Amberwood v. Swann's ( 2017 )


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  •                      NOTICE: NOT FOR OFFICIAL PUBLICATION.
    UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT
    PRECEDENTIAL AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.
    IN THE
    ARIZONA COURT OF APPEALS
    DIVISION ONE
    AMBERWOOD DEVELOPMENT, INC., an Arizona corporation doing
    business as Amberwood Homes; WINSTON CASA, LLC, an Arizona
    corporation; SUMMERSET MARKETING ENTERPRISES, INC., an
    Arizona corporation doing business as Amberwood Homes,
    Third Party Plaintiffs/Appellees/Cross-Appellants,
    v.
    SWANN’S GRADING, INC., an Arizona corporation,
    Third Party Defendant/Appellant/Cross-Appellee.
    No. 1 CA-CV 15-0786
    FILED 2-23-2017
    Appeal from the Superior Court in Maricopa County
    No. CV2008-012745
    The Honorable Randall H. Warner, Judge
    AFFIRMED
    COUNSEL
    Lee, Hernandez, Landrum, Garofalo, Phoenix
    By Jennifer E. Mullen, Barrett N. Lindsey
    Counsel for Third Party Plaintiffs/Appellees/Cross-Appellants
    Tyson & Mendes, LLP, Phoenix
    By Lynn M. Allen
    Counsel for Third Party Defendant/Appellant/Cross-Appellee
    AMBERWOOD et al. v. SWANN’S
    Decision of the Court
    MEMORANDUM DECISION
    Judge Lawrence F. Winthrop delivered the decision of the Court, in which
    Presiding Judge Randall M. Howe and Judge Jon W. Thompson joined.
    W I N T H R O P, Judge:
    ¶1             Appellant Swann’s Grading, Inc. (“Swann’s”) challenges the
    trial court’s judgment obligating it to indemnify Appellee Amberwood
    Development, Inc. (“Amberwood”) for damages stemming from a series of
    construction defect claims. Swann’s also challenges the trial court’s defense
    costs and attorneys’ fees awards. We affirm for the reasons set forth below.
    FACTS AND PROCEDURAL HISTORY
    ¶2            Amberwood served as general contractor on a housing
    development in Chandler. Swann’s subcontracted to provide rough and
    final grading services in the development.
    ¶3            Eighteen homeowners sued Amberwood after construction
    was completed, alleging numerous defects. As a result, Amberwood
    sought indemnification from its subcontractors, including Swann’s, under
    the terms of their subcontracts. Swann’s subcontract provided as follows:
    INDEMNITY: Subcontractor agrees to and does hereby hold
    Contractor harmless from any and all claims, actions,
    damages, costs or Attorney’s fees arising out of the acts or
    omissions of Subcontractor, its employees, agents or suppliers
    with regard to the performance or omission of any of
    Subcontractor’s duties and obligations under this contract.
    The indemnity extends to any claims asserted by any
    subsequent property owner alleging improper or defective
    workmanship or materials in any work or material done or
    provided by Subcontractor.
    To the fullest extent permitted by law, Subcontractor shall
    defend and indemnify and hold harmless, Contractor and
    their agents and employees from claims, demands, costs,
    attorney fees, causes of action and liabilities of every kind
    whatsoever arising out of or in connection with
    Subcontractor’s work performed for Contractor. This defense
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    AMBERWOOD et al. v. SWANN’S
    Decision of the Court
    and indemnity shall extend to claims occurring after this
    agreement is terminated as well as while it is in force. The
    defense and indemnity shall apply regardless of any active
    and/or passive negligent act or omission of the Contractor,
    Architect, or their agents or employees, but Subcontractor
    shall not be obligated to indemnify any party for claims
    arising from the sole negligence or willful misconduct of the
    Contractor or its agent or employees. The defense and
    indemnity set forth in this section shall not be limited by any
    insurance requirements, or by any provision of this
    Agreement. All work done at a site or in preparing or
    delivering materials or equipment to the site shall be at the
    sole risk of Subcontractor until the work is accepted by
    Contractor.
    Ten of the eighteen homeowners arbitrated their claims, resulting in a
    $1,750,000 award against Amberwood. Swann’s provided Amberwood a
    defense but did not otherwise participate in the arbitration.
