Taeger v. CATHOLIC FAMILY AND COMMUNITY SERVS.

• Decision Date: 17 June 1999
• Docket Number: No. 1 CA-CV 97-0536.,1 CA-CV 97-0536.
• Citation: 196 Ariz. 285,995 P.2d 721
• Parties: Gilbert TAEGER and Mary Taeger, individually and as parents and guardians of Melissa Joy Taeger, and Melissa Joy Taeger, a minor child, Plaintiffs-Appellants, v. CATHOLIC FAMILY AND COMMUNITY SERVICES, Roman Catholic Diocese of Phoenix, an Arizona non-profit corporation, d/b/a Catholic Social Service Adoptions and Catholic Social Service of Phoenix; The Roman Catholic Diocese of Phoenix, Defendants-Appellees.
• Court: Arizona Court of Appeals

995 P.2d 721

196 Ariz. 285

Gilbert TAEGER and Mary Taeger, individually and as parents and guardians of Melissa Joy Taeger, and Melissa Joy Taeger, a minor child, Plaintiffs-Appellants, v. CATHOLIC FAMILY AND COMMUNITY SERVICES, Roman Catholic Diocese of Phoenix, an Arizona non-profit corporation, d/b/a Catholic Social Service Adoptions and Catholic Social Service of Phoenix; The Roman Catholic Diocese of Phoenix, Defendants-Appellees.

No. -0536.

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

June 17, 1999.

Review Denied March 14, 2000.¹

Thayer & Thayer, P.C. by Ted J. Thayer, Teresa S. Thayer, Phoenix, Attorneys for Appellants.

Jennings, Strouss & Salmon, P.L.C. by Ernest Calderon, James M. Ackerman, David B. Earl, Phoenix, Attorneys for Appellee—Catholic Family and Community Services.

Snell & Wilmer by Barry D. Halpern, Martha E. Gibbs, Phoenix, Attorneys for Appellee—Roman Catholic Diocese of Phoenix.

OPINION

GRANT, Judge.

¶ 1 The Taeger family appeals a judgment in favor of Catholic Family and Community Services ("CFCS") and the Roman Catholic Diocese of Phoenix ("the Diocese"). We are asked to determine whether the Taegers failed to establish an agency or alter ego relationship between CFCS² and the Diocese as well as to resolve other issues raised by the Taegers related to their adoption of Melissa from CFCS.

¶ 2 Gilbert and Mary Taeger and their adoptive daughter, Melissa, ("the Taegers")³ filed an action against CFCS and the Diocese for failing to provide them with all non-identifying information about Melissa's biological mother when the Taegers adopted Melissa in 1976 and again when the Taegers specifically requested such information in 1982. The Taegers claim that, had they known certain information about Melissa's biological mother, they would not have agreed to adopt her and Melissa would have received more appropriate and prompt treatment for her mental and physical health problems. The Taegers also named the Diocese as a defendant, alleging that the Diocese was vicariously liable for the acts of CFCS. Judgment was entered in favor of CFCS and the Diocese.

¶ 3 The Taegers appeal the trial court's finding that the Diocese did not violate its disclosure obligations, the finding that no confidential or fiduciary relationship existed between CFCS and the Taegers, the directing of a verdict in favor of the Diocese on the Taegers' vicarious liability theory, the exclusion of certain evidence, and the failure to strike a juror for cause. The essence of this dispute is whether the trial court correctly limited the Taegers to theories of negligence, negligent representation, and fraud, and whether it committed reversible error by denying the Taegers the opportunity to have the jury decide their claim of constructive fraud based on a breach of fiduciary duty. We conclude that a new trial is required because the Taegers presented sufficient evidence of a confidential or fiduciary relationship between themselves and CFCS to withstand a directed verdict and to allow a jury instruction on constructive fraud based on the breach of fiduciary duty claim.

FACTUAL AND PROCEDURAL BACKGROUND

¶ 4 CFCS is a non-profit corporation that administers ten service agencies throughout central and northern Arizona, including an adoption agency. Gilbert and Mary Taeger worked with CFCS to finalize the adoption of their first child. Gilbert and Mary again went through CFCS to adopt their second child, Melissa. They requested a child that was not at high risk for health problems. When Melissa was ready to be placed, Louise Gordon, a CFCS employee, gave Gilbert and Mary basic non-identifying information about the biological mother, which indicated she was healthy other than asthma and an allergy to dust. Melissa developed much more slowly than normal in terms of crawling, walking, and talking. However, Melissa's pediatrician advised the Taegers that some children are just slower than others, and they should not be alarmed. Once Melissa began school, however, her teacher noticed learning problems. The school psychologist then asked Gilbert and Mary to see if there was any more information about Melissa's biological parents that would assist in understanding Melissa's problems. CFCS told the Taegers it needed a court order to release any further information. In 1982, Gilbert and Mary wrote a letter to the Presiding Judge of the Juvenile Court in Maricopa County requesting additional information on the biological mother's health during pregnancy, any problems with the birth, and Melissa's health in her first six weeks of life. The Presiding Juvenile Judge, the Honorable C. Kimball Rose, explicitly ordered CFCS to provide the Taegers with non-identifying medical and social background information on Melissa's biological parents. In response to the Taegers' inquiry and the court order, CFCS told the Taegers incorrectly there was nothing more in the file even though there was additional information. When CFCS withheld information from the Taegers in 1982, it did not tell them it was doing so and it did so in violation of the court order.

