Court Opinion

ID: 4157717
Source: CourtListenerOpinion
Date Created: 2017-04-04 16:03:56.695086+00
Date Added: 2024-06-11T14:35:23.486624
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  UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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

                  JOAN W. BRUBACHER, Plaintiff/Appellee,

                                         v.

  PROPAGANDA COMMUNICATIONS, INC., an Arizona corporation;
    JPM III, LLC, an Arizona limited liability company; RESOLUTE
 COMMERCIAL SERVICES, LLC, an Arizona limited liability company;
JEREMIAH FOSTER and LISA FOSTER; and JOHN P. MITCHELL III and
             JENNIFER MITCHELL, Defendants/Appellants.

                              No. 1 CA-CV 15-0682
                                FILED 4-4-2017

            Appeal from the Superior Court in Maricopa County
                           No. CV2014-008042
               The Honorable Katherine M. Cooper, Judge

AFFIRMED IN PART, VACATED IN PART AND MODIFIED IN PART

                                    COUNSEL

Quarles & Brady LLP, Phoenix
By Isaac M. Gabriel, William Scott Jenkins Jr., Andrea H. Landeen
Counsel for Defendants/Appellants

Jennings, Haug & Cunningham, L.L.P., Phoenix
By Blake E. Whiteman, Robert J. Lamb
Counsel for Defendant/Appellee
                   BRUBACHER v. PROPAGANDA et al.
                         Decision of the Court

                       MEMORANDUM DECISION

Presiding Judge Samuel A. Thumma delivered the decision of the Court, in
which Chief Judge Michael J. Brown and Judge Maurice Portley joined.1

T H U M M A, Judge:

¶1            Defendants Propaganda Communications, Inc.; JPM III, LLC;
Resolute Commercial Services, LLC; Jeremiah and Lisa Foster and John and
Jennifer Mitchell (collectively Appellants) appeal from a final judgment,
entered after a bench trial, in favor of plaintiff Joan Brubacher (Appellee)
for breach of contract, conversion, accounting, constructive trust and an
award of attorneys’ fees and against Appellants on their fiduciary duty
counterclaim. For the reasons that follow, that portion of the judgment for
Appellee on her conversion claim is vacated, that portion of the judgment
imposing a constructive trust is vacated as moot and that portion of the
judgment awarding attorneys’ fees to Appellee is modified so that the
award is against defendants JPM and Propaganda only. The remainder of
the judgment is affirmed.

                 FACTS2 AND PROCEDURAL HISTORY

¶2          Jeremiah Foster is the principal and sole member of
Propaganda, and John Mitchell is the principal and sole member of JPM.3
Propaganda and JPM are the founding members of Resolute, which was
formed in 2009. After working as a consultant for Resolute for about two
years, in 2011, Brubacher became a Member of Resolute (with
corresponding management rights) and acquired a one-third ownership

1The Honorable Maurice Portley, Retired Judge of the Court of Appeals,
Division One, has been authorized to sit in this matter pursuant to Article
VI, Section 3 of the Arizona Constitution.

2On appeal, this court views the evidence in the light most favorable to
upholding the superior court’s decision following a bench trial. Double AA
Builders, Ltd. v. Grand State Constr. L.L.C., 210 Ariz. 503, 506 ¶ 9 (App. 2005).

3 Lisa Foster and Jennifer Mitchell were joined solely for community
property purposes.

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                  BRUBACHER v. PROPAGANDA et al.
                        Decision of the Court

Interest in Resolute. As of June 15, 2011, Appellee, Propaganda and JPM all
agreed to a 32-page Operating Agreement for Resolute (Agreement).

¶3             The Agreement defined Appellee’s rights as a Member and
rights associated with her ownership Interest. The Agreement provides
“[t]he Members shall direct, manage and control the business” of Resolute.
Under the Agreement, an Interest “shall mean the economic rights of a
Member . . . to share in distributions of cash and other property from
[Resolute] . . . together with its allocable share of [Resolute’s] Profits or
Losses and net income or loss for federal and state income taxes.”

