Timeless v. Olson

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UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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

TIMELESS GLOBAL, LLC, a Nevada limited liability company;
JAMES STEWART, an individual, Plaintiffs/Appellants,

v.

JILL OLSON and SHAWN OLSON, wife and husband; and
MORGAN STANLEY SMITH BARNEY, LLC, a Delaware limited liability
company, Defendants/Appellees.

No. 1 CA-CV 15-0005
FILED 7-5-2016

Appeal from the Superior Court in Maricopa County
No. CV2013-051600
The Honorable Michael D. Gordon, Judge

AFFIRMED

COUNSEL

The Nathanson Law Firm, Scottsdale
By Philip J. Nathanson
Counsel for Plaintiffs/Appellants

Ballard Spahr LLP, Phoenix
By John G. Kerkorian, Heather Todd Horrocks
Counsel for Defendants/Appellees Jill and Shawn Olson

Lewis Roca Rothgerber Christie LLP, Phoenix
By Jesse B. Simpson, Kimberly A. Demarchi
Counsel for Defendant/Appellee Morgan Stanley Smith Barney, LLC
 TIMELESS et al. v. OLSON et al.
Decision of the Court

MEMORANDUM DECISION

Judge Randall M. Howe delivered the decision of the Court, in which
Presiding Judge Diane M. Johnsen and Judge Andrew W. Gould joined.

H O W E, Judge:

¶1 Stewart1 appeals the superior court’s orders dismissing his
amended complaint for failure to state a claim upon which relief could be
granted, denying his motions for a new trial and for relief, and granting Jill
Olson’s motion for relief. For the following reasons, we affirm.

FACTS AND PROCEDURAL HISTORY

¶2 In February 2013, Stewart filed a complaint against the Olsons
and Morgan Stanley, alleging claims of “rescission and cancellation due to
breach of condition” and damages. Stewart alleged that during the summer
of 2011, Stewart and Shawn discussed forming a company called “Timeless
Global,” where “individuals could share their documents, pictures, and/or
full-motion videos . . . , with whom they wish, to be delivered exactly when
they wish.” Stewart alleged that during those discussions, Shawn “made a
commitment to Plaintiffs, and became obligated to them, to raise the
necessary capital to begin development of the business of the Company.”

¶3 Stewart further alleged that in June 2011, Jill lent him $145,000
to conduct his business. Stewart alleged that he and Jill signed a promissory
note, securities purchase agreement, and a unit purchase warrant
(collectively, “loan documents”). The note obligated Stewart to repay the
$145,000 plus $45,000 in interest by December 1, 2012, and provided that
Stewart would use the proceeds to develop Timeless Global. The securities

1 James Stewart and Timeless Global, LLC, are plaintiffs against
defendants Jill and Shawn Olson and Morgan Stanley Smith Barney, LLC
(“MSSB”) in the amended complaint, and Morgan Stanley & Co., Inc. in the
complaint. Jill Olson filed a counterclaim against Stewart and Timeless
Global and a third-party claim against Capsoul, LLC. As far as the record
reveals, Timeless Global and Capsoul were both owned by Stewart during
the proceedings before the superior court. Consequently, for convenience,
we refer to Stewart, Timeless Global, and Capsoul collectively as “Stewart.”

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purchase agreement stated that in exchange for the $145,000 loan, Jill would
own 11% of Timeless Global, and the unit purchase warrant stated that Jill
would be entitled to purchase 11% of the outstanding shares for $190,000.
Stewart used the money to “rais[e] the capital to develop the business,”
including developing a “corporate video.”

¶4 The Olsons moved to dismiss the complaint for failure to
(1) state a claim upon which relief could be granted under Arizona Rule of
Civil Procedure 12(b)(6) and (2) allege fraud with particularity as Rule 9(b)
requires. Morgan Stanley joined the Olsons’ motion to dismiss, arguing that
it was not a party to the agreements at issue and was merely the parent
corporation of MSSB, Shawn’s employer. After oral argument and upon
Stewart’s request to amend his complaint, the superior court granted
Stewart leave to amend his complaint by April 18.

