FRANSEN v. BIERMAN

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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 IN THE COURT OF APPEALS STATE OF ARIZONA DIVISION ONE SHAWN FRANSEN, ) ) Plaintiff/Appellee, ) ) v. ) ) JOSH BIERMAN; BIERMAN GROUP, ) LLC, ) ) Defendants/Appellants. ) ) 1 CA-CV 11-0602 DIVISION ONE FILED: 09/25/2012 RUTH A. WILLINGHAM, CLERK BY: sls DEPARTMENT C MEMORANDUM DECISION (Not for Publication Rule 28, Arizona Rules of Civil Appellate Procedure) Appeal from the Superior Court in Maricopa County Cause No. CV2010-034072 The Honorable Eileen S. Willett, Judge AFFIRMED IN PART, REVERSED AND VACATED IN PART Michael J. Fuller, Attorney at Law Attorney for Plaintiff/Appellee Phoenix Richard N. Crenshaw, Attorney at Law Attorney for Defendants/Appellants Phoenix O R O Z C O, Judge ¶1 Josh Bierman and Bierman Group LLC appeal from the trial court s judgment after a bench trial in favor of Shawn Fransen. For the reasons explained below, we affirm in part, reverse in part and vacate the trial court s award of punitive damages. FACTS AND PROCEDURAL BACKGROUND ¶2 of In two separate transactions, Bierman borrowed a total $105,000 property. from Fransen to purchase two pieces of real Bierman signed a promissory note and deed of trust for each property. Instead of taking title in his own name, Bierman took title to the properties in the name of his limited liability company, Bierman Group. ¶3 The properties were located in Pinal County, but both deeds of trust were mistakenly recorded in Maricopa County. As a result, when Bierman sold the properties, the deeds of trust in favor of Fransen did not appear as recorded liens. falsely represented to the buyers and the title Bierman agencies handling the escrows that there were no loans or open deeds of trust related to the properties. of the sales until after Bierman did not inform Fransen escrow closed on both properties. Bierman instructed the title companies to wire the proceeds from both sales directly into Bierman Group s bank account and did not pay Fransen. ¶4 the Fransen sued Bierman for breach of contract, breach of duty of good faith and 2 fair dealing, conversion, constructive trust, and fraud. aiding and abetting constructive ruled in trust, fraud, and Fransen s compensatory aiding unjust favor damages Fransen sued Bierman Group for of and abetting enrichment. on each The claim, $116,224.37 plus conversion, trial awarding interest, court Fransen punitive damages of $350,000, and attorney fees and costs. ¶5 Bierman and Bierman Group filed a motion for new trial and motion to amend the judgment. motions. The trial court denied the Bierman and Bierman Group timely appealed. jurisdiction pursuant to Arizona Revised Statutes We have (A.R.S.) section 12-2101.A.1 and 5(a) (Supp. 2011). DISCUSSION ¶6 appeal Bierman related to and Bierman Fransen s Group tort raise claims, several the doctrine, and the award of punitive damages. issues economic on loss Because they do not raise any issues on appeal related to the entry of judgment in favor of Fransen on the claims of breach of contract, breach of the duty of good faith and fair dealing, constructive trust, and unjust enrichment, we affirm the trial court s judgment as to those claims, as well as the award of compensatory damages. 3 Standard of Review ¶7 When trial, we reviewing view the issues facts in decided the upholding the court s ruling. light following most a bench favorable to Bennett v. Baxter Grp., Inc., 223 Ariz. 414, 417, ¶ 2, 224 P.3d 230, 233 (App. 2010). We review questions of law de novo, but we accept the trial court's findings of fact unless they are clearly erroneous. Spaulding v. Pouliot, 218 Ariz. 196, 199, ¶ 8, 181 P.3d 243, 246 (App. 2008). ¶8 The trial court held that Fransen was entitled to tort damages, including punitive damages, against Bierman and Bierman Group under Fransen s fraud and conversion claims. however, does conversion. not support Fransen was a finding therefore not of The record, either entitled to fraud or punitive damages. Fraud ¶9 (2) The elements of fraud include: (1) a representation; its falsity; (3) its materiality; (4) the speaker s knowledge of its falsity or ignorance of its truth; (5) the speaker s intent that the representation be acted upon by the hearer in a manner reasonably contemplated; (6) the hearer s ignorance of the reliance on its representation s truth; (8) the 4 falsity; right (7) to the rely hearer s on the representation; and (9) the hearer s consequent and proximate injury. Echols v. Beauty Built Homes, Inc., 132 Ariz. 498, 500, 647 P.2d 629, 631 (1982). sufficient evidence. Each element must be supported by Id. Bierman