Brown v. Hope

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UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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

DOUGLAS E. BROWN, TRUSTEE OF THE BROWN & BROWN LAW
OFFICES, P.C. PROFIT SHARING PLAN AND TRUST, Plaintiff/Appellee,

v.

SANDRA J. HOPE, Defendant/Appellant.

No. 1 CA-CV 20-0059
FILED 2-11-2021

Appeal from the Superior Court in Apache County
No. S0100CV201700098
The Honorable D. Steven Williams, Judge Pro Tempore Retired

AFFIRMED

COUNSEL

Brown & Brown Law Offices, PC, Eagar
By Douglas E. Brown, Amy Brown
Counsel for Plaintiff/Appellee

Sandra J. Hope, Phoenix
Defendant/Appellant
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Decision of the Court

MEMORANDUM DECISION

Judge Kent E. Cattani delivered the decision of the Court, in which
Presiding Judge Randall M. Howe and Judge Cynthia J. Bailey joined.

C A T T A N I, Judge:

¶1 Sandra Hope appeals the superior court’s order declining to
set aside a default judgment foreclosing a tax lien on real property in
Apache County. For reasons that follow, we affirm.

FACTS AND PROCEDURAL BACKGROUND

¶2 CMEGO, LLC, a Nevada limited liability corporation, with
Hope as its statutory agent, held title to the property at issue until 2017. In
2014, Brown & Brown Law Offices, P.C., Profit Sharing Plan and Trust,
acting through its trustee, Douglas E. Brown (“Brown & Brown”),
purchased a tax lien on the property. Three years later, Brown & Brown
filed a tax lien foreclosure and quiet title action against the property and
named CMEGO in its complaint. Brown & Brown repeatedly attempted
service on Hope, as CMEGO’s statutory agent, but failed to effectuate
service. The court thereafter authorized service by alternative means.

¶3 In November 2017, the court entered an unsigned default
judgment against CMEGO, and Brown & Brown obtained a judgment deed
against the property. One year later, acting as a “defendant pro se,” Hope
filed a motion to set aside the default judgment. Hope asserted that the
judgment was improper because she was never properly served and that
she had paid the taxes due on the property.

¶4 The superior court held oral argument on Hope’s motion but
concluded that Hope was not authorized to appear on behalf of CMEGO
because she was not a licensed attorney. The court granted additional time
to allow Hope to hire an attorney. Nevertheless, several weeks later, Hope
filed multiple motions requesting to appear telephonically and asserting
that she was entitled to proceed without an attorney.

¶5 The court then issued a signed order finding (1) as a non-
attorney, Hope was not authorized under the Arizona Rules of the Supreme
Court to appear or file motions on behalf of CMEGO, and (2) Hope lacked
standing in her individual capacity because she was not a party named in

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Decision of the Court

the action. The following month, Hope filed an emergency motion for
reconsideration, asserting that newly discovered evidence showed
CMEGO’s business license was revoked in 2016—before Brown & Brown
served CMEGO via alternative service. The superior court denied the
motion.

¶6 Hope appealed, but this court stayed the appeal pending a
signed and final order under Rule 54(c). After the superior court issued
such an order, we reinstated the appeal. Brown & Brown filed a motion to
dismiss based on Hope’s lack of standing to represent CMEGO or to appear
as a party, but this court denied the motion, concluding that (1) Hope could
appear in the Court of Appeals on her own behalf to challenge an order
denying a personal motion to set aside, and (2) an order denying a motion
to set aside a default judgment is generally appealable as a special order
after final judgment. We have jurisdiction over Hope’s appeal under A.R.S.
§ 12-2101(A)(2).

DISCUSSION

¶7 Hope challenges the superior court’s denial of her motion to
set aside. She argues that the court erred by finding that she lacked
standing to appear in her individual capacity, and she asserts that she was
entitled to represent CMEGO even as a non-attorney. Absent a clear abuse
of discretion, we will not disturb the superior court’s denial of a request to
set aside a default judgment. Hirsch v. Nat’l Van Lines, Inc., 136 Ariz. 304,
308 (1983).

