Berry v. 352 E. Va.

• Decision Date: 06 October 2011
• Docket Number: No. 1 CA–CV 09–0630.,1 CA–CV 09–0630.
• Citation: Berry v. 352 E. Va., 228 Ariz. 9, 261 P.3d 784, 618 Ariz. Adv. Rep. 12 (Ariz. App. 2011)
• Parties: Frederick C. BERRY, Jr. and Carolyne W. Berry, Trustees under The Berry Family Trust Agreement, dated August 2, 1991, Plaintiffs–Counter–defendants–Appellants,v.352 E. VIRGINIA, L.L.C., Defendant–Counter–claimant–Appellee.
• Court: Arizona Court of Appeals

228 Ariz. 9

261 P.3d 784

618 Ariz. Adv. Rep. 12

Frederick C. BERRY, Jr. and Carolyne W. Berry, Trustees under The Berry Family Trust Agreement, dated August 2, 1991, Plaintiffs–Counter–defendants–Appellants,

v.352 E. VIRGINIA, L.L.C., Defendant–Counter–claimant–Appellee.

No. 1 CA–CV 09–0630.

Court of Appeals of Arizona, Division 1, Department E.

Oct. 6, 2011.

Schneider & Onofry, P.C. by Charles D. Onofry, Luane Rosen, Phoenix, Attorneys for Appellants.Law Offices of Charles Carson, by Charles T. Carson, Phoenix, Attorneys for Appellee.

OPINION

WEISBERG, Judge.^*

¶ 1 Frederick C. Berry, Jr. and Carolyne W. Berry, as Trustees of a family trust (hereinafter “Berry”), filed suit against 352 E. Virginia, L.L.C. (hereinafter “352”) for breach of an agreement ¹ for Berry to sell an office building to 352. Both sides submitted offers of judgment prior to trial. At trial, the jury awarded 352 the sum of $8,625 on 352's first counterclaim but rejected 352's second counterclaim. Both sides requested attorneys' fees, costs, and sanctions. The superior court found that 352 was the prevailing party in the litigation for purposes of Arizona Revised Statutes (“A.R.S.”) section 12–341.01 (2003) and granted a partial award of attorneys' fees in the amount of $50,000 as well as taxable costs of $3,617.70 and $1,854.84 in sanctions under Arizona Rule of Civil Procedure 68.

¶ 2 For reasons that follow, we affirm in part, vacate in part, and remand for further proceedings.

BACKGROUND

¶ 3 In April 2005, Berry agreed to sell an office building to 352 for $1 million. The sales agreement contained warranties that all mechanical systems would be in working order and “no material defects” existed, and provided that the warranties “survive the closing of this transaction.” Otherwise, the property was being sold “as is.” Also, if the transaction gave rise to litigation, “the prevailing party shall be entitled to recover actual court costs, actual expenses and reasonable attorneys' fees.”

¶ 4 352 had the property inspected, including the air conditioning system (“HVAC”), and received a detailed report. The parties agreed to replace a staircase, and in June 2005, Thomas Stoops, on 352's behalf, informed Berry of a “tentative estimate” of $12,000 to $15,000 to do so. Berry acknowledged the “unofficial” estimate, and the parties revised the purchase agreement to state: “Seller shall pay for one half of the cost of remodeling the exterior staircase up to a maximum of $10,000.00. If remodel is done after close of escrow, a hold back of Seller's funds will occur in this amount.” The parties similarly amended the escrow instructions to provide that 352 would “deliver ... copies of the invoices for the work done,” and the escrow company then would “release funds equal to one half of the actual reconstruction costs up to a maximum of the entire $10,000.00.”

¶ 5 In March 2006, 352 hired Stanley Runnels, a general contractor, who agreed to replace the staircase for $14,650. Stoops sent Runnels' bid to Berry and noted that each party's share of the cost would be $7,325. In June, Stoops informed Berry of additional items that increased the staircase replacement cost to $17,250. Stoops requested disbursements of $8,625 to 352 and of the remaining funds to Berry.

¶ 6 Berry suspected, however, that 352 was attempting to recoup costs of remodeling elsewhere in the building and asked for receipts and an itemization. Stoops sent Runnels' bid and a list of related costs that totaled $17,250. Berry next asked for “backup” for Runnels' fee and offered to pay less than the amount requested by 352.

¶ 7 In July 2006, 352 submitted invoices to the title company supporting its entitlement to a $8,625 distribution, but Berry instructed the title company to disburse $5,838 to himself and only $4,162 to 352. He later agreed to accept $4,494 and to allow 352 a $5,506 distribution. In August 2006, Stoops offered to accept $6,500 to resolve the dispute. Instead, in October, Berry informed Stoops that he would file suit “to get down to the bottom of this through discovery.” In response, Stoops suggested that they arbitrate the matter but said that if Berry refused, 352 would file a counterclaim based upon Berry's nondisclosure of material facts about the HVAC system.

¶ 8 Berry filed suit for breach of contract and sought attorneys' fees pursuant to A.R.S. § 12–341.01. 352 answered, also sought attorneys' fees pursuant to § 12–341.01, and ultimately asserted counterclaims seeking $8,625 from the escrow account and $42,000 for Berry's breach of warranty on the HVAC system.

