Court Opinion

ID: 4579585
Source: CourtListenerOpinion
Date Created: 2020-10-22 16:01:50.316485+00
Date Added: 2024-06-11T13:42:06.434544
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 UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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

      IMH SPECIAL ASSET NT 168 LLC, et al., Plaintiffs/Appellants,

                                        v.

                  GREGORY M BECK, Intervenor/Appellee.

                             No. 1 CA-CV 19-0156
                               FILED 10-22-2020

           Appeal from the Superior Court in Maricopa County
                          No. CV2010-010943
                          No. CV2010-010990
                             (Consolidated)
                 The Honorable James D. Smith, Judge
                The Honorable Karen A. Mullins, Judge

                      VACATED AND REMANDED

                                   COUNSEL

Snell & Wilmer L.L.P., Phoenix
By Christopher H. Bayley (argued), Benjamin W. Reeves, and James G.
Florentine
Counsel for Plaintiffs/Appellants

Udall Shumway, Mesa
By Joel E. Sannes (argued), Carson T. H. Emmons
Counsel for Intervenor/Appellee
                           IMH, et al. v. BECK
                           Decision of the Court

                      MEMORANDUM DECISION

Judge Paul J. McMurdie delivered the Court’s decision, in which Presiding
Judge James B. Morse Jr. and Judge Maria Elena Cruz joined.

M c M U R D I E, Judge:

¶1            Appellants, IMH Special Asset NT 161, LLC and IMH Special
Asset NT 168, LLC (collectively “IMH”), challenge several aspects of the
superior court’s rulings in favor of Appellee Gregory M. Beck. For the
reasons set forth below, we vacate and remand.

             FACTS AND PROCEDURAL BACKGROUND

¶2            Recorp New Mexico Associates, LP (“RNMA I”) is a single
asset New Mexico limited partnership that owns a large land parcel
northwest of Albuquerque, New Mexico. RNMA I is governed by a
“Limited Partnership Agreement of Recorp-New Mexico Associates
Limited Partnership” (the “Partnership Agreement”). When this dispute
arose, Recorp Partners, Inc. (“RPI”) was RNMA I’s managing general
partner. IMH and its subsidiaries own or control approximately 13 percent
of the limited partnership interests of RNMA I. Beck individually owns an
approximately seven percent limited partnership interest in RNMA I.

¶3            In 2012, IMH obtained a significant judgment against David
Maniatis and several entities and individuals, not parties to this appeal.1 As
a result, Maniatis agreed to transfer his 9.6 percent ownership interest in
RPI to an IMH subsidiary, Stockholder, LLC (“Stockholder”). At that time,
Perma, LLC (“Perma”), an entity controlled by Maniatis, held the remaining
90.4 percent interest in RPI.

1      This court affirmed that judgment in part. IMH Special Asset NT 168,
LLC v. Aperion Communities, LLLP, Case No. 1 CA-CV 13-0131, 2016 WL
7439001, at *10, ¶ 53 (Ariz. App. Dec. 27, 2016) (mem. decision). On remand,
the superior court entered a nunc pro tunc judgment, which we affirmed.
MW2 Investments LLC v. IMH Special Asset NT 168 LLC, Case No. 1 CA-CV
18-0271, 2019 WL 6910436, at *5, ¶¶ 22-24 (Ariz. App. Dec. 19, 2019) (mem.
decision).

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                           Decision of the Court

¶4             IMH’s collection efforts resulted in the creation of two
receiverships in 2013. The first receivership took control of Stockholder in
June 2013 (the “Stockholder Receivership”). The second receivership took
control of other assets previously held or controlled by Maniatis, including
Perma (the “Bierman Receivership”). The Bierman Receivership concluded
in April 2015, at which time Perma was conveyed to Stockholder, granting
it control of Perma and its RPI shares.

¶5           In September 2015, the Stockholder Receiver made a capital
call on RNMA I’s limited partners, including Beck (the “First Capital Call”).
Other than the IMH subsidiaries, none of the limited partners provided
funds.

¶6           RNMA I was set to dissolve on December 31, 2015, after
which there would be a “liquidation period not to exceed 12 months.” No
partner took action to extend the dissolution date before it elapsed.

¶7          In September 2016, RPI made a second capital call on the
RNMA I limited partners (the “Second Capital Call”). The
non-IMH-subsidiary limited partners again provided no funds. In
November 2016, a well that accessed deep groundwater in which RNMA I
held an interest began leaking toxic water, causing significant
environmental problems. Around that time, the Stockholder Receiver
sought emergency relief, asking the court to allow it to borrow
approximately $1.4 million from MRH Lending, LLC, an IMH subsidiary,
to perform repairs (the “Well Repair Loan”). The court denied the
emergency motion.

