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  UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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


                             ROY MAXTED, et al.,
                    Plaintiffs/Counter-Defendants/Appellees,

                                         v.

                              TWS INC., et al.,
                   Defendants/Counter-Claimants/Appellants.

                              No. 1 CA-CV 16-0408
                               FILED 5-4-2017


            Appeal from the Superior Court in Maricopa County
                   Nos. CV2014-094400, CV2014-095474
                              (Consolidated)
               The Honorable Robert H. Oberbillig, Judge

                                   AFFIRMED


                                    COUNSEL

J. Kent Mackinlay, P.C., Mesa
By J. Kent Mackinlay
Counsel for Defendants/Counter-Claimants/Appellants

David Vandeventer, Paradise Valley
Counsel for Plaintiffs/Counter-Defendants/Appellees
                    MAXTED, et al. v. TWS INC., et al.
                        Decision of the Court



                      MEMORANDUM DECISION

Judge Patricia Starr1 delivered the decision of the Court, in which Presiding
Judge Samuel A. Thumma and Chief Judge Michael J. Brown joined.


S T A R R, Judge:

¶1            Defendant TWS, Inc. (“TWS”) challenges the grant of
summary judgment in favor of plaintiffs Roy and Dottie Maxted
(collectively “Maxted”) finding TWS was not entitled to receive excess
proceeds from a credit bid following a trustee’s sale of real property. TWS
also challenges the award of attorneys’ fees to Maxted. For the following
reasons, both orders are affirmed.

                             BACKGROUND

¶2           In early 2013, TWS purchased a restaurant/bar and associated
real property (“Property”) from Maxted for $580,000. TWS paid Maxted
$170,000 in cash and borrowed the balance of $410,000 from Maxted,
evidenced by a promissory note and secured by a deed of trust. Later in
2013, TWS defaulted and Maxted instituted sale proceedings. The Property
was sold at public auction through a trustee’s sale in May 2014. Maxted
was the successful bidder for a credit bid of $560,180.44.

¶3            In August 2014, Maxted sued TWS seeking a deficiency
judgment for the difference between the credit bid and the fair market value
of the Property. TWS then sued Maxted for breach of contract claiming it
was entitled to excess proceeds from the trustee’s sale totaling $150,180.44
(representing the difference between the credit bid and the amount of the
note), conversion of items remaining in the Property, and fraudulent
concealment. The cases were consolidated, and both parties moved for
summary judgment.

¶4           The court granted each motion in part finding (1) in favor of
TWS that “there is no prepayment penalty or interest due following the sale


1      The Honorable Patricia Starr, Judge of the Arizona Superior Court,
has been authorized to sit in this matter pursuant to Article VI, Section 3 of
the Arizona Constitution.



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                     MAXTED, et al. v. TWS INC., et al.
                         Decision of the Court

and there is no deficiency owed”; and (2) in favor of Maxted that “there are
no excess proceeds as a matter of law.” The court denied the balance of
both motions. TWS unsuccessfully moved for reconsideration, arguing it
was entitled to the excess proceeds. After a bench trial, the court found for
Maxted on TWS’ conversion claim (the only remaining claim), and awarded
Maxted attorneys’ fees and costs in the amount of $17,521.40. After entry
of final judgment, see Ariz. R. Civ. Pro. 54(c),2 TWS timely appealed. We
have jurisdiction pursuant to Article VI, Section 9, of the Arizona
Constitution, and Arizona Revised Statutes (“A.R.S.”) sections 12-
120.21(A)(1) and -2101(A)(1).

                                   DISCUSSION

    I.   No Excess Proceeds Existed from the Credit Bid

¶5           TWS argues the court erred in granting summary judgment
for Maxted finding no excess proceeds existed as a matter of law.

¶6              Summary judgment is appropriate “if the moving party
shows that 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). Summary judgment “should be granted if the facts produced in
support of the claim or defense have so little probative value, given the
quantum of evidence required, that reasonable people could not agree with
the conclusion advanced by the proponent of the claim or defense.” Orme
Sch. v. Reeves, 166 Ariz. 301, 309 (1990). We determine de novo whether any
genuine issue of material fact exists and whether the trial court erred in
application of the law. Logerquist v. Danforth, 188 Ariz. 16, 18 (App. 1996).
We construe the evidence and reasonable inferences in the light most
favorable to the non-moving party. Wells Fargo Bank v. Ariz. Laborers,
Teamsters & Cement Masons Local No. 395 Pension Trust Fund, 201 Ariz. 474,
482, ¶ 13 (2002). And we will uphold the trial court’s ruling if it is correct
for any reason. Logerquist, 188 Ariz. at 18.

