Sandoval v. Oxford Financial ( 2021 )

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UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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
JORGE SANDOVAL, Plaintiff/Appellant/Cross-Appellee,
v.
OXFORD FINANCIAL LLC, et al., Defendants/Appellees/Cross-Appellants.
No. 1 CA-CV 20-0023
FILED 03-09-21
Appeal from the Superior Court in Maricopa County
No. CV 2017-014797
The Honorable Teresa A. Sanders, Judge
AFFIRMED IN PART; VACATED IN PART; REMANDED
COUNSEL
Lemon Law Group, North Miami Beach, FL
By Brooks Richard Siegel
Co-Counsel for Plaintiff/Appellant/Cross-Appellee
The Law Offices of Edward L. Ewald Jr., Wixom, MI
By Edward L. Ewald Jr. (Pro Hac Vice)
Co-Counsel for Plaintiff/Appellant/Cross-Appellee
Tiffany & Bosco PA, Phoenix
By Tina M. Ezzel
Counsel for Defendants/Appellees/Cross-Appellants
SANDOVAL v. OXFORD FINANCIAL
Decision of the Court
MEMORANDUM DECISION
Presiding Judge Jennifer B. Campbell delivered the decision of the Court,
in which Judge Lawrence F. Winthrop and Chief Judge Peter B. Swann
joined.
C A M P B E L L, Judge:
¶1 Jorge Sandoval appeals the superior court’s order granting
Oxford Financial LLC d/b/a Certified Benz and Beemer (“CBB”) attorneys’
fees, adopting the proposed form of judgment, and denying his motion for
new trial. Because discretion over these matters resides in the superior
court, we affirm. However, we vacate the interest rate calculation and
remand for further proceedings consistent with this decision. CBB cross-
appeals the superior court’s order denying sanctions against Sandoval. We
affirm.
BACKGROUND
¶2 Sandoval purchased a preowned 2012 BMW X5 from CBB in
2016 (the “vehicle”). BMW of North America, LLC (“BMW”), the
manufacturer of the vehicle, issued Sandoval a four year-warranty. Over
the next few years, Sandoval had to take the vehicle in for repairs on
numerous occasions. Some of these repairs were performed by CBB.
¶3 Dissatisfied with the vehicle, Sandoval sent BMW a letter
revoking acceptance of the vehicle. When both BMW and CBB declined to
accept return of the vehicle, Sandoval brought a complaint against both
BMW and CBB alleging the following claims: breach of factory warranty
(Count I), breach of Magnuson-Moss Warranty Act (Count II), revocation
of acceptance (Count III), and negligent repair (Count IV). It was clear from
the complaint that Count I was only brought against BMW. Count III
appears to have been brought against both BMW and CBB, and Count IV
appears to have only been brought against CBB.
¶4 CBB filed a motion to dismiss the complaint, or in the
alternative, requested the court require a more definitive statement. In his
response to CBB’s motion, Sandoval clarified that Count II was only
directed at BMW. The court denied the motion.
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¶5 As part of discovery, Sandoval was deposed. At his
deposition, he explained that the vehicle had been purchased for his family
to use, and that he had never driven the vehicle or even been a passenger.
He stated that CBB’s repair work had always been top quality, and that he
has never had to pay for any of the repairs. Sandoval also admitted that he
was unaware of any current problems with the vehicle, and that his family
was still driving it.
¶6 CBB filed a motion for summary judgment, and a separate
motion for attorneys’ fees and sanctions. Before the court ruled on CBB’s
motions, Sandoval and BMW entered into a settlement. In the notice of
settlement, BMW explained that all claims between Sandoval and all
defendants had been settled, but the settlement did not affect CBB’s ability
to pursue reimbursement of its own attorneys’ fees and costs. In light of the
notice of settlement, the court denied both of CBB’s motions without
prejudice. After a change of judge, CBB moved for reconsideration of its
motion for fees and sanctions. The court ultimately denied this request,
stating it would consider a request for attorneys’ fees, costs, and sanctions
upon the resolution of the case.
