STEPHAN v. STEWART

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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 ) ) ) Plaintiff/CounterDefendant/ ) Appellant, ) ) ) v. ) ) MARK STEWART, an individual, ) ) Defendant/CounterClaimant/ ) Appellee. ) _______________________________________ ) ROBERT J. STEPHAN, JR, an individual, DIVISION ONE FILED: 7/18/2013 RUTH A. WILLINGHAM, CLERK BY: mjt 1 CA-CV 12-0731 DEPARTMENT E MEMORANDUM DECISION (Not for Publication - Rule 28, Arizona Rules of Civil Appellate Procedure) Appeal from the Superior Court in Maricopa County Cause No. CV 2010-053887 The Honorable Maria del Mar Verdin, Judge AFFIRMED IN PART, VACATED IN PART, REMANDED Robert S. Porter, P.C. By Robert S. Porter Phoenix and Knapp & Roberts, P.C. By David L. Abney Co-Counsel for Plaintiff/CounterDefendant/Appellant Cook & Price PLC By Jesse Cook Attorneys for Defendant/CounterClaimant/Appellee Scottsdale Tempe B R O W N, Judge ¶1 This appeal arises out of a lease of a condominium ( condo ) and its landlord, and furnishings Mark Stewart, the between Robert tenant. On Stephan, appeal, the Stephan challenges the sufficiency of the evidence regarding his damages claim for lost furnishings and the superior court s intent instruction to the jury relating to Stewart s counterclaim for overpaid rent. For reasons that follow, we affirm the jury s verdict denying Stephan s claim but we vacate the jury s verdict awarding damages to Stewart. We also vacate the superior court s award of attorneys fees and costs in favor of Stewart and remand for a determination of whether either party should be awarded fees or costs incurred in the superior court. BACKGROUND ¶2 In 2008, Stephan obtained a loan from M&I Bank to purchase the condo, which he then furnished. To secure the loan, on Stephan gave the bank a deed of trust the condo. Because of the decline in the housing market, the condo s value decreased and Stephan owed more on the loan than the condo was worth. Stephan attempted to negotiate a loan modification with the bank and in June 2009 stopped making his loan payments. ¶3 On July 7, 2009, Stewart leased Stephan s furnished condo for one year, from July 11, 2009 through July 10, 2010. 2 Pursuant to the lease, Stewart paid Stephan $36,648 as prepaid rent for the year. The lease included a clause, handwritten by Stewart s realtor ( handwritten clause ), which provided: Tenant has been informed of Landlord s situation with the lender regarding loan modification, etc. If Tenant is required to vacate the premises prior to expiration of this lease, then Landlord shall reimburse Tenant for all rent plus tax pre-paid but not used through the expiration of the lease. ¶4 Stephan with the bank. foreclosed on was unsuccessful in renegotiating loan On February 18, 2010, the bank non-judicially the deed of trust and, making purchased the condo at the trustee s sale. continued the residing in the condo and, a credit bid, Nonetheless, Stewart on June 7, 2010, he purchased the condo from the bank. ¶5 Stephan sued Stewart for the return of his furnishings or their fair market value, and rent for their use after the lease had expired. Stewart counterclaimed for a refund of the prepaid rent from the date of the foreclosure through the end of the lease period. After a trial, the jury found against Stephan on his claim against Stewart and in favor of Stewart on his counterclaim against $34,808.50. Upon Stephan. Stewart s The request jury for awarded attorneys Stewart fees and costs pursuant to the terms of the lease agreement and Arizona Revised Statutes ( A.R.S. ) section 3 12-341.01, the superior court awarded Stewart attorneys fees in the amount of $37,277 and costs in the amount of $1,654. Stephan timely appealed. We have jurisdiction pursuant to A.R.S. § 12-2101(A)(1). STEPHAN S CLAIM AGAINST STEWART ¶6 We first address Stephan s claim against Stewart for the value of the furnishings within the condo. In finding in favor jury of Stewart Stephan s claim. in sending present any the and against Stephan, the rejected Stephan argues that the superior court erred issue evidence to the Stephan jury because abandoned Stewart the failed furnishings. to We disagree, however, because we conclude that Stewart presented evidence from which a jury could reasonably conclude Stephan abandoned the furnishings. Strawberry Water Co. v. Paulsen, 220 Ariz. 401, 408, ¶ 16, 207 P.3d 654, 661 (App. 2008) (abandonment as applied to personal property means the act of voluntarily and intentionally relinquishing a known right and must be proven by clear and convincing evidence). ¶7 Stewart furnishings after testified the that Stephan foreclosure. did not Instead, mention the after the foreclosure, Stephan only asked to look at the fixtures to see if there was anything he might want to take out. Stewart also contradicted Stephan s testimony that he had called Stewart in March and had read to Stewart a letter he had written to the 4 bank informing it [he had] personal property in the unit which [he had] leased to [Stewart]. Finally, Stewart testified that it was not until after he had purchased the condo from the bank that Stephan had attempted to retrieve the furnishings, which was approximately four months after the foreclosure. ¶8 Although testimony, it was we for recognize the Stephan jury to disputed evaluate the Stewart s parties credibility and determine whether Stewart had presented clear and convincing evidence Stephan had abandoned the furnishings. Thompson v. Better-Bilt Aluminum Products Co., 171 Ariz. 550, 558, 832 P.2d 203, 211 (1992). 