Court Opinion

ID: 4223885
Source: CourtListenerOpinion
Date Created: 2017-11-28 15:02:27.506498+00
Date Added: 2024-06-11T14:15:16.437887
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  UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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

         ROBERT ALTHERR, Plaintiff/Counter-Defendant/Appellant,

                                         v.

        LARRY A. ALTHERR, Defendant/Counter-Claimant/Appellee.

                              No. 1 CA-CV 16-0387
                                FILED 11-28-2017

            Appeal from the Superior Court in Yavapai County
                         No. V1300CV201580080
           The Honorable Jeffrey G. Paupore, Judge Pro Tempore

                       REVERSED AND REMANDED

                                    COUNSEL

Porter Law Firm, Phoenix
By Robert S. Porter
Counsel for Plaintiff/Appellant

Favour & Wilhelmsen PLLC, Prescott
By David K. Wilhelmsen, Lance B. Payette
Counsel for Defendant/Appellee
                          ALTHERR v. ALTHERR
                           Decision of the Court

                       MEMORANDUM DECISION

Acting Presiding Judge Peter B. Swann delivered the decision of the court,
in which Judge Maria Elena Cruz and Judge Michael J. Brown joined.

S W A N N, Judge:

¶1           Robert (“Bob”) Altherr brought an action against his brother
Larry A. Altherr arising out of the parties’ alleged partnership in the Jerome
Grand Hotel. The superior court determined on summary judgment that
no partnership existed. Because no written partnership agreement was
required and the undisputed evidence does not compel a finding that there
was no oral partnership agreement, we reverse and remand.

                 FACTS AND PROCEDURAL HISTORY

¶2            Larry purchased the Hotel in 1994. In 2000, Larry bought
Bob’s interest in the Hotel, and for the next six years Bob played no
significant role in the Hotel’s business. Starting in 2007, however, Bob
resumed substantial involvement in the Hotel’s operations. Bob’s
involvement continued until late 2014, when Larry took steps to preclude
Bob from further participation.

¶3             Bob brought an action against Larry on the theory that the
brothers had an oral partnership agreement that Larry breached. In his
initial complaint, Bob alleged that the partnership was formed in 2008. In
his first amended complaint, Bob alleged that Larry transferred the entirety
of his interest to Bob in 2007 or 2008, and that the brothers agreed to equal
partnership interests in 2010. Bob asserted claims for breach of contract,
breach of the duty of good faith and fair dealing, unjust enrichment,
declaratory relief, constructive trust and accounting, and dissolution.

¶4             Larry moved for summary judgment, arguing that Bob was
never made a partner in the Hotel after the 2000 buy-out, and that his later
contributions to the Hotel were as an independent-contractor general
manager. Bob responded that the brothers agreed to an equal partnership
in 2007, that Larry transferred the entirety of his interest to Bob in 2009, and
that the two returned to an equal partnership in either late 2009 or early
2010.

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                          Decision of the Court

¶5             The evidence presented in the summary-judgment
proceedings reveals the following. No recorded document identifies
anyone other than Larry as the owner of the Hotel. In 2010, the Hotel’s
accountant assisted in the creation of a limited liability company, and two
trusts, one with Larry as trustee and one with Bob and his wife as trustee,
that were made managers of the limited liability company. Larry intended
to transfer the Hotel to the limited liability company for estate-planning
purposes. According to Larry, the contemplated transfer would have been
gratuitous; according to Bob, the transfer would have been consistent with
partnership interests. But Larry never actually deeded any property to the
limited liability company or the trusts.

¶6            Larry is the sole obligor and trustor on a series of promissory
notes and deeds of trusts, dating from 1994 to 2014, that encumber the
Hotel. Larry also is the sole obligor and trustor on a 2007 promissory note
and deed of trust related to the purchase of a nearby property used for
overflow Hotel parking. Larry was the sole signer on the Hotel’s tax filings.
Larry consistently reported the Hotel as his sole proprietorship for tax
purposes, and no tax form of the type required of partnerships was ever
filed for the Hotel. Payments to Bob were identified as “Nonemployee
compensation” in Hotel tax filings and as expenses in the Hotel’s accounts.
The Hotel’s accountant treated the business as a sole proprietorship and
accounted for Bob’s remuneration (the fixed-payment or profit-based
nature of which the brothers dispute) as expenses and Larry’s as owner
withdrawals. Larry was identified as the only “Owner” on the Hotel’s
“SOLE PROPRIETORSHIP” bank account.

