Opinion
1 CA-CV 21-0211
02-15-2022
THOMAS GIBBONS, Plaintiff/Appellant, v. KODIAK CONCEPTS, LLC., et al., Defendants/Appellees.
Mick Levin, Phoenix Counsel for Plaintiff/Appellant Jones, Skelton & Hochuli P.L.C., Phoenix By Michael E. Hensley, Elizabeth B.N. Garcia Counsel for Defendant/Appellee 8090, LLC Schelstraete Law Offices, Tempe Peter H. Schelstraete Counsel for Defendant/Appellee Kodiak Concepts, LLC
Not for Publication - Rule 111(c), Rules of the Arizona Supreme Court
Appeal from the Superior Court in Maricopa County No. CV2018-004855 The Honorable Andrew J. Russell, Judge
Mick Levin, Phoenix Counsel for Plaintiff/Appellant
Jones, Skelton & Hochuli P.L.C., Phoenix By Michael E. Hensley, Elizabeth B.N. Garcia Counsel for Defendant/Appellee 8090, LLC
Schelstraete Law Offices, Tempe Peter H. Schelstraete Counsel for Defendant/Appellee Kodiak Concepts, LLC
Judge Samuel A. Thumma delivered the decision of the Court, in which Presiding Judge Maria Elena Cruz and Judge Michael J. Brown joined.
MEMORANDUM DECISION
THUMMA, JUDGE
¶1 In this dramshop action, plaintiff Thomas Gibbons alleges that defendant 8090, LLC (8090), is liable under a joint venture theory and that defendant Kodiak Concepts, LLC (Kodiak), is liable as a successor in interest to the operator of the bar. In separate rulings, the superior court granted summary judgment for defendants. Because Gibbons has shown no error, the resulting judgments reflecting those rulings are affirmed.
FACTS AND PROCEDURAL HISTORY
¶2 In June 2016, while riding a motorcycle, Gibbons was injured when he hit debris from a car accident. Gibbons filed this suit in June 2018, alleging the driver at fault in the car accident had been overserved alcohol at The Great Alaskan Bush Company (GABC), owned and operated by defendant 5832, Inc. (5832). Gibbons alleged dram shop liability against 5832 doing business as GABC. Claiming 8090 owns the land leased by 5832 to operate GABC, Gibbons also pressed premises liability and joint venture liability claims against 8090. Gibbons also alleged Kodiak was liable as the successor in interest to 5832.
¶3 After 5832 failed to timely respond, an $800,000 default judgment was entered in favor of Gibbons and against 5832. After the close of discovery, 8090 and Kodiak separately moved for summary judgment. Gibbons conceded his premises liability claim against 8090 failed, but otherwise opposed both motions. After full briefing and oral argument, the court granted both motions.
¶4 As to 8090, the court found Gibbons failed to provide evidence supporting each of the five elements required to establish a joint venture. As to Kodiak, the court found Gibbons failed to show that Kodiak purchasing assets from 5832 made Kodiak liable for 5832's obligations to Gibbons. After entry of a final judgment, Gibbons timely appealed. This court has appellate jurisdiction pursuant to Article 6, Section 9, of the Arizona Constitution and A.R.S. Sections 12-120.21(A)(1) and -2101(A)(1) (2022).
Absent material revisions after the relevant dates, statutes and rules cited refer to the current version unless otherwise indicated.
DISCUSSION
¶5 This court reviews the entry of summary judgment de novo, "viewing the evidence and reasonable inferences in the light most favorable to the party opposing the motion," Andrews v. Blake, 205 Ariz. 236, 240 ¶ 12 (2003), to determine "whether any genuine issues of material fact exist," Brookover v. Roberts Enters., Inc., 215 Ariz. 52, 55 ¶ 8 (App. 2007). When uncontroverted, "facts alleged by affidavits attached to a motion for summary judgment may be considered true." Portonova v. Wilkinson, 128 Ariz. 501, 502 (1981). "The court shall grant summary judgment if the moving party shows that there is no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law." Ariz. R. Civ. P. 56(a).
¶6 Gibbons' opening brief disregards this court's procedural rules. Among other things, it fails to support his factual assertions with "appropriate references to the portions of the record on which the appellant relies." Ariz. R. Civ. App. P. 13(a)(7)(A). That failure constitutes waiver. See Sholes v. Fernando, 228 Ariz. 455, 460 ¶ 14 n.3 (App. 2011). Even absent waiver, Gibbons has shown no error.
