Opinion
No. 1 CA-CV 14-0684
01-28-2016
JAMES W. GERLACH, Plaintiff/Appellant, v. UPTOWN PLAZA ASSOCIATES, LLC, a foreign limited liability company, Defendant/Appellee.
COUNSEL Platt and Westby, PC, Phoenix By R. Andrew Rahtz Counsel for Plaintiff/Appellant Greenberg Traurig, LLP, Phoenix By Peter W. Sorensen, Nedda R. Gales Counsel for Defendant/Appellee
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 UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL AND MAY BE CITED ONLY AS AUTHORIZED BY RULE. Appeal from the Superior Court in Maricopa County
No. CV 2013-015795
The Honorable J. Richard Gama, Judge
AFFIRMED
COUNSEL Platt and Westby, PC, Phoenix
By R. Andrew Rahtz
Counsel for Plaintiff/Appellant Greenberg Traurig, LLP, Phoenix
By Peter W. Sorensen, Nedda R. Gales
Counsel for Defendant/Appellee
MEMORANDUM DECISION
Judge Margaret H. Downie delivered the decision of the Court, in which Presiding Judge Andrew W. Gould and Judge John C. Gemmill joined. DOWNIE, Judge:
¶1 James W. Gerlach appeals from a judgment dismissing his civil complaint and awarding attorneys' fees to Uptown Plaza Associates, LLC ("Uptown"). For the following reasons, we affirm.
FACTS AND PROCEDURAL HISTORY
Because Gerlach's complaint was dismissed pursuant to Rule 12(b)(6), we assume the truth of all well-pled factual allegations and draw all reasonable inferences in Gerlach's favor. See Coleman v. City of Mesa, 230 Ariz. 352, 356, ¶ 9 (2012); Cullen v. Auto-Owners Ins. Co., 218 Ariz. 417, 419, ¶ 7 (2008). --------
¶2 Gerlach and Uptown entered into a commercial lease agreement ("Lease") in January 1999 for property located at a Phoenix strip mall. Under the Lease, Gerlach's minimum monthly rent was a per-square-foot variable rate based on a square footage figure Uptown provided. The Lease stated that the "[a]pproximate" square footage of the leased space was "1,825 gross square feet of floor area" and further provided:
The Minimum Monthly Rent has been calculated on the basis of the rental rate per square foot of gross floor area specified in Section 1.5. Upon substantial completion of construction of the Premises, Landlord shall determine the actual gross leasable floor area within the Premises . . . and, if necessary, the Minimum Monthly Rent will be recalculated and either increased or decreased, as the case may be.
¶3 After the buildout of the leased premises was completed, Uptown did not advise Gerlach of any change in rent or square footage. Gerlach paid rent based on the 1825 square foot figure set forth in the Lease for almost 13 years.
¶4 Gerlach sold his business in 2012 to an individual who questioned the square footage. Uptown arranged for a survey, which reportedly revealed that Gerlach had paid rent for 271 square feet that should not have been included in the rent base, resulting in an alleged overcharge of more than $200,000 over the Lease term.
¶5 Gerlach filed suit against Uptown in November 2013 for breach of contract and unjust enrichment. Uptown moved to dismiss pursuant to Arizona Rule of Civil Procedure 12(b)(6). The superior court granted the motion, concluding Gerlach's claims accrued in 1999 and were barred by the applicable statutes of limitation. The court also ruled that Gerlach had not alleged facts that would warrant tolling of the limitations period and made "no allegations of concealment by Uptown or allegations that the discovery of the underlying claim was difficult to detect." In addition to expiration of the limitations period, the court concluded the unjust enrichment claim was subject to dismissal because a contract governed the parties' relationship.
¶6 Uptown requested attorneys' fees of $36,905.50 and costs totaling $590.04. Over Gerlach's objection, the court awarded the requested sums and entered final judgment. Gerlach timely appealed. We have jurisdiction pursuant to Arizona Revised Statutes ("A.R.S.") section 12-2101(A)(1).
