Date: 02-23-2017

Case Style:

Case Number: 1 CA-CV 15-0786

Judge: Winthrop

Court: Arizona Court of Appeals, Division One

Plaintiff's Attorney: Jennifer Mullen and Barrett Lindsey

Defendant's Attorney: Lynn Allen

Description: ¶1 Appellant Swann’s Grading, Inc. (“Swann’s”) challenges the
trial court’s judgment obligating it to indemnify Appellee Amberwood
Development, Inc. (“Amberwood”) for damages stemming from a series of
construction defect claims. Swann’s also challenges the trial court’s defense
costs and attorneys’ fees awards. We affirm for the reasons set forth below.
FACTS AND PROCEDURAL HISTORY
¶2 Amberwood served as general contractor on a housing
development in Chandler. Swann’s subcontracted to provide rough and
final grading services in the development.
¶3 Eighteen homeowners sued Amberwood after construction
was completed, alleging numerous defects. As a result, Amberwood
sought indemnification from its subcontractors, including Swann’s, under
the terms of their subcontracts. Swann’s subcontract provided as follows:
INDEMNITY: Subcontractor agrees to and does hereby hold
Contractor harmless from any and all claims, actions,
damages, costs or Attorney’s fees arising out of the acts or
omissions of Subcontractor, its employees, agents or suppliers
with regard to the performance or omission of any of
Subcontractor’s duties and obligations under this contract.
The indemnity extends to any claims asserted by any
subsequent property owner alleging improper or defective
workmanship or materials in any work or material done or
provided by Subcontractor.
To the fullest extent permitted by law, Subcontractor shall
defend and indemnify and hold harmless, Contractor and
their agents and employees from claims, demands, costs,
attorney fees, causes of action and liabilities of every kind
whatsoever arising out of or in connection with
Subcontractor’s work performed for Contractor. This defense
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and indemnity shall extend to claims occurring after this
agreement is terminated as well as while it is in force. The
defense and indemnity shall apply regardless of any active
and/or passive negligent act or omission of the Contractor,
Architect, or their agents or employees, but Subcontractor
shall not be obligated to indemnify any party for claims
arising from the sole negligence or willful misconduct of the
Contractor or its agent or employees. The defense and
indemnity set forth in this section shall not be limited by any
insurance requirements, or by any provision of this
Agreement. All work done at a site or in preparing or
delivering materials or equipment to the site shall be at the
sole risk of Subcontractor until the work is accepted by
Contractor.
Ten of the eighteen homeowners arbitrated their claims, resulting in a
$1,750,000 award against Amberwood. Swann’s provided Amberwood a
defense but did not otherwise participate in the arbitration.
¶4 Swann’s answered Amberwood’s third-party complaint
shortly after the arbitration matter concluded. The remaining eight
homeowners eventually settled with Amberwood for $723,900.
Amberwood then settled its third-party indemnity claims against all
subcontractors except Swann’s for $479,400.
¶5 Both Swann’s and Amberwood moved for partial summary
judgment on the scope of Swann’s indemnity obligations. The trial court
granted Amberwood’s motion and denied Swann’s motion, finding that
Swann’s was obligated to defend and indemnify Amberwood for claims
related to Swann’s work and that, to recover on the indemnity claim,
Amberwood would have to show that its settlements were “reasonable and
prudent and that the allocated amount arose out of or was in connection
with Swann’s work.”
¶6 Before proceeding to bench trial, the parties stipulated that
Amberwood’s settlements with all eighteen homeowners were reasonable.
At trial, Amberwood offered undisputed testimony that Swann’s had
provided a defense throughout the arbitration matter but contributed no
indemnification. Amberwood also presented expert witness testimony that
approximately 70 percent of the litigation settlement and 81 percent of the
arbitration award were at least partially attributable to Swann’s work.
Amberwood’s expert also prepared a list of repair costs that, in his opinion,
stemmed at least partially from Swann’s work.
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¶7 Swann’s objected to both the expert’s testimony and the list as
having been untimely disclosed. The trial court overruled Swann’s
objection to the list and admitted it into evidence. Swann’s also offered
