IN THE COURT OF APPEALS STATE OF ARIZONA DIVISION ONE ) ) ) ) ) ) ) ) ) ) ) ) ) ) Appeal from the Superior Court in Maricopa County

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1 NOTICE: THIS DECISION DOES NOT CREATE LEGAL PRECEDENT AND MAY NOT BE CITED EXCEPT AS AUTHORIZED BY APPLICABLE RULES. See Ariz. R. Supreme Court 111(c; ARCAP 28(c; Ariz. R. Crim. P IN THE COURT OF APPEALS STATE OF ARIZONA DIVISION ONE RUDGER P. HIATT, M.D. and RUTH HIATT, husband and wife, Plaintiffs/Appellants- Cross-Appellees, v. NORMAN E. MEHLHORN and PETRA MEHLHORN, husband and wife, Defendants/Appellees- Cross-Appellants. 1 CA-CV DEPARTMENT B MEMORANDUM DECISION (Not for Publication Rule 28, Arizona Rules of Civil Appellate Procedure Appeal from the Superior Court in Maricopa County Cause No. CV The Honorable Joseph B. Heilman, Judge The Honorable Janet E. Barton, Judge AFFIRMED Sanders & Parks P.C. By Rick N. Bryson Anupam Bhatheja Attorneys for Plaintiffs/Appellants-Cross-Appellees Hopkins Law Offices P.L.C. By Stephen M. Hopkins Cynthia D. Starkey Attorneys for Defendants/Appellees-Cross-Appellants Phoenix Phoenix D O W N I E, Judge

2 1 Rudger P. and Ruth Hiatt appeal the superior court s summary judgment for Norman E. Mehlhorn and Petra Mehlhorn, as well as the order denying their motion for new trial. The Mehlhorns cross-appeal the award of less than the full amount of their attorneys fees. For the following reasons, we affirm. FACTUAL AND PROCEDURAL BACKGROUND 1 2 Rocky Mountain Financial Center Joint Venture ( Rocky Mountain was a general partnership formed by ten partners for the purpose of entering an agreement to develop an incomeproducing commercial building in Chandler, Arizona. Rudger Hiatt and Norman Mehlhorn were members of Rocky Mountain. 3 The members business relationship was governed by the Rocky Mountain Joint Venture Agreement ( JVA, which stated that the parties formed the joint venture to acquire certain real property, construct thereon a multi-story office building and related facilities, and manage the building and facilities as a profit-making enterprise. The agreement provided that, if necessary, the joint venturers would execute joint and/or several guarantees for loans to obtain financing for the project. 1 On appeal from a summary judgment, we view the facts in the light most favorable to the party against whom judgment was entered. Gipson v. Kasey, 214 Ariz. 141, 142, 2, 150 P.3d 228, 229 (2007 (citation omitted. 2

3 4 Rocky Mountain, through a related entity, Rocky Mountain Investments, Inc., purchased land from the City of Chandler ( City to develop a bank and office complex. Rocky Mountain financed the construction and development by obtaining bonds, the interest on which it paid with monies from a line of credit established with two banks. In addition, the Rocky Mountain members agreed to be held jointly and severally liable for payment of agreed amounts to the City in exchange for its construction of a parking garage at the property. 5 Rocky Mountain was unable to procure tenants for the bank building and defaulted on its various repayment obligations. Rocky Mountain obtained additional financing, which several members personally guaranteed or secured with their own property. Nevertheless, Rocky Mountain ultimately surrendered the bank and office building to its creditors. Hiatt continued to contribute monies to Rocky Mountain to allow it to pay its obligations. Other members were unable or unwilling to contribute. 6 On June 3, 1993, Mehlhorn contributed $1,350 to Rocky Mountain. Although Mehlhorn testified he told Hiatt at that time he would not contribute further, Hiatt disputed that statement and testified Mehlhorn never refused to pay more. Hiatt claimed he repeatedly telephoned Mehlhorn to request money, and Mehlhorn responded he would contribute if another 3

