Rose v. Stewart Title & Trust of Phoenix Inc.

• Decision Date: 09 June 2011
• Docket Number: No. 1 CA-CV 10-0348,1 CA-CV 10-0348
• Court: Arizona Court of Appeals
• Parties: VIVIAN ROSE, as President Trustee of the Mariposa Springs Irrevocable Trust dated December 2, 1999, Plaintiff/Appellee/ Cross-Appellant, v. STEWART TITLE & TRUST OF PHOENIX, INC., an Arizona corporation, Defendant/Appellant/ Cross-Appellee.

VIVIAN ROSE, as President Trustee of the Mariposa Springs Irrevocable Trust dated December 2, 1999, Plaintiff/Appellee/ Cross-Appellant,

v. STEWART TITLE & TRUST OF PHOENIX, INC., an Arizona corporation,Defendant/Appellant/ Cross-Appellee.

No. 1 CA-CV 10-0348

COURT OF APPEALS STATE OF ARIZONA DIVISION ONE DEPARTMENT C

Filed: June 9, 2011

NOTICE: THIS DECISION DOES NOT CREATE LEGAL PRECEDENT AND MAY NOT BE CITED

EXCEPT AS AUTHORIZED BY APPLICABLE RULES.

See Ariz. R. Supreme Court 111(c); ARCAP 28(c);

Ariz. R. Crim. P. 31.24

MEMORANDUM DECISION

(Not for Publication - Rule 28, Arizona Rules of Civil Appellate Procedure)

Appeal from the Superior Court in Maricopa County

Cause No. CV2007-017961

The Honorable John Rea, Judge

AFFIRMED

Fennemore Craig, P.C.

By Keith L. Hendricks, Louis D. Lopez, and Jesse Santana Wulsin

Phoenix

Attorneys for Plaintiff/Appellee/Cross-Appellant

Gary F. Howard, P.C.

By Gary F. Howard

Phoenix

Attorney for Defendant/Appellant/Cross-Appellee

BROWN, Judge

¶1 Stewart Title & Trust of Phoenix, Inc., ("Stewart Title") appeals the trial court's judgment entered following a jury verdict in favor of Vivian Rose, as President Trustee of the Mariposa Springs Irrevocable Trust ("Vivian"). Stewart Title challenges the denial of its motions for judgment as a matter of law ("JMOL") and motion in limine seeking to preclude an investigative report. Alternatively, Stewart Title challenges the prejudgment interest and attorneys' fees awarded by the trial court. Vivian cross-appeals, asserting that if we reverse, the trial court should not permit Stewart Title to introduce certain testimony under the "Dead Man's Statute." For the following reasons, we affirm.

BACKGROUND

¶2 Ken and Vivian Rose, a retired couple living in Florida, formed the Mariposa Springs Irrevocable Trust and were named as co-trustees. In 2001, Ken sold his $3,000, 000 life insurance policy for $720,000.¹ Robert Lynes provided the Roses with tax and financial advice. He told them about an investment opportunity in Chandler, Arizona, that would yield a sixteen percent return. Lynes then introduced Ken to Michael Melnick,the owner of Tibbar, Inc., and Derek Sivley, a branch manager at Stewart Title.

¶3 Ken and Tibbar entered a short-term loan investment agreement, with Sivley serving as the escrow officer. The escrow instructions provided that the funds would be released when Stewart Title received a "signed receipt and acceptance from Dennis R. Primavera of the Pledge Agreement and Irrevocable Payment Guaranty," and a "written request from Tibbar to deliver the Escrow Confirmation." As soon as the two conditions were satisfied, Sivley was to provide "notice by fax and overnight courier to each of [Ken] and Tibbar at the addresses listed below their respective signatures to these instructions within one (1) business day of [] receipt of such demand." Additionally, once Tibbar secured a $53 million dollar loan from B.L. Securities, Stewart Title was to return the $750,000 plus interest to Ken. If Tibbar did not secure the loan before January 31, 2002, the $750,000 was to be returned to Ken, along with interest.

¶4 The Chandler transaction fell through, but the money was not returned to Ken. Instead, the parties and Sivley signed an amended escrow agreement, and Ken agreed to invest in the purchase of a Florida property ("Light House transaction"). The only amendment to the text of the escrow agreement was a changein the due date, which extended the return date of the funds to May 1, 2002.

¶5 On April 4, 2002, Melnick sent Sivley a transfer order for $50,000 to be sent to the trust account of a Florida real estate attorney. The funds were to be used as an earnest deposit for the Light House transaction. There was no evidence that Ken was given a copy of the transfer order. Despite not having received a signed receipt of the Pledge Agreement from Primavera or a written request from Tibbar to deliver the Escrow Confirmation, and without sending notice to Ken and Tibbar via overnight courier or fax, Sivley released the funds. Sivley sent a fax to Melnick on April 8, 2002, confirming the transfer, but did not fax the document to Ken.

¶6 On May 10, 2002, Melnick sent a second transfer order to Sivley for an additional $50,000, with the same instructions as the April order. Sivley again released the money, with no evidence that Ken was copied on any of the correspondence.

