Kemoseme v. Battles

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NOTICE: THIS DECISION DOES NOT CREATE LEGAL PRECEDENT AND MAY NOT BE CITED EXCEPT AS AUTHORIZED BY APPLICABLE RULES. See Ariz. R. Supreme Court 111(c); ARCAP 28(c); Ariz. R. Crim. P. 31.24 IN THE COURT OF APPEALS STATE OF ARIZONA DIVISION ONE KEMOSEME PACIFIC, LLC, an Arizona ) limited liability company, ) ) Plaintiff/Appellant, ) ) v. ) ) KARI D. BATTLES and WILLIAM C. ) BATTLES, wife and husband; JOHN ) W. BUSBY and GAIL H. BUSBY, ) husband and wife, ) ) Defendants/Appellees, ) ) TEXAZ FOOD SERVICES, LLC, an ) Arizona limited liability ) company; SOUTHPOINT CONSOLIDATED ) LIMITED PARTNERSHIP, ) ) Relief Defendants/Appellees, ) _________________________________ ) ) SHERMAN CAPITAL GROUP, LLC, ) ) Intervenor/Appellee. ) ) 1 CA-CV 11-0154 DIVISION ONE FILED: 03/06/2012 RUTH A. WILLINGHAM, CLERK BY: DLL DEPARTMENT E MEMORANDUM DECISION (Not for Publication Rule 28, Arizona Rules of Civil Appellate Procedure) Appeal from the Superior Court in Maricopa County Cause No. CV2009-028010 The Honorable Jeanne Garcia, Judge VACATED AND REMANDED Conant & Associates PLC By Paul A. Conant Attorney for Plaintiff/Appellant Phoenix Farley & Holmes By Darren E. Holmes Attorneys for Defendants/Appellees Battles Peoria Owens & Pyper PLC By Bradley T. Owens Attorneys for Defendants/Appellees Busby, et al. Phoenix Lewis & Roca LLP By Randall S. Papetti Lawrence A. Kasten Attorneys for Intervenor/Appellee Phoenix H A L L, Judge ¶1 Kemoseme Pacific, LLC (Kemoseme) appeals from the award of attorneys fees in favor of John and Gail Busby, Kari and William Battles, TEXAZ Food Services, LLC, Southpoint Consolidated Limited Partnership, and Sherman Capital Group, LLC (collectively Defendants). vacate the attorneys For the reasons stated below, we fees award and remand for further complaint against proceedings. FACTUAL AND PROCEDURAL BACKGROUND ¶2 Kemoseme Defendants, which filed included a twelve-count a request to appoint a receiver pursuant to Arizona Revised Statutes (A.R.S.) section 12-1241 (2003). All claims except the receivership claim were ordered 2 to arbitration. After a hearing, the trial court denied Kemoseme s request to appoint a receiver. ¶3 Defendants then filed applications for attorneys fees citing A.R.S. parties fees § 12-341.01(A) Partnership some (2003) Agreement. Defendants and The incurred in a provision requested obtaining compelling arbitration on the remaining counts. fees a in the included court order Kemoseme argued that because arbitration on the merits of the complaint was not complete, an award of attorneys fees would be premature as there was no prevailing party entitled to attorneys fees under A.R.S. § 12-341.01(A). ¶4 was The trial court concluded that the receivership claim a separate and independent issue from the issues in arbitration and awarded attorneys fees and costs to Defendants as prevailing A.R.S. § judgments. parties on We have receivership Kemoseme 12-341.01. the timely jurisdiction claim appealed pursuant to pursuant from A.R.S. to these § 12- 2101(A)(1) (Supp. 2011). DISCUSSION A.R.S. § 12-341.01(A) - Arising Out of a Contract ¶5 Kemoseme argues that the court erred in determining that Defendants were entitled to attorneys fees pursuant to A.R.S. § 12-341.01(A), which authorizes attorneys fees in cases 3 arising out of a contract. waived any argument that Defendants contend that Kemoseme its claim did not arise out of a contract by failing to raise that argument in response to the fee applications below. Alternatively, Defendants argue that Kemoseme s out claims arose of the alleged breach of the Partnership Agreement, which entitled them to fees under A.R.S. § 12-341.01(A). ¶6 Interpretation and application of the attorney fee statute present questions of law subject to de novo review. . . . If attorney s fees are available under the statute, we review the award for abuse of discretion. Dooley v. O Brien, 226 Ariz. 149, 152, ¶ 9, 244 P.3d 586, 589 (App. 2010) (internal quotation omitted). ¶7 Defendants argue that in responding to their fee requests, Kemoseme failed to assert that the claims did not arise out of a contract. argues that an award arbitration is completed. The majority of Kemoseme s response of fees would be premature until There is one sentence, however, that can be viewed as raising this argument below. Kemoseme argued that there was no determination of the type that would allow an attorneys fee award to be made. We infer from this language that Kemoseme meant an action arising out of a contract was a 4 determination of the type that would allow an award of fees. Accordingly, we find Kemoseme did not waive this issue. ¶8 Although Kemoseme s complaint raised several claims, the only issue the trial court decided was whether to appoint a receiver under A.R.S. § 12-1241. [Section 12-1241] simply requires the trial court to determine that the property or the rights of the parties need protection. Gravel Resources of Ariz. v. Hills, 217 Ariz. 33, 37, ¶ 11, 170 P.3d 282, 286 (App. 2007). The statute itself authorizes the cause of action. A.R.S. § 12-1241. receivership action. See No contract is required to give rise to a Id. Nor was Kemoseme s request for a receiver based on any contract provision. ¶9 The appoint a trial receiver court was noted based that on Kemoseme s allegations request to fraud and of mismanagement. Significantly, however, the court acknowledged that allegations the fraud resolved in arbitration. were not before it and would be The fact that the claims subject to arbitration may arise out of a contract for purposes of A.R.S. § 12-341.01(A) is irrelevant in determining whether Defendants were entitled to an award of fees on the single issue before the trial court. We need not decide whether the claims subject to arbitration arise out of contract. The only issue the trial court decided was Kemoseme s petition to appoint a receiver. 