4 member also contributed. On December 1, 1996, Mehlhorn made his final contribution to Rocky Mountain. Hiatt testified that, thereafter, he would ask Mehlhorn to contribute whenever Rocky Mountain owed money, but Mehlhorn refused. 7 In 2000, the last Rocky Mountain debt was paid. Hiatt met with accountants and lawyers through 2003 to wind up partnership affairs. These winding up activities included determining the members respective interests based on their contributions, preparing Rocky Mountain s tax returns, and assessing members individual tax consequences. 8 On November 22, 2005, the Hiatts filed this action, alleging claims for breach of the JVA and unjust enrichment, and seeking contribution and indemnity pursuant to Arizona Revised Statutes ( A.R.S. section ( More than two years after initiation of the litigation, the Mehlhorns moved for summary judgment, asserting the claims for a partnership accounting, unjust enrichment, and contribution were barred by the statute of limitations. They also argued that a claim asserted in the Hiatts Second Supplemental Disclosure Statement, for open account, failed as a matter of law. The 2 The Hiatts also brought a claim for breach of the Boulevard Enterprises Partnership Agreement. Although the Mehlhorns admitted they were partners in Boulevard Enterprises, the record does not contain any further allegations or evidence concerning the alleged breach of this agreement, and the Hiatts do not assign error related to this claim on appeal. Accordingly, we do not address it. 4

5 Hiatts cross-moved for summary judgment regarding the statute of limitations. 9 The superior court granted the Mehlhorns motion for summary judgment, ruling no reasonable juror could find that cessation of partnership dealings occurred any later than December 11, 2000, when Rocky Mountain paid its last debt, and therefore the Hiatts claims were not brought within the fouryear statute of limitations. The court also ruled the unjust enrichment and open account claims were barred as a matter of law because a valid, express contract governed the parties relationship and afforded the Hiatts an adequate remedy at law The parties also filed cross-motions for summary judgment regarding whether Rocky Mountain s members were jointly and severally liable for the company s liabilities or were responsible only for their pro rata share. The court denied the Hiatts motion and granted the Mehlhorns cross-motion, ruling that under the JVA, the Mehlhorns were only responsible for their pro rata share. 11 The court entered judgment for the Mehlhorns on June 6, The Hiatts filed a motion for new trial, which the court denied. The Hiatts timely appealed. We have jurisdiction pursuant to A.R.S (B ( In addition, the court noted the open account claim was neither timely nor properly pled. 5

6 ISSUES 12 The Hiatts contend the superior court improperly granted summary judgment against them based on the statute of limitations. They also challenge the summary judgment for the Mehlhorns regarding joint and several liability. The Mehlhorns cross-appeal the order awarding them less than the full amount of their attorneys fees. DISCUSSION 13 A court may grant summary judgment when there is no genuine issue as to any material fact and [] the moving party is entitled to judgment as a matter of law. Ariz. R. Civ. P. 56(c. 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, 802 P.2d 1000, 1008 (1990. A. Statute of Limitations 1. Partnership Accounting Claim 14 Arizona law provides that an action by one partner against a co-partner for a settlement of the partnership account shall be commenced and prosecuted within four years after the cause of action accrues. A.R.S (2 (2003. The statute states that a cause of action to settle accounts between 6

7 partners accrues upon cessation of the dealings in which they were interested together. Id. 15 The Arizona Supreme Court considered when the statute of limitations begins to run on a partner s claim for an accounting in Younis v. Griego, 72 Ariz. 369, 236 P.2d 358 (1951. Younis and Griego formed a partnership in 1934 to conduct a grocery business. Id. at 372, 236 P.2d at 360. Within a year, Younis left town and became involved in other pursuits. Id. Griego operated the business and expanded it by investing his own money. Id. In 1948, Younis brought an action seeking dissolution of the partnership and an accounting, and asking the court to declare him a one-half owner of the partnership s assets. Id. at 371, 236 P.2d at The court held that accrual of a partner s claim depends upon the circumstances of each particular case and that no hard and fast rule can be laid down as to the time from which the statute of limitations runs on the right of a partner to have an accounting. Id. at 373, 236 P.2d at 361 (internal quotations omitted. It concluded that because Younis showed little or no interest in the grocery business after leaving town and exercised no control over any portion of the business, it would subvert all principles of equity and justice to allow him to claim an interest in the business. Id. 7