¶7           Bob was authorized as a “Signer” on the Hotel bank account,
and he actively managed Hotel operations. He also was involved in the
acquisition of the parking lot in 2007: in fact, he and Larry made the
purchase offer together, the contract listed both brothers as buyers until it
was amended to omit Bob’s name, and the sellers thereafter sent a message
congratulating both brothers on the completed transaction.

¶8             In 2008, Bob and his wife filed a complaint against the Town
of Jerome that alleged the Hotel “is currently owned by a relative of the
Plaintiffs but the Plaintiffs have no control over this property.”

¶9          But in 2010 the brothers, through shared counsel and as
“LARRY ALTHERR AND ROBERT ALTHERR, doing business as, THE
JEROME GRAND HOTEL,” filed a verified complaint against the Town of
Jerome. The original complaint, verified by Bob, alleged that the Hotel “is
owned by the Plaintiffs.” An amended verified complaint, verified by

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                         ALTHERR v. ALTHERR
                          Decision of the Court

Larry, elaborated: “Plaintiffs, doing business as THE JEROME GRAND
HOTEL (“HOTEL”) own improved real property . . . on which the HOTEL
is operated.” In a preliminary-injunction hearing, Larry testified that
“[w]e’ve owned the [Hotel] building for 16 years” and “we” developed it,
and he characterized the Hotel as “[f]uture for my family.” The brothers’
counsel thereafter asked his clients to review a proposed form of
preliminary-injunction order that included a finding that “Plaintiffs own
and operate the Jerome Grand Hotel.” Larry apparently did not object, and
the court ultimately entered an order that included that finding. Media
coverage of the dispute referred to Larry and Bob as the Hotel’s owners,
and in a “Press release” email Larry stated: “The owners of the Jerome
Grand Hotel (Bob and Larry Altherr) would like to inform you of the
current status with the pending lawsuit . . . .” When the case eventually
settled in 2013, both brothers signed the settlement agreement. In some
places the settlement agreement directed payment to and imposed
obligations on the brothers collectively, but a separate provision specified
that the payment would be made to “Larry A. Altherr dba Jerome Grand
Hotel.” According to Larry, his characterizations of Bob as an owner during
the litigation were a mistake.

¶10          In 2012, a couple who had stayed at the Hotel brought an
action against Larry and Bob, alleging that Bob had committed a sexual
assault. The complaint alleged that Bob had represented himself as the
Hotel’s owner but that Larry was the true owner. Larry admitted that
allegation; Bob, in a separate answer by separate counsel, denied the
allegation and stated: “these Defendants are owners to the Jerome Grand
Hotel.”

¶11          In 2014, Larry barred Bob from continuing to participate in
the Hotel’s business. Larry thereafter offered to pay Bob a monthly sum
and to give Bob’s wife a 49% share of the Hotel or its sale proceeds upon
Larry’s death or the Hotel’s sale. Bob rejected the offer.

¶12          Based on the foregoing, the superior court granted Larry’s
motion for summary judgment. The court held:

      Robert did not offer written evidence of an ownership interest
      in the real or personal property of the Hotel. . . .

             In order for Robert to prove an ownership interest in
      the Hotel’s real and personal property, he must produce a
      promise, a writing, or some memorandum thereof signed by
      Larry or some authorized person. A.R.S. § 44-101. Robert has

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                          ALTHERR v. ALTHERR
                           Decision of the Court

       failed to do so. Robert’s further allegations of a partnership
       defies [sic] logic and common sense when one considers 7
       years earlier the brothers had a written buyout of the
       partnership. Out of the blue, in 2007, Robert becomes a 50/50
       partner, Larry quickly resigns over a family dispute, and he
       later returns as a 50/50 partner. All of this without even a
       “napkin” agreement. Robert’s circumstantial evidence does
       not raise a scintilla of proof supporting the allegation of a
       verbal partnership.

       ....

               Even though it might be said that Robert had raised a
       scintilla of evidence or a slight doubt, the evidence in this case
       is such that, if produced at trial, the trial judge would have
       been required to direct a verdict in favor of Larry. Orme
       School, supra.

¶13           Bob appeals.

