Estate of Lewis (CA2 3/29/12)

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As we’ve shown before, some cases aren’t content to reach the right appellate result; they try to ensure the “right” trial-court result, too. Others tackle head-on the easy issues and sidestep the harder ones. This one does both.

Simon Lewis objected to the informal probate of Frances Lewis’ estate and sued its executor, Mark Lewis. The court ordered Simon, who lives out of state, to appear personally for a pretrial conference. Never he nor his counsel did, though, so the court called counsel, who said he was ready to proceed telephonically and didn’t know why Simon wasn’t there. He also gave an excuse about why he hadn’t filed a response to Mark’s counterclaim, which was due before the pretrial conference. So the court struck Simon’s pleadings and gave Mark relief on the counterclaim. Counsel then filed an motion for reconsideration, admitting that he wasn’t ready after all because of some disruptions in his practice and that Simon was indigent and couldn’t come. Then Simon himself filed something saying that counsel hadn’t told him to come. The court denied these, whereupon counsel withdrew and Simon appealed pro se.

Mark argued that as to “certain aspects” of the matter there was no final judgment. “Given the overlapping subject matter of the original probate proceeding and the claims and counterclaims presented, as well as the consolidation of all proceedings below, we conclude we have jurisdiction to review the entirety of the court’s  . . .  order.” So, you’re clear on why the Court of Appeals has jurisdiction, yes? Maybe so, but when something like this looks like its being swept under the rug, it too often is.

Simon argued that the whole thing was his lawyer’s fault and that the court should have held a hearing to determine that before sanctioning him.

The Court of Appeals begins by discussing the background of Rule 16, for reasons not clear since nobody argued that the trial court didn’t have the power to order Simon’s personal appearance at a Rule 16 hearing. (Although in this regard the court notes in passing Armstrong v. Hooker, a much more important case that all litigation types should know.)

Severe sanctions such as dismissal are improper unless there is willfulness/bad faith/gross negligence.  The trial court has to hold a hearing on this. The pretrial conference didn’t count as that since Simon couldn’t explain himself and it didn’t determine where the fault lay.

That’s enough to decide the case but the court apparently fears that it isn’t enough to change the result, so it goes on to say that under these facts dismissal wouldn’t be appropriate even if Simon had known of the order to appear. Throughout, the court is careful to signal to the trial judge what his findings should be on the hearing he hasn’t held yet.

And the opinion also suggests that the trial court’s failure to award Mark his costs  — the opinion does not suggest that he asked for them – is another reason why the order in his favor should be set aside. If noncompliance is not “substantially justified,” according to a 1984 Bar committee note, the judge should award fees; so, you see, failure to award fees doesn’t mean that the judge was trying to give Simon a break, it means that he either thought Simon justified or wasn’t thinking. (This smells so strongly of midnight oil that we wonder whether it was non-lawyer Simons’ idea or the court’s concoction.)

As to giving Mark judgment on his counterclaim, default judgment is another thing about which, when there’s an issue, you need a hearing to see whether the lawyer or the client was the culprit. You also need a hearing for default after an appearance, which Simon had done through counsel. And you need a hearing on damages. The court makes this all sound like a slam dunk by ignoring the fact that the trial court referred to it not as a default but as a waiver. Is there a difference? That’s the question, the answer to which the court assumes rather than explains. (It may be, though, that Mark argued it that way.)

Lastly, Mark argued that there were other reasons, not cited by the trial court, justifying sanctions. The opinion doesn’t say whether he argued those below and lost or didn’t argue them there at all. Either way, he loses them on appeal. But instead of saying that the court explains factually why they shouldn’t result in severe sanctions.

The court concludes by telling Simon what to do at the hearing: appear, present evidence, and call your former lawyer to testify.

(The opinion goes out of its way to identify that lawyer repeatedly. An earlier age would have avoided this, on the theory that he doesn’t deserve possibly-unjustified blame or what is in any event pointless public humiliation. Why do the courts think their modern lack of decorum an improvement?)

