Strickland v. Calton

NOTICE: NOT FOR OFFICIAL PUBLICATION.
UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL
AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.

IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE

PHYLLIS STRICKLAND, Plaintiff/Appellant,

v.

CALTON & ASSOCIATES, INC., et al., Defendants/Appellees.

No. 1 CA-CV 24-0336
FILED 01-07-2025

Appeal from the Superior Court in Maricopa County
No. CV2023-011525
The Honorable Dewain D. Fox, Judge

AFFIRMED

COUNSEL

Boliver Law Firm, Chandler
By Gail E. Boliver
Co-Counsel for Plaintiff/Appellant

Sacks Tierney PA, Scottsdale
By Christopher D. Lonn
Co-Counsel for Plaintiff/Appellant

Meagher & Geer PLLP, Scottsdale
By Thomas H. Crouch
Counsel for Defendants/Appellees
 STRICKLAND v. CALTON, et al.
Decision of the Court

MEMORANDUM DECISION

Judge Anni Hill Foster delivered the decision of the Court, in which
Presiding Judge Cynthia J. Bailey and Judge Angela K. Paton joined.

F O S T E R, Judge:

¶1 Plaintiff Phyllis Strickland appeals the dismissal of her
lawsuit against Calton & Associates, Inc. (“CAI”), Daryl Ray Calton
(individually “Calton”) and Virginia Calton. For the following reasons, this
Court affirms.

FACTS AND PROCEDURAL HISTORY

¶2 When reviewing a dismissal pursuant to Arizona Rule of
Civil Procedure 12(b)(6), “courts must assume the truth of all well-pleaded
factual allegations and indulge all reasonable inferences from those facts.”
Coleman v. City of Mesa, 230 Ariz. 352, 356, ¶ 9 (2012).

¶3 In 2012, Strickland and her husband met Calton, a licensed
securities professional working for broker-dealer CAI. Soon after, Calton
recommended they invest in a real estate product, which they did.

¶4 Two years later, Calton recommended the Stricklands sell the
real estate investment and reinvest in another real estate product titled
American Realty Capital Healthcare Trust II (“Product”), which they
agreed to do. This Product was a non-traded real estate investment trust
and was illiquid, meaning the Product could not generally be sold on the
open market.

¶5 Strickland does not remember receiving a prospectus related
to the Product at the time of the transaction but admits she may have
received it. The Stricklands signed a subscription agreement that stated
they received and understood the prospectus. Strickland suspected that
statements made on the subscription agreement were not accurate,
including the provision that they received the prospectus, understood it
and that the representations about their net worth were accurate.

¶6 Strickland’s husband became disabled at some point and the
Stricklands contacted Calton to liquidate the Product. Calton advised
liquidation was not available even though the Stricklands received a letter

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in 2020 from a third party offering to purchase it. After her husband passed
away in 2021, Calton advised Strickland to sign a new account form and re-
register with CAI. Strickland signed the re-registration form, which again
contained inaccurate information about her net worth. Strickland again
asked Calton to liquidate the Product and was again told she could not.

¶7 Strickland consulted an attorney in 2021 or 2022 for legal
assistance relating to her investment. In September 2022, Strickland
pursued claims against Calton and CAI with the Financial Industry
Regulatory Authority (“FINRA”). An arbitration panel dismissed the
claims as time-barred pursuant to FINRA’s six-year eligibility rule
prohibiting claims filed six years after the Product’s sale in 2014.

¶8 Strickland then filed this lawsuit against Calton and CAI in
July 2023. She brought claims for breach of contract, breach of the covenant
of good faith and fair dealing, professional negligence, negligent
supervision, negligent misrepresentation, negligent due diligence,1 breach
of fiduciary duty, Arizona securities fraud under A.R.S. § 44-1991,
participant liability under A.R.S. § 44-2003(A), 2 investment-advisory fraud
under A.R.S. § 44-3241, respondeat superior and constructive fraud.

¶9 Strickland alleged “Calton and CAI failed to properly conduct
due diligence on [the Product and the Stricklands] to determine if [the
Product] was suitable for [the Stricklands] considering their age, income,
status in life, year to retirement, [and] risk tolerance.” Strickland claimed
Calton and CAI never disclosed that the Product was illiquid. Strickland
alleged Calton and CAI deceived her and her husband about the
investment’s value. She sought actual damages for approximately $236,000
and requested punitive damages.

¶10 Calton and CAI moved to dismiss based on the expiration of
the statute of limitations. After oral argument, the superior court found
Strickland’s claims accrued in 2014 at the time of the sale and rejected
Strickland’s argument that the discovery rule and continuing-tort doctrine

1 Strickland brings a claim for negligent due diligence “[p]ursuant to
applicable securities regulations, industry standards and Arizona law,”
without citing any underlying authority. This Court treats this count as one
for ordinary negligence.
2 A.R.S. § 44-2003(A) applies to “action[s] brought under §§ 44-2001, 44-2002

or 44-2032,” none of which Strickland alleged in the complaint.

