Opinion
2 CA-CV 2022-0098
12-19-2023
Reliant Well Drilling and Pump Corporation, Inc., an Arizona corporation, Plaintiff/Appellee, v. Roger Nusbaum and Jill E. Betz-Nusbaum, husband and wife; Rancho Vista Angus, LLC, an Arizona limited liability company, Defendants/Appellants.
Engelman Berger P.C., Phoenix By Michael P. Rolland Counsel for Plaintiff/Appellee Satchel &Associates P.C., Sierra Vista By Robert D. Satchel Jr. Counsel for Defendants/Appellants
Not for Publication - Rule 111(c), Rules of the Arizona Supreme Court
Appeal from the Superior Court in Cochise County No. S0200CV202100204 The Honorable John F. Kelliher Jr., Judge
Engelman Berger P.C., Phoenix By Michael P. Rolland Counsel for Plaintiff/Appellee
Satchel &Associates P.C., Sierra Vista By Robert D. Satchel Jr. Counsel for Defendants/Appellants
Judge Eckerstrom authored the decision of the Court, in which Presiding Judge Brearcliffe and Judge Kelly concurred.
MEMORANDUM DECISION
ECKERSTROM, JUDGE:
¶ 1 Roger Nusbaum, Jill Betz-Nusbaum, and Rancho Vista Angus LLC (collectively, "Appellants") appeal from the superior court's grant of summary judgment in favor of Reliant Well Drilling and Pump Corporation Inc. and its denial of Appellants' cross-motion for summary judgment. For the following reasons, we reverse and remand for proceedings consistent with this decision.
Factual and Procedural Background
¶ 2 "In reviewing a trial court's rulings on cross-motions for summary judgment, we review questions of law de novo, construing the facts and reasonable inferences in the light most favorable to the party against whom summary judgment was granted." Wood v. Nw. Hosp., LLC, 249 Ariz. 600, ¶ 4 (App. 2020). In 2017, Reliant and Farwest Pump Company, both owned by Clark Vaught, each drilled one agricultural water well on Nusbaum's property in Cochise County. In March 2017, Nusbaum paid $25,000 to Farwest Pump Company. On April 26, 2017, Reliant sent two invoices indicating a total amount due of $217,343.55, due May 26, 2017. In January 2018, Nusbaum wrote a $25,000 check to Reliant, with the memo line reading "Estimate #1001 Deposit."
It appears undisputed that at least one well produced insufficient water and had to be capped. The opening brief maintains that both wells were capped. Reliant does not appear to specifically admit this fact in its filings, instead stating only that the wells "were completed," that the performance of the wells was irrelevant to the action, and that Nusbaum "received the benefit" of the wells because there "is value in learning that the Subject Property has or does not have water for particular purposes."
¶ 3 In April 2019, Reliant wrote to Nusbaum, apparently seeking payment on the outstanding balance as stated in the April 2017 invoices. Nusbaum responded by asking for the "original contracts," noting that the "numbers are way off," that the invoices did not reflect relevant "calculations and payment records including commissions for new business" he had secured for Vaught, and that the "true and accurate number of the balance" was "not $200k." Additionally, in response to Reliant's threatened litigation, Nusbaum repeatedly stated he was in the process of applying for a bank loan. By June 25, 2019, Nusbaum had not informed Reliant whether he had secured a loan, and communications between the parties appear to have ceased.
¶ 4 Reliant filed the underlying action on April 20, 2021, raising claims of breach of contract and unjust enrichment. The parties filed cross-motions for summary judgment.
¶ 5 Reliant argued that it was undisputed that the parties contracted for Reliant to drill two wells on Nusbaum's property, that Reliant had drilled the wells, and that Nusbaum had failed to fully pay the two invoices Reliant had sent for its work. Reliant thus requested the remainder of payment owed on the work, plus interest.
¶ 6 Appellants argued that contested issues of fact existed such that summary judgment in Reliant's favor was improper. As relevant here, they argued the terms of the oral contract were disputed: they urged that Nusbaum's two payments totaling $50,000 had fully satisfied the amount the parties had orally agreed upon for the drilling work, while Reliant claimed that more money was owed, as reflected in the invoices sent in April 2017. Appellants further raised the affirmative defense that Reliant's claims are barred by the three-year statute of limitations set forth in A.R.S. § 12-543, which governs oral agreements.
¶ 7 The superior court summarily granted Reliant's motion and denied Appellants' cross-motion, without making any factual findings or setting forth any reasoning. This appeal followed. We have jurisdiction pursuant to A.R.S. §§ 12-2101(A)(1) and 12-120.21(A)(1).
Discussion
I. Statute of Limitations
¶ 8 Appellants contend the three-year statute of limitations set forth at § 12-543 bars Reliant from obtaining relief in this matter. Although the superior court did not directly address this affirmative defense, by granting summary judgment in favor of Reliant and denying Appellants' cross-motion, it implicitly found the action was not time-barred.
