Stern v. Stern ( 2016 )

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UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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
BRAD D. STERN, a single individual,
Plaintiff/Appellant/Cross-Appellee,
v.
STEVEN J. STERN and JAMIE R. STERN, husband and wife; SENIOR
ADVISORY GROUP OF AMERICA, INC., an Arizona corporation,
Defendants/Appellees/Cross-Appellants.
No. 1 CA-CV 14-0737
FILED 7-12-2016
Appeal from the Superior Court in Maricopa County
No. CV 2012-014573
The Honorable John Christian Rea, Judge
AFFIRMED IN PART AS AMENDED; VACATED IN PART
COUNSEL
Law Office of Scott E. Boehm, PC, Phoenix
By Scott E. Boehm
Co-Counsel for Plaintiff/Appellant/Cross-Appellee
Tiffany & Bosco, PA, Phoenix
By Robert A. Royal, Aaron T. Lloyd
Co-Counsel for Plaintiff/Appellant/Cross-Appellee
Gallagher & Kennedy, PA, Phoenix
By Michael R. Ross, Cober Plucker
Counsel for Defendants/Appellees/Cross-Appellants
STERN v. STERN et al.
Decision of the Court
MEMORANDUM DECISION
Judge Patricia A. Orozco delivered the decision of the Court, in which
Presiding Judge Diane M. Johnsen and Judge Kenton D. Jones joined.
O R O Z C O, Judge:
¶1 Brad Stern appeals from the judgment entered against him on
Counts 1-6 of his verified complaint and the trial court’s award of
$579,461.59 in attorney fees to Steven Stern, as well as expenses to be
incurred in future enforcement and collection of the judgment. For the
following reasons, we affirm the judgment and the award of $579,461.59 in
attorney fees, but amend the judgment to reflect its disposition of only
Counts 1-5 of the verified complaint, and strike the award of attorney fees
for enforcement and collection costs.
FACTS AND PROCEDURAL HISTORY
¶2 Brad and Steven are brothers who conducted business
together. In September 2012, Brad sued Steven and their business, Senior
Advisory Group of America, Inc. (SAG), alleging numerous claims related
to Brad’s ouster from SAG.1 In his verified complaint, Brad alleged that he
and Steven agreed to go into business together in 2001 as partners, and that
in 2003, he and Steven “incorporate[d] their partnership business into an
entity called SAG[,]” such that SAG was the corporate “alter ego or
instrumentality by which Brad and Steven would conduct their partnership
activities.”2 Brad further alleged that “[a]s part of the Partnership
Agreement, Brad and Steven agreed . . . that they would share the profits
and losses and management of the partnership on an equal basis[,]” and
that the brothers were paid equal salaries, monthly bonuses and benefits.
Finally, Brad alleged that in 2012, Steven ousted him from the partnership,
1 Brad also named Jamie R. Stern, Steven’s wife, as a Defendant.
2 Brad asserted additional claims unrelated to the alleged partnership,
which are not a part of this appeal.
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giving rise to six partnership-related claims.3 Steven denied the existence
of the alleged partnership.
¶3 Because Brad’s claims for relief depended on the existence of
the alleged partnership, the parties stipulated to bifurcate the trial and first
try the partnership issue. Specifically, the parties stipulated in May 2013
“that the Court may first conduct a trial on the threshold question of
whether an enforceable, oral partnership exists between [Brad and Steven]
and, if so, what are the terms of that oral partnership[.]” The trial court then
ordered a jury trial “on the threshold question of whether an enforceable,
oral partnership exists between [Brad and Steven] and, if so, what are the
terms of that oral partnership.”
¶4 Later, in the November 2013 joint pretrial statement, the
parties listed the contested issues of fact and law as: (1) “[w]hether Brad
and Steven are partners under Arizona law[,]” (2) “[w]hether Brad and
Steven entered into an oral partnership agreement[,]” and (3) “[i]f Brad and
Steven are partners, what are the terms of their oral partnership
agreement?”
