Court Opinion

ID: 4465738
Source: CourtListenerOpinion
Date Created: 2019-12-19 16:03:51.975524+00
Date Added: 2024-06-11T14:25:42.408933
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  UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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

       MW2 INVESTMENTS LLC, Plaintiff/Appellant/Cross-Appellee,

                                         v.

      IMH SPECIAL ASSET NT 168 LLC, et al., Defendants/Appellees/
                        Cross-Appellants.

              R. STEWART HALSTEAD, et al., Cross-Appellees.

                              No. 1 CA-CV 18-0271
                                FILED 12-19-2019

            Appeal from the Superior Court in Maricopa County
                           No. CV 2016-051187
              The Honorable Christopher T. Whitten, Judge

                                   AFFIRMED

                                    COUNSEL

Jeffrey M. Proper PLLC, Phoenix
By Jeffrey M. Proper
Counsel for Plaintiff/Appellant/Cross-Appellee

Snell & Wilmer LLP, Phoenix
By Benjamin W. Reeves, Christopher H. Bayley, James G. Florentine
Counsel for Defendants/Appellees/Cross-Appellants

Broening, Oberg, Woods & Wilson, Phoenix
By Brian Holohan
Counsel for R. Stewart Halstead and R. Stewart Halstead, P.C.
              MW2 INVESTMENTS v. IMH SPECIAL, et al.
                      Decision of the Court

                      MEMORANDUM DECISION

Presiding Judge Jennifer B. Campbell delivered the decision of the Court,
in which Judge Maria Elena Cruz and Judge James B. Morse Jr. joined.

C A M P B E L L, Judge:

¶1             MW2 Investments LLC (“Investments”) appeals the superior
court’s orders dismissing its complaint and denying it leave to amend its
complaint against IMH Special Asset NT 168, LLC and several other related
entities (collectively, “IMH”). IMH cross-appeals the court’s denial of its
request for sanctions pursuant to Arizona Rule of Civil Procedure (“Rule”)
11. For the following reasons, we affirm.

                             BACKGROUND1

¶2            Investments is a member of Seagoville Investments, LLLP
(“Seagoville”). The present case is predicated on a judgment and
subsequent receivership entered in a separate lawsuit involving Seagoville
(“Lawsuit 1”). In that case, IMH obtained a judgment (the “Judgment”)
against the then-general partner of Seagoville, David Maniatis, and his
revocable trust (collectively, “Judgment Debtors”). With that judgment
secured, IMH asked the court to appoint a receiver to manage all assets
owned or controlled by the Judgment Debtors and aid IMH in executing on
the Judgment. As relevant to this case, the court appointed MCA Financial
Group, Ltd. (“Receiver”) as a receiver pursuant to Rule 66(b)2 (the
“Receivership Order”). See A.R.S. § 12-1241 (empowering the superior court
to “appoint a receiver to protect and preserve property or the rights of
parties”). The court expressly authorized the Receiver to “take immediate

1      Investments asks to incorporate a brief filed by the former general
partner of Seagoville, David Maniatis, in a related appeal. Although
ARCAP 13(h) allows parties to join in a single brief or “an appellant or
appellee [to] adopt by reference any part of the brief of another party,” the
rule applies only to briefs filed in the same appeal. We thus grant IMH’s
motion to strike Investments’ incorporation of David P. Maniatis’ opening
brief.
2      The Arizona Rules of Civil Procedure were amended during the
pendency of this case. No material changes affect the outcome of this appeal
and, therefore, we cite to the current Rules unless noted.

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              MW2 INVESTMENTS v. IMH SPECIAL, et al.
                      Decision of the Court

possession, custody and control of all . . . partnership interests . . . owned
. . . or controlled in whole or in part by” Maniatis, as the judgment debtor,
and to “manage and takeover all of [Maniatis’] business affairs.” The court
also charged the Receiver with the duty to exercise rights in the receivership
estate “for the benefit of [Maniatis’] creditors.”

