Sprang v. Petersen Lumber, Inc.

• Decision Date: 27 March 1990
• Docket Number: CA-CV,No. 1,1
• Parties: Albert C. SPRANG, an unmarried man, Defendant-Appellant, v. PETERSEN LUMBER, INC., Plaintiff In Intervention-Appellee. 88-577.
• Court: Arizona Court of Appeals

Page 395

798 P.2d 395

165 Ariz. 257

Albert C. SPRANG, an unmarried man, Defendant-Appellant, v. PETERSEN LUMBER, INC., Plaintiff In Intervention-Appellee.

No. 1 CA-CV 88-577.

Court of Appeals of Arizona Division 1, Department B.

March 27, 1990.

Reconsideration Denied May 8, 1990.

Review Denied Oct. 2, 1990.

[165 Ariz. 259] Frost & Porter by G. Terris Porter, Show Low, for defendant-appellant.

Mangum, Wall, Stoops & Warden by Robert W. Warden, Flagstaff, for plaintiff in intervention-appellee.

OPINION

CLABORNE, Presiding Judge.

Sprang filed this appeal seeking review of the trial court's grant of summary judgment in favor of Petersen Lumber, Inc. (Petersen Lumber). The trial court found that Petersen Lumber was the true owner of ten acres of property in Navajo County, free and clear of any claim of Sprang or any person or entity claiming under him. Because we find that Sprang is the only party who holds a valid interest in the property, we reverse and remand with instructions to enter partial summary judgment in favor of Sprang.

I. FACTS AND PROCEDURAL BACKGROUND

In December 1979, Albert Sprang (Sprang) sold ten acres of property in Navajo County to Madrid Industries, Inc. (Madrid) for $135,000. Sprang took a beneficiary's interest in the deed of trust as security for deferred payment of the purchase price. Madrid subsequently defaulted on the obligation. Sprang initiated an action in Navajo County to foreclose Madrid's interest in the property. On March 27, 1986, Sprang obtained a sheriff's deed to the property, which was recorded on April 17, 1986.

When Madrid had possession of the property, it failed to pay the property taxes. Based on A.R.S. § 42-387, the county treasurer published notice that because taxes on the property were delinquent, the property would be sold at a public auction. Sprang did not receive actual notice of the tax sale as required by A.R.S. § 42-387(C). Western States Development Co. (Western States) purchased the property on February 12, 1986, for $5,838.47, the amount of delinquent taxes.

On April 21, 1986, Western States initiated an action in Coconino County against Madrid, Sprang, the Internal Revenue Service, the Arizona Department of Revenue, and several other parties to foreclose their right to redeem the property. Western States accomplished personal service on Madrid, the Internal Revenue Service, and the Arizona Department of Revenue. Western States attempted to serve Sprang personally. It mailed the summons and complaint to Sprang's post office box. It also requested the sheriff of Mohave County to locate Sprang. The sheriff's affidavit indicated that he went to Sprang's house in Mohave County, but the house was vacated. The sheriff made no further efforts to find Sprang. Western States thereafter published the summons in the Arizona Daily Sun in Flagstaff.

Western States obtained judgments against the Internal Revenue Service and the Arizona Department of Revenue. After a hearing on Western State's application for entry of default judgment against Madrid and Sprang, the court entered default judgments against them on October 20, 1986.

In May 1987, Western States sold the property to Petersen Lumber for $60,000. Petersen Lumber received a quitclaim deed to the property and obtained a title insurance policy which did not indicate any outstanding interest of Sprang.

Sprang first learned of Petersen Lumber's possession of the property in June 1987. On June 30, 1987, Sprang moved to set aside the default judgment entered against him by Western States. Sprang argued that the default judgment was void for insufficient service of process. The court granted Sprang's motion to set aside the default on July 24, 1987. Sprang then redeemed the property by paying the taxes on it and received a certificate of redemption from the Navajo County Treasurer which was recorded on August 25, 1987. Sprang also offered to pay Western States' attorney fees in the foreclosure action.

Petersen Lumber moved to intervene in Western State's action against Sprang on the ground that it had a valid interest in the property as a bona fide purchaser for value. Judge Mangum granted Petersen Lumber's motion to intervene on August 24, 1987.

On October 16, 1987, Western States moved to amend its complaint to request the court to declare Petersen Lumber the true owner of the property because it was a bona fide purchaser and had a right to rely on the validity of the judgment at the time of purchase. The court granted the motion to amend. In his answer to the amended complaint, Sprang denied that Petersen Lumber was a bona fide purchaser because Western States could not have conveyed valid title to Petersen Lumber because the default judgment was void, and therefore the treasurer's deed was void. Sprang also filed a counterclaim against Madrid and Petersen Lumber to quiet title in the property.