¶8           Believing that the Well Repair Loan would deprive him of his
RNMA I interest, Beck communicated with other RNMA I limited partners
seeking to build support to have RPI removed as the general partner. He
also moved to intervene in the underlying action. IMH did not oppose the
motion, and the superior court allowed Beck to intervene.

¶9            On December 1, 2016, Beck wrote the Stockholder Receiver to
inform him that more than 75 percent of the RNMA I limited partners had
voted to remove RPI as the general partner for cause under section 19.2 of
the Partnership Agreement. Attached to Beck’s letter were approximately
30 consent forms in which RNMA I limited partners “[a]pprove[d] . . . the
removal of [RPI] as General Partner, for cause” and “appoint[ed] . . . [Beck]
as the undersigned’s attorney-in-fact to vote in favor of” RPI’s removal (the
“Consent Forms”). The Consent Forms also included an amendment to the

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                            IMH, et al. v. BECK
                            Decision of the Court

Partnership Agreement purporting to extend RNMA I’s term to December
31, 2025.

¶10            RPI took the position that the removal attempt did not comply
with the Partnership Agreement. While it acknowledged the agreement
allowed it to challenge the removal attempt in arbitration, RPI contended
there was “no need” to do so because the effort was “void on its face.”
Instead, it continued to act as the general partner, making another capital
call on the limited partners in January 2017 (the “Third Capital Call”).

¶11          None of the limited partners except for IMH subsidiaries
provided any funds in response to the Third Capital Call. After IMH funded
the unpaid portions of the Third Capital Call, RPI notified the
non-contributing limited partners that it had terminated their interests.

¶12           Shortly thereafter, Beck moved the court for an order that RPI
lacked authority “to take any action as general partner of [RNMA I].” The
court considered the motion but did not expressly grant or deny the
requested relief. But cf. Atchison, Topeka & Santa Fe Ry. Co. v. Parr, 96 Ariz.
13, 15 (1964) (Motions the superior court does not rule on are deemed
denied.).

¶13          In July 2017, the court appointed a replacement Stockholder
Receiver. Two months later, it ruled that the Stockholder Receivership
should be terminated and allowed Stockholder to “continue to manage the
shares of stock directly.” Beck then requested an evidentiary hearing to
determine:

       1. Whether RNMA I had been dissolved;

       2. Whether RPI had the authority to act as RNMA I’s general
       partner after the December 2016 removal attempt;

       3. Whether the receivership orders or the Partnership
       Agreement authorized the Third Capital Call; and

       4. Whether IMH could become RNMA I’s de facto general
       partner after it terminated RPI’s then-president.

The hearing began in December 2017 but did not conclude until November
2018. In May 2018, the court ordered the parties to submit any remaining
sworn witness testimony and make the testifying witnesses available for
court questioning. IMH raised due-process objections, which the court
overruled. IMH sought special-action review over the court’s decision, but

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                            IMH, et al. v. BECK
                            Decision of the Court

we declined to exercise jurisdiction. Around that time, the court directed
the Stockholder Receiver to “issue a Superseding Irrevocable Stock Power
to clarify the transfer of shares to [RPI]” and discharging him “after he
issues the Superseding Irrevocable Stock Power (if not yet done).” The
parties agreed the Stockholder Receiver had already issued that document
several months earlier, but the court did not formally discharge the
Stockholder Receiver until May 2019.

¶14           After the hearing concluded in November 2018, the court
ruled that (1) the Stockholder Receiver did not have the power to manage
RNMA I during the time the receivership order was in place; (2) the
Stockholder Receivership order did not authorize the Third Capital Call or
the subsequent forfeiture of Beck’s limited partnership interest; and
(3) Beck’s interest was not forfeited (the “January 2019 Ruling”). IMH
moved to vacate, alter, or amend the January 2019 Ruling under Arizona
Rules of Civil Procedure (“Rules”) 59(a), 59(d), and 60(b). It also appealed
the January 2019 Ruling, which we stayed pending resolution of the
post-judgment motions.

¶15            The superior court stayed the January 2019 Ruling and set a
bench trial to determine “(1) whether [Stockholder] owned 9.6 or 100
percent of [RPI], and (2) whether the actions of [RPI] as General Partner of
[RNMA I] were authorized under the Receivership Order.” Following the
trial, the superior court ruled as follows (the “November 2019 Ruling”):

       It had jurisdiction to resolve the dispute between IMH and
       Beck under the order winding up the Stockholder
       Receivership;

       Stockholder “came to own 100% of RPI”;

       Beck did not violate the injunction included in the
       Stockholder Receivership order;

       The removal of RPI as the general partner did not violate the
       RNMA I Partnership Agreement.

