O R S E, Judge:
¶1 Four 3's LLC appeals the superior court's grant of summary
judgment for James Scott and Michelle Scott. The Scotts cross-appeal,
arguing the superior court erred by failing to award them their attorney
fees. For the reasons herein, we affirm the court's summary judgment in
favor of the Scotts, but reverse and remand on the issue of the Scotts'
attorney fees and costs.
FACTS1 AND PROCEDURAL BACKGROUND
¶2 In 2012, Mike Seabrook, through his company MI
Construction, bought a parcel of property ("Property") for $90,000. Shortly
thereafter, James Scott approached Seabrook and proposed a joint venture
to purchase and develop residential properties. To that end, the two
created MIJ Homes, LLC. But James Scott failed to make certain promised
capital contributions to MIJ Homes, and it wasn't long before both Seabrook
and MI Construction were struggling financially.
¶3 Later, Seabrook approached Chris Finn, the owner of Four 3's,
about building an investment home on the Property. Seabrook told Finn
that the two of them could build a half-million-dollar home on the Property,
and offered to sell the Property to Finn. Finn expressed interest and made
immediate plans to use Four 3's to purchase and develop the Property in
partnership with Seabrook.
¶4 What Finn did not know was that Seabrook was in
bankruptcy and MI Construction was on the brink of financial failure.
1 Because we are reviewing a grant of summary judgment, we view
the facts in the light most favorable to the non-movant. United Dairymen of
Ariz. v. Schugg, 212 Ariz. 133, 140, ¶ 26 (App. 2006). Though we recognize
most of these facts are disputed by the Scotts, none of the disputes are
material to the issues presented in this decision.
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FOUR 3'S v. SCOTT, et al.
Decision of the Court
Fearing MI Construction's creditors would seize its assets, including the
Property, Seabrook went to James Scott for help. James Scott contrived a
plan wherein MI Construction would transfer the Property to James Scott's
and Seabrook's joint venture, MIJ Homes. Then, after MI Construction was
out of financial trouble, MIJ Homes would deed the Property back to MI
Construction.
¶5 However, things did not proceed as planned. Though
Seabrook had agreed to deed the property to MIJ Homes, James Scott
prepared the deed to transfer the Property to him personally. Seabrook,
failing to read the documents, executed the deed and James Scott swiftly
recorded it. James Scott deposited a check for $25,000 into MI
Construction's bank account. On the check, James Scott noted it was
payment for the purchase of the Property.
¶6 Meanwhile, Seabrook continued negotiating with Finn to sell
the Property. Ultimately, Finn agreed to purchase the Property for $70,000,
and paid Seabrook outside of escrow. When Seabrook asked James Scott to
transfer the Property back to MI Construction, he refused.
¶7 Finn then discovered that Seabrook could not deliver the deed
to the Property unless James Scott signed the deed over to him. Finn,
having already paid Seabrook $70,000, was left with no deed to the Property
and no way to obtain title.
¶8 Finn, through Four 3's, filed suit against the Scotts and MI
Construction. He accused the defendants of violating the Uniform
Fraudulent Transfer Act and asked the court to quiet title to the Property in
Four 3's name. Additionally, Four 3's raised claims for equitable relief,
asking for the court to either force the Scotts to transfer the Property to Four
3's or to use other equitable remedies to grant Four 3's title to the Property.
In the alternative, Four 3's accused the defendants of forming a civil
conspiracy to commit fraud.
¶9 The Scotts filed a counter-claim and third-party complaint,
asking the court to quiet title in their name and to award damages for the
filing of a groundless lis pendens against the Property by Finn and Four 3's,
under A.R.S. § 33-420.
¶10 The Scotts moved for summary judgment on all claims. The
Scotts disputed the allegations of deceit and fraud but argued that, even
accepting Four 3's allegations, James Scott was the lawful owner of the
Property because Four 3's agreement to purchase the Property did not occur
until after the warranty deed transferring title from MI Construction to
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Decision of the Court
James Scott was recorded. Thus, the Scotts contended that Four 3's claims
failed as a matter of law.
