Farnsworth v. Evans, 1 CA-CV 10-0456

• Decision Date: 26 May 2011
• Docket Number: 1 CA-CV 10-0456
• Parties: RITA FARNSWORTH, as Personal Representative of the ESTATE OF ROBERT KEEN, Plaintiff-Counter-defendant-Appellee v. RAYBURN EVANS and ROBIN EVANS, husband and wife, dba EVANS FARMS, Defendants-Counter-claimants-Appellants.
• Court: Arizona Court of Appeals

RITA FARNSWORTH, as Personal Representative of the ESTATE OF ROBERT KEEN, Plaintiff-Counter-defendant-Appellee v. RAYBURN EVANS and ROBIN EVANS husband and wife, dba EVANS FARMS, Defendants-Counter-claimants-Appellants.

1 CA-CV 10-0456

COURT OF APPEALS STATE OF ARIZONA DIVISION ONE DEPARTMENT E

Filed: May 26, 2011

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

MEMORANDUM DECISION

(Not for Publication -Rule 28, Arizona Rules of Civil Appellate Procedure)

Appeal from the Superior Court in LaPaz County

Cause No. CV-2007-0022

The Honorable Randolph A. Bartlett, Judge

REVERSED AND REMANDED

Jennings, Haug & Cunningham LLP

by Edward Rubacha

Hillary P. Gagnon

Attorneys for Appellee

Phoenix

Law Offices of John C. Churchill

by John C. Churchill

Julie A. LaBenz

Parker

and

The Law Office of Toby Zimbalist

by Toby Zimbalist

Attorney for Appellants

Phoenix

WEISBERG, Judge

¶1 Rayburn Evans and Robin Evans, husband and wife ("Evans") dba Evans Farms appeal the trial court's grant of summary judgment in favor of Rita Farnsworth, as Personal Representative of the Estate of Robert Keen ("the estate"), and the court's dismissal with prejudice of their counterclaim. For reasons that follow, we reverse and remand the matter to the trial court for further proceedings.

FACTS AND PROCEDURAL HISTORY

¶2 Rita Farnsworth is the personal representative of the estate of her father, Robert Keen, who died on July 29, 2006. Prior to his death, Keen was a hay broker doing business as Keen Hay Sales ("Keen Hay") and Evans were hay farmers in La Paz County. Robin kept books both for Keen Hay and Evans Farms. As a hay broker, Keen bought and sold hay and made loans to farmers. He also made advances on crops whereby "he would advance a farmer some money, he would then buy and sell their hay; and as the hay moved, [he] he would deduct that off of the amount advanced."

¶3 Pursuant to an oral agreement, on March 26, 2003, Keen loaned Evans Farms $12,000 with interest at 12 percent per annum, payable at the rate of $500 per month to begin after 60 days. The loan was evidenced by an entry in a ledger kept byRobin for transactions between Keen Hay and Evans Farms. Pursuant to a written agreement, on October 6, 2003, Keen loaned Evans Farms $16,000 with interest at the rate of 12% per annum.

¶4 On November 16, 2003, Keen Hay and Evans Farms entered into a written contract whereby "Evans Farms agrees to sell, and Keen Hay Sales agrees to buy all alfalfa hay produced by Evans Farms during the calendar year 2004." The contract terms were that the "[p]rice to Evans Farms shall be market price in the Parker Valley at the time hay is stacked less $5/Ton broker fee" and that the "[p]rice shall be established within 10 days of hay being put in the stack, and value of hay shall be deducted from any amount owed to Keen Hay." The contract gave Evans Farms "the right to sell [the] hay if a better price [could] be negotiated" with Keen Hay Sales receiving any amount due from that sale. It also gave Keen Hay Sales the "right to place a lien on [Evans Farms'] equipment" until Evans Farms paid the amount owed in full.

¶5 The contract further provided that "Keen Hay shall make available on the first of each month a line of credit to Evans Farms" in specified amounts according to a monthly schedule ending in July 2004. Keen Hay agreed to advance Evans Farms as much as $386,000 with interest at the rate of 12 percent per annum, and in November 2003, to advance $39,000 (less $16,000 already advanced). Rayburn understood that thereference to the $16,000 deduction, which had been handwritten by Robin, referred to the October 6, 2003 loan, and that "this loan went away and went into the advance."

¶6 On November 20, 2003, Keen Hay paid Evans Farms $20,000 as evidenced in an entry made by Robin in the ledger. In December 2003, Keen informed Rayburn that he would not make further advances under the November 16 contract. As a result of Keen's repudiation of the contract, Evans allege they had to borrow against their home, obtain alternate financing, lost a lease on a 488-acre parcel, and lost profits on two other leases. They also allege that it became "impossible" for them to repay the amounts Keen had advanced and that they have "still not recovered from the losses" suffered.

