Spencer v. Asher

NOTICE: NOT FOR OFFICIAL PUBLICATION.
UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL
AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.

IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE

NANCY SPENCER, Plaintiff/Appellee,

v.

ALICIA ASHER, Defendant/Appellant.

No. 1 CA-CV 17-0631
FILED 1-8-2019

Appeal from the Superior Court in Maricopa County
No. CV2016-052126
The Honorable Aimee L. Anderson, Judge (Retired)

VACATED AND REMANDED

COUNSEL

Hymson Goldstein Pantiliat & Lohr PLLC, Scottsdale
By John L. Lohr, Jr., Evan B. Schechter
Counsel for Plaintiff/Appellee

Lipson Neilson PC, Phoenix
By Daxton R. Watson, Michael H. Orcutt
Counsel for Defendant/Appellant
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Decision of the Court

MEMORANDUM DECISION

Judge Michael J. Brown delivered the decision of the Court, in which
Presiding Judge James P. Beene and Judge James B. Morse Jr. joined.

B R O W N, Judge:

¶1 Alicia Asher appeals the superior court’s judgment in favor of
Nancy Spencer arising from various disputes between the parties in a real
estate transaction. For the following reasons, we vacate the court’s
judgment and remand for further proceedings.

BACKGROUND

¶2 In February 2016, Spencer entered into a Contract for Deed
(“Contract”) to sell her house (the “Property”) to Asher for $275,000. The
Contract required a down payment of $76,704 upon signing, monthly
payments of $1,381 beginning March 15, 2016, and a balloon payment in
January 2019, at which time Spencer would transfer title to Asher. The
parties agreed that Weststar Pacific Mortgage & Escrow (“Weststar”) would
process the monthly payments. Late payments would trigger the
Contract’s default provisions, which required Spencer to provide Asher
with 14 days’ notice to cure the default and then 15 additional days’ notice
before Spencer could re-take possession of the Property or pursue other
remedies. The Contract also provided that Asher would “take possession
of the property . . . upon execution of this [C]ontract,” however, the parties
signed an addendum that allowed Spencer to remain on the Property until
March 15, 2016. Two days after signing the Contract, the parties signed and
recorded a one-page document titled Assignment of Contract for Deed
(“Assignment”), which assigned all of Spencer’s “right, title, and interest”
in the Contract to Asher.

¶3 Spencer refused to deliver possession on March 15 because
she believed Asher had not timely made her first payment. On March 20,
Spencer informed Asher she would be willing to deliver possession if Asher
would go to Weststar with her to find out why Weststar was not disbursing
the payment to Spencer. The next day, Spencer texted Asher about the
Assignment, noting “we both did not know what it said” and it “sh[ou]ld
not [have] been includ[e]d or recorded.” On March 21, at the behest of her
attorney, Spencer signed and recorded an affidavit of scrivener’s error

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stating she had “inadvertently signed and recorded” the Assignment.
Spencer’s attorney then informed Asher that if she also signed an affidavit
of scrivener’s error and filled out forms with Weststar, he “would anticipate
that [Spencer] will turn over possession of the home.” Asher initially
refused to sign the affidavit. Spencer, in turn, refused to grant Asher
possession of the Property.

¶4 In response, Asher filed (1) an eviction action in justice court,
(2) a breach of contract action in justice court, and (3) a request for an
injunction against harassment. Asher relied on the erroneous Assignment
in those proceedings, claiming she was at least entitled to possession
because the Assignment gave her the contractual rights of the seller.

¶5 In April 2016, Spencer requested under Arizona Revised
Statutes (“A.R.S.”) section 12-1101 et. seq. that Asher sign the affidavit of
scrivener’s error and return it within 20 days pursuant to A.R.S.
§ 33-420 (C). When Asher did not return the affidavit, Spencer filed a
complaint in superior court, asserting claims for fraud/negligent
misrepresentation, breach of contract, breach of the implied covenant of
good faith and fair dealing, and wrongful recordation of a lien in violation
of § 33-420. Asher counterclaimed for breach of contract and declaratory
relief. On May 7, 2016, Asher signed an exact replica of Spencer’s affidavit
of scrivener’s error. During the course of the litigation, Asher gained
possession of the Property using self-help means, and Spencer filed an
amended complaint adding a claim of trespass and a request for an
injunction.

