King v. Espinoza

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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 KENNETH KING, Respondent/Third Party Plaintiff/Appellant, v. JOSEPH FERMIN ESPINOZA, a single man, Third Party Defendant/ Appellee. LOWELL J. SHINN and DEBRA D. SHINN, as Trustees of the DEBRA D. SHINN LIVING TRUST DATED JUNE 9, 1999, Third Party Defendants/ Intervenors/Appellees. ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) DIVISION ONE FILED: 08/11/2011 RUTH A. WILLINGHAM, CLERK BY: DLL 1 CA-CV 09-0770 DEPARTMENT C AMENDED MEMORANDUM DECISION (Not for Publication Rule 28, Arizona Rules of Civil Appellate Procedure) Appeal from the Superior Court in Mohave County Cause No. DO 2007-7318 The Honorable Jill W. Davis, Judge Pro Tempore AFFIRMED Kenneth L. Sondgeroth, P.C. By Kenneth L. Sondgeroth Attorney for Plaintiff/Appellant Bullhead City Joseph F. Espinoza, Appellee In Propria Persona Lake Havasu City Bruno, Brooks & Goldberg, P.C. By Robert H. Brooks and Gust Rosenfeld P.L.C. By Scott A. Malm Attorneys for Defendants/Appellees Lowell J. Shinn and Debra D. Shinn Kingman Phoenix P O R T L E Y, Judge ¶1 Kenneth King ( King ) appeals from the summary judgment granted to Joseph Espinoza and Lowell and Debra Shinn, as Trustees of the Debra D. Shinn Living Trust ( the Shinns ) (collectively, court Appellees ). misapplied the law King when it argues that entered the superior summary judgment upholding the transfers of real property made by King s former wife, Betty Jean King, to Espinoza, and from Espinoza to the Shinns. For the reasons that follow, we affirm the summary judgment. FACTS AND PROCEDURAL BACKGROUND 1 ¶2 King married Betty in July 1995. property in Mohave County in 2003. loan. They purchased real Betty wanted to apply for a Because she had better credit, King signed a warranty deed in May 2004 conveying the property to Betty as her sole and 1 We view the facts in the light most favorable to King as the party against whom summary judgment was entered. Angus Med. Co. v. Digital Equip. Corp., 173 Ariz. 159, 162, 840 P.2d 1024, 1027 (App. 1992). 2 separate property. They also agreed that she would ultimately place King s name back on the title to the property. ¶3 In spite of their agreement, Betty conveyed the property to Espinoza on September 4, 2007, by quitclaim deed. King recorded later. a lis pendens against the property two weeks Betty filed a petition for divorce in November 2007 and acknowledged that the property was community property. 2 In addition to responding to the petition, King filed a third-party complaint against Espinoza. Espinoza was a fraudulent He alleged that the transfer to conveyance. Espinoza subsequently conveyed the property to the Shinns. ¶4 Shinns intervened title. quiet The and They subsequently filed filed a a counterclaim motion for to summary judgment and argued that King had no interest in the property that they owned. Espinoza joined their motion. In his response, King argued that the issues of the fraudulent transfer to Espinoza and the transfer to the Shinns after the lis pendens had been filed were genuine precluded summary judgment. issues of material fact that The trial court granted summary 2 The Kings had acquired the property as joint tenants with right of survivorship but agreed the property was community property. See State v. Superior Court, 188 Ariz. 372, 373, 936 P.2d 558, 559 (App. 1997) (Married joint tenants each hold his or her ownership interest as separate property. ); Toth v. Toth, 190 Ariz. 218, 220, 946 P.2d 900, 902 (1997) ( Joint tenancy property is separate, not community, property. ). 3 judgment because it found no evidence of a fraudulent conveyance or that any deeds were invalid. ¶5 The Kings subsequently entered into a stipulated divorce decree, wherein Betty acknowledged that her failure to put King s name back on the title to the property was a result of fraud or mistake and/or a breach of her fiduciary duty. She also admitted that she improperly transferred the property to Espinoza so that he could sell the property for her sole benefit. The Kings agreed the property was worth $250,000 and King s interest equaled $120,000. As a result, King was given a judgment against Betty for $120,000 as an equalizing payment. ¶6 King jurisdiction appealed pursuant to the summary Arizona judgment, Revised and Statutes we have ( A.R.S. ) section 12-2101(B) (2003). DISCUSSION ¶7 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 determine de novo whether any issue of material fact exists and whether the court properly applied the law. Prince v. City of Apache Junction, 185 Ariz. 43, 45, 912 P.2d 47, 49 (App. 1996). 