Hartford Acc. & Indem. Co. v. Federal Ins. Co.

• Decision Date: 21 July 1992
• Docket Number: CA-CV,No. 1,1
• Citation: 834 P.2d 827,172 Ariz. 104
• Parties: HARTFORD ACCIDENT & INDEMNITY COMPANY, a Connecticut corporation, Plaintiff-Appellant, v. FEDERAL INSURANCE COMPANY, a New Jersey corporation, Defendant-Appellee. 90-376.
• Court: Arizona Court of Appeals

Page 827

834 P.2d 827

172 Ariz. 104

HARTFORD ACCIDENT & INDEMNITY COMPANY, a Connecticut corporation, Plaintiff-Appellant, v. FEDERAL INSURANCE COMPANY, a New Jersey corporation, Defendant-Appellee.

No. 1 CA-CV 90-376.

Court of Appeals of Arizona,

Division 1, Department E.

July 21, 1992.

[172 Ariz. 105] Jennings, Kepner & Haug by Robert O. Dyer, Jeff R. Wilhelm, Phoenix, for plaintiff-appellant.

Robbins & Green, P.A. by Henry Jacobowitz, Phoenix, for defendant-appellee.

OPINION

EUBANK, Judge.

Hartford Accident & Indemnity Company ("Hartford") appeals from the trial court's order, granting summary judgment in favor of Federal Insurance Company ("Federal"). We reverse and remand to the trial court for proceedings consistent with this opinion.

FACTS AND PROCEDURAL HISTORY

On September 28, 1984, Tibshraeny Brothers Construction, Inc. ("TBC") became the prime contractor for the construction of certain additions to a Phoenix medical center complex. Federal provided TBC with a payment bond in order to comply with A.R.S. § 33-1003. The prime contract and the payment bond were recorded in Maricopa County on November 7, 1984.

On October 3, 1984, TBC subcontracted with Valley Mechanical, Inc. ("VMI") to perform labor and furnish materials for certain plumbing work on the project. Hartford provided the subcontractor with a performance and payment bond. VMI later experienced financial difficulties and required financial assistance from Hartford to complete its subcontract. Hartford then entered into a takeover agreement with Arizona Mechanical Industries, Inc. ("AMI"), a replacement contractor and TBC, wherein AMI agreed to take over and complete VMI's subcontract. TBC also consented to the takeover agreement and agreed to pay Hartford the undisputed subcontract price pursuant to the terms of the contract documents. Hartford continued to financially assist AMI until March 29, 1987. After March 29, 1987, AMI worked on the project without Hartford's financial backing. Later, TBC determined that, subject to certain set-offs, Hartford was entitled to $84,593.07. TBC failed to pay Hartford this undisputed amount and also refused to pay Hartford certain disputed amounts, totalling in excess of $200,000.

On April 21, 1988, Hartford filed a complaint against TBC. Count One of the complaint alleged breach of contract, and Count Two alleged breach of implied warranty. On December 7, 1988, with leave of the court, Hartford amended its complaint to include Federal as a co-defendant. On the same date, Hartford also added Count Three, a claim on Federal's payment bond.

On June 28, 1989, Federal moved for summary judgment on Count Three, claiming that the payment bond was invalid, because the bond failed to comply with all of the technical requirements of A.R.S. § 33-1003. In addition, Federal alleged that, if its payment bond were considered a valid statutory bond, Hartford's claim for payment on the bond was barred by the one-year statute of limitations pursuant to A.R.S. § 34-223(B). Hartford contended that Federal's payment bond should not be considered invalid, but should be construed as a common law bond instead. In addition, Hartford asserted that the applicable statute of limitations should be two years pursuant to A.R.S. § 20-1115, rather than one year pursuant to A.R.S. § 34-223(B). Therefore, Hartford contended that its claim was not time-barred. Finally, Hartford argued that, if Federal's payment bond is considered to be a valid statutory bond, Federal should not be able to enforce the applicable one-year statute of limitations.

On August 10, 1989, the trial court granted Federal's motion for summary judgment. First, the trial court noted that both Hartford and Federal agreed that Federal's payment bond did not meet all of the technical requirements of A.R.S. § 33-1003. Second, the court stated that "[p]ublic policy should not permit a surety to avoid its undertakings because of circumstances related to the word crafting of [Federal's] anti-lien bond." Third, the court concluded that, because Federal's payment bond was intended to satisfy the requirements of the anti-lien statute and because the terms of the bond provided for statutory compliance, Federal's bond must be considered a statutory bond pursuant to A.R.S. § 33-1003.