¶4            In the summer of 2013, Appellee announced she was
voluntarily withdrawing as a Member. This action constituted an “Event of
Withdrawal” under the Agreement. Accord Ariz. Rev. Stat. (A.R.S.) §§ 29-
733, -734 (2017).4 Two Articles in the Agreement discuss the rights of
withdrawing and remaining Members5 following an Event of Withdrawal.
Article 8 (“Admissions and Withdrawals”) sets forth the rights of a
withdrawing Member regardless of the reason for withdrawal (including
that the withdrawing Member “shall not have or enjoy any right to
participate in the management of” Resolute). Article 9 (“Transfers”)
governs the possible acquisition of the Interest owned by the voluntarily
withdrawing Member by the remaining Members. Given Appellee’s
voluntary withdrawal, under Article 9, the remaining Members had “the
right or option to purchase” her Interest. Article 9 contains a detailed
process for the remaining Members to exercise such an option to purchase,
including how to determine the purchase price and method of payment for
the Interest and various related timelines.

¶5           From July 2013 through March 2014, the parties
unsuccessfully negotiated a buyout for JPM and Propaganda to acquire
Appellee’s Interest. The parties did not, however, invoke the process
contained in Article 9.

¶6         Appellee continued to perform work for Resolute through
mid-September 2013. She and the other two Members each received their

4Absent material revisions after the relevant dates, statutes and rules cited
refer to the current version unless otherwise indicated.

5As a result of her withdrawal, Appellee also was deemed a “Violating
Member” under the Agreement. Consistent with the parties’ briefs, and for
ease of reference, this decision refers to Appellee as the withdrawing
Member and Propaganda and JPM as the remaining Members.

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                  BRUBACHER v. PROPAGANDA et al.
                        Decision of the Court

one-third share of distributions from Resolute (designated “Partner
Earnings”) approximately monthly through September 20, 2013, with
Appellee’s share totaling $60,000. After September 20, 2013, as relevant
here, Appellee received no additional distributions while the other two
Members received a total of $1,698,750 in additional distributions from
Resolute. By March 2014, Appellee objected, claiming she was entitled to a
one-third share of distributions until such time as her Interest was acquired
by the remaining Members.

¶7           By early April 2014, negotiations had broken down and
Mitchell told Appellee “now I guess we’ll follow the terms of the
[A]greement.” Appellee testified that she then waited two weeks to hear
more and, having heard nothing, her attorney sent a demand letter to
Mitchell and Foster. After receiving no response, Appellee filed this case in
mid-May 2015. As amended, her complaint asserted breach of contract,
conversion and breach of fiduciary duty claims and sought an accounting
and a constructive trust. Appellants pressed counterclaims for declaratory
judgment, breach of fiduciary duty and breach of contract.

¶8            After disclosure, discovery and substantial motion, the
superior court held a three-day bench trial. After taking the matter under
advisement, in an eight-page minute entry containing findings of fact and
conclusions of law, the court found for Appellee on her claims for breach of
contract, conversion and an accounting, and imposed a constructive trust,
but found for Appellants on Appellee’s fiduciary duty claim. In doing so,
the court rejected Appellants’ estoppel defenses. The court also found for
Appellee on Appellants’ counterclaims. Finding that Appellants had not
yet acquired Appellee’s Interest, the court valued that Interest at $60,000
“pursuant to Section 9.3 of the” Agreement and found Appellee was
entitled to a one-third share of distributions that Resolute had paid since
September 20, 2013.

¶9            Following additional motion practice, including an
unsuccessful motion to amend findings/for new trial by Appellants, a final
judgment awarded Appellee $60,000 for her Interest; $566,250 in
distributions (one-third of the $1,698,750 distributed to the remaining
Members); $67,508 in attorneys’ fees pursuant to A.R.S. § 12-341.01 and
$3,400.40 in taxable costs, all plus interest until paid. This court has
jurisdiction over Appellants’ timely appeal pursuant to Article 6, Section 9,
of the Arizona Constitution and A.R.S. §§ 12-120.21(A)(1) and -2101(A)(1).

