Delmastro & Eells v. Taco Bell Corp.

FILED BY CLERK
IN THE COURT OF APPEALS
STATE OF ARIZONA OCT 21 2011
DIVISION TWO
COURT OF APPEALS
DIVISION TWO
DELMASTRO & EELLS, an Arizona )
corporation, )
)
Plaintiff/Counterdefendant/ ) 2 CA-CV 2010-0188
Appellant, ) DEPARTMENT A
)
v. ) OPINION
)
TACO BELL CORP., a California )
corporation and its affiliates, )
)
Defendant/Counterclaimant/ )
Appellee. )
)
APPEAL FROM THE SUPERIOR COURT OF PIMA COUNTY
Cause No. C20091855
Honorable Kenneth Lee, Judge
AFFIRMED
Berens, Kozub, Kloberdanz & Blonstein, PLC
By William A. Kozub and Richard W. Hundley Phoenix
Attorneys for Plaintiff/
Counterdefendant/Appellant
Snell & Wilmer L.L.P.
By William N. Poorten, III, Andrew M. Jacobs,
and Melissa A. Marcus Tucson
Attorneys for Defendant/
Counterclaimant/Appellee
E C K E R S T R O M, Presiding Judge.
¶1 This appeal concerns a mechanic‟s lien recorded by appellant Delmastro &
Eells, Inc., against property owned by appellee Taco Bell Corp.1 After Delmastro filed a
complaint seeking to foreclose the lien, Taco Bell filed an answer and counterclaim
alleging wrongful recording of a lien and lis pendens pursuant to A.R.S. § 33-420. On
appeal, Delmastro contends the trial court erred by granting Taco Bell‟s motion for
summary judgment, thereby dismissing the foreclosure count and granting relief on the
statutory counterclaim. We affirm for the reasons set forth below.
Factual and Procedural Background
¶2 “In reviewing a grant of summary judgment, we view the facts and the
reasonable inferences to be drawn from those facts in the light most favorable to the party
against whom judgment was entered.” Diaz v. Phx. Lubrication Serv., Inc., 224 Ariz.
335, ¶ 10, 230 P.3d 718, 721 (App. 2010). Because Delmastro has improperly cited to its
own appendix to support certain factual assertions in its opening brief, we disregard those
assertions and rely instead on Taco Bell‟s statement of facts and our own review of the
record. See State Farm Mut. Auto Ins. Co. v. Arrington, 192 Ariz. 255, n.1, 963 P.2d
334, 336 n.1 (App. 1998); Lansford v. Harris, 174 Ariz. 413, 417 n.1, 850 P.2d 126, 130
n.1 (App. 1992).
¶3 Venture Development Group (VDG) owned two blocks of platted property,
specifically, Blocks 1 and 3, included in the Riverside Crossing III commercial complex
1
Other entities involved in the action below are not parties to this appeal; hence,
we refer to them only as needed to provide context for our discussion. See Albert
Steinfeld & Co. v. Allison Mining Co., 41 Ariz. 340, 340-41, 18 P.2d 267, 267 (1933).
2
at 2190 W. River Road, in Tucson. In January 2008, Delmastro entered into a contract
with VDG to build the Tutor Time Child Care Center, located on Block 1 of the complex,
and to make other improvements. Delmastro started work on the project that same
month. Taco Bell acquired title to Block 3 from VDG several months later, recording its
deed on June 18, 2008.
¶4 Delmastro sent VDG three preliminary twenty-day notices pursuant to
A.R.S. § 33-992.01: one on January 17, 2008; another on June 24, 2008; and the last on
October 16, 2008. In all three preliminary notices, Delmastro asserted it had provided
“materials and/or labor” for a building, structure, or improvement located at “2190 W.
River Road” in “Tucson, Pima County, Arizona,” that was “legally described as . . . Tutor
Time Child Care.” Delmastro acknowledges that Taco Bell was neither named in, nor
served with, any preliminary notice.
¶5 Pursuant to A.R.S. § 33-993, Delmastro subsequently filed a notice and
claim of lien in January 2009 against property that included Block 3. Delmastro
maintains it “was not aware Defendant Taco Bell had acquired title to Block 3 until after
the lawsuit had commenced.” Consequently, the lien did not name Taco Bell as the
owner of this parcel, and Taco Bell did not receive any notice of the lien until Delmastro
filed an amended complaint seeking to foreclose against Block 3 in May 2009.