¶6 The parties filed competing motions for summary judgment.
The court granted Spencer’s motion and denied Asher’s cross-motion. As
reflected in the court’s final judgment, the court rescinded the Contract and
awarded Spencer $22,500 in damages for trespass and a violation of
§ 33-420, as well as $73,172 in attorneys’ fees and $3,014.20 in costs. This
timely appeal followed.

DISCUSSION

¶7 We review the superior court’s grant of summary judgment
de novo, viewing the evidence in the light most favorable to the non-
moving party. Lee v. M & H Enters., Inc., 237 Ariz. 172, 175, ¶ 10 (App. 2015).
Summary judgment is appropriate when “there is no genuine dispute as to

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any material fact and the moving party is entitled to judgment as a matter
of law.” Ariz. R. Civ. P. 56(a).1

A. Mootness

¶8 After the superior court issued its judgment, Asher filed her
notice of appeal and ceased making payments on the Contract. Spencer
then proceeded to forfeit Asher’s interest in the Property. See A.R.S.
§§ 33-741 to -750 (allowing the seller of real property to forfeit a purchaser’s
interest if the purchaser defaults under a contract for deed). As far as the
record before us reveals, Spencer conducted a forfeiture by notice. See
A.R.S. § 33-745. Because the forfeiture is not part of this appeal, we address
it only in the context of whether the appeal is moot.

¶9 Spencer argues that Asher’s appeal is moot because
regardless of the outcome she will retain the Property due to the forfeiture.
See Vinson v. Marton & Assocs., 159 Ariz. 1, 4 (App. 1988) (“A decision
becomes moot for purposes of appeal where as a result of a change of
circumstances before the appellate decision, action by the reviewing court
would have no effect on the parties.”). Spencer further contends that
because Asher forfeited her rights, title, and interest in the Property, she
forfeited not only her right to possession but also her rights to the refund of
payments made towards the overall purchase price, and to any damages
she may receive on potentially-successful counterclaims. Given our
decision to vacate the superior court’s judgment, various issues must be
considered on remand, including competing claims for damages, attorneys’
fees, and costs. Thus, even if there was a valid forfeiture, it does not moot
Asher’s appeal.

B. Anticipatory Repudiation

¶10 The superior court found that Asher anticipatorily repudiated
the Contract by (1) recording the erroneous Assignment and (2) claiming
in court proceedings that “she held the rights to the property . . . as both

1 Spencer argues that we should disregard all documents attached to
Asher’s reply in support of her amended motion for summary judgment,
which include Asher’s affidavit. The superior court considered these
documents in reaching its decision; therefore, we consider them as well. See
Morris v. Sw. Sav. & Loan Ass’n, 9 Ariz. App. 65, 67–68 (1969) (explaining
that an appellate court reviews the action of the superior court in light of
the record presented to that court).

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the seller as well as the buyer.” Asher argues the court erred because there
was no “positive and unequivocal manifestation” that she would not fulfill
her contractual obligations.

¶11 To establish anticipatory repudiation, “there must be a
positive and unequivocal manifestation on the part of the party allegedly
repudiating that he will not render the promised performance when the
time fixed for it in the contract arrives.” Diamos v. Hirsch, 91 Ariz. 304, 307
(1962). The record on this matter does not establish as a matter of law that
Asher anticipatorily repudiated the Contract. First, although Asher signed
the Assignment and paid for it to be recorded, the face of the document
states, “prepared by, recording requested by and return to” Spencer.
Second, Spencer’s March 21 text to Asher describes the Assignment as a
document they had recorded that “[they] both did not know what it said.”
Third, both parties’ affidavits say, “I inadvertently signed and recorded . . .
an Assignment.” Finally, assuming without deciding that Asher’s reliance
on the erroneous Assignment was improper, her reliance occurred after
making both the initial payment of $76,604 and her first monthly payment
of $1,381 to Weststar and after Spencer refused to transfer possession of the
Property. See Zancanaro v. Cross, 85 Ariz. 394, 400 (1959) (explaining that a
victim of a minor or partial breach must continue to perform, but that the
victim of a material or total breach is excused from further performance).
Viewing the evidence and all reasonable inferences in the light most
favorable to Asher, a reasonable jury could find that she did not
anticipatorily repudiate the Contract. Therefore, Spencer was not entitled
to summary judgment based on anticipatory repudiation.

