MJG v. Moon

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NOTICE: THIS DECISION DOES NOT CREATE LEGAL PRECEDENT AND MAY NOT BE CITED EXCEPT AS AUTHORIZED BY APPLICABLE RULES. See Ariz. R. Supreme Court 111(c); ARCAP 28(c); Ariz. R. Crim. P. 31.24 DIVISION ONE FILED: 12/13/2011 RUTH A. WILLINGHAM, CLERK BY: DLL IN THE COURT OF APPEALS STATE OF ARIZONA DIVISION ONE ) ) ) ) Plaintiff/Appellee, ) ) v. ) ) WAYNE RADFORD MOON and LESLIE MOON, ) husband and wife; GCR CAPITAL ) PARTNERS, LLC, a Nevada limited ) liability company, ) Defendants/Appellants. ) _______________________________________ ) MJG ENTERPRISES, INC., an Arizona corporation, 1 CA-CV 10-0767 DEPARTMENT C MEMORANDUM DECISION (Not for Publication - Rule 28, Arizona Rules of Civil Appellate Procedure) Appeal from the Superior Court in Maricopa County Cause No. CV 2009-020325 The Honorable Eileen Willett, Judge The Honorable Jay L. Davis, Commissioner VACATED AND REMANDED Mitchell & Associates By Robert D. Mitchell and Sarah K. Deutsch and Jamie Gill Santos Attorneys for Plaintiff/Appellee Phoenix Wayne Radford Moon, In Propria Persona Defendant/Appellant Reno, NV Leslie Moon, In Propria Persona Defendant/Appellant Reno, NV Harper Law PLC By Kevin R. Harper Attorneys for Defendants/Appellants Gilbert N O R R I S, Judge ¶1 This appeal arises out of default judgments entered in favor of Appellee MJG Enterprises, Inc. ( MJG ), against Appellants Wayne Moon, Leslie Moon, and GCR Capital Partners, LLC, 1 (unless separately referenced, collectively, Defendants ) of Nevada. Defendants argue we should vacate the default judgments because, inter alia, MJG failed to demonstrate it had exercised due diligence serving them by publication. to serve them personally before We agree, and hold MJG s failure to show it exercised due diligence to locate the Defendants to effect personal service rendered the default judgments void for lack of jurisdiction. We also hold MJG s publication was not sufficient notice under the Due Process Clause of the Fourteenth Amendment. FACTS AND PROCEDURAL BACKGROUND ¶2 On July 30, 2009, a licensed Nevada process server, acting on behalf of MJG, attempted to serve GCR with a summons 1 Wayne Moon was the managing member of GCR. After this appeal was at issue, this court granted Defendants counsel s motion to withdraw as their counsel in this matter. We remind Defendants a corporation may not appear in court without an attorney. See Boydston v. Strole Dev. Co., 193 Ariz. 47, 49, ¶ 7, 969 P.2d 653, 655 (1998). 2 and complaint using three available addresses in Reno. The process server personally visited two of the addresses, but the properties number were vacant. listed for disconnected. The the process third server address, but called the a phone phone was The next day, the process server attempted to serve the Moons at a separate address in Reno, but the house was empty and had a For Sale sign in the front yard. ¶3 In October, MJG mailed a complaint and summons postage prepaid, to the last known address[es] of Defendants. The mailing was not returned to MJG as undeliverable. MJG then published the summons in a newspaper in Maricopa County once a week for four weeks in October and November. In February 2010, MJG asked the superior court to approve service of Defendants by publication. MJG attached affidavits to its motions attesting service had been attempted personally at each defendant s last known address and a copy of the summons had been mailed to those addresses. had been made The affidavits did not describe what efforts to locate the Defendants current addresses. Nevertheless, on February 23, 2010, the superior court entered orders approving service by publication. ¶4 In March 2010, MJG filed an application for entry of default, and, in May, MJG moved for entry of default judgments against Defendants ( Default Judgment Motions ). 3 MJG attached affidavits to these motions that stated the applications for entry of default had been filed with the clerk and a copy of those applications had been mailed to the Defendants last known addresses. ¶5 In a letter to the superior court judge assigned to the case, filed in the record July 13 but dated June 8, Wayne Moon stated he had never been made aware of the lawsuit and would be hiring an attorney to make special appearances. 2 also stated he was contesting Arizona jurisdiction on He the grounds he had facilitated only two phone calls between the parties (MJG & Callahan/Tucker), as an intermediary maintain[ed] no presence within the state of Arizona. and The superior court treated the letter as a response to the Default Judgment Motions. Moon had The letter, however, contained no indication submitted it in response to the Default Judgment Motions or had ever seen the Default Judgment Motions. ¶6 In an unsigned minute entry filed August superior court granted the Default Judgment Motions. 