Lapour v. Central State

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UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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
LAPOUR D.C. ONE, LLC,
Plaintiff/A ppellee,
Vv.
CENTRAL STATE SHINGLE RECYCLING, LLC, et al,
Defendants/A ppellees.
Vv.
JASON MCCULLAR AND MINDY MCCULLAR,
Defendants/A ppellants.
No. 1 CA-CV 21-0578
FILED 8-30-2022
Appeal from the Superior Court in Maricopa County
No. CV2018-052699
The Honorable Sara J. Agne, Judge
AFFIRMED IN PART, REVERSED IN PART
COUNSEL
Shein Phanse Adkins, PC, Scottsdale
By David E. Shein, Erik Daniel Smith
Counsel for Plaintiff/A ppellee
Lang & Klain, PC, Scottsdale
By Michael Walter Thal, George H. King, Mickell J. Summerhays
Counsel for Defendants/A ppellants
LAPOUR v. CENTRAL STATE, et al.
Decision of the Court
MEMORANDUM DECISION
Presiding Judge David D. Weinzweig delivered the decision of the Court,
in which Judge Brian Y. Furuya and Judge Jennifer M. Perkins joined.
WEINZWEIG Judge:
q1 Defendant Jason McCullar appeals from the superior court's
entry of partial summary judgment in favor of LaPour DC One, LLC
(“Landlord”) for breach of a lease guaranty, and its ruling that McCullar is
jointly and severally liable for a $10 million judgment. For the reasons set
forth below, we affirm in part and reverse in part.
FACTS AND PROCEDURAL BACKGROUND
First Lease
q2 In February 2011, Yelton Contracting (“Tenant A”) leased ten
acres of commercial land from Landlord in north Phoenix. Scott Yelton
owned Tenant A, also known as Central State Shingle Recycling.
q3 Landlord and Tenant A entered a simple one-year lease
agreement (“First Lease”), which provided that Tenant A “shall use the
Premises for recycling of roofing shingles,” ensuring “compliance with
all” laws and administrative regulations. Tenant A agreed to keep the
Premises “in good repair,” and to “surrender the Premises to Landlord in
the same condition as received, broom-clean.” Shane Fellers, Tenant A’s
employee, signed the First Lease for Tenant A.
Second Lease and Personal Guaranty from Yelton
q4 A year later, Landlord entered a second one-year lease
agreement (“Second Lease”) with Tenant A for the “agreed use [of]
[s]hingle storage and recycling.” Again, Tenant A promised to comply with
all laws and regulations, to “surrender the Premises to Landlord in the same
condition as received,” and to perform “any environmental clean up that
1 Although listed as a party on appeal, Mindy McCullar has not
appeared or filed anything, and the marital community is not responsible
for a “personal guaranty” absent both spouses’ signatures. See A.R.S. § 25-
214(C); A.R.S. § 25-215(D). We only discuss Jason McCullar.
LAPOUR v. CENTRAL STATE, et al.
Decision of the Court
may be required.” Scott Yelton signed the Second Lease as Tenant A’s CEO
and sole owner.
q5 This time, Landlord also required Yelton to sign a separate
“Guaranty of Lease” agreement (“Yelton Guaranty”), which promised to
“guarantee the performance of [the] lease,” and to “jointly, severally,
unconditionally and irrevocably guarantee the prompt payment by Lessee
of all rents and other sums payable by Lessee under the [Second Lease] and
the faithful and prompt performance by Lessee of each and every one of the
terms, conditions and covenants of [the Second Lease].” Yelton signed as
“Guarantor|].”
2014 Addendum to First Lease
q6 More than two years later, Landlord and Tenant A entered an
Addendum (“2014 Addendum”), which (1) “reinstated” the First Lease for
twenty months, and (2) “added” a second tenant “to the Lease” named JML
Energy Resources (“Tenant B”). Tenant B was owned by Yelton and Jason
McCullar’s business. By this time, Tenant A had merged into Tenant B.
q7 Landlord again required a personal guaranty, so the 2014
Addendum stated that “Jason McCullar and Scott Yelton shall personally
guarantee the Lease.” Yelton and McCullar both signed the 2014
Addendum. McCullar’s signature is shown in this screenshot:
Ad pose if applicable
2016 Amendment to First and Second Lease
q8 Tenant A, Tenant B and Landlord entered a written
Amendment in December 2016 to the First Lease and Second Lease. The
2016 Amendment stated that the Tenants must either “resume recycling the
asphalt shingles” at the premises or pay Landlord monetary penalties. But
“all other terms” of the First Lease and Second Lease “remain{ed] in full
force and effect.” Only McCullar signed for Tenant B. His signature is
undated.