¶5 As the trial approached, the parties and the court discussed
the issues to be tried at the March 2014 trial management conference:
THE COURT: . . . Oh, the issues . . . we bifurcated it. We’re
doing the partnership. Part I of the forms of verdict,
obviously the jury is going to have to say was there a
partnership, yes or no?
I mean the Plaintiff’s position is there was a
partnership where we were –- that we were equal owners. I
mean it’s not 30/70, it’s not –- I mean that’s the Plaintiff’s
position is just we were just partners and equal owners, right?
[Brad’s Attorney]: Right, that’s correct.
THE COURT: Now, one of the proposed forms of
verdict and one of the things you’ve got here in your
contested issues is the fact if they were partners, what are the
terms of their agreement? I mean, how do you envision the
jury answering that verdict form? Other than half and half
ownership, what other terms –-
3 Before trial, Brad withdrew Count 6, Application for Receivership,
without prejudice, which the trial court approved.
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[Brad’s Attorney]: It’s not really disputed, it’s either 50/50
–- your point is it’s either 50/50 or nothing.
THE COURT: Well I think that’s your position.
[Brad’s Attorney]: That’s right.
THE COURT: I think that’s –-
[Brad’s Attorney]: That’s exactly right.
THE COURT: Okay. And so in terms of terms –- other
than that what terms do we –- what do we need to decide in
this case? I mean what I would envision is if we decide –- if
the jury says yes, there was a partnership, and it was 50/50,
then we go to the next step of saying was there a breach of the
partnership agreement. And in that trial we introduce
evidence of the terms and the cause of the termination and
whether that was within the scope of the term.
[Steven’s Attorney]: Your Honor, I think if the position is
–- and I think that’s right. It’s consistent with the case and the
way it’s progressed is they’re either equal partners or they’re
not.
THE COURT: Yes.
[Steven’s Attorney]: I think that’s the inquiry that we’ve put
into a special verdict form.
[Brad’s Attorney]: Right.
THE COURT: Okay.
¶6 During jury selection and prior to voir dire, the trial court
provided the following overview of the case to the jury pool:
Brad . . . claims that he and Steven formed an oral partnership
agreement in 2001 and that the oral partnership continued
until 2012. Brad alleges that he and Steven agreed to operate
their partnership through a corporation called [SAG] . . . and
that they are equal partners in [SAG]. Steven denied ever
forming an oral partnership with Brad. Steven asserts that he
hired Brad into an existing incorporated business, that the
business is, and always was, a corporation that Steven owned
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and controlled and that he and Brad were never equal
partners in [SAG].
¶7 During trial on March 27, the parties discussed the jury
instructions. Brad’s proposed jury instruction for the partnership claim
stated, “[i]f you find that the facts, circumstances, actions, conduct, and
intent of Brad and Steven Stern proved by a preponderance of evidence that
a partnership existed between the two, then your verdict must be for Brad.”
Steven’s proposed jury instruction for the partnership claim stated, “Brad
claims that he and Steven agreed to equal ownership of [SAG]. To establish
that a partnership on these terms existed, Brad must prove by a
preponderance of the evidence that Brad and Steven’s conduct and
statements show that they both agreed to equally share in the ownership of
[SAG].” Steven made clear that Brad’s claim was for an equal partnership.
Brad then confirmed that Steven’s recitation was “absolutely correct” and
that “we [pled in] this case that they were 50/50 partners.” Brad’s attorney
continued:
[Brad’s attorney]: . . . In the joint pretrial, we stated that the
first question is, of course, is there or is there not oral
partnership. The second question discussed what are the
terms and conditions . . . of that partnership. So our evidence
has been that . . . there was a partnership, and the terms and
conditions are that it was 50/50.
THE COURT: Equal co-owners.
[Brad’s Attorney]: Equal co-owners.
THE COURT: Okay.
