Nardelli v. Metropolitan

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NOTICE: THIS DECISION DOES NOT CREATE LEGAL PRECEDENT AND MAY NOT BE CITED EXCEPT AS AUTHORIZED BY APPLICABLE RULES. See Ariz. R. Supreme Court 111(c); ARCAP 28(c); Ariz. R. Crim. P. 31.24 IN THE COURT OF APPEALS STATE OF ARIZONA DIVISION ONE ) ) ) Plaintiffs/Appellants/ ) Cross-Appellees, ) ) ) v. ) ) METROPOLITAN GROUP PROPERTY AND ) CASUALTY INSURANCE COMPANY, a Rhode Island corporation; METROPOLITAN ) ) PROPERTY AND CASUALTY INSURANCE ) COMPANY, a Rhode Island corporation, ) Defendants/Appellees/ ) Cross-Appellants. ) _______________________________________ ) KENNETH JOHN NARDELLI and TAMMY M. NARDELLI, husband and wife, DIVISION ONE FILED: 05/01/2012 RUTH A. WILLINGHAM, CLERK BY: sls 1 CA-CV 10-0350 DEPARTMENT C MEMORANDUM DECISION (Not for Publication - Rule 28, Arizona Rules of Civil Procedure) Appeal from the Superior Court in Maricopa County Cause No. CV 2004-019991 The Honorable A. Craig Blakey, II, Judge AFFIRMED IN PART, VACATED IN PART, AND REMANDED WITH INSTRUCTIONS Dawson & Rosenthal, P.C. By Steve C. Dawson and Anita Rosenthal Phoenix and Dillenburg Law Offices By Richard A. Dillenburg Attorneys for Plaintiffs/Appellants/Cross-Appellees Tempe Steptoe & By and and and Attorneys Johnson LLP Floyd P. Bienstock Bennett Evan Cooper Douglas Janicik Tim Strong for Defendant/Appellees/Cross-Appellants Phoenix N O R R I S, Judge ¶1 This timely appeal and cross appeal arise out of a lawsuit filed by Plaintiffs/Appellants/Cross-Appellees, Kenneth and Tammy Nardelli ( the Nardellis ), Defendants/Appellees/Cross-Appellants, Property Property and and Casualty Casualty Insurance against Metropolitan Company Insurance and Company Group Metropolitan (collectively MetLife ), for breach of the implied covenant of good faith and fair dealing. After a jury awarded the Nardellis $155,000 in compensatory damages and $55 million in punitive damages, the superior court reduced the punitive damages to $620,000. ¶2 In a separate opinion filed simultaneously with this memorandum decision, we have addressed the arguments raised by the parties regarding bad-faith liability and punitive damages. See Nardelli v. Metro. Grp. Prop. & Cas. Ins. Co., 1 CA-CV 100350 (Ariz. App. May 1, 2012). In this memorandum decision, we address the other arguments raised by the parties concerning sanctions under Arizona Rule of Civil Procedure ( Rule ) 68, the 2 accrual of post-judgment interest, hearing and transcript costs, and attorneys fees and costs on appeal. I. Rule 68 Sanctions ¶3 On cross appeal, MetLife argues the superior court should not have awarded the Nardellis sanctions under Rule 68 even though the judgment eventually entered by the superior court far exceeded the Nardellis November 9, 2004 $55,000 offer of judgment. court, Ariz. R. Civ. P. 68. 1 MetLife argues the As it did in the superior Nardellis offer of judgment was invalid as a matter of law because they failed to allocate or We agree. 2 apportion the offer between themselves. Pima Cnty. v. Pima Cnty. Law Enforcement Merit Sys. Council, 211 Ariz. 224, 227, ¶ 13, 119 P.3d 1027, 1030 (2005) (meaning and effect of court rule is question of law subject to de novo review). ¶4 Under certain circumstances, Rule 68 authorizes the superior court to impose sanctions against a party who does not accept an offer of judgment. Ariz. 35, 938 P.2d 84 In Duke v. Cochise County, 189 (App. 1996), we held a single, 1 The Arizona Supreme Court amended Rule 68 in 2008. The Rule now allows multiple parties to make a joint unapportioned offer to a single offeree. The parties have never contested the applicability of the version of Rule 68 in effect when they made their offers of judgment. 2 Given our resolution of this issue, we need not address the Nardellis argument the superior court miscalculated pre-judgment interest under Rule 68. 3 unapportioned lump sum offer -- made by three plaintiffs who were presenting one joint claim for wrongful death and two individual claims for emotional distress and false imprisonment -- was invalid under the Rule. Relying on case law from other jurisdictions of joint, and the unapportioned language settlement parties -- in that case, the offer Rule, we submitted explained by a multiple plaintiffs -- failed to provide the offeree with a meaningful opportunity to evaluate his or her chances of doing better at trial as compared to the offer: An offeree presented with an unapportioned joint offer cannot make a meaningful choice between accepting the offer on any single claim or continuing the litigation to judgment on all claims. Imposing sanctions for failing to accept what is in effect an unspecified and unapportioned offer of judgment deprives the offeree of the opportunity to assess his or her chances of doing better at trial against one or more of the parties covered by the joint offer. On the other hand, requiring joint offers to be specifically allocated between multiple parties or claims places no greater burden on the party making the offer. 