Sholes v. Fernando

• Decision Date: 20 October 2011
• Docket Number: Nos. 2 CA–CV 2010–0216,2 CA–CV 2010–0217.,s. 2 CA–CV 2010–0216
• Citation: Sholes v. Fernando, 228 Ariz. 455, 268 P.3d 1112, 574 Ariz. Adv. Rep. 19 (Ariz. App. 2011)
• Parties: Bruce A. SHOLES; Russell R. Sholes and Mary L. Sholes, husband and wife, Plaintiffs/Counterdefendants/Appellants, v. Eleanor FERNANDO and Nihal J. Fernando, Wife and Husband; Judy Fernando–Sholes; and Raynu Fernando, Defendants/Counterclaimants/Appellees.
• Court: Arizona Court of Appeals

228 Ariz. 455

268 P.3d 1112

574 Ariz. Adv. Rep. 19

Bruce A. SHOLES; Russell R. Sholes and Mary L. Sholes, husband and wife, Plaintiffs/Counterdefendants/Appellants,

v.Eleanor FERNANDO and Nihal J. Fernando, Wife and Husband; Judy Fernando–Sholes; and Raynu Fernando, Defendants/Counterclaimants/Appellees.

Nos. 2 CA–CV 2010–0216

2 CA–CV 2010–0217.

Court of Appeals of Arizona, Division 2, Department A.

Oct. 20, 2011.

Bruce A. Sholes, Cortaro, In Propria Persona.

Russell R. Sholes, Cortaro, In Propria Persona.

Mary L. Sholes, Cortaro, In Propria Persona.Mesch, Clark & Rothschild, P.C.By Michael J. Crawford and Paul A. Loucks, Tucson, Attorneys for Defendants/Counterclaimants/Appellees.

OPINION

BRAMMER, Judge.

¶ 1 Russell, Mary, and Bruce Sholes(collectively “the Sholes”) appeal from the trial court's judgment determining the parties' ownership interests in Oasis at Wild Horse Ranch, LLC(Oasis) and in two residential properties.The Sholes argue there was insufficient evidence to support the court's determination that Judy Fernando–Sholes and Raynu Fernando each owned an interest in Oasis, the court erred in allocating ownership among the parties, the court erred in determining Bruce had “abandoned” the cash he asserted he had contributed as capital in Oasis, and the court lacked jurisdiction to determine ownership of the property known as the Camino Verde house.¹We affirm.

Factual and Procedural Background

¶ 2“We view the facts in the light most favorable to upholding the trial court's ruling.”²Hammoudeh v. Jada,222 Ariz. 570, ¶ 2, 218 P.3d 1027, 1028(App.2009).Oasis was formed in 1999 when articles of organization were filed with the Arizona Corporation Commission listing four parties each owning an interest twenty percent or greater: Judy, Raynu, their parents Nihal and Eleanor Fernando(collectively “Fernandos”), and Bruce's parents Russell and Mary Sholes.Bruce and Judy, who were planning to marry, and Judy's brother Raynu, attended an auction and made the successful bid on a guest ranch property on behalf of Oasis.Money to purchase that property came from various sources the parties disputed at trial.After the property was acquired, Raynu and Judy were responsible for most of the day-to-day management of Oasis.

¶ 3 In 2006, the Sholes and the Fernandos began litigation involving multiple claims and counterclaims regarding Oasis's ownership and management.The trial court granted directed verdicts on some claims and granted partial summary judgment in favor of the Sholes ruling that Eleanor and Nihal had no interest in Oasis.By the time of trial, the claims had been reduced to who owned Oasis as between Russell and Mary, Bruce, Raynu, and Judy.

¶ 4 After a nine-day jury trial, the advisory jury found that Raynu, Judy, and Russell and Mary had agreed to make capital contributions to Oasis.It also found that Judy and Raynu collectively had contributed over $300,000 in services to Oasis.The advisory jury concluded that Russell and Mary owned fifty percent of Oasis and that Raynu and Judy each owned twenty-five percent of Oasis.

¶ 5 After considering the record, including the evidence presented at trial, and the advisory jury verdicts, the trial court ruled that Oasis was owned: fifty percent by Russell and Mary, twenty-five percent by Raynu, and twenty-five percent by Judy.The court further concluded “that portion of ownership attributable to the Sholes to be $170,000, and that portion attributable to Raynu Fernando to be $85,000, and that portion attributable to Judy Fernando to be $85,000.”It found Bruce Sholes had no ownership interest in Oasis.The court also found “Bruce Sholes attempted to avoid his creditors by holding various assets in the name of Russell and Mary Sholes, including ... [the residence known as] the Camino Verde House.”As a result, the court found that Russell and Mary held title to one half the Camino Verde house in a constructive trust as to any claims of Bruce's creditors and the other half in a resulting trust for Judy.The Sholes filed a motion for a new trial, which the court denied.This appeal followed.

