North Shore v. Kwang

IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE

NORTH SHORE CONDOMINIUM ASSOCIATION,
Plaintiff/Appellee/Cross-Appellant,

v.

WAN-TSING KWANG,
Defendant/Appellant/Cross-Appellee.

No. 1 CA-CV 22-0641
FILED 9-14-2023

Appeal from the Superior Court in Maricopa County
No. CV2020-094346
The Honorable Rodrick J. Coffey, Judge

VACATED AND REMANDED

COUNSEL

The Bainbridge Law Firm, L.L.C., Phoenix
By Mark J. Bainbridge
Counsel for Defendant/Appellant/Cross-Appellee

Maxwell & Morgan, P.C., Mesa
By Garren R. Laymon, Jeffrey B. Corben
Counsel for Plaintiff/Appellee/Cross-Appellant
 NORTH SHORE v. KWANG
Opinion of the Court

OPINION

Presiding Judge Jennifer B. Campbell delivered the opinion of the Court, in
which Judge Kent E. Cattani and Judge Anni Hill Foster joined.

C A M P B E L L, Judge:

¶1 In this compulsory arbitration case, the arbitrator filed an
award addressing the plaintiff’s request for attorneys’ fees and costs after
the notice of decision became an award by operation of law and the time to
appeal that award expired. The superior court treated the second award as
valid, entering an additional judgment based on that award. We vacate the
additional judgment because it was based on a legal nullity—the arbitrator
had no authority to modify or add to the award after the notice of decision
was converted to a final award. We remand for the court to enter judgment
on the award that arose from the filing of the notice of decision and passage
of time, and we vacate the second award granting litigation fees and costs.

BACKGROUND

¶2 North Shore Condominium Association, a non-profit
property owners’ association, brought an action and moved unsuccessfully
for summary judgment against its member Wan-Tsing Kwang for
delinquent assessments. The matter then proceeded to compulsory
arbitration.

¶3 On December 15, 2021, the arbitrator filed a notice of decision
in favor of North Shore for $6,942.50 in unpaid assessments and $1,645 in
attorneys’ fees. The arbitrator directed North Shore to apply for its
recoverable costs. On December 20, 2021, North Shore submitted a
proposed award to the arbitrator and asked for costs as well as an
additional $16,885 in litigation-related attorneys’ fees. Kwang objected, and
North Shore moved to strike the objection as untimely and improperly
filed.

¶4 The arbitrator did not act on North Shore’s application until
March 22, 2022, about a week after the superior court notified the parties
that the case would be dismissed absent the filing of a motion to enter
judgment on the arbitration award. On that date, the arbitrator finally filed
an arbitration award addressing the outstanding request for attorneys’ fees

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and costs. The arbitrator gave North Shore costs plus litigation attorneys’
fees totaling $10,920. North Shore moved for entry of judgment on the
arbitrator’s award which included the amounts granted in the initial award
along with the grant of attorneys’ fees and costs. Kwang appealed the
award to the superior court and sought entry of judgment consistent with
the notice of decision, arguing that it had become the final award by
operation of law before the arbitrator acted by awarding the additional fees
and costs.

¶5 Limiting Kwang’s appeal to the new fees and costs awarded
by the arbitrator, the court decided the appeal on briefing. The court
entered a judgment for North Shore that included costs and a reduced
award of $8,000 in litigation-related attorneys’ fees.

¶6 Kwang timely appealed, and North Shore timely cross-
appealed.

DISCUSSION

¶7 Kwang contends that under the rules of civil procedure, the
passage of time caused the notice of decision to become the final arbitration
award in February 2022. He contends that the superior court lacked
authority to award the costs and additional fees in the March 2022
arbitration award. We review the interpretation of court rules de novo,
giving effect to their clear and unambiguous language as the best indicator
of the drafters’ intent. Fragoso v. Fell, 210 Ariz. 427, 430, ¶ 7 (App. 2005).

