Metzler v. Bci Coca-Cola Bottling Company of Los Angeles, Inc.

IN THE
SUPREME COURT OF THE STATE OF ARIZONA
MARISOL METZLER,
Plaintiff/Appellee,
v.
BCI COCA-COLA BOTTLING COMPANY OF LOS ANGELES, INC., DBA BCI COCA-
COLA BOTTLING COMPANY OF ARIZONA, A FOREIGN CORPORATION DOING
BUSINESS IN ARIZONA,
Defendant/Appellant.
No. CV-13-0302-PR
Filed July 11, 2014
Appeal from the Superior Court in Pima County
The Honorable Gus Aragón, Judge
No. C20072433
REVERSED AND REMANDED
Opinion of the Court of Appeals, Division Two
233 Ariz. 133, 310 P.3d 9 (App. 2013)
VACATED
COUNSEL:
Louis Hollingsworth, Michael F. Kelly (argued), John F. Kelly, Hollingsworth
Kelly, Tucson, for Marisol Metzler
Susan M. Freeman (argued), William G. Voit, Lewis Roca Rothgerber LLP,
Phoenix; and Tamara N. Cook, Kevin R. Myer, Renaud Cook Drury Mesaros,
Phoenix, for BCI Coca-Cola Bottling Company of Los Angeles, Inc., dba BCI
Coca-Cola Bottling Company of Arizona
Charles M. Callahan, Jones Skelton & Hochuli, PLC, Phoenix, for Amicus Curiae
Arizona Association of Defense Counsel
METZLER v. BCI COCA-COLA BOTTLING
OPINION OF THE COURT
David L. Abney, Knapp & Roberts, P.C., Scottsdale, for Amicus Curiae Tidmore
Law Offices, L.L.P.
VICE CHIEF JUSTICE PELANDER authored the opinion of the Court, in which
CHIEF JUSTICE BALES, JUSTICE BERCH, JUSTICE BRUTINEL, and JUSTICE
TIMMER joined.
VICE CHIEF JUSTICE PELANDER, opinion of the Court:
¶1 The issue here is whether prejudgment interest awarded as a
sanction pursuant to Arizona Rule of Civil Procedure 68(g) is interest on an
“obligation” under A.R.S. § 44-1201(A) or “interest on a[] judgment” under § 44-
1201(B). We hold that it is interest on a judgment and, therefore, the applicable
prejudgment interest rate in this case is 4.25% under subsection (B), rather than
10% under subsection (A).
I.
¶2 This case is complicated in its procedural history but not its
underlying facts. While shopping at a Tucson grocery store, Marisol Metzler
slipped and fell on water leaking from a refrigerator owned and maintained by
BCI Coca-Cola Bottling Co. In the personal injury action that followed, Metzler
made an offer of judgment to settle for $150,000, which BCI rejected. The case
went to trial, and the jury returned a verdict in Metzler’s favor, awarding her
$1.5 million in damages.
¶3 On September 2, 2009, the trial court entered judgment in the
amount of $1,855,398.86, which included $347,672.16 in prejudgment interest
under Rule 68(g) as a sanction against BCI for rejecting Metzler’s offer of
judgment. The court calculated the interest at the then-applicable rate of 10%
per annum. BCI timely moved for a new trial on both liability and damages. The
trial court granted the motion in part on December 8, ordering a new trial on
liability only and vacating its earlier judgment.
¶4 Both sides appealed. On March 16, 2011, the court of appeals
reversed the grant of a new trial on liability and affirmed the trial court’s denial
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METZLER v. BCI COCA-COLA BOTTLING
OPINION OF THE COURT
of a new trial on damages. Metzler v. BCI Coca-Cola Bottling Co. (“Metzler I”), No.
2 CA-CV 2010-0023, 2011 WL 917330, at *5 ¶ 16 (memorandum decision filed
March 16, 2011).
