Johnson v. Swing ( 2015 )

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UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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.
ARIZONA COURT OF APPEALS
DIVISION ONE
JOHNSON UTILITIES, LLC dba JOHNSON UTILITIES COMPANY, an
Arizona limited liability company; THE CLUB AT OASIS, LLC, an
Arizona limited liability company, Plaintiffs/Appellants/Cross-Appellees,
v.
SWING FIRST GOLF, LLC, an Arizona limited liability company,
Defendant/Appellee/Cross-Appellant,
DAVID ASHTON, Defendant/Appellee.
No. 1 CA-CV 13-0625
FILED 8-27-2015
Appeal from the Superior Court in Maricopa County
No. CV2008-000141
The Honorable John Christian Rea, Judge
AFFIRMED
COUNSEL
Sanders & Parks, PC, Phoenix
By Garrick L. Gallagher, Anoop Bhatheja
Margrave Celmins, PC, Scottsdale
By Lat J. Celmins, Michael L. Kitchen
Co-Counsel for Plaintiffs/Appellants/Cross-Appellees
Craig A. Marks, PLC, Phoenix
By Craig A. Marks
Counsel for Defendant/Appellee/Cross-Appellant Swing First Golf, LLC
JOHNSON v. SWING
Decision of the Court
MEMORANDUM DECISION
Judge Maurice Portley delivered the decision of the Court, in which
Presiding Judge Andrew W. Gould and Judge Jon W. Thompson joined.
P O R T L E Y, Judge:
¶1 Johnson Utilities, LLC (“Utility”) and The Club at Oasis, LLC
(“Oasis”) (collectively “Utility/Oasis”) challenge the jury verdicts and
resulting judgment in favor of Swing First Golf, LLC (“SFG”). The
appellants argue: (1) the court, and jury, lacked jurisdiction to decide SFG’s
breach of tariff contract claim; (2) the court erred in denying its motion for
directed verdict at the close of both trials, and in denying Utility’s Arizona
Rule of Civil Procedure (“Rule”) 50 motion at the conclusion of the second
trial; (3) the court erred by submitting SFG’s quantum meruit claim to the
jury; (4) the court erred in admitting impermissible and prejudicial
evidence; and (5) the court abused its discretion in awarding attorneys’ fees
and costs to SFG. And on its cross-appeal, SFG argues the court erred in
granting summary judgment to Utility and dismissing SFG’s breach of the
covenant of good faith and fair dealing claim. For the following reasons,
we affirm the judgment.
FACTS1 AND PROCEDURAL HISTORY
¶2 Utility is a water utility company in the San Tan Valley. Oasis
owns a golf course, and is owned by George Johnson, the president and
majority owner of Utility. SFG purchased a golf course in 2004 from
1We review the evidence in the light most favorable to sustain the verdict
and judgment. Hutcherson v. City of Phoenix, 192 Ariz. 51, 53, 961 P.2d 449,
451 (1998) (citations omitted).
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Johnson Ranch Holdings2 and watered the course with water provided by
Utility.3
¶3 Two years after SFG purchased the golf course, George
Johnson and David Ashton, SFG’s manager, discussed a plan for SFG to
manage the Oasis golf course and, in return for SFG’s management services,
Johnson proposed to pay SFG with water credits provided by Utility.
Ashton drafted a letter of understanding (“Oasis Agreement”) outlining the
scope of SFG’s management services and confirming that Utility would
provide water credits to pay for those services.4 Ashton and Johnson shook
hands in Johnson’s office to confirm the agreement. SFG then began to
manage Oasis, and Utility provided the agreed-upon water credits.
Specifically, Utility supplied SFG with irrigation water for its golf course
each month and sent a monthly invoice. SFG did not pay the invoice, and
the following month’s invoice did not show any balance due.
¶4 SFG managed Oasis for six months. SFG had not anticipated
that Johnson would fire the Oasis staff as SFG began managing the golf
course and that it would also be responsible for being the golf course’s
caretaker. As a result, and after training a new on-site manager, SFG
resigned in November 2006. The following month, after changing SFG’s
accounts for the CAP water and effluent, Utility sent new invoices to SFG
for the irrigation water that had been delivered and credited to SFG under
the Oasis Agreement. The invoices reflected that Utility had raised SFG’s
rates for effluent from $0.62 per thousand gallons, the rate approved by the
2 Johnson Ranch Holdings (“JRH”) had a Utilities Services Agreement with
Utility for water services. Although JRH did not, as part of the golf course
sale, assign its rights under the agreement to SFG, SFG argued during the
first trial that the parties adopted the agreement. However, the court found
the Utilities Services Agreement was a discriminatory contract and held
that it was “illegal and against public policy” because the agreement
provided a benefit to one of Utility’s customers without providing that
same benefit to its other customers.
3 Utility initially provided untreated water from the nearby Central Arizona
Project canal (“CAP water”). The parties, however, understood and agreed
that Utility would provide treated wastewater (“effluent”) to SFG for
irrigation upon completion of the wastewater treatment plant, and Utility
eventually delivered effluent water.
4 During the first trial, the court held the Oasis Agreement to be
unenforceable, and granted Utility’s motion for summary judgment in part
and dismissed SFG’s breach of contract (Oasis Agreement) claim.
