Hkb, Inc. v. Imperial

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UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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

HKB, INC., Plaintiff/Appellee,

v.

IMPERIAL CRANE SERVICES, INC., Defendant/Appellant.

No. 1 CA-CV 20-0402
FILED 6-8-2021

Appeal from the Superior Court in Maricopa County
No. CV2018-000548
The Honorable Roger E. Brodman, Judge

AFFIRMED IN PART; VACATED IN PART; REMANDED

COUNSEL

Broening Oberg Woods & Wilson, P.C., Phoenix
By Tyler M. Abrahams, Robert T. Sullivan, Kelley M. Jancaitis
Counsel for Plaintiff/Appellee

DKL Law, PLLC, Tempe
By David W. Lunn
Counsel for Defendant/Appellant
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Decision of the Court

MEMORANDUM DECISION

Judge Maria Elena Cruz delivered the decision of the Court, in which
Presiding Judge Jennifer M. Perkins and Judge Randall M. Howe joined.

C R U Z, Judge:

¶1 Imperial Crane Services, Inc. (“Imperial”) appeals the
superior court’s denial of a motion for new trial challenging rulings made
after a bench trial that awarded HKB, Inc. dba Southwest Industrial Rigging
(“Southwest”) contractual interest on a pre-judgment interest calculation
and attorneys’ fees. Imperial also appeals the court’s pre-judgment award
of sanctions to Southwest. For the following reasons, we vacate that portion
of the judgment ordering interest on the pre-judgment interest calculation
and remand for a revised judgment.1 We lack jurisdiction to address the
sanctions ruling and affirm all other rulings challenged by Imperial.

FACTUAL AND PROCEDURAL HISTORY

¶2 Beginning in 2015, the parties entered into several agreements
for Imperial to lease certain cranes from Southwest, which Imperial would
use or re-rent to its own customers.

¶3 The lease agreements were written in two different versions,
both of which required Imperial to pay interest on unpaid rent accruing at
18% annually. Neither version of the lease agreement provided for
compound interest to accrue. Imperial would occasionally ask Southwest
for rent abatement for a particular leased unit, described by Imperial as
being “off-rent” when the unit was not in use. Southwest occasionally
granted Imperial rent abatement based on Imperial’s representation that a
particular unit was not in use by Imperial or its sublessee.

1 During the pendency of the instant appeal Appellants filed a motion
to suspend the appeal and revert jurisdiction to the superior court, claiming
that Appellees had not disclosed all payments received regarding the repair
of unit 1587. We have summarily denied that motion via separate order
and, without taking a position on the merits, leave the matter of any
potential credits due on the recalculation of the judgment amount owed for
the superior court to determine on remand.

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¶4 In 2017, Imperial stopped paying rent on several of
Southwest’s cranes. Southwest invoiced Imperial and requested payment
for unpaid lease amounts.

¶5 When Imperial did not pay, Southwest sued Imperial,
alleging breach of contract, breach of the implied covenant of good faith
and fair dealing, common law fraud, negligent misrepresentation,
conversion, trespass to chattels, negligence, and unjust enrichment.
Southwest sought $990,524 in overdue rent plus accrued interest.

¶6 Southwest moved for declaratory judgment requesting a
declaration that Imperial owed interest at 18% annually on all unpaid or
late-paid rents. Imperial responded that Southwest had waived its right
under the lease agreements to collect interest. The superior court ruled
Imperial owed 18% interest on any unpaid amounts.

¶7 After a three-day bench trial, the superior court found that
Imperial breached its lease contracts and failed to pay Southwest for rents
owed. As part of its ruling, the court found that Southwest waived its right
to reject retroactively and universally the “off-rent” rent-abatement
practice. The court ordered Imperial to pay Southwest $406,959.42 for
unpaid rents plus interest at 18% in the amount of $237,249.16, for a total
judgment of $644,208.58. The court also ordered Imperial pay $432,000 in
attorneys’ fees pursuant to the lease agreements.

¶8 Upon reviewing Southwest’s proposed form of judgment, the
superior court found that Southwest did not waive its right to collect
interest, finding as a factual matter that Imperial failed to meet its burden
to prove waiver. The court entered final judgment ordering Imperial to pay
interest on the total judgment—including on the interest amount of
$237,249.16—at the contractual rate of 18% until paid. Imperial filed
motions to amend the judgment and for new trial, which the court denied.

