Salucci v. Arz Partners

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UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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

SANTA SALUCCI, Plaintiff/Appellee,

v.

ARZ PARTNERS LP, et al., Defendants/Appellants

No. 1 CA-CV 18-0521
FILED 12-3-2019

Appeal from the Superior Court in Maricopa County
No. CV 2016-054933
The Honorable Cynthia J. Bailey, Judge

AFFIRMED IN PART; VACATED AND REMANDED IN PART

COUNSEL

Winsor Law Firm PLC, Scottsdale
By Joseph Urtuzuastegui, Mark A. Winsor
Counsel for Defendants/Appellants

Radix Law PLC, Scottsdale
By John T. Gilbert, Stephanie A. Webb
Counsel for Plaintiff/Appellee
 SALUCCI v. ARZ PARTNERS, et al.
Decision of the Court

MEMORANDUM DECISION

Presiding Judge Jennifer B. Campbell delivered the decision of the Court,
in which Judge Lawrence F. Winthrop and Judge Michael J. Brown joined.

C A M P B E L L, Judge:

¶1 ARZ Partners LP (“ARZ”), ARZ Group, LLC, Pamela Gorrie,
and Sandra Ryan (collectively, “the defendants”) appeal from the superior
court’s entry of summary judgment in favor of Santa Salucci and Michael
Borrelli (collectively, “the Investors”) as well as its order denying the
defendants’ motion for relief from judgment. For the following reasons, we
affirm the superior court’s entry of summary judgment in part, vacate it in
part, and remand for further proceedings consistent with this decision.

BACKGROUND

¶2 After attending a real estate investment seminar, the Investors
entered an oral contract with Gorrie and Ryan to purchase, rehabilitate, and
sell a residential property (“the property”). Under the contract, the
Investors agreed to contribute $100,000 toward the parties’ joint venture,
with the assurance they would recover their capital contribution plus 25%
of any net profits when the property sold. Shortly thereafter, the oral
agreement was reduced to a written contract between the Investors and
ARZ. Gorrie signed on ARZ’s behalf and Salucci signed on behalf of the
Investors. The written agreement included an express guarantee that the
Investors would recoup their entire cash outlay when the property sold.

¶3 Within days of securing the Investors’ money, ARZ closed on
its purchase of the property. Approximately nine months later, ARZ
refinanced the property and withdrew $75,543.14 in equity. Nine months
later, the property was sold at a trustee’s sale. Despite its guarantee, ARZ
failed to return the Investors’ $100,000 contribution

¶4 Alleging the defendants had misappropriated the $100,000
capital contribution for their own use, the Investors filed a complaint
asserting five claims: (Count One) fraud in the inducement; (Count Two)
declaratory judgment for rescission of the contract; (Count Three) breach of
fiduciary duty; (Count Four) breach of contract and breach of the implied
covenant of good faith and fair dealing; and (Count Five) unjust

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enrichment. After the defendants answered, denying all the allegations
specific to the claims, the Investors moved to amend the complaint to add
a claim for constructive trust (Count Six), which the superior court granted.
Despite written notice, the defendants never responded to the amended
complaint and, specifically, failed to respond to the new constructive trust
allegation. When the Investors subsequently moved for partial summary
judgment with respect to Counts One, Two, Four, and Five, the defendants
did not respond.

¶5 Considering “all facts and reasonable inferences flowing from
those facts in the light most favorable” to the defendants, the superior court
found there were “no genuine issues of material fact” and concluded that
the defendants had induced the Investors to contribute $100,000 to the
project, borrowed against the property, and retained the loan proceeds
leaving little or no equity in the property. ARZ then abandoned the
property, resulting in a foreclosure event, causing the Investors’ financial
loss. The Investors’ summary judgment motion did not include counts three
and six of the amended complaint. The court did not find any facts in
dispute and granted summary judgment on Counts One, Two, Four, and
Five of the Investors’ amended complaint.

