Fidelity National Title Insurance v. Centerpoint Mechanic Lien Claims, LLC

IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE
FIDELITY NATIONAL TITLE INSURANCE COMPANY, in its corporate
capacity and as successor by merger to Lawyers Title Insurance
Corporation and Commonwealth Land Title Insurance Company,
Plaintiff/Appellant,
v.
CENTERPOINT MECHANIC LIEN CLAIMS, LLC, an Arizona limited
liability company, Defendant/Appellee.
__________________________________
ML MANAGER, LLC; as manager of CENTERPOINT I LOAN, LLC; and
CENTERPOINT II LOAN, LLC; and as authorized agent for ROBERT L.
BARNES, a single man; HAROLD CHRIST, LTD, an Arizona corporation;
CHARLES GOLDSTEIN, M.D., Trustee of Charles Goldstein Emergency
Services, PC Section 401(k) Profit Sharing Plan and Trust Agreement
effective December 10, 2007; PENNY HARDAWAY INVESTMENTS, LLC,
an Arizona limited liability company; MORRIS A. KAPLAN, Trustee of
the Goldman and Kaplan Ltd., Defined Benefit Plan under agreement
dated December 31, 2001; G. GRANT LYON, Trustee for Radical Bunny,
LLC, an Arizona limited liability company; SARAH A. LISA-
PETRAUSCHKE and BRIAN M. PETRAUSCHKE, husband and wife;
LORINDA S. MCMULLEN and LAURA MARTINI, as joint tenants with
right of survivorship; and FREDERICK A. TAUNTON and DALE C.
TAUNTON, Trustees of the Taunton Family Trust dated January 18, 2007,
Defendants/Appellees/Cross-Appellants,
and
CENTERPOINT MECHANIC'S LIEN CLAIMS LLC,
Intervenor/Appellee/Cross-Appellant.
and
UNIVERSAL-SCP 1 LP; and VRCP FUNDING, LP, Defendants/Appellees.
v.
FIDELITY NATIONAL TITLE INSURANCE COMPANY,
Intervenor/Appellant/Cross-Appellee.
Nos. 1 CA-CV 12-0721 and 1 CA-CV12-0726 (Consolidated)
FILED 8-27-2015
Appeal from the Superior Court in Maricopa County
Nos. CV2011-015738, CV2008-024849, CV2008-032460, CV2009-036739,
CV2009-036821, CV2009-036828 and CV2009-036861
The Honorable Randall H. Warner, Judge
The Honorable Edward O. Burke, Judge Retired
REVERSED
COUNSEL
Jones Skelton & Hochuli, PLC, Phoenix
By Lori L. Voepel, Robert R. Berk, Jennifer B. Anderson
Counsel for Fidelity National Title Insurance Company and Commonwealth Land
Title Insurance Company
Perkins Coie, LLP, Phoenix
By Richard M. Lorenzen, Philip R. Higdon, Rusty D. Crandell
Counsel for Centerpoint Mechanic Lien Claims, LLC
Moyes Sellers & Hendricks, Phoenix
By Keith L. Hendricks, Joshua T. Greer
Counsel for ML Manager, LLC, et al.
Tiffany & Bosco, PA, Phoenix
By J. Lawrence McCormley
Counsel for Universal –SCP 1 LP and VRCP Funding, LP
Haralson Miller Pitt Feldman & McAnally, PLC, Tucson
By Stanley G. Feldman
Noel Fidel Attorney at Law, Phoenix
By Noel Fidel
Co-counsel for Amicus Curiae American Land Title Association
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FIDELITY v. CENTERPOINT
Opinion of the Court
OPINION
Presiding Judge Kent E. Cattani delivered the opinion of the Court, in
which Judge Margaret H. Downie and Judge Michael J. Brown joined.
C A T T A N I, Judge:
¶1 In this case, we address whether a title insurance company is
liable under United Services Automobile Ass’n v. Morris, 154 Ariz. 113, 741
P.2d 246 (1987), for damages agreed to by its insureds in a settlement
agreement resolving third-party mechanics’ lien claims against the
insureds’ interest in a real estate development. Under Morris, when an
insurer agrees to defend its insured against a third-party liability claim,
but reserves the right to challenge coverage under the insured’s policy, the
insured may independently settle with the third-party claimant without
violating the insured’s duty of cooperation under the insurance contract;
this settlement may assign to the claimant the insured’s rights against the
insurer, subject to the insurer’s retained right to contest coverage.
