NOTICE: NOT FOR OFFICIAL PUBLICATION.

UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL

AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.

IN THE

ARIZONA COURT OF APPEALS

DIVISION ONE

DAWN CALLAWAY, Plaintiff/Appellant,

v.

NORTH IRONWOOD, LLC, Defendant/Appellee.

No. 1 CA-CV 21-0337

Appeal from the Superior Court in Maricopa County

No. CV2019-004131

The Honorable Randall H. Warner, Judge

AFFIRMED

COUNSEL

Law Office of Timothy M. Collier, PLLC, Scottsdale

By Timothy M. Collier, William A. Weber

Counsel for Plaintiff/Appellant

Stoops Denious Wilson & Murray, PLC, Phoenix

By Michael T. Denious

Counsel for Defendant/Appellee

FILED 3-29-2022
CALLAWAY v. NORTH IRONWOOD

Decision of the Court

2

MEMORANDUM DECISION

Presiding Judge Maria Elena Cruz delivered the decision of the Court, in 

which Judge Samuel A. Thumma and Judge Michael J. Brown joined.

C R U Z, Judge:

¶1 Dawn Callaway appeals from the superior court’s judgment, 

following a bench trial, finding in favor of North Ironwood, LLC, on her 

claims for breach of contract and breach of the implied covenant of good 

faith and fair dealing. For the following reasons, we affirm.

FACTUAL AND PROCEDURAL HISTORY

¶2 In February 2017, Callaway and North Ironwood entered into 

a Real Estate Purchase Agreement and a Lease Agreement (collectively, 

“the Agreements”) for Callaway to lease and then subsequently purchase 

residential real property owned by North Ironwood. Under the terms of 

the Purchase Agreement, Callaway had an extended escrow of two years.

During this two-year period, Callaway would lease the property while

renovating the existing home and making other improvements. The

Purchase Agreement also provided that all plans for construction and 

improvements were subject to pre-approval by North Ironwood. Callaway 

agreed to purchase the property for $885,000 at the conclusion of the lease 

term, with the close of escrow to take place on or before January 31, 2019.

Callaway deposited $10,000 in earnest money, which was to be applied to 

the purchase price at closing. The parties agreed that if Callaway breached 

the Purchase Agreement, the earnest money was to be paid to North 

Ironwood as liquidated damages.

¶3 Callaway took possession of the property, the initial 

construction plans were approved by North Ironwood, and she began 

making improvements. In the first part of 2018, Callaway emailed revised 

plans to North Ironwood, and requested the approval of a permit to 

construct a guest house. However, North Ironwood did not approve the 

construction of a guest house and did not authorize Callaway to request 

permits for one. North Ironwood informed Callaway she could build the 

guest house after she purchased the property, and that she could accelerate 

the closing date for the purchase if she so desired. Callaway did not 

respond to that communication.
CALLAWAY v. NORTH IRONWOOD

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3

¶4 In the four months leading up to the closing date, North 

Ironwood wrote Callaway to remind her of the January 31, 2019 closing 

date and that there were steps that needed to be taken prior to then.

Callaway did not respond. A final notice was sent January 10, 2019, in 

which North Ironwood made clear it was expecting Callaway to close on 

the property, and it would seek all available remedies if she did not do so.

¶5 Shortly after, Callaway gave written notice to North 

Ironwood, stating North Ironwood breached the parties’ contract, in part 

because it refused to approve the construction of the guest house. Callaway 

stated she was choosing not to exercise her “option” to purchase the 

property, and she requested $35,000 in damages for the improvements she 

had made on the property. She also sought a return of the earnest money. 

North Ironwood refused Callaway’s demands and they both made 

competing demands to the escrow title agent for the $10,000 earnest money.

¶6 As pertinent here, Callaway sued North Ironwood for breach 

of contract and breach of good faith and fair dealing. Callaway alleged 

damages in the amount of the $10,000 earnest money deposit and another 

$85,000 she allegedly incurred while making improvements on the 

property.

