Opinion
No. 2 CA-CV 2018-0113
03-07-2019
MONICA D. LABADIE, TRUSTEE OF THE MONICA D. LABADIE REVOCABLE TRUST DATED FEBRUARY 23, 2016, Plaintiff/Appellee, v. RICHARD MENKIN, AN INDIVIDUAL, Defendant/Appellant.
COUNSEL Davis Miles McGuire Gardner PLLC, Tempe By Bradley D. Weech and Marshall R. Hunt Counsel for Plaintiff/Appellee Stein and Stein P.C., Mesa By Henry M. Stein and Amy R. Wilson Counsel for Defendant/Appellant
THIS DECISION DOES NOT CREATE LEGAL PRECEDENT AND MAY NOT BE CITED EXCEPT AS AUTHORIZED BY APPLICABLE RULES.
NOT FOR PUBLICATION
See Ariz. R. Sup. Ct. 111(c)(1); Ariz. R. Civ. App. P. 28(a)(1), (f). Appeal from the Superior Court in Pinal County
Nos. S1100CV201602132, S1100CV201602133, S1100CV201602134, S1100CV201602135, and S1100CV201602136 (Consolidated)
The Honorable Stephen F. McCarville, Judge
AFFIRMED IN PART; VACATED IN PART AND REMANDED
COUNSEL Davis Miles McGuire Gardner PLLC, Tempe
By Bradley D. Weech and Marshall R. Hunt
Counsel for Plaintiff/Appellee Stein and Stein P.C., Mesa
By Henry M. Stein and Amy R. Wilson
Counsel for Defendant/Appellant
MEMORANDUM DECISION
Judge Vásquez authored the decision of the Court, in which Presiding Judge Staring and Judge Brearcliffe concurred. VÁSQUEZ, Judge:
¶1 In this partition action, Richard Menkin appeals from the trial court's grant of summary judgment and award of attorney fees in favor of his daughter Monica Labadie. He argues the court erred by failing to order that his share of the initial costs in purchasing the five properties at issue be reimbursed upon the sale of the properties. He additionally argues the court erred by awarding Labadie fees under A.R.S. § 12-341.01 because this action did not arise out of a contract, and under A.R.S. § 12-349 because the court failed to state its reasons on the record. For the following reasons, we affirm in part, vacate in part, and remand.
Factual and Procedural Background
¶2 "We view the facts in the light most favorable to the party against whom summary judgment was entered." Thompson v. Pima County, 226 Ariz. 42, ¶ 2 (App. 2010). The following facts, however, are not in dispute. In February 2006, Menkin, Tim Williams, and Jerry Morrison purchased a parcel of property (the "Baseball Park property"), in which each acquired a one-third interest. Later, in November 2006, Menkin and Williams purchased four other parcels of property in Eloy (hereinafter the "Eloy properties"), each receiving an undivided one-half interest in each parcel. Menkin's interest was conveyed to him and his daughters—Labadie and Andrea Menkin—as joint tenants. Andrea later conveyed her interest back to her father.
¶3 In 2011 and 2012, Williams conveyed his interest in each of the properties to Labadie. Labadie, in turn, transferred her interests into the Monica D. Labadie Revocable Trust. This resulted in Labadie owning a 66.66 percent interest and Menkin owning a 33.34 percent interest in the Eloy properties. Labadie, Menkin, and Morrison thereafter each had a 33.3 percent interest in the Baseball Park property.
¶4 In December 2016, Labadie filed this action against Menkin and Morrison, seeking a partition of the five properties. Although Menkin did not object to the sale of the properties, he filed a motion for summary judgment, arguing the sale proceeds should first be used to reimburse him for his share of the purchase costs. In her cross-motion for summary judgment, Labadie asserted that the proceeds had to be distributed according to the interests set forth in the deeds and that the acquisition costs were not a reimbursable expense.
Andrea was also named as a defendant. But after Andrea transferred her interests to Menkin in January 2017, Labadie voluntarily dismissed her from the lawsuit without prejudice. She later moved to have the dismissal be with prejudice, which the trial court granted.
Labadie initially filed five separate complaints—one for each property. The trial court granted Menkin's motion to consolidate the five cases under a single cause number.
