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  UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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


                   CHRIS BESS, et al., Plaintiffs/Appellants,

                                         v.

                  MARK SPENO, et al., Defendants/Appellees.

                              No. 1 CA-CV 18-0009
                                FILED 10-30-2018


            Appeal from the Superior Court in Maricopa County
                           No. CV2013-052880
                The Honorable Susan M. Brnovich, Judge
            The Honorable Thomas L. LeClaire, Judge (Retired)

               AFFIRMED IN PART; REMANDED IN PART


                                    COUNSEL

Goldman & Zwillinger PLLC, Scottsdale
By Mark D. Goldman, Carolyn J. Goldman
Counsel for Plaintiffs/Appellants

Buchalter, PC, Scottsdale
By Glenn B. Hotchkiss
Counsel for Defendants/Appellees


                        MEMORANDUM DECISION

Judge Lawrence F. Winthrop delivered the decision of the Court, in which
Presiding Judge Jennifer M. Perkins and Judge Jon W. Thompson joined.
                        BESS, et al. v. SPENO, et al.
                          Decision of the Court

W I N T H R O P, Judge:

¶1           Chris Bess, et al. (“Plaintiffs”) appeal the superior court’s
judgment in favor of Mark Speno, et al. (“Defendants”).1 For the following
reasons, we affirm but remand for the limited purpose of allowing the
superior court to determine whether Defendants have paid their
appropriate share of expenses.

                 FACTS AND PROCEDURAL HISTORY

¶2            Plaintiffs and Defendants collectively funded eight loans
secured by deeds of trust on commercial real property. For each loan, the
parties entered a Beneficiary Operating Agreement, which took the same
form for all eight loans (collectively, “the Agreements”). The Agreements
provide that a 51% majority vote binds the group in making certain
decisions.

¶3             After the borrowers defaulted on the loans, Plaintiffs and
Defendants foreclosed and purchased eight properties (“the Properties”) at
trustee’s sales. The deeds conveyed ownership to Plaintiffs and Defendants
as tenants in common according to each party’s undivided interest in the
Properties. After taking ownership, Plaintiffs, who collectively own a
majority interest in each property, desired to hold the Properties until the
market improved. Defendants, who own a minority interest in each
property, wanted to sell the Properties.

¶4            Unable to resolve their dispute, Plaintiffs filed a complaint in
superior court, seeking a declaration that the Agreements require
Defendants to abide by the majority’s decision. See Ariz. Rev. Stat.
(“A.R.S.”) § 12-1832 (authorizing individuals holding an interest in a deed
or written contract to obtain a declaration of rights). Defendants
counterclaimed, requesting a declaration that the Agreements are
unenforceable and seeking partition of the Properties by sale. See A.R.S.
§ 12-1211 (authorizing a co-owner of real property to compel partition).

¶5            Following oral argument on the parties’ competing
declaratory judgment claims, the superior court (the Honorable Thomas L.
LeClaire) ruled that, although the Agreements are valid and enforceable,
they do not address “any rights, obligations, or procedures for maintaining
property ownership after a foreclosure.” The court concluded the law


1     Plaintiffs are a group of thirty-five individuals and entities.
Defendants are Mark Speno, his wife, Ronda Lalonde, and their entities.


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                         BESS, et al. v. SPENO, et al.
                           Decision of the Court

governing tenancy in common applied and, therefore, Defendants could
seek partition. Thereafter, the court appointed a special real estate
commissioner and ordered him to list the Properties for sale.

¶6           Plaintiffs petitioned this court for special action relief from the
sale order. We accepted jurisdiction and granted relief, concluding the
superior court had abused its discretion by ordering partition because “the
matter was not tried as a partition action” and “the parties presented no
evidence regarding partition.” See Bess, et al. v. LeClaire (Speno, et al.), 1 CA-
SA 15-0076, at *6, ¶ 12 (Ariz. App. Aug. 4, 2015) (decision order).

