Court Opinion

ID: 6340120
Source: CourtListenerOpinion
Date Created: 2022-05-12 16:01:41.428957+00
Date Added: 2024-06-11T15:49:13.846932
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  UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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

                                AGRICANN LLC,
                        Plaintiff/Appellee/Cross-Appellant,

                                         v.

               NATURAL REMEDY PATIENT CENTER LLC,
                   Defendant/Appellant/Cross-Appellee,

                                        and

                               DAVID SANCHEZ,
                               Defendant/Appellee.

                              No. 1 CA-CV 20-0231
                                FILED 5-12-2022

            Appeal from the Superior Court in Maricopa County
                           No. CV2016-001283
                  The Honorable James D. Smith, Judge

    AFFIRMED IN PART; VACATED AND REMANDED IN PART

                                    COUNSEL

Mills and Woods Law PLLC, Phoenix
By Sean A. Woods
Co-Counsel for Plaintiff/Appellee/Cross-Appellant

Ahwatukee Law Office, P.C., Phoenix
By David L. Abney
Co-Counsel for Plaintiff/Appellee/Cross-Appellant
Osborn Maledon, P.A., Phoenix
By Eric M. Fraser, Thomas L. Hudson, Hayleigh S. Crawford
Co-Counsel for Defendant/Appellant/Cross-Appellee

Greenspoon Marder LLP, Scottsdale
By Sharon A. Urias, Stuart Knight Pro Hac Vice
Co-Counsel for Defendant/Appellant/Cross-Appellee

                      MEMORANDUM DECISION

Presiding Judge D. Steven Williams delivered the decision of the Court, in
which Judge Jennifer B. Campbell and Judge James B. Morse Jr. joined.

W I L L I A M S, Judge:

¶1            Natural Remedy Patient Center, LLC (“Natural Remedy”)
appeals portions of the superior court’s judgment in favor of Agricann, LLC
(“Agricann”). Agricann cross-appeals portions of the same judgment
granted in favor of Natural Remedy. For reasons that follow, we affirm the
judgment, but vacate the damages award for Agricann and remand for
further proceedings consistent with this decision.

              FACTUAL AND PROCEDURAL HISTORY

¶2             Natural Remedy, a not-for profit entity, which holds a
medical marijuana dispensary certificate issued by the Arizona Department
of Health Services, formed a joint venture to grow and sell medical
marijuana with Agricann, a for-profit entity, which held the lease to a
facility suitable for medical marijuana production (the “Grow Facility”).

¶3           At the time of the joint venture, David Sanchez and his wife
Kathy Sanchez were the principals of Natural Remedy. Shadi Zaki, though
not a principal or agent of Natural Remedy, consulted on their behalf.
Agricann’s principals were Brig Burton and Imran Kazem.

¶4           In May 2014, the parties entered a two-year dispensary agent
contract (the “Management Contract”) under which Agricann would
cultivate and Natural Remedy would sell medical marijuana. The parties

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formed Natural Agriculture, LLC1 (“Natural Agriculture”) to pay the joint
venture’s expenses, including rent, and to hold the lease rights to the Grow
Facility.

¶5              Under the Management Contract, profits were to be shared as
follows: “[a]ll distributions of [s]ales [i]ncome shall be paid on a pro-rata
basis (i.e.[,] 80% of all gross sales from both the retail and wholesale
operations shall be paid to [Agricann], and 20% shall be retained by
[Natural Remedy].” Natural Remedy agreed to pay Agricann its share of
the profits within five days of receipt of sales income and was subject to an
interest penalty of 1% per day for late payments. It appears, however, that
profits were not shared in this manner and that the parties later agreed to
share profits equally.

¶6           An ongoing dispute developed over what Natural Remedy
owed Agricann and whether either party was complying with its
obligations under the contract’s terms. Agricann then locked Natural
Remedy out of the Grow Facility and contemplated suing Natural Remedy
for amounts owed under the Management Contract. Consequently, in
October 2015, approximately six months before the expiration of the
Management Contract, the parties met to avoid a lawsuit and to find an
amicable way to end their business relationship.

¶7            At the meeting, the parties contemplated an agreement that
would alter their rights and obligations under the Management Contract
and under which Natural Remedy would “buy out” Agricann’s lease rights
to the Grow Facility and obtain title to the equipment therein. During the
meeting, a representative from Agricann, either Burton or Kazem, wrote the
following terms on a sheet of a paper:

1The Management Contract refers to this entity as “Nature’s Agriculture,
LLC.” However, the parties formed “Natural Agriculture, LLC.”

