Wallace v. Irving

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UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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

KEITH WALLACE, Plaintiff/Appellee/Cross-Appellant,

v.

CHRIS IRVING, et al., Defendants/Appellants/Cross-Appellees.

No. 1 CA-CV 24-0486
FILED 05-22-2025

Appeal from the Superior Court in Maricopa County
No. CV2020-054359
The Honorable Michael D. Gordon, Judge

AFFIRMED IN PART, REVERSED IN PART, AND REMANDED

COUNSEL

Law Office of Timothy M. Collier PLLC, Scottsdale
By Timothy M. Collier, William A. Weber
Counsel for Plaintiff/Appellee/Cross-Appellant

Dunn Desantis Walt & Kendrick LLP, Phoenix
By Justin V. Niedzialek
Counsel for Defendants/Appellants/Cross-Appellees
 WALLACE v. IRVING, et al.
Decision of the Court

MEMORANDUM DECISION

Presiding Judge Michael S. Catlett delivered the decision of the Court, in
which Judge Daniel J. Kiley and Judge David D. Weinzweig joined.

C A T L E T T, Judge:

¶1 Chris Irving (“Irving”) and Aqua Spa and Pool, LLC (“Aqua
Spa”) (collectively, “Appellants”) appeal the superior court’s judgment
vacating a jury verdict in Irving’s favor and denying them attorney fees.
Keith Wallace (“Wallace”) cross-appeals the superior court’s denial of a
new trial. We reverse the judgment vacating the verdict in favor of Irving.
We therefore remand for the court to determine whether Irving is now
entitled to attorney fees and costs. We otherwise affirm.

FACTS AND PROCEDURAL HISTORY

¶2 Wallace owned and operated Aqua Spa. In 2017, Wallace sold
Irving a forty-nine percent ownership interest, leaving Wallace as the fifty-
one percent owner. In February 2019, Wallace agreed to make Irving the
sole owner. Wallace and Irving executed four agreements memorializing
the deal, two of which were the Purchase Agreement and the Employment
Agreement. Under the Purchase Agreement, Wallace sold Irving his fifty-
one percent interest for $80,000, paid with a promissory note. The
Employment Agreement said Aqua Spa would employ Wallace for five
years, unless terminated earlier, and pay him $2,500 a month. The
Employment Agreement had a non-compete provision and breaching it
would automatically result in termination.

¶3 In May 2019, Aqua Spa’s counsel sent Wallace a letter
terminating his employment. It alleged Wallace breached the non-compete
provision by operating a spa service in the Phoenix area. For that reason,
Aqua Spa informed Wallace the Employment Agreement was terminated
and “no more payments [would] be forthcoming.” Irving also alleged
Wallace violated the Purchase Agreement by not disclosing tax liability, so
Irving would no longer pay the note.

¶4 In response, Wallace denied the allegations and demanded
continuing compensation. Counsel for the parties exchanged emails. But

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other than agreeing Irving would make certain payments on the note, the
parties could not resolve their differences.

¶5 In July 2020, Wallace sued Appellants, alleging they breached
the Employment Agreement and were unjustly enriched. Appellants
counterclaimed for breach of contract, breach of the implied covenant of
good faith and fair dealing, fraud, negligent misrepresentation, and unjust
enrichment. Appellants also asserted Wallace’s claims were time-barred
because he was terminated on May 3, 2019, but did not file his complaint
until July 2020, more than a year later.

¶6 The superior court held a jury trial, and the parties submitted
almost all issues to the jury. But they submitted two issues to the court:
whether Wallace’s claims were untimely and whether Appellants were
equitably estopped from asserting the statute of limitations. The jury
returned four verdicts. One, it found Aqua Spa breached the Employment
Agreement and awarded Wallace $13,241.69 (“the Wallace Jury Verdict”).
Two, it found Wallace did not breach a contract with Irving. Three, it found
Wallace committed fraud but awarded Irving nothing. And four, it found
Wallace committed negligent misrepresentation and awarded Irving
$13,241.69 (“the Irving Jury Verdict”).