On these findings, the superior court granted IMH’s motion regarding
Stockholder’s ownership interest in RPI but otherwise denied it. The court
determined that “RPI could not act as the general partner for RNMA I after
the written notice of removal.” It deemed that its acts after receiving written
notice—which included the Third Capital Call and the termination and
assignment of Beck’s limited partnership interest—were ultra vires. The
court also ruled that RPI “may contest its removal via arbitration under the

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                            IMH, et al. v. BECK
                            Decision of the Court

partnership agreement,” which it had not yet done, and noted the parties’
agreement that “the only issue remaining for an arbitrator is whether cause
existed to remove RPI.”

¶16           IMH timely appealed from the January 2019 and November
2019 Rulings. We have jurisdiction under Arizona Revised Statutes
(“A.R.S.”) section 12-2101(A)(4).

                                DISCUSSION

¶17            We review the denial of Rule 59 and Rule 60 motions for an
abuse of discretion. See Am. Power Prods., Inc. v. CSK Auto, Inc., 239 Ariz.
151, 154, ¶ 10 (2016) (Rule 59); City of Phoenix v. Geyler, 144 Ariz. 323, 328
(1985) (Rule 60). Following a bench trial, we review the superior court’s
legal conclusions de novo but defer to its findings of fact unless clearly
erroneous. Town of Marana v. Pima County, 230 Ariz. 142, 152, ¶ 46 (App.
2012). A finding of fact is not clearly erroneous if supported by substantial
evidence, even if there is significant conflicting evidence. Castro v.
Ballesteros-Suarez, 222 Ariz. 48, 51–52, ¶ 11 (App. 2009).

A. The Superior Court Must Determine the Effects of RNMA I’s
   Dissolution Date.

¶18           IMH contends the superior court “failed to decide the effect
of the December 31, 2015 dissolution date in the . . . Partnership
Agreement,” an issue it argues “is critical to the resolution of the parties’
dispute.” While this court is not a factfinder, we may consider pure legal
issues the superior court leaves unresolved. See Bills v. State Bd. of Educ., 169
Ariz. 366, 369–70 (App. 1991) (declining to remand and addressing two
issues “left untouched by the superior court” because they could be
“resolve[d] by statutory interpretation” and “no genuine issues as to any
material facts” remained).

           1. The Limited Partners’ Attempt to Extend RNMA I’s Term
              Through 2025 Was Invalid.

¶19           As noted above, the Consent Forms included an amendment
to Article VI of the Partnership Agreement extending the term of RNMA I
through December 31, 2025.2 IMH argues the limited partners could not

2      The Consent Forms erroneously identify Article IV.

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                             IMH, et al. v. BECK
                             Decision of the Court

retroactively extend the December 31, 2015 dissolution date, pointing out
that the Consent Forms were not executed until November 2016.

¶20            Beck argues section 23.8 of the Partnership Agreement allows
amendments with the Limited Partners’ approval owning at least 75% of
the Units and does not prohibit retroactive amendments. Even if section
23.8 expressly allowed retroactive amendments, New Mexico law does not
allow parties to “vary the requirement to wind up the partnership’s
business as specified in Section 803 of the Uniform Revised Limited
Partnership Act” in a partnership agreement. N.M.S.A. § 54-2A-110(B)(10).
Section 803, in turn, only authorizes a limited partnership to continue after
dissolution “for the purpose of winding up its activities.” N.M.S.A.
§ 54-2A-803(A). And “a limited partnership is dissolved, and its activities
must be wound up . . . upon . . . the happening of an event specified in the
partnership agreement”—here, the established dissolution date of
December 31, 2015. N.M.S.A. § 54-2A-801(A). We conclude New Mexico
law barred the limited partners’ attempt to extend RNMA I’s term
retroactively. Cf. Ratner v. Iron Stone Real Estate Fund I, L.P., 212 A.3d 70, 78–
81 (Pa. Super. 2019) (holding that Pennsylvania’s version of the Uniform
Limited Partnership Act did not permit post-dissolution votes to extend a
limited partnership’s term).

           2.     We Do Not Reach IMH’s Contention That RNMA I’s
                  Activities Went Beyond the Twelve-Month Wind-Up
                  Period.

¶21            IMH next contends RNMA I became a general partnership
because its activities went beyond the twelve-month wind-up period called
for in the Partnership Agreement. We note, however, that IMH discouraged
the superior court from enforcing this limitation, calling it “arbitrary” and
arguing that section 20.2 of the Partnership Agreement “recogniz[ed] the
paramount import of an orderly liquidation.” Indeed, IMH argued that “as
a practical matter, RPI can continue to manage RNMA I until RNMA I’s
assets are ripe for liquidation.” And both the Stockholder Receiver and
RPI’s then-president testified that it would have been impractical to
liquidate RNMA I’s assets by December 31, 2016.

