Opinion
No. 1 CA-CV 13-0765
04-21-2015
REVA'S FLOOR DECOR, INC., an Arizona corporation; CITY OF PRESCOTT, a municipal corporation, Plaintiffs/Appellees, v. ANNE MORRISON TALLY, as Trustee of THE ANNE MORRISON TALLY REVOCABLE TRUST DATED JANUARY 28, 1986, Defendant/Appellant. JOANNE MELUSKI, a single woman aka JOANNE HUPPER aka JOANNE MARIE HAMMONTREE, Defendant/Appellee.
COUNSEL Goodman Law Firm PC, Prescott By Mark N. Goodman Counsel for Plaintiff/Appellee Reva's Floor Décor, Inc. Wong Fujii Carter PC, Phoenix By Rick K. Carter, Susan Larsen and Matthew Klopp Counsel for Defendant/Appellant
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 UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL AND MAY BE CITED ONLY AS AUTHORIZED BY RULE. Appeal from the Superior Court in Yavapai County
Nos. P1300CV20080194 and P1300CV201100433
The Honorable Anna C. Young, Judge
AFFIRMED
COUNSEL Goodman Law Firm PC, Prescott
By Mark N. Goodman
Counsel for Plaintiff/Appellee Reva's Floor Décor, Inc.
Wong Fujii Carter PC, Phoenix
By Rick K. Carter, Susan Larsen and Matthew Klopp
Counsel for Defendant/Appellant
MEMORANDUM DECISION
Presiding Judge Andrew W. Gould delivered the decision of the Court, in which Judge Maurice Portley and Judge Jon W. Thompson joined. GOULD, Judge: ¶1 Anne Morrison Tally appeals from the trial court's judgment finding her liable for civil conspiracy, quieting title and granting a constructive trust/equitable lien over real property fraudulently transferred to her, and awarding attorneys' fees and costs in favor of Appellee Reva's Floor Décor ("Plaintiff"). For the following reasons, we affirm.
Joanne Meluski is not a party to this appeal.
FACTUAL AND PROCEDURAL BACKGROUND
¶2 Joanne Meluski and her long-time live-in boyfriend, Peter Hupper, owned an accounting business entitled A Better Bookkeeper, Inc. ("ABBI"). In 2001, Plaintiff employed Meluski and ABBI as its accountant. Plaintiff authorized Meluski to write checks on behalf of Plaintiff in October 2003. From 2003 until December 2007, Meluski used this authority to embezzle money from Plaintiff, writing checks payable to businesses run by her and Hupper. ¶3 In early December 2007, Plaintiff discovered Meluski's scheme and the police began investigating Meluski for fraud and theft. Meluski was interrogated by the police on December 10, 2007. Later that day Hupper picked up Meluski from the police station and was made aware of the investigation. On December 18, 2007, Hupper transferred his interest in property located in Prescott, Arizona (the "220 Property") to his mother, Tally. ¶4 Tally originally owned the 220 Property, the house having been in her family since 1928. In 2002, she deeded the 220 Property to Hupper for $165,000.00. Tally loaned Hupper the purchase money secured by a deed of trust on the property with Tally as beneficiary. When Hupper learned of the police investigation in December 2007, he conveyed the 220 Property back to Tally as trustee of the Anne Morrison Tally Revocable Trust (the "Trust"); in exchange, Tally forgave the $110,600.00 that remained outstanding on the lien. Notably, at the time of the transfer, the house had been substantially improved, and was valued at about $300,000.00. ¶5 In February 2008, Plaintiff instituted this civil action seeking judgment for conversion against Meluski, Hupper, and ABBI; fraudulent transfer as to the 220 Property against Meluski, Hupper, ABBI, and Tally; and civil conspiracy against Meluski, Hupper, ABBI, and Tally, both as an individual and as trustee of the Trust. Plaintiff alleged that Meluski and Hupper used funds fraudulently taken from Plaintiff to purchase and improve cars, boats, and the 220 Property. Plaintiff also alleged that Hupper fraudulently transferred the 220 Property to Tally; accordingly, Plaintiff sought a constructive trust/equitable lien and a judgment