Free Brief (Non Appeal) - 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.
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CASE NO. CV-04-0384-PHX-ROS 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 (Assigned to the Hon. Roslyn O. Silver)

And All Related Claims.

Defendants, Rick Hancock and Brenda Hancock, represented by Ivan K. Mathew, hereby replies to the response filed by plaintiff regarding the motion to amend to file a counterclaim. This reply is supported by the attached Declarations of Shari Mesicko, Rick Hancock and Brenda Hancock, and attached exhibits. Exhibits "F", "G" and "H", respectively.) (Declarations attached hereto as

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I.

THE MOTION TO AMEND WAS MADE IN ACCORDANCE WITH THE STIPULATED ORDER AND IS THEREFORE TIMELY. Stipulations made by the parties are binding absent exceptional circumstances. Vallejos

v. C.E. Glass Co., 583 F.2d 507, 510-11 (10th Cir.1978); see, also, American Title Insurance Co. v. Lacelaw Corp., 861 F.2d 224, 226 (9th Cir. 1988.) On March 27, 2006, plaintiff and defendants entered into a Stipulation which provided that counterclaims could be filed on or before March 2, 2006. The Stipulated Order was signed by the Court. On March 2, 2006, the Proposed Counterclaim was filed in accordance with not only the Court's Order, but the Stipulation of the parties. II. THE NINTH CIRCUIT HAS REPEATEDLY STATED THAT MOTIONS TO AMEND SHALL BE GRANTED WITH EXTREME LIBERALITY. The Ninth Circuit has repeatedly stated that there is a strong policy that Motions to Amend shall be granted with extreme liberality. Eminence Capitol, L.L.C. v. Aspeon, Inc., 316 F.3d 1048, 1051 (9th Cir. 2003). The Ninth Circuit has held that undue delay alone is

insufficient to justify denying a motion to amend. Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 9 L.Ed.2d 222 (1962.) In Arizona, incases involving fraud, all possible remedies are afforded the defendant. Medasys Acquisition Corp. v. SDMS, P.C., 203 Ariz. 420, 423 55 P.3d 763, 766 (2002.) III. PREJUDICE. After failing to disclose the execution of Madrid subdivision contract, plaintiff cannot complain that they are prejudiced. Plaintiff knew about the executed real estate contract, suppressed it, failed to turn it over, as required by law, and therefore, cannot be the beneficiary of their own wrongful conduct. They cannot claim prejudice as discovery has not yet closed in this matter. They are not prejudiced as the information regarding fraudulent conduct is in the knowledge of the plaintiff themselves. They are not prejudiced as plaintiff anticipated that the counterclaim would be filed and began conducting discovery regarding the contract. (Deposition of Shari Mesicko, p. 29, l. 14 to p. 30, l. 21, attached as Exhibit "A".) Roger

Zetah requested the contract to be canceled despite it being signed by the designated broker, Scott Keeffe. Scott Keeffe, the designated broker and person who executed the contract, and
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Roger Zetah, the Chief Financial Officer who attempted to cancel the contract are employees of Meritage. The party opposing amendment bears the burden of showing prejudice. Eminence Capital, 316 F.3d at 1052. IV. THE CLAIMS ARE NOT FUTILE. "[A] proposed amendment is futile only if no set of facts can be proved under the amendment to the pleadings that would constitute a valid and sufficient claim or defense." Sweaney v. Ada County, Idaho, 119 F.3d 1385, 1393 ( 9th Cir. 1997.)

There is no futility as to time because Fed.R.Civ.P. 15(c)(2) relates an amendment of a pleading back to the date of the original pleading, as long as "the claim or defense asserted in the [proposed amendment] arose out of the conduct, transaction, or occurrence set forth or attempted to be set forth in the original pleading." Where there is fraudulent concealment, the statute of limitations is tolled. Walker v. Ring, 202 Ariz. 310, 318 44 P.3d 990 998 (1990). In addition, plaintiffs' bald allegations that Hancock cannot prove intent are not sufficient to deny a claim. V. PLAINTIFF CLAIMS THERE WAS NO FIDUCIARY DUTY - THEY ARE MISTAKEN. In real estate, there is a doctrine of dual agency. R4-28-1101(A). (See attached Exhibit "B".) Arizona case law is directly on point. The Court addressed this very issue in Lombardo v. Albu, 199 Ariz. 97, 14 P.3d 288 Ariz. (2000.) R4-28-1101 provides: A. A licensee owes a fiduciary duty to his client and shall protect and promote the

interests of the client. The licensee shall also deal fairly with all other parties to a transaction. B. Each licensee participating in a real estate transaction shall disclose to all other

parties to the transaction any information which the licensee possesses which materially and adversely affects the consideration to be paid by any party to the transaction, including, but not limited to, the following matters: 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.

