John Munic Enterprises, Inc. v. Laos
235 Ariz. 12
| Ariz. Ct. App. | 2014Background
- In 2009 Munic loaned the Laoses $900,000 to avoid foreclosure; the Laoses defaulted and Munic sued for breach of contract and fraud.
- The trial court granted summary judgment for Munic, awarding $1,362,305.70 in contract damages and attorney fees, but declined additional fraud damages.
- After judgment, Munic settled a malpractice suit against its own attorney for an undisclosed amount; the settlement was confidential and Munic did not credit it against the judgment versus the Laoses.
- The Laoses moved under Ariz. R. Civ. P. 60(c)(5) to set aside or credit the judgment based on Munic’s settlement and alternatively sought a fair market valuation hearing under A.R.S. § 12-1566; the trial court denied relief.
- On appeal the Laoses argued judicial bias, that UCATA or other doctrines required crediting Munic’s settlement against the judgment, and that equitable considerations entitled them to a valuation hearing; the court of appeals affirmed.
Issues
| Issue | Plaintiff's Argument (Munic) | Defendant's Argument (Laoses) | Held |
|---|---|---|---|
| Judicial bias/disqualification | Trial judge’s docket review was proper; no timely motion to disqualify was made | Judge was biased; court reviewed other pending cases involving Laoses | Waived: Laoses failed to timely seek disqualification and they had stipulated to same judge; claim forfeited |
| Whether UCATA (A.R.S. §§ 12-2501–2509) bars crediting Munic’s settlement with its attorney against judgment | UCATA applies only to tort-based liability; here damages are primarily contractual so UCATA does not control | Settlement should offset judgment under UCATA because economic loss/property damage is covered | Court of appeals: trial court erred applying UCATA because the award was contractual in substance, not a UCATA tort claim |
| Whether the collateral source rule prevents offset of Munic’s settlement (and thus supports denying credit) | Collateral source can apply in contract cases with tortious/willful breach; Munic’s attorney settlement addressed a separate wrong and Laoses shouldn’t benefit | Laoses: collateral source is a tort doctrine and should not defeat contractual offset; Grover forecloses collateral source in ordinary contract cases | Applied: collateral source rule may apply in contract cases with willful/tortious conduct; because Beth’s fraud procured the contract and Munic paid a separate source (its attorney), the trial court properly refused to offset the settlement against the judgment on equitable/collateral-source grounds |
| Right to a fair market valuation hearing under A.R.S. § 12-1566 | Statute’s 30-day request period is jurisdictional and was not timely invoked by Laoses | Laoses: fairness required notice of whether judgment was satisfied before deadline; discovery of settlement should toll or justify extension | Denied: Laoses failed to timely request the § 12-1566 hearing and offered no authority to extend the statutory 30-day deadline; claim rejected |
Key Cases Cited
- Grover v. Ratliff, 120 Ariz. 368 (App. 1978) (held collateral source rule is a tort concept and did not apply to an ordinary breach of contract)
- Fidelity & Deposit Co. of Md. v. Bondwriter Sw., Inc., 228 Ariz. 84 (App. 2011) (UCATA comparative-fault provisions do not extend to ordinary contract breaches)
- State Farm Ins. Cos. v. Premier Manufactured Sys., Inc., 217 Ariz. 222 (2007) (UCATA’s purpose to abolish joint and several liability in most tort circumstances)
- Norwest Bank (Minn.), N.A. v. Symington, 197 Ariz. 181 (App. 2000) (quoted Grover; left open trial court discretion when damages differ in nature)
- Pasco Indus., Inc. v. Talco Recycling, Inc., 195 Ariz. 50 (App. 1998) (addressed double recovery principle; distinguished where recoveries compensate for different wrongs)
- Hyatt Regency Phoenix Hotel Co. v. Winston & Strawn, 184 Ariz. 120 (App. 1995) (settlement with joint tortfeasor may reduce judgment against another joint tortfeasor)