244 P.3d 586
Ariz. Ct. App.2010Background
- Plaintiff Dooley, a 31.25% Corvallas shareholder, sues for breach of fiduciary duty, fraudulent conveyance, and accounting against O'Brien, Kathleen O'Brien, and Fencl.
- Corvallas was formed in the 1990s by the parties to pursue Merrill Ranch development; Merrill Ranch was transferred to a new LLC without Plaintiff's or Corvallas' investment.
- Plaintiff recorded lis pendens; Defendants transferred Merrill Ranch to Corvallas to avoid encumbrances and to facilitate home sales.
- Special Master conducted an accounting of Corvallas and related LLCs; his report was adopted by the court in 2007 over Plaintiff's objections.
- Defendants moved for summary judgment arguing claims were moot after the Merrill Ranch transfer and the Special Master’s report; most claims were resolved in their favor.
- Defendants requested attorney’s fees under A.R.S. § 12-341.01(A); the trial court granted fees; Plaintiff appealed seeking reversal and detailed findings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether § 12-341.01(A) applies to claims arising from non-contract duties | Dooley: claims do not arise from contract, so fees improper | O'Brien/ Fencl: some claims arise from contract-related relationships warranting fees | No; claims do not arise out of contract |
| Whether breach of fiduciary duty/misappropriation claim arises out of contract | Dooley: fiduciary duties created by contract control remedies | O'Brien/Fencl: duties arise from law, not contract | Not arise from contract |
| Whether fraudulent conveyance claim arises out of contract | Dooley: relies on contract-based transfer duties | O'Brien/Fencl: arises under the Uniform Fraudulent Transfer Act, not contract | Not arise from contract |
| Whether accounting claims arise out of contract | Dooley seeks direct accounting against fiduciaries | O'Brien/Fencl: accounting rights exist independent of contract | Not arise out of contract |
Key Cases Cited
- Barmat v. John and Jane Doe Partners A-D, 155 Ariz. 519 (Ariz. 1987) (duties created by law vs. contract; not all torts recoverable fees)
- In re Naarden Trust, 195 Ariz. 526 (Ariz. 1999) (trust duties are implied by law, not contractual; no §12-341.01(A) fees)
- Ramsey Air Meds, L.L.C. v. Cutter Aviation, Inc., 198 Ariz. 10 (Ariz. 2000) (contractual relations may place parties within tort range but fees depend on nature of duty)
- Atkinson v. Marquart, 112 Ariz. 304 (Ariz. 1975) (directors owe fiduciary duties to corporation and stockholders)
- Dawson v. Withycombe, 216 Ariz. 84 (Ariz. 2007) (fiduciary duties can apply to creditors; duties imposed by law)
- Meinhard v. Salmon, 164 N.E. 545 (N.Y. 1928) (fiduciary standards; punctilio of honor applicable to trustees)
- Johnson v. Gilbert, 127 Ariz. 410 (Ariz. 1980) (closely held corporation quasi-partner status allows accounting rights)