Court Opinion

ID: 2802572
Source: CourtListenerOpinion
Date Created: 2015-05-21 15:06:35.175207+00
Date Added: 2024-06-11T11:29:44.788475
License: Public Domain

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 UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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

MADISON SQUARE DEVELOPMENT PARTNERSHIP OF ARIZONA, a
         California limited partnership, Plaintiff/Appellee,

                                        v.

  CHICAGO TITLE INSURANCE COMPANY, a Nebraska corporation,
                     Defendant/Appellant.

                             No. 1 CA-CV 14-0115
                               FILED 5-21-2015

           Appeal from the Superior Court in Maricopa County
                          No. CV2010-016594
              The Honorable Katherine M. Cooper, Judge

                      REVERSED AND REMANDED

                                   COUNSEL

Mandel Young PLC, Phoenix
By Taylor C. Young, Robert A. Mandel, Julie Barton Linaman
Counsel for Plaintiff/Appellee

Fidelity National Law Group, Phoenix
By Jamey A. Thompson
Counsel for Defendant/Appellant
                     MADISON v. CHICAGO TITLE
                        Decision of the Court

                      MEMORANDUM DECISION

Judge Kenton D. Jones delivered the decision of the Court, in which
Presiding Judge John C. Gemmill and Judge Donn Kessler joined.

J O N E S, Judge:

¶1             Chicago Title Insurance Company (Chicago Title) appeals the
trial court’s grant of summary judgment to Madison Square Development
Partnership of Arizona (Madison) on Madison’s negligence, breach of
contract, and breach of fiduciary duty claims. For the following reasons,
we reverse the decision of the trial court, and remand for entry of judgment
in favor of Chicago Title.

                FACTS1 AND PROCEDURAL HISTORY

¶2           In August 2006, Madison sold commercial property to the
predecessor of Corporate Center ATM, L.L.C. (CCATM),2 which included
the premises leased from CCATM by Centex. As part of the transaction
between Madison and CCATM, Madison agreed that $225,000 of the sale
proceeds would be placed into an escrow account with Chicago Title to be
used for reimbursement of improvements the parties anticipated would be
completed by Centex. Disbursement of those funds was controlled by an
Escrow Agreement the parties entered into with Chicago Title in January
2007. Paragraph 2 of the Escrow Agreement provided:

      2.     Disbursement from Accounts. Buyer shall be entitled
      to disbursements from the ASM Account and the Centex
      Account to reimburse Buyer for obligations incurred for
      tenant improvements pursuant to the ASM Lease and the

1      We view the facts and reasonable inferences therefrom in the light
most favorable to Chicago Title, the party against whom summary
judgment was entered. DBT Yuma, L.L.C. v. Yuma Cnty. Airport Auth., 236
Ariz. 372, 373 n.3 (App. 2014) (quoting Bothell v. Two Point Acres, Inc., 192
Ariz. 313, 315, ¶ 2 (App. 1998)).

2      For ease of reference, we refer to both Corporate Center ATM, L.L.C.,
and its predecessor in interest, Cambra Advisors, Inc., as CCATM.

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                      MADISON v. CHICAGO TITLE
                         Decision of the Court

       Centex Lease, respectively. Buyer shall deliver copies of
       invoices, contracts or other evidence that Buyer has incurred
       such obligations to Seller and Escrow Holder, together with a
       request that Escrow Holder disburse to Buyer the amount of
       the obligation incurred by Buyer from the appropriate
       Account. Promptly thereafter Seller shall give Escrow Holder
       notice of Seller’s consent to the requested disbursement.
       Seller shall not unreasonably withhold, condition or delay its
       consent. Seller’s consent shall be deemed given if it has not
       either consented to or denied (with a reasonably detailed
       written statement of the reasons for such denial) Buyer’s
       request for disbursement within ten business days after
       Seller’s receipt of the request.