This Lawsuit
q9 Landlord sued Tenant A and Tenant B in 2018, asserting
several claims, including breach of contract and breach of good faith and
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Decision of the Court
fair dealing. Landlord alleged that Tenants did not pay rent, keep the
premises in good repair, return the property in the condition it was
received, or meet all applicable laws and regulations. Landlord requested
$7 million in remediation costs, along with unpaid rent, punitive damages
and attorney fees. What is more, Landlord sued Yelton and McCullar
personally for breaching the guaranty in the lease agreement.
710 A default judgment was entered against Tenant B, and we
affirmed that judgment on appeal, but remanded to determine the amount
of damages. See LaPour DC One LLC v. JML Energy Res. LLC, 2020 WL
897732 (Ariz. App. Feb. 25, 2020). The superior court entered a final
judgment against Tenant B for more than $10 million. Tenant B did not
appeal.
q11 Landlord then moved for summary judgment on its contract
claims against Tenant A, and its breach of guaranty claims against Yelton
and McCullar. In support, Landlord offered: (1) the lease documents, (2) a
pair of 2018 declarations from McCullar and Yelton about remediating the
property, (3) McCullar’s emails from July 2016, when he confirmed he
“signed the updated lease with a personal guarantee,” adding he did not
“take that lightly,” and (4) assorted documents on environmental
violations. McCullar, Yelton and Tenant A responded pro se, admitting
they left more than 200,000 tons of asphalt roofing shingles on the premises,
but arguing the Landlord gave permission. At oral argument, McCullar
also challenged the personal guarantee clause in the 2014 Addendum as
“incredibly ambiguous.”
q12 After oral argument, the superior court granted partial
summary judgment to Landlord on its breach of contract and breach of
guaranty claims, and awarded damages of $10,697,403, plus attorney fees
and costs. It ruled that (1) Tenant A breached the lease agreement, (2)
Yelton and McCullar personally guaranteed the lease agreement, and (3)
Yelton and McCullar were liable for Tenant B’s default judgment. Finding
no just reason for delay, the court entered judgment under Arizona Rule of
Civil Procedure (“Rule”) 54(b).
q13 McCullar timely appealed. We have jurisdiction. See A.R.S. §
12-2101(A)(1).
DISCUSSION
q14 We review de novo the superior court’s grant of summary
judgment, Jackson v. Eagle KMC LLC, 245 Ariz. 544, 545, § 7 (2019),
construing the facts in the light most favorable to the non-moving party,
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Decision of the Court
Wells Fargo Bank, N.A. v. Allen, 231 Ariz. 209, 213, § 14 (App. 2012).
Summary judgment is appropriate only if “the moving party shows that
there is no genuine dispute as to any material fact and [it] is entitled to
judgment as a matter of law.” Ariz. R. Civ. P. 56(a). We also interpret
contracts de novo. Tenet Healthsystem TGH, Inc. v. Silver, 203 Ariz. 217, 219,
{ 5 (App. 2002).
I, Burden of Proof
q15 A plaintiff who moves for summary judgment on its breach
of contract claims must prove each element of the claim with “undisputed
admissible evidence that would compel any reasonable juror to find in its
favor,” and “the mere absence of a genuine dispute of material fact does not
automatically entitle a plaintiff to judgment.” Wells Fargo Bank, 231 Ariz. at
211, 213, 9 16-18 (citation omitted).
716 McCullar argues that he never bore the burden of proof here
because Landlord relied on “uniformly inadmissible” evidence, “consisting
of unauthenticated, hearsay documents.” We disagree. Landlord met its
initial burden to show a contract, breach and damage. See First Am. Title
Ins. Co. v. Johnson Bank, 239 Ariz. 348, 353, § 22 (2016). At summary
judgment, Landlord offered (1) signed copies of the First Lease, Second
Lease, 2014 Addendum, and 2016 Amendment; (2) three emails in which
McCullar confessed the Tenants had not paid the rent, promised to do so,
and conceded that he “signed the updated lease with a personal
guarantee”; and (3) McCullar’s responsive statement of facts at summary
judgment, which confessed the Tenants returned the premises with 200,000
tons of concrete debris.
q17 McCullar was then required to come forward with evidence
creating a genuine issue of material fact as to his liability under the lease
and guarantee. See Ariz. R. Civ. P. 56(e). Like the superior court, we
conclude he did not. Aside from his unsupported conclusions and self-
serving denials, McCullar offered no evidence to rebut Landlord’s
evidence. He offered no evidence about the capacity of his signature on the
2014 Addendum, and no evidence that Landlord authorized him to
abandon the debris. Summary judgment was appropriate. See GM Dev.
Corp. v. Cmty. Am. Mortg. Corp., 165 Ariz. 1, 5-6 (App. 1990).
