Worldwide v. Toulatos Silberman ( 2022 )

IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE
WORLDWIDE JET CHARTER, INC., Plaintiff/Appellant,
v.
GUS CHRISTOPHER TOULATOS, Defendant/Appellee.
__________________________________
WORLDWIDE JET CHARTER, INC., Plaintiff/Appellant,
v.
DISAPONG SILBERMAN, Defendant/Appellee.
Nos. 1 CA-CV 21-0717
1 CA-CV 22-0173
(Consolidated)
FILED 12-15-2022
Appeal from the Superior Court in Maricopa County
Nos. CV2020-095740
CV2020-095755
The Honorable Stephen M. Hopkins, Judge
AFFIRMED
COUNSEL
Denton Peterson Dunn PLLC, Mesa
By Larry A. Dunn, Dustin D. Romney, Brad A. Denton
Counsel for Plaintiff/Appellant
Yen Pilch Robaina & Kresin PLC, Phoenix
By David C. Kresin, Michael Pang
Counsel for Defendant/Appellee Gus Christopher Toulatos
Vasin & Rocco PLLC, Mesa
By Mitchell A. Vasin
Counsel for Defendant/Appellee Disapong Silberman
OPINION
Judge Jennifer B. Campbell delivered the opinion of the Court, in which
Presiding Judge Brian Y. Furuya and Judge Paul J. McMurdie joined.
C A M P B E L L, Judge:
¶1 In three appeals, Worldwide Jet Charter, Inc. (Worldwide)
has challenged the dismissal of its complaints against former employee-
pilots for breach of contract, breach of the implied covenant of good faith
and fair dealing, and unjust enrichment. In the first appeal, Worldwide Jet
Charter, Inc. v. Moen (Moen), 1 CA-CV 21-0614, 2022 WL 2812786 (Ariz. App.
July 19, 2022) (mem. decision), we affirmed, finding the one-year statute of
limitations applicable to employment contracts barred Worldwide’s claims.
See A.R.S. § 12-541(3). Finding no reason to distinguish Worldwide’s claims
in these consolidated appeals, we affirm the dismissals in both cases.
BACKGROUND
¶2 Worldwide provides charter jet services and extended offers
to hire the defendants, Gus Christopher Toulatos and Disapong Silberman,
as pilots. Worldwide provided the defendants conditional offers of
employment (Offer) that were substantively identical, each with two
attached exhibits: a promissory note (Note) and a training reimbursement
agreement (TRA). Toulatos signed the documents in June 2016, and
Silberman signed them in September 2018.
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WORLDWIDE v. TOULATOS
Opinion of the Court
¶3 As outlined in the Offer, the defendants’ employment was
contingent upon their completion of the specified flight training.1 Although
each defendant was financially responsible for his training, the Offer stated
that Worldwide would advance the training costs in accordance with the
terms in the attached Note and TRA. The Note provided for payments over
two years, but Worldwide agreed to credit the defendants for these
payments if they remained employed. If their employment ended before
the two-year period expired, however, the defendants became responsible
for any balance due. And, if the defendants did not successfully complete
the training or terminated their employment within three months after
completing the training, they were responsible for the entire cost.
¶4 Toulatos completed the training in July 2016 and resigned 14
months later. Worldwide did not demand any payment from Toulatos until
it sued him more than three years later. Silberman completed his training
in October 2018, and Worldwide terminated his employment one year later.
Worldwide then waited more than one year to sue Silberman.
¶5 In separate complaints, Worldwide alleged breach of contract,
breach of the implied covenant of good faith and fair dealing, and unjust
enrichment based on the defendants’ failure to repay the training costs after
their employment ended. In their respective cases, Toulatos and Silberman
moved to dismiss under Arizona Rules of Civil Procedure (Rule) 12(b)(6),
arguing Worldwide’s complaints were time-barred by the one-year statute
of limitations applicable to employment contracts. See A.R.S. § 12-541(3).
The superior court agreed and dismissed both complaints, rejecting
Worldwide’s argument that the Note and the TRA were separate from the
Offer and subject to the longer limitations periods applicable to actions to
collect a debt and enforce a promissory note. See A.R.S. §§ 12-548(A)(1) (six
year limitations period for actions for debt based on a writing); 47-3118(A)
(six year limitations period for actions to enforce a promissory note).
