In re: Dennis L. Kolodin and Catherine Kolodin

FILED
DEC 21 2017
1 NOT FOR PUBLICATION
SUSAN M. SPRAUL, CLERK
2 U.S. BKCY. APP. PANEL
OF THE NINTH CIRCUIT
3 UNITED STATES BANKRUPTCY APPELLATE PANEL
4 OF THE NINTH CIRCUIT
5 In re: ) BAP No. AZ-16-1425-SKuF
)
6 DENNIS L. KOLODIN and ) Bk. No. 2:15-bk-07843-BKM
CATHERINE KOLODIN, )
7 ) Adv. No. 2:15-ap-00793-BKM
Debtors. )
8 ______________________________)
)
9 TAPESTRY ON CENTRAL, L.L.C., )
)
10 Appellant, )
)
11 v. ) MEMORANDUM*
)
12 DENNIS L. KOLODIN; CATHERINE )
KOLODIN, )
13 )
Appellees. )
14 ______________________________)
15 Argued and Submitted on October 26, 2017
at Phoenix, Arizona
16
Filed – December 21, 2017
17
Appeal from the United States Bankruptcy Court
18 for the District of Arizona
19 Honorable Brenda K. Martin, Bankruptcy Judge, Presiding
20 Appearances: Ryan J. Lorenz of Clark Hill PLC argued for
appellant; Evan P. Schube of Manning & Kass,
21 Ellrod, Ramirez, Trester LLP argued for appellees.
22
Before: SPRAKER, KURTZ, and FARIS, Bankruptcy Judges.
23
24
25
26 *
This disposition is not appropriate for publication.
27 Although it may be cited for whatever persuasive value it may
have (see Fed. R. App. P. 32.1), it has no precedential value.
28 See 9th Cir. BAP Rule 8024-1.
1 INTRODUCTION
2 Tapestry on Central, L.L.C. (“TOC”) appeals from the
3 bankruptcy court’s summary judgment in favor of chapter 71
4 debtors Dennis and Katherine Kolodin denying TOC any relief on
5 its nondischargeability claims under § 523(a)(2), (4) and (6).
6 TOC also appeals from the denial of its motion to alter or amend
7 that judgment.
8 TOC asserts that the bankruptcy court erred when it ruled
9 that TOC’s claims were barred by the applicable statute of
10 limitations. According to TOC, the statute did not run because
11 its damages were not sufficiently certain until May 2013 – less
12 than three years before TOC commenced its litigation. TOC also
13 asserts that the bankruptcy court erred in concluding that
14 equitable estoppel was inapplicable as a matter of law and in
15 holding that Mr. Kolodin did not owe a continuing fiduciary duty
16 to TOC.
17 None of TOC’s arguments on appeal justify reversal.
18 Accordingly, we AFFIRM.
19 FACTS
20 This appeal concerns a mixed use commercial and residential
21 development in Phoenix, Arizona. Under a series of seven
22 purchase contracts entered into in 2005, TOC, as the nominee
23 designated by Yair Ben Moshe (TOC’s managing member), agreed to
24 buy seven commercial units located on the first floor of
25
1
26 Unless specified otherwise, all chapter and section
references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and
27 all "Rule" references are to the Federal Rules of Bankruptcy
Procedure, Rules 1001-9037. All "Civil Rule" references are to
28 the Federal Rules of Civil Procedure.
2
1 building C of the development from developer Willowalk Property
2 Limited Partnership. At the time, TOC believed it was purchasing
3 all but one of the development’s commercial units. The eighth
4 commercial unit, on the far north side of building C, was to be
5 purchased by Mr. Kolodin, who was acting as the joint broker for
6 both the buyer and the seller.
7 While the architectural drawing relied upon in drafting the
8 contracts showed eight commercial units, a replat recorded in
9 2004 showed the commercial space on the first floor of building C
10 reconfigured into 12 commercial units. When the sale closed in
11 2007, as a result of the way the deeds were prepared and
12 interlineated, TOC ended up with title to only seven of the 12
13 commercial units. Title to commercial unit numbers 9-12 remained
14 with the developer Willowalk, and Kolodin ended up with title to
15 commercial unit number 8, in the middle of the building, instead
16 of receiving the unit farthest north, unit 12.
17 TOC discovered in 2010 that there was a discrepancy between
18 the seven units it purchased and the additional units that
19 actually existed but were not transferred from Willowalk at
20 closing. Ben Moshe told a representative of the Tapestry on
21 Central Condominium Association (“Association”) that he intended
22 “to sue Kolodin for incompetence and negligence, and the Seller
23 to obtain title to the units.” However, the Association and
24 Kolodin worked to address the title defects and corrected most of
25 the defects relating to the additional units in April or May 2011
26 when Willowalk deeded to TOC commercial unit numbers 9-11.
27 Kolodin deeded commercial unit number 8 to TOC in February 2012,
28 thereby completing the correction of the title defects.
