Opinion
No. 1 CA-CV 14-0820
02-16-2016
PATRICK FISHELL and DEBORAH FISHELL, husband and wife, Plaintiffs/Appellees, v. ERIC G. JOHNSON and THEDA A. JOHNSON, husband and wife, Defendants/Appellants.
COUNSEL Francis J. Slavin, PC, Phoenix By Francis J. Slavin and Daniel J. Slavin Counsel for Plaintiffs/Appellees Eric G. Johnson and Theda A. Johnson, Bradenton, FL Defendants/Appellants
NOTICE: NOT FOR OFFICIAL PUBLICATION. UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL AND MAY BE CITED ONLY AS AUTHORIZED BY RULE. Appeal from the Superior Court in Maricopa County
No. CV2007-022255
The Honorable David King Udall, Judge
REVERSED; JUDGMENT VACATED AND REMANDED
COUNSEL Francis J. Slavin, PC, Phoenix
By Francis J. Slavin and Daniel J. Slavin
Counsel for Plaintiffs/Appellees Eric G. Johnson and Theda A. Johnson, Bradenton, FL
Defendants/Appellants
MEMORANDUM DECISION
Judge Donn Kessler delivered the decision of the Court, in which Presiding Judge Peter B. Swann and Judge Lawrence F. Winthrop joined. KESSLER, Judge:
¶1 Eric G. and Theda A. Johnson (the "Johnsons") appeal the superior court's denial of their motion for relief from the judgment entered against them and in favor of Patrick and Deborah Fishell (the "Fishells"). For the reasons stated, we reverse the court's denial of the Johnsons' motion for relief from judgment, vacate the judgment in favor of the Fishells against the Johnsons, and remand for further proceedings consistent with this decision.
FACTUAL AND PROCEDURAL HISTORY
¶2 In 2008, the Johnsons answered the Fishells' complaint which claimed that an alleged shell company was the alter ego of Mr. Johnson and that he aided and abetted a breach of fiduciary duty and fraud. The two counts alleged against the Johnsons also included a co-defendant, Vogt, and Vogt's company. The court entered default and ultimately a default judgment against Vogt on Counts 7, 9, 10, 11, and 12.
Theda Johnson was named only as a member of a marital community.
In 2011, the Johnsons answered the Fishells' third amended complaint asserting the same claims against the Johnsons listed under different count numbers.
¶3 In February 2012, Mr. Johnson appeared for the first day of trial; however, before trial began, the Fishells settled with many of the other defendants. The trial did not proceed and the court ultimately entered orders dismissing all the remaining defendants except the Johnsons, the corporation which was allegedly Mr. Johnson's alter ego, and Vogt.
The settling defendants and the Fishells were ordered to pay jury fees.
¶4 The Fishells then noticed a default judgment hearing against Vogt which they sent to the Johnsons. The notice referred only to Vogt and did not indicate the Fishells sought to establish the Johnsons' liability at a default judgment hearing. The Johnsons, who were not represented by counsel, did not attend the June 2012 Vogt default judgment hearing. On the day of the hearing, the Fishells mailed the Johnsons several volumes of exhibits and evidence to be presented at the hearing including one document regarding damage calculations that summarily stated the Johnsons were 10 percent liable.
¶5 In 2012, the court issued a minute entry as to the amount of Vogt's liability and instructed the Fishells to submit a form of judgment. The court's ruling did not reference the Johnsons, but stated: "The testimony and exhibits, particularity (sic) Ex 46, accurately set forth the damages suffered by Plaintiffs as a result of all of the Defendant's conduct. Ex 46 also sets forth the appropriate amount of damages allocable to Defendant Keith T. Vogt based on his conduct as reflected by the evidence and his failure to answer Plaintiff's Third Amended Complaint." After the default judgment hearing, the Fishells mailed their proposed form of judgment against Vogt to the Johnsons. The only reference to the Johnsons in the proposed judgment is a statement at the end that apportions 10 percent liability to them: "[The Fishells] presented evidence showing that Defendant First American was liable for 45% . . . that Defendants Farris, Vogt, and Traw were together jointly and severally liable for 45% . . . and Defendant Johnson was liable for 10%." The court signed the judgment in October 2012.
