Turley v. Beus

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UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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

RACHEL A. TURLEY, et al., Plaintiffs/Appellees,

v.

LEO R. BEUS, et al., Defendants/Appellants.

No. 1 CA-CV 15-0107
FILED 1-31-2017

Appeal from the Superior Court in Maricopa County
No. CV2014-009811
The Honorable Katherine M. Cooper, Judge

AFFIRMED

COUNSEL

Bryan Cave LLP, Phoenix
By J. Alex Grimsley, Robert J. Miller, Sean K. McElenney
Counsel for Plaintiffs/Appellees

Stinson Leonard Street LLP, Phoenix
By Michael C. Manning, James E. Holland Jr.
Co-Counsel for Defendants/Appellants Cardon

Moyes Sellers & Hendricks, Phoenix
By Keith L. Hendricks, Joshua T. Greer, Lawrence Palles
Co-Counsel for Defendants/Appellants Cardon
 TURLEY et al. v. BEUS et al.
Decision of the Court

Osborn Maledon, P.A., Phoenix
By David B. Rosenbaum, Nathan Arrowsmith
Counsel for Defendants/Appellants Beus/Nelson

MEMORANDUM DECISION

Presiding Judge Kenton D. Jones delivered the decision of the Court, in
which Judge Randall M. Howe and Judge Donn Kessler joined.

J O N E S, Judge:

¶1 Appellants appeal the trial court’s orders denying their
motion to compel arbitration. For the following reasons, we affirm.

FACTS1 AND PROCEDURAL HISTORY

¶2 This family dispute arose over an alleged promise by Wilford
Cardon to give his son, Wil, 50% of the family’s considerable assets in
exchange for Wil’s agreement to manage the family businesses. Wilford
disputed making such a promise to the detriment of his seven other
children.2 In an attempt to settle the dispute, Wilford and Wil met with two
high-ranking leaders of their church (the Church Leaders).

¶3 The meeting resulted in an agreement (the November 2013
Agreement), signed by Wilford and Wil, their wives, and the Church
Leaders, all in their individual capacities, that granted Wil 35% of the total
Cardon assets — 28.75% “as compensation” for his management services
plus 6.25% as his inheritance — and allocated 6.25% of the assets to each of
Wilford’s seven other children. The November 2013 Agreement also
contained a provision whereby the numerous Cardon companies would be
“governed by a board of directors” that “would include Wilford, Wil,
another rotating family member, and others,” with final selection to be
determined by the Church Leaders. The November 2013 Agreement
purported to create a board of directors (the Board) for the purpose of

1 We view the facts in the light most favorable to upholding the trial
court’s ruling. Estate of DeCamacho ex rel. Guthrie v. La Solana Care & Rehab,
Inc., 234 Ariz. 18, 19 n.1, ¶ 1 (App. 2014) (citing Ruesga v. Kindred Nursing
Ctrs., L.L.C., 215 Ariz. 589, 597, ¶ 26 (App. 2007)).

2 Neither Wilford nor one of Wil’s siblings are parties to this appeal.

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disentangling Cardon investments by selling the real estate properties in
which those investments were held and distributing the liquidated cash to
the various Cardon children in accordance with the agreed-upon schedule.

¶4 Leo Beus, a longtime attorney and friend of Wilford’s, later
averred that, shortly after the execution of the November 2013 Agreement,
the Church Leaders had asked him “to take affirmative steps to . . .
implement that Agreement” and “to serve on the Board.” As part of these
responsibilities, Beus informed Wil’s brother, Patrick, that Patrick had been
elected to the Board by a unanimous vote of the three then-existing Board
members — Wilford, Wil, and Beus. Those four Board members further
agreed to a five-member Board in total and selected Todd Nelson, who was
to be “independent of all persons involved,” as the final Board member.
An initial Board meeting was scheduled for early December 2013. The
Cardons’ estate-planning attorney drafted a “Comprehensive Management
Agreement” (the Management Agreement) in preparation for the initial
Board meeting.

¶5 The parties to the Management Agreement purport to be Boa
Sorte L.P., Rio Claro, Inc., and Harvard Capital L.P. (the Companies), all of
which hold Cardon assets and are, in turn, owned by a number of
irrevocable and multi-generational trusts.3 Section 1.1(a) of the
Management Agreement grants the Board “sole and unfettered authority
to make . . . any and all determinations . . . regarding the business and affairs
of [the Companies] and all Cardon Assets . . . and decisions by the Board
are binding and non-appealable by [the Companies] or any Cardon Family
Member.” Section 1.1(b) further asserts that the Board “shall also have full
authority to consider and resolve any . . . disputes raised by any . . . Cardon
Family Member, and the Board’s decisions and actions shall be binding on
. . . every Cardon Family Member, none of which shall have any right to
litigate or arbitrate such decision unless” the Board’s decision involved
fraud or dishonesty related to self-dealing, in which case the matter would
be resolved by a qualified arbitrator selected by the American Arbitration
Association.

