Abel Cuellar v. Megan G. Vettorel

IN THE
ARIZONA COURT OF APPEALS
DIVISION TWO
ABEL CUELLAR,
Plaintiff/Appellant,
v.
MEGAN G. VETTOREL,
Defendant/Appellee.
No. 2 CA-CV 2014-0005
Filed August 18, 2014
Appeal from the Superior Court in Pima County
No. C20113599
The Honorable Charles V. Harrington, Judge
AFFIRMED
COUNSEL
Phillips & Lyon, P.L.C., Phoenix
By Henry G. Hester
Counsel for Plaintiff/Appellant
Curl & Glasson, P.L.C., Tucson
By David L. Curl
Counsel for Defendant/Appellee
OPINION
Presiding Judge Kelly authored the decision of the Court, in which
Judge Howard and Judge Vásquez concurred.
CUELLAR V. VETTOREL
Opinion of the Court
K E L L Y, Presiding Judge:
¶1 Abel Cuellar appeals from the trial court’s award of
sanctions to Megan Vettorel pursuant to Rule 68, Ariz. R. Civ. P.,
after Cuellar failed to obtain a final judgment more favorable than
Vettorel’s offer of judgment. Cuellar contends the court erred by
failing to account for his medical liens when comparing the offer of
judgment to the final judgment. For the following reasons, we
affirm.
Factual and Procedural Background
¶2 Cuellar filed a complaint against Vettorel, claiming he
had been injured as a result of her negligent driving. Vettorel
offered to allow judgment to be entered against her in the amount of
$10,000, inclusive of costs and fees, “contingent on the satisfaction of
all liens which attach by operation of law to the proceeds of this suit
and for which [Vettorel] could be held liable.” Cuellar did not
accept the offer.
¶3 Following trial, the jury found in favor of Cuellar,
concluding his damages were $41,300 but finding him ninety
percent at fault for the accident. Judgment was entered in Cuellar’s
favor for $5,310.90, which included costs of $1,180.90. Cuellar
objected to Vettorel’s proposed form of judgment, arguing that
Vettorel should not be awarded Rule 68 sanctions because Cuellar’s
medical liens rendered the offer of judgment “far less” than the final
judgment. The court implicitly rejected this argument, concluding
Cuellar’s final judgment did not exceed the $10,000 offer of
judgment, and awarded Vettorel sanctions in the amount of
$25,631.06 pursuant to Rule 68(g) for double her taxable costs and
expert witness fees dating from the offer. Cuellar timely appealed
the court’s judgment. We have jurisdiction pursuant to A.R.S.
§§ 12-120.21 and 12-2101(A)(1).
Discussion
¶4 Cuellar argues the trial court erred by imposing Rule 68
sanctions because “the Offer of Judgment included a requirement
that [Cuellar] assume outstanding liens which rendered the true
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CUELLAR V. VETTOREL
Opinion of the Court
value of the Offer of Judgment less than [Cuellar]’s total verdict.”1
We review de novo the trial court’s award of sanctions based on its
interpretation of a court rule. See Vega v. Sullivan, 199 Ariz. 504, ¶ 8,
19 P.3d 645, 648 (App. 2001). Our primary goal in construing a court
rule “‘is to discern and give effect’” to the intent of the rule. Warner
v. Sw. Desert Images, LLC, 218 Ariz. 121, ¶ 49, 180 P.3d 986, 1001
(App. 2008), quoting Bridgestone/Firestone N. Am. Tire, L.L.C. v. A.P.S.
Rent-A-Car & Leasing, Inc., 207 Ariz. 502, ¶ 15, 88 P.3d 572, 576 (App.
2004). The language of the rule itself is the “best and most reliable
indicator” of intent. Vega, 199 Ariz. 504, ¶ 9, 19 P.3d at 648. If the
plain language is unambiguous, we need not employ other methods
of construction. State v. Campoy, 220 Ariz. 539, ¶ 11, 207 P.3d 792,
797 (App. 2009).