¶7 Sandoval then voluntarily dismissed the case. CBB again filed
an application for attorneys’ fees, costs, and sanctions. The court granted
CBB attorneys’ fees and costs but denied sanctions. CBB supplied a
proposed form of judgment. Sandoval objected. The court adopted CBB’s
proposed form of judgment. Sandoval moved for a new trial, which the
court denied. Sandoval timely appealed, and CBB timely cross-appealed.
DISCUSSION
¶8 Sandoval appeals the superior court’s order granting CBB
attorneys’ fees under A.R.S. 12-341.01. Sandoval argues that: (1) his action
against CBB did not arise out of contract; (2) CBB was not the successful
party; (3) the court abused its discretion in awarding attorneys’ fees; and (4)
even if attorneys’ fees were appropriate, the amount awarded was
unreasonable. Sandoval also appeals the form of judgment, and the
superior court’s order denying him a new trial.
¶9 CBB cross-appeals the superior court’s order denying a fee
award under A.R.S. § 12-349 and sanctions under Arizona Rule of Civil
Procedure (“Rule”) 11, arguing clear error and abuse of discretion.
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I. Attorneys’ Fees
¶10 Section 12-341.01(A) states that “[i]n any contested action
arising out of a contract, express or implied, the court may award the
successful party reasonable attorney fees.” Whether an attorneys’ fees
statute applies “is a question of statutory interpretation that we review de
novo.” Chaurasia v. Gen. Motors Corp., 212 Ariz. 18, 26, ¶ 24 (App. 2006).
However, a court’s decision to award fees is reviewed for an abuse of
discretion. Pioneer Roofing Co. v. Mardian Constr. Co., 152 Ariz. 455, 466 (App.
1986).
A. Arising Out of Contract
¶11 For a party to recover fees and costs under A.R.S. § 12-341.01,
the action must arise out of contract. In awarding attorneys’ fees, the
superior court held that Sandoval’s negligent repair claim against CBB
arose out of a contract. Sandoval argues on appeal that this was error
because his negligent repair claim sounds in tort.
¶12 For purposes of A.R.S. § 12-341.01, a claim arises out of
contract if it could not exist but for a breach of contract. Barmat v. John &
Jane Doe Partners A-D, 155 Ariz. 519, 522 (1987). Where the contract merely
creates a relationship between the parties, but public policy imposes a duty,
violation of that duty is a tort claim that does not arise out of a contract. Id.On the other hand, when the duty alleged to have been breached is not
imposed by law, but created by the contract, the alleged breach does arise
out of contract. Id.; see also Lewin v. Miller Wagner & Co., 151 Ariz. 29, 36
(App. 1986) (“[W]hile a contractual relationship may give rise to a duty to
perform in accordance with a certain standard of care, this legally imposed
duty exists separate and apart from the contract giving rise to the duty. The
failure to comply with this standard of care results in a breach of the legal
duty imposed and is not an action ‘arising out of contract’ under A.R.S.
§ 12–341.01(A).”).
¶13 Sandoval argues that the duty CBB breached arose out of
operation of law, and not the contract itself. Sandoval points to his negligent
repair claim which was pled as a traditional tort claim, asserting duty,
breach, causation and damages. Further, Sandoval notes that under
common law there is a “duty to perform repairs in a reasonably competent
manner.” Rocky Mountain Fire & Cas. Co. v. Biddulph Oldsmobile, 131 Ariz.
289, 294 (1982). Although CBB was repairing the vehicle under the
warranty, Sandoval asserts that the warranty was just a predicate contract
that induced their relationship.
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¶14 CBB agrees that this claim is pled in the language of tort-law.
However, CBB notes that, in the complaint, Sandoval asserted that “[CBB]
owed a duty of care to [p]laintiff under the warranties to perform repairs in
a good and workmanlike manner within a reasonable time.” The phrase
“workmanlike manner” is often used to describe duties owed under
warranties implied in contract. Lofts at Fillmore Condominium Ass’n v.
