Camelot v. Genaro's

NOTICE: NOT FOR OFFICIAL PUBLICATION.
UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL
AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.

IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE

CAMELOT HOMES, Third-Party Plaintiff/Appellant,

v.

GENARO’S FRAMING CONSTRUCTION LLC, Third-Party
Defendant/Appellee.

No. 1 CA-CV 19-0704
FILED 6-9-2020

Appeal from the Superior Court in Maricopa County
No. CV2016-005810
The Honorable Connie Contes, Judge

AFFIRMED IN PART; VACATED IN PART; REMANDED

COUNSEL

Righi Fitch Law Group, P.L.L.C., Phoenix
By Richard L. Righi, Benjamin L. Hodgson
Counsel for Third-Party Plaintiff/Appellant

Sanders & Parks, P.C., Phoenix
By Mark G. Worischeck, Dillon J. Steadman
Counsel for Third-Party Defendant/Appellee
 CAMELOT v. GENARO’S
Decision of the Court

MEMORANDUM DECISION

Judge Maria Elena Cruz delivered the decision of the Court, in which
Presiding Judge Lawrence F. Winthrop and Judge David B. Gass joined.

C R U Z, Judge:

¶1 Camelot Homes (“Camelot”) appeals the superior court’s
ruling denying leave to amend its third-party complaint and granting
summary judgment against it on its third-party complaint, and the court’s
judgment awarding attorneys’ fees to Genaro’s Framing Construction
(“Genaro’s”). For the following reasons, we affirm. However, we vacate
and remand on the issue of attorneys’ fees.

FACTUAL AND PROCEDURAL HISTORY

¶2 Mark Hancock Development Corporation contracted with
Younger Brothers (“YB”) to perform trade contract work at a residential
development. Camelot is listed on the contract as the seller associated with
the residential development. YB subcontracted with Genaro’s to perform
framing work, and Genaro’s further subcontracted with Alvarez Framing
Services (“Alvarez”). YB and Genaro’s never performed any framing work
at the residential development. Alvarez’s employee, Vicente Cabrera, was
injured at the development on July 3, 2014, when he attempted to manually
lift a framing wall off the ground without mechanical assistance.

¶3 Cabrera filed a complaint against Camelot alleging
negligence and agency/joint venture liability based on his personal injury
claim. Camelot answered and filed a third-party complaint against
Genaro’s alleging common law indemnity and negligence.

¶4 Almost three years later, Genaro’s moved for summary
judgment on Camelot’s third-party complaint. Within weeks of Genaro’s
moving for summary judgment, Camelot and YB executed an assignment
agreement in which YB assigned to Camelot rights in claims, contracts, and
damages with and against Genaro’s, including contract, tort, and indemnity
claims. The assignment agreement referenced the subcontract between YB
and Genaro’s, which included an express indemnity provision for work
performed on the residential construction project.

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¶5 Shortly after executing the assignment agreement, Camelot
moved to amend its third-party complaint to allege express indemnity,
gross negligence, and breach of contract against Genaro’s.

¶6 The superior court denied Camelot’s motion to amend its
third-party complaint, granted Genaro’s motion for summary judgment,
and awarded Genaro’s $70,000 in attorneys’ fees.

¶7 We have jurisdiction over Camelot’s timely appeal under
Arizona Revised Statutes (“A.R.S.”) section 12-2101(A)(1).

DISCUSSION

I. Denial of Motion for Leave to Amend Complaint

¶8 In its motion to amend its third-party complaint, Camelot
sought to assert claims of express indemnity and breach of contract
premised on express indemnity against Genaro’s by virtue of the
assignment agreement between Camelot and YB and the subcontract
between YB and Genaro’s. Camelot also sought to allege that it was a third-
party beneficiary of the assignment agreement and the subcontract between
YB and Genaro’s and that Genaro’s breached a contractual safety duty to
maintain a safe work environment. Finally, Camelot sought to assert a
gross negligence claim against Genaro’s, alleging Genaro’s owed Camelot
a duty to maintain a safe working environment. The superior court denied
the motion, finding as a matter of law Camelot could not prevail under any
of the claims.

