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Markham Contracting Co. Inc. v. First American Title Insurance Co.

Court of Appeals of Arizona, First Division, Department B

July 18, 2013

MARKHAM CONTRACTING CO. INC., an Arizona corporation, Plaintiff/Appellee/ Cross-Appellant,
v.
FIRST AMERICAN TITLE INSURANCE COMPANY, a California Corporation, Defendant/Appellant/ Cross-Appellee.

Not for Publication -Rule 28, Arizona Rules of Civil Appellate Procedure

Appeal from the Superior Court in Maricopa County Cause No. CV2008-015602 The Honorable Jose S. Padilla, Judge

Osborn Maledon PA Thomas L. Hudson And Eric M. Fraser And Palecek & Palecek PLLC By Karen A. Palecek Attorneys for Plaintiff/Appellee/Cross-Appellant.

Lewis and Roca LLP By Robert G. Schaffer And William G. Voit Attorneys for Defendant/Appellant/Cross-Appellee.

MEMORANDUM DECISION

DONN KESSLER, Judge.

¶1 These appeals arise out of a mechanics' lien foreclosure action between the construction lender, New South Federal Savings Bank[1] ("New South") and a general contractor, Markham Contracting Company ("Markham") . The critical issue is one of fact: whether Markham performed work prior to June 20, 2005 (meaning it has priority) or on or after that date (meaning New South has priority). The superior court entered a final judgment granting Markham's mechanics' lien priority over New South's deed of trust and awarded Markham prejudgment interest and attorneys' fees. For the reasons stated below, we affirm the priority ruling and most of the attorneys' fees award, but vacate the prejudgment interest award and remand for adjustment consistent with this decision.

FACTUAL AND PROCEDURAL HISTORY[2]

¶2 The construction project at issue is the building of a townhouse development called the Lindsay Park Townhome Project ("Project"). In 2003, Rodney Morris, through his entity Lindsay Park Townhomes, LLC ("Townhomes"), contracted to buy a 21-acre lot in Mesa for the Project. In 2004, Townhomes sought a bid from Markham, to do grading and paving work on the Project. Markham submitted its first bid in November 2004, and then submitted four revised bids in 2005. The July 2005 bid was incorporated into a contract dated June 28, 2005 and signed August 4, 2005.

¶3Starting in March 2005, Markham performed construction on the Project. Markham undertook to "blue stake" and "pothole" the property to identify utility locations with paint on the property. Markham first requested Arizona Blue Stake, Inc. to mark utilities on March 18, 2005, and then requested subsequent visits every fourteen days pursuant to Arizona law. Markham did not have to pay Arizona Blue Stake for its services; rather Markham charged Morris for its own labor related to the blue staking process, which included mapping out the area for blue staking and sending out Markham employees to meet with and supervise Arizona Blue Stake employees. After the utilities were marked, Markham contacted a company called TBE in late March 2005 to dig the potholes on the property, and Markham supervised the digging. The potholes were completed on the property on March 29, 2005. Witnesses testified that the potholing was done pursuant to the bid, which was ultimately incorporated into the contract, but that Markham was paid for that work separately.

¶4 Although there was conflicting testimony presented at trial, there was evidence that Markham performed other construction activities during April, May, and in June, prior to June 20, 2005. In either March or April 2005, Markham arranged for the preparation of a barricade plan to be approved by the city and then installed by Markham. At least three witnesses testified that barricades were required before potholing could begin, which documents establish occurred in late March 2005. Although conflicting at times, evidence also indicated that the following activities occurred in April, May, or June: trash removal, installation of job trailers, pad clearing for the job trailers, installation of an access ramp, creation of a "V ditch" to prevent additional trash build-up, issuance of permits, and the installation of a temporary water system. Although one of Markham's project managers testified that no construction activities, except blue staking and potholing, occurred before June 20, 2005, he "ha[d] no reason to disagree with" the testimony of Markham's project estimator, who testified that the staking and potholing occurred prior to June 20, 2005. He also testified that he struggled to recall the specific times construction activities occurred. In addition, even though the original owner of the Project testified that no construction commenced before June 30, 2005, he testified that potholing occurred in late March 2005.

¶5 Townhomes decided to sell the Project, and in June 2005, Townhomes closed on the sale of the property with Lindsay Park Development, LLC ("Development"). Development obtained construction financing through New South, and New South recorded a deed of trust on the Project on June 30, 2005. In August 2005, Development's related entity, OWCP17, LLC (later Leadermark, LLC) ("OWCP17") signed a contract with Markham that was dated June 28, 2005 and incorporated Markham's July 2005 bid.