testimony from its own geotechnical expert, who opined that Swann’s did
not cause any of the damages for which Amberwood sought
indemnification.
¶8 The trial court found Swann’s was obligated to indemnify
Amberwood for 70.6 percent of the litigation settlements and 72.7 percent
of the arbitration award. The trial court then granted Swann’s an offset of
the full amount Amberwood received in settlement from the other
subcontractors. The trial court also stated that, to the extent Swann’s was
liable for more than its fair share of Amberwood’s losses, “its remedy is
equitable contribution.” The trial court also awarded Amberwood defense
costs, attorneys’ fees, and court costs of $179,570.63, $121,074.92, and
$14,559.25, respectively.
¶9 Following the entry of final judgment, Swann’s moved for a
new trial or to alter or amend the judgment under Ariz. R. Civ. P. 59(a) and
(l), arguing that (1) the trial court erred in finding Swann’s could pursue the
other subcontractors for equitable contribution; (2) Swann’s was only
severally liable for Amberwood’s damages; (3) Amberwood’s settlements
with the other subcontractors were unreasonable; and (4) Amberwood’s
attorneys’ fee claim should have been apportioned among Swann’s and the
settling subcontractors. The trial court denied Swann’s motion. Swann’s
timely appealed, and Amberwood timely cross-appealed, challenging the
offset. We have jurisdiction pursuant to Arizona Revised Statutes
(“A.R.S.”) section 12-2101(A)(1) (2016).1
ANALYSIS
I. Amberwood Was Not Required to Prove Swann’s Negligence to
Recover.
¶10 Swann’s first argues that Amberwood could recover only if it
showed under the indemnity provision that Swann’s was negligent in
performing its work. We review the indemnity provision de novo. MT
Builders, L.L.C. v. Fisher Roofing, Inc., 219 Ariz. 297, 302, ¶ 10, 197 P.3d 758,
763 (App. 2008). We must give effect to the provision as written; if its terms
1 We cite the current version of applicable statutes when no revisions
material to this decision have since occurred.
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are clear and unambiguous, they are conclusive. Goodman v. Newzona Inv.
Co., 101 Ariz. 470, 472, 421 P.2d 318, 320 (1966).
¶11 Swann’s directs us to two out-of-state cases to support its
argument. In Heppler v. J.M. Peters Co., 87 Cal. Rptr. 2d 497 (Cal. Ct. App.
1999), the California Court of Appeals found an indemnity clause requiring
the subcontractor to “indemnify and save [Peters] harmless against all
claims for damages to persons or to property growing out of the execution
of the work, and at his own expense to defend any suit or action brought
against [Peters] founded upon the claim of such damage” only applied to
claims in which the subcontractor was negligent. Id. at 509-12. Here,
though, the indemnification provision covered claims “arising out of or in
connection with” Swann’s work, not just claims “growing out of the
execution of the work.” Id. at 509 (emphasis added).
¶12 Swann’s also cites Reyburn Lawn & Landscape Designers, Inc. v.
Plaster Dev. Co., 255 P.3d 268 (Nev. 2011). There, the Nevada Supreme
Court interpreted a subcontract requiring indemnification for claims
“arising directly or indirectly out of the obligation herein undertaken or out
of the obligations conducted by Subcontractor, save and except claims or
litigation arising through the sole negligence or sole willful misconduct of
Contractor” as only covering claims in which Reyburn was at least partially
negligent. Id. at 272, 275. Reyburn is not persuasive here because Nevada
follows the “express negligence doctrine” under which “parties are free to
contractually agree to indemnify another for its own negligence” but “an
express or explicit reference to the indemnitee’s own negligence is
required.” Id. at 274 (quoting George L. Brown Ins. v. Star Ins. Co., 237 P.3d
92, 97 (Nev. 2010)). Arizona does not follow this doctrine. See, e.g.,
Washington Elementary Sch. Dist. No. 6 v. Baglino Corp., 169 Ariz. 58, 61, 817
P.2d 3, 6 (1991) (“There is . . . no requirement that the term negligence
actually be used, or that specific reference be made to liability arising out of
the indemnitee’s negligence.”). The absence of any express reference to
Amberwood’s own negligence thus does not limit Swann’s indemnity
obligations to claims arising out of its own negligence.
¶13 We believe Cont'l Heller Corp. v. Amtech Mech. Servs., Inc., 61
Cal. Rptr. 2d 668 (Cal. Ct. App. 1997) is closer to the mark. There, the
California Court of Appeals determined that subcontract language
requiring indemnification for losses that “arise[] out of or [are] in any way