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Arizona Corporation Commission (“ACC”), to $0.83 per thousand gallons,
and raised the CAP water rate from $0.82 per thousand gallons, the ACC
tariff rate, to $3.75 per thousand gallons. SFG paid for the water received
at the tariff rate.
¶5 Additionally, SFG was not paid for its management services.
Moreover, Utility began withholding effluent and, through the end of 2007,
delivered almost exclusively the more expensive CAP water to SFG, and
billed SFG at the rates above the ACC-approved rates. Utility also turned
off SFG’s irrigation water in November 2007 claiming that SFG owed about
$215,000. SFG filed an informal complaint with the ACC and Utility
restored SFG’s irrigation service. Then seeking to prevent further service
disruption, SFG filed a formal complaint with the ACC. Utility then
resumed sending SFG effluent; in fact, Utility once delivered so much
effluent that the golf course lake flooded much of the 18th-hole fairway.
¶6 Utility sued SFG and Ashton in January 2008 for failure to pay
its water bills and for defamation.5 In response, SFG answered and filed a
thirteen-count counterclaim, including multiple breach of contract claims,
quantum meruit, specific performance, negligence and a number of tort
claims.6 After discovery, voluntary dismissals and pretrial motions,
including summary judgment for Utility on SFG’s bad faith claim, the only
claims remaining for trial were the breach of contract claims, SFG’s claims
for trespass and negligence related to the golf-course flooding, its quantum
meruit claim, and defamation claim.
¶7 The dispute was tried in March 2012. The jury’s verdicts were
as follows: (1) SFG owed Utility $151,156 for breach of contract; (2) Utility
owed SFG $1,000,000 for breach of contract; (3) Oasis owed SFG $54,600 on
the quantum meruit claim related to the Oasis Agreement; (4) Ashton was
awarded $10,000 for compensatory damages and $10,000 as punitive
damages for defamation; and (5) Utility was negligent and committed
5 Specifically, Utility alleged: (1) breach of contract (Utility Service
Agreement); (2) breach of the covenant of good faith and fair dealing; (3)
tortious interference; and (4) defamation (as to SFG and Ashton).
6 SFG’s counterclaims included: (1) breach of contract – Utility Service
Agreement; (2) breach of contract – Oasis Agreement; (3) quantum meruit;
(4) unjust enrichment; (5) breach of contract – tariff rate schedule; (6) breach
of covenant of fair dealing; (7) specific performance; (8) negligence; (9)
trespass to land; (10) interference with a business relationship; (11)
defamation; (12) unlawful use of monopoly power; and (13) racketeering.
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trespass by over-delivering effluent and flooding the golf course, but no
damages were awarded.7 Utility/Oasis filed a motion for a new trial and
the court granted the motion, vacated the verdicts on the contract claims
and ordered a new trial on those claims.
¶8 The parties then tried the breach of contract issues. After
considering the evidence, argument and instructions, the jury only found
for SFG on its breach of contract claim and awarded it $41,883.11. The court
considered SFG’s request for attorneys’ fees, and in the final judgment
awarded SFG $300,737.25 in attorneys’ fees.
¶9 Utility/Oasis then appealed the quantum meruit verdict from
the first trial, the breach of contract verdict from the second trial, and SFG’s
award of attorneys’ fees. SFG filed a cross-appeal. We have jurisdiction
pursuant to Arizona Revised Statutes (“A.R.S.”) section 12-2101(A)(1)8 and
Arizona Rule of Civil Appellate Procedure 8(a).
DISCUSSION
I. UTILITY/OASIS’S APPEAL
¶10 In challenging the verdicts in favor of SFG on its quantum
meruit and breach of tariff contract claims, Utility/Oasis asks that we enter
judgment in its favor, or alternatively, for a new trial to correct alleged
evidentiary errors. Utility/Oasis also seeks a reduction in SFG’s attorneys’
fees.
A. Subject Matter Jurisdiction
¶11 Utility/Oasis argues that the trial court and, as a result, the
jury, lacked jurisdiction to decide SFG’s breach of tariff contract claim
because the ACC has exclusive jurisdiction over utility regulation.9 Subject
matter jurisdiction is a question of law we review de novo. State v. Dixon,
231 Ariz. 319, 320, ¶ 3, 294 P.2d 157, 158 (App. 2013) (citation omitted).
7 Utility/Oasis does not appeal the defamation verdict and SFG does not
appeal the verdict on its negligence and trespass claims.
8 We cite the current version of the statute unless otherwise noted.
9 Utility/Oasis filed a petition for special action asking this court to review
the superior court’s denial of its motion to dismiss based on lack of subject
matter jurisdiction. We denied the request for stay and declined to take
special action jurisdiction.
