Washington v. Pellerito ( 2014 )

NOTICE: NOT FOR PUBLICATION.
UNDER ARIZ. R. SUP. CT. 111(c), THIS DECISION DOES NOT CREATE LEGAL PRECEDENT
AND MAY NOT BE CITED EXCEPT AS AUTHORIZED.
IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE
WASHINGTON STREET ENTERPRISES ARIZONA, L.L.C., an Arizona
limited liability company, Plaintiff/Appellee,
v.
LARRY PELLERITO, Defendant/Appellant.
No. 1 CA-CV 13-0327
FILED 07-10-2014
Appeal from the Superior Court in Maricopa County
No. CV2009-054888
The Honorable John R. Doody, Judge Pro Tempore
AFFIRMED IN PART, VACATED IN PART
COUNSEL
Curtis Ensign, PLLC, Phoenix
By Curtis Ensign
Counsel for Defendant/Appellant
Sanford J. Germaine, P.C., Phoenix
By Sanford J. Germain
Melinda K. Cekander PLLC, Flagstaff
By Melinda K. Cekander
Co-Counsel for Plaintiff/Appellee
WASHINGTON v. PELLERITO
Decision of the Court
MEMORANDUM DECISION
Judge Maurice Portley delivered the decision of the Court, in which Chief
Judge Diane M. Johnsen and Judge Patricia K. Norris joined.
P O R T L E Y, Judge:
¶1 Larry Pellerito (“Pellerito”) appeals the denial of his motion
to set aside the default judgment, the denial of his motion for new trial,
and the award of attorneys’ fees to Washington Street Enterprises
Arizona, L.L.C. (“Washington Street”). Because we find that service of
process was completed by substituted service, we affirm the rulings of the
trial court, but vacate the award of fees to Washington Street and vacate
the judgment against Jane Doe Pellerito.
FACTS AND PROCEDURAL BACKGROUND
¶2 Washington Street filed a complaint against Pellerito and
Jane Doe Pellerito in November 2009 for breaching the commercial lease
he had entered into with its predecessor-in-interest, Presson Equity
Partners, L.L.P. The day after the complaint was filed, a process server
went to a house on East Carolina Drive and spoke to a woman who came
out onto the second-floor balcony. She said that she was not Mrs.
Pellerito, admitted that Pellerito lived at the address, but would not accept
substitute service. The process server left a copy of the documents at the
front door, and told her that “she was served and the documents were at
her front door in an area of her direct control.”
¶3 Pellerito did not file an answer or other responsive pleading.
Washington Street filed an affidavit of default and application for default,
and mailed the two documents to Pellerito at the East Carolina address.
He did not respond, and a default judgment was entered against him and
Jane Doe Pellerito in February 2010. 1
1 There is no dispute that Pellerito was single at the time the process
server left the documents at the doorstep. Accordingly, we vacate the
judgment against Jane Doe Pellerito.
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WASHINGTON v. PELLERITO
Decision of the Court
¶4 Washington Street then attempted to collect the judgment.
In December 2012, Washington Street served a writ of garnishment on
Pellerito’s bank. After receiving notice of the garnishment, Pellerito
objected by arguing that the judgment was void for lack of service. He
also filed a motion to set aside the default judgment pursuant to Arizona
Rules of Civil Procedure (“Rule”) 55(c) and 60(c). In due course, the trial
court rejected his objection to the garnishment, released the garnished
funds to Washington Street and denied Pellerito’s motion to set aside the
default and default judgment. Pellerito then filed an unsuccessful motion
for a new trial, and the trial court subsequently awarded Washington
Street its attorneys’ fees and costs. Pellerito then filed this appeal.
DISCUSSION
¶5 Pellerito challenges the denial of his motion to set aside the
default and default judgment, and the denial of his motion for new trial.
He raises two distinct arguments on appeal. First, he argues that the trial
court employed the wrong legal standard when denying his motion to set
aside the default judgment. Second, he contends that the court erred by
finding effective service. Specifically, he argues there was no reasonable
evidence that: (1) the process server left the summons and complaint at his
dwelling house or usual place of abode; (2) service of process was left with
a person who also resided at the residence; and (3) he received actual
service of process.
¶6 We review the rulings for an abuse of discretion. Delbridge v.