6, the Following the issuance of this minute entry, Defendants sent letters to the superior court judge that 2 were styled as motions to While Wayne Moon did not specifically state the letter was sent on behalf of Leslie Moon and GCR as well, the first paragraph of the letter noted that Wayne Moon, Leslie Moon, and GCR had all been included as defendants. 4 reconsider for lack of jurisdiction and motions to dismiss for lack of jurisdiction. ¶7 On August 19, Defendants, now represented by counsel, filed a motion asking August 6 minute entry. the superior court to reconsider its This motion included an affidavit from Wayne Moon stating that when he was first informed in June that he, Leslie case, he promptly sent a letter disputing the Court s jurisdiction. On September to respond, Moon, 1, and the denied GCR superior all of were defendants court, Defendants without motions in the directing and MJG affirmed the granting of the Default Judgment Motions. ¶8 On September 22, a superior court commissioner signed and entered default judgments against Defendants, and Defendants timely appealed. 3 DISCUSSION ¶9 Defendants argue the default judgments should be vacated because MJG did not exercise due diligence to serve 3 Generally, a default judgment is not appealable; rather, parties can appeal only an order setting aside or refusing to set aside a default judgment. Kline v. Kline, 221 Ariz. 564, 568, ¶ 11, 212 P.3d 902, 906 (App. 2009). However, a default judgment can be appealed when there is a question regarding personal or subject matter jurisdiction, or when there is a question regarding the validity of the default judgment pursuant to Ariz. R. Civ. P. 55. Id. Because Defendants attack the adequacy of service of process, which is required for a valid default judgment under Rule 55, this appeal is welltaken. See id. at ¶ 12. 5 them personally before resorting to service by publication. agree. We MJG s failure to provide evidence of a due diligence effort to judgments personally entered serve by jurisdiction. MJG s adequate the the under Defendants superior service Due rendered court by void publication Process Clause of the for was the default lack also of not Fourteenth Amendment. ¶10 Arizona Rule of Civil Procedure ( Rule ) 4.2(f) permits service by publication when the person to be served is one whose present residence is unknown but whose last known residence was outside the state . . . and service by publication is the best means practicable under the circumstances. The Rule requires that a party making service by publication file an affidavit showing . . . the circumstances warranting utilization of [service by publication] which shall be prima facie evidence of compliance. Id. facts made indicating [the party] This affidavit must provide a due diligent locate an opposing party to effect personal service. effort to Sprang v. Petersen Lumber, Inc., 165 Ariz. 257, 261, 798 P.2d 395, 399 (App. 1990) (citations omitted). indicate that due diligence [I]f the affidavit fails to was exercised to locate the defendant, the default judgment is void on its face for lack of jurisdiction. Id. at 262, 798 P.2d at 400. 6 ¶11 Aside from the requirements of Rule 4.2(f), a plaintiff seeking service by publication must also satisfy the due process minimums required by the Fourteenth Amendment and articulated by the United States Supreme Court in Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 70 S. Ct. 652, 94 L. Ed. 865 (1950). Master Fin., Inc. v. Woodburn, 208 Ariz. 70, 73, ¶ 15, 90 P.3d 1236, 1239 (App. 2004); see also Ariz. R. Civ. P. 4.1 cmt. In Mullane, the Court explained when notice is a person s due, process which is a mere gesture is not due process. actually The means employed must be such as one desirous of informing accomplish it. the absentee might reasonably adopt to 339 U.S. at 315, 70 S. Ct. at 657. I. Due Diligence ¶12 In property mailed Sprang, a a copy party of seeking the to summons foreclose and on complaint real to the defendant s post office box, but the defendant later testified he did not receive them. 165 Ariz. at 261, 798 P.2d at 399. A sheriff then attempted personal service at the defendant s home, but, after finding the house vacant, served the defendant by publication. foreclosing search: party [a] due failed to diligent Id. exercise effort the due foreclosing party This court held the diligence requires such in its pointed measures as an examination of telephone company records, utility 7 company records, and records maintained by the county treasurer, county recorder, or similar record keepers. Id.; cf. Roberts v. Robert, 215 Ariz. 176, 180, ¶ 19, 158 P.3d 899, 903 (App. 2007) (to conduct a diligent search and inquiry . . . similar to the type of diligence required to justify and effect service of process by publication, a