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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. 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 Contract § 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 is a step further and argued that because she has no fiduciary duty to the seller, she has 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 at ¶ 4, Exhibit "B"). The 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. R428-1101(A). Subparagraph (B), (C) and (D) of the rule provides minimum standards of care in the exercise of the agent's duties. If the agent fails to reveal circumstances which effect transactions of the principal to perform, 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. R4-281101(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. This is also reiterated by the testimony of Meritage's own employees. Jerry Lilly stated that he believed he was operating under a fiduciary duty to Rick and Brenda Hancock in
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handling the Rick Hancock transaction. (Deposition of Jerry Lilly, p. 99, ll. 18-25, attached as Exhibit "C".) VI. MERITAGE FAILED TO DISCLOSE AN EXECUTED CONTRACT. Meritage failed to disclose the executed contract. Plaintiff claims there is no need to disclose the contract because the contract was inadvertently signed. First, the regulations governing the conduct of real estate agents requires a signed contract to be disclosed. R4-28802. It was not. The disclosure was to be timely. R4-28-1101(C). It was not. There was a regulatory duty to disclose it and undisputed that it was not disclosed. There is a per se cause of action when one fails to abide by statutory duty as in this case. VII. THE EXECUTION OF THE CONTRACT WAS NOT "INADVERTENT". The execution of the contract was not "inadvertent." Knowledge of fraud may be inferred from the circumstances. See, In re American Continental Corp./Lincoln Sav. and Loan Sec. Litig., 684 F.Supp. 1424, 1436 (D.Ariz. 1992.) The former controller of Meritage testified that the only way the purchase contract can be cancelled is if Meritage first sends the request for cancellation to the buyer (Motion to Amend, Exhibit "3") and the buyer cancels with his or her signature. (Deposition of Shari Mesicko, p. 169, ll. 8-14, Exhibit "A".) Meritage knew where to locate Rick and Brenda Hancock as he was a former employee. They did not. (Deposition of Roger Zetah, p.166, ll. 2-14, attached as Exhibit "D".) The earnest money of Rick and Brenda Hancock was accepted on November 21, 2003 and deposited five days later on November 25, 2003. Ron French and Jerry Lilly both reviewed the contract and noted that Scott Keeffe was the one authorized to accept the contract and he was the designated agent to accept the contract. (Deposition of Jerry Lilly, p. 83, l. 14 to p. 84, l. 7, attached as Exhibit "C".) (Deposition of Ron French, p. 134, l. 19 through p. 135, l. 4, attached as Exhibit "E".) The signature of Scott Keeffe signified that the contract was accepted. (Deposition of Ronald French, p. 146, ll. 8-11, Exhibit "E".) 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
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Jerry Lilly, p. 83, l. 16 through p. 84, l. 7; p. 85, l. 23 through p 86, l. 4, Exhibit "C".) 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, ll. 209, Exhibit "A".) Indeed, Scott Keeffe never canceled the contract. 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, Exhibit "D".) The notice of cancellation was back dated. The notice of cancellation states it was cancelled on December 8. This is false. Roger Zetah signed the cancellation notice on December 9 or later as Shari Mesicko retrieved it on December 9 or later. (Declaration of Shari Mesicko, ¶ 3, Exhibit "F".) The area above Roger Zetah's name contains the designation "Signed this ___ day of ____." This was left blank by Mr. Zetah. A jury could find that the document was not signed on December 8. 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 which was signed was inadvertently signed by Roger Zetah. Indeed, he said the opposite. Meritage has now come up with "the inadvertent signature theory" after the proposed counterclaim had been lodged. In any event, as the Defendants' statements are taken as true, the motion to amend should be granted. Defendants have alleged there is a written contract signed by the parties. The Court should accept that there is a contract at this stage. VIII. SHARI MESICKO DID NOT DELAY AT ALL IN SEEKING TO RETRIEVE THE CONTRACT FROM SCOTT KEEFFE. Shari Mesicko did not delay at all in seeking to retrieve the contract from Scott Keeffe. Meritage claims that Shari Mesicko, the former controller, failed to procure the contract from Scott Keeffe's office by purposeful delay. This is a false statement. From the time of Mr. Zetah's request to the retrieval of documents to Zetah took less than five minutes. (Declaration of Shari Mesicko, ¶¶ 6, 8 and 9, Exhibit "F".) Ms. Mesicko stated that early on the morning of December 9 or later, she was instructed by Roger Zetah to obtain the signed contract. (Deposition of Shari Mesicko, p. 174, ll. 17-21, Exhibit "A".) She did as she was told. Id.
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IX.

