Gammage v. Als

NOTICE: NOT FOR PUBLICATION.
UNDER ARIZ. R. SUP. CT. 111(c), THIS DECISION DOES NOT CREATE LEGAL PRECEDENT
AND MAY NOT BE CITED EXCEPT AS AUTHORIZED.

IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE

CHAD GAMMAGE, Appellant,

v.

AURORA LOAN SERVICES, INC., Appellee.

No. 1 CA-CV 13-0172
FILED 03/13/2014

Appeal from the Superior Court in Maricopa County
CV2011-098920
The Honorable Mark F. Aceto, Judge

AFFIRMED

COUNSEL

Chad Gammage, Scottsdale
Appellant In Propria Persona

Akerman, LLP, Denver, CO
By Justin D. Balser and Ashley E. Calhoun
Counsel for Appellee
 GAMMAGE v. ALS
Decision of the Court

MEMORANDUM DECISION

Presiding Judge Kent E. Cattani delivered the decision of the Court, in
which Judge Margaret H. Downie and Judge Michael J. Brown joined.

C A T T A N I, Judge:

¶1 Chad Gammage appeals from the superior court’s judgment
in favor of Aurora Loan Services, Inc. (“ALS”). For reasons that follow,
we affirm.

FACTS AND PROCEDURAL BACKGROUND

¶2 In May 2006, First Magnus Financial Corporation extended a
$360,000 loan secured by a deed of trust to Gammage to refinance his
home. In July 2008, Gammage stopped making loan payments, even
though he had the funds to make them, intending that his default would
result in a loan modification. After receiving a notice of default, he
retained legal counsel and began the loan modification process. The
lender scheduled a foreclosure sale for May 2009 and provided notice to
Gammage.

¶3 In April 2009, ALS, which was servicing Gammage’s loan,
offered Gammage a temporary Workout Agreement. Gammage
understood that this Workout Agreement was temporary and not the
permanent loan modification he was seeking. Under the Workout
Agreement, he was required to demonstrate an ability to make payments.
ALS agreed to forbear foreclosure during the process, and Gammage
agreed to make the payments as set out in the agreement. Gammage
made three payments under the Workout Agreement, but failed to make
the final payment of $22,043. Despite Gammage’s failure to make the final
payment, ALS agreed to review updated financial documents to
determine whether to go forward with a loan modification. Gammage
sent ALS the documents in July 2009.

¶4 On August 5, 2009, Gammage received an email from his
legal counsel stating that Gammage had been approved by ALS for a loan
modification. The email represented that Gammage would receive a “new
terms package” to review and execute by September 1, 2009, and that a
payment of $1,312.53 would be due by that same date. But neither

2
 GAMMAGE v. ALS
Decision of the Court

Gammage nor his legal counsel ever received a loan modification package
with new terms from ALS. Instead, Gammage’s legal counsel received a
letter from ALS dated August 5, 2009 stating that Gammage’s loan
modification request had been denied because ALS had received
notification of Gammage’s withdrawal of his request. The letter was
addressed to “Chadwick R. Gammage C/o Neil W. Thomson.”

¶5 In a letter dated August 10, 2009, Gammage’s legal counsel
asked ALS for clarification, stating that Gammage had not requested that
his loan workout option be withdrawn, and that ALS’s letter directly
contradicted the information provided by an ALS employee. ALS
responded on August 12, 2009 with a computer-generated letter, which
stated “a response addressing your request/concerns is being prepared
and will be sent under separate cover,” but no further response followed.
In September 2009, Gammage’s property was sold at a foreclosure sale. At
the time of the sale, the value of the home was at least $200,000 less than
the amount owed.

¶6 In October 2009, Gammage sued ALS for declaratory
judgment, specific performance, and a temporary restraining order.
During the course of litigation, ALS agreed to permit Gammage to stay in
the property until mid February 2010 in exchange for Gammage’s
dismissal of the matter with prejudice. Gammage agreed to this
settlement, but did not execute the stipulated dismissal. The court
dismissed the matter without prejudice for lack of prosecution.