1 For these reasons, we affirm that portion of the judgment in favor of Stewart on Stephan s claim for the cost of the furnishings. STEWART S COUNTERCLAIM FOR REFUND OF RENT ¶9 On appeal, as in the superior court, Stephan argues the phrase required to vacate in the handwritten clause was unambiguous and thus the superior court abused its discretion in instructing the jury to determine what the parties intended at the time that the [lease] was formed. 2 Although we review the 1 Because Stewart presented sufficient evidence Stephan abandoned the furnishings, we need not address Stephan s other argument on appeal, namely, the bank could not have sold the furnishings to Stewart. 2 The court gave the jury the standard instruction on intent: 5 superior court s decision to give or withhold a jury instruction for an abuse of discretion, A Tumbling-T Ranches v. Flood Control Dist. of Maricopa Cnty., 222 Ariz. 515, 533, ¶ 50, 217 P.3d 1220, 1238 (App. 2009), we review de novo the superior court s Burke v. determination whether Voicestream a Wireless contract Corp. II, term 207 is ambiguous. Ariz. 393, 395, ¶ 11, 87 P.3d 81, 83 (App. 2004); see also Taylor v. State Farm Mut. Auto Ins. Co., 175 Ariz. 148, 158-59, 854 P.2d 1134, 114445 (1993) ( Whether contract language is reasonably susceptible to more than one interpretation . . . is a question of law[.] ). ¶10 When unambiguous, we the give terms of effect an to agreement the are agreement clear as In deciding what a contract provision means, you should attempt to determine what the parties intended at the time that the contract was formed. You may consider the surrounding facts and circumstances as you find them to have been at the time that the contract was formed. It is for you to determine what those surroundings facts and circumstances were. To determine what the parties intended the terms of a contract to mean, you may consider the language of the written agreement; the acts and statements of the parties themselves before any dispute arose; the parties negotiations; any prior dealings between the parties; any reasonable expectations the parties may have had as the result of the promises or conduct of the other party; and any other evidence that sheds light on the parties intent. 6 and written. Marana v. Pima Cnty, 230 Ariz. 142, 147, ¶ 21, 281 P.3d 1010, 1015 (App. 2012) (citation omitted). If, however, the terms of the agreement are ambiguous, that is, reasonably susceptible to more than one interpretation, parol evidence may be used to explain [the ambiguity], but in the absence of fraud or mistake, it may not be used to change, alter or vary the express terms in a written agreement. parties submit meaning, the determine susceptible competing court whether to Id. (internal quotations omitted). should the the interpretations consider contract interpretation the of a offered language asserted Taylor, 175 Ariz. at 154, 854 P.2d at 1140. When contract s evidence to is by reasonably its proponent. If parties use language that is mutually intended to have a special meaning, and that meaning is proved by credible evidence, a court is obligated to enforce the agreement according to the parties intent, even if the language ordinarily might mean something different. Id. 153, 854 P.2d at 1139. Nonetheless, the more unusual an asserted interpretation is, the more convincing must be the testimony that supports it and a court need not consider parol evidence when the asserted meaning of the contract is so unreasonable . . . that it is improbable that actually subscribed to the asserted interpretation. 