¶2 Here, the settlement agreement was not between the
insureds and the third-party mechanics’ lien claimants, but was rather an
agreement between the insureds and an entity they controlled that had
purchased the mechanics’ lien claims. Moreover, the settlement
agreement was for an amount significantly greater than the amount paid
to purchase the mechanics’ lien claims. Accordingly, and for reasons
discussed below, we conclude that the settlement agreement between the
insureds and the entity that purchased the mechanics’ lien claims was not
a compliant Morris agreement, and we accordingly reverse the superior
court’s ruling that the amount of the insurer’s liability (if it loses the yet to
be litigated coverage dispute) is the negotiated settlement amount.
FACTS AND PROCEDURAL BACKGROUND
I. Parties and Title Insurance Policies.
¶3 In March 2007 and early April 2008, Mortgages, Ltd., a
private lender, agreed to loan a developer additional funds to build
Centerpoint, a high-rise residential condominium development in Tempe.
Construction on the project had begun in December 2005, and a portion of
the loan was used to pay off an earlier loan from Freemont Investment
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FIDELITY v. CENTERPOINT
Opinion of the Court
and Loan (“Freemont”) secured by a deed of trust, with the balance used
to fund construction. The loan was secured by a deed of trust against
Centerpoint. A predecessor to Fidelity National Title Insurance Company
(“Fidelity”) issued a title insurance policy insuring priority of Mortgages,
Ltd.’s deed of trust for a face amount of $165,200,000 (the “ML Policy”).
¶4 Two months after issuing the loan, Mortgages, Ltd. went
into bankruptcy. As part of its bankruptcy reorganization plan,
Mortgages, Ltd.’s Centerpoint deed of trust interests were transferred to
two investors—Centerpoint I Loan, LLC (“CPI”) and Centerpoint II Loan,
LLC (“CPII”)—and eight individual fractional interest holders. ML
Manager, LLC acted as manager of CPI and CPII, as well as agent and
attorney-in-fact for the fractional interest holders. We refer to ML
Manger, CPI, CPII, and the fractional interest holders collectively as “ML
Investors.”
¶5 In April 2010, ML Investors purchased Centerpoint at a
trustee’s sale for a credit bid of $8 million. Soon thereafter, CPI and CPII
purchased a parking lot adjacent to Centerpoint. Fidelity issued a title
insurance policy to CPI and CPII for the parking lot (the “Parking Lot
Policy”) for the amount of the purchase price, $875,000.
¶6 Universal-SCP 1, LP (“Universal”) contemporaneously
provided CPI and CPII a bankruptcy exit loan of $20 million, secured in
part by CPI and CPII’s Centerpoint assets. Commonwealth Land Title
Insurance Company (“Commonwealth”) issued Universal a $5 million exit
lender title policy insuring priority of its security interest in Centerpoint
(the “Universal Policy”).
¶7 CPI and CPII also obtained a $5 million loan from VRCP
Funding, LP (“VRCP”), used in part to purchase the parking lot. The
VRCP loan was secured by a deed of trust on Centerpoint and the parking
lot, and Commonwealth issued VRCP a $5 million lender title policy
insuring priority of its deed of trust (the “VRCP Policy”).
II. Mechanics’ Lien Litigation.
¶8 Funding for the Centerpoint project became erratic during
construction, which eventually stalled. Starting in April 2008,
subcontractors and suppliers began to record mechanics’ liens and notices
of lis pendens against Centerpoint. The first of eventually dozens of
mechanics’ lien foreclosure claims was filed in October 2008, asserting that
the mechanics’ liens had priority over Mortgages, Ltd.’s (subsequently ML
Investors’) security interest in Centerpoint.
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FIDELITY v. CENTERPOINT
Opinion of the Court
¶9 ML Investors tendered the defense of the mechanics’ lien
claims to Fidelity, and in September 2009, Fidelity accepted the defense
with a general reservation of rights and engaged counsel to represent ML
Investors. Counsel asserted that ML Investors, as Mortgages, Ltd.’s
assignees, were entitled to be equitably subrogated to the priority position
held by Freemont, whose loan Mortgages, Ltd.’s initial loan had paid off
and whose deed of trust undisputedly had priority over the mechanics’
liens. In September 2010, the superior court denied summary judgment
on equitable subrogation, finding issues of fact as to whether there was an
agreement to subrogate at the time of Mortgages, Ltd.’s loan and whether
Mortgages, Ltd. was at fault for failing to fund the loan while encouraging
continued construction and representing that funding was forthcoming.
