Opinion
2 CA-CV 2023-0103
09-17-2024
Falcone Brothers & Associates, Inc., an Arizona corporation, Plaintiff/Appellee/Cross-Appellant, v. City of Tucson, a Municipality, Defendant/Appellant/Cross-Appellee.
Greenbriar Law PLC, Phoenix By Michael W. Baldwin Counsel for Plaintiff/Appellee/Cross-Appellant Mesch Clark Rothschild, Tucson By Melvin C. Cohen, David J. Hindman, and Alex Winkelman Counsel for Defendant/Appellant/Cross-Appellee
Not for Publication - Rule 111(c), Rules of the Arizona Supreme Court
Appeal from the Superior Court in Pima County No. C20152217 The Honorable Casey F. McGinley, Judge
Greenbriar Law PLC, Phoenix By Michael W. Baldwin Counsel for Plaintiff/Appellee/Cross-Appellant
Mesch Clark Rothschild, Tucson By Melvin C. Cohen, David J. Hindman, and Alex Winkelman Counsel for Defendant/Appellant/Cross-Appellee
Chief Judge Staring authored the decision of the Court, in which Presiding Judge Gard and Judge Eckerstrom concurred.
MEMORANDUM DECISION
STARING, CHIEF JUDGE
¶1 The City of Tucson appeals from the trial court's March 2023 ruling awarding Falcone Brothers & Associates, Inc. prejudgment interest on a judgment for unpaid retention related to a 2012 construction contract. Falcone cross appeals, challenging the court's denial of its request for attorney fees. We affirm in part and reverse in part, remanding for further proceedings consistent with this decision.
Factual and Procedural Background
¶2 In 2012, Falcone and the City contracted for improvements to a traffic intersection in Tucson, Arizona ("the Project"). Construction on the Project began in July 2012, and the City certified it as complete in January 2014. The following month, Falcone filed a notice of claim for, among other things, payment of funds owed to it that had been withheld by the City as retention. The City rejected Falcone's claim and asserted Falcone had failed to comply with the contract's notice-and-documentation provisions. After participating in a contractually mandated administrative hearing, the parties were unable to settle the matter. Falcone sued the City for breach of contract and the City counterclaimed, also alleging breach of contract.
¶3 The City moved for summary judgment, which the trial court denied. After a seven-day trial, the jury awarded Falcone $1,049,000 in damages and the City $164,000 on its counterclaim. Additionally, the court awarded Falcone attorney fees and costs, as well as prejudgment and postjudgment interest pursuant to A.R.S. §§ 34-221(J) and 44-1201(B). The City then moved for a new trial and renewed its motion for judgment as a matter of law. The court denied the City's motions, and the City appealed.
¶4 On appeal, we concluded the trial court had erred in denying the City's motion for summary judgment. Falcone Bros. & Assocs., Inc. v. City of Tucson, No. 2 CA-CV 2019-0114 (Ariz. App. Oct. 29, 2020) (mem. decision). We vacated the judgment on Falcone's claim and remanded for further proceedings. Id.
¶5 On remand, the trial court directed the parties to file briefing on the remaining issues. The court later vacated its prior judgment in favor of Falcone and granted the City's motion for summary judgment on all of Falcone's claims. Additionally, the court ordered the City to file a proposed form of judgment.
¶6 The City's proposed form of judgment awarded $300,366 in unpaid retention funds to Falcone offset by the City's $164,000 award on its counterclaim. The City also requested $4,686.80 in costs for prosecuting the appeal and an award of interest from the date of the judgment. Falcone objected, arguing the City's proposed form did not account for $47,830.13 in extra work performed by Falcone, the judgment should include prejudgment interest, and Falcone was entitled to its attorney fees.
¶7 In March 2023, the trial court denied Falcone's request for payment for extra work performed and its request for attorney fees. However, the court awarded Falcone $300,366 in retention funds, as well as prejudgment and postjudgment interest on the full amount. The court ordered that prejudgment interest was to be calculated at a rate of one percent per month from January 2014 through March 2023. The court awarded the City $164,000 on its counterclaim, plus postjudgment interest, and $4,686.80 for costs associated with its appeal. This appeal and cross-appeal followed. We have jurisdiction pursuant to A.R.S. §§ 12-120.21(A)(1) and 12-2101(A)(1).
Discussion
I. Prejudgment Interest
¶8 The City argues the trial court erred in awarding Falcone prejudgment interest on the unpaid retention funds because Falcone's claim remained unliquidated pending trial and "only liquidated claims are eligible for prejudgment interest." Alternatively, the City asserts that even if Falcone is entitled to prejudgment interest, it failed to plead or prove a claim under A.R.S. §§ 34-221 to 34-227, also known as the Little Miller Act ("the Act"), and is therefore only entitled to interest at a rate of ten percent per year as provided in A.R.S. § 44-1201. Whether a claim is liquidated is a question of fact, Able Distrib. Co. v. James Lampe, Gen. Contractor, 160 Ariz. 399, 406 (App. 1989), but whether a party is entitled to prejudgment interest is a question of law, which we review de novo, John C. Lincoln Hosp. & Health Corp. v. Maricopa County, 208 Ariz. 532, ¶ 39 (App. 2004).
