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Young v. Bishop

Supreme Court of Arizona

June 30, 1960

A. J. YOUNG and Ruth A. Young, his wife; Max W. Rothpletz and Norma Rothpletz, his wife; Harry S. Gill and Naomi L. Gill, his wife; Otis Paddock and Gladys T. Paddock, his wife; Roy Mitchell and Dimple Mitchell, his wife; H. E. Swineford and Vera M. Swineford, his wife; and Al E. Stone and Arlene Stone, his wife, Appellants,
William W. BISHOP, Appellee.

Page 1018

[88 Ariz. 142] Lewis, Roca, Scoville & Beauchamp and Joseph E. McGarry, Phoenix, for appellants.

Parker & Muecke, Phoenix, for appellee.

JOHNSON, Justice.

This is an appeal by plaintiffs-buyers from an order for judgment on the pleadings made on motion of defendant-seller in plaintiffs' action for specific performance or, in the alternative, damages for defendant's alleged breach of a real estate sales contract. The parties appear herein as they did below.

The essential facts in this case are these: On January 16, 1956, in an office of the Phoenix Title and Trust Company, plaintiffs, through their agent, Al Norell, a real estate broker, and defendant negotiated an escrow agreement. The agreement was signed by defendant, by defendant's then attorney, Stephen Rayburn, and by Norell, who acted as buyer on behalf of plaintiffs for the purpose of setting up the escrow. In addition to the usual escrow instructions and provisions, the agreement provided for a total sales price of $50,000, to be paid by plaintiffs in the following manner: $1,000 to be deposited in escrow presumably with the signed agreement; $7,750 to be deposited in escrow on or before the date of defendant's compliance with the escrow; and the remaining balance of $41,250 payable in three annual installments of $13,750 at an annual interest rate of 4 1/2%, installment payments to begin one year from the close of escrow, which date was specified as February 16, 1956. Also included in the agreement was a description of the property the subject of the transaction.

Page 1019

The source of most of the difficulty in this litigation is the following clause typed on the face of the escrow agreement:

'Note: The Escrow is subject to and conditioned upon Supplemental Trust Escrow Instructions which are to be submitted to Escrow, Agent, which supplemental instructions will be made a part of this escrow.'

[88 Ariz. 143] These supplemental trust escrow instructions, herein termed the supplemental instructions, pertained to the contemplated conveyance by defendant of his title to the subject property to the Phoenix Title and Trust Company, which title was to be held in trust by said company under a trust agreement wherein defendant would appear as first beneficiary and plaintiffs as second beneficiaries. The purpose of this arrangement was to allow the second beneficiaries to subdivide the subject property and at the same time protect the security interest of the vendor-first beneficiary in the land against the unpaid purchase price.

Agreement on a set of supplemental instructions never was reached. Defendant refused to sign any of the submitted instructions and to convey his title to the trust company. Thereupon, plaintiffs instituted the present action seeking specific performance of the alleged agreement to buy and sell, or in the alternative, damages for breach thereof. For reasons which shortly will become apparent, we find it unnecessary to consider the merits of the supplemental instructions controversy, or to detail particulars.

A motion for judgment on the pleadings by defendant tests the sufficiency of the complaint. If the complaint fails to state a cause of action, judgment will be entered for defendant with leave to plaintiff to amend. State of Arizona v. Barnum, 58 Ariz. 221, 118 P.2d 1097. For the purposes of the motion, all well-pleaded material allegations of the opposing party's pleading are to be taken as true, Snyder v. Betsch, 56 Ariz. 508, 109 P.2d 613, and all allegations of the moving party which have been denied are taken as false. Moore's Federal Practice (2d ed.) Vol. II, para. 12.15. Conclusions of law are not deemed admitted. Judgment on the pleadings may be granted only if, on the facts as so admitted, the moving party clearly is entitled to judgment. A defendant may not obtain a judgment on the pleadings on the basis of the allegations in his answer where, as in this state, no reply is required, since under 16 A.R.S. Rules of Civil Procedure, Rule 8(e), these allegations are deemed denied.

At the time of the motion for judgment on the pleadings, the well-pleaded and admitted material facts of plaintiffs' case were these: escrow instructions were executed by the parties covering the sale of real property from defendant to plaintiffs; these instructions were conditioned upon and subject to supplemental instructions to be submitted to the escrow agent on behalf of the buyer; defendant was aware of the identity of plaintiffs at all times, who were the real parties in interest; plaintiffs submitted supplemental instructions to defendant who in bad faith refused to sign them; defendant in bad faith requested numerous changes in the supplemental instructions in [88 Ariz. 144] an effort to delay and terminate the transaction; these requests were agreeable to plaintiffs, but defendant arbitrarily and capriciously refused to complete the transaction; plaintiffs at all times and in court were ready, willing and able to execute the transaction according to the terms contemplated by the original escrow instructions, and did request conveyance by defendant who refused to accept tender or make conveyance; plaintiffs paid earnest money into escrow and by their complaint offered to pay the full purchase price.

Attached to the complaint as an exhibit was a copy of the original escrow agreement, which became a part of the complaint for all purposes. 16 A.R.S. Rules of Civil Procedure, Rule 10(c). This would include the consideration of the terms of the agreement in determining the sufficiency of the complaint. Foshee v. Daoust Const. Co., 7 Cir., 1950, 185 F.2d 23.

Page 1020

The record before us admits of two possible theories upon which the trial court may have acted in granting defendant's motion for judgment on the pleadings: the first, that no written contract of sale existed between the parties thus precluding plaintiffs from enforcing any cause of action based upon the alleged contract by virtue of the statute of frauds; and the second, that the escrow agreement constituted nothing more than an agreement to agree upon a future contract the consummation of which necessarily depended upon the ...

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