Free Response to Motion - District Court of Arizona - Arizona

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MATHEW & MATHEW, P.C. IVAN K. MATHEW (SBN: 011610) 1850 N. Central Avenue, Suite 1910 Phoenix, Arizona 85004 Tel: (602) 254-8088 / Fax: (602) 254-2204 e-mail: [email protected] Attorneys for Defendants RICKY LEE HANCOCK, BRENDA HANCOCK, RICK HANCOCK HOMES, L.L.C. and RLH DEVELOPMENT, L.L.C.

UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA

Meritage Homes Corporation, a Maryland Corporation, formerly d/b/a Meritage Corporation, Hancock-MTH Builders, Inc., an Arizona corporation, Hancock-MTH Communities, Inc., an Arizona corporation, and currently d/b/a Meritage Homes Construction, Inc., an Arizona corporation, and Meritage Homes of Arizona, Inc., an Arizona corporation, Plaintiffs, v. Ricky Lee Hancock and Brenda Hancock, husband and wife; Gregory S. Hancock and Linda Hancock, husband and wife, Rick Hancock Homes L.L.C., an Arizona limited liability company; RLH Development, L.L.C., an Arizona limited liability company; and J2H2, L.L.C., an Arizona limited liability company, Defendants. _________________________________________ Greg Hancock, an individual, Defendant, Counterclaimant, and Third-Party Plaintiff, v. Steven J. Hilton, an individual; John R. Landon, an individual; Larry W. Seay, an individual; and Snell
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CASE NO. CV-04-0384-PHX-ROS RESPONSE TO MOTION TO DISMISS RICK AND BRENDA HANCOCK'S COUNTER-CLAIMS AND THIRD PARTY CLAIMS

(Assigned to the Hon. Roslyn O. Silver)

Filed 10/27/2006

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& Wilmer, L.L.P., an Arizona professional corporation, Third-Party Defendants. __________________________________________ Rick and Brenda Hancock, Defendants, Counterclaimants and Third-Party Plaintiffs, v. Meritage Homes Corporation, a Maryland Corporation, formerly d/b/a Meritage Corporation, Hancock-MTH Builders, Inc., an Arizona corporation, Hancock-MTH Communities, Inc., an Arizona corporation, and currently d/b/a Meritage Homes Construction, Inc., an Arizona corporation, and Meritage Homes of Arizona, Inc., an Arizona corporation; Steven J. Hilton and Suzanne Hilton, husband and wife; John R. Landon and Debi Landon, husband and wife; Scott Keeffe and Vicky Keeffe, husband and wife; Roger Zetah and Jane Doe Zetah, husband and wife; and James Arneson and Zane Arneson, husband and wife, Third-Party Defendants.

Defendants, Rick and Brenda Hancock, represented by Ivan K. Mathew, hereby respond to the Motion to Dismiss.1 I. MOTIONS TO DISMISS ARE DISFAVORED. A Motion to Dismiss for failure to state a claim is viewed with disfavor and is rarely granted. Gilligan v. Jamco Dev. Corp., 108 F.3d 246, 249 (9th. Cir. 1997). A suit should not be dismissed if it is possible to hypothesize facts, consistent with the Complaint, that would make out a claim. Hearn v. R.J. Reynolds Tobacco Co., 279 F.Supp.2d 1096, 1107 (D. Ariz. 2003). In reviewing a Rule 12(b)(6) Motion, the Court must 1) construe the Complaint and

Hereinafter Defendants refer to Plaintiffs, Counterdefendants and Third-Party Defendants collectively as "Meritage."
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the facts most favorably to the Plaintiff; 2) accept all well pleaded factual obligations as true; and 3) determine whether Plaintiff can prove any set of facts to support a claim that would merit relief. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337­38 (9th Cir. 1996). A Rule 12(b)(6) dismissal is proper only in extraordinary cases. U.S. v. City of Redwood City, 640 F.2d 963, 966 (9th Cir. 1981). The claim should not be dismissed for failure to state a claim unless it appears beyond doubt that the Plaintiff cannot prove any set of facts in support of his claim which would entitle him to relief. Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957). When complainants' allegations are capable of more than one inference, the Court must adopt whatever inference supports the valid claim. Pareto v. F.D.I.C., 139 F.3d 696, 699 (9th Cir. 1998); Columbia Natural Resources, Inc. v. Tatum, 58 F.3d 1101, 1109 (6th Cir.1995). As long as the Court can ascertain from the face of the Complaint that some relief (as opposed to the requested relief) is merited, a Motion to Dismiss will not be granted. Doe v. U.S. Dept. of Justice, 753 F.2d 1092, 1104 (D.C. Cir. 1985); Massey v. Banning Unified School Dist., 256 F.Supp.2d 1090 (C.D. Cal 2003). II. FACTUAL BASIS FOR THE CLAIMS. A. The Acceptance of the Contract.

On or about November 21, 2003, Rick Hancock sought to purchase a home. (Counterclaim, p. 4, ¶ 16.) When purchasing a home, he was entitled to a discount of approximately $76,000. (Counterclaim, p. 4, ¶ 15.) When John Landon and James Arneson, officers of Meritage, found out that Rick Hancock, the brother of Greg Hancock, would be purchasing a home and receiving an employee discount, they contrived a policy for the purpose of depriving Mr. Hancock of the discount. (Counterclaim, p. 6, ¶ 44.) However, on December 8, 2003, the contract was accepted by Hancock-MTH Communities, Inc., a subsidiary of Meritage. The contract was executed by Scott Keeffe, the authorized broker. (Counterclaim, p. 4, ¶ 17.) Meritage had a duty to inform Rick Hancock of the executed Madrid home contract without delay. (Counterclaim, p. 4, ¶ 17.) On or about

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December 8, 2003, Meritage should have informed Brenda and Rick Hancock of the executed contract. (Counterclaim, p. 4, ¶ 17.) Instead Meritage hid this fact. (Counterclaim, p. 5, ¶ 21.) On December 8, 2003, Jon Titus, on behalf of Rick Hancock, notified Steve Hilton and James Arneson by a hand-delivered letter that the contract needed to be honored. (Counterclaim, p. 5, ¶¶ 22-24.) Meritage proceeded to claim that the contract was not in effect. In reality, it was accepted on December 8, 2003. The terms of the contract included how acceptance was to be made. (Counterclaim, p. 4, ¶ 17.) In this case, it was upon execution. After Messrs. Hilton and Arneson received the letter, Roger Zetah, the Chief Financial Officer, who had never involved himself in the cancellation of contracts, sought to have the contract pulled from Scott Keeffe before it was authorized by the designated broker. (Counterclaim, p. 5, ¶¶ 25-33.) III. MERITAGE FAILED TO DISCLOSE AN EXECUTED CONTRACT. Meritage failed to disclose the executed contract. (Counterclaim, p. 7, ¶ 48.) Earlier, Plaintiffs claimed there was no need to disclose the contract because the contract was "inadvertently signed." (Opposition to Motion to Amend, ¶ 6.) First, the regulations

governing the conduct of real estate agents require a signed contract to be disclosed. R4-28802. The executed contract was not disclosed. The disclosure must be timely. R4-281101(C). It was not timely disclosed. There is a per se cause of action grounded in

negligence when one fails to abide by statutory duty as in this case. Telleg v. Saban, 188 Ariz. 165, 169, 933 P.2d 1233, 1237 (App. Div. 1, 1996.) A. The Secret Cancellation of the Madrid Home Contract.

