Michigan Supreme Court
Lansing, Michigan 48909
____________________________________________________________________________________________
C hief Justice Justices
Maura D. Cor rigan Michael F. Cavanagh
Opinion
Elizabeth A. Weaver
Marilyn Kelly
Clifford W. Taylor
Robert P. Young, Jr.
Stephen J. Markman
____________________________________________________________________________________________________________________________
FILED SEPTEMBER 26, 2001
GEORGE J. MARKETOS and
MARK VIDEO ENTERPRISES, INC.,
Plaintiffs-Appellants,
v No. 117376
AMERICAN EMPLOYERS INSURANCE
CO.,
Defendant-Appellee.
________________________________
PER CURIAM
The plaintiffs brought this action to recover on a fire
insurance policy for damages to their property. The trial
resulted in a judgment for the plaintiffs, with the jury
rejecting defendant’s arson defense. The circuit court
refused to award mediation sanctions under MCR 2.403(O).
However, the Court of Appeals reversed, concluding that the
trial court should not have deducted a setoff in determining
whether mediation sanctions were warranted. We hold that the
setoff was properly deducted and therefore reverse the
judgment of the Court of Appeals in part.
I
Plaintiff, Mark Video Enterprises, Inc.,1 owned a
facility in Ann Arbor that it used to duplicate tapes of
television programs and distribute them to local stations. On
the evening of January 4, 1986, the building and most of the
equipment were destroyed by fire. Plaintiffs filed a claim
with defendant American Employers Insurance Co, which insured
the property against loss by fire. Defendant denied the
claim, asserting that the fire had been deliberately set and
that Marketos was responsible for the arson. Following the
denial of the claim, plaintiffs brought this action in
December 1986 alleging breach of contract and bad-faith
refusal to pay the claim.2 Defendant had already paid
$455,073.15 to First of America Bank, which held a mortgage on
the real estate.3
The case has been tried twice. In 1990 a jury awarded no
damages after finding that Marketos had committed arson. The
trial judge, however, granted judgment notwithstanding the
1
Plaintiff George J. Marketos was the president and sole
shareholder of Mark Video Enterprises, Inc.
2
Three amended complaints added claims for emotional
distress and defamation, on which summary dispositions were
granted for the defendant in April 1987, July 1987, and
November 1987.
3
The mortgagee had independent rights under the policy
and would have had a valid claim even if the jury found that
Marketos committed arson. In exchange for payment, the
mortgagee assigned its debt instruments to the defendant,
including the mortgage, promissory note, and personal
guarantee of Marketos that secured the loan to Mark Video.
2
verdict and awarded $3,138,113.99 to Mark Video and
$330,671.90 to Marketos. Under MCR 2.610(C), the judge also
granted conditionally a new trial in the event that an
appellate court reversed the judgment notwithstanding the
verdict. The judge concluded that the defendant’s evidence of
arson was insufficient, that the verdict was against the great
weight of the evidence, and that the plaintiffs were unfairly
prejudiced when the defendant added a new theory during
closing arguments.
The Court of Appeals thereafter reversed, concluding that
sufficient evidence supported the verdict and that the verdict
was not contrary to the great weight of the evidence. The
Court also rejected the trial judge’s conclusions regarding
defense counsel’s closing argument.4
The plaintiffs applied for leave to appeal to this Court.
On August 22, 1995, we reversed the judgment of the Court of
Appeals in part. Our order stated:
As to that part of the Court of Appeals
judgment reversing the judgment notwithstanding the
verdict, leave to appeal is denied because we are
not persuaded that the questions presented should
now be reviewed by this Court. We reverse that
part of the Court of Appeals judgment that reversed
the Washtenaw Circuit Court’s conditional ruling
granting the plaintiffs’ motion for a new trial.
MCR 2.610(C). The Court of Appeals erred by
rejecting the trial judge’s conclusion that, in the
circumstances of this case, the plaintiffs were
disadvantaged unfairly when the defendant’s closing
argument advanced a previously unpleaded theory of
4
Unpublished opinion per curiam, issued June 29, 1994
(Docket Nos. 140985, 143322).
