Title: GEORGE J MARKETOS V AMERICAN EMPLOYERS INSUR CO
Citation: N/A
Docket Number: 117376
State: Michigan
Issuer: Michigan Supreme Court
Date: September 26, 2001

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Michigan Supreme Court 
Lansing, Michigan 48909 
C hief Justice 
Justices 
Maura D. Corrigan  
Michael F. Cavanagh 
Elizabeth A. Weaver 
Marilyn Kelly 
Clifford W. Taylor 
Robert P. Young, Jr. 
Opinion 
Stephen J. Markman 
FILED SEPTEMBER 26, 2001  
GEORGE J. MARKETOS and  
MARK VIDEO ENTERPRISES, INC.,  
Plaintiffs-Appellants,  
v 
No. 117376  
AMERICAN EMPLOYERS INSURANCE  
CO.,  
Defendant-Appellee.  
PER CURIAM  
The plaintiffs brought this action to recover on a fire  
insurance policy for damages to their property.  The trial  
resulted in a judgment for the plaintiffs, with the jury  
rejecting defendant’s arson defense. 
The circuit court  
refused to award mediation sanctions under MCR 2.403(O).  
However, the Court of Appeals reversed, concluding that the  
trial court should not have deducted a setoff in determining  
whether mediation sanctions were warranted.  We hold that the  
setoff was properly deducted and therefore reverse the  
judgment of the Court of Appeals in part.  
I  
Plaintiff, Mark Video Enterprises, Inc.,1 owned a  
facility in Ann Arbor that it used to duplicate tapes of  
television programs and distribute them to local stations. On  
the evening of January 4, 1986, the building and most of the  
equipment were destroyed by fire.  Plaintiffs filed a claim  
with defendant American Employers Insurance Co, which insured  
the property against loss by fire.  Defendant denied the  
claim, asserting that the fire had been deliberately set and  
that Marketos was responsible for the arson.  Following the  
denial of the claim, plaintiffs brought this action in  
December 1986 alleging breach of contract and bad-faith  
refusal to pay the claim.2  Defendant had already paid  
$455,073.15 to First of America Bank, which held a mortgage on  
the real estate.3  
The case has been tried twice.  In 1990 a jury awarded no  
damages after finding that Marketos had committed arson.  The  
trial judge, however, granted judgment notwithstanding the  
1 Plaintiff George J. Marketos was the president and sole 
shareholder of Mark Video Enterprises, Inc.  
2 
 Three amended complaints added claims for emotional 
distress and defamation, on which summary dispositions were 
granted for the defendant in April 1987, July 1987, and 
November 1987.  
3 The mortgagee had independent rights under the policy 
and would have had a valid claim even if the jury found that 
Marketos committed arson.  In exchange for payment, the 
mortgagee assigned its debt instruments to the defendant, 
including the mortgage, promissory note, and personal 
guarantee of Marketos that secured the loan to Mark Video.  
2  
verdict and awarded $3,138,113.99 to Mark Video and  
$330,671.90 to Marketos. Under MCR 2.610(C), the judge also  
granted conditionally a new trial in the event that an  
appellate court reversed the judgment notwithstanding the  
verdict.  The judge concluded that the defendant’s evidence of  
arson was insufficient, that the verdict was against the great  
weight of the evidence, and that the plaintiffs were unfairly  
prejudiced when the defendant added a new theory during  
closing arguments.  
The 
Court 
of 
Appeals 
thereafter 
reversed, 
concluding 
that  
sufficient 
evidence 
supported the verdict and that the verdict  
was not contrary to the great weight of the evidence.  The  
Court also rejected the trial judge’s conclusions regarding  
defense counsel’s closing argument.4  
The plaintiffs applied for leave to appeal to this Court.  
On August 22, 1995, we reversed the judgment of the Court of  
Appeals in part. Our order stated:  
As to that part of the Court of Appeals 
judgment reversing the judgment notwithstanding the 
verdict, leave to appeal is denied because we are 
not persuaded that the questions presented should 
now be reviewed by this Court.  We reverse that  
part of the Court of Appeals judgment that reversed 
the Washtenaw Circuit Court’s conditional ruling 
granting the plaintiffs’ motion for a new trial. 
MCR 2.610(C). 
The Court of Appeals erred by 
rejecting the trial judge’s conclusion that, in the 
circumstances of this case, the plaintiffs were 
disadvantaged unfairly when the defendant’s closing 
argument advanced a previously unpleaded theory of  
4 
  Unpublished opinion per curiam, issued June 29, 1994 
(Docket Nos. 140985, 143322).  
3  
 