¶3            The Escrow Agreement also incorporated the notice
provisions of the Purchase and Sale Agreement between Madison and
CCATM, which required “[a]ll notices or other communications required
or permitted hereunder . . . be in writing, and . . . personally delivered, sent
by registered or certified mail, postage prepaid, return receipt requested, or
sent by telecopy” to those persons designated by the agreement. As to
Madison, notice was to be sent to its corporate office, with copies to its
attorney and two principals, including its managing partner, Gerald W.
Bosstick. The parties agreed the Escrow Agreement “constitute[d] the
entire agreement and understanding among the parties . . . and
supersede[d] all prior agreements and understandings with respect to [the
Centex account].”

¶4               In October 2008, CCATM sent Chicago Title a request for
disbursement of $213,842.04 from the escrow account. Unbeknownst to
Chicago Title, CCATM did not send the request to Madison, as required by
the Escrow Agreement. However, on its own initiative, on October 16, 2008,
Chicago Title sent a “courtesy email” to Bosstick that had attached a copy
of both the Escrow Agreement and CCATM’s request, and stated:
“Pursuant to the attached Escrow Agreement, please find a draw request in
the amount of $213,842.04 for your review. Barring any objection from
Madison . . . , this draw is scheduled to be dispersed on 10/31/08. Feel free
to contact me should you have any questions.”

¶5            In November 2008, CCATM sent a second request for
disbursement of $807.05, and Chicago Title repeated its prior practice,
sending a similar email to Bosstick. Bosstick received the emails; however,
he did not respond until April 2009. Receiving no objection within the ten

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                     MADISON v. CHICAGO TITLE
                        Decision of the Court

day response period, Chicago Title disbursed the funds to CCATM on the
scheduled dates as it was required to do by the Escrow Agreement.

¶6             In May 2010, Madison filed suit against Chicago Title,
alleging Chicago Title had wrongfully distributed the funds to CCATM in
violation of the Escrow Agreement and its fiduciary duty to Madison.3 On
April 15, 2013, the parties filed cross-motions for summary judgment,4
essentially disputing the scope of Chicago Title’s obligations under the
Escrow Agreement prior to disbursement of funds to CCATM. The trial
court ruled in favor of Madison and entered a signed final judgment on
December 18, 2013. This appeal timely followed. We have jurisdiction
pursuant to Arizona Revised Statutes (A.R.S.) sections 12-120.21(A)(1)5 and
-2101(A)(1).

                              DISCUSSION

¶7              We review the grant of summary judgment de novo. DBT
Yuma, 236 Ariz. at 374, ¶ 8 (citing Tierra Ranchos Homeowners Ass’n v.
Kitchukov, 216 Ariz. 195, 199, ¶ 15 (App. 2007)). In the absence of any
disputed issue of material fact, our review focuses on whether either party
is entitled to judgment as a matter of law. Tenet Healthsystem TGH, Inc. v.
Silver, 203 Ariz. 217, 226, ¶ 36 (App. 2002); Ariz. R. Civ. P. 56(a).

3       Madison also brought claims against CCATM for breach of contract,
conversion, and creation of a constructive trust. CCATM did not defend
the action, and ultimately, summary judgment on those claims was entered
in favor of Madison. Recognizing CCATM’s inability to pay, Madison has
not pursued judgment against CCATM, and these claims are not relevant
to this appeal.

4      The parties filed their first round of opposing motions for summary
judgment in October and November 2011. The trial court initially denied
both motions, but upon request for reconsideration, entered judgment in
favor of Chicago Title. Thereafter, Madison discovered it had named the
incorrect Chicago Title entity as a defendant. Upon being advised of the
error, the trial court vacated the judgment in favor of Chicago Title and
permitted Madison to amend its complaint accordingly. The April 2013
motions properly addressed the amended complaint.

