AZAPP Blog

Midtown Med. Group, Inc. v. State Farm Mut. Auto. Ins. Co. (12/23/2008):  Arizona Court of Appeals Division One Holds That an Outpatient Treatment Center, as Described in A.R.S. § 36-405(B)(1) and A.A.C. R9-10-101(39), May Be Owned by Persons Who Are Not Licensed Physicians or Chiropractors.     

Plaintiff Midtown is incorporated as an Arizona general corporation and is solely owned by an individual who is not licensed to practice medicine or chiropractic.  All of Midtown’s medical and chiropractic services are provided by licensed physicians and chiropractors.  A number of insurance companies, including Defendant State Farm, refused to reimburse patients treated at Midtown, claiming that it was not legally licensed.  Midtown, however, is licensed as an “outpatient treatment center” (“OTC”) by the Arizona Department of Health Services (“ADHS”).  Midtown field a declaratory action, seeking an order stating that it is legally providing medical and chiropractic services in Arizona.  Both parties moved for summary judgment.  The trial court granted Midtown’s motion and State Farm appealed. 

The Arizona Appeals Court affirmed.  The Court first described in detail Arizona’s statutory licensing scheme for OTCs.  ADHS has the authority to license OTCs under A.R.S. § 36-405.  Using that authority, ADHS promulgated A.A.C. R9-10-102(A)(16), which states that a “person,” including a corporation, may apply for an OTC license.  Thus, the Court concluded that under the plain language of the rule, a corporation can be licensed as an OTC.  Moreover, it explained that no other statutes or rules support a requirement that the owner of an OTC be a licensed physician or chiropractic; indeed the Court noted that the statutes demonstrate the contrary.

The Court rejected State Farm’s argument that OTCs can only be owned by professional corporations, not general corporations, because the latter cannot practice a profession.  Citing numerous statutes, the Court explained that State Farm’s foundational premise was flawed, because neither professional nor general corporations ever practice professions; only licensed natural persons do.  The Court also rejected State Farm’s contention that a general corporation that owns an OTC must itself be 100% be owned by a licensed professional, noting that neither A.R.S. § 10-2213(C), the provision cited by State Farm, nor Title 36 contain such a requirement.  The Court also noted that nothing in Arizona’s licensing statutes or case law prevents physicians and chiropractors from being employed by a lay person or general corporation.  Finally, the Court rejected State Farm’s argument that a general corporation cannot divide its business into two departments: business and the practice of medicine.

After discussing the statutory framework allowing a general corporation owned by an unlicensed individual to own an OTC, the Court discussed the application of the “corporate practice of medicine doctrine” as set forth in Funk Jewelry Co. v. State ex rel. La Prade, 46 Ariz. 348, 50 P.2d 945 (1935), and State ex rel. Board of Optometry v. Sears, Roebuck & Co., 102 Ariz. 175, 427 P.2d 126 (1967).  That doctrine provides that a corporation may not practice medicine because it cannot be licensed to do so.  The Court held that the doctrine, and the cases supporting it, did not apply to this case because this case arises from a completely different statutory framework through which ADHS did in fact license Midtown. 

The Court awarded Midtown costs on appeal, but denied its request for attorneys’ fees below and on appeal.

Judge Barker authored the opinion; Presiding Judge Brown and Judge McVey concurred.

Britt v. Steffen (12/26/2008): Arizona Court of Appeals, Division One, Holds that Trial Court May Award Attorneys’ Fees Under A.R.S. § 12-341.01(A) to Defendants in Contract Action That Is Dismissed Without Prejudice for Lack of Prosecution

Plaintiffs sued Defendants for breach of contract and negligent misrepresentation.  In their Answer, Defendants requested an award of attorneys’ fees under A.R.S. § 12-341.01, which permits an award of attorneys’ fees to the successful party in a contract action.  The Superior Court dismissed the lawsuit without prejudice for lack of prosecution.  Defendants filed a timely application for an award of attorneys’ fees combined with a motion for Rule 11 sanctions against Plaintiff’s counsel.  Plaintiffs did not timely oppose the motions, but instead filed an untimely motion to strike, asserting that the court lacked jurisdiction to consider the motions.  The court denied the motion to strike and awarded Defendants their attorneys’ fees by a judgment against both Plaintiffs and Plaintiffs’ counsel.

