Court Opinion

ID: 9925962
Source: CourtListenerOpinion
Date Created: 2024-01-23 16:04:03.725378+00
Date Added: 2024-06-11T09:21:54.554614
License: Public Domain

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  UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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

            JOHN F. WALKER, a single man, Plaintiff/Appellant,

                                         v.

           WENDY HEALD, a single woman, Defendant/Appellee.

                              No. 1 CA-CV 23-0320
                               FILED 01-23-2024

            Appeal from the Superior Court in Yavapai County
                        No. V1300CV202080180
            The Honorable Linda M. Wallace, Judge Pro Tempore

                                   AFFIRMED

                                    COUNSEL

John F. Walker, Wooroloo, WA Australia
Plaintiff/Appellant

Law Office of Florence M. Bruemmer, P.C., Anthem, Arizona
By Florence M. Bruemmer
Counsel for Defendant/Appellee

                        MEMORANDUM DECISION

Presiding Judge Daniel J. Kiley delivered the decision of the Court, in which
Judge Kent E. Cattani and Judge D. Steven Williams joined.
                            WALKER v. HEALD
                            Decision of the Court

K I L E Y, Judge:

¶1            John F. Walker appeals the superior court’s order denying his
motion for relief from final judgment. For the following reasons, we affirm.

             FACTS AND PROCEDURAL BACKGROUND

¶2            Walker and Wendy Heald were married and share two sons.
In 1996, Walker founded Knowledge 2000 (“K2000”), an “eLearning
technology” company. Walker and Heald divorced in 2000. The dissolution
decree ordered Walker to pay child support to Heald, which Walker failed
to pay as required.

¶3             In 2002, Walker and Heald participated in an alternative
dispute resolution (“ADR”) conference regarding Walker’s child support
arrearage which, with accrued interest, came to approximately $18,000. The
parties agreed, among other things, that Walker would pay Heald $500 per
month until January 2004, when he would make a $15,000 balloon payment
and reimburse Heald for other expenses as well. They further agreed that
Walker would transfer 50,000 shares of K2000 stock to Heald “[a]s
collateral” to secure his payment obligations.

¶4           In late October 2002, Walker mailed Heald a certificate for the
50,000 shares of K2000 stock. On the back of the certificate, Walker added
the following terms:

      If full satisfaction of my debt to [Heald] has not been made by
      January 1, 2004, I hereby authorized the transfer of 50,000
      shares of [K2000] from my account to [Heald] to be used as
      collateral against that debt.

      If the debt has not been fully extinguished by this date,
      [Heald] may present this stock certificate to [K2000] for
      signature by the corporation’s officers, and may subsequently
      sell all or part of the stock in order to satisfy the balance of the
      debt. The remaining proceeds or unsold shares will then be
      returned to [Walker] . . . .

¶5           Shortly thereafter, Walker resigned as president of K2000 and
moved to Australia. In his resignation letter, he “proposed the creation” of
a new company “to enable separate corporate wrappings around K2000’s
eLearning technology and the products that the company created based on
the technology.” In 2003, Ted Foley, a K2000 board member and one of its

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“original investor[s],” founded the new company, Efficient Learning
Systems. K2000 was dissolved in 2012.

¶6           In 2010, an agency of the Australian government notified
Walker that his child support obligation remained outstanding. Walker
later acknowledged that he knew, at that point, that Heald had not used the
50,000 K2000 shares to pay off his child support debt.

¶7            In 2020, Walker sued Heald for common law fraud, alleging
that she accepted the 50,000 shares of K2000 stock “under the terms that
they would be consummated and sold in 2004 and the proceeds used to pay
off [Walker’s] past and future child-support obligations.” “Instead of using
the shares to pay off [Walker’s] child-support obligations in 2004,” Walker
alleged, Heald used them to acquire shares of Efficient Learning Systems
“as a future investment without informing [Walker] or the Arizona
Child-Support Services of her actions.” According to Walker, Heald’s
“actions resulted in the [continued] accrual” of his child support debt “for
over a decade,” the “loss of the value of the [K2000] shares,” and “the hiding
of other malfeasances associated with [his] financial interest in the
company’s business assets.” Heald filed an answer denying Walker’s
substantive allegations and asserting various affirmative defenses and a
counterclaim for defamation.

¶8           In April 2021, Heald filed a motion for partial summary
judgment, arguing, inter alia, that Walker’s claim was time-barred.