8 17 The Arizona Supreme Court revisited the topic in Brand v. Elledge, 101 Ariz. 352, 419 P.2d 531 (1966. Brand alleged she had a partnership with Elledge to operate a tavern and sought an accounting and dissolution; Elledge denied the existence of a partnership. Id. at 354, 419 P.2d at 533. The court found the parties reached a valid partnership agreement in August Id. at 358, 419 P.2d at 537. It stated that a claim for a partnership accounting accrues upon cessation of partnership dealings and acknowledged that the case required it to determine what in fact constitutes a cessation of the dealing in which [the parties] were interested together in order to determine whether Brand s claim was time-barred. Id. at 359, 419 P.2d at It then considered a document Elledge prepared in 1942 which stated she and the tavern owed Brand $11,797.35, as well as evidence Brand had little or nothing to do with the partnership after execution of that document. Id. at , 419 P.2d at The court concluded Brand and Elledge terminated their partnership in 1942 via the document written by Elledge as a private settlement and account. Id. at 358, 419 P.2d at 537. However, it also ruled the partnership termination was not a cessation of dealings between Brand and Elledge because there was to be a type of continued existence until such time as distribution would be made of the firm assets in 8

9 accordance with the agreement. Id. at 361, 419 P.2d at 540. Even though Brand was no longer involved in day-to-day affairs, because the parties contemplated further dealings between them before their business was settled, there was no cessation of dealings that would trigger the statute of limitations. Id. 19 The Hiatts argue the court in Brand held that the statute of limitations runs from the winding up of partnership affairs, not from dissolution of the partnership. In particular, the Hiatts cite the court s quotation from Hodge v. Kennedy, 94 S.E.2d 274, 279 (Va. 1956, in which the Virginia court, construing a statute of limitations identical to A.R.S , followed earlier Virginia authority to hold that, in determining when partnership dealings ceased, the court should include winding up activities that occur after dissolution of the partnership. Brand, 101 Ariz. at 360, 419 P.2d at 539. Although the Arizona Supreme Court did cite that language in Brand, it reiterated earlier Arizona law that cessation of dealings is the accrual point and held that because Brand and Elledge had not ceased their partnership dealings, the statute had not begun to run. Indeed, the court found the parties intent was not to liquidate the assets of the partnership at the time of the dissolution, but that the defendant should pay the plaintiff out of profits of the ongoing tavern enterprise. Id. at 361, 419 P.2d at 540. We disagree with the Hiatts 9

10 contention that Brand stands for the proposition that a claim for partnership account accrues only upon winding up of a partnership. No Arizona court has held that cessation of partnership dealings means cessation of not just partnership business, but also all winding up activities. Indeed, the above-quoted authority is to the contrary. 20 Here, the evidence showed that Rocky Mountain terminated and dissolved on December 11, 2000, when its final debt was paid and the partners were no longer pursuing the purpose for which the partnership was created. Thus, the Hiatts claim for an accounting accrued, and the statute of limitations began to run, in December See Brand, 101 Ariz. at 359, 419 P.2d at 538. Because the Hiatts did not initiate their lawsuit until November 2005, their claim is timebarred. 21 Although the Hiatts concede Rocky Mountain paid its final bank debt in December 2000, they contend the partnership nevertheless continued to operate because it distributed debts and assets after that date. In particular, they cite Dr. Hiatt s declaration, which states: 3. The main asset of the Rocky Mountain Financial Center Joint Venture was the Rocky Mountain Financial Center Building. That building was not sold until

