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UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL AND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


  DALE F. SCHAUB and ANNETTE SCHAUB; GREGORY G. MCGILL,
                        Appellants,

                                         v.

                              NFRA INC., Appellee.

                              No. 1 CA-CV 14-0026
                                FILED 3-24-2015


            Appeal from the Superior Court in Maricopa County
                           No. CV2010-098263
                The Honorable David O. Cunanan, Judge
             The Honorable James R. Morrow, Commissioner

                                   AFFIRMED


                                    COUNSEL

McGill Law Firm, Scottsdale
By Gregory G. McGill
Counsel for Appellants

Tiffany & Bosco, P.A., Phoenix
By Dow Glenn Ostlund
Counsel for Appellee
                           SCHAUB v. NFRA
                          Decision of the Court



                     MEMORANDUM DECISION

Judge Jon W. Thompson delivered the decision of the Court, in which
Presiding Judge Andrew W. Gould and Judge Maurice Portley joined.


T H O M P S O N, Judge:

¶1            Appellants Dale F. Schaub and Annette Schaub (Schaub) and
their attorney Gregory G. McGill (McGill) appeal from the trial court’s
orders sanctioning them for filing a motion for a creditor bond and denying
their motion for new trial with regard to the sanction. For the following
reasons, we affirm.

              FACTUAL AND PROCEDURAL HISTORY

¶2           NFra, Inc. (NFra), an engineering and infrastructure
consulting services firm, was formed in 2004. Dale Schaub was elected
president and CEO of NFra in 2004. He had a 33.33% stock interest in NFra,
as did two other shareholders, Sai Gundala (Gundala) and Randal
Weyrauch (Weyrauch). In 2005 Schaub was diagnosed with cancer and
subsequently sustained a brain injury. He continued to work at NFra. In
2009 and 2010, Gundala and Weyrauch offered Schaub $100,000 to buy him
out. Schaub rejected the buy-out offers. NFra terminated his employment
in 2010.

¶3             In October 2010, Schaub filed a complaint in superior court
against Gundala and Weyrauch for breach of contract, intentional
interference with contract, conversion, breach of fiduciary duty, and
negligent misrepresentation. Among other allegations, Schaub complained
that his stock had been improperly diluted. He sought monetary damages
as well as a declaratory judgment that his stock be restored to 33.33%.
Gundala and Weyrauch answered and filed a counterclaim against Schaub.
NFra filed its own answer. In late 2011, NFra filed a motion for protective
order pursuant to Arizona Rule of Civil Procedure 37(a)(4)(C), seeking to
avoid producing documents sought by Schaub. 1



1 The documents included NFra’s financial records, customer, vendor and
employee contracts and related correspondence, tax returns, and personnel
files.


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                            SCHAUB v. NFRA
                           Decision of the Court

¶4            After oral argument in February 2012, the trial court granted
NFra’s motion for protective order, finding that the scope of the proposed
protective order was reasonable and that NFra had demonstrated good
cause that a protective order was “necessary to protect confidential,
financial, employment, sensitive and trade secret information.” The court
further denied Schaub’s motion to compel production of documents. NFra
filed an application for award of attorneys’ fees and costs in February 2012,
and the court awarded NFra a judgment for $12,360 as a sanction pursuant
to Arizona Rule of Civil Procedure 37. Schaub did not appeal from the
judgment.

¶5              Trial was set for September 2013. In March 2013, NFra
sought to attach plaintiff’s stock to satisfy the $12,360 judgment. Schaub
filed a motion to stay the enforcement of the judgment. NFra filed a
response and Schaub filed a second motion to expedite motion for stay and
request for creditor garnishment bond. After oral argument, the trial court
stayed the judgment until “the claims against [NFra] have been disposed of
at the trial court level (either on motion or through trial),” conditioned on
Shchaub posting $13,200 cash or bond with the court by May 3, 2013. After
the court ruled that it would stay the judgment, Schaub’s counsel asked the
court to order NFra to post a creditor bond “in case there’s a wrongful
garnishment of the stock.” The court declined to order NFra to post a
creditor bond at that time, stating:

             This garnishment’s going to be discharged . . .
             the first full week of May. Your clients are free
             to do with their stock whatever they wish to do
             with it after the discharge assuming this plan
             goes into effect. They post the bond on or before
             May 3rd . . . and [NFra is] going to file . . . a
             simple order for me to sign discharging the
             garnishee. Then your . . . client’s stock is freed
             up and they can do with it what they will . . .
             [A]m I missing something? . . . They don’t have
             to post [the bond]. If they don’t want to they
             can just tell me now . . . and we can go forward
             with the garnishment.

