National Equity v. Mwm Forever ( 2021 )

NOTICE: NOT FOR OFFICIAL PUBLICATION.
UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL
AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.
IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE
NATIONAL EQUITY CONSULTANTS LLC, et al.,
Plaintiffs/Appellees,
v.
MWM FOREVER PLLC, et al.,
Defendants/Appellants.
No. 1 CA-CV 20-0267
FILED 1-12-2021
Appeal from the Superior Court in Maricopa County
No. CV2019-055666
The Honorable Gary L. Popham, Jr., Judge Pro Tempore
AFFIRMED
COUNSEL
The Kozub Law Group, PLC, Phoenix
By Richard W. Hundley
Counsel for Plaintiffs/Appellees
Kelly McCoy, PLC, Phoenix
By Walid A. Zarifi
Counsel for Defendants/Appellants
NATIONAL EQUITY, et al. v. MWM FOREVER, et al.
Decision of the Court
MEMORANDUM DECISION
Presiding Judge Samuel A. Thumma delivered the decision of the Court, in
which Judge D. Steven Williams and Judge David D. Weinzweig joined.
T H U M M A, Judge:
¶1 Defendants MWM Forever, PLLC, and Victor Gojcaj appeal
an order denying their motion to set aside a default judgment entered in
favor of plaintiffs National Equity Consultants, LLC, and 8241 Pinnacle,
LLC. Because defendants show no reversible error, the order is affirmed.
FACTS AND PROCEDURAL HISTORY
¶2 8241 Pinnacle, LLC, owned a single-family house used as a
vacation rental property. National Equity Consultants, LLC, leased
personal property to Pinnacle for use in the house, including furniture,
furnishings and household goods. In 2016, Pinnacle filed for Chapter 11
bankruptcy protection. After the plan of reorganization was confirmed in
early 2018, Pinnacle fell behind on payments. MWM purchased the house
at a trustee’s sale later that year. The trustee’s deed granting title to MWM
was recorded in April 2019. That same day, defendants took possession of
the house, including National’s personal property, and did not provide
plaintiffs access to recover their personal property.
¶3 Plaintiffs filed this case in July 2019, alleging defendants
wrongfully converted their personal property and that MWM failed to
allow access to recover the property. See Ariz. Rev. Stat. (A.R.S.) §§ 12-1173,
-1173.01 (2020).1 Plaintiffs sought $30,000 as the “minimum value of the
personal property,” doubled pursuant to A.R.S. section 33-1367.
¶4 When defendants failed to plead or otherwise timely defend,
plaintiffs applied for entry of default. When defendants did not respond
within 10 days, default was entered against them. Ariz. R. Civ. P. 55(a)(5).
Plaintiffs then moved for entry of default judgment, Ariz. R. Civ. P. 55(b)(1),
which the superior court entered after an evidentiary hearing. Nearly two
months later, defendants moved to set aside the default judgment, but did
1Absent material revisions after the relevant dates, statutes and rules cited
refer to the current version unless otherwise indicated.
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Decision of the Court
not challenge the entry of default. Although making a passing reference to
Rule 60(b)(1), (2) and (3), defendants argued, “as relevant to this matter,” a
default judgment can be set aside based on “mistake or fraud [sic]
representation or other misconduct of an opposing party.” Defendants
argued there was a “mistake or possible misrepresentation” regarding the
value of the household furnishings. Defendants also argued plaintiffs
“failed to follow the proper procedural rules [in Rule 55] with respect to
obtaining the default judgment.”2
¶5 After oral argument, the superior court denied defendant’s
motion. Citing Daou v. Harris, 139 Ariz. 353 (1984) and Richas v. Superior
Court of Arizona, Maricopa County, 133 Ariz. 512 (1982), the court found
defendants made no showing “that their failure to defend or appear and
file a timely Answer was the result of excusable neglect.” See Ariz. R. Civ.
P. 60(b)(1). The court also found there was “no new evidence discovered
after the Application for Entry of Default that warrants setting aside the
Default Judgment.” See Ariz. R. Civ. P. 60(b)(2). This court has jurisdiction
over defendants’ timely appeal pursuant to Article 6, Section 9, of the
Arizona Constitution and A.R.S. sections 12-120.21(A)(1) and -2101(A)(1).
DISCUSSION
¶6 Defendants argue the court (1) abused its discretion in
refusing to set aside the default judgment; and (2) erred by applying the
wrong standard to set aside a default judgment under Rules 60(b)(2) and
(b)(3). This court reviews the denial of a motion to set aside a default
judgment for an abuse of discretion, Blair v. Burgener, 226 Ariz. 213, 216 ¶ 7
(App. 2010), and may affirm if the superior court was correct for any reason,
First Credit Union v. Courtney, 233 Ariz. 105, 107 ¶ 7 (App. 2013); State v.
Perez, 141 Ariz. 459, 464 (1984). The superior court may set aside a final
default judgment on a party’s motion for several enumerated reasons,
including “newly discovered evidence that, with reasonable diligence,
could not have been discovered in time to move for a new trial,” and “fraud
. . . misrepresentation, or other misconduct of an opposing party.” Ariz. R.
