Blair Southern Ventures, Inc. v. Burgener Tigerlilly ( 2010 )

IN THE COURT OF APPEALS FILED BY CLERK
STATE OF ARIZONA DEC 29 2010
DIVISION TWO
COURT OF APPEALS
DIVISION TWO
JAMES E. BLAIR and SOUTHERN )
VENTURES, INC., )
)
Plaintiffs/Appellees, ) 2 CA-CV 2010-0028
) DEPARTMENT B
v. )
) OPINION
CLIFTON BURGENER and JANE DOE )
BURGENER, husband and wife; )
TIGERLILLY INVESTMENTS, LLC; and )
BONANZA REALTY MANAGEMENT, )
LLC, )
)
Defendants/Appellants. )
)
APPEAL FROM THE SUPERIOR COURT OF COCHISE COUNTY
Cause No. CV200800466
Honorable James L. Conlogue, Judge
Honorable Ann R. Littrell, Judge
AFFIRMED
Peter A. Kelly Palominas
Attorney for Plaintiffs/Appellees
Lawrence K. Lynde Phoenix
Attorney for Defendants/Appellants
V Á S Q U E Z, Presiding Judge.
¶1 In this breach of contract action, appellants Clifton Burgener; Tigerlilly
Investments, LLC; and Bonanza Realty Management, LLC (collectively, Appellants)
appeal from the trial court‟s denial of their motion to set aside default judgment in favor
of appellees, James Blair and Southern Ventures, Inc. (collectively, Blair). Appellants
contend the court abused its discretion in permitting alternative means for service of
process and, in any event, Blair failed to effect service properly under the terms of the
court‟s order. For the reasons set forth below, we affirm.
Facts and Procedure
¶2 “We view the facts in the light most favorable to upholding the trial court‟s
ruling on a motion to set aside a default judgment.” Ezell v. Quon, 224 Ariz. 532, ¶ 2,
233 P.3d 645, 647 (App. 2010); see also Goglia v. Bodnar, 156 Ariz. 12, 20, 749 P.2d
921, 929 (App. 1987). In May 2007, Blair entered into a contract with Tigerlilly and
Bonanza, which included the conveyance of Blair‟s residence to Tigerlilly. Pursuant to
the contract, Tigerlilly was required to transfer the residence back to Blair upon his
performance of additional terms in the contract. In May 2008, Blair filed a complaint in
superior court, alleging breach of contract, civil conspiracy, and fraud against Appellants,
arising from their failure to reconvey the residence to him. Blair also alleged Burgener
controlled and operated Tigerlilly and Bonanza as his alter egos.1
1
Blair later filed an amended complaint adding additional defendants. However,
they are not parties to this appeal.
2
¶3 Blair made numerous attempts to serve Appellants by attempting to serve
Burgener individually and as statutory agent for Tigerlilly and Bonanza, at Appellants‟
business address in Phoenix. On May 21, 2008, the process server went to Appellants‟
office and was told Burgener “was not in.” Although it is unclear from the record, the
process server either telephoned or visited the office seven times over the following two
weeks, between 9:30 a.m. and 1:40 p.m., in an attempt to determine whether Burgener
was there. Each time the process server was told Burgener was not in the office. Blair
then authorized the process server to attempt to locate Burgener‟s home address and
serve him there. The process server located Burgener‟s residence in Phoenix, confirming
with a neighbor that Burgener indeed lived at that address, and attempted to serve him
there five times over the next eight days, between 4:10 p.m. and 8:40 p.m.
¶4 After the attempts at personal service were unsuccessful, Blair filed a
motion for alternate service, in which he alleged Appellants were attempting to avoid
service and requested permission to effect service “upon any person in charge of the
office located at 40[2] W. Roosevelt, Suite E, Phoenix, AZ.”2 He supported his motion
with the process server‟s affidavit of non-service, describing the failed attempts to effect
service. The trial court granted the motion and, in addition to allowing Blair to serve the
person in charge of the office, it also ordered Blair to mail a copy of the process and the
2
Blair‟s motion and the trial court‟s order list the business address as “400 W.
