Owens v. M.E. Schepp Ltd. Partnership

• Decision Date: 23 August 2007
• Docket Number: No. 1 CA-CV 06-0162.,1 CA-CV 06-0162.
• Citation: 165 P.3d 674,216 Ariz. 273
• Parties: Hal OWENS, a married man dealing with his sole and separate property, Plaintiff/Counterdefendant, Appellee, v. M.E. SCHEPP LIMITED PARTNERSHIP, an Arizona partnership, Defendant/Counterclaimant, Appellant.
• Court: Arizona Court of Appeals

165 P.3d 674

216 Ariz. 273

Hal OWENS, a married man dealing with his sole and separate property, Plaintiff/Counterdefendant, Appellee, v. M.E. SCHEPP LIMITED PARTNERSHIP, an Arizona partnership, Defendant/Counterclaimant, Appellant.

No. 1 CA-CV 06-0162.

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

August 23, 2007.

Perkins, Coie, Brown & Bain, P.A. by Jordan L. Green, Phoenix, Attorneys for Plaintiff-Counterdefendant, Appellee.

Fennemore Craig, P.C., Roger T. Hargrove, Roger T. Hargrove, Phoenix, Attorneys for Plaintiff-Counterdefendant, Appellee.

McCabe O'Donnell, P.A. by Joseph I. McCabe, Jr., Clifford J. Roth, Phoenix, Attorneys for Defendant-Counterclaimant, Appellant.

OPINION

BARKER, Judge.

¶ 1 M.E. Schepp Limited Partnership ("Schepp Partnership") appeals from entry of partial summary judgment ordering statutory partition of residential property in which it owns an undivided interest as a tenant in common with Hal Owens. It contends the court erred by failing to find issues of fact concerning the existence and enforceability of an oral, voluntary partition agreement. For the reasons that follow, we agree and accordingly reverse.¹

Facts and Procedural History

¶ 2 The parties to this lawsuit own undivided interests as tenants in common in Lots 17, 18 and 20, contiguous parcels of residential property located in Phoenix, Arizona. Hal Owens possesses a two-thirds interest and Schepp Partnership possesses a one-third interest. Lots 17 and 18 are vacant; a residence and guest house are located on Lot 20. The co-managing partners of Schepp Partnership are brothers Rex and Thomas Schepp, Hal's cousins. Thomas resides in the home on Lot 20, and the guest house is rented to third parties.

¶ 3 Hal initiated this lawsuit in May 2005, seeking partition of the lots pursuant to Arizona Revised Statutes ("A.R.S.") section 12-1211 to -1225 (2003), and an accounting for rents and profits. Schepp Partnership answered and counterclaimed for specific performance of an alleged voluntary partition agreement or, alternatively, damages for a purported diminution in value of Lots 17 and 18 caused by Hal's removal of mature trees from those lots.

¶ 4 Hal filed a motion for partial summary judgment on the counterclaim and for appointment of commissioners to begin the process of statutory partition. Schepp Partnership filed a response in opposition to the motion, contending in relevant part that statutory partition was not available to Hal because he had entered in the voluntary partition agreement. After oral argument on the motion, the court granted partial summary judgment for Hal, ordering statutory partition and appointment of commissioners, and dismissing the counterclaim for specific performance. Significantly, the court ruled that "[t]here was never an agreement as to how the property is to be divided between the parties."

¶ 5 Following the disposition of post-hearing motions, the court entered judgment, and Schepp Partnership filed a timely notice of appeal. We have jurisdiction over an interlocutory partition judgment pursuant to A.R.S. § 12-2101(H) (2003).

¶ 6 We review de novo the trial courts partial summary judgment, viewing the evidence in the light most favorable to Schepp Partnership as the non-prevailing party. Myers v. City of Tempe, 212 Ariz. 128, 130, ¶ 7, 128 P.3d 751, 753 (2006); L. Harvey Concrete, Inc. v. Agro Constr. & Supply Co., 189 Ariz. 178, 180, 939 P.2d 811, 813 (App. 1997). The court properly entered partial summary judgment for Hal if no genuine issues of material fact existed and he was entitled to judgment as a matter of law. Ariz. R. Civ. P. 56(c); Orme Sch. v. Reeves, 166 Ariz. 301, 305, 802 P.2d 1000, 1004 (1990).

Discussion

¶ 7 Schepp Partnership first argues that the trial court erred by entering partial summary judgment for Hal because genuine issues of disputed material fact regarding the existence of an enforceable agreement to partition the lots precluded summary judgment. As Schepp Partnership correctly notes, voluntary agreements to partition real property are controlling over involuntary partition proceedings. McCready v. McCready, 168 Ariz. 1, 3, 810 P.2d 624, 626 (App.1991) (noting that in absence of an agreement of cotenants to divide property, the only method of doing so is statutory involuntary partition proceeding); A.R.S. § 12-1224(A) ("The provisions of this article [relating to involuntary partition] shall not preclude partition in any other manner authorized by law."). Thus, if there was a dispute of fact concerning the existence and enforceability of such an agreement, partial summary judgment was improper.