¶6 In its motion for summary judgment, Taco Bell claimed the lien against
Block 3 was invalid because (1) Delmastro did not serve Taco Bell with a preliminary
twenty-day notice, as required by § 33-992.01(B); (2) its preliminary notices did not
sufficiently describe the jobsite and the nature of work and materials furnished, as
3
required by § 33-992.01(C); (3) Delmastro failed to name Taco Bell as the owner of the
property in its notice and claim of lien filed pursuant to § 33-993; and (4) the notice and
claim of lien failed to apportion value for the work performed on Block 3, as required by
A.R.S. § 33-991. Taco Bell also sought damages and attorney fees for the wrongful
recording of a lien and lis pendens under A.R.S. § 33-420(A). The trial court granted the
motion and entered judgment pursuant to Rule 54(b), Ariz. R. Civ. P. This appeal
followed.
Discussion
¶7 Delmastro first argues the trial court erred in entering summary judgment
on the lien foreclosure count.2 Summary judgment is appropriate when the pleadings and
items in the record “show that there is no genuine issue as to any material fact and that
the moving party is entitled to a judgment as a matter of law.” Ariz. R. Civ. P. 56(c)(1);
2
Delmastro acknowledges the trial court‟s ruling was based upon the “alleged
multiple defects with [Delmastro]‟s preliminary twenty day lien notices and with [it]s
mechanic‟s lien.” Nevertheless, Delmastro has not provided record citations for these
critical documents in either the fact section of its opening brief or the argument section,
as required by Rule 13(a)(4) and (6), Ariz. R. Civ. App. P. Although Delmastro has
attached an appendix to its opening brief and referred to the items within it, reference to
an appendix alone fails to inform this court whether the item referred to is, in fact,
included in the record on appeal pursuant to Rule 11(a)(1) and (3), Ariz. R. Civ. App. P.,
and it does not substitute for a citation to the record as it is numbered pursuant to Rule
11(a)(2). Such impermissible practice is an appropriate ground for this court to find an
appellant‟s argument waived. See Inspiration Consol. Copper Co. v. Ariz. Dep’t of
Revenue, 147 Ariz. 216, 224, 709 P.2d 573, 581 (App. 1985); Spillios v. Green, 137 Ariz.
443, 447, 671 P.2d 421, 425 (App. 1983); cf. Dykeman v. Ashton, 8 Ariz. App. 327, 330,
446 P.2d 26, 29 (1968) (declining to address alleged errors when appellant failed to set
forth challenged jury instructions in brief or appendix as required by appellate rules).
Taco Bell, however, has not objected to this deficiency in Delmastro‟s brief.
Accordingly, in the exercise of our discretion, we overlook the defect and will not deem
the argument waived. See Clemens v. Clark, 101 Ariz. 413, 414, 420 P.2d 284, 285
(1966) (appellate court may entertain deficient brief on merits).
4
accord Villa De Jardines Ass’n v. Flagstar Bank, FSB, 227 Ariz. 91, ¶ 5, 253 P.3d 288,
291-92 (App. 2011). Under this standard, “if the facts produced in support of the claim
or defense have so little probative value, given the quantum of evidence required, that
reasonable people could not agree with the conclusion advanced by the proponent of the
claim or defense,” then summary judgment should be granted. Orme Sch. v. Reeves, 166
Ariz. 301, 309, 802 P.2d 1000, 1008 (1990).
¶8 We review a grant of summary judgment de novo. Wells Fargo Bank v.
Ariz. Laborers, Teamsters & Cement Masons Local No. 395 Pension Trust Fund, 201
Ariz. 474, ¶ 13, 38 P.3d 12, 20 (2002). Although the trial court did not specify its
reasons for granting Taco Bell‟s motion here, we will affirm the ruling if it is correct on
any ground. See Jones v. Cochise Cnty., 218 Ariz. 372, ¶ 16 & n.5, 187 P.3d 97, 102 &
n.5 (App. 2008); Miller v. Hehlen, 209 Ariz. 462, n.2, 104 P.3d 193, 197 n.2 (App. 2005).
We address first whether the lien was valid. See Commercial Cornice & Millwork, Inc. v.
Camel Constr. Servs. Corp., 154 Ariz. 34, 36-37, 739 P.2d 1351, 1353-54 (App. 1987)
(invalid lien warrants dismissal of foreclosure action).
Validity
¶9 Because mechanic‟s liens are creations entirely of statute, Morgan v.
O'Malley Lumber Co., 39 Ariz. 400, 404, 7 P.2d 252, 253 (1932), we require strict
compliance with the statutes relating to them. Irwin v. Murphey, 81 Ariz. 148, 155, 302
P.2d 534, 538 (1956); MLM Constr. Co. v. Pace Corp., 172 Ariz. 226, 229, 836 P.2d 439,
442 (App. 1992). When construing the provisions of these statutes, however, we
interpret them liberally so as to effectuate their purposes. A.R.S. § 1-211(B); Leeson v.
