Mfc v. Gray
1 CA-CV 15-0611
| Ariz. Ct. App. | Nov 8, 2016Background
- MFC Investments sued John and Bonnie Gray for breach of promissory notes; Gray filed counterclaims and a crossclaim.
- At a September 16, 2014 settlement conference the parties signed a four‑paragraph written settlement agreement.
- The agreement required Gray to provide MFC a statement verified by his California CPA and stated that if the verified statement was unsatisfactory to MFC, no settlement would occur.
- Three days later Gray notified MFC he could not provide a verified statement and that he had changed his mind about the settlement.
- MFC moved to enforce the settlement; the trial court granted enforcement, dismissed Gray’s claims, and entered final judgment.
- The court of appeals affirmed, holding the verified‑statement term was Gray’s duty (protecting MFC) and could be waived by MFC; MFC was awarded appellate fees.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a binding settlement formed given Gray did not provide the CPA‑verified financial statement | MFC: A settlement formed; the verified statement was a duty for Gray and MFC could waive it | Gray: No contract formed because the verified statement was a condition precedent to formation | Held: Contract formed; Gray frustrated the condition by repudiation, so MFC could enforce and waive the statement requirement |
| Whether providing the verified financial statement was a condition precedent excusing Gray's obligations | MFC: The statement was Gray’s duty and a condition of MFC’s performance, not a mutual condition precedent | Gray: The verified statement was a condition of his own performance, so failure to provide it excuses his payment/dismissal obligations | Held: The term creates a duty for Gray that benefits MFC and can be waived by MFC; it does not nullify the settlement |
| Whether the verified‑statement term benefited both parties (so MFC could not unilaterally waive) | MFC: The term was intended to protect MFC’s assessment of Gray’s ability to pay | Gray: The term also benefited him and therefore could not be waived solely by MFC | Held: The contract language shows the provision was for MFC’s benefit (MFC satisfaction required); Gray’s argument unpersuasive |
| Whether MFC is entitled to attorney’s fees on appeal | MFC: Prevailing party in a contract action; fees under A.R.S. § 12‑341.01 appropriate | Gray: The settlement provision that each bear their own fees bars fee recovery | Held: Fees awarded — the fee‑splitting clause assumed compliance with the settlement; repudiation permits statutory fee award |
Key Cases Cited
- State ex rel. Goddard v. R.J. Reynolds Tobacco Co., 206 Ariz. 117, 75 P.3d 1075 (App. 2003) (standard of review for contract interpretation)
- Emmons v. Superior Court In & For County of Maricopa, 192 Ariz. 509, 968 P.2d 582 (App. 1998) (settlement enforcement governed by contract principles)
- Johnson Int'l, Inc. v. City of Phoenix, 192 Ariz. 466, 967 P.2d 607 (App. 1998) (party may not frustrate condition precedent then rely on its nonfulfillment)
- Cavazos v. Holmes Tuttle Broadway Ford, Inc., 104 Ariz. 540, 456 P.2d 910 (1969) (distinguishing where a third party’s failure of condition prevents contract formation)
- Able Distrib. Co., Inc. v. James Lampe, Gen. Contractor, 160 Ariz. 399, 773 P.2d 504 (App. 1989) (contract provisions should not be construed as conditions precedent unless unambiguous)
- Nelson v. Cannon, 126 Ariz. 381, 616 P.2d 56 (App. 1980) (party benefiting from a contractual provision may waive it)