On December 9, 2003, Mr. Zetah became upset when he discovered the contract had been accepted by the contract terms, i.e., Scott Keeffe's signature. (Counterclaim, p. 5, ¶¶ 2728.) Mr. Zetah then asked another employee to cancel the contract, and the employee replied that she was uncomfortable doing that. (Counterclaim, p. 5, ¶¶ 29-31.) Mr. Zetah then sought to cancel the contract himself. (Counterclaim, p. 5, ¶ 32.) In doing so, he filled out a cancellation contract with false information to make it appear that the contract had been cancelled as of December 8, 2003. . (Counterclaim, p. 5, ¶ 33, p. 6, ¶ 35.) However, the place
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where the actual execution date must be noted by the signer of the document was intentionally left blank by Mr. Zetah. (Counterclaim, p. 7, ¶ 51.) The date was left blank because the

Madrid home contract was not canceled on December 8, 2003. (Counterclaim, p. 7, ¶ 52.) The Notice of Cancellation indicates it was canceled at the request of Rick and Brenda Hancock. (Counterclaim, p. 6, ¶ 34.) This statement is false. B. The Fraudulently Obtained Release.

During December 2003, negotiations for Rick Hancock's severance package began. (Counterclaim, p. 8, ¶ 64.) Meritage's approach was that there was no home-purchase

contract. (Counterclaim, p. 7, ¶ 47.) Rick and Brenda Hancock kept inquiring about their Madrid home purchase. During the time the release was being sought, neither Steve Hilton, John Landon, James Arneson, Roger Zetah or Scott Keeffe ever informed Rick Hancock that the contract had actually been accepted. (Counterclaim, p. 7, ¶ 56.) As part of the severance package, Meritage sought and obtained a release from Rick Hancock. The settlement and release was induced by fraudulent pretenses and material omissions. On January 26, 2006, the deposition of Jerry Lilly, a Meritage employee and the real estate agent for Rick Hancock and Brenda Hancock, took place. At that point, Mr. Lilly stated that he was stunned to find out that the contract he wrote had been accepted by Meritage. He had been led to believe the contract had never been accepted. (Counterclaim, p. 10, ¶ 80.) Employees of Meritage had a fiduciary duty to Rick Hancock. (Counterclaim, p. 10, ¶ 82.) IV. THE PLAINTIFFS' CHALLENGE OF THE CLAIM HAS ALREADY BEEN RAISED BY PLAINTIFFS AND REJECTED. On March 20, 2006, Meritage raised virtually the same issues. Their arguments were rejected. (Order dated August 22, 2006, p. 10.) Where there is fraudulent concealment, the statute of limitations is tolled. Walk v. Ring, 202 Ariz. 310, 318, 44 P.3d 990, 998 (2002). In addition, Plaintiffs' bald allegations that Hancock cannot prove intent are insufficient to deny a claim. At this stage, the Hancocks need not prove anything. U.S. ex rel. Clausen v. Laboratory Corp. of America, Inc., 290 F.3d 1301, 1313 (11th Cir. 2002).

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V.

PLAINTIFFS MISTAKENLY CLAIM THERE WAS NO FIDUCIARY DUTY­ Plaintiffs claim there is no fiduciary duty between employee and employer misses the

mark. The relationship of fair dealing springs from a real estate transaction. (Counterclaim, p. 10, ¶ 77-82.) In real estate, there is a doctrine of dual agency. R4-28-1101(A).

(Counterclaim, p. 3, ¶¶ 5-9, p. 10, ¶¶ 77-82.) R4-28-1101 provides: A. A licensee owes a fiduciary duty to the client and shall protect and promote the client's interests. The licensee shall also deal fairly with all other parties to a transaction. B. A licensee participating in a real estate transaction shall disclose in writing to all other parties any information the licensee possesses that materially or adversely affects the consideration to be paid by any party to the transaction, including: C. A licensee shall expeditiously perform all acts required by the holding of a license. A licensee shall not delay performance, either intentionally or through neglect. D. A licensee shall not allow a controversy with another licensee to jeopardize, delay, or interfere with the initiation, processing, or finalizing of a transaction on behalf of a client. This prohibition does not obligate a licensee to agree to alter the terms of any employment or compensation agreement or to relinquish the right to maintain an action to resolve a controversy. In an Arizona case directly on point, Lombardo v. Albu, 199 Ariz. 97, 14 P.3d 288 (2000), buyers and sellers in a real estate transaction must deal fairly with each other. Lombardo at 99, 290. This includes the covenant of good faith and fair dealing. Id. The duties are not a one-way street. Id. This would violate the sellers' broker's duty to deal fairly under the contract and the legal duties imposed by Restatement (Second) of Contracts § 161 and Restatement (Second) of Torts § 551. Id. The Lombardos argued that the only fiduciary duty an agent has runs to his client. The co-defendant, Albu, argued this step further, that because she had no fiduciary duty to the seller, she had no duty at all to the seller. The Arizona Court of Appeals rejected this argument. "The duty of disclosure is paramount." Restatement (Second) of Agency § 395. The duty to disclose is compatible to the fiduciary duty an agent owes to his client. Lombardo, 197 Ariz. at 100, 4 P.3d at 291. The performance of a real estate agent's fiduciary duty to its principal is compatible with the agent's duty to deal fairly with all parties to the transaction. R4-28-1101(A.). The
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regulation adopted by the real estate department is essentially a codification of the common law. Lombardo acknowledges the agent's fiduciary duty to its principal but also