DISCUSSION
¶7 This Court reviews the grant of a motion to dismiss under Rule 12(b)(6) de novo. See Coleman v. City of Mesa, 230 Ariz. 352, 355, ¶ 7 (2012). We will uphold such a dismissal only if the plaintiff would not be entitled to relief under "any facts susceptible of proof in the statement of the claim." Sw. Non-Profit Hous. Corp. v. Nowak, 234 Ariz. 387, 391, ¶ 10 (App. 2014).
I. Breach of Contract
¶8 The parties agree that a six-year statute of limitations applies to the breach of contract claim. See A.R.S. § 12-548(A)(1) (statute of limitations for breach of written contract). Gerlach contends, though, that his claims did not accrue in 1999 as the superior court determined. Alternatively, he argues the doctrines of equitable tolling and equitable estoppel should apply, making his complaint timely.
¶9 "As a matter of public policy, our 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). Courts examine four factors in determining whether a claim is time-barred: (1) when the cause of action accrued; (2) the applicable limitations period; (3) when the claim was filed; and (4) whether the limitations period was tolled or suspended. Id. at ¶ 8. A statute of limitations defense is properly raised in a motion to dismiss "where it appears from the face of the complaint that the claim is barred." McCloud v. State, Ariz. Dep't of Pub. Safety, 217 Ariz. 82, 85, ¶ 8 (App. 2007).
A. Accrual
¶10 "As a general matter, a cause of action accrues, and the statute of limitations commences, when one party is able to sue another." Gust, Rosenfeld & Henderson v. Prudential Ins. Co. of Am., 182 Ariz. 586, 588 (1995). Arizona, though, applies the "discovery rule" to breach of contract claims. Id. A plaintiff relying on the discovery rule has the burden of establishing its application. See Logerquist v. Danforth, 188 Ariz. 16, 19 (App. 1996).
¶11 Under the discovery rule, a "cause of action does not accrue until the plaintiff knows or, in the exercise of reasonable diligence, should know the facts underlying the cause." Gust, 182 Ariz. at 588. The rule, however, "does not permit a party to hide behind its ignorance when reasonable investigation would have alerted it to the claim." ELM Ret. Ctr., LP v. Callaway, 226 Ariz. 287, 290, ¶ 12 (App. 2010). "[T]he important inquiry in applying the discovery rule is whether the plaintiff's injury or the conduct causing the injury is difficult for plaintiff to detect." Gust, 182 Ariz. at 590.
¶12 Gerlach alleges he "did not discover the fact that he had been charged rent for the additional 271 square feet until he sold his business" in 2012. He contends his failure to discover the true square footage earlier was reasonable because he was "reassured by the Lease" that Uptown would verify square footage after the buildout and make necessary adjustments to the rent amount. Gust, however, makes clear that a party is required to "exercise[] reasonable diligence in monitoring the performance of another under the contract" in order for the discovery rule to apply. 182 Ariz. at 591.
¶13 Gerlach was in possession of the property, and the actual square footage was easily discoverable through minimal effort. Uptown's obligation to re-assess square footage after the buildout did not absolve Gerlach of the duty to exercise reasonable diligence in monitoring Uptown's contractual performance. See Doe v. Roe, 191 Ariz. 313, 324, ¶ 37 (1998) (a plaintiff "is charged with a duty to investigate with due diligence to discover the necessary facts"). Nor does the complaint allege facts suggesting that, after the buildout, Gerlach exercised reasonable diligence by, for example, attempting to determine the true square footage or inquiring about Uptown's efforts to verify the figure set forth in the Lease. See, e.g., ELM Ret. Ctr., 226 Ariz. at 290, ¶ 13 ("[Plaintiff's] complaint does not allege facts establishing that after [plaintiff] purchased the home, it exercised reasonable diligence in discovering the true square footage, nor does the complaint offer an adequate explanation for [plaintiff's] failure to do so.").
¶14 Even viewing the well-pled facts and reasonable inferences therefrom in the light most favorable to Gerlach, the superior court properly determined that his breach of contract claim accrued in 1999.
