                          NOTICE: NOT FOR PUBLICATION.
   UNDER ARIZONA RULE OF THE SUPREME COURT 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


WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking
               association, Plaintiff/Appellee,

                                        v.

     CROWN CITY PROPERTIES, L.L.C., an Arizona limited liability
 company; JOHN D. WRIGHT and NANNETTE WRIGHT, husband and
    wife; MICHAEL J. HERLIHY and MARGUERITE N. HERLIHY, as
  Trustees of the Michael J. & Marguerite N. Herlihy Family Trust dated
                 December 13, 1999, Defendants/Appellants.

                             No. 1 CA-CV 13-0248
                             FILED 05-27-2014


           Appeal from the Superior Court in Maricopa County
                          No. CV2009-028547
                The Honorable Lisa Daniel Flores, Judge

   AFFIRMED IN PART, VACATED IN PART, AND REMANDED


                                   COUNSEL

Quarles & Brady LLP, Phoenix
By Scott A. Klundt, Brian A. Howie and Lauren Elliott Stine
Co-Counsel for Plaintiff/Appellee

Ivy L. Kushner, Attorney at Law, Scottsdale
By Ivy L. Kushner
Counsel for Defendants/Appellants
                    WELLS FARGO v. CROWN, et al.
                        Decision of the Court



                      MEMORANDUM DECISION

Judge Andrew W. Gould delivered the decision of the Court, in which
Presiding Judge Lawrence F. Winthrop and Judge Maurice Portley joined.


G O U L D, Judge:

¶1           Crown City Properties, L.L.C., John D. and Nannette Wright,
Michael J. and Marguerite N. Herlihy, and The Michael J. & Marguerite N.
Herlihy Family Trust dated December 13, 1999 (collectively, the
“Appellants”) appeal from the trial court’s judgment entered in favor of
Wells Fargo Bank, National Association (“Wells Fargo”).1 For the reasons
discussed below, we affirm the judgment in part, vacate it in part, and
remand for further proceedings consistent with this decision.

                FACTS AND PROCEDURAL HISTORY

¶2            This case arises from a guaranty executed in connection with
a construction loan.       In December 2005, Wells Fargo executed a
construction loan with Loop 76, L.L.C. (“Loop 76”), for the purpose of
constructing three commercial office/storage buildings. Pursuant to the
Construction Loan Agreement and Promissory Note (the “Loan
Documents”), Loop 76 promised to pay the principal amount of the loan
plus interest, late fees, professional consultant’s fees, and attorney’s fees
and costs incurred by Wells Fargo in connection with enforcement of the
loan.

¶3           Appellants are owners of membership interests in Loop 76.
Appellants personally guaranteed repayment of the loan, as well as all
indebtedness owed by Loop 76 in connection with the loan.

¶4           The note for the loan was originally scheduled to mature on
February 2, 2008, but was later extended to December 31, 2008. On July
20, 2009, Loop 76 filed for bankruptcy. Loop 76 and Appellants eventually
defaulted under the terms of the loan and the guaranty, and never paid


1       The Kraus Family Trust was previously dismissed as a defendant
in this case and is not a party to this appeal.




                                     2
                     WELLS FARGO v. CROWN, et al.
                         Decision of the Court

the amounts due under the loan. On September 8, 2009, Wells Fargo filed
a lawsuit against Appellants for breach of the guaranty.

¶5             The court held a three-day bench trial in December 2012.
After the trial, the court entered judgment in favor of Wells Fargo in the
amount of $28,554,367.37; Appellants filed a timely appeal.

                               DISCUSSION

¶6             We review the record on an appeal from a bench trial in the
light most favorable to sustaining the trial court's judgment. Cimarron
Foothills Cmty. Ass’n v. Kippen, 206 Ariz. 455, 457, ¶ 2, 79 P.3d 1214, 1216
(App. 2003). “We will not set aside the [trial] court’s findings of fact
unless clearly erroneous, giving due regard to the opportunity of the court
to judge the credibility of witnesses.” In re Estate of Zaritsky, 198 Ariz. 599,
601, ¶ 5, 12 P.3d 1203, 1205 (App. 2000). “A finding of fact is not clearly
erroneous if substantial evidence supports it, even if substantial
conflicting evidence exists.” Kocher v. Dep't of Revenue of State of Ariz., 206
Ariz. 480, 482, ¶ 9, 80 P.3d 287, 289 (App. 2003). We review de novo the
trial court’s legal conclusions, as well as its findings regarding mixed
questions of law and fact. Pueblo Santa Fe Townhomes Owners’ Ass’n v.
Transcontinental Ins. Co., 218 Ariz. 13, 19, ¶ 19, 178 P.3d 485, 491 (App.
2008).