acknowledges the agent's non-fiduciary duty to other parties to the transaction. Id. R4-281101(A). Subparagraphs (B), (C) and (D) of the rule provide minimum standards of care in the exercise of the agent's duties. If the agent fails to reveal material facts which affect the transaction, the other party has the remedies given for misrepresentation. Lombardo at 100, 291. These principles are not limited to fraud. The duty to disclose must not be delayed. R4-28-1101(B). R4-28-1101 prescribes an appropriate standard of conduct in this case. Lombardo at 101, 292. That standard was breached. There is a claim. Indeed Meritage's own employee, Jerry Lilly, stated that he believed he was operating under a fiduciary duty to Rick and Brenda Hancock in handling the Rick Hancock transaction. (Deposition of Jerry Lilly, p. 99, ll. 18-25.)2 VI. THE EXECUTED CONTRACT WAS CONCEALED. Rick and Brenda Hancock can show a prima facie case of concealment. The former controller of Meritage testified that the only way a purchase contract can be cancelled is if Meritage first sends the request for cancellation to the buyer and the buyer cancels with his or her signature. (Deposition of Shari Mesicko, p. 169, ll. 8-14.) Meritage knew where to contact Rick and Brenda Hancock, as Rick was a former employee and Meritage knew where they lived, but Meritage did not contact them. (Deposition of Roger Zetah, p.166, ll. 2-14.) Rick and Brenda Hancock's earnest money was accepted on November 21, 2003, and deposited five days later on November 25, 2003. James Arneson, Ron French and Jerry Lilly reviewed the contract and noted that Scott Keeffe was the one authorized to accept the contract as he was the designated agent to accept the contract. (Deposition of Jerry Lilly, p. 83, l. 14 to p. 84, l. 7; deposition of Ronald French, p. 134, l. 19 through p. 135, l. 4.) The Actual deposition pages were provided to the Court on April 7, 2006 attached to the Reply to Opposition to Rick and Brenda Hancock's Motion to Amend and File Counterclaim, Add Claims Against Existing Third Party Defendants and Add Third Parties.)
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signature of Scott Keeffe signified that the contract was accepted. (Deposition of Ronald French, p. 146, ll. 8-11.) James Arneson, the COO, stated that the signature signified acceptance. Jerry Lilly, the real estate agent employed by Meritage, stated that the contract was signed and it was his understanding that Rick Hancock should have been sold the house. (Deposition of Jerry Lilly, p. 83, l. 16 through p. 84, l. 7; p. 85, l. 23 through p 86, l. 4.) Roger Zetah requested Scott Keeffe's office to cancel the contract. Mr. Keeffe's office refused to do so. (Deposition of Shari Mesicko, p. 170, l. 209.) Indeed, Scott Keeffe never canceled the contract. Laura Steinmeyer stated that Scott Keeffe wanted nothing to do with the shady behavior of Meritage. Roger Zetah admitted that Meritage attempted to cancel the contract but without Rick and Brenda Hancock's knowledge. (Deposition of Roger Zetah, p. 162, ll. 15-20.) The notice of cancellation was backdated. (Counterclaim, p. 10, ¶ 87.) The notice of cancellation states it was cancelled on December 8, 2003. This is false.

(Counterclaim, p. 6, ¶ 35.) Roger Zetah signed the cancellation notice on December 9, 2003, or later, as Shari Mesicko retrieved it on December 9, 2003, or later. (Declaration of Shari Mesicko, ¶ 3.) The area above Roger Zetah's name contains the designation "Signed this _____ day of __________." (Counterclaim, p. 7, ¶¶ 51-52.) This was left blank by Mr. Zetah. (Counterclaim, p. 7, ¶¶ 51-52.) A jury could find that the document was not signed on December 8, 2003. At the deposition of Roger Zetah, it was never stated that Scott Keeffe's signature of the contract was "inadvertent." At the deposition of Ron French, the President of Meritage Arizona Division, Mr. French never stated that the contract was inadvertently signed by Scott Keeffe. Indeed, he said the opposite. (Deposition of Ronald French, p. 136, ll. 13-20.) After the Compliant was filed, Meritage came up with "the inadvertent signature theory" after the proposed counterclaim had been lodged. (Opposition to Motion to Amend, p. 6.) In any event, as the Defendants' statements must be accepted as true, the Motion to Dismiss should be denied. Defendants have alleged there is a written contract signed by the parties. (Counterclaim, p. 4, ¶ 17.) The Court, at this stage, should accept that there is a contract.

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The contract provides the terms of acceptance. (See Contract attached to Counterclaim, pp. 1, 10, and 12). The conditions are that there is acceptance upon execution of the contract by the designated broker. (Counterclaim, p. 4, ¶ 17.) The contract was signed by Scott Keeffe, the person designated by Meritage as "the designated broker who is authorized to accept contracts." (Counterclaim, p. 5, ¶ 27.) refused to cancel the contract. Mr. Keeffe's assistant, Laura Steinmeyer,

How can Mr. Keeffe's assistant know more about the

prohibitions against cancellation than Mr. Zetah or Mr. Keeffe? These are questions for a jury. In addition, the cancellation required Rick and Brenda Hancock to sign documents authorizing the cancellation, as there was a live contract. (Counterclaim, p. 6, ¶ 37.) The contract cancellation form states "contract cancelled per customer's request." (Counterclaim, p. 6, ¶ 34.) This was false. The Court accepts as true all claims and inferences in favor of Rick and Brenda Hancock. Roger Zetah, the Chief Financial Officer, cancelled the contract. He acknowledged he had never done this before. The proper cancellation procedures were not followed. If a method or transaction is atypical or lacks business justification it may be possible to infer knowledge necessary for aiding and abetting liability. Wells Fargo Bank v. Arizona Laborers, Teamsters and Cement Masons Local No. 395 Pension Trust Fund, 201 Ariz. 474, 490, 38 P.3d 12, 28 (2002). Knowledge of fraud may be inferred from the circumstances. See In re American Continental Corp./Lincoln Sav. & Loan Sec. Litig., 794 F.Supp. 1424 (D. Ariz. 1992); Woodward v. Metro Bank of Dallas, 522 F.2d 84, 97 (5th Cir. 1975) (for purposes of establishing liability as an aider and abettor, knowing assistance of a violation can be inferred from atypical business actions). Courts have also commented that executing transactions, even ordinary course transactions, can constitute substantial assistance under some circumstances, such as where there is an extraordinary economic motivation to aid in the fraud. See, Armstrong v. McAlpin, 699 F.2d 79, 91 (2d Cir. 1983) (broker's processing of transactions with knowledge of fraudulent nature was done to generate commissions); IIT, an Intern. Inv. Trust v. Cornfeld, 619 F.2d 909, 921-22 (2d Cir. 1980) (Defendant performed

