Rose v. Evers

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UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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.

IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE

KERRY WILLIAM ROSE, Plaintiff/Appellant,

v.

ELIZABETH EVERS, Defendant/Appellee.

No. 1 CA-CV 18-0495
FILED 6-13-2019

Appeal from the Superior Court in Maricopa County
No. CV2017-008454
The Honorable Rosa Mroz, Judge

AFFIRMED

COUNSEL

Tiffany & Bosco, PA, Phoenix
By Kelly L. Mendoza, Jack R. Vrablik
Counsel for Plaintiff/Appellant

Dickinson Wright PLLC, Phoenix
By Dana M. Levy
Counsel for Defendant/Appellee
 ROSE v. EVERS
Decision of the Court

MEMORANDUM DECISION

Judge Jennifer B. Campbell delivered the decision of the Court, in which
Presiding Judge Paul J. McMurdie and Judge Randall M. Howe joined.

C A M P B E L L , Judge:

¶1 Kerry William Rose appeals the superior court’s dismissal of
his complaint against his wife, Elizabeth Evers, for breach of fiduciary duty
and contribution to community debt. We affirm.

BACKGROUND

¶2 In November 2012, Evers petitioned for legal separation from
Rose. After approximately two years of litigation, the parties participated
in private mediation resulting in a Rule 69 agreement. Ariz. R. Fam. Law P.
(“ARFLP”) 69. The parties agreed Rose would be awarded the house
located at 2626 East Arizona Biltmore Circle, No. 7 (the “Biltmore Home”)
and Evers agreed Rose could use her $250,000 tax exemption if he sold the
Biltmore Home while they were still married. The parties included a
disclaimer that explicitly stated there was no guarantee the exemption
would be transferable under IRS code. The parties also included an
arbitration clause requiring any disputes relating to the agreement be
submitted to the arbitrator.

¶3 After entering the agreement, but before the court signed the
decree of legal separation (“Decree”), Rose obtained an opinion from a tax
attorney explaining he could not use Evers’ tax exemption after the Decree
was entered. Rose asked Evers to renegotiate the terms of the agreement or
to delay filing the Decree until 2017, but Evers refused. Rose then submitted
his demand to the arbitrator, who concluded that he was simply engaging
in “an attempt to re-write that Agreement.”

¶4 The family court then signed the Decree as set forth in the
parties’ agreement. Rose moved to set aside the Decree under ARFLP 85(C)
or, in the alternative, sought relief from judgment, arguing that Evers
“engaged in fraud to bring about a property settlement that is both
inequitable and unfair.” The family court denied Rose’s motion, finding it
without merit. Rose appealed to this court, and we affirmed the family

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Decision of the Court

court’s decision. See Evers v. Rose, 1 CA-CV 16-0122, 2017 WL 1020297, at *2,
*3, ¶¶7, 18 (Ariz. App. Mar. 16, 2017) (mem. decision).

¶5 Two months later, Rose filed a complaint in the superior court
asserting claims for breach of fiduciary duty, contribution to payment of
community debt, and breach of the confidentiality provision contained in
the parties’ prenuptial agreement. Evers moved to dismiss the complaint
based on claim preclusion, issue preclusion, and waiver.1 The court granted
her motion. Rose timely appealed.

DISCUSSION

¶6 We review the superior court’s dismissal of Rose’s complaint
under Arizona Rule of Civil Procedure 12(b)(6) de novo. See Coleman v. City
of Mesa, 230 Ariz. 352, 356, ¶ 8 (2012). In doing so, we assume the truth of
the facts alleged and will affirm only if Rose would not be entitled to relief
“under any interpretation of the facts susceptible of proof.” Id. (citation
omitted).

I. Breach of Fiduciary Duty

¶7 Approximately three years before Evers petitioned for legal
separation, Rose and Evers contracted with MSR Biltmore Resort, LP
(“MSR”) to sell the Biltmore Home. After MSR failed to perform, Rose and
Evers sued MSR for specific performance (the “MSR Litigation”). The
parties settled with MSR, and the settlement proceeds were allocated in the
Decree.

¶8 In his ARFLP 85(C) motion to set aside the Decree in family
court, Rose argued that Evers had breached her fiduciary duty concerning
the MSR Litigation:

[Evers] had a fiduciary duty to inform [Rose] of anything that
could affect the economic consequences of settling [Rose] and
[Evers’] claims against MSR. However, [Evers] breached that
duty and knowingly allowed [Rose] to enter into a settlement
with MSR without full knowledge of the ramifications of such
a settlement.

1 On appeal, Rose does not challenge the dismissal of his claim for
breach of the confidentiality provision.

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¶9 As relevant here, Rose alleges that the Biltmore Home and
MSR Litigation were community assets and that Evers breached her
“fiduciary duty to inform [him] of anything that could affect the economic
and financial elements” of those assets. Because this claim had already been
raised in the family court and found to be without merit, Evers argued that
the claim was governed under the doctrine of claim preclusion and thereby
prohibited Rose from re-litigating this issue.