I.     Equitable Estoppel

¶7            Appellants contend the trial court erred when it determined
that the guaranty was valid and enforceable against Appellants, and that
“Wells Fargo is not [equitably] estopped from enforcing the [g]uaranty
against [Appellants].” Appellants argue the evidence supports their
equitable estoppel defense because it establishes: (1) Wells Fargo agreed to
a loan modification in February 2008; (2) potential financing was available
to Appellants with another lender, Prudential Mortgage Capital
Corporation (“Prudential”) in early 2008; (3) based upon Wells Fargo’s
agreement to modify their loan, Appellants decided to forego financing
with Prudential; and (4) when Wells Fargo withdrew the agreement to
modify the loan in July 2008, the commercial lending market had
drastically changed, and financing was no longer available with
Prudential. As a result, Appellants assert that the actions of Wells Fargo
“led to the inability of [Loop 76] to secure financing to address the
construction loan,” and “undeniably increased the risk that a claim on
[Appellants’] guaranty would be asserted.”




                                       3
                     WELLS FARGO v. CROWN, et al.
                         Decision of the Court

¶8            Equitable estoppel is an affirmative defense that “applies
when the conduct of a party absolutely precludes the party from asserting
rights which might have otherwise existed against another person who in
good faith has relied upon the conduct and as a result of such reliance has
changed his position for the worse.” Heltzel v. Mecham Pontiac, 152 Ariz.
58, 61, 730 P.2d 235, 237 (1986); see Gorman v. Pima Cnty., 230 Ariz. 506,
510, ¶ 20 n.4, 287 P.3d 800, 804 n.4 (App. 2012). The three elements of
equitable estoppel are: “(1) the party to be estopped commits acts
inconsistent with a position it later adopts; (2) reliance by the other party;
and (3) injury to the latter resulting from the former’s repudiation of its
prior conduct.” Valencia Energy Co. v. Ariz. Dep’t of Revenue, 191 Ariz. 565,
576-77, ¶ 35, 959 P.2d 1256, 1267-68 (1998); see Gorman, 230 Ariz. at 510-11,
¶ 21, 287 P.3d at 804-05 (noting the three elements of an equitable estoppel
defense). In establishing the second element of equitable estoppel, a party
must show that its reliance was reasonable under the circumstances of the
case. Valencia, 191 Ariz. at 577, ¶ 37, 959 P.2d 1268.

   A. The Prudential Loan

¶9           Appellants argue the trial court erred when it determined
that, “Prudential never agreed to issue a loan on the terms stated in the
Prudential Loan Application.” Based on our review of the record, we
disagree.

¶10           In early 2008, Appellants attempted to obtain permanent
financing for Loop 76 from Prudential to pay off the Wells Fargo loan. In
January 2008, Appellant John Wright (“Wright”), in his capacity as
managing member for Loop 76, executed a loan application with
Prudential. The application stated, “[t]his Application does not constitute
a commitment to lend by [Prudential],” and “[s]ubject to payment of the
Application Deposit and Good Faith Deposit . . . full underwriting, due
diligence review, and loan committee approval,” Prudential would
“consider issuing a loan commitment.” The application contained a “No
Material Adverse Change” provision, which provided that Prudential was
under no obligation to close and fund the proposed loan if, in Prudential's
sole discretion, a “material adverse change” occurred in the “financial,
banking, loan syndication, securitization or capital markets.”

¶11           To accept the terms listed in the application, Loop 76 was
required to sign the application and return it to Prudential with payment
of the “Application Deposit” and the “Good Faith Deposit” no later than
January 11, 2008. The application expressly stated, “If an executed copy of
this Application, together with the Application Deposit and Good Faith


                                      4
                    WELLS FARGO v. CROWN, et al.
                        Decision of the Court

Deposit, has not been timely received, this Application shall be null and
void.”

