SWC Baseline & Crismon Investors, L.L.C. v. Augusta Ranch Ltd. P'ship

• Decision Date: 22 November 2011
• Docket Number: 1–CA–CV 10–0100.,Nos. 1 CA–CV 09–0241,s. 1 CA–CV 09–0241
• Citation: 228 Ariz. 271,622 Ariz. Adv. Rep. 11,265 P.3d 1070
• Parties: SWC BASELINE & CRISMON INVESTORS, L.L.C., an Arizona limited liability company, Plaintiff/Appellant,California Bank and Trust, a California banking corporation, Third Party Defendant/Appellant, v. AUGUSTA RANCH LIMITED PARTNERSHIP, a Delaware limited partnership, Defendant/Appellee.Augusta Ranch Limited Partnership, a Delaware limited partnership, Counterclaimant/Third Party Plaintiff/Appellant/Cross–Appellee, v. SWC Baseline & Crismon Investors, L.L.C., an Arizona limited liability company, Counterdefendant/Appellee,A.R. Development L.L.C., an Arizona limited liability company, Third Party Defendant/Appellee/Cross–Appellant,W.M. Grace Construction, Inc., a Missouri corporation; California Bank and Trust, a California banking corporation; Mark A. Voight and Michelle C. Mencuccini, husband and wife; C. Dennis Knight; Michael Kern, Third Party Defendants/Appellees.
• Court: Arizona Court of Appeals

228 Ariz. 271

265 P.3d 1070

622 Ariz. Adv. Rep. 11

SWC BASELINE & CRISMON INVESTORS, L.L.C., an Arizona limited liability company, Plaintiff/Appellant,California Bank and Trust, a California banking corporation, Third Party Defendant/Appellant,

v.AUGUSTA RANCH LIMITED PARTNERSHIP, a Delaware limited partnership, Defendant/Appellee.Augusta Ranch Limited Partnership, a Delaware limited partnership, Counterclaimant/Third Party Plaintiff/Appellant/Cross–Appellee,

v.SWC Baseline & Crismon Investors, L.L.C., an Arizona limited liability company, Counterdefendant/Appellee,A.R. Development L.L.C., an Arizona limited liability company, Third Party Defendant/Appellee/Cross–Appellant,W.M. Grace Construction, Inc., a Missouri corporation; California Bank and Trust, a California banking corporation; Mark A. Voight and Michelle C. Mencuccini, husband and wife; C. Dennis Knight; Michael Kern, Third Party Defendants/Appellees.

Nos. 1 CA–CV 09–0241

1–CA–CV 10–0100.

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

Nov. 22, 2011.

Mariscal, Weeks, McIntyre & Friedlander, P.A. By Timothy J. Thomason, Michael J. Plati, Phoenix, Attorneys for Plaintiff/Appellant/Counterdefendant/Appellee, SWC Baseline & Crismon Investors, L.L.C.; Third Party Defendant/Appellant/Cross–Appellee, California Bank and Trust; and Third Party Defendant/Appellee, W.M. Grace Construction, Inc.

David B. Earl, Attorney at Law, By David B. Earl, Phoenix, and Newmeyer & Dillion LLP, By Gregory L. Dillion, pro hac vice, Newport Beach, CA, Attorneys for Defendant/Appellee/Counterclaimaint/Third Party Plaintiff/Appellant/Cross–Appellee, Augusta Ranch Limited Partnership.

The Cavanagh Law Firm, P.A. By Henry L. Timmerman, Taylor C. Young, Phoenix, Attorneys for Third Party Defendant/Appellee/Cross–Appellant, A.R. Development and Third Party Defendants/Appellees, Mark A. Voigt, Michelle C. Mencuccini, C. Dennis Knight and Michael Kern.

OPINION

JOHNSEN, Judge.

¶ 1 In 1992 a corporate investor arranged to acquire more than a thousand acres of real estate from a partnership of which it had become the sole partner. By mistake, the investor prepared and recorded a warranty deed that omitted a critical quarter-acre at the center of a commercial intersection. When the mistake was discovered years later, a firestorm of litigation ensued among the investor's successor and other parties claiming an interest in the omitted property. In this appeal, we take up issues of reformation, slander of title, trespass and conversion as they may apply to the circumstances. We also address claims under the false-recording statute, Arizona Revised Statutes (“A.R.S.”) section 33–420.

FACTS AND PROCEDURAL HISTORY

¶ 2 During the late 1980s a general partnership called The Crossings owned 1,038 acres at the southwest corner of Baseline and Crismon Roads in Mesa. The Crossings had acquired the land in two separate transactions. In January 1987, it purchased title to all but a 150–by–150 square (the “Corner”) at the northeast tip of the larger parcel. The deeds issued in that transaction specifically excluded the Corner, which then was owned by the City of Mesa. The Crossings bought the Corner from the City five months later, in June 1987.

