Certainteed Corp. v. United Pacific Ins. Co., 2

• Court: Arizona Court of Appeals
• Writing for the Court: HOWARD; LACAGNINA, C.J., and HATHAWAY
• Citation: Certainteed Corp. v. United Pacific Ins. Co., 762 P.2d 560, 158 Ariz. 273 (Ariz. App. 1988)
• Decision Date: 29 March 1988
• Docket Number: No. 2,CA-CV,2
• Parties: CERTAINTEED CORPORATION, a Maryland corporation, Plaintiff/Appellee/Cross-Appellant, v. UNITED PACIFIC INSURANCE COMPANY, a Washington corporation, Defendant/Appellant/Cross-Appellee. 87-0290.

Page 560

762 P.2d 560

158 Ariz. 273

CERTAINTEED CORPORATION, a Maryland corporation, Plaintiff/Appellee/Cross-Appellant, v. UNITED PACIFIC INSURANCE COMPANY, a Washington corporation, Defendant/Appellant/Cross-Appellee.

No. 2 CA-CV 87-0290.

Court of Appeals of Arizona Division 2, Department A.

March 29, 1988.

Review Denied Nov. 1, 1988.

Evans, Kitchel & Jenckes, P.C. by Robert L. Dysart and Kevin M. LeWinter, Phoenix, for plaintiff/appellee/cross-appellant.

Watt & Cohen by Melvin C. Cohen, Tucson, for defendant/appellant/cross-appellee.

HOWARD, Presiding Judge.

This is an appeal and cross-appeal from the granting of a summary judgment. The main issue is whether the defendant (United Pacific) was estopped from asserting the defense of the statute of limitations. The trial court granted the plaintiff (Certainteed) summary judgment for $21,392.20, which was only part of its claim. It denied judgment for any amounts over and above that sum.

THE UNDISPUTED FACTS

Certainteed furnished building materials to C & D Pipeline, which was constructing a sewage treatment plant in San Luis, Arizona. United Pacific is the surety on a payment bond furnished by C & D for the protection of suppliers of labor and materials pursuant to A.R.S. § 34-222. ¹ Certainteed furnished materials to C & D for the San Luis project. The last material was delivered on October 20, 1983. This meant that suit on the bond had to be brought by October 20, 1984. See A.R.S. § 34-223.

Certainteed periodically sent invoices to C & D which made partial payments. When Certainteed's demands for payment of the balance went unheeded, it made a demand upon United Pacific for payment under the bond. In late December of 1983, Certainteed turned the matter over to its attorney, Steven Hirsch. Certainteed provided Hirsch with a letter from Patrick Brady, an independent insurance agent for United Pacific who wrote the bond, which stated:

"Dear Mr. Sanford:

Per our discussion of today, I am enclosing a photocopy of the captioned labor and material payment bond.

I have discussed this matter with Mr. Bill Byrne of C & D Pipeline and I have been assurred (sic) that they are making every effort to clear your account. C & D's records indicate an amount due you of $126,601.28. It is my understanding that the amount owing from the town of San Luis exceeds $200,000 and that that amount is more than sufficient to pay your bill and all other amounts owing on this project.

Please call Mr. Bill Byrne at 792-0531 for information regarding when they expect to be able to settle your account."

On February 6, 1984, United Pacific sent the following letter to Certainteed "Your letter of December 27, 1983, in which you indicated certain amounts remained due your company on the above project, finally has been referred to this office.

Your letter contained very few details, and we have no current information concerning your allegations. Therefore, please note that our acknowledgment of receipt of that letter is not an admission of liability under the bond, nor does it constitute a waiver of any rights or defenses which may be available to the surety under the bond, or applicable law.

It is the opinion of United Pacific Insurance Company that its principal is a financially responsible contractor which should be able to resolve this matter without our intervention. In fact, we have been informed that a partial payment has been made to your company, and have been advised that final payment will be made when all work is approved, accepted, and paid for by the obligee. [Town of San Luis]

We expect you should be able to arrange to resolve this matter with our principal, and would hope that you will advise us when that has occurred."

Based on these letters a decision was made to await payment by United Pacific rather than initiating litigation.

Having received no payment by May 1984, Hirsch sent a letter to Mr. Leftwich with United Pacific making a demand on the bond in the amount of $68,671.64. The letter stated that an action would be instituted unless Leftwich contacted Hirsch within ten days from the receipt of Hirsch's letter in order to make arrangements for full payment of Certainteed's claim.

