Fine Point v. Occidental

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UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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.

IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE

FINE POINT PAINTING, LLC, an Arizona
limited liability company,
Plaintiff/Appellee,

v.

OCCIDENTAL FIRE & CASUALTY COMPANY
OF NORTH CAROLINA, a North Carolina corporation,
Defendant/Appellant.

No. 1 CA-CV 13-0677
FILED 1-8-2015

Appeal from the Superior Court in Maricopa County
No. CV2012-092859
The Honorable Margaret Benny, Commissioner

AFFIRMED

COUNSEL

Schneider & Onofry, PC, Yuma
By Jason M. Kelly

Kelly Warner, PLLC, Scottsdale
By Daniel R. Warner
Co-Counsel for Plaintiff/Appellee

Israel & Gerity, PLLC, Phoenix
By Kyle A. Israel
Counsel for Defendant/Appellant
 FINE POINT v. OCCIDENTAL
Decision of the Court

MEMORANDUM DECISION

Presiding Judge Patricia A. Orozco delivered the decision of the Court, in
which Judge Randall M. Howe and Judge Maurice Portley joined.

O R O Z C O, Judge:

¶1 Occidental Fire and Casualty Company of North Carolina
(Occidental) appeals the trial court’s order denying its motion to set aside a
default judgment in favor of Fine Point Painting, LLC (Fine Point). For the
reasons that follow, we affirm.

FACTS AND PROCEDURAL BACKGROUND

¶2 Belfor Property Restoration (Belfor) hired Fine Point to repair
paint and drywall and to perform general carpentry tasks in Paul and Marie
Denny’s home. After Fine Point completed the project, an explosion
occurred in the home causing Donovan Staley to sustain burns. At the time
of the incident, Fine Point was insured by Occidental. Belfor claimed it was
entitled to additional insured benefits under Fine Point’s general liability
policy and filed a claim with Occidental.

¶3 On January 5, 2012, Occidental notified Fine Point and Belfor
that Belfor did not qualify as an additional insured under Fine Point’s
policy. Nevertheless, Fine Point made multiple demands upon Occidental
to defend and indemnify Belfor in claims related to the incident. On June
11, 2012, Fine Point filed suit against Occidental alleging breach of contract,
breach of duty of good faith and fair dealing, and negligent
misrepresentation.

¶4 On July 18, 2012, Occidental notified Fine Point that it agreed
to defend and indemnify Belfor in an action the Dennys filed in the District
Court of the Navajo Nation. However, Occidental stated:

Any action taken by us in the investigation, defense, or
settlement shall not constitute or be construed as a waiver or
an estoppel of any rights or defenses we have under the
subject policy of insurance. [Occidental] reserves the right to
deny coverage and withdraw from any further participation
in this matter altogether, should facts be developed that
determine the . . . policy does not cover this loss.

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¶5 Occidental asked Fine Point to dismiss its lawsuit because
Occidental’s agreement to defend Belfor rendered the lawsuit “moot.” On
August 24, 2012, after the deadline to respond to Fine Point’s complaint
expired, Fine Point notified Occidental that, “[b]ecause [Occidental] has
provided coverage to [Fine Point] and Belfor, we are hopeful that we can
also settle the remaining items short of continued litigation and have
elected not to default [Occidental] at this point.” Fine Point requested
Occidental pay $12,591 for Fine Point’s incurred attorney fees and costs and
$70,092 representing those funds Belfor was withholding from Fine Point
“because of [Occidental’s] failure to indemnify Belfor.” After reviewing
Fine Point’s invoices, Occidental agreed to pay only $8,801.60 of the
attorney fees. In response, Fine Point explained to Occidental that, “Belfor
would not be withholding payment of $70,092 but for Occidental’s failure
to provide coverage,” and it would be filing a notice of default if the total
amount of requested attorney fees and costs were not paid.

¶6 Fine Point filed an application and notice for entry of default
judgment on October 17, 2012. In its motion for hearing for the default
judgment, which was served on Occidental, Fine Point sought
compensatory damages in the amount of $1,070,092, claiming that Belfor
refused to do any further business with Fine Point as a result of Occidental’s
failure to defend Belfor, and $200,000 in punitive damages because
“[Occidental] knowingly denied coverage for several months after being
informed several times that substantial loss would be caused to [Fine
Point].” Fine Point also requested its attorney fees and costs, totaling
$15,385.40 and $642.10, respectively. The default judgment hearing was
held on April 22, 2013, and Occidental did not appear. The trial court
awarded Fine Point a judgment for compensatory damages in the amount
of $977,000 plus costs in the amount of $642.10, and interest at the statutory
rate until the judgment was paid in full.

¶7 On July 2, 2013, Occidental moved for a new trial or amended
judgment, to set aside the judgment and to stay post-judgment collection
proceedings, claiming: “(1) the [j]udgment was entered after [Occidental]
reasonably believed it had settled this claim with [Fine Point] more than
once and (2) the [j]udgment was obtained through [Fine Point’s]
misrepresentation of the true cause of its economic losses.” The trial court
denied the motions, finding that the motion to amend the judgment and the
request for new trial were untimely filed and the trial court could find no
reason under any subsection of Arizona Rule of Civil Procedure (Rule) 60(c)
to set aside the judgment. Occidental timely appealed and we have
jurisdiction pursuant to Article 6, Section 9 of the Arizona Constitution and

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Arizona Revised Statutes (A.R.S.) sections 12-120.21.A.1. and -2101.A.5(a)
(West 2014).1

DISCUSSION

I. Relief Under Rule 60(c)

¶8 Trial courts have broad discretion when determining whether
to set aside a judgment under Rule 60(c). Woodbridge Structured Funding,
LLC. v. Ariz. Lottery, 235 Ariz. 25, 29, ¶ 21, 326 P.3d. 292, 296 (App. 2014).
“We review a trial court’s denial of relief from judgment under Rule 60 for
an abuse of discretion.” Id. at 29-30, ¶ 21, 326 P.3d. at 296-97. “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, LLC. v. Meienberg, 215 Ariz. 44, 50, ¶ 27, 156 P.3d 1149, 1155 (App.
2007) (internal citation and quotation omitted). 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).

