Andrews v. Blake
| Citation | 69 P.3d 7,205 Ariz. 236 |
| Decision Date | 20 May 2003 |
| Docket Number | No. CV-02-0233-PR.,CV-02-0233-PR. |
| Parties | Jeffrey L. ANDREWS, Plaintiff/Counterdefendant/Appellant, v. Leslie W. BLAKE and Moon Valley Nursery, Inc., an Arizona corporation, Defendants/Counterclaimants/Appellees. |
| Court | Supreme Court of Arizona |
Law Office of Curtis D. Drew, by Curtis D. Drew, Scottsdale, and Ulrich & Anger, P.C. by Paul G. Ulrich, Phoenix, Attorneys for Plaintiff/Counterdefendant/Appellant.
Mariscal, Weeks, McIntyre & Friedlander, P.A. by Timothy J. Thomason, Law Offices of Neil Vincent Wake by Neil Vincent Wake, and Quarles & Brady Streich Lang LLP by Michael E. Korenblat, Phoenix, Attorneys for Defendants/Counterclaimants/Appellees.
¶ 1 Defendants Leslie Blake and Moon Valley Nursery, Inc., (collectively, Blake) petitioned us to review a decision of the court of appeals that reversed the trial court's summary judgment in favor of Blake and that, instead, directed entry of summary judgment in favor of plaintiff Jeffrey Andrews. We granted review to examine important questions concerning acceptable methods for a lessee to exercise an option to purchase leased property and the availability of equitable relief to excuse the lessee's failure to timely exercise the option. See Ariz. R. Civ.App. P. 23, 17B A.R.S. We have jurisdiction pursuant to article VI, § 5(3) of the Arizona Constitution and A.R.S. § 12-120.24. Finding multiple issues of fact that preclude summary judgment for either party, we vacate the court of appeals' decision, reverse the trial court's judgment, and remand the case for further proceedings.
¶ 2 Andrews owns a 2.33-acre parcel of land in Phoenix that he leased to Blake, who operated a plant and tree nursery on the property through his company, Moon Valley Nursery. After the parties operated under a one-year lease in 1995, they entered into a three-year lease, prepared by Andrews, in 1996. Although that lease was to terminate by its terms on January 31, 1999, it also provided an option for Blake to purchase the property for $300,000 "at any time within the calendar year 1999." In consideration for that option, Blake agreed to pay significantly increased rent during the lease term.
¶ 3 As of January 1999, both Blake and Andrews were under the mistaken impression that the option as well as the lease would expire at the end of January. Accordingly, in early February, the parties executed an "Addendum to Lease" that extended the lease term through the end of 1999 and purportedly "extended" the option to purchase the property for the same $300,000 option price until October 1, 1999. Pursuant to the addendum, Blake paid Andrews $10,000 for that "extension."
¶ 4 The addendum deleted provisions in the underlying three-year lease relating to notices and Blake's option to purchase, replacing them with new provisions on those topics. The addendum's new "Notices" provision stated that "[a]ll notices ... required or permitted under this Lease (a `Notice') shall be deemed given if given in writing and delivered personally, delivered by commercial delivery service, delivered by courier, or mailed by certified mail return receipt requested, postage or delivery charges prepaid, to the party to receive the Notice." That new provision also stated that "[a]ll Notices shall be deemed given when received, as evidenced by the acknowledgment of receipt issued with respect thereto by the entity making the delivery." The addendum's replacement provision concerning Blake's option to purchase stated that "[t]he option granted hereby shall terminate if not exercised in writing before October 1, 1999."
¶ 5 The record contains conflicting evidence on when and how Blake first attempted to exercise the option to purchase in the fall of 1999.2 In his affidavit, Blake stated he had told Andrews in a telephone call on September 17, 1999, that he was unconditionally exercising the option. Andrews, however, testified in his deposition that Blake had called him on or about September 17 and had said he wanted "to talk about the property" but had not specifically stated he "wanted to talk about purchasing the property." In his subsequent affidavit, Andrews acknowledged having had a telephone conversation with Blake sometime in September 1999, in which "Blake said something to the effect that he wanted to get together to talk about buying the Property," but Andrews stated he had told Blake he was too busy to talk and Blake should call again the following week, which he never did.