¶ 9 Claims brought outside the relevant limitations period are conclusively barred. Montano v. Browning, 202 Ariz. 544, ¶ 4 (App. 2002). In determining whether a claim is time-barred, we examine: (1) the applicable limitations period; (2) when the plaintiff's cause of action accrued; (3) when the plaintiff filed the claim; and (4) whether the running of the limitations period was suspended or tolled. Porter v. Spader, 225 Ariz. 424, ¶ 8 (App. 2010). Pursuant to § 12-543, an action to enforce an oral contract must be brought "within three years after the cause of action accrues."
Likewise, the parties appear to agree that the claim of unjust enrichment-to the extent it may be asserted in light of the undisputed existence of a contract-is subject to § 12-543. See Costanzo v. Stewart, 9 Ariz.App. 430, 433 (1969); see also Brooks v. Valley Nat. Bank, 113 Ariz. 169, 174 (1976) (where specific contract "governs the relationship of the parties, the doctrine of unjust enrichment has no application"); USLife Title Co. of Ariz. v. Gutkin, 152 Ariz. 349, 354 (App. 1986) ("That the doctrine of unjust enrichment has no application to express contractual situations, quite obviously, results from the fact that unjust enrichment is a form of restitutionary relief available upon either 'implied in fact' contract or quasi-contractual grounds.").
¶ 10 The determination of when a plaintiff's cause of action accrues sometimes implicates Arizona's "discovery rule," under which a cause of action accrues when the plaintiff "knew or by the exercise of reasonable diligence should have known of the defendants' conduct." Logerquist v. Danforth, 188 Ariz. 16, 19 (App. 1996) (quoting Mayer v. Good Samaritan Hosp., 14 Ariz.App. 248, 252 (1971)); see also Specialty Cos. Grp., LLC v. Meritage Homes of Ariz., Inc., 251 Ariz. 365, ¶ 24 (2021). The inquiry "center[s] on the plaintiff's knowledge of the subject event and resultant injuries, whom the plaintiff believed was responsible, and plaintiff's diligence in pursuing the claim." Logerquist, 188 Ariz. at 22. "Application of the discovery rule often depends on resolution of such factual issues." Id.
¶ 11 But not all breach-of-contract actions implicate the discovery rule. See, e.g., Gust, Rosenfeld &Henderson v. Prudential Ins. Co. of Am., 182 Ariz. 586, 588-90 (1995) (tracing application of discovery rule across tort and contract cases). The rule does not apply, for example, when "the plaintiff's injury is open and obvious." Id. at 589-90 ("important inquiry" is whether "plaintiff's injury or the conduct causing the injury is difficult for plaintiff to detect"). In such instances, the "traditional rule" applies, such that a cause of action "accrues, and the statute of limitations commences, when one party is able to sue another," or, in other words, "when the act upon which legal action is based took place." Id. at 588; see also Baseline Fin. Servs. v. Madison, 229 Ariz. 543, ¶ 7 (App. 2012) ("Generally, a cause of action accrues when the contract is breached."). Where no material factual dispute exists, we may resolve the question of accrual as a matter of law. See Montano, 202 Ariz. 544, ¶ 4; see also Mertola, LLC v. Santos, 244 Ariz. 488, ¶ 8 (2018).
¶ 12 Arizona courts have held in a variety of contexts that an action for breach of contract stemming from failure to pay generally begins to accrue upon a stated due date or a demand for payment in full, rather than on a debtor's actual refusal to pay. See, e.g., Mertola, 244 Ariz. 488, ¶ 21 ("[W]hen a credit-card contract contains an optional acceleration clause, a cause of action to collect the entire outstanding debt accrues upon default: that is, when the debtor first fails to make a full, agreed-to minimum monthly payment."); Peterson v. Valley Nat. Bank of Phx., 102 Ariz. 434, 439 (1967) (in context of promissory notes, generally "notes payable on demand are due and payable immediately after execution"); Cheatham v. Sahuaro Collection Serv., Inc., 118 Ariz. 452, 454 (App. 1978) (accrual occurs when "debt becomes due" on promissory note); La Canada Hills Ltd. P'ship v. Kite, 217 Ariz. 126, ¶¶ 2, 13 (App. 2007) (partnership's letters "urging [defendant] to pay" outstanding payments under subscription agreement constituted notice of breach and triggered accrual); Navy Fed. Credit Union v. Jones, 187 Ariz. 493, 494 (App. 1996) (in unmatured installment contract with optional acceleration clause, accrual occurs "on the due date of each matured but unpaid installment," and on date creditor exercises optional acceleration clause as to unmatured future installments). "[A] party's failure to assert a cause of action does not mean that the cause of action has not accrued." Cheatham, 118 Ariz. at 454. Indeed, calculating accrual upon the first default "encourages creditors to begin collection efforts," thus furthering the purpose of the statute of limitations of avoiding litigation of "stale claims." Navy Fed. Credit Union, 187 Ariz. at 495 (quoting In re Estate of Musgrove, 144 Ariz. 168, 171 (App. 1985)).