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¶12 “Subject matter jurisdiction is the power to hear and
determine cases of the general class to which the particular proceedings
belong,” In re Marriage of Dorman, 198 Ariz. 298, 301, ¶ 7, 9 P.3d 329, 332
(App. 2000) (quoting Estes v. Superior Court, 137 Ariz. 515, 517, 672 P.2d 180,
182 (1983)) (internal quotation marks omitted), and is conferred by our
constitution or statutes, State v. Maldonado, 223 Ariz. 309, 311, ¶ 14, 223 P.3d
653, 655 (2010). Subject matter jurisdiction cannot be vested in a court solely
by waiver or estoppel. Guminski v. Ariz. State Veterinary Med. Examining Bd.,
201 Ariz. 180, 184, ¶ 18, 33 P.3d 514, 518 (App. 2001).
¶13 Disputes involving whether a contract is enforceable or
breached, even when one party is a utility, is left to the exclusive jurisdiction
of Arizona courts. See Ariz. Const. art. 6, § 1; General Cable Corp. v. Citizens
Utilities Co., 27 Ariz. App. 381, 386, 555 P.2d 350, 355 (1976) (“We agree with
the trial court that the construction and interpretation to be given to legal
rights under a contract reside solely with the courts . . . .”); see, e.g., Nelson
v. Rice, 198 Ariz. 563, 567, ¶ 13, 12 P.3d 238, 242 (App. 2000) (noting that the
trial court has to determine whether a contract is unconscionable as a matter
of law). In fact, more than fifty years ago our supreme court stated that:
“No judicial power is vested in or can be exercised by the corporation
commission unless that power is expressly granted by the constitution.”
Trico Elec. Coop. v. Ralston, 67 Ariz. 358, 363, 196 P.2d 470, 473 (1948). And
although the ACC has broad jurisdiction over “public service corporations”
pursuant to Article 15 of the Arizona Constitution, the provision does not
give the ACC jurisdiction to entertain and resolve contract claims. See Trico,
67 Ariz. at 362-65, 196 P.2d at 472-74 (comparing Arizona Constitution
Article 15 to Article 6, and concluding that the Constitution vested no
jurisdiction in the ACC to construe contracts and determine their validity);
see, e.g., Ariz. Corp. Comm’n v. Tucson Gas, Elec. Light & Power Co., 67 Ariz.
12, 189 P.2d 907 (1948).
¶14 Utility/Oasis, however, contends that the ACC has exclusive
jurisdiction in this case because SFG’s contract claim is not based on an
enforceable contract. We disagree. This is not a case about setting water
rates. Instead, Utility elected to sue SFG in the Maricopa County Superior
Court for breach of contract and related legal theories for failing to pay its
water bill, including the water that SFG received while it provided
management services at the Oasis golf course. The fact that Utility/Oasis
was unsuccessful given the totality of the evidence, does not wrest subject
matter jurisdiction from the court.
¶15 Moreover, even though one of SFG’s claims against Utility
involved whether Utility had billed SFG, its customer, above the rates
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approved by the ACC, the court had subject matter jurisdiction to resolve
the contract dispute. See Sommer v. Mountain States Tel. & Tel. Co., 21 Ariz.
App. 385, 387-88, 519 P.2d 874, 876-77 (1974). Therefore, the superior court
had subject matter jurisdiction to resolve the dispute between Utility and
its customer. See Trico, 67 Ariz. at 365, 196 P.2d at 474; see also General Cable,
27 Ariz. App. at 386, 555 P.2d at 355 (concluding that the ACC cannot
construe and interpret the parties’ rights under a contract, even if that
contract had been specifically approved by the ACC).
¶16 Utility/Oasis also contends the jury had to decide water
utility policy, even though the ACC has sole and exclusive jurisdiction. We
disagree with the argument.
¶17 Neither jury in either trial was asked to decide water utility
regulation policy. Instead, the jury in the second trial had to decide whether
SFG or Utility breached any contracts and, if so, to decide damages.
Because the jury was not asked to resolve water utility regulation policy or
rates, and did not, the superior court was not divested of subject matter
jurisdiction over this lawsuit.
B. Breach of Tariff Contract Claim
¶18 Utility/Oasis next asserts that the superior court erred in
denying its motion for directed verdict10 at the close of both trials, and in
denying its Rule 50(b) post-judgment motion for judgment as a matter of
law after the second trial. Utility/Oasis asserts that SFG failed to present
any evidence to support its breach of tariff contract claim.
¶19 We review the court’s ruling on a motion for directed verdict
and a motion for judgment as a matter of law de novo. Felder v.
Physiotherapy Assocs., 215 Ariz. 154, 162, ¶ 36, 158 P.3d 877, 885 (App. 2007);
Warne Invs., Ltd. v. Higgins, 219 Ariz. 186, 194, ¶ 33, 195 P.3d 645, 653 (App.
2008). We will affirm the ruling unless, like a motion for summary
judgment, “the facts produced in support of the claim or defense have so
little probative value, given the quantum of evidence required, that
reasonable people could not agree with the conclusion advanced by the
10 Utility/Oasis did not provide the transcript from the first trial. As a
result, we presume that the record would support the court’s ruling. Baker
v. Baker, 183 Ariz. 70, 73, 900 P.2d 764, 767 (App. 1995). Consequently, the
superior court did not err by denying the motion for directed verdict in the
first trial. See id.7
JOHNSON v. SWING
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proponent of the claim or defense.” Orme Sch. v. Reeves, 166 Ariz. 301, 309,
802 P.2d 1000, 1008 (1990); see Ariz. R. Civ. P. 50(a).
¶20 To prevail on its breach of contract claim, SFG was required
to prove it had a contract with Utility, Utility breached the contract, and
SFG suffered resulting damages. See Goodman v. Physical Res. Eng’g, Inc.,
229 Ariz. 25, 28, ¶ 7, 270 P.3d 852, 855 (App. 2011). Utility does not dispute
the existence of a contract – it provided irrigation water to SFG for a fee.
