Court Opinion

ID: 4015713
Source: CourtListenerOpinion
Date Created: 2016-07-14 15:02:30.807055+00
Date Added: 2024-06-11T13:03:38.133526
License: Public Domain

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  UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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.

                                     IN THE
              ARIZONA COURT OF APPEALS
                                 DIVISION ONE

                   ARIZONA LAND ADVISORS, LLC dba
                   LAND ADVISORS ORGANIZATION,
                      Plaintiff/Appellant/Cross-Appellee,

                                         v.

                       STUDIO CITY LOFTS, LLC, an
                      Arizona limited liability company,
                      Defendant/Appellee/Cross-Appellant.

                              No. 1 CA-CV 15-0402
                               FILED 7-14-2016

            Appeal from the Superior Court in Maricopa County
                           No. CV2014-012556
              The Honorable Christopher T. Whitten, Judge

                                   AFFIRMED

                                    COUNSEL

Fennemore Craig, PC, Phoenix
By Gerald L. Shelley, Emily Ayn Ward
Counsel for Plaintiff/Appellant/Cross-Appellee

Morrill & Aronson, PLC, Phoenix
By K. Layne Morrill, Martin A. Aronson
Counsel for Defendant/Appellee/Cross-Appellant
                           ARIZONA v. STUDIO
                           Decision of the Court

                       MEMORANDUM DECISION

Presiding Judge Diane M. Johnsen delivered the decision of the Court, in
which Judge Patricia A. Orozco and Judge Donn Kessler joined.

J O H N S E N, Judge:

¶1            Arizona Land Advisors, LLC, appeals the superior court's
entry of summary judgment in favor of Studio City Lofts, LLC. Studio City
cross-appeals the court's order awarding it only a portion of its attorney's
fees. For the reasons that follow, we affirm.

             FACTS AND PROCEDURAL BACKGROUND

¶2            John Lupypciw was the sole manager of Studio City from
June 2011 until July 17, 2012, when the other members removed him from
that position by amending the company's Articles of Incorporation. The
following day, Studio City filed the amendment with the Arizona
Corporation Commission. Notwithstanding that he was no longer the
company's manager, on February 4, 2013, Lupypciw signed an agreement
with Land Advisors, purportedly on behalf of Studio City, granting Land
Advisors a one-year exclusive right to sell a parcel of real property owned
by Studio City. Pursuant to the agreement, if the property were sold during
the one-year term, Land Advisors would receive a six-percent commission.
In such event, the agreement did not condition payment of the commission
on Land Advisors' having introduced the buyer to the property.

¶3            Two days after Lupypciw signed the listing agreement,
Studio City entered an involuntary bankruptcy. On July 1, 2013, the
bankruptcy was resolved by a settlement agreement to which Land
Advisors was not a party. The settlement agreement, inter alia, provided
that "Lupypciw shall have the authority, subject only to bankruptcy court
approval, to sell or refinance the Real Property for a period of 60 days."

¶4            Without Land Advisors' involvement but still within the one-
year term of the listing agreement, Studio City sold the property on
September 27, 2013. Land Advisors then sued Studio City, alleging breach
of contract and seeking its commission. On cross motions for summary
judgment, the superior court entered judgment in favor of Studio City and
against Land Advisors. The court also granted Studio City's request for
attorney's fees and costs, awarding it $10,000 of its requested $23,559 in fees.

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                          ARIZONA v. STUDIO
                          Decision of the Court

¶5           Land Advisors timely appealed from the superior court's
order and Studio City filed a timely cross-appeal. We have jurisdiction
pursuant to Article 6, Section 9 of the Arizona Constitution and Arizona
Revised Statutes ("A.R.S.") section 12-2101(A)(1) (2016).1

                              DISCUSSION

A.    Land Advisors' Appeal: Ratification.

¶6             The issue in Land Advisors' appeal is whether Studio City
ratified Lupypciw's execution of the listing agreement, such that Studio
City is bound by the agreement even though Lupypciw was no longer the
company's manager when he signed it. Summary judgment is appropriate
when "there is no genuine dispute as to any material fact and the moving
party is entitled to judgment as a matter of law." Ariz. R. Civ. P. 56(a). We
review the grant of a motion for summary judgment de novo and view the
facts in the light most favorable to the party against which judgment was
entered. Corbett v. ManorCare of America, Inc., 213 Ariz. 618, 621-22, ¶ 2
(App. 2006).