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                   BRUBACHER v. PROPAGANDA et al.
                         Decision of the Court

                               DISCUSSION

¶10            Appellants argue the superior court erred by (1) finding for
Appellee on her breach of contract claim regarding distributions, meaning
Appellants (not Appellee) are the prevailing parties; (2) rejecting
Appellants’ estoppel defenses; (3) finding for Appellee on her conversion
claim; (4) imposing a constructive trust; (5) finding Appellee did not owe
Appellants a fiduciary duty and (6) denying Appellants’ motion for new
trial.6 This court reviews issues of contract interpretation de novo, see ELM
Ret. Ctr., LP v. Callaway, 226 Ariz. 287, 290 ¶ 15 (App. 2010), but reviews
factual findings for an abuse of discretion, see Great W. Bank v. LJC Dev., LLC,
238 Ariz. 470, 478 ¶ 22 (App. 2015).

I.     The Court Did Not Err In Finding For Appellee On Her Breach Of
       Contract Claim.

¶11           Although contract interpretation is a question of law that this
court reviews de novo, Callaway, 226 Ariz. at 290 ¶ 15, whether a party has
breached a contract is a factual matter, see Keg Restaurants Arizona, Inc. v.
Jones, 240 Ariz. 64 ¶ 45 (App. 2016).

       A.     The Superior Court Properly Rejected Appellants’
              Argument That Appellee Breached The Agreement By
              Rejecting Appellants’ Buyout Offer.

¶12           Appellants argue that because the court found Appellee’s
Interest was worth $60,000, but they had offered her more than that amount
during negotiations, she breached the Agreement. Not so. The Agreement
contains no provision requiring a withdrawing Member to accept an offer
from the remaining Members during negotiations, even if that offer is
higher than the ultimate value determined pursuant to the formal
provisions of the Agreement or in resulting litigation.

6 Appellants do not challenge that portion of the judgment awarding
Appellee $60,000 for her Interest. Indeed, at oral argument before this court,
counsel agreed that, soon after entry of the judgment, Appellants paid
Appellee the $60,000 set by the court as the value for that Interest and that,
as a result, Appellee’s Interest transferred to the remaining Members.
Accordingly, the value of Appellee’s Interest and the transfer of that
Interest to the remaining Members is not at issue in this appeal.

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                  BRUBACHER v. PROPAGANDA et al.
                        Decision of the Court

¶13           As support for their argument, Appellants rely on United
California Bank v. Prudential Ins. Co. of Am., 140 Ariz. 238 (App. 1983), which
they assert “is controlling precedent and is directly on point.” Appellants’
reliance on Prudential is misplaced. Prudential does not stand for the
proposition that, in attempting to agree on an unspecified sum, a party
breaches a contract by requesting an amount more than the other parties
think is reasonable. Instead, Prudential held that a repudiation of a contract
may occur if “one party clearly insists upon a performance to which he is
not entitled.” 140 Ariz. at 279. Appellants have not shown, and the court
did not find, that Appellee insisted on such performance, repudiated the
Agreement or, for that matter, did not negotiated in good faith. See id. (“a
mere disagreement over the terms of a contract is not itself an anticipatory
repudiation, nor is a mere offer to perform on terms other than those
contained in the agreement, at least if the offer is made in good faith”). That
Appellants and Appellee could not negotiate an agreeable price does not
mean that Appellee breached the Agreement.

¶14           Appellants argue Appellee anticipatorily breached the
Agreement because she “ignored the Agreement’s valuation procedures.”
The record, however, reveals that neither Appellants nor Appellee invoked
the “valuation procedures” in the Agreement for the transfer of her Interest
for many months after she announced her departure. This conduct,
undertaken before the dispute arose, allowed the superior court to properly
conclude Appellee did not commit an anticipatory breach of the
Agreement. See Ancell v. Union Station Associates, Inc., 166 Ariz. 457, 460
(App. 1990) (“‘Conduct can manifest acceptance of an offer or acquiescence
in a modification.’”) (citation omitted); see also Prudential, 140 Ariz. at 266
(“The acts of the parties themselves, before disputes arise, are the best
evidence of the meaning of doubtful contractual terms.”).

       B.     The Superior Court Properly Concluded Appellee Had A
              Right To Distributions Until Her Interest Was Acquired.