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¶8             According to this document, (hereinafter, the “Breakup
Deal”) Natural Remedy would sublease the Grow Facility for $20,000.00 a
month for three years, beginning on November 15, 2015, and ending with a
$400,000.00 balloon payment. Although not self-evident from the
document’s four corners, the parties agree the Breakup Deal would include
the transfer of title to equipment from Agricann to Natural Remedy and the
transfer of Agricann’s lease rights in the Grow Facility to Natural Remedy.

¶9           The Breakup Deal was signed by Burton, as Agricann’s
representative, and by Sanchez, as Natural Remedy’s representative.2
Nevertheless, the parties dispute whether the Breakup Deal was a binding
agreement.

¶10          Following the meeting, the parties continued negotiations
regarding additional terms related to the Breakup Deal, and Burton
prepared several additional contract documents, including a personal
guarantee, a promissory note, a security agreement, and a purchase and
settlement agreement and release (the “Release Agreement”) under which
Agricann agreed to “settle[] and release[] [Natural Remedy] from its
obligations, delinquent or otherwise, arising under the [Management
Contract].” Burton then sent several emails to Natural Remedy in which he

2 Although the Breakup Deal provided a space for Zaki to sign, he did not
sign as he was not a principal or agent of Natural Remedy.

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acknowledged that the Breakup Deal was created, in part, “to resolve the
[debt] that [Natural Remedy] owes Agricann,” and cautioned that, if the
documents were not signed, Agricann would likely move to enforce the
debts owed under the Management Contract. Unlike the Breakup Deal,
these documents were never signed.

¶11           The parties dispute whether Natural Remedy made payments
under the Breakup Deal but agree that Agricann was last paid in January
2016. In February 2016, Agricann sued Natural Remedy alleging, as
relevant to this appeal, that Natural Remedy breached the Management
Contract by failing to pay Agricann 80% of the gross sales, and that Natural
Remedy breached the Breakup Deal by failing to make the required
payments. In May or June 2016, Natural Remedy moved out of the Grow
Facility. Before their departure, Natural Remedy allegedly found a new
tenant to occupy the Grow Facility. At some point, Agricann lost its lease
rights, which Agricann attributes to Natural Remedy’s nonpayment.

¶12           The matter proceeded to a three-day bench trial. At trial,
Burton, the signatory for Agricann, testified that it was his intent that the
Breakup Deal would be binding. Kazem testified in support,
acknowledging that while the parties anticipated signing a formal
document, the parties agreed to the terms set forth in the Breakup Deal.
Sanchez, the signatory for Natural Remedy, did not testify. Instead, only
Zaki, Natural Remedy’s independent contractor, who is neither a party to
nor a signatory of the Breakup Deal, testified to the parties’ intent. Zaki
testified that the Breakup Deal reflected only “discussions towards a
potential agreement.” Burton also testified that under the Breakup Deal,
Agricann gave up its rights under the Management Contract “going
forward.” He did not, however, testify as to whether the Breakup Deal
included the settlement of debts owed by Natural Remedy under the
Management Contract.

¶13          Agricann claimed damages of approximately $30 million,
including interest, for Natural Remedy’s breach of the Management
Contract. Agricann also claimed damages of $1.065 million in principal,
totaling approximately $15.5 million including interest, for Natural
Remedy’s breach of the Breakup Deal. A damages expert was not used;
rather Burton calculated and testified to Agricann’s damages. In its closing
brief, Natural Remedy argued Agricann did not prove breach of the
Management Contract or related damages and contended that the Breakup
Deal was unenforceable.

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¶14           The superior court ruled against Agricann on the
Management Contract and made the following relevant findings: (1) the
parties’ course of performance and contemporaneous communications
modified the Management Contract such that income was split equally,
rather than 80/20; (2) Agricann’s claim for a daily interest penalty of 1% for
late payments of goods sold was unenforceable because it was a “form of
liquidated damages” and functioned as an “impermissible penalty rather
than enforceable liquidated damages;” (3) Agricann failed to show that
Natural Remedy breached the modified, as opposed to original,
Management Contract; and (4) Agricann failed to establish its damages
persuasively.

