                                IN THE
            ARIZONA COURT OF APPEALS
                            DIVISION ONE


        ARIZONA STATE UNIVERSITY BOARD OF REGENTS,
                      Plaintiff/Appellant,

                                   v.

              ARIZONA STATE RETIREMENT SYSTEM,
                       Defendant/Appellee.

                         No. 1 CA-CV 16-0239
                           FILED 5-11-2017


          Appeal from the Superior Court in Maricopa County
                       No. LC2012-000689-001
            The Honorable Crane McClennen, Judge Retired

                    REVERSED AND REMANDED


                              COUNSEL

Osborn Maledon PA, Phoenix
By Thomas L. Hudson, Eric M. Fraser

Arizona State University, Office of General Counsel, Tempe
By Lisa K. Hudson
Co-counsel for Plaintiff/Appellant

Arizona Attorney General’s Office, Phoenix
By Jothi Beljan
Counsel for Defendant/Appellee
                    ASU BOARD OF REGENTS v. ASRS
                          Opinion of the Court



                                OPINION

Presiding Judge Peter B. Swann delivered the opinion of the court, in which
Judge Kent E. Cattani and Judge Donn Kessler joined.


S W A N N, Judge:

¶1            In Arizona State University v. Arizona State Retirement System,
237 Ariz. 246 (App. 2015) (hereinafter “ASU v. ASRS”), we held that the
Arizona State Retirement System (“ASRS”) wrongly collected $1,149,103
from Arizona State University (the “University”). This appeal concerns the
rate of prejudgment interest that applies to ASRS’s liability for the refund.
The superior court held that the refund was in the nature of a “judgment,”
and not a “debt” — a distinction that determines the applicable interest rate
under A.R.S. § 44-1201. We disagree, and hold that ASRS’s over-collection
of money created a debt that was not dependent on the existence of a
judgment. We therefore reverse and remand for entry of judgment with
prejudgment interest computed at 10%.

                FACTS AND PROCEDURAL HISTORY

¶2            The underlying litigation arose from an invoice ASRS sent to
the University for a purported actuarial unfunded liability resulting from
17 employees’ participation in the University’s termination incentive
program. See generally A.R.S. § 38-749; ASU v. ASRS, 237 Ariz. 246. ASRS
determined the unfunded liability to be $1,149,103 and demanded payment
within 90 days. ASU v. ASRS, 237 Ariz. at 249, ¶ 9. It also asserted under
§ 38-749 that ASU would owe ASRS 8% interest on any “balance” until the
$1,149,103 was paid in full. The University paid the invoice and then
pursued an administrative appeal. Id. at 223, ¶ 9.

¶3            In ASU v. ASRS, we concluded that ASRS was required to
follow the Administrative Procedure Act’s rulemaking procedures before
enforcing the policy under which it charged the University. 237 Ariz. at
253–54, ¶ 32. We remanded the case to the superior court with instructions
“to enter an order directing ASRS to refund $1,149,103 to the University,
with interest thereon if and as authorized by law — an issue the superior
court should address on remand.” Id. at 254, ¶ 33.




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                   ASU BOARD OF REGENTS v. ASRS
                         Opinion of the Court

¶4             The superior court entered judgment for the original invoice
— $1,149,103 — together with prejudgment interest at the rate of 4.25%.
The only issue before us in this appeal is whether the court chose the correct
interest rate.

                               DISCUSSION

¶5           The parties agree that the interest rate is determined by A.R.S.
§ 44-1201. That statute provides in pertinent part:

       A. Interest on any loan, indebtedness or other obligation shall
       be at the rate of ten per cent per annum, unless a different rate
       is contracted for in writing, in which event any rate of interest
       may be agreed to. Interest on any judgment that is based on
       a written agreement evidencing a loan, indebtedness or
       obligation that bears a rate of interest not in excess of the
       maximum permitted by law shall be at the rate of interest
       provided in the agreement and shall be specified in the
       judgment.