3
1 Although TOC eventually received all of the commercial units
2 it thought it had purchased, Ben Moshe did not believe that the
3 transfers of the additional units addressed the harm caused by
4 the title defects. He later described TOC’s situation as
5 follows:
6 Since title to units 8 to 11 had never been conveyed to
TOC, it could not sell the units, it could not lease
7 the units, it could not build the space out, and to the
day it actually acquired title, the space was vacant
8 and still in the original grey shell condition it was
in on the day it should have been conveyed in 2007.
9
10 Ben Moshe Decl. (Jan. 20, 2015) at ¶ 67. When he summarized the
11 history of TOC’s dispute with Kolodin and the Association, Ben
12 Moshe reiterated that the delay in obtaining title to commercial
13 unit numbers 8-11 effectively precluded TOC from leasing those
14 units, and he further stated that, as a result, “I have lost
15 millions in revenue from that space. . . .” Ben Moshe Letter to
16 Neal Hansen (July 27, 2015) at p. 2.
17 Another issue eventually arose from the title defects. The
18 Association insisted that TOC was liable for the assessments on
19 commercial unit numbers 8-11 that accrued before TOC obtained
20 title to those units. As described in more detail below, the
21 parties initially attempted to negotiate a resolution of the pre-
22 ownership assessment issue, but that resolution eventually fell
23 apart.
24 In addition to the title defects and the assessment issue,
25 the 2005 purchase entitled TOC to a certain number of surface and
26 garage parking places to be allocated by the Association. Ben
27 Moshe states that under the purchase agreements TOC was to
28 receive 38 underground and 20 adjacent parking spaces upon the
4
1 purchase of the units. According to him, problems with the
2 parking spaces began shortly after the sale closed in 2007 when
3 the Association misappropriated some of TOC’s parking spaces by
4 reallocating them to the residential condominium owners.
5 Ultimately, the amended governing Covenants, Conditions &
6 Restrictions (“CC&Rs”) recorded for the development allocated
7 20 parking spaces to TOC adjacent to the building. By the end of
8 April 2007, the Association had substantially reduced TOC’s
9 parking spaces, leaving the commercial units without sufficient
10 parking spaces for customers.
11 According to Ben Moshe, the Association’s reduction of TOC’s
12 parking spaces “severely impacted” TOC’s ability to obtain
13 tenants for the commercial units. The problem with the parking
14 spaces remained unresolved as of the time Willowalk and Kolodin
15 conveyed the additional units to TOC. In Ben Moshe’s view, the
16 failure to provide the promised parking spaces effectively
17 precluded TOC from leasing the commercial units:
18 [W]ithout close and adequate parking, a tenant could
not hope to generate enough patronage to turn a profit.
19 This parking space grab has been the difference between
a successful commercial aspect of the development and
20 vacant space.
21 * * *
22 [Prospective tenants] have not been interested in such
a horrific parking situation and occupancy of the
23 commercial units has been virtually zero for eight
years because of it.
24
25 Ben Moshe Decl. (Aug. 15, 2016) at ¶¶ 20-21; see also Ben Moshe
26 Decl. (Jan. 20, 2015) at ¶ 45 (“Specifically, the parking and
27 [construction] defects issues had still not been addressed and
28 the [commercial units] could not be rented until these issues
5
1 were addressed as well.”).
2 In support of Ben Moshe’s generalized statements of harm,
3 the record includes a letter dated September 3, 2010, to TOC from
4 a prospective purchaser of the commercial units withdrawing its
5 purchase offer, in part, because of insufficient parking for the
6 units.
7 Despite these problems, and the ongoing harm they were
8 causing, TOC did not immediately sue the Association, Willowalk
9 or Kolodin. Ben Moshe maintains that the Association persuaded
10 TOC to postpone the commencement of litigation. According to
11 Ben Moshe, the Association was concerned that litigation would
12 interfere with its efforts to reach a consensual resolution of
13 the construction defect issues with Willowalk and the builders of
14 the development.2 Beginning in 2011, TOC and the Association
15
2
16 Ben Moshe stated that the construction defects were
“rampant throughout the Tapestry development since 2007.” Ben
17 Moshe Decl. (Aug. 15, 2016) at ¶ 24. He specifically described
the defects as follows:
18
19 1) a lack of firestopping between units and floors for
plumbing and electrical penetrations; 2) on [sic]
20 overheated and intolerable [sic] moist garage, which
has been vented out of sidewalk vent towers on the
21 storefronts of TOC's commercial units; 3) a defective
rooftop HVAC chiller unit, which is supposed to provide
22
adequate cooling for building C, and which to this day
23 still cannot cool the entire commercial space; 4) a
crack in a wall which was just fixed in October 2015 on
24 a structural wall. The garage situation actually
caused a large bay window to buckle in place.
25
26 Id. at ¶ 23. Initially, TOC suggested that the construction
defects were part of its claims against Kolodin. TOC effectively
27 claimed that Kolodin concealed the construction defects from TOC.
However, at the summary judgment oral argument, TOC conceded that
28 (continued...)