    ¶4           Swann’s answered Amberwood’s third-party complaint
    shortly after the arbitration matter concluded. The remaining eight
    homeowners eventually settled with Amberwood for $723,900.
    Amberwood then settled its third-party indemnity claims against all
    subcontractors except Swann’s for $479,400.
    ¶5           Both Swann’s and Amberwood moved for partial summary
    judgment on the scope of Swann’s indemnity obligations. The trial court
    granted Amberwood’s motion and denied Swann’s motion, finding that
    Swann’s was obligated to defend and indemnify Amberwood for claims
    related to Swann’s work and that, to recover on the indemnity claim,
    Amberwood would have to show that its settlements were “reasonable and
    prudent and that the allocated amount arose out of or was in connection
    with Swann’s work.”
    ¶6           Before proceeding to bench trial, the parties stipulated that
    Amberwood’s settlements with all eighteen homeowners were reasonable.
    At trial, Amberwood offered undisputed testimony that Swann’s had
    provided a defense throughout the arbitration matter but contributed no
    indemnification. Amberwood also presented expert witness testimony that
    approximately 70 percent of the litigation settlement and 81 percent of the
    arbitration award were at least partially attributable to Swann’s work.
    Amberwood’s expert also prepared a list of repair costs that, in his opinion,
    stemmed at least partially from Swann’s work.
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    AMBERWOOD et al. v. SWANN’S
    Decision of the Court
    ¶7            Swann’s objected to both the expert’s testimony and the list as
    having been untimely disclosed. The trial court overruled Swann’s
    objection to the list and admitted it into evidence. Swann’s also offered
    testimony from its own geotechnical expert, who opined that Swann’s did
    not cause any of the damages for which Amberwood sought
    indemnification.
    ¶8             The trial court found Swann’s was obligated to indemnify
    Amberwood for 70.6 percent of the litigation settlements and 72.7 percent
    of the arbitration award. The trial court then granted Swann’s an offset of
    the full amount Amberwood received in settlement from the other
    subcontractors. The trial court also stated that, to the extent Swann’s was
    liable for more than its fair share of Amberwood’s losses, “its remedy is
    equitable contribution.” The trial court also awarded Amberwood defense
    costs, attorneys’ fees, and court costs of $179,570.63, $121,074.92, and
    $14,559.25, respectively.
    ¶9             Following the entry of final judgment, Swann’s moved for a
    new trial or to alter or amend the judgment under Ariz. R. Civ. P. 59(a) and
    (l), arguing that (1) the trial court erred in finding Swann’s could pursue the
    other subcontractors for equitable contribution; (2) Swann’s was only
    severally liable for Amberwood’s damages; (3) Amberwood’s settlements
    with the other subcontractors were unreasonable; and (4) Amberwood’s
    attorneys’ fee claim should have been apportioned among Swann’s and the
    settling subcontractors. The trial court denied Swann’s motion. Swann’s
    timely appealed, and Amberwood timely cross-appealed, challenging the
    offset. We have jurisdiction pursuant to Arizona Revised Statutes
    (“A.R.S.”) section 12-2101(A)(1) (2016).1
    ANALYSIS
    I.     Amberwood Was Not Required to Prove Swann’s Negligence to
    Recover.
    ¶10            Swann’s first argues that Amberwood could recover only if it
    showed under the indemnity provision that Swann’s was negligent in
    performing its work. We review the indemnity provision de novo. MT
    Builders, L.L.C. v. Fisher Roofing, Inc., 
    219 Ariz. 297
    , 302, ¶ 10, 
    197 P.3d 758
    ,
    763 (App. 2008). We must give effect to the provision as written; if its terms
    1     We cite the current version of applicable statutes when no revisions
    material to this decision have since occurred.
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    AMBERWOOD et al. v. SWANN’S
    Decision of the Court
    are clear and unambiguous, they are conclusive. Goodman v. Newzona Inv.
    Co., 
    101 Ariz. 470
    , 472, 
    421 P.2d 318
    , 320 (1966).
