Bentivegna v. Powers Steel & Wire Products, Inc.

• Decision Date: 31 December 2003
• Docket Number: No. 1 CA-CV 03-0226.,1 CA-CV 03-0226.
• Citation: 206 Ariz. 581,81 P.3d 1040
• Parties: Salvatore BENTIVEGNA and Frances Bentivegna, husband and wife, Plaintiffs-Appellants, v. POWERS STEEL & WIRE PRODUCTS, INC., an Arizona corporation, Defendant-Appellee.
• Court: Arizona Court of Appeals

81 P.3d 1040

206 Ariz. 581

Salvatore BENTIVEGNA and Frances Bentivegna, husband and wife, Plaintiffs-Appellants, v. POWERS STEEL & WIRE PRODUCTS, INC., an Arizona corporation, Defendant-Appellee.

No. -0226.

Court of Appeals of Arizona, Division 1, Department E.

December 31, 2003.

As Amended January 6, 2004.

Stephen I. Dokken, Scottsdale, and Ulrich & Anger, P.C. By Paul G. Ulrich, Melinda K. Cekander, Phoenix, Attorneys for Plaintiffs-Appellants.

Garrey, Woner, Khalil & Peshek, P.C. By D. Reid Garrey, Margaret Z. Khalil, Scottsdale, Attorneys for Defendant-Appellee.

OPINION

IRVINE, Judge.

¶ 1 Salvatore and Frances Bentivegna (collectively "the Bentivegnas") appeal the trial court's summary judgment in favor of Powers Steel & Wire Products, Inc. ("Powers") in this action seeking restitution and damages for breach of contract, breach of warranty, and negligence arising from Powers' alleged failure to properly construct a steel warehouse. The trial court ruled that the Bentivegnas' claims were barred because they failed to exhaust their administrative remedies by appealing the decision of the Registrar of Contractors ("ROC") on their complaint against Powers, that their negligence claim was barred by the two-year statute of limitations, and that Arizona Revised Statutes ("A.R.S.") section 32-1153 (which provides that unlicensed contractors cannot sue to collect money due under the contract) does not support a claim for restitution of amounts paid to the unlicensed contractor. For the following reasons, we conclude that the Bentivegnas' breach of contract and breach of warranty claims are not barred by the doctrine of exhaustion of administrative remedies, but that A.R.S. § 32-1153 does not support their claim for restitution.

FACTS AND PROCEDURAL HISTORY

¶ 2 In 1997, the Bentivegnas hired a general contractor, Albert L. Rice dba Electro Contracting ("Rice"), to prepare the site and construct a new warehouse for their business. The warehouse was to be a metal building with a concrete floor slab. The total cost of the project was $204,318, which included $85,000 for construction of the metal warehouse. Powers was hired to construct the metal portion of the warehouse. Powers required both Salvatore Bentivegna and Rice to sign a contract for $85,000 for the construction.

¶ 3 When Powers entered the contract and did the work, Powers possessed only a Class L-62 license, allowing it to perform reinforcing bar and wire mesh work. A Class A-11 license or Class B-01 license was required for erecting steel buildings. Powers did not tell the Bentivegnas or Rice that it did not have the correct license to perform the work until after the work was completed.

¶ 4 Powers completed its work on the warehouse in January 1998, and as of January 22, 1998, the Bentivegnas had paid Powers the entire $85,000: $76,500 directly to Powers and $8,500 through Rice. Both the foundation contractor and Powers, however, made unauthorized changes to the structural engineer's approved plans, and the warehouse, as finally constructed, had several material defects. The Bentivegnas' expert witness, Daniel C. Barnett, estimated that it would cost at least $97,297, plus engineering fees and any cost increases, to repair the structural and non-structural defects.

¶ 5 The Bentivegnas filed a complaint against Powers with the ROC. The ROC issued a corrective work order, requiring Powers to correct many of the defects in the warehouse. The Bentivegnas also filed an additional complaint against Rice with the ROC. The ROC issued a corrective work order and an amended corrective work order to Rice, which ordered Rice to correct numerous defects in the site and building. In November 1999, the Bentivegnas settled their claims against Rice and the ROC entered a final order regarding the complaint against Rice based upon the settlement.

¶ 6 In March 2001, the Bentivegnas filed the complaint in this case against Powers, alleging claims for breach of contract, breach of warranty, negligence, and restitution. In April 2002, the Bentivegnas moved for partial summary judgment on the issue of their entitlement to restitution of the $85,000 they had paid Powers to construct the warehouse. The Bentivegnas argued that because A.R.S. § 32-1153 precludes unlicenced contractors from bringing suit for payment for work performed, they were entitled to full restitution of all funds they had paid to Powers. Powers responded and moved for summary judgment on all counts of the complaint, arguing that the Bentivegnas had elected to pursue an administrative remedy by filing their complaint with the ROC and, having failed to appeal from the ROC's decision, were barred from suing in court. Powers also argued that the statute of limitations barred the Bentivegnas' negligence claim. Finally, Powers contended that it was an indispensable party to the settlement between Rice and the Bentivegnas and, therefore, that settlement precluded the Bentivegnas from suing Powers under the doctrine of merger and bar.