Reliance Commercial Constr., Inc., 218 Ariz. 574, 575, ¶ 5 (2008) (noting that
the implied warranty in a builder-vendor contract includes construction
done in a workmanlike manner).
¶15 We need not decide if the negligent repair claim arose out of
contract because it was not the only claim brought against CBB. Sandoval
also asserted a revocation of acceptance claim against CBB which can only
exist if there is a contractual relationship. A revocation of acceptance action
could not exist but for a breach of contract. See Seekings v. Jimmy GMC of
Tucson, Inc., 130 Ariz. 596, 601 (1981) (holding that a revocation of
acceptance action is available when the purchase of goods is in
“nonconformity from what they were represented to be”). Indeed,
Sandoval himself requested attorneys’ fees under A.R.S. § 12-341.01 in his
response to CBB’s motion for summary judgment, asserting that “[t]his
action arises, in part, from a contract between Defendants and Plaintiff.”
¶16 Regardless of whether the negligent repair claim arises out of
contract, we find that the revocation of acceptance does arise out of contract.
“[W]e will affirm the trial court’s decision if it is correct for any reason.”
Rancho Pescado, Inc. v. Nw. Mut. Life Ins., 140 Ariz. 174, 178 (App. 1984).
Further, “[a]ttorney’s fees may be awarded under that statute for tort claims
that are intertwined with contract claims.” Campbell v. Westdahl, 148 Ariz.
432, 441 (App. 1985). We hold that the trial court did not err when it found
the action to arise out of contract.
B. Prevailing Party
¶17 For fees to be appropriate under A.R.S. § 12-341.01, the
requesting party must be a prevailing party. Because Sandoval dismissed
all claims against CBB with prejudice and CBB paid nothing, the court
found that CBB was the “successful party.” It is typically within the trial
court’s discretion to recognize a defendant as the successful party when the
plaintiff voluntarily dismisses the case. See Vicari v. Lake Havasu City, 222
Ariz. 218, 224–25, ¶¶ 25–27 (App. 2009); see also Fulton Homes Corp. v. BBP
Concrete, 214 Ariz. 566, 572, ¶¶ 23–25 (App. 2007).
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Decision of the Court
¶18 Sandoval argues that the superior court abused its discretion
by characterizing CBB as the successful party. First, Sandoval contends that
there is no successful party because neither party prevailed on the merits,
citing General Cable Corporation v. Citizens Utilities Co., 27 Ariz. App. 381(1976), as support. However, Sandoval’s reliance on this case is misguided.
In General Cable, the trial court ruled against both plaintiff’s claim and
defendant’s counterclaim. 27 Ariz. App. at 383. Plaintiff argued that
because its claim was for more money than defendant’s counterclaim, it
should have been the successful party. Id. at 385. However, we held that
“[u]nder the facts of this case, where a complaint seeks greater damages
than the counterclaim and the trial court has denied relief to both parties,
we find that neither party is the ‘successful party.’” Id. Here, CBB did not
lose a counterclaim. Rather, as the superior court noted, CBB ultimately
achieved its desired result. Moreover, this court has recognized that “[a]n
adjudication on the merits is not a prerequisite to recovering attorneys’ fees
under A.R.S. § 12–341.01.” Fulton Homes, 214 Ariz. at 572, ¶ 24.
¶19 Next, Sandoval argues that CBB is not the prevailing party
because he only dismissed his claims against CBB because he had settled
with BMW. If anything, Sandoval argues, he should be considered the
successful party, citing Moedt v. General Motors Corp. for support. 204 Ariz.
100, 103, ¶ 9 (App. 2002) (holding that “a party who settles a Lemon Law
claim after a lawsuit has been initiated is a ‘prevailing party’ entitled to an
award of attorney’s fees”).
¶20 However, we are not persuaded by this argument. Even if
Sandoval were the successful party against BMW, he cannot be considered
a successful party against CBB. As the trial court notes, CBB paid nothing,
and all the claims against it were dismissed. Moreover, we are not
persuaded by Sandoval’s reliance on Moedt. In Moedt, the court found that
a car purchaser may be characterized as the prevailing party when it settles
with the manufacturer. Id. This case does not suggest that a car purchaser
is also the prevailing party against third parties not privy to the settlement
agreement.
