Opinion
No. 2 CA-CV 2017-0142
06-28-2018
R. E. LEE MECHANICAL CONTRACTING INC., AN ARIZONA CORPORATION, Plaintiff/Appellant, v. RAYGARR LLC, AN ARIZONA LIMITED LIABILITY COMPANY; RAYTHEON COMPANY, A DELAWARE CORPORATION, Defendants/Appellees.
COUNSEL Lee & Travers P.L.C., Tucson By Brenda J. Lee Counsel for Plaintiff/Appellant DeConcini McDonald Yetwin & Lacy P.C., Tucson By Spencer A. Smith and John C. Richardson and Wells Anderson & Race LLC, Denver, Colorado By Michael Brooks, Jr. Counsel for Defendants/Appellees
THIS DECISION DOES NOT CREATE LEGAL PRECEDENT AND MAY NOT BE CITED EXCEPT AS AUTHORIZED BY APPLICABLE RULES.
NOT FOR PUBLICATION
See Ariz. R. Sup. Ct. 111(c)(1); Ariz. R. Civ. App. P. 28(a)(1), (f). Appeal from the Superior Court in Pima County
No. C20150845
The Honorable Sarah R. Simmons, Judge
AFFIRMED
COUNSEL Lee & Travers P.L.C., Tucson
By Brenda J. Lee
Counsel for Plaintiff/Appellant DeConcini McDonald Yetwin & Lacy P.C., Tucson
By Spencer A. Smith and John C. Richardson and Wells Anderson & Race LLC, Denver, Colorado
By Michael Brooks, Jr.
Counsel for Defendants/Appellees
MEMORANDUM DECISION
Presiding Judge Staring authored the decision of the Court, in which Chief Judge Eckerstrom and Judge Brearcliffe concurred. STARING, Presiding Judge:
¶1 R. E. Lee Mechanical Contracting Inc. appeals from the trial court's partial summary judgment disbursing funds interpleaded by defendant Raytheon Company. On appeal, R. E. Lee argues the trial court erred by ordering it to return erroneously disbursed funds, and by allowing Raytheon to assert arguments concerning the court's ultimate disbursement of the funds. For the reasons that follow, we affirm.
Factual and Procedural Background
¶2 Starting in 2014, RayGarr LLC served as the general contractor for several construction projects on Raytheon property, including buildings 802 and 809. RayGarr used several subcontractors for the projects, including R. E. Lee and Commonwealth Electric Company of the Midwest. Raytheon paid the amounts it owed to RayGarr for work on building 809, but withheld $75,390.85 in payment for building 802 when it learned RayGarr had not paid several subcontractors.
The record sometimes refers to a "Project 802/M05," and although Raytheon describes 802 and M05 as two different buildings, they are covered by the same agreements.
¶3 In February 2015, R. E. Lee sued RayGarr for breach of contract and related theories, claiming RayGarr owed it $50,685 for work on building 809 and $50,073 for building 802. R. E. Lee had not perfected any mechanics' liens in connection with the work for Raytheon, but instead asserted additional claims against Raytheon for unjust enrichment.
See A.R.S. §§ 33-981 to 33-1008.
¶4 In August, Raytheon filed a counterclaim and cross-claim for interpleader, seeking to deposit with the court the $75,390.85 it owed to RayGarr for work on building 802, and asking the court to resolve competing claims to the funds as well as Raytheon's liability for work on buildings 809 and 802. Raytheon asserted funds should be disbursed first to claimants with valid mechanics' liens, and identified Commonwealth and Babby-Henkel Building Specialties Inc. as parties who had asserted such liens. Raytheon also indicated that Commonwealth had filed a lawsuit to foreclose its mechanics' lien for building 802. On September 3, Raytheon moved to consolidate the separate lawsuits filed by R. E. Lee and Commonwealth.
¶5 The trial court granted Raytheon's motion to interplead funds, and Raytheon deposited the $75,390.83 on or about September 16. On September 21, R. E. Lee and RayGarr stipulated to the court issuing an order to release the entirety of the interpleaded funds to R. E. Lee, which the court ordered the following morning, despite the lack of any prior notice being provided to Raytheon. Raytheon objected to the disbursement order, and the court rescinded it and ordered R. E. Lee to hold the funds it had received. The court later granted Raytheon's motion to consolidate.
When the court later ordered R. E. Lee to return the funds to the clerk, it only returned $75,000.
¶6 In February 2016, Raytheon moved for partial summary judgment on R. E. Lee's unjust enrichment claims, and requested disbursement of the interpleaded funds to Commonwealth in satisfaction of its mechanics' lien on building 802, using any remaining funds to satisfy R. E. Lee's unjust enrichment claim for the same project. The trial court granted the motion, and, pursuant to a stipulation resolving Commonwealth's attorney fees and costs, the court ordered disbursement of the bulk of the funds to Commonwealth and the remaining $12,561 to R. E. Lee. The court thereafter issued a judgment on those claims, which it certified as final under Rule 54(b), Ariz. R. Civ. P. This appeal followed. We have jurisdiction pursuant to A.R.S. § 12-2101(A)(1).
