Alameda Materials Inc.; James Beito and Penny Beito; Insearch Corp.; Saturn Materials Inc. v. Capital Title Agency Inc., (Court of Appeals of Arizona, No. 1 CA–CV 11–0203)
An Arizona court affirmed a jury verdict dismissing claims against a title company for breach of contract, breach of fiduciary and agency duties, and negligence, refusing to reverse the decision based on the plaintiffs’ claim that the jury had received erroneous instructions.
The plaintiffs appealed from the judgment, contending that, because an interrogatory submitted to the jury on the statute of limitations omitted reference to the effect of possible concealment of information by defendant Capital Title Agency Inc. (CTA), the interrogatory was an erroneous instruction to the jury requiring reversal.
The facts
On Sept. 24, 2001, Alameda Building Components Inc. (ABC), which was solely owned by Tom Stewart, purchased a parcel of property from Eugene and Virginia Swagel. CTA served as escrow agent for the transaction and was the account servicer for ABC’s promissory note to the Swagels. The purchase money was paid by Insearch Inc., a company of which James Beito was president. Stewart and Beito incorporated Alameda Materials, Inc. (AMI) for the purpose of jointly owning the property.
On Oct. 22, 2001, ABC conveyed the property to AMI.
In December 2001, the State of Arizona obtained a preliminary injunction against ABC, Stewart, Beito, Insearch, and others, precluding them from crossing state trust land surrounding the property without first obtaining the necessary rights of way.
Unbeknownst to Beito, on March 18, 2002, Stewart conveyed the property from AMI back to ABC. CTA prepared and recorded the deed at Stewart’s request. About the same time, Insearch began making monthly payments to CTA and continued through August 2003.
At the end of April 2002, Stewart, ABC and Superstition Crushing LLC formed 1405 Mine LLP. In early May, Beito's counsel, Craig Mousel, advised Beito by letter that ABC had formed a new company with Superstition Crushing. The same letter indicated that the new partnership was amending the prior land use permit applications on the property.
On May 22, 2002, ABC conveyed the property to 1405 Mine. CTA was the escrow agent on the transaction.
In August 2002, communications from the Arizona State Land Department concerning permit issues on the land involving Superstition Crushing were sent to Beito by his counsel. In addition, in August 2003, Beito became aware that someone else was making payments to CTA for the land. In February 2005, Beito received an advertisement from 1405 Mine advertising products from the property.
Beito faxed the price list to Mousel noting it advertised products at “my Alameda property.” Mousel sent a letter to the lawyer believed to be Stewart’s counsel demanding an inspection of AMI’s fiscal records. The attorney responded that he had no fiscal corporate records for AMI, that he had not heard from Stewart “in some time,” and that he did not believe he represented either Stewart or AMI.
On Aug. 24, 2005, AMI and Beito filed suit against Stewart, ABC, Superstition Crushing, and others to quiet title to the Property and for damages. CTA was added as a defendant on Dec. 4, 2006. Claims against CTA included breach of contract, breach of fiduciary and agency duties, and negligence. The claims arose from CTA’s involvement in the March 2002 transfer of the property from AMI to ABC and its continuing acceptance of payments from Insearch on the promissory note to the Swagels despite the transfer.
The quiet title claim was bifurcated from the other claims and in August 2008, the court ruled that the property would be titled in 1405 Mine. The findings of fact adopted by the court included findings that Beito had both actual and constructive knowledge of the transfer of the property to 1405 Mine and had waited more than three years with that knowledge before pursuing legal action.
The claims against CTA were tried by a jury in 2010. An issue at trial was whether the plaintiffs’ claim against CTA was barred by the statute of limitations because Beito knew or should have known about the facts underlying the conveyance of the property from AMI to ABC earlier than two years before filing suit against CTA. The plaintiffs asserted that CTA concealed information by accepting payments on the mortgage and by not informing Beito who had been making duplicate payments on the mortgage.
The court instructed the jury on the statute of limitations noting, “If you find that plaintiff either knew of the relevant facts giving rise to his claim, or should have discovered those facts had plaintiff exercised reasonable diligence, more then two years before December 2006, then you must find for Capital Title on all claims. If Capital Title fraudulently concealed the facts giving rise to plaintiff’s claim, plaintiff is relieved of the duty of diligent investigation and the duty to investigate only arises when plaintiff discovers the concealment.”
The jury found that Beito knew or should have known of the transfer more than two years before bringing his claim, resulting in a verdict for CTA.
The plaintiffs moved for a new trial, arguing (1) that the jury interrogatory was erroneous, (2) that evidence of concealment was presented, and (3) that in such a case, actual notice, not constructive notice triggered the limitations period. The plaintiffs asserted that CTA had continued to accept payments even after the transfer of the Property from AMI to ABC and that CTA had represented to Beito that he still owned the property. The court denied the motion for new trial. The plaintiffs appealed.
What the court decided:
Beito argued that the interrogatory was an improper statement of the law of the statute of limitations under the facts of the case because it did not take into account the possibility that CTA had concealed from Beito the transfer of the Property from AMI to ABC. Beito argued that the interrogatory should have provided for equitable tolling of the statute of limitations and that the instruction to the jury that it should stop if it found that Beito knew or should have known of the transfer in the exercise of reasonable diligence foreclosed the jury from considering concealment.
In viewing the instructions and interrogatories as a whole, the court did not find substantial doubt that the jury was properly guided in its deliberations. The court further noted that there was nothing in the record that indicated that the jury was unclear as to the instructions, and there were no juror questions on the subject.
“The post-verdict communication by the jurors did not mention any conflict or confusion regarding concealment, and taken on its face (in light of the jury instruction) simply suggests that the jurors had concluded no concealment occurred, that Beito had a duty to exercise reasonable diligence, and that the jury had difficulty agreeing on whether Beito had met the reasonable diligence standard,” the court said, concluding that when the instructions and the interrogatory are read together, there is no substantial doubt that the jury was properly guided in its deliberations.