¶6 Upon reviewing the Management Agreement, Wilford
specifically requested a right of appeal of Board decisions to the Church
Leaders. The Board members unanimously agreed nothing in Section 1.1(b)

3 As of June 2014, eleven trusts had ownership interests in the
Companies, with all parties involved — Wilford, Wil, Beus, Patrick, and
five other Cardon children (the Siblings) — serving as a trustee or “power
holder” for one of the various trusts.

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would “limit the right of appeal” they agreed to in Section 1.9. As relevant
here, Section 1.9 provides the right of appeal is “in the sole and absolute
discretion” of the Church Leaders and “acknowledge[s] that it is the strong
desire of [the Church Leaders] not to be a final arbiter of any dispute,” but
notes “[i]f the Appeal is considered, [the Church Leaders’] decision . . . shall
be binding on the Board.”

¶7 On the signature page, the Management Agreement
establishes, with the signatures of the five Board members, that it is to be
“binding on all signatories hereto and all Cardon Family Members
concerning management of Cardon Assets as defined herein.” Although
the document has numerous signature blocks for the Board directors,
managers of the Companies, trustees of the trusts, and individual Cardon
family members, only Wilford and Patrick ever signed the Management
Agreement, both of whom signed in December 2013. Additionally, Section
1.11 provides that “[t]he [Companies’] respective governing instruments
shall be modified as soon as reasonably possible to expressly grant
authority to the Board as provided for herein,” but this did not occur.

¶8 Despite the attempt to settle disputes through the
Management Agreement, family acrimony continued. Beus met with the
Siblings in December 2013, where he purportedly circulated copies of the
Management Agreement, but the document remained substantially
unexecuted. Although the Siblings were not fully aware of the Board’s
involvement in managing the Cardon assets, Wilford, Patrick, and the
Siblings4 would consult either Beus or the Church Leaders for advice, and,
in so doing, evidenced a basic understanding of the Board’s structure and
purpose. The Management Agreement’s appeal provision, involving
recourse to the Church Leaders, was first invoked in January 2014. At that
time, the Church Leaders declined to consider the dispute, stating “[o]ur
role never was and is not now to participate in the complex details of the
Cardon Group. We have neither the time nor responsibility to understand
the many issues. For this reason, we encouraged the forming of [the Board]
. . . .”

¶9 The Board met in late December 2013 as well as January and
March 2014 and discussed, among other issues, the value of two vacation
homes to be transferred to Wilford and the Siblings such that Wil could be
credited for his 35% share. Several emails from the Siblings to Beus in
February 2014 continued to evince a rudimentary awareness of the Board

4 Appellees include Patrick and the Cardon Siblings minus Wil and
one Cardon child that is not a party to this appeal. See supra nn.2-3.

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and its function in settling disputes within the Cardon family, and Beus
referred to the Board’s arbitration function in one of his responses.
Moreover, Patrick communicated to the Board that he and the Siblings,
together with Wilford, had created their own board — separate from the
one created by the Management Agreement — and Patrick, as chairman of
the alternate board, was “tasked to report the decisions and progress of the
[Management Agreement’s] Board to disentangle the assets owned by Boa
Sorte, Rio Claro, and Harvard.” Patrick also asked Beus how the Board
intended to “handle the arbitration” on the property valuation issue so he
could prepare for an April 2014 Board meeting and the “related arbitration
process.”

¶10 At the April 2014 Board meeting and alleged arbitration
hearing, Wilford and Patrick presented materials acknowledging “Wilford,
[Wilford’s wife], and [the] Seven Siblings[‘] desire to separate the
ownership and control of the [vacation homes]” and the Board’s “authority
to arbitrate disentanglement” as “empowered through the Comprehensive
Management Agreement.” Following the presentation, the Board rejected
Wilford and Patrick’s valuation, and Wilford and Patrick appealed the
decision to the Church Leaders.