¶7 After a bench trial, the superior court found in favor of North 

Ironwood on Callaway’s contract claims. Because Callaway did not close 

on the sale of the property, the superior court found that Callaway was in 

breach, and under the terms of the Purchase Agreement, she forfeited the 

return of the earnest money. The superior court awarded North Ironwood 

its attorneys’ fees and costs.

¶8 Callaway timely appealed. We have jurisdiction pursuant to 

Arizona Revised Statutes section 12-120.21(A)(1).

DISCUSSION

¶9 Callaway argues the court erred in finding the parties entered 

a binding Purchase Agreement rather than a lease with an option to 

purchase. Callaway further argues she was within her contractual rights 

when she decided not to purchase the property at the end of the lease term

and her earnest money deposit should have been returned to her.

¶10 Matters of contract interpretation present issues of law we 

review de novo. Andrews v. Blake, 205 Ariz. 236, 240, ¶ 12 (2003). In 

interpreting a contract, our purpose is to determine and enforce the parties’

intent. Taylor v. State Farm Mut. Auto Ins. Co., 175 Ariz. 148, 152 (1993). In 
CALLAWAY v. NORTH IRONWOOD

Decision of the Court

4

determining the parties’ intent, we “look to the plain meaning of the words 

as viewed in the context of the contract as a whole.” United Cal. Bank v. 

Prudential Ins. Co. of Am., 140 Ariz. 238, 259 (App. 1983). “A contract must 

be construed so that every part is given effect, and each section of an 

agreement must be read in relation to each other to bring harmony, if 

possible, between all parts of the writing.” Chandler Med. Bldg. Partners v. 

Chandler Dental Grp., 175 Ariz. 273, 277 (App. 1993). Determinations of fact, 

however, are reviewed applying a clearly erroneous standard. In re Johnson, 

231 Ariz. 556, 557, ¶ 1 (2013). The meaning of ambiguous language in a 

negotiated contract turns on what the parties intended, and to the extent 

credibility determinations must be made, the intent of the parties is a 

question of fact. Taylor, 175 Ariz. at 154, 159.

¶11 The superior court considered the fact that the document’s 

title is “Real Estate Purchase Agreement with Escrow Instructions,”

highlighting the terms Purchase Agreement as a basis for its finding that

the language in the Lease and Purchase Agreements demonstrates the 

parties’ intent to enter into a purchase agreement and not an option to 

purchase. That the contract included a clause stating that section headings 

and captions “in no way define, limit, construe or describe the meaning, 

scope or intent of such sections, nor in any way affect this Agreement,” is 

of no consequence, because “Real Estate Purchase Agreement with Escrow 

Instructions” is the name of the document, not a section heading or caption. 

Moreover, the Purchase Agreement referred to the period during which 

Callaway leased the property as an “extended escrow period.” The 

Purchase Agreement also contains several provisions that make it clear 

Callaway was obligated to purchase the property: (1) “Buyer agrees to 

purchase the Property from Seller”; (2) “Buyer hereby agrees to purchase 

the Property from Seller, and Seller hereby agrees to sell to Buyer the 

Property for the Purchase Price as defined below in this Agreement”; and 

(3) The closing “shall occur on or before 31st January, 2019.” (Emphasis 

added.)

¶12 Additionally, the Purchase Agreement contains language 

pertaining to a ten-day “inspection period” during which Callaway had 

“the right to immediately cancel” the contract. As North Ironwood notes, 

if the parties had intended to enter into an option to purchase, an inspection 

period would be unnecessary; Callaway would have the opportunity to 

refuse to exercise the option, and thereby not purchase the property, until 

the date of closing.

¶13 The Purchase Agreement provides that “[t]he Earnest Money 

shall be applied to the Purchase Price at Closing.” But because Callaway 
CALLAWAY v. NORTH IRONWOOD

Decision of the Court

5

failed to close on the property, she was in breach, and the Purchase 

Agreement provides that in those circumstances, North Ironwood “shall 

retain the Earnest Money as its damages and, thereafter, neither party shall 

have any further obligations to the other under this Agreement.”

