Saia v. nineveh/bronson ( 2024 )

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UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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
SAIA FAMILY LIMITED PARTNERSHIP, Plaintiff/Appellant/Cross-
Appellee,
v.
NINEVEH HOLDINGS, LLC, Defendant/Appellee/Cross-Appellant,
and
EUGENE BRONSON, et al., Defendants/Appellees.
No. 1 CA-CV 23-0509
FILED 10-08-2024
Appeal from the Superior Court in Maricopa County
No. CV2019-009045
The Honorable Sara J. Agne, Judge
AFFIRMED IN PART, VACATED IN PART, AND REMANDED
COUNSEL
Poli Moon & Zane PLLC, Phoenix
By Michael N. Poli, Lawrence R. Moon
Counsel for Plaintiff/Appellant/Cross-Appellee
Perez Law Group PLLC, Glendale
By Steve R. Janssen
Counsel for Defendant/Appellee/Cross-Appellant
The Cavanagh Law Firm PA, Phoenix
By Richard W. Mear, Benjamin J. Branson
Counsel for Defendants/Appellees
MEMORANDUM DECISION
Presiding Judge Michael S. Catlett delivered the decision of the Court, in
which Judge Jennifer M. Perkins and Vice Chief Judge Randall M. Howe
joined.
C A T L E T T, Judge:
¶1 Saia Family Limited Partnership (“Saia”) sued Eugene
Bronson (“Bronson”), his spouse, and Nineveh Holdings, LLC (“Nineveh”),
for consumer fraud, fraudulent inducement, and intentional and negligent
misrepresentation stemming from statements Bronson allegedly made
during the sale of real property to Saia. The superior court granted
summary judgment to the defendants but denied Nineveh’s request for
attorney fees. Saia appeals the grant of summary judgment and Nineveh
cross-appeals the denial of attorney fees. Because Saia failed to provide
evidence that Bronson’s statements were false at the time they were made,
we affirm summary judgment. We, however, vacate the superior court’s
denial of attorney fees to Nineveh and remand for the court to determine
the proper amount of fees to be awarded, if any.
FACTS AND PROCEDURAL HISTORY
¶2 Bronson owned Nineveh, a company that owned and leased
commercial real property in Phoenix. Michelangelo Leasing, a separate
transportation company Bronson also owned, was the tenant at Nineveh’s
property. In late 2016, Bronson sold Michelangelo Leasing to Silverado
Stages (“Silverado”) and became an employee and director of Silverado.
After the sale, Silverado replaced Michelangelo Leasing as the tenant at
Nineveh’s property.
¶3 On July 17, 2018, Saia signed an Agreement of Purchase and
Sale (“Agreement”) to purchase the property from Nineveh. Under the
Agreement, Saia agreed to purchase the property for $3,650,000, subject to
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the satisfaction of various terms and conditions, including Saia’s receipt of
various materials from Nineveh and Silverado, such as a survey of the
property, an environmental assessment, and proof of insurance. After
signing the Agreement, Saia performed due diligence about the property
and Silverado. The sale closed on October 1, 2018 (“Property Sale”).
¶4 Within a week of the Property Sale, Silverado filed for
Chapter 11 reorganization. Thereafter, Silverado failed to make all lease
payments but one, and in December 2018, Silverado converted the
bankruptcy to a liquidation proceeding.
¶5 Saia sued Bronson and Nineveh for consumer fraud,
fraudulent inducement, and intentional and negligent misrepresentation.
Saia’s complaint alleged that, on July 10, 2018, Bronson falsely told Saia that
“Silverado had a strong business, was doing very well as an enterprise, and
was strong financially,” and it alleged that Bronson “knew or reasonably
should have known that Silverado was considering filing or intended to file
bankruptcy.”
¶6 During discovery, Saia obtained the meeting minutes for
Silverado’s board of directors. The minutes showed that Bronson attended
a meeting on July 14, 2017. Bronson claimed that was the only meeting he
ever attended as a director. Bronson characterized his responsibilities at
Silverado as similar to that of an employee and claimed he was not involved
in the business’s operations or finances.
¶7 Discovery also revealed that, between March 27 and June 11,
2018, EverBank Commercial Finance, Inc. (“EverBank”), a lender to
Silverado, sent multiple reservation of rights notices to Bronson. Bronson
acknowledged receiving the notices, but said he delivered them to
Silverado’s Chief Financial Officer (“CFO”).
