0450 . . . . . . . . . ..Schwab v. Shea Hill

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NOTICE: THIS DECISION DOES NOT CREATE LEGAL PRECEDENT AND MAY NOT BE CITED EXCEPT AS AUTHORIZED BY APPLICABLE RULES. See Ariz.R.Sup.Ct. 111(c); ARCAP 28(c); Ariz.R.Crim.P. 31.24 IN THE COURT OF APPEALS STATE OF ARIZONA DIVISION ONE SCHWAB SALES, INC., a foreign corporation, Plaintiff/Appellee, v. SHEA HILLS DEVELOPMENT, LTD., an Arizona corporation, Defendant/Appellant. ) ) ) ) ) ) ) ) ) ) ) 1 CA-CV 09-0449 1 CA-CV 09-0450 DIVISION ONE FILED: 07-13-2010 PHILIP G. URRY,CLERK BY: GH DEPARTMENT E MEMORANDUM DECISION (Not for Publication Rule 28, Arizona Rules of Civil Appellate Procedure) Appeal from the Superior Court in Maricopa County Cause Nos. CV2006-051770; CV2007-050198 (Consolidated) The Honorable Brian R. Hauser, Judge AFFIRMED Paul S. Harter, PC by Paul S. Harter and Alicia Mykyta Attorneys for Plaintiff/Appellee Phoenix Spiess & Bell, PC by G. Peter Spiess and James O. Bell Attorneys for Defendant/Appellant Phoenix I R V I N E, Judge ¶1 In this consolidated appeal, we consider whether mechanic s and materialman s liens held by a subcontractor, who was not in contractual privity with the owner of the project, could be enforced for the value of the supplies and services rendered. The trial court found that the reasonable value of the subcontractor s supplies and services was not measured by the amount the owner s property was enhanced where, as here, the supplies and services were undisputedly provided to and used by the contractor in the project and the fact that the supplies and services provided no value to the owner s property was a consequence of the poor performance of the contractor. For the following reasons, we affirm. FACTS AND PROCEDURAL HISTORY ¶2 Defendant/Appellant Shea Hills Development, Ltd. ( Shea Hills ) is the developer of a construction project in Fountain Hills, Arizona. Shea Hills entered into contracts with two contractors, Plaintiff/Appellee equipment to both of Schwab perform the which entered Sales, work Inc. required into contracts ( Schwab ) by the to with lease contractors respective contracts with Shea Hills. ¶3 3-F Contracting, Inc. ( 3-F ) was hired to excavate, grade and perform fill work in constructing streets and curbs. Schwab charged 3-F $55,647.89 for the rental equipment on the project. Schwab received $22,000 as an advance deposit from Shea Hills. 3-F was removed from the project for allegedly failing to perform in accordance with the plans and specifications. As a 2 result, Shea Hills hired other subcontractors to correct the work. Although Shea Hills had paid 3-F in full, including all amounts billed by Schwab, Schwab received no payments other than the original $22,000 advance. Schwab filed a notice of claim of mechanic s and materialman s lien in the amount of $33,932.17, and in June 2006 filed a complaint, CV2006-051770, against Shea Hills for foreclosure of the lien. Shea Hills deposited funds into a trust in lieu of recording a bond to secure discharge of the lien under Arizona Revised Statutes ( A.R.S. ) section 331004 (2007), 1 and Schwab released the lien. The parties agreed that if the lien was found to have been valid, Shea Hills would be liable to Schwab in lieu of foreclosure of the mechanic s and materialman s lien. ¶4 GW Grading Contractors, LLC ( GW ), was hired to install a complete storm water drainage system. Schwab leased equipment to GW on the project for a total of $23,733.46. GW failed to perform its obligations in a timely and workmanlike manner, repeatedly failed inspections by the town, and frequently had to re-do work already completed because it was performed improperly. The town inspector ultimately shut down GW, requiring Shea Hills to remove all the work installed by GW, obtain supplies, and hire other companies to perform the work 1 We cite the version of the statute in effect at the time the act was committed that formed the basis of the complaint. 3 originally tasked to GW. 2 Schwab recorded a notice of claim of mechanics and materialman s lien in the amount of $23,733.46. Shea Hills deposited $31,000 into escrow in lieu of a lien discharge bond. Schwab filed a complaint, CV2007-050198, against Shea Hills to recover the deposit in lieu of the lien discharge bond. ¶5 Both matters were assigned to the Honorable Brian R. Hauser. In each case, Schwab moved for summary judgment. Schwab argued that under A.R.S. § 33-981 (2007), 3 it was entitled to payment in the amount of the value of the equipment furnished to the contractors and not in the amount of the value that Shea Hills property was enhanced. ¶6 Shea Hills responded and filed cross-motions for summary judgment. Shea Hills argued that case law interpreted reasonable value of the labor or materials furnished as entitling Schwab to only the amount by which the equipment and services provided enhanced the value of the property. Concerning 3-F, Shea Hills argued that once the initial $22,000 payment, the stand-by time, overhead, and equipment used for corrective 2 The Registrar of Contractors suspended GW s license. 