Fulton Homes Corp. v. Bbp Concrete

• Court: Arizona Court of Appeals
• Writing for the Court: Irvine
• Citation: Fulton Homes Corp. v. Bbp Concrete, 155 P.3d 1090, 214 Ariz. 566 (Ariz. App. 2007)
• Decision Date: 24 April 2007
• Docket Number: No. 1 CA-CV 05-0510.,1 CA-CV 05-0510.
• Parties: FULTON HOMES CORPORATION, an Arizona corporation; Fulton Home Sales Corporation, an Arizona corporation, as successor in interest through merger to Fulton Home Sales Corporation, a California corporation; Fulton Homes Warranty Corporation, an Arizona corporation, Third-Party Plaintiffs/Appellants, v. BBP CONCRETE, an Arizona corporation; Trojan Concrete, Inc., an Arizona corporation, Third-Party Defendants/Appellees.

155 P.3d 1090

214 Ariz. 566

FULTON HOMES CORPORATION, an Arizona corporation; Fulton Home Sales Corporation, an Arizona corporation, as successor in interest through merger to Fulton Home Sales Corporation, a California corporation; Fulton Homes Warranty Corporation, an Arizona corporation, Third-Party Plaintiffs/Appellants, v. BBP CONCRETE, an Arizona corporation; Trojan Concrete, Inc., an Arizona corporation, Third-Party Defendants/Appellees.

No. 1 CA-CV 05-0510.

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

April 24, 2007.

Koeller, Nebeker, Carlson & Haluck, LLP By William A. Nebeker, Corey B. Larson and Wood Smith Henning & Berman LLP By David E. McDowell, Ryan P. Toftoy, Phoenix, Attorneys for Third-Party Plaintiffs/Appellants.

Schneider & Onofry, PC By Charles D. Onofry, Luane Rosen, Phoenix, Attorneys for Third-Party Defendants/Appellees.

OPINION

IRVINE, Presiding Judge.

¶ 1 Fulton Homes Corporation ("Fulton") appeals the trial court's summary judgment awarding attorneys' fees in favor of BBP Concrete ("BBP") and Trojan Concrete ("Trojan") after the parties stipulated to the dismissal of Fulton's third-party complaint against BBP and Trojan.

FACTS AND PROCEDURAL HISTORY

¶ 2 In October 2003, homeowners at the El Dorado/Cornerstone Highlands project sued Fulton, the homebuilder/general contractor, alleging various problems with the construction of their homes. The complaint alleged that the homes were "designed and/or constructed in an unworkmanlike and substandard fashion," and specifically alleged that the homes contained "damaged slabs." The original complaint did not give details regarding the nature of the defects alleged.

¶ 3 In December 2003, the homeowners moved to certify the case as a class action. In the motion for class certification, the homeowners more fully described the alleged defects, stating that the cause of the problems at the homes included "inadequate design and construction of the homes to mitigate the effects of the expansive soils known by Fulton to be present throughout the development." The motion specifically alleged that although the civil engineer had recommended that the homes be built on heavily reinforced slab systems specifically designed for expansive soil conditions, Fulton had built the homes upon unreinforced slabs. The court certified the class in May 2004.

¶ 4 In July 2004, Fulton filed a third-party complaint against BBP and Trojan, the concrete subcontractors for the project. The third-party complaint alleged that BBP and Trojan owed a contractual duty to defend and indemnify Fulton in the event that the court awarded damages arising from BBP's or Trojan's concrete installation to the homeowners.

¶ 5 In January 2005, in response to BBP's non-uniform interrogatories, the homeowners stated that they were not seeking damages resulting from workmanship issues, but were alleging only design defects. In February 2005, the parties prepared a joint report in preparation for a status conference. BBP and Trojan stated in the report that they had requested that Fulton dismiss them from the action because the homeowners were not alleging concrete workmanship issues. BBP and Trojan requested permission, pursuant to the court's case management order, to file a motion for summary judgment seeking dismissal with prejudice. At a status conference on February 28, 2005, Fulton stipulated to dismiss BBP and Trojan from the action.

¶ 6 Trojan and BBP then moved for attorneys' fees pursuant to Arizona Revised Statutes ("A.R.S.") section 12-341.01 (2003). Trojan and BBP each requested an award of $6,054.75. Fulton objected to the requests, arguing that BBP and Trojan were proper third-party defendants under Rule 14 of the Arizona Rules of Civil Procedure ("Rules"); that the court should exercise its discretion to deny the award; and that if the court decided to award the fees, it should assess the fees against the homeowners, not against Fulton.

¶ 7 The court denied Fulton's motion to assess the fees against the homeowners, and granted Trojan's and BBP's requests for fees. In denying Trojan's motion to pass through the fees to the homeowners, the court stated:

[I]t was obvious as early as 2003 from a review of the pleadings and discovery/disclosure that no concrete workmanship problems were involved in this action. This information was known to Fulton Homes well before the Third-Party Plaintiff [Fulton] brought the permissive action under Rule 14. If Defendant Fulton Homes had been more precise in its third party practice, the two concrete subcontractors would not have been in this action . . . . Plaintiffs' [Homeowners'] framing of their action was not a cause for bringing the action against the two concrete subcontractors.