    ¶11            Swann’s directs us to two out-of-state cases to support its
    argument. In Heppler v. J.M. Peters Co., 
    87 Cal. Rptr. 2d 497
    (Cal. Ct. App.
    1999), the California Court of Appeals found an indemnity clause requiring
    the subcontractor to “indemnify and save [Peters] harmless against all
    claims for damages to persons or to property growing out of the execution
    of the work, and at his own expense to defend any suit or action brought
    against [Peters] founded upon the claim of such damage” only applied to
    claims in which the subcontractor was negligent. 
    Id. at 509-12.
    Here,
    though, the indemnification provision covered claims “arising out of or in
    connection with” Swann’s work, not just claims “growing out of the
    execution of the work.” 
    Id. at 509
    (emphasis added).
    ¶12            Swann’s also cites Reyburn Lawn & Landscape Designers, Inc. v.
    Plaster Dev. Co., 
    255 P.3d 268
    (Nev. 2011). There, the Nevada Supreme
    Court interpreted a subcontract requiring indemnification for claims
    “arising directly or indirectly out of the obligation herein undertaken or out
    of the obligations conducted by Subcontractor, save and except claims or
    litigation arising through the sole negligence or sole willful misconduct of
    Contractor” as only covering claims in which Reyburn was at least partially
    negligent. 
    Id. at 272,
    275. Reyburn is not persuasive here because Nevada
    follows the “express negligence doctrine” under which “parties are free to
    contractually agree to indemnify another for its own negligence” but “an
    express or explicit reference to the indemnitee’s own negligence is
    required.” 
    Id. at 274
    (quoting George L. Brown Ins. v. Star Ins. Co., 
    237 P.3d 92
    , 97 (Nev. 2010)). Arizona does not follow this doctrine. See, e.g.,
    Washington Elementary Sch. Dist. No. 6 v. Baglino Corp., 
    169 Ariz. 58
    , 61, 
    817 P.2d 3
    , 6 (1991) (“There is . . . no requirement that the term negligence
    actually be used, or that specific reference be made to liability arising out of
    the indemnitee’s negligence.”). The absence of any express reference to
    Amberwood’s own negligence thus does not limit Swann’s indemnity
    obligations to claims arising out of its own negligence.
    ¶13           We believe Cont'l Heller Corp. v. Amtech Mech. Servs., Inc., 
    61 Cal. Rptr. 2d 668
    (Cal. Ct. App. 1997) is closer to the mark. There, the
    California Court of Appeals determined that subcontract language
    requiring indemnification for losses that “arise[] out of or [are] in any way
    connected with the performance of work under this Subcontract” did not
    require the indemnitee to show the subcontractor was either negligent or at
    fault. 
    Id. at 670.
    The court instead found that “[t]he language of the
    agreement leaves no doubt the parties intended Amtech should indemnify
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    AMBERWOOD et al. v. SWANN’S
    Decision of the Court
    Continental irrespective of whether Continental’s loss arose by reason of
    Amtech’s negligence or for any other reason except for the sole negligence
    or willful misconduct of Continental.” 
    Id. at 671.
    ¶14          Swann’s subcontract contains nearly the same language; its
    indemnity obligation reaches any claim “arising out of or in connection
    with [Swann’s] work performed for [Amberwood] . . . regardless of any
    active and/or passive negligent act or omission of [Amberwood]” and only
    excepts claims arising out of Amberwood’s sole negligence or willful
    misconduct. Accordingly, the trial court correctly held that Amberwood
    did not have to show Swann’s was negligent to recover.
    II.    Amberwood Was Not Required to Prove Causation to Recover.
    ¶15           Swann’s next argues it only was obligated to indemnify
    Amberwood for damages “that ha[d] a direct causal connection to Swann’s
    acts or omissions,” citing MT Builders. But MT Builders is distinguishable
    because the subcontract at issue there required indemnity for damages
    “caused in whole or in part by any negligent act or omission of the
    Subcontractor or anyone directly or indirectly employed by him or anyone
    for whose acts he may be 
    liable.” 219 Ariz. at 303-04
    , ¶ 
    16, 197 P.3d at 764
    -
    65 (emphasis added). As discussed above, Swann’s subcontract required it
    to indemnify Amberwood for any claims arising out of or connected to
    Swann’s work, not merely those caused by Swann’s negligent acts or
    omissions. We will not impose a causation requirement the parties did not
    include in their contract. See Evans Withycombe, Inc. v. W. Innovations, Inc.,
    
    215 Ariz. 237
    , 242, ¶ 20, 
    159 P.3d 547
    , 552 (App. 2006) (“The extent of a
    contractual duty to indemnify ‘must be determined from the contract.’”
