Cachenos v. Baumann

• Decision Date: 22 January 1976
• Docket Number: No. 1,CA-CIV,1
• Citation: 25 Ariz.App. 502,544 P.2d 1103
• Parties: Faith CACHENOS, a widowed woman, Appellant, v. Marcus T. BAUMANN and Rachel Baumann, husband and wife, Bankers' Finance& Holding Company, Western Surety Company, Kenneth R. Lavin, Kenneth R. Lavin and George J. Lucero d/b/a Lake Havasu Estates, the Estate of Ben Chittenden, Deceased, and Arizona Real Estate Department, Appellees. 2715.
• Court: Arizona Court of Appeals

Page 1103

544 P.2d 1103

25 Ariz.App. 502

Faith CACHENOS, a widowed woman, Appellant, v. Marcus T. BAUMANN and Rachel Baumann, husband and wife, Bankers' Finance& Holding Company, Western Surety Company, Kenneth R. Lavin, Kenneth R. Lavin and George J. Lucero d/b/a Lake Havasu Estates, the Estate of Ben Chittenden, Deceased, and Arizona Real Estate Department, Appellees.

No. 1 CA-CIV 2715.

Court of Appeals of Arizona, Division 1, Department B.

Jan. 22, 1976.

Bonn, Anderson & Moore, by Jeffrey D. Bonn, Phoenix, for appellant

Sorenson, Esser & Moore, by George Sorenson, Jr., Phoenix, for Western Surety Co.

Steven M. Friedman, Phoenix, for Kenneth R. Lavin.

Bruce E. Babbitt, Atty. Gen., by James W. Woodcock, Asst. Atty. Gen., Phoenix, for Arizona Real Estate Department and Estate of Chittenden, deceased.

Acer & Kennedy, by John W. Acer, Phoenix, for Bankers' Finance & Holding Co.

OPINION

JACOBSON, Presiding Judge.

The sole issue raised by this appeal is whether the trial court abused its discretion in applying the dead man statute, A.R.S. § 12--2251, under the circumstances of this case.

While this matter arose under cross motions for summary judgment, the parties stipulated that the trial court, in determining whether there were any disputed issues of material fact should also determine the applicability of A.R.S. § 12--2251 to the facts and the admissibility of the evidence presented by affidavits and depositions. The appellant also stipulated that the affidavits and depositions contained all the evidence which appellant would present, if the matter was actually tried.

Based upon the stipulation, the trial court found that the dead man statute applied and thus, deleting any evidence of representations allegedly made by the deceased, Ben Chittenden, the trial court found that appellant's allegations of fraud could not be supported and entered judgment for the various defendants. The plaintiff-appellant, Faith Cachenos, has appealed.

The facts as presented by the plaintiff are as follows. The plaintiff, Mrs. Cachenos, being an elderly woman with no prior business experience, first met the deceased, Ben Chittenden, in 1965 or 1966, in connection with a newspaper ad placed by Snow-flake Highlands Development Company for 'investors' in land contracts. As a result of this contact, Chittenden became Mrs. Cachenos' trusted friend and financial advisor.

Prior to 1968, Chittenden and defendant-appellee Kenneth R. Lavin incorporated a company known as United Brokerage, Inc. In February, 1968, Chittenden approached Mrs. Cachenos for a loan to United Brokerage in the sum of $6,500, purportedly for the purpose of having a survey done on certain property located in Phoenix, Arizona, which United Brokerage was going to buy for a high-rise office building. Mrs. Cachenos subsequently gave Chittenden a check in the sum of $6,500 and received a note and mortgage in return.

In June, 1968, Arizona Land Company, a company both Chittenden and Lavin had worked for, went into bankruptcy. Lavin then became employed by a new corporation known as Arizona Acceptance Corporation. This corporation was to engage in the selling of paper or contracts generated by other corporations' land sales. Prior to the takeover of the assets of Arizona Land Company by the trustee or receiver, Lavin, with the assistance of a Karla G. Hensley, secretly removed various land contracts from Arizona Land Company to the offices of Arizona Acceptance Corporation.

