John Munic Enters., Inc. v. Laos

• Decision Date: 06 May 2014
• Docket Number: No. 2 CA–CV 2013–0108.,2 CA–CV 2013–0108.
• Citation: 326 P.3d 279,686 Ariz. Adv. Rep. 28,235 Ariz. 12
• Parties: JOHN MUNIC ENTERPRISES, INC., an Arizona corporation, Plaintiff/Appellee, v. Beth Anne LAOS and Enrico B. Laos, Wife and Husband, Defendant/Appellant.
• Court: Arizona Court of Appeals

235 Ariz. 12

326 P.3d 279

686 Ariz. Adv. Rep. 28

JOHN MUNIC ENTERPRISES, INC., an Arizona corporation, Plaintiff/Appellee,

v.Beth Anne LAOS and Enrico B. Laos, Wife and Husband, Defendant/Appellant.

No. 2 CA–CV 2013–0108.

Court of Appeals of Arizona, Division 2.

May 6, 2014.

Altfeld & Battaile P.C., By Robert A. Kerry, Tucson, Counsel for Plaintiff/Appellee.

Waterfall, Economidis, Caldwell, Hanshaw & Villamana, P.C., By Corey B. Larson, Tucson, Counsel for Defendant/Appellant.

Chief Judge HOWARD authored the opinion of the Court, in which Judge BRAMMER and Judge OLSON concurred.¹

OPINION

HOWARD, Chief Judge.

¶ 1 Beth and Enrico Laos (“the Laoses”) appeal from the trial court's denial of their Rule 60(c)(5), Ariz. R. Civ. P., motion for relief from judgment entered in favor of John Munic Enterprises, Inc. (“Munic”), and its denial of their request for a fair market valuation hearing pursuant to A.R.S. § 12–1566. On appeal, they argue that the court was biased against them, that it erred in applying the Uniform Contribution Among Tortfeasors Act (“UCATA”) to prevent a settlement amount between Munic and its attorney from serving as a credit against the judgment entered against them, and that fundamental fairness and equity entitled them to a fair market valuation hearing. For the following reasons, we affirm.

Factual and Procedural Background

¶ 2 The underlying facts are undisputed. In March 2009, the Laoses sought a loan from Munic in order to avoid the non-judicial foreclosure of a ranch they had purchased. Munic loaned them $900,000 for this purpose. When the Laoses failed to repay any amount of the loan, Munic discovered that Beth Laos had misrepresented the value of assets that secured the loan. Munic sued the Laoses for breach of contract and fraud and was granted summary judgment on both claims and awarded contract damages in the amount of $1,362,305.70, which covered the loan principal, unpaid interest, and attorney fees. The trial court declined to enter any additional compensatory or punitive damages on the fraud claim.

¶ 3 Over a year after the judgment was entered, the Laoses discovered Munic had sued its attorney for legal malpractice in connection with his work on the loan and had obtained a confidential settlement amount from him. The Laoses moved for relief from judgment pursuant to Rule 60(c)(5), arguing that Munic should reveal the amount of the settlement so that it could be credited against the judgment entered against them or, in the alternative, that Munic should be required to enter a satisfaction of judgment. They also requested a fair market valuation hearing for the value of the ranch. The trial court denied the motion and the request for a valuation hearing. We have jurisdiction over the Laoses' appeal pursuant to A.R.S. § 12–2101(A)(2).

Trial Court Prejudice

¶ 4 The Laoses first argue the trial court was biased or prejudiced against them because it looked into other cases involving the Laoses pending on the superior court's docket. However, they did not make this argument below in their motion for reconsideration or through an affidavit requesting the judge's disqualification pursuant to A.R.S. § 12–409. Additionally, they stipulated to the same trial judge entering an amended judgment to confirm this court's jurisdiction. “The right to apply for a change of judge for cause is waived if not timely filed.” Fendler v. Phx. Newspapers Inc., 130 Ariz. 475, 481, 636 P.2d 1257, 1263 (App.1981). Therefore, they have waived any error. See Trantor v. Fredrikson, 179 Ariz. 299, 300, 878 P.2d 657, 658 (1994) (errors not raised in trial court cannot be asserted on appeal); Marsin v. Udall, 78 Ariz. 309, 313, 279 P.2d 721, 724 (1955) (untimely to move to disqualify judge when judgment already rendered on pleadings).

Settlement Credit

¶ 5 The Laoses next argue the trial court erred by concluding that UCATA prevented crediting the settlement Munic obtained from its attorney against the judgment entered against them and therefore denying their Rule 60(c)(5) motion. We review the denial of a Rule 60(c)(5) motion for an abuse of discretion. Ezell v. Quon, 224 Ariz. 532, ¶ 15, 233 P.3d 645, 649 (App.2010). A court abuses its discretion if it commits an error of law. City of Tucson v. Clear Channel Outdoor, Inc., 218 Ariz. 172, ¶ 58, 181 P.3d 219, 236 (App.2008). We review de novo issues of statutory interpretation. First Credit Union v. Courtney, 233 Ariz. 105, ¶ 9, 309 P.3d 929, 931 (App.2013). “When the statutory language ‘is clear and unambiguous,’ we look no further and ‘assum[e] the legislature has said what it means.’ ” Id., quoting Clear Channel Outdoor, 218 Ariz. 172, ¶ 6, 181 P.3d at 225.

