Bradshaw v. State Farm Mut. Auto. Ins. Co.

Decision Date18 May 1988
Docket NumberNo. CV-87-0011-PR,CV-87-0011-PR
Citation157 Ariz. 411,758 P.2d 1313
PartiesSamuel L. BRADSHAW and Deborah A. Bradshaw, husband and wife, Plaintiffs- Appellees/Cross-Appellants, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant-Appellant/Cross- Apellee.
CourtArizona Supreme Court

Thur, Dawson & O'Sullivan by Steven C. Dawson, Calvin C. Thur, Scottsdale, for plaintiffs-appellees/cross-appellants.

O'Connor, Cavanagh, Anderson, Westover, Killingsworth & Beshears by Scott E. Boehm, Ralph E. Hunsaker, Larry L. Smith, Phoenix, for defendant-appellant/cross-appellee.

FELDMAN, Vice Chief Justice.

Petitioner asks us to review a decision of the court of appeals reversing the trial judgment in an unusual malicious prosecution case. 1 We granted review to examine important questions concerning the issue of probable cause. Rule 23, Ariz.R.Civ.App.P., 17A A.R.S. We have jurisdiction under Ariz. Const. art. 6, § 5(3) and A.R.S. § 12-120.24.

FACTUAL AND PROCEDURAL SUMMARY
A. The Underlying Action

Many of the essential facts in this case are undisputed. We view the other facts and all inferences in the light most favorable to sustaining the verdict. Curlee v. Morris, 72 Ariz. 125, 127, 231 P.2d 752, 753 (1951).

Shortly after 5:00 p.m. on January 27, 1980, Maricopa County Deputy Sheriff Samuel Bradshaw was rapidly driving east in his patrol car on University Drive in Mesa, Arizona. Because he was responding to another officer's distress call, Bradshaw had turned on his vehicle's siren and overhead flashing lights. As he neared the intersection of University Drive and 64th Street (the intersection), Bradshaw's radio dispatcher informed him that the emergency was supposedly over and he could now travel at posted speed limits without using his siren or lights. 2 Bradshaw acknowledged receipt of the dispatcher's signal.

William Ivie had been driving north toward the intersection. Ivie apparently did not halt at the intersection stop sign but drove directly into the path of Bradshaw's car, which had the right-of-way. Bradshaw swerved and braked, but still rammed broadside into Ivie's vehicle. Ivie neither braked nor made any evasive maneuver. Weather conditions were excellent; visibility was unobstructed.

The precise interval between Bradshaw's acknowledgment of the dispatcher's signal and the accident was not documented, but was probably quite short. The next transmission from Bradshaw's vehicle, about one and one-half minutes later, was from a citizen reporting the accident. Bradshaw suffered retrograde amnesia as a result of his injuries and had no recollection of the crash.

Accident experts estimated that Bradshaw's speed just prior to impact was from sixty-three to over seventy miles per hour. The posted speed limit for the area was forty-five miles per hour. The police interviewed seven people who had been witnesses to the accident. 3 All of the witness accounts were provided in the police report given to State Farm in early 1980. Every witness to the crash either heard Bradshaw's siren or saw his car's flashing emergency lights just before the crash. Two witnesses said that both emergency warning systems were in operation. The police report concluded that Ivie had improperly failed to yield the right of way. All witnesses to the incident agreed with that assessment.

The collision killed Ivie and inflicted severe injuries on Bradshaw. Soon after the accident, Bradshaw and his wife (the Bradshaws) retained an attorney who contacted Ivie's insurer, State Farm Mutual Automobile Insurance Company (State Farm). The Bradshaws also filed a perfunctory claim against Ivie's estate, apparently to preserve the right to sue the estate in case State Farm refused to settle for the limits of Ivie's liability policy. Over the next few months, State Farm claims personnel evidently concluded that their insured was liable for the accident. Reporter's Transcript (RT) Jan. 31, 1985, at 89-90, 116-17. They focused their attention on the extent of the damages, estimating the value of the Bradshaws' claim at from $65,000 to $75,000. The claims specialists were genuinely concerned that the damages might exceed the $100,000 policy limit. RT Jan. 31, 1985, at 55-56.

On October 8, 1980, the Bradshaws' attorney sent a detailed letter to State Farm, offering to settle for the $100,000 policy limits covering Ivie. The letter added that if settlement were not reached and the Bradshaws obtained a judgment in excess of the policy coverage, they would pursue State Farm directly for the excess because "Mr. Ivie's estate has indicated a willingness to assign that action to us should litigation be necessary." The attorney gave State Farm fourteen days to consider this settlement offer. On October 14, 1980, the Bradshaws granted State Farm an additional thirty days to consider the proposal. But rather than negotiate further with the Bradshaws, State Farm decided to persuade Mrs. Ivie, an Iowa resident, to sue the Bradshaws in federal court. There was evidence that State Farm's decision to sue was unrelated to the true merits of Ivie's claim. RT Jan. 30, 1985, at 142-43; Jan. 31, 1985, at 14, 27, 37-38.