Counsel for Schaub responded:

             MR. MCGILL: And they’re going to try to do
             that . . . and I believe that they will do that, okay,
             but what I’m suggesting is any time I’ve ever


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               SCHAUB v. NFRA
              Decision of the Court

seen a case where a creditor goes in to garnish
an asset that purportedly far exceeds the
judgment that’s involved . . . the Court has
ordered that the creditor post a bond in the
event there’s a wrongful attachment. . . . That’s
why I ask.

THE COURT: And how would that come into
play here? You would have me have [NFra] post
the bond when and for what?

MR. MCGILL: In the event that the stock is
wrongfully executed upon. We don’t think that
will happen because it’ll be bonded and
discharged. I am suggesting that to you, I agree
with you. That may never happen is [sic] this
bond doesn’t discharge . . . but if that doesn’t
happen, if that scenario where they’re damaged
by a wrongful judgment could happen.

THE COURT: You’ve gone quite a ways from
what you were telling me last time. The last
time you were here, I thought I asked it pretty
directly, that your clients have no intent of
allowing the stock to be sold at a sheriff’s
auction?

MR. MCGILL: That’s true.

THE COURT: They plan on either . . . paying
the judgment . . . [or] putting up a bond which
is what I’ve ordered.

...

MR. MCGILL: That’s the intent but I don’t
know how events are going to unfold in the
future. . . . [H]opefully that all happens . . . that
is their good-faith intent and this may all be
mute [sic] because of that but all I’m suggesting
. . . is any time I’ve seen a creditor try to move
against an asset that has value that far exceeds
the judgment, the Court orders the creditor to



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                            SCHAUB v. NFRA
                           Decision of the Court

             bond it in the event there’s a wrongful
             attachment . . ..

             THE COURT: Most certainly I will allow your
             client to file supplement briefing by May 15th
             on that issue. . . . With respect to the objection to
             the Writ of Garnishment, at this point I’m going
             . . . to wait [until] after May 3rd to see if that’s
             mute [sic]. I believe that would be mute [sic] if
             the bond is posted.

In its April 29, 2013 minute entry order, the court denied Schaub’s second
motion to expedite motion for stay and request for garnishment bond as
moot.

¶6            Schaub filed a cash bond in the amount of $13,200 on May 2,
2013. On May 15, 2013, he filed a motion seeking a creditor’s bond pending
trial. NFra filed a response objecting to the motion and seeking sanctions
against Schaub and McGill pursuant to Arizona Revised Statutes (A.R.S.) §
12-349(B) (2003). On June 5, 2013, NFra filed a notice of quashing the writ
of garnishment. Also in June 2013, the trial court, based on the pleadings,
granted NFra’s motion for sanctions. The court ordered additional briefing
on the issue of the appropriate sanction. Subsequently, the court awarded
NFra $4,160 against Schaub and McGill jointly and severally, as a sanction
for unreasonably expanding the proceedings.

¶7            The court entered its signed order on September 6, 2013.
Schaub and McGill filed a motion for new trial and request for evidentiary
hearing with regard to the award for sanctions. The trial court denied the
motion in a signed minute entry order, ruling:

             Most of the issues raised in Debtors’ [Schaub
             and McGill] Motion have previously been
             addressed in the Court’s rulings (Minute
             Entries dated June 17, 2013 and September 6,
             2013) and will not be repeated here. A new
             issue urged by Debtors is that they have newly
             discovered evidence warranting a new trial
             under Rule 59(a)(4). Debtors point to the grant
             of their Rule 50 trial motion as new evidence.
             The ruling on the Rule 50 motion did not set
             aside the 2012 Judgment concerning Rule
             37(a)(4)(B) sanctions or [NFra]’s efforts to collect



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                             SCHAUB v. NFRA
                            Decision of the Court

              on the 2012 Judgment. Debtors also point to the
              evidence of the “book value” of stock as a basis
              for a new trial. Information concerning the
              value of the stock that [NFra] had previously
              attempted to execute upon does not alter
              whether it was reasonable for Debtors to seek
              the posting of a creditor bond. Once the stay of
              execution was granted, [NFra] could no longer
              seek to execute on the stock, whatever its value,
              to satisfy the 2012 Judgment.

The court further stated that it had denied Schaub and McGill’s request for
an evidentiary hearing because they sought to present evidence regarding
whether they had brought a claim without substantial justification under
A.R.S. § 12-349(A)(1) (2003), when the court’s ruling for sanctions had been
based on A.R.S. § 12-349(A)(3) (unreasonably expanding or delaying the
proceeding). Schaub and McGill timely appealed. We have jurisdiction
pursuant to A.R.S § 12-2101(A)(5)(a) (Supp. 2014).2

                               DISCUSSION

¶8            Appellants raise two issues in this appeal: 1) whether the trial
court abused its discretion by sanctioning them pursuant to A.R.S. § 12-
349(A)(3), and 2) whether the trial court’s decision denying their request for
an evidentiary hearing violated their due process rights.

