Hall v. Read Dev., Inc.

• Decision Date: 26 April 2012
• Docket Number: No. 1 CA–CV 10–0175.,1 CA–CV 10–0175.
• Citation: Hall v. Read Dev., Inc., 229 Ariz. 277, 274 P.3d 1211, 632 Ariz. Adv. Rep. 11 (Ariz. App. 2012)
• Parties: Jane HALL, a single woman, Plaintiff/Appellee–Cross Appellant, v. READ DEVELOPMENT, INC., an Arizona corporation; Read Homes, Inc., a Nevada Corporation, Defendant/Appellant–Cross Appellee.
• Court: Arizona Court of Appeals

229 Ariz. 277

274 P.3d 1211

632 Ariz. Adv. Rep. 11

Jane HALL, a single woman, Plaintiff/Appellee–Cross Appellant,

v.READ DEVELOPMENT, INC., an Arizona corporation; Read Homes, Inc., a Nevada Corporation, Defendant/Appellant–Cross Appellee.

No. 1 CA–CV 10–0175.

Court of Appeals of Arizona, Division 1, Department C.

April 12, 2012.As Amended April 26, 2012.

Richards Law Office, P.C.By Charles F. Richards and Corrine J. Fields, Phoenix, Attorneys for Plaintiff/Appellee–Cross Appellant.

Israel and Gerity, P.L.L.C.By Kyle A. Israel and Scott A. Alles, Phoenix, Attorneys for Defendant/Appellant–Cross Appellee.

OPINION

BROWN, Judge.

¶ 1 In this opinion, we address whether “judgment finally obtained,” as used in Arizona Revised Statutes(“A.R.S.”)section 12–341.01(2003), is limited to the jury's verdict or whether it includes attorneys' fees ultimately awarded by the trial court.We also consider whether the remedy of rescission is available to a subsequent purchaser in connection with a claim for breach of the implied warranty of habitability.For the following reasons, we hold that for purposes of determining the successful party pursuant to § 12–341.01(A), “judgment finally obtained,” as construed and applied in this case, is inclusive of attorneys' fees.We further conclude that under the circumstances presented here, rescission cannot be properly requested by a subsequent purchaser.¹

BACKGROUND

¶ 2 In 1999, Jane Hall and her now-deceased husband purchased a previously-owned house, originally constructed by Read Development, Inc.(“RDI”).Soon thereafter, Hall experienced various structural problems with the house.In 2004, Hall filed suit against RDI, alleging breach of the implied warranty of habitability and requesting “rescission of the purchase,” or alternatively, damages for the costs to repair.²RDI later moved for summary judgment on whether Hall was entitled to rescission, asserting that the remedy of rescission was unavailable because Hall, as a subsequent purchaser, was not in privity with RDI.The trial court granted RDI's motion.

¶ 3 At trial, the court granted judgment as a matter of law against Hall on her claims for negligent infliction of emotional distress and punitive damages.The jury found in favor of Hall on her breach of implied warranty of habitability claim and awarded $30,000 in damages, but found in favor of RDI on Hall's intentional infliction of emotional distress claim.

¶ 4 Both parties requested attorneys' fees and costs pursuant to § 12–341.01(A).Under that statute, RDI asserted it was the successful party because its settlement offers exceeded the amount of the jury verdict.Hall countered that the offers did not exceed the “judgment finally obtained,” which necessarily consisted of the jury verdict, plus attorneys' fees and costs.Hall's fee request totaled $303,496.01, which included only those fees estimated to have been incurred in connection with the implied warranty of habitability claim.Finding that Hall was the successful party, the trial court awarded attorneys' fees in the amount of $227,500.It then reduced this figure by $2,500, the amount awarded to RDI for successfully defending against Hall's request for rescission.The court later issued a final judgment, awarding Hall damages of $30,000, taxable costs of $10,757.79, and attorneys' fees of $225,000.

¶ 5 RDI moved for a new trial, asserting the court erred when it granted attorneys' fees to Hall pursuant to § 12–341.01(A).Upon the retirement of the original trial judge, a different judge denied RDI's motion.This appeal and cross-appeal followed.

DISCUSSION

I.Trial Court's Decision Regarding Attorneys' Fees

¶ 6 In construing a statute, our fundamental goal is to give effect to legislative intent.Premiere RV & Mini Storage LLC v. Maricopa Cnty.,222 Ariz. 440, 444, ¶ 14, 215 P.3d 1121, 1125(App.2009).We first look to the language of the rule and will give effect to the plain meaning of its terms as the best indicator of intent unless those terms are ambiguous or would create an absurd result.Id.If we find uncertainty about the meaning of the statute's terms, we consider “the statute's context, language, subject matter, historical background, effects and consequences, and spirit and purpose.”Estancia Dev. Assocs., L.L.C. v. City of Scottsdale,196 Ariz. 87, 90, ¶ 11, 993 P.2d 1051, 1054(App.1999)(citation omitted).We review the interpretation of a statute de novo.Barry v. Alberty,173 Ariz. 387, 389, 843 P.2d 1279, 1281(App.1992).

