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Desert Gardens Holdings, L.L.C. v. Singh

Court of Appeals of Arizona, First Division, Department B

June 25, 2013

DESERT GARDENS HOLDINGS, L.L.C., an Arizona limited liability company, Plaintiff/Appellee,
HARJIT SINGH and MANJIT KAUR, husband and wife, Defendants/Appellants.

Not for Publication – Rule 28, Arizona Rules of Civil Appellate Procedure

Appeal from the Superior Court in Maricopa County Cause No. CV2010-010513 The Honorable Robert H. Oberbillig, Judge The Honorable Arthur T. Anderson, Judge.

The Law Office of D. John Djordjevich Phoenix By D. John Djordjevich Attorneys for Appellants.

Frank L. Ross, Attorney At Law Goodyear Attorney for Appellee.



¶1 Harjit Singh and Manjit Kaur (collectively"Defendants”) appeal the superior court's grant of partial summary judgment, award of damages, and denial of their motion for new trial. For the following reasons, we affirm.


¶2 Desert Garden Holdings, L.L.C. ("Desert Garden”), executed a Promissory Note for $207, 982 (the"Loan-) secured by a Deed of Trust in favor of The Money Source, L.L.C. (“The Money Source”). The Money Source then executed an Assignment of Deed of Trust to Defendants which was recorded in La Paz County. Both before and after the assignment, Desert Garden made all payments on the note to The Money Source without any complaint by Defendants or any directions from Defendants to pay them directly.

¶3 In May 2009, Desert Garden paid off the balance of the note to The Money Source. When Desert Garden later attempted to borrow money to refinance the property described in the Deed of Trust, Singh told Desert Garden that The Money Source still owed Defendants $39, 167.51 and Defendants would not sign a release of the Deed of Trust until the amount was paid. Desert Garden paid Defendants the remaining amount and demanded Defendants execute a Deed of Release and Full Reconveyance of the Deed of Trust. Defendants allegedly did not comply with the demand.

¶4 Desert Garden filed a two-count complaint against Defendants, The Money Source, and Issam Habbo.[1] In the first count, they alleged Defendants had wrongfully refused to release the Deed of Trust, and they requested statutory damages under Arizona Revised Statutes (“A.R.S.”) section 33-712 (2007) and general and compensatory damages. The second count sought punitive damages.

¶5 Desert Garden filed a motion for partial summary judgment against Defendants on the issue of liability. Desert Garden argued that neither the recording of the Assignment of Beneficial Interest in the Deed of Trust nor the issuance of a partial release were sufficient to give Desert Garden notice of the assignment under A.R.S. § 33-818 (2007). Rather, to have required Desert Garden to have made payments on the note directly to Defendants, Defendants had to have given Desert Garden actual notice to make such payments to Defendants, rather than to The Money Source. Desert Garden also argued that The Money Source had been acting as Defendants' agent for purposes of payments.

¶6 Defendants argued that Desert Garden had: (1) actual knowledge that Defendants were the lender/mortgagee and The Money Source was merely a mortgage broker/agent; and (2) notice of the assignment and made payments to The Money Source as assignor at its peril. Defendants also argued that The Money Source was Defendants' express agent, but the agency relationship terminated upon the recording of the Assignment of Deed of Trust.

¶7 The superior court granted Desert Garden's motion. The court concluded that Defendants had created a course of dealing in which The Money Source acted as their agent in collecting payments on the note, and when Desert Garden made the final payment on the note to The Money Source, Defendants' had in effect received payment so Defendants' remedy was only against The Money Source:

[I]n my view, The Money Source was an agent in this entire context and –– and the principal through course of dealing fully accepted –– this is a finding of fact; it's not disputed –– fully accepted payments being made through The Money Source through the entirety of the transaction. And that to the extent that The Money Source failed to make a payment that it should have made or transferred the payment on to the principal, [Defendants], the remedy of [Defendants] is back against The Money Source.

¶8 Having resolved the issue of liability, the superior court held a bench trial on damages. At trial, Desert Garden argued that actual damages include damages flowing from or incurred as a direct result of the wrongdoing. Defendants countered by arguing that A.R.S. § 33-712 provides only for actual damages, and excluding consequential and incidental damages, the allowable award was limited to the $39, 167.51 Desert Garden paid Defendants in satisfaction of the Loan.

¶9Hamid Kazi (“Kazi”), manager of Desert Garden, testified that once he thought he had paid off the Loan to The Money Source, he attempted to refinance the property through another company. That other company required Desert Garden to prepare a business plan using a consultant, do an accounting, obtain an appraisal, and pay a nonrefundable fee. Once Kazi realized there was still a lien on the property as a result of the Loan, he alerted Defendants to the problem that lien was causing. Ultimately, the refinancing failed because Defendants did not release the lien. In addition, Desert Garden still had a loan outstanding on the property from the seller of the property that was coming due and could not be paid without the refinancing. Desert Garden obtained an extension on that loan, but at a much higher interest rate and with a penalty. Thus, the total of Desert Garden's alleged damages included a $10, 000 nonrefundable fee, a $750 appraisal fee, a $2, 000 consulting fee, and a $3, 741 accounting fee. In addition, ...

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