Opinion
No. 1 CA-CV 13-0587
02-12-2015
JOSE and ROSA LEYVA, husband and wife, Plaintiffs/Appellees, v. DOME CENTER, L.L.C., an Arizona limited liability company; ROBERT TUFFLY, Defendants/Appellants.
COUNSEL Wong Fujii Carter, P.C., Phoenix By Matthew A. Klopp, Rick K. Carter Counsel for Plaintiffs/Appellees Garcia, Kinsey & Villarreal, P.L.C., Yuma By Arturo I. Villarreal Counsel for 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 UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.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 Yuma County
No. S1400CV200700849
The Honorable Lawrence C. Kenworthy, Judge
AFFIRMED
COUNSEL Wong Fujii Carter, P.C., Phoenix
By Matthew A. Klopp, Rick K. Carter
Counsel for Plaintiffs/Appellees
Garcia, Kinsey & Villarreal, P.L.C., Yuma
By Arturo I. Villarreal
Counsel for Defendants/Appellants
MEMORANDUM DECISION
Judge Kenton D. Jones delivered the decision of the Court, in which Presiding Judge John C. Gemmill and Judge Donn Kessler joined. JONES, Judge:
¶1 Dome Center, L.L.C. and its sole member, Robert Tuffly, (collectively, Tuffly) appeal from the trial court's denial of their motion to set aside a default judgment. Tuffly also challenges the trial court's order striking his answer as a sanction for failing to appear at a status hearing. For the following reasons, we affirm.
FACTS AND PROCEDURAL HISTORY
"'We view the facts in the light most favorable to upholding the trial court's ruling on a motion to set aside a default judgment.'" Blair v. Burgener, 226 Ariz. 213, 215, ¶ 2, 245 P.3d 898, 900 (App. 2010) (quoting Ezell v. Quon, 224 Ariz. 532, 534, ¶ 2, 233 P.3d 645, 647 (App. 2010)).
¶2 In 2006, Jose and Rosa Leyva, after negotiations with Tuffly, purchased a two-acre parcel of property from Dome Center, L.L.C. for $185,000. In 2007, the Levyas sued Tuffly, seeking rescission of the sale for breach of contract. Tuffly filed a timely answer. The parties subsequently entered four separate stipulations to continue the case on the inactive calendar.
The complaint originally named Tuffly's wife as an additional defendant. In May 2013, the Leyvas voluntarily dismissed her from the case; therefore, she is not a party to this appeal.
¶3 Thereafter, in April 2009, the Leyvas moved for summary judgment. In May 2009, by stipulation of the parties, the Leyvas also filed a first amended complaint, adding a claim for "Negligent and/or Fraudulent Misrepresentation." Tuffly filed an answer to the first amended complaint and the motion for summary judgment was fully briefed by the parties. In July 2009, the parties again stipulated to continue the case on the inactive calendar. The trial court held oral argument in September 2009 and denied the Leyva's motion. The parties then entered into two more stipulations to continue on the inactive calendar in December 2009 and August 2010.
¶4 In November 2010, counsel for Tuffly moved to withdraw from representation, asserting Tuffly had not communicated with him since late June 2010, and he had not been paid for services despite repeated requests. The trial court set a hearing on that motion for January 3, 2011. Although a copy of the motion and notice of the hearing were mailed to Tuffly, no objection or response was filed. Following the hearing, the trial court allowed counsel to withdraw, and set a "Status Hearing regarding Appointment of [Tuffly's] Counsel" for January 24, 2011. The court's order specifically directed Tuffly to be "personally present at this hearing" and prepared to "advise th[e trial c]ourt as to the status of retaining counsel" so "the Court [could] set deadlines as to any and all future proceedings."
The formal order mailed to Tuffly contained a typographical error that indicated the status hearing was scheduled for January 24, 2010.
¶5 Tuffly did not appear at the January 24, 2011 Status Hearing as ordered. The Leyvas argued Tuffly had a long history of being non-responsive and non-participatory and had now failed to comply with a court order directing his appearance, despite receiving notice, and recommended the trial court strike Tuffly's answer as a sanction for his failure to appear. After considering the Leyvas' argument, the court struck Tuffly's answer, but instructed the Leyvas to proceed with a default under Arizona Rule of Civil Procedure 55(a), requiring them to file and serve an application for default upon Tuffly, thereby providing him the opportunity to respond and prevent default from entering. See Ariz. R. Civ. P. 55(a)(1), (4). Effectively, the court placed the ultimate disposition of the matter in Tuffly's hands.