¶7            After the parties returned to superior court, Defendants
requested partition pursuant to A.R.S. § 12-1215. Plaintiffs did not object.
The superior court (the Honorable Susan M. Brnovich) issued a judgment
of partition and appointed three real estate commissioners to execute the
partition. See A.R.S. § 12-1216 (outlining the duties of the commissioners).
The commissioners determined the Properties could not be equitably
divided, so the court ordered their sale. See A.R.S. § 12-1218(A) (directing
the court to order a sale if the property cannot be partitioned). Thereafter,
the court entered a judgment pursuant to Arizona Rule of Civil Procedure
54(b), awarding attorneys’ fees and costs to Defendants.2

¶8            Plaintiffs timely appealed. We have jurisdiction pursuant to
A.R.S. § 12-2101(A).

                                  ANALYSIS

       I.     The Agreements

¶9            Plaintiffs argue the superior court erred in concluding the
Agreements do not apply to their decision to hold the Properties post-
foreclosure. According to Plaintiffs, “it is abundantly clear on the face of
the Agreements that the parties intended the Agreements to apply to their
decisions regarding the sales of the Properties.” We review de novo issues
of contract interpretation. Elm Ret. Ctr., LP v. Callaway, 226 Ariz. 287, 290,
¶ 15 (App. 2010).

¶10          Our role in interpreting an agreement “is to ascertain and
enforce the parties’ intent.” Id. (citing U.S. W. Commc’ns, Inc. v. Ariz. Corp.
Comm’n, 185 Ariz. 277, 280 (App. 1996)). In doing so, we “look to the plain
meaning of the words as viewed in the context of the contract as a whole.”

2     The superior court retained continuing jurisdiction for purposes of
overseeing the Properties’ sales and the distribution of sale proceeds.


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                           Decision of the Court

Earle Invs., LLC v. S. Desert Med. Ctr. Partners, 242 Ariz. 252, 255, ¶ 14 (App.
2017) (quoting United Cal. Bank v. Prudential Ins. Co. of Am., 140 Ariz. 238,
259 (App. 1983)). Applying these rules of construction, we analyze the
Agreements’ majority vote provision:

       A) 1% of the investment amount equals 1 vote.

       B) An instruction sheet signed by a simpl[e] majority 51% or
       more shall be binding on the group and may be relied on by
       anyone we do business with as a valid instruction. . . .

       C) This authorization shall be used for:

       Making decisions in any and all actions to collect money or
       other security due, including, but not limited to hiring a
       Trustee sales agent, changing Trustee sales agents, hiring
       attorneys for foreclosure or bankruptcy filings, [and] buying
       insurance to protect uninsured property owned or [on] which
       we hold liens.[3]

       Decisions to hire agents to sell property or goods owned by
       us collectively.

The Agreements further provide, “We may use any broker to lend, buy a
loan, sell a loan, commence a trustee sale to foreclose our security on a loan,
sell property and hire and fire agents based on our 51% vote.”

¶11            The parties entered the Agreements for the stated purpose “of
making a loan secured by real estate.” The Agreements expressly provide
that a 51% majority vote authorizes decisions relating to: (1) collecting
money or other security; (2) hiring a trustee sale agent; (3) hiring attorneys
for foreclosures or bankruptcy filings; (4) buying insurance; (5) hiring
agents to sell property; and (6) using a broker to lend, buy a loan, sell a loan,
commence a trustee sale, sell property, and hire and fire agents. In contrast,
the Agreements do not authorize the parties to rely on a majority vote to
hold the Properties for an indefinite time or to maintain, lease, or improve
the Properties during any holding period.


3       Plaintiffs are correct that the language “including, but not limited to”
in this paragraph is the predicate to an inclusive, rather than exclusive, list.
However, the qualifying language before that phrase limits the
authorization to “decisions in . . . actions to collect money or other security
due.”