¶12          Wright returned the application, but did not submit the
Good Faith Deposit; instead, Wright deleted that term from the
application.   As a result, Prudential never processed Loop 76’s
application. Prudential also declined to process Loop 76’s application due
to changing market conditions.

¶13          The record reflects that in late February 2008, Prudential
submitted an alternative financing proposal to Appellants. However,
Appellants declined to pursue this alternative proposal because it would
not have provided Loop 76 with sufficient funds to pay off the Wells
Fargo loan. Thus, by late February 2008, Appellants had been unable to
obtain a loan commitment on behalf of Loop 76 from Prudential, and the
proposed terms in the original application were no longer being
considered by Prudential.

¶14           Accordingly, we conclude the record supports the trial
court’s finding that Prudential did not agree to offer Loop 76 a loan based
on the terms of the January 2008 application.

   B. The Proposed Wells Fargo Loan Modification

¶15           Appellants also contend the trial court erred when it
determined that Wells Fargo and Loop 76 “never reached an agreement
on the terms for a modification to the existing Loan that included either an
increase to the principal balance or a long-term extension of the maturity
date.”

¶16          While Appellants were attempting to obtain a loan from
Prudential, they also tried to obtain a modification of the Wells Fargo
loan. On February 6, 2008, a few days after the original loan matured,
Brandon Cox from Wells Fargo met with Wright to discuss the terms of a
possible loan modification/extension. Cox was the representative from
Wells Fargo who was responsible for handling the Loop 76 loan.

¶17           At trial, the parties disputed what occurred during the
February 6, 2008 meeting between Cox and Wright. According to Cox, the
parties discussed potential terms for extending or modifying the loan,
including the possibility of increasing the loan limit from approximately
$4.5 million to $28 million. The additional $4.5 million would be used to
finish the second floor, or mezzanine section of one of the buildings,
thereby making this section of the building available for leasing to office


                                     5
                    WELLS FARGO v. CROWN, et al.
                        Decision of the Court

tenants. Cox testified that he never agreed to obtain a new loan for Loop
76 during the meeting; rather, he only discussed the potential terms for an
extension or modification of the existing loan. In summarizing the
meeting, Cox testified that there were no promises or agreements, and
that the proposed terms were “[o]bviously still subject to our internal
approval and final document of the loan.”

¶18          In contrast, Wright testified that when the February 6, 2008
meeting was concluded, he believed a loan modification agreement had
been reached between Wells Fargo and Loop 76. As a result, Wright
cancelled any pending financing with Prudential.

¶19           After the meeting concluded, Appellant Michael J. Herlihy e-
mailed Cox and asked, “Have you been able to come up with terms for
our semi perm loan? Can you tell us what to expect?” In response, Cox
noted that he had met with Wright earlier that day and stated:

      I'm shooting for the following:

      Amount - $28,000,000 (I'm not sure I'll get more out of it, but
      I'll try)

      Rate - 30 day LIBOR + 2.00 floating (currently 5.25%). We
      will use a SWAP agreement to fix the rate on $24,000,000
      matching the maturity at around 5%.

      Term - 24 month (Again, I'm not sure I'll get more but I'll try)

      Fee - .50% ($140,000)

      Recourse - stays the same

      I will keep you posted of my progress. If you have any
      questions or comments, please don’t hesitate to contact me.

¶20         Wright testified that from February 2008 through June 2008,
Cox continued to assure him that Wells Fargo was attempting to finalize
the loan modification based on the terms the parties had agreed to on
February 6.

¶21          In contrast, Cox testified that he never provided any
assurances regarding the proposed loan modification during this time
period. Rather, on February 29, 2008, Herlihy sent Cox an email
expressing the desire of Loop 76 and Appellants to alter the proposed loan
modification terms.      Specifically, Herlihy proposed a decrease in


                                     6
                     WELLS FARGO v. CROWN, et al.
                         Decision of the Court

additional funding from $4.5 million (total $28 million) to $2.5 million
(total $26 million). Herlihy stated that Loop 76 now intended to use
“private funds” to finish construction on the mezzanine section of the
building instead of additional loan funds from Wells Fargo. Cox
responded that the “benefit” of the original proposal for an additional $4.5
million loan modification was to “stabilize the property” and finish the
mezzanine floor so that it would be available for leasing to tenants, and
not simply to provide Loop 76 with additional cash. Cox concluded his
email by stating, “I don’t understand the change of heart . . . .”

