A-1-CA-35872 | Omnilex

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Court of Appeals of New Mexico
Filed 5/16/2019 11:34 AM

OCR transcription for search; preserved printed pages are authoritative

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Court of Appeals of New Mexico
Filed 5/16/2019 11:34 AM

al
IN THE COURT OF APPEALS OF THE STATE OF NEW veut {
Ma

STATE OF NEW MEXICO for the
use and benefit of ASHCRAFT
MECHANICAL INC., a New Mexico
corporation,

Plaintiff/Counterdefendant
-Appellee,

MAKWA BUILDERS, LLC,

Defendant/Counterclaimant
-Appellant,

and

STATE OF NEW MEXICO for the
use and benefit of ASHCRAFT
MECHANICAL, INC., a New Mexico

corporation,

Plaintiff-Appellee,

GREAT AMERICAN INSURANCE
COMPANY,

Defendant-Appellant,

and

No. A-1-CA-35872

Reynolds

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MAKWA BUILDERS, LLC,

Third-Party Plaintiff,

OHIO CASUALTY INSURANCE
COMPANY,

Third-Party Defendant.

APPEAL FROM THE DISTRICT COURT OF BERNALILLO COUNTY
Carl J. Butkus, District Judge

Calvert Menicucci, P.C.

Sean R. Calvert

Albuquerque, NM

for Appellee

Philip Dabney

P. Reid Griffith

Los Alamos, NM

SMTD LAW LLP

Robert J. Berens

Phoenix, AZ

for Appellant
MEMORANDUM OPINION

DUFFY, Judge.

{1}. This appeal arises from a dispute between a subcontractor, Ashcraft

Mechanical, Inc., and a general contractor, Makwa Builders, LLC, over payment and

offsets, respectively. Following a bench trial, the district court issued forty-seven
findings of fact and fifteen conclusions of law, and granted judgment in favor of
Ashcraft on all matters. Makwa appeals. We affirm the district court’s judgment.
BACKGROUND

(23 Makwa was the general contractor on a construction project to build a new
student union building for New Mexico Highlands University (NMHU) in the
summer of 2010. Makwa hired Ashcraft as a subcontractor. Ashcraft in turn
subcontracted parts of its contract and a portion of the work eventually fell to Hays
Plumbing & Heating.

33. | Ashcraft submitted a payment application in the amount of $59,336 for work
performed through the end of December 2011. About two months later, Makwa
informed Ashcraft that its December payment application had been adjusted down
to $21,558.08 but was otherwise approved. Ashcraft revised the application to reflect
the adjusted amount and resubmitted it to Makwa. Makwa stipulated at trial that it
was paid $21,558.08 by NMHU for Ashcraft’s December invoice, but that it did not
pay Ashcraft. In this same period, Hays submitted a claim to Makwa’s surety, Great
American Insurance Company, alleging it too had not been paid for work performed.
{44 NMHU terminated Makwa’s contract for convenience before construction
was complete, and Makwa then terminated its subcontract with Ashcraft. Having not

received payment from Makwa for the December payment application, Ashcraft

sued Makwa and Great American for breach of contract, violations of the Prompt
Payment Act (PPA), NMSA 1978, Sections 57-28-1 to -11 (2001, as amended
through 2007), and the Little Miller Act, NMSA 1978, Sections 13-4-18 to -20
(1923, as amended through 2015). Makwa filed an answer and a counterclaim for
breach of contract, seeking declaratory relief and an order requiring Ashcraft to
indemnify and defend it from Hays’s claim. The district court issued judgment in
favor of Ashcraft on all matters.