¶21 Further, we are not persuaded by Sandoval’s suggestion that
his decision to dismiss had to be in some way motivated by CBB’s actions,
in order for CBB to be the successful party. Section 12–341.01(B) is intended
“to mitigate the burden of the expense of litigation to establish a just claim
or a just defense.” CBB should not lose its ability to recover, after incurring
expenses, simply because Sandoval voluntarily withdrew his complaint.
The superior court did not abuse its discretion in characterizing CBB as the
prevailing party.
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Decision of the Court
C. Abuse of Discretion
¶22 Sandoval also argues that, even if the action arises out of
contract and CBB is a prevailing party, the trial court nonetheless abused
its discretion in awarding CBB attorneys’ fees under A.R.S. § 12-341.01. In
exercising its discretion, the trial court must consider:
[1] [T]he merits of the unsuccessful party’s claim, [2] whether
the claim could have been avoided or settled [and] whether
the successful party’s efforts were completely superfluous in
achieving the result, [3] whether assessing fees against the
unsuccessful party would cause an extreme hardship, [4]
whether the successful party did not prevail with respect to
all of the relief sought, [5] the novelty of the legal question
presented, and [6] whether an award to the prevailing party
would discourage other parties with tenable claims from
litigating legitimate contract issues for fear of incurring
liability for substantial amounts of attorneys’ fees.
Fulton Homes, 214 Ariz. at 569, ¶ 10 (internal quotation marks omitted); see
also Associated Indem. Corp. v. Warner, 143 Ariz. 567, 570 (1985). After
considering these factors, the superior court found that an award of
attorneys’ fees was justified.1 On appeal, Sandoval argues that a proper
consideration of these factors actually weighs against an award of
attorneys’ fees.2
1 Sandoval contends that CBB did not offer any evidence of these six
factors. Therefore Sandoval argues, CBB did not meet its burden of proving
attorneys’ fees were warranted. See Woerth v. Flagstaff, 167 Ariz. 412, 419–20
(App. 1990). However, a review of the record indicates that CBB did
provide an adequate factual basis.
2 CBB argues that Sandoval waived this argument on appeal. As CBB
points out, Sandoval did not address these factors in its response to CBB’s
application for attorneys’ fees but raised them for the first time in his
motion for new trial. Sandoval responds that he preserved the argument
that CBB did not meet its burden through its briefing on CBB’s request for
sanctions. Because the evidence relevant to an attorneys’ fees analysis
under A.R.S. § 12-341.01 overlaps with the evidence in the sanctions
analysis, we find that the issue has not been waived.
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¶23 The superior court found that “once discovery was conducted
facts were revealed that put into question the merits of Plaintiff’s claim”
(first factor). Sandoval disputes this finding, asserting that his claims had
merit. To support his argument, Sandoval cites the numerous instances
where the vehicle required repair. He argues that the repair record
demonstrates that the vehicle was either defective as manufactured or
negligently repaired. Further, Sandoval points out that he testified at his
deposition that the vehicle had many problems, and that an unnamed
employee of CBB admitted that the car was defective.
¶24 However, Sandoval also testified that he has never actually
driven or been a passenger in the vehicle. He also stated that the repair
work had been top quality, he did not pay for any of the repairs, and that
he was not aware of any current problems with the vehicle. Given these
admissions, the trial court did not err when it found that his case was
questionable on the merits.
¶25 The superior court noted that Sandoval dismissed his
complaint before the court’s ruling on CBB’s motion for summary
judgment, avoiding an oral argument and trial (second factor). The court
found that defendant’s efforts were necessary to achieve this result. On
appeal, Sandoval asserts that CBB actually employed tactics to manufacture
a record through which it could request sanctions. However, given that
Sandoval’s withdrawal came after discovery and CBB’s motion for
summary judgment, there is a sufficient basis to support the superior
court’s conclusion.