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                         BESS, et al. v. SPENO, et al.
                           Decision of the Court

¶12          Moreover, the Agreements acknowledge that Plaintiffs and
Defendants came together for the purpose of making a loan. When the
loans were extinguished by foreclosure, the purpose of the Agreements,
which were titled “Beneficiary Operating Agreement[s],” was fulfilled.
(Emphasis added.) The parties were no longer beneficiaries of the deeds of
trust. Notably, the trustee’s deeds conveyed the Properties to Plaintiffs and
Defendants as tenants in common according to their individual percentage
ownership.

¶13           Upon review of the Agreements, we conclude the 51%
majority vote provision authorizes only those decisions specifically
delineated in the text of the Agreements. The Agreements do not authorize
the investors to hold the Properties for an indefinite time based on a
majority vote.

              A.      Extrinsic Evidence

¶14            Plaintiffs next argue the superior court “erred in refusing to
consider extrinsic evidence to determine the intent of the parties.” Relying
on Taylor v. State Farm Mutual Automobile Insurance Co., 175 Ariz. 148 (1993),
they argue the superior court was required to consider extrinsic evidence
of the parties’ intent.

¶15            In Taylor, our supreme court explained that Arizona follows
the “Corbin view,” which permits the admission of extrinsic evidence to
assist in contract interpretation. Id. at 152-53. The court defined the word
“interpretation” as “the process by which we determine the meaning of
words in a contract.” Id. at 152; see also Restatement (Second) of Contracts
§ 200 (1981). Even under the Corbin view, however, extrinsic evidence is
not admissible to vary the terms of an agreement. See Taylor, 175 Ariz. at
152-53; Standage Ventures, Inc. v. State, 114 Ariz. 480, 482 (1977) (holding that
the parol evidence rule “prohibits the use of extrinsic evidence to add to,
subtract from, vary or contradict the terms of a complete and unambiguous
written agreement” (citing Richards Dev. Co. v. Sligh, 89 Ariz. 100, 101
(1961))).

¶16             Before considering extrinsic evidence, the superior court
“must determine whether the agreement’s language is reasonably
susceptible to the proposed interpretation.” See Nahom v. Blue Cross & Blue
Shield of Ariz., Inc., 180 Ariz. 548, 552 (App. 1994) (citing Taylor, 175 Ariz. at
154-55). This determination is a question of law, which we review de novo.
See In re Estate of Lamparella, 210 Ariz. 246, 250, ¶ 21 (App. 2005).




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                          BESS, et al. v. SPENO, et al.
                            Decision of the Court

¶17            Plaintiffs did not request an evidentiary hearing in writing
regarding their declaratory judgment claim. At oral argument, however,
Plaintiffs’ counsel claimed,

       [M]y clients can testify and Mr. Speno can testify that the
       intent of the parties, when they entered into this agreement,
       was to govern all the decisions down the road that pertain to
       the investment in these loans, and clearly it applies to what
       would happen if the parties ended up taking the property
       back and becoming owners of the property.

Even assuming Plaintiffs’ request for an evidentiary hearing was sufficient,
the proffered testimony, if true, would vary the terms of the Agreements,
adding additional decisions to which the majority vote provision would
apply. Plaintiffs’ evidence does not help us interpret the meaning of the
Agreements’ language; it adds to the terms of the Agreements. See Mining
Inv. Grp., LLC v. Roberts, 217 Ariz. 635, 639, ¶ 16 (App. 2008) (stating that it
is not the court’s role “to alter, revise, modify, extend, rewrite or remake an
agreement” (quoting Goodman v. Newzona Inv. Co., 101 Ariz. 470, 472
(1966))). Accordingly, exclusion of the proffered evidence was appropriate.