I. The Court Properly Granted Summary Judgment for 8090 on Gibbons' Joint Venture Claim.
¶7 A joint venture is "a special combination of two or more persons where in some special venture a profit is jointly sought" Ariz. Pub. Serv. Co. v. Lamb, 84 Ariz. 314, 317 (1958). "To constitute a valid joint venture under Arizona law, there must exist: (1) a contract; (2) a common purpose; (3) a community of interest; (4) an equal right to control; and (5) participation in the profits and losses." Tanner Cos. v. Superior Court, 144 Ariz. 141, 143 (1985) (citing Ellingson v. Sloan, 22 Ariz.App. 383, 386 (1974)).
¶8 The superior court found Gibbons failed to present evidence that 8090 had a right to control 5832's business or that the two entities jointly shared profits, two necessary elements of a joint venture claim. On appeal, Gibbons asserts that a jury could find the parties' lease "was a sham," that its terms "were largely never followed," and that 5832 made improvements to 8090's property, paid taxes on the property and insured the property against loss.
Although claiming that 8090 also purchased insurance on the property, Gibbons has not shown how a landowner insuring that land somehow constitutes a joint venture with the tenant.
¶9 Gibbons did not present his "sham" lease argument to the superior court and did not develop it in his opening brief on appeal. Accordingly, it is waived. See Odom v. Farmers Ins. Co. of Ariz., 216 Ariz. 530, 535 ¶ 18 (App. 2007) ("[Arguments raised for the first time on appeal are untimely and deemed waived."); MacMillan v. Schwartz, 226 Ariz. 584, 591 ¶ 33 (App. 2011) ("Merely mentioning an argument in an appellate opening brief is insufficient.").
¶10 Even absent waiver, the 29-page June 2012 lease agreement detailed the landlord-tenant relationship between 8090 and 5832. With extensions, the lease could extend 20 years and included an express provision stating it will not "be deemed or construed as creating a . . . joint venture." The lease required 5832, as a long-term tenant, to pay taxes and obtain insurance and, at its own expense, allowed it to make improvements. Gibbons has not shown how the lease turned the landlord-tenant relationship into a joint venture contrary to its express terms. Nor has Gibbons sought to, or shown any basis to, set aside or go beyond the terms of the lease. See Grubb & Ellis Mgmt. Servs., Inc. v. 407417 B.C., L.L.C., 213 Ariz. 83, 86 ¶ 12 (2006) (where parties bind themselves by a lawful contract, the terms of which are clear and unambiguous, a court must give effect to the contract as written).
¶11 Apart from the lease, Gibbons presented no evidence or argument about what other contract would provide a basis for his joint venture claim. Thus, even accepting as true his argument that the lease "was a sham," Gibbons' joint venture claim would fail. See Estate of Hernandez v. Flavio, 187 Ariz. 506, 510 (1997) (affirming summary judgment where plaintiff failed to support, factually, all five elements required for a joint venture claim).
¶12 Gibbons next contends the entities shared profits because 5832 only paid rent depending on "the economy and how much [it] had available." The lease, however, contained a tiered rent payment schedule, which 5832 paid on time for nearly ten years. Although 5832's rent payments then varied given financial issues, Gibbons has not shown that accepting such payments or failing to evict 5832 somehow created a joint venture. Moreover, Gibbons conceded at oral argument before this court that the rental payments established in the lease created a cap on the rent payments that were made, negating any profit-sharing claim involving rent. Similarly, Gibbons has not shown how a tenant agreeing to pay property taxes and insurance, and paying for improvements, under the terms of a long-term commercial lease converts a landlord-tenant relationship into a joint venture. In short, Gibbons presented no evidence that this type of arrangement created a "special venture" where 8090 and 5832 each had "a share in the profits," as required for a joint venture claim. See Ellingson, 22 Ariz.App. at 386 (stating that five specific elements must be present to establish a joint venture); see also Lamb, 84 Ariz. at 317 (1958) ("[A] share in the profits is necessary to create [a joint] venture.")
¶13 Gibbons argues that the owners of 8090 and 5832 "entered into a 'partnership' in 1997." Gibbons' joint venture claim, however, is directed at 8090 and 5832, not the owners of those entities. And Gibbons did not, in this suit, attempt to go behind the corporate structures of 8090 or 5832. On this record, any partnership of the owners in 1997 does not show that 8090 and 5832 were a joint venture in 2016.