¶ 7 The trial court denied the Bentivegnas' motion and granted Powers' cross-motion for summary judgment, finding that Powers had completed the work ordered by the ROC and that the Bentivegnas had settled their claims against Rice. The court ruled that A.R.S. § 32-1153 did not require repayment of funds paid to an unlicensed contractor and denied the Bentivegnas' motion for summary judgment on their restitution claim. The court further concluded that the Bentivegnas' failure to appeal the ROC's decisions regarding Powers' work barred this action. Finally, the court concluded that the two-year statute of limitations barred the Bentivegnas' claim for negligence, because the Bentivegnas knew or should have known of Powers' alleged negligence in the Spring of 1998, but did not file their negligence claim until March 2001.

¶ 8 The trial court denied the Bentivegnas' motion for new trial and awarded Powers attorneys' fees in the reduced amount of $9200 pursuant to A.R.S. § 12-341.01, which allows the trial court to award fees to the successful party in a contested action arising out of a contract. We have jurisdiction over the Bentivegnas' timely appeal from the final judgment pursuant to A.R.S. § 12-2101(B).

DISCUSSION

A. Work Completed Pursuant to ROC Work Orders

¶ 9 The Bentivegnas first contend that the trial court erred in granting summary judgment to Powers based on its finding that the repairs to the warehouse were completed in accordance with the ROC work orders, arguing that no evidence supported the trial court's finding.

¶ 10 On appeal from summary judgment, we view the evidence in the light most favorable to the party against whom judgment was entered. Pioneer Annuity Life Ins. Co. v. Rich, 179 Ariz. 462, 464, 880 P.2d 682, 684 (App.1994). "[W]e determine de novo whether there are any genuine issues of material fact and whether the trial court erred in its application of the law." Gonzalez v. Satrustegui, 178 Ariz. 92, 97, 870 P.2d 1188, 1193 (App.1993) (citation omitted). "Summary judgment is appropriate only if no genuine issues of material fact exist and the moving party is entitled to judgment as a matter of law." Wells Fargo Bank v. Ariz. Laborers, Teamsters and Cement Masons Local No. 395 Pension Trust Fund, 201 Ariz. 474, 482, ¶ 13, 38 P.3d 12, 20 (2002) (citations omitted).

¶ 11 We have reviewed the record and agree with the Bentivegnas that the trial court erred in finding that Powers had completed the work required by the ROC's corrective work order. Powers cites nothing in the record that affirmatively indicates that Powers ever fully complied with the work order. At most, a letter from Powers' attorney to the attorneys for Rice and the Bentivegnas indicates that Rice had agreed to perform the work using some of Powers' employees and that Powers would pay Rice for doing the work. The letter, however, continued by disputing that Powers had authorized Rice to perform a number of tasks that Rice and the Bentivegnas apparently had agreed upon. The letter concluded by stating "Powers Steel will take action to correct those items identified" in the corrective work order, but not others. Nothing in the letter indicates that any corrections had already been made. We conclude that the trial court erred in finding that the work had been completed in accordance with the work orders.

B. Exhaustion of Administrative Remedies

¶ 12 Powers argues that whether or not the work was done, the corrective work order was issued and the Bentivegnas failed to follow-up on it by requesting a hearing or other action by the ROC. Thus, Powers argues, the Bentivegnas failed to exhaust their administrative remedies and are barred from bringing this suit alleging the same defects. In support of this proposition, Powers cites A.R.S. § 32-2159(A), the statute governing appeals from decisions of the real estate commissioner, as well as A.R.S. §§ 12-901 et seq., the general statutes governing administrative appeals. Powers argues that, because the ROC is an administrative agency with a procedure for review of its decisions, a party must exhaust all administrative remedies and properly appeal them to obtain judicial review. See, e.g., Hinz v. City of Phoenix, 118 Ariz. 161, 164, 575 P.2d 360, 363 (App.1978)

(noting it is a "well-established principle of law that administrative remedies must be exhausted before judicial relief can be sought.").

¶ 13 The exhaustion of administrative remedies doctrine, however, does not apply "where, by the terms or implications of the statute authorizing an administrative remedy, such remedy is permissive only or not exclusive of the judicial remedy, warranting the conclusion that the legislature intended to allow the judicial remedy even though the administrative remedy has not been exhausted." Farmers Inv. Co. v. Ariz. State Land Dept., 136 Ariz. 369, 373, 666 P.2d 469, 473 (App.1982) (quoting 2 Am.Jur.2d, Administrative Law, § 598 at 432-33 (1...