¶11 The Church Leaders replied “that it would be impossible and
inappropriate for us . . . to sit in judgment on the large array of complex
issues before the family, [and] we [have been] very grateful that those
controlling the Cardon Group accepted to be governed by [the Board].”
Thereafter, Wilford, Patrick, and the Siblings explicitly disavowed the
Board’s authority, repudiated the validity of the Management Agreement,
and threatened Beus and Nelson with litigation. In late June 2014, Patrick
requested that the Church Leaders dissolve the Board. The Church Leaders
continued to reject any formal participation in the management of the
Cardon assets:

Through the past eight months, we have encouraged family
members to find solutions through the [B]oard that was
established. . . . After the request two weeks ago from two
[B]oard members for a change in two other [B]oard members,
we, for the first time, asked for a copy of the Comprehensive
Management Agreement. . . . [W]e were surprised to learn
that this agreement granted us legal authority with respect to
the [B]oard, including . . . the power to accept, consider, and
decide appeals from [B]oard decisions (paragraph 1.9). We
believed our role was informal, and not legally binding. . . .
So that there is no misunderstanding, we cannot accept and

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refuse to accept the legal powers, responsibilities, and duties
that the Management Agreement gives to us.

¶12 In July 2014, Appellees filed suit against Wil, Beus, and
Nelson (Appellants), seeking: (1) a declaratory judgment that the
November 2013 Agreement and the Management Agreement were void
and unenforceable; (2) removal of Wil and Beus from their management
and trustee positions in the Companies and the irrevocable trusts; (3) the
appointment of a receiver for the Companies; and (4) a permanent
injunction prohibiting Appellants from acting in their asserted capacities as
members of the Board under the Management Agreement. Appellants
moved to compel arbitration of the issues before the Board pursuant to the
terms of the Management Agreement.

¶13 The trial court held oral argument and, after taking the matter
under advisement, issued a partial ruling in November 2014 concluding
that the Siblings, “other than Patrick Cardon, are not signatories to the
Management Agreement and are not bound by it. They are not required to
participate in [alternative dispute resolution (ADR)] with the Board.” As to
Patrick, the trial court found his claims “are subject to ADR with the Board
if the Management Agreement itself is valid and enforceable” but did not
find the Agreement to be void as to Patrick “based on the [Church Leaders’]
role.” The court reserved its final ruling pending submission of additional
pleadings and argument regarding whether the Management Agreement
was fully executed or whether requiring an ADR that allows Appellants to
decide the charges against them was a legal absurdity.

¶14 After further pleadings and oral argument, the trial court
ruled, in April 2015, that all Appellees, including Patrick, were “not
required to submit their claims to ADR before the Board.” The court
concluded the Management Agreement was unconscionable to the degree
that it allowed Appellants to sit as binding arbitrators over the claims
against them. The court identified multiple, unresolved factual disputes
regarding Appellees’ ratification or acceptance of the Management
Agreement and Board decisions and whether the Management Agreement
may be voidable for mutual mistake resulting from the Church Leaders
“want[ing] nothing to do with the MA or the Board.”

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¶15 Appellants timely appealed the denial of their motion to
compel arbitration. We have jurisdiction pursuant to Arizona Revised
Statutes (A.R.S.) sections 12-120.21(A)(1)5 and -2101.01(A)(1).

DISCUSSION

I. The Siblings Never Consented to the Purported Arbitration
Agreement.

¶16 We begin with the general rule in Arizona that the courts,
rather than arbitrators, decide the threshold, jurisdictional issue of whether
parties have an existing agreement to arbitrate a particular dispute.6 Duenas
v. Life Care Ctrs. of Am., Inc., 236 Ariz. 130, 140, ¶ 31 (App. 2014) (quoting
A.R.S. § 12-3006(B)); accord A.R.S. § 12-1502(A); Foy v. Thorp, 186 Ariz. 151,
153-54 (App. 1996) (citing City of Cottonwood v. James L. Fann Contracting,
Inc., 179 Ariz. 185, 189-90 (App. 1994)). This determination is governed by
general principles of contract law. Stevens/Leinweber/Sullens, Inc. v. Holm
Dev. & Mgmt., Inc., 165 Ariz. 25, 28 (App. 1990). And, it is axiomatic that an
agreement does not exist unless it is legally enforceable. See, e.g., 17A Am.
Jur. 2d Contracts § 1 (2016).

