Opinion
2 CA-CV 2022-0100
02-23-2023
Anna Phillips, Plaintiff/Appellant, v. Mark Peterson and Sayeh Peterson, Defendants/Appellees.
Papetti Samuels Weiss McKirgan LLP, Scottsdale By Randy Papetti Counsel for Plaintiff/Appellant Waterfall, Economidis, Caldwell, Hanshaw & Villamana P.C., Tucson By Corey B. Larson and Cindy K. Schmidt Counsel for Defendants/Appellees
Not for Publication - Rule 111(c), Rules of the Arizona Supreme Court
Appeal from the Superior Court in Pima County No. C20214134 The Honorable Gary J. Cohen, Judge
COUNSEL
Papetti Samuels Weiss McKirgan LLP, Scottsdale By Randy Papetti Counsel for Plaintiff/Appellant
Waterfall, Economidis, Caldwell, Hanshaw & Villamana P.C., Tucson By Corey B. Larson and Cindy K. Schmidt Counsel for Defendants/Appellees
Judge Eckerstrom authored the decision of the Court, in which Presiding Judge Brearcliffe and Judge Kelly concurred.
MEMORANDUM DECISION
ECKERSTROM, Judge:
¶1 Anna Phillips appeals from the trial court's dismissal of her first amended complaint ("FAC"), which claimed breach of contract, breach of fiduciary duty, and conversion against her brother, Mark Peterson, and his wife, Sayeh Peterson. She also appeals from the court's award to Peterson of his attorney fees and costs. For the reasons that follow, we affirm.
Sayeh Peterson is a named defendant in this matter, but only, according to Phillips, "to comply with A.R.S. § 25-215(D) so that any judgment rendered may be collectible against their marital community." As the underlying allegations relate only to Mark Peterson, we name only him in our discussion.
Factual and Procedural Background
¶2 On review of the trial court's ruling on a motion to dismiss for failure to state a claim pursuant to Rule 12(b)(6), Ariz. R. Civ. P., we take as true the facts set forth in Phillips's FAC. Shepherd v. Costco Wholesale Corp., 250 Ariz. 511, n.1 (2021). The FAC alleged the following: Before the 2011 death of the parties' mother- a Vietnamese resident at that time- Peterson had "assumed control over most or all of his mother's liquid assets." After their mother's death, Peterson told Phillips he "intended to provide her with roughly one quarter of the assets he controlled that had previously belonged to their mother," assuring her that "he would hold those assets and invest them conservatively for her benefit." Peterson renewed his assurances that he would hold and manage the funds for Phillips's benefit "[o]ver the next several years." In 2015, at Phillips's request, Peterson transferred her some 10,000 Euros for one of her three daughters, presumably in fulfillment of a directive from the parties' father, who had died in 2008, also outside of the United States.
¶3 However, by 2017, Phillips and another of her brothers had become concerned about Peterson's oversight of the funds, and they requested a family meeting. At that meeting, Peterson "promised [Phillips] to pay her approximately $296,000 (USD), plus an additional 20,000 Euros that she could use to distribute 10,000 Euros each to her other two daughters." Phillips "thought she perhaps might have been entitled to more," but she agreed to the figure, and thus she and Peterson "settled on the amount." In the presence of family member witnesses, Peterson agreed to pay the figure but indicated that "making any distributions would require him to liquidate assets and do so in a prudent fashion, which would take some time." By 2019, no funds had been disbursed, and Peterson ordered that Phillips stop communicating with him.
Phillips further alleged that Peterson had mishandled the funds, specifically by transferring them to various offshore accounts, some of which were ultimately closed due to noncompliance with certain tax laws.
¶4 In dismissing the FAC, the trial court determined that the "alleged 'commitments' and 'promises'" Peterson had made to Phillips were, ultimately, promises to give Phillips a gift at some point in the future. Because "a stated intention by one to subsequently give another a gift in the future gives rise to no obligation that the law will recognize or enforce," the court concluded that Phillips had "failed to state a claim upon which relief could be granted." See Ariz. R. Civ. P. 12(b)(6). In particular, the court determined Phillips had failed to demonstrate she had given any consideration to support her breach of contract claim, had failed to allege a sufficient fiduciary duty to support the breach of duty claim, and had failed to establish any legal right to the funds in support of a conversion claim. The court then awarded Peterson attorney fees and costs and entered final judgment. This appeal followed. We have jurisdiction pursuant to A.R.S. §§ 12-2101(A) and 12-120.21(A).
