Rozenman v. Blanco

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UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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

DIMITRI ROZENMAN,
Petitioner/Appellee,

v.

JANA ROZENMAN,
Respondent/Appellee.
_________________________________

JOSE BLANCO, et al.,
Intervenors/Appellants,

No. 1 CA-CV 19-0751 FC
FILED 11-5-2020

Appeal from the Superior Court in Maricopa County
Nos. CV2017-156301
FC2008-001839
(Consolidated)
The Honorable Margaret LaBianca, Judge

AFFIRMED

COUNSEL

Jana Rozenman, Phoenix
Respondent/Appellee

Snell & Wilmer, LLP, Phoenix
By Benjamin W. Reeves, Emily Gildar Wagner
Counsel for Appellee Discharged Receiver Bradley Reith
 ROZENMAN, et al. v. BLANCO, et al.
Decision of the Court

Schutt Law Firm, PLC, Scottsdale
By Kenneth W. Schutt, Jr.
Counsel for Intervenors/Appellants

MEMORANDUM DECISION

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

M O R S E, Judge:

¶1 Intervenors Jose Blanco, KV9, Inc., Schutt Law Firm, PLC, and
Arkady Vikentiev (collectively "Creditors") appeal various superior court
orders regarding the termination of a receivership. For the following
reasons, we affirm.

FACTS AND PROCEDURAL BACKGROUND

¶2 We presume the parties' familiarity with the lengthy
procedural history of this dispute and provide only a brief recount of the
prior cases and appeals.

Divorce, Murder, Receivership, and Tort Cases

¶3 Dimitri Rozenman ("Husband") and Jana Rozenman ("Wife")
were divorced by dissolution decree in January 2009 ("Decree"). The Decree
provided that Husband was the sole owner of a cigar business ("Business").
The Business consisted of several limited liability companies ("LLCs") and
associated retail stores. After the superior court entered the Decree,
Husband moved for a new trial and asserted, among other arguments, that
he only had a 75 percent interest in the Business's real property in Mesa
("Mesa Property"). Husband alleged Intervenor/Creditor Jose Blanco
("Blanco") co-owned the LLC that owned the Mesa Property ("2826 LLC").
The superior court denied the motion. Husband appealed the Decree's
division of property, and this Court affirmed the judgment. See Rozenman
v. Rozenman (Rozenman I), 1 CA-CV 09-0337, 2010 WL 845924, at *1, ¶ 1
(Ariz. App. Mar. 11, 2010) (mem. decision).

¶4 One month after the Decree, Husband was arrested and
indicted for conspiracy to murder Wife. A jury convicted Husband, and the
trial court sentenced him to a minimum of twenty-five years in prison. On
appeal, this Court affirmed Husband's conviction and sentence. See State v.

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Rozenman, 1 CA-CR 13-0458, 2015 WL 404537 (Ariz. App. Jan. 1, 2015)
(mem. decision).

¶5 During and after his criminal trial, Husband continued to run
the Business through his business manager. Later, Husband replaced the
business manager with his girlfriend, and Wife petitioned the court to
appoint a receiver. In June 2010, the superior court granted Wife's petition
and appointed a receiver (the "Receiver").1 Husband did not object, but in
2012 he sought the receivership's termination. The superior court denied
the motion, and we affirmed. See Rozenman v. Rozenman (Rozenman II), 1
CA-CV 13-0280, 2014 WL 2211398 (Ariz. App. May 27, 2014) (mem.
decision).

¶6 In 2011, Wife sued Husband for personal torts relating to the
murder conspiracy. In August 2015, Wife obtained a judgment for
$22,807,000 against Husband. See Rozenman v. Rozenman, No. CV2011-
001525, 2015 WL 6964056 (Maricopa Cty. Super. Ct. Aug. 27, 2015)
(judgment), appeal abandoned, 1 CA-CV 15-0849 (Ariz. App. Feb. 9, 2016).

