Opinion
2 CA-CV 2023-0161
07-10-2024
The Estate of Gillis Patrick Flanagan v. EdenStar, LLC, an Arizona limited liability company, Defendant/Appellee/Cross-Appellant. Stephanie Sutton, personal representative, Plaintiff/Appellant/Cross-Appellee,
Medalist Legal PLC, Chandler By Devin M. Tarwater, Brandon P. Bodea, and Mark W. Sandison Counsel for Plaintiff/Appellant/Cross-Appellee Davis Miles PLLC, Tempe By David Williams, Angelika O. Doebler, and Diego Brito Counsel for Defendant/Appellee/Cross-Appellant
Not for Publication - Rule 111(c), Rules of the Arizona Supreme Court
Appeal from the Superior Court in Yavapai County No. P1300CV201900883 The Honorable Michael P. McGill, Judge
Medalist Legal PLC, Chandler By Devin M. Tarwater, Brandon P. Bodea, and Mark W. Sandison Counsel for Plaintiff/Appellant/Cross-Appellee
Davis Miles PLLC, Tempe By David Williams, Angelika O. Doebler, and Diego Brito Counsel for Defendant/Appellee/Cross-Appellant
Judge O'Neil authored the decision of the Court, in which Judge Vasquez and Judge Kelly concurred.
MEMORANDUM DECISION
O'NEIL, JUDGE
¶1 Gillis Patrick Flanagan, and later his Estate, sought to quiet title to real property, alleging fraud against EdenStar LLC. On appeal, the Estate challenges the trial court's verdict in favor of EdenStar and the court's denial of the Estate's motion for a new trial based, in part, on an erroneous evidentiary ruling. Because we conclude the court erred in precluding evidence relevant to the validity of the deed, we reverse and remand for a new trial.
Background
¶2 In 2015, Flanagan visited Ecuador with Stephanie Sutton, his romantic partner. Although their primary residence was in Arizona, they remained in Ecuador longer than expected for various reasons, including a stroke Flanagan suffered in 2016. While in Ecuador, they met and began spending time with Ray Copp, who is also from the United States but had been living in Ecuador. In the years that followed, they increasingly came to rely on Copp for house sitting, pet care, repairs, and construction work. They also went to him for advice on various matters including an investigation into stolen jewelry and financial planning. Flanagan also discussed his business with Copp, and Copp became involved in Flanagan's medical care.
¶3 During this time, Sutton began receiving email invoices from "Craftsman Custom Homes," which she believed to be a company owned by Copp. As directed in the emails, she made wire transfers totaling over $500,000 to the account of a woman named Wisarat Manutsom, who was Copp's girlfriend. Sutton had never met the individuals identified as sending the emails, but she believed them to be Copp's employees, including a person named Dan Foster. She paid the invoices until December 2018.
¶4 That same month, Flanagan quitclaimed "all rights, title and interest" to real property in Arizona to EdenStar LLC, a business formed by Manutsom. In October 2019, Flanagan filed a complaint to quiet title to the same property. After his death two months later, Flanagan's Estate amended the complaint to include a claim of wrongful recording and to allege that the deed had been fraudulently procured.
¶5 At trial in October 2022, both Copp and Manutsom testified that EdenStar had been formed to facilitate a transaction between Foster and Flanagan, in which Flanagan would transfer his Arizona property to EdenStar in exchange for 1.4 million dollars in services that Foster had provided. They testified Craftsman Custom Homes was Dan Foster's company, not Copp's, and that Manutsom was Foster's employee. Copp denied having any relationship with EdenStar and ever having done any work for payment for Flanagan and Sutton. Dan Foster of Craftsman Custom Homes did not appear at the trial, but a Dan Foster of Colorado, the owner of a company named The Craftsmen Inc., testified that he had never heard of-much less provided services to-Sutton and Flanagan.
¶6 Following the bench trial, the court entered judgment in favor of EdenStar. The court denied the Estate's motion for new trial. We have jurisdiction of the appeal and cross-appeal that followed. See A.R.S. §§ 12120.21, 12-2101(A)(1), (5)(a).