[Brad’s Attorney]: You know it. But I would just note that,
you know, that a [sic] equal partnership isn’t what the statute
says. It’s a fact driven statement that they’ve added to the
instructions. . . . [A]s we presented our case, and will continue
to present our case, we are going to show that the terms of the
partnership were equal, it was 50/50. Brad said that many
times. You know, during the examination and in pretrial. . . .
I understand the court’s thinking about equal co-owners;
equal isn’t in the statute, it’s certainly part of the evidence[.]”
...
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[Steven’s attorney]: But at the end of the day the jury also has
to be told, whether it’s in the special verdict form, or within
the other aspects of the instruction; they got to be told that the
claims are 50/50 because that’s the claim.
And I guess I need to understand, for [the] sake of
clarity for today and tomorrow morning, closing argument, is
the claim now –- are they now asking the jury to find
something less than a 50/50 partnership. We got to –- I need
a –-
THE COURT: I don’t –- I hear that they are not.
[Brad’s attorney’s]: No.
THE COURT: Co-owner. That co-ownership –-
[Brad’s attorney]: Okay.
THE COURT: -- means the 50/50 co-ownership.
[Brad’s attorney]: Fair enough.
¶8 At no point during the March 27 discussion did Brad clearly
object to the jury instruction. In fact, on March 28, the following exchange
took place:
[Steven’s attorney]: We had a discussion yesterday about
what needs to be proved about the partnership, whether they
have to prove by a preponderance of the evidence that a
partnership existed or whether Brad has to prove that an equal
50/50 partnership existed. And . . . we need to make sure the
jury understands that they have to prove by a preponderance
of the evidence that an equal 50/50 partnership existed, and I
think it makes sense to include that language.
THE COURT: Yeah, that’s the claim.
[Brad’s attorney]: That is the claim, Your Honor. It’s
somewhat redundant because it does talk about equal 50/50
partners on your instruction on Page 4.
THE COURT: On Page 7, I’ll just change both
paragraphs to say that proved by a preponderance of the
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evidence that an equal partnership existed between the two. I
mean, that is the claim and that’s consistent with the other.
¶9 The Court and the parties then discussed the proposed forms
of verdict. Brad’s proposed verdict form stated “We, the Jury, . . . do find
in favor of Plaintiff Brad Stern that Brad Stern and Steven Stern are
partners.” Steven’s proposed verdict form stated, “We, the Jury, . . . do find
in favor of Defendant Steven Stern that Brad Stern and Steven Stern are not
partners.” The Court asked:
THE COURT: Have you seen the proposed form of
verdict? I think it’s one simple, “Do you find there was a
partnership?” “Yes” or “no.”
...
[Steven’s attorney]: I thought the equal ownership of the
business was the foundation of your claim[.]
...
THE COURT: “Agreed to an equal partnership.”
[Brad’s attorney]: Yeah.
[Brad’s attorney]: That’s fine.
...
THE COURT: How about “an equal partnership that did
business as [SAG]” -- “that did business through [SAG].”
[Brad’s attorney]: “Operated through [SAG].”
THE COURT: “Equal partnership that operated through
[SAG].” All right.
¶10 After closing arguments, the trial court read the jury
instructions, and the jury retired to deliberate. Eventually, the jury sent a
note to the court that read: “[w]e, the jury, unanimously agree that Brad
and Steven Stern agreed to a partnership that operated through SAG of
America, Inc. However, we cannot agree that it was an equal partnership.
Advice?” The trial court then discussed the note with both parties. Brad’s
attorney stated:
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The question, including in the joint pretrial, is there or is there
not a partnership, you know. So we got an answer to that and,
as we said on the record plenty of times, the law in Arizona
doesn’t require anything in addition. You don’t add you must
prove equal in order to get a partnership; you must prove
50/50 to get a partnership. And the terms and conditions of
the partnership are something else. But, you know, we’ve
been down that road and I’ve made my record.