Salt River Project Agric. Improvement & Power Dist., 182 Ariz. 46, 53, 893
P.2d 46, 53 (App. 1994) (reviewing the denial of a motion for new trial for
an abuse of discretion); Gen. Elec. Capital Corp. v. Osterkamp, 172 Ariz. 191,
193, 836 P.2d 404, 406 (App. 1992) (reviewing the denial of a motion to set
aside default judgment for an abuse of discretion). “A court abuses its
discretion if it commits an error of law in reaching a discretionary
conclusion, it reaches a conclusion without considering the evidence, it
commits some other substantial error of law, or the record fails to provide
substantial evidence to support the trial court’s finding.” Flying Diamond
Airpark, L.L.C. v. Meienberg, 215 Ariz. 44, 50, ¶ 27, 156 P.3d 1149, 1155
(App. 2007) (citation omitted) (internal quotation marks omitted). We also
review issues of the court’s interpretation and application of the Arizona
Rules of Civil Procedure de novo. See Bradshaw v. Jasso-Barajas, 231 Ariz.
197, 199, ¶ 5, 291 P.3d 991, 993 (App. 2013).
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WASHINGTON v. PELLERITO
Decision of the Court
¶7 After a lawsuit has been filed, the complaint and summons
must be served on any defendant. Ariz. R. Civ. P. 4(i), 4.1(b). The Rules
detail the methods for service, which may include serving an individual
defendant, or leaving a copy of a summons and complaint at his or her
“dwelling house or usual place of abode with some person of suitable age
and discretion then residing therein.” Ariz. R. Civ. P. 4.1(d). Once the
summons and complaint have been served, the sheriff’s deputy or private
process server must file a return of service, 2 which creates a presumption
of service. Ariz. R. Civ. P. 4(g); Phx. Airport Travelodge v. Dolgin, 12 Ariz.
App. 358, 360, 470 P.2d 506, 508 (1970) (noting the verity imputed to a
return of service); Riggs v. Huachuca Inv. Co., 2 Ariz. App. 527, 529, 410
P.2d 149, 151 (1966) (noting that an officer’s return of service creates a
presumption of service).
¶8 The presumption of service can only be impeached by clear
and convincing evidence. Riggs, 2 Ariz. App. at 529, 410 P.2d at 151; Gen.
Elec. Capital Corp., 172 Ariz. at 194, 836 P.2d at 407 (citing Mayhew v.
McDougall, 16 Ariz. App. 125, 127, 491 P.2d 848, 850 (1971)). “[C]lear and
convincing evidence is more than a preponderance of the evidence but
less than proof beyond a reasonable doubt.” State v. Turrentine, 152 Ariz.
61, 68, 730 P.2d 238, 245 (App. 1986).
¶9 When reviewing a ruling on a motion to set aside a default
judgment, we “view the facts in the light most favorable to upholding” the
ruling. Ezell v. Quon, 224 Ariz. 532, 534, ¶ 2, 233 P.3d 645, 647 (App. 2010).
If, however, there was no service of process, the default judgment has to
be set aside because the judgment is void. See Ariz. R. Civ. P. 55(c),
60(c)(4); see also Master Fin. Inc. v. Woodburn, 208 Ariz. 70, 74, ¶ 19, 90 P.3d
1236, 1240 (App. 2004) (noting that the lack of personal jurisdiction over a
defendant renders any judgment void).
I
¶10 Pellerito argues that the trial court used the wrong legal
standard in rejecting his challenge to the default judgment. He claims he
did not need to impeach the service of process by clear and convincing
evidence because cases should be resolved on the merits and not by
default. Although he cites to French v. Angelic, 137 Ariz. 244, 669 P.2d 1021
(App. 1983), for his proposition, the case does not change the standard of
2For private process servers, the return and proof of service must be
made by an affidavit. Ariz. R. Civ. P. 4(g).
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review. There, after the plaintiff secured a default judgment, the trial
court set aside the judgment after defendant argued service was
ineffective. Id. at 245, 669 P.2d at 1022. On appeal, we affirmed the trial
court’s findings and ruling to set aside the default judgment for lack of
service. Id. at 247, 669 P.2d at 1024. Because the trial court has to
determine whether there is clear and convincing proof to impeach the
presumption of service, Riggs, 2 Ariz. App. at 529, 410 P.2d at 151, we will
affirm unless there is a clear abuse of discretion, French, 137 Ariz. at 246,
669 P.2d at 1022. Consequently, the trial court in this case did not err by
following the established legal standard to set aside a default and default
judgment.
