                               NOTICE: NOT FOR PUBLICATION.
     UNDER ARIZ. R. SUP. CT. 111(c), THIS DECISION DOES NOT CREATE LEGAL PRECEDENT
                     AND MAY NOT BE CITED EXCEPT AS AUTHORIZED.




                                      IN THE
              ARIZONA COURT OF APPEALS
                                  DIVISION ONE


    MICHAEL RZENDZIAN; PAMELA RZENDZIAN and RICHARD
        RZENDZIAN, husband and wife, Plaintiffs/Appellants,

                                          v.

  MARSHALL & ILSLEY BANK dba M&I BANK, a Wisconsin banking
                corporation, Defendant/Appellee.

                              No. 1 CA-CV 13-0058
                               FILED 07-17-2014


           Appeal from the Superior Court in Maricopa County
                          No. CV2011-091648
                  The Honorable Mark F. Aceto, Judge

                                    AFFIRMED




Hadous Co PLLC, Mesa
By Nemer N. Hadous
and
Price Law Group APC, Tempe
By David A. Chami
Co-Counsel for Plaintiffs/Appellants

Greenberg Traurig LLP, Phoenix
By Brian J. Schulman, Nedda R. Gales
Counsel for Defendant/Appellee
                        RZENDZIAN v. M&I BANK
                           Decision of the Court



                      MEMORANDUM DECISION

Judge John C. Gemmill delivered the decision of the Court, in which
Presiding Judge Maurice Portley and Judge Kent C. Cattani joined.


G E M M I L L, Judge:

¶1          Michael, Pamela, and Richard Rzendzian appeal from the
grant of summary judgment on their claims against Marshall & Ilsely
Bank (“M&I”). We affirm.

                             BACKGROUND

¶2            Pamela and Richard Rzendzian entered into an asset
purchase agreement (“Agreement”) in September of 2004 to purchase
property that contained a gas station and convenience store for $2,000,000.
Subsequently, Terra Properties RPM, LLC (“Terra”), managed by Michael
Rzendzian, was nominated as the buyer under the Agreement. The
$2,000,000 purchase price was satisfied, in part, by a $1,000,000 loan from
M&I to Terra, which executed a note to repay the loan (the “Terra Note”).
Two personal guaranties ("Guaranties") securing the payment of the Terra
Note were executed, one by Pamela and Richard Rzendzian and one by
Michael Rzendzian.

¶3           Approximately two months after Terra’s inspection period
ended, M&I retained Thoms & Associates Appraisal & Consulting, LLC
(“Thoms”) to prepare an appraisal on the property. M&I provided Thoms
with an “internal bank write-up” that both informed Thoms of the
property’s $2,000,000 purchase price and noted that the property was
expected to appraise at $2,000,000. Additionally, the write-up stated that
the Seller purchased the gas station from Giant Industries in October of
2003 as part of a deal that sold three separate stations and that the Seller
owned fourteen gas stations in the Phoenix metropolitan area. It was later
discovered that, six months earlier, another appraisal was prepared by a
different appraiser for a different bank (“Sell Appraisal”) that had valued
the property at $700,000. Thoms discovered in the course of its appraisal
that the Seller had purchased the property in July 2004 for $675,000.
Nothing in the record, however, demonstrates that M&I knew of the Sell
Appraisal at the time it hired Thoms or that Thoms knew of it when
conducting its appraisal.


                                     2
                       RZENDZIAN v. M&I BANK
                          Decision of the Court

¶4           Thoms appraised the property at $2,010,000. At closing,
M&I told the Rzendzians that the property appraised at $2,010,000, but the
Rzendzians were not provided with a copy of the appraisal or informed of
the earlier Sell Appraisal. The Rzendzians never obtained their own
appraisal. The Thoms Appraisal expressly provided that it was prepared
for M&I, the Southwest Business Administration, and the Small Business
Administration, that they were the intended users, and that the intended
use was for loan underwriting purposes. Ultimately, Terra defaulted on
the Terra Note in 2010.

¶5            After Terra defaulted, the Rzendzians sued M&I, seeking
damages for breach of contract, breach of the implied covenant of good
faith and fair dealing, and unjust enrichment. The trial court granted
summary judgment for M&I on each claim and awarded attorneys’ fees.
The Rzendizians timely appealed, and we have jurisdiction pursuant to
Arizona Revised Statutes (“A.R.S.”) sections 12-120.21(A)(1) and -
2101(A)(1).

                               ANALYSIS

¶6             Summary judgment is appropriate if “there is no genuine
dispute as to any material fact and the moving party is entitled to a
judgment as a matter of law.” Ariz. R. Civ. P. 56(c)(1). We view the facts
and the inferences arising from those facts in the light most favorable to
the Rzendzians as the nonmoving party. Best Choice Fund, LLC v. Low &
Childers, P.C., 228 Ariz. 502, 506, ¶ 10, 269 P.3d 678, 682 (App. 2011). “We
determine de novo whether any genuine issues of material fact exist and
whether the trial court properly applied the law.” Id.