¶7            The breakdown of Maxted’s credit bid to purchase the
Property at the trustee’s sale is as follows:

               Principal balance                        $ 398,698.04

               Interest Through 4/25/19                   131,238.10



2     Absent material revisions, we cite to the current version of statutes
and rules unless otherwise indicated.


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                      MAXTED, et al. v. TWS INC., et al.
                          Decision of the Court

             Penalties                                       1,200.30

             Prepayment [Penalty]                           24,006.00

             Funds Advanced for Insurance                    1,015.00

             Interest on Funds 4/15/14 – 5/15/14                 5.27

             Trustee/Account Servicing Fees & Costs          4,017.73

             Credit Bid Total                            $ 560,180.44

¶8            Pursuant to A.R.S. § 33-801(5), a credit bid is “a bid made by
the beneficiary in full or partial satisfaction of the contract or contracts
which are secured by the trust deed.” It

      may only include an amount up to the full amount of the
      contract or contracts secured by the trust deed . . . together
      with the amount of other obligations provided in or secured
      by the trust deed and the costs and expenses of exercising the
      power of sale and the sale, including the trustee’s fees and
      reasonable attorney fees actually incurred.

Id. At a trustee’s sale, only the beneficiary, here Maxted, is authorized to
make a credit bid in lieu of cash. A.R.S. § 33-810(A).

¶9             As relevant here, a trustee shall apply the proceeds of a
trustee’s sale in the following order of priority:

      1. To the costs and expenses of exercising the power of sale
      and the sale, including the payment of the trustee’s fees and
      reasonable attorney fees actually incurred.

      2. To the payment of the contract or contracts secured by the
      trust deed.

      3. To the payment of all other obligations provided in or
      secured by the trust deed and actually paid by the beneficiary
      before the trustee’s sale.

      ....

      5. . . . After payment in full of all sums due . . . payment shall
      be made to the trustor [“excess proceeds”].

A.R.S. § 33-812(A).


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                     MAXTED, et al. v. TWS INC., et al.
                         Decision of the Court

¶10           As defined in the statutory scheme, a credit bid cannot result
in excess proceeds. Such a bid may only include the amount necessary to
pay the contract or contracts secured by the trust deed, along with the other
obligations provided in or secured by the trust deed, and costs and
expenses. Once those amounts are taken out of the credit bid, nothing
remains that would constitute excess proceeds.

¶11           Here, TWS contends that under the note and deed of trust,
Maxted could not recover (1) the unaccrued, post-sale interest calculated
from the sale date through April 25, 2019 (six-year anniversary of the note
as determined by the prohibition against prepayment within the first six
years) or (2) the prepayment penalty because TWS did not voluntarily
repay the note. TWS argues it was entitled to those amounts as excess
proceeds from the credit bid following the trustee sale.

¶12            We agree, as did the superior court, that Maxted was
prohibited from collecting a prepayment penalty and unaccrued interest
from TWS, and those amounts were wrongly included in the amount of the
credit bid. See Florida Nat’l Bank of Miami v. Bankatlantic, 557 So. 2d 596, 598
(Fla. 4th Dist. Ct. App. 1990) (stating the general rule is that “unless
otherwise specifically provided for in the note, the lender cannot upon the
lender’s acceleration also collect the prepayment penalty.”); cf. Camelot Ltd.
v. Union Mut. Life Ins. Co., 154 Ariz. 330, 331 (App. 1987) (finding deed of
trust gave lender, by its terms, the right to accelerate payment and the right
to recover a prepayment penalty). The inclusion of the prepayment penalty
and unaccrued interest in the credit bid, however, did not result in excess
proceeds. There were no cash proceeds for the trustee to distribute or
deposit with the county treasurer pursuant to A.R.S. § 33-812. See also
Passanisi v. Merit-Mcbride Realtors, Inc., 190 Cal. App. 3d 1496, 1503 (Ct. App.
1987) (stating no deficiency and no surplus results from successful creditor-
beneficiary’s “full credit bid”).

