Opinion
2 CA-CV 2022-0050
01-24-2023
Tax Lien Services, LLC, Plaintiff/Appellant, v. Ramon Gilberto Banuelos-Figueroa, Defendant/Appellee.
The Hendrix Law Office P.L.L.C., Gilbert By Heather M. Hendrix Counsel for Plaintiff/Appellant Ahwatukee Legal Office P.C., Phoenix By David L. Abney and Jesus R. Romo Vejar P.C., Tucson By Jesus R. Romo Vejar Counsel for Defendant/Appellee
Not for Publication - Rule 111(c), Rules of the Arizona Supreme Court
Appeal from the Superior Court in Pima County No. C20196520 The Honorable Leslie Miller, Judge The Honorable Richard E. Gordon, Judge
The Hendrix Law Office P.L.L.C., Gilbert By Heather M. Hendrix Counsel for Plaintiff/Appellant
Ahwatukee Legal Office P.C., Phoenix By David L. Abney and
Jesus R. Romo Vejar P.C., Tucson By Jesus R. Romo Vejar Counsel for Defendant/Appellee
Presiding Judge Eckerstrom authored the decision of the Court, in which Chief Judge Vasquez and Judge Brearcliffe concurred.
MEMORANDUM DECISION
ECKERSTROM, PRESIDING JUDGE
¶1 In this tax lien foreclosure action, Tax Lien Services, LLC (TLS) appeals from the trial court's order setting aside a default judgment that had been entered against Ramon Banuelos-Figueroa. TLS presents six issues for review, all but two of which relate to its efforts to serve Banuelos-Figueroa with pre-litigation notice of its intent to foreclose and with service of process notifying him of the foreclosure proceedings. For the reasons that follow, we affirm.
Factual and Procedural Background
¶2 We view the facts in the light most favorable to upholding the rulings below. Ezell v. Quon, 224 Ariz. 532, ¶ 2 (App. 2010). In 2012, Banuelos-Figueroa purchased a house located on Corinthian Drive in Tucson. He used the property as a second residence, as he primarily resided in Mexico. Around 2017, he began leasing the residence to a tenant. The lease was administered by a third-party management company, and the tenant made rental payments to the company rather than paying Banuelos-Figueroa directly.
¶3 In 2014, Banuelos-Figueroa had failed to pay property taxes on the Corinthian property. TLS subsequently purchased a tax lien on it. In 2019, through certified mail, TLS sent notice of its intent to file a foreclosure action on the tax lien, pursuant to A.R.S. § 42-18202. TLS mailed the notice to the Corinthian address, the only address on record with the Pima County Recorder's, Assessor's, and Treasurer's offices. The mail was returned marked recipient unknown, unable to forward, and return to sender.
¶4 In December 2019, TLS filed a complaint to foreclose on its tax lien. In January 2020, on behalf of TLS's attorney, a clerk of a newspaper in "general circulation in the City of Tucson" filed an affidavit stating TLS had published a summons of "Ramon Gilberto Banuelos" for four consecutive weeks, from late December 2019 through mid-January 2020. Thereafter, in February 2020, a process server for TLS declared that she had unsuccessfully attempted personal service upon Banuelos-Figueroa at the Corinthian address four times between February 6 and February 11, 2020.At each attempt, the process server heard a dog barking but received no answer at the door.
TLS also served the Pima County Treasurer's Office in February 2020. The propriety of that service is not in dispute.
¶5 Later that month, TLS filed a motion for alternative service, as provided by Ariz. R. Civ. P. 4.1(k). The motion detailed the four unsuccessful attempts at personal service and further asserted that TLS had confirmed Banuelos-Figueroa's address through a skip trace and by reviewing the mailing address on record with the Pima County Assessor's and Treasurer's offices.
Although our supreme court has substantively amended Rule 4.1 twice since TLS attempted to serve Banuelos-Figueroa, subsection (k), which governs alternative service, has not changed. See Ariz. Sup. Ct. Order R-21-0021 (Aug. 30, 2021); Ariz. Sup. Ct. Order R-22-0011 (Aug. 29, 2022).
¶6 The trial court granted TLS's motion for alternative service. It ordered that alternative service could be accomplished "by posting a copy of the Summons, Complaint, Certificate of Compulsory Arbitration, and this Order" upon the Corinthian property. It further ordered TLS to serve Banuelos-Figueroa by both certified mail, "return receipt requested," and regular first-class mail, postage pre-paid.
¶7 The following week, TLS filed a declaration, through its process server, stating it had posted the legal documents at the Corinthian residence. It also provided a photograph showing the documents had been posted on the front door of the property. Additionally, a process server for TLS sent the documents through both regular mail and certified mail on February 24, 2020. However, the server failed to request a return receipt, despite TLS having been ordered to do so by the trial court in the alternative service order. The packages also lacked return addresses. Consequently, TLS received no return receipt for the certified package, and the first-class mail was never returned, although tracking data indicated that the addressee was unknown and that a return to sender had been processed.
The process server obtained a tracking code for the package. The tracking history shows the package was undeliverable and was returned as such.
¶8 In March 2020, TLS filed a notice and application for entry of default. TLS filed a motion for entry of default the following month, noting Banuelos-Figueroa's failure to appear in the matter. Both of these filings were mailed to Banuelos-Figueroa at the Corinthian address, but they were also returned marked recipient unknown, unable to forward. In October 2020, following a hearing at which only TLS appeared, the trial court entered judgment in favor of TLS. That judgment specifically found that "proper service ha[d] been completed" upon Banuelos-Figueroa.
