Decision Date08 April 2004
Docket NumberNo. 2 CA-CV 2003-0069.,2 CA-CV 2003-0069.
Citation88 P.3d 169,207 Ariz. 455
PartiesWATERFALL, ECONOMIDIS, CALDWELL, HANSHAW & VILLAMANA, P.C., Plaintiff/Appellee, v. PIMA COUNTY, Arizona, Defendant/Appellant.
CourtArizona Court of Appeals

Haralson, Miller, Pitt, Feldman & McAnally, P.L.C., By Gerald Maltz and Traci L. Riccitello, Tucson, for Plaintiff/Appellee.

Slutes, Sakrison & Hill, P.C., By Tom Slutes and Diana L. Kanon, Tucson, for Defendant/Appellant.



¶ 1 Defendant/appellant Pima County appeals the trial court's judgment awarding $130,743.60 in attorney fees and costs, plus interest, to the law firm of Waterfall, Economidis, Caldwell, Hanshaw & Villamana, P.C. The trial court found the fees had been incurred pursuant to a contract in which the parties had agreed that the Waterfall firm would provide legal representation for a Pima County prosecutor who had been formally charged with ethical violations by the State Bar of Arizona. The trial court conducted a bench trial and, after taking the matter under advisement, ruled that the County had breached its implied covenant of good faith and fair dealing and that even if that covenant had not been breached, the County had been unjustly enriched and was liable under a theory of quantum meruit.

Factual and Procedural Background

¶ 2 In matters arising from a judgment after a bench trial, we accept the trial court's factual findings and will not set them aside unless they are clearly erroneous. Ariz. R. Civ. P. 52(a), 16 A.R.S., Pt. 1; Valley Med. Specialists v. Farber, 194 Ariz. 363, ¶ 9, 982 P.2d 1277, ¶ 9 (1999). In early May 2000, Pima County Attorney Barbara LaWall contacted James Stuehringer, an attorney at the Waterfall firm, and asked him to defend her employee, then Deputy County Attorney Ken Peasley, against the state bar's formal charges, assuring Stuehringer that Pima County would pay him for the representation. Stuehringer, who had represented Peasley pro bono prior to the filing of the state bar complaint, discussed the matter with the chief civil deputy county attorney, and they agreed upon an hourly rate of $125. Stuehringer began work on the formal charges on May 11, 2000, and a few days later, sent a letter to the county attorney's office confirming the arrangement "in light of [the county attorney's] decision that Pima County should pay for [his] representation" of Peasley.

¶ 3 In August 2000, the deputy county attorney sent Stuehringer a letter stating that Pima County would pay "any legal fees you have incurred as of the date of the filing of the State Bar complaint," which was May 11, 2000, but would not pay some $30,000 in attorney fees Stuehringer had accrued previously. Attached to the letter was a document entitled "CONTRACT FOR LEGAL SERVICES," which was a form contract substantially the same as forms used by the County to retain other outside legal services. The contract set a limit of $25,000 on the amount that the County would pay for legal services provided on behalf of Peasley in the absence of further approval by the Pima County Board of Supervisors. The contract also contained a clause providing that the parties had reached no agreements, verbal or otherwise, not found within the contract's express terms. It provided that "notice or correspondence [wa]s to be sent to COUNTY through the Pima County Attorney's Office" in care of the chief civil deputy, whose signature appeared on the contract "approv[ing it] as to Form." The document further stated that the contract "shall not be amended, modified, or altered in any way except by written instrument duly executed by the Parties hereto."

¶ 4 When Stuehringer signed and returned the contract to the chief civil deputy, he included a letter that stated: "By the terms of your letter, Pima County has agreed to pay for any legal fees incurred as of the date of the filing of the state bar complaint, and you should be aware that this date is May 11, 2000." Stuehringer stated he enclosed with his letter, which was dated September 7, the law firm's "bill for services rendered ... from May 11, 2000 through the present ... in the total amount of $15,850.66." On September 15, Pima County Administrator Chuck Huckelberry signed the contract on behalf of Pima County, and in early October, the board of supervisors approved it.

