Protective Life Insurance Company v. Mizioch et al

Filing 266

ORDER denying 223 Mr. Mizioch's Motion for Attorney Fees. Signed by Judge James A Teilborg on 3/12/12.(LSP)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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Protective Life Insurance Company, a)
)
Tennessee Corporation,
)
)
Plaintiff,
)
)
vs.
)
Peter Mizioch, an Arizona resident; The)
Estate of Phyllis A. Mizioch; Jimmy Ray)
Montoya, an Arizona resident; Mark)
Casey Montoya, an Arizona resident;)
Russell Lynn Montoya, an Arizona)
)
resident,
)
)
Defendants.
)
Peter Mizioch, an Arizona resident,
)
)
Cross-Claimant,
)
)
vs.
)
)
Jimmy Ray Montoya, an Arizona resident;)
Mark Casey Montoya, an Arizona)
resident; Russell Lynn Montoya, an)
Arizona resident,
)
)
Cross-Defendants.
)
)
Mark Casey Montoya, an Arizona)
resident; Russell Lynn Montoya, an)
Arizona resident,
)
)
Cross-Claimants,
)
)
vs.
)
)
Peter Mizioch, an Arizona resident,
)
)

No. 2:10-CV-01728-PHX-JAT (Lead)
No. 2:10-CV-02341-PHX-ROS (Cons)
ORDER

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)
)
AXA Equitable Life Insurance Company,)
a New York Stock Company,
)
)
Plaintiff,
)
)
vs.
)
)
Peter Mizioch, an Arizona resident; The)
Estate of Phyllis A. Mizioch; Jimmy Ray)
Montoya, an Arizona resident; Mark)
Casey Montoya, an Arizona resident;)
Russell Lynn Montoya, an Arizona)
resident,
)
)
Defendants.
)
)
Peter Mizioch, an Arizona resident,
)
)
Cross-Claimant,
)
)
vs.
)
)
Jimmy Ray Montoya, an Arizona resident;)
Mark Casey Montoya, an Arizona)
resident; Russell Lynn Montoya, an)
Arizona resident,
)
)
Cross-Defendants.
)
)
Cross-Defendant.

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Pending before the Court is Defendant and Cross-Claimant Peter Mizioch’s Motion

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for Attorneys’ Fees. (Doc. 223.) Mr. Mizioch seeks $126,057.29 in attorneys’ fees pursuant

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to A.R.S. §12-341.01(A).

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I.

BACKGROUND

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Peter Mizioch married Phyllis Mizioch for the first time in October of 1995. They

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divorced in July of 1997, but remarried in March of 2005. On December 28, 1999, Mr.

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Mizioch applied for a life insurance policy with Protective Life Insurance Company

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(“Protective Life”) for the life of Phyllis Mizioch.1 That same day, Protective Life issued

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Although the application for the Protective Life Policy indicated that Phyllis Mizioch
was Peter Mizioch’s wife, the two actually were not married in December of 1999.

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policy #PL0675396 (the “Protective Life Policy”) on the life of Phyllis Mizioch with a death

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benefit of $1,000,000. Mr. Mizioch is the primary beneficiary of the Protective Life Policy;

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Phyllis Mizioch’s Estate is the contingent beneficiary.

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On September 20, 2007, Mr. Mizioch applied for a life insurance policy with AXA

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Equitable Life Insurance Company (“AXA”) for the life of his wife Phyllis Mizioch. On

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December 1, 2007, AXA issued policy #J 107 024 229 (the “AXA Policy”)2 on the life of

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Mrs. Mizioch with a death benefit of $3,500,000. Mr. Mizioch is the primary beneficiary of

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the AXA Policy; Mrs. Mizioch’s Estate is the contingent beneficiary.

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Peter and Phyllis Mizioch were separated in the summer of 2010 and were

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contemplating filing for divorce. Peter, Phyllis, Peter’s daughter from another marriage,

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Marilyn Ortega, and Edward Maciag, Mr. Mizioch’s long-time business associate, all met

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at Phyllis’s North Central Phoenix home around 4:00 p.m. on July 6, 2010 to discuss the

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impending divorce and inventory property. The meeting lasted about thirty minutes. Peter

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and Phyllis Mizioch disagreed about various issues relating to the distribution of property.

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Phyllis Mizioch was murdered in the kitchen of her home some time later that

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evening. Dakota Guinn, a step-niece who was residing with Phyllis, discovered her body

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around 10:00 p.m. on July 6th when Ms. Guinn returned home. Phyllis had three gunshot

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wounds to her head, neck, and upper torso.

