Sycamore Hills Estates Homeowners Ass’n v. Zablotny (D2 1.22.21)

Our curiosity is piqued whenever we see “affirmed in part; vacated in part and remanded,” and we expect something interesting is coming. So often we find ourselves disappointed – as we do here. It isn’t the court’s fault. The shallowness comes from the parties. The court tells us very little about the underlying dispute between the Zablotnys and their homeowners association the Sycamore Hills Estates Homeowners Ass’n. The Zablotnys sued the Association for breaching the CC&Rs for some reason the court does not explain. The case is settled and as part of the settlement, a consent judgment is entered. Two years later the Association changes its mind. The Association argues the judgment was beyond the scope of the pleadings because it can be characterized as a declaratory judgment and should not have been entered. Although the Association stipulated to it, it argues the court did not have jurisdiction to do what it asked. The Association then argues it really did not have authority to enter into such a settlement.

The court of appeals holds the trial court had authority to hear the underlying case; the parties had agreed to the stipulated judgment to resolve the dispute; and thus, the judgment was not void for lack of jurisdiction. As for the ultra vires challenge by the Association against itself, it’s a corporation and Arizona statutes limit challenges for lack of authority. A member can challenge the corporation’s action, but the corporation cannot challenge itself. Finally, the trial court had entered a supplemental award of fees against the Association before the time had expired for the Association to file a response. (Why wasn’t this fixed earlier when the court of appeals told the parties they had to go back to the trial court and get a final judgment because the first one wasn’t signed? ) The trial court is directed to give the Association the opportunity to be heard on this. We expect there will be more litigation because when the Association proclaims it acted without authority, it is sending its members a litigation invitation.

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The Spaulding LLC v Miller et al (D1 12.22.20)

When parties contractually agree to a broad arbitration clause to resolve “all disputes of every kind and nature” one party cannot later complain about the chosen forum when things go south. Basically, the parties formed an LLC called Dynamite and bought a vacant lot in Scottsdale. The loan was personally guaranteed by Miller who is the managing member. Things do not quite work out as envisioned and Dynamite defaults on the loan. Before the sale, Miller personally pays off the debt, and Dynamite keeps the lot. Miller then quitclaimed the property to another entity he owns and that entity quitclaimed the property to yet another entity he owns. Plaintiff was not told about either transfer. Three years later, Plaintiff learned another restaurant was closing and talked to Miller about developing the lot as a restaurant. Miller liked the idea and agreed to increase Plaintiff’s share in Dynamite to 8.6% if it was successful. Plaintiff was able to rezone the lot from residential to commercial. This increased the value of the lot from $300,000 to $5 million. Plaintiff then first learned Dynamite no longer owned the property and sued Miller. Plaintiff won at arbitration and was awarded 8.6% interest in the property.

In superior court, Miller contested the arbitration claiming Plaintiff’s claim was a “derivative action” and Plaintiff was required to follow the Arizona statute which he had not done. Because of this failure, he argued, the arbitrator lacked “subject matter jurisdiction.” He loses because subject matter jurisdiction involves a court’s jurisdiction and is not a defense to an arbitration clause. Miller further complained the arbitrator did not follow the rules. Without telling us what the rules are, the court cites and footnotes a dead-end link to AAA arbitration rules. Thus, the court ends with highlighting an unaddressed problem as to what rules and law apply. AAA makes its own rules and arbitrators are given considerable discretion in interpreting and applying substantive law. Many years ago we were told by the courts that arbitrators may do what no other judge has a right to do; an arbitrator may intentionally decide contrary to law and still have the arbitrator’s judgment stand. If there was a substantive defense here, it was lost in Miller’s quibbling over jurisdiction.

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Ball v. Ball (CA1 12/10/20)

Unlike the previous post, this case actually addresses the ecclesiastical abstention doctrine. Parents divorce and have a parenting plan. The plan is set forth on a court-provided form and includes a box as to religious education. Two boxes were checked: the first box states, “Each parent may take the minor children to a church of place of worship of his or her choice while the minor children are in his or her care.” The second box states, “Both parents agree the minor children may be instructed in the ____ faith.” The blank is handwritten with the word “Christian.” Father later joins The Church of Jesus Christ of Latter-day Saints. He takes his children to church and mother objects. The superior court judge conducts an evidentiary hearing and considers testimony from a youth ministry leader who testified that the father’s church is not Christian. After considering this and other evidence, the trial court agrees. The court of appeals reverses. First, the first box unambiguously states that either parent may take the children to any place of worship. Second, the use of the word “may” indicates permissive intent, and it allows for instruction in the Christian faith but does not require it. The court of appeals could end it there, but we would be left wondering what the trial judge was thinking in conducting an evidentiary hearing on religious belief. The court of appeals continues and answers this by holding the trial court violated the First Amendment when it ruled father’s church is not Christian or part of the Christian Faith. The First Amendment prohibits the exact inquiry made by the trial court. One would expect an evidentiary hearing on Christian beliefs is so far out-of-bounds a trial court would have paused before it “dove into an ecclesiastical matter.” The trial court exercised an authority and a competency it is constitutionally barred from asserting. Perhaps following a fill-in-the-blank kiosk form invited such an intrusion. The court of appeals reminds litigants that courts will enforce specific agreements, but courts may not construe agreements that compel religious inquiry. Poorly drafted agreements as to religious upbringing of children are not enforceable. “The ambiguities surrounding the phrase ‘the Christian faith’ thrust the court directly into a matter of theological controversy in which it could not take part.”

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