Sands v. bill/zinkel ( 2014 )

NOTICE: NOT FOR PUBLICATION.
UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION DOES NOT CREATE LEGAL
PRECEDENT AND MAY NOT BE CITED EXCEPT AS AUTHORIZED.
IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE
RODNEY C. SANDS, Plaintiff/Appellant,
v.
BILL KAY’S TEMPE DODGE, INC., dba TEMPE DODGE CHRYSLER
JEEP KIA; DAVE ZINKEL, Defendants/Appellees.
No. 1 CA-CV 13-0051
FILED 3-20-2014
Appeal from the Superior Court in Maricopa County
No. CV2010-033143
The Honorable Robert H. Oberbillig, Judge
REVERSED IN PART; AFFIRMED IN PART; VACATED IN PART;
REMANDED
COUNSEL
Baker & Baker, Phoenix
By Thomas M. Baker
Counsel for Plaintiff/Appellant
Hammond & Tobler, P.C., Tempe
By Doug Tobler
Counsel for Defendants/Appellees
SANDS v. BILL KAY/ZINKEL
Decision of the Court
MEMORANDUM DECISION
Judge Patricia K. Norris delivered the decision of the Court, in which
Presiding Judge Donn Kessler and Judge Maurice Portley joined.
N O R R I S, Judge:
¶1 Rodney C. Sands appeals from the superior court’s grant of
summary judgment on his statutory consumer fraud claim and denial of
consequential and punitive damages. He also appeals the attorneys’ fee
award in favor of Bill Kay’s Tempe Dodge, Inc. and Dave Zinkel. For the
following reasons, we reverse the superior court’s judgment in part, affirm
in part, vacate the fee award, and remand for further proceedings
consistent with this decision.
FACTS AND PROCEDURAL HISTORY
¶2 On September 9, 2010, Sands entered into a purchase
contract with Tempe Dodge to purchase a specific 2011 Jeep Grand
Cherokee Overland 4x4 (“the Jeep”). Sands gave Tempe Dodge a check
for $4,000 as a deposit. Zinkel, as a salesperson and fleet director for
Tempe Dodge, told Sands it would take two to three weeks for the Jeep to
arrive at the dealership. Sands informed Zinkel he was willing to wait
that period of time because he had to have tow brackets custom-made for
the Jeep so he could tow it behind his recreational vehicle and he was not
planning on traveling until after the Jeep arrived.
¶3 Sands called multiple times to check on the delivery status of
the Jeep. Zinkel first told Sands the Jeep was “stuck on a train in Kansas
City,” then told Sands it was in New Mexico, and later told Sands it was in
a train yard in Phoenix. Sands then decided to go to the dealership to talk
to Zinkel, and another salesperson approached him. Sands asked the
salesperson if the dealership had a white 2011 Jeep Grand Cherokee
Overland, and the salesperson showed him a vehicle with the same
vehicle identification number as the Jeep Sands had purchased. Sands
told the salesperson he had already purchased that specific Jeep, and the
salesperson got Zinkel.
¶4 Zinkel told Sands he could not take possession of the Jeep
because the trunk latch was broken and needed to be repaired. Zinkel
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also offered to sell a different vehicle to Sands, but Sands declined, saying
he would wait for the Jeep to be repaired. Later, Zinkel told Sands that
Tempe Dodge would not sell the Jeep at all because it was too badly
damaged, but that Tempe Dodge might be able to get a replacement Jeep
from a dealership in Las Vegas. At that point, Zinkel again offered to sell
Sands a different vehicle, but Sands again declined, stating he had already
had the tow brackets custom-made for the Jeep.
¶5 On October 25, 2010, Zinkel returned to Sands the deposit
check and purchase contract with “VOID” written across them, stating he
was unable to find a replacement Jeep. Sands subsequently learned that
on September 27, 2010, Tempe Dodge had received the Jeep and had then
sold it to a third party on October 16, 2010 for more than Sands had
agreed to pay for it. On January 31, 2011, Sands ultimately purchased a
2011 Jeep Grand Cherokee Overland from another dealership.
¶6 Sands sued Tempe Dodge and Zinkel (collectively, “Tempe
Dodge”) for breach of contract, seeking, as relevant here, compensatory
and consequential damages. Sands requested damages for the difference
between the price of the Jeep and the price of the vehicle he ultimately
purchased and loss of use damages based on daily rental rates for a
comparable vehicle for 122 days.1 Sands also sued Tempe Dodge for
statutory consumer fraud, seeking, as relevant here, punitive damages
pursuant to Arizona Revised Statutes (“A.R.S.”) section 44-1522 (Supp.