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On July 21, 2010, the Phoenix Police Department informed Protective Life that the

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Department considered Peter Mizioch a suspect in Phyllis’s homicide. Pursuant to A.R.S.

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§14-2803 (Arizona’s so-called “slayer statute”), a “person who feloniously and intentionally

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kills the decedent forfeits all benefits under this chapter with respect to the decedent’s

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estate,” and the felonious killing revokes any revocable “disposition or appointment of

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The Court refers to the Protective Life Policy and the AXA Policy collectively as the
“Policies.”

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property made by the decedent to the killer in a governing instrument . . .” A.R.S. §14-2803

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(A) &(B)(1)(a). Protective Life therefore would not process the claim submitted to it by

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Peter Mizioch on July 19, 2010.

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Both Protective Life and AXA filed interpleader complaints with the Court. Because

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competing claims to both Policies would prevail if Peter Mizioch were prohibited from

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recovering under the Policies pursuant to A.R.S. §14-2803B(1)(a), the insurance companies

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filed suit to have the Court resolve the slayer statute issues and determine the proper

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beneficiaries of the Policies. Protective Life and AXA named Peter Mizioch, the Estate of

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Phyllis A. Mizioch, and Jimmy, Mark, and Russell Montoya, Phyllis’s sons from a prior

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relationship, as Defendants in the interpleader actions. The Court consolidated the AXA

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interpleader action, CV10-02341-PHX-ROS, with the Protective Life interpleader action on

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March 9, 2011 (Docs. 110 & 111).

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In the Protective Life action, Peter Mizioch filed cross-claims against Protective Life

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and Jimmy, Mark, and Russell Montoya. Mr. Mizioch alleged that Protective Life breached

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the insurance contract, acted in bad faith, and breached the covenant of good faith and fair

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dealing. He voluntarily dismissed all cross-claims against Protective Life on December 13,

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2010 (Doc. 52). Mr. Mizioch alleged that Mark and Russell Montoya interfered with his

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contract with Protective Life, interfered with business expectancies, and aided and abetted

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tortious conduct.3 Mr. Mizioch also filed a counter-claim for declaratory relief against

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Protective Life and Jimmy, Mark, and Russell Montoya.

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Mark and Russell Montoya filed cross-claims against Mr. Mizioch in the Protective

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Life case for wrongful death and intentional infliction of emotional distress. In the AXA

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action, Peter Mizioch cross-claimed against Mark and Russell Montoya for interference with

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contract and interference with business expectancies and against Jimmy, Mark, and Russell

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Mr. Mizioch voluntarily dismissed the aiding and abetting cross-claim against Mark
and Russell Montoya on December 13, 2010 (Doc. 52).

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Montoya for declaratory relief.

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In his claims for declaratory relief against the Montoyas, Mr. Mizioch alleges that,

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having made all annual premiums on the Policies, he is the legal beneficiary of their

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proceeds. He argues that disqualification under the Arizona slayer statute is the only reason

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he would not be entitled to the Policies’ proceeds and: 1) the Montoyas failed to petition the

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Court to make findings under the slayer statute as required by A.R.S. §14-2803(F) and 2)

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there is insufficient evidence as a matter of law to disqualify Mr. Mizioch under the slayer

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statute.

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On August 1, 2011, the Court granted Mr. Mizioch’s Motion for Partial Summary

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Judgment (Doc. 82) as to his claims for Declaratory Relief. (Doc. 210.) Because the

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Montoyas did not properly respond to Mr. Mizioch’s Statement of Facts in Support of his

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Motion for Partial Summary Judgment, the Court deemed his Statement of Material Facts

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admitted for purposes of the Motion for Partial Summary Judgment. The Court therefore

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accepted Mr. Mizioch’s time line of events for the day of Phyllis’s murder, as well as his

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statement that he had nothing to do with her death. The Court consequently found that for

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the purposes of the Motion for Partial Summary Judgment on claims for Declaratory Relief,

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the Montoyas had not met their burden of demonstrating an issue of material fact existed

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regarding Mr. Mizioch’s responsibility for Phyllis’s death. The Court therefore granted

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partial summary judgment to Mr. Mizioch and vacated the Arizona slayer statute hearing.

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Mr. Mizioch now seeks an award of fees for the time spent on the Arizona slayer statute

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issues.

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II.

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Under Arizona law, “[i]n any contested action arising out of a contract, express or

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implied, the court may award the successful party reasonable attorney fees.” A.R.S. § 12-

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341.01(a). If the Court finds a party successful, then the Court must determine whether

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awarding fees to the successful party is appropriate. Finally, the Court must determine if the

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amount of fees sought is reasonable.