Discussion
¶ 5We review de novo the dismissal of a complaint for failure to state a claim. Shepherd, 250 Ariz. 511, ¶ 11. Dismissal under Rule 12(b)(6) is appropriate only if, as a matter of law, Phillips would "not be entitled to relief under any interpretation of the facts susceptible of proof." Coleman v. City of Mesa, 230 Ariz. 352, ¶ 8 (2012) (quoting Fid. Sec. Life Ins. v. Ariz. Dep't of Ins., 191 Ariz. 222, ¶ 4 (1998)). We must "indulge all reasonable inferences" from the well-pleaded facts in the operative complaint. Id. ¶ 9. Like the trial court, we limit our review to only the operative complaint, in this case the FAC, which supersedes any prior complaints in this action. See Mohave Concrete & Materials, Inc. v. Scaramuzzo, 154 Ariz. 28, 30 (App. 1987). Therefore, we consider whether the allegations in the FAC could be interpreted to satisfy the elements for each cause of action advanced by Phillips. See In re $70,070 in U.S. Currency, 236 Ariz. 23, ¶ 15 (App. 2014).
We address the contract-based claims raised in the FAC because the trial court expressly considered whether these claims could survive a motion to dismiss under Rule 12(b)(6). However, we could alternatively affirm on the ground that this matter sounds in probate. See Mirchandani v. BMO Harris Bank, N.A., 235 Ariz. 68, ¶ 15 (App. 2014) (appellate court may affirm grant of motion to dismiss on any applicable basis, but "we are reluctant to rule on grounds that the trial court did not address"). As Peterson notes and as the trial court apparently concluded when it dismissed the original complaint, an Arizona trial court would have been an improper venue to adjudicate the original probate of the estates of decedents who were neither domiciled nor held any property in Arizona. See A.R.S. §§ 14-1301(1)-(2) (Title 14, governing probate proceedings in Arizona, applies to, inter alia, estates of decedents domiciled in Arizona and property of nonresidents located in Arizona), 14-3201(A) (venue for testacy proceedings proper in decedent's county of domicile at time of death or, if decedent domiciled outside Arizona, in county where property located at time of death). Furthermore, even if an Arizona court could oversee the estate of a decedent not domiciled within the state at the time of death, such matters must be filed in a probate proceeding. See Ariz. R. Prob. P. 3(b). Such claims also generally must be filed within two years of the decedent's death. A.R.S. § 14-3108.
¶6 A legally enforceable contract-whether written or verbal-must contain an offer, acceptance, consideration, and sufficiently specific terms to ascertain the parties' obligations. K-Line Builders, Inc. v. First Fed. Sav. & Loan Ass'n, 139 Ariz. 209, 212 (App. 1983). "Consideration is a benefit to the promisor or a loss or detriment to the promisee, and there is no consideration for a promise where no benefit is conferred on the promisor or a detriment suffered by the promisee." Id. "Monetary compensation is not needed; any benefit to the promisor or detriment to the promisee is sufficient." USLife Title Co. of Ariz. v. Gutkin, 152 Ariz. 349, 354 (App. 1986); see also Restatement (Second) of Contracts § 71 (1981) (to "constitute consideration, a performance or a return promise must be bargained for," which may consist of act or forbearance, among other things).
¶7 Typically, courts do not scrutinize the adequacy of consideration between parties. See Cheatham v. DiCiccio, 240 Ariz. 314, ¶ 29 (2016); Restatement § 71 cmt. c. But the FAC recites no factual allegation whatsoever that any consideration supported Peterson's promise after their mother's death to give Phillips her share of their mother's assets. At most, considering all allegations in the FAC as true and drawing all inferences in Phillips's favor, Coleman, 230 Ariz. 352, ¶ 9, the FAC alleges only that, after their mother had died in 2011, Peterson verbally promised to gift Phillips some unspecified assets at some unspecified future date. Phillips alleges no fact supporting the inference that she made a promise to perform or forbear to her detriment in exchange for Peterson's promise. Thus, no legally enforceable agreement existed at that time. See, e.g., Restatement § 71 cmt. c ("[A] gift is not ordinarily treated as a bargain, and a promise to make a gift is not made a bargain by the promise of the prospective donee to accept the gift, or by his acceptance of part of it.").
¶8 Because no contract existed as a result of the first promise, Phillips's claim that an enforceable obligation arose out of the 2017 negotiations also fails as a matter of law. Certainly, as Phillips argues, a legally enforceable agreement may arise when two parties settle on the conveyance of a sum less than what is owed on an existing enforceable agreement. See, e.g., Brecht v. Hammons, 35 Ariz. 383, 389 (1929) ("settlement of a bona fide dispute, or a doubtful claim . . . is a sufficient consideration for a compromise based thereon"). In such instances, the agreement to accept less than what was originally agreed upon is detrimental, constituting valid consideration in exchange for a promise to pay. See, e.g., Hill v. Chubb Life Am. Ins., 182 Ariz. 158, 164 (1995) (detriment to promisee sufficient consideration to render agreement enforceable). But the FAC fails to establish that any enforceable agreement existed such that the 2017 agreement demonstrated any forbearance or detriment to Phillips. At most, it establishes that in 2017 Peterson renewed his earlier unenforceable promise to gift Phillips some share of money. Even if Phillips believed the sum offered to her in 2017 should have been larger, agreeing to accept a smaller gift than what Peterson originally promised does not constitute a legal detriment. See Restatement § 71 cmt. c, illus. 8 (promise to accept gratuitous loan not consideration for promise to make loan). In short, under the FAC's alleged facts, there was simply no "mutuality of obligation." Carroll v. Lee, 148 Ariz. 10, 13 (1986).