¶22            Following this email exchange, in March 2008 Wright
informed Cox that he was being sued in California and faced a potential
judgment of $5.9 million. While Appellants assert that Cox knew or
should have known about this lawsuit prior to March 2008, Cox testified
that the discovery of Wright’s potential liability from the California
lawsuit concerned Wells Fargo, because “such a judgment was well in
excess of any cash that [Wright] would have maintained on his personal
financial statement.”

¶23            On July 2, 2008, Herlihy sent an email to Cox inquiring about
the status of the Wells Fargo loan modification. In response, Cox advised
Herlihy that he was only focused on a possible extension of the maturity
date for the current loan, and it was not likely Wells Fargo was going to
agree to a modification that increased the loan limit. Based on this email,
Appellants understood, purportedly for the first time, that Wells Fargo
was not going to modify Loop 76’s loan.

¶24            Based on our review of the record, we conclude there is
substantial evidence to support the trial court’s finding that Wells Fargo
and Loop 76 never reached an agreement on a loan modification. While
the testimony of Cox and Wright concerning the February 6, 2008 meeting
is conflicting, we defer, as we must, to the trial court’s determination that
the testimony of Cox was more credible. Imperial/Litho Graphics v. M.J.
Enters., 152 Ariz. 68, 72, 730 P.2d 245, 249 (App. 1986) (stating that it is the
province of the trial judge, and not the appellate court, to determine the
credibility of witnesses).

¶25          The February 6, 2008 email supports the trial court’s
conclusion. The email does not, as Appellants contend, establish that
Loop 76 and Wells Fargo had reached an agreement on the terms of a loan
modification. Cox’s statements that he is “shooting for the following,”
“I’m not sure I’ll get more,” and “I’ll keep you posted on my progress” is
not an agreement. These statements indicate that (1) Cox was reciting the


                                       7
                     WELLS FARGO v. CROWN, et al.
                         Decision of the Court

proposed terms the parties had discussed at their earlier meeting, and
(2) Cox was going to present those terms for consideration by Wells Fargo.

¶26           Finally, there is substantial evidence in the record showing
that Cox did not induce Appellants to believe Wells Fargo had agreed to a
modification during the period between February 2008 and July 2008. To
the contrary, Cox expressed his concerns about two material changes that
potentially prevented the parties from reaching an agreement. When
notified of Appellants’ alternative financing proposal in late February
2008, Cox stated “I don’t understand the change of heart,” and noted that
Appellants’ proposal jeopardized the primary purpose of the loan
modification; to provide sufficient funds to finish the construction project.
In addition, in March 2008, Cox advised Wright that Wells Fargo was
concerned about Wright’s liability in his pending California lawsuit.

¶27           Appellants assert that we should disregard the trial court’s
credibility determinations because the trial judge was biased against them.
This argument is presented for the first time on appeal, and we do not, as
a general matter, consider issues unless they were raised in the trial court.
Englert v. Carondelet Health Network, 199 Ariz. 21, 26, ¶ 13, 13 P.3d 763, 768–
69 (App. 2000).

¶28           Moreover, a party challenging a trial judge’s impartiality
must overcome the presumption that trial judges are free of bias and
prejudice and must set forth “a specific basis for the claim of partiality and
prove by a preponderance of the evidence that the judge is biased or
prejudiced.” Simon v. Maricopa Med. Ctr., 225 Ariz. 55, 63, ¶ 29, 234 P.3d
623, 631 (App. 2010) (internal citations omitted). The bias and/or
prejudice necessary for disqualification “generally must arise from an
extra-judicial source and not from what the judge has done in his
participation in the case.” Id. Here, Appellants’ late claim of judicial bias
fails because they have not presented any facts establishing any source of
bias.

¶29           Accordingly, we affirm the trial court’s judgment
(1) determining that Wells Fargo was not equitably estopped from
enforcing the guaranty, and (2) finding Appellants liable under the
guaranty for the indebtedness incurred by Loop 76 under the loan.