¶22            The superior court did not address this issue, which hinges
on numerous disputed facts. Indeed, IMH argued RPI’s post-December 31,
2015 actions “were done in furtherance of the wind-up of RNMA I; to bring
about the optimal circumstances for liquidation of RNMA I’s assets” but
noted that “[t]he parties . . . dispute what constitutes ‘winding up
activities.’” The superior court should address this issue in the first instance.

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                             IMH, et al. v. BECK
                             Decision of the Court

See Muscat by Berman v. Creative Innervisions LLC, 244 Ariz. 194, 200, ¶ 22
(App. 2017) (declining to rule on a claim where the superior court did not
“separately analyze [it] in its detailed ruling”); see also Broadband Dynamics,
LLC v. SatCom Mktg., Inc., 244 Ariz. 282, 287, ¶ 14 (App. 2018) (declining to
address an issue on appeal “because the superior court did not address it
and the facts are not sufficiently developed to permit a proper legal
analysis”).

B. Beck Sufficiently Complied with Rule 24.

¶23            We address one other argument raised by the appeal as the
issue may occur on remand. See Buckholtz v. Buckholtz, 246 Ariz. 126, 131,
¶ 17 (App. 2019); State v. Abdi, 226 Ariz. 361, 366, ¶ 18 (App. 2011) (court to
address issues likely to arise on remand); Dawson v. Withycombe, 216 Ariz.
84, 113, ¶ 98 (App. 2007).

¶24            IMH contends the court should not have allowed Beck to
intervene because his motion did not include a proposed pleading as
required by Rule 24(c)(1)(B). While IMH raised this issue in multiple filings
after the court allowed Beck to intervene—including in its motion to vacate,
amend, or alter the January 2019 Ruling—it did not initially object to Beck’s
motion to intervene. The court could have granted the motion on that basis
alone. Ariz. R. Civ. P. 7.1(b)(2).

¶25             In any event, we reject IMH’s formalistic objection. As no
Arizona court has yet addressed this issue, we may consult federal court
interpretations of the substantially similar Federal Rule of Civil Procedure
24 for guidance. Heritage Village II Homeowners Ass’n v. Norman, 246 Ariz.
567, 572, ¶ 19 (App. 2019). Federal courts typically are “quite lenient in
permitting participation by parties who failed to comply strictly with Rule
24.” Pub. Citizen v. Liggett Group, Inc., 858 F.2d 775, 784 (1st Cir. 1988) (citing
cases). Indeed, “it is rare that only procedural grounds are proffered for
denial.” U.S. ex rel. Frank M. Sheesley Co. v. St. Paul Fire and Marine Ins., 239
F.R.D. 404, 410 (W.D. Pa. 2006) (quoting Charles Alan Wright, Arthur R.
Miller & Mary Kay Kane, Federal Practice and Procedure § 1914, p. 414-15 (2d
ed. 1986)). As such, federal courts have allowed intervention without a
proposed pleading if the applicant makes his positions clear in his motion.
See, e.g., Spring Const. Co. v. Harris, 614 F.2d 374, 377 (4th Cir. 1980) (allowing
intervention despite failure to attach proposed pleading because “[t]he
petition and accompanying affidavit . . . set forth sufficient facts and
allegations to apprise Spring of LTIC’s claims”); Bituminous Cas. Corp. v.
Garcia, 223 F.R.D. 308, 311, n.4 (N.D. Tex. 2004).

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                            IMH, et al. v. BECK
                            Decision of the Court

¶26              Here, Beck explained that (1) he owns a limited partnership
interest in RNMA I; (2) RNMA I would be affected by the Court’s ruling on
the motion seeking approval of the Well Repair Loan; (3) his limited
partnership interest could be virtually wiped out if the Court allowed the
Well Repair Loan to proceed; and (4) “[n]o other limited partner in RNMA
I . . . has intervened to protect RNMA I’s interests, nor is the general partner
protecting RNMA I’s interests.” The superior court did not err by allowing
Beck to intervene.

C. We Decline to Award Attorney’s Fees on Appeal.

¶27            Both parties request their attorney’s fees incurred in this
appeal under A.R.S. § 12-341.01(A). IMH offers no argument regarding why
it would be entitled to recover fees. Beck states that he is “unaware of IMH’s
basis for asserting a right to recover fees under A.R.S. § 12-341.01,” and only
claims them “to the same extent IMH asserts it is entitled to fees.” In our
discretion, we decline to award fees to either side.

                               CONCLUSION

¶28           We vacate the court’s determination that the limited partners
extended RNMA I’s dissolution date and remand for further proceedings
consistent with this decision. IMH is the successful party on balance in this
appeal and may recover its taxable costs upon compliance with Arizona
Rule of Civil Appellate Procedure 21.

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

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