¶7 In 2013, during the receivership, Husband executed security
agreements with the Creditors that purported to establish security interests
in his membership interests in the LLCs.2 The Creditors then filed Uniform
Commercial Code ("UCC") Financing Statements (UCC-1) with the Arizona
Secretary of State covering Husband's "right, title and membership interest"
in the LLCs. See A.R.S. §§ 47-9310 and -9312. Husband also granted a
separate security interest to non-party Joel Thompson and a deed of trust
against the Mesa Property to RLS Capital, Inc. ("Lender").3

The Liquidation Orders

¶8 Wife sought payment of the $13,602 attorney fee award we
issued in Rozenman II through the receivership. On September 15, 2015, the

1 The court originally appointed the business manager as the receiver.
In February 2016, Bradley Reith became the successor receiver.

2 The following debts were asserted by the Creditors: Arkady
Vikentiev ($400,000), Jose Blanco ($760,000), KV9, Inc. ($20,000), and Schutt
Law Firm, PLC ($206,720.77).

3 In 2018, RLS Capital, Inc. assigned its note to Culver City Properties,
LLC.

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superior court granted an "Application for Payment of Judgment for
Attorney's Fees."

¶9 In August 2015, a third party offered to buy the Business's
store and real property located in Phoenix for $550,000. At the request of
Wife, the superior court authorized the sale on October 15, 2015, and
ordered the proceeds applied to Wife's liens.

¶10 In January 2016, Wife sought an order for a sheriff's sale of the
Business's remaining assets and the Mesa Property to satisfy Husband's
debts to Wife. On March 4, 2016, the superior court entered an order
approving the proposed sales.

The Bankruptcy Case

¶11 In June 2016, Husband filed a voluntary Chapter 7
bankruptcy petition. See In Re Rozenman, No. 4:16-bk-07234 (Bankr. D. Ariz.
June 24, 2016). The bankruptcy court found Wife's tort judgment non-
dischargeable. See Sampson v. Rozenman (In Re Rozenman), No. 4:16-ap-
00472 (Bankr. D. Ariz. Feb. 27, 2017). Husband received a discharge, and
the bankruptcy case closed in September 2017 with no distribution of any
assets.

The Civil Case and the Creditors' Intervention

¶12 In December 2017, Wife filed a complaint against Husband
and the Creditors, seeking the alleged transfers of security interests in the
Business by Husband to Creditors declared void and invalid. In January
2018, the Creditors sought to intervene in the dissolution action. The
superior court granted the motion to intervene and consolidated the civil
case with the dissolution action.

¶13 The Creditors moved to vacate the orders entered on
September 15, 2015, October 15, 2015, and March 4, 2016 (collectively
"Liquidation Orders"). The Creditors claimed that they did not receive
notice of the proceedings and that the Liquidation Orders were void under
Arizona Rule of Family Law Procedure ("ARFLP") 85(C)(1)(d) for
"depriving them of property rights without notice and an opportunity to be
heard." In May 2018, the superior court denied the motion to vacate.

¶14 In April 2018, Wife filed a motion for declaratory judgment.
The Creditors moved to dismiss, alleging that such relief was time-barred.
The superior court denied the motion to dismiss.

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Sale of the Mesa Property

¶15 In October 2018, Lender filed a notice of appearance and
sought a trustee's sale of the Mesa Property. The court temporarily stayed
the sale but ordered that the stay would expire unless the Receiver posted
a bond. The Lender acquired the Mesa Property at a trustee's sale on
October 15, 2018, via a credit bid for $550,000.

Receiver Discharge

¶16 On November 28, 2018, Wife purchased the Business's assets
at a special execution sale by credit bidding a portion of her tort judgment.
The Receiver then turned over the Business's assets to Wife. Over
Husband's objection, the superior court granted the Receiver's discharge
motion. The court entered the discharge as final under Arizona Rule of
Civil Procedure 54(c).

¶17 On July 1, 2019, the superior court entered a declaratory
judgment against Creditors. It declared Wife's interests in the Business's
funds and assets "superior" to Creditors' asserted interests. Between July
and September 2019, the Creditors filed several motions seeking a new trial
on the declaratory judgment and the Receiver's discharge. The court denied
the motions and the Creditors appealed.

JURISDICTION

¶18 The Receiver asserts that we lack jurisdiction over an appeal
of the Receiver's discharge order because the Creditors failed to timely
appeal the same, causing it to become final and non-appealable. We
disagree.