¶10 The application of claim preclusion requires (1) a former
judgment on the merits in the first action, (2) the same parties or their
privies in the second action, and (3) a claim that “was, or might have been,
determined” in the first action. Hall v. Lalli, 194 Ariz. 54, 57, ¶ 7 (1999).
Unlike issue preclusion, which applies only to issues actually litigated,
claim preclusion applies to issues that “might have been litigated” in the
former action. Pettit v. Pettit, 218 Ariz. 529, 533, ¶ 10 (App. 2008). We review
the application of claim preclusion de novo. See Phoenix Newspapers, Inc. v.
Dep’t of Corrs., 188 Ariz. 237, 240 (App. 1997).

¶11 On appeal, Rose concedes that the legal separation
proceeding “resulted in a final judgment on the merits and involved the
same parties,” satisfying the first two requirements of claim preclusion. He
argues, however, that the third requirement, was or could have been
litigated in the previous proceeding, is not satisfied because he could not
have asserted a breach of fiduciary duty in the legal separation proceedings
“because he did not become aware of the claim’s existence until after the
[agreement] was executed.”

¶12 The record reflects that Rose’s counsel alleged a breach of
fiduciary duty in a letter to Evers’ counsel after the parties entered into the
agreement, but before both the arbitrator’s ruling on Rose’s request to
modify the agreement and entry of the Decree. Therefore, Rose could have
raised a claim for breach of fiduciary duty in the legal separation
proceedings.

¶13 Rose also argues that his claim for breach of fiduciary duty
sounds in tort and that asserting the claim in the legal separation
proceeding would have been “procedurally and jurisdictionally improper.”
He relies on Windauer v. O’Connor, 107 Ariz. 267 (1971), in which a wife sued
her husband alleging that he had “willfully and intentionally fired a bullet
into [her] head with the intent to kill her.” Id. at 267. Our supreme court
held that claim preclusion did not prevent the wife from bringing a separate
action for an intentional tort after entry of the decree of dissolution,
explaining:

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Decision of the Court

[T]he action for the intentional tort does not arise until the
parties are divorced, hence the tort action could not have been
brought as a part of the divorce action. Furthermore, the
peculiar and special nature of a divorce action speaks against
the bringing of the two actions in one litigation.

Id. at 268.

¶14 The holding in Windauer does not prohibit the application of
claim preclusion in this circumstance. Rose’s claim, which arose before
entry of the Decree, is intertwined with the property settlement. Therefore,
it could have been raised as part of the legal separation proceeding. See
Victor v. Victor, 177 Ariz. 231, 232 (App. 1993) (explaining that the family
court’s jurisdiction extends to “matters germane” to statutory subject
matter); Ariz. Rev. Stat. (“A.R.S.”) § 25-318 (authorizing the family court to
divide property). Because the elements of claim preclusion are satisfied, we
affirm the superior court’s dismissal of Rose’s claim for breach of fiduciary
duty.

II. Contribution to Payment of Community Debt

¶15 Rose also claims he is entitled to contribution for payment of
“community debt”—$88,620 in legal fees for the MSR litigation. He argues
that claim preclusion does not apply “to actions for contribution of omitted
debts.” While he is correct about the legal principle, he attempts to apply
that principle incorrectly. A party “may bring a separate action seeking to
require a divorced spouse to contribute to the payment of a community
debt that was not allocated in the property settlement agreement and decree
of dissolution.” Fischer v. Sommer, 160 Ariz. 530, 531 (App. 1989); see also
A.R.S. § 25-318(D) (providing that community property “for which no
provision is made in the decree” is “held by the parties as tenants in
common”). Here, however, the attorney fee obligation was allocated in the
Decree.

¶16 The court awarded Rose the Biltmore Home and provided
that he would “assume and pay . . . [a]ll debts and obligations associated
with property” awarded to him, evidenced in the Decree. The attorney fees
arising from the MSR litigation were an obligation tied to the Biltmore
Home. Accordingly, the court allocated that debt to Rose as agreed by the
parties and reflected in the Decree. Based on the language of the Decree,
we affirm the superior court’s dismissal of Rose’s claim for contribution.

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Decision of the Court

CONCLUSION

¶17 For the foregoing reasons, we affirm the dismissal of Rose’s
complaint. Evers seeks attorney fees on appeal pursuant to the Decree and
A.R.S. §§ 12-341.01 and -349. The Decree provides for a fee award in
paragraph 20, which states, “[i]n the event that either party breaches any
provision and/or defaults with respect to any obligation” of the Decree,
“the breaching/defaulting party shall, at the Court’s discretion, pay the
attorneys’ fees . . . incurred by the injured party in the enforcement of this
Decree.” Under paragraph 22 of the Decree, “[e]ach party’s duty to
indemnify the other as ordered in this Decree shall include, but not be
limited to the payment of any damage, including defense of any claim, and
payment of all reasonable costs and expenses incurred . . . including, but
not limited to reasonable attorneys’ fees . . . .” (Emphasis added.) We find
an award of attorney fees is authorized under these paragraphs of the
Decree and therefore grant Evers’ reasonable attorney fees on appeal in an
amount to be determined upon her compliance with ARCAP 21. As the
prevailing party, Evers is also entitled to her costs on appeal upon
compliance with ARCAP 21.

AMY M. WOOD • Clerk of the Court
FILED: AA

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