Best v. Edwards

• Court: Arizona Court of Appeals
• Writing for the Court: Weisberg
• Citation: Best v. Edwards, 176 P.3d 695, 217 Ariz. 497 (Ariz. App. 2008)
• Decision Date: 31 January 2008
• Docket Number: No. 1 CA-CV 06-0770.,1 CA-CV 06-0770.
• Parties: Gregory BEST, a single man, Plaintiff-Counter-Defendant-Appellant, v. Carl R. EDWARDS and Sookie M. Edwards, husband and wife; Frank R. Salinas and Frances B. Salinas, husband and wife, Defendants-Counter-Claimants Appellees.

176 P.3d 695

217 Ariz. 497

Gregory BEST, a single man, Plaintiff-Counter-Defendant-Appellant, v. Carl R. EDWARDS and Sookie M. Edwards, husband and wife; Frank R. Salinas and Frances B. Salinas, husband and wife, Defendants-Counter-Claimants Appellees.

No. 1 CA-CV 06-0770.

Court of Appeals of Arizona, Division 1, Department E.

January 31, 2008.

Bueler Jones LLP by Gordon S. Bueler, Chandler, Attorneys for Appellant.

Dominguez & Associates PC by Antonio Dominguez, Phoenix, Attorneys for Appellees.

WEISBERG, Judge.

¶ 1 Gregory Best appeals from the grant of summary judgment to defendants, Carl and Sookie Edwards and Frank and Frances Salinas, which ended Best's action for specific performance of a real estate option agreement. Best contends that although the Arizona statute of frauds mandates that an option contract for the sale of real property be in writing, the statute does not require that an amendment to such a contract be in writing. He also argues that even if the statute of frauds does apply, defendants here should be equitably estopped from asserting it as a defense. For reasons that follow, we conclude that modification of a real estate option contract that extends the life of an option is a material modification that must be in writing. We further conclude that Best failed to assert sufficient equitable grounds to estop defendants' reliance upon the statute of frauds.

FACTUAL AND PROCEDURAL BACKGROUND

¶ 2 In December 2003, Best entered into a written contract with defendants that granted him the exclusive option to purchase real property in Phoenix, Arizona for the price of $130,000, to be exercised and paid in full on or before March 23, 2005. After that date, the option would expire "unless all parties agree[d] to renew" the option in accordance with Arizona law. (Emphasis added.)

¶ 3 Best did not exercise the option to purchase the property prior to March 23, 2005. Instead, on that date he recorded an "Amendment to Exclusive Purchase Option Contract," signed only by him, that purported to extend the expiration date stated in the contract until March 23, 2006.¹

¶ 4 In November 2005, defendants entered into a contract with an unrelated third party to sell the property for $285,000. The title company required that defendants record a release of Best's option rights under the original contract and recorded amendment. Claiming that Best had unilaterally recorded the amendment without their knowledge, defendants demanded that Best immediately execute a written release. Best declined to do so and asserted that Carl Edwards had orally agreed to extend the option term for an additional year. On December 30, 2005, Best informed defendants in writing that he intended to exercise his option to purchase the property.

¶ 5 Defendants refused to convey the property to Best, and he brought this action for specific performance of the option contract. In addition to filing an answer and counterclaim,² defendants moved for summary judgment, arguing that the option contract had expired and the purported amendment was unenforceable under the statute of frauds. Best responded that the statute of frauds did not bar enforcement of the oral amendment and that even if it did, defendants were equitably estopped from asserting such a defense because Best relied to his detriment upon the oral extension.

¶ 6 The court granted defendants summary judgment. It held that the statute of frauds applied and that "rainy extension to the contract needed to be in writing and signed by all of the responsible parties." Absent a written agreement, the court also concluded that no material questions of fact existed and that defendants were entitled to judgment as a matter of law because the option agreement had expired. The court also awarded attorney's fees and costs to defendants. Best timely appealed from the judgment. We have jurisdiction pursuant to Arizona Revised Statute ("A.R.S.") section 12-2101(B) (2003).

DISCUSSION

¶ 7 A court properly grants summary judgment when no genuine issue of material fact exists and the moving party is entitled to a judgment as a matter of law, Ariz. R. Civ. P. 56(c). On appeal from the grant of summary judgment, however, we determine de novo whether any genuine material fact question exists and whether the trial court properly applied the law. Eller Media Co. v. City of Tucson, 198 Ariz. 127, 130, ¶ 4, 7 P.3d 136, 139 (App.2000). We also view the facts and any inferences from those facts in the light most favorable to the non-moving party. Prince v. City of Apache Junction, 185 Ariz. 43, 45, 912 P.2d 47, 49 (App.1996). Interpretation of a statute is a question of law subject to our de novo review, and when interpreting a statute, we attempt to fulfill the legislature's intent. Calvert v. Farmers Ins. Co. of Ariz., 144 Ariz. 291, 294, 697 P.2d 684, 687 (1985).