The Arizona Court of Appeals upheld the judgment.  A defendant to an action dismissed without prejudice is considered a “successful party” for purposes of A.R.S. § 12-341.01(A) even though the dismissal does not operate as an adjudication upon the merits.  The Court of Appeals noted that recent changes to the Arizona Rules of Civil Procedure make clear that a dismissal of the case does not divest the trial court of jurisdiction to consider a timely filed, post-judgment application for attorneys’ fees, which makes prior cases on the issue inapplicable.  See Rules 54(b), 54(g), 58(g).  Finally, the trial court did not err by also holding the Plaintiffs’ attorney jointly and severally liable for the attorneys’ fees as a sanction under Rule 11.  Because the motion for Rule 11 sanctions was promptly filed following dismissal of the complaint, the trial court did not abuse its discretion in finding the motion timely filed and awarding sanctions. 

The Court of Appeals therefore affirmed the judgment and awarded Defendants’ reasonable attorneys’ fees incurred in connection with the appeal.

Judge Hall authored the opinion; Judges Ehrlich and Irvine concurred.

Zilles v. American Legion (12/23/2008): Arizona Court of Appeals Division One Holds that a Lapsed Gift of Residuary Trust Assets Passes to the Other Residual Beneficiaries Identified in the Trust, Not to the Trustor’s Heirs According to the Law of Intestacy.     

Frederick and Annabel Zilles created a revocable living trust, which upon their death, was to distribute their personal effects according to a self-prepared list of beneficiaries (which was never found) and their residual assets to three charities as follows: (1) the art collection and ninety-percent of any remaining assets to a to-be-named charity; and (2) the remaining ten percent to two named charities, five percent each.  The first charity was never named and, indeed, Annabel Zilles sold the entire art collection before she died.  Therefore, the first residual distribution was rendered impossible.  In light of this lapsed gift, the heirs of the Zilles claimed that the residual trust assets should be distributed to them, while the two named charities claimed that they should receive everything.  The trial court sided with the heirs, concluding that “[i]t is . . . probably more in accord with the trustors[’] intent that this failed devise be distributed to surviving heirs than to increase a minimal charitable devise [to the two named charities] by nine hundred percent.”  The charities appealed.     

The Arizona Appeals Court reversed.  After concluding that the language of the trust itself did not evidence an intent to distribute the lapsed gift to the heirs, the Court turned to the question “whether Arizona law independently requires the failed bequest to be distributed to the Charities as the remaining residuary beneficiaries or to the Trustors’ heirs under the laws of intestacy.”  The Court relied heavily on In re Estate of Jackson, 106 Ariz. 82, 471 P.2d 278 (1970), which found that “it is probably more in accord with the testator’s intent that a lapsed residuary bequest remain in the residue and pass to the surviving residuary legatees [of the will],” not through the laws of intestacy.  This conclusion was subsequently codified at A.R.S. § 14-2604.  Although both Jackson and section 14-2604 apply to wills, not to trusts, the Court found these authorities persuasive because the “Trust is operating like a will in that it is disposing of property on the death of the surviving Trustor.”  See also Restatement (Third) of Trusts § 25 (2003) (suggesting that trusts may be subject to the rules applicable to testamentary dispositions).  The Court therefore held that the two charities, “as residuary beneficiaries of the Trust, are entitled to split the remaining ninety percent of the Trust estate according to the relative (here, equal) proportions of their express interests in the residuary.”                                 

Judge Swann authored the opinion; Judges Portley and Thompson concurred. 

Turken v. Gordon (12/23/08):  Arizona Court of Appeals Division One Holds That City Funding of a Private Parking Structure Violates Constitution’s Gift Clause.