2013).2
¶7 Tempe Dodge moved for summary judgment, arguing
Sands was not entitled to damages on his consumer fraud claim because
the alleged fraud occurred after he signed the purchase contract and
Sands did not enter into a subsequent purchase contract for a substitute
vehicle from Tempe Dodge. Tempe Dodge also argued Sands was not
entitled to loss of use or punitive damages. Sands responded and moved
1Sands estimated loss of use damages from September 30,
2010, which is approximately the date he would have taken possession of
the Jeep had Tempe Dodge delivered it to him, and January 31, 2011, the
date he purchased a vehicle from another dealership.
2Although the Arizona Legislature amended statutes cited in
this decision after the date of Tempe Dodge’s breach of the purchase
contract, the revisions are immaterial. Thus, we cite to the current version
of these statutes.
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for partial summary judgment on liability for his breach of contract and
consumer fraud claims, arguing Tempe Dodge’s breach of the purchase
contract was undisputed and he had detrimentally relied on Tempe
Dodge’s statements in connection with the purchase of the Jeep. The
superior court granted Tempe Dodge’s motion “as to the claim for
consumer fraud and the claim for punitive damages.” It further granted
Sands’s motion in part, finding Tempe Dodge had breached the contract
as a matter of law. It found, however, he had “no claim under the contract
theory for incidental or consequential damages for loss of
use/enjoyment/rental value.” Based on the amount in controversy, the
court transferred the case for compulsory arbitration for an arbitrator to
decide the sole issue of actual damages under the contract theory. See
A.R.S. § 12-133(A) (Supp. 2013); Ariz. R. Civ. P. 72(b); Ariz. Local R. Prac.
Super. Ct. (Maricopa) 3.10(a).
¶8 The arbitrator awarded Sands damages and Tempe Dodge
attorneys’ fees and costs, resulting in a net judgment for Tempe Dodge.
Sands appealed the arbitration award and asked the court to set a jury
trial. Tempe Dodge again moved for summary judgment, advising the
court that in order to avoid the expense of a jury trial, it would stipulate
that Sands’s actual damages were $2,527.90 -- the greatest amount of
actual damages Sands had requested. Sands agreed that, without loss of
use damages, his damages were limited to that amount, but asked the
court to reconsider whether he had a claim for incidental or consequential
damages. The court refused to reconsider its prior ruling on incidental
and consequential damages and granted Tempe Dodge’s motion. Both
parties requested an award of attorneys’ fees pursuant to A.R.S. § 12-
341.01 (Supp. 2013). The superior court entered judgment in favor of
Sands for $2,527.90 plus costs and awarded Tempe Dodge $16,000 in
attorneys’ fees.
DISCUSSION
I. Summary Judgment in Favor of Tempe Dodge
¶9 On appeal, Sands argues the superior court should not have
granted summary judgment for Tempe Dodge on his claim for consumer
fraud and request for consequential and punitive damages.3 Reviewing
3Tempe Dodge did not cross-appeal from the superior
court’s grant of summary judgment to Sands on his breach of contract
claim. Accordingly, we affirm that portion of the superior court’s
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the issues de novo, we agree. See Ochser v. Funk, 228 Ariz. 365, 369, ¶ 11,
266 P.3d 1061, 1065 (2011) (citation omitted).
A. Sands’s Claim Under the Consumer Fraud Act
¶10 Sands first argues the superior court should not have
dismissed his claim under Arizona’s Consumer Fraud Act (“CFA”), A.R.S.
§ 44-1522 to -1534 (Supp. 2013), because he presented a genuine dispute of
material fact that Tempe Dodge committed an unlawful practice under the
CFA. We agree.
¶11 The CFA defines an unlawful practice as:
The act, use or employment by any person of
any deception, deceptive or unfair act or
practice, fraud, false pretense, false promise,
misrepresentation, or concealment,
suppression or omission of any material fact
with intent that others rely on such
concealment, suppression or omission, in
connection with the sale or advertisement of any
merchandise whether or not any person has in
fact been misled, deceived or damaged
thereby . . . .