II. Contract Interpretation
718 McCullar contends that summary judgment was improper
because the 2014 Addendum was ambiguous.
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Decision of the Court
q19 Arizona courts interpret contracts “according to their plain
and ordinary meaning,” First Am. Title Ins. Co., 239 Ariz. at 350, { 8, looking
to determine and implement the parties’ intent, Taylor v. State Farm Mut.
Auto. Ins. Co., 175 Ariz. 148, 152 (1993). We glean the meaning “from the
whole contract,” Climate Control, Inc. v. Hill, 86 Ariz. 180, 188 (1959), aspiring
to “reconcile and give effect to all terms of the contract to avoid any term
being rendered superfluous,” Terrell v. Torres, 248 Ariz. 47,50, 9 14 (2020).
A. Existence of personal guarantee
20 McCullar argues the court should not have granted summary
judgment on the guarantee claim because he only signed the 2014
Addendum as “Lessee/Tenant,” and not in his individual capacity. We are
not persuaded.
q21 First, McCullar signed the 2014 Addendum as
“Lessee/Tenant” and “Jason Mc[C]ullar.”. A defendant’s unsupported,
self-serving denials are not competent evidence to defeat summary
judgment. Florez v. Sargeant, 185 Ariz. 521, 526 (1996) (“Self-serving
assertions without factual support in the record will not defeat a motion for
summary judgment.”).
q722 Second, we must interpret the 2014 Addendum as a whole,
bringing harmony to its terms, careful not to render them meaningless. See
Provident Nat’l Assur. Co. v. Sbrocca, 180 Ariz. 464, 465-66 (App. 1994);
Climate Control, Inc., 86 Ariz. at 189 (“A clause in a contract, if taken by itself,
often admits of two meanings, when from the whole contract there is no
reasonable doubt as to the sense in which the parties use it”). The 2014
Addendum stated that “Jason McCullar and Scott Yelton shall personally
guaranty the Lease.” The record shows that Landlord refused to “reinstate”
the First Lease unless personally guaranteed by McCullar and Yelton. If
accepted, McCullar’s preferred interpretation “would render the guaranty
substantially meaningless and valueless from the standpoint of the entire
collateral package bargained for by plaintiff” Sbrocca, 180 Ariz. at 466(quoting First Interstate Bank v. Colcott, 833 P.2d 876, 878 (Colo. App. 1992)).
q23 Third, the external evidence at summary judgment doused
any embers of ambiguity. Arizona courts may consider parol evidence to
determine the intent of the parties if “the contract language is ‘reasonably
susceptible’ to the interpretation asserted by its proponent.” See Johnson v.
Earnhardt’s Gilbert Dodge, Inc., 212 Ariz. 381, 384, § 12 (2006) (quoting Taylor,
175 Ariz. at 154). Here, over two years after signing the 2014 Addendum,
McCullar assured Landlord he “signed the updated lease with a personal
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Decision of the Court
guarantee” and did not “take that lightly.”. McCullar now insists he did not
mean what he wrote, but that’s not enough to defeat summary judgment.
A person’s undisclosed intent or understanding “is not admissible as
evidence of the meaning of the written agreement.” See Helena Chemical Co.
v. Coury Bros. Ranches, Inc., 126 Ariz. 448, 453 (App. 1980). This extrinsic
evidence cements McCullar to his personal guaranty.
q24 We decline McCullar’s invitation to adopt the laws of other
states that have chosen to require two signatures when binding a business
and an individual in the same contract. Arizona has not made that policy
choice and we decline to make it now.
q25 McCullar also contends that summary judgment was
improper because he offered an alternative interpretation of the 2014
Addendum — that he agreed only to enter a personal guaranty down the
road. He emphasizes the word “shall” in the relevant sentence: “Jason
McCullar and Scott Yelton shall personally guarantee the Lease.”
26 We disagree. The verb “shall” directly modifies “personally
guarantee.” The contract does not say he “shall at some point sign a separate
agreement.” 167 Ariz. 93,
96 (App. 1990) (a contractual term “is not ambiguous . . . merely because
one party assigns a different meaning to it in accordance with his or her
own interest’). And again, the external evidence still negates this
interpretation.
927 McCullar’s last two arguments are not persuasive. McCullar
argues the 2014 Addendum is not a personal guaranty because his spouse
never signed the document to bind the community under A.R.S. § 25-
214(C)(2). The absence of his wife’s signature, however, only shows he did
not bind the community. He also stresses that Arizona courts “generally
construe a guaranty to limit a guarantor’s liability,” Tenet Healthsystem
TGH, Inc., 203 Ariz. at 220, § 7, and generally resolve ambiguities against
the drafting party, Ins. Agencies Co. v. Weaver, 124 Ariz. 327, 329 (1979). But
we only deploy those interpretative shortcuts when a contract is
ambiguous, Valley Nat'l Bank of Phx. v. Shumway, 63 Ariz. 490, 497 (1945),
and this contract is not.
