Right to Attys' Fees in Action for Breach of Fiduciary Duty & Fraudulent Conveyance & Accounting

Civil Procedure--Right to Attys' Fees in Action for Breach of Fiduciary Duty & Fraudulent Conveyance & Accounting

Dooley v. O'Brien, 598 Ariz. Adv. Rep. 23 (App. Div. I, December 2, 2010) (J. Swan)

ACTION ARISING OUT OF A DUTY IMPOSED BY LAW, NOT BY EXPRESS OR IMPLIED PROMISE IS NOT AN ACTION "ARISING OUT OF CONTRACT" UNDER ATTYS' FEES STATUTE

The parties entered into a real estate venture and created a corporation together to facilitate investment in the venture. Plaintiff sued one of the other parties to the venture claiming breach of fiduciary duty, fraud and demanding accounting when the defendant conveyed some of the real estate without plaintiff's knowledge or consent. Defendant won by summary judgment and then filed an application for attorneys' fees pursuant to ARS sec. 12-341.01 which was granted by the trial court.

The Arizona Court of Appeals reversed holding that a claim does not "arise out of contract" under the statute when the relevant duty is not created by an express or implied promise. A claim for breach of fiduciary duty, fraud and misappropriation of a corporate opportunity are all claims where the duty alleged breached arises under the law and not out of the contract. The court acknowledged that the relationship required to establish the legal duty was created by the contract. Nonetheless, the law and not the contract created and defined the duty. Therefore the trial court was reversed and defendant was denied fees under ARS sec. 12-341.01.