¶17 The validity and enforceability of an arbitration clause
present mixed questions of fact and law subject to de novo review. Duenas,
236 Ariz. at 135 n.1, ¶ 6 (quoting DeCamacho, 234 Ariz. at 20, ¶ 9). We also
review the denial of a motion to compel arbitration de novo. Sun Valley
Ranch 308 Ltd. P’ship ex rel. Englewood Props., Inc. v. Robson, 231 Ariz. 287,
291, ¶ 9 (App. 2012) (citing Nat’l Bank of Ariz. v. Schwartz, 230 Ariz. 310, 311,
¶ 4 (App. 2012)). Notwithstanding our de novo review, we defer to the trial

5 Absent material changes from the relevant date, we cite a statute’s
current version.

6 Appellees argue Appellants rendered this appeal moot by conceding
the Board lacks authority to arbitrate certain counts in Appellees’ complaint
involving the validity of the trusts or the Management Agreement as a
whole. However, in reviewing the denial of a motion to compel arbitration,
such claims are outside this Court’s jurisdiction in first deciding whether
an agreement to arbitrate exists. Compare A.R.S. § 12-3006(B) (“The court
shall decide whether an agreement to arbitrate exists . . . .”), with A.R.S.
§ 12-3006(C) (“An arbitrator shall decide whether . . . a contract containing
a valid agreement to arbitrate is enforceable.”); see also A.R.S. § 12-
3007(A)(2).

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court’s factual findings unless clearly erroneous. Austin v. Austin, 237 Ariz.
201, 204, ¶ 2 (citing Harrington v. Pulte Home Corp., 211 Ariz. 241, 245, 246-
47, ¶¶ 8, 16 (App. 2005)).

¶18 “Although public policy supports arbitration agreements,
‘only when the arbitration provision is enforceable will the court compel
arbitration.’” Id. at 206, ¶ 12 (quoting WB, The Bldg. Co. v. El Destino, L.P.,
227 Ariz. 302, 306, ¶ 11 (App. 2011)). In defining the validity and
enforceability of an arbitration agreement, A.R.S. § 12-3006(A) states:

An agreement contained in a record to submit to arbitration
any existing or subsequent controversy arising between the
parties to the agreement is valid, enforceable and irrevocable,
except on a ground that exists at law or in equity for the
revocation of a contract.

The legal and equitable grounds for revoking a contract include lack of
mutual consent, consideration, or capacity; fraud, duress, or mistake; or
procedural or substantive unconscionability. Austin, 237 Ariz. at 206, ¶ 12
(quoting Stevens/Leinweber, 165 Ariz. at 28-29); Falcone Bros. & Assocs., Inc. v.
City of Tucson, 240 Ariz. 483, 490, ¶ 21 (App. 2016) (citation omitted).

¶19 Appellants argue the Siblings’ signatures on the Management
Agreement were not required to enforce the arbitration provision contained
therein, see Smith v. Pinnameneni, 227 Ariz. 170, 177, ¶ 23 (App. 2011)
(“Nonsignatories . . . can be required to arbitrate under certain
circumstances.”) (citations omitted), because they either: (1) impliedly
accepted the arbitration agreement by their conduct; (2) designated Patrick
as an agent to enter the agreement on their behalf; or (3) are estopped from
now contesting the arbitration agreement because they availed themselves
of the benefits of the Board’s arbitration decisions before April 2014. As
detailed below, Appellants have not met their burden in proving any
circumstances existed such that the arbitration provision should be
enforced against the Siblings as nonsignatories.

A. Implied Consent and Assumption

¶20 A nonsignatory may be bound by an arbitration clause if his
conduct indicates he is assuming the duty to arbitrate. See Duenas, 236 Ariz.
at 139, ¶ 26 (citing Bridas S.A.P.I.C. v. Gov’t of Turkmenistan, 345 F.3d 347,
356 (5th Cir. 2003)); see also Thomson-CSF, S.A. v. Am. Arbitration Ass’n, 64
F.3d 773, 777 (2d Cir. 1995) (citations omitted). Indeed, an implied and
enforceable agreement may be inferred from an individual’s acts or
conduct, though the burden of proving such an agreement is on the party

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asserting it. See Carroll v. Lee, 148 Ariz. 10, 13 (1986); Alexander v. O’Neil, 77
Ariz. 91, 98 (1954) (citing Kellogg v. Gleeson, 178 P.2d 969, 972 (Wash. 1947));
Johnson Int’l, Inc. v. City of Phx., 192 Ariz. 466, 470-71, ¶ 26 (App. 1998).
However, “a distinct intent common to both parties must exist” before an
enforceable agreement is created, “and until all understand alike there can
be no contractual assent.” Hartford v. Indus. Comm’n, 178 Ariz. 106, 112
(App. 1994) (citing Hill-Shafer P’ship v. Chilson Family Tr., 165 Ariz. 469, 473
(1990)). Whether mutual assent exists is a factual question, resolved by
consideration of objective evidence, “not the hidden intent of the parties.”
Tabler v. Indus. Comm’n, 202 Ariz. 518, 521, ¶¶ 12-13 (App. 2002) (citing Callie
v. Near, 829 F.2d 888, 890-91 (9th Cir. 1987), and Hartford, 178 Ariz. at 112).