B. Scope of personal guarantee
28 McCullar raises three arguments about the scope of
guarantee. He argues “it is impossible to tell” which “lease” he guaranteed
under the 2014 Addendum. We disagree. The plain language of the 2014
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Decision of the Court
Addendum “reinstated” only the First Lease, and McCullar personally
guaranteed the terms of that lease from April 2014 to January 2016.
q29 He next argues he cannot be liable for damages incurred
before he signed the 2014 Addendum. We need not reach the bulk of this
argument because the summary judgment record contained substantial
evidence of post-2014 defaults, including the mountain of debris left at the
premises in 2016 and unpaid rent from 2016.
q30 We agree, however, that McCullar was not personally liable
for unpaid rent before he signed the 2014 Addendum and personally
guaranteed the lease. See 38A C.J.S. Guaranty § 56 (2022) (guaranty clauses
apply prospectively). We therefore reduce the damages by $245,740—
which represents the amount due for unpaid rent and rental taxes from 2012
and 2013. We affirm the rest of the damages award.
q31 McCullar also argues that summary judgment was improper
because the 2014 Amendment's guarantee clause did not differentiate
between a payment “guarantee” or collection guaranty. We disagree.
McCullar agreed to “personally guarantee the Lease” under the 2014
Amendment. “A guarantee is a promise to pay an obligation between a
creditor and debtor.” Howard v. Associated Grocers, 123 Ariz. 593, 595 (1979);
Phoenix Arbor Plaza, Ltd. v. Dauderman, 163 Ariz. 27, 29 (App. 1989) (“A
guarantee is a contract secondary or collateral to the principal contractual
obligations which it guarantees.”); Guarantee, Black’s Law Dictionary (11th
ed. 2019) (defining “guarantee” as “[t]he assurance that a contract or legal
act will be duly carried out”). On the other hand, a guaranty has been
defined as “[a] promise to answer for the payment of some debt, or the
performance of some duty, in case of the failure of another who is liable in
the first instance.” Guaranty, Black’s Law Dictionary (11th ed. 2019).
q32 But we need not rely solely on the difference in spelling to
divine the meaning of the guarantee. McCullar’s email to LaPour shows
his intent to “personally guarantee” not just the rent payments, but the
other lease obligations. He declared:
I intend to process material and clean up the shingle pile.
Please make no mistake that I signed the updated lease with
a personal guarantee, and while some people may take that
lightly, Ido not. It is my intention to right this issue.
933 Landlord’s parol evidence dispels any doubt as to the intent
behind the guarantee agreement. See Mason v. Telefunken Semiconductors
Am., LLC, 797 F.3d 33, 38 (1st Cir. 2015) (summary judgment proper when
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Decision of the Court
extrinsic evidence makes a contract’s meaning unequivocal). McCullar
presented no disputing evidence. We therefore affirm the superior court's
entry of partial summary judgment on Landlord’s contract claims.
III. Final Judgment under Rule 54(b)
934 McCullar contends the superior court should not have
entered a Rule 54(b) judgment because the continuing lawsuit turns on the
same facts and issues resolved here. See Ariz. R. Civ. P. 54(b). But a claim
for breach of guaranty turns on different elements and requires different
proof than actions for fraud, unlawful acts and punitive damages claims.
See GM Dev. Corp., 165 Ariz. at 8-9.
CONCLUSION
q35 We affirm the superior court’s entry of partial summary
judgment for Landlord on its contract claims, but reverse, and reduce the
total damages award from $10,697,403 to $10,451,663. See Nardelli v. Metro.
Grp. Prop. & Cas. Ins. Co., 230 Ariz. 592, 595-96, § 3 (App. 2012) (affirming
judgment but reducing damages award without remanding).
436 Landlord requests its attorney fees and costs under A.R.S. §
12-341.01(A) (fees awarded to “successful party” “in any contested action
arising out of contract”). Landlord has substantially prevailed on appeal,
so we grant its reasonable attorney fees subject to compliance with ARCAP
21. See Sanborn v. Brooker & Wake Prop. Mgmt., Inc., 178 Ariz. 425, 430 (App.
1994) (“While the award of money is an important item to consider when
deciding who is the prevailing party, the fact that a party does not recover
the full measure of relief it requests does not mean that it is not the
successful party.”). We also grant Landlord its costs on compliance with
ARCAP 21,
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AQ QA
AMY M. WOOD « Clerk of the Court
FILED: JT
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