Roosevelt, Suite E, Phoenix, AZ.” However, as Blair states in his brief, this appears to
have been a clerical error, given that the process server had initially attempted service at
402 W. Roosevelt, and there is no dispute concerning the correct business address of
Appellants. And, although the process server apparently initially mailed service to 400
W. Roosevelt, this mistake was rectified by re-mailing service to the correct address.
3
court‟s order “to the last known residence or business address of each party receiving
alternate service.”
¶5 The process server served Appellants at the business address by leaving
copies of the required documents with a woman working at the front desk of the office.
The woman gave her first name to the process server but refused to provide her last name
or proof of identity. He also mailed copies of the process to the business address. After
the time for responding had passed, Blair filed an application for entry of default
judgment, and the trial court entered default judgment on November 12, 2008, in the
amount of $252,000.
¶6 On June 22, 2009, Appellants filed a motion to set aside the entry of
default, asserting that they had not been properly served under the Arizona Rules of Civil
Procedure and the judgment therefore was void. After oral argument, the trial court
denied their motion. This appeal followed.
Standard of Review
¶7 Although default judgments are not favored, Harper v. Canyon Land Dev.,
L.L.C., 219 Ariz. 535, ¶ 4, 200 P.3d 1032, 1033-34 (App. 2008), we review a trial court‟s
denial of a motion to set aside a default judgment for an abuse of discretion, Daou v.
Harris, 139 Ariz. 353, 359, 678 P.2d 934, 940 (1984). Generally, a party will only be
entitled to relief if it can demonstrate: “1) that its failure to file a timely answer was
excusable under one of the subdivisions of Rule 60(c), 2) that it acted promptly in
seeking relief and 3) that it had a substantial and meritorious defense to the action.”
4
Almarez v. Superior Court, 146 Ariz. 189, 190-91, 704 P.2d 830, 831-32 (App. 1985).
However, a trial court “must vacate . . . a [void] judgment[,] . . . [and] a party seeking
relief from a void judgment need not show that their failure to file a timely answer was
excusable, that they acted promptly . . . , or that they had a meritorious defense.” Master
Fin., Inc. v. Woodburn, 208 Ariz. 70, ¶ 19, 90 P.3d 1236, 1240 (App. 2004). Even where
a judgment is challenged on voidness grounds, “[t]he movant generally bears the burden
of demonstrating his entitlement to have a default judgment set aside.” Miller v. Nat’l
Franchise Servs., Inc., 167 Ariz. 403, 406, 807 P.2d 1139, 1142 (App. 1991).
Discussion
¶8 Appellants maintain the trial court abused its discretion by not setting aside
the default judgment, arguing it was void for lack of personal jurisdiction over them. See
Ariz. R. Civ. P. 60(c)(4) (party may be relieved from void final judgment); Master Fin.
Inc., 208 Ariz. 70, ¶ 19, 90 P.3d at 1240 (lack of personal jurisdiction over defendants
renders judgment void). In particular, they contend service of process had not been made
upon them. Although Appellants assign ten different issues on appeal, the essential
questions raised are (1) whether the court erred in concluding Blair had demonstrated that
personal service was impracticable under Rule 4.1(m), Ariz. R. Civ. P., such that
alternate service was appropriate, (2) whether the means of alternate service authorized
by the court violated Appellants‟ due process rights, and (3) whether Blair sufficiently
complied with the court‟s order of alternate service. We address each of these issues in
turn.
5
¶9 Preliminarily, we note that Appellants have not provided this court with a
transcript of the hearing on their motion to set aside judgment. It is the appellant‟s
burden to ensure that “the record on appeal contains all transcripts or other documents
necessary for us to consider the issues raised.” Baker v. Baker, 183 Ariz. 70, 73, 900
P.2d 764, 767 (App. 1995); see also Ariz. R. Civ. App. P. 11(b)(1). And, in the absence
of a transcript, we presume the evidence and arguments presented at the hearing support
the trial court‟s ruling. Kohler v. Kohler, 211 Ariz. 106, n.1, 118 P.3d 621, 623 n.1 (App.
2005); Chavarria v. State Farm Mut. Auto. Ins. Co., 165 Ariz. 334, 338, 798 P.2d 1343,
1347 (App. 1990).