Leftwich responded by letter dated May 10, 1984. He stated that United Pacific was in the process of reviewing in detail, C & D's accounts payable in order to determine whether it would be necessary for United Pacific to be involved in these matters. Despite the fact that Certainteed had already provided United Pacific with relevant invoices, Leftwich requested them again and the completion of United Pacific's proof of claim form. Leftwich assured Hirsch that he would be in contact with him shortly in order to advise him of United Pacific's findings. The proof of claim form was promptly completed and sent to United Pacific by late May 1984.

On May 21, Leftwich told Hirsch that United Pacific had obtained an independent auditor to check the books and records of C & D and that the auditor was examining each item of Certainteed's claim. Leftwich told Hirsch that United Pacific would proceed with payment of Certainteed's claim following the auditor's accounting. Leftwich also said that following the completion of the accounting he would contact Hirsch by the following week.

During the months of June, July and August, neither C & D, United Pacific, nor the auditor conducting the accounting of C & D's books responded to demands and inquiries made by Certainteed. On August 29, 1984, Hirsch once again sent a letter to United Pacific, this time reminding Leftwich of their prior correspondence and telephone conversations and stated that, since Hirsch had not heard from United Pacific, a complaint was being prepared and would be filed within ten days after receipt of Hirsch's letter unless payment on Certainteed's claim was immediately forthcoming.

On September 14, 1984, Hirsch spoke by telephone with Charles W. Langfitt of United Pacific. Langfitt told Hirsch that a special report prepared by the auditor had just been completed the day before and that it would be forwarded to Hirsch. Langfitt further told Hirsch that the results of this audit were apparently such that the amount United Pacific admittedly owed Certainteed totaled only $21,392.20, but he could not explain the difference between this number and the claim from Certainteed for over $60,000. At that time Langfitt made no reference to any contention that part of Certainteed's claim was unbonded.

Under cover of a letter dated September 18, 1984, Hirsch received the report referred to by Langfitt in their telephone conversation of September 14. The report consisted of a stack of Certainteed invoices prefaced by a brief series of barely legible numbers on a balance sheet. There were also defenses to bonded and unbonded works. Certainteed concluded that the auditor had simply failed to take into account a number of invoices previously provided to C & D and United Pacific which resulted in a figure far less than the actual amount owed to Certainteed.

Hirsch suggested to United Pacific that Sanford deal directly with United Pacific's auditor in an effort to resolve the differing account and balances. On October 8, 1984, Hirsch spoke with Langfitt. Hirsch told Langfitt that although United Pacific had acknowledged that a portion of the claim was owed to Certainteed, it appeared that the auditor had missed a number of invoices and that the best method of resolving the matter would be by direct contact between Sanford and the auditor. Langfitt agreed and provided Hirsch with the auditor's name and telephone number to pass on to Sanford.

Sanford and United Pacific's auditor eventually discovered the missing invoices and reached the point where United Pacific's version of the amount due from C & D was close to the amount Certainteed had claimed all along, approximately $60,000. Certainteed was willing to accept United Pacific's figure, which was approximately $300 shy of the amount actually owed to Certainteed, in full and complete satisfaction of its claim.

However, on October 14, 1984, Sanford received an audit report from United Pacific showing that only $21,392.20 was covered by its bond. On October 29, or a few days after October 14, Sanford of Certainteed, called Hirsch and told him that United Pacific was now claiming that only a small portion of Certainteed's claim was on the project bonded by United Pacific.

On December 19, 1984, Hirsch advised Langfitt by telephone that Certainteed had no other recourse but to resort to litigation. Langfitt told Hirsch to go ahead and file and that it would only cost him a filing fee but requested that the matter be continued to be held in abeyance while the issues concerning the latest auditor report were further investigated.

The next day, December 20, this action was filed. On December 21, United Pacific denied Certainteed's claim based on the one-year statute of limitations.

DISPUTED FACTS

There are some facts that are in dispute. Attorney Hirsch claims that during his dealings with United Pacific he was told that so long as Certainteed and other creditors did not "rock the boat" by instituting litigation, C & D would be able to work its way out of its troublesome financial situation and, with the aid of the surety, would be able to make prompt payment of all obligations without resort to litigation. Hirsch believed that it was probably John Leftwich of United Pacific who told him this. Leftwich denies ever making such a representation.

OTHER RELEVANT MATTERS

During the proceedings in the trial court United Pacific had taken the deposition of Hirsch. During the taking of the deposition counsel for United Pacific attempted to question Hirsch as to conversations that he had with his clients. Hirsch refused to answer these questions. United Pacific moved to compel Hirsch to answer them, but the trial court denied its motion.

United Pacific moved for reconsideration of the...