¶5 The trial court granted Labadie's motion, ordering that the properties be sold and that, after reimbursing Labadie for property taxes paid in previous years, the remaining proceeds "be divided between the Parties according to their . . . respective interests" set forth in the relevant deeds. The court also granted Labadie's request for an award of attorney fees and costs "pursuant to [A.R.S. §§] 12-341.01 and [12-]349." Menkin timely appealed. We have jurisdiction pursuant to A.R.S. §§ 12-120.21(A)(1) and 12-2101(A)(1).
Following the trial court's entry of judgment, the parties reached a settlement releasing Morrison from the judgment and dismissing him from the case. Consequently, Morrison is not a party to this appeal.
Summary Judgment
¶6 Menkin first argues the trial court erred in granting Labadie's motion for summary judgment and ordering that the proceeds from the sales be distributed according to the parties' interests as reflected in the deeds. On appeal from the grant of summary judgment, we determine de novo whether the court correctly applied the law and whether there is a genuine dispute as to any material fact. Dayka & Hackett, LLC v. Del Monte Fresh Produce N.A., Inc., 228 Ariz. 533, ¶ 6 (App. 2012). Summary judgment is appropriate when "the moving party shows that 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).
¶7 "The partition of real property is a statutory procedure," and, "[a]s such, the proceedings are governed by the statute[s]." Register v. Coleman, 130 Ariz. 9, 14 (1981); see A.R.S. §§ 12-1211 to 12-1225. "The fundamental objective in a partition action is to divide the property so as to be fair and equitable and confer no unfair advantage on any cotenant." 59A Am. Jur. 2d Partition § 6 (2019); see McCready v. McCready, 168 Ariz. 1, 3 (App. 1991). Accordingly, the trial court has discretion to determine the most equitable way to partition the property, either by physically dividing it or forcing its sale. See §§ 12-1215, 12-1218. If the court forces a sale, the proceeds must be distributed "between the persons entitled . . . according to their respective interests." § 12-1218(C); see McCready, 168 Ariz. at 3. The court lacks discretion to order a distribution that conflicts with the statute. See Owens v. M.E. Schepp Ltd. P'ship, 218 Ariz. 222, ¶ 35 (2008) (commissioners may not recommend dividing property in way that conflicts with statute); see also Cohen v. Frey, 215 Ariz. 62, ¶ 6 (App. 2007) (any remedy must comply with statutory scheme).
¶8 Menkin does not dispute the trial court's decision to force the sale of the properties. Nor does he dispute the interests expressly granted to the parties by the respective deeds. Instead, Menkin challenges the court's interpretation of the statute's mandate that the proceeds be distributed "between the persons entitled . . . according to their respective interests." § 12-1218(C). He maintains the phrase refers not only to legal interests, but also equitable interests, and thus the court has discretion to "reimburse at least a portion of the co-owners' . . . acquisition costs." Labadie, on the other hand, contends that according to the statute's plain language, "each party is entitled to a percentage of proceeds consistent with that party's percentage interest in the property" as determined by the relevant deeds.
¶9 "When interpreting a statute, we look to the plain meaning of the language as the most reliable indicator of legislative intent and meaning." Grubaugh v. Blomo, 238 Ariz. 264, ¶ 6 (App. 2015). If a statute's plain meaning is clear, we do not look beyond the face of the statute to determine legislative intent. Yollin v. City of Glendale, 219 Ariz. 24, ¶ 7 (App. 2008). In considering whether the plain language is clear, "[w]e give words and phrases in statutes and rules their common or ordinary meanings unless the context reveals a special meaning." Stout v. Taylor, 233 Ariz. 275, ¶ 12 (App. 2013). "To determine the ordinary meaning of a word, we may refer to established and widely used dictionaries." Id.
¶10 The common meaning of the term "interest" is "[a] legal share in something." Interest, Black's Law Dictionary (10th ed. 2014); see also The American Heritage Dictionary 914 (5th ed. 2011) (defining "interest" as "right, claim, or legal share"); Webster's Third New Int'l Dictionary 1178 (1971) (interest is "legal interest" or "right, title, or legal share in something"). Consequently, the term "interests" as used in § 12-1218(C) appears to refer to legal interests in a property.