quieting title to the 220 Property in Plaintiff. ¶6 While Plaintiff's civil case was pending, criminal charges were also pending against Meluski. The civil action was stayed pending resolution of Meluski's criminal charges. In March 2009, Meluski pled guilty to stealing money from Plaintiff, and was convicted of fraudulent schemes and artifices and theft. Following sentencing in the criminal case, the stay was lifted in the civil case. ¶7 During the course of the criminal investigation, on February 6, 2008, personal property was seized from the 220 Property pursuant to a search warrant. The City of Prescott eventually filed an interpleader action regarding this personal property. Tally filed an answer seeking release of two gold coins and any paperwork belonging to her. Plaintiff, however, claimed a right to all the subject property arguing that Tally's claims were time-barred. The court consolidated the interpleader action with the civil case. ¶8 Because Plaintiff's complaint sought both legal and equitable relief, the trial court issued a ruling determining that all equitable claims were non-jury issues, and the court would be the finder of fact. Plaintiff's legal claims would be submitted to a jury. At Tally's request, the court granted an advisory jury for the equitable claims. ¶9 Following trial, the jury found against Meluski, Hupper, ABBI, and Tally on the civil conspiracy claim. The jury awarded $1,200,000.00 in compensatory damages and $1,000,000.00 in punitive damages against Meluski, Hupper, and ABBI, jointly and severally; the jury awarded $0 in compensatory damages against Tally. The jury also issued advisory verdicts finding that the 220 Property was fraudulently transferred and that Plaintiff was entitled to a constructive trust and equitable lien on the 220 Property. Additionally, the jury quieted title in Plaintiff as the "sole legal owner" of the 220 Property. ¶10 Prior to trial neither party requested that the trial court make findings of fact and conclusions of law. However, during trial the court directed counsel to file findings of fact and conclusions of law with their post-trial memoranda. The trial court subsequently adopted and entered Plaintiff's proposed findings and conclusions. ¶11 In its findings, the trial court stated that Hupper transferred the 220 Property just eight days after becoming aware of the fraud investigation involving him and Meluski. The court found that Tally was also aware of the criminal investigation before the transfer. The court noted that although the 220 Property was worth $300,000.00, Hupper conveyed the property to Tally in exchange for forgiveness of Tally's $110,600.00 outstanding lien on the property. The court concluded that Hupper made the transfer at a time when he reasonably believed he could not pay his debts as they came due. The court further found that Hupper committed actual fraud in transferring the property, and Tally was not a good faith transferee. ¶12 The trial court incorporated its findings in its final judgment and granted a constructive trust on the 220 Property. The court quieted title to the 220 Property in Plaintiff and directed that recordation of the judgment would act as partial satisfaction of the compensatory damages awarded against the defendants. ¶13 With respect to the interpleader action, the court concluded that Plaintiff had a superior claim to the personal property; accordingly, all claims to the property, including Tally's, were dismissed. The court also awarded attorneys' fees against Meluski, Hupper, and ABBI in the amount of $300,000.00, and against Tally in the amount of $50,000.00. ¶14 Tally challenged the court's findings of fact and conclusions of law in a motion to amend/motion for new trial. The motion was denied, and Tally filed a timely notice of appeal.
Tally is the trustee and sole beneficiary of the Trust.
