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ABCDW LLC v. Banning

Court of Appeals of Arizona, First Division

December 30, 2016

ABCDW LLC, et al., Plaintiffs/Appellants/Cross-Appellees,
v.
LLOYD E. BANNING, SR., Defendant/Appellee/Cross-Appellant.

         Appeal from the Superior Court in Maricopa County No. CV2011-098405 The Honorable David M. Talamante, Judge.

         AFFIRMED IN PART; REVERSED IN PART; REMANDED.

          Udall Shumway, PLC, Mesa By Ryan P. Dyches Counsel for Plaintiff/Appellant/Cross-Appellee ABCDW LLC.

          Plattner Schneidman Schneider Jeffries & Plattner, PC, Scottsdale By Jeff Schneidman Counsel for Plaintiff/Appellant/Cross-Appellee Van Leeuwen Buckeye, LLC.

          Zwillinger Greek Zwillinger & Knecht, PC, Phoenix By Monty L. Greek and Sara Witthoft Counsel for Plaintiffs/Appellants/Cross-Appellees Melanie Nevitt, LLC; Melanie Gila Bend II, LLC; Pantano Banning, LLC.

          Jennings Strouss & Salmon, PLC, Phoenix By Brian Imbornoni and Eric D. Gere Counsel for Defendant/Appellee/Cross-Appellant Lloyd E. Banning, Sr.

          Presiding Judge Andrew W. Gould delivered the opinion of the Court, in which Judge Peter B. Swann and Judge Patricia A. Orozco joined.

          OPINION

          GOULD, Judge.

         ¶1 ABCDW, LLC, Van Leeuwen Buckeye, LLC, Melanie Nevitt, LLC, and Pantano Banning, LLC ("Landlords") appeal the superior court's denial of their motion for judgment as a matter of law and motion for new trial on Lloyd E. Banning, Sr.'s counterclaims. They also appeal from the court's grant of summary judgment for Banning on their statutory claim under Arizona Revised Statutes ("A.R.S.") section 3-114. Banning cross-appeals the court's order granting summary judgment on Landlords' claims and its award of attorneys' fees to Landlords as the prevailing party at trial. For the following reasons we affirm in part, reverse in part, and remand for further proceedings.

         FACTS AND PROCEDURAL BACKGROUND

         ¶2 Banning farmed several parcels of land he leased from Landlords ("Banning Lease"). The Banning Lease, entered into in 2006, provided an initial term of two years with three automatic one-year extensions. If Landlords sought to lease the land beyond the initial five-year term, which ended in January 2011, the Banning Lease gave Banning a right of first refusal to continue leasing the parcels.[1]

         ¶3 In 2009, one year before the end of his lease, Banning planted 549 acres of alfalfa. In the fall of 2010, he planted another 360 acres of alfalfa. At the time Banning planted the alfalfa, there was no assurance from Landlords that the Banning Lease would be renewed.

         ¶4 In November 2010, Landlords informed Banning they would not be renewing the Banning Lease. Pursuant to the right of first refusal, Landlords provided Banning notice of a third party offer to lease the parcels. The third party, Double Anchor Farms, agreed to lease the property at a rate of $275.00 per acre; this offer was based on the understanding the existing alfalfa stands would remain and continue to produce a crop for a number of years.

         ¶5 Banning informed Landlords he would not exercise his right of first refusal at the rental rate of $275.00 an acre, and that if Landlords could provide a copy of a signed lease at that rate, he would relinquish the property at the end of the lease term. Landlords provided Banning a signed copy of the lease with Double Anchor Farms ("Double Anchor Lease"). The Double Anchor Lease provided for a rental rate of $275.00 per acre for a term of one year, commencing on January 23, 2011, and expiring on January 22, 2012. At the time it signed the lease, Double Anchor Farms tendered full payment for the entire term of the lease. Additionally, Section 4.3 of the Double Anchor Lease stated that "in the event the crops currently planted on the Premises are disced or otherwise destroyed prior to the commencement date of the term of this Lease, the rent set forth in Section 2.1 shall be equitably adjusted by Landlord and Tenant."

         ¶6 After receiving a copy of the Double Anchor Lease, Banning declined to exercise his right of first refusal. Thereafter, Banning informed Landlords that he would complete his last alfalfa cutting in early January 2011, and that the newly planted alfalfa stands were available for Double Anchor Farms to purchase. Banning stated that if he was not paid for the alfalfa, he would plow it under at the conclusion of his lease. Landlords objected and refused to pay Banning for the alfalfa because they contended Banning did not own it. The parties ceased communication at that point and did not reach an agreement.

         ¶7 In January, shortly before the conclusion of the lease, Banning harvested his last alfalfa cutting and then disced the fields, destroying all of the alfalfa plants. In doing so, he also plowed under the borders in place to control irrigation of the fields. Accordingly, pursuant to section 4.3 of the Double Anchor Lease, Landlords renegotiated the rental rate in the Lease to $125.00 per acre. This litigation followed.

         ¶8 Landlords sued Banning for intentional interference of contractual relations, unauthorized destruction of a crop under A.R.S. § 3-114, conversion, and breach of contract. Banning counterclaimed that Landlords had breached both the Banning Lease and the implied covenant of good faith and fair dealing by not offering Banning a valid right of first refusal.

