Beck v. Heath

NOTICE: NOT FOR OFFICIAL PUBLICATION.
UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT
PRECEDENTIAL AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.

IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE

FRED W. BECK, an unmarried man, Plaintiff/Appellant,

v.

ROBERT HEATH and LINDA HEATH, husband and wife;
HIGH RIDGE INVESTMENTS, INC., an Arizona corporation dba
RED ARROW REAL ESTATE; and MICHELLE WATNE and
JOHN DOE WATNE, husband and wife, Defendants/Appellees.

No. 1 CA-CV 14-0337
FILED 4-28-2015

Appeal from the Superior Court in Yavapai County
No. P1300CV201300766
The Honorable Patricia A. Trebesch, Judge

VACATED AND REMANDED
 COUNSEL

The Adams Law Firm, PLLC, Prescott
By Jeffrey R. Adams
Counsel for Plaintiff/Appellant

Roberts & Carver, PLLC, Prescott
By Paul L. Roberts
Counsel for Defendants/Appellees High Ridge Investments, Inc., dba Red Arrow
Real Estate, and Michelle Watne

The Vakula Law Firm, PLC, Prescott
By Alex B. Vakula
Counsel for Defendants/Appellees Robert and Linda Heath

MEMORANDUM DECISION

Presiding Judge Andrew W. Gould delivered the decision of the Court, in
which Judge Maurice Portley and Judge Jon W. Thompson joined.

GOULD, Judge:

¶1 Plaintiff/Appellant Fred W. Beck (“Beck”) appeals the trial
court’s dismissal of his complaint on the basis that his claims are barred by
the doctrine of res judicata. Because there was no adjudication on the merits
resulting from Beck’s first lawsuit, res judicata does not apply.
Accordingly, we vacate the judgment of dismissal and remand for further
proceedings.

FACTUAL AND PROCEDURAL BACKGROUND

¶2 Beck filed a complaint against Defendants/Appellees Robert
G. Heath, Linda G. Heath, High Ridge Investments, Inc., and Michelle
Watne (collectively, “Defendants”) asserting breach of contract and other
claims arising from a residential real estate purchase contract. Defendants
moved to dismiss the complaint, arguing that the purchase contract
included a mandatory alternative dispute resolution (“ADR”) provision.
The relevant contract provision states:

Buyer and Seller agree to mediate any dispute or claim arising
out of or relating to this Contract in accordance with the

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 BECK v. HEATH, et al.
Decision of the Court

REALTORS® Dispute Resolution System, or as otherwise
agreed. . . . In the event that mediation does not resolve all
disputes or claims, the unresolved disputes or claims shall be
submitted for binding arbitration. . . . Notwithstanding the
foregoing, either party may opt out of binding arbitration
within thirty (30) days after the conclusion of the mediation
conference by notice to the other and in such event either
party shall have the right to resort to court action.

¶3 The trial court granted Defendants’ motion and entered
judgment dismissing the complaint. The judgment did not state whether
the dismissal was with or without prejudice. Beck moved to set aside the
dismissal and for reconsideration, which the court denied. Beck did not
appeal.

¶4 After an unsuccessful attempt to initiate mediation, Beck filed
a second complaint that was essentially the same as the first. Defendants
moved to dismiss the complaint based on res judicata, arguing that the first
dismissal was an adjudication on the merits pursuant to Arizona Rule of
Civil Procedure 41(b). The trial court granted Defendants’ motion and
dismissed Beck’s second complaint. Beck timely appealed.1

DISCUSSION

¶5 The application of res judicata is “a question of law that this
court reviews de novo.” Better Homes Const., Inc. v. Goldwater, 203 Ariz. 295,
298, ¶ 10 (App. 2002).

¶6 On appeal, Beck challenges the trial court’s determination
that dismissal of Beck’s first lawsuit bars his second lawsuit on the grounds
of res judicata. Beck contends that res judicata does not apply to his second
lawsuit because his first lawsuit was not dismissed on the merits. We agree.

¶7 Res judicata bars a subsequent action only if there is a final
judgment on the merits in the previous litigation. In re Gen. Adjudication of
All Rights to Use Water In Gila River Sys. & Source, 212 Ariz. 64, 69, ¶ 14 (2006)
(emphasis added). When parties enter into a mandatory ADR agreement,
however, a court lacks jurisdiction to resolve the merits of all claims subject
to the ADR agreement. DiMercurio v. Sphere Drake Ins., PLC., 202 F.3d 71,
77 (1st Cir. 2000); cf. Duenas v. Life Care Centers of America, Inc., 236 Ariz. 130,

1 Defendants Heath joined in Watne and Red Arrow’s Answering
Brief on appeal.

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 BECK v. HEATH, et al.
Decision of the Court

139, ¶ 29 (App. 2014) (“An agreement to arbitrate relates to the jurisdiction
of the courts, not to the merits, viability or ownership of a claim.”)

¶8 In this case, the dismissal of Beck’s first lawsuit based on a
mandatory ADR agreement did not result in a final judgment on the merits.
Accordingly, res judicata does not apply to bar his second lawsuit.

¶9 Beck requests an award of attorneys’ fees on appeal
pursuant to A.R.S. § 12-341.01. In the exercise of our discretion we decline
to award fees on appeal due to Beck’s failure to initiate mediation as
required by the purchase contract, which ultimately resulted in this appeal.
However, we award Beck his taxable costs on appeal upon timely
compliance with ARCAP 21.

CONCLUSION

¶10 For the foregoing reasons, we vacate the trial court’s
judgment of dismissal based on res judicata and remand for further
proceedings.

:ama

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