¶15            Appellants argue the superior court erred in finding Appellee
was entitled to distributions until her Interest was acquired because she
only retains a right to distributions if the remaining Members “fail to
‘timely’ pay the buyout price.” This argument is premised on the last
sentence of Section 9.1 of the Agreement: “If the remaining Members fail to
exercise such option within the time limit provided herein, the rights of the
[withdrawing Member] shall be as set forth in Section 8.2 hereof.” Section
8.2, in turn, provides that a withdrawing Member who owns an Interest
“shall cease to have any rights of a Member except only the right to receive
the distributions and allocations of taxable income or loss to which the

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                   BRUBACHER v. PROPAGANDA et al.
                         Decision of the Court

affected Member would have been entitled under this Agreement with
respect to his or her Interest” until the withdrawing Member’s Interest is
acquired by the remaining Members. Importantly, Section 8.2 provides that
a withdrawing Member’s right to receive distributions remains in place
“following any Event of Withdrawal.” (Emphasis added.)

¶16            A contract is to be interpreted in a way that will “harmonize
all of its parts, and apparently conflicting parts must be reconciled, if
possible, by any reasonable interpretation.” U.S. Insulation, Inc. v. Hilro
Const. Co., Inc., 146 Ariz. 250, 259 (App. 1985). A “standard of
reasonableness” applies “to contract language.” Malad, Inc. v. Miller, 219
Ariz. 368, 371 ¶ 17 (App. 2008). Contract terms are to be considered “in view
of the surrounding circumstances,” and courts are not “to abandon
common sense and experience or to ignore the surrounding circumstances
of an agreement.” Miller v. Hehlen, 209 Ariz. 462, 466 ¶ 12 (App. 2005)
(citations and quotations omitted); accord AZTAR Corp. v. U.S. Fire Ins. Co.,
223 Ariz. 463, 469 ¶ 17 (App. 2010) (“In construing a contract, we ‘give
words their ordinary, common sense meaning.’”) (citation omitted).
Construed with these standards in mind, the last sentence of Section 9.1
does not mean what Appellants claim it means.

¶17            Appellants argue the last sentence of Section 9.1 means the
right to distributions under Section 8.2 is only applicable if the remaining
Members fail to exercise their option to purchase the withdrawing
Member’s Interest in a timely fashion. Stated differently, Appellants argue
that they timely exercised the option, meaning the last sentence of Section
9.1 does not apply by its terms, but that given the mere existence of the
provision, a withdrawing Member is entitled to distributions for owning
their Interest only if the last sentence of Section 9.1 applies.

¶18            This strained interpretation ignores the fact that Article 8
(addressing admission and withdrawal of Members) and Article 9
(addressing transfer of Interests) deal with different rights. There is no
indication that Article 9 is intended to create a forfeiture of the broad rights
set forth for all Members who withdraw (regardless of cause) to continue
to receive distributions for owning their Interest under Article 8. See U.S.
Insulation, Inc., 146 Ariz. at 259 (directing courts to interpret contracts to
reconcile even apparently conflicting parts). Moreover, it ignores that
Article 8 expressly applies to any type of withdrawal. Finally, it ignores the
specific, express definition of “Interest” contained in Section 1.8(p) of the
Agreement:

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                  BRUBACHER v. PROPAGANDA et al.
                        Decision of the Court

              “Interest” in the Company shall mean the
              economic rights of a Member and its permitted
              assignees and successors to share in
              distributions of cash and other property from
              the Company pursuant to the Act and this
              Agreement, together with its allocable share of
              the Company’s Profits or Losses and net income
              or loss for federal and state income taxes.

The right to “share in distributions” is a right associated with Interest
ownership. Given that, the right to share in distributions is one of the
benefits an owner of an Interest retains until ownership has been
transferred. Additionally, Section 8.1 provides that no Member may be
admitted without written consent or approval of all Members “regardless
of whether such [p]erson has acquired an Interest in the Company.”
Reading Article 8 in conjunction with the definition of “Interest,” it is clear
that owning an Interest with corresponding distribution rights is
independent from, and a different right than, being a Member with defined
management rights.