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STANDARD OF REVIEW

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The trial court has discretion when determining whether to award attorneys’ fees.

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Associated Indem. Corp. v. Warner, 694 P.2d 1181, 1183 (Ariz. 1985). The court in Warner

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provides six factors that courts should consider when determining whether it is appropriate

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to award attorneys’ fees. Id. at 1184. These factors include: (1) considering the merits of the

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unsuccessful party’s claim or defense; (2) considering whether the case could have been

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settled and whether the unsuccessful party’s efforts were superfluous in that effort; (3)

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considering whether assessing fees against the unsuccessful party would create extreme

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hardship; (4) considering whether the successful party obtained all the relief sought; (5)

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considering the novelty of the legal question presented and whether the claim or defense has

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previously been adjudicated; and (6) considering whether the award of attorneys’ fees would

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discourage other parties with valid claims or defenses from litigating legitimate contract

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issues because those parties would be afraid of incurring liability for a large amount of

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attorneys’ fees. Id.

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III.

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The Court granted partial summary judgment to Mr. Mizioch on his claims for

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declaratory relief that the Arizona slayer statute does not disqualify him from receiving the

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Policies’ proceeds. Finding no just reason for delay, the Court entered judgment on those

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claims. Mr. Mizioch now seeks an award of attorneys’ fees for the time his counsel spent

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on those claims.

ANALYSIS AND CONCLUSION

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Before reaching whether it is appropriate to award fees on Mr. Mizioch’s claims for

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declaratory relief, the Court must determine whether the claims for declaratory relief arise

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out of contract. A.R.S. §12-341.01(A) entitles successful parties to an award of attorneys’

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fees only if the case arises out of contract.

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Mr. Mizioch argues his claims for declaratory relief regarding the Arizona slayer

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statute arise out of contract because the claims concern the proper recipient of the Policies’

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proceeds and because the Montoyas would not have standing to protest Mr. Mizioch’s right

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to the proceeds unless they were contingent beneficiaries of the Policies. Mr. Mizioch argues

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his declaratory relief claims arise out of contract despite the statutory nature of those claims.

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If a contract is merely “somewhere within the factual background” of a case, an award

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of fees under A.R.S. §12-341.01(A) is not proper. In re: Larry’s Apartment L.L.C., 249 F.3d

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832, 836 (9th Cir. 2001). But if the contract at issue is central to the issues of the case, it can

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serve as basis for a fee award. Id. at 836-37.

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Determining whether an action arises out of contract can be difficult if questions of

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contract are mixed with other questions, such as statutory interpretation. A.H. v. Arizona

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Prop. and Cas. Ins. Guar. Fund, 950 P.2d 1147, 1150 (Ariz. 1997)(en banc). The Court’s

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analysis of whether an action is sufficiently contractual must focus on the substance of the

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action. Id. If the claim arises “from statutory rather than contractual obligations, the

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‘peripheral involvement of a contract does not require the application of §12-341.01(A).’”

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Id. (quoting O’Keefe v. Grenke, 825 P.2d 985, 997-98 (Ariz. Ct. App. 1992)).

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To justify fees under §12-341.01(A), claims that do not sound directly in contract

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must be so “‘intrinsically related’ to an asserted claim for breach or contract as to ‘not exist

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but for the breach of contract.’” Bldg. Innovation Indus., L.L.C. v. Onken, 473 F.Supp.2d

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978, 988 (D. Ariz. 2007)(quoting Sparks v. Republic Nat’l Life Ins. Co., 647 P.2d 1127,

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1141-42 (Ariz. 1982)). The mere existence of a contract somewhere in a transaction will not

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support the awarding of fees on a claim that does not itself allege the breach or invalidity of

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a contract. Id. (quoting A.H., 950 P.2d at 1150). If a contract is merely a factual predicate

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to the action, but not the essential basis of it, an award of fees is not warranted. Cashway

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Concrete & Materials v. Sanner Contracting Co., 761 P.2d 155, 157 (Ariz. Ct. App. 1988).