¶3            After the Receiver identified over 150 different partnerships,
corporations, and trusts that Maniatis created and controlled, the
receivership court amended the initial Receivership Order, authorizing the
Receiver to take control of many of the businesses and identify assets to be
gathered into the receivership estate. This amended order included
Seagoville, an entity the court determined Maniatis owned and controlled:
“Seagoville is ultimately owned and controlled by Judgment Debtors David
P. Maniatis (“Maniatis”) and/or the DPM-TT Trust (the “Trust”), and not
subject to any applicable exemptions from execution. Accordingly,
Seagoville is subject to administration under this Court’s MCA
Receivership Order. “

¶4           Before the Receiver was appointed, Maniatis had executed an
agreement (the “Seagoville PSA”) on behalf of Seagoville to sell
approximately 12 acres of property in Texas (“the Seagoville Property”) to
a buyer (the “Buyer”) for a sum certain. After execution of the Seagoville
PSA, the court appointed a receiver. When Maniatis failed to timely close
the sale, the Buyer sued Seagoville and the Receiver seeking specific
performance.

¶5             Rather than litigate the specific performance action, the
Receiver chose to perform under the Seagoville PSA. The Receiver, joined
by IMH, asked the receivership court to (1) allow the Receiver to exercise
Seagoville’s rights as seller pursuant to the Seagoville PSA, and (2) approve
a related agreement between the Buyer and IMH that authorized IMH to
purchase the Buyer’s interest in the Seagoville PSA. The Receiver notified
the court that IMH intended to assemble the Seagoville Property with
several other parcels that could then be sold together for more money than
if each parcel was sold separately. The receivership court granted the
motion, finding “Seagoville [was] ultimately owned and controlled by [the
Judgment Debtors]” and therefore was “subject to administration under
[the] MCA Receivership Order.” The court also found that all parties who
claimed an ownership or management interest in Seagoville or the
Seagoville Property received proper notice of the joint motion. The Receiver
completed the transaction pursuant to the Seagoville PSA, and after IMH
acquired ownership rights, it sold the assembled properties to a third-party.

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              MW2 INVESTMENTS v. IMH SPECIAL, et al.
                      Decision of the Court

All proceeds from the sale of the Seagoville Property went into the
receivership estate.

¶6            After IMH completed the purchase of the property,
Investments attempted to intervene in the receivership proceeding.
Investments moved to set aside the sale and void the appointment of the
Receiver. In the alternative, Investments asked the receivership court to
give it some of the proceeds of the sale of the Seagoville property. The
receivership court denied Investments’ motion, finding that Investments
had not shown a right to intervene because its interests were already
represented in the case by Maniatis, the court had already addressed the
relief sought, and “if [Investments] has an interest in a receivership asset,
[such as the Seagoville Property or its sale proceeds,] there is a process for
[Investments] to protect that interest by submitting a claim.”

¶7             The receivership court then granted the Receiver’s motion to
distribute the sale proceeds to IMH, explaining it had previously
determined the proceeds from the Seagoville sale were to be “made
available for [IMH’s] execution” on the Judgment. Noting Maniatis’
objections to the distribution, the court went on to explain that the
Seagoville Property is owned and controlled by the Judgment Debtors
[Maniatis and his various business organizations] and subject to the
Receivership and Receivership Order. The Receiver then filed a motion to
wind-up the estate and make its final distributions to the creditors.
Investments filed a notice of adverse impact to its interests. The court
granted the Receiver’s motion and denied and overruled “[a]ny and all
objections to the Wind-Up Motion.” As provided in that order, the Receiver
distributed the remaining assets of the receivership estate and was
discharged by the court.

