Surowiec v. Capital Title Agency Inc.

• Decision Date: 04 May 2011
• Docket Number: No. CV–09–2153–PHX–DGC.,CV–09–2153–PHX–DGC.
• Citation: 790 F.Supp.2d 997
• Parties: James M. SUROWIEC, Plaintiff,v.CAPITAL TITLE AGENCY, INC., an Arizona corporation; and Scott Romley, an individual, Defendants.
• Court: U.S. District Court — District of Arizona

790 F.Supp.2d 997

James M. SUROWIEC, Plaintiff,

v.CAPITAL TITLE AGENCY, INC., an Arizona corporation; and Scott Romley, an individual, Defendants.

No. CV–09–2153–PHX–DGC.

United States District Court, D. Arizona.

May 4, 2011.

James M. Surowiec, Royal Oak, MI, pro se.Andrew Abraham, Richard Aaron Edens, Burch & Cracchiolo PA, Phoenix, AZ, for Defendants.

ORDER

DAVID G. CAMPBELL, District Judge.

In November 2006, Plaintiff James Surowiec purchased a condominium unit located in Scottsdale, Arizona from developer Shamrock Glen, LLC. Scott Romley, an employee with Capital Title Agency, Inc. (“Capital”), served as escrow agent for the transaction. Plaintiff alleges, among other things, that Romley failed to disclose before closing that the property would remain encumbered by deeds of trusts held by certain investors in the Shamrock Glen development. Plaintiff claims that those junior liens and related foreclosure actions brought by the investors have prevented him from selling the condominium, resulting in financial loss.

Plaintiff filed suit against Romley and Capital in November 2009. Doc. 1. The amended complaint asserts claims for breach of contract, breach of fiduciary duty, fraud, negligent misrepresentation, negligence, and breach of the implied covenant of good faith and fair dealing. Doc. 27. Plaintiff seeks compensatory and punitive damages. Id.

The parties have filed motions for summary judgment. Docs. 79, 92. Plaintiff has filed two motions for sanctions. Docs. 82, 97. The motions are fully briefed. For reasons that follow, the Court will grant in part Defendants' summary judgment motion, deny Plaintiff's summary judgment motion, and grant in part the motions for sanctions.¹

I. Summary Judgment Standard.

A party seeking summary judgment “bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of [the record] which it believes demonstrate the absence of a genuine issue of material fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Summary judgment is appropriate if the evidence, viewed in the light most favorable to the nonmoving party, shows “that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). Only disputes over facts that might affect the outcome of the suit will preclude the entry of summary judgment, and the disputed evidence must be “such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

II. Defendants' Summary Judgment Motion.

Defendants move for summary judgment on the ground that Plaintiff cannot establish the amount of compensatory damages with reasonable certainty. Doc. 79 at 1. Defendants further argue that summary judgment is appropriate on the claim for punitive damages because there is no evidence that Defendants acted with an evil mind or malice toward Plaintiff. Id. The Court will address each argument in turn.

A. Compensatory Damages.

It is well established “that ‘certainty in amount’ of damages is not essential to recovery when the fact of damage is proven.” Gilmore v. Cohen, 95 Ariz. 34, 386 P.2d 81, 82 (1963) (citations omitted; emphasis in original). This rule is “simply a recognition that doubts as to the extent of injury should be resolved in favor of the innocent plaintiff and against the wrongdoer.”Id. The plaintiff in every case, however, “should supply some reasonable basis for computing the amount of damage and must do so with such precision as, from the nature of his claim and the available evidence, is possible.” Id.

Because Defendants do not seek summary judgment as to liability, the Court will assume the allegations of wrongdoing on their part can be proven at trial. Construing the evidence in the light most favorable to Plaintiff, a jury reasonably could conclude that Plaintiff has suffered more than $100,000 in compensatory damages as a result of Defendants' misconduct.

Plaintiff purchased his condominium unit as a short-term investment. Doc. 100 ¶ 33. He paid $137,000 for the unit in November 2006. Id. ¶ 40. He expected to receive a marketable title free and clear of all liens ( id. ¶ 13), and would not have bought the property if he had known that it remained encumbered with liens (Doc. 113–2 at 56–57). In May 2007, after discovering that the property was encumbered by numerous liens and likely subject to future litigation, Plaintiff was advised by title and real estate experts that the title problems had to be resolved before the property could be sold. Doc. 100 ¶ 36. While Plaintiff waited for some resolution through the fall of 2007, similar unencumbered units in the Shamrock Glen development sold for more than $130,000. Id. ¶ 41. As of June 2010, Plaintiff's unit remained subject to liens and was appraised at $31,000. Id. ¶¶ 39, 44. Accepting this evidence as true, a jury could find with reasonable certainty that Plaintiff has suffered more than $100,000 in damages taking into account the $137,000 purchase price, the $130,000 selling price for units in the fall of 2007, the property's current value of $31,000, and the fact that Defendants' actions prevented Plaintiff from selling the property when its value was higher.