¶6 As directed, on January 26, 2011, the Leyvas filed an application for entry of default and supporting affidavit, and mailed a copy of each to Tuffly; Tuffly did not respond to the application and, accordingly, default entered. Rather than immediately seeking a default judgment, the Leyvas moved for two additional continuances on the inactive calendar, in April and August 2011, which were granted. Then, on December 15, 2011, nearly eleven months after the filing of the application for entry of default, the Leyvas alleged damages in a sum certain and filed a motion for default judgment pursuant to Rule 55(b)(1), and mailed a copy to Tuffly. Again receiving no response, the trial court entered a signed default judgment on December 23, 2011, and awarded the Leyvas their requested damages in the amount of $211,151.68 plus pre- and post-judgment interest, costs, and an unspecified amount for pre- and post-judgment attorneys' fees. In February 2012, the court entered a second judgment "[i]n addition to the [December 23, 2011] Judgment," at the Leyvas request, that awarded them an additional $31,497 in accrued attorneys' fees.
¶7 The Leyvas then sought to recover on the judgment. In March 2012, the Leyvas attempted to garnish bank accounts they believed belonged to Tuffly. These writs of garnishment were subsequently quashed and released in April 2012, with notice mailed to Tuffly's residence. Thereafter, in July 2012, the Leyvas applied for a writ of general execution on Tuffly's personal residence, and in August 2012, the Yuma County Sheriff levied upon that property.
¶8 On August 22, 2012, in response to the Notice of Sheriff's sale, Tuffly took his first action in more than eighteen months, moving to "vacate [the] judgment or in the alternative set aside [the] default judgment." Tuffly argued (1) the judgment was void for lack of subject matter jurisdiction because a default hearing was not conducted pursuant to Rule 55(b)(2); or in the alternative, (2) the judgment should be set aside pursuant to Rule 55(c), Rule 60(c), or principles of equity. He also sought a preliminary injunction enjoining the Leyvas from taking any action against his personal or real property. Tuffly averred in attached affidavits that he had not received notice of either the hearing regarding his prior counsel's motion to withdraw, or the January 24, 2011 Status Hearing, as a result of secretarial error.
¶9 In response, the Leyvas agreed the trial court should have conducted a damages hearing under Rule 55(b)(2) and conceded the default judgments were void, but argued Tuffly failed to demonstrate that entry of the underlying default should also be set aside. The trial court conducted a hearing on Tuffly's motion, during which it accepted the Leyvas' concession. The court then set an evidentiary hearing to address the motion to set aside the entry of default, specifically directing the parties to present evidence regarding whether Tuffly acted promptly in response to the entry of default and whether his failure to respond was the result of excusable neglect. The court also scheduled additional time to address the appropriate amount of damages, pursuant to Rule 55(b)(2), in the event the motion to set aside the default was denied.
On November 30, 2012, the trial court entered a signed order vacating the December 23, 2011 and February 22, 2012 default judgments.
¶10 At the evidentiary hearing, Tuffly did not contest proper service, but instead testified he never personally received notice because his office assistant had misfiled documents. He explained he recently searched his home office and discovered a box labeled "Dome property" containing the correspondence received relating to this case. Tuffly noted he was also litigating a different matter during this same time period in question that was referred to in his office as the "Dome property or the Dome project." Tuffly surmised his office assistant may have overheard a conversation between him and his attorney in which they decided not to pursue an appeal in the "Dome property" case, and that his assistant had thereafter filed every piece of correspondence regarding this matter, involving Dome Center, L.L.C., in the incorrect box without first presenting the documents to him.
Tuffly did not include a certified transcript of the November 7, 2012 Evidentiary Hearing in the record on appeal, as required by Arizona Rule of Civil Appellate Procedure 11(b)(1), but he did submit a copy of that transcript in the appendix to his opening brief. The Leyvas did not object, and in fact cite to the transcripts in their answering brief. Therefore, we consider the transcript as part of the record on appeal. For similar reasons, we also consider the transcripts of the September 21 and October 2, 2012 hearings provided in Tuffly's appendix to his opening brief.