I.    The Guaranties and the Implied Covenant of Good Faith and Fair
      Dealing

¶7             The Rzendzians argue that the trial court erred in granting
summary judgment on their claim that M&I breached the covenant of
good faith and fair dealing implied in the Guaranties by causing them to
rely on factual and legal inaccuracies. Specifically, the Rzendzians argue
that the trial court improperly considered the absence of an express
contractual duty in the Guaranties to disclose the Thoms Appraisal as
dispositive of whether M&I owed a duty under the implied covenant. To
prevail on a claim for breach of the implied covenant of good faith and
fair dealing, a plaintiff must demonstrate that: (1) the defendant exercised
express discretion in a way that was inconsistent with the plaintiff’s
reasonable expectations regarding the contract or (2) the defendant acted


                                     3
                       RZENDZIAN v. M&I BANK
                          Decision of the Court

in a manner not expressly excluded by the contract’s terms but that
nevertheless adversely impacted the plaintiff’s reasonably expected
benefits of the bargain. Bike Fashion Corp. v. Kramer, 202 Ariz. 420, 424, ¶
14, 46 P.3d 431, 435 (App. 2002).

¶8             In granting summary judgment, the trial court held that the
implied covenant of good faith and fair dealing only impacted the
Rzendzians’ expected benefit for the Guaranties—specifically, that the
loan from M&I to Terra would be made. The trial court found that
because lenders often obtain pre-loan appraisals for their own benefit,
which are not required to be shared with borrowers or guarantors, the
Rzendzians did not have a reasonable expectation that any such
appraisals would be disclosed. Accordingly, the trial court held that M&I
did not breach any implied covenant of good faith and fair dealing by
failing to disclose it.

¶9            The Rzendzians contend that the trial court was required to
look beyond the express conditions of the Guaranties and consider
whether M&I’s failure to disclose the Thoms Appraisal was intended to
mislead them into signing the Guaranties. We conclude otherwise,
however, because the duty of good faith, even if it “extends beyond the
written words of the contract,” remains limited to the scope of the contract
between the parties when the damages claimed are based on a breach of
contract. See Wells Fargo Bank v. Ariz. Laborers, Teamsters, and Cement
Masons Local No. 395 Pension Trust Fund, 201 Ariz. 474, 490-91, ¶¶ 59-63, 38
P.3d 12, 28-29 (2003) (noting that “implied terms” can exist in a contract to
establish a covenant of good faith and fair dealing, but claims for contract
damages are governed by whether an agreement between parties
established a duty that was breached). Furthermore, this court has
previously noted that a breach of the implied covenant of good faith and
fair dealing cannot contradict an express contractual term. Bike Fashion
Corp., 202 Ariz. at 423, ¶14, 46 P.3d at 435. Because the Rzendzians were
not parties to the Agreement or the Terra Note, we only look to the
Guaranties to determine whether any duty arose.

¶10           The Guaranties provide that they exist to “induce” M&I “to
extend credit or to grant or continue other credit accommodations” to
Terra. No amount of credit is mentioned in the Guaranties. The
Guaranties likewise state:

      REPRESENTATIONS: The undersigned [guarantor]
      acknowledges and agrees that Lender (a) has not made any



                                     4
                       RZENDZIAN v. M&I BANK
                          Decision of the Court

       representations or warranties with respect to, (b) does not
       assume any responsibility to the undersigned for, and (c) has
       no duty to provide information to the undersigned
       regarding, the enforceability of any of the Obligations or the
       financial condition of any Debtor or guarantor.           The
       [guarantor]    has     independently       determined      the
       creditworthiness of Debtor [Terra] and the enforceability
       of the Obligations [under the Terra Note] and until the
       Obligations are paid in full will independently and
       without reliance on Lender continue to make such
       determinations.

(Bold original).

¶11            The Rzendzians assert that had they known about the
Thoms Appraisal or the information that suggested the property was only
worth $700,000, they would not have signed the Guaranties. This
argument fails to establish a breach of the implied covenant of good faith
and fair dealing, however, because the Guaranties cannot be read to
establish a reasonable expectation that M&I would disclose any appraisal,
and neither did M&I’s non-disclosure of the Thoms Appraisal adversely
impact the Rzendzians’ “reasonably expected benefits of the bargain.” See
Bike Fashion Corp., 202 Ariz. at 424, ¶ 14, 46 P.3d at 435. As the trial court
noted, the Rzendzians benefit in executing the Guaranties was to induce
M&I into providing a loan for Terra, which occurred. Even if the
Guaranties were read in conjunction with the obligations imposed by the
Terra Note, the Rzendzians’ argument would necessarily mean that they
relied on information provided by M&I on the enforceability of the
obligations under the Terra Note, despite agreeing to an independent duty
to determine whether the obligations being imposed by M&I on Terra
were achieving the benefit of that separate bargain. The Rzendzians’
reliance on M&I cannot give rise to a duty on M&I based on an implied
covenant when the express terms of the Guaranties imposes a
responsibility on the Rzendzians to independently determine whether
Terra was achieving the expected benefit of its bargain under the Terra
Note. Accordingly, we conclude that the trial court did not err in granting
summary judgment.