tax lien holder may need to examine public records or court records, or may need to ask relatives, friends or neighbors to discover unknown heirs.) ¶13 Here, as in Sprang, the record does not demonstrate MJG s search for Defendants rose to the level of a due diligent effort. In July 2009, MJG attempted to serve the Moons at one address, attempted to serve GCR at two addresses, called a third address for GCR but did not visit it. later, MJG mailed the summons and complaint and then Two months to the same addresses that had previously been unsuccessful, assumed that because they received -- were even not returned though the as fact undeliverable they were not they were returned is insufficient proof the intended recipients received them -- and then began service by publication. Just as in Sprang, MJG attempted personal service once (although one address was not even physically visited) resorting to publication. and service by mail once before MJG s affidavits do not assert it took the pointed measures of examining telephone, county, or 8 other records. 4 Further, although according to MJG s affidavits, an individual in an office suite neighboring the vacant suite listed for GCR told MJG s process server that the business that was in [GCR s suite] had been gone for a couple of weeks, there is no evidence the process server made any effort to ascertain where GCR had moved. Instead, MJG s affidavits asserted in conclusory fashion that [a due diligent] effort had been made. Barlage v. Valentine, 210 Ariz. 270, 273, ¶ 8, 110 P.3d 371, 374 (App. 2005). The record reveals that the search undertaken did not meet the standards for due diligence necessary before using service by publication. ¶14 MJG argues Defendants have not overcome the prima facie evidence of compliance created by the affidavits it filed because Defendants have not presented evidence that a diligent search would have revealed their addresses. See Rule 4.2(f) ( The party . . . making service shall file an affidavit showing 4 In its answering brief on appeal, MJG asserts it obtained the addresses for Defendants where personal service was attempted from the Nevada Secretary of State and comprehensive Lexis public record reports that include information from various public record sources, including county records, court records and motor vehicle registrations. The record on appeal, however, contains no evidence MJG actually took any of these steps. See Pingitore v. Town of Cave Creek, 194 Ariz. 261, 264, ¶ 20, 981 P.2d 129, 132 (App. 1998) ( The record on appeal consists of all original papers, exhibits, minute entries, and other objects filed with the clerk of the superior court. (quoting Arizona Rule of Civil Appellate Procedure ( ARCAP ) 11(a)(1)). 9 the manner and dates of publication and mailing, and the circumstances warranting [service by publication] which shall be prima facie evidence of compliance herewith. ). is unavailing. Because MJG s affidavits did This argument not set forth facts indicating it made a due diligent effort to locate [the Moons and GCR], Sprang, 165 Ariz. at 261, 798 P.2d at 399, it failed to meet the requirements of Rule 4.2(f) and thus failed to present prima facie evidence of compliance with the Rule. See Barlage, 210 Ariz. at 273, ¶ 8, 110 P.3d at 374 (explaining requirements of Rule 4.2(f) and holding that a conclusory affidavit is insufficient to meet those requirements). only after the plaintiff files an affidavit It is sufficiently demonstrating a due diligent search has been performed that the defendant is presumed to have an unknown address; the defendant can then rebut that presumption by address was, in fact, knowable. Ariz. 214, allegation 222, that 382 the P.2d demonstrating his or her See Preston v. Denkins, 94 686, 691 residence is (1963) ( It unknown is which not the confers jurisdiction upon service by publication but the existence of the jurisdictional fact that the residence is unknown. ); Barlage, 210 Ariz. at 277, ¶¶ 26-28, 110 P.3d at 378 (affidavit that was compliant with rule for service by mail constituted prima facie evidence of personal service . . . and thereby 10 created a presumption of that fact (citation omitted)). Because MJG s insufficient affidavits never properly raised the presumption Defendants jurisdictionally addresses deficient, and were therefore unknown, they Defendants were were not required to present evidence that a diligent search would have revealed their addresses. II. Due Process ¶15 As mentioned above, a party seeking service by publication must meet both the requirements of Rule 4.2(f) and the requirements of the Due Process Clause of the Fourteenth Amendment, as articulated by the United States Supreme Court in Mullane. 