Vig v. Nix Project II Partnership (3/5/2009)

March 10, 2009

Arizona Court of Appeals Division One Holds That an Affidavit Is Proper Under A.R.S. § 33-422 When It Is Furnished to the Buyer at Least Seven Days Before Closing and Contains Sufficient Information to Put the Buyer on Inquiry Notice of All Relevant Conditions.

AA American Development Corporation (“American”) submitted an offer to Nix Project II Partnership (“Nix”) for the purchase of a large undeveloped property.  Nix accepted the offer and a 30-day inspection period commenced.  On June 7, 2005, Nix’s real estate agent faxed an affidavit of disclosure to American’s real estate agent, indicating that there was no legal access to the property.  The real estate agent acknowledged receipt, but American neither acknowledged the affidavit of disclosure nor exercised its right of rescission.  After six extensions of the time for closing, American assigned its interest in the transaction to Vig.  The escrow officer then sent a copy of the affidavit of disclosure to Vig.  Ten months after escrow closed, Vig brought an action against Nix for breach of contract and statutory rescission on the basis that Nix’s affidavit of disclosure did not comply with A.R.S. § 33-422.  The trial court held that the affidavit of disclosure complied with § 33-422 and this appeal followed.

The Arizona Appeals Court first held that an affidavit of disclosure complies with A.R.S. § 33-422 so long as it is furnished to the buyer at least seven days before closing and that the buyer’s failure to formally acknowledge receipt has no legal significance.  Second, the Court held that so long as the affidavit of disclosure is self-explanatory and puts the buyer on inquiry notice, it complies with § 33-422.  Finally, the Court explained that a nominee of rights and obligations under a contract is bound by the nonminor’s waiver of a right of rescission for non-compliance with § 33-422.  Because Nix furnished an affidavit of disclosure to American at least seven days before closing and marked a box on the affidavit clearly indicating that there was no legal access to the property, American waived Vig’s right to rescission by failing to rescind the transaction within five days after it received the affidavit of disclosure.

Judge Swann authored the opinion; Judges Kessler and Gemmill concurred.