5     Absent material revisions from the relevant date, we cite a statute’s
current version.

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                      MADISON v. CHICAGO TITLE
                         Decision of the Court

¶8           Madison’s claims are premised upon the undisputed fact that
Chicago Title did not take any steps to confirm that CCATM sent its
reimbursement request directly to Madison, its attorneys, and principals,
before disbursing the funds from escrow. Madison effectively argues
Chicago Title had an affirmative duty, in the absence of any suspicion of
wrongdoing, to investigate CCATM’s request for reimbursement. We
disagree.

¶9            “An escrow agent has a fiduciary relationship of trust and
confidence to the parties to the escrow.” Maxfield v. Martin, 217 Ariz. 312,
314, ¶ 12 (App. 2007) (citing Maganas v. Northroup, 135 Ariz. 573, 576 (1983)).
That fiduciary relationship gives rise to two distinct duties: first, the duty
of strict compliance, which requires the escrow agent “to act in strict
accordance with the terms of the escrow agreement,” and second, the duty
“to disclose known fraud.” Maganas, 135 Ariz. at 576. Madison does not
present any facts or argument to suggest Chicago Title knew or should have
known CCATM did not provide notice of its request to Madison; the
question presented then, is whether Chicago Title’s disbursement of the
funds departed from the terms of the Escrow Agreement, or any general
duty of care, so as to constitute a breach of Chicago Title’s duties as the
escrow holder.

¶10           Chicago Title defends its position based upon the final clause
of the disbursement instructions, providing that Madison’s consent would
be deemed given if it did not object within ten business days of its “receipt
of the request,” asserting Madison “received the request” when it received
the courtesy email. In response, Madison contends the Escrow Agreement
requires Madison receive notice of the request from CCATM prior to
disbursement. And, because CCATM never provided notice of its
disbursement request to Madison, the ten-day period was never triggered.
The fatal flaw in Madison’s argument, however, is that CCATM’s
wrongdoing cannot, without more, be imputed to Chicago Title.

¶11            A contract’s interpretation is controlled by the intent of the
parties, as ascertained through its language. ELM Ret. Ctr., L.P. v. Callaway,
226 Ariz. 287, 290-91, ¶ 15 (App. 2010) (citations omitted). Words are given
their normal, ordinary meaning, Aztar Corp. v. U.S. Fire Ins. Co., 223 Ariz.
463, 469, ¶ 17 (App. 2010) (quoting A Tumbling-T Ranches v. Flood Control
Dist. of Maricopa Cnty., 220 Ariz. 202, 209, ¶ 23 (App. 2008)), and when the
language is plain and unambiguous, will be enforced as written. Emp’rs
Mut. Cas. Co. v. DGG & CAR, Inc., 218 Ariz. 262, 267, ¶ 24 (2008) (quoting
D.M.A.F.B. Fed. Credit Union v. Emp’rs Mut. Liab. Ins. Co., 96 Ariz. 399, 403
(1964)). Here, the plain language of the Escrow Agreement presumes

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                      MADISON v. CHICAGO TITLE
                         Decision of the Court

Madison’s consent to disbursement if it did not object “within ten business
days after Seller’s receipt of the request.”

¶12           Madison does not dispute that it “received” the email copy of
the request from Chicago Title in accordance with the ordinary meaning of
the word “receive.”6 See State v. Jensen, 217 Ariz. 345, 349, ¶ 7 (App. 2008)
(“To ‘receive’ is commonly defined as ‘to take delivery of (a thing) from
another’ and ‘to accept (something offered or presented)’ and ‘to take in.’”)
(quoting II Compact Edition of the Oxford English Dictionary 232 (1971)).
Madison nonetheless contends Chicago Title breached its duty of strict
compliance because the ten-day period “did not begin to run until Madison
Square received the contractually-required notice of a request for
disbursement from CCATM.”

¶13          However, disbursement of the funds was not conditioned
upon “receipt of notice” or “receipt from CCATM.” The Escrow Agreement
simply required, by its plain language, that Madison “receive the request.”
See Andrews v. Blake, 205 Ariz. 236, 241, ¶ 18 (2003) (declining to interpret
option agreement, which stated it “shall terminate if not exercised in
writing,” to incorporate separate notice provision, where purchase
provision did not specifically refer to notice provision or require exercise be
accomplished in any particular manner).