¶8           Investments then initiated the current lawsuit, on its own
behalf and derivatively on behalf of Seagoville (“Lawsuit 2”). It alleged a
17% interest in Seagoville and sued to unwind the sale of the Property,
claiming the sale occurred only through IMH’s “misrepresentations,
concealment of facts and other misconduct and fraud on the Court.”
Investments alleged six causes of action: (1) accounting and distribution; (2)
sums owed under a contract; (3) fraud; (4) constructive fraud; (5) negligent
misrepresentation; and (6) unjust enrichment.

¶9            IMH filed a motion to dismiss Lawsuit 2. The superior court
granted IMH’s motion to dismiss and denied Investments’ oral motion for
leave to amend the complaint, reasoning “there is no legal theory on which
[it] could prevail.” IMH sought attorney fees, costs, and sanctions against

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               MW2 INVESTMENTS v. IMH SPECIAL, et al.
                       Decision of the Court

Investments; its sole member/manager, Robert M. Semple; its attorney, R.
Stewart Halstead; and his firm, R. Stewart Halstead, P.C. The court denied
the request for sanctions under Rule 11 but awarded $63,062.12 in attorney
fees and $1,581.72 in taxable costs under A.R.S. §§ 12-341.01 and 12-341.
Investments timely appealed the superior court’s dismissal of its claim and
IMH timely cross-appealed the court’s denial of sanctions.

                               DISCUSSION

I.     Investments’ Claims on Appeal

¶10            We review the dismissal of a claim under Rule 12(b)(6) de
novo. Coleman v. City of Mesa, 230 Ariz. 352, 355, ¶ 7 (2012). In doing so, we
“assume the truth of all well-pleaded factual allegations and indulge all
reasonable inferences from those facts.” Id. at 356, ¶ 9 (citation omitted).
However, we will not “speculate about hypothetical facts that might entitle
the plaintiff to relief,” Cullen v. Auto-Owners Ins., 218 Ariz. 417, 420, ¶ 14
(2008), nor will we “accept as true allegations consisting of conclusions of
law, inferences or deductions that are not necessarily implied by well-
pleaded facts, unreasonable inferences or unsupported conclusions from
such facts, or legal conclusions alleged as facts.” Jeter v. Mayo Clinic Ariz.,
211 Ariz. 386, 389, ¶ 4 (App. 2005) (citation omitted).

¶11            The premise of each of Investments’ claims is that it was
improperly deprived of a share in the benefits of the sale of the Seagoville
property when the Receiver executed the sale to IMH and IMH
subsequently packaged the property for sale to a third party. Investments
argues the superior court erred by concluding that the receivership court’s
rulings, along with the Receiver’s judicial immunity, barred its claims.
Investments contends the receivership court’s orders cannot bar its claims
in this case because (1) IMH committed fraud on the receivership court, (2)
the receivership court’s orders and rulings are void because the Judgment
was partially vacated on appeal, and (3) the receivership court did not have
subject matter jurisdiction to appoint a receiver.3

       A.     New Arguments may not be made on Appeal

¶12         For the first time on appeal, Investments argues (1) the
appointment of the receiver over Seagoville’s assets constituted an “‘event
of withdrawal’ under A.R.S. § 29-323”; (2) Seagoville, rather than Maniatis

3       Although Investments did not raise its attack on subject matter
jurisdiction below, in our discretion, we address it here. See Hawkins v.
Allstate Ins. Co., 152 Ariz. 490, 503 (1987).

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               MW2 INVESTMENTS v. IMH SPECIAL, et al.
                       Decision of the Court

and the other Judgment Debtors, owned the partnership assets; (3) it
“alleged sufficient facts to support liability for conspiracy” between IMH
and the Receiver amounting to a breach of fiduciary duty; and (4) it “alleged
sufficient facts to support liability [of IMH] for aiding and abetting” the
Receiver in breaching its fiduciary duties. Generally, “an appellate court
will not consider issues not raised in the trial court.” Hawkins v. Allstate Ins.
Co., 152 Ariz. 490, 503 (1987). Because Investments failed to raise these
arguments below, we decline to consider them for the first time on appeal.

