Mtr Builders v. Jahan ( 2016 )


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  •                           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    UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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
    MTR BUILDERS, INC., an Arizona corporation,
    Plaintiff/Counterdefendant/Appellee/Cross-Appellant,
    v.
    JAHAN REALTY MANAGEMENT CORPORATION,
    Defendant/Counterclaimant/Appellant/Cross-Appellee.
    No. 1 CA-CV 14-0650
    FILED 4-12-2016
    Appeal from the Superior Court in Maricopa County
    No. CV2011-007463
    The Honorable Maria Del Mar Verdin, Judge, Retired
    The Honorable James T. Blomo, Judge
    AFFIRMED
    COUNSEL
    Dickinson Wright PLLC, Phoenix
    By Denise H. Troy
    Counsel for Plaintiff/Counterdefendant/Appellee/Cross-Appellant
    Wilenchik & Bartness PC, Phoenix
    By Dennis I. Wilenchik and Tyler Q. Swensen
    Counsel for Defendant/Counterclaimant/Appellant/Cross-Appellee
    MTR BUILDERS v. JAHAN
    Decision of the Court
    MEMORANDUM DECISION
    Presiding Judge Andrew W. Gould delivered the decision of the Court, in
    which Judge John C. Gemmill and Judge Margaret H. Downie joined.
    G O U L D, Judge:
    ¶1            MTR Builders Inc. (“Contractor”) and Jahan Realty
    Management Corporation (“Owner”) both appeal from a jury verdict
    declaring Owner breached the parties’ contract and awarding Contractor
    $52,129.18 in damages. For the following reasons we affirm the verdict and
    rulings of the trial court.
    FACTS AND PROCEDURAL BACKGROUND
    ¶2            In December 2009, Owner and Contractor entered a
    construction contract to build a shell building for retail space in Tempe.
    The construction contract contained a draw schedule of five progress
    payments outlining the amounts Owner would pay Contractor at
    predetermined stages of construction.1 The project progressed and
    Contractor reached completion of the fifth and final phase of construction.
    ¶3            On June 1, 2011, Contractor emailed Owner with an invoice
    seeking payment of Draw 5 and requesting a final walkthrough. Owner
    responded via email on June 10 stating that a few outstanding matters
    needed to be resolved pursuant to the contract before scheduling a final
    walkthrough; Owner requested issuance of a Certificate of Occupancy by
    the City of Tempe and final written approval by the Owner’s appointed
    third-party inspector.
    ¶4           Owner and its architect, who acted as the third-party
    inspector, walked through the building and created a punch list that was
    sent to Contractor on June 29, 2011. Contractor responded on July 12,
    stating (1) it had remedied all punch-list items for which it was
    contractually responsible, and (2) requesting Owner’s inspector to re-
    inspect the property and issue final approval. However, the inspector
    1      During the course of construction the parties signed an amendment
    to the contract extending the completion date and increasing payment to
    Contractor for various change orders.
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    MTR BUILDERS v. JAHAN
    Decision of the Court
    declined to re-inspect the property unless at Owner’s direction, explaining
    that he could not sign a certificate of substantial completion without a
    certificate of completion first being issued by Tempe.
    ¶5              On July 24, 2011, Contractor informed Owner that it needed a
    certificate of special inspection to be signed by Owner before Tempe would
    issue a certificate of completion.2 In the communication, Contractor again
    requested payment for the work it had performed in the amount of
    $59,224.18.
    ¶6           The parties continued to disagree over some items required
    to complete the contract. Owner required Contractor to test and balance
    A/C units it installed. Contractor maintained that any outstanding items
    were warranty items that would be remedied after Owner paid the final
    payment in completion of the contract. Owner also requested Contractor
    to provide an unconditional lien waiver indemnifying Owner from any
    subcontractor claims.
    ¶7            At one point, Owner obtained a certified check in the amount
    Contractor was requesting for final payment, and the only outstanding
    issue appeared to be Contractor’s lien waivers. Additionally, the record
    shows the City of Tempe did issue a certificate of completion, although both
    parties were unable to produce the document at trial, and Owner continued
    to demand that Contractor provide it.3
    ¶8           Ultimately, the parties’ differences could not be resolved and
    communication between them broke down. Contractor then filed a
    complaint for breach of contract against Owner on August 3, 2011.