¶21 Appellants attempt to meet their burden of proof through
email communications indicating the Siblings had an opportunity to review
the Management Agreement, were generally aware of the Board and its
actions, and occasionally communicated familial disputes to Beus. Mere
knowledge of a contract is not a sufficient manifestation of intent to be
bound. See Althaus v. Cornelio, 203 Ariz. 597, 601, ¶ 17 (App. 2002) (“[T]he
fact that one of the parties, with the knowledge and approval of the other, has
begun performance is nearly always evidence that they regard the contract
as consummated and intend to be bound thereby.”) (quoting Schade v.
Diethrich, 158 Ariz. 1, 10 (1988)). Moreover, Appellants admit they
presented the Management Agreement, with explanation by Beus, to the
Siblings, thereby providing them with a distinct and objective opportunity
to unambiguously provide their consent to arbitration by signing; yet, the
Siblings declined to do so. Appellants’ evidence, in its totality, is
insufficient to establish error in the trial court’s factual finding that the
Siblings did not intend to be bound to arbitration.

B. Agency and Waiver

¶22 The party asserting agency has the burden of showing the
relevant person was in fact a nonsignatory’s agent and, thus, had authority
to bind the nonsignatory to an agreement. See Escareno v. Kindred Nursing
Ctrs. W., L.L.C., 239 Ariz. 126, 129, ¶ 7 (App. 2016) (citing Goodman v. Physical
Res. Eng’g, Inc., 229 Ariz. 25, 29, ¶ 12 (App. 2011), and Restatement (Third)
of Agency § 6.01 (2006)); see also Duenas, 236 Ariz. at 139, ¶ 27 (noting agent
“could not contractually limit [the principals’] personal claims without
their assent”). “Apparent authority . . . arises when ‘the principal
intentionally or inadvertently induce[s] third persons to believe [a
particular] person was his agent although no actual or express authority
was conferred on him as agent.’” Escareno, 239 Ariz. at 130, ¶ 8 (quoting
Reed v. Gershweir, 160 Ariz. 203, 205 (App. 1989)). Whether an agency

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relationship exists is a question of fact. Id. at 129, ¶ 6 (quoting Goodman, 229
Ariz. at 29, ¶ 12, and Salvation Army v. Bryson, 229 Ariz. 204, 211, ¶ 23 (App.
2012)).

¶23 Appellants contend that Patrick’s communication of his
status as chairman of Wilford and Appellees’ alternate board, coupled with
the materials Patrick presented at the April 2014 meeting acknowledging
the Board’s authority to arbitrate, are sufficient to create an apparent agency
relationship between Patrick and the other Appellees. However, Patrick’s
representations cannot prove apparent authority because such authority
“can never be derived from the acts of the agent alone.” Reed, 160 Ariz. at
205. The trial court found no evidence that the Siblings authorized Patrick
to sign the Management Agreement or participate in Board proceedings on
their behalf, and Appellants have not shown those findings were clearly
erroneous.7 And if Patrick was not the Siblings’ agent at the April 2014
Board meeting, they cannot be found to have waived their objection to
arbitration allegedly occurring at that meeting, given the Siblings did not
attend, much less participate in, the meeting.

C. Estoppel and Third-Party Beneficiary

¶24 The equitable estoppel and third-party beneficiary doctrines
each evaluate whether a nonsignatory has received benefits from an
arbitration agreement or a contract containing an arbitration clause and,
therefore, should be equitably barred from avoiding arbitration. See
Schoneberger v. Oelze, 208 Ariz. 591, 594 n.6, ¶ 14 (App. 2004) (citing Bridas,
345 F.3d at 362), superseded by A.R.S. § 14-10205; see also Austin, 237 Ariz. at
208-09, 210, ¶¶ 23-24, 29 (citations omitted).