¶5 Meanwhile, Jill filed a counterclaim against Stewart and
Timeless Global, adding Capsoul as a third-party defendant. Jill alleged
that Stewart allowed Timeless Global’s limited liability company status to
lapse and in its place formed Capsoul. She alleged that Capsoul had
operations that were “virtually identical to those of Timeless” Global and
“performs the same services as Timeless” Global. Jill alleged breach of the
note, the securities purchase agreement, the covenant of good faith and fair
dealing, and fiduciary duty and claims of constructive fraud and violation
of the Arizona Uniform Fraudulent Transfer Act. Jill also alleged that
Capsoul was liable as the successor of Timeless Global and that she was
entitled to the equivalent value of 11% of shares in Capsoul and the option
of purchasing additional shares. Jill requested compensatory and punitive
damages and declaratory relief.

¶6 After Stewart did not respond to Jill’s counterclaim, Jill filed
an application for entry of default under Arizona Rule of Civil Procedure
55(a) on April 23. The superior court issued a form order acknowledging
receipt of the application for entry of default and stating that it would take
no action because “commissioners handle Rule 55(b) Default Judgment
proceedings.” Pursuant to Rule 55(a)(3), the entry of default became
effective May 7. The court ordered Jill to file all documents necessary to
support the entry of a default judgment. On May 10, Stewart answered Jill’s
counterclaim, denying the allegations and alleging the affirmative defense
of “rescission and cancellation due to breach of condition.”

¶7 The Olsons renewed their motion to dismiss the complaint
because Stewart had not met the superior court’s April 18 deadline to file
an amended complaint. Morgan Stanley joined. Jill also separately moved

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to strike Stewart’s answer to her counterclaim because Stewart filed it after
the application for entry of default became effective on May 7. After oral
argument, the superior court again ordered Stewart to file an amended
complaint and ordered him to pay the Olsons’ and Morgan Stanley’s
attorneys’ fees for appearing at the hearing as a sanction. After a subsequent
oral argument, the court granted Jill’s motion to strike Stewart’s answer.

¶8 Stewart filed an amended complaint against the Olsons and
removed Morgan Stanley, but added MSSB. Stewart alleged claims of
rescission and cancellation due to “breach of condition” and fraud, seeking
damages for the fraud claim. Stewart alleged that Shawn, “an executive and
manager of MORGAN STANLEY in Arizona,” made commitments to
Timeless to raise the necessary capital to begin development of Timeless
Global. Stewart also alleged that Shawn brought two non-disclosure
agreements (“NDAs”) to a meeting, one with his name and the other with
Jill’s name. Stewart alleged that during that meeting, Shawn and Stewart
talked about Timeless Global’s business plan and that Shawn offered to
invest $150,000. Stewart alleged that Jill signed the NDA in Shawn’s place
because of Shawn’s position at MSSB.

¶9 Stewart further alleged that he signed the loan documents
with Jill and that he received funding and began producing a video “to
entice potential investors.” But Stewart also alleged that Jill “was merely a
nominee” of Shawn and that Stewart went into business with Shawn, not
Jill. Stewart further alleged that “[a]fter all the materials were developed
and created for SHAWN OLSON’s benefit,” he “completely failed and
refused to perform his commitments, assurances, representations and
obligations, which conduct constituted an abandonment by SHAWN
OLSON of his obligations under the arrangement he made with Plaintiffs
to arrange for and provide the funding and capitalization of TIMELESS
GLOBAL.” Stewart alleged finally that Shawn took no “material steps . . .
to fulfill his commitments and obligations and, as a result, TIMELESS
GLOBAL was not able to develop its products or systems.”

¶10 The Olsons moved to dismiss the complaint for failure to state
a claim upon which relief could be granted and failure to plead fraud with
particularity, and they asked that the dismissal be with prejudice because
Stewart had the opportunity to amend his complaint and further
amendment would be futile. Specifically, the Olsons argued that a dismissal
was appropriate because the amended complaint was inconsistent with the
allegations in Jill’s counterclaim, which had become judicial admissions of
Stewart by nature of the entry of default. The Olsons also argued that the
amended complaint did not state a claim upon which relief could be

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granted because Shawn’s alleged misrepresentations were unrelated to the
loan documents, which were the sole basis for which Stewart could be
entitled to rescission. The Olsons further argued that the amended
complaint did not allege fraud with particularity and that Shawn’s alleged
misrepresentations regarded future conduct. The Olsons requested
attorneys’ fees and costs pursuant to the promissory note, securities
purchase agreement, and A.R.S. §§ 12–341 and 12–341.01.

