KP Limited v. Built to Last

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NOTICE: THIS DECISION DOES NOT CREATE LEGAL PRECEDENT AND MAY NOT BE CITED EXCEPT AS AUTHORIZED BY APPLICABLE RULES. See Ariz. R. Supreme Court 111(c); ARCAP 28(c); Ariz. R. Crim. P. 31.24 IN THE COURT OF APPEALS STATE OF ARIZONA DIVISION ONE K.P. LIMITED PROPERTIES, INC., an Arizona corporation, ) ) ) Plaintiff/Counterdefendant/ ) Appellee/Cross-Appellant, ) ) v. ) ) BUILT-TO-LAST INDUSTRIAL, ) L.L.C., an Arizona limited ) Liability company; JACE ) JOHNSTON, ) ) Defendants/Counterclaimants/ ) Appellants/Cross-Appellees. ) ________________________________) DIVISION ONE FILED: 07-06-2010 PHILIP G. URRY,CLERK BY: GH No. 1 CA-CV 09-0436 DEPARTMENT E MEMORANDUM DECISION Not for Publication (Rule 28, Arizona Rules of Civil Appellate Procedure) Appeal from the Superior Court in Maricopa County Cause No. CV2008-006600 The Honorable Jeanne M. Garcia, Judge AFFIRMED IN PART; REVERSED IN PART AND REMANDED Owens & Pyper PLC By Bradley T. Owens Attorneys for Plaintiff/Appellee Phoenix Combs Law Group PC By Christopher A. Combs Adam D. Martinez Attorneys for Defendants/Appellants Phoenix H A L L, Judge ¶1 Built-to-Last Industrial, Johnston (collectively, L.L.C. (Seller) appeal the Defendants) and trial Jace court s grant of summary judgment in favor of K.P. Limited Properties, Inc. (Buyer) on Buyer s breach of contract claim. Buyer cross- appeals the court s denial of its request for attorneys fees. For the reasons that follow, we affirm in part, reverse in part, and remand for further proceedings. FACTS AND PROCEDURAL BACKGROUND ¶2 The facts are undisputed. On April 10, 2007, Seller and Buyer entered into a contract wherein Seller agreed to sell approximately $3,640,000. twenty That acres same day, of vacant Buyer land deposited money into escrow pursuant to the contract. to Buyer $25,000 for earnest The contract also required a second $25,000 earnest money deposit as follows: $25,000.00 Additional Earnest Money, upon the satisfaction of the Inspection Period, Buyer shall deposit an additional Twenty Five Thousand Dollars ($25,000.00) with Escrow Holder TSA Title Agency. ¶3 Regarding the Inspection Period, the provided in relevant part: Buyer s obligation to purchase the Property is conditioned upon Buyer satisfaction, within thirty (30) calendar days from final acceptance of this Contract by all parties (the Review Period ), in the exercise of it s [sic] sole and absolute discretion and exclusive judgment, with it s [sic] general inspection of the Property. If Buyer fails to deposit written disapproval with the 2 contract Escrow Holder on or before the expiration of the Review Period, then all contingencies contained in this Contract and Escrow shall be considered to have been extinguished as of that time and date. This contingency/review period is solely for the benefit of the Buyer and may be waived in whole or in part at any time by the Buyer without waiving any other rights contained under this Contract. Buyer shall provide written notice to Seller of any items disapproved, within thirty (30) calendar days after acceptance of this Contract. ¶4 On May 7, the parties executed an addendum to the contract extending the inspection period to May 24. On May 8, the parties executed a second addendum reducing the purchase price to $3,500,000. escrow on May 11. Buyer deposited another $25,000 into On May 22, shortly after it received an unfavorable geological soil inspection of the property, Buyer delivered written notice of its disapproval of the property and canceled the contract. ¶5 The parties disputed rights to the $50,000 held in escrow. Buyer filed a complaint against Defendants alleging breach of contract, enrichment. declaratory judgment, fraud, and unjust Seller answered and counterclaimed for breach of contract and declaratory relief. ¶6 On cross-motions for summary judgment, Seller argued the second $25,000 deposit signaled Buyer s satisfaction with the inspection of the property, and therefore, Buyer breached the contract by canceling it 3 after such contingency was fulfilled. Buyer argued the second $25,000 deposit was merely a sign of good faith for the price reduction and, in support of that argument, submitted an email Buyer sent Seller on May 8. The email states in pertinent part: The purchase price will then be $3,458,000. Upon your approval of this suggestion I will forward a check for another $25,000 to