PREMIER v. NEW GRAND, et al.

Annotate this Case

Download PDF

NOTICE: THIS DECISION DOES NOT CREATE LEGAL PRECEDENT AND MAY NOT BE CITED EXCEPT AS AUTHORIZED BY APPLICABLE RULES. See Ariz. R. Supreme Court 111(c); ARCAP 28(c); Ariz. R. Crim. P. 31.24 IN THE COURT OF APPEALS STATE OF ARIZONA DIVISION ONE PREMIER HOMES, INC., a Nevada corporation, ) ) ) Plaintiff/Appellee, ) ) v. ) ) THE NEW GRAND ISLAND RESORT, LLC, ) an Arizona limited liability ) company; A DIAMOND KEY MASTER ) PLANNED COMMUNITY, LLC, an ) Arizona limited liability ) company; JEROME P. SCHMITZ, an ) individual, ) ) Defendants/Appellants. ) ) No. 1 CA-CV 10-0629 DIVISION ONE FILED: 5/28/2013 RUTH A. WILLINGHAM, CLERK BY: mjt DEPARTMENT D MEMORANDUM DECISION (Not for Publication Rule 28, Arizona Rules of Civil Appellate Procedure) Appeal from the Superior Court in Mohave County Cause Nos. CV2007-2090, CV2007-7196, CV2008-0113, CV2008-0627, CV2008-1264 (Consolidated) The Honorable Charles W. Gurtler, Jr., Judge AFFIRMED Bluff & Associates By Guy W. Bluff I. Bianca Lederer Jessica M. Patrick Attorneys for Plaintiff/Appellee Phoenix Ballard Spahr LLP By John G. Kerkorian Phoenix -And- Ballard Spahr LLP By Mark R. Gaylord Jason D. Boren (Admitted pro hac vice) Attorneys for Defendants/Appellants Salt Lake City G O U L D, Judge ¶1 This case arises from a stop work order that terminated construction by Premier Homes, Inc. ( Premier ) of a hotel in Lake Community, Havasu LLC City. ( Diamond A Diamond Key ), and Key Master Jerome P. Planned Schmitz ( Schmitz ) appeal from the superior court s judgment finding them jointly and severally liable for breach of contract damages and violations of Arizona s Prompt Pay Act. Diamond Key and Schmitz, along with The New Grand Island Resort, LLC ( New Grand Island ), also appeal the court s order finding them jointly and severally liable as to Premier s mechanics and materialmen s lien foreclosure. Diamond Key, Schmitz and New Grand Island (collectively, Appellants ) raise issues concerning the court s admission damages. of evidence at trial and computation of monetary Appellants also challenge the award of attorneys fees to Premier and the court s failure to submit this matter to arbitration. As we explain below, we find that Appellants have either waived their arguments or that we disagree with their assertions of error. 2 BACKGROUND ¶2 On February 24, 2007, Premier entered into a contract (the Contract ) with Schmitz whereby Premier would serve as the general contractor in the construction of a Holiday Inn hotel (the Project ) on property Schmitz owned in Lake Havasu City.1 The Contract was a standard AIA form agreement and required a $100,000 down payment from Schmitz to Premier, which Schmitz made. the Schmitz agreed to ultimately pay Premier $8,300,000 for Project. subcontractors Premier to subsequently complete the contracted Project, with and several construction activities commenced. ¶3 Schmitz experienced difficulties sufficient financing to fund the Project. in obtaining After Schmitz failed to pay Premier s progress payment applications, Schmitz informed Premier by telephone on or about June 25, 2007 to cease work on the Project. On July 9, 2007, Schmitz informed Premier formally in writing of the stop work order.2 Schmitz did not rescind the 1 At the time of the Contract, Diamond Key, an LLC for which Schmitz was the managing member, owned the subject property and then transferred ownership approximately one month later to New Grand Island, another LLC in which Schmitz had a controlling interest. According to Appellants brief, Diamond Key filed for bankruptcy after jointly filing the notice of appeal in this case. 2 Schmitz admitted at trial that the Contract required work stoppage requests to be in writing. 3 stop work order and the Project remained unfinished at the time of trial. ¶4 Meanwhile, before construction ceased, subcontractors began purchasing and receiving materials for the Project. For example, the framing subcontractor ( Two Amigos ) purchased and received lumber and other materials at the Project site on June 22, 2007 and commenced work that day.3 Upon learning of the stop work order on June 25, Two Amigos ceased framing activities and subsequently returned the unused lumber to the lumber supplier. Because some of the lumber was specially manufactured for the Project, Two Amigos only received a partial refund from the supplier. Also subcontractor, stored prior Esmay off-site to the Electric $159,000 stop Inc. worth