affirmative defense.  We remand the case to the  
Washtenaw Circuit Court for a new trial pursuant to 
that conditional ruling.[5]  
At the second trial in September 1997, the verdict form  
asked whether defendant had established the arson defense; if  
not, the verdict form then instructed the jury to determine  
the actual cash value of eight categories of property  
allegedly damaged in the fire.  The jury found that the  
insurer had not proved arson, and determined that the actual  
cash value of the damaged property was $1,707,709.  
In posttrial motions, the judge adjusted the jury’s  
findings of actual cash value on the basis of the trial  
evidence, policy language, and legal principles, resulting in  
an award of $799,394.85. The court entered judgment in that  
amount, plus accrued interest, on December 11, 1997.  
Before trial, mediation proceedings under MCR 2.4036 had  
resulted in a proposed award of $1.5 million.7  The plaintiffs  
sought  sanctions under MCR 2.403(O), contending that the  
jury’s “verdict” was more favorable than the mediation award.  
The trial judge refused to award sanctions because the verdict  
5 Docket Nos. 101058, 101059, 102026, 102027.  See 450  
Mich 852 (1995).  
6 
 Effective August 1, 2000, MCR 2.403 was amended to 
change the term “mediation” to “case evaluation.”  In this  
opinion we will use the terminology applicable at the time of 
the proceedings in this case.  
7 
 The plaintiffs had accepted the mediation award; the 
defendant had rejected it.  
4  
 
 
following the posttrial adjustments was not more favorable to  
plaintiffs than the mediation award.  
The Court of Appeals reversed on the sanctions issue.  It  
examined the language of MCR 2.403(O), which provided, in  
part:  
(1) If a party has rejected an evaluation and 
the action proceeds to verdict, that party must pay 
the opposing party’s actual costs unless the  
verdict is more favorable to the rejecting party 
than the mediation evaluation. . . .  
(2) For the purposes of this rule “verdict” 
includes,  
(a) a jury verdict,  
(b) a judgment by the court after a nonjury 
trial,  
(c) a judgment entered as a result of a ruling  
on a motion after rejection of the mediation 
evaluation.  
(3) For the purpose of subrule (O)(1), a 
verdict must be adjusted by adding to it assessable 
costs and interest on the amount of the verdict  
from the filing of the complaint to the date of the 
mediation evaluation . . . .  
The Court held that the circuit court had improperly  
considered its posttrial adjustment of the jury’s findings  
when determining whether to award sanctions:  
We 
hold 
that 
the 
plain 
language 
of  
MCR 2.403(O) requires the trial court to award 
mediation sanctions if the jury verdict itself, 
adjusted only as set forth in MCR 2.403(O)(3), is 
not more favorable to the rejecting party than the 
mediation evaluation. See Frank v William A Kibbe  
& Assoc, Inc, 208 Mich App 346, 352; 527 NW2d 82 
(1995) (“The judge should have considered the 
amount of the jury verdict, adjusted only as 
permitted by MCR 2.403(O)(3), when determining if 
sanctions were required”). As applied to the case  
5  
at hand, we find that the trial court erred by 
subtracting the setoff amount before determining if 
mediation sanctions were warranted.  
The plaintiffs have applied for leave to appeal to this  
Court, raising claims about other aspects of the Court of  
Appeals decision.  Defendant has cross-appealed on the  
mediation sanctions ruling.  
II  
This issue involves interpretation of a court rule,  
which, 
like 
matters 
of statutory interpretation, is a question  
of law that we review de novo.  McAuley v General Motors Corp,  
457 Mich 513, 518; 578 NW2d 282 (1998).  Grievance  
Administrator v Underwood, 462 Mich 188, 193-194; 612 NW2d 116  
(2000), articulates the proper mode of interpretation:  
When called on to construe a court rule, this 
Court applies the legal principles that govern the 
construction 
and 
application 
of 
statutes.  
Accordingly, we begin with the plain language of 
the court rule.  When that language is unambiguous,  
we must enforce the meaning expressed, without 
further judicial construction or interpretation. 
Similarly, common words must be understood to have 
their everyday, plain meaning. [Citations omitted.]  
In this case, the Court of Appeals erred in treating the  
jury’s findings as the “verdict” for purposes of MCR 2.403(O).  
The jury did not determine the amount that plaintiffs should  
recover.  Rather, it made specific factual findings about the  
cash value of categories of property damage.  
After the questions on the arson defense, the verdict  
form asked the jury:  
6  
 
