Opinion
No. 1 CA-CV 16-0771
12-21-2017
STATE OF ARIZONA, ex rel., ARIZONA REGISTRAR OF CONTRACTORS, Plaintiff/Appellee, v. WILLIAM T. McMASTER, et al., Defendants/Appellants.
COUNSEL Arizona Attorney General's Office, Phoenix By Lindsay M. Hughes Counsel for Plaintiff/Appellee Holland Law Group, Snowflake By Joseph E. Holland Counsel for Defendants/Appellants
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 UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL AND MAY BE CITED ONLY AS AUTHORIZED BY RULE. Appeal from the Superior Court in Maricopa County
No. CV2015-012807
The Honorable Hugh E. Hegyi, Judge
AFFIRMED
COUNSEL Arizona Attorney General's Office, Phoenix
By Lindsay M. Hughes
Counsel for Plaintiff/Appellee Holland Law Group, Snowflake
By Joseph E. Holland
Counsel for Defendants/Appellants
MEMORANDUM DECISION
Presiding Judge Kenton D. Jones delivered the decision of the Court, in which Judge Jon W. Thompson and Judge Patricia A. Orozco joined. JONES, Judge:
The Honorable Patricia A. Orozco, Retired Judge of the Court of Appeals, Division One, has been authorized to sit in this matter pursuant to Article 6, Section 3, of the Arizona Constitution.
¶1 William McMaster appeals the trial court's order granting summary judgment in favor of the State on its claim for subrogation of amounts paid on his behalf from the Arizona Residential Contractor's Recovery Fund (the Recovery Fund), see Ariz. Rev. Stat. (A.R.S.) §§ 32-1131 to -1140. For the following reasons, we affirm.
Absent material changes from the relevant date, we cite a statute's current version.
FACTS AND PROCEDURAL HISTORY
"We view the facts and inferences drawn from those facts in the light most favorable to the party against whom judgment was entered." Korwin v. Cotton, 234 Ariz. 549, 554, ¶ 8 (App. 2014) (quoting Maxfield v. Martin, 217 Ariz. 312, 314, ¶ 11 (App. 2007)).
¶2 In June 2006, a homeowner lodged a complaint against McMaster with the Arizona Registrar of Contractors (AROC). At the conclusion of the administrative proceedings, AROC adopted the decision of the administrative law judge and issued an order revoking McMaster's contractor's license. In June 2009, the homeowner filed a claim seeking payment from the Recovery Fund for damages incurred as a result of McMaster's acts and omissions as a registered contractor. McMaster did not contest the amount or propriety of payment to the homeowner, and in September 2010, AROC awarded the homeowner $26,748.48 from the Recovery Fund and directed the sum be charged against McMaster. In November 2015, the State filed a complaint seeking repayment from McMaster.
¶3 McMaster immediately moved for summary judgment, arguing the State's complaint was time-barred. The State denied that the matter was barred by the statute of limitations and filed a cross-motion for summary judgment on the merits, which McMaster did not contest. After the matter was fully briefed, the trial court denied McMaster's motion and granted summary judgment in the State's favor for the sum of $26,748.48 plus pre- and post-judgment interest. McMaster timely appealed, and this Court has jurisdiction pursuant to A.R.S. §§ 12-120.21(A)(1) and -2101(A)(1).
DISCUSSION
¶4 McMaster does not dispute that AROC issued a payment from the Recovery Fund to a homeowner who had filed a successful complaint against him, that he received notice of AROC's intent to pay and did not dispute the charges, or that the administrative order issuing payment became final when he did not appeal. See A.R.S. § 32-1154(G). He instead seeks to avoid responsibility for reimbursing the Recovery Fund by arguing the State's efforts at recovery are time-barred and, therefore, the trial court erred in denying his motion for summary judgment. We review both the denial of summary judgment and the interpretation and application of statutes de novo. Ramsey v. AROC, 241 Ariz. 102, 105, ¶ 6 (App. 2016) (citing First Fin. Bank, N.A. v. Claassen, 238 Ariz. 160, 162, ¶ 8 (App. 2015)) (statutes); Korwin, 234 Ariz. at 554, ¶ 8 (quoting Maxfield, 217 Ariz. at 314, ¶ 11) (summary judgment).
¶5 The Recovery Fund exists for "the general purpose of making a homeowner who suffers from a contractor's misdeeds 'whole.'" Ramsey, 241 Ariz. at 107, ¶ 12; see also Brown Wholesale Elec. Co. v. Merchs. Mut. Bonding Co., 148 Ariz. 90, 92-93 (App. 1984). This does not, however, relieve the contractor from "the ultimate responsibility of compensating an injured party for damages caused by his non-compliance with Arizona law." See State ex rel. AROC v. Johnston, 222 Ariz. 353, 356, ¶ 9 (App. 2009). Rather, A.R.S. § 32-1138 provides: "The state has the right of subrogation to the extent of payments made from the [Recovery Fund] including the right to collect from a bond, cash payment or alternative to cash payment." Accordingly, a homeowner who receives an award from the Recovery Fund "is deemed to have assigned to the [State] the person's rights for recovery against the responsible residential contractor . . . to the extent of the person's award from the fund." A.R.S. § 32-1139(C).
¶6 McMaster argues that by making the payment on his behalf and pursuing its subrogation rights, the State simply "stood in the same shoes as and inherited the same rights as those held by [the homeowner]." He then characterizes the homeowner's substantive claim as one to recover for a construction defect and subject to the eight-year statute of limitations prescribed by A.R.S. § 12-552(A). See Am. Sur. Co. v. De Escalada, 47 Ariz. 457, 460 (1936) (noting a party "is not entitled to any new or additional rights" by virtue of his subrogation of the rights of another; "[h]e merely steps into the shoes of the person to whose rights he is subrogated so far as a remedy is concerned.") (quoting Mosher v. Conway, 45 Ariz. 463, 473 (1935)).