¶7            Land Advisors argues Studio City ratified Lupypciw's
execution of the listing agreement when it agreed to the following provision
in the bankruptcy settlement agreement:

      Notwithstanding the foregoing, Lupypciw shall have the
      authority, subject only to bankruptcy court approval, to sell
      or refinance the Real Property for a period of 60 days from the
      date of execution of this agreement. . . . The Parties recognize
      and acknowledge that Lupypciw has been engaged in ongoing and
      active attempts to refinance or sell the Real Property. He remains
      optimistic that he will be able to sell or refinance the property
      within the next 60 days for an amount well in excess of $1.5
      million. [Studio City and its creditors] are willing to accept
      this discounted payoff figure for a period of 60 days . . . in a
      sincere hope that the property will be quickly sold or
      refinanced and that they will receive the discounted payoff
      figure of $1.5 million.

1     Absent material revision after the relevant date, we cite a statute's
current version.

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                           ARIZONA v. STUDIO
                           Decision of the Court

(Emphasis added.)        Land Advisors argues the italicized language
constituted a ratification by Studio City of Lupypciw's efforts to sell the
property, necessarily including Lupypciw's entering into the listing
agreement.

¶8             "Arizona courts generally follow the Restatement of Agency."
Fid. & Deposit Co. of Md. v. Bondwriter Sw., Inc., 228 Ariz. 84, 90, ¶ 30 (App.
2011) (quoting Ruesga v. Kindred Nursing Centers, L.L.C., 215 Ariz. 589, 597
n.5, ¶ 28 (App. 2007)). The Restatement (Third) of Agency (2006)
("Restatement") defines ratification as "the affirmance of a prior act done by
another, whereby the act is given effect as if done by an agent acting with
actual authority." Restatement § 4.01(1). One may ratify the act of another
by "manifesting assent" to the act or by "conduct that justifies a reasonable
assumption that the person so consents."              Restatement § 4.01(2).
Ratification requires intent to ratify, coupled with full knowledge of all the
material facts. United Bank v. Mesa N. O. Nelson Co., Inc., 121 Ariz. 438, 440
(1979).

¶9            It is undisputed that Studio City did not know that Lupypciw
had signed the listing agreement with Land Advisors. Land Advisors
argues Studio City nonetheless ratified Lupypciw's execution of the listing
agreement when it signed the bankruptcy settlement agreement knowing
that it was not aware of everything that Lupypciw might have done in his
"ongoing and active attempts to refinance or sell the Real Property." Land
Advisors cites the comment to Restatement § 4.06, which states, "A
principal may choose to affirm without knowing the material facts."
Restatement § 4.06 cmt. b; see also Restatement § 4.01 cmt. b ("The principal
is not bound by a ratification made without knowledge of material facts
about the agent's act unless the principal chose to ratify with awareness that
such knowledge was lacking.").

¶10            In support of its argument, Land Advisors cites Grabois v.
BMO Harris Bank, N.A., 1 CA-CV 13-0164, 2015 WL 4040612 (Ariz. App.
June 30, 2015) (mem. decision). In that case, this court cited § 4.06 in holding
that a person ratified a refinancing by his actions even though he asserted
he did not know the specifics of the transaction. Id. at *5, ¶ 21. Although
Land Advisors contends the same principle applies here, when read in
context, the Restatement allows a much narrower exception to the general
rule that ratification may occur only when the principal has knowledge of
the material facts.

