Sanders v. Harris ( 2021 )

NOTICE: NOT FOR OFFICIAL PUBLICATION.
UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL
AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.
IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE
JOSHUA SANDERS, et al., Plaintiffs/Appellants,
v.
CLARA HARRIS, et al., Defendants/Appellees.
No. 1 CA-CV 19-0835
FILED 1-28-2021
Appeal from the Superior Court in Maricopa County
No. CV2016-054510
The Honorable Cynthia J. Bailey, Judge (Retired)
AFFIRMED
COUNSEL
Joshua Sanders, Cheryl Jackson, Phoenix
Plaintiffs/Appellants
Berk Law Group, P.C., Scottsdale
By Daphne J. Reaume
Counsel for Defendants/Appellees Clara Harris, Personal Representative of the
Estate of Mark D. Harris and Clara Harris
Manning & Kass Ellrod, Ramirez, Trester, LLP, Phoenix
By Robert B. Zelms, Samantha J. Kattau
Counsel for Defendants/Appellees Jeffrey Jones and AZ Home Seekers, LLC
SANDERS, et al. v. HARRIS, et al.
Decision of the Court
MEMORANDUM DECISION
Judge Maria Elena Cruz delivered the decision of the Court, in which
Presiding Judge Jennifer M. Perkins and Judge Randall M. Howe joined.
C R U Z, Judge:
¶1 Joshua Sanders and Cheryl Jackson, a married couple, appeal
from the superior court’s final judgments after a jury trial and the court’s
denial of their motion for new trial. For the following reasons, we affirm.
FACTUAL AND PROCEDURAL HISTORY
¶2 This case involves the sale of real property. Mark Harris, who
owned a house in Chandler, died in March 2015. His mother, Clara Harris,
who lived in California, became the personal representative of his estate.
Ms. Harris decided to sell the house, and Mark’s friend Ric Patrick arranged
for work to be done on it before it was listed. Patrick also assisted Harris
with hiring real estate agent Jeff Jones and Jones’ company AZ Home
Seekers, LLC (collectively “Jones”) to list the property.
¶3 In April 2015, Jones visited the property to assess its
marketability. Jones advised Patrick that the property needed a good deal
of work. Patrick, on behalf of Harris and the Estate, hired general contractor
Jon Passey to work on the property. Passey brought in a roof contractor to
make roof repairs and an exterminator to treat the house for termites.
¶4 Eventually, in March 2016, Jones listed the property for sale.
That same month Joshua Sanders offered to purchase the house.
¶5 Sanders hired an inspection company, BPG. During the
inspection period BPG performed a general inspection and found a number
of problems with the house. Sanders asked the Estate to make repairs
before closing, including replacing windows and making repairs to the pool
and fireplace. Sanders also asked the Estate to make repairs to the garage
to deal with water damage, including remediating possible mold in a wall
between the garage and a bedroom. The Estate declined to make repairs
and agreed to Sanders’ request for a $4,000 price reduction instead. Sanders
accepted the price reduction and signed an “as-is” addendum to the
purchase contract. The Estate accepted Sanders’ offer to purchase the house
for $290,000. The sale of the property closed escrow in May 2016. Sanders’
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Decision of the Court
wife Jackson was not a party to the purchase contract, but several days after
the close of escrow Sanders conveyed Jackson a community property
interest in the house.
¶6 After taking possession of the property, Sanders and Jackson
discovered problems they believed had not been disclosed. They hired a
contractor, Arizona’s Restoration Experts (“ARE”), to perform mold
remediation services. They hired Westlife Environmental LLC (“Westlife”)
to inspect ARE’s work. Westlife issued a “failed clearance” report
indicating the air within the living room, dining room, and two bedrooms
failed inspection. Westlife noted that ARE had failed to install proper
critical barriers during abatement, “exposing the HVAC system to probable
contamination.” In July 2016 Sanders and Jackson obtained a bid from
Sagebrush Restoration, LLC (“Sagebrush”) to remove all remaining
sheetrock, wall insulation, and attic insulation. Sagebrush commenced its
work in November 2016—after Sanders filed his complaint.