¶11 Following the close of evidence, the trial court noted "inconsistencies between testimony provided [at the hearing] and filed affidavits [of Tuffly] concerning the mishandling/storage of documentation associated with this litigation by [Tuffly's] secretary," and found Tuffly "did not act promptly in moving to set aside default" and did not demonstrate a "showing of excusable neglect for failure to file a response to the application [for default judgment]" based upon the "unexplained neglect and unexplained error committed by [Tuffly's] secretary." Accordingly, it denied Tuffly's motion to set aside the default.
The trial court also reasoned it would not disturb its sanction against Tuffly for failing to attend the January 24, 2011 Status Hearing, concluding the findings "made in support of denying the motion to set aside default," such as Tuffly's failure to establish excusable neglect, "apply equally to the application for entry of default as well as the status hearing."
¶12 After taking evidence pursuant to Rule 55(b)(2) and receiving post-hearing memoranda regarding damages, the trial court entered a default judgment in favor of the Leyvas, and awarded $193,687.32, plus costs and attorneys' fees; the court also directed the Leyvas to transfer the two-acre property back to Tuffly. Tuffly timely appealed. We have jurisdiction pursuant to Arizona Revised Statutes (A.R.S.) sections 12-120.21(A)(1) and -2101(A)(1).
Absent material revisions from the relevant dates, we cite a statute's current version.
DISCUSSION
¶13 Tuffly raises three issues on appeal: (1) whether the trial court erred in sanctioning Tuffly for violating a court order under Arizona Rule of Civil Procedure 16(f) without first conducting a "willfulness" hearing; (2) whether the trial court abused its discretion by striking Tuffly's answer; and (3) whether the trial court abused its discretion in failing to set aside the entry of default.
¶14 We review a trial court's choice of sanction for violation of a court order for an abuse of discretion. See Ariz. R. Civ. P. 16(f) State Bar committee note (citing Sears Roebuck & Co. v. Walker, 127 Ariz. 432, 437, 621 P.2d 938, 943 (App. 1980)); Green v. Lisa Frank, Inc., 221 Ariz. 138, 153, ¶ 40, 211 P.3d 16, 31 (App. 2009) (citing Hays v. Gama, 205 Ariz. 99, 102, ¶ 17, 67 P.3d 695, 698 (2003), and Flaska v. Little River Marine Constr. Co., 389 F.2d 885, 887 (5th Cir. 1968)) (discussing standard of review of sanctions for failure to obey a trial court's non-discovery order). We likewise review a trial court's denial of a motion to set aside a default judgment for an abuse of discretion. Daou v. Harris, 139 Ariz. 353, 359, 678 P.2d 934, 940 (1984). A trial 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) (quoting Grant v. Ariz. Pub. Serv. Co., 133 Ariz. 434, 456, 652 P.2d 507, 529 (1982)). This court "defer[s] to the [trial] court's explicit or implicit factual findings and will affirm as long as such findings are supported by reasonable evidence." Roberts v. City of Phx., 225 Ariz. 112, 119, ¶ 24, 235 P.3d 265, 272 (App. 2010) (citing Stoddard v. Donahoe, 224 Ariz. 152, 154-55, ¶ 9, 228 P.3d 144, 146-47 (App. 2010)). I. Striking the Answer as a Sanction Under Rule 16(f) Did Not Deny Tuffly Due Process.
¶15 Tuffly first argues he was denied due process by the trial court's failure to hold an evidentiary hearing to determine fault prior to its imposition of a sanction. Under these facts, we disagree.
¶16 Rule 16(f) requires the trial court to sanction a party who "fails to obey a scheduling or pretrial order" or fails to appear or participate in good faith in a scheduling or pretrial conference. Ariz. R. Civ. P. 16(f) and committee cmt. This rule is meant to allow for "any and all of the sanctions available under the [civil] rules" to address any non-compliance with the letter and spirit of Rule 16, Ariz. R. Civ. P. 16(f) committee cmt., and specifically incorporates the sanctions "provided in [Arizona] Rule [of Civil Procedure] 37(b)(2)(B), (C), and (D)," including striking a pleading. Ariz. R. Civ. P. 16(f), 37(b)(2)(C). Therefore, we are guided by case precedent regarding Rule 37 discovery sanctions when reviewing a sanction imposed under Rule 16. See Estate of Lewis v. Lewis, 229 Ariz. 316, 323, ¶ 18, 275 P.3d 615, 622 (App. 2012) (citing Ariz. R. Civ. P. 16(f) State Bar committee note, and Taliaferro v. Taliaferro, 188 Ariz. 333, 340, 935 P.2d 911, 918 (App. 1996)); Green, 221 Ariz. at 153-54, ¶¶ 41-45, 211 P.3d at 31-32.