¶19 The Court of Appeals has jurisdiction to consider an appeal
from a "final judgment" that disposes of all claims and parties. A.R.S. § 12-
2101(A)(1); Kim v. Mansoori, 214 Ariz. 457, 459, ¶ 6 (App. 2007). The superior
court determined that the ARFLP controlled over the consolidated case. A
family court ruling is not final and appealable until all the claims pending
before the family court have been resolved or until the family court has
issued a certification of finality. Ariz. R. Fam. Law P. 78; McCarthy v.
McCarthy, 247 Ariz. 414, 416, ¶ 6 (App. 2019).

¶20 Despite the superior court's assertion in the discharge order
that "[n]o further matters remain[] pending," Wife's motion for declaratory
judgment remained at issue, and the court heard oral argument on the
motion in May 2019. Thus, the discharge order was not a "final judgment."

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See McCarthy, 247 Ariz. at 416, ¶ 7; see also Aea Fed. Credit Union v. Yuma
Funding, Inc., 237 Ariz. 105, 110, ¶ 17 (App. 2015) (holding that an order
declining to set aside an order appointing or releasing a receiver is not a
final appealable order).

¶21 Further, the superior court did not find "no just reason for
delay" such that an appeal would be proper under ARFLP 78(b). See
McCarthy, 247 Ariz. at 416, ¶ 6. This determination is not affected by the
discharge order's citation to Arizona Rule of Civil Procedure 54(c), the
equivalent provision to ARFLP 78(c). Because the discharge order similarly
lacked a certification pursuant to Arizona Rule of Civil Procedure 54(b), we
need not decide whether certification under that rule would permit an
appeal in a case governed by the ARFLP. Cf. In re Marriage of Kassa, 231
Ariz. 592, 593, ¶ 5 n.1 (App. 2013) (noting that "we may apply
interpretations of Rule 54(b) to Rule 78([b])").

¶22 Accordingly, the discharge order became final on July 1, 2019,
and is reviewable on appeal. See Dowling v. Stapley, 221 Ariz. 251, 263, ¶ 36
n.12 (App. 2009) ("[A]ppeal from the final judgment would include appeals
from otherwise non-appealable interlocutory orders."). The Creditors'
timely filed a notice of appeal, and we have jurisdiction pursuant to A.R.S.
§ 12-2101(A)(1), (2), and (5)(a).4

DISCUSSION

¶23 The Creditors raise multiple issues on appeal. We separately
address the Creditors' UCC interests and Blanco's claimed ownership
interest in 2826 LLC.

I. The Creditors Had No Interest in the Business's Assets Through
Their UCC Fillings.

¶24 Based on the doctrine of custodia legis, the superior court
found that the Creditors had "no valid interest in the Receivership
Property." "It is well settled that property in custodia legis is not subject to
attachment or garnishment. This rule is universal." O'Leary v. Superior
Court, 104 Ariz. 308, 311 (1969), overruled in part on other grounds by Walker v.

4 This Court stayed the appeal pending an ARFLP 78(c) order. See
Eaton Fruit Co. v. Cal. Spray-Chemical Corp., 102 Ariz. 129, 130 (1967).
Further, another panel of this Court determined that the Creditor's
counterclaims had "been resolved and the court has jurisdiction over the
appeal." Rozenman v. Blanco, 1 CA-CV 19-0751 FC (Ariz. App. Mar. 23, 2020)
(order).

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Dallas, 146 Ariz. 440 (1985). Property controlled by a receiver is in custodia
legis and is not subject to levy or sale without leave of court. Kunselman v.
Kaser, 41 Ariz. 219, 226 (1932). "[T]he rule is enforced by the courts to
preserve the jurisdiction of the court administering the particular property."
O'Leary, 104 Ariz. at 311 (holding that "no interest in, or lien on, the res was
ever acquired []since the res was in custodia legis").

¶25 On appeal, the Creditors raise five arguments against the
application of custodia legis.

A. Standing.

¶26 First, the Creditors argue that Wife lacked standing to contest
the validity of the Creditors' claims. We disagree.

