Macquarie Mortgs. USA, Inc. v. C.P. Home Invs., Inc.

• Decision Date: 23 February 2012
• Docket Number: 1 CA-CV 11-0257
• Parties: MACQUARIE MORTGAGES USA, INC., a Delaware corporation, Plaintiff/Appellee/ Cross-Appellant, v. C.P. HOME INVESTMENTS, INC., an Arizona corporation, Defendant/Appellant/ Cross-Appellee
• Court: Arizona Court of Appeals

MACQUARIE MORTGAGES USA, INC., a Delaware corporation, Plaintiff/Appellee/ Cross-Appellant,

v.C.P. HOME INVESTMENTS, INC., an Arizona corporation, Defendant/Appellant/ Cross-Appellee

1 CA-CV 11-0257

COURT OF APPEALS STATE OF ARIZONA DIVISION ONE DEPARTMENT A

Dated: February 23, 2012

NOTICE: THIS DECISION DOES NOT CREATE LEGAL PRECEDENT ND MAY

NOT BE CITED EXCEPT AS AUTHORIZED BY APPLICABLE RULES.

See Ariz. R. Supreme Court 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(Not for Publication - (Rule 28, Arizona Rules of Civil Appellate Procedure)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 Maricopa County

Cause No. CV2010-007320

The Honorable Gary E. Donahoe

AFFIRMED

Dioguardi Flynn, LLP

By Mark Dioguardi

Attorneys for Plaintiff/Appellee/Cross-Appellant

Scottsdale

GUST ROSENFELD, PLC

By Richard A. Segal

Timothy W. Barton

Frank S. Tomkins

Attorney for Defendant/Appellant/Cross-Appellee

Phoenix

GOULD, Judge

¶1 C.P. Home Investments, Inc. ("CP Home") appeals the denial of its Rule 60(c)(1) motion for relief from default judgment. For the reasons that follow, we affirm. On Macquarie Mortgages USA, Inc.'s ("Macquarie") cross-appeal, we affirm the award of attorneys' fees incurred by Macquarie in connection with its defense against CP Home's request for injunctive relief.

Factual and Procedural Background

¶2 Macquarie extended a line of credit ("LOC") to Ronald and Andrea Orban ("the Orbans"). The LOC was secured by a first deed of trust on real property located in Waddell ("the Property") and owned by the Orbans. The Orbans took out other loans secured by the Property. In November of 2005, the Orbans temporarily paid down the LOC to zero. The Orbans had Camelback Title Agency ("Camelback Title") prepare a Line of Credit Termination ("Termination") and a Release and Reconveyance of Macquarie's deed of trust ("Release"). Macquarie never received the Termination. The Orbans continued utilizing the LOC. In April of 2006, despite the fact that the Orbans owed Macquarie more than $449,000.00 on the LOC, Camelback Title recorded the Release. Camelback Title did not send Macquarie notice of its intent to file the Release as required by Arizona RevisedStatutes ("A.R.S.") section 33-707(E). As a result, Macquarie did not contest the recording of the Release. Thus, when Deutsche Bank National Trust Company ("Deutsche"), a lender subordinate to Macquarie, foreclosed on the Property, Macquarie was not paid. Deutsche purchased the Property at trustee's sale, and was issued a trustee's deed to the Property. Thereafter, Deutsche sold the Property to CP Home.

¶3 CP Home is a closely held Arizona corporation. Dora German and Jose Lopez are directors of CP Home. Both reside at the Property. After the Orbans defaulted on the LOC, Macquarie filed a complaint against the Orbans, Camelback Title, and CP Home, alleging, among other claims, judicial foreclosure of its deed of trust.

¶4 On five separate occasions over the course of four months, Macquarie served CP Home's statutory agent, Elba Nunez, with the lawsuit and default pleadings. After default judgment was entered against it, CP Home moved to set aside the default and obtained a preliminary injunction prohibiting the sale of the Property until after the trial court ruled on its motion.

¶5 In connection with CP Home's motion to set aside, Dora German stated that she was not aware of the lawsuit until early August 2010, when she received a copy of the Sheriff's Notice of Sale of Real Property. The record is silent as to whether Mr.Lopez, the other director, received the documents, voice mails or notice of the lawsuit. Mr. Gutierrez also submitted a declaration admitting that the statutory agent advised him of the lawsuit.¹ His declaration states after being notified of the lawsuit and impending default judgment he confirmed through Guaranty Title Agency ("GTA"), the company that handled the escrow for the Property, that CP Home had purchased title insurance through LSI Title Agency Inc. ("LSI").

¶6 The statutory agent testified at her deposition that she called Ms. German repeatedly and left voice mails informing her that she had received legal documents, but Ms. German never returned any of the statutory agent's calls. The statutory agent also testified that she sent copies of all but one of the legal documents she received on behalf of CP Home from Macquarie to Ms. German and Mr. Lopez at the address she had on file for them.² Finally, she testified that none of these envelopes were returned to her as undeliverable.

