Opinion
No. 1 CA-CV 19-0425
03-05-2020
GUY VALE, et al., Plaintiffs/Defendants/Appellants, v. BARBARA VALE, Defendant/Plaintiff/Appellee.
COUNSEL Law Office of Timothy M. Collier PLLC, Scottsdale By Timothy M. Collier, William Andrew Cahoon Counsel for Plaintiffs/Defendants/Appellants Dillingham Law PLLC, Scottsdale By John L. Dillingham Counsel for Defendant/Plaintiff/Appellee
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 UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.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 Maricopa County
Nos. CV2019-052988 CV2019-053002 (Consolidated)
The Honorable Bruce R. Cohen, Judge
AFFIRMED
COUNSEL Law Office of Timothy M. Collier PLLC, Scottsdale
By Timothy M. Collier, William Andrew Cahoon
Counsel for Plaintiffs/Defendants/Appellants Dillingham Law PLLC, Scottsdale
By John L. Dillingham
Counsel for Defendant/Plaintiff/Appellee
MEMORANDUM DECISION
Judge Jennifer B. Campbell delivered the decision of the Court, in which Presiding Judge Paul J. McMurdie and Judge Kent E. Cattani joined. CAMPBELL, Judge:
¶1 Guy Vale, Sandra Vale, and Nicholas Vale appeal the superior court's judgment declaring Barbara Vale the sole member of VBS CAL, LLC ("CAL"), a business entity. For the following reasons, we affirm.
BACKGROUND
¶2 In 2008, Guy filed articles of organization with the Arizona Corporation Commission ("ACC") and formed CAL. The articles reserved management of CAL to the members and listed Guy as the sole member. Guy did not file an operating agreement for CAL. Guy's sister, Barbara, ran all aspects of CAL's business out of California.
¶3 Barbara moved to Arizona in July 2010 and operated CAL out of her home. In October 2010, Barbara signed a lease on CAL's behalf to rent office space in Tempe from University Smith Partners. Guy is an owner of University Smith Partners. Guy also signed that lease, not as the sole member of CAL, but on behalf of University Smith Partners in his capacity as the building landlord. Barbara signed on behalf of CAL.
¶4 Two years later, in October 2012, Barbara filed articles of amendment with the ACC changing CAL's sole member from Guy to herself. Barbara consistently acted as CAL's owner for years afterwards by executing leases on CAL's behalf, including CAL's profit and losses on Schedule C of her tax returns, identifying herself with the IRS as CAL's sole member, maintaining CAL's bank accounts, and obtaining business loans for CAL. In contrast, Guy took no action exhibiting ownership of CAL and never included a Schedule C for CAL on his tax returns.
¶5 After an apparent falling out, Guy and Barbara each filed competing articles of amendment with the ACC in 2019 attempting to remove the other as the sole member of CAL. Guy and Barbara also filed competing lawsuits.
¶6 Guy alleged CAL was his company and that Barbara breached a verbal contract to report CAL's profits and losses properly. Further, Guy alleged that Barbara fraudulently filed false articles of amendment in 2012 removing Guy as the sole member of CAL, which he allegedly did not discover until 2019.
¶7 Barbara sought a declaratory judgment declaring her the sole member of CAL. Barbara alleged that she and Guy formed CAL together in 2008 and agreed that Guy would later transfer his membership interest in CAL to Barbara. Barbara alleged Guy transferred his interests in CAL to her in 2012, making her the sole member of CAL, and that she filed articles of amendments to document that change.
¶8 After a two-day evidentiary hearing regarding the disputed ownership of CAL, the superior court noted that ownership is determined from the "totality of the evidence." The court considered application of the Arizona Limited Liability Company Act ("ALLCA"), A.R.S. §§ 29-601 to -858, and found that Barbara's 2012 filing, removing Guy and adding her as the sole member, was only valid under the ALLCA if Barbara were a member of CAL at the time of filing. The court found that other than filing the initial articles of organization in 2008, "there is almost a complete absence of evidence to support ownership by Guy and a wealth of evidence to support that Barbara is and always has been the sole member/owner of CAL." Accordingly, the court concluded Barbara was a member of CAL under ALLCA when she filed the articles of amendment in October 2012 and declared Barbara the sole member of CAL.