BAD FAITH. Mr. Zetah at his deposition never claimed that there was any delay by Shari Mesicko.

It was signed by Scott Keeffe, the person designated by Meritage as "the designated broker who is authorized to accept contracts. Mr. Keeffe's assistant, Laura Steinmeyer, refused to cancel the contract. (Deposition of Shari Mesicko, p. 170, ll. 2-9, Exhibit "A".) 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. This was not done. Shari Mesicko stated that research would have to be done to locate people when contracts were cancelled and they had to be brought in to be signed. (Declaration of Shari Mesicko, p. 169, ll. 8-23, Exhibit "F".) Meritage knew of the location of Rick and Brenda Hancock as they were former employees. All they needed to do was go to personnel department, obtain the phone number and call Rick and Brenda Hancock. However, they did not do this because they did not want them to know that the contract had been accepted. Roger Zetah, the Chief Financial Officer, cancelled the contract. He acknowledged he had never done this before. The cancellation procedures were not followed. If a method or transaction is atypical or lacks business justification it may be possible to infer the knowledge necessary for aiding and abetting liability. Wells Fargo at 489, 27; 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 securities 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 Int'l Inv. Trust v. Cornfeld, 619 F.2d 909, 921-22 (2d Cir. 1980.) (defendant performed challenged transaction knowing it violated client's policy, with heightened economic motive to do so.)

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X.

THE FAILURE TO GIVE NOTICE WHEN THERE IS A STATUTORY TO DISCLOSE IS FRAUD. The failure to give notice when there is a statutory 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 (Ariz.App.Div.1 2000.) Real Estate Regulation R4-28-802 provides that executed contracts must be provided to buyers and sellers. It is undisputed this was not done, as required by law. Meritage's claim that notice of the acceptance was not conveyed to the Hancocks is unavailing. Meritage fails to understand that they cannot claim the benefit of the failure to give notice as such a failure is in direct contravention of the law which required disclosure. It is the sine non qua of the regulation. Meritage owed a duty of fair dealing to Rick and Brenda Hancock. Or to put it

another way, they owed the duty of disclosure. Lombardo at 100, 292. Upon signing the document, Meritage should have given notice without a two year delay to Rick and Brenda Hancock. By virtue of Mr. Keeffe's signatures and their regulatory duties they cannot claim that acceptance was not conveyed. Plaintiff claims Hancock should give monies back. 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. XI. THE RELEASE. 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. 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. Id. Urfirer v. Cornfeld, 408 F.3d 710, 723 (11th Cir. 2005.) [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. Id. 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. Id.
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"Where fraud or duress in the procurement of a release is alleged, a motion to dismiss should be denied." Id. at 724. "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." Id. at FN2. "It is the duty of the Court not to enforce fraudulently obtained agreements." Id. A settlement agreement obtained on the basis of fraud is a nullity. Id. Plaintiff claims 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). A party cannot use fraudulent tactics to obtain a release and then when the deceit is uncovered use the improperly obtained release as a shield. XII. MERITAGE CLAIMS THAT THE EMPLOYEE HANDBOOK MAKES BENEFITS SUBJECT TO CHANGE. Meritage claims that the employee handbook makes benefits subject to change. Employees were to receive a benefit of a 10 percent discount and 10 percent cost plus on options in connection with a home purchase. Meritage claims that the policy changed to provide a discount cap of $35,000.00. 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), citing Leikvold v. Valley View Cmty. Hosp., 141 Ariz. 544, 548, 688 P.2d 170, 174 (1984). 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
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power to cancel. Id. at 77, 993 P.2d at 1041. Southwest Savings & Loan Association v. SunAmp Systems, Inc., 172 Ariz. 553, 558, 838 P.2d 1314, 1319 (App.1992.) Meritage also cannot keep their stories straight. On February 3, 2006, Ron French admitted that the $35,000.00 policy did not exist. 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, Exhibit "E".) As such, the alleged new policy was a sham. It shows bad faith. In any event, whether or not there was or whether or not the policy is not controlling for the purpose of the Motion to Amend. It is undisputed that there was a written executed real estate contract which contains a discount of 10 percent and costs plus 10 percent for options. (Proposed Counterclaim, ¶ 103.) There is a claim. XIII. WRONGFUL TERMINATION. Plaintiff claims that there is no relief available under a claim for wrongful termination. They claim it is time barred. This is incorrect. The basis for the fraudulent release was discovered on January 24, 2006. When there is a fraudulent concealment, the statute of limitations is tolled. Walker v. Ring, 202 Ariz. 310, 318 44 P.3d 990 998 (1990). XIV. THE EXTRAORDINARY DECLARATION OF SCOTT KEEFFE. The Declaration of Scott Keeffe is incredible as a matter of law. On his first day of work, December 8, 2003, Mr. Keeffe states that he signed a contract for approximately $700,000 on his first day on the job. He states it was inadvertent. He also states that for some reason he signed the contract although he believed that the contract was not valid. He also states that he learned for the first time that he inadvertently signed a purchase agreement in excess of $700,000 in March, 2006. However, during the period of December 2003 it was contended that Rick Hancock had purchased the house which Mr. Keeffe now claims he inadvertently signed. (Declaration of Scott Keeffe, ¶ 8, attached to Meritage's Opposition to Hancock's Motion to Amend and File Counterclaim.) He stated that it was never his intention to sign the purchase agreement. This is rather bizarre considering it is the function of the designated broker to sign contracts signifying
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The written executed contract trumps the policy manual.

