Leyva v. Dome Ctr., L.L.C.

• Decision Date: 12 February 2015
• Docket Number: No. 1 CA-CV 13-0587,1 CA-CV 13-0587
• Parties: JOSE and ROSA LEYVA, husband and wife, Plaintiffs/Appellees, v. DOME CENTER, L.L.C., an Arizona limited liability company; ROBERT TUFFLY, Defendants/Appellants.
• Court: Court of Appeals of Arizona

JOSE and ROSA LEYVA, husband and wife, Plaintiffs/Appellees, v. DOME CENTER, L.L.C., an Arizona limited liability company;ROBERT TUFFLY, Defendants/Appellants.

No. 1 CA-CV 13-0587

ARIZONA COURT OF APPEALS DIVISION ONE

February 12, 2015

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 UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.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

No. S1400CV200700849

The Honorable Lawrence C. Kenworthy, Judge

AFFIRMED

COUNSEL

Wong Fujii Carter, P.C., Phoenix

By Matthew A. Klopp, Rick K. Carter

Counsel for Plaintiffs/Appellees

Garcia, Kinsey & Villarreal, P.L.C., Yuma

By Arturo I. Villarreal

Counsel for Defendants/Appellants

MEMORANDUM DECISION

Judge Kenton D. Jones delivered the decision of the Court, in which Presiding Judge John C. Gemmill and Judge Donn Kessler joined.

JONES, Judge:

¶1 Dome Center, L.L.C. and its sole member, Robert Tuffly, (collectively, Tuffly) appeal from the trial court's denial of their motion to set aside a default judgment. Tuffly also challenges the trial court's order striking his answer as a sanction for failing to appear at a status hearing. For the following reasons, we affirm.

FACTS¹ AND PROCEDURAL HISTORY

¶2 In 2006, Jose and Rosa Leyva, after negotiations with Tuffly, purchased a two-acre parcel of property from Dome Center, L.L.C. for $185,000. In 2007, the Levyas sued Tuffly,² seeking rescission of the sale for breach of contract. Tuffly filed a timely answer. The parties subsequently entered four separate stipulations to continue the case on the inactive calendar.

¶3 Thereafter, in April 2009, the Leyvas moved for summary judgment. In May 2009, by stipulation of the parties, the Leyvas also filed a first amended complaint, adding a claim for "Negligent and/or Fraudulent Misrepresentation." Tuffly filed an answer to the first amended complaint and the motion for summary judgment was fully briefed by the parties. In July 2009, the parties again stipulated to continue the case on the inactive calendar. The trial court held oral argument in September 2009 anddenied the Leyva's motion. The parties then entered into two more stipulations to continue on the inactive calendar in December 2009 and August 2010.

¶4 In November 2010, counsel for Tuffly moved to withdraw from representation, asserting Tuffly had not communicated with him since late June 2010, and he had not been paid for services despite repeated requests. The trial court set a hearing on that motion for January 3, 2011. Although a copy of the motion and notice of the hearing were mailed to Tuffly, no objection or response was filed. Following the hearing, the trial court allowed counsel to withdraw, and set a "Status Hearing regarding Appointment of [Tuffly's] Counsel" for January 24, 2011.³ The court's order specifically directed Tuffly to be "personally present at this hearing" and prepared to "advise th[e trial c]ourt as to the status of retaining counsel" so "the Court [could] set deadlines as to any and all future proceedings."

¶5 Tuffly did not appear at the January 24, 2011 Status Hearing as ordered. The Leyvas argued Tuffly had a long history of being non-responsive and non-participatory and had now failed to comply with a court order directing his appearance, despite receiving notice, and recommended the trial court strike Tuffly's answer as a sanction for his failure to appear. After considering the Leyvas' argument, the court struck Tuffly's answer, but instructed the Leyvas to proceed with a default under Arizona Rule of Civil Procedure 55(a), requiring them to file and serve an application for default upon Tuffly, thereby providing him the opportunity to respond and prevent default from entering. See Ariz. R. Civ. P. 55(a)(1), (4). Effectively, the court placed the ultimate disposition of the matter in Tuffly's hands.

¶6 As directed, on January 26, 2011, the Leyvas filed an application for entry of default and supporting affidavit, and mailed a copy of each to Tuffly; Tuffly did not respond to the application and, accordingly, default entered. Rather than immediately seeking a default judgment, the Leyvas moved for two additional continuances on the inactive calendar, in April and August 2011, which were granted. Then, on December 15, 2011, nearly eleven months after the filing of the application for entry of default, the Leyvas alleged damages in a sum certain and filed a motion for default judgment pursuant to Rule 55(b)(1), and mailed a copy to Tuffly. Again receiving no response, the trial court entered a signed default judgment onDecember 23, 2011, and awarded the Leyvas their requested damages in the amount of $211,151.68 plus pre- and post-judgment interest, costs, and an unspecified amount for pre- and post-judgment attorneys' fees. In February 2012, the court entered a second judgment "[i]n addition to the [December 23, 2011] Judgment," at the Leyvas request, that awarded them an additional $31,497 in accrued attorneys' fees.

