2021-01-20 — Sycamore Hills Estates Homeowners Association, Inc. v. Zablotny ↑ top

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IN THE
ARIZONA COURT OF APPEALS
DIVISION TWO

SYCAMORE HILLS ESTATES HOMEOWNERS ASSOCIATION, INC.,
AN ARIZONA NON-PROFIT CORPORATION,
Plaintiff/Appellant,

v.

KENNETH W. ZABLOTNY AND BARBARA K. ZABLOTNY, HUSBAND AND WIFE,
INDIVIDUALLY AND AS TRUSTEES OF THE KENNETH W. ZABLOTNY AND
BARBARA K. ZABLOTNY JOINT LIVING TRUST DATED AUGUST 29, 1995,
Defendants/Appellees.

No. 2 CA-CV 2019-0200
Filed January 20, 2021

Appeal from the Superior Court in Pima County
No. C20154533
The Honorable Charles V. Harrington, Judge

AFFIRMED IN PART; VACATED IN PART AND REMANDED

COUNSEL

Munger Chadwick & Denker P.L.C., Tucson
By Mark E. Chadwick
Counsel for Plaintiff/Appellant

Davis Miles McGuire Gardner PLLC, Tempe
By Gregory L. Miles and Marshall R. Hunt
Counsel for Defendants/Appellees

SYCAMORE HILLS ESTATES HOMEOWNERS ASS’N, INC. v.
ZABLOTNY
Opinion of the Court

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OPINION

Judge Brearcliffe authored the opinion of the Court, in which Presiding
Judge Eppich and Chief Judge Vásquez concurred.

B R E A R C L I F F E, Judge:

¶1
The Sycamore Hills Estates Homeowners Association appeals
from the trial court’s order denying its motion for relief from judgment, the
court’s award of supplemental attorney fees to Kenneth and Barbara
Zablotny, and the denial of its motion for relief from that fee award. We
affirm in part, vacate in part and remand.
Factual and Procedural Background
¶2
Sycamore Hills Estates is a residential community governed
by an Amended and Restated Declaration of Covenants, Conditions,
Restrictions, and Easements (“CC&Rs”), which establishes the Sycamore
Hills Estates Homeowners Association (“the Association”). The Zablotnys
are homeowners in Sycamore Hills Estates and bound by the CC&Rs. In
2015, the Zablotnys filed a complaint alleging that the Association had
breached the CC&Rs. The parties settled the litigation, entered into a
written settlement agreement, and stipulated to a form of final judgment,
incorporating the terms of the settlement agreement by reference. In March
2017, the trial court approved the settlement agreement and signed and
entered the stipulated final form of judgment.
¶3
In May 2019, following other procedural steps we need not
recount here, the Association filed a Rule 60(b)(4), Ariz. R. Civ. P., motion
for relief from the March 2017 judgment. In the motion, the Association
argued that the parties’ settlement agreement was void in part because the
Association did not have the authority to agree to certain provisions that
conflicted with the CC&Rs. It also asserted that the March 2017 final
judgment was void because the trial court did not have “jurisdiction to
render the particular judgment or order entered.”
¶4
On August 9, 2019, in an unsigned order, the trial court
denied the motion, and on September 5, the Association filed a notice of
appeal of that order. Before the Association filed that notice of appeal, on

SYCAMORE HILLS ESTATES HOMEOWNERS ASS’N, INC. v.
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Opinion of the Court

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August 28, the Zablotnys filed an application for a supplemental award of
attorney fees incurred in defending against the Rule 60(b)(4) motion. The
court granted the Zablotnys’ application, awarding them fees on September
13, before the Association filed any opposition. On September 17, the
Association filed its response to the Zablotnys’ supplemental fee
application. It thereafter filed a Rule 59, Ariz. R. Civ. P., motion for relief
from the fee award.1 The Association then timely appealed from the court’s
supplemental attorney fees award.
¶5
Because the August 2019 ruling denying the Rule 60(b)(4)
motion was unsigned, we suspended that appeal to allow counsel to obtain
a signed order and revested the trial court with jurisdiction. A final
appealable order was thereafter signed, and the appeal reinstated. We have
jurisdiction pursuant to A.R.S. § 12-2101(A)(2).
Analysis
Requests for Relief from the Final Judgment and Settlement Agreement
¶6
The Association argues the trial court erred in denying its
Rule 60(b)(4) motion for relief from the final judgment because, as it argued
below, the court lacked the “jurisdiction to render the particular judgment
or order entered.” It further argues that, once we have determined that the
final judgment is void, we must relieve it from the settlement agreement
because it did not have the authority to enter into certain of its provisions.
“We review the denial of a Rule 60(b)(4) motion de novo.” Laveen Meadows
Homeowners Ass’n v. Mejia, 249 Ariz. 81, ¶ 10 (App. 2020). Whether a
corporation has engaged in unauthorized—or, ultra vires—acts, such as to
render those acts void, is a question of law, which we also review de novo.
Tovrea Land & Cattle Co. v. Linsenmeyer, 100 Ariz. 107, 113-14 (1966).

