Gonzalez v. Nguyen

• Court: Arizona Court of Appeals
• Writing for the Court: DOWNIE, Judge
• Decision Date: 21 March 2017
• Docket Number: No. 1 CA-CV 16-0141,1 CA-CV 16-0141
• Citation: Gonzalez v. Quoc Nguyen, No. 1 CA-CV 16-0141 (Ariz. App. Mar 21, 2017)
• Parties: PABLO GONZALEZ, et al., Plaintiffs/Appellants, v. QUOC NGUYEN, et al., Defendants/Appellees.

PABLO GONZALEZ, et al., Plaintiffs/Appellants, v. QUOC NGUYEN, et al., Defendants/Appellees.

No. 1 CA-CV 16-0141

ARIZONA COURT OF APPEALS DIVISION ONE

March 21, 2017

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 UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.

Appeal from the Superior Court in Maricopa County

No. CV 2014-052846

The Honorable Brian S. Rees, Judge Pro Tempore

REVERSED AND REMANDED

COUNSEL

Gregg Clarke Gibbons PC, Scottsdale

By Gregg Clarke Gibbons

Co-Counsel for Plaintiffs/Appellants

Lewis Roca Rothgerber Christie LLP, Phoenix

By Susan M. Freeman, Justin J. Henderson

Co-Counsel for Plaintiffs/Appellants

Jones, Skelton & Hochuli PLC, Phoenix

By William G. Caravetta, III, Kevin K. Broerman, Justin M. Ackerman

Counsel for Defendants/Appellees

MEMORANDUM DECISION

Judge Margaret H. Downie delivered the decision of the Court, in which Presiding Judge Diane M. Johnsen and Judge James P. Beene joined.

DOWNIE, Judge:

¶1 Pablo and Randi Gonzalez (collectively, "Plaintiffs")¹ appeal from an order setting aside a default judgment against Quoc Nguyen and Dysart Hotel L.L.C. dba Quality Inn — Goodyear ("Dysart Hotel") (collectively, "Defendants"). For the following reasons, we reverse and remand with instructions to reinstate the default judgment in favor of Plaintiffs.

FACTS AND PROCEDURAL HISTORY

¶2 Nguyen was driving a vehicle owned by his then-employer, Dysart Hotel, when he rear-ended Gonzalez's truck on April 9, 2012. Dysart Hotel advised its insurance carrier — Companion Commercial Insurance Company ("Companion") — of the claim through Companion's designated claims administrator, Precision Risk Management ("Precision"). Precision in turn retained independent adjuster Carl Warren & Company ("Carl Warren") to assist with the Gonzalezes' claim.

¶3 In May 2012, Carl Warren claims analyst Bill Sim advised Plaintiffs' counsel that "any future communications concerning Mr. Gonzalez" should be directed to him. In September 2012, Plaintiffs' counsel sent Sim "medical bills, medical records, and reports and other documents" regarding the Gonzalezes' claim.

¶4 Plaintiffs filed a negligence complaint against Defendants on April 4, 2014. On August 12, 2014, Plaintiffs' counsel sent Sim a detailed demand letter, as well as a copy of the complaint. The demand letter asserted damages of $716,242.50, including $600,000 for pain and suffering, and offered to settle for $695,000. After receiving no response, Plaintiffs' counsel learned on October 14, 2014 that Sim had sent the file to Gabriela Diaz at Precision due to the size of the demand. Diaz advisedPlaintiffs' counsel that Sim would call him by November 7, 2014. The Gonzalezes' lawyer thereafter left voice-mail messages for Diaz on December 10, 11, and 15, but received no response.

¶5 Dysart Hotel was served on December 18, 2014, but it did not respond to the complaint. On February 13, 2015, Plaintiffs' counsel left a voice-mail message for Diaz, stating that he was preparing to default Defendants. He asked Diaz to call him immediately, but she did not respond. Plaintiffs applied for entry of default against Dysart Hotel on February 20, 2015, serving that filing on Dysart Hotel's LLC member and statutory agent, Sim, and Diaz.

¶6 On February 25, 2015, Plaintiffs' attorney left Diaz a voice-mail message advising that Dysart Hotel's time to answer was running. Diaz responded that they wished to "resolve the case and will 'answer accordingly.'" On February 27, 2015, Plaintiffs' counsel advised Diaz: "Please be aware that the Defendant has ten (10) judicial days by which to file its Answer or the Default will become final," and asked, "Does your insured intend to file an answer? Please advise." Diaz did not respond.

¶7 On April 20, 2015, Plaintiffs applied for entry of default and served that filing on Dysart Hotel's LLC member and statutory agent, on Sim, and on Diaz. On June 2, 2015, Plaintiffs moved for a default judgment against Dysart Hotel and Nguyen in an amount to be determined at a hearing.² Plaintiffs served that filing on Dysart Hotel through its LLC member and statutory agent and also served Diaz and Sim. The same individuals were also served with notice of the June 23, 2015 default judgment hearing.