¶14 Although disputing the superior court's conclusions, Gibbons provided no evidence to establish that 8090 exercised any control over 5832's business. See Flavio, 187 Ariz. at 510 ("[E]ach joint venture must share, to some extent, in the control of the venture.") (emphasis added). As noted by the superior court, there was no evidence that 8090 had any role in hiring, training, compensation or firing 5832's employees or in operating GABC. This failure in proof defeats Gibbons' joint venture claim. See Flavio, 187 Ariz. at 510; Ellingson, 22 Ariz.App. at 386.
¶15 In response to 8090's motion for summary judgment, Gibbons could not "rely merely on allegations or denials of its own pleading." Ariz. R. Civ. P. 56(e). Instead, he was required, "by affidavits or as otherwise provided" in Rule 56, to "set forth specific facts showing a genuine issue for trial." Id. When he failed to do so, the court properly granted 8090's motion for summary judgment against Gibbons. Id. For these reasons, Gibbons has shown no error in the superior court granting summary judgment against him on his joint venture claim against 8090.
II. The Court Properly Granted Summary Judgment for Kodiak Concepts, LLC on Gibbons' Successor Liability Claim.
¶16 In November 2016, five months after Gibbons' accident and nearly 18 months before Gibbons filed suit, Kodiak and 5832 entered into an Asset Purchase Agreement. The 32-page agreement specified 5832's assets (which were not valued) and liabilities included in Kodiak's purchase. Gibbons' claim was not listed, and was not included in the transaction. In return, 5832 received $150,000 from Kodiak, and Kodiak assumed specified liabilities exceeding $1.1 million, with a total purchase amount later valued at more than $2 million. Kodiak also made two unscheduled payments of $193,900 each to individuals not specified by the Asset Purchase Agreement.
¶17 Gibbons claims the Asset Purchase Agreement means Kodiak has successor liability for 5832, including for the default judgment against 5832. Under the Asset Purchase Agreement, however, 5832 did not transfer the Gibbons liability to Kodiak. "As a general rule, when a corporation sells or transfers its principal assets to a successor corporation, the latter will not be liable for the debts and liabilities of the former." A.R. Teeters & Assocs., Inc. v. Eastman Kodak Co., 172 Ariz. 324, 329 (App. 1992). Thus, Kodiak is responsible for 5832's judgment for Gibbons only if an exception to this general rule applies. The four recognized possible exceptions require a factual showing that: (1) the successor expressly or impliedly assumed the liabilities; (2) the transaction is a consolidation or merger of the two entities; (3) the successor is a continuation or reincarnation of the seller or (4) the transfer was for the fraudulent purpose of escaping liability for the seller's debts. Id.; see also A.R.S. §§ 44-1001 to -1010 (Arizona's version of the Uniform Fraudulent Transfer Act). Gibbons argues successor liability applies under three of these four exceptions.
A. Gibbons Failed to Provide Evidence Showing Kodiak Assumed 5832's Liabilities That Were Not Transferred Under the Asset Purchase Agreement.
¶18 Gibbons asserts that because the Asset Purchase Agreement transferred specified liabilities to Kodiak, Kodiak impliedly assumed all of 5832's liabilities. This argument is negated by the terms of the Asset Purchase Agreement, which specifically identifies the liabilities Kodiak assumed. Those specified liabilities did not purport to include all of 5832's liabilities and did not include any liability to Gibbons. The Asset Purchase Agreement added that Kodiak "does not assume and shall in no event be liable" for any liability "[e]xcept as specifically" stated in that detailed contract. Nor has Gibbons shown that Kodiak allegedly making payments beyond those required by the Asset Purchase Agreement meant it assumed all of 5832's liabilities, including those that were unknown to the parties (like Gibbons' claims). Under the Asset Purchase Agreement, Kodiak did not expressly or impliedly assume any liability by 5832 to Gibbons.
¶19 Nor does the record suggest that 5832 or Kodiak had notice or knowledge of any potential claim by Gibbons before they finalized the Asset Purchase Agreement in November 2016. The superior court observed that "[n]o evidence suggests that 5832, Kodiak, or anyone else associated with Defendants knew about [Gibbons'] claim before execution of the Purchase Agreement." This lack of evidence also negates Gibbons' claim that Kodiak impliedly assumed liability for 5832's judgment.
B. Gibbons Failed to Show that Kodiak Is a "Mere Continuation" of 5832.
¶20 Asserting Kodiak and 5832 both "utilized the same building, the same name, and served substantially the same patrons," and that Kodiak "did not substantially change the nature" or name of GABC, Gibbons argues Kodiak is "a mere continuation of" 5832 for successor liability purposes. The superior court, however, found that "no evidence suggests" the "mere continuation" exception would apply. Similarly, on appeal, Gibbons provides no record support for his assertions.