I. Standing.

¶8 Hope argues that because CMEGO’s business license was
“revoked” under Nevada law, she is the correct real party in interest and
should have been personally named in the complaint, and therefore she
should be able to stand in the shoes of CMEGO or otherwise litigate the
action. We review questions of standing de novo. City of Tucson v. Pima
County, 199 Ariz. 509, 514, ¶ 10 (App. 2001). Arizona courts treat standing
not as a jurisdictional rule, but rather “solely a rule of judicial restraint.” Id.
at ¶ 11 (citation omitted). To have standing, “a party must have a ‘direct
stake’ in the outcome of the case.” Id. (citation omitted).

¶9 Hope asserts that CMEGO is a defunct corporation, and that
when it ceased to exist, she became the sole owner of the property at issue.
Hope thus asserts that she is the real party in interest.

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¶10 CMEGO was established as a limited liability company
organized under Nevada law, so Nevada law controls the method and
effect of dissolution. See A.R.S. § 29-801(A)(1) (2020) (“The laws of the state
or another jurisdiction under which a foreign limited liability company is
organized govern its organization and internal affairs and the liability of its
members . . . .”).1 Hope’s argument fails because she has not shown that
CMEGO has been dissolved. Nevada law requires companies to prepare
articles of dissolution, Nev. Rev. Stat. § 86.531(1), and the record does not
contain CMEGO’s articles of dissolution, only an edited printout from a
website that Hope provided. Additionally, Hope fails to prove her alleged
ownership interest in CMEGO’s property. Nevada law dictates how an
LLC’s property is distributed upon dissolution, and the record contains no
evidence regarding winding up of the property. See Nev. Rev. Stat. § 86.521;
Coto Settlement v. Eisenberg, 593 F.3d 1031, 1037 (9th Cir. 2010). Moreover,
even assuming CMEGO was dissolved as Hope asserts, Nevada law
provides that an LLC may sue and be sued for two years after its
dissolution. Nev. Rev. Stat. § 86.505(1). Brown & Brown filed this action
less than one year after the date Hope claims CMEGO was dissolved.
Therefore, CMEGO continued to exist for purposes of defending this action,
and Hope was not entitled to intervene as a nonparty to set aside the default
judgment.

¶11 In limited circumstances, an aggrieved person whose
interests are directly affected by a judgment may timely move to set aside
such judgment, even when he or she is not a party. Liston v. Butler, 4 Ariz.
App. 460, 466 (App. 1966). But for a nonparty to move to set aside the
judgment, the nonparty must concurrently have the right to intervene. See
Woodbridge Structured Funding, LLC v. Arizona Lottery, 235 Ariz. 25, 30, ¶ 23
(App. 2014); see also Ariz. R. Civ. P. 24(a). Here, Hope has not pursued a
motion to intervene. Nor has she otherwise established a right to intervene.
See Morris v. Sw. Sav. & Loan Ass’n, 9 Ariz. App. 65, 68 (App. 1969).
Intervention by right requires that the intervenor’s interests are not already
represented by an existing party. Ariz. R. Civ. P. 24(a)(2). And in this case,
Hope’s interests in the property and the lawsuit do not diverge from those
of CMEGO, which remained a suable entity for purposes of this litigation.
See Nev. Rev. Stat. § 86.505(1).

1 This statute was repealed effective August 31, 2020 as part of the
recodification of the Arizona Limited Liability Company Act. See 2018 Ariz.
Sess. Laws, ch. 168, § 3 (53d Leg., 2d reg. sess.). As relevant here, the
substance of the law remains unchanged, although it has been restyled and
renumbered. See A.R.S. § 29-3901(A).