¶7 In September 2016 Sanders filed a complaint in superior court
against Clara Harris personally and the Estate (“collectively “Estate
defendants”), Jones, and BPG. Sanders brought causes of action for breach
of contract (counts 1 and 2 against the Estate and BPG), breach of the
implied covenant of good faith and fair dealing (count 3 against the Estate),
negligent misrepresentation/non-disclosure (count 4 against the Estate and
against Harris personally), professional negligence/negligence per se
(count 5 against Jones), and consumer fraud (count 6 against the Estate,
Harris personally, and Jones). In November 2016 Sanders amended the
complaint to add Jackson as a plaintiff and to add a cause of action for
common law fraud against the Estate (count 7). In February 2017, the
superior court granted a stipulation dismissing BPG after Sanders and
Jackson settled with BPG.
¶8 In March 2017, the superior court dismissed Sanders’ and
Jackson’s breach of contract and good faith and fair dealing claims as time
barred. In addition, the court granted the Estate’s motion to dismiss
Jackson’s remaining claims against the Estate (counts 4, 6, and 7) because
Jackson was not a party to the real estate contract and related transactions.
Harris, in her personal capacity, joined the Estate’s motion to dismiss
counts 4 and 6, arguing Jackson’s claims against her should also be
dismissed, but the court did not then address the issue and in May 2017 the
court dismissed Jackson’s claims against the Estate and awarded attorneys’
fees against Jackson. The court dismissed Jackson’s claims against Harris
in her personal capacity in August 2018.
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Decision of the Court
¶9 Sanders’ claims for negligent misrepresentation/non-
disclosure and consumer fraud against Jones, Harris personally, and the
Estate (counts 4, 5, and 6),1 and his claim for common law fraud against the
Estate (count 7) proceeded to a jury trial. Because the superior court
dismissed Jackson’s claims against BPG, the Estate, and Harris personally
before the trial, her only remaining claims to be tried were those against
Jones. After a five-day jury trial, the jury entered a unanimous defense
verdict.
¶10 Sanders and Jackson filed a motion for new trial pursuant to
Arizona Rule of Civil Procedure (“Rule”) 59, which the superior court
denied. The superior court entered judgments against Sanders and Jackson,
and they appealed. After the notice of appeal was filed, we stayed the
appeal, noting it was premature because the superior court had entered two
judgments resolving all claims against all parties, but that the judgment
resolving Harris and the Estate’s claims did not contain finality language.
In February 2020, the court entered a signed judgment with a certification
of finality pursuant to Rule 54(c) and we reinstated the appeal. We have
jurisdiction pursuant to Arizona Revised Statutes (“A.R.S.”) section 12-
2101(A)(1), (A)(5).
DISCUSSION
I. Adverse Inference Jury Instruction
¶11 Sanders and Jackson first argue the superior court abused its
discretion by giving the jury an adverse inference jury instruction.
¶12 Before trial, Estate defendants filed a motion in limine to
exclude Sanders’ and Jackson’s expert witnesses’ “post-demolition
opinions and damages calculations.” Jones joined in the motion. Estate
defendants argued that Sanders and Jackson willfully destroyed evidence
critical to their defense by removing the remaining interior of the house
(85% of the drywall along with attic and wall insulation) in November 2016,
despite repeated requests from defense counsel to inspect the house before
the work commenced. Estate defendants argued they were prejudiced by
1 Before the superior court gave its final instructions to the jury, the
parties discussed whether the claim against Jones for professional
negligence/negligence per se was the same as a claim for negligent
misrepresentation, and the parties agreed that the court need not give a
separate instruction on professional negligence/negligence per se.
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Decision of the Court
Sanders’ and Jackson’s intentional spoliation of evidence “because
Plaintiffs’ removal of the drywall and insulation destroyed the very
evidence that the defendants needed to defend themselves against
Plaintiff’s claim that the Estate concealed latent defects by painting,
caulking and drywalling over them.”
¶13 After oral argument on the motion in limine, the superior
court denied it, finding that precluding Sanders’ and Jackson’s experts’
reports and calculation of damages was an inappropriate sanction. The
court noted, however, that an adverse inference jury instruction might be
appropriate depending on the evidence at trial.
¶14 On the last day of trial, the superior court agreed to give the
Estate defendants’ and Jones’ requested adverse inference instruction,
noting that based on the evidence, the jury could find that Sanders and
Jackson “acted improperly in taking down the drywall during the time
when [the parties] were negotiating the inspections.” In its final jury
instructions, the court instructed the jury:
A litigant has a duty to preserve evidence it knows or
reasonably should know is relevant to a claim. Accordingly,
the jury may draw an adverse inference from the destruction
of evidence relevant to a case. Under this adverse inference,
the jury may assume that the lost evidence, if available, would
have been unfavorable to the responsible party. Testimony
was presented at trial concerning the destruction of certain
portions of Plaintiff’s property. If you find the Plaintiffs knew
or should have known that destroyed evidence was relevant
to issues in this case, you may infer that the evidence would
have been favorable to Defendants.