Discussion
I. Denial of Motion for New Trial
¶7 The Estate argues the trial court abused its discretion in denying its motion for new trial, claiming the court erroneously precluded certain evidence: the testimony of an Ecuadorian notary, whose seal appears on the English-language quitclaim deed to the Arizona property, from a criminal proceeding that took place in Ecuador near the time of the Arizona trial. See Ariz. R. Civ. P. 59(a)(1)(F). We review the denial of a motion for new trial for an abuse of discretion, Boatman v. Samaritan Health Servs., Inc., 168 Ariz. 207, 212 (App. 1990), and we will reverse "when the denial is based upon an error of law," Caruthers v. Underhill, 235 Ariz. 1, ¶ 17 (App. 2014).
¶8 Neither Flanagan nor Sutton spoke Spanish. On the first day of trial, the Estate informed the trial court it had received a certified translation of a "transcript of a hearing that was held last week . . . in Ecuador," including "the statement of the notary who witnessed the signature of Patrick Flanagan." Although the Estate ultimately never moved to admit the transcript into evidence, it did offer the notary's testimony into evidence by other means. During Sutton's testimony, the Estate asked her if "the notary [had] expressed any concern about whether the English language deed was . . . notarized." The court sustained EdenStar's hearsay objection to the question. Similarly, when the Estate attempted to cross-examine Copp concerning the notary's testimony in Ecuador, the court again sustained EdenStar's objection.
¶9 In its motion for new trial, the Estate argued that the trial court had erred in excluding the notary's testimony given in the Ecuadorian proceeding. It asserted the testimony was material because it suggested that Flanagan did not "sign[] an English-language copy of the December 2018 quitclaim" deed and indicated that the notarization on the deed "might have been forged." The court denied the motion, reasoning that the Estate's "failure to call [the notary] as a witness d[id] not warrant a new trial." The court also reasoned that the notary's "out of court statements, written or verbal, offered at a trial . . . to prove the truth of the matter asserted in them, to wit: statements of Patrick Flanagan['s] intentions, would amount to hearsay . . . for which no exception applies."
¶10 On appeal, the Estate argues that the trial court erred in concluding the notary's statements were inadmissible because they "fall within the former testimony exception to the rule against hearsay." EdenStar contends the Estate waived this argument by raising it for the first time on appeal. See Christy C. v. Ariz. Dep't of Econ. Sec., 214 Ariz. 445, ¶ 21 (App. 2007) ("We generally do not consider objections raised for the first time on appeal."). And EdenStar asserts that because the Estate "never sought to admit" the notary's testimony at the trial, the statements must have been "new []or newly discovered" to justify a new trial. But as noted, the Estate did attempt to introduce the notary's statements through witness testimony. The Estate preserved its argument by describing the contents of the notary's testimony and explaining why it should be admitted. Ariz. R. Evid. 103(a)(2) (party preserves claim of error relating to ruling to exclude evidence if the error "affects a substantial right of the party" and the party "informs the court of its substance by an offer of proof, unless the substance was apparent from the context"). In its motion for new trial, the Estate argued that the court had improperly excluded the notary's testimony, thereby raising the matter as an "error in the admission or rejection of evidence" under Rule 59(a)(1)(F) rather than as a matter of newly discovered evidence under Rule 59(a)(1)(D).
¶11 Under Rule 803(25), Ariz. R. Evid., "testimony given as a witness at another hearing of the same or different proceeding . . . if the party against whom the testimony is now offered, or a predecessor in interest, had an opportunity and similar motive to develop the testimony by direct, cross, or redirect examination," is "not excluded by the rule against hearsay, regardless of whether the declarant is available as a witness." EdenStar argues this hearsay exception does not apply because it was not a party to the criminal proceedings. Assuming without deciding that EdenStar and Manutsom are not the "same party" under this rule, the exception applies if either Manutsom or Copp was EdenStar's "predecessor in interest" under Rule 803(25), with an opportunity and motive to develop the testimony.
To the extent EdenStar argues Rule 804(b)(1), Ariz. R. Evid., applies, we reject this argument. Compare Ariz. R. Evid. 804(b) (former-testimony exception to hearsay rule in criminal case requires that declarant is unavailable as witness), with Ariz. R. Evid. 803(25) (former-testimony exception to hearsay rule in civil case does not require that declarant is unavailable as witness); see also 1 Shirley J. McAuliffe Arizona Practice: Law of Evidence § 803:26 (4th ed. 2024) (requirement of unavailability has "been eliminated in civil cases under the Arizona rules").
