Commerce v. Zinke

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UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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

COMMERCE REALTY ADVISORS, LTD, et al.,
Plaintiffs/Appellees,

v.

ZINKE INVESTMENTS LIMITED PARTNERSHIP, et al.,
Defendants/Appellants.

No. 1 CA-CV 16-0153
FILED 7-13-2017

Appeal from the Superior Court in Maricopa County
No. CV2011-019472
The Honorable Arthur T. Anderson, Judge

AFFIRMED IN PART AND VACATED IN PART AND REMANDED

COUNSEL

Nye LTD, Scottsdale
By Richard Q. Nye, Benjamin J. Branson
Counsel for Defendants/Appellants

Coppersmith Brockelman PLC, Phoenix
By John E. DeWulf, Roopali Desai
Counsel for Plaintiffs/Appellees
 COMMERCE et al. v. ZINKE et al.
Decision of the Court

MEMORANDUM DECISION

Presiding Judge Samuel A. Thumma delivered the decision of the Court, in
which Judge Lawrence F. Winthrop and Judge James P. Beene joined.

T H U M M A, Judge:

¶1 Defendants Zinke Investments Limited Partnership and
Bernard L. and Gloria J. Zinke (the Zinkes) appeal from a judgment, entered
after a jury trial, awarding plaintiff CRA, LLC damages plus compound
interest and attorneys’ fees. The Zinkes allege there was insufficient
evidence for the jury to award damages, that compound interest is
improper and that CRA was not the successful party. Because there was
sufficient evidence for the jury to award damages, and the award of
attorneys’ fees was proper, those portions of the judgment are affirmed.
That portion of the judgment awarding compound interest, however, is
vacated and this matter is remanded for the entry of an amended judgment
awarding simple interest consistent with this decision.

FACTS1 AND PROCEDURAL HISTORY

¶2 For decades, the Zinkes operated a dairy farm on land they
owned near Gilbert, Arizona. On November 4, 2003, the Zinkes entered an
exclusive listing agreement (Agreement) with Commerce Realty Advisors,
Ltd. (Commerce) for approximately 410 acres of land the Zinkes owned.
Under the Agreement, the Zinkes were obligated to pay Commerce a 2.5
percent commission for the sale of any residentially-zoned property subject
to the Agreement for, as relevant here, any “transaction commenced
during” the five-year term of the Agreement. Under the Agreement,
interest on any unpaid commission “shall accrue at the rate of eighteen
percent (18%) per annum from the date due until paid.” On November 5,
2008, Commerce assigned to CRA all its rights, privileges and interest
under the Agreement.

1On appeal, this court views the evidence in the light most favorable to
upholding the jury’s verdict. Powers v. Taser Int’l Inc., 217 Ariz. 398, 399 n.1
¶ 4 (App. 2007).

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¶3 In early 2008, the Zinkes began negotiating with Gilbert for its
acquisition of some rights of way and, later, some parcels of property,
including approximately 62 acres subject to the Agreement. The Zinkes did
not inform Commerce of these negotiations. Gilbert’s program manager
testified that the Zinkes asked to delay signing the sale documents because
the Agreement was going to expire. Closing documents for the sale were
not finalized until March 2009, and Gilbert paid the Zinkes $300,000 per
acre for the 62 acres acquired. The Zinkes did not pay CRA or Commerce
any commissions for that sale.

¶4 CRA and Commerce later discovered the sale and
unsuccessfully demanded that the Zinkes pay commissions under the
Agreement. In November 2011, CRA and Commerce filed this action
against the Zinkes, alleging breach of contract and breach of the covenant
of good faith and fair dealing. On motion, the Zinkes obtained summary
judgment against both CRA and Commerce. On appeal, this court affirmed
as to Commerce but vacated and remanded as to CRA. In doing so, this
court affirmed the superior court’s award of attorneys’ fees and costs
against Commerce, but vacated the award against CRA.

¶5 On remand, the case went to a four-day jury trial in May 2015.
Nearly 50 exhibits were received in evidence and 11 witnesses testified at
trial. Because the Agreement applied only to residential property that was
sold, the parties presented conflicting evidence on the zoning of the 62 acres
sold to Gilbert. One of CRA’s witnesses testified “[t]he current Town of
Gilbert map indicates about 18 acres” of the 62 acres were rezoned
commercial. Another testified the rezoned property could be “something
less than a third” of the 62 acres, but that he “couldn’t say. It could be 20, it
could be 18.” A Gilbert ordinance received in evidence described the land
rezoned commercial as “approximately 30 acres.” There was, however,
testimony that the land described in the ordinance was “more than just Mr.
Zinke’s property.”