¶25 Appellants argue the Siblings accepted two primary benefits
from Board decisions that compel them to arbitrate the present disputes —
financial distributions and the implementation of a “timeout” between Wil
and the rest of the family. Regarding the financial distributions, we cannot
say the Siblings claimed any direct benefits from the Board’s decision, given
the Siblings were unaware they derived from Board action. Austin, 237
Ariz. at 210, ¶ 29 (“[A] nonsignatory may be compelled to arbitrate only
when the nonsignatory . . . knowingly exploits the benefits of an agreement

7 Appellants also assert the Siblings themselves consented to Patrick
representing their interests on the Board in the December 2013 meetings, an
assertion the Siblings deny. These conflicting assertions were reconciled by
the trial court, and we defer to the court’s findings in the absence of clear
error.

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containing an arbitration clause . . . .”) (emphasis added) (citation omitted).
And though some of the Siblings acknowledged Beus’ hand in directing the
“timeout” between Wil and the family, such an informal and indirect
benefit relative to an agreement designed to disentangle significant, illiquid
financial assets is insufficient to overcome the court’s discretionary findings
and establish an equitable requirement to arbitrate under the Management
Agreement. See id. at 209, ¶¶ 24, 28. Again, Appellants have not established
error in the trial court’s findings.

II. Mutual Mistake as to the Availability of an Appeal of the Board’s
Decisions Renders the Arbitration Agreement Void as to Patrick.

¶26 Appellants argue the trial court erred in determining the
arbitration agreement was unconscionable as to Patrick. Whether a contract
is unconscionable and unenforceable are questions of law subject to de novo
review. See Duenas, 236 Ariz. at 135 n.1, ¶ 6 (citations omitted).
Accordingly, we may affirm the trial court for any reason supported by the
record. Navajo Nation v. Ariz. Dep’t of Econ. Sec., 230 Ariz. 339, 344, ¶ 14
(App. 2012) (citing St. Joseph’s Hosp. v. Ariz. Health Care Cost Containment
Sys., 185 Ariz. 309, 312 (App. 1996)); WB, 227 Ariz. at 309, ¶ 16 (citing United
Effort Plan Tr. v. Holm, 209 Ariz. 347, 351, ¶ 24 (App. 2004)).

¶27 Procedural unconscionability addresses the fairness of the
bargaining process, including whether mistakes of important facts
occurred. Duenas, 236 Ariz. at 135, ¶ 8 (quoting Clark v. Renaissance W.,
L.L.C., 232 Ariz. 510, 512, ¶ 8 (App. 2013)). “A mutual mistake exists where
there has been a meeting of the minds of the parties and an agreement is
actually entered into, but the agreement contains a mistake regarding an
essential part of the contract.” Hartford, 178 Ariz. at 111 (citing Renner v.
Kehl, 150 Ariz. 94, 97 (1986), and Hill-Shafer, 165 Ariz. at 473); see also
Restatement (Second) of Contracts § 152 cmt. b (1981) (“A mistake of both
parties does not make the contract voidable unless it is one as to a basic
assumption on which both parties made the contract.”). A party seeking to
rescind an agreement on the basis of mutual mistake must do so through
clear and convincing evidence. Estate of Nelson ex rel. Franz v. Rice, 198 Ariz.
563, 566, ¶ 7 (App. 2000) (citing Emmons v. Superior Court, 192 Ariz. 509, 513,
¶ 15 (App. 1998)).

¶28 Appellees argue clear and convincing evidence exists to show
the Church Leaders were never aware of nor consented to binding appellate
jurisdiction over Board decisions, an integral provision of the arbitration
agreement for which all Board members, including Patrick, specifically
negotiated. Appellants counter with the assertion that the Church Leaders

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were merely exercising their right of discretionary review under the
Management Agreement, or, alternatively, Patrick had already been put on
notice that the Church Leaders would not issue binding decisions.
Although the discretionary nature of the Management Agreement’s appeal
provision is clearly delineated, the record portrays a fundamental
misunderstanding regarding the binding force of the appeal provision.

¶29 Before the Management Agreement’s creation, the Board
negotiated and discussed a right of a binding appeal to the Church Leaders
“so that the board would have a safety check on its decision making.” An
appeal provision was included within the Management Agreement that
stated the Church Leaders would act as binding arbitrators of disputed
Board decisions. Yet, eight months later, when the Church Leaders
reviewed a copy of the Management Agreement for the first time, they
unequivocally “refuse[d] to accept the legal powers, responsibilities, and
duties that the Management Agreement” gave to them. See supra ¶ 11.
Although the Church Leaders had “denied review” once before, in January
2014, their statements at the time were not so unmistakable as to lead
Patrick to believe they would never issue a binding decision regarding
Board action. See supra ¶ 8. And there is a fundamental distinction between
denying review of a particular dispute and universal unwillingness to
participate in binding arbitration.