¶7 In March 2010, Gammage sued his legal counsel for
malpractice, alleging a failure to follow up with ALS regarding the
termination of the loan modification process. Gammage testified at trial in
that matter that he did not receive notice of ALS’s August 5, 2009 letter
until after the foreclosure sale, and had he known there was a problem
with the loan modification process, he could have cured the arrearage
because he had the necessary funds to do so. The jury found in favor of
Gammage and allocated fault for the foreclosure of Gammage’s home
with Gammage 0% at fault, legal counsel 100% at fault, and ALS 0% at
fault.

¶8 In September 2011, Gammage sued ALS in the current action
for negligence, breach of contract, intentional and/or negligent infliction
of emotional distress, negligent supervision, and breach of duty of good
faith and fair dealing. ALS moved to dismiss Gammage’s complaint
pursuant to Rule 12(b)(6) of the Arizona Rules of Civil Procedure for
failure to state a claim upon which relief can be granted. After full

3
 GAMMAGE v. ALS
Decision of the Court

briefing, the superior court denied ALS’s motion to dismiss, and ALS
subsequently answered the complaint.

¶9 On September 26, 2012, five days after the close of discovery,
Gammage’s counsel withdrew from the case. On September 28, 2012, the
superior court held a telephonic conference to set a trial date and ordered
that any dispositive motions be filed on or before October 31, 2012.

¶10 On October 31, 2012, ALS filed a motion for summary
judgment as to all of Gammage’s claims. ALS sent Gammage a copy of its
motion, along with a Separate Statement of Material Facts in Support of
the Motion for Summary Judgment, a Request for Judicial Notice in
Support of the Motion for Summary Judgment, and the Declaration of
Justin Balser in Support of the Motion for Summary Judgment. Gammage
did not file a response to these filings. In December 2012, the superior
court granted ALS’s motion for summary judgment, finding that ALS
“ha[d] established entitlement to judgment as a matter of law.”

¶11 Gammage filed a motion to set aside summary judgment
under Rule 60(c) of the Arizona Rules of Civil Procedure based on
surprise and excusable neglect. ALS opposed Gammage’s motion to set
aside. The superior court denied Gammage’s motion and directed entry
of final judgment in ALS’s favor.

¶12 Gammage timely appealed. We have jurisdiction under
Article 6, Section 9, of the Arizona Constitution and Arizona Revised
Statutes (“A.R.S.”) sections 12-120.21(A)(1) and -2101(A)(1). 1

DISCUSSION

¶13 Gammage contends that the superior court erred by (1)
denying his motion to set aside summary judgment and (2) granting
summary judgment in favor of ALS. We address each issue in turn.

I. Motion to Set Aside Summary Judgment.

¶14 Gammage argues that the trial court should have granted his
motion for relief under Arizona Rule of Civil Procedure 60(c)(1), which
permits a court to relieve a party from a judgment on the basis of
“mistake, inadvertence, surprise or excusable neglect.” Gammage alleges

1 Absent material revisions after the relevant date, we cite a statute’s
current version.

4
 GAMMAGE v. ALS
Decision of the Court

in particular that surprise and excusable neglect justified relief from the
judgment. We review the superior court’s denial of a motion for relief
from judgment for an abuse of discretion and will affirm “unless
undisputed facts and circumstances require a contrary ruling.” Verma v.
Stuhr, 223 Ariz. 144, 158, ¶ 76, 221 P.3d 23, 37 (App. 2009) (citation
omitted).

A. Surprise.

¶15 Gammage contends he was surprised to find that ALS had
filed a motion for summary judgment, because when he located the
motion after the court had already entered summary judgment, it was
buried under a large stack of discovery/disclosure documents he received
from ALS. The superior court found that “the situation presented does
not constitute the type of surprise necessary for Rule 60(c) relief.” We
agree.

¶16 At the September 28, 2009 final pretrial conference, the
superior court ordered that any dispositive motions be filed on or before
October 31, 2012. Thus, Gammage should not have been surprised that
the documents sent by ALS on that date included a motion for summary
judgment. See Lopez-Hudson v. Schneider, 188 Ariz. 407, 410, 937 P.2d 329,
332 (App. 1996) (noting that “a showing of ‘exceptional circumstances’” is
required for a party to establish “surprise” warranting relief from
judgment).

