From Casetext: Smarter Legal Research

Washington v. Estate of Campbell

ARIZONA COURT OF APPEALS DIVISION ONE
Jun 24, 2014
No. 1 CA-CV 12-0777 (Ariz. Ct. App. Jun. 24, 2014)

Opinion

No. 1 CA-CV 12-0777 No. 1 CA-CV 13-0233

06-24-2014

ANTHONY WASHINGTON, a single man and Trustee of the AWAMH-1 TRUST; WILLIAM D. HOWELL, Plaintiffs/Appellants, v. THE ESTATE OF CALLIE J. CAMPBELL, Defendant/Appellee.

Law Office of William D. Shostak, PLLC, Chandler By William D. Shostak, Counsel for Plaintiffs/Appellants Schneider & Onofry, PC, Phoenix By Joseph B. Swan, Luane Rosen Counsel for Defendant/Appellee


NOTICE: NOT FOR PUBLICATION.

UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION DOES NOT CREATE

LEGAL PRECEDENT AND MAY NOT BE CITED EXCEPT AS AUTHORIZED.


Appeal from the Superior Court in Maricopa County

No. CV2006-019021

The Honorable John Christian Rea, Judge


AFFIRMED


COUNSEL

Law Office of William D. Shostak, PLLC, Chandler
By William D. Shostak,
Counsel for Plaintiffs/Appellants
Schneider & Onofry, PC, Phoenix
By Joseph B. Swan, Luane Rosen
Counsel for Defendant/Appellee

MEMORANDUM DECISION

Presiding Judge Randall M. Howe delivered the decision of the Court, in which Judge Michael J. Brown and Judge Jon W. Thompson joined. HOWE, Presiding Judge:

¶1 Anthony Washington appeals the judgment in favor of Callie Campbell regarding insurance proceeds arising from a fire-related loss to a residential home. For the following reasons, we affirm.

FACTS AND PROCEDURAL HISTORY

¶2 In May 2006, Campbell sold a house (the Property) to Washington for $50,000. The purchase agreement recognized that a deed of trust in favor of Valley National Bank of Arizona (the Bank) encumbered the Property for $10,000 and that Washington purchased the Property subject to the mortgage. The purchase agreement also provided that Washington agreed to (1) "insure and keep all improvements on [the Property] insured for the protection of [Campbell] in an amount not less than $10,000" and (2) "pay all [insurance] premiums . . . ." If Washington failed to pay the insurance premiums, the purchase agreement permitted Campbell to "pay the [premiums] and add such amounts paid either to: (1) the deferred balance then owing under [the purchase agreement], or (2) the installment payment next due and owing under [the purchase agreement]. Upon receiving full payment of the deferred balance owed on the Property, the purchase agreement required Campbell to provide Washington with clear title. Washington, however, never purchased a homeowner's policy insuring the Property.

After Campbell died in May 2007, her estate was substituted in as a defendant. For consistency, we refer to her estate as "Campbell."

Valley National Bank of Arizona was subsequently named Bank One.
--------

¶3 But Campbell did. She had a fire insurance policy on the Property issued by American Reliable Insurance Company (ARIC). Naming Campbell and the Bank as the only loss payees, the policy's limit for fire damages was $49,000. The policy required that the Bank's mortgage be paid from the insurance proceeds in the event of a loss.

¶4 When a fire destroyed the Property in June 2006, ARIC sent Campbell a check for $29,478.73, made payable to both Campbell and the Bank. Along with the check, ARIC sent Campbell a letter stating that the Property was a total loss, the Property's actual cash value was $22,860.98, and debris removal was $7,117.75.

¶5 On September 8, 2006, Washington's attorney sent a letter to Campbell and ARIC, seeking $29,000 in insurance proceeds to "restore the Property or that it might be applied to the outstand[ing] balance owed to [Campbell] . . . ." The letter also requested "[t]hat the respective insurance companies hold any funds owed under the [insurance policy] in constructive trust for [Washington] . . . and [t]hat the final payment of $20,000.00 be sent [to Washington] so that he may utilize those funds to restore [the Property]." On September 12, 2006, Campbell's attorney filed an affidavit stating that he advised Campbell that the insurance proceeds belonged to her and that "[Washington] had no legal right to the funds paid to [Campbell]."

¶6 In October 2006, Washington's attorney informed Campbell's attorney that he had received a $90,000 offer to buy the Property but could not sell it unless he received credit for the insurance proceeds. Campbell's attorney responded that Campbell would neither provide credit for the insurance proceeds nor use the proceeds to repair the Property.

¶7 Washington sued Campbell and ARIC in December 2006, alleging that they (1) breached and intentionally interfered with the purchase agreement (Count 1); (2) acted negligently "[i]n committing the common law and statutory breaches . . . to ensure that the insurance proceeds were paid for the benefit of [Washington] or the Property" (Count 2); (3) breached fiduciary duty "to [Washington] to ensure that the funds paid for the fire were applied to restore the property or reduce the debt owed by [Washington]" (Count 3); and (4) breached the covenant of good faith and fair dealing by "intentionally breach[ing] the Purchase Agreement, without a reasonable basis for such action. . . ." (Count 4).

¶8 In November 2008, Washington moved—and Campbell cross-moved—for partial summary judgment on Count 3. Granting Washington's motion in part, the court found that "the insurance policy purchased by [Campbell] is not the equivalent of the insurance required in paragraph 6 of the [purchase agreement]." The court found that the "equitable resolution of the case allows [Campbell] to apply the insurance proceeds first to the purpose contemplated in the [purchase agreement], and then to reduce [Washington's] obligation [by $18,896.23.]"

¶9 In March 2009, Washington moved for partial summary judgment regarding the Property's actual cash value of fire damages. Washington argued that the insurance policy required ARIC to settle for the Property's actual cash value at the time of the loss, which he claimed was $46,616.70. Although Campbell agreed that ARIC underpaid the fire loss claim, Campbell argued that "any additional sums owed by [ARIC] must be paid to [Campbell because Campbell] owned the policy, is the only insured named in the policy[,] and is the only loss payee now that [the Bank's] mortgage lien has been satisfied. The court denied Washington's motion for partial summary judgment regarding the Property's actual cash value.

¶10 Washington moved to add Campbell's attorney as a defendant in May 2009, alleging that Campbell's attorney aided and abetted Campbell in taking the insurance proceeds. Campbell objected, arguing that Campbell's attorney was not an indispensable or necessary party and that the applicable statute of limitations barred Washington's claims. Washington also filed an amended complaint, seeking "to assert the additional legal theories of liability of [u]njust [e]nrichment, [b]reach of [i]mplied [c]ovenant of [g]ood [f]aith and [f]air [d]ealing and [c]ivil [a]iding and [a]betting." The court denied Washington's motion to add Campbell's attorney as a defendant.

¶11 In January 2010, Washington went to Campbell's daughter's house and secretly recorded his conversation with her to obtain admissions or evidence against Campbell. The superior court later awarded Campbell $4,130 in attorney's fees pursuant to A.R.S. § 12-349(A)(4) for secretly recording a conversation with a represented party.

¶12 In June 2010, Campbell informed ARIC that Campbell would pursue a bad faith claim against ARIC to recover the balance of the policy limits under the insurance policy. ARIC then entered into a settlement agreement with Campbell, whereby ARIC agreed to pay Campbell $19,521.27, "representing the balance of the fire insurance policy limits and $4,500 representing interest on the $19,521.27." In its order approving the settlement agreement, the court credited Washington's obligation under the purchase agreement "the total amount of the settlement, including interest, less [Campbell's] attorney's fees in obtaining the [settlement agreement]."

¶13 In March 2012, Washington moved for attorney's fees pursuant to A.R.S. § 12-341.01(A), arguing that he was the successful party in an action arising out of a contract. Denying Washington's motion, the court found that "it would be a gross miscarriage of justice for either party to be rewarded or compensated for the conduct of this litigation in an award of either fees or costs." Washington timely filed a notice of appeal.

DISCUSSION

¶14 Washington raises several issues on appeal. Rejecting his claims, we affirm the superior court's judgment.

1) Insurance Proceeds Allocation

¶15 Washington contends that the superior court erred in granting Campbell's cross-motion for partial summary judgment on the allocation of the insurance proceeds from Campbell's insurance policy by allowing Campbell to apply the insurance proceeds to pay off the mortgage before paying Washington for his equitable interest in the Property. In reviewing a grant of summary judgment, we view the facts in a light most favorable to the party opposing the judgment. CSA 13-101 Loop, LLC v. Loop 101, LLC, 233 Ariz. 355, 359 ¶ 12, 312 P.3d 1121, 1125 (App. 2013). "Our task is to determine whether a genuine issue of material fact for trial exists, and, if not, whether the trial court correctly applied the substantive law." Id. (quoting Aaron v. Fromkin, 196 Ariz. 224, 227 ¶ 10, 994 P.2d 1039, 1042 (App. 2000)).

¶16 The basis of Washington's argument is that because he had purchased the property from Campbell, he was entitled to the insurance proceeds, which Campbell held as an equitable trustee. Although Washington is correct that Campbell was the equitable trustee of the insurance proceeds for Washington's benefit, see Chaplin v. North Am. Acceptance Corp., 25 Ariz. App. 465, 469-70, 544 P.2d 682, 686-87 (1978) (when seller of property receives insurance proceeds because of loss or damage to property, seller is the equitable trustee of those proceeds for the benefit of buyer), Washington purchased the property subject to the mortgage. Also, Campbell's insurance policy required that in the event of loss, the insurance proceeds would be used first to pay off the mortgage. Washington was indeed entitled to the insurance proceeds, but only after the proceeds had been used to pay off the mortgage. Because no genuine dispute existed that the insurance proceeds should be used first to pay the mortgage, the superior court did not err in granting partial summary judgment.

2) Motions to Add Defendant and Amend Complaint

¶17 Washington appeals the superior court's denial of his motions to (1) join Campbell's attorney as a defendant and (2) amend his complaint to include theories of aiding and abetting. Washington argues that the attorney erroneously "advised [Campbell] that [Washington] was not entitled to a credit for the insurance proceeds and was not entitled to benefit from the [insurance policy]." Relying on Commercial Union Ins., v. Lewis and Roca, 183 Ariz. 250, 258, 902 P.2d 1354, 1362 (App. 1995), Washington contends that Campbell's attorney could not assert a statute of limitations defense because "the statute of limitation accrues for attorney negligence, based on a faulty legal opinion regarding insurance coverage, when the erior court rules that a particular case is authoritative." We review the denial of a motion to amend a pleading for a clear abuse of discretion. MacCollum v. Perkinson, 185 Ariz. 179, 185, 913 P.2d 1097, 1103 (App. 1996).

¶18 We affirm the superior court's denial of Washington's motions to amend his pleadings. First, Commercial Union Ins. concerns legal malpractice claims by clients against their attorneys, not against third parties. Commercial Union Ins.,183 Ariz. 250, 902 P.2d 1362. Second, a claim for aiding and abetting against Campbell's attorney is subject to a two year statute of limitations, A.R.S § 25-542, and required Washington to prove three elements: (1) Campbell committed a tort causing injury to Washington; (2) the attorney knew Campbell's conduct constitute a breach of duty; and (3) the attorney substantially assisted or encouraged Campbell in achieving the breach. Wells Fargo Bank v. Ariz. Laborers, Teamsters and Cement Masons Local No. 395 Pension Trust Fund, 201 Ariz. 474, 485 ¶ 34, 38 P.3d 12, 23 (2002). The record shows that Washington was on notice since October 2006 of the attorney's advice to Campbell to not credit Washington with the insurance proceeds, but did not move to amend his complaint until May 2009. Because Washington's motions to add the attorney to allege a theory of aiding and abetting exceeded the two year statute of limitations, we find no error.

3) Attorney's Fees from Settlement Agreement

¶19 Washington argues that the court "engaged in impermissible fee shifting" when it allowed Campbell to deduct her attorney's fees from the credit owed to Washington pursuant to the settlement agreement.

¶20 But no fee shifting occurred here. Campbell was the equitable trustee of the insurance proceeds for Washington's benefit. Thus, when Campbell recovered the balance of the fire insurance policy limits under the settlement agreement, Campbell was entitled to reimbursement of attorney's fees." Cf. A.R.S. § 14-11004 (Stating that with regard to express trusts, "a trustee is entitled to reimbursement from the trust for . . . reasonable fees, expenses and disbursement, including attorney fees and costs . . . .") Accordingly, we affirm the superior court's award of attorney's fees arising from the settlement agreement.

4) Attorney's Fees for Abuse of Discovery

¶21 Washington argues that the superior court erred in awarding Campbell attorney's fees pursuant to A.R.S. § 12-349(A)(4) when Washington secretly recorded a conversation with a represented party. Washington contends that the award "was an abuse of discretion because the attorney testified that he was representing [Campbell] pro bono." Section 12-349(A)(4) provides for the assessment of reasonable attorney fees and expenses if the attorney or party engages in the abuse of discovery. The court may do so as long as it "set[s] forth the specific reasons for the award." A.R.S. § 12-350.

¶22 The superior court did not abuse its discretion. Consistent with A.R.S. § 12-350 and in support of its attorney's fee award under § 12-340(A)(4), the superior court set forth its reason for the award, finding that Washington had surreptitiously recorded a conversation with a represented party. Because an award of attorney's fees should not be limited by the fact that a party's attorneys accepted the case on a pro bono basis, see Arnold v. Ariz. Dep't of Health Servs., 160 Ariz. 593, 608, 775 P.2d 521, 536 (1989), we reject Washington's claim and affirm the award.

5) Lost Profits

¶23 Washington argues that the superior court erred in granting Campbell's cross-motion for partial summary judgment on the profits Washington claims that he lost from his inability to provide marketable title on the Property. He contends that Campbell's "breach of her duty to credit the [insurance proceeds]" prevented him from selling the Property to a third-party for $90,000.

¶24 Pursuant to the purchase agreement, Campbell was to provide Washington with clear title upon receiving full payment of the deferred balance owed on the Property. Washington never paid the outstanding balance on the Property. Therefore, Campbell was not required to provide him with clear title. Any outstanding issue concerning the insurance proceeds did not prevent Washington from paying the balance on the Property. Because no genuine dispute existed that Washington was not entitled to a claim for lost profits, the superior court did not err in granting partial summary judgment.

6) Remaining Issues

¶25 Without claiming any particular legal error, Washington argues that the actual cash value of the fire damages is $46,616.70. Because the full policy limits were paid out pursuant to the settlement agreement and thus exceeded Washington's alleged actual cash value of the Property, a determination that Washington's calculation was correct is moot. See Contempo-Tempe Mobile Home Owners Ass'n v. Steinert, 144 Ariz. 227, 229, 696 P.2d 1376, 1378 (App. 1985) (appellate court will not address issues rendered moot by resolution of other claims).

¶26 Washington contends that ARIC committed bad faith and that the superior courts "[f]ailure to permit [Arizona] Rule [of Civil Procedure] 77(g) discovery permits [ARIC] to continue unabated its fraudulent non-disclosure of harmful evidence." Because ARIC is not a named party to this appeal, we reject Washington's claim that ARIC committed bad faith.

¶27 Washington argues that Campbell "wilfully breached both the implied and express terms of the [purchase agreement] when she refused to provide [him] any credit for the [insurance proceeds]." He also contends that "Campbell's settlement of the fire claim for less than the 'actual cash value' of the loss was a breach of both an equitable and contractual duty." Because Washington received credit from the insurance proceeds, his breach of contract claims against Campbell are moot.

¶28 Washington also argues that Campbell intentionally sought to cause him financial harm. Because he fails to state with any particularity why or how the superior court erred, we find this issue abandoned. Modular Sys, Inc. v. Naisbitt, 114 Ariz. 582, 587, 562 P.2d 1080, 1085 (App. 1977).

¶29 Washington finally argues that he is "entitled to [a] jury trial . . . to determine the factual issues related to his alternate theories of recovery and relative degrees of fault." Because Washington failed to develop this argument, we deem it waived on appeal. See Lohmeir v. Hammer, 214 Ariz. 57, 64 ¶ 26 n.5, 148 P.3d 101, 108 n.5 (App. 2006).

7) Attorney's Fees

¶30 Washington next asserts that the court erred in denying his request for attorney's fees. We reject his argument.

¶31 Section 12-341.01(A) permits an award of attorneys' fees "to the successful party in any contested action arising out of a contract." Schwartz v. Farmers Ins. Co. of Ariz., 166 Ariz. 33, 38, 800 P.3d 20, 25 (App. 1990). The superior court has the sole discretion to determine the successful party, and its ruling "will not be disturbed on appeal if any reasonable basis exists for it," Berry v. 352 E. Virginia, L.L.C., 228 Ariz. 9, 13 ¶ 21, 261 P.3d 784, 788 (App. 2011), because the superior court maintains "superior understanding of the litigation and the desirability of avoiding frequent appellate review of what essentially are factual matters," Associated Indem. Corp. v. Warner, 143 Ariz. 567, 571, 694 P.2d 1181, 1185 (1985).

¶32 To determine the successful party "in a case involving multiple claims and varied success, the trial court may apply a 'percentage of success' or a 'totality of the litigation test.'" Berry, 228 Ariz. at 13-14, ¶ 22, 261 P.3d at 788-89. Therefore, a party that "does not recover the full measure of relief it requests" can still be the successful party and prevail for the purposes of "receiving a discretionary award of attorneys' fees." Id. at 13-14, ¶¶ 22, 24, 261 P.3d at 788-89 (internal quotation marks omitted).

¶33 The superior court awarded Washington all of the insurance proceeds less the amount owed on the Property's mortgage and the costs associated with reaching the settlement agreement. On the other hand, Campbell succeeded in defending against Washington's claims of lost profits and punitive damages. In balance, the court determined that neither Washington nor Campbell was the prevailing party. When viewing the totality of the litigation, the court did not abuse its discretion in declining to award attorney's fees to either party. Although Washington complains that his claim was more meritorious, we will not replace our judgment for that of the superior court in matters of discretion. Sanborn v. Brooker & Wake Prop. Mgmt., Inc., 178 Ariz. 425, 430, 874 P.2d 982, 987 (App. 1994) (quoting Associated Indemnity, 143 Ariz. at 571, 694 P.2d at 1185). Consequently, we find no abuse of discretion in the court's decision to award neither party attorney's fees.

¶34 Both parties request attorney's fees on appeal pursuant to Arizona Rule of Civil Appellate Procedure 21 (ARCAP) and A.R.S. § 12- 349. Campbell also requests fees under ARCAP 25 and Washington adds A.R.S. § 12-341.01 to his request. In our discretion, we decline to award either party attorney's fees. As the prevailing party on appeal, Campbell is awarded costs upon Campbell's compliance with ARCAP 21(c).

CONCLUSION

¶35 For the foregoing reasons, we affirm.


Summaries of

Washington v. Estate of Campbell

ARIZONA COURT OF APPEALS DIVISION ONE
Jun 24, 2014
No. 1 CA-CV 12-0777 (Ariz. Ct. App. Jun. 24, 2014)
Case details for

Washington v. Estate of Campbell

Case Details

Full title:ANTHONY WASHINGTON, a single man and Trustee of the AWAMH-1 TRUST; WILLIAM…

Court:ARIZONA COURT OF APPEALS DIVISION ONE

Date published: Jun 24, 2014

Citations

No. 1 CA-CV 12-0777 (Ariz. Ct. App. Jun. 24, 2014)