FARMERS INSURANCE EXCHANGE v. BREWER

No. 1 CA-CV 16-0478.

FARMERS INSURANCE EXCHANGE, Plaintiff/Appellant, v. MICHAEL LEE BREWER, Defendant/Appellee.

Court of Appeals of Arizona, Division One.


Attorney(s) appearing for the Case

Manning & Kass, Ellrod, Ramirez, Trester LLP, Phoenix, By Keith R. Ricker and Scott A. Alles , Counsel for Plaintiff/Appellant.

Michael Lee Brewer, Payson, Defendant/Appellee in propria persona.

Judge Paul J. McMurdie delivered the decision of the Court, in which Presiding Judge Kent E. Cattani and Judge Jon W. Thompson joined.


NOT FOR OFFICIAL PUBLICATION

UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.

MEMORANDUM DECISION

McMURDIE, Judge.

¶1 Farmers Insurance Exchange ("Farmers") appeals the superior court's judgment in favor of Michael Brewer d/b/a Integrity Plumbing ("Brewer") awarding Brewer $4800 in attorney's fees. For the following reasons, we affirm.

FACTS AND PROCEDURAL BACKGROUND

¶2 On November 8, 2013, Farmers brought a complaint as a subrogee of its insureds, Steve and Irma Economos ("the Economos"), against Bradford White Corporation ("Bradford") and Brewer for water damage to the Economos' home resulting from a malfunctioning water heater. Brewer installed the heater purchased from Bradford, and Bradford provided a six-year express warranty on the heater. The heater leaked before the warranty expired.

¶3 Farmers raised claims of strict liability for defective products and breach of warranty against both Bradford and Brewer, and for negligent installation against Brewer. In his answer, Brewer disclaimed responsibility for any warranty of the product he installed, but confirmed a guaranty for his workmanship. Brewer also requested "future attorney's fees," but did not specifically base his request on Arizona Revised Statutes ("A.R.S.") section 12-341.01.1

¶4 The parties submitted the case for compulsory arbitration and filed a joint prehearing statement pursuant to Arizona Rule of Civil Procedure 75(b). On December 18, 2014, an arbitrator awarded $29,324.53 to Farmers, and found no liability on the part of Brewer. The result of the arbitration was more favorable to Brewer than his settlement offer to pay Farmers $1500, and the arbitrator awarded $4800 in attorney's fees to Brewer.

¶5 Bradford appealed the arbiter's award to the superior court pursuant to Rule 77 and Farmers subsequently filed a Notice of Withdrawal of Contract or Warranty Claims Against Brewer. Brewer was eventually dismissed from the case, and Bradford was prohibited from naming Brewer as a non-party at fault. After considering de novo Brewer's request for an award of attorney's fees, the superior court affirmed the arbitrator's award of $4800 because Brewer was "a successful party" and the case, when presented to the arbitrator, was a "contested action arising out of a contract" because Farmers pled a breach of warranty claim.2 The superior court did not award attorney's fees to Brewer for his post-arbitration involvement.

¶6 On April 26, 2016, the court entered a final judgment awarding Brewer $4800 in attorney's fees. Farmers filed a Motion for New Trial on the issue of the attorney's fees awarded to Brewer, which the court denied, and Farmers timely appealed. We have jurisdiction pursuant to Article 6, Section 9, of the Arizona Constitution, and A.R.S. §§ 12-120.21(A)(1) and -2101(A)(1).

DISCUSSION

¶7 Farmers argues (1) Brewer waived any claim for attorney's fees because he failed to request such an award in the pleadings, disclosures, or a pre-arbitration hearing statement, instead waiting until after he won at arbitration to affirmatively seek attorney's fees; (2) the case was not prosecuted or defended on a contract theory as Farmers abandoned its breach of warranty claim in "subsequent pleadings," rendering both the arbitrator and the superior court awards in error; and (3) any possible contract was implied-in-law, not in-fact, and as such did not give rise to an attorney's fees award pursuant to A.R.S. § 12-341.01.