 
3.
 What was the actual cash value, that 
Plaintiffs have proven by a preponderance of the 
evidence for each of the following categories of 
property, at the time of the fire:  
The form then listed the categories of property.  
However, the trial court-
- not the jury-
-
-determined the  
amount that defendant would have to pay. In particular, the  
court decided the legal effect of the setoff for defendant’s  
payments to the bank on the mortgage. The jury was told:  
There has been some testimony in this case 
about the defendant’s payment of monies to First of 
America and obtaining an assignment of the mortgage 
as a result. If you decide to rule in favor of the 
plaintiffs, you should award plaintiffs the full 
$480,000 stipulated value of the building and 
should not consider whether the defendant is  
entitled to a credit for the amount paid to First 
of America. 
Any credit in this case can be 
determined by the Court, by me, as a matter of law.  
MCR 2.403(O)(2) was amended in 1987 to include a  
definition of “verdict.”
 The rule now clarifies that  
decisions by the court, as well as by a jury, may be  
considered a verdict in some instances.8
 For purposes of  
awarding sanctions under MCR 2.403(O), a “verdict” must  
represent a finding of the amount that the prevailing party  
should be awarded. The dollar amount that the jury includes  
on the verdict form may or may not be the “verdict” for that  
purpose.9  
8 See Mehelas v Wayne Co Comm College, 176 Mich App 809, 
811-814; 440 NW2d 117 (1989); Wayne-Oakland Bank v Brown  
Valley Farms, Inc, 170 Mich App 16, 20; 428 NW2d 13 (1988).  
9  The Court of Appeals has considered other questions 
related to the meaning of this rule. 
For example, several  
7  
 
The jury’s factual findings in this case do not  
constitute a “verdict” under MCR 2.403(O).  The jury found  
that the value of the building was $480,000.  However, the  
circuit court determined as a matter of law that the  
plaintiffs were not entitled to recover that amount because  
the insurer had paid over $450,000 to the mortgagee, in effect  
on behalf of the plaintiffs.  Similarly, some of the jury’s  
findings regarding the actual cash value of other categories  
of property did not entitle plaintiffs to recover those  
amounts in light of applicable policy limits or deductibles.  
Thus, in this case, the actual “verdict” was the decision  
by the court using the jury’s factual findings.  This verdict  
was not more favorable to the plaintiffs than the mediation  
award, and thus sanctions against the defendant were  
decisions have stated that the result following appeals 
controls for purposes of sanctions under MCR 2.403.  Hyde v  
Univ of Mich Bd of Regents, 226 Mich App 511, 526; 575 NW2d 36  
(1997); Keiser v Allstate Ins Co, 195 Mich App 369, 374-375; 
491 NW2d 581 (1992).  In condemnation cases, the Court of 
Appeals has held that the jury’s “verdict” should be adjusted 
to take into account the condemnor’s deposit at the outset of 
the case, to make the verdict actually reflect the actual 
amount in controversy.  Detroit v Kallow Corp, 195 Mich App 
227, 229; 489 NW2d 500 (1992); Great Lakes Gas Transmission v  
Markel, 226 Mich App 127, 134; 573 NW2d 61 (1997).  In  
Szymanski v Brown, 221 Mich App 423, 432-435; 562 NW2d 212 
(1997), the Court held that for the purpose of MCR 2.403 
sanctions, the amount of damages found by the jury must be 
trebled as provided by the applicable statute.  Finally, a 
jury’s findings must be adjusted by the court to take into 
account a plaintiff’s comparative negligence.  Klinke v  
Mitsubishi Motors Corp, 219 Mich App 500, 517-518; 556 NW2d 
528 (1996), aff’d 458 Mich 582; 581 NW2d 272 (1998).  While we  
have noted the Court of Appeals application of the rule in 
these various circumstances, we confine our holding in this 
case to the issue before us.  
8  
 
 
 
 
inappropriate.  Accordingly, the judgment of the Court of  
Appeals is reversed in part,10 and the case is remanded to the  
Washtenaw 
Circuit 
Court 
for 
any 
further 
proceedings 
necessary.  
CORRIGAN, C.J., and CAVANAGH, WEAVER, 
KELLY, TAYLOR, 
YOUNG, 
and  
MARKMAN, JJ., concurred.  
10 We have considered the plaintiffs’ application for 
leave to appeal, and it is denied because we are not persuaded 
that the questions presented should be reviewed by this Court.  
9