3 the parties Id. 3 Based on our review of the record, it does not appear that 7 ¶11 At trial, Stephan testified that required to vacate meant surrendering occupancy or physical possession. Stephan explained the handwritten clause was added at [his] suggestion to protect both [Stewart] and [him]self. . . . [I]f [Stewart] was required to vacate, he would get a refund, but if he wasn t required to vacate he wouldn t, and the reason for that was that under the Federal Landlord Tenant Act [the bank] had to honor this lease. Stephan s real estate agent corroborated his testimony. His agent explained the handwritten clause was added because Stephan was in the process of . . . applying for a loan modification . . . and [Stephan s real estate agent] believe[d] [Stephan] had perhaps not made one [mortgage] payment[.] [Stephan] wanted to disclose that to [Stewart] . . . [a]nd if for some reason [Stewart] was forced to leave . . . Stephan would reimburse [Stewart] for any time that he was not there during the term of the lease. ¶12 Stewart, interpretation handwritten of clause on the the other handwritten meant if hand, disputed clause. [Stephan] lost He Stephan s testified the [condo] foreclosure [he] would get [his] prepaid rent back. the to He also explained required to vacate meant if [the condo] went into foreclosure[,] that would expire the lease at that point and that [he] would get [his] remaining prepaid rent back. Stewart also testified he, not Stephan, insisted on the handwritten clause. the parties cited Taylor to the trial court. 8 ¶13 the When Stewart s real estate agent was asked to explain parties intent in including the handwritten clause, he testified: [T]he intent was that if the landlord was not successful in modifying the loan, that in a traditional situation the tenant would be required to vacate. And since he paid the full amount, the full year of the rent, the landlord would reimburse him for whatever he didn t use. That was the intent. Stewart s attorney then asked the real estate agent to clarify whether the parties intended the provision to require a refund of all unused prepaid rent monies in the event of a foreclosure, and he responded: Yeah, I guess, yes. I would just add to that that the option that the tenant didn t vacate the premises because he would end up purchasing it wasn t even on the table. ¶14 The ordinary meaning of the term vacate is cease to occupy, Webster s II New College Dictionary 1246 (3rd ed. 2005), or surrender occupancy or possession; to move out or leave, Black s Law Dictionary 1584 (8th ed. 2004). See W. Corrs. Group, Inc. v. Tierney, 208 Ariz. 583, 587, ¶ 17, 96 P.3d 1070, 1074 (App. 2004) (explaining we refer to established and widely used dictionaries to determine the plain and ordinary meaning of a word). These definitions are consistent with the use of the phrase vacate the premises in other provisions of 9 the parties lease agreement. See Nichols v. State Farm Fire & Cas. Co., 175 Ariz. 354, 356, 857 P.2d 406, 408 (App. 1993) (explaining that a contract must be read as a whole in order to give a reasonable and harmonious meaning and effect to all of its provisions and each part must be read and interpreted in connection with all other parts ). ¶15 For example, the provision beginning at Line 26 of the lease agreement provides that [i]f the tenant willfully fails to vacate the premises as provided for in this agreement, the landlord shall be entitled to specified damages. Additionally, the provision commencing at Line 202 sets forth the tenant s obligations upon vacating premises and explains the tenant promises to surrender the premises in the same condition as when the lease began. The use of the word vacate in these contractual is provisions not reasonably susceptible to the special meaning offered in Stewart s testimony, namely, that the parties intended the word vacate to mean in the event of a foreclosure. ¶16 Moreover, when Stewart was asked whether he discussed the handwritten clause with Stephan or Stephan s realtor, he admitted he only discussed the clause with his own realtor and further stated that he and his realtor didn t discuss what it meant. And, to the extent Stewart s 10 realtor believed that required to vacate meant foreclosure of the condo, there is no evidence in the record that he discussed his interpretation with Stephan or Stephan s negotiations. special As meaning agreement. 4 realtor explained to an at in any point Taylor, ordinary word, in parties but the may only by lease give a mutual 175 Ariz. at 153, 854 P.2d at 1139; see also Tabler v. Indus. Comm n, 202 Ariz. 518, 521, ¶ 13, 47 P.3d 1156, 1159 (App. 2002) ( The determination of the parties intent must be based on objective parties. ). evidence, Therefore, the not the phrase hidden required intent to of the vacate the premises as used in the handwritten clause was not ambiguous and, under Taylor, not reasonably susceptible to Stewart s proffered interpretation. ¶17 In sum, because required to vacate retained its ordinary meaning having to surrender or leave the premises and both parties agree that Stewart was in fact not required to vacate the premises during the one-year term of the lease, the trial 4 court erred in submitting the interpretation of the We also note that the parties lease agreement contains an integration clause commencing at Line 227, which expressly states that the written contract shall constitute the entire agreement between the parties and supersede[s] any other written or oral agreement between the parties. 