The ruling further determined the validity and amount of several
mechanics’ liens, although it left the issue of priority for trial.
¶10 After the summary judgment ruling, Fidelity reaffirmed its
general reservation of rights under the ML Policy. In December 2010,
Fidelity accepted the defense of CPI and CPII under the Parking Lot
Policy, again with a reservation of rights. Universal and VRCP tendered
their defense against the mechanics’ lien claims to Commonwealth, which
accepted with a reservation of rights in December 2010.
¶11 Meanwhile, ML Investors were considering selling the
Centerpoint property, which was incurring ongoing security,
maintenance, and other expenses during the pendency of the lawsuit. In
addition to attempting to recoup at least part of their investment, ML
Investors were also under pressure to liquidate Centerpoint to fund
payments on the Universal exit loan, which risked substantial default
penalties if not cured.
¶12 In September 2010, ML Investors contracted to sell
Centerpoint for $30 million. The sale failed to close in October as planned,
at least in part due to Fidelity’s decision, in the wake of the summary
judgment ruling, not to provide a title policy to the buyer that would
insure priority over the mechanics’ liens.
¶13 ML Investors concurrently pursued settlement negotiations
with the mechanics’ lien claimants. After the summary judgment ruling,
the claimants insisted on a cash settlement, rather than an assignment of
ML Investors’ title insurance claims. ML Investors needed money from
the potential sale of Centerpoint to fund the settlement, but the sale could
not be completed without first settling the mechanics’ liens claims to
enable the buyer to receive clear title. Beginning in October 2010 and
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FIDELITY v. CENTERPOINT
Opinion of the Court
continuing until the eventual sale of Centerpoint in January and February
2011, ML Investors informed Fidelity that they were seeking a potential
Morris settlement directly with the mechanics’ lien claimants.
III. Sale and Settlement.
¶14 After extensive negotiations, ML Investors, Universal,
VRCP, the buyer, and the mechanics’ lien claimants reached a global
agreement in February 2011 (as memorialized in November 2011) to sell
Centerpoint and settle the mechanics’ lien claims. Concerned that Fidelity
would deny coverage if ML Investors simply paid the liens (thus clearing
title) or if ML Investors—rather than a third party—purchased the liens
(under the merger doctrine), the investors created a new entity,
Centerpoint Mechanic Lien Claims, LLC (“CMLC”), which was wholly
owned and controlled by CPII, to acquire the mechanics’ lien claims and,
later, to pursue the title insurance claims against Fidelity.
¶15 Under the global agreement, the buyer purchased
Centerpoint for $30 million. To provide clear title to the buyer, CMLC
purchased the mechanics’ liens for $13.65 million and agreed to
subordinate its interest in Centerpoint to the buyer’s fee interest.
Additionally, Universal and VRCP subordinated their interests in
Centerpoint to that of the buyer. As a failsafe, CMLC agreed to a
liquidated damages provision requiring it to pay $38 million to the buyer
if CMLC failed to release the mechanics’ liens within three years.
¶16 ML Investors waived $13.5 million of their proceeds from
the sale for CMLC to use to purchase the mechanics’ liens. They further
set aside $3 million from the sale as CMLC’s litigation reserve to pursue
title insurance claims. ML Investors also waived their right to proceeds
from the sale of the parking lot. Additionally, CPII purchased VRCP, and
Universal and VRCP waived their claims to $5 million each from the sale
proceeds and subordinated their interests in Centerpoint to that of the
buyer.
¶17 The global agreement provided that once CMLC had been
substituted for the mechanics’ lien claimants, CMLC and ML Investors
would enter a stipulated judgment for $38 million and a declaration that
the mechanics’ liens had priority over ML Investors’ interest in
Centerpoint. CMLC would accept assignment of ML Investors’ claims
against Fidelity, would agree not to execute against ML Investors, and
would pursue title insurance claims directly against Fidelity. The
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FIDELITY v. CENTERPOINT
Opinion of the Court
agreement included a plan to distribute any money recovered from
Fidelity to ML Investors.