¶30 Considering the evidence as a whole, clear and convincing
evidence exists to establish the appeal provision was a basic tenet of the
arbitration agreement (which comprises both Section 1.1(b)’s grant of
arbitration authority to the Board and Section 1.9’s right of appeal). Because
both parties were mistaken regarding their understanding of the Church
Leaders’ role in review of the Board’s decisions, Section 1.9 is a nullity and
the entire arbitration agreement is unenforceable as to Patrick. On this
basis, we hold, as a matter of law, that Patrick is not bound by the
arbitration agreement on the grounds of mutual mistake.8

¶31 We are mindful of Appellants’ argument that Patrick waived
his objection to the April 2014 Board meeting and alleged arbitration
hearing. See A.R.S. § 12-3023(A)(5) (“[T]he court shall vacate an award
made in the arbitration proceeding if . . . [t]here was no agreement to
arbitrate, unless the person participated in the arbitration proceeding
without raising [an] objection [concerning lack of notice] not later than the

8 Because the existing record supports this determination, Appellees’
motion to supplement the record on appeal is denied.

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beginning of the arbitration hearing.”); see also Pinnamaneni, 227 Ariz. at 177,
¶ 24 (“[O]ne who consents to arbitration without objection — even when
there is no binding contract . . . — must abide by the arbitrator’s decision
. . . .”) (citing Verdex Steel & Constr. Co. v. Bd. of Supervisors, 19 Ariz. App.
547, 550 (1973)). But in our de novo interpretation of the arbitration
agreement, we construe Section 1.1(b)’s Board arbitration proceedings and
Section 1.9’s right of appeal to the Church Leaders as inextricable parts of
the whole agreement to arbitrate.

¶32 As applied narrowly to the facts of this case, we interpret the
agreed-upon proceeding encompassed both an opportunity to be heard by
the Board and a right to seek review from the Church Leaders. Because the
right to seek binding review by the Church Leaders was the illusory
product of a mutual mistake, the April 2014 “arbitration proceeding” could
never be completed, and Patrick cannot have waived his objection thereto.

¶33 Moreover, even if Patrick had waived his right to object to the
purported April 2014 arbitration hearing, any award derived from that
arbitration would be unenforceable against the Siblings, who did not agree
to arbitrate and cannot be bound to the outcome.9 See supra Part I.

The test of indispensability in Arizona is whether the absent
person’s interest in the controversy is such that no final
judgment or decree could be entered, doing justice between
the parties actually before the court and without injuriously
affecting the rights of others not brought into the action.

Copper Hills Enters. v. Ariz. Dep’t of Revenue, 214 Ariz. 386, 392, ¶ 21 (App.
2007) (quoting Town of Gila Bend v. Walled Lake Door Co., 107 Ariz. 545, 549
(1971)). Indispensability of parties is a question of law subject to de novo
review. Gerow, 192 Ariz. at 14, ¶ 19 (citing Connolly v. Great Basin Ins., 6
Ariz. App. 280, 285 (1967), and Tovrea Land & Cattle Co. v. Linsenmeyer, 100
Ariz. 107, 114 (1966)).

¶34 Applying this principle to the facts before us, we conclude
there is no way the Board could address the valuation of the vacation homes

9 Although the indispensability defense was not addressed by the trial
court, it is not waivable and may be raised at any time. Gerow v. Covill, 192
Ariz. 9, 14, ¶ 19 (App. 1998) (citing City of Flagstaff v. Babbitt, 8 Ariz. App.
123, 127 (1968)).

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and apportion the proper percentage interest among the Cardon family
members without affecting the rights of the Siblings as trust beneficiaries
with ownership interests in those homes.10 The Siblings are therefore
indispensable to a just determination of the action. Without their
participation, arbitration of this issue under the Management Agreement is
a meaningless nullity.

¶35 Accordingly, we find no error in the trial court’s order
declining to compel Patrick to arbitrate the dispute before the Board.

III. Appellants Waived Their Opportunity to Request an Evidentiary
Hearing.

¶36 Appellants contend the trial court’s determination that
certain questions of fact remained regarding whether the Appellees ratified
and accepted the Management Agreement or the Board’s decisions,
generally, requires this Court to remand the matter for an evidentiary
hearing. Appellants have not shown how the factual disputes on these
issues are relevant to the sole question before the trial court — whether
Appellees could be compelled to participate in arbitration. But we need not
reach that issue because the record reflects Appellants waived their
opportunity to contest the court’s decision not to hold an evidentiary
hearing.

