Britt v. Advanced Business Services

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UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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
GRACE BRITT, Plaintiff/Appellee,
v.
ADVANCED BUSINESS SERVICES, et al., Defendants/Appellants.
________________________________
JEFFREY MATTHEWS, et al., Third-Party Defendants/Appellees.
No. 1 CA-CV 22-0535
FILED 5-11-2023
Appeal from the Superior Court in Maricopa County
No. CV2022-090532
The Honorable Stephen M. Hopkins, Judge (Retired)
AFFIRMED
COUNSEL
Elley Law PLC, Gilbert
By Richard D. Elley
Counsel for Plaintiff/Appellee and Third-Party Defendants/Appellees
Schern Richardson Finter, PLC, Mesa
By Aaron M. Finter, Michael R. Somers
Counsel for Defendants/Appellants
BRITT v. ADVANCED BUSINESS, et al.
Decision of the Court
MEMORANDUM DECISION
Judge Anni Hill Foster delivered the decision of the Court, in which
Presiding Judge Samuel A. Thumma and Judge Randall M. Howe joined.
F O S T E R, Judge:
¶1 Defendant Advanced Business Services, LLC (“ABS”) appeals
from the superior court’s denial of its motion to set aside a default judgment
ordering specific performance of a real estate transaction with plaintiff
Grace Britt. For the following reasons, the Court affirms.
FACTUAL AND PROCEDURAL HISTORY
¶2 Because this case comes after the entry of default, all well-pled
facts in the complaint are viewed as true. Smith & Wesson Corp. v. The
Wuster, 243 Ariz. 355, 360, ¶ 22 (App. 2017). ABS waived service of process
through its member, Brian Loiselle, see Ariz. R. Civ. P. 4(f)(1), and therefore
had notice of the action necessary to satisfy due process, cf. Nat’l Inv. Co.,
Inc. v. Est. of Bronner, 146 Ariz. 138, 140 (App. 1985).
¶3 Britt entered a purchase agreement with ABS for the home she
lived in (“the property”). After Britt lost her job, the parties mutually
disavowed that first purchase agreement and entered a second purchase
agreement. The second agreement required Britt to pay a $300,000 down
payment and ABS would provide carryback financing—loaning Britt the
remaining funds at 2.99% interest. Britt paid ABS the $300,000 down
payment.
¶4 ABS delivered a special warranty deed to Britt, but no deed
of trust or promissory note that reflected the carryback financing. ABS and
Brian Loiselle later refused to perform according to the second agreement.
¶5 After Britt recorded the special warranty deed, Loiselle then
recorded a notice stating the deed was issued in error and inadvertently
recorded. ABS then demanded that Britt execute a third purchase
agreement with different terms than the second agreement—including the
elimination of carryback financing at 2.99%—or be evicted.
¶6 Britt sued ABS and Loiselle for breach of contract, consumer
fraud, and unjust enrichment, seeking specific performance of the second
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Decision of the Court
agreement. Simultaneously, Britt requested and received a temporary
restraining order (later converted into a preliminary injunction) preventing
ABS from filing an eviction action against her.
¶7 After ABS and Loiselle failed to plead or otherwise defend the
action, Britt filed an application for entry of default. See Ariz. R. Civ. P.
55(a). After that default became effective given the passage of time, see Ariz.
R. Civ. P. 55(a)(4), Loiselle answered the complaint on his own behalf and,
ostensibly, for ABS. However, he could not properly answer on behalf of
ABS because he is not an attorney and ABS is a business entity. See Ramada
Inns, Inc. v. Lane & Bird Advert., Inc., 102 Ariz. 127, 128 (1967).
¶8 Britt then filed a motion for entry of default judgment, with
hearing, against ABS and Loiselle. The court held a default hearing where
Britt and Loiselle (but no ABS representative) appeared. At that hearing,
Britt introduced evidence of the second agreement and ABS’s breach. She
testified that she believed the purchase and seller carryback agreement
accurately reflected the specific performance due under the second
agreement. She introduced text messages between herself and Loiselle as
evidence of the parties’ agreement to specific terms. After considering the
evidence received, the court entered a partial final judgment in favor of Britt
and against ABS, requiring ABS to convey the property to Britt under the
seller carryback financing terms pled in her complaint and testified to at the
hearing.