Relief from Final Judgment
¶7
Rule 60(b)(4) allows a party to seek relief from a “void” final
judgment or order when “the court entering it lacked jurisdiction: (1) over

1The trial court’s ruling on the Association’s Rule 59 motion does not
appear in the record on appeal. Nonetheless, as we discuss in the analysis
below, it is unnecessary that the record contain it because we do not have
jurisdiction to review the court’s ruling.

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the subject matter, (2) over the person involved, or (3) to render the
particular judgment or order entered.” Martin v. Martin, 182 Ariz. 11, 15
(App. 1994). The Association, citing Andrews v. Andrews, 126 Ariz. 55, 58
(App. 1980), asserts that the scope of a trial court’s jurisdiction is limited by
the pleadings, and, if it exceeds those limits, its judgment is void. If void, a
court must vacate the judgment. Martin, 182 Ariz. at 14.
¶8
In the judgment here, the trial court decreed that “[t]he terms
of the Settlement Agreement are approved and the Agreement is attached
hereto and incorporated herein.” Notwithstanding that the Association
stipulated to the form of judgment entered, it claims that this approval
constituted a “declaratory judgment” of the settlement agreement’s
validity, which the court “did not have jurisdiction ‘to render.’” For
purposes of this decision, we will assume without deciding that the
challenged “approval” language in the final judgment constitutes a
declaratory judgment.
¶9
As we stated in Andrews, “[t]he power of a court to render a
valid judgment is limited by the nature of the suit, and the issues raised by
the pleadings. If the court’s judgment exceeds those limits it is void.” 126
Ariz. at 58. In Andrews, a post-decree child support action, the trial court
granted the husband an affirmative judgment against the wife for post-
decree mortgage payments. Id. at 56. The husband had raised the claim for
mortgage payments as an affirmative defense to the wife’s demand for
increased child support. Id. at 58. The wife objected to the judgment. Id. at
57. On review, this court vacated that judgment concluding the statutorily
limited nature of the relief available to parties in such a case
commensurately limited the power of the trial court to grant certain relief.
Id. at 58. Accordingly, its damages award was void because the court, in a
dissolution action, had no authority to enter a civil judgment for claims
outside of the scope of the statutory dissolution action. Id. Additionally,
the award was invalid because the husband had not sought a civil
judgment. Id.; see Byrer v. A. B. Robbs Tr. Co., 102 Ariz. 559, 561 (1967).
¶10
While not challenging the trial court’s general authority to
enter declaratory judgments, the Association asserts the judgment is void
because, as it correctly notes, neither party sought declaratory relief in their
pleadings. Certainly, the Zablotnys’ complaint did not expressly seek a
declaratory judgment as to the validity of the settlement agreement (given,
of course, that it did not yet exist). Nonetheless, the stipulation by the
parties seeking the court’s entry of a judgment approving the settlement