    (quoting INA Ins. Co. of N. Am. v. Valley Forge Ins. Co., 
    150 Ariz. 248
    , 252, 
    722 P.2d 975
    , 979 (App. 1986))).
    ¶16           Swann’s also contends it can only be held liable for its pro rata
    share of Amberwood’s damages under the Uniform Contribution Among
    Tortfeasors Act (“UCATA”), which largely abolished joint and several
    liability. UCATA, however, does not impair Amberwood’s contractual
    indemnity rights. See A.R.S. § 12-2501(F)(1) (2016) (UCATA does not
    “[i]mpair any right of indemnity under existing law”); cf. State Farm Ins. Cos.
    v. Premier Manufactured Sys., Inc., 
    217 Ariz. 222
    , 228, ¶ 26, 
    172 P.3d 410
    , 416
    (2007) (“[I]ndemnification is not at all inconsistent with apportionment of
    fault under § 12–2506.”).
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    AMBERWOOD et al. v. SWANN’S
    Decision of the Court
    III.   Swann’s Waived Its Objections to Amberwood’s Alleged Failure to
    Provide Proper Notice of the Litigation Settlement.
    ¶17            Swann’s next contends Amberwood waived its
    indemnification rights by not giving Swann’s timely notice of its
    settlements with the eight litigation plaintiffs.2 Swann’s raised this issue in
    its motion for partial summary judgment, which the trial court denied, but
    did not raise it in its motion for new trial. Thus, unless the issue is purely
    one of law, it is waived on appeal. See John C. Lincoln Hosp. & Health Corp.
    v. Maricopa Cty., 
    208 Ariz. 532
    , 539, ¶ 19, 
    96 P.3d 530
    , 537 (App. 2004).
    ¶18           Swann’s contends the issue is one of law because the trial
    court “affirmatively found . . . that Swann’s had repudiated its duty to
    defend ‘long before the settlement at issue.’” But the trial court’s explicit
    repudiation finding was one of fact, not law. Waiver therefore applies.
    IV.    The Trial Court Did Not Abuse Its Discretion in Awarding
    Amberwood Defense Costs and Attorneys’ Fees.
    ¶19           Swann’s next argues that the trial court awarded Amberwood
    excessive defense costs and fees. Swann’s first challenges the defense costs
    award based on its contention that the trial court erred in denying its
    motion for partial summary judgment. Swann’s failed to preserve this issue
    in its motion for new trial; accordingly, it is waived on appeal.
    ¶20          Swann’s also contends the trial court erred in awarding
    Amberwood attorneys’ fees for services related to Amberwood’s third-
    party claims against the settling subcontractors and by not allocating the
    fees among all subcontractors on a pro rata basis.
    ¶21          We review the amount of a fee award for an abuse of
    discretion. Modular Mining Sys., Inc. v. Jigsaw Techs., Inc., 
    221 Ariz. 515
    , 521,
    ¶ 21, 
    212 P.3d 853
    , 859 (App. 2009). We will affirm if the award has a
    reasonable basis even if the trial court gave no reasons for its decision.
    Fulton Homes Corp. v. BBP Concrete, 
    214 Ariz. 566
    , 569, ¶ 9, 
    155 P.3d 1090
    ,
    1093 (App. 2007).
    ¶22          In its briefing to this court, Swann’s has not shown the award
    lacked any reasonable basis; indeed, its arguments relative to this issue are
    2      As previously noted, the other ten claimants proceeded to arbitration
    of their claims on the merits.
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    AMBERWOOD et al. v. SWANN’S
    Decision of the Court
    cursory at best. We therefore affirm the defense costs and attorneys’ fees
    awards.
    V.     The Trial Court Did Not Abuse Its Discretion by Admitting
    Amberwood’s Expert Evidence.