¶ 5 Finally, in 1992, Mary Taeger called CFCS to ask it to review the file again. This time, CFCS told the Taegers that the biological mother had undergone psychiatric care and used tranquilizers during pregnancy, and that the biological mother's siblings had suffered from depression. It is undisputed that this information had been in CFCS's file since 1976. CFCS explained that its policy was not to provide information that might stigmatize the child.

¶ 6 Gilbert and Mary testified that if they had known this information in 1976 when they agreed to adopt Melissa, they would have declined the placement because of the high risk that Melissa would have special needs. However, Gilbert and Mary also testified that none of Melissa's doctors ever said that had they had this information in 1976, they could have predicted Melissa's problems.

¶ 7 The Taegers filed an action against CFCS and the Diocese claiming that CFCS was liable for fraud, negligent misrepresentation, breach of contract, constructive fraud based on breach of fiduciary duty and negligence, and seeking punitive damages. The Taegers also claimed that CFCS was the agent or alter ego of the Diocese and, therefore, the Diocese was vicariously liable for CFCS's actions.

¶ 8 Prior to trial, the court granted summary judgment in favor of CFCS on the punitive damages claim. At the close of the Taegers' case-in-chief, the Diocese and CFCS moved for a directed verdict. The trial court directed a verdict in favor of the Diocese on the vicarious liability claim and directed a verdict in favor of CFCS on the breach of contract and constructive fraud based on breach of fiduciary duty claims. The jury returned a verdict in favor of CFCS on the remaining negligent misrepresentation, fraud, and negligence claims. The Taegers timely appeal.

ISSUES

I. Did the Taegers have a confidential or fiduciary relationship with CFCS, entitling them to a jury instruction on constructive fraud and entitling them to have the jury consider their constructive fraud based on the breach of fiduciary duty claim against CFCS?

II. Did the Diocese violate Rule 26.1, Arizona Rules of Civil Procedure, in discovery matters?

III. Did the trial court abuse its discretion in excluding certain evidence?

IV. Did the trial court err by directing a verdict in favor of the Diocese?

DISCUSSION

I. Confidential or Fiduciary Relationship

¶ 9 The Taegers argue that they had a confidential or fiduciary relationship with CFCS and, therefore, were entitled to a jury instruction on constructive fraud and to have the jury consider their breach of fiduciary duty claim against CFCS. The trial court found that no such relationship existed, refused the instruction on constructive fraud, and directed a verdict in favor of CFCS on the breach of fiduciary duty claim. "Constructive fraud is defined as a breach of a legal or equitable duty which, without regard to moral guilt or intent of the person charged, the law declares fraudulent because the breach tends to deceive others, violates public or private confidences, or injures public interests." Lasley v. Helms, 179 Ariz. 589, 591, 880 P.2d 1135, 1137 (App.1994) (citations omitted). Constructive fraud in this context means that a negligent omission of a regulatory requirement or noncompliance with a regulation causes prejudice to persons whom the regulation was intended to protect, in this case the adoptive parents. See Tyler v. Children's Home Soc'y of Cal., 29 Cal. App.4th 511, 527, 35 Cal.Rptr.2d 291, 299 (Cal.App.1994),

cert. denied, 515 U.S. 1160, 115 S.Ct. 2614, 132 L.Ed.2d 857 (1995).

¶ 10 "In determining whether a jury instruction is justified, we must view the evidence in the strongest manner supporting the theory of the party requesting the instruction. If there is any evidence tending to establish such a theory, the instruction should be given even if contradictory facts are also presented." Pioneer Roofing Co. v. Mardian Constr. Co., 152 Ariz. 455, 462, 733 P.2d 652, 659 (App.1986); see also Cotterhill v. Bafile, 177 Ariz. 76, 79, 865 P.2d 120, 123 (App.1993)

(citation omitted). "Upon review of a motion for directed verdict ..., the appellate court must take that view of the evidence most favorable to the verdict and from that evidence and the inferences reasonably and justifiably to be drawn therefrom, determine whether, under the law, the verdict can be sustained." Pioneer Roofing, 152 Ariz. at 462,

733 P.2d at 659.

¶ 11 A fiduciary relationship has been described as "`something approximating business agency, professional relationship, or family tie impelling or inducing the trusting party to relax the care and vigilance he would ordinarily exercise.'" In re McDonnell's Estate, 65 Ariz. 248, 252-53, 179 P.2d 238, 241 (1947) (quoting 37 C.J.S. Fraud, § 2(2), pp. 213-14). The McDonnell court defined a confidential...