The Act governs construction contracts for public buildings and improvements. See Maricopa Turf, Inc. v. Sunmaster, Inc., 173 Ariz. 357, 359 (App. 1992).
¶9 "Prejudgment interest is awarded as a matter of right on a liquidated claim, whether based on contract or tort." Alta Vista Plaza, Ltd. v. Insulation Specialists Co., 186 Ariz. 81, 82 (App. 1995); see A.R.S. § 12-823 (plaintiff entitled to "amount actually due" and "legal interest thereon from the time the obligation accrued"). Prejudgment interest accrues from the date damages are liquidated "as compensation for the detention of the money from the judgment creditor." Ariz. E. R.R. Co. v. Head, 26 Ariz. 259, 262 (1924); see § 34-221(J) ("If any payment to a contractor is delayed after the date due, interest shall be paid . . . on such unpaid balance as may be due."). A claim is liquidated "if the plaintiff provides a basis for precisely calculating the amounts owed." John C. Lincoln Hosp. & Health Corp., 208 Ariz. 532, ¶ 39; see Pueblo Santa Fe Townhomes Owners' Ass'n v. Transcon. Ins. Co., 218 Ariz. 13, ¶ 48 (App. 2008) (damages liquidated when evidence allows for exact computation without relying on opinion or discretion).
¶10 The parties' contract provided that the City "shall retain ten percent of each monthly statement of amount earned until the final acceptance of the work." The contract stated "final payment and release of retention . . . shall occur within sixty days after final acceptance." It further provided that, "[s]hould any defective work or material be discovered prior to the final acceptance or should a reasonable doubt arise prior to the final acceptance as to the integrity of any part of the completed work, the payment for such defective or questioned work shall not be allowed until the defect has been remedied or cause for doubt removed." (Emphasis added.) However, the contract also provided that "[f]inal acceptance does not necessarily constitute complete performance by the contractor of all provisions of the contract," and "[i]n that event the [City] may make a specific written finding justifying delay in payment of retention monies to the contractor beyond" the sixty-day period. "Any undisputed amounts" were to be "released by the [City] within sixty days of final acceptance." These provisions comply with the requirements set forth in § 34-221(C)(5).
¶11 The City asserts Falcone's claim never became liquidated because the City did not provide "unconditional final acceptance" of the Project and therefore "release of retention never became due and payable as provided in the Contract." Thus, the City argues, because it was "statutorily required and contractually entitled to keep [the retained funds] unless and until Falcone achieved final acceptance or the jury determined the City['s] damages were less than the amount withheld and judgment was subsequently entered," "it would be absurd to penalize the City with prejudgment interest."
¶12 Contrary to the City's argument that it had granted Falcone only "conditional final acceptance" of the Project as of January 15, 2014, the record supports the trial court's finding that the City had granted final acceptance as of that date. The parties stipulated in their joint pretrial statement that the City's "final acceptance of the Project, with conditions, occurred on January 15, 2014," and evidence presented at trial reflects that the City's letter entitled "Project Final Acceptance with Conditions" stated the one-year project warranty began to run on that date. See In re $26,980.00 U.S. Currency, 199 Ariz. 291, ¶ 9 (App. 2000) (court's factual findings not clearly erroneous if supported by substantial evidence, even if substantial conflicting evidence exists); Great W. Bank v. LJC Dev., LLC, 238 Ariz. 470, ¶ 22 (App. 2015) (we do not reweigh evidence or substitute our judgment for that of the trial court). Pursuant to the parties' contract and § 34-221(C)(5), the City was no longer entitled to withhold the retention funds once it notified Falcone of its final acceptance of the Project.
¶13 Additionally, the City maintains Falcone's claim remained unliquidated pending judgment because the parties "disputed whether and how much one owed the other," and "any amount due to either Party depended on the discretion or opinion of the jury." In concluding Falcone's damages were liquidated and thus subject to prejudgment interest, the trial court noted § 34-221(C) had required the City to retain a specific percentage of the contract's estimate as retention and the $300,366 amount had been consistently acknowledged by the City. See Pueblo Santa Fe Townhomes Owners' Ass'n, 218 Ariz. 13, ¶ 48. The court rejected the argument the City now reasserts on appeal, concluding the jury's determination of "what, if any, damages to which the City was entitled on its counterclaim did not, in any way, affect the calculation as to what Falcone was owed by the City for withholding the retention funds." And the trial court did not err in so concluding. See Fairway Builders, Inc. v. Malouf Towers Rental Co., 124 Ariz. 242, 265-66 (App. 1979) (offsets do not affect liquidated nature of a claim or preclude award of prejudgment interest). Because the amount held in retention owed to Falcone was ascertainable as of January 2014, the damages were liquidated and the trial court did not err in awarding prejudgment interest, subject to the offset. See Pueblo Santa Fe Townhomes Owners' Ass'n, 218 Ariz. 13, ¶ 48; Emps. Mut. Cas. Co. v. McKeon, 170 Ariz. 75, 78 (App. 1991) (interest award on liquidated claim not discretionary).