¶5 On April 28, 2011, BCI tendered, and Metzler accepted, payment of
$1,906,690.76, representing (1) “[t]he amount of the final judgment entered on
September 2, 2009,” (2) post-judgment interest on that amount from September
3 through December 8, 2009, and (3) taxable costs on appeal. The monies were
tendered “unconditionally and without prejudice to the rights of either party,”
including Metzler’s “right[] to claim she is entitled to pre-judgment interest from
September 3, 2009 to [April 28, 2011].”
¶6 On May 11, 2011, the court of appeals issued its mandate in Metzler
I. In moving for judgment on the mandate, BCI argued that prejudgment interest
ended on September 2, 2009, when the trial court first entered judgment, rather
than on the date of the mandate. The trial court agreed and, on June 30, 2011,
entered judgment on the mandate in the amount tendered.
¶7 Metzler appealed and the court of appeals reversed, concluding
that the trial court erred in calculating prejudgment interest only up to the
September 2009 judgment, which had no “force or effect” after the trial court
granted a new trial on liability and vacated that judgment. Metzler v. BCI Coca-
Cola Bottling Co. (“Metzler II”), 230 Ariz. 26, 28 ¶ 8, 279 P.3d 1188, 1190 (App.
2012) (internal quotation marks omitted). The court of appeals then vacated the
June 2011 judgment and remanded for a redetermination of prejudgment interest
and entry of a new judgment reflecting the correct amount. Id. at 29 ¶ 11, 279
P.3d at 1191.
¶8 On remand, Metzler sought a total award of $2,135,867.03, again
calculating prejudgment interest at the rate of 10% per annum. Citing a 2011
amendment to A.R.S. § 44-1201, BCI argued that the applicable rate was instead
1% per annum plus the prime rate, or 4.25%. The trial court rejected that
argument and entered judgment in Metzler’s favor on October 10, 2012.
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METZLER v. BCI COCA-COLA BOTTLING
OPINION OF THE COURT
¶9 The court of appeals affirmed, holding that prejudgment interest
under Rule 68(g) is interest on an “obligation,” thus entitling Metzler to the 10%
rate set forth in § 44-1201(A). Metzler v. BCI Coca-Cola Bottling Co. (“Metzler III”),
233 Ariz. 133, 137 ¶¶ 10–11, 139 ¶ 18, 310 P.3d 9, 13, 15 (App. 2013). The court
also held that BCI owed Metzler an additional $28,568.80 in prejudgment interest
that had accrued between the date of the tender and the October 10, 2012
judgment. Id. at 139 ¶¶ 20–21, 310 P.3d at 15.
¶10 We granted review of two issues: (1) whether the court of appeals
erred in holding that prejudgment interest awarded under Rule 68(g) is interest
on an “obligation” under § 44-1201(A), rather than interest on a judgment under
subsection (B); and (2) whether a tender of the full principal amount of a damage
award ends the accrual of additional prejudgment interest.
II.
¶11 Under common law, “[p]rejudgment interest on a liquidated claim
is a matter of right in an action on a contract or in tort.” State ex rel. Ariz.
Structural Pest Control Comm’n v. Taylor, 223 Ariz. 486, 488 ¶ 6, 224 P.3d 983, 985
(App. 2010) (citing Fleming v. Pima Cnty., 141 Ariz. 149, 155, 685 P.2d 1301, 1307
(1984)). But prejudgment interest is generally not awardable on unliquidated
claims, including personal injury claims. See Am. Eagle Fire Ins. Co. v. Van
Denburg, 76 Ariz. 1, 6, 257 P.2d 856, 859 (1953) (holding that interest on an
unliquidated claim is available only from the date of judgment); Ariz. E. R.R. Co.
v. Head, 26 Ariz. 259, 262, 224 P. 1057, 1059 (1924) (interest accrues on
unliquidated, disputed personal injury damage claims only after claim is
liquidated by verdict); see also A.R.S. § 44-1201(D)(1) (“A court shall not award
. . . [p]rejudgment interest for any unliquidated, future, punitive or exemplary
damages that are found by the trier of fact.”).
¶12 Rule 68 “allows either party to serve upon the adverse party an
offer to allow judgment to be entered in accordance with the terms of the offer.”