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agreement—to the extent such was indeed declaratory relief—provided the
court the power to grant it.
¶11
Industrial Park Corp. v. U.S.I.F. Palo Verde Corp., 19 Ariz. App.
342 (1973) is instructive. Industrial Park Corp. was a forcible entry and
detainer action; in such an action, the right to possession is the primary
contested issue. Id. at 345. During the course of the litigation, the landlord
and tenant reached a settlement agreement in which the lease was
terminated and the landlord received a money judgment against the tenant
for breach of the lease. Id. at 343. That judgment included “further damages
to be determined and added by Addendum” with payment of the judgment
to be made in installments. Id. The trial court subsequently added
additional sums to the money judgment by an addendum to which the
parties had also stipulated. Id. The tenant later fell into arrears in the
installment payments and the landlord gave notice that it was accelerating
the judgment debt and would begin execution. Id. at 343-44. Following
notice of the acceleration, the tenant filed a motion to vacate the acceleration
of the debt and recording of the judgment for “accident and mistake.” Id.
at 344. The trial court denied the motion. Id.
¶12
On appeal, the tenant asserted that, because the action was a
forcible entry and detainer action, the trial court had no jurisdiction to enter
the money judgment. Id. It argued that the nature of such an action was
for possession only and “the award of damages was therefore beyond the
subject matter jurisdiction of the trial court.” Id. It also argued the
judgment addendum was invalid because, although stipulated to, it
“provided a remedy not requested in the pleadings.” Id. at 345. As to the
latter issue, we concluded, “[t]he law is quite clear that provisions of a
consent judgment may be sustained and enforced, even where the relief
sought was outside the pleadings, so long as the court has general
jurisdiction over the matters adjudicated.” Id. And, because the trial court
had constitutional and statutory authority to hear the underlying matter, it
had jurisdiction to enter the stipulated judgment. Id. The court “had the
necessary requisites for jurisdiction, namely, it had jurisdiction of the
subject matter, of the parties, and jurisdiction to render the particular
judgment which was stipulated to between the parties.”2 Id. at 344.

2 Section 12-1178, A.R.S., was amended in 2002 to provide for
damages when a defendant is found guilty of forcible entry and detainer.

SYCAMORE HILLS ESTATES HOMEOWNERS ASS’N, INC. v.
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¶13
Here, the Association does not contest the trial court’s
constitutional or statutory authority, that is, its jurisdiction, to hear the
underlying contract action. And, despite the breadth of relief ultimately
granted, because the parties agreed to that relief, the court properly entered
the stipulated final judgment and it is not void. The court correctly denied
the Association’s Rule 60(b)(4) request to set aside the final judgment.
Relief from Settlement Agreement
¶14
Although we do not find the final judgment void for lack of
jurisdiction, we will address the Association’s second argument: that
entering into the settlement agreement was an ultra vires act thus rendering
the settlement agreement void. In the settlement agreement reached below,
the Association affirmed that “[t]he individual(s) who have signed this
Agreement on behalf of their respective entities hereby certify that they
have the right and full corporate authority to enter into this Agreement on
behalf of their entities.” Nonetheless, as it did below, the Association
argues section III of the settlement agreement is void because its agreement
to that provision was an “ultra vires” act under the CC&Rs.
¶15
An ultra vires corporate act is an act taken outside the
authority of the corporate officers. See Trico Elec. Coop. v. Ralston, 67 Ariz.
358, 367 (1948). The Association claims that the contractual rights granted
to the Zablotnys under section III of the settlement agreement could only
be granted by a vote of the Association members, and not by the
Association only through its board. The Association further asserts it had
no authority to give the benefit of section III to only the Zablotnys; rather,
it either had to be uniformly granted to all Association members or none at
all. Pursuant to A.R.S. § 10-3304, however, the Association is barred from
denying its authority to enter into the settlement agreement.
¶16
Section 10-3304(A) states that “[e]xcept as provided in
subsection B of this section, the validity of the corporate action shall not be
challenged on the ground that the corporation lacks or lacked power to

See 2002 Sess. Laws, ch. 53, § 1. At the time of Industrial Park, however, there
was no provision for damages in a forcible entry and detainer action.