4 ¶8 the Although it appears that Betty fraudulently conveyed property to Espinoza 3 and the Shinns then received the property despite a recorded lis pendens, those facts are not material to resolving this matter. The material fact is, however, the contract that Betty and King entered into that led to the decree that included the judgment to King for $120,000. ¶9 who Generally, a bona fide purchaser refers to a person purchases property for value without person s interest in the property. notice of another First Am. Title Ins. Co. v. Action Acquisitions, LLC, 218 Ariz. 394, 398, ¶ 12, 187 P.3d 1107, 1111 (2008). A lis pendens, however, provides notice that a particular piece of property is the subject of litigation. Warren v. Whitehall Income Fund 86, 170 Ariz. 241, 244, 823 P.2d 689, 692 (App. 1991). The purpose of a lis pendens is to prevent innocent third persons from acquiring an interest in such property which, in granting suitable relief. ¶10 King turn, might prevent the court from Id. Here, the lis pendens was recorded in September 2007. filed December fraudulent his 2007 third-party and alleged conveyance by complaint against that Espinoza obtaining the 3 Espinoza participated property from in in a Betty The superior court granted summary judgment based on the validity of the warranty deed conveying the property to Betty as her sole and separate property. Although King did not contest the validity of that deed, he argued that he retained a community interest in the property, which Betty did not dispute. 5 without adequate consideration in order to deprive him of his interest in the property. 4 Espinoza, however, subsequently sold the property to the Shinns, 5 and they took title even though there was a recorded lis pendens affecting the property. result, they took title subject to King s claims. As a Id. at 243, 823 P.2d at 691 (a person who purchases property with actual and/or constructive knowledge of a prior claim to the property is not a bona fide purchaser); see also Santa Fe Ridge Homeowners Ass n v. Bartschi, 219 Ariz. 391, 395, ¶ 11, 199 P.3d 646, 650 (App. 2008) (a lis pendens provides constructive notice that a pending lawsuit may affect title to real property). ¶11 Despite differences. those a Betty and King settled their Betty acknowledged that she fraudulently conveyed community property. contract, facts, The couple, however, entered into another substituted finalize the divorce. contract, to settle the issue and A substituted contract is a contract that is itself accepted by the obligee in satisfaction for the 4 According to the stipulated decree, Betty received a $20,000 loan from Espinoza when she transferred the property to him. Espinoza received $112,508.38 in sale proceeds from the Shinns. Espinoza gave Betty the $112,508.38, and Betty returned $20,000 to Espinoza as repayment for the loan. 5 According to the Shinns, they purchased the property for $306,418.92, which was allocated as follows: $112,508.38 to Espinoza; $166,000 to B.T. Investments, Inc., for the benefit of Kenneth and Betty; $5,100 to a 401(K) plan for the benefit of Kenneth and Betty; $15,300 for a commission to Espinoza; and the remainder for taxes, recording, title insurance, and escrow. 6 obligator s existing duty. 279 (1981). Restatement (Second) of Contracts § The substituted contract discharges the original duty and breach of the substituted contract by the obligor does not give the obligee a right to enforce the original duty. Id. Additionally, [a] substituted contract is one that contains a term that is inconsistent with a term of an earlier term between the parties. K-Line Builders, Inc. v. First Federal Sav. & Loan Ass n, 139 Ariz. 209, 213, 677 P.2d 1317, 1321 (App. 1983). ¶12 to Here, despite Betty s breach of her original agreement return King s name to the property and selling it to Espinoza, she and King entered into a substituted contract that gave King a $120,000 judgment as an equalizing payment for his community interest in the property. right to enforce settlement. return King s the original Consequently, name back on the the King, therefore, lost his agreement original property because contractual was of the duty to discharged and substituted by the terms of the decree. ¶13 Moreover, because the substituted contract was reduced to a judgment, he has to look to Betty to secure payment of the $120,000, and not Espinoza or the Shinns. Consequently, there is no genuine issue to preclude summary judgment and we affirm the judgment granted. 7 ¶14 A.R.S. King requests attorneys fees on appeal pursuant to § 12-341.01(A), (C) (2003). Because he is not the prevailing party, we deny his request. CONCLUSION ¶15 Based on the foregoing, we affirm the summary judgment. /s/ _______________________________ MAURICE PORTLEY, Presiding Judge CONCURRING: /s/ ____________________________ MARGARET H. DOWNIE, Judge /s/ ____________________________ PATRICIA A. OROZCO, Judge 8

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