Court Opinion

ID: 4214122
Source: CourtListenerOpinion
Date Created: 2017-10-24 15:04:01.179824+00
Date Added: 2024-06-11T14:41:47.990885
License: Public Domain

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 UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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

           MOON VALLEY NURSERY, INC., Plaintiff/Appellee,

                                        v.

                    TEGROUS, LLC, Defendant/Appellant.

                             No. 1 CA-CV 16-0291
                               FILED 10-24-2017

           Appeal from the Superior Court in Maricopa County
                          No. CV2014-004171
                The Honorable Douglas Gerlach, Judge

              AFFIRMED IN PART; REVERSED IN PART

                                   COUNSEL

Polsinelli PC, Phoenix
By Troy B. Froderman, John Barwell, Lauren Crawford
Counsel for Plaintiff/Appellee

The Nathanson Law Firm, Scottsdale
By Philip J. Nathanson
Counsel for Defendant/Appellant
                      MOON VALLEY v. TEGROUS
                        Decision of the Court

                      MEMORANDUM DECISION

Judge Maria Elena Cruz delivered the decision of the Court, in which
Presiding Judge Lawrence F. Winthrop and Judge Diane M. Johnsen joined.

C R U Z, Judge:

¶1           Defendant Tegrous, LLC appeals from certain pre-judgment
and post-judgment orders, including the superior court’s order granting
Plaintiff Moon Valley Nursery, Inc.’s motion for new trial.1 For the
following reasons, we affirm in part and reverse in part.

               FACTUAL AND PROCEDURAL HISTORY

¶2            In early 2013, Moon Valley engaged Tegrous to provide
technology and consulting services for the purpose of updating Moon
Valley’s accounting software. In early 2014, Moon Valley sued Tegrous,
alleging breach of contract and breach of the covenant of good faith and fair
dealing, claiming Tegrous did not perform the work required by the parties’
agreement.

¶3          As relevant on appeal, in October 2014, Moon Valley
propounded the following requests for admission to Tegrous:

      #1     Admit that you agreed to reimburse Moon Valley
      $40,000 for your failure to satisfy the obligations under the
      Tegrous Agreement.

      #2    Admit that you tendered a $40,000 check to Moon
      Valley for your failure to satisfy the obligations under the
      Tegrous Agreement.

1      The statement of facts in the opening brief does not comply with
Arizona Rule of Civil Appellate Procedure 4(b)(2) or (4) (outlining the
appropriate type, font size, and line spacing for an appellate brief) or
13(a)(5) (requiring a statement of facts “that are relevant to the issues
presented for review”). Accordingly, we disregard it and rely on Moon
Valley’s statement of facts and our own review of the record. See State Farm
Mut. Auto. Ins. Co. v. Arrington, 192 Ariz. 255, 257 n. 1 (App. 1998).

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                       MOON VALLEY v. TEGROUS
                         Decision of the Court

       #3    Admit that you cancelled payment on the $40,000
       check without any legal justification.

       #4     Admit that you owe Moon Valley at least $40,000.

       #6    Admit that Moon Valley paid Tegrous $65,000 under
       the Tegrous Agreement without receiving any benefit.

       #7     Admit that in May 2014 you told Moon Valley that the
       work that Tegrous was to perform under the Tegrous
       Agreement would consume more hours than you originally
       anticipated.2

See generally Ariz. R. Civ. P. (“Rule”) 36.3

¶4            Tegrous did not respond to the requests for admission. Later,
Moon Valley moved for summary judgment based, in part, on the matters
deemed admitted pursuant to Rule 36(a).4 In response, Tegrous argued that
summary judgment was improper because the requests sought admissions
to legal conclusions, not factual matters. See Ariz. R. Civ. P. 36(b). In any
event, Tegrous argued, Moon Valley did not meet its burden of production
on causation, i.e., why the software integration project failed. To this end,

2      Moon Valley withdrew request #5 prior to trial.

3       After the events and rulings at issue here, the Arizona Rules of Civil
Procedure were revised effective January 1, 2017 to reflect comprehensive
stylistic and substantive changes. To be consistent with the record below
and the briefing on appeal, we cite the former version of the Rules.