Accordingly, given Callaway’s material breach, North Ironwood is entitled 

to the $10,000 earnest money deposit.

¶14 Callaway, however, cites to one phrase in a provision in the 

Lease Agreement she contends evidences the parties’ intent to enter into an 

option agreement:

Tenants are leasing the Property for the purpose of taking 

possession and constructing a residential structure and 

improvements to the Property during the term of the Lease, 

with the right to purchase the Property subject to and pursuant 

to the terms and conditions of that separate Purchase 

Agreement entered into between Tenant and Landlord.

¶15 However, there is no express language in either contract that 

indicates the parties agreed to an option to purchase; there is no use of the 

word “option,” there was no requirement of an “option fee” to be paid by 

Callaway, nor did the Agreements contain any other language typically 

found in an option to purchase, like the manner in which the option had to 

be exercised. The provision Callaway cites does not necessitate a finding 

that the parties entered into an option agreement. Moreover, if that single 

provision in the Lease Agreement was construed as an option, it would 

render the language in the Purchase Agreement explicitly outlining the 

terms of the sale as meaningless, inconsistent, and contradictory. See supra

¶¶ 11-12; see also Chandler Med. Bldg. Partners, 175 Ariz. at 277 (“[T]he court 

will not construe one provision in a contract so as to render another 

provision meaningless.”). Further, if the Agreements were interpreted as 

constituting an option, they would be silent and ambiguous as to what 

happens to the earnest money if Callaway did not exercise the option.

¶16 Callaway also points to a provision in the Lease Agreement 

that states at the termination of the lease, the options are (a) “Tenant shall 

return all keys and vacate the Premises, or (b) the successful closing of 

escrow under that separate Purchase Agreement.” But these are the terms 

under which the lease necessarily comes to an end, nothing more. Option 

(a) is not inconsistent with finding Callaway was under an obligation to 

close escrow, and it did not foreclose North Ironwood’s ability to seek 

remedies if she failed to do so. The Lease Agreement and Purchase 

Agreement expressly provide that they are to be read together, and the 
CALLAWAY v. NORTH IRONWOOD

Decision of the Court

6

Purchase Agreement contains the mandatory purchase language and North 

Ironwood’s remedies in the event of a breach. Looking at the contract as a 

whole, and not solely two isolated provisions within the Lease Agreement, 

the evidence supports the superior court’s finding that the parties’ intent 

was to enter into a purchase agreement.

¶17 Additionally, interpreting the Agreements as an option 

would lead to an absurd result where North Ironwood would gain nothing 

if Callaway had the ability to cancel the Purchase Agreement at any time 

before closing without incurring any financial penalty. That is, under 

Callaway’s interpretation of the Agreements, she could withdraw from the 

Purchase Agreement at any time before the closing date and nonetheless be 

entitled to the return of the $10,000 earnest money. Callaway argues the 

consideration for entering into the option was that North Ironwood would 

keep any improvements and fixtures she made to the property during the 

two-year lease term. But such benefits are illusory. Under Callaway’s 

interpretation of the contract, there would be no guarantee she would 

actually make any improvements to the property before cancelling the 

Agreements, let alone improvements that would enhance the property’s

value. See Roe v. Austin, 246 Ariz. 21, 27, ¶ 17 (App. 2018) (“[C]ourts must 

avoid an interpretation of a contract that leads to an absurd result.”); see also 

Chandler Med. Bldg. Partners, 175 Ariz. at 277 (“The court must apply a 

standard of reasonableness in contract interpretation.”) (citation omitted).

¶18 Callaway also looks to extrinsic evidence to support her 

argument that the parties intended to enter into an option, including emails 

between the two parties that took place a year after the Agreements were 

entered. In the email conversation, North Ironwood’s representative 

notified Callaway that it was not interested in approving the construction 

of a guest house before closing “should [Callaway] not be able to exercise 

the purchase.” He again stated the seller was not interested in approving 

the construction “should [Callaway] not exercise the option.”