¶ 6 Rule 60(c)(5) allows a trial court to relieve a party from a judgment if “the judgment has been satisfied, released or discharged.” The Laoses claim Munic's settlement with its attorney satisfied, or at least partially satisfied, the judgment against them. But the trial court concluded that “UCATA does apply to this case” because § 12–2501(G) “defines ‘property damage’ to include ‘economic loss[.]’ ” The court then found that because the liability of Munic's attorney and the Laoses was several, and not joint, the settlement could not be used to offset their judgment under UCATA. See § 12–2506(A); Gemstar Ltd. v. Ernst & Young, 185 Ariz. 493, 507–08, 917 P.2d 222, 236–37 (1996).

¶ 7 Sections 12–2501 through 12–2509, A.R.S., establish Arizona's version of UCATA. By its plain language, the act applies to persons who become “liable in tort.” § 12–2501(A). “The right to contribution under §§ 12–2501 through 12–2504 applies to all tortfeasors whose liability is based on negligence, strict liability in tort or any product liability action, as defined in § 12–681, including warranty.” A.R.S. § 12–2509(A). Section 12–2506(A) sets a default rule that in “personal injury, property damage or wrongful death” actions liability is several and “in direct proportion to that defendant's percentage of fault.”

¶ 8 UCATA's purpose is to “abolish joint and several liability in most circumstances” so that “ ‘each tortfeasor [is] responsible for paying his or her percentage of fault and no more.’ ” State Farm Ins. Cos. v. Premier Manufactured Sys., Inc., 217 Ariz. 222, ¶ 12, 172 P.3d 410, 413 (2007), quoting Dietz v. Gen. Elec. Co., 169 Ariz. 505, 510, 821 P.2d 166, 171 (1991) (first emphasis added; second emphasis in Dietz ). Although § 12–2506(F) defines “[f]ault” as including the “breach of a legal duty,” we recently concluded that “[i]n the context of the UCATA ... breach of a contractual undertaking is [not] included within the meaning of ‘breach of a legal duty.’ ” ²Fidelity & Deposit Co. of Md. v. Bondwriter Sw., Inc., 228 Ariz. 84, ¶ 24, 263 P.3d 633, 638 (App.2011). We also determined that “[t]he fact that economic losses are included within the definition of ‘property damage’ does not compel the conclusion that the comparative fault provisions of UCATA apply to breach of contract claims.” Id. ¶ 25.

¶ 9 Munic received a judgment in its favor on both its contract and tort claims against the Laoses. The judgment did not include compensatory or punitive damages for the fraud claim. In granting judgment in Munic's favor on the contract claim, however, the trial court awarded damages and attorney fees pursuant to the terms of the contract. Because the Laoses are liable in tort and contract, we must review the substance of the damages at issue to determine whether UCATA was intended to apply to this situation. See Thomas v. Goudreault, 163 Ariz. 159, 163–64, 165, 786 P.2d 1010, 1014–15, 1016 (App.1989) (courts look to substance not labels; analyzing damages involved to determine relevant law).

¶ 10 “To determine whether contract or tort law applies in a specific case, the court must consider the facts of the case, ‘bearing in mind the purposes of tort law recovery as contrasted with contract law.’ ” Salt River Project Agric. Improvement & Power Dist. v. Westinghouse Elec. Corp., 143 Ariz. 368, 376, 694 P.2d 198, 206 (1984), quoting Arrow Leasing Corp. v. Cummins Ariz. Diesel, Inc., 136 Ariz. 444, 448, 666 P.2d 544, 548 (App.1983), abrogated on other grounds by Phelps v. Firebird Raceway, Inc., 210 Ariz. 403, 111 P.3d 1003 (2005). “[C]ontract remedies are designed to redress loss of the benefit of the bargain while tort remedies are designed to protect the public....” Arrow Leasing Corp., 136 Ariz. at 447, 666 P.2d at 547. When a party is induced to enter a contract by fraudulent misrepresentations and justifiably relies on the misrepresentation, the contract is voidable by that party, but is not automatically void. SeeRestatement (Second) of Contracts § 164(1) (1981) (hereinafter “Restatement (Contracts)”). But whether the party chooses to void the contract or not, it also has an independent tort action for fraud. Morris v. Achen Constr. Co., 155 Ariz. 512, 514, 747 P.2d 1211, 1213 (1987).

¶ 11 The summary judgment in Munic's favor awarded damages and attorney fees based on the terms of the contract, but did not award additional damages as requested by Munic's fraud claim. Thus, although Munic could have sought to void the contract, Restatement (Contracts) § 164(1), it instead sought to enforce the contract by its terms and receive the benefit of its bargain. The only recovery Munic received in this case thus fits squarely within the type of remedy that contract law is designed to provide. See Arrow Leasing Corp., 136 Ariz. at 447, 666 P.2d at 547; Thomas, 163 Ariz. at 165, 786 P.2d at 1016.

¶ 12 Under these circumstances, we conclude the damages in this case sound primarily in contract. Therefore UCATA was not intended to apply to this situation in which the Laoses were not primarily “liable in tort” pursuant to § 12–2501(A) or liable for a breach of a legal duty causing personal injury,property damage or wrongful death within the meaning of § 12–2506(A), (F). See Fidelity & Deposit Co. of Md., 228 Ariz. 84, ...