Massey v. 1st Hc

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UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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

LEONARD R. MASSEY, Plaintiff/Appellee,

v.

1ST HC L.L.C., Defendant/Appellant.

No. 1 CA-CV 16-0763
FILED 2-8-2018

Appeal from the Superior Court in Maricopa County
No. CV2015-091148
The Honorable David M. Talamante, Judge

AFFIRMED

COUNSEL

Lake & Cobb, PLC, Tempe
By Hank E. Pearson, Richard L. Cobb
Counsel for Plaintiff/Appellee

Lewis Roca Rothgerber Christie, LLP, Phoenix
By Robert G. Schaffer, Amanda L. Thatcher, Daniel A. Arellano
Counsel for Defendant/Appellee
 MASSEY v. 1ST HC
Decision of the Court

MEMORANDUM DECISION

Judge Kenton D. Jones delivered the decision of the Court, in which
Presiding Judge Randall M. Howe and Judge James B. Morse Jr. joined.

J O N E S, Judge:

¶1 1st HC, L.L.C. (HC) appeals the trial court’s order directing
sale of property owned by HC and Appellants to Seven Jones, L.L.C. (Seven
Jones) for $12.5 million. For the following reasons, we affirm.

FACTS AND PROCEDURAL HISTORY

¶2 In March 2015, Appellants (collectively, Massey) sued to
partition a fifty-six-acre parcel of vacant farmland in Mesa (the Property)
by sale to extricate his undivided ninety-one-percent ownership interest
from the undivided nine-percent interest held by HC. The trial court found
Massey was entitled to partition, ordered the Property sold, and, in January
2016, appointed a real estate commissioner (the Commissioner) to facilitate
the sale. The Commissioner prepared a market analysis report valuing the
Property at $11.5 million for a “quick, all cash investor sale,” or between
$15.8 and $17 million for a “blue sky, aggressive developer” with a longer
escrow, more contingencies, and more risk. The Property was appraised
for $11.3 million in April 2016.

¶3 Around this same time, Seven Jones made an unsolicited offer
to purchase the Property for $12.5 million. Noting the offer was higher than
both the market analysis and the appraisal price, involved a willing buyer
with confirmed financing, and contained no risky contingencies, the
Commissioner recommended the trial court approve the offer. The
Commissioner and Massey requested the court expedite its review of the
transaction given concerns from Seven Jones “regarding the timing
constraints of a 1031 exchange.” See generally 26 U.S.C. § 10311 (permitting
an investor to defer capital gains tax where “property held for productive
use in a trade or business or for investment” is exchanged for similar

1 Absent material changes from the relevant date, we cite a statute’s
current version.

2
 MASSEY v. 1ST HC
Decision of the Court

property within a specific timeframe). HC objected to the sale price and
requested the property be partitioned in-kind instead.

¶4 In August 2016, the trial court held a hearing “to determine
the conditions upon which the subject property will be marketed and sold.”
Massey testified he received an offer to sell the Property for $17 million in
2015, but HC would not agree to the sale, prompting the filing of the
partition action. Massey also said he had been trying, unsuccessfully, to
sell the Property for thirteen years and urged the court to approve the sale
to Seven Jones without further delay. The Commissioner agreed Seven
Jones’s offer was “probably the best offer we’re going to get” and further
marketing would be futile.

¶5 HC finally admitted the Property should be sold but opposed
the sale to Seven Jones in light of a competing expert appraisal valuing the
Property at $18.3 million. HC requested the court order the Property be
listed for a reasonable period to better determine its true value.

¶6 After taking the matter under advisement, the trial court
found HC’s valuation “not credible” and approved the sale to Seven Jones.
The court also found HC acted unreasonably during the proceedings and
awarded Massey his attorneys’ fees. HC timely appealed, and we have
jurisdiction pursuant to Arizona Revised Statutes (A.R.S.) §§ 12-
120.21(A)(1), -2101(A)(1) and (7).

