Mission Ins. Co. v. Cash, Sullivan & Cross

• Decision Date: 27 August 1991
• Docket Number: No. 1,CA-CV,1
• Citation: 822 P.2d 1,170 Ariz. 105
• Parties: MISSION INSURANCE COMPANY, a California corporation, Plaintiff-Appellant, v. CASH, SULLIVAN & CROSS, an Arizona corporation; William J. Murphy and Jane Doe Murphy, husband and wife, Defendants-Appellees. 90-031.
• Court: Arizona Court of Appeals

Page 1

822 P.2d 1

170 Ariz. 105

MISSION INSURANCE COMPANY, a California corporation, Plaintiff-Appellant, v. CASH, SULLIVAN & CROSS, an Arizona corporation; William J. Murphy and Jane Doe Murphy, husband and wife, Defendants-Appellees.

No. 1 CA-CV 90-031.

Court of Appeals of Arizona,

Division 1, Department A.

Aug. 27, 1991.

Review Granted Jan. 21, 1992. ^*

[170 Ariz. 106] Gallagher & Kennedy by Kevin E. O'Malley, Phoenix, and Simon, Buckner & Haile by Alan Buckner, Marina Del Rey, Cal., for plaintiff-appellant.

Jones, Skelton & Hochuli by Georgia A. Staton, William R. Jones, Jr., Phoenix, for defendants-appellees.

OPINION

BROOKS, Presiding Judge.

Mission Insurance Company (Mission) has appealed from the trial court's denial of its motion for relief from judgment under Rule 60(c)(6), Arizona Rules of Civil Procedure, and its alternative motion for permission to refile its complaint under A.R.S. section 12-504, the "savings statute." ¹ We find no abuse of discretion and therefore affirm.

FACTUAL AND PROCEDURAL HISTORY

On April 30, 1986, Mission filed an action against Cash, Sullivan & Cross, an insurance agency, and its agent, William J. Murphy (collectively "CSC"), alleging that Murphy's misrepresentation had induced Mission to issue an insurance policy and seeking to recover the more than $3,000,000 that it had paid pursuant to a claim on that policy. The California law firm of Simon, Buckner & Haile represented Mission in the action. Attorney William Z. Elliott, an associate of the firm, was responsible for handling the litigation. Mission also retained local counsel, Harris & Palumbo, P.C.

Before filing suit, Mission took sworn statements from various key witnesses. Later, the parties conducted discovery, serving and answering interrogatories and requests to produce documents. Both parties filed lists of witnesses and exhibits, and on April 23, 1987, Mission filed a motion to set and certificate of readiness. CSC filed a controverting certificate, which the trial court overruled, setting trial for September 28, 1987.

Meanwhile, Mission was also a party in a separate action, State v. Mission Insurance Co., Maricopa County Superior Court cause no. CV 87-06289. In that case, Judge Marilyn A. Riddell had appointed a receiver for Mission and had enjoined it and its agents from "[c]ommencing, prosecuting, continuing or enforcing any suit or proceeding in the name or on behalf of Mission Insurance Company" until the termination of the receivership, except by leave of the court. On August 11, 1987, CSC informed Judge Norman D. Hall, to whom the instant case was assigned, of the injunction. Judge Hall rescheduled the trial for December 28, 1987, and set a status conference for October 16. At the conference, Judge Hall informed the parties that he would consider a motion to lift the injunction. Pursuant to Rule V, Superior Court Uniform Rules of Practice, Judge Hall then continued the case on the inactive calendar for dismissal on April 18, 1988. ² In February of 1988, the case was again continued on the inactive calendar for dismissal on August 18, 1988.

On July 18, 1988, Mission filed a new list of witnesses and exhibits. CSC filed its own list on July 28, along with alternative motions, one to dismiss the complaint for failure to prosecute, the other seeking security for court costs should the injunction be lifted. On August 18, 1988, Mission filed a second motion to set and certificate of readiness.

Trial was set for December 12, 1988. On September 21, the trial court denied CSC's alternative motions without prejudice, giving Mission 90 days within which to obtain the court's leave to modify the injunction. Mission's local counsel, who had moved for permission to withdraw based upon attorney Elliott's refusal to respond to his repeated requests to secure a cost bond, was permitted to do so.

Some time in the fall of 1988, Elliott informed Mission that he needed $10,000 for a cost bond in order to lift the injunction. On November 7, Mission issued a check in that amount and sent it to Elliott's firm, but Elliott never filed a motion to lift the injunction. On November 15, 1988, the trial court vacated the December 12 trial date and placed the case on the inactive calendar for dismissal on February 15, 1989. The case was dismissed without prejudice on March 16, 1989.

