In re Monroe

          Appeal from the Superior Court in Mohave County Nos. S8015CV201400668 S8015CV201400669 The Honorable Lee Frank Jantzen, Judge

          Lundberg & Elias, PLLC, Bullhead City By T'shura-Ann Elias Counsel for Plaintiffs/Appellees

          Johnson & Gubler, P.C, Las Vegas, Nevada By Matthew L. Johnson, Russell G. Gubler Counsel for Defendants/Appellants

          Presiding Judge Lawrence F. Winthrop delivered the opinion of the Court, in which Judge Maria Elena Cruz and Chief Judge Samuel A. Thumma joined.

          OPINION

          WINTHROP, JUDGE

         ¶1 These consolidated appeals arise from two class action lawsuits to foreclose on real property in Mohave County, Arizona. Defendants Arizona Acreage LLC ("AZ Acreage") and Sunny Lakes Ranchos LLC ("Sunny Lakes") (collectively "Appellants") appeal the superior court's denial of their cross-motions for partial summary judgment and grant of partial summary judgment in favor of representative plaintiffs Jean M. Monroe and Boyd Family Partnership (collectively "Appellees"). Co-defendant Leonard Mardian ("Mardian") also appeals the superior court's grant of judgment on the pleadings in favor of Appellees. For the following reasons, we hold: (1) the six-year statute of limitations in Arizona Revised Statutes ("A.R.S.") section 47-3118(A) (2019)^[1]controls the underlying debts, the deeds of trust, and the guaranties signed by Mardian; (2) Appellees had standing to seek foreclosure of the deeds of trust; (3) the certification of each class satisfied the requirements for initiating a foreclosure action as outlined in the deeds of trust; and (4) Nevada Revised Statutes ("N.R.S.") section 645B.340 did not apply to bar Appellees' claims. We further reject Appellants' arguments concerning issue and claim preclusion. Because Appellees properly demonstrated they were entitled to judgment as a matter of law, we affirm the judgments entered.

         FACTS AND PROCEDURAL HISTORY

         ¶2 In September 2006, Sunny Lakes executed a promissory note in favor of multiple lenders in exchange for $5, 000, 000. Over one hundred individuals and entities contributed money to the Sunny Lakes loan, and no lender contributed more than fourteen percent of the total loan value. The note was secured by a deed of trust encumbering several acres of undeveloped land in Mohave County ("Plot A"). In addition to the note and deed of trust, Mardian executed a guaranty agreement, promising to repay the loan in the event Sunny Lakes failed to do so.^[2] The execution of the promissory note was conditioned on Mardian providing a personal guaranty on the note.

         ¶3 In August 2007, AZ Acreage executed a promissory note in favor of multiple lenders in exchange for $4, 000, 000. Over eighty individuals and entities - many of whom contributed to the Sunny Lakes loan-contributed money to the AZ Acreage loan.^[3] The loan was secured by a deed of trust encumbering another plot of undeveloped land in Mohave County ("Plot B"). No lender contributed more than twenty-one percent to the total loan value. Mardian also executed a guaranty agreement as a material condition for execution of the AZ Acreage loan.

         ¶4 Both Sunny Lakes and AZ Acreage made payments on their respective notes until July 2008, when both companies stopped making payments. In late June 2014, believing the statute of limitations was just days from expiration, Appellees filed two class action lawsuits to foreclose on Plot A and Plot B and recover any resulting deficiency.^[4] Although many of the investors contributed money to both promissory notes, some contributed towards one note but not the other - resulting in two different classes. Sunny Lakes and Mardian were named defendants in one lawsuit (the "Boyd Case"); and AZ Acreage and Mardian were named defendants in the other lawsuit (the "Monroe Case").

         ¶5 Appellants moved to dismiss each case pursuant to Arizona Rule of Civil Procedure ("Rule") 12(b)(6), arguing that the four-year statute of limitations under A.R.S. § 12-544(3) applied and had expired and that Appellees lacked standing because they did not obtain the requisite fifty-one percent ("51%") majority agreement outlined in the deeds of trust to declare a default and bring a judicial foreclosure action. The superior court denied Appellants' motions and later certified the classes.