¶11        As the comment to § 4.06 explains, a principal may ratify
without knowing all the facts when the principal acts after failing to

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                           ARIZONA v. STUDIO
                           Decision of the Court

investigate despite having "knowledge of facts that would have led a
reasonable person to investigate further . . . ." Restatement § 4.06 cmt. d.
Land Advisors argues that Studio City had to know that, if, as the
bankruptcy settlement said, Lupypciw had been "engaged in ongoing and
active attempts to refinance or sell the Real Property," he must have
retained a broker to do so. Land Advisors' argument sweeps too broadly.
Land Advisors was not a party to the settlement and, as stated, there is no
evidence that Studio City knew that Lupypciw had somehow engaged with
Studio City. As a stranger to the alleged ratifying act, Land Advisors may
not use it to bind Studio City to a liability of which Studio City had no
knowledge. To be sure, assent need not be communicated to the third party
in order to constitute ratification. Restatement § 4.01 cmt. b, d. But under
the "ratification without knowledge" theory that Land Advisors presses, the
principal must make a choice to ratify. Restatement § 4.01 cmt. b. ("The
principal is not bound by a ratification made without knowledge of
material facts about the agent's act unless the principal chose to ratify with
awareness that such knowledge was lacking."). See id.; cmt. d ("[T]he focal
point of ratification is an observable indication that the principal has
exercised choice and has consented."). Land Advisors failed to offer
evidence sufficient to create a genuine issue of fact that by assenting to the
language in the bankruptcy settlement agreement, Studio City chose to
ratify everything Lupypciw might have done in attempting to refinance or
sell the property.

¶12             Land Advisors' reliance on Grabois is similarly misplaced. In
that case, there was abundant evidence that the principal knew that the loan
had been refinanced. The principal made multiple draw requests against
the loan in excess of the original loan amount, and he received monthly
statements bearing the refinanced loan identification number. Grabois, 1
CA-CV 13-0164, at *6, ¶¶ 26-27. Not only did the evidence show the
principal was aware of the refinancing, the principal consented to the
refinancing by accepting the benefit of the transaction and drawing against
the refinanced loan. Land Advisors offered no such evidence during the
briefing on the cross motions for summary judgment. Even viewing the
facts in the light most favorable to Land Advisors, there is no evidence that
Studio City ratified the listing agreement. For that reason, the superior
court did not err in granting summary judgment in Studio City's favor.

B.     Studio City's Cross-Appeal: Attorney's Fees.

¶13         In its cross-appeal, Studio City argues the superior court erred
when it awarded only a portion of the attorney's fees it requested. We

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                           ARIZONA v. STUDIO
                           Decision of the Court

review an award of attorney's fees for an abuse of discretion. Motzer v.
Escalante, 228 Ariz. 295, 296, ¶ 4 (App. 2011).

¶14           The superior court granted fees pursuant to A.R.S. § 12-341.01
(2016), which states, "In any contested action arising out of contract, express
or implied, the court may award the successful party reasonable attorney
fees."   A.R.S. § 12-341.01(A).        Although Studio City argues the
circumstances warranted an award of all of the requested fees, the statute
is permissive and in no way guarantees the successful party all of its fees:
"The award of reasonable attorney fees pursuant to this section should be
made to mitigate the burden of the expense of litigation to establish a just
claim or a just defense. It need not equal or relate to the attorney fees
actually paid or contracted[.]" A.R.S. § 12-341.01(B).

¶15            In making its fees award, the superior court explained, "The
Court awards only $10,000.00 in fees, as opposed to the $23,559.00
requested, because, as [Land Advisors] points out, this is a 'single count
Complaint that did not require any discovery and only entailed one round
of dispositive motion filings.'" On this record, we cannot say the superior
court abused its discretion. See City of Cottonwood v. James L. Fann
Contracting, Inc., 179 Ariz. 185, 195 (App. 1994) (court will uphold an award
of attorney's fees "if the record contains a reasonable basis to do so").

                              CONCLUSION

¶16           For the foregoing reasons, we affirm the superior court's entry
of summary judgment in favor of Studio City and the court's award of
attorney's fees and costs. In our discretion, we deny both parties' requests
for attorney's fees on appeal. Given our disposition of the appeal and the
cross appeal, neither side is entitled to receive its costs on appeal.

                                   :AA

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