4      Rule 36(a) provided, in relevant part:

                A party may serve upon any other party a written
       request for the admission, for purposes of the pending action
       only, of the truth of any matters within the scope of Rule 26(b)
       set forth in the request that relate to statements or opinions of
       fact or of the application of law to fact[.] . . . The matter is
       admitted unless, within (40) days after service of the request,
       . . . the party to whom the request is directed serves upon the
       party requesting the admission a written answer or objection
       addressed to the matter[.]

(Emphasis added.)

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                      MOON VALLEY v. TEGROUS
                        Decision of the Court

Tegrous submitted the affidavit of its president, Shawn Tibbitts, who
testified the project’s failure was the result of Moon Valley’s unstable
software system.

¶5             The superior court concluded that Tegrous had waived its
objection to the requests for admission by failing to respond or request an
extension of the deadline. Nevertheless, the court denied Moon Valley’s
motion on the basis that “the matters stated in the Tibbitts’ affidavit are
sufficient to meet the low bar necessary to withstand summary judgment.”
The court also determined that Tegrous’ failure to comply with Rule 36 was
sanctionable, “especially when, as here, Moon Valley Nursery incurred
attorney[s’] fees preparing a motion for summary judgment that may have
never been filed had Tegrous complied with Rule 36 and what the
disclosure rules require.” Subsequently, the court awarded Moon Valley
$17,850 in attorneys’ fees incurred in moving for summary judgment.

¶6            A month before trial, Tegrous filed a motion in limine seeking
to withdraw its admissions. See Ariz. R. Civ. P. 36(c). The superior court
denied the motion at the final pretrial management conference, finding that
Moon Valley would be unfairly prejudiced if it were required to “prove up”
the admissions on the eve of trial. The court intended to read the
admissions to the jury as findings of fact and Moon Valley requested that
Tegrous be precluded from offering any contrary evidence. However, the
next day, just before opening statements, the court ruled it would not read
request #4 to the jury because it was “too confusing.” Over Moon Valley’s
objection, the court concluded:

             You can seek recovery of that amount, and we will tell
      the jury about this $40,000 check and cancellation. But I’m not
      going to instruct the jury that it has been established that
      Tegrous owes Moon Valley at least $40,000. And the reason
      I’m not going to do it is because I think [Tegrous’ counsel]
      correctly points out the “at least” . . . that’s going to be too
      confusing for the jury.

             Present your evidence and tell them how much you are
      owed. And I don’t think I’m undermining your case in the
      slightest by not giving number four.

¶7            After a two-day trial, the jury returned a defense verdict.
Moon Valley then moved for new trial, arguing that errors of law by the
court, including the preclusion of request #4, “effectively gutted” its case.

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                      MOON VALLEY v. TEGROUS
                        Decision of the Court

See Ariz. R. Civ. P. 59(a)(6). Tegrous did not file a response. The superior
court granted the motion, concluding:

             [Moon Valley] quarrel[s] with the court’s treatment of
      requests for admission served by Moon Valley before trial to
      which Tegrous did not respond within the time required by
      Ariz. R. Civ. P. 36(a). In doing so, [Moon Valley] seemingly
      overlook[s] that Rule 36 permits the court to allow the
      withdrawal of an otherwise conclusively established
      admission when, as here, “the presentation of the merits of
      the action will be subserved thereby.” What the court failed
      to appreciate when doing so, however, was the unfair
      prejudice that the timing of that ruling would impose on
      Moon Valley.

¶8            Shortly thereafter, Tegrous moved to vacate the new trial
ruling, asserting it had not received Moon Valley’s post-trial motion and
requesting leave to respond to it. The superior court denied Tegrous’
motion, explaining:

              . . . The court’s [new trial] ruling explained that a new
      trial was warranted because allowing defendant Tegrous, LLC to,
      in effect, withdraw what otherwise was a damaging admission
      unfairly prejudiced plaintiff Moon Valley Nursery, Inc.