¶11 Other sections of the partition statutes refer to "equitable" divisions of property or interests or give the trial court discretion to determine the most equitable way to partition the property. See, e.g., A.R.S. §§ 12-1218(A) (referring to commissioners' opinion on "fair and equitable division of the property"), (B) (court may physically divide property or force sale, whichever it finds most "beneficial" to parties), 12-1223(B) (discussing court's powers when personal property "will not admit of an equitable partition"). We thus presume that had the legislature intended to include equitable interests in § 12-1218(C), or to give courts the authority to consider such interests, it would have said so. See Progressive Cas. Ins. Co. v. Estate of Palomera-Ruiz, 224 Ariz. 380, ¶ 14 (App. 2010).
¶12 Labadie, Andrea, and Menkin initially shared an undivided one-half interest in the Eloy properties as joint tenants, but that joint tenancy was terminated when Labadie transferred her interests into her trust. See 20 Am. Jur. 2d Cotenancy and Joint Ownership § 23 (2019) (joint tenancy terminates when one tenant transfers interest to trust); see Lonergan v. Strom, 145 Ariz. 195, 198 (App. 1985) (party to joint tenancy may terminate it by conveyance of her interest). Williams also conveyed Labadie an additional one-half interest in each of the properties. Neither party disputes that these conveyances ultimately resulted in Labadie owning a 66.66 percent interest in each of the Eloy properties. As to the Baseball Park property, Labadie's interest arises solely from Williams's conveyance of his 33.3 percent interest.
¶13 Here, the parties' interests—and relationship as cotenants—are clearly defined by the deeds as percentage interests. See McCready, 168 Ariz. at 3 ("In a partition suit, the only relevant equities are those which arise out of the relationship of cotenancy."). Thus, the fact that Labadie paid no consideration for her interests in the properties is irrelevant in light of the controlling deeds. Cf. Christen v. Christen, 38 S.W.3d 488, 492-93 (Mo. Ct. App. 2001) (considering contributions towards property purchase only when deed failed to specify respective shares). Consequently, the trial court lacked discretion to adjust the distribution of the proceeds in a way that altered those clearly defined interests. See § 12-1218(C); see also Owens, 218 Ariz. 222, ¶ 35.
¶14 Nevertheless, Menkin asserts that Keith v. El-Kareh, 729 P.2d 377 (Colo. App. 1986), supports his position. That case involved a partition action in which each of the cotenants owned an undivided one-half interest in the property. Id. at 378. The cotenants had agreed to divide the cost of the down payment, mortgage payments, taxes, and interest evenly. Id. El-Kareh, however, paid a larger share of the down payment and mortgage, with the agreement that Keith would repay him when he was able to do so. Id. Keith later paid the entire mortgage himself. Id. At issue was whether the trial court could adjust the parties' interests in the partition proceeds to "offset any amount owing against" each other's share. Id. at 379.
¶15 The Colorado Court of Appeals noted that generally "[a] court's function when deciding a partition action is not to create new interests in property owned by tenants in common, but is merely to sever their unity of possession." Id. Accordingly, "when partitioning property held by tenants in common, each with an undivided one-half interest, the court should assign only the one-half interest in the property to each tenant, and not grant a greater share of the property to either." Id. However, under Colorado law, a court in a partition action is required to "make a complete adjudication of the rights of all parties," Colo. Rev. Stat. Ann. § 38-28-103, and has the discretion to "direct the payment and discharge of liens . . . or . . . apportion any lien among the persons to whom the partition is made." Colo. Rev. Stat. Ann. § 38-28-110. Based on the Colorado partition statutes, the court re-calculated Keith's and El-Kareh's shares and offset their respective ownership interests in light of their actual contributions. 729 P.2d at 379-80.
¶16 Arizona's partition statutes have no counterpart to the Colorado statutes that would allow the trial court here to consider such a remedy. See A.R.S. §§ 12-1211 to 12-1225. Without that authority, as the court in Keith explained, the court in a partition action should assign each party its respective interest in the property and no more. 729 P.2d at 379. Consequently, Keith undermines rather than supports Menkin's position.