    ¶9          Contractor’s complaint alleged Owner had breached its
    contract, Owner was unjustly enriched thereby, and Owner had violated
    the Prompt Pay Act in failing to pay Contractor’s invoice. Owner replied
    2      Although the contract refers to a certificate of occupancy, both
    parties agree that what was actually required was a certificate of
    completion. The building is a shell building that would not be occupied
    until tenant improvements were performed; therefore, completion of
    Contractor’s work on the building would be marked by a certificate of
    completion.
    3     We conclude that a certificate of completion was finally issued
    because Owner admitted it was able to occupy the property.
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    and filed a counterclaim alleging Contractor was the party who had
    breached.
    ¶10           Before trial, the parties filed cross-motions for summary
    judgment on Contractor’s Prompt Pay Act claim. Contractor argued it
    submitted an invoice requesting final payment pursuant to the Act on June
    1, 2011, and Owner had failed to provide a written objection to the billing
    within the required time. Owner responded that Contractor’s request for
    final payment was premature. Additionally, Owner claimed it did object
    to Contractor’s requested billing in its June 10 email response and the punch
    list generated by its inspector on June 29. Owner also sought dismissal of
    the unjust enrichment claim because a contract governed the parties’
    relationship.
    ¶11          The court granted summary judgment for Owner on both the
    Prompt Pay Act and the unjust enrichment claims. The court concluded
    that Contractor’s request for final payment was premature and that Owner
    had timely objected in its email and punch list.
    ¶12           Just before start of trial, Owner filed a motion for judgment as
    a matter of law. Owner argued the contract contained conditions precedent
    to final payment that precluded Contractor from prevailing on its breach of
    contract claim. Owner asserted that Contractor did not obtain the third-
    party inspector’s final approval or the City of Tempe’s certificate of
    completion before seeking final payment. Thus, under American Continental
    Life Insurance Co. v. Ranier Construction Co., 
    125 Ariz. 53
     (1980), Owner
    concluded it was entitled to judgment as a matter of law.
    ¶13           The court denied Owner’s motion and proceeded with the
    trial. During trial, Contractor presented evidence that it had substantially
    performed its duties under the contract. Further, Contractor showed that
    the City of Tempe eventually issued a certificate of completion, and Owner
    was able to occupy the premises. Owner’s expert testified that Contractor
    had grossly deviated from the contract and the cost of required repairs
    exceeded the amount of the final payment. Contractor’s rebuttal expert
    countered that many of the complained-of deficiencies were minor and
    incidental to any construction project.
    ¶14           Having found there was sufficient evidence to support both
    parties’ breach of contract theories, the court instructed the jury on
    substantial performance and anticipatory breach. The jury returned a
    verdict in favor of Contractor on its breach of contract claim and awarded
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    Decision of the Court
    $52,129.18 in damages; the jury also entered a verdict denying Owner’s
    breach of contract claim against Contractor.
    ¶15          The court entered judgment in accordance with the jury
    verdicts and awarded Contractor $105,000 in attorneys’ fees. Owner
    renewed its Rule 50(b) motion, requesting the court direct a verdict in its
    favor pursuant to Ranier. The court denied Owner’s motion.
    ¶16          Owner appealed the denial of its Rule 50(b) motions.
    Contractor cross-appealed the grant of summary judgment to Owner on the
    Prompt Pay Act claim.
    DISCUSSION
    I.     Summary Judgment Award
    ¶17            “We review an award of summary judgment de novo, both as
    to whether there are any genuine issues of material fact and as to whether
    the moving party is entitled to judgment as a matter of law.” Greenwood v.
    State, 
    217 Ariz. 438
    , 442, ¶ 13 (App. 2008). “[W]e view the facts in a light
    most favorable to the party opposing the motion.” Nelson v. Phoenix Resort
    Corp., 
    181 Ariz. 188
    , 191 (App. 1994). We will affirm if the trial court’s ruling
    is correct for any reason. Hawkins v. State, 
    183 Ariz. 100
    , 103 (App. 1995).