connected with the performance of work under this Subcontract” did not
require the indemnitee to show the subcontractor was either negligent or at
fault. Id. at 670. The court instead found that “[t]he language of the
agreement leaves no doubt the parties intended Amtech should indemnify
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Continental irrespective of whether Continental’s loss arose by reason of
Amtech’s negligence or for any other reason except for the sole negligence
or willful misconduct of Continental.” Id. at 671.
¶14 Swann’s subcontract contains nearly the same language; its
indemnity obligation reaches any claim “arising out of or in connection
with [Swann’s] work performed for [Amberwood] . . . regardless of any
active and/or passive negligent act or omission of [Amberwood]” and only
excepts claims arising out of Amberwood’s sole negligence or willful
misconduct. Accordingly, the trial court correctly held that Amberwood
did not have to show Swann’s was negligent to recover.
II. Amberwood Was Not Required to Prove Causation to Recover.
¶15 Swann’s next argues it only was obligated to indemnify
Amberwood for damages “that ha[d] a direct causal connection to Swann’s
acts or omissions,” citing MT Builders. But MT Builders is distinguishable
because the subcontract at issue there required indemnity for damages
“caused in whole or in part by any negligent act or omission of the
Subcontractor or anyone directly or indirectly employed by him or anyone
for whose acts he may be liable.” 219 Ariz. at 303-04, ¶ 16, 197 P.3d at 764-
65 (emphasis added). As discussed above, Swann’s subcontract required it
to indemnify Amberwood for any claims arising out of or connected to
Swann’s work, not merely those caused by Swann’s negligent acts or
omissions. We will not impose a causation requirement the parties did not
include in their contract. See Evans Withycombe, Inc. v. W. Innovations, Inc.,
215 Ariz. 237, 242, ¶ 20, 159 P.3d 547, 552 (App. 2006) (“The extent of a
contractual duty to indemnify ‘must be determined from the contract.’”
(quoting INA Ins. Co. of N. Am. v. Valley Forge Ins. Co., 150 Ariz. 248, 252, 722
P.2d 975, 979 (App. 1986))).
¶16 Swann’s also contends it can only be held liable for its pro rata
share of Amberwood’s damages under the Uniform Contribution Among
Tortfeasors Act (“UCATA”), which largely abolished joint and several
liability. UCATA, however, does not impair Amberwood’s contractual
indemnity rights. See A.R.S. § 12-2501(F)(1) (2016) (UCATA does not
“[i]mpair any right of indemnity under existing law”); cf. State Farm Ins. Cos.
v. Premier Manufactured Sys., Inc., 217 Ariz. 222, 228, ¶ 26, 172 P.3d 410, 416
(2007) (“[I]ndemnification is not at all inconsistent with apportionment of
fault under § 12–2506.”).
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III. Swann’s Waived Its Objections to Amberwood’s Alleged Failure to
Provide Proper Notice of the Litigation Settlement.
¶17 Swann’s next contends Amberwood waived its
indemnification rights by not giving Swann’s timely notice of its
settlements with the eight litigation plaintiffs.2 Swann’s raised this issue in
its motion for partial summary judgment, which the trial court denied, but
did not raise it in its motion for new trial. Thus, unless the issue is purely
one of law, it is waived on appeal. See John C. Lincoln Hosp. & Health Corp.
v. Maricopa Cty., 208 Ariz. 532, 539, ¶ 19, 96 P.3d 530, 537 (App. 2004).
¶18 Swann’s contends the issue is one of law because the trial
court “affirmatively found . . . that Swann’s had repudiated its duty to
defend ‘long before the settlement at issue.’” But the trial court’s explicit
repudiation finding was one of fact, not law. Waiver therefore applies.
IV. The Trial Court Did Not Abuse Its Discretion in Awarding
Amberwood Defense Costs and Attorneys’ Fees.
¶19 Swann’s next argues that the trial court awarded Amberwood
excessive defense costs and fees. Swann’s first challenges the defense costs
award based on its contention that the trial court erred in denying its
motion for partial summary judgment. Swann’s failed to preserve this issue
in its motion for new trial; accordingly, it is waived on appeal.
¶20 Swann’s also contends the trial court erred in awarding
Amberwood attorneys’ fees for services related to Amberwood’s thirdparty
claims against the settling subcontractors and by not allocating the
fees among all subcontractors on a pro rata basis.
¶21 We review the amount of a fee award for an abuse of
discretion. Modular Mining Sys., Inc. v. Jigsaw Techs., Inc., 221 Ariz. 515, 521,
