Court Opinion

ID: 2675036
Source: CourtListenerOpinion
Date Created: 2014-05-20 15:01:13.268789+00
Date Added: 2024-06-11T08:39:52.255480
License: Public Domain

NOTICE: NOT FOR PUBLICATION.
   UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION DOES NOT CREATE
          LEGAL PRECEDENT AND MAY NOT BE CITED EXCEPT AS AUTHORIZED.

                                    IN THE
               ARIZONA COURT OF APPEALS
                                 DIVISION ONE

KENNETH JOHN NARDELLI and TAMMY M. NARDELLI, husband and
                wife, Plaintiffs/Appellants,

                                        v.

METROPOLITAN GROUP PROPERTY AND CASUALTY INSURANCE
COMPANY, a Rhode Island corporation; METROPOLITAN PROPERTY
AND CASUALTY INSURANCE COMPANY, a Rhode Island corporation,
                     Defendants/Appellees.

                             No. 1 CA-CV 13-0400
                              FILED 5-20-2014

           Appeal from the Superior Court in Maricopa County
                          No. CV 2004-019991
                The Honorable Lisa Daniel Flores, Judge

                                  AFFIRMED

                                   COUNSEL

Dawson & Rosenthal, P.C., Sedona
By Steven C. Dawson, Anita Rosenthal
Co-Counsel for Plaintiffs/Appellants

Richard A. Dillenburg, P.C., Tempe
By Richard A. Dillenburg
Co-Counsel for Plaintiffs/Appellants
Steptoe & Johnson, L.L.P., Phoenix
By Floyd P. Bienstock, Bennett Evan Cooper
Counsel for Defendants/Appellees

Knapp & Roberts, P.C., Scottsdale
By David L. Abney
Counsel for Amicus Curiae

                      MEMORANDUM DECISION

Judge Margaret H. Downie delivered the decision of the Court, in which
Presiding Judge Kenton D. Jones and Judge Donn Kessler joined.

D O W N I E, Judge:

¶1             Kenneth and Tammy Nardelli appeal from a judgment
entered on remand after this Court’s decisions in Nardelli v. Metropolitan
Group Property & Casualty Insurance Co., 230 Ariz. 592, 277 P.3d 789 (App.
2012), and Nardelli v. Metropolitan Group Property & Casualty Insurance Co.,
No. 1 CA-CV 10-0350, 2012 WL 1537415 (App. May 1, 2012), (collectively,
“Nardelli I”). For the following reasons, we affirm.

                FACTS AND PROCEDURAL HISTORY

¶2            In March 2009, a jury found that Metropolitan Group
Property and Casualty Insurance Company and Metropolitan Property
and Casualty Insurance Company (collectively, “MetLife”) had committed
bad faith in handling the Nardellis’ insurance claim and awarded the
Nardellis $155,000 in compensatory damages and $55 million in punitive
damages. During post-trial proceedings, the superior court reduced the
punitive damage award to $620,000 and entered judgment against MetLife
for $1,571,417.58. The judgment included attorneys’ fees of $496,442.50,
Rule 68 sanctions of $247,317.24, and pre-judgment interest of $52,657.84.

¶3            By letter dated December 30, 2009, MetLife stated it would
wire transfer the full amount of the judgment plus “interest through the
date of the wire” to the Nardellis’ counsel’s trust account upon receipt of

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                  NARDELLI v. METROPOLITAN, et al.
                       Decision of the Court

wiring instructions. 1 When the Nardellis declined to accept its tender,
MetLife filed a Motion for Relief from Judgment Re Post-Judgment
Interest, arguing it had made “an effective, unconditional tender of the
full amount of the Judgment plus interest accrued through that date.”
Over the Nardellis’ objection, the superior court granted MetLife’s motion
and issued an amended judgment on July 19, 2010.

