Antseliovich v. US Bank ( 2018 )


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  •                       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    UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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
    PAUL ANTSELIOVICH, et al., Plaintiffs/Appellants,
    v.
    JP MORGAN CHASE BANK NA, et al., Defendants/Appellees,
    US BANK NA, Defendant/Appellee.
    No. 1 CA-CV 16-0515
    FILED 5-1-2018
    Appeal from the Superior Court in Maricopa County
    No. CV2013-005659
    The Honorable Karen A. Mullins, Judge
    REVERSED IN PART, AFFIRMED IN PART, AND REMANDED
    COUNSEL
    Stephen Silverman Law, Scottsdale
    By Stephen E. Silverman
    Counsel for Plaintiffs/Appellants
    Dickinson Wright PLLC, Phoenix
    By Michael J. Plati
    Counsel for Defendants/Appellees JP Morgan Chase Bank NA and Wells Fargo
    Bank NA
    Quarles & Brady LLP, Phoenix
    By C. Bradley Vynalek, Sarah R. Anchors, Brian Howie
    Counsel for Defendant/Appellee US Bank NA
    ANTSELIOVICH, et al. v. US BANK
    Decision of the Court
    MEMORANDUM DECISION
    Judge Jennifer M. Perkins delivered the decision of the Court, in which
    Presiding Judge Diane M. Johnsen and Judge Kent E. Cattani joined.
    P E R K I N S, Judge:
    ¶1            Appellants Paul Antseliovich and Oksana Gugis appeal the
    superior court’s orders denying their motion for new trial and dismissing
    their Second Amended Complaint against Appellees JP Morgan Chase
    Bank NA (“Chase”), Wells Fargo Bank NA (“Wells Fargo”), and U.S. Bank
    NA. For the following reasons, we reverse dismissal of the conversion claim
    against Chase and Wells Fargo, affirm in part, and remand.
    FACTS AND PROCEDURAL HISTORY
    ¶2            Appellants obtained a loan from U.S. Bank in May 2009,
    secured by a recorded deed of trust encumbering their residential property.
    In 2011, Appellants submitted a claim to their insurer, IDS Property
    Casualty Insurance Company (“IDS”), for water and structural damage to
    their home. Appellants then hired a contractor to repair at least some
    portion of their home. Between 2011 and 2012, IDS issued four checks
    totaling approximately $90,000 (the “Checks”) to pay for the repairs. IDS
    made the checks jointly payable to Appellants, the contractor, and U.S.
    Bank. Appellants received the Checks, indorsed them, and gave them to the
    contractor. The contractor then deposited or cashed the Checks at Chase,
    without U.S. Bank’s indorsement. The Checks were drawn on IDS’s account
    with Wells Fargo, which honored the checks without U.S. Bank’s
    indorsement.
    ¶3            A dispute between Appellants and IDS arose sometime
    during the claims adjustment process. In May 2013, when this dispute could
    not be resolved, Appellants filed suit against IDS, Wells Fargo, Chase, and
    others. The following month, Appellants amended their complaint to
    include U.S. Bank. In September 2013, Appellants requested leave to file a
    second amended complaint. Chase and Wells Fargo filed a joint motion to
    dismiss the First Amended Complaint in October 2013. Thereafter, in
    November 2013, the superior court granted Appellants’ request to amend
    and the Second Amended Complaint became the operative complaint. In
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    ANTSELIOVICH, et al. v. US BANK
    Decision of the Court
    December 2013, U.S. Bank filed its own motion to dismiss the Second
    Amended Complaint. 1
    ¶4             In their Second Amended Complaint, Appellants alleged
    Chase and Wells Fargo converted the Checks, intentionally interfered with
    a contract between Appellants and U.S. Bank, and engaged in a conspiracy
    to deprive Appellants of their rights in the Checks. Additionally,
    Appellants alleged U.S. Bank had breached its deed of trust with
    Appellants by failing to pursue or assign a conversion claim against Chase
    and Wells Fargo, violated the contract’s implied covenant of good faith and
    fair dealing, and converted the Checks. After oral argument, the superior
    court dismissed the claims against Chase, Wells Fargo, and U.S. Bank in
    March 2014. The case proceeded against IDS until Appellants and IDS
    reached a settlement in January 2016. Thereafter, the superior court entered
    a judgment of dismissal with prejudice as to Chase, Wells Fargo, and U.S.
    Bank.
    ¶5           Appellants filed a motion for new trial as to Chase, Wells
    Fargo, and U.S. Bank in March 2016, arguing Chase and Wells Fargo
    converted the Checks under Arizona’s version of the Uniform Commercial
    Code. The superior court denied Appellants’ motion and Appellants timely
    appealed the dismissal and denial of their motion for new trial.