¶9 We review for an abuse of discretion the denial of a motion
for leave to amend. ELM Ret. Ctr., LP v. Callaway, 226 Ariz. 287, 292, ¶ 25
(App. 2010). Although granting leave to amend is within the superior
court’s discretion, “[l]eave to amend must be freely given when justice
requires.” Ariz. R. Civ. P. 15(a)(2); ELM Ret., 226 Ariz. at 292, ¶ 25. We will
affirm denial of leave to amend absent clear abuse of discretion. In re Estate
of Torstenson v. Valley Nat’l Bank, 125 Ariz. 373, 376 (App. 1980). Denying
leave to amend when the movant has unduly delayed or the amendment is
futile is not an abuse of discretion. Id. at 376-77 (citing Foman v. Davis, 371
U.S. 178, 182 (1972)).

¶10 Cabrera was injured in 2014 and filed his personal injury
lawsuit in 2016. Camelot was the sole defendant. Cabrera did not sue YB
and the statute of limitations on Cabrera’s claims against YB expired at the
latest in 2016. See A.R.S. § 12-542. Camelot waited until 2019 to execute an
assignment agreement with YB and seek leave to amend to add new claims

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based solely on the assignment agreement. This delay was five years after
the underlying injury occurred, three years after the underlying lawsuit had
been filed, two and a half years after Camelot filed its third-party
complaint, and after Genaro’s filed its motion for summary judgment on
the third-party claims.

¶11 Further, the assignment agreement purported to assign to
Camelot all rights in claims and damages against Genaro’s, including
claims YB may have had arising out of contract, tort, or indemnity. But YB
had no rights arising out of express indemnity or tort in 2019. It had not
been sued and could never be liable to Cabrera on these claims. Thus,
Camelot’s proposed express indemnity claim, breach of contract claim
premised on express indemnity, and gross negligence claim premised on a
contractual relationship were futile as a matter of law.

¶12 Additionally, Camelot in part bases its proposed contract
claim on an alleged breach of a contractual safety provision arising from its
purported third-party beneficiary status from the various agreements.
Specifically, Camelot alleges it, as YB’s “client” in the original agreement
between Camelot and YB, is an intended third-party beneficiary of the
YB/Genaro’s agreement and, consequently, an intended third-party
beneficiary of the Genaro’s/Alvarez subcontract. But YB/Genaro’s and the
Genaro’s/Alvarez agreements do not mention Camelot or YB’s “client.”
And until the present lawsuit, Camelot did not even know YB and Genaro’s
entered a subcontracting agreement. Simply stated, Camelot is not a third-
party beneficiary of the YB/Genaro’s and the Genaro’s/Alvarez
agreements such as to give rise to a breach of contract claim. See Nahom v.
Blue Cross & Blue Shield of Ariz., Inc., 180 Ariz. 548, 552 (App. 1994) (recovery
as third-party beneficiary requires indication in contract of intent to
intentionally and directly benefit that third party and third party must be
primary party in interest); Irwin v. Murphey, 81 Ariz. 148, 153 (1956);
Sherman v. First Am. Title Ins. Co., 201 Ariz. 564, 567, ¶ 6 (App. 2002).

¶13 The gross negligence claim, for which Camelot argues
Genaro’s owes a duty based on this same contractual relationship, also fails
as futile. Because Camelot was not a party to the contract between YB and
Genaro’s, Genaro’s did not owe Camelot a duty to comply with that
contract and thus could not have breached any duty to Camelot. And, as
discussed above, the purported assignment of any claims arising in tort did
not give rise to a contractual duty. Further, Sarmiento v. Stubblefield’s Custom
Concrete, Inc., 178 Ariz. 440 (App. 1994) does not establish a non-contractual
duty, as argued by Camelot. Sarmiento does not impose an upstream duty
from a subcontractor to a general contractor. 178 Ariz. at 442-43 (holding

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subcontractor “had a duty to exercise available discretion in performing its
work to avoid creating an unreasonable risk to other subcontractors’
employees”). In the absence of duty, Camelot cannot be liable to Genaro’s
for gross negligence. Gipson v. Kasey, 214 Ariz. 141, 143, ¶ 11 (2007).

¶14 Because we find Camelot unduly delayed in seeking
amendment and the proposed amendments are futile, the superior court
did not abuse its discretion in denying leave to amend. Torstenson, 125 Ariz.
at 376-77.

II. Motion for Summary Judgment

¶15 We review de novo the grant of summary judgment, viewing
the “evidence in the light most favorable” to Camelot, against whom
summary judgment was taken. Normandin v. Encanto Adventures, LLC, 246
Ariz. 458, 460, ¶ 9 (2019). Summary judgment is proper when there is no
genuine issue of material fact and the moving party is entitled to judgment
as a matter of law. Ariz. R. Civ. P. 56(a).