The stipulation explicitly acknowledged that R. E. Lee and Raytheon disagreed concerning whether R. E. Lee could seek additional recovery from Raytheon based on the theory of unjust enrichment. Our disposition of this matter, however, does not require us to determine whether, as Raytheon asserts, R. E. Lee's execution of the stipulation constituted an abandonment of any claim for additional recovery. See Digital Sys. Eng'g, Inc. v. Moreno, 242 Ariz. 272, ¶ 11 (App. 2017) (stipulation results in abandonment of contrary contentions and is foreclosed from repudiation on appeal).
Discussion
¶7 On appeal, R. E. Lee asserts several overlapping arguments concerning the trial court's disbursement of the interpleaded funds. It insists that mechanics' liens do not take precedence over all other claims, and that Raytheon was automatically discharged as a party when it deposited the funds and had no standing to object or otherwise "control" disbursement of the funds. R. E. Lee also argues the trial court erred by ordering it to return the interpleaded funds, asserting there was no "legal basis" for the trial court "to seize previously disbursed funds."
R. E. Lee also contends Raytheon should have been equitably estopped from "changing its position" about interpleader, but this argument was not raised below and is thus waived. See Fendler v. Phx. Newspapers Inc., 130 Ariz. 475, 478 n.2 (App. 1981) (argument may not be raised for the first time on appeal).
¶8 The trial court's disbursement order is a grant of summary judgment, which we review de novo. Espinoza v. Schulenburg, 212 Ariz. 215, ¶ 6 (2006). We also review de novo other questions of law, including the trial court's interpretation of procedural rules, Aztar Corp. v. U.S. Fire Ins. Co., 223 Ariz. 463, ¶ 60 (App. 2010), and application of statutes, Rogone v. Correia, 236 Ariz. 43, ¶ 17 (App. 2014). In reviewing a grant of summary judgment, we view the evidence in the light most favorable to the non-moving party, Duncan v. Scottsdale Med. Imaging, Ltd., 205 Ariz. 306, ¶ 2 (2003), although in this case there appear to be no disputed issues of material fact.
Claim Priority
¶9 As noted, R. E. Lee asserts that mechanics' liens do not have absolute priority over all claims, suggesting that its unjust enrichment claim was not inferior to valid mechanics' liens arising out of work on the same property. Subject to exceptions not applicable here, however, mechanics' liens enjoy a statutory preference over "all liens, mortgages or other encumbrances . . . attaching subsequent to the time the labor was commenced or the materials were commenced to be furnished." A.R.S. § 33-992(A) ; cf. Valley Drive-In Theatre Corp. v. Superior Court, 79 Ariz. 396, 399 (1955) ("When rights are clearly established and defined by a statute, equity has no power to change or upset such rights."); Hunnicutt Constr., Inc. v. Stewart Title & Tr. of Tucson Tr. No. 3496, 187 Ariz. 301, 304-05 (App. 1996) ("[W]here a legal remedy such as a statutory lien exists, but has not been utilized, a claimant should not be permitted to substitute an equitable remedy."). At no place in its pleadings, filings in connection with the various motions for summary judgment, or its briefing here, does R. E. Lee assert that its equitable claim arose before Commonwealth provided labor or materials to the project. The trial court did not err by determining Commonwealth's mechanics' lien should be paid in full before allocating any interpleaded funds to R. E. Lee's unjust enrichment claim.
Pursuant to A.R.S. § 33-995(B), a property owner is entitled to withhold payment to the general contractor during the pendency of a subcontractor's lawsuit to foreclose a mechanics' lien, and may deduct the amount of any resulting judgment from the amount owed to the general contractor.
¶10 It is also well established that a subcontractor may only state a claim of unjust enrichment against an owner for work if the owner has not paid anyone for that work. Commercial Cornice & Millwork, Inc. v. Camel Constr. Servs. Corp., 154 Ariz. 34, 38-40 (App. 1987); see also Advance Leasing & Crane Co. v. Del E. Webb Corp., 117 Ariz. 451, 453 (App. 1977) (entity providing equipment to subcontractor did not have unjust enrichment claim against general contractor who fully paid subcontractor). In short, unjust enrichment cases fall into two categories:
ones in which the owner has fully paid the general contractor and ones in which the owner has not fully paid the general contractor. Our courts have held that recovery under a theory of unjust enrichment is not available in the former category, because the owner is not unjustly enriched if it fully paid its obligation.Wang Elec., Inc. v. Smoke Tree Resort, LLC, 230 Ariz. 314, ¶ 12 (App. 2012). Here, Raytheon first fell into the latter category, and then, by payment of the remaining contract amounts due the general contractor RayGarr through the interpleader, moved into the former category.
