Tucson Estates Property Owners Association, Inc. v. McGovern, Sines , 239 Ariz. 52 ( 2016 )

IN THE
ARIZONA COURT OF APPEALS
DIVISION TWO
TUCSON ESTATES PROPERTY OWNERS ASSOCIATION, INC., AN ARIZONA
NONPROFIT CORPORATION,
Plaintiff/Appellee,
v.
HOLLY A. MCGOVERN, AN UNMARRIED WOMAN; AND
DONALD E. SINES, AN UNMARRIED MAN,
Defendants/Appellants.
No. 2 CA-CV 2015-0069
Filed January 15, 2016
Appeal from the Superior Court in Pima County
No. C20145514
The Honorable Richard S. Fields, Judge
AFFIRMED IN PART AND REVERSED IN PART
COUNSEL
Carpenter, Hazlewood, Delgado & Bolen, PLC, Tucson
By Jason Smith and Nicholas Nogami
Counsel for Plaintiff/Appellee
Stephen M. Weeks, Marana
Counsel for Defendants/Appellants
TUCSON ESTATES POA v. MCGOVERN; SINES
Opinion of the Court
OPINION
Judge Miller authored the opinion of the Court, in which Presiding
Judge Vásquez and Chief Judge Eckerstrom concurred.
M I L L E R, Judge:
¶1 We address whether A.R.S. § 12-341.01 requires an
award of attorney fees to the prevailing party if the contract that
authorizes such fees mandates an award to the other party but is
silent as to the prevailing party. As a matter of statutory
interpretation, we conclude that § 12-341.01(A) permits a fees award
in this situation but does not mandate it.
¶2 Holly McGovern and Donald Sines (collectively,
“Appellants”) appeal the trial court’s denial of their request for
attorney fees and costs against Tucson Estates Property Owners
Association (TEPOA) after its request for an injunction and breach of
contract claims were decided in favor of Appellants. Appellants
argue they should have been awarded fees pursuant to A.R.S.
§ 12-341.01 and costs pursuant to A.R.S. § 12-341 because they were
the prevailing parties below; further, they should have been
awarded fees pursuant to A.R.S. § 12-349 as a sanction. For the
following reasons, we affirm the court’s ruling on attorney fees but
reverse its denial of costs.
Factual and Procedural Background
¶3 We view the facts in the light most favorable to
upholding the trial court’s ruling. McMurray v. Dream Catcher USA,
Inc., 220 Ariz. 71, ¶ 6, 202 P.3d 536, 539 (App. 2009). In 2012,
Appellants purchased property in Tucson Estates, which included a
shed that had been built more than thirty-five years earlier. They
were informed in writing that if they moved or replaced the shed,
any new structure would have to comply with the current
covenants, conditions, and restrictions (CC&Rs).
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TUCSON ESTATES POA v. MCGOVERN; SINES
Opinion of the Court
¶4 Sines soon submitted a change request to replace the
shed in a new location.1 The request form included this admonition:
“The Association has thirty (30) days to respond to this request. Do
not start your project until you have received approval.” There were
multiple handwritten notes on the form, including “Appears shed
will fit,” and a check mark in a box indicating the plan was denied.
Contrary to the suggestion in the document that his plan was
rejected, Sines testified that the person who inspected the property
for TEPOA gave verbal approval to replace the shed. He also
testified he never received a copy of his request with the “Plan
Denial” box checked. The trial court accepted Sines’s testimony,
finding that TEPOA did not send the rejection form to Appellants.
¶5 More than a year after Sines submitted the request, and
after he had completed the shed, TEPOA sent Sines a letter stating
he had violated the CC&Rs. Sines continued to correspond with
TEPOA and eventually moved the shed to the cement pad where the
previous shed had stood.
¶6 TEPOA sought injunctive relief to require appellants to
remove the shed, as well as liquidated damages and attorney fees
based on breach of contract. The matter was tried to the court in a
one-day hearing. The court found the homeowners relied on either
actual or implicit approval in building their shed. Additionally, it
denied injunctive relief based, in part, on TEPOA’s year-long delay
in giving notice to Appellants of the alleged violations of the CC&Rs
and its failure to approve the relocation of the shed. The court also
vacated the fines imposed by TEPOA against the homeowners,
effectively denying the breach of contract claims. The court
concluded, “In light of the tenor of this case, each party is to bear
their own fees and costs.” The court denied Appellants’ motion for
reconsideration “[i]n light of the procedural history, the evidence
presented, and the tenor of the case.” Appellants’ motion for a new
trial on the attorney fees issue was denied without further comment.
This timely appeal followed.
1Although both McGovern and Sines are owners of the lot,
most of the communications with TEPOA involved only Sines.
