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Sunstate Equip. Co. v. Davis

ARIZONA COURT OF APPEALS DIVISION ONE
Apr 4, 2019
No. 1 CA-CV 18-0222 (Ariz. Ct. App. Apr. 4, 2019)

Opinion

No. 1 CA-CV 18-0222

04-04-2019

SUNSTATE EQUIPMENT COMPANY, LLC, Plaintiff/Appellant, v. WILBUR DAVIS, et al., Defendants/Appellees.

COUNSEL Parker Law Firm PLC, Phoenix By John D. Parker, II Counsel for Plaintiff/Appellant Stein and Stein PC, Mesa By Henry M. Stein, Amy R. Wilson Counsel for Defendants/Appellees


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 UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL AND MAY BE CITED ONLY AS AUTHORIZED BY RULE. Appeal from the Superior Court in Maricopa County
No. CV2014-096340
The Honorable Joshua D. Rogers, Judge

AFFIRMED

COUNSEL Parker Law Firm PLC, Phoenix
By John D. Parker, II
Counsel for Plaintiff/Appellant Stein and Stein PC, Mesa
By Henry M. Stein, Amy R. Wilson
Counsel for Defendants/Appellees

MEMORANDUM DECISION

Judge Peter B. Swann delivered the decision of the court, in which Presiding Judge James B. Morse Jr. and Judge Jon W. Thompson joined. SWANN, Judge:

¶1 This is a fraud case in which the defendants used the credit account of a defunct company to rent equipment from the plaintiff. The superior court entered summary judgment in favor of the defendants, and plaintiff appeals. We conclude that the superior court properly granted summary judgment to the defendant because no genuine issues of material fact exist concerning whether the defendants fraudulently concealed another entity's financial status or failed to disclose it.

FACTS AND PROCEDURAL HISTORY

¶2 Sunstate Equipment Company, LLC ("Sunstate") is a rental equipment company and Wilbur Davis is the sole member of Gemini Equipment Rental, LLC ("Gemini"). In 2014, Gemini was awarded a government contract to supply light towers. Gemini rented the light towers from Sunstate under a commercial account that another company, Green Act, LLC ("Green Act") had with Sunstate. Mark Pike, Tara Pike, and David Pike ("the Pikes") formed and operated Green Act. Davis, working for Gemini, picked up the light towers from Sunstate and signed the delivery tickets for the equipment. The delivery tickets identify Green Act, not Gemini, as the customer.

¶3 The credit account became delinquent and Sunstate brought an action against Green Act for breach of contract and against Gemini for unjust enrichment. The court entered default judgment against Green Act and Gemini.

¶4 Sunstate alleged that at the time Davis picked up the light towers from Sunstate, Green Act was no longer an existing business. Sunstate amended its complaint to add a claim for fraud and negligent misrepresentation against the Pikes and Wilbur and Joseth Davis (Wilbur's wife) alleging that the Davis defendants concealed Green Act's financial and business status to induce Sunstate to supply the rentals on the credit account. The Davis defendants each filed motions for summary judgment. Mrs. Davis asserted that Sunstate had no factual basis to support its claims that she knew of her spouse's tortious conduct, and that Sunstate's claims were based solely on her membership in the marital community. Mr. Davis asserted that Sunstate had no evidence showing he knowingly misrepresented Green Act's financial status, that he owed no duty to disclose even if he was aware of Green Act's financial status, and that there is no evidence to show Mr. Davis communicated false information to Sunstate.

¶5 The superior court granted summary judgment on both motions and awarded attorney's fees to the Davis defendants. Sunstate timely appeals both grants of summary judgment.

Though Sunstate's claims were for fraud and negligent misrepresentation, the superior court framed them as claims for fraudulent concealment and negligent misrepresentation. Sunstate does not challenge that characterization.

DISCUSSION

¶6 In reviewing a grant of summary judgment, we view the facts in the light most favorable to the non-moving party and review the superior court's legal determinations de novo. Kiley v. Jennings, Strouss & Salmon, 187 Ariz. 136, 139 (App. 1996). I. THERE ARE NO GENUINE ISSUES OF MATERIAL FACT REGARDING WILBUR DAVIS'S ALLEGED CONCEALMENT OF GREEN ACT'S FINANCES.

¶7 Sunstate contends that there are genuine issues of material fact concerning its fraudulent concealment claim against Wilbur Davis. Arizona recognizes the tort of fraudulent concealment, and has adopted the Restatement (Second) of Torts § 550 (1977):

One party to a transaction who by concealment or other action intentionally prevents the other from acquiring material information is subject to the same liability to the other, for pecuniary loss as though he had stated the nonexistence of the matter that the other was thus prevented from discovering.
Wells Fargo Bank v. Ariz. Laborers, Teamsters & Cement Masons Local No. 395 Pension Tr. Fund, 201 Ariz. 474, 496, ¶ 87 (2002).

¶8 Liability for fraudulent concealment requires knowledge of the false information and action by the defendant that intentionally prevented the plaintiff from finding out the truth. Id. at ¶ 89 (citing Frazier v. Sw. Sav. & Loan Ass'n, 134 Ariz. 12, 17 (App. 1982)). The tort is characterized by deceptive acts that are intended to hide information and mislead, rather than by mere silence. Id. at 497-98, ¶ 95 (citation omitted).

¶9 Here, Sunstate argues that there are disputed facts as to whether Wilbur Davis knew about Green Act's financial status at the time of the transaction. First, it points out that while he testified at deposition that he did not "[know] about Green Act" until the lawsuit was filed, Davis received checks from Green Act in 2013 and paid Green Act's bill to Sunstate in early 2014—before the action was filed. Second, Sunstate contends that Davis, as the sole member of Gemini, signed for the light towers and used them on Gemini's government job. Third, Sunstate also claims that former Green Act and Gemini representative, Wendi Shepard, testified in deposition that Green Act was behind on its obligations and that she told Davis of that fact. Sunstate ultimately argues that these facts show that there is a genuine issue of material fact as to whether Davis knew of Green Act's financial problems. But while these assertions may have referred to material facts, Sunstate did not provide sufficient evidence of them to generate a genuine dispute of material fact.

¶10 The record shows that Davis received a $700 check written from Green Act's account in May 2013, but he testified at deposition that he did not remember receiving the check until he was presented with it at the deposition, and that he assumed the check was in connection with another contract that he agreed to perform for David Pike (but not Mark Pike). Though Sunstate argues that the receipt of the check creates a genuine issue of material fact regarding Davis's knowledge of the bare existence of Green Act, it did not provide any evidence to call into question Davis's testimony regarding Davis's personal knowledge of Green Act's financial status. And though Davis signed for the light towers, there is no evidence showing that he placed the order under Green Act's account or identified himself as a representative of Green Act.

¶11 Similarly, Sunstate argues that Wendi Shepard testified that she told Davis about Sunstate's financial problems. Shepard testified that she did not believe that Davis was telling the truth when he said he did not know about Green Act until he picked up the light towers because Davis and David Pike were close. She spoke of past-due invoices, saying Davis and David Pike were "always cycling behind," and that she would let them know when vendors sought past-due payments. Shepard testified she would usually "complain to Mark [Pike] saying that [vendors] were complaining about payment." But Shepard's belief that Davis knew about Green Act, standing alone, is not a fact from which a jury could find liability. Similarly, the fact that Shepard let Davis and Mark Pike know of past-due payments does not imply that Davis knew Green Act had financial problems, especially because Shepard testified she mostly only told the Pikes about issues with vendors. II. THERE ARE NO GENUINE ISSUES OF MATERIAL FACT REGARDING WHETHER WILBUR DAVIS HAD A DUTY TO DISCLOSE TO SUNSTATE.

¶12 Sunstate also contends that there are genuine issues of material fact as to its non-disclosure claim against Wilbur Davis. The tort of non-disclosure arises when:

(1) One who fails to disclose to another a fact that he knows may justifiably induce the other to act or refrain from acting in a business transaction is subject to the same liability to the other as though he had represented the nonexistence of the matter that he has failed to disclose, if, but only if, he is under a duty to the other to exercise reasonable care to disclose the matter in question.

(2) One party to a business transaction is under a duty to exercise reasonable care to disclose to the other before the transaction is consummated,

(a) matters known to him that the other is entitled to know because of a fiduciary or other similar relation of trust and confidence between them; and

(b) matters known to him that he knows to be necessary to prevent his partial or ambiguous statement of the facts from being misleading; and

. . .

(e) facts basic to the transaction, if he knows that the other is about to enter into it under a mistake as to them, and that the other, because of the relationship between them, the customs of the trade or other objective circumstances, would reasonably expect a disclosure of those facts.
Lerner v. DMB Realty, LLC, 234 Ariz. 397, 404, ¶ 25 (App. 2014) (citing Restatement (Second) of Torts § 551). A party may be obliged to disclose a fact if "good faith and fair dealing" require it. Id. at 405, ¶ 28.

Though we analyze "duty to disclose" as a factual question, we do not imply that the term has the same meaning as a legal "duty," which the court evaluates as a matter of law. See Gipson v. Kasey, 214 Ariz. 141, 143, ¶ 9 (2007). In the context of this tort, the term "duty to disclose" relates to the content of the duty, which is a question of fact. --------

¶13 Sunstate argues that there are genuine issues of material fact regarding Davis's disclosures. Sunstate contends that the Davis defendants admitted that Gemini rented light towers from Sunstate, and argues, for the first time on appeal, that Davis may have been a party to the business transaction as Gemini's director. We do not consider arguments raised for the first time on appeal, and deem those arguments waived. See Hannosh v. Segal, 235 Ariz. 108, 115, ¶ 25 (App. 2014). And even in the absence of waiver, we note that Sunstate previously admitted that Davis was not a party to the business transactions between Green Act and Sunstate. Even if Davis was aware of financial problems on the part of Green Act, there are no facts giving rise to a duty to disclose any knowledge of Green Act's status because there is nothing in the record to prove he was a party to the business transaction. See Lerner, 231 Ariz. at 403-04, ¶¶ 21-22 (explaining that a party to a business transaction is under a duty to exercise reasonable care to disclose). Therefore, the superior court correctly granted summary judgment on the issue of non-disclosure. III. THERE ARE NO GENUINE ISSUES OF MATERIAL FACT REGARDING JOSETH DAVIS'S KNOWLEDGE OF ANY ALLEGED CONCEALMENT OR NON-DISCLOSURE.

¶14 Sunstate also contends that there are genuine issues of material fact concerning Joseth Davis's knowledge about the alleged concealment and non-disclosure. Because we hold that there were no triable issues of fact regarding the underlying concealment and non-disclosure claims, we do not address these arguments. IV. REASONABLE EVIDENCE SUPPORTS THE SUPERIOR COURT'S AWARD OF ATTORNEY'S FEES UNDER A.R.S. § 12-341.01.

¶15 Sunstate contends that the superior court erred when it awarded the Davis defendants attorney's fees under A.R.S. § 12-341.01 because its claims arose out of tort, and not contract.

¶16 Under § 12-341.01, the court may award attorney's fees when the claim arose out of a contract. The court may award attorney's fees "upon facts which show a breach of contract, the breach of which may also constitute a tort." Sparks v. Republic Nat'l Life Ins. Co., 132 Ariz. 529, 543 (1982). The two theories may be intertwined and still allow an award of attorney's fees "as long as the cause of action in tort could not exist but for the breach of contract." Id. (emphasis added). When a tort claim and contract claim are inextricably interwoven, we review whether the trial court abused its discretion in awarding fees. Modular Mining Sys., Inc. v. Jigsaw Tech., Inc., 221 Ariz. 515, 521-22, ¶¶ 21-23 (App. 2009).

¶17 Here, Sunstate brought fraudulent concealment and non-disclosure claims, which are tort claims. These claims, however, both arise out of the alleged business transactions between Sunstate and the Davis defendants. Neither cause of action could exist but for the alleged breach of contract. See Sparks, 132 Ariz. at 543. Though we agree with the superior court that no contractual relationship existed between the Davis defendants and Sunstate, we look at the fundamental nature of the cause of action rather than the form of the pleadings; in this case, a breach of contract. See Ramsey Air Meds, L.L.C. v. Cutter Aviation, Inc., 198 Ariz. 10, 15, ¶ 27 (App. 2000).

CONCLUSION

¶18 For the foregoing reason, we affirm the superior court's grant of summary judgment and attorney's fees.


Summaries of

Sunstate Equip. Co. v. Davis

ARIZONA COURT OF APPEALS DIVISION ONE
Apr 4, 2019
No. 1 CA-CV 18-0222 (Ariz. Ct. App. Apr. 4, 2019)
Case details for

Sunstate Equip. Co. v. Davis

Case Details

Full title:SUNSTATE EQUIPMENT COMPANY, LLC, Plaintiff/Appellant, v. WILBUR DAVIS, et…

Court:ARIZONA COURT OF APPEALS DIVISION ONE

Date published: Apr 4, 2019

Citations

No. 1 CA-CV 18-0222 (Ariz. Ct. App. Apr. 4, 2019)