6
1 discussed and negotiated resolution of the parking, title and
2 assessment issues at length. Ben Moshe claims that in exchange
3 for TOC’s forebearance and after many months of discussions and
4 negotiations, TOC and the Association reached an agreement in
5 January 2013 to resolve all issues. According to Ben Moshe, the
6 Association promised that it would release TOC from any
7 condominium owner assessment obligations for commercial unit
8 numbers 8-11 for the period before TOC received legal title to
9 those units. The Association also promised to remediate the
10 construction defects and to address the parking space issue once
11 it completed a settlement with Willowalk and the builders.3
12 Ben Moshe contends that the Association reneged on its
13 agreement in April or May 2013 by charging TOC for the pre-
14 ownership assessments on commercial unit numbers 8-11 and by
15 refusing to remediate the parking issue and the construction
16 defects. This led to a plethora of litigation.
17 In January 2014, TOC sued the Association, Willowalk,
18 Kolodin and others in the Maricopa County Superior Court for,
19 among other things, breach of contract, breach of the implied
20 covenant of good faith and fair dealing, tortious interference
21 with business expectancy and breach of fiduciary duty. But TOC
22 only sued Kolodin in his capacity as a member of the
23
24 2
(...continued)
Kolodin had no responsibility for any damages arising from the
25 construction defects and has reiterated that position on appeal.
26 3
According to Ben Moshe, the construction defects dispute
27 with Willowalk and the builders settled in early 2014, and the
Association received the funds to fix the construction defects at
28 that time.
7
1 Association’s board of directors.
2 In January 2015, TOC sued Kolodin for the first time in his
3 individual capacity for, among other things, fraud, breach of
4 contract and breach of fiduciary duty. TOC claimed that Kolodin
5 induced it not to hire an attorney to look over transaction
6 documents (including the defective deeds). It also claimed that
7 Kolodin should have but failed to obtain from TOC an effective
8 waiver, after getting TOC’s informed consent, regarding the
9 conflicts inherent in Kolodin’s dual representation of both
10 Willowalk and TOC. TOC further alleged that Kolodin committed
11 fraud by misrepresenting the number of commercial units on the
12 first floor of building C and by misrepresenting the number of
13 parking spaces that were to be assigned to it. TOC also asserted
14 that Kolodin fraudulently concealed the development’s
15 construction defects. Finally, TOC complained that Kolodin
16 breached the fiduciary duty he owed to TOC as its broker on the
17 2007 purchase transaction by serving on the Association’s board
18 of directors and actively siding with the board in the 2014
19 dispute regarding TOC’s assessment obligations.
20 In June 2015, Kolodin and his wife filed their chapter 11
21 bankruptcy petition. Shortly thereafter, TOC commenced its
22 nondischargeability action under § 523(a)(2), (4) and (6),
23 relying upon the same allegations and claims it made in its state
24 court action against Kolodin.4
25
26 4
At no point either in the bankruptcy court or on appeal
27 has TOC attempted to justify its nondischargeability claims
against Kolodin’s wife. Consequently, we will not address the
28 bankruptcy court’s grant of summary judgment in her favor.
8
1 In July 2016, Kolodin filed his motion for summary judgment
2 focusing solely on statute of limitations issues. At the hearing
3 on the summary judgment motion, TOC conceded all of its alleged
4 losses as against Kolodin, except for the losses arising from the
5 Association’s failure to honor its January 2013 promises. Those
6 promises included: (1) the promise to restore the parking spaces;
7 and (2) the promise to release TOC from any liability for pre-
8 ownership Association assessments. This was a critical aspect of
9 TOC’s defense against summary judgment. By conceding or ignoring
10 the other damages allegedly caused by Kolodin’s misfeasance, TOC
11 argued there were no damages and its claims did not accrue until
12 the Association repudiated its January 2013 promises in May
13 2013.5
14 The bankruptcy court was not persuaded. Relying mostly on
15 TOC’s and Ben Moshe’s admissions, the bankruptcy court determined
16 that Kolodin knew about the title defects, the assessment issues,
17 and the parking issues certainly by no later than 2011. From
18 these admissions and other undisputed facts in the summary
19 judgment record, the court further determined that, by the time
20 TOC discovered these three issues, it must have known about
21 Kolodin’s potential responsibility for these issues and the harm
22 arising from them. Because it was undisputed that TOC learned of
23 these issues no later than 2011 and did not file its tort action
24 against Kolodin until 2015, the court held that its claims were
25
5
26 On appeal, TOC has reiterated the same damages position:
“If the Association had given TOC back its parking and accepted
27 TOC’s [limited] assessment payment[s], there would have been
little or no reason to sue Mr. Kolodin.” Appellant’s Opening
28 Brief (Mar. 1, 2017) at p. 21.
9
1 barred by the applicable Arizona statutes of limitations.6
2 Additionally, the court rejected TOC’s argument that its
3 damages did not arise, and its claims did not accrue, until its
4 January 2013 agreement with the Association fell apart in May
5 2013. As the bankruptcy court explained, “. . . the very reason
6 [TOC] was having [these] negotiations is because it had
7 damages it was trying to offset against claims the HOA was
8 asserting against it.” Hr’g Tr. (Sept. 29, 2016) at 51:15-18.
