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Sirrah Enterprises, LLC v. Wunderlich

Court of Appeals of Arizona, First Division

June 16, 2016

SIRRAH ENTERPRISES, LLC, an Arizona Corporation, Plaintiff/Counterdefendant/Appellant,
v.
WAYNE and JACQUELINE WUNDERLICH, husband and wife, Defendants/Counterclaimants/Appellees.

         Appeal from the Superior Court in Yavapai County No. P1300CV20070399 The Honorable David L. Mackey, Judge

          Bremer Whyte Brown & O'Meara, Phoenix By John J. Belanger, Paul O. Mittelstadt Counsel for Plaintiff/Counterdefendant/Appellant

          The Adams Law Firm, PLLC, Prescott By Jeffrey R. Adams Counsel for Defendants/Counterclaimants/Appellees

          Judge Randall M. Howe delivered the opinion of the Court, in which Presiding Judge Kent E. Cattani and Judge Samuel A. Thumma joined.

          OPINION

          HOWE, Judge

         ¶1 This appeal is based on a construction contract dispute between Sirrah Enterprises, LLC ("Sirrah") and Wayne and Jacqueline Wunderlich (collectively, "the Wunderlichs"). Sirrah succeeded in a jury trial on a breach of contract claim against the Wunderlichs and was awarded damages, but the Wunderlichs succeeded on a counterclaim for breach of the implied warranty of workmanship and habitability and were awarded much greater damages. The trial court awarded attorneys' fees to the Wunderlichs as the prevailing party and denied Sirrah prejudgment interest on its award. Sirrah appeals from that judgment.

         ¶2 We hold that the trial court did not err by awarding the Wunderlichs attorneys' fees because the implied warranty of workmanship and habitability was an implied term of the construction contract and the nature and size of the jury's award for the breach of that warranty made the Wunderlichs the prevailing party in the dispute. We also hold, however, that the trial court erred in denying Sirrah prejudgment interest on its breach of contract claim because Sirrah timely requested interest and was entitled to it.

         FACTS AND PROCEDURAL HISTORY

         ¶3 In April 2006, the Wunderlichs contracted with Sirrah, a licensed contractor, to construct a basement and exterior walls for a house on the Wunderlichs' property. Under the contract, the Wunderlichs were to pay Sirrah the actual cost of construction plus fifteen percent, which at the time of the contract Sirrah estimated would total $68, 582. The contract also specified that any amounts due to Sirrah "shall accrue interest at the rate of one and one-half percent per month from the date due until paid." Finally, the contract's attorneys' fees provision stipulated that "in the event either party . . . is required to retain the services of an attorney to enforce any term or provision of this agreement, the prevailing party shall be entitled to and the losing party shall pay all expenses and costs including reasonable attorneys' fees incurred by the prevailing party."

         ¶4 Sirrah began working on the Wunderlichs' property later that month, and the Wunderlichs made payments as Sirrah completed the work. In early December, Sirrah submitted an invoice for $26, 908.47, but upon receiving that invoice, the Wunderlichs objected to the labor and materials that Sirrah's concrete subcontractor provided. Sirrah first reduced the balance owed to $22, 259.33 and then to $19, 878.49, but the Wunderlichs still did not pay. In January 2007, Sirrah completed the work and submitted a final invoice for $8, 905.24. Again, the Wunderlichs did not pay.

         ¶5 Sirrah consequently sued the Wunderlichs, alleging, among other things, breach of contract for failure to pay and breach of the implied covenant of good faith and fair dealing for failing to fulfill their contractual obligations in a timely manner. Sirrah sought actual and compensatory damages to be proved at trial, "but in no event less than" $28, 783.73, prejudgment interest at the statutory rate of ten percent per annum from the date the last invoice was issued, and attorneys' fees and costs pursuant to the contract and A.R.S. § 12-341.01.

         ¶6 The Wunderlichs counter-claimed, alleging, among other things, breach of contract, breach of the contract's implied warranty of workmanship and habitability, and breach of the implied covenant of good faith and fair dealing. Specifically, the Wunderlichs alleged that the walls Sirrah constructed were out of plumb and not square, that several batches of grout used on the project were less than 3, 000 pounds per square inch as promised because Sirrah failed to supervise its use, and that Sirrah failed to follow industry standards and manufacturer requirements for the construction of the walls by failing to properly seal and support them. The Wunderlichs sought compensatory damages at an amount to be proved at trial as well as pre- and post-judgment interest.

         ¶7 After seven years of discovery and pretrial motions, the parties tried the case before a jury. The jury found in Sirrah's favor on its breach of contract claim against the Wunderlichs, awarding $31, 374 in damages. The jury further found in Sirrah's favor on the Wunderlichs' claims for breach of contract and breach of the covenant of good faith and fair dealing. However, the jury found in the Wunderlichs' favor on their claim for breach of the implied warranty of workmanship and habitability, awarding them $297, 782 in damages. Of that award, $214, 579 was for the cost of demolition, repair, and reconstruction of Sirrah's work.

         ¶8 The Wunderlichs applied for attorneys' fees pursuant to A.R.S. § 12-341.01, arguing that their claim for breach of implied warranty arose out of contract, and claimed taxable costs pursuant to A.R.S. § 12-341. Sirrah objected, arguing that the Wunderlichs could not seek fees under A.R.S. § 12-341.01 because their contract had an attorneys' fees provision that took precedence over the statute. Sirrah also contended that the Wunderlichs could not seek fees under the contract because it allowed for fees only for successfully enforcing the contract, and the implied warranty claim was not based on ...


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