In July, 1968, Chittenden obtained a check from Mrs. Cachenos in the sum of $19,786.83 for the purchase of ten parcels of land with existing contracts of sale from Arizona Acceptance Corporation. The 'package' sold to Mrs. Cachenos originally came from contracts owned by Arizona Land Company and had file notations from that company's records indicating that these contracts should not be sold. Affidavits by Karla G. Hensley and defendant-appellee, George J. Lucero, indicate that for two or three months, payments to Mrs. Cachenos on these contracts were made personally by Chittenden and Lavin.

About this time, Lavin and Lucero formed a partnership known as Lake Havasu Estates. This partnership had an open option to purchase land in a subdivision known as Lake Havasu Estates located in Mohave County. The basis of this option was a monthly cash payment of $15,000, the partnership selling lots in the subdivision upon which they had exercised their option.

After the formation of the partnership, Chittenden again contacted Mrs. Cachenos and informed her that he did not consider the investment made in the Arizona Acceptance Corporation contracts to be safe. He therefore suggested that she surrender to him the security received for the $6,500 loan to United Brokerage, the deeds and contracts received from Arizona Acceptance Corporation and for an additional $12,396.41 he would arrange a loan to Lake Havasu Estates secured by mortgages on 40 acres of uncontiguous lots scattered throughout the subdivision. Mrs. Cachenos agreed to this proposition.

Mr. Lucero's affidavit stated that he was ordered by Lavin to locate a 40-acre tract of land in Mohave County in order to close a 'deal' with Chittenden's client, Mrs. Cachenos. Lucero found a 40-acre parcel located approximately 30 miles from Lake Havasu Estates Subdivision which was purchased for approximately $8,000. This land was transferred to Lake Havasu Estates, a partnership, then to Lake Havasu Estates, a corporation, and thereafter deeded to Chittenden, who in turn deeded the property to Mrs. Cachenos in 32 one and one-quarter acre parcels. Mrs. Cachenos was advised by Chittenden that these 32 deeds represented uncontiguous parcels located throughout the Lake Havasu Estates Subdivision.

Lucero testified that Chittenden appeared at the offices of the partnership with Mrs. Cachenos' check in the sum of $12,369.41 and delivered the same to Lavin. Mrs. Hensley in the company of Lavin and Chittenden then went to the Valley National Bank where the check was negotiated, $4,396.41 being deposited to the account of Lake Havasu Estates and the balance in cash was paid to Chittenden.

Mrs. Cachenos did not learn until two years later, at which time the 'loan' to Lake Havasu Estates was to be paid, that the only evidence of the transaction showed a purchase of 32 one and one-quarter acre parcels, for which she had spent $38,000, and which had a value of approximately $8,000.

During a portion of the time that Mrs. Cachenos was dealing with Chittenden he was a licensed real estate salesman for defendant-appellee, Marcus Baumann, broker, and both Baumann and Chittenden were officers in a corporation known as Bankers' Finance & Holding Company. Defendant-appellee, Western Surety Company, was the bonding company for Baumann. Prior to this action being filed, Chittenden committed suicide and his estate was then represented by way of interpleader by the Arizona State Real Estate Recovery fund.

On appeal, Mrs. Cachenos raises basically two issues:

1. Did the trial court abuse its discretion, under the circumstances of this case, by holding that the 'dead man statute', A.R.S. § 12--2251, precluded testimony by a party to fraudulent representations made by a deceased defendant? And,

2. Assuming the trial court did not abuse its discretion, was there independent evidence of fraud sufficient to preclude the granting of summary judgment?

Since we are of the opinion that this matter must be reversed on the first issue, we do not reach the second.

A.R.S. § 12--2251 (1956) provides:

'In an action by or against executors, administrators or guardians in which judgment may be given for or against them as such, neither party shall be allowed to testify against the other as to any transaction with or statement by the testator, intestate or ward unless called to testify thereto by the opposite party, or required to testify thereto by the court. The provisions of this section shall extend to and include all actions by or against the heirs, devisees, legatees or legal representatives of a decedent arising out of any transaction with the decedent.'

This statute has been interpreted to mean that the admission of testimony regarding transactions with or statements by the deceased is within the sound discretion of the trial court. Condos v. Felder, 92 Ariz. 366, 377 P.2d 305 (1962); Costello v. Gleeson, 15 Ariz. 280, 138 P. 544 (1914).

While the discretion vested in the trial court to admit or reject testimony is well established, the Arizona cases have not clearly articulated the basis upon which this discretion should be...