CASTLE ROCK v. PERRY

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UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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

CASTLE ROCK HOMES, LLC, Plaintiff/CounterDefendant/Appellant,

v.

BARBARA PERRY, et al., Defendants/CounterClaimants/Appellees.

No. 1 CA-CV 25-0678
FILED 04-20-2026

Appeal from the Superior Court in Maricopa County
No. CV2024-005948
The Honorable Melissa Iyer Julian, Judge

AFFIRMED

COUNSEL

Schern Richardson Finter, PLC, Mesa
By Aaron M. Finter and M. Rob Somers
Counsel for Plaintiff/CounterDefendant/Appellant

Guidant Law, PLC, Tempe
By Gary Michael Smith and Mark A. Hanson
Counsel for Defendants/CounterClaimants/Appellees
CASTLE ROCK v. PERRY, et al.
Decision of the Court

MEMORANDUM DECISION

Judge Veronika Fabian delivered the decision of the Court, in which
Presiding Judge Michael J. Brown and Chief Judge Randall M. Howe joined.

F A B I A N, Judge:

¶1 Castle Rock Homes, LLC (“Contractor”) appeals the superior
court’s order denying its motion to compel arbitration of counterclaims
asserted by Barbara Perry and Derek Hayes (“Owners”). Because
Contractor waived its right to arbitrate, this Court affirms.

FACTS AND PROCEDURAL HISTORY

¶2 Contractor offers residential design and contractor services. It
provided labor, materials, equipment, and professional services to
construct a single-family residence on Owners’ property.

¶3 The parties entered two construction contracts, each
containing the same arbitration provision:

Should any dispute arise relative to the performance of this
contract that the parties cannot resolve, the dispute shall be
referred to a single arbitrator acceptable to the builder and the
buyer. If the builder and the buyer cannot agree upon an
arbitrator, the dispute shall be referred to the American
Arbitration Association for resolution. All attorney fees that
shall be incurred in the resolution of disputes shall be the
responsibility of the party not prevailing in the dispute.

¶4 After construction of the Owners’ residence, a dispute arose
between the parties about alleged defects in the home and payment for
Contractor’s work.

¶5 Contractor filed a complaint in superior court alleging claims
for (1) foreclosure of a materialmen’s lien it had filed against the property
and (2) unjust enrichment. A few days later, Owners’ attorney wrote to
Contractor’s attorney asking whether Contractor intended to stay the
lawsuit to invoke the arbitration clause. When Contractor did not, Owners
answered and alleged ten counterclaims against Contractor, including
breach of contract, breach of fiduciary duty, fraud, and wrongful lien.

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Contractor filed an answer to the counterclaims but did not invoke
arbitration.

¶6 One year later, Contractor filed a motion to dismiss Owners’
counterclaims, arguing the court lacked subject matter jurisdiction because
the parties’ contract required them to arbitrate those claims. Owners
asserted Contractor waived its right to invoke the arbitration provision by
stipulating to a bench trial and substantially participating in the litigation.
After filing a reply in support of the motion to dismiss, Contractor moved
the superior court to stay the case until it ruled on the motion to dismiss,
citing A.R.S. § 12-3007 and noting that the motion to dismiss was “in effect
a motion to compel arbitration.”

¶7 The superior court denied both motions, ruling that
Contractor had waived any right to arbitration.

JURISDICTION

¶8 As an initial matter, this Court addresses Owners’ argument
that this Court lacks jurisdiction over the appeal because the superior
court’s order denying Contractor’s motion to dismiss is not appealable. See
Sorensen v. Farmers Ins. Co., 191 Ariz. 464, 465 (App. 1997) (appellate court
has an “independent duty to determine whether it has jurisdiction to
consider an appeal”).

¶9 In June 2025, the superior court denied Contractor’s motion
to dismiss and motion to stay in an unsigned minute entry. This Court
dismissed Contractor’s appeal because unsigned rulings, as well as denials
of motions to dismiss and motions to stay, are not appealable. Thereafter,
the superior court issued a signed minute entry memorializing the June
2025 ruling and stating that Contractor’s motion to dismiss was
substantively a motion to compel arbitration. Contractor’s appeal of the
amended order forms the basis of this appeal.

¶10 Owners maintain this Court lacks jurisdiction because the
superior court’s denial of Contractor’s motion to dismiss is not an
appealable order. An order denying a motion to dismiss is not appealable,
Nowell v. Rees, 219 Ariz. 399, 403 ¶ 10 (App. 2008); whereas, the denial of a
motion to compel arbitration is appealable under A.R.S. § 12-2101.01(A)(1).
This Court determines “the nature of a motion . . . by its substance and not
by its title.” State ex rel. Corbin v. Tolleson, 152 Ariz. 376, 380-81 (App. 1986).

¶11 In its motion to dismiss, Contractor stated that Owners’
counterclaims “should be dismissed and the matter referred to arbitration.”