¶26 The superior court also found that defendant had succeeded
with respect to all relief sought, (fourth factor) and that the issues were not
novel (fifth factor). Sandoval does not directly address the fourth factor.
Sandoval also agrees that the issues were not novel, but confusingly states
this factor weighs against finding an award. However, a finding that the
issues are not novel weighs in favor of finding an award.
¶27 Moving on to the sixth factor, the superior court also found
that “[a]n award [of attorneys’ fees] would not discourage parties with
tenable claims from pursuing them.” Sandoval contends that an award in
this case would disincentivize future parties from bringing a claim against
a car dealer in cases where there is an open question regarding
responsibility for the defective condition of a product. Sandoval asserts that
a party would be incentivized to only go after the manufacturer. However,
given the weaknesses exposed in Sandoval’s arguments through discovery,
we agree with the superior court. A fee awarded under these facts would
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not discourage parties with tenable claims to raise them in the future. We
find that the trial court did not abuse its discretion.
D. Reasonableness of the Amount of Fees
¶28 Sandoval asserts that, even if it was not an abuse of discretion
to award attorneys’ fees, it was still an error to award CBB’s full amount of
requested fees. However, Sandoval never disputed the reasonableness of
the amount of fees requested. The only issues Sandoval raised were
whether the action arose from contract and whether CBB was a successful
party.
¶29 In his reply brief, Sandoval argues that he asserted below that
no amount of attorneys’ fees were reasonable, but does not cite to the record
for support of this assertion. Therefore, we find that Sandoval waived any
argument that the amount of the award was unreasonable. Schoenfelder v.
Ariz. Bank, 165 Ariz. 79, 90 (1990) (appellate court generally will not
consider issues on appeal not argued before the trial court); Conant v.
Whitney, 190 Ariz. 290, 293–94 (App. 1997) (arguments raised for the first
time in a motion for new trial are waived).
¶30 Waiver aside, we are still not convinced by Sandoval’s
arguments. He contends that the amount is unreasonable because CBB’s
counsel used block billing, CBB’s fees are outrageous when compared to his
own attorneys’ fees, and that a significant amount of work was performed
by a shareholder rather than less expensive counsel. However, “[o]nce a
party establishes its entitlement to fees and meets the minimum
requirements in its application and affidavit for fees, the burden shifts to
the party opposing the fee award to demonstrate the impropriety or
unreasonableness of the requested fees.” Nolan v. Starlight Pines Homeowners
Ass’n, 216 Ariz. 482, 491, ¶ 38 (App. 2007). Further, an “opposing party does
not meet [that] burden merely by asserting broad challenges to the
application. It is not enough . . . simply to state, for example, that the hours
claimed are excessive and the rates submitted too high.” Id. (quoting
Arizona v. Maricopa Cnty. Med. Soc’y, 578 F.Supp. 1262, 1264 (D.Ariz.1984)).
Sandoval has not met his burden of proving that the amount of fees
awarded was unreasonable.
II. Motion for New Trial
¶31 Sandoval argues that, because the trial court concluded his
negligent repair claim arose from contract, which he asserts is an error, the
court abused its discretion when it denied his motion for new trial. We
review the denial of a motion for new trial for an abuse of discretion. Castro
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v. Ballesteros-Suarez, 222 Ariz. 48, 52, ¶ 12 (App. 2009). As previously
explained, Sandoval’s revocation of acceptance claim arises out of contract.
Therefore, even if the negligent repair claim does not independently arise
from contract, the trial court may still award attorneys’ fees for this claim
because it is interwoven with the revocation of acceptance claim. We hold
the trial court did not abuse its discretion when it denied Sandoval’s motion
for new trial.
III. Form of Judgment
¶32 Sandoval next objects to the trial court’s adoption of CBB’s
proposed form of judgment. He asserts that the proposed form does not
comport with Rule 54 because it includes findings of fact and conclusions
of law. He argues that because no rule expressly allows for the inclusion of
findings of fact and conclusions of law in a judgment, the court erred by
including them. However, the proposed form is not advancing new
findings of fact or conclusions of law, rather it is merely summarizing the
court’s findings from its previous order on attorneys’ fees. Sandoval points
to no rule prohibiting such a summary from being included in a judgment.
