Opinion
No. 1 CA-CV 18-0373
05-21-2019
ESCUDILLA MANAGEMENT CORPORATION, Plaintiff/Appellee, v. FRED K. CHRISTENSEN and ANNE CHRISTENSEN, husband and wife; STEPHEN C. DRIGGS and DON C. DRIGGS as co-trustees of J and B DRIGGS CHILDREN'S TRUST; GKD INVESTMENTS LIMITED PARTNERSHIP; RENEE HAGGARD, as trustee of THE RENEE HAGGARD FAMILY LIVING TRUST; BUZZ ALDRIN and LOUIS ALDRIN, husband and wife; MELVIN J. OWENS and YVONNE M. OWENS, as trustees of the OWENS REVOCABLE TRUST; PFI, LC; ROBERT OWENS and CHEER OWENS, as trustees of the ROBERT & CHEER OWENS LIVING TRUST; SHARON MAE MULLINS, as trustee of SHARON MAE HAGGARD MULLINS FAMILY TRUST; GAIL DRIGGS, as trustee of the DOUGLAS H. DRIGGS IRREVOCABLE TRUST FOR JOHN AND GAIL DRIGGS; KENT M. DIBBLE as trustee of the BEN DIBBLE PROFIT SHARING TRUST; RUSSELL CROSBY and BECKY CROSBY, husband and wife; JARRETT JARVIS and JANE DOE JARVIS, husband and wife; JAMES TANNER, as trustee for J & A TRUST; BRENT HOLMES and SUSAN HOLMES, as trustees of the BRENT HOLMES AND SUSAN HOLMES JOINT LIVING TRUST; ROGER SMITH and JESSIE SMITH, as trustees of the ROGER & JESSIE SMITH TRUST; DAVID C. TANNER and BETH E. BORST, husband and wife; SYDNEY TANNER and JOHN DOE TANNER, wife and husband; MORGAN TANNER and VALERIE TANNER, husband and wife; KARL OWENS and JANE DOE OWENS, husband and wife; BRADLEY T. OWENS and JANE DOE OWENS, husband and wife, Defendants/Appellants.
COUNSEL Denton Peterson PC, Mesa By Brad A. Denton, Sterling R. Peterson Counsel for Plaintiff/Appellee Jardine Baker Hickman & Houston PLLC, Phoenix By Bradley R. Jardine Counsel for Defendants/Appellants Patricia Jarvis, Jarrett Jarvis, Jarvis Revocable Trust Owens & Pyper PLC, Scottsdale By Bradley T. Owens Counsel for Defendants/Appellants Yvonne M. Owens, Robert Owens, Cheer Owens, Bradley T. Owens, Karl Owens, Melvin J. Owens, Owens Revocable Trust, Robert and Cheer Owens Living Trust
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 UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL AND MAY BE CITED ONLY AS AUTHORIZED BY RULE. Appeal from the Superior Court in Apache County
No. S0100CV201500076
The Honorable Steve Williams, Judge Pro Tempore
AFFIRMED
COUNSEL Denton Peterson PC, Mesa
By Brad A. Denton, Sterling R. Peterson
Counsel for Plaintiff/Appellee Jardine Baker Hickman & Houston PLLC, Phoenix
By Bradley R. Jardine
Counsel for Defendants/Appellants Patricia Jarvis, Jarrett Jarvis, Jarvis Revocable Trust Owens & Pyper PLC, Scottsdale
By Bradley T. Owens
Counsel for Defendants/Appellants Yvonne M. Owens, Robert Owens, Cheer Owens, Bradley T. Owens, Karl Owens, Melvin J. Owens, Owens Revocable Trust, Robert and Cheer Owens Living Trust
MEMORANDUM DECISION
Judge Randall M. Howe delivered the decision of the Court, in which Presiding Judge Paul J. McMurdie and Judge Jennifer B. Campbell joined. HOWE, Judge:
¶1 Yvonne M. Owens, as trustee of the Owens Revocable Trust; Robert Owens and Cheer Owens, as trustees of the Robert & Cheer Owens Living Trust; Bradley T. Owens and Jane Doe Owens; Karl Owens and Jane Doe Owens; and the Jarvis Revocable Trust (collectively "Owens and Jarvis") appeal from the trial court's order directing partition of property owned by the limited partnership Escudilla Management Company, L.P. ("Escudilla"). For the following reasons, we affirm.
