Opinion
1 CA-CV 98-0172
Filed July 15, 1999
Appeal from the Superior Court of Yavapai County, Cause No. CV 96-0411.
The Honorable William T. Kiger, Judge
AFFIRMED.
JENSEN LAW FIRM, P.C. By Christopher Jensen and Anna Young, Attorneys for Plaintiffs-Appellants, Prescott.
BOYLE, PECHARICH, CLINE WHITTINGTON By J. Jeffrey Coughlin and Joseph I. Vigil, Attorneys for Defendants-Appellees, Prescott.
OPINION
¶ 1 Plaintiffs Lemuel L. Welker and Vera L. Welker obtained a judgment against defendant Timothy Daniel Yogerst after accepting Yogerst's offer of judgment under Rule 68 of the Arizona Rules of Civil Procedure. As a result of post-judgment motions, the trial court amended the judgment and awarded Welker $7.58 in post-judgment interest. Welker appeals from the denial of his request for pre-judgment interest dating from Welker's written acceptance of the offer of judgment. Welker also appeals from the award of post-judgment interest in the amount of $7.58. The appeal raises these issues:
1. Does a Rule 68 offer of judgment for a sum certain and accrued costs preclude recovery of interest on the resulting judgment as a matter of law?
2. Does the acceptance of a Rule 68 offer of judgment amount to the liquidation of unliquidated tort damages, thereby triggering pre-judgment interest?
¶ 2 With his reply brief, Welker also filed a motion to strike the answering brief. We discuss and resolve the motion below.
FACTUAL AND PROCEDURAL HISTORY
¶ 3 In June 1996, Welker brought a motor vehicle negligence action against Yogerst. On July 9, 1997, Yogerst's counsel mailed Welker a Rule 68 offer of judgment. The offer provided:
Defendant, pursuant to Rule 68, Arizona Rules of Civil Procedure, hereby offers to allow judgment to be entered against him in the above-entitled action for the sum of ELEVEN THOUSAND FIVE HUNDRED AND NO/100 DOLLARS ($11,500.00), plus costs accrued to date. This Offer of Judgment is made for the purposes specified in Rule 68, and is not to be construed either as an admission that the Defendant is liable in this action, or that the Plaintiff has suffered any damages.
If this Offer is not accepted within thirty (30) days after service, it shall be deemed withdrawn.
¶ 4 On July 18, 1997, Welker's counsel timely executed and mailed an unconditional acceptance of Yogerst's Rule 68 offer. Welker filed the original offer of judgment and his acceptance. He then filed a sworn "Proof of Offer of Judgment and Acceptance" and a statement of costs and notice of taxation. Yogerst filed a notice of lodging judgment with an attached judgment that awarded plaintiffs the sum of $11,500.00 plus costs of $223.10. The judgment made no mention of interest. The court signed the original form of judgment and it was filed with the clerk on September 3, 1997.
¶ 5 Two days later, Yogerst's counsel mailed an insurance settlement draft for $11,500.00 to Welker with a satisfaction of judgment form and a letter advising him that he was not authorized to endorse the draft until the Satisfaction of Judgment had been executed and returned. On September 23, 1997, Yogerst's counsel mailed Welker an insurance draft for his costs in the amount of $223.10.
¶ 6 On September 9, 1997, shortly after the $11,500.00 check was mailed, but before the check representing Welker's costs was put in the mail, Welker filed an objection to the proposed form of judgment. He contended it was deficient because it failed to award interest on the judgment from the date Yogerst received Welker's acceptance of the offer of judgment. Nine days later, Welker filed a motion requesting the trial court to correct the judgment pursuant to Rule 60(a) by adding to the award the words "together with interest at the rate of ten percent (10%) per annum from July 23, 1997, the date the Acceptance of the Offer of Judgment was served on Defendants, plus accruing costs."
¶ 7 Yogerst opposed Welker's objection to the proposed form of judgment on the ground of untimeliness. He also opposed the motion to correct clerical error on the basis that the error Welker sought to correct was not "clerical," and Rule 60(a) did not apply. Welker argued in his reply, among other things, that the motion properly invoked Rule 60(a) as the procedural avenue for seeking the addition of interest owed to a judgment creditor as a matter of right.
¶ 8 The trial court ruled that Welker's objection to the form of judgment was untimely and that "[T]he power to correct clerical error under Rule 60(a) does not extend to changing [a] judgment, order or decree which was entered as [the] Court intended."
¶ 9 Welker moved for reconsideration and Yogerst filed a response in which he observed that he had tendered to Welker $11,500.00 and $223.10 for costs on September 5 and 23, 1997. Yogerst contended that at 10% per annum, Welker had no arguable claim for more than $7.58 in interest. In reply, Welker argued that the tender of damages without interest was ineffective.