3
affirmative defense. We remand the case to the
Washtenaw Circuit Court for a new trial pursuant to
that conditional ruling.[5]
At the second trial in September 1997, the verdict form
asked whether defendant had established the arson defense; if
not, the verdict form then instructed the jury to determine
the actual cash value of eight categories of property
allegedly damaged in the fire. The jury found that the
insurer had not proved arson, and determined that the actual
cash value of the damaged property was $1,707,709.
In posttrial motions, the judge adjusted the jury’s
findings of actual cash value on the basis of the trial
evidence, policy language, and legal principles, resulting in
an award of $799,394.85. The court entered judgment in that
amount, plus accrued interest, on December 11, 1997.
Before trial, mediation proceedings under MCR 2.4036 had
resulted in a proposed award of $1.5 million.7 The plaintiffs
sought sanctions under MCR 2.403(O), contending that the
jury’s “verdict” was more favorable than the mediation award.
The trial judge refused to award sanctions because the verdict
5
Docket Nos. 101058, 101059, 102026, 102027. See 450
Mich 852 (1995).
6
Effective August 1, 2000, MCR 2.403 was amended to
change the term “mediation” to “case evaluation.” In this
opinion we will use the terminology applicable at the time of
the proceedings in this case.
7
The plaintiffs had accepted the mediation award; the
defendant had rejected it.
4
following the posttrial adjustments was not more favorable to
plaintiffs than the mediation award.
The Court of Appeals reversed on the sanctions issue. It
examined the language of MCR 2.403(O), which provided, in
part:
(1) If a party has rejected an evaluation and
the action proceeds to verdict, that party must pay
the opposing party’s actual costs unless the
verdict is more favorable to the rejecting party
than the mediation evaluation. . . .
(2) For the purposes of this rule “verdict”
includes,
(a) a jury verdict,
(b) a judgment by the court after a nonjury
trial,
(c) a judgment entered as a result of a ruling
on a motion after rejection of the mediation
evaluation.
(3) For the purpose of subrule (O)(1), a
verdict must be adjusted by adding to it assessable
costs and interest on the amount of the verdict
from the filing of the complaint to the date of the
mediation evaluation . . . .
The Court held that the circuit court had improperly
considered its posttrial adjustment of the jury’s findings
when determining whether to award sanctions:
We hold that the plain language of
MCR 2.403(O) requires the trial court to award
mediation sanctions if the jury verdict itself,
adjusted only as set forth in MCR 2.403(O)(3), is
not more favorable to the rejecting party than the
mediation evaluation. See Frank v William A Kibbe
& Assoc, Inc, 208 Mich App 346, 352; 527 NW2d 82
(1995) (“The judge should have considered the
amount of the jury verdict, adjusted only as
permitted by MCR 2.403(O)(3), when determining if
sanctions were required”). As applied to the case
5
at hand, we find that the trial court erred by
subtracting the setoff amount before determining if
mediation sanctions were warranted.
The plaintiffs have applied for leave to appeal to this
Court, raising claims about other aspects of the Court of
Appeals decision. Defendant has cross-appealed on the
mediation sanctions ruling.
II
This issue involves interpretation of a court rule,
which, like matters of statutory interpretation, is a question
of law that we review de novo. McAuley v General Motors Corp,
457 Mich 513, 518; 578 NW2d 282 (1998). Grievance
Administrator v Underwood, 462 Mich 188, 193-194; 612 NW2d 116
(2000), articulates the proper mode of interpretation:
When called on to construe a court rule, this
Court applies the legal principles that govern the
construction and application of statutes.
Accordingly, we begin with the plain language of
the court rule. When that language is unambiguous,
we must enforce the meaning expressed, without
further judicial construction or interpretation.
Similarly, common words must be understood to have
their everyday, plain meaning. [Citations omitted.]
In this case, the Court of Appeals erred in treating the
jury’s findings as the “verdict” for purposes of MCR 2.403(O).
The jury did not determine the amount that plaintiffs should
recover. Rather, it made specific factual findings about the
cash value of categories of property damage.