work order, ( Esmay ), of copper another purchased wire and that was mechanics and ultimately never used in the Project. ¶5 Premier materialmen s subsequently lien on the recorded subject a property (the demanding the principal sum of $603,519.28, and a litigation ensued subcontractors construction of as and the between other Appellants, parties Project. The affected matters flurry of Premier, by were the Lien ) various incomplete consolidated. Premier specifically sought as against Diamond Key and Schmitz 3 Premier terminated its relationship with the Project s initial framing subcontractor and entered into a contract on June 19, 2007 with Two Amigos, a framing subcontractor Premier had used on another job. 4 the principal damages and amount of violations $781,775.29 of for Arizona s breach Prompt of contract Act4 Pay after deducting appropriate credits and offsets as set forth in the Contract. As against Diamond Key, Schmitz, and New Grand Island, Premier sought to foreclose the Lien and be awarded the principal sum of $603,519.28. ¶6 Premier was awarded partial summary judgment against Appellants as to, among other things, Schmitz s Key s liability under the Prompt Pay Act. and included Appellants, the issues appropriate amount remaining of Diamond Other parties in the consolidated actions settled their claims. Premier and Thus, as between for damages a -- bench trial subject to applicable offsets and credits pursuant to the Contract -- to be awarded Premier regarding the work and materials provided by Two Amigos and Esmay, and whether the $100,000 down payment made by Schmitz to Premier should be applied to offset the damage award to Premier. ¶7 After trial, the court issued a detailed order on April 2, 2010 setting forth its findings and conclusions of law regarding its interpretation and 4 application of the relevant See A.R.S. §§ 32-1129 to -1129.07 (Westlaw 2012); Stonecreek Bldg. Co., Inc., v. Shure, 216 Ariz. 36, 39, ¶ 16, 162 P.3d 675, 678 (App. 2007) ( [T]he primary purpose of the [Prompt Pay] Act is to establish a framework for ensuring timely payments from the owner to the contractor and down the line to the subcontractors and suppliers whose work has been approved. ). 5 Contract provisions to determine amounts of credits and offsets available to Appellants for calculating a principal sum owed to Premier. parties Before submit to entering a judgment, statement or the court the concerning accounting ordered the application of the various credits and offsets . . . . The parties did so and agreed that the principal sum due Premier was $158,185 but they posited different amounts of total interest then due on the different claims. Accordingly, the court entered judgment in the principal amount of $158,185 for all claims and adopted Appellants computations of interest.5 Appellants attorneys followed, objection, fees and in we the have the court amount also of jurisdiction awarded $103,500.6 under Over Premier This Arizona its appeal Revised Statutes section 12-2101(A)(1) (West 2012).7 5 Actually, Premier calculated the principal amount to be $158,185.47 and Appellants calculated $158,185.41. Although the court entered judgment in the amount calculated by Premier, we find the six cent difference with Appellants calculation to be de minimus. We accordingly refer to the principal amount in the judgment as the round figure of $158,185. We similarly find the court s interest award of $81,819.75 on the Prompt Pay Act claim to be a de minimus difference from the $81,819.44 calculated by Appellants, especially in light of the $93,218.13 of interest requested by Premier. 6 7 Premier requested $136,169.53. We cite the statute s current version as it appears in Westlaw because changes material to our analysis have not since occurred. 6 DISCUSSION I. Premier s Purported Violation of Duty to Disclose ¶8 Appellants first argue the court violated Arizona Rule of Civil Procedure ( Rule ) 37(c) in allowing Premier to use . . . at trial documents supporting Premier s damages calculations because Premier did not disclose the documents in violation of Rule 26.1. ¶9 We reject this argument. The background to this issue is as follows: On the first day of trial, Two Amigos representative Rivera testified that Two Amigos claim amounted to $76,000 as the sum of labor expended before the construction stopped and the value of the non-refunded lumber. During a portion of Rivera s testimony, the court sustained Appellants objection on the basis of the best evidence rule because no documentation was provided supporting Rivera s estimation of costs accrued by Two Amigos. The following Appellants morning, counsel a FAX Premier s that Rivera evening specifying Two Amigos damages. the document into evidence; but counsel received disclosed the to previous The court did not admit rather, allowed Rivera to refresh his recollection as to Two Amigos unreimbursed labor and material expenditures. The court determined the reasonable value of labor, materials, equipment and services provided by Two Amigos was $75,123.18. 