¶ 10 The trial court granted the motion for reconsideration and amended the judgment to include an award of interest in the amount of $7.58. Over Welker's objection, the trial court entered a formal amended judgment in accordance with its ruling. Welker timely appealed.
DISCUSSION
I. Welker's Motion to Strike Yogerst's Answering Brief
¶ 11 As a preliminary matter, Welker moves to strike Yogerst's answering brief on the ground that it "raises new theories and issues never presented to the trial court." Welker asserts that Yogerst has raised the following new issues not raised in the trial court: (1) whether a judgment entered after acceptance of a Rule 68 offer of judgment with no provision for interest accrues interest nevertheless; (2) whether the acceptance of a Rule 68 offer of judgment liquidates unliquidated tort damages and precipitates the accrual of pre-judgment interest; and (3) whether Welker's failure over a four-month period to return checks totalling $11,723.10 tendered by Yogerst bars Welker's recovery of interest beyond the $7.58 that the trial court awarded.
¶ 12 In support of the motion to strike, Welker relies on the principle that contentions not made before the trial court may not be raised for the first time on appeal. He cites Parks v. American Casualty Co. of Reading, Pa., 117 Ariz. 339, 572 P.2d 901 (1977), Milam v. Milam, 101 Ariz. 323, 419 P.2d 502 (1966), Dugan v. Fujitsu Business Communications Systems, Inc., 188 Ariz. 516, 937 P.2d 706 (App. 1997), and R. E. Monks Construction Co. v. Aetna Casualty Surety Co., 189 Ariz. 575, 944 P.2d 517 (App. 1997).
¶ 13 Welker relies on cases in which the appellants sought reversal based on issues and theories raised for the first time on appeal. Welker cites no authority for the proposition that Yogerst cannot support a judgment being attacked on appeal with an argument not presented in the trial court. It may have been unnecessary for Yogerst to raise every possible supporting rule of law to prevail in the trial court. In any event, we have discretion to entertain arguments raised for the first time on appeal that involve substantive legal issues not affected by questions of fact. See Resolution Trust Corp. v. City of Scottsdale, 177 Ariz. 234, 866 P.2d 902 (App. 1993).
¶ 14 In addition, the arguments and issues urged by Yogerst have their roots in issues initially raised by Welker in the trial court. Rule 13(b)(3) of the Arizona Rules of Civil Appellate Procedure requires only that issues be "properly presented" below. There is no requirement that the issue be presented below by the party seeking to argue it on appeal.
¶ 15 Welker's motions before the trial court quite clearly encompassed whether a judgment entered on acceptance of a Rule 68 offer of judgment that omitted any mention of interest nevertheless accrues interest, and whether accepting an offer of judgment renders the amount offered for non-economic tort damages a liquidated obligation that commences accruing interest. Yogerst's answering brief properly addresses these issues.
¶ 16 Nowhere in the record do we find arguments addressing Welker's delay in returning the checks tendered by Yogerst and whether the delay should bar Welker's recovery of interest. We therefore disregard that issue on appeal. Welker's motion to strike is otherwise denied.
II. Pre-and Post-Judgment Interest on Rule 68 Judgment
¶ 17 Rule 68 of the Arizona Rules of Civil Procedure provides in pertinent part:
(a) Offer; Time for Making. At any time more than 30 days before the trial begins, any party may serve upon the adverse party an offer to allow judgment to be entered in the action in accordance with the terms and conditions specified in the offer, plus costs then accrued.
(b) Procedure Generally; Contents of Offer; Acceptance; Entry of Judgment on Offer. In cases in which attorneys' fees have not been sought, if any portion of an offer made pursuant to this Rule is for the entry of a monetary judgment, the monetary award to be made shall be set forth in the offer as a specific stated sum. If, while such an offer remains effective within the meaning of this Rule, the adverse party serves written notice that the offer is accepted, either party may then file the offer together with proof of acceptance thereof and a judgment complying with the requirements of Rule 58(a) shall be entered.
. . . .
(d) Offer Not Accepted; Sanctions. An offer which is not accepted while it remains effective within the meaning of this Rule shall be deemed withdrawn and evidence thereof shall not be admissible except in a proceeding to determine sanctions under this Rule. If the judgment finally obtained is equal to, or more favorable to the offeror than, the offer, the offeree must pay, as a sanction, those reasonable expert witness fees and double the taxable costs of the offeror, as defined in A.R.S. § 12-332, incurred after the making of the offer, and prejudgment interest on unliquidated claims to accrue from the date of the offer.
(Emphasis added).