¶ 8 Hal does not contest that the existence of a voluntary partition agreement would trump his right to obtain involuntary partition. Rather, he asserts that partial summary judgment was appropriate because the undisputed evidence demonstrates the parties never reached an agreement for voluntary partition. Alternatively, he contends any agreement was unenforceable under the statute of frauds, A.R.S. § 44-101 (2003). We address each contention in turn.

I. Existence of Partition Agreement

A.

¶ 9 A contract is formed when there is "a bargain, consisting of promises exchanged, and consideration." Schade v. Diethrich, 158 Ariz. 1, 8, 760 P.2d 1050, 1057 (1988). Viewing the evidence in the light most favorable to Schepp Partnership, we conclude that a reasonable jury could find the existence of a bargained-for exchange and consideration.

¶ 10 In July 2004, Hal met with Thomas and Rex at the Duck and Decanter restaurant to discuss the lots and, specifically, a City of Phoenix notice requiring clean-up of those lots. During this meeting, in addition to discussing clean-up issues, Hal said he wanted to remove a row of mature, 65-foot tamarack trees along the northern edge of Lots 17 and 18. Thomas objected, saying the neighbors would be upset. Hal responded that he would decide what to do because he was taking Lots 17 and 18 and leaving Lot 20 to Schepp Partnership. Hal also said words to the effect that because Schepp Partnership would be getting the more valuable lot, "it might cost you some money." The parties then agreed to divide the lots in this manner but did not reach agreement on any equalization payment. Thomas and Rex understood, however, that Hal might make a future claim for such payment.

¶ 11 Shortly after this meeting, Thomas heard the crack of a tree being removed on Lot 18 by an excavator hired by Hal. Thomas rushed to the site and confronted Hal about what he was doing to the trees. Hal declared that because he had paid a great deal of money for the two lots, the choice to remove the trees was his alone. During that discussion, Hal drew a diagram in the dirt showing the placement of a proposed house for his family centered on Lots 17 and 18 and the location of various trees to be planted on those two lots. Hal and Thomas then agreed a second time that Hal would take Lots 17 and 18 and Schepp Partnership would take Lot 20. Based on this agreement to split the lots, Thomas allowed Hal to remove the mature trees. Schepp Partnership later paid Hal $16,600, one-third of the total removal cost, as compensation to Hal in light of Schepp Partnership's receipt of the more valuable Lot 20.

¶ 12 According to Thomas, he would have taken steps to stop removal of the trees to prevent permanent damage to Lots 17 and 18 had it not been for the agreement to split the lots. He claims the tree removal was not necessary to comply with the City of Phoenix clean-up notice and that the understanding reached with Hal was not an ordinary maintenance agreement between co-owners.

¶ 13 In August 2004, Schepp Partnership asked its attorney to memorialize the partition agreement in a written agreement. Upon completion, the partnership sent the agreement to Hal for execution, but he returned it unsigned objecting to the lack of an equalization payment provision. Hal proposed that Schepp Partnership pay him $233,333 and grant him an access easement as equalization. The parties negotiated in the ensuing months but never reached agreement regarding whether Hal was entitled to additional compensation in light of the greater value of Lot 20. Consequently, the parties never executed a written agreement.

¶ 14 The above recited evidence would allow a reasonable jury to find that in July 2004 the parties agreed to partition the property by giving Lots 17 and 18 to Hal and Lot 20 to Schepp Partnership. Consideration existed as the parties agreed to relinquish their undivided interests in all three lots in order to obtain sole ownership of specific lots.

¶ 15 An enforceable contract, however, must also be reasonably certain and definite. Id. at 8-9, 760 P.2d at 1057-58. One focus of dispute in this appeal is whether the parties' purported agreement was sufficiently certain and definite in light of their undisputed failure to resolve whether Hal was entitled to additional compensation. Schepp Partnership contends that the parties' failure to reach agreement on whether Hal was entitled to compensation does not preclude enforceability of the agreement because the court can supply that term. Hal responds that whether he was entitled to payment and, if so, the amount of such payment was an essential element of the proposed agreement that cannot be supplied by the court. Thus, because the parties did not arrive at a meeting of the minds on this term, Hal contends the parties never reached an agreement.

¶ 16 The requirement of reasonable certainty and definiteness exists to ensure that the parties intended to be bound by an agreement. Id. at 9, 760 P.2d at 1058 ("The requirement of reasonable certainty of terms arises from the inescapable fact that the uncertainty of the promises may indicate that a proposal or acceptance was not intended to be understood as a binding offer or acceptance."). Consequently, agreements leaving material terms for future resolution can be...