         ¶6 Mardian then moved for summary judgment in both cases, arguing the four-year statute of limitations period in A.R.S. § 12-544(3) barred the claim against him for enforcement of the guaranty contracts. Both sides briefed the issue and presented oral argument, and the court denied the motions.

         ¶7 Thereafter, Appellees moved for partial summary judgment to: (1) establish the dollar amount due under each note; (2) establish that the classes were entitled to payment under the notes; (3) order a sheriff's sale of Plot A and Plot B; and (4) establish liability against each defendant for payment of any deficiency that may arise. Appellants each cross-moved for summary judgment, again arguing the claims were barred by a four-year statute of limitations and Appellants had failed to bring the actions in accordance with the terms of the deeds of trust and controlling Nevada law. In July 2018, the court granted the Appellees' motions in part-reserving the issue of Mardian's liability to pay a deficiency until after the properties were sold and a fair market value hearing could be held. In its Rule 54(b) order, the court determined Sunny Lakes owed $13, 870, 277.75 on its promissory note plus interest, and AZ Acreage owed $10, 933, 666.62 on its promissory note plus interest. Sunny Lakes and AZ Acreage timely appealed the superior court's order in August 2018, and the appeals were consolidated.

         ¶8 While the first two appeals were pending, Plot A and Plot B were sold at a sheriffs sale in September 2018. Appellants and Mardian did not contest the sale price for either property, and the court vacated the fair market value hearing. Plot A sold for $80, 000, resulting in a deficiency for Sunny Lakes. Plot B sold for $195, 000, resulting in a deficiency for AZ Acreage.

         ¶9 A week later, Appellees moved for judgment on the pleadings, arguing Appellants and Mardian admitted all the material facts in the complaints and failed to show any viable defense to their claims. Appellants and Mardian opposed the motions. The court ultimately granted the motions and entered final Rule 54(c) judgments in favor of Appellees. Mardian appealed the judgments, and those appeals have been consolidated with the previous appeals. We have jurisdiction pursuant to A.R.S. § 12-120.21.

         ANALYSIS

         ¶10 The promissory notes, deeds of trust, and guaranties were all executed in Nevada and include choice-of-law provisions designating Nevada law as governing the agreements. We therefore review the substantive issues according to the laws of Nevada but apply Arizona law to resolve any procedural issues. Ross v. Ross, 96 Ariz. 249, 251-52 (1964) ("Matters respecting the remedy, such as the bringing of suits, admissibility of evidence, [and] statutes of limitation, depend upon the law of the place where the suit is brought.") (internal quotation omitted).

         ¶11 Appellants and Mardian raise three main arguments on appeal: (1) the Appellees' claims are barred by the doctrines of issue and claim preclusion; (2) the Appellees' claims are governed by a four-year statute of limitations and, accordingly, are untimely; and (3) the Appellees' claims are barred because they failed to obtain written consent of 51% of the lenders before filing the lawsuits, as required by the deeds of trust and by N.R.S. § 645B.340. We review each issue below. I. Issue Preclusion and Claim Preclusion Do Not Apply

         ¶12 Appellants argue the holding in related litigation, Karayan v. Mardian, 690 Fed.Appx. 996 (9th Cir. 2017) (mem. decision), under the doctrines of issue and claim preclusion bars both class action lawsuits. Before the superior court, however, Appellants only argued that the Karayan decision should preclude one class member, the Karayan Family Trust, from participating in the class. Appellants never argued that Appellees as class representatives should be barred from bringing suit, and we will not consider the argument for the first time on appeal. ARCAP 13(a)(7)(B); In re MH 2008-002659, 224 Ariz. 25, 27, ¶ 9 (App. 2010).^[5]

         II. Statutes of Limitations

         ¶13 We review the application of each statute of limitations de novo. Broadband Dynamics, LLC v. SatCom Mktg., Inc., 244 Ariz. 282, 285, ¶ 5 (App. 2018). We discuss the applicable limitations period for the deeds of trust and guaranty agreements separately. A. The Judicial Foreclosure Claims Were Timely Filed

         ¶14 Appellants failed to make payments on the notes starting in July 2008. The subject lawsuits were filed on June 27, 2014. Appellants contend the superior court erred by denying their cross-motions for summary judgment, arguing that the four-year limitations period under A.R.S. § 12-544(3) applies to bar Appellees' claims. Appellees assert the ...