¶11 MSSB also moved to dismiss the amended complaint under
Rule 12(b)(6). The company argued that the action was a dispute between
the Olsons and Stewart and that Stewart had not alleged that Shawn was
acting within the scope of his employment. MSSB also argued that the
amended complaint was defective because the fraud claim alleged no
actionable misrepresentations and the rescission claim failed because the
company was not a party to or beneficiary of any of the agreements at issue.

¶12 After Stewart failed to respond to their motions to dismiss,
the Olsons and MSSB moved for summary disposition. The superior court
granted the motions to dismiss the complaint “for the reasons set forth in
the respective Motions.” The court also found that Stewart’s failure to
respond constituted consent to the court’s granting of the motions. The
court ordered that its prior sanction of attorneys’ fees against Stewart
include attorneys’ fees for filing the renewed motion to dismiss. The Olsons
and MSSB filed their applications for attorneys’ fees; Stewart objected.

¶13 At a status conference in October 2013, Stewart requested a
“due process hearing” on the motions to dismiss and the attorneys’ fees
sanction. The court denied the request and ordered Stewart to file a
memorandum regarding whether Arizona Rule of Civil Procedure 54(b)
language should be included in the form of judgment. Stewart filed the
memorandum, arguing that because the issues raised in the complaint were
also raised in the answer to the counterclaim, no final judgment could be
entered because judgment was only entered on the complaint. The superior
court subsequently awarded the Olsons and MSSB reasonable fees and
costs and declined to enter a final judgment on the matter under Rule 54(b).
Instead, the court stated it would enter a final judgement “[a]t the
conclusion of all proceedings.”

¶14 Meanwhile, Jill moved for partial final default judgments
under Rules 54(b) and 55(b) on her counterclaim against Stewart. A
superior court commissioner denied the Rule 55(b) motion regarding
Stewart individually, but granted it regarding Timeless Global and
Capsoul. The commissioner concluded that because Jill did not personally

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serve Stewart with the motion for entry of default, Jill did not meet Rule
55(a)’s requirements for entry of default.

¶15 Jill moved for relief under Arizona Rule of Civil Procedure
60(c)(6) from the superior court’s order referring the default matter to a
commissioner. Jill argued that all proceedings before the superior court
should be heard by the same judge, so that the court could enter a single
“comprehensive judgment.” She contended that the superior court had
already declined to issue partial judgments on particular claims and
defenses and had ordered the parties to submit final forms of judgment at
the conclusion of all proceedings. A month later, Jill moved for summary
disposition of her motion for relief because Stewart had not responded.

¶16 The superior court scheduled a hearing regarding Jill’s
motion for application for the entry of a default judgment for March 2014.
The Olsons notified Stewart and MSSB of the hearing and their intent to
request entry of a default judgment and to submit final forms of judgment
resolving all claims and counterclaims. The superior court continued the
default hearing to April, however, and the Olsons once again notified the
parties of their intent to request a default judgment. The court also ordered
Stewart to respond to Jill’s Rule 60 motion. Stewart responded, arguing that
the Olsons’ request for relief was merely a “horizontal appeal” of the
commissioner’s order and Rule 60 did not authorize any relief because the
Olsons were merely disagreeing with the commissioner’s order.

¶17 Jill replied that she was entitled to relief because the
commissioner’s order conflicted with the superior court’s order. She
contended that the commissioner’s order requiring her to once again serve
Stewart with the application for default contradicted (1) the superior court’s
order striking Stewart’s answer to her counterclaim and (2) the superior
court clerk’s entering the default. The superior court granted Jill’s Rule 60
motion. The court found that the commissioner’s ruling was “manifestly
erroneous” and that the “law of the case” doctrine—a judicial policy of not
reopening questions previously decided in the same case by the same
court—did not prevent the superior court from revisiting the
commissioner’s decision. The court concluded that “under the
circumstances presented, personal service of the application on both the
individual and his attorney was not necessary.”