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DISCUSSION
I. Standard of Review ¶15 On appeal, we view the evidence in the light most favorable to supporting the trial court's judgment. Premier Fin. Servs. v. Citibank (Arizona), 185 Ariz. 80, 85 (App. 1995). "[W]e will not disturb a judgment if there is evidence to support it." Id. To the extent that the trial court makes a ruling of law, we review that decision de novo. Id. at 87. The trial court's interpretation and application of a statute is a matter of law subject to de novo review. Moore v. Browning, 203 Ariz. 102, 108, ¶ 21 (App. 2002). II. Trial Court's Findings ¶16 Tally claims the court erred when it issued findings of fact and conclusions of law because neither party requested such findings before trial as required by Arizona Rule of Civil Procedure 52(a). ¶17 Tally's challenge is unfounded. The trial court, sua sponte, requested the parties to file proposed findings/conclusions with their post-trial memoranda. Under these circumstances, the trial court acted within its discretion to adopt and enter Plaintiff's proposed findings/conclusions. See Universal Inv. Co. v. Sahara Motor Inn, Inc., 127 Ariz. 213, 215 (App. 1980) (stating that sua sponte findings need not be ignored even if neither party made a proper request under Arizona Rule of Civil Procedure 52(a)). Moreover, we will not disturb the court's findings unless there is no reasonable evidence to support them. Universal Inv. Co., 127 Ariz. at 215. ¶18 Tally next claims the trial court invaded the province of the jury by finding Tally liable on the civil conspiracy claim despite the fact the jury awarded $0 in compensatory damages against Tally. Tally notes that proof of damages is a required element of a claim for civil conspiracy. See Wells Fargo Bank v. Ariz. Laborers, Teamsters & Cement Masons Local No. 395 Pension Trust Fund, 201 Ariz. 474, 498, ¶ 99 (2002) (quoting Baker v. Stewart Title & Trust of Phoenix, 197 Ariz. 535, 542, ¶ 30 (App. 2000)) ("For a civil conspiracy to occur two or more people must agree to accomplish an unlawful purpose or to accomplish a lawful object by unlawful means, causing damages."). Thus, Tally argues the only interpretation of the jury's verdict is that the jury did not find Tally liable for civil conspiracy. ¶19 The jury's verdict was inconsistent. The jury expressly found against Tally and in favor of Plaintiff on the civil conspiracy claim, but awarded no compensatory damages against Tally. However, "[w]here jury verdicts appear inconsistent" the court will "exhaust all reasonable ways to read them as expressing a coherent view of the case before disregarding them." A Tumbling-T Ranches v. Flood Control Dist. Of Maricopa Cnty., 222 Ariz. 515, 526, ¶ 23 (App. 2009). ¶20 Here, although the jury awarded no compensatory damages against Tally, it did find, in its advisory capacity, that Hupper had fraudulently transferred the 220 Property to Tally. As a result, the jury recommended establishing a constructive trust on the 220 Property in favor of Plaintiff and quieting title to the 220 Property in Plaintiff. Taken together, these verdicts indicate the jury concluded that Tally acted in concert with Hupper to fraudulently transfer the 220 Property to Plaintiff's detriment. However, based on the evidence, it was reasonable for the jury to conclude that, beyond the 220 Property, Tally was not responsible for any other damages to Plaintiff arising from the civil conspiracy. ¶21 Accordingly, the $0 compensatory damage award signifies the jury's determination that Tally's liability on the civil conspiracy count is limited to the loss of her interest in the 220 Property. It does not, as Tally contends, require the court to disregard the jury's clear verdict finding Tally liable for civil conspiracy. ¶22 Additionally, Tally was required to raise any objection to inconsistencies in the jury verdict when the verdict was rendered. Trustmark Ins. Co. v. Bank One, Ariz., N.A., 202 Ariz. 535, 544, ¶ 42 (App. 2002). Tally "should have moved, before the jury was excused, for resubmission of the case to the jury pursuant to Rule 49(c), Arizona Rules of Civil Procedure." Id. at 543, ¶ 39. Doing so would have provided the court an "opportunity to correct the error with minimal effort and expense." Id. at ¶ 40. By failing to make a timely objection and waiting to challenge the inconsistency on appeal, Tally has waived any objection. See Id. at 544, ¶ 42. III. Fraudulent Transfer of the 220 Property ¶23 The trial court voided the transfer of the 220 Property based on its finding that Hupper transferred the property to Tally with actual intent to hinder, delay or defraud Plaintiff. See A.R.S. § 