¶8 "[W]e review the court's decision to grant or deny a party's requested attorneys' fees for an abuse of discretion." Vicari v. Lake Havasu City, 222 Ariz. 218, 224, ¶ 23 (App. 2009); see A.R.S. § 12-341.01 (the superior court has broad discretion in determining the amount of the fee, but it "may not exceed the amount paid or agreed to be paid").3 The superior court abuses its discretion if "the record fails to establish substantial evidence to support the ruling, or if the trial court commits an error of law in reaching its discretionary conclusion." Perguson v. Tamis, 188 Ariz. 425, 427 (App. 1996) (citation and quotations omitted). Whether an attorney's fees statute applies "is a question of statutory interpretation that we review de novo." Chaurasia v. Gen. Motors Corp., 212 Ariz. 18, 26, ¶ 24 (App. 2006). "[W]e view the evidence in the light most favorable to upholding the court's decision," Vicari, 222 Ariz. at 224, ¶ 23, and will "uphold the trial court's decision if it is correct for any reason." Citibank (Ariz.) v. Van Velzer, 194 Ariz. 358, 359, ¶ 5 (App. 1998).

¶9 Brewer filed a short pro se pleading opposing the appeal, but did not file an answering brief. "When a debatable issue is raised on [appeal], the failure to file an answering brief generally constitutes a confession of error." Gibbons v. Indus. Comm'n, 197 Ariz. 108, 111, ¶ 8 (App. 1999); State v. Woods, 236 Ariz. 527, 530, ¶ 9, n.1 (App. 2015). We may, however, exercise our discretion to waive this general rule to address the merits of an appeal. Id. Because this case presents no debatable issues, we address the merits of Farmers' appeal.

A. Brewer Did Not Fail to Request an Award of Attorney's Fees in a Pleading or a Prehearing Statement.

¶10 Farmers argues Brewer waived any claim for attorney's fees because he failed to request such an award in the pleadings and waited until after he won at arbitration to affirmatively seek an attorney's fees award, contrary to Rule 54(g)(1).

¶11 Per Rule 54, "[a] claim for attorney's fees must be made in the pleadings or in a Rule 12 motion filed before the movant's responsive pleading." Ariz. R. Civ. P. 54(g)(1). "Under Rule 7(a), a `pleading' means only a complaint, [or] an answer. . . ." Balestrieri v. Balestrieri, 232 Ariz. 25, 27, ¶ 4 (App. 2013).

¶12 Brewer requested in his answer that he be awarded "future attorney's fees incurred in the defense of this action." Although Brewer did not specifically cite § 12-341.01, Farmers was on notice that Brewer intended to request an attorney's fees award. See Wagenseller v. Scottsdale Mem'l Hosp., 147 Ariz. 370, 391 (1985) (a notice of intent to seek attorney's fees should be given before "each stage" of a lawsuit to further the public policy of encouraging settlement) (superseded by statute on other grounds). Because Farmers pled a claim for breach of warranty against Brewer, Farmers was on notice that "future attorney's fees" would include a defense sounding in contract. See Chaurasia, 212 Ariz. at 27, ¶ 27 ("Time after time, Arizona courts have held that a claim for breach of warranty does arise out of contract for purposes of A.R.S. § 12-341.01(A).").

¶13 Farmers also argues that because Brewer did not request attorney's fees in a disclosure or a prehearing statement, he abandoned his claim for fees. Rule 75, which governs hearing procedures for compulsory arbitration, does not, however, require attorney's fees be specifically requested. See Ariz. R. Civ. P. 75(b)(2) (a prehearing statement must contain a brief statement of the nature of each party's claims or defenses, a witness list, an exhibit list, and the estimated time required for the arbitration hearing). Brewer was not required to restate his request for attorney's fees in the prehearing statement to preserve it.