11 4. The record owner of the building was Rocky Mountain Investments. Because the Rocky Mountain Financial Center Joint Venture held a 70% interest in Rocky Mountain Investments, passthrough income was received and recorded by the Partnership in In addition, the distributions from the sale were made to the individual members of the Rocky Mountain Financial Center Joint Venture in The Hiatts presented this information for the first time with their motion for new trial. A new trial may be granted on the grounds of newly discovered evidence when it appears the evidence was in existence at the time of trial but could not have been discovered before trial by the exercise of due diligence and if the evidence would probably change the result. Ariz. R. Civ. P. 59(a(4; Wendling v. Sw. Sav. and Loan Ass n, 143 Ariz. 599, 602, 694 P.2d 1213, 1216 (App Evidence is newly discovered if: (1 it was in existence at the time of trial; (2 it was not possessed by the party seeking relief; (3 the party did not know about the evidence; and (4 the evidence was not available to that party. Soto v. Brinkerhoff, 183 Ariz. 333, 336, 903 P.2d 641, 644 (App The proffer of Dr. Hiatt s affidavit regarding the sale of the building in 2002, after the grant of summary judgment to the Mehlhorns, does not satisfy the requirements for newly discovered evidence. The Hiatts could have discovered 11

12 that information earlier with reasonable diligence. 4 See Ariz. R. Civ. P. 59(a(4; Boatman v. Samaritan Health Servs., Inc., 168 Ariz. 207, 212, 812 P.2d 1025, 1030 (App (for evidence to be newly discovered, it must not have been capable of prior discovery with due diligence. Moreover, even if the evidence were newly discovered, it would not alter the result; collecting monies due from Rocky Mountain Investment s sale of the building and handling tax paperwork constitute winding up activities, not continuing operations of the partnership. 24 We affirm summary judgment for the Mehlhorns on the claims for an accounting based on the statute of limitations. This resolution obviates the need to separately address whether the JVA provided for pro rata or joint and several liability. 2. Unjust Enrichment Claim 25 The superior court ruled the Hiatts unjust enrichment claim was barred because the relationship between the parties was governed by a valid express contract -the JVA--and the Hiatts therefore had an adequate remedy at law. 5 We agree. 4 Before the entry of summary judgment, Hiatt submitted an affidavit stating Rocky Mountain had surrendered the building to its creditors. 5 The Mehlhorns urge us to affirm summary judgment on the unjust enrichment claim based on the statute of limitations. See, e.g., Hawkins v. State, 183 Ariz. 100, 103, 900 P.2d 1236, 1239 (App (stating appellate court will affirm summary judgment if it is correct for any reason. An action for unjust enrichment must be brought within four years after the cause of action accrues, A.R.S (1998; San Manuel Copper Corp. 12

13 26 The doctrine of unjust enrichment is a flexible, equitable remedy available whenever the court finds that the defendant... is obliged by the ties of natural justice and equity to make compensation for the benefits received. Murdock-Bryant Const., Inc. v. Pearson, 146 Ariz. 48, 53, 703 P.2d 1197, 1202 (1985 (citation omitted. To establish unjust enrichment, a party must show: (1 an enrichment; (2 an impoverishment; (3 a connection between the enrichment and the impoverishment; (4 the absence of justification for the enrichment and the impoverishment; and (5 the absence of a legal remedy. Trustmark Ins. Co. v. Bank One Ariz., N.A., 202 Ariz. 535, 541, 31, 48 P.3d 485, 491 (App If there is a specific contract which governs the relationship of the parties, the doctrine of unjust enrichment has no application. Brooks v. Valley Nat l Bank, 113 Ariz. 169, 174, 548 P.2d 1166, 1171 ( Because the parties relationship was governed by the JVA, and the Hiatts could pursue a legal claim against the v. Redmond, 8 Ariz. App. 214, 218, 445 P.2d 162, 166 (1968, and it accrues upon the defendant s repudiation of any obligation. Nitrini v. Feinbaum, 18 Ariz. App. 307, 312, 501 P.2d 576, 581 (1972. Although Mehlhorn testified he told Hiatt in 1993 he would not contribute more money to Rocky Mountain, Hiatt stated Mehlhorn never repudiated his obligation to contribute monies or to reimburse Hiatt for monies he contributed in excess of his pro rata share. Accordingly, there is a material factual dispute regarding whether the unjust enrichment claim would be time-barred; we cannot affirm the summary judgment on that basis. 13