7 ¶10 Rule 26.1 imposes an ongoing duty on parties to seasonably disclose new or different information after it is discovered. Ariz. R. Civ. P. 26.1. Absent leave of the court, Rule 37(c) prohibits a party that has failed to make a timely disclosure under Rule 26.1 to use the information or witness as evidence unless the Rule 26.1 violation was harmless. Ariz. R. Civ. P. 37(c)(1). ¶11 Here, Premier discovered the FAX during the evening recess, and disclosed it the following morning. the court explain relied how evidence they regarding on the were Two FAX as evidence, prejudiced Amigos in damages Appellants light -- Even assuming of do other including not trial Rivera s other un-objected-to testimony on the first day of trial that the amount of damages was $76,000, which was almost $900 more than the amount of damages the court eventually found. any error in the evidentiary use of the FAX was Thus, harmless. Consequently, we cannot find an abuse of discretion mandating reversal. SDR Associates v. ARG Enterprises, Inc., 170 Ariz. 1, 4, 821 P.2d 268, 271 (App. 1991) (court s ruling on admission of evidence reviewed for abuse of discretion). II. ¶12 Relief in Excess of Lien Amount The court ruled that Appellants were entitled to a credit of $50,465.62 for the work on the Project performed by Two Amigos. The court arrived at this amount by deducting the 8 reasonable value of labor and material performed and provided by Two Amigos ($75,123.18) from the amount Two Amigos initially billed and apparently received ($125,588.80). Appellants contend that the court should have determined they were entitled to a credit of $94,975.04, which was the amount Premier noted in an attachment to its Notice of Lien as the amount of Materials returned to Vendor. ¶13 Appellants, however, do not point out where in the record they made this argument to the trial court, and our review of the court s April 2, 2010 order indicates the court made no ruling on this issue. A litigant must present significant arguments, set forth his or her position on the issues raised, and include citations to relevant authorities, statutes, and portions of the record. See Arizona Rule of Civil Appellate Procedure ( ARCAP ) present significant 13(a)(6) arguments, set (appellate briefs must forth positions on issues raised, and include citations to relevant authorities, statutes and portions of the record). Accordingly, we deem Appellants argument waived. See Odom v. Farmers Ins. Co. of Ariz., 216 Ariz. 530, 535, ¶ 18, 169 P.3d 120, 125 (App. 2007) ( Generally, arguments raised for the first time on appeal are untimely and deemed waived. ); see also Modular Sys., Inc. v. Naisbitt, 114 Ariz. 582, 587, 562 P.2d 1080, 1085 (App. 1977) (issues deemed abandoned when party failed to state with any particularity why 9 or how the trial court erred in making these rulings and simply concludes that error was committed ). ¶14 In addition, Appellants fail to explain why the $95,975.04 referenced in the amended lien should take precedence over the trial court s determination that the reasonable value of labor, materials, equipment, and services furnished by Two Amigos was $75,123.18. III. Subcontractors Authority to Purchase Materials and Court s Calculation of Credit for Unused Materials ¶15 Appellants raise a number of issues that challenge the court s preliminary findings and orders that resulted in the judgment. were not For example, Appellants assert Two Amigos and Esmay properly authorized under the Contract to purchase respectively the lumber and copper wire. Appellants also argue they of were entitled materials. to a greater amount credit for those We address these issues in turn. A. Subcontractors Authority ¶16 With respect to Esmay, Appellants argue the copper wire purchase and storage was in violation of § 5.1.9 of the Contract, which prohibited Premier from making advance payments to suppliers for materials or equipment which have not been delivered and