II.    Damages

¶30          Appellants contend the trial court erred in its award of
damages. Appellants argue that Wells Fargo failed to present sufficient
evidence to support the damages set forth in the trial court’s judgment.


                                      8
                     WELLS FARGO v. CROWN, et al.
                         Decision of the Court

¶31            We review a trial court’s calculation of damages for an abuse
of discretion. Gonzales v. Ariz. Pub. Serv. Co., 161 Ariz. 84, 90, 775 P.2d
1148, 1154 (App. 1989). Once the fact of damages has been proved, a
plaintiff must establish the amount of his damages with a reasonable
certainty. Cnty. of La Paz v. Yakima Compost Co., Inc., 224 Ariz. 590, 607, ¶
53, 233 P.3d 1169, 1186 (App. 2010). A “plaintiff's evidence [should]
provide some basis for estimating his loss,” and “conjecture or speculation
cannot provide the basis for an award of damages.” Gilmore v. Cohen, 95
Ariz. 34, 36, 386 P.2d 81, 82 (1963) (internal citations omitted); see Cnty. of
La Paz, 224 Ariz. at 607, ¶ 53, 233 P.3d at 1186. The terms of an agreement
may provide the basis for calculating a party’s damages. See Paul R.
Peterson Constr., Inc. v. Ariz. State Carpenters Health and Welfare Trust, 179
Ariz. 474, 485, 880 P.2d 694, 705 (App. 1984) (holding that calculation of
prejudgment interest may be based on the terms of a contract between the
parties).

¶32          As an initial matter, Wells Fargo claims Appellants waived
any challenge to the damages award by not previously filing a motion for
new trial. See Tucson Gas & Elec. Co. v. Larsen, 19 Ariz. App. 266, 268, 506
P.2d 657, 659 (1973). We disagree. Because this case was decided by a
judge and not a jury, the issue is properly before us. S & R Properties v.
Maricopa Cnty., 178 Ariz. 491, 504, 875 P.2d 150, 163 (App. 1993).

   A. Cox’s Testimony

¶33          Cox testified as Wells Fargo’s primary witness concerning
the amount of Wells Fargo’s damages. Appellants objected to Cox’s
testimony, claiming that Cox lacked the requisite knowledge to testify
about the reasonableness or necessity of any fees or costs incurred by
Loop 76 under the loan. The trial court overruled Appellants’ objection.
Appellants argue the trial court’s ruling was reversible error.

¶34            This court “will affirm the trial court's rulings on the
exclusion or admission of evidence absent an abuse of discretion or legal
error and prejudice.” Brown v. United States Fid. & Guar. Co., 194 Ariz. 85,
88, ¶ 7, 977 P.2d 807, 810 (App. 1998); see Waddell v. Titan Ins. Co., 207 Ariz.
529, 536, ¶ 28, 88 P.3d 1141, 1148 (App. 2004) (holding that a trial court’s
evidentiary rulings are reviewed for an abuse of discretion).

¶35          We find no error. The record reflects that Cox had sufficient
personal knowledge to testify about Wells Fargo’s damages. Cox testified
that he was the Wells Fargo employee assigned to handle the Loop 76
loan. Cox also described the steps he took to determine the fees and costs



                                       9
                     WELLS FARGO v. CROWN, et al.
                         Decision of the Court

paid by Wells Fargo to third party consultants such as appraisers,
environmental consultants, and property inspectors.

   B. Principal and Interest

¶36           The trial court awarded Wells Fargo $23,622,423.82 in
damages for the unpaid principal balance of the loan. This award was
based upon the testimony of Cox, as well as the note, construction loan
agreement, guaranty, and all of the loan documents. In addition, Wells
Fargo representative Sam Supple testified to a similar principal balance of
$23.1 million. Finally, Wright conceded during his testimony that Wells
Fargo claimed an outstanding principal balance of $23,622,000, but Wright
believed the principal owed to Wells Fargo was $23,604,000.

¶37            Despite some minor conflicts in the testimony, we conclude
there is sufficient evidence to support the trial court’s damage award of
$23,622,423.82 for unpaid principal.

