Hilgeman v. American Mortgage Securities, Inc.

994 P.2d 1030, 196 Ariz. 215, 314 Ariz. Adv. Rep. 15, 2000 Ariz. App. LEXIS 16
CourtCourt of Appeals of Arizona
DecidedJanuary 27, 2000
Docket2 CA-CV 98-0236
StatusPublished
Cited by28 cases

This text of 994 P.2d 1030 (Hilgeman v. American Mortgage Securities, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals of Arizona primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Hilgeman v. American Mortgage Securities, Inc., 994 P.2d 1030, 196 Ariz. 215, 314 Ariz. Adv. Rep. 15, 2000 Ariz. App. LEXIS 16 (Ark. Ct. App. 2000).

Opinion

OPINION

PELANDER, Presiding Judge.

¶ 1 DefendanVappellant American Mortgage Securities (AMS) appeals from the trial court’s order denying AMS’s motion to set aside a default judgment entered against it pursuant to Rules 54(b) and 55(b)(2), Ariz. R. Civ. P., 16 A.R.S. The judgment awarded $900,000 in compensatory and punitive damages to plaintiffs/appellees David and Elizabeth Hilgeman on their complaint.

¶ 2 Because the trial court did not clearly abuse its discretion in finding that AMS had been properly served with process, we affirm that aspect of the court’s order which declined to set aside the judgment as void under Rule 60(c)(4), Ariz. R. Civ. P. We also affirm the trial court’s denial of relief under Rule 60(c)(6), Ariz. R. Civ. P., insofar as AMS’s liability, the compensatory damage award against it, and the Hilgemans’ entitlement to punitive damages are concerned. But because of the unique constitutional safeguards relating to punitive damage awards and because the record is insufficient for us to evaluate or uphold that award, we vacate that aspect of the trial court’s order and remand for a reported evidentiary hearing on the amount of punitive damages to be assessed against AMS.

BACKGROUND

¶3 The Hilgemans alleged in their complaint, and the trial court found in its judgment, the following facts. In September 1996, the Hilgemans purchased a home in Pinal County and secured it with a mortgage from AMS, a Florida corporation. Shortly thereafter, but before the first payment was due, AMS assigned, transferred, or sold the mortgage to Flagstar Bank, F.S.B. Claiming they did not receive notice of the transfer, the Hilgemans sent their first mortgage payment to AMS rather than Flagstar. AMS negotiated the check and did not notify or forward that payment to Flagstar.

¶4 In November 1997, the Hilgemans sued Flagstar and AMS, alleging various tort theories and violations of 12 U.S.C. § 2605. The Hilgemans sought unspecified compensatory and punitive damages allegedly resulting from AMS’s failure to send their first mortgage payment to Flagstar and from AMS’s acceptance of that payment and failure to credit their account. According to an affidavit of service in the record, a deputy sheriff in Florida served “Larry Bache, President” of AMS at its office in Florida on November 25. When AMS failed to answer *218 the complaint or otherwise timely appear in the action, the Hilgemans applied for entry of default against it on January 28, 1998, pursuant to Rule 55(a), Ariz. R. Civ. P. The application stated that a copy of it was mailed that same date to “Larry Bache, President” at two different addresses for AMS in Florida, including the address where he had been served. The trial court entered default against AMS on January 28.

¶5 Several weeks later, the Hilgemans requested a hearing for purposes of obtaining a default judgment. Following an unreported evidentiary hearing on March 16, 1998, at which only Mr. Hilgeman testified, the trial court entered a default judgment against AMS. The judgment stated, inter alia, that AMS had breached fiduciary duties and an implied covenant of good faith and fair dealing; “[a]s a direct and proximate result of the breaches of [those] ... dut[ies] ... [the Hilgemans] have suffered or incurred damages for emotional distress, humiliation, invasion of privacy, damage to their credit record and reputation, defamation, severe stress resulting in physical injury, medical bills and other damages”; and AMS’s “conduct was outwardly aggravated, outrageous, malicious, and/or fraudulent, and committed with an ‘evil mind’, entitling [the Hilgemans] to recover punitive damages.” The trial court awarded the Hilgemans $180,-000 in compensatory damages, $720,000 in punitive damages, and approximately $4,000 in attorney’s fees and costs.

¶ 6 In June 1998, after its Florida statutory agent had been served with Flagstar’s cross-claim, AMS moved to set aside the default judgment pursuant to Rule 60(c)(4) and (6), primarily contending the judgment was void for lack of proper service. The trial court denied AMS’s motion. After this court stayed AMS’s appeal from that ruling and revested jurisdiction to allow the trial court to rule on unresolved issues it had raised relating to the punitive damage award, and after the parties submitted supplemental memoranda on those issues, the trial court denied AMS’s renewed request to set aside that award. We have jurisdiction under A.R.S. § 12-2101(0). See Rosen v. Bd. of Med. Exam’rs, 185 Ariz. 139, 142, 912 P.2d 1368, 1371 (App.1995).

DISCUSSION

¶ 7 AMS contends it was entitled to relief under. Rule 60(c)(4) because the default judgment was void due to improper service; equity required the trial court to set aside the judgment under Rule 60(c)(6); and the punitive damage award was unconstitutional and excessive. Although “it is a highly desirable legal objective that cases be decided on their merits,” we review the trial court’s refusal to set aside a default judgment only for “a clear abuse of discretion.” Hirsch v. Nat’l Van Lines, Inc., 136 Ariz. 304, 308, 666 P.2d 49, 53 (1983); see also General Elec. Capital Corp. v. Osterkamp (General Elec. I), 172 Ariz. 185, 188, 836 P.2d 398, 401 (App.1992). Additionally, “[i]f a court’s decision is based upon ‘a determination of disputed questions of fact or credibility, a balancing of competing interests, pursuit of recognized judicial policy, or any other basis to which we should give deference,’ we will not second-guess or substitute our judgment for that of the trial court.” General Elec. I, 172 Ariz. at 188, 836 P.2d at 401, quoting City of Phoenix v. Geyler, 144 Ariz. 323, 329, 697 P.2d 1073, 1079 (1985).

I. Propriety of Service

¶ 8 In denying AMS’s motion to set aside the default judgment under Rule 60(c)(4), the trial court found that “the evidence supported] that service was properly made on an agent of the company known as Larry Bache, and that AMS has failed to overcome the Affidavit of Service filed herein.” AMS challenges that ruling. If a defendant is not properly served with process, any resulting judgment is void and must be vacated upon request. Marquez v. Rapid Harvest Co., 99 Ariz. 363, 365, 409 P.2d 285, 287 (1965); Martin v. Martin, 182 Ariz. 11, 14, 893 P.2d 11, 14 (App.1994). Under Rule 4.2(h), Ariz. R. Civ. P., service on a corporation located outside Arizona “shall be made on one of the persons specified in Rule 4.1(k).” That rule, in turn, provides that “[sjervice upon a ... foreign corporation ... shall be effected by delivering a copy of the *219

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Cite This Page — Counsel Stack

Bluebook (online)
994 P.2d 1030, 196 Ariz. 215, 314 Ariz. Adv. Rep. 15, 2000 Ariz. App. LEXIS 16, Counsel Stack Legal Research, https://law.counselstack.com/opinion/hilgeman-v-american-mortgage-securities-inc-arizctapp-2000.