Owens v. M.E. Schepp Limited Partnership – 5/8/2008

May 12, 2008

Arizona Supreme Court Holds That Acts of Part Performance Must Be “Unequivocally Referable” to an Alleged Oral Agreement to Exempt the Agreement From the Statute of Frauds.

Owens and the M.E. Schepp Limited Partnership (the “Partnership”) owned a parcel of land as tenants in common.  Owens filed suit, seeking a statutory partition of the parcel.  The Partnership counterclaimed, contending that the parties had entered into an oral partition agreement.  Owens moved for summary judgment, denying the existence of an agreement and asserting that even if there had been partition agreement, it was unenforceable under the statute of frauds.  The trial court granted Owens’ motion, ruling there was no partition agreement.  A divided court of appeals reversed, finding that the Partnership had produced sufficient evidence of part performance to take the contract out of the statute of frauds.

In a unanimous opinion, the Arizona Supreme Court vacated the Court of Appeals decision and affirmed the judgment of the trial court, holding that alleged acts of part performance must be “unequivocally referable” to an alleged contract to remove the agreement from the statute of frauds, and finding that the alleged acts, in this case, did not conclusively establish that a contract existed.  The Court found that the alleged acts of part performance — the Partnership’s withdrawal of its objection for certain improvements and its payment for one-third of the cost of the improvements — were more consistent with the continued existence of a co-tenancy than with an agreement to partition.  The Court also rejected the Partnership’s argument under Restatement (Second) of Contracts § 128(2) that the oral agreement was enforceable notwithstanding the Statute of Frauds because the parties took exclusive possession of divided portions of the parcel, finding that the evidence did not support the argument. 

The Court further rejected the Partnership’s argument that the trial court abused its discretion in denying the Partnership’s Rule 56(f) motion to continue the summary judgment proceedings until it could depose Owens and examine his documents.  The Court noted that additional document discovery could not have aided the Partnership in proving part performance because only the Partnership’s own actions could be used to show the required detrimental reliance.  The Court also found that the trial court did not abuse its discretion by refusing to allow the Partnership to depose Owens because he had unequivocally and repeatedly denied under oath that the contract existed. 

Finally, the Court rejected the Partnership’s argument that the trial court erred by failing to include an instruction in its order appointing a three-commissioner panel to partition the parcel that the panel could issue a report partitioning the parcel pursuant to terms of the oral agreement, with any disparity in values offset by an equalization payment.  The Court noted that A.R.S. § 12-1218 does not allow for commissioners to propose an equalization payment. 

Justice Hurwitz authored the unanimous opinion.