Mallamo v. Hartman

Citations: 219 P.2d 1039; 70 Ariz. 294; 1950 Ariz. LEXIS 227Docket: 5171

Court: Arizona Supreme Court; June 26, 1950; Arizona; State Supreme Court

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Herbert Mallamo filed a lawsuit against Paul Hartman and his wife in the Superior Court of Pima County, seeking to impose a trust on specific lots in the Samos Addition or, alternatively, to recover damages. Mallamo alleged that he had employed Hartman as an agent to procure property for him, specifically instructing Hartman to negotiate terms for purchasing the lots. Instead, Hartman allegedly misled Mallamo by falsely claiming that the property was only available for cash and that the title was defective. Hartman ultimately purchased the property for himself under a deferred payment plan and later sold it to Mallamo for $3,500 without disclosing the true circumstances. 

The plaintiff's complaint included two counts: one seeking the imposition of a trust and the other requesting damages. The defendants responded with a general denial. At trial, the defendants moved for an instructed verdict on several grounds, including lack of evidence supporting Mallamo's claims and that he waived his right to sue by purchasing the property. The court granted the motion for an instructed verdict, leading to a judgment for the defendants. Mallamo appealed, presenting five assignments of error, with the first asserting that the court erred in finding no fraud by Hartman, given that he failed to disclose his personal interest in the property he was supposed to negotiate for Mallamo.

The evidence presented was deemed insufficient to support the trial court's finding and verdict in favor of the defendants. The court erred in directing a verdict for the defendants, as there was a conflict in the evidence that should have been presented to a jury. The complaint adequately stated a cause of action for fraud against the defendants, yet the trial court granted an instructed verdict based on a perceived failure to prove the alleged fraud by Hartman and the applicability of the Statute of Frauds, which was not properly pleaded by the defendants. The relevant statute requires affirmative pleading to invoke it as a defense, and the court denied the defendants' motion to dismiss on that basis. 

The court concluded that the Statute of Frauds did not apply, as the action was based on fraudulent conduct rather than a direct contractual dispute between principal and agent. The agency relationship imposed a higher duty of good faith on Hartman towards Mallamo, and the court asserted that the fraud claim was separate from the contract of agency. The statute cited by the defendants only limits actions by agents seeking commissions, not the validity of the contract itself. It was emphasized that agents must demonstrate utmost good faith in their dealings, and if there was indeed a conflict in evidence regarding Hartman's alleged fraud, it should have been resolved by a jury. The testimonies of Mallamo and Hartman indicated an initial agreement regarding the purchase of the Samos property, which further supported the claim of potential fraud against Hartman.

Hartman informed the individual that the property owners sought all cash for the sale and suggested he consider other properties, expressing concerns about the property's title being defective. The individual later learned that Hartman had purchased the property under different terms. Hartman first showed the individual the Samos property in mid-1946 without having it officially listed and did not communicate any specific interest or instructions regarding the purchase. He presented the property to another party, Mallamo, based on the owners' terms but did not advise the individual to pursue other options. Hartman later purchased the property with half down and the remainder on terms, confirming to the individual post-purchase that he had acquired it under these conditions. Testimony from the Title Company indicated no record of title defects. The evidence regarding fraud was conflicting, warranting jury consideration, leading to the trial court's error in directing a verdict for the defendant. The judgment was reversed, and a new trial was ordered. Judges La Prade, Udall, and Stanford concurred, while Judge DeConcini did not participate.