[No. 59606-3-I. Division One. December 17, 2007.]
[1] Statutes — Construction — Review — Standard of Review. Issues of statutory interpretation are reviewed de novo. [2] Appeal — Review — Issues of Law — Standard of Review. Claimed errors of law are reviewed de novo. [3] Statutes — Construction — Unambiguous Language — Plain Meaning — Statutory Language. A court first looks to the language of a statute to determine its meaning. Effect is given to the plain meaning of the statute if the statutory language is unambiguous. [4] Statutes — Construction — Considered as a Whole — Harmonious Construction. A statute should be read as a whole, with its provisions harmonized, if possible. [5] Statutes — Construction — Superfluous Provisions. A statute is construed so that all of its language is given effect, with no portion rendered meaningless or superfluous. [6] Statutes — Construction — Rational Interpretation — Avoiding Absurdity. A court will avoid reading a statute in ways that will lead to absurd or strained results. [7] Compromise and Settlement — Settlement Agreement — Covenant Judgment — Tort Claim — Foundation of Judgment — Contract or Tort. Once parties have agreed to settle a tort claim with a covenant judgment, the foundation for the judgment is the parties' written settlement agreement, which is contractual in nature, not the underlying allegation of tortious conduct. [8] Interest — Postjudgment Interest — Settlement of Tort Claim — Covenant Judgment — Contractual Interest Rate — Validity. Although RCW 4.56.110(3) specifies the interest rate for judgments founded on tortious conduct, RCW 4.56.110(1) allows contracting parties to specify a different interest rate in an agreement to settle a tort claim with a covenant judgment. Where a court determines that the settlement and covenant judgment is reasonable, the reasonableness determination includes the contractual specification of interest on the judgment. Because the agreed interest is part of the "amount to be paid" on the contract implementing the settlement of the tort claim, the court does not have the authority to adjust the specified rate of interest once the court has determined that the "amount to be paid" is reasonable. Nature of Action: A personal injury plaintiff who settled with the tortfeasor and obtained an assignment of the tortfeasor's rights against its insurer in exchange for an agreed judgment that the plaintiff covenanted not to execute against the tortfeasor sought a determination that the settlement was reasonable. The agreed judgment included a provision for interest on the judgment at the rate of 12 percent per annum until fully paid. Superior Court: After ruling that the settlement was reasonable and entering the agreed judgment, the Superior Court for King County, No. 05-2-24195-1, Douglass A. North, J., on January 30, 2007, granted the insurer's motion for reconsideration and reduced the interest rate on the judgment to the statutory rate. Court of Appeals: Holding that the parties could contract for a higher interest rate than provided for by statute and that, once the superior court ruled that the settlement agreement was reasonable, it had no authority to adjust the interest rate specified in the settlement agreement and covenant judgment, the court reverses the order granting the insurer's motion for reconsideration and remands the case to the trial court for reinstatement of the 12 percent interest rate. David J. Balint-, for appellants. Earl M. Sutherland- (of Reed McClure), for respondents. ¶1 BECKER, J. — When parties to a tort suit settle their dispute in a written agreement providing for a specified rate of interest, and the court enters judgment to enforce their settlement agreement, then for purposes of RCW 4.56.110 the judgment is founded on a written contract rather than on tortious conduct. It bears interest at the rate specified in the agreement. ¶2 A fight took place outside a nightclub in Seattle's Pioneer Square at 3:30 in the morning on April 2, 2005. A security guard for Fenix Underground pushed appellant Anthony Jackson to the ground. As a result of the fall, Jackson sustained injury to his knees. Jackson brought a lawsuit against the guard and Fenix Underground, alleging tortious conduct. At the time of the incident, Fenix Underground had an insurance policy with Scottsdale Insurance Company. ¶3 Jackson, Fenix, and Scottsdale participated in a mediation on September 5, 2006. Jackson took the position that there was coverage available under the policy for bodily injury up to the limit of $1,000,000. Scottsdale took the position that the maximum amount of coverage available was the $50,000 sublimit for liability arising from assault and battery and declined to offer more than that amount. ¶4 Fenix admitted liability and agreed to entry of a judgment for $275,000, with interest to accrue at 12 percent: That the amount of the judgment to be entered against the defendants, jointly and severally, is in the principal amount of $275,000, which judgment shall carry interest at the rate of 12% per annum until fully paid. Fenix agreed to assign Jackson all rights against Scottsdale, including a possible bad faith action. In return, Jackson covenanted not to execute on the judgment against Fenix, except for the rights against Scottsdale. ¶5 In this