The City of Phoenix agreed to provide funding for a parking space development for a private shopping center in the planned CityNorth development.  The city believed aiding the construction of a private shopping center would serve public purposes by adding free public parking, stimulating the economy, and generating substantial additional sales tax revenues.  Meyer Turkin and several other taxpayers and business owners challenged the expenditure on the ground that it violated the Arizona Constitution’s “gift clause” along with several other provisions.  The superior court granted summary judgment in favor of the City. 

The Arizona Appeals Court reversed, holding that the City’s expenditure violated the “gift clause.”  The Court expanded upon its previous interpretation of the “gift clause” and held that in deciding whether the clause was violated, the Court must examine not only (1) whether the expenditure is for a valid public purpose; and (2) whether there is proper consideration; but also (3) the extent to which private interests are implicated. 

The Court held that providing free public parking directly promoted the private interests of the shopping center, because the “public” that would use the parking would be the private customers of the shopping center. The Court held that the City’s other stated “public purposes” of stimulating the economy and generating sales tax revenue were too indirect to satisfy the gift clause. 

Judge Irvine authored the opinion with Presiding Judge Winthrop and Judge Hall concurring.

Havasupai Tribe v. Ariz. Board of Regents.  (11/28/2008):  Arizona Court of Appeals Division One Holds that Notice of Claim Letter Need Not Include All Facts Known to Claimant About Alleged Wrongdoing and Need Not Contain Separate Settlement Sums for Each Defendant.

One group of Plaintiffs is comprised of members of the Havasupai Tribe and the Tribe itself (together the “Tribe”), which makes its home at the bottom of the Grand Canyon.  Years ago, researchers from ASU asked for and received permission to draw the blood of tribal members to investigate possible genetic causes for the unusually high rate of diabetes among the tribe’s members.  The research eventually ruled out genetic causes for the epidemic.  The blood samples, however, were preserved.  Later, unbeknownst to the Tribe, its members, and the study’s research professor, a graduate student used the blood samples for unrelated, experiments including tests regarding schizophrenia and possible inbreeding.  When the original study’s professor learned of this, he brought it to the attention of Defendant Arizona Board of Regents (“ABOR”).  After the graduate student presented his dissertation based on work done on the blood samples, the professor informed the Havasupai Tribal Council of his suspicions regarding unauthorized use of the sample.

The Tribe served notices of claim and eventually brought suit.  The Superior Court granted the State’s motion for summary judgment holding that even if the notices were timely, they failed to sufficiently set forth “the facts supporting” the amount sought in the claims, as required by Arizona’s notice of claim statute, A.R.S. § 12-821.01.

A second group of Plaintiffs are 29 other members of the Tribe (the “Talousi Plaintiffs”) who served separate notices of claim and filed a separate suit, relating to the same conduct, which was consolidated with the first suit.  The Talousi Plaintiffs, in addition to naming ABOR, named several individual defendants.  Here again, the Superior Court granted summary judgment.  It granted summary judgment for the individual defendants because they were not served with notices of claim.  It granted summary judgment as to ABOR on the same grounds on which judgment was entered against the Tribe.  Plaintiffs in both cases appealed from these consolidated cases, which were also consolidated on appeal.

The Arizona Appeals Court reversed.   First as to whether the Tribe’s notices of claim contained sufficient facts the Court of Appeals looked to two letters that had been served and found that taken together they provided “the facts supporting” the settlement demand.   The Court rejected the argument that the notice of claim must include all facts known by the claimant about the alleged wrong and all facts known to the claimant about the damages allegedly sustained.  The Court further rejected the contention that the notice of claim must include facts “sufficient to support” the demand.  The Court cited several similar fact pattern cases from other jurisdictions in which a general description of the unauthorized testing of blood samples was held to adequately notify the government defendants of the nature of the claims.  The Court further concluded that “dignitary tort” claims of the kind raised here need not be accompanied, in the notice of claim, by specific allegations of physical harm.

