Opinion
No. 2 CA-CV 2018-0030
05-22-2019
U.S. BANK NATIONAL ASSOCIATION, AS TRUSTEE, SUCCESSOR-IN-INTEREST TO BANK OF AMERICA, N.A., AS TRUSTEE, SUCCESSOR TO WELLS FARGO BANK, N.A., AS TRUSTEE, FOR THE REGISTERED HOLDERS OF CREDIT SUISSE FIRST BOSTON MORTGAGE SECURITIES CORPORATION, COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2006 TFL2, BY AND THROUGH ITS SPECIAL SERVICER, CW CAPITAL ASSET MANAGEMENT, LLC, Plaintiff/Appellee, v. STARR PASS RESORT DEVELOPMENTS LLC; TITLE SECURITY AGENCY OF ARIZONA; STARPASS MASTER HOMEOWNERS ASSOCIATION, INC.; STARR PASS RESIDENTIAL LLC; STARR PASS REDEVELOPMENT LLC; STARR PASS HOLDINGS LLC; AND F. CHRISTOPHER ANSLEY, Defendants/Appellants, and RECEIVER DOUGLAS P. WILSON, Defendant/Appellee.
COUNSEL Ballard Spahr LLP, Phoenix By Brian Schulman, Dean C. Waldt, and Craig Hoffman Counsel for Plaintiff/Appellee U.S. Bank National Association Snell & Wilmer L.L.P., Tucson By Mark E. Konrad and James D. Carlson Counsel for Defendant/Appellee Receiver Douglas P. Wilson Campbell Killin Brittan & Ray LLC, Denver, Colorado By Bruce E. Rohde and BurnsBarton LLP, Phoenix By C. Christine Burns Counsel for Defendants/Appellants Stephen J. Gonzalez, Tucson Counsel for Appellant Starr Pass Resort Developments LLC Deconcini McDonald Yetwin & Lacy, Tucson By Jody Corrales Counsel for Appellant Starr Pass Residential LLC
THIS DECISION DOES NOT CREATE LEGAL PRECEDENT AND MAY NOT BE CITED EXCEPT AS AUTHORIZED BY APPLICABLE RULES.
NOT FOR PUBLICATION
See Ariz. R. Sup. Ct. 111(c)(1); Ariz. R. Civ. App. P. 28(a)(1), (f). Appeal from the Superior Court in Pima County
No. C20117682
The Honorable Charles V. Harrington, Judge
AFFIRMED
COUNSEL Ballard Spahr LLP, Phoenix
By Brian Schulman, Dean C. Waldt, and Craig Hoffman
Counsel for Plaintiff/Appellee U.S. Bank National Association Snell & Wilmer L.L.P., Tucson
By Mark E. Konrad and James D. Carlson
Counsel for Defendant/Appellee Receiver Douglas P. Wilson Campbell Killin Brittan & Ray LLC, Denver, Colorado
By Bruce E. Rohde and BurnsBarton LLP, Phoenix
By C. Christine Burns
Counsel for Defendants/Appellants Stephen J. Gonzalez, Tucson
Counsel for Appellant Starr Pass Resort Developments LLC Deconcini McDonald Yetwin & Lacy, Tucson
By Jody Corrales
Counsel for Appellant Starr Pass Residential LLC
MEMORANDUM DECISION
Judge Brearcliffe authored the decision of the Court, in which Presiding Judge Staring and Judge Vásquez concurred. BREARCLIFFE, Judge:
¶1 Starr Pass Resort Developments LLC ("SPR Developments"), Starr Pass Holdings LLC ("SP Holdings"), Starr Pass Residential LLC ("SP Residential"), and F. Christopher Ansley ("Ansley") (collectively "2015 Appellants") appeal the trial court's two individual grants of partial summary judgment in 2013 and 2014. SPR Developments and Ansley also appeal the court's 2017 denial of a post-trial restraining order and a motion for new trial. SP Holdings, SP Residential, Title Security Agency of Arizona as Trustee of Trust 708 ("Trust 708"), StarPass Master Homeowners Association Inc., and Starr Pass Redevelopment LLC, ("SP Redevelopment") (collectively "Related Entities"), appeal the court's 2017 grant of partial summary judgment, denial of specific performance, grant of accounting, and final judgment. We affirm.
By order of April 9, 2018, we accepted the parties' briefing in the dismissed 2015 appeal in this action.
The notice of appeal recites the August 8, 2017 judgment rather than the August 28, 2017 amended judgment, entered for the sole purpose of attaching exhibits. However, we "liberally construe notices of appeal 'if the result is neither misleading nor prejudicial to the appellees involved.'" Gutierrez v. Gutierrez, 193 Ariz. 343, ¶ 30 (App. 1998) (quoting McKillip v. Smitty's Super Valu, Inc., 190 Ariz. 61, 63 (App. 1997)). Because the error here is "merely a technical one, and no one was misled," we so construe the notice of appeal as noticing the August 28, 2017 amended judgment. Hanen v. Willis, 102 Ariz. 6, 9 (1967) (retaining jurisdiction when appellant noticed a minute entry rather than the judgment that was entered later).
Factual and Procedural History
To avoid redundancy and confusion, we reserve the discussion of some facts for the analysis sections to which they pertain.
¶2 In reviewing the trial court's summary judgment rulings below, we view the facts in the light most favorable to the nonmoving party. In re Estate of Evitt, 245 Ariz. 352, ¶ 8 (App. 2018). We consider the factual material placed before the court at the time of the ruling. See Tilley v. Delci, 220 Ariz. 233, ¶ 10 (App. 2009) ("[T]he trial court considers 'those portions of the verified pleadings, depositions, answers to interrogatories and admissions on file which are brought to the court's attention by the parties.'" (emphasis omitted) (quoting Choisser v. State ex rel. Herman, 12 Ariz. App. 259, 261 (1970))). Otherwise, and as to the remaining rulings made following the bench trial, we view the facts adduced at trial in the light most favorable to sustaining the judgment. All. Marana v. Groseclose, 191 Ariz. 287, 288 (App. 1997).
The Loan and Guaranty
¶3 In August 2006, SPR Developments, as borrower, entered into a loan agreement with Column Financial Inc., as lender. The loan, in the principal amount of $145 million, was to refinance debt incurred in constructing the JW Marriott Starr Pass Resort and Spa in Tucson (the "Resort"). Ansley was the president of SP Holdings, which was the sole member of SP Resort Holdings LLC ("SPR Holdings"), which itself was the sole member of SPR Developments.
Ansley was also the director and president of SPR Developments, SP Holdings, and SP Residential.
¶4 The loan, evidenced by a promissory note, was secured by a deed of trust and security agreement providing the lender with a security interest in certain real property owned by SPR Developments. This property included the Resort, golf course, and "Block 14," which contained a temporary overflow parking lot for the hotel and the maintenance facility for the golf course. Adjacent to the Resort and golf course are residential properties and common areas that make up the "Starr Pass" master planned community.
The parties use both "Block 14" and "Release Parcel" to refer to the same property; we use Block 14 for consistency.
¶5 The loan was a non-recourse loan, meaning that the obligation was secured first and foremost by the pledged collateral; the lender could foreclose on the collateral in the event of a breach, but could not seek a money judgment against the borrower. However, the loan would become a full-recourse loan if, among other events, "Borrower fails to obtain Lender's prior consent to any . . . voluntary Lien encumbering the Property" or "if Borrower fails to obtain Lender's prior consent to any Transfer as required by [the loan agreement] or the Mortgage." A "transfer" is defined in the loan agreement broadly as, among other things, selling, conveying, encumbering, or pledging the collateral property.
¶6 In conjunction with the loan agreement, Ansley executed a guaranty agreement. In that guaranty, Ansley personally "unconditionally guarantee[d]" to the lender the payment of certain defined obligations, including any full-recourse obligations and liabilities of SPR Developments under the loan agreement.
¶7 The loan agreement also contemplated, and SPR Developments acknowledged and agreed, that the lender could "securitize" the loan by selling all or any portion of the loan, or by selling securities which could be backed by all or part of the loan. Immediately after the loan was extended, Column Financial assigned the loan, note, and deed of trust to Wells Fargo Bank N.A., as "trustee." Ultimately, the loan was securitized through the sale of securities to several classes of participants (specifically "A" and "B" participants).
Default and Lawsuit
¶8 In October 2011, appellee U.S. Bank as trustee and successor note-holder and secured party, filed a complaint against SPR Developments claiming it was in default for failing to make loan payments. In November 2011, the trial court appointed Douglas P. Wilson to act as receiver (the "Receiver") for the Resort and "all other collateral relating thereto." In October 2012, U.S. Bank filed a second amended complaint, asserting new claims and adding several additional defendants, including Ansley, SP Residential, and SP Holdings.
¶9 The second amended complaint alleged, among other things, that SPR Developments had committed several breaches of the loan agreement and that the breaches triggered both SPR Developments' full-recourse liability under the loan agreement and also Ansley's corresponding personal liability under the guaranty "for all amounts due and owing under the Note." In November 2013, U.S. Bank filed a third amended complaint, asserting new claims, including a request for imposition of alter-ego liability among the various defendants.
Pretrial Motions
Partial Summary Judgment Re: Block 14
¶10 In August 2009, SPR Developments transferred Block 14 to SP Residential for nominal recited consideration. As stated above, as with all other collateral for the loan, SPR Developments could not sell, transfer, or otherwise convey Block 14 without the consent of the lender. And, while the loan documents contemplated the eventual release of Block 14 as collateral and its transfer to SP Residential, any such transfer had to comply with certain stated conditions, including that the transfer deed "contain a restriction prohibiting the use of [Block 14] as a hotel or any similar hospitality business or golf course." In April 2013, U.S. Bank moved for partial summary judgment, seeking a declaratory judgment that the Block 14 transfer violated the loan agreement, and as such, that Block 14 remained as collateral under the deed of trust ("Block 14 motion").
