Court Opinion

ID: 9633626
Source: CourtListenerOpinion
Date Created: 2023-08-22 11:54:49.097477+00
Date Added: 2024-06-11T14:55:19.885107
License: Public Domain

HAIRE, Chief Judge,
dissenting in part:
I dissent from that portion of the majority opinion which holds that the trial court improperly awarded attorney’s fees to defendant Boden.
Appellant Haldiman’s complaint asserted claims for the recovery of damages incurred when Gosnell allegedly breached its contract by refusing to return to Haldiman some $3,300 deposited by her pursuant to her contract to purchase a home from Gosnell. The first count of the complaint alleged that the contract was conditioned upon Haldiman’s qualifying for a certain mortgage, that Haldiman was unable to qualify, and that accordingly Gosnell breached the contract by failing to return the sum deposited by her. Thus, the first count sought damages for breach of contract in the amount of the deposits, $3,300 against Gosnell.
The second count, insofar as pertinent to this appeal, sought to recover damages from defendant Boden, a real estate agent. The second count incorporated the breach of contract allegations of the first count and additionally alleged that Boden represented the plaintiff (Haldiman) in connection with the real estate transaction identified in Count I, and, that in connection with such representation, he owed the plaintiff a duty to give her “full and frank advice.”1 Count II further alleged that defendant Boden “breached this duty.” Based on the alleged breach of duty, Haldiman sought to recover damages from Boden in the amount of the deposits, $3,300, which Gosnell had refused to refund to her.
An arbitration award was entered on the first count in favor of Gosnell, in effect determining that Haldiman, rather than Gosnell, had breached the purchase contract, and that Gosnell was entitled to retain the amounts deposited.
Haldiman’s claim in the second count against Boden was resolved in Boden’s favor when the trial court granted his motion for summary judgment. Although the trial judge did not set forth his reasons for the entry of summary judgment in Boden’s favor, it is apparent from the motion papers and from the arguments presented on appeal that he found that there was no agency contract between Boden and the plaintiff, and that accordingly Boden did not owe the plaintiff the duties which normally are created by such a contract. The summary judgment in Boden’s favor also awarded him attorney’s fees in the amount of $2,094 pursuant to A.R.S. § 12-341.01. While agreeing that the trial judge correctly granted summary judgment in Boden’s favor, the majority would reverse the award of attorney’s fees to him, holding that the action by Haldiman against Boden was not an “action arising out of a contract” within the meaning of A.R.S. § 12-341.01.
A.R.S. § 12-341.01(A) provides:
“A. In any contested action arising out of a contract, express or implied, the court may award the successful party *593reasonable attorney’s fees. This section shall in no manner be construed as altering, prohibiting or restricting present or future contracts or statutes that may provide for attorney’s fees.”
As previously stated, it is apparent that the basis for the entry of judgment in Boden’s favor was the trial court’s conclusion that there was no contractual agency relationship between plaintiff and Boden so as to give rise to the duties and obligations which the law implies when such a relationship is created. The fact that defendant Boden was successful in proving the nonexistence of an agency contract between himself and plaintiff does not preclude the award of attorney’s fees to him. The eventual finding that the contract sued upon by the plaintiff does not exist does not negate a defendant’s claim for attorney’s fees pursuant to A.R.S. § 12-341.01. See Lacer v. Navajo County, 141 Ariz. 392, 394, 687 P.2d 400, 402 (App.1984); Trebilcox v. Brown & Bain, 133 Ariz. 588, 591, 653 P.2d 45, 48 (App.1982). Accordingly, the issue of Boden's entitlement to attorney’s fees must be approached as though a contract of agency actually existed between the parties. With this concept in mind, it is difficult to perceive how a determination could be made that plaintiff’s claim did not constitute an action arising out of a contract. In fact, both plaintiff and the majority recognize that the claim against Boden had its genesis in contract, and would not have come into existence in the absence of an agency contract between the parties. It was the absence of such a contractual relationship that led the trial court to conclude that the duties claimed did not arise in this case.
In reviewing the language of A.R.S. § 12-341.01, it is important to note that the authority to award attorney’s fees is not limited to “actions for breach of contract.” Rather, the language is very broad. The court may award attorney’s fees if the action arises “out of a contract, express or implied.”