Discussion

Ownership of Oasis

¶ 6 The Sholes argue there was insufficient evidence to support the trial court's ruling that Judy and Raynu each owned a twenty-five percent interest in Oasis.We defer to a trial court's factual findings and will not set them aside on appeal “unless they are clearly erroneous or not supported by substantial evidence.”Nordstrom, Inc. v. Maricopa Cnty.,207 Ariz. 553, ¶ 18, 88 P.3d 1165, 1170(App.2004);see alsoAriz. R. Civ. P. 52(a)(“Findings of fact ... shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the trial court to judge the credibility of witnesses.”). “To the extent the parties presented facts from which conflicting inferences could be drawn ..., it was for the trial court, not this court, to weigh those facts.”Ruesga v. Kindred Nursing Ctrs., L.L.C.,215 Ariz. 589, ¶ 27, 161 P.3d 1253, 1261(App.2007).Moreover, any additional findings necessary to sustain the judgment are implied if they are reasonably supported by the evidence and not in conflict with the court's express findings.Gen. Elec. Capital Corp. v. Osterkamp,172 Ariz. 191, 193, 836 P.2d 404, 406(App.1992).However, we are not bound by a trial court's conclusions of law, which we review de novo.SeeFlying Diamond Airpark, LLC v. Meienberg,215 Ariz. 44, ¶ 9, 156 P.3d 1149, 1152(App.2007).

Law of the Case

¶ 7 The Sholes first argue the “law of the case” doctrine bound the trial court to a ruling issued by a judge previously assigned to the case.They argue that judge ruled during a hearing concerning the ownership interests of Eleanor and Nihal Fernando that a written agreement signed by all members of the limited liability company (LLC) was required before services rendered the LLC by a member could have been considered a valid capital contribution.

¶ 8 The “law of the case” doctrine refers to “ ‘the judicial policy of refusing to reopen questions previously decided in the same case by the same court or a higher appellate court.’ ”Hall v. Smith,214 Ariz. 309, ¶ 28, 152 P.3d 1192, 1200(App.2007), quotingJimenez v. Wal–Mart Stores, Inc.,206 Ariz. 424, ¶ 12, 79 P.3d 673, 677(App.2003).However, the rule is “ ‘one of procedure, not of substance’ ” and “ ‘[a]court does not lack the power to change a ruling simply because it ruled on the question at an earlier stage,’ ” especially where a substantial change has occurred in the evidence.Id.¶¶ 28–29, quotingLove v. Farmers Ins. Grp.,121 Ariz. 71, 73, 588 P.2d 364, 366(App.1978).The doctrine is not absolute, does not have the same binding effect as the doctrine of res judicata, and should not be applied “ ‘when it would result in a manifestly unjust decision.’ ”Lennar Corp. v. Transamerica Ins. Co.,227 Ariz. 238, ¶ 12, 256 P.3d 635, 640(App.2011), quotingDancing Sunshines Lounge v. Indus. Comm'n,149 Ariz. 480, 482, 720 P.2d 81, 83(1986).

¶ 9 Although the Sholes do not cite the portion of the record that purportedly contains the “law of the case” ruling as they have stated it, they refer generally to the hearing challenging the trial court's grant of partial summary judgment determining that Eleanor and Nihal had no ownership interest in Oasis.The court granted the motion because Eleanor and Nihal had not “come forward with ... competent evidence to support any capital contributions made or to be made by them pursuant to A.R.S. § 29–701.”Even assuming, without deciding, that the court's comments at the hearing “decided” the requirements that Eleanor and Nihal were required to meet pursuant to § 29–701, seeHall,214 Ariz. 309, ¶ 28, 152 P.3d at 1200, the issue before the court as to Judy and Raynu was substantially different and, as the court noted, “distinguished due to factual differences between Judy and Raynu as contrasted with their parents, Eleanor and Nihal.”The Sholes do not dispute that Judy and Raynu presented competent evidence they had made capital contributions to Oasis, in direct contrast to the court's finding that Eleanor and Nihal had not presented evidence of “any capital contributions made.”Therefore, to the extent the court reopened any previously raised question, it was within its power to do so.SeeLennar Corp.,227 Ariz. 238, ¶ 12, 256 P.3d at 639–40(law of case applies where “facts, issues and evidence are substantially the same as those upon which the first decision rested”).

Evidence of Ownership

¶ 10 The Sholes also argue A.R.S. §§ 29–701(A)and29–702(A) compel the conclusion that Judy and Raynu could not have acquired an ownership interest in Oasis in exchange for services rendered because they did not “come forward with a writing signed by them at any point in time” promising to make such a contribution.Section 29–701 provides:

A.An interest in a limited liability company may be issued in exchange for a capital contribution or an enforceable promise to make a capital contribution in the future, or both.

B.Except as otherwise provided in an operating agreement, the agreement or consent of all of the members is necessary to fix or modify the amount and character of the capital contributions that a member shall make or shall promise to make in exchange for an interest in the limited liability company.

A capital contribution may include “services rendered or any other valuable consideration.”A.R.S. § 29–601(3).

¶ 11“The primary rule of statutory construction is to find and give effect to legislative intent.”Mail Boxes, Etc., U.S.A. v. Indus. Comm'n,181 Ariz. 119, 121, 888 P.2d 777, 779(1995).We first look to the plain language of the statute as the best reflection of the legislature's intent.Seeid.If the statute's language is unambiguous, we give effect to it and do not employ other rules of statutory construction to determine its meaning.Janson ex rel. Janson v. Christensen,167 Ariz....