Instead, Utility argues that SFG claimed that it had a right to effluent for its
irrigation water, but failed to prove a contractual right to effluent instead
of CAP water. The record belies the focus of the argument.
¶21 SFG presented evidence to the jury that Utility breached its
tariff contract by: (1) overcharging SFG for deliveries of both CAP water
and effluent; (2) withholding effluent; (3) improperly charging for
minimum bills; (4) over-delivering irrigation water resulting in flooding of
the golf course; (5) manufacturing bills; (6) using a manufactured account
balance as a pretext to discontinue service; (7) failing to follow Arizona
Administrative code regulations; and (8) not providing appropriate credits
for overcharges. And citing to A.R.S. § 47-2306(B), SFG also claimed that
Utility breached its contracts by failing to use its best efforts to deliver
effluent to SFG.
¶22 Because the water rates that Utility can charge its customers
for CAP water and effluent are set by the ACC, the approved tariffs
constitute an enforceable contract between Utility and its customer, SFG.
See Sommer, 21 Ariz. App. at 387-88, 519 P.2d at 876-77. SFG presented
evidence that Utility breached the contract. SFG also presented evidence
that it was damaged as a result of Utility’s breach and the amount of those
damages, including the amount SFG overpaid between November 2006 and
December 2007.
¶23 The jury heard the testimony. The jury had to determine the
credibility of the witnesses, evaluate the exhibits and determine the facts in
reaching its verdict. See Logerquist v. McVey, 196 Ariz. 470, 488, ¶ 52, 1 P.3d
113, 131 (2000). The jury fulfilled its role, found that Utility had breached
the tariff rates, and awarded SFG $41,883.11 in damages. Because
substantial evidence supported the jury’s breach of tariff contract verdict,
we find no error.
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C. Quantum Meruit Claim
¶24 Utility/Oasis argues that the superior court erred in the first
trial by submitting SFG’s quantum meruit claim to the jury because the
claim was based on an illegal contract. We disagree.
¶25 “Quantum meruit” is the measure of damages imposed when
a party prevails on the equitable claim of unjust enrichment. W. Corr. Grp.,
Inc. v. Tierney, 208 Ariz. 583, 590, ¶ 27, 96 P.3d 1070, 1077 (App. 2004) (citing
Landi v. Arkules, 172 Ariz. 126, 135, 835 P.2d 458, 467 (App. 1992)). To
recover quantum meruit damages, a plaintiff must prove “the defendant
received a benefit, that by receipt of that benefit the defendant was unjustly
enriched at the plaintiff’s expense, and that the circumstances were such
that in good conscience the defendant should provide compensation.”
Freeman v. Sorchych, 226 Ariz. 242, 251, ¶ 27, 245 P.3d 927, 936 (App. 2011).
¶26 Utility/Oasis contends, however, that SFG cannot recover
damages under its quantum meruit theory because the court found the
Oasis Agreement to be unenforceable and against public policy. Although
the agreement was unenforceable, quantum meruit damages can be
awarded when one party has performed in return for a promise that turns
out to be unenforceable on public policy grounds. See Blue Ridge Sewer
Improvement Dist. v. Lowry and Assocs., Inc., 149 Ariz. 373, 375, 718 P.2d 1026,
1028 (App. 1986) (noting that a plaintiff may recover under quantum meruit
despite the possible illegality of the underlying contract); Pelletier v. Johnson,
188 Ariz. 478, 937 P.2d 668 (App. 1996) (allowing a seller to recover on a
quantum meruit claim against the buyer even though the contract was
illegal under Arizona law); see also Restatement (Second) of Contracts § 198
cmt. b (1981) (claimant entitled to restitution for performance under a
contract determined to be against public policy where “the public policy is
intended to protect persons of the class to which he belongs and, as a
member of that protected class, he is regarded as less culpable.”); see also
Restatement (Third) of Restitution and Unjust Enrichment § 32 (2011).
¶27 Here, SFG provided golf course management services for six
months to Oasis pursuant to an agreement made between SFG and Johnson,
the owner of Oasis and Utility. Johnson, on behalf of Utility, agreed that
Utility would provide water credits to SFG in exchange for SFG’s
management services. The superior court found the Oasis Agreement
unenforceable and against public policy because “[a] public utility must
treat all customers without discrimination.” The court, as a result,
dismissed SFG’s breach of Oasis Agreement claim, but allowed the jury to
decide whether SFG was entitled to damages under its quantum meruit
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claim. Because there were facts supporting the equitable quantum meruit
claim and damages, the court did not err by allowing the jury to decide
whether SFG was entitled to quantum meruit damages despite the illegality
of the Oasis Agreement.
¶28 Utility/Oasis also claims the superior court erred in denying
its request in the first trial for a non-uniform quantum meruit jury
instruction. We review de novo whether jury instructions correctly state
the law. State v. Torres, 233 Ariz. 479, 481, 314 P.3d 825, 827 (App. 2013).
We review jury instructions as a whole to determine whether the jury was
properly guided in its deliberations. See Terry v. Gaslight Square Assocs., 182
Ariz. 365, 368, 897 P.2d 667, 670 (App. 1994).