¶38           The trial court also awarded Wells Fargo accrued interest on
the principal sum of the loan in the amount of $6,861,630.88. This interest
was calculated at the rate of 8.25% per annum from January 1, 2009 to
December 3, 2012. This calculation is based on the default interest rate set
forth in the note, which was introduced as an exhibit at trial, and the
testimony of Cox. Based on this evidence, the record supports the trial
court’s (1) award of accrued interest on the loan, and (2) its method of
calculating accrued interest on the loan.

¶39            However, for the reasons discussed below, we conclude the
trial court erred when it failed to reduce either the principal or accrued
interest on the loan by the amount of Loop 76’s bankruptcy payments. See
supra, at pgs. 12-13. As a result, we vacate the principal and interest
awards in the judgment, and remand this matter to the trial court to
determine the amount the loan principal and/or interest may have been
reduced by Loop 76’s bankruptcy payments.

   C. Fees and Costs

¶40            The trial court awarded Wells Fargo $62,838.67 for “fees and
costs” in its judgment. Based on the parties’ briefs, this damage award
appears to consist of fees and costs that were incurred in connection with
Loop 76’s bankruptcy proceeding. However, subsequent to the filing of
the briefs in this case, Wells Fargo conceded that the trial court incorrectly




                                     10
                     WELLS FARGO v. CROWN, et al.
                         Decision of the Court

awarded this item of damages.2 We therefore vacate this amount of
damages from the trial court’s judgment.

¶41            The trial court also awarded Wells Fargo damages for “other
loan fees and costs” in the amount of $7,474.00. In their briefs, Appellants
do not specifically address this item of damages. As a result, Appellants
have waived any objection to this award of damages, and we therefore
affirm the trial court’s judgment as to this amount of damages. DeElena v.
S. Pac. Co., 121 Ariz. 563, 572, 592 P.2d 759, 768 (1979) (holding that issues
which are not clearly raised and argued by a party in his appellate brief
are waived); Belen Loan Investors, LLC v. Bradley, 231 Ariz. 448, 457, ¶ 22,
296 P.3d 984, 993 (App. 2012) (same).

    D. Bankruptcy Payments

¶42           Appellants also assert the trial court erred by failing to
reduce the amount of the judgment by $3,525,644.57, the amount Loop 76
paid to Wells Fargo through its Chapter 11 reorganization plan as of
December 2012. Wells Fargo admitted that, pursuant to the bankruptcy
reorganization plan, Loop 76 had been paying Wells Fargo about
$115,000.00 per month in principal and interest. At the time of trial, Wells
Fargo was holding Loop 76’s payments in a “suspense account”; however,
after the judgment was entered, Wells Fargo applied the payments to the
judgment.

¶43            “A guarantee is a contract secondary or collateral to the
principal contractual obligation it guarantees.” Phx. Arbor Plaza, Ltd. v.
Dauderman, 163 Ariz. 27, 29, 785 P.2d 1215, 1217 (App. 1989). Thus, as a
general matter, discharge or payment of a principal debtor’s obligation to
a creditor also discharges or reduces the obligation of a guarantor.
Howard v. Associated Grocers, 123 Ariz. 593, 595, 601 P.2d 593, 595 (1979);
Giovanelli v. First Fed. Sav. and Loan Ass’n of Phx., 120 Ariz. 577, 582, 587
P.2d 763, 768 (App. 1978). See Restatement (Third) of Suretyship &
Guaranty § 19(a), Cmt. a (1996) (“To the extent that the underlying



2     Wells Fargo determined that this award of “fees and costs”
awarded in the judgment consists of late fees Wells Fargo had previously
demanded in its correspondence with Appellants, but subsequently
determined had been calculated incorrectly. As a result, Wells Fargo was
no longer seeking an award of these fees and costs at the time of trial.




                                     11
                     WELLS FARGO v. CROWN, et al.
                         Decision of the Court

obligation is discharged by performance or other satisfaction by the
principal obligor, the secondary obligation is also discharged.”).

¶44           Here, the guaranty limits Appellants’ liability to the
“indebtedness” incurred by Loop 76 under the loan. This indebtedness is,
in turn, the basis for the judgment against Appellants. Appellants are
therefore entitled to a reduction of their obligation as guarantor of the loan
in the amounts Loop 76 paid to Wells Fargo through the bankruptcy
proceedings.

