Marketos v. American Employers Ins. Co.
| Decision Date | 26 September 2001 |
| Docket Number | Docket No. 117376. |
| Citation | 633 N.W.2d 371,465 Mich. 407 |
| Parties | George J. MARKETOS and Mark Video Enterprises, Inc., Plaintiffs-Appellants, v. AMERICAN EMPLOYERS INSURANCE CO., Defendant-Appellee. |
| Court | Michigan Supreme Court |
Kanter & Associates (by Robert W. Roddis) Ann Arbor, MI and Honigman, Miller, Schwartz & Cohn (by I.W. Winsten), Detroit, MI, for the plaintiffs-appellants.
Cozen & O'Connor (by Thomas McKay, III, and Kathie D. King) Philadelphia, PA and Miller, Canfield, Paddock & Stone, PLC (by Allyn D. Kantor) Ann Arbor, MI, for the defendant-appellee.
The plaintiffs brought this action to recover on a fire insurance policy for damages to their property. The trial resulted in a judgment for the plaintiffs, with the jury rejecting defendant's arson defense. The circuit court refused to award mediation sanctions under MCR 2.403(O). However, the Court of Appeals reversed, concluding that the trial court should not have deducted a setoff in determining whether mediation sanctions were warranted. We hold that the setoff was properly deducted and therefore reverse the judgment of the Court of Appeals in part.
Plaintiff, Mark Video Enterprises, Inc.,1 owned a facility in Ann Arbor that it used to duplicate tapes of television programs and distribute them to local stations. On the evening of January 4, 1986, the building and most of the equipment were destroyed by fire. Plaintiffs filed a claim with defendant American Employers Insurance Co, which insured the property against loss by fire. Defendant denied the claim, asserting that the fire had been deliberately set and that Marketos was responsible for the arson. Following the denial of the claim, plaintiffs brought this action in December 1986 alleging breach of contract and bad-faith refusal to pay the claim.2 Defendant had already paid $455,073.15 to First of America Bank, which held a mortgage on the real estate.3
The case has been tried twice. In 1990 a jury awarded no damages after finding that Marketos had committed arson. The trial judge, however, granted judgment notwithstanding the verdict and awarded $3,138,113.99 to Mark Video and $330,671.90 to Marketos. Under MCR 2.610(C), the judge also granted conditionally a new trial in the event that an appellate court reversed the judgment notwithstanding the verdict. The judge concluded that the defendant's evidence of arson was insufficient, that the verdict was against the great weight of the evidence, and that the plaintiffs were unfairly prejudiced when the defendant added a new theory during closing arguments.
The Court of Appeals thereafter reversed, concluding that sufficient evidence supported the verdict and that the verdict was not contrary to the great weight of the evidence. The Court also rejected the trial judge's conclusions regarding defense counsel's closing argument.4
The plaintiffs applied for leave to appeal to this Court. On August 22, 1995, we reversed the judgment of the Court of Appeals in part. Our order stated:
As to that part of the Court of Appeals judgment reversing the judgment notwithstanding the verdict, leave to appeal is denied because we are not persuaded that the questions presented should now be reviewed by this Court. We reverse that part of the Court of Appeals judgment that reversed the Washtenaw Circuit Court's conditional ruling granting the plaintiffs' motion for a new trial. MCR 2.610(C). The Court of Appeals erred by rejecting the trial judge's conclusion that, in the circumstances of this case, the plaintiffs were disadvantaged unfairly when the defendant's closing argument advanced a previously unpleaded theory of affirmative defense. We remand the case to the Washtenaw Circuit Court for a new trial pursuant to that conditional ruling.5
At the second trial in September 1997, the verdict form asked whether defendant had established the arson defense; if not, the verdict form then instructed the jury to determine the actual cash value of eight categories of property allegedly damaged in the fire. The jury found that the insurer had not proved arson, and determined that the actual cash value of the damaged property was $1,707,709.
In posttrial motions, the judge adjusted the jury's findings of actual cash value on the basis of the trial evidence, policy language, and legal principles, resulting in an award of $799,394.85. The court entered judgment in that amount, plus accrued interest, on December 11, 1997.
Before trial, mediation proceedings under MCR 2.4036 had resulted in a proposed award of $1.5 million.7 The plaintiffs sought sanctions under MCR 2.403(O), contending that the jury's "verdict" was more favorable than the mediation award. The trial judge refused to award sanctions because the verdict following the posttrial adjustments was not more favorable to plaintiffs than the mediation award.
The Court of Appeals reversed on the sanctions issue. It examined the language of MCR 2.403(O), which provided, in part:
The Court held that the circuit court had improperly considered its posttrial adjustment of the jury's findings when determining whether to award sanctions:
We hold that the plain language of MCR 2.403(O) requires the trial court to award mediation sanctions if the jury verdict itself, adjusted only as set forth in MCR 2.403(O)(3), is not more favorable to the rejecting party than the mediation evaluation. See Frank v. William A Kibbe & Assoc., Inc., 208 Mich.App. 346, 352, 527 N.W.2d 82 (1995) (). As applied to the case at hand, we find that the trial court erred by subtracting the setoff amount before determining if mediation sanctions were warranted.
The plaintiffs have applied for leave to appeal to this Court, raising claims about other aspects of the Court of Appeals decision. Defendant has cross-appealed on the mediation sanctions ruling.
This issue involves interpretation of a court rule, which, like matters of statutory interpretation, is a question of law that we review de novo. McAuley v. General Motors Corp., 457 Mich. 513, 518, 578 N.W.2d 282 (1998). Grievance Administrator v. Underwood, 462 Mich. 188, 193-194, 612 N.W.2d 116 (2000), articulates the proper mode of interpretation:
When called on to construe a court rule, this Court applies the legal principles that govern the construction and application of statutes. Accordingly, we begin with the plain language of the court rule. When that language is unambiguous, we must enforce the meaning expressed, without further judicial construction or interpretation. Similarly, common words must be understood to have their everyday, plain meaning. [Citations omitted.]
In this case, the Court of Appeals erred in treating the jury's findings as the "verdict" for purposes of MCR 2.403(O). The jury did not determine the amount that plaintiffs should recover. Rather, it made specific factual findings about the cash value of categories of property damage.
After the questions on the arson defense, the verdict form asked the jury:
However, the trial court—not the jury— determined the amount that defendant would have to pay. In particular, the court decided the legal effect of the setoff for defendant's payments to the bank on the mortgage. The jury was told:
There has been some testimony in this case about the defendant's payment of monies to First of America and obtaining an assignment of the mortgage as a result. If you decide to rule in favor of the plaintiffs, you should award plaintiffs the full $480,000 stipulated value of the building and should not consider whether the defendant is entitled to a credit for the amount paid to First of America. Any credit in this case can be determined by the Court, by me, as a matter of law.
MCR 2.403(O)(2) was amended in 1987 to include a definition of "verdict." The rule now clarifies that decisions by the court, as well as by a jury,...
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