C. Breach of the Implied Covenant of Good Faith and Fair
Dealing

¶12 Asher next argues the superior court erred in ruling that she
breached the implied covenant of good faith and fair dealing. As an initial
matter, we note that “[w]hether a party breached the covenant is a question
of fact for the jury.” Cty. of La Paz v. Yakima Compost Co., 224 Ariz. 590, 604,
¶ 38 (App. 2010). Thus, that principle alone shows that summary judgment
was not properly granted. Even assuming the claim can be decided as a
matter of law in some instances, such is not the case here.

¶13 Arizona law implies a covenant of good faith and fair dealing
in every contract. Rawlings v. Apodaca, 151 Ariz. 149, 153 (1986). “The
essence of that duty is that neither party will act to impair the right of the
other to receive the benefits which flow from their agreement or contractual
relationship.” Id. at 153–54. “A party may breach the implied covenant

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even in the absence of a breach of an express provision of the contract by
denying the other party the reasonably expected benefits of the agreement.”
Nolan v. Starlight Pines Homeowners Ass’n, 216 Ariz. 482, 489, ¶ 27 (App.
2007).

¶14 The superior court found that Asher breached the implied
covenant of good faith and fair dealing “by coercing [Spencer] into signing
the Assignment and attempting to use the Assignment to [g]ain the benefit
of the bargain.” However, Asher presented evidence that Spencer (1)
produced the Assignment, (2) filled in the blanks of the Assignment form,
and (3) acknowledged that neither party understood the document’s legal
effect. Asher’s evidence creates disputed issues of material fact regarding
coercion that the court could not properly resolve on summary judgment.

¶15 The superior court also found, and Spencer argues on appeal,
that Asher breached the implied covenant of good faith and fair dealing by
“using the Assignment multiple times to assert that she held all rights to
the Contract.” According to the Restatement, “[t]he obligation of good faith
and fair dealing extends to the assertion, settlement and litigation of
contract claims and defenses.” Restatement (Second) of Contracts § 205
cmt. e (1981); see also McCarthy W. Constructors, Inc. v. Phoenix Resort Corp., 169 Ariz. 520, 526 (App. 1991) (relying on this section of the Restatement).
Stated differently, the duty of good faith and fair dealing extends to contract
enforcement as well as performance. A party breaches the implied
covenant of good faith and fair dealing “by dishonest conduct such as
conjuring up a pretended dispute, asserting an interpretation contrary to
one’s own understanding, or falsification of facts.” Restatement (Second)
of Contracts § 205 cmt. e (1981).

¶16 The record confirms that Asher relied on the Assignment in
three different court proceedings as proof that Spencer had assigned her
rights as seller to Asher. But Asher avowed, “All I ever tried to do is possess
the house that I purchased and that I continue[d] to pay for. That was the
basis of each action I started. I just wanted possession.” As for her refusal
to sign the affidavit, Asher stated she did so because “it was clear to me that
[Spencer] changed her mind and refused me possession for no reason other
than simply wanting to ‘undo’ our deal.” Whether Asher’s reliance was in
bad faith is a factual issue for the jury. See Yakima Compost Co., 224 Ariz. at
604, ¶ 38.

¶17 Moreover, Spencer has failed to establish as a matter of law
that Asher’s reliance on the Assignment (if improper) prohibited Spencer
from receiving a benefit under the Contract. Although Spencer relies on

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the court’s statement that Asher was “us[ing] the Assignment to [g]ain the
benefit of the bargain,” the standard is whether Asher prevented Spencer
from receiving her contractual benefits—not merely attempted to prevent.
Rev. Ariz. Jury Inst. (Civil) Contract 16 (5th ed. 2015). Thus, the court erred
in granting summary judgment on Spencer’s claim for breach of the implied
covenant of good faith and fair dealing.

