Edwards v. Hauff
| Decision Date | 26 March 1984 |
| Docket Number | CA-CIV,No. 2,2 |
| Citation | 682 P.2d 1,140 Ariz. 373 |
| Parties | Robert T. EDWARDS, a single man, Southwestern Properties, a joint venture, and Townhomes of Skyline, an Arizona corporation, Plaintiffs/Appellees, v. Brian L. HAUFF and Beverly J. Hauff, husband and wife, and Intrex Corporation, a foreign corporation, Defendants/Appellants. 4923. |
| Court | Arizona Court of Appeals |
This appeal is from the judgment of the trial court granting the plaintiffs/appellees a constructive trust in and to the interest of the defendants/appellants in certain real property in Pima County. The trial court also dismissed count six of the appellants' counterclaim and the appeal is also from that portion of the judgment. The case was tried with an advisory jury which found in favor of the plaintiffs and the court adopted that verdict.
The evidence relevant to the issues presented on appeal follows. In the fall of 1979 appellee Robert T. Edwards and James Manzolillo purchased for development certain property at Skyline Country Club in Tucson. Townhomes of Skyline was incorporated for that purpose. Edwards engaged the appellant, Brian L. Hauff, to manage the development and to acquire other investment properties in Arizona. A one-page contract representing this agreement was prepared in October 1979 and was eventually signed by Edwards as managing partner of the joint ventures, and Hauff for Intrex, his wholly-owned, foreign corporation. The agreement provided that Hauff was to receive a percentage of profits from the venture and to have a salary draw of $3,000 per month. This was later increased to $5,000.
Hauff began his employment in about November 1979. In addition to his salary, he was provided a home, car and guest privileges at the country club. Edwards subsequently acquired the Manzolillo interest. The Skyline development venture was eventually unsuccessful.
In March 1980 Hauff, on behalf of Skyline, began negotiating for the purchase of 500 acres of raw land near Tucson known as Star Pass. On April 29, 1980, he signed for Skyline a deposit receipt and agreement for the purchase of this property and signed and delivered a check for $10,000 drawn on the Skyline account. The agreement actually gave Skyline an option to purchase the property since it was subject to the buyer obtaining a feasibility study and subsequent confirmation of the purchase by a later date. The total purchase price for the land was $1,344,000 to be paid with interest over a period of years. It would have required a considerable investment in a relatively short time with no foreseeable immediate return. In May 1980 Hauff told Edwards about the Star Pass property and the two of them viewed it together with the involved sales agents. Afterward, Edwards told Hauff to see if he could restructure the agreement to make it more financially attractive.
Subsequently in May through June 1980 Hauff found an investor, Peter Voorlas, who was willing to make the required payments for the Star Pass contract, but did not inform Edwards. On June 9 Hauff, Voorlas and his sons entered into a written joint venture agreement to exercise the Star Pass option. By letter to the title company, which held Star Pass as trustee and was also designated as the escrow agent, Hauff, again signing for Skyline, assigned all of its interest in Star Pass to the new syndicate. Under the new agreement he was a 50 percent owner of that syndicate. He substituted his own $10,000 check and requested refund of Skyline's earnest money. Subsequently the new venture conveyed the property to appellant, Stewart Title and Trust of Tucson as trustee, Trust No. 2191, with the new venture as beneficiary. The sale closed. Edwards first learned about all of this several months later from a third party.
In this appeal, Hauff contends that the contract wherein he was to acquire investment properties in Arizona (other than Skyline) is too indefinite to enforce; that the trial court erred in dismissing count six of his counterclaim which alleged an oral agreement that he was to have a right of first refusal on investment opportunities found by Edwards, and that the trial court should have ordered restitution to him for his investment in Star Pass. We affirm.
