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U.S. Bank NA v. Varela

United States District Court, D. Arizona

January 20, 2017

U.S. Bank NA, Plaintiff,
v.
Henry A Varela, Jr., et al., Defendants.

          ORDER

          Douglas L. Rayes, United States District Judge

         Before the Court is Defendant/Counterclaimant Henry A. Varela, Jr.'s Motion for Reconsideration of the Court's Order Granting U.S. Bank's Motion for Summary Judgment on Bona Fide Purchaser Issue and Count I of Defendant's Counterclaim. (Doc. 91.) For the following reasons, Mr. Varela's motion is denied.[1]

         BACKGROUND[2]

         This case involves a dispute between Mr. Varela and Plaintiff/Counterdefendant U.S. Bank National Association (U.S. Bank) over title to certain real property in Yuma, Arizona (Property). Initially, spouses Frederick and Christine Wood owned the Property, which was encumbered by a deed of trust recorded in November 1987 (Woods Deed of Trust). In December 1987, Mr. Wood and Mr. Varela entered into a residential lease (Woods Lease), which was recorded several years later in December 1991. Only Mr. Wood and Mr. Varela signed the Woods Lease, though it identified Mr. and Mrs. Woods as lessors and Mr. Varela and his spouse as lessees. The Woods Lease had a 30-year term and granted Mr. Varela an option to purchase the Property during that time.

         In February 1992, the Property was sold at a trustee's sale (First Trustee's Sale). The Property was sold again in August 1992, this time to James Sandoval. Mr. Sandoval executed a deed of trust encumbering the Property in favor of his lender, Casa Blanca Mortgage, Inc., which was recorded in February 2006 (Sandoval Deed of Trust). The Sandoval Deed of Trust covenanted “the Property is unencumbered, except for encumbrances of record[.]” Nonetheless, Mr. Sandoval was aware of the Woods Lease when he purchased the Property and Mr. Varela continued to reside at the Property and pay rent. Mr. Sandoval and Mr. Varela did not execute a written lease on the same terms as the Woods Lease. Instead, the only written lease between Mr. Sandoval and Mr. Varela was entered into so that Mr. Varela could present it to a court as a condition of his release from jail on house arrest (Sandoval Lease). The Sandoval Lease did not include a purchase option and was not recorded.

         In September 2011, U.S. Bank purchased the Property at a trustee's sale (Second Trustee's Sale). Several years later, Mr. Varela purported to exercise his right to purchase the Property. As a result, U.S. Bank initiated this action seeking a declaratory judgment that it has clean title. Mr. Varela brought a three-count counterclaim, Count I of which alleged breach of contract and sought, inter alia, a declaratory judgment that the purchase option contained in the Woods Lease is enforceable against U.S. Bank and an award of specific performance. U.S. Bank moved for summary judgment on its claim for declaratory relief and on Count I of Mr. Varela's counterclaim and, on December 9, 2016, the Court granted U.S. Bank's motion. Mr. Varela now moves for reconsideration.

         LEGAL STANDARD

         Motions for reconsideration should be granted only in rare circumstances. Defenders of Wildlife v. Browner, 909 F.Supp. 1342, 1351 (D. Ariz. 1995). Mere disagreement with a previous order is an insufficient basis for reconsideration. See Leong v. Hilton Hotels Corp., 689 F.Supp. 1572, 1573 (D. Haw. 1988). “Reconsideration is appropriate if the district court (1) is presented with newly discovered evidence, (2) committed clear error or the initial decision was manifestly unjust, or (3) if there is an intervening change in controlling law.” School Dist. No. 1J, Multnomah Cty. v. ACandS, Inc., 5 F.3d 1255, 1263 (9th Cir. 1993). Such motions should not be used for the purpose of asking a court “‘to rethink what the court had already thought through-rightly or wrongly.'” Defenders of Wildlife, 909 F.Supp. at 1351 (quoting Above the Belt, Inc. v. Mel Bohannon Roofing, Inc., 99 F.R.D. 99, 101 (E.D. Va. 1983)).

         DISCUSSION

         Mr. Varela does not present newly discovered evidence or argue that there has been an intervening change in controlling law. He, instead, argues that the Court committed clear error and its order was manifestly unjust. He raises four distinct arguments, none of which warrant reconsideration.