¶ 18 We first address whether interest of any kind is due on a judgment entered following acceptance of a Rule 68 offer that makes no reference to interest. Citing cases from California and Illinois decided in the late 1950s, Yogerst argues that the "tendency" is to allow interest in accordance with equity and justice, and to deny it when justified by the facts and circumstances. Yogerst also argues that awarding any interest on a judgment based on the acceptance of a Rule 68 offer that makes no mention of interest is inappropriate and unjustified because "compromise/settlement agreements are only subject to interest when the interest is agreed upon by the parties." Yogerst relies principally on our decision in Employers Mutual Casualty Co. v. McKeon, 170 Ariz. 75, 821 P.2d 766 (App. 1991) (McKeon II).
¶ 19 We disagree with Yogerst's analysis. In Arizona, a party unable to collect a valid judgment is entitled to interest. See A.R.S. § 12-347 (1992). Arizona Revised Statutes Annotated section 44-1201 (Supp. 1998) governs the rate of interest that a judgment shall bear:
A. Interest on any loan, indebtedness, judgment or other obligation shall be at the rate of ten per cent per annum, unless a different rate is contracted for in writing, in which event any rate of interest may be agreed to.
. . . .
C. A judgment given on an agreement bearing a higher rate not in excess of the maximum permitted by law shall bear the rate of interest provided in the agreement, and it shall be specified in the judgment.
Thus, A.R.S. section 12-347 requires that a judgment will bear interest computed from the date the judgment is entered. Because there was no reference to an interest rate in the offer of judgment or the subsequent acceptance of it, Welker's judgment accrued interest at the statutory rate of ten percent per annum.
¶ 20 McKeon II does not support Yogerst's position. The underlying facts are set forth in Employers Mutual Casualty Co. v. McKeon, 159 Ariz. 111, 765 P.2d 513 (1988) (McKeon I). The automobile liability policy that the insurer sold the insureds contained uninsured motorist coverage. See id. at 112, 765 P.2d at 514. Based on an accident in which one of the insureds was injured while driving another person's car, the insureds made a claim under their uninsured motorist coverage. See id. The insurer disclaimed coverage and brought a declaratory judgment action against the insureds. See id.
¶ 21 While the declaratory judgment action was pending, the insureds and the insurer agreed that if the insureds ultimately prevailed in the action, the insurer would waive arbitration and "`pay the policy limits subject to any valid offset or credit if applicable.'" McKeon II, 170 Ariz. at 77, 821 P.2d at 768. Ultimately, the insureds prevailed in the trial court and on appeal. See McKeon I, 159 Ariz. 111, 765 P.2d 513. The insurer paid the insureds the policy limits, but the insureds demanded interest on that sum from the date the trial court entered its declaratory judgment in their favor. See McKeon II, 170 Ariz. at 77, 821 P.2d at 768.
¶ 22 The trial court later ruled that the insureds were not entitled to the interest they requested. This Court affirmed on appeal. See id. at 380, 821 P.2d at 771. We stated: [T]he McKeons agreed that they would settle for the policy limits, subject to any offsets or credits, upon favorable final judgment on appeal. That agreement is sufficient to render the McKeons's claim a liquidated claim, even though Jay McKeon's damages were not computed with exactness.
. . . In this case, however, the agreement that made the claim liquidated also provided that the agreed-upon amount was only payable upon judgment against the insurer, affirmed on appeal. The parties thus essentially agreed that the claim would not become payable unless the Arizona appellate courts ruled in favor of the McKeons. The settlement agreement controls the question of the McKeons's entitlement to interest on the judgment.
. . . When parties compromise a cause of action, and comply with the terms of the compromise agreement, the agreement is binding and the suit ends (citation omitted). In this case, Employers Mutual complied with the parties' agreement by paying the McKeons pursuant to the settlement agreement, thus resolving all claims as to money due.
Although the McKeons properly reserved the question of interest when accepting the settlement, we conclude that the agreement itself is silent on the issue. A settlement agreement should be construed as an ordinary contract. 15A Am.Jur.2d Compromise and Settlement § 23. Here, the parties could have negotiated for an award of interest. They did not. We will not interpose such a term in their agreement.
. . . .
. . . We decline to expand the parties' negotiated settlement beyond its intended scope.
Id. at 79-80, 821 P.2d at 770-71.
¶ 23 In McKeon II, there was no interest because the judgment was a declaratory judgment, rather than a judgment on damages. In the instant case, the entry of a monetary judgment was the entire purpose of the transaction out of which this dispute arose. It is not surprising that the McKeon II court neither cited nor applied A.R.S. section 12-347. Section 12-347 mandates the awarding of interest on money judgments. That statute plainly applies in this case.
