Tucson Estates Prop. Owners Ass'n, Inc. v. McGovern

• Court: Arizona Court of Appeals
• Writing for the Court: MILLER, Judge
• Citation: Tucson Estates Prop. Owners Ass'n, Inc. v. McGovern, 366 P.3d 111 (Ariz. App. 2016)
• Decision Date: 15 January 2016
• Docket Number: No. 2 CA–CV 2015–0069.,2 CA–CV 2015–0069.
• Parties: TUCSON ESTATES PROPERTY OWNERS ASSOCIATION, INC., an Arizona Nonprofit Corporation, Plaintiff/Appellee, v. Holly A. McGOVERN, an Unmarried Woman; and Donald E. Sines, an Unmarried Man, Defendants/Appellants.

366 P.3d 111

TUCSON ESTATES PROPERTY OWNERS ASSOCIATION, INC., an Arizona Nonprofit Corporation, Plaintiff/Appellee,

v.Holly A. McGOVERN, an Unmarried Woman; and Donald E. Sines, an Unmarried Man, Defendants/Appellants.

No. 2 CA–CV 2015–0069.

Court of Appeals of Arizona, Division 2.

Jan. 15, 2016.

Carpenter, Hazlewood, Delgado & Bolen, PLC, By Jason Smith and Nicholas Nogami, Tucson, Counsel for Plaintiff/Appellee.

Stephen M. Weeks, Marana, Counsel for Defendants/Appellants.

Judge MILLER authored the opinion of the Court, in which Presiding Judge VÁSQUEZ and Chief Judge ECKERSTROM concurred.

OPINION

MILLER, Judge:

¶ 1 We address whether A.R.S. § 12–341.01 requires an award of attorney fees to the prevailing party if the contract that authorizes such fees mandates an award to the other party but is silent as to the prevailing party. As a matter of statutory interpretation, we conclude that § 12–341.01(A) permits a fees award in this situation but does not mandate it.

¶ 2 Holly McGovern and Donald Sines (collectively, "Appellants") appeal the trial court's denial of their request for attorney fees and costs against Tucson Estates Property Owners Association (TEPOA) after its request for an injunction and breach of contract claims were decided in favor of Appellants. Appellants argue they should have been awarded fees pursuant to A.R.S. § 12–341.01 and costs pursuant to A.R.S. § 12–341because they were the prevailing parties below; further, they should have been awarded fees pursuant to A.R.S. § 12–349 as a sanction. For the following reasons, we affirm the court's ruling on attorney fees but reverse its denial of costs.

Factual and Procedural Background

¶ 3 We view the facts in the light most favorable to upholding the trial court's ruling. McMurray v. Dream Catcher USA, Inc., 220 Ariz. 71, ¶ 6, 202 P.3d 536, 539 (App.2009). In 2012, Appellants purchased property in Tucson Estates, which included a shed that had been built more than thirty-five years earlier. They were informed in writing that if they moved or replaced the shed, any new structure would have to comply with the current covenants, conditions, and restrictions (CC & Rs).

¶ 4 Sines soon submitted a change request to replace the shed in a new location.¹ The request form included this admonition: "The Association has thirty (30) days to respond to this request. Do not start your project until you have received approval." There were multiple handwritten notes on the form, including "Appears shed will fit," and a check mark in a box indicating the plan was denied. Contrary to the suggestion in the document that his plan was rejected, Sines testified that the person who inspected the property for TEPOA gave verbal approval to replace the shed. He also testified he never received a copy of his request with the "Plan Denial" box checked. The trial court accepted Sines's testimony, finding that TEPOA did not send the rejection form to Appellants.

¶ 5 More than a year after Sines submitted the request, and after he had completed the shed, TEPOA sent Sines a letter stating he had violated the CC & Rs. Sines continued to correspond with TEPOA and eventually moved the shed to the cement pad where the previous shed had stood.

¶ 6 TEPOA sought injunctive relief to require appellants to remove the shed, as well as liquidated damages and attorney fees based on breach of contract. The matter was tried to the court in a one-day hearing. The court found the homeowners relied on either actual or implicit approval in building their shed. Additionally, it denied injunctive relief based, in part, on TEPOA's year-long delay in giving notice to Appellants of the alleged violations of the CC & Rs and its failure to approve the relocation of the shed. The court also vacated the fines imposed by TEPOA against the homeowners, effectively denying the breach of contract claims. The court concluded, "In light of the tenor of this case, each party is to bear their own fees and costs." The court denied Appellants' motion for reconsideration "[i]n light of the procedural history, the evidence presented, and the tenor of the case." Appellants' motion for a new trial on the attorney fees issue was denied without further comment. This timely appeal followed.

Attorney Fees

Mandatory Attorney Fees Pursuant To § 12–341.01

¶ 7 Appellants contend the trial court was required to award attorney fees under § 12–341.01(A). We generally review the denial of attorney fees for an abuse of discretion, but whether § 12–341.01(A) requires an award of fees is a question of law we review de novo. See Bennett Blum, M.D., Inc. v. Cowan, 235 Ariz. 204, ¶ 5, 330 P.3d 961, 962–63 (App.2014).