¶11 The superior court agreed and entered judgment for the Scotts
on all claims. The court's judgment found that James Scott was the true
owner of the Property, and Four 3's and Finn were estopped from claiming
any right to the Property. The court also ordered Four 3's to pay James Scott
$5,000 in damages. The court did not enter any judgment against MI
Construction.
¶12 Additionally, the Scotts argued they were entitled to their
attorney fees under A.R.S. §§ 12-1103(B) and 33-420(A). The superior court
disagreed and ordered the parties to bear their own fees and costs.
¶13 Four 3's timely appealed and the Scotts timely cross appealed.
DISCUSSION
I. Jurisdiction.
¶14 We begin by noting that the judgment in this case was
improperly certified as final under Arizona Rule of Civil Procedure 54(c).
MI Construction was properly served as a defendant, but the claims against
it have not been resolved. See McHazlett v. Otis Engineering Corp., 133 Ariz.
530, 532 (1982); Madrid v. Avalon Care Center-Chandler, LLC, 236 Ariz. 221,
224-25, ¶ 11 (App. 2014) (providing that this court lacks jurisdiction if
parties remain in the action despite Rule 54(c) language).
¶15 At oral argument, both parties requested that we invoke our
special action jurisdiction. "Although this court lacks appellate jurisdiction,
we may exercise our discretionary special action jurisdiction under
appropriate circumstances . . . ." Phillips v. Garcia, 237 Ariz. 407, 410, ¶ 7
(App. 2015). Considering the procedural posture, and because both parties
have requested we do so, we exercise our special action jurisdiction over
this case. See A.R.S. § 12-120.21(A)(4); Ariz. R.P. Spec. Act. 1(a).
II. Standard of Review.
¶16 We review a grant of summary judgment de novo. Schugg,
212 Ariz. at 140, ¶ 26. We will affirm if there is no genuine issue of material
fact in dispute and if the movants were entitled to judgment as a matter of
law. Goldman v. Sahl, 248 Ariz. 512, 519, ¶ 16 (App. 2020). "If the evidence
would allow a jury to resolve a material issue in favor of either
party, summary judgment is improper." Comerica Bank v. Mahmoodi, 224
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Decision of the Court
Ariz. 289, 291, ¶ 12 (App. 2010). Additionally, we will affirm the grant of
summary judgment if the trial court was correct for any reason. Federico v.
Maric, 224 Ariz. 34, 36, ¶ 7 (App. 2010). We review the proper interpretation
of a statute de novo. State v. Potter, 248 Ariz. 347, 349, ¶ 9 (App. 2020).
III. Four 3's Appeal.
A. Four 3's Equitable Claims.
¶17 We start with Four 3's equitable claims, which essentially all
seek the same equitable relief.2 Specifically, Four 3's asked the superior
court to either establish a constructive trust for the Property in their favor
or, alternatively, order James Scott to transfer title to the Property to Four
3's. The superior court held that Four 3's did not have standing to raise
claims for equitable relief because it had notice of James Scott's claim to the
Property when it attempted to purchase the Property from Seabrook. Four
3's argues this was error. We agree with the superior court.
¶18 Like the superior court, we begin with the text of A.R.S. § 33-
416:
The record of a grant, deed or instrument in writing
authorized or required to be recorded, which has been duly
acknowledged and recorded in the proper county, shall be
notice to all persons of the existence of such grant, deed or
instrument, but a mortgage of real property may be recorded
and constructive notice and the contents thereof given as
provided in § 33-415.
¶19 The superior court read this statute to mean that "Four 3's is
deemed by law to have known that Seabrook did not own the property he
was purporting to sell." Because Four 3's had such notice, the superior court
held it was not a bona-fide purchaser and its claims failed as a matter of
law.