¶14 Farmers further attempts to impute the mandatory nature of Rule 54 to Rule 75 by invoking the principle that "[t]he pretrial statement controls the subsequent course of the litigation." Leathers v. Leathers, 216 Ariz. 374, 378, ¶ 9 (App. 2007). However, neither Rule 16(g), nor Rule 54(g), contain a requirement to include a specific request for attorney's fees in a joint pretrial statement. See Ariz. R. Civ. P. 16(g) (the joint pretrial statement must include the contested issues of fact and law); Ariz. R. Civ. P. 54(g) ("A claim for attorney's fees must be made in the pleadings or in a Rule 12 motion filed before the movant's responsive pleading."); cf. Ariz. R. Fam. Law 78(D)(1) ("A claim for attorneys' fees, costs and expenses initially shall be made in the pleadings, pretrial statement, or by motion filed prior to trial or post-decree evidentiary hearing.") (emphasis added); Bobrow v. Bobrow, 241 Ariz. 763, 769, ¶ 29 (App. 2017) (wife failed to challenge the enforceability of the Agreement as it related to attorney's fees in her pretrial statement and was thus precluded from later attacking the Agreement's prevailing-party provision as violating public policy).

B. Brewer's Defense Sounded in Contract and Farmers' Contract and Tort Claims Were Inextricably Interwoven.

¶15 Farmers contends it did not base the lawsuit on a contract theory, nor did Brewer defend on a contract theory, because Farmers abandoned its warranty claim in "subsequent pleadings," and both the arbitrator and the superior court erred by awarding Brewer attorney's fees.

¶16 In Barmat, our supreme court held "attorney's fees may be recovered in tort actions in which the victim and the tortfeasor have some type of contractual relationship." Barmat v. John & Jane Doe Partners A-D, 155 Ariz. 519, 520 (1987). When the claims and defenses are based on the same set of facts, requiring the same or closely related factual development in discovery, and the legal theories are overlapping, the contractual and tort claims are "inextricably interwoven." Modular Mining Sys., Inc. v. Jigsaw Techs., Inc., 221 Ariz. 515, 522-23, ¶¶ 23-25 (App. 2009); see also Sparks v. Republic Nat. Life Ins. Co., 132 Ariz. 529, 543 (1982) ("The fact that the two legal theories are intertwined does not preclude recovery of attorney's fees under § 12-341.01(A) as long as the cause of action in tort could not exist but for the breach of the contract.") (emphasis added).

¶17 At the arbitration stage of the litigation, Brewer successfully defended against Farmers' contractual claim for breach of warranty. See Colberg v. Rellinger, 160 Ariz. 42, 51 (App. 1988) (the duty in express warranty is contractual and the claim of breach of express warranty sounds in contract) (overruled on other grounds by Flagstaff Affordable Hous. Ltd. P'ship v. Design All., Inc., 223 Ariz. 320 (2010)). In his defense, Brewer raised the existence and terms of a contract between himself and the Economos when he explained he merely installed the heater without providing an express warranty for the product, and the installation was not a proximate cause of the heater's failure. Because Farmers' tort and contractual claims against Brewer stemmed from his installation of the water heater, requiring closely related discovery and overlapping legal theories, the contractual claim for breach of warranty and the negligent installation claim pled by Farmers were "inextricably interwoven." See Modular Mining, 221 Ariz. at 522-23, ¶¶ 23-25.

¶18 Farmers argues it abandoned its breach of warranty claim against Brewer in its prehearing statement, leaving only claims sounding in tort. Even if that were true, "[a]n adjudication on the merits is not a prerequisite to recovering attorneys' fees under A.R.S. § 12-341.01." Fulton Homes Corp. v. BBP Concrete, 214 Ariz. 566, 572, ¶ 24 (App. 2007) (third-party defendants were "successful parties" pursuant to A.R.S. § 12-341.01 when plaintiff and defendant stipulated to dismiss the case). Here, Brewer incurred attorney's fees in "just defense" of the claims against him and prevailed. See id. at 569, ¶ 9. The arbitrator thus acted within his discretion in awarding Brewer attorney's fees. See id. at 572, ¶ 25 (the trial court has substantial discretion to determine who is a "successful party").