         ¶9 The parties filed cross-motions for summary judgment. Banning sought summary judgment on all of the Landlords' claims, arguing he was the rightful owner of the alfalfa and was entitled to plow it under at the end of his lease. Landlords argued the alfalfa was a fixture under the Banning Lease that belonged to Landlords and Banning was not authorized to destroy it. The court concluded that the alfalfa plants were fixtures and should have remained with the land; thus, it granted Landlords' motion for summary judgment as to Banning's liability on Landlords' claims, reserving the issue of damages for the jury.

         ¶10 Banning filed a motion for reconsideration. He challenged the court's rationale for finding him liable under A.R.S. § 3-114. He also argued the Landlords had not shown they were entitled to summary judgment on their interference with contract claim. Additionally, because the court concluded that the alfalfa was a fixture, and thus part of the realty, Banning argued he could not be liable for conversion because a conversion claim requires that personal property be converted.

         ¶11 Landlords objected to Banning's motion for reconsideration both on the merits and procedurally; they argued Banning had waived these arguments by not raising them during the summary judgment briefing. However, the court granted Banning's motion for reconsideration as to Landlords' A.R.S. § 3-114 claim and their conversion claim. Upon reexamination, the court concluded that A.R.S. § 3-114 did not apply to the alfalfa plants and that Banning could not be found liable for conversion.

         ¶12 The parties filed another set of motions for summary judgment. Based on the court's prior rulings, Banning moved for summary judgment regarding Landlords' damage claims for breach of contract and intentional interference with contract. Landlords sought summary judgment on Banning's counterclaims for breach of contract and breach of the implied covenant of good faith and fair dealing. The court denied both parties' motions, and sent the Landlords' claims for damages and Banning's counterclaims to the jury.

         ¶13 On a single verdict form, the jury awarded Landlords $520, 000.00 in compensatory damages and $75, 000.00 in punitive damages. The compensatory damage award did not distinguish the amount of damages awarded to Landlords on each of their respective claims for breach of contract and intentional interference with contract. It also found for Banning on his claims for breach of contract and breach of the duty of good faith and fair dealing; it awarded Banning $318, 150.00 in damages against Landlords.

         ¶14 After trial, Landlords filed a motion for judgment as a matter of law and a motion for new trial on Banning's counterclaims. Landlords continued to argue that Banning had been given a bona fide offer that triggered his right of first refusal, and that Banning had waived that right. The court denied Landlords' motions, and this appeal followed.

         DISCUSSION

         ¶15 Landlords appeal the court's denial of their motion for judgment as a matter of law and motion for new trial on Banning's counterclaims. They also argue the court incorrectly granted Banning summary judgment on their statutory claim under A.R.S. § 3-114. Banning appeals the court's determination that the alfalfa was a fixture belonging to Landlords at the end of the lease. He argues he should have been granted summary judgment on Landlords' claims and that he should have been awarded attorneys' fees in the trial court.

         I. Standard of Review

         ¶16 When reviewing a grant of summary judgment, we consider the evidence in the light most favorable to the non-moving party. Unique Equip. Co. v. TRW Vehicle Safety Sys., Inc., 197 Ariz. 50, 52, ¶ 5 (App. 1999). We decide de novo whether there are any genuine issues of material fact, and whether the trial court correctly applied the law. Airfreight Exp. Ltd. v. Evergreen Air Center, Inc., 215 Ariz. 103, 110 (App. 2007). We will affirm a grant of summary judgment if the judgment is correct for any reason. Desarrollor Immobiliario y Negocios Indus. De Alta Tech. De Hermosillo, S.A. De C.V. v. Kader Holdings Co. Ltd., 229 Ariz. 367, 373-74, ¶ 21 (App. 2012). We review the denial of a motion for judgment as a matter of law de novo. Goodman v. Physical Res. Eng'g. Inc., 229 Ariz. 25, 27, ¶ 6 (App. 2011).

         II. Ownership of the Alfalfa

         ¶17 The key issue in this case is which party owned the alfalfa plants. The law generally makes a distinction between the ownership of a perennial plant, i.e., the roots of the alfalfa that will produce cuttings for a period of years, and the alfalfa crop, which consists of the alfalfa cuttings periodically harvested from the plant. See Mattis v. St. Louis & S.F. Ry. Co., 119 S.W. 998, 998 (Kan. App. 1909) (distinguishing between the perennial root and the matured crop); see also Gentry v. Alexander, 224 S.W.2d 143, 144 (Ken. App. 1949) (distinguishing the crop from the perennial root or plant that produces the crop). Here, the parties agree that Banning owned the alfalfa crops he cut and harvested during the term of the Banning Lease. The parties disagree, however, as to whether the entirety of the perennial alfalfa plants were fixtures that belonged to Landlords.

         ¶18 The parties can direct by contract whether a plant will be considered a fixture to the realty. Here, Section 7(c) of the Banning Lease provides that:

all alterations, improvements, additions and utility installations . . . which may be made on the Premises and which become fixtures to the Premises, shall become property of lessor and shall remain and be surrendered with the Premises at the expiration of the term.

         ¶19 If applicable, this provision is ambiguous in terms of explaining whether the alfalfa plants are considered fixtures. Additionally, because we have no extrinsic evidence of the parties' intent in the contract, we must look to the presumed intent that arises from their actions. See Dept. of Rev. v. Outdoor Advertisers,202 Ariz. 93, 98 (App. 2002) (stating that objective actions indicate a party's intent to ...


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