Queiroz v. Harvey

• Decision Date: 15 May 2008
• Docket Number: No. 1 CA-CV 07-0309.,1 CA-CV 07-0309.
• Citation: 204 P.3d 390
• Parties: Ivo QUEIROZ, an unmarried man, Plaintiff-Counterdefendant/Appellant, v. Daniel HARVEY, Defendant-Counterplaintiff/Appellee.
• Court: Arizona Court of Appeals

204 P.3d 390

Ivo QUEIROZ, an unmarried man, Plaintiff-Counterdefendant/Appellant, v. Daniel HARVEY, Defendant-Counterplaintiff/Appellee.

No. 1 CA-CV 07-0309.

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

May 15, 2008.

Review Granted January 6, 2009.

Gust Rosenfeld P.L.C. By Charles W. Wirken, Phoenix, Attorneys for Appellant.

Jennings, Strouss & Salmon, P.L.C. By David B. Earl, David Brnilovich, Garrett J. Olexa, Phoenix, Attorneys for Appellee.

OPINION

JOHNSEN, Judge.

¶ 1 Ivo Queiroz ("Buyer") appeals a judgment denying him specific performance of a contract by which he agreed to purchase 20 acres of land in Tonopah from Daniel Harvey ("Seller"). The superior court found that Buyer materially breached the contract by failing to promptly deposit earnest money and that his attempted deposit after Seller orally cancelled the contract was invalid. The court also held that even if Buyer timely cured his breach, specific performance would be denied due to inequitable conduct by Buyer's agent. We conclude that Buyer cured his breach before Seller cancelled the contract pursuant to its terms and hold that inequitable acts of the Buyer's agent may be attributed to Buyer so as to bar his claim for specific performance only if Buyer knew of those acts. Accordingly, we vacate the judgment and remand for further proceedings.

FACTUAL AND PROCEDURAL HISTORY

¶ 2 Seller listed 10 acres of land for sale with real estate agent Debra Walters. Buyer was represented in the transaction by his friend and roommate Charles Harrison, a real estate agent. On December 7, 2004, Harrison prepared a form real estate purchase contract on Buyer's behalf and faxed it to Seller, offering to pay $150,000 for 20 acres, including the 10 acres originally listed. The next day, Seller faxed a counteroffer to Buyer, changing the down payment amount and substituting "Westland Title Agency" as the designated escrow company, but noting that "ALL other terms and conditions [were] to remain the same." Buyer accepted the counter-offer that same day.

¶ 3 The contract called for most of the purchase price to be seller-financed and for escrow to close on February 15, 2005. The receipt section of the contract stated that Buyer had given a $1,000 personal check to his agent Harrison as earnest money. It further recited ("Broker" for this purpose being Harrison):

Earnest money shall be held by Broker until offer is accepted. Upon acceptance, Broker shall promptly deposit the earnest money with any escrow company to which the check is payable. If the check is payable to Broker, Broker may deposit the check in Broker's trust account or endorse the check without recourse and deposit it with a duly licensed escrow company. Buyer agrees that, if Buyer breaches this Contract, any earnest money is subject to forfeiture. If any check for earnest money is dishonored for any reason, Seller may, at Seller's option, immediately cancel this Contract pursuant to Lines 352-355.

¶ 4 Line 12 in the receipt section of the contract called for the agent's name and business information and provided a space for the agent's signature to signify receipt of the earnest money. Harrison filled out the business information and printed "C.A. Harrison" in the space labeled "Received By." He left blank the space for his signature, however.

¶ 5 The contract provided that time was of the essence and also contained a "Remedies" section, which detailed the parties' remedies for breach and the procedure for cancelling the contract. This section stated in pertinent part, "If either party breaches in any respect on [sic] any material obligation under this Contract, the non-breaching party may elect to be released from all obligations under this Contract" as further provided in lines 352-355 of the contract. Lines 352-355 provided:

Cancellation: Except as otherwise provided herein, any party who wishes to cancel this Contract because of any material breach by the other party, and who is not in material breach except as occasioned by a material breach by the other party, may cancel this Contract by delivering written notice of cancellation to either the breaching party or to the Escrow Company stating the nature of the breach. Cancellation shall become effective immediately upon delivery of the written notice of cancellation to either the breaching party or Escrow Company.