SYCAMORE HILLS ESTATES HOMEOWNERS ASS’N, INC. v.
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act.” 3 Subsection B of § 10-3304 provides, in pertinent part, that a
“corporation’s power to act may be challenged”: (1) “In a proceeding by
members of a corporation that is not . . . a planned community association
as defined in [A.R.S.] § 33-1802 . . . against the corporation”; (2) “In a
proceeding by any member of a . . . planned community association against
the corporation to enjoin the act”; or (3) “In a proceeding by the corporation,
directly, derivatively or through any receiver, trustee or other legal
representative, against an incumbent or former director, officer, employee
or agent of the corporation.” The Association is a non-profit “planned
community association as defined in § 33-1802.” See § 10-3304(B)(1).
Accordingly, the Association’s corporate actions may not be challenged for
a lack of authority except as provided in § 10-3304(B)(2) or (3)—that is, in a
proceeding brought by a member against the corporation or by the
corporation “against an incumbent or former director, officer, employee or
agent of the corporation.”
¶17
Here, in its Rule 60(b)(4) motion below and in its appeal of the
trial court’s denial of that motion, the Association challenges its own
authority to act. In its motion below, it claimed “Section III of the
Settlement Agreement is void as ultra vires because [the Association] lacked
authority to enter into an agreement in conflict with its governing
documents,” the CC&Rs. And further, that “[b]y its own terms, the ADR
apparatus in Section III applies only to the Zablotnys” and “[t]he
Association lacks any authority to enter into an agreement that purports to
alter the [CC&Rs] without uniform application.”
¶18
The Association is plainly challenging its authority to enter
into the settlement agreement, or, at least, a key provision of it. The
Association, however, is not a “member” of the Association but the
Association itself, and neither Zablotny is an “incumbent, former director,
officer, employee or agent of the corporation.” Consequently, the
Association is not authorized by § 10-3304(B) to raise a claim denying its
authority here.

3 Because neither party mentioned § 10-3304 in their briefs, we
ordered supplemental briefing on the issue. See Meiners v. Indus. Comm’n,
213 Ariz. 536, n.2 (App. 2006).

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¶19
In its supplemental briefing on this question, however, the
Association argues that § 10-3304 is no bar because its claim “is not a
generalized claim regarding the ‘validity of corporate action;’ it is [a]
specific challenge to a purported amendment governed by the planned
community statutes and the [CC&Rs].” It further asserts that “[a]n
amendment to the [CC&Rs] is not ‘corporate action’ by the corporation
within the meaning of A.R.S. § 10-3304, but it is ‘member action’ reserved
solely to the members of the planned community association” under a
different statutory scheme, A.R.S. §§ 33-1801 to 33-1818 (governing planned
communities). Barring this claim under § 10-3304, it asserts, “would
undermine the purposes of the planned communities statutes to construe
the general ‘corporate action’ statute to somehow preclude a challenge to
validity of [the CC&Rs] that is addressed by” other “highly specific”
statutes. And “it would allow an illegal amendment to remain in force
despite failure to comply with the highly specific requirements.”
¶20
Although the statutory bar of § 10-3304 could allow
impermissible corporate action to stand, it does not mean that such
corporate action is unchallengeable. It simply means the Association may
not bring this challenge. Although neither party raised § 10-3304, and the
trial court did not deny the Association’s motion on this ground, the court
could have correctly done so. Consequently, we affirm the court’s denial
of the Association’s motion to set aside the settlement agreement as void on
this basis. See Forszt v. Rodriguez, 212 Ariz. 263, ¶ 9 (App. 2006) (“We may
affirm the trial court’s ruling if it is correct for any reason apparent in the
record.”).
Supplemental Attorney Fees
¶21
On appeal, the Association argues that the trial court erred in
awarding supplemental attorney fees because, given its September 5, 2019
notice of appeal, the court lacked jurisdiction to do so, the fee request was
untimely, and the court deprived the Association of due process by ruling
on supplemental attorney fees before it could file a timely response. It
further asserts that the court abused its discretion in denying its Rule 59
motion concerning supplemental attorney fees.

Due Process
¶22
The Association claims a deprivation of due process when the
trial court ruled on the Zablotnys’ request for supplemental attorney fees
before it could file a timely response. Based on the August 28 filing date of