3 Section 33-981 provides, in part, that the owner shall be liable for the reasonable value of labor or materials furnished to his agent. A.R.S. § 33-981(B). 4 work were credited, Schwab had no remaining lien rights in the property. Concerning GW, Shea Hills argued that Schwab had no lien rights in the property because Schwab s equipment provided no value to the project. 4 ¶7 The oral arguments on the motions were heard together before Judge Hauser, and the court issued a single minute entry ruling. The court disagreed with the interpretation of case law advocated by Shea Hills. The court noted that the purpose of the lien statutes was remedial and stated: It is undisputed that plaintiff s equipment was used by the contractors 3-F and GW in the construction of defendant s project. The degree to which the value of defendant s project was enhanced by the use of plaintiff s equipment is a result solely of the skill or lack of skill of 3-F and GW, a factor completely out of plaintiff s control. Defendant s satisfaction with either 3-F s or GW s work is an issue between them and if defendant is dissatisfied, it may seek appropriate relief from those entities. The court does not read the many cases cited by defendant as standing for the result it suggests should occur. The court entered two judgments against Shea Hills and in favor of Schwab. judgment With awarded respect Schwab to the $54,853.93 matter (the involving principal 3-F, the amount of $33,647.89, prejudgment interest, costs, and attorneys fees). 4 Shea Hills explained that it had to remove the work GW had performed and had not used Schwab s equipment in correcting the work. 5 With respect to the matter involving GW, the judgment awarded Schwab $35,814.65 prejudgment defendants (the interest, timely principal costs, appealed. amount of $23,733.46, and have We attorneys fees). jurisdiction Both pursuant to A.R.S. § 12-2101(B) (2003). DISCUSSION ¶8 Summary judgment may be granted when there is no genuine issue as to any material fact and [] the moving party is entitled to a judgment as a matter of law. Ariz.R.Civ.P. 56(c). We determine de novo whether any genuine issues of material fact exist and whether the trial court properly applied the law. Eller Media Co. v. City of Tucson, 198 Ariz. 127, 130, ¶ 4, 7 P.3d 136, 139 (App. 2000). We view the facts and the inferences to be drawn from those facts in the light most favorable to the party against whom judgment was entered. Prince v. City of Apache Junction, 185 Ariz. 43, 45, 912 P.2d 47, 49 (App. 1996). ¶9 The laborers and purpose of materialmen the and lien to statutes ensure the is to payment protect of their accounts. United Metro Materials, Inc. v. Pena Blanca Props., L.L.C., 197 Ariz. 479, 484, ¶ 26, 4 P.3d 1022, 1027 (App. 2000). The statutes are remedial and are to be construed liberally to effect their purpose. Id. ¶10 Arizona Revised Statutes pertinent part: 6 § 33-981 provides in A. [E]very person who labors or furnishes professional services, materials, machinery, fixtures or tools in the construction, alteration or repair of any building, or other structure or improvement, shall have a lien on such building, structure or improvement for the work or labor done or professional services, materials, machinery, fixtures or tools furnished, whether the work was done or the articles were furnished at the instance of the owner of the building, structure or improvement, or his agent. B. Every contractor, subcontractor, . . . or other person having charge or control of the construction, alteration or repair, either wholly or in part, of any building, structure or improvement is the agent of the owner for the purposes of this article, and the owner shall be liable for the reasonable value of labor or materials furnished to his agent. A.R.S. § 33-981(A), (B). The recovery of a subcontractor not in privity with the owner of the property is limited to the reasonable value of the labor and materials furnished whereas one in privity with the owner is not so limited. Lenslite Co. v. Zocher, 95 Ariz. 208, 212-14, 388 P.2d 421, 424-25 (1964). ¶11 Shea Hills argues that reasonable value has been interpreted to mean the amount by which the labor and materials actually incorporated into the project have enhanced the value of the