¶8 In August 2018, before the Property Sale, Saia received
Silverado’s financial statements, which an independent auditor prepared.
The financial statements included details of Silverado’s overall debt,
including approximately $14 million owed to Volvo Financial Services
(“Volvo”). An additional thirteen sections in the financial statements,
characterized as “[n]ote[s],” discussed specific topics. Note 5 disclosed that,
as of December 31, 2017, Silverado owed nearly $2 million to Western
Alliance Bank and “was not in compliance with various financial
covenants.” Note 13 certified that “[m]anagement has not identified any
subsequent events [from January 1 through August 22, 2018] that require
disclosure.” Before the Property Sale, Silverado also provided Saia with
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financial projections showing Silverado expected to continue being
profitable.
¶9 In late September 2018, Volvo sued Silverado for breach of
contract. Bronson testified that, on October 3, 2018, Silverado asked him to
loan it approximately $400,000 to assist with its forthcoming bankruptcy
filing, and he agreed to do so. Silverado signed the promissory note for the
loan on October 4, 2018. Bronson did not recall having conversations with
Silverado about bankruptcy before it decided to file, but he acknowledged
he discussed the loan around the time Silverado filed.
¶10 In this litigation, Bronson moved for summary judgment
arguing, in part, that “[t]here is no evidence in this case to support [a]
finding of any false statement or material omission.” Nineveh sought to
join Bronson’s motion for summary judgment but did so after the superior
court’s dispositive motion deadline.
¶11 Because Saia stated it was “relying solely on Bronson’s
representations regarding Silverado’s finances and operations,” the
superior court analyzed whether Bronson made a misrepresentation about
Silverado’s finances and business prospects. The court determined Saia did
not “provide[] any evidence that Bronson made any misrepresentations
surrounding Silverado’s debt.” The court emphasized that Silverado’s
debt, including the Volvo loan, was disclosed in the financial statements
provided to Saia. The court also concluded that, while Bronson loaned
$400,000 to Silverado, that action on its own did not demonstrate Bronson
was aware of Silverado’s finances before the sale closed. The court
therefore granted summary judgment to Bronson. But the court rejected
Nineveh’s request to join Bronson’s summary judgment motion because it
did not “specifically address[] how [Bronson’s] motion applie[d] to [it.]”
¶12 Nineveh moved for reconsideration and clarification, arguing
Saia’s failure to show Bronson made a misrepresentation meant Nineveh
could not be liable because Bronson was Nineveh’s sole agent. After
allowing Saia to respond, the court concluded Saia alleged
misrepresentations only by Bronson. It therefore reconsidered its prior
decision and granted Nineveh summary judgment.
¶13 Nineveh requested attorney fees under A.R.S. § 12-341.01.
The court denied that request because Saia’s claims were “fraud-based” and
not based on a breach or enforcement of a contract.
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Decision of the Court
¶14 The court entered final judgment, Saia timely appealed, and
Nineveh timely cross-appealed. We have jurisdiction. See A.R.S. § 12-
2101(A)(1).
DISCUSSION
I. Summary Judgment
¶15 Saia brought claims against Bronson (and his spouse) for
consumer fraud, fraudulent inducement, and intentional and negligent
misrepresentation. Saia argues the superior court improperly granted
Bronson summary judgment on those claims. Summary judgment is
appropriate when there is “no genuine dispute as to any material fact and
the moving party is entitled to judgment as a matter of law.” Ariz. R. Civ.
P. 56(a); Orme Sch. v. Reeves, 166 Ariz. 301, 309 (1990). We review a grant of
summary judgment de novo and view the evidence and reasonable
inferences in favor of Saia, the non-moving party. Zambrano v. M & RC II
LLC, 254 Ariz. 53, 58 ¶ 9 (2022).
¶16 To succeed, each of Saia’s claims required it to show Bronson
made a false statement. See Comerica Bank v. Mahmoodi, 224 Ariz. 289, 291-
92 ¶ 14 (App. 2010) (fraud); Castle v. Barrett-Jackson Auction Co., 229 Ariz.
471, 473 ¶ 9 (App. 2012) (consumer fraud); St. Joesph’s Hosp. & Med. Ctr. v.
Reserve Life Ins. Co., 154 Ariz. 307, 312 (1987) (negligent misrepresentation);
John Munic Enters., Inc. v. Laos, 235 Ariz. 12, 16 ¶ 10 (App. 2014) (fraudulent
inducement).