The parties agreed to call in the jury to clarify the note. The judge asked the
jury a number of questions about the note, and sent them back to continue
their deliberations. Thereafter, the jury returned a verdict in favor of
Steven, finding that Brad did not prove that he and Steven “agreed to an
equal partnership that operated through” SAG. The trial court then entered
a Rule 54(b) judgment on the jury’s verdict.
¶11 After trial, Brad filed a motion to amend the complaint to
conform to the evidence. Specifically, Brad sought to add a claim for
declaratory judgment, as he explained, because, based on the jury’s note,
“evidence at trial showed that Brad and Steven [were] partners.” Steven
opposed the motion, arguing, inter alia, that the parties did not consent to
try the claim outside the pleadings and that amending the complaint would
cause him prejudice. The trial court denied Brad’s motion, reasoning that
“[t]he claim of a partnership agreement other than 50/50 was not pled,
disclosed, or tried by express or implied consent.”
¶12 Brad timely appealed and Steven timely cross-appealed. We
have jurisdiction pursuant to Article 6, Section 9, of the Arizona
Constitution, and Arizona Revised Statutes (A.R.S.) sections 12-120.21.A
and -2101.A (West 2016).4
DISCUSSION
I. Jury instructions
¶13 Brad argues that the jury instructions constituted error for
multiple reasons, including: (1) the jury instructions misapplied Arizona
partnership law by requiring that Brad prove an equal partnership; (2) the
jury instructions did not mirror the parties’ pretrial stipulations; and (3)
because the jury instructions required that Brad prove an equal partnership,
“the trial court necessarily found Brad had waived his rights to recover” for
4 We cite the current version of applicable statutes when no revisions
material to this decision have since occurred.
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any lesser, unequal interest in the partnership. Generally, we review jury
instructions for an abuse of discretion. A Tumbling-T Ranches v. Flood
Control Dist. of Maricopa Cty., 222 Ariz. 515, 533, ¶ 50 (App. 2009). However,
“we review whether a jury instruction correctly states the law de novo.” Id.
¶14 Under Rule 51(a), Arizona Rules of Civil Procedure, “[n]o
party may assign as error the giving or the failure to give an instruction
unless that party objects thereto before the jury retires to consider its
verdict, stating distinctly the matter objected to and the grounds of the
objection.” A general objection to a given instruction is insufficient under
Rule 51(a). Long v. Corvo, 131 Ariz. 216, 217 (App. 1981). An objection that
an instruction does not state the law is a general objection and thus
insufficient. Spillios v. Green, 137 Ariz. 443, 446 (App. 1983). Failure to object
with particularity to a jury instruction results in waiver of the objection on
appeal. Duran v. Safeway Stores, Inc., 151 Ariz. 233, 234 (App. 1986); Long,
131 Ariz. at 217.
¶15 Brad does not refer us to the portion of the transcript in which
he objected to the instruction he challenges on appeal, and our review of
the record reflects that Brad did not object to the jury instructions with
particularity. To the contrary, both parties agreed to the jury instructions
after lengthy discussions during which both parties provided input. Brad
agreed to the jury instruction that his claim was for an equal partnership,
that his claim required proof of an equal partnership, and that the verdict
form should reflect that the parties “agreed to an equal partnership that
operated through [SAG].” Although Brad argues that his counsel made the
point that “equal partnership [is not] what the statute says,” under the
circumstances we cannot construe that to be an objection to the jury
instruction. At no point did Brad argue the jury should be instructed that
it could find anything other than an “equal” partnership. When the court
took up the matter again the following morning, Brad offered no objection,
and indeed endorsed, a form of verdict that, consistent with the instruction,
required him to prove an “equal partnership.” See Spillios, 137 Ariz. at 446
(“An objection on the ground that an instruction . . . does not state the law
is a general objection and is insufficient.”).