Phillips also argues that whether an enforceable agreement existed or was supported by valid consideration are fact matters that the trial court erroneously decided as a matter of law. To be sure, "any challenge to the adequacy of consideration is a fact question." Hill, 182 Ariz. at 164. But when, as here, a complaint alleges no fact that could possibly give rise to a cognizable legal claim, it is appropriate for the trial court to dismiss the claim pursuant to Rule 12(b)(6).
¶9 Furthermore, even to the extent Peterson verbally promised to give Phillips a gift after their mother's death in 2011 or in 2017, that promise was also unenforceable in Arizona. A verbal promise to give a future gift is not, on its own, legally enforceable. See A.R.S. § 33-601 (gift of any goods invalid unless in writing, by will, or "unless actual possession of the gift is passed to and remains with the donee"); see also 38 Am. Jur. 2d Gifts § 18 (2023 update). The FAC makes no allegation that the funds Phillips seeks to collect were ever transferred to her possession. Nor does she claim the promise was memorialized by any writing. Thus, Phillips's breach of contract claim fails as a matter of law, and the trial court correctly dismissed it pursuant to Rule 12(b)(6). See First Am. Title Ins. v. Johnson Bank, 239 Ariz. 348, ¶ 22 (2016) (existence of valid contract first element in breach of contract claim).
The FAC makes no allegation that Phillips's claim arises from a probate dispute. As Peterson himself notes, Phillips "does not allege any right to any estate assets arising from a will, trust, intestate succession, probate proceedings, beneficiary designation, or otherwise."
¶10 For the same reason, Phillips's claims sounding in breach of fiduciary duty and conversion also fail as a matter of law. Absent any valid contract or agreement, the FAC alleges no legally cognizable duty running from Peterson to Phillips to support a breach of fiduciary duty claim. See Cook v. Orkin Exterminating Co., 227 Ariz. 331, ¶ 14 (App. 2011) (describing fiduciary relationship). Similarly, a conversion claim presupposes that one party's right to possess or control property has been usurped or otherwise interfered with. See Miller v. Hehlen, 209 Ariz. 462, ¶ 34 (App. 2005) (setting forth elements of conversion claim); Case Corp. v. Gehrke, 208 Ariz. 140, ¶ 11 (App. 2004) (liquid assets may be subject of conversion claim). Absent any valid claim to legal possession of the funds in question, the FAC cannot support a claim sounding in conversion.
Additionally, as Peterson argues, Phillips's claims for breach of fiduciary duty and conversion are time-barred under the two-year statute of limitations set forth in A.R.S. § 12-542. See CDT, Inc. v. Addison, Roberts, & Ludwig, C.P.A., P.C., 198 Ariz. 173, ¶ 6 (App. 2000). Such claims accrue when a plaintiff knows, or through the exercise of reasonable diligence should know, of a defendant's wrongful conduct. See Sato v. Van Denburgh, 123 Ariz. 225, 227 (1979). Although the issue of accrual is generally a question of fact to be decided by the jury, Doe v. Roe, 191 Ariz. 313, ¶ 32 (1998), on its face the latest possible date of accrual occurred sometime in July 2019, when Peterson "abruptly told [Phillips] he owed her nothing and directed her" to cease contacting him. The original complaint was filed in August 31, 2021, which falls outside the two-year limitation period.
Trial Court's Award of Attorney Fees and Costs
¶11 Phillips requests that if we rule in her favor, we also reverse the trial court's grant of attorney fees, which it imposed pursuant to A.R.S. § 12-341.01, on the premise that Peterson was the prevailing party. See Berthot v. Sec. Pac. Bank of Ariz., 170 Ariz. 318, 324 (App. 1991) (§ 12-341.01 entitles prevailing party to attorney fees even if court finds that "the contract on which the action is based does not exist"), superseded on other grounds by A.R.S. § 47-3419, as recognized in Koss Corp. v. Am. Express Co., 233 Ariz. 74, ¶ 45 (App. 2013). Phillips does not contest the amount of fees awarded; rather, she only requests that we reverse the fee award if we find error in the trial court's dismissal of her complaint. Because we find no such error, and because we agree with the court's determination that Peterson was the prevailing party below, we affirm the court's award of attorney fees. See Owner-Operator Indep. Drivers Ass'n v. Pac. Fin. Ass'n, 241 Ariz. 406, ¶ 38 (App. 2017) (appellate court will uphold attorney fees if awarded on any reasonable basis).
Attorney Fees and Costs on Appeal
¶12 Both parties request their attorney fees on appeal, pursuant to § 12-341.01. In our discretion, we decline to award fees to either party. See § 12-341.01(A) ("court may award the successful party reasonable attorney fees" (emphasis added)).
Disposition
¶13 For the foregoing reasons, we affirm.