¶12 The parties do not cite, and we have not located, a published Arizona opinion defining the term "predecessor in interest" in the context of Rule 803(25). Cf. 1 Shirley J. McAuliffe Arizona Practice: Law of Evidence § 803:26 (4th ed. 2024) (hearsay exception does not require "party identity"). "In interpreting rules, we apply the same principles used in construing statutes." In re Nelson, 207 Ariz. 318, ¶ 16 (2004). Words in rules are generally "given their ordinary meaning unless it appears from the context or otherwise that a different meaning is intended." State ex rel. Brnovich v. Maricopa Cnty. Cmty. Coll. Dist. Bd., 243 Ariz. 539, ¶ 7 (2018) (quoting State v. Miller, 100 Ariz. 288, 296 (1966)).
¶13 The Arizona Rules of Evidence are derived from the federal rules. See Ariz. Sup. Ct. Admin. Order 2010-42 (Mar. 24, 2010); see also State v. Winegardner, 243 Ariz. 482, ¶ 8 (2018). Accordingly, "[w]hen interpreting an evidentiary rule that predominantly echoes its federal counterpart, we often look to the latter for guidance," State v. Green, 200 Ariz. 496, ¶ 10 (2001), especially "in the absence of Arizona precedent," State v. Johnson, 132 Ariz. 5, 8 (App. 1981). See also Ariz. R. Evid. cmt. to 2012 amend. ("Where the language of an Arizona rule parallels that of a federal rule, federal court decisions interpreting the federal rule are persuasive but not binding with respect to interpreting the Arizona rule.").
¶14 Under Rule 804(b)(1), Fed. R. Evid., testimony that is "offered against a party who had-or, in a civil case, whose predecessor in interest had-an opportunity and similar motive to develop it by direct, cross-, or redirect examination" is "not excluded by the rule against hearsay." As originally drafted, Rule 804(b)(1) "allowed prior testimony of an unavailable witness to be admissible if the party against whom it is offered or a person 'with motive and interest similar' to his had an opportunity to examine the witness." Fed.R.Evid. 804(b)(1) advisory committee's note to 1974 enactment. "The House amended the rule to apply only to a party's predecessor in interest," and the Senate Committee on the Judiciary accepted the amendment after reasoning that "the difference between the two versions is not great." Lloyd v. Am. Exp. Lines, Inc., 580 F.2d 1179, 1185 (3d Cir. 1978). Federal courts have interpreted the term "predecessor in interest" broadly to include a party with "like motive to develop the testimony about the same material facts" as the present party. Id. at 118182, 1186-87 (previous party predecessor in interest to present party-even though "results sought in the two proceedings differed"-because "basic interest advanced by both [parties] was that of determining culpability and, if appropriate, exacting a penalty," based on same underlying facts); see also New England Mut. Life Ins. Co. v. Anderson, 888 F.2d 646, 651-52 (10th Cir. 1989) (applying Third Circuit's like motive test); Clay v. Johns-Manville Sales Corp., 722 F.2d 1289, 1294-95 (6th Cir. 1983) (same).
¶15 Likewise, we conclude that under Rule 803(25), Ariz. R. Evid., a "predecessor in interest" is one who shared the same basic interest in developing the same underlying material facts as the party against whom the testimony is offered. The "interest" at issue, for the purpose of this hearsay exception, is the party's interest in developing the testimony concerning the relevant facts in dispute. This interpretation applies the most straightforward meaning to the language of the rule, and it is consistent with the "guarantees of trustworthiness" upon which exceptions to the rule against hearsay must stand. Cf. Ariz. R. Evid. 807(a).
¶16 The criminal proceeding in Ecuador arose from Sutton and Flanagan's breach of trust claim and allegations that Copp and Manutsom had taken their property through "false behavior." The notary testified about the details and circumstances of the signing of the deed. He explained that he had gone to a pizzeria, where he met Flanagan and Copp, to acknowledge Flanagan's signature on the document. He testified that the document had been written in Spanish and already had Flanagan's signature. He testified that he had not seen the English version of the deed until months later, and although the English deed bore his notary seal, he had "never put it there."