¶7 Farnsworth replaced Robin as Keen Hay's bookkeeper in 2004, and for over two years Farnsworth sent billing statements to Evans Farms for payment of the principal amount of $48,000 plus interest. Evans made one interest payment to Keen on April 3, 2006 on the $12,000 loan, which they did not dispute, but did not make any payments on the November 16 contract.¹ Keen made no collection attempts because, according to Evans, Keen knew that "he had caused [them] to nearly lose [their] farm." However,Evans never made a demand upon Keen or Farnsworth for damages allegedly caused by Keen's repudiation of the contract.

¶8 Robin continued to make entries in the Evans Farms' ledger. The ledger entry ending on March 25, 2006, showed a principal balance of $47,846.62. Next to entries for January 2004, the ledger contained an entry stating, "Bob defaulted on contract. No interest on $36,000." Robin prepared a spreadsheet on the "2004 Keen contract," which showed a principal balance of $36,000 as of December 26, 2004. It contained an entry at the bottom stating, "Bob Keen broke contract December 2003. Will repay principle [sic] but not interest after 12/26/03." Robin could not remember why she created this spreadsheet. According to Evans, however, the entries did not reflect their intention or an agreement to repay Keen the $36,000, but were used for internal record-keeping purposes only to "keep track of all money either loaned or advanced" by Keen.

¶9 Robin inadvertently sent the ledger to Farnsworth in April 2006. After receiving it, Farnsworth realized that a dispute existed with Evans over the November 16, 2003 contract, but assumed they intended to pay the principal sum of $36,000. She and Evans previously had a dispute about payment of a February 2004 bill in the amount of $445.73 for work Robin had performed for Keen Hay. Farnsworth claimed an offset in agreater amount and did not pay it. She also disputed an April 2004 bill in the amount of $1,354.86 for harvesting work done by Rayburn for another hay farmer, at Keen's request. The latter obligation was reflected on the ledger as an amount owed by Keen Hay to Evans Farms. According to Evans, Robin sent Keen Hay an invoice for this amount and Farnsworth returned it, stating "Do not Pay."²

¶10 After Keen died in July 2006, Farnsworth and Robin stopped sending each other statements. Farnsworth thought it was a "forget-it-thing" and that it was wasting her time. Evans believed that Farnsworth had acknowledged liability for damages caused by Keen's breach.

¶11 In September and October, 2006, a notice to creditors of the estate of Robert Keen advising them to present claims within four months was published in Mohave County pursuant to Arizona Revised Statutes ("A.R.S.") section 14-3801(A) (2005). Farnsworth asserted that she had no knowledge that Evans claimed the estate owed them money for the alleged breach of theNovember 16 contract. She did not provide the estate lawyer with documentation regarding Evans' claims for services rendered by Robin or for payment to Rayburn for work performed by him for another hay farmer because she and Robin "had kind of quit sending each other statements a while back." Evans did not receive written notice of the claim period pursuant to A.R.S. § 14-3801(B) . They did not present a creditor's claim to the estate within the four-month period, but allege that had they received notice, they would have consulted with their attorney and presented a claim.

¶12 In February 2007, the estate filed an action against Evans dba Evans Farms for breach of contract and unjust enrichment and requested judgment in the principal amount of $56,277.64,³ together with pre- and post-judgment interest, attorneys' fees and costs. Evans answered and raised numerous affirmative defenses, including offset. They also asserted a counterclaim in which they alleged that Keen had breached the November 16, 2003 contract and as a result, they had suffered damages in an amount of not less than $75,500.

¶13 The estate filed a motion for summary judgment claiming it was entitled to judgment on the full amount of theunpaid loan balances. The estate alleged that Evans had admitted liability in the ledger Farnsworth had received and that this admission evidenced an account stated and barred Evans' offset. It claimed that the offset was also barred by waiver. The estate asserted that Evans' offset and counterclaim were barred by A.R.S. § 14-3801(A) because they failed to timely present their claim to the estate, and by laches because they waited too long to assert them.

¶14 In their response and controverting statement of facts and supplement thereto, Evans disputed that the November 16, 2003 agreement, which they alleged incorporated the October 3, 2006 agreement, was a loan. Instead, they claimed it was a hay purchase contract or an advance. They alleged that Keen repudiated the contract, which excused them from fulfilling their obligations under it and entitled them to assert an offset and counterclaim for damages. Evans disputed the estate's contention that the entry in their ledger was intended as an admission of liability or an account stated. Instead, Evans claimed it was intended as a mere bookkeeping entry.

¶15 Evans also maintained that the offset was not barred by the disputed admission or waiver because they could not calculate damages until 2007, and/or were unaware of their legal rights at the time Keen breached the contract. They further alleged that their offset and counterclaim were not barred byA.R.S. § 14-3801(A)...