For clarity, we refer to Karl Owens individually by his first name. --------
FACTS AND PROCEDURAL HISTORY
¶2 Escudilla was formed about 45 years ago. In May 2015, Escudilla Management Corp. ("EMC")—the general partner of the limited partnership—initiated a partition action of the partnership's assets, including over 2,000 acres of Arizona real estate, numerous accounts receivable, and cash. The real estate the limited partnership owned consists of several subdivided lots and various other tracts of land, including real-estate parcels located in Coulter Creek, Sawmill, Watts Creek, and Auger Canyon. The real estate has varied topography and some parcels have issues relating to utility and road access. EMC owns 40% of the partnership interests; the limited partners own the remaining 60% of the interests. Owens and Jarvis together own about 10% of the total partnership interests in the limited partnership.
¶3 In January 2017, the trial court entered a judgment for partition, appointed three real-estate commissioners to determine the most "fair and equitable" distribution of the partnership's assets, and ordered the commissioners to issue a report to the court. The court granted the commissioners "full authority" to investigate the condition of the various real-estate properties and to obtain all documents related to those properties or their value. After the appointment, the commissioners visited each parcel and lot and held several meetings to discuss the matter. The commissioners determined that the properties, accounts receivable, and cash could be equitably divided "into as many tracts/shares as . . . persons entitled thereto" but "it [was] not possible to divide . . . the parcels of property into as many tracts as . . . persons entitled to the tracts."
¶4 To establish values for the parcels, the commissioners considered several factors, including the size, topography, vegetation, views, water availability, road access, and each parcel's access to utilities. They also considered recent sales in the area and spoke with local real-estate brokers about the market. After completing a market analysis and coming to a tentative conclusion on how the partnership's assets should be divided, the commissioners met with Owens' and Jarvis' counsel to discuss any concerns the parties may have about the partition. During the June 2017 meeting, the parties discussed the possibility of placing deed restrictions on the parcels. Following that meeting, EMC emailed Owens and Jarvis, requesting that they review and comment on a proposed draft of the deed restrictions that were discussed at the meeting, but neither Owens nor Jarvis responded.
¶5 Around this same time, EMC sold approximately 100 acres of the Coulter Creek parcel for approximately $3,000 an acre. The commissioners subsequently reevaluated their previous valuation of the Coulter Creek property and reduced it by about 15%, "which equated to $750 an acre." Noting the sale was higher than the commissioners' valuation and allegedly involved a buyer that "intend[ed] to purchase more acres," Jarvis and Owens insisted that the commissioners' valuation of the Coulter Creek parcel was erroneous. They asserted that the sale "established the [parcel's] value." The commissioners disagreed, however, and reasoned that a minor price reduction was necessary because the sale concerned "the plum of that property." One commissioner also noted that, on a per-acre basis, some of the remaining portions of the property were worth as low as $300 an acre.
¶6 The commissioners' valuation of the real estate reflected that the Auger Canyon parcel was the most valuable property, followed by Sawmill, Watts Creek, and finally Coulter Creek. The commissioners placed these valuations in their report to the court. The report listed each parcel of land, each note, and the amount of cash the partnership held and assigned those assets in proportion to the parties' respective interests. The report assigned the Watts Creek, Sawmill, and Coulter Creek parcels to EMC and divided the Auger Canyon parcels into 14 "tracts," which were assigned to various limited partners. Included in the report was also an exhibit listing proposed deed restrictions governing such matters as required setback distances, prohibitions against certain types of activities, and restrictions on temporary buildings.
¶7 Owens and Jarvis objected to the commissioners' proposed division of assets in the report, arguing that the recommendations were "unjust, unfair and inequitable." By the same token, they maintained that many of the real-estate properties were undervalued and that the limited partners would have received more acreage if "Coulter Creek and the other parcels had been valued correctly[.]" They also asserted that the commissioners "exceeded their authority" by attaching proposed deed restrictions as an exhibit to the report.
