Wash. St. Enters. Ariz., L.L.C. v. Pellerito

• Decision Date: 10 July 2014
• Docket Number: No. 1 CA-CV 13-0327,1 CA-CV 13-0327
• Parties: WASHINGTON STREET ENTERPRISES ARIZONA, L.L.C., an Arizona limited liability company, Plaintiff/Appellee, v. LARRY PELLERITO, Defendant/Appellant.
• Court: Arizona Court of Appeals

WASHINGTON STREET ENTERPRISES ARIZONA, L.L.C., an Arizona limited liability company, Plaintiff/Appellee, v. LARRY PELLERITO, Defendant/Appellant.

No. 1 CA-CV 13-0327

ARIZONA COURT OF APPEALS DIVISION ONE

FILED: July 10, 2014

NOTICE: NOT FOR PUBLICATION.

UNDER ARIZ. R. SUP. CT. 111(c), THIS DECISION DOES NOT CREATE LEGAL PRECEDENT

AND MAY NOT BE CITED EXCEPT AS AUTHORIZED.

Appeal from the Superior Court in Maricopa County

No. CV2009-054888

The Honorable John R. Doody, Judge Pro Tempore

AFFIRMED IN PART, VACATED IN PART

COUNSEL

Curtis Ensign, PLLC, Phoenix

By Curtis Ensign

Counsel for Defendant/Appellant

Sanford J. Germaine, P.C., Phoenix

By Sanford J. Germain

Melinda K. Cekander PLLC, Flagstaff

By Melinda K. Cekander

Co-Counsel for Plaintiff/Appellee

MEMORANDUM DECISION

Judge Maurice Portley delivered the decision of the Court, in which Chief Judge Diane M. Johnsen and Judge Patricia K. Norris joined.

PORTLEY, Judge:

¶1 Larry Pellerito ("Pellerito") appeals the denial of his motion to set aside the default judgment, the denial of his motion for new trial, and the award of attorneys' fees to Washington Street Enterprises Arizona, L.L.C. ("Washington Street"). Because we find that service of process was completed by substituted service, we affirm the rulings of the trial court, but vacate the award of fees to Washington Street and vacate the judgment against Jane Doe Pellerito.

FACTS AND PROCEDURAL BACKGROUND

¶2 Washington Street filed a complaint against Pellerito and Jane Doe Pellerito in November 2009 for breaching the commercial lease he had entered into with its predecessor-in-interest, Presson Equity Partners, L.L.P. The day after the complaint was filed, a process server went to a house on East Carolina Drive and spoke to a woman who came out onto the second-floor balcony. She said that she was not Mrs. Pellerito, admitted that Pellerito lived at the address, but would not accept substitute service. The process server left a copy of the documents at the front door, and told her that "she was served and the documents were at her front door in an area of her direct control."

¶3 Pellerito did not file an answer or other responsive pleading. Washington Street filed an affidavit of default and application for default, and mailed the two documents to Pellerito at the East Carolina address. He did not respond, and a default judgment was entered against him and Jane Doe Pellerito in February 2010.¹

¶4 Washington Street then attempted to collect the judgment. In December 2012, Washington Street served a writ of garnishment on Pellerito's bank. After receiving notice of the garnishment, Pellerito objected by arguing that the judgment was void for lack of service. He also filed a motion to set aside the default judgment pursuant to Arizona Rules of Civil Procedure ("Rule") 55(c) and 60(c). In due course, the trial court rejected his objection to the garnishment, released the garnished funds to Washington Street and denied Pellerito's motion to set aside the default and default judgment. Pellerito then filed an unsuccessful motion for a new trial, and the trial court subsequently awarded Washington Street its attorneys' fees and costs. Pellerito then filed this appeal.

DISCUSSION

¶5 Pellerito challenges the denial of his motion to set aside the default and default judgment, and the denial of his motion for new trial. He raises two distinct arguments on appeal. First, he argues that the trial court employed the wrong legal standard when denying his motion to set aside the default judgment. Second, he contends that the court erred by finding effective service. Specifically, he argues there was no reasonable evidence that: (1) the process server left the summons and complaint at his dwelling house or usual place of abode; (2) service of process was left with a person who also resided at the residence; and (3) he received actual service of process.

¶6 We review the rulings for an abuse of discretion. Delbridge v. Salt River Project Agric. Improvement & Power Dist., 182 Ariz. 46, 53, 893 P.2d 46, 53 (App. 1994) (reviewing the denial of a motion for new trial for an abuse of discretion); Gen. Elec. Capital Corp. v. Osterkamp, 172 Ariz. 191, 193, 836 P.2d 404, 406 (App. 1992) (reviewing the denial of a motion to set aside default judgment for an abuse of discretion). "A court abuses its discretion if it commits an error of law in reaching a discretionary conclusion, it reaches a conclusion without considering the evidence, it commits some other substantial error of law, or the record fails to provide substantial evidence to support the trial court's finding." Flying Diamond Airpark, L.L.C. v. Meienberg, 215 Ariz. 44, 50, ¶ 27, 156 P.3d 1149, 1155 (App. 2007) (citation omitted) (internal quotation marks omitted). We also review issues of the court's interpretation and application of the Arizona Rules of Civil Procedure de novo. See Bradshaw v. Jasso-Barajas, 231 Ariz. 197, 199, ¶ 5, 291 P.3d 991, 993 (App. 2013).

