Grant v. Benson

• Court: Arizona Court of Appeals
• Writing for the Court: PATRICK IRVINE
• Decision Date: 17 November 2011
• Docket Number: 1 CA-CV 10-0493
• Citation: Grant v. Benson, 1 CA-CV 10-0493 (Ariz. App. Nov 17, 2011)
• Parties: STUART GRANT and MARCIA GRANT, Plaintiffs/Appellants/ Cross-Appellees, v. L. WILLIAM BENSON and ARLENE BENSON, husband and wife, Defendants/Appellees/ Cross-Appellants.

STUART GRANT and MARCIA GRANT, Plaintiffs/Appellants/ Cross-Appellees, v. L. WILLIAM BENSON and ARLENE BENSON, husband and wife, Defendants/Appellees/ Cross-Appellants.

1 CA-CV 10-0493

COURT OF APPEALS STATE OF ARIZONA DIVISION ONE DEPARTMENT A

Dated: November 17, 2011

NOTICE: THIS DECISION DOES NOT CREATE LEGAL PRECEDENT AND MAY NOT BE CITED

EXCEPT AS AUTHORIZED BY APPLICABLE RULES.

See Ariz.R.Sup.Ct. 111(c); ARCAP 28(c);

Ariz.R.Crim.P. 31.24

MEMORANDUM DECISION

(Not for Publication - Rule 28, Arizona Rules of Civil Appellate Procedure)

Appeal from the Superior Court in Coconino County

Cause Nos. CV2007-0236; CV2008-0330 (Consolidated)

The Honorable Danna D. Hendrix, Judge

AFFIRMED IN PART; VACATED IN PART; REMANDED

Eckley & Associates, P.C.

by J. Robert Eckley

Kevin B. Sweeney

Michael Raine

Attorneys for Plaintiffs/Appellants/Cross-Appellees

Phoenix

Deconcini McDonald Yetwin & Lacy, P.C.

by Shelton L. Freeman

Attorneys for Defendants/Appellees/Cross-Appellants

Flagstaff

IRVINE, Judge ¶1 Plaintiffs Stuart and Marcia Grant, husband and wife (the "Grants"), appeal the amount of damages awarded for default judgment against defendants William and Arlene Benson, husband and wife (the "Bensons"), in their contract and tort claims. The Grants also challenge the trial court's denial of a motion to extend the time to file an affidavit of attorneys' fees. The Bensons cross-appeal the denial of their motions to set aside default judgment, and raise other arguments, including that the default judgment was void under the contract. For the reasons that follow, we vacate the award in part and remand for a determination of contract damages for loss rents.

FACTS AND PROCEDURAL BACKGROUND

¶2 In 1999, the Bensons moved into a house built by Casa Natural (the "Builder"). Three years later, the Bensons sold the house to the Grants. As part of the contract, the Bensons gave the Grants a "seller property disclosure statement" disclosing only a roof leak, which was then repaired to the Grants' satisfaction.

¶3 After the purchase, the Grants used the house as a rental property. Over three years later, the Grants discovered mold and, upon further inspection, other structural defects in the house requiring significant repairs. By letter dated March 26, 2007, the Grants demanded damages or rescission of the contract and offered mediation if the Bensons responded beforeApril 1. The Bensons received the letter in March or early April, but did not respond.

¶4 On April 2, 2007, the Grants filed a complaint against the Builder, the Bensons and unnamed fictitious defendants for contract and tort damages. The complaint alleged in part that the Bensons concealed or failed to fully disclose the defects and extent of repairs and gave false and incomplete information in connection with the sale. The complaint did not state the amount of damages but asserted that it would be proven at trial.

¶5 On June 4, 2007, the Bensons were served with the complaint, summons, offer to mediate under the contract, and other court documents. In a letter to the Grants' attorney dated June 9, 2007, the Bensons answered "requests," denied liability and attached supporting documents. Believing this was sufficient, the Bensons did not file anything with the superior court.

¶6 On July 18, 2007, the Grants filed an application for entry of default, and the Bensons received notice of the filing. On August 9, the Grants filed a motion to enter default judgment as to the liability of the Bensons. That same month, the Bensons met with a paralegal who advised them to retain counsel. In September, they met with an attorney to discuss the case, but did not immediately retain him.

¶7 On November 19, 2007, the Bensons' counsel filed a notice of appearance along with a motion to set aside the entry of default. The motion argued there was good cause to set aside the entry of default under Arizona Rule of Civil Procedure ("Rule") 55(c) and Rule 60(c), because they believed they did all that was required by contacting the Grant's attorney, who allegedly told them that "there was nothing for [the Bensons] to do at the (then) present time." The trial court denied the motion, finding that "it was over 100 days before [the Bensons] requested that default be set aside."

¶8 In November 2008, the trial court ruled that the Bensons were entitled to present evidence of comparative fault between them and the Builder. The trial court stayed the ruling to allow the Grants to file a special action petition, which this Court declined.