IV. Intervention and Judgment.
¶18 In the wake of the February 2011 agreement, CMLC
substituted itself for the mechanics’ lien claimants in the ongoing
litigation. Fidelity and Commonwealth intervened to challenge the
settlement agreement. After a five-day hearing, the superior court ruled
that (1) the settlement agreement was valid under Morris, (2) the
agreement was neither fraudulent nor collusive, (3) Fidelity had received
proper notice of the settlement, and (4) the settlement amount was
reasonable. The court thus found the settlements of the claims against
Fidelity’s ML Policy ($24,583,799.38 plus $1,880,994.51 in mechanics’ lien
attorney’s fees) and Parking Lot Policy ($875,000) and on
Commonwealth’s Universal Policy ($5 million) and VRCP Policy ($5
million) “were reasonable, prudent, and fully supported by the evidence
produced at the hearing” and entered judgment in favor of ML Investors,
Universal, VRCP, and CMLC.
¶19 The superior court thereafter denied Fidelity’s motion for
new trial. The court also denied as premature CMLC and ML Investors’
requests for attorney’s fees, concluding that they were not yet successful
parties within the meaning of Arizona Revised Statutes (“A.R.S.”) § 12-
341.01 because the insurance coverage issue remained pending. Fidelity,
but not Commonwealth, timely appealed, and CMLC and ML Investors
timely cross-appealed.
V. Companion Intentional Interference Case.
¶20 In a companion case, Fidelity and Commonwealth sued
CMLC for intentional interference with contract, alleging that CMLC had
intentionally interfered with the title insurance contracts by entering into
the Morris-type agreement. The superior court dismissed the case on the
basis that it had previously found that the Insureds did not breach the
insurance contracts by entering into the settlement agreement. Fidelity
and Commonwealth timely appealed.
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FIDELITY v. CENTERPOINT
Opinion of the Court
¶21 We have jurisdiction over these consolidated cases under
A.R.S. § 12-2101(A)(1).1
DISCUSSION
¶22 Fidelity argues that, as a matter of law, a title insurance
policy holder may not enter a Morris agreement. Fidelity and amicus
curiae American Land Title Association assert that, unlike the third-party
insurance claim at issue in Morris, the policies here provide insurance for a
first-party property loss, meaning loss caused by alleged defects that, if
established, could lessen the value of the insureds’ property. We need not
address this argument, however, because even assuming Morris applies to
title insurance claims, under the circumstances presented here, the
settlement agreement is not a compliant Morris agreement.
I. Settlement Agreements Under Morris.
¶23 As a general rule, an indemnitor with a duty to defend its
indemnitee has the right and obligation to provide a defense against any
third-party claim potentially within its indemnity obligation. See Morris,
154 Ariz. at 117, 741 P.2d at 250. “[B]y defending all claims the
[indemnitor] obtains the advantage of exclusively controlling the
litigation,” including settlement with the third-party claimant. Id. Under
these circumstances, the indemnitee is contractually bound by a
cooperation clause to participate and aid the indemnitor in the defense,
and may not independently settle with the claimant without breaching
this contractual duty. Id.¶24 The situation changes if the indemnitor accepts the defense,
but reserves its right to contest coverage.2 An indemnitor may
“appropriately perform its contractual duty to defend while
simultaneously reserving the right to later assert the defense,” provided
the indemnitor asserts the potential coverage defense in good faith.
Parking Concepts, Inc. v. Tenney, 207 Ariz. 19, 22, ¶ 12, 83 P.3d 19, 22 (2004).
1 Absent material revisions after the relevant date, we cite a statute’s
current version.
2 A related, but distinct, doctrine applies where the indemnitor
declines the indemnitee’s tender of the defense. See Damron v. Sledge, 105
Ariz. 151, 460 P.2d 997 (1969).
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FIDELITY v. CENTERPOINT
Opinion of the Court
¶25 In Morris, the court noted that an insurer’s reservation of
rights places an insured in a “precarious position.” 154 Ariz. at 118, 741
P.2d at 251. The insureds in that case faced “the possibility of a jury
verdict greater than their [] policy limit or, even if within the limit, one
that might not be covered.” Id. The insureds were thus entitled “to act
reasonably to protect themselves from ‘the sharp thrust of personal
liability.’” Id. (quoting Ariz. Prop. & Cas. Ins. Guar. Fund v. Helme, 153 Ariz.
129, 137, 735 P.2d 451, 459 (1987)); see also Damron, 105 Ariz. at 153, 460
P.2d at 999 (quoting Critz v. Farmers Ins. Grp., 41 Cal. Rptr. 401, 408 (Ct.