¶7 The Leyvas then sought to recover on the judgment. In March 2012, the Leyvas attempted to garnish bank accounts they believed belonged to Tuffly. These writs of garnishment were subsequently quashed and released in April 2012, with notice mailed to Tuffly's residence. Thereafter, in July 2012, the Leyvas applied for a writ of general execution on Tuffly's personal residence, and in August 2012, the Yuma County Sheriff levied upon that property.

¶8 On August 22, 2012, in response to the Notice of Sheriff's sale, Tuffly took his first action in more than eighteen months, moving to "vacate [the] judgment or in the alternative set aside [the] default judgment." Tuffly argued (1) the judgment was void for lack of subject matter jurisdiction because a default hearing was not conducted pursuant to Rule 55(b)(2); or in the alternative, (2) the judgment should be set aside pursuant to Rule 55(c), Rule 60(c), or principles of equity. He also sought a preliminary injunction enjoining the Leyvas from taking any action against his personal or real property. Tuffly averred in attached affidavits that he had not received notice of either the hearing regarding his prior counsel's motion to withdraw, or the January 24, 2011 Status Hearing, as a result of secretarial error.

¶9 In response, the Leyvas agreed the trial court should have conducted a damages hearing under Rule 55(b)(2) and conceded the default judgments were void, but argued Tuffly failed to demonstrate that entry of the underlying default should also be set aside. The trial court conducted a hearing on Tuffly's motion, during which it accepted the Leyvas' concession.⁴ The court then set an evidentiary hearing to address the motion to set aside the entry of default, specifically directing the parties to present evidence regarding whether Tuffly acted promptly in response to the entry of default and whether his failure to respond was the result of excusable neglect. The court also scheduled additional time to address theappropriate amount of damages, pursuant to Rule 55(b)(2), in the event the motion to set aside the default was denied.

¶10 At the evidentiary hearing,⁵ Tuffly did not contest proper service, but instead testified he never personally received notice because his office assistant had misfiled documents. He explained he recently searched his home office and discovered a box labeled "Dome property" containing the correspondence received relating to this case. Tuffly noted he was also litigating a different matter during this same time period in question that was referred to in his office as the "Dome property or the Dome project." Tuffly surmised his office assistant may have overheard a conversation between him and his attorney in which they decided not to pursue an appeal in the "Dome property" case, and that his assistant had thereafter filed every piece of correspondence regarding this matter, involving Dome Center, L.L.C., in the incorrect box without first presenting the documents to him.

¶11 Following the close of evidence, the trial court noted "inconsistencies between testimony provided [at the hearing] and filed affidavits [of Tuffly] concerning the mishandling/storage of documentation associated with this litigation by [Tuffly's] secretary," and found Tuffly "did not act promptly in moving to set aside default" and did not demonstrate a "showing of excusable neglect for failure to file a response to the application [for default judgment]" based upon the "unexplained neglect and unexplained error committed by [Tuffly's] secretary." Accordingly, it denied Tuffly's motion to set aside the default.⁶

¶12 After taking evidence pursuant to Rule 55(b)(2) and receiving post-hearing memoranda regarding damages, the trial court entered a default judgment in favor of the Leyvas, and awarded $193,687.32, plus costs and attorneys' fees; the court also directed the Leyvas to transfer the two-acre property back to Tuffly. Tuffly timely appealed. We have jurisdiction pursuant to Arizona Revised Statutes (A.R.S.) sections 12-120.21(A)(1)⁷ and -2101(A)(1).

DISCUSSION

¶13 Tuffly raises three issues on appeal: (1) whether the trial court erred in sanctioning Tuffly for violating a court order under Arizona Rule of Civil Procedure 16(f) without first conducting a "willfulness" hearing; (2) whether the trial court abused its discretion by striking Tuffly's answer; and (3) whether the trial court abused its discretion in failing to set aside the entry of default.

¶14 We review a trial court's choice of sanction for violation of a court order for an abuse of discretion. See Ariz. R. Civ. P. 16(f) State Bar committee note (citing Sears Roebuck & Co. v. Walker, 127 Ariz. 432, 437, 621 P.2d 938, 943 (App. 1980)); Green v. Lisa Frank, Inc., 221 Ariz. 138, 153, ¶ 40, 211 P.3d 16, 31 (App. 2009) (citing Hays v. Gama, 205 Ariz. 99, 102, ¶ 17, 67 P.3d 695, 698 (2003), and Flaska v. Little River Marine Constr. Co., 389 F.2d 885, 887 (5th Cir. 1968)) (discussing...