New Law in Business and Real Estate in Arizona

Posted on November 18, 2008 in Arizona Law Regarding Business and Real Estate

Quintero v. Rodgers (11/18/2008): Arizona Court of Appeals Division One Holds That A.R.S. § 14-3110 Precludes Damages for Loss of Enjoyment of Life But Does Not Preclude Recovery of Punitive Damages. Please call William A. Miller Phoenix, Arizona Lawyer at 602-319-6899 with questions.

After filing a lawsuit against the defendant, Matthew Rodgers, for injuries suffered in a motor vehicle accident, Plaintiff Luis Anaya Soto died in an unrelated workplace accident.  Soto’s wife, Elizabeth Quintero, was substituted as the personal representative of Soto in the suit.  Rodgers filed a motion for partial summary judgment on the grounds that Arizona’s survival statute, A.R.S. § 14-3110, precludes recovery of punitive damages and damages for loss of enjoyment of life.  Rogers also argued that Quintero failed to meet the clear and convincing standard required for recovery of punitive damages.  The trial court granted the motion without explaining its reasons.  Following a settlement agreement that preserved Quintero’s rights to appeal the ruling on the motion for partial summary judgment, Quintero appealed.

The Arizona Appellate Court affirmed in part and reversed in part.  The Court held that A.R.S. § 14-3110 precludes recovery of damages for loss of enjoyment of life.  Arizona’s survival statute precludes recovery for damages for pain and suffering.  The Court explained that damages for loss of enjoyment of life were meant to be included as part of pain and suffering under the statute and reasoned that to find otherwise would be contrary to the Legislature’s intent.  Additionally, the Court distinguished its holding in Ogden v. J.M. Steel Erecting, Inc., 201 Ariz. 32, 31 P.3d 806 (Ariz. App. 2001), which stated that when a jury makes a general damages determination, a court can properly instruct the jury on damages for loss of enjoyment of life as a component of those general damages without necessarily duplicating damages for pain and suffering.   

In regard to the punitive damages, the Court held that punitive damages survive the death of both the plaintiff and the tortfeasor, noting that § 14-3110 does not preclude recovery of punitive damages.  The Court went on to explain that because the trial court did not provide any reasoning for its grant of the motion for partial summary judgment, it would address the evidence supporting the claim for punitive damages.  Citing Rodgers’ guilty plea to reckless driving and additional circumstantial evidence re Rodgers’ speed at the time of the collision, the Court found that a reasonable jury could find that Rodgers acted with sufficient recklessness to support an award of punitive damages. 

M.T. Builders, L.L.C. v. Fisher Roofing Inc. (11/13/2008): Arizona Court of Appeals Division One Holds That “Narrow Form” Indemnity Provision That Limits Indemnity Obligation to the Extent of Indemnitor’s Fault Does Not Create Any Up-Front Duty to Defend Suit Against Indemnitee.

A condominium association (“Plaintiff”) sued a general contractor (“Builder”) for alleged construction defects.  Builder filed a cross-complaint and a third-party complaint against a subcontractor (“Subcontractor”) and others for indemnity and for alleged breach of a duty to defend Builder.  An indemnity provision in Builder’s contract with Subcontractor obligated Subcontractor to indemnify and hold harmless the Builder against all claims, damages, losses and expenses “to the extent caused in whole or in part by any negligent act or omission of the Subcontractor” or of persons employed by the Subcontractor.  After settling with Plaintiff, Builder obtained summary judgment for its indemnity claim against Subcontractor.  The trial court awarded to Builder the Subcontractor’s allocated share of indemnity damages, attorneys’ fees and defense costs.  Subcontractor appealed.

The Court of Appeals held that the trial court erred by granting summary judgment to Builder in the face of disputed facts regarding the extent that Subcontractor’s fault caused Builder’s damages, and without a determination that the relevant portions of Builder’s settlement with Plaintiff were reasonable and prudent.

The Court rejected Subcontractor’s threshold arguments that the settlement between Plaintiff and Builder had eliminated Builder’s indemnity claim by failing to discharge the Plaintiff’s claims against Subcontractor.  Nor was Builder’s indemnity claim defeated by Plaintiff’s assignment to Builder of its claims against Subcontractor. 