5
Bartol, 55 Ariz. 160, 168, 99 P.2d 485, 489 (1940); R & M Oxford Constr., Inc. v. Smith,
172 Ariz. 241, 246, 836 P.2d 454, 459 (App. 1992).3 In effect, this means a lien claimant
must demonstrate substantial compliance with each statutory requirement consistent with
its purpose. See Fagerlie v. Markham Contracting Co., 227 Ariz. 367, ¶ 13, 258 P.3d
185, ___ (App. 2011); MLM Constr. Co., 172 Ariz. at 229, 836 P.2d at 442; Lewis v.
Midway Lumber, 114 Ariz. 426, 431, 561 P.2d 750, 755 (App. 1977).
¶10 We find Delmastro‟s lien was invalid, at minimum, because the
descriptions of the jobsite and labor and materials it had provided in its preliminary
notices were legally inadequate to secure a lien against Taco Bell‟s property. Under the
circumstances here, a preliminary twenty-day notice is a necessary prerequisite to
recording a valid lien. A.R.S. §§ 33-981(D), 33-992.01(B). A lien claimant‟s
preliminary notice must include both “[a] general description of the labor, professional
services, materials, machinery, fixtures or tools furnished or to be furnished and an
3
Delmastro points out that we have often justified liberal construction on the
ground that “the purpose of the mechanic‟s . . . lien statutes is to protect laborers and
materialmen who enhance the value of other persons‟ property.” MLM Constr. Co., 172
Ariz. at 229, 836 P.2d at 442; accord Ranch House Supply Corp. v. Van Slyke, 91 Ariz.
177, 181, 370 P.2d 661, 664 (1962); Kerr-McGee Oil Indus. v. McCray, 89 Ariz. 307,
311, 361 P.2d 734, 736 (1961). But not every provision the legislature creates relating to
mechanic‟s liens is intended to benefit workers and suppliers. When the legislature first
enacted A.R.S. § 33-992.01, for example, it created an additional hurdle for lien
claimants without imposing any additional obligation for property owners, and the law
expressly provided that “[a]ny agreement made or entered into by an owner whereby the
owner agrees to waive the rights or privileges conferred upon him by this section is
void.” 1979 Ariz. Sess. Laws, ch. 202, § 2. The legislature‟s minutes establish that the
bill responsible for these changes was opposed by several contractors‟ associations on the
ground that it created too many burdens and costs for them. Ariz. State S., Minutes of
Comm. on Commerce & Labor, 34th Leg., 1st Reg. Sess., at 3, 4 (1979). Later
amendments to § 33-992.01 reflect legislative attempts to balance the interests of the
competing groups affected by this statute.
6
estimate of the total price thereof,” § 33-992.01(C)(1), as well as “[a] legal description,
subdivision plat, street address, location with respect to commonly known roads or other
landmarks in the area or any other description of the jobsite sufficient for identification.”
§ 33-992.01(C)(4).
¶11 We agree with both parties that Westinghouse Electric Supply Co. v.
Western Seed Production Corp., 119 Ariz. 377, 580 P.2d 1231 (App. 1978), establishes
the standard to be used for determining the adequacy of these descriptions. There, we
held that “the test to be applied is whether a stranger to the underlying transaction, based
upon the description contained in the notice and claim of lien and [his or her] general
knowledge of the area, could ascertain the property to which the lien attached.” Id. at
379, 580 P.2d at 1233. Westinghouse specifically addressed the description requirement
of former § 33-993 and did not prescribe a standard for the subsequently enacted § 33-
992.01(C). 119 Ariz. at 379, 580 P.2d at 1233; see also 1966 Ariz. Sess. Laws, ch. 63,
§ 20. Nevertheless, the operative language of these provisions is essentially the same,4
and logic compels extending the Westinghouse standard to the descriptions within a
preliminary lien notice.
¶12 The descriptions required by § 33-992.01(C), therefore, must be sufficient
to allow a stranger to the transaction to identify both what the lien claimant has provided
and to which specific property any future lien will attach. In this way, a court may assess
4
Westinghouse construed language in the former version of § 33-993 requiring a
notice of lien to include “[a] description of the lands and improvements to be charged
with a lien, sufficient for identification.” 1966 Ariz. Sess. Laws, ch. 63, § 20.
7
whether claims are precluded under § 33-992.01(E).5 In addition, the recipient of a
preliminary notice can assess the accuracy of the information within it, see § 33-
992.01(J), and comply with the disclosure obligations specified in § 33-992.01(I).6
5
This provision establishes that a person “is entitled to claim a lien only for such
labor, professional services, materials, machinery, fixtures or tools furnished within
twenty days prior to the service of the notice and at any time thereafter.” § 33-992.01(E).