¶17 Additionally, contrary to Gammage’s assertion that he
received the motion for summary judgment along with
discovery/disclosures, ALS provided evidence that the motion for
summary judgment was sent by overnight delivery separate and apart
from ALS’s Rule 26.1 disclosure documents, which were sent five days
later via compact disc. The only documents Gammage would have
received in the summary judgment mailing were the motion and related
filings. Had Gammage reviewed the mailing upon receipt, he presumably
would have found the motion for summary judgment. Gammage has not
established the existence of exceptional circumstances under Rule 60(c)(1),
and we conclude that the superior court did not abuse its discretion by
rejecting Gammage’s assertion that his failure to look through documents
delivered to him established “surprise” warranting relief from judgment.

B. Excusable Neglect.

¶18 Gammage alternatively asserts that his neglect to look
through the large stack of documents received from ALS was excusable

5
 GAMMAGE v. ALS
Decision of the Court

because he did not have the time to go through all of them, and he had no
reason to believe that the motion for summary judgment would be mixed
in with them. The test to determine whether neglect is excusable under
Rule 60(c)(1) is whether a reasonably prudent person might have acted in
the same manner under the circumstances. Almarez v. Superior Court, 146
Ariz. 189, 192, 704 P.2d 830, 833 (App. 1985). In determining whether
neglect or mistake is excusable, the court considers whether a party acted
diligently. City of Phoenix v. Geyler, 144 Ariz. 323, 332, 697 P.2d 1073, 1082
(1985).

¶19 The superior court rejected Gammage’s contention, ruling
that his “lack of diligence does not constitute ‘excusable neglect.’” The
court further noted that “a party who represents himself cannot simply
toss aside legal documents for review weeks or months in the future.
Rather, any reasonable person would have at least taken a few moments
to see what documents were included in the mailing before setting the
documents aside.”

¶20 We agree that Gammage’s decision to forego immediate
review of the stack of documents received from ALS was not reasonable in
light of the fact that he had notice that all dispositive motions were due on
or before October 31, 2012. Thus, we affirm the superior court’s ruling
rejecting Gammage’s contention that his failure to timely review
documents provided by opposing counsel established excusable neglect.

II. ALS’s Motion for Summary Judgment.

¶21 Gammage argues that the superior court erred by basing its
decision to grant summary judgment in favor of ALS on Gammage’s
failure to respond and the doctrine of res judicata. Gammage also alleges
that the court was biased against him and his counsel.

¶22 Summary judgment is appropriate if there “is no genuine
dispute as to any material fact and the moving party is entitled to
judgment as a matter of law.” Ariz. R. Civ. P. 56(a); Orme Sch. v. Reeves,
166 Ariz. 301, 305, 802 P.2d 1000, 1004 (1990). We review de novo the
superior court’s grant of summary judgment, viewing the facts in the light
most favorable to the party against whom judgment was entered. United
Bank of Ariz. v. Allyn, 167 Ariz. 191, 193, 195, 805 P.2d 1012, 1014, 1016
(App. 1990). We will affirm summary judgment if the facts produced in
support of the claim have so little probative value, given the quantum of
evidence required, that no reasonable person could find for its proponent.
Orme Sch., 166 Ariz. at 309, 802 P.2d at 1008. We will affirm a motion for

6
 GAMMAGE v. ALS
Decision of the Court

summary judgment if it is correct on any basis supported by the record,
even if not explicitly considered below. Mutschler v. City of Phoenix, 212
Ariz. 160, 162, ¶ 8, 129 P.3d 71, 73 (App. 2006).