Simon, Buckner & Haile hired George M. Dell, a retired judge of the California Superior Court, to investigate the matter. The investigation led Judge Dell to conclude that Elliott had engaged in a pattern of malfeasance on this and other files and that he had purposely engaged in a course of conduct directed at hiding his malfeasance from Mission and his firm. ³

Mission then retained new local counsel, who filed a motion for relief from the judgment pursuant to Rule 60(c), Arizona Rules of Civil Procedure, and an alternative motion for leave to file a new action pursuant to A.R.S. section 12-504. After oral argument, the court denied relief, finding as follows:

3. The Plaintiff's failure to comply with the orders of the court occurred because one of its law firm's lawyers, William Z. Elliott, failed to proceed with the lawsuit and deliberately misrepresented that he had, in fact, filed appropriate motions and taken other action on behalf of the Plaintiff.

4. In reviewing the actions of Mr. Elliott, the court does not find that "extraordinary circumstances" exist which would justify relief pursuant to Rule 60(c)(6) as set forth in that rule or Bickerstaff v. Denny's Restaurant, Inc., 141 Ariz. 629, 688 P.2d 637 (1984). See also Cline v. Ticor Title Ins. Co. of California, 154 Ariz. 343, 742 P.2d 844 (App.1987).

. . . . .

6. Plaintiff continually failed to abide by the orders of the court and simply sat on its rights rather than vigorously pursue its claim to a conclusion over a period verging on two years. As a result, Plaintiff is not entitled to the relief provided by Rule 60(c)(6), Arizona Rules of Civil Procedure, nor under the savings statute, A.R.S. § 12-504.

This appeal followed.

STANDARD OF REVIEW

An order denying relief under Rule 60(c)(6) will be reversed on appeal only for an abuse of discretion. Gorman v. City of Phoenix, 152 Ariz. 179, 182, 731 P.2d 74, 77 (1987). The same standard applies on review from an order denying relief under A.R.S. section 12-504. Flynn v. Cornoyer-Hedrick Architects, 160 Ariz. 187, 191, 772 P.2d 10, 14 (App.1988), aff'd sub nom. Jepson v. New, 164 Ariz. 265, 792 P.2d 728 (1990) (vacating Jepson v. New, 160 Ariz. 193, 772 P.2d 16 (App.1989)).

DILIGENCE

Relief under Rule 60(c)(6) is warranted only if the plaintiff shows " 'extraordinary circumstances of hardship or injustice,' other than or in addition to those circumstances set out in clauses (1) through (5)." Gorman, 152 Ariz. at 182, 731 P.2d at 77 (quoting Davis v. Davis, 143 Ariz. 54, 57, 691 P.2d 1082, 1085 (1985)) (other citations omitted). The plaintiff must demonstrate active, vigorous prosecution of the case; "diligence is the hallmark." Gorman, 152 Ariz. at 183, 731 P.2d at 78.

Our supreme court has consistently declined to set forth any specific set of circumstances that would qualify as extraordinary, unique, or compelling under Rule 60(c)(6). Id. at 182, 731 P.2d at 77. Nevertheless, Gorman and Jepson provide ample guidance for us in considering this question.

First, Jepson demonstrates that the level of activity in the early stages of a lawsuit is a less important consideration than activity toward the end. In Jepson, although virtually no activity had taken place before the case was first extended on the inactive calendar, from then on, the parties were actively engaged in prosecuting the case. 164 Ariz. at 276, 792 P.2d at 737. Similarly, the parties in Gorman were vigorously pursuing the case up to and even after its dismissal. 152 Ariz. at 180-81, 731 P.2d at 75-76.

In contrast, the instant case was active only in its infancy. That activity came to a halt soon after Judge Riddell issued the injunction. All that followed was a hollow attempt to comply with Uniform Rule V: hollow because it completely ignored the injunction, which was the major impediment in the case. The case had been virtually dormant for almost two years when it was dismissed.

Furthermore, this case is unlike Gorman and Jepson in a more important respect. Dismissal here did not occur merely because a Uniform Rule V dismissal deadline passed unnoticed. The injunction had brought the case to a stand-still, and the trial court made counsel aware that the case could not proceed unless the injunction were lifted. Under the circumstances, Mission's failure to take the steps necessary to remove the one obstacle in its path demonstrates a singular lack of diligence in pursuit of the case. Accordingly, barring application of the exception that Mission advocates (which we discuss below), we find no abuse of discretion in the trial court's denial of relief under Rule 60(c)(6).

Mission's bid for relief under the savings statute stands or falls upon the same exception for it suffers from the same defect. "[T]he diligence necessary to obtain relief under Rule 60(c) should also be part of the standard for relief under the savings statute." Jepson, 164 Ariz. at 273, 792 P.2d at 736.

THE "POSITIVE MISCONDUCT" RULE

As a general rule, the client is charged with the actions and omissions of its attorney. See, e.g., United Imports and Exports, Inc. v. Superior Court, 134 Ariz. 43, 46, 653 P.2d 691, 694 (1982); Coconino Pulp & Paper Co. v. Marvin, 83 Ariz. 117, 317 P.2d 550 (1957). Mission urges that the circumstances of this case warrant an exception to the rule.

Mission maintains that the "positive misconduct" of attorney Elliott created the sort of "extraordinary circumstances" necessary to obtain relief under Rule 60(c)(6). Citing cases from California and some federal circuits, Mission argues that when an attorney's conduct is so egregious as to constitute an...