               B.     Alteration of Statutory Rights

¶18           Plaintiffs further argue that parties “may alter their rights
under Arizona laws through their contracts.” They contend that Plaintiffs
and Defendants altered their rights as tenants in common “by agreeing
instead that their co-ownership rights in the Properties would be governed
by the 51% majority vote provision in the Agreements.” As explained
above, the Agreements did not authorize a majority decision to hold the
Properties. Therefore, the Agreements did not alter Defendants’ right to
seek partition of the Properties. See A.R.S. § 12-1211. Accordingly, we
affirm the superior court’s decision as to this issue.

       II.     Attorneys’ Fees in the Superior Court

¶19            Plaintiffs also argue the superior court erred “in ruling that
Defendants were the ‘prevailing party’ for purposes of awarding
attorney[s’] fees and costs.”

¶20            The superior court may award reasonable attorneys’ fees to
the successful party in an action arising out of contract. A.R.S. § 12-
341.01(A). When there are multiple claims, and both parties have
succeeded in part, a court may utilize a “percentage of success factor” or a
“totality of the litigation” test. Schwartz v. Farmers Ins. Co. of Ariz., 166 Ariz.


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                        BESS, et al. v. SPENO, et al.
                          Decision of the Court

33, 38 (App. 1990). As a general rule, we review an award of attorneys’ fees
for an abuse of discretion. See Assyia v. State Farm Mut. Auto. Ins. Co., 229
Ariz. 216, 222, ¶ 25 (App. 2012).

¶21            Here, the superior court exercised its discretion to award
Defendants their attorneys’ fees. The court acknowledged that both
Plaintiffs and Defendants were successful in part but concluded that, under
the “totality of the circumstances,” Defendants were the successful party.
Finding no abuse of discretion, we affirm the awards.

      III.   Additional Issues

¶22           Plaintiffs next argue the superior court failed to rule on
several issues raised by their pleadings.

             A.     Attorneys’ Fees for Foreclosure and Bankruptcy Filings

¶23           Plaintiffs argue the superior court did not determine whether
Defendants were required to pay their proportionate share of attorneys’
fees incurred to prosecute foreclosures and handle bankruptcy filings as
well as “other matters involving the Loans and the Properties.”

¶24           The Agreements authorize Plaintiffs to rely on a majority vote
to hire attorneys “for foreclosure or bankruptcy filings” and require
Defendants to pay their share of those expenses. On remand, the superior
court shall conduct proceedings to determine whether Defendants have
paid these expenses and, if not, order payment of the same with applicable
interest.

             B.     Tax Penalties and Interest

¶25          Plaintiffs also argue the superior court did not determine
whether Defendants owed penalties and interest arising from Defendants’
failure to make timely tax payments. The court did rule, however, that
Defendants fully paid the delinquent taxes on six of the eight Properties.
The court then ordered that, for the remaining two properties, the parties
should pay “the taxes, interest, and penalties, imposed by the applicable
governmental entity or entities, equally and proportionately to the
percentage interest held by that party.” To the extent Plaintiffs seek
enforcement of the superior court’s order, they must do so in superior court.




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                        BESS, et al. v. SPENO, et al.
                          Decision of the Court

              C.     Leases

¶26            Finally, Plaintiffs seek damages caused by Defendants’
objection to grazing and cell phone leases. The superior court determined
the Agreements did not authorize Plaintiffs to lease the Properties in
reliance on a majority vote. We affirm that ruling. Accordingly, Plaintiffs
are not eligible for their claimed damages.

       IV.    Attorneys’ Fees on Appeal

¶27           Both parties seek attorneys’ fees on appeal pursuant to A.R.S.
§ 12-341.01. In the exercise of our discretion, we deny both parties’ requests.
We award taxable costs to Defendants upon compliance with Arizona Rule
of Civil Appellate Procedure 21.

                               CONCLUSION

¶28           For the foregoing reasons, we affirm the superior court’s
judgment, but remand this matter to the superior court for the limited
determination of whether Defendants owe their share of expenses related
to foreclosures and bankruptcy filings.




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




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