¶18 The superior court entered a final judgment in favor of the
Olsons and MSSB and certified the judgment pursuant to Rule 54(c). The
court dismissed Stewart’s complaint with prejudice and granted the Olsons
attorneys’ fees and costs and MSSB attorneys’ fees, costs, and post-

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judgment interest. On the counterclaim, the court entered judgment in
favor of Jill and against Stewart for $190,000 in damages, pre- and post-
judgment interest, attorneys’ fees, and 11% of shares in Capsoul or an
equivalent value. The court also held that Jill retained an option to purchase
additional ownership interest in Capsoul.

¶19 Stewart moved for a new trial under Rule 59(a). He argued
that the complaint stated a claim upon which relief could be granted, that
he was not in default of the counterclaim, and that the superior court erred
in granting Jill’s Rule 60 motion. Stewart also moved for relief under Rule
55(c) and 60(c) from the default judgment and the order striking his answer
to the counterclaim. After briefing, the superior court denied Stewart’s
motions. Stewart timely appealed; after this Court stayed the appeal for the
superior court to sign one of its orders, we reinstated the appeal.

DISCUSSION

1. Motion for a New Trial

¶20 Stewart argues that the superior court erred in denying his
motion for a new trial because the complaint stated claims for which relief
could be granted. We review the denial of a motion for a new trial for an
abuse of discretion, Summers v. Gloor, 239 Ariz. 222, 225 ¶ 10, 368 P.3d 930,
933 (App. 2016), but we review de novo the court’s order dismissing a
complaint under Rule 12(b)(6), Coleman v. City of Mesa, 230 Ariz. 352, 355–
56 ¶ 7, 284 P.3d 863, 866–67 (2012). In determining whether a complaint
states a claim upon which relief may be granted, we assume the truth of all
well-pled factual allegations and resolve all reasonable inferences in the
plaintiffs’ favor, but “mere conclusory statements are insufficient to state a
claim upon which relief can be granted.” Cullen v. Auto-Owners Ins. Co., 218
Ariz. 417, 419 ¶ 7, 189 P.3d 344, 346 (2008).

¶21 In reviewing whether the dismissal was appropriate under
Rule 12(b)(6), we consider the complaint and written instruments attached
to it. See Ariz. R. Civ. P. 10(c) (“Statements in a pleading may be adopted by
reference in a different part of the same pleading or in another pleading or
in a motion. A copy of a written instrument which is an exhibit to a pleading
is a part thereof for all purposes.”); Cullen, 218 Ariz. at 419 ¶ 7, 189 P.3d at
346. Dismissal is appropriate under Rule 12(b)(6) when, as a matter of law,
plaintiff would not be entitled to relief under any interpretation of the facts
susceptible of proof. Rodriguez v. Fox News Network, L.L.C., 238 Ariz. 36, 38–
39 ¶ 5, 356 P.3d 322, 324–25 (App. 2015). Because the amended complaint

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did not state a claim upon which relief could be granted, the superior court
did not err in dismissing Stewart’s complaint under Rule 12(b)(6).

1(a). The Claims Against the Olsons

¶22 In count 1, Stewart sought rescission and cancellation of the
loan documents because of an alleged “breach of condition” on Shawn’s
part that precluded the written agreements from taking effect. Stewart
alleged that Shawn made promises that Stewart relied on and that as a
result of Shawn’s failure to fulfill his promises, Stewart was unable to
“develop [his] products and systems.” As an initial matter, rescission is not
a cause of action, but a remedy that may be sought based on various
theories, including fraud and breach of contract. See Jennings v. Lee, 105 Ariz.
167, 461 P.2d 161 (1969) (action for rescission based on fraud); Earven
v. Smith, 127 Ariz. 354, 621 P.2d 41 (App. 1980) (action for rescission based
on breach of contract; stating that upon breach, the aggrieved party has
three remedies: rescission, continued performance, or termination and
damages). We therefore construe Stewart’s claim as seeking rescission as a
remedy for an alleged “breach of a condition.”

