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Cunningham v. Goettl Air Conditioning Inc.5/19/1999
Appeal from the Superior Court of Maricopa County The Honorable Elizabeth A. Stover, Judge AFFIRMED IN PART; REVERSED IN PART
Opinion of the Court of Appeals, Division One 254 Ariz. Adv. Rep. 16, Ariz., P.2d (App. 1997) VACATED AND REMANDED
Goettl Air Conditioning (Goettl) and Washington Street Investments (WSI) entered a lease agreement that included a provision requiring Goettl, the lessee, to indemnify and hold harmless WSI, the lessor, against specified claims and expenses. We accepted review to determine whether and, if so, to what extent, Goettl is bound by a stipulated judgment that WSI entered to settle a tort action in which the plaintiff, alleging he suffered injuries on the leased premises, named WSI as a defendant.
I.
Mark Cunningham, an employee of Goettl, fell through a skylight on the roof of a building Goettl leased from WSI and suffered a severe back injury . Cunningham applied for and received workers' compensation benefits pursuant to Arizona Revised Statutes (A.R.S.) § 23-801 to § 23-1091, and therefore was precluded from suing Goettl for his injuries. See A.R.S. § 23-906.A. Cunningham and his wife (the Cunninghams) also filed a third party action against WSI (the tort action). See A.R.S. § 23-1023.A.
Relying on the indemnity clause in its lease agreement with Goettl, WSI tendered the defense of the tort action to Goettl. Goettl refused to assume or participate in WSI's defense, even after WSI informed Goettl of impending settlement negotiations with the Cunninghams. After two years of litigation and on the eve of trial, WSI and the Cunninghams agreed to settle the tort action.
The WSI-Cunningham settlement agreement involved a series of documents. The parties first executed a document entitled "Settlement Agreement and Release," which the Cunninghams signed on November 16, 1992, their attorney signed on November 20, 1992, and counsel for WSI signed on December 3, 1992. The terms of the release agreement specified that the Cunninghams agreed to "completely release and forever discharge" WSI from any claims arising from the acts or omissions alleged in the WSI-Cunningham lawsuit. In exchange, WSI assigned to the Cunninghams all its rights against Goettl under the indemnity clause of the WSI-Goettl lease agreement. The release agreement included a graduated payback provision. WSI agreed to pay the Cunninghams $90,000 upon execution of the agreement, which the Cunninghams would repay, in part or in full, if they obtained a judgment against Goettl in excess of $99,999.99. Under the graduated payback provision, WSI would recover the full $90,000 it paid the Cunninghams if the Cunninghams obtained a judgment against Goettl of $250,000 or more, and WSI would never owe the Cunninghams more than the $90,000 already paid.
On December 3, 1992, the parties' attorneys executed a second settlement document entitled "Agreement for Stipulation of Judgment/Covenant Not to Execute and Assignment." Under the terms of this agreement, WSI stipulated to judgment against it in the amount of $250,000. In exchange, the Cunninghams agreed not to execute the judgment against WSI's assets or to record the judgment in any state.
Also on December 3, 1992, WSI and the Cunninghams submitted to the trial court the two settlement documents, a stipulation for dismissal with prejudice, an order dismissing the action with prejudice, and a form of judgment in the amount of $250,000. The trial Judge signed the dismissal order on December 17, 1992, but did not sign the judgment until January 4, 1993. The clerk entered the judgment on January 4, 1993 and the dismissal order on January 6, 1993, in reverse order
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