¶16 After Camelot filed its motion to amend the complaint, and in
response to Genaro’s motion for summary judgment, Camelot notified the
court that it was “no longer alleging a count of common law/implied
indemnity against Genaro’s, and as such, Genaro’s motion for summary
judgment on this withdrawn count is now moot.” Given Camelot’s
withdrawal of its negligence and common law indemnity claims, and its
failure to set forth any facts demonstrating a genuine issue for trial on these
claims, we affirm summary judgment. Ariz. R. Civ. P. 56(e) (to demonstrate
a triable issue of fact, party opposing summary judgment must set forth
specific facts demonstrating genuine issue for trial).

III. Attorneys’ Fees

¶17 Camelot argues Genaro’s is not entitled to the full attorneys’
fee award of $70,000 under A.R.S. § 12-341.01(A) because its claims of
common law indemnity and negligence asserted in its third-party
complaint do not arise out of contract. Camelot argues the fee award
should be reduced by at least $47,625, representing the amount of fees and
costs incurred by Genaro’s before Camelot attempted to amend the
complaint to assert contractual claims.

¶18 We review de novo the application of A.R.S. § 12-341.01(A) to
Camelot’s claims. Chaurasia v. Gen. Motors Corp., 212 Ariz. 18, 26, ¶ 24 (App.
2006). Attorneys’ fees under A.R.S. § 12-341.01(A) are limited to actions
“arising out of a contract.”

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¶19 In analyzing whether a tort claim such as negligence “arises
out of a contract,” this court explained:

[T]he court should look to the fundamental nature of the
action rather than the mere form of the pleadings. The
existence of a contract that merely puts the parties within
tortious striking range of each other does not convert ensuing
torts into contract claims. Rather, a tort claim will “arise out
of contract” only when the tort could not exist “but for” the
breach or avoidance of contract. When the duty breached is
one implied by law based on the relationship of the parties,
that claim sounds fundamentally in tort, not contract. In such
cases, it cannot be said that the plaintiff’s claim would not
exist “but for” the contract. The test is whether the defendant
would have a duty of care under the circumstances even in
the absence of a contract.

Ramsey Air Meds, LLC v. Cutter Aviation, Inc., 198 Ariz. 10, 15-16, ¶ 27 (App.
2000). In its third-party complaint, Camelot alleged a breach of a duty to
comply with a safety standard of care. Although Camelot references the
various subcontracts in the third-party complaint, Camelot had no contract
directly with Genaro’s. Instead, Camelot’s alleged duty seems to be that of
the general contractor’s duty of care to provide a safe work environment,
which is implied in law. See Lewis v. N.J. Riebe Enters., Inc., 170 Ariz. 384,
388 (1992). As such, Camelot’s negligence claim does not arise out of
contract.

¶20 Moreover, common law indemnity is an equitable claim
based on an obligation of “one party to make good a loss or damage another
party has incurred.” Evans Withycombe, Inc. v. W. Innovations, Inc., 215 Ariz.
237, 241-42, ¶¶ 18-20 (App. 2006) (internal quotation marks and citation
omitted); see also Masaryk v. Mendolsohn Constr. LLC, 1 CA-CV 13-0085, 2015
WL 1456636, at *5, ¶ 20 (Ariz. App. Mar. 31, 2015) (mem. decision). Because
an equitable remedy is not a theory of contract recovery, A.R.S. § 12-341.01
does not apply to a common law indemnity claim. See Double AA Builders,
Ltd. v. Grand State Constr. LLC, 210 Ariz. 503, 511-12, ¶¶ 45-48 (App. 2005)
(promissory estoppel is an equitable remedy and A.R.S. § 12-341.01(A) did
not apply).

¶21 Because Camelot’s third-party claims do not arise out of
contract, we vacate the attorneys’ fee award and remand for the superior
court’s recalculation as it relates to reasonable fees incurred in connection

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with Camelot’s late assertion of breach of contract and contractual
indemnity claims.

CONCLUSION

¶22 For the foregoing reasons, we affirm the superior court’s
ruling denying leave to amend Camelot’s third-party complaint and
granting summary judgment to Genaro’s. We vacate the attorneys’ fee
award and remand for recalculation by the superior court. In the exercise
of our discretion, we decline to award attorneys’ fees to either party, but we
award costs to Genaro’s upon compliance with Arizona Rule of Civil
Appellate Procedure 21.

AMY M. WOOD • Clerk of the Court
FILED: AA

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