¶27 Before seeking declaratory judgment against the Creditors,
Wife sought the sale of the Business's assets in the receivership to satisfy
her judgment against Husband. The court approved Wife's request and
ordered that the sale proceeds be turned over to Wife. The Creditors then
sought to encumber the funds that would otherwise go to Wife. We are
satisfied, under the facts in this case, that Wife had "a legitimate interest in
the outcome" of the motion for declaratory relief. In re Strobel, 149 Ariz. 213,
216 (1986); cf. also Acad. Life Ins. Co. v. Odiorne, 165 Ariz. 188, 191 (App. 1990)
(holding that "claimants have standing to assert the statute of limitations
defense in receivership proceedings where the receiver has neglected to do
so").

B. Texas Receivership Law.

¶28 The Creditors also argue that receivership law permits the
owner of the receivership assets to encumber their interest beyond that
necessary to fulfill the receivership's purpose. The Creditors rely on a
decision from the Texas Court of Civil Appeals in which that court stated
that "[s]ince a receivership does not vest the receiver with title to the
property in his control, it does not preclude the owner from encumbering
the property, or contracting with reference to it, subject to the receivership,
in any other way." Fuller v. Neel, 535 S.W.2d 719, 720-21 (Tex. Civ. App.
1976) (citing 49 Tex.Jur.2d, Receivers, Sec. 11). The Creditors' reliance on
this case is misplaced. On appeal, the Texas Supreme Court reversed and
held that the owner's purported conveyance was "declared to have no force
and effect . . ." because "the property was held in custodia legis free from
interference with the exclusive custody and possession which the
[receivership] court had assumed over it." Neel v. Fuller, 557 S.W.2d 73, 76,

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77 (Tex. 1977). The Creditors' citation to other older Texas authorities is
similarly unpersuasive.

C. Judicial Estoppel.

¶29 Next, the Creditors assert that Wife and the Receiver are
barred from arguing that custodia legis should apply based on the doctrine
of judicial estoppel. In 2013, Husband took out a $400,000 loan from Lender
and secured it with a deed of trust against the Mesa Property. Husband
used the funds to pay Wife the remaining non-child support obligations
under the Decree. The Creditors assert that, while the Court did not give
prior approval of the transaction, Wife and the Receiver acquiesced to the
transfer of security interests in the real property.

¶30 Judicial estoppel prevents "a party who has assumed a
particular position in a judicial proceeding . . . [from assuming] an
inconsistent position in a subsequent proceeding involving the same parties
and questions." State v. Towery, 186 Ariz. 168, 182 (1996) (quoting Martin v.
Wood, 71 Ariz. 457, 459 (1951)). Here, the parties are not the same; the deed
of trust involved Lender, not the Creditors. See id. (noting the first required
element of judicial estoppel is that "the parties must be the same"). Further,
the Creditors do not cite, and we are unaware of, any authority that a failure
to object is a "position" that can be judicially estopped. See Glover v. Bank of
New York, 147 P.3d 336, 343-44 (Or. App. 2006) (finding no authority that a
failure to object constitutes an inconsistent statement for purposes of
judicial estoppel). Thus, the doctrine of judicial estoppel is inapplicable.

D. Claim Preclusion.

¶31 The Creditors also argue that Wife cannot assert custodia legis
because she did not raise it during Husband's bankruptcy. We review
Husband's bankruptcy case and applicable federal law to determine
whether the bankruptcy case should be given preclusive effect. See Howell
v. Hodap, 221 Ariz. 543, 546, ¶ 17 (App. 2009) ("We review de novo the claim
preclusive effect of a prior judgment."); Maricopa-Stanfield Irr. & Drainage
Dist. v. Robertson, 211 Ariz. 485, 491, ¶ 37 (2005) ("Federal law determines
the preclusive effect of a federal court judgment in state court.") (citing
Semtek Int'l Inc. v. Lockheed Martin Corp., 531 U.S. 497, 507 (2001)).

¶32 The defense of claim preclusion has three elements: (1) an
identity of claims, (2) a final judgment on the merits in the previous
litigation, and (3) identity or privity between parties in the two suits.
Blonder-Tongue Lab., Inc. v. Univ. of Ill. Found., 402 U.S. 313, 323-24 (1971).

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Wife and the Creditors dispute whether the bankruptcy court issued an
applicable final judgment.

