Harsh Bldg. Co. v. Bialac

• Decision Date: 07 January 1975
• Docket Number: CA-CIV,No. 1,1
• Citation: 529 P.2d 1185,22 Ariz.App. 591
• Parties: HARSH BUILDING COMPANY, an Oregon Corporation, Harsh Investment Corporation, an Oregon Corporation; and Harold J. Schnitzer, Appellants, v. Sam BIALAC, Jerry Bialac, James T. Bialac, Lee Bialac, Alice Sue Altman and Robert Altman, Appellees. 2752.
• Court: Arizona Court of Appeals

Page 1185

529 P.2d 1185

22 Ariz.App. 591

HARSH BUILDING COMPANY, an Oregon Corporation, Harsh Investment Corporation, an Oregon Corporation; and Harold J. Schnitzer, Appellants, v. Sam BIALAC, Jerry Bialac, James T. Bialac, Lee Bialac, Alice Sue Altman and Robert Altman, Appellees.

No. 1 CA-CIV 2752.

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

Jan. 7, 1975.

Rehearing Denied Feb. 18, 1975.

Evans, Kitchel & Jenckes, P.C., by Newman R. Porter and F. Pendleton Gaines, III, Phoenix, for appellants.

Lewis & Roca by John P. Frank, Gerald K. Smith and Richard N. Goldsmith, and Flynn, Kimerer, Thinnes & Galbraith by John J. Flynn, Phoenix, for appellees.

OPINION

STEVENS, Judge.

This appeal is to review the decision of the trial court not to accept two stipulations entered into between the parties while litigating their case in federal court. Harsh Building Company and the other appellants (Harsh Building) were the defendants in an action commenced in the State court 31 January 1967. On 3 February 1967, the case was removed to the United States District Court for the District of Arizona on the basis of diversity of citizenship. Following six years of federal court proceedings which included a trial and two appeals, the case was remanded to the State court for lack of federal jurisdiction, see Bialac v. Harsh Building Co., 463 F.2d 1185 (9th Cir. 1972). On 31 May 1973, Harsh Building filed an 'answer and counterclaim' in the Superior Court of Arizona for Maricopa County. Sam Bialac and the other appellees (Bialacs) made a motion to dismiss several counterclaims of Harsh Building. In a judgment entered 8 April 1974, the trial court dismissed counterclaims A and B. The trial court made an express finding that there is no just reason for delay and expressly directed the entry of judgment, thereby making this judgment a final, appealable judgment. Rule 54(b), Rules of Civil Procedure, 16 A.R.S.

The detailed recitation of the facts of this dispute is not necessary to our decision and, especially due to the incompleteness of the record before us, ¹ we quote appellants' brief for a short statement of facts:

'The parties' disputes center around a large apartment complex and adjacent shopping center located in Phoenix. At one time, the property was owned by a corporation controlled by plaintiffs (referred to hereinafter simply as 'the Bialacs'). This complex litigation arises from the Bialacs' desire and efforts to convert the rental apartments into 'FHA 234' condominium units during the period from 1965 through 1967. Without unnecessary detail, it is sufficient to note that the complicated, intricate series of contractual arrangements between the parties arose from the Bialacs' wish to avoid being taxed on the proceeds of the condominium conversion at ordinary-income rates. The Bialacs sought to achieve favorable capital gains treatment of the sales and proceeds and at the same time preserve the benefits of FHA financing.'

The case was pending in the federal court for several years while both parties filed numerous pleadings, motions and engaged in extensive discovery. In May and June, 1971, the litigants participated in a five-week jury trial. Towards the end of their case, the Bialacs made an oral motion to remand the case to the State court based on an incomplete diversity of citizenship alleging that Harsh Building, an Oregon corporation, had its principal place of business in Arizona. The motion to remand was denied. The Court, a few days later, directed verdicts in favor of Harsh Building on seven of eight counts of the Bialacs' complaint. The case was in this posture when the parties entered into and filed a second stipulation entitled 'Stipulation for Judgment, Dismissal and Other Disposition of Certain Claims.' This stipulation settled the major portion of the case and it settled and disposed of the remaining count of the Bialacs' complaint as well as Harsh Building's counterclaims. This stipulation incorporated by reference a 13 March 1970 stipulation entitled 'Stipulation and Order Re Disposition of Certain Claims.'

Subsequently, the Ninth Circuit Court of Appeals determined that the federal court lacked jurisdiction and remanded with directions to send the case back to the State court. Once in the Maricopa County Superior Court, Harsh Building sought the enforcement of the two stipulations by incorporating them as counterclaims A and B in their answer. Upon the motion of the Bialacs, the trial court dismissed counterclaims A and B. Harsh Building appealed this decision. The question for review is: As a matter of law, is an agreement to settle claims in litigation rendered invalid because the agreement is evidenced by a stipulation filed in a court later determined to lack jurisdiction?

The general rule is that the parties are bound by their stipulations unless relieved therefrom by the court. Higgins v. Guerin, 74 Ariz. 187, 245 P.2d 956 (1952); Guard v. County Of Maricopa, 14 Ariz.App. 187, 481 P.2d 873 (1971). The parties could not direct us to any case directly on point nor did our research reveal any. We must find the general rules and apply them to the present dispute to find a solution.

' A stipulation is an agreement, admission or concession made in a judicial proceeding by the parties thereto or their attorneys, in respect to some matter incident thereto, for the purpose, ordinarily, of avoiding delay, trouble and expense.' Bekins Van & Storage Company v. The Industrial Commission Of Arizona, 4 Ariz.App. 569, 570, 422 P.2d 400, 401 (...