AZAPP Blog

Ry-Tan Construction v. Washington Elem. Sch. Dist.: Supreme Court Holds That a School District is not Contractually Bound Prior to the Execution of a Written Contract.

The Washington Elementary School Board voted to accept a bid from Ry-Tan Construction for a school construction project. Before the contract was formally executed, District personnel decided not to sign the contract and cancelled Ry-Tan’s bid. Ry-Tan brought suit, contending that the Board’s approval of Ry-Tan’s bid created a binding contract. The jury returned a verdict in favor of Ry-Tan; the court of appeals affirmed, holding that a contract was formed as of the date of the Board’s vote.

Justice McGregor, writing for the majority, reversed the court of appeals’ decision. The Court followed the controlling, bright-line rule adopted in Covington v. Basich Brothers Construction Company (72 Ariz. 280, 233 P.2d 837 (1951)), which held that “a contract with a public agency is not binding on the public agency until a formal contract is executed.” The Court rejected Ry-Tan’s argument that the Arizona School District Procurement Code (“the Code”) (AAC R7-2-1001 to R7-2-1195) abrogated the common law rule of Covington. Rather, the Court held that when the provisions of the Code were read together they anticipated an interval between a bid’s award and the execution of the contract. Finally, the Court noted that public policy favored giving the elected officials responsible for the disbursement of public funds flexibility in making their decisions.

Vice Chief Justice McGregor authored the majority opinion; Justices Jones, Berch, and Ryan joined.

Justice Hurwitz dissented. He felt that the Code displaced the Covington common-law rule. He would have held that under the Code a contract is formed when a school district awards a contract, not at the formal execution of the contract.

Phelps v. Firebird Raceway, Inc.: In a 3-2 Split, Supreme Court holds that Article 18, Section 5 Applies to Express Contractual Waivers—Assumption of the Risk, whether Implied or Express, is always a Jury Question.

Article 18, Section 5 of the Arizona Constitution provides that “the defense of . . . assumption of risk shall, in all cases whatsoever, be a question of fact and shall, at all times, be left to the jury.” This case of first impression addressed whether that provision applies to a written express contractual waiver. Charles Phelps signed a release and waiver before participating in a drag race at Firebird Raceway, agreeing that he “voluntarily elect[ed] to accept the risks” associated with drag racing. His vehicle crashed, and he brought suit against Firebird, arguing that Firebird’s employees negligently failed to rescue him promptly. Firebird moved for summary judgment, arguing that Phelps had expressly assumed the risk. Phelps argued that summary judgment was unavailable because Section 5 requires a jury to decide whether he had in fact assumed the risk. The trial court granted Firebird’s motion for summary judgment. In an opinion issued last year, the court of appeals affirmed, holding that the drafters of the Constitution intended that Section 5 apply only to implied assumption of risk, not express contractual waivers.

In a 3-2 split, the Supreme Court reversed. Justice Ryan wrote for the majority, which also included Justices Berch and Hurwitz. The Court applied a plain meaning analysis and reasoned that the broad language of the provision (referring to “all cases whatsoever” and “at all times”) unambiguously includes express contractual assumption of risk. The Court likewise found that there was no indication that the drafters of the constitution intended to exclude express waivers from the broad language of Section 5. Departing from the Court of Appeals analysis, the Court also declined to follow Oklahoma case law regarding its identical constitutional provision. The Court also rejected the Court of Appeals suggestion that the broad reading of Section 5 extends that section to cover contract claims. The mere fact that a defendant asserts an express assumption of the risk defense based on a contract does not transform the plaintiff’s tort claim into a contract claim. Further, the Court maintained that its prior affirmation of appellate opinions permitting summary judgment as to the enforceability of express waivers does not mandate a contrary holding since the applicability of Section 5 was never addressed in those cases.