¶13           In support of its argument that it is entitled to excess proceeds
from the credit bid, TWS relies in large part on two cases: M & I Bank FSB
v. Coughlin, 805 F. Supp. 2d 858 (D. Ariz. 2011) and Nussbaumer v. Superior
Court, 107 Ariz. 504 (1971). In M & I Bank, the District Court did not reach
the issue presented here, but decided whether A.R.S. § 33-814(D) bars an
action by a lender against third parties if the action is brought more than 90
days after the trustee’s sale. 805 F. Supp. 2d at 860. The court noted that
“[a] beneficiary who bids high, drives out other bidders, and takes the
property for the amount of its bid may not then say it was not really paid
because it paid itself too much.” Id. at 868. But here, there is no evidence



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                     MAXTED, et al. v. TWS INC., et al.
                         Decision of the Court

that Maxted bid high to drive out other bidders, only that it mistakenly
included the unaccrued interest and prepayment penalty in the bid.

¶14            TWS cites to Nussbaumer for the proposition that an accepted
bid at a trustee’s sale forms a contract, which a court may not reform. But
again, that case does not reach the issue before us—whether a credit bid can
result in excess proceeds. Instead, the court held that when a mortgagee,
through its own negligence or inadvertence, bid the full amount of the
judgment at a foreclosure sale, it was bound by that bid. 107 Ariz. at 508.
The court did not, however, reach the issue of whether excess proceeds
would exist if the credit bid exceeded the amount of the full judgment.

¶15           In short, because the unaccrued interest and prepayment
penalty were wrongly included in the credit bid, the credit bid exceeded
the amount actually owed. But nothing in the statutory scheme converted
the erroneous credit bid into excess proceeds because of that mistake. Thus,
under these particular facts, and leaving for another day whether any set of
facts could result in excess proceeds from a credit bid, no excess proceeds
existed. Because there was no genuine issue of material fact, the superior
court correctly found that the credit bid did not result in excess proceeds.

 II.   Award of Attorneys’ Fees to Maxted

¶16            TWS argues the superior court erred in awarding attorneys’
fees to Maxted under A.R.S. § 12-341.01, claiming (without any supporting
authority) Maxted was not the successful party because the court denied its
deficiency judgment claim. The superior court has substantial discretion in
making the successful-party determination under A.R.S. § 12-341.01. See
Summers v. Gloor, 239 Ariz. 222, 228, ¶ 21 (App. 2012) (citing cases). We
review an award for attorneys’ fees for abuse of discretion. Bennett Blum,
M.D., Inc. v. Cowan, 235 Ariz. 204, 205, ¶ 5 (App. 2014).

¶17         “In any contested action arising out of a contract, . . . the court
may award the successful party reasonable attorney fees.” A.R.S. § 12-
341.01(A). The factors relevant in determining whether attorneys’ fees
should be awarded under the statute are:

       1. The merits of the claim or defense presented by the
       unsuccessful party.

       2. The litigation could have been avoided or settled and the
       successful party’s efforts were completely superfluous in
       achieving the result.



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                    MAXTED, et al. v. TWS INC., et al.
                        Decision of the Court

       3. Assessing fees against the unsuccessful party would cause
       an extreme hardship.

       4. The successful party did not prevail with respect to all of
       the relief sought.

       ....

       [5. T]he novelty of the legal question presented, and whether
       such claim or defense had previously been adjudicated in this
       jurisdiction.

       ....

       [6. W]hether the award in any particular case would
       discourage other parties with tenable claims or defenses from
       litigating or defending legitimate contract issues for fear of
       incurring liability for substantial amounts of attorney’s fees.

Associated Indem. Corp. v. Warner, 143 Ariz. 567, 570 (1985).

¶18           Here, the superior court concluded the litigation arose out of
contract and the contract issues predominated; findings TWS does not
challenge on appeal. The court also gave some weight to its conclusion that
awarding fees would cause a hardship to TWS, but added that there was
“no dispute” that “an early walk away settlement [offer by Maxted] was
rejected” by TWS and had TWS accepted that offer “most of the fees could
have been avoided.” Although TWS is correct in stating that Maxted did
not prevail on its deficiency claim, TWS has not shown that the court
abused its discretion in finding Maxted was the successful party and
awarding Maxted reasonable attorneys’ fees.

III.   Attorneys’ Fees on Appeal

¶19           Both parties request attorneys’ fees on appeal under A.R.S.
§ 12-341.01. Maxted also requests fees as a sanction pursuant to A.R.S. § 12-
349 and its taxable costs on appeal pursuant to A.R.S. § 12-341. In the
exercise of our discretion, we deny the requests for attorneys’ fees. Because
Maxted is the successful party on appeal, we award it costs incurred on
appeal under § 12-341 upon compliance with ARCAP 21.




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               MAXTED, et al. v. TWS INC., et al.
                   Decision of the Court

                         CONCLUSION

¶20       For the foregoing reasons, we affirm the superior court’s
orders.




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




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