                               DISCUSSION

¶14             We review the grant of summary judgment de novo, viewing
the evidence and reasonable inferences in the light most favorable to the
non-moving party. Andrews v. Blake, 205 Ariz. 236, 240, ¶ 12 (2003). A party
is entitled to summary judgment only 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). The existence of a scintilla of evidence in the
non-movant’s favor cannot forestall summary judgment—“affidavits that
contain inadmissible evidence, that are internally inconsistent, that tend to
contradict the affiant’s sworn testimony at deposition, and similar items of
evidence may provide a ‘scintilla’ or create ‘the slightest doubt’ and still be
insufficient to withstand a motion for summary judgment.” Orme School v.
Reeves, 166 Ariz. 301, 309 (1990). But the court may not grant summary
judgment based on credibility determinations or a weighing of the
evidence. Id. “[S]ummary judgment should not be used as a substitute for
jury trials simply because the trial judge may believe the moving party will
probably win the jury’s verdict, nor even when the trial judge believes the
moving party should win the jury’s verdict.” Id. at 310.

¶15            Here, each of the claims at issue was predicated on the
existence of a partnership between Larry and Bob. Arizona’s version of the
Revised Uniform Partnership Act (“RUPA”) provides in general that, “the
association of two or more persons to carry on as co-owners a business for

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                          ALTHERR v. ALTHERR
                           Decision of the Court

profit forms a partnership, whether or not the persons intend to form a
partnership.” A.R.S. § 29-1012(A). Shared profits create a presumption of
partnership, unless the shared profits serve as payment for employee or
independent-contractor services, debt, rent, annuity or retirement benefits
owed to a deceased or retired partner, interest or other charges on a loan,
or the sale of goodwill. A.R.S. § 29-1012(C)(3). But the sharing of gross
returns is not itself dispositive regarding the existence of a partnership, and
neither is shared property ownership, even if the co-owners share profits,
unless a written partnership agreement provides that the property is
partnership property. A.R.S. § 29-1012(C)(1)–(2).

¶16            Citing the statute of frauds, A.R.S. § 44-101, the superior court
held that Bob was required to show a written partnership agreement. But
the statute of frauds does not include partnership agreements among those
requiring signed writings as a condition to a civil action, and nothing in the
partnership alleged by Bob otherwise triggers the statute of frauds—for
example, Bob did not claim that the partnership was predicated on a
transfer of real property. See A.R.S. § 44-101; see also Turley v. Ethington,
213 Ariz. 640, 644, ¶ 14 (App. 2006) (“We first note that the Turleys’ claim
for profits based on an oral partnership agreement, not involving a transfer
of an interest in real property, would not be within the statute of frauds in
any event.”). Further, nothing in the RUPA requires a written partnership
agreement. See A.R.S. § 29-1012; see also Myrland v. Myrland, 19 Ariz. App.
498, 502 (1973) (recognizing that under previously applicable Uniform
Partnership Act, which defined partnership as “an association of two or
more persons to carry on as co-owners a business for profit,” a “[l]ack of
partnership documentation is not the critical factor as a partnership may be
formed by an oral agreement” (citations omitted)). To the contrary,
A.R.S. § 29-1012 contemplates that partnership is the default business form
when the parties have associated to carry on as co-owners.

¶17           The critical inquiry under the RUPA, therefore, is whether
Larry and Bob carried on as co-owners. We conclude that the undisputed
evidence does not compel a finding that no partnership existed. Some of
the undisputed evidence, such as the absence of partnership tax filings,
weighs in favor of such a finding. But the majority of the evidence
presented is simply inconclusive regarding whether the parties have a
partnership — the fact that Larry owned and assumed debts on the real
property, for example, could exist under either a sole-proprietorship or a
partnership scenario. And other undisputed evidence directly supports
Bob’s theory that there was a partnership. Most meaningfully, Larry
identified Bob as a co-owner of the Hotel not only in a press release
regarding the lawsuit against the Town of Jerome, but in a pleading that he

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                          ALTHERR v. ALTHERR
                           Decision of the Court

verified in that action, which the brothers brought jointly on the Hotel’s
behalf through shared counsel. The superior court’s conclusion that Bob’s
account of the alleged partnership’s formation “defie[d] logic and common
sense” was an improper credibility determination in the summary-
judgment context.

¶18            A reasonable jury may well conclude that the brothers never
formed a partnership. But the record does not support entry of judgment
to that effect as a matter of law. No written agreement is required. And
though the fact that parties have held themselves out as partners is itself
insufficient to create a partnership, there are sufficient facts on this record
from which a reasonable jury could find the creation of a partnership.

                               CONCLUSION

¶19           We reverse the entry of summary judgment, and we remand
for further proceedings. In exercise of our discretion, we deny both parties’
requests for attorney’s fees under A.R.S. § 12-341.01.

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

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