¶7 After the jury left, the court found Wallace’s contract claims
accrued on May 3, 2019, and were time-barred. The court also found
Appellants were not estopped from asserting the statute of limitations. So
the court vacated the Wallace Jury Verdict.

¶8 Wallace asked for judgment notwithstanding the verdict. He
argued the court should vacate the Irving Jury Verdict because the jury did
not follow the verdict form’s instructions. Specifically, the verdict form for
Irving’s negligent misrepresentation claim instructed, “Do not use if you
found in favor of Defendant/Counterclaimant Chris Irving for fraud.”
Because the jury signed the fraud and negligent misrepresentation verdict
forms, Wallace argued he was entitled to judgment notwithstanding the
verdict. The court directed Wallace to make that argument in writing. The
court also ordered Appellants to file a form of judgment and apply for
attorney fees after it resolved Wallace’s motion.

¶9 Following the court’s direction, Wallace moved in writing for
entry of judgment under Arizona Rules of Civil Procedure (“Rules”) 54 and
58. He argued the court “should vacate [the Irving Jury Verdict] for the
Jury’s failure to follow the instruction” on the verdict form. Appellants
responded that the court could not vacate the Irving Jury Verdict and, even

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if it could, Wallace waived any argument that the Verdict was defective by
not asking the court to resubmit the claims to the jury using Rule 49.

¶10 Appellants proposed their own form of judgment awarding
Irving $13,241.69 on his negligent misrepresentation claim. Appellants also
requested attorney fees under the Employment and Purchase Agreements
because they prevailed in a contract action. See A.R.S. § 12-341.01.

¶11 In its final judgment, the court vacated the Irving Jury Verdict
under Rule 58. The court reasoned that Appellants “repeatedly took the
position that [the negligent misrepresentation verdict form] should not be
used if the Jury found fraud.” The court thought that “Wallace adequately
preserved and presented the issue to the Court’s determination under Rule
58[.] Clearly, the jury intended that neither party be awarded damages for
any of their claims.” The court ordered that the parties take nothing on
their claims and bear their own attorney fees.

¶12 Wallace sought a new trial under Rules 59(a)(1)(E) and
(a)(1)(H). He argued the jury’s verdict on Irving’s fraud claim could not
stand because it awarded Irving no damages. The court erred, he claimed,
by vacating the Wallace Jury Verdict. The accrual date for his contract
claim, he argued, was August 16, 2019, not May 2019, and, anyway, Aqua
Spa should be estopped from using the statute of limitations. And finally,
he believed the jury gave him insufficient damages for Aqua Spa’s breach
of contract. The court denied Wallace’s motion.

¶13 Appellants appealed, Wallace cross appealed, and we have
jurisdiction. See A.R.S. § 12-2101(A)(1).

DISCUSSION

I. The Irving Jury Verdict

¶14 Appellants argue the court could not vacate the Irving Jury
Verdict for three reasons. First, Wallace waived any defect in that Verdict
by not requesting to resubmit the case to the jury under Rule 49. Second,
vacating that Verdict exceeded the court’s authority under Rule 58. And
third, the court improperly substituted its judgment for the jury’s. Wallace
responds that Rule 58 allowed the court to vacate the Irving Jury Verdict to
conform it to the jury’s intent to award no damages. We conclude the court
could not vacate the Irving Jury Verdict using Rule 58.

¶15 We review de novo the interpretation and application of court
rules. See Chartone, Inc. v. Bernini, 207 Ariz. 162, 167 ¶ 14 (App. 2004);

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Duckstein v. Wolf, 230 Ariz. 227, 231 ¶ 8 (App. 2012). “[T]he plain meaning
of the language” is “the most reliable indicator of the construction and
meaning.” Phillips v. Garcia, 237 Ariz. 407, 410 ¶ 9 (App. 2015). Misapplying
the law is an abuse of discretion and reversible error. Tobin v. Rea, 231 Ariz.
189, 194 ¶ 14 (2013); see also Chartone, Inc., 207 Ariz. at 172–73 ¶ 40–43.