¶19 Moreover, as Farmers did not request the attorney's fees be apportioned between defenses of the tort and contract claim, the arbitrator was within his discretion to award Brewer the full amount of the fee. See Skydive Ariz., Inc. v. Hogue, 238 Ariz. 357, 370, ¶ 53 (App. 2015) (superior court did not abuse its discretion in awarding all attorney's fees, costs, and expenses when the resolution of tort claims was "substantially dependent upon provisions of the agreement and the ability to prevail on the contract claims") (quotations omitted).

¶20 After Bradford appealed the arbitrator's decision to the superior court pursuant to Rule 77 and A.R.S. § 12-133(H), Brewer continued defending the lawsuit by filing a Motion for Partial Summary Judgment and other documents.4 Eventually, Brewer was dismissed from the lawsuit. However, the superior court did not award fees based on actions taken by Brewer post arbitration. The superior court acted within its discretion by awarding Brewer his attorney's fees.

¶21 In sum, Farmers brought legal action on inextricably interwoven contract and tort claims and lost against Brewer in arbitration as well as in superior court. "It is well-established that a successful party on a contract claim may recover not only attorneys' fees expended on the contract claim, but also fees expended in litigating an `interwoven' tort claim." Ramsey Air Meds, L.L.C. v. Cutter Aviation, Inc., 198 Ariz. 10, 13, ¶ 17 (App. 2000). Therefore, the superior court had a "reasonable basis" for awarding Brewer the full extent of his attorney's fees, costs, and post-judgment interest, remaining fully within its discretion. See Hogue, 238 Ariz. at 369, ¶ 50. As § 12-341.01 is designed to "mitigate the burden of the expense of litigation to establish a just claim or a just defense," the superior court did not abuse its discretion by denying Farmers' Motion for New Trial.5 Chaurasia, 212 Ariz. at 29, ¶ 43 (citing A.R.S. § 12-341.01(B)).

C. Costs on Appeal.

¶22 As Brewer is the prevailing party on appeal, we award him costs incurred on appeal upon compliance with Arizona Rule of Civil Appellate Procedure 21. See Bennett v. Baxter Grp., Inc., 223 Ariz. 414, 423-24, ¶ 40 (App. 2010).

CONCLUSION

¶23 For the reasons stated above, we affirm the superior court's order denying Farmers' Motion for New Trial, and award Brewer costs on appeal upon compliance with Arizona Rule of Civil Appellate Procedure 21.

FootNotes


1. We cite to the current version of applicable statutes and rules when no revision material to this case has occurred.
2. On September 2, 2015, a three-day jury trial concluded with a unanimous jury verdict in favor of Farmers and against Bradford, but the jury apportioned 65% fault to the Economos. The court entered a judgment awarding Farmers $9321.27 pursuant to the fault apportionment.
3. Section 12-341.01(A) states: 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. This section shall not be construed as altering, prohibiting or restricting present or future contracts or statutes that may provide for attorney fees.
4. "Any party to the arbitration proceeding may appeal from the arbitration award to the court in which the award is entered by filing . . . a demand for trial de novo on law and fact." A.R.S. § 12-133(H); see Valler v. Lee, 190 Ariz. 391, 396 (App. 1997) (a timely appeal from arbitrator's award "requires the entire case to be tried de novo as to all parties, claims, and issues of law and fact"); see also Ariz. R. Civ. P. 77(d) ("the parties are entitled to a trial on all issues determined by the arbitrator").
5. Because the nature of Brewer's defense sounded in contract and Farmers' claims against Brewer were inextricably interwoven, we do not reach Farmers' argument that its claims stemmed exclusively from the tort of negligence and the implied-in-law duty to perform in a workmanlike manner. In any case, Farmers never asserted Brewer breached an implied warranty of workmanlike performance. Because Brewer and the Economos had a contractual relationship, the implied warranty would have sounded in contract. See Woodward v. Chirco Const. Co., Inc., 141 Ariz. 514, 516 (1984) (the cause of action based on the implied warranty of workmanlike performance and habitability was based on the contract between builder and purchaser).

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