¶11 U.S. Bank argued that the transfer violated the loan agreement because it was made without its consent and SPR Developments had failed to satisfy "eleven separate and specific conditions precedent set forth in Section 5.2.10(i) of the Loan Agreement." The named defendants, including the 2015 Appellants here, opposed the motion, arguing that the conditions set forth in § 5.2.10 of the loan agreement are not conditions precedent, that the conditions were satisfied, that enforcement of the section would result in disproportionate forfeiture, and that U.S. Bank should be estopped from claiming default due to the transfer. The trial court granted the Block 14 motion concluding that because "the transfer . . . did not contain the requisite [deed] restrictions . . . the [d]efendants breached the contract." It entered judgment that the Block 14 property "must remain part of the collateral for the loan because it was not transferred in compliance with the conditions precedent to transfer."
Partial Summary Judgment Re: HOA Assessment
¶12 The Starr Pass residential community adjacent to the Resort, which was neither part of the Resort nor collateral for the loan, was governed by the "Master Declaration Creating Covenants, Conditions, Restrictions, and Easements for Starr Pass," recorded in 1992 ("Master CC&Rs"). The Master CC&Rs, created by Ansley as president of StarrPass Development Corp., through StarrPass Properties LP, also established the StarPass Master Homeowners Association ("SP HOA") to enforce them.
¶13 The Master CC&Rs imposed annual and special assessments as "continuing liens" against each property governed by it, subjecting each property to foreclosure for non-payment of such assessments "in a like manner as a mortgage on real property." The assessments and related charges also became "the personal obligation" of each property owner when assessed. The assessments were to be paid to SP HOA, which also controlled the amount of annual assessments and the levying of any special assessments.
¶14 Any resort hotel and golf course—although yet to be built at the time of the adoption of the Master CC&Rs—was expressly exempted from the provisions. Similarly, any golf course or resort was specifically excluded from the definition of "Properties" subject to the Master CC&Rs. The Master CC&Rs also stated: "[n]one of the provisions hereof shall apply to any golf course, guest ranch, villas, resort, or to any related facilities, and none of said facilities, if any, shall be governed by or affected by the provisions hereof." It further stated that, "[i]f any such facility is built upon a Block" subject to the Master CC&Rs, "then this Declaration shall nevertheless have no application of relevance to such facility . . . it being the intent that this Declaration shall govern only the residential projects planned or constructed within the Properties." The assessments established by the Master CC&Rs were expressly not imposed on the golf course and Resort.
¶15 When the loan was made and until 2011, the Resort and golf course continued, by express language in the Master CC&Rs, to be exempted from assessments by SP HOA and consequently free of any risk of liens, foreclosure, or personal liability for unpaid assessments. In May 2011, Ansley, as president of SP HOA and of SP Redevelopment, executed and recorded the "Sixth Amendment" to the Master CC&Rs. This sixth amendment was "approved by" SPR Developments, as owner of the Resort, also through its president, Ansley.
¶16 In relevant part, the sixth amendment provided:
Article IV shall be and hereby is amended that, commencing in the year 2006 and for each year after, the aggregate rate of annual and special assessments ("Aggregate Assessment Amount") for all Properties shall be as follows:The "Resort" was defined in the sixth amendment by legal descriptions inclusive of the properties on which the Resort and golf course, both still collateral for the loan, then sat.
. . . .
The Owner of the Resort . . . shall be responsible to pay an amount equal to twenty (20%) of the Aggregate Assessment Amount . . . . The Resort shall be excluded from the definition of "Lot" in the Declaration, and is made subject to the Declaration for the sole purposes of assessments and voting as set forth in this Sixth Amendment.
¶17 In January 2014, U.S. Bank moved for partial summary judgment seeking a declaratory judgment that SPR Developments had breached the loan agreement by imposing, and doing so retroactively to 2006, an assessment lien on the Resort and golf course through the sixth amendment ("HOA Assessment motion"). This, it alleged, resulted in a prohibited "[t]ransfer" of the property. The named defendants, including the 2015 Appellants here, opposed the motion arguing, among other things, that the sixth amendment could not and did not create a lien. The defendants argued that, in fact, the language of the sixth amendment "protect[ed]" the Resort and golf course from liens and foreclosure consistent with their exemption in the Master CC&Rs. They also argued that, even if a lien were created, it was immaterial for a variety of reasons.
¶18 The trial court granted U.S. Bank's motion for partial summary judgment. It concluded that the sixth amendment caused "a lien or other encumbrance to be created and recorded against [properties] which are subject to the deed of trust . . . and . . . effected a prohibited 'transfer' of the [p]roperty." The court entered judgment that the prohibited transfer constituted "a default under the terms of the Loan Agreement."
Partial Summary Judgment Re: Guaranty
¶19 Thereafter, in May 2014, U.S. Bank moved for partial summary judgment seeking a declaratory judgment that, given the rulings on the Block 14 and HOA Assessment motions, SPR Developments was liable under the full-recourse provision of the loan agreement and that Ansley was liable under the terms of the guaranty ("Guaranty motion"). The named defendants, including the 2015 Appellants here (except for SP Residential which had then filed for bankruptcy protection), and joined by SPR Developments, argued that the motion was premature, that "newly discovered evidence" undermined the trial court's earlier rulings on which the motion depended—namely that documents revealed that the lender had "consented to" the transfer of Block 14. They also argued that the court's earlier rulings as to SPR Developments' breach were not conclusive as to any breach by Ansley of the guaranty agreement.
¶20 In its reply, U.S. Bank asserted that the newly discovered evidence was merely a re-characterization of arguments earlier made and rejected by the trial court. At the motion hearing, U.S. Bank asked the court to characterize the defendants' arguments as a "motion for reconsideration." The court granted U.S. Bank's motion for partial summary judgment on the guaranty, concluding that its earlier rulings on the Block 14 and HOA Assessment motions "trigger[ed]" both the full-recourse provision of the loan agreement and Ansley's personal liability under the guaranty. The court did not, however, make any ruling as to whether defendants' arguments were seeking reconsideration of the earlier rulings.
Motions for Reconsideration
¶21 In November 2014, the defendants, including the 2015 Appellants here, filed a motion for reconsideration of the Block 14 and Guaranty motions, presenting new evidence. The trial court summarily denied the motion, without ordering U.S. Bank to file an opposition, and vacated a hearing on the motion. In December 2014, the 2015 Appellants filed a motion for reconsideration of the HOA Assessment and Guaranty motions. The court also summarily denied this motion without requiring U.S. Bank to file an opposition.
Partial Summary Judgment Re: Development Agreement
¶22 In August 1998, Starr Pass Resort LLC ("SP Resort")—the predecessor-in-interest to SPR Developments—as the "developer," and Pima County had executed the Starr Pass Resort Hotel Development Agreement ("Development Agreement"). The Development Agreement acknowledged that SP Resort was the owner of "approximately 197 acres," which it defined as the "Property," of which approximately forty-eight acres was identified as the "Resort Property," on which the Resort was to be built. The Starr Pass master planned community, being developed by Starpass Properties L.P. ("SP Properties"), was adjacent to the 197 acre property. Ansley was SP Properties' corporate general partner and remains its sole surviving partner.
SP Properties was dissolved in 2004, with its residential property being transferred to SP Residential.
¶23 As part of the Development Agreement, SP Resort agreed that "[w]ithin thirty . . . days after the Opening Date of the Resort, [it . . . ] shall cause Starpass Properties to convey the Biological Corridor Core to [Pima] County in fee simple estate by Gift Deed, free and clear of any and all liens (including monetary liens) and encumbrances." The "Biological Corridor Core" properties were four identified parcels of land in certain "biological corridors," which allowed for the "unfettered migration of wildlife through the Resort and contiguous areas of development." At the time of the loan in 2006, a year after the Resort opened, SP Resort had not conveyed the Biological Corridor Core properties to Pima County.
¶24 Under the loan agreement, SPR Developments made certain representations and warranties regarding the collateral property, including that it "is not in default in any material respect in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any material agreement or instrument to which it is a party or by which the Borrower or the property are bound."
¶25 In April 2014, U.S. Bank filed a motion for partial summary judgment regarding breach of the no-default warranty ("No-Default motion"). It argued that the borrower's loan agreement representations were false given its failure to convey the Biological Corridor Core properties to Pima County. The trial court granted the motion, concluding that SPR Developments was in default of the loan agreement "based upon false and/or misleading representations and warranties contained in . . . the Loan Agreement." In January 2015, the Related Entities sought reconsideration of the ruling. After permitting U.S. Bank to respond, the court denied the motion.
2015 Appeal
¶26 On April 7, 2015, the trial court signed a judgment against Ansley in the amount of $180,853,741.97 pursuant to the guaranty. The judgment was entered with language required by Rule 54(b), Ariz. R. Civ. P., to make that judgment immediately appealable. In April 2015, the named defendants, including the 2015 Appellants here, filed a notice of appeal, challenging that judgment and all prior rulings, including those on the Block 14, HOA Assessment, and Guaranty motions. After determining that certification of the April 7, 2015, judgment under Rule 54(b) was improper and that this court therefore did not have jurisdiction over the appeal, we dismissed the appeal. U.S. Bank Nat'l Ass'n v. F. Christopher Ansley, No. 2 CA-CV 2015-0101, ¶ 17 (Ariz. App. Dec. 28, 2016) (mem. decision).
Trial
¶27 Following the dismissal of the 2015 appeal, the parties tried all remaining issues to the trial court. No parties asked the court to issue findings of fact and conclusions of law. In September 2015, the court issued its under-advisement ruling on the matters tried. Over the succeeding two calendar years, other proceedings were conducted, and various forms of judgment were lodged by the parties, objected to, and ruled upon by the court.
¶28 On August 8, 2017, the trial court entered a Rule 54(b) judgment, which it thereafter amended solely to attach exhibits. This judgment incorporated by reference the rulings on the Block 14, HOA Assessment, and Guaranty motions. The court found in favor of U.S. Bank in the amount of $192,870,321.33; the court also found that the breach of the loan agreement resulted in SPR Developments' full-recourse liability and that each defendant was the alter ego of the other and under common control of Ansley and, as such, the defendants were collectively liable for the judgment amount.