The Court then addressed whether the notices of claim were properly and timely served.  As to timeliness of the Tribe’s notices, the Court held that, when viewed in the light most favorable to the Tribe, the evidence shows a question of fact as to when the Tribe realized it had been damaged; thus summary judgment based on untimeliness was improper.  Similarly, the Court held that, because the evidence, favorably viewed, showed that the notices were served on the ASU General Counsel and the Assistant Attorney General involved with the matter, the Superior Court erred in granting summary judgment based on improper service.

The Court then addressed whether the notices of claim for all plaintiffs were defective for failing to state separate settlement sums for each defendant.  The court refused to adopt the defendants’ argument that the same rationale that requires apportioned offers under Rule 68 requires such offers in a notice of claim.

The Court of Appeals thus reversed the grant of summary judgment and remanded the case to the Superior Court.  Judge Johnsen authored the opinion in which Chief Judge Timmer concurred.

Judge Thompson dissented.  He disagreed principally with the majority’s reliance on  Backus v. State of Arizona, 534 Ariz. Adv. Rep. 26, 29, ¶ 28, --- Ariz. ----, ----, --- P.3d ----, ----, 2008 WL 2764601 (App.2008).  He explained his belief that Backus wrongly decided that a notice of claim is sufficient if it contains “any facts” supporting the claim.  He expressed his belief that the notices in this case did not support the settlements demanded and that he would therefore have affirmed.

FIA Card Services, N.A. v. Levy ( 12/12/2008):  Arizona Court of Appeals Division Two Holds that Arizona Courts May Vacate an Arbitration Award Because of Undue Means Only When There Exists Proof that an Arbitrating Party Engaged in Intentional Misconduct.

Mr. Levy opened a credit card account with FIA.  The credit card agreement contained an arbitration clause.  Several years later, a dispute arose between Levy and FIA over the amount owed on the account.  FIA filed an arbitration claim with the National Arbitration Forum (NAF), and served Levy with two notices of the claim.  Levy failed timely to respond to either of them.  As a result, the arbitrator issued an award in FIA’s favor.  Thereafter, FIA filed in the Superior Court an Application to Confirm Arbitration Award, which after holding a hearing, the Superior Court granted.  This appeal followed.

On appeal, Levey argued that the Superior Court erred in confirming the arbitration award because FIA had procured the award using undue means.  The Arizona Appeals Court explained that “undue means” is included as one of the proscribed, statutory grounds for refusing to confirm an arbitration award, but, adopting the federal courts’ interpretation of the term, held that “undue means” requires proof of intentional misconduct.  Because NAF adhered to the NAF Code in issuing the award and partiality by NAF, which Levy had no actual evidence of, is not a listed ground for vacating an arbitration award, the trial court correctly confirmed FIA’s award.

Enterprise Leasing Company of Phoenix v. Arizona Department of Revenue (12/16/08): Division One Holds That 2000 Amendment to A.R.S. § 43-1170 Retroactively Excluding Motor Vehicle Equipment from Tax Credit for Pollution Control Devices Did Not Violate Due Process or Separation of Powers Clauses.

Beginning in 1995, A.R.S. § 43-1170 provided a tax credit for purchases of pollution control devices.  In 2000 some entities submitted claims for purchases of pollution control devices attached to motor vehicles, leading the Legislature to amend the provision to retroactively exclude credits for such equipment.  That same year, Enterprise Leasing Company (“ Enterprise”) filed income tax returns claiming credits for pollution control devices attached to motor vehicles for the years 1996, 1997, and 1998.  Based on the Legislature’s retroactive exclusion, the Department of Revenue denied the claims.  On appeal, the Arizona Tax Court upheld the denial, holding that the 2000 amendment’s retroactivity was constitutional, or, alternatively, that the original statute’s language excluded the credit.  This appeal followed.