stored at the site [except with the Owner s prior approval]. Appellants, however, again do not point out where in the record they made this argument to the trial court, and our review of the court s April 2, 2010 order again indicates 10 the court made no ruling on this issue. For the reasons stated supra ¶ 13, we find this argument waived. ¶17 Regarding Two Amigos authority to purchase lumber and materials and Appellants commence argue framing Premier never activities submitted on Two the Project, Amigos as a proposed subcontractor for Appellants approval in violation of § 5.2 of the Contract s General Provisions. The court rejected this argument, finding the evidence at trial showed that Premier never submitted for Schmitz s approval of any of the various subcontractors used on the Project, and Schmitz never objected to a subcontractor on the basis of a violation of § 5.2. Thus, the court concluded that [t]he course of conduct or dealing between the parties would not have lead Premier to submit Two Amigos, as Schmitz. were a replacement . . ., for written approval to Appellants do not argue that the court s findings unsupported by the record or otherwise Consequently, we find no abuse of discretion. erroneous. See Ace Auto. Prods. Inc. v. Van Duyne, 156 Ariz. 140, 143, 750 P.2d 898, 901 (App. 1987) ( It is not incumbent upon the court to develop an argument for a party. ). ¶18 Two Also regarding Two Amigos authority, Appellants argue Amigos was in violation of its agreement with Premier because the former had not provided the latter with required documentation such as proof of insurance, proper licensing, etc. 11 Appellants imply this violation abrogated Two Amigos authority to commence work on the project. ¶19 However, Appellants assertions appear to be factually incorrect; based on the record, it appears that the absence of such papers would not affect Two Amigos authority to commence work on the project. Premier s President testified at trial that the insurance certificates, license, and MSDS sheets were used by Premier for its internal purposes only and that the absence of such documents in the home office project files did not preclude Premier from billing for the work performed by the subcontractor. In addition, another witness testified that some of these documents (such as the material safety data sheets) were typically kept on the construction site in Two Amigos foreman s truck. ¶20 Appellants also fail to indicate where in the record they raised this issue with the trial court, resulting in a waiver of this issue, given that the court s April 2, 2010 order did not address it. B. ¶21 Amount of Credit for Unused Materials The court ruled that Appellants were entitled to credit of $11,263.00, which constituted 5% of the profit . . . for the return of the copper wire and lumber. 8 8 Appellants do As the court found, The contract provisions upon termination entitles Premier to reasonable expenses incurred plus reasonable markup for overhead and profit. 12 not challenge the court s computation of the dollar amount of the credit, but contend they are entitled to a credit of 100% of the profit. One basis for the Appellants argument is the purportedly unauthorized work conducted by Two Amigos and Esmay related to the lumber and copper wire. For the reasons already explained, arguments regarding the subcontractors authority are not properly before us. The remaining basis for Appellants argument is that the Contract provision apparently relied upon by the court in making its ruling is ambiguous and should be construed against the drafter, Premier. 9 do not satisfy their burden to show Once again, Appellants that this argument presented to, and considered by, the trial court. the contract clearly provides: ALL CREDITS was In any event, FOR WORK NOT PERFORMED WILL BE CREDITED AT 5% PROFIT ONLY. IV. ¶22 Attorneys Fee Award to Premier The court found Premier was the prevailing party for purposes of a fee award. Appellants challenge this finding and argue of A.R.S. 9 the §§ court s award 12-341.01(A) attorneys (West 2012) fees (in a was error. contested Section 4.2 of the Contract states, in relevant part: ANY CHANGE ORDERS TO THE ORIGINAL SCOPE OF WORK THAT ARE GENERATED BY THE OWNER . . . THAT RAISES THE COST OF THE PROJECT SHALL BE CHARGED AT THE COST OF THE WORK PLUS 5% FOR OVERHEAD AND 10% FOR PROFIT. ALL CREDITS FOR WORK NOT PERFORMED WILL BE CREDITED AT 5% PROFIT ONLY. 13 See action arising out of contract, court may award successful party