DISCUSSION

I. Sale of the Property

¶7 HC argues the trial court erred in approving the sale of the
Property to Seven Jones. Under Arizona law, once it is determined a
property subject to partition is incapable of fair division, the court may
direct it be sold. A.R.S. § 12-1218. We review an order directing the sale of
property subject to partition for an abuse of discretion. See Cuprite Mine
Partners L.L.C. v. Anderson, 809 F.3d 548, 554 (9th Cir. 2015) (applying an
abuse of discretion standard when reviewing a sale conducted pursuant to
A.R.S. § 12-1218). Additionally, “[w]e defer to the trial court with respect
to any factual findings explicitly or implicitly made, affirming them so long
as they are not clearly erroneous, even if substantial conflicting evidence
exists.” John C. Lincoln Hosp. & Health Corp. v. Maricopa Cty., 208 Ariz. 532,
537, ¶ 10 (App. 2004) (citing Twin City Fire Ins. v. Burke, 204 Ariz. 251, 254,
¶ 10 (2003), and Kocher v. Ariz. Dep’t of Revenue, 206 Ariz. 480, 482, ¶ 9 (App.
2003)). “We do not reweigh the evidence or determine the credibility of

3
 MASSEY v. 1ST HC
Decision of the Court

witnesses.” Brown v. U.S. Fid. & Guar. Co., 194 Ariz. 85, 92, ¶ 36 (App. 1998)
(citing Godwin v. Farmers Ins. of Am., 129 Ariz. 416, 419 (App. 1981)).

A. Bona Fide Sale

¶8 HC first argues the sale to Seven Jones was not “a bona fide
sale” because there was “no evidence of true negotiation with Seven Jones.”
HC also suggests it was improperly deprived of its interest in the Property
because it did not participate in the negotiations.

¶9 Pursuant to the court’s January 2016 order, a bona fide offer
is “an offer from a qualified purchaser presenting commercially reasonable
terms.” The record reflects that Seven Jones did not know Massey when it
approached him about purchasing the Property. Seven Jones, an
experienced and sophisticated commercial developer, then independently
analyzed the value of the Property and made an offer at the highest price it
was willing to pay. Massey’s attempts at negotiating a higher price were
unsuccessful. Where there was no room for negotiation within the
transaction, Massey’s efforts, and HC’s participation, or lack thereof, were
irrelevant; the arms-length offer of Seven Jones was as good as it was going
to get. Additionally, the court found the purchase price to be in excess of
the fair market value of the Property and the balance of the terms effecting
the sale to be commercially reasonable — findings with ample support in
the record.

¶10 HC cites no authority indicating it had a right to personally
discuss the details of an unsolicited offer to purchase property subject to a
partition action where the transaction is otherwise fair and reasonable, and
we find none. See McCready v. McCready, 168 Ariz. 1, 3 (App. 1991) (“The
fundamental objective in a partition action is to divide the property so as to
be fair and equitable and confer no unfair advantage on any of the
cotenants.”) (quoting Frame v. Frame, 740 P.2d 655, 658 (Mont. 1987), and
citing 59A Am. Jur. 2d Partition § 6 (1987)). We therefore find no support
for HC’s suggestion that the sale to Seven Jones was unfairly beneficial to
Massey.

B. Listing of the Property

¶11 HC also argues the trial court erred in approving a sale that
did not “maximize[] both parties’ interests in the proceeds.” Although HC
argues the value could only have been maximized through “exposure to an
open market,” the court found otherwise here. Indeed, the court found “no
evidence that listing the Property for sale or marketing the Property further
will more likely than not lead to a purchase offer with a higher price and/or

4
 MASSEY v. 1ST HC
Decision of the Court

more favorable terms” and therefore “further marketing of the Property
would not benefit the parties.” Implicit within these findings is the
conclusion that the Seven Jones offer reflected the best possible price that
could be obtained for the Property. These findings are supported by
testimony from Massey and the Commissioner and the April 2016
appraisal.2 Although HC challenged that testimony and presented a
competing appraisal, the court rejected HC’s arguments and found its
expert’s appraisal not credible. We do not reweigh conflicting evidence, see
supra ¶ 7, and, on this record, find no error.