Although trial resolved all remaining claims among all parties to the suit, U.S. Bank sought a Rule 54(b) judgment rather than a Rule 54(c) judgment. It did so to maintain the trial court's jurisdiction over the court-appointed Receiver while it continued to manage the collateral during appellate proceedings.
Post-Trial Motions
¶29 Defendants, including SPR Developments and Ansley, filed a series of post-trial motions. In July 2016, defendants filed a "supplemental objection to plaintiff's proposed form of judgment," arguing for the first time that junior note holders—holders of "B Participation" interests in the securitization of the loan ("B Participants")—were indispensable parties, and therefore must be joined or, in the alternative, the judgment must be modified to exclude recovery to which they were solely entitled. In February 2017, defendants filed an "amended objection to the plaintiff's proposed form of judgment," arguing again that the B Participants were indispensable parties, that U.S. Bank had made misstatements to the trial court about the securitization of the loan, and that it had "change[d] its story" in responding to their claim that B Participants were indispensable parties.
¶30 In August 2017, defendants filed an "application for a temporary restraining order" to forestall foreclosure, arguing, also for the first time, that U.S. Bank was not the successor-in-interest to the original lender. Also in August 2017, defendants, including SPR Developments and Ansley, filed a "motion to vacate judgment or amend or modify judgment or for a new trial," arguing that U.S. Bank misrepresented its standing, that the August 8, 2017 judgment (as amended) was void or should have been modified for failure to join indispensable parties, and that the judgment should have been amended due to "[i]rregularity, [m]isconduct, [n]ewly [d]iscovered [e]vidence and [l]ack of [s]upport in the [e]vidence or [l]aw, and [m]istake, [f]raud, [m]isrepresentation, or other [m]isconduct."
¶31 By unsigned orders, the trial court denied the application for temporary restraining order and each post-trial motion and request, including for an evidentiary hearing. In denying the motions, the court made no factual findings or otherwise explained its reasoning.
2018 Appeal
¶32 In January 2018, Appellants SPR Developments, SP Residential, Trust 708, SP HOA, SP Redevelopment, and Ansley filed a notice of appeal, appealing the trial court's August 8, 2017 judgment and the court's under-advisement ruling of December 15, 2017, denying post-trial motions. On March 12, 2018, the court signed an order re-stating its earlier December 15, 2017 denial of the post-trial motions and application for temporary restraining order. Thereafter, Appellants filed an amended notice of appeal to include the March 12, 2018 order in the appeal. We have jurisdiction pursuant to A.R.S. § 12-2101(A)(1).
Analysis
Motions for Partial Summary Judgment
¶33 2015 Appellants' briefing addresses the trial court's Block 14 and HOA Assessment motions rulings, but, as appellee U.S. Bank points out, the briefing does not expressly challenge the Guaranty motion ruling. We review a grant of summary judgment based solely on the record made in the trial court, "but we determine de novo whether the entry of [summary] judgment was proper." Modular Mining Sys., Inc. v. Jigsaw Techs., Inc., 221 Ariz. 515, ¶ 9 (App. 2009) (quoting Nat'l Bank of Ariz. v. Thruston, 218 Ariz. 112, n.3 (App. 2008)). Entry of summary judgment is proper if, in viewing the facts in the light most favorable to the non-moving party, there exists no reasonable dispute as to material facts that would prevent the court from entering judgment for the moving party as a matter of law. Id. ¶ 10. For the reasons stated below, the trial court correctly granted the motions relating to Block 14 and the HOA Assessment and, consequently, correctly granted the Guaranty motion.
¶34 The resolution of the issues presented requires interpretation of the written agreements between the parties, principally the loan agreement. "The interpretation of a contract is a question of law, which we review de novo." Rand v. Porsche Fin. Servs., 216 Ariz. 424, ¶ 37 (App. 2007). The interpretation of the loan agreement here, as stated in the loan documents, is governed by New York law. Under New York law, "[i]t is well settled that a contract is to be construed in accordance with the parties' intent, which is generally discerned from the four corners of the document itself." MHR Capital Partners LP v. Presstek, Inc., 912 N.E.2d 43, 47 (N.Y. 2009). Thus, "a written agreement that is complete, clear and unambiguous on its face must be enforced according to the plain meaning of its terms." Id. (quoting Greenfield v. Philles Records, Inc., 780 N.E.2d 166, 170 (N.Y. 2002)).
Block 14 Motion
¶35 At the time of the loan agreement, SPR Developments was building a new parking garage to replace the temporary parking lot on Block 14. As stated above, the loan agreement generally prohibited SPR Developments from encumbering, conveying or otherwise transferring property secured by the deed of trust without the lender's prior consent. However, the loan agreement provided that, once the new garage was completed, Block 14 could be released as collateral for the loan and be conveyed to SP Residential for no consideration. That conveyance could be on thirty-days' prior written notice to the lender, provided that conditions set forth in § 5.2.10(i) of the loan agreement were satisfied, including the condition in § 5.2.10(i)(ii), described above that required a deed restriction barring use of the lot for a hotel or golf course. In August 2009, SPR Developments conveyed Block 14 to SP Residential by warranty deed without the required deed restriction.
¶36 In contending that the trial court erred in granting the Block 14 motion, 2015 Appellants argue, as they did below, that the conditions restricting the conveyance of Block 14 to SP Residential are not conditions precedent; rather, they argue, they are "promises," which can be satisfied through substantial performance. U.S. Bank asserts that the deed restriction condition was intended to protect the lender against competition to its collateral and that the plain language of the loan agreement clearly shows that the conditions were conditions precedent to SPR Developments' contractual right to transfer Block 14.
¶37 A condition precedent is "an act or event, other than a lapse of time, which, unless the condition is excused, must occur before a duty to perform a promise in the agreement arises." MHR Capital Partners LP, 912 N.E.2d at 47 (quoting Oppenheimer & Co. v. Oppenheim, Appel, Dixon & Co., 660 N.E.2d 415, 418 (N.Y. 1995)). "A promise is 'a manifestation of intention to act or refrain from acting in a specified way, so made as to justify a promisee in understanding that a commitment has been made.'" Merritt Hill Vineyards Inc. v. Windy Heights Vineyard, Inc., 460 N.E.2d 1077, 1081 (N.Y. 1984) (quoting Restatement (Second) of Contracts §2(1) (1981)). Under New York law, "[e]xpress conditions must be literally performed; substantial performance will not suffice." MHR Capital Partners LP, 912 N.E.2d at 47. "[T]he use of terms such as 'if,' 'unless' and 'until' constitutes 'unmistakable language of condition.'" Id. (quoting Oppenheimer & Co., 660 N.E.2d at 415).
¶38 Section 5.2.10(i) of the loan agreement provides:
From and after the date of the completion of the New Garage in accordance with the terms and provisions hereof, Borrower may, upon thirty (30) days prior notice to Lender, convey [Block 14] to Starr Pass Residential LLC . . . for no consideration upon satisfaction of each of the following conditions . . . .The phrase "upon satisfaction of each of the following conditions" is, operatively, not materially different from phrases using the expressly conditional terms "if," "unless" and "until." That is, the scrivener could have as easily, and without changing the effect of the phrase, stated "unless each of the following conditions is satisfied," or "until each of the following conditions is satisfied," or "if each of the following conditions is satisfied." Section 5.2.10(i), therefore, contains "unmistakable language of condition." See Oppenheimer & Co., 600 N.E.2d at 415. As such, each condition thereafter stated must be "literally performed" before the borrower can convey Block 14. See MHR Capital Partners LP, 912 N.E.2d at 47. Consequently, the trial court was correct in concluding that SPR Developments' failure to include the deed restriction when it conveyed Block 14 failed to satisfy a condition precedent to its power to do so, and it breached the loan agreement. See id.
Even if we were to construe the language as a promise such that substantial performance might be sufficient, SPR Developments did not substantially perform "each of the following conditions" when it failed completely to include the deed restriction.
¶39 2015 Appellants additionally argue that holding them to the conditions precedent would result in a disproportionate forfeiture, such that SPR Developments' need to satisfy them should be excused. Under New York law, "'[t]o the extent that the non-occurrence of a condition would cause disproportionate forfeiture, a court may excuse the non-occurrence of that condition unless its occurrence was a material part of the agreed exchange.'" Oppenheimer & Co., 660 N.E.2d at 418 (quoting Restatement (Second) of Contracts § 229). The comment to Restatement § 229, as to how we determine whether a forfeiture is "disproportionate," continues "a court must weigh the extent of the forfeiture by the obligee against the importance to the obligor of the risk from which he sought to be protected and the degree to which that protection will be lost . . ." if the failure to meet the condition is excused. § 229(b). Below, and here, U.S. Bank argued that its motion did not seek forfeiture of Block 14, but only a declaration that it remains collateral for the loan. Here, as below, it further argues that, even if forfeiture were implicated, the conditions in § 5.2.10(i) were material terms to the loan.
¶40 Among other things relative to the conditions precedent, U.S. Bank argues it sought protection from direct competition to the Resort and golf course from any successor owner of Block 14 in exchange for the benefit obtained by the borrower—the release of that parcel as collateral. By conveying Block 14 to SP Residential without the deed restriction, SPR Developments deprived U.S. Bank of that protection. Cf. Lenel Sys. Int'l, Inc. v. Smith, 966 N.Y.S.2d 618, 621 (App. Div. 2013) (noting that non-compete provisions are material). As the trial court concluded, to excuse this failure would deny the lender a material, bargained-for benefit. Consequently, any forfeiture due to borrower's breach is not "disproportionate" justifying an excuse of the condition.