In summer 2013, the case was placed on the superior court's inactive calendar and the court entered a minute entry confirming that the Johnsons and the alleged alter ego company were the only remaining defendants in the action. The court continued the case on the inactive calendar until November 1, 2013, at which time the case would be automatically dismissed unless "a proper Judgment is entered or filed, a Stipulation for Dismissal is presented, or a Motion to Set and Certificate of Readiness is filed."
¶6 Over a year later, in October 2013, and without any further proceedings against the Johnsons, the Fishells filed a proposed form of judgment against the Johnsons. The form of judgment sought to use the 10 percent liability apportionment from Vogt's default judgment to obtain judgment and an award of $365,000 (10 percent of the total award in the Vogt judgment) against the Johnsons. The parties stipulated to extend time for the Johnsons to respond or object to the proposed judgment until mid-December 2013; however, a response was never filed or docketed, and none appears in the record on appeal. In January 2014, the court entered a judgment finding the Johnsons 10 percent liable, and awarding $366,192 to the Fishells.
¶7 About a month later, the Johnsons moved for relief from judgment pursuant to Arizona Rule of Civil Procedure ("Rule") 60(c)(1), (4), and (6). The Fishells argued that they "were never informed that their liability . . . was being determined except" at the February 2012 trial which had been cancelled and thus, should be relieved from judgment due to mistake and surprise. See Ariz. R. Civ. P. 60(c)(1). The Johnsons argued that despite traveling to Arizona for the February 2012 trial, it was canceled the morning of the first day due to the Fishells' settlement with most of the other defendants. They also argued that the judgment was void for lack of notice that their liability was being determined and that they should therefore be relieved from the judgment pursuant to Rule 60(c)(4). Finally, they maintained that the extraordinary circumstances here otherwise warranted relief from judgment. See Ariz. R. Civ. P. 60(c)(6).
¶8 The Fishells opposed the motion arguing the judgment was not void because the court had personal and subject matter jurisdiction and therefore Rule 60(c)(4) was not applicable. They argued that Rule 60(c)(1) is for mistakes and errors which occur despite diligent efforts to comply with the rules and the Johnsons did "not argue that they were untimely in responding to a court-established deadline. . . . [but rather] argue[d] in essence that the judgment is void which is dealt with under Rule 60(c)(4)." The Fishells also argued the Johnsons should have taken action upon receiving a notice of a default judgment hearing against Vogt, and upon receipt of a proposed form of judgment against Vogt that apportions liability to the Johnsons. See supra ¶ 4. Finally, the Fishells maintained that Rule 60(c)(6) relief cannot be premised upon Rule 60(c)(1)-(5) and because the Johnsons' motion "is premised upon their assertion of mistake or surprise under Rule 60(c)(1) and that the judgment is void, which basis for relief clearly falls under Rule 60(c)(4). . . . Rule 60(c)(6) is not available to provide them with an independent basis for relief."
¶9 On April 29, 2014, the court held argument on the Johnsons' Rule 60(c) motion for relief from judgment after which the court ruled that "Rule 60(c)(1) does not apply" and reaffirmed the judgment entered against them in January 2014.
The court had issued an order a few weeks prior to the argument ordering the Fishells to "bring to the Status Conference proof of any Court order entering Judgment against the Johnson Defendants, other than the 'Judgment Against the Defendant Eric Glen Johnson and Theda A. Johnson' signed by this Court on January 22, 2014." The record is devoid of any such other judgment.
¶10 The Johnsons filed a notice of appeal from the April 29, 2014 denial of their Rule 60(c) motion. This Court determined the appeal was abandoned after the filing fee was not paid and sent a letter to that effect to the superior court. When the Johnsons sought to reinstate the appeal by paying the filing fee, we denied the motion to reinstate, concluding the superior court's minute entry denial of the Johnsons' Rule 60(c) motion was unsigned and did not state that no further matters remain pending. On October 21, 2014, the superior court entered a final signed minute entry stating that nothing further was pending in the case and dismissing the case with prejudice as to all outstanding claims. The Johnsons timely appealed. We have jurisdiction pursuant to Arizona Revised Statutes ("A.R.S.") sections 12-2101(A)(1), (2) (Supp. 2015) and 12-120.21(A)(1) (2003).