¶9 We have jurisdiction over Imperial’s timely appeal from the
denial of the motion for new trial under Arizona Revised Statutes (“A.R.S.”)
section 12-2101(A)(5)(a). This court dismissed Southwest’s cross-appeal
upon Southwest’s motion.

DISCUSSION

¶10 We generally review the denial of motion for new trial for
abuse of discretion. Health for Life Brands, Inc. v. Powley, 203 Ariz. 536, 542,
¶ 28 (App. 2002).

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I. Right to Collect Interest

¶11 Imperial argues that because Southwest repeatedly failed to
invoice for interest on late-paid invoices, the superior court erred in
determining Southwest did not waive its right to collect interest.

¶12 Waiver is the intentional relinquishment of a known right and
can be shown by conduct inferring intentional relinquishment. Am. Cont’l
Life Ins. Co. v. Ranier Constr. Co., 125 Ariz. 53, 55 (1980). Whether waiver
occurs is a fact question. Minjares v. State, 223 Ariz. 54, 58, ¶ 17 (App. 2009).
The superior court’s finding that Southwest did not waive its right to collect
interest is binding on this court unless that finding is clearly erroneous. Id.
at 58-59, ¶ 17. A factual finding is not clearly erroneous if supported by
substantial evidence. City of Tucson v. Clear Channel Outdoor, Inc., 218 Ariz.
172, 189, ¶ 58 (App. 2008).

¶13 Here, Imperial points to no evidence that Southwest ever
agreed to waive interest or acted in any way inconsistent with the right to
collect interest. The alleged failure to invoice for interest does not constitute
a waiver of the right to collect interest. Imperial even stipulated in the joint
pretrial statement as a material fact that “neither lease form requires that
Southwest invoice Imperial for the rents or interest to accrue or be due.”

¶14 Imperial argues that because the superior court ruled
Southwest waived its rights in off-rent situations, the court likewise should
have found Southwest waived its right to collect interest under the lease
agreements. However, “[t]he waiver of one right under a contract does not
necessarily waive other rights under the contract.” Ranier, 125 Ariz. at 55.
Because the superior court’s factual finding on waiver was not clearly
erroneous, we uphold it.

II. Calculation of Amount of Interest Owed

¶15 In the alternative, Imperial argues the superior court erred in
calculating the amount of interest Imperial owed Southwest. Imperial
argues that Southwest waived interest until it filed the complaint because
it submitted no invoices to Imperial before filing the complaint that
requested interest. This argument merely reframes its interest-waiver
argument above. Again, no invoices were necessary to trigger the interest
provision. The timing of the filing of the complaint does not affect the
waiver analysis. We find no error.

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III. 18% Interest on Interest Award

¶16 Imperial argues the superior court erred in interpreting the
lease agreements’ interest provisions and in ordering Southwest to recover
interest on the total judgment, including $237,249.16 in pre-judgment
interest. Southwest argues that post-judgment interest at the contractually
agreed upon rate applies to the entire amount of past-due obligations,
including the pre-judgment interest portion.

¶17 We review the superior court’s interpretation of leases de
novo. Andrews v. Blake, 205 Ariz. 236, 240, ¶ 12 (2003). We interpret a
contract to make it reasonable and effective, giving ordinary meaning to
words, and construing the meaning of a provision from the language the
parties used. Cnty. of La Paz v. Yakima Compost Co., 224 Ariz. 590, 599, ¶ 16
(App. 2010).