¶9 ABS then hired counsel and belatedly filed an answer. ABS
filed a motion for a new trial, seeking to set aside the default judgment
under Ariz. R. Civ. P. 59 and 60. The superior court denied ABS’s motion,
and ABS timely appealed. This Court has jurisdiction pursuant to Arizona
Revised Statutes (“A.R.S.”) Sections 12-120.21 and 12-2101(A)(2).
DISCUSSION
¶10 A denial of a Rule 60 motion to set aside a default judgment
is reviewed for abuse of discretion. Laveen Meadows Homeowners Ass’n. v.
Mejia, 249 Ariz. 81, 83, ¶ 6 (App. 2020). This Court does not inquire whether
the superior court was substantively correct in entering the default
judgment, Hirsch v. Nat’l Van Lines, Inc., 136 Ariz. 304, 311 (1983), but
instead, “defer[s] to the superior court’s factual findings and will not set
them aside unless they are clearly erroneous,” Ruffino v. Lokosky, 245 Ariz.
165, 168, ¶ 9 (App. 2018).
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Decision of the Court
I. ABS cannot raise the admissibility of evidence at the default hearing
on appeal.
¶11 ABS argues that the superior court erred by admitting the text
messages as evidence of terms of the second agreement at the default
judgment hearing. This argument is improper on appeal.
¶12 After the entry of default, “a defaulted party loses all rights to
litigate the merits of the cause of action.” Tarr v. Superior Ct. In & For Pima
Cnty., 142 Ariz. 349, 351 (1984). “A default is treated as an admission, by the
defaulting party, of the truth of all well pleaded facts in the case.” Clugston
v. Moore, 134 Ariz. 205, 206 (App. 1982). Thus, a party cannot directly appeal
a default judgment, after entry of default, but must instead move under
Rule 60 for the default to be set aside. Aloia v. Gore, 252 Ariz. 548, 553, ¶ 21
(App. 2022). If the motion is denied, “[t]he scope of an appeal . . . is
restricted to the questions raised by the motion to set aside. . . .” Hirsch, 136
Ariz. at 311.
¶13 By arguing that the superior court admitted evidence at the
default judgment hearing that was either insufficient or inadmissible parol
evidence, ABS is not challenging the validity of the judgment or whether
ABS was properly defaulted. Rather, these arguments go to the substance
of the judgment and Britt’s entitlement to specific performance. This Court
rejects this substantive argument as impermissible on appeal from denial of
a motion to set aside a default judgment.
II. The superior court did not grant greater relief than that prayed for
in the complaint.
¶14 ABS argues the superior court erred by granting relief greater
than that Britt requested in her complaint. “A judgment by default must not
be different in kind from, or exceed in amount, that prayed for in a
pleading’s demand for judgment.” Ariz. R. Civ. P. 55(b)(3). Although this
argument is permissible on appeal, ABS somewhat conflates this
permissible argument with its impermissible argument discussed above.
ABS’s challenge to the scope of relief is also barred as a substance-based
attack on a default to the extent it presses an evidentiary argument.
¶15 The purpose of Rule 55(b)(3) is “to assure the defendant who
consciously allows a default judgment . . . [to] rest secure in the knowledge
that the judgment will not exceed the relief requested in the complaint.”
Darnell v. Denton, 137 Ariz. 204, 206 (App. 1983). But “a complaint need not
be technically sufficient to support a default judgment.” Ezell v. Quon, 224
Ariz. 532, 537, ¶ 19 (App. 2010) (quoting Cockerham v. Zikratch, 127 Ariz. 230,
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Decision of the Court
234 (1980)). Rather, it must be sufficient to put a defendant on notice of the
cause of action and allegations as a whole. See id. Further, while specific
performance may not be ordered if “the parties have not agreed on one or
more of the important, essential or material terms . . . absolute completeness
in every detail is not a prerequisite of specific performance.” Daley v. Earven,
131 Ariz. 182, 185 (App. 1981).
¶16 Britt’s complaint requested specific performance of the
second agreement for the sale of the real estate. She pleaded that the terms
included seller carryback financing with a loan at 2.99% interest and a
$300,000 down payment. She also alleged in her complaint that ABS
removed certain line-item terms from the purchase agreement as originally
presented—implying that apart from the changed seller carryback, which
was supported by text message evidence, the terms of the first contract
otherwise supplied the terms of the second agreement.