6
This subsection, which applies to people who receive either a request for
information or a preliminary twenty-day notice, provides as follows:
Within ten days after receipt of a written request from
any person or the person‟s agent intending to file a
preliminary twenty day notice, which request shall identify
the person, the person‟s address, the jobsite and the general
nature of the person‟s labor, professional services, materials,
machinery or tools to which the preliminary twenty day
notice shall apply, or within ten days of the receipt of a
preliminary twenty day notice, the owner or other interested
party shall furnish the person a written statement containing
the following information:
1. The legal description, subdivision plat, street
address or location with respect to commonly known roads or
other landmarks in the area, or any other description of the
jobsite sufficient for identification.
2. The name and address of the owner or reputed
owner.
3. The name and address of the original contractor or
reputed contractor.
4. The name and address of the construction lender, if
any, or reputed construction lender.
8
¶13 Such descriptions further the general purpose of § 33-992.01. Like the
California statute on which it was patterned, our pre-lien notice statute
“was intended as a means of identifying . . . unknown
persons, who are potential lien claimants, so that meaningful
communication could be had among the property owner,
lending institution and general contractor to insure timely
payment of these persons‟ claims and avoid[] . . . costly work
stoppages, mechanics‟ lien foreclosure sales, and double
payments by the owner.”
Schrader Iron Works, Inc. v. Lee, 103 Cal. Rptr. 106, 111 (Ct. App. 1972), quoting 51
Op. Cal. Att‟y Gen. 69; see also MLM Constr. Co., 172 Ariz. at 229-30, 836 P.2d at 442-
43. “The purpose of the statutory notice requirement is to give the owner advance
information of the identities of any unpaid claimants who may perfect liens against his
property if their debts remain unsatisfied.” Truestone, Inc. v. Simi W. Indus. Park II, 209
Cal. Rptr. 757, 761 (Ct. App. 1984). This is the same basic function served by our long-
standing notice requirement in § 33-993: “giv[ing] the property owner an opportunity to
protect himself . . . and giv[ing] him time to investigate the claim.” Lewis, 114 Ariz. at
432, 561 P.2d at 756. It therefore is appropriate to extend the Westinghouse standard to
§ 33-992.01(C).
¶14 By this measure, Delmastro‟s preliminary notices plainly were insufficient.
In all three preliminary notices, Delmastro asserted it had provided “materials and/or
5. If any payment bond has been recorded pursuant to
§ 33-1003, a copy of the bond and the name and address of
the surety company and bonding agent, if any, providing the
payment bond.
§ 33-992.01(I).
9
labor” for a building, structure, or improvement located at “2190 W. River Road” that
was “legally described as . . . Tutor Time Child Care.” Delmastro contends these notices
“provided both a description of its labor and of the real property involved.” As to its first
contention, we observe that merely indicating labor has been performed does little to
describe such labor, and failing to specify whether labor or materials were furnished
accomplishes even less. But we need not decide what qualifies as adequate description
solely under § 33-992.01(C)(1) to resolve this appeal.
¶15 The critical deficiency here is that the three preliminary notices did not
describe any work being performed on Block 3 so as to alert a notice recipient that a lien
might attach to this property. Notice recipients were apprised that work was being
performed on Block 1 of the commercial center located at 2190 W. River Road—the
Tutor Time Child Care building. But nothing in the preliminary notices provides any
indication that other properties were affected or that notice recipients had any obligation
to supply information relating to other parcels within the shopping complex. Cf. Smith
Pipe & Steel Co. v. Mead, 130 Ariz. 150, 150-51, 634 P.2d 962, 962-63 (1981) (notice
and claim of lien describing parcel adjacent to worksite did not substantially comply with
legal description requirement of § 33-993(A)(1)). Given the bare-bones assertions in the
preliminary notices, there was no basis for a notice recipient to clarify the ownership of
Block 3, for example, see § 33-992.01(I)(2), (J), or to amend the description of the
jobsite. See § 33-992.01(I)(1), (J). In fact, the notice recipient here did neither, and, as a
result, Taco Bell never received notice of Delmastro‟s claims against its property until
Delmastro sought to foreclose its lien. Contrary to Delmastro‟s assertion, the sum total of
10
information provided in the preliminary notices did not reveal that its labor and jobsite
involved property owned by Taco Bell. Thus, substantial compliance with § 33-
992.01(C)(1) and (4) was not achieved.