    ¶23           Swann’s contends the trial court erred in overruling its
    disclosure objections to Amberwood’s expert witness’ testimony and list of
    repair costs. We will not disturb the trial court’s disclosure rulings absent
    an abuse of discretion. Marquez v. Ortega, 
    231 Ariz. 437
    , 441, ¶ 14, 
    296 P.3d 100
    , 104 (App. 2013).
    ¶24            We first note that Swann’s raised its disclosure objections at
    trial before Amberwood offered either the list or repair costs or the expert’s
    testimony into evidence. The trial court declined to rule on the objections
    at that time but allowed Swann’s to renew its objection to the list when it
    was offered into evidence. The trial court also stated that it would “make
    rulings on particular testimony” as it was presented. Swann’s failed to
    object to any part of the expert’s testimony on disclosure grounds as it was
    offered. The trial court thus did not err in finding Swann’s waived any
    objections to the expert testimony.
    ¶25           Swann’s did renew its objection to the repair costs list, which
    the trial court overruled. But Swann’s has not shown that the trial court
    abused its discretion in doing so. Amberwood’s expert testified that the list
    was a compilation of items taken from cost of repair reports prepared
    several years earlier that he believed Swann’s was at least partially
    responsible for. Swann’s did not rebut this testimony or offer anything to
    show that the substance of the list had not been previously known and
    timely disclosed. On this record, we therefore find no abuse of discretion.
    VI.    Swann’s Was Entitled to an Offset Representing Settlement
    Payments Amberwood Already Had Received.
    ¶26            In its cross-appeal, Amberwood challenges the trial court’s
    decision to grant Swann’s an offset representing the funds Amberwood
    received in its settlements with other subcontractors. Citing Summers v.
    Gloor, 
    239 Ariz. 222
    , 
    368 P.3d 930
    (App. 2016), Amberwood contends it was
    Swann’s burden to prove the offset and that Swann’s offered no evidence
    at trial to meet that burden.
    ¶27         Generally, the party claiming an offset has the burden to
    prove it. See, e.g., Harmony at Madrona Park Owners Ass'n v. Madison
    Harmony Dev., Inc., 
    253 P.3d 101
    , 105 (Wash. Ct. App. 2011). But here, the
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    AMBERWOOD et al. v. SWANN’S
    Decision of the Court
    parties stipulated that Amberwood had already received $479,400 in
    settlement funds before trial. Amberwood also does not dispute that,
    absent the offset, it would have received a double recovery. We therefore
    affirm the offset.
    VII.   Attorneys’ Fees on Appeal.
    ¶28           Amberwood requests its attorneys’ fees incurred on appeal
    under the subcontract, and both parties request fees under A.R.S. § 12-
    341.01(A) (2016). Amberwood does not cite any subcontract provision that
    authorizes a fee award for its express indemnity claim. We therefore deny
    that request.
    ¶29            In our discretion, we also decline to award fees under § 12-
    341.01(A) to either party. See Associated Indem. Corp. v. Warner, 
    143 Ariz. 567
    , 570, 
    694 P.2d 1181
    , 1184 (1985) (stating that § 12-341.01(A) does not
    require an award of fees to the prevailing party); Autenreith v. Norville, 
    127 Ariz. 442
    , 444, 
    662 P.2d 1
    , 3 (1980) (same). We will, however, award
    Amberwood its costs as the successful party in this appeal upon compliance
    with Arizona Rule of Civil Appellate Procedure 21. See Ocean West
    Contractors, Inc. v. Halec Constr. Co., 
    123 Ariz. 470
    , 473, 
    600 P.2d 1102
    , 1105
    (1979) (“The award of money is . . . an important item to consider when
    deciding who, in fact, did prevail. The fact that a party did not recover the
    full measure of relief requested does not mean that he is not the successful
    party. Neither does the fact that the amount of the claim is set off or
    reduced by counterclaim mean that the plaintiff was not the successful
    party”) (internal citations omitted).
    CONCLUSION
    ¶30           We affirm the trial court’s judgment and deny Amberwood’s
    cross-appeal.
    AMY M. WOOD • Clerk of the Court
    FILED: AA
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