reasonable attorney fees), 33-998(B) (West 2012) (court has same discretion to award fees in action to enforce mechanics and materialmen s lien). Specifically, Appellants point out that Premier lost on several of the main issues in this case . . . . ¶23 We defer to the trial court to determine which party was successful for the purpose of making a fee award because that court is better able to evaluate the parties positions during the litigation and to determine which has prevailed. Berry v. 352 E. Virginia, L.L.C., 228 Ariz. 9, 13, ¶ 22, 261 P.3d 784, 789 (App. 2011). ¶24 In Berry, this court noted that a party may be deemed successful for purposes of a fee award even if the party does not recover the total amount of relief requested; instead, in cases such as this one involving various competing claims . . . and setoffs all tried together, the successful party is the net winner. Id. (quoting Ayala v. Olaiz, 161 Ariz. 129, 131, 776 P.2d 807, 809 (App. 1989)). The Berry court concluded that although the fee award applicant in that case did not succeed on all claims, the party did receive a monetary judgment and was therefore entitled to a discretionary award of fees. 22-24. Id. at ¶¶ In reaching this conclusion, the court in Berry found it significant that the trial court reduced the amount of the fee 14 award perhaps in light of [the award recipient s] failure to prevail on one of its counterclaims. ¶25 Here, Premier obtained Id. at ¶ 23. a money judgment against Appellants on all three of its claims. Although the amount of the Premier judgment winner. was less than requested, was the net As in Berry, the amount of the fee award was reduced by the trial court, apparently as a result of Premier s failure to completely succeed in obtaining all the relief requested. find Berry reasonable dispositive basis accordingly, the to and find court conclude Premier did not was that the the abuse court prevailing its We had a party; discretion in determining Premier was entitled to a fee award. ¶26 Appellants also argue that the court failed to correctly apply the factors listed in Associated Indemnity Corp. v. Warner, 143 Ariz. 567, 694 P.2d 1181 (1985). However, their argument essentially requests that we substitute our own itemby-item analysis for that of the trial court. See Sanborn v. Brooker & Wake Prop. Mgmt., Inc., 178 Ariz. 425, 430, 874 P.2d 982, 987 (App. 1994). our review. ¶27 fee Id. Accordingly, we cannot reverse on this basis. Alternatively, award was Such an exercise is beyond the scope of Appellants contend the amount of the unreasonable. The specific factors Appellants argue result in an unreasonable amount include: that 1) the $103,500.00 award is excessive in light of the judgment 15 obtained and the amount of work performed by Premier s counsel; 2) Premier s counsel sought fees for time spent traveling from Phoenix to Bullhead or Kingman; 3) Premier s counsel failed to substantiate his assertion that his fees were similar to those regularly charged in Phoenix; 4) Premier sought fees for work performed on issues Premier did not prevail upon; 5) Premier sought to recover fees relating to subcontractor claims that were dismissed and the parties were to bear their own fees and costs; 6) the amount of fees written off by Premier s counsel should have been ignored by the Trial Court; 7) tasks performed by Premier s lawyers could have been performed by less than the number whose time was charged; and, 8) several of Premier s counsel s time entries are vague. ¶28 Appellants provide us with no authority to support their argument, and they do not provide us with sufficient and appropriate references to the record. the amount of the fee award. had before it a detailed Thus, we will not vacate Further, we note that the court accounting of the time Premier s counsel spent on performing specific tasks related to this case, and that the amount awarded was 76% of what Premier requested. Absent authority to the contrary, we cannot find an abuse of discretion on this record. 