¶19           To be sure, the last sentence of Section 9.1 could have been
written more clearly. That said, the more reasonable construction of that
provision is that it clarifies that the rights of a withdrawing Member (who
withdraws by retirement or voluntarily) are at least as great as those of any
other withdrawing Member. This interpretation of Section 9.1 makes plain
that a withdrawing Member who also owns an Interest does not surrender
the right to distributions (a subset of the rights accompanying the
ownership of an Interest) even if the remaining Members do not timely
exercise the option to purchase the withdrawing Member’s Interest. And
nowhere does Section 9.1 purport to expressly trump the more specific
(Section 1.8(p)) and the more general (Section 8.2) provisions in the
Agreement defining the rights associated with owning an Interest
(including the right to distributions) for a withdrawing Member.

¶20           Accepting Appellants’ argument also would lead to bizarre
results. Appellants argue that the last sentence of Section 9.1, which is
expressly limited to Members who “retire or withdraw voluntarily,” means
that the distribution rights for owners of an Interest discussed under
Section 8.2 are forfeited, unless the remaining Members fail to timely
exercise their option to purchase the Interest. Under this interpretation,
Members who withdraw other than by retirement or voluntarily (ranging
from death to expulsion because, hypothetically, they stole money from
Resolute) would not forfeit their rights to distributions as owners of an

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                   BRUBACHER v. PROPAGANDA et al.
                         Decision of the Court

Interest under Section 8.2. Such an interpretation -- resulting in forfeiture of
distributions for voluntary withdrawals but providing no such forfeiture
for forced withdrawals that are the result of wrongdoing -- would be
unreasonable and contrary to the directive that this court is not “to abandon
common sense and experience or to ignore the surrounding circumstances
of an agreement.” Miller, 209 Ariz. at 466 ¶ 12.

¶21           The pre-dispute conduct of the parties provides further
guidance. Prudential, 140 Ariz. at 266 (“The acts of the parties themselves,
before disputes arise, are the best evidence of the meaning of doubtful
contractual terms.”). After Appellee withdrew, Resolute made several
payments to her, totaling $60,000, that the superior court found were
distributions resulting from Appellee’s ownership of an Interest. Rejecting
Appellants’ arguments to the contrary, the court found those payments
were distributions and not payments to purchase her Interest. Although
Appellants claim the court should have found otherwise as a factual matter,
they have not shown these findings were erroneous. See In re Estate of
Zaritsky, 198 Ariz. 599, 601 ¶ 5 (App. 2000) (findings of fact will not be set
aside “unless clearly erroneous, giving due regard to the opportunity of the
court to judge the credibility of witnesses”). On these facts, the court did
not err in concluding Appellants understood that Appellee was entitled to
distributions until her Interest was acquired. See Prudential, 140 Ariz. at 266.

¶22           Quite apart from these reasons, even if Appellants’
interpretation of Section 9.1 prevailed, the superior court did not err in
concluding Appellee had a right to distributions until her Interest was
acquired. The parties did not successfully complete the process set forth in
Article 9 to acquire Appellee’s Interest. Although Appellants argue this
failure constitutes a breach by Appellee, Appellants also had affirmative
obligations to invoke Section 9.1 and then perform as required. The record
indicates Appellants failed to do so, including failing to secure an appraiser
required by Section 9.3.7 As a result, the superior court looked to Article 9
as a proxy to determine the value of Appellee’s Interest, but did not find

7 Appellants argue that when one of the two required values for Resolute’s
assets (book value) became available, the value for Appellee’s Interest had
been calculated. However, it is undisputed that the second of the two values
(appraised value, to be determined pursuant to Section 9.3) was never
calculated, and the purchase price under Section 9.1 was based on the lesser
of those two values. Accordingly, although the book value provided a
ceiling, because the second value was never calculated, it did not constitute
the value upon which the purchase of Appellee’s Interest could be
calculated under Section 9.1.

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                   BRUBACHER v. PROPAGANDA et al.
                         Decision of the Court

that Appellants properly complied with that provision. As noted above,
Appellants do not challenge that portion of the judgment awarding
Appellee $60,000 for her Interest and, in fact, paid that amount and her
Interest transferred to the remaining Members soon after entry of judgment.
Because that portion of the judgment is now final, Appellants will never be
able to timely exercise their option under Article 9. Thus, even under
Appellants’ reading of Section 9.1, because they “fail[ed] to exercise such
option within the time limit provided” in that provision (and can now never
do so), Appellee’s “rights . . . shall be as set forth in Section 8.2,” which
includes the right to distributions until her Interest transferred to
Appellants. On this record, Appellants have not shown error in finding
Appellee was entitled to distributions until her Interest was acquired by the
remaining Members.

