Western Corrections Group, Inc. v. Tierney

• Decision Date: 31 August 2004
• Docket Number: No. 1 CA-CV 03-0001.,1 CA-CV 03-0001.
• Citation: 96 P.3d 1070,208 Ariz. 583
• Parties: WESTERN CORRECTIONS GROUP, INC., a Wyoming corporation, Plaintiff-Appellant, v. David TIERNEY and Jane Doe Tierney, husband and wife, and Sacks Tierney, P.A., a professional association, Defendants-Appellees.
• Court: Arizona Court of Appeals

96 P.3d 1070

208 Ariz. 583

WESTERN CORRECTIONS GROUP, INC., a Wyoming corporation, Plaintiff-Appellant, v. David TIERNEY and Jane Doe Tierney, husband and wife, and Sacks Tierney, P.A., a professional association, Defendants-Appellees.

No. -0001.

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

August 31, 2004.

Thomas & Elardo, P.C., Phoenix, By John A. Elardo, Neal B. Thomas, for Plaintiff-Appellant.

Lewis and Roca LLP, Phoenix, By Peter D. Baird, Robert G. Schaffer, Jason C. Furedy, for Defendants-Appellees.

OPINION

TIMMER, Presiding Judge

¶ 1 Arizona Revised Statute ("A.R.S.") section 11-254.01(A) (2001) requires counties to procure contractual services over a specified dollar value, other than professional services, by sealed, competitive bids. To decide the appeal in this legal malpractice case, we must delineate the "professional services" that are exempt from the competitive bid requirement. After resolving that issue and others, we affirm the trial court's judgment.

FACTS AND PROCEDURAL HISTORY

¶ 2 On July 15, 1996, La Paz County and appellant Western Corrections Group, Inc. ("WCG") entered in a "Project Expediter Agreement" ("Agreement"), whereby WCG agreed to assist the County Supervisors and serve as their agent "in planning, designing, contracting, implementing and constructing" two County facilities and "by selecting and expediting the work of an architect and/or engineer and contractor for the Project." The County did not submit the Agreement for competitive bid. WCG is operated by Wesley Box, who signed the Agreement as WCG's authorized agent. Neither WCG nor Box was licensed as a contractor, engineer, or architect.

¶ 3 The Agreement segregated WCG's duties into three stages: planning, bidding, and construction. WCG was required to pay all costs, fees, and expenses incurred in performing its duties. In return for WCG's services, the County agreed to compensate WCG by paying it 13% of the total construction costs for the facilities, which the County would pay pursuant to a payment schedule set forth in the Agreement. The schedule also required the County to pay WCG $1,000 upon execution of the Agreement, which the County paid on July 15, 1996.

¶ 4 During the planning stage of the project, WCG procured architectural plans and specifications to be used in a project bid package and submitted them to the County. The County Board of Supervisors subsequently accepted the bid package and authorized payment of $360,000 to WCG pursuant to the terms of the payment schedule. Consequently, on November 12, 1996, the County issued WCG a $360,000 warrant for payment. On November 21, however, the county treasurer refused to honor the warrant. Thereafter, WCG hired appellee David Tierney and Sacks Tierney, P.A. (collectively, "Tierney"), to represent it in an attempt to collect on the warrant.

¶ 5 On December 24, Tierney filed a complaint in federal district court for mandamus relief against the county treasurer, seeking to compel payment of the $360,000 warrant. The district court later dismissed the complaint for failure to join the County as an indispensable party.

¶ 6 On September 2, 1997, a newly elected Board of Supervisors, which questioned the legality of the Agreement, voted to cancel the Agreement and rescind the warrant. Thereafter, the County returned the plans and specifications to WCG, the facilities were never built, and no construction costs were incurred.

¶ 7 On May 13, 1998, Tierney sent a notice of claim to the County pursuant to A.R.S. § 12-821.01 (2003), which requires a person with a claim against a public entity or a public employee to provide notice of that claim within 180 days of the date the claim accrued. Failure to comply with this provision bars any claim. Id. at § 12-821.01(A).

¶ 8 On September 9, the County filed a complaint in superior court seeking a declaration of the parties' rights under the Agreement. WCG counterclaimed for breach of contract and quantum meruit. The court eventually dismissed WCG's counterclaim because WCG, through Tierney, had failed to timely file a notice of claim as required by A.R.S. § 12-821.01(A). As a result, WCG sued Tierney for professional negligence (legal malpractice), breach of fiduciary duty, and fraud, and sought both compensatory and punitive damages.