¶45           Wells Fargo argues that the judgment should not be reduced
by the amount of Loop 76’s bankruptcy payments because: (1) at the time
the judgment was entered, the payments ordered under the bankruptcy
reorganization plan had been appealed by Wells Fargo and were subject
to change; (2) the bankruptcy code prevented Wells Fargo from obtaining
a double recovery from both Loop 76 and Appellants; and (3) the
payments made by Loop 76 only affected the amount of money Wells
Fargo could collect from Appellants, not the amount of the judgment
against Appellants.

¶46          We disagree. If Loop 76’s bankruptcy payments had been
applied by Wells Fargo to the loan, the payments may have reduced the
amount of principal and/or accrued interest ultimately awarded to Wells
Fargo in the judgment. Wells Fargo’s delay in applying these payments
appears to have inured to its benefit by increasing the amount of the
judgment.

¶47           Accordingly, we conclude the trial court reversibly erred by
failing to reduce Wells Fargo’s damages award by the amounts paid by
Loop 76 to Wells Fargo in connection with Loop 76’s bankruptcy
proceedings.

III.   Written Demand

¶48           Finally, Appellants contend the trial court erred when it
determined that Wells Fargo had sent a proper written demand for
payment after Loop 76 defaulted on the loan. Appellants argue that Wells
Fargo failed to present sufficient admissible evidence establishing that it
provided proper written notice of default and demand for payment as
required by the guaranty.




                                     12
                     WELLS FARGO v. CROWN, et al.
                         Decision of the Court

   A. Notice Required by the Guaranty

¶49           Under the terms of the guaranty, Wells Fargo was required
to provide a five-day written notice to Appellants before it could demand
payment and seek to obtain a “judgment” for damages connected with the
loan. Section 5.9 of the guaranty required that all notices be sent to
Appellants on the addresses shown on the signature pages. The signature
page signed by the Wrights reflected their address as “10800 E. Cactus
Road, #59, Scottsdale, Arizona”; the signature page for the Herlihys and
the Herlihy Trust reflected their address as “415 9th Street, Coronado, CA,
92118.”

   B. Admissibility of the Demand Letters

¶50            Appellants assert the trial court erred by allowing Wells
Fargo, on the final day of trial, to admit into evidence the demand letters
sent to Appellants. Attached to each letter was a certified mail receipt.
Appellants contend the letters should have been precluded because they
were not listed as exhibits by Wells Fargo in the joint pretrial statement.
See Ariz. R. Civ. P. 16(d)(2)(E) (stating that exhibits not listed in the
parties’ joint pretrial statement may be precluded “except for good cause
shown”). Appellants argue that the trial court reversibly erred when it
admitted the letters over their objection. We review the trial court’s
evidentiary ruling on this issue for an abuse of discretion. Waddell, 207
Ariz. at 536, ¶ 28, 88 P.3d at 1148.

¶51           Before trial, the parties submitted a joint pretrial statement
containing the following stipulation: “Notwithstanding Wells Fargo’s
demand for payment, [Appellants] have not paid Wells Fargo any
amounts owed by [Loop 76] to Wells Fargo under the Loan Documents.”
(Emphasis added.) When Appellants objected to admission of the letters,
Wells Fargo explained that, relying on the stipulation in the joint pretrial
statement, it did not list the letters as exhibits because it had assumed
Appellants did not dispute receiving a demand letter.

¶52           The court overruled Appellants’ objection and admitted the
letters into evidence. The court stated that it was reasonable for Wells
Fargo to assume that Appellants did not contest receiving the demand
letters based on the stipulation in the joint pretrial statement. In addition,




                                     13
                      WELLS FARGO v. CROWN, et al.
                          Decision of the Court

the court noted that Wells Fargo had already introduced testimony stating
that the demand letters had been sent to Appellants.3

¶53             Our review of the record shows no abuse of discretion. The
trial court properly considered the reasons for Wells Fargo’s failure to list
the letters in the joint pretrial statement, as well as the prejudicial effect, if
any, the admission of the letters would have on Appellants.

    C. Sufficiency of the Evidence

¶54           Appellants contend that even with the admission of the
demand letters, Wells Fargo has not proved it complied with the notice
requirements of the guaranty because it failed to show that Appellants
received the letters prior to the filing of Wells Fargo’s lawsuit.