¶20 We reject Four 3's argument that a court must find a recorded
instrument valid in all respects before imputing constructive notice to other
persons. We interpret statutes according to their plain language. See Secure
Ventures, LLC v. Gerlach, 249 Ariz. 97, 99, ¶ 5 (App. 2020). Nothing in the
plain language of A.R.S. § 33-416 requires a court to analyze the validity of
a deed before the statute can take effect. The statute plainly provides that
2 These are claims for injunctive relief, specific performance, and for
the creation of a constructive trust.
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Decision of the Court
once a deed is recorded, it serves as constructive notice to "all persons" of
the existence of that deed.
¶21 Under A.R.S. § 33-416, Four 3's had constructive notice of the
deed transferring ownership of the Property from MI Construction to James
Scott. See Warren v. Whitehall Income Fund 86, 170 Ariz. 241, 243 (App. 1991)
("Constructive notice and actual notice have the same effect and when the
purchaser of land has notice of a prior claim to the land, he takes it subject
to that claim."). Knowing that another person had record title to the
Property, Four 3's was not a bona-fide purchaser. Id. Even a non-bona-fide
purchaser, however, may stand in the "same position as" the seller, id. at
243-44, and Four 3's alleges that MI Construction, through Seabrook, made
a unilateral mistake in transferring the property due to the
misrepresentations of James Scott.
¶22 Taking its allegations as true, if Four 3's were a non-bona-fide
purchaser, then it could attempt to void the deed by standing in MI
Construction's shoes. See Parrish v. United Bank of Ariz., 164 Ariz. 18, 20
(App. 1990); see also Ignatova v. Ignatova, 1 CA-CV 19-0100 FC, 2020 WL
547271, at *2, ¶ 10 (Ariz. App. Feb. 4, 2020) (mem. decision) ("[A] disclaimer
deed may be voided by a unilateral mistake induced by
misrepresentation."). But Four 3's was not a non-bona-fide purchaser. It
never purchased the Property, but instead had a non-actionable agreement
with MI Construction to purchase the Property. It is undisputed that the
agreement failed to comport with the statute of frauds, see A.R.S. § 44-101,
and that Seabrook did not own the Property at the time the agreement was
made. However, Four 3's argues it is still entitled to an equitable remedy
in the form of a constructive trust. See Gabitzch v. Cole, 95 Ariz. 15, 20 (1963)
("A trust created by operation of law is not within the Statute of Frauds.").
Four 3's asserts that creating a constructive trust is appropriate because
Seabrook only intended to deed the Property to MIJ Homes for safekeeping
until it could safely be transferred to Four 3's, and James Scott's alleged
malfeasance prevented that transfer from occurring.
¶23 We reject this argument because "[a] constructive trust is a
remedial device created by courts of equity to compel one who unfairly
holds a property interest to convey that interest to another to whom it justly
belongs." Harmon v. Harmon, 126 Ariz. 242, 244 (App. 1980) (emphasis
added). Four 3's does not explain why the Property "justly belongs" to it,
when it had constructive knowledge that MI Construction did not own the
Property at the time the non-actionable agreement for sale was made.
Perhaps Four 3's has other claims it may raise against Seabrook and MI
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Decision of the Court
Construction, but we do not see how Four 3's has any equitable claim to the
Property.3
¶24 Four 3's does not purport to have any relationship or
agreement with the Scotts. Instead, Four 3's asserts it has the right to
unwind the transfer of the Property it attempted to buy from a prior owner.
Because Four 3's was on notice that MI Construction did not own the
Property at the time it agreed to buy it, we fail to see how Four 3's has any
claim for equitable relief. Accordingly, we affirm the superior court's grant
of summary judgment on Four 3's claims for equitable relief.
B. Four 3's Remaining Claims.
¶25 We turn now to Four 3's remaining claims for quiet title, civil
conspiracy, and an alleged violation of the Uniform Fraudulent Transfer
Act. Because Four 3's fails to cite any evidence or law in support of these
claims, we affirm the superior court's grant of summary judgment.
¶26 Four 3's argues the superior court erred by granting summary
judgment to the Scotts on its quiet-title claim. "In a quiet title action the
plaintiff must ordinarily prove his own title and cannot rely on defects in
the defendant's title." Mounce v. Coleman, 133 Ariz. 251, 253 (App. 1982).