¶6 In response to the motions to dismiss, Worldwide sought to
amend its complaint, arguing that the superior court dismissed the
complaint based on incorrect factual assumptions. Worldwide proposed
identical amended complaints in both cases, alleging that the parties
intended the Note and the TRA to be separate agreements, severable from
the employment agreement, independently enforceable, and subject to
1 The Silberman Offer states, “Until you complete and successfully pass [the
training], the Company will not employ you.” (Emphasis added.) The
underlined language is omitted in the Toulatos Offer. This difference does
not affect our analysis.
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WORLDWIDE v. TOULATOS
Opinion of the Court
longer limitations periods. The superior court denied the motions to amend
the complaint as futile.
¶7 The superior court then denied Worldwide’s motion for
reconsideration and awarded attorneys’ fees and costs to Toulatos
($11,187.50) and Silberman ($3,999.25) based on the fee provision in the
Offer. After entry of final judgment, Worldwide timely appealed.
DISCUSSION
¶8 Worldwide challenges the superior court’s application of the
one-year statute of limitations and its orders denying leave to amend the
complaints. The contracts and issues here are substantively identical to
those addressed in Moen, involving the same plaintiff and another pilot-
defendant, and we agree with and follow that decision.
I. Employment Contract
¶9 As in Moen, Worldwide argues that the parties intended for
the Note and the TRA to constitute separate agreements, independent of
the Offer. The interpretation of a contract presents a question of law, which
we review de novo. Grosvenor Holdings, L.C. v. Figueroa, 222 Ariz. 588, 593,
¶ 9 (App. 2009).
¶10 “The purpose of contract interpretation is to determine the
parties’ intent and enforce that intent.” Id. To do so, “we first consider the
plain meaning of the words in the context of the contract as a whole.” Id.(citing United Cal. Bank v. Prudential Ins. Co. of Am., 140 Ariz. 238, 259 (App.
1983)). If the text is unambiguous, we apply the language as written.
Grosvenor, 222 Ariz. at 593, ¶ 9. The parties’ disagreement about the
meaning of the language does not, by itself, constitute an ambiguity. United
Cal. Bank, 140 Ariz. at 258.
¶11 Relying on language in the TRA that states, “WHEREAS,
[Worldwide] and Employee acknowledge and agree that this [TRA] is not
intended to constitute any type of employment agreement or guarantee of
continued employment[,]” Worldwide asserts that the parties did not
intend to incorporate the Note and the TRA into the Offer. While this term
suggests an intent that the TRA is not a stand-alone employment
agreement, it does not negate the requirement that to accept the Offer, the
defendants had to accept the TRA secured by the Note. In other words,
Worldwide conditioned its offer of employment on the defendants’
acceptance of the Offer, the Note, and the TRA. Thus, the three documents
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Opinion of the Court
operated together, and the obligations in the three documents were all
required to form the employment relationship contemplated by the parties.
¶12 The Offer demonstrates the parties’ intent to incorporate the
Note and the TRA as part of the contract, stating in relevant part:
Your employment is contingent upon your successful
completion of [various requirements] and your signing of this
letter agreement and each of the attached exhibits. The date of
your successful completion of all of these items will be your
“Effective Hire Date.”
The following are some of the more significant benefits, terms
and conditions of your conditional offer of employment.
...
[] Initial Training. You are required to successfully
complete Worldwide Jet Charter’s approved initial training
and checking program such that you can be added to the
Company’s Certificate . . . . The cost of this training and
checking program is [$35,378.08 in the Toulatos Offer and
$40,448 in the Silberman Offer] (the “Training Costs”) and is
your responsibility. The Company agrees to finance the
Training Costs on your behalf in accordance with the terms
contained in the Promissory Note attached hereto as Exhibit A
(the “Promissory Note”) and the Training Reimbursement
Agreement attached hereto as Exhibit B. The Promissory Note
provides for payment of the full amount of the Training Costs,
plus interest, over a period ending two (2) years after your
Effective Hire Date. For so long as you remain employed with
the Company during such two (2) year period, the Company
agrees to credit you (at no cost to you) with making the
payments which are required to be made by you under the
terms of the Promissory Note. If you cease to be employed by
the Company for any reason whatsoever (whether your
employment is terminated voluntarily or involuntarily, or
with or without cause) during such two (2) year period, the
Company will no longer have any obligation to credit you
with making payments under the Promissory Note, your
remaining obligations under [the] Promissory Note will be
accelerated and become immediately due and payable, and
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Opinion of the Court
you will be responsible to pay immediately the entire unpaid
balance of the Promissory Note.
(Emphasis added.)