¶ 21, 212 P.3d 853, 859 (App. 2009). We will affirm if the award has a
reasonable basis even if the trial court gave no reasons for its decision.
Fulton Homes Corp. v. BBP Concrete, 214 Ariz. 566, 569, ¶ 9, 155 P.3d 1090,
1093 (App. 2007).
¶22 In its briefing to this court, Swann’s has not shown the award
lacked any reasonable basis; indeed, its arguments relative to this issue are
2 As previously noted, the other ten claimants proceeded to arbitration
of their claims on the merits.
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cursory at best. We therefore affirm the defense costs and attorneys’ fees
awards.
V. The Trial Court Did Not Abuse Its Discretion by Admitting
Amberwood’s Expert Evidence.
¶23 Swann’s contends the trial court erred in overruling its
disclosure objections to Amberwood’s expert witness’ testimony and list of
repair costs. We will not disturb the trial court’s disclosure rulings absent
an abuse of discretion. Marquez v. Ortega, 231 Ariz. 437, 441, ¶ 14, 296 P.3d
100, 104 (App. 2013).
¶24 We first note that Swann’s raised its disclosure objections at
trial before Amberwood offered either the list or repair costs or the expert’s
testimony into evidence. The trial court declined to rule on the objections
at that time but allowed Swann’s to renew its objection to the list when it
was offered into evidence. The trial court also stated that it would “make
rulings on particular testimony” as it was presented. Swann’s failed to
object to any part of the expert’s testimony on disclosure grounds as it was
offered. The trial court thus did not err in finding Swann’s waived any
objections to the expert testimony.
¶25 Swann’s did renew its objection to the repair costs list, which
the trial court overruled. But Swann’s has not shown that the trial court
abused its discretion in doing so. Amberwood’s expert testified that the list
was a compilation of items taken from cost of repair reports prepared
several years earlier that he believed Swann’s was at least partially
responsible for. Swann’s did not rebut this testimony or offer anything to
show that the substance of the list had not been previously known and
timely disclosed. On this record, we therefore find no abuse of discretion.
VI. Swann’s Was Entitled to an Offset Representing Settlement
Payments Amberwood Already Had Received.
¶26 In its cross-appeal, Amberwood challenges the trial court’s
decision to grant Swann’s an offset representing the funds Amberwood
received in its settlements with other subcontractors. Citing Summers v.
Gloor, 239 Ariz. 222, 368 P.3d 930 (App. 2016), Amberwood contends it was
Swann’s burden to prove the offset and that Swann’s offered no evidence
at trial to meet that burden.
¶27 Generally, the party claiming an offset has the burden to
prove it. See, e.g., Harmony at Madrona Park Owners Ass'n v. Madison
Harmony Dev., Inc., 253 P.3d 101, 105 (Wash. Ct. App. 2011). But here, the
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parties stipulated that Amberwood had already received $479,400 in
settlement funds before trial. Amberwood also does not dispute that,
absent the offset, it would have received a double recovery. We therefore
affirm the offset.
VII. Attorneys’ Fees on Appeal.
¶28 Amberwood requests its attorneys’ fees incurred on appeal
under the subcontract, and both parties request fees under A.R.S. § 12-
341.01(A) (2016). Amberwood does not cite any subcontract provision that
authorizes a fee award for its express indemnity claim. We therefore deny
that request.
¶29 In our discretion, we also decline to award fees under § 12-
341.01(A) to either party. See Associated Indem. Corp. v. Warner, 143 Ariz.
567, 570, 694 P.2d 1181, 1184 (1985) (stating that § 12-341.01(A) does not
require an award of fees to the prevailing party); Autenreith v. Norville, 127
Ariz. 442, 444, 662 P.2d 1, 3 (1980) (same). We will, however, award
Amberwood its costs as the successful party in this appeal upon compliance
with Arizona Rule of Civil Appellate Procedure 21. See Ocean West
Contractors, Inc. v. Halec Constr. Co., 123 Ariz. 470, 473, 600 P.2d 1102, 1105
(1979) (“The award of money is . . . an important item to consider when
deciding who, in fact, did prevail. The fact that a party did not recover the
full measure of relief requested does not mean that he is not the successful
party. Neither does the fact that the amount of the claim is set off or
reduced by counterclaim mean that the plaintiff was not the successful
party”) (internal citations omitted).

Outcome: ¶30 We affirm the trial court’s judgment and deny Amberwood’s
cross-appeal.

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