    ¶18           The trial court granted Owner’s motion for summary
    judgment on the Prompt Pay Act claim. It concluded that Contractor’s
    request for payment was premature and that Owner timely objected to the
    request for payment. On cross-appeal, Contractor argues the trial court
    erred in granting summary judgment to Owner. Contractor contends
    Owner never issued a written statement within the terms of the act to notify
    Contractor it would not approve the billing.
    ¶19           Under the Prompt Pay Act an owner is required to make final
    payment to the contractor “within seven days after the billing or estimate
    for final payment is certified and approved.” Arizona Revised Statutes
    (“A.R.S.”) § 32-1129.01(A). The contractor shall submit its billing “[o]n final
    completion of the work.” A.R.S. § 32-1129.01(K). The Act defines “final
    completion” to mean either (1) when the work “has been completed in
    accordance with the terms and conditions of the construction contract,” or
    (2) the “date of final inspection and final written acceptance by the
    governmental body that issues the building permit.” A.R.S. § 32-
    1129(A)(3).
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    ¶20           The terms of the parties’ contract provide that payment for
    Draw 5 would be made after the contractor finished “plumbing, electrical .
    . . and any other work to complete the Project and obtain the Certificate of
    Occupancy.” The contract also states that draw payments would be
    disbursed subject to the satisfaction of a third-party inspector to be
    designated by Owner. The contract reiterates that “Draw 5 may be
    withheld pending final approval by the City of Tempe and the third-party
    inspector, which will then result in receiving the Certificate of Occupancy.”
    ¶21           Thus, under both the contract and the Prompt Pay Act,
    Contractor could not submit a billing for Draw 5 before obtaining final
    approval of the third-party inspector and of the City of Tempe as evidenced
    by a Certificate of Completion. The record reflects that neither occurred
    before Contractor submitted its invoice seeking payment of Draw 5 on June
    1, 2011.
    ¶22          At the time Contractor submitted its request for payment of
    Draw 5, the Owner’s inspector had not performed a walkthrough and the
    City of Tempe had not issued a certificate of completion. Accordingly,
    under the Prompt Pay Act, Contractor’s request for payment was
    premature; the trial court properly granted summary judgment to Owner
    on Contractor’s Prompt Pay Act claim.
    ¶23          On appeal, Owner reasons the court’s ruling denying
    Contractor’s Prompt Pay Act claim is tantamount to a finding that Owner
    did not breach the contract. We disagree.
    ¶24           The primary purpose of the Prompt Pay Act is to establish a
    framework for ensuring timely payments from the owner to the contractor.
    Stonecreek Bldg. Co. Inc., v. Shure, 
    216 Ariz. 36
    , 39, ¶ 16 (App. 2007). The Act
    does not displace other contractual remedies available to the parties; rather,
    the Prompt Pay Act affords a remedy for enforcement of construction
    contracts in addition to any other breach of contract remedy available to a
    contractor. Thus, the court’s grant of summary judgment against
    Contractor on its Prompt Pay Act claim did not prohibit Contractor from
    seeking damages for breach of contract.
    II.    Denial of Rule 50(b) Motion
    ¶25          We review the court’s ruling on a motion for directed verdict
    de novo. Dawson v. Withycombe, 
    216 Ariz. 84
    , 95, ¶ 25 (App. 2007). In our
    review, “we view the evidence and all reasonable inferences drawn from
    the evidence in a light most favorable to the non-moving party, and will
    reverse a court’s denial only upon a showing that there is no probative
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    Decision of the Court
    evidence in the record to support the ultimate verdict.” 
    Id.
     “When the terms
    of a contract are plain and unambiguous, its interpretation is a question of
    law” subject to de novo review. ELM Retirement Ctr., LP v. Callaway, 
    226 Ariz. 287
    , 291, ¶ 15 (App. 2010); Grosvenor Holdings, L.C. v. Figueroa, 
    222 Ariz. 588
    , 593, ¶ 9 (App. 2009).
    ¶26             Owner relies on Ranier, to argue the trial court erred in
    denying its Rule 50(b) motion for directed verdict on Contractor’s breach of
    contract claim. In Ranier, the court enforced a condition precedent to final
    payment in the construction contract and denied final payment to the
    contractor. 
