Court Opinion

ID: 4112102
Source: CourtListenerOpinion
Date Created: 2016-12-29 17:02:26.710855+00
Date Added: 2024-06-11T09:20:44.566621
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 UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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

 STATE OF ARIZONA ex rel. LAUREN KINGRY, Superintendent of the
        Arizona Department of Financial Institutions, Plaintiff,

                                        v.

   LANDMARC CAPITAL & INVESTMENT COMPANY, Defendant.
            ________________________________

JUNE H. BEHRENDT; FIRST TRUST COMPANY OF ONAGA, Custodian
    FBO Beverly Clarke IRA, BENNETT A. GRIMM JR. and SUSAN V.
   GRIMM; KAREN CHOPRA LIVING TRUST U/A/D 2/26/27; FIRST
  TRUST COMPANY OF ONAGA, Custodian FBO Stephen Leshner IRA;
 FIRST TRUST COMPANY OF ONAGA, Custodian FBO Michael Macken
  IRA; FIRST TRUST COMPANY ONAGA, Custodian FBO Robert Rader
    IRA; RUSSELL INVESTMENTS, LP; FIRST TRUST COMPANY OF
 ONAGA, Custodian FBO Rhonda Kay Solheim IRA; JOHN K. SOLHEIM
and BROOKE SOLHEIM; URQUIETA SMYTHE FAMILY TRUST U/A/D
11/1/90; OXTOX HOLDINGS, LLC; RHONDA KAY SOLHEIM FAMILY
   TRUST U/A 05-09-77; SPRUCE AVENUE LTD. PARTNERSHIP, LLP;
 ROBERT BUCHHEIT; PK HOLDINGS, LLC; and THE 1977 GILL TRUST
           U/A 12/07/77, Plaintiffs/Appellees/Cross-Appellants,

                                        v.

LANDMARC CAPITAL PARTNERS, LLC, an Arizona Limited Liability
        Company, Defendant/Appellant/Cross-Appellee.
           ________________________________
 OXTOX HOLDINGS, LLC; RHONDA KAY SOLHEIM FAMILY TRUST
  U/A 05-07-7 SPRUCE AVENUE LTD. PARTNERSHIP, LLP; ROBERT
  BUCHHEIT; PK HOLDINGS, LLC; and THE 1977 GILL TRUST U/A
             12/07/77, Plaintiffs/Appellees/Cross-Appellants,

                                       v.

 LANDMARC CAPITAL PARTNERS, LLC, an Arizona Limited Liability
         Company, Defendant/Appellant/Cross-Appellee.

                            No. 1 CA-CV 14-0022
                                1 CA-CV 14-0516
                            (CONSOLIDATED)
                              FILED 12-29-16

           Appeal from the Superior Court in Maricopa County
                No. CV2009-020595 and CV2009-050052
                          (CONSOLIDATED)
                The Honorable Lisa Daniel Flores, Judge

                      REVERSED AND REMANDED

                                  COUNSEL

Ramras Law Offices, PC, Phoenix
By David N. Ramras
Counsel for Plaintiffs/Appellees/Cross-Appellants

Lang & Klain, PC, Scottsdale
By Kent A. Lang, William G. Klain, George H. King

Russell Piccoli, PLC, Phoenix
By Russell Piccoli
Co-Counsel for Defendant/Appellant/Cross-Appellee

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                     OXFORD, et al. v. LANDMARC
                         Decision of the Court

                      MEMORANDUM DECISION

Judge Kent E. Cattani delivered the decision of the Court, in which
Presiding Judge Diane M. Johnsen and Judge John C. Gemmill (retired)
joined.

C A T T A N I, Judge:

¶1            Landmarc Capital Partners, LLC (“Partners”) appeals from
the superior court’s grant of summary judgment in favor of several
investors (the “Oxford Investors”)1 on issues relating to various real estate
investment loans. The Oxford Investors cross appeal from the superior
court’s denial of their application for attorney’s fees. For reasons that
follow, we reverse the superior court’s grant of summary judgment to the
Oxford Investors and remand for further proceedings consistent with this
decision.

             FACTS AND PROCEDURAL BACKGROUND

¶2             In 2006, Landmarc Capital & Investment Co. (“Landmarc”), a
licensed mortgage broker, formed Partners, a limited liability company, as
a vehicle for making secured real estate loans and selling participation
interests in such loans. Landmarc’s officers—President David Crantz, Vice
President Jeff Petersen, and Secretary Malecia Golf—also served as
Partners’s management team.