¶55            “[T]here is a strong presumption that a letter properly
addressed, stamped and deposited in the United States mail will reach the
addressee.” State v. Mays, 96 Ariz. 366, 367-68, 395 P.2d 719, 721 (1964); see
Andrews v. Blake, 205 Ariz. 236, 243, ¶ 22 n.3, 69 P.3d 7, 14 n.3 (2003). “The
presumption is rebutted, however, when the addressee denies receipt” of
the letter. Blake, 205 Ariz. at 243, ¶ 22 n.3, 69 P.3d at 14 n.3. As a result,
the issues concerning the mailing and receipt of Wells Fargo’s letters were
a question of fact that had to be determined by the trial court. Id. “We
will not set aside the [trial] court's findings of fact unless clearly
erroneous, giving due regard to the opportunity of the court to judge the
credibility of witnesses.” Zaritsky, 198 Ariz. at 601, ¶ 5, 12 P.3d at 1205.

¶56           The record shows that Appellants received the demand
letters. Wells Fargo mailed written notices/demand letters to Appellants
on August 21, 2009, approximately two weeks before Wells Fargo filed its
lawsuit. In addition, the demand letters were sent to the addresses
Appellants listed as their mailing addresses in the guaranty.

¶57            The mail receipt attached to the Herlihys’ letter is date
stamped August 21, 2009, and was signed for by Appellant Marguerite
Herlihy on August 25, 2009 at the address identified by the Herlihys in the
guaranty. At trial, Mr. Herlihy confirmed that the signature on the mail
receipt is his wife’s signature.


3      Sam Supple, a representative for Wells Fargo, testified that he had
sent separate demand letters to Loop 76 and Appellants on September 22,
2008.



                                       14
                     WELLS FARGO v. CROWN, et al.
                         Decision of the Court

¶58            The mail receipt attached to the Wrights’ letter also shows
that it was sent to the Wrights on August 21, 2009, at the address listed in
the guaranty. However, the letter addressed to the Wrights was returned
as undeliverable. Wells Fargo located an alternate address for the Wrights
and sent a second demand letter (enclosing the original August 21 letter)
to them on September 14, 2009. John Wright initially denied living at the
address to which the September 14 letter was sent; however, he ultimately
confirmed that his wife’s signature appeared on the mail receipt attached
to the letter.

¶59         Accordingly, we affirm the trial court’s determination that
Wells Fargo sent a written demand to Appellants as required by the
guaranty.

IV.    Attorney’s Fees

¶60          Both parties request an award of attorney’s fees incurred on
appeal pursuant to A.R.S. § 12-341.01(A). Because both parties have lost
on some issues and prevailed on other issues on appeal, we deny the
parties’ requests for discretionary attorney’s fees under A.R.S. § 12-
341.01(A). A.R.S. § 12-341.01(A) (stating an award of fees is discretionary;
“the court may award the successful party” fees) (emphasis added); Fulton
Homes Corp. v. BBP Concrete, 214 Ariz. 566, 569, ¶ 10, 155 P.3d 1090, 1093
(App. 2007) (stating that one of the factors a court should consider in
awarding fees under A.R.S. § 12-341.01 is “whether the successful party
did not prevail with respect to all of the relief sought”) (internal citations
omitted).

¶61            However, Wells Fargo also seeks attorney’s fees pursuant to
the guaranty, which provides that Appellants “promise to pay”
“reasonable attorneys’ fees and court cost incurred” by Wells Fargo “to
enforce its rights under this [g]uaranty.” Based on the fee provision in the
guaranty, an award of reasonable fees in favor of Wells Fargo is
mandatory. Geller v. Lesk, 230 Ariz. 624, 627, ¶ 10, 285 P.3d 972, 975 (App.
2012). We therefore direct Wells Fargo to submit a fee application in
compliance with Arizona Rule of Civil Appellate Procedure 21(C).




                                     15
                     WELLS FARGO v. CROWN, et al.
                         Decision of the Court

                                Conclusion

¶62            For the aforementioned reasons, we affirm the judgment in
part, vacate it in part, and remand this matter to the trial court for further
proceedings consistent with this decision.




                                :gsh




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