¶17 In the superior court, Saia relied on one, and only one,
allegedly false statement by Bronson. That statement, which Bronson
allegedly made on July 10, 2018, was that “Silverado had a strong business,
was doing very well as an enterprise, and was strong financially.” Saia
claimed that statement was an actionable misrepresentation and was alone
sufficient to defeat Bronson’s summary judgment motion. We, however,
agree with Bronson and the superior court that Saia did not create a genuine
issue of fact defeating summary judgment.
¶18 To defeat summary judgment, Saia needed to provide
evidence that Bronson’s July 10, 2018, statement was false at that time. See
Dawson v. Withycombe, 216 Ariz. 84, 96 ¶ 27 (App. 2007) (“[T]o constitute
actionable fraud, the false representation must be of a matter or fact which
exists in the present, or has existed in the past[.]” (quoting Law v. Sidney, 47
Ariz. 1, 4 (1936))). Put differently, Saia needed to produce evidence from
which a reasonable jury could find that, as of July 10, 2018, Silverado was
not a strong business, was not doing very well as an enterprise, or was not
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strong financially. See Nat’l Bank of Ariz. v. Thruston, 218 Ariz. 112, 119 ¶ 26
(App. 2008). Saia did not do so.
¶19 The statement Saia relies upon occurred ten days before the
parties entered into the Agreement. During the sales process, Silverado,
through Bronson, provided Saia with various financial documents. Saia
admitted that “[o]n the 5th and 6th of June, 2018, Bronson (via the listing
brokers) sent [Saia] an email with Silverado’s financial statements and tax
returns for the years 2013 [through] 2017.” Moreover, “[i]n August 2018,
Bronson provided Mr. Saia financial projections for Silverado.” And
Bronson provided Saia with Silverado’s audited financial statements for the
year ended 2017, which were prepared as of August 22, 2018.
¶20 Saia admitted those documents showed that Silverado was a
flourishing company. Saia explained, for example, that Silverado’s
“records indicated that Silverado generated significant profits for the
respective time periods and was expected to continue to do so.” Those
“significant profits,” Saia admitted, were “consistent with Bronson’s
repeated statements to [Saia’s President] that Silverado was a profitable
company with extensive, stable operations, having been in business for
over twenty years.” Saia conceded that Silverado’s audited financial
statements disclose “that there were no subsequent events following
December 31, 2017, that would give rise to concern for the auditor.” When
asked if Saia took issue with anything in Silverado’s financial documents,
Saia’s President responded that the documents did not give rise to any
concern that Silverado was “in any financial jeopardy.” When asked if
there was any “specific line-entry” in those documents that caused “pause
when reviewing them,” Saia’s President responded, “Quite [] the opposite,
there are items in here that gave me comfort.”
¶21 The record also demonstrates that Silverado’s bankruptcy
and other financial setbacks largely occurred after Bronson made his
allegedly false statement on July 10, 2018. Saia admits that “Volvo’s
enforcement of its leases and loans with Silverado and refusal to negotiate
with Silverado regarding them may have precipitated Silverado’s filing for
bankruptcy protection[.]” Silverado’s financial obligations to Volvo were
disclosed to Saia in Silverado’s audited financial statements. On September
13, 2018, Volvo filed a lawsuit against Silverado and its owners, and a copy
of the complaint was publicly available before the Property Sale closed. But
that lawsuit came two months after Bronson’s allegedly fraudulent
statements. Saia provided insufficient evidence about the status of the
Volvo obligations as of July 10, 2018.
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¶22 Silverado then filed for bankruptcy protection on October 5,
2018. On October 3, 2018, Bronson agreed to loan Silverado $400,000 (the
note was signed October 4, 2018). From this, Saia speculates that Bronson
must have known about the bankruptcy when he made the July 10
statement. But Saia has no evidence supporting that speculation and thus
cannot use it to defeat summary judgment. Badia v. City of Casa Grande, 195
Ariz. 349, 357 ¶ 29 (App. 1999) (“Sheer speculation is insufficient . . . to
defeat summary judgment.”). Bronson testified Silverado first asked him
for a loan on October 3—two days after the Property Sale (and months after
Bronson’s statement). And Saia submitted insufficient evidence
controverting that testimony or suggesting that Silverado was
contemplating bankruptcy before Bronson’s July 10 statement.
