Falcone Bros. & Assocs., Inc. v. City of Tucson

• Decision Date: 25 August 2016
• Docket Number: No. 2 CA–CV 2015–0212,2 CA–CV 2015–0212
• Citation: Falcone Bros. & Assocs., Inc. v. City of Tucson, 240 Ariz. 482, 381 P.3d 276, 746 Ariz. Adv. Rep. 35 (Ariz. App. 2016)
• Parties: Falcone Brothers & Associates, Inc., an Arizona Corporation, Plaintiff/Appellant, v. City of Tucson, an Arizona Municipal Corporation, Defendant/Appellee.
• Court: Arizona Court of Appeals

240 Ariz. 482

381 P.3d 276

746 Ariz. Adv. Rep. 35

Falcone Brothers & Associates, Inc., an Arizona Corporation, Plaintiff/Appellant,

v.City of Tucson, an Arizona Municipal Corporation, Defendant/Appellee.

No. 2 CA–CV 2015–0212

Court of Appeals of Arizona, Division 2.

Filed August 25, 2016

Carmichael & Powell, P.C., Phoenix, By David J. Sandoval, Counsel for Plaintiff/Appellant

Michael G. Rankin, Tucson City Attorney, By Stacy Stauffer, PrincipalAssistant City Attorney, Tucson, Counsel for Defendant/Appellee

OPINION

ECKERSTROM, Chief Judge:

Chief Judge Eckerstromauthored the opinion of the Court, in which Presiding Judge Vásquez and Judge Miller concurred.

¶ 1 Following a contractual dispute regarding a road-improvement project, appellantFalcone Brothers and Associates, Inc.(Falcone) filed a civil complaint against appelleeCity of Tucson(City).The City maintained that the action was barred because the issues already had been decided by the City's director of procurement and that Falcone had refused to challenge the director's “administrative decision” by special action as required by the parties' contract and the City's code.We conclude that neither the contract nor the City code can direct judicial review of a breach-of-contract claim by special action; therefore, we reverse the trial court's order granting the City's motion to dismiss and remand the case for further proceedings.

I.Factual and Procedural Background

¶ 2 In 2012, Falcone and the City executed a contract that incorporated chapter 28 of the Tucson Code, a chapter also known as the Procurement Code.Under the applicable version of that code, a dispute regarding a contract would be decided first by a contract officer from the City's Procurement Department.Tucson, Ariz., Code (“TC”)§§ 28–76, 28–91 to 28–93(1987& Supp. 2007).¹An aggrieved party then could file an appeal with the City's director of procurement.TC§ 28–94.If the director assigned the claim to a hearing, the director would appoint a hearing officer to conduct the proceeding and make a recommendation, which included proposed findings and conclusions.SeeTC§§ 28–94(3), 28–96, 28–113, 28–114(1).The Procurement Code broadly authorized the director to “affirm, modify, or reject the hearing officer's recommendation in whole or in part, ... remand the matter to the hearing officer with instructions, or make any other appropriate disposition.”TC§ 28–114(2).The Procurement Code specified that “[a] decision by the director shall be final.”TC§ 28–115.Under TC§§ 28–117 and 28–118, the director's final decision could only be challenged by “special action review” in the superior court filed within thirty days.The Procurement Code stated that “[e]xhaustion of the procedures set forth in this Code shall be a condition precedent to seeking judicial review,”TC§ 28–117, and that the code “provide[d] the exclusive procedure for asserting a claim or cause of action against this city” that arose from a procurement contract.TC§ 28–118.

¶ 3 According to Falcone, the company suffered approximately $2.5 million in damages from the construction project.Those damages included the additional costs that Falcone incurred from errors in the plans it had relied on to formulate its bid, as well as unforeseeable utility conflicts and subterranean structures for which the City bore responsibility.

¶ 4 In 2014, Falcone submitted a notice of claim pursuant to A.R.S. § 12–821.01, expressly reserving its right to file a civil suit.In the notice, the company maintained “the claim procedure set forth in the Contract [w]as illegal and unenforceable,” but Falcone nonetheless agreed to participate in the City's administrative proceedings.In the first stage of that process, a City contract officer rejected Falcone's claim in its entirety.After Falcone appealed, a hearing officer conducted an evidentiary hearing and recommended to the director that the claim be denied.The director then issued a decision on April 20, 2015, denying Falcone any additional compensation.²

¶ 5 Despite the limitation in TC§ 28–117, Falcone did not seek special action relief from this decision.Instead, the company filed a complaint in the superior court asserting claims of breach of contract and unjust enrichment.The City filed a motion under Rule 12(b)(1), Ariz. R. Civ. P., to dismiss the complaint on three grounds: failure to exhaust administrative remedies, res judicata, and collateral estoppel.The trial court granted the motion after oral argument, stating that the grounds for its decision were “stated on the record.”Neither party provided a transcript of the hearing.This appeal by Falcone followed.