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the Zablotnys’ supplemental fee application, under Rule 54(g), Ariz. R. Civ.
P., the Association would have had until September 17 in which to file a
response in opposition. Rule 54(g)(4) provides that attorney fee motions
are governed by Rule 7.1, Ariz. R. Civ. P., and all motions under Rule 7.1
are controlled by Rule 6, Ariz. R. Civ. P. Under Rule 7.1(a)(3), “an opposing
party must file any responsive memorandum within 10 days after the
motion and supporting memorandum are served.” Rule 6(c), however,
extends the specified time to file a responsive memorandum by five days
when service is made by mail, as it was here, under Rule 5(c)(2)(C), Ariz. R.
Civ. P. The court’s fee award was, therefore, premature.
¶23
The Zablotnys do not dispute that the trial court ruled on their
request for attorney fees before the time had run for the Association to
respond. The Zablotnys, however, contend that there was no “surprise” in
its request for supplemental attorney fees because the court had already
granted its initial application for attorney fees, and furthermore, the
Association had the opportunity to be heard in its Rule 59 motion for a new
trial. We review constitutional due process claims de novo. Emmett
McLoughlin Realty, Inc. v. Pima Cnty., 212 Ariz. 351, ¶ 16 (App. 2006).
¶24
“Procedural due process means that a party had the
opportunity to be heard ‘at a meaningful time and in a meaningful
manner.’” Comeau v. Ariz. State Bd. of Dental Exam’rs, 196 Ariz. 102, ¶ 20
(App. 1999) (quoting Mathews v. Eldridge, 424 U.S. 319, 333 (1976)). A party
opposing attorney fees is entitled to be heard on the reasonableness and
appropriateness of the claimed fees and expenses. See Reed v. Reed, 154 Ariz.
101, 108 (App. 1987) (reversing attorney fees award on due process grounds
when trial court had “effectively refused to allow petitioner to be heard on
the subject of the reasonableness and appropriateness of the fees and
expenses claimed”). The Association was not afforded that opportunity
here, and we see no reason why the rules should give one opposing a
supplemental fee request less consideration. The trial court erred in
prematurely granting the Zablotnys’ supplemental fee request, and the
error was not remedied by the Association filing a motion for a new trial.
Cf. Morrison v. Shanwick Intern. Corp., 167 Ariz. 39, 43 (App. 1990) (motion
for reconsideration does not rectify deprivation of notice and opportunity
to be heard).4

4Because we conclude that the trial court erred in granting the fee
award prematurely and remand for a redetermination of the fee award, we
do not address the Association’s remaining contentions. Those

SYCAMORE HILLS ESTATES HOMEOWNERS ASS’N, INC. v.
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Rule 59 Motion
¶25
Lastly, the Association argues the trial court erred in denying
its Rule 59 motion for relief from the judgment awarding attorney fees. The
Zablotnys counter—and we agree—that, because the order denying the
Rule 59 motion was entered after the Association filed its notice of appeal,
the Association, consequently, did not properly appeal the trial court’s
ruling on the Rule 59 motion, and this court does not have jurisdiction to
address the claim. Rule 8(c)(3), Ariz. R. Civ. App. P., requires that a notice
of appeal must designate the judgment from which the party is appealing.
We do not have “jurisdiction to review matters not contained in the notice
of appeal.” Lee v. Lee, 133 Ariz. 118, 124 (App. 1982). Thus, “[i]n the absence
of a timely notice of appeal following entry of the order sought to be
appealed, we are without jurisdiction to determine the propriety of the
order sought to be appealed.” Id. Thus, because the trial court’s ruling on
the Rule 59 motion was entered after the Association filed its notice of
appeal, we lack jurisdiction to address the court’s denial of the Rule 59
motion.
Attorney Fees and Costs Incurred on Appeal
¶26
Both parties have requested an award of attorney fees and
costs on appeal pursuant to Rule 21, Ariz. R. Civ. App. P., and A.R.S. § 12-
341.01, which provides that the court may award reasonable attorney fees
to the successful party in a contested action arising out of a contract. An
appeal of a Rule 60 ruling to set aside a stipulated judgment incorporating
a settlement agreement constitutes a “contested action arising out of
contract” for purposes of § 12-341.01. See, e.g., Lamb v. Ariz. Country Club,
124 Ariz. 32 (App. 1979). But, because neither party completely prevailed
on appeal, in our discretion, we decline to award fees to either party. See
Murphy Farrell Dev., LLLP v. Sourant, 229 Ariz. 124, ¶ 38 (App. 2012). We
further conclude that neither party is a prevailing party for purposes of an
award of costs, and we award none. See A.R.S. § 12-341; Compassionate Care
Dispensary, Inc. v. Ariz. Dep’t of Health Servs., 244 Ariz. 205, ¶ 44 (App. 2018).

contentions—that the fee motion was untimely or that the Association’s
notice of appeal deprived the trial court of jurisdiction—if reasserted, may
be addressed by the trial court on remand.

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Disposition
¶27
For the foregoing reasons, we affirm the trial court’s denial of
the Association’s Rule 60(b)(4) motion. We vacate its order awarding
supplemental attorney fees and costs to the Zablotnys and remand with
direction that the court address again whether to award supplemental
attorney fees and costs.