Porthos v. Pulito

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UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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

PORTHOS CAPITAL LLC, Plaintiff/Appellee,

v.

JAMES P. PULITO, Defendant/Appellant.

No. 1 CA-CV 17-0275
FILED 6-21-2018

Appeal from the Superior Court in Maricopa County
No. CV2015-096539
The Honorable David M. Talamante, Judge

AFFIRMED AS MODIFIED IN PART, VACATED IN PART,
AND REMANDED

COUNSEL

James P. Pulito, Scottsdale
Defendant/Appellant

Kessler Law Offices, Mesa
By Eric W. Kessler
Counsel for Plaintiff/Appellee
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MEMORANDUM DECISION

Judge Kent E. Cattani delivered the decision of the Court, in which
Presiding Judge Diane M. Johnsen and Judge Jennifer M. Perkins joined.

C A T T A N I, Judge:

¶1 James P. Pulito appeals the superior court’s order requiring
him to pay Porthos Capital LLC’s costs and attorney’s fees incurred in
bringing a tax lien foreclosure action against Pulito’s real property. Pulito
argues that Porthos is not entitled to costs or fees for several reasons,
including that it was engaged in self-representation and that it does not
have a genuine obligation to pay its attorney. For reasons that follow, we
affirm the superior court’s grant of summary judgment for Porthos, affirm
a reduced award of costs in the amount of $620.33 (reduced by $35.00),
vacate the court’s award of attorney’s fees, and remand for further
proceedings consistent with this decision.

FACTS AND PROCEDURAL BACKGROUND

¶2 In December 2015, Porthos instituted a tax lien foreclosure
action against a plot of real property owned by Pulito. At the time it filed
the complaint, Porthos was a registered LLC in Wyoming—with its
principal and mailing address in Mesa, Arizona—but was not registered in
Arizona. The complaint alleged that Porthos was entitled to the real
property, but noted that Pulito still had a statutory right to redeem the
property before judgment was entered on the foreclosure and that, if he did
redeem, he had a statutory obligation to pay Porthos’s costs and attorney’s
fees. Several months later, before Porthos obtained a default judgment,
Pulito answered the complaint and provided notification that he had
redeemed the property by paying all of his delinquent property taxes.

¶3 Porthos filed an application for costs and attorney’s fees
under Arizona Revised Statutes (“A.R.S.”) § 42-18206, which provides that
the redeeming party in a tax lien foreclosure action must pay the costs and
fees incurred by the plaintiff in bringing the action. Pulito filed an
opposition to the application, requesting an evidentiary hearing, noting
that Porthos was not a registered LLC in Arizona, and alleging that the
attorneys representing Porthos also wholly owned the company and that

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the company was not obligated to pay the attorney’s fees. Thus, Pulito
asserted, Porthos was not entitled to fees.

¶4 Before Porthos responded to Pulito’s opposition with a
motion for summary judgment, it registered as an LLC in Arizona, listing
three managers, two of whom were attorneys with the law firm
representing Porthos, and a third person who had the same address as the
law firm and who Pulito alleged was also an attorney with the firm.

¶5 After considering several additional pleadings relating to
whether Porthos was entitled to costs and fees, the court granted Porthos’s
motion for summary judgment and denied Pulito’s cross-motion. Porthos’s
attorney filed an affidavit of attorney’s fees and costs, in which he included
an invoice and affirmed that he was the attorney of record for Porthos and
that, with regard to fees, “counsel’s normal hourly rate for contested real
estate litigation matters for Plaintiff is $395.00.” The court held oral
argument on the amount of costs and fees, and awarded Porthos $655.33 in
costs and $4,883.50 in attorney’s fees. Pulito timely appealed, and we have
jurisdiction under A.R.S. § 12-2101(A)(5)(a).

DISCUSSION

I. Porthos’s Registration in Arizona.

¶6 Relying on A.R.S. § 29-809(A), which prohibits an out-of-state
LLC from maintaining an action in an Arizona court until it has registered
with the Arizona Corporation Commission (“ACC”), Pulito argues that
Porthos should have been precluded from asserting a claim for costs and
fees because Porthos did not register with the ACC until after Pulito had
already redeemed his property. However, in Capin v. S & H Packing Co., 130
Ariz. 441, 442 (App. 1981), we rejected a similar argument raised regarding
an analogous statute addressing corporations. We noted that the statute
did not prohibit a foreign company from commencing an action before
compliance, but only from maintaining the action until it complied. Id. We
thus held that “compliance [with the statute] after the action has been
commenced is sufficient to enable the foreign corporation to maintain the
action.” Id.