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TUCSON ESTATES POA v. MCGOVERN; SINES
Opinion of the Court
Attorney Fees
Mandatory Attorney Fees Pursuant To § 12-341.01
¶7 Appellants contend the trial court was required to
award attorney fees under § 12-341.01(A). We generally review the
denial of attorney fees for an abuse of discretion, but whether
§ 12-341.01(A) requires an award of fees is a question of law we
review de novo. See Bennett Blum, M.D., Inc. v. Cowan, 235 Ariz. 204,
¶ 5, 330 P.3d 961, 962-63 (App. 2014).
¶8 Section 12-341.01(A) provides that in an action arising
out of contract, the trial court “may award the successful party
reasonable attorney fees.” (Emphasis added.) This section,
however, cannot “be construed as altering, prohibiting or
restricting” the contract terms. Id.
¶9 We first determine whether there was a contract
between the parties and, if so, examine the particular fees provision.
See Barmat v. John & Jane Doe Partners A-D, 155 Ariz. 519, 521, 747
P.2d 1218, 1220 (1987) (analyzing first whether express or implied
contract existed before determining whether § 12-341.01 applied).
Here, the relevant fees clause is contained in the CC&Rs, which
constitute a contract between TEPOA’s property owners as a whole
and individual lot owners. Ahwatukee Custom Estates Mgmt. Ass’n,
Inc. v. Turner, 196 Ariz. 631, ¶ 5, 2 P.3d 1276, 1279 (App. 2000). The
agreement included this attorney fees provision: “In the event
[TEPOA] receives judgment against any person for a violation or
threatened violation of any of the CC&R’s herein, [TEPOA] shall . . .
be entitled to recover from such person reasonable legal fees and
costs.” The CC&Rs contained no provisions regarding attorney fees
in the event judgment was rendered for the lot owner and against
TEPOA.
¶10 Appellants argue they were entitled to mandatory
attorney fees under § 12-341.01(A) as a matter of “equity [and] basic
fairness” because TEPOA would have received mandatory fees
under the unilateral contract provision if it had prevailed. They rely
on Pioneer Roofing Co. v. Mardian Construction Co., 152 Ariz. 455, 733
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TUCSON ESTATES POA v. MCGOVERN; SINES
Opinion of the Court
P.2d 652 (App. 1986), to support this argument.2 In that case, the
trial court ordered Mardian to pay the attorney fees of two other
parties. Id. at 470, 733 P.2d at 667. The contract contained a specific
provision that allowed Mardian to recover attorney fees in disputes,
but was silent as to the other parties. Id. Mardian argued on appeal
that the contract provision preempted the applicability of
§ 12-341.01, and because it was silent as to the other parties, it was
error to award them fees. 152 Ariz. at 470, 733 P.2d at 667. In
upholding the award of fees, we concluded that there was no
“prohibition against the recovery of attorneys’ fees to one party
under § 12-341.01 simply because a contract contains a unilateral
attorneys’ fees provision favorable to another party.” Id. at 471, 733
P.2d at 668; see also Geller v. Lesk, 230 Ariz. 624, ¶ 9, 285 P.3d 972, 975
(App. 2012) (citing Pioneer Roofing for principle that court will apply
contract to determine fee award for named party, but “may award
fees for other party under A.R.S. § 12-341.01(A)”).
¶11 Appellants seek to expand Pioneer Roofing to mandate
an award of fees when a unilateral fees provision requires an award
of fees to the other party had it prevailed. Although arguably
reasonable as a matter of equity, the plain language of § 12-341.01(A)
states only that a court may award fees in an action arising out of
contract, and that it will not alter applicable contracts. The purpose
of the statute is to “mitigate the burden of the expense of litigation to
establish a just claim or a just defense.” § 12-341.01(B); Chaurasia v.
Gen. Motors Corp., 212 Ariz. 18, ¶ 43, 126 P.3d 165, 176 (App. 2006).
It offers the possibility of mitigating the expense of bringing a valid
2Appellants also rely on two unpublished cases dated before
January 1, 2015, presumably because they wish to assist the court in
deciding whether to issue a published opinion. See Ariz. R. Sup.
Ct. 111(c) (allowing citation to memorandum decisions to establish
claim preclusion, assist court in deciding whether to publish, or—if
issued on or after January 1, 2015—for persuasive value). The two
unpublished cases, however, do not illustrate any lack of guidance
in published case law or expand the holding of Pioneer Roofing, 152
Ariz. at 471-72, 733 P.2d at 668-69. Thus, we rely solely on the
published cases.