4501 Northpoint LP v. Maricopa Cnty., 212 Ariz. 98, 99 ¶ 4, 128 P.3d 215, 216 (2006)
(citing Ariz. R. Civ. P. 68(a)). As amended in 1992, subsection (g) of the rule
states:
If the offeree rejects an offer and does not later obtain a more
favorable judgment . . . the offeree must pay, as a sanction,
reasonable expert witness fees and double the taxable costs, as
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METZLER v. BCI COCA-COLA BOTTLING
OPINION OF THE COURT
defined in A.R.S. § 12-322, incurred by the offeror after making the
offer and prejudgment interest on unliquidated claims to accrue
from the date of the offer.
Ariz. R. Civ. P. 68(g). This amendment sought “to increase the sanctions
associated with failures to accept offers of judgment to include . . . post-offer
prejudgment interest on unliquidated claims.” Ariz. R. Civ. P. 68, State Bar
Committee Note, 1992 Amendments. By imposing as a sanction against a losing
offeree an award of “prejudgment interest on unliquidated claims,” Rule 68(g)
permits the successful offeror to obtain monies to which she would otherwise
not be legally entitled.
III.
¶13 Whether the rate for prejudgment interest awarded pursuant to
Rule 68(g) is governed by § 44-1201(A) or § 44-1201(B) is an issue of statutory
interpretation, which we review de novo. See Pima Cnty. v. Pima Cnty. Law
Enforcement Merit Sys. Council, 211 Ariz. 224, 227 ¶ 13, 119 P.3d 1027, 1030 (2005).
Our primary purpose in interpreting statutes is to give effect to the legislature’s
intent. Sell v. Gama, 231 Ariz. 323, 327 ¶ 16, 295 P.3d 421, 425 (2013). If the
statute’s language is clear, “it controls unless an absurdity or constitutional
violation results.” Id. But if the text is ambiguous, we also consider “the statute’s
context; its . . . subject matter, and historical background; its effects and
consequences; and its spirit and purpose,” Baker v. Univ. Physicians Healthcare,
231 Ariz. 379, 383 ¶ 8, 296 P.3d 42, 46 (2013) (internal quotation marks omitted),
as well as other applicable canons of statutory construction. We seek to
harmonize, whenever possible, related statutory and rule provisions. State v.
Hansen, 215 Ariz. 287, 289 ¶ 7, 160 P.3d 166, 168 (2007).
¶14 When Rule 68(g) was amended in 1992, the version of § 44-1201(A)
then in effect provided for a 10% per annum interest rate on any loans,
indebtedness, judgments, or other obligations. See A.R.S. § 44-1201 (1989)
(amended in 1997). Thus, from 1992 to 2011, § 44-1201 did not differentiate
between judgments and other obligations, or between prejudgment and post-
judgment interest on judgments. Nor does Rule 68 indicate that its sanction of
prejudgment interest on unliquidated claims should be measured at a higher or
different rate than that otherwise applicable to prejudgment or post-judgment
interest on judgments.
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METZLER v. BCI COCA-COLA BOTTLING
OPINION OF THE COURT
¶15 In 2011, the legislature amended § 44-1201, uncoupling
“judgments” from “loans, indebtedness, or other obligations” so as to “limit” the
interest applicable to judgments. Arizona Senate Fact Sheet, S.B. 1212, 50th Leg.,
1st Reg. Sess. (Apr. 13, 2011). Effective July 20, 2011, § 44-1201 now reads in
pertinent part:
A. Interest on any loan, indebtedness or other obligation shall be
at the rate of ten percent per annum, unless a different rate is
contracted for in writing, in which event any rate of interest may
be agreed to. . . .
B. Unless specifically provided for in a statute or a different rate is
contracted for in writing, interest on any judgment shall be at the
lesser of ten percent per annum or at a rate that is equal to one
percent plus the prime rate . . . .
....
F. If awarded, prejudgment interest shall be at the rate described
in subsection A or B of this section.
