Articles Posted in Contracts

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The Arizona Supreme Court reversed the trial court’s award of attorney fees to Plaintiff and its ruling that Plaintiff was the “prevailing party” in the proceedings below. Before trial, Defendant made a settlement offer of $1,000,001. Plaintiff rejected the offer and, later, obtained a jury verdict in the amount of $10,733. Because a fee award provision in a contract between the parties did not itself define “prevailing party” but did incorporate Arizona law to determine the parties’ rights and remedies, Ariz. Rev. Stat. 12-341.01(A) applied for the purpose of determining the successful party. Because the final judgment was more favorable to Defendant than its pretrial offer, Plaintiff was not entitled to recover any fees incurred after the offer under section 12-341.01(A). The court remanded to the trial court to apportion fees and costs between the parties. View "American Power Products, Inc. v. CSK Auto, Inc." on Justia Law

Posted in: Contracts

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Canadian Imperial Bank of Commerce loaned Dobson Bay Club II DD, LLC and related entities (Dobson Bay) $28.6 million for Dobson Bay’s purchase of commercial properties. The loan was secured by a deed of trust encumbering the properties. Under the terms of a promissory note, as a consequence for any delay in payment, Dobson Bay was required to pay, in addition to regular interest, default interest and collection costs and a five percent late fee assessed on the payment amount. When Dobson Bay failed to make the required payments, La Sonrisa de Siena, LLC, which bought the note and deed of trust, noticed a trustee’s sale of the secured properties, arguing that Dobson Bay owed more than $30 million, including a nearly $1.4 million late fee. At issue during the ensuing trial was whether the note was an enforceable liquidated damages provision. The superior court concluded that the late fee was enforceable as liquidated damages. The court of appeals reversed. The Supreme Court vacated the court of appeals’ opinion and reversed the trial court’s partial summary judgment in favor of La Sonrisa on the liquidated damages claim, holding that an approximately $1.4 million late fee is unreasonable and an unenforceable penalty. View "Dobson Bay Club II DD, LLC v. La Sonrisa De Siena, LLC" on Justia Law

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Ariz. Rev. Stat. 12-341.01(A) provides that if a party makes a written settlement offer that is rejected, and the final judgment is more favorable to the offering party, that party “is deemed to be the successful party from the date of the offer.” American Power Products (American) and CSK Auto (CSK) entered into a contract that provided that, in the event of an action arising out of the contract, “the prevailing party shall be entitled to recover…reasonable attorneys’ fees.” American later sued CSK for breach of contract. Before trial, CSK served American with an offer of judgment in the amount of $1,000,001. American did not accept the offer and obtained a jury verdict in the amount of $10,733. The trial court concluded that American was the “prevailing party” at trial and awarded American attorney fees. The court of appeals affirmed the fee award. The Supreme Court reversed, holding (1) because the contract did not define “prevailing party” but did incorporate Arizona law to determine the parties’ rights and remedies, the statute applied for the purpose of determining the successful party; and (2) the trial court correctly determined that American was the prevailing party before CSK’s offer of judgment but erred in ruling that American was the prevailing party after CSK’s settlement offer. View "American Power Products Inc. v. CSK Auto, Inc." on Justia Law

Posted in: Contracts

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The United States Court of Appeals for the Ninth Circuit certified certain questions to the Supreme Court regarding what impact, if any, a lender’s full-credit bid made at an Arizona trustee’s sale has on an insurer’s liability under standard form title insurance policies. The policy provisions at issue were (1) Section 2, which provides that coverage continues in force when an insured acquires the property in a foreclosure sale but the amount of coverage is reduced by all payments made; (2) Section 9, which provides that payments of principal or the voluntary satisfaction or release of the mortgage reduce available insurance coverage, except as provided under Section 2(a); and (3) Section 7, which explains how the insurer’s liability is calculated. The Supreme Court answered the certified questions as follows: (1) Section 2 applies when a lender purchases property by full-credit bid at a trustee’s sale; (2) the full-credit bid does not constitute a “payment” under Sections 2 or 9 of the policy; and (3) accordingly, the full-credit bid neither terminates nor reduces coverage under Section 2 or Section 7. View "Equity Income Partners, LP v. Chicago Title Insurance Co." on Justia Law

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Patients filed suit to set aside accord and satisfaction agreements and to recover the amounts paid to release liens. Hospitals, health care providers who treated patients injured by third parties, were paid by the Patients' insurer, AHCCCS, which had negotiated reduced rates with the Hospitals. The Hospitals then recorded liens against the Patients pursuant to A.R.S. 33-931 and A.R.S. 36-2903.01(G) for the difference between the amount typically charged for their treatment and the reduced amount paid by AHCCCS. In order to receive their personal injury settlements with the third parties, Patients settled with the Hospitals by paying negotiated amounts to release the liens. At issue is the validity of these accord and satisfaction agreements. The court assumed, without deciding, that Arizona’s lien statutes are preempted by federal law. But, because there was a bona fide dispute about the enforceability of these liens when the Patients and Hospitals entered into settlement agreements to achieve lien releases, the agreements were supported by adequate consideration and addressed a proper subject matter. Therefore, the accord and satisfaction agreements are valid. View "Abbott v. Banner Health Network" on Justia Law