¶15            By contrast, the superior court ruled in favor of Agricann on
the Breakup Deal, making the following relevant findings: (1) the Breakup
Deal was enforceable; (2) the Breakup Deal was a novation of the
Management Contract; (3) Natural Remedy paid $20,000.00 in November
2015, $20,000.00 in December 2015, and $15,000.00 in January 2016; and (4)
Natural Remedy breached the Breakup Deal by failing to make payments
after January 2016. The court determined that Natural Remedy owed
$5,000.00 for January 2016, the remaining thirty-three contract payments of
$20,000.00, and the $400,000.00 balloon payment, totaling $1.065 million.
The court noted that these were “liquidated amounts,” and awarded ten
percent statutory pre-judgment interest.

¶16            Lastly, the court denied both parties’ requests for fees holding
that neither side was the successful party.

¶17            Both parties moved for reconsideration and the court denied
the motions. The superior court entered judgment. Natural Remedy timely
appealed and Agricann timely cross-appealed. We have jurisdiction under
Article 6, Section 9, of the Arizona Constitution and A.R.S. § 12-2101(A)(1).

                               DISCUSSION

I.     Natural Remedy Appeals the Superior Court’s Ruling on the Breakup Deal

¶18           Natural Remedy argues the Breakup Deal was not an
enforceable contract and also argues, in the alternative, that if the Breakup
Deal was enforceable, the damages award has “no basis in the law.” On
these bases, Natural Remedy requests that we reverse the superior court’s
ruling.

¶19          On appeal from a bench trial, we view the “evidence and all
reasonable inferences in the light most favorable to sustaining the superior

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court’s ruling,” Town of Marana v. Pima Cnty., 230 Ariz. 142, 152, ¶ 46 (App.
2012), and we will affirm the court’s judgment if it is correct for any reason,
FL Receivables Tr. 2002-A v. Ariz. Mills, L.L.C., 230 Ariz. 160, 166, ¶ 24 (App.
2012). “We defer to a superior court’s findings of fact unless clearly
erroneous, but we review its conclusions of law de novo.” Town of Marana,
230 Ariz. at 152, ¶ 46. “A finding of fact is not clearly erroneous if
substantial evidence supports it, even if substantial conflicting evidence
exists.” Kocher v. Dep’t of Revenue of Ariz., 206 Ariz. 480, 482, ¶ 9 (App. 2003).
The validity and enforceability of a contract and whether the court applied
the correct measure of damages are mixed questions of fact and law that we
review de novo. Armiros v. Rohr, 243 Ariz. 600, 605-06, ¶¶ 16, 21 (App. 2018).

       A.     Enforceability of the Breakup Deal

¶20           Natural Remedy asserts that the Breakup Deal is not an
enforceable contract but rather represents only the parties’ “preliminary
negotiations,” as demonstrated by the lack of certain “material terms” and
by the parties’ contemporaneous behavior and conduct. Agricann asserts
that the Breakup Deal was a binding document, not a mere preliminary
negotiation.

¶21            A contract may be formed if it is clear the parties intended to
be bound by its terms. Johnson Int’l, Inc. v. City of Phx., 192 Ariz. 466, 470,
¶ 26 (App. 1998). The parties’ anticipation of the creation of a more
complete, thorough contract will not prevent enforcement of an otherwise
binding contract unless a party has expressed the intention not to be bound
until the future writing is executed. See id. at 471, ¶ 31 (concluding initial
agreement was not binding where one party expressed the intention not to
be bound until execution of the final agreement); 1 Samuel Williston &
Richard A. Lord, Williston on Contracts § 4.11 (4th ed. 1999) (“[T]o avoid
the conclusion that a contract has been formed it must be found as a fact
that at least one of the parties has expressed the intention not to be bound
until the [future] writing [is] executed.”); AROK Constr. Co. v. Indian Constr.
Servs., 174 Ariz. 291, 295, 299 (App. 1993) (concluding that, even if the
parties anticipated making a written agreement, that fact would not
preclude the finding that an oral contract was made if the parties intended
to be bound). In determining whether the parties intended to be bound, a
court may look to the writing, the parties’ conduct, and the surrounding
circumstances. Muchesko v. Muchesko, 191 Ariz. 265, 268 (App. 1997). The
focus is on objective evidence, not on the “hidden intent of the parties.” Id.
(quoting Modular Sys., Inc. v. Naisbitt, 114 Ariz. 582, 585 (App. 1977)).