¶6 At the close of the evidence, the Zinkes sought a judgment as
a matter of law, arguing CRA “did not establish in their case [] the portion
of the property that was zoned [] as non-residential,” and, therefore, “it’s
not possible to calculate how much land [CRA] would be entitled to a
commission on.” The court denied the motion, noting conflicting evidence
and adding the issue “I think, is more appropriately [] saved for closing
argument.”

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Decision of the Court

¶7 The Zinkes requested a final instruction directing the jury that
it could not speculate and to limit deliberations to evidence presented to
determine damages. The court rejected the instruction.

¶8 During deliberations, the jury provided the court a note that
the jurors had “reached a consensus” but still needed “to calculate the
interest,” asking “[c]an we have someone else do the calculation?” The
court responded that the “verdict form does not require a calculated interest
amount” and that the court would calculate the interest based on the jury’s
findings. The jury returned a verdict in favor of CRA and against the
Zinkes. It awarded damages to CRA of $219,169.84 with interest at 18
percent per year from March 4, 2009 until paid.

¶9 CRA lodged a proposed form of judgment awarding
compound interest, to which the Zinkes timely objected, arguing the
interest should be simple. After hearing oral argument, the court denied the
Zinkes’ objection and entered a final judgment using compound interest.
Finding the jury verdict made CRA the prevailing party, the court awarded
CRA $449,046 in attorneys’ fees under the Agreement and $9,211.06 in
taxable costs. After numerous unsuccessful post-trial motions, including a
motion for a new trial, the Zinkes appealed. This court has jurisdiction,
following the entry of a final judgment pursuant to Arizona Rule of Civil
Procedure 54(c)(2017)2 pursuant to Article 6, Section 9, of the Arizona
Constitution and Arizona Revised Statutes (A.R.S.) sections 12-120.21(A)(1)
and -2101(A)(1).

DISCUSSION

I. Sufficient Evidence Supports The Jury’s Award Of Damages.

¶10 This court will affirm the jury’s verdict if substantial evidence
supports it. County of La Paz v. Yakima Compost Co., Inc., 224 Ariz. 590, 607 ¶
52 (App. 2010). “Substantial evidence is evidence which would permit a
reasonable person to reach the [fact-finder’s] result.” In re Estate of Pouser,
193 Ariz. 574, 579 ¶ 13 (1999). This court “will not disturb a jury’s damage
award unless it is so unreasonable and outrageous as to shock the
conscience of this court.” Acuna v. Kroack, 212 Ariz. 104, 114 ¶ 36 (App. 2006)
(quotations and citations omitted).

2Absent material revisions after the relevant dates, statutes and rules cited
refer to the current version unless otherwise indicated.

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¶11 The damages issues the Zinkes raise on appeal center on one
argument: that CRA was required to prove with mathematical certainty the
precise number of acres subject to the Agreement. The Zinkes argue “there
was no evidence in this case from which the jury could have found the
acreage of land sold which was zoned either residential or commercial at
the time of sale let alone evidence to the level of certainty required here.”

¶12 As CRA rightly points out, even under the Zinkes’ theory of
how the jury calculated damages,3 the jury appears to have resolved in the
Zinkes’ favor the disputed factual issue about the number of acres subject
to the Agreement. See R & M Oxford Const., Inc. v. Smith, 172 Ariz. 241, 247
(App. 1992) (“Conflicts of evidence are within the sole province of the trier
of fact, as is the weight of the evidence and the reasonable inferences to be
drawn therefrom.”). The Zinkes did not request special interrogatories
asking the jury to specify how it reached damages or how many acres of
land it found were subject to the Agreement.

¶13 It is impossible to determine how the jury arrived at its
verdict, “but, under the evidence presented in this case, the sum obviously
can be justified.” Pioneer Constructors v. Symes, 77 Ariz. 107, 111 (1954). The
jury was provided with a valid city ordinance (including a map) and
conflicting evidence describing the rezoning and, even using the Zinkes’
calculations, the jury arrived upon a number more favorable to the Zinkes
than they had argued at trial. This court will not disturb a jury’s verdict
“[w]here there are sufficient facts for the jury to consider, and where the
verdict on those facts can be justified under some theory of law.” Id.; County
of La Paz v. Yakima Compost Co., Inc., 224 Ariz. 590, 608 ¶ 54 (App. 2010)
(noting assumptions underlying damage claim “had a basis in fact.
Assessing their accuracy and reliability was a question of fact for the jury.
Indeed, the jury may have rejected some of the assumptions as it failed to
award the full amount of [claimant’s] calculated damages. The trial court
did not err by refusing to order a new trial or remit the verdict on this
basis.”); see also Hammontree v. Kenworthy, 1 Ariz. App. 472, 481 (1965)

3 The Zinkes speculate the jury found 29.223 acres were zoned residential
by taking the verdict of $219,169.48, divided by 2.5 percent to yield a sales
price of $8,766,793.60 that, at the established per acre price of $300,000,
would yield 29.223 acres of residential land. Apart from the fact that this
speculation is not supported by the jury’s answering a special
interrogatory, at trial, CRA argued roughly 40 acres were residential and
the Zinkes argued roughly 32.376 acres were residential. Therefore, even
using the Zinkes’ calculations, the jury found damages more favorable to
the Zinkes than they had argued at trial.