¶16 Delmastro maintains the property descriptions within the three preliminary
notices were adequate because they included the street address that encompassed all
blocks of the commercial subdivision. We do not dispute that our preliminary notice
statute allows the property subject to the notice to be described in different ways,
including by way of a street address. But under § 33-992.01(C)(4), any such description
must be “sufficient for identification” of the jobsite, meaning it must inform a stranger to
the transaction about the specific property to which any future lien will attach. Here, all
of Delmastro‟s preliminary notices specified work on “Tutor Time Child Care” which
was “located at . . . 2190 W. River Road.” Given that specificity, no reasonable person
would conclude Delmastro‟s jobsite included the entire subdivided commercial complex
at 2190 W. River Road—even those blocks where Tutor Time Child Care is not located.
The descriptions in the preliminary notices, therefore, were insufficient as to Block 3.
¶17 Delmastro counters that “under . . . § 33-992.01(J), if the contents of the
preliminary twenty day lien notice are insufficient, the owner is barred from raising this
as a defense unless the owner or other interested party previously sent a writing to the
claimant to correct the contents of the preliminary twenty day notice,” which did not
occur here. Yet this argument ignores an important distinction between inaccuracy and
insufficiency. Subsection (J) provides, in relevant part:
11
Failure of the owner or other interested party to furnish
the information required by this section does not excuse any
claimant from timely giving a preliminary twenty day notice,
but it does stop the owner from raising as a defense any
inaccuracy of the information in a preliminary twenty day
notice, provided the claimant‟s preliminary twenty day notice
of lien otherwise complies with the provisions of this chapter.
§ 33-992.01(J). Rather than being “inaccura[te],” and thus subject to correction,
Delmastro‟s preliminary notices simply were insufficient to alert recipients to the fact
that it had worked on and intended to file a lien against Block 3. Although in some cases
the distinction might be less clear, the defect in this case is easily characterized. See
MLM Constr. Co., 172 Ariz. at 230, 836 P.2d at 443. Delmastro did not comply
substantially with § 33-992.01(C), as noted above, because its preliminary notices did not
serve the purposes of the statute so as to trigger disclosure obligations under § 33-
992.01(I).
¶18 Delmastro emphasizes that VDG still owned Block 3 when the first
preliminary notice was served and relies on Fagerlie v. Markham Contracting Co., 227
Ariz. 367, 258 P.3d 185 (App. 2011), to support the proposition that VDG could waive
challenges to the preliminary notices on behalf of Taco Bell. Yet we need not address the
merits of Fagerlie‟s alternative holding regarding waiver by “interested” third parties, see
id. ¶¶ 24-25, as that case is readily distinguishable. There, the lien claimant/contractor
correctly described all the property within a residential subdivision that was to be charged
with a lien in its preliminary notice. Id. ¶¶ 2-3, 22. Here, by contrast, the lien claimant
failed to properly identify the property to be charged with a lien. Even assuming that
Fagerlie correctly concluded “interested” third parties can waive rights for property
12
owners pursuant to § 33-992.01(J), such waiver cannot occur when the third party has not
been provided notice of which property is to be charged with the lien.
¶19 Delmastro also maintains Taco Bell “was not an innocent bystander” in that
it either knew or should have known that Delmastro was improving the property that
Taco Bell acquired. Pointing to Taco Bell‟s purchase agreement for Block 3, Delmastro
claims “Taco Bell knew work was being performed to benefit the parcel it was acquiring
and that somebody, be it [Delmastro] or another contractor, was improving its parcel and
would have lien rights if not paid.” From this, Delmastro concludes that Taco Bell
“could have protected itself through a simple inquiry directed to the seller as to who was
performing the work and/or requiring proof of payment.” In a related argument,
Delmastro contends “there was a triable issue of fact as to whether Taco Bell Corp.
independently knew about the project and where it was performed.”
¶20 We reject these arguments, however, because the very purpose of the
preliminary notice is to clarify in writing what is happening with a project and who is
seeking payment. Notice recipients are not required to read the minds of lien claimants
or track the happenings on or near their property. As § 33-992.01(J) illustrates, even with
the waiver provision of this subsection in place, lien claimants are still required to
“compl[y] with the provisions of th[e] chapter” relating to mechanic‟s liens. The duty
rests with a lien claimant to supply the basic information in § 33-992.01(C) in order to
signal his or her intentions and allow the preliminary notice process to work.