¶23 The “remedy of rescission abrogates the contract and undoes
it from the beginning; that is, not merely to release the parties from further
obligation to each other in respect to the subject of the contract, but to annul
the contract and restore the parties to the relative positions which they
would have occupied if no such contract had ever been made.” Hall v. Read
Dev., Inc., 229 Ariz. 277, 285 ¶ 30, 274 P.3d 1211, 1219 (App. 2012) (internal
quotation marks and citation omitted). Rescission therefore restores the
parties to the status quo before entering into the contract. Reed v. McLaws, 56
Ariz. 556, 563, 110 P.2d 222, 225 (1941). “The general rule is that a party
seeking to rescind a contract must restore or offer to restore to the other
party that which he has received under the contract.” Jennings, 105 Ariz. at
171, 461 P.2d at 165.

¶24 Here, Stewart has failed to allege that he offered to pay back
the $145,000 loan from Jill. In fact, the amended complaint alleged that
Stewart entered into contracts with Jill to obtain the loan, he received the
loan, and he used the loan proceeds in developing Timeless Global. Because
Stewart did not offer to restore Jill the loan proceeds, Stewart is not entitled
to rescission of the loan documents. Consequently, Stewart has not alleged
a claim upon which relief could be granted in count 1.

¶25 In count 2, Stewart alleged that Shawn made
misrepresentations with knowledge and intent to defraud him. All

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allegations of fraud must state the circumstances constituting fraud with
particularity. Ariz. R. Civ. P. 9(b). While no “magic language” is required,
a claimant must plead all the essential elements of fraud in the complaint.
Green v. Lisa Frank, Inc., 221 Ariz. 138, 155–56 ¶ 53, 211 P.3d 16, 33–34 (App.
2009). A showing of actual fraud requires: “(1) a representation, (2) its
falsity, (3) its materiality, (4) the speaker’s knowledge of its falsity or
ignorance of its truth, (5) the speaker’s intent that the information should
be acted upon by the hearer and in a manner reasonably contemplated,
(6) the hearer’s ignorance of the information’s falsity, (7) the hearer’s
reliance on its truth, (8) the hearer’s right to rely thereon, and (9) the hearer’s
consequent and proximate injury.” Taeger v. Catholic Family & Cmty. Servs.,
196 Ariz. 285, 294 ¶ 28, 995 P.2d 721, 730 (App. 1999).

¶26 Here, Stewart’s complaint does not contain short and plain
statements alleging with particularity the nine elements of actual fraud.
The amended complaint does not allege that Shawn made
misrepresentations without the intent to perform. Specifically, it does not
allege that Shawn knew that the misrepresentations were false at the time
of making them or was ignorant of their truth; that he made them with the
intent that Stewart would rely upon them in a manner reasonably
contemplated; and that Stewart was ignorant of the misrepresentation’s
falsity. Consequently, Stewart has not alleged a claim upon which relief
could be granted in count 2. Accordingly, because the amended complaint
did not establish a claim upon which relief could be granted, the superior
court did not err in dismissing it under Rule 12(b)(6).

1(b). The Claims Against MSSB

¶27 Because the amended complaint did not state a claim upon
which relief could be granted against the Olsons and because the claims
against MSSB are secondary liability claims predicated upon the alleged
conduct of Shawn as an MSSB employee, Stewart’s failure to state a claim
for relief against the Olsons required dismissal of the claims against MSSB.
See Torres v. Kennecott Copper Corp., 15 Ariz. App. 272, 274, 488 P.2d 477, 479
(1971) (holding that employee’s dismissal with prejudice barred plaintiff’s
vicarious liability claims against employer where employer’s “liability
[wa]s based solely on the negligent acts of [employee]”). Thus, the superior
court did not err in granting MSSB’s motion to dismiss under Rule 12(b)(6).