A.R.S. § 44-1522(A) (emphasis added). “Sale” includes “any sale, offer for
sale, or attempt to sell any merchandise for any consideration.” A.R.S.
§ 44-1521(7) (2013).
¶12 “To succeed on a claim [for] consumer fraud, a plaintiff must
show a false promise or misrepresentation made in connection with the
sale or advertisement of merchandise and consequent and proximate
injury resulting from the promise.” Kuehn v. Stanley, 208 Ariz. 124, 129,
¶ 16, 91 P.3d 346, 351 (App. 2004) (citation omitted). Injury occurs when
the consumer relies on the false promise or misrepresentation, even if
unreasonably. Id.¶13 Here, Sands presented evidence Tempe Dodge made
numerous false statements in an attempt to persuade him to buy a
judgment. See Bogard v. Cannon & Wendt Elec. Co., Inc., 221 Ariz. 325, 332-
33, ¶ 24, 212 P.3d 17, 24-25 (App. 2009) (citations omitted) (rulings not
challenged on appeal considered final and implicitly affirmed).
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different vehicle, in what he characterized as a “bait and switch” sales
tactic. Although Sands did not buy a different vehicle, he presented
evidence he relied on Tempe Dodge’s statements by purchasing custom-
made tow brackets and delaying shopping at other dealerships for a
replacement Jeep. See Restatement (Second) of Torts § 525 (1977) (“One
who fraudulently makes a misrepresentation of fact . . . for the purpose of
inducing another to act or to refrain from action in reliance upon it, is
subject to liability . . . .” (emphasis added)).
¶14 Despite this evidence, Tempe Dodge argues Sands did not
present a genuine dispute of material fact regarding reliance because it
made these alleged statements to Sands after he had entered into the
purchase contract and, thus, he did not actually rely on anything Tempe
Dodge supposedly said. In making this argument, Tempe Dodge relies on
Kuehn, 208 Ariz. 124, 91 P.3d 346. Kuehn, however, is distinguishable.
¶15 There, the plaintiffs agreed to purchase property contingent
on obtaining financing. Id. at 126, ¶ 2, 91 P.3d at 348. Their lender
obtained an appraisal that reported the property had a fair market value
that exceeded the amount the plaintiffs needed to finance the property. Id.
at ¶ 3. After the purchase closed, the plaintiffs learned the appraiser had
over-valued the property. Id. The plaintiffs had the property evaluated
by a second appraiser, and although the second appraiser reported a
lower value, the value was still sufficient to satisfy the financing
contingency because the property appraised for more than the loan
amount. Id. We affirmed the superior court’s dismissal of the plaintiffs’
consumer fraud claim against the lender for lack of reliance, explaining
the plaintiffs could not have relied on the appraisal in entering or
performing the contract because they were already bound to purchase the
property when they received the appraisal. Id. at 130, ¶ 20, 91 P.3d at 352.
¶16 Here, unlike the plaintiffs in Kuehn, Sands was not bound to
buy the Jeep when Tempe Dodge was trying to persuade him to buy a
different vehicle. Sands’s obligation to perform the purchase contract was
conditioned on his inspection and final acceptance of the Jeep. The
purchase contract provided:
RIGHT TO INSPECT - FINAL ACCEPTANCE
OF VEHICLE. The Customer acknowledges
that he or she will be given an opportunity to
thoroughly inspect the vehicle sold hereunder
prior to taking delivery and that [by] taking
delivery the customer agrees to accept such
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Decision of the Court
vehicle with any defect or non-conformity.
Receipt or delivery of the vehicle sold
hereunder constitutes the Customer’s
acknowledgment that said [vehicle] conforms
to this contract and constitutes the customer’s
unqualified acceptance of the vehicle . . . .
In addition to this clause, the contract had a handwritten notation that
stated, “subject to customer approval when car arrives.” Kuehn is thus
distinguishable from this case.
¶17 Further, the statements allegedly made by Tempe Dodge to
persuade Sands to buy a different vehicle were made “in connection with”
Tempe Dodge’s sale of the Jeep to Sands. As noted, supra ¶ 11, the CFA
states fraud or misrepresentations must occur “in connection with the
sale.” This is a broad phrase that goes beyond the moment of sale. C.f.