44-1004(A)(1). Tally challenges the court's avoidance of the transfer, arguing that (1) she took the 220 Property for "reasonable value" and (2) she was entitled to a good faith defense to avoidance of the transfer. ¶24 The Uniform Fraudulent Transfer Act ("UFTA") provides that a transfer is not voidable "against a person who took in good faith and for a reasonably equivalent value." A.R.S. § 44-1008(A). The UFTA states that value is given for a transfer if, in exchange for the property, "an antecedent debt is secured or satisfied." A.R.S. § 44-1003(A). The statute goes on to state that such satisfaction will only be considered "reasonably equivalent value" if the transferee "acquires an interest of the debtor in an asset pursuant to a regularly conducted, noncollusive foreclosure sale or execution of a power of sale . . . on default under a mortgage, deed of trust or security agreement." A.R.S. § 44-1003(B). ¶25 The record supports the trial court's finding that Tally did not take the 220 Property in good faith. She was aware of the fact that Meluski was being investigated; in fact, she provided the collateral to bail Meluski out of jail. To avoid losing the house, just eight days after the police began their investigation, Hupper transferred the house to his mother, Tally. Indeed, it was Tally who directed Hupper to transfer the 220 Property to protect it from Plaintiff. To carry out this plan, Hupper drove from Prescott to Sun City to take Tally to the title company to sign the deed despite the fact that she was recovering from a broken leg. Tally then hastily recorded the deed a week later, on Christmas Eve. However, despite the transfer, Hupper and Meluski continued to live in the 220 Property rent-free. ¶26 Additionally, Tally did not pay reasonably equivalent value for the property. Tally forgave the $110,600.00 lien on the 220 Property in exchange for the transfer, but the property was valued at above $300,000.00. Although Tally attempts to cast the transfer as an exercise of her right to foreclose on the deed of trust, her knowledge of the circumstances indicates the sale was collusive, and she did not take the property for reasonably equivalent value. ¶27 Tally also argues the trial court could not grant a constructive trust on the entire 220 Property. She characterizes the outstanding balance on her deed of trust as a "valid lien" that has priority over Plaintiff's equitable lien. See A.R.S. § 44-1001. As a result, Tally contends that the court, when it voided the fraudulent transfer of the 220 Property, was required to account for the lien created by her deed of trust. ¶28 We disagree. Because Tally is not a good faith transferee, she is not entitled to recoup the value she "paid" Hupper for the transfer in the form of a first-position lien on the property. See A.R.S. § 44-1008(D) (providing the right to a lien on the transferred property in the amount of value given for a good faith transferee). Accordingly, her claim that the court should have recognized the $110,600.00 outstanding balance on the deed of trust as a "valid lien," beyond the reach of Plaintiff, must fail. ¶29 Tally's final claim with respect to the transfer of the 220 Property argues the court erred in granting a constructive trust on the property without performing proper tracing of Plaintiff's funds that were used to improve or maintain the property. A party must provide clear and convincing evidence in support of a constructive trust, and on appeal we will "not interfere with the trial court's determination as to the sufficiency of the evidence unless it can be said, as a matter of law, that no one could reasonably find the evidence to be clear and convincing." L.M. White Contracting Co. v. Tucson Rock & Sand Co., 11 Ariz. App. 540, 545 (1970). ¶30 There is no basis to disturb the trial court's ruling here. The jury verdict finding Hupper liable for civil conspiracy and awarding $1,200,000.00 in compensatory damages against Hupper establishes that Hupper was involved in Meluski's fraudulent conduct. Hupper's financial documents indicate he could not have afforded his lifestyle from his income alone. Furthermore, Hupper's statement that he received all his money from Meluski coupled with the many checks written out to Hupper's business from Plaintiff's account establish that Plaintiff's funds were used to improve the 220 Property. IV. Tally's Personal Property ¶31 Tally argues the court erred in granting Plaintiff's claim to Tally's personal property that was seized in execution of a search warrant of the 220 Property. The court concluded that Tally's claim to this property was barred by the statute of limitations. Tally argues her claims are