A. Alternate service
¶10 Appellants first contend Blair failed to make the requisite showing under
Rule 4.1(m) to establish service upon them was impracticable, such that he was entitled
to effect service through alternate means. Appellants maintain, as to Tigerlilly and
Bonanza, that personal service can never be impracticable. Relying on Rule 4.1(l), they
contend that when service cannot be completed by serving the statutory agent of a
corporation, the plaintiff is required to effect service through the Arizona Corporation
Commission. But Rule 4.1(l) applies only “[w]hen a domestic corporation does not have
an officer or agent in this state upon whom legal service of process can be made.”3 Here,
3
And in any event, this means of completing service would have provided no
greater due process protection than the manner of service authorized by the trial court and
employed by Blair, who delivered process to the defendants‟ office and mailed a copy to
the business address. Under Rule 4.1(l), when service is made by depositing the
summons and pleadings with the Corporation Commission, it “shall file one of the copies
6
Appellants do not dispute that Burgener is the statutory agent for both companies. Thus,
Rule 4.1(l) does not apply.
¶11 Rule 4.1(m) provides, in pertinent part: “If service by one of the means set
forth in the preceding paragraphs of this Rule 4.1 proves impracticable, then service may
be accomplished in such manner, other than by publication, as the court, upon motion and
without notice, may direct.”
¶12 There are no Arizona cases interpreting the meaning of “impracticable” as
that term is used in the rule. This court‟s “purpose is to interpret the statutes and rules
according to the drafters‟ intent, and we will first look to the plain language of the statute
or rule as the best evidence of that intent.” Hornbeck v. Lusk, 217 Ariz. 581, ¶ 6, 177
P.3d 323, 325 (App. 2008). When “the language is clear and unambiguous, we give
effect to that language and do not employ other methods of statutory construction.”
Fragoso v. Fell, 210 Ariz. 427, ¶ 7, 111 P.3d 1027, 1030 (App. 2005).
¶13 Relying on Calabro v. Leiner, 464 F. Supp. 2d 470, 472 (E.D. Penn. 2006),
Appellants contend service of process is only impracticable “when personal service
absolutely cannot be made under the applicable rules of civil procedure.” And, they
suggest that four attempts at service at Burgener‟s residence were insufficient as a matter
in its office and immediately mail the other copy, postage prepaid, to the office of the
corporation, or to the president, secretary or any director or officer of such corporation as
appears or is ascertained by the Corporation Commission from the articles of
incorporation or other papers on file in its office, or otherwise.”
7
of law to “warrant alternative service.”4 In Calabro, the court was interpreting Rule
430(a), Penn. R. Civ. P., to determine whether the plaintiff had made reasonable efforts to
effect personal service on the defendant before resorting to alternative means. The rule
provides:
If service cannot be made under the applicable rule[,] the
plaintiff may move the court for a special order directing the
method of service. The motion shall be accompanied by an
affidavit stating the nature and extent of the investigation
which has been made to determine the whereabouts of the
defendant and the reasons why service cannot be made.
Based on its interpretation of the rule, the court determined that alternative service is
only appropriate when the plaintiff has demonstrated a good faith effort to locate the
defendant, has made “practical efforts” to effectuate service of process, and the proposed
alternative means are “reasonably calculated to provide the defendant with notice of the
proceedings against him.” 464 F. Supp. 2d at 472-73. In applying the “practical efforts”
requirement to the facts before it, the court concluded the plaintiff‟s three attempts at
service, two of which were on the same day of the week, and occurred within the same
4
Appellants also heavily rely on cases dealing with service by publication pursuant
to Rule 4.1(n), and they apparently seek to import into the standard of impracticability the
requirement of due diligence in locating a defendant before effecting service by
publication. See, e.g., Barlage v. Valentine, 210 Ariz. 270, ¶ 8, 110 P.3d 371, 374 (App.