Judge Thompson, writing for a unanimous court, affirmed the first theory, holding that the retroactivity of the 2000 amendment did not violate due process or separation of powers.  First, the Court explained that the 2000 amendment was passed to clarify that the Legislature never intended motor vehicle equipment to be eligible for a credit under A.R.S. § 43-1170.  Because the amendment was intended to be a curative, retroactive clarification, it did not violate due process.  Second, the Court further held that Enterprise never acquired a vested property right entitled to due process because a taxpayer’s claim does not vest until the Department of Revenue accepts or verifies the claim.  Finally, the Court reasoned that the amendment nevertheless satisfied due process because the prevention of unanticipated revenue loss is a rational basis for legislation.  In so holding, the Court rejected the suggestion in Justice O’Connor’s concurrence in United States v. Carlton, 512 U.S. 26, 38 (1994) (O’Connor, J., concurring), that retroactivity provisions extending back longer than one year are problematic under due process.  Because the Legislature acted shortly after the first claims for motor vehicle equipment credits were filed, and because Enterprise could not demonstrate detrimental reliance, Justice O’Connor’s concerns were not implicated.

The Court also rejected Enterprise’s argument that the retroactive amendment violated the Arizona Constitution’s separation of powers clause.  The Court distinguished between cases allowing a retroactive amendment to a civil statute and cases holding that the Legislature may not use a clarifying amendment to retroactively overrule a court’s interpretation of a criminal statute.  There was no separation of powers problem in this context because the amendment here did not overrule a court decision, and because civil statutes do not implicate the same ex post facto concerns as do criminal statutes.

Judge Thompson authored the opinion; Judges Winthrop and Irvine concurred.

Messina v. Midway Chevrolet Company (12/18/2008): Arizona Court of Appeals Division One Holds That a Purchaser of a Vehicle Who Loses Financing for the Vehicle is Still Considered a “Customer” Under the Exclusion Provision of a Car Dealership’s Garage Coverage Insurance Policy. 

On January 30, 2002, James Bookhammer entered into a sales contract with Midway Chevrolet (“Midway”) for a new Cavalier.  Bookhammer paid a down payment, secured financing, and took possession of the vehicle.  His check was later returned for insufficient funds and the financing bank declined to finance the vehicle.  Nine days later, Bookhammer crashed the vehicle head-on into Messina.  Within an hour of the collision, Bookhammer died.  Messina sustained injuries but survived.  Mesina sued Bookhammer’s estate and Midway, seeking a declaration that Bookhammer was an insured under Midway’s insurance policy and thus, Midway was liable for the full deductible under that policy.  The relevant portion of the insurance policy provides that an insured includes any person using one of Midway’s covered autos with Midway’s permission except Midways’ customers.  The policy does, however, cover customers who are uninsured or who have insurance but do not have the minimum insurance coverage required by law.  

 Both Midway and Messina filed motions for summary judgment on whether the insurance policy applied to Bookhammer.  The trial court concluded that Bookhammer was Midway’s customer and therefore was not an insured under the policy.  The trial court denied Messina’s motion for summary judgment and granted Midway’s motion.  Messina timely appealed.             

The Arizona Appeals Court affirmed, concluding that Bookhammer was a customer of Midway’s.  The Court rejected Messina’s argument that Bookhammer’s failure to pay for the vehicle meant he was not “customer” under the policy.  The Court reasoned that interpreting the term “customer” to require a completed purchase would render the customer exception of the policy meaningless.  The Court explained that Bookhammer met all of the “indicia” of being a customer:  he went to the dealership to buy a specific vehicle, he signed documents to execute the purchase of that vehicle, he completed paperwork for the financing of that vehicle, and he left with the vehicle.  The Court therefore further agreed with the trial court that an expert declaration was not necessary to determine the definition of customer. 

Judge Downie authored the opinion, Judges Brown and Barker concurred.

Sklar v. Town of Fountain Hills (11/25/2008):  Arizona Court of Appeals Division One Holds That Referendum Petitions Must Strictly Comply with A.R.S. § 19-101(A), Which Requires Them to Identify the Principle Provisions of the Challenged Government Acts.     