¶17 Menkin asserts that costs towards the initial acquisition of properties nevertheless are reimbursable by the other cotenants. See Gonzales v. Gonzales, 134 Ariz. 437, 438-39 (App. 1982) ("[T]enant in common may seek indemnification from a cotenant for expenses or liabilities incurred in connection with the common property."); see also Bowart v. Bowart, 128 Ariz. 331, 336-37 (App. 1980). "[N]ecessary expenses" such as taxes, repairs, and insurance costs are ongoing expenses that are "the responsibility of all the co-owners in proportion to their respective interests." 20 Am. Jur. 2d Cotenancy and Joint Ownership § 62; see also In re Marriage of Berger, 140 Ariz. 156, 161-62 (App. 1983) (joint tenant entitled to reimbursement for improvements paid for with separate funds); Gonzales, 134 Ariz. at 438 (cotenants may seek indemnification from each other for expenses incurred in connection with common property). The initial purchase amount, however, was not an ongoing expense incurred during the cotenancy. Consequently, it does not fall within this rule.
Labadie paid the property taxes—totaling $366.38—on the properties in 2016 and 2017. The trial court ordered that she be paid $123.13 from Menkin's share of the proceeds and $86.90 from Morrison's share as reimbursement. Menkin does not challenge this order on appeal. --------
¶18 In sum, the deeds here set forth specific percentage interests that are undisputed by the parties. Section 12-1218(C) mandates that the proceeds from the sale of the properties be distributed according to those interests. The trial court thus did not err in ordering the proceeds from the sale of the properties be distributed in accordance with the parties' legal interests as determined by the deeds. See Dayka & Hackett, 228 Ariz. 533, ¶ 6.
Attorney Fees Under § 12-341.01(A)
¶19 Menkin argues the trial court erred in awarding Labadie her attorney fees pursuant to § 12-341.01(A), arguing this action did not arise out of a contract. The applicability of this statute is a matter of statutory interpretation we review de novo. Rudinsky v. Harris, 231 Ariz. 95, ¶ 27 (App. 2012).
¶20 Section 12-341.01(A) authorizes a trial court to award attorney fees to a prevailing party in "any contested action arising out of a contract." This section applies if the action "could not exist 'but for' the contract." Hanley v. Pearson, 204 Ariz. 147, ¶ 17 (App. 2003) (quoting Sparks v. Republic Nat'l Life Ins. Co., 132 Ariz. 529, 543 (1982)). In other words, the contract must be "the essential basis" of the action. Id. It does not apply if the action is based purely on statute or if the contract is only a factual predicate to the action. Id.
¶21 No Arizona case has specifically addressed whether a deed is a contract under similar circumstances or whether a partition action "aris[es] out of a contract" for the purposes of fees under § 12-341.01(A). Cf. Valento v. Valento, 225 Ariz. 477, ¶ 22 (App. 2010) (deed treated as contract for purpose of parole evidence rule); McCready, 168 Ariz. at 4 (noting that "no statutory authorization exists for attorneys' fees in a partition action," but not discussing § 12-341.01(A)); Pinetop Lakes Ass'n v. Hatch, 135 Ariz. 196, 198 (App. 1983) (action to enforce restrictive covenant arises out of contract for purposes of § 12-341.01(A)); Bender v. Bender, 123 Ariz. 90, 94 (App. 1979) (disclaimer deed is contract). Although both parties have devoted a great deal of argument to whether a deed is or is not a contract as a matter of law, we find it unnecessary to make that determination. Even assuming a deed may generally constitute a contract, for the following reasons, we find that § 12-341.01(A) does not apply to this proceeding.
¶22 Although the deeds were factual predicates to the partition insofar as none of the parties would have had any interest in the properties without them, the deeds were not the essential basis of their dispute. Neither party challenged the other's interests under the deeds, nor was the trial court required to interpret the deeds. Rather, the only issue in dispute was whether the proceeds from the sale of the properties should have been used first to reimburse Menkin for his portion of the properties' purchase. The dispute thus turned on the meaning of § 12-1218(C) and was not affected by the deeds. Consequently, the case did not arise out of contract, and the court erred by awarding Labadie her attorney fees pursuant to § 12-341.01(A). See Rudinsky, 231 Ariz. 95, ¶ 27.