9 Finally, the bankruptcy court sua sponte considered whether
10 TOC’s claims were equitably tolled. But, as a matter of law, the
11 court found that the doctrine could not be applied to save TOC’s
12 claims from the statute of limitations because TOC did not sue
13 Kolodin within a reasonable amount of time after the January 2013
14 agreement with the Association fell apart.
15 The bankruptcy court entered summary judgment in favor of
16 Kolodin on October 7, 2016. TOC timely filed a motion to alter
17 or amend the judgment on October 21, 2016, which largely rehashed
18 the issues addressed in the bankruptcy court’s oral ruling.
19 After the bankruptcy court denied TOC’s reconsideration motion,
20 TOC timely appealed both the summary judgment ruling and the
21
22
23
6
Claims for negligent misrepresentation or negligence are
24 subject to the two year statute of limitations under Arizona law.
Ariz. Rev. Stat. § 12-542(3); Hullett v. Cousin, 63 P.3d 1029,
25 1034 (Ariz. 2003); Elm Ret. Ctr., LP v. Callaway, 246 P.3d 938,
26 941 (Ariz. App. 2010). Claims for breach of a fiduciary duty are
also subject to a two year limitations period. Coulter v. Grant
27 Thornton, LLP, 388 P.3d 834, 838 (Ariz. App. 2017). Claims for
fraud are subject to a three year limitations period. Ariz. Rev.
28 Stat. § 12-543; Elm Ret. Ctr., LP, 246 P.3d at 941.
10
1 order denying reconsideration.7
2 JURISDICTION
3 The bankruptcy court had jurisdiction pursuant to 28 U.S.C.
4 §§ 1334 and 157(b)(2)(I), and we have jurisdiction under
5 28 U.S.C. § 158.
6 ISSUES
7 1. When did TOC’s causes of action accrue for statute of
8 limitations purposes?
9 2. As a matter of law, is equitable estoppel inapplicable to
10 Kolodin’s assertion of his statute of limitations defense?
11 3. Was Kolodin’s alleged continuing fiduciary duty actionable
12 under § 523(a)(4)?
13 STANDARDS OF REVIEW
14 We review de novo the bankruptcy court’s grant of summary
15 judgment. Salven v. Galli (In re Pass), 553 B.R. 749, 756 (9th
16 Cir. BAP 2016). Under de novo review, the bankruptcy court’s
17 ruling is not entitled to any deference. Ulrich v. Schian
18 Walker, P.L.C. (In re Boates), 551 B.R. 428, 433 (9th Cir. BAP
19 2016); Barnes v. Belice (In re Belice), 461 B.R. 564, 572 (9th
20 Cir. BAP 2011).
21 DISCUSSION
22 A. General Summary Judgment Standards
23 Summary judgment is appropriate when there are no genuine
24 issues of material fact and when the movant is entitled to
25
7
26 TOC did not address in its opening brief the bankruptcy
court’s denial of its reconsideration motion. Consequently, we
27 decline to consider it. See Christian Legal Soc'y v. Wu,
626 F.3d 483, 485 (9th Cir. 2010); Brownfield v. City of Yakima,
28 612 F.3d 1140, 1149 n.4 (9th Cir. 2010).
11
1 judgment as a matter of law. Rule 7056 (incorporating Civil
2 Rule 56); Celotex Corp. v. Catrett, 477 U.S. 317, 322–23 (1986).
3 Material facts are those that can affect the disposition of the
4 case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
5 Genuine issues are those the trier reasonably could find in favor
6 of the nonmoving party. Far Out Prods., Inc. v. Oskar, 247 F.3d
7 986, 992 (9th Cir. 1997).
8 To succeed on summary judgment, “[w]here the moving party
9 will have the burden of proof on an issue at trial, the movant
10 must affirmatively demonstrate that no reasonable trier of fact
11 could find other than for the moving party.” Soremekun v.
12 Thrifty Payless, Inc., 509 F.3d 978, 984 (9th Cir. 2007).
13 Kolodin moved for summary judgment and bore the burden of proof
14 on his statute of limitations defense.8 See Olmos v. Ryan,
15 2013 WL 394879, at *2 (D. Ariz. 2013) (citing Kerwin v. Bank of
16 Douglas, 379 P.2d 978, 981 (Ariz. 1963)); but see also Cytron v.
17 PHH Mortg. Corp., 2016 WL 7187933, at *4 (D. Ariz. Dec. 12, 2016)
18 (whereas the running of the statute of limitations is an
19 affirmative defense, plaintiff bears the burden of proving any
20 claim that the statute of limitations has been tolled or that the
21 discovery rule applies). This was the sole basis on which
22
23
8
The parties do not dispute that the substantive rule of
24 law governing this matter is Arizona law. See generally Gaughan
v. Edward Dittlof Revocable Tr. (In re Costas), 555 F.3d 790, 793
25 (9th Cir. 2009) (citing Butner v. United States, 440 U.S. 48, 54,
26 (1979), and stating that the parties’ rights and property rights
in bankruptcy ordinarily are determined with reference to state
27 law). When state law provides the applicable substantive law, it
also provides the governing burdens of proof. Johnston v. Pierce
28 Packing Co., 550 F.2d 474, 476 n.1 (9th Cir. 1977).
12
1 Kolodin sought and obtained summary judgment. Thus, Kolodin was
2 required to establish that there was no genuine issue of material
3 fact as to his affirmative defense.