    A. The A.R.S. § 12-349(A)(3) Sanction

¶9              The trial court sanctioned appellants $4,160 in attorneys’ fees
for unreasonably expanding the proceedings by filing a motion seeking a
creditor’s bond. We view the evidence in a manner most favorable to
sustaining an award pursuant to A.R.S. § 12-349(A) and will affirm unless
the trial court’s findings are clearly erroneous. Phoenix Newspapers v. Dept.
of Corrections, 188 Ariz. 237, 243, 934 P.2d 801, 807 (App. 1997). We review
the appropriateness of the sanction under an abuse of discretion standard.
Gilbert v. Board of Med. Exam’rs, 155 Ariz. 169, 184, 745 P.2d 617, 632 (App.
1987) (citation omitted), abrogated by statute on other grounds. We review the
trial court’s denial of a motion for new trial for an abuse of discretion.



2On December 11, 2014, appellants filed a motion to correct the record on
appeal to include the 2014 activity in the case below, CV 2010-098263. We
deny the motion.


                                      6
                            SCHAUB v. NFRA
                           Decision of the Court

Monaco v. HealthPartners of S. Ariz., 196 Ariz. 299, 304, ¶ 13, 995 P.2d 735,
740 (App. 1999).

¶10           Section 12-349 provides, in relevant part:

              A.   Except as otherwise provided by and not
                   inconsistent with another statute, in any
                   civil action . . . the court shall assess
                   reasonable attorney fees, expenses and, at
                   the court’s discretion, double damages of
                   not to exceed five thousand dollars against
                   an attorney or party . . . if the attorney or
                   party does any of the following:

                   ...

                   3. Unreasonably expands or delays the
                   proceeding.

                   ...

              B.    The court may allocate the payment of
                   attorney fees among the offending
                   attorneys and parties, jointly or severally,
                   and may assess separate amounts against
                   an offending attorney or party.

Section 12-350 (2003) requires the court to set forth specific reasons for an
award of attorneys’ fees pursuant to A.R.S. § 12-349.

¶11           Here, the trial court found that the statute cited by appellants
in support of its request for a creditor’s bond, A.R.S. § 12-15733, was not
applicable because a judgment had been entered against Schaub in May
2012. In its June 19, 2013 minute entry ruling, the court found that
appellants unreasonably expanded the proceedings by seeking a creditor’s
bond because section 12-1573 “applies in the context of pre-judgment
garnishments.” The court further noted that appellants filed their motion
for creditor bond on May 15, 2013, “[a]fter their stay of execution was

3 A.R.S. § 12-1573 (2003) provides, in relevant part: “If a garnishment is
requested and no judgment has been entered, a writ shall not be issued until
the judgment creditor executes and delivers to the court a bond payable to
the judgment debtor in the amount of the debt claimed therein . . . .”
(Emphasis added).


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                            SCHAUB v. NFRA
                           Decision of the Court

granted and they had posted [the required $13,200].” (Emphasis added).
In its September 9, 2013 minute entry, the court found that it had not
authorized the appellants to file “an entirely new motion relying on A.R.S.
§ 12-1573.”

¶12           On this record we cannot say that the trial court’s finding that
appellants unreasonably expanded or delayed the proceedings was clearly
erroneous or that imposition of the sanction was an abuse of discretion. The
trial court correctly concluded that section 12-1573 did not provide
authority for a creditor’s bond after judgment had already been entered,
and Schaub’s stock was secure from attachment once he posted the cash
bond with the court and the writ of garnishment was quashed.

  B. The Request for Evidentiary Hearing

¶13            After both sides submitted briefing on the motion for creditor
bond, the trial court determined that oral argument would not benefit the
court and vacated the oral argument it had previously set for June 18, 2013.
The court denied appellants’ subsequent requests for an evidentiary
hearing. Appellants argue that the trial court’s denial of its requests for an
evidentiary hearing violated their due process rights and was an abuse of
discretion. We disagree. The trial court repeatedly noted that it had not
been presented with an issue which would require an evidentiary hearing,
in light of the fact that it imposed the sanction solely pursuant to A.R.S. §
12-349(A)(3). Furthermore, neither A.R.S. § 12-349 nor A.R.S. § 12-350
requires a hearing. We find no abuse of discretion or violation of
appellants’ due process rights.

  C. Attorneys’ Fees

¶14           Both sides request their attorneys’ fees and costs on appeal.




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                            SCHAUB v. NFRA
                           Decision of the Court

Neither party cites statutory authority for their attorneys’ fees request. We
deny both requests for attorneys’ fees and appellants’ request for costs.
Subject to its compliance with Arizona Rule of Civil Appellate Procedure
21, we award NFra its costs in connection with this appeal.

                              CONCLUSION

¶15           For the foregoing reasons, we affirm the judgment of the trial
court in favor of NRra for $4160.




                                 :ama




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