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(Emphasis added). Contractor also told the superior court that it “lacks
subject matter jurisdiction over the dispute and must compel the parties to
pursue their claims in arbitration.” (Emphasis added). In addition, although
Contractor did not cite the statute allowing the superior court to compel
arbitration, see A.R.S. § 12-3007, every case it relied on in the motion
concerned the grant or denial of a motion to compel arbitration. The motion
to dismiss is fairly understood as asking the superior court to compel
arbitration rather than simply dismiss Owners’ counterclaims. Indeed, in
their opposition to the motion, Owners noted “until [Contractor’s] instant
motion, [Contractor] never raised an issue about arbitration nor sought its
compulsion,” (emphasis added), thereby implicitly acknowledging they
understood Contractor was asking the court to compel arbitration.

¶12 Despite its title, Contractor’s motion to dismiss was
substantively a motion to compel arbitration. See Tolleson, 152 Ariz. at 380-
81. Accordingly, this Court has jurisdiction over this appeal under Article
VI, Section 9 of the Arizona Constitution and A.R.S. §§ 12-120.21(A)(1) and
2101.01(A)(1).

DISCUSSION

¶13 Contractor argues the superior court erred by finding that it
waived the arbitration provision.1

¶14 Whether conduct amounted to a waiver of the right to
arbitrate is a question of law this Court reviews de novo with deference to
the findings of fact made by the superior court.2 See Duncan v. Pub. Storage,
Inc., 253 Ariz. 15, 19 ¶ 10 (App. 2022). A party may waive its right to enforce
an arbitration agreement by expressly relinquishing it or by exhibiting
conduct that clearly warrants inference of an intentional relinquishment.
Meineke v. Twin City Fire Ins. Co., 181 Ariz. 576, 581 (App. 1994). Waiver is
generally not favored, however, and this Court must consider the facts of

1 Owners moved to supplement the record on appeal to include
Contractor’s cross-motion for summary judgment filed December 30, 2025.
Because the superior court sent a supplemental record that included the
cross-motion for summary judgment, this Court denies that motion as
moot.

2 Arizona courts have used both the terms “waiver” and “repudiation”

when discussing relinquishment of the right to invoke an arbitration
provision. See, e.g., Meineke v. Twin City Fire Ins. Co., 181 Ariz. 576, 580-81
(App. 1994). For clarity, this Court uses “waiver” throughout this decision.

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the case “in light of the strong policy approving of arbitration.” Id. “[T]he
party seeking to prove waiver has the burden of proof.” Id.

¶15 Conduct inconsistent with the arbitration remedy may be
proof of waiver. City of Cottonwood v. James L. Fann Contracting, Inc., 179
Ariz. 185, 190 (App. 1994). “Inconsistency is usually found from such
conduct as preventing arbitration, making arbitration impossible,
proceeding at all times in disregard of the arbitration clause, . . . or
unreasonable delay.” EFC Dev. Corp. v. F.F. Baugh Plumbing & Heating, Inc.,
24 Ariz. App. 566, 569 (1975). If waiver is based on unreasonable delay,
there must also be a showing of prejudice. In re Est. of Cortez, 226 Ariz. 207,
212 ¶ 11 (App. 2010). However, prejudice is not required where waiver is
based on conduct other than delay. See id.

¶16 “[E]ven when a dispute is subject to arbitration, that right
may be waived by a party who participates substantially in litigation
without promptly seeking an order from the court compelling arbitration.”
City of Phoenix v. Fields, 219 Ariz. 568, 575 ¶ 30 n.4 (2009). Indeed, the
Arizona Supreme Court held in Bolo Corp. v. Homes & Son Construction Co.
that a party waived its right to arbitrate by filing a lawsuit requesting the
same relief it could have obtained from arbitration and suggested that filing
an answer without demanding arbitration would also constitute a waiver
of the arbitration agreement. 105 Ariz. 343, 346-47 (1970); see also Meineke,
181 Ariz. at 582 (noting that filing an answer without invoking arbitration
“would nearly always indicate a clear [waiver] of the right to arbitrate”).
This Court ruled in In re Estate of Cortez that a defendant who failed to
request arbitration in its answer and then substantially participated in
litigation for nearly a year had acted wholly inconsistent with enforcing the
arbitration agreement, thereby waiving its right to do so. 226 Ariz. at 211
¶ 6.

¶17 Here, Contractor replied to Owners’ counterclaims in May
2024 without raising the parties’ arbitration agreement and did not move to
dismiss the counterclaims and compel arbitration for another year. During
that time, the parties filed a joint report with a proposed case schedule
agreeing the case would be ready for a seven-day bench trial by May 2025.
The court adopted the proposed schedule and later held a Rule 16(d)
scheduling conference where Contractor confirmed that it intended to
waive its right to a jury trial. Contractor served its initial disclosure
statement in August 2024.

¶18 Two months later, the parties jointly informed the superior
court they were mediating their dispute and planned to submit a

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stipulation to adjust the case schedule if they did not reach a settlement.
They again updated the court on their mediation efforts in December 2024.
In March 2025, Owners notified the court that the parties had not settled
and requested the court enter an amended scheduling order extending the
case deadlines to account for the time the parties spent pursuing mediation.
Contractor did not oppose the request, and the court entered an amended
scheduling order noting the parties had already exchanged initial
disclosure statements and disclosed areas of expert testimony. Contractor
then defended a Rule 30(b)(6) deposition in April 2025 before it filed the
motion to dismiss later that month.