D. Breach of Contract Counterclaim

¶18 Asher also argues the superior court erred in finding that
Spencer did not breach the contract “despite the fact that Spencer failed to
deliver possession” of the Property. The court did not address Asher’s
counterclaim, presumably because the court determined that Asher
anticipatorily repudiated the Contract, which, if true, would have excused
Spencer from her obligation to transfer possession of the Property. Thomas
v. Montelucia Villas, LLC, 232 Ariz. 92, 95, ¶ 9 (citations omitted) (explaining
that an anticipatory repudiation excuses the non-breaching party from
tendering performance).

¶19 Asher’s amended motion for summary judgment asserted
that she had the contractual right to possess the Property on March 15, 2016.
In response, Spencer argued that Asher was not entitled to possession
because Asher anticipatorily repudiated the Contract and failed to provide
certain information to Weststar, which meant that Spencer did not timely
receive Asher’s first monthly payment. Spencer also contended that
Asher’s exhibits proved her first payment was nine days late. The record,
however, shows that Asher paid Weststar on or about March 16, but
Weststar was unable to establish the escrow account and provide Spencer
access to the funds until March 24, 2016 due to failures by both parties.

¶20 Because the superior court’s finding of anticipatory
repudiation presumably served as the basis for which it denied Asher’s
motion for summary judgment on her counterclaim, we vacate the court’s
denial of her motion. Nevertheless, we cannot determine as a matter of
law that Spencer breached the Contract by refusing to transfer possession
of the Property on March 15, 2016 because whether Asher’s role in the
delayed disbursement was a material breach is also disputed.

E. Violation of A.R.S. § 33-420

¶21 Finally, Asher argues the superior court erred in awarding
damages to Spencer under A.R.S. § 33-420(A) because the statute imposes
liability for knowing violations only, and “there was substantial evidence

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for a reasonable jury to conclude that Asher lacked knowledge of the
alleged impropriety of the Assignment.”

¶22 Pursuant to § 33-420,

[a] person purporting to claim an interest in, or a lien or
encumbrance against, real property, who causes a document
asserting such claim to be recorded in the office of the county
recorder, knowing or having reason to know that the document
is forged, groundless, contains a material misstatement or
false claim or is otherwise invalid is liable to the owner or
beneficial title holder of the real property for the sum of not
less than five thousand dollars, or for treble the actual
damages caused by the recording, whichever is greater, and
reasonable attorney fees and costs of the action.

A.R.S. § 33-420(A) (emphasis added). The knowledge requirement
imposed by § 33-420 often involves factual disputes. See, e.g., Pence v. Glacy, 207 Ariz. 426, 429, ¶ 16 (App. 2004) (holding that whether defendant knew
or had reason to know that the recorded document was invalid is a question
of fact); Coventry Homes, Inc. v. Scottscom P’ship, 155 Ariz. 215, 219 (App.
1987) (finding genuine issues of material fact regarding whether plaintiff
knew or should have known the recorded document was groundless).
Furthermore, Spencer cites no authority indicating that a party may be
found liable under the statute if the owner or beneficial title holder also
signed and participated in recording the erroneous document. Viewing the
record in the light most favorable to Asher, which includes evidence
supporting her assertion that her reliance on the Assignment was not
improper, supra ¶ 16, material disputes of fact remain as to whether Asher
knew or should have known that the Assignment was groundless. Thus,
we vacate the superior court’s entry of summary judgment on this claim.

CONCLUSION

¶23 The superior court erred in finding that Asher anticipatorily
repudiated the Contract. Because that finding impacts each of the court’s
other findings and conclusions, including the award of attorneys’ fees and
costs, we vacate the judgment in its entirety and remand for further
proceedings consistent with this decision. Both parties request attorneys’
fees on appeal. We deny Spencer’s request as she is not the prevailing
party. Regarding Asher’s request, we deny it because she failed to provide
a substantive basis for the request. See ARCAP 21(a)(2) (“A claim for fees

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under this Rule must specifically state the statute, rule, decisional law,
contract, or other authority for an award of attorneys’ fees.”). However, as

the prevailing party on appeal, Asher is entitled to recover taxable costs
upon her compliance with ARCAP 21.

AMY M. WOOD • Clerk of the Court
FILED: AA

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