Furst v. Mayne

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UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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

ROBERT G. FURST, Plaintiff/Appellee/Cross-Appellant,

v.

LINDA MAYNE, et al., Defendants/Appellants/Cross-Appellees.

No. 1 CA-CV 23-0202
FILED 01-28-2025

Appeal from the Superior Court in Maricopa County
No. CV2020-002498
The Honorable M. Scott McCoy, Judge

AFFIRMED IN PART AND AMENDED IN PART

COUNSEL

Womble Bond Dickinson LLP, Phoenix
By Todd Feltus, Daniel P. Crane
Counsel for Plaintiff/Appellee/Cross-Appellant

Ahwatukee Legal Office, PC, Phoenix
By David L. Abney
Counsel for Defendants/Appellants/Cross-Appellees
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Decision of the Court

MEMORANDUM DECISION

Judge James B. Morse Jr. delivered the decision of the Court, in which
Presiding Judge Brian Y. Furuya and Judge David D. Weinzweig joined.

M O R S E, Judge:

¶1 Linda Mayne appeals the superior court's judgment in favor
of Robert G. Furst on claims involving partnership dissolution, accounting,
and enforcement of negotiable instruments. For the following reasons, we
amend a clerical error in the final judgment, but otherwise affirm.

FACTS AND PROCEDURAL BACKGROUND

¶2 Investor Clout was formed as a partnership in 2007 to invest
in commercial-real-estate loans through Mortgages, Ltd., where Robert1
was a managing director. The single-page partnership agreement stated
that "cash flow from the partnership shall be distributed to the partners in
proportion to their respective contributions. Profits and losses shall be
allocated accordingly." The agreement also states that "[m]anagement of
the partnership will be vested in all of the partners." Investor Clout's
partnership was comprised of Robert, Linda, Stephen Mayne as trustee of
the Stephen S. Mayne Exempt Trust, and Leonard Rosenberg. Robert and
Linda are siblings, Stephen is Robert's brother-in-law, and Leonard is a
family friend.

¶3 Mortgages, Ltd. collapsed in June 2008 and its bankruptcy
agent, ML Manager, oversaw subsequent bankruptcy disbursements. To
ensure Investor Clout received distributions from the bankruptcy
proceedings, Robert left the management of Investor Clout but retained his
economic interests. As a result of leaving the management of Investor
Clout, Linda held Investor Clout assets on behalf of Robert. Between 2008
and 2018, Investor Clout received periodic distributions ("Distributions 1–
10") totaling $1,171,828 of its original $1.8 million investment. Linda
deposited all but one of these installments to multiple financial accounts,
including personal accounts she shared with her husband, before making

1 Because individuals involved in this matter share last names, we use
first names for ease of reference.

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distributions to Investor Clout's partners—Robert distributed the
remaining installment to the partners with Linda's knowledge. Linda
received $301,687.77 on Robert's behalf from Distributions 1–10, including
the following which she remitted to him or for his benefit: (1) a 2015 check
for $100,000 addressed to Robert, which Linda testified was presented for
deposit in 2022 but rejected due to insufficient funds in the account; and (2)
a 2015 check for $56,000 addressed to their parents, which Linda testified
was for the benefit of Robert and that she placed a stop payment on
sometime after 2015. Robert rejoined the management of Investor Clout in
2016.

¶4 In 2019, ML Manager notified Investor Clout of its intent to
send an additional distribution of $403,068.99 ("Distribution 11"). However,
Linda and Robert disagreed about how Investor Clout should receive and
distribute the proceeds, and ultimately could not send joint instructions to
ML Manager regarding the distribution. This resulted in ML Manager
holding the funds of Distribution 11 and a subsequent distribution
("Distribution 12").

¶5 Robert filed this action in 2020, seeking declaratory and
equitable relief, and the dissolution of Investor Clout. He also alleged
breaches of fiduciary duty and oral contract. Linda moved to dismiss. The
superior court: (1) found the breach claims untimely; (2) dismissed the
claim for declaratory relief as to ML Manager's Distribution 11; (3) noted
that Robert might have timely claims to the $100,000 and $56,000 checks;
and (4) granted Robert leave to amend his complaint.

