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Cooley v. Davison

United States District Court, D. Arizona

June 28, 2017

Gerrie A Cooley, et al., Plaintiffs,
v.
James E Davison, et al., Defendants.

          ORDER

          Douglas L. Rayes United States District Judge.

         This case arises out of the sale of Camptown Mobile Home Park ("Camptown"), located in Show Low, Arizona. During the relevant time period, Camptown was owned by Defendant James E. Davidson Revocable Trust Dated March 26, 2003 ("Trust") and operated as a sole proprietorship.[1] Jim Davidson ("Jim"), who now is deceased, was the settlor of the Trust, and he and his daughter Defendant Eileen Davidson ("Eileen") operated the business together. In August 2014, Plaintiff Gerrie Cooley purchased Camptown, including all park owned trailers, buildings, and equipment, as well as all lease agreements and carryback loans between Camptown and its tenants. Cooley and Plaintiff Camptown of Show Low, LLC ("the LLC"), a limited liability company of which Cooley is the sole member and manager, now claim that Defendants breached the sale agreement, converted Camptown assets, and committed fraud in connection with the sale of Camptown. (Doc. 51.)

         Pending before the Court are Eileen's Motion for Partial Summary Judgment (Doc. 140) and Defendant Robert Davidson's ("Robert") Motion for Summary Judgment (Doc. 141). The motions are fully briefed and the Court heard oral argument on June 20, 2017. For the following reasons, Eileen's motion for partial summary judgment is granted in part and denied in part, and Robert's motion for summary judgment is granted.

         I. Legal Standard

         Summary judgment is appropriate if the evidence, viewed in the light most favorable to the nonmoving party, demonstrates "that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). "[A] party seeking summary judgment always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of [the record] which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Substantive law determines which facts are material and "[o]nly disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). "A fact issue is genuine 'if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.'" Villiarimo v. Aloha Island Air, Inc., 281 F.3d 1054, 1061 (9th Cir. 2002) (quoting Anderson, 477 U.S. at 248). Thus, the nonmoving party must show that the genuine factual issues "'can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party.'" Cal. Architectural Bldg. Prods., Inc. v. Franciscan Ceramics, Inc., 818 F.2d 1466, 1468 (9th Cir. 1987) (quoting Anderson, 477 U.S. at 250).

         II. Discussion

         Robert moves for summary judgment on all claims against him because: (1) he is not a co-trustee of the Trust; (2) he is not a party to the contract between Cooley and the Trust; (3) he owns all personal property that Cooley alleges he converted; and (4) there is no evidence to support Cooley's civil conspiracy claim against him. (Doc. 141.) Eileen and the Trust move for partial summary judgment as follows: (1) complete summary judgment on Cooley's Arizona Consumer Fraud Act (ACFA) claim because Camptown is not "merchandise" within the meaning of the act; (2) partial summary judgment on Cooley's common law fraud claim to the extent it is based on alleged misrepresentations about Camptown's revenue because Cooley knew before purchasing Camptown that the revenue projections were based on contingencies that had not yet occurred; (3) complete summary judgment on Cooley's negligent misrepresentation and breach of the covenant of good faith and fair dealing claims based on application of the economic loss rule; (4) partial summary judgment on Cooley's breach of contract claim against the Trust to the extent it is based on an alleged oral agreement to modify the terms of the promissory note at a later date, and complete summary judgment to the extent Cooley asserts the claim against Eileen because Eileen is not a party to the agreement; and (5) complete summary judgment on all claims purportedly brought on behalf of the LLC. (Doc. 140.)

         During oral argument, Cooley made several concessions that substantially narrow the issues now before the Court. First, Cooley conceded that summary judgment against Robert is appropriate. Having reviewed the briefs, the Court agrees. Summary judgment therefore is granted in favor of Robert on all claims asserted against him.

         Second, Cooley conceded that she cannot maintain a common law fraud claim based on alleged misrepresentations about Camptown's revenue because she was aware of the revenue issues prior to closing. Based on its own review of the record, the Court agrees. Cooley alleges that Eileen and the Trust falsely represented that Camptown's tenants paid $400 per month in rent and that it produced annual income of $551, 400, of which $109, 000 was profit. Cooley claims that Camptown actually produced less income and that the existing tenants' leases were only for $375 per month.

         During negotiations over the sale of Camptown, Jim wrote down various numbers related to Camptown's revenue. According to Eileen and the Trust, these numbers were estimates of Camptown's potential cash flow if certain conditions occurred in the future, such as raising rent from $375 to $400 per month and selling or renting eight units that were vacant at the time. Cooley claims that Jim represented these figures as Camptown's current revenue. Regardless, however, Cooley admitted during her deposition that she knew certain preconditions to earning that revenue, such as raising rent from $375 to $400 and leasing or selling certain vacant lots, had not occurred at the time she purchased Camptown and that she would be responsible for taking these steps post-sale. Accordingly, based on Cooley's concessions at oral argument and the Court's independent review, the Court grants partial summary judgment in favor of Eileen and the Trust on Cooley's common law fraud claim to the extent it is based on alleged misrepresentations concerning Camptown's revenue.

         Third, Cooley conceded at oral argument she could not bring a breach of contract claim against Eileen because Eileen was not a party to the agreement. Indeed, the promissory note and escrow instructions, which together govern the transaction, identify the Trust and Cooley as the contracting parties. (Docs. 142-6, 142-7.) The Court therefore grants summary judgment in favor of Eileen on Cooley's breach of contract claim. Relatedly, the Court also grants summary judgment in favor of Eileen on Cooley's breach of the covenant of good faith and fair dealing claim because Eileen was not a party to the contract from which the duty of good faith allegedly derives.

         Finally, Cooley conceded at oral argument that Arizona's Statute of Frauds, A.R.S. § 44-101, precludes her from asserting a breach of contract claim based on an alleged oral agreement to modify the terms of the promissory note after the close of escrow. Based on its own review, the Court agrees. Accordingly, partial summary judgment is granted in favor of the Trust on Cooley's breach of contract claim to the extent it is based on an alleged oral agreement to modify the terms of the promissory note.

         After accounting for these concessions, the parties continue to dispute: (1) whether Cooley can maintain a claim under the ACFA; (2) whether the economic loss rule bars Cooley's negligent misrepresentation claim against Eileen, and her negligent misrepresentation and breach of the covenant of good faith and fair dealing claims against the Trust; and (3) whether the LLC has asserted any viable claims. It is with these issues that the Court now engages.

         A. Consumer ...


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