¶ 8 Section 12–341.01(A) provides that in an action arising out of contract, the trial court "may award the successful party reasonable attorney fees." (Emphasis added.) This section, however, cannot "be construed as altering, prohibiting or restricting" the contract terms. Id.

¶ 9 We first determine whether there was a contract between the parties and, if so, examine the particular fees provision. See Barmat v. John & Jane Doe Partners A–D, 155 Ariz. 519, 521, 747 P.2d 1218, 1220 (1987) (analyzing first whether express or implied contract existed before determining whether § 12–341.01 applied). Here, the relevant fees clause is contained in the CC & Rs, which constitute a contract between TEPOA's property owners as a whole and individual lot owners. Ahwatukee Custom Estates Mgmt. Ass'n, Inc. v. Turner, 196 Ariz. 631, ¶ 5, 2 P.3d 1276, 1279 (App.2000). The agreement included this attorney fees provision: "In the event [TEPOA] receives judgment against any person for a violation or threatened violation of any of the CC & R's herein, [TEPOA] shall ... be entitled to recover from such person reasonable legal fees and costs." The CC & Rs contained no provisions regarding attorney fees in the event judgment was rendered for the lot owner and against TEPOA.

¶ 10 Appellants argue they were entitled to mandatory attorney fees under § 12–341.01(A) as a matter of "equity [and] basic fairness" because TEPOA would have received mandatory fees under the unilateral contract provision if it had prevailed. They rely on Pioneer Roofing Co. v. Mardian Construction Co., 152 Ariz. 455, 733 P.2d 652 (App.1986), to support this argument.² In that case, the trial court ordered Mardian to pay the attorney fees of two other parties. Id. at 470, 733 P.2d at 667. The contract contained a specific provision that allowed Mardian to recover attorney fees in disputes, but was silent as to the other parties. Id. Mardian argued on appeal that the contract provision preempted the applicability of § 12–341.01, and because it was silent as to the other parties, it was error to award them fees. 152 Ariz. at 470, 733 P.2d at 667. In upholding the award of fees, we concluded that there was no "prohibition against the recovery of attorneys' fees to one party under § 12–341.01 simply because a contract contains a unilateral attorneys' fees provision favorable to another party." Id. at 471, 733 P.2d at 668 ; see also Geller v. Lesk, 230 Ariz. 624, ¶ 9, 285 P.3d 972, 975 (App.2012) (citing Pioneer Roofing for principle that court will apply contract to determine fee award for named party, but "may award fees for other party under A.R.S. § 12–341.01(A)").

¶ 11 Appellants seek to expand Pioneer Roofing to mandate an award of fees when a unilateral fees provision requires an award of fees to the other party had it prevailed. Although arguably reasonable as a matter of equity, the plain language of § 12–341.01(A) states only that a court may award fees in an action arising out of contract, and that it will not alter applicable contracts. The purpose of the statute is to "mitigate the burden of the expense of litigation to establish a just claim or a just defense." § 12–341.01(B) ; Chaurasia v. Gen. Motors Corp., 212 Ariz. 18, ¶ 43, 126 P.3d 165, 176 (App.2006). It offers the possibility of mitigating the expense of bringing a valid claim, but does not, by its language and stated purpose, require equity. Further, Pioneer Roofing does not support such an expansion; the court held only that the trial court has the discretion to award attorney fees under § 12–341.01despite the existence of a unilateral fee provision. 152 Ariz. at 471, 733 P.2d at 668. To the extent this mandatory-discretionary differentiation results in an asymmetrical treatment of parties to a contract,³ the authority to revise § 12–341.01 is vested solely in the legislature.⁴

See In re Pinal Cty. Mental Health No. MH–201000029, 225 Ariz. 500, ¶ 20, 240 P.3d 1262, 1268 (App.2010) ("[T]his court is not free to amend the unambiguous language of our statutes to conform to our own notions of public policy."). The trial court was not required to award attorney fees pursuant to § 12–341.01 and Pioneer Roofing.

Whether Discretionary Attorney Fees Should Have Been Awarded

¶ 12 Appellants argue in the alternative that the trial court abused its discretion because the factors to be considered in awarding fees pursuant to § 12–341.01(A) weighed in their favor. We may uphold a decision on attorney fees under § 12–341.01 if it has any reasonable basis, even if the trial court gave no reasons for denying the request for fees. Uyleman v. D.S. Rentco, 194 Ariz. 300, ¶ 27, 981 P.2d 1081, 1086 (App.1999). The question on appeal " ‘is not whether the judges of this court would have made an original like ruling, but whether a judicial mind, in view of the law and circumstances, could have made the ruling without exceeding the bounds of reason. We cannot substitute our discretion for that of the trial judge.’ " Associated Indem. Corp. v. Warner, 143 Ariz. 567, 571, 694 P.2d 1181, 1185 (1985), quoting Davis v. Davis, 78 Ariz. 174, 179, 277 P.2d 261, 265 (1954) (Windes, J., specially concurring).

¶ 13 Our supreme court outlined the factors that may be considered to determine the amount of a fee award under § 12–341.01. Id. at 570, 694 P.2d at...