189 Ariz. at 41, 938 P.2d at 90. In a subsequent case, we applied the principle enunciated in Duke -- invalidating joint, unallocated defendant offers made a -- to joint, a situation in unapportioned which offer plaintiffs, specifically, a husband and wife. the to multiple Gamez v. Brush Wellman, Inc., 201 Ariz. 266, 34 P.3d 375 (App. 2001). 4 offeror In so doing, we rejected the plaintiffs argument the offer did not need to be apportioned between them due to the derivative and joint nature of the wife s claims. Id. at 273, ¶ 21, 34 P.3d at 382; see also Greenwald v. Ford Motor Co., 196 Ariz. 123, 993 P.2d 1087 (App. 1999) (offer of judgment submitted by defendant in wrongful death case which failed to apportion as to individual beneficiaries invalid under Rule 68; wrongful death claim requires apportionment if more than one beneficiary represented in the action). ¶5 Here, although the Nardellis asserted a single cause of action for breach of the duty of good faith and fair dealing against MetLife, when they submitted the offer of judgment to MetLife they First Amended were seeking Complaint, damages, for their as they alleged anxiety, in worry, their anger, mental and emotional distress, fear, feelings of hopelessness, insecurity. As MetLife points out, emotional distress damage claims are distinctly personal to each spouse, and are not derivative claims, nor are they claims that belong marital community like a claim for lost wages. Jurek, 124 Ariz. 596, 598, 606 P.2d 812, to the See Jurek v. 814 (1980) ( compensation for [husband s] injuries to his personal wellbeing should belong to him as his separate property although lost wages and expenses incurred by community for medical care 5 resulting from husband s personal injury would be community property); Brumbaugh v. Pet Inc., 129 Ariz. 12, 14, 628 P.2d 49, 51 (App. 1981) (applying Jurek, damages recovered by wife for pain, suffering, and mental anguish constitute wife s separate property). Accordingly, the Nardellis unapportioned offer of judgment to MetLife was invalid under Rule 68. ¶6 In so holding, we reject the Nardellis argument they were not required to apportion their offer of judgment because MetLife submitted an unapportioned offer of judgment to them and treated them as one entity at trial. MetLife s failure to comply with the requirements of Rule 68 does not excuse the Nardellis failure to do so. Smyser v. City of Peoria, 215 Ariz. 428, 442, ¶ 48, 150 P.3d 1186, 1200 (App. 2007) (rejecting defendant s argument unapportioned offer offer). that excused plaintiff s defendant s submission failure to of apportion Further, the apportionment rule was designed to allow the offeree a meaningful opportunity to evaluate and assess his or her chances of doing better at trial against one or more of the parties. MetLife s apparent decision to treat the Nardellis as one entity at trial does not change the fact the Nardellis joint, unapportioned offer failed to permit this evaluation. ¶7 We also disagree with the Nardellis argument their offer of judgment was valid because it was similar to the offer 6 of judgment we upheld in Sheppard v. Crow-Barker-Paul No. 1, Ltd., 192 Ariz. 539, 968 P.2d 612 (App. 1998). In Sheppard, a parent asserted a claim for personal injuries on behalf of his minor child and medical care. his own claim for the cost of his child s The parent submitted an offer of judgment to the defendant which did not distinguish between the two claims. We distinguished Duke and the cases following it, noting they did not involve a single plaintiff acting as a representative of another in the capacity of next friend, conservator, or guardian ad litem, and instead involved multiple plaintiffs, multiple claims, or both. Id. at 549, ¶ 57, 968 P.2d at 622. explained claims the two were ordinarily two We then aspects of an individual personal injury claim, and had been divided solely because of the child s minority. Id. at ¶ 58. ¶8 Here, neither of the Nardellis was acting as a representative of the other and, more importantly, as discussed, Tammy and Ken Nardelli were each entitled to assert and recover damages for the emotional distress and pain and suffering they separately sustained. P.3d at 1200 Cf. Smyser, 215 Ariz. at 442, ¶ 47, 160 (distinguishing Sheppard; unallocated offer of judgment submitted by parent in medical malpractice and wrongful death action on her behalf and on behalf of minor children should have been split between [parent] and her children not 7 based on the children s minority but on the separate nature of the loss suffered by each. ). ¶9 The offer of judgment the Nardellis MetLife failed to comply with Rule 68. submitted to We thus vacate that portion of the judgment awarding Rule 68 sanctions and remand to the superior court for entry of an amended judgment deleting the sanctions. II. Post-Judgment Interest ¶10 By letter dated December 30, 2009 ( December 30 letter ), MetLife, through counsel, offered to wire transfer to the Nardellis counsel s client trust account the full amount of the judgment entered by the superior court on November 23, 