¶ 9 The trial court granted partial summary judgment in favor of Tierney. The court ruled that WCG would have lost its case against the County because the Agreement was unenforceable due to the County's failure to comply with applicable statutory provisions, and WCG was not otherwise entitled to receive compensation from the County. Consequently, the court determined that WCG could not recover any damages for legal malpractice based on its contention that it would have prevailed against the County but for Tierney's failure to timely submit the notice of claim. The court further found that the evidence did not support a punitive damages award. After the court's ruling, the claims remaining for trial concerned only whether WCG was entitled to recover attorneys' fees and costs expended to pursue its claim against the County after expiration of the 180-day time limit to file a notice of claim.

¶ 10 Prior to trial, Tierney voluntarily paid $83,709.28 to WCG, representing attorneys' fees and costs expended by WCG for actions taken after the expiration of the 180-day time limit. A jury subsequently found in favor of WCG on the negligence and fraud claims, but against it on the breach of fiduciary duty claim. The jury assessed damages in the amount of $83,709.28. Upon Tierney's motion, the court entered judgment as a matter of law in favor of Tierney on the fraud claim. Additionally, the court credited Tierney with the pretrial payment, thereby reducing the damages verdict to zero. After entry of judgment, this appeal followed.¹

DISCUSSION

¶ 11 To prevail on its legal malpractice claim, WCG was required to show that but for Tierney's failure to timely file a notice of claim, WCG would have been successful in the "case within the case," which was WCG's lawsuit against the County. Hyatt Regency Phoenix Hotel Co. v. Winston & Strawn, 184 Ariz. 120, 131, 907 P.2d 506, 517 (App.1995) ("To recover compensatory damages in a legal malpractice action the plaintiff must prove that but for the attorney's negligence, the prosecution or defense of the original action would have been successful."). We review de novo the trial court's grant of partial summary judgment on this issue, viewing the evidence in the light most favorable to WCG as the non-prevailing party. L. Harvey Concrete, Inc. v. Agro Constr. & Supply Co., 189 Ariz. 178, 180, 939 P.2d 811, 813 (App.1997). The court properly entered partial summary judgment for Tierney if no genuine issues of material fact existed, and he was entitled to judgment as a matter of law. Ariz. R. Civ. P. 56(c); Orme School v. Reeves, 166 Ariz. 301, 305, 802 P.2d 1000, 1004 (1990).

¶ 12 WCG argues that the trial court erred by ruling as a matter of law that WCG would have lost its case against the County because (1) the Agreement was not void due to statutory violations, (2) even if one or more violations occurred, the County was estopped from relying on these provisions to void the Agreement, and (3) alternatively, WCG was entitled to recover damages in quantum meruit. We address each contention in turn.

A. Statutory violations

¶ 13 The trial court ruled that the Agreement was void and thus unenforceable because (1) A.R.S. § 11-254.01(A) required the County to submit the project expediter job for competitive bid, and (2) contrary to the terms of the Agreement, A.R.S. §§ 34-102(A),—104(A) (2000 & Supp.2003) required the County to directly employ and contract with the project architect and engineer. A public contract entered in violation of a statute is invalid and unenforceable. Mohave County v. Mohave-Kingman Estates, Inc., 120 Ariz. 417, 420, 586 P.2d 978, 981 (1978); Ariz. Bd. of Regents ex rel. Univ. of Ariz. v. Main St. Mesa Assocs., 181 Ariz. 422, 429, 891 P.2d 889, 896 (App.1994) (holding that failure to follow the competitive bidding statutes for the sale of state lands is "void ab initio and can never be the basis for an agreement"). WCG does not contest this general principle but contends that the Agreement did not violate any statutory provision.

¶ 14 Section 11-254.01 provides as follows:

A. All purchases of supplies, materials, equipment and contractual services except professional services, made by the county having an estimated cost in excess of ten thousand dollars per transaction ... shall be based on sealed, competitive bids.

. . .

D. Professional services shall be procured pursuant to written policies developed by the county purchasing agent and adopted by the board of supervisors.

(Emphasis added.) As with all competitive bid statutes, the purpose of § 11-254.01(A) is to prevent favoritism, fraud and public waste by encouraging free and full competition, and to secure the best work for the lowest, practicable price. Achen-Gardner, Inc. v. Superior Court, 173 Ariz. 48, 52, 839 P.2d 1093, 1097 (1992); Main St. Mesa Assocs., 181 Ariz. at 426, 891 P.2d at 893.

¶ 15 The County did not submit the project expediter job for competitive bid. WCG argues, however, that competitive bidding was not mandated because a project expediter provides "professional services," which are exempted under § 11-254.01(A). Tierney, not surprisingly, takes the opposite view. Because the legislature did not define "professional services," we employ accepted principles of statutory construction to discern the meaning of the term.

¶ 16 The cardinal rule of statutory interpretation is to ascertain the legislature's intent in adopting the provision. City of Phoenix v. Superior Court, 139 Ariz. 175, 178, 677 P.2d 1283, 1286 (1984). To determine the legislature's intent in enacting § 11-254.01, we look first to the provision's language, Calmat of Ariz....