¶19 Contractor’s participation in the litigation for a year was
inconsistent with its assertion of its right to arbitrate Owners’
counterclaims. See id.; Bolo, 105 Ariz. at 346; Meineke, 181 Ariz. at 582; see also
Rancho Pescado, Inc. v. Nw. Mut. Life Ins. Co., 140 Ariz. 174, 181-83 (App.
1984) (party’s decision not to formalize and appeal from order denying its
motion to compel arbitration and instead to proceed with trial was a
“tactical decision not to arbitrate” and constituted a waiver of its right to
arbitrate).

¶20 Contractor maintains that its participation in the litigation
was “minimal” and insufficient to constitute a waiver of the arbitration
provision. Noting that its involvement in discovery was limited to serving
its initial disclosure statement and defending one deposition, Contractor
argues this case is nearly identical to In re Noel R. Shahan Irrevocable and Inter
Vivos Trust, in which this Court found the petitioner’s actions were not
inconsistent with arbitration. 188 Ariz. 74, 78 (1996).

¶21 The Shahan court’s discussion of “limited discovery,”
however, occurred in the context of whether the petitioner had waived his
right to arbitrate through unreasonable delay and prejudiced the
respondent by causing him to engage in discovery that was unavailable in
arbitration, not whether the petitioner’s actions in the litigation were
inconsistent with asserting a right to arbitration. Id. Further, the Shahan
court determined that the filing of a petition in superior court was not
inconsistent with arbitration because one of the respondents was not subject
to arbitration. Id. Here, there was no party involved who was not subject to
arbitration. Accordingly, Shahan does not prevent us from concluding that
under these circumstances, Contractor’s litigation activity was
incompatible with its invocation of the arbitration provision.

¶22 This Court pauses here to address Contractor’s repeated
citation to Smith v. Clouse Construction Co., 1 CA-CV 11-0482 (Ariz. App.

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Oct. 30, 2012) (mem. decision), an unpublished memorandum decision that
cannot be cited under Arizona Rule of the Supreme Court 111(c)(1).
Although Contractor asserts it does not cite Clouse for precedential value, it
repeatedly points to the case and improperly argues it is persuasive. For
example, Contractor claims “[c]omparison of the Clouse case to this one
would surely result in the Court ordering the parties to arbitrate.” This
Court admonishes counsel to read Arizona Rule of the Supreme Court
111(c)(1), which sets forth the limited circumstances in which an
unpublished memorandum decision may be cited. In the future, such a
blatant violation of Rule 111(c) may result in sanctions.

¶23 This Court is mindful of Arizona’s strong policy approving of
arbitration, but replying to counterclaims and participating in litigation for
a year without invoking arbitration “clearly warrants inference of an
intentional relinquishment.” Meineke, 181 Ariz. at 582 (“Although
arbitration is favored, the reasons for favoring it are to save the parties both
time and expense and to spare judicial resources.”). Under these
circumstances, Contractor’s conduct was wholly inconsistent with
arbitration and therefore constituted a waiver of its right to arbitrate under
the parties’ agreement.3 See id.; Bolo, 105 Ariz. at 346; Cortez, 226 Ariz. at 211
¶ 6.

ATTORNEY FEES AND COSTS

¶24 Contractor requests an award of attorney fees on appeal,
citing A.R.S. § 12-341.01 and the attorney fees provisions in the parties’
contracts. Owners request a fee award under A.R.S. § 12-341.01 and argue
an award is also appropriate as a sanction pursuant to A.R.S. § 12-349(A)
and Arizona Rule of Civil Appellate Procedure (“ARCAP”) 25 because
Contractor’s appeal is frivolous and was filed solely for the purpose of
delay.

¶25 Contractor has not prevailed on appeal, so its request is
denied.

3 Because this Court determines Contractor waived its right to arbitration

by participating substantially in the litigation without asking the superior
court to compel arbitration, this Court does not consider Owners’
alternative arguments that Contractor expressly agreed to waive arbitration
by stipulating to a bench trial or unreasonably delayed its assertion of the
arbitration provision.

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¶26 Because Owners have not shown that Contractor’s appeal
was without substantial justification (i.e., frivolous) or brought for purposes
of delay or harassment, this Court denies their request for an award of fees
under A.R.S. § 12-349 or ARCAP 25. However, because Owners are the
prevailing parties on appeal, this Court awards them attorney fees pursuant
to the parties’ contract and costs on appeal upon compliance with ARCAP
21. See Am. Power Prods., Inc. v. CSK Auto, Inc., 242 Ariz. 364, 368 ¶ 14 (2017)
(express contractual provisions for attorney fees govern over A.R.S.
§ 12-341.01 to the extent contract conflicts with the statute).

CONCLUSION

¶27 For the foregoing reasons, this Court affirms.

MATTHEW J. MARTIN • Clerk of the Court
FILED: JR

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