II.    Unjust Enrichment

¶12            The Rzendzians argue that their unjust enrichment claim
arises out of the alleged bad faith action of M&I in concealing the Thoms
Appraisal. In addition to arguing the merits of that claim, M&I argued


                                      5
                        RZENDZIAN v. M&I BANK
                           Decision of the Court

below and on appeal that the claim was barred by the statute of
limitations. The trial court granted M&I summary judgment on the merits
of the Rzendzians’ unjust enrichment claim without reaching the statute of
limitations issue. Although the trial court adjudicated this claim on the
merits, we resolve the issue on appeal by application of the applicable
statute of limitations. We may affirm if the trial court’s judgment is
correct for any reason. City of Phoenix v. Geyler, 144 Ariz. 323, 330, 697 P.2d
1073, 1080 (1985).

¶13             The statute of limitations on a claim for unjust enrichment is
four years, as established by A.R.S. § 12-550. See San Manuel Copper Corp.
v. Redmond, 8 Ariz. App. 214, 218, 445 P.2d 162, 166 (App. 1968) (stating
“we would have no difficulty in finding that a suit for unjust enrichment .
. . is controlled by A.R.S. § 12-550”). Michael and Pamela Rzendzian both
testified that they first became familiar with the Thoms appraisal in mid-
2006. Because the Rzendzians’ unjust enrichment claim arises out of their
lack of knowledge about the Thoms appraisal, their discovery of the
Thoms appraisal’s existence began the four year statute of limitations
period, which expired in mid-2010. Because the Rzendzians did not file
their lawsuit until February of 2011, their unjust enrichment claim is
untimely. The trial court did not err in granting summary judgment on
the unjust enrichment claim.

III.   Trial Court’s Application of Rule 17(a)

¶14           The Rzendzians challenge the trial court’s denial of their
motion under Arizona Rule of Civil Procedure 17(a) to join or substitute
Terra as the plaintiff. The meaning and effect of a procedural rule is a
question of law that we review de novo. Preston v. Kindred Hospitals W.,
L.L.C., 225 Ariz. 223, 225, ¶ 8, 236 P.3d 450, 452 (App. 2010) aff'd, 226 Ariz.
391, 249 P.3d 771 (2011).

¶15           In granting summary judgment, the trial court additionally
ruled that the Rzendzians were not parties to the Terra Note and had “no
standing to sue based on that contract.” The trial court, with a different
judge presiding, in June 2011 had previously denied M&I’s Rule 12
motion that alleged the Rzendzians lacked standing. Twenty-four days
after summary judgment was granted in September 2012, the Rzendzians
filed a motion under Rule 17(a) to substitute Terra Properties as plaintiffs
for the claims on the Terra Note. This motion was denied by the trial
court without comment.




                                      6
                       RZENDZIAN v. M&I BANK
                          Decision of the Court

¶16          In relevant part, Rule 17(a) provides:

      No action shall be dismissed on the ground that it is not
      prosecuted in the name of the real party in interest until a
      reasonable time has been allowed after objection for
      ratification of commencement of the action by, or joinder or
      substitution of, the real party in interest.

Our supreme court has endorsed an application of Rule 17(a) that
recognizes the discretion of trial courts, under Rule 15(a), to deny leave to
amend when “there has been undue delay, dilatory action, or undue
prejudice.” See Preston, 226 Ariz. at 394, ¶ 13, 249 P.3d at 774 (quoting
Owen v. Superior Court (Donald), 133 Ariz. 75, 79, 649 P.2d 278, 282 (1982)).
Here, the Rzendzians allege prejudice only to the extent that “equity
commands they be afforded reasonable opportunity to join/substitute
Terra Properties.”

¶17           This court has previously recognized that Rule 17(a) exists
“to enable the defendant to avail himself of the evidence and defenses that
he has against the real party in interest and to assume the finality of the
results in the application of res judicata.” Cruz v. Lusk Collection Agency,
119 Ariz. 356, 358, 580 P.2d 1210, 1212 (App. 1978). On this record, we
find nothing to suggest that the trial court did not adequately follow Rule
17(a) in denying the Rzendzians’ motion. Indeed, the Rzendzians should
have realized when M&I first raised the standing question in April of 2011
that Terra Properties may have been an appropriate plaintiff or a real
party in interest that needed to be joined in their action. Under Rule 15(a)
the Rzendzians could have sought leave to join Terra at any point between
April 2011 and September 2012.