alleges that his representations regarding ownership of the properties did not cause Fransen s injury because the injury resulted from Fransen s failure to properly record the deeds, not Fransen s lending of the money. ¶10 We agree. A person who makes a fraudulent misrepresentation is subject to liability if the hearer s justifiable reliance on the misrepresentation is a substantial factor in determining the course of conduct that results in his loss. Restatement (Second) of Torts § 546 (1977); see Wisener v. State, 123 Ariz. 148, 150, 598 P.2d 511, 513 (1979) ( On the issue of causation, the plaintiff must introduce evidence that affords a reasonable basis for the conclusion that it is more likely than not that defendant s conduct was a substantial factor in bringing about the result. ). The trial court found that Fransen relied on Bierman s representation that Bierman owned the properties in an individual capacity when in fact the properties were owned by Bierman Group and that Fransen suffered consequent and proximate injury as a result. The court did not make factual findings 5 linking this particular misrepresentation to Fransen s pecuniary loss, or any other findings on the issue of causation. ¶11 Although Fransen relied on Bierman s representation that he, individually, owned the properties, our review of the record shows that Fransen s reliance on that representation was not a substantial Bierman Group Bierman had factor took no title impact leading to on the to Fransen s properties Fransen s loss. That of Josh Fransen loss. instead did not receive any money when Bierman sold the properties because the deeds were recorded in the wrong county. If Fransen had properly recorded the deeds in Pinal County, a cloud on title would have been properties. revealed Bierman through took the advantage title of searches Fransen s on the recording mistake and signed documents indicating that the properties were to be treated as free and clear. Bierman s conduct, the record Although we do not condone before us does not support a finding that Bierman s representation regarding ownership of the properties caused Fransen s loss. Thus, Bierman cannot be liable for fraud. Conversion ¶12 Conversion is an act of wrongful dominion or control over personal property that interferes with another s rights to the property. Case Corp. v. Gehrke, 208 Ariz. 140, 143, ¶ 11, 6 91 P.3d 362, 365 (App. 2004). To maintain an action for conversion, a plaintiff must have had the right to immediate possession of the personal property at the time of the alleged conversion. Id. Failure to pay a debt, which may be satisfied by the payment of money generally, does not support a conversion claim. Autoville, Inc. v. Friedman, 20 Ariz. App. 89, 92, 510 P.2d 400, 403 (1973). However, if the money can be described, identified or segregated, and an obligation to treat it in a specific manner is established, then it may be the subject of a conversion claim. ¶13 Id. at 91, 510 P.2d at 402. Fransen argues, and the trial court found, that the deeds of trust required Bierman to apply the sales proceeds to his obligation to Fransen first, above all other creditors. However, neither the promissory notes nor the deeds of trust contain any specific promise to pay Fransen first. of trust immediately state that due and Fransen payable may in declare full if the Both deeds entire Bierman sells debt the property without Fransen s written consent, but the right to accelerate the notes was not invoked. Although Fransen had a right to be paid, his right was not tied to a specific fund. Bierman failed to pay a debt that can be satisfied by the payment of money generally; thus, Fransen does not have a valid conversion claim. 7 Punitive Damages ¶14 the Because we reverse on the tort claims, we must vacate trial Dawson, court s 173 Ariz. award of punitive 220, 232, 841 damages. P.2d 215, See 227 Rhue (App. v. 1992) (stating that punitive damages are not appropriate in a contract action).1 CONCLUSION ¶15 We Fransen on affirm the the breach trial of court s contract judgment claims and in favor of its award of compensatory damages, interest and attorney fees. the trial court s judgment in favor of Fransen We reverse on the tort claims and vacate the award of punitive damages. /S/ ___________________________________ PATRICIA A. OROZCO, Judge CONCURRING: /S/ ____________________________________ MARGARET H. DOWNIE, Presiding Judge /S/ ____________________________________ RANDALL M. HOWE, Judge 1 Because we find that Bierman is not liable for the fraud or conversion claims, we need not address the economic loss rule. 8

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