¶3            In 2007, Landmarc brokered a $3.36 million loan (the
“Westgate Loan”) secured by a deed of trust on commercial property in
Glendale (the “Westgate Property”).            Landmarc thereafter sold
participation and security interests in the Westgate Loan to, among others,
Partners and the Oxford Investors. The agreements between Landmarc and
the Oxford Investors were negotiated by Petersen and Allen Weintraub on

1     The Oxford Investors are: June H. Behrendt; First Trust Company of
Onaga, Custodian FBO Beverly Clarke IRA, Bennett A. Grimm Jr. and
Susan V. Grimm; Karen Chopra Living Trust UAD 2/26/07; First Trust
Company of Onaga, Custodian FBO Stephen Leshner IRA; Michael J.
Macken Revocable Trust U/A/D 11/17/95; First Trust Company of Onaga,
Custodian FBO Rhonda Kaye Solheim IRA; John K. Solheim and Brooke L.
Solheim; and Urquieta Smythe Family Trust U/A/D 11/1/90.

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                      OXFORD, et al. v. LANDMARC
                          Decision of the Court

behalf of Landmarc, and by investment advisor Walter Clarke on behalf of
the Oxford Investors.

¶4             The participation agreements themselves did not grant any
investor priority over any other, and instead specified that recovery in the
event of default (after covering collection costs) would be shared among
investors in proportion to each investor’s participation interest. But both
before and after the Oxford Investors entered the participation agreements,
Petersen, who was authorized to sign documents “relating to the sale of
participation in deeds of trust” on Landmarc’s behalf, sent Clarke multiple
letters (the “Petersen Letters”) “certif[ying]” that the Oxford Investors were
“in a first payout position” and would be paid first in the event of a default
on the Westgate Loan. The core of the current dispute is whether the letters
granted the Oxford Investors first-out priority.

¶5             In late 2008, following the borrower’s default on the Westgate
Loan, Landmarc foreclosed on the Westgate Property and took title via a
trustee’s deed. Landmarc then conveyed legal title to the Westgate
Property via warranty deed to LCI-Westgate, L.L.C. (“LCI-Westgate”)—a
limited liability company of which Landmarc was (at the time) the only
member and which had no operating agreement.

¶6            Soon thereafter, Landmarc went into receivership. The
superior court appointed a Receiver for Landmarc in June 2009, and
subsequently authorized the Receiver to assume control of Landmarc and
to “conduct the business operations of Landmarc and the entities it
control[led].” Because Landmarc was the sole manager of Partners, the
Receiver assumed that role.

¶7             In April 2010, the Receiver, in its capacity as manager of
Partners, signed an operating agreement for LCI-Westgate (which then
owned the Westgate Property). The operating agreement named Partners,
the Oxford Investors, and other participants in the Westgate Loan as
members of LCI-Westgate, and it specified a first-out payment priority for
the Oxford Investors. The Receiver then filed Petition 41 with the superior
court, seeking, as relevant here, ratification of its decision to enter the LCI-
Westgate operating agreement. The superior court granted the petition and
ratified the operating agreement, but this court reversed on appeal,
concluding that Partners lacked notice and an opportunity to be heard on
the petition. State ex rel. Kingry v. Landmarc Capital Partners, LLC, 1 CA-CV
11-0739, 2012 WL 4893397, at *3, ¶ 19 (Ariz. App. October 16, 2012) (mem.
decision). This court did not determine the validity of the Oxford Investors’
claim of first-out priority, but rather remanded the case, concluding that

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                      OXFORD, et al. v. LANDMARC
                          Decision of the Court

whether the parties were bound by Petersen’s agreement to preferential
treatment involved “factual issues unsuited for resolution as a matter of law
on appeal.” Id. at *4, ¶ 21.

¶8              Meanwhile, the Receiver filed Petition 54 seeking court
approval of its conclusion that the Petersen Letters reflected a valid and
enforceable pre-receivership agreement granting the Oxford Investors first-
out priority for participation claims among Landmarc’s investors. The
Oxford Investors filed a complaint in superior court requesting a ruling that
the Petersen Letters’ first-out provision was enforceable under principles of
promissory estoppel. On cross-motions for summary judgment, the
superior court granted judgment as a matter of law in favor of the Oxford
Investors and against Partners, holding that the Oxford Investors
reasonably relied on the Petersen Letters to establish first-out priority, and
that the first-out provision was thus enforceable on the basis of promissory
estoppel.

¶9            The Oxford Investors then moved for summary judgment
seeking approval of Petition 41, which the superior court granted based in
part on its ruling on Petition 54 that the first-out provisions were in place
and enforceable at the time the Receiver was appointed (such that the LCI-
Westgate operating agreement reflecting the Oxford Investors’ priority
position was appropriate). The court denied without comment the Oxford
Investors’ request for attorney’s fees.