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TUCSON ESTATES POA v. MCGOVERN; SINES
Opinion of the Court
claim, but does not, by its language and stated purpose, require
equity. Further, Pioneer Roofing does not support such an expansion;
the court held only that the trial court has the discretion to award
attorney fees under § 12-341.01 despite the existence of a unilateral
fee provision. 152 Ariz. at 471, 733 P.2d at 668. To the extent this
mandatory-discretionary differentiation results in an asymmetrical
treatment of parties to a contract,3 the authority to revise § 12-341.01
is vested solely in the legislature.4 See In re Pinal Cty. Mental Health
No. MH-201000029, 225 Ariz. 500, ¶ 20, 240 P.3d 1262, 1268 (App.
2010) (“[T]his court is not free to amend the unambiguous language
of our statutes to conform to our own notions of public policy.”).
The trial court was not required to award attorney fees pursuant to
§ 12-341.01 and Pioneer Roofing.
3A party may avoid asymmetrical treatment under the terms
of a contract by negotiation or simply refusing to enter such a
contract. We recognize that some contracts may be contracts of
adhesion for which there is no practical ability to alter the terms of
an unfavorable contract. See generally Broemmer v. Abortion Servs. of
Phx., Ltd., 173 Ariz. 148, 150-51, 840 P.2d 1013, 1015-16 (1992).
Because this issue was not raised below, we express no opinion as to
whether the CC&Rs constitute such a contract and, even if so
construed, whether an adhesion contract would affect the statutory
analysis.
4Appellants argue in their reply that reciprocal attorney fees
were required under the familiar maxim “‘[o]ne who seeks equity
must do equity.’” See, e.g., Turner, 196 Ariz. 631, ¶ 20, 2 P.3d at 1282,
quoting Ariz. Coffee Shops, Inc. v. Phx. Downtown Parking Ass’n, 95
Ariz. 98, 100, 387 P.2d 801, 802 (1963) (alteration in Turner).
Typically we do not consider arguments raised for the first time in a
reply brief. Fisher v. Edgerton, 236 Ariz. 71, n.2, 336 P.3d 167, 171 n.2
(App. 2014). Even were we to consider the issue here, it is doubtful
a general common-law canon supplants the plain language of § 12-
341.01. Cf. Flood Control Dist. of Maricopa Cty. v. Gaines, 202 Ariz. 248,
¶ 9, 43 P.3d 196, 200 (App. 2002) (within constitutional limits,
legislature may alter common law “when its intent to do so is
‘clearly and plainly manifest[ed]’”), quoting Wyatt v. Wehmueller, 167
Ariz. 281, 284, 806 P.2d 870, 873 (1991) (alteration in Gaines).
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TUCSON ESTATES POA v. MCGOVERN; SINES
Opinion of the Court
Whether Discretionary Attorney Fees Should Have Been Awarded
¶12 Appellants argue in the alternative that the trial court
abused its discretion because the factors to be considered in
awarding fees pursuant to § 12-341.01(A) weighed in their favor.
We may uphold a decision on attorney fees under § 12-341.01 if it
has any reasonable basis, even if the trial court gave no reasons for
denying the request for fees. Uyleman v. D.S. Rentco, 194 Ariz. 300,
¶ 27, 981 P.2d 1081, 1086 (App. 1999). The question on appeal “‘is
not whether the judges of this court would have made an original
like ruling, but whether a judicial mind, in view of the law and
circumstances, could have made the ruling without exceeding the
bounds of reason. We cannot substitute our discretion for that of the
trial judge.’” Associated Indem. Corp. v. Warner, 143 Ariz. 567, 571,
694 P.2d 1181, 1185 (1985), quoting Davis v. Davis, 78 Ariz. 174, 179,
277 P.2d 261, 265 (1954) (Windes, J., specially concurring).
¶13 Our supreme court outlined the factors that may be
considered to determine the amount of a fee award under
§ 12-341.01. Id. at 570, 694 P.2d at 1184. Those potentially applicable
here include the merits of the claim presented by TEPOA, whether
the litigation could have been avoided or settled, whether fees
would cause extreme hardship to the unsuccessful party, whether
the successful party prevailed with respect to all relief sought,
novelty of the legal questions, and whether awarding fees would
discourage parties from prosecuting legitimate contract claims. Id.
¶14 Appellants contend all factors weighed in their favor,
particularly because the trial court concluded the late issuance of the
denial letter “encroache[d] on misconduct,” and because the
homeowners repeatedly communicated with TEPOA to resolve the
issue, ultimately moving the shed. Although the trial court did
make note of TEPOA’s failures, it generally found that the merits of
the case were “equally balanced,” and that the delay in issuing the
denial later essentially tipped the scale against TEPOA. The other
factors may weigh in favor of Appellants, but because a reasonable
basis supports the ruling, we do not substitute our discretion for that
of the trial court. Orfaly v. Tucson Symphony Soc’y, 209 Ariz. 260,
¶ 21, 99 P.3d 1030, 1036 (App. 2004). The court did not abuse its
discretion by denying Appellants’ request for attorney fees.