The argument that the contract was too indefinite is misplaced. Hauff clearly owed fiduciary duties to Edwards as a result of his employment. See Geomet Exploration, Ltd. v. Lucky McUranium Corporation, 124 Ariz. 55, 601 P.2d 1339 (1979), cert. denied, 448 U.S. 917, 101 S.Ct. 38, 65 L.Ed.2d 1180 (1980); Patrick v. Cochise Hotels, Inc., 76 Ariz. 136, 259 P.2d 569 (1953); Valley National Bank of Phoenix v. Milmoe, 74 Ariz. 290, 248 P.2d 740 (1952); Button v. Wakelin, 41 Ariz. 84, 15 P.2d 956 (1932). An agent is duty bound not to acquire a private interest antagonistic to that of his employer. Mallamo v. Hartman, 70 Ariz. 294, 219 P.2d 1039 (1950). Hauff was obligated to inform Edwards of the availability of an investor willing to provide the necessary capital to acquire Star Pass. See Patrick v. Cochise Hotels, Inc., supra. In their relationship, Hauff was duty bound to act on behalf of Edwards, subject to his control, and could have acquired Star Pass only with the informed consent of Edwards. See Valley National Bank of Phoenix v. Milmoe, supra. The conduct of Hauff was blatantly in violation of these duties owed to Edwards. The facts of this case are extreme. The evidence was overwhelming that Hauff secretly acquired his interest in Star Pass intentionally excluding Edwards. Both the advisory jury verdict and the judgment of the trial court were unquestionably correct.
The trial court did not allow count six of the counterclaim to go to the advisory jury. After Hauff assumed his duties at Skyline, and his duty to acquire other investment opportunities in Arizona, Edwards acquired an interest in some real property in Maricopa County. Hauff contends he was not offered an opportunity to participate in that venture. (Actually there is evidence that he was given such an opportunity.) Hauff testified that during negotiations leading to their written agreement, they discussed an agreement whereby neither would purchase an interest in property without first having offered the other an opportunity to participate. He testified only that it was his "understanding" that this was their agreement. That was the extent of the evidence pertaining to count six, except that Edwards denied any such agreement. Their written agreement provided only that Hauff was to be responsible for "the acquiring of other investment properties in the Arizona market." The agreement also provided that it represented "the whole of the agreement between the parties", and that "all further terms and conditions of this contract shall occur by mutual agreement between the said parties by notice in writing". No evidence shows any written modification of the October 1979 agreement.
The record reveals at least two reasons for the dismissal of count six. First the trial court may have found the alleged agreement unenforceable because it was indefinite; that there was no agreement as to the share of participation. See Savoca Masonry Company, Inc. v. Homes & Son Construction Company, Inc., 112 Ariz. 392, 542 P.2d 817 (1975); Pyeatte v. Pyeatte, 135 Ariz. 346, 661 P.2d 196 (App.1982); Correa v. Pecos Valley Development Corporation, 126 Ariz. 601, 617 P.2d 767 (App.1980); Aztec Film Productions v. Tucson Gas & Electric Co., 11 Ariz.App. 241, 463 P.2d 547 (1970). The second reason was the lack of evidence showing any agreement at all, i.e., a meeting of the minds.
Another reason urged for dismissal was the statute of frauds. The appellee claims that the alleged agreement would involve a transfer of land coming within the law enunciated in Johnson v. Gilbert, 127 Ariz. 410, 621 P.2d 916 (App.1980).
We agree that the dismissal was required for either of the first two reasons. The evidence of the alleged oral agreement was too indefinite to be enforceable and the evidence was not sufficient to show an agreement in any event. We need not decide whether the alleged agreement was within the statute of frauds.
The final issue presented by the appellant concerns the trial court's refusal to compensate him for his time and expenses for Star Pass as a condition of the constructive trust.
The appellant testified that he paid expenses in the development of Star Pass from his own funds. He testified to the following amounts for the items indicated:
Hauff also testified that he spent 2,900 hours working on the project over the three years. He valued his time at $100 per hour, but for the purposes of estimating reduced this to $50 X 2,900 hours, producing $145,000 for a total of $253,752. No other evidence contradicted this testimony although cross-examination revealed that some of the expenses may have been paid by the Hauff-Voorlas joint venture. Also other evidence showed Hauff was still working for Skyline (Edwards) during part of this time with the fringe benefits...
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