    DISCUSSION
    ¶6            The grant of a motion under Arizona Rule of Civil Procedure
    12(b)(6) is question of law. Thus, we review dismissal for failure to state a
    claim on which relief can be granted de novo. Coleman v. City of Mesa, 
    230 Ariz. 352
    , 355–56, ¶¶ 7, 9 (2012). In doing so, we assume the truth of all well-
    pled factual allegations and “indulge” reasonable inferences from those
    allegations; however, mere conclusory statements are insufficient to state a
    claim. Cullen v. Auto-Owners Ins. Co., 
    218 Ariz. 417
    , 419, ¶¶ 6–7 (2008). While
    the superior court looks only to the complaint in adjudicating a Rule
    12(b)(6) motion, it may consider exhibits to the complaint, other documents
    central to the alleged claim, and public records regarding matters
    referenced in a complaint without converting a Rule 12(b)(6) motion into
    one for summary judgment. See Strategic Dev. & Constr., Inc. v. 7th &
    Roosevelt Partners, LLC, 
    224 Ariz. 60
    , 63–64, ¶¶ 10, 13–14 (App. 2010). We
    will affirm dismissal only if, as a matter of law, the plaintiff is not entitled
    1The superior court, without objection, ruled on the combined Chase and
    Wells Fargo Motion to Dismiss as though it had been directed at the Second
    Amended Complaint.
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    ANTSELIOVICH, et al. v. US BANK
    Decision of the Court
    to relief under any interpretation of the alleged facts susceptible to proof.
    Fidelity Sec. Life. Ins. Co. v. State Dep’t of Ins., 
    191 Ariz. 222
    , 224, ¶ 4 (1998).
    I.     Conversion Claims
    ¶7            Conversion of a negotiable instrument is governed by
    Arizona Revised Statutes (“A.R.S.”) section 47-3420, which provides, in
    relevant part, “An instrument is also converted if . . . a bank makes or
    obtains payment with respect to the instrument for a person not entitled to
    enforce the instrument or receive payment.” A.R.S. § 47-3420(A). Thus,
    Chase and Wells Fargo are proper defendants in an action by Appellants
    for conversion of the Checks if the contractor who deposited the Checks
    was not entitled to enforce them or receive payment from them.
    ¶8            The Checks were made jointly payable to Appellants, the
    contractor, and U.S. Bank. Jointly payable negotiable instruments may only
    be “negotiated, discharged or enforced” by all co-payees. A.R.S. § 47-
    3110(D). The Checks were not indorsed by U.S. Bank and were paid to the
    contractor despite U.S. Bank’s missing indorsement.
    ¶9             The superior court found that Appellants had no claim of
    conversion because they transferred their interest in the Checks under
    A.R.S. § 47-3203. “Transfer” is defined in that statute as the delivery of a
    negotiable instrument “by a person other than its issuer for the purpose of
    giving to the person receiving delivery the right to enforce the instrument.”
    A.R.S. § 47-3203(A). In this context, “delivery” is statutorily defined as the
    “voluntary transfer of possession.” A.R.S. § 47-1201(B)(15). Upon transfer,
    the transferee gains any right of the transferor to enforce the instrument.
    A.R.S. § 47-3203(B).
    ¶10            A transfer of less than complete interest operates as an
    assignment. See West v. Baker, 
    109 Ariz. 415
    , 417 (1973). However, transfer
    or assignment only occurs when the payee delivers the instrument to a
    person with the intent to give the person receiving the instrument their
    rights to the instrument. A.R.S. § 47-3203(A). Thus, whether there was an
    assignment implicates a question of fact as to whether the delivery was
    meant to give any interest Appellants had in the checks to the contractor.
    Here, Appellants’ intent in passing the Checks to the contractor has not
    been determined. Accordingly, the superior court erred by granting Chase
    and Wells Fargo’s Rule 12(b)(6) motion solely on the basis that Appellants
    had indorsed the Checks and gave the Checks to the contractor. For the
    foregoing reasons we reverse the dismissal of Appellants’ conversion claim
    against Chase and Wells Fargo.
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    ANTSELIOVICH, et al. v. US BANK
    Decision of the Court
    ¶11           Appellants additionally alleged U.S. Bank converted the
    Checks or converted a cause of action on the Checks. Appellants’ Second
    Amended Complaint contains nothing more than conclusory statements
    regarding a common law claim of conversion against U.S. Bank. Because
    we do not consider mere conclusory statements, Appellants have failed to
    state a claim for common law conversion of a cause of action against U.S.
    Bank. 
    Cullen, 218 Ariz. at 419
    , ¶ 7. Moreover, Appellants do not allege that
    U.S. Bank ever possessed the Checks or received proceeds from the Checks.