the title company today. From this point forward the only issue that could possibly disrupt this agreement would be the discovery of fissures which you said is not likely. . . . My Geotechnician said that he has advance[d] his work on the fissure study and may have something for us as early as next week. Seller argued the email was inadmissible parol evidence. ¶7 The court granted Buyer s cross-motion for summary judgment on the contract claims, and granted Seller s motion for summary judgment on the fraud and unjust enrichment claims and declined to award attorneys fees, successful under the contract. finding neither party The court also awarded Buyer $1,013.89 in costs. Seller timely appealed and Buyer filed a timely cross-appeal. We have jurisdiction pursuant to Arizona Revised Statutes (A.R.S.) section 12-2101(B) (2003). DISCUSSION I. Appeal A. Standard of Review ¶8 We review a grant of summary judgment de novo. L. Harvey Concrete, Inc. v. Argo Constr. & Supply Co., 189 Ariz. 4 178, 180, 939 P.2d 811, 813 (App. 1997). Summary judgment is appropriate when no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law. Ariz. R. Civ. P. 56(c). We view the facts in the light most favorable against to the party whom summary judgment was entered. Angus Med. Co. v. Digital Equip. Corp., 173 Ariz. 159, 162, P.2d 840 1024, 1027 (App. 1992). Interpretation contract is a question of law we review de novo. of a Rand v. Porsche Fin. Servs., 216 Ariz. 424, 434, ¶ 37, 167 P.3d 111, 121 (App. 2007). ¶9 Buyer contends we should review the court s decision under a clearly erroneous standard because the fundamental issue is whether Buyer intended to waive its right to contract by making the second $25,000 deposit. cancel the See Goglia v. Bodnar, 156 Ariz. 12, 19, 749 P.2d 921, 928 (App. 1987) (a finding that erroneous). no waiver Whether occurred waiver may is be binding inferred unless from conduct, however, is generally a question of fact. clearly particular See N. Ariz. Gas Serv., Inc. v. Petrolane Transp., Inc., 145 Ariz. 467, 476, 702 P.2d 696, 705 (App. 1984). We determine de novo whether a question of fact exists precluding summary judgment. Andresano v. County of Pima, 213 Ariz. 65, 66-67, ¶ 6, 138 P.3d 1192, 1193-94 (App. 2006). Accordingly, our standard of review is de novo. 5 B. Contract Interpretation ¶10 Seller argues Buyer signified its satisfaction with the inspection Seller bases clause, period this which by making argument provides on upon the the second $25,000 additional satisfaction of deposit. earnest the money Inspection Period, Buyer shall deposit an additional Twenty Five Thousand Dollars ($25,000.00). is to determine parties. 185 and When interpreting a contract, our goal enforce the intent of the contracting U.S. W. Communications, Inc. v. Ariz. Corp. Comm'n, Ariz. 277, 280, 915 P.2d 1232, 1235 (App. 1996). To ascertain intent, we examine the plain meaning of the words in the context of the contract as a whole and in the context of the surrounding circumstances. United Cal. Bank v. Prudential Ins. Co., 140 Ariz. 238, 259, 681 P.2d 390, 411 (App. 1983). ¶11 The clause does not mean that the Buyer waives its right to the benefits of the inspection by depositing the second $25,000 payment before the inspection period is complete. does it mean that Buyer s deposit terminates the inspection period. of the second Nor payment According to the contract, the inspection period can only be satisfied or terminated by the passage of time, written disapproval, or by Buyer s waiver of the period. Here, the inspection period was extended to May 24, Buyer made a second $25,000 deposit on May 11, and Buyer sent written notice of its disapproval and canceled the contract on 6 May 22. Thus, the only way the inspection period could have ended before Buyer gave its written disapproval is by waiver. ¶12 Waiver is either the express, voluntary, intentional relinquishment of a known right or such conduct as warrants an inference of such an intentional relinquishment. Am. Cont'l Life Ins. Co. v. Ranier Constr. Co., 125 Ariz. 53, 55, 607 P.2d 372, 374 (1980). Although waiver is generally a question of fact, where the facts are not in dispute, the trial court may decide waiver as a matter of law. Jones v. Cochise County, 218 Ariz. 372, 381, ¶ 29, 187 P.3d 97, 106 (App. 2008). not submitted any evidence showing Buyer intentionally waived the inspection period. Seller has expressly or Patton v. Paradise Hills