¶7 After the trial court denied CP Home's motion to set aside the default judgment, the Property was sold at a sheriff's sale to Macquarie.³

¶8 We have jurisdiction to review the order denying CP Home's motion for relief from default judgment pursuant to A.R.S. § 12-2101(A)(2) (West 2012) as a "special order made after final judgment."⁴

Discussion

¶9 We review the denial of a motion to set aside a default judgment for an abuse of discretion. Gen. Elec. Capital Corp. v. Osterkamp, 172 Ariz. 185, 188, 836 P.2d 398, 401 (App. 1992). We note, however, that the law prefers resolution of actions on their merits rather than by default and any doubts should be resolved in favor of the party seeking to set aside the default judgment. Id. The superior court is vested withbroad discretion when deciding a motion to set aside a default judgment and its ruling will not be overturned on appeal absent a clear abuse of discretion. Richas v. Superior Court, 133 Ariz. 512, 514, 652 P.2d 1035, 1037 (1982). The exercise of discretion must be supported "by facts or sound legal policy." City of Phoenix v. Geyler, 144 Ariz. 323, 328-29, 697 P.2d 1073, 1078-79 (1985).

¶10 The entry of default may be vacated and set aside "for good cause shown," according to Arizona Rule of Civil Procedure 55(c). The good cause necessary for setting aside or vacating entry of default is the same as that required for relief from a judgment by default under Rule 60(c). DeHoney v. Hernandez, 122 Ariz. 367, 371, 595 P.2d 159, 163 (1979); Richas, 133 Ariz. at 514, 652 P.2d at 1037.

¶11 A party seeking relief from a default judgment pursuant to Rule 60(c) must establish each of the following: (1) the failure to file a timely answer was excusable under one of the subdivisions of Rule 60(c), (2) the party had a meritorious defense to the action, and (3) the party acted promptly in seeking relief from the default judgment.⁵ UnitedImps. & Exps., Inc. v. Superior Court, 134 Ariz. 43, 45, 653 P.2d 691, 693 (1982); Almarez v. Superior Court, 146 Ariz. 189, 190, 704 P.2d 830, 831 (App. 1985).

¶12 CP Home contends that the default judgment should have been set aside because it demonstrated excusable neglect under Rule 60(c)(1). Because we disagree, we need not decide whether CP Home established that it had a meritorious defense.

I. CP Home Did Not Demonstrate Excusable Neglect

¶13 Generally, default judgments are disfavored; however, this does not mean that every default judgment will be set aside. Richas, 133 Ariz. at 514, 652 P.2d at 1037. As the superior court noted, Ms. German and Mr. Lopez chose to take title to the home in the name of a corporation. In Arizona, if a statutory agent is served with a lawsuit, the superior court examines the conduct of the statutory agent to determine whether there is excusable neglect. W. Coach Corp. v. Mark V Mobile Homes Sales, Inc. , 23 Ariz. App. 546, 549, 534 P.2d 760, 763 (1975). Failure to inform its principal of the service of a lawsuit due to mere carelessness on the part of a duly appointed statutory agent is not excusable neglect for failure to defend a lawsuit. Postal Benefit Ins. Co. v. Johnson, 64 Ariz. 25, 34, 165 P.2d 173, 178 (1946). See also, Lynch v. Ariz. Enter. Mining Co. , 20 Ariz. 250, 253, 179 P. 956, 957 (1919) (failureto notify its principal because the statutory agent did not know its address was not excusable neglect).

¶14 The court did not abuse its discretion by concluding that CP Home failed to establish excusable neglect to set aside the default judgment. CP Home acknowledges that its statutory agent was served with the complaint and default papers and made numerous attempts to notify the principals via mail and phone.⁶ The superior court provided a detailed explanation for its finding that there was no excusable neglect, explaining that (1) the statutory agent was served with the initial complaint, (2) the statutory agent was served with the amended complaint, (3) the statutory agent received the application for default in April 2010, but Defendant took no action to defend the case, (4) Defendant was mailed a copy of Plaintiff's motion seeking entry of the default judgment on June 24, 2010, and (5) the default hearing was held, again with Defendant doing nothing to defend the action prior to the hearing to vacate the entry of default. Thus, "Defendant was advised at least five times thatthere was a lawsuit against it that required Defendant's attention," but "did not act as a reasonably prudent person would act under the circumstances."

¶15 CP Home's effort to show excusable neglect based on the actions of Mr. Gutierrez lack merit. The record is not clear as to why CP Home's statutory agent provided notice to Mr. Guitierrez; Mr. Gutierrez was not an officer or director of the corporation, and there is no evidence before us that he was acting as the agent of CP Home or its principals. In any event, upon receipt of the default pleadings from Ms. Nunez, Mr. Gutierrez gave the documents to Marie Soja at GTA, and "[a]t that time, Ms. Soja indicated that she would turn over the documents to the appropriate people at GTA." Mr. Gutierrez provides no information regarding Ms. Soja's position with GTA. In addition, Ms. Soja provided no assurance whatsoever that GTA would take any action to defend CP Home in the lawsuit; Ms. Soja did not even promise to advise LSI of the problem.

¶16 Assuming that CP Home could rely upon the actions of Mr. Gutierrez to establish...