¶41 2015 Appellants additionally argue that U.S. Bank should be estopped from claiming default. "The elements of promissory estoppel are: a clear and unambiguous promise; a reasonable and foreseeable reliance by the party to whom the promise is made; and an injury sustained by the party asserting the estoppel by reason of his reliance." Ripple's of Clearview, Inc. v. Le Havre Assocs., 452 N.Y.S.2d 447, 449 (App. Div. 1982). 2015 Appellants contend that there was a clear and unambiguous representation that the § 5.2.10(i) conditions had been satisfied. It relies upon: (1) a September 2008 "case report" written by an employee of one of the lender banks; (2) a November 2008 letter from the same bank conditionally approving the release of Block 14; (3) a May 2009 letter from the same bank approving the fourth amendment to the management agreement between SPR Developments and Marriott Hotel Services Inc.; and (4) various notices in 2010 regarding loan maturity date extensions and other minor loan breaches.
2015 Appellants make several other arguments—including consent, waiver, and materiality—regarding the Block 14 motion and rely on evidence that was first presented to the trial court in its response to the Guaranty motion and its motion for reconsideration filed after the Block 14 motion was granted. As to the motion for reconsideration, the trial court summarily denied the motion without requiring U.S. Bank to respond. We will not consider arguments and evidence raised for the first time in motions for reconsideration when "the opposing party has been deprived of the opportunity to respond with applicable evidence and arguments." See Best Choice Fund, LLC v. Low & Childers, P.C., 228 Ariz. 502, n.3 (App. 2011); see also Evans Withycombe, Inc. v. W. Innovations, Inc., 215 Ariz. 237, ¶ 15 (App. 2006) (arguments first made in motion for reconsideration waived on appeal when opposing party did not respond below). Likewise, much of 2015 Appellants' estoppel argument was made for the first time after the court had granted summary judgment; we will only consider the arguments preserved in their response to the motion for summary judgment. See id.
For the sake of clarity, we use the word "representation" instead of "promise."
¶42 The 2008 case report contains no clear and unambiguous representation that the conditions had been satisfied. In fact, the report notes, as "Conditions of approval," that "Borrower . . . comply with all terms of Section 5.2.10 of the Loan Agreement pertaining to the release of Block 14." (Emphasis added.) Additionally, in a table also labeled "Conditions of Approval," the report notes that the condition requiring the instrument conveying Block 14 "contain a restriction prohibiting the use of the Release Parcel as a hotel or any similar hospitality business or golf course" has not been met. If this report can be construed as a representation of anything, it is a representation that the condition was to be met, but had not been. 2015 Appellants could not have reasonably relied on an opposite meaning. See Ripple's of Clearview, Inc., 452 N.Y.S.2d at 449 (noting that reliance must be reasonable).
¶43 The November 2008 letter states "the proposed release of Block 14 . . . has been approved, subject to the following conditions: . . . Borrower to comply with all terms of Section 5.2.10 of the Loan Agreement pertaining to the release of Block 14." (Emphasis added.) The letter on its face, then, is wholly consistent with the loan agreement, stating that the approval of the transfer is conditional and subject to, among other conditions, the deed-restriction condition. Again, any reliance on an opposite reading would have been unreasonable.
¶44 The fourth amendment to the managerial agreement between SPR Developments and Marriott Hotel Services Inc. provides for, among other things, the management of the new parking garage and the facilities located on Block 14. The lender was not a party to the managerial agreement, but it was required to approve the agreement. Although the fourth amendment to the managerial agreement is implicitly contingent on Block 14 being released as collateral from the deed of trust, it does not explicitly mention Block 14, much less comment on the satisfaction of the § 5.2.10(i) conditions. Likewise, the letter approving the fourth amendment does not mention Block 14 or the § 5.2.10(i) conditions. The lender's approval of the fourth amendment does not, therefore, "clearly" or "unambiguously" serve as a representation that the § 5.2.10(i) conditions have been satisfied. Even so, as U.S. Bank points out, there is no evidence in the record demonstrating that the 2015 Appellants ever saw the approval letter. We cannot say that it would be reasonable for a party to rely on a representation that a condition had been satisfied when it was that very party that indisputably failed to satisfy the condition. And we certainly cannot say SPR Developments reasonably relied on a representation when no evidence showed that it actually relied upon it. See McGowan v. Treacy, 84 N.Y.S. 497, 498 (App. Term 1903) (finding "there was no estoppel, because there was no actual reliance"); see also DiLascio v. Tilden Glen Head, Inc., 894 N.Y.S.2d 203, 205 (App. Div. 2010) ("[T]he party asserting estoppel must show, with respect to himself or herself, a lack of knowledge of the real facts.").
¶45 Finally, as to the three 2010 letters regarding maturity extensions of the loan and SPR Developments' other defaults, 2015 Appellants point out that none of the letters includes any "notice" of an event of default under § 5.2.10(i)(ii). Consequently, they argue, in 2010 the lender, "must not have thought the conveyance" of Block 14 in 2009 "was an unpermitted 'Transfer.'" However, § 8.1(b) of the loan agreement states that
Upon the occurrence . . . of an Event of Default [including transfers in violation of the Loan Agreement] and at any time thereafter . . . Lender may take such action, without notice or demand, that Lender deems advisable to protect and enforce its rights against Borrower and in and to the Property, including, without limitation, declaring the Debt to be immediately due payable, and Lender may enforce or avail itself of any or all rights or remedies provided in the Loan Documents against Borrower and the Property.(Emphasis added.) Further, § 8.2(c) states that "[n]o delay or omission to exercise any remedy, right or power accruing upon an Event of Default shall impair any such remedy, right or power or shall be construed as a waiver thereof." By the plain terms of the loan agreement, U.S. Bank could declare an event of default at any time and without notice. Therefore, it would have been unreasonable to rely on the failure of the lender to state all then-existing events of default in any particular notice as a representation that any particular event of default had not occurred. See Ripple's of Clearview, Inc., 452 N.Y.S.2d at 449 (noting that reliance must be reasonable).
HOA Assessment Motion
¶46 The loan agreement is breached and the full-recourse provision of the loan agreement is triggered "if Borrower fails to obtain Lender's prior consent to any Indebtedness or voluntary Lien encumbering the Property." (Emphasis added.) Thus, by the plain terms of the loan agreement, any lien on any portion of the property to any degree without U.S. Bank's consent violates the loan agreement and triggers full-recourse liability. See Vanlex Stores, Inc. v. BFP 300 Madison II LLC, 887 N.Y.S.2d 576, 577 (App. Div. 2009) (stating a "clear and complete writing must be enforced according to its plain terms"). In granting the HOA Assessment motion, the trial court concluded that the HOA Assessment imposed by the sixth amendment to the Master CC&Rs was a non-consensual encumbrance and prohibited transfer that breached the loan agreement.
Permitted Encumbrance
¶47 The 2015 Appellants first claim the trial court erred when it granted the HOA Assessment motion arguing the assessments in the sixth amendment did not create a "new" encumbrance against the Resort and golf course. Rather, they contend, any assessment was a "permitted encumbrance," disclosed in the title policy, and thus allowed by the loan agreement. A "permitted encumbrance" is defined in the loan agreement as, in relevant part, "all Liens, encumbrances and other matters disclosed in the Title Insurance Policy." Such encumbrances are not impermissible transfers under § 8.1(iv). 2015 Appellants contend that the recorded re-platting of the property in 2003 and its attendant Notice of Designation, made the property generally subject to the Master CC&Rs. And, because the re-platting and Notice of Designation were identified in the title policy issued at the time of the loan, the assessments in the sixth amendment were "permitted encumbrances." Consequently, they argue, the assessment lien imposed by the sixth amendment was not an impermissible transfer and a breach.
¶48 2015 Appellants do not, however, identify any language in the re-platting, Notice of Designation, or the Master CC&Rs, that necessarily subjects the Resort and golf course to the provisions of the Master CC&Rs even if the re-platting did sweep the Resort and golf course into the geographic reach of that development. Indeed, as argued by U.S. Bank, the Notice of Designation itself disclaims any such result. Notice 2 in the Notice of Designation, as to certain parcels affected by the 2003 re-platting, states:
Blocks 1 and 4 of Starr Pass III and Block 14 of the Original Plat shall for all purposes be deemed to be "Golf Course" as defined in the Master [CC&Rs] and in the First Amendment, and shall be entitled to all of the rights, benefits and easements of the "Golf Course" as so defined, and shall also be exempted from the effect and burden of the Master [CC&Rs] and the Amendments to the full extent contemplated for the "Golf Course", and such Blocks 1 and 4 shall be exempt from paying any assessment, whether annual, special or otherwise, that may be levied under the Master [CC&Rs].
¶49 If, as 2015 Appellants argue, either the purpose or effect of the re-platting and Notice of Designation were to subject earlier exempted properties to the Master CC&Rs and assessments, this statement affirming the exemption in the same Notice belies that. Also, the preamble to the Master CC&Rs, unaffected by any provision in the Notice of Designation, states, "None of the provisions hereof shall apply to any golf course, guest ranch, villas, resort, or to any related facilities, and none of said facilities, if any, shall be governed by or affected by the provisions hereof." And further, "If any such facility is built upon a Block constituting part of the properties, as defined herein, then [the CC&Rs] shall nevertheless have no application of relevance to such facility or facilities . . . ." The trial court correctly concluded that the sixth amendment, recorded in 2011 and making the Resort and golf course subject to special and annual assessments retroactive to 2006, was a new encumbrance, a prohibited transfer, and a breach of the loan agreement, triggering the borrower's full-recourse liability.
Immaterial Breach
¶50 2015 Appellants argue that any breach of the loan agreement by the HOA Assessment was "immaterial" under Restatement (Second) of Contracts § 221. 2015 Appellants no doubt intended to cite to § 241. Even so, 2015 Appellants provide no argument supporting its application here. Section 241 states a number of factors are to be considered in determining "whether a failure to render performance or to offer performance is material." The comment to § 241 states that "[a] determination that a failure is not material means only that it does not have the effect of the non-occurrence of a condition" where performance by the other party is due (either later or simultaneously). Restatement (Second) of Contracts § 241(a).