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challenged transaction knowing it violated client's policy, with heightened economic motive to do so). VII. THE COUNTERCLAIM ALLEGES THE ELEMENTS OF FRAUD TO GIVE SPECIFIC NOTICE OF THE FRAUDULENT CONDUCT. The failure to give notice when there is a statutory duty to disclose is fraud. When someone is under a common law or statutory duty to disclose information and they fail to do so, it is the basis of fraud. Haisch v. Allstate Ins. Co., 197 Ariz. 606, 5 P.3d 940 (App. 2000). Real Estate Regulation R4-28-802 provides that executed contracts must be provided to buyers and sellers. This was not done as required by regulation. (Counterclaim, p. 15, ¶ 136.) Meritage's claim that notice of the acceptance was not conveyed to the Hancocks is unavailing. Meritage owed a duty of fair dealing to Rick and Brenda Hancock. Or to put it another way, they owed the duty of timely disclosure, without a two-year delay, to the Hancocks. Indeed, the regulations provide that disclosure must be without delay. R4-281101(C). Lombardo at 100, 292. Moreover, the contract specified the terms of acceptance. (See Contract attached to Counterclaim, pp. 1, 10, 12). Acceptance is by signature of the broker. By virtue of Mr. Keeffe's signatures and their regulatory duties, Meritage cannot claim benefits of the ancient mailbox rule. Plaintiffs claim that the Hancocks' remedies are extinguished. They are mistaken. A victim may retain what he has received, and bring an action at law to recover the damages sustained. Urfirer v. Cornfeld, 408 F.3d 710, 723 (11th Cir. 2005) (emphasis added). In any event, election of remedies is not appropriate for consideration at this stage. It only need be elected before the matter is submitted to the jury. VIII. THE RELEASE. "Where fraud or duress in the procurement of a release is alleged, a motion to dismiss should be denied." Urfirer, supra. A waiver or release of rights does not preclude a party from claiming fraud in the inducement of the very instrument by which the party waived his rights.

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The maxim that fraud vitiates every transaction would no longer be the rule, but the exception. It could be applied then only in such case as the guilty party neglected to protect himself from his fraud by means of such a stipulation. Such a principle would in a short time break down every barrier which the law has erected against fraudulent dealing. . . . [D]efenses based upon allegations of fraud may not be waived. This is because a written waiver in any form cannot operate to shield a party from his own fraud. For the Courts to give effect to such a clause would be violative of both public policy and morality, since an ultimate finding of fraud must of necessity vitiate the contract relied upon.

"A releasor is entitled to be relieved from the consequences of the release obtained by fraud, misrepresentation, or deceit. A release obtained through fraud may on that basis be rendered invalid." . . . "... it is the duty of the Court to set aside the judgment under such circumstances." Id. at n.2 A settlement agreement obtained on the basis of fraud is a nullity. Id. Plaintiffs claim that their settlement agreement precludes release. They are mistaken. In Arizona and

elsewhere settlement agreements must be obtained without "the taint" of fraud. Wick v. Wick, 107 Ariz. 382, 384, 489 P.2d 19, 21 (1971). . Constructive fraud is characterized by a breach of a duty actionable at law irrespective of moral guilt arising out of the fiduciary or confidential relationship. In re McDonnell's Estate, 65 Ariz. 248, 252, 179 P.2d 238, 241 (1947). Intent to deceive is not an element of constructive fraud. Tom Reed Gold Mines Co. v. United Eastern Min. Co., 39 Ariz. 533, 542, 8 P.2d 449, 452 (1932). Constructive fraud includes negligent omission, a failure to comply with a regulatory requirement or noncompliance with a regulation that causes prejudice to a person whom the regulation was intended to protect. Taeger v. Catholic Family and

Community Services, 196 Ariz. 285, 289, 995 P.2d 721, 725 (Ariz.App. Div. 1, 1999). In order to establish a claim for constructive fraud, one need only to allege the existence of a legal or equitable duty and the breach of the duty regardless of the intent of the party charged. This was done. (Counterclaim, p. 4, ¶ 17, p. 9, ¶ 71, p. 10, ¶¶ 78, 81, 82.) When there is a duty to deal fairly, the party must disclose the true facts and not deceive. In Re Estate of Thurston, 199 Ariz. 215, 219, 16 P.3d 776, 780 (Ariz.App. Div. 1 2000). The duty to deal
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fairly gives rise to circumstances in which fraud may be implied. Condos v. Felder, 92 Ariz. 366, 370, 377 P.2d 305, 307 (1963). The parties are bound to act for the benefit of the other and can take no advantage for himself from his acts relating to the interest of the other. Apolito v. Johnson, 3 Ariz.App. 232, 413 P.2d 291 (1966). This includes inducing another to act or refrain from action. Restatement Second of Torts § 525, Wells Fargo Bank, supra, at 201 Ariz. at 496, 38 P.3d 34. (Emphasis added.) Plaintiffs contend that Hilton's statements were legal statements and not actionable as fraud. They are mistaken. A misrepresentation does not have to be in specific legal terms or language to be a statement of law in order to satisfy one of the nine elements of actual fraud. Love v. Home Transp. Co., Inc., 131 Ariz. 366, 368, 641 P.2d 854, 856 (1992). Meritage made fraudulent statements to Rick and Brenda Hancock about their Madrid home contract. (Counterclaim, p. 8, ¶ 59.) Hilton knew the contract was not cancelled as Rick and Brenda Hancock never signed the cancellation form. (Counterclaim, p. 6, ¶ 40.) When one sets out to conceal a fact and makes a generalized statement, this is not a mere expression of opinion.3 Wagner v. Casteel, 136 Ariz. 29, 663 P.2d 1020 (App. 1983). There is liability for fraudulent concealment against the parties to a transaction who by concealment or other action intentionally prevents the other from acquiring material information. Restatement Second of Torts § 550, Wells Fargo Bank, 201 Ariz. at 496, 38 P.3d at 34. Suppression of a material fact which a party is bound in good faith to disclose is the equivalent to a false misrepresentation. Leigh v. Loyd, 74 Ariz. 84, 244 P.2d 356 (1952). Nondisclosure which impairs the right of the other party to receive the benefits of a contract is tantamount to fraud. S Development Co. v. Pima Capital Management Co., 201 Ariz. 10, 31 P.3d 123 (Ariz.App. Div. 1 2001). A party may be liable for the intentional concealment or acts taken to conceal, mislead or otherwise deceive even in the absence of a fiduciary duty or other legal duty to disclose. Wells Fargo Bank, 201 Ariz. at 483, 38 P.3d at 21. (Emphasis What occurred in this case is anything but puffery. Puffery means an expression of opinion as opposed to a representation of fact (Black's Law Dictionary, 5th ed. 1979). In any event, the inference goes to the Hancocks.
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added.) In Alaface v. National Inv. Co., 181 Ariz. 586, 892 P.2d 1375 (App. 1994), the court held that a real estate developer who subdivided lots that were liable on a theory of negligence per se for misrepresentation by omission for failing to disclose problems related to the transaction. This case is directly on point as it had to do with the Defendants' failure to comply with real estate regulations. IX. THE COUNTERCLAIM COMPLIES WITH RULE 9(b) The particularly requirement is met when 1) the alleged fraudulent misrepresentations or omissions are identified, 2) the alleged misrepresentations were falsely made 3) they identify the speaker, 4) they state when and where the statements were made and 5) they state the manner in which the representations or omissions were false and misleading. DiLeo v. Ernst & Young, 901 F.2d 624, 627 (7th Cir. 1990) (the who, what, when, where and how would be comparable to the first paragraph of a newspaper story). Arnold & Associates, Inc. v. Misys Healthcare Systems, 275 F.Supp.2d 1013, 1028 (D. Ariz. 2003). The allegations in a Complaint are taken collectively, beyond each individual allegation. In determining the

