Title: Gifford v. Makaus

State: arizona

Issuer: Arizona Supreme Court

Document:

112 Ariz. 232 (1975) 540 P.2d 704 William F. GIFFORD and Susan E. Gifford, husband and wife, Appellants, v. Peter Robert MAKAUS, Trustee, Appellee. No. 11734. Supreme Court of Arizona, In Division. October 8, 1975. *233 Robert P. Davidson, Scottsdale, for appellants. James L. DeSouza, Phoenix, for appellee. CAMERON, Chief Justice. This is an appeal from a judgment of the Superior Court of Maricopa County which denied the specific performance of a contract of sale of real estate which the appellant-buyers, William and Susan Gifford, sought to enforce against the appellee-seller, Peter Makaus. We are called upon to determine: The facts necessary for a determination of this matter on appeal are as follows. Matthew J. Makaus and Gladys M. Makaus created a trust on 5 April 1967 and their son, Peter Robert Makaus, was named as trustee. The trust encompassed the real property which is the subject of this action. Notwithstanding this trust, Matthew Makaus, on 25 July 1970, entered into an agreement with Bill Gifford, Inc., for the lease of the property. The lease was for two years commencing 1 August 1970 and contained a provision against subletting in "whole or any part" and further contained an option to purchase: The lease was signed by William Gifford and Matthew J. Makaus. Thereafter by an undated instrument the lease was assigned by Bill Gifford, Inc., to William F. Gifford and Susan E. Gifford, husband and wife. *234 On 26 November 1970, Matthew Makaus died and his son and trustee continued to receive the payment of rents from William and Susan Gifford. Notwithstanding the prohibition in the lease against subletting, the Giffords sublet part of the property with the result that the subtenant built on the property and caused a mechanic's and materialman's lien in the amount of $4,120.00 to be filed against the property. William Gifford testified that he had obtained permission to sublease a week before Matthew Makaus died and Peter Makaus testified he knew nothing about it at the time, but admitted he did nothing after he found out about the sublease. During the term of the lease a City of Phoenix paving lien assessment in the amount of $3,044.76 was also filed against the property. Prior to the termination of the lease the Giffords indicated their interest of exercising the option to purchase. The Giffords opened an escrow with Arizona Title Insurance and Trust Company. The instructions provided that the seller was to pay all liens including the City of Phoenix paving assessment and the mechanic's lien. These instructions were signed by the Giffords and a Norman Rudd though Rudd was not indicated as a party on the face of the escrow. William Gifford testified as to Norman Rudd's authority as follows: Peter Makaus refused to sign these instructions but instead had new escrow instructions prepared which provided that the Giffords were to take the property subject to existing liens, the paving lien to be prorated. As to the new escrow instructions, Peter Makaus signed them as did Norman Rudd who signed as a buyer along with the Giffords. Mr. Rudd testified: The Giffords had placed $100 in escrow at the time the original escrow instructions were prepared and this amount was carried over to the second escrow instructions. The balance of $4,900 under the terms of the option and the escrow instructions was never paid into escrow. When the Giffords failed to deposit the $4,900 in escrow, Peter Makaus, on 25 August, directed the title company to mail a 13-day cancellation notice which was mailed on 28 August. Complying with the regulations of the title company, Peter Makaus signed all papers necessary to complete the transaction on his part including the deed to the property and an agreement for sale under the terms set forth in the second escrow instructions. The notice was mailed and contained the following provision: The Giffords failed to comply with this notice and the escrow was cancelled on 13 September 1972. The Giffords then sued for specific performance standing upon the original escrow instructions, their complaint alleging: And praying: *236 WAS THE OPTION CONTRACT ENFORCEABLE? The trial court found as follows: On appeal the facts will be viewed most favorably to sustaining the judgment of the trial court, Arizona Cotton Ginning Co. v. Nichols, 9 Ariz. App. 493, 454 P.2d 163 (1969), and the burden is upon the plaintiffs to prove there was a valid option contract. Malcoff v. Coyier, 14 Ariz. App. 524, 484 P.2d 1053 (1971). We have stated: We believe in the instant case that there was no distinct intention common to both and the trial court was correct in finding there was no valid option contract. Although there was a general intent to sell the property, the parties did not understand alike as to the other terms particularly the treatment of the lien. There is, however, another reason why the option contract is not enforceable under the facts in this case. Assuming a valid option contract for sale of property, it does not appear that the option was validly exercised by the Giffords. The Giffords contend that the option was unambiguous and that they have made a valid exercise of that option. The Giffords in their brief state: This statement ignores the fact that $4,120 of the $7,164.76 is the result of a lien created by the failure of the Giffords' subtenant to pay for construction on the land. The Giffords then attempted to add a new and unforeseen condition to the exercise of the option that the seller pay the liens incurred by the Giffords' subtenant. The option agreement cannot be contorted to provide that the purchase price agreed upon by the parties was then to be reduced by the amount of any lien on the property incurred during the term of the lease by the Giffords or their subtenant. We therefore hold that the first escrow instructions did not constitute a valid exercise of the option contained in the lease. WAS THERE AN AGREEMENT TO SELL? The second escrow instructions were prepared under the direction of Peter Makaus and were in effect an offer to sell by him. This offer was never accepted by the Giffords for two reasons: 1. First the testimony indicates that there was a conditional delivery of the instructions by the Giffords' agent, Rudd. Admittedly, the Giffords did sign the agreement but the testimony of Norman Rudd, their agent, indicates that this offer was rejected and the Giffords did nothing to correct that situation after they received the 13-day notice. Also, by the complaint, it is apparent that the Giffords never agreed to the terms of the second escrow *237 instructions since they demanded that the seller absorb the amount of both the mechanic's lien and the full amount of the paving assessment. 2. There was never any compliance with the requirement in the escrow instructions for the $5,000 down payment. There was no tender of this amount into escrow either before or after the 13-day notice. The evidence as well as the pleadings indicate that the Giffords never accepted the offer to purchase as extended in the second escrow instructions. The Giffords rejected this offer and continued to reject as the language in their complaint indicates. Judgment affirmed. STRUCKMEYER, V.C.J., and HAYS, J., concur.