¶19 Extrinsic evidence is inadmissible if it “would actually vary 

or contradict the meaning of the written words.” Long v. City of Glendale, 

208 Ariz. 319, 328, ¶ 29 (App. 2004). But even assuming arguendo this 

evidence is admissible, the superior court was not required to find it 

persuasive evidence that the parties entered into an option agreement. The 

representative uses the word “option” only once, and at trial, he testified 

that he was not using the word as a legal term of art in that context. The 

representative testified that he had only meant to say the seller was not 

interested in Callaway building a guest house in case she did not end up 

closing on the property, but he did not mean to imply she would not be in 
CALLAWAY v. NORTH IRONWOOD

Decision of the Court

7

breach if she decided not to close. He further testified that it was always 

his understanding the parties entered into a purchase agreement. The 

superior court found his testimony credible.

¶20 Further, North Ironwood sent notices to Callaway in October 

and December 2018 regarding the upcoming closing date, which make clear 

the seller believed Callaway was obligated to close. A January 2019 notice 

sent shortly before the closing date informed Callaway that North 

Ironwood was insisting “upon strict performance” and it would “exercise 

all rights and remedies available under the Agreement and the Lease.” 

North Ironwood acted consistent with that intent when it demanded the 

release of the earnest money from the escrow title agent after Callaway 

refused to close.

¶21 Callaway additionally contends the parties’ intention to 

execute an option to purchase is evidenced by the fact North Ironwood did 

not send a notice of default to Callaway. Callaway argues that North 

Ironwood would have sent a notice of default if it believed she was 

obligated to purchase the property. However, even assuming arguendo 

that North Ironwood’s written communications fell short of the requisite 

language in a notice of default, a few weeks before the closing date,

Callaway sent a letter informing North Ironwood she would not be closing 

on the property. “A party anticipatorily repudiates a contract when he or 

she provides a positive and unequivocal manifestation that the party will 

not perform when his or her duty to perform arises.” Ratliff v. Hardison, 219 

Ariz. 441, 443, ¶ 9 (App. 2008) (citation and internal quotation marks 

omitted). Callaway’s anticipatory repudiation excused North Ironwood 

from further performance under the Agreements. See Thomas v. Montelucia 

Villas, LLC, 232 Ariz. 92, 96, ¶ 12 (2013); see also Ariz. Prop. & Cas. Ins. Guar. 

Fund v. Helme, 153 Ariz. 129, 137 (1987) (noting “a party which repudiates 

its contract obligations on the basis of an incorrect interpretation of a 

contract has committed an anticipatory breach”).

¶22 Finally, Callaway argues that even if she did breach the 

Agreements by failing to close, North Ironwood waived an alleged breach 

by failing to send the required notice of default and giving her an 

opportunity to cure. Callaway has waived this argument by failing to raise 

it in the superior court. Orfaly v. Tucson Symphony Soc’y, 209 Ariz. 260, 265,

¶ 15 (App. 2004). In fact, at trial, Callaway specifically confirmed to the 

superior court that “[Callaway] is not making the argument that [North 

Ironwood] waived its right to keep the $10,000 earnest money by failing to 

provide notice and an opportunity to cure.” Regardless, as noted above,

North Ironwood was excused from further performance after Callaway’s
CALLAWAY v. NORTH IRONWOOD

Decision of the Court

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anticipatory repudiation, and so it was under no obligation to send a notice 

of default. See Thomas, 232 Ariz. at 96, ¶ 12.

¶23 Callaway argues that should we vacate any portion of the 

judgment, the attorneys’ fees awarded to North Ironwood should be 

vacated, as well. Because the superior court did not err in finding in favor 

of North Ironwood on Callaway’s contract claims, we affirm the superior 

court’s award of attorneys’ fees.

CONCLUSION

¶24 For the foregoing reasons, we affirm. Both parties request 

their attorneys’ fees and costs on appeal. Pursuant to the terms of the 

parties’ Purchase Agreement, we award North Ironwood its reasonable 

attorneys’ fees and costs upon compliance with ARCAP 21.