sufficiency of the Complaint, Courts are to consider whether the total of Plaintiff's allegations, even though individually lacking, are sufficient to create a strong inference that Defendants acted with deliberate, conscious recklessness. No. 84 Employer-Teamster Joint Council

Pension Trust Fund v. America West Holding Corp., 320 F.3d 920, 938 (9th Cir. 2003). Violations of regulations or norms provide evidence of fraud. In re Daou Systems, Inc. Sec. Litig., 411 F.3d 1006, 1016 (9th Cir. 2005). Allegation that Defendants were willful

participants in a joint action was sufficient to state a claim. Beanal v. Freeport-McMoran, Inc., 197 F.3d 161, 164 (5th Cir. 1999); DeGrassi v. City of Glendora, 207 F.3d 636, 647 (9th Cir. 2000). Thus the particularity requirement of Rule 9(b) is satisfied if the pleading identified the circumstances constituting fraud (or mistake) so that the Defendant could prepare an adequate answer from the allegations. Moore v. Kayport Package Exp., Inc., 885 F.2d 531, 540 (9th Cir. 1989).

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X.

THE HANDBOOK AND REVISIONS DO NOT PRECLUDE RELIEF. In Arizona, a policy manual can be the basis of a claim for enforcement. DeMasse v.

ITT Corp., 194 Ariz. 500, 509, 984 P.2d 1138, 1147 (1999). This states a claim. The fact that there is a clause stating that the policy can be changed does not preclude an action. In Arizona's Towing Professionals, Inc. v. State, 196 Ariz. 73, 77, 993 P.2d 1037, 1041 (App. 1999), the Court of Appeals held that a party to a contract could not use an express provision in the contract--in that case, a "cancellation for convenience" provision--to thwart administrative or judicial review of the state's decisions in awarding contracts after the bidding process. The Court found that if cancellations for convenience were permissible under these circumstances, they would effectively eliminate a party's appeal rights, which would violate the implied covenant of good faith, even though the state expressly retained the power to cancel. Id. at 77, 993 P.2d at 1041. Southwest Sav. and Loan Ass'n v. SunAmp Systems, Inc., 172 Ariz. 553, 558, 838 P.2d 1314, 1319 (Ariz.App. Div. 1 1992). Meritage also cannot keep their stories straight. On February 3, 2006, Ron French conceded that employees were not actually held to any $35,000.00 discount limit. He testified that Angie Kramer White received a discount in excess of $35,000.00. (Deposition of Ron French, p. 155, l. 24 through p. 156, l. 1.) As such, the alleged new policy was a sham. It shows bad faith. There is a claim. XI. WRONGFUL TERMINATION. Plaintiffs claim that there is no relief available under a claim for wrongful termination as is time barred. They are mistaken. The Counterclaim alleges the fraudulent release was discovered on January 25, 2006. (Counterclaim, p. 8, ¶ 57.) When there is a fraudulent concealment, the statute of limitations is tolled. Walk v. Ring, supra. XII. NEGLIGENT MISREPRESENTATION. There was a failure to disclose as was required by Real Estate Regulations R4-28-804 and R4-28-1101(A), (B), (C) and (D). The Counterclaim alleges the regulations were

breached. (Counterclaim, p. 10, ¶¶ 83-87.) There is a claim. Lombardo at 101, 291; Wells Fargo Bank, supra, 201 Ariz. at 496, 38 P.3d at 34-36.
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Where one party has special

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knowledge of material facts to which the other party has no access, or where one party has spoken, but has not said enough to prevent his words from being misleading, this is the basis for fraud. Id. There is an affirmative duty to disclose those facts before a party engages in transactions with the customer which further the fraud, i.e., obtaining a release. In this case, a negligence misrepresentation claim does not preclude a claim of negligence. Furthermore, the limitation of foreseen ability does not apply to specific

performance. Restatement (Second) of Torts § 552 comment (a). In addition, the cases of Standard Chartered PLC v. Price Waterhouse, 190 Ariz. 6, 24, 945 P.2d 317, 335 (App. 1996) and Kuehn v. Stanley, 208 Ariz. 124, 127-29, 91 P.3d 346, 349-51 (App. 2004) are not applicable in this context. Standard Chartered dealt with liability of an auditor to a bank. Kuehn dealt with liability of an appraiser. The issue was unforeseen liability. There is no issue of unforeseen liability as the Hancocks are in privity with the Plaintiffs. The reliance upon Standard Charter and Kuehn v. Stanley are not applicable. As mentioned earlier, there is a dual agency concept in Arizona. In fact, the Plaintiffs' own pleading recognizes that "a nonclient's claim is the one that is barred by a double claim." In addition, Plaintiffs contend that the signature was "inadvertent." The failure to disclose by a real estate professional is also viable under negligence per se, i.e., the breach of a statutory duty. In addition, the problems with the cases of Standard Charter and Kuehn v. Stanley are not applicable. There is no issue of unforeseen ability due to a breach of care of negligence by a fiduciary. In addition, the parties are in privity. More importantly, Standard Chartered and Kuehn v. Stanley are not cases where there is an allegation of breach of fiduciary duty. When there is a claim of negligence against a person with a fiduciary duty, both negligence claims and negligent misrepresentation claims may go forward. Donnelly Construction Co. v. Oberg/Hunt/Gilleland, 139 Ariz. 184, 188-89 672 P.2d 1292 (1984). Furthermore, the claim labeled negligent misrepresentation but alleged with sufficient particularity to be considered intentional misrepresentation can be treated as a claim for intentional misrepresentation. Minger v. Green, 239 F.3d 793 (6th Cir. 2001). The negligence claim should not be dismissed.
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XIII. BREACH OF THE IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING. Arizona law implies a covenant of good faith and fair dealing in every contract. Id. at 490-91, 28-29. Such implied terms are as much a part of a contract as are the express terms. Id. The implied covenant of good faith and fair dealing prohibits a party from doing anything to prevent other parties to the contract from receiving the benefits and entitlements of the agreement. The duty arises by operation of law but exists by virtue of a contractual