16 V. Admissibility of Testimony in Purported Violation of Arizona Rule of Evidence 403 ¶29 Over Appellants objection on relevance grounds, the court permitted Schmitz s 50 percent partner in Diamond Key, Jim Rohl, to testify that Schmitz once went to Las Vegas with the Project s superintendent, and Schmitz called Rohl in the middle of the night to explain he was partying . . . with female companionship . . . at the expense of Diamond Key. Appellants argue the court violated Arizona Rule of Evidence 403 by admitting Rohl s testimony. ¶30 Whether the court violated Rule 403 in allowing Rohl s testimony is not an issue properly before us because Appellant did not object on the basis that the testimony was unfairly prejudicial relative to its probative value. See Ariz. R. Evid. 403 ( The court may exclude relevant evidence if its probative value is substantially outweighed by a danger of . . . unfair prejudice . . . ); State v. Montano, 204 Ariz. 413, 425, ¶ 58, 65 P.3d 61, 73 supplemented, 206 Ariz. 296, 77 P.3d 1246 (2003) (failure to object on Rule 403 grounds waives issue on appeal). Instead, we interpret Appellants Rule 403 argument as a challenge to the court s implicit ruling that the testimony was relevant. Assuming, without deciding, that the court erred in finding Rohl s testimony relevant, the error is harmless because this was a bench trial. When evidence is erroneously admitted by a trial court sitting without a jury, the court is presumed 17 to have ignored such testimony. In re Estate of Newman, 219 Ariz. 260, 276, ¶ 66, 196 P.3d 863, 879 (App. 2008)(quoting Norvell v. (1966)). record Lucas, 3 Ariz.App. 464, 465, 415 P.2d 478, 479 We apply this presumption here because nothing in the suggests the trial court relied on Rohl s testimony. Accordingly, we do not find reversible error. VI. ¶31 Court s Refusal to Submit Matter to Arbitration In response to Premier s motion for partial summary judgment, Appellants argued the motion should be denied because the Prompt Pay Act claim was subject to arbitration. In its ruling on July 17, 2008 granting in part Premier s motion, the court found Appellants waived their right to arbitration because they did not timely make a demand for it. ¶32 A party may waive the right to arbitration when it pursues litigation instead of arbitration. See Bolo Corp. v. Homes & Son Constr. Co., 105 Ariz. 343, 347, 464 P.2d 788, 789 (1970) (holding that plaintiff waived the right to arbitrate the controversy by filing a lawsuit that requested the same type of relief it could have gained in arbitration); In re Estate of Cortez, 226 Ariz. 207, 245 P.3d 892 (App. 2010) (discussing Bolo and extending this principle to mean that filing an answer under the arbitrate same circumstances without also would in result agreement ). 18 asserting waiver of the the right to arbitration ¶33 Appellants contend the court waived their right to arbitration. erred in finding they Appellants claim they could not waive this right because they did not have the provision of the Contract that set forth the requirement that a demand for arbitration be made within a reasonable time. Thus, Appellants argue they had no knowledge that they had the right to demand arbitration. ¶34 The trial court, however, expressly rejected this argument and found that Schmitz and Appellant s counsel could have easily access[ed] personally possess it. the Contract, even if they did not Further, the court found Appellants did make a timely demand for arbitration in another action related to this case. Appellants do not refer to an item of record that refutes these findings. We therefore cannot find reversible error. 19 CONCLUSION ¶35 The judgment is affirmed. Pursuant to A.R.S. § 12- 341.01 (West 2012), Premier requests its reasonable attorneys fees and costs incurred in this appeal. Because Premier is the prevailing action party on appeal and this arises out of contract, we exercise our discretion to grant Premier s request subject to compliance with ARCAP 21.10 /S/__________________________ ANDREW W. GOULD, Judge CONCURRING: /S/ ______________________________ MICHAEL J. BROWN, Presiding Judge /S/_______________________________ DONN KESSLER, Judge 10 During the pendency of this appeal, both Premier and Diamond Key filed for bankruptcy. They later arrived at a settlement, approved by both bankruptcy courts, whereby Diamond Key s estate purchased Premier s right to the lien and judgment in return for $335,000, paid to Premier s Chapter 7 Trustee. In addition, Premier s proof of claim against Diamond Key in Diamond Key s bankruptcy was deemed disallowed. Diamond Key has withdrawn its own notice of appeal as a defendant/appellant and now stands in the shoes of Premier with regard to its right to enforce this judgment against New Grand Island and Schmitz. 20

Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You should read the full case before relying on it for legal research purposes.

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.