We summarily reject the Fishells' statement of issue that we lack jurisdiction over the appeal based on the prior dismissal. First, the Fishells do not argue that issue in their brief, thus waiving it. State Farm Mut. Auto. Ins. Co. v. Novak, 167 Ariz. 363, 370 (App. 1990). Moreover, their summary statement in an issue on appeal is not meritorious. The earlier appeal was only deemed abandoned for failure to pay a filing fee and we ultimately determined the first appeal was premature because there was no final appealable order. When a final appealable order was entered on October 21, 2014, the Johnsons timely appealed which would include an appeal from the interlocutory order denying their Rule 60 motion. See Rourk v. State, 170 Ariz. 6, 12-13 (App. 1991) (stating appeal from judgment includes appeal from any interlocutory orders).
DISCUSSION
¶11 "[U]pon such terms as are just" the superior court may "relieve a party . . . from a final judgment" pursuant to Rule 60(c)(6) for "any other reason [apart from subsections (c)(1)-(5)] justifying relief from the operation of the judgment." Ariz. R. Civ. P. 60(c)(6). We review the denial of a Rule 60(c) motion for an abuse of discretion. Norwest Bank (Minnesota), N.A. v. Symington, 197 Ariz. 181, 184, ¶ 11 (App. 2000) (stating abuse of discretion includes making decisions unsupported by law).
¶12 Here, the Fishells argue that Rule 60(c)(6) relief is unavailable because the Johnsons' bases for requesting such relief is really due to circumstances embodied in Rule 60(c)(1) and (4). We disagree. As the court found and the Fishells have argued, the Johnsons were aware of the filings, the Vogt default judgment hearing, and the proposed Vogt judgment. The Johnsons did not respond to the Vogt default judgment proceedings, and specifically did not appear at the default judgment evidentiary hearing because the Fishells did not state in the notice that they were going to seek judgment against the Johnsons at that proceeding. Indeed, because no default had ever been entered against the Johnsons, there would be no need for them to appear at a default judgment evidentiary hearing against a different defendant. Accordingly, this is not a Rule 60(c)(1) situation involving mistake, inadvertence, surprise, or excusable neglect. See City of Phoenix v. Geyler, 144 Ariz. 323, 331-32 (1985) (explaining Rule 60(c)(1) applies in a normal default situation and that diligence "is the final arbiter of whether mistake or neglect is excusable"). In addition, the superior court here had subject matter and personal jurisdiction, and upon following the correct procedure had the authority to enter judgment in this case, thus Rule 60(c)(4) does not provide a basis for relief. See Ezell v. Quon, 224 Ariz. 532, 537, ¶ 19 (App. 2010) ("only errors that undermine jurisdiction render a judgment void under Rule 60(c)(4)").
The Fishells also contend that the Johnsons argue Rule 60 relief is appropriate for fraud under Rule 60(c)(3). However, nowhere in the opening brief do the Johnsons argue for Rule 60(c)(3) relief. In addition, they did not argue Rule 60(c)(3) in the superior court.
¶13 However, Rule 60(c)(6) relief is warranted under the extraordinary circumstances here. See Gorman v. City of Phoenix, 152 Ariz. 179, 182 (1987) (explaining Rule 60(c)(6) relief is only available if a party can show "'extraordinary circumstances of hardship or injustice,' other than or in addition to those circumstances set out in clauses (1) through (5)") (citation omitted)); De Gryse v. De Gryse, 135 Ariz. 335, 338 (1983) ("The rule governing motions for relief from final judgments is primarily intended to allow relief from judgments that are unjust due to extraordinary circumstances that cannot be remedied by legal review.").
¶14 The Fishells failed to give the Johnsons notice and opportunity to defend before a judgment was entered against them, and relief from the judgment should have been granted. Although the Fishells sent a notice of default judgment hearing for Vogt to the Johnsons, as noted above, that notice in no way stated that the default judgment hearing was going to involve a determination of liability or damages against the Johnsons so that they should have been prepared to attend or defend themselves at the Vogt hearing. Moreover, determination of the Johnsons' liability when they had never defaulted, in a default judgment hearing against a different defendant, was inconsistent with basic notions of due process and was an unconscionable adjudication of legal disputes.
¶15 Nor does the fact that on the day of the hearing the Fishells mailed the Johnsons a summary of the evidence to be presented correct the error. The mailing was of numerous volumes of exhibits and evidence the Fishells intended to present, and the one reference to the Johnsons alleging 10 percent liability was on page 140 of volume ten. Documents, produced the day of a hearing to which the Johnsons were not parties, remedy nothing. See Cravens, Dargan and Co. v. Superior Court, 153 Ariz. 474, 475-77 (1987) (holding that a judgment arising from a proceeding for which the defendant was not provided notice that liability was going to be determined so the defendant could appear and defend is patently erroneous and must be vacated on special action).