In support of its reversal of the trial court’s award of attorney’s fees, the majority appears to place controlling significance on the fact that plaintiff characterizes her action as one in tort for negligence or “real estate malpractice” and thus was an action in delicto rather than ex contractu. This narrow approach to the interpretation of A.R.S. § 12-341.01 has been expressly rejected by the Arizona Supreme Court. In Sparks v. Republic Nat’l Life Ins. Co., 132 Ariz. 529, 647 P.2d 1127, cert. denied, 459 U.S. 1070, 103 S.Ct. 490, 74 L.Ed.2d 632 (1982), the court considered whether § 12-341.01 authorized an award of attorney’s fees to the plaintiff in a bad faith tort claim asserted against an insurance company. The court stated that there was a legal duty implied in an insurance contract that the insurance company must act in good faith in dealing with its insured on a claim, and that a violation of that implied duty of good faith constituted a tort. The court rejected the reasoning of Division 2 in Amphitheater Public Schools v. Eastman, 117 Ariz. 559, 574 P.2d 47 (App.1977) (statute did not authorize attorney’s fees on negligence count based on a duty arising out of a bailment contract),2 noting that the tort of bad faith could not be committed in the absence of an insurance contract. The court then held that “[bjecause the existence of the tort is so intrinsically related to the contract, we conclude that an action alleging insurer’s bad faith is one ‘arising out of a contract’ within the meaning of § 12-341. 01(A).” Sparks, 132 Ariz. at 544, 647 P.2d at 1142 (footnote omitted).
In Trebilcox v. Brown & Bain, this court applied Sparks in a tort action for breach of a fiduciary duty arising out of an attorney-client contract. This court noted that the attorney-client relationship was based on contract, and held that the tort action “could not exist but for the breach of the attorney-client contract.” The court fur*594ther held that attorney’s fees were awardable, even when the defendants successfully proved the nonexistence of the contractual relationship.
The majority attempts to distinguish Sparks on the basis of the following excerpts from Sparks:
“The fact that the two legal theories are intertwined does not preclude recovery of attorney’s fees under § 12-341.01(A) as long as the cause of action in tort could not exist but for the breach of the contract.” Sparks, 132 Ariz. at 543, 647 P.2d at 1141 (emphasis in original).
“Clearly, the tort of bad faith cannot be committed absent the existence of an insurance contract and a breach thereof” Sparks, 132 Ariz. at 544, 647 P.2d at 1142 (emphasis added).
The majority reasons that since the allegations of the complaint in this case would not have constituted a breach of the alleged agency contract, Sparks is inapplicable. Assuming, without deciding, that Boden’s alleged breach of the implied obligations created by the alleged agency contract would not have constituted a breach of contract, it is my opinion that the Arizona Supreme Court in Sparks did not intend to make a breach of the express terms of the underlying contract a sine qua non to the applicability of § 12-341.01 to tort actions arising out of the breach of the relationships created by such a contract.
First, I note that the Arizona Supreme Court has recently held that the tort of bad faith can be committed without the necessity of the breach of the express terms of the underlying insurance contract. See Rawlings v. Apodaca, 151 Ariz. 149, 156, 726 P.2d 565, 572 (1986). More importantly, in my opinion the true basis of the court’s holding in Sparks was its determination of the intrinsic relationship of the tort of bad faith to the contract. In Sparks, the court held that the action arose out of a contract because the implied obligations arose from the existence of the contract and the tort could not have been committed in the absence of the contract.
Recently, in Marcus v. Fox, 150 Ariz. 333, 723 P.2d 682 (1986), the Arizona Supreme Court expressly rejected the contention that § 12-341.01 could not be applied in a tort action which did not also involve a breach of the underlying contract. Marcus did not involve an alleged breach of contract, but rather was an action for damages for fraudulent inducement to enter into the contract. The court stated:
“In the instant case, [the defendant] argues that, based on our decision in Sparks, attorney’s fees cannot properly be awarded under § 12-341. 01(A) as this is purely a tort action and no actual breach of a contract is involved. [The plaintiff], however, urges us to adopt the more liberal view followed by the appeals court in Ash [ASH] v. Mesa Unified School Dist., 138 Ariz. 190, 673 P.2d 934 (App.1983). There, the phrase ‘arising out of a contract’ was interpreted to mean any action in which a contract was a factor in causing the dispute.” 150 Ariz. at 335, 723 P.2d at 684 (emphasis in original).
“We believe this language is not limited to only those cases in which a contract is entered into and subsequently breached (Sparks). It may also include those cases in which a contract is entered into and later found void due to a claim of fraudulent inducement. For example, in the present case, [the plaintiff] was attempting to invalidate the contract with [the defendant]. It was that contract which prompted this suit and also served as the basis for his claim. Stated otherwise, [the plaintiff’s] cause of action for tort could not have existed but for the fraudulently induced contract.” 150 Ariz. at 335-36, 723 P.2d at 684-85 (footnote omitted).