¶23 Silverado also experienced issues obtaining insurance and
one of its largest customers, Arizona State University (“ASU”), terminated
its agreement with Silverado. But, so far as the record reflects, those issues
also arose after July 10, 2018. As to insurance, Saia does not dispute that
Silverado had all required insurance at the time of the Property Sale. Saia
also admits that, on October 1, 2018, Silverado had insurance set to expire
on January 9, 2019, but, on December 4, 2018, Silverado “discovered for the
first time that their current insurer would not renew the insurance, even if
[Silverado] secured outside funds” to pay the insurer. As to the contract
with ASU, Saia admits that ASU first sent a notice of default to Silverado
on October 24, 2018, and moved in the bankruptcy proceeding to terminate
its contract with Silverado on November 14, 2018. Saia presented
insufficient evidence about issues with Silverado’s insurance or the ASU
contract on or before July 10, 2018.
¶24 So, what evidence did Saia use to show Bronson’s July 10
statement was false? First, Saia produced five notices EverBank sent to
Bronson between March 27 and June 11, 2018. Contrary to Saia’s argument,
the five notices did not create a genuine issue of material fact about the
falsity of Bronson’s statement at the time it was made. Four of the five
notices addressed missing or late payments, but the reason for those missed
payments is unclear, as is whether the payments were ever made and, if so,
when. The other notice was a “[l]etter agreement and reservation of rights
signed by the Bronsons regarding EverBank’s agreement to discuss
modification of one of its loans[.]” It is unclear what the status of the loans
was on July 10, 2018—the record does not reflect whether they were
modified, paid off, brought current, or in default at that time.
¶25 Also, Silverado’s audited financials disclosed that, as of
December 31, 2017, Silverado owed approximately $42 million to creditors,
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meaning the EverBank loan constituted only a small percentage of
Silverado’s total liabilities. Among its loans, Silverado had a line of credit
from Western Alliance Bank with a balance of $1,974,423—an amount
nearly identical to the principal amount owed to EverBank. Silverado’s
audited financials disclosed that it “was not in compliance with various
financial covenants” with respect to that line of credit. But Saia still agreed
Silverado’s financial documents “reflected profitability and stability” and
did not raise any concern that Silverado was “in any financial jeopardy.”
Finally, Saia admits that Silverado’s auditors explained that, as of August
22, 2018, “there were no subsequent events following December 31, 2017,
that would give rise to concern for the auditor,” which includes the
timeframe when EverBank sent the five notices. Saia has no evidence that
the auditors were unaware of the status of the EverBank loans when
making that statement.
¶26 Second, Saia argues that, as a director of Silverado, Bronson
must have known more about Silverado’s financial issues than he is letting
on. Bronson’s knowledge, however, is irrelevant if Saia cannot first create
a material issue of fact about the falsity of Bronson’s statement. See
Mahmoodi, 224 Ariz. at 291-92 ¶ 14 (listing falsity and knowledge as separate
elements of fraud). In other words, before addressing Bronson’s
knowledge, Saia must first establish that some event occurred or condition
existed before July 10, 2018, from which a jury could conclude that
Silverado was not a strong business, was not doing very well as an
enterprise, or was not strong financially. Saia did not do so. Regardless,
Saia only produced evidence showing that Bronson attended a single
Silverado board meeting on July 14, 2017, a full year before Bronson
allegedly made the statement underlying Saia’s fraud claims. A jury could
not find Bronson’s statement false based solely on his attendance at a single
meeting that occurred a year before the alleged misrepresentation,
particularly when Saia has no evidence that the board discussed any
financial difficulties on Silverado’s part during that meeting.
¶27 In sum, Saia did not produce evidence creating a genuine
issue of material fact about the falsity of Bronson’s alleged statement at the
time it was made. The superior court did not err in granting summary
judgment to Bronson (and his spouse).
II. Motion for Reconsideration
¶28 Saia argues the court erred in granting Nineveh’s motion for
reconsideration because Nineveh filed its joinder request late and included
only a summary statement. We review the superior court’s decision
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granting a motion for reconsideration for an abuse of discretion. McGovern
v. McGovern, 201 Ariz. 172, 175 ¶ 6 (App. 2001).
¶29 A party may move the court to reconsider a decision. Ariz. R.