¶37 Pursuant to A.R.S. § 12-3007(A)(2):

10 The Appellants argue the Siblings’ claims are derivative of the
Companies’ because Wil, as the manager of the Companies, consented to
the Board’s arbitration authority under the Management Agreement.
However, conferring arbitration authority on the Board was not a mere
business transaction requiring only management authority. The terms of
the Management Agreement itself recognized this, as the Agreement
provided signature lines for the Siblings in their various capacities and
included a provision calling for the Companies’ governing documents to be
revised to bestow authority on the Board. See supra ¶ 7. None of the parties
allege that revision occurred. Moreover, a grant of such broad authority, as
defined in the Management Agreement, would materially and adversely
affect the Siblings’ rights under the Companies’ governing documents. As
members of the entity that manages the “main economic vehicle” of the
Cardon Companies, the Siblings never voted or consented to amend any
operating agreements to allow for such a material and adverse effect on
their rights.

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Decision of the Court

On motion of a person showing an agreement to arbitrate and
alleging another person’s refusal to arbitrate pursuant to the
agreement . . . the court shall proceed summarily to decide the
issue and order the parties to arbitrate unless it finds that
there is no enforceable agreement to arbitrate.

To proceed “summarily,” the trial court must first determine whether
material issues of fact are disputed and, if so, conduct an expedited
evidentiary hearing to resolve those disputes. Ruesga, 215 Ariz. at 596, ¶ 24
(quoting Haynes v. Kuder, 491 A.2d 1286, 1290 (D.C. 1991)). The party
claiming the existence of a factual dispute regarding arbitrability bears the
burden of requesting a hearing. Id. (citing Ex parte Greenstreet, Inc., 806
So.2d 1203, 1207 (Ala. 2001)). Absent a request, “any error in the trial court’s
not holding an evidentiary hearing is waived” on appeal. Brake Masters
Sys., Inc. v. Gabbay, 206 Ariz. 360, 365, ¶ 15 (App. 2003) (citing Hahn v. Pima
Cty., 200 Ariz. 167, 172, ¶ 13 (App. 2001), and Trustmark Ins. v. Bank One,
Ariz., NA, 202 Ariz. 535, 543, ¶ 38 (App. 2002)).

¶38 The record reflects Appellants made only a passing reference
to holding an evidentiary hearing in their motions for a new trial and to
amend the order denying the motion to compel arbitration as to the
Siblings. And the evidence Appellants asserted as creating a genuine issue
of material fact was almost wholly contained in Beus’ affidavit, which the
trial court explicitly reviewed, referenced, and apparently rejected in its
order denying Appellants’ motion to compel the Siblings to arbitration.
Furthermore, the record reflects the court heard oral argument and
reviewed hundreds of pages of the parties’ pleadings and supporting
documentation and gave the matter adequate consideration after taking it
under advisement. When the court deferred its decision on Patrick’s
obligation to participate in arbitration to a later date, Appellants were
granted a second opportunity to provide additional briefing and exhibits
and participate in oral argument. At no time did they request an
evidentiary hearing.

¶39 With regard to the Siblings, Appellants’ obscure reference to
an evidentiary hearing was both untimely — occurring for the first time in
motions filed after the trial court ruled on the motion to compel the Siblings
to arbitration, see Brake Masters, 206 Ariz. at 365, ¶ 15 — and superfluous,
without reference to additional or previously undiscovered, relevant
evidence not already contained in the robust record upon which the court
based its ruling. With regard to Patrick, Appellants did not request a
hearing at all. On this record, Appellants waived any claims of error
regarding the failure to hold an evidentiary hearing.

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Decision of the Court

CONCLUSION

¶40 The trial court’s denial of Appellants’ motion to compel
arbitration is affirmed as to all Appellees.

¶41 Both parties request an award of attorneys’ fees on appeal.
Appellants cite A.R.S. § 12-3014(E) as the authority for their request. This
section authorizes an award of fees to an arbitrator who is determined to be
immune from civil liability. Because we hold the parties did not have an
enforceable arbitration agreement, this section does not apply, and
Appellants request is denied. Appellees request attorneys’ fees pursuant to
A.R.S. § 12-341.01(A). In our discretion, we deny Appellees’ request.
However, as the successful parties, Appellees are awarded their costs on
appeal pursuant to A.R.S. § 12-341 and upon compliance with ARCAP
21(b).

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

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