¶51 Here, by imposing the assessment by the sixth amendment on the Resort and golf course properties in 2011, SPR Developments breached its duty not to act to impair the collateral. 2015 Appellants have provided insufficient argument on appeal as to why the materiality criteria of Restatement (Second) of Contracts § 241 should be considered. By failing to sufficiently support their arguments, the 2015 Appellants have waived them. Ritchie v. Krasner, 221 Ariz. 288, ¶ 62 (App. 2009) ("Opening briefs must present and address significant arguments, supported by authority that set forth the appellant's position on the issue in question."); Ariz. R. Civ. App. P. 13(a)(7)(A) ("An 'argument' must contain . . . [a]ppellant's contentions concerning each issue presented for review, with supporting reasons for each contention, and with citations of legal authorities and appropriate references to the portions of the record on which the appellant relies.").
2018 Appeal
¶52 As with any judgment after trial, "we view the facts in light most favorable to upholding" the judgment. All. Marana, 191 Ariz. at 288. And where, as here, a bench trial was held and neither party requested findings of fact and conclusions of law, "we must presume that the trial court found every fact necessary to support its judgment and we will affirm if any reasonable construction of the evidence justifies it." Double AA Builders, Ltd. v. Grand State Constr. L.L.C., 210 Ariz. 503, ¶ 9 (App. 2005).
Maturity and Full-Recourse Provisions
¶53 Related Entities argue that the trial court erred by entering judgment for the entire loan amount due on maturity. However, Related Entities did not object to the proposed judgment on this basis below, therefore the argument is waived. See Trantor v. Fredrikson, 179 Ariz. 299, 300 (1994) ("Because a trial court and opposing counsel should be afforded the opportunity to correct any asserted defects before error may be raised on appeal, absent extraordinary circumstances, errors not raised in the trial court cannot be raised on appeal.").
¶54 Related Entities argue that the trial court erred by finding that the full-recourse provision was triggered as a result of breaches of the loan agreement related to the Reclaimed Water Delivery System ("RWDS"), the Wildcat Pass Memberships, and the Biological Corridor Core. Because we have already concluded that the full-recourse provision of the loan agreement was triggered by the Block 14 and HOA Assessment breaches, we need not reach the question whether these other alleged breaches also trigger the full-recourse provision. See Progressive Specialty Ins. Co. v. Farmers Ins. Co., 143 Ariz. 547, 548 (App. 1985) (noting that appellate courts should not decide questions that have no practical effect on litigants' rights or that are unnecessary to disposition of appeal). Likewise, we need not reach the Related Entities' estoppel argument related to the Biological Corridor Core because the requested relief is the same. Id.
The RWDS and the Wildcat Pass Memberships are discussed in more detail in the context of the trial court's finding of alter-ego liability.
Injunctive Relief Re: Biological Corridor Core
¶55 As stated above, SP Resort (SPR Developments' predecessor-in-interest) and Pima County were parties to the 1998 Development Agreement which, among other things, required SP Resort to convey the Biological Corridor Core properties to Pima County within thirty days of the opening of the Resort. The Development Agreement also provided for an Environmental Enhancement Fee ("Enhancement Fee") to be assessed against the Resort operations. The Enhancement Fee was to be assessed at two percent of "the gross amount charged" related to services provided by the Resort "for the purpose of defraying the costs of the acquisition of the Biological Corridor Core and the costs of managing, maintaining, preserving and enhancing" the property. The Development Agreement was thereafter amended in 2002, and the county, Trust 708, and SP Properties executed and recorded an "Acknowledgement and Agreement," acknowledging that SP Properties was "either the owner or the beneficial owner . . . of [the] real property described" in the agreement.
¶56 In 2005, the Resort opened, but Pima County did not receive the four parcels making up the Biological Corridor Core within thirty days. Nonetheless, in a 2006 email to Pima County, Ansley confirmed his intention to convey the parcels, writing:
As I mentioned . . . we should receive the legals from Tetra Tec[h] this week and will review and try and convey. The problem may be in the details of getting everything completed.(Emphasis added.)
Regardless of what set of lawyers are correct in the interpretation of the Easement . . . it seems foolish to debate that issue. You know that we will convey the corridors when it is completed . . . .
¶57 A representative of Pima County, Mike Stofko, testified that the parties had consistently identified the same four parcels as comprising the Biological Corridor Core since 2006. Ansley confirmed that these parcels fell within the description provided for in the 2002 Acknowledgement and Agreement. Three of the parcels were owned by Trust 708 and the fourth was owned by SP HOA. In 2006, Pima County prepared four special warranty deeds to convey these parcels to the county, but Trust 708 and SP HOA did not execute them.
¶58 Despite the parcels not being conveyed, the county had collected the Enhancement Fee since the Resort opened in 2005. Consistent with the Development Agreement, the county disbursed the Enhancement Fees collected, seventy-five percent to SPR Developments and twenty-five percent to the county. However, SPR Developments did not use the Enhancement Fee to "defray the costs of the parcels" but instead to pay interest on loans related to the Resort. In 2012, after the Receiver had taken possession and control of the Resort, Ansley asked Pima County to stop disbursing the collected Enhancement Fees; the county did as Ansley requested.
¶59 In its amended judgment, the trial court found that "the recorded Acknowledgment [and] Agreement runs with the land, and any subsequent owners [of] property identified therein took title to such property subject to the rights and obligations of the Development Agreement and the Acknowledgement [and] Agreement." Thus, the court found that Trust 708 and SP HOA were obligated under the Development Agreement to tender the Biological Corridor Core parcels to Pima County, and it ordered that, should Pima County accept the tender, "Ansley, Trust No. 708, and SP HOA, are directed under this Court's mandatory injunction to do all additional acts reasonably required to complete this conveyance to Pima County, including executing the 'Special Warranty Deeds.'"
¶60 Related Entities argue that the trial court erred when it ordered SP HOA and Trust 708 to convey the Biological Corridor Core properties to Pima County. We review a trial court's findings of fact for clear error, and we will only reverse if those findings are unsupported by credible evidence. See Federoff v. Pioneer Title & Trust Co., 166 Ariz. 383, 388 (1990). "A finding of fact is not clearly erroneous if substantial evidence supports it, even if substantial conflicting evidence exists." Kocher v. Dep't of Revenue, 206 Ariz. 480, ¶ 9 (App. 2003). "A trial court's grant or refusal of specific performance is reviewed for an abuse of discretion." Queiroz v. Harvey, 220 Ariz. 273, ¶ 7 (2009).
¶61 Related Entities argue that SP HOA cannot be compelled to convey the parcel it owns because there is no binding contract to which SP HOA is a party regarding the Biological Corridor Core. Although SP HOA was not a party to the Development Agreement or 2002 Acknowledgment and Agreement, the basis of the trial court's ruling was that those agreements created a covenant running with the land to which subsequent owners are bound. As such, SP HOA need not have been a party to the contract in order to be bound to convey the land. See Federoff, 166 Ariz. at 387 ("The successor takes the property bound by the covenant and must comply with it.").
Related Entities raise for the first time in their reply brief that SP HOA owned the parcel in question prior to the Development and Acknowledgment Agreements. However, we find this argument waived as Related Entities failed to raise this argument both at the trial court and in their opening brief. See In re Marriage of Hinkston, 133 Ariz. 592, 595 (App. 1982) ("Normally, issues raised for the first time in a reply brief shall not be considered by the appellate court."); see also Sobol v. Marsh, 212 Ariz. 301, ¶ 7 (App. 2006) ("[A] party cannot argue on appeal legal issues and arguments that have not been specifically presented to the trial court.").
¶62 Next, Related Entities argue that the trial court erred because Pima County was the only party that was entitled to specific performance. "[I]t is the well-settled rule of law that where one person agrees with another, on a sufficient consideration, to do a thing for the benefit of a third person, the third person may enforce the agreement, and it is not necessary that any consideration move from the latter." Shreeve v. Greer, 65 Ariz. 35, 40 (1946) (quoting Steward v. Sirrine, 34 Ariz. 49, 58 (1928)). Here, the Receiver is standing in the shoes of SPR Developments, and as such, it stands to benefit from Pima County's resuming the disbursement of the Enhancement Fee and, therefore, as third-party beneficiary it is entitled to specific performance of the contract. See Gravel Res. of Ariz. v. Hills, 217 Ariz. 33, ¶ 16 (App. 2007) (an appointed receiver "takes the rights, causes of action, and remedies" available to the entity it represents).
¶63 Related Entities also argue that there is "no equity" in requiring Trust 708 or SP HOA to forfeit their property to the county without compensation. Related Entities argue that because the Enhancement Fee was collected "for the purpose of defraying the costs of acquisition of the Biological Corridor Core," Trust 708 and SP HOA are entitled to compensation from the Enhancement Fee. They cite to Glad Tidings Church of Am. v. Hinkley, 71 Ariz. 306 (1951), for the proposition that "equity abhors a forfeiture." The trial court, however, found that "there is no agreement which would entitle Trust 708 or SP HOA to receive any [Enhancement Fee]." Absent a showing that an agreement exists entitling SP HOA or Trust 708 to the Enhancement Fee, we cannot say that the court erred in specifically finding that SP HOA and Trust 708 are not entitled to the Enhancement Fee. And, because the conveyance of the Biological Corridor Core merely fulfills a contractual obligation arising from a covenant running with the land, there is no "forfeiture," and the court did not err in ordering SP HOA and Trust 708 to convey the land.
Related Entities also make two additional arguments that have been waived. Their statute of frauds argument is waived for insufficient argument. See Ritchie v. Krasner, 221 Ariz. 288, ¶ 62 (App. 2009) (failure to "present and address significant arguments, supported by authority . . . constitute[s] . . . waiver of that claim"). Their notice argument is waived because it was not presented to the trial court. See Sobol, 212 Ariz. 301, ¶ 7 ("[A] party cannot argue on appeal legal issues and arguments that have not been specifically presented to the trial court.").
We note that this quotation is not actually from Glad Tidings Church of America, although Related Entities quote it as such.