¶6 Robert amended his complaint to seek: (1) judicial dissolution
of Investor Clout; (2) enforcement of the $100,000 and $56,000 checks; (3)
declaratory judgment to receive any awarded relief from distributions of
ML Manager; and (4) addition of Rosenburg as a defendant. Robert
subsequently purchased Rosenburg's interest and obligations in Investor
Clout, dismissed claims against him in this action, and asserted the
acquired interest and obligations for purposes of winding up partnership
accounts in a contemplated dissolution.

¶7 The superior court held a four-day bench trial, during which
the parties presented various evidence, including partnership records,
communications, and testimony. Linda, Robert, Stephen, and an
accountant testified. Before trial, the court granted Linda's motion in limine
to preclude evidence regarding attempted negotiation of the $100,000
check. During direct examination, however, Linda volunteered such
testimony in response to broad questions about the check. The court

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additionally heard argument from the parties pertaining to accounting,
including the subject of missing distributions due to Leonard.

¶8 The superior court granted judicial dissolution and a winding
up of Investor Clout. The court noted that dissolution was proper because
the action itself demonstrated that the partnership was not reasonably
practicable to carry on, and that Linda's conduct had frustrated its economic
purpose.

¶9 The superior court found the checks enforceable, concluded
Robert was entitled to Leonard's amounts due, and calculated Robert was
owed $183,000 in damages. The $183,000 was comprised of: (1) the $100,000
unpaid check; (2) the $56,000 canceled check; (3) $17,000 due to Leonard
and attributable to Robert; (4) $7,000 Linda withheld from Robert's portion
of Distribution 10; and (5) $3,000 to compensate Robert for other prior
distributions not fully paid due to errors in Linda's record keeping. The
court found that Linda's testimony, supra ¶ 3, demonstrated: (1) the
$100,000 check was repudiated such that presentment was excused under
A.R.S. § 47-3504(A); (2) the $56,000 check was intended for Robert's benefit;
and (3) she issued a stop payment on the $56,000 check.

¶10 Lastly, the superior court ruled that Distributions 11–12 must
be divided based on ownership interests in Investor Clout. The court
entered final judgment jointly and severally against Stephen, both
individually and in his capacity as trustee. The court entered the same
judgment against Linda in her individual capacity. The court denied
Robert's request for attorney fees, noting that while he was successful on
some of his claims, his bookkeeping and behavior throughout the action
seemed purposeful to avoid judgment creditors of Mortgages, Ltd., rather
than simply a good-faith effort that fell short.

¶11 Linda timely appealed, and we have jurisdiction under A.R.S.
§ 12-2101(A)(1).

DISCUSSION

¶12 Linda argues the superior court erred by: (1) allowing
argument and evidence concerning the $100,000 check despite previously
granting her motion in limine precluding them; (2) ruling the $100,000 and
$56,000 checks were enforceable despite Arizona's Uniform Commercial
Code ("UCC"); (3) awarding Robert distributions resulting from Leonard's
ownership when those claims were not previously noticed as part of this
action; (4) finding Linda frustrated the economic purpose of Investor Clout
and granting judicial dissolution of Investor Clout; and (5) assigning

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liability to Stephen personally rather than solely in his capacity as trustee.
Robert asks for attorney fees on appeal, which Linda opposes.

¶13 "We review a trial court's findings of fact for abuse of
discretion and reverse only when clearly erroneous." In re Marriage of Gibbs,
227 Ariz. 403, 406, ¶ 6 (App. 2011). We review legal questions de novo. Id.
at 406–07, ¶ 6.

I. Testimony Subject to Motion in Limine.

¶14 Linda argues the superior court erred in permitting testimony
and damages related to the $100,000 check because the pretrial motion in
limine barred argument or evidence concerning the check.

¶15 "Because a trial court and opposing counsel should be
afforded the opportunity to correct any asserted defects before error may
be raised on appeal, absent extraordinary circumstances, errors not raised
in the trial court cannot be raised on appeal." Trantor v. Fredrikson, 179 Ariz.
299, 300 (1994).

¶16 Even though the superior court granted her motion in limine,
Linda volunteered testimony about the $100,000 check during direct
examination, including on the check's presentation for deposit in 2022 and
subsequent dishonor. Linda's counsel did not object or move to strike her
testimony about the check. Nor did Linda's counsel elicit contradictory
testimony during her cross-examination. Linda's counsel only objected to
Robert's request to testify on the subject and moved to strike Robert's
closing argument referencing Linda's volunteered testimony.