Arizona's Statute of Frauds

¶ 8 The statute of frauds provides in relevant part:

No action shall be brought in any court in the following cases unless the promise or agreement upon which the action is brought, or some memorandum thereof, is in writing and signed by the party to be charged, or by some person by him there-unto lawfully authorized:

....

6. Upon an agreement for leasing for a longer period than one year, or for the sale of real property or an interest therein. Such agreement, if made by an agent of the party sought to be charged, is invalid unless the authority of the agent is in writing, subscribed by the party sought to be charged.

A.R.S. § 44-101 (2003) (emphasis added).

¶ 9 The statute of frauds historically has served as a means to avoid the perpetration of fraud that might otherwise occur if one need only assert that an oral agreement had been reached in order to enforce a purported agreement. See, e.g., Realty Exch. Corp. v. Cadillac Land & Dev. Co., 13 Ariz. App. 232, 236, 475 P.2d 522, 526 (1970) (the statute "protect[s] against claims backed only by oral testimony which could be fabricated"). By requiring a writing for certain important types of contracts, the statute ensures that some enduring evidence of an agreement exists. See Owens v. M.E. Schepp Ltd. P'ship, 216 Ariz. 273, 281, ¶ 36, 165 P.3d 674, 682 (App.2007) (quoting Sherwood v. Lowell, 34 Cal.App. 365, 167 P. 554, 559 (1917)). As one court has observed,

[t]he Statute of Frauds is a time honored statute . . . . It was designed to prevent fraud and perjury in connection with the sale and the transfer of lands and other designated transactions. Though it may never be made the instrument of fraud which it was intended to prevent, it is just as ... important that it should not be ignored or circumvented in any set of circumstances which comes within its scope unless its application, in a particular instance, results in fraud or leads to inequitable conduct.

Cottrell v. Nurnberger, 131 W.Va. 391, 47 S.E.2d 454, 463-64 (1948).

¶ 10 In this case, the parties agree that the executed real estate option agreement is within the scope of the statute of frauds. See Chevron U.S.A. Inc. v. Schirmer, 11 F.3d 1473, 1478 (9th Cir.1993) (Arizona's statute of frauds requires an option to purchase real property to be in writing); Lyon v. Big Bend Dev. Co., 7 Ariz.App. 1, 4, 435 P.2d 732, 735 (1968) (statute of frauds applies to option agreement to purchase real property). However, Best argues that a modification of such an option agreement, which extends the option date, is not. We disagree with that argument.

¶ 11 In their written contract, defendants agreed to hold open their offer for a specified time. That term became "binding and irrevocable for the period specified" and "create[d] in the holder a power of acceptance ... and a right to conveyance upon fulfillment of the specified conditions." Corbin on Contracts, § 17.18 at 487.

¶ 12 Because time was of the essence, the option could not be exercised after the option period expired. See Cummings v. Bullock, 367 F.2d 182 (9th Cir.1966) (time is of the essence unless option agreement expressly states that it is not). Moreover, an option must be exercised in strict accordance with its terms because "any relaxation of terms would substantively extend the option contract to subject one party to greater obligations than he bargained for." Restatement (Second) of Contracts § 25, cmt d. See also Rogers v. Jones, 126 Ariz. 180, 182, 613 P.2d 844, 846 (App.1980) (option is strictly construed and "must be exercised in exact accord with its terms and conditions"). Given its importance, the time for performance clearly was a material term.

¶ 13 This court has previously held that the modification of a material term of an agreement, which was required by the statute of frauds to be in writing, must also be in writing. In Kammert Bros. Enter., Inc. v. Tanque Verde Plaza Co., 4 Ariz.App. 349, 360, 420 P.2d 592, 603 (1966), vacated on other grounds, 102 Ariz. 301, 428 P.2d 678 (1967), we addressed whether a contract required by the statute of frauds to be in writing could be orally modified to extend the buyer's time to make contract payments.

¶ 14 In Kammert, the buyer contracted to purchase real estate, made a down payment, and agreed to pay the balance over time. 4 Ariz.App. at 352-53, 420 P.2d at 595-96. When the first installment of principal came due, the buyer asked for an extension, which the seller's attorney granted under certain additional conditions. Id. at 354, 420 P.2d at 597. The parties did not, however, sign a written amendment. Id. At a later date, the seller informed the escrow agent that the original contract was in default.

¶ 15 At a trial for breach of contract, the jury found that the seller had agreed to give the buyer an extension, that the buyer had offered to pay the full amount due, and that the seller had refused in bad faith to accept payment. Id. at 359, 420 P.2d at 602. The jury also found that the seller had led the buyer to believe that it had an extension and that the buyer had acted...