¶16 Finally, although the proposed form of judgment against Vogt was sent to the Johnsons, it could not be considered a judgment against the Johnsons because it did not result from proceedings designed to assess the Johnsons' liability and for which the Johnsons received proper notice and an opportunity to defend. It was error to rely upon the Vogt judgment to summarily enter judgment against the Johnsons.
At oral argument on the Johnsons' motion, the Fishells argued their proposed form of judgment was "almost sort of like a motion for summary judgment, whatever. We submitted the entire matter for him to object to it. He never objected to it. And now he's claiming somehow he didn't have his day in court." To the extent the Fishells have seemed to treat their proposed form of judgment in the nature of an unopposed dispositive motion for summary judgment, and suggest the Johnsons should have pursued a course of action similar to responding to a motion for summary judgment (i.e. objecting), we note that the proposed judgment does not meet any of the requirements for summary judgment proceedings. See Ariz. R. Civ. P. 56(a) ("A party may move for summary judgment, identifying each claim or defense—or the part of each claim or defense—on which summary judgment is sought. The court shall grant summary judgment if the moving party shows that there is no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law."); Ariz. R. Civ. P. 56(c)(3) ("Any party filing a motion for summary judgment shall set forth, in a statement separate from the memorandum of law, the specific facts relied upon in support of the motion. The facts shall be stated in concise, numbered paragraphs. As to each fact, the statement shall refer to the specific portion of the record where the fact may be found."); Nat. Bank of Ariz. v. Thruston, 218 Ariz. 112, 114-15, ¶ 12 (App. 2008) (explaining "party moving for summary judgment has the burden of showing there are no genuine issues of material fact . . . . Only if the moving party satisfies this burden will the party opposing the motion be required to come forward with evidence establishing the existence of a genuine issue of material fact that must be resolved at trial").
¶17 This is sufficient grounds for Rule 60(c)(6) relief from judgment. There was no alleged basis upon which to enter a judgment against the Johnsons apart from the default judgment against Vogt; the January 2014 judgment against the Johnsons is based entirely on the default judgment proceedings against Vogt. The Vogt default judgment and related proceedings, however, cannot serve as a basis for the Johnson judgment. Those proceedings were an opportunity for the Fishells to prove their allegations against Vogt and afforded Vogt notice and an opportunity to defend at a default judgment hearing. This does not mean that the Fishells proved their case against the Johnsons at the Vogt hearing. The Johnsons did not have notice of a proceeding at which their liability as alleged in the complaint was to be determined, at which they would present their defense, and after which a judgment would be entered that pertained to them. Cravens, Dargan and Co., 153 Ariz. at 475-77.
¶18 Nor can we find any other basis for a default or a default judgment against the Johnsons. The Johnsons answered the Third Amended Complaint in 2011. The other defendants were dismissed and the Vogt judgment was in 2012. The Johnsons were the only remaining defendants. Yet, the Fishells waited over a year after the Vogt judgment before taking further action to prosecute their case against the Johnsons. Even then, the action pursued was simply a motion seeking judgment based on the Vogt judgment as opposed to noticing and preparing for a trial which is typical after defendants answer a complaint and there are pending claims. See Ariz. R. Civ. P. 16(b) ("No later than 60 days after any defendant has filed an answer to the complaint or 180 days after commencement of the action, whichever occurs first, the parties shall confer regarding the subjects set forth in Rule 16(d). No later than 14 days after the parties confer, they shall file a Joint Report and a Proposed Scheduling Order with the court . . . proposing a Scheduling Order that specifies . . . deadlines for [among other things] . . . discovery . . . dispositive motions . . . [and] a proposed trial date."); Ariz. R. Civ. P. 16(c) ("The court shall issue a Scheduling Order as soon as practicable after receiving the parties' Joint Report and their Proposed Scheduling Order under Rule 16(b) . . . . Absent leave of court, no trial shall be set unless the parties certify that they engaged in a settlement conference or private mediation or that they will do so by a date certain established by the court."); Ariz. R. Civ. P. 16(g)(1) (the parties "shall confer and prepare a written Joint Pretrial Statement"); Ariz. R. Civ. P. 16(a) (objectives of case management include "expediting a just disposition of the action"); Ariz. R. Civ. P. 38.1(a) ("Civil actions shall be set for trial pursuant to Rule 16 . . . .").