¶17 Arizona courts have long preferred to resolve actions on their merits rather than through default. Hirsch v. Nat'l Van Lines, Inc., 136 Ariz. 304, 308, 666 P.2d 49, 53 (1983) (citing Richas v. Superior Court, 133 Ariz. 512, 514, 652 P.2d 1035, 1037 (1982), and Union Oil Co. v. Hudson Oil Co., 131 Ariz. 285, 288, 640 P.2d 847, 850 (1982)). Thus, "drastic sanctions running counter to that policy" are likewise disfavored, and may only be levied based upon "a determination of willfulness or bad faith by the party being sanctioned," or "[f]ault equivalent to gross negligence." Estate of Lewis, 229 Ariz. at 324, ¶ 18, 275 P.3d at 623 (citing Birds Int'l Corp. v. Ariz. Maint. Co., 135 Ariz. 545, 547, 662 P.2d 1052, 1054 (App. 1983)).
¶18 Although "a preference for a hearing to determine whether a [violation] was willful or in bad faith and whether the circumstances justify drastic action," exists, Robinson v. Higuera, 157 Ariz. 622, 624, 760 P.2d 622, 624 (App. 1988) (citing Zakroff v. May, 8 Ariz. App. 101, 104, 443 P.2d 916, 919 (1968)), due process does not require a hearing prior to the imposition of sanctions "[w]here willfulness or bad faith or fault of the party is clear from the record." Id. (citing Link v. Wabash R.R. Co., 370 U.S. 626, 632 (1962)). For instance, a hearing is necessary when questions exist as to a party's ability to comply with an order. See Birds Int'l, 135 Ariz. at 546, 662 P.2d at 1053 (recognizing dismissal is not authorized where "'the failure to comply has been due to inability, and not to willfulness, bad faith, or any fault of petitioner'") (quoting Societe Internationale Pour Participations Industrielles Et Commerciales S.A. v. Rogers, 357 U.S. 197, 211 (1958)). Additionally, a hearing is warranted where it is unclear whether a party, or the party's counsel, is at fault for the sanctionable conduct. See id. at 547-48, 662 P.2d at 1054-55 ("Where the party is not guilty he should not suffer default or dismissal as a result of counsel's conduct.") (citing Treadaway v. Meador, 103 Ariz. 83, 84-85, 436 P.2d 902, 903-04 (1968)); see also Roberts, 225 Ariz. at 121, ¶ 31, 235 P.3d at 274 ("When considering the imposition of default judgment as a sanction for discovery violations, a court must find the party itself is at fault . . . .") (citing Wayne Cook Enters. v. Fain Props. Ltd. P'ship, 196 Ariz. 146, 149, ¶ 12, 993 P.2d 1110, 1113 (App. 1999)); Lenze v. Synthes, Ltd., 160 Ariz. 302, 306, 772 P.2d 1155, 1159 (App. 1989) (remanding for an evidentiary hearing where it was unknown whether fault for a discovery violation lay with the party or its former counsel).
¶19 Here, the record before the trial court was sufficiently clear to find Tuffly at fault for his failure to obey the court's order and impose a sanction without first holding an evidentiary hearing. In November 2010, Tuffly's former counsel cited as the basis for his withdrawal that he "ha[d] not had any communication with [Tuffly] since late June[] 2010," and had "not been paid for his services" despite "repeated requests for payment upon [Tuffly] which [were] ignored." The motion also stated Tuffly was provided a copy of counsel's motion and had "been notified in writing as to the status of the case." Although the motion was clearly mailed to Tuffly, he did not object or otherwise contest his prior counsel's assertions. While not specifically ordered to appear by the trial court, when a hearing was held regarding withdrawal of his counsel over a month later, Tuffly did not appear or participate in any manner. This then prompted the court to order Tuffly's appearance at the January 24, 2011 Status Hearing, where he once again failed to appear.