Civ. P. 7.1(e)(1). When that happens, the court must allow all other parties
to respond before granting the motion. Ariz. R. Civ. P. 7.1(e)(2). A non-
claimant may “move for summary judgment at any time after the action is
commenced.” Ariz. R. Civ. P. 56(b)(2). But a motion for summary judgment
“may not be filed later than the dispositive motion deadline . . . or absent
such a deadline, 90 days before the date set for trial.” Ariz. R. Civ. P.
56(b)(3).
¶30 The superior court did not abuse its discretion in granting
reconsideration. Although Nineveh filed its joinder after the court’s
dispositive motion deadline, Bronson filed his motion, which Nineveh
joined, before that deadline. Nineveh filed its motion for reconsideration
after the parties stipulated to vacate the trial date, and the court allowed
Saia to respond before issuing its decision. The court correctly concluded
that Saia’s claims against Nineveh were predicated solely on statements
Bronson made, and thus summary judgment for Bronson necessarily meant
summary judgment for Nineveh.
III. Attorney Fees
¶31 Nineveh cross-appeals, arguing the superior court should
have awarded it attorney fees under A.R.S. § 12-341.01 because Saia’s claim
for fraudulent inducement “arose out of contract.” We review de novo
whether a cause of action “arises out of a contract.” Caruthers v. Underhill,
230 Ariz. 513, 526 ¶ 58 (App. 2012).
¶32 “An action for fraudulent inducement can arise out of
contract for purposes of A.R.S. § 12-341.01 where a party to a contract sues
the other contracting party to invalidate the contract.” Caruthers, 230 Ariz.
at 526 ¶ 58. This is because the “cause of action for tort could not have
existed but for the . . . contract.” Marcus v. Fox, 150 Ariz. 333, 336 (1986).
The court may award attorney fees when “the dispute concerns the validity
of the contract” not just when “there is a breach”; concluding otherwise
“would be both inequitable and unjust.” Id.¶33 Saia argues that Caruthers and Marcus do not apply because it
did not sue Nineveh to invalidate the Agreement. Although Saia is correct
about the nature of its requested remedy—it sought only damages—the
reasoning underlying Caruthers and Marcus still applies. Saia’s cause of
action for fraudulent inducement could not have existed but for the
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Agreement with Nineveh—without an agreement there could be no
inducement. Moreover, nothing in the text of § 12-341.01 suggests that its
application turns solely on the nature of the remedy sought. Instead, § 12-
341.01(A) allows a fee award “[i]n any contested action arising out of a
contract.” Finally, Saia’s argument is inconsistent with Marcus. There, the
superior court “awarded Marcus damages based on the jury’s finding that
he had been fraudulently induced to enter the contract,” but the court
refused to award fees. Marcus, 150 Ariz. at 336 (emphasis added). Our
supreme court concluded that “[i]f the basis for the [superior] court’s
decision was that Marcus could not recover under § 12–341.01(A), it is
ordered that a new finding be entered,” and the court ordered the superior
court to instead exercise its discretion to determine an appropriate amount
of fees to award, if any. Id. We have the same situation here.
¶34 The superior court incorrectly relied on Morris v. Achen
Construction Co., 155 Ariz. 512 (1987), to deny Nineveh attorney fees. In
Morris, our supreme court analyzed whether fraud “between A and B is an
action ‘arising out of contract’ because the alleged fraud caused A to enter
into a contract with C.” 155 Ariz. at 513. The supreme court held that
attorney fees could not be awarded under A.R.S. § 12-341.01 by
“fraudulently inducing one to enter into a contract with a third party[.]” Id.
at 514 (emphasis added). As part of its holding, however, the court
distinguished its conclusion with an example of when fraudulent
inducement does “arise out of contract”—when a party to the contract sues
another party to the contract and claims fraudulent inducement. Id.; see also
Marcus, 150 Ariz. at 336.
¶35 Here, Nineveh and Saia were parties to the Agreement. Like
the example in Morris, a party to the contract (Saia) sued another party to
the contract (Nineveh) for fraudulent inducement. The superior court
therefore erred in concluding that Nineveh was legally ineligible for an
attorney fees award under § 12-341.01(A). We vacate the denial of attorney
fees and remand for the court to exercise its discretion to determine the
appropriate amount of attorney fees, if any, to award Nineveh based only
on its fraudulent inducement claim.
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CONCLUSION
¶36 We affirm the superior court’s grant of summary judgment to
the defendants. We vacate the denial of attorney fees and remand for
further proceedings consistent with this decision.
AMY M. WOOD • Clerk of the Court
FILED: AGFV
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