¶9 In April 2009, the Bensons, now represented by different counsel, filed a renewed motion to set aside default. The Bensons argued the default judgment was void because the Grants had agreed to waive all claims after the close of escrow unless the Bensons had actual knowledge of the defects, and because the complaint failed to specifically allege that fact, it failed to state a claim for relief. The trial court rejected this argument and again denied the motion to set aside.

¶10 Meanwhile, the Grants had settled with the Builder for $350,000. In July 2009, the Grants sought to preclude evidence of their own negligence or that of non-party defendants other than the Builder. The Grants argued comparative fault was an affirmative defense that had been waived due to the entry of default. The trial court granted the Grants' motion to preclude evidence of their own negligence. The court then granted a stay of the proceedings for the Bensons to file a special action petition, which this Court declined.

¶11 Following a two-day evidentiary hearing, the trial court found that the Grants proved damages in the amount of $473,120. Subtracting from this the $350,000 settlement with Builder, the trial court determined that the Bensons owed the remaining $123,119.94. The trial court declined to award damages for "loss of rent or reduction in value due to repairs," because they were "a result of the actions of [Builder] alone."

¶12 The court preliminarily awarded the Grants attorneys' fees and costs. The Grants' attorney, however, failed to timely file an affidavit of fees within twenty days pursuant to Rule 54(g), and sought an extension of time. The Bensons objected and argued that they would be prejudiced by it because the only reason for their liability was their own untimely response to the entry of default. The trial court denied an extension andawarded no attorneys' fees, but awarded costs in the amount of $14,393.04.

¶13 The trial court denied the Grants' motion for new trial. The Grants timely appeal and the Bensons timely cross-appeal.

DISCUSSION

1. The Bensons' Cross-claims

¶14 The Bensons contend that the trial court erred in refusing to set aside the entry of default. Because resolution of this issue in the Bensons' favor would render the remaining issues moot, we address it first.

¶15 We review a superior court decision on a motion to set aside default judgment for a clear abuse of discretion. Goglia v. Bodnar, 156 Ariz. 12, 16, 749 P.2d 921, 925 (App. 1987). Although the Bensons argue substantive reasons for why the default judgment is invalid, we review only the denial of the motion to set aside, not the propriety of the underlying judgment. Hirsch v. Nat'l Van Lines, Inc., 136 Ariz. 304, 311, 666 P.2d 49, 56 (1983).

¶16 Under Rule 55(c), a court may set aside a default judgment in accordance with Rule 60(c). The moving party must make an adequate showing (1) it acted promptly in seeking relief from the default judgment, (2) its failure to file a timely answer was excusable under one of the subdivisions of Rule60(c), and (3) it had a meritorious defense. United Imps. & Exps., Inc. v. Superior Court (Peterson), 134 Ariz. 43, 45, 653 P.2d 691, 693 (1982).

¶17 Here, the trial court implicitly found that the Bensons failed to act promptly in seeking relief.

The Court finds that the defendants, the Bensons, were served and that default was entered in July 2007, that prior to that time they had been engaged in providing discovery to the plaintiffs in this case, that even if they called and talked to [the Grants' attorney] and she indicated that there was nothing for them to do, that conversation occurred prior to the motion for entry of default and the entry of default.

The Court further finds that it was over 100 days before they requested that that default be set aside. The Court cannot find good cause again to set aside the default.

These findings are not contested. Because we defer to the trial court's determination that the Bensons did not act reasonably in the delay, we find no abuse of discretion in denying the motion to set aside the default. See Hilgeman v. Am. Mortg. Secs., Inc., 196 Ariz. 215, 220, ¶ 15, 994 P.2d 1030, 1035 (App. 2000).

¶18 The Bensons further contend that the default judgment was legally void because the Grants had no right to recover damages under the express terms of the contract. The Bensons assert that the contract allocates risk of property damage to the Grants such that the Bensons' only liability after thepurchase is for defects they knew about but did not disclose. Because the complaint did not expressly state that the Bensons had actual knowledge of the defects, the Bensons argue the Grants are not entitled to any relief. Accordingly, they argue the complaint fails to state a claim, and the default judgment is void. The trial court rejected this argument in the Bensons' renewed motion to set aside the default.

¶19 By entry of default judgment, a defendant admits all material allegations, but not facts that are not well-pleaded or conclusions of law. S. Ariz. Sch. For Boys, Inc. v. Chery, 119 Ariz. 277, 281-82, 580 P.2d 738, 742-43 (App. 1978). Therefore, a default judgment cannot be based on a complaint which fails to state a cause of action. Ness v. Greater Ariz. Realty, Inc., 21 Ariz. App. 231, 232, 517 P.2d 1278, 1279 (App. 1974).

¶20 In this case, the complaint pled sufficient facts to state several causes of action in tort, which we need...