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applied to toll the statute of limitations. The court dismissed all claims,
awarded attorneys’ fees to Calton and CAI and entered final judgment.

¶11 This Court has jurisdiction over Strickland’s timely appeal
under A.R.S. § 12-2101(A)(1).

DISCUSSION

I. Discovery Rule & Continuing-Wrong Doctrine

¶12 A dismissal based on the expiration of statutes of limitations
is reviewed de novo. Worldwide Jet Charter, Inc. v. Toulatos, 254 Ariz. 331, 336,
¶ 15 (App. 2022). The statute of limitations begins to run “when the act upon
which [the] legal action is based took place, even though the plaintiff may
be unaware of the facts underlying his or her claim.” Gust, Rosenfeld &
Henderson v. Prudential Ins. Co. of Am., 182 Ariz. 586, 588 (1995). If a
defendant affirmatively establishes that the statute of limitations applies,
then the plaintiff bears the burden of proving the limitations period was
tolled. See Troutman v. Valley Nat’l Bank of Ariz., 170 Ariz. 513, 517 (App.
1992).

¶13 At issue here is the Product sale in 2014. The relevant
limitations period for Strickland’s claims are: (1) two years for statutory
fraud pursuant to A.R.S. § 44-1991, see A.R.S. § 44-2004(B); (2) three years
for statutory fraud under A.R.S. § 44-3241, see A.R.S. § 44-3241(B); (3) two
years for common-law duty claims, see A.R.S. § 12-542; and (4) three years
for oral contract, see A.R.S. § 12-543(1), or six years for written contract, see
A.R.S. § 12-548. Allegations of participant liability under A.R.S. § 44-2003,
respondeat superior liability and a request for punitive damages are not
separate claims and do not have their own statutes of limitations. See A.R.S.
§ 44-2003 (parties under the enumerated acts proscribed “shall be jointly
and severally liable to the person who is entitled to maintain such action”);
Laurence v. Salt River Project Agric. Improvement & Power Dist., 255 Ariz. 95,
104, ¶ 35 (2023) (a plaintiff can still bring a respondeat superior claim against
an employer even if the claim against the employee was dismissed without
prejudice so long as it falls within the statute of limitations); Sisemore v.
Farmers Ins. Co. of Ariz., 161 Ariz. 564, 566 (App. 1989) (a punitive damages
claim is not a separate claim that can be enforced from the underlying tort
claim). Given that the longest applicable limitations period for Strickland’s
claims is six years, any claim brought in 2023 based upon the 2014 sale is
time-barred unless it was tolled.

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A. Discovery Rule

¶14 Strickland first argues the discovery rule tolled the statutes of
limitations because the defendants continued to engage in a series of
wrongs that she did not discover until late 2021 or 2022 when she and her
attorney asked to sell the Product.

¶15 When an injury or act causing injury is difficult to detect,
courts can apply the discovery rule to toll the statute of limitations. Gust,
182 Ariz. at 590. Under the discovery rule, a cause of action accrues when a
“plaintiff knows or with reasonable diligence should know the facts
underlying the cause.” Doe v. Roe, 191 Ariz. 313, 322, ¶ 29 (1998). The
discovery rule tolls the statute of limitations only where a plaintiff
establishes that crucial facts underlying their claims were “difficult for the
plaintiff to detect.” ELM Ret. Ctr., LP v. Callaway, 226 Ariz. 287, 290, ¶ 12
(App. 2010) (quoting Gust, 182 Ariz. at 589). The key question is whether a
plaintiff “possess[es] a minimum requisite of knowledge sufficient to
identify that a wrong occurred and caused injury” and has “reason to
connect the ‘what’ to a particular ‘who.’” Walk v. Ring, 202 Ariz. 310, 316,
¶ 22 (2002) (emphasis omitted).

¶16 Strickland’s discovery rule argument is unavailing. The
complaint shows that she was on notice of potential wrongdoing in 2014
when she suspected the forms she signed contained inaccurate information.
She admits that in 2014 she would not have been able to understand the
prospectus, but points to no crucial facts that made it difficult for her to
detect alleged wrongful acts within the statutory limitations period. She
knew she did not understand the prospectus and knew or should have
known her own net worth. She had a duty to investigate beginning in 2014,
see Doe, 191 Ariz. at 322, ¶ 29, but delayed filing suit until 2023. She also
knew the “who” in 2014 because all her dealings were with Calton.
Strickland failed to establish a tolling defense.