¶16 Rule 58 governs proposed forms of judgment, entering
judgment, notifying parties when judgment is entered, and remittitur. See
Ariz. R. Civ. P. 58(a)–(d). Some rules expressly allow a court to vacate or
modify a jury verdict. See Ariz. R. Civ. P. 50(b); Ariz. R. Civ. P. 59(a)(1)(H).
But Rule 58 does not. So that Rule did not allow the court to vacate the
Irving Jury Verdict. See Tobin, 231 Ariz. at 194 ¶ 14.

¶17 Because the court could not use Rule 58 to vacate the Irving
Jury Verdict, we need not address whether Wallace should have asked to
resubmit the case to the jury under Rule 49. But even if we overlook the
court’s reliance on Rule 58, it should not have vacated the Irving Jury
Verdict because that Verdict was not manifestly irregular or defective. See
Smith v. Tang, 100 Ariz. 196, 202 (App. 1966) (“Where a verdict is manifestly
irregular or defective the trial court may put the verdict in such form as to
conform to the intention of the jury, when the intention can be ascertained
with certainty.”). The superior court thought that “[c]learly, the jury
intended that neither party be awarded damages for any of their claims.”
But that intent cannot “be ascertained with certainty” from the jury’s
verdict forms. Id. It is doubtful—let alone certain—that the jury intended
that neither party get damages when it awarded both damages. After the
verdicts, Wallace’s contract claim faced the statute of limitations, but
Irving’s negligent misrepresentation claim did not. The natural
consequence of the court’s statute of limitations ruling was that Wallace
could no longer press a breach of contract claim. One can only guess what
the jury might have done with Irving’s negligent misrepresentation claim
knowing Wallace could not press a breach of contract claim. And that
uncertainty means the court should not have vacated the Irving Jury
Verdict. We reverse the judgment doing so and instruct the court to
reinstate that Verdict.

II. Wallace’s Cross Appeal

¶18 Wallace argues the court erred by denying him a new trial
because: (1) the jury’s verdict on Irving’s fraud claim was contrary to law;
(2) the evidence did not support the court’s conclusions about the accrual
date for Wallace’s claim and equitable estoppel; and (3) the jury awarded
insufficient damages on his breach of contract claim. See Ariz. R. Civ. P.

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59(a)(1)(E), (a)(1)(H). We will not order a new trial “absent a clear abuse of
discretion.” Delbridge v. Salt River Project Agric. Improvement & Power Dist.,
182 Ariz. 46, 53 (App. 1994).

A. Irving’s Fraud Claim

¶19 Wallace first argues the court should have vacated the jury’s
verdict on Irving’s fraud claim because the jury could not find for Irving
“while finding zero damages[.]”

¶20 Wallace lacks standing to make that argument. Wallace was
neither aggrieved nor materially affected by the court’s judgment. See Ariz.
R. Civ. App. P. 1(d); Waid v. Bergschneider, 94 Ariz. 21, 24 (1963) (“[A] new
trial should be granted only for a cause materially affecting the rights of the
aggrieved party.”); see also Miller v. Palmer, 143 Ariz. 84, 86 (App. 1984).
Although the verdict form said the jury found in favor of Irving on his fraud
claim, it awarded no damages. Damages are required for a fraud claim, so
the court correctly entered judgment for Wallace. See Aaron v. Fromkin, 196
Ariz. 224, 227, ¶ 13 (App. 2000) (listing damages as one of the nine necessary
elements of common-law fraud). The verdict form, on its own, does not
make Wallace an aggrieved party when the final judgment later resolved
Irving’s fraud claim in Wallace’s favor. See Compass Realty & Inv. Corp. v. A
A Refrigeration & Heating, Inc., 21 Ariz. App. 214, 216 (1974) (“Mere
disappointment with a particular result does not constitute aggrievement
sufficient to support an appeal.”).

B. Accrual and Equitable Estoppel

¶21 Wallace next argues the accrual date for his breach of contract
claim was August 16, 2019, the date settlement discussions broke off, not
May 3, 2019, the date he received the termination letter. We disagree.