In 2007, Fountain Hills (the “Town”) amended its General Plan and rezoned a 1276-acre parcel of land.  Save Our Small Town (“SOST”) subsequently circulated two referendum petitions on the measures.  Those petitions were certified and both measures were put on hold pending a vote of the electors.  Sherry Sklar filed a complaint seeking to invalidate the referenda and enjoin the Town from placing them on the ballot, and SOST intervened as a defendant.  Both parties moved for summary judgment.  The trial court granted Sklar’s motion.  SOST filed an expedited appeal. 

The Arizona Appeals Court affirmed.  The Court first set forth the general principles governing referendum petitions, noting that although citizens have the constitutional right to referendum, referendum petitions must “comply strictly with applicable constitutional and statutory provisions.”  Sherrill v. City of Peoria, 189 Ariz. 537, 540, 943 P.2d 1215,1218 (1991).  Strict compliance is proper because referenda may hold up the effective date of measures that may in fact represent the wishes of the majority.  Although strict compliance is required, A.R.S. § 19-111 requires that specific requirements for referendum petitions be broadly construed.

Applying these principles, the Court held that SOST’s referendum petitions were defective under A.R.S. § 19-101(A), which requires petitions to include a 100-word “description of . . . the principal provisions of the measure sought to be referred.”  Not only did the petitions fail to include the principal provisions of the measures, they failed to provide any description of the provisions.  The Court rejected SOST’s argument that the petitions were proper because they attached copies of the subject litigation, explaining that the attachment requirement is a separate and distinct requirement than the description requirement, and is found in a different statute – A.R.S. § 19-121(E).  The Court also rejected SOST’s request that it broadly construe § 19-101(A) to approve the language utilized in the petitions.  It explained that adoption of SOST’s proposed standard would not further the purpose of § 19-101(A), which is to ensure full disclosure of the measure that is to be referred, because SOST’s descriptions merely described the purported anticipated effect of the provisions and were therefore “uninformative” and “unhelpful.”  Moreover, the Court reasoned that the descriptions were improper because they were subjective opinions, which should not be included in referendum petitions according to Kromko v. Superior Court, 168 Ariz. 51, 59, 811 P.2d 12, 20 (1991).

The Court awarded Sklar costs on appeal pursuant to A.R.S. § 12-341, but denied her request for attorneys’ fees and costs under ARCAP 25 or A.R.S. § 12-349, finding that SOST’s appeal was neither frivolous nor unjustified.

Presiding Judge Winthrop authored the opinion; Chief Judge Timmer and Judge Hall concurred.

A Tumbling-T Ranches v. Flood Control Dist. (11/28/2008): Arizona Court of Appeals Division One Holds that a Damron/Morris Agreement Can Be Enforceable even if the Agreement Arises out of an Indemnity and Hold-Harmless Provision Within a Property Easement Agreement, Rather Than an Insurance Contract, But the Ultimate Liability of the Indemnitor Will Depend on the Language and Intent of the Underlying Indemnity Provision.     

Owners of the Gillespie Dam gave the Maricopa County Flood Control District an easement to establish a channel in portions of the Gila River upstream from the Gillespie Dam.  The easement contained an indemnity agreement whereby the District agreed to indemnify and hold the dam owners harmless for certain liabilities.  When the dam failed, various farmers who owned land adjacent to the Gila River sued the dam owners and the District claiming that the District’s upstream project had partially caused the farmers’ damages.  The dam owners twice tendered their defense to the District, but the District declined.  After a jury found liability, but before the damages trial, the dam owners entered into a settlement agreement with the farmers.  The agreement provided that a stipulated judgment would be entered in favor of the farmers and against the dam owners in the amount of fourteen million dollars.  The stipulated judgment further provided that the dam owners would pay three-plus million dollars in return for a covenant not to execute against the dam owners for the remainder of the judgment.  The trial court held a reasonableness hearing on the amount of the settlement agreement and concluded that the amount was reasonable and the indemnity claim against the District was not limited to the three-plus million dollars that the dam owners had actually paid.  The District appealed.     