¶5 Rule 68(g) requires a trial court to impose sanctions
upon a party that rejects an offer of judgment and fails to obtain a
more favorable judgment at trial. See Levy v. Alfaro, 215 Ariz. 443,
¶ 8, 160 P.3d 1201, 1203 (App. 2007) (award of sanctions pursuant to
Rule 68(g) is mandatory). When determining whether a judgment is
“more favorable” than an offer of judgment, the court must make an
“apples to apples” comparison between the offer and the judgment
finally obtained. See Hales v. Humana of Ariz., Inc., 186 Ariz. 375, 378,
923 P.2d 841, 844 (App. 1996). For example, a court may not
compare an offer of judgment, with costs, to the final award,
without costs, as such would not permit an “apples to apples”
comparison. Id.
¶6 Cuellar argues the trial court erred in applying Rule 68
because “the true value of the Offer of Judgment [was] less than
[Cuellar]’s total verdict.” He claims that the actual value of the offer
was $1,882.26—far less than the final judgment of $5,310.90,
reasoning that the $10,000 offer of judgment required him to satisfy
his medical lien, which was $6,936.84 at the time of the offer, and
1 Although Vettorel argues that Cuellar has waived any
objection to the offer of judgment by failing to object within ten days
after the offer was made as required by Rule 68(d), Ariz. R. Civ. P.,
we construe Cuellar’s argument on appeal as a challenge to the trial
court’s application of Rule 68(g), rather than an objection to the form
of the offer.
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CUELLAR V. VETTOREL
Opinion of the Court
included costs totaling $1,180.90. Cuellar argues the court should
have “ruled that [his] recovery was greater than the actual amount
of the actual judgment when the lien was taken into consideration.”
By not doing so, he claims, the “trial [c]ourt failed to properly
compare ‘apples to apples.’”
¶7 In support of his position, Cuellar urges us to adopt the
Alaska Supreme Court’s holding in Dearlove v. Campbell, 301 P.3d
1230 (Alaska 2013), that a subrogation payment made by the
defendant directly to the subrogee must be added to the jury’s
damages award when making a Rule 68 comparison.2 In that case,
Campbell sued Dearlove for her damages arising from a vehicular
collision. Id. at 1232. Campbell rejected Dearlove’s pretrial offer of
judgment of $18,000, which had required Campbell to satisfy her
insurer’s outstanding subrogation claim for medical expenses. Id.
Dearlove’s insurer subsequently paid Campbell’s insurer $20,000 to
satisfy the claim.3 Id. Dearlove thereafter made a second offer of
judgment for $5,000, which was conditioned upon Campbell
satisfying all accident-related liens and expenses except the $20,000
subrogation payment Dearlove already had paid. Id. Campbell did
not accept the second offer, and a jury, having been instructed to not
“make an economic award for those expenses that have already been
paid,” awarded Campbell $3,870 in damages. Id.
¶8 The Alaska Supreme Court held that when evaluating
the first offer of judgment for purposes of Rule 68, the trial court
should compare the offer to the offeree’s ultimate recovery—
calculated by adding the previously paid subrogation payment to
2This case examined the application of Alaska R. Civ. P. 68(b),
which is similar to Arizona’s Rule 68(g), and provides in pertinent
part that “[i]f the judgment finally rendered by the court is at least 5
percent less favorable to the offeree than the offer, . . . the offeree . . .
shall pay all costs as allowed under the Civil Rules and shall pay
reasonable actual attorney’s fees incurred by the offeror from the
date the offer was made.”
3The same company insured both parties. Dearlove, 301 P.3d
at 1232.
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CUELLAR V. VETTOREL
Opinion of the Court
the amount the offeree recovered at trial.4 Id. at 1235. Cuellar urges
that Dearlove “stand[s] for the logical proposition that a Rule 68 offer
that contains conditions or requirements that change the real value
of the offer must be considered in light of what the offer was
actually worth at the time it was made.” For the following reasons,
we disagree.