2009, plus post-judgment MetLife explained interest it was through making the the date tender of to the wire. terminate the accrual of post-judgment interest. As discussed in more detail below, tender. the Nardellis refused the Subsequently, on MetLife s motion and over the Nardellis objection, the superior court terminated the accrual of post-judgment interest as of December 30, 2009, finding MetLife s tender unconditional. ¶11 should On December not appeal, have 30, the Nardellis terminated the 2009, asserting argue accrual MetLife s the of superior interest tender court as was of not unconditional because its December 30 letter also stated if the 8 judgment was reversed or vacated in whole or in part it would be entitled to recover from the Nardellis the amount of any overpayment with interest. According to the Nardellis, this statement conditional refused made to the give tender up its rights in because the regardless of the outcome of any appeal. rejected this argument, and so do we. MetLife amount had tendered The superior court See Gemstar Ltd. v. Ernst & Young, 185 Ariz. 493, 507, 917 P.2d 222, 236 (1996) (whether party is entitled to interest is matter of law court reviews de novo). ¶12 Under Arizona law, a valid tender relieves the debtor from any interest or penalties due for a failure to pay the debt when due. Peterson v. Cent. Ariz. Light & Power Co., 56 Ariz. 231, 237, 107 P.2d 205, 208 (1940). the creditor refuses the tender. Dull v. Dull, 138 Ariz. 357, 359, 674 P.2d 911, 913 (App. 1983). judgments. This is true even if These rules also apply to Welch v. McClure, 123 Ariz. 161, 165-66, 598 P.2d 980, 984-85 (1979) (citing Peterson, unconditional tender will stop running of interest on a judgment); Dull, 138 Ariz. at 359, 674 P.2d at 912 (same). ¶13 In the vernacular, an unconditional tender is one with no strings attached. Accordingly, a tender is conditional when the debtor attaches a condition to it that the creditor cannot 9 accept the tender without compromising his or her legal right to recover additional sums which he or she claims due. Pleasant v. Ariz. Storage & Distrib. Co., 34 Ariz. 68, 78, 267 P. 794, 798 (1928). A tender is not made conditional if it is submitted, however, with a declaration that it is without prejudice either to the contention by [the debtor] that no more is due, or to a claim by the creditor that an acceptance does not amount to an admission by the latter that the tender covers the entire debt. Peterson, 56 Ariz. at 237-38, 107 P.2d at 208. 3 Further, a tender is not conditional if it is submitted with a condition the person making the tender has a legal right to insist upon. Dull, 138 Ariz. at 359, 674 P.2d at 913 (tender by husband of payment pursuant to dissolution decree, with request former wife execute quit claim deed to family home, did not make tender 3 The Nardellis suggest a tender is conditional, under Peterson, unless the party who makes the tender relinquishes all rights to recover the amount tendered. We disagree; indeed, Peterson held the opposite: In the present case, it appears very clearly that plaintiff, in making its tenders, did not in any manner require the county to admit that the amount tendered was the full amount of the legal taxes due, but merely stated that they were without prejudice to the right of either party to insist, in proper proceedings in court, on the one hand, that the amounts tendered were the full debt, and on the other that they were not. Id. at 238, 107 P.2d at 208. 10 conditional; requirement wife execute deed was part and parcel of the court s decree. It was not some condition tacked on by the husband to gain some advantage or thing of value which he did not already have a right to by virtue of the court s existing order ). ¶14 Here, MetLife s tender was not conditional because it essentially reserved its right to appeal (or cross-appeal) the judgment in the Nardellis favor and, if successful in whole or in part, seek recovery of any overpayment. ¶15 First, in its December 30 letter, MetLife specifically advised the Nardellis its tender was not conditioned on [their] filing of a notice of satisfaction of the Judgment or relinquishment of any rights, including the right to appeal. ¶16 Second, in advising the Nardellis it was making the tender without relinquishing its appeal rights or its right to seek repayment of any overpayment if successful on appeal, MetLife was simply asserting its legal rights, similar to the situation in Dull. See generally Webb v. Crane Co., 52 Ariz. 299, 320, 80 P.2d 698, 708 (1938) (even though execution of judgment has not issued, payment of judgment must be regarded as compulsory. the payor compromise of and Payment does not releas[e] errors, nor deprive his right to settlement, appeal, pursuant 11 unless to an it was agreement made in not to appeal.); In re Matter of 1969 Chevrolet, 134 Ariz. 357, 360-61, 656 P.2d 646, 649-50 (App. 1982) (citing with approval Restatement of Restitution § 74) (person who has conferred a benefit upon another in compliance with judgment is entitled to restitution if the judgment is reversed or set aside); Restatement (Third) of Restitution and Unjust Enrichment § 18 (transfer of subsequently property reversed in or compliance avoided gives with judgment disadvantaged that is party a claim in restitution as necessary to avoid unjust enrichment). 