¶6 After the Investors submitted their application for attorney
fees and costs, the defendants moved for relief from judgment pursuant to
Arizona Rule of Civil Procedure (“Rule”) 60(b), without identifying any
applicable subsection. Applying Rule 60(b)(6)―the catch-all provision―the
superior court found the defendants had “failed to make any credible
argument for the lack of response to the [Investors’] Motion for Summary
Judgment” and denied the motion for relief from judgment. Subsequent to
its Rule 60(b) ruling, the court entered a Rule 54(b) final judgment granting
summary judgment in favor of the Investors and awarding them their
reasonable attorney fees and costs. The defendants timely appealed.

DISCUSSION

¶7 The defendants contend the superior court erred in denying
their motion for relief from judgment. The defendants argue the court
applied an incorrect legal standard by finding they had failed to
demonstrate “extraordinary circumstances” justifying relief from
judgment. According to the defendants, they needed only to provide
“evidence of a meritorious defense” to prevail on their Rule 60(b)(6) motion.
Because the defendants moved for Rule 60(b) relief before the superior
court entered a final judgment, however, we do not consider the merits of
this argument.

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¶8 Although the defendants titled their motion as one requesting
relief from judgment pursuant to Rule 60(b), that rule only allows a motion
for relief from a final order, judgment or proceeding. Southwest Barricades,
L.L.C. v. Traffic Management, Inc., 240 Ariz. 139, 141, ¶ 11 (App. 2016) (“Rule
60[(b)]’s application is limited to judgments, orders, or proceedings that are
final.”). Because the court had not yet entered a final judgment when the
motion was filed, the defendants’ motion was in substance—though not in
form—a motion for reconsideration. Therefore, distilled, the sole issue on
appeal is whether the superior court properly entered partial summary
judgment in favor of the Investors.

¶9 On that point, the defendants assert genuine issues of
material fact precluded summary judgment. They also argue that Counts
One, Two, Four and Five presented alternative, irreconcilable claims and
summary judgment on these claims was therefore improper as a matter of
law.

¶10 Summary judgment is appropriate if no genuine issues of
material fact exist and the moving party is entitled to judgment as a matter
of law. Ariz. R. Civ. P. 56(a). Conversely, if there are material facts upon
which reasonable people could reach different conclusions, summary
judgment is not appropriate. Gulf Ins. Co. v. Grisham, 126 Ariz. 123, 124
(1980). In deciding a motion for summary judgment, courts make no
distinction between direct and circumstantial evidence. Mobilisa, Inc. v. Doe, 217 Ariz. 103, 113, ¶ 34 (App. 2007).

¶11 We review de novo the grant of summary judgment, viewing
the facts and all reasonable inferences therefrom in the light most favorable
to the party against whom judgment was entered. Felipe v. Theme Tech Corp., 235 Ariz. 520, 528, ¶ 31 (App. 2014) (citation omitted). “Summary judgment
should be granted ‘if the facts produced in support of the claim or defense
have so little probative value, given the quantum of evidence required, that
reasonable people could not agree with the conclusion advanced by the
proponent of the claim or defense.’” Aranki v. RKP Invs., Inc., 194 Ariz. 206,
208, ¶ 6 (App. 1999) (quoting Orme Sch. v. Reeves, 166 Ariz. 301, 309 (1990)).
While an opposing party may not rely merely on unsworn general denials
in its own pleadings, a court may not grant summary judgment based on
the failure of a non-moving party to respond and must consider the entire
record to determine whether the moving party is entitled to judgment as a
matter of law. Schwab v. Ames Const., 207 Ariz. 56, 59–60, ¶ 15 (App. 2004).
On review, we may affirm the superior court’s summary judgment ruling
“if it is correct for any reason apparent in the record.” Forszt v. Rodriguez, 212 Ariz. 263, 265, ¶ 9 (App. 2006).