5 That claim is based on a statute, A.R.S. § 12-1241, and does not arise out of a contract.1 Therefore, the trial court improperly awarded attorneys fees to Defendants pursuant to A.R.S. § 12341.01(A). CROSS-ISSUE ON APPEAL Fees Pursuant to Partnership Agreement ¶10 Defendants parties Partnership cite the Agreement affirming the fee award. attorney as an fee provision alternative in the basis for As they did below, Defendants contend the following provision in the Partnership Agreement entitles them to fees: In the event any Partner brings an action at law or other proceeding against any other Partner to enforce any of the terms, covenants and conditions hereof, or by reason of any breach or default hereunder, the party prevailing in any such action or proceeding shall be paid all reasonable attorneys fees by the non-prevailing party, and in the event any judgment is secured by such prevailing party, all such attorneys fees shall be determined by the court and not by jury and shall be included in any such judgment. ¶11 Defendants also argue that Kemoseme failed to respond to this argument below or in its opening brief and, therefore, cannot object on appeal. 1 Kemoseme contends that it did not Having decided that the fee award was erroneous, we need not decide whether the award of attorneys fees under A.R.S. § 12341.01(A) was premature. 6 elaborate on its statement that the Partnership Agreement did not give rise to an award of fees because the plain language of the Partnership Agreement clearly did not apply. Kemoseme s statement that attorneys fees were not available pursuant to the Partnership Agreement hardly constitutes a legal argument. See ARCAP 13(a). However, Kemoseme argued below and on appeal that an award of attorneys fees was premature because neither party prevailed on the merits. Like A.R.S. § 12-341.01(A), the Partnership Agreement allows an award of fees to the prevailing party. Thus, we conclude Kemoseme raised an objection, albeit sparse, to Agreement. the award of fees pursuant to the Partnership Additionally, we may exercise discretion to address the merits of an issue instead of relying on the procedural doctrine of Waterhouse, waiver. 190 Ariz. See 6, Standard 39-40, 945 Chartered, P.2d PLC Price 350-51 317, v. (App. 1996). ¶12 To be entitled to attorneys fees under the Partnership Agreement, Kemoseme s action must have been one to enforce the terms, covenants and conditions of the Partnership Agreement or Partnership an action Agreement. for any breach Kemoseme s or default complaint alleged of the fraud relating to a separate Settlement Agreement entered into six years after the Partnership Agreement, 7 not the Partnership Agreement itself. Arizona The complaint also alleged a violation of the Securities Act and sought a constructive trust, accounting, declaratory judgment, and punitive damages as well as asserting a claim for intentional interference with business relations. None of these claims involve the terms of or a breach of the Partnership Agreement. ¶13 The action breached fiduciary determine whether also duties these alleged owed that to claims Busby Kemoseme. give rise to and We Battles need attorneys not fees under the Partnership Agreement because the single claim before the trial court was the request to appoint a receiver. Defendants and the trial court acknowledged, this issue As was separate and discrete from the remainder of the claims in the complaint. The sole issue before the trial court was not an action to enforce the terms of the Partnership Agreement or for any breach of that Agreement. Accordingly, we conclude that § 12.9 of the Partnership Agreement did not entitle Defendants to an award of their attorneys fees related to the receivership proceeding. ¶14 Defendants next argue on appeal that they were entitled to attorneys fees to the extent the fee award was based on Kemoseme s failure to abide requirement in the Partnership Agreement. 8 by the arbitration They contend their motions to compel arbitration justify the fee award pursuant to § 12.9 of the Partnership Agreement. ¶15 In their affidavits for attorneys fees, Defendants included fees related to their motions to compel arbitration as part of their overall fee request. request totaled $117,716.50 and Defendants combined fee the trial court granted Defendants a combined fee award in the amount of $81,993.00. is unclear from the minute entry and judgments It awarding Defendants their attorneys fees what amount, if any, of the awarded fees arbitration related to the proceedings. fees Although incurred we have in pursuing determined the that Defendants were not entitled to a fee award for the receivership proceeding, they may nonetheless be entitled to the portion of their fees attributable to their successful motions to compel arbitration. Therefore, without expressing an opinion as to the merits of the matter, we remand for the trial court to determine whether Defendants are entitled to an award of the attorneys fees related to the arbitration issue. ATTORNEYS FEES ON APPEAL ¶16 appeal Defendants for the awarded below. same request reasons an award argued of in attorneys support of fees the on fees Because Defendants did not prevail on appeal, we deny their request. 9 CONCLUSION ¶17 For attorneys the fees foregoing to reasons, Defendants we and vacate remand proceedings. /s/ PHILIP HALL, Judge CONCURRING: /s/ PATRICIA A. OROZCO, Presiding Judge /s/ JOHN C. GEMMILL, Judge 10 the for award of further

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