                               NOTICE: NOT FOR PUBLICATION.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


   GLIC REAL ESTATE HOLDING, LLC, a Delaware limited liability
                  company, Plaintiff/Appellee,

                                          v.

 NORTHVIEW HOLDINGS, LLC, an Arizona limited liability company;
   TOWN LAKE ENTERPRISES, L.L.C., an Arizona limited liability
      company; GERALD FANDYTIS, Defendants/Appellants.

                              No. 1 CA-CV 13-0065
                               FILED 3-27-2014


           Appeal from the Superior Court in Maricopa County
                          No. CV2011-019852
                The Honorable Lisa Daniel Flores, Judge

                                    AFFIRMED


                                    COUNSEL

Quarles & Brady, LLP, Phoenix
By Isaac M. Gabriel and Amy D. Reyes
Counsel for Plaintiff/Appellee

Berens Kozub Kloberdanz & Blonstein, PLC, Scottsdale
By Daniel L. Kloberdanz
Counsel for Defendants/Appellants
                           GLIC v. NORTHVIEW
                           Decision of the Court



                      MEMORANDUM DECISION

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


C A T T A N I, Judge:

¶1             Northview Holdings, LLC, Town Lake Enterprises, LLC,
and Gerald Fandytis (collectively, “Appellants”) appeal from the entry of
summary judgment in favor of GLIC Real Estate Holding, LLC, (“GLIC”)
and the denial of Appellants’ cross-motion for summary judgment.
Appellants assert in particular that the superior court erred by (1) finding
that the trustees’ sale of the subject property did not extinguish
Appellant’s liability for accrued property taxes as of the date of the sale, or
alternatively, by determining that property taxes began to accrue on the
first date of every year, rather than on the date the taxes were due, and (2)
rejecting Appellant’s claim that GLIC failed to mitigate its damages. For
reasons that follow, we affirm.

              FACTS AND PROCEDURAL BACKGROUND

¶2           In August 2006, GLIC (through a predecessor in interest)
loaned $4.2 million to Northview Holdings, LLC (“Northview”), secured
by a Promissory Note (“Note”) and Deed of Trust, Assignment of Rents
and Leases, and Security Agreement on property located near the
Arrowhead Mall in Glendale, Arizona (“Property”). The Note was non-
recourse, limiting the lender’s remedy upon default to recovery of the
Property, but the Note contained specific full recourse “carve-outs” for
accrued taxes and other assessments. Paragraph 11(b) of the Note
provided specifically as follows:

       Notwithstanding [non-recourse provisions], however,
       Borrower and each member of Borrower shall be fully and
       personally, and jointly and severally, liable to the holder of
       this Note for all claims, demands, damages, losses, liabilities,
       fines, penalties, fees, liens, costs and expenses, including
       attorneys’ fees, suffered or incurred by Lender on account of
       or in connection with:

       ....



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                          GLIC v. NORTHVIEW
                          Decision of the Court

             (f)    Any taxes or assessments relating to the
             Property encumbered by the Deed of Trust which
             accrue prior to foreclosure sale under the Deed of
             Trust or any transfer of said Property in lieu of
             foreclosure[.]

¶3           In August 2006, Town Lake Enterprises, LLC, (“Town
Lake”), Gerald Fandytis, and Lorenda Hartwell signed an unconditional
guaranty of Northview’s obligations (“Guaranty”). Paragraph 1(a) of the
Guaranty provided as follows:

      Guarantor unconditionally, absolutely and irrevocably
      guarantees . . . any and all claims, demands, damages, losses,
      liabilities, fines, penalties, fees, liens, costs and expenses,
      including attorney’s fees, suffered or incurred by Lender on
      account of or in connection with:

      ....

             vi) Any taxes or assessments relating to the Property
             encumbered by the Deed of Trust which accrue prior
             to foreclosure sale under the Deed of Trust or any
             transfer of said Property in lieu of foreclosure.