¶29 During the first trial, Utility/Oasis requested the following
non-uniform jury instructions:
A party may not recover on an unjust enrichment claim where
the claimed amount is simply the amount allegedly due on a
contract.
Where a contract is alleged, a party has no claim for unjust
enrichment.
An innocent party to an illegal contract may only seek
restitution under the contract if a public interest is not
threatened.
The court rejected the requested instruction, and gave the following:
Quantum Meruit11
Swing First is entitled to recover the reasonable value of the
services rendered to Oasis unless you find that either one of
two things was true in this case:
First, Swing First is not entitled to recover for his services if it
was understood by Swing First and Oasis that the services
were being rendered free of charge. It is Oasis’ burden to
show that the parties had such an understanding.
11This is the Revised Arizona Jury Instruction for Quantum Meruit. See
Rev. Ariz. Jury Instr. (Civil) Contract 24 (5th ed. 2013).
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Second, Swing First may not recover for his services if you
find that, under all the circumstances, it was not unfair for
Oasis to receive the benefit of Swing First’s services without
paying for them.
Unless you find that Swing First and Oasis understood that
the services were being rendered free of charge, or that under
all the circumstances it was not unfair for Oasis to receive the
benefit of those services without paying for them, you should
award Swing First the reasonable value of the services. In
determining what the reasonable value of Swing First’s
services was, you may consider the nature of the services
provided and the customary rate of pay for such services.
The instruction the court gave was not a misstatement of the law but
reflected the current state of the law. And viewing the instruction with the
other instructions in this case, the jury was not misled by the instruction
and, as a result, we find no error. See Blue Ridge, 149 Ariz. at 375, 718 P.2d
at 1028.
¶30 Utility/Oasis’s last challenge to the quantum meruit verdict
is based on In re Estate of Newman, and Utility/Oasis contends that the claim
should have been decided by the judge rather than the jury because it is
purely an equitable claim. 219 Ariz. 260, 274, ¶ 55, 196 P.2d 863, 877 (App.
2008). In Newman, a probate matter, we stated that there is no constitutional
right to a jury trial for equitable claims, including breach of fiduciary duty
relating to a trustee’s duties in probate proceedings. Id. at 273-74, ¶¶ 53, 57,
196 P.3d at 876-77; see Henry v. Mayer, 6 Ariz. 103, 114, 53 P. 590, 593 (Ariz.
Terr. 1898) (“[T]he cause being one of equitable jurisdiction, the court below
was not bound to submit any issue of fact to a jury[.]”). This case, however,
is not a probate action. Instead, it was a contract and tort dispute that was
whittled down to just the equitable claim against Oasis after the verdicts in
the first trial and the court’s grant of the motion for new trial. Moreover,
Arizona Rule of Civil Procedure 39(m) provides:
In all actions not triable of right by a jury the court upon
motion or of its own initiative may try any issue with an
advisory jury or, the court, with the consent of both parties,
may order a trial with a jury whose verdict has the same effect
as if trial by jury had been a matter of right.
And “even in equity cases, where a jury has been demanded, the court may
not withdraw the case from the jury’s consideration if there are
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controverted issues of fact.” Jones v. CPR Div., Upjohn Co., 120 Ariz. 147,
150, 584 P.2d 611, 614 (App. 1978) (internal citation and quotation marks
omitted). Although the quantum meruit claim is an equitable claim, the
jury had to resolve diverse factual questions to determine if SFG was
entitled to any damages under the theory. See id. Consequently, the court
properly allowed the jury to decide the issue after properly instructing the
jury; we find no error.
D. Evidentiary Rulings
¶31 Utility/Oasis asserts that the court’s erroneous evidentiary
rulings in both trials prejudiced Utility/Oasis and precluded a fair trial. We
will not disturb the trial court’s rulings regarding the exclusion or
admission of evidence unless there is a clear abuse of discretion and
prejudice results. Larsen v. Decker, 196 Ariz. 239, 241, ¶ 6, 995 P.2d 281, 283
(App. 2000) (citations omitted).
¶32 First, Utility/Oasis argues that the court erred in admitting
the unsigned Oasis Agreement in the first trial because it was an illegal
contract. As discussed in ¶ 26, supra, Arizona law allows the remedy of
quantum meruit for an innocent party who has provided benefits under an
illegal contract. See Restatement (Third) of Restitution and Unjust
Enrichment § 32 (1981); Blue Ridge, 149 Ariz. at 375, 718 P.2d at 1028. The
court did not abuse its discretion by admitting the Oasis Agreement. The
agreement was relevant to show the meeting of the minds, the parties’
understanding of the scope of work, and the expected cost for SFG’s
management services.
¶33 Utility/Oasis next contends that the admission of evidence
relating to the management of the Oasis golf course in the second trial was
prejudicial and precluded a fair trial. Although the Oasis Agreement was
not directly relevant to the contract claims being litigated in the second trial,
Utility asked Ashton questions about SFG’s payment history. On redirect,
the court allowed Ashton to testify to a limited extent and explain why SFG
did not make payments on its water accounts during the time it provided
management services to Oasis. See Elia v. Pifer, 194 Ariz. 74, 79, 977 P.2d
796, 801 (App. 1998) (“[A] party will not be allowed to complain of the
introduction of irrelevant evidence where he has asserted a position that
makes such evidence relevant.”) (citing Morris K. Udall et. al, Law of
Evidence § 11, at 11 (3d ed. 1991)).