Fourth, the trial court stated that, because Federal's bond is a statutory bond, any claimants must file suit within the one-year statute of limitations provided in A.R.S. § 34-223(B). According to the court, the evidence showed that AMI last provided materials subject to Hartford's takeover bond on March 29, 1987. Further, Hartford's amended complaint on Federal's payment bond was not filed until December 7, 1988. Thus, because Hartford failed to file its suit on Federal's payment bond within the one-year statute of limitations, the court found that Hartford's claim was time-barred. Thus, the court dismissed Hartford's claim on Federal's payment bond. ¹

On February 27, 1990, the trial court entered final judgment in favor of Federal, dismissing Hartford's claim on Federal's payment bond with prejudice. Hartford filed a timely appeal. This court has jurisdiction pursuant to A.R.S. § 12-2101(B). ²

ISSUES ON APPEAL

On appeal, Hartford alleges that the trial court erred by granting Federal's motion for summary judgment for its claim on Federal's payment bond. Specifically, Hartford raises two issues:

1. Did the trial court err by determining that Federal's payment bond is a valid statutory bond pursuant to A.R.S. § 33-1003, instead of a common law bond?

2. Assuming that Federal's payment bond is a valid statutory bond, did the trial court err by determining that the applicable one-year statute of limitations under A.R.S. § 34-223(B) is enforceable?

Because we reverse and remand on the first issue raised, we do not need to consider the second issue.

STANDARD OF REVIEW

In reviewing the granting of a motion for summary judgment, we must view the facts in a light most favorable to the party opposing the judgment. Grain Dealers Mut. Ins. Co. v. James, 118 Ariz. 116, 118, 575 P.2d 315, 317 (1978); In re Estate of Kerr, 137 Ariz. 25, 29, 667 P.2d 1351, 1355 (App.1983). Further, we must reverse and remand for a trial on the merits if such a review reveals that reasonable inferences about material facts could be resolved in favor of either party. United Bank of Arizona v. Allyn, 167 Ariz. 191, 195, 805 P.2d 1012, 1016 (App.1990). In addition, we review de novo issues of statutory interpretation, because these issues are issues of law. Arizona State Bd. of Accountancy v. Keebler, 115 Ariz. 239, 241, 564 P.2d 928, 930 (App.1977).

DISCUSSION

Hartford alleges that the trial court erred by finding that Federal's payment bond was a statutory bond pursuant to A.R.S. § 33-1003, because the bond itself did not satisfy the applicable statutory requirements. Because Federal's payment bond failed to satisfy the technical requirements of a statutory bond, Hartford argues that Federal's payment bond should be construed as a common law bond. Finally, Hartford contends that, as a common law bond, the payment bond is subject to a two-year statute of limitations pursuant to A.R.S. § 20-1115, rather than a one-year statute of limitations pursuant to A.R.S. § 34-223(B). Therefore, Hartford requests that we reverse the trial court's dismissal of its claim on Federal's payment bond, because Hartford filed its claim within the applicable two-year statute of limitations.

Federal argues that the trial court correctly held that its payment bond was a statutory bond pursuant to A.R.S. § 33-1003. It essentially alleges that the language of the bond indicates that the bond was intended by the parties to satisfy all of the technical requirements of a statutory bond. Contradicting its prior assertions in its motion for summary judgment, Federal then states that its payment bond does meet all of the requirements of A.R.S. § 33-1003, and it contends in a footnote that "[o]nly the protection to the owner is cast in doubt by the owner's failure to attach the legal description of the land to be improved to the recorded contract, as is required by subsection B, of A.R.S. § 33-1003." Federal also asserts that its payment bond should not be construed as a common law bond. Thus, Federal argues that the trial court correctly determined that its payment bond was a statutory bond, with a one-year statute of limitations. Moreover, it contends that Hartford failed to file its claim on the bond within the applicable one-year statute of limitations, and therefore the trial court properly dismissed Hartford's claim.

In relevant part, section 33-1003 provides as follows:

A. Every owner of land, including any person who has a legal or equitable interest therein, who enters a contract requiring any person to perform labor or professional services or to furnish materials, machinery, fixtures or tools in the construction, alteration or repair of any building, or other structure or improvement on such land, may avoid the lien provisions of § 33-981 pertaining to agents by requiring the person with whom he contracts to furnish a payment bond prior to or at the time of execution of such contract. Upon recordation of the payment bond together with a copy of such contract in the office of the county recorder, in the county in which the land is located, no lien shall thereafter be allowed or recorded by the person claiming a lien against the land on which the labor or professional services are performed or the materials, machinery, fixtures or tools furnished, as provided in this article, except by the person who contracts, in writing, directly with the owner.

B. A payment bond furnished pursuant to subsection A of this section shall be in a sum equal to the full amount of the contract between the owner and the person with whom the owner contracts, and shall be solely for the protection of claimants performing labor or professional services or...