Arizona Court of Appeals Division One Holds that Determinations of a Board of Directors of a County Improvement District Made at a Hearing Held Pursuant to A.R.S. § 48-924(D) Are Quasi-Judicial and Have Preclusive Effect.

A. Miner Contracting, Inc. and the Toho-Tolani County Improvement District and Coconino County (“the District”) entered into a contract to build a road and drainage improvements.  Safeco Insurance Company provided a performance bond that guaranteed Miner’s performance on the project.  Miner and the District had various disputes, and Miner did not complete the project by the agreed deadline.  Miner and the District entered into a settlement agreement that established a new deadline of July 1, 2005 for completion and that declared failure to substantially complete work by this date would be a material breach of the contract.  On June 8, 2005, Miner informed the District that it was terminating the contract because the District had failed to pay for work that had been performed up through May 2005.  Miner filed an action against the District on June 14, 2005, for breach of contract and other claims.  On June 21, 2005, the District’s Board of Directors held a hearing pursuant to A.R.S. § 48-924 in which the Board found Miner in default.  Miner received notice of the hearing, but failed to appear, instead submitting a letter listing its requirements to continue work.  In September 2005, Safeco and the District entered into a takeover agreement in which the District would release to Safeco some funds that had been withheld.  Safeco contracted with another construction company to finish the project, which was completed in June 2006.  In November 2007, Miner filed a motion for summary judgment on the District’s damages claim, and the District filed a cross-motion seeking summary judgment on Miner’s and SafeCo’s liability for breach of contract.  The court eventually granted the District’s cross-motion for summary judgment, finding that Miner’s claims were precluded because the Board had made a determination about default at its hearing in June 2005.   The court later also granted summary judgment to the District on damages against Miner and Safeco.  Miner and Safeco appealed.

The Court of Appeals affirmed in part and remanded in part.  The statute governing county improvement districts authorizes a district’s board of directors to conduct a hearing if a contractor’s work “is not prosecuted with diligence.”  A.R.S. § 48-924(D).  At the hearing, aboard “may prescribe such terms and conditions as it deems proper before permitting the contractor to continue with the work” or may “hold the contractor in default and make demand on the surety.”  A board’s determinations are “final and conclusive” and “maybe reviewed only by a special action.”  Quoting the Restatement, the court explained that “[a]n adjudicative determination by an administrative tribunal is entitled to the same res judicata effect as a judgment of a court if it ‘entail[s] the essential elements of adjudication.”  Because the hearing entailed the essential elements of adjudication, the court held that the Board’s determination at the hearing was entitled to preclusive effect and was “final and binding on the parties.”  Such elements of adjudication at the hearing included notice of the hearing and an opportunity to be heard by parties to be affected by the decision; the right to present evidence and legal argument; a determination at the hearing that resolves a matter analogous to a legal claim; that the determination was final; and that “additional procedural rights in the form of compulsory process and judicial review [were] granted to parties as part of the hearing process.”  Miner and Safeco argued that the trial court could not, as a matter of law, have awarded the District’s actual damages and liquidated damages.  The court noted that a “party may not receive actual and liquidated damages for the same injury.”   The still court upheld the award of both kinds of damages, however, because the contract allowed for such damages and because the actual damages were related to the cost of completion, while the liquidated damages were for the delay in completion.  Because of an ambiguity in the contract, the court remanded the case for a determination about whether the District had waived its right to liquidated damages from Safeco.

Judge Hall authored the opinion.  Judges Brown and Norris concurred.