¶14            Additionally, the disbursement instructions conclude by
stating that if Madison does not affirmatively consent within ten business
days of receipt, its consent will be deemed given. Clearly, the parties
anticipated Madison might simply elect not to respond and, therefore,
pursuant to the specific provisions of the agreement, communication was
not required between Madison and Chicago Title prior to disbursement.

¶15           While Madison purports to demand strict compliance with
the terms of the Escrow Agreement, it does not identify anywhere within
the instructions where Chicago Title was tasked with investigating
CCATM’s compliance with its obligations thereunder. Madison further
concedes Chicago Title was not obligated or even expected to advise
Madison it had received a request for disbursement. In the absence of any

6       Madison argues for the first time on appeal that the reimbursement
request was not attached to the email it received from Chicago Title.
Madison did not assert this position with the trial court, and we deem it
waived. See Airfreight Express Ltd. v. Evergreen Air Ctr., Inc., 215 Ariz. 103,
109, ¶ 17 (App. 2007) (citing Englert v. Carondelet Health Network, 199 Ariz.
21, 26, ¶ 13 (App. 2000)).

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                      MADISON v. CHICAGO TITLE
                         Decision of the Court

contractual agreement otherwise, we agree with our supreme court that
there is no general duty imposed upon the escrow holder to search for
irregularities or police the performance of the parties absent knowledge
that a fraud is being committed on a party to the escrow. See Berry v.
McLeod, 124 Ariz. 346, 352 (1979) (“Generally, there is no duty to disclose
information received by an escrow agent unless such a duty is required by
the terms of the agreement, but we hold that there is an exception to the
foregoing rule when the escrow agent [k]nows that a fraud is being
committed on a party to an escrow and the failure of the escrow agent to
disclose the information of the fraud will assist in accomplishing the fraud;
under such conditions the escrow agent has a duty to disclose the facts
actually known.”); see also Maxfield, 217 Ariz. at 313, 315, ¶¶ 4, 14 (holding
escrow holder had a fiduciary duty to confirm identity of a party whom it
had never met and who arrived to collect funds in an obvious disguise).

¶16            Madison has not suggested that, had it desired any of these
alternate terms, it was denied the opportunity to negotiate for them; to the
contrary, Madison asserts the provisions regarding communication were
“heavily negotiated and carefully-crafted” to reflect the parties’ agreement.
See 1800 Ocotillo, L.L.C. v. WLB Group, Inc., 219 Ariz. 200, 202, ¶ 8 (2008)
(“Our law generally presumes, especially in commercial contexts, that
private parties are best able to determine if particular contractual terms
serve their interests.”) (citation omitted). We are not at liberty to rewrite
the contract to provide terms more favorable to either party than those they
chose to include. Coury Bros. Ranches, Inc. v. Ellsworth, 103 Ariz. 515, 522
(1968) (citing Goodman v. Newzona Inv. Co., 101 Ariz. 470, 472 (1966)); see also
Mission Ins. Co. v. Nethers, 119 Ariz. 405, 408 (App. 1978) (“[I]t is not the
prerogative of the courts to rewrite the contract in attempting to avoid
harsh results.”) (citing Harbor Ins. Co. v. United Servs. Auto. Ass’n, 114 Ariz.
58, 61 (App. 1976)).

¶17             Madison relies heavily on Burkons v. Ticor Title Insurance Co.
of California, 168 Ariz. 345, 352 (1991), in arguing that Chicago Title should
have sought clarification from the parties in the face of any ambiguity
amongst the various documents placed in escrow. Having concluded the
Escrow Agreement was clear and unambiguous as to the event triggering
the ten-day period for consent — Madison’s receipt of the request — and
that Chicago Title should not have been surprised if Madison did not
respond — an event specifically contemplated by the parties — we find
Burkons inapplicable. Moreover, even assuming some discrepancy between
the various contracts, Chicago Title need not seek clarification where the
parties explicitly agreed the Escrow Agreement controlled over any prior
agreements.