¶4            The Nardellis provided MetLife with wire              transfer
instructions on July 20, 2010, and MetLife wired $1,571,417.50      to their
attorney’s trust account two days later. The funds remained          in that
account while the Nardellis pursued their appeal, earning           interest
“between .10 and .15 percent.”

¶5             This Court reduced the punitive damage award to $155,000
in Nardelli I. We also vacated the portions of the judgment awarding the
Nardellis Rule 68 sanctions and hearing and transcript costs. We directed
the superior court to enter an amended judgment on remand.

¶6            The Nardellis subsequently sent MetLife a check for
$685,284.54, representing the amount MetLife had overpaid in light of the
decision in Nardelli I “plus interest at the rate the Nardellis were able to
earn.” The Nardellis accepted MetLife’s calculation of the principal
amount of restitution owing ($683,232.04), with the remaining $2052.50
representing interest.

¶7           MetLife filed a motion asking the superior court to, inter alia,
order the Nardellis to pay interest “on the overpaid amount at the 10-
percent statutory rate” set forth in Arizona Revised Statutes (“A.R.S.”)
section 44-1201(A). The Nardellis objected, arguing restitution is an
equitable remedy and that the amount of prejudgment interest should
approximate the rate of interest they actually earned. The Nardellis did
not contend, either in response to MetLife’s motion or at oral argument in
the superior court, that a statutory interest rate other than ten-percent
applied.

¶8           The superior court ruled MetLife was entitled to interest “at
the statutory rate of 10% for an ‘indebtedness or other obligation.’” It
entered a judgment that included interest on the restitution amount in the

1 MetLife had previously sent the Nardellis’ counsel a check, which was
rejected for several reasons, including that it was not “in the form of
cash.”

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                  NARDELLI v. METROPOLITAN, et al.
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sum of $136,272.03, representing the period of time between the wire
transfer of funds to the Nardellis through the Nardellis’ restitution
payment to MetLife after Nardelli I. The Nardellis timely appealed. We
have jurisdiction pursuant to A.R.S. §§ 12-120.21(A)(1) and -2101(A)(1).

                               DISCUSSION

¶9            The only issue properly before us is whether the superior
court erred by not deviating from the statutory interest rate set forth in
A.R.S. § 44-1201(A) based on equitable principles. Until filing their
opening brief in this Court, the Nardellis never argued the statutory rate
of interest was anything other than ten percent or that MetLife lacked a
liquidated claim before the mandate issued in Nardelli I. “We do not
consider arguments raised for the first time on appeal except under
exceptional circumstances.” In re MH 2008-002659, 224 Ariz. 25, 27, 226
P.3d 394, 396 (App. 2010); see also Cullum v. Cullum, 215 Ariz. 352, 355, ¶ 14
n.5, 160 P.3d 231, 234 n.5 (App. 2007) (As a general rule, a party cannot
argue on appeal legal issues not raised below.). 2

¶10          Section 44-1201(A), which the parties acknowledged below
was the applicable statute, provides, in pertinent part:

       Interest on any loan, indebtedness 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.

¶11           In opposing MetLife’s request for interest under
§ 44-1201(A), the Nardellis never argued their restitution obligation was
not an “indebtedness or other obligation.” Nor did they raise such an
argument in their opening brief filed in this Court. We deem their
argument to this effect, presented for the first time at oral argument,
waived. See State v. Powers, 200 Ariz. 123, 129, ¶21, 23 P.3d 668, 674 (App.
2001) (issues raised for first time at oral argument are untimely and will
not be considered).

2 We similarly decline to address arguments presented in the amicus brief
that the Nardellis failed to properly preserve. See Town of Chino Valley v.
City of Prescott, 131 Ariz. 78, 84, 638 P.2d 1324, 1330 (1981) (amici curiae
may not create, extend, or enlarge issues properly raised by the parties).