The Court agreed with Subcontractor, however, that the indemnity clause of the contract between Builder and Subcontractor provided for indemnification only to the extent that Builder’s damages and expenses were caused by Subcontractor’s negligence – an issue that was never decided.  Subcontractor’s refusal to accept Builder’s tender of defense did not preclude Subcontractor from disputing the extent of its indemnity liability, because Subcontractor’s limited indemnity obligation did not create any up-front duty to defend Builder.  Because the contract’s “narrow form” indemnity provision limited Subcontractor’s indemnity obligation to the extent of Subcontractor’s fault, the provision imposed no duty to defend Builder prior to a determination of Subcontractor’s fault.


 Finally, the trial court erred by entering summary judgment against Subcontractor without determining whether the portion of the Plaintiff/Builder settlement attributable to Subcontractor’s fault was reasonable and prudent under the circumstances.  The Court therefore reversed and remanded to the trial court for further proceedings.


South West Sand & Gravel, Inc. v. Central Arizona Water Conservation District (11/10/2008): Division One Holds That Land Owner Does Not Have Taking or Tort Claims Where Increase of River’s Water Levels Interfered with Mining Operation

Pursuant to permits issued by the Arizona Department of Water Resources, the Central Arizona Water Conservation District (“District”) diverted water from a Central Arizona Project canal into the Agua Fria River so that surplus water could flow downstream for storage in an underground storage facility.  As a result of the diverted water, the water table beneath South West Sand & Gravel’s (“South West”) property elevated and interfered with the company’s mining business.  After South West sued on various tort theories and for a taking without compensation, the superior court granted summary judgment against South West.  This appeal followed.

Judge Thompson, writing for a unanimous panel, held that summary judgment was appropriate.  The court explained that Arizona has long recognized a right to use a natural stream to move and store water, and that A.R.S. § 45-173 (1994) expressly authorizes the use of a natural channel to deliver water to an underground storage facility.  Relying on West Maricopa Combine, Inc. v. Arizona Department of Water Resources, 200 Ariz. 400, 26 P.3d 1171 (Ariz. App. 2001), the court held that such use of a natural channel could not constitute a taking because South West’s ownership was always subject to Arizona’s reservation of natural channels to move and store water, and therefore the District’s actions under the permits did not alter South West’s pre-existing rights.

Turning to the tort claims, the court held that there could be no action for trespass because, although its property is in and around the natural water channel, South West had no right to exclude others from using the river.  Under West Maricopa Combine, the right to use natural water channels is not limited to natural water flow, and South West had no entitlement to a fixed water table level. 


Finally, the court held that the Arizona Department of Water Resources did not have to consider non-existing future uses in determining whether unreasonable harm would result from the issuance of a permit like the one the District received.



Wednesday, November 12, 2008

1800 Ocotillo, LLC v. The WLB Group, Inc. (11/3/2008): Arizona Supreme Court Holds Liability-Limitation Clauses Do Not Violate Public Policy, and Do Not Require Submission To A Jury As An Assumption of Risk Defense.

The WLB Group, Inc. (“WLB”) contracted with 1800 Ocotillo, LLC (“Ocotillo”) to provide surveying services for Ocotillo’s construction project.  A flaw in WLB’s survey resulted in additional costs to Ocotillo, so Ocotillo sued WLB for damages.  However, the contract limited WLB’s liability to the amount Ocotillo paid for its services.  The trial court held the clause did not violate public policy.  The Court of Appeals agreed, but held the clause was an assumption of risk defense, and therefore a jury must decide its enforceability.  WLB petitioned the Supreme Court for review of the assumption of risk issue, and Ocotillo cross-petitioned for review of the public policy issue.

To demonstrate a public policy against liability-limitation clauses, Ocotillo relied on A.R.S. § 32-1159, which states that indemnity clauses in construction contracts are against public policy.  However, the Supreme Court noted that indemnity clauses are distinguishable from liability limitations, because the former remove all incentive for a party to exercise due care, whereas the latter do not.

Ocotillo also relied on various laws that retain personal liability for members of professional corporations, limited liability companies, and partnerships.  The Court explained that these laws are irrelevant to the issue of limiting liability by contract, and that WLB is a traditional corporation, for which none of the cited statutes applied.  The Court also rejected Ocotillo’s argument that liability-limitation clauses are contrary to judicially created public policy.  The Court held the liability-limitation clause was not unenforceable for being against public policy.

With respect to the second issue, the Arizona Constitution states that “[t]he defense of … assumption of risk shall, in all cases whatsoever … be left to the jury.”  Ariz. Const. art XVIII, § 5.  The Court explained that the drafters of the Constitution intended this section to apply to defenses that would operate as a complete bar to a plaintiff’s recovery, which a liability-limitation clause does not.  Therefore, the Court vacated the opinion of the court of appeals on this issue, and remanded the case for further proceedings.