¶34 Moreover, the court instructed the jury before the final jury
instructions to disregard any testimony about the alleged Oasis Agreement
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involving SFG and the management of another golf course because it had
no bearing on the issues in the case. Therefore, even if Utility had not
opened the door to allow Ashton’s redirect testimony, the court’s limiting
instruction cured any potential error. See Jimenez v. Starkey, 85 Ariz. 194,
196, 335 P.2d 83, 84 (1959) (when superior court properly instructs jury, an
appellate court “must presume that the jury obeyed such instructions”);
Hyatt Regency Phoenix Hotel Co. v. Winston & Strawn, 184 Ariz. 120, 140, 907
P.2d 506, 526 (App. 1995) (“We must assume on review that the jury
followed the instructions of the trial court.”).
¶35 Utility also contends the court erred in allowing the jury to
hear testimony about the Utility Services Agreement. During Ashton’s
testimony in the second trial, a juror submitted the following question:
Was there ever anything in writing, such as a contract, that
says you were only to get effluent from Johnson Utilities?
Utility objected to be question because the Utility Services Agreement had
been determined to be an illegal contract in the first trial and any affirmative
answer would “completely open[] up the door to lots of issues that have
been thrown out already in this case.” The objection was overruled, and
Ashton answered “Yes, there was.” Utility/Oasis argues that Ashton’s
answer caused it substantial prejudice and affected the jury’s verdict. We
disagree. Both parties were given the opportunity to ask Ashton any
follow-up questions to clarify his answer to the question. Moreover, the
court, as noted in ¶ 34, supra, gave a limiting instruction telling the jury to
“disregard any testimony regarding any other golf course in reaching your
decision in this case.” Finally, neither party mentioned the Utility Services
Agreement in closing arguments. Consequently, given the answer to the
one question and the limiting instruction, the court did not err by allowing
Ashton to answer the juror’s question.
¶36 Finally, Utility/Oasis argues that the court abused its
discretion by refusing to admit additional attachments to a letter Brian
Tompsett, Utility’s Executive Vice President, sent to Ashton (Exhibit 8).
Utility/Oasis, however, does not cite to any legal authority supporting its
argument.
¶37 During the first trial, Utility offered Exhibit 22 that had the
Tompsett letter as well as additional attachments, and it was admitted. In
the second trial, SFG offered Exhibit 8, which included the Tompsett letter,
but omitted 83 pages of the attached invoices from Exhibit 22. Utility
argued that Exhibit 8 was incomplete and moved to admit the 83 pages of
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additional attachments to the Tompsett letter.12 SFG objected because the
83-page document had not been disclosed nor provided before trial, and
the court sustained the objection. Because the trial court is the gate-keeper
to ensure that exhibits have been disclosed, see Arizona Rule of Civil
Procedure 26.1, see, e.g., Lohmeier v. Hammer, 214 Ariz. 57, 66, ¶ 32, 148 P.3d
101, 110 (App. 2006) (noting a trial court must serve as an evidentiary
gatekeeper), the court did not abuse its discretion by admitting Exhibit 8
and precluding Utility’s undisclosed additional attachments.
E. Prejudgment Interest
¶38 Utility/Oasis claims that the court erred by awarding SFG
prejudgment interest on its quantum meruit claim. Whether a party is
entitled to prejudgment interest is a question of law we review de novo.
Berry v. 352 E. Virginia, L.L.C., 228 Ariz. 9, 13, ¶ 18, 261 P.3d 784, 788 (App.
2011); Alta Vista Plaza, Ltd. v. Insulation Specialists Co., 186 Ariz. 81, 82, 919
P.2d 176, 177 (App. 1995).
¶39 Oasis asserts that SFG was not entitled to prejudgment
interest on its quantum meruit claim because the claim was not liquidated.
Prejudgment interest is awarded as a matter of right on a liquidated claim.
Alta Vista, 186 Ariz. at 82-83, 919 P.2d at 177-78. A claim is liquidated if
there is credible data from which a precise amount of damages can be
calculated without reliance on opinion or discretion. Id.; see also John C.
Lincoln Hosp. & Health Corp. v. Maricopa Cnty., 208 Ariz. 532, 544, ¶ 39, 96
P.3d 530, 542 (App. 2004) (“A claim is liquidated if the plaintiff provides a
basis for precisely calculating the amounts owed.”).
¶40 Here, the court awarded prejudgment interest on SFG’s
quantum meruit damages from November 1, 2006, the date SFG resigned
from managing Oasis, to the date of the judgment. The record establishes
that the reasonable value of the management services SFG provided to
Oasis was ascertainable by accepted standards of valuation and the jury
determined the value of those services. SFG managed the Oasis golf course
for six months according to the terms of the Oasis Agreement. And the
agreement provided that Utility would provide to SFG as payment for its
services water credits to 150 million gallons of irrigation per year. Although
that agreement was unenforceable, it was some evidence of the value SFG
was to receive for its management services. Given the agreement, the value
of the management services were ascertainable by reasonable calculation
12The additional attachments were marked as Exhibit 42. The exhibit is not
contained in the record on appeal.