¶19 Thus, signing this judgment against the Johnsons under the circumstances here is an abuse of discretion and clear error of law warranting relief from judgment pursuant to Rule 60(c)(6). See In re Marriage of Williams, 219 Ariz. 546, 548, ¶ 8 (App. 2008) ("An abuse of discretion occurs when a court commits an error of law in the process of reaching a discretionary conclusion.").
¶20 Normally, under these circumstances, we would vacate the January 22, 2014 judgment against the Johnsons and remand for a trial on the merits against them. This is especially true because the Johnsons only requested such relief in their motion for Rule 60 relief and on appeal. However, on this record, it appears the Johnsons were present on the day of trial, and the Fishells had full opportunity to try their claims against the Johnsons, but did not do so. That the Fishells proceeded to settle with most of the defendants before empaneling a jury on the first day of trial did not, absent some ruling from the court, relieve the Fishells of their burden to prosecute and prove their case against the Johnsons on the day set for trial. There is nothing in the record to indicate that the parties moved to continue the trial.
In August 2013, after the court continued the case on the inactive calendar, the Johnsons were informed that their case would be dismissed on November 1, 2013 "unless prior to said date a proper Judgment is entered or filed, a Stipulation for Dismissal is presented, or a Motion to Set and Certificate of Readiness is filed." No proper judgment was filed because, as we discuss supra, the January 22, 2014 judgment was erroneously based on a default judgment against Vogt. Nor did the Fishells file either a motion to set the case for trial or a certificate of readiness. Cf. Ariz. R. Civ. P. 38.1(f)(3) (providing that "[a] case remaining on the Dismissal Calendar for 60 days shall be dismissed without prejudice for lack of prosecution . . . unless prior to the expiration . . . the court, on motion for good cause shown, orders the case to be continued on the Dismissal calendar for a specific period of time without dismissal").
¶21 Accordingly, on remand, the court may, sua sponte or upon motion by the Johnsons, consider whether it should dismiss the complaint against the Johnsons (and any company alleged to be Mr. Johnson's alter ego). See Ariz. R. Civ. P. 41(b) (providing court with discretion to dismiss case for lack of prosecution upon defendant's motion); Ariz. Local R. Prac. Super. Ct. (Maricopa) 3.6(a) ("[a]ny civil action shall be dismissed for failure to prosecute upon written motion and notice to opposing counsel, at the discretion of the court . . . ."). The court may also consider whether to dismiss the case without prejudice if it finds there was a failure to move to continue the trial against the Johnsons and to comply with Rule 38.1(f)(3) which requires a "motion for good cause shown" to continue a case on the dismissal calendar. See Slaughter v. Maricopa County, 227 Ariz. 323, 326, ¶ 14 (App. 2011) (stating trial court has inherent power to dismiss the case on its own motion) (citing Cooper v. Odom, 6 Ariz. App. 466, 469 (1967)); Craft v. Cannon, 58 Ariz. 457, 462 (1942) ("It is doubtless within the power of the court to dismiss a plaintiff's action for lack of diligence in prosecuting it . . . ."); Price v. Sunfield, 57 Ariz. 142, 148-49 (1941) (explaining plaintiffs must pursue cases diligently and ensure they come to trial within a reasonable amount of time); Brown v. Haymore, 43 Ariz. 466, 469 (1934) ("It is an inherent right of the courts, and therefore one existing independently of any statute, to dismiss a suit for a failure to prosecute it with due diligence."). Whether to grant such motion, and whether any such dismissal should be with or without prejudice lies in the sound discretion of the superior court.
¶22 Pursuant to A.R.S. § 12-341 (2003), we award the Johnsons their taxable costs upon their compliance with Arizona Rule of Civil Appellate Procedure 21.
CONCLUSION
¶23 For the reasons stated, we reverse the superior court's denial of the Johnsons' Rule 60(c) motion, vacate the January 22, 2014 judgment against the Johnsons, and remand for proceedings consistent with this decision and the Arizona Rules of Civil Procedure.
On remand, the Vogt judgment as it applies to the Johnsons is not binding on the Johnsons because they did not receive notice that their fault or allocation of fault would be determined at the proceedings. --------