¶33 The Creditors rely on a Ninth Circuit decision holding that,
when no objections are filed to a creditor's proof of claim in bankruptcy, the
claim is "deemed allowed" and the claim's validity cannot be attacked in
later proceedings. Siegel v. Fed. Home Loan Mortg. Corp., 143 F.3d 525, 530-
31 (9th Cir. 1998). Other courts question the soundness of that proposition.
See Cty. Fuel Co. v. Equitable Bank Corp., 832 F.2d 290, 292 (4th Cir. 1987) ("[I]t
is doubtful that the 'automatic allowance' under 11 U.S.C. § 502(a) of a claim
not objected to constitutes a 'final judgment' of the type that gives rise to
'bar' or 'claim preclusion' under strict res judicata principles."); In re One
World Adoption Servs., Inc., 571 B.R. 474, 485 (Bankr. N.D. Ga. 2017) ("The
Siegel opinion, however, has been criticized by many courts . . . ."). Wife
also cites to a Fifth Circuit decision that distinguished Siegel in a "no asset"
bankruptcy case. See Kipp Flores Architects, LLC v. Mid-Continent Cas. Co.,
852 F.3d 405, 415-16 (5th Cir. 2017) (holding that an unobjected-to claim in
a no asset bankruptcy is not preclusive).

¶34 The Creditors counter that, notwithstanding the report of no
distribution by the Chapter 7 trustee ("Trustee"), Husband's bankruptcy
was not a "no asset" case. We disagree. See generally In re Brown, 606 B.R.
40, 49 (B.A.P. 9th Cir. 2019) ("If no assets are available for administration, a
debtor's case may be designated as a no asset case, and a notice is sent out
instructing creditors not to file a proof of claim."). Husband's bankruptcy
schedules identified no assets other than his membership interests in the
various LLCs, and those assets were subject to the ongoing receivership.
The Trustee issued a "Report of No Distribution" in which she declared "that
there is no property available for distribution from the estate." The report
noted $1,222,050 of "Assets Abandoned." See 11 U.S.C. § 554; Catalano v.
Comm'r., 279 F.3d 682, 685 (9th Cir. 2002) ("Upon abandonment, the debtor's
interest in the property is restored nunc pro tunc as of the filing of the
bankruptcy petition."); see also In re Xonics, Inc., 813 F.2d 127, 132 (7th Cir.
1987) (holding bankruptcy court lacked jurisdiction to hear a dispute
between two creditors over assets abandoned by the estate).

¶35 We agree with Wife's characterization of Husband's
bankruptcy as a "no asset" case. A bankruptcy case can be administered as
a "no asset" case, notwithstanding a debtor's substantial assets. See In re
Bilzerian, 258 B.R. 850, 853, 857-58 (Bankr. M.D. Fla. 2001) (noting "no asset"
nature of bankruptcy case, despite debtor's ownership of "substantial
assets" in federal receivership, when bankruptcy schedules "listed no assets
available for creditors"); see also In re Pena, 600 B.R. 415, 418 (B.A.P. 9th Cir.

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2019) (finding case administered as a "no asset" case despite administration
of real property on behalf of secured creditors prior to abandonment).

¶36 The Creditors alternatively argue that the only explanation
for the Trustee's abandonment of the assets is "because the assets were the
subject of the security interests of Appellants." We find this unsupported
argument unpersuasive. See In re Bilzerian, 258 B.R. at 858 (dismissing no
asset bankruptcy when "receivership is already in place for the purposes of
marshaling and liquidating [debtor's] assets").

¶37 Concluding that Husband's bankruptcy was a "no asset" case,
we turn to our preclusion analysis.

¶38 While we generally "look first to the Ninth Circuit rule in
interpreting substantive federal statutory law," Weatherford ex rel. Michael L.
v. State, 206 Ariz. 529, 533, ¶ 9 (2003), several courts reject Siegel or
distinguish it in the no asset context. See Kipp Flores Architects, 852 F.3d at
415; Cty. Fuel Co., 832 F.2d at 292; In re Giordano, 234 B.R. 645, 649 (Bankr.
E.D. Pa. 1999) (criticizing application of Siegel); In re Khan, 10-36155, 2011
WL 6179941, at *4-5 (Bankr. E.D. Tenn. Dec. 13, 2011) (declining to follow
Siegel in "no asset" case); see also In re Ramirez Ramirez, 8:18-BK-13870-CB,
2020 WL 4436263, at *8 (B.A.P. 9th Cir. Aug. 3, 2020) (distinguishing Siegel
when prior Chapter 13 bankruptcy was dismissed); In re Santry, 481 B.R.
824, 830 (Bankr. N.D. Ga. 2012) (same).