¶9 We first question whether Dearlove stands for the
principle proposed by Cuellar. That case involves a voluntary
payment to Campbell’s insurer by Dearlove’s insurer after Campbell
filed a complaint specifically seeking reimbursement for her
insurer’s subrogated claim for medical expenses—a circumstance
not present here.5 Dearlove, 301 P.3d at 1232. Given that the amount
of the subrogated claim had been established and paid prior to the
second offer of judgment, the second offer excepted the $20,000
payment from its requirement that Campbell would be “responsible
for satisfying any and all accident-related liens and expenses.” Id.
The Dearlove court concluded the $20,000 payment had to be added
to the offer when making a Rule 68 comparison to prevent a party
from “‘creat[ing] a loophole allowing parties to either escape or
create the punitive measures of an offer of judgment by simply
making a gratuitous payment prior to the entry of a final
judgment.’” Id. at 1235, quoting Progressive Corp. v. Peter ex rel. Peter,
195 P.3d 1083, 1091 (Alaska 2008). But the court did not, as Cuellar
suggests, evaluate “what the offer was actually worth at the time it
was made” by adjusting for other “accident-related liens and
expenses,” as Dearlove’s offer had required. Id. at 1232.
4As to Dearlove’s second offer of judgment, the Alaska
Supreme Court concluded that the $20,000 subrogation payment
properly was excluded from Campbell’s total recovery. Id. at 1235.
That amount had been removed from Campbell’s amount of
damages by the time of the second offer, and she could not have
expected to recover it at trial. Id. at 1235-36.
5Nor is it likely to be present in any Arizona case because of
our anti-subrogation doctrine—“a common law doctrine that bars
the subrogation or assignment of personal injury claims.” Estate of
Ethridge v. Recovery Mgmt. Sys., Inc., 235 Ariz. 30, ¶ 4, 326 P.3d 297,
299 (App. 2014).
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CUELLAR V. VETTOREL
Opinion of the Court
¶10 Even if Dearlove could be read to require the trial court,
when applying Rule 68, to evaluate the “real value” of an offer “at
the time it was made,” the plain language of Arizona’s rule does not
permit Cuellar’s approach. Rather, Rule 68 requires a court to
compare the offer, comprised of a “specifically stated sum” that
includes “all damages, taxable court costs, interest, and attorneys’
fees, if any, sought in the case” to the judgment finally obtained.
Ariz. R. Civ. P. 68(b) and (g). To determine if the judgment finally
obtained is more favorable than the offer, the court may consider
only those taxable costs and attorney fees incurred as of the date the
offer was made. Ariz. R. Civ. P. 68(g); see also Vega, 199 Ariz. 504,
¶ 12, 19 P.3d at 649 (had our supreme court intended taxable costs to
be excluded from comparison of judgments, presumably it would
have said so). Nor is there a provision in the rule for subtracting
medical liens from either the offer or the judgment before the two
are compared.
¶11 Next, even were we to conclude that medical liens
could be removed from the offer of judgment to determine its true
value, Cuellar’s proposal does not lend itself to an “apples to
apples” comparison. Rather, his suggested calculation would
require the trial court to compare the offer of judgment, less costs
and the medical lien, to the judgment following trial, less costs and
fees, without consideration of the medical lien. Although Cuellar is
correct in stating that AHCCCS,6 his medical provider, has a “lien by
operation of law” pursuant to A.R.S. § 36-2915, and that it has
asserted such a lien, Cuellar has not addressed how his medical liens
would be satisfied following trial—liens which he asserts were much
larger than at the time of the offer of judgment.7
6 Arizona
Health Care Cost Containment System is a state
agency that administers health care services to Arizona’s eligible
indigent population pursuant to A.R.S. §§ 36-2901 through
36-2930.01.