¶7 Here, Porthos registered with the ACC after it filed its
complaint and after Pulito redeemed the property but before it moved for
summary judgment and before the court issued any ruling on costs or fees.
Applying the reasoning in Capin, we hold that Porthos timely cured any
defect by registering as an LLC with the ACC, and was thus not barred from

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maintaining the action. Accordingly, the superior court did not err by
permitting Porthos to move forward with the action.

II. Summary Judgment for Porthos and the Prerequisites to
Recovering Attorney’s Fees.

¶8 Pulito argues that Porthos is wholly owned by the law firm
that represents it, and that because there was no attorney–client
relationship or genuine obligation to pay fees, the superior court erred by
granting summary judgment for Porthos and awarding it attorney’s fees.
We review the superior court’s grant of summary judgment de novo,
viewing the facts in the light most favorable to the party against whom
judgment was entered. Wells Fargo Bank, N.A. v. Allen, 231 Ariz. 209, 213, ¶
14 (App. 2012). We review the court’s award of attorney’s fees for an abuse
of discretion. Orfaly v. Tucson Symphony Soc’y, 209 Ariz. 260, 265, ¶ 18 (App.
2004).

¶9 Summary judgment is proper if there are no genuine disputes
of material fact and the moving party is entitled to judgment as a matter of
law. Ariz. R. Civ. P. 56(a). Here, Porthos made a prima facie showing that
it was entitled to judgment under A.R.S. § 42-18206 as a matter of law—it
showed that it held the tax lien on Pulito’s property and that Pulito
redeemed the property before judgment was entered. Pulito did not contest
those facts. The court therefore correctly found that Porthos was entitled to
the costs and reasonable attorney’s fees that it incurred in bringing the
action.

¶10 To receive attorney’s fees, however, Porthos must have
actually incurred fees. See A.R.S. § 42-18206 (“[J]udgment shall be entered
in favor of the plaintiff against the person for the costs incurred by the
plaintiff, including reasonable attorney fees to be determined by the
court.”) (emphasis added); see also Lisa v. Strom, 183 Ariz. 415, 420 (App.
1995) (“Attorney’s fees are meant to make a party whole for costs incurred
for an attorney’s services.”). A party does not incur—and therefore may
not receive—attorney’s fees unless it fulfills two fundamental common law
prerequisites: there is an attorney–client relationship and the client has a
genuine obligation to pay its attorney. See Lisa, 183 Ariz. at 419.

¶11 Pulito first contends that Porthos was not entitled to fees
because it was engaged in self-representation. A party engages in self-
representation when acting only for himself or itself. Compare Hunt Inv. Co.
v. Eliot, 154 Ariz. 357, 363 (App. 1987) (holding that the attorney could
recover fees when he represented a partnership in which he owned a

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majority interest because he was acting for the benefit of others, as well as
himself), with Munger Chadwick, P.L.C. v. Farwest Dev. & Constr. of the Sw.,
LLC, 235 Ariz. 125, 127–28, ¶¶ 7, 13 (App. 2014) (holding that a law firm that
represents itself cannot recover attorney’s fees).

¶12 Here, Porthos presented sufficient evidence to establish that
there was an attorney–client relationship—the law firm and Porthos were
separate entities and the attorney’s affidavit stated that he represented
Porthos. To contradict this, Pulito showed that Porthos had the same
principal and mailing address as the law firm representing it. He also
showed that the three managers listed on Porthos’s ACC information page
included Porthos’s attorney in this matter, another attorney from the same
firm, and a third person who Pulito claims is also an attorney with the firm.
But a manager of an LLC does not necessarily have an ownership interest
in that LLC, see A.R.S. § 29-681(B), and an LLC is not required to list its
interest-holding members in the document it provides to the ACC. A.R.S.
§§ 29-631(A), -632(A)(6). Thus, by offering only the ACC information page,
Pulito did not establish, even assuming the three referenced managers are
the only attorneys at the firm and they have ownership in Porthos, that they
are the only owners of Porthos. See Hunt, 154 Ariz. at 363. Pulito’s argument
thus fails.