¶15 “In determining whether a jury instruction should be given,
this court views the evidence in the light most favorable to the requesting
party, and if there is evidence tending to establish the theory proposed in
the instruction, it should be given.” Cotterhill v. Bafile, 177 Ariz. 76, 79 (App.
1993). The superior court has substantial discretion in determining how to
instruct the jury, and we review the court’s decision to give a requested jury
instruction for an abuse of discretion. Smyser v. City of Peoria, 215 Ariz. 428,
439, ¶ 33 (App. 2007); S. Dev. Co. v. Pima Cap. Mgmt. Co., 201 Ariz. 10, 23,
¶ 41 (App. 2001). “We will not overturn a verdict unless we have
substantial doubt about whether the jury was properly guided.” Smyser,
215 Ariz. at 439, ¶ 33 (internal quotation omitted). Even if the superior court
gives an erroneous instruction, we will not reverse unless the instruction
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Decision of the Court
“prejudiced the appellant’s substantial rights, and prejudice affirmatively
appears in the record.” Id. (internal quotation omitted).
¶16 The adverse inference jury instruction correctly stated the law
and the evidence at trial supported giving the instruction. See McMurtry v.
Weatherford Hotel, Inc., 231 Ariz. 244, 260, ¶ 51 (App. 2013). Sanders and
Jackson were aware that Estate defendants and Jones made multiple
requests to inspect the property in October and November 2016, and that
defense counsel had warned they had a duty to preserve evidence. They
then signed the contract with Sagebrush to remove the remaining drywall
and insulation and the work commenced on November 14, 2016, before
Estate defendants and Jones could inspect the house. We find no abuse of
discretion.
II. Motion for New Trial
¶17 Sanders and Jackson next argue the superior court erred by
denying their motion for a new trial because the jury verdicts were not
supported by the evidence. They argue Jones admitted at trial that he had
knowledge of material defects and failed to disclose them, and that the
evidence at trial also showed Estate defendants and the Estate’s agent Ric
Patrick had knowledge of material defects they failed to disclose. We
review the superior court’s denial of a motion for a new trial for an abuse
of discretion. Desert Palm Surgical Grp., P.L.C. v. Petta, 236 Ariz. 568, 581,
¶ 37 (App. 2015). “A motion for a new trial on the ground that [a jury’s]
verdict is against the weight of the evidence is within the sound discretion
of the trial court,” and “[w]e will reverse the trial court’s denial of such a
motion only if it reflects a manifest abuse of discretion.” Ogden v. J.M. Steel
Erecting, Inc., 201 Ariz. 32, 36, ¶ 15 (App. 2001). We will affirm “[i]f any
substantial evidence could lead reasonable persons to find the ultimate
facts to support a verdict.” Id. Under well-established rules, we must
resolve every conflict in the evidence and draw every reasonable inference
in favor of sustaining the jury’s verdict. St. Joseph’s Hosp. and Med. Ctr. v.
Reserve Life Ins. Co., 154 Ariz. 307, 312 (1987).
¶18 Sanders and Jackson alleged that Estate defendants and Jones
made misrepresentations and omitted material facts in the sale of the
property and “intended that Plaintiffs rely upon such concealment,
suppression or omission, in connection with the sale,” thereby violating the
Consumer Fraud Act (“CFA”), A.R.S. §§ 44-1521 to -1534. Under the CFA,
consumer fraud may be predicated on an “act” or “omission.” State ex rel.
Horne v. AutoZone, Inc., 227 Ariz. 471, 476, ¶ 10 (App. 2011), vacated in part
on other grounds, 229 Ariz. 358 (2012). In the case of an alleged act, the statute
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Decision of the Court
only requires the “intent to do the act involved,” but not the intent to
deceive. Id. at 476-77, ¶ 12. In the case of an alleged omission, the statute
requires the intent that others rely on the alleged omission, but not the
intent to deceive. Id. at 478, ¶ 15. To succeed on their consumer fraud
claims, Sanders and Jackson needed to prove Estate defendants and Jones
made a misrepresentation or omitted a material fact in connection with the
sale or advertisement of the property, and they suffered damages as a result
of reliance on the misrepresentation or omission of a material fact. A.R.S.