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acceptance. (Deposition of Ron French, p. 133, ll. 1-7.) He states that he did not even know he had the contract in his possession on December 8, 2003. In addition, his signature is on the purchase agreement in two different locations. (Motion to Amend, Exhibit "2", p.10 and p.13.) XV. NEGLIGENT MISREPRESENTATION. There was a failure to disclose. It was required by regulation R4-28-84, R4-28-84 (A), (B), (C) and (D). The regulation was breached. There is a claim. Lombardo at 101, 291; Wells Fargo Bank v. Arizona Laborers, et al., 201 Ariz. at 496, 38 P.3d at 34-36. Where one party has special 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 disclos[e] those facts before a party engages in transactions with the customer which further the fraud, i.e., obtaining a release. Where there are allegations of intentional torts, a discussion of duty is needlessly academic. Wells Fargo Bank v. Arizona Laborers, et al., 201 Ariz. at 484, 22, 38 P.3d 12 (2002.) XVI. 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. R4-28-1101(A). A party may also be injured when the other party to a contract manipulates bargaining power to its own advantage. Id. Indeed, a party may nevertheless breach its duty of good
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faith without actually breaching an express covenant in the contract. Id. This is especially appropriate in cancellation situations. Arizona's Towing Professionals, Inc. v. State, supra p. 9; Southwest Savings & Loan Association v. SunAmp Systems, Inc., supra p. 10. XVII. INTENTIONAL INTERFERENCE WITH A CONTRACT. Intentional interference with a contract is an intentional tort. Wells Fargo Bank v. Arizona Laborers, et al., 201 Ariz. at 493, 38 P.3d 12 at 131. In addition, "[t]he duty not to interfere with the contract of another arises out of law, not contract." Bar J Bar Cattle Co. Inc. v. Pace, 158 Ariz. 481, 486, 763 P.2d 545, 550 (App.1988) (Emphasis added). 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. 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 cmt. k (1979). Liability attaches to any intentional interference, whether by inducement or otherwise. Id. (Emphasis in original). "The essential thing is the intent to cause the result." Wells Fargo at 494, 32. The defendants readily participated in the Madrid purchase contract cancellation, the failure to disclose which is a cognizable claim. Intent is a question for the fact finder. Id. Meritage certainly had reason to believe that the cancellation would interfere with the Hancock's Madrid purchase contract and the benefit of the employee policy manual. The Hancocks can prove damage if they can establish that they would have demanded the Madrid house had they been told of the execution of the contract. Id. at 494, 32. Wrongful conduct can be analyzed by considering seven factors previously advanced by this Court: (a) the nature of the actor's conduct, (b) the actor's motive, (c) the interests of the other with which the actor's conduct interferes, (d) the interest sought to be advanced by the actor, (e) the social interests in protecting the freedom of action of the actor and the contractual interests of the other, (f) the proximity or remoteness of the actor's conduct to the
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interference, and (g) the relations between the parties. Id. Factors deserving the most weight are the nature of the actor's conduct and the actor's motive. Id. G.M. Ambulance & Med. Supply Co., Inc. v. Canyon State Ambulance, Inc., 153 Ariz. 549, 551, 739 P.2d 203, 205 (App.1987). (Emphasis added.) Conduct specifically in violation of statutory provisions or contrary to public policy may for that reason make an interference improper. Restatement (Second) of Torts § 767 cmt. c (1979), i.e., cancellation without signatures of Rick and Brenda Hancock and the failure to disclose to obtain a release causing the Hancock's to forego their home. Causation is also a question for the jury. Id. at FN2. 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 disclose 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 employee may not employ "wrongful means" to cause the breach of his employer's contract, i.e., not disclose an executed contract. Id. claim. In Arizona, as elsewhere, an employee does not have absolute immunity from claims of tortuous interference. Arizona uses the predominate motive test, i.e., was the employee motivated primarily for spite or corporate benefit. Id. at 494, 32. A privilege one may enjoy to interfere with a contract has no application when there is a dual agency or when one acts for his own personal advantage. In re Western States Wholesale Natural Gas, 346 F. Supp 2d 1143, 1147 (D. Nev. 2004) declining motion to dismiss. In addition, in this particular circumstance, there is no privilege to interfere as real estate regulations preclude a real estate agent for acting for the interest of his employer over a party to a real estate transaction. R4-28-1101(E). At best, an employee has a qualified privilege called a breach of an employer's contract with a third person if the employee can show his acts were taken in good faith belief they were for the lawful interest of the employer and that he did not employ wrongful means to cause
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The Hancocks state a