¶39 We find the decision in Siegel is either distinguishable, see Kipp
Flores Architects, 852 F.3d at 415 (explaining that "Siegel does not, however,
discuss the claims allowance process for a no asset case"), or is not a "clear
rule" that "appears just" in the no asset context, Weatherford, 206 Ariz. at 533,
¶ 9. The Fifth Circuit's well-reasoned analysis on the lack of preclusive
effect of claims filed without objection in "no asset" cases is persuasive. Kipp
Flores Architects, 852 F.3d at 409-16. Without assets to distribute in the
bankruptcy estate, there is no need to file proofs of claims. See In re Nielsen,
383 F.3d 922, 927 (9th Cir. 2004) ("[T]he bankruptcy rules permit the court
to dispense with the filing of proofs of claim in a no-asset case.") (citation
omitted). It follows that there is no purpose for the bankruptcy court to
hear an interested party's challenge to a creditor's claim, as no matter the
outcome of the dispute, the debtor's bankruptcy estate would remain
insolvent and without assets. Kipp Flores Architects, 852 F.3d at 415; see also
In re Khan, 2011 WL 6179941, at *5 (noting "concerns as to the res judicata
effect of an unchallenged and therefore 'deemed allowed' proof of claim are
unfounded" in a "no asset" case).

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¶40 Here, the ongoing receivership prevented the Trustee from
distributing any assets to Husband's creditors, even if Wife had pursued
her challenge to the Creditors' claimed interests during the bankruptcy. See
In re Uno Broad. Corp., 167 B.R. 189, 200 (Bankr. D. Ariz. 1994) (holding that
pre-petition receiver remained in custody and control of the debtor's assets
during bankruptcy). In other words, the dispute between the Creditors and
Wife would have had no effect on the administration of Husband's
bankruptcy estate. See Kipp Flores Architects, 852 F.3d at 415. Thus, we find
that Wife's failure to challenge the Creditor's claims based on custodia legis
in the bankruptcy court had no preclusive effect.

E. Security Interest Outside the Receivership.

¶41 Finally, the Creditors alternatively assert that custodia legis is
generally inapplicable because Husband's membership interests are not
receivership assets. But this is contrary to the receivership order, which
notes that the Business components are operated through separate LLCs.
The court treated the "Businesses as a whole" and granted the Receiver
power to take possession of the Business. Further, when Husband
attempted to transfer his membership interest in one of the LLCs to his
girlfriend, the superior court voided the transfer for violating the
receivership order. Accordingly, Husband's membership interests were
receivership assets, and custodia legis bars any transfer of those interests.

II. Remaining UCC Interest Issues Are Moot.

¶42 Because we affirm the superior court's declaratory judgment
that the Creditors lacked an interest in the receivership assets through their
UCC fillings, we need not address their fraudulent transfer arguments, the
motion to dismiss, their motion to vacate the Liquidation Orders, or their
appeal of the receivership discharge order as those issues are now moot.
We address Blanco's claims on appeal separately.

III. Blanco's Purported Membership Interest in 2826 LLC.

A. Blanco Waived Any Argument Appealing the Receiver's
Discharge.

¶43 Blanco argues that the superior court erred by discharging the
Receiver and approving the Receiver's final account because the Receiver
should not have allowed the Lender to foreclose on the Mesa Property. The
Receiver argues that Blanco waived this argument because Blanco did not
assert his objection until the amended motion for a new trial.

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¶44 "Parties may not sit by and allow error which is not
fundamental to be committed, without protesting and asking the trial court
to correct the error at the time, and then later, when the judgment goes
against them, ask for a new trial on that ground." S. Ariz. Freight Lines, Ltd.
v. Jackson, 48 Ariz. 509, 518 (1936); see Conant v. Whitney, 190 Ariz. 290, 293
(App. 1997) (finding appellant "waived the issue by first raising it in the
motion for a new trial"); Helena Chem. Co. v. Coury Bros. Ranches, Inc., 126
Ariz. 448, 453 (App. 1980) (holding that "a motion for new trial may not be
based on a question to which no objection was made at the time of trial
unless the error is fundamental").