Attorney Fees Under § 12-349
¶23 Menkin further argues the trial court erred by basing its award of attorney fees on § 12-349 without explaining its reasons for doing so. An award under § 12-349(A) is mandatory if "an attorney or party . . . [b]rings or defends a claim without substantial justification[,] . . . [b]rings or defends a claim solely or primarily for delay or harassment[,] . . . [u]nreasonably expands or delays the proceeding," or "[e]ngages in abuse of discovery." When granting an award of attorney fees under this section, a court is required to "set forth the specific reasons for the award." A.R.S. § 12-350.
¶24 Below, Menkin objected to Labadie's proposed form of judgment, contending, as relevant here, that it "fail[ed] to allow space for the [trial court] to" make specific findings justifying an award under § 12-349. In its ruling, the court stated that it was granting Labadie's request for attorney fees "pursuant to [§§] 12-341.01 and [12-]349." Neither that ruling nor the final judgment contain any findings to support an award under § 12-349.
¶25 On appeal, Menkin contends that the trial court's failure to specify its reasons allows this court to review the record de novo to determine if it applied § 12-349 correctly. We review the court's factual findings under § 12-349 for clear error. Phx. Newspapers, Inc. v. Dep't of Corr., 188 Ariz. 237, 244 (App. 1997); see Ariz. R. Civ. P. 52(a). And based on the court's findings, we review de novo whether § 12-349 is applicable. Phx. Newspapers, Inc., 188 Ariz. at 244. The purpose of requiring the court to set forth the specific reasons for an award "is to assist the appellate court on review." Bennett v. Baxter Grp., Inc., 223 Ariz. 414, ¶ 28 (App. 2010).
¶26 The trial court here did not make any factual findings that would permit this court to review its determination that an award was proper under § 12-349. Contrary to Labadie's assertions, we cannot review the award for clear error without some indication of the court's factual basis and reasoning. See Bennett, 223 Ariz. 414, ¶ 28 (findings must be "specific enough to allow an appellate court 'to test the validity of the judgment'" (quoting Phx. Newspapers, Inc., 188 Ariz. at 243). Effective review of the award requires "a sufficient factual basis that explains how the trial court actually arrived at its conclusion." Miller v. Bd. of Supervisors, 175 Ariz. 296, 299 (1993).
¶27 Because we cannot discern the basis for the trial court's award of fees under § 12-349, we vacate the award and remand to allow the trial court, in its discretion, to evaluate an award pursuant to § 12-349 and to make the necessary factual findings if it determines an award is appropriate. See id. at 300 ("Where possible, when a trial court . . . fails to make or makes insufficient findings of fact and conclusions of law, a reviewing court should remand the case to the trial court for further findings.").
Attorney Fees and Costs on Appeal
¶28 Labadie has requested her reasonable attorney fees on appeal pursuant to §§ 12-341.01(A) and 12-349. As explained above, § 12-341.01(A) is inapplicable in this proceeding. As the party seeking fees under § 12-349, Labadie bears the burden of showing, by a preponderance of the evidence, that Menkin's claims or actions fall within one of the specific subsections of § 12-349(A). See In re Estate of Stephenson, 217 Ariz. 284, ¶ 28 (App. 2007). She has not identified which subsection she believes is applicable and has not provided any further argument on the issue. We therefore deny her request for fees on this basis. See id.
¶29 Labadie has also requested her costs on appeal. As we are affirming the trial court's grant of summary judgment and are remanding the attorney fee award to allow the court to reconsider it, we conclude that she is the "successful party" in this appeal. A.R.S. § 12-341; see also Murphy Farrell Dev., LLLP v. Sourant, 229 Ariz. 124, ¶ 38 (App. 2012) (standard for determining successful party under § 12-349 same as under § 12-341.01); Desert Mountain Props. Ltd. P'ship v. Liberty Mut. Fire Ins. Co., 225 Ariz. 194, ¶ 81 (App. 2010) ("The successful party is the one that is the 'ultimate prevailing party' in the litigation." (quoting U.S. Insulation, Inc. v. Hilro Constr. Co., 146 Ariz. 250, 259 (App. 1985))). She is therefore entitled to recover her costs incurred on appeal upon her compliance with Rule 21, Ariz. R. Civ. App. P. Consequently, for those same reasons, we deny Menkin's requests for costs.
Disposition
¶30 For the foregoing reasons, we affirm the trial court's grant of summary judgment, and vacate and remand the award of attorney fees for further proceedings consistent with this decision.