¶13 Pulito also contends that Porthos failed to show that it
fulfilled the second prerequisite to recovering fees—that it had a genuine
obligation to pay its attorney. See Lisa, 183 Ariz. at 419 (holding there is no
genuine obligation when a husband represents his marital community even
though he is acting for himself and his wife). Here, Porthos’s attorney’s
affidavit states that he has “rendered the legal services in the manner and
on the dates set forth in [the invoice],” and that “counsel’s normal hourly
rate for contested real estate litigation matters for [Porthos] is $395.00.” But,
even when read in conjunction with the invoice, which states the amounts
due to the firm, the affidavit does not plainly assert or allow the court to
easily infer that Porthos actually agreed to pay the attorney’s “normal
hourly rate.” Although the superior court states in its minute entry that “as
a matter of law, Porthos is required to be represented,” it does not explicitly
find that the affidavit affirms any obligation to pay fees.

¶14 We therefore hold that the superior court abused its discretion
by awarding Porthos attorney’s fees because Porthos had not demonstrated
an actual obligation to pay its attorney. Because Pulito did not expressly
argue this technical shortcoming in the superior court, however, we vacate
the award and remand to the superior court to allow Porthos to prove its
genuine obligation—assuming it has one—to pay attorney’s fees.

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III. Award of Taxable Costs to Porthos.

¶15 Pulito next argues the court erred in its award to Porthos by
including a $35.00 cost for a title report. Only taxable costs specifically
identified in A.R.S. § 12-332(A), including “certified copies of papers or
records,” may be awarded in tax lien foreclosures. A.R.S. §§ 12-332, -333;
Hunt, 154 Ariz. at 361. Whether an expenditure qualifies as a taxable cost
is a question of law that we review de novo. Reyes v. Frank’s Serv. &
Trucking, LLC, 235 Ariz. 605, 608, ¶ 6 (App. 2014).

¶16 Here, Porthos requested $668.29 in costs, listing four line-
items, including $12.96 for certified mail and $35.00 for a title report. The
court awarded Porthos $655.33 in costs, which is $12.96 less than the
requested amount. We infer, as Pulito suggests, that the court struck the
cost for certified mail as a non-taxable cost under § 12-332(A), but
considered the other three items to be taxable costs.

¶17 Neither party provides authority for why the title report
should or should not be considered a taxable cost. The title report’s closest
fit under the statute appears to be as a “cost of certified copies of papers or
records,” A.R.S. § 12-332(A)(4), but because that provision only “refers to
records of a public office for which a specific charge is made by the officer
certifying to their correctness,” Fowler v. Great Am. Ins. Co., 124 Ariz. 111,
114 (App. 1979), the title report ultimately does not fit within the statute.
The superior court therefore erred by including the title report cost in its
award to Porthos, and we reduce the award by $35.00, from $655.33 to
$620.33.

IV. Pulito’s Request for an Evidentiary Hearing and Oral Argument.

¶18 Finally, Pulito argues that the superior court should have
granted his two requests for an evidentiary hearing on his claim that
Porthos was engaged in self-representation. We review the superior court’s
denial of a request for an evidentiary hearing for abuse of discretion. Gullett
ex rel. Gullett v. Kindred Nursing Ctrs. W., L.L.C., 241 Ariz. 532, 540, ¶ 26
(App. 2017). To support his argument, Pulito makes unsupported
accusations regarding the opposing attorney’s conduct, and fails to explain
how those accusations establish any abuse of discretion by the court.
Because the record instead reveals that Pulito did not take advantage of the
tools of discovery, the superior court did not abuse its discretion by denying
him a hearing to discover otherwise easily attainable evidence.

¶19 Pulito also argues that the court erred by not granting his
request for oral argument. But Pulito waived this argument because he

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raised it for the first time in his appellate reply brief. See Ness v. W. Sec. Life
Ins. Co., 174 Ariz. 497, 502–03 (App. 1992); see also ARCAP 13(c). Even
considering its merits, Pulito’s argument does not warrant relief. Assuming
Pulito timely requested oral argument, the superior court was required to
set argument, see Ariz. R. Civ. P. 56(c)(1), but Pulito has not established any
prejudice resulting from the court’s technical error in failing to hold oral
argument. See Ariz. Const. art. 6, § 27 (“No cause shall be reversed for
technical error in pleadings or proceedings when upon the whole case it
shall appear that substantial justice has been done.”). Accordingly, the
court did not commit reversible error.

CONCLUSION

¶20 For the foregoing reasons, we affirm the superior court’s grant
of summary judgment for Porthos, we affirm its award of costs as modified
to reflect a reduction from $655.33 to $620.33, and we vacate its award of
attorney’s fees and remand for further proceedings consistent with this
decision.

AMY M. WOOD • Clerk of the Court
FILED: AA

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