¶7 In advancing this argument, McMaster misconstrues the nature of the State's claim. The State has not assumed the right to a civil claim, and is not pursuing a civil claim, against McMaster, such as an action for damages caused by a construction defect. Nor is the State pursuing an action "based in contract" such that A.R.S. § 12-552(A) would apply. See Mason v. Ellison, 63 Ariz. 196, 203 (1945) (noting even a conditional decree is not a contract between the parties). Indeed, the claim for a construction defect no longer existed once the administrative order reduced the claim to judgment. Accordingly, the plain language of A.R.S. § 32-1139(C) indicates the homeowner assigns to the State his "rights for recovery" only. McMaster does not identify any limitations period that would apply to the State's claim to recover a debt created through a final administrative order, and we find none. See Johnston, 222 Ariz. at 356, ¶ 9 ("[N]either the language, purpose, nor context of A.R.S. § 32-1138 reflects a legislative intent to create a statute of limitations regulating the enforcement of the [State]'s subrogation right against a non-compliant contractor.").
¶8 McMaster also relies upon a stilted and inflexible definition of "subrogation," that does not reflect the reality of the method devised by the legislature to assure swift compensation to injured homeowners through the Recovery Fund. The meaning of statutory language is best discerned within the context of the statutory scheme as a whole. See Premier Physicians Grp., P.L.L.C. v. Navarro, 240 Ariz. 193, 196, ¶ 16 (2016) (citing Robinson v. Shell Oil Co., 519 U.S. 337, 341 (1997), and J.D. v. Hegyi, 236 Ariz. 39, 41, ¶ 6 (2014)). When viewed in context, the term "subrogation" within A.R.S. § 32-1138 simply means the State may seek reimbursement from the wrongdoer.
¶9 Although A.R.S. § 32-1138 states that "[t]he registrar and the attorney general shall promptly enforce all subrogation claims," this statute does not operate as a statute of limitations. Johnston, 222 Ariz. at 355-56, ¶¶ 7-10. Because the Recovery Fund is funded through biennial contributions from licensed contractors, see A.R.S. § 32-1132(B), the State should act promptly to replenish the Fund after distributions to injured homeowners are made, Johnston, 222 Ariz. at 356, ¶ 9 (noting that excusing a non-compliant contractor from his responsibility to reimburse the Recovery Fund for distributions made on his behalf "would effectively require all licensed residential contractors in compliance with the law to bear the burden of paying for a non-compliant contractor's misdeed"). But, nothing in the language, history, or context of A.R.S. § 32-1138 suggests the directive to act promptly "was intended to be a shield to protect non-compliant contractors" by creating an otherwise undefined limitations period within which the State must pursue, or lose, its subrogation claim. Id.
¶10 McMaster nonetheless argues the directive that the State act promptly "underscore[s] the importance of the State not waiting until claims grow stale, memories fade, and evidence diminishes." We disagree. These considerations, which generally support the adoption of a definite limitations period, are irrelevant when the misconduct has been established, and the amount of damages fixed, through a final administrative order. As McMaster points out within his opening brief, "[s]ubrogation is meant to compel the ultimate payment of a debt by one who, in justice and good conscience, ought to pay it." See Kilpatrick v. Superior Court, 105 Ariz. 413, 422 (1970) (citing D. W. Jaquays & Co. v. First Sec. Bank, 101 Ariz. 301, 305 (1966), and Mosher v. Conway, 45 Ariz. 463, 468 (1935)). Having already established that McMaster ought to pay, the only questions remaining are when and how he will reimburse the State for payments made on his behalf — questions that do not require the type of information that grows stale over time.
¶11 Finally, it is a "basic premise of common law that the state, as sovereign, cannot be statutorily limited in its power to collect money due the public purse other than by express inclusion in such a limitation or by necessary inference." State ex rel. Dep't of Health Servs. v. Cochise Cty., 166 Ariz. 75, 78 (1990). The legislature has codified this premise, expressly excluding the State from limitations periods. See A.R.S. § 12-510 ("Except as provided in [A.R.S.] § 12-529[], the state shall not be barred by the limitations of actions prescribed in this chapter."). Therefore, even had McMaster identified a relevant statute of limitations, the defense is not applicable against the State absent an express statutory directive, of which there is none.
No party has argued the exception found within A.R.S. § 12-529, relating to suits involving public trust land and navigable watercourses, applies here.
McMaster relies heavily on City of Phoenix v. Glenayre Electronics, Inc. in arguing the State is not exempt from the statute of limitations. That case holds only that a government entity is bound by the eight-year statute of limitations set forth in A.R.S. 12-552(A). Glenayre, 242 Ariz. 139, 146, ¶ 25 (2017). Because we conclude A.R.S. § 12-552(A) is not applicable here, see supra ¶ 7, Glenayre is not dispositive.
McMaster suggests the State "stepped outside of its administrative and governmental capacity" in pursuing subrogation from McMaster, but the applicable statutes provide otherwise. See A.R.S. §§ 32-1138 & -1139(C) (authorizing the State to seek repayment from a contractor for distributions from the Recovery Fund paid on his behalf), -1154 (granting AROC administrative authority to regulate contractors and provide remedies to injured homeowners). --------
CONCLUSION
¶12 The trial court's order entering summary judgment in the State's favor is affirmed.
¶13 McMaster requests an award of attorneys' fees and costs pursuant to A.R.S. § 12-341.01(A). This matter does not arise out of contract and McMaster is not the prevailing party. Accordingly, his claim is denied.