App. 1964)); Tenney, 207 Ariz. at 22, ¶ 13, 83 P.3d at 22. Morris thus held
that “[t]he [indemnitor]’s reservation of the privilege to deny the duty to
pay relinquishes to the [indemnitee] control of the litigation.” 154 Ariz. at
119, 741 P.2d at 252. And an indemnitee may then independently settle
with a third-party claimant without breaching the indemnitee’s
contractual cooperation obligation. Id.; see also Tenney, 207 Ariz. at 22, ¶
13, 83 P.3d at 22.
¶26 Under a typical Morris agreement, the insured agrees to
allow judgment to be entered against it in exchange for a covenant not to
execute, and assigns its rights under the policy to the claimant, who then
pursues the insurer. Tenney, 207 Ariz. at 22, ¶¶ 14, 15, 83 P.3d at 22.
Because this type of covenant not to execute insulates the indemnitee from
potential liability, neither party to the settlement has an incentive to
minimize the stipulated judgment amount. Id. at ¶ 14. In fact, by
contemporaneously assigning its right to sue the insurer for bad faith, the
insured can potentially bind the insurer to a stipulated judgment in excess
of policy limits. Leflet v. Redwood Fire & Cas. Ins. Co., 226 Ariz. 297, 300, ¶
13, 247 P.3d 180, 183 (App. 2011).
¶27 To protect the indemnitor, Morris announced several
limitations on 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 is reasonable.” Leflet, 226 Ariz. at 300, ¶ 14, 247 P.3d at183 (citing Morris, 154 Ariz. at 119–20, 741 P.2d at 252–54).
Reasonableness turns on “what a reasonably prudent person in the
[indemnitee’s] position would have settled for on the merits of the
claimant’s case” in light of the circumstances affecting liability, defense,
and coverage. Tenney, 207 Ariz. at 23, ¶ 15, 83 P.3d at 23 (quoting Morris,
154 Ariz. at 121, 741 P.2d at 254). This inquiry attempts to re-create “what
would have occurred if there had been an arm’s-length negotiation
between interested parties.” Himes v. Safeway Ins. Co., 205 Ariz. 31, 38–39,
¶¶ 22–23, 66 P.3d 74, 81–82 (App. 2003).
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FIDELITY v. CENTERPOINT
Opinion of the Court
¶28 “The overarching goal of Morris is to permit the insured and
the insurer to balance their competing interests in an atmosphere of
fairness and defined risk—not to promote the transformation of
underlying contract and tort claims into bad faith claims at inflated
values.” Leflet, 226 Ariz. at 301, ¶ 15, 247 P.3d at 184. Thus, a Morris
agreement that falls “outside the permitted parameters” is unenforceable.
Safeway Ins. Co. v. Guerrero, 210 Ariz. 5, 15, ¶ 34, 106 P.3d 1020, 1030 (2005).
¶29 Here, we conclude that the settlement agreement between
the insured and the entity that purchased the lien claims falls outside the
permitted parameters of Morris. Rather than representing an arm’s length
settlement between lien claimants and insureds, the purported Morris
agreement in this case was between the insureds and an entity they
controlled. The lien claimants—the parties whose claims created the
insureds’ potential liability—were not parties to the agreement. Instead,
ML Investors interposed CMLC, which was wholly owned and controlled
by CPII, as a purported proxy for the lien claimants. Thus, the interests of
the parties to the settlement agreement, CMLC and ML Investors, were
aligned, not divergent. Compare Leflet, 226 Ariz. at 301, ¶ 17, 247 P.3d at
184 (noting that a Morris agreement generally settles a dispute between
opposing parties).
¶30 Moreover, by assigning their claims to the insureds’ entity,
the lien claimants effectively settled their claims unconditionally for a
fixed sum, leaving no risk of excess liability for the insureds. This is
particularly significant because the insureds no longer faced the risk of
personal liability that motivates a Morris agreement. And having settled
with the lien claimants, ML Investors’ remedy against Fidelity was instead
to seek reimbursement under the insurance contract, and if appropriate, to
pursue a potential bad faith claim based on Fidelity’s allegedly improper
reservation of rights. Given these circumstances, the settlement
agreement—even if economically prudent from ML Investors’
perspective—was not a compliant Morris agreement.
¶31 The circumstances in this case are in stark contrast to those
in cases in which Morris agreements have been upheld, where such
agreements resolve outstanding adverse claims by third-party claimants
who accept an assignment of the insured’s claims against the insurer
and/or partial payment for stipulated liability. See, e.g., Morris, 154 Ariz.
at 118, 741 P.2d at 251; Tenney, 207 Ariz. at 22, ¶¶ 11–15, 83 P.3d at 22. In
those cases, the Morris-type agreement with third-party claimants
operated to protect the insured against the “sharp thrust of personal
liability.” In contrast, here, the agreement at issue was not a protection
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FIDELITY v. CENTERPOINT
Opinion of the Court
against potential liability; that liability had already been resolved through
a settlement with the lien claimants.