¶17 Because Linda did not object to the superior court considering
her volunteered testimony, she cannot raise this issue on appeal. Id.

II. Enforceability of $100,000 and $56,000 Checks.

¶18 Linda argues that the $100,000 and $56,000 checks were
improperly included as damages, asserting both claims were barred by the
three-year statute of limitations of A.R.S. § 47-3118(C). Linda further argues
that the $56,000 check was unenforceable because it was not addressed to
Robert. While Linda only makes a fleeting reference to a three-year statute
of limitations applying to the $100,000 check and only expands on such
legal argument in her reply brief, we address her UCC statute-of-limitations
argument as to both checks in the exercise of our discretion.

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¶19 When an issue involves "a matter of statutory interpretation,
we apply a de novo standard of review." City of Tucson v. Clear Channel
Outdoor, Inc., 209 Ariz. 544, 547, ¶ 8 (2005). An "action to enforce the
obligation of a party to an unaccepted draft to pay the draft must be
commenced within three years after dishonor of the draft or ten years after
the date of the draft, whichever period expires first." A.R.S. § 47-3118(C).
However, presentment may be excused when the "maker or acceptor has
repudiated an obligation to pay the instrument," A.R.S. § 47-3504(A)(2), or
when the "drawer or indorser whose obligation is being enforced has
waived presentment or otherwise has no reason to expect or right to require
that the instrument be paid or accepted," A.R.S. § 47-3504(A)(4). "When a
defendant asserts the statute of limitations as a defense, that defendant has
the burden of proving the complaint falls within the statute." Kiley v.
Jennings, Strouss & Salmon, 187 Ariz. 136, 139 (App. 1996).

¶20 Here, the superior court found that Linda's testimony
regarding the $100,000 check constituted repudiation such that
presentment was waivable under A.R.S. § 47-3504(A). Supra ¶ 9. The
testimony at trial established that the $56,000 check was issued to Linda and
Robert's parents for Robert's benefit. Id. The court further found that her
testimony of a stop payment issued on the $56,000 check was insufficiently
specific as to date of occurrence to establish a three-year statute of
limitations under A.R.S. § 47-3118(C). Id. We conclude the court's factual
findings are supported by the record and discern no abuse of discretion in
the court's conclusion that Linda has not met her burden of proving the
claims were barred. Kiley, 187 Ariz. at 139. Accordingly, we affirm.

III. Notice of Claims as to Leonard's Distributions.

¶21 Linda argues that Robert's claim for Leonard's unpaid
distributions violates Arizona Rule of Civil Procedure 13(a) as an untimely
compulsory counterclaim, and that the $17,000 award for Leonard's
distributions lacked sufficient evidentiary support.

¶22 A partnership may be dissolved through judicial dissolution
if "[t]he economic purpose of the partnership is likely to be unreasonably
frustrated," A.R.S. § 29-1071(5)(a), or "[i]t is not otherwise reasonably
practicable to carry on the partnership business," A.R.S. § 29-1071(5)(c).
After the partnership's obligations to creditors are satisfied, the partners are
"entitled to a settlement of all partnership accounts on winding up the
partnership business." A.R.S. § 29-1077(B). During the winding up of a
partnership, "the assets of the partnership . . . shall be applied to discharge
its obligations to creditors . . . Any surplus shall be applied to pay in cash

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the net amount distributable to partners in accordance with their right to
distributions." A.R.S. § 29-1077(A). When granting a judicial dissolution,
the superior court may "make such orders as it deems advisable to
effectuate the speedy winding up of the partnership affairs." Wood v.
Holiday Mobile Home Resorts, Inc., 128 Ariz. 274, 284 (App. 1980).

¶23 "[R]elations among the partners and between the partners
and the partnership are governed by the partnership agreement." A.R.S. §
29-1003(A). A partner's transferrable interest "is the partner's share of the
profits and losses of the partnership and the partner's right to receive
distributions." A.R.S. § 29-1042.

A transferee of a partner's transferable interest in the
partnership has a right to:
1. Receive, in accordance with the transfer, distributions to
which the transferor would otherwise be entitled.
2. Receive on the dissolution and winding up of the
partnership business, in accordance with the transfer, the net
amount otherwise distributable to the transferor.

A.R.S. § 29-1043(B)(1)–(2).