relationship. Id. A party may bring an action in tort claiming damages for breach of the implied covenant of good faith, where there is a "special relationship between the parties arising from elements of public interest, adhesion, and fiduciary responsibility." It is undisputed that there is a special relationship to deal fairly. R4-28-1101(A). A party may also be injured when the other party to a contract manipulates bargaining power to its own advantage. Wells Fargo, 201 Ariz. at 491, 38 P.3d at 29. Indeed, a party may nevertheless breach its duty of good faith without actually breaching an express covenant in the contract. Id. This is especially appropriate in cancellation situations. Arizona's Towing Professionals, Inc. supra, at 9; Southwest Savings & Loan Association, supra, at 10. XIV. INTENTIONAL INTERFERENCE WITH A CONTRACT. The privilege one may enjoy to interfere with a contract is inapplicable when there is a dual agency or when one acts for his own personal advantage. In re Western States

Wholesale Natural Gas Antitrust Litig., 346 F.Supp.2d 1143, 1147 (D. Nev. 2004) (declining motion to dismiss) (emphasis added). In addition, in this particular circumstance, there is no privilege to interfere, as real estate regulations preclude a real estate agent from acting in the interest of his employer over a party to a real estate transaction. R4-28-1101(E). A prima facie case of intentional interference requires: 1) existence of a valid

contractual relationship, 2) knowledge of the relationship on the part of the interferor, 3) intentional interference inducing or causing a breach, 4) resultant damage to the party whose relationship has been disrupted, and 5) that the Defendant acted improperly. Id.

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Restatement (Second) of Torts § 766 (1977). There is no technical requirement as to the kind of conduct that may result in interference with the third party's performance of the contract. Restatement (Second) of Torts § 766 (1977) comment (k) (1979). Liability attaches to any intentional interference, whether by inducement or otherwise. Id. "The essential thing is the intent to cause the result." Wells Fargo at 494, 32. Where there are allegations of intentional torts, a discussion of duty is needlessly academic. Id. at 484, 22, 38 P.3d at 12. A parent company does not have the right to interfere with a subsidiary corporation's contract. Kozlowsky v. Westminster Nat. Bank (1970) 6 Cal.App.3d 593, 598, 86 Cal.Rptr. 52. See, also, Culcal Stylco, Inc. v. Vornado, Inc. (1972) 26 Cal.App.3d 879, 881-882, 103 Cal.Rptr. 419. At best, there is a qualified privilege. There is no absolute right of a parent to interfere in the affairs of a subsidiary regarding contracts of a third party. Id. at 883 (reversal of dismissal of Complaint for failure to state a claim). In reversing, the Court noted that the Complaint must be construed with a view to do substantial justice to the complaining party. Id. As such, there is a cognizable claim. Conduct specifically in violation of statutory provisions or contrary to public policy may for that reason make such an interference improper. Restatement (Second) of Torts § 766 comment (c) (1979), i.e., cancellation without signatures of Rick and Brenda Hancock and the failure to disclose the existence of the executed contract to obtain a release causing the Hancocks to forego their home, states a claim for relief. G.M. Ambulance and Medical Supply Co., Inc. v. Canyon State Ambulance, Inc., 153 Ariz. 549, 551, 739 P.2d 203, 205 (App. 1987). Causation is also a question for the jury. Wells Fargo Century, Inc. v. Hanakis, 2005 WL 1523788 (E.D.N.Y. 2005). Acting in self interest does not justify an affirmative strategy to deprive the Hancocks of information which Meritage knows is vital to the Hancocks and required be disclosed by law. Wells Fargo at 494, 495, 32-33. Further, it is not justification to interfere knowingly with a contract where the Defendant acts with an improper purpose and seeks to further his own interests. Id. An employer may not employ "wrongful means" to cause the breach of

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his employee's contract, i.e., not disclose an executed contract. Id. The Hancocks state a claim for breach of and interference with contract. XV. FRAUDULENT CONCEALMENT. One party to a transaction who, by concealment or other action, intentionally prevents the other from acquiring material information is subject to the same liability to the other, for pecuniary loss as though he had stated the nonexistence of the matter that the other was thus prevented from discovering. Wells Fargo at 496, 34. Where failure to disclose a material fact is calculated to induce a false belief, "the distinction between concealment and affirmative misrepresentation is tenuous." Schock v. Jacka, 105 Ariz. 131, 133, 460 P.2d 185, 187 (1969); Wells Fargo at 496, 34. Liability for fraudulent concealment occurs under § 550 of Restatement (Second) of Torts and lies against a "party to a transaction who by concealment or other action intentionally prevents the other from acquiring material information." (Emphasis added.) Concealment necessarily involves an element of nondisclosure, but it is the intentional act of preventing another from learning a material fact that is significant, and this act is always the equivalent of a misrepresentation. Restatement (Second) of Contracts § 160 ("Action intended or known to be likely to prevent another from learning a fact is equivalent to an assertion that the fact does not exist"). i.e., the executed contract. Where fraud is based on a plan of actual concealment, as opposed to simple nondisclosure, a duty to speak is not required. Wells Fargo at 497, 35. (Emphasis added.) Rick Hancock kept requesting information regarding the Madrid house in December 2003. (Counterclaim, p. 9, ¶ 65.) Hancock was told that the contract was not accepted.

(Counterclaim, p. 7, ¶ 47.) There is actual concealment. The Counterclaim states the Counter-Defendants readily participated in the fraudulent Madrid purchase contract, beginning with Landon and Arneson making up the bogus $35,000 limit, (Counterclaim, p. 6, ¶ 44) then Keeffe accepting the contract (Counterclaim, p. 4, ¶ 17) and Meritage not disclosing this to the client (Counterclaim, p. 5, ¶ 21). The contract is cancelled by Zetah based upon directions from Hilton and/or Landon. (Counterclaim, p. 5, ¶ 33.) Then Hilton states the contract is cancelled. (Counterclaim, p. 7, ¶ 47.) Hilton and
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Arneson are specifically asked about the Madrid contract. (Counterclaim, p. 7, ¶ 47.) Hilton and Arneson do not disclose that there is an executed contract. (Counterclaim, p. 7, ¶ 48.) Hilton or Arneson prepare a release knowing that Rick is seeking to purchase the house. (Counterclaim, p. 9, ¶ 66, p. 15, ¶ 130.) The failure to disclose is a cognizable claim. Intent is a question for the fact finder. Id. Any words or acts which create a false impression covering up the truth, or which remove an opportunity that might otherwise have led to the discovery of a material fact - as by floating a ship to conceal the defects in her bottom, sending one who is in search of information in a direction where it cannot be obtained, or even a false denial of knowledge by one in possession of facts - are classed as misrepresentation, no less than a verbal assurance that the fact is not true. Wells Fargo, at 498, 36. Actions by Meritage which intended to conceal material facts or allege misrepresentations are sufficient to prove a claim. A jury could find 1) Meritage had