¶22 “[O]ur legislature has determined that claims must be
brought within an identifiable period of time, and claims brought thereafter
are, absent certain circumstances, too stale to be enforceable.” Porter v.
Spader, 225 Ariz. 424, 427 ¶ 7 (App. 2010); see also Brooks v. S. Pac. Co., 105
Ariz. 442, 444 (1970). Arizona law imposes a one-year limitations period in
actions “[f]or breach of an oral or written employment contract[.]” A.R.S.
§ 12-541(3). And that period begins “when one party is able to sue another.”
Gust, Rosenfeld & Henderson v. Prudential Ins. Co. of Am., 182 Ariz. 586, 588
(1995). So a claim for breaching an employment contract ordinarily accrues
when the contract is breached. See Angus Med. Co. v. Digit. Equip. Corp., 173
Ariz. 159, 162 (App. 1992).

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¶23 At trial, all parties agreed the Employment Agreement is an
employment contract. Wallace’s claim therefore accrued when he knew
Aqua Spa allegedly breached that Agreement. This occurred on May 3,
2019, when Aqua Spa notified Wallace that it was terminating his
employment and “no more payments [would] be forthcoming.” In both
deposition and trial testimony, Wallace admitted he was “fully aware” that
Aqua Spa terminated his employment as of May 3, 2019. So we agree with
the court’s conclusion that Wallace’s claim accrued on May 3, 2019.

¶24 Wallace also argues that, even if his claim accrued on May 3,
2019, the court erred by concluding Aqua Spa was not estopped from
asserting the statute of limitations. For equitable estoppel, Wallace had to
show that (1) specific promises, threats, or inducements by Aqua Spa
prevented him from filing suit; (2) Aqua Spa’s conduct caused his failure to
timely file suit; (3) Aqua Spa’s conduct reasonably could be expected to
induce forbearance; and (4) he brought the action a reasonable time after
Aqua Spa terminated its conduct warranting estoppel. See Nolde v. Frankie, 192 Ariz. 276, 281 ¶ 20 (1998).

¶25 Wallace argues that emails between counsel about mediation
caused his filing delay. But, at best, those communications reflect the
parties’ attempt to settle or mediate their dispute. As Appellants point out,
the “mere conduct of settlement negotiations does not estop the defendant
from pleading the statute of limitations.” Kelley v. Robison, 121 Ariz. 229,
230 (App. 1978). The court correctly concluded that Aqua Spa was not
estopped from asserting the statute of limitations.

¶26 Because the court correctly concluded Wallace filed his breach
of contract claim too late, we need not address whether the jury awarded
him insufficient damages for that claim.

III. Attorney Fees

A. In the Superior Court

¶27 Appellants argue the superior court should have awarded
them attorney fees. After vacating the Irving Jury Verdict, the court did not
award attorney fees and costs to any party because it thought no one
prevailed. The superior court did not abuse its discretion in not awarding
attorney fees or costs to Aqua Spa. See Wistuber v. Paradise Valley Unified
Sch. Dist., 141 Ariz. 346, 350 (1984) (explaining the court of appeals does not
substitute its judgment for the trial court’s in not awarding attorney fees).

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¶28 But we have concluded the court could not vacate the Irving
Jury Verdict. See supra ¶ 17. So, before entering an amended judgment, the
superior court should consider whether Irving is now entitled to attorney
fees and costs under A.R.S. § 12-341.01(A) or the parties’ agreements. We
take no position on that question.

B. On Appeal

¶29 Both Wallace and Appellants request attorney fees and costs
on appeal. We decline Wallace’s request because he has not prevailed. See
supra ¶¶ 22, 27, 29. We also decline Appellants’ request for attorney fees
because they did not follow the procedural requirements for requesting
fees. See Ariz. R. Civ. App. P. 21(a)(2); Olewin v. Nobel Mfg., LLC, 254 Ariz.
346, 354 ¶ 32 (App. 2023). As prevailing parties, Appellants are entitled to
costs on appeal under A.R.S. § 12-341 once they comply with Arizona Rule
of Civil Appellate Procedure 21.

CONCLUSION

¶30 We reverse the superior court’s judgment vacating the Irving
Jury Verdict and instruct it to enter judgment for Irving consistent with that
Verdict. But before doing so, the court should redetermine whether Irving
is entitled to attorney fees. We otherwise affirm.

MATTHEW J. MARTIN • Clerk of the Court
FILED: JR

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