       B.     Subject Matter Jurisdiction

¶13            Investments challenges the receivership court’s subject matter
jurisdiction in the underlying matter based on theories of partnership law
in Lawsuit 1. While it does not raise a challenge to the court subject matter
jurisdiction in the instant case, as a practical matter, the receivership court
was acting with subject matter jurisdiction. Subject matter jurisdiction is a
court’s statutory or constitutional authority to hear a certain type of case.
Sheets v. Mead, 238 Ariz. 55, 57, ¶ 9 (App. 2015). The superior court has
statutory authority to appoint a receiver. See A.R.S. § 12-1241. Likewise,
under Rule 66, a court may appoint a receiver as an equitable remedy to
protect property that is subject to pending litigation. Moreover, if the
receiver acts within the scope of the court’s appointment order, he is
entitled to judicial immunity. Mashni v. Foster ex rel. County of Maricopa, 234
Ariz. 522, 527, ¶¶ 15–16 (App. 2014). This broad protection applies to every
action taken, “whether good or bad, honest or dishonest, well-intentioned
or not,” and is not waived unless the receiver acts outside the scope of the
order appointing him. Id. (quoting B.K. v. Cox, 116 S.W.3d 351, 357 (Tex.
App. 2003)). Therefore, the receivership court acted with statutory
authority and had subject matter jurisdiction over the proceeding and
parties.

       C.     Converting Rule 12(b)(6) Motion into Motion for Summary
              Judgment

¶14            Investments next argues the superior court erred in denying
its request to convert the motion to dismiss—brought under Rule 12(b)(6)
—to a motion for summary judgment under Rule 56(A). In support of this
argument, it notes that IMH relied on matters outside of the pleadings to
support its motion. Under Rule 12(d), a motion to dismiss for failure to
state a claim that presents “matters outside the pleading,” which are “not
excluded by the court . . . must be treated” as a motion for summary
judgment. The rule, however, does not require conversion when the
motion refers to documents that are matters of public record or matters

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              MW2 INVESTMENTS v. IMH SPECIAL, et al.
                      Decision of the Court

central to the complaint. Strategic Dev. & Constr., Inc. v. 7th Roosevelt
Partners, LLC, 224 Ariz. 60, 64, ¶¶ 13–14 (App. 2010).

¶15            The documents attached to IMH’s motion to dismiss relate
directly to the appointment and actions of the Receiver, which the
complaint itself referenced, consisting of records from the receivership
litigation. Because the court considered only records that were central to the
complaint, it was not required to treat the motion to dismiss as a motion for
summary judgment. Id. at 63, 64, ¶¶ 8, 13.

       D.     Alleged Fraud Upon the Receivership Court

¶16            Investments alleges the Receiver and IMH engaged in “bad
faith, dishonest and ill-intentioned acts and omissions for the sole benefit
of the creditor and to the direct prejudice and harm” of Investments. But
the record illustrates that the challenged actions by the Receiver—
specifically, selling the Seagoville Property pursuant to the Seagoville PSA
and distributing the proceeds from that sale—were specifically authorized
in the Receivership Order and were conducted with the express permission
of the receivership court.

¶17          As stated, the receivership court ordered the Receiver to act
“for the benefit of the Judgment Debtors’ creditors.” In the receivership
action, Maniatis complained that the Receiver was acting in IMH’s interest,
but the court rejected his objection and explicitly found the Receiver was
acting pursuant to the Receivership Order, which defines its scope of
authority.

¶18          To the extent Investments now challenges acts of the Receiver
taken pursuant to the Receivership Order, its claims necessarily fail. As the
receivership court held in rejecting Investments’ motion to set aside the
sale, Investments’ remedy was to submit a claim in the receivership. The
wind-up order entered by the receivership court finally disposed of the
matter.