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Plaintiff sued Defendant for breach of contract, and Defendant counterclaimed. The trial lasted twelve trial days. During deliberations, a juror asked a bailiff “how long deliberations typically lasted.” The bailiff responded that “an hour or two should be plenty.” After deliberating for one to two hours, the jurors returned a verdict awarding Plaintiff $10,733. Plaintiff had sought more than $5 million in damages. Plaintiff moved for a new trial based on the bailiff’s statement. The trial court denied the motion without holding an evidentiary hearing. The court of appeals reversed, concluding that prejudice should be presumed where it could not be determined from the record how the jury might have interpreted the bailiff’s comment, and therefore, the trial court abused its discretion in determining that the communication was not prejudicial. The Supreme Court reversed, holding that the trial court did not abuse its discretion in denying Plaintiff’s motion for a new trial without holding an evidentiary hearing, as the bailiff’s statement was not objectively prejudicial, and there was no significant fact question about what occurred. View "American Power Products, Inc. v. CSK Auto, Inc." on Justia Law

Posted in: Contracts

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DBT Yuma subleased property at the Yuma International Airport from the Yuma County Airport Authority - a nonprofit corporation that operated the airport under a lease from Yuma County - and operated a fixed base operation there. YCAA later evicted DBT Yuma and entered into a new sublease with another tenant. DBT Yuma sued YCAA for breaching its sublease. DBT Yuma later added Yuma County as a defendant, alleging that YCAA was the County’s “instrumentality and alter ego,” and therefore, the County was liable for YCAA’s breach. The trial court granted summary judgment in favor of the County. At issue on appeal was the interpretation of Ariz. Rev. Stat. 28-8424(A)(3), under which a nonprofit corporation that leases airport property from a county “[p]erforms an essential governmental function as an agency or instrumentality” of the county. The Supreme Court affirmed, holding that section 28-8424(A)(3) by itself does not make YCAA the County’s agent for purposes of imputed liability. View "DBT Yuma LLC v. Yuma County Airport Auth." on Justia Law

Posted in: Contracts

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Martha and Mario Madrigal sued the City of Mesa. After the case was settled by the Madrigals’ second attorney, Raymond Slomski, the Madrigals’ first attorney, Edward Fitzhugh, assigned his rights under the parties’ contingent fee agreement to Al Carranza. Carranza later sued the Madrigals (“the fee-collection action”). The Madrigals subsequently divorced pursuant to a decree that allocated the remaining funds from the as-yet-unresolved fee-collection action. Mario and Carranza then entered into a settlement agreement that called for a portion of the disputed funds to be released to Mario and Carranza. The superior court approved the agreement. Slomski filed an interpleader action contesting the settlement. Thereafter, Martha successfully moved to set aside the order approving the settlement. Carranza then moved to substitute Fitzhugh as the real party in interest in both the fee-collection action and the interpleader action. The superior court denied the substitution request and court granted summary judgment in favor of Martha in the fee-collection action. The court of appeals affirmed summary judgment but reversed the denial of Carranza’s motion to substitute in the fee-collection action. The Supreme Court vacated in part, holding that the trial court did not abuse its discretion in denying the motions to substitute. View "Carranza v. Madrigal" on Justia Law

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Defendant constructed a home that it sold to its initial purchaser. The initial purchaser, in turn, sold the home to Plaintiffs. Plaintiffs later learned the home's hillside retaining wall and home site had been constructed in a dangerously defective manner. Plaintiffs requested that Defendant cover the cost of repair, but Defendant claimed it was no longer responsible for any construction defects. Plaintiffs then filed an action against Defendant to force Defendant to cover the cost of repair. The trial court dismissed all of the claims, concluding, among other things, that Plaintiffs' negligence claims were barred by Arizona's economic loss doctrine. The court of appeals remanded for resolution of Plaintiffs' various negligence claims, concluding that, because Plaintiffs had no contract with Defendant, the economic loss doctrine did not bar their tort claims. The Supreme Court affirmed, holding that the economic loss doctrine did not bar Plaintiffs' negligence claims to recover damages resulting from the construction defects. Remanded. View "Sullivan v. Pulte Home Corp." on Justia Law

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Plaintiffs leased state trust land and owned all structures and improvements on the land. Under the terms of the lease, the improvements that existed on the land would become the state's property upon lease termination. After the leases were entered into, the legislature created a property tax classification ("Class Nine") in which property was taxed at a lower rate than that applicable to commercial property. For certain years, Maricopa County classified the improvements under the classification applicable to general commercial property and taxed Plaintiffs accordingly. The State Board of Equalization denied Plaintiffs' request for Class Nine classification. Plaintiffs then filed a declaratory judgment action in the tax court. The tax court granted summary judgment for the County based on Plaintiffs' failure to meet the requirements of Ariz. Rev. Stat. 42-12009(A)(1)(a), which provides that improvements on land leased from the state qualify for a reduced ad valorem tax rate if they become the property of the state on termination of the leasehold interest in the property. The Supreme Court remanded, holding that section 42-12009(A)(1)(a) applies when, at the time of taxation, improvements exist on the land that, under the terms of the lease, would become the state's property upon lease termination. View "CNL Hotels & Resorts, Inc. v. Maricopa County" on Justia Law