¶ 8 On August 15, 2005, finding no just reason for delay, the court entered judgment in favor of Trojan and BBP pursuant to Rule 54(b), dismissing them from the case and awarding each $6,054.75 in attorneys' fees. We have jurisdiction over Fulton's appeal from these judgments. A.R.S. § 12-2101(B) (2003).

DISCUSSION

¶ 9 The trial court may award attorneys' fees to the "successful party" in a "contested action arising out of a contract" to "mitigate the burden of the expense of litigation to establish a just claim or a just defense." A.R.S. § 12-341.01(A), (B). To justify such an award, the parties must actually be "adverse," and the trial court must exercise its discretion to determine who is the "successful party." See Pioneer Roofing Co. v. Mardian Constr. Co., 152 Ariz. 455, 466-67, 733 P.2d 652, 663-64 (App.1986). Additionally, the award of fees itself "is discretionary with the trial court, and if there is any reasonable basis for the exercise of such discretion, its judgment will not be disturbed." Id. at 466, 733 P.2d at 663 (citing Associated Indem. Corp. v. Warner, 143 Ariz. 567, 570-71, 694 P.2d 1181, 1184-85 (1985)). We will affirm an award with a reasonable basis even if the trial court gives no reasons for its decision regarding whether to award fees. See Uyleman v. D.S. Rentco, 194 Ariz. 300, 305, ¶ 27, 981 P.2d 1081, 1086 (App. 1999).

¶ 10 In exercising its discretion, the trial court should consider the factors set forth in Warner, which include

the merits of the unsuccessful party's claim, whether the claim could have been avoided or settled, whether the successful party's efforts were completely superfluous in achieving the result, whether assessing fees against the unsuccessful party would cause an extreme hardship, whether the successful party did not prevail with respect to all of the relief sought, the novelty of the legal question presented, and whether an award to the prevailing party would discourage other parties with tenable claims from litigating legitimate contract issues for fear of incurring liability for substantial amounts of attorneys' fees.

Id. (citing Warner, 143 Ariz. at 570, 694 P.2d at 1184).

¶ 11 Fulton contends that the trial court erred in awarding attorneys' fees in favor of BBP and Trojan because (1) it properly filed the third-party complaint pursuant to Rule 14; (2) Fulton was not an "adverse party" to BBP and Trojan within the meaning of A.R.S. § 12-341.01 because Fulton asserted only contingent claims based upon the homeowners' allegations; (3) Trojan and BBP were not "successful parties" because the homeowners abandoned the claim upon which Fulton's claim against them was contingent and (4) the fee award was inappropriate in light of the factors to be considered, and will have a chilling effect on third-party claims.¹

A. Rule 14

¶ 12 Fulton contends that the trial court erred in awarding fees because Fulton properly brought the action against BBP and Trojan pursuant to Rule 14. Fulton contends that it is unclear from the homeowners' initial complaint, and even the subsequently filed motion for class certification, whether the homeowners sought compensation for faulty workmanship in addition to compensation for faulty design of the concrete slabs on which their homes were built. Fulton's third-party complaint alleged only that if it were liable to the homeowners for concrete workmanship damages, then Trojan and BBP were liable to Fulton for those damages. Rule 14 allows a defendant to bring such a contingent third-party claim to protect its rights and to efficiently resolve all claims that may arise from the same transaction. Ariz. R. Civ. P. 14(a). Thus, Fulton contends, it brought a legitimate third-party complaint, and should not be penalized by being required to pay attorneys' fees.

¶ 13 BBP and Trojan argue that even if the initial complaint and motion for class certification were unclear, disclosure and discovery soon revealed that the homeowners sought compensation only for design defects, not construction defects, and that Fulton should have dismissed the third-party complaint sooner. Thus, they contend the fee award is justified because Fulton unreasonably expanded the litigation.

¶ 14 Fulton responds that it unsuccessfully attempted to obtain a stipulation from the homeowners regarding their intention to seek damages only for concrete design issues, not concrete workmanship issues. Moreover, Fulton notes that it stipulated to dismiss the third-party complaint promptly when the homeowners stated on the record that they did not intend to pursue claims for concrete workmanship issues. Consequently, Fulton contends that it properly handled its third-party complaint, and the trial court had no basis for awarding fees.

¶ 15 The propriety of the third-party complaint under Rule 14 is not dispositive. Assuming that the third-party complaint was entirely proper under Rule 14 and that Fulton did not delay dismissing the complaint for even one minute longer than necessary, that fact would not protect Fulton from a fee award under A.R.S. § 12-341.01. Courts regularly award fees against plaintiffs who bring good faith but ultimately unsuccessful contract actions. Whether a claim...