DISCUSSION

{5} All of the issues presented in this appeal involve mixed questions of law and
fact. “[We] review a district court’s interpretation of an unambiguous contract de
novo” and effectuate the intent of the parties by adopting a “reasonable construction
of the usual and customary meaning of the contract language.” Smith & Marrs, Inc.
v. Osborn, 2008-NMCA-043, J 10, 143 N.M. 684, 180 P.3d 1183 (internal quotation
marks and citation omitted). “The facts are reviewed to see if they are supported by
substantial evidence, but the legal conclusions flowing from those facts are reviewed
de novo.” Bank of Santa Fe v. Marcy Plaza Assocs., 2002-NMCA-014, 4 12, 131
N.M. 537, 40 P.3d 442; see also Sims v. Sims, 1996-NMSC-078, § 65, 122 N.M.
618, 930 P.2d 153 (“Findings of fact made by the district court will not be disturbed
if they are supported by substantial evidence.”). “We review the evidence in the light

most favorable to support the trial court’s findings, resolving all conflicts and

indulging all permissible inferences in favor of the decision below.” Jones v.
Schoellkopf, 2005-NMCA-124, § 8, 138 N.M. 477, 122 P.3d 844.

I. Waivers Were Not a Condition Precedent to Makwa’s Obligation to
Offer Payment

6} | Makwa argues that Ashcraft was not entitled to payment because Ashcraft
failed to submit lien waivers from its subcontractors, which Makwa claims is a
contractual condition precedent to payment. “Generally, a condition precedent is an
event occurring subsequently to the formation of a valid contract, an event that must
occur before there is a right to an immediate performance, before there is breach of
a contractual duty, and before the usual judicial remedies are available.” W.
Commerce Bank v. Gillespie, 1989-NMSC-046, J 4, 108 N.M. 535, 775 P.2d 737
(citing 3A A. Corbin, Corbin on Contracts § 628, at 16 (1960)).

{7} The parties’ contract identifies two types of waivers—conditional and
unconditional waivers. The conditional waiver states that it becomes effective and
that the subcontractor waives its right to assert a lien when the subcontractor has
been paid for its work. Rider D to the parties’ contract states that the conditional
waiver must be included with Ashcraft’s applications for payment and refers to a
form provided within the contract for Ashcraft to use.

{8} Separately, the contract identified unconditional waivers as a “condition
precedent” to payment. The unconditional waiver form was different from the

conditional waiver form, stating that the subcontractor had already been paid and,

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therefore, unconditionally waived its right to assert a lien against the project. Rider
D states clearly that Ashcraft was required to submit the unconditional waivers
“when the check is picked[]up.” Rider D also states:
After the first draw, and prior to the release of [next] payment,
[Ashcraft] shall submit unconditional lien waivers from all major
suppliers who have submitted Preliminary Lien Notices to Makwa
Builders, LLC, or furnished materials and/or labor on this
project....This procedure shall take place each month when the
subcontractor is to pick{]up his monthly draw check. (Emphasis added.)
493 At trial, Dawn Gurule, Ashcraft’s contract administrator and project
coordinator, testified that the parties followed a procedure consistent with Rider D,
stating that “I would submit a pay application. And normally I—a lien release would
follow with Ashcraft mechanical. Lien releases were then provided from our
subcontractors and suppliers to Makwa once we were notified that payment was
available.” (Emphasis added.)
{10} The plain, unambiguous language in the contract states that the unconditional
lien waivers were a condition precedent to payment, but that these waivers were not
due until Ashcraft was to pick up the monthly check; as such, Makwa necessarily
had a duty to offer payment to Ashcraft before Ashcraft’s duty to produce the
unconditional waivers arose. We conclude that Ashcraft’s duty to submit
unconditional lien waivers was a condition precedent to Makwa’s duty to release the

payment to Ashcraft, and not a condition precedent to Makwa’s duty to offer the

payment in the first place. The district court’s findings that Ashcraft had satisfied all

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conditions precedent to Makwa’s duty to pay, that payment was due to Ashcraft, and
that Makwa’s failure to pay was a material breach of the subcontract are supported
by substantial evidence.