¶18 Two versions of the lease agreements are at issue. The short
form states that “[u]npaid rentals shall bear Interest at 18% per annum.”
The long form states that “Lessee shall pay interest on any overdue Rent or
other late payment” at 18% per year, which “shall accrue up to and
including the date of the final payment of all amounts due regardless of the
fact that the overdue amounts have been reduced to judgment.” Citing the
long-form lease agreement language calling for interest on “late payments,”
the superior court explained that because $237,249.16 in interest was due at
the time it rendered judgment, that amount constituted a “late payment”
and an additional 18% was due on that amount. But a late payment is
distinct from interest. Moreover, neither lease agreement expressly
provides for interest on interest, so-called compound interest, to accrue. See
Metzler v. BCI Coca-Cola Bottling Co. of L.A., 235 Ariz. 141, 146, ¶ 22 (2014)
(comparing interest on interest with compound interest). Rather, both lease
agreements call for simple interest. Cherokee Nation v. United States, 270 U.S.
476, 490 (1926) (“The general rule, even as between private persons, is that,
in the absence of a contract therefor or some statute, compound interest is
not allowed to be computed upon a debt.”); Fairway Builders, Inc. v. Malouf
Towers Rental Co., 124 Ariz. 242, 267 (App. 1979) (declining to award
compound interest in absence of supporting authority).

¶19 Southwest argues that awarding interest on interest is
permissible, citing Markham Contracting Co. v. First American Title Insurance
Co., 1 CA-CV 12-0195, 2013 WL 3828690 (Ariz. App. July 18, 2013) (mem.
decision) for support. In Markham, a panel of this court found that a general
contractor was entitled to post-judgment interest provided by A.R.S. § 44-
1201(B) on the entire underlying judgment in a mechanics’ lien foreclosure

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action, including post-judgment interest on the pre-judgment interest. Id.
at *13-*15, ¶¶ 52-58. Markham is distinguishable because it involved
statutory post-judgment interest under A.R.S. § 44-1201(B). Here, the court
awarded interest pursuant to lease agreements, not a statute. See A.R.S.
§ 44-1201(A) (mandating that “[i]nterest on any judgment that is based on
a written agreement evidencing a loan, indebtedness or obligation . . . shall
be at the rate of interest provided in the agreement and shall be specified in
the judgment.”). Given the lease agreements provide for simple interest,
the judgment awarding 18% on the accumulated interest of $237,249.16 was
in error. We vacate that portion of the judgment ordering 18% contractual
interest on the interest and remand for a judgment consistent with this
decision.

IV. Rent Abatement

¶20 We do not address Imperial’s challenge to the superior court’s
factual finding on the reasonable time to repair a particular damaged crane,
which, in turn, affected the court’s unpaid principal rent-collection
calculation. Because this argument is tantamount to challenging the
principal amount owed, which Imperial does not dispute, Imperial
withdraws this argument.

V. Testimony of Harry Baker

¶21 Imperial asserts that the superior court erred by allowing
Harry Baker, Southwest’s president, to testify regarding Southwest’s
damages. We will affirm the superior court’s evidentiary rulings unless it
clearly abuses its discretion with resulting prejudice. Gemstar Ltd. v. Ernst
& Young, 185 Ariz. 493, 506 (1996).

¶22 Although Southwest’s disclosure of Baker and several other
witnesses included a global statement of expected testimony for all
witnesses rather than detailing specific testimony for each, the record
supports the superior court’s factual finding that Baker was adequately
disclosed to testify about damages generally. Further, in the order denying
motion for new trial, the court specifically noted that it disregarded Baker’s
testimony on damages issues material to Imperial. Ultimately, Imperial
does not challenge the court’s calculation as to the principal amount due for
damages and points to no specific testimony that was improper or that
resulted in prejudice. The court did not abuse its discretion by allowing
Baker to testify at trial.

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VI. Attorneys’ Fees

¶23 Imperial argues the superior court erred in finding Southwest
the prevailing party and awarding attorneys’ fees pursuant to the lease
agreements and A.R.S. § 12-341.01(A).

¶24 For purposes of awarding attorneys’ fees under § 12-
341.01(A), the determination of the successful party is within the sole
discretion of the superior court, a finding we will uphold on appeal if any
reasonable supporting basis exists. Associated Indem. Corp. v. Warner, 143
Ariz. 567, 570 (1985); Kaman Aerospace v. Ariz. Bd. of Regents, 217 Ariz. 148,
157, ¶ 35 (App. 2007). We review the record in the light most favorable to
upholding the court’s determination. Rowland v. Great States Ins. Co., 199
Ariz. 577, 587, ¶ 31 (App. 2001).