¶14 However, the trial court erred in awarding prejudgment interest on the entire amount. As the court noted, the City was entitled to a total offset against Falcone in the amount of $168,686.80. While this offset does not change the nature of Falcone's liquidated claim, it does change the amount on which prejudgment interest is based. Where an unliquidated counterclaim offset arises from the same contract as a liquidated claim, prejudgment interest is allowed only on the net difference. See Fairway Builders, 124 Ariz. at 265-66.
II. Interest Rate
¶15 The City argues that even were we to conclude Falcone is entitled to prejudgment interest, the trial court nonetheless erred by awarding interest "at the rate provided in § 34-221 rather than the 10% rate provided in A.R.S. § 44-1201" based on Falcone's failure to "plead or prove a claim" under § 34-221.
¶16 The trial court awarded prejudgment interest to Falcone at the rate of one percent per month from January 2014 until March 2023 "pursuant to A.R.S. § 44-1201." However, one percent per month is the interest rate mandated by the Act, not the statute cited by the court. Compare A.R.S. § 34-221(J) (one percent per month), with A.R.S. § 44-1201(B) (ten percent per annum or less).
¶17 As the cause of action-the withholding and non-payment of retention-was established by the Act, the rate of prejudgment interest under the Act applies. See State v. Seyrafi, 201 Ariz. 147, ¶ 13 (App. 2001) (statutory provisions must be "construed in context with related provisions and in light of their place in the statutory scheme"). Under the Act, "[i]f any payment to a contractor is delayed after the date due, interest shall be paid at the rate of one percent per month," or twelve percent per annum. § 34-221(J). Thus, while the trial court's citation to § 44-1201 does not reflect the interest rate ultimately applied, the rate used was legally correct. On this record, we find no prejudice. See Ariz. Const. art. VI, § 27 (no cause shall be reversed for technical errors where "substantial justice has been done"); Joshua J. v. Ariz. Dep't of Econ. Sec., 230 Ariz. 417, ¶ 22 (App. 2012) ("We will not reverse for a procedural error absent a showing of prejudice.").
III. Attorney Fees
¶18 On cross-appeal, Falcone argues the trial court erred in denying its request for attorney fees. Generally, we review the denial of a request for attorney fees for an abuse of discretion, but whether a statute requires an award of fees presents a question of law we review de novo. Tucson Ests. Prop. Owners Ass'n v. McGovern, 239 Ariz. 52, ¶ 7 (App. 2016). A court abuses its discretion when it commits "[a]n error of law in reaching a discretionary ruling." Am. Power Prods., Inc. v. CSK Auto, Inc., 242 Ariz. 364, ¶ 12 (2017).
¶19 Below, Falcone requested its reasonable attorney fees as the "prevailing party" in this matter based on the "net judgment, in principal only," in its favor. The trial court denied Falcone's request, reasoning that the parties' contract-which incorporated specifications providing that "[e]ach party to the litigation shall be responsible for their own costs . . . including attorney's fees"-precluded an award of fees to either party. Additionally, the court concluded that, "[e]ven if the contract did not control the issue," Falcone had failed to show it was the "successful party" and was not entitled to attorney fees on that basis. The court also cited Falcone's "fail[ure] to provide the Court with any specifics as to the amount of fees sought, the basis for that request, and how such a request is reasonable or otherwise justified."
¶20 Falcone asserts the trial court erred in concluding the parties' contract precluded an award of fees because the City had waived any such argument by raising it for the first time in November 2022 despite "countless" prior opportunities to do so. Further, Falcone argues the court erroneously found it had failed to provide the amount of fees sought and the basis for its request, pointing to its 2019 fee application filed after the jury had returned its verdict on Falcone's breach of contract claim. In any event, Falcone maintains, its failure to file a fee application before the court entered its March 2023 ruling is not dispositive because, until the court issued that ruling, neither party could have known who would ultimately prevail, preventing either party from filing an accurate fee application.