             It is beyond fair dispute that Tegrous had the court’s
      ruling in hand before filing the motion to vacate, and yet, the
      [Tegrous] motion fails to address, much less challenge, even
      implicitly, the basis for the court’s ruling. Since then, the
      court has received a reply memorandum submitted on behalf
      of Tegrous that, without reference to any applicable authority,
      devotes no more than three sentences to the basis for the
      court’s ruling, and as such, fails to demonstrate persuasively
      that the court’s concern about unfair prejudice was
      misguided.

      ...

            At trial, the court concluded that its decision would not
      prejudice Moon Valley unfairly. In retrospect, and especially
      after reading and rereading the parties’ post-trial
      submissions, the court is unable to reach the same conclusion
      with any meaningful conviction because it is apparent that,
      when preparing its case for trial, Moon Valley relied on the

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                      MOON VALLEY v. TEGROUS
                        Decision of the Court

      conclusive effect of Tegrous’ admission about what was a conceded
      amount for which Tegrous was liable. Thus, to grant Tegrous’
      motion in these circumstances would amount to little more
      than an unwarranted, stubborn refusal to correct a mistake.
      Although the court regrets the error, the court is not willing
      to let it slide.

             In view of what is said here, the Tegrous motion’s
      complaint about not receiving Moon Valley’s motion for a
      new trial is beside the point. Tegrous has had a sufficient
      opportunity to consider and address the basis for the court’s
      [new trial] ruling.

(Emphasis added.)

¶9          Tegrous timely appealed. We have jurisdiction pursuant to
Arizona Revised Statutes (“A.R.S.”) section 12-2101(A)(5)(a).

                              DISCUSSION

I.    Tegrous’ Appeal

      A.     Motion to Withdraw Admissions

¶10             Tegrous argues the superior court erred by not allowing it to
withdraw the admissions. “The trial court has broad discretion to resolve
discovery matters, which we will not disturb absent a showing of abuse.”
MM&A Prods., LLC v. Yavapai-Apache Nation, 234 Ariz. 60, 66, ¶ 18 (App.
2014). “An abuse of discretion occurs when there is no evidence to support
a holding or the court commits an error of law when reaching a
discretionary decision.” Dowling v. Stapley, 221 Ariz. 251, 266, ¶ 45 (App.
2009); see also Grant v. Ariz. Pub. Serv. Co., 133 Ariz. 434, 455-56 (1982).

¶11           If a party does not respond to requests for admission within
40 days after service, the matter is deemed admitted. Ariz. R. Civ. P. 36(a).
Once admitted, the matter “is conclusively established unless the court on
motion permits withdrawal or amendment of the admission.” Ariz. R. Civ.
P. 36(c). Subject to the provisions of Rule 16, withdrawal or amendment
may be permitted when (i) “the presentation of the merits of the action will
be subserved thereby” and (ii) the party who obtained the admission fails
to show it would be prejudiced “in maintaining the action or defense on the
merits.” Id.

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                      MOON VALLEY v. TEGROUS
                        Decision of the Court

¶12           Tegrous suggests that Moon Valley failed to show it would be
prejudiced by Tegrous’ late responses to the requests for admissions. See
DeLong v. Merrill, 233 Ariz. 163, 167, ¶¶ 13-14 (App. 2013) (discussing “the
prejudice prong” of Rule 36(c)). Tegrous, however, did not file a response
to Moon Valley’s request for admissions and did not file its motion to
withdraw until approximately four and a half months after the court’s
ruling on Moon Valley’s summary judgment motion and only one month
before trial. In opposing Tegrous’ motion to withdraw, Moon Valley
explained the strategic decisions it made in reliance on the matters deemed
admitted, specifically (1) deciding what evidence it needed to prove its
claims, (2) selecting the questions to ask Tibbetts at his deposition, (3)
determining the facts it needed to investigate to prove its case, and (4)
deciding which witnesses it would interview, depose, and call to testify. In
denying the motion, the superior court properly focused on the prejudice
Moon Valley would suffer at trial. See DeLong, 233 Ariz. at 167, ¶ 13
(“Prejudice is more likely to be found when the motion to withdraw or
amend is made during trial or when a trial is imminent.”) (citations
omitted). Tegrous offers no other basis of error, nor do we find any.

