Court Opinion

ID: 3193087
Source: CourtListenerOpinion
Date Created: 2016-04-12 16:02:09.358454+00
Date Added: 2024-06-11T12:18:37.419437
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  UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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

               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.

                                    2
                       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.

                                     3
                        MTR BUILDERS v. JAHAN
                          Decision of the Court

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

                                      4
                         MTR BUILDERS v. JAHAN
                           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).

                                       5
                         MTR BUILDERS v. JAHAN
                           Decision of the Court

¶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

                                       6
                         MTR BUILDERS v. JAHAN
                           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

                                        7
                         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.

                                       8
                        MTR BUILDERS v. JAHAN
                          Decision of the Court

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.

                                     9
                         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

                                      10