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¶12 Finally, Hope argues that Brown & Brown failed to name the
correct party in its complaint—asserting that she, rather than CMEGO,
should have been named as the defendant. Rule 10(a), (d) of the Arizona
Rules of Civil Procedure requires the complaint to name all known parties.2
And because companies continue to exist after dissolution for the purpose
of lawsuits under Nevada law, Nev. Rev. Stat. § 86.505(1), Brown & Brown
correctly named CMEGO as a known party. See Ariz. R. Civ. P. 10(a).

II. Rule 31.

¶13 Brown & Brown argues that Arizona Rule of Supreme Court
31 precludes Hope from representing CMEGO as a pro per litigant. Rule 31
prohibits any person from practicing law in this state unless he or she is an
active member of the state bar. Ariz. R. Sup. Ct. 31.1(a)(1), 31.2(a). We
review de novo issues involving interpretation of court rules. Haroutunian
v. Valueoptions, Inc., 218 Ariz. 541, 544, ¶ 6 (App. 2008).

¶14 Hope does not dispute that she is not a licensed attorney.
Instead, she argues that she should be able to represent CMEGO as a pro per
litigant because Mr. and Ms. Brown, counsel for Brown & Brown, also
represent their entity pro per without entering a notice of limited
appearance.

¶15 Hope’s arguments are unavailing because a corporation or
other legal entity can only appear in court through an attorney. Ramada
Inns, Inc. v. Lane & Bird Advert., Inc., 102 Ariz. 127, 128 (1967). Until an entity
appears in court through an active member of the state bar, its appearance
is defective. Glenn H. v. Hoskins, 244 Ariz. 404, 406, ¶ 3 n.1 (App. 2018). A
lawyer can represent his or her own legal entity only if an attorney–client
relationship is formed. See Hunt Inv. Co. v. Eliot, 154 Ariz. 357, 362–63 (App.
1987). An attorney who forms an attorney–client relationship with his firm
or his partners is not a pro per litigant. See Munger Chadwick, P.L.C. v. Farwest
Dev. & Constr. of the Sw., LLC, 235 Ariz. 125, 127, ¶ 7 (App. 2014).

¶16 Because Mr. Brown and Ms. Brown, both licensed attorneys,
have formed an attorney–client relationship with Brown & Brown, their

2 Hope contends that the superior court should have applied Rule
104(a) through (e) of the justice court rules, which provide procedures for
naming plaintiffs, defendants, and necessary and indispensable parties.
Ariz. Just. Ct. R. Civ. P. 104. But because this case arose in superior court,
the Arizona Rules of Civil Procedure govern; the justice court rules do not.
Compare Ariz. Just. Ct. R. Civ. P. 101(b), with Ariz. R. Civ. P. 1.

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representation does not violate Rule 31. Id. Ms. Brown entered a general
appearance as Brown & Brown’s attorney under Rule 5.3(a)(1) in January
2019, so there was no need for her to limit her appearance. This general
notice of appearance established Ms. Brown’s attorney–client relationship
with Brown & Brown for the duration of the litigation. See Ariz. R. Sup. Ct.
42; ER 1.2(c). In contrast, as a nonlawyer, Hope cannot represent CMEGO.
See Ariz. R. Sup. Ct. 31.1(a)(1), 31.2(a); Glenn H., 244 Ariz. at 406, ¶ 3 n.1.

¶17 Further, because CMEGO has not appeared through an
attorney, it has not yet entered an appearance in this case. Glenn H., 244
Ariz. at 406, ¶ 3 n.1. Therefore, we do not consider Hope’s arguments on
the merits of the tax lien foreclosure action, the validity of the certificates of
purchase, nor the adequacy of service of process. These merits-based
arguments can only be brought by CMEGO through an attorney, not by
Hope in her individual capacity. See id.

III. Attorney’s Fees and Costs on Appeal.

¶18 Brown & Brown requests an award of costs and fees incurred
on appeal pursuant to ARCAP 25. In our discretion, we decline to award
attorney’s fees as a sanction.

CONCLUSION

¶19 The superior court did not abuse its discretion by determining
that Hope lacked standing to represent CMEGO. Therefore, we affirm.

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

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