¶ 13 Here, Reliant sent invoices in which it demanded full payment by May 26, 2017. Nusbaum's failure to pay by that date provided Reliant clear notice of the breach. At that time, it could have brought suit to enforce collection of the balance. See Gust, 182 Ariz. at 588; La Canada Hills, 217 Ariz. 126, ¶ 13. Thus, the statute-of-limitations period began to run no later than May 27, 2017, the first day after the stated due date on the invoices. Therefore, the three-year limitations period ended on May 26, 2020. § 12-543. Reliant filed its complaint nearly eleven months later, on April 20, 2021. Thus, the action is time-barred, absent any suspension or tolling of the limitations period.
¶ 14 Reliant does not meaningfully challenge that the limitations period ended before it filed suit. Instead, it argues the limitations period was "reset," either by acknowledgment of the debt, see A.R.S. § 12-508, or by equitable estoppel. Like the determination of when accrual begins, the determination of whether a limitations period is tolled or estopped may be decided as a matter of law if premised on undisputed facts. See Steinfeld v. Marteny, 40 Ariz. 116, 125 (1932).
¶ 15 Reliant's argument that the limitations period was reset by acknowledgment of the debt fails as a matter of law. Reliant correctly asserts that when a debtor renews his promise to pay a debt otherwise barred by the statute of limitations, the new promise may be independently enforceable. Under such circumstances, a new limitations period will begin to run upon the new agreement. See De Anza Land &Leisure Corp. v. Raineri, 137 Ariz. 262, 267 (App. 1983). However, as Arizona jurisprudence and statute have long recognized, "there must be both an acknowledgment of the debt and an express or implied promise to pay" before the action may be founded upon the new promise. John W. Masury & Son v. Bisbee Lumber Co., 49 Ariz. 443, 473-74 (1937); see also § 12-508.
To the extent Reliant reasserts on appeal its contention that the statute of limitations was tolled by Nusbaum's emails causing it to forebear from filing suit, that argument also fails. As evidenced in the exhibits filed by the parties, the relevant communications took place between April 11, 2019 and June 25, 2019, a period of seventy-five days. Reliant filed its complaint on April 20, 2021, nearly eleven months after the close of the limitations period. See § 12-543. Thus, even assuming the necessary statutory elements were met, a tolling period of seventy-five days would not prevent the complaint from being time-barred on that ground.
¶ 16 To effectively reset the limitation period under § 12-508, the indebted party "must sufficiently identify the obligation referred to, though it need not specify the exact amount or nature of the debt, must contain a promise, express or implied, to pay the indebtedness, and must contain, directly or impliedly," an acknowledgment of the debt's justness. Bulmer v. Belcher, 22 Ariz.App. 394, 396 (1974). The acknowledgment must take the form of a signed writing. See Freeman v. Wilson, 107 Ariz. 271, 275-76 (1971).
¶ 17 Justness "refers to the moral obligation which the debtor feels rests upon himself to repay the original obligation." Id. (two signed letters agreeing, among other things, to "pay it by the month," offered "legally sufficient acknowledgment of the indebtedness" to remove limitations period). However, a denial of "the full amount of the indebtedness" is, "in effect, a denial of the justness" of the debt and is insufficient to revive the time-barred claim. Masury, 49 Ariz. at 475-76 (where debtor claimed it was "entitled to some adjustment" on past-due account, that response constituted refusal to pay original debt, not acknowledgment of debt's "justness"). Similarly, an "offer of a compromise" is not "sufficient to take a case out of the statute of limitations." Id. at 468. And partial payment, alone, is insufficient to demonstrate acknowledgment of a debt. Cheatham, 118 Ariz. at 454-55.