    Appellants’ claim for conversion under A.R.S. § 47-3420 fails as to U.S.
    Bank; the superior court’s dismissal of that claim is therefore affirmed.
    II.    Remaining Claims
    ¶12            Appellants’ remaining claims against Chase, Wells Fargo, and
    U.S. Bank were properly dismissed. For the reasons set forth below, the
    allegations on which these claims are based are mere conclusory statements
    which fail to state a claim for which relief could be granted. See 
    Cullen, 218 Ariz. at 419
    , ¶¶ 6–7.
    A. Intentional Interference with Contractual Relations
    ¶13            Appellants alleged Chase and Wells Fargo intentionally
    interfered with the contract between Appellants and U.S. Bank. In support
    of this claim, Appellants alleged that Chase and Wells Fargo “are aware of
    the contract entered into between Plaintiffs and U.S. Bank” and
    “intentionally interfered with the contract . . . by engaging in a scheme to
    indifferently delay resolution of the fraud committed by a third party, and
    aided and endorsed by these defendants.”
    ¶14            Intentional interference with contractual relations is an
    intentional tort that requires: the existence of a valid contractual
    relationship; knowledge of the relationship on the part of the interferor;
    intentional interference inducing or causing a breach; resultant damage to
    the party whose relationship has been disrupted; and improper action by
    the defendant. Safeway Ins. Co., Inc. v. Guerrero, 
    210 Ariz. 5
    , 10, ¶ 14 (2005).
    Although Appellants assert Chase and Wells Fargo knew of their
    relationship with U.S. Bank, they alleged no facts to support this assertion
    beyond U.S. Bank’s presence as a co-payee on the Checks. More
    significantly, Appellants did not allege any acts by Chase or Wells Fargo to
    induce U.S. Bank to breach its contract with Appellants. Finally, Appellants
    did not allege any facts showing how Chase or Wells Fargo’s alleged
    “scheme to indifferently delay resolution” of conduct by a third party
    constitutes intentional action by Chase or Wells Fargo, nor how such delay
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    ANTSELIOVICH, et al. v. US BANK
    Decision of the Court
    induced or caused U.S. Bank to breach Appellants’ contract. Accordingly,
    we affirm the superior court’s dismissal of the intentional interference
    claim.
    B. Breach of Contract
    ¶15             With respect to U.S. Bank, Appellants alleged their contract
    required U.S. Bank to deposit any property insurance proceeds into
    “escrow . . . to be held for the benefit of Plaintiffs.” U.S. Bank filed a copy of
    its deed of trust, as reflected in Maricopa County’s public records, with its
    motion to dismiss. 2 The superior court properly considered the document
    as a matter of public record integral to the claims at issue. See Strategic Dev.
    & Constr., 
    Inc., 224 Ariz. at 64
    , ¶ 13. Reviewing the record de novo, and
    considering the actual text of the trust deed pursuant to Strategic
    Development & Construction, Inc., the language alleged by Appellants
    appears nowhere in the deed. Instead, the deed gives U.S. Bank the right,
    but not the obligation, to hold insurance proceeds until repairs are made to
    its satisfaction. No term of the deed of trust requires U.S. Bank to hold or
    pursue insurance proceeds on behalf of Appellants, nor is there any
    indication that the insurance-related provisions are for the benefit of
    Appellants rather than U.S. Bank. Further, no term of the contract requires
    U.S. Bank to “credit [Appellants’] mortgage obligation” in the amount of
    checks it never received, to assign a cause of action, or to otherwise pay
    Appellants for missing or converted insurance proceeds. Consequently, we
    affirm the superior court’s dismissal of Appellants’ breach of contract claim
    against U.S. Bank.
    C. Breach of Implied Covenant of Good Faith and Fair Dealing
    ¶16           Appellants also alleged U.S. Bank breached the implied
    covenant of good faith and fair dealing in the deed of trust. The superior
    court dismissed this claim on the basis that it is derivative of Appellants’
    claim for breach of contract; however, breach of the implied covenant of
    good faith and fair dealing is not dependent on a breach of an enumerated
    contractual term. Bike Fashion Corp. v. Kramer, 
    202 Ariz. 420
    , 423–24, ¶ 14
    2 The deed of trust filed by U.S. Bank was dated 2013; however, the
    operative contract for the events giving rise to the Second Amended
    Complaint was actually a 2009 deed of trust. The 2009 deed of trust is
    recorded in the Maricopa County Recorder’s Office. Pursuant to Arizona
    Rule of Evidence 201, we take judicial notice of the 2009 deed of trust.
    Paragraph 5 of the 2009 and 2013 deeds of trust are identical in all respects
    and do not affect the outcome at the superior court or on appeal.
