Bennett v. Baxter Group (CA2 2/10/10)

Sometimes you read a case and wonder what the [bleep] was really going on.

Bennett agreed to buy a hotel from Baxter, conditioned on getting financing. He didn’t get it, so Baxter arranged to sell to someone else. Baxter refused to return Bennett’s $10,000 deposit. In retaliation, Bennett recorded his purchase agreement (which of course interfered with the new sale) and refused to release it until he got his money back. They sued each other.

That’s right: having sold a property for $1.7 million, Baxter got greedy about $10,000; Bennett deliberately clouded a title he had no interest in. Seems a shame that either won the case. But, after a bench trial, Bennett did. Baxter appealed.

Most of Baxter’s claims were thrown out on summary judgment; what remained was slander of title (and interference with contract, though having mentioned that the opinion drops it). This claim, the opinion says, was based on A.R.S. 33-420. It grants treble damages against a person who records a “forged, groundless . . . or otherwise invalid” document claiming an interest in title. A document “purporting to create an interest . . . not authorized” by law is presumed groundless. According to the court, Baxter argued that since no law specifically permits the recording of a real estate sales agreement, it was groundless. This is such a dumb argument that the opinion blows it off in a few sentences.

The discussion seems like the typical newspaper report of a trial: accurate bits and pieces assembled wrongly. Was that really what Baxter argued? Didn’t Bennett act precisely for the purpose of making a claim on title – a claim he knew he didn’t have – and precisely for the purpose of blocking another deal until he got what he wanted? Since when must a slander of title claim rely on a statute? Isn’t that a separate claim? What happened to interference with contract?

As for Bennett’s claim, it was based on one 132-word sentence in the contract. (A sentence that long doesn’t just beg for trouble, it grabs trouble by the lapels and double-dares it.) It could be read either as letting Baxter keep the deposit if Bennett didn’t buy the hotel or as letting Baxter keep it only if Bennett didn’t perform “in accordance with” the contract. The difference, apparently, is that getting out of the deal for lack of financing was in accordance with the contract, which would get Bennett the money back. The trial court ruled that the sentence – at least when read in conjunction with a a provision the opinion doesn’t quote – was unambiguous and the Court of Appeals agreed: it meant “in accordance with.”

Was the appellate court’s decision on the contract de novo or did it uphold the trial court’s ruling? Good question; the opinion wants it both ways. And why didn’t either court do the sensible thing and call ambiguous language ambiguous?

Having dealt with mere substance, though, the opinion addresses what takes up about two-thirds of the opinion and at least that much of the court’s thought: costs and attorneys fees. The trial court awarded Bennett a bunch of both.

Baxter argued that a lot of the fees arose out of tort, not contract claims. What do you do when you have both? The trial court applied a case called Ramsey v. Air Meds, which says that a tort claim will “arise out of a contract” only when it could not exist “but for” the contract breach. But it misapplied the case, ruling that but for the contract the tort claims “would” (not “could”) not have been brought. Last year, in Modular Mining Systems, the Court of Appeals basically threw up its hands at trying to apply Ramsey and simply awarded fees when the issues are “interwoven.” So the opinion remands to let the trial court cite Modular Mining when it re-awards the fees (the opinion isn’t worded quite that blatantly).

The trial court had also awarded fees because Baxter’s claims were groundless, harassment, not made in good faith. Baxter argued that there were no specific findings to support this. At first the opinion says that the findings include enough bad things to justify fees but then decides that one of those bad things might not have justified some of them so it remands all of them for “reconsideration” (i.e., rewording).

The trial court had awarded all Bennett’s costs. The opinion has to point out that there is a statute on what costs are taxable and that most of Bennett’s weren’t. Wasn’t anybody paying attention?

Finally, Baxter argued that its two shareholders were included in the judgment even though they weren’t parties in the case. They were also not parties to the appeal, so the court decided that it had no jurisdiction to decide whether they could appeal (that’s what it says).

How does that happen? Did that sweet guy Bennett just inadvertently add to his judgment people he had never before bothered to name (and who were therefore not in the existing caption)? Did Baxter’s lawyers catch it in the court below? If not, why not; if so, what did they do about it? And if not, how do you like having to hope that the trial court paid no particular attention to what it was doing?

One more problem with this case: we shouldn’t read an opinion and end up with the suspicion that one party and its lawyers got slammed because someone, somewhere, didn’t like them.

(Link to opinion)