¶19            Investments argues, however, that the Receivership Order
does not bar its claims because it was procured by extrinsic fraud. Extrinsic
fraud includes “deception practiced by the successful party in purposely
keeping his opponent in ignorance,” Bates v. Bates, 1 Ariz. App. 165, 168
(1965) (citation omitted), and may justify vacating a prior judgment, see
Dockery v. Cent. Ariz. Light & Power Co., 45 Ariz. 434, 454 (1935). The party
seeking relief from a judgment based on extrinsic fraud must establish the
existence and non-disclosure of the evidence in question. See Northwest Bank
(Minn.), N.A. v. Symington, 197 Ariz. 181, 185–87, ¶¶ 15–23 (App. 2000).

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               MW2 INVESTMENTS v. IMH SPECIAL, et al.
                       Decision of the Court

Investments does not contend that IMH withheld facts from the court or the
Receiver about their intention to bundle the parcels to sell in an attempt to
maximize proceeds from that sale. The court was aware the purpose of the
subsequent transaction was to increase the funds available to the Receiver
who was attempting to satisfy the claims of the Judgement Creditors
without the assets necessary to do so. Simply put, Investments did not
plead sufficient facts to substantiate a claim for extrinsic fraud.

¶20            The receivership court was fully aware that the Receiver was
acting in the interest of IMH as a judgment creditor, and in fact directed it
to do just that in the Receivership Order. Moreover, the receivership court
directed the Receiver to complete the Seagoville PSA, which Maniatis had
negotiated before the Receiver was appointed.

¶21          Investments also argues that even if the Receiver may be
immune from a claim for breach of fiduciary duty owed to Seagoville and
its members, “IMH should be held vicariously liable for the alleged
wrongful acts and omissions of the [R]eceiver.” But the receivership court’s
approval of the transactions by the Receiver bar Investments’ current
claims, independent of any application of receiver immunity. Because
Investments did not allege facts sufficient to show fraud on the receivership
court in connection with its entry of the Receivership Order or its approval
of the Seagoville transaction, Investments’ attack on those transactions
based on allegations of vicarious liability also fails.

       E.     Vacated Judgment from the Court of Appeals

¶22           Investments next argues that the entirety of the receivership
court’s rulings are void because this court partially vacated the Judgment
that was the basis for appointing MCA as a receiver. See IMH Special Asset
NT 168, LLC v. Aperion Communities, LLLP (“Aperion”), No. 1 CA-CV
13-0131, 2016 WL 7439001 (Ariz. Ct. App. Dec. 27, 2016) (mem. decision).

¶23            In Aperion, this court held that, although the Judgment
Debtors’ creditors were entitled to summary judgment with respect to the
Judgment Debtors’ defaults, questions of fact remained about the precise
balance owed. Id. at *4, *6, ¶¶ 20, 30. In doing so, this court vacated the
Judgment and remanded, directing the superior court to determine the
amount owed. Id. at *6, ¶¶ 30-33. The court noted, however, that “even if
the [creditors] do not prove their claimed deficiency balances upon remand,
substantial deficiency balances will still exist even under the [Judgment
Creditors’] version of the facts.” Id. at *6, ¶ 33. The creditors filed a motion
for reconsideration with this court, and we ordered that any judgment

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               MW2 INVESTMENTS v. IMH SPECIAL, et al.
                       Decision of the Court

entered on remand be entered nunc pro tunc to the date of the original
Judgment.

¶24         Because the creditors were still entitled to a “substantial
deficiency balance,” this court’s prior ruling did not render the
appointment of the Receiver and its subsequent actions void.

       F.     Investments’ Motion for Leave to Amend

¶25             Investments also argues the superior court erred by denying
its motion for leave to amend the complaint. We review for an abuse of
discretion the denial of a motion for leave to amend. Timmons v. Ross Dress
For Less, Inc., 234 Ariz. 569, 572, ¶ 17 (App. 2014) (explaining a court does
not abuse its discretion in denying a motion for leave to amend if
amendment would be futile); ELM Ret. Ctr., LP v. Callaway, 226 Ariz. 287,
292, ¶ 26 (App. 2010).