Tuffly also argues a hearing was required because the notice regarding the January 24, 2011 Status Hearing, drafted by his former attorney, incorrectly ordered Tuffly to appear on January 24, 2010, a date that had passed almost a year prior, and therefore it was unclear who was at fault for Tuffly's non-appearance. We find this argument unavailing. Setting aside that Tuffly's asserted defense for failing to appear at that hearing was secretarial error rather than reliance upon the erroneous date provided within the notice, simply ignoring the notice of a court order mailed on January 11, 2011, directing a party's presence on January 24, 2010, without taking any action to receive guidance or clarification, is manifestly unreasonable. See Nat'l Broker Assocs., Inc. v. Marlyn Nutraceuticals, Inc., 211 Ariz. 210, 216, ¶ 28, 119 P.3d 477, 483 (App. 2005) ("[A] party cannot simply ignore an order of the court until the time for compliance passes and then argue in defense that the order was ineffective. If a party believes that a defect exists, it is incumbent on the party to approach the court for clarification or reconsideration.").
In fact, Tuffly's later testimony confirmed his prior counsel's assertions, as he stated he had not spoken to him since around July 2010.
¶20 The record illustrates Tuffly was provided notice of the status of the case and the trial court's order to appear, and that the fault for violating the order, as a self-represented party, rested with him. The prior history of the case demonstrated Tuffly was disinterested in participating, as evidenced by his failure to communicate with his own counsel, and this apathy was re-affirmed by his absence and lack of participation at the January 3 and January 24, 2011 hearings. Moreover, out of an abundance of caution by the court, the nature of the imposed sanction, itself, provided Tuffly with both notice of the sanction and subsequent opportunity to be heard before the full force of the sanction went into effect. As detailed above, the court struck Tuffly's answer, but rather than immediately entering a default against him, directed the Leyvas to file, and serve upon Tuffly, an application for default. See Ariz. R. Civ. P. 55(a)(1). Tuffly was thereby provided ten days to respond to the application and prevent the entry of default. See Ariz. R. Civ. P. 55(a)(4).
¶21 As the record is clear that Tuffly had stopped taking any actions with respect to the lawsuit and the fault resided with him, the trial court did not err by imposing the sanction without first holding an evidentiary hearing. II. The Trial Court Did Not Abuse its Discretion by Striking Tuffly's Answer.
¶22 Tuffly also argues the trial court abused its discretion by striking its answer without first considering whether a lesser sanction should be imposed for his failure to attend the January 24, 2011 Status Hearing. We disagree.
¶23 Generally, a trial court possesses broad power to impose sanctions under Rule 16(f). Estate of Lewis, 229 Ariz. at 323, ¶ 18, 275 P.3d at 622 (citing Groat v. Equity Am. Ins. Co., 180 Ariz. 342, 346, 884 P.2d 228, 232 (App. 1994)). But a trial court's discretion "is more limited" when it imposes severe sanctions, such as striking a pleading or entering a default judgment, than when imposing lesser sanctions. Id. (citing Roberts, 225 Ariz. at 119, ¶ 27, 235 P.3d at 272 (App. 2010)). "'The purpose of the sanctions . . . is to coerce [a party's] cooperation rather than to dispose of litigation as a form of punishment.'" Id. at ¶ 17 (quoting Jancauskas v. Tow Motor Corp., 261 N.E.2d 753, 755 (Ill. App. Ct. 1970)). Therefore, the sanction imposed "must be appropriate to the circumstances." Roberts, 225 Ariz. at 119-20, ¶ 27, 235 P.3d at 273 (citing Zimmerman v. Shakman, 204 Ariz. 231, 235, ¶ 13, 62 P.3d 976, 980 (App. 2003)). Nonetheless, a "discretionary exercise of power within those limits is entitled to deference on appeal." Lenze, 160 Ariz. at 305, 772 P.2d at 1158 (citing Gulf Homes, Inc. v. Beron, 141 Ariz. 624, 628, 688 P.2d 632, 636 (1984)).
¶24 In Estate of Lewis, we reversed a trial court's dismissal of a plaintiff's complaint, entered as a sanction for failing to comply with a court's ambiguous order to personally appear at a pretrial conference. 229 Ariz. at 325-26, ¶¶ 24-26, 275 P.3d at 624-25. In that case, the plaintiff "was an out-of-state party who was represented by counsel of record" at the missed hearing, and had previously been allowed to appear by telephone without objection. Id. at 325, ¶ 24, 275 P.3d at 624. It was also unclear whether the plaintiff was ever informed by his attorney that he need personally appear, and the record suggested he had not personally received the minute entry order directing his presence. Id. at 325-26, ¶¶ 22, 25, 275 P.3d at 624-25. Thus, we concluded the "nonaggravated circumstances of this case . . . would not permit the drastic sanctions imposed . . . ." Id. at 325, ¶ 24, 275 P.3d at 624 (citing Zakroff, 8 Ariz. App. at 104, 443 P.2d at 919).