       C.     The Superior Court Did Not Err In Rejecting Appellants’
              Estoppel Defenses.

¶23            Appellants argue the superior court erred in rejecting their
equitable estoppel defense, asserting they “were fully justified in relying on
[Appellee]’s own statements that she had already been paid $60,000.”
Appellants argue that the $60,000 received from Resolute as distributions
by mid-September 2013 was, in fact, payments by Appellants to Appellee
for her Interest. The court, however, found otherwise and this court will not
re-weigh the evidence, particularly where, as here, there was conflicting
evidence. See Zaritsky, 198 Ariz. at 601 ¶ 5.

¶24            As Appellants concede, equitable estoppel requires that the
purported inducement “results in acts in justifiable reliance thereon.”
Carlson v. Arizona Dep’t of Econ. Sec., 184 Ariz. 4, 5 (App. 1995). The superior
court found Appellants had not shown such reliance, noting they purported
to rely on a proposal they did not accept that was contrary to the express
language of the Agreement. Appellants have not shown the court, as the
finder of fact, erred in concluding that their claimed reliance was
unreasonable, meaning equitable estoppel did not apply. See John C. Lincoln
Hosp. & Health Corp. v. Maricopa County, 208 Ariz. 532, 537 ¶ 10 (App. 2004)
(questions of estoppel are fact-intensive and this court will “defer to the trial
court with respect to any factual findings explicitly or implicitly made,

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                   BRUBACHER v. PROPAGANDA et al.
                         Decision of the Court

affirming them so long as they are not clearly erroneous, even if substantial
conflicting evidence exists”).8

¶25           Appellants argue the court also erred in rejecting their
promissory estoppel defense. “[P]romissory estoppel rests upon a promise
to do something in the future.” Trollope v. Koerner, 106 Ariz. 10, 18 (1970).
The court found “[t]here was no evidence that [Appellee] promised to
decline her Section 8.2 right to her membership [I]nterest.” On the record
presented, Appellants have not shown this finding was clearly erroneous.
See Health Corp., 208 Ariz. at 537 ¶ 10.

       D.     The Superior Court Properly Found Appellee Was The
              Prevailing Party.

¶26            Appellants argue that, because they had previously offered
Appellee more than $60,000 as a buyout, and the judgment values her
Interest at $60,000, they were the prevailing parties, meaning she is not the
successful party under A.R.S. § 12-341.01.

              In any contested action arising out of a contract,
              express or implied, the court may award the
              successful party reasonable attorney fees. If a
              written settlement offer is rejected and the
              judgment finally obtained is equal to or more
              favorable to the offeror than an offer made in
              writing to settle any contested action arising out
              of a contract, the offeror is deemed to be the
              successful party from the date of the offer and
              the court may award the successful party
              reasonable attorney fees.

A.R.S. § 12-341.01(A).

¶27            Appellee correctly notes that Appellants did not raise this
argument with the superior court and, accordingly, it is deemed waived.
See Continental Lighting & Contracting, Inc. v. Premier Grading & Utilities, LLC,
227 Ariz. 382, 386 ¶ 12 (App. 2011); Schurgin v. Amfac Elec. Distribution Corp.,
182 Ariz. 187, 190 (App. 1995). As a result, the judgment properly found

8 Nor have Appellants shown Appellee’s purported silence mandated the
court to find equitable estoppel applied. “To make the silence of a party
operate as an estoppel, there must have been a duty to speak.” Ray v. First
Nat. Bank of Ariz., 88 Ariz. 337, 341 (1960). Appellants have not shown how
it was Appellee’s duty to tell them about a right set forth in the Agreement.

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                   BRUBACHER v. PROPAGANDA et al.
                         Decision of the Court

Appellee was the successful party and awarded her reasonable attorneys’
fees under this statute.

