Watson Const. Co. v. Amfac Mortg. Corp.
| Decision Date | 04 October 1979 |
| Docket Number | CA-CIV,Nos. 1,s. 1 |
| Citation | 606 P.2d 421,124 Ariz. 570 |
| Parties | WATSON CONSTRUCTION COMPANY, a Minnesota Corporation, Appellant, v. AMFAC MORTGAGE CORPORATION, an Oregon Corporation, Appellee (two cases). AMFAC MORTGAGE CORPORATION, an Oregon Corporation, Appellant, v. WATSON CONSTRUCTION COMPANY, a Minnesota Corporation, and Frederick O. Watson, Appellees. AMFAC MORTGAGE CORPORATION, an Oregon Corporation, Plaintiff-Appellee and Cross-Appellant, v. WATSON CONSTRUCTION COMPANY, a Minnesota Corporation, and Frederick O. Watson and Janet Watson, Defendants-Appellants and Cross-Appellees. 4050, 1 4051, 1 4212 and 1 4465. |
| Court | Arizona Court of Appeals |
These multiple appeals originated in this court as separate and distinct appeals, were briefed separately by the parties and were individually argued before this court (except 1 CA-CIV 4212 and 4465 which were consolidated by this court after hearing separate oral argument on 1 CA-CIV 4050 and 4051). We have consolidated these appeals for opinion purposes for ease of understanding and presentation.
Before setting forth the legal and factual issues presented by these appeals, we wish to point out the problems rising from the indiscriminate use of Rule 54(b), 1 Rules of Civil Procedure, language in pre-final judgment orders.
All of these appeals arose out of a single multi-count complaint by Amfac Mortgage Corporation (Amfac), and a single amended answer and multi-count counterclaim filed by Watson Construction Company (Watson). All claims related to the same construction project. Two of these appeals (1 CA-CIV 4050 and 4051) arose out of the trial court's granting partial summary judgments which contained the applicable language of Rule 54(b), Rules of Civil Procedure. (A third partial summary judgment also containing 54(b) language between the parties was disposed of by Department A of this court in Watson Construction Co. v. Amfac Mortgage Corporation, 1 CA-CIV 3810, memo decision filed August 17, 1978.) While all of the claims and counterclaims were interrelated, this court has been forced to consider them piecemeal; has been required to read 440 pages of briefs (92 pages of which were single spaced); the parties have prepared 11 volumes of abstracts; and this court in order to be sure inconsistent opinions would not be rendered, has been forced to withhold decisions on these appeals until the final appeal was heard. While the various summary judgments which were entered may very well have been appropriate, the inclusion of 54(b) language therein has vastly increased the costs of this litigation and has duplicated appellate judicial time. We cannot urge the trial bench too strongly to use sparingly, in a case of this nature, the finality effect of Rule 54(b).
Turning now to the merits of the controversy before this court, the basic background facts underlying all of these appeals are that on July 11, 1973, Watson entered into a construction contract with Arizona Mall of Tempe, Inc. (Arizona Mall), which had been formed by a Mr. Orrin A. Ericson. Under this contract Watson agreed to construct a shopping center on certain real property located in Tempe, Arizona. One of the controversies between the parties centers on what constituted the terms of this agreement. Following execution of the construction contract, Ericson contacted representatives of Amfac as a potential lender of funds needed to purchase the real property involved and to finance the construction of the shopping mall.
Following negotiations between Ericson and Amfac, on August 7, 1973, Amfac advised Arizona Mall through a loan commitment letter that Arizona Mall's application for a loan in the amount of 22.5 million dollars had been conditionally approved. One of the conditions required by Amfac was that Arizona Mall obtain from Watson an "assignment" of the construction agreement between Arizona Mall and Watson. In response to this request, Watson, on August 24, 1973, sent Amfac a letter stating in part:
As previously indicated, a major dispute between the parties centers on what constituted the "contract" referred to in the letter of August 24, 1973 and what was attached as "Exhibit A" to that same letter. Suffice it to say at this point that Amfac contends that "Exhibit A" consisted of a "Standard Form of Agreement between Owner and Contractor" and pertinent attachments thereto which set forth a guaranteed maximum cost of construction of $16,854,900.00. Watson on the other hand contends that in addition there was attached as a part of "Exhibit A" a document which the parties have referred to as a "Side Agreement." This side agreement in essence provided that the guaranteed maximum price of $16,854,900.00 set forth in the "Standard Form of Agreement" was in fact based upon incomplete drawings and specifications and as between Arizona Mall and Watson, the guaranteed maximum price of construction would be adjusted as phases of construction were completed and complete plans and specifications became available.
On August 27, 1973, Amfac and Arizona Mall entered into an agreement whereby Amfac was to deposit monies in a building loan account, Arizona Mall executed a note in Amfac's favor and secured that note by a deed of trust under which Amfac was the beneficiary. This deed of trust was recorded.
With the financing secured, Watson commenced construction of the shopping mall. Subsequently, problems arose and Arizona Mall defaulted under the terms of its agreement with Amfac. Following the default, Amfac made attempts to salvage the situation, including a demand upon Watson to perform pursuant to its letter of August 24, 1973 at the guaranteed maximum price set forth in the Standard Form of Agreement. Watson refused and this litigation ensued.
Amfac's complaint against Watson and others sought basically the following relief:
(1) Foreclosure of its deed of trust and establishment of its priority of lien over Watson (this forms the subject matter of appeal No. 1 CA-CIV 4050), and
(2) a claim for breach by Watson of its August 24, 1973 letter agreement; a fraud claim against Watson and a claim for personal relief against Frederick Watson, president of Watson (this forms the subject matter of appeal No. 1 CA-CIV 4212).
Watson by amended counterclaim sought relief against Amfac for its alleged breach of the August 24, 1973 letter (this forms the subject matter of appeal No. 1 CA-CIV 4051). In addition, there has been an appeal and cross-appeal from the trial court's order settling costs and attorneys' fees (this constitutes appeal No. 1 CA-CIV 4465). Additional facts will be set forth which are specifically applicable to the disposition of the various appeals involved.
1 CA-CIV 4050
Under this cause number, Watson appeals from the trial court's granting of partial summary judgments foreclosing Amfac's deed of trust, determining the amounts due thereunder and denying Watson's request that its lien have priority over that of Amfac. In addition to the facts previously stated, the following facts are necessary to determine the issues presented by this appeal. Since these matters were disposed of by summary judgment, they will be stated in a light most favorable to Watson.
On August 27, 1973, the same day that Amfac and Arizona Mall entered into a building loan agreement, Amfac qualified with the Arizona Corporation Commission to do business in the state of Arizona. Negotiations between Amfac and Arizona Mall were carried on in Arizona before that date.
On August 28, 1973, the deed of trust between Arizona Mall as trustor and Amfac as beneficiary was recorded. This document did not contain a "caption" but on its first page it did refer to the document as a deed of trust. In addition, through inadvertence, the deed of trust recorded on August 28, 1973, did not contain pages 7 and 8 of the original document. It did, however, state the amount of the loan, identify the parties and describe the real property covered by the deed of trust. On October 16, 1973, Watson began construction of the shopping mall. In December, 1973, Amfac re-recorded its deed of trust "for the purposes of placing on public record pages 7 and 8 thereof."
Watson also alleges that it was induced by its letter of August 24, 1973 and Amfac's subsequent loan commitment to begin construction on this project. In addition, it alleges that it received nine monthly payments from the loan proceeds and that Amfac's architectural representative approved two monthly payments which were not paid by Amfac, all during a time when Amfac's representative knew or should have known that funding problems and cost overrun...
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