¶ 6 On Friday, December 10, 2004, Harrison faxed the contract to Angi Alex, an escrow agent in the Glendale office of Westland Title. Alex opened escrow on Monday, December 13. Walters testified that she called Harrison on December 13, 15 and 16 to inquire about the earnest money deposit, but Harrison did not answer and did not return the calls. On Friday, December 17, Walters called Alex and, after determining that Buyer had not yet deposited the earnest money, announced to Alex on the phone that the deal was cancelled. That same day, Walters called Harrison and left a message that the contract was cancelled. This time Harrison returned the call and Walters explained the contract was cancelled because of the failure to deposit earnest money.

¶ 7 Early Monday morning, December 20, Harrison withdrew $1,000 out of his personal account, bought $1,000 in money orders, and went to the escrow company's Phoenix office to make the earnest money deposit. When he arrived, Harrison was told that he could make the deposit at that office even though the file for the escrow was in the Glendale office. Some hours after Harrison deposited the earnest money, Seller's written cancellation notice arrived by facsimile at Alex's office.

¶ 8 Buyer filed a complaint against Seller, alleging breach of contract and seeking specific performance or damages, in the alternative. After Seller's denial, the court held a two-day bench trial. Buyer presented evidence that he had given Harrison $3,000 to hold in Harrison's personal bank account, that the earnest money deposit was not late by industry standards and that Buyer had fulfilled his obligations under the contract before Seller cancelled in writing.

¶ 9 Seller, on the other hand, presented evidence that Buyer had not given Harrison a check for earnest money, that Walters called Harrison several times to inquire about earnest money but Harrison did not return the calls, that Walters three times had orally told Harrison the contract was cancelled, and that industry standard is to deposit earnest money into escrow at the same time as the contract is signed.

¶ 10 At the close of evidence, Buyer elected specific performance as his remedy. After taking the matter under advisement, the court entered detailed findings and conclusions. Those pertinent to our discussion are the following:

3. The testimonies of the two real estate agents are contradictory. For example, Mr. Harrison says that no one called him about an earnest money payment; Ms. Walters says she called and left messages several times. They dispute what transpired in a telephone conversation on cancellation of the contract. Where the testimony conflicts, the Court finds Ms. Walters is the more credible witness.

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9. . . . On these facts, the failure of the buyer to deliver earnest money to the escrow agent by the close of business on Friday, December 17, 2004, seven days after the contract was delivered to the escrow agent, was not "prompt" and was a material breach of the contract triggering the seller's right to cancel the contract.

10. On Friday, December 17, 2004[,] at 4:45 p.m., Ms. Walters e-mailed or telephoned [Westland Title] and advised them that Seller cancelled the contract.¹

11. Between Friday evening and Saturday evening, December 17 to 18, Mr. Harrison finally called Ms. Walters. Ms. Walters told him that Seller cancelled the contract.

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13. On Monday morning, December 20, 2004, Mr. Harrison brought money orders for $1,000 to [Westland Title] in Phoenix. . . .

14. There was a fact issue at trial as to whose money this was: whether it was money belonging to [Buyer] or money belonging to Mr. Harrison. The earnest money came from Mr. Harrison's account. Mr. Harrison testified that [Buyer] gave him money, $3,000, to hold for him in Harrison's bank account when he came to Arizona. Mr. Harrison could not point to any deposit on any bank statement to reflect that transfer. The Court does not find Mr. Harrison's testimony credible.

15. On Monday afternoon, December 20, 2004, Seller faxed to the escrow agent a handwritten notice of cancellation because "Buyer failed to deposit earnest money promptly to [the] escrow company." The fax came in at 1:16 p.m.

16. Under the facts and circumstances here, where seller declared a material breach on Friday, December 17, 2004[,] and faxed a written cancellation on Monday, December 20, [2004,] the Court does not find that the "rush to the escrow agent," which was won by [Buyer], cures the material breach. First, to be sure, defendant seller can waive the "prompt" requirement and accept late payment, but that did not happen here. Second, [Seller] elected to cancel the contract; and the contract has no "cure" provision for this material breach.

17. Even if the Court were to consider the payment prompt, there are a number of equitable considerations that would result in the Court denying specific performance. First, Mr. Harrison testified he did not sign the initial purchase offer—he just printed out his name—because he did not have a check for the earnest money. The Court finds this type of conduct a trick, and less than candid and honest. Second, the Court does not believe Mr. Harrison has been truthful to the Court. The Court believes that Mr. Harrison did not return phone calls, precipitating this conflict; and either paid his own money into escrow, or made an undisclosed oral loan to [Buyer], or, if he is to be believed, once the purchase contract was made he did not take the earnest money out of his account and commingled the earnest money with his money...