Savarese v. Edrick Transfer & Storage, Inc.

• Decision Date: 10 March 1975
• Docket Number: No. 73-2160,73-2160
• Citation: 513 F.2d 140
• Parties: Frank SAVARESE, Plaintiff-Appellee, v. EDRICK TRANSFER & STORAGE, INC., a Wisconsin Corporation, Defendant-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 140

513 F.2d 140

Frank SAVARESE, Plaintiff-Appellee, v. EDRICK TRANSFER & STORAGE, INC., a Wisconsin Corporation Defendant-Appellant.

No. 73-2160.

United States Court of Appeals Ninth Circuit.

March 10, 1975.

Duane W. Bolze (argued), Phoenix, Ariz., for defendant-appellant.

John G. Thomas (argued), Scottsdale, Ariz., for plaintiff-appellee.

OPINION

Before LUMBARD, ^* KOELSCH and WRIGHT, Circuit Judges.

LUMBARD, Circuit Judge:

Defendant Edrick Transfer & Storage, Inc. (Edrick), appeals from the entry of a default judgment against it in the District Court of Arizona.

Plaintiff Frank Savarese filed his complaint in this action on April 6, 1972, in the Superior Court of Maricopa County, Arizona. He alleged that Edrick owed him $6,501.83 in unpaid wages and commissions and $5,400.00 that it had received from him for payment of a truck which it had later repossessed. Savarese also alleged that he had in his possession some $2,578.41 which belonged to defendant and which he asked the court to permit him to apply to his claim of $11,901.83. Edrick removed the case to the district court on May 31, 1972. It thereafter took no action and a default was entered on January 22, 1973. The district court denied Edrick's motion under Fed.R.Civ.P. 55(c) to set aside the entry of default and entered a default judgment on March 29, 1973, which awarded Savarese the relief sought in his complaint. The district court later denied a motion under Fed.R.Civ.P. 60(b) to vacate its judgment and Edrick appealed.

On appeal Edrick argues that the default judgment should be set aside for five reasons: first, it claims that the district court lacked subject-matter jurisdiction because less than $10,000 was in controversy; second, that its time to answer had not expired before entry of default; third, that no personal jurisdiction existed because the summons and complaint were not properly served; fourth, that it was not subject to the long-arm jurisdiction of Arizona courts because it was not "doing business" in the state of Arizona; and fifth, that the district court erred in not granting its motion to set aside the entry of default and its motion to vacate the default judgment.

I.

Edrick claims that the complaint does not satisfy the $10,000 jurisdictional amount requirement of 28 U.S.C. §§ 1332, 1441. ¹ We disagree. As found by the district court, the amount in controversy here is $11,901.83. That is the amount requested by Savarese and that is the amount that the district court awarded to him. ² The $2,578.41 which the complaint stated Savarese possessed and owed to Edrick should not be subtracted from the $11,901.83 in order to calculate the jurisdictional amount. If the court had awarded Savarese $9,323.42, he would not have received what he was claiming because he then would have no legal right to continue to retain Edrick's $2,578.41. Edrick could pay Savarese $9,323.42 and then sue him for its $2,578.41 and it would undoubtedly win. Thus the amount in controversy was $11,901.83. ³

II.

Edrick's second argument is that the default judgment was improperly entered because its time to file an answer had not expired. Since Edrick is located out of Arizona, Savarese obtained service of the summons and complaint by mailing it to Edrick in May 1972. However, Savarese's attorney failed to file an affidavit of service in the district court until December 19, 1972. Under Arizona rules of procedure service is not complete until 30 days after such an affidavit is filed. Ariz.R.Civ.P. 4(e)(2)(a), 16 A.R.S. Thus, under Arizona rules service was not complete until January 18, 1973. Arizona rules would then give Edrick 30 days in which to file an answer. Ariz.R.Civ.P. 4(e)(4). Default was entered on January 22, 1973, only four days after service was complete under the Arizona rules. Edrick argues that default was improperly entered since its time to answer had not expired.

In advancing this argument on appeal Edrick ignored rule 81(c) of the Federal Rules of Civil Procedure even though it had been cited by the district court. That rule provides in part:

In a removed action in which the defendant has not answered, he shall answer or present the other defenses or objections available to him under these rules within 20 days after the receipt through service or otherwise of a copy of the initial pleading setting forth the claim for relief upon which the action or proceeding is based, or within 20 days after the service of summons upon such initial pleading, then filed, or within 5 days after the filing of the petition for removal, whichever is longest.

There is no question that Edrick failed to file an answer within 5 days of filing its removal petition or within 20 days after receipt of the initial pleading by "service or otherwise."