2. Motions for Relief

¶28 Stewart next argues that the superior court erred in denying
his Rule 60(c)(1) motion for relief and granting Jill’s Rule 60(c)(6) motion. A

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superior court enjoys broad discretion in deciding whether to set aside
judgments under Rule 60(c). Woodbridge Structured Funding, LLC v. Ariz.
Lottery, 235 Ariz. 25, 29 ¶ 21, 326 P.3d 292, 296 (App. 2014). We review its
decision for an abuse of discretion. Rogone v. Correia, 236 Ariz. 43, 48 ¶ 12,
335 P.3d 1122, 1127 (App. 2014). Because Stewart was not entitled to relief
under Rule 60(c), but Jill was, the superior court did not err in denying
Stewart’s motion and granting Jill’s motion.

2(a). Default Judgment

¶29 Stewart first argues that the superior court erred in denying
his Rule 60(c) motion because he did not default on Jill’s counterclaim. A
court may set aside an entry of default for “good cause shown” and a
default judgment in accordance with Rule 60(c). Ariz. R. Civ. P. 55(c). Under
Rule 60(c), a court may relieve a party from a final judgment for “mistake,
inadvertence, surprise or excusable neglect.” Ariz. R. Civ. P. 60(c)(1). “The
law favors resolution on the merits and therefore resolves all doubts in
favor of the moving party.” Richas v. Superior Court, 133 Ariz. 512, 514, 652
P.2d 1035, 1037 (1982). Thus, a superior court has broad discretion and we
will not reverse that court’s decision on a motion to set aside a default
judgment absent a clear abuse of that discretion. See Ruesga v. Kindred
Nursing Ctrs., L.L.C., 215 Ariz. 589, 595 ¶ 17, 161 P.3d 1253, 1259 (App. 2007).
A court abuses its discretion when no evidence supports its conclusion or
the reasons given are clearly untenable, legally incorrect, or amount to a
denial of justice. Searchtoppers.com, L.L.C. v. TrustCash LLC, 231 Ariz. 236,
241 ¶ 20, 293 P.3d 512, 517 (App. 2012).

¶30 Stewart argues that because the superior court’s order stated
that it took “no action” on Jill’s application for entry of default, it “negates
any ‘acceptance’ required by [Rule] 55(a)(2).” But Rule 55(a) states that the
“acceptance by the clerk of the filing of the application for entry of default
constitutes the entry of default.” Ariz. R. Civ. P. 55(a)(2). Further, the
default “shall be effective ten (10) days after the filing of the application for
entry of default,” unless the opposing party defends the action before the
time expires. Ariz. R. Civ. P. 55(a)(3)–(4).

¶31 Here, Stewart was not entitled to Rule 60(c) relief. After
Stewart failed to respond to Jill’s counterclaim, Jill filed and served the
application for entry of default on April 23; therefore, Stewart had until
May 7 to respond to the counterclaim. Stewart did not file an answer until
May 10. The court’s statement regarding taking “no action” referred to the
entry of the default judgment under Rule 55(b); the court had already
acknowledged receipt of Jill’s application for default. Consequently,

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because Stewart did not file an answer before the default became effective,
the superior court did not err in striking Stewart’s answer and finding that
he defaulted on Jill’s counterclaim.

2(b). Horizontal Appeal

¶32 Stewart next argues that the superior court erred in granting
Jill’s Rule 60(c) motion because she was improperly “horizontally”
appealing the commissioner’s order to the superior court. Under Rule
60(c)(6), a court may relieve a party from a final judgment for any reason
justifying relief, provided that the movant can show “extraordinary
circumstances of hardship or injustice justifying relief” and “a reason for
setting aside the judgment other than one of the reasons set forth in the
preceding five clauses of rule 60(c).” Hilgeman v. Am. Mortg. Sec., Inc., 196
Ariz. 215, 220 ¶ 15, 994 P.2d 1030, 1035 (App. 2000). Courts must consider
the totality of facts and circumstances to determine whether Rule 60(c)(6)
relief is appropriate. Amanti Elec., Inc. v. Engineered Structures, Inc., 229 Ariz.
430, 432 ¶ 7, 276 P.3d 499, 501 (App. 2012).