II
¶11 Pellerito challenges the service of process. He argues that he
was not served, did not live at the East Carolina address when the process
server left the documents, never received the documents, and had no
knowledge about the default judgment until the garnishment of his bank
account. He initially submitted his affidavit, which included a photocopy
of his driver’s license listing his address on West Florentine. He later
submitted an affidavit from the woman on the balcony, 3 and testified
briefly at the February 2013 hearing. After reviewing the pleadings,
including the affidavits and Pellerito’s testimony, the court found that
Pellerito had not demonstrated by clear and convincing evidence that the
substituted service of process was ineffectual.
¶12 The court had to resolve conflicting facts. Pellerito had a
driver’s license issued in October 2009 that listed an address on West
Florentine. Washington Street provided the process server with its
information about an address for Pellerito, and the process server went to
the East Carolina address and had contact with the woman on the
balcony. Although Pellerito stated in his affidavit that his only residence
or place of abode was on West Florentine, it has been recognized that a
person may have “two or more ‘dwelling houses or usual places of
3 The woman on the balcony submitted two affidavits. In the first, she
stated that she married Pellerito on January 9, 2010, and that she owns the
East Carolina address, but never told anyone he lived at that address.
Pellerito submitted a second affidavit from her with his motion for new
trial. In that affidavit, the woman stated that she refused to accept service
and never gave Pellerito the documents.
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WASHINGTON v. PELLERITO
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abode.’” Nat’l Dev. Co. v. Triad Holding Corp., 930 F.2d 253, 257 (2d Cir.
1991) (interpreting the corresponding federal rule for abode service).
Moreover, even though the affidavit of the process server stated that the
woman on the balcony told the process server that Pellerito lived at the
East Carolina address, Pellerito challenged that fact by submitting an
affidavit, as well as one from the woman on the balcony. 4 The court, as a
result, had to determine the facts and related inferences to determine
whether Pellerito had impeached the process server’s affidavit by clear
and convincing evidence in order to grant him relief. See City of Phx. v.
Geyler, 144 Ariz. 323, 329, 333, 697 P.2d 1073, 1079, 1083 (1985) (noting that
we defer to the trial court because it is in the best position to hear
testimony, determine credibility and decide the facts); see also Riggs, 2
Ariz. App. at 529, 410 P.2d at 151 (noting that the fact that the president of
two companies was served but only one company responded to the
service, raised the “inference to corroborate the affidavit of the garnishee
that it was in fact not served”); S.E.C. v. Internet Solutions for Bus. Inc., 509
F.3d 1161, 1167 (9th Cir. 2007) (finding that defendant did not rebut the
presumption of service by clear and convincing evidence given the
process server’s sworn affidavits and the district court’s finding that the
defendant was less credible than the process server).
¶13 We agree with Pellerito that he was not served directly. The
process server never handed him the summons, complaint, and
arbitration certificate. 5 The trial court, however, determined that
substitute service occurred when the process server left a copy of the
4 Pellerito renews the hearsay objection he made for the first time in his
motion for new trial. Because he did not object to the statements in the
process server’s affidavit in the motion to set aside default and default
judgment or at the hearing in February 2013, he waived any hearsay
objection. See Nickerson v. Green Valley Recreation, Inc., 228 Ariz. 309, 315,
¶ 9, 265 P.3d 1108, 1114 (App. 2011) (noting that the failure to object to the
trial court’s use of a particular doctrine until the motion for new trial
waived the issue); Conant v. Whitney, 190 Ariz. 290, 293–94, 947 P.2d 864,
867–68 (App. 1997) (noting that an argument first raised in a motion for
new trial was waived on appeal).
5 The trial court found that Pellerito was at home when the process server
talked to the woman on the balcony by inferring that the woman turned
and talked to Pellerito before stating that he was not expecting anything.
The process server’s affidavit does not, however, state or suggest that she
turned before making her statement. As a result, there is not a factual
basis for the court’s inference.
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WASHINGTON v. PELLERITO
Decision of the Court
documents on the doorstep after telling the woman on the balcony that
she was served and the documents were at her front door. Even if the
West Florentine address was his residence, Pellerito could be served at his
“usual place of abode.” See Ariz. R. Civ. P. 4.1(d). The term “usual place
of abode” generally means where a person is living during attempted
service. Melton v. Superior Court, 154 Ariz. 40, 42, 739 P.2d 1357, 1359
(App. 1987); Bowen v. Graham, 140 Ariz. 593, 597, 684 P.2d 165, 169 (App.