¶7 After a lawsuit has been filed, the complaint and summons must be served on any defendant. Ariz. R. Civ. P. 4(i), 4.1(b). The Rules detail the methods for service, which may include serving an individual defendant, or leaving a copy of a summons and complaint at his or her "dwelling house or usual place of abode with some person of suitable age and discretion then residing therein." Ariz. R. Civ. P. 4.1(d). Once the summons and complaint have been served, the sheriff's deputy or private process server must file a return of service,² which creates a presumption of service. Ariz. R. Civ. P. 4(g); Phx. Airport Travelodge v. Dolgin, 12 Ariz. App. 358, 360, 470 P.2d 506, 508 (1970) (noting the verity imputed to a return of service); Riggs v. Huachuca Inv. Co., 2 Ariz. App. 527, 529, 410 P.2d 149, 151 (1966) (noting that an officer's return of service creates a presumption of service).

¶8 The presumption of service can only be impeached by clear and convincing evidence. Riggs, 2 Ariz. App. at 529, 410 P.2d at 151; Gen. Elec. Capital Corp., 172 Ariz. at 194, 836 P.2d at 407 (citing Mayhew v. McDougall, 16 Ariz. App. 125, 127, 491 P.2d 848, 850 (1971)). "[C]lear and convincing evidence is more than a preponderance of the evidence but less than proof beyond a reasonable doubt." State v. Turrentine, 152 Ariz. 61, 68, 730 P.2d 238, 245 (App. 1986).

¶9 When reviewing a ruling on a motion to set aside a default judgment, we "view the facts in the light most favorable to upholding" the ruling. Ezell v. Quon, 224 Ariz. 532, 534, ¶ 2, 233 P.3d 645, 647 (App. 2010). If, however, there was no service of process, the default judgment has to be set aside because the judgment is void. See Ariz. R. Civ. P. 55(c), 60(c)(4); see also Master Fin. Inc. v. Woodburn, 208 Ariz. 70, 74, ¶ 19, 90 P.3d 1236, 1240 (App. 2004) (noting that the lack of personal jurisdiction over a defendant renders any judgment void).

I

¶10 Pellerito argues that the trial court used the wrong legal standard in rejecting his challenge to the default judgment. He claims he did not need to impeach the service of process by clear and convincing evidence because cases should be resolved on the merits and not by default. Although he cites to French v. Angelic, 137 Ariz. 244, 669 P.2d 1021 (App. 1983), for his proposition, the case does not change the standard ofreview. There, after the plaintiff secured a default judgment, the trial court set aside the judgment after defendant argued service was ineffective. Id. at 245, 669 P.2d at 1022. On appeal, we affirmed the trial court's findings and ruling to set aside the default judgment for lack of service. Id. at 247, 669 P.2d at 1024. Because the trial court has to determine whether there is clear and convincing proof to impeach the presumption of service, Riggs, 2 Ariz. App. at 529, 410 P.2d at 151, we will affirm unless there is a clear abuse of discretion, French, 137 Ariz. at 246, 669 P.2d at 1022. Consequently, the trial court in this case did not err by following the established legal standard to set aside a default and default judgment.

II

¶11 Pellerito challenges the service of process. He argues that he was not served, did not live at the East Carolina address when the process server left the documents, never received the documents, and had no knowledge about the default judgment until the garnishment of his bank account. He initially submitted his affidavit, which included a photocopy of his driver's license listing his address on West Florentine. He later submitted an affidavit from the woman on the balcony,³ and testified briefly at the February 2013 hearing. After reviewing the pleadings, including the affidavits and Pellerito's testimony, the court found that Pellerito had not demonstrated by clear and convincing evidence that the substituted service of process was ineffectual.

¶12 The court had to resolve conflicting facts. Pellerito had a driver's license issued in October 2009 that listed an address on West Florentine. Washington Street provided the process server with its information about an address for Pellerito, and the process server went to the East Carolina address and had contact with the woman on the balcony. Although Pellerito stated in his affidavit that his only residence or place of abode was on West Florentine, it has been recognized that a person may have "two or more 'dwelling houses or usual places ofabode.'" Nat'l Dev. Co. v. Triad Holding Corp., 930 F.2d 253, 257 (2d Cir. 1991) (interpreting the corresponding federal rule for abode service). Moreover, even though the affidavit of the process server stated that the woman on the balcony told the process server that Pellerito lived at the East Carolina address, Pellerito challenged that fact by submitting an affidavit, as well as one from the woman on the balcony.⁴ The court, as a result, had to determine the facts and related inferences to determine whether Pellerito had impeached the process server's affidavit by clear and convincing evidence in order to grant him...