¶21 The Westinghouse standard reflects this burden by requiring that a
description apprise “a stranger to the . . . transaction” of the property to which any lien
13
will attach. 119 Ariz. at 379, 580 P.2d at 1233. “„The notice must be sufficient in itself
to identify the property . . . and . . . [outside] evidence . . . cannot be received to supply a
deficiency in that regard.‟” Id. at 380, 580 P.2d at 1234, quoting Hurley v. Tucker, 112
N.Y.S. 980, 984 (App. Div. 1908) (first omission in Westinghouse). When a prospective
claimant fails to discharge this duty, a triable issue of fact is not thereby created as to
whether a property owner‟s knowledge obviated the need for such a description. This is
because neither a notice recipient nor a property owner is charged with knowledge
outside the preliminary notice. And actual knowledge of an improvement or construction
debt does not relieve a lien claimant of the duty to provide a preliminary notice that
complies with § 33-992.01(C). Cf. Westinghouse, 119 Ariz. at 379, 580 P.2d at 1233
(“[T]he fact that the owner had knowledge that the description set forth applied to his
property is not controlling.”).
¶22 Delmastro interprets Westinghouse as holding that “a fact-based, case-by-
case analysis is required to determine whether a description of the jobsite is sufficient.”
It concludes from this premise that the trial court could not have found “the descriptions
in the preliminary twenty day notice . . . , as a matter of law, to be insufficient,” at least
not “without any evidence provided by Taco Bell . . . to show the descriptions were
insufficient or confusing for either its agents or for a stranger.” But this conclusion
simply does not follow from the premise, as Westinghouse demonstrates.
¶23 There, the parties had provided a joint statement of facts to support their
cross-motions for summary judgment, and the trial court had entered judgment in favor of
the lease holder, Western Seed, denying the validity of Westinghouse‟s lien on the
14
property. Westinghouse, 119 Ariz. at 378, 580 P.2d at 1232. Applying the stranger-to-
the-transaction standard on appeal, this court held Westinghouse‟s description of the
property was sufficient as a matter of law to perfect a valid lien, and we reversed the trial
court‟s ruling, directing it to proceed with the foreclosure. Id. at 380-81, 580 P.2d at
1234-35.
¶24 Westinghouse thus illustrates that because the sufficiency of a description is
measured by an objective standard that looks to the notice itself, trial courts may draw a
legal conclusion on this issue on a motion for summary judgment. The simple fact that a
sufficiency determination will vary case by case, depending upon the content of the
preliminary notice and the features of the property concerned, does not mean the
sufficiency of a preliminary notice is always a question of fact necessitating a trial, nor
does it place a burden of production on a property owner.
¶25 In sum, Delmastro‟s preliminary notices did not substantially comply with
§ 33-992.01(C) because the descriptions therein were insufficient to further the purpose
of the statute. See Fagerlie, 227 Ariz. 367, ¶ 13, 258 P.3d at ___. The trial court
therefore correctly concluded that the lien was invalid and did not err by granting
summary judgment in favor of Taco Bell and dismissing the lien foreclosure count
against it.
Knowledge
¶26 Delmastro next argues that the trial court erred in granting summary
judgment in favor of Taco Bell on its statutory counterclaim. Delmastro contends that,
even assuming its lien was invalid, “neither the recording of it nor of the notice of lis
15
pendens were actionable under A.R.S. § 33-420(A) unless [Delmastro]‟s representatives
knew or had reason to know the documents were groundless.” Section 33-420(A) affords
relief when
[a] person purporting to claim an interest in, or a lien or
encumbrance against, real property, . . . causes a document
asserting such claim to be recorded in the office of the county
recorder, knowing or having reason to know that the
document is forged, groundless, contains a material
misstatement or false claim or is otherwise invalid.
We focus here on the invalidity of the lien rather than the lis pendens, as this issue alone
is dispositive.
¶27 Taco Bell was entitled to judgment under § 33-420(A) if it could
demonstrate the party recording the lien had “reason to know the document is . . .
invalid.” For the reasons explained above, Delmastro had reason to know its preliminary
notices contained legally deficient descriptions that were insufficient to secure a lien
against Taco Bell‟s property. By extension, therefore, Delmastro had reason to know that
the lien it recorded was invalid. See A.R.S. § 33-992.01(B) (service of written
preliminary twenty-day notice “a necessary prerequisite to the validity of any claim of
lien”).
¶28 Delmastro counters that the objective invalidity of a lien, standing alone, is
an insufficient basis to justify summary judgment under the statute. Relying on Pence v.
Glacy, 207 Ariz. 426, 87 P.3d 839 (App. 2004), and Coventry Homes, Inc. v. Scottscom
Partnership, 155 Ariz. 215, 219, 745 P.2d 962, 966 (App. 1987), Delmastro maintains
that because the “„reason to know‟ element of A.R.S. § 33-420(A)” is a question of fact
16
to be determined on a case-by-case basis, the issue cannot be resolved by summary
judgment. This argument misapprehends the law regarding § 33-420(A), although we
acknowledge there is some lack of clarity in pertinent authority on this point.