Il. Makwa’s Claims for Offsets Are Not Supported

A. Offset Claim for Water Hauling Costs

411}. Makwa asserts that it is entitled to a $21,000 offset for amounts paid to Hays
to transport water to the construction site. Neither party disputes the district court’s
finding that “Ashcraft agreed to provide the means and methods to transport the
water from the job locations to its work.” The parties’ contract states: “Construction

Water: temporary water services for construction needs will be provided at certain

specific job locations. The subcontractor shall provide any and all methods by which

to transport water to its area where needed from points at which the water service is
located.” The district court found that
[t]he source of water for the project was originally located at a
park near the project.... During the course of the project, NMHU
changed the location of the source of the water to NMHU’s golf course.
Ashcraft declined to transport water from the NMHU golf course to the
project site.
The district court further found that “[t]he NMSU golf course was not a job location”

and that “Makwa was in breach of its Subcontract obligations by failing to provide

water on site.”

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{123} On appeal, Makwa challenges only two of the district court’s findings: (1) that
“Makwa was obligated under the terms of its Subcontract with Ashcraft to provide
temporary water for construction services to the project site”; and (2) that “[i]t was
not Ashcraft’s contractual obligation to transport water from its source [at the golf
course] to the area of the Project.”

{13} The plain language of the parties’ contract includes a promise by Makwa that
water would be provided at “certain specific job locations.” Makwa argues that “job
locations” is not synonymous with “jobsite,” a term used elsewhere in the parties’
contract. However, Makwa failed to challenge the district court’s finding that the
golf course was not a “job location” and this unchallenged finding is binding on
appeal. See Robey v. Parnell, 2017-NMCA-038, § 22, 392 P.3d 642 (“An
unchallenged finding of the trial court is binding on appeal.” (internal quotation
marks and citation omitted)). Moreover, as Makwa’s interpretation would render
meaningless the word “job” in “job location,” we conclude that the district court
correctly found that Makwa was obligated to provide water services at the project
site. See Smith & Marrs, Inc., 2008-NMCA-043, J 10 (stating that we adopt a
“reasonable construction of the usual and customary meaning of the contract
language”). Further, Makwa would have us read Ashcraft’s promise to transport
water in isolation to mean that Ashcraft agreed to transport water from any location

to the area where needed. This overlooks the mutual promises set forth in the

“Construction Water” paragraph, which must be read together. See Pub. Serv. Co.
of N.M. v. Diamond D Constr. Co., 2001-NMCA-082, ¥ 19, 131 N.M. 100, 33 P.3d
651 (“[W]e view the contract as a harmonious whole, give meaning to every
provision, and accord each part of the contract its significance in light of other
provisions.”). Ashcraft’s agreement to transport water immediately follows
Makwa’s promise that water would be provided at the job location and, read
harmoniously, means that Ashcraft agreed to transport water only from the water
source provided at the job location. The district court’s findings are supported by
substantial evidence and we conclude that the district court appropriately denied
Makwa’s claim for an offset for water transportation costs.

B. Claim for Offset for Attorney Fees

414} Makwa also claims that it is entitled to an offset of $16,711.50 for the attorney
fees it incurred to “defend” against a bond claim by Hays. While Ashcraft had a
contractual duty to defend, indemnify, and hold Makwa harmless, Makwa does not
point to any action taken by Hays to pursue its claim for payment other than
submitting its initial demand letter in November 2011. Makwa, and not Hays,
initiated litigation regarding Hays’s claim, and Hays declined to participate,
resulting in a default judgment in Makwa’s favor.

15}. To determine whether a contractual duty to defend has arisen, we look to the

facts asserted in the complaint. See, e.g., City of Albuquerque v. BPLW Architects &

Engineers, Inc., 2009-NMCA-081, J 11, 146 N.M. 717, 213 P.3d 1146 (“Because
the duty to defend is a contractual obligation, we hold that regardless of the type of
contract containing it, the duty to defend arises when the language of a complaint
states a claim that falls within the terms of the contract.”). Makwa fails to cite any
authority for the proposition that Ashcraft’s contractual duty to defend was triggered
when Makwa filed a lawsuit against Hays, nor does it persuade us that this duty can
or should be construed to require Ashcraft to pay attorney fees under these
circumstances. See Curry v. Great Nw. Ins. Co., 2014-NMCA-031, J 28, 320 P.3d
482 (“Where a party cites no authority to support an argument, we may assume no
such authority exists.”). We conclude that the district court did not err in finding that
Makwa is not entitled to an offset for any amount incurred in “defending against
Hays’s claim.”