¶ 18 Even assuming Nusbaum's 2019 correspondence with Reliant satisfies the elements of identifying the debt in a signed writing, nothing in the record supports a finding that Nusbaum acknowledged the justness of the claim. Like the debtor in Masury, Nusbaum denied that he owed the "full amount of the indebtedness" Reliant claimed remained outstanding on the account. 49 Ariz. at 476. In particular, upon Reliant's first attempt to collect on the outstanding balance, Nusbaum responded by stating that "the projects are not completed" and that certain "calculations and payment records including commissions for new business" were not reflected in the invoiced amounts. Later that day, he told Reliant that the "numbers are way off in your claim." Shortly thereafter, he informed Reliant that he was considering obtaining legal representation "if we cannot come to a real number." And later that month, in response to Reliant's threat of imminent litigation, Nusbaum again directly refuted the claimed balance. In short, although Reliant repeatedly asked Nusbaum to name an exact amount he thought he owed, no evidence presented by either party suggests this ever occurred. Rather, the remainder of the correspondence between the parties concerned Nusbaum's efforts to obtain a loan, the purpose of which is apparently disputed by the parties. Because Nusbaum repeatedly denied that he owed Reliant's claimed balance, the requirement that he, as debtor, acknowledge the justness of the debt cannot be met as a matter of law. See Masury, 49 Ariz. at 476. Thus, the statute of limitations was not reset by any acknowledgment of the debt.
Reliant argues the only possible interpretation of these efforts was that Nusbaum agreed he owed, and sought a loan to pay for, the entire alleged balance. But Appellants, in both their filings below and their briefing on appeal, claim the loan was intended to finance a continuation of the drilling project. That statement comports with Nusbaum's early reply to Reliant's April 2019 request for payment, in which he noted the project was not yet finished.
¶ 19 Reliant also argues that Nusbaum's conduct induced it to forestall litigation, such that it would be inequitable to dismiss the action as time-barred. Under principles of equitable estoppel, a defendant may not assert a statute of limitations defense if "by its conduct the defendant induces the plaintiff to forego litigation by leading plaintiff to believe a settlement or adjustment of the claim will be effected without the necessity of bringing suit." Roer v. Buckeye Irrigation Co., 167 Ariz. 545, 547 (App. 1990); see also Cheatham, 118 Ariz. at 455.
¶ 20 To successfully assert estoppel of the statute of limitations, a court must consider whether a plaintiff has established four factors. Nolde v. Frankie, 192 Ariz. 276, ¶¶ 16, 20 (1998). These are: (1) whether the defendant intended by its affirmative conduct to cause the plaintiff's forbearance; (2) whether the defendant's conduct actually caused the plaintiff's failure to timely file; (3) whether the defendant's conduct "reasonably could be expected to induce forbearance;" and (4) whether the plaintiff filed suit "within a reasonable time after termination of the objectionable conduct." Id. ¶ 20. But, "the estoppel by inducement doctrine does not permit the indefinite and unlimited extension of the limitations period." Id. ¶ 19.
¶ 21 Although generally all four factors involve factual questions and must be resolved by a factfinder, "a court appropriately may conclude as a matter of law that no reasonable jury could find for the plaintiff on one or more of these inquiries." Id. ¶ 20. From the record before us, we cannot ascertain on what ground or grounds the superior court granted summary judgment. Nothing in the record suggests the court directly considered Appellants' statute-of-limitations defense at all, much less how it applied any factors relevant to Reliant's equitable estoppel claim.
¶ 22 However, even assuming the first three factors were met, we can conjure no reasonable interpretation of the facts that could sustain a finding that Reliant's delay in commencing litigation was reasonable. The communications between Reliant and Nusbaum broke down in June 2019, about eleven months before the limitations period ended and twenty-two months before Reliant filed suit. The record contains no further indicia of negotiation between the parties that might have induced Reliant to forebear filing suit. Indeed, the parties present no evidence of any communication between them after the June 2019 email exchange ended. On this record, no trier of fact could find Reliant's twenty-two-month delay in filing suit reasonable. See, e.g., Brewer v. Food Giant Supermarkets, Inc., 121 Ariz. 216, 217 (App. 1978) (no estoppel defense, when last conversation between insurance carrier and injured insured occurred sixteen months before limitations period ended); Nelson v. Nelson, 137 Ariz. 213, 216 (App. 1983) (same as to eight-year delay in filing suit); cf. Certainteed Corp. v. United Pac. Ins. Co., 158 Ariz. 273, 274-76, 278 (App. 1988) (suit filed within "reasonable time" when first indication claim was rejected occurred one week before close of limitations period and complaint filed two months thereafter). Therefore, Reliant's claim that the limitations period must be equitably estopped also fails.
Because we deem the action time-barred, we need not address the remaining claim raised on appeal, namely that disputed issues of material fact existed so as to preclude an entry of summary judgment.
II. Attorney Fees and Costs
¶ 23 Both parties request their attorney fees and costs on appeal, as provided by A.R.S. § 12-341.01. In our discretion, we grant Appellants' request for fees. As the successful party, Appellants are also entitled to their costs on appeal as provided by A.R.S. § 12-341, upon their compliance with Rule 21(b), Ariz. R. Civ. App. P.
Disposition
¶ 24 Because we find Reliant's claims are barred by the statute of limitations set forth in § 12-543, we reverse the superior court's grant of summary judgment in favor of Reliant. We remand the matter to the superior court for proceedings consistent with this decision.