(link to opinion)

Thomas v. Montelucia Villas L.L. C. (CA1 3/27/12)

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THIS OPINION HAS BEEN VACATED IN PART

An interesting aspect of the law of anticipatory repudiation.

The Thomases contracted to buy a house Montelucia would build at its luxury resort in Scottsdale. The contract provided, as usual, that if the seller had not complied with a term then the buyer could give it a certain amount of time to remedy the problem and then cancel the contract. Just before closing the Thomases refused to go through with the sale, and demanded the return of their earnest money, because some of the resort’s amenities weren’t done and because a certificate of occupancy for the house hadn’t been issued. Montelucia refused to return the earnest money; the Thomases sued; Montelucia countersued, for specific performance. They both moved for summary judgment on the Thomases’ claim; the trial court granted the Thomases’ motion. Montelucia appealed.

The Court of Appeals reverses. It concludes that what the Thomases did was an anticipatory repudiation. They didn’t have a contractual right to cancel without giving Montelucia notice and time to remedy.

That raises the next question: whether Montelucia was ready and able to perform. There was a dispute about this. But “the law does not require the non-breaching party to prove it was able to perform . . .  unless it is seeking damages” or equitable relief. “This appeal concerns only Montelucia’s defense to the Thomases’ claim for damages, not a claim by Montelucia for any affirmative relief.” “Once the Thomases repudiated  . . .  Montelucia was no longer obligated to do anything more  . . . ” In other words, proof of ability to perform was an element of Montelucia’s claim against the Thomases, not of its defense to their claim.

The court remands for the entry of judgment against the Thomases on their claim. It sets aside the trial court’s award of fees and costs to them and allows the trial court to determine where fees/costs should lie after final judgment. The immediate result is that Montelucia keeps the Thomases’ $659,000 in earnest money.

We know nothing else of this case. You can perhaps read between the lines and judge for yourself whether the Thomases made a bad legal mistake, were desperately trying to avoid closing on a home they could no longer pay for, or both.

(link to opinion)

Assyia v. State Farm (CA1 3/22/12)

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This case holds that a claim for breach of an insurance contract sounds in contract for purposes of a fee award.

Assyia, hurt in a car accident, made an underinsured-motorist claim against her carrier, State Farm. She wanted her limits, $50,000. State Farm thought the claim worth only $2,000 and paid that, whereupon Assyia sued. During discovery it turned out that some big, contested charges were related to the accident after all. So State Farm paid the remaining $48,000. The court then found Assyia the prevailing party in a contested action arising out of contract and awarded $19,000 in costs ($400 an hour, in case you’re curious) under 12-341.01. State Farm appealed the award.

It argued primarily that the claim sounded in tort, not contract. The purpose of UIM coverage is to put the insurer in the tortfeasor’s place, so claiming the coverage is functionally the same as suing the tortfeasor, right? But the contract, not the accident, was the cause of State Farm’s liability; it otherwise had no duty to Assyia.

State Farm argued that the action wasn’t “contested” after the facts about the contested charges came out. But its Answer had denied liability and it also contested the fee award.

The company pointed out that the policy states that “Regardless of the amount of any award  . . . we are not obligated to pay any amount in excess of the available limits under this coverage . . .” But 12-341.01 is also part of the contract as a matter of law.

State Farm also disagreed with some details about the size of the fees and made one or two other, minor arguments that aren’t really worth your time.

Its not as if State Farm doesn’t have an argument here. But as carriers have abandoned the requirement to arbitrate UIM claims (they originally thought that arbitration would save them money; at the moment they mostly don’t; eventually they’ll change their minds and policies back again; that’s the way these things work) careful defense counsel have for some time been pointing out to them their probable exposure under 12-341.01. In any event, State Farm has never been shy about litigating questionable causes; its various counsel over the years may have lost more appeals than any other single set of civil lawyers in Arizona.

(link to opinion)