B. Continuing-Wrong Doctrine

¶17 Strickland next contends that her claims filed in 2023 were
timely because Calton and CAI committed continuing wrongs that she did
not discover until 2021 or 2022. Under the continuing-wrong doctrine, a
claim “based on a series of closely related wrongful acts” is treated as
continuous and the claim accrues for statute of limitations purposes at the
termination of the wrongdoing, not the inception. Watkins v. Arpaio, 239
Ariz. 168, 171, ¶ 9 (App. 2016). Though similar in nature to the discovery
doctrine because they both provide relief from statutes of limitations, the

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continuing-wrong doctrine is an independent concept. Compare Cruz v. City
of Tucson, 243 Ariz. 69, 74, ¶ 20 (App. 2017) (under the continuing-tort
doctrine “accrual begins at the termination of the wrongdoing”) with Doe,
191 Ariz. 322, ¶ 29 (“Under the discovery rule [ ] a cause of action does not
accrue until the plaintiff knows or with reasonable diligence should know
the facts underlying the cause.”).

¶18 Strickland argues the following constituted continuing
wrongful acts: (1) the defendants misrepresented the suitability of the
Product for her; (2) the defendants sent false account statements3 to her with
baseless product prices; and (3) the defendants continued to fail to facilitate
the sale of the Product. But these allegations do not provide a basis for
Strickland’s claims to accrue in 2021 or 2022 because they are not part of a
series of closely-related wrongful acts. See Watkins, 239 Ariz. at 172, ¶ 15
(liability for intentional infliction of emotional distress can “ar[i]se from a
long series of cumulative acts, any one of which likely was insufficient by
itself to support the claim”). Even assuming the allegations are true, each
allegation constitutes a separate act causing alleged separate harms. Floyd
v. Donahue, 186 Ariz. 409, 413 (App. 1996) (the continuing-tort doctrine did
not apply because “each claimed act is a separate assault causing separate
as well as cumulative injury”). Strickland’s claims were neither cumulative
nor closely related. Because Strickland failed to meet her burden of proof to
establish tolling, her claims are time-barred.

II. Attorneys’ Fees

¶19 Strickland argues the superior court erred in awarding
attorneys’ fees, a ruling this Court reviews for an abuse of discretion. ABC
Supply, Inc. v. Edwards, 191 Ariz. 48, 52 (App. 1996).

¶20 In its ruling, the superior court analyzed relevant factors set
forth in Associated Indem. Corp. v. Warner, 143 Ariz. 567, 570 (1985), to
determine whether to award a discretionary attorneys’ fee award under
A.R.S. § 12-341.01.4

3 Despite Strickland’s argument in her opening brief that the defendants

sent her account statements, her complaint alleges a custodian or third
party sent her the statements.
4 The superior court noted that Strickland brought two causes of action for

contract and that the remaining claims were interwoven, a finding
Strickland does not challenge on appeal. See Zeagler v. Buckley, 223 Ariz. 37,

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¶21 Strickland argues the superior court erred in analyzing
whether litigation could have been avoided by considering the fact she had
filed the subject lawsuit after she pursued her claims in FINRA arbitration,
which were dismissed as untimely. Strickland argues that a dismissal of the
FINRA arbitration-claim was a procedural issue separate and distinct from
the dismissal here on statute-of-limitations grounds. Even accepting her
argument, the court independently analyzed the statute of limitations
argument and tolling defense and concluded litigation could have been
avoided because the statute of limitations had expired.

¶22 Strickland next asserts that the superior court erred by failing
to consider her destitution as a factor favoring against an attorneys’ fee
award. But a party opposing a fee award based on hardship “has the
burden of coming forward with prima facie evidence of financial hardship
by affidavit or testimony.” See Woerth v. City of Flagstaff, 167 Ariz. 412, 420
(App. 1990). Strickland’s attorney’s “[u]nsworn and unproven assertions”
in motion practice do not satisfy this burden. See id.

¶23 Finally, Strickland claims the superior court erred in failing to
consider the novelty of the legal question she presented regarding a retail
investment dispute and whether awarding attorneys’ fees would chill other
litigants from litigating legitimate contract claims. But a statute of
limitations issue, even one related to a retail investment dispute, is not
novel and an attorneys’ fee award in such circumstances will not deter
further litigants from pursuing legitimate contract claims.

39, ¶ 7 (App. 2009) (“[W]hen two claims are so intertwined as to be
indistinguishable, a court has discretion to award attorney fees under § 12-
341.01 even though the fees attributable to one of the causes of action would
not be recoverable under this statute.”).

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CONCLUSION

¶24 For the foregoing reasons, the superior court’s ruling is
affirmed. The parties’ requests for attorneys’ fees are denied. A.R.S. § 12-
341.01(A). This Court awards costs to Calton and CAI upon compliance
with Arizona Rule of Civil Appellate Procedure 21. A.R.S. § 12-341.

AMY M. WOOD • Clerk of the Court
FILED: JR

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