¶29 Ordinarily, a showing that a recorded instrument is invalid is the best
evidence that whoever recorded the instrument had reason to know it was invalid. It is
both a long-standing rule and a fundamental principle of our system of government that
all people of sound mind are presumed to know the law. State v. Soltero, 205 Ariz. 378,
¶ 7, 71 P.3d 370, 372 (App. 2003); see also Conway v. State Consol. Publ’g Co., 57 Ariz.
162, 171, 112 P.2d 218, 222 (1941); Moore v. Meyers, 31 Ariz. 347, 356, 253 P. 626, 629
(1927); Newman v. Fid. Sav. & Loan Ass’n, 14 Ariz. 354, 359, 128 P. 53, 55 (1912).
Parties recording liens, no less, are charged with knowledge of the laws pertaining to
them. See Guarriello v. Sunstate Equip. Corp., 187 Ariz. 596, 597-98, 931 P.2d 1106,
1107-08 (App. 1996); Hatch Cos. Contracting v. Ariz. Bank, 170 Ariz. 553, 559, 826
P.2d 1179, 1185 (App. 1991). In addition, given the “reason to know” language within
§ 33-420(A), parties are charged with drawing certain factual inferences germane to their
liens. As we stated in Coventry Homes:
“„Reason to know‟ means that the actor has knowledge of
facts from which a reasonable man of ordinary intelligence or
one of the superior intelligence of the actor would either infer
the existence of the fact in question or would regard its
existence as so highly probable that his conduct would be
predicated upon the assumption that the fact did exist.”
155 Ariz. at 219, 745 P.2d at 966, quoting Restatement (Second) of Torts § 12 cmt. a
(1965); accord Hatch, 170 Ariz. at 559, 826 P.2d at 1185.
17
¶30 In adopting this “reason to know” standard from the Restatement, Coventry
Homes perhaps overlooks that it applies solely to factual inferences and probable
assumptions made from the facts. As the Restatement explains: “Both the expression
„reason to know‟ and „should know‟ are used with respect to existent facts.” Restatement
of Torts § 12 cmt. a. An example of a fact bearing upon the validity of a lien is whether a
property owner may be “found within the county” for purposes of serving notice under
A.R.S. § 33-993(A). Whether a party has “reason to know” the relevant law, by contrast,
is not a factual inquiry under most circumstances. Indeed, if it were, it would be an
inquiry lacking almost any guidance, and one producing wildly disparate results. Pence
appears to follow this overbroad reasoning, suggesting a defendant‟s lack of “particular
or specialized knowledge” of the relevant law is a factual issue that may allow him to
escape liability under § 33-420(A). 207 Ariz. 426, ¶ 16, 87 P.3d at 842. But when
parties have reason to know the law, knowledge with which each party must be charged,
we can only conclude that, under most circumstances, they have reason to know when
they fail to comply with it.
¶31 Consequently, reason to know of the invalidity of a lien generally follows
from the fact that the lien is facially invalid. Section 33-420(A) does not require that a
defendant always be cognizant of the invalidity of a lien. And even if Coventry Homes
suggests the contrary under its particular facts, 155 Ariz. at 219, 745 P.2d at 966, a party
must have more than a subjective, good faith belief in the propriety of its recording to
escape liability under § 33-420(A). Hatch, 170 Ariz. at 559, 826 P.2d at 1185. Thus, our
courts routinely will uphold the grant of summary judgment on claims under § 33-
18
420(A). E.g., Webber v. Grindle Audio Prods., Inc., 204 Ariz. 84, ¶¶ 7, 27-29, 60 P.3d
224, 226, 230 (App. 2002); Guarriello, 187 Ariz. at 598, 931 P.2d at 1108; Hatch, 170
Ariz. at 554, 559, 826 P.2d at 1180, 1185.
¶32 Under certain circumstances, of course, the fact that an invalid instrument
was recorded is insufficient for liability to arise under the statute. For example, as our
supreme court established in Wyatt v. Wehmueller, 167 Ariz. 281, 287, 806 P.2d 870, 876
(1991), damages may not be recovered from a client when his attorney filed a lis pendens
without the client‟s knowledge or consent.