¶26            Here, the court found there is no legal theory on which
Investments could prevail, given the absolute immunity of the Receiver. We
find no abuse of discretion in this finding. The record shows the Receiver
and IMH acted with express authorization of the receivership court.
Investments’ complaint failed to allege facts to support extrinsic fraud, and
on appeal, it still fails to identify any additional facts it might have alleged
to support its claims.4

II.    Superior Court’s Denial of IMH’s Request for Rule 11 Sanctions
       Against Investments

¶27            IMH asks us to “conclude that [Investments’] Complaint
lacked any good faith basis in either fact or law” and reverse the superior
court’s Rule 11 order declining to sanction Investments, Robert Semple
(Investments’ principal), R. Stewart Halstead, and R. Stewart Halstead P.C.
(Investments’ counsel). We review the superior court’s denial of Rule 11
sanctions for an abuse of discretion. See Roberts v. City of Phoenix, 225 Ariz.
112, 123, ¶ 45 (App. 2010). We will affirm the court’s ruling unless it is
“clearly untenable, legally incorrect, or amount[s] to a denial of justice.”
State ex rel. Thomas v. Newell, 221 Ariz. 112, 114, ¶ 6 (App. 2009) (internal
quotation omitted).

4      Given our resolution of Investments’ arguments on appeal, we need
not determine whether its collateral attack on the receivership court’s
orders is precluded under the doctrine of claim preclusion.

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               MW2 INVESTMENTS v. IMH SPECIAL, et al.
                       Decision of the Court

¶28            “[A]n attorney violates Rule 11 by filing a document that he
or she knows or should know asserts a position that ‘is insubstantial,
frivolous, groundless or otherwise unjustified.’” Cal X-Tra v. W.V.S.V.
Holdings, L.L.C., 229 Ariz. 377, 410, ¶ 113 (App. 2012) (internal quotation
omitted). “The good faith component of Rule 11 is not based on whether an
attorney subjectively pursues claims in good faith, but instead is judged on
an objective standard of what a professional, competent attorney would do
in similar circumstances . . . .” Standage v. Jaburg & Wilk, P.C., 177 Ariz. 221,
230 (App. 1993). A violation of this rule permits the court to impose an
appropriate sanction, which may include expenses and attorney fees
caused by the filing of the pleading. Rule 11(c)(1).

¶29            In its request for Rule 11 sanctions, IMH argued that
Investments’ complaint lacked any good faith basis and was barred by the
receivership court’s orders, and that Semple acted in bad faith in bringing
the complaint. The superior court denied IMH’s motion, declining to
sanction Investments, Semple, or Halstead, reasoning that “the record does
not support a conclusion that it was objectively unreasonable for
[Investments’] lawyer to pursue IMH.” The court explained that, although
Halstead’s theory was creative and later turned out to be unsupported by
facts, based on the record at the time the complaint was filed, Halstead did
not act in an objectively unreasonable manner. We do not find an abuse of
discretion in the superior court’s ruling declining to impose sanctions.

III.   Attorney Fees

¶30            Investments argues the superior court erred in awarding
attorney fees to IMH for three reasons. First, Investments argues the court
abused its discretion when it found five of their claims “derive from
contract.” Second, Investments argues the court should not have awarded
fees that IMH incurred in connection with its unsuccessful Rule 11 motion
for sanctions. Finally, Investments argues the award of fees is unreasonable
because IMH did not provide the terms of its fee agreement.