II.    Appellee Failed To Prove An Actionable Conversion Claim.

¶28           Under Arizona law, a conversion claim for money is
cognizable only if the funds “can be described, identified or segregated, and
an obligation to treat it in a specific manner is established.” Autoville, Inc. v.
Friedman, 20 Ariz. App. 89, 91 (1973). Appellee’s conversion claim fails to
meet this standard. As Appellants correctly argue, “[Appellee] never even
argued (and the Trial Court did not hold) that her unpaid distributions were
‘described, identified or segregated’ with sufficient particularity to qualify
for a conversion claim.”

¶29             On appeal, Appellee relies largely on Koss Corp v. American
Exp. Co., 233 Ariz. 74 (2013). In Koss, a Koss employee embezzled millions
of dollars from Koss and used it to pay various American Express bills. Id.
at 77 ¶ 3. Koss sued American Express for conversion “based on its control
over Koss funds transferred by the wire transfers and cashier’s checks.” Id.
at 78 ¶ 6. In reversing the superior court’s dismissal and remanding, this
court stated the embezzled funds could be the subject of conversion because
“[t]he money was segregated and described by the amounts of the checks.”
Id. at 90 ¶ 55. Appellee has not shown how Koss stands for the proposition
that her conversion claim -- seeking payment from the general coffer of
Resolute in fungible dollars -- is properly cognizable under Arizona law.
See, e.g., Stokes v. Stokes, 143 Ariz. 590, 594 (App. 1984) (rejecting conversion
claim where “husband’s failure to pay to the wife one-half the amount of
his monthly check created a debt which could have been discharged by
payment of money generally”).9

III.   The Constructive Trust Imposed Is Moot.

¶30           Appellants argue the constructive trust imposed in the
judgment was “to generally freeze all of the assets of all defendants to allow
enforcement of a money judgement.” Appellee responds the constructive
trust was limited to the $60,000 payment for her Interest, adding that such
payment “has since been paid and, therefore, the issue of the constructive

9Given this conclusion, the court need not, and expressly does not, address
Appellants’ argument that the conversion claim is barred by Arizona’s
economic loss doctrine. See Flagstaff Affordable Hous. Ltd. P’ship v. Design All.,
Inc., 223 Ariz. 320, 323 ¶ 12 (2010).

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                  BRUBACHER v. PROPAGANDA et al.
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trust is moot.” Because the constructive trust is now moot, that portion of
the judgment imposing the constructive trust is vacated.

IV.    The Court Did Not Err In Finding For Appellee on Appellants’
       Fiduciary Duty Counterclaim.

¶31          Appellants press two arguments about the superior court’s
fiduciary duty findings: (1) the court erred in finding the parties did not
owe each other a fiduciary duty, and (2) the court erred in rejecting their
fiduciary duty counterclaim on disclosure grounds.

¶32           As for the first argument, the parties concede that, pursuant
to Section 3.1(b) of the Agreement, Members owe each other and Resolute
a fiduciary duty. The superior court’s statement to the contrary was in error.

¶33            Turning to the second argument, however, Appellants are
incorrect. In finding for Appellee on the fiduciary duty counterclaim, the
superior court found Appellants “did not disclose a computation or
evidence of damages in support of their breach of contract and breach of
fiduciary duty claims.” Accepting that as true, such a statement does not
mean that Appellants properly disclosed those claims. The record on appeal
does not reflect any timely proper disclosure by Appellants of such
damages. See Ariz. R. Civ. P. 26.1(a)(7); SWC Baseline & Crismon Inv’rs, L.L.C.
v. Augusta Ranch Ltd. P’ship, 228 Ariz. 271, 284 ¶ 50-52 (App. 2011) (vacating
damages because, although the party’s disclosure statements referred to
generally related things, it never revealed the amount of damages it would
seek).

¶34          Apart from the lack of timely disclosure, Appellants proved
no damages. They assert “[Appellee] held her 1/3 interest as an active
member serving as Resolute’s CFO, yet performed none of these services
after September, 2013. [Appellee] cannot claim the benefits of the
Agreement when she was not acting as a [M]ember or as a fiduciary.”
Appellants then claim, as resulting damages, Appellee: (1) began working
somewhere else and formed her own company; (2) did not follow the
“appraisal and valuation protocols” in the Agreement; (3) rejected
Appellants’ buyout offer and (4) filed a lawsuit. Appellants, however, have
not shown how these facts mandated a finding that Appellee breached her
fiduciary duty and damaged Appellants separate and apart from
Appellants’ breach of contract claims, which the court found were not
supported. Additionally, Appellants do not quantify and do not purport to
properly quantify any resulting damages.