¶8 The rules governing compulsory arbitration contemplate that
the arbitrator will make two sequential filings: a notice of decision and then
a final arbitration award. Phillips v. Garcia, 237 Ariz. 407, 411, ¶ 11 (App.
2015). After the notice of decision is filed, either party may submit a
proposed form of arbitration award, which “may include blanks for
requested amounts for attorney’s fees and costs.” Ariz. R. Civ. P. 76(b)(1).
After considering any objections, the arbitrator must then file an arbitration
award deciding any fees and costs issues. Ariz. R. Civ. P. 76(b)(4); Aqua
Mgmt., Inc. v. Abdeen, 224 Ariz. 91, 94, ¶ 13 (App. 2010). The filing of the
award divests the arbitrator of jurisdiction and revests jurisdiction in the
superior court. Diggs Realty & Ins. v. Pertile, 114 Ariz. 85, 85–86 (App. 1977).

¶9 The rules also expressly address what should happen when
an arbitrator fails to timely file an arbitration award: “[i]f an award or
stipulation for entry of another form of relief is not filed with the court
within 50 days after the notice of decision is filed, the notice of decision will
constitute the arbitrator’s award.” This automatic-conversion rule ensures

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finality and promotes compulsory arbitration’s express intent of
“provid[ing] for the efficient and inexpensive resolution of claims.” Ariz. R.
Civ. P. 75(b)(1). Nothing in the automatic-conversion rule suggests that a
pending request for attorneys’ fees or costs will prevent its application. See
Ariz. R. Civ. P. 76(c). Nor does anything in the rule suggest that an award
arising under the automatic-conversion rule has lesser effect than an award
filed by the arbitrator. See id. To the contrary, the rule governing appeals,
Rule 77(b), recognizes that both forms of award trigger the right to appeal
and the deadlines limiting the time for such an appeal. That rule provides
that “[t]o appeal an award, a party must file a notice of appeal no later than
20 days after (1) the award is filed or (2) the date on which the notice of
decision becomes an award under Rule 76(c), whichever occurs first.” Ariz.
R. Civ. P. 77(b) (emphasis added).

¶10 We reject North Shore’s contention that the appeal rule’s
“whichever occurs first” language can only mean that an automatic-
conversion award does not preclude the arbitrator from filing a second
award altering or adding to it. The quoted phrase does not authorize a
series of arbitration awards and accompanying number of opportunities to
appeal the changing results. Rather, it recognizes that the time to appeal is
determined by which of the two time-dependent mechanisms created the
award. To accept North Shore’s arguments would be to ignore the plain
language of both the automatic-conversion rule and the appeal rule, and to
deprive the parties of an expeditious resolution and certainty. See Ariz. R.
Civ. P. 76(c), 77(b). Consistent with the rules’ recognition that awards
created by operation of law have the same effect as awards filed by the
arbitrator, we hold that when an award arises under the automatic-
conversion rule, the arbitrator is divested of jurisdiction and has no
independent authority to make additional rulings.

¶11 Here, under the terms of the rules, the notice of decision
became the award in early February 2022, and the deadline to appeal
expired later that month without either party appealing or otherwise
seeking resolution of the outstanding fees and costs request. The
arbitrator’s unilateral filing of a second award in March 2022 was a nullity
that the court could not consider as it was issued after the arbitrator’s grant
of jurisdiction expired. The superior court had no discretion but to enter

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judgment on the February 2022 award pursuant to Kwang’s motion.1 See
Ariz. R. Civ. P. 76(d).

¶12 We recognize that the rules placed North Shore in an
unenviable position. North Shore acted promptly in seeking fees and costs
following the arbitration, but the arbitrator was remiss in ruling.2 The
arbitrator’s delay in fulfilling his duty created an automatic-conversion
award that failed to address litigation fees and costs. The rules specify only
one route for relief from an award: appeal. If North Shore had appealed the
award, the court could have remanded the matter to the arbitrator for a
decision on fees and costs. Ariz. R. Civ. P. 77(d). But an appeal also would
have exposed North Shore to a trial de novo on all issues—an undesirable
result for a prevailing party. Id.; see also Schwab Sales, Inc. v. GN Constr. Co., 196 Ariz. 33, 35, ¶¶ 5–7 (App. 1998). We must, however, interpret the rules
according to their express terms.