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(evidence was sufficient to support judgment on property’s rental value
where there “was no direct testimony as to its rental value,” but there was
other relevant testimony, including “the approximate number of acres” of
the property); Great W. Bank v. LJC Dev., LLC, 238 Ariz. 470, 482 ¶ 41 (App.
2015) (“Reasonable certainty is therefore provided where there is ‘some
reasonable method of computing [the] net loss.’”) (citation omitted). Given
there is substantial evidence supporting the damages found by the jury, the
superior court did not err in rejecting the Zinkes’ challenges to that verdict.

¶14 Similarly, the court did not err in refusing the Zinkes’
proposed jury instructions. On top of the fact that sufficient evidence
supports the verdict, the court instructed the jury to “[d]etermine the facts
only from the evidence produced in the court” and that it “should not guess
about any fact.” The Zinkes have made no showing that, in addition to these
legally-correct instructions, the superior court also was required to give
their requested final instruction that the jury could not speculate and was
required to limit deliberations to evidence presented to determine damages.

¶15 On this record, the Zinkes have shown no error in the jury’s
damages award or in the jury instructions given.

II. The Award Of Compound Interest Was Error.

¶16 The Zinkes challenge the judgment awarding compound
interest and argue that only simple interest was allowed, asserting
compound interest does not apply to an interest rate specified by contract
unless expressly stated. CRA counters that the Zinkes waived this
argument by failing to object to its trial evidence proving damages. CRA
asserts “the only evidence before the jury on the parties’ understanding of
how interest was to be calculated was . . . testimony [by a CRA
representative], and the Zinkes’ objection” regarding interest “should have
been made during trial,” but was not, and is therefore “untimely.”

¶17 The issue of whether interest is compound or simple is a
question for the court, not the jury, to decide. Indeed, both in the form of
verdict and in answering the jury’s question, the superior court instructed
the jury to determine damages, the rate of interest and the date from which
interest was to accrue, but not whether interest was simple or compound.
CRA did not object to this approach. Because the issue of whether interest
is simple or compound was a matter for the court to decide, the time to
address this aspect of interest was post-verdict, as the Zinkes did here.
Accordingly, the Zinkes did not waive the issue. See Am. Cont’l Life Ins. Co.
v. Ranier Constr. Co., 125 Ariz. 53, 55 (1980) (noting waiver requires finding

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Decision of the Court

of intentional relinquishment of known right or conduct warranting such
an inference; claimed waiver based on inaction must include evidence of
acts inconsistent with intent to assert right).

¶18 In addressing interest, the Agreement simply states “[i]f any
amount payable to Broker is not paid when due, Interest on the unpaid
amount shall accrue at the rate of eighteen percent (18%) per annum from
the date due until paid.” Neither the Agreement nor any persuasive
evidence shows this interest provision contemplated compound interest.
See Cherokee Nation v. United States, 270 U.S. 476, 490 (1926) (“The general
rule, even as between private persons, is that, in the absence of a contract
therefor or some statute, compound interest is not allowed to be computed
upon a debt.”); Fairway Builders, Inc. v. Malouf Towers Rental Co., Inc., 124
Ariz. 242, 267 (App. 1979) (declining to award compound interest in
absence of express agreement to the contrary); see also Westberry v. Reynolds,
134 Ariz. 29, 34 (App. 1982) (construing statute for interest on legal
indebtedness to require the application of simple interest unless a contract
expressly provides for compound interest).

¶19 In arguing to the contrary, CRA relies on its disclosures and
witness’ trial testimony about damages, a number that was presumably
reached using compound interest. CRA’s complaint, designed to place the
Zinkes on notice of its claims, alleged a single daily interest accrual rate,
which by definition implies simple interest. Although later amended, at no
time did CRA’s pleading seek compound interest. CRA’s disclosures do not
constitute evidence of the parties’ intent in the Agreement. Moreover,
CRA’s witness did not testify that the damages claimed included
compounded interest and did not offer any evidence as to whether the
parties intended in the Agreement for interest to be compound. These
vagaries do not serve as evidence that the parties intended interest to be
compound in the Agreement.

¶20 Given that absence of proof, and given the case law stating
that interest is simple unless shown or agreed upon to the contrary, the
judgment awarding compound interest was in error, and that portion of the
judgment is vacated and remanded.