II.Appellate Jurisdiction

¶ 6 With respect to the procedures applicable to a case such as this, both parties have cited this court's opinion in Richard E. Lambert, Ltd. v. City of Tucson Department of Procurement , 223 Ariz. 184, 221 P.3d 375(App.2009).There, the aggrieved contractor pursued an appeal in the superior court that was characterized as a “special action” under the City's Procurement Code.Lambert , 223 Ariz. 184, ¶¶ 4–5, 221 P.3d at 377–78.We expressly declined to address whether this procedure was proper.Id. n.1.We also implied that we had appellate jurisdiction over the resulting judgment from the superior court under the former A.R.S. § 12–2101(B), which was later renumbered § 12–2101(A)(1).³SeeLambert , 223 Ariz. 184, ¶ 5, 221 P.3d at 378.

¶ 7 That provision allows an appeal to this court when an action is “commenced in a superior court.”§ 12–2101(A)(1).However, neither an appeal nor a special action in the superior court is “commenced” there within the meaning of this statute.Stant v. City of Maricopa Emp. Merit Bd. , 234 Ariz. 196, ¶¶ 7–8, 319 P.3d 1002, 1004–05(App.2014).Accordingly, because Lambert did not identify a proper ground for appellate jurisdiction, we do not rely on that case as precedent.

¶ 8The present case differs from Lambert because Falcone filed a civil complaint in the superior court.The case therefore “commenced” in that court pursuant to § 12–2101(A)(1), and the trial court's dismissal order is a “final judgment” subject to appeal.Id.Although the court's order initially lacked certification pursuant to Rule 54(c), Ariz. R. Civ. P., we have stayed the appeal and revested jurisdiction in the superior court to obtain such certification.SeeAriz. R. Civ. App.P. 3;Madrid v. Avalon Care Ctr.–Chandler, L.L.C. , 236 Ariz. 221, ¶ 5, 338 P.3d 328, 330–31(App.2014).With a formal judgment now included in the record on appeal, we have appellate jurisdiction pursuant to A.R.S. §§ 12–120.21(A)(1)and12–2101(A)(1).

III.Discussion

¶ 9 As it did below, Falcone claims on appeal that the “administrative process” prescribed by the City violates Falcone's constitutional rights to due process and a jury trial.Specifically, Falcone maintains that the City's director of procurement is not a neutral arbiter of the City's contract disputes and that the limited process of review afforded by the City denies an aggrieved party the opportunity for “a de novo review of the facts” by an impartial decision maker.In light of these alleged constitutional defects, Falcone asserts that the trial court erred in granting the City's motion to dismiss and that the “civil complaint was appropriately filed and should be tried on its merits.”

¶ 10 Rule 12(b)(1) allows a trial court to dismiss an action for lack of subject matter jurisdiction.When, as here, a trial court's disposition of such a motion does not resolve any disputed jurisdictional facts, we review the court's ruling de novo.SeeChurch of Isaiah 58 Project of Ariz., Inc. v. LaPaz County , 233 Ariz. 460, ¶ 9 & n.4, 314 P.3d 806, 808–09 & 809 n.4(App.2013).

¶ 11 As our supreme court established in R.L. Augustine Construction Co. v. Peoria Unified School DistrictNo. 11 , “[w]e will not reach a constitutional question if a case can be fairly decided on nonconstitutional grounds.”188 Ariz. 368, 370, 936 P.2d 554, 556(1997).Following that precedent, we avoid Falcone's constitutional arguments and decide the present case on a narrow basis.Our analysis that follows will establish, first, that Falcone properly asserted a contract claim in the superior court that is subject to trial on a de novo basis; second, the City's Procurement Code was invalid insofar as it attempted to make the director's decision binding and to limit access to the superior court by restricting parties to special action review; and third, none of the doctrines identified in the City's motion to dismiss would bar Falcone's action.

A.Superior Court Jurisdiction

¶ 12The superior court's jurisdiction is provided by our state constitution and statutes.Grosvenor Holdings, L.C. v. Figueroa , 222 Ariz. 588, ¶ 13, 218 P.3d 1045, 1052(App.2009);seeAriz. Const. art. VI, §§ 14,16,18.The court is one of general jurisdiction, State ex rel. Neely v. Brown , 177 Ariz. 6, 8, 864 P.2d 1038, 1040(1993), with original jurisdiction to resolve contract disputes in which the amount in controversy is at least $1,000.SeeAriz. Const. art. VI, § 14 (3).Because the present contract claim exceeds this amount, the superior court has jurisdiction over the case.

¶ 13“[A] city has no authority to limit the jurisdiction of the state's courts.”Tempe Life Care Vill., Inc. v. City of Tempe , 148 Ariz. 264, 266, 714 P.2d 434, 436(App.1985).A superior court's jurisdiction can only be limited by law, not by a city's charter or an agreement between two parties.SeeGrosvenor , 222 Ariz. 588, ¶ 21, 218 P.3d at 1053–54;Tempe Life Care Vill. , 148 Ariz. at 266, 714 P.2d at 436.When an action presents a traditional contract claim and no statute gives another entity exclusive jurisdiction over the matter, the superior court retains jurisdiction to resolve the claim.SeeCampbell v. Mountain States Tel. & Tel. Co. , 120 Ariz. 426, 432, 586 P.2d 987, 993(App.1978).We therefore must examine...