4 B. General Statute of Limitations and Discovery Rule
Considerations
5
6 Arizona courts enforce the state’s statutes of limitations
7 “to ‘protect defendants and courts from stale claims where
8 plaintiffs have slept on their rights.’” Doe v. Roe, 955 P.2d
9 951, 960 (Ariz. 1998) (citing Gust, Rosenfeld & Henderson v.
10 Prudential Ins. Co., 898 P.2d 964, 968 (Ariz. 1995)). On the
11 other hand, under the discovery rule, “a plaintiff’s cause of
12 action does not accrue until the plaintiff knows or, in the
13 exercise of reasonable diligence, should know the facts
14 underlying the cause.” Gust, 898 P.2d at 966. The discovery
15 rule prevents statutes of limitations from beginning to run until
16 “the plaintiff has a reasonable basis for believing that a claim
17 exists.” Doe, 955 P.2d at 960 (citing Gust, 898 P.2d at 967).
18 The discovery rule applies not only to the plaintiff’s discovery
19 of the defendant’s tortious conduct but also to all elements
20 necessary to state a claim including the discovery of causation
21 and damages. Commercial Union Ins. Co. v. Lewis & Roca, 902 P.2d
22 1354, 1358 (Ariz. App. 1995).
23 C. TOC’s Arguments – and Concessions – on Appeal
24 TOC’s appellate arguments are narrow and technical in
25 nature. TOC primarily argues that it could not have discovered
26 its claims against Kolodin, for statute of limitations purposes,
27 until the damages allegedly resulting therefrom were fixed and
28 irrevocable. TOC also argues that, as a matter of law, it did
13
1 not wait an unreasonable amount of time in pursuing its claims
2 against Kolodin after its January 2013 agreement with the
3 Association collapsed, so the bankruptcy court erred when it
4 determined on summary judgment that equitable estoppel could not
5 preserve its claims. Finally, TOC argues that Kolodin owed a
6 continuing fiduciary duty to TOC, even after the sale closed, and
7 thus the statute of limitations could not have run on TOC’s
8 breach of fiduciary duty claim.
9 We will address each of TOC's appellate arguments in turn.
10 But, before we do so, we should note some of TOC’s key
11 concessions. For instance, TOC has not disputed on appeal that,
12 except for its damages argument, the bankruptcy court correctly
13 applied the discovery rule and correctly held that all other
14 aspects of its claims were known to it more than three years
15 before it filed suit against Kolodin in January 2015. In
16 addition, TOC has not challenged on appeal the determinations of
17 the bankruptcy court that: (1) Arizona law applies to Kolodin’s
18 statute of limitations defense; (2) Arizona’s statute of
19 limitations for breach of fiduciary duty is two years;
20 (3) Arizona’s statue of limitations for fraud is three years;
21 (4) no other statutes of limitations apply to TOC’s claims
22 against Kolodin; and (5) TOC did not commence litigation against
23 Kolodin on the relevant claims until January 2015. Because of
24 these concessions on appeal, we will accept as correct all of
25 these determinations of the bankruptcy court. See Christian
26 Legal Soc'y, 626 F.3d at 485; Brownfield, 612 F.3d at 1149 n.4.
27 1. Accrual of Causes of Action – Occurrence of Damages
28 In light of TOC’s concessions, the merits of TOC’s appeal
14
1 largely turn on its argument that its damages did not become
2 sufficiently certain, for claim accrual purposes, until its
3 agreement with the Association fell apart in May 2013.
4 To support its argument, TOC relies on a series of four
5 Arizona cases. Amfac Distrib. Corp. v. Miller, 673 P.2d 792
6 (Ariz. 1983); CDT, Inc. v. Addison, Roberts & Ludwig, C.P.A.
7 P.C., 7 P.3d 979 (Ariz. App. 2000); Commercial Union Ins. Co.,
8 902 P.2d at 1354; Tullar v. Walter L. Henderson, P.C., 816 P.2d
9 234 (Ariz. App. 1991). These cases stand for the unremarkable
10 proposition that malpractice causes of action do not accrue until
11 the harm or damage from the defendant’s conduct actually occurs.
12 Amfac, 673 P.2d at 793-94; CDT, 7 P.3d at 982; Commercial Union
13 Ins. Co., 902 P.2d at 1360; Tullar, 816 P.2d at 236. For
14 purposes of the discovery rule, the plaintiff must sustain actual
15 and appreciable harm before a cause of action accrues.