Also, Sandoval does not demonstrate how the inclusion of this summary
causes him any harm.
¶33 Sandoval also argues that the form of judgment
inappropriately requests attorneys’ fees and costs for collecting the
judgment. However, the judgment does not grant CBB attorneys’ fees and
costs for collecting a judgment. Rather, it only permits CBB to apply for
such an award in the future.
¶34 Sandoval also contends that the interest rate was
inappropriate. Under A.R.S. § 44-1201(B), the interest rate “shall be at the
lesser of ten per cent per annum or at a rate per annum that is equal to one
per cent plus the prime rate as published . . . .” The rate adopted by the
court in its judgment was 6.25%. However, on the date that judgment was
entered, September 24, 2019, the prime rate was only 5%. Data Download
Program, Federal Reserve, https://www.federalreserve.gov/
datadownload/Chart.aspx?rel=H15&series=8e83f7f17c5cea4d190d85ae67
37639f&lastobs=100&from=&to=&filetype=csv&label=include&layout=se
riescolumn&pp=Download (last visited February 4, 2021). Following A.R.S.
§ 44-1201(B), the interest rate should have been set at 6%.
¶35 We find that the only error in the form of judgment was the
interest rate assessed. Therefore, we vacate that part of the judgment, and
remand for further proceedings.
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IV. Fee Award under A.R.S. § 12-349
¶36 On cross-appeal, CBB argues that the trial court erred by
denying its request for a fee award against both Sandoval and his attorneys
under A.R.S. § 12-349. Section 12-349(A), when applicable, requires the
court to “assess reasonable attorney fees, expenses and, at the court’s
discretion, double damages of not to exceed five thousand dollars against
an attorney or party.” Because a fee award under this statute is mandatory
once the predicate findings are made, we review the court’s application of
the statute de novo and the court’s findings of fact for clear
error. See Phoenix Newspapers, Inc. v. Dep’t of Corr., 188 Ariz. 237, 243, 244
(App.1997); City of Casa Grande v. Arizona Water Co., 199 Ariz. 547, 555, ¶ 27
(App. 2001).3
¶37 The trial court found that, based on the record, it could not
make the necessary findings of fact to support an award under § 12-349.
CBB argues that the record clearly indicates that an award is required under
§ 12-349 (A)(1) and (A)(2).
A. Claims Without Substantial Justification
¶38 Section 12-349(A)(1) requires the court to assess attorneys’
fees when an attorney or party “[b]rings or defends a claim without
substantial justification.” A claim or defense is “without substantial
justification” when it is both “groundless” and “not made in good faith.”
A.R.S. § 12-349(F). When analyzing good faith under A.R.S. § 12-349, we use
a subjective standard. Goldman v. Sahl, 248 Ariz. 512, 531, ¶ 66 (App. 2020).
¶39 CBB argues that the record demonstrates bad faith pointing
to excerpts from Sandoval’s deposition where he admits that he did not
actually speak to his attorneys until two days before his deposition and had
not actually reviewed several documents prepared by his attorneys. CBB
also points out that Sandoval and his attorneys did not disclose important
3 As a threshold matter, CBB argues that the trial court was required
to consider the factors set out in A.R.S. § 12-350. The trial court did not
specifically address any of the A.R.S. § 12-350 factors, only noting that it
was unable to make the required findings of fact. However, A.R.S. § 12-350
only states that, in awarding attorney fees pursuant to § 12-349, “the court
shall set forth the specific reasons for the award and may include the
[enumerated] factors, as relevant.” (Emphasis added.) Section 12-350 does
not require the trial court to specifically address every factor enumerated
when denying a motion for sanctions under A.R.S. § 12-349.
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facts, such as the fact that Sandoval had never actually used the vehicle
himself. CBB asserts that this conduct represents an unwillingness to
investigate the underlying facts of the case, indicating bad faith.