       B.     Motion to Vacate/Motion for New Trial

¶13            Tegrous argues that it should have been allowed an
opportunity to respond to Moon Valley’s motion for new trial. We construe
this argument to assert a denial of due process. Due process requires the
opportunity to be heard “at a meaningful time and in a meaningful
manner.” Mathews v. Eldridge, 424 U.S. 319, 333 (1976) (quoting Armstrong
v. Manzo, 380 U.S. 545, 552 (1965)). We review this issue de novo. Jeff D. v.
Dep’t of Child Safety, 239 Ariz. 205, 207, ¶ 6 (App. 2016).

¶14            The party asserting a denial of due process must show
prejudice. See Cty. of La Paz v. Yakima Compost Co., 224 Ariz. 590, 598, ¶ 12
(App. 2010); see also Brown v. U.S. Fid. & Guar. Co., 194 Ariz. 85, 91, ¶ 30
(App. 1998). Tegrous has shown none. Tegrous contends the underlying
premise of the superior court’s new trial ruling—that the court should not
have allowed Tegrous to withdraw an admission prior to trial—was
factually incorrect. However, regarding request #4, the record supports the
court’s finding. The morning of trial, the court concluded it would “not
[give] number four,” and the admission that Tegrous “owed Moon Valley
at least $40,000” was not read to the jury. In granting a new trial, the court
determined that “allowing defendant Tegrous, LLC to, in effect, withdraw
what otherwise was a damaging admission unfairly prejudiced plaintiff
Moon Valley Nursery, Inc.” Again, Tegrous offers no explanation of error.

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                       MOON VALLEY v. TEGROUS
                         Decision of the Court

¶15            The superior court has “significant latitude” in ruling on a
motion for new trial. Soto v. Sacco, 242 Ariz. 474, 478, ¶ 8 (2017). It may
grant a new trial if “[e]rror in the admission or rejection of evidence, error
in the charge to the jury, or in refusing instructions requested, or other
errors of law occurring at the trial or during the progress of the action”
materially affect the moving party’s rights. Ariz. R. Civ. P. 59(a)(6).
Reviewing the court’s decision to grant a new trial for an abuse of
discretion, see Englert v. Carondelet Health Network, 199 Ariz. 21, 25, ¶ 5 (App.
2000), we find no error.

       C.     Sanctions

¶16            Tegrous challenges the superior court’s award of attorneys’
fees as a sanction for Tegrous’ failure to respond to Moon Valley’s requests
for admission. We review an order imposing sanctions for an abuse of
discretion. Seidman v. Seidman, 222 Ariz. 408, 411, ¶ 18 (App. 2009).

¶17           Tegrous argues there is no evidence supporting the superior
court’s conclusion that, but for Tegrous’ failure to comply with Rule 36,
Moon Valley “may” not have incurred attorneys’ fees to prepare a
summary judgment motion. We agree. Therefore, we reverse the award of
attorneys’ fees as a sanction.

II.    Moon Valley’s Additional Arguments                 and     Request    for
       “Confirmation” of the Admissions

¶18           Finally, Moon Valley asks that we confirm that “the
unanswered requests for admission are deemed wholly and fully
established for all purposes in this litigation, including for the new trial.”
We decline to do so. See Ariz. R. Civ. P. 36(c) (stating that the superior court
has discretion to allow withdrawal or amendment of an admission when
“the presentation of the merits of the action will be subserved thereby” and
the party who obtained the admission fails to show it would be prejudiced).
To the extent Moon Valley requests the judgment be modified to enlarge its
rights or reduce Tegrous’ rights, we have no jurisdiction to do so absent a
cross appeal. See ARCAP 13(b)(2); see also Engel v. Landman, 221 Ariz. 504,
510, ¶ 17 (App. 2009).

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                      MOON VALLEY v. TEGROUS
                        Decision of the Court

                             CONCLUSION

¶19          For the foregoing reasons, we affirm in part and reverse in
part. We defer Moon Valley’s requests for attorneys’ fees and costs on
appeal to the superior court, pending resolution of the case. See Tierra
Ranchos Homeowners Ass’n v. Kitchukov, 216 Ariz. 195, 204, ¶ 37 (App. 2007).

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

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