¶33 The policy against horizontal appeals forms part of the
general concept of “law of the case” as applied to decisions of the same
court. Powell-Cerkonery v. TCR-Mont. Ranch Joint Venture, II, 176 Ariz. 275,
278, 860 P.2d 1328, 1331 (App. 1993). A party seeks a “horizontal appeal”
when it requests a second trial judge to reconsider the decision of the first
trial judge in the same matter, even though no new circumstances have
arisen in the interim and no other reason justifies reconsideration. Hibbs v.
Calcot, Ltd., 166 Ariz. 210, 214, 801 P.2d 445, 449 (App. 1990). The doctrine
is one of procedure, not of substance, however; a “court does not lack the
power to change a ruling simply because it ruled on the question at an
earlier stage.” Hall v. Smith, 214 Ariz. 309, 317 ¶ 28, 152 P.3d 1192, 1200
(App. 2007). Because of the “potentially harsh nature of the doctrine,”
Powell-Cerkonery, 176 Ariz. at 279, 860 P.2d at 1332, we will not apply it if
doing so would result in a “manifestly unjust decision,” Sibley v. Jeffreys, 81
Ariz. 272, 276, 305 P.2d 427, 429 (1956). Similarly, reliance upon law of the
case does not justify a court’s refusal to reconsider a ruling when an error
in the first decision renders it “manifestly erroneous.” Donlann v. Macgurn,
203 Ariz. 380, 386 ¶ 29, 55 P.3d 74, 80 (App. 2002).

¶34 Here, Jill was entitled to relief under Rule 60(c). The superior
court found that the commissioner’s decision was manifestly erroneous,
and therefore, the law-of-the-case doctrine did not preclude it from
revisiting the commissioner’s decision. The court stated “[t]o be clear,”
“under the circumstances presented, personal service of the application on

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both the individual and his attorney was not necessary.” Moreover, the
record shows that the superior court reached this conclusion after holding
a default hearing. When no transcript is provided on appeal, the reviewing
court assumes that the record supports the superior court’s decision. Kline
v. Kline, 221 Ariz. 564, 572 ¶ 33, 212 P.3d 902, 910 (App. 2009). The duty to
order and include the transcript in the record on appeal was Stewart’s, Ariz.
R. Civ. App. P. 11(b), and he failed to do so. Consequently, the superior
court did not err in granting Jill’s Rule 60(c) motion for relief.

3. Attorneys’ Fees on Appeal

¶35 The Olsons request attorneys’ fees incurred on appeal
pursuant to the loan documents and A.R.S. § 12–341.01. Because a
contractual basis exists for Jill’s fees in enforcing her contractual rights
against Stewart, she is entitled to her fees under the loan documents and
A.R.S. § 12–341.01 for defending the judgment regarding the counterclaim
upon compliance with Arizona Rule of Civil Appellate Procedure 21. See
F.D.I.C. v. Adams, 187 Ariz. 585, 595, 931 P.2d 1095, 1105 (App. 1996) (“[A]
contractual provision for attorneys’ fees will be enforced according to its
terms.”). Moreover, because the allegations in the complaint arose out of
the Olsons’ alleged breach of obligations in connection with enforcing the
loan documents, the claims arose out of contract. Thus, the Olsons are
entitled to fees for defending the judgment regarding the complaint under
A.R.S. § 12–341.01 upon compliance with Rule 21. See A.R.S. § 12–341.01
(“In any contested action arising out of a contract, express or implied, the
court may award the successful party reasonable attorney fees.”).

¶36 MSSB requests attorneys’ fees under A.R.S. § 12–349 because
(1) Stewart had no claims against MSSB based on its own acts or as an
employer of Shawn; (2) Stewart did not address the respondeat superior issue
in his briefs, despite it being the basis for the superior court’s dismissal of
MSSB; and (3) Stewart failed to respond to MSSB’s repeated requests to
dismiss it from the appeal. But because the record does not show that
Stewart engaged in any of the actions justifying an award of attorneys’ fees
to MSSB under A.R.S. § 12–349, we deny MSSB’s request.

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CONCLUSION

¶37 For the foregoing reasons, we affirm.

:AA

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