Court Opinion

ID: 9549252
Source: CourtListenerOpinion
Date Created: 2023-08-07 18:15:23.868907+00
Date Added: 2024-06-11T15:20:02.021380
License: Public Domain

GORDON, Justice:
This appeal involves a suit for breach of a construction contract between American Continental Life Insurance Co. (American) and Ranier Construction Co., Inc. (Ranier). After trial by jury, a verdict was returned for Ranier in the amount of $130,000 and for American in the amount of $10,000 on its counterclaim. The trial judge determined that neither party was entitled to recover attorney’s fees from the other. Both parties appeal. Having jurisdiction pursuant to 17A A.R.S., Rules of Civil Appellate Procedure, Rule 19(e), we reverse the judgment in favor of Ranier and the court’s disposition of attorney’s fees.
American contracted with Ranier to construct a building for $517,286.30. To date, American has paid Ranier $457,247.47. The contract required American to make monthly progress payments for 90% of the work completed each month upon the .issuance by the architect of a certificate for payment. American refused to make the final payment, consisting of the 10% retained each month and the amount due for work completed after the date of the last progress payment. It claimed that Ranier had breached the procedural requirements of the contract and had failed to construct the building in a workmanlike manner and in accordance with the plans and specifications. Ranier subsequently instituted suit for breach of the contract, to recover funds retained under the contract and damages for delays and lost profits. American counterclaimed for breach of contract and negligence, to recover damages for faulty construction and delays. The jury returned a single verdict for Ranier in the amount of $130,000 and a single verdict for American in the amount of $10,000. American appeals the verdict in favor of Ranier. Ranier cross appeals the trial court’s refusal to award attorney’s fees to Ranier as the prevailing party.1
At the close of Ranier’s case and again at the close of all the evidence, American moved for a directed verdict, which was denied. One of the grounds urged by American was that Ranier had failed to meet a condition precedent to the right to final payment, because it had failed to procure from the architect a final certificate for payment as provided in the contract. *55American renews this argument on appeal, contending that the court erred in denying its motion for a directed verdict.
Article 7 of the contract provides:
“Final payment constituting the entire unpaid balance of the Contract Sum shall be paid by the Owner to the Contractor within thirty (30) days after Substantial Completion of the Work * * * provided the work has then been completed * * * and a final Certificate for Payment has been issued by the Architect.”
Issuance of the final certificate for payment is governed by paragraph 9.7.2 of the General Conditions of the contract:
“Upon receipt of written notice that the Work is ready for final inspection and acceptance and upon receipt of a final Application for Payment, the Architect will promptly make such inspection and, when he finds the Work acceptable under the Contract Documents and the Contract fully performed, he will promptly issue a final Certificate for Payment stating that to the best of his knowledge, information and belief, and on the basis of his observations and inspections, the Work has been completed in accordance with the terms and conditions of the Contract Documents and that the entire balance found to be due the Contractor, and noted in said final Certificate, is due and payable.”
The architect issued a certificate of substantial completion,2 but Ranier admits that a final certificate for payment, as provided for in the contract, was never applied for or obtained. American asserts, and it is undisputed by Ranier, that it was Ranier’s responsibility to procure issuance of the certificate. Ranier argues, however, that strict compliance with the requirement of a final certificate for payment was waived, because, from the beginning, both parties deviated from the formal requirements of the contract in other respects. Ranier cites as examples the fact that change orders, although done at the owner’s request, were not signed by the owner; that on occasion the owner even ordered changes to be made without execution of a formal change order; that extensions of time were granted both formally and informally; and that the owner, although in agreement, also failed to sign extensions of time. The trial court believed that there was sufficient evidence to support a submission to the jury as to whether strict compliance had been waived. We disagree.
Waiver is either the express, voluntary, intentional relinquishment of a known right or such conduct as warrants an inference of such an intentional relinquishment. See, e. g., City of Tucson v. Koerber, 82 Ariz. 347, 313 P.2d 411 (1957). Waiver by conduct must be established by evidence of acts inconsistent with an intent to assert the right. Occidental Life Insurance Co. v. Jacobson, 15 Ariz. 242, 137 P. 869 (1914); see Bolo Corp. v. Homes and Son Construction Co., Inc., 105 Ariz. 343, 464 P.2d 788 (1970). The waiver of one right under a contract does not necessarily waive other rights under the contract. See O’Malley v. Cummings, 86 Ill.App.2d 446, 229 N.E.2d 878 (1967). Thus, even if American did waive other rights under the contract relating to change orders or extensions of time, that conduct does not manifest an intent to waive any right relating to payment for *56work. See Practical Construction Co. v. Granite City Housing Authority, 416 F.2d 540 (7th Cir. 1969). Ranier does not indicate any evidence, nor does any evidence appear in the record, that the parties ever disregarded any of the terms of the contract relating to payments. Accordingly, we find no waiver.3
Ranier also argues, alternatively, that certain acts by American4 prevented ■fulfillment of the condition precedent, thereby excusing performance. We fail to perceive how these acts prevented Ranier from seeking a final certificate of payment from the architect. Similarly, we reject Ranier’s assertion that seeking a final certificate of payment would have been a futile act, because American had already demonstrated its unwillingness to co-operate by refusing to sign the certificate of substantial completion. The failure of American to sign the certificate of substantial completion has nothing to do with Ranier’s obligation under the contract to procure the final certificate of payment in order to be in a posture to claim that payment from American is due. Moreover, even if Ranier is correct in assuming that American would not have made the final payment had Rani-er sought and received the final certificate of payment from the architect, Ranier is not excused from the contractually-imposed duty of acquiring the certificate. Without it, we have no way of knowing if the architect was satisfied that the list of items to be completed between the time of issuance of the certificate of substantial compliance and the application for final payment5 had been completed and that the contract was, thus, fully performed. At the trial, in fact, the architect testified that after he issued the certificate of substantial completion, the building was not complete, and items on the “punch” list remained unfinished.6
We agree with American that the final certificate for payment is not “procedural chaff.” It is a major substantive right, which “serves a vital interest, in that it induces the contractor to render a performance that conforms in fact to plans and specifications, spurs him to stay with the job and, upon completion, furnishes the main incentive to make conforming corrections.” Loyal Erectors, Inc. v. Hamilton & Son, Inc., 312 A.2d 748, 755 (Me.1973). The trial court erred in failing to direct a verdict in American’s favor because of Ranier’s *57non-compliance with the condition precedent of obtaining a final certificate of payment.
American challenges the jury’s award to Ranier on several other grounds, which we need not consider, because we reverse on the basis of the court’s denial of American’s motion for a directed verdict. We next address the issue of attorney’s fees raised by Ranier.
The contract between American and Ranier provides for attorney’s fees in the following language:
“In the event of litigation between the parties hereto arising out of this Contract or the performance of the Work hereunder, the prevailing party shall be entitled to recover reasonable attorney’s fees in addition to any other damages allowed by law.” Supplementary General Conditions, Paragraph 15.3.
The trial judge would not allow either party to recover attorney’s fees from the other, because he believed that both parties had breached their agreements, and he considered this finding implicit in the jury’s verdicts. Because of our decision today reversing the judgment in favor of Ranier, American is clearly the prevailing party and is entitled to recover attorney’s fees by the above express provision of the contract.
The judgment in favor of Ranier is reversed and remanded to the trial court with directions to enter judgment in American’s favor upon Ranier’s complaint and to award attorney’s fees to American.
HOLOHAN, V. C. J., and HAYS and CAMERON, JJ., concurring.