knowledge of false information being given the Hancocks, and 2) Meritage took measures intended to prevent the Hancocks from learning the truth. These inferences are grounded in fact and are sufficient to take the concealment theory to the jury under the applicable clear and convincing standard. More importantly, the allegations in the Counterclaim are taken as true. XVI. CONTRACT. The Counterclaim alleges there is an executed contract and Meritage has not provided Rick Hancock with the Madrid house as set forth in the contract. (Counterclaim, p. 8, ¶ 60.) There is a claim for breach of contract. The statute of limitations is eight years. A.R.S. § 12548. The real estate regulations required disclosure of the contract. This was not done. XVII. THE FURTHER ALLEGED DEFICIENCIES Plaintiffs claim the Hancocks have released all of their claims against Meritage and its subsidiaries and employees. The alleged seven separate and independent reasons fail to focus on what constitutes acceptance in this contract. The fact that the contract was executed, and there is a dual agency as set forth by Real Estate Regulations governing the conduct of real
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estate professionals in Arizona, overrides Meritage's general claims of law.

While the

mailbox rule is the law school lore like Hadley Baxendale, the method of acceptance specified in the contract cannot be disregarded. Meritage claims that having obtained a release, they are entitled to have the Court rely upon such a release. They are mistaken. Releases obtained by fraud, i.e., fraudulent

inducement, are a nullity. Urfirer, supra. The Court, in allowing the Motion to Amend, noted that there is an allegation of a fraudulently induced release being obtained in this case. (Order dated August 22, 2006, p. 5.) The Plaintiffs then go on to state that the execution, i.e., the signature is not an execution, as it is not executed as a matter of law. They claim that there was no acceptance as it was not communicated to the Defendants. However, the acceptance of a contract is

governed by the contract terms. An offeree may rely upon a specified method of acceptance. Empire Machinery Co. v. Litton Business Tel. Systems, 115 Ariz. 562, 566 P.2d 1044 (Ariz. Div. 1 1977). If someone takes steps that would lead a reasonable person to believe a contract has been accepted then this is a factor to determine that there has been an acceptance of the contract. Id. See also, Clark v. Compania Ganadera de Cananea, S.A., 385 p.2D 691, 94 Ariz. 391 (1963) (acceptance of a contract must occur in the manner as set forth in the contract). In this particular case, the contract states that the acceptance occurs once there is a signature of the broker. There is no requirement that the acceptance be communicated in order for the contract to come into existence. Indeed, the opposite is true. Id. The live contract must then be given to the purchaser by law. R4-28.1101(B). Lombardo, supra, p. 5-6. Meritage also asserts that Rick Hancock's status as an employee was a condition precedent to the formation of the Madrid contract. Nowhere in the Counterclaim does it state that Rick Hancock's contract was conditioned upon him being an employee at the time the contract is accepted. Moreover, since there is an executed contract, the terms of the contract control. Plaintiffs further allege that Rick Hancock was not eligible to receive the employee discount. There was an executed contract and the contract must be enforced. Meritage specifically contends that absent a condition precedent that Rick Hancock was an employee of
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Meritage, there is no binding executed agreement. This is incorrect. The contract specifically states that the contract supersedes all prior agreements and understandings. The contract that was executed and hidden from Rick Hancock trumps the informal employee handbook. Meritage then makes the allegation that the contract was cancelled. Therefore,

Meritage claims, Mr. Hilton's statement cannot be false. Once again, this disregards the allegations stated in the Counterclaim. Rick and Brenda Hancock, as identified on the The cancellation

cancellation form, did not cancel the contract. (Counterclaim, p. 6, ¶ 34.)

form was not signed by Rick or Brenda Hancock. (Counterclaim, p. 6, ¶ 34.) The statement that it was cancelled is false. The cancellation form has a false date of cancellation.

(Counterclaim, p. 7, ¶ 51.) The bogus cancellation form is specified in the Counterclaim. It was not the document that was put into effect by Meritage to make it look like there was an actual cancellation. The effect of this document which aided and abetted Steve Hilton's false claim was that the contract had been cancelled. XVIII. INCONSISTENCY IS NOT GROUNDS FOR THE DISMISSAL OF THE COUNTERCLAIM.

The theory of the Defendants' case as set forth in the Counterclaim is totally consistent and not as the Plaintiffs would say "inconsistent." Plaintiffs need not be pinned down to a single theory of fraud, and inconsistency is not a tenable objection to a pleading. Sears Petroleum & Transport Corp. v. Ice Ban America, (2004 WL 834849) (N.D.N.Y. 2004). See, also, Fulk v. Bagley, 88 F.R.D. 153 (M.D.N.C. 1980). Furthermore, the falsity and materiality of the falsity is a matter for the jury. U.S. v. Gaudin, 515 U.S. 506, 512, 115 S.Ct. 2310, 2314 (1995). Creating a bogus employee policy that one cannot buy a house, manipulating that policy to preclude an employee from receiving the benefits of employment, creating fraudulent cancellation forms, keeping the cancellation form hidden, keeping the executed contract hidden from the Defendants, and negotiating a severance without disclosing the executed document forms the basis for the claim. This is set forth in detail in the

Counterclaim. This is sufficient. A jury really could easily construe the misstatements, as the

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fraud cancellation was made purely to invalidate a contract for a home which must be given to the Defendants and was used to obtain a release without notifying them that the contract existed. The Counterclaim alleges that the Plaintiffs knew the statements they were making were false (Counterclaim, p. 8, ¶ 59), and they knew that they were false when they were being made. (Counterclaim, p 8, ¶ 59.) The method of the execution of the fraud is set forth. These were not bald assertions. Specific details had been provided, including the bogus caps on discounts, identification of specific documents, and false cancellation requests and contracts. The fact is that the CFO, rather than the real estate broker, signed the cancellation is, in and of itself, a factor of fraud. The cancellation itself contains numerous false A jury could

statements, and fails to identify when the cancellation form was signed. conclude that the documents were prepared at a later date.

The Plaintiffs claim that the Hancocks have exhausted their remedies.