property. ¶12 In interpreting a statute, our goal is to find and give effect to the intent of the legislature. Mail Boxes, etc. 7 U.S.A. v. Indus. Comm n, 181 Ariz. 119, 121, 888 P.2d 777, 779 (1995). We look first to the plain language of the statute; if the language is unambiguous we give effect to that language and do not employ determining other the rules statute s of statutory meaning. Janson construction ex rel. Janson in v. Christensen, 167 Ariz. 470, 471, 808 P.2d 1222, 1223 (1991). Statutory construction presents a question of law we consider de novo. State Comp. Fund v. Superior Court, 190 Ariz. 371, 374-75, 948 P.2d 499, 502-03 (App. 1997). ¶13 The language of the statute here does not support Shea Hills interpretation. materials and machinery improvements, makes declares owner the materials The and authorizes furnished in contractor the the liable machinery statute for the provided by the a lien for construction owner s reasonable agent, of and of the subcontractor a value to the contractor. The language of the statute does not suggest that reasonable value is measured by the increase in value of the owner s property. Rather, under the statute, the measure of the amount of the lien is the reasonable value of the items furnished that were used in the construction of the improvement. Furnish has been defined as [t]o supply, provide, or equip, for accomplishment of a particular purpose. Black s Law Dictionary 675 (6th ed. 1990). The focus of the statute is on the equipment provided, not on the increase in value of the 8 property achieved through the use of the equipment provided. That the statute also specifies that the owner is liable for the reasonable value of materials and machinery furnished to the owner s agent or contractor rather than furnished to the project or to the owner, suggests that, once the equipment is provided to the contractor, the subcontractor is entitled to the lien and is not responsible for how the contractor uses the items provided, so long as the items are used in the construction. ¶14 Here, Shea Hills does not dispute that the rental equipment was provided by Schwab to 3-F and GW and that it was used in Shea Hills project. It also does not challenge that the price charged by Schwab (the value of the use of the equipment) was reasonable. Under the statute, Shea Hills is therefore liable for the reasonable value of the equipment provided by Schwab. Whether that equipment as used by Shea Hills contractor increased the value of Shea Hills property is not a factor under the statute. ¶15 Shea reasonable Hills value contends is case law to the limited has established actual value of that any enhancement to the property received by the owner. The cases cited by Shea Hills, however, do not establish such a standard. ¶16 concerning property In a Spitalny quantum owner, the v. Tanner meruit Arizona claim Construction between Supreme 9 Court a Co., a contractor found that case and the measure of the value of the services rendered must be the value to the defendants, not the cost to the plaintiff in performing such services. 75 Ariz. 192, 200, 254 P.2d 440, 446 (1953) overruled in part on other grounds by Schwartz v. Schwerin, 85 Ariz. 242, 250, 336 P.2d 144, 149 (1959). The court concluded that no evidence showed that the reasonable value of the services rendered was different from the amount stated by the contract. Spitalny, 75 Ariz. at 200, 254 P.2d at 446. The court did not mention enhancement of the owner s property as a measure of the value of the contractor s services. ¶17 In Parker v. Holmes, a lien foreclosure case involving a contractor and owner who terminated the contract by mutual consent, the Arizona Supreme Court restated the above quoted language from Spitalny as the test for determining reasonable value in the context of a lien. 79 Ariz. 82, 86, 284 P.2d 455, 457 (1955). testimony In applying the test, however, the court looked to from experts as to the value of the services and materials furnished. Id. The court did not mention the enhanced value of the property in determining the value of the lien. ¶18 cases Contrary supports determined by to the the Shea Hills position enhanced argument, that value of neither reasonable the owners of these value is property. Although both cases state that the measure of the value of the services is based on the value to the owner rather that the cost 10 to the contractor, the cases are still concerned with the value of the materials and services furnished and not with the value of the enhancement to the owners property. Applied to this case, the parties do not dispute that Schwab furnished rental equipment to 3-F and GW that was used on Shea Hills project. The