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    ANTSELIOVICH, et al. v. US BANK
    Decision of the Court
    (App. 2002). Indeed, a contracting party may commit a breach by exercising
    express discretion in a manner that denies the other party a reasonably
    expected benefit of the bargain. 
    Id. at 424,
    ¶ 14.
    ¶17           As 
    discussed supra
    , however, nothing in the deed of trust
    required U.S. Bank to preserve, process, or pursue insurance proceeds
    outside its control. Instead, to the extent insurance proceeds are discussed,
    the deed of trust merely allows U.S. Bank to protect its security interest in
    Appellants’ property by acting to preserve the collateral. From the terms of
    their agreement, Appellants could not reasonably expect U.S. Bank to
    affirmatively pursue insurance proceeds. Moreover, nothing in the deed of
    trust required U.S. Bank to litigate missing or converted insurance proceeds
    on behalf of Appellants, and Appellants could not characterize such action
    as an expected benefit of their bargain. We affirm the superior court’s
    dismissal of Appellants’ claim for bad faith as to U.S. Bank.
    D. Common Law Conspiracy and Fraud Claims
    ¶18           Appellants also alleged all the defendants acted in concert to
    “commit a fraud upon the appraisal process” and to “delay and refuse
    payment” of the Checks. Nothing in the Second Amended Complaint
    explains or alleges any details of any Appellee’s participation in the
    appraisal process. Furthermore, Appellants alleged no facts suggesting U.S.
    Bank was involved in the alleged conspiracy or fraud despite Appellants’
    reference to “Defendants” acting collectively. To the extent Appellants
    alleged a civil conspiracy in their Second Amended Complaint, these
    allegations amount to mere conclusory statements that do not satisfy the
    notice pleading requirements of Rule 8. See also 
    Cullen, 218 Ariz. at 419
    , ¶¶
    6–7. Moreover, civil conspiracy alone is not a recognized cause of action in
    Arizona. Wells Fargo Bank v. Arizona Laborers, Teamsters & Cement Masons
    Local No. 395 Pension Trust Fund, 
    201 Ariz. 474
    , 498–99, ¶ 99 (2002). Plaintiffs
    must allege an underlying tort, such as fraud, when pleading a civil
    conspiracy. 
    Id. ¶19 Appellants
    alleged Appellees agreed to “commit a fraud” and
    “refuse payment” as part of the conspiracy. Once more, these allegations
    amount to mere conclusory recitations of unlawful acts and are insufficient
    to survive a motion to dismiss. 
    Cullen, 218 Ariz. at 419
    , ¶¶ 6–7. Moreover,
    allegations of fraud must satisfy a higher standard of specificity. See Ariz.
    R. Civ. P. 9(b) (allegations of fraud must be stated with “particularity” as to
    the circumstances constituting fraud). While there is no “magic language”
    necessary to plead fraud, a plaintiff must plead all the essential elements of
    fraud. Steinberger v. McVey ex rel. County of Maricopa, 
    234 Ariz. 125
    , 141,
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    ANTSELIOVICH, et al. v. US BANK
    Decision of the Court
    ¶20           ¶ 73 (App. 2014). Here, Appellants failed to plead any of the
    elements of fraud. Thus, we affirm the superior court’s dismissal of the civil
    conspiracy and fraud allegations.
    III.   Motion for New Trial
    ¶21           We review the denial of a motion for new trial for an abuse of
    discretion. Styles v. Ceranski, 
    185 Ariz. 448
    , 450 (App. 1996). Because we
    reverse the superior court’s dismissal of the conversion claim against Chase
    and Wells Fargo, we do not consider the denial of retrial as to that claim.
    As to the remaining claims, for the reasons 
    discussed supra
    , we affirm the
    superior court’s denial of Appellants’ motion for new trial.
    CONCLUSION
    ¶22           For foregoing reasons, we reverse the dismissal of Appellants’
    claim for conversion against Chase and Wells Fargo and remand the matter
    to the superior court. We affirm the dismissal of Appellants’ remaining
    claims and the denial of Appellants’ motion for new trial.
    ¶23           With respect to the contract claims against U.S. Bank, U.S.
    Bank has requested an award of attorneys’ fees and costs. The award of
    attorneys’ fees pursuant to A.R.S. § 12-341.01 is discretionary. Winter v.
    Coor, 
    144 Ariz. 56
    , 65 (1985). In our discretion, we deny U.S. Bank’s request
    for attorneys’ fees. As the prevailing party, U.S. Bank may seek its costs
    upon compliance with Arizona Rule of Civil Appellate Procedure
    (“ARCAP”) 21. Because neither Appellants nor Appellees Chase and Wells
    Fargo prevailed on the totality of their claims, they are not prevailing
    parties under ARCAP Rule 21.
    AMY M. WOOD • Clerk of the Court
    FILED: AA
    8