¶4             Northview’s tenant (Ultimate Electronics) vacated the
Property, and Northview subsequently defaulted on the Note. A court-
appointed receiver took control of the Property in mid-June 2011 until
GLIC obtained title to the Property through a credit bid of $2.8 million at a
trustee’s sale on September 26, 2011. Despite GLIC’s demand, Appellants
did not pay the accrued property taxes and interest for the Property,
which totaled approximately $121,000 for the second half of 2010, the first
half of 2011, and the second half of 2011 (prorated from June 30, 2011
through September 26, 2011).

¶5             GLIC paid the property taxes and, in November 2011, sued
Northview for breaching the Note, and Town Lake, Fandytis, and
Hartwell for breaching the Guaranty by failing to pay property taxes
accrued as of the date of the trustee’s sale. GLIC later dismissed with
prejudice its complaint against Hartwell.

¶6              In April 2012, GLIC filed a motion for summary judgment as
to all of its claims against Appellants. GLIC argued that it was entitled to
judgment as a matter of law because Appellants defaulted on their
obligations (Northview under the Note and Town Lake and Fandytis


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                          GLIC v. NORTHVIEW
                          Decision of the Court

under the Guaranty) by refusing to pay property taxes accrued prior to
the Property’s foreclosure. Appellants filed a cross-motion for summary
judgment, asserting that any claims for property taxes were fully satisfied
by the $2.8 million in proceeds from the trustee’s sale of the Property, or
alternatively, that Appellants were not liable for taxes not yet due and
payable at the time of the trustee’s sale. Appellants further asserted that
GLIC should have rented the Property prior to the trustee’s sale, and thus
failed to mitigate its damages. The superior court granted GLIC’s motion
for summary judgment and denied Appellants’ cross-motion, directing
entry of final judgment in GLIC’s favor.

¶7            Appellants timely appealed. We have jurisdiction under
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). 1

                              DISCUSSION

¶8            Summary judgment is appropriate only if “there is no
genuine dispute as to any material fact and the moving party is entitled to
judgment as a matter of law.” Ariz. R. Civ. P. 56(a); Orme Sch. v. Reeves,
166 Ariz. 301, 305, 802 P.2d 1000, 1004 (1990). We review de novo the
superior court’s grant of summary judgment, viewing the facts in the light
most favorable to the party against whom judgment is entered. United
Bank of Ariz. v. Allyn, 167 Ariz. 191, 193, 195, 805 P.2d 1012, 1014, 1016
(App. 1990). We will affirm summary judgment only “if the facts
produced in support of the claim [] have so little probative value, given
the quantum of evidence required,” that no reasonable person could find
for its proponent. Orme Sch., 166 Ariz. at 309, 802 P.2d at 1008.

I.    Obligation to Pay Accrued Property Taxes.

¶9            Appellants argue that the superior court should have ruled
that their property tax obligations were fully satisfied by the $2.8 million
in proceeds generated from the trustee’s sale. They assert that, under
Paragraph 8.3 of the Deed of Trust, property tax expenditures should have
been reimbursed from the proceeds of the trustee’s sale before
outstanding principal amounts, and that their obligation to pay the taxes
was thus extinguished by proceeds from the sale.


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




                                     4
                         GLIC v. NORTHVIEW
                         Decision of the Court

¶10          Appellant’s obligations to pay property taxes arose,
however, under the Note and/or Guaranty, and not under the Deed of
Trust. Accordingly, and because the Deed of Trust did not limit recovery
of taxes and assessments or otherwise conflict with the Note and the
Guaranty, Appellants remained liable for accrued property taxes under
the Note and Guaranty following the trustee’s sale.

¶11          Paragraph 8.3 of the Deed of Trust provided as follows:

      Application of Sale Proceeds. The proceeds of any sale under
      this Deed of Trust will be applied in the following manner:

      FIRST: Payment of the costs and expenses of the sale,
      including without limitation Trustee’s fees, legal fees and
      disbursements, title charges and transfer taxes, and payment
      of all expenses, liabilities and advances of Trustee, together
      with interest on all advances made by Trustee from date of
      disbursement at the applicable interest rate under the Note
      from time to time or at the maximum rate permitted to be
      charged by Trustee under the applicable law if that is less.