2005); Sprang v. Petersen Lumber, Inc., 165 Ariz. 257, 261-62, 798 P.2d 395, 399-400
(App. 1990). However, even assuming the reasoning of these cases applies outside the
service-by-publication context, a proposition we doubt, the issue in this case is not Blair‟s
ability to locate the defendants. Blair independently confirmed that Burgener actually
resided at the residential address through a neighbor, and Blair was consistently told that
Burgener was not present in the office at 402 W. Roosevelt—not that Burgener did not
work there. Blair thus met any requirement for due diligence and indeed was successful
in locating the defendants for the purpose of service of process.
8
ninety-minute period of time, were insufficient to “meet her burden of showing that she
ha[d] undertaken practical efforts to serve the defendants under the circumstances.” Id.
at 473.
¶14 Calabro is distinguishable from this case. Unlike our Rule 4.1(m), Rule
430, Penn. R. Civ. P., permits alternative service only when “service cannot be made
under the applicable rule” and also requires an affidavit detailing the plaintiff‟s efforts to
locate and serve the defendant. These requirements are more closely akin to the
heightened “due diligence” showing necessary for service by publication in Arizona.
See Ariz. R. Civ. P. 4.1(n) (“party or officer making service shall file an affidavit
showing the manner and dates of the publication and mailing, and the circumstances
warranting the utilization of the procedure); Sprang v. Petersen Lumber, Inc., 165 Ariz.
257, 261, 798 P.2d 395, 399 (App. 1990) (before service by publication, party must file
“affidavit setting forth facts indicating it made a due diligent effort to locate an opposing
party to effect personal service”). Thus we do not find Calabro instructive.
¶15 Relying on Kelly v. Lewis, 632 N.Y.S.2d 186, 186 (App. Div. 1995), Blair
contends “the standard of impracticability is different from the more stringent one of „due
diligence.‟” The service of process rule at issue in that case gives trial courts “discretion
to direct alternative service of process . . . when it has determined that the methods set
forth [in the service of process statute] are „impracticable.‟” 632 N.Y.S.2d at 485. And
in Kelly, the New York Appellate Division defined the standard of impracticability as
“different from the more stringent one of „due diligence‟ . . . . That is, to meet the
9
standard on impracticability does not require satisfying due diligence, or even showing
that actual prior attempts to serve a party under each and every method provided in the
statute have been undertaken[.]” Id. (citing cases). Applying this standard, the court
concluded that three attempts at service on three different days constituted sufficient
efforts to warrant alternative means of service. Id. at 486.
¶16 Like the rule in Kelly, Rule 4.1(m), Ariz. R. Civ. P., permits alternative
service of process when traditional service is “impracticable” under the circumstances.
And, we agree this standard requires something less than the “due diligence” showing
required before service by publication may be utilized. If the drafters of Rule 4.1(m) had
intended plaintiffs to meet the same burden of establishing due diligence for alternative
service as for service by publication, it would have used the same language and included
the same requirements in both subsections. See Fragoso, 210 Ariz. 427, ¶ 12, 111 P.3d at
1031.
¶17 Other courts, in various contexts, have held the term “impracticable” “does
not mean that . . . impossibility . . . must be established,” but rather requires a showing
that the act to be performed “is extremely difficult or inconvenient.” Pac. Fire Ins. Co. v.
Reiner, 45 F. Supp. 703, 708 (E.D. La. 1942) (interpreting numerosity requirement for
class certification under federal rules of procedure); see also Garner v. Ellingson, 18
Ariz. App. 181, 182, 501 P.2d 22, 23 (1972) (doctrine of commercial frustration “not
necessarily limited to strict impossibility, but includes impracticability caused by extreme
or unreasonable difficulty or expense”); Gen. Motors Corp. v. Superior Court, 416 P.2d
10
492, 496 (Cal. 1966) (equating impracticability with futility, not impossibility, in
addressing statute of limitations argument); Bldg. Indus. Ass’n of San Diego County v.
State Water Res. Control Bd., 22 Cal. Rptr. 3d 128, 138, 145 (Cal. App. 2004) (in
discussing whether water permit requirements “impracticable or unreasonable,” noting
“practicable” something more than “possible”; impracticability means difficulty or
inconvenience, not impossibility). This interpretation of the word impracticable also is
consonant with its use in Rule 4.1(m), in that the showing for alternative service requires
something less than a complete inability to serve the defendant because the defendant‟s
current address is unknown or the defendant completely has avoided service of process.
