McAlister v. Citibank (Arizona), a Subsidiary of Citicorp

• Decision Date: 16 April 1992
• Docket Number: CA-CV
• Citation: 171 Ariz. 207,829 P.2d 1253
• Parties: Roy E. McALISTER, Plaintiff-Appellant, Cross Appellee, v. CITIBANK (ARIZONA), A SUBSIDIARY OF CITICORP, successor to Great Western Bank & Trust, Defendant-Appellee, Cross Appellant. 189-600.
• Court: Arizona Court of Appeals

Page 1253

829 P.2d 1253

171 Ariz. 207

Roy E. McALISTER, Plaintiff-Appellant, Cross Appellee, v. CITIBANK (ARIZONA), A SUBSIDIARY OF CITICORP, successor to Great Western Bank & Trust, Defendant-Appellee, Cross Appellant.

1 CA-CV 89-600.

Court of Appeals of Arizona Division 1, Department C.

April 16, 1992.

[171 Ariz. 209] Douglas G. Wymore and Tracey Westerhausen, Phoenix, for plaintiff-appellant/cross appellee.

Brown & Bain, P.A. by Robert C. Houser, Jr., Douglas Gerlach and Richard C. Cooledge, Phoenix, for defendant-appellee/cross appellant.

OPINION

GRANT, Judge.

This appeal considers the trial court's grant of summary judgment in favor of Citibank on the issues of consequential damages, fiduciary duty, and intentional fraud, and its grant of Citibank's motion to dismiss for failure to state a claim upon which relief can be granted on the issues of negligent misrepresentation and breach of good faith and fair dealing.

FACTUAL AND PROCEDURAL BACKGROUND

Roy McAlister ("McAlister") is an inventor and engineer who claims to hold over 100 patents. Since 1976, McAlister maintained various personal and business accounts with Great Western Bank, presently Citibank. In 1983, McAlister planned to develop, manufacture, and market several new products. To finance these projects, McAlister applied for and received a $500,000 line of credit from Citibank.

In March 1985 this credit line became due. McAlister alleges that Citibank promised to renew the credit line at a competitive rate. When the credit line was not renewed, McAlister sought substitute offers. McAlister applied for a comparable line of credit with several different banks, eventually receiving two lines of credit from Liberty Bank, one for $300,000 and another for $150,000, with an interest rate of 2 percent above the prime rate. The $300,000 line of credit was used to pay off the amount still owed by McAlister to Citibank.

As a result of Citibank's alleged failure to (1) renew its credit lines with McAlister at a competitive rate, (2) transfer funds from McAlister's line of credit to his checking account, and (3) prevent checks from bouncing, McAlister alleges tort and contract damages totalling $500 million. McAlister sued Citibank for this amount.

Citibank moved to dismiss McAlister's claims for negligent misrepresentation and breach of the covenant of good faith and fair dealing for failure to state a claim upon which relief could be granted. Citibank also moved for summary judgment on McAlister's claims of intentional fraud, consequential damages, and breach of fiduciary duty. The trial court granted each of these motions. The trial court also awarded Citibank its costs. McAlister appeals from these decisions. The trial court, however, refused to award attorney's fees to either party. Citibank cross appeals, seeking attorney's fees.

DISCUSSION

1. Jurisdiction

Preliminarily, we note that there is a dispute over whether we can exercise jurisdiction over each issue before us on appeal. The dispute springs from the contention that McAlister's appeal of the order denying consequential damages is not timely. For the following reasons, we believe that the September 27, 1988, partial summary judgment erroneously included Rule 54(b) language regarding consequential damages, as it was not a final appealable order disposing of a claim. We conclude that we have jurisdiction over all of the issues raised in this appeal.

On September 27, 1988, the trial court ordered that the "[p]laintiff is denied any recovery of consequential damages, including damages for lost profits, sales, market share, consulting fees, appreciation, opportunity costs and patent rights on all claims based upon any alleged failure to loan or advance money, whether sounding in tort or contract." ¹ This order included the Rule 54(b) language that "there is no just reason for delay with respect to the entry of said final judgment." ² Ariz.R.Civ.P. 54(b). McAlister filed a motion for reconsideration of this order on April 21, 1989. That motion was denied as was a subsequent motion to vacate the September 27th order. Finally, the trial court denied McAlister's motion for reconsideration of his motion to vacate and his motion for new trial. McAlister appeals, in part, from the denial of his motion for new trial.

Citibank argues that this court has no jurisdiction over that part of the appeal relating to the September 27, 1988, order since McAlister failed to timely file his motion for new trial. Ariz.R.Civ.P. 59(d). McAlister responds that his appeal is timely because the September 27, 1988, order relating to consequential damages was not a final, appealable order. Since the order merely eliminated a potential remedy while not disposing of a single claim, it was improper for the trial court to include Rule 54(b) language. Sisemore v. Farmers Ins. Co., 161 Ariz. 564, 779 P.2d 1303 (App.1989). Therefore, McAlister argues that until the trial court issued an order disposing of one of the substantive issues related to consequential damages, the partial summary judgment was not final and appealable.