A State Farm claims adjuster asked Ivie's probate attorney for permission to bring a wrongful death action against the Bradshaws in Mrs. Ivie's name. Mrs. Ivie's attorney apparently did not give consent and requested that the Bradshaws' claim be settled. State Farm renewed its request, and in an October 22, 1980 letter, Ivie's probate attorney responded to State Farm's offer:

I explained to Mrs. Ivie that you desired to commence action in her name against Bradshaws ... and wished her permission to do so; that such would be of no expenses whatsoever and of any kind to her; that if a recovery was made on her behalf or the estate, that you would deduct therefrom only the court costs, but nothing else, nor would she be required to pay legal fees. Mrs. Ivie has consented to the above and you may proceed. She stated that this does not in any way modify her request that the case be settled within the limits of [her] insurance policy, as was stated and mentioned in my letter of October 13th, 1980.

(Emphasis added.)

State Farm filed a complaint against the Bradshaws in Arizona federal district court on November 3, 1980. The Bradshaws answered and counterclaimed for the injuries inflicted by Mr. Ivie. While the complaint was technically brought in the name of Mrs. Ivie and the estate of Mr. Ivie, State Farm had complete control of the litigation and paid all costs, fees and expenses. The parties conducted over twenty-five depositions preparing for trial. By the summer of 1982, the Bradshaws' "difficult financial situation" and emotional upset over being sued and accused of negligently causing Mr. Ivie's death forced them to accept a settlement of $60,000 from State Farm. The parties signed a stipulation and order for dismissal with prejudice, which was granted by the district court on July 22, 1982. Mrs. Ivie had died by the time of the settlement.

B. This Action

On June 30, 1983, the Bradshaws brought this action against State Farm alleging malicious prosecution, abuse of process, intentional infliction of emotional distress, unfair or deceptive insurance acts or practices, and racketeering. State Farm answered and obtained dismissal of the last three counts. The case went to trial on malicious prosecution and abuse of process theories. At the conclusion of the evidence, the trial court granted State Farm's motion for a directed verdict on abuse of process but sent the malicious prosecution count to the jury.

The jury awarded the Bradshaws $40,000 4 in compensatory damages and assessed $2,000,000 in punitive damages. State Farm filed motions for a new trial and for judgment notwithstanding the verdict. The trial court ordered a new trial unless the Bradshaws accepted a remittitur of $1,000,000. They accepted the remittitur on May 16, 1985, and the judgment became final.

State Farm appealed, raising the question of probable cause and a number of other substantive, evidentiary and damage issues. 5 The Bradshaws cross-appealed claiming the trial court erred in directing a verdict for State Farm on the abuse of process count and in calculating the remittitur.

C. Opinion of the Court of Appeals

The court of appeals focused on State Farm's contention that the Bradshaws' malicious prosecution count should have been dismissed because there was probable cause for Mrs. Ivie's wrongful death lawsuit. The court correctly noted that in order to prove malicious prosecution, a plaintiff must prove that the underlying action was brought without probable cause. Bradshaw v. State Farm Mutual Automobile Insurance Co., 157 Ariz 410, 411, 758 P.2d 1312, 1313 (Ariz.Ct.App.1986). Because the existence of probable cause is a matter of law, the court of appeals concluded that it need not defer to the trial court's findings. 157 Ariz. at 411, 758 P.2d at 1313, citing Bird v. Rothman, 128 Ariz. 599, 627 P.2d 1097 (App.), cert. denied, 454 U.S. 865, 102 S.Ct. 327, 70 L.Ed.2d 166 (1981). The court of appeals noted that two witnesses to the crash said that Bradshaw did not have his siren on at the time of impact. Because Ivie's death claim could therefore have survived a motion for summary judgment, the court believed that as a matter of law there had been probable cause for the institution of the death action. 157 Ariz. at 411, 758 P.2d at 1313. The court of appeals therefore reversed the judgment. We granted the Bradshaws' petition for review.

In essence, the Bradshaws have presented four issues 6 we must consider. State Farm raised six additional issues not decided by the court of appeals that merit our attention. Because they go to the heart of this case, we turn first to the issues relating to the malicious prosecution elements.

MALICIOUS PROSECUTION ISSUES

There are five elements to a claim for wrongful prosecution of a...

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