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de Jong v. Genske

United States District Court, D. Arizona

May 15, 2019

Erik Samuel de Jong and Daryl Lynn de Jong, Appellants,
v.
Gary Genske, Appellee.

          ORDER

          SUSAN M. BRNOVICH, UNITED STATES DISTRICT JUDGE

         Appellants Erik and Daryl de Jong (collectively, “Appellants”) appeal the bankruptcy court's decision granting Appellee Estate of Hugo N. Van Vliet (“Appellee”) a claim in the amount of $240, 273.46. (Doc. 6, “Op. Br.”). Appellee has filed a response brief (Doc. 8, “Resp.”) to which Appellant replied. (Doc. 10, “Reply”). The underlying dispute concerns a property that Appellants leased from Appellee in order to run a dairy. For the reasons that follow, the bankruptcy court is affirmed.

         I. BACKGROUND

         Appellants were in bankruptcy court after filing a petition pursuant to Chapter 11 of the Bankruptcy Code. Appellee filed a proof of claim in the amount of $347, 773.46 to which Appellants objected. (ER0209; ER0234). After a three-day hearing, the bankruptcy court issued a decision granting Appellee's claim in the amount of $240, 273.46. (ER0283; ER0884). Appellants filed a motion for relief from that order, which was denied. (ER0284; ER0303).

         The facts giving rise to the claim concern a property lease. Appellants and Appellee signed a lease (the “Agreement”) for a dairy (the “Property”) in Buckeye, Arizona, that went into effect August 1, 2011. (Excerpt of Record at 0217, “ER”). Appellee acted through the administrator of the estate, Gary Genske. (Id.). The Agreement was for a four-year lease on the property that would expire July 31, 2015. (Id.). It required Appellee to, among other things, reinstall all milking equipment, bring property infrastructure to good operating condition, warranty the property infrastructure for 90 days after the commencement of the lease, ensure “all utilities, fans, misters and shade” were in “proper working condition, ” ensure water handling systems were in operating condition, and re-certify truck scales. (ER0219). It also promised Appellants four move-in ready residences and a dairy office. (ER0217). It gave Appellants the chance to approve or disapprove the conditions and cancel the lease prior to taking control of the Property. (Id.).

         Prior to taking control of the property, Appellants asked for 24 different repairs. (ER0088-89). The parties do not explain in their briefings which of these repairs were made, though the bankruptcy court concluded Appellee contracted with third parties to address some of them. (ER0874). In any event, the Appellants took control of the Property. Appellants provided further notice that they were unsatisfied with the Property at least twice in writing. (ER0098-99; ER0120-21). On appeal, they specifically point to two reasons that the Property could not be used as a dairy: (1) the scale was inoperable and (2) the system for cooling cattle was not functioning (Op. Br. at 5). Ultimately, Appellants vacated the premises in late February or early March 2012. (ER0245).

         Appellee filed a claim in bankruptcy court against Appellants in the amount of $347, 773.46. (ER0209). The total was derived from rent withheld during the time Appellants occupied the Property, rent for the 18 months it took for Appellee to find new tenants for the Property, and other costs to pay for damage to the Property that Appellee believes Appellants caused (“non-rental damages”). (ER0214-16). The Appellants argued that they were not obligated to perform under the Agreement because the Appellee materially breached the Agreement and/or constructively evicted them. After three days of trial in the bankruptcy court, the court awarded a claim to Appellee in the amount of $240, 273.46. (ER0870-84).

         The bankruptcy court issued a memorandum decision explaining its order. (Id.). It held that Appellees did not materially breach the Agreement nor constructively evict Appellants. (ER0876-79). The purpose of the Agreement was to allow Appellants to operate a dairy, and the Property's shortcomings did not prevent them from doing so. (ER0877-78). The inoperable cooling system and scale may have made operating the dairy more difficult, but the remedy was not termination of the Agreement. (ER0878). Rather, any breach relating to the scale gave rise to a claim for damages. (Id. citing Thompson v. Harris, 9452 P.2d 122, 126 (Ariz.Ct.App. 1969)). Likewise, the alleged breaches did not give rise to constructive eviction, as Appellants were not deprived of the beneficial enjoyment of the Property because they were able to operate their dairy and produce grade A milk. (Id. citing Stewart Title & Trust of Tucson v. Pribbeno, 628 P.2d 52, 53 (Ariz.Ct.App. 1981)). Furthermore, Appellants had advised Appellee that the cooling system repairs were not necessary until May 2012, so the bankruptcy court concluded that there were no damages from it being inoperable. (ER0877-78; ER0882). The bankruptcy court added that Appellants “had no reasonable concern that the cow cooling system would go unrepaired.” (ER0878).