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¶12 To prove a breach of contract, a party must demonstrate: (1)
the existence of a contract; (2) breach of that contract; and (3) resulting
damages. Thomas v. Montelucia Villas, LLC, 232 Ariz. 92, 96, ¶ 16 (2013). In
this case, there is no dispute that the Investors entered a joint venture
agreement with ARZ to purchase, rehabilitate, and sell the property.1
Pursuant to the express terms of that contract, ARZ guaranteed that the
Investors’ capital contribution of $100,000 would be returned when the
property sold. Notwithstanding this guarantee, ARZ failed to return the
monies to the Investors after the trustee’s sale, resulting in their $100,000
loss.

¶13 Although no genuine issues exist regarding the existence of
the contract, breach of that contract, and resulting damages, the defendants
raise several challenges to the superior court’s entry of summary judgment
on the breach of contract claim. First, the defendants contend the Investors’
breach of contract claim was unripe when the Investors filed the complaint
because the property had not yet been sold at that time. While the
defendants could have moved to dismiss the complaint as unripe, they
failed to do so and instead acknowledged the superior court’s jurisdiction
over the matter in their answer. Equally important, there is no question that
by the time the court entered partial summary judgment in the Investors’
favor, the property had been sold and the Investors’ loss fully realized.
Therefore, the defendants’ ripeness claim is moot.

¶14 Second, the defendants contend that the Investors are not real
parties in interest because ARZ executed a second joint venture agreement,
replacing the first, with SBDA Arizona, Inc. rather than with the individual
Investors. Again, the defendants could have moved to dismiss the
complaint on this basis but failed to do so. More importantly, the
defendants have failed to produce any evidence of this purported
superseding agreement or respond to the motion for summary judgment.
Therefore, on this record, the superior court did not err by finding, as a
matter of law, that the Investors suffered a $100,000 loss as a result of ARZ’s
breach.

1 Noting that Salucci, alone, signed the contract with ARZ, the
opening brief states that the Investors “did not allege how” Borrelli “could
be a real party in interest.” Other than this fleeting statement, however, the
defendants do not dispute that Borrelli was a party to the contract. To the
contrary, the defendants acknowledge that it “is not contested that the
Investors entered into the [c]ontract with ARZ Partners.” (emphasis added.)

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¶15 The defendants further contend, however, that ARZ, alone,
contracted with the Investors and that Gorrie and Ryan, in their individual
capacity, were not parties to the joint venture agreement. The written
contract clearly reflects that ARZ entered the joint venture agreement, with
Gorrie signing on ARZ’s behalf. Gorrie and Ryan were not identified in the
contract nor did they sign in their individual capacities. Because neither
Gorrie nor Ryan are named contracting parties, at this stage of the
proceedings, the Investors have failed to show that they are entitled to
judgment as a matter of law against Gorrie and Ryan, individually, on their
breach of contract claim. In other words, the record does not reflect that
Gorrie and Ryan, in their individual capacity, contracted with the Investors.

¶16 Furthermore, entry of summary judgment in the Investors’
favor on Counts Two, declaratory relief seeking to rescind the contract, and
Five, unjust enrichment, are irreconcilable with summary judgment on
Count Four, breach of contract, and we vacate the entry of summary
judgment on those counts accordingly. Finally, at this stage of the
proceedings, genuine issues of fact regarding Gorrie and Ryan’s alleged
false representations outside the contract preclude summary judgment on
the claim of fraudulent inducement, and we likewise vacate entry of
summary judgment on Count One.

CONCLUSION

¶17 For the foregoing reasons, we affirm the superior court’s entry
of summary judgment on Count Four, breach of contract. We vacate the
grant of summary judgment on Count One, fraudulent inducement; Count
Two, declaratory relief; and Count Five, unjust enrichment. We remand for
further proceedings consistent with this decision. Although the defendants
request an award of their attorney fees and costs incurred on appeal
pursuant to A.R.S. § 12-341, they have not prevailed on the contract claim

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and we deny their request. Citing ARCAP 21, the Investors likewise request
an award of their reasonable attorney fees and costs incurred on appeal.
Because ARCAP 21 does not provide a substantive basis for an attorney fees
award, we deny that request. Having predominantly prevailed, however,
the Investors are entitled to an award of their costs on appeal upon
compliance with ARCAP 21.

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

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