¶25 In contrast, Tuffly was not an out-of-state party; nor did he have a representative appear at the hearing on his behalf. Rather, Tuffly had a six-month history of non-participation in the litigation, beginning with ignoring his former attorney in June 2010, and concluding with his failure to comply with the court order in January 2011. With this background, the trial court crafted a sanction that balanced the competing interests of the parties. By striking Tuffly's answer, but requiring the Leyvas to file an application for default to which Tuffly then had the opportunity to respond, the trial court provided Tuffly a mechanism to prevent the entry of default and illustrate his intention to participate in the litigation. On the other hand, in the event Tuffly continued to disregard the litigation, as had been his past practice, the Leyvas would be able to obtain a default judgment and avoid incurring additional costs and delay while hoping Tuffly would eventually participate. Thus, it was entirely up to Tuffly to signal how he wished to proceed. Under the circumstances of this case, we cannot say the sanction imposed was inappropriate.
¶26 Tuffly also argues the trial court abused its discretion in failing to consider and reject lesser sanctions before striking his pleading. When considering the imposition of drastic sanctions, the trial court should first consider and reject lesser sanctions. Roberts, 225 Ariz. at 121, ¶ 31, 235 P.3d at 274 (citing Wayne Cook, 196 Ariz. at 149, ¶ 12, 993 P.2d at 1113).
¶27 At the start of the January 24, 2011 Status Hearing, the trial court specifically acknowledged Tuffly had been ordered to personally appear and was sent notice of the hearing, but was not present. When asked if they had anything to say about Tuffly's absence, the Leyvas' counsel requested Tuffly's answer be stricken, arguing the sanction was appropriate given his lack of participation in the preceding six months. Counsel supported his position by highlighting Tuffly's lack of communication with his own counsel since June 2010 and his current failure to comply with the court's order. Only after hearing and considering the reasons articulated for striking the answer did the trial court find it appropriate to do so.
¶28 Moreover, the nature of the sanction itself demonstrates the trial court considered the appropriateness of less stringent sanctions. As structured, the magnitude of the sanction was dependent entirely upon Tuffly's own conduct. Normally, when a party's answer is stricken as a sanction, there is no opportunity to file an answer because "[t]o allow a second chance would render the . . . sanction meaningless." Groat, 180 Ariz. at 348, 884 P.2d at 234. Here, however, the trial court and the Leyvas' counsel contemplated Tuffly could respond to the application and prevent entry of default, as evidenced by the court's specific instruction to proceed under Rule 55(b). Had Tuffly learned from the striking of his answer, as the court clearly hoped he would, the sanction would have amounted to nothing more than those costs incurred to file a response to the default and restore his position in the litigation. Instead, the default entered only after Tuffly failed to respond to the Plaintiff's application for default — one of many papers he admittedly received. Further, the judge that imposed the sanction had been assigned to this case since its inception and crafted the sanction consistently with his direct knowledge of Tuffly's time-tested lack of participation. Therefore, the record reflects the trial court was aware it was not required to impose drastic sanctions.
¶29 Tuffly also contends the trial court failed to impose the mandatory minimum monetary sanction contemplated by Rule 16(f), and that this demonstrates the trial court did not consider lesser sanctions before striking his answer. The record supports otherwise.
¶30 As pertinent here, Rule 16(f) provides:
In lieu of or in addition to any other sanction, the judge shall require the party, . . . to pay reasonable expenses incurred because of any noncompliance with this rule, including attorneys' fees, or payment of an assessment to the clerk of the court, or both, unless the judge finds that the noncompliance was substantially justified, or that other circumstances make an award of expenses unjust.However, contrary to Tuffly's assertion, the trial court did award the Leyvas their attorneys' fees resulting from Tuffly's noncompliance with the court's order, in addition to striking the answer. A statement of fees generated by the Leyvas' counsel for his attendance at the January 24, 2011 Status Hearing was included in his declaration in support of the application for attorneys' fees, and that amount was included in the attorneys' fees award entered by the court.
