Zaki v. Capstone Asset Mgmt. LLC

EMAD ZAKI, Plaintiff/Appellee, v. CAPSTONE ASSET MANAGEMENT LLC, Defendant/Appellant.

No. 1 CA-CV 19-0263

ARIZONA COURT OF APPEALS DIVISION ONE

March 5, 2020

NOTICE: NOT FOR OFFICIAL PUBLICATION. UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.

Appeal from the Superior Court in Maricopa County

No. CV2018-002073

No. CV2018-004485

The Honorable Roger E. Brodman, Judge

AFFIRMED

COUNSEL

Paul M. Levine, P.C., Scottsdale

By Paul M. Levine

Counsel for Plaintiff/Appellee

Engelman Berger, P.C., Phoenix

By Wade M. Burgeson

Counsel for Defendant/Appellant

MEMORANDUM DECISION

Presiding Judge Paul J. McMurdie delivered the decision of the Court, in which Judge Jennifer B. Campbell and Vice Chief Judge Kent E. Cattani joined.

McMURDIE, Judge:

¶1 Capstone Asset Management, L.L.C. ("Capstone") appeals the superior court's order granting a permanent injunction for specific performance for the sale of two commercial properties to Emad Zaki and awarding Zaki his attorney's fees and costs. We affirm.

FACTS AND PROCEDURAL BACKGROUND

¶2 Min Kim is the manager of Capstone.¹ On January 3, 2018, Capstone and Zaki entered a real estate contract whereby Zaki agreed to purchase two commercial condominiums from Capstone for $405,000. The agreement: (1) required Zaki to pay a $5000 earnest money deposit and the remaining balance at close of escrow; (2) selected Greystone Title Agency ("Greystone") to serve as the escrow agent; and (3) stated that Capstone was obligated to provide Zaki title insurance at the close of escrow. The contract contained a buyer disapproval clause, which provided if Zaki "disapproves of the property" he could immediately cancel the contract without consent from Capstone or deliver written notice of the items he disapproved of to Capstone. If Capstone did not agree or was unable to resolve the conflict, Zaki could cancel the contract and retain his deposit, or proceed as is with the transaction. The agreement provided that the failure to give written notice of cancellation or disapproval was deemed an election to proceed with the contract. The parties also included a time-is-of-the-essence provision. For the transaction, Capstone used BrettIsbell as its broker. Zaki did not have a broker. Greystone opened escrow, and Zaki paid the $5000 deposit.

¶3 The condominiums are part of a seven-unit association called the Camino Medical Property Owners Association (the "Association"). The Association is headed by its President, Kerry Giangobbe, who owns the other five units.

¶4 On January 9, Greystone sent Giangobbe a one-page questionnaire, requesting information about the Association and property. Greystone needed the answers to the questionnaire to close escrow. The questionnaire asked for such information as the existence of fees and whether a buyer was required to be approved by the Association before closure. The questionnaire identified Zaki as the buyer, Capstone as the owner, and stated that the escrow was scheduled to close on February 28, 2018. Giangobbe did not respond to the questionnaire. Greystone re-sent the questionnaire to Giangobbe on January 19, 2018.

¶5 Isbell, on behalf of Capstone, also sent a questionnaire to Giangobbe on January 18, informing her that to close escrow, she needed to complete it and provide a copy of the Association's Covenants, Conditions, and Restrictions ("CC&Rs") and bylaws. On January 24, 2018, Isbell again sent the questionnaire and requested a copy of the Association's budget. Instead of answering the questionnaire and providing the CC&Rs and bylaws, Giangobbe demanded that both Zaki and Kim call her to address concerns she had about Zaki because "[h]is phone and current employment does not exist." She claimed that the Association had a non-compete clause restricting the use of the properties, and she needed to approve the buyer before supplying the information necessary to close escrow.

¶6 Isbell also emailed Kim, provided him with Giangobbe's phone number, and encouraged him to call her "as soon as possible to avoid more stress on [Zaki]." When Kim did not contact Giangobbe, Isbell emailed Kim again stating, "your assistance may be needed in order to resolve this matter." On January 30, Giangobbe complained to Isbell that Kim had not called her and demanded he do so. Isbell emailed Kim stating he "should probably speak to her as soon as possible. She is very combative and is putting this deal in jeopardy."