1239. Master Fin., Inc., 208 Ariz. at 73, ¶ 15, 90 P.3d at In Mullane, the Court emphasized [i]t would be idle to pretend that publication alone . . . is a reliable means of acquainting interested parties of the fact that their rights are before the courts. It is not an accident that the greater number of cases reaching this Court on the question of adequacy of notice have been concerned with actions founded on process constructively served through local newspapers. Chance alone brings to the attention of even a local resident an advertisement in small type inserted in the back pages of a newspaper, and if he makes his home outside the area of the newspaper s normal circulation the odds that the information will never reach him are large indeed. 11 339 U.S. at 315, 70 S. Ct. at 658. The general inadequacy of service by publication to acquaint interested parties of the fact that their rights are before the courts is assuredly behind Rule 4.2(f) s language specifying that the person to be served must be one whose present residence is unknown but whose last known residence was outside the state . . . and service by publication circumstances is the for best providing means practicable notice. (emphasis under added). the Cf. Ariz. R. Civ. P. 4.1 cmt. ( service by publication [of in-state defendants] must also satisfy due process standards articulated in Mullane). Here, although MJG s search for Defendants focused on their last known addresses in Reno, Nevada, it published the summons only in Maricopa County, the county where the action [was] pending, as required by Rule 4.2(f). This was not the best means practicable under the circumstances. ¶16 Before 1994, Rule publication requirement. 1994 to remove this 4.2(f) included an out-of-state Our supreme court amended the Rule in requirement. The court comment to the amended rule explains the court acted out of concern for the unnecessary expense in the vast majority of cases in which outof-state publication is ineffective as a means notice. Rule 4.2(f) Court cmt. 1994 Amendment. of providing The court also explained, however, it was aware that in a small category of 12 cases out-of-state publication might yield the best practicable notice under the circumstances and emphasized [c]ounsel should always consider whether, in a given publication may nevertheless be indicated. ¶17 Here, addition to the publication Maricopa in County a case, out-of-state Id. Reno-area publication newspaper, required by in the Rule, would have been the means employed . . . one desirous of actually informing accomplish it. the absentee might reasonably adopt to Mullane, 339 U.S. at 315, 70 S. Ct. at 657. There is nothing in the record indicating MJG could reasonably expect Defendants would be informed of the lawsuit through the publication in the Maricopa County newspaper. In its answering brief, MJG recognizes Defendants contacts with Arizona - and we express no opinion on whether Defendants did in fact have contacts with the state for purposes of personal jurisdiction - were limited to facilitating telephone calls between MJG and out-of-state parties and involved in this lawsuit. were specific to the transaction Thus, as the Court recognized in Mullane, the odds were large indeed out-of-state parties such as Defendants would come across a legal notice published in an Arizona newspaper. A notice published in a major Reno-area paper, on the other hand, could be defended on the ground that it [was] in itself reasonably certain to inform those affected. 13 Id. We therefore conclude that publishing the summons only in the Maricopa County newspaper was not the best means of notice under the circumstances, Master Fin., Inc., 208 Ariz. at 73, ¶ 15, 90 P.3d at 1239, or notice reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections, Mullane, U.S. 339 at 314, 70 S. Ct. at 657, and thus did not comply with the notice requirements of the Due Process Clause of the Fourteenth Amendment. CONCLUSION ¶18 Because sufficiently MJG s demonstrate Rule MJG 4.2(f) had affidavits exercised due did not diligence in searching for the whereabouts of Defendants, and because MJG s service by publication did not meet the requirements of the Due Process Clause, we hold the default judgments entered by the superior court were void for lack of jurisdiction and, accordingly, we vacate them and remand for further proceedings consistent with this decision. MJG must obtain jurisdiction over Defendants through proper service of process before it can seek to prosecute this case against them. 14 See Sprang, 165 Ariz. at 265, 798 P.2d at 403. Defendants, as the prevailing parties on appeal, are entitled to costs on appeal subject to their compliance with ARCAP 21. __/s/___________________________ PATRICIA K. NORRIS, Judge CONCURRING: __/s/__ _________________________ MICHAEL J. BROWN, Presiding Judge __/s/______________________________ PHILIP HALL, Judge 15

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