B. Continuing Breach
¶15 Gerlach alternatively argues that each monthly rent payment he made constitutes a separate breach, permitting him to recover overpayments made less than six years before the complaint was filed. Gerlach relies on Builders Supply Corp. v. Marshall, which held that where a contract calls for a series of payments, each underpayment constitutes a separate breach. 88 Ariz. 89, 95 (1960). The court stated that a cause of action accrues for statute of limitations purposes "each time defendant fails to perform as required under the contract." Id.
¶16 According to Gerlach, "Logic suggests that, if a continuing underpayment constitutes a recurring breach, that a monthly overpayment would trigger the same exception to the statute of limitation." We disagree. Gerlach's ongoing rent payments did not transform Uptown's one-time performance obligation under the Lease to verify square footage into a monthly duty.
C. Equitable Tolling
¶17 "The equitable tolling doctrine is rooted in a number of common law exceptions to statutes of limitations, including: defendant's fraudulent concealment of a cause of action; defendant's inducement of plaintiff not to sue; disability of the suing party; and delays due to war." Hosogai v. Kadota, 145 Ariz. 227, 231 (1985). Equitable tolling is applied sparingly and only under extraordinary circumstances. See McCloud, 217 Ariz. at 87-88, ¶¶ 13, 16. "In instances involving equitable tolling, courts have recognized that, as a matter of equity, a defendant whose affirmative acts of fraud or concealment have misled a person from either recognizing a legal wrong or seeking timely legal redress may not be entitled to assert the protection of a statute of limitations." Porter, 225 Ariz. at 428, ¶ 11.
¶18 Gerlach has not alleged facts suggesting that Uptown prevented him from discovering the true square footage of the premises he occupied or affirmatively induced him not to file suit. The allegations of his breach of contract claim fall short of the "extraordinary circumstances" necessary to trigger equitable tolling. See, e.g., McCloud, 217 Ariz. at 85, 89, ¶¶ 4, 20 (attorney's need to care for disabled brother, the death of family members, and series of surgeries immediately before limitations period expired did not constitute extraordinary circumstances to justify equitable tolling). Nor are the facts of this case analogous to Hosogai, where the plaintiff timely filed suit, received a favorable jury verdict, but had the judgment reversed on appeal based on defective service of process. Hosogai recognized a "narrow equitable exception to the statute of limitations" for cases where a timely lawsuit was filed, the defendant had notice thereof, and the plaintiff demonstrated "reasonable and good faith conduct . . . in prosecuting the first claim and diligence in filing the second claim." 145 Ariz. at 230.
D. Estoppel
¶19 The elements of equitable estoppel are: (1) the defendant engaged in conduct inconsistent with a position it later adopts; (2) plaintiff reasonably relied on such conduct; and (3) plaintiff was injured by defendant's repudiation of its prior conduct. See Valencia Energy Co. v. Ariz. Dep't of Revenue, 191 Ariz. 565, 576-77, ¶ 35 (1998). When a plaintiff relies on a defendant's conduct to estop a limitations defense, courts look to see whether the defendant induced the plaintiff's delay in filing. See, e.g., Nolde v. Frankie, 192 Ariz. 276, 281, ¶ 20 (1998); McBride v. Kieckhefer Assocs., 228 Ariz. 262, 267, ¶ 23 (App. 2011). In Nolde, 192 Ariz. at 281, ¶ 20, our supreme court articulated the following standard:
[I]n determining whether a defendant is estopped from asserting the limitations defense based on inducement to forbear filing suit, a trial court must determine: (1) whether the defendant engaged in affirmative conduct intended to cause the plaintiff's forbearance; (2) whether the defendant's
conduct actually caused the plaintiff's failure to file a timely action; (3) whether the defendant's conduct reasonably could be expected to induce forbearance; and (4) whether the plaintiff brought the action within a reasonable time after termination of the objectionable conduct.
¶20 As noted supra in our discussion of the equitable tolling doctrine, Gerlach has not alleged conduct by Uptown that might give rise to estoppel. Uptown's silence about the square footage and continued collection of rent based on the original figure in the Lease is not "affirmative conduct intended to cause the plaintiff's forbearance." Id.
