Fen Invs., LLC v. Fonzi Food – 6/11/2024

June 21, 2024

Arizona Court of Appeals, Division One holds that the Arizona Rules of Procedure for Eviction Actions do not allow for joinder of guarantor in eviction proceedings.

Defendant was the former lessee of property owned by Plaintiff. Plaintiff filed suit under applicable eviction rules and joined Defendant’s guarantors in the proceedings. Prior to the hearing, Defendant and Plaintiff’s attorneys spoke about the case. Defendant claims Plaintiff’s attorney agreed to vacate the upcoming hearing, waive the requirement for an answer, and set the matter for trial. Plaintiff’s attorney disputed this characterization. Neither Defendant nor its attorney attended the hearing, and default judgment was entered against Defendant and the guarantors. Defendant and guarantors moved to set aside the default judgment based on mistake or excusable neglect. The superior court denied the motion. 

On appeal, Defendant and the guarantors argued the superior court erred in denial their motion for several reasons. The court of appeals affirmed the judgment against the Defendant, finding no abuse its discretion in the superior court’s decision. It held that a reasonably prudent person would not have failed to answer the complaint or notify the court of their absence at the upcoming hearing. Moreover, Defendant failed to demonstrate a meritorious defense (a requirement to overcome a default judgment). The court of appeals also found other arguments meritless; namely, that an improperly amended complaint caused sufficient harm to reverse judgment and that the agreement violated due process.

Regarding the guarantors, the court of appeals reversed, holding that the guarantors could not be joined in the eviction action. Citing the Arizona Rules of Procedure for Eviction Actions, Defendant and guarantors argued eviction actions do not include guaranty liability claims amongst the relief available. Plaintiff responded by pointing to the Arizona Supreme Court’s opinion in Staffco, Inc. v. Maricopa Trading Co., 122 Ariz. 353, 357 (1979), which held “whenever possible, all claims should be disposed of in one action.”

The Court agreed with Defendant and the guarantors. The Arizona Rules of Procedure for Eviction Actions, which were adopted 30 years after Staffco, state that the Civil Rules no longer apply unless explicitly incorporated. Therefore, the Eviction Rules supersede Staffco in all eviction actions. The Eviction Rules limit counterclaims, cross claims, and third-party claims to only those expressly provided for by statute, and no statute allows adding guaranty claims to eviction actions. Moreover, the Rules do not list guaranty liability claims amongst the relief available. Thus, the Court held no joinder of guarantors is proper in eviction actions.

Judge McMurdie authored the opinion, in which Judges Cruz and Bailey joined.

Posted by: Gloria Farrisi