¶31 In sum, the trial court was aware of Tuffly's non-participation in the litigation and structured a sanction anticipated to either prompt Tuffly to actively participate, or allow the Leyvas to conclude the litigation. Under the circumstances of this case, we cannot say the trial court abused its discretion. III. The Trial Court Did Not Abuse its Discretion in Denying Tuffly's Motion to Set Aside the Default for Failure to Take Prompt Action.
¶32 Finally, Tuffly argues the trial court abused its discretion in denying his motion to set aside the entry of default pursuant to Rule 55(c). We disagree.
¶33 Arizona courts adhere to "a principle of finality in proceedings, which is to be recognized and given effect." Daou, 139 Ariz. at 359, 678 P.2d at 940 (citing Richas, 133 Ariz. at 514, 652 P.2d at 1037, and United Imports & Exps., Inc. v. Superior Court, 134 Ariz. 43, 45, 653 P.2d 691, 693 (1982)). Thus, under Rule 55(c), a trial court may set aside an entry of default only "[f]or good cause shown." To satisfy Rule 55(c), the moving party must show each of the following: (1) his actions were "excused by one of the grounds enumerated in Rule 60(c);" (2) "he acted promptly in seeking relief from the entry of default;" and (3) "he had a meritorious defense." Webb v. Erickson, 134 Ariz. 182, 185-86, 655 P.2d 6, 9-10 (1982) (citing Richas, 133 Ariz. at 514, 652 P.2d at 1037).
¶34 A trial court has discretion to determine whether a party's actions were prompt given the circumstances, but the delay must be adequately explained in order for the court to exercise its discretion. See Richas, 133 Ariz. at 515, 652 P.2d at 1038. "The burden of explanation is upon the party seeking to set aside the entry of default." Id. (citing Sloan v. Florida-Vanderbilt Dev. Corp., 22 Ariz. App. 572, 574, 529 P.2d 726, 728 (1974)).
¶35 Here, the application for entry of default was filed on January 26, 2011, and when a response was not made, the default became effective in early February 2011. See Ariz. R. Civ. P. 55(a)(3). Tuffly did not move to set aside the entry of default until August 2012, more than a year and a half later. During that intervening period, Tuffly was served by mail with: (1) the application for entry of default; (2) an affidavit in support of the application for entry of default; (3) the Leyvas' April 2011 motion to continue on the inactive calendar, seeking a continuance because "default has been entered by the Clerk against [Tuffly], and Plaintiffs are preparing their Motion for Default Judgment, and related filings to finalize the Judgment against [Tuffly];" (4) the Leyvas' August 2011 motion to continue on the inactive calendar, asserting "default has been entered by the Clerk against [Tuffly], and [the Leyvas] are in the final stages of finalizing their Motion for Default Judgment, and related filings to finalize the Judgment against [Tuffly];" (5) the Leyvas' motion for default judgment and affidavit in support of that motion; (6) the Leyvas' application for attorneys' fees and costs; and (7) the Leyvas' request to clarify the December 2012 default judgment. At the hearing on the motion to vacate, Tuffly was shown each of these documents, along with several others; he confirmed they all were properly addressed, and admitted that "probably all of them" were in the "Dome property" box in his office. According to Tuffly's admission, the "Dome property" box also contained the order directing Tuffly to personally appear at the January 24, 2011 Status Hearing.
In their answering brief, the Leyvas' moved to supplement the record on appeal with the garnishee bank's answers to the writ of garnishments, arguing "[t]hey are relevant because [they are] further evidence that [Tuffly] should have been aware of the entry of default and judgment sooner than when [he] claims." However, given the volume of other documents that would have alerted Tuffly to the entry of default, we conclude it is unnecessary. Therefore, we deny the Leyvas' motion to supplement.
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¶36 Having acknowledged receipt of the court documents, Tuffly could only explain his failure to respond as the result of secretarial neglect. Tuffly testified his office assistant left his employ around March 2012, but gave inconsistent information regarding her departure within his pre-hearing affidavits and hearing testimony. In his affidavits in support of the motion to set aside the default judgment and order to show cause, both admitted at the evidentiary hearing without objection, Tuffly averred he terminated her employment after discovering she hid or threw away important papers. This avowal indicated he was aware of a potential problem as early as March 2012. At the hearing, however, Tuffly testified that he did not terminate her employment; rather, Tuffly asserted she voluntarily left his employ to accompany her husband, a marine, who had been stationed in another state. Tuffly's new testimony suggested he was unaware of the underlying court proceedings until the Notice of Sheriff's sale was posted at his residence in August 2012. Attempting to explain the drastically different explanations, Tuffly admitted the affidavits were hastily drafted, and further stated he could "honestly say" he had signed the affidavits without "reading [them] thoroughly."