¶21 The City responds the trial court correctly denied Falcone's request for attorney fees "on three independently sufficient grounds." First, it asserts Falcone was not entitled to such an award under the terms of the parties' contract. Second, the City points to Falcone's failure on remand to "file any motion supported by affidavit seeking an award of attorney fees." As to Falcone's assertion that it had filed a fee application in 2019 before entry of the now-vacated judgment, the City asserts that Falcone "fails to explain how remand revived that motion" or why it was not required to reference or incorporate the 2019 fee application in a new request. Finally, the City argues an award of attorney fees was ultimately in the court's discretion pursuant to A.R.S. § 12-341.01 and the record supports the court's denial of Falcone's request.
¶22 When interpreting a statute, we will "effectuate the text if it is clear and unambiguous." See BSI Holdings, LLC v. Ariz. Dep't of Transp., 244 Ariz. 17, 19 (2018). And when construing specific provisions, "we look to the statute as a whole and we may also consider statutes that are in pari materia-of the same subject or general purpose-for guidance and to give effect to all of the provisions involved." Stambaugh v. Killian, 242 Ariz. 508, ¶ 7 (2017). Section 12-341.01 generally provides that "[i]n any contested action arising out of a contract, . . . the court may award the successful party reasonable attorney fees." However, this section cannot be "construed as altering, prohibiting or restricting . . . contracts or statutes that may provide for attorney fees." § 12-341.01(A). Thus, as the City argues, a contract provision preventing fee collection would control under § 12-341.01. See Connor v. Cal-Az Props., Inc., 137 Ariz. 53, 55 (App. 1983) (Arizona's fee shifting statute "is not to be considered" when parties' contract provides conditions under which attorney fees may be recovered).
¶23 The Act, however, provides more specific guidance on contracts between contractors and public entities for the construction of public improvements. See § 34-221; Carter Oil Co. v. Ariz. Dep't of Revenue, 248 Ariz. 339, ¶ 18 (App. 2020) (where a general statute and a specific statute conflict, the specific governs). And unlike § 12-341.01, under which the court may award attorney fees to the successful party, § 34-221(N) requires the court to award "reasonable attorney fees and costs" to the successful party in "any action or arbitration brought pursuant to [the Act]." Additionally, nothing prevents this section from overriding contract provisions, particularly as to damages. See A.R.S. §§ 34-221 through 34-226. On the contrary, § 34-226(B) provides that a contracting agent can only require a contractor to hold it harmless from damages-"including reasonable attorney fees and court costs"-to the extent damages are "caused by the negligence, recklessness or intentional wrongful conduct" of the contractor. Any contract provision that requires further indemnity is considered "void" as "against the public policy of this state." § 34-226(C); see Sch. Dist. No. One of Pima Cnty. v. Hastings, 106 Ariz. 175, 177 (1970) ("Where a contract is incompatible with the statute, the statute must, of course, govern.").
¶24 Although Falcone did not request attorney fees pursuant to § 34-221(N), as mentioned above, both Falcone and the City have consistently claimed the Act's application, and the trial court applied the Act when awarding Falcone prejudgment interest. Because Falcone was awarded both retention and prejudgment interest, and the damages awarded were not due to Falcone's negligence, recklessness, or intentional wrongful conduct, the Act entitles Falcone to its reasonable attorney fees. See § 34-221(N); § 34-226(B), (C); City of Chandler v. Ariz. Dep't of Transp., 216 Ariz. 435, ¶ 10 (App. 2007) ("shall" indicates a mandatory provision); Hess v. Purcell, 229 Ariz. 250, ¶ 8 (App. 2012) (party prevails where claim is litigated and relief is granted). Thus, the trial court committed an error of law in denying Falcone's request. See Exodyne Props., Inc. v. City of Phoenix, 165 Ariz. 373, 380 (App. 1990) (court has no discretion whether to award or deny fees where statute mandates award); Am. Power Prods., Inc., 242 Ariz. 364, ¶ 12.
¶25 Moreover, we note that Falcone was not required to provide a detailed affidavit until there was a ruling establishing which party had prevailed. See Ariz. R. Civ. P. 54(g)(2), (4) (motion for attorney fees generally must be filed within twenty days after decision is filed and be supported by affidavit); Schweiger v. China Doll Rest., Inc., 138 Ariz. 183, 188 (App. 1983) (entitling "prevailing party" to attorney fees). We therefore reverse the trial court's denial of Falcone's request for attorney fees and costs.
Disposition
¶26 For the foregoing reasons, we affirm the trial court's award of prejudgment interest, subject to the counterclaim offset, but we reverse the court's denial of Falcone's request for attorney fees and remand for the court to determine a reasonable attorney fee award for Falcone.
¶27 Falcone requests its attorney fees and costs on appeal pursuant to A.R.S. §§ 12-331 and 12-341.01. Although Falcone failed to cite the proper statutory provision in its request for attorney fees, the Act imposes mandatory fees. See § 34-221(N). Thus, Falcone is entitled to its reasonable attorney fees and costs, subject to compliance with Rule 21, Ariz. R. Civ. App. P.