Queen Creek Summit, LLC v. Davis (10/30/2008): Arizona Court of Appeals Division One Holds that in a Condemnation Proceeding in Which the State’s compliance with A.R.S. § 12-1115(A) Is Challenged, The Landowner Bears the Burden of Proof by Clear and Convincing Evidence, And on the Merits, The Trial Court Correctly Concluded that the Public Good of Gilbert’s Water Pipeline Outweighed the Private Injury to the Landowner. 

Queen Creek Summit, LLC (QCS) owns the land on which Canyon State Academy sits.  The Town of Gilbert instituted proceedings against QCS to condemn a pipeline easement through the middle of Canyon State Academy.  The trial court found that QCS failed to meet its burden of proving that Gilbert had improperly decided that the public good of locating the water pipeline through the middle of campus outweighed the private injury to QCS.  QCS appealed.     

The Arizona Appeals Court affirmed.  A.R.S. § 12-1115(A) provides that “[w]here land is required for public use, the state, or its agents in charge of such use, may survey and locate the land, but it shall be located in the manner which will be most compatible with the greatest public good and the least private injury.”  Relying on language in the Supreme Court’s opinion in Chambers v. State ex rel. Morrison, 82 Ariz. 278, 312 P.2d 155 (1957), the Court concluded that the landowner, here QCS, bears the burden of proof – by clear and convincing evidence – that the state actor, here the Town of Gilbert, failed to comply with A.R.S. § 12-1115(A).  Turning to the merits, the Court concluded that the trial court properly balanced the “greatest public good” and “least private injury” requirements of the statute.  In particular, QCS failed to prove that Gilbert did not consider QCS’s private injury or that its private injury justified the substantial time and expense of placing the pipeline in an alternative location.  Finally, using rational basis review, the Court rejected QCS’s equal protection challenge on similar grounds because Gilbert offered testimony that an alternative location “would involve additional costs, complications, obstacles, and delays beyond those involved with the proposed route.”                 


Judge Barker authored the opinion; Judges Brown and Timmer concurred. 


Chalpin v Snyder.  (10/21/2008):  Arizona Court of Appeals Division One Reverses Summary Judgment and Dismissal Against Attorney on Malicious Prosecution and Aiding and Abetting Complaint.

Hi Health Supermarket (the “Company”) and its President and CEO (“Chalpin”), had liability insurance on the company’s vehicles through Reliance Insurance Company.  In 1996, the Company added Chalpin’s daughter Debra and her car to the Company’s policy.  A few years later, Debra was at-fault in an accident where the driver of the other car was left in a vegetative state.  Debra tendered the claim to Reliance, which initially confirmed that the claim was covered. 

At a mediation following its assurance to Debra and Chalpin that the claim was covered, Reliance refused to settle for the $5 million demanded by the injured woman’s family.  Instead, Reliance hired Snyder, a California lawyer, to investigate “with an eye toward disavowing coverage” for the accident.  Snyder wrote a coverage opinion stating that Reliance could not disavow coverage.  He also, however, recommended that Reliance file a suit against Debra and Chalpin, raising defenses to coverage, to pressure them into a settlement.  Reliance then filed the suit urged by Snyder, and named Chalpin and his daughter personally.  Chalpin, the Company, and Debra counterclaimed for declaratory relief confirming coverage.  Reliance lost and the jury awarded nearly $500,000 in attorneys’ fees against it.

Chalpin, having won the first suit, then sued Snyder, the lawyer (Reliance had declared bankruptcy), for abuse of process, malicious prosecution, and aiding and abetting.  The superior court dismissed the aiding and abetting claim for failure to state a claim.  The superior court granted Snyder summary judgment on Chalpin’s remaining claims; Chalpin appealed.

The Arizona appeals court first confirmed that, among five elements in the tort of malicious prosecution, the requirement that the defendant lacked probable cause to institute the underlying action is to be judged objectively.  The Court further explained that the trial court’s ruling on Rule 50 motions in the case brought by Snyder is not dispositive of whether Snyder had probable cause to bring the initial suit.  The superior court, in this case, erred in holding otherwise.


The court went on to discuss, though, whether the record of the underlying litigation otherwise supported the superior court’s ruling here that probable cause existed.  Rejecting Snyder’s argument that probable cause was lacking only if “there was no chance for success,” the Court of Appeals held that probable cause is lacking unless the initiator believes he has a “good chance” of success.  See Bradshaw v. State Farm Mut. Auto Ins. Co., 157 Ariz. 411, 416-17 (1988).