¶9            In his response, Walker disputed most of Heald’s factual
allegations and insisted that his fraud claim was not, in fact, based on
Heald’s failure to use the K2000 shares to retire his child support debt.
Instead, according to Walker, “the fraud in this lawsuit has to do with
[Heald’s] misuse of the 50,000 collateral shares to acquire 23,500 [Efficient
Learning Systems] shares in a deal made with Ted Foley.” Walker
elaborated that Heald “ignore[d] the intended purpose” of the shares—to
“retire [his] child-support debt”—and instead used them to make a
“personal investment” in Early Learning Systems, giving her a “double
financial benefit” in the continued accrual of his child support debt and the
acquisition of the Early Learning Systems shares. Walker maintained that
he did not learn of Heald’s “deal” with Foley until one of the parties’ sons
“accidentally discovered” documents related to the transaction on Heald’s
computer in August 2017. Accordingly, he concluded, his cause of action
did not accrue until 2017, and his claim was timely filed in 2020.

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                            WALKER v. HEALD
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¶10           After oral argument, the court granted summary judgment in
Heald’s favor on Walker’s fraud claim, concluding that Walker’s claim was
barred by the three-year statute of limitations applicable to fraud. See A.R.S.
§ 12-543(3). The court reasoned that, even “assuming arguendo that Walker’s
version of events is true,” Walker admitted that he was notified by the
“Australian Government Department of Child-Support” in 2010 that “his
child support debt had not been retired by the stock shares” and that he
was required to start making payments. Thus, “[p]utting aside Walker’s
obligation to investigate his own debts owed for child support,” “at a
minimum, the statute of limitations . . . accrued no later than 2010.”

¶11            Walker moved for reconsideration. In his motion, he admitted
that he learned in 2010 that Heald had not used the K2000 shares to retire
his child support debt and admitted that he “could have brought a lawsuit
for [her] failure to do so.” He explained, however, that he decided that
suing Heald “was not a viable option” at the time because “the only injury
that he could claim was the accumulated interest on the debt.” Filing suit
would not have been cost-effective, Walker stated, because the “legal costs”
involved “would have exceeded the accumulated interest” that he could
claim as damages.

¶12            Walker nonetheless insisted that the knowledge he gained in
2010 that Heald had not applied the K2000 shares to his outstanding child
support debt was not enough to trigger the running of the statute of
limitations. Reiterating that his claim was “never about” Heald’s failure to
“use the collateral shares to retire [his] child support debt,” he argued that
his claim arises out of Heald’s use of the K2000 shares “to acquire (convert
them to) Efficient Learning Systems shares and to hide that action from”
him “in order to establish a double financial benefit for herself”—namely,
“the continued accumulation of [his] child-support debt” and “an
investment in a company with rising sales.” When he learned in 2010 that
Heald had not used his K2000 shares for “their intended purpose,” he
believed that Heald had “transferred” the shares into the names of the
parties’ sons. Because he “felt” that transferring the shares to his sons “was
a reasonable and fair outcome,” he took no further action. Not until 2017,
he asserted, did he learn that Heald exchanged the K2000 shares for
Efficient Learning Systems shares. He concluded that his cause of action
against Heald did not accrue until he made this discovery.

¶13           The superior court denied Walker’s motion for
reconsideration. Walker then filed a notice of appeal. Shortly thereafter,
Walker filed a motion for leave to file an amended complaint, asserting that
he had discovered new evidence that supported two additional fraud

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                            WALKER v. HEALD
                            Decision of the Court

claims against Heald. This Court dismissed the appeal, and the superior
court granted Walker’s motion to file an amended complaint.

¶14            Walker then filed a first amended complaint (“FAC”)
asserting three claims: (1) common law fraud (Count 1); (2) “aiding and
abetting insolvency fraud” (Count 2); and (3) “aiding and abetting share
elimination fraud” (Count 3). Count 1 re-alleged, verbatim, the common
law fraud claim against Heald that Walker alleged in his original complaint.
Counts 2 and 3 alleged that Heald gave “critical assistance” to Foley “in his
perpetrating” of “Insolvency Fraud” and “Share Elimination Fraud,”
respectively, both of which “resulted in the elimination of” the value of the
interest Walker and his sons had “in the business assets” of K2000. The FAC
described the “Insolvency Fraud” as Foley falsely informing shareholders
that K2000 was “insolvent” and the “Share Elimination Fraud” as Foley
failing to transfer Walker’s 2.5 million shares in K2000 to Walker’s sons.

¶15            Heald moved to dismiss the FAC as barred by res judicata. She
argued that the court had already adjudicated and dismissed the common
law fraud claim Walker re-alleged in Count 1 of the FAC. As for Counts 2
and 3, Heald asserted that both claims had been dismissed as time-barred
in a separate case, “Case Vl300CV202080244,” on April 1, 2021. Walker did
not file a response.