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¶22            Because the law “favors enforcement when it is clear that the
parties intended themselves to be bound,” “absent or uncertain terms are
not fatal to the enforceability of an otherwise binding contract.” AROK, 174
Ariz. at 297; see also Schade v. Diethrich, 158 Ariz. 1, 10-11 (1988) (holding
promise to enter into an equitable and fair settlement with the specific terms
to be resolved later, sufficiently manifested mutual assent to be bound
despite the absence of agreement on the most basic terms). Whether an
agreement resolves every matter is not the touchstone for enforceability.
AROK, 174 Ariz. at 297. Rather, an agreement’s terms are sufficiently certain
if they “provide a basis for determining the existence of a breach and for
giving an appropriate remedy.” Id. (quoting Restatement (Second) of
Contracts § 33(2) (1981)). Thus, omitted terms, even those “essential” to the
contract, “are not invariably fatal to the rights of the parties to obtain
enforcement of their bargain.” Id. at 298.

¶23            Accordingly, the questions before us are whether the parties
intended to be bound by the Breakup Deal, despite anticipating a future,
more formal agreement and, if so, whether the terms of the Breakup Deal
are sufficiently certain to be enforceable.

       1.     The Parties Intended to Be Bound by the Breakup Deal

¶24           Natural Remedy contends the parties’ contemporaneous
communications and behavior, particularly their contemplation of a more
formal agreement, demonstrates that the parties did not intend to be bound
by the Breakup Deal. We disagree. Viewed in the light most favorable to
upholding the court’s ruling, Town of Marana, 230 Ariz. at 152, ¶ 46, the
writing, the parties’ conduct, and the surrounding circumstances
demonstrate that the parties’ intended to be bound by the terms included
in the writing, see Muchesko, 191 Ariz. at 268.

¶25            We first consider whether the writing establishes the parties’
intent to be bound. At the October 2015 meeting, the parties not only
reduced their agreement to writing, but also signed the agreement.
Notably, the Breakup Deal did not contain a “non-binding” clause, or any
language indicating that the parties did not intend to be bound by its terms.
See Johnson, 192 Ariz. at 473, ¶¶ 42-44 (holding that where a preliminary
agreement contained non-binding language, the agreement could not bind
the parties). Accordingly, we may look beyond the writing to determine the
parties’ intent. See id. at ¶ 43.

¶26          After signing the Breakup Deal, the parties acted consistently
with a binding agreement. As the superior court found, Natural Remedy

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was given possession of the Grow Facility and Natural Remedy does not
dispute this fact. The superior court also found that Natural Remedy paid
“$20,000.00 in November and [$20,000.00 in] December 2015 and
[$]15,000.00 in January 2016.” Natural Remedy argues this finding was in
error, citing only an internal, undated spreadsheet created by Zaki. At trial,
Burton and Zaki gave conflicting testimony regarding the payments and
the only piece of non-testimonial evidence on the matter was Zaki’s
internal, undated spreadsheet.

¶27             Burton testified that Natural Remedy made three payments
under the Breakup Deal—$20,000.00 in November, $20,000.00 in December,
and $15,000.00 in January. By contrast, Zaki testified that Natural Remedy
did not make any payments under the Breakup Deal. On
cross-examination, Zaki’s prior deposition testimony was used to show he
had previously acknowledged that two payments totaling $20,000.00 were
made in December 2015 and a payment of $15,000.00 was made in January
2016. Zaki’s spreadsheet confirms this account but fails to provide dates or
reasons for the payments. We acknowledge that conflicting testimony
exists. However, “where there is a dispute in the evidence from which
reasonable [persons] could arrive at different conclusions as to the ultimate
facts, we will not disturb the findings of a trial court.” In re U.S. Currency in
Amount of $26,980.00, 199 Ariz. 291, 296, ¶ 16 (App. 2000) (citations omitted);
see also In re Estate of Zaritsky, 198 Ariz. 599, 601, ¶ 5 (App. 2000) (noting that
the appellate court gives “due regard to the opportunity of the [superior]
court to judge the credibility of witnesses”).

¶28           Lastly, the circumstances surrounding the creation of the
Breakup Deal support the finding that the parties intended to be bound by
its terms. Prior to their meeting, Agricann locked Natural Remedy out of
the Grow Facility and contemplated suing Natural Remedy. The parties
met in October to resolve their problems under the Management Contract
and to avoid a lawsuit. On this record, substantial evidence supports the
court’s finding that the parties’ intended to be bound by the terms of the
Breakup Deal. See Kocher, 206 Ariz. at 482, ¶ 9.