The dissent argued that “assumption of risk” does not unambiguously include express contractual assumptions of risk, but rather is an “amorphous concept defined in a variety of ways.” Turning to the intent of the drafters, the dissent observed that previous drafts of the provision would have eliminated the common law doctrine of assumption of risk in one provision and would have prohibited express contractual waivers in another provision. For the dissent this drafting history indicated that the framers considered express contractual waivers to be distinct from assumption of risk. The dissent further argued that Arizona courts have always decided the enforceability of express contractual waivers as a matter of law, applying contract principles. According to the dissent, the majority presented “no compelling reason to depart from this established jurisprudence.”

Justice Ryan wrote the opinion for the Court, which Justices Berch and Hurwitz joined. Vice-Chief Justice McGregor wrote for the dissent, joined by Chief Justice Jones.

FL Receivables Trust 2002-A v. Arizona Mills, L.L.C.: A Unanimous Division Panel Identifies Circumstances in Which a Landlord's Interest in Tenant's Property is Subordinate to the Lender's Interest.

Arizona Mills, a landlord, and its tenant executed an amendment to a written lease in order to permit tenant to secure additional financing for improvements, furniture, fixtures and equipment. The amendment subordinated all but landlord's interest in the land itself to the lender's lien. When the tenant defaulted under the lease, the lender sued to determine its rights in the real property, including the fixtures and the building. The superior court ruled in favor of landlord, determining that although it had consented to the tenant's grant of a lien on the tenant's interest in the lease, leasehold improvements and furniture, fixtures and equipment and subordinated its interest in tenant's property located on the premises, the landlord gave no consideration for the subordination. Moreover, when the tenant defaulted, the landlord acquired fee simple title to improvements to the property, including the building.

The Trust appealed and the Court of Appeals reversed. Assuming that both the landlord and lender have an interest in the property when the tenant defaulted, the dispositive question is whose right is superior? Under the UCC, a security interest is upheld against an ownership interest if either the owner consents to the creation of the security interest or the owner has given the right to remove the goods to the debtor. A.R.S. Sec. 47-9334. Even when a security interest had not been filed and therefore remains unperfected, a security interest in fixtures will prevail over an ownership interest if either condition is met. This provision applies to security interest's in a tenant's fixtures, and is true regardless of whether the landlord gave consideration. Thus, because the landlord consented to subordinate its interest and the lease gave the tenant the right to remove the "building and all fixtures" from the premises, the lender's security interest is superior to the landlord's ownership interest. The lender's security interest continues for a reasonable time after the tenant's right to remove the property (as against the landlord) terminates. See A.R.S. Sec. 47-9334(G).

Judge Lankford authored the opinion in which Presiding Judge Portley and Judge Hall concurred.

Primary Consultants v. Maricopa County Recorder: Court of Appeals Holds that County Recorder May Not Withhold Certain Voter Information from Political Consulting Firm based on Commercial Purpose Exception to Public Records Access.

Primary Consultants is a political consulting firm that uses voter and election records in providing professional services to active and prospective political committees and candidates. Primary Consultants made a number of public records requests to the Maricopa County Recorder for various voter information. The County refused to provide the information because Primary Consultants is a for-profit election consulting business and A.R.S. § 16-168(E) expressly precludes use of voter information for a “commercial purpose” as further defined in A.R.S. § 39-121.03. The trial court upheld the County’s refusal.

The Court of Appeals reversed the trial court. As an initial matter, the appellate court held that voter records are indeed public records and that denial of access to such records is subject to de novo review. A.R.S. § 39-121.02. The court then held that although Primary Consultants is a business and, in the words of the statute, “anticipates the receipt of monetary gain from the direct or indirect use of the public record,” this statutory language does not constitute an independent definition of commercial purpose. Instead, sentence structure and context limit the application of the quoted language to a restriction on the “sale of” public records. Consequently, Primary Consultants’ status as a for-profit entity does not bring its use of public records in serving its clients within the statutory definition of a “commercial purpose.” Moreover, sale of such information to candidates and political parties is expressly exempted from the definition of commercial purpose under the statute. A.R.S. § 16-168(E).

The court also concluded that, if the County preserves documents regarding requests for public records, the County is required to produce those documents pursuant to Primary Consultants’ separate requests for that information. Such data does not constitute voter data.

Judge Hall wrote the unanimous opinion, which judges Portley and Lankford joined.