¶12 HC also argues that A.R.S. § 12-1218(C), which directs a
commissioner be appointed “to sell the real property in the time and
manner, and after notice, as directed by the court,” implies “public notice
and the opportunity for competitive bidding.” We disagree. First, if the
legislature had meant to specifically require public notice and competitive
bidding, it knew how to do so. See, e.g., A.R.S. § 12-1191 (providing specific
notice requirements); A.R.S. § 38-431.02 (setting forth public notice
requirements); A.R.S. § 41-2533 (providing competitive bidding
requirements). It chose not to do so here, and the lack of public notice or
competitive bidding requirements within A.R.S. § 12-1218(C) is dispositive.
See Wright v. Gates, 243 Ariz. 118, 122, ¶ 17 (2017). Second, when considered
in the context of the partition statutes, and particularly A.R.S. § 12-1219
(directing the court to hold a hearing on objections to the commissioner’s
report), the phrase “after notice” simply indicates the parties should be given
an opportunity to comment on the “time and manner” in which the
property will be sold. This is precisely what occurred here, and we find no
error.

¶13 Finally, HC argues the trial court erred in disregarding its
initial January 2016 order directing the property be listed for sale. That

2 HC acknowledges the circumstances surrounding the sale of
property “necessarily affects its worth,” BFP v. Resolution Tr. Corp., 511 U.S.
531, 548 (1994), but argues it is error to conclude a sale resulting from this
partition action would be a “‘forced’ sale that would command a low sale
price.” We need not address this contention because, although the trial
court judge suggested at the close of evidence that the sale could “in the
context of a partition action . . . be characterized as a forced sale” and result
in a lower sale price, the court did not incorporate that reasoning in its final
order. Moreover, this analysis is not necessary to sustain the ultimate
conclusion that further marketing would be futile.

5
 MASSEY v. 1ST HC
Decision of the Court

order, which outlined the procedure and responsibilities attendant to the
appointment of the Commissioner, states:

The subject real property shall be listed for sale in a
commercially reasonable manner at the value estimated by
the market analysis or, if applicable, at the appraised value.

The order, however, contemplates that the listing would occur after the
appraisal was complete. Here, Seven Jones’ unsolicited offer was made
almost simultaneously with the completion of the appraisal. This offer
triggered other provisions of the order, including the direction that “[t]he
parties shall consider all written offers for purchase of the subject real
property,” and that the Commissioner “may petition the Court for an
emergency or accelerated hearing and for acceptance of the offer” if a
written offer to purchase is rejected. And ultimately, the property subject
to partition is to be sold “in the time and manner . . . directed by the court.”
A.R.S. § 12-1218(C).

¶14 Although the court may have initially contemplated that the
Property be listed, the situation changed rapidly and, apparently,
fortuitously. In light of the court’s subsequent finding that listing the
property would not create additional value for the parties beyond what
Seven Jones had offered, see supra ¶ 11, we cannot say the court erred by
exercising the discretionary authority granted to it by A.R.S. § 12-1218 in a
way that took advantage of Seven Jones’ existing and otherwise fair offer.
See Cuprite, 809 F.3d at 553-54 (concluding the acceptance of an existing
offer was “a reasonable way . . . to structure the partition sale” where the
opposing party’s suggestion that auctioning the property would bring
greater value was speculative). The court was not thereafter bound to the
limitations of its own prior order or required to perform what it perceived,
based upon changed circumstances, to be the futile act of proceeding with
the marketing of the Property. See Coronado Co. v. Jacome’s Dep’t Store, Inc.,
129 Ariz. 137, 140 (App. 1981) (“The law does not require a futile act.”)
(citing Kammert Bros. Enters. v. Tanque Verde Plaza Co., 102 Ariz. 301, 306
(1967)).

C. Purchase Option

¶15 HC argues the trial court erred by denying HC an option to
purchase the Property on better terms than those offered by Seven Jones.
However, HC was specifically authorized to make a written purchase offer
in the court’s January 2016 order but did not do so; nor did it identify this
issue within its pretrial statement or advance the argument at the August

6
 MASSEY v. 1ST HC
Decision of the Court

2016 hearing. Arguments not properly or timely presented to the trial court
for its consideration are waived, and we will not consider them. Turtle Rock
III Homeowners Ass’n v. Fisher, 243 Ariz. 294, 296, ¶ 9 (App. 2017) (quoting
Odom v. Farmers Ins. of Ariz., 216 Ariz. 530, 535, ¶ 18 (App. 2007)).