¶6 Although there was some testimony to the contrary, evidence established the construction work performed in March through June was "rolled into" Markham's June 28, 2005 contract with OWCP17. The June 28, 2005 contract referenced construction activities that occurred prior to the contract, including the March 2005 engineering plan, blue staking, and trash haul-off. Markham's head of project management testified that all of the work Markham performed as part of the Project was ultimately incorporated into the written executed contract with OWCP17. Several witnesses testified that it was not uncommon during that time for contractors to begin performing work before the written contract was signed. Even though the contract itself stated, "The date of commencement of the Work shall be the date of this Agreement [June 28, 2005] unless a different date is stated below, " evidence established work commenced as early as March 2005. A witness for Markham testified that he didn't specify a different commencement date on the contract because his longstanding relationship with the client led him to believe it was irrelevant. There was also evidence that Markham's various bids, the last of which was incorporated into the June 28, 2005 contract, were "updated proposal[s]" that were similar in scope, and "pretty much the same."

¶7 On July 26, 2005, Markham asserted a lien against the Project by filing the preliminary twenty-day notice required by Arizona Revised Statutes ("A.R.S.") section 33-992.01 (2001).[3] After not being fully paid, Markham recorded and served a notice of lien on April 1, 2008, stating under oath that Markham "first supplied labor and materials on or about the 7th day of July, 2005." At trial, a witness for Markham testified that the notice erroneously stated the commencement date as July 7, 2005 because the person who created the notice mistakenly calculated commencement by looking only at the time cards of Markham's hourly employees rather than including the work performed by Markham's subcontractors or salaried personnel.

¶8 Development defaulted on New South's construction loan, and New South foreclosed its deed of trust and took title to the property at a trustee sale. Markham filed a complaint to foreclose on its mechanics' lien, claiming priority over New South's deed of trust. After a four-day trial, an advisory jury returned answers to seven interrogatories, including findings that 1) Markham's mechanics' lien had priority over New South's deed of trust; 2) Markham performed fifteen different construction activities prior to June 20, 2005, which were part of the Project and included in Markham's July 2005 bid; 3) the work Markham performed prior to June 20, 2005 was performed pursuant to the contract with OWCP17; and 4) OWCP17 affirmed the actions of Morris, the original owner. The superior court affirmed and adopted the findings of the jury, entered judgment in favor of Markham, and awarded Markham prejudgment interest at 18 percent per annum and attorneys' fees and costs.

¶9 Both New South timely appealed and Markham timely cross-appealed. We have jurisdiction pursuant to A.R.S. § 12-2101(A)(1) (Supp. 2012).

DISCUSSION

¶10 New South argues the superior court erred by adopting the findings of the advisory jury when the evidence, including Markham's own binding admissions, contradicted the jury's findings. New South also argues that the court erred in granting Markham prejudgment interest and attorneys' fees. On cross-appeal, Markham argues the court erred in the post- judgment interest rate and, alternatively, that post-judgment interest should have applied to the prejudgment interest award as well as all other monetary awards in the judgment.

I. Evidence supports the superior court's priority ruling.

A. Reasonable evidence supports the court's finding that labor commenced prior to June 20, 2005.

¶11 New South argues that the superior court erred in adopting the advisory jury's findings and ignored evidence which established that the construction activities performed by Markham occurred after June 20, 2005.

¶12 A.R.S. § 33-992 (2007) governs the priority of mechanics' liens. Subsection A provides:

The liens provided for in this article . . . are preferred to all liens, mortgages or other encumbrances upon the property attaching subsequent to the time the labor was commenced or the materials were commenced to be furnished except any mortgage or deed of trust that is given as security for a loan made by a construction lender . . . if the mortgage or deed of trust is recorded within ten days after labor was commenced or the materials were commenced to be furnished.

Thus, Markham's mechanics' lien takes priority if construction commenced prior to June 20, 2005, ten days before New South recorded its deed of trust. The advisory jury found, and the court affirmed, that Markham performed the following activities prior to June 20, 2005: trash haul-off, potholing, blue staking, pad clearing, installing job trailers, installing an access ramp, digging a "V-ditch, " clearing and "[g]rubbing, " obtaining permits, installing the "[p]re [w]et [s]ystem, " setting up barricades, surveying the property, on-sight supervision, and installing a temporary power and water source.

