Centerpoint v. Fidelity ( 2022 )

NOTICE: 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UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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.
IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE
CENTERPOINT MECHANIC LIEN CLAIMS LLC, Plaintiff/Appellant,
v.
FIDELITY NATIONAL TITLE INSURANCE COMPANY, et al.
Defendants/Appellees.
No. 1 CA-CV 21-0127
FILED 2-1-2022
Appeal from the Superior Court in Maricopa County
No. CV2011-008600
The Honorable Christopher Whitten, Judge
AFFIRMED
COUNSEL
Perkins Coie LLP, Phoenix
By Richard M. Lorenzen, P. Derek Petersen, Benjamin C. Calleros
Counsel for Plaintiff/Appellant
Jones Skelton & Hochuli PLC, Phoenix
By Robert R. Berk, Lori L. Voepel, Charles M. Callahan
Co-Counsel for Defendant/Appellee
Loeb & Loeb LLP, New York, New York
By David M. Satnick, Helen Gavaris
Co-Counsel for Defendant/Appellee
CENTERPOINT v. FIDELITY, et al.
Decision of the Court
MEMORANDUM DECISION
Judge Jennifer M. Perkins delivered the decision of the Court, in which
Presiding Judge Cynthia J. Bailey and Judge Maria Elena Cruz joined.
P E R K I N S, Judge:
¶1 Centerpoint Mechanic Lien Claims LLC (“CMLC”) appeals
the superior court’s grant of summary judgment in favor of Fidelity
National Title Insurance Company (“Fidelity”). For the following reasons,
we affirm.
FACTUAL AND PROCEDURAL BACKGROUND
¶2 More than a decade ago, a developer began work on
Centerpoint, a high-rise residential condominium development. The
project failed, spawning various complex legal disputes and we consider
here another installment of that legal saga. The background facts of this tale
appear in our earlier opinion. See Fidelity Nat’l Title Ins. Co. v. Centerpoint
Mech. Lien Claims, LLC (“Centerpoint I”), 238 Ariz. 135 (App. 2015). We
summarize here only the facts relevant to this appeal.
¶3 After the development project failure resulted in a series of
mechanics’ liens, Fidelity agreed to defend its insureds on the mechanics’
lien claims and reserved its right to later challenge coverage of those claims.
The insureds thereafter attempted to enter a settlement known as a “Morris
agreement.” The agreement assigned CMLC, a company composed entirely
of insureds, the “Insureds’ rights, title, interest in any and all claims,
actions, causes of action, suits . . . of any nature or kind whatsoever against
Fidelity.” Under the assignments in the Morris agreement, CMLC asserted
claims against Fidelity under the title insurance policy for breach of contract
and bad faith along with independent claims for breach of contract and
tortious interference. In Centerpoint I, we invalidated the Morris agreement
as to Fidelity. Id. at 142, ¶ 36.
¶4 On remand, the superior court granted Fidelity summary
judgment on all of CMLC’s claims. The court applied Morris’ “ultimate
sanction” and found CMLC forfeited its claims against Fidelity by entering
into an unenforceable Morris agreement. CMLC timely appealed, and we
have jurisdiction under A.R.S. § 12-2101(A)(1).
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CENTERPOINT v. FIDELITY, et al.
Decision of the Court
DISCUSSION
¶5 CMLC argues the superior court erred in granting Fidelity’s
summary judgment motion by applying an “ultimate sanction” not
supported by law. We review de novo the court’s grant of summary
judgment. Jackson v. Eagle KMC L.L.C., 245 Ariz. 544, 545, ¶ 7 (2019).
¶6 When an insurer agrees to provide coverage under a
reservation of rights, the insured may enter a Morris agreement to mitigate
its coverage risk. The agreement requires the insured admit liability and
assigns to the claimant any rights against the liability insurer; in exchange,
the claimant promises not to execute the liability judgment against the
insured. Safeway Ins. Co. v. Guerrero, 210 Ariz. 5, 7, ¶ 1 n.1 (2005) (citing
United Servs. Auto Ass’n v. Morris, 154 Ariz. 113 (1987)). Morris protects the
insurer by limiting an insured’s right to enter into such an agreement. The
insured must (1) provide notice to the insurer, (2) demonstrate that the
settlement was free from fraud and collusion, and (3) prove that the
settlement amount was reasonable. Leflet v. Redwood Fire and Cas. Ins. Co.,
226 Ariz. 297, 300, ¶ 14 (App. 2011). A Morris agreement “that falls outside
the permitted parameters is unenforceable.” Centerpoint I, 238 Ariz. at 141,
¶ 28 (cleaned up). As our supreme court explained in Guerrero: “[i]f counsel
negotiate such agreements, the result will be that their clients can collect
neither from the defendant [insured] . . . nor from the insurer.” 210 Ariz. at
15, ¶ 34.
¶7 In Centerpoint I, we determined the unity of parties to the
purported Morris agreement amounted to collusion, as evidenced by the
significantly inflated judgment amount. See 238 Ariz. at 141, ¶¶ 29–30. We
thus determined the negotiated settlement fell outside the permitted
parameters of Morris and no agreement remained which CMLC could
enforce against Fidelity. See id. at 141–42, ¶¶ 28, 36.
¶8 Given these holdings, CMLC had no remaining claims to
assert against Fidelity because there no longer existed an enforceable
assignment of “any and all claims, actions, causes of action, suits . . . of any
nature or kind whatsoever against Fidelity.” This is consistent with Morris
and its progeny. See Guerrero, 210 Ariz. at 15, ¶ 34; see also Leflet, 226 Ariz. at
302, ¶ 21 (an agreement that “mimics Morris in form” but substantively
disregards the legal context the Morris court relied on “is both
unenforceable and offensive to the policy’s cooperation clause”).
¶9 We note that in their briefing and at oral argument before this
court, the parties advanced their divergent views on what this court held in
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CENTERPOINT v. FIDELITY, et al.
Decision of the Court
Centerpoint I. In particular, the parties grappled with the language in
paragraph 2. We cannot read the language of paragraph 2 inconsistently
with the analysis and holdings found later in the opinion. With this in mind,
we hold, consistent with Centerpoint I, the superior court properly found
CMLC forfeited its claims against Fidelity by entering into a Morris
agreement which fell outside the permitted parameters. See 238 Ariz. at 142,
¶¶ 36–37; see also Guerrero, 210 Ariz. at 15, ¶ 34. We find no error.
¶10 Both parties seek attorneys’ fees under A.R.S. § 12-341.01. We
award Fidelity, as the successful party, its reasonable attorneys’ fees upon
compliance with ARCAP 21 and deny CMLC’s request.
CONCLUSION
¶11 We affirm.
AMY M. WOOD • Clerk of the Court
FILED: AA
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