    125 Ariz. at 54-55
    . The parties’ contract expressly conditioned
    payment on issuance of a final certificate for payment by the architect. 
    Id. at 55
    . Because the contractor did not obtain a final certificate for payment,
    the court found that the owner was entitled to a directed verdict on its
    breach of contract claim against the contractor. 
    Id. at 56-57
    . Accordingly,
    the court reversed a jury verdict in the contractor’s favor and directed the
    trial court to enter judgment in the owner’s favor. 
    Id. at 57
    .
    ¶27          The facts of this case and the facts of Ranier are similar.
    However, the holding in Ranier specifically relied upon the express,
    unambiguous contract language stating that payment was required
    “provided that . . . a final Certificate for Payment has been issued by the
    Architect.” Ranier, 
    125 Ariz. at 55
    . Accordingly, Ranier only requires a
    directed verdict for Owner in this case if the subject contract expressly
    conditions payment on the alleged conditions precedent.
    ¶28             “As a general rule conditions precedent are not favored and
    the courts are not inclined to construe a contractual provision as a condition
    precedent unless such construction is plainly and unambiguously required
    by the language of the contract.” Watson Constr. Co. v. Reppel Steel & Supply
    Co., 
    123 Ariz. 138
    , 140 (App. 1979); see also Valley Nat’l Bank of Ariz. v. Cotton
    Growers Hail Ins., Inc., 
    155 Ariz. 526
    , 528 (App. 1987). To create a condition
    precedent “there must be contractual language demonstrating the parties’
    unequivocal intent” to do so. L. Harvey Concrete, Inc. v. Agro Constr. &
    Supply Co., 
    189 Ariz. 178
    , 182 (App. 1997). The language must demonstrate
    that payment is only required upon satisfaction of that condition, and that
    failure to satisfy the condition precludes any right to payment. See Watson,
    
    123 Ariz. at 142
    . To determine what the parties intended, we “consider the
    plain meaning of the words in the context of the contract as a whole.”
    Figueroa, 222 Ariz. at 593, ¶ 9.
    ¶29           Owner contends that final approval by its third-party
    inspector, issuance of a certificate of completion by the City of Tempe, and
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    MTR BUILDERS v. JAHAN
    Decision of the Court
    signing of lien waivers on behalf of subcontractors are conditions precedent
    to the payment Contractor sought. Owner relies on a number of provisions
    of the contract in support of its condition-precedent argument. Section 2.3
    states “[s]ubject to the inspector’s satisfaction, each draw will be
    disbursed.” Section 3.1 states “Owner will make payments to the contractor
    pursuant to the attached construction draw schedule as work required by
    said schedule is satisfactorily completed per the Inspector’s satisfaction.”
    Additionally, the contract states “Draw 5 may be withheld pending final
    approval by the City of Tempe and the third-party inspector.” Finally, the
    contract amendment provides “future draw releases or payments will
    require a conditional lien waiver signed by all subcontractors and MTR.”4
    ¶30            However, the contract contains other provisions under which
    Contractor can seek payment. In section 3.2 the contract expressly provides
    that in the event either party terminates the contract Owner remains
    obligated to pay Contractor for “that part of the work performed to the
    satisfaction of [the third-party] inspector.” Section 12.1 provides that
    should either party fail to carry out the contract, “with all of its provisions,”
    the non-defaulting party may proceed for breach of contract and seek its
    damages. Thus, the contract language, when viewed as a whole, is not a
    strict condition precedent contract. Miller v. Crouse, 
    19 Ariz. App. 268
    , 273-
    74 (1973) (stating that where the contract provides the remedy for breach or
    termination of contract, the terms of the contract control).
    ¶31           Contrary to Owner’s assertions, Contractor’s breach of
    contract claim is not simply a claim for payment of Draw 5, and therefore
    limited to section 3.1 of the contract. Rather, Contractor’s claim reaches
    beyond payment of Draw 5 and seeks damages for breach of contract in the
    amount of $59,224.18. The claim is for Contractor’s damages caused by
    Owner’s breach of the contract pursuant to section 12.1 of the contract.