Before a trial court may certify judgment as to less than all multiple claims, it must find that judgment is "final" in that it is the ultimate disposition of an individual claim. Davis v. Cessna Aircraft Corp., 168 Ariz. 301, 812 P.2d 1119 (App.1991).

In Sisemore, the plaintiffs "alleged a contract claim and a tort claim for insurer bad faith." 161 Ariz. at 566, 779 P.2d at 1305. In an order containing Rule 54(b) language the trial court granted partial summary judgment and denied recovery of punitive damages. The court of appeals held that the order only limited the type of recovery and did not dispose of any claims. Therefore, inclusion of Rule 54(b) language was improper as the order was not final and appealable. Similarly, the order here, by denying consequential damages, simply limits the type of recovery, while the underlying "claims remain to be litigated." Id. Thus, since the September 27, 1988, order was not final, McAlister's appeal is timely. Our exercise of jurisdiction in this matter is proper.

2. Standards of Review

a. Motion to Dismiss--Rule 12(b)(6)

The trial court dismissed McAlister's claims for negligent misrepresentation and breach of good faith and fair dealing for failure to state a claim upon which relief could be granted. Ariz.R.Civ.P. 12(b)(6). On review, this court assumes the allegations of the complaint to be true and will uphold the dismissal only if the plaintiff is not entitled to any relief under the facts stated in the complaint. Donnelly Constr. Co. v. Oberg/Hunt/Gilleland, 139 Ariz. 184, 186, 677 P.2d 1292, 1294 (1984).

b. Summary Judgment--Rule 56(c)

The trial court granted Citibank's motion for summary judgment on the issues of consequential damages, breach of a fiduciary relationship, and intentional fraud. Summary judgment is properly granted by the trial court "if the facts produced in support of the claim have so little probative value, given the quantum of evidence required, that reasonable people could not agree with the conclusion advanced by the proponent of the claim." Orme School v. Reeves, 166 Ariz. 301, 309, 802 P.2d 1000, 1008 (1990); see also Wagenseller v. Scottsdale Memorial Hosp., 147 Ariz. 370, 388, 710 P.2d 1025, 1043 (1985).

3. Substantive Issues

a. Consequential Damages

In the trial court's September 27, 1988, grant of partial summary judgment, the court denied the recovery of consequential damages, either in tort or contract. Consequential damages are those reasonably foreseeable losses that flow from a breach of contract. See Renner v. Kehl, 150 Ariz. 94, 97-98, 722 P.2d 262, 265-266 (1986); see also Drop Anchor Realty v. Hartford Fire Ins. Co., 126 N.H. 674, 496 A.2d 339, 342 (1985). Consequential damages include lost future profits. Rancho Pescado, Inc. v. Northwestern Mut. Life Ins., 140 Ariz. 174, 680 P.2d 1235 (App.1984); see also Seaman v. United States Steel Corp., 166 N.J.Super. 467, 400 A.2d 90, 93 (App.Div.1979).

Here, the trial court denied consequential damages for a breach of contract to loan money. Generally, the damage for such a breach is the difference between the contracted for interest rate and the interest rate at the time of breach. United Cal. Bank v. Prudential Ins. Co., 140 Ariz. 238, 295-296, 681 P.2d 390, 447-448 (App.1983). However, McAlister relies upon a well-established exception to this general rule which allows for special, or consequential, damages if the defendant knew of or could foresee the use of the loan money. Higgins v. Arizona Savings & Loan Ass'n, 90 Ariz. 55, 64, 365 P.2d 476, 482-483 (1961) (citing Hadley v. Baxendale, 9 Exch. (Eng.) 341, 354) ("[I]f the special circumstances under which the contract was actually made were communicated by the plaintiffs to the defendants, and thus known to both parties, the damages resulting from the breach of such a contract, which they would reasonably contemplate, would be the amount of injury which would ordinarily follow from a breach of contract under these special circumstances so known and communicated."). McAlister argues that this special circumstances exception applies here since Citibank was aware of how the loan would be used.

While we acknowledge this exception, we hold that it does not apply here when the plaintiff could procure the loan from another source. Annotation, Damages--Breach of Contract to Lend Money, 4 A.L.R. 4th 682 § 5 (1981); United Cal. Bank, 140 Ariz. at 297, 681 P.2d at 449 ("For breach of a contract to loan money for the purpose of discharging encumbrances upon real estate, the loss occasioned by foreclosure of the liens may not be recovered, where there is nothing to show that the money could not have been procured in the normal money market....").

There is no dispute in the evidence that McAlister could procure the loan money elsewhere. The evidence shows that he applied for comparable credit lines at...