However, in its reply brief filed in this court Edrick focuses on the second clause of rule 81(c) and claims that service of the summons was not complete until January 18, 1973, because of the Arizona rule cited previously. We disagree. The second clause of rule 81(c) was intended to cover cases arising in states which require only service of a summons and not a complaint:

The phrase, "or within 20 days after the service of summons upon such initial pleading, then filed," was inserted . . . because in several states suit is commenced by service of summons upon the defendant, notifying him that the plaintiff's pleading has been filed with the clerk of the court. Thus, he may never receive a copy of the initial pleading.

Supreme Court's Explanatory Note in 7 Moore's Federal Practice P 81.01(19) at 81-33 n *. ⁴ Thus, the second clause of the rule was viewed as more restrictive than the first because a defendant would have to file an answer within 20 days of service of a summons even though the complaint to which the answer would have to be directed was not served.

We think it is clear that the intent of the rule makers was to ensure the speedy filing of answers in removed actions. See generally 7 Moore's Federal Practice PP 81.01(12)-(20); cf. Mahoney v. Witt Ice & Gas Co.,131 F.Supp. 564, 568 (W.D.Mo.1955). The interpretation of rule 81(c) urged by Edrick would defeat the purpose of speedily processing removed cases. Thus, we conclude that the second clause of rule 81(c) applies only to cases arising in states which do not require service of both a summons and complaint. Since Arizona does require service of both, Ariz.R.Civ.P. 4(d), this clause is not available to Edrick. Edrick should have filed its answer by June 5, five days after it petitioned for removal. ⁵

Even if we did not adopt the foregoing interpretation of rule 81(c)'s second clause, we would conclude that Edrick was in default. The removal statute provides that if service has not been completed prior to removal, it may be completed under the federal rules. 28 U.S.C. § 1448. See also Fed.R.Civ.P. 81(c). ⁶ There is no federal rule that specifies the time at which service becomes complete. ⁷ However, service was unquestionably complete when the affidavit of service was filed in federal court on December 19, 1972. See Fed.R.Civ.P. 4(g). In such a case rule 81(c) would require Edrick to answer by January 11, 1973, or 11 days prior to entry of default. Thus we conclude that Edrick's time to answer had expired prior to default.

III.

Edrick's third argument is that the state court lacked personal jurisdiction over it (and therefore no derivative federal jurisdiction exists) ⁸ because the service of the summons and complaint failed to comply with the Arizona Rules of Civil Procedure which provide:

Service shall be made as follows:

6. Upon a domestic or foreign corporation or upon a partnership or other unincorporated association which is subject to suit under a common name, by delivering a copy of the summons and of the complaint to (a partner,) an officer, a managing or general agent, or to any other agent authorized by appointment or by law to receive service of process and, if the agent is one authorized by statute to receive service and the statute so requires, by also mailing a copy to the defendant.

Ariz.R.Civ.P. 4(d)(6). ⁹ Edrick claims that service was inadequate because the registered mail receipt indicates that the summons and complaint was received by James L. Plale, who did not hold any of the positions listed in the rule. We find this argument unpersuasive.

Under Arizona law the requirements of rule 4(d)(6) are met if process is served on a person in a position such that it is "reasonably certain" that the corporation will receive actual notice of the suit. Schering Corp. v. Cotlow, 94 Ariz. 365, 385 P.2d 234, 237 (1963) (en banc). Here the corporation received actual notice; it promptly removed the case to the federal court. In fact, the vice president of Edrick in his petition for removal stated that "a copy of the Summons and Complaint was served on petitioner . . . on May 4, 1972." Record at 1. ¹⁰

The only issue is whether Plale held such a position that one could assume with reasonable certainty that he would notify the proper officials of Edrick. Plale was Edrick's dispatcher. Since this job largely entails receiving and sending communications, we think that it was reasonably certain that Plale would forward any legal papers to the proper official of Edrick. The fact that he did so promptly lends support to our conclusion.

This result is supported by decisions of the Arizona courts. They indicate that a person is an agent of a corporation so long as he is a responsible employee of the corporation. See Schering Corp. v. Cotlow, supra (sales representative); Arizona Mutual Auto Ins. Co. v. Bisbee Auto Co., 22 Ariz. 376, 197 P. 980 (1921) (insurance salesman); Safeway Stores, Inc. v. Ramirez, 1 Ariz.App. 117, 400 P.2d 125 (1965) (store manager). See also Koninklijke Luchtvaart Maatschappij N.V. v. Curtiss Wright Corp., 17 F.R.D. 49 (S.D.N.Y.1955) (federal rule service on corporate officer's secretary). We find it no...