¶16 It is unclear from the text of § 44-1201 whether, as the court of
appeals concluded, the phrase “other obligation” in subsection (A) should be
construed broadly to include “prejudgment interest on unliquidated claims”
under Rule 68(g). Because the statute does not define “obligation,” we interpret
the term according to its ordinary meaning. See Jennings v. Woods, 194 Ariz. 314,
323 ¶ 42, 982 P.2d 274, 283 (1999).
¶17 On the one hand, “obligation” could simply mean “[a] legal or
moral duty to do or not do something,” Black’s Law Dictionary 1179 (9th ed. 2009),
a definition that arguably encompasses a mandatory Rule 68(g) sanction. See
Webster’s II New College Dictionary 754 (1995) (defining “obligation” as “[t]he act
of binding oneself by a social, moral, or legal tie”). On the other hand, the term
“obligation” can plausibly be viewed more narrowly as “[a] formal, binding
agreement . . . to pay a certain amount or to do a certain thing for a particular
person or set of persons.” Black’s Law Dictionary 1179; see Webster’s II New College
Dictionary 754 (alternatively defining “obligation” as “[a] legal agreement
stipulating a specified payment or action and often a specified penalty for failure
to comply”). As BCI notes, prejudgment interest under Rule 68(g) is not part of
a negotiated agreement; rather, it is a sanction that is linked to, and dependent
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METZLER v. BCI COCA-COLA BOTTLING
OPINION OF THE COURT
on, entry of a “judgment” that is more favorable to the offeror than the offer
made. Because § 44-1201 is reasonably susceptible to multiple constructions, it
is ambiguous. See State v. Whitman, 234 Ariz. 565, 566 ¶ 7, 324 P.3d 851, 852 (2014)
(noting that an ambiguity exists when the text “may be reasonably understood
in two or more ways”).
¶18 Considering the history and context of § 44-1201, see ¶¶ 14–15,
supra, we disagree with the court of appeals’ holding. In addition, under the
ejusdem generis canon of statutory interpretation, “general words [that] follow the
enumeration of particular classes of persons or things should be interpreted as
applicable only to the persons or things of the same general nature or class.”
Estate of Braden ex rel. Gabaldon v. State, 228 Ariz. 323, 326 ¶ 13, 226 P.3d 349, 352
(2011) (internal quotation marks omitted). Thus, the phrase “other obligation”
in subsection (A) is most appropriately interpreted to apply only to things of the
same nature or class as “loan” and “indebtedness,” the terms that precede it.
¶19 A loan is commonly understood as “money lent at interest,” and
an indebtedness is “something (as an amount of money) that is owed.” Webster’s
Ninth New Collegiate Dictionary 612, 700 (1983). Prejudgment interest awarded
under Rule 68(g) is markedly different. Unlike loans and indebtedness, it
depends on a judgment for its existence. Accordingly, prejudgment interest,
even when imposed as a sanction, is not an “other obligation” for purposes of
§ 44-1201(A). Cf. Taylor, 223 Ariz. at 489 ¶ 12, 224 P.3d at 986 (holding that § 44-
1201 “does not provide expressly for the accrual of interest on a penalty of any
sort” and that “the established definitions of ‘indebtedness’ [and] ‘obligation’
[do not] necessarily encompass penalties”).
¶20 As BCI acknowledges, Rule 68(g) could be viewed as giving rise to
a right or entitlement to prejudgment interest. But that right is contingent on the
successful party obtaining “a more favorable judgment” than what it previously
offered to accept in settlement. Ariz. R. Civ. P. 68(g). What would otherwise be
an unliquidated claim on which no prejudgment interest is owed becomes
liquidated, memorialized, and enforceable only when judgment is entered, even
though the time frame for which prejudgment interest is owed obviously
predates the judgment.
¶21 We agree with the court of appeals that “the source of prejudgment
interest imposed as a sanction under Rule 68(g) is the rule itself, not the
judgment.” Metzler III, 233 Ariz. at 138 ¶ 17, 310 P.3d at 14. But the interest due
and owing is necessarily “on” the judgment for purposes of § 44-1201 because
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METZLER v. BCI COCA-COLA BOTTLING
OPINION OF THE COURT
prejudgment interest, when recoverable only as a Rule 68(g) sanction, is not on
a “loan, indebtedness or other obligation.”