1984) (“We agree that constitutional due process notice requires that
substituted service at the defendant’s ‘usual place of abode’ must be at the
place where the defendant normally actually resides so that service will be
substantially . . . likely to bring home notice to the party affected.”
(quoting Mullane v. Cent. Hanover Bank & Trust Co., 339 U.S. 306, 315
(1950)) (internal quotation marks omitted)). As a result, based on the
totality of the evidence, including Pellerito’s testimony that he had spent
the night at the house before the date of service, the court resolved the fact
against Pellerito. See Marks v. LaBerge, 146 Ariz. 12, 14, 703 P.2d 559, 561
(App. 1985) (noting that a trial court concludes whether “a particular
location is the person’s ‘dwelling house or usual place of abode’ based on
the facts specific to that case”) (citing French, 137 Ariz. at 246, 669 P.2d at
1023).
¶14 In addition to the facts surrounding the service, and even if
we assume for argument that Pellerito was never told by the woman on
the balcony that a process server had stopped by and she never handed
him the documents that were left at her front door, 6 Pellerito received
notice of the lawsuit. Washington Street mailed both the application of
default and affidavit of default to Pellerito at the East Carolina address on
December 10, 2009, and the documents were not returned as
undeliverable. Moreover, neither Pellerito nor the woman on the balcony
dispute the receipt of those documents at the East Carolina address just a
month before their marriage. Consequently, the court did not abuse its
discretion in determining that the East Carolina address was Pellerito’s
usual place of abode where he would get notice of the status of the
lawsuit.
6 Although Pellerito submitted two affidavits from the woman on the
balcony, neither stated that she had not told Pellerito that a process server
attempted to serve him at the East Carolina address. In fact, she admitted
in her affidavit that was filed with the motion for new trial, that she did
not give Pellerito the documents that were left on her front door.
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¶15 Pellerito also argues that service was ineffective for two
additional reasons. He claims that the summons, complaint, and
certificate of arbitration were not left with an individual who lived at the
house, 7 or that the documents were not left with a person because the
process server left the documents at the front door. We disagree.
¶16 The key to substitute service is that the documents are left
with a person of suitable age and discretion and the person knows that the
documents were left to accomplish service. Tonelson v. Haines, 2 Ariz.
App. 127, 128-29, 406 P.2d 845, 846-47 (1965). In Tonelson, although the
affidavit of the process server stated service had been made by leaving a
copy of the documents with the defendant’s wife, she later testified that “a
strange man” came to her door in the evening and she told him that her
husband, who had been in surgery, did not want to see him and closed the
door. Id. at 128, 406 P.2d at 846. “She shut the door without ever hearing
that service was being attempted and without ever knowing about the
summons and complaint being left at the doorstep.” Id. In ruling on the
motion to set aside the default judgment, the trial court concluded that the
defendant’s wife did not understand and did not hear that the process
server was there to serve her husband and determined that the service
was ineffective. Id. at 128-29, 406 P.2d at 846-47. On appeal, after stating
that the return of service can only be impeached by clear and convincing
evidence and we will not disturb the sound discretion of the court unless
there is a clear abuse of discretion, we affirmed the trial court’s ruling. Id.
at 129, 406 P.2d at 847. Specifically, we stated that the person the
summons and complaint are left with “must be aware of the leaving” and
“apprised in some substantial form that service is intended to be made” to
avoid surreptitious service not likely to provide notice. Id.
¶17 Citing to Liberty Mutual Insurance Co. v. Rapton, 140 Ariz. 60,
680 P.2d 196 (App. 1984), Pellerito contends that there was no evidence
that the summons and complaint were left with anyone of suitable age
and discretion pursuant to Rule 4.1(d). We disagree.
¶18 In Liberty Mutual, this court found that defendant was
properly served when his future wife, who he was living with, was served
with the summons and complaint, and she gave the papers to him even
7 Although Pellerito challenges the fact that Washington Street did not
prove that the woman on the balcony lived there, he later submitted her
affidavit that said that she owned the house. The affidavit undermines his
argument.