16 Commercial Union Ins. Co., 902 P.2d at 1358. This occurs when
17 the harm becomes irremediable or irrevocable. Id.9
18 However, the occurrence of harm and the extent of damages
19 sustained are “two distinct concepts” not to be confused. Id.
20 It is not necessary for a plaintiff to know the exact amount of
21 its damages before the cause of action accrues, only that it has
22 been damaged. Id. at 1359. “[A]ccrual requires only actual or
23 constructive knowledge of the fact of damage, rather than of the
24 total extent or calculated amount of damage.” CDT, 7 P.3d at
25
9
26 TOC’s appellate argument assumes that Kolodin’s alleged
misfeasance falls within the ambit of professional malpratice
27 and, hence, Amfac, Commercial Union Ins. Co., CDT and Tullar
apply. For purposes of our analysis, we have assumed (without
28 deciding) the same thing.
15
1 982.10
2 Here, by TOC’s own admission, it knew Kolodin had caused it
3 to suffer actionable harm long before its settlement with the
4 Association fell apart. As Ben Moshe stated in his declarations,
5 Kolodin’s allegedly shoddy job in preparing the purchase
6 contracts and the deeds directly led to the title defects, and to
7 the Association’s parking space misappropriation. Ben Moshe has
8 steadfastly maintained that the title defects and lack of parking
9 spaces have directly harmed TOC by severely impeding its ability
10 to build out and rent the commercial units since the closing of
11 its purchase in 2007. TOC admits that it knew of these defects
12 since at least 2010.11 Ben Moshe has been equally adamant that
13 TOC’s inability to rent out the commercial units cost it millions
14 of dollars in revenue. TOC’s damages for lost rents trace back
15 to Ben Moshe’s discovery of the title problems and the loss of
16 parking spaces. Indeed, the title and parking problems were the
17 impetus for TOC’s settlement negotiations with the Association.
18 That the specific amount of damages/lost rent was not fixed did
19 not stop TOC’s causes of action from accruing.
20 Moreover, TOC, through Ben Moshe, further admitted that it
21
10
22 The scenario in which damages are not immediate is the
exception to the rule. Commercial Union Ins. Co., 902 P.2d at
23 1360; see also Keonjian v. Olcott, 169 P.3d 927, 930 (Ariz. App.
2007) (“In the majority of malpractice cases, the damage or
24 injury occurs contemporaneously with the malpractice.”). Accord
DeBoer v. Brown, 673 P.2d 912, 914 (Ariz. 1983).
25
11
26 At page 4 of its opening appeal brief, TOC concedes it
discovered in 2010 that it did not own commercial unit numbers
27 8-11 as a result of the defective 2007 deeds. At page 6 of the
opening brief, TOC concedes it discovered in April 2007 the
28 Association’s misappropriation of its parking places.
16
1 already had connected its losses to Kolodin’s alleged misfeasance
2 before entering into settlement negotiations with the
3 Association. As Ben Moshe put it, as soon as TOC learned of the
4 title defects and the parking dispute, it wanted to sue Kolodin
5 and Willowalk immediately, but the Association persuaded TOC to
6 postpone such litigation.
7 Perhaps most telling, TOC has never explained how and why
8 its third party settlement negotiations with the Association
9 could affect the accrual of its claims against Kolodin. Nor are
10 we aware of any legally sound explanation. TOC attempted to use
11 its existing claims for damages to settle the Association’s
12 pre-ownership assessment claims against it. While the
13 pre-ownership assessments may constitute a part of TOC’s
14 injuries, such harm arose from the title defects rather than the
15 failed settlement.
16 In sum, as a result of TOC’s own admissions, TOC obviously
17 was aware that it had been damaged – and the alleged cause of
18 those damages (Kolodin) – no later than 2010. By that point, TOC
19 knew of the title defects and the misappropriated parking
20 spaces.12 Therefore, TOC’s argument that it did not suffer
21 appreciable damages until the Association reneged on its January
22
12
23 In its summary judgment ruling, the bankruptcy court
stated that TOC and Ben Moshe knew of the title defects and the
24 parking issues certainly by no later than 2011. The bankruptcy
court apparently referenced 2011 out of an abundance of caution.
25 As our factual recitation set forth above reflects, Ben Moshe
26 admitted knowledge of the title defects and the parking issues
well before 2011, in 2010 and earlier. In any event, regardless
27 of whether TOC’s causes of action accrued in 2010 or 2011, the
applicable statutes of limitations fully ran before TOC filed its
28 state court lawsuit against Kolodin in January 2015.
17
1 2013 promises regarding the assessments and the parking spaces is
2 without merit.