¶ 9 In May 2007, Berry and Stoops instructed the title company to release $6,225 to 352, and although in July Berry offered to accept $3,275 in settlement, the case proceeded to arbitration. After an award in 352's favor, ² Berry appealed and requested a jury trial. In February 2008, Berry offered 352 the additional sum of $2,400 from the escrow account, which represented a total offer of $8,625. 352 did not accept. In April 2008, 352 offered to accept the sum of $25,000 to settle the case, but Berry did not accept.

¶ 10 At trial, Berry, Stoops, and Runnels testified about their negotiations and renovations to the building. The jury found that 352 was entitled to $8,625 from the escrow account but found for Berry on 352's HVAC counterclaim.

¶ 11 After trial, Berry moved for sanctions pursuant to Rule 68 ³ in the form of taxable costs and expert witness fees in the sum of $13,344.52 incurred after his February 2008 offer of judgment. Berry also sought non-taxable costs of $10,793.54 and attorneys' fees in the amount of $85,955 based on the attorneys' fee provision of the contract. 352 objected and moved for an award of costs in the amount of $3,617.70 and of attorneys' fees in the amount of $98,359 both as the prevailing party pursuant to the contract and pursuant to A.R.S. §§ 12–341 (2003) and –341.01. Berry objected.

¶ 12 The superior court awarded Berry Rule 68 sanctions of $13,344.52 but no attorneys' fees or costs. It concluded that the jury verdict of $8,625 included $2,400 that 352 had not previously received and thus that 352 was the successful party pursuant to A.R.S. § 12–341.01. It therefore awarded 352 all of its costs and $50,000 of its $98,359 in attorneys' fees. 352 then moved for Rule 68 sanctions because its final judgment, which included attorneys' fees and costs, exceeded its $25,000 offer to Berry in April 2008. Berry objected. 352 also moved for reconsideration of the Rule 68 award to Berry and the denial of the full amount of its attorneys' fees.

¶ 13 At a subsequent oral argument, Berry conceded that he was not entitled to Rule 68 sanctions, and the court accordingly vacated its prior award. The court again concluded that 352 was the successful party based on “the totality of the circumstances” by its receipt of $2,400 from the escrow account. The court cited A.R.S. § 12–341.01(A) as support for a discretionary award of $50,000 in attorneys' fees to 352 plus taxable costs of $3,617.70. It also awarded 352 $1,854.84 in Rule 68 sanctions.

¶ 14 352 submitted a form of judgment that included prejudgment interest of $1,290.12. Berry objected that 352 had not asked for or been awarded prejudgment interest. The court entered judgment for $56,762.66, which included prejudgment interest and “legal interest” until the judgment was paid. Berry timely appealed. We have jurisdiction pursuant to A.R.S. § 12–2101(B) (2003).

DISCUSSION

¶ 15 Berry raises numerous issues, all related to the A.R.S. § 12–341.01(A) award of attorneys' fees, costs, Rule 68 sanctions, and prejudgment interest. We first consider whether the parties' agreement formed a basis for an attorneys' fee award.

Attorneys' Fee Clause in Sales Agreement

¶ 16 Berry contends that the parties' contract, rather than A.R.S. § 12–341.01(A), should govern his fee request. Neither party, however, cited the sales agreement as the basis for awarding fees until after trial had concluded.

¶ 17 We have held that “[a] contractual provision for attorneys' fees will be enforced according to its terms.” Chase Bank of Ariz. v. Acosta, 179 Ariz. 563, 575, 880 P.2d 1109, 1121 (App.1994). However, a fee request based upon a contractual provision requires pleading and proof. Robert E. Mann Constr. Co. v. Liebert Corp., 204 Ariz. 129, 133, ¶ 12, 60 P.3d 708, 712 (App.2003). In Robert E. Mann, we held that a general request for attorneys' fees in the answer waived the contract as a basis for an award, id., even though the trial court retained “broad discretion to award attorneys' fees under A.R.S. § 12–341.01.” Id. at ¶ 13. Therefore, Berry's failure to cite the parties' contract in his pleadings precluded a fee award on that basis. The trial court properly disregarded the contract.

Prejudgment Interest

¶ 18 Berry asks us to vacate the award of prejudgment interest to 352. Whether a party is entitled to such interest is a question of law for our de novo review. John C. Lincoln Hosp. & Health Corp. v. Maricopa Cnty., 208 Ariz. 532, 544, ¶ 39, 96 P.3d 530, 542 (App.2004); Alta Vista Plaza, Ltd. v. Insulation Specialists Co., 186 Ariz. 81, 82, 919 P.2d 176, 177 (App.1995).

¶ 19 Berry asserts that 352's claim was not liquidated because 352 failed to itemize its “lump sum demand” in a June 6, 2006 letter or to reveal a legal basis for it. But “[a] claim is liquidated if the plaintiff provides a basis for precisely calculating the amounts owed.” John C. Lincoln, 208 Ariz. at 544, ¶ 39, 96 P.3d at 542; see also Costanzo v. Stewart Title & Trust of Phoenix, 23 Ariz.App. 313, 317, 533 P.2d 73, 77 (1975) (liquidated claim exists if claimant's information were believed and would permit an amount to be calculated “with exactness, without reliance upon opinion or discretion”). Thus, even if Berry disputed the facts and the legal basis for 352's first counterclaim, and even if he had succeeded in reducing the amount owed, the sum might still be...