¶10           Partners timely appealed from the Petition 54 and Petition 41
judgments, and the Oxford Investors timely cross-appealed the denial of
attorney’s fees, and we consolidated the appeals. We have jurisdiction
under Arizona Revised Statutes (“A.R.S.”) § 12-2101(A)(1).2

                               DISCUSSION

¶11             Partners challenges the superior court’s grant of summary
judgment in favor of the Oxford Investors on both Petition 54 and Petition
41. Summary judgment is only appropriate if there are no genuine issues
of material fact and the moving party is entitled to judgment as a matter of
law. Ariz. R. Civ. P. 56(a); see also Orme Sch. v. Reeves, 166 Ariz. 301, 309
(1990). We review a grant of summary judgment de novo, considering the
facts in the light most favorable to the party opposing it. BMO Harris Bank,
N.A. v. Wildwood Creek Ranch, LLC, 236 Ariz. 363, 365, ¶ 7 (2015).

2     Absent material revisions after the relevant date, we cite a statute’s
current version.

                                      5
                      OXFORD, et al. v. LANDMARC
                          Decision of the Court

I.     Petition 54.

¶12           Partners argues that the superior court erred by awarding
summary judgment to the Oxford Investors on Petition 54 based on
promissory estoppel. To prove promissory estoppel, the promisee must
show that a promise was made, the promisor should have reasonably
foreseen the promisee’s reliance, and the promisee actually relied on that
promise. See Double AA Builders, Ltd. v. Grand State Constr. L.L.C., 210 Ariz.
503, 507, ¶ 19 (App. 2005). The promisee’s reliance must be reasonable
under the circumstances. Higginbottom v. State, 203 Ariz. 139, 144, ¶ 18
(App. 2002). Whether reliance is reasonable is generally a question of fact.
See John C. Lincoln Hosp. & Health Corp. v. Maricopa Cty., 208 Ariz. 532, 537,
¶ 10 (App. 2004) (“Questions of estoppel, including reasonable reliance, are
fact-intensive inquiries.”).

¶13           The only element of promissory estoppel in dispute here is
the reasonableness of the Oxford Investors’ reliance on the Petersen Letters.
Partners contends that disputed issues of fact should have precluded
summary judgment on whether the Oxford Investors reasonably relied on
the Petersen Letters’ assurances of first-out priority. We agree.

¶14            There was evidence supporting a finding that the Oxford
Investors had good reason to rely on the Petersen Letters. Petersen (who
was negotiating the purchase agreements on behalf of Landmarc) sent
Clarke (who was negotiating on behalf of the Oxford Investors) the January
2008 letters “certif[ying]” that the Oxford Investors were “in a first payout
position” in the event of default on the Westgate Loan. An email sent to the
Oxford Investors in August 2008, after the Oxford Investors had entered the
participation agreements, reiterated their “first payout position” in the
event of asset liquidation. Landmarc (as manager of Partners) had
authority to make all decisions and enter any agreements for Partners;
Landmarc’s authority in this regard was set forth in Partners’s operating
agreement and was communicated to the Oxford Investors in the 2007
offering documents related to participation in the Westgate Loan.
Moreover, as the superior court noted, Petersen was undisputedly a
principal of Landmarc, and he acted as part of Partners’s management team
along with other Landmarc principals. And Landmarc issued a corporate
resolution on January 1, 2008, that authorized Petersen “to sign any
documents relating to the sale of participation in deeds of trust.” Along
with affidavits and testimony from Clarke, Weintraub, and Golf recounting
meetings in which Petersen promised first-out priority for the Oxford
Investors, this evidence weighs in favor of a finding that the Oxford
Investors reasonably relied on the Petersen Letters.

                                      6
                      OXFORD, et al. v. LANDMARC
                          Decision of the Court

¶15            However, Partners offered evidence supporting the contrary
position that the Oxford Investors knew or should have known that
Landmarc had refused to grant them first-out priority, and thus should not
have relied on the Petersen Letters. First, the written participation
agreements that formalized the transaction (entered after the January
Petersen Letters) did not grant any particular investor or investor group a
priority position and did not contemplate subordination of other investors’
interests. These contracts further included a merger clause providing that
the formal written agreement “constitutes the entire agreement among the
parties. It supersedes any prior agreement or understanding among them,
and it may not be modified or amended in any manner unless in writing
executed by both parties hereto.” And Clarke acknowledged that he had
never before entered a priority agreement when the transactional document
itself made no specific reference to such priority.

¶16           Second, Crantz and Petersen offered sworn statements
contrary to the Oxford Investors’ position. Crantz stated that, on behalf of
Landmarc, he personally refused Clarke’s request to sign a first-out
agreement, and he personally informed Clarke that Petersen lacked
authority to offer a priority position to an investor. And Petersen avowed
that his letters were not intended to commit Landmarc to granting the
Oxford Investors a first-out priority, but were merely intended to reassure
the Oxford Investors that Landmarc would not short-sell the Westgate
Property in the event of a default.