3 2. Equitable Estoppel13
4 The Arizona Supreme Court has identified the following
5 factors as relevant in determining whether a defendant is
6 equitably estopped from raising a statute of limitations defense:
7 (1) whether the defendant engaged in affirmative
conduct intended to cause the plaintiff's forbearance;
8 (2) whether the defendant's conduct actually caused the
plaintiff's failure to file a timely action;
9 (3) whether the defendant's conduct reasonably could be
expected to induce forbearance; and (4) whether the
10 plaintiff brought the action within a reasonable time
after termination of the objectionable conduct.
11
12 Nolde, 964 P.2d at 482.
13 Here, the bankruptcy court found, as a matter of law, that
14 the amount of time it took TOC to bring its action against
15 Kolodin was unreasonable. As the bankruptcy court pointed out,
16
17 13
At the summary judgment hearing, the bankruptcy court
stated that it sua sponte was raising the issue of “equitable
18 tolling.” But the principal case it relied upon, Nolde v.
19 Frankie, 964 P.2d 477 (Ariz. 1988), dealt with the issue of
whether the defendant was equitably estopped by his conduct from
20 raising the statute of limitations defense. Under Arizona law,
equitable tolling generally requires consideration of different
21 factors than equitable estoppel. Compare McCloud v. Ariz. Dep't
of Pub. Safety, 170 P.3d 691, 696–97 (Ariz. App. 2007), with
22
Nolde, 964 P.2d at 481-82; see generally Hosogai v. Kadota,
23 700 P.2d 1327, 1331 (Ariz. 1985), partially superseded by statute
as stated in, Jepson v. New, 792 P.2d 728, 734 (Ariz. 1990).
24 Because neither the bankruptcy court nor the parties addressed
the equitable tolling factors as part of the summary judgment
25 proceedings, we decline to consider them on appeal. Absent
26 exceptional circumstances not present here, we will not consider
issues raised for the first time on appeal. See Rhoades v.
27 Henry, 598 F.3d 495, 501 n.7 (9th Cir. 2010); El Paso v. Am. W.
Airlines, Inc. (In re Am. W. Airlines), 217 F.3d 1161, 1165 (9th
28 Cir. 2000).
18
1 the settlement with the Association fell apart in May 2013, and
2 yet TOC did not commence its litigation against Kolodin until
3 January 2015. According to the bankruptcy court, this twenty-
4 month delay was per se unreasonable.
5 TOC takes issue with this determination. In essence, TOC
6 contends that the reasonableness of a plaintiff’s delay must be
7 considered on a case-by-case basis and depends on all of the
8 surrounding circumstances, which makes the issue ill suited for
9 determination on summary judgment. However, we can affirm on any
10 ground supported by the record. Fresno Motors, LLC v. Mercedes
11 Benz USA, LLC, 771 F.3d 1119, 1125 (9th Cir. 2014). We decline
12 to decide the issue of whether the twenty-month delay was per se
13 unreasonable because we can affirm on an alternate ground.
14 The Association’s settlement conduct, on which TOC’s
15 estoppel argument relies, was insufficient as a matter of law to
16 equitably estop Kolodin from raising his statute of limitations
17 defense. As a threshold matter, it is far from clear whether a
18 third party’s settlement conduct – in this case the Association’s
19 – can or should serve as the foundation for estoppel against a
20 separate litigant – in this case Kolodin. The only specific
21 conduct TOC has attributed directly to Kolodin is cooperating in
22 the settlement process and advocating on TOC’s behalf with the
23 Association’s board. This is a slender reed on which to base
24 estoppel, and TOC has cited no authority imposing estoppel based
25 on such limited conduct.
26 Even if all of the Association’s settlement conduct is
27 somehow attributed to Kolodin, that conduct was insufficient to
28 justify estoppel. A defendant will be estopped from asserting a
19
1 statute of limitations defense only if its conduct induced the
2 plaintiff to forbear from litigation “by leading plaintiff to
3 believe a settlement or adjustment of the claim will be effected
4 without the necessity of bringing suit.” Roer v. Buckeye Irr.
5 Co., 809 P.2d 970, 972 (Ariz. App. 1990), cited with approval in,
6 Nolde 964 P.2d at 481. When the defendant’s conduct does not
7 actually and reasonably induce the plaintiff to believe that its
8 claim will be satisfied without the necessity of litigation,
9 estoppel is inappropriate. Id.
10 Roer is instructive. In Roer, the plaintiffs sued an
11 irrigation company and a canal company alleging that both
12 companies’ negligence had caused the plaintiffs’ farmland to
13 become waterlogged and useless as farmland. Id. at 971. As
14 early as 1974, the plaintiffs had complained to the irrigation
15 company that much of their land had been rendered unfarmable as a
16 result of waterlogging. Id. at 972. Meanwhile, the canal
17 company was responsible for a canal which traversed the
18 plaintiffs’ land and which exacerbated the waterlogging problem
19 because it was not properly cleaned and maintained. Id. Over
20 the course of several years, up until the time the plaintiffs
21 commenced litigation in 1986, the defendants made various
22 promises that they would look into the problem and take steps to
23 ameliorate the conditions that were causing the waterlogging, but
24 they never did so. Id. A jury returned a $1.3 million verdict
25 against the defendants for the damage done to the plaintiffs’
26 land, but the trial court granted the defendants’ motion for
27 judgment notwithstanding the verdict based on, among other
28 things, the expiration of a two-year statute of limitations. Id.