A.Discretionary Nature of A.R.S. § 12–341.01

¶ 7 Recovery of attorneys' fees in actions arising out of contract is governed by § 12–341.01(A):

In any contested action arising out of a contract, express or implied, the court may award the successful party reasonable attorney fees.If a written settlement offer is rejected and the judgment finally obtained is equal to or more favorable to the offeror than an offer made in writing to settle any contested action arising out of a contract, the offeror is deemed to be the successful party from the date of the offer and the court may award the successful party reasonable attorney fees.

(Emphasis added.)Based on the plain language of the statute, fees may be awarded only to “the successful party.”Under the first sentence of § 12–341.01(A), a trial court exercises its broad discretion to determine whether a party was successful in the litigation.See, e.g., Sanborn v. Brooker & Wake Prop. Mgmt., Inc.,178 Ariz. 425, 430, 874 P.2d 982, 987(App.1994)(recognizing, in the context of § 12–341.01(A), that a determination of the successful party“will not be disturbed on appeal if any reasonable basis exists for it”);Schwartz v. Farmers Ins. Co. of Ariz.,166 Ariz. 33, 38, 800 P.2d 20, 25(App.1990)(“The trial court possesses discretion to determine who is the successful party in multiple-party litigation and in cases where there are multiple-parties as well as multiple-claims.”(citation omitted)).

¶ 8 Once the court determines the successful party, the court weighs various factors to decide the amount of fees, if any, to be awarded the successful party, an exercise that is also highly discretionary.See, e.g., Associated Indem. Corp. v. Warner,143 Ariz. 567, 571, 694 P.2d 1181, 1185(1985)(“[T]he question is not whether the judges of this court would have made an original like ruling, but whether a judicial mind, in view of the law and circumstances, could have made the ruling without exceeding the bounds of reason.We cannot substitute our discretion for that of the trial judge.”(citation and internal quotation omitted)).

¶ 9 The second sentence of the statute, added in 1999, seemingly narrows the trial court's discretion in handling fee determination issues in contract cases, obligating the court to compare a written settlement offer against the “judgment finally obtained.”A.R.S. § 12–341.01(A);S.B. 1159, 44th Leg., 1st Reg. Sess. (Ariz.1999).If the offer is more favorable than the judgment finally obtained, then the offeror is “deemed” to be the successful party“from the date of the offer.”Therefore, an offeror is the successful party, even if an offeree obtains a favorable judgment, if the offeror previously made a written offer for an amount equal to or greater than the final judgment.Under such circumstances, however, the offeror is the successful party in the litigation only after the date of the offer and the trial court still retains its broad discretion to award the successful party some, all, or none of its claimed attorneys' fees.See2A Daniel J. McAuliffe, Arizona Legal Forms, Civil Procedure§ 68.0 (3d ed.)(“While the amendment to the statute is not artfully worded, it seems to provide that, if a defendant in a contract action makes a written settlement offer during the course of the case which is rejected, and the plaintiff's ultimate recovery is less than the amount of the offer, then the defendant is entitled to seek a discretionary award of attorneys' fees incurred from and after the date the offer was made.”).

¶ 10 Moreover, nothing in the language of the statute indicates that these methods are necessarily mutually exclusive directives for determining the successful party.The first contemplates an overall assessment of whether the plaintiff prevailed on his or her contractual claim.The second presumes a comparison of a settlement offer against the final judgment, potentially altering the successful party designation from the date of the offer.Cf.Drozda v. McComas,181 Ariz. 82, 84, 887 P.2d 612, 614(App.1994)(harmonizing Arizona Rule of Civil Procedure 68 and § 12–341 by holding that although the judgment finally obtained by plaintiff was less than defendant's offer of judgment, plaintiff was still the successful party and therefore entitled to recover both pre-offer and post-offer costs under § 12–341; however, plaintiff was also required to pay defendant's post-offer costs);Arizona Attorneys' Fees Manual§ 2.6.2(Bruce E. Meyerson & Patricia K. Norris eds., Fifthed. 2010)(recognizing that § 12–341.01(A)“fixes the status of ‘successful party’ as of a date certain” and “[i]t remains to be seen whether, for example, the award of fees to the party making a qualifying offer under the statute should be offset by the fees incurred up to the date of the offer by the party who is otherwise the prevailing party in the case”).³

¶ 11 Here, after extensive briefing and oral argument, the trial court first determined that by “presenting her complaint to a jury and attaining a verdict awarding damages,” Hall was the successful party for “purposes of both A.R.S. § 12–341and§ 12–341.01.”⁴Recognizing that RDI “might become the successful party‘from the date of the offer’ under § 12–341.01(A),”the court then addressed RDI's claim that it prevailed under the settlement comparison test:

[RDI] contends it is the successful party because of offers to settle made January 25, 2007, the...