4 MetLife s tender was not, therefore, conditional. We thus affirm the superior court s ruling MetLife s tender terminated the accrual of additional post-judgment interest after December 30, 2009. 5 4 In its December 30 letter and on appeal, MetLife asserts it will also be entitled to interest at the statutory rate if entitled to restitution. Whether MetLife is entitled to interest and, if so, what the applicable rate is, are issues the parties have not briefed and are not before us. We express no opinion on these issues. 5 In their reply brief, the Nardellis argue MetLife s tender was conditional because, on December 30, they were disputing the superior court s calculation of pre-judgment interest. This argument is not properly before us as the Nardellis did not raise it in their opening brief, thus depriving MetLife of the opportunity to respond to it. See Dawson v. Withycombe, 216 Ariz. 84, 111, ¶ 91, 163 P.3d 1034, 1061 (App. 2007). Further, MetLife s tender was for the full amount of the judgment entered by the court in November 2009 with interest to the date of the wire. The judgment entered by the court, not the Nardellis objection to it, controlled the amount of the tender. 12 III. Amended Judgment and Discrepancy in Post-Judgment Interest ¶17 After the court determined MetLife s tender terminated the accrual of interest, the Nardellis submitted -and MetLife objected to -- a proposed form of amended judgment. After briefing, on July 19, 2010, the superior court entered an amended judgment but failed to include $15,562.14 in post- judgment interest that had accrued from the date of the original judgment, tender. November 23, 2009, through MetLife s December 30 Although, before entry of the amended judgment, MetLife acknowledged the Nardellis were entitled to this sum, the Nardellis did not contest this omission in the superior court or, as far as the record reveals, bring it to the superior court s attention. Instead, they have asked us to modify the judgment or direct the superior court to do so. remanding this matter superior court judgment interest will on for need the entry to of an determine amended amended the amount Because we are judgment, accrual of the of the post- judgment. Accordingly, there is no need for us to resolve this issue. IV. Hearing and Transcript Costs ¶18 MetLife also argues the superior court should not have taxed it $27,397 for hearing and transcript costs under Arizona Revised Statutes ( A.R.S. ) section 12-332 (2001). We agree. Bennett v. Baxter Grp., Inc., 223 Ariz. 414, 422, ¶ 36, 224 P.3d 13 230, 238 (App. 2010) (whether certain expenditures are taxable costs is a matter of law subject to de novo review on appeal). Transcript costs are not a recoverable cost under that statute. Instead, they can be recovered by the successful party as a cost on appeal. superior A.R.S. § 12-331(4) (2003). court should vacate the Thus, on remand the award for hearing and transcript costs. V. Attorneys Fees and Costs on Appeal ¶19 The Nardellis and MetLife have each requested an award of attorneys fees under A.R.S. § 12-341.01 (2003). Because the Nardellis and MetLife have each been partially successful and partially unsuccessful on requests for attorneys fees. appeal, we deny their competing For the same reason, we refuse to award either side costs on appeal pursuant to A.R.S. § 12-342 (2003). 6 6 MetLife argues the offer of judgment/settlement offer it submitted to the Nardellis constituted a written settlement offer under A.R.S. § 12-341.01(A), thus requiring us to vacate the attorneys fees the superior court awarded to the Nardellis. Even if we view MetLife s Rule 68 offer of judgment as a written settlement offer under this statute, we nevertheless reject MetLife s argument. Although in our simultaneously issued opinion we have reduced the punitive damages to $155,000, the total amount of damages the Nardellis recovered ($310,000 in compensatory and punitive damages) exceeds MetLife s $300,001 offer. 14 CONCLUSION ¶20 For the foregoing reasons, we vacate that portion of the superior court s judgment awarding the Nardellis Rule 68 sanctions and hearing and transcript costs. We affirm, however, the superior court s decision terminating the accrual of postjudgment interest after December 30, 2009. Finally, we remand this may matter to the superior court so it determine the accrual of post-judgment interest and enter an amended judgment consistent with this decision and the opinion filed simultaneously with this decision. /s/ ___________________________________ PATRICIA K. NORRIS, Judge CONCURRING: /s/ ____________________________________ MICHAEL J. BROWN, Presiding Judge /s/ ____________________________________ PETER B. SWANN, Judge 15

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