The Arizona Appeals Court affirmed with a modification.  It explained that a Damron/Morris agreement is based on general principles of indemnity law, not on aspects peculiar to the insurer-insured relationship.  See United Servs. Auto. Ass’n v. Morris, 154 Ariz. 113, 120, 741 P.2d 246, 253 (1987); Restatement (Second) of Judgments § 57(1) (1982).  Therefore, it agreed with the farmers and dam owners that such an agreement may arise out of a property easement, not just an insurance contract.  Furthermore, because the District had refused the dam owners undisputed attempts to tender the defense, and because significant evidence indicated that the dam owners defended and settled the action with “due diligence and reasonable prudence,” the Court upheld the trial court’s conclusion that the settlement amount was reasonable.  The District, however, would be allowed in due course to litigate whether the language of the indemnity provision includes liability for amounts that the dam owners are not obligated to pay in light of the covenant not to execute.  That question of fact must be decided in the first instance in the trial court.                         

Judge Barker authored the opinion; Judge Brown and Maricopa County Superior Court Judge Foster, sitting by designation, concurred. 

Buccellato v. Morgan (12/4/08):  Arizona Court of Appeals Division One Affirms That Adult Service Providers Are Not Entitled to a Jury Trial for Violating Provisions of the Scottsdale City Code Governing Adult Service Providers.

Appellants work as dancers and a manager at a Scottsdale club featuring live exotic dance entertainment.  They brought a special action in superior court, seeking a jury trial on charges that they violated the Scottsdale City Code.  The superior court accepted jurisdiction, but denied relief. 

The Arizona Court of Appeals rejected the claim by various dancers that they were entitled to a jury trial under Article 2, Section 23 of the Arizona Constitution because the offenses did not have a common law antecedent for which the right to jury trial was guaranteed at the time of statehood.  The Court also rejected the club manager’s claim that he was entitled to a jury trial under Article 2, Section 24 because the charges against him were “serious offenses.”  The Court considered the additional penalties arising from violations of the code and found that they were neither severe nor uniformly applied to all persons convicted of the charge.  The Court further rejected the argument that penalties attached to separate misdemeanor charges alleged in a single complaint should be considered together to determine whether a defendant is entitled to a jury trial.  The Court affirmed the superior court’s denial of a jury trial and remanded the matter to city court for a bench trial.

Judge Thompson authored the opinion; Judges Winthrop and Weisberg concurred.

Ratliff v. Hardison (11/26/08): Arizona Court of Appeals Division Two Holds That Retraction of Anticipatory Repudiation of Contract Must Be Clear and Unequivocal to Be Effective.

Ratliff contracted to purchase a tract of land from Hardison.  Prior to the close of escrow, Ratliff informed Hardison that he would not fulfill his obligations under the contract, but was possibly interested in purchasing the land under different terms.   Hardison sued for breach.  The trial court entered summary judgment against Ratliff, finding there was no genuine issue of material fact as to whether he anticipatorily repudiated the contract, and that no reasonable person could conclude he had subsequently retracted his repudiation. 

The Arizona Court of Appeals affirmed, explaining that a party anticipatorily repudiates a contract when he or she provides a “positive and unequivocal manifestation” that the party will not perform when his or her duty to perform arises.  Adopting reasoning from other jurisdictions and authorities, the Court held that a retraction of a repudiation must be clear and unequivocal to be effective.  The Court reasoned that a vague retraction that does not bind the repudiator to the original terms of the contract would deny finality to the injured party, because he or she could then be bound by yet unknown contract terms.  Further, injured parties could mistakenly believe that anticipatory repudiators who express remorse for their prospective breaches are actually retracting their repudiations.  

In this case, Ratliff had not clearly and unequivocally retracted his repudiation, but had merely expressed a continuing interest in purchasing the land under terms different from the original contract.

Judge Espinosa authored the opinion, with Presiding Judge Eckerstrom and Judge Vasquez concurring.