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Zumar Industries, Inc. v. Caymus Corp.

Court of Appeals of Arizona, First Division

November 16, 2017

ZUMAR INDUSTRIES, INC., Plaintiff/Appellee,
v.
CAYMUS CORPORATION, Defendant/Appellant.

         Appeal from the Superior Court in Maricopa County No. CV2014-012421 The Honorable James T. Blomo, Judge

          Snell & Wilmer, LLP, Tucson By Jason Ebe, Andrew M. Jacobs, W. Danny Green Counsel for Plaintiff/Appellee.

          Miranda Law Firm, Gilbert By Daniel L. Miranda Counsel for Defendant/Appellant.

          Judge Maria Elena Cruz delivered the opinion of the Court, in which Acting Presiding Judge Peter B. Swann and Judge Michael J. Brown joined.

          OPINION

          CRUZ, Judge.

         ¶1 Caymus Corporation ("Caymus") appeals the superior court's (1) grant of summary judgment in favor of Zumar Industries, Inc. ("Zumar") and (2) denial of its motion to add counterclaims. Because we hold the court incorrectly applied the Arizona Prompt Pay Act ("Act") to a contractor-subcontractor dispute on a federal work project, we reverse and remand for proceedings consistent with this decision.

         FACTUAL AND PROCEDURAL HISTORY[1]

         ¶2 The National Park Service ("NPS") is a bureau of the U.S. Department of the Interior, a federal agency. In 2013, NPS hired Caymus to provide and install road signs at Grand Canyon National Park. The contract price was $292, 300. Caymus was prepared to bond the project, but NPS's representative told Caymus a bond was not required because the contract was a service contract, not a construction contract. Caymus hired Zumar, a supplier of traffic signs and related highway safety products with offices in Arizona, California, and Washington, to supply the sign panels. Zumar quoted $92, 793.60 for the job; Caymus accepted the quote and agreed to Zumar's credit application, which provided that Caymus would pay according to the terms of sale stated on Zumar's invoices.

         ¶3 In March 2014, Zumar delivered sign panels to the job site; NPS raised immediate concerns about defective and missing panels. Thereafter, the parties and NPS had ongoing discussions regarding completion of the sign panels work. On June 30, though, Caymus submitted a pay application to NPS, certifying the sign panels line item was 100% completed. In total, Caymus requested and received $98, 800 from NPS for the sign panels scope of work.

         ¶4 Zumar invoiced Caymus in full for the sign panels. Caymus paid Zumar $59, 278.10, but withheld $35, 632.33 pending Zumar's satisfactory performance.[2] To resolve the parties' dispute, in October 2014, Zumar's counsel proposed the following:

Although Caymus has not facilitated a discussion with NPS to attempt to resolve this matter, NPS has contacted Zumar, and proposed to release payment through Caymus to Zumar of the principal amount of $30, 632.33 now, with the final principal amount of $5, 000.00 to be paid by NPS through Caymus to Zumar upon Zumar's completion of the items on the enclosed punch list. This proposed resolution is acceptable to Zumar, and we understand NPS has or will contact you to seek your consent. Of course, both payments need to be by joint check, executed first by Caymus, to ensure that Zumar actually receives payment as intended by NPS.

         To this end, Bryan Gregory, a contracting officer with NPS, asked Randy Ringleb, Caymus' president:

Can you provide the status of payments to Zumar? Zumar has expressed a desire to perform needed repairs, but had concerns about payment. Understandably, there may be some amount that is withheld until completion. However, I would encourage you to continue to work with Zumar to get things wrapped up, particularly since we are so near. If you have not already made plans for an interim payment, you may consider doing so to keep things moving in a positive direction. The Government has withheld less than 10% of the contract value. Perhaps you could take a similar approach?

         Caymus would not agree to the proposal absent agreement by Zumar to warranty the sign panels or assurance from NPS that it would accept them in as-is condition.

         ¶5 In December 2014, NPS submitted to Zumar and Caymus a punch list of items required to complete the sign panels work. Several months later, NPS sent a Cure Notice, alleging that twenty-two sign panels needed repair and three were missing. Caymus completed the work at a cost of $15, 000. NPS withheld final payment to Caymus of $35, 367.96 pending resolution of a dispute based in part on the sign panels.

         ¶6 In the meantime, in September 2014, Zumar brought this breach of contract action against Caymus, seeking damages of $35, 632.33. The matter proceeded to compulsory arbitration. Zumar prevailed, and Caymus appealed. Zumar moved for summary judgment, arguing Caymus violated state and federal prompt pay laws, which constituted a material breach of the subcontract. The superior court agreed and granted the motion. While the motion was pending, Caymus moved to add counterclaims for breach of contract, breach of warranty, and (in the alternative) unjust enrichment. The court denied that motion and Caymus' subsequent motion for reconsideration. The court entered a final judgment and Caymus timely appealed. We have jurisdiction pursuant to Arizona Revised Statutes ("A.R.S.") section 12-2101(A)(1).

         DISCUSSION

         I. Motion for ...


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