¶23 A failure to respond to a motion for summary judgment
does not, in and of itself, establish a basis for judgment against the non-
moving party if the motion does not demonstrate that the moving party is
entitled to the requested relief. See Zimmerman v. Shakman, 204 Ariz. 231,
237, ¶ 21, 62 P.3d 976, 982 (App. 2003). But under Rule 56(e)(4), the
superior court may “presume that any uncontroverted evidence favorable
to the movant, and from which only one inference can be drawn, is true.”
Schwab v. Ames Constr., 207 Ariz. 56, 60, ¶ 16, 83 P.3d 56, 60 (App. 2004).

¶24 The court’s December 18, 2012 minute entry stated:

On October 31, 2012, Defendant filed a Motion for Summary
Judgment. Plaintiff has not responded to the motion. By
failing to do so, Plaintiff has waived any procedural or
evidentiary arguments or objections that could have been
made in response to the motion. Johnson by Johnson v.
Svidergol, 157 Ariz. 333, 335 (App. 1988).

Defendant has established entitlement to judgment as a
matter of law. Therefore,

IT IS ORDERED granting the above identified motion.

¶25 The record does not support Gammage’s contention that the
court simply granted summary judgment in favor of ALS due to
Gammage’s non-response or the doctrine of res judicata because of its
prior dismissal of a lis pendens action. The minute entry reflects that the
court granted summary judgment because ALS’s position was meritorious
“as a matter of law.”

¶26 Nor does the record support Gammage’s assertion that the
court was biased toward him and his counsel. Gammage argues that the
court’s bias is evidenced by the denial of his motion to set aside. But a
court’s ruling alone does not constitute bias. State v. Ellison, 213 Ariz. 116,
129, ¶ 40, 140 P.3d 899, 912 (2006). Although Gammage argued in a
motion for change of judge that the court made an “inappropriate,
outrageous comment that [his counsel’s] disbarment was ‘not
surprising,’” the minute entry reflects only that the court noted the
disbarment was not a surprise because “[a]n Administrative Hearing
Officer announced many months ago that this was going to happen.”

7
 GAMMAGE v. ALS
Decision of the Court

Accordingly, the record does not support Gammage’s contention that the
court was biased against him or his attorney, or otherwise improperly
granted summary judgment in favor of ALS.

A. Contract Claims: Breach of Contract and Breach of Duty of
Good Faith and Fair Dealing.

¶27 Gammage alleges that by foreclosing on his loan, ALS
breached an agreement to permanently modify his loan and breached its
duty of good faith and fair dealing. To prevail on a claim for breach of
contract, a plaintiff must prove (1) the existence of a contract, (2) breach of
that contract, and (3) damages resulting from the breach of the contract.
Thomas v. Montelucia Villas, LLC, 232 Ariz. 92, 96, ¶ 16, 302 P.3d 617, 621
(2013). For a contract to be enforceable, there must be a clear offer
communicated to the offeree, acceptance of the offer by the offeree, and an
exchange of consideration. Tabler v. Indus. Comm’n, 202 Ariz. 518, 520, ¶ 8,
47 P.3d 1156, 1158 (App. 2002).

¶28 A covenant of good faith and fair dealing is implied in every
contract under Arizona law. Bike Fashion Corp. v. Kramer, 202 Ariz. 420,
423, ¶ 13, 46 P.3d 431, 434 (App. 2002). A defendant can breach this
implied covenant “by exercising express discretion in a way inconsistent
with a party’s reasonable expectations and by acting in ways not expressly
excluded by the contract’s terms but which nevertheless bear adversely on
the party’s reasonably expected benefits of the bargain.” Id. at 424, ¶ 14,
46 P.3d at 435.

¶29 Even assuming that an ALS representative told Gammage’s
counsel that Gammage had been approved for a loan modification, the
parties clearly had not yet agreed to loan modification terms, as the only
term referenced in counsel’s email related to a payment amount. See Hill-
Shafer P’ship v. Chilson Family Trust, 165 Ariz. 469, 473, 799 P.2d 810, 814
(1990) (stating that parties to a contract “must mutually consent to all
material terms” to form a binding contract). Additionally, Gammage
testified in his lawsuit against legal counsel that despite counsel’s email
informing him that ALS had approved him for a loan modification, he and
ALS never actually entered into a loan modification agreement.
Gammage understood that the loan modification “deal” was not binding
until the documentation was reviewed and “everybody signed off,” and
he admitted that he never received loan modification documentation.
Instead, Gammage’s counsel received a letter from ALS explicitly
informing Gammage that his loan modification request had been denied.

