Wang Electric, Inc. v. Smoke Tree Resort, LLC
230 Ariz. 314
| Ariz. Ct. App. | 2012Background
- Smoke Tree leased restaurant space to REM for ten years, with option to extend, and agreed to reimburse REM up to $840,000 for remodeling; REM was to pay all costs beyond $840,000.
- KAI acted as general contractor; subcontracts were issued to Wang, Aero, Allied, Beecroft, and Adobe to perform specific trades, with payment duties flowing through KAI.
- Subcontractors submitted invoices to KAI; KAI submitted payment applications to REM and Smoke Tree, and Smoke Tree paid KAI directly for disbursement to subcontractors.
- By late April 2008 progress payments ceased; Wang, Aero, Beecroft, and Allied filed mechanic’s liens on Smoke Tree’s property; Adobe filed liens on REM’s leasehold interest in Smoke Tree’s property.
- Lawsuits were filed December 2008–February 2009; all subcontractors asserted contract, lien foreclosure, and unjust enrichment claims; Smoke Tree sought summary judgment denying liens and disregarding unjust enrichment.
- The trial court granted summary judgment for Smoke Tree on lien foreclosure, but for subcontractors on unjust enrichment, awarding damages for Uncompensated Work and invalidating liens; prejudgment interest and attorney’s fees were addressed variably on review.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Smoke Tree is liable for unjust enrichment | Subcontractors argue unjust enrichment because owner retained tenant-improvement benefits without payment. | Smoke Tree argues no unjust enrichment because owner’s conduct was proper and improvements were tenant-imposed under lease; DCB Construction controls. | No unjust enrichment liability; remand for judgment in Smoke Tree’s favor |
| Validity of mechanic's liens and foreclosures against Smoke Tree | Wang, Aero, Adobe, Allied contend liens were valid and foreclosure actions should proceed. | Smoke Tree asserts liens were defective for not complying with strict statutory requirements. | Reverse in part; remand for further proceedings on liens; some liens survive under agency and notice theories |
| Agency and notice issues for lien enforcement | Laborers contend REM/Smoke Tree acted as agent for lien purposes; notices and service complied with statute. | Smoke Tree challenges agency and perfection of notices; service timelines and descriptions questioned. | Wang lien valid via agency; Aero notices substantially comply; Adobe Drywall service to REM suffices; Allied lien remanded for proper proceedings |
| Lien survival on leasehold versus property interests | Adobe contends lien survives lease termination against leasehold; Hayward Lumber supports lien on improvements. | Smoke Tree argues lien cannot attach to landlord’s interest after lease termination. | Adobe’s lien survives against leasehold; lien on landlord’s interest survives only if agency/estoppel applies |
| Attorney’s fees and costs on appeal | Subcontractors seek fees under A.R.S. § 12-341.01; Adobe seeks cross-appeal fees under § 33-998(B). | Parties argue for fee-shifting; varying success on appeal. | Fees denied to most; Adobe awarded some cross-appeal fees; costs awarded as stated |
Key Cases Cited
- DCB Construction Co., Inc. v. Central City Development Co., 965 P.2d 115 (Colo. 1998) (owner not liable for tenant improvements absent improper conduct; Restatement § 110 applied)
- DeVry Brick Co. v. Mordka, 96 Ariz. 70 (Ariz. 1964) (agency theory for lien purposes where lease requires improvements)
- Bobo v. John W. Lattimore Contractor, 12 Ariz. App. 137 (Ariz. App. 1970) (agency concept for lien statutes in lease-improvement context)
- Fagerlie v. Markham Contracting Co., 227 Ariz. 367 (Ariz. 2011) (liberal construction of lien statutes to protect laborers)
- Hayward Lumber & Investment Co. v. Graham, 104 Ariz. 103 (Ariz. 1968) (lien survives where improvements are tenant-initiated despite landlord ownership interests)
- Demund Lumber Co. v. Franke, 40 Ariz. 461 (Ariz. 1932) (only lessee’s interest may be used to satisfy mechanics’ liens unless agency/estoppel)
- Mulcahy Lumber Co. v. Ohland, 44 Ariz. 301 (Ariz. 1934) (tenants’ improvements lien could not foreclose landlord’s interest absent agency/estoppel)
- Smith Pipe & Steel Co. v. Mead, 130 Ariz. 150 (Ariz. 1981) (definition of legal description for liens)
- United Metro Materials, Inc. v. Pena Blanca Props., L.L.C., 197 Ariz. 479 (Ariz. 2000) (mechanics’ lien controls and notice mechanics)