¶8 No one appeared for Defendants at the default hearing. Gonzalez testified about his loss of earnings, ongoing and permanent problems with his right arm and neck, and continuing pain. The court questioned Gonzalez and his attorney about damages and causation, directed counsel to submit "a packet of damages," and took the matter under advisement. Plaintiffs thereafter submitted extensive medical records, bills and damage calculations to the court, sending copies of the documents to Dysart Hotel, Sim, and Diaz.

¶9 The court issued a default judgment against Defendants in the sum of $667,279.56 on July 15, 2015.

¶10 On August 11, 2015, Defendants moved to vacate the default judgment under Arizona Rule of Civil Procedure 60(c).³ After briefing and oral argument, the court granted Defendants' motion and vacated the default judgment. Plaintiffs filed a timely notice of appeal. We have jurisdiction pursuant to Arizona Revised Statutes ("A.R.S.") section 12-2101(A)(2).

DISCUSSION

¶11 Whether to set aside a default judgment is a decision entrusted to the superior court's discretion, and we will affirm its ruling absent a clear abuse of discretion. Richas v. Superior Court, 133 Ariz. 512, 514 (1982); Gen. Elec. Capital Corp. v. Osterkamp, 172 Ariz. 191, 193 (App. 1992). The court's exercise of discretion, though, must be supported "by facts or sound legal policy." City of Phoenix v. Geyler, 144 Ariz. 323, 328-29 (1985). A court abuses its discretion if no evidence supports its conclusion or the reasons given are clearly untenable, legally incorrect, or amount to a denial of justice. Searchtoppers.com, L.L.C. v. TrustCash LLC, 231 Ariz. 236, 241, ¶ 20 (App. 2012).

¶12 When a party against whom a complaint has been filed fails to respond as provided in the Arizona Rules of Civil Procedure, the plaintiff may apply for entry of default. Ariz. R. Civ. P. 55(a). The default becomes effective ten days after the filing of the application for entry of default, unless the party alleged to be in default "pleads or otherwise defends" within those ten days. Ariz. R. Civ. P. 55(a)(2)-(4). The court may enter default judgment on motion of the plaintiff or after a hearing. Ariz. R. Civ. P. 55(b). A court may set aside a final default judgment under Rule 60(c) "[f]or good cause shown." Ariz. R. Civ. P. 55(c); see also Webb v. Erickson, 134 Ariz. 182, 185-86 (1982) (good cause standard applies to setting aside entry of default and to setting aside a default judgment).

¶13 Defendants' motion to vacate cited Rule 60(c) without specifying any subparagraph of the rule. Plaintiffs' response focused on Rule 60(c)(1), arguing Defendants had proffered "insufficient facts upon which the Court could predicate even a discretionary finding that the failure to answer was due to 'excusable neglect'" and analyzing factors relevant to a Rule 60(c)(1) determination. In their reply, Defendants madeno mention of Rule 60 and conceded "any reasonable person would have not acted in the manner resulting in the default." At oral argument in the superior court, Defendants stated at one point that they were relying on Rule 60(c)(6), but later argued that "in accordance with 60(c)(1), inexcusable inadvertence, neglect and any other reason justifying relief," the default judgment should be set aside. On appeal, Defendants rely solely on Rule 60(c)(6), so we confine our review to that provision.

¶14 A trial court may vacate a default judgment "when, but only when, the moving party has made an adequate showing of each of the following elements: (1) that it acted promptly in seeking relief from the default judgment, (2) that its failure to file a timely answer was excusable under one of the six subdivisions of Rule 60(c) . . . and (3) that it had a meritorious defense." United Imps. & Exps., Inc. v. Superior Court, 134 Ariz. 43, 45 (1982). Although the law "favors resolution on the merits" and vests "broad discretion" in the trial court, its discretion to set aside a default judgment "is a legal, and not an arbitrary or personal discretion. There must be some legal justification for the exercise of the power, some substantial evidence to support it." Id.; see also Richas, 133 Ariz. at 514 ("[A] proper showing of facts is 'a prerequisite to the exercise' of the discretion given the trial court.").

¶15 The Gonzalezes first contend Defendants did not act promptly in seeking relief. The record, though, supports Defendants' contention that Plaintiffs not only failed to make this argument in the superior court, they conceded the timeliness of the motion to vacate. We therefore decline to address Plaintiffs' contrary argument urged for the first time on appeal. See In re MH 2008-002659, 224 Ariz. 25, 27, ¶ 9 (App. 2010) ("We do not consider arguments raised for the first time on appeal except under exceptional circumstances.").

¶16 Defendants assert that "[t]he default judgment came as a complete surprise to Companion." But it is undisputed that Companion learned of Plaintiffs' claim shortly after the accident and that its designated agents — Precision and Carl Warren — received notice of all relevant proceedings. See Mayhew v. McDougall, 16 Ariz. App. 125, 129 (1971) (Notice to independent adjuster acting for insurance company "was equivalent to notice to the Balboa Insurance Company itself."). This is not a situation where an insured failed to advise its insurer of an action and the insurer "through no fault of its own . . . has not had the opportunity of defending a suit on the merits." Camacho v. Gardner, 104 Ariz. 555, 560 (1969).

¶17 In granting the motion to vacate, the superior court did not mention the meritorious defense requirement. "To set aside a default without substantial...