The primary issue on appeal is whether the trial court erroneously dismissed plaintiffs' amended claim against the interpleaders for a violation of the Arizona Bulk Sales Transfer Act, A.R.S. § 47-6101 et seq., (bulk sales act), based on the court's conclusion that the statute of limitations imposed by the act had run. The cross-appeal raises issues whether defending against a violation of the bulk sales act is an action arising out of contract so as to allow the interpleaders attorneys' fees against plaintiffs, and whether interpleaders were entitled to setoff against the interpled funds their judgment for attorneys' fees against defendants arising from a stipulated judgment on their crossclaim. We affirm.
Facts and Procedural Background
In July 1982, Michael J. O'Keefe and Theresa A. O'Keefe (plaintiffs) entered into a contract (management agreement) with William E. Conry and Lyvia Conry (defendants), which provided that defendants would manage a business owned by plaintiffs known as Convenient Food Mart. The management agreement, as amended, also provided defendants with an option to purchase the business for $50,000 but provided that until defendants had paid fifty-one percent of the purchase price, plaintiffs would retain title to the store franchise, the fixtures and equipment, and all inventory. Defendants exercised this option to purchase in March 1984, but did not make payments exceeding fifty-one percent of the $50,000 price.
On February 18, 1987, defendants agreed to sell the business to Gary Grenke, Jean Grenke, Brian Winstanley, and Lori Winstanley (collectively, interpleaders) for $90,000; $60,000 to be paid upon transfer and
Exhibit "D" listed the following creditors:
1. Pepsi Cola $ 800.00 2. Central Arizona Distributing Co. 125.00 3. Salt River Project (Last month's utilities) 1,100.00
These creditors were paid from the proceeds of the sale. No notice of the transfer was sent to plaintiffs, and defendants did not pay the balance of the $50,000 option price to plaintiffs.
On March 28, 1987, an agent of plaintiffs discovered that the business had been sold to interpleaders. On May 15, 1987, plaintiffs filed suit against defendants alleging breach of the management agreement, conversion/trespass, racketeering, fraudulent concealment and nondisclosure, and sought issuance of provisional remedies (garnishment and attachment). This complaint named no other parties, although it did allege that the Grenkes and the Winstanleys were "subsequent purchasers," and attached a U.C.C. financing statement and security agreement that named the interpleaders as the transferees. The complaint requested damages in the amount of $90,000, and sought attachment of the security interest to satisfy the judgment.
On June 23, 1987, plaintiffs amended the complaint to add a sixth count, alleging that the sale constituted a bulk transfer as defined by A.R.S. § 47-6101, that defendants violated the bulk sales act by failing to supply a list of creditors and failing to give proper notice of the transfer, and that interpleaders knew or had reason to know that defendants owed a debt to plaintiffs at the time of the transfer. The complaint requested "an order voiding the purported sale ... from the Conrys to the Grenkes and Winstanleys," "an order of attachment allowing the O'Keefes to proceed against any and all of the property transferred in violation of the Bulk Sales Transfer Act," and attorneys' fees and costs. The amended complaint again did not formally join the interpleaders as parties, but did add fictitious defendants "whose true identity or role in this lawsuit is unknown at present." Plaintiffs sent a copy of this complaint to the interpleaders on June 23, 1987, and again on July 24, 1987, together with letters from plaintiffs' attorney advising interpleaders that their property interest in the business may be affected by the suit, and advising them to seek legal advice.
On September 11, 1987, interpleaders filed a "Motion for Joinder and Motion for Interpleader," requesting that the court join them to the suit "for the purposes of interpleading certain funds pursuant to Rule 22," Arizona Rules of Civil Procedure. They requested permissive joinder under Rule 20(a), for the reason that "if plaintiffs are successful it will presumably affect or may affect the intervenors' ownership of the fixtures, some goods and the store itself." They further stated that "it may be that the ongoing monthly payments should in fact be paid to the plaintiffs," and requested "that the court enter its order allowing the moving parties to pay the ongoing payments into a restricted savings account and that said funds not be disbursed without a Court Order. This action would insure that the party who has a right to the money would in fact receive it."