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                      MADISON v. CHICAGO TITLE
                         Decision of the Court

¶18           Chicago Title confirmed Madison received the disbursement
request by providing a copy to Madison. While Madison may complain
about the manner of transmittal, it does not dispute its receipt; nor does it
dispute that Bosstick was the person with whom Chicago Title regularly
corresponded regarding Madison’s business, or that Chicago Title did so
via email. Chicago Title took reasonable steps to confirm Madison received
the request, allowed Madison the contracted-for period to respond prior to
disbursement, and acted in strict accordance with the Escrow Agreement in
distributing the funds after it received no response within ten business
days. In the absence of any irregularities in the drafting or execution of the
contract, we are bound to enforce the terms agreed upon by the parties. See
Freedman v. Cont’l Serv. Corp., 127 Ariz. 540, 545 (App. 1980) (“[A] court will
enforce a valid contract according to its terms, even though enforcement
may be harsh . . . .”) (citing Goodman, 101 Ariz. at 474).

¶19             Madison also suggests a separate breach by Chicago Title in
its failure to confirm that the improvements for which CCATM requested
reimbursement were “approved tenant improvements,” as described
within the lease between Madison and Centex. Once again, the relevant
documents do not impose any such obligation on Chicago Title, and
Madison cites no authority for its assertion that an escrow agent has a duty
to investigate the validity of a claim against funds in escrow. Contra Berry,
124 Ariz. at 352 (“The escrow company is not a guardian for the
uninitiated.”). Madison was charged with consenting or objecting to the
request, and it alone was responsible for assessing and responding to the
substance and legitimacy of the request. As with the prior issue, we cannot,
on appeal, craft previously non-existent provisions into the agreement in
order to create a breach not evident from the agreement the parties
bargained for and signed. Coury Bros., 103 Ariz. at 522. We therefore reject
any argument that Chicago Title had an obligation, whether through the
language of the parties’ agreement or as an independent duty, to police the
contents of CCATM’s request on Madison’s behalf and/or independently
assess whether the improvements were authorized.

¶20           In the absence of any breach, Madison’s claims fail. See Berne
v. Greyhound Parks of Ariz., Inc., 104 Ariz. 38, 39 (1968) (noting “universal
rule” that plaintiff must establish breach of a duty to prevail on a claim of
negligence); Rev. Ariz. Jury Instr. (RAJI) (Civil) 5th Contract 2 (instructing
that breach is an essential element of claim for breach of contract); RAJI
(Civil) 5th Commercial Torts 1A (same for breach of fiduciary duty of

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                      MADISON v. CHICAGO TITLE
                         Decision of the Court

escrow agent). Chicago Title is therefore entitled to judgment as a matter
of law.7

                              CONCLUSION

¶21            Based upon the foregoing, we reverse the summary judgment
in favor of Madison, vacate the award of attorneys’ fees and costs, and
remand for entry of judgment in favor of Chicago Title and an evaluation
of the parties’ entitlement to fees, and the amount of any such fees, in light
of the issues determined within this appeal. Burke v. Voicestream Wireless
Corp. II, 207 Ariz. 393, 400, ¶ 37 (App. 2004) (“When cross-motions for
summary judgment have been filed, this court may evaluate the cross-
motions and, if appropriate, remand with instructions that judgment be
entered in favor of the appellants.”).

¶22          Both parties request their attorneys’ fees and costs on appeal
pursuant to A.R.S. § 12-341.01 and ARCAP 21. As the prevailing party,
Chicago Title is awarded its attorneys’ fees and costs on appeal upon
compliance with ARCAP 21.

                                  :ama

7      Because of this conclusion, we do not reach the remaining issues
asserted on appeal.

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