not barred because the two-year statute of limitations did not begin to run until the conclusion of the criminal proceedings against Meluski. ¶32 Tally is incorrect. Any claim Tally had to the property should have been made at the time the property was seized. Under A.R.S. § 13-3922, an owner of seized property can controvert the grounds of the search warrant to show the property seized is not the same as that described in the warrant, or that probable cause does not exist for believing the items are subject to seizure. Such "a motion for return of property is civil in nature." Greehling v. State, 135 Ariz. 498, 499 (1982). The motion would essentially allege a civil conversion claim. See Jackson v. American Credit Bureau, Inc., 23 Ariz. App. 199, 201 (1975) (stating that cause of action accrues at time of wrongful taking). Tally made no such motion. In fact, Tally made no claims to the property until March 2011, when she filed an answer in the interpleader action. The property was seized pursuant to a search warrant on February 6, 2008, well over two years before Tally made any claim to it; the court properly concluded Tally had forfeited her rights to the property. ¶33 Tally also argues the court improperly granted a constructive trust on all of Tally's personal assets. Tally's argument misinterprets the judgment. The court's judgment imposed a constructive trust on the 220 Property. The only personal property of Tally's that was contemplated in the judgment was property seized pursuant to the search warrant executed in 2008. The court found that Plaintiff's claim to this property was superior to all other claims. Tally misquotes statements in the court's findings of fact and conclusion of law to argue otherwise. The court's findings merely state that "Plaintiff is entitled to an equitable lien embracing all assets" belonging to Tally (1) "in which any portion of the money taken from Plaintiff was used to obtain, acquire, improve or otherwise benefit including but not limited to [the 220 Property]," and (2) "fraudulently transferred" by Tally. ¶34 When read in its entirety, it is clear the court's judgment only reached Tally's property that was improved as a result of the fraud, or that was fraudulently transferred. The evidence and the judgment both indicate the 220 Property was the only such property. The court's judgment regarding Tally's personal property in the interpleader action, supra ¶ 32, was resolved on separate grounds wholly unrelated to the remedy of a constructive trust. V. The Trial Court's Award of Attorneys' Fees ¶35 Tally also claims the court improperly awarded attorneys' fees against Tally. The court may award reasonable attorneys' fees as a sanction if the court determines the claim constitutes harassment, is groundless, and is not made in good faith; "[a]ll three elements must be shown and the trial court must make appropriate findings of fact and conclusions of law." Fisher v. Nat'l Gen. Ins. Co., 192 Ariz. 366, 370, ¶ 13 (App. 1998); A.R.S. § 12-349. We review the trial court's findings for clear error. Phoenix Newspapers, Inc. v. Dept. of Corrections, Ariz., 188 Ariz. 237, 244 (App. 1997). We review application of the statute de novo. Fisher, 192 Ariz. at 370, ¶ 13. ¶36 In awarding fees against all defendants, the court found that their defenses were not well grounded in fact, were not warranted by existing law or a good faith argument for modification of existing law, and were interposed for improper purposes such as harassment or delay. Specific to Tally, the court found that Tally knowingly participated in the fraudulent transfer, that she was not a good faith transferee, and that she had no viable defense to the fraudulent transfer claim. These findings are sufficient to affirm the court's award of fees. The court hears the evidence firsthand and can determine whether the credibility of Tally's testimony was so lacking that her defense constituted harassment or was not made in good faith. See Rogone v. Correia, 236 Ariz. 43, 51, ¶ 26 (App. 2014). VI. Recordation of the Judgment ¶37 Finally, Tally argues Plaintiff violated Arizona Rule of Civil Procedure 62(j) by recording the judgment prior to the prescribed waiting period to allow her to appeal. In light of our resolution of this appeal, Tally's arguments on this matter are moot and we decline to address them. See Hall v. World Sav. & Loan Ass'n, 189 Ariz. 495, 504 (App. 1997) (stating that mootness occurs when action by the reviewing court would have no effect on the parties).
CONCLUSION
¶38 For the reasons above, we affirm. Plaintiff has requested an award of costs. Upon compliance with ARCAP 21, Plaintiff is entitled to its costs on appeal.