§ 44-1521(7), -1522(A); Parks v. Macro-Dynamics, Inc., 121 Ariz. 517, 520-21
(App. 1979) (discussing elements for a private cause of action under the
CFA). In the case of an omission, they needed to show Estate defendants
and Jones intended they rely on the omission. Id.¶19 Sanders and Jackson also alleged Estate defendants and Jones
committed the tort of negligent misrepresentation because they had a duty
to disclose latent defects in the property and failed to do so, that they knew
Sanders and Jackson would rely on their representations and omissions
concerning the property and failed to exercise reasonable care, and that
they justifiably relied on Estate defendants’ and Jones’ representations and
omissions and were damaged by them. Arizona recognizes the tort of
negligent misrepresentation as set forth in the Restatement (Second) of
Torts § 552 (1977), which provides in part:
One who, in the course of his business, profession or
employment, or in any other transaction in which he has a
pecuniary interest, supplies false information for the
guidance of others in their business transactions, is subject to
liability for pecuniary loss caused to them by their justifiable
reliance upon the information, if he fails to exercise
reasonable care or competence in obtaining or
communicating the information.
Kuehn v. Stanley, 208 Ariz. 124, 127, ¶ 9 (App. 2004) (quoting Restatement
(Second) of Torts § 552 (1977)).
¶20 Last, Sanders and Jackson alleged that the Estate committed
common law fraud by making “representations and omissions [that] were
intentionally and knowingly false and intended to defraud.” “The elements
of common law fraud are a material, false representation, scienter, the
fraudfeasor’s intent to induce reliance upon the misrepresentation, the
fraud victim’s ignorance of its falsity, his actual, reasonable reliance, and
his consequent and proximate injury.” Parks, 121 Ariz. at 520.
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¶21 Sufficient evidence supported the jury’s verdicts. Harris
testified that she did not intend to deceive Sanders and Jackson and had no
knowledge of any potential material omissions or misrepresentations in the
information provided to him about the house. Although Harris testified
that she knew the water heater had flooded and the kitchen slab had a crack,
other evidence showed that Passey corrected the drywall damage around
the water heater and repaired the slab crack before the Estate sold the house
to Sanders. In response to questions from the jurors, Harris further testified
that she was unaware of mold, termite damage, water damage, or issues
with the roof of the house. Passey testified that he completed all of his
repairs consistent with industry standards and did not see mold in the
house.
¶22 Jones testified that he helped Harris, an elderly woman in her
eighties who had never lived in the house, complete the seller’s disclosure
statement to the best of his ability “from what I remembered at the time,”
and further testified that “to my knowledge, I was helping [the Estate]
disclose what . . . they knew, what I knew.” Jones testified that he had not
been privy to Passey’s repairs, and that he did not fail to disclose known
material issues about the house. Jones testified that he believed he had
over-disclosed on the seller’s disclosure statement. Jones testified that,
contrary to Jackson’s testimony, he never told Sanders or Sanders’ real
estate agent that there was no mold at the property.
¶23 Viewing the evidence in the light most favorable to sustaining
the verdict, we cannot find the superior court abused its discretion by
denying Sanders’ and Jackson’s motion for a new trial. A reasonable juror
could conclude that they failed to meet their burden of establishing the
elements of their claims against Estate defendants and Jones. See Ogden, 201
Ariz. at 36, ¶ 15.
III. Attorneys’ Fees and Sanctions
¶24 Finally, Sanders and Jackson argue the superior court erred
and abused its discretion by awarding the Estate attorneys’ fees, costs, and
Rule 68 sanctions. At the outset, we note that although Sanders and Jackson
argue the superior court’s judgment awarding attorneys’ fees was not a
final judgment because it did not have Rule 54(c) language, as noted supra
¶ 10, the court entered a signed judgment with a certification of finality
pursuant to Rule 54(c) in February 2020.
¶25 Section 12-341.01 authorizes an award of attorneys’ fees in
contested contract actions. Associated Indem. Corp. v. Warner, 143 Ariz. 567,
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Decision of the Court
569 (1985). Fee awards under A.R.S. § 12-341.01 are permissive and the
superior court has broad discretion to determine whether fees should be
awarded. Id. at 570. If the record reflects a reasonable basis for the award,
we will uphold it. Orfaly v. Tucson Symphony Soc’y, 209 Ariz. 260, 267, ¶ 25
(App. 2004). We review the superior court’s award of attorneys’ fees for an
abuse of discretion but review questions of law, including the court’s
authority to award attorneys’ fees and contract interpretation, de novo.