reasonable value of the materials and equipment furnished is the value of the use of that rental equipment. ¶19 Shea Hills cites Kerr-McGee Oil Industries, Inc. v. McCray, 89 Ariz. 307, 361 P.2d 734 (1961), Wahl v. Southwest Savings and Loan Ass n, 106 Ariz. 381, 476 P.2d 836 (1970), and other cases for the proposition that a lien is available only for materials or services that actually enhance the value of the owner s property. Both Kerr-McGee and Wahl describe the theory of a materialmen s lien in the following language relied on by Shea Hills: The very foundation of a lien claim under our statute is the performance of labor upon or the furnishing of materials for the construction or improvement of the property upon which the lien is claimed. The theory upon which a lien is given as a prior claim upon the property is that the party claiming the lien has, either by his labor or by the materials furnished, contributed to the construction or improvement of the property upon which the lien is claimed. Kerr-McGee, 89 Ariz. at 312, 361 P.2d at 737 (citation omitted); Wahl, 106 Ariz. at 385, 476 P.2d at 840 (citation omitted). 11 ¶20 of In Kerr-McGee, the court considered whether the value equipment left on stand-by completed could be included concluded that no lien equipment on stand-by after in could because a contract mechanic s attach the the for lien. the equipment had The value had not been court of the been a necessary instrumentality in accomplishing the work and had not contribute[d] to the improvement of the property. KerrMcGee, 89 Ariz. at 311-12, 361 P.2d 734, 736-37. The court noted that the purpose of the mechanic s lien was to protect those laborers and materialmen enhancing the value of another s property. Id. at 311, 361 P.2d at 736 (emphasis in original). ¶21 Similarly, in Wahl, the court considered how to determine the amount of a lien and noted that the lien was based on the equitable principle of giving a man a lien for the Actual [sic] labor or materials which he places into a building thereby enhancing the value of another s property. 106 Ariz. at 386, 476 P.2d at 841. The court noted that a materialman was not entitled to a lien for materials that were delivered to a construction site but not used in the building. Id. at 385-86, 476 P.2d at 840-41. ¶22 Although Kerr-McGee and Wahl, as well as other cases cited by Shea Hills, refer to a lien as protecting a materialman who enhances the value of another s property, we do not interpret these cases as advocated by Shea Hills. The theory of 12 the materialman s lien articulated in both Kerr-McGee and Wahl notes that underlying the lien claim is the fact that the claimant has either by his labor or by the materials furnished, contributed to the construction or improvement of the property. In both Kerr-McGee and Wahl the court was concerned with including in the value of a lien equipment and materials that were not actually used on the property. That is not the case here. the Schwab furnished its equipment to the contractors, and equipment was used on the property. Therefore, Schwab contributed to the construction. Because the equipment was not used to good effect by a third party does not diminish that contribution. The lien statutes are to be liberally construed to protect laborers and materialmen. We do not interpret the cases as requiring the conclusion that a subcontractor that furnished materials or equipment used in the construction of a project loses the protection of the mechanic s lien statutes because the owner s contractor, through no fault of the subcontractor, performs deficiently. As stated in A.R.S. § 33981(B), the owner is liable for the reasonable value of labor or materials furnished to his agent. (Emphasis added.) CONCLUSION ¶23 For the foregoing reasons, we affirm the trial court s finding that Schwab is entitled to recover on its liens against Shea Hills. 13 ¶24 Shea Hills has requested an award of attorneys fees on appeal pursuant to A.R.S. §§ 12-349 (2003), 33-998 (2007), and 33-1004 (Supp. 2009). 5 In our discretion we deny Shea Hills request for fees, but we award reasonable attorneys fees on appeal to Schwab upon Schwab s compliance with Rule 21(a) of the Arizona Rules of Civil Appellate Procedure. _____/s/_________________________ PATRICK IRVINE, Judge CONCURRING: ______/s/____________________________ DIANE M. JOHNSEN, Presiding Judge _____/s/_____________________________ PHILIP HALL, Judge 5 Section 33-998, the only cited statute that applies, authorizes a discretionary award of reasonable attorneys fees to the successful party in any action to enforce a lien under the statute. 14

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