¶13 Generally, when the evidence is heard by an advisory jury, "it is the findings and judgment of the court that are presumed to be correct rather than the jury's answers to the interrogatories." Garden Lakes Cmty. Ass'n, Inc. v. Madigan, 204 Ariz. 238, 240-41, 9, 62 P.3d 983, 985-86 (App. 2003); see also Ariz. R. Civ. P. 39(n) ("The answers shall be only advisory to the court."). In this case, although the superior court did not make its own specific findings, it explicitly "affirm[ed] and adopt[ed] the Jury's finding as the finding of the [c]ourt." Thus, we will affirm unless the advisory jury's findings of fact, as adopted by the court, are clearly erroneous and not supported by the evidence. See Sholes v. Fernando, 228 Ariz. 455, 458, ¶ 6, 268 P.3d 1112, 1115 (App. 2011); Turley v. Adams, 14 Ariz.App. 515, 518, 484 P.2d 668, 671 (1971). "To the extent the parties presented facts from which conflicting inferences could be drawn . . . it was for the trial court, not this [C]ourt, to weigh those facts." Sholes, 228 Ariz. at 458, 6, 268 P.3d at 1115 (citation and internal quotation marks omitted); see also Kocher v. Ariz. Dep't of Rev., 206 Ariz. 480, 482, ¶ 9, 80 P.3d 287, 289 (App. 2003) ("A finding of fact is not clearly erroneous if substantial evidence supports it, even if substantial conflicting evidence exists.").

¶14 Furthermore, we presume the superior court made any additional findings that are necessary to sustain the judgment if "they are reasonably supported by the evidence and not in conflict with the court's express findings." Sholes, 228 Ariz. at 458, 6, 268 P.3d at 1115; see also Coronado Co., v. Jacome's Dep't Store, Inc., 129 Ariz. 137, 139, 629 P.2d 553, 555 (App. 1981) ("Implied in every judgment, in addition to express findings made by the court, is any additional finding that is necessary to sustain the judgment, if reasonably supported by the evidence, and not in conflict with the express findings."). Thus, this Court will sustain any presumptive findings if they are justified by any reasonable construction of the evidence.

¶15 We agree with Markham that evidence supports the court's finding that Markham commenced construction prior to June 20, 2005. Although there was conflicting evidence regarding the commencement date, "the conflicts of the evidence are within the sole province of the trier of facts for determination. The trial court . . . is judge of the credibility of witnesses, the weight of evidence, and also the reasonable inference to be drawn from the evidence." Rogers v. Greer, 70 Ariz. 264, 270, 219 P.2d 760, 763 (1950); see also In re the General Adjudication of All Rights to Use Water in Gila River Sys. and Source, 198 Ariz. 330, 340, 25, 9 P.3d 1069, 1079 (2000) (stating that when parties present conflicting evidence and the record reflected that the superior court "made findings that, although disputed, [were] fully supported by the evidence, " the appellate court does not re-weigh the evidence or second-guess the superior court's factual findings).

¶16 Here, there was sufficient evidence from which a reasonable person could determine that construction commenced prior to June 20, 2005. See supra ¶¶ 3-4. Although conflicting evidence was received about when the work commenced, both parties had the opportunity to vigorously examine and cross-examine witnesses, and it was not clearly erroneous for the court to accept Markham's theory of the evidence as more credible.

B. Documentary evidence and pleadings did not establish as a matter of law New South's lien priority.

¶17 New South argues that Markham's statements in its notice and claim of lien and its complaint that Markham first supplied labor and materials "on or about" July 7, 2005 are binding, and thus, New South was entitled to judgment as a matter of law. Markham stated under oath in its notice and claim of lien, "Claimant first supplied labor and materials on or about the 7th day of July, 2005." In its complaint, Markham stated, "On or about July 7, 2005, Plaintiff . . . furnished labor and materials to the project according to the Agreement." New South cites Morgan v. O'Malley Lumber Company, 39 Ariz. 400, 405, 7 P.2d 252, 253 (1932), and Allied Contract Buyers v. Lucero Contracting Company, 13 Ariz.App. 315, 317, 476 P.2d 521, 524 (1970), to argue that a party is bound by its statements made in a notice and claim of lien. New South also argues that ...


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