         The bankruptcy court did, however, reduce the amount of the claim to account for the Property's shortcomings or lack of proof of certain damages. It held that Appellee did not meet its burden of proof to show that Appellants were obligated to pay for the non-rental damages. (ER0883). It also reduced the amount of the claim to account for the inoperable scale ($40, 000 per a contractor's repair bid), the cost of remodeling one of the four residences on the Property because it was uninhabitable ($15, 000 per testimony from the administrator of Appellee, Genske), and the cost of renting one of the residences because it was also uninhabitable ($600 a month for 25 months, which equals $15, 000). (ER0881-84). This brought the claim's total down to $240, 273.46. (ER0884).

         On appeal, Appellants raise five issues: (1) whether the bankruptcy court applied the correct measure of damages; (2) whether the bankruptcy court properly calculated Appellee's alleged damages; (3) whether the bankruptcy court incorrectly determined there was no constructive eviction; (4) whether Appellee's actions/inactions caused a breach of the lease; and (5) whether Appellants were justified in vacating the premises. (Op. Br. at 1-2). Appellee asserts, however, that Appellants only provided sufficient argument for the Court to consider the second and third issues.

         The Court agrees and “will not consider any claims that were not actually argued in appellant's opening brief.” Indep. Towers of Wash. v. Washington, 350 F.3d 925, 929 (9th Cir. 2003). The Court “cannot ‘manufacture arguments for an appellant'” and will “review only issues which are argued specifically and distinctly in a party's opening brief.” Id. (quoting Greenwood v. Fed. Aviation Admin., 28 F.3d 971, 977 (9th Cir. 1994). The “bare assertion of an issue does not preserve a claim.” Id. (citing D.A.R.E. America v. Rolling Stone Magazine, 270 F.3d 793, 793 (9th Cir. 2001)). In the Opening Brief, Appellants do not develop arguments for their first, fourth, and fifth issues with any specificity. Even in the Reply, Appellants do not argue they preserved those issues, and the Court will not manufacture such arguments for them. Accordingly, the Court will not address them.

         II. STANDARD OF REVIEW

         The parties agree that the second issue, whether the bankruptcy court properly calculated Appellee's damages is a question of fact reviewed for clear error. See Howard v. Crystal Cruisers, Inc., 41 F.3d 527, 530 (9th Cir. 1994). “A court's factual determination is clearly erroneous if it is illogical, implausible, or without support in the record. In re Retz, 606 F.3d 1189, 1196 (9th Cir. 2010) (citing United States v. Hinkson, 585 F.3d 1247, 1261-62, n. 21 (9th Cir. 2009) (en banc)).

         The parties disagree on the standard of review for Appellants constructive eviction argument. Appellants believe it is de novo but provide no legal authority for that conclusion. (Op. Br. at 2). Appellee contends it is reviewed for clear error, arguing that it involves questions of fact. (Resp. at 1) (citing Worcester Felt Pad Corp. v. TucsonAirport Authority, 233 F.2d 44, 50 (9th Cir. 1956) (recognizing that constructive eviction is a question for the jury); Gottdiener v. Mailhot, 431 A.2d 851, 855 (1981) ( N.J.Super. App. Div. 1981) (“What amounts to a constructive eviction is a question of fact.”)); Auto. Supply Co. v. Scene-in-Action Corp., 340 Ill. 196, 201 (1930) (citations omitted) (same). Undoubtedly, resolving a constructive eviction claim involves questions of fact, but the bankruptcy court also made legal conclusions when considering Appellants ...


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