    ¶32           This distinction is significant. In the event that either party
    should default and fail to carry out its obligations under the contract, the
    non-defaulting party is given the option to sue for breach of contract.
    Thus, although there are conditions under section 3.1 that may preclude
    Contractor from demanding payment of Draw 5, in the event of a breach,
    sections 12.1 and 3.2 of the contract provide that Contractor is still entitled
    4     Owner incorrectly asserts the contract required Contractor to
    provide unconditional lien waivers. The contract language clearly provides
    that conditional lien waivers be signed by subcontractors and by
    Contractor. Furthermore, the contract does not expressly condition
    payment of any draw on the lien waivers.
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    to seek damages for breach of contract. These contract provisions clearly
    govern the dispute between Owner and Contractor.
    ¶33           Thus, when viewed as a whole, the contract does not plainly
    and unambiguously create conditions precedent for Contractor to seek
    damages for breach of contract; accordingly, Ranier does not control. The
    court correctly denied Owner’s Rule 50(b) motions. See Gardner v. Royal
    Dev. Co., 
    11 Ariz. App. 447
    , 449 (1970) (stating that reviewing court will
    assume court made necessary findings to support its ruling).
    III.   Trial Court’s Jury Instructions
    ¶34            “In determining whether a jury instruction is justified, we
    must view the evidence in the strongest manner supporting the theory of
    the party requesting the instruction.” Pioneer Roofing Co. v. Mardian Constr.
    Co., 
    152 Ariz. 455
    , 462 (App. 1986). The instruction should be given if there
    is “any evidence tending to establish” the theory, “even if contradictory
    facts are also presented.” 
    Id.
    ¶35           Owner argues the court erred in instructing the jurors they
    could find in favor of Contractor if they found Contractor had substantially
    performed the contract.5 Owner also contends Contractor anticipatorily
    repudiated the contract when it prematurely sought final payment thereby
    freeing Owner of any obligation to further perform.
    ¶36         The court properly instructed the jury on both substantial
    performance and anticipatory breach. Evidence was presented at trial that
    could support either theory. See Golonka v. General Motors Corp., 
    204 Ariz. 5
               Owner also argues interpretation of the contract, a legal
    determination, was improperly sent to the jury. “When the terms of a
    contract are plain and unambiguous, its interpretation is a question of law
    for the court.” Callaway, 226 Ariz. at 291, ¶ 15. However, if the court
    determines the “contract language is reasonably susceptible to more than
    one interpretation,” “determination of the intent of contracting parties from
    extrinsic evidence may require fact finding.” In re Estate of Lamparella, 
    210 Ariz. 246
    , 250, ¶ 21 (App. 2005). Here, the court determined the contract
    was ambiguous as to the parties’ intent to condition Contractor’s right to
    payment on satisfaction of certain conditions. Having done so, it was
    proper to submit the issue to the jury.
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    MTR BUILDERS v. JAHAN
    Decision of the Court
    575, 593, ¶ 64 (App. 2003). “It is for the jury to find the facts and apply the
    instructions to the facts as they find them.” Pioneer Roofing, 
    152 Ariz. at 462
    .
    CONCLUSION
    ¶37           The trial court properly dismissed Contractor’s Prompt Pay
    Act claim on summary judgment and allowed Contractor’s breach of
    contract claim to go to the jury. We also affirm the jury’s verdict in
    Contractor’s favor and the trial court’s award of attorneys’ fees.
    ¶38           Both parties have requested their fees on appeal. Owner
    requested fees under A.R.S. § 12-341.01. Although Owner successfully
    defended Contractor’s cross-appeal, Owner was unsuccessful on its appeal.
    Therefore, in our discretion we decline to award it fees.
    ¶39            Contractor requested fees both under A.R.S. § 12-341.01 and
    pursuant to the contract. The parties’ contract provides that a non-
    defaulting party may recover reasonable attorneys’ fees resulting from the
    other party’s breach. Thus, upon compliance with ARCAP 21, Contractor
    is entitled to its reasonable fees incurred to pursue the appeal. Because
    Contractor was unsuccessful on its cross-appeal, any fees incurred in
    pursuance of the cross-appeal should not be included in Contractor’s
    request.
    :ama
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