¶ 5 In March 2001, the chief civil deputy sent Stuehringer a letter stating that his firm had "exhausted its monetary limit to this contract and now requires an amendment increasing this amount an additional $25,000.00." She attached to the letter a document proposing two amendments to the contract and asked Stuehringer to "review the attached amendments and if they meet with your approval, sign and return to me as soon as possible." The first proposed amendment added the complaint number issued by the state bar and Peasley's bar number and the second substituted an amount of "$50,000.00" in place of the original amount of $25,000. The document then stated that all other terms of the original contract would "remain in full force and effect" and concluded that the "amendment shall be effective upon execution of document." Both Stuehringer and the chief civil deputy signed the document, leaving blank the spaces for the signature of the chairman of the board of supervisors and the attestation of the clerk of the board.

¶ 6 The board of supervisors considered the proposed amendment at a public hearing on May 22, 2001. After hearing comments from the public, the board unanimously rejected the amendment. The County made no further payment to the law firm beyond the original amount of $25,000 promised by the contract. Nonetheless, Stuehringer continued to provide legal services, eventually incurring $130,743.60 of fees and costs beyond the $25,000 that the County had paid under the contract. Approximately $100,000 of those fees and costs were incurred after the board rejected the amendment.

¶ 7 Both before and after the board voted, Stuehringer had received repeated assurances from the attorneys in the civil division of the county attorney's office, including the chief civil deputy, (1) that the $25,000 limit was "boilerplate" language, and (2) that Waterfall would be paid in full for its services. During the months following the vote, Stuehringer was also told by the chief civil deputy that if the County could not be persuaded to pay him more than $25,000, the county attorney's office would pay his legal fees out of its own budget. Sometime before September of 2001, the chief civil deputy advised Stuehringer that the county attorney's office had "rethought" its commitment to pay him out of its own budget but assured him that the county general fund would still be required to pay for his legal services due to an indemnification provision in a county ordinance. Stuehringer interpreted these assurances from employees of the county attorney's office to mean that he would be paid as much as the representation cost, even if the total exceeded $25,000. When the County persisted in declining to pay Waterfall for services beyond $25,000, Waterfall filed this complaint.

¶ 8 In January 2003, the trial court conducted a bench trial at which it admitted evidence extrinsic to the contract, including evidence that employees of the county attorney's office repeatedly assured Stuehringer that he would be paid the full amount for his services. After taking the matter under advisement, the trial court found that the County had breached its implied covenant of good faith and fair dealing by refusing to pay Stuehringer any amounts beyond the $25,000 limit specified by the contract. The trial court further found that the contract had never been terminated and continued in full force and effect. The trial court then awarded judgment in favor of Waterfall and against Pima County in the amount of $130,743.60 for Stuehringer's services through December 24, 2002. The court also awarded interest from December 24, 2002.

Extrinsic Evidence

¶ 9 Pima County first contends the trial court erred in considering extrinsic evidence to interpret the contract. It argues that the court "was mistaken in both finding that there was an ambiguity [in the contract] and finding that [extrinsic] evidence of intent was needed." Our first task, then, is to determine whether the trial court properly considered such evidence. See Taylor v. State Farm Mut. Auto. Ins. Co., 175 Ariz. 148, 152, 854 P.2d 1134, 1138 (1993) (in interpreting a contract, court must decide whether any evidence other than the contract is admissible).1 The interpretation of a contract involves questions of law, subject to de novo review. Samaritan Health Sys. v. Superior Court, 194 Ariz. 284, ¶ 14, 981 P.2d 584, ¶ 14 (App.1998) (contract interpretation is a legal inquiry conducted de novo). Although a determination of the intent of contracting parties from extrinsic evidence may require fact finding, the question of "[w]hether contract language is reasonably susceptible to more than one interpretation so that extrinsic evidence is admissible is a question of law for the court." Taylor, 175 Ariz. at 158-59, 854 P.2d at 1145-46.

¶ 10 When a contract contains an integration clause—a written expression of the parties' intent that the contract represents the complete and final agreement between them—the parol evidence rule "`renders inadmissible any evidence of prior or contemporaneous oral understandings and of prior written understandings, which would contradict, vary or add to a written contract.' " Pinnacle Peak Developers v. TRW Inv. Corp., 129 Ariz. 385, 389, 631 P.2d 540, 544 (App.1980),quoting Childres and Spitz, Status in the Law of Contract, 47 N.Y.U. L.Rev. 1, at 6-7 (1972). The contract between the parties here contained such an integration clause:

XXIII. ENTIRE CONTRACT—It is expressly agreed that this written Contract embodies the entire Contract of the Parties in relation to the subject matter, and that no

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