Opinion
1 CA-CV 12-0360
03-21-2013
COUNTRY BANK, an Arizona banking corporation, Plaintiff/Appellee, v. HIGHLAND PROPERTIES WEST, LLC; BRAD L. MORK and SUSAN M. HOPMAN, husband and wife, Defendants/Appellants.
Clark Hill PLC By Mark S. Sifferman Attorneys for Plaintiff/Appellee Penilla Metzger PLLC By Perry E. Casazza Attorneys for Defendant/Appellants
NOTICE: THIS DECISION DOES NOT CREATE LEGAL PRECEDENT AND MAY NOT BE CITED
EXCEPT AS AUTHORIZED BY APPLICABLE RULES.
See Ariz. R. Supreme Court 111(c); ARCAP 28(c);
Ariz. R. Crim. P. 31.24
MEMORANDUM DECISION
(Not for Publication
- Rule 28, Arizona
Rules of Civil
Appellate Procedure)
Appeal from the Superior Court in Yavapai County
Cause No. P1300CV201000107
The Honorable Tina R. Ainley, Judge
The Honorable Anna Young, Judge
AFFIRMED
Clark Hill PLC
By Mark S. Sifferman
Attorneys for Plaintiff/Appellee
Scottsdale Penilla Metzger PLLC
By Perry E. Casazza
Attorneys for Defendant/Appellants
Phoenix NORRIS, Judge ¶1 Appellants, Highland Properties West, LLC, Brad L. Mork, and Susan M. Hopman (collectively, "Highland") appeal from the superior court's award of attorneys' fees to Appellee, Country Bank, in an action Country filed to obtain a deficiency judgment against Highland. Although Country voluntarily dismissed its complaint, the superior court awarded Country attorneys' fees it had incurred in successfully defending against counterclaims Highland had asserted against it. ¶2 On appeal, Highland first argues Country was not entitled to attorneys' fees in defending against its counterclaims because the applicable fee provisions in the deed of trust and construction loan agreement (collectively, unless otherwise specified, "contractual agreements") only entitled Country to attorneys' fees "in connection with the enforcement" of the contractual agreements. Although we agree that the contractual agreements spoke in terms of enforcement, exercising de novo review, we nevertheless reject this argument. Grosvenor Holdings, L.C. v. Figueroa, 222 Ariz. 588, 593, ¶ 9, 218 P.3d 1045, 1050 (App. 2009) (appellate court reviews interpretation of contract de novo). ¶3 The deed of trust provided:
If Lender institutes any suit or action to enforce any of the terms of this Deed of Trust, Lender shall be entitled to recover such sum as the court may adjudge reasonable as attorneys' fees at trial and upon any appeal.Similarly, the construction loan agreement provided: "Borrower agrees to pay upon demand all of Lender's costs and expenses, including Lender's attorneys' fees and Lender's legal expenses, incurred in connection with the enforcement of this Agreement." (Emphasis added.) ¶4 Of significance, the construction loan agreement authorized a fee award to Country "in connection with" enforcing the construction loan agreement. In other contexts, we have defined "in connection with" as "a relationship or association in thought." State v. Bews, 177 Ariz. 334, 336, 868 P.2d 347, 349 (App. 1993) (quoting Webster's Third New International Dictionary (1971)) (pretrial interview was conducted "in connection with" official proceeding -- criminal trial -- for purpose of false-statement statute). This phrase, thus, serves to broaden the reach of the attorneys' fee provision in the construction loan agreement. ¶5 Here, Country sued Highland to collect a deficiency judgment on the loan when Highland defaulted. Highland answered and counterclaimed, asserting claims for "consumer fraud; common law fraud; bad faith -- both contractual and tort; breach of contract; negligent / fraudulent misrepresentation; aiding and abetting the commission of fraud; in the alternative, intentional interference with contractual relations; intentional infliction of emotional distress and punitive damages." Although all but one of these claims bore tort names, all of them were predicated on breaches of the contractual agreements, as the superior court correctly recognized. Summarizing Highland's claims as "defenses or objections to the trustee's sale," the superior court ruled:
[Highland's] allegations in the Counter-claim mirror the defenses in their Answer. In essence, [Highland] assert[ed] that [Country] failed to act as required under the [contractual agreements] and in accordance with its duty to [Highland]. Specifically, [Highland] complain[ed] that [Country] breached the terms of the [contractual agreements], failed to follow the terms of the [contractual agreements] and interfered with [Highland's] ability to pay off the [loan] prior to declaring a default. While these may have been legitimate objections prior to the trustee's sales, [Highland] waived the allegations made in the Counterclaim.In so concluding, the court quoted from Highland's answer, which read in pertinent part, as follows:
[Country] initially and materially breached the [contractual agreements] in three express ways. First, through a "scheme to defraud" [Highland], second, by declaring a "default" without submitting the "dispute" to "binding arbitration" as required by the [contractual agreements]. [Country] knew the issue of default was "disputed" and [thereby] subject to "binding arbitration."¶6 Thus, the thrust of Highland's counterclaims was to avoid or bar Country from obtaining a deficiency judgment. Accordingly, by defending against these claims, Country was enforcing its rights under and "in connection with" the contractual agreements. See Kammert Bros. Enters., Inc. v. Tanque Verde Plaza Co., 102 Ariz. 301, 308, 428 P.2d 678, 685 (1967) (in contract to purchase real estate, which provided, "[i]f any suit shall be brought by either party to enforce or cancel this contract, the prevailing party . . . shall be entitled to recover . . . reasonable attorney's fee," words "to enforce or cancel" were "broad enough to encompass" buyer's action against seller for damages) (citation omitted). Therefore, we agree with Country that it was entitled to attorneys' fees under the contractual agreements. ¶7 Highland also argues Country was not entitled to attorneys' fees under Arizona Revised Statute ("A.R.S.") section 12-341.01(A) (Supp. 2012) because its counterclaims were based in tort and did not "arise[] out of a contract" as required by that statute. ¶8 Arguably, this assertion is moot because, as discussed, Country was entitled to fees under the contractual agreements. In awarding fees, however, the superior court did not rely on the contractual agreements, but awarded Country its fees pursuant to A.R.S. § 12-341.01(A). We note, however, that when a contractual provision for attorneys' fees exists, it is mandatory and displaces A.R.S. § 12-341.01. Bennett v. Appaloosa Horse Club, 201 Ariz. 372, 378, ¶ 26, 35 P.3d 426, 432 (App. 2001) (awarding attorneys' fees on contract is mandatory) (citation omitted); Pioneer Roofing Co. v. Mardian Const. Co., 152 Ariz. 455, 471, 733 P.2d 652, 668 (App. 1986) (if contract has unilateral attorneys' fees provision permitting one party to recover, A.R.S. § 12-341.01(A) requires contract provision be applied when party seeking fees is allowed recovery under it). Here, although the court should have awarded fees under the contractual agreements rather than the statute, Country does not argue on appeal the court improperly granted it fees under A.R.S. § 12-341.01(A). Instead, it only argues it was alternatively entitled to fees under A.R.S. § 12-341.01(A). We agree. ¶9 Whether a party is entitled to attorneys' fees under A.R.S. § 12-341.01 is a question of law we review de novo. Assyia v. State Farm Mut. Auto. Ins. Co., 229 Ariz. 216, 220, ¶ 10, 273 P.3d 668, 672 (App. 2012) (citation omitted). An action arises out of contract when the duty breached is "created by the contractual relationship, and would not exist 'but for' the contract." Id. at 220-21, ¶ 12, 273 P.3d at 672-73 (citations omitted). As discussed, Highland's counterclaims rested on allegations of breach of contract, thus triggering A.R.S. § 12-341.01(A). See Deutsche Credit Corp. v. Case Power & Equip. Co., 179 Ariz. 155, 164, 876 P.2d 1190, 1199 (App. 1994) (litigation arose out of contract because claim stemmed from alleged breach of contract and could not have existed "but for" the breach). ¶10 Finally, Highland argues Country's request for attorneys' fees was untimely under Rule 54(g)(2) of the Arizona Rules of Civil Procedure because Country requested a ruling on its fee application more than 20 days after the superior court entered a decision on the merits. Under the circumstances of this case, we disagree. ¶11 After the court dismissed Highland's counterclaims, Country moved for an award of attorneys' fees. The court deferred ruling on Country's motion "until such time as this matter [was] concluded in its entirety." After the court granted Country's motion to dismiss its complaint with prejudice, Country asked the court to rule on its fee request. Under these circumstances, we agree with the superior court -- Country's request was not untimely as "it was not necessary for [Country] to file a renewed fee application." ¶12 For the foregoing reasons, we affirm the superior court's order awarding attorneys' fees to Country. Contingent on its compliance with Rule 21 of the Arizona Rules of Civil Appellate Procedure and pursuant to the contractual agreements, we award Country its reasonable attorneys' fees and costs on appeal.
[. . .] Thus, [Country] had no right to foreclose through the Trustee Sale. Third, [Country] slandered [Highland's] title by letting private information "leak out" that [Country] was taking the property back.
See also Key Air, Inc. v. Comm'r of Revenue Servs., 983 A.2d 1, 8 n.11 (Conn. 2009) (listing cases broadly construing "in connection with" in statutory and contractual contexts).
In denying Highland's motion to reconsider the fee award to Country, the court stated it had "specifically found that [Country] was the successful party in a contract action."
Rule 54(g)(2) provides: "When attorneys' fees are claimed, the determination . . . shall be made after a decision on the merits of the cause. The motion for attorneys' fees shall be filed within 20 days from the clerk's mailing of a decision on the merits of the cause, unless extended by the trial court."
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PATRICIA K. NORRIS, Presiding Judge
CONCURRING: _______________
ANDREW W. GOULD, Judge
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RANDALL M. HOWE, Judge