¶17 In the present suit, Copp testified that both he and Manutsom had been present when Flanagan reviewed the English deed at Copp's home. After Flanagan approved of the language in the deed, Manutsom, along with Maria, another one of Foster's employees, made an appointment with a notary "to get the deed signed at [a] pizza restaurant" and delivered the English deed to the notary "so that it could be translated into Spanish." Copp accompanied Flanagan to the restaurant where they met Maria and the notary. Copp testified that the notary had "show[n] up with two deeds, the English one and Spanish one." He testified that Flanagan had read the English deed, confirmed with Copp and Maria that the Spanish deed "present[ed] the correct translation," and then signed "both of them." The notary, Copp testified, had taken the Spanish deed for his records, and Copp and Flanagan had given the "executed English version of the quitclaim deed" to Manutsom when they returned to Copp's house from the restaurant.
¶18 The notary's testimony at the criminal proceeding in Ecuador addressed the same operative facts at issue in this case concerning Flanagan's signing the deed at the pizzeria and its notarization. EdenStar argues that the hearsay exception nonetheless does not apply because only Copp was involved in the criminal proceedings and it is speculative whether Copp's attorneys cross-examined the notary. But Sutton testified that the criminal proceedings had been brought against "both of them, Ray [Copp] and Wisarat [Manutsom]," and they had both been "put under arrest." Copp's testimony also suggested that he and Manutsom had been co-defendants in the criminal proceeding. Manutsom and Copp thus each had ample motive to develop the notary's testimony. Although the record does not indicate whether Manutsom had the opportunity to cross-examine the notary, Copp testified that he had been present "when the notary provided testimony in the criminal proceeding in Ecuador" and his "attorneys had the opportunity to cross-examine the notary." See Ariz. R. Evid. 803(25). Indeed, the transcript reflects the notary's "crossexamination" by the "Defense."
¶19 In the criminal proceeding, both Copp and Manutsom shared the same basic interest and motive to develop the same underlying material facts from the notary's testimony as relevant to EdenStar in this case. In that respect, therefore, they are both EdenStar's predecessors in interest. See Lloyd, 580 F.2d at 1187. Even if Manutsom did not cross-examine the notary, Copp did. The notary's statements therefore fall within the formertestimony exception to the rule against hearsay. See Ariz. R. Evid. 802, 803(25).
Because we conclude the testimony was admissible under Rule 803(25), we do not address the Estate's argument that the transcript of the notary's testimony "also falls within the absence of public record exception to the rule against hearsay."
¶20 Although the Estate's motion did not identify with particularity a basis for a new trial under Rule 59(a)(1), an error in the preclusion of evidence may warrant a new trial when it materially affects the rights of a party. Ariz. R. Civ. P. 59(a)(1)(F); Englert v. Carondelet Health Network, 199 Ariz. 21, ¶ 5 (App. 2000). Not every such error requires a new trial. See Ariz. R. Civ. P. 61 ("Unless justice requires otherwise, an error in admitting or excluding evidence . . . is not grounds for granting a new trial ...."). A trial court, having heard the evidence and observed the witnesses, has "significant latitude" in deciding whether a purported error materially affected a party's rights to require a new trial. Soto v. Sacco, 242 Ariz. 474, ¶ 8 (2017); see also Mammo v. State; 138 Ariz. 528, 533-34 (App. 1983).
¶21 The trial court's denial of a new trial here, however, rested on legal error. See Caruthers, 235 Ariz. 1, ¶ 17; Flying Diamond Airpark, LLC v. Meienberg, 215 Ariz. 44, ¶ 27 (App. 2007) ("A court abuses its discretion if it commits an error of law in reaching a discretionary conclusion."). The error was not harmless. See Ariz. R. Civ. P. 61. The notary's testimony materially contradicts Copp's account. Indeed, the notary testified that he had not seen the English deed until months after the signing, but Copp testified that the notary had translated and brought the English deed to the restaurant. The notary testified that the Spanish deed he received had already been signed, and he was only seeking Flanagan's acknowledgement of the signature. But Copp testified that Flanagan had signed the deeds in front of the notary. And the notary's testimony that he never put his seal on the English deed contravenes the validity of the quitclaim deed that was admitted into evidence at the trial.
¶22 We reverse the trial court's denial of the motion for new trial and remand for proceedings consistent with this decision. Having granted relief on this ground, we decline to address the Estate's alternative arguments, with the exception of an additional evidentiary challenge that may reoccur on remand.