¶17           The Oxford Investors argue the Crantz and Petersen
declarations should be disregarded as conclusory. See Florez v. Sargeant, 185
Ariz. 521, 526 (1996) (“[A]ffidavits that only set forth ultimate facts or
conclusions of law can neither support nor defeat a motion for summary
judgment.”). But these declarations do more than simply assert in
conclusory fashion that the Oxford Investors’ reliance was not reasonable;
rather, they offer competing testimony regarding specific communications
with Clarke that, if credited by the factfinder, would undermine the
reasonableness of the Oxford Investors’ purported reliance on the Petersen
Letters. See Higginbottom, 203 Ariz. at 144, ¶ 18 (noting that reliance “is not
justified when knowledge to the contrary exists.”).

¶18           The Oxford Investors additionally posit that the Crantz and
Petersen declarations are inadmissible parol evidence seeking to vary the
interpretation of the Petersen Letters. But the issue is not one of contract
interpretation; instead, the declarations offer evidence of other
circumstances and communications contrary to the language of the

                                      7
                      OXFORD, et al. v. LANDMARC
                          Decision of the Court

Petersen Letters, knowledge of which would tend to undermine the
reasonableness of the Oxford Investors’ reliance on the Petersen Letters.

¶19           Although the superior court minimized the Crantz and
Petersen declarations as “self-serving” and contradictory to other record
evidence, the declarants’ motives go to their credibility, not to the
admissibility of their statements. See Aranda v. Cardenas, 215 Ariz. 210, 219,
¶ 34 (App. 2007). And the inconsistency between the Oxford Investors’
evidence showing that Petersen apparently was authorized to enter first-
out agreements and Crantz’s account of his contrary communication to
Clarke reveals a genuine issue of material fact.

¶20           Third, Partners offered evidence that Weintraub (at Petersen’s
request), sent an email to the Oxford Investors in February 2008 stating,
“Regarding the re-assignment of interests, and placing investors in
subordinate position, we can not and have never placed an investor in
subordinate position.” Although Weintraub stated in his deposition that
this email “may” have been referring to a situation involving a warehouse
lender (as opposed to subordinating an investor’s interests to those of
another investor), Weintraub admitted he “d[id]n’t know” for certain
whether the email was referring to the warehouse lender or to the Oxford
Investors. Absent clarification, this email arguably put the Oxford
Investors on notice to make further inquiry or request a more formal
statement from Partners regarding their payout priority. See Manicom v.
CitiMortgage, Inc., 236 Ariz. 153, 160, ¶ 29 (App. 2014) (estoppel should not
be applied when a party was on notice that further inquiry may be
warranted).

¶21           When a factfinder must decide “the credibility of witnesses
with differing versions of material fact,” or “weigh the quality of
documentary or other evidence,” or “choose among competing or
conflicting inferences,” summary judgment is not appropriate. See Orme
Sch., 166 Ariz. at 311. Although the Oxford Investors offered substantial
evidence supporting their reliance on the first-out priority reference in the
Petersen Letters, Partners offered contrary evidence from which a factfinder
could conclude the Oxford Investors’ reliance was not reasonable. Given
this dispute of material fact, neither party was entitled to judgment as a
matter of law on the Oxford Investors’ promissory estoppel claim, and the
superior court erred by granting summary judgment in favor of the Oxford
Investors regarding Petition 54.

                                      8
                     OXFORD, et al. v. LANDMARC
                         Decision of the Court

II.   Petition 41.

¶22           Partners also disputes the superior court’s grant of summary
judgment in favor of the Oxford Investors on Petition 41, ratifying their
priority payout position as reflected in the LCI-Westgate operating
agreement. The superior court’s decision on Petition 41 was premised on
its ruling approving Petition 54, in which the court found that the Oxford
Investors had first-out priority and that this priority position was created
prior to appointment of the Receiver. Because we reverse summary
judgment on Petition 54, we likewise reverse the resulting grant of
summary judgment on Petition 41. And because we reverse summary
judgment for the Oxford Investors on Petition 41, their cross-appeal
regarding the denial of their request for attorney’s fees is moot.

                             CONCLUSION

¶23           For the foregoing reasons, we reverse the superior court’s
grant of summary judgment regarding Petitions 54 and 41 and remand for
further proceedings. In light of this disposition, we deny the Oxford
Investors’ request for an award of attorney’s fees on appeal pursuant to the
LCI-Westgate operating agreement. In an exercise of our discretion, we
similarly deny Landmarc’s request for attorney’s fees under A.R.S. § 12-
341.01.

                          AMY M. WOOD • Clerk of the Court
                          FILED:    JT

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