¶16           In August 2022, the superior court granted Heald’s motion
and dismissed the FAC. The court also awarded Heald reasonable attorney
fees and costs incurred in filing the motion to dismiss.

¶17          Heald subsequently moved to voluntarily dismiss her
counterclaim for defamation, while Walker moved for reconsideration of
the order dismissing the FAC. The court denied Walker’s motion for
reconsideration, granted Heald’s request to voluntarily dismiss her
counterclaim, and denied pending discovery motions as moot. Because no
further matters remained pending, the court entered the order as a final
judgment pursuant to Arizona Rule of Civil Procedure (“Rule”) 54(c).

¶18            Walker then sought leave to file a second amended complaint,
justifying his proposed amendment by citing “recently discovered
documents” that had allowed him to “pinpoint an exact description of how
the [K2000] business assets were expropriated and fraudulently transferred
into Efficient Learning Systems.” The court denied his motion, noting that
the matter had already been dismissed and final judgment entered.

¶19            Walker filed a motion for relief from final judgment under
Rule 60(b)(2). In his motion, he did not dispute that, before he filed the FAC,

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                           WALKER v. HEALD
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the court had granted summary judgment on his common law fraud claim
against Heald and his remaining claims had been dismissed as time-barred
in separate litigation. He nonetheless asserted that on August 24, 2022, he
received various documents from Foley’s daughter (who is a “member of
the board of Efficient Learning Systems”), including a document entitled
“Efficient Learning Systems 2007/2008 financial statement” (the “ELS
Financial Statement”). Walker further asserted that the ELS Financial
Statement constitutes “newly discovered evidence” within the meaning of
Rule 60(b)(2) because the document “exposes the exact mechanism by
which the [K2000] business assets were expropriated and fraudulently
transferred into Efficient Learning Systems.” Walker explained that the ELS
Financial Statement “explicitly states that K2000’s business assets were
acquired through the foreclosure of a loan” that Foley had made to K2000.
Thus, Walker asserted, the ELS Financial Statement illuminated how Foley
“managed to take control of the [K2000’s] business assets.” Walker added
that he could not have discovered the ELS financial statement through due
diligence because he was not privy to Efficient Learning Systems financial
information since he was “not an Efficient Learning Systems shareholder.”

¶20          Subsequently, and with leave of court, Walker filed an
amended motion for relief from final judgment, asserting the same
arguments but with two additional exhibits attached. In response, Heald
argued that the “new” evidence could have been discovered through due
diligence and, in any event, the new evidence would not have changed the
outcome of the case.

¶21           On April 3, 2023, the court denied Walker’s motion for relief
from final judgment and again entered judgment pursuant to Rule 54(c).
Walker filed a motion for reconsideration of the denial but, before the court
issued a ruling on the motion, filed a timely notice of appeal. We have
jurisdiction under A.R.S. § 12-2101(A)(1).

                              DISCUSSION

¶22           Under Rule 60(b)(2), “[o]n motion and just terms, the court
may relieve a party . . . from a final judgment, order, or proceeding” based
on “newly discovered evidence that, with reasonable diligence, could not
have been discovered in time to move for a new trial.” The superior court
enjoys broad discretion in deciding whether to grant relief from a judgment
or order under Rule 60(b), Skydive Ariz., Inc. v. Hogue, 238 Ariz. 357, 364,
¶ 24 (App. 2015), and this Court reviews its decision for an abuse of that
discretion, Rogone v. Correia, 236 Ariz. 43, 48, ¶ 12 (App. 2014).

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                            WALKER v. HEALD
                            Decision of the Court

¶23           Heald devotes several pages of her answering brief to
detailing the myriad ways in which Walker’s amended opening brief fails
to comply with the Arizona Rules of Civil Procedure. Although the Court
agrees that Walker’s 63-page brief makes little attempt to comply with
ARCAP 11 and 13, our preference for resolving cases on their merits leads
us to decline Heald’s invitation to summarily dismiss this appeal despite
Walker’s noncompliance with applicable rules. See DeLong v. Merrill, 233
Ariz. 163, 166, ¶ 9 (App. 2013).