¶21 Although Gibbons relies on Warne Invs., Ltd. v. Higgins, 219 Ariz. 186 (App. 2008), that case is distinguishable. Warne involved related companies, the second created after the first lost a jury trial where an owner told the plaintiff "he would never get paid" because the first company "would just close down" if it lost. Id. at 189 ¶ 4. In affirming a "mere continuation" finding after it lost and the creation of the second company, Warne noted the two companies, among other things, "had identical or substantially similar directors, officers, and stockholders" and the owners of both "admitted there was no real difference between the companies." Id. at 192 ¶ 19. Warne found that evidence showed the first company's "business, including its owners, key employees and services, was essentially reconstituted as" the second company. Id. at 194 ¶ 29. Here, by contrast, Gibbons provided no such evidence. Nor does Gibbons show "a substantial similarity in the ownership and control" over Kodiak and 5832, "[a] crucial factor in determining if a successor corporation is a mere continuation" of a predecessor. Teeters, 172 Ariz. at 329-30 (citing authority).
C. Gibbons Presented No Evidence that the Transfer of Assets Was for the Fraudulent Purpose of Escaping Liability for 5832's Debts.
¶22 Gibbons' final argument is that the Asset Purchase Agreement is a fraudulent transfer designed to allow 5832 to escape liability for its debt to Gibbons. As noted above, there is no evidence that 5832 knew of Gibbons' claim, let alone liability, before the November 2016 Asset Purchase Agreement. Thus, that factual predicate for such an argument is missing.
¶23 Nor does the record show that Kodiak provided insufficient consideration for the purchase. Gibbons argues that 5832 had a fair market value of $158,096 in November 2016, while Kodiak paid 5832 $81,000 under the Asset Purchase Agreement. The record, however, is to the contrary. Along with the payment, Kodiak also assumed liabilities exceeding $1.1 million, with a total purchase price later valued at more than $2 million. On this record, Gibbons' argument that "Kodiak provided insufficient consideration for the purchase" fails.
¶24 Although Gibbons did not assert a claim under Arizona's Fraudulent Transfer Act, the superior court found the factors set forth in Section 44-1004(B) did not defeat summary judgment. Gibbons has shown no error in that analysis. There is no evidence that the transfer failed to involve the receipt of a reasonably equivalent value in exchange. See A.R.S. § 44-1004(A)(2). The other option under that Act focuses on the application of eleven enumerated factors. See A.R.S. § 44-1004(B).
¶25 As the superior court noted in applying those factors, there is no evidence anyone affiliated with 5832 had an interest in Kodiak; that 5832 retained any possession or control of the property after the transfer or that the transfer was concealed. See A.R.S. §§ 44-1004(B)(1), (2) & (3); see also A.R.S. § 44-1004(B)(11) (whether "essential assets" were indirectly transferred "to an insider of the debtor"). There was no evidence that, before the transfer, 5832 "had been sued or threatened with suit" by Gibbons, A.R.S. § 44-1004(B)(4), with the superior court noting "[h]ad Plaintiff pursued his claims sooner, this factor might have favored him."
¶26 Although 5832 transferred substantially all its assets to Kodiak, A.R.S. § 44-1004(B)(5), Kodiak's payment and assumption of liabilities shows 5832 "received greater value than it transferred." Accord A.R.S. § 44-1004(8) (requiring value of consideration received be at least "reasonably equivalent" to that transferred). Recognizing 5832 did not participate in the litigation with a default judgment entered against it, there is no evidence that 5832 removed or concealed assets. A.R.S. §§ 44-1004(B)(6) & (7). Nor was there evidence that 5832 was or became insolvent shortly after the transfer, or that the transfer accompanied 5832 incurring "a substantial debt." A.R.S. §§ 44-1004(B)(9) & (10). For these reasons, even if it applied to Gibbons' successor liability claim regarding Kodiak, the superior court properly analyzed the Fraudulent Transfer Act and found Gibbons had not made the required showing to defeat summary judgment.
CONCLUSION
¶27 The judgment is affirmed. In the exercise of the court's discretion, the requests by 8090 and Kodiak for attorneys' fees as sanctions are denied. 8090 and Kodiak are, however, awarded their taxable costs incurred on appeal contingent upon their compliance with ARCAP 21.