¶40 Although this approach to litigation is a poor recipe for
success, we do not find that the superior court committed clear error. First,
there is sufficient evidence to find that Sandoval acted in good faith. The
record shows that there were numerous repair orders, and that Sandoval
subjectively believed that this is what his case was about. While it may be
doubtful that Sandoval would have ultimately been successful, the record
does not suggest that Sandoval, subjectively, acted in bad faith.
¶41 The record is sufficient to find that Sandoval’s counsel did not
act in bad faith. Even if Sandoval did not speak directly with his attorneys,
his daughter seemed to be acting as an intermediary. English appears to
Sandoval’s second language, evidenced by the fact that he needed an
interpreter to assist during his deposition. To be sure, it is concerning that
Sandoval and his attorneys failed to disclose important facts regarding
Sandoval’s actual use of the vehicle. However, viewing the facts in favor of
upholding the judgment, we find that there is sufficient evidence to support
a finding that Sandoval and his attorneys acted in good faith under a
subjective standard. The trial court did not commit clear error in denying
fees under A.R.S. § 12-349(A)(1).
B. Expand and Delay
¶42 CBB also contends that fees are appropriate under A.R.S.
§ 12–349(A)(3), which requires the court to award fees when a party
“[u]nreasonably expands or delays the proceeding.” CBB argues that
Sandoval and his counsel unreasonably expanded and delayed the
proceedings by refusing to clarify ambiguities in their complaint. CBB
contends that Sandoval and counsel only provided clarification after CBB
was forced to file its motion to dismiss. CBB also argues that Sandoval and
his counsel unreasonably expanded and delayed the proceedings by
withholding potentially dispositive facts until discovery, such as the fact
that Sandoval did not personally use the car. These were facts CBB contends
that Sandoval and his attorneys had access to and could have disclosed
either in the complaint or initial disclosure.
¶43 Such behavior is surely questionable and even sanctionable
within the trial court’s discretion. But it does not rise to the level of
unreasonable conduct such that the court was required to find a violation of
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A.R.S. § 12-349. The superior court did not commit clear error in denying
fees under A.R.S. § 12–349(A)(3).
V. Rule 11 Sanctions
¶44 CBB also contends that the trial court erred by denying its
motion for Rule 11 sanctions against both Sandoval and his attorneys. We
review the court’s denial of Rule 11 sanctions for an abuse of discretion. In
re $15,379 in U.S. Currency, 241 Ariz. 462, 469, ¶ 15 (App. 2016).
¶45 Rule 11 requires that all pleadings, written motions, and other
documents filed with the court be signed by an attorney of record or the
party. Rule 11(a). Before signing the document, a lawyer must possess
a good faith belief, formed on the basis of a reasonable investigation, that a
colorable claim or defense exists. James, Cooke & Hobson, Inc. v. Lake Havasu
Plumbing & Fire Prot., 177 Ariz. 316, 319 (App. 1993). If this requirement is
not met, the court may levy sanctions against the person that signed the
document, the represented party, or both. Rule 11(c)(1). Unlike the analysis
under § 12-349, we evaluate conduct under an objective standard of good
faith. James, Cooke & Hobson, 177 Ariz. at 319.
¶46 CBB contends that both Sandoval’s complaint and initial
disclosure violated Rule 11. CBB points to the same general facts as in the
argument for fees under A.R.S. § 12-349. For the same reasons we found
that Sandoval and his counsel did not act in bad faith for the purposes of
A.R.S. § 12-349(A)(1), we find the same here, even under an objective
standard. The trial court did not abuse its discretion when it denied CBB’s
request for Rule 11 sanctions.
CONCLUSION
¶47 We affirm the superior court’s ruling except we vacate the
portion of the judgment regarding the interest rate and remand for further
proceedings. CBB requests an award for attorneys’ fees and costs in relation
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to this appeal pursuant to A.R.S. §§ 12-341.01 and -349. CBB also requests
sanctions under ARCAP 21 and Rule 11. In our discretion, and because we
vacated part of the judgment, we deny all CBB’s request for attorneys’ fees,
costs and sanctions.
AMY M. WOOD • Clerk of the Court
FILED: HB
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