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TUCSON ESTATES POA v. MCGOVERN; SINES
Opinion of the Court
Whether Attorney Fees Should Have Been Awarded As a Sanction
¶15 Appellants contend attorney fees were mandatory
under A.R.S. § 12-349(A)(1) for bringing a claim without substantial
justification. We could consider TEPOA’s failure to respond to this
argument to be a confession of error, see In re 1996 Nissan Sentra, 201
Ariz. 114, ¶ 7, 32 P.3d 39, 42 (App. 2001), but in our discretion we do
not do so, see Savord v. Morton, 235 Ariz. 256, ¶ 9, 330 P.3d 1013
(App. 2014). To mandate attorney fees, TEPOA’s claim must have
been groundless and not made in good faith. See § 12-349(F). As the
trial court found, there was conflicting evidence regarding
Appellants’ assertion they had no notice of the plan denial. This
conflict in the testimony and the absence of evidence showing the
claim lacked good faith demonstrates that the trial court did not err
in its decision not to award § 12-349 attorney fees.5
Costs
¶16 Appellants argue the trial court erred by denying their
request for costs. We review the court’s decision for an abuse of
discretion. Democratic Party of Pima Cty. v. Ford, 228 Ariz. 545, ¶ 15,
269 P.3d 721, 725 (App. 2012).
¶17 A.R.S. § 12-341 states, “The successful party to a civil
action shall recover from his adversary all costs expended or
incurred therein unless otherwise provided by law.” Although the
award of costs is mandatory, the trial court has discretion to
determine which party was successful. Ford, 228 Ariz. 545, ¶ 15, 269
P.3d at 725. Arizona courts apply the same principles to determine
the successful party in both the attorney fees and costs contexts. See
Henry v. Cook, 189 Ariz. 42, 44, 938 P.2d 91, 93 (App. 1996).
¶18 TEPOA does not directly respond to the § 12-341
argument, but generally contends that Appellants were not
successful parties below. It reasons that because injunctive relief is
5Appellants also argue the trial court erred by failing to make
findings of fact as required by A.R.S. § 12-350, but this was never
raised below, and is therefore waived. See Trantor v. Fredrikson, 179
Ariz. 299, 300-01, 878 P.2d 657, 658-59 (1994).
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TUCSON ESTATES POA v. MCGOVERN; SINES
Opinion of the Court
an equitable remedy and denial of such does not require finding a
prevailing party, the trial court could have correctly determined that
neither party prevailed. TEPOA relies on Turner, 196 Ariz. 631, ¶ 4,
2 P.3d at 1278, in which a special master denied retroactive
injunctive relief to the plaintiffs for previous violations of the
CC&Rs, but enjoined the homeowners from making future
alterations without board approval. The court upheld the finding
that there was no prevailing party. Id. ¶ 22. Turner is inapposite.
TEPOA prevailed on none of the claims against Appellants, while
each party in Turner prevailed in part. Id. ¶ 4. Moreover,
Appellants prevailed against the breach of contract claims for
monetary damages. In view of its ruling on the merits that denied
all of TEPOA’s requested relief and the mandatory requirement of
A.R.S. § 12-341, the court erred in failing to award Appellants their
costs. See Michaelson v. Garr, 234 Ariz. 542, ¶ 5, 323 P.3d 1193, 1195
(App. 2014) (court abuses discretion when record devoid of
competent evidence supporting decision).
Request for Judicial Notice of Subsequent Case
¶19 Appellants requested that this court take judicial notice
of a second lawsuit filed against them by TEPOA after they filed
their notice of appeal. They argue the second lawsuit is relevant
because it illustrates that an attorney fee award is necessary to
discourage “another meritless lawsuit.” TEPOA objects to the
request and seeks attorney fees as a sanction for a frivolous motion.
See Ariz. R. Civ. App. P. 25.
¶20 We decline the request to take judicial notice because
the case file was not forwarded along with the request. Ariz. Dep’t of
Revenue v. Questar S. Trails Pipeline Co., 215 Ariz. 577, n.7, 161 P.3d
620, 625 n.7 (App. 2007). Further, the case was not available to the
trial court at the time it ruled and its relevance is minimal, at least
while it is pending in the superior court. Although we decline to
take judicial notice of the subsequent case, in our discretion we deny
TEPOA’s request for fees.
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TUCSON ESTATES POA v. MCGOVERN; SINES
Opinion of the Court
Disposition
¶21 For the foregoing reasons, we affirm the trial court’s
ruling as to attorney fees, but reverse as to costs. Appellants also
request an award of attorney fees on appeal. In our discretion, we
deny the request.
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