¶17 The superior court, consistent with the allegations in Britt’s
complaint, ordered the relief of specific performance of the material terms
of the contract in its judgment. To the extent that ABS complains that certain
terms were not pleaded expressly in the complaint or text messages, they
were incorporated by reference to the original purchase contract by the
complaint. These terms include the choice of Arizona law and Britt’s
purchase of fixtures. To the extent the second agreement—as a form of
judgment—includes other terms, they are not material such that they
preclude summary judgment. ABS points to no prejudice from having Britt,
for instance, choose an escrow company or that each side pays its own
customary fees for the sale. See Daley, 131 Ariz. at 185. Such changes do not
vary the kind of relief requested in the complaint, and because a sum certain
of damages was not demanded, the relief provided did not exceed the
amount requested in the complaint. See Ariz. R. Civ. P. 55(b)(3). This Court
finds no error.
III. The superior court did not err by denying relief based on fraud or
misconduct.
¶18 Finally, ABS argues Britt failed to present “exculpatory
evidence” and committed fraud upon the court. This argument, as it relates
to Rule 60(b)(3) fraud, is waived because it was not presented to the
superior court. Mejia, 249 Ariz. at 84, ¶ 9. ABS also alleges misconduct
under Rule 60(b)(3), an issue it properly raised by pressing Rule 59(a)(1)(B)
misconduct in its motion for a new trial. ABS, however, failed to include a
transcript of the hearing on its motion for new trial, so it is assumed such a
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Decision of the Court
transcript would support the superior court’s ruling. See Kline v. Kline, 221
Ariz. 564, 572, ¶ 33 (App. 2009).
¶19 ABS argues that Britt hid “exculpatory evidence” from the
superior court, namely an email suggesting a deed of trust and promissory
note were, in fact, transmitted to Britt in contradiction to her testimony at
the default hearing. ABS’s non-standard use of the term “exculpatory
evidence” is taken to mean that a defaulting party has a special duty to
present not just the moving party’s case, but any evidence that does not
support the judgment.
¶20 This argument fails. First, ABS cites no rule or caselaw for the
proposition that a party moving for default judgment has a special duty to
present “exculpatory evidence” at a default hearing on the defaulting
party’s behalf. No authority has been found to support the proposition that
anything other than the ordinary duty of candor applies to attorneys
moving for a default judgment.
¶21 Second, when a default becomes effective after a party fails to
answer or otherwise defend, the defaulting party is deemed to admit “[a]ll
well-pleaded facts,” in the complaint. S. Ariz. Sch. for Boys, Inc. v. Chery, 119
Ariz. 277, 281 (App. 1978). By defaulting, ABS admitted it failed to provide
a promissory note and deed of trust that conformed to the second
agreement and admitted its terms. Thus, after entry of default, ABS was
precluded from arguing the existence of a different contract—or no
enforceable contract at all—to the extent the argument contests the
sufficiency of the evidence or would limit Britt’s right to recover the relief
properly demanded in the complaint. See id. at 282. The proposition that
Britt, with ABS having admitted the facts alleged against it, has an
obligation to negate those same admitted facts by presenting ABS’s case for
it at a default hearing makes no sense.
¶22 Third, even assuming Britt had some duty to present
“exculpatory evidence” she knew existed, nothing in the record indicates
this evidence was hidden rather than inadvertently omitted, forgotten, or
simply construed differently than ABS would like. ABS had an opportunity
to argue to the superior court that Britt’s reliance on text messages without
presenting the email was misconduct. The superior court is in the best
position to determine whether misconduct by a party occurred and
“materially affected the rights of the aggrieved party.” See Leavy v. Parsell,
188 Ariz. 69, 72 (1997). In the absence of a transcript, this Court presumes
the argument and evidence presented at the hearing on the motion to set
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Decision of the Court
aside supported the superior court’s rejection of that argument. This Court
finds no abuse of discretion.
IV. Britt is entitled to Attorneys’ Fees.
¶23 Both parties request fees and costs on appeal. Because this
action arises out of contract, Britt is awarded her reasonable attorneys’ fees
and costs upon compliance with ARCAP 21. See A.R.S. §§ 12-341, 12-341.01.
CONCLUSION
¶24 Affirmed.
AMY M. WOOD • Clerk of the Court
FILED: AA
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