¶ 3 The Crossings had two general partners, Amcor Investments Corporation and Taiyo Development U.S.A., Inc. Amcor sold its interest in The Crossings to Taiyo in September 1991. In January 1992, The Crossings, by then solely owned by Taiyo, issued to Taiyo a warranty deed conveying property at the Baseline and Crismon intersection. The warranty deed attached a legal description of what was conveyed. There is no evidence in the record that as the sole partner in The Crossings, Taiyo intended to convey to itself anything other than all the property the partnership owned at the intersection, including the Corner. Nevertheless, the legal description attached to the warranty deed specifically excluded the Corner. (It appears that the legal description attached to the January 1992 warranty deed was the legal description attached to the January 1987 transaction by which The Crossings had acquired everything except the Corner.) On the same day, Taiyo conveyed what it had acquired from The Crossings to its affiliate, Augusta Ranch Limited Partnership. The warranty deed Taiyo gave Augusta Ranch attached the legal description that specifically excepted the Corner.

¶ 4 In 1997, Augusta Ranch sold some 616 acres at the Baseline/Crismon intersection to A.R. Development L.L.C. The legal description attached to the purchase and sale agreement specifically excluded the Corner, and a survey that showed the property subject to the sale also excluded the Corner. Mark Voigt, president of the entity that managed A.R. Development, signed the purchase agreement. Voigt recognized at the time of the 1997 transaction that the legal description of the property to be conveyed excluded the Corner. Voigt had been president of Amcor in the 1980s and worked for Augusta Ranch for a few months in 1992, after the conveyance from The Crossings. After this litigation arose years later, Voigt testified that in 1997, he mistakenly thought the City still owned the Corner. According to Voigt, A.R. Development intended to purchase all the property Augusta Ranch owned south of Baseline at the intersection. Voigt testified that if Augusta Ranch had owned the Corner, he would have insisted that Augusta Ranch sell it along with the other acreage.

¶ 5 In 1998 and 1999, A.R. Development granted two easements and rights of way in favor of the City over property that included the Corner. According to Voigt, A.R. Development was not concerned that the dedications implicated the Corner because it thought the City owned the Corner anyway. After having the dedications reviewed by an engineer and lawyers, an officer of a company affiliated with Augusta Ranch approved the release of the dedicated property from a deed of trust. At trial, the officer testified that in approving the dedications, she did not realize they implicated the Corner.

¶ 6 In 2002, A.R. Development decided to acquire the Corner so it could package it for sale with other property near the intersection. City records seemed to confirm Voigt's understanding that the City owned the Corner. Despite the fact that record title to the Corner lay with The Crossings, the City conveyed the Corner to A.R. Development by special warranty deed. A.R. Development paid the City $25,500 for the property, and a title company issued a title insurance policy covering the transaction.

¶ 7 The true owner of the Corner finally came to light in March 2003, after A.R. Development contracted to sell the Corner and adjoining property to A & C Properties, Inc. In connection with that transaction, A & C obtained a title report revealing that title to the Corner was held by The Crossings and not by A.R. Development. Accordingly, A & C asked A.R. Development to obtain clear title to the Corner so the larger transaction could be completed.

¶ 8 Hoping for a quick resolution to the issue, A.R. Development contacted Augusta Ranch on June 18, 2003, and explained its view that the Corner had been omitted inadvertently from the 1992 conveyance to Augusta Ranch and from the 1997 sale from Augusta Ranch to A.R. Development. In a letter response dated July 8, Augusta Ranch offered to meet and resolve the matter, noting that “the amount involved is small and it would be quite uneconomical mutually to spend much of our time.” Before A.R. Development responded, however, Augusta Ranch wrote again, and from there, things quickly escalated.

¶ 9 In a letter from its lawyer dated July 11, 2003, Augusta Ranch asserted it owned the Corner and demanded that A.R. Development “cease any efforts to market or sell” the property until the title issue could be resolved. Rather than comply with Augusta Ranch's demand to stop trying to sell the Corner, A.R. Development negotiated with A & C to deliver a quitclaim deed to the Corner instead of a warranty deed. A & C then assigned its rights to SWC Baseline & Crismon Investors (“SWC”), which recorded the quitclaim deed on July 29, 2003, and a title company issued a policy insuring SWC's title.¹ SWC promptly entered into a lease for a shopping center to be built on property including the Corner. On July 29, 2003, in connection with construction of the shopping center, California Bank and Trust (“Cal Bank”) recorded a deed of trust against property that included the Corner. Later, on behalf of SWC, W.M. Grace Construction entered the Corner while building the shopping center.

¶ 10 Meanwhile, unaware that A.R. Development had completed its conveyance, a company identifying itself as the successor to Taiyo on August 14, 2003 executed “corrective” deeds that purported to “correct[ ] the legal description” of the warranty deeds by which The Crossings originally had conveyed the intersection to Taiyo and by which Taiyo had conveyed to Augusta Ranch. The “corrective” deeds amended the legal description of the original warranty deeds to include the Corner; each deed explained that the Corner had been “inadvertently excepted out of the original legal description.” No similar corrective deed was executed with respect to the purchase by A.R. Development from Augusta Ranch, however.

¶ 11 A.R. Development did not inform Augusta Ranch it had closed the deal with SWC until September 23, 2003. Augusta Ranch responded on October 1 with a written demand to release any conveyances, instruments and transactions affecting title to the Corner by October 31. In a letter response sent by facsimile dated October 28, Joseph Cattaneo, president of A & C and managing member of SWC, asked to meet with Augusta Ranch and confirmed that SWC's title company would pay Augusta Ranch's attorney's fees for the meeting. In a letter to Cattaneo dated November 4, Augusta Ranch acknowledged it had received the October 28 letter but asserted SWC had not made a “reply of good...