¶24 Here, both Robert and Linda requested judicial dissolution.
The superior court found that A.R.S. §§ 29-1071(5)(a) and -1071(5)(c) were
applicable, ordering Investor Clout's dissolution and a winding up of
partnership affairs under A.R.S. § 29-1077(A).

¶25 For purposes of winding up, Robert asserted entitlement to
$17,000 in unpaid portions of Distributions 1–10 related to Leonard's
interest in Investor Clout which Robert had purchased. And while Linda
asserts that the superior court relied upon no fact supporting this figure,
the record shows the court reviewed partnership records and heard
testimony. Supra ¶ 7. The superior court concluded that this $17,000 formed
part of the partnership's unresolved distributions and was subject to the
same accounting principles as other partnership assets pursuant to A.R.S.
§§ 29-1003, -1042, and -1043(B)(1)–(2). The superior court's factual findings
are supported by the record. Accordingly, we affirm. Gibbs, 227 Ariz. at
406–07, ¶ 6.

IV. Judicial Dissolution of Investor Clout.

¶26 Linda argues the superior court erred in determining she
frustrated Investor Clout's economic purpose pursuant to A.R.S. § 29-
1071(5)(a). In support, Linda asserts that the standard of determining

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frustration-of-economic-purpose claims as a defense to contractual non-
performance is applicable and unmet. Linda further asserts that, as a result,
she did not consent to judicial dissolution, rendering it an abuse of
discretion.

¶27 Here, the superior court found that both A.R.S. § 29-1071(5)(a)
and -1071(5)(c) were applicable. Linda makes no argument regarding the
latter determination. And that determination is amply supported by
testimony describing irreconcilable differences in the management of
Investor Clout. Supra ¶ 4. We decline to address her arguments regarding
A.R.S. § 29-1071(5)(a) because A.R.S. § 29-1071(5)(c) provides an
independent basis to uphold the superior court's decision to dissolve
Investor Clout. See City of Phoenix v. Geyler, 144 Ariz. 323, 330 (1985)
(recognizing that we are obliged to "affirm where any reasonable view of
the facts and law might support the judgment of the trial court"); Arnold v.
Knettle, 10 Ariz.App. 509, 511 (1969) (noting that we must affirm "if the trial
court was correct in its ruling for any reason"). As to Linda's assertion that
her consent was necessary for judicial dissolution to occur, we disagree.
Judicial dissolution without a partner's consent is permissible. Imperial
Litho/Graphics v. M.J. Enters., 152 Ariz. 68, 76 (App. 1986) (finding partner
"was entitled to seek judicial dissolution of the partnership for cause,"
despite the partnership agreement only contemplating "voluntary
dissolution upon agreement of all partners"). Accordingly, we affirm.

V. Stephen's Liability as Trustee.

¶28 Linda argues a ministerial error appears in the superior
court's final judgment. The error appears on page 4, lines 4–6, and enters
judgment "jointly and severally, against Defendants Linda Mayne and
Stephen S. Mayne." Robert concedes this was error, and we accept the
parties' invitation to correct the error. We therefore amend the final
judgment on page 4, lines 4–6, to replace the aforementioned text with
"jointly and severally, against Defendants Linda Mayne and Stephen S.
Mayne, as trustee of the Stephen S. Mayne Exempt Trust."

VI. Attorney Fees on Appeal.

¶29 Linda opposes Robert's request for attorney fees on appeal,
asserting that the issues raised were legitimate and not frivolous.

¶30 Courts may award attorney fees to the successful party in
contract disputes. A.R.S. § 12-341.01(A). "[A]n award of fees under A.R.S.
§ 12-341.01 is discretionary; it is not an entitlement." Munger Chadwick,
P.L.C. v. Farwest Dev. and Const. of the Sw., LLC, 235 Ariz. 125, 128, ¶ 14 (App.

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2014). Although Robert prevailed on most issues, making him the
successful party on appeal, we note our agreement with the superior court's
categorization of Robert's behavior in this action as "not a good faith effort
that simply fell short, but as a purposeful effort to avoid judgment creditors
. . . that—fortunately for him—never materialized." In the exercise of our
discretion, we decline to award Robert attorney fees on appeal.

CONCLUSION

¶31 For the foregoing reasons, we amend the final judgment to
prescribe liability to Stephen only as trustee, but otherwise affirm the
superior court's judgment. Robert may recover taxable costs upon
compliance with ARCAP 21.

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

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