¶ 6 In his affidavit, Blake further claimed that, three days later, on September 20, he had According to the affidavits of Blake and Moon Valley's chief financial officer (CFO), the September 20 letter was drafted by the CFO at Blake's instruction and "was sent by ordinary mail." Andrews denies having received any such letter until he received a copy after he commenced this litigation.
¶ 7 In a letter to Blake dated October 13, Andrews stated Blake had "not compl[ied] with that part of our lease agreement, which required [him] to notify [Andrews], in writing and by certified mail, of [his] intent to exercise the option to purchase the property" before October 1, 1999, and, therefore, Andrews "consider[ed] the option to purchase as expired." According to Moon Valley's CFO, after Blake received that letter on October 18, the CFO had immediately called Andrews, informed him that he already had sent notice of Blake's exercise of the option, and offered to immediately provide a copy of the September 20 letter to Andrews. Andrews testified in deposition that he had spoken by telephone around October 18 with Blake's CFO and that the CFO had stated he previously had sent a letter, but not by certified or registered mail. Andrews further testified that he had told the CFO that he had not received any such letter.
¶ 8 Blake's counsel also sent a second letter to Andrews dated October 21, purportedly exercising the option again and urging Andrews to "acknowledge, in writing, [his] intent to honor Mr. Blake's valid exercise of the option." Andrews admittedly received that letter around October 23. On December 3, 1999, Blake sent another letter to Andrews, this time by certified mail, return receipt requested, again confirming that Blake was exercising his option to purchase the property. Andrews also admits having received that letter.
¶ 9 While those events unfolded in the fall of 1999, unbeknownst to Blake, Andrews negotiated a sale of the property to Albertson's grocery stores for approximately $950,000. During those negotiations, Andrews offered to sell the property to Blake in December 1999 for $1,000,000. Blake refused and did not make a counteroffer. According to Blake, Andrews and Albertson's subsequently executed a purchase and sale agreement that was conditioned on the outcome of this litigation.
¶ 10 In November 1999, Andrews filed this declaratory judgment action seeking a ruling that Blake's option to purchase had expired without being exercised and that Blake therefore had no further interest in the property that would prevent Andrews from selling it to a third party. Blake counterclaimed for specific performance, claiming he had validly exercised the option. On the parties' cross-motions for summary judgment, the trial court granted summary judgment in favor of Blake, invoking equitable principles to excuse Blake's late exercise of the option. Accordingly, the court entered a judgment permitting Blake to purchase the property at the $300,000 option price.
¶ 11 On Andrews's appeal, the court of appeals reversed and directed entry of summary judgment in his favor. Noting that Arizona law requires strict compliance with options and does not afford equitable relief to a party such as Blake who negligently failed to timely and properly exercise an option, the court of appeals ruled as a matter of law that "Blake's failure to timely exercise the option was due solely to his own lack of diligence." Accordingly, the court held that Blake's late exercise of the option was not excused on equitable grounds and that, because Andrews denied having received the September 20 letter Blake allegedly had sent by regular mail, Blake could not "ignore his failure to provide the type of notice required in the addendum, which would have established unequivocally that notice had been given."
¶ 12 We review de novo a grant of summary judgment, viewing the evidence and reasonable inferences in the light most favorable to the party opposing the motion. Wells Fargo Bank v. Arizona Laborers, Teamsters & Cement Masons Local No. 395 Pension Trust Fund, 201 Ariz. 474, ¶ 13, 38 P.3d 12, ¶ 13 (2002). Because interpretation of leases and other contracts involves questions of law, we also review de novo any issues relating thereto. See Gutmacher v. H & J Constr. Co., 101 Ariz. 346, 347, 419 P.2d 525, 526 (1966)
; Willamette Crushing Co. v. State ex rel. Dep't of Transp., 188 Ariz. 79, 81, 932 P.2d 1350, 1352 (App.1997). Similarly, the determination of whether equitable relief is available and appropriate is subject to our de novo review. See SDG Macerich Properties, L.P. v. Stanek, Inc., 648 N.W.2d 581, 584 (Iowa 2002); see also Pelletier v. Johnson, 188 Ariz. 478, 480, 937 P.2d 668, 670 (App.1996).
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