¶25 Imperial argues that Southwest was not the prevailing party
because Southwest lost most of its claims, including the tort claims, and did
not recover a significant portion of its claimed damages. But the superior
court in its discretion may award attorneys’ fees to a partially successful
party. Berry v. 352 E. Virginia, L.L.C., 228 Ariz. 9, 14, ¶ 24 (App. 2011). Here,
the court considered the factors in Associated Indemnity Corp., relevant to a
discretionary attorney-fees determination and found Southwest the
prevailing party on the totality of the litigation. See 143 Ariz. at 570. The
record supports the court’s determination. Shortly after Southwest filed its
complaint, Imperial acknowledged it owed Southwest money pursuant to
its contractual obligations and paid Southwest $207,498.20. Southwest
ultimately obtained a judgment on its breach of contract claim for over
$644,208.58, including principal and interest. Although Southwest lost on
its fraud claim, the court found that the breach of contract claim was the
“key claim” in this litigation.

¶26 Imperial also challenges the amount of attorneys’ fees as
unreasonable, which we likewise review for abuse of discretion and will
uphold upon finding a reasonable basis. ABC Supply, Inc. v. Edwards, 191
Ariz. 48, 52 (App. 1996).

¶27 Imperial contends the fee award is unreasonable because
counsel for Southwest billed excessive hours without concern for client
oversight due to its contingency-fee arrangement, blocked billed, and had
numerous legal professionals billing simultaneously. However, the
superior court did not award Southwest attorneys’ fees based on the
number of hours billed, but rather on its contingency-fee arrangement
based on Southwest’s overall recovery. Section 12-341.01 authorizes the

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court to award attorneys’ fees in a contingency-fee case. See Sparks v.
Republic Nat’l Life Ins. Co., 132 Ariz. 529, 545 (1982). In contingency-fee
cases, the court may award attorneys’ fees based on the total amount of the
client’s recovery. See Marcus v. Fox, 155 Ariz. 524, 525-26 (App. 1987).

¶28 Here, noting that Southwest had a 40% fee agreement with its
counsel, the superior court used that agreement as the “fairest method to
calculate Imperial’s liability for attorneys’ fees.” The court found that
Southwest’s total award since filing lawsuit was $1,081,071, including
Imperial’s insurer’s payment of $229,364.29 for property damage,
Imperial’s payment of $207,498.20 during litigation, and the final judgment
of accumulated interest plus principal for $644,208.58. The court then
awarded attorneys’ fees in an amount slightly less than 40% of the total
recovery. Because the court used a reasonable basis to determine the
amount of attorneys’ fees, we find no error in the amount of fees awarded.

VII. Discovery Sanctions

¶29 Finally, Imperial challenges the superior court’s pre-
judgment award of discovery sanctions to Southwest based on disclosure
violations. Southwest argues this court lacks jurisdiction to review the
order because Imperial only appeals from the denial of the motion for new
trial and not the judgment. The scope of our review of an appeal from a
motion denying a new trial is limited to matters challenged as error in the
underlying motion. Van Dusen v. Registrar of Contractors, 12 Ariz. App. 518,
520 (1970); Wendling v. Sw. Sav. & Loan Ass’n, 143 Ariz. 599, 602 (App. 1984).
Imperial did not challenge the sanctions ruling in its motions to amend or
for new trial. Because Imperial has failed to appeal the award of discovery
sanctions, our review is limited to the court’s denial of the motion for new
trial. Therefore, we do not address the sanctions ruling.

VIII. Attorneys’ Fees on Appeal

¶30 Southwest seeks attorneys’ fees on appeal pursuant to the
lease agreements and § 12-341.01. Pursuant to the lease provisions
providing for recovery of attorneys’ fees, and finding Southwest the overall
prevailing party on appeal, in our discretion we award reasonable
attorneys’ fees to Southwest.

CONCLUSION

¶31 For the foregoing reasons, we vacate that portion of the
superior court’s judgment ordering interest on the pre-judgment interest
and remand for a revised judgment consistent with this decision. We affirm

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all other rulings. We award reasonable attorneys’ fees on appeal to
Southwest. Pursuant to A.R.S. § 12-342, we award costs on appeal to
Southwest upon compliance with Rule 21 of the Arizona Rules of Civil
Appellate Procedure.

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

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