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                   BRUBACHER v. PROPAGANDA et al.
                         Decision of the Court

¶35            In their reply brief and in oral argument before this court,
Appellants argue that a failed fiduciary duty counterclaim must be treated
as an affirmative defense. Appellants have not argued they “mistakenly”
designated their fiduciary duty claim a counterclaim when, correctly
viewed, it should have been an affirmative defense. See Ariz. R. Civ. P.
8(c)(2). Even if they had shown such a mistake, that does not mean the court
was mandated to treat a failed counterclaim as an affirmative defense. See
Ariz. R. Civ. P. 8(c)(2) (providing court discretion “on terms, if justice so
requires,” to treat a mistakenly designated counterclaim as an affirmative
defense). Moreover, on this record, Appellants have not shown what would
have changed even if the court had done so. The first two alleged facts relied
upon by Appellants in their counterclaim (demanding excessive payments
and taking money under a false pretense) were a part of the breach of
contract claims the court resolved in favor of Appellee as a factual matter.
The next alleged fact (competing with Resolute) is not supported as a
factual matter and Appellants have not shown how the final alleged fact
(demanding an accounting of JPM and Propaganda) would constitute a
fiduciary duty breach.

¶36             On this record, Appellants have not shown the court erred in
addressing their fiduciary duty counterclaim. See SWC Baseline & Crismon
Inv’rs, L.L.C., 228 Ariz. at 284 ¶ 47.

V.     Appellants Have Not Shown The Superior Court Abused Its
       Discretion In Denying Their Motion For New Trial.

¶37            Appellants argue because the superior court’s ruling
“contained numerous errors,” it should have granted their motion for new
trial. As applicable here, a new trial may be granted if “the verdict, decision,
findings of fact, or judgment is not supported by the evidence or is contrary
to law.” Ariz. R. Civ. P. 59(a)(1)(H). To the extent the “numerous errors”
claimed by Appellants are addressed above, Appellants have shown no
abuse of discretion in the denial of their motion for new trial. See Summers
v. Gloor, 239 Ariz. 222, 225 ¶ 10 (App. 2016) (noting “decision denying a
motion for new trial” is reviewed “for an abuse of discretion”). To the extent
Appellants claim “numerous additional errors in the conclusions of law and
the manner in which it is applied against all” defendants, Appellants have
failed to support any such arguments, which are now waived. See
MacMillan v. Schwartz, 226 Ariz. 584, 591 ¶ 33 (App. 2011) (“[m]erely
mentioning an argument in an appellate opening brief is insufficient,” and
doing so constitutes abandonment and waiver).

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                  BRUBACHER v. PROPAGANDA et al.
                        Decision of the Court

VI.   Attorneys’ Fees.

¶38           Appellants correctly argue that the judgment does not specify
against whom the award of attorneys’ fees is imposed. In objecting to the
form of judgment, Appellants argued that attorneys’ fees should be
imposed against Propaganda and JPM only, a point Appellee conceded.
Accordingly, the judgment is modified to reflect that the award of
attorneys’ fees is against JPM and Propaganda.

¶39           Appellants and Appellee request attorneys’ fees on appeal
pursuant to A.R.S. § 12-341.01, and Appellee requests taxable costs on
appeal. Because they are not the prevailing parties on appeal, Appellants’
request for fees is denied. Appellee’s request for an award of reasonable
fees incurred on appeal against JPM and Propaganda, and for taxable costs
incurred on appeal against Appellants, is granted, contingent upon her
compliance with Arizona Rule of Civil Appellate Procedure 21.

                              CONCLUSION

¶40           That portion of the judgment for Appellee on her conversion
claim is vacated; that portion of the judgment imposing a constructive trust
is vacated as moot and the judgment is modified to reflect that the award
of attorneys’ fees imposed in favor of Appellee is against defendants JPM
and Propaganda only. The remainder of the judgment is affirmed.

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

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