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In Cashway, the provider of concrete to a subcontractor foreclosed on a materialman’s

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lien when the subcontractor failed to pay. Id. at 156. The concrete provider and the

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subcontractor had an oral contract regarding the unit price of the concrete. Id. On appeal,

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the Arizona court determined that the concrete provider’s action against those charged with

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the lien did not arise out of contact and the provider therefore was not entitled to an award

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of attorneys’ fees pursuant to §12-341.01(A). Id. at 157. The Cashway court found that even

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though breach of the contract between the lien holder and the subcontractor was a factual

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predicate to the action, it was not the essential basis for the case. Id. “Both issues litigated

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in this case, the validity of the lien and the reasonable value of the material provided, are

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wholly separate from the contract. They relate to a statutory remedy . . .. That remedy stands

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apart from the contract remedy.”

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Similarly, in Kennedy v. Linda Brock Automotive Plaza, Inc., the Arizona Court of

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Appeals found that a lessee’s Lemon Law suit against his lessor did not arise out of contract.

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856 P.2d 1201, 1203-04 (Ariz. Ct. App. 1993). The plaintiff in Kennedy leased a defective

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BMW that the manufacturer could never satisfactorily fix, so the plaintiff sued the lessor and

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the manufacturer. Id. at 1202. The trial court granted judgment on the pleadings to the lessor

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and awarded the lessor its attorneys’ fees. Id.

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The Arizona appellate court noted that if a cause of action is purely statutory, then

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§12-341.01(A) does not apply. Id. at 1203. The court found that even though breach of the

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BMW lease was a factual predicate to the statutory Lemon Law suit, it was not the essential

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basis of the action, which was statutory in nature. Id. The court therefore held that the

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plaintiff’s action did not arise out of the lease contract and that the trial court erred in

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awarding attorneys’ fees to the lessor pursuant to §12-341.01(A).

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The Court finds that the claims at issue here are similar to the claims in Cashway and

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Kennedy. Although Mr. Mizioch would not have had claims for declaratory relief unless the

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insurance agreements existed, his claims did not involve the validity or breach of the Policies

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or coverage under the Policies. The claims for declaratory relief instead called for a

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determination of whether a statute would disqualify Mr. Mizioch from receiving benefits

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under valid and enforceable Policies.

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The Court’s decision regarding the Arizona slayer statute and Mr. Mizioch’s alleged

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responsibility for the death of his estranged wife was wholly separate from the Policies

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themselves. The Court did not have to consult the Policies at all to make its determination.

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The Policies were mere factual predicates to Mr. Mizioch’s claims for declaratory relief, not

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the essential bases for those claims. Rather, the declaratory relief claims dealt with a

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statutory scheme designed to prevent a person from benefitting from the death of another if

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that person murdered the other.

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Mr. Mizioch argues that Carpenter v. Carpenter, 722 P.2d 298 (Ariz. Ct. App. 1985),

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rev’d in part on other grounds, Carpenter v. Carpenter, 722 P.2d 230 (Ariz. 1986)(en banc),

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supports his contention that the declaratory relief claims arise from contract. In Carpenter,

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the ex-wife of a decedent sued the decedent’s wife at the time of his death and others for an

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interest in the decedent’s retirement fund and group life insurance policy proceeds. Id. at

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299. The trial court awarded the former wife one half the value of the decedent’s retirement

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account as of the date of the divorce and all the proceeds of the life insurance policy because,

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in the divorce property settlement, the decedent agreed to maintain the former spouse as the

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beneficiary on his work life insurance or to obtain a policy in the same amount if for any

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reason the insurance was terminated. Id.

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attorneys’ fees under §12-341.01(A). Id. at 299-300.

The trial court also awarded the former wife

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On appeal, the court affirmed the trial court’s award of the life insurance proceeds,

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but reversed the award of one-half of the retirement benefits. Id. at 300-303. The court

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reversed the award of attorneys’ fees because, after its decision on appeal, the former wife

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was the successful party on only one claim. Id. at 304. But the appellate court found that the

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former wife’s claim for injunctive relief and imposition of a constructive trust on the life

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insurance proceeds arose out of contract for purposes of §12-341.01(A) because that claim

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could not have existed “but for []’s breach of the property settlement agreement relating to

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the group life insurance policy.” Id. (emphasis added).

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Mr. Mizioch’s declaratory relief claims against the Montoyas do not depend on the

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breach of any agreement. So, Carpenter does not control the issue presented to this Court.

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Because Mr. Mizioch’s claims for declaratory relief regarding the Arizona slayer statute do

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not involve the validity or breach of the Policies, the Court finds that the claims do not arise

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out of contract. The Court therefore will not award attorneys’ fees pursuant to A.R.S. §12-

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341.01(A) on those claims.

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Accordingly,

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IT IS ORDERED Denying Mr. Mizioch’s Motion for Attorneys’ Fees (Doc. 223).

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DATED this 12th day of March, 2012.

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