. We note that Ranier is not appealing the jury’s $10,000 verdict in favor of American, and we, therefore, do not consider that facet of the judgment.

. Issuance of the certificate of substantial completion is provided for in Paragraph 9.7.1 of the General Conditions of the contract:
“9.7.1. When the Contractor determines that the Work or a designated portion thereof acceptable to the Owner is substantially complete, the Contractor shall prepare for submission to the Architect a list of items to be completed or corrected. The failure to include any items on such list does not alter the responsibility of the Contractor to complete all Work in accordance with the Contract Documents. When the Architect on the basis of an inspection determines that the Work is substantially complete, he will then prepare a Certificate of Substantial Completion which shall establish the Date of Substantial Completion, shall state the responsibilities of the Owner and the Contractor for maintenance, heat, utilities, and insurance, and shall fix the time within which the Contractor shall complete the items listed therein. The Certificate of Substantial Completion shall be submitted to the Owner and the Contractor for their written acceptance of the responsibilities assigned to them in such Certificate.”

. Because we find no waiver, we need not address American’s contentions that waiver must be specially pleaded and that Ranier failed to plead it.

. The president of American at one point, in a fit of anger, broke a panel of drywall with an ax to protest what he considered shoddy workmanship. He also hired a special supervisor who Ranier claims improperly began giving orders directly to the workmen.

. The list of items to be completed is provided for in Paragraph 9.7.1 of the General Conditions of the contract. See footnote 2 infra.

. The dissenting opinion discusses another argument to support Ranier’s contention that failure to fulfill the condition precedent should not preclude it from bringing suit for the contract price. This is the theory that the contract had been repudiated, thereby obviating the necessity to comply with the condition precedent. We are convinced that the facts of the case do not support repudiation. American’s refusal to make the final payment may not be equated with a denial on its part of its obligation to pay under any circumstances, no matter what Rani-er did, thereby bringing the contract to an end. While refusing to pay, American continued to demand that Ranier complete the punch list, a clear indication that American considered the contract extant. As stated in its answer, American refused to make final payment because it believed that Ranier had not completed construction according to the contract plans and specifications. Thus, American thought that its duty to make final payment had not yet arisen according to the terms of the contract, not that its contractual obligation was forever terminated.
Additionally, the dissent relies on the doctrine of substantial performance, apparently satisfied that Ranier’s deviations were so trivial as to give rise to the doctrine, despite contradictory evidence. By express provision of the contract, the parties set up a system of progress payments whereby the agreed upon value of full compliance by Ranier with the plans and specifications called for within the contract, and as vouched for by the architect, was the final payment by American. To allow the doctrine of substantial performance to operate here would fly in the face of the original intent of the parties and would nullify the contract.