In at least two filings below, R. E. Lee acknowledged that by virtue of Raytheon's paying the full contract price owed to RayGarr by interpleading the funds, R. E. Lee's unjust enrichment claim was lost: "As no further monies are owed to Raygarr by Raytheon, there is no longer an unjust enrichment claim by R. E. Lee against Raytheon."
Raytheon's Standing to Object to Improper Disbursement
¶11 Rule 22, Ariz. R. Civ. P., allows an interpleading party to be discharged from liability upon request, but nothing in the rule indicates that discharge is automatic or that a party who deposits funds is thereby dismissed as a party in the lawsuit. Ariz. R. Civ. P. 22(b). Here, Raytheon sought to limit its liability to the amount of valid mechanics' liens against its property and to allocate the interpleaded funds to satisfy mechanics' liens on building 802. Raytheon did not request, and the trial court did not order, Raytheon's discharge as a party in the litigation. The reference to Rule 22(b) in the proposed order to interplead funds does not, as R. E. Lee suggests, indicate discharge of Raytheon from the action, because subsection (b) also contains the rule's only reference to depositing funds with the court. And, Raytheon unambiguously asserted the right to ensure the interpleaded funds were distributed among all proper claimants and in a manner that limited its liability, to the extent possible, to the amount of its contracts with RayGarr. In so arguing, Raytheon did not "dictate" the disbursement of the interpleaded funds, but merely sought to ensure the court determined to whom they were entitled before ordering disbursement. The trial court correctly concluded Raytheon was still a party with standing to object to improper disbursement of the funds.
Nor does Hill v. Favour, 52 Ariz. 561 (1938), support the contention that a party is discharged automatically upon depositing interpleaded funds. Hill involved homeowners who sought to compel multiple parties to litigate their competing claims to the proceeds of a mortgage. Id. at 563. When one claimant appealed the judgment, the appellees sought to dismiss the appeal because the borrowers had not been made parties to the appeal, an argument our supreme court rejected because the borrowers did not claim "any right or interest whatever against the conflicting claimants." Id. at 565-66.
To the extent Raytheon's property would have been subject to liability beyond the amount of its contract with RayGarr as a result of using the interpleaded funds to pay parties other than those holding mechanics' liens, it had a sufficient interest in the litigation to have standing under Arizona law. See Armory Park Neighborhood Ass'n v. Episcopal Cmty. Servs. in Ariz., 148 Ariz. 1, 6 (1985) (Arizona standing requirement ensures issues are "fully developed by true adversaries" having "an interest in the outcome").
Propriety of Rescinding Original Disbursement Order
¶12 We likewise reject R. E. Lee's contention that the trial court had no "legal basis" to order it to return previously disbursed funds. Trial court rulings are generally subject to reconsideration and reversal until a final judgment has been entered. Ariz. R. Civ. P. 54(b); BCAZ Corp. v. Helgoe, 194 Ariz. 11, ¶ 14 (App. 1998) ("interlocutory or intermediate order . . . subject to change prior to final judgment").
¶13 In this case, the 2015 disbursement of funds to R. E. Lee was improper because, as explained above, its unjust enrichment claim on building 802 did not have priority over Commonwealth's mechanics' lien. Because Raytheon had identified Commonwealth as a party entitled to interpleaded funds, and the motion to consolidate was still outstanding, R. E. Lee is clearly mistaken when it contends that it and RayGarr were the "only claimants to the funds" when it sought distribution. The 2015 disbursement order was also granted prematurely because Raytheon, who was still a party, did not have an opportunity to respond to the stipulated request for the order. See Ariz. R. Civ. P. 7.1(a)(3) (allowing ten days to respond to motion). Because the disbursement order was both interlocutory and erroneous, the trial court did not err by ordering R. E. Lee to return the funds.
The amount disbursed also exceeded the amount RayGarr owed R. E. Lee for work on building 802.
Rule 7.1 has been revised and reorganized since the trial court's 2015 disbursement order, but those revisions did not alter the times provided for response and reply. We therefore cite the current version of the rule. --------
Attorney Fees
¶14 R. E. Lee requests an award of attorney fees under both A.R.S. § 12-349(A) and Rule 11, Ariz. R. Civ. P., claiming Raytheon delayed the proceedings and asserted arguments without legal authority. This appears to be a request for fees based on the trial court proceedings, though R. E. Lee's reply brief suggests it seeks fees on appeal. In any case, because R. E. Lee has not identified any arguments brought without "substantial justification" or any behavior that might qualify as unreasonable expansion or delay of the proceedings, an award under § 12-349(A)(1) or (3) is not appropriate. And, Rule 11 does not provide for an award of attorney fees on appeal. See Villa De Jardines Ass'n v. Flagstar Bank, FSB, 227 Ariz. 91, n.10 (App. 2011). We thus deny the request for attorney fees. Because it is the prevailing party, Raytheon is entitled to its costs on appeal pursuant to A.R.S. § 12-341, subject to compliance with Rule 21(b), Ariz. R. Civ. App. P.
Disposition
¶15 For the foregoing reasons, we affirm the judgment of the trial court.