Turning to the aiding and abetting claim, the Court of Appeals, citing the Restatment, rejected the superior court’s conclusion that Arizona law limits actions against lawyers to only two causes of action – abuse of process and malicious prosecution.  The Court of Appeals also rejected Snyder’s claim that the Constitution and the Noerr-Pennington doctrine barred an aiding and abetting claim against him.

Vasquez v. State (9/29/2008):  Arizona Court of Appeals Division Two Holds That:  (1) a Notice of Claim for Wrongful Death Is Sufficient if It Sets Forth Any Facts Supporting the Amount Demanded; and (2) Government Entities Do Not Have a Duty to Identify Individuals Killed During High-Speed Pursuits.     

In November 2004, a suspect was killed during a high-speed pursuit involving State and Cochise County officers.  The officers were unable to identify the suspect and after an autopsy, the body was buried at county expense.  Two months later, the suspect was identified as 15 year-old Angel Romo.  Romo’s mother, Plaintiff Gloria Vasquez, subsequently brought a wrongful death suit against the State and Department of Public Safety (“State”), as well as separate claims against the State and Cochise County (“County”) for wrongful handling of a dead body and negligent infliction of emotional distress.  Before suing, she filed a notice of claim with the State for wrongful death in which she demanded $750,000, supporting that amount only with the fact that Romo was her “15-year old son.”  The County moved for summary judgment arguing that it had no duty to identify Romo or to notify Vasquez of his death.  The State joined the motion, and additionally moved to dismiss based on Vasquez’s failure to strictly comply with the notice of claim statute, A.R.S. § 12-821.01.  The trial court granted both motions, and Vasquez appealed. 

The Arizona Appeals Court affirmed in part and reversed in part.  The Court first addressed whether Vasquez’s notice of claim contained “facts supporting” the amount she demanded, as required under A.R.S. § 12-821.01(A).  Citing Backus v. State, 534 Ariz. Adv. Rep. 26 (Ct. App. July 17, 2008) and Yollin v. City of Glendale, 536 Ariz. Adv. Rep. 20 (Ct. App. Aug. 5, 2008), the Court explained that a notice of claim for wrongful death is sufficient if it provides any facts, no matter how meager, to support the amount claimed.  Applying that standard, and noting that it is appropriate to consider the type of action when determining what facts must be provided, the Court held that the fact that Romo was Vasquez’s son and died prematurely was sufficient to satisfy the notice of claim statute.  The Court therefore reversed on the wrongful death claim.    

The Court then held that the State and County’s did not have a duty to identify Romo or notify Vasquez of his death.  The Court first rejected Vasquez’s argument that such a duty arises from A.R.S. § 28-624(D), which imposes on drivers of emergency vehicles a “duty to drive with due regard for the safety of all persons,” because that statute does not impose any duty related to post-pursuit identification of a suspect or notification of family members.  The Court next rejected the argument, based on Restatement (Second) of Torts § 314A(4), that a duty arose as a result of the “apprehension” of Romo.  No special relationship, and thus no duty, arose because Romo died before being apprehended or taken into custody, and nothing in § 314A(4) suggests that a special relationship is created when custody is taken of a dead body.  Next, the Court rejected the argument that a special relationship, and therefore a duty, arose by virtue of the State and County’s investigation following Romo’s death.  Citing Morton v. Maricopa County, 177 Ariz. 147, 865 P.2d 808 (App. 1993), the Court held that a special relationship does not arise merely when an investigation is undertaken.  Finally, the Court rejected Vasquez’s argument that her claims were independently actionable under Restatement § 868, which prohibits the improper treatment of bodies.  Regardless of the theory of her claims, Vasquez failed to demonstrate that the State or County had a duty to identify Romo’s body.  Moreover, the County acted properly in disposing of Romo’s body under A.R.S. § 11-600(A), which applies to unidentified bodies.  The Court therefore upheld the trial court’s grant of summary judgment on the wrongful handling of a dead body and negligent infliction of emotional distress claims.

Judge Eckerstrom concurred in part and dissented in part.  He disagreed with the majority’s holding that the State and County had no duty to identify Romo, and argued that such a duty existed by virtue of the State and County’s conduct in pursuing Romo, taking sole responsibility and custody of his body, and undertaking some effort to identify his body.

Chief Judge Pelander authored the opinion; Judge Vasquez concurred; Judge Eckerstrom concurred in part and dissented in part.



Comments are closed.

© Copyright 2008 William A. Miller, Esq., All Rights Reserved