Specific Performance and Accounting
¶64 Related Entities argue that the trial court erred in denying their motion for specific performance regarding Block 14. Related Entities sought an order releasing Block 14 as collateral for the loan, because they alleged they had tendered all of the documents necessary to satisfy the conditions in the loan agreement. "A trial court's grant or refusal of specific performance is reviewed for an abuse of discretion." Queiroz, 220 Ariz. 273, ¶ 7. We review a contract de novo. Rand, 216 Ariz. 424, ¶ 37.
To the extent that Related Entities challenge the underlying trial court ruling on summary judgment regarding Block 14, we will not address those arguments again as we have already resolved them above.
¶65 The parties stipulated below that the entire amount due under the loan agreement, including the principal balance of $145 million, was due on August 9, 2010, was unpaid, and the loan then entered monetary default status. The remedy of specific performance is typically unavailable to a defaulting party. See Poggioli v. Liebegott, 354 N.Y.S.2d 57, 62 (Gen. Term 1974); see also Johnson v. Phelan, 721 N.Y.S.2d 378, 379 (App. Div. 2001) (party's default on making payments constituted a material breach precluding them from obtaining specific performance). Further, to be entitled to specific performance, a party must "demonstrate . . . it is ready, willing and able to satisfy those obligations not yet performed." Johnson, 721 N.Y.S.2d at 379. The Related Entities are not able to perform condition 5.2.10(i)(x) of the release conditions, which requires, in accord with other provisions of the loan agreement, that SPR Developments certify that "[t]here are no actions, . . . pending or threatened against or affecting" it "or the [collateral] Property" that "might materially adversely affect" its business or the collateral property. This action is clearly pending. As such, the trial court did not abuse its discretion in refusing to grant the motion for specific performance.
¶66 Related Entities also argue that the trial court erred in granting U.S. Bank's motion to compel an accounting related to Block 14. U.S. Bank sought, and the court ordered, an accounting of all rent generated by Block 14 and collected by SP Residential and an order to convey those rents to the Receiver. Because Related Entities' argument is premised on our reversing the Block 14 motion ruling, and because we affirm that ruling, we need not reach this issue. See Progressive Specialty Ins. Co., 143 Ariz. at 548 (noting that appellate courts should not decide questions that have no practical effect on litigants' rights or that are unnecessary to disposition of appeal).
Alter-Ego Liability
¶67 Related Entities argue that the trial court erred in finding alter-ego liability for each of the Related Entities. U.S. Bank asserts that the record amply supports the court's ruling. For our review, the parties urge us to apply the law of the state of incorporation. SPR Developments, SP Holdings, SP Residential, and SP Redevelopment are Delaware entities, and SP HOA and Trust 708 are Arizona entities. However, the parties concede that Delaware and Arizona law are "essentially the same" or "similar"; therefore we will apply Arizona law.
Related Entities argue for the first time in their reply brief that a finding of alter-ego liability is duplicative, but because they did not make this argument in their opening brief, we do not consider it. See Hinkston, 133 Ariz. at 595.
To the extent that Delaware law and Arizona may conflict, we would still apply Arizona law under the Restatement of Conflicts. See Restatement (Second) of Conflict of Laws § 302(g) (1971) (noting that it is appropriate to apply local state law where the matter does not affect the internal corporate structure and the corporations have little contact with the state of incorporation); see also Winsor v. Glasswerks PHX, LLC, 204 Ariz. 303, ¶ 11 (App. 2003) ("Without an applicable choice of law provision, Arizona courts follow the Restatement (Second) of Conflict of Laws (1971) . . . to determine the controlling law.").
¶68 As a general matter, one corporate entity is not, absent express agreement, liable for the obligations of another corporate entity. Cf. Deutsche Credit Corp. v. Case Power Equip. Co., 179 Ariz. 155, 160 (App. 1994) ("The mere fact that corporations have the same officers does not make one liable for the acts of the other."). Neither is an owner of a corporation or limited liability company—whether an individual or a corporate shareholder or member—liable for the obligations of that entity. Cf. Dietel v. Day, 16 Ariz. App. 206, 208 (1972) ("Stock ownership by a few persons does not mean necessarily that corporation debts should be imposed upon them."). Imposing alter-ego liability—commonly referred to as "piercing the corporate veil"—breaks from those general principles and holds one entity liable for the debts of another entity, or an owner liable for corporate debts. Id.
¶69 U.S. Bank urges us, as it urged the trial court, to apply the "single-enterprise rule," adopted in other jurisdictions, as to liability between sister companies. The single-enterprise rule has been described as follows:
In effect what happens is that the court, for sufficient reason, has determined that though there are two or more personalities, there is but one enterprise; and that this enterprise has been so handled that it should respond, as a whole, for the debts of certain component elements of it. The court thus has constructed for purposes of imposing liability an entity unknown to any secretary of state comprising assets and liabilities of two or more legal personalities; endowed that entity with the assets of both, and charged it with the liabilities of one or both.Las Palmas Assocs. v. Las Palmas Ctr. Assocs., 1 Cal. Rptr. 2d 301, 317-18 (1991) (quoting 2 Harold Marsh et al., Marsh's Cal. Corp. Law § 16.23 (3d ed. 1990)). We do not find the single-enterprise rule to be substantively inconsistent with Arizona's alter-ego liability law. Consequently, it is unnecessary for us here to adopt the single-enterprise rule as may be employed in other jurisdictions. We will look only to the factors commonly considered in Arizona in assessing whether substantial evidence in the record supports the trial court's finding of alter-ego liability.
¶70 We review a trial court's ruling on alter-ego liability for clear error and will uphold that ruling if substantial evidence supports it. Dietel, 16 Ariz. App. at 209. However, we review legal conclusions de novo. Id. ("[T]he Court of Appeals may draw its own legal conclusions from the facts."). The amended judgment reflects that the trial court correctly applied the law and that substantial evidence in the record supports its ruling.
¶71 "The alter-ego status is said to exist when there is such unity of interest and ownership that the separate personalities of the corporation and owners cease to exist." Dietel, 16 Ariz. App. at 208. To establish alter-ego liability, U.S. Bank "must prove both (1) unity of control and (2) that observance of the corporate form would sanction a fraud or promote injustice." Gatecliff v. Great Republic Life Ins. Co., 170 Ariz. 34, 37 (1991). As stated in Jabczenski v. Southern Pacific Memorial Hospitals, Inc.,
Either the dominant corporation must so control and use the other as a mere tool or instrument in carrying out its own plans and purposes that justice requires it be held liable for the results, or, there must be such a confusion of identities and acts as to work a fraud upon third persons.119 Ariz. 15, 21 (App. 1978).
¶72 In order to show unity of control, Arizona courts have identified a number of factors to be considered related to the operation of the entities. These are: common officers, directors or ownership; payment of subsidiary's expenses by the parent company or by shareholders; failure to maintain formality of corporate separateness; similarity of corporate logos; plaintiff's lack of knowledge of corporate separateness; the making of interest-free loans; maintenance, or lack thereof, of financial records; commingling of personal and corporate funds; the personal use of corporate property; observance of formalities of corporate meetings; intermixing of shareholder's actions with those of the corporation; and filing, or lack thereof, of corporate income tax returns and other reports. Deutsche Credit Corp., 179 Ariz. at 160.
¶73 Whether a fraud or an injustice is threatened by the entities' operation is harder to determine. "The term injustice or unjust act as used in the Arizona cases is not easy to define." Youngren v. Rezzonico, 25 Ariz. App. 304, 306 (1975) (piercing corporate veil and finding president of company liable for debt). Injustice has been interpreted as "fall[ing] in the realm of equity":
Equity is reluctant to permit a wrong to be suffered without remedy. It seeks to do justice and is not bound by strict common law rules or the absence of precedents. It looks to the substance rather than form. It will not sanction an unconscionable result merely because it may have been brought about by means which simulate legality. And once rightfully possessed of a case it will not relinquish it short of doing complete justice.Id. (quoting Sanders v. Folsom, 104 Ariz. 283, 289 (1969)). Put another way, "[a] fraud or injustice arises if observance of the corporate form would confuse the opposing parties and frustrate their efforts to protect their rights, while allowing the party responsible to evade liability." Keg Rests. Ariz., Inc. v. Jones, 240 Ariz. 64, ¶ 38 (App. 2016).
¶74 In Youngren, the defendant was a sole stockholder and decision maker for the corporation. 25 Ariz. App. at 308. The defendant commingled personal and corporate funds, and corporate formalities were not practiced, such as holding meetings and taking minutes. Id. The defendant, through the corporation, took out a loan knowing that the corporation was in poor financial condition and that it would be unable to repay the loan. Id. As such, this court upheld the jury's finding that the defendant was personally liable for the loan. Id. In Keg Restaurants Arizona, Inc., the parent company exercised substantial control over three subsidiaries, and provided financial assistance to each of them in developing restaurants. 240 Ariz. 64, ¶ 33. The record revealed no distinction between the companies in dealing with the plaintiff; different subsidiaries contracted with plaintiff for different aspects of the development and construction of a restaurant. Id. ¶ 34. Employees for the parent company also acted as agents of the subsidiary companies. Id. ¶ 36. Documents and testimony from agents of the companies demonstrated the companies were commonly conflated and confused with one another. Id. ¶¶ 34, 37. As such, we upheld the jury's finding that the subsidiary companies were the alter ego of the parent company. Id. ¶ 40.
¶75 It is undisputed that Ansley either was the director, the president, or otherwise controlled each of the Related Entities. Ansley also had a majority ownership interest in SPR Developments, SP Residential, and SP Holdings. Ansley also has an ownership interest in SP Redevelopment, which is now the beneficiary of Trust 708. Ansley's conduct and that of his controlled entities by his direction, as cited by U.S. Bank and as demonstrated by the record, which we discuss in detail below, shows a general disregard of the corporate form such that the law need not respect the corporate form in assessing liability.
SP Holdings is the sole member of SPR Developments and SP Residential.
The beneficiary of Trust 708 changed from Starr Pass Properties to Starr Pass Signature to SP Residential, and, in 2010, to SP Redevelopment.