¶24            Rule 60(b)(2) allows the court to relieve a party from a final
judgment based on “newly discovered evidence that, with reasonable
diligence, could not have been discovered in time to move for a new trial
under Rule 59(b)(1).” “[T]he evidence must have been in existence at the
time of the trial, but if it was in possession of the party before the judgment
was rendered it is not newly discovered and does not entitle him to relief.”
Ashton v. Sierrita Mining & Ranching, 21 Ariz. App. 303, 305 (1974) (citation
omitted). Also, “the moving party must show why he did not have the
evidence at the time of the trial or in time to move [for a new trial].” Id.
(citation omitted). “A judgment will not be reopened if the evidence is
merely cumulative and would not have changed the result.” Id. (citation
omitted).

¶25           Here, Walker contends that the ELS Financial Statement
constitutes “newly discovered evidence” under Rule 60(b)(2) because it
existed when this case was filed, was not in his possession at the time
judgment was rendered, could not have been discovered through due
diligence, and was “materially significant” to his claims. As for its
significance, Walker argues that the document “exposes” the exact
“mechanism” by which Foley “expropriated” K2000’s assets and
“fraudulently transferred” them to Efficient Learning Systems.

¶26            Even assuming arguendo that the ELS Financial Statement
could not have been discovered despite reasonable diligence and that it
provides new information about the “exact mechanism” of the alleged
fraud, Walker does not explain how such information would have led the
court to deny Heald’s motion to dismiss the FAC. All of the claims in the
FAC arose out of alleged fraud by Heald and Foley. Those fraud claims had
already been adjudicated, and so the court dismissed the FAC on the basis
of res judicata. New information explaining exactly how the underlying
fraud was allegedly perpetrated is irrelevant to the court’s determination
that res judicata barred the fraud claims. Because Walker does not dispute
the court’s determination that res judicata barred his claims, he has not
shown that the court abused its discretion in denying his request to set aside

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                            WALKER v. HEALD
                            Decision of the Court

the judgment based on this purported “newly discovered evidence.” See
Ruesga v. Kindred Nursing Ctrs., LLC, 215 Ariz. 589, 595, ¶ 17 (App. 2007) (“A
judgment will not be reopened if the evidence . . . would not have changed
the result.”) (cleaned up).

¶27            Walker also argues that he is entitled to relief from final
judgment under Rule 60(b)(6), which allows for relief based on “any other
reason justifying relief.” He asserts that the court’s order denying him relief
“results in a miscarriage of justice in that the tortfeasor . . . and his
accessories” who “defrauded [Walker’s sons] of their entire financial
interest in [K2000’s] business assets” are “not held to account.”

¶28             In the motion he filed in superior court, Walker did not assert
that he is entitled to relief on any basis other than Rule 60(b)(2). Because our
review is limited to the issues raised in the motion for relief from judgment,
see Ruesga, 215 Ariz. at 599, ¶ 38, Walker’s belated Rule 60(b)(6) claim is
waived. See also Cont’l Lighting & Contracting, Inc. v. Premier Grading & Utils.,
LLC, 227 Ariz. 382, 386, ¶ 12 (App. 2011) (as corrected) (if a legal theory is
“not raised below so as to allow the trial court” “an opportunity to address
all issues on their merits,” it is waived on appeal).

¶29           Walker discusses at length his position that the superior court
erred in granting summary judgment on his original common law fraud
claim against Heald. He “expected . . . in 2004” that Heald had used the
50,000 K2000 shares to “retire[]” his child support debt, he argues, and
“never had any reason” until 2017 to believe she would use them to acquire
an interest in Efficient Learning Systems. According to Walker, Heald’s
“perfidious actions” resulted in the continued “accrual” of his child support
debt “for over a decade.”

¶30            Because these arguments do not relate to the denial of the
motion for relief from judgment on grounds of res judicata, and instead
attempt to re-litigate the merits of the underlying judgment, we do not have
jurisdiction to address them. Rule 60(b) “is not an alternative to filing an
appeal or to other procedures for obtaining review of erroneous legal
rulings.” See Craig v. Superior Court, 141 Ariz. 387, 388 (App. 1984) (citation
omitted); see also Budreau v. Budreau, 134 Ariz. 539, 541 (App. 1982) (“[Rule
60(b)] cannot be used as a substitute for appeal to relitigate issues which
have already been finally determined.”).

                               CONCLUSION

¶31           For the foregoing reasons, we affirm.

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                        WALKER v. HEALD
                        Decision of the Court

¶32          Heald requests attorney fees and costs pursuant to A.R.S.
§ 12-349 and ARCAP 21, citing Walker’s “unreasonable” positions on
appeal. In our discretion, we grant Heald’s request for an award of
reasonable fees and costs upon compliance with ARCAP 21.

                         AMY M. WOOD • Clerk of the Court
                         FILED: TM

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