       B. Unless specifically provided for in statute or a different
       rate is contracted for in writing, interest on any judgment
       shall be at the lesser of ten per cent per annum or at a rate per
       annum that is equal to one per cent plus the prime rate as
       published by the board of governors of the federal reserve
       system in statistical release H.15 or any publication that may
       supersede it on the date that the judgment is entered. The
       judgment shall state the applicable interest rate and it shall
       not change after it is entered.

       ....

       F. If awarded, prejudgment interest shall be at the rate
       described in subsection A or B of this section.

(Emphases added.)

¶6            The University argues that once it paid the improperly issued
invoice, ASRS became “indebted” to it in the amount of $1,149,103, entitling
it to 10% interest under subsection (A). ASRS contends that the superior
court correctly decided that the University was entitled only to the prime
rate plus 1% (i.e., 4.25%) — the rate applicable to a “judgment” under
subsection (B).



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                     ASU BOARD OF REGENTS v. ASRS
                           Opinion of the Court

¶7             We review this issue de novo. Hall v. Elected Officials’ Ret.
Plan, 241 Ariz. 33, 46, ¶ 38 (2016); Metzler v. BCI Coca-Cola Bottling Co. of Los
Angeles, 235 Ariz. 141, 144, ¶ 13 (2014). “If the plain language of a statute is
clear and unambiguous when considered in context, we do not resort to
other methods of statutory construction.” Newman v. Select Specialty Hosp.-
Ariz., Inc., 239 Ariz. 558, 566, ¶ 35 (App. 2016). We interpret statutes to
avoid rendering “any of its language mere ‘surplusage,’ [and instead] give
meaning to ‘each word, phrase, clause, and sentence . . . so that no part of
the statute will be void, inert, redundant, or trivial.’” In re Estate of Zaritsky,
198 Ariz. 599, 603, ¶ 11 (App. 2000) (citation omitted).

¶8              Until 2011, A.R.S. § 44-1201 did not differentiate between
“judgments” and “loans, indebtedness, or other obligations.” See Metzler,
235 Ariz. at 145, ¶ 14. The Legislature then amended § 44-1201,
“uncoupling ‘judgments’ from ‘loans, indebtedness, or other obligations’ so
as to ‘limit’ the interest applicable to judgments.” Id. at ¶ 15 (citing Arizona
Senate Fact Sheet, S.B. 1212, 50th Leg., 1st Reg. Sess. (Apr. 13, 2011)). In
Metzler, the supreme court held under subsection (A) that prejudgment
interest is awarded at 10% on any loan (“money lent at interest”),
indebtedness (“something (as an amount of money) that is owed”), or other
obligation (“things of the same nature or class as ‘loan’ and
‘indebtedness’”). 235 Ariz. at 145–46, ¶¶ 18–19 (citations omitted). And
under subsection (B), prejudgment interest is currently awarded at 4.25%
on “any judgment,” which our supreme court concluded means an amount
that “depends on a judgment for its existence.” See id. at 146, ¶ 19.

¶9              Taken alone, subsection (A) might be read as a contractual
gap-filler for debt obligations that are paid without resort to litigation, and
subsection (B) could be read to define the interest rate for liabilities that are
reduced to judgments. But read as a whole, § 44-1201 makes clear that
subsection (B) is not triggered every time a judgment is entered. Subsection
(F) states that “prejudgment interest shall be at the rate described in
subsection A or B.” (Emphasis added.) Were we to hold that subsection (B)
applies to all liabilities reduced to judgments, subsection (F) would have no
meaning. Therefore, a person who successfully obtains a judgment to
collect an “indebtedness” is entitled to the 10% interest rate even though
litigation and a judgment was necessary to collect the debt.