14 Mehlhorns based on that document, the doctrine of unjust enrichment has no application here. The superior court properly granted summary judgment to the Mehlhorns on the unjust enrichment claim. 3. Open Account Claim 28 The Hiatts also challenge the dismissal of their claim for open account. The superior court ruled the Hiatts had not timely and properly pled that claim and that they could not maintain such a claim because there was an express contract defining the parties duties and liabilities. 29 Generally speaking, an open account is one where there are running or concurrent dealings between the parties, which are kept unclosed with the expectation of further transactions. Krumtum v. Burton, 111 Ariz. 448, 450, 532 P.2d 510, 512 (1975 (quoting Connor Livestock Co. v. Fisher, 32 Ariz. 80, 85, 255 P. 996, 997 (1927. However, an express contract that defines the parties duties and liabilities is not an open account. Connor Livestock Co., 32 Ariz. at 85, 255 P. at 998 (citation omitted. Because the JVA defines the parties responsibilities here, the superior court properly dismissed the open account claim, even assuming it was timely and properly pled. See id. 14

15 B. Attorneys Fees 30 Finally, the Mehlhorns challenge the order awarding them only a portion of their attorneys fees. The court awarded them fees pursuant to A.R.S (2003, which allows a discretionary award to the prevailing party in an action arising out of contract. The court has broad discretion to award fees under that provision, and we review its decision only for an abuse of discretion. Orfaly v. Tucson Symphony Soc y, 209 Ariz. 260, 265, 18, 99 P.3d 1030, 1035 (App (citation omitted. 31 The Arizona Supreme Court has identified several factors a trial court may consider in determining whether to award fees under (A, including the merits of each party s claim or defense, whether litigation could have been avoided, and the effect of assessing fees. Associated Indem. Corp. v. Warner, 143 Ariz. 567, 570, 694 P.2d 1181, 1184 (1985. The Hiatts argue the Mehlhorns were not entitled to fees at all under the Associated Indemnity factors. However, because the Hiatts did not challenge the attorneys fees award on appeal, and the Mehlhorns cross appeal relates only to the amount of fees awarded, we do not address this contention. 32 The superior court declined to award the Mehlhorns all of their requested fees because it determined they unreasonably delayed in filing their motion for summary judgment on the 15

16 statute of limitations defense. The court awarded only the reasonable fees incurred in bringing and arguing that motion, as well as fees incurred before July 2006, when the Mehlhorns were aware of and could have raised their statute of limitations defense. 33 The Mehlhorns argue the reduction was improper because they were not required to move for summary judgment based on the statute of limitations until after the close of discovery and should not be penalized for waiting. They contend they could not have brought the motion until after they completed discovery and learned when the parties ceased dealing with one another. 34 In their application for attorneys fees, the Melhorns stated they believed early in the litigation that the entire case was barred by the statute of limitations. Nevertheless, they did not move for summary judgment on that basis until December of If the Mehlhorns believed discovery was necessary before filing their motion, they could have conducted 6 We reject the Mehlhorns argument that Arizona law, in particular Orme School, 166 Ariz. 301, 802 P.2d 1000, prohibits a court from granting summary judgment before the close of discovery. Although the Arizona Supreme Court stated in Orme School that summary judgment may be appropriate after discovery is completed, id. at 309, 802 P.2d at 1008, it did not preclude a party from moving for, or the court from granting, summary judgment before discovery is completed if there are no material questions of fact. See also Ariz. R. Civ. P. 56(a (providing that a motion for summary judgment may be filed after the expiration of twenty days from the service of process upon the adverse party, but no sooner than the date on which the answer is due

17 that discovery at the outset of the litigation to expedite resolution of that issue. The delay caused them to incur significant attorneys fees relating to other matters that could have been avoided by a more timely motion. Under these circumstances, we find no abuse of discretion in awarding the Mehlhorns only a portion of their attorneys fees. CONCLUSION 35 We affirm the superior court s grant of summary judgment and its attorneys fees award. The parties have requested attorneys fees on appeal pursuant to A.R.S (A. In the exercise of our discretion, we award the Mehlhorns their reasonable attorneys fees and taxable costs on appeal, in amounts to be determined upon their compliance with Arizona Rule of Civil Appellate Procedure 21. CONCURRING: /s/ PATRICIA K. NORRIS, Presiding Judge /s/ MARGARET H. DOWNIE, Judge /s/ SHELDON W. WEISBERG, Judge 17