See Rule 4.1(n) (describing conditions necessary to permit service by publication).
¶18 Here, Blair attempted service at both Appellants‟ place of business and
Burgener‟s residence on five different days and at various times. In addition to these
physical attempts, the process server attempted to ascertain over an additional seven days
whether Burgener was present in the office so that service could be made. Each time he
was told Burgener was not in the office.5 These circumstances demonstrate that service
of process through the usual means would have been “extremely difficult or
inconvenient.” See Pac. Fire Ins. Co., 45 F. Supp. at 708. And, to the extent additional
evidence and argument were presented at the hearing on Appellants‟ motion to set aside
5
These efforts are far more substantial than the efforts found insufficient in the
three out-of-state cases Appellants cite in support of their argument. See Calabro, 464
F. Supp. 2d at 473 (three attempts insufficient); Lombay v. Padilla, 895 N.Y.S.2d 503,
505 (N.Y. App. Div. 2010) (three attempts over four days and affixing notice to wrong
door insufficient); Austin v. Tri-County Mem’l Hosp., 834 N.Y.S.2d 419, 420 (N.Y. App.
Div. 2007) (three attempts on consecutive weekday afternoons insufficient).
11
the default, we presume they support the trial court‟s ruling. Kohler, 211 Ariz. 106, n.1,
118 P.3d at 623 n.1. On this record, we therefore cannot say the court abused its
discretion in permitting Blair to serve Appellants through alternate means.
B. Adequacy of service
¶19 Appellants next argue that the means of alternative service authorized by
the trial court and as effected by Blair—which they characterize as “[a]lternative process
upon a receptionist in an eight office building”—did not comply with constitutional due
process. Due process requires notice “reasonably calculated, under all the circumstances,
to apprise interested parties of the pendency of the action and afford them an opportunity
to present their objections.” Mullane v. Cent. Hanover Bank & Trust Co., 339 U.S. 306,
314 (1950).6
¶20 Rule 4.1(m) provides that when alternate means of service of process are
employed, “reasonable efforts shall be undertaken by the party making service to assure
that actual notice of the commencement of the action is provided to the person to be
served,” and the service of process “shall be mailed to the last known business or
6
Relying on a state bar committee note pertaining to service by publication,
Appellants argue Blair was required to effect service by “„the best means of notice
practicable under the circumstances.‟” Ariz. R. Civ. P. 4.1, committee note, citing
Mullane, 339 U.S. 306 (1950). Not only is this comment limited to notice by publication,
and inapplicable here, but this is not the standard promulgated in Mullane. Mullane held
only that “notice by publication was constitutionally defective as to known persons
whose whereabouts were also known” because such notice is not reasonably calculated to
apprise them of pending litigation, while other, more effective methods of notice—
notably “the mails”—are available. Dusenbery v. United States, 534 U.S. 161, 162, 162
n.4 (2002), citing Mullane, 339 U.S. at 314, 319.
12
residential address of the person to be served.” These two requirements ensure that a
defendant‟s due process rights have been satisfied. Appellants present no argument that
the trial court‟s order authorizing service upon “any person in charge of the office” in
which each of them conducted business, and by first-class mail to that address, was not
reasonably calculated to inform them of the pending litigation. 7 We conclude the court‟s
order was consistent with the requirements of due process.
¶21 Appellants‟ primary jurisdictional challenge appears to be focused on
whether Blair‟s actual means of service comported with due process. The trial court‟s
order for alternative service authorized personal service on any person “in charge of the
office.” In denying Appellants‟ motion to set aside the default judgment, the court
necessarily rejected their arguments that service by first-class mail and personal service
upon “any person in charge of the office” were not reasonable measures to inform
Appellants of the pending litigation.
7
To the extent Appellants argue service was deficient because it was not sent by
certified mail, we observe that the trial court did not specify any particular manner of
mailing, and Appellants do not argue certified mail was required pursuant to any other
authority. And, contrary to their assertion that “there is no proof that any of the
documents [Blair‟s] process server allegedly mailed to . . . 402 W. Roosevelt were
actually received by any of the Defendants,” the process server‟s affidavit that he had
mailed the process to the correct address constituted substantial evidence. See Lee v.