¶18            With this in mind, we note that the rule places the burden on
the plaintiff to ensure that a real party in interest is properly joined. The
Rzendzians’ argument that they relied on the trial court’s previous denial
of M&I’s Rule 12 motion in assuming the question of standing resolved is
to no avail because the court’s denial of the Rule 12 motion did not create
a different contractual relationship between the Rzendzians and M&I
beyond what was defined by the terms of the Guaranties. Accordingly,
the trial court, in reviewing the substantive evidence on summary
judgment, properly determined that the contracts at issue did not
establish standing for the Rzendzians as alleged. See generally Orme Sch. v.
Reeves, 166 Ariz. 301, 309, 802 P.2d 1000, 1008 (1990). With over a year
between M&I’s first argument that suggested the Rzendzians were not



                                     7
                       RZENDZIAN v. M&I BANK
                          Decision of the Court

real parties in interest and M&I’s motion for summary judgment raising
the same question, the Rzendzians had “a reasonable time” to seek to
include Terra as a plaintiff. After the court had granted summary
judgment to M&I, the Rzendzians were not entitled to use Rule 17(a) to
breathe new life into their claims. At that point in time, M&I would have
been prejudiced if the Rzendzians were allowed to add a new party
because the claims against M&I had been resolved and M&I would be
subjected to new litigation based on a contractual relationship that was
not alleged in the instant action. Moreover, even if the Rzendzians had
filed a Rule 15(a) motion instead of a Rule 17(a) motion, the trial court was
properly within its discretion to deny it. We conclude therefore that the
trial court did not err or misapply Rule 17(a) in denying the Rzendzians’
motion.

IV.    Attorneys’ Fees Award

¶19           The Rzendzians argue that the trial court abused its
discretion in awarding attorneys’ fees to M&I because the trial court erred
in determining that they had not demonstrated extreme hardship.
“Extreme hardship” is a factor that may assist a trial court in determining
the appropriateness of attorneys’ fees. Associated Indem. Corp. v. Warner,
143 Ariz. 567, 570, 694 P.2d 1181, 1184 (1985). To raise the issue of extreme
hardship, the party asserting it must “present specific facts by affidavit or
testimony.” Woerth v. City of Flagstaff, 167 Ariz. 412, 420, 808 P.2d 297, 305
(App. 1990). We apply an abuse of discretion standard when reviewing a
trial court’s decision to award attorneys’ fees in the face of a plea of
hardship. See Scottsdale Memorial Health Systems, Inc. v. Clark, 164 Ariz.
211, 217, 791 P.2d 1094, 1100 (App. 1990) (reviewing a determination of
extreme hardship for an abuse of discretion). Evidence of hardship,
however, only obligates the court to consider it as a factor in determining
an attorneys’ fees award. See Rowland v. Great States Ins. Co., 199 Ariz. 577,
587 n.7, ¶ 32, 20 P.3d 1158, 1168 n.7 (App. 2001) (observing that a trial
court could not consider hardship as a factor for determining attorneys’
fees because the party asserting hardship provided no evidence of it).

¶20           Here, the Rzendzians raised the issue of extreme hardship
by presenting sworn declarations, several documents related to an
individual retirement account in Richard Rzendzian’s name with funds of
approximately $420,000, a letter from the Department of the Treasury
stating that Michael Rzendzian owed over $600,000 to the Small Business
Administration, and a Federal Reserve Bank of Chicago document entitled
“Modern Money Mechanics: A Workbook on Bank Reserves and Deposit



                                      8
                       RZENDZIAN v. M&I BANK
                          Decision of the Court

Expansion.” In awarding attorneys’ fees, the trial court stated that it had
considered the applicable law, “including the factors set out in Associated
Indem. Corp. v. Warner.” The trial court specifically concluded that the
evidence provided by the Rzendzians did not show that an attorneys’ fees
award would cause extreme hardship. Because the trial court noted that it
considered the applicable law and made its determination accordingly, we
conclude on this record that the trial court did not abuse its discretion. Cf.
Hart v. Seven Resorts Inc., 190 Ariz. 272, 284, 947 P.2d 846, 858 (App. 1997)
(reversing an award of attorneys’ fees because the trial court based its
ruling on unsupported factual claims).

                              CONCLUSION

¶21          In our discretion, we deny M&I’s request for attorneys’ fees
on appeal, but we will award taxable costs to M&I as the prevailing party
upon its compliance with ARCAP 21. We affirm the judgment entered in
favor of M&I against the Rzendzians.




                                  :gsh




                                      9