¶37 The trial court resolved the conflicting testimony, finding the office assistant was fired in March 2012 as a result of her filing mistakes. See Mahurin v. Schmeck, 95 Ariz. 333, 337, 390 P.2d 576, 578 (1964) (noting it is the trial court's duty, as trier of fact, to reconcile conflicts in testimony) (citing Hyder v. Barton Hat Co., 29 Ariz. 380, 382, 241 P. 959, 960 (1926)). It further determined discovery of those mistakes in March 2012 should have prompted Tuffly to investigate their magnitude and effect, and that his actions, in August 2012, were not prompt. As reasonable evidence — in the form of Tuffly's own sworn affidavits — supports the trial court's resolution, we will not disturb it on appeal. O'Hern v. Bowling, 109 Ariz. 90, 93, 505 P.2d 550, 553 (1973) (citing In re Estate of Harber, 104 Ariz. 79, 89, 449 P.2d 7, 17 (1969)).
¶38 The trial court also concluded Tuffly failed to adequately explain the basis of the office assistant's errors sufficient to support setting aside the default. See State ex rel. Corbin v. Marshall, 161 Ariz. 429, 431-32, 778 P.2d 1325, 1327-28 (App. 1989) ("The moving party has the burden of demonstrating good cause for vacating the entry of default — that is, grounds such as mistake, inadvertence, excusable neglect and due diligence.") (citing Richas, 133 Ariz. at 514, 652 P.2d at 1037). While Tuffly claimed his assistant misfiled the paperwork after overhearing, and misunderstanding, a conversation between Tuffly and his attorney about a different case, he acknowledged this was only a theory. He admitted he had not personally spoken to the office assistant to ascertain the actual reason she filed the papers without first presenting them to him for review. Such theorizing was speculative and insufficient to explain the delay. See Richas, 133 Ariz. at 515, 652 P.2d at 1038 (noting the testimony supporting the explanation for delay "must be based upon personal knowledge and must allege facts sufficient to establish what occurred and explain why it should be found excusable") (citing W. Coach Corp. v. Mark V Mobile Home Sales, Inc., 23 Ariz. App. 546, 548, 534 P.2d 760, 762 (1975)).
¶39 In sum, the record reflects Tuffly took no action for eighteen months after the entry of default, including five months after which he admitted having knowledge that the office assistant was misfiling or discarding important papers. Indeed, Tuffly testified to having made no inquiries of the trial court, his former attorney, the Leyvas or the Leyvas' counsel about the status of this litigation from November 2010 until August 2012. Further, Tuffly did not offer a substantiated explanation for the delay in his actions. Therefore, he cannot reasonably be perceived as "acting promptly." See id. (finding a five week, unexplained delay was not prompt); Hyman v. Arden-Mayfair, Inc., 150 Ariz. 444, 447-48, 724 P.2d 63, 67-68 (App. 1986) (affirming trial court's finding that nine week delay, without "factual information justifying any delay," was not prompt).
¶40 Because we agree with the trial court that Tuffly did not act promptly in seeking to set aside the entry of default, we need not consider the remaining requirements of Rule 55(c). See Hirsch, 136 Ariz. at 309, 666 P.2d at 54 ("Because we find that the defendant has failed to establish the second element [necessary to obtain relief under Rule 55(c)] we do not consider the other requirements."). As the Rule 55(c) requirement of reasonably prompt action was not satisfied, the trial court did not abuse its discretion in denying Tuffly's motion to set aside the entry of default. See Richas, 133 Ariz. at 515, 652 P.2d 1035 (holding failure to act promptly provides "no basis on which [trial court] could exercise its discretion" to set aside a default).
CONCLUSION
¶41 Based upon the foregoing, we affirm. The Leyvas request their attorneys' fees on appeal pursuant to A.R.S. § 12-341.01. In our discretion, we decline their request. As the prevailing party, however, the Leyvas are entitled to their costs on appeal upon compliance with ARCAP 21.