State, 218 Ariz. 235, ¶ 11, 182 P.3d 1169, 1171-72 (2008) (“[A]lthough a denial of
receipt rebuts the legal presumption that a piece of mail was received, a factfinder may
still infer from the fact of mailing that the mail did reach its destination.”). Thus, faced
with the process server‟s affidavit of service and Appellants‟ affidavits denying receipt, it
was for the trial court to determine which evidence was more credible. See Reliable Elec.
Co. v. Clinton Campbell Contractor, Inc., 10 Ariz. App. 371, 373, 459 P.2d 98, 100
(1969).
13
¶22 Although Appellants describe the person served as a “receptionist,” Blair
described her in his opposition to the motion to set aside the default as “the „front desk‟
woman at 402 Roosevelt, Suite E.” Appellants do not dispute that “402 Roosevelt, Suite
E” is their business address.
¶23 In denying Appellants‟ motion to set aside the default judgment, the trial
court necessarily rejected their arguments that the service Blair employed was
inconsistent with either the court‟s order or due process. “Service of process can be
impeached only by clear and convincing evidence.” Gen. Elec. Capital Corp. v.
Osterkamp, 172 Ariz. 191, 194, 836 P.2d 404, 407 (App. 1992); see also Hilgeman v.
Am. Mortgage Secs., Inc., 196 Ariz. 215, ¶ 14, 994 P.2d 1030, 1034 (App. 2000) (same).
And this court will not “second-guess or substitute our judgment for that of the trial
court” on questions of disputed fact. Gen. Elec. Capital Corp. v. Osterkamp, 172 Ariz.
185, 188, 836 P.2d 398, 401 (App. 1992). Because Appellants have failed to provide a
transcript of the hearing on their motion, we cannot say the court erred in concluding that
Appellants failed to sustain their burden or that, under the circumstances, due process
considerations had been satisfied and “service upon [Appellants] was adequate.” Kohler,
211 Ariz. 106, n.1, 118 P.3d at 623 n.1.
C. Compliance with order for service
¶24 Finally, Appellants contend that by not mailing a copy of the process to
Burgener‟s residential address and by not enumerating the documents re-mailed to the
correct address of 402 W. Roosevelt in the affidavit of service, Blair did not comply
14
strictly with the trial court‟s order for alternate service and therefore did not “make a
prima facie showing of compliance with the requirements of Rule 4.1(m).” However, the
court‟s order authorized Blair to serve each of the Appellants by “mail[ing the process] to
the last known residence or business address of each party receiving alternate service.”
(Emphasis added.) Blair mailed the process to 402 W. Roosevelt, Suite E, and Burgener
has not disputed that this is his business address. Blair thus strictly complied with this
term of the court‟s order.
¶25 Additionally, the original affidavit of service specifically listed the
documents served in person upon the woman at the front desk and stated a second copy
of the process was mailed to the “above address.” The mailed copies apparently were
returned due to an incorrect address, but the process server‟s affidavit indicated “the
documents” were “re-mailed” to the correct address and not returned. Viewed in this
context, it is abundantly clear that the process server re-mailed the same documents listed
in the original service of process. Blair therefore complied in full with the court‟s order
for alternate service.
Disposition
¶26 Because the trial court did not abuse its discretion in permitting alternative
service by the means employed, it had jurisdiction over Appellants. The entry of default
judgment thus was not void, and Appellants made no other showing of excusable neglect
that would entitle them to relief under Rule 60(c), Ariz. R. Civ. P. See Almarez v.
Superior Court, 146 Ariz. 189, 190-91, 704 P.2d 830, 831-32 (App. 1985). The court
15
therefore did not abuse its discretion in denying Appellants‟ motion to set aside the
default judgment. The default judgment against Appellants is affirmed.
/s/ Garye L. Vásquez
GARYE L. VÁSQUEZ, Presiding Judge
CONCURRING:
/s/ Peter J. Eckerstrom
PETER J. ECKERSTROM, Judge
/s/ Virginia C. Kelly
VIRGINIA C. KELLY, Judge
16