7As Vettorel correctly points out, Cuellar was responsible for
his medical bills both at the time of the offer and following trial; had
he accepted the offer of judgment, he would have had $10,000 with
which to do so; following trial, he had the lesser sum of $5,310.90.
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CUELLAR V. VETTOREL
Opinion of the Court
¶12 Moreover, even were it possible to account for a lien
obligation in determining the net amount of an offer of judgment, as
Cuellar proposes, it would not be possible to account for liens in a
final judgment where, as here, Cuellar did not seek reimbursement
for liens in his complaint, making an “apples to apples” comparison
impossible under these circumstances. A “judgment finally
obtained” means “the sum ultimately obtained in a particular case,”
Hall v. Read Dev., Inc., 229 Ariz. 277, ¶ 14, 274 P.3d 1211, 1215 (App.
2012), and while it may include costs, interest, or attorney fees, it
does not encompass any obligations a party may owe that were not
litigated in the action. See Ariz. R. Civ. P. 58(a) and (g); A.R.S. § 44-
1201(B); see also Gerow v. Covill, 192 Ariz. 9, ¶ 15, 960 P.2d 55, 59
(App. 1998) (suggesting judgment contingent on satisfaction of lien
would be invalid, as conditional judgments generally void).
¶13 Additionally, “‘[t]he word ‘judgment’ is commonly
understood to mean the act of a court which fixes clearly the rights
and liabilities of the respective parties to litigation and determines
the controversy at hand.’” Berry v. 352 E. Virginia, L.L.C., 228 Ariz. 9,
¶ 28, 261 P.3d 784, 789 (App. 2011), quoting Wolf Corp. v. Louis, 11
Ariz. App. 352, 355, 464 P.2d 672, 675 (1970). Judgments do not
encompass or direct any rights or obligations pertaining to third-
party entities, such as medical lien holders, that are not parties to the
action. See State ex rel. Thomas v. Grant, 222 Ariz. 197, ¶ 12, 213 P.3d
346, 350 (App. 2009) (with few exceptions, person not party to an
action not bound by judgment in that action), citing Restatement
(Second) of Judgments § 62 cmt. a (1982).
¶14 Finally, we see nothing wrong with Vettorel’s attempt
to protect herself from any future liability for the liens. See Hall, 229
Ariz. 277, ¶ 18, 274 P.3d at 1216 (offer to settle usually represents
offeror’s willingness to pay specific amount in exchange for
termination of further liability). As Vettorel points out, had Cuellar
failed to pay his medical liens, AHCCCS potentially could pursue an
action against her to satisfy the lien obligation. See, e.g.,
A.R.S. §§ 36-2916 and 33-934. This result would be directly contrary
to the purpose of Rule 68—to promote settlement and end litigation.
Levy, 215 Ariz. 443, ¶ 12, 160 P.3d at 1203.
¶15 Such purpose is not met by encouraging or requiring
collateral litigation to determine liability for lien obligations
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CUELLAR V. VETTOREL
Opinion of the Court
following entry of judgment. See Warner, 218 Ariz. 121, ¶ 57, 180
P.3d at 1003. Nor is it advanced by requiring evidence of the
amount of liens asserted at the time of an offer of judgment as
opposed to the obligation which may exist at the time a final
judgment is entered. As Cuellar admits, these amounts can vary,
making an “apples to apples” comparison inherently difficult and
detracting from Rule 68(b)’s specificity requirement. See also Drozda
v. McComas, 181 Ariz. 82, 86-87, 887 P.2d 612, 616-17 (App. 1994)
(litigant considering offer of judgment engages in risk-benefit
calculation based on knowledge at time of offer).
¶16 In considering whether Rule 68 sanctions were
warranted, the trial court correctly determined that the jury’s verdict
did not exceed Vettorel’s offer of judgment. It therefore did not err
in awarding Vettorel sanctions pursuant to Rule 68(g).
Disposition
¶17 For the foregoing reasons, we affirm the trial court’s
judgment.
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