       2.     The Terms of the Breakup Deal are Sufficiently Certain to be
       Enforceable

¶29           Natural Remedy argues the Breakup Deal is unenforceable
because the document did not include certain additional terms discussed
by the parties, such as how the agreement would alter the parties’ rights
and obligations under the Management Contract, how title to the
equipment would transfer, whether the agreement would contain a

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personal guarantee by the Sanchezes, and whether the agreement would
include an interest penalty for late payments.

¶30           Because the parties intended to be bound by the Breakup
Deal, the law favors its enforcement. See AROK, 174 Ariz. at 297. Omitted
terms, even those essential to the contract, are not fatal to its enforceability,
so long as the agreement’s terms “provide a basis for determining the
existence of a breach and for giving an appropriate remedy.” Id. (quoting
Restatement (Second) of Contracts § 33(2)).

¶31            Here, the terms of the Breakup Deal are sufficiently certain to
render the Breakup Deal enforceable. Natural Remedy breached the
contract at a point when the only terms necessary to determine the existence
of the breach (payments under the agreement) and for giving an
appropriate remedy (agreed-upon payments) were present. Because
Natural Remedy breached the contract—by failing to make the required
payments—the absence of additional contract terms contemplated by the
parties is not fatal to Agricann’s claim. “Only ‘[i]f the essential terms are so
uncertain that there is no basis for deciding whether the agreement has been
kept or broken’ does a contract not exist.” Id. at 298 (quoting Restatement
(Second) of Contracts § 33 cmt. a).

¶32           Accordingly, the superior court did not err in finding the
contract enforceable.

       B.     The Damages Award

¶33          Natural Remedy requests this court reverse the damages
award arguing it has “no basis in the law.” Whether the court applied the
correct measure of damages is a mixed question of fact and law we review
de novo. Armiros, 243 Ariz. at 605-06, ¶¶ 16, 21.

¶34            Contract remedies are designed to redress the plaintiff’s “loss
of the benefit of the bargain.” Arrow Leasing Corp. v. Cummins Ariz. Diesel,
Inc., 136 Ariz. 444, 447 (App. 1983). Accordingly, one of the principal goals
of remedying a breach of contract is to “[e]nforc[e] the expectation interests
of the parties.” John Munic Enterprises, Inc. v. Laos, 235 Ariz. 12, 18, ¶ 18
(App. 2014). Expectation damages, therefore, are “intended to put the
injured party ‘to the extent possible . . . in as good a position as he would
have been in had the contract been performed.’” Ramsey v. Ariz. Registrar of
Contractors, 241 Ariz. 102, 107, ¶ 12 (App. 2016) (quoting Restatement
(Second) of Contracts § 347 cmt. a). However, in doing so, the court must
adhere to the maxim that “a party should not profit more from breach of a
contract than its full performance.” John Munic, 235 Ariz. at 18, ¶ 19; see also

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Int’l Prod. Specialists, Inc. v. Schwing Am., Inc., 580 F.3d 587, 601 (7th Cir.
2009) (remanding where damages award placed non-breaching party “in a
better position than it would have been in had [breaching party]
performed”); see also 11 Joseph M. Perillo, Corbin on Contracts § 55.3 (rev.
ed. 2005) (“[I]t is a basic tenet of contract law that the aggrieved party will
not be placed in a better position than it would have occupied had the
contract been fully performed.”). Therefore, the calculation of expectation
damages “necessarily includes a deduction for ‘any cost or other loss that
[the injured party] has avoided by not having to perform.’” Ramsey, 241
Ariz. at 107, ¶ 12 (quoting Restatement (Second) of Contracts § 347(c)).

¶35             Here, the court, by awarding Agricann the full amount due
under the Breakup Deal, less the amounts paid by Natural Remedy,
awarded Agricann its expectation under the contract. However, because
nothing in the court’s ruling suggests that it considered the costs that
Agricann avoided by not having to perform, such as, but not limited to, the
rent payments and the transfer of the equipment, the court’s award was in
error. See, e.g., id.

¶36           Because the court’s error placed Agricann in a better position
than it would have been in had the contract been fully performed, we vacate
the damages award and remand with instruction for the superior court to
consider the costs that Agricann avoided by not having to perform.