¶13 It is also important to note that had North Shore acted
diligently earlier in the case, it might have avoided the post-award
dilemma. Rule 76 gives parties ample opportunity to avoid an automatic-
conversion award. An arbitrator’s duty to file an award resolving fees and
costs is triggered approximately 25 days after the notice of decision is filed. 3
Ariz. R. Civ. P. 76(b). The automatic-conversion rule does not come into
play until 50 days after the notice of decision is filed. Ariz. R. Civ. P. 76(c).
Parties whose arbitrators have not timely ruled on fees and costs thereby
have time to urge the arbitrator to rule before it is too late. North Shore
made no such effort.

1 Because we so hold, we need not address Kwang’s alternative
argument that his appeal from the March 2022 award entitled him to a trial
de novo on all issues. Further, North Shore’s cross-appeal challenging the
amount of the litigation attorneys’ fees award is moot.
2 Failure to rule on a motion may constitute an implicit denial of the
motion. See Pearson v. Pearson, 190 Ariz. 231, 237 (App. 1997). But here,
where the court directed North Shore to apply for costs and belatedly
purported to award fees, the arbitrator clearly did not intend to act through
silence.
3 Rule 76(b) provides that the proposed form of award must be
submitted within 10 days of the notice of decision’s filing, that an opposing
party has 5 days from receipt of the proposed form of award to submit
objections, and that the arbitrator has 10 days from receipt of the objections
to rule on them and file the award.

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¶14 Rule 76(e) also suggests that the court may sua sponte order
a negligent arbitrator to act. That rule requires clerks and court
administrators to refer matters to the assigned judge “for appropriate
action” if no award is filed within 145 days of the arbitrator’s appointment
or 30 days after a noticed hearing, whichever is later.4 Ariz. R. Civ. P. 76(e);
see also Ariz. R. Civ. P. 77(i) (in appeal rule, providing that court “may
contact an arbitrator regarding the arbitration award or other matters
relating to the arbitration”). But that rule does not impose a judicial
obligation to investigate and manage the arbitrator’s docket, and the
automatic-conversion rule ensures that an award will be entered even in
the absence of court intervention. Arbitrators should issue timely awards.
When they fail to meet that obligation, diligent parties should act
affirmatively to remind arbitrators of outstanding motions—or to inform
courts of matters still pending—before the rules’ clear deadlines pass.

CONCLUSION

¶15 We vacate the court’s entry of judgment because it was based
on an appeal from an award that had no legal effect. We remand with
directions that the court enter judgment consistent with the award that
automatically arose from the notice of decision.

¶16 Both parties request attorneys’ fees on appeal, citing A.R.S.
§ 12-341.01 and the condominium declarations, Section 13.1 of which
provides that “[i]f any lawsuit is filed by [North Shore] . . . to enforce the
provisions of the Condominium Documents or in any other manner arising

4 We note that under Rule 76(a) and (b), in some cases the arbitrator
may properly enter an award slightly more than 30 days after the hearing:
the arbitrator has 10 days from the hearing to file the notice of decision, the
parties then have 10 days to submit a proposed form of award and 5 days
from receipt to submit objections, and the arbitrator then has 10 days from
receipt to rule.

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out of the Condominium Documents . . ., the prevailing party in such action
shall be entitled to recover from the other party all attorney fees incurred
by the prevailing party in the action.” Because Kwang is the prevailing
party, we grant his request for fees and deny North Shore’s. Kwang is
entitled to recover fees plus costs under A.R.S. § 12-341, contingent his
compliance with ARCAP 21.

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

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