C. Offset Claim for Refund of Bond Premium

416 Makwa asks for an offset of $7,051.09 for an amount it claims Ashcraft
“should have” received as a refund of its bond premium. Ashcraft secured and
maintained a performance bond for its work, and Makwa paid the bond premium.
Makwa asserts that because the contract was terminated early, the value of
Ashcraft’s ultimate scope of work decreased, and therefore, the bond premium
likewise “should have” decreased, resulting in a partial refund. As an initial matter,

Makwa failed to challenge any of the district court’s findings related to this claim.

See Seipert v. Johnson, 2003-NMCA-119, § 26, 134 N.M. 394, 77 P.3d 298 (“An
unchallenged finding of the trial court is binding on appeal.”). Further, Makwa does
not point to any provision in the parties’ contract that requires Ashcraft to reimburse
Makwa under these circumstances. Makwa provided no evidence that Ashcraft
received a refund. To the contrary, Ashcraft’s witness testified that Ashcraft was
asked to stay on the project and complete the work under the new general contractor
and never received a refund of any bond premium. Therefore, Makwa’s offset claim
fails.

III. Makwa’s Failure to Pay Ashcraft Violated the Prompt Payment Act

{17} Finally, Makwa argues that the district court erred in awarding interest and
attorney fees to Ashcraft under the PPA, raising the issue of whether the amount
owed to Ashcraft was “undisputed” and “due” pursuant to the PPA. The PPA
provides that when a contractor fails to pay its subcontractor within seven days of
receiving payment, interest accrues “beginning on the eighth day after payment was
due, computed at one and one-half percent of the undisputed amount per month or
fraction of a month until payment is issued.” Section 57-28-5(C). The PPA also
provides that “[i]n an action to enforce the provisions of the [PPA], the court may
award court costs and reasonable attorney fees.” Section 57-28-11. Makwa states
that Ashcraft’s failure to supply the lien waivers and Makwa’s claims for offsets are

“disputes” that render the PPA inapplicable here.

418s} We have held that “undisputed” within the PPA means “unchallenged,
unquestioned.” Unified Contractor, Inc. v. Albuquerque Hous. Auth., 2017-NMCA-
060, { 73, 400 P.3d 290 (alteration omitted). “Given this definition, raising a
challenge or question as to an invoiced item limits a defendant’s liability for
statutory interest.” Jd. The record indicates that Makwa made no challenge to
Ashcraft’s December payment application and did not raise any argument regarding
the waivers or offsets before payment was due to Ashcraft. After payment was due,
Makwa waited an additional year—after Ashcraft filed its complaint—and only
raised these arguments as affirmative defenses in its answer to Ashcraft’s complaint.
Makwa does not explain how its after-the-fact claim that a dispute existed justifies
its failure to pay Ashcraft within the timeframe set forth in the PPA or operates to
preclude the application of the interest or attorney fee provisions of the PPA. More
important, however, is that the district court found that “Makwa did not assert any
disputes with Ashcraft’s December payment application, as amended and
resubmitted on February 9, 2012” and that “[pJayment by Makwa to Ashcraft was
due under the terms of New Mexico’s Prompt Payment Act by February 15, 2012.
Makwa’s failure to pay was a material breach of the Subcontract and/or the [PPA].”
Makwa failed to challenge these findings and they are therefore binding, and

dispositive, on appeal. See Seipert, 2003-NMCA-119, § 26. We hold that the amount

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due to Ashcraft was undisputed and, therefore, Makwa is subject to the interest and
attorney fee provisions of the PPA.

CONCLUSION

{19} For the reasons set forth above, we affirm the district court.

20} ITISSO ORDERED.

MEGAN P. DUFFY, Judge
WE CONCUR:
M. MONICA ZAMORK, Ch ief Judge

has Pro _

KRISTINA BOGARDUS, Judge

May 16, 2019- Ashcraft Mechanical Inc. v. Makwa Builders, LLC, No. A-1-CA-35872

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