Both before the superior court and on appeal, Four 3's fails to provide any
evidence that it holds title to the Property. At most, Four 3's claims that
James Scott is not entitled to the Property. That is not enough to defeat
summary judgment. See id.¶27 Civil conspiracy occurs when "two or more people . . . agree
to accomplish an unlawful purpose or to accomplish a lawful object by
unlawful means, causing damages." Wells Fargo Bank v. Ariz. Laborers,
Teamsters, and Cement Masons Local No. 390 Pension Tr. Fund, 201 Ariz. 474,
498, ¶ 98 (2002) (citation omitted). Four 3's argues that "evidence and facts
exist . . . sufficient for the claim of civil conspiracy . . . to be tried before the
[superior court]." But Four 3's never cites the evidence and facts it relies on,
nor does it explain which people were involved in the alleged conspiracy.
Given this, and our examination of the record, we see no error with the
superior court's grant of summary judgment on this claim.
3 MI Construction is still a defendant in the superior court, and Four
3's has raised similar claims against that entity. Nothing herein should be
taken to suggest a particular outcome on Four 3's claims against MI
Construction.
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Decision of the Court
¶28 We last turn to Four 3's claim for violations of Arizona's
Uniform Fraudulent Transfer Act. See A.R.S. § 44-1001. "[T]o set aside a
transfer as fraudulent, there must have been a valid claim at the time of the
transfer, meaning a right to payment." Hullett v. Cousin, 204 Ariz. 292, 296,
¶ 21 (2003) (emphasis added); see also A.R.S. § 44-1001(2). Assuming Four
3's had any right of payment against MI Construction, that right arose after
the transfer of the Property occurred. And Four 3's makes no argument to
the contrary. In fact, Four 3's fails to address the Uniform Fraudulent
Transfer Act at all.
¶29 Because Four 3's cites no evidence and provides little, if any,
argument on its remaining claims, it has failed to show error.
Consequently, we affirm the grant of summary judgment.
IV. The Scotts' Cross-Appeal.
¶30 The sole issue raised on cross-appeal is the superior court's
failure to award the Scotts their attorney fees. All parties agree that the
Scotts were granted summary judgment on their claim brought under
A.R.S. § 33-420(A). "A.R.S. § 33-420 mandates the awarding of attorney's
fees." Janis v. Spelts, 153 Ariz. 593, 598 (App. 1987). The superior court erred
on this issue. We reverse the judgment as it pertains to attorney fees and
remand so that the superior court may award reasonable attorney fees
incurred for that claim. We also reverse the judgment to the extent it fails
to award the Scotts the costs associated with their quiet-title claim and
instruct the superior court to award the Scotts those costs. See A.R.S. § 12-
1103(B) (mandating an award of costs to the prevailing plaintiff in a quiet-
title claim, so long as certain procedural steps are followed).
¶31 We affirm the superior court's denial of the Scotts' request for
fees under A.R.S. § 12-1103 for all other attorney fees incurred.
V. Attorney Fees and Costs on Appeal.
¶32 All parties request their reasonable fees and costs on appeal.
As noted, A.R.S. § 33-420 mandates the award of attorney fees to the
prevailing owner in a false documents case. See Janis, 153 Ariz. at 598.
Accordingly, the Scotts are awarded their reasonable attorney fees related
to that claim and their costs incurred on appeal in an amount to be
determined upon timely compliance with ARCAP 21.
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Decision of the Court
CONCLUSION
¶33 For the above-stated reasons, we affirm the superior court's
grant of summary judgment on all claims but reverse the judgment to the
extent it denies the Scotts their attorney fees. The case is remanded to the
superior court for the limited purpose of awarding the Scotts their
reasonable attorney fees. Further, the Scotts are awarded their costs on
appeal and reasonable attorney fees incurred in defense of the appeal of
their false documents claim, contingent upon their timely compliance with
ARCAP 21.
AMY M. WOOD • Clerk of the Court
FILED: AA
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