Plaintiff's damages are speculative, Defendants contend, because he has made no serious effort to sell the property. Doc. 79 at 6. But Plaintiff's real estate expert, Roger Williams, has opined that the liens on the property rendered it virtually unmarketable, making any attempt to sell an exercise in futility. Doc. 100 ¶ 42. Defendants assert that Mr. Williams contradicted his own opinion by admitting during his deposition that there are buyers who purchase property with title defects. Doc. 112 ¶ 42. This purported inconsistency goes to the weight of Mr. William's opinion, not its admissibility. “Credibility determinations, the weighing of evidence, and the drawing of inferences from the facts are jury functions, not those of a judge [.]” Anderson, 477 U.S. at 255, 106 S.Ct. 2505.

Defendants further assert that because Plaintiff still holds title to the property, he will reap the benefits from the expected real estate market rebound. Doc. 79 at 7. Defendants, of course, are free to make this argument to the jury, but a potential future boom in the real estate market does not render uncertain the damages currently suffered by Plaintiff.

Defendants argue for the first time in their reply brief that Plaintiff cannot establish that their actions caused the loss in market value, as opposed to the steep decline in the Arizona real estate market. Doc. 111 at 3–5. The Court will not consider this argument. “It is well established in this circuit that courts will not consider new arguments raised for the first time in a reply brief.” Bach v. Forever Living Prods. U.S., Inc., 473 F.Supp.2d 1110, 1122 n. 6 (W.D.Wash.2007) (citing Lentini v. Cal. Ctr. For the Arts, 370 F.3d 837 n. 6 (9th Cir.2004)); see Gadda v. State Bar of Cal., 511 F.3d 933, 937 n. 2 (9th Cir.2007).

Moreover, while Plaintiff makes clear that the liens were not a positive selling point and certainly did not increase the property's value (Doc. 99 at 18 n. 4), he does not dispute that the decrease in value is due in part to the general downturn in the real estate market. Plaintiff claims that he was unable to sell the property as the downturn worsened because it was encumbered by liens Defendants failed to extinguish at closing. A plaintiff “is not required to prove causation to a certainty; ‘the jury must be permitted to make causal judgments from its ordinary experience without demanding impossible proof about what would have occurred if the defendant behaved [properly].’ ” Harris v. State ex rel. Dep't of Transp., No. 1 CA–CV 10–0019, 2010 WL 5313761, at *4 (Ariz.Ct.App. Dec. 21, 2010) (citation omitted). Whether Defendants' alleged misconduct caused damages is for the jury to decide.

Defendants' reliance on Soilworks v. Midwest Industrial Supply, Inc., 575 F.Supp.2d 1118 (D.Ariz.2008), is misplaced. The lost profit damages sought in that case fell far short of the “reasonable certainty” standard because the plaintiff presented no documents or other information in support of its damages claim. Id. at 1128. Plaintiff, by contrast, has presented evidence from which damages in excess of $100,000 reasonably may be found.

The Court will deny Defendants' summary judgment motion with respect to compensatory damages.

B. Punitive Damages.

Punitive damages are those damages awarded “in excess of full compensation to the victim in order to punish the wrongdoer and deter others from emulating his conduct.” Linthicum v. Nationwide Life Ins. Co., 150 Ariz. 326, 723 P.2d 675, 679 (1986). “Punishment is an appropriate objective in a civil case only if the defendant's conduct or motive ‘involves some element of outrage similar to that usually found in a crime.’ ” Gurule v. Ill. Mut. Life & Cas. Co., 152 Ariz. 600, 734 P.2d 85, 86 (1987) (quoting Rawlings v. Apodaca, 151 Ariz. 149, 726 P.2d 565, 578 (1986)). Where the defendant did not act with an “evil mind,” compensatory damages usually provide sufficient deterrence. Id.

Plaintiff claims that the requisite evil mind may be inferred from Romley's active participation in an ongoing fraud. Doc. 99 at 14. But to recover punitive damages, “something more is required over and above the ‘mere commission of a tort.’ ” Linthicum, 723 P.2d at 679 (quoting Rawlings, 726 P.2d at 578). This “something more” must be established by clear and convincing evidence. Id. at 681.

When ruling on summary judgment, the Court must also consider the burden of proof to be satisfied at trial—in this case, clear and convincing evidence of an evil mind. As the Supreme Court has explained, “in ruling on a motion for summary judgment, the judge must view the...