R & F INVESTORS, LLC, an Arizona limited liability company, Plaintiff/Appellant,
FRANK A. CIOLLI and ANITA CIOLLI, his wife, Defendants/Appellees.
Not for Publication – Rule 111(c), Rules of the Arizona Supreme Court
Appeal from the Superior Court in Maricopa County No. CV2010-029905 The Honorable Lisa Daniel Flores, Judge
The Law Office of Libby Banks, PLLC, Phoenix By Libby Banks Counsel for Plaintiff/Appellant
Berens, Kozub, Kloberdanz & Blonstein, PLC, Phoenix By Richard W. Hundley Counsel for Defendants/Appellees
Judge Peter B. Swann delivered the decision of the court, in which Presiding Judge Randall M. Howe and Judge Andrew W. Gould joined.
¶1 This is an appeal from a deficiency judgment. The lender's successor-in-interest, R & F Investors, LLC ("R & F"), contends that the judgment should have included delinquent property taxes that it paid after the trust property was sold at a trustee's sale. We disagree. The court properly excluded the amount of the taxes from its calculation of the amount owed as of the date of the trustee's sale, and R & F waived the taxes' inclusion in the calculation of the property's fair market value. We further hold that R & F failed to comply with contractual provisions that could have allowed for default interest to accrue as of the date of the tax delinquency.
¶2 R & F also contends that it was entitled to recover additional attorney's fees, and its expert's fees. We find no abuse of discretion in the amount of attorney's fees awarded, but we agree that under the broad terms of the promissory note, R & F was entitled to recover its expert's fees. We therefore remand for entry of an award of expert's fees to R & F, but we otherwise affirm.
FACTS AND PROCEDURAL HISTORY
¶3 In March 2007, Webber & Associates loaned $725, 000 to Frank and Anita Ciolli ("the Ciollis"), and the Ciollis executed a promissory note secured by a deed of trust against commercial property ("the Property"). Soon thereafter, Webber & Associates transferred its interests in the note and the deed of trust to a group of entities: Leonard A. Frankel, Trustee of the Leonard A. Frankel Trust; Reiss/Excelsior, LLC; and Barry Reiss and Leni Sue Reiss as Trustees of the Excelsior Trust (collectively, "Frankel").
¶4 The note required the Ciollis to pay Frankel monthly interest payments starting in May 2007, a principal installment payment in April 2010, and a final payment in April 2011. Under the deed of trust, the Ciollis were also required to pay all taxes and assessments affecting the Property in a timely manner. The deed of trust provided that if the Ciollis failed to pay the property taxes, Frankel could do so to protect the security and the Ciollis would be liable to repay Frankel for the expenditure, with interest. Further, the note provided that if the Ciollis defaulted on any of their obligations under the note or the deed of trust, Frankel could declare all unpaid principal and accrued interest immediately due, and default-rate interest would apply. The note also provided that if a collection action were brought, the Ciollis would be responsible for all costs.
¶5 The Ciollis failed to pay the taxes on the Property starting in June 2008, failed to make the principal installment payment in April 2010, and were sometimes late in making the monthly interest payments. Accordingly, in May 2010, Frankel recorded a notice of trustee's sale. At the August 2010 sale, Frankel purchased the Property for $500, 000. Frankel subsequently assigned title to the Property, and the right to pursue a deficiency claim, to R & F. R & F promptly brought an action against the Ciollis under A.R.S. § 33-814, seeking a deficiency judgment of over $450, 000.
¶6 While the deficiency action was pending, R & F paid the delinquent property taxes. R & F included this expenditure, plus default interest dating from the Ciollis' initial failure to pay the taxes, in its calculation of the amount due under the note. The Ciollis moved for summary judgment with respect to these aspects of the calculation, arguing that they were not liable for the delinquent taxes, or for interest related thereto, because Frankel did not pay the taxes before the trustee's sale. In response, R & F argued that it was entitled to recover its tax expenditure under an unjust enrichment theory, and was in any event entitled to default interest based on the unpaid taxes and late interest payments.
¶7 The Ciollis filed a reply and the superior court scheduled oral argument. Before the time set for oral argument, R & F filed a "Bench Memorandum" purporting to address "new arguments" raised in the reply. The court declined to consider the memorandum, concluding that the summary judgment motion had been fully briefed and that the memorandum was not authorized by the Rules of Civil Procedure. After hearing oral argument, the court granted partial summary judgment for the Ciollis, ruling that the amount due under the note included neither the delinquent property taxes ...