20
1 at 971.
2 The Arizona Court of Appeals affirmed the trial court. In
3 the process, the Roer court held, as a matter of law, that the
4 defendants’ respective promises to take steps to ameliorate the
5 waterlogging problem were not sufficient to estop either of them
6 from asserting the statute of limitations. Id. at 972-73. Roer
7 explained:
8 Prior to the filing of this lawsuit the plaintiffs
never made any claim upon either of the defendants for
9 the damages to their land. At no time did they
indicate that they were holding them responsible,
10 financially or otherwise, for the waterlogging. As far
as [the canal company] is concerned, its statements
11 that it would clear and repair the canal do not
constitute conduct which would support an estoppel. It
12 never said that it would take care of the waterlogging
damage but only that it would repair its canal.
13
14 Id. at 972 (emphasis added).
15 Like the company in Roer, the Association (and Kolodin)
16 allegedly promised to fix two of the problems that were causing
17 TOC to lose rent: the parking space misappropriation and the
18 title defects. However, there is absolutely nothing in the
19 record that could support an inference that the Association, or
20 more importantly Kolodin, agreed or promised to compensate TOC
21 for the damages TOC already had incurred. As such, the
22 Association’s and Kolodin’s conduct was insufficient as a matter
23 of law to estop Kolodin from raising the statute of limitations
24 defense. Neither the Association nor Kolodin led “plaintiff to
25 believe a settlement or adjustment of [TOC’s] claim [would] be
26 effected without the necessity of bringing suit.” Id.
27 Accordingly, we reject TOC’s equitable estoppel argument.
28
21
1 3. Continuing Breach of Fiduciary Duty
2 Finally, TOC contends that the bankruptcy court erroneously
3 determined that Kolodin’s fiduciary duty ended when the 2007
4 purchase transaction closed. TOC maintains that Kolodin had a
5 continuing fiduciary duty to rectify the title defects and the
6 parking space misappropriation. It further contends that,
7 because Kolodin continued to breach his fiduciary duty until
8 those errors were rectified, the statute of limitations could not
9 have run on its breach of fiduciary claim. TOC alternately
10 argues that Kolodin, at the time, was acting as a real estate
11 broker and as an agent for TOC in other transactions, so
12 Kolodin’s fiduciary duty also was continuing in that respect.
13 TOC cites no authority to support its continuing breach of
14 fiduciary duty argument. More importantly, there is another,
15 more fundamental flaw in TOC’s breach of fiduciary duty argument.
16 The type of fiduciary obligation actionable under § 523(a)(4) is
17 narrow in scope. “The broad definition of fiduciary under
18 nonbankruptcy law — a relationship involving trust, confidence,
19 and good faith — is inapplicable in the dischargeability
20 context.” Honkanen v. Hopper (In re Honkanen), 446 B.R. 373, 378
21 (9th Cir. BAP 2011) (citing Cal–Micro, Inc. v. Cantrell
22 (In re Cantrell), 329 F.3d 1119, 1125 (9th Cir. 2003)). As
23 Honkanen further explained:
24 To fit within § 523(a)(4), the fiduciary relationship
must be one arising from an express or technical trust
25 that was imposed before, and without reference to, the
wrongdoing that caused the debt as opposed to a trust
26 ex maleficio, constructively imposed because of the act
of wrongdoing from which the debt arose.
27
28 Id. at 378-79 (citing Ragsdale v. Haller, 780 F.2d 794, 796 (9th
22
1 Cir. 1986)). Consequently, “trusts arising as remedial devices
2 to breaches of implied or express contracts — such as resulting
3 or constructive trusts — are excluded, while statutory trusts
4 that bear the hallmarks of an express trust are not.” Id. at
5 379.
6 To create an express trust under Arizona law, there must be
7 “a competent settlor and a trustee, clear and unequivocal intent
8 to create a trust, ascertainable trust res, and sufficiently
9 identifiable beneficiaries.” Golleher v. Horton, 715 P.2d 1225,
10 1231 (Ariz. App. 1985). Here, TOC never alleged – let alone
11 proved – the existence of an express or statutory trust.
12 Instead, it is clear from TOC’s argument that it has been relying
13 on the more general definition of a fiduciary relationship
14 arising from Kolodin holding a position of trust, confidence and
15 good faith. As set forth in Honkanen, this type of general
16 fiduciary relationship is not actionable under § 523(a)(4).
17 Honkanen, 446 B.R. at 378-79. Thus, TOC’s continuing fiduciary
18 duty argument does not support reversal of the bankruptcy court’s
19 summary judgment in favor of Kolodin.
20 CONCLUSION
21 Given that none of TOC’s arguments on appeal has merit, we
22 AFFIRM the bankruptcy court’s summary judgment denying TOC any
23 relief on its nondischargeability claims.
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