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 COMMERCE et al. v. ZINKE et al.
Decision of the Court

III. Attorneys’ Fees.

¶21 The Zinkes challenge the superior court’s award of attorneys’
fees to CRA as the prevailing party. Under the Agreement, “the prevailing
party shall be entitled to recover its reasonable attorneys’ fees.” First the
Zinkes argue that the judgment should have been entered in their favor, not
CRA, meaning the Zinkes were the prevailing parties eligible for an award
of fees. Because this court has rejected those arguments, the Zinkes’
argument they should be the prevailing party similarly fails.

¶22 The Zinkes next claim the fees awarded to CRA were
excessive. The Zinkes note that Commerce and CRA have been represented
by the same attorney throughout the litigation; that the Zinkes prevailed on
summary judgment against Commerce and were awarded attorneys’ fees
and that the superior court, after trial against CRA, “awarded CRA all fees
incurred throughout this entire lawsuit, including those incurred on behalf
of Commerce.”

¶23 The Zinkes’ factual predicate –- that the superior court’s
award of fees to CRA “include[ed] those incurred on behalf of Commerce”
–- is not supported by the record. Indeed, the Zinkes provide no record
citation supporting that argument. It is true that, given the judgment in
favor of the Zinkes against Commerce in the prior appeal, this case has
resulted in a situation where: (1) the Zinkes are the prevailing party with
an award of fees in their favor for the claims by Commerce and (2) CRA is
the prevailing party with an award of fees in its favor for its similar claims
against the Zinkes. But to the extent those awards are anomalous, it is
because they are the product of claims involving at least one different party.

¶24 The Zinkes’ judgment against Commerce and CRA was for
$101,697 in attorneys’ fees. Although the portion of that judgment against
CRA was vacated, the Zinkes continue to seek a judgment against
Commerce for that exact same amount: $101,697. Thus, by their own
conduct, the Zinkes appear to concede that the amount of fees incurred
before the first appeal does not turn on whether Commerce, CRA or both
were parties to the litigation.

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¶25 Comparing the magnitude of the claims for attorneys’ fees
similarly shows there was no error here. The Zinkes’ judgment against
Commerce was for $101,697 in attorneys’ fees.4 Because Commerce was not
the successful party, it filed no application for an award of attorneys’ fees,
so the amount of fees it incurred is not set forth in the record. If, however,
the $101,697 the Zinkes were awarded against Commerce is a proxy for the
fees Commerce incurred, the superior court’s award here appears to have
accounted for that work.

¶26 After trial, CRA requested an award for attorneys’ fees
against the Zinkes that, excluding mediation costs, totaled $542,027. After
full briefing and argument, the superior court awarded CRA $449,046 in
fees against the Zinkes. This award was $92,981 less than the amount CRA
requested. That difference approximates (although is slightly less than) the
amount the Zinkes were awarded against Commerce. On this record, the
superior court properly could have exercised its discretion to conclude CRA
would have incurred $8,716 in attorneys’ fees up to that point regardless of
Commerce’s involvement. In any event, these differences provide no
support for the Zinkes’ argument that CRA was awarded fees that, in fact,
the Zinkes were awarded against Commerce.

¶27 Finally, even if not discounted, the superior court could have
concluded that the legal work performed for both CRA and Commerce up
through the mandate in the first appeal would have been essential for CRA
regardless of whether Commerce was involved. On this additional basis,
the Zinkes have not shown the superior court’s award of fees in favor of
CRA was in error. See Pettay v. Ins. Mktg. Services, Inc., 156 Ariz. 365, 368
(App. 1987) (noting superior court “has broad discretion in fixing the
amount of attorney’s fees”); State Farm Mut. Auto. Ins. Co. v. Arrington, 192
Ariz. 255, 261 ¶ 27 (App. 1998) (noting fee award will not be disturbed if
supported by “any reasonable basis”).

¶28 The Zinkes and CRA request attorneys’ fees and costs on
appeal pursuant to Arizona Rule of Civil Appellate Procedure 21 and the
Agreement. Because they are not the prevailing parties on appeal, the
Zinkes’ request for fees and costs is denied. CRA’s request for an award of
reasonable attorneys’ fees and costs incurred on appeal is granted,

4 Although the memorandum decision on appeal awarded the Zinkes’
attorneys’ fees they incurred on appeal involving Commerce, no such
application was made and no fees were awarded in that appeal.

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Decision of the Court

contingent upon its compliance with Arizona Rule of Civil Appellate
Procedure 21.

CONCLUSION

¶29 That portion of the judgment for CRA awarding compound
interest is vacated; the remainder of the judgment is affirmed and this
matter is remanded for the entry of an amended judgment awarding simple
interest consistent with this decision.

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

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