      SECOND: Payment of all sums expended by Lender under the
      terms of this Deed of Trust and not yet repaid, together with
      interest on such sums from date of disbursement at the
      applicable interest rate under the Note from time to time or
      the maximum rate permitted by applicable law if that is less.

      THIRD: Payment of all other indebtedness secured by this
      Deed of Trust in any order that Lender chooses.

      FOURTH: The remainder, if any, to the person or persons
      legally entitled to it.

(Emphasis added.)       This provision did not eliminate Appellants’
obligations under the Note and/or Guaranty, and instead simply detailed
the order in which proceeds from a trustee’s sale are to be applied. The
provision did not convey rights on the borrower and guarantors other
than a right to proceeds that exceeded the amounts otherwise recoverable
by the lender.

¶12           Appellants do not dispute that the proceeds from the sale
were insufficient to satisfy all of their obligations under the Note and/or
Guaranty. Accordingly, the superior court did not err by finding that



                                    5
                          GLIC v. NORTHVIEW
                          Decision of the Court

Appellants remained obligated to pay taxes that accrued as of the date of
the trustee’s sale notwithstanding Paragraph 8.3 of the Deed of Trust.

¶13            Appellants alternatively argue that the superior court erred
by concluding that they were obligated to pay taxes that were not yet due
as of the date of the trustee’s sale. Appellants’ obligation to pay “accrued”
taxes, however, was not extinguished simply because the trustee’s sale
occurred prior to the due date for payment of the taxes to Maricopa
County.

¶14            Under A.R.S. § 42-17153, a property tax lien attaches to real
property on January 1 of each year and is not satisfied or removed until
taxes are paid. Section 42-18052(A) sets October 1 as the due date for the
first half of property taxes and March 1 of the following year as the due
date for the second half of taxes. To “accrue” means “[t]o accumulate
periodically.” Black’s Law Dictionary (9th ed. 2009). An accrued tax is
one that “has been incurred but not yet paid or payable.” Id. Thus, the
setting of due dates under A.R.S. § 42-18052 does not change the fact that
taxes begin to accrue on January 1 of each year.

¶15            Paragraph 11(b)(f) of the Note and Paragraph 1(a)(vi) of the
Guaranty contain identical language requiring that the borrower
(Northview) and guarantors (Town Lake and Fandytis) reimburse GLIC
for “[a]ny taxes or assessments relating to the Property encumbered by the
Deed of Trust which accrue prior to the foreclosure sale under the Deed of
Trust or any transfer of said Property in lieu of foreclosure.” (Emphasis
added.) Because the tax obligation at issue accrued prior to the due date
for payment of the taxes, the superior court did not err by finding that
Appellants remained liable for any unpaid taxes that had accrued as of the
date of the trustee’s sale.

II.    Mitigation of Damages.

¶16            Appellants argue that the superior court erred by granting
summary judgment in favor of GLIC because there was a genuine issue of
material fact regarding whether GLIC mitigated its damages. Appellants
argue specifically that there was a factual issue as to whether GLIC
improperly failed to market and lease the Property during the 3 ½-month
receivership prior to the trustee’s sale in September 2011. The superior
court found that Appellants waived their right to object to the receiver’s
conduct by failing to object to the receiver’s actions prior to the receiver
being discharged. The court further found that Appellants did not
support their claim with admissible evidence.



                                     6
                           GLIC v. NORTHVIEW
                           Decision of the Court

¶17             We agree that Appellants waived their right to object to the
court-appointed receiver’s actions by not making any such objection
before the receiver was discharged. After Northview defaulted on its loan
obligations, a receiver was appointed to protect the Property pending
transfer of title to a new owner. See Midway Lumber, Inc. v. Redman, 4 Ariz.
App. 471, 472, 421 P.2d 904, 905 (1967) (noting that a receiver is “a
ministerial officer of the court, acting under its direction for the benefit of
all parties in interest”). Appellants never challenged the receiver’s
actions, and they waived their right to do so by failing to object before the
receiver was discharged. See McCollum v. Cont’l Cas. Co., 151 Ariz. 492,
495, 728 P.2d 1242, 1245 (App. 1986) (noting that waiver may be shown by
inaction).