¶9 A trial court may set aside a default judgment in accordance
with Rule 60(c). Ariz. R. Civ. P. 55(c). To be entitled to relief, Occidental
must prove: 1) that its failure to file a timely answer was excusable under
one of the subdivisions of Rule 60(c), 2) that it acted promptly in seeking
relief and 3) it had a substantial and meritorious defense to the action. See
Blair, 226 Ariz at 216, ¶ 7, 245 P.3d at 901.

¶10 Occidental first argues it is entitled to relief under Rule
60(c)(3), which allows the trial court to set aside a default judgment that is
procured by “fraud . . . misrepresentation or other misconduct of an adverse
party.” To obtain relief under this rule, a party must show that the adverse
party’s fraud, misrepresentation or misconduct prevented the first party
from fully presenting a meritorious defense before the default judgment.
See Estate of Page v. Litzenburg, 177 Ariz. 84, 93, 865 P.2d 128, 137 (App. 1993)
(interpreting Federal Rule of Procedure 60(b)(3), which is functionally
identical to Arizona’s Rule 60(c)(3)).

1 We cite to the current version of applicable statutes when no
revisions material to this decision have since occurred.

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¶11 Occidental contends that Fine Point engaged in misconduct
by misleading the trial court about the “true cause of [Fine Point’s] lost
profits which led to a judgment far in excess of that [which] was caused by
even an assumed breach of contract by [Occidental].” Occidental has failed
to provide any evidence that Fine Point did or said anything that prevented
Occidental from demonstrating that Fine Point’s purported damages were
excessive. Before denying Occidental’s motion to set aside the judgment,
the trial court found that:

Occidental did not file an answer. They were aware,
numerous times, from the attorney that [Fine Point] intended
to apply for default and request a default judgment, and the
documentation was provided to show that they did attempt
to notify [Occidental] of [the] default hearing.

¶12 Because Occidental was on notice of Fine Point’s complaint
and application for default judgment, Occidental’s failure to file an answer
and attend the default judgment hearing cannot be said to be the result of
Fine Point’s fraud, misrepresentation or misconduct. Also, had Occidental
appeared and defended, it could have raised its defenses. But for whatever
reason, it chose not to appear before the entry of default. Therefore, we find
the trial court did not abuse its discretion in determining that Rule 60(c)(3)
was not applicable.

¶13 Occidental also argues that the trial court should have set
aside the judgment pursuant to Rule 60(c)(6), which permits the court to
grant relief from a final judgment for “any other reason justifying relief
from the operation of the judgment.” To obtain relief under Rule 60(c)(6),
Occidental must show, “1) extraordinary circumstances of hardship or injustice
justifying relief and 2) a reason for setting aside the judgment other than
one of the reasons set forth in the preceding five clauses of Rule 60(c).” See
Hilgeman v. American Mortg. Sec., Inc., 196 Ariz. 215, 220, ¶ 15, 994 P.2d 1030,
1035 (App. 2000) (emphasis added).

¶14 Occidental argues that Rule 60(c)(6) applies to this case
because the June 18, 2012 correspondence in which Occidental agreed to
indemnify Belfor, constituted a settlement of its dispute with Fine Point in
compliance with Rule 80(d). Occidental further contends that “[b]ecause
the parties had already settled this matter, the settlement should be
enforced and the void Judgment should be set aside . . . The failure to
defend the litigation after the settlement should not operate to unwind the
settlement.” Fine Point maintains that there was no settlement because the
correspondence reserved Occidental’s right to withdraw from the litigation,

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“should facts be developed that determine the . . . policy does not cover this
loss.” Furthermore, Occidental did not pay Belfor’s defense fees until after
the judgment was entered.

¶15 Even if Occidental could show that it promptly sought relief
from the default judgment and that its settlement argument was a
substantial and meritorious defense, it has not demonstrated that its failure
to file an answer to Fine Point’s complaint was justified as required by Rule
60(c)(6). We have held that a party’s choice to not respond to a complaint
does not rise to the level of extraordinary circumstances of hardship or
injustice under Rule 60(c)(6). Marks v. LaBerge, 146 Ariz. 12, 16, 703 P.2d
559, 563 (App. 1985). Thus, the trial court did not abuse its discretion by
determining that Occidental’s failure to file an answer was not excused by
Rule 60(c)(6).2

II. Attorney Fees and Costs

¶16 On appeal, both parties request attorney fees pursuant to
A.R.S. § 12-341.01. Fine Point also requests its costs pursuant to A.R.S. § 12-
341. In the exercise of our discretion, we grant Fine Point its reasonable
attorney fees and costs contingent on its compliance with Arizona Rule of
Civil Appellate Procedure 21. We deny Occidental’s request for attorney
fees.

2 Occidental’s argument that a Rule 80(d) agreement existed is not
well taken. Because Occidental did not appear, Rule 80(d) did not apply.
Also, because Occidental did not address the denial of the motion for a new
trial, we will not address it. See Carrillo v. State, 169 Ariz. 126, 132, 817 P.2d
493, 499 (App. 1991) (“[i]ssues not clearly raised and argued on appeal are
waived”).

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Decision of the Court

CONCLUSION

¶17 For the foregoing reasons, we affirm the trial court’s order
denying Occidental’s motion to set aside the default judgment.

:ama

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