As the Arizona Supreme Court noted in Marcus, the Arizona courts have broadly interpreted § 12-341.01. In many instances, the Arizona courts have found that the action arose out of a contract, without the necessity of a finding of a breach of contract or even that the litigants were actual parties to the contract. In ASH, Inc. v. Mesa Unified School Dist., 138 Ariz. 190, *595673 P.2d 934 (App.1983), the trial court had awarded attorney’s fees, pursuant to § 12-341.01, against the party who had sued to invalidate a contract between the defendant municipality and a third party. On appeal it was urged that the award of attorney’s fees was improper since the action did not allege rights flowing from an existing contract or breach of contract, but rather a right to compel the municipality to perform a legal duty. We rejected this reasoning, and looking at the essential nature of the litigation, held that the action arose out of a contract within the meaning of § 12-341.01. See also Lacer v. Navajo County, 141 Ariz. at 393-95, 687 P.2d at 401-03 (action to enforce deed restrictions by a plaintiff who was not a party to the original contract); Arizona Farmers Production Credit Ass’n v. Northside Hay Mill & Trading Co., 153 Ariz. 333, 736 P.2d 816 (App.1987) (allows attorney’s fees in tort action for conversion of cattle based on claims of priority between two competing lienholders); Arizona Ammonia of Tucson, Inc. v. The Mission Bank, 152 Ariz. 361, 364, 732 P.2d 591, 594 (App.1986) (reversed trial court’s refusal to award attorney’s fees to plaintiff in an action against a third party to establish plaintiff’s security interests: “The Arizona Supreme Court has directed courts in Arizona to interpret broadly the types of transactions included within the ‘arising out of’ /clause of A.R.S. § 12-341.01(A) (citation omitted). The claims of all parties in this case arise out of the rights, obligations, validity, enforceability and priority of rights arising out of contract.”); Scottsdale Memorial Health Systems, Inc., v. Clark, 2 CA-CIV 5956 (Ariz.App. March 3, 1987) (even though mechanic’s lienholders’ rights are based on statute, attorney’s fees are allowable where the contract was a major factor in the dispute).
The majority also relies on this court’s opinion in Lewin v. Miller Wagner & Co., Ltd., 151 Ariz. 29, 725 P.2d 736 (App.1986). In Lewin the court reversed a judgment for attorney’s fees awarded pursuant to § 12-341.01, in an action against an accountant based upon the accountant’s failure to give proper tax advice to his client. The Lewin court recognized that the duty to give appropriate tax advice arose solely from the existence of the contract to perform accounting services between the plaintiff and the defendant accountant, but nevertheless concluded that the action did not arise out of a contract within the meaning of § 12-341.01.
In all candor, I must admit that the holding in Lewin supports the majority’s decision in this case. However, in equal candor, I find it difficult to find support in the language of the statute, the mainstream Arizona decisions, or in Lewin itself for the result reached. The analysis in Lewin relies heavily upon the premise that Sparks requires a showing of a breach of the underlying contract before an action based on a breach of a duty arising from that contract can be said to be an action arising out of a contract. As I have previously demonstrated in this dissent, that premise is incorrect. Additionally, the Lewin court, in discussing the duty which was violated in Lewin, states that the duty is a “legally imposed duty [which] exists separate and apart from the contract giving rise to the duty.” Lewin, 151 Ariz. at 36, 725 P.2d at 743. I disagree. The duty discussed in Lewin was completely dependent upon the existence of the contract. Without the existence of the contract, there could be no duty. The duty has no existence separate and apart from the contract.
The Lewin court attempts to distinguish prior Arizona decisions such as Sparks and Trebilcox with the observation that the breach of fiduciary duty arising out of an attorney-client relationship in Trebilcox, and the breach of the duty of good faith (bad faith tort) in Sparks were “contractual duties” arising from the contract of the parties. I fail to see how the breaches involved in Trebilcox and Sparks were any more “contractual” in nature than was the breach of duty in Lewin or the breach of duty in this case. In my opinion this, purported distinction is without meaningful basis. To the extent that Lewin relies on Sato v. Van Denburgh, 123 Ariz. 225, 599 P.2d 181 (1979), and other cases dealing with the determination of whether an action is in tort or contract for statute of limitations purposes, I do not find these cases persuasive on the issue at hand. A *596tort action can be a tort action for statute of limitations purposes and still have its foundation in contract so as to “arise out of a contract” within the meaning of § 12-341.01. In Sparks the Arizona Supreme Court rejected the analysis set forth in Amphitheater, which denied an award of attorney’s fees based on an analogy to statute of limitations decisions. Similarly, in my opinion, the same analysis in Lewin must be rejected.
In conclusion, I would hold that the trial judge correctly held that the action against Boden was “an action arising out of a contract” within the meaning of § 12-341.01. Accordingly, I would affirm the award of attorney’s fees to Boden. Having arrived at this conclusion, I need not consider the additional contention that the claim could be considered to be an action “arising out of a contract” because it had its genesis in the entirely separate contract which existed between plaintiff and Gosnell. I concur with the majority decision on all other issues.

. Although not specifically alleged in the complaint, Haldiman’s primary contentions were that Boden should have advised her relating to problems which might result from her inability to sell her present home and consequent inability to obtain the financing necessary to complete the purchase from Gosnell.

. "Regardless of the label on the second count, the essence of her claim is negligence, and the statute has no application. See Wetzel v. Commercial Chair Company, 18 Ariz.App. 54, 500 P.2d 314 (1972). If the cause of action arises from a breach of promise set forth in the contract, the action is ex contractu, but if it arises from the breach of duty growing out of contract it is ex delicto." 117 Ariz. at 560, 574 P.2d at 48 (footnote omitted).