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after being told by his lawyer that service was ineffective. Id. at 62-63, 680
P.2d at 198-99. In reaching our conclusion, we distinguished the facts
from cases where it was determined that service was ineffective because
documents had been left at a business location or without any notice to
anyone of suitable age or discretion. Id. at 63, 680 P.2d at 199. 8 Unlike the
cases cited to in Liberty Mutual, the evidence the trial court found in this
case supports its ruling: the process server told the woman on the balcony
that he was leaving the documents at her front door to accomplish
substitute service and she did not deny telling Pellerito that a process
server had been by and left papers for him. Based on those facts, we do
not find that the trial court abused its discretion by denying Pellerito’s
motion to set aside the default and default judgment for lack of service.
III
¶19 Pellerito argues that the trial court erred by awarding
Washington Street attorneys’ fees under Arizona Revised Statutes section
12-1580(E). 9 He also contends the court erred by failing to conduct an
evidentiary hearing before awarding fees.
8 For example, in United States v. N. Tully Semel, Inc., the District Court
found that despite the fact that the affidavit of service stated it was left at
the defendant’s usual place of abode, the papers were left in a business
hallway across from the apartment defendant used as living quarters. 88
F. Supp. 732, 732-33 (D. Conn. 1949). In Clover v. Urban, the Connecticut
Supreme Court affirmed the ruling that the defendant had not been
properly served when the documents were left in the outer hallway of a
house where the defendant rented a first floor apartment, but he never
saw the documents and they were never brought to his attention.
142 A. 389, 389-91 (1928). In Perry v. Perry, the Georgia Supreme Court
found that the defendant, who was residing with his son-in-law and
daughter, was not served when the sheriff left a copy of the documents
with the son-in-law at his drug store business. 30 S.E. 663, 663 (1898).
Finally, in Briscoe v. Getto, the Kansas Supreme Court affirmed the ruling
that service was improper because the writ of garnishment had been
served on the secretary of the defendant’s employer. 462 P.2d 127, 128-30
(1969), superseded by statute, Kan. Stat. Ann. § 60-304(a) (West 2014), as
recognized in Fisher v. DeCarvalho, 314 P.3d 214, 220 (2013). Those cases,
however, do not suggest the the trial court’s ruling in this case was in
error given our decision in Tonelson.
9 We cite to the current version of all statutes unless otherwise noted.
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¶20 Section 12-1580(E) states that the trial court can only assess
fees and costs against the judgment debtor if the court finds that the
objection was “solely for the purpose of delay or to harass the judgment
creditor.” The statute does not require a hearing and neither does
Schweiger v. China Doll Restuarant, Inc., 138 Ariz. 183, 673 P.2d 927 (App.
1983). We review an award of attorneys’ fees for an abuse of discretion.
See Phx. Newspapers, Inc. v. Dep’t of Corr., State of Ariz., 188 Ariz. 237, 243,
934 P.2d 801, 807 (App. 1997).
¶21 Section 12-1580(E), which allows fees for delay and
harassment, is similar to § 12-349(A)(2). Although we have yet to address
the parameters of § 12-1580(E), in Fund Manager, Public Safety Personnel
Retirement System v. Corbin, we found that the Attorney General did not
unreasonably expand or delay the proceedings by filing a motion
challenging the constitutionality of a statute. 161 Ariz. 348, 355, 778 P.2d
1244, 1251 (App. 1988), aff’d in part and dismissed in part, 161 Ariz. 364, 778
P.2d 1260 (1989). Here, Pellerito challenged the service of process, the
resulting default judgment and garnishment. Although the trial court
ruled against him, Pellerito had the right to challenge the default
judgment. The fact that he lost does not demonstrate that his motions
were solely for the purpose of delay or to harass the judgment creditor. In
fact, but for the clarity of the process server’s affidavit, the trial court may
have followed Tonelson and found that there was not substituted service.
Consequently, we vacate the award of attorneys’ fees awarded under
§ 12-1580(E).
IV
¶22 Washington Street requests its attorneys’ fees on appeal
under the terms of the lease and § 12-341.01. Although the lease has an
attorneys’ fees provision in paragraph 13, an indemnification provision,
there is not a similar provision in paragraph 24 that discusses the
remedies for default. Although the lease does not have a specific fees
provision in the event of a default of the lease, we can consider § 12-
341.01, and in our discretion award Washington Street its reasonable
attorneys’ fees on appeal pursuant to § 12-341.01(A), upon compliance
with ARCAP 21(a).
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CONCLUSION
¶23 We affirm the denial of Pellerito’s motion to set aside default
judgment and motion for new trial, vacate the award of attorneys’ fees
pursuant to § 12-1580(E), and vacate the judgment against Jane Doe
Pellerito.
:gsh
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