Shopping Ctr., Inc., 4 Ariz. App. 11, 14, 417 P.2d 382, 385 (App. 1966) (party opposing summary judgment must come forth with specific facts controverting the motion). Because the additional earnest money provision cannot be interpreted in the manner Seller asserts and there is no evidence Buyer otherwise waived the inspection period, as a matter of law, Buyer did not waive the inspection period by depositing $25,000.1 1 Seller also argues Buyer did not expressly indicate its intention to keep the inspection period open after the deposit. Under the contract, Buyer was not required to indicate its intent to keep the inspection period open as the inspection period was expressly extended to May 24. Moreover, contrary to Seller s argument, Buyer did expressly indicate its intent to keep the inspection period open in the email. See supra ¶ 6. 7 ¶13 Next, Seller argues the court erred by considering the email because the email constitutes inadmissible parol evidence. The parol evidence rule prohibits the admission of extrinsic evidence to vary or contradict the terms of a written contract, but allows admission of such evidence to interpret a contract. Taylor v. State Farm Mut. Auto. Ins. Co., 175 Ariz. 148, 152, 854 P.2d 1134, 1138 (1993). ¶14 The consideration parol of the evidence email. rule The email does was not not preclude offered to interpret the contract; rather, Buyer offered it as evidence that it did not waive the inspection period. Moreover, the email does not contradict the terms of the contract. Indeed, the email is consistent with our interpretation and the trial court s interpretation provision. of the additional earnest money Finally, as the trial court noted, even without considering the email, an early deposit of the second $25,000 could not be considered a waiver of the explicitly extended inspection period. Thus, there was no error in considering the email. ¶15 Because the contract cannot be interpreted as Seller argues, there is no evidence Buyer waived the inspection period, and Buyer therefore canceled the contract within the inspection period and the trial court properly granted summary judgment in favor of Buyer. 8 II. Judgment ¶16 Seller summary argues judgment the against trial Johnston court erred because in granting Johnston is not personally liable for Seller s obligations under A.R.S. § 29-651 (1998). Section 29-651 provides a member, [or] manager, . . . of a limited liability company is not liable, solely by reason of being a obligations member, and [or] liabilities manager, of the . . . for limited the liability debts, company whether arising in contract or tort under a judgment, decree or order of a court or otherwise. ¶17 against The court Defendant awarded judgment Built-to-Last in favor Industrial, of Buyer L.L.C., in and the amount of $50,000, plus pre-judgment interest . . . plus taxable costs. The judgment provides said $50,000 account proceeds are hereby ordered released and turned over to [Buyer] to apply against the amounts due under this Judgment, and Defendants are ordered to cooperate fully in releasing the funds to [Buyer]. ¶18 As clarified at oral argument, the $50,000 in escrow proceeds has been released to the Buyer. extent the judgment could be construed Therefore, to the as against Johnston personally, any obligation imposed upon him has been satisfied and we need not address the issue further. 9 III. Attorneys Fees and Costs A. Fees and Costs in the Trial Court ¶19 Seller s final argument is that the trial court erred in awarding Buyer its costs because the court found neither party successful under the contract. On cross-appeal, Buyer argues it was the successful party and should have been awarded attorneys fees. We review the trial court s orders concerning attorneys fees and costs for an abuse of discretion. Maleki v. Desert Palms Prof l Props., L.L.C., 222 Ariz. 327, 333-34, ¶ 32, 214 P.3d 415, 421-22 (App. 2009). ¶20 The contract provides that in any action arising out of the contract, the prevailing party shall be entitled to reasonable attorneys fees and costs. See Heritage Heights Home Owners Ass n v. Esser, 115 Ariz. 330, 333, 565 P.2d 207, 210 (App. 1977) ( Contracts for payment of attorneys fees are enforced in accordance with the terms of the contract. ) (citations omitted); see also Chase Bank of Ariz. v. Acosta, 179 Ariz. 563, 575, 880 P.2d 1109, 1121 (App. 1994) ( [T]he court lacks discretion to refuse to award fees under [a] contractual provision. ). At the conclusion of oral argument on the cross- motions, the trial court stated [o]n the issue of attorney s fees, because I have found in favor of both parties, I find that neither party is a successful 10 party under the contract, so neither party is entitled to recover their attorney s fees. In the judgment, however, the court awarded costs to Buyer. ¶21 In counterclaims cases and involving setoffs party is the net winner. all various tried competing together, the claims, successful Ayala v. Olaiz, 161 Ariz. 129, 131, 776 P.2d 807, 809 (App. 1989). Thus, a party is successful if he obtains a judgment in excess of the setoff or counterclaim allowed. Trollope v. Koerner, 21 Ariz.App. 43, 47, 515 P.2d 340, 344 (1973). Further, we have specifically rejected the notion that partial success warrants denial of a request for attorneys fees and costs. See Henry v. Cook, 189 Ariz. 42, 44 n.1, 938 P.2d 91, 93 n.1 (App. 1996). ¶22 breach In its complaint, Buyer sought $50,000 in damages for of contract, $30,000 unspecified punitive damages. in damages for fraud, and Seller filed a counterclaim for breach of contract, seeking to keep the $50,000. Buyer was awarded $50,000 on its contract claims, and its remaining claims were dismissed. Seller did not prevail on its claim to keep the earnest money. Under the applicable net winner rule, Buyer is the successful party. ¶23 Citing Sandborn v. Brooker & Wake Property Management, Inc., 178 Ariz. 425, 430, 874 P.2d 982, 987 (App. 1994), Seller notes that successful the trial party, and court argues has discretion that 11 we to cannot determine the substitute our discretion for that of the trial judge. See also Schwartz v. Farmers Ins. Co., 166 Ariz. 33, 38, 800 P.2d 20, 25 (App. 1990). Although this principle is correct, Sandborn also states a party is successful if he obtains judgment for an amount in excess of the setoff or counterclaim allowed. Sandborn, 178 Ariz. at 430, 874 P.2d at 987 (internal quotation omitted). Therefore, under Sandborn, Buyer is the successful party and the fee provision at issue mandates an award of fees to Buyer. ¶24 to Seller also contends it was reasonable for the court conclude neither party was successful. We disagree. Although Buyer s claims for fraud and unjust enrichment were dismissed, it prevailed on its breach of contract and declaratory relief claims, defeated Seller s counterclaim, and recovered $50,000. Although we are normally reluctant overturn a trial court s ruling on attorneys fees, to City of Cottonwood v. James L. Fann Contracting, Inc., 179 Ariz. 185, 194-95, 877 P.2d 284, 293-94 (App. 1994), a court abuses its discretion if it commits an error of law. Grant v. Ariz. Pub. Serv. Co., 133 Ariz. 434, 455-56, 652 P.2d 507, 528-29 (1982). Based on the rule enunciated in Ayala and Trollope that the net winner is the successful party, Buyer is the successful party under the contract. Because the trial court was required to award the prevailing party reasonable attorneys fees and costs under the contract, the court abused its discretion by failing 12 to award any attorneys fees. Nonetheless, on remand the trial court its may only award Buyer reasonable attorneys fees incurred in litigating the parties competing contract claims. See City of Cottonwood, 179 Ariz. at 195, 877 P.2d at 294 ( Attorney s fees should not be allowed on unsuccessful separate and distinct separately. ). claims that could have been litigated The award of costs is affirmed. B. Fees and Costs on Appeal ¶25 Both parties request an award of attorneys fees on appeal. Seller requests an award of fees pursuant to A.R.S. § 12-341.01 (2003), and Buyer requests fees pursuant to the terms of the contract. award Buyer its As the prevailing party on appeal, we reasonable attorneys fees and costs upon compliance with Arizona Rule of Civil Appellate Procedure 21. Both parties also request attorneys fees and costs on crossappeal pursuant to the terms of the contract. the prevailing party on cross-appeal, attorneys fees and costs on cross-appeal. 13 we Because Buyer is award Buyer its CONCLUSION ¶26 For the foregoing reasons, we affirm the grant of summary judgment, reverse the denial of Buyer s attorneys fees and remand for further proceedings consistent decision. /s/ PHILIP HALL, Judge CONCURRING: /s/ DIANE M. JOHNSEN, Presiding Judge /s/ LAWRENCE F. WINTHROP, Judge 14 with this

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