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breach of the employer's contract. Rutledge v. Arizona Board of Regents, 147 Ariz. 534, 550551, 711 P.2d 1207, 1224 (1985). A parent company does not have the right to interfere with a contract with a subsidiary corporation. Kozlowski v. Westminster National Bank,

6 Cal. App. 3d 593, 599-600 86 Cal, Rptr. 52 (1970.) There is no absolute right of a parent to interfere in the affairs of a subsidiary regarding contracts of third party. Culcal Stylco, Inc. v. Vornado, Inc., 26 Cal. App. 3d 879, 881-882, 103 Cal. Rptr. 419. At best, there is a qualified privilege. Id. at 883. (Reversal of dismissal of complaints 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 party. Id. As such, there is a cognizable claim. XVIII. 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 Bank v. Arizona Laborers, et al., 201 Ariz. at 496, 38 P.2d at 34. Liability for fraudulent concealment occurs under § 550 of the 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 non-disclosure, 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. Rick Hancock kept requesting the Madrid house in December 2003. (Proposed Counterclaim, Complaint, ¶ 65.) Hancock was told that the contract was not accepted. (Proposed Counterclaim, ¶ 47.) There
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is actual concealment. "Thus, fraudulent concealment--without any misrepresentation or duty to disclose - can constitute common law fraud." Id. at 899. 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, 498, 36. Actions by Meritage which intended to conceal material facts or alleged 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. allegations in the complaint are taken as true. XIX. CONTRACT. There is an executed contract and Meritage has not provided Rick Hancock with the Madrid house as set forth in the contract. There is a claim for breach of contract. The statute of limitations is eight years. A.R.S. 12-548. XX. JOINT AND SEVERAL LIABILITY. The defendants are liable under aiding and abetting and concert of action. Wells Fargo Bank v. Arizona Laborers, 201 Ariz. at 485, 38 P.3d at 23 (relying upon Restatement (Second) of Torts § 876(b).) A.R.S. 12-2506. XXI. 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. Id. More importantly, the

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XXII. 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 Hancocks state claims. The Motion to Amend should be granted. RESPECTFULLY SUBMITTED this 7th day of April, 2006. MATHEW & MATHEW, P.C By: s/Ivan K. Mathew Ivan K. Mathew, Attorneys for Defendants Rick and Brenda Hancock

CERTIFICATE OF SERVICE
I hereby certify that on April 7, 2006, I electronically transmitted the foregoing 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 Plaintiff Timothy J. Burke Fennemore & Craig, P.C. 3003 N. Central Avenue, Suite 2600 Phoenix, AZ 85012 e-mail: [email protected] Attorneys for Snell & Wilmer, LLP

Robert M. Frisbee Frisbee & Bostock 5611 N. 16th Street Phoenix, AZ 85016 e-mail: [email protected] Attorneys for Defendant Gregory Hancock

s/Karen Gawel

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