Brown Wholesale Elec. Co. v. H.S. Lastar Co.

• Decision Date: 02 September 1986
• Docket Number: CA-CIV,No. 1,1
• Citation: 152 Ariz. 90,730 P.2d 267
• Parties: BROWN WHOLESALE ELECTRIC COMPANY, a California corporation, Plaintiff-Appellee, v. H.S. LASTAR COMPANY, an Arizona corporation; and the Continental Casualty Insurance Company, a corporation, Defendants-Appellants. 7735.
• Court: Arizona Court of Appeals

Page 267

730 P.2d 267

152 Ariz. 90

BROWN WHOLESALE ELECTRIC COMPANY, a California corporation, Plaintiff-Appellee, v. H.S. LASTAR COMPANY, an Arizona corporation; and the Continental Casualty Insurance Company, a corporation, Defendants-Appellants.

No. 1 CA-CIV 7735.

Court of Appeals of Arizona Division 1, Department B.

Sept. 2, 1986.

Reconsideration Denied Dec. 5, 1986.

[152 Ariz. 91] Strong & Pugh, P.A. by William K. Strong, and Elizabeth A. Yancey, Phoenix, for plaintiff-appellee.

Lee, Theisen & Eagle by David W. Eagle, Phoenix, for defendants-appellants.

OPINION

CONTRERAS, Judge.

Plaintiff Brown Wholesale Electric Company [hereinafter "Brown Wholesale"] filed suit on a contractor's license bond to recover for materials it had furnished on a public works construction project. On appeal, we must decide whether the trial court erred in granting summary judgment for Brown Wholesale on the bond against the defendants-appellants H.S. Lastar Company [hereinafter "Lastar"] and The Continental Casualty Insurance Company [hereinafter "Continental"]. We conclude that summary judgment was improperly granted. The statute which provided Brown Wholesale a remedy in this case was amended by the legislature and the amendment effectively repealed the remedy.

Brown Wholesale is a supplier of electrical goods. It supplied electrical materials and equipment to Grace Company for use in the construction of a public works project, the Peoria Boys and Girls Club, in Peoria, Arizona. Grace Company had been a subcontractor on the project for which Lastar had been the general contractor. Continental is a surety and provided Lastar with a $15,000 bond that Lastar was required to file with the registrar of contractors pursuant to A.R.S. § 32-1152 in order to be licensed as a contractor in Arizona.

At the time Lastar originally posted the bond in 1978 and until the statutory scheme was changed in 1981, the legislature required that all construction projects, both residential and nonresidential, be regulated. The term "contractor" had been broadly defined in A.R.S. § 32-1101:

In this chapter, unless the context otherwise requires, the term "contractor" is synonymous with the term "BUILDER" and means a person, firm, partnership, corporation, association or other organization, or a combination of any of them, who undertakes to or offers to undertake to, or purports to have the capacity to undertake to, or submits a bid to, or does himself or by or through others, construct, alter, repair, add to, subtract from, improve, move, wreck or demolish any building, highway, road, railroad, excavation or other structure, project, development or improvement, or to do any part thereof, including the erection of scaffolding or other structure or works in connection therewith, OR PROVIDE MECHANICAL OR STRUCTURAL SERVICE FOR ANY SUCH STRUCTURE, PROJECT, DEVELOPMENT OR IMPROVEMENT. The term contractor includes subcontractors and specialty contractors, floor covering contractors and landscape contractors other than gardeners.

See Laws 1977, ch. 153, § 1 (capitalized portion indicates addition to statute). The version of A.R.S. § 32-1152 in effect prior to July 1, 1981, required that a bond be posted in the appropriate amount designated in subsection B by all contractors in order to be licensed. See Laws 1980, 3d Spec.Sess., ch. 1, § 8. Section 32-1152(D) provided in relevant part:

The bonds or deposit required by this chapter shall be for the benefit of any person covered by this subsection. The bond or deposit shall be subject to claims ... by any person furnishing labor, materials or construction equipment on a rental basis used in the direct performance of a construction contract.

See Laws 1980, 3d Spec.Sess., ch. 1, § 8.

In 1981, the Arizona legislature determined that it was no longer necessary to regulate contractors other than those engaged in residential building activities and accordingly made major changes in the statutory scheme of A.R.S. §§ 32-1101 to -1168. The purpose of the amendments was explained in the notes to the session laws:

The legislature finds that regulation of the commercial and industrial construction business, including public works, by the registrar of contractors agency is not necessary for the protection of the public health, safety and welfare, and that it is in the public interest to deregulate such business. It is the purpose and intent of the legislature to continue the registrar of contractors agency in order to protect the public health, safety and welfare by providing for the continued licensing, bonding and regulation of contractors engaged in residential construction. It is the further purpose of the legislature to provide improved protection for owners and lessees of property who contract for the construction or alteration of residential structures by establishing the contractors' recovery fund and the contractors' recovery fund board.