II. Preclusion of Flanagan's Statement
¶23 The Estate argues the trial court abused its discretion by precluding a sworn statement made by Flanagan that "disclaimed any intent to transfer" his property. At trial, the Estate sought to admit the statement, "made as part of the[] criminal action against" Copp and Manutsom in Ecuador, arguing it was "inherently reliable" and a "critical recitation of the facts." The court determined the statement was hearsay and not admissible under any exception, including the residual hearsay exception. See Ariz. R. Evid. 807. It reasoned that because Flanagan had made the statements in 2019 in anticipation of a lawsuit, they were "selfserving," "unreliable," and "inherently untrustworthy." We review challenges to a trial court's evidentiary rulings for an abuse of discretion. See Larsen v. Decker, 196 Ariz. 239, ¶ 6 (App. 2000).
In addition to the written statement, the Estate also refers to "three audio recordings and five videos in which Patrick disclaimed any intent to transfer the Property." To the extent the Estate's argument concerning the audio and video recordings differs from its arguments concerning the written statement, the Estate has waived any such argument by failing to preserve it below. See Christy C., 214 Ariz. 445, ¶ 21.
¶24 On appeal, the Estate argues Flanagan's statements should have been admitted under the residual hearsay exception. See Ariz. R. Evid. 807. Under Rule 807, "a hearsay statement is not excluded by the rule against hearsay" if "the statement is supported by sufficient guarantees of trustworthiness" and "is more probative on the point for which it is offered than any other evidence that the proponent can obtain through reasonable efforts." To decide if a statement "is supported by sufficient guarantees of trustworthiness," Ariz. R. Evid. 807, "we consider 'the spontaneity, consistency, knowledge, and motives of the declarant . . . to speak truthfully,'" State v. Burns, 237 Ariz. 1, ¶ 69 (2015) (quoting State v. Allen, 157 Ariz. 165, 174 (1988)).
¶25 The Estate argues Flanagan's "statement is supported by sufficient guarantees of trustworthiness" because Flanagan made the statement "under oath to a prosecutor" in the criminal proceeding and his statements "are supported by evidence corroborating the statement." But the circumstances of the statement also support the trial court's reasoning that the statement was motivated by a lawsuit and was not spontaneous. The court did not abuse its discretion in determining that Flanagan's statement lacked sufficient guarantees of trustworthiness to be admitted under the residual hearsay exception. See Boyle v. Boyle, 231 Ariz. 63, ¶ 8 (App. 2012) (court abuses its discretion by "making a discretionary ruling that the record does not support").
Disposition
¶26 We reverse and remand for proceedings consistent with this decision. Because we reverse the judgment in the Estate's favor, we do not reach the issues raised on EdenStar's cross-appeal, namely that the action arose out of contract and that the trial court "erred in denying [its] request for attorney fees under A.R.S § 12-341.01."
¶27 EdenStar requests attorney fees on appeal under § 12-341.01. Assuming without deciding the action arose out of contract and A.R.S. § 121103 permits an award of attorney fees under § 12-341.01 in a quiet-title action, we deny its request because EdenStar did not prevail on appeal. See § 12-341.01 ("In any contested action arising out of a contract, express or implied, the court may award the successful party reasonable attorney fees."); see also § 12-1103 (basis for attorney fees in quiet-title action).
¶28 The Estate requests attorney fees under § 12-1103, authorizing an award to the prevailing party in an action to quiet title if certain prerequisites are met, see Cook v. Grebe, 245 Ariz. 367 ¶ 5 (App. 2018), and A.R.S. § 33-420, "mandat[ing] the award[] of attorney's fees" to the prevailing owner in false-document cases, Janis v. Spelts, 153 Ariz. 593, 598 (App. 1987). We deny its request for attorney fees without prejudice because the Estate's success on appeal is limited to a new trial in which to pursue its claims. See R &M Oxford Const., Inc. v. Smith, 172 Ariz. 241, 247 (App. 1992) (deeming similar attorney fee request "premature" where success "merely results in a new trial"). As the prevailing party on appeal, we award the Estate its costs upon compliance with Rule 21, Ariz. R. Civ. App. P. See A.R.S § 12-341.