Block 14 and Block B
¶76 As discussed above, in August 2009, SPR Developments conveyed Block 14 to SP Residential by warranty deed, without the restrictive covenant required under the loan agreement, for recited nominal consideration. In October 2009, SPR Developments again conveyed Block 14 to SP Residential, and Trust 708 conveyed a property called Block B to SPR Developments as, apparently, additional consideration for Block 14. In July 2011, after the loan was in monetary default, SPR Developments and SP Residential drafted a cancellation agreement in which they agreed to rescind the prior deed regarding Block B and that Block B would be deeded to SP Residential. Ansley signed on behalf of each entity.
Note that this cancellation agreement suggests that SP Residential was the prior owner of Block B, but the evidence shows that it was Trust 708.
¶77 In August 2011, SPR Developments deeded Block B to SP Residential for recited nominal consideration. However, Block 14 remained with SP Residential; and as such, SPR Developments possessed neither Block 14 nor Block B. The golf maintenance facility, then being used as part of the Resort's golf course operations, was located on Block 14. Additionally, the water reservoir on Block B was essential to the Resort's operation. Therefore, SPR Developments, owner of the Resort—which was collateral for its loan with U.S. Bank—conveyed Block 14 and Block B for nominal consideration to other entities, after defaulting on the loan, depriving the Resort of access to and control of facilities needed for its operations.
Sixth Amendment
¶78 As discussed above, in May 2011, after the loan entered monetary default, by executing and recording the sixth amendment to the Master CC&Rs, Ansley, through SPR Developments, subjected the Resort to a retroactive and on-going assessment obligation—an obligation from which it had previously been exempt. It did so to be effective, as a practical matter, only after SPR Developments faced loss of control of the Resort to creditors, with the assessment benefiting SP HOA of which Ansley was a member and director.
¶79 In January 2014, U.S. Bank filed a Motion for Partial Summary Judgment, arguing that the HOA assessment triggered both full-recourse liability and Ansley's guaranty liability. SP HOA and Trust 708 then recorded a "Notice," which stated its purpose was "to provide specific record notice [that] the Declaration and the Sixth Amendment do not subject and have never subjected the Resort . . . to any lien or encumbrance in favor of the [SP HOA]." By doing so, SP HOA, against its own interests, forswore its valuable right to an ongoing and retroactive assessment on the Resort. The record supports the inference that the Notice was calculated to allow SPR Developments and Ansley to avoid full-recourse and guaranty liability—for which Ansley faced a far greater personal penalty than SP HOA lost in forgoing the assessment. This further supports a conclusion that these entities had lost their corporate "separateness" and any pretense that they were anything other than tools for Ansley's personal benefit.
Biological Corridor Core
¶80 As detailed above, the Development Agreement between SPR Developments and Pima County required SPR Developments to "cause" other Ansley-controlled entities, Trust 708 and SP HOA, to convey property to the county to allow SPR Developments to receive a portion of the Enhancement Fee. Neither Trust 708 nor SP HOA received any direct benefit from the arrangement. Mike Stofko, Pima County's agent working with Ansley and his companies, testified that Ansley never drew any distinction between any of the entities in terms of their ownership of the different parcels and their obligations to convey them.
¶81 After the Receiver had been appointed in November 2011, in April 2012, Ansley sent an email to Stofko, stating that the Biological Corridor Core parcels "cannot be conveyed until the various entities that own these propert[ies] reach an agreement with the current beneficiary of the [Enhancement Fee], the Lender to the Resort." And, on May 8, 2012, Ansley sent an email to another Pima County official's personal email account, in which Ansley asked for "some assistance" regarding reaching an agreement with U.S. Bank over the parcels. Despite the fact that since the Resort had opened the Enhancement Fee had been collected and disbursed to his benefit, Ansley suggested that Pima County write a letter stating, "please be advised that until the remaining wildlife corridor core properties are conveyed, the Development Agreement has not been satisfied and therefore all disbursements of the [Enhancement Fee] payments will be withheld." Ansley further stated "[o]bviously this [is] short of putting us in default."
¶82 On May 31, 2012, Pima County issued a letter, addressed to Ansley stating that the county had terminated the Enhancement Fee disbursement. On the next day, June 1, 2012, SP Holdings' counsel issued a letter noting that the Enhancement Fees being withheld were projected to be $750,000 for 2012 and demanding that the Receiver "immediately cause the subject real property to be dedicated" under the terms of the Development Agreement. In a follow-up letter, counsel reminded the Receiver that it was obligated to satisfy the requirements of the Development Agreement, and that, if it did not control the property to be conveyed to Pima County it "will need to acquire" it—that is, buy it from entities that Ansley still controlled. Ansley, therefore, personally acted to alert Pima County to SPR Developments' breach and urged Pima County to withhold the Enhancement Fee from SPR Developments, all for the purpose, seemingly, of giving him leverage in negotiations with the Receiver to benefit his other companies.
Reclaimed Water Delivery System
¶83 At the cost of $1.9 million, SPR Developments built the RWDS on property owned by SP Residential, SP Redevelopment, and SP HOA. The RWDS is essential to the operation of the Resort because the golf course requires water delivered through the RWDS. Ansley's SPR Developments did not secure any easements from any of the other entities he controlled to accommodate the RWDS.
¶84 In 2011, after SPR Developments went into default, Ansley sent a letter on behalf of SP Redevelopment to SPR Developments claiming SP Redevelopment had "just discovered" that the RWDS pipeline was located on land owned by SP Redevelopment and demanded removal of the pipeline. However, at trial, Ansley testified that he had known the pipeline was embedded on land owned by Related Entities, and that those entities had previously given permission for the RWDS to be placed on their property. After the Receiver had been appointed, SP Holdings' counsel demanded that the Resort cease using the RWDS. In March 2012, SP Holdings demanded rent of $448,844 annually for use of the RWDS.
¶85 When Ansley had control of SPR Developments, SPR Developments built the RWDS on property owned by SP HOA and Trust 708, yet never secured an easement, because SP HOA and Trust 708 expressly permitted the use of the RWDS. Post-default, when Ansley no longer controlled the Resort, the Ansley-controlled SP HOA and Trust 708 tried to extract nearly a half-million dollars in annual rent from the collateral properties. Fairly interpreted, this means that, until then, Ansley caused SP HOA and Trust 708 to forgo a half-million dollars in rent to benefit SPR Developments while he controlled it. Such an act would make no commercial sense unless these three separate companies were being operated as a single enterprise.
Golf Course Encroachments
¶86 Before the appointment of the Receiver, Trust 708 and SP HOA "expressly permitted" encroachments by the golf course operations on their land. After the Receiver took control of the Resort and golf course, in February 2012, SP Holdings' counsel sent a letter to the Receiver revoking "further permission to use the property subject to the [e]ncroachments." In that letter, SP Holdings claimed that the prior use of the encroachments "was expressly permitted" by the property owners "due to their relationship" with SP Residential. By letter in March 2012, SP Holdings demanded nearly $8,000 per month from SPR Developments for the use of the properties. Just as with the RWDS, the Ansley-controlled entities owning the encroached property forwent $8,000 per month in rent for the benefit of another Ansley-controlled property in a way that made no commercial sense but for the unity of control.
Wildcat Pass Memberships
¶87 In February 2011, Trust 708, as seller, and Wildcat Pass 31 LLC, as buyer, entered into an agreement to transfer, in bulk, thirty-one lots ("Bulk Sale Agreement"). Ansley signed the Bulk Sale Agreement on behalf of SP Residential. Along with the lots, "31 individual golf memberships in the Starr Pass Country & Spa . . . [were] included in the purchase of the [p]roperty." These golf memberships were owned by SPR Developments and were collateral for the loan. To facilitate the sale, SP HOA, without consideration, discounted delinquent assessments owed it by Trust 708 on the thirty-one lots.
The Bulk Sale Agreement lists SP Residential as the beneficiary of Trust 708; however, at the time, SP Redevelopment was actually the beneficiary of Trust 708.
¶88 In March 2011, Ansley, on behalf of SPR Developments, modified the golf course club rules to ensure that the golf memberships were attached to the lots. Nothing in the Bulk Sale Agreement indicated that SPR Developments received any consideration for these memberships. According to Ansley, the memberships were valued at $20,000 per lot, $620,000 in the aggregate. This was confirmed by U.S. Bank's expert, Richard Liquanti, who testified that previous transactions involving Wildcat Pass lots—as many as thirty others—included settlement statements with a disbursement of $20,000 per membership going to SPR Developments from the seller's funds at the closing of each sale.
¶89 Trust 708 and Ansley, on behalf of SP Residential, executed the fourth amendment to the Bulk Sales Agreement to facilitate the sale. The fourth amendment notes that "[s]ubsequent investigation and due diligence has revealed to the parties that there are multiple entities which have or may have an interest in the Wildcat Pass Properties." It identifies seven such entities, including SP Residential, SP Holdings, and SP Redevelopment. Further, the fourth amendment states, "Ansley is the person solely authorized by Beneficiary and by each and every one of the remaining Starr Pass Entities to manage or otherwise control the operation of the said entities." Further, "in the event such entities [have interest in the property], [Ansley] is the sole person with management control of such entities," and that those entities "agree[]" to the "appl[ication]" of the fourth amendment to them. And finally, Ansley "directs such Starr Pass Entities . . . to assign, transfer and convey to the Wildcat Pass 31, LLC . . . all of the Declarant's interest, rights, and obligations in and to the Wildcat Pass Covenants Conditions and Restrictions." Ansley signed the fourth amendment on behalf of "himself and as a manager or managing officer of the Starr Pass Entities." At trial, Liquanti testified that the fourth amendment was "extraordinary" and that he had never seen anything like it in forty-one years.
¶90 Here, SPR Developments and SP HOA worked against their own interests in facilitating the Wildcat Pass sale for the benefit of Trust 708. Moreover, Ansley explicitly dispensed with the corporate formalities of each entity in executing the fourth amendment to facilitate that sale. Some Ansley-controlled entities received substantial benefit at the expense of other Ansley-controlled entities with no discernible commercial benefit to them other than that it benefitted an overall commercial undertaking under the control of one man.