¶7 Finally, on January 30, Giangobbe emailed Kim. In the email, Giangobbe gave Kim her phone number and told him to contact her "at [his] earliest convenience." The next day, Kim responded to the email and stated he would call her that day. Kim then sent two emails to Giangobbeinforming her that he was out of the country and unable to find someone who sold an international calling card. He asked her to communicate via email because his written English skills were better than his spoken English. Giangobbe repeatedly asked Kim to call her and requested more information about Zaki in multiple emails over the next few days. She also stated that Zaki had no right to any of the asked for financial information. Kim avoided the request to call Giangobbe again by stating: "I have not been able to find a way to call you from here. The earliest I am scheduled to return is next week and there is a possibility of my trip being delayed, depending on how things work out here."

¶8 Growing frustrated with Giangobbe's resistance and Zaki for not wanting to provide more information about himself to Giangobbe, Kim decided to "press the matter." On February 5, he emailed Giangobbe, stating he had the right as an "owner and member of the [A]ssociation" to obtain the information requested and was prepared to sue her if she did not provide the necessary information and documents. He also informed Giangobbe that his copy of the CC&Rs did not mention a non-compete or a right to approve a buyer. The next day, Giangobbe offered to "set up a meeting at our attorney's office" and gave Kim the Association's attorney's contact information. On February 18, Capstone and Zaki extended the feasibility period to March 15 and close of escrow to April 3, 2018.

¶9 On March 14, Giangobbe emailed Kim and asked why he had not contacted the Association's lawyer yet. Despite more than a dozen requests by Giangobbe for Kim to call her or the Association's attorney, he never did. On March 20, Isbell contacted the Association's attorney, and two days later, Giangobbe filled out the questionnaire. However, the Association incorrectly claimed its Board of Directors had the right to review and approve the deal before it closed. The next week, Kim's and the Association's attorneys "agreed the Association does not have veto power over prospective buyers" and that the Association's attorney would try to provide a corrected questionnaire. Before he could give the correct information, the Association hired new counsel, and Giangobbe insisted that the Board had 30 days to approve Zaki.

¶10 Aware that escrow was not going to close on time, Zaki and Kim began negotiating alternative ways to transfer the properties. Negotiations broke down over who was to pay the transfer fees, Zaki's refusal to deposit additional funds into escrow, and Kim's insistence not to provide the title insurance. The parties failed to reach an agreement, and escrow did not close on April 3, 2018. Three days later, Kim emailed Isbell stating, "I feel the Camino property is underpriced." Later that week, Kimrequested that the asking price of the properties be increased by $145,000. Eventually, Kim increased the asking price to $875,000, more than double the original contract price with Zaki.

¶11 Relations between Kim and Zaki continued to deteriorate, eventually resulting in both parties suing the other for breach of contract and breach of the covenant of good faith and fair dealing. Zaki argued Capstone was obligated to do more to get the Association to comply with Greystone's request for information, Capstone acted unreasonably, and escrow should have been extended to allow Zaki an opportunity "to complete his due diligence." Zaki requested specific performance and an award for his attorney's fees and costs per the terms of the contract. Capstone argued that escrow failed to close on time, Zaki never made the written disapproval required under the contract, and Zaki refused to deposit additional funds into the escrow which could have extended the time to close.

¶12 The superior court held an evidentiary hearing on Zaki's application for permanent injunction for specific performance. After the hearing, the court granted the permanent injunction. The court concluded Capstone's original owner, Kim, faked his death and was the person sending the emails pretending to be his father. The court stated "one of the reasons Ms. Giangobbe was so difficult was because she felt that she was getting the runaround" by Kim, who refused to call her and only offered "lame excuses in the process," and by Zaki, who she claimed had lied to her and whose "true intent was to move his wife's ophthalmology practice to the Property. . . . [when] there already was an ophthalmology practice in the Association." The court found that Capstone materially breached the purchase contract because it "did not act reasonably or timely in dealing with the Association and that [Capstone's] conduct was itself an action that was beyond the risks [Zaki] assumed in the contract." It also found Zaki was "not at fault for the failure to close escrow on April 3 and therefore not in material breach of the contract." The court ordered that Zaki was entitled to specific performance of the contract and awarded him attorney's fees and costs. Capstone appealed the decision and we have jurisdiction under Arizona Revised Statutes ("A.R.S.") sections 12-2101(A)(1) and -2101(A)(5)(b).

DISCUSSION

¶13 Following a bench trial, we view the facts in the light most...