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Chevron U.S.A. v. Schirmer

filed: December 16, 1993.


Appeal from the United States District Court for the District of Arizona. D.C. No. CV 88-1866-RCB. Robert C. Broomfield, District Judge, Presiding.

Before: Betty B. Fletcher, Cecil F. Poole, and Stephen Reinhardt, Circuit Judges. Opinion by Judge Fletcher; Partial Concurrence and Partial Dissent by Judge Reinhardt.

Author: Fletcher

FLETCHER, Circuit Judge:

Chevron U.S.A. Inc. ("Chevron") appeals the entry of summary judgment in favor of W. Scott Schirmer ("Schirmer") on Chevron's suit for specific performance of an option contract to purchase real property. Schirmer appeals the entry of summary judgment for Chevron on his counterclaim for damages sustained from Chevron's recording of notice of lis pendens on the property. Both sides appeal the denial of their requests for attorneys' fees. We affirm the summary judgment against Chevron denying specific performance and the denial of its fee request, but reverse the summary judgment against Schirmer on his counterclaim. We also reverse the denial of Schirmer's fee request, and remand for the determination of reasonable fees.

I. Facts

In 1987, Schirmer Properties*fn1 owned a 37.8 acre tract of land in Peoria, Arizona, a small community near Phoenix. On May 14, 1987, the partnership entered into an option contract with Chevron to sell it a 200' X 200' corner parcel of that tract, upon which Chevron intended to build a service station and convenience store. The option provided, in relevant part, that

on or before the 13th day of November, 1987, Buyer [Chevron] may exercise this Real Estate Purchase Option (hereinafter called "Option") by mailing or delivering to Seller (or any one of them if more than one Seller) at c/o Scott Schirmer [address], a copy of this Option signed on behalf of Buyer. If Buyer exercises this Option by mail, such exercise shall be deemed valid and effective upon mailing.

Upon exercise of this Option by Buyer, all the terms and conditions set forth herein shall constitute the contract of Seller to sell and the contract of Buyer to buy the Property.

Chevron failed to exercise the option before it expired.*fn2

The record does not definitively reveal why Chevron failed to simply sign the option and timely deliver it to Schirmer, thereby binding the parties to the contract. Zoning and permit issues, for example, were seemingly covered by the option:

Notwithstanding any other provision of this Option to the contrary, Buyer shall have no obligation to pay the balance of the purchase price until ten (10) days after obtaining all necessary rezoning and permits. If the necessary rezoning and permits cannot be obtained or if they are available only upon terms and conditions which are unsatisfactory to Buyer, Buyer may rescind the exercise of this Option and the Deed deposited in escrow by Seller shall be returned to Seller.

One possibility is that Chevron badly miscalculated the option expiration date. (An internal Chevron memorandum suggests the author's confidence that "we can receive all necessary permits prior to our December 21, 1987 expiration of option") (emphasis added).

The record reveals that the passing of the expiration date did not bring a halt to either side's efforts to secure the necessary governmental permits, a quest aided by Schirmer's real estate agent, Robert Broyles. Chevron characterizes the continuing effort and other instances of continued interaction as evidence that the parties "at all relevant times recognized that there existed an agreement between them for Chevron to buy the Property," that Schirmer "never denied or expressed doubt as to the existence of such an agreement" and indeed made "renewed promises to Chevron to perform [his] obligations under the agreement." Complaint Par. 10. Schirmer argues that both sides benefitted by following through on the permit process after the option expired - Chevron because its interest in the property was conditioned on its being suitably zoned, and Schirmer because any such permits would be obtained in his name, thereby enhancing the value of the property to other potential buyers.

On March 11, 1988, Chevron delivered to an escrow agent what it considered to be sufficient funds to complete the transaction; some time prior to March 11, it had mailed to Broyles a copy of the option (unsigned), along with a copy of the instruction letter to the escrow agent, dated March 4. Schirmer refused to convey the property. On November 14, 1988, Chevron filed a diversity action in the District of Arizona seeking specific performance.

On July 26, 1989, Schirmer filed an amended answer and counterclaim alleging that, inter alia, the notice of lis pendens recorded by Chevron on the property when it filed its suit was (and was known by it to be) "groundless, improper and invalid." Schirmer asked for treble damages under Arizona Revised Statute § 33-420.

On March 6, 1990, the district court granted Schirmer's motion for summary judgment against Chevron on its complaint. The court subsequently permitted Chevron to amend its complaint to allege, inter alia, that in February 1988 it had entered into a new, oral agreement with Schirmer for the purchase of the property and that this oral agreement had been partially performed. On August 29, 1991, the court entered summary ...

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