Civ. P. 60(b)(2)-(3), (c), 55.
¶7 In their motion to set aside default judgment, defendants
cited Rule 60(b)(1), (2) and (3). But defendants did not clearly develop
arguments as to why the judgment should be set aside under each
2Plaintiffs later presented evidence that they complied with the procedural
requirements; defendants did not rebut that evidence and that issue need
not be addressed more here.
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NATIONAL EQUITY, et al. v. MWM FOREVER, et al.
Decision of the Court
subsection of Rule 60(b). It cannot be genuinely disputed that the court
properly analyzed defendants’ motion under Rule 60(b)(1) under Daou and
Richas. The court noted there was no new evidence that warranted setting
aside the default judgment, as Rule 60(b)(2) might authorize. The minute
entry does not reference Rule 60(b)(3) or mention the fraud,
misrepresentation or other misconduct standard in that rule. Defendants,
however, did not provide a transcript from the oral argument before the
superior court, meaning the specific arguments defendants presented to the
court at the hearing are unknown. That missing transcript is presumed to
support the superior court’s ruling. See Myrick v. Maloney, 235 Ariz. 491, 495
¶ 11 (App. 2014). Moreover, defendants have failed to show the superior
court improperly denied their motion to set aside default judgment to the
extent that it relied on Rule 60(b)(2) or (b)(3).
I. Defendants Have Not Shown The Default Judgment Should Have
Been Set Aside Under Rule 60(b)(2).
¶8 Default judgment may be set aside if there is “newly
discovered evidence that, with reasonable diligence, could not have been
discovered in time to move for a new trial.” Ariz. R. Civ. P. 60(b)(2); Catalina
Foothills Ass’n v. White, 132 Ariz. 427, 429 (1982). The only evidence cited in
defendants’ motion was an alleged “mistake” or “misrepresentation.”
Defendants supported no argument that the default judgment should be set
aside based on newly discovered evidence, pursuant to Rule 60(b)(2).
Indeed, defendants raise the “newly discovered evidence” argument for the
first time in their opening brief on appeal. Because defendants failed to raise
this argument with the superior court, it is waived on appeal. Cont’l Lighting
& Contracting, Inc. v. Premier Grading & Util., LLC, 227 Ariz. 382, 386 ¶ 12
(App. 2011); Schurgin v. Amfac Elec. Distrib. Corp., 182 Ariz. 187, 190 (App.
1995). Even on the merits, defendants have presented no newly discovered
evidence, as the superior court found. Accordingly, defendants have not
shown the default judgment should have been set aside under Rule 60(b)(2).
II. Defendants Have Not Shown the Default Judgment Should Have
Been Set Aside Under Rule 60(b)(3).
¶9 To obtain relief under Rule 60(b)(3), the moving party must
show “(1) . . . a meritorious defense, (2) that he was prevented from fully
presenting before judgment, (3) because of the adverse party’s fraud,
misrepresentation, or misconduct.” Est. of Page v. Litzenburg, 177 Ariz. 84,
93 (App. 1993) (citation omitted). Defendants argue the damages awarded
in the default judgment were based on a discrepancy in the value of the
household furnishings. As support, defendants submitted a financial
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Decision of the Court
statement filed in 2016 in Pinnacle’s bankruptcy proceedings, indicating the
value of National’s property in the house was $4,000. By contrast, the July
2019 complaint here claims $30,000 is the “minimum value” of the personal
property. Defendants argue this discrepancy is a “glaring mistake and
misrepresentation” by plaintiffs. However, in an affidavit provided to the
superior court, the individual who completed the 2016 statement stated the
$4,000 was a typographical error and that the correct amount was $40,000.
This statement of error, plaintiffs plausibly argued, is supported by the fact
that there are too many items in the house for the value to reasonably be
$4,000. Even if the discrepancy resulted from mistake or misrepresentation,
defendants have presented no argument as to how such misrepresentation
prevented them from fully presenting controverting evidence before entry
of the default judgment, a showing required to grant relief. Estate of Page,
177 Ariz. at 93. Accordingly, defendants have not shown that the default
judgment should have been set aside under Rule 60(b)(3).
CONCLUSION
¶10 The superior court’s ruling denying defendants’ motion to set
aside entry of default judgment is affirmed. Defendants seek an award of
attorney’s fees and costs under A.R.S. §§ 12-341, 12-341.01 and 12-349 and
Arizona Rule of Civil Appellate Procedure 21(a), while plaintiffs seek an
award of fees under ARCAP 25 and A.R.S. § 12-349. For various reasons,
including that they are not the successful parties, defendants’ request for
fees and costs is denied. In the court’s discretion, plaintiffs’ request for an
award of attorneys’ fees is denied, although plaintiffs are awarded their
taxable costs contingent upon their compliance with ARCAP 21.
AMY M. WOOD • Clerk of the Court
FILED: AA
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