¶91 In sum, the record reflects substantial evidence to support the finding that SPR Developments and Related Entities were the instruments of Ansley. Cf. Deutsche Credit Corp., 179 Ariz. at 160. We also find substantial evidence to support the injustice prong, as observing the corporate form here would "frustrate [the opposing party's] efforts to protect their rights," while allowing responsible parties "to evade liability." Keg Rests. Ariz., Inc., 240 Ariz. 64, ¶ 38. As such, the trial court did not err in finding alter-ego liability.
Post-Trial Motions
Lack of Standing
¶92 On appeal, SPR Developments and Ansley argue that the trial court erred by failing to vacate the judgment and grant its motion for new trial because, as it argued below in its post-trial motions, U.S. Bank failed to adequately prove its authority to foreclose the note. This was implicitly a claim for new trial under Rule 59(a)(1)(H), Ariz. R. Civ. P., that the "judgment is not supported by evidence or is contrary to law." Whether to grant a motion for new trial under Rule 59(a)(1)(H) "is within the sound discretion of the trial court. We will reverse the trial court's denial of such a motion only if it reflects a manifest abuse of discretion." Ogden v. J.M. Steel Erecting, Inc., 201 Ariz. 32, ¶ 15 (App. 2001).
¶93 Although defendants in their answer made a blanket denial of U.S. Bank's authority to foreclose the note, they did not raise any legal or factual challenge to that authority at trial. Indeed, they failed to object to the admission of the note as evidence at trial when offered by U.S. Bank in support of its claims. The defendants also acknowledged in their own pretrial disclosure statements that U.S. Bank was the successor-in-interest to Column Financial, the original lender, and it was undisputed that the lender was entitled to, among other acts, foreclose on the note and deed of trust. By failing to raise any substantive arguments on U.S. Bank's alleged failure of proof of authority until its post-trial motions, SPR Developments and Ansley failed to preserve these arguments and waived them for appeal. Medlin v. Medlin, 194 Ariz. 306, ¶ 6 (App. 1999) ("An issue raised for the first time after trial is deemed to have been waived."); see also Flanders v. Maricopa Cty., 203 Ariz. 368, ¶ 65 (App. 2002) (holding that an issue raised for the first time in a motion for judgment as a matter of law following the verdict is waived); Conant v. Whitney, 190 Ariz. 290, 293 (App. 1997) (holding that plaintiff waived claim of manifest injustice by raising it for first time in motion for new trial); Ruck Corp. v. Woudenberg, 125 Ariz. 519, 522 (App. 1980) (declining to consider merits of defendants' objection to attorney fees award because objection was raised for first time in motion for new trial).
¶94 In their reply brief, SPR Developments and Ansley claim they preserved the issue on appeal by listing the allegation that "Plaintiff . . . is the assignee [of] the Loan Documents" as a contested issue in its pretrial statement. However, "[i]n order to preserve his right to appeal from such errors of the lower court he must distinctly set forth the grounds for objecting which gives that court an opportunity to pass upon that particular proposition of law." Bean v. Gorby, 80 Ariz. 25, 29 (1956); see also Cedric Dev. Corp. v. Sibole, 25 Ariz. App. 185, 187 (1975) (finding "counsel's references . . . insufficient to preserve the question for appeal [because] . . . no intention was demonstrated by these comments that the court consider a formal, specific objection to have been made"). The pretrial statement does nothing more than put U.S. Bank on notice to produce the note at trial and assert its authority to foreclose on it, which it did. SPR Developments and Ansley were thereafter obligated to contest the note and U.S. Bank's assertion of authority at trial, which they did not.
Failure to Join Indispensable Party
¶95 Finally, SPR Developments and Ansley argued for the first time in their post-trial motions, as they do on appeal, that the trial court erred by failing to find the judgment void for failure to join the B Participants to the securitization of the loan as indispensable parties. This, they argue, exposes them to a "double recovery." In the alternative, SPR Developments argued, as it again does here, if the judgment is not void, the judgment should be modified to "protect" the B Participants. The issue is a question of law that we review de novo because the failure to join an indispensable party cannot be waived and may be raised on appeal for the first time. Gerow v. Covill, 192 Ariz. 9, ¶ 19 (App. 1998). Whether the B Participants are indispensable parties to this action is controlled by various written agreements, which, for these purposes, we review de novo. Rand, 216 Ariz. 424, ¶ 37.
¶96 As permitted in the loan agreement, in October 2006, the loan was securitized through a series of agreements, including a participation agreement and a pooling and service agreement ("PSA"). The participation agreement created "four separate participation interests in the Mortgage Loan": "one senior participation . . . Participation A . . . and three subordinate participations . . . Participation B-1, Participation B-2, and Participation B-3." Although the B Participants hold "beneficial ownership interests" in the loan and its proceeds, they, as holders of "Junior Participations," do not hold "a direct ownership interest in the Mortgage Loan."
¶97 As to the power to pursue remedies under the note, the participation agreement states,
Subject to the terms of the Applicable Servicing Agreement, the Participation A Holder and each [Participation B] Holder agrees
that the Applicable Servicer . . . shall have the sole and exclusive authority with respect to the administration of, and exercise of rights and remedies with respect to, the Mortgage Loan, including, without limitation, the sole and exclusive authority . . . to take legal action to enforce or protect Holders' interest with respect to the Mortgage Loan . . . or institute any foreclosure action.Further, it states "no [B Participant] shall have any voting, consent or other rights whatsoever with respect to the administration of, or exercise rights and remedies with respect to, the Mortgage Loan." And,
each [B Participant] agrees that it shall have no right to, and hereby presently and irrevocably assigns and conveys to the Servicer, in its capacity as agent of the Holders, the rights, if any, that [B Participant] has (x) to declare or cause the Servicer . . . to declare an Event of Default under the Mortgage Loan (y) to exercise any remedies with respect to the Mortgage Loan.
¶98 Rule 19, Ariz. R. Civ. P., provides that a party must be joined if:
(A) in that person's absence, the court cannot accord complete relief among existing parties; or
(B) that person claims an interest relating to the subject of the action and is so situated that disposing of the action in the person's absence may:
"The test of indispensability in Arizona is whether the absent person's interest in the controversy is such that no final judgment or decree could be entered, doing justice between the parties actually before the court and without injuriously affecting the rights of others not brought into the action." Copper Hills Enters., Ltd. v. Ariz. Dep't of Revenue, 214 Ariz. 386, ¶ 21 (App. 2007) (quoting Town of Gila Bend v. Walled Lake Door Co., 107 Ariz. 545, 549 (1971)).(i) as a practical matter impair or impede the person's ability to protect the interest; or
(ii) leave an existing party subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations because of the interest.
¶99 Thus, by the plain terms of the participation agreement, the B Participants assigned their rights to enforce the loan to the servicer. Consequently, because the servicer is contractually, as between it and the B Participants, the only entity entitled to foreclose the note, the trial court can "accord complete relief" among existing parties and the B Participants were not indispensable parties. Ariz. R. Civ. P. 19(a)(1)(A).
Here, special servicers are Talmage LLC until July 2015 and CW Capital Asset Management LLC from July 2015 and through appeal. Additionally, we note that at the time of the post-trial motions, the successor servicer, through a signed verification, asserts that it "services the interest of all interest holders in the Loan related to this matter."
¶100 SPR Developments and Ansley also argue that the B Participants are indispensable because their "ability to protect their interest was impaired" because the servicer did not comply with an "analysis" required under the PSA. Under the PSA, at § 3.28(b), when addressing a loan default, the servicer must prepare "a summary of such proposed action and an analysis" stating whether the proposed action or another action would produce a greater recovery. To the extent the B Participants are entitled by contract with the servicer to any such summary and analysis but did not receive one here, they may raise this as a claim against the servicer. It does not affect the power of the servicer to pursue any particular action in the event of a default against the borrower.
¶101 The PSA expressly states that "[w]ith respect to [the loan], the rights of the holder of the related B Participation . . . under this Agreement shall be exercisable by the holders of the related B Participations . . . in the manner specified in the related Participation Agreement." Consequently, to whatever extent the B Participants may exercise their rights under the PSA as to the loan, that exercise is controlled by the participation agreement, which, as stated above, assigns to the servicer the power to enforce those rights. Therefore, because the B Participants' contractual rights are being exercised by the servicer as contractually assigned, their ability to protect their interests is not impaired or impeded by their lack of joinder in the litigation.
SPR Developments and Ansley allege that the "whole loan" was not deposited into the trust, and as such, the Participation B holders are entitled to relief under the PSA. However, as we state above, even having a claim under the PSA, the Participation B holders are not indispensable parties in the present case.
¶102 Finally, SPR Developments and Ansley's argument that they are at risk of "double recovery" is without merit. Because the B Participants cannot enforce the loan under the express terms of the participation agreement, they cannot separately recover against SPR Developments and a double recovery is foreclosed.
¶103 Consequently, and for each reason stated above, the trial court did not err in denying defendants' post-trial motion on the grounds of failure to join an indispensable party. For the same reasons, the court did not err in refusing to modify the judgment.
SPR Developments and Ansley also argue that the trial court erred when it failed to grant their request to stay the foreclosure. However, the merits of their argument are the same as those made in their motion for new trial and those arguments were waived. To the extent that SPR Developments and Ansley make additional arguments in their request for an injunction, those arguments are also waived because they were presented to the trial court for the first time after trial. See Medlin, 194 Ariz. 306, ¶ 6 ("An issue raised for the first time after trial is deemed to have been waived.").
Disposition
¶104 For the above reasons, we affirm the trial court's judgment and pretrial rulings. We also award U.S. Bank and the Receiver costs incurred on appeal under A.R.S. § 12-342 and attorney fees under A.R.S. § 12-341.01 upon each party's compliance with Rule 21(a), Ariz. R. Civ. App. P.