8
 GAMMAGE v. ALS
Decision of the Court

¶30 Because Gammage and ALS never entered into a binding
loan modification agreement, the superior court properly granted
summary judgment in favor of ALS on Gammage’s contract claims.

B. Negligence.

¶31 Gammage argues that as a result of negligence, ALS
wrongfully foreclosed on his property without warning. To establish a
claim for negligence, a plaintiff must prove four elements: (1) the
defendant owed a duty of care to the plaintiff; (2) the defendant breached
that duty; (3) the breach proximately caused the plaintiff’s injury; and (4)
actual damages. Gilbert Tuscany Lender, LLC v. Wells Fargo Bank, 232 Ariz.
598, 601, ¶ 11, 307 P.3d 1025, 1028 (App. 2013).

¶32 An action for negligence cannot be maintained in absence of
a duty. Republic Nat’l Bank of N.Y. v. Pima County, 200 Ariz. 199, 202–03, ¶
12, 25 P.3d 1, 4–5 (App. 2001). The existence of a duty is a question of law.
Ferguson v. Cash, Sullivan & Cross Ins. Agency, Inc., 171 Ariz. 381, 384, 831
P.2d 380, 383 (App. 1991). Although duties of care may arise from a
special relationship based on a contract or a defendant’s conduct, such a
relationship is not essential to find the existence of a duty of care. Gipson
v. Kasey, 214 Ariz. 141, 145, ¶ 18, 150 P.3d 228, 232 (2007).

¶33 ALS, in servicing Gammage’s loan, did not have a duty to
protect Gammage from foreclosure after Gammage (1) decided to stop
making payments on his loan, (2) remained in default by not fulfilling the
terms of the temporary Workout Agreement, and (3) failed to come to
terms with ALS on a loan modification. See Republic Nat’l Bank, 200 Ariz.
at 202–03, ¶ 12, 25 P.3d at 4–5 (stating that a negligence action requires a
duty that a defendant “conform to a particular standard of conduct in
order to protect [plaintiff] against unreasonable risks of harm”).
Accordingly, we conclude that the superior court did not err by granting
summary judgment in favor of ALS on Gammage’s negligence claim.

C. Negligent Supervision.

¶34 Gammage argues that “[n]otes from [ALS] show inconsistent
activity by employees, directives by employees of [ALS] to other agents
and without notice of retracting the agreement and redirecting the home
to foreclosure, no notification of the pending foreclosure.” To establish a
claim for negligent supervision, the plaintiff must first prove that an
employee of the defendant committed a tort. Kuehn v. Stanley, 208 Ariz.
124, 130, ¶ 21, 91 P.3d 346, 352 (App. 2004). If the theory of the underlying
tort fails, the defendant employer is not liable for negligent supervision.

9
 GAMMAGE v. ALS
Decision of the Court

Id. The plaintiff must further prove that the defendant “had a reason and
an opportunity to act, [] failed to adequately discharge [its] duty to
supervise, and [] thereby contributed to the cause of the [injury].” Boomer
v. Frank, 196 Ariz. 55, 60, ¶ 21, 993 P.2d 456, 461 (App. 1999).

¶35 A review of ALS’s internal “Consolidated Notes Log” does
not support Gammage’s assertion that ALS’s employees committed tort(s)
against him. At most, the log reflects ALS’s efforts as a loan servicer to
determine what to do with a loan that was in default. Even assuming that
an ALS employee incorrectly informed Gammage’s counsel that the loan
modification request had been approved, Gammage has not established
negligent supervision or that the employee’s act was anything more than a
mere mistake. More importantly, there is no evidence that improper
supervision by ALS of any of its employees caused harm to Gammage.
See id.