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after SFG resigned, and as the jury determined after reviewing the
agreement and relevant exhibits. Accordingly, the court did not err by
awarding SFG prejudgment interest on the value of its management
services from the date it resigned. See Alta Vista, 186 Ariz. at 82-83, 919 P.2d
at 177-78.
F. Attorneys’ Fees
¶41 Utility/Oasis contends that the court erred by awarding SFG
its attorneys’ fees. We review the award, including the amount, for an
abuse of discretion. Assyia v. State Farm Mut. Auto. Ins. Co., 229 Ariz. 216,
222, ¶ 25, 273 P.3d 668, 674 (App. 2012). We consider whether “a judicial
mind, in view of the law and circumstances, could have made the ruling
without exceeding the bounds of reason.” Associated Indem. Corp. v. Warner,
143 Ariz. 567, 571, 694 P.2d 1181, 1185 (1985) (citation omitted). But, the
application of A.R.S. § 12-341.01(A) is a question of law we review de novo.
Nolan v. Starlight Pines Homeowners Ass’n, 216 Ariz. 482, 490, 167 P.3d 1277,
1285 (App. 2007).
¶42 After two trials, Utility did not prevail on its lawsuit, but SFG
was awarded damages against Utility/Oasis for quantum meruit and
breach of the tariff contract; the total exceeding $95,000. In ruling on
competing requests for attorneys’ fees, the court denied Utility’s request,
found that SFG was the prevailing party and, after deducting the fees
associated with the non-contract claims and unsuccessful claims, awarded
SFG $300,737.25 in attorneys’ fees.
¶43 Utility/Oasis asserts that the court erred by awarding SFG
fees for the breach of tariff contract and quantum meruit because those
claims were not “actions arising under contract.” See A.R.S. § 12-341.01(A)
(“In any contested action arising out of a contract, express or implied, the
court may award the successful party reasonable attorney fees.”). We
disagree. As discussed above in ¶ 15, supra, SFG’s breach of tariff contract
counterclaim arose because it was a customer of Utility and Utility
unlawfully billed it above the rates set by the ACC for CAP water and
effluent. See Sommer, 21 Ariz. App. at 387-88, 519 P.2d at 876-77. Moreover,
a party prevailing on a quantum meruit claim may recover attorneys’ fees
under A.R.S. § 12-341.01(A). See Pelletier, 188 Ariz. at 482-83, 937 P.2d at
672-73. Therefore, the court did not abuse its discretion by awarding SFG
its attorneys’ fees associated with the two claims under A.R.S. § 12-
341.01(A).
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¶44 Utility also challenges the court’s decision that SFG was the
“successful party,” and therefore eligible for an award of fees pursuant to
A.R.S. § 12-341.01. Determining the “successful” party for the purposes of
attorneys’ fees is within the trial court’s discretion and “will not be
disturbed on appeal if any reasonable basis exists for it.” Vortex Corp. v.
Denkewicz, 235 Ariz. 551, 562, ¶ 39, 334 P.3d 734, 745 (App. 2014) (internal
citation and quotation marks omitted); see also Assyia, 229 Ariz. at 223, 273
P.3d at 675 (“[T]he trial court has substantial discretion to determine who
is a ‘successful party.’”) (internal citation omitted). Here, SFG was the
“successful party” because it prevailed and received a monetary judgment
and Utility/Oasis did not. See Berry, 228 Ariz. at 14, ¶ 24, 261 P.3d at 789(finding that buyer was the successful party because it received a monetary
judgment); see also Ocean W. Contractors, Inc. v. Halec Constr. Co., 123 Ariz.
470, 473, 600 P.2d 1102, 1105 (1979) (monetary award not dispositive but
“an important item to consider when deciding who, in fact, did prevail”).
Although it did not prevail on all of its counterclaims or claims that were
tried, SFG prevailed more than Utility/Oasis and the court did not abuse
its discretion by finding that SFG was the successful party.
¶45 Finally, Utility/Oasis argues that the court abused its
discretion by awarding SFG attorneys’ fees because (1) SFG did not provide
sufficient detail to determine the reasonableness of the fees sought, and (2)
the fees were excessive. SFG’s fee affidavit, as required, disclosed “the type
of legal services provided, the date the service was provided, the attorney
providing the service . . . and the time spent in providing the service.” See
Schweiger v. China Doll Rest., Inc., 138 Ariz. 183, 188, 673 P.2d 927, 932 (App.
1983). The fee affidavit also provided “sufficient detail to enable the court
to assess the reasonableness of the time incurred.” See id.¶46 Once a party establishes entitlement to fees and meets the
minimum requirements in an application and affidavit, as SFG did here, the
burden shifts to the party opposing the fee award to demonstrate the
impropriety or unreasonableness of the requested fees. Assyia, 229 Ariz. at
223, ¶ 29, 273 P.3d at 675. The argument that $400 was an unreasonable
hourly rate because SFG’s counsel, Craig Marks, lacked sufficient litigation
experience is not persuasive. See State ex rel. Corbin v. Tocco, 173 Ariz. 587,
594, 845 P.2d 513, 520 (App. 1992) (citing State v. Maricopa Cnty. Med. Soc’y,
578 F. Supp. 1262, 1264 (D. Ariz. 1984)) (opposing party cannot simply claim
that the rates submitted are “too high”). SFG supported its fee request with
an affidavit from counsel that documented Mr. Marks’ experience and
credentials, including more than 30 years’ experience in utility law. SFG
was entitled to retain competent, experienced counsel to represent it, and a
commensurate hourly rate was not unreasonable. See Assyia, 229 Ariz. at
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223, ¶ 30, 273 P.3d at 675. Therefore, finding no error, we affirm the court’s
award of SFG’s attorneys’ fees.