They are

mistaken. The contract specifically provides that they may seek specific performance with regard to breach of contract. Meritage states that the failure to disclose a signature is immaterial. This is a

remarkable assertion statement, i.e., that a signature on a three-quarter million dollar contract is immaterial. There is no support for Plaintiffs' statements that it was not material. It is so material that public policy requires disclosure. It is what constitutes acceptance of the contract pursuant to the contract's own terms. They also state that Mr. Hilton did not know that the contract was signed. So then why was there a cancellation form? A jury could infer that Mr. Hilton knew it was signed as he was trying to undo the contract and state that the contract was cancelled. There have been specific statements saying how the Plaintiffs participated in the fraud by a corporation and its insiders. The roles of Hilton, Landon, Arneson, Zetah and Keeffe were identified in the Counterclaim. If there is a concerted action of the Defendants acting in concert and the Complaint adequately identifies particular Defendants within a category of Defendants alleging responsibility for some continuing course or conduct, allegations cover
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each member of the group. It is reasonable to presume that in this case the collective actions of the officers were on behalf of the corporation. In re Equity Funding Corp. of America Sec. Litig., 416 F.Supp. 161, 181 (D.C. Cal. 1976). See, also, In re Stratosphere Corp. Sec. Litig., 1 F.Supp.2d 1096, 1108 (D. Nev. 1998). Furthermore Rule 9(b) is also relaxed when all information is within Defendant's control. See Shapiro v. UJB Financial Corp., 964 F.2d 272, 285 (3d Cir. 1992); U.S. ex rel. Russell v. Epic Healthcare Management Group, 193 F.3d 304, 308 (5th Cir. 1999). All that need be pled in a corporate fraud situation is the involvement of the individual Defendants directly associated with the fraudulent conduct and the relationship that existed amongst the Defendants. It is not necessary to designate which Defendant did what with particularity. Denny v. Carey, 72 F.R.D. 574 (D.C. Pa. 1976). See, also, In re Checkers Securities Litigation, 858 F.Supp. 1168 (M.D. Fla. 1994); Baugh v. CBS, Inc., 828 F.Supp. 745 (N.D. Cal. 1993) (denying motion for more definite statement of individual defendant liability). All that is necessary is an allegation of the manner in which the fraudulent

conspiracy was carried out and the role of the Defendants is sufficient. Deere & Co. v. Zahm, 837 F.Supp. 346 (D. Kan. 1993). A Complaint which identifies misstatements and omissions of material facts by Defendants in connection with the sale of securities and sets forth misstatements and omissions with particularity, along with the dates and letters in which those mistakes and omissions were made, meets the notice requirement even though none of the misstatements or omissions were attributable to specific Defendants. Burkhart v. Allson Realty Trust, 363 F.Supp. 1286 (N.D. Ill. 1973). (Emphasis added.) XIX. FLEXIBILITY IN CONCEALMENT CASES. Requirements of Rule 9 are tempered somewhat when the defrauded Plaintiff does not have all the facts necessary to provide details such as facts which are the exclusive possession of the Defendant. Whirlpool Financial Corp. v. GN Holdings, Inc., 873 F.Supp. 111, 118 (N.D. Ill. 1995) (aff'd 7th Cir. 1995). There is no obligation for Plaintiffs to plead

information that is in the sole possession of the Defendants. Endo v. Albertine, 812 F.Supp. 1479, 1497 (N.D. Ill. 1993) (Since Plaintiff could not show which Defendant made which
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representation as long as the Complaint alleged the time, place, content and consequences of misrepresentation, the Complaint could not be dismissed.) When there is an allegation of fraudulent misrepresentation which suggests that the necessary information is in the Defendant's control, Plaintiff has pled sufficient facts to establish that pre-complainant investigation satisfies Rule 9(b). Vega v. Contract Cleaning Maintenance, Inc., 2004 WL 2358274 (N.D. Ill. 2004). The Plaintiff need not draw a specific connection between every alleged misrepresentation and a particular Defendant when the Defendants acted in concert. In re Grand Casinos, Inc. Securities Litigation, 988 F.Supp. 1273, 1282 (D. Minn. 1997). See, also, Lewis v. Berry, 101 F.R.D. 706, 707 (D.C. Wash. 1984) (aiding and abetting claim sustained.) The Defendants are liable under aiding and abetting and concert of action. Wells Fargo at 485, 23 (relying upon Restatement (Second) of Torts § 876(b). A.R.S. § 12-2506. In Husted v. Amrep Corp., 429 F.Supp. 298, 310 (D.C.N.Y. 1977), the particularity requirement was shown in a Complaint for common law fraud showing lot sales, the nature of the fraudulent scheme, the devices allegedly used, identification of documents and that the omissions or misrepresentations were identified. Id. The Counterclaim in this case does this. XX. REQUEST FOR LEAVE TO CORRECT ANY DEFICIENCIES. Defendants respectfully request leave to correct any deficiencies in the counterclaim which is allowed to be filed. A Complaint should not be dismissed for errors in the form of potential allegations. XXI. CONCLUSION. The Hancocks are entitled to take their case to the jury with all reasonable inferences to be drawn from the facts. Reasonable jurors could find by the appropriate evidentiary standard that the Plaintiff is entitled to a verdict. In any event, the Hancock Defendants state claims. The Motion to Dismiss should be denied. RESPECTFULLY SUBMITTED this 27th day of October, 2006. MATHEW & MATHEW, P.C By: /s/Ivan K. Mathew Ivan K. Mathew, Attorneys for Defendants Rick and Brenda Hancock
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CERTIFICATE OF SERVICE Meritage v. Hancock, et al. Case No. CV 04 00384 ROS

I hereby certify that on October 27, 2006, I electronically transmitted the attached document to the Clerk's Office using the CM/ECF System for filing and transmittal of a Notice of Electronic Filing to the following CM/ECF registrants: Dan W. Goldfine Richard G. Erickson Snell & Wilmer, LLP One Arizona Center 400 E. Van Buren Phoenix, AZ 85004-2202 e-mail: [email protected] Attorneys for Plaintiffs and Counterdefendants and Third Party Defendants Steve Hilton and John Landon Timothy J. Burke Fennemore & Craig, P.C. 3003 N. Central Avenue, Suite 2600 Phoenix, AZ 85012 e-mail: [email protected] Attorneys for Third Party Defendant, Snell & Wilmer, LLP Robert M. Frisbee Frisbee & Bostock 5611 N. 16th Street Phoenix, AZ 85016 e-mail: [email protected] Attorneys for Defendant Gregory Hancock

Grant Woods Grant Woods, P.C. 1726 N. Seventh Street Phoenix, AZ 85006 e-mail: [email protected] Attorneys for Plaintiffs and Counterdefendants and Third Party Defendants Steve Hilton and John Landon /s/Karen Gawel