¶36 Gammage’s legal counsel only sent one letter to ALS to try to
find out why the August 5 letter contradicted what counsel believed to be
an approval of Gammage’s loan modification request, and Gammage
notes that his counsel failed to notify him that there was a problem with
his loan modification request. But that failure does not make ALS liable
for negligent supervision of its employees. Accordingly, we conclude that
the superior court did not err by granting summary judgment on
Gammage’s negligent supervision claim.

D. Intentional Infliction of Emotional Distress.

¶37 Gammage did not argue in his opening brief his claim for
intentional infliction of emotional distress (“IIED”). While he discussed
this claim in his reply brief, an issue raised for the first time in a reply brief
is waived. See Ness v. W. Sec. Life Ins. Co., 174 Ariz. 497, 502, 851 P.2d 122,
127 (App. 1992); ARCAP 13(a)(6) (stating that appellant’s opening brief
must set forth “[a]n argument which shall contain the contentions of the
appellant with respect to the issues presented, and the reasons therefor,
with citations to the authorities, statutes and parts of the record relied
on”).

¶38 Furthermore, the claim is meritless. To establish a claim for
IIED, a plaintiff must produce evidence to show that (1) the defendant
engaged in “extreme and outrageous” conduct, (2) the defendant
“intend[ed] to cause emotional distress or recklessly disregard[ed] the
near certainty that distress will result from his conduct,” and (3) the
plaintiff suffered severe emotional distress as a result of defendant’s

10
 GAMMAGE v. ALS
Decision of the Court

conduct. Lucchesi v. Stimmell, 149 Ariz. 76, 78–79, 716 P.2d 1013, 1015–16
(1986) (citation omitted). For a defendant’s conduct to be considered
“extreme and outrageous” it must be “so outrageous in character, and so
extreme in degree, as to go beyond all possible bounds of decency, and to
be regarded as atrocious, and utterly intolerable in a civilized
community.” Ford v. Revlon, Inc., 153 Ariz. 38, 43, 734 P.2d 580, 585 (1987)
(citation omitted).

¶39 Although Gammage asserts that ALS engaged in “extreme”
and “outrageous” conduct by foreclosing on his house notwithstanding a
temporary workout agreement, the evidence does not support such an
assertion. Gammage decided to default on his loan payments in order to
persuade ALS to enter into a loan modification agreement. But Gammage
was unsuccessful in entering into an agreement to modify the terms of his
loan. Because Gammage remained in default and failed to cure the
arrearage, ALS exercised its right to foreclose on Gammage’s home.
Concluding that ALS’s actions do not rise to the level of being “beyond all
possible bounds of decency” and are in fact normal business practice
when a loan remains in default, the superior court properly granted
summary judgment in favor of ALS on Gammage’s IIED claim. See Patton
v. First Fed. Sav. & Loan Ass’n of Phx., 118 Ariz. 473, 476, 578 P.2d 152, 155
(1978) (affirming the grant of summary judgment on an IIED claim in
favor of a lender because the lender’s actions, although harsh and
upsetting to the borrower, were “within the realm of acceptable business
practice” and did not rise to the level of extreme and outrageous conduct
necessary for IIED).

E. Negligent Infliction of Emotional Distress.

¶40 Gammage did not raise this claim in his opening brief.
Accordingly, he has waived consideration of this issue on appeal. See
Dawson v. Withycombe, 216 Ariz. 84, 100 n.11, ¶ 40, 163 P.3d 1034, 1050 n.11
(App. 2007).

¶41 The claim is meritless in any event. To maintain a cause of
action for negligent infliction of emotional distress, a plaintiff must “(1)
witness an injury to a closely related person, (2) suffer mental anguish
manifested as physical injury, and (3) be within the zone of danger so as to
be subject to an unreasonable risk of bodily harm created by the
defendant.” Pierce v. Casas Adobes Baptist Church, 162 Ariz. 269, 272, 782
P.2d 1162, 1165 (1989). Gammage has not established any of the elements
of this type of claim.

11
 GAMMAGE v. ALS
Decision of the Court

CONCLUSION

¶42 For the foregoing reasons, we affirm the superior court’s
entry of judgment in favor of ALS.

:gsh

12