¶16 Because Brad did not object to the jury instructions, errors
resulting from the jury instructions, if any, are waived for purposes of this
appeal. See Ariz. R. Civ. P. 51(a); Duran, 151 Ariz. at 234 (appellant waived
objection to a jury instruction by failing to object as required by Rule 51(a));
Bradshaw v. State Farm Mut. Auto. Ins. Co., 157 Ariz. 411, 419-20 (1988)
(deeming waived appellant’s argument that jury instruction was error
because appellant failed to object to the final instructions at trial); Rodriguez
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v. Schlittenhart, 161 Ariz. 609, 616 (App. 1989) (waiving objection to jury
instruction when appellant does not object at trial).
II. The Jury’s Note
¶17 During deliberations, the jury submitted a note to the trial
court suggesting it had found that Brad and Steven were partners, but not
equal partners. On appeal, Brad contends for the first time, that the jury’s
note constituted a legal verdict under the Arizona Rules of Civil Procedure.
We review the application of court rules de novo. Cranmer v. State, 204 Ariz.
299, 301, ¶ 8 (App. 2003).
¶18 Under the Arizona Rules of Civil Procedure, “[w]hen the
eight jurors unanimously agree upon a verdict, the verdict shall be signed
by the foreman and returned into court.” Ariz. R. Civ. P. 49(a). “No special
form of verdict is required. Where there has been substantial compliance
with the law in rendering a verdict, the judgment shall be rendered and
entered thereon notwithstanding a defect in the form of the verdict.” Id. at
49(e). However, “[i]f the verdict is not responsive to the issue submitted to
the jury, the court shall call the jurors’ attention thereto, and send them back
for further deliberation.” Id. at 49(c).
¶19 Brad did not move the trial court to enter judgment based on
the jury’s note at the time the jury submitted the note. On appeal, Brad cites
no authority, and we find none, for the proposition that a jury’s question
might constitute a verdict, or supporting the proposition that the trial court
was required to sua sponte enter judgment for Brad on the partnership
issue based solely on the jury’s note. Even assuming that the jury’s note
qualified as a verdict under Rule 49(a), the verdict would have been
unresponsive under Rule 49(c). The issue submitted to the jury was
whether Brad and Steven “agreed to an equal partnership.” Because the
jury’s note stated “we can not [sic] agree that it was an equal partnership[,]”
the note was unresponsive to the issue of equality. Therefore, again
assuming that the jury’s note might qualify as a verdict, the trial court
properly sent the jury back for further deliberation rather than entering
judgment. See Ariz. R. Civ. P. 49(c); see also Fornara v. Wolpe, 26 Ariz. 383,
389-90 (1924) (stating that if a jury “decides issues not submitted to it, its
action to that extent is without force or effect”). Accordingly, we find no
error.
III. Motion to Amend
¶20 After trial, Brad moved to amend his complaint to include a
claim for declaratory judgment—based on the jury’s note—regarding the
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existence of a partnership. After briefing and oral argument, the trial court
denied the motion, reasoning that “[t]he claim of a partnership agreement
other than 50/50 was not pled, disclosed, or tried by express or implied
consent.” We review the trial court’s denial of Brad’s motion for an abuse
of discretion. See Parker v. City of Tucson, 233 Ariz. 422, 439, ¶ 51 (2013).
¶21 Under Rule 15(b), Arizona Rules of Civil Procedure,
When issues not raised by the pleadings are tried by express
or implied consent of the parties, they shall be treated in all
respects as if they had been raised in the pleadings. Such
amendment of the pleadings as may be necessary to cause
them to conform to the evidence and to raise these issues may
be made upon motion of any party at any time . . . .
Generally, courts liberally permit amendments of the pleadings to conform
to the evidence. Bujanda v. Montgomery Ward & Co., Inc., 125 Ariz. 314, 316
(App. 1980). However, it is proper to refuse an amendment if the
amendment would cause prejudice. See id.; Eng v. Stein, 123 Ariz. 343, 347
(1979).