Petersen Lumber filed a motion for summary judgment arguing that it, as an innocent third party purchaser for value, was entitled to fee simple title. Sprang filed a motion for partial summary judgment arguing that because the default judgment entered against him was void, Petersen Lumber could not have received valid title to the property. Therefore, Sprang contended that he was entitled to recover the property.

The trial court granted Petersen Lumber's motion for summary judgment, denied Sprang's motion for partial summary judgment, and declared Petersen Lumber the owner of the property, free and clear of any claim of Sprang. Sprang filed a timely notice of appeal.

In reviewing the grant of a motion for summary judgment, this court views the facts, evidence, and all reasonable inferences drawn from the evidence in favor of the party against whom summary judgment was entered. Cecil Lawter Real Estate School, Inc. v. Town & County Shopping Center Co., 143 Ariz. 527, 694 P.2d 815 (App.1984).

II. DISCUSSION

Sprang raises three arguments on appeal:

(1) that the trial court erred in granting summary judgment in favor of Petersen Lumber because a void judgment which had been set aside by the trial court should not be given effect to forfeit Sprang's property after Sprang redeemed it;

(2) that the trial court erred in giving effect to the void judgment because the judgment amounts to a taking of Sprang's property without due process; and

(3) that the trial court erred in granting summary judgment in favor of Petersen Lumber because an issue of fact exists as to whether Petersen Lumber was a bona fide purchaser of the property.

To resolve the first argument, we must determine: (A) whether the default judgment entered against Sprang was void due to insufficient service of process; (B) if so, whether the treasurer's deed issued pursuant to that judgment was void; (C) whether Petersen Lumber obtained an interest in the property when it purchased the property from Western States; and (D) whether Sprang's redemption of the property was valid. Because resolution of the first argument is determinative of the matter on appeal, we do not reach Sprang's second and third arguments.

A.

Is the default judgment entered against Sprang void because of insufficient service of process by Western States on Sprang?

When Western States initiated its action against Sprang, it mailed a copy of the summons and complaint to a post office box in Riviera, Arizona, Sprang's address as listed on the tax records of Navajo County. Sprang testified he never received them. Western States also requested the Mohave County sheriff to attempt personal service on Sprang. The sheriff went to Sprang's house in Riviera, but the house was vacant. The sheriff's affidavit indicated he made no other attempts to locate Sprang. Western States then attempted service by publishing the summons in the Arizona Daily Sun in Flagstaff, Coconino County, for four consecutive weeks, beginning on July 2, 1986.

In its affidavit of service by publication, filed after the summons was first published, Western States indicated that Sprang's residence was unknown and that, "after the exercise of due diligence," it had been unable to ascertain his whereabouts. This affidavit was insufficient. Before resorting to service by publication, a party must file an affidavit setting forth facts indicating it made a due diligent effort to locate an opposing party to effect personal service. Omega II Investment Co. v. McLeod, 153 Ariz. 341, 342, 736 P.2d 824, 825 (App.1987); Rule 4(e)(3), Arizona Rules of Civil Procedure. A "due diligent effort" requires such pointed measures as an examination of telephone company records, utility company records, and records maintained by the county treasurer, county recorder, or similar record keepers. Id. See also Preston v. Denkins, 94 Ariz. 214, 222-23, 382 P.2d 686, 892-93 (1963). Western State's affidavit failed to show that it exercised due diligence to locate Sprang. Interestingly, the record reflects that Sprang had been a resident of Mohave County but had moved to Lakeside, Navajo County, Arizona, where the property was located. Service by publication was attempted only in Coconino County. At all times material, Sprang was a resident of either Mohave or Navajo County. The record on appeal indicates that the postal service records, the utility company records, and the records at the Navajo County Assessor's office would have revealed information concerning Sprang's current address. Thus, sufficient information was available from which Western States, with the exercise of due diligence, could have obtained Sprang's current address.

A finding of due diligence prior to service by publication is a jurisdictional prerequisite. Omega II Investment Co. v. McLeod, 153 Ariz. at 342, 736 P.2d at 825 (citing Preston v. Denkins, 94 Ariz. 214, 382 P.2d 686 (1963)). Thus, if the affidavit fails to indicate that due diligence was exercised to locate the defendant, the default judgment is void on its face for lack of jurisdiction. Cooper v....