Plaintiffs responded that they had no objection to the joinder of interpleaders, but for the first time requested that interpleaders be joined as defendants for the purposes of the bulk sales claim. Plaintiffs
On December 11, 1987, plaintiffs filed their second amended complaint, naming interpleaders as defendants only on the bulk sales claim, retaining the fictitious defendants, and requesting the same relief as requested in the first amended complaint.
Interpleaders filed an answer, admitting that the sale constituted a bulk transfer; asserting, among other affirmative defenses, that the statute of limitations had run; and requesting attorneys' fees and costs against plaintiff, but not stating a basis for that request. Interpleaders also filed a crossclaim against defendants, asserting that defendants were obligated under the terms of the purchase agreement to be responsible for all debts associated with the business and for compliance with the bulk sales act, and therefore interpleaders would be entitled to a setoff on the promissory note and on funds already paid to defendants pursuant to the original contract "for that amount that cross-claimants are found to be liable to the plaintiffs herein." Interpleaders also requested attorneys' fees against defendants pursuant to A.R.S. § 12-341.01.
Interpleaders then sought and received leave to file an amended answer, which added defenses to the other counts of the second amended complaint, although no relief was sought against them on those counts.
On April 4, 1988, a default judgment was entered on interpleaders' crossclaim against defendants. On April 6, 1988, a stipulated judgment was entered against defendants in interpleaders' favor, as follows:
Plaintiffs then filed a motion for partial summary judgment against interpleaders, requesting a ruling that the transfer violated the bulk sales act on the basis that the list of creditors did not comply with the statutory requirements and no notice of sale was sent to any creditor. The interpleaders responded, conceding that the statutory notice requirements were not met, but asserting that plaintiffs' action against interpleaders was barred by the six-month statute of limitations in A.R.S. § 47-6111, and cross-moved for summary judgment on that ground. Plaintiffs replied that the statute of limitations did not bar their action because the second amended complaint related back to a date within the statute of limitations, pursuant to Rule 15(c), Arizona Rules of Civil Procedure. Interpleaders' reply put in issue this contention.
After several hearings, additional discovery and a request by the court to brief the issue whether noncompliance with the statutory notice requirements constituted "concealment" of the transfer, which would toll the statute of limitations until plaintiffs discovered the transfer on March 28, 1987, the court held that the transfer was not "concealed" within the meaning of A.R.S. § 47-6111 for purposes of tolling the statute of limitations, that plaintiffs' second amended complaint did not relate back to a date within the statute of limitations, and that the interpleaders were therefore entitled to summary judgment on the bulk sales claim because plaintiffs' action against them was time-barred.
Subsequently, the court, in the action between plaintiffs and defendants (to which interpleaders were not a party), entered a stipulated judgment in favor of plaintiffs against defendants on the conversion count, dismissing "all other pending
Interpleaders filed a motion to set aside the stipulated judgment, claiming that they had a "priority entitlement to the funds in the restricted account" because they prevailed against plaintiffs on the bulk sales claim, and stating:
Interpleaders also noted that they had previously obtained a judgment against defendants, had prevailed in obtaining summary judgment against plaintiffs, and had concurrently filed an application for attorneys' fees against plaintiffs. After a hearing on the motion
After further briefing and additional oral argument, the court denied interpleaders' motion for attorneys' fees against plaintiffs, but granted their motion for attorneys' fees against defendants. On April 7, 1989, the trial court entered its "Judgment re: Attorneys' Fees (v. [defendants])," awarding interpleaders $20,046.75 in attorneys' fees against defendants pursuant to A.R.S. § 12-341.01, and awarding $666.90 as taxable costs. On May 5, 1989, the court entered its "Judgment (v. [plaintiffs])" in interpleaders' favor against plaintiffs, dismissing the second amended complaint against interpleaders with prejudice, awarding $2,492.40 attributable to attorneys' fees previously granted arising out of plaintiffs' withdrawal of their motion for leave to file a third amended complaint, awarding $666.90 in taxable costs, and denying attorneys' fees pursuant to A.R.S. § 12-341.01.
Plaintiffs timely appealed from the judgment in interpleaders' favor on the bulk sales claim. Interpleaders have cross-appealed from the denial of attorneys' fees against plaintiffs under A.R.S. § 12-341.01 and from the court's refusal to allow them a priority entitlement to the interpled funds to satisfy their judgment against defendants.
I. Issues on Appeal
A. Relation-Back of Amended Complaint
Plaintiffs argue that the trial court erred in holding that their second amended complaint, filed December 11, 1987, did not relate back to a date within the six-months statute of limitations.
The parties do not seriously dispute that the first two requirements of the rule have been met: (1) the bulk sales claim arose from the same transaction as the sale of the business claims set forth in the original complaint, (2) interpleaders received written notice of the institution of that action shortly after it was filed. The only issue remaining is whether the amendment naming the interpleaders as defendants on the bulk sales claim was a result of a "mistake" concerning their identities. In the trial court, plaintiffs contended that the omission of the interpleaders as parties in the first amended complaint, filed within the statutory period,
Plaintiffs attached an affidavit from counsel, which stated as follows:
Plaintiffs thus admit that the "mistake" in not naming interpleaders as defendants on the bulk sales claim in their first amended complaint was a result of an erroneous conclusion of law by their counsel. Further, it is clear that by naming interpleaders as the subsequent purchasers in both the original complaint and the first amended complaint that plaintiffs knew of the existence and identities of these parties from the time they commenced this action. The issue is thus directly presented as to whether the failure to name interpleaders as the result of a "mistake as to the necessity for naming them," meets the requirements of Rule 15(c).
In our opinion, a "mistake concerning the identities of the proper party" does not include a mistake of law by counsel regarding whom to name in a lawsuit. If such a broad reading of Rule 15(c) were adopted, it would unreasonably extend the statute of limitations in a limitless number of cases in which legal counsel made strategic, conscious, tactical choices, although erroneous, about whom to sue initially, and then changed their minds after the statute of limitations had run.
The proper interpretation of the rule is that widely adopted in other federal and state courts: Where a plaintiff knows
Furthermore, under Rule 15(c), plaintiffs are required to establish that the interpleaders "knew or should have known" that, but for that "mistake," they would have been sued. Notice of the suit does not necessarily establish that knowledge. See, e.g., Bisaillon v. Casares, 165 Ariz. 359, 798 P.2d 1368 (App. 1990) (even if party is aware of action, plaintiff's decision not to sue could be seen as intentional rather than mistake); Gridley v. Cunningham, 550 F.2d 551 (8th Cir.1977) (the added defendant, even if served with notice of the original complaint, would not necessarily know that plaintiff made a "mistake" in not naming him); Curry v. Johns-Manville Corp., 93 F.R.D. 623 (D.Pa. 1982) (third party could have reasonably inferred that plaintiff made a deliberate tactical choice not to take action to assert direct claims against them); King & King Enterprises v. Champlin, 446 F.Supp. 906 (E.D.Okla. 1978) (reasonable for unnamed parties to assume that plaintiffs made a strategic choice of defendant that did not include them). Here, plaintiffs have shown no evidence of interpleaders' knowledge of their mistake of law, and interpleaders have correctly noted that notice of the suit, alone, did not require them "to speculate as to the obvious decision of [plaintiffs] not to sue them." See Holden v. R.J. Reynolds, Ind., 82 F.R.D. 157 (D.N.C. 1979) ("when the plaintiff merely sues one joint tort-feasor or obligor, the missing party is under no duty to speculate as to the reason plaintiff has not pursued him").
Because plaintiffs failed to meet the "mistake of identity" requirement of Rule 15(c), the trial court correctly refused to allow plaintiffs' second amended complaint to relate back to defeat the interpleaders' statute of limitations defense.
B. Waiver of Defense by Joinder/Interpleader
Plaintiffs alternatively argue that, even if their second amended complaint does not relate back to a date within the six-month statute of limitations, interpleaders are estopped from asserting the statute of limitations defense because it was waived by voluntarily moving to join the suit before the statute of limitations had run. We disagree.
Because an answer can be amended at any time prior to trial with permission of the court, a statute of limitations defense is waived only if not asserted prior to judgment. Transamerica Ins. Co. v. Trout, 145 Ariz. 355, 358, 701 P.2d 851, 854 (App. 1985). A party does not waive the defense by filing a notice of appearance in the suit within the statute of limitations. Matthies v. Knodel, 19 Wn.App. 1, 573 P.2d 1332, 1335 (1977). The civil rules provide for waiver of an affirmative defense only if not
In this case, interpleaders' motion to join for the purpose of interpleading the funds at issue in the lawsuit was not a responsive pleading that required them to assert any defenses to a claim that at this point in the proceedings had not been brought against them. We find no "waiver" of the statute of limitations defense.
C. Noncompliance as "Concealment" Under the Bulk Sales Act
The parties' primary dispute in the trial court and on appeal is the date on which the applicable six-month statute of limitations for the bulk sales claim began to run. The relevant statute provides:
A.R.S. § 47-6111 (emphasis added).
The dispositive dates are undisputed: the transferee took possession on February 18, 1987; plaintiffs' discovery of the transfer occurred on March 28, 1987; plaintiffs' complaint naming interpleaders on the bulk sales claim was filed on December 11, 1987. Plaintiffs argue that because the transfer was "concealed" by failure to comply with the requirements of the bulk sales act, the statute of limitations did not begin to run until they discovered the transfer on March 28, 1987. Therefore, their amended complaint was not barred by the statute of limitations.
First, we agree that there is no evidence in this record that either the transferor or the transferee in this bulk sale performed any "positive acts ... to prevent detection" by "trick or contrivance to exclude suspicion and prevent inquiry," under the traditional definition of "concealment" in other contexts outside the bulk sales act. See Tovrea Land & Cattle Co. v. Linsenmeyer, 100 Ariz. 107, 130, 412 P.2d 47, 64 (1966). Indeed, the only evidence is to the contrary. For example, interpleaders removed the sign in the front of the store that had read "Conry's Food Mart" and placed a 4' X 5' banner in front of the store that read "Under New Ownership and Management." They also obtained a sales tax license, liquor license, and lottery permit in the name of Gary Grenke and conspicuously posted those documents in the store. In addition, at least one of the interpleaders was physically present and involved in the operation of the store between 65 and 70 hours a week after February 18, 1987. Furthermore, the parties stipulated that interpleaders were not even aware, at the time of transfer, of any potential interest of plaintiffs. Although the trial court did note that defendants may have "actively concealed" the existence of any alleged debt from the interpleaders prior to the transfer, no evidence was presented that defendants performed any act or omission after the transfer to actively prevent plaintiffs from finding out about it.
We therefore must decide whether the "concealment" necessary under A.R.S. § 47-6111 to extend the running of the statute of limitations requires something more than mere noncompliance with the notice provisions of the bulk sales act. This issue is one of first impression in
To determine this question, a review of the notice provisions of the bulk sales act is in order. A bulk transfer is ineffective against any creditor of the transferor unless the transferee gives proper notice of the transfer to that creditor at least ten days prior to payment or possession. A.R.S. § 47-6105. The notice must state that the transfer is about to be made, the names and business addresses of the transferor and transferee, and whether the debts are to be paid in full upon transfer. A.R.S. § 47-6107. The notice must be personally delivered or sent by registered or certified mail to the creditors on the list. A.R.S. § 47-6104. The parties do not dispute that this was a bulk transfer to which this requirement applied, and that proper notice was not given to plaintiffs.
Some jurisdictions have held that total noncompliance with the notice provisions of the bulk sales act constitutes the "concealment" necessary to toll the running of the statute of limitations to the date that a creditor discovers the transfer, without requiring any showing of any other acts by the transferor or transferee to hide the transfer. See, e.g., Carpenter, Bennett & Morrissey v. Jones, 197 N.J.Super. 475, 485 A.2d 316 (1984) (dictum); Columbian Rope Co. v. Rinek Cordage Co., 314 Pa.Super. 585, 461 A.2d 312 (1983); E.J. Trum, Inc. v. Blanchard Parfums, Inc., 33 A.D.2d 689, 306 N.Y.S.2d 316 (1969). A reason given for this result is that treating noncompliance differently from active concealment would undermine the legislature's purpose to promote advance notice of a bulk transfer, and would encourage transferees to take the "small risk of creditor action within six months after the completely undisclosed transfer." Columbian Rope Co., 461 A.2d at 315; see also J. White and R. Summers, Uniform Commercial Code § 19-3 at 768 (2d ed. 1980) ("It is notorious that lawyers sometimes advise their clients not to go through the formalities of complying with Article Six. Compliance may be time-consuming and expensive. It may also stir up creditors — even questionable ones — who may try to hold up the sale."). Another reason given for this approach is the difficulty creditors may face in proving affirmative concealment when they have received no notice of the transfer. SVM Investments, 685 S.W.2d at 429.
Other jurisdictions hold that something more than mere notice noncompliance is necessary to constitute concealment of a bulk sale. See e.g., Matter of Borba, 736 F.2d 1317 (9th Cir.1984); In re Northern Specialty Sales, Inc., 57 B.R. 557 (Bkrtcy. D.Ore. 1986); Aluminum Shapes, Inc. v. K-A-Liquidating Co., 290 F.Supp. 356 (W.D.Pa. 1968); SVM Investments v. Mexican Exporters, Inc., 685 S.W.2d 424, 429 (Tex. App. 1985); Pipeline Materials v. Turf Irrigation Corp., 754 P.2d 775 (Colo. App. 1988). A common theme in these cases is that equating "concealment" with "notice noncompliance" would effectively cancel that portion of the statute that requires that an action be brought within six months from date of transfer, in contravention of the public policy to promote prompt action by defrauded creditors. See Borba, 736 F.2d at 1320. Another reason given against a broad interpretation of "concealment" is that if the legislature had wanted to include notice noncompliance in the concealment category, it could easily have
We believe the better-reasoned view is taken by courts that hold that the "concealment" required to extend the running of the statute of limitations to the date the creditor discovers the transfer requires more than mere noncompliance with the notice provisions of the bulk sales act. The bulk sales act clearly provides three different time periods in which a creditor may bring suit, depending on the circumstances. First, if the creditor has received proper notice, it has ten days prior to the transfer to protect its interest. A.R.S. § 47-6105. Second, if the creditor does not receive notice, it has six months from the date of the transferee's possession to take action. A.R.S. § 47-6111. Third, if the transfer has been concealed, the creditor has six months from discovery of the transfer to take action. Id. We agree with those cases that note that if we were to interpret "concealment" as including failure to give notice, we would render meaningless the language in A.R.S. § 47-6111 referring to the six months from the date of the transferee's possession. We would also distort the ordinary definition of "conceal" from meaning "to prevent disclosure or recognition of; to place out of sight" to mean something more, without any legislative intent of such a broad interpretation. See Webster's New Collegiate Dictionary (1981).
The position we adopt has been supported by prominent commentators as well:
J. White and R. Summers, 2 Uniform Commercial Code § 20-4 at 117 (3d ed. 1988). We agree with the reasons given for this position. First, bad faith can be proven by evidence that the buyer knowingly and willingly withheld notice. Second, contrary to those courts that have adopted the "complete failure rule" on the basis that the legislative intent was to protect creditors against fraudulent transfers, in our opinion, there exist two competing goals of the bulk sales act: to protect creditors from fraudulent transfers and to protect innocent transferees from stale creditor claims. Id. at 117-18. Those combined purposes are best served, in our opinion, by this interpretation. It is important not only that creditors be protected but also that transferees enjoy the right to continue the operation of the purchased business after a reasonable period of time without fear of creditor claims. Third, extending the limitations period against a transferee without a showing of bad faith "does not lessen the chance of fraud by the transferor. It does not provide the creditor with notice, it simply punishes the unwary transferee." Id. at 118. Finally, the drafters' intent was to minimize "the possibility of a trap for the unwary buyer"; however, applying the "complete failure" rule to good faith transferees "would widen the trap without lessening the danger of fraud," which contradicts that intent. Id.
Apparently the drafters of the uniform law also agree with this position. The current version of the limitations period for bulk sales claims, set forth in 2A Uniform Laws Annotated § 6-110 (Supp. 1991), specifically states: "Complete noncompliance with the requirements of this article does not of itself constitute concealment." We believe our interpretation of "concealment" in A.R.S. § 47-6111 is a tacit recognition of this standard.
We hold, therefore, that the interpleaders' failure to comply with the notice requirements of A.R.S. § 47-6111, without further evidence of any act or omission calculated to hide the transfer from these plaintiffs, did not constitute "concealment" within the meaning of A.R.S. § 47-6111 that would extend the statute of limitations to six months after plaintiffs discovered the transfer. The trial court thus correctly concluded that plaintiffs' amended claim for interpleaders' violation of the bulk sales
II. Issues on Cross-Appeal
A. Interpleaders' Priority Rights to Interpled Funds
On cross-appeal, interpleaders argue, as they did in the trial court, that they had a priority right to setoff against the interpled funds the judgment they were awarded against defendants "on their breach of warranty claim." We find that interpleaders neither asserted a "breach of warranty" claim against defendants nor presented any other claim that would entitle them to a right of setoff against the interpled funds.
Interpleaders included in their amended answer an affirmative defense of setoff to the bulk sales claim, as follows:
No lien on the property occurred as a result of any of the four judgments entered in this case, so this request does not entitle interpleaders to any right of setoff on that basis.
In addition, in their crossclaim, interpleaders requested the following relief against defendants:
As to the first request, interpleaders were not found to be liable to plaintiffs, as the amended bulk sales claim was dismissed as untimely, and they were not named defendants on any of the other counts in the complaint. As we have already noted, no lien was placed on the business. As to the second request, no setoff was necessary as affirmative relief because no judgment was entered against interpleaders in plaintiffs' favor. As to the third request, interpleaders were awarded attorneys' fees against defendants, but did not claim any right to setoff that award against any interpled funds. Interpleaders had no right to setoff the judgment for attorneys' fees owed by defendants to them from the funds found by the court to be owed by defendants to plaintiffs.
Interpleaders also argue that they have a priority entitlement to the interpled funds "since [interpleaders] prevailed by summary judgment on the Plaintiff's sixth claim for relief in the second amended complaint," (the bulk sales claim). However, interpleaders did not receive any money judgment on this claim, nor did they assert any affirmative claim against plaintiffs on that action. Interpleaders also argued that they had "prevailed" on the other counts against defendants, but they were not named parties on those counts, which were dismissed as a result of a stipulation between plaintiffs and defendants on the conversion count. We simply find no basis in this record for interpleaders' entitlement to setoff of any portion of the interpled funds on any theory against plaintiffs.
As the trial court correctly noted, the judgments in this case did not bar any future "recoupment, setoff, or similar claim that the interpleaders may assert as a defense to payment of the promissory note." The interpleaders' right to setoff against plaintiffs is clearly not raised in this lawsuit. We do not determine if such a claim of setoff may arise if interpleaders fail to make payments on the promissory
B. Attorneys' Fees Pursuant to A.R.S. § 12-341.01(A)
Interpleaders also cross-appeal from the trial court's denial of their request for attorneys' fees against plaintiffs, based on their successful defense of the bulk sales claim, contending that such a claim is embraced within A.R.S. § 12-341.01(A), which provides:
The trial court denied interpleaders any attorneys' fees against plaintiffs on the basis of A.R.S. § 12-341.01, finding that the bulk sales claim, on which interpleaders prevailed, arose out of a statutory claim, not contract.
Interpleaders argue that A.R.S. § 12-341.01(A) is applicable because, "but for" the management agreement and purchase contract involved in this case, no bulk sales claim would have arisen. Although conceding that they "prevailed upon an issue which did not itself concern a contract," they argue that when a contract is "a factor" causing the dispute, the statute applies. See Nationwide Mut. Ins. Co. v. Granillo, 117 Ariz. 389, 394, 573 P.2d 80, 85 (App. 1977); Ash, Inc. v. Mesa Unified Sch. Dist., 138 Ariz. 190, 673 P.2d 934 (App. 1983). They further contend that an intervenor can be entitled to attorneys' fees under A.R.S. § 12-341.01(A) when the "requisite causal link" is found between the intervenor's claims and defenses and the underlying contract between plaintiff and defendant. McKesson Chem. Co. v. Van Waters & Rogers, 153 Ariz. 557, 739 P.2d 211 (App. 1987). These cases are distinguishable.
In Granillo, Division Two of this court found A.R.S. § 12-341.01 applicable to successful defendants in a declaratory judgment action determining whether an insurance policy provided coverage. Although defendants were not a "party" to the contract, they prevailed on an issue involving "facts and law regarding the insurance contract," and thus were entitled to attorneys' fees. Granillo, 117 Ariz. at 395, 573 P.2d at 86. Conversely, the bulk sales claim on which interpleaders prevailed in this case did not involve any contractual interpretation issue.
In Ash, the prevailing party sought by special action to invalidate a contract. This court found A.R.S. § 12-341.01 applied because "the words `arising out of a contract' describe an action in which a contract was a factor causing the dispute." Ash, 138 Ariz. at 192, 673 P.2d at 936. We found that because the prevailing defendants had "incurred substantial expense in defending the propriety of their contract," the trial court had properly awarded them attorneys' fees. Id. at 193, 673 P.2d at 937. Here, however, interpleaders' defense of the bulk sales claim against them did not involve any attempt to defend either the management agreement or the purchase contract.
We also note that this case is unlike Marcus v. Fox, 150 Ariz. 333, 723 P.2d 682 (1986), also cited by interpleaders. In Marcus, the supreme court held that when two parties to a contract were involved in litigation over fraudulent inducement to enter the contract, A.R.S. § 12-341.01 could be applied to award fees to the prevailing party. Id. at 336, 723 P.2d at 685. Although the claim sounded in tort, the court found the requisite causal link between the claim and the underlying contract because the relief sought was invalidation of the contract, and the tort could not have existed but for the fraudulently induced contract. Id. at 336-37, 723 P.2d at 685-86. In other words, the existence of the contract was a necessary element of the tort claim. See also Barmat v. John and Jane Doe Partners, 155 Ariz. 519, 747 P.2d 1218 (1987) (tort arising from breach of a contractual duty arises out of contract); Sparks v. Republic Nat'l Life Ins. Co., 132 Ariz. 529, 647 P.2d 1127 (1982) (A.R.S. § 12-341.01(A) applies if tort action could not exist but for the breach of the contract). Here, in contrast, no evidence of any contract was necessary for plaintiffs to assert, or interpleaders to defend, a statutory violation of the bulk sales act. Furthermore, as the Marcus court stated, "attorneys' fees are not appropriate based on the mere existence of a contract somewhere in the litigation." Id. 150 Ariz. at 335, 723 P.2d at 684.
We find the cases cited by plaintiffs more analogous to this one. See Morris v. Achen Constr. Co., Inc., 155 Ariz. 512, 747 P.2d 1211 (1987); Cauble v. Osselaer, 150 Ariz. 256, 722 P.2d 983 (App. 1986); Lewin v. Miller Wagner & Co., Ltd., 151 Ariz. 29, 725 P.2d 736 (App. 1986); Sanchez-O'Brien Minerals Corp. v. State, 149 Ariz. 258, 717 P.2d 937 (App. 1986). Morris found no contractual basis for an award of fees in a case where the claim arose out of a duty not to commit fraud that was not created by any contractual relationship between the parties. 155 Ariz. at 514, 747 P.2d at 1213. In Cauble, we found that when "the immediate genesis" of the claim was not the peripheral deed of trust but was the court-imposed requirement that the receiver's compensation be "reasonable," the claim arose not from a contractual duty but from an independent duty created by the trial court's order. Likewise, the bulk sales claim in this case arose from an alleged breach of interpleaders' statutory duty to notify plaintiffs of the transfer, and not from any contractual obligation. Lewin also supports this result in its clarification of the Ash test of whether a contract was "a factor" causing the dispute:
Lewin, 151 Ariz. at 37, 725 P.2d at 744. Similarly, in this case, the peripheral involvement of a contract does not require the application of A.R.S. § 12-341.01(A),
We hold that the trial court properly found A.R.S. § 12-341.01 inapplicable to interpleaders' request for attorneys' fees against plaintiffs based on interpleaders' successful defense of the bulk sales claim.
Interpleaders have requested attorneys' fees for this appeal, presumably under the same theories they were denied in the trial court. For the same reasons that we affirm that denial, we deny their request.
For the foregoing reasons, we affirm the judgment of the trial court.
CLABORNE and LANKFORD, JJ., concur.
Interpleaders also contend that they successfully obtained judgment against defendants based on a "breach of warranty" claim arising out of the purchase contract. As we have previously pointed out, the pleadings do not support this contention; interpleaders' crossclaim against defendants sought nothing more than indemnity against defendants if plaintiffs prevailed against interpleaders, and attorneys' fees against defendant, which they were awarded.