After the questions on the arson defense, the verdict
form asked the jury:
6
3. What was the actual cash value, that
Plaintiffs have proven by a preponderance of the
evidence for each of the following categories of
property, at the time of the fire:
The form then listed the categories of property.
However, the trial court--not the jury--determined the
- -
amount that defendant would have to pay. In particular, the
court decided the legal effect of the setoff for defendant’s
payments to the bank on the mortgage. The jury was told:
There has been some testimony in this case
about the defendant’s payment of monies to First of
America and obtaining an assignment of the mortgage
as a result. If you decide to rule in favor of the
plaintiffs, you should award plaintiffs the full
$480,000 stipulated value of the building and
should not consider whether the defendant is
entitled to a credit for the amount paid to First
of America. Any credit in this case can be
determined by the Court, by me, as a matter of law.
MCR 2.403(O)(2) was amended in 1987 to include a
definition of “verdict.” The rule now clarifies that
decisions by the court, as well as by a jury, may be
considered a verdict in some instances.8 For purposes of
awarding sanctions under MCR 2.403(O), a “verdict” must
represent a finding of the amount that the prevailing party
should be awarded. The dollar amount that the jury includes
on the verdict form may or may not be the “verdict” for that
purpose.9
8
See Mehelas v Wayne Co Comm College, 176 Mich App 809,
811-814; 440 NW2d 117 (1989); Wayne-Oakland Bank v Brown
Valley Farms, Inc, 170 Mich App 16, 20; 428 NW2d 13 (1988).
9
The Court of Appeals has considered other questions
related to the meaning of this rule. For example, several
7
The jury’s factual findings in this case do not
constitute a “verdict” under MCR 2.403(O). The jury found
that the value of the building was $480,000. However, the
circuit court determined as a matter of law that the
plaintiffs were not entitled to recover that amount because
the insurer had paid over $450,000 to the mortgagee, in effect
on behalf of the plaintiffs. Similarly, some of the jury’s
findings regarding the actual cash value of other categories
of property did not entitle plaintiffs to recover those
amounts in light of applicable policy limits or deductibles.
Thus, in this case, the actual “verdict” was the decision
by the court using the jury’s factual findings. This verdict
was not more favorable to the plaintiffs than the mediation
award, and thus sanctions against the defendant were
decisions have stated that the result following appeals
controls for purposes of sanctions under MCR 2.403. Hyde v
Univ of Mich Bd of Regents, 226 Mich App 511, 526; 575 NW2d 36
(1997); Keiser v Allstate Ins Co, 195 Mich App 369, 374-375;
491 NW2d 581 (1992). In condemnation cases, the Court of
Appeals has held that the jury’s “verdict” should be adjusted
to take into account the condemnor’s deposit at the outset of
the case, to make the verdict actually reflect the actual
amount in controversy. Detroit v Kallow Corp, 195 Mich App
227, 229; 489 NW2d 500 (1992); Great Lakes Gas Transmission v
Markel, 226 Mich App 127, 134; 573 NW2d 61 (1997). In
Szymanski v Brown, 221 Mich App 423, 432-435; 562 NW2d 212
(1997), the Court held that for the purpose of MCR 2.403
sanctions, the amount of damages found by the jury must be
trebled as provided by the applicable statute. Finally, a
jury’s findings must be adjusted by the court to take into
account a plaintiff’s comparative negligence. Klinke v
Mitsubishi Motors Corp, 219 Mich App 500, 517-518; 556 NW2d
528 (1996), aff’d 458 Mich 582; 581 NW2d 272 (1998). While we
have noted the Court of Appeals application of the rule in
these various circumstances, we confine our holding in this
case to the issue before us.
8
inappropriate. Accordingly, the judgment of the Court of
Appeals is reversed in part,10 and the case is remanded to the
Washtenaw Circuit Court for any further proceedings necessary.
CORRIGAN , C.J., and CAVANAGH , WEAVER , KELLY , TAYLOR , YOUNG , and
MARKMAN , JJ., concurred.
10
We have considered the plaintiffs’ application for
leave to appeal, and it is denied because we are not persuaded
that the questions presented should be reviewed by this Court.
9