II. Unjust Enrichment
¶21 Our analysis regarding accrual of the breach of contract claim applies equally to the unjust enrichment claim. Additionally, we agree with the superior court that the unjust enrichment claim was subject to dismissal on a separate, independent ground. The doctrine of unjust enrichment does not apply "where there is a specific contract which governs the relationship of the parties." Brooks v. Valley Nat'l Bank, 113 Ariz. 169, 174 (1976). This well-established tenet is unsurprising, as an essential element of an unjust enrichment claim is the absence of a legal remedy. See Trustmark Ins. Co. v. Bank One, Ariz., NA, 202 Ariz. 535, 541, ¶ 31 (App. 2002).
¶22 There is a contract here — the Lease — that governs the parties' relationship in relevant respects. And there is no dispute that the Lease is valid and enforceable — obviating the necessity to plead unjust enrichment in the alternative. Gerlach's assertion that the unjust enrichment claim exists "independent of the contractual relationship between the parties" is simply not supported by the record. Whether — and to what extent — Uptown was unjustly enriched through the receipt of "excess rent" is wholly dependent on the terms of the Lease.
III. Attorneys' Fees Award
¶23 The Lease includes a provision that states, in pertinent part: "In any dispute between the parties, the prevailing party shall be entitled to recover from the other party . . . all costs and attorneys' fees." Gerlach argues Uptown's filings in the superior court did not justify the hours its attorneys ("GT") billed, and he challenges the "extremely high" hourly rates. Gerlach also stresses that Uptown's fee request for $36,905.50 included an admittedly erroneous $133 charge. Thus, he contends, the award "is excessive on its face and the Trial Court's refusal to even reduce the award when Uptown acknowledges that part of the bill was done in error just solidifies the fact that the lower court abused its discretion in making this award."
¶24 A trial court has broad discretion in awarding attorneys' fees, and we will not disturb a fee award absent an abuse of discretion. Robert E. Mann Constr. Co. v. Liebert Corp., 204 Ariz. 129, 133, ¶ 13 (App. 2003). Courts generally enforce a contract provision for attorneys' fees according to its terms. Geller v. Lesk, 230 Ariz. 624, 627, ¶ 10 (App. 2012).
When the parties contractually agree that a party may recover all of its attorneys' fees, the court's discretion is more limited than when awarding "reasonable" fees. Once the prevailing party makes a prima facie case that the fees requested are reasonable, the burden shifts to the party opposing the fee request to establish that the amount requested is clearly excessive. If that party fails to make such a showing of unreasonableness, the prevailing party is entitled to full payment of the fees. If, however, the party opposing the award shows that the otherwise prima facie reasonable fee request is excessive, the court has discretion to reduce the fees to a reasonable level.Id. at 628, ¶ 11.
¶25 We discern no abuse of discretion. The $550 and $625 hourly rates that Gerlach challenges were for two senior attorneys who billed a relatively small portion of the total hours. An associate with a substantially lower billing rate performed the majority of work. Gerlach's argument that GT billed for an unreasonable amount of time is similarly unpersuasive. GT filed an affidavit "based on contemporaneous billing logs" to support its fee request, which created a presumption of reasonableness. See Geller, 230 Ariz. at 629, ¶ 15 (court may base assumption of reasonableness on detailed affidavit). Uptown was entitled to recover fees for "every item of service which, at the time rendered, would have been undertaken by a reasonable and prudent lawyer to advance or protect his client's interest." Schweiger v. China Doll Rest., Inc., 138 Ariz. 183, 188 (App. 1983). Other than the admittedly erroneous $133 charge, Gerlach has not argued that any of GT's services were beyond what a prudent lawyer would have undertaken.
¶26 The court's decision not to reduce the fee award, even after Uptown admitted unintentionally including an erroneous $133 charge in its initial application, does not establish the award's unreasonableness. A reasonable trier of fact could take into account Uptown's avowal in its reply that it had "incurred fees beyond that $133" after filing the initial application.
CONCLUSION
¶27 We affirm the judgment of the superior court. We deny Gerlach's request for attorneys' fees incurred on appeal because he is not the prevailing party. Pursuant to the parties' contract, we award Uptown its appellate fees as the prevailing party, as well as taxable costs, upon compliance with Arizona Rule of Civil Appellate Procedure 21.