¶ 24 The offer of judgment and acceptance in this case are a far cry from the "ordinary contract" discussed in McKeon II. 170 Ariz. at 79, 821 P.2d at 770. Unlike the compromise agreement in McKeon II, the "agreement" here was authorized and defined by Rule 68, and regulated by Rule 68, A.R.S. section 12-347, and A.R.S. section 44-1201. It is true that upon acceptance of a Rule 68 offer, a judgment is to be entered according to "the terms and conditions specified in the offer." Ariz.R.Civ.P. 68(a). Because Rule 68 contemplates the entry of a judgment, it must be read and applied in harmony with A.R.S. sections 12-347 and 44-1201. Those statutes require that judgments bear interest either at ten percent or at whatever rate the parties expressly agreed to in writing. Yogerst's offer of judgment and Welker's acceptance embodied no agreement concerning interest. Under A.R.S. sections 12-347 and 44-1201, Welker's judgment bore interest at ten percent per annum.
¶ 25 Welker contends that his acceptance of Yogerst's offer of judgment for $11,723.10 rendered the unliquidated tort damages and costs liquidated, and the liquidated sum commenced accruing interest as of the date of the acceptance of the offer. A sum is liquidated when it is definitely known or ascertainable by computation or is adjudicated to be due. See Canal Ins. Co. v. Pizer, 183 Ariz. 162, 164, 901 P.2d 1192, 1194 (App. 1995). Interest is added to liquidated claims as a matter of right as compensation for the judgment debtor's detention of the money from the judgment creditor. See, e.g., Arizona Eastern R.R. Co. v. Head, 26 Ariz. 259, 262, 224 P. 1057, 1059 (1924). We are mindful of, but distinguish our earlier decision in Hall v. Schulte, 172 Ariz. 279, 836 P.2d 989 (App. 1992), in which we held that a tort claim becomes liquidated when the jury determines the amount of the plaintiff's damages and the percentages of fault, and that under A.R.S. section 12-347 interest therefore accrues at "the legal rate from the date of the jury verdict." Id. at 284, 836 P.2d at 994.
¶ 26 We are convinced that the supreme court did not intend for pre-judgment interest to accrue from the date of the acceptance of the offer of judgment on an unliquidated claim. The drafters of Rule 68(d) chose to include pre-judgment interest on unliquidated claims among the sanctions to be awarded when a Rule 68 offeree rejects an offer of judgment and then fails to obtain a judgment that is at least equally favorable. We do not believe it was the drafters' intent to use the threat of pre-judgment interest as a sanction on the one hand, and then, on the other hand, award it as a matter of right upon the acceptance of an offer of judgment. Thus, Welker's claim for interest began running on September 3, 1997, the date the original judgment was entered.
¶ 27 Lastly, we address Welker's argument that Yogerst's tenders of checks for $11,500.00 and $223.10 were inadequate and did not halt the running of interest on the judgment. We disagree. Yogerst's insurer's draft for $11,500.00 was accompanied by Yogerst's counsel's instruction that "[y]ou are not authorized to endorse the draft until the Satisfaction of Judgment has been signed by you and returned to me." No similar warning accompanied the draft for $223.10 in costs tendered later, but it appears reasonable that Welker's counsel concluded that the initial warning still applied.
¶ 28 Because Welker took the position that pre-judgment and post-judgment interest should have been included in the final judgment, it is understandable why counsel did not immediately execute the satisfaction of judgment and negotiate the drafts. However, Yogerst's tenders of these drafts stopped the running of interest on the principal amount of the judgment and costs. At that point, Welker was free to accept and negotiate them and to treat the $11,723.10 as his own. Welker's decision not to negotiate the drafts was a strategic one evidently based on the belief that his position was correct and that he would prevail on appeal. Because we believe Welker is incorrect and the trial court was correct, we affirm the judgment.
¶ 29 Yogerst requests an award of attorneys' fees under A.R.S. section 12-349 (1992). Within two days after judgment, Yogerst tendered the full amount of the judgment; within twenty days after judgment, Yogerst tendered the outstanding costs ($223.10). Because of the meager amount of interest due Welker, it cannot be said that the appeal was filed in good faith. In addition, the appeal unreasonably expanded and delayed the proceedings. We award attorneys' fees to Yogerst upon compliance with Rule 21 of the Arizona Rules of Civil Appellate Procedure. We deny Welker's request for attorneys' fees.
__________________________________ WILLIAM F. GARBARINO, Judge
CONCURRING:
__________________________________ JAMES B. SULT, Presiding Judge
__________________________________ MICHAEL D. RYAN, Judge