¶22 The trial court did not abuse its discretion when it denied
Brad’s motion, because an unequal partnership claim was not “tried by
express or implied consent of the parties.” See Ariz. R. Civ. P. 15(b). Steven
did not expressly consent to try an unequal partnership claim. Steven’s
consent also cannot be implied because the evidence Brad relies on to
support his amended claim is relevant to his claim within the pleadings.
See Bujanda, 125 Ariz. at 316 (consent cannot be implied “by admission
without objection of evidence relevant to an issue within the pleadings”);
see also SWC Baseline & Crismon Inv’rs, L.L.C. v. Augusta Ranch Ltd. P’ship,
228 Ariz. 271, 290-91, ¶ 82 (App. 2011). Furthermore, amending the
complaint would cause prejudice to Steven, given the extensive discussions
pre-trial and mid-trial about the proper way to instruct the jury and the
form of judgment. See Bujanda, 125 Ariz. at 317 (finding prejudice when a
requested amendment would have changed the theory of the case).
¶23 Because we affirm the trial court’s denial of Brad’s motion to
amend the complaint, we do not address his interrelated arguments for
declaratory judgment and equitable relief.
IV. Attorney Fees and Enforcement Costs
¶24 In its judgment, the trial court awarded Steven $579,461.59 in
attorney fees pursuant to A.R.S. § 12-341.01. In addition, the trial court
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ordered that “Defendants are entitled to their attorney[] fees and costs
incurred in enforcement and collection of this judgment, in an amount to
be set forth in subsequently filed affidavits.”
¶25 The trial court has “broad discretion” to award attorney fees
under A.R.S. § 12-341.01. Associated Indemn. Corp. v. Warner, 143 Ariz. 567,
570 (1985). Determining a prevailing party for the purpose of attorney fees
is also within the discretion of the trial court, and will not be disturbed if it
is supported by any reasonable basis. Berry v. 352 E. Va., L.L.C., 228 Ariz. 9,
13, ¶ 21 (App. 2011). We will not disturb an award of attorney fees absent
an abuse of discretion. State Farm Mut. Auto. Ins. Co. v. Arrington, 192 Ariz.
255, 261, ¶ 27 (App. 1998).
¶26 Brad also argues that there is no legal basis for awarding
Steven attorney fees and costs “incurred in enforcement and collection of
[the] judgment, in an amount to be set forth in subsequently filed
affidavits.” We agree that the trial court abused its discretion. Because the
amount of attorney fees and costs incurred in enforcement and collection of
the judgment is to be set forth in subsequently filed affidavits, the amount
of the award cannot yet be known or reviewed. We therefore strike this
provision from the judgment.
V. Steven’s Cross-Appeal
¶27 Because we affirm the judgment entered on the jury’s verdict,
we do not address Steven’s cross-appeal. See Catalina Foothills Unified Sch.
Dist. No. 16 v. La Paloma Prop. Owners Ass’n, Inc., 238 Ariz. 510, 519 n.8, ¶ 37
(App. 2015) (declining to address cross-appeal when affirming judgment
on jury’s verdict); Best Choice Fund, L.L.C. v. Low & Childers, P.C., 228 Ariz.
502, 510 n.6, ¶ 23 (App. 2011) (deeming a cross-appeal moot when affirming
judgment for the reasons underlying the trial court’s ruling).
CONCLUSION
¶28 For the forgoing reasons, we affirm the judgment on the jury’s
verdict and the award of $579,461.59 in attorney fees to Steven. We vacate
the award of Steven’s future attorney fees and costs incurred in
enforcement and collection of the judgment. In addition, in light of Brad’s
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withdrawal of Count 6 of his verified complaint and the subsequent minute
entry ordering that withdrawal, we amend the judgment to reflect its
disposition of only Counts 1-5 of Brad’s verified complaint. Finally, in our
discretion, we deny Steven his attorney fees on appeal.
:AA
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