Vivian Arnold Realty Co. v. McCormick

• Decision Date: 06 March 1973
• Docket Number: CA-CIV,No. 2,2
• Citation: 506 P.2d 1074,19 Ariz.App. 289
• Parties: VIVIAN ARNOLD REALTY CO., Vivian Arnold, Individually, and Western Surety Company, Inc., Appellants, v. Jack A. McCORMICK and Barbara A. McCormick, husband and wife, and Homer H. Osborne and Dorothy Osborne, husband and wife, Appellees. 1226.
• Court: Arizona Court of Appeals

Page 1074

506 P.2d 1074

19 Ariz.App. 289

VIVIAN ARNOLD REALTY CO., Vivian Arnold, Individually, and Western Surety Company, Inc., Appellants, v.Jack A. McCORMICK and Barbara A. McCormick, husband and wife, and Homer H. Osborne and Dorothy Osborne, husband and wife, Appellees.

No. 2 CA-CIV 1226.

Court of Appeals of Arizona, Division 2.

March 6, 1973.

Vincent E. Odgers, Tucson, for appellees Osborne.

Kali & Allen, P.C., by David I. Kali and Carl B. Pratt, Tucson, for appellees McCormick.

HOWARD, Judge.

Subsequent to the trial court's denial of a motion for a new trial, defendants-appellantsVivian Arnold, individually, and Vivian Arnold Realty Company appealed.The trial court, sitting without a jury, made a ruling declaring a deposit and receipt agreement to be void and that the $500 earnest money deposit be returned to the purchasers, plaintiffs-appellees McCormick.The trial court also entered judgment in favor of (1) the sellers, defendants-appellees Osborne, against the appellants, who had been made defendants on a cross-claim by Osborne, in the amount of $500 for damages caused by appellants' negligence, (2)Vivian Arnold's salesperson, Carolyn Watchman, also a defendant on Osborne's cross-claim.

The salient facts leading to this litigation are as follows.On September 14, 1969, Jack A. McCormick and wife, residents of the State of Arizona, signed a deposit and receipt agreement to purchase a certain lot located in Pima County, Arizona, from Homer H. and Dorothy Osborne, residents of Colorado, with Vivian Arnold Realty Company as listing broker for the sellers.The terms of the sale as expressed in the agreement were that the purchasers paid $500 as earnest money at the time of the agreement and the remainder of the $6,000 purchase price was to be paid in cash at closing on or before November 14, 1969.The sale was contingent upon the purchasers being able to obtain financing for construction of a home on the property prior to closing.Arizona Land Title Company was employed as escrow agent, the agreement specifically providing that 'all funds and instruments necessary to such closing shall . . . be deposited by the respective parties in escrow with the appropriate agent.'In the event of a forfeiture of the earnest money the broker was entitled to one-half as compensation for services rendered.

On September 30th, Vivian Arnold wrote to the Osbornes advising that the home being built by the McCormicks on the subject lot involved a 'package deal' and that the monies for the lot would come out of the 'construction draws.'Osborne replied in a letter dated October 12, 1969, that according to the deposit receipt and agreement, $6,000 was to be paid by the purchasers upon closing and if he had to wait for his money he wanted an additional $600 for his property.The following day, October 13th, Carolyn Watchman wrote to Mr. Osborne advising that he submit his deed to escrow in order for the McCormicks to obtain final approval of their loan.

On October 20th, Vivian Arnold wrote to Homer Osborne explaining that when Mr. McCormick made his offer on the lot he was not aware that Osborne would be paid in draws and would not receive the $6,000 in one payment.She asked that he give serious consideration to McCormick's Request and sign an attached authorization to receive payment for the lot in three construction draws as it would result in very little delay in receiving his money.Also attached was a prepared joint tenancy deed from the Osbornes to the McCormicks requiring the Osbornes' signatures.Mr. Osborne's responsive letter was dated October 27, 1969:

'Dear Vivian:

Let me know when you are ready to close according to the terms of the Deposit Receipt and Agreement and I will mail the deed to the Arizona Land Title and Trust Company.'

There was no further correspondence between Vivian Arnold and the Osbornes until November 18th, four days after the agreed-upon date for closing, nor did Mr. and Mrs. Osborne submit the necessary deed to the escrow agent for such closing in accordance with the provisions of the deposit and receipt agreement.

At deposition, Mr, McCormick stated that during the first week in November, 1969, he had retained counsel and was advised that if he did not want to lose his deposit, he had to 'come up with the six thousand dollars and close the deal.'Mr. McCormick added:

'I didn't want to come up with six thousand dollars to close the deal, but I also didn't want to lose five hundred.'

Mr. McCormick also acknowledged that he had met the financing contingency of the deposit and receipt agreement and had obtained the necessary $6,000 cash for closing after contacting his father in New Mexico who sent him the money.McCormick's position at deposition, in his complaint and on appeal is that he gave notice to Osborne's agent, Vivian Arnold Realty, by means of unanswered telephone messages left by his attorney that he was ready to close.Mr. McCormick, however, did not appear at the closing of escrow on or before November 14, 1969, nor did he present the necessary funds for closing.He claimed that it was his understanding that he'would close the deal with Vivian Arnold Realty,' despite his acknowledgement that he had read the deposit and receipt agreement, understood its terms, and was not at any time advised by Vivian Arnold or any member of her office that he was to close the sale through the broker.In short, Mr. McCormick did not present the required $6,000 to either Vivian Arnold Realty or to the appointed escrow agent.Within two days after the date set for closing, Mr. McCormick decided that he did not want to purchase the Osborne property, and brought the action below to recover his earnest money deposit of $500.

In summary, the McCormicks allege that they gave notice to Vivian Arnold Realty Company of their ability and readiness to perform their obligation under the deposit and receipt agreement, despite the fact that they did not deliver the required closing funds to either Vivian Arnold Realty or the escrow agent.The Osbornes allege that Vivian Arnold's failure to notify them that the McCormicks were ready to perform was an act of negligence causing them not to be ready to close the sale by submitting their deed to escrow, notwithstanding Vivian Arnold's testimony at trial that on and before the date set for closing she had no knowledge that the McCormicks had obtained the funds required for closing.At trial her attorney stated:

'. . . As broker it's our position that neither party to this transaction lived up to the obligations of the deposit and receipt agreement.'

IDID THE TRIAL COURT ERR IN DECLARING THE DEPOSIT AND RECEIPT AGREEMENT TO BE VOID AND IN ORDERING THE EARNEST MONEY REFUNDED TO APPELLEES MCCORMICK?

The subject deposit and receipt agreement constituted a valid and binding bilateral contract containing mutual promises on both sides, subject to a financing condition which was met by the potential buyers.Both parties were competent to contract, did so freely at arms length, acknowledged reading the agreement, and where therefore, bound by its terms.Apolito v. Johnson, 3 Ariz.App. 232, 413 P.2d...