¶18           Waiver notwithstanding, Appellants have not presented
competent evidence that the receiver acted improperly. Nor have they
presented competent evidence or otherwise met their burden to show that
GLIC failed to mitigate its damages. See Solar-West, Inc. v. Falk, 141 Ariz.
414, 419, 687 P.2d 939, 944 (App. 1984) (stating that a party in breach has
the burden of showing mitigation was reasonably possible and that the
non-breaching party did not make a reasonable attempt).

¶19            The receiver only controlled the Property for a 3 ½-month
period prior to the trustee’s sale; Northview controlled the Property prior
to the receiver’s appointment. Moreover, the receiver was not tasked with
maximizing revenue for Northview during that period, but rather with
protecting the Property, and Appellants have not alleged that the receiver
failed to protect the Property.

¶20           Appellants assert that GLIC should have directed the
receiver to lease the Property to some type of tenant prior to the trustee’s
sale. Appellants cite no authority, however, for the proposition that a
lender can direct the conduct of a court-appointed receiver in such a
manner, and we decline to find such an obligation on the part of the
lender—particularly given the fact that the lender is not obligated to
purchase the Property at a pending trustee’s sale, and leasing the Property
for a particular period of time to a specific tenant may not be in the best
interests of a party or parties who may be interested in purchasing the
Property.

¶21          Furthermore, even assuming such an obligation, Appellants
did not present competent evidence that a tenant was available to lease
the Property on terms favorable to prospective owners during the short
period of time during which the receiver controlled the Property.


                                      7
                           GLIC v. NORTHVIEW
                           Decision of the Court

Appellants’ only evidence in support of their position was an affidavit
from Fandytis, in which he stated that he received or was aware of offers
to lease the Property, but that he could not entertain them because the
Property was in receivership. The affidavit also stated that the receiver
had taken down leasing signs prior to the trustee’s sale.

¶22           The superior court properly rejected the affidavit as
inadmissible hearsay. See Ariz. R. Civ. P. 56(e)(1). Appellants did not
present any type of affidavit or evidence from a prospective tenant willing
to lease the Property, much less an affidavit detailing terms that would
have been acceptable to a receiver tasked with protecting the Property
pending foreclosure. We further note that in June 2011, shortly before the
receiver took control of the Property, Northview’s counsel acknowledged
in correspondence to GLIC’s counsel that attempting to lease the Property
had been difficult particularly in light of vacancy rates for “big box” stores
and the fact that the building had been custom built for Ultimate
Electronics. Accordingly, the court did not err by finding that Fandytis’
affidavit inadmissible and denying Appellants’ claim that GLIC failed to
mitigate its damages.

III.   Attorney’s Fees and Costs.

¶23           Appellants and GLIC have requested their attorney’s fees
and costs on appeal pursuant to the terms of the Note and Guaranty and
A.R.S. § 12-341.01(A) and ARCAP 21.

¶24           When a contract contains an attorney’s fees provision, we
will grant fees consistent with such a provision. A. Miner Contracting, Inc.,
v. Toho-Tolani Cnty. Improvement Dist., 233 Ariz. 249, 261, ¶ 40, 311 P.3d
1062, 1074 (App. 2013). Here, Paragraphs 9 and 11(b) of the Note and
Paragraph 1(a) of the Guaranty provide that the lender is entitled to
attorney’s fees and costs incurred in pursuing claims for payment of taxes
or assessments relating to the Property. Accordingly, and because GLIC is
the prevailing party on appeal, we grant GLIC its reasonable attorney’s
fees and costs on appeal upon GLIC’s compliance with ARCAP 21.
Appellants’ request for attorney’s fees and costs on appeal is denied.




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                        GLIC v. NORTHVIEW
                        Decision of the Court




                           CONCLUSION

¶25          For the foregoing reasons, we affirm the superior court’s
entry of summary judgment in favor of GLIC and the denial of
Appellants’ cross-motion for summary judgment.




                               :MJT




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