¶7 On May 31, 2002, Melnick sent a final transfer order to Sivley for the remaining $650,000. On June 5, 2002, Melnick sent Sivley an email, apparently unhappy that the money had not yet been wired:

I am writing this memo as a clarification of our Transfer Order dated May 31, 2002, wherein I requested an immediate transfer of $650,000.00 to the real estate trust accountof Dale A. Beardsley PA. [sic] member, Attorney's Title, Jacksonville, Florida.

1) This transfer is part of the LightHouse Plaza transaction for which you have an executed contract of purchase and sale.

2) This transfer is to be made into the same real estate trust account to which you have already transferred $100,000.00. Therefore, a known and previously dealt with entity.

3) I have a Florida bank willing to issue the necessary instruments to BL Securities, which satisfies the funder's requirement for a payment guaranty. Both the Bank and BL are currently working on the verbiage of the enclosed draft to agree on the final document to be issued. This document should be ready for issuance shortly and will trigger the necessary funding to effect the purchase of the LightHouse Plaza Center.

4) The Bank requires that the entire $750,000.00 be on deposit with them in the Dale A. Beardsley PA, Real Estate Trust Account, as a ["]good faith["] condition of doing business. They simply want to know that we are serious enough as not to waste their time.

5) It is my understanding, that once Ken Rose agreed to lend and did disburse $750,000.00 to Tibbar, Inc., said funds became the property of Tibbar, Inc. without any further consent or notification to Rose.

6) #5 above does not mean that Tibbar, Inc. is free to spend the funds at will. It does mean that the corporation is at liberty to prudently use these funds for a legitimate business purpose. Why else would Tibbar agree to pay interest on funds it could not use? The transfer ofthe $650,000.00 from one escrow agent to another is safe and a prudent move if such a transfer helps to effect our goal.

7) Therefore, as President of Tibbar, Inc., it is well within my authority to have issued the transfer order of May 31, 2002.

8) NO CONTACT WITH KEN ROSE. I am amazed that you made an attempt to contact Ken Rose when you have a STANDING INSTRUCTION not to do so unless or until you have first contacted myself. In my memo of May 31, 2002, I requested that you contact Dale or me as early in your day as possible. I have yet to hear from you.

Derek, I believe we are acting prudently in our request of you to transfer funds. I do not wish to lose this deal with the necessary funds on deposit in the National Bank of Arizona. To add insult to injury, daily interest is accruing against Tibbar for the use of these funds. We must be allowed to use them!

Please telephone both Dale and myself as early in your day as possible. Your cooperation is essential to a successful closing. Thank you.²

¶8 Sivley released the funds to Beardsley on June 6, 2002. On July 23, 2002, Ken, Melnick, and Sivley signed another amended escrow agreement, extending the return date of Ken's funds to November 1, 2002, even though Melnick and Sivley knew that Stewart Title was no longer holding any funds in escrow.

¶9 On October 30, 2002, Melnick and Ken signed a termination agreement for the escrow. Melnick gave Ken a checkfor $130,436.40 for "interest," ³ shares of stock in Tibbar, the promise of a deed to the hotel after closing, and promises of a percentage of monthly net operating income, tax advantages and so forth, in exchange for cancelling the escrow. The fax cover sheet from Melnick to Sivley stated, "As you can see from the enclosed, Rose and Tibbar have come to a new agreement which does not require the funds to be held in escrow. I would appreciate your executing the enclosed on today's business[.]" The new agreement read:

The undersigned, for good and valuable consideration, given by each to the other, hereby agree as follows:

The Escrow Agreement between Kenneth H. Rose, as Executive Trustee of Mariposa Springs, hereinafter referred to as "Lender", Tibbar, Inc., hereinafter referred to as "Tibbar" and Stewart Title & Trust of Phoenix, Inc., hereinafter referred to as "Escrow Agent", dated November 9, 2001, as modified thereafter, is hereby terminated and the Escrow Agent is instructed to deliver to Tibbar the escrow funds immediately upon receipt of this agreement.

Sivley signed the agreement and closed the escrow file. The Light House transaction never occurred, B.L. Securities did not fund a loan, and the benefits promised to Ken in exchange for releasing the note never occurred because the purchase of the hotel property had failed.

¶10 In early 2003, Ken filed a complaint with the Florida Melnick for securities violations. Michelle Dygon investigated for approximately seven months, until Ken passed away. Dygon closed the matter on September 8, 2004, concluding that "although the analysis completed has revealed that the funds were not use[d] for the intended purpose, no other victims could be located [and] . . . the family has hired a civil attorney in order to file a lawsuit against the parties involved."

¶11 Vivian sued Stewart Title in October 2007, alleging a breach of the escrow agreement and breach of the implied covenant of good faith and fair dealing.⁴ After both parties requested summary judgment, the court denied both motions. Vivian moved in limine to preclude oral statements allegedly made by Ken to Sivley as well as expert testimony opining that Ken had orally authorized or later ratified the disbursements of...