¶10           The University argues that “indebtedness” under subsection
(A) includes all liquidated claims once they are reduced to judgments. See
Viad Corp. v. MoneyGram Int’l, Inc., 1 CA-CV 15-0053, 2016 WL 6436827, at
*8, ¶¶ 42–45 (Ariz. App. Nov. 1, 2016). Though liquidated claims will very
often qualify for prejudgment interest under subsection (A), we decline to


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                    ASU BOARD OF REGENTS v. ASRS
                          Opinion of the Court

rewrite the statute to substitute the three terms the Legislature wrote —
“loan,” “indebtedness,” and “other obligation” — with the single term
“liquidated sum.” Had the Legislature intended subsection (A) to apply to
all “liquidated” claims, it would have said so. See, e.g., A.R.S. §§ 44-
1201(D)(1) (“A court shall not award . . . [p]rejudgment interest for any
unliquidated, future, punitive or exemplary damages that are found by the
trier of fact.” (emphasis added)), 47-2718(A) (“Damages for breach by either
party may be liquidated in the agreement . . . .” (emphasis added)).

¶11            “Liquidated” damages can exist even when there is not an
“indebtedness.” See, e.g., Precision Heavy Haul, Inc. v. Trail King Indus., Inc.,
224 Ariz. 159, 161–62, ¶¶ 7, 14 (App. 2010). Therefore, while the majority of
cases involving liquidated damages may indeed be cases involving
“indebtedness,” we cannot say that the two terms are congruent.

¶12            Instead, consistent with Metzler, we hold that courts must
look to the fundamental nature of the underlying obligation to determine
which subsection applies. Here, while the litigation and resulting judgment
may have been necessary to secure ASRS’s refund of the money that the
University paid, the obligation itself does not “depend on the judgment for
its existence.” Metzler, 235 Ariz. at 145, ¶ 17.

¶13             ASRS’s obligation has all indicia of a “debt.” ASRS cast the
original demand that created the overpayment, giving rise to the need for
refund, as an amount “due” within 90 days. ASRS’s own letter stated:
“Payment is due within 90 days of the invoice. If not paid in full within
that time, the ASRS will assess interest on the balance at a rate of eight
percent (8%) until the amount is paid in full.” (Emphasis in original.) It is
difficult to imagine a better fit for the word “indebtedness” than an amount
“due” within a time certain that carries a fixed interest rate if any “balance”
remains outstanding after the due date. And the wording of ASRS’s letter
was not merely a rhetorical characterization of a generic demand — A.R.S.
§ 38-749(C) established the deadline for payment of actuarial unfunded
liabilities, the default interest rate, and the concept of an “amount due.”
Therefore, had ASRS’s demand been meritorious, the underlying claim
would have been one by ASRS against the University for nonpayment of an
indebtedness and ASRS would have received the benefit of the 10% interest
rate under A.R.S. § 44-1201(A).

¶14         We see no reason to treat a claim for refund of an
overpayment differently from the claim that gave rise to the overpayment.
Properly applied, A.R.S. § 38-749 creates “indebtedness” owed by
employers to ASRS. Claims for refunds of overpayments on such


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                    ASU BOARD OF REGENTS v. ASRS
                          Opinion of the Court

indebtedness are likewise claims for indebtedness governed by A.R.S.
§ 44-1201(A).1

                               CONCLUSION

¶15           The University was entitled to 10% prejudgment interest on
an “indebtedness” under A.R.S. § 44-1201(A). We therefore reverse the
superior court’s order awarding prejudgment interest at 4.25% and remand
for modification of the interest calculation.

¶16            The University requests an award of costs on appeal under
A.R.S. § 12-341. ASRS argues the University was not a “successful party to
a civil action” under § 12-341. ASRS did not raise this argument in the first
appeal, and it is therefore waived. Carrillo v. State, 169 Ariz. 126, 132 (App.
1991) (failing to raise an issue in first appeal waives it as to the second
appeal). We award the University its costs under § 12-341, upon its
compliance with ARCAP 21.




                          AMY M. WOOD • Clerk of the Court
                           FILED: AA




1      Although ASRS urges “equities” favoring an award of interest at
4.25%, it offers no authority for the proposition that equitable
considerations bear on the applicable interest rate. Cf. Employer’s Mut. Cas.
Co. v. McKeon, 170 Ariz. 75, 77 (App. 1991) (“[P]rejudgment interest on a
liquidated claim is a matter of right and not a matter of discretion.”).


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