See note following A.R.S. § 32-1101 (West Supp.1985), citing Laws 1981, ch. 221, § 1. Among the statutory changes was the amendment of A.R.S. § 32-1101 to make the term "contractor" synonymous with the term "home builder." Laws 1981, ch. 221, § 2. Subsection C was added to A.R.S. § 32-1101, providing that "[o]nly contractors as defined in this section are licensed and regulated by this chapter." Laws 1981, ch. 221, § 2. Among the extensive changes made in A.R.S. § 32-1152, former subsection D, providing for claims against the bond, became subsection E:

The bonds or deposit required by subsection B of this section shall be for the benefit of and shall be subject to claims by ... any person furnishing labor, materials or construction equipment on a rental basis used in the direct performance of a construction contract.

Laws 1981, ch. 221, § 20. The effective date for these amendments to the statute was July 1, 1981, and the legislature expressly provided that the "act is effective retroactively to July 1, 1981." Laws 1981, ch. 221, § 38. In 1982, the Arizona legislature added clarifying language to A.R.S. § 32-1152(E). The statute, as amended in 1982, provides in pertinent part:

E. The bonds or deposit required by subsection B of this section shall be for the benefit of and shall be subject to claims by ... any person furnishing labor, materials or construction equipment on a rental basis used in the direct performance of a construction contract involving a residential structure.

Laws 1982, ch. 194, § 1 (emphasized portion indicates addition to statute).

Brown Wholesale filed suit on the contractor's license bond naming Lastar and Continental as defendants. It sought recovery of $10,969.85 for materials it had supplied to the project and for which it had not been paid, along with pre-judgment interest, costs and attorney's fees. Brown Wholesale supplied all the materials for which it seeks recovery prior to the date that the amendments to A.R.S. §§ 32-1101 to -1168 went into effect on July 1, 1981. The defendants do not dispute that the materials were ultimately used on the project. The materials, however, were not used in the construction project until after July 1, 1981, according to the evidence presented with the cross-motions for summary judgment.

Brown Wholesale contended in its motion for summary judgment that the amended statute could not be applied retroactively to prevent it from recovery on the bond for the materials it supplied prior to the effective date of the amendment. The defendants in their cross-motion for summary judgment argued that the amendment of the statute prevented Brown Wholesale from recovering on the bond. The trial court found for Brown Wholesale, ruling that "Plaintiff's right against the bond in question matured when Plaintiff furnished the materials for the project, that the 1981 Amendments to Article 32 are not retroactively applicable to defeat Plaintiff's claim, as a matter of law...." The trial court awarded Brown Wholesale judgment in the amount of $10,943.75, pre-judgment interest of $2,482.62, costs of $908.61 and attorney's fees of $4,475.45 for a total of $18,810.43. Lastar and Continental appeal the judgment and argue that summary judgment in their favor should have been granted. Additionally, they contend that even if Brown Wholesale was entitled to judgment, no attorney's fees should have been awarded, or, alternatively, that the total judgment including attorney's fees could not exceed the $15,000 face amount of the bond.

Before examining the grounds of the trial court's ruling and the substance of the parties' arguments, we comment briefly on Brown Wholesale's contentions that there are additional grounds for upholding the trial court's ruling. We find that these same contentions have been decided against Brown Wholesale in a previous opinion of this court. See Brown Wholesale Electric Co. v. Merchants Mutual Bonding Co., 148 Ariz. 90, 713 P.2d 291 (App.1984).

Brown Wholesale argues at length in this appeal that the scope of the statutory bond is determined by the statute in effect at the time of execution of the bond. However, this argument was considered and rejected in Brown Wholesale Electric Co. v. Merchants Mutual Bonding Co. We noted in that case that "[s]ince the only purpose for the bond was to satisfy the statutory requirement, the parties' intention would only be served by limiting the scope of the bond's liability to conform to the statute, as amended." Id. at 96, 713 P.2d at 297. Part of Brown Wholesale's argument concerning the scope of the bond is that since defendant Lastar had chosen not to supply a new bond but had instead left the old bond (posted when the former statute was in effect) on file, claims could continue to be made against the bond for materials used on nonresidential jobs. This argument is also rejected in Brown Wholesale Electric Co. v. Merchants Mutual Bonding Co.:

Because licenses for commercial construction expired as of July 1, 1981, and the only license that could be...