State v. Bews, 177 Ariz. 334, 336, 868 P.2d 347, 349 (App. 1993) (defining “in
connection with” as “a relationship or association in thought” in criminal
context (quoting Webster’s Third New International Dictionary 481
(1971))); see also Key Air, Inc. v. Comm’r of Revenue Servs., 983 A.2d 1, 8 n.11
(Conn. 2009) (noting cases broadly construing “in connection with” in
statutory and contractual contexts). The representations and actions of
Tempe Dodge, taken as a whole, were therefore “in connection with” a
sale of merchandise under A.R.S. § 44-1522(A).
¶18 Considering the evidence presented by Sands and
reasonable inferences from this evidence in a light most favorable to
Sands, see Ochser, 228 Ariz. at 369, ¶ 11, 266 P.3d at 1065 (citation omitted),
Sands presented a genuine dispute of material fact sufficient to go
forward on his statutory consumer fraud claim. See Ariz. R. Civ. P. 56(a).
We therefore reverse the superior court’s grant of summary judgment on
Sands’s consumer fraud claim and remand for further proceedings
consistent with this decision.
B. Consequential Damages
¶19 Sands also argues the court should not have dismissed his
request for consequential damages on the breach of contract claim for loss
of use of the Jeep. We agree.
¶20 A plaintiff may recover damages for loss of use when the
seller fails to deliver goods on the date promised in a contract if the seller
knew of the buyer’s intended use of the goods at the time of entering into
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Decision of the Court
the contract and the buyer proves the goods would have been used but for
the seller’s failure to deliver. Aries v. Palmer Johnson, Inc., 153 Ariz. 250,
259, 735 P.2d 1373, 1382 (App. 1987). The measure of damages for loss of
use of a vehicle is the reasonable rental value at the time of the loss; the
buyer need not actually rent a substitute. Id. The buyer must prove when
the goods would have been in use and can recover damages only for that
period of time. Id. at 259-60, 735 P.2d at 1382-83.
¶21 Aries is directly on point. There, the plaintiff purchased a
yacht with a June delivery date. Id. at 253, 735 P.2d at 1376. The seller
delivered the yacht five months late, depriving the plaintiff of its use
during the summer. Id. at 254, 735 P.2d at 1377. Before agreeing to buy
the yacht, the plaintiff had informed the seller of his intended use of the
yacht during the summer. Id. The court awarded damages to the plaintiff
for loss of use, using the reasonable rental value as the measure of
damages. Id. at 259-60, 735 P.2d at 1382-83.
¶22 Tempe Dodge argues Aries does not entitle Sands to
damages for loss of use because Sands was not waiting in good faith for
Tempe Dodge to cure, and therefore, he merely had an action for breach of
contract, rather than delay. We see nothing in Aries to suggest the
availability of loss of use damages applies only to cases of delay while
waiting for the seller to cure. In fact, Aries expressly states loss of use
damages would “also apply to the failure to deliver the goods on the date
promised in the contract.” Id. at 259, 735 P.2d at 1382 (citation omitted).
¶23 Tempe Dodge also argues “common sense” precludes Sands
from recovering for loss of use because he could have taken years to
replace the Jeep, resulting in an outrageous amount of damages against
Tempe Dodge. We find this argument unpersuasive. First, damages
would be recoverable only for the time Sands could prove the goods
would have been in use. Id. Second, recoverable consequential damages
are those “which could not reasonably be prevented by cover or
otherwise.” A.R.S. § 47-2715(B)(1) (2005). Thus, the law provides
safeguards against such unreasonable damages requests.
¶24 Tempe Dodge also argues Sands waived any right to
consequential damages based on a provision in the purchase contract
precluding incidental or consequential damages. Next to the provision at
issue, however, is a space for initials. Sands did not initial the space,
possibly indicating he had not agreed to the provision. On remand, if
appropriate on a more fully developed record, Tempe Dodge may raise
the argument that the alleged waiver is effective.
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¶25 Tempe Dodge also argues Sands failed to provide admissible
evidence regarding damages. The superior court did not, however,
address the admissibility of Sands’s evidence regarding damages and
therefore neither will we. Although Tempe Dodge argued the rental rate
information was hearsay and lacked foundation, the superior court did
not rule on these objections. The minute entry only reflects the superior
court summarily concluded Sands could not recover loss of use damages.