DISCUSSION
¶9 We view the evidence in the light most favorable to upholding the trial court's findings. Federoff v. Pioneer Title & Trust Co. of Ariz., 166 Ariz. 383, 388 (1990). We will uphold the trial court's findings of fact unless the findings "are clearly erroneous or unsupported by any credible evidence." Id. We give due regard to the court's opportunity to judge witness credibility. Ariz. R. Civ. P. 52(a)(6). On appeal, we do not weigh conflicting evidence. Tanque Verde Enters. v. City of Tucson, 142 Ariz. 536, 542 (1984). We review legal conclusions and questions of statutory interpretation de novo. Dabrowski v. Bartlett, 246 Ariz. 504, 512, ¶ 17 (App. 2019); Rogone v. Correia, 236 Ariz. 43, 49, ¶ 17 (App. 2014). We look to the statutes' language as the best indication of legislative intent. Rogone, 236 Ariz. at 49, ¶ 17. When the statutory language is clear, Arizona courts must follow it. Jackson v. Phoenixflight Prods., Inc., 145 Ariz. 242, 245 (1985).
¶10 Guy argues the superior court erred in applying a "totality of the evidence" standard when concluding that Barbara was the sole member of CAL. This is a declaratory judgment action. Under the Uniform Declaratory Judgments Act, A.R.S. §§ 12-1831 to -1846, the court has the "power to declare rights, status, and other legal relations." A.R.S. § 12-1831. We find no error with the court's review of the totality of the evidence as it considered the facts and the parties' credibility to declare ownership interests.
¶11 Guy further argues that because Barbara was not a member of CAL when she filed the 2012 articles of amendment removing Guy and adding herself as the sole member, the filing is invalid. Barbara argues that Guy consented to her becoming the sole member shortly before her 2012 filing of the articles of amendment, and that the superior court correctly found her to be CAL's owner.
¶12 Under ALLCA, an amendment to a limited liability company's articles of organization is effectuated by filing articles of amendment signed by a "member." A.R.S. § 29-633(A). A "member" is defined as a "person who is admitted as a member." A.R.S. § 29-601(15). Membership admission, in turn, is governed by A.R.S. § 29-731, which provides that admission after the company's initial articles of organization are filed can occur by consent. A.R.S. § 29-731(B)(1). A.R.S. § 29-731(B)(1) does not mandate that consent be in writing if, as here, there is no operating agreement.
¶13 There is substantial evidence that Guy consented to Barbara being admitted as a member of CAL no later than 2010. In 2010, CAL rented space next door to a suite that housed Guy's principle business. Guy signed the lease between University Smith Partners and CAL in his capacity as landlord of the building housing both companies. He did not purport to act on behalf of CAL during the execution of the lease and was obviously aware that Barbara was doing so. Guy testified that he assumed he was signing the lease only as the landlord, and the superior court noted that "[c]uriously, despite being the named owner/member of CAL, Guy did not sign the lease on behalf of CAL when it began its occupancy; Barbara signed it . . . . Guy's signature appears to have been in the capacity of landlord." From this record, we imply that Guy consented to Barbara being admitted as a member of CAL no later than 2010 upon the signing of the lease. Gen. Elec. Capital Corp. v. Osterkamp, 172 Ariz. 191, 193 (App. 1992) (additional findings necessary to uphold the judgment are implied if reasonably supported by the evidence and not in conflict with the court's express findings). Given Guy's consent, Barbara—as an admitted member—could file the 2012 articles of amendment changing the documented membership. A.R.S. § 29-633(A).
The superior court found that Barbara was always the owner/member, even though Barbara only argued she was the sole member from October 2012 forward. Our resolution of the issues raised on appeal would be the same regardless of whether Barbara's ownership interest commenced upon organization of CAL or commenced upon the October 2012 filing of the articles of amendment. --------
¶14 Guy took no action manifesting ownership of CAL and never included a Schedule C for CAL on his tax returns, which further supports this conclusion. The parties shared an accountant. Neither the accountant nor Guy ever informed Barbara that she was not the owner of CAL and should not be filing a Schedule C for CAL on her tax returns. Given that the parties shared an accountant and worked in such close physical proximity to each other, Guy knew or should have known that Barbara was acting as CAL's member/owner as early as 2010. Yet Guy never opposed any of Barbara's conduct manifesting ownership of CAL until 2019 when he filed his own articles of amendment seeking Barbara's removal as a member. Although Guy claims he did not know until 2019 that Barbara filed the 2012 articles of amendment, any action for false filings with the ACC must be filed no later than six years after the ACC filed or received the alleged false filing. A.R.S. § 29-858(B). Guy's delay in bringing a false filings claim until 2019 foreclosed his cause of action. Id.
¶15 Accordingly, we find no error with the superior court declaring Barbara the sole member of CAL. Picaso v. Tucson Unified Sch. Dist., 217 Ariz. 178, 181, ¶ 9 (2007) (determining "whether the judgment, not the reasoning, of the superior court was correct").
CONCLUSION
¶16 For the foregoing reasons, we affirm the superior court's ruling. Both parties seek attorney fees on appeal. In our discretion, we decline to award attorney fees. We award costs to Barbara upon compliance with ARCAP 21.