¶13 While attaching the Note and the TRA to the Offer does not,
by itself, show an intent to incorporate them, the Offer’s references to both
documents setting forth some of the “terms and conditions” of the
employment contract reflects such an intent. See United Cal. Bank, 140 Ariz.
at 258. Simply put, without the Note and the TRA, the “Initial Training”
provision in the Offer is meaningless. But taken together, Worldwide made
clear it would not hire the defendants unless they completed the training
financed under the Note and defined in the TRA terms.
¶14 Despite the Offer’s plain language, Worldwide points to Mesa
Airlines, Inc. v. Condron, 1 CA-CV 16-0326, 2017 WL 4638171 (Ariz. App. Oct.
17, 2017) (mem. decision), to argue that the Note and the TRA should be
interpreted as separate contracts. In Mesa Airlines, the airline and the pilots’
union, of which the defendant pilot was a member, previously entered into
a collective bargaining agreement. Id. at *1, ¶ 3. That agreement provided
that Mesa Airlines may require pilots to execute training agreements. Id.
Although the facts of Mesa Airlines involved a similar promissory note and
an oral employment agreement between the pilot and the airline, the note
in Mesa Airlines “was not integrated into nor conditioned in any respect” on
the oral at-will employment agreement. Id. at *3, ¶ 14 (emphasis added). By
contrast, Worldwide and the defendants in these consolidated cases entered
into one contract—the Offer—which incorporated and referenced the terms
and conditions in the two exhibits attached—the Note and the TRA. Thus,
the description of the agreement in Mesa Airlines is substantively different
than the Offer, the Note, and the TRA here. The Offer required the
defendants to agree to the “terms and conditions” in the attached TRA and
Note. Together, these three documents constitute one agreement and must
be construed accordingly.
II. Statute of Limitations
¶15 Worldwide argues that even if the Offer, the Note, and the
TRA constitute one agreement, the longer statutes of limitations in A.R.S.
§§ 12-548(A)(1) (actions for debt based on written contract) and 47-3118(A)
(actions to enforce a promissory note) apply. We review questions of law,
such as a dismissal under Rule 12(b)(6) and the application of statutes of
limitations, de novo. CVS Pharmacy, Inc. v. Bostwick, 251 Ariz. 511, 515-16,
¶ 10 (2021); Monroe v. Ariz. Acreage LLC, 246 Ariz. 557, 562, ¶ 13 (App. 2019).
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Opinion of the Court
¶16 The one-year statute of limitations applies to actions on
“employment contracts.” A.R.S. § 12-541(3). In Redhair v. Kinerk, Beal,
Schmidt, Dyer & Sethi, P.C., this court construed the statute and ascribed the
“ordinary” dictionary meaning to the term employment contract: “’a
contract between an employer and employee in which the terms and
conditions of employment are stated.’” 218 Ariz. 293, 295, ¶ 7 (App. 2008)
(quoting Black’s Law Dictionary 321 (7th ed. 1999)). Worldwide contends that
Redhair is distinguishable.
¶17 In Redhair, the parties disputed whether A.R.S. § 12-541(3)
applied to an oral contract to pay an employee bonus. 218 Ariz. at 294-95,
¶¶ 3-4. While Redhair may be factually distinguishable, its legal definition
of an “employment contract” for purposes of applying A.R.S. § 12-541(3) is
not. The Offer, including the incorporated Note and TRA, defined the terms
and conditions of employment, specifically that Worldwide agreed to
finance the training consistent with the Note and the TRA, with the
expectation of employing the defendants. In fact, the Offer required the
defendants to sign the Note and the TRA. Accordingly, those documents
are part of the employment contract subject to the one-year statute of
limitations in A.R.S. § 12-541(3).
¶18 Worldwide nonetheless argues that the superior court should
have bifurcated the individual provisions in the contracts into employment
and non-employment terms to determine which statute of limitations to
apply. According to Worldwide, its action is for recovery of a debt, not for
breach of an employment contract, so A.R.S. §§ 12-548(A)(1) and 47-3118(A)
apply.
¶19 Worldwide’s cause of action arose from the defendants’
breaches of the employment terms and conditions in the Offer, the Note,
and the TRA. Specifically, the Offer required them to complete the training,
which Worldwide agreed to finance as a condition of the employment offer.
The Offer also required the defendants to remain employed for two years,
at which time Worldwide would absorb the entire cost of the training. Both
Toulatos and Silberman ended their employment before the two years. Yet,
Worldwide waited over three years to bring a claim against Toulatos and
over one year to sue Silberman. Although Worldwide contends it is seeking
to collect a debt, the debt arose due to the alleged breach of the employment
contract. In other words, but for the defendants’ separation from
employment, Worldwide could not have collected on the Note and would
have remained obligated to continue to absorb payments on their behalf.