On remand, the superior court may address any evidentiary inadequacies
of this evidence.
C. Punitive Damages
¶26 Sands also argues the superior court should not have
dismissed his request for punitive damages. We agree.
¶27 Tempe Dodge sought summary judgment on punitive
damages, arguing Sands could not recover any punitive damages for the
alleged consumer fraud because he had not sustained any actual damages.
See Medasys Acquisition Corp. v. SDMS, P.C., 203 Ariz. 420, 423, ¶ 14, 55
P.3d 763, 766 (2002) (“The traditional rule requires an award of actual
damages before punitive damages may be awarded . . . .”). Tempe Dodge
did not, however, contend that Sands presented insufficient evidence of
the requisite level of recklessness, spite, or ill will to withstand summary
judgment. See Sellinger v. Freeway Mobile Home Sales, Inc., 110 Ariz. 573,
577, 521 P.2d 1119, 1123 (1974) (punitive damages available if defendant’s
conduct was “wanton, reckless or show[ed] spite or ill-will or where there
[was] a reckless indifference to the interests of others” (citations omitted)).
Although the basis for the superior court’s ruling is not clear from the
record before us, it appears the court may have granted the motion
because it had dismissed the consumer fraud claim. Given that the court
should not have dismissed Sands’s consumer fraud claim, we likewise
reverse the superior court’s dismissal of Sands’s request for punitive
damages and remand for further proceedings consistent with this
decision.
II. Attorneys’ Fee Award to Tempe Dodge
¶28 Because we are remanding this matter for further
proceedings, we vacate the superior court’s attorneys’ fee award to Tempe
Dodge. We will, however, address Sands’s argument that if Tempe
Dodge prevails, it is not entitled to a fee award under A.R.S. § 12-341.01.
A party’s legal entitlement to attorneys’ fees is a question of law.
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Chaurasia v. Gen. Motors Corp., 212 Ariz. 18, 26, ¶ 24, 126 P.3d 165, 173
(App. 2006) (citation omitted).
¶29 Sands argues Tempe Dodge is not entitled to attorneys’ fees
pursuant to A.R.S. § 12-341.01 because the purchase contract contained a
provision that only allowed Tempe Dodge to recover fees if Sands
breached the purchase contract, which, as Sands points out, did not
happen here. We disagree.
¶30 The purchase contract provided:
In the event of any breach of contract or default
by Purchaser that necessitates the filing of a
court action, Seller shall be entitled to
reasonable attorney’s fees and costs in addition
to any other recovery by Seller against
Purchaser.
Contrary to Sands’s argument, this provision does not preclude Tempe
Dodge from recovering fees under A.R.S. § 12-341.01 in other
circumstances. Fees may be awarded under the statute unless to do so
would expressly conflict with the terms of the contractual provision. See
Jordan v. Burgbacher, 180 Ariz. 221, 229, 883 P.2d 458, 466 (App. 1994)
(A.R.S. § 12-341.01 inapplicable “if it effectively conflicts with an express
contractual provision governing recovery of attorney’s fees”). The
provision here does not address Tempe Dodge’s entitlement to fees when
it, and not the purchaser, has breached the purchase contract. Thus, the
provision does not conflict with A.R.S. § 12-341.01, and Tempe Dodge is
entitled to attorneys’ fees pursuant to that statute if it prevails on remand.
III. Attorneys’ Fees on Appeal
¶31 Both parties have requested fees on appeal pursuant to
A.R.S. § 12-341.01. Because neither Sands nor Tempe Dodge has yet
prevailed, we deny their requests without prejudice. The superior court
may consider their competing requests for fees on appeal after
determining the prevailing party. See Hall v. Read Dev. Inc., 229 Ariz. 277,
279-81, ¶¶ 7-11, 274 P.3d 1211, 1213-15 (App. 2012) (discussing prevailing
party determinations in light of settlement offers).
CONCLUSION
¶32 For the foregoing reasons, we reverse the superior court’s
entry of summary judgment on Sands’s consumer fraud claim, affirm its
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grant of summary judgment on Sands’s breach of contract claim, reverse
its dismissal of Sands’s requests for compensatory damages for breach of
contract and punitive damages for consumer fraud, vacate the fee award
in favor of Tempe Dodge, and remand for further proceedings consistent
with this decision.
:mjt
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