¶33 Pence is another special case. There, Pence sought a loan from her
employer, Glacy, which he reluctantly made on the condition that she secure it with a
deed of trust on her property. 207 Ariz. 426, ¶ 2, 87 P.3d at 839. Pence signed the deed
herself but did not obtain the signature of her husband, as required by our community
property statutes, and she later asserted a wrongful lien claim against Glacy on the basis
of this defect. Id. ¶¶ 3, 6, 8. After a bench trial, the court concluded Glacy was not liable
for recording an invalid lien, and we upheld this determination on appeal. Id. ¶¶ 1, 8.
¶34 Pence stands for the proposition that when the party asserting a claim under
§ 33-420(A) has participated in creating the document in question, acted as though it
were valid, and benefited from the defendant believing it to be valid, whether the
defendant had “reason to know” the document was invalid presents a factual question. It
is not the case, “[a]s a matter of law, . . . that the presumption of knowledge of the law
provides the scienter requirement under the statute.” Pence, 207 Ariz. 426, ¶ 16, 87 P.3d
at 842. This is because the purpose of § 33-420 is to protect property owners and deter
19
wrongful conduct, Wyatt, 167 Ariz. at 286, 806 P.2d at 875; it is not designed to give
property owners a windfall when documents they have reviewed and agreed to happen to
be invalid.
¶35 We acknowledge that language in Pence could be interpreted as suggesting
ignorance of the law or a subjective, good faith belief in the validity of an instrument may
serve as a defense to a wrongful lien claim under § 33-420(A). But we view that decision
to be far more limited based on its facts. Although we have echoed language from Wyatt
that “the law requires scienter on the part of the wrongdoer,” Fagerlie v. Markham
Contracting Co., 227 Ariz. 367, ¶ 49, 258 P.3d 185, ___ (App. 2011), such statements, in
order to be harmonized with our case law and the language of § 33-420(A), must be
regarded as shorthand. At times, a defendant‟s lack of knowledge will defeat a claim
under § 33-420(A). Yet “having reason to know” is not synonymous with “knowing” a
lien is invalid, for such a construction would rewrite the terms of § 33-420(A). Nothing
in § 33-420(A) relieves a defendant of the general obligation to discover and comply with
the laws relating to liens, particularly when it attempts to impose and enforce one. Nor
does the “reason to know” requirement shield a defendant from liability or necessarily
create a question of fact sufficient to withstand summary judgment when the party‟s
ignorance of the invalidity of a lien arose from the party‟s own failure to take basic steps
to assure its validity.
¶36 In sum, the factual nature of the “reason to know” requirement in § 33-
420(A) will depend upon why the recorded document is invalid and the circumstances of
a particular case. Our observation in Williams v. A.J. Bayless Markets, Inc., 13 Ariz.
20
App. 348, 353, 476 P.2d 869, 874 (1970), applies equally to this statute: “These
situations may, in a particular case, be fact questions and in another case may be resolved
as a matter of law.”
¶37 Although we acknowledge a defendant‟s reason to know of the invalidity of
a lien might, at times, present a factual issue to be resolved at trial, we agree with the trial
court that we are not presented with that situation here. Delmastro essentially claims it
did not have reason to know its lien was invalid because no one informed it of this fact or
supplied it with the information necessary to correct its preliminary notices.7 Yet it was
Delmastro‟s duty under the express language of § 33-992.01(C) to provide a description
of the work it had performed, as well as a description of the property that had benefited
from that work and might be charged with a lien. Both those facts were well within
Delmastro‟s own knowledge. Because there was no special circumstance creating a
disputed factual issue, the trial court properly found Delmastro had reason to know its
lien against Taco Bell‟s property was invalid, and the court did not err by granting
summary judgment in favor of Taco Bell on its counterclaim pursuant to § 33-420(A).
See Orme Sch. v. Reeves, 166 Ariz. 301, 309, 802 P.2d 1000, 1008 (1990).
Disposition
¶38 For the foregoing reasons, we affirm the trial court‟s judgment. Taco Bell
has requested an award of attorney fees and costs on appeal pursuant to A.R.S. §§ 33-
7
Delmastro does not address specifically the issue of whether it had reason to
know the lien was invalid based on the inadequate descriptions in its preliminary notices;
rather, it focuses its argument on the issue of ownership of the property, emphasizing that
its “agents testified they did not know . . . Taco Bell Corp. owned Block 3 until after the
litigation had commenced.”
21
420(B), 33-995(E), 33-998(B) and Rule 21, Ariz. R. Civ. App. P. We grant the request,
subject to Taco Bell‟s compliance with Rule 21.
/s/ Peter J. Eckerstrom
PETER J. ECKERSTROM, Presiding Judge
CONCURRING:
/s/ Joseph W. Howard
JOSEPH W. HOWARD, Chief Judge
/s/ J. William Brammer, Jr.
J. WILLIAM BRAMMER, JR., Judge
22