¶22 Indeed, if a Rule 68(g) sanction were considered an “obligation,”
that would result in assessing interest on interest under § 44-1201(A) because the
rule-created sanction is, at bottom, solely prejudgment interest. But the statute
does not contemplate or provide for compound interest. See Westberry v.
Reynolds, 134 Ariz. 29, 34, 653 P.2d 379, 384 (App. 1982) (holding that prior
version of § 44-1201(A) mandates simple interest, not compound interest, for any
legal indebtedness).
¶23 Construing “obligation” as the principal to which prejudgment
interest is applied avoids this result and is consistent with our practice of
harmonizing Rule 68 with surrounding law. See Hall v. Read Dev., Inc., 229 Ariz.
277, 282–83 ¶ 19, 274 P.3d 1211, 1216–17 (App. 2012) (meshing Rule 68 with
A.R.S. § 12-341.01 and noting that procedural rules and statutes should be read
together and harmonized whenever possible); Hansen, 215 Ariz. at 289 ¶ 7, 160
P.3d at 168. For all these reasons, we conclude that prejudgment interest
awarded under Rule 68(g) is “interest on a[] judgment” within the meaning of
§ 44-1201(B).
IV.
¶24 Metzler alternatively argues that she has a vested, substantive right
to the 10% prejudgment interest rate prescribed in the pre-2011 version of § 44-
1201. She contends that the date became fixed on May 11, 2011, when the court
of appeals issued its mandate in Metzler I. But that argument runs afoul of
Metzler II, in which the court of appeals concluded that the trial court’s
September 2009 judgment had no force or effect. 230 Ariz. at 28 ¶ 8, 279 P.3d at
1190; see ¶ 7, supra. Similarly, the trial court’s judgment of June 30, 2011 lost its
effect when the court of appeals vacated it in Metzler II. 230 Ariz. at 29 ¶ 10, 279
P.3d at 1191.
¶25 Given the procedural history of this case, there was no effective
“judgment for the comparative purposes of Rule 68(g)” until October 10, 2012,
when the trial court entered judgment on the Metzler II mandate. Id. at 28 ¶ 8,
279 P.3d at 1190. The current version of § 44-1201 took effect on July 20, 2011,
and it applies to “all judgments that are entered on or after that date.” See S.B.
1212, ch. 99, § 17(B) (Applicability); cf. McBride v. Superior Court, 130 Ariz. 193,
194, 635 P.3d 178, 179 (1981) (holding that, absent an agreement to the contrary,
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METZLER v. BCI COCA-COLA BOTTLING
OPINION OF THE COURT
“the interest rate stated in [a] judgment by statute is . . . subject to later
modification by statute”); Metzler III, 233 Ariz. at 136 ¶ 7 n.1, 310 P.3d at 12 n.1
(citing State ex rel. Miller v. Beardsley Indus. Prop., 173 Ariz. 19, 24, 839 P.2d 444
(App. 1992) (holding that a statute providing for compound interest in
condemnation actions applied retroactively to a taking that occurred before the
statute’s effective date)).
V.
¶26 Given our conclusion that the applicable rate for prejudgment
interest under Rule 68(g) in this case is 4.25% based on § 44-1201(B), BCI’s
unconditional tender in April 2011 more than satisfied, and thus fully
extinguished, the judgment debt BCI owed. According to our calculations, BCI
owed Metzler $253,078.77 in prejudgment interest as of April 28, 2011, when BCI
made the unconditional tender. Because that amount is significantly less than
the prejudgment interest that BCI unconditionally tendered, there is
indisputably no remaining balance. We thus need not address whether a tender
of the full amount of a damage award ends the accrual of additional prejudgment
interest.
VI.
¶27 We vacate the court of appeals’ opinion in Metzler III, reverse the
superior court’s October 10, 2012 judgment, and remand to that court for entry
of judgment in accordance with this opinion.
9