Bennett Blum, M.D. Inc., v. Cowan, 235 Ariz. 204, 205, ¶ 5 (App. 2014).
¶26 “A tort claim will ‘arise out of a contract’ only when the tort
could not exist ‘but for’ the breach or avoidance of the contract.” ML
Servicing Co. v. Coles, 235 Ariz. 562, 570, ¶ 31 (App. 2014) (citations omitted);
see also Sparks v. Republic Nat’l Life Ins. Co., 132 Ariz. 529, 543 (1982) (“The
fact that . . . two legal theories are intertwined does not preclude recovery
of attorney’s fees under § 12-341.01(A) as long as the cause of action in tort
could not exist but for the breach of the contract.”).
¶27 In its fee application, the Estate sought fees against Sanders
and Jackson in the amount of $164,826.59 pursuant to § 12-341.01. In
October 2019, the superior court awarded the Estate $112,000 in attorneys’
fees, costs in the amount of $1,977.51, and Rule 68 sanctions in the amount
of $2,299 against Sanders and Jackson jointly and severally. In addition, the
court granted the Estate’s request to vacate the May 2017 judgment
awarding the Estate $15,386.77 in attorneys’ fees and $1,233.10 in costs
against Jackson. The court incorporated those amounts into the October
2019 judgment. The superior court’s judgment stated that “the actions by
Plaintiffs Joshua Sanders and Cheryl Jackson in pursuing their Amended
Complaint were taken in furtherance of and for the benefit of their marital
community, and . . . any money judgments . . . against them or each of them
may be satisfied from their community property and their separate
property.”
¶28 The court did not err by awarding the Estate attorneys’ fees
pursuant to A.R.S. § 12-341.01. Here, as noted by the superior court,
Sanders’ and Jackson’s claims arose out of contract because they were based
on the alleged breach of Sanders’ contract with the Estate. The fact that
Sanders’ contract and bad faith claims were dismissed as time barred does
not factor into our analysis. Further, the court considered the factors set
forth in Warner, 143 Ariz. at 570, before deciding to award fees, and the
record reasonably supports the amount of the fee award.
¶29 Sanders and Jackson argue the superior court erred by
awarding the Estate attorneys’ fees incurred in defending Harris
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personally. Sanders’ and Jackson’s claims against the Estate and Harris
personally were based on the same allegations concerning Harris’ actions
and the argument that her actions were attributable to the Estate.
Accordingly, the fees sought were reasonable and necessary to defend the
Estate.
¶30 Sanders and Jackson further argue the superior court erred by
awarding attorneys’ fees, costs, and sanctions against the marital
community and Jackson’s separate property, because the fees, costs, and
sanctions were incurred after the superior court dismissed Jackson’s claims
against the Estate.
¶31 They also argue the superior court erred by awarding the
Estate $16,619.87 “against the separate property and marital community of
Sanders and Jackson from [the May] 2017 award against Jackson,
individually.”
¶32 “Generally, all debts incurred during marriage are presumed
to be community obligations unless there is clear and convincing evidence
to the contrary.” Schlaefer v. Fin. Mgmt. Serv., Inc., 196 Ariz. 336, 339, ¶ 10
(App. 2000). “Outside of the specific exceptions set forth in [A.R.S.] § 25-
214, [t]he test of whether an obligation is a community debt is whether the
obligation is intended to benefit the community.” Cardinal & Stachel, P.C. v.
Curtiss, 225 Ariz. 381, 383-84, ¶ 7 (App. 2010) (internal quotations omitted).
Jackson became a party to the lawsuit early in the litigation when Sanders
added her as a plaintiff when he filed the amended complaint. Together,
Sanders and Jackson pursued this matter in their individual capacities and
for the benefit of their marital community. We find no error in the
judgment.
¶33 The Estate requests an award of attorneys’ fees and costs on
appeal pursuant to A.R.S. § 12-341.01 and the contract. Sanders and Jackson
request costs on appeal. In our discretion, we award the Estate reasonable
attorneys’ fees pursuant to A.R.S. § 12-341.01 and taxable costs upon
compliance with ARCAP 21.
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CONCLUSION
¶34 For the foregoing reasons, we affirm.
AMY M. WOOD • Clerk of the Court
FILED: AA
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