11 pertinent contract language to the jury. 5 See Grosvenor Holdings, L.C. v. Figueroa, 222 Ariz. 588, 593, ¶ 9, 218 P.3d 1045, 1050 (App. 2009) ( Where the intent of the parties is expressed in clear and unambiguous language, there is no need or room for construction or interpretation and a court resort thereto. ) (internal quotations omitted); may not In re Estate of Lamparella, 210 Ariz. 246, 250, ¶ 21, 109 P.3d 959, 963 (App. 2005) ( A contract is not ambiguous just because the parties to it [] disagree about its meaning. ); Long v. Glendale, 208 Ariz. 319, 329, ¶ 34, 93 P.3d 519, 529 (App. 2004) (recognizing that under Taylor, a party cannot claim he is interpreting a written clause with extrinsic evidence if such interpretation unavoidably changes the meaning of the writing ). we vacate the jury verdict in 5 favor of Accordingly, Stewart on his At trial, Stephan was impeached with his replevin hearing testimony in which he stated that he informed Stewart he was attempting a loan modification and if that failed, then it would be foreclosed on, in which event, [Stewart s] prepaid rent would be refunded to him. When questioned about this testimony at trial, Stephan explained that it was incomplete and he had meant to say if [Stephan] had to vacate as a result of foreclosure. Although Stephan s replevin hearing testimony can be construed as supporting Stewart s proffered definition of vacate, in light of Stephan s clarifying trial testimony and, more importantly, Stewart s admission that he never disclosed his special meaning of the word vacate to Stephan, we conclude the term vacate as used in the parties lease agreement is not ambiguous. The determination of the parties' intent must be based on objective evidence, not the hidden intent of the parties. 12 counterclaim against Stephan for a refund or return of unused rent. 6 ATTORNEYS FEES AND COSTS ¶18 Based on our decision to vacate the jury s verdict on Stewart s counterclaim, we also vacate the superior court s award of attorneys fees and costs in favor of Stewart. remand, the court should (1) determine whether either On party qualifies as prevailing or successful under the terms of the lease or A.R.S. § 12-341.01; and (2) if one party has prevailed, determine an appropriate award of attorneys fees and costs to such party. See Arizona Attorneys Fees Manual § 2.6.1, at 2-17 (Bruce E. Meyerson & Patricia K. Norris, eds. 5th ed. 2010) ( In multiple-claim cases, when there has been no recovery on any of the claims no recovery on either the complaint or counterclaim there may be no successful party under A.R.S. § of attorneys 12- 341.01(A). ). ¶19 Each party requests an award fees incurred on appeal pursuant to A.R.S. §§ 12-341.01 and -349(A). 6 Stephan testified that he believed the Protecting Tenants at Foreclosure Act of 2009 ( PTFA ), Pub. L. No. 111-22, §§ 70104, 123 Stat. 1632 (2009), would have protected Stewart from eviction following foreclosure. Given our conclusion that the handwritten language of the lease is not reasonably susceptible to Stewart s interpretation, application of the PTFA to the lease is irrelevant and we therefore need not reach Stephan s additional argument that the superior court should have instructed the jury on the PTFA. 13 In our discretion, we deny both attorneys fees requests. In addition, both parties request an award of costs incurred on appeal pursuant to A.R.S. § 12-341, which provides that the successful party in a civil action is entitled to recovery of costs. Although Stephan made a successful argument on Stewart s counterclaim, Stephan did not prevail on his argument regarding abandonment of the furnishings. Thus, as noted, we are remanding for further proceedings to permit the superior court to determine whether there should be a successful party in this litigation. We therefore decline to award costs on appeal to either party. See Concannon v. Yewell, 16 Ariz. App. 320, 322, 493 P.2d 122, 124 (1972) ( As a general rule, where both parties prevail on a material question on appeal, each must bear his own costs. ). Our decision to deny fees and costs on appeal should not be construed as expressing an opinion as to whether either party should be awarded fees or costs on remand. CONCLUSION ¶20 For the foregoing reasons, we affirm the jury s verdict in favor of Stewart on Stephan s furnishings claim. vacate, however, the $34,808.50 We judgment in favor of Stewart on 14 his counterclaim for prepaid rent. We also vacate the superior court s and award of attorneys fees costs and remand for further proceedings consistent with this decision. _______________/s/_________________ MICHAEL J. BROWN, Judge CONCURRING: _____________/s/____________________ PATRICIA K. NORRIS, Presiding Judge _____________/s/____________________ JOHN C. GEMMILL, Judge 15

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