¶9 In November 2020, Banuelos-Figueroa filed a motion to set aside the default judgment under Rules 55(c) and 60(b)(4), Ariz. R. Civ. P., claiming lack of notice. At an evidentiary hearing on that motion, Banuelos-Figueroa testified that the first notice he received of the lawsuit occurred in October 2020, through his property management company. The tenant testified to having taken photographs of both the February 2020 notice of the summons and the October 2020 notice of default and sending them to the property manager.
¶10 Following the evidentiary hearing, the trial court, relying on a line of authority that has since been disavowed by our state supreme court, set aside the judgment on the ground that TLS had failed to provide proper pre-litigation notice of intent to foreclose. In the alternative, the court reasoned that service of process was defective due to TLS's failure to comply with the alternative service order. In particular, the court noted that TLS failed to send the certified mailing "accompanied by a return receipt request." Further, TLS neglected to inform the court that any of the notice mailings had been returned as undeliverable. Thus, the court concluded that service was ineffective, and it granted Banuelos-Figueroa relief from default judgment.
See 4QTKIDZ, LLC v. HNT Holdings, LLC, 253 Ariz. 382, n.4 (2022) (disavowing cases, including Advanced Prop. Tax Liens, Inc. v. Othon, 252 Ariz. 206, ¶ 26 (App. 2021), that interpret § 42-18202 to instruct lienholders to send pre-foreclosure litigation notice to property owners, rather than merely to addresses on file).
The trial court also noted that TLS had failed to inform the court entering default judgment that "numerous pieces of mail" had been returned as undeliverable prior to entry of default.
The trial court's ruling of November 22, 2021 was unsigned. The record reflects that numerous filings continued to be made by both parties after that ruling, in part in response to the case law that was in flux and which the November 2021 ruling partially relied on. Consequently, no final judgment was entered in this matter until March 2022.
¶11 This appeal followed. We have jurisdiction pursuant to A.R.S. §§ 12-2101(A)(1) and 12-120.21(A)(1).
TLS lists as an issue on appeal whether it was error for the trial court to grant the motion to set aside "via a Rule 54(c) final judgment rather than a special order setting aside default judgment." However, it appears to abandon review of that issue, having failed to develop it in the opening brief, and we therefore do not address it. Ariz. R. Civ. App. P. 13(a)(7) (opening brief must contain "supporting reasons for each contention" as well as "citations of legal authorities and appropriate references to the portions of the record on which the appellant relies"). See Torrez v. Knowlton, 205 Ariz. 550, n.1 (App. 2003).
¶12 We generally review a trial court's grant of a motion to set aside default judgment pursuant to Rule 60(b) for abuse of discretion. See Gonzalez v. Nguyen, 243 Ariz. 531, ¶¶ 1, 8 (2018). We limit our review to the questions raised in the motion to set aside. This "does not extend to a review of whether the trial court was substantively correct in entering the judgment from which relief was sought." Hirsch v. Nat'l Van Lines, Inc., 136 Ariz. 304, 311 (1983). We defer to the trial court's findings of fact unless they are clearly erroneous. Ruffino v. Lokosky, 245 Ariz. 165, ¶ 9 (App. 2018). However, we review de novo a court's legal determinations and interpretations of court rules like Rule 60(b), including that a judgment is void for lack of proper service and consequentially must be vacated. Ruffino, 245 Ariz. 165, ¶¶ 9-10; see also Aloia v. Gore, 252 Ariz. 548, ¶ 11 (App. 2022). If service is incomplete or defective, the trial court never acquires jurisdiction to enter default judgment. See Postal Instant Press, Inc. v. Corral Rests., Inc., 186 Ariz. 535, 537 (1996), supp. op., 187 Ariz. 487, 488 (1997).
Pre-Litigation Notice under A.R.S. § 42-18202
¶13 As an initial matter, the parties agree that TLS complied with pre-litigation foreclosure requirements as set forth by § 42-18202. Thus, the trial court's ruling cannot be sustained on that ground. See Bischofshausen v. Pinal-Gila Cnties. Air Quality Control Dist., 138 Ariz. 109, 110 (App. 1983) ("When there is a change in the law by court decision between the time of the trial court ruling and the time of appeal, the appellate court applies the law prevailing at the time of the appellate disposition.").
At the time the trial court ruled on the motion to set aside default, the law was unsettled. See 2022 Ariz. Sess. Laws, ch. 17, § 1; see also 4QTKIDZ, 253 Ariz. 382, n.4.
Service Under Rule 4.1
¶14 TLS also argues the trial court erred in setting aside default on the ground that service was defective. In particular, it contends the court incorrectly concluded that TLS failed to comply with the second part of the alternative service order, which required "the certified mailing of the Summons and Complaint to be accompanied by a return receipt request." Essentially, TLS argues that because it completed alternative service by the first means listed in the alternative service order-namely, posting of the summons and other documents on the Corinthian Drive property- "service was in fact effected," and it was error to set aside judgment on the "laser-focus" ground that TLS did not fully comply with the court's second ordered method of alternative service via mail.
¶15 We disagree. "Service by mail is an alternative form of service, available in lieu of personal service." Postal Instant Press, 186 Ariz. at 537. "When a serving party elects to serve process by mail," our supreme court has reasoned that "the rule which regulates the method of sending and receiving service, and the return and filing thereof, must be followed." Id.
¶16 Rule 4.1(k) broadly allows a court to "order that service may be accomplished in another manner" and that a serving party must, at minimum, send specified documents "to the last-known business or residential address of the person being served." This rule creates a floor, not a ceiling, for how a trial court may require alternative service to occur. See Postal Instant Press, 186 Ariz. at 538 (setting aside default for insufficient service, when serving party failed "to obtain and file the acknowledgment executed under oath" that named defendant acknowledged postal receipt, as required by rule then in effect). As our supreme court has reasoned, certified mail is "a higher, more reliable method of service" than regular mail service. