Baker v. Stewart Title & Trust of Phoenix
| Decision Date | 02 May 2000 |
| Docket Number | No. 1 CA-CV 99-0211.,1 CA-CV 99-0211. |
| Citation | 5 P.3d 249,197 Ariz. 535 |
| Parties | L. Kenneth BAKER, on Behalf of HALL BRAKE SUPPLY, INC., Employee Profit Sharing Plan; Richard Bertocchi as Trustee of Regal Lighting Fixture Co., Inc. Profit Sharing Plan; Susan W. Boyes and William J. Boyes, wife and husband; Profit Sharing Plan of Carmen H. Brooks, M.D., P.C.; James E. Campbell a Trustee of James E. Campbell, M.D., P.C. Profit Sharing Plan and Trust; A. Leroy Ellison as Trustee of the Allen Leroy Ellison Family Trust; W. Lee Fanning M.D., Ltd., Pension Plan; Murray E. Goodman, as Trustee of Goodmans Inc. Defined Benefit Pension Plan; Harry W. Hale, Jr., M.D. as Trustee of the Hale Family Trust; Richard L. Henderson and Barbara A. Henderson, husband and wife; Lawrence Koep as Trustee of the Erik Kenneth Koep Trust; Robert E. Leber, M.D. as Trustee of the Robert E. Leber, M.D., P.C. Profit Sharing Plan; W. Steven Leeper, M.D. as Trustee of the W. Steven Leeper, M.D., P.C. Profit Sharing Plan; Alan H. Manas, M.D. as Trustee of the Sun City Eye Consultants, Ltd. Employee DBPP; Vicente G. Mortel, M.D. as Trustee of the Vicente Mortel, M.D., Ltd. Profit Sharing Plan; Guarantee and Trust Company, as Trustee for the Benefit of Walter J. Nieri, M.D., IRA Rollover, and Geraldine McGartland, former spouse of Walter J. Nieri, M.D.; NMM Limited Partnership; Richard T. Perry, M.D. as Trustee of Richard T. Perry, M.D., P.C., FACS; Dr. Charles M. Rucker as Trustee of the Arizona Heart and Lung Surgeons, Ltd. Retirement Plan; Alfred D. Sachs and Frances T. Sachs as Trustees of the Sachs Family Trust; Howard M. Segal; Southwest Medical Specialist, P.C. Amended and Restated Employee Pension Plan and Trust, including one-half interest currently held by Jerome G. Bickel, Smith Barney Shearson, IRA R/O Custodian; Robert H. Tamis, M.D. as Trustee of Robert H. Tamis, M.D., P.C. Employee Pension Plan; Ian A.D. Todd; David R. Towar as President and Trustee of Phoenix Dog & Cat Hospital Pension Plan; Ben A. Vanderwerf, M.D. as Trustee for Phoenix Transplant and Vascular Surgery Employee's Pension Plan; Fred Yerger, M.D., Paul Wasserman, M.D., W. Lee Fanning, M.D. and Steven Dippe, M.D., Officers of the Scottsdale Medical Specialists Ltd. Defined Benefit Pension Plan; Arizona Chest Physicians Employees' Pension Plan; ArMA Membership Benefits, Inc., IRA Custodian FBO William E. Dozer, M.D., IRA Rollover; L. Kenneth Baker, on Behalf of Hall Brake Supply Inc. Employee Profit Sharing Plan; Richard Besserman, Smith Barney Shearson, IRA R/O Custodial (Richard and Rosalie Besserman); Dale Block and Marshall B. Block; H.H. Buchman, II, M.D.; James H. Carlisle, M.D. as Trustee of James H. Carlisle, M.D., F.A.C.S., P.C. Employees' Pension Plan; Mark R. Cohen, M.D. as President of Mark R. Cohen, M.D., P.C.; David J. Crosby, M.D. and Eleanor Crosby as Trustees of D & E Investment Co.; Beverly E. Flentje; Estate of Dorothy A. Fox; Randall J. Fox; Ronald S. Garlikov, M.D. and Reda S. Garlikov, husband and wife; Ronald S. Garlikov, M.D. as Trustee of Southwest Eye Surgeons Profit Sharing Plan and Trust; David Goldfarb, M.D. as Trustee of David Goldfarb, M.D., P.C. Profit Sharing Plan; David Goldfarb, M.D. and Joan Goldfarb, husband and wife; Albert Hahn and James Cooley as Trustees of Cohaco Building Specialists, Inc. Money Purchase Pension Plan and Trust; Douglas Hilton; Robert E. Leber, M.D. as Trustee of the Robert E. Leber, M.D., P.C. Profit Sharing Plan; Lewis Equipment Profit Sharing Plan & Retirement Trust; Robert S. Lewis, M.D. as President of Ophthalmic Surgeons & Physicians Ltd. Pension Plan; John MacLeod Diversified, Inc. Employees Pension Plan; Stanley J. Marks; Max Minuck, M.D., individually, and as Trustee and Representative of the Estate of Estelle Minuck; John A. Pifer; William J. Salomon and Saundra E. Salomon, husband and wife; Howard M. Segal (aka Howard Segel); Jane Siegel; Allan B. Starr; Peter Thomas, M.D. as Trustee of Thomas Laser Centers Medical Group Ltd. Profit Sharing Plan; Ben A. Vanderwerf, M.D. as Trustee for Phoenix Transplant and Vascular Surgery Employee's Pension Plan; Quail Run Airpark Limited Partnership; Ox Bow Airpark Limited Partnership; Chaparral Airpark Limited Partnership; Kachina Airpark Limited Partnership; North Black Canyon Properties I Limited Partnership; Cactus View Properties Limited Partnership; Palo Verde Valley II Limited Partnership; Pinnacle Peak Properties Limited Partnership, Plaintiffs-Appellants, v. STEWART TITLE & TRUST OF PHOENIX, INC., Defendant-Appellee. |
| Court | Arizona Court of Appeals |
Bonnett, Fairbourn, Friedman & Balint, PC by Andrew S. Friedman and Wendy J. Harrison, Phoenix, Attorneys for Plaintiffs-Appellants.
Howard & Rouse, PC by Gary F. Howard, Phoenix, Attorneys for Defendant-Appellee.
¶ 1 In September, 1994, about 80 investors filed a complaint against multiple defendants alleging negligence, breach of fiduciary duty, common law fraud, securities fraud, consumer fraud, constructive fraud and violation of RICO statutes. The plaintiffs ("plaintiffs" or "appellants") obtained a judgment of $8,638,044 against Ben Friedman ("Friedman"), the main organizer and promoter of the scheme. Other defendants included his accountants, real estate broker and title company. This appeal involves the sole remaining defendant, Stewart Title and Trust of Phoenix, Inc. ("Stewart Title"). The main issue is whether Stewart Title is liable under respondeat superior for the conduct of its escrow agent, Bonnie DeAngio ("DeAngio").
¶ 2 Attorney Friedman solicited the plaintiffs to invest in a number of limited partnerships. With the participation of a real estate broker, accountants and title companies, he defrauded them by purchasing land under a fake name and then reselling it to the limited partnership at an inflated price.
¶ 3 Upon locating an appropriate property, Friedman, using a fictitious name or shell partnership, would buy the land through an escrow established at a title company. While the escrow was open, he would create a partnership and solicit investors to provide funds to pay the down payment. After the escrow closed and title was transferred to the fictitious buyer or shell entity, he would then "sell" the property to the limited partnership for a price greater than the purchase price he paid to the original seller. By acting through the fictitious buyers and shell entities, he was able to conceal the fact that he was transferring the property to the investment partnership at a substantial profit. Friedman and his associates shared the undisclosed profit and related fees.
¶ 4 DeAngio, an employee of Stewart Title, processed at least eight escrows that Friedman established in the name of the fictitious buyers or shell entities. On at least one escrow transaction, she notarized the signature of a fictitious person on the deed of trust and assignment of rents executed in favor of the seller. On another escrow, not covered by this appeal, she assisted Friedman in impersonating a fictitious buyer in a face to face meeting with the original seller. Her participation in both transactions facilitated Friedman's scheme to conceal profits.
¶ 5 After the escrows were closed and title transferred to the fictitious buyer, Friedman, secretly acting as the fictitious buyer, transferred the property to the investment partnerships. Although these transactions were not handled in escrow, DeAngio notarized affidavits of value and some of the partnership documents. The affidavits of value showed that the fictitious buyer, whom DeAngio knew to be Friedman, was receiving the undisclosed profit on the transaction. Usually, after each closing, Tom Lynch, an associate of Friedman, would pay DeAngio several hundred dollars. No evidence exists that Stewart Title knew of DeAngio's wrongful actions.
¶ 6 DeAngio eventually terminated her employment with Stewart Title to work for Chicago Title, where she continued to participate in Friedman's schemes. Here and in the trial court, plaintiffs allege that she and Stewart Title are liable for the fraud-based claims because of her involvement with Friedman while she was working at Stewart Title.
¶ 7 Stewart Title first filed a motion to dismiss/motion for summary judgment which was denied by Judge Dunevant, who concluded that Stewart Title could be liable under respondeat superior for Racketeer Influenced and Corrupt Organizations Act ("RICO") violations. After the case was reassigned to Judge Howe, Stewart Title filed three more motions for summary judgment.
¶ 8 Stewart Title's first summary judgment motion related to plaintiffs who invested in property around Deer Valley Airport (Chaparral, Quail Run, Ox Box, and Kachina Airpark Limited Partnerships). Friedman purchased the property in the names of Robert and Estelle Winters ("Winters"). The Winters, names of real people known by Friedman, were uninvolved in these transactions. They never gave permission for use of their name or knew that their names were used.
¶ 9 DeAngio opened two escrows and prepared the escrow documents at Stewart Title. She notarized the fictitious Winters signatures on the deeds of trust on March 14, 1983, after leaving Stewart Title on March 5. Her last paycheck from Stewart Title was dated March 15. Friedman eventually sold the property to Quail Run, Ox Box and Kachina Airpark Limited Partnerships while DeAngio was at Chicago Title. She opened another escrow using the Winters' name while at Chicago Title. Friedman resold the property to Chaparral Airpark Limited Partnership ("Chaparral") through a Chicago Title escrow. DeAngio again notarized the fictitious signatures on the deeds of trust, assignment of rent, warranty deed and certificates of partnership.
¶ 10 Plaintiffs argued that DeAngio was involved with three of the four disputed Winters' escrows ...
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