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                  NARDELLI v. METROPOLITAN, et al.
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¶12            “The right to recover what one has lost by the enforcement
of a judgment subsequently reversed is well established.” Balt. & Ohio
R.R. Co. v. United States, 279 U.S. 781, 786 (1929); see also Raimey v.
Ditsworth, 227 Ariz. 552, 559, ¶ 22, 261 P.3d 436, 443 (App. 2011) (when
judgment reversed, judgment debtor who has satisfied the judgment is
entitled to restitution); 5 C.J.S. Appeal and Error § 1157 (2014) (“The
reversal of a judgment or decree gives rise to a right in favor of the party
who has lost money or property by reason of the judgment or decree to
have restitution made thereof, and a corresponding duty or obligation on
the part of the party who has received the benefits of the money or
property to make the restitution to the adverse party.”).

¶13            When a judgment that has been satisfied is later set aside,
the judgment debtor is “entitled to restitution, including both the amounts
paid and interest from the dates of such payments at the rate established
by the law of the state in which such sums were paid.” Raimey, 227 Ariz. at
559, ¶ 22, 261 P.3d at 443; see also Balt. & Ohio R.R. Co., 279 U.S. at 786
(Upon reversal of judgment, the overpaying party was “entitled to have
the amounts so paid by it together with interest thereon from the dates of
such payments at the rate established by the law of the state in which such
sums were paid.”). Although the restitution obligation itself is subject to
equitable considerations, see Raimey, 227 Ariz. at 559, ¶ 21, 261 P.3d at 443
(repayment required when “justice requires restitution”); Restatement
(First) of Restitution § 74 (1937) (restitution required unless it would be
inequitable), the Nardellis voluntarily repaid the principal amount of the
overpayment, obviating the need for the court to assess whether “justice
require[d] restitution.” Raimey, 227 Ariz. at 559, ¶ 21, 261 P.3d at 443.
And we disagree with the Nardellis’ contention that once the restitution
amount was set, the superior court had the discretion to impose a rate of
interest less than the statutory rate “or no interest at all.”

¶14           “[W]here there is a specific statute on the subject, equity
follows the law.” State v. Jacobson, 22 Ariz. App. 260, 265, 526 P.2d 784, 789
(1974). “Courts of equity are as much bound by the plain and positive
provisions of a statute as are courts of law. When rights are clearly
established and defined by a statute, equity has no power to change or
upset such rights.” Valley Drive-In Theatre Corp. v. Superior Court, 79 Ariz.
396, 399, 291 P.2d 213, 214 (1955) (trial court exceeded its jurisdiction by
limiting plaintiff’s statutory remedy based on equitable considerations).

¶15         The Restatement (Third) of Restitution and Unjust
Enrichment supports our conclusion. Section 18 states that, “[w]here
money has been paid or collected to satisfy a judgment, a party entitled to

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                  NARDELLI v. METROPOLITAN, et al.
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restitution under this section is normally entitled to interest on the money
from the date of payment.” Restatement (Third) of Restitution and Unjust
Enrichment § 18 cmt. h. Section 53 notes that, “the availability of
prejudgment interest is extensively regulated by local statute and
decisional law.” Id. at § 53 cmt. e. Only in the absence of a statutory
interest rate does the Restatement suggest applying equitable principles to
the rate of interest applicable to sums paid in restitution. Id.

¶16           The Nardellis’ reliance on Canal Insurance Co. v. Pizer, 183
Ariz. 162, 901 P.2d 1192 (App. 1995), is unavailing. That case stands for
the proposition that an insurer who interpleads insurance proceeds in
compliance with the rules of civil procedure owes no prejudgment interest
to individual claimants who later receive distributions. Id. at 164-65, 901
P.2d at 1194-95. It says nothing about interest obligations vis-à-vis
restitution payments or the ability of a court to award less interest than
mandated by an applicable statute.

                             CONCLUSION

¶17             For the reasons stated, we affirm the judgment of the
superior court.

                                 :MJT

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