II. Attorneys’ Fees

¶16 HC argues the trial court erred in ordering HC to pay
Massey’s attorneys’ fees as a sanction for its unreasonable behavior.
Whether the court had the authority to award attorneys’ fees presents a
question of law we review de novo. Rogone v. Correia, 236 Ariz. 43, 50, ¶ 23
(App. 2014) (citing City of Casa Grande v. Ariz. Water Co., 199 Ariz. 547, 555,
¶ 27 (App. 2001). The court’s discretionary decision to award fees is
reviewed for an abuse of discretion. Gutierrez v. Gutierrez, 193 Ariz. 343,
351, ¶ 32 (App. 1998) (citing Thomas v. Thomas, 142 Ariz. 386, 393 (App.
1984)).

¶17 While “[i]t is generally accepted . . . that attorneys’ fees are not
recoverable . . . unless specifically provided for by statute or by an
agreement between the parties,” our supreme court has identified the
imposition of sanctions as “[a] noteworthy exception to this rule.” Taylor v.
S. Pac. Transp. Co., 130 Ariz. 516, 523 (1981). Moreover, here, the trial court
imposed sanctions in accordance with its January 2016 order, which
advised the parties: “The Court shall impose sanctions against the party
having unreasonably withheld approval of sale,” or otherwise exhibiting
“unreasonable behavior, including but not limited to . . . an award of
attorney’s fees.” From this language, it is abundantly clear that the court
intended to invoke the standards set forth in A.R.S. § 12-349(A), which
authorizes an award of attorneys’ fees against a party to a civil action who
“[b]rings or defends a claim without substantial justification” or
“[u]nreasonably expands or delays the proceedings.” Accordingly, we
reject HC’s contention that it did not know sanctions could be imposed
upon the basis of a party’s unreasonable conduct and conclude the court
had authority to do just that.

¶18 To justify sanctions against a party for its unreasonable
conduct, the trial court must make specific findings justifying the award,
though they “need only be specific enough to allow a reviewing court to
test the validity of the judgment.” Rogone, 236 Ariz. at 50, ¶ 22 (citing A.R.S.
§ 12-350, and Bennett v. Baxter Grp., 223 Ariz. 414, 421, ¶ 28 (App. 2010)). To
support the award here, the court found:

7
 MASSEY v. 1ST HC
Decision of the Court

[HC] has unreasonably withheld approval of the sale of the
Property and has otherwise acted unreasonably in this
proceeding. [HC] filed its Answer claiming that the Property
should be divided and not sold, resisted Plaintiff’s Motion for
Summary Judgment on the same ground, and served its
Initial Disclosure Statement under the theory that the
Property should be equitably divided. When provided with
an opportunity to submit evidence that division was
appropriate, [HC], after resisting sale for 15 months,
submitted no evidence that would support an equitable
division of the Property and instead agreed that the Property
should be sold.

...

[HC] further acted unreasonably by refusing to provide
information to the Special Commissioner regarding [its]
opinion of value, and by attempting to delay consideration of
the Seven Jones offer when [HC] admits that sale is
appropriate.

¶19 HC argues that it “has always been open to selling the
Property . . . if the price and terms are right.” But the record supports the
trial court’s findings that HC maintained its position that the sale was not
an appropriate remedy throughout the proceedings (only to abandon the
position at the hearing) and that HC was not cooperative with the
Commissioner. The record also indicates HC rejected an amended offer
from Seven Jones that would have netted it nine percent of the higher, $18.3
million price tag placed upon the Property by its own expert (with the
greater amount to HC partially offset by contributions from Massey),
suggesting that no price would have been high enough and HC intended
to blindly pursue its partition in-kind defense. On this evidence, we cannot
say the findings are clearly erroneous. Because they support imposition of
a discretionary award of fees, HC has failed to prove error.

8
 MASSEY v. 1ST HC
Decision of the Court

CONCLUSION

¶20 The trial court’s orders are affirmed.

¶21 Massey requests an award of attorneys’ fees and costs
incurred on appeal pursuant to A.R.S. § 12-349(A). Although we affirm the
trial court’s sanction against HC, we cannot say its appeal is entirely
frivolous, and deny Massey’s request. However, as the successful party,
Massey is awarded his reasonable costs incurred on appeal upon
compliance with ARCAP 21(b).

9