situation, the defendant's insurer can ultimately be held liable only for the amount of the settlement that is reasonable and paid in good faith. See Chaussee v. Md. Cas. Co., 60 Wn. App. 504, 509-10, 803 P.2d 1339 (1991). A reasonableness hearing was held in superior court on December 14, 2006, with Scottsdale participating as an intervenor. The court approved the settlement agreement as reasonable: I guess I'm not sure that I would say that it's a settlement of what they could get on the best day. It may be somewhat toward the high end. But on the best day, it seems to me he could get substantially more if the jury finds that he has significant permanent injuries. The court then entered the agreed judgment against Fenix "in the principal amount of $275,000 which judgment shall carry interest at the rate of 12% per annum until fully paid." ¶6 One week after the judgment was entered, Scottsdale filed a motion for reconsideration or relief from judgment, asserting that the judgment was subject to the interest rate provided in RCW 4.56.110(3) for judgments "founded on the tortious conduct of individuals." Judgments governed by this statute bear interest at a rate that fluctuates on a monthly basis depending upon the rate for treasury bills. For purposes of this case, that rate is 7.180 percent. Scottsdale argued the judgment should be "corrected" to bear interest at the lower rate. Scottsdale did not question the court's determination that the settlement itself was reasonable. Scottsdale's attorney merely claimed that he had failed to notice that the judgment "incorrectly" provided for interest at 12 percent. Jackson responded that the judgment correctly reflected the interest rate specified in the settlement contract, as dictated by RCW 4.56.110(1) for judgments "founded on written contracts." ¶7 The court granted Scottsdale's motion for reconsideration and reduced the interest rate accordingly: The court finds that the order entered on December 14, 2006 contained a mistake in the judgment summary and in its provisions in that it was contrary to the law of the state of Washington set forth in RCW 4.56.110(3); and that the judgment herein should bear interest at the rate of 7.180% per annum from December 14, 2006. ¶8 Jackson appeals and asks this court to reinstate the agreed 12 percent per annum interest rate. Interest on judgments shall accrue as follows: (1) Judgments founded on written contracts, providing for the payment of interest until paid at a specified rate, shall bear interest at the rate specified in the contracts: PROVIDED, That said interest rate is set forth in the judgment. . . . . (3) Judgments founded on the tortious conduct of individuals or other entities, whether acting in their personal or representative capacities, shall bear interest from the date of entry at two percentage points above the equivalent coupon issue yield, as published by the board of governors of the federal reserve system, of the average bill rate for twenty-six week treasury bills as determined at the first bill market auction conducted during the calendar month immediately preceding the date of entry. . . . RCW 4.56.110 (emphasis added). Issues of statutory interpretation and claimed errors of law are reviewed de novo. Meadow Valley Owners Ass'n v. Meadow Valley, LLC, 137 Wn. App. 810, 816, 156 P.3d 240 (2007). ¶12 Scottsdale argues, however, that even if judgments founded on tort claim settlements are governed by subsection (1), an exception should be carved out for covenant judgments entered after a reasonableness hearing has been held under RCW 4.22.060. That statute provides for a hearing on the issue of the reasonableness of the "amount to be paid." RCW 4.22.060(1). Scottsdale contends that the "amount to be paid" in this case was $275,000 because the arguments at the hearing revolved around whether this principal sum was reasonable in light of the evidence of liability and damages, not whether the interest rate was reasonable. But it would be a strained interpretation of RCW 4.22.060 to hold that the "amount to be paid" includes only the principal amount of the settlement, and not the interest to be paid on the outstanding balance. Both principal and interest are components of the settlement. A plaintiff may be willing to accept a smaller principal amount if the interest rate on the outstanding balance is higher, and vice versa. ¶13 RCW 4.56.110(1) provides contracting parties with the freedom to choose varying interest rates depending on their individual circumstances. Because the interest is part of the "amount to be paid" on a contract implementing a settlement of a tort suit, the court does not have authority to adjust the specified interest rate once the court has determined that the amount to be paid is reasonable. The fact that the parties may have focused their arguments at the hearing exclusively on the reasonableness of the principal amount does not alter this conclusion. Scottsdale's motion for reconsideration was in reality a collateral attack on the reasonableness determination, which is not before us for review because Scottsdale has not appealed it. ¶14 The order granting Scottsdale's motion for reconsideration is reversed. The judgment is remanded for reinstatement of the interest rate of 12 percent. SCHINDLER, A.C.J., and AGID, J., concur.