         I. Judicial Estoppel

         First, Mr. Varela contends that the Court clearly erred when it accepted “new evidence and a legal theory of judicial estoppel concerning the Sandoval Lease, ” introduced by U.S. Bank in its reply memorandum. (Doc. 91 at 2-3.) The Court disagrees. U.S. Bank did not introduce new evidence with its reply memorandum; all evidence relied upon by U.S. Bank in its reply was introduced earlier, either with its motion for summary judgment or with Mr. Varela's response thereto. (Docs. 34, 40, 64.) Nor was U.S. Bank's judicial estoppel argument outside the scope of reply. Though arguments raised for the first time in a reply brief generally will not be considered, arguments made in response to those raised in the opposing party's brief are permissible rebuttal arguments. See Beckhum v. Hirsch, No. CV 07-8129-PCT-DGC (BPV), 2010 WL 582095, at *8 (D. Ariz. Feb. 17, 2010). Mr. Varela argued in his response brief that the Sandoval Lease was not intended by the parties to be binding and enforceable, and was instead prepared as an accommodation to law enforcement as a condition of his release on house arrest. (Doc. 63 at 4-5.) U.S. Bank rebutted by arguing that Mr. Varela was judicially estopped from disavowing the Sandoval Lease because he had presented it to a prior court, which required that a lease be produced as a condition of Mr. Varela's release. (Doc. 67 at 3-4.) The Court did not clearly err by considering U.S. Bank's rebuttal argument.

         Moreover, even if it was error to consider U.S. Bank's judicial estoppel argument, such error was harmless. Notably, Mr. Varela does not argue in his motion for reconsideration that the Court's judicial estoppel analysis was erroneous. Further, judicial estoppel was not the sole basis for the Court's ruling. The Court first concluded that the purchase option granted to Mr. Varela was extinguished in 1992 by the First Trustee's Sale. (Doc. 87 at 5.) The Court explained that Arizona's statute of frauds, A.R.S. § 44-101(6), requires a real estate purchase option agreement to be in writing, and then found that no written purchase option was executed after the Woods Lease was extinguished. (Id. at 6.) Finally, the Court noted that the Sandoval Lease, which was the only written agreement post-dating the First Trustee's Sale, did not include a purchase option, that the parol evidence rule precluded extrinsic evidence of contrary intent or unwritten understandings between Mr. Sandoval and Mr. Varela, and that Mr. Varela was judicially estopped from asserting that the Sandoval Lease was inoperable or nonbinding. (Id. at 6-7.) Even if the Court were to ignore U.S. Bank's judicial estoppel argument, the fact remains that no written purchase option was executed after the First Trustee's Sale and the parol evidence rule precludes Mr. Varela from disavowing the Sandoval Lease by pointing to extrinsic evidence of contrary intent. Mr. Varela's argument therefore does not provide a basis for reconsidering the Court's summary judgment order.

         II. Sufficiency of Mr. Varela's Factual Denials

         Next, Mr. Varela argues that Court clearly erred “when it failed to acknowledge [his] denial of [U.S. Bank's] Statement of Facts.” (Doc. 91 at 3.) Specifically, Mr. Varela quarrels with footnote 2 of the Court's summary judgment order, which states:

Many of [Mr. Varela's] responses to U.S. Bank's separate statement of facts are either non-responsive to the factual statements made by U.S. Bank or consist of legal arguments and conclusions. (See, e.g., Doc. 64 at 2, ¶¶ 3-4, 9.) For purposes of this order, the Court accepts as true all factual statements not properly disputed.

         (Doc. 87 at 1 n.2.) Mr. Varela contends that the record is unclear as to which of his responses were deemed improper. To the extent Mr. Varela seeks clarification on this point, the Court will oblige. Paragraphs 3, 4, 9, and 14 of Mr. Varela's Controverting Statement of Facts were deemed either to be non-responsive to the facts asserted by U.S. Bank, to contain legal arguments and conclusions rather than facts, or both. Before explaining further, an examination of this Court's local rules provides useful context.

         Local Rule of Civil Procedure 56.1 governs summary judgment motions. As ...


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