Because Worldwide’s cause of action only arose when the defendants’
employment ended, there was no “non-employment issue” to bifurcate.
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WORLDWIDE v. TOULATOS
Opinion of the Court
Simply put, Worldwide’s offer to finance the training costs constituted part
of the defendants’ compensation and was integrated into the employment
contract. Cf. Blood Sys., Inc. v. Roesler, 972 F. Supp. 2d 1150, 1155-56 (D. Ariz.
2013) (finding that an ERISA plan in which the employer agreed to pay the
employee “additional compensation in the form of paying for medical care
in return for [the employee’s] continued employment[]” constituted an
employment contract and claim for breach of the plan was subject to A.R.S.
§ 12-541(3)).
¶20 For this reason, Lytikainen v. Schaffer’s Bridal, LLC, 409 F. Supp.
3d 767, 775 (D. Ariz. 2019), does not compel a different result. Lytikainen
involved two separate claims: one for breach of a promise to pay the
plaintiff’s salary as the manager of a bridal store and another for breach of
an agreement to sell the plaintiff a 50-percent interest in the bridal store in
exchange for $100,000 cash and $400,000 worth of alteration services. Id. at
770-71. Because the purchase agreement was not a component of the
plaintiff’s compensation as the store manager, the claims were distinct. Id.
at 774-75.
¶21 Worldwide also contends that because A.R.S. §§ 12-548(A)(1)
and 47-3118(A) conflict with A.R.S. § 12-541(3), the superior court should
apply the longer statutes of limitations. See Monroe, 246 Ariz. at 562, ¶ 17
(explaining that when statutes of limitations conflict, application of the
“longer period of limitations is preferred”) (internal quotation and citation
omitted). Because Worldwide’s cause of action is for breach of an
employment contract—not recovery of a separate debt—there is no conflict.
The superior court applied the correct statute of limitations.
III. Motion for Leave to Amend the Complaint
¶22 Worldwide argues the superior court erred by applying the
wrong standard in denying its motions to amend and that newly-alleged
facts precluded dismissal. As a rule, amendments should be liberally
permitted absent a finding of undue delay, dilatory motive, undue
prejudice, or futility in the amendment. Ariz. R. Civ. P. 15(a)(2) (“Leave to
amend must be freely given when justice requires.”); Bishop v. State Dep’t of
Corr., 172 Ariz. 472, 474-75 (App. 1992); Owen v. Superior Court, 133 Ariz. 75,
79 (1982); see also Wigglesworth v. Mauldin, 195 Ariz. 432, 439, ¶ 26 (App.
1999) (explaining the superior court should grant a non-moving party the
opportunity to amend a complaint “if such an amendment cures its
defects”). Although the superior court has the discretion to deny a motion
to amend, we review de novo whether a request to amend is futile. See
Bishop, 172 Ariz. at 474; Carvalho v. Equifax Info. Servs., LLC, 629 F.3d 876, 893
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(9th Cir. 2010). In considering futility, we presume as true all well-pled
factual allegations set forth in the proposed amendments. See Cullen v. Auto-
Owners Ins. Co., 218 Ariz. 417, 419, ¶ 7 (2008).
¶23 Even taking the new facts alleged in the proposed amended
complaint as true, Worldwide’s claims are still time-barred. These
additional facts do not change the language in the Offer stating the Note
and the TRA are part of the Offer. Worldwide is not in the business of
financing pilot training independent of employment, and its Offer was
contingent upon the defendants “signing the attached [TRA].”
¶24 Nor did the newly-added facts change the nature of the cause
of action—breach of an employment contract. Given this, the proposed
amendments were futile. Accordingly, even if the superior court erred in
treating the motion for leave to amend as a motion for reconsideration in
the Toulatos action, it properly denied the motion. See Dube v. Likins, 216
Ariz. 406, 417, ¶ 36 n.3 (App. 2007) (noting that the appellate court may
affirm the superior court if it is correct for any reason).
¶25 Having affirmed the dismissal, we need not address
Worldwide’s argument that the defendants were ineligible for an award of
attorneys’ fees under the contract.
CONCLUSION
¶26 We affirm the judgment dismissing Worldwide’s complaints
and awarding attorneys’ fees to Toulatos and Silberman. As the prevailing
parties on appeal, we award attorneys’ fees to the defendants consistent
with the terms of the Offer and costs under A.R.S. § 12-342 upon compliance
with ARCAP 21.
AMY M. WOOD • Clerk of the Court
FILED: AA
9