¶32 The unity of parties and lack of remaining risk of liability are
further reflected in the artificially inflated judgment—$38 million despite
the underlying settlement with the lien claimants for $13.65 million—
entered pursuant to the purported Morris agreement. CMLC and ML
Investors argue that although the lien claimants settled their claims in
their entirety, ML Investors still faced greater economic risk. But this
argument conflates Morris’s discussion of “personal liability” with overall
economic or financial risk, which here included ML Investors’ potential
loss of their investment due to foreclosure of the mechanics’ liens.
¶33 As relevant here, Fidelity’s title policies insured only against
loss stemming from the priority of the mechanics’ liens over ML Investors’
interest in Centerpoint. The policies did not otherwise guaranty the value
of the property or that the insureds could complete the sale of Centerpoint
in February 2011 (even accepting that it was in the insureds’ interests
generally to do so).
¶34 Because a Morris agreement cannot expand the insured’s
rights under the insurance contract, Tenney, 207 Ariz. at 24, ¶ 25, 83 P.3d at
24, the only loss for which Fidelity was potentially liable was the cost to
the insureds of the mechanics’ liens’ priority, i.e., the $13.65 million paid to
acquire the mechanics’ lien claims. Thus, the relevant “arm’s-length
negotiation” occurred in this case between the mechanics’ lien claimants
and the insureds, see Himes, 205 Ariz. at 39, ¶ 23, 66 P.3d at 82, and the
subsequent agreement between CMLC and ML Investors for a judgment
in an amount almost three times what was paid for the liens goes beyond
ML Investors’ established liability and beyond Fidelity’s potential liability
under the insurance contract.
¶35 Moreover, the stipulated judgment exceeded ML Investors’
liability in scope as well as amount. The judgment’s award to the insureds
of the mechanics’ lien claimant’s attorney’s fees illustrates this point.
Because the insureds did not pay the mechanics’ lien claimants any sum
for attorney’s fees, those fees cannot reasonably be considered a loss
incurred due to a defect in title. The insureds may not, by using CMLC as
a proxy, artificially inflate Fidelity’s indemnity obligation to nearly three
times the price actually paid.
¶36 In sum, the purported Morris agreement bound parties
whose interests aligned, after the actual opposing party had settled for a
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Opinion of the Court
fixed sum, and stipulated to a judgment that exceeded actual liability both
in scope and amount. We thus conclude that the agreement does not fit
within the parameters of a Morris agreement.
¶37 Because of our resolution of this issue, we need not address
Fidelity’s alternative arguments attacking the agreement and stipulated
judgment. Similarly, this conclusion renders moot CMLC and ML
Investors’ cross-appeal from the superior court’s order denying their
requests for attorney’s fees as premature.
II. Intentional Interference Claims.
¶38 Fidelity and Commonwealth appealed from the superior
court’s dismissal of their companion case asserting a claim that CMLC
intentionally interfered with Fidelity’s insurance contracts and induced
the insureds to breach their contracts by improperly entering a Morris
agreement. The superior court dismissed this claim on the basis of issue
preclusion, ruling that, because the purported Morris agreement was
found to be reasonable and not fraudulent or collusive, the insureds did
not breach the insurance contracts by entering the agreement.
¶39 Because we vacate the judgment as against Fidelity, issue
preclusion no longer bars the intentional interference claim. Accordingly,
we reverse the judgment dismissing Fidelity’s claim in CV 2011-015738
and remand for further proceedings. Because the stipulated judgment
remains in effect as against Commonwealth, however, and because
Commonwealth has stated no alternative grounds for reversing dismissal,
we affirm the judgment dismissing Commonwealth’s intentional
interference claim.
III. Attorney’s Fees on Appeal.
¶40 All parties seek awards of attorney’s fees expended on
appeal pursuant to A.R.S. § 12-341.01. In an exercise of our discretion, we
decline to award fees to any party.
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FIDELITY v. CENTERPOINT
Opinion of the Court
CONCLUSION
¶41 Based on the foregoing, we reverse the decision of the
superior court and remand for further proceedings consistent with this
opinion.
:ama
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