¶31            We review the superior court’s award of attorney fees and
costs for an abuse of discretion. Charles I. Friedman, P.C. v. Microsoft Corp.,
213 Ariz. 344, 350, ¶ 17 (App. 2006). We will affirm the court’s award of
attorney fees and costs if it has “any reasonable basis.” State Farm Mut. Auto
Ins. Co. v. Arrington, 192 Ariz. 255, 261, ¶ 27 (App. 1998). Whether the basis
for awarding fees is proper is an issue of law we review de novo. Barrow v.
Ariz. Bd. of Regents, 158 Ariz. 71, 80 (App. 1988).

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               MW2 INVESTMENTS v. IMH SPECIAL, et al.
                       Decision of the Court

¶32            The superior court did not err in awarding attorney fees
pursuant to A.R.S. § 12-341.01. Section 12-341.01 provides for recovery of
fees to the successful party in any contested action arising out of a contract.
The phrase “arising out of a contract” in § 12-341.01 must be read broadly,
and “an action is considered to have arisen out of contract” if the claim
would not exist absent the contract. ML Servicing Co. v. Coles, 235 Ariz. 562,
570, ¶ 30 (App. 2014). The superior court found IMH was entitled to
attorney fees under § 12-341.01 for every count in the complaint, except the
count for accounting and distribution, explaining the remaining counts
were derived from the contract for the sale and purchase of the Seagoville
Property. The court further explained that Seagoville’s claims were based
on the contract, that the contract was “the direct result of fraud, constructive
fraud, or negligent misrepresentation, and that it resulted in unjust
enrichment.” We agree. Absent the contract IMH entered into for the
purchase of the Seagoville Property, after the Seagoville PSA was entered
into, Investments’ claims would not exist.

¶33            The superior court likewise did not err in awarding IMH
attorney fees that were incurred in pursuing IMH’s unsuccessful Rule 11
motion for sanctions. When “a party has accomplished the result sought in
the litigation, fees should be awarded for time spent even on unsuccessful
legal theories.” Schweiger v. China Doll Rest., Inc., 138 Ariz. 183, 189 (App.
1983). The court has discretion to award fees when “a successful claim is
intertwined with one for which fees are not awardable.” City of Cottonwood
v. James L. Fann Contracting, Inc., 179 Ariz. 185, 194 (App. 1994). Here, the
court treated the research done in IMH’s Rule 11 motion as research done
for its case in chief. IMH sought to dismiss Investments’ complaint, and it
was successful in doing so. Moreover, its arguments for sanctions are
directly related to its arguments for why Investments’ complaint should be
dismissed as a matter of law.

¶34           Finally, the fee award to IMH is not unreasonable.
Investments argues that IMH’s failure to “provide by affidavit or otherwise
its fee agreement with its attorneys” is fatal to its request for attorney fees.
We disagree. We have held an affidavit submitted in connection with an
application for fees must identify the agreed-upon hourly billing rate
between the lawyer and the client. China Doll, 137 Ariz. at 188. Here, IMH
submitted affidavits of its counsel to support its request for a fee award,
which contained the billable rate of IMH’s counsel and the amount of time
billed. The superior court reasoned “[Investments] has offered no . . .
reason” to disbelieve IMH’s counsel’s sworn China Doll affidavit, and in the
absence of such a reason, courts generally accept sworn affidavits as true.

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              MW2 INVESTMENTS v. IMH SPECIAL, et al.
                      Decision of the Court

We agree and presume the hourly billing rate in the affidavit is the amount
agreed upon by IMH and its counsel.

¶35           Both parties request attorney fees on appeal. Because IMH is
largely the prevailing party, see China Doll, 138 Ariz. at 189, and a majority
of the claims arose out of contract, we grant its request for attorney fees on
appeal under A.R.S. § 12-341.01, and also award costs to IMH upon
compliance with ARCAP 21. See A.R.S. § 12-341.

                               CONCLUSION

¶36           For the foregoing reasons, we affirm the judgment of the
superior court dismissing Investments’ complaint. We also affirm the
court’s denial of sanctions.

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

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