II.    Agricann Cross-Appeals the Superior Court’s Ruling on the Management
       Contract

¶37            Agricann cross-appeals the superior court’s entry of
judgment in favor of Natural Remedy on the Management Contract.
Agricann argues the court erred by finding: (1) that the parties validly
modified the Management Contract; (2) that Agricann did not establish
damages under the modified Management Contract; and (3) that the
interest rate was an impermissible penalty.

¶38            Because we will affirm the court’s judgment if it is correct for
any reason, Ariz. Mills, L.L.C., 230 Ariz. at 166, ¶ 24, we must determine
whether the judgment rather than the reasoning of the superior court was
correct, Picaso v. Tucson Unified Sch. Dist., 217 Ariz. 178, 181, ¶ 9 (2007).

¶39          The superior court, finding that the parties modified the
Management Contract, held that Agricann did not establish breach or
resulting damages under the Management Contract. While Agricann
challenges this finding on appeal, we need not address the court’s
reasoning because we conclude the judgment was correct. See id.

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¶40            As noted, supra ¶ 15, the superior court found the Breakup
Deal was a novation of the Management Contract which “replac[ed] the
Management Contract.” While the court explained that a novation
extinguishes obligations arising under a previous agreement, the court did
not specify whether the Breakup Deal extinguished the debts and claims
arising under the Management Contract.3 Because we conclude the
Breakup Deal was a complete novation of the Management Contract, that
is, it extinguished the debts and claims arising under the Management
Contract as well as the future obligations due under the Management
Contract, we affirm the court’s judgment.

¶41             A novation is the “substitution by mutual agreement of . . .
a new debt or obligation for an existing one which is thereby extinguished.”
Maxwell v. Fid. Fin. Servs., Inc., 184 Ariz. 82, 91 (1995) (quoting Western Coach
Corp. v. Roscoe, 133 Ariz. 147, 152 (1982)). Thus, “[t]he effect of a novation is
to discharge the original debt.” Id. A novation may be express, or it may be
“implied from the facts and circumstances surrounding the transaction and
the conduct of the parties thereafter.” United Sec. Corp. v. Anderson Aviation
Sales Co., Inc., 23 Ariz. App. 273, 275 (1975).

¶42          The facts and circumstances surrounding the creation of the
Breakup Deal, as well as the parties’ conduct following its execution,
demonstrate that the Breakup Deal novated the Management Contract and
extinguished the debts arising therefrom. Just before the parties entered the
Breakup Deal, Agricann locked Natural Remedy out of the Grow Facility
and contemplated suing Natural Remedy for amounts owed under the
Management Contract. To be sure, the parties entered the Breakup Deal to
avoid a lawsuit over the Management Contract. Moreover, following its
execution, Burton prepared the Release Agreement under which Agricann
agreed to release Natural Remedy from its “obligations, delinquent or
otherwise, arising under the [Management Contract]” and sent several
emails to Natural Remedy in which he acknowledged that the Breakup Deal
was created to resolve the debt that Natural Remedy owed Agricann.

3 Agricann asserts the finding of novation is supported by the evidence but
contends that the superior court “concluded that the effect of the Breakup
Deal was a ‘novation’ of the Management Contract for the remainder of its
term.” In other words, Agricann asserts that the superior court found the
Breakup Deal “novate[d] the Management Contract going forward” but did
not extinguish Natural Remedy’s obligation to pay past amounts due under
the Management Contract. The superior court made no such express
finding.

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¶43            Because the Breakup Deal was a novation of the Management
Contract, Natural Remedy was released from liability under the
Management Contract. See Western Coach Corp., 133 Ariz. at 152 (noting that,
if a novation had occurred, the defendants would have been released from
liability under the original contract). Accordingly, Agricann could not
establish that Natural Remedy breached the Management Contract. On this
basis, we affirm the judgment of the superior court.

                              CONCLUSION

¶44            Both parties have requested attorneys’ fees and costs on
appeal pursuant to A.R.S. § 12-341.01. Because neither party is fully
successful on appeal, we decline to award fees or costs to either party.
Similarly, both parties have requested that on remand we instruct the
superior court to reconsider the prevailing party for purpose of an award
of attorneys’ fees and costs at the superior court level. We decline to do so.

¶45        For these reasons, we affirm the judgment but vacate the
damages award and remand for further proceedings consistent with this
decision.

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

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