II. SFG’S CROSS-APPEAL
¶47 In its cross-appeal, SFG argues that the trial court erred in
granting Utility’s motion for summary judgment and dismissing SFG’s
claim that Utility tortiously breached the covenant of good faith and fair
dealing. SFG seeks to reverse the court’s ruling, and remand the claim for
a jury trial. For the following reasons, we affirm.
¶48 SFG, as part of its claims against Utility, asserted a claim for
breach of good faith and fair dealing as it related to Utility’s alleged breach
of contract. Specifically, SFG argued that Utility breached its duty of good
faith by failing to make payment under the Oasis Agreement and by failing
to abide by the ACC-mandated tariffs in providing water service. Utility
moved for summary judgment, which included SFG’s bad faith claim, the
court granted the motion in part and dismissed the claim.13 SFG filed a
motion for reconsideration, which the court denied.
¶49 We review the grant of summary judgment de novo to
determine “whether there are any genuine issues of material fact” and to
determine whether the movant is entitled to judgment as a matter of law.
Unique Equip. Co. v. TRW Vehicle Safety Sys., Inc., 197 Ariz. 50, 52, ¶ 5, 3 P.3d
970, 972 (App. 1999). If “the evidence or inferences would permit a jury to
resolve a material issue in favor of either party, summary judgment is
improper.” Comerica Bank v. Mahmoodi, 224 Ariz. 289, 292, ¶ 19, 229 P.3d
1031, 1034 (App. 2010) (internal citation and quotation marks omitted). We
view the facts and reasonable inferences in the light most favorable to the
13 SFG argues that Utility’s motion for summary judgment only requested
that the court dismiss SFG’s bad faith claim as to the Utility Services
Agreement and the Oasis Agreement, but not as to the tariff contract. SFG
contends, “the Court granted a motion that was not made and to which
[SFG] did not respond.” In its summary judgment motion, Utility claimed
it was entitled to summary judgment on Count Six of SFG’s First Amended
Counterclaim, which alleged that Utility breached the covenant of good
faith and fair dealing by breaching the terms of the Utility Service
Agreement, the Oasis Agreement, and tariffs. The record, as a result,
supports the court’s ruling that the motion encompassed SFG’s bad faith
claim in its entirety.
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party against whom judgment was entered. Unique Equip. Co., 197 Ariz. at
52, ¶ 5, 3 P.3d at 972.
¶50 Tort damages for breach of the covenant of good faith and fair
dealing are available only when there exists a “special relationship”
between the parties, which is characterized by “‘elements of public interest,
adhesion, and fiduciary responsibility.’” Rawlings v. Apodaca, 151 Ariz. 149,
158, 726 P.2d 565, 574 (1986) (quoting Seaman’s Direct Buying Serv., Inc. v.
Standard Oil Co. of Cal., 686 P.2d 1158, 1166 (Cal. 1984)) (emphasis added).
Examples of the “special relationship” include the relationship between
common carrier and passenger, innkeeper and guest, physician and patient,
and attorney and client. Rawlings, 151 Ariz. at 159, 726 P.2d at 575. And as
the superior court noted in its ruling, Arizona case law does not permit tort
damages “based on the adhesive nature of the contract alone – the Supreme
Court used ‘and,’ not ‘or,’ in listing the elements.” See id. at 158, 726 P.2d at
574.
¶51 Here, SFG alleged the special relationship between the parties
was based solely on the adhesive nature of the contract, and it did not allege
any additional elements of public interest or fiduciary responsibility in its
amended counterclaim. In its cross-appeal, SFG now argues that Utility’s
relationship with its customers is subject to the public interest and involved
fiduciary elements. SFG did not raise the argument in response to the
summary judgment motion, but only in its motion for reconsideration. The
superior court did not reconsider its ruling, and we generally do not
consider arguments raised for the first time in a motion for reconsideration.
See Evans Withycombe, Inc. v. W. Innovations, Inc., 215 Ariz. 237, 240, ¶ 15, 159
P.3d 547, 550 (App. 2006). Because we find no reason to consider an
argument the court did not address, SFG failed to preserve its argument for
appellate review.
III. ATTORNEYS’ FEES AND COSTS ON APPEAL
¶52 Both parties have requested an award of attorneys’ fees and
costs upon appeal pursuant to A.R.S. § 12-341.01. Because Utility/Oasis has
not prevailed, we deny the request. In the exercise of our discretion, we
award SFG its reasonable attorneys’ fees on appeal in an amount to be
determined pursuant to A.R.S. § 12-341.01, as well as its costs on appeal
upon compliance with Arizona Rule of Civil Appellate Procedure 21.
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CONCLUSION
¶53 For the foregoing reasons, we affirm the court’s judgment.
:ama
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