¶45 During the litigation, Blanco objected to the Receiver's motion
authorizing the sale of the Mesa Property. Blanco questioned why the
Receiver did not use funds from the sale of the Phoenix property to pay the
deed of trust on the Mesa Property. The objection did not assert gross
negligence by the Receiver. The Receiver responded by noting that he made
the distribution to Wife according to the superior court's October 15, 2015,
order. The court denied the objection. Despite being aware of the
Receiver's actions prior to his discharge application, Blanco did not object
or raise this issue. The issue did not come up again until the amended
motion for a new trial.

¶46 Although none of the Creditors objected to the discharge
order, Blanco argues we should consider the issue because Husband filed
an objection. See Gordon v. Liguori, 182 Ariz. 232, 237 (App. 1995) (declining
to find waiver when the issue was argued before the trial and the court
made a tentative ruling on it). But contrary to Blanco's claim, Husband's
objection did not assert any objections to the Mesa Property. Instead,
Husband's "Motion For Leave to File Lawsuit against the Receiver" asserted
that "due to the Receiver's gross negligence [Wife] stole $309,242.34" and
made other assertions related to Husband's IRS debt. The allegedly stolen
funds represent child support overpayments made by the Receiver to Wife.
Again, Blanco was aware of the Receiver's actions relating to the child
support overpayments but did not file an objection. Although Husband
raised gross negligence, he asserted the funds should have been used to pay
his income tax debt. He did not assert negligence relating to the
management or foreclosure of the Mesa Property. That argument was not
raised before the amended motion for a new trial.

¶47 Blanco also argues that, waiver notwithstanding, in our
discretion we may nevertheless analyze the merits of an appellant's
arguments. See CSA 13-101 Loop, LLC v. Loop 101, LLC, 233 Ariz. 355, 363, ¶
29 (App. 2013) (holding party "waived this argument" by "not

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object[ing] . . . on this basis" but examining the merits and determining "no
error occurred"). We decline to exercise that discretion here. Such
discretion is particularly inappropriate when the objecting party's inaction
allows a receivership to terminate, and no funds remain for collection or for
the receiver's defense. See AEA Fed. Credit Union, 237 Ariz. at 110, ¶ 18 ("The
appointment of a receiver sets in motion a series of events that cannot easily
be unwound and may have significant effects on relationships and
transactions involving non-parties."); see also S.E.C. v. Wealth Mgmt. LLC,
628 F.3d 323, 331-32 (7th Cir. 2010) (recognizing the administrative
difficulty of reversing consummated business transactions and potential for
unfair effect on innocent third parties).

¶48 Accordingly, we find that Blanco waived any objection to the
order discharging the Receiver.

B. Blanco's Appeal of the Mesa Property Sale Order is Moot.

¶49 Blanco also appeals the order authorizing the Mesa Property
sale, which directed the entire proceeds to Wife. Blanco asserts that his
right as an owner was superior to any right of Wife to receive distributions
from 2826 LLC. But Blanco does not assert, and the record does not
indicate, what distributions, if any, Wife received from 2826 LLC. Instead,
the record reflects that Lender received possession of the Mesa Property,
the only purported asset of 2826 LLC.

¶50 Thus, assuming arguendo that: (1) Blanco was an owner of
2826 LLC, (2) 2826 LLC owned the Mesa Property, (3) the court erred in
failing to vacate the order authorizing the sheriff's sale, and (4) Blanco did
not waive the issue by asserting it for the first time in the second motion for
a new trial, Blanco's appeal of that order is moot. See ASH, Inc. v. Mesa
Unified Sch. Dist. No. 4, 138 Ariz. 190, 191-92 (App. 1983) (finding moot a
request to declare a fully performed contract void).

IV. Attorney Fees.

¶51 The Receiver requests an award of attorney fees pursuant to
A.R.S. § 12-341.01 and his costs. In the exercise of our discretion we deny
the Receiver's fee request. As a successful party on appeal, the Receiver is
entitled to his costs. See ARCAP 21.

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 ROZENMAN, et al. v. BLANCO, et al.
Decision of the Court

CONCLUSION

¶52 For the foregoing reasons, we affirm.

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

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