¶8 In March 2018, the court addressed the objections in an evidentiary hearing. At that hearing, both parties presented evidence about the values of the various parcels and lots. Owens and Jarvis provided evidence showing that a 2008 appraisal had valued the parcels at higher figures than those assigned by the commissioners. Owens' and Jarvis' expert, a real-estate broker, also opined that the parcels allocated to EMC were undervalued and consequently the division of property was "unfair" to the limited partners.
¶9 Karl, a limited partner in Escudilla, also testified as an expert at the hearing. He assigned higher values to the properties than the commissioners and asserted that the commissioners had overlooked many appealing characteristics of the various properties. For instance, he testified that the commissioners undervalued Watts Creek—and should have valued it only as "slightly less than the Auger Canyon parcel"—because, although "the Auger parcel [had] some advantages[,]" the Watts property had a "great view of the entire valley," no "unbuildable" land, "[g]ently rolling topography," and access to a "paved and maintained state highway."
¶10 The commissioners disagreed vigorously with the experts. The commissioners testified that the 2008 appraisal had minimal value because it was based on "unrealistically high" pre-recession sales-values. Commissioner Brown also opined that the Auger Canyon property was significantly more valuable than the other properties because it had convenient road access, a creek, Ponderosa pines, preferred topography, and a "gently sloping nature . . . conducive to residential building."
¶11 Following the hearing, the court ordered the commissioners to provide an amended report, "taking into consideration the objections raised by the parties relative to the deed restrictions." The commissioners subsequently filed an Amended Commissioners' Report that deleted the restrictions but was otherwise identical to their initial report. Owens and Jarvis objected to the amended report, maintaining that the court lacked authority under A.R.S. § 12-1219 to direct the commissioners to amend the report because the commissioners had committed "material error" by attaching proposed deed restrictions to the original report. They asserted that the court had only two options under Arizona law: either adopt the report as filed or reject it in its entirety and appoint new commissioners. They also argued that the recommended partition was "unjust, unfair and inequitable." The court concluded, however, that the proposed division was equitable and that the commissioners had made no material error. Accordingly, the court adopted the Amended Commissioners' Report and ordered the partition of the partnership's assets. Owens and Jarvis timely appealed.
DISCUSSION
1. Division of Property
¶12 Owens and Jarvis dispute the trial court's finding that the division of the partnership's assets was fair and equitable. Fashioning an equitable remedy is within a trial court's discretion, and we review a trial court's exercise of equitable discretion for an abuse thereof. See City of Tucson v. Clear Channel Outdoor, Inc., 218 Ariz. 172, 188 ¶¶ 55, 58 (App. 2008) (applying an abuse of discretion standard to determine if an equitable remedy was proper). An abuse of discretion exists when the record, viewed in the light most favorable to upholding the court's decision, is devoid of competent evidence to support the decision. Michaelson v. Garr, 234 Ariz. 542, 544 ¶ 5 (App. 2014). "We defer to the trial court with respect to any factual findings explicitly or implicitly made, affirming them so long as they are not clearly erroneous, even if substantial conflicting evidence exists." John C. Lincoln Hosp. and Health Corp. v. Maricopa Cty., 208 Ariz. 532, 537 ¶ 10 (App. 2004). We neither reweigh the evidence nor determine the credibility of witnesses. Brown v. U.S. Fidelity and Guar. Co., 194 Ariz. 85, 92 ¶ 36 (App. 1998).
¶13 An owner of any interest in property may seek partition of the property between himself and other owners. A.R.S. §§ 12-1211(A), -1222. A partition is an equitable proceeding governed by statute. Collier v. Collier, 73 Ariz. 405, 414 (1952). "The fundamental objective in a partition action is to divide the property so as to be fair and equitable[.]" McCready v. McCready, 168 Ariz. 1, 3 (App. 1991) (quoting Frame v. Frame, 227 Mont. 439, 443 (1987)). Accordingly, the court has the discretion to determine the most equitable manner to partition the property, either by physically dividing it or forcing a sale. Id.; A.R.S. §§ 12-1215, -1218. Here, the record shows that the trial court's division of property was appropriate.
¶14 Although Owens and Jarvis argue that the parcels and lots assigned to EMC were undervalued and, as a result, EMC was assigned far more acreage than it was entitled to have, the court found otherwise. Indeed, the court found that although the Amended Commissioners' Report might result in a partner receiving more cash, more accounts receivable, or more land than another partner with a proportional interest, "the overall value of cash, and accounts receivable, and land attributed to each partner [was] comparable." Implicit in these findings is the conclusion that the commissioners' valuation reflected the best valuation for the properties.
¶15 Moreover, these findings were based on the commissioners' testimony. Although Owens and Jarvis challenged that testimony and presented a competing valuation, the trial court was free to accept EMC's and the commissioners' evidence to the contrary. See Vincent v. Nelson, 238 Ariz. 150, 155 ¶ 18 (App. 2015) (noting that the trial court is in the best position to judge credibility and resolve conflicting evidence and that the appellate court generally defers to its findings). We therefore decline to reweigh the evidence and defer to the trial court's resolution of any dispute concerning the value of the real-estate properties.
¶16 Owens and Jarvis assert nonetheless that the commissioners failed to justify why they valued the Watts Creek parcel at "55% less than the Auger Canyon parcel" and that the commissioners erred by failing to explain how the Auger Canyon valuation was determined. Neither assertion has merit. Brown testified about why he and the other commissioners found the Auger Canyon parcels significantly more valuable than the Watts Creek parcel. Brown explained that a "big factor" in valuing property is "the slope" and that much of the acreage on Watts Creek was especially steep. He also opined that Auger Canyon was the "best property" because it had convenient road and water access, superior topography, and a gentle slope.
¶17 In a related argument, Owens and Jarvis assert that the commissioners failed to "investigate and consider the access, location of utilities, and [] other factors that affect value" when valuing the Auger Canyon parcels. This assertion is contrary to the record. In addition to testifying about the road access, water access, and topography of the Auger Canyon parcels, Brown testified that he had visited "every property" and that he and the other commissioners had "detailed discussions" about the pieces of property. Furthermore, another commissioner testified that, for purposes of valuing the parcels, he looked at such factors as water access, electricity, topography, and ingress and egress access.
¶18 Owens and Jarvis next argue that the commissioners' report was deficient because the trial court's Order Appointing Commissioners "required" the commissioners to investigate and consider "the title and status of timber rights" and to set forth "whether any of the parcels come with timber rights or whether Escudilla will claim the timber rights." The part of the order to which Owens and Jarvis cite and rely, however, does not mandate that the commissioners make any particular findings; instead, it merely grants the commissioners "authority" to investigate and obtain information related to such matters. Thus, this argument fails.
¶19 Owens and Jarvis additionally argue that the partnership's assets were inequitably distributed among the partners because the commissioners improperly valued "the real estate and notes/receivables the same as cash." In particular, they insist that because "real estate and notes are not the same as cash," the commissioners' failure to discount the assigned real estate and notes receivable constitutes error. In support of their position they cite Karl's testimony. But again, this argument amounts to a request that this Court reweigh the evidence. In addition to Karl's testimony, Brown testified that he and the commissioners had detailed discussions as to the necessity of discounting the notes and real property. Brown also testified that the commissioners adjusted the notes only "slightly" because they were "well secured" by deeds of trust. He further opined the notes receivable were allocated equitably. The trial court considered the strengths and weaknesses of the experts' positions and was in the best position to judge their credibility. See State v. Estrada, 209 Ariz. 287, 292 ¶ 22 (App. 2004). Accordingly, we find no error in the trial court's adopting the commissioners' value for the land and notes. The trial court therefore did not abuse its discretion in finding that the partnership's assets were equitably divided.
2. Application of A.R.S. § 12-1219
¶20 Owens and Jarvis assert that the commissioners committed "material error" by attaching deed restrictions to their initial report and that consequently the trial court lacked authority under A.R.S. § 12-1219 to instruct the commissioners to amend their report. We review issues of statutory interpretation and application de novo. Rogone v. Correia, 236 Ariz. 43, 49 ¶ 17 (App. 2014). Section 12-1219 provides that if "any report of the commissioners in partition" is found "erroneous in a material respect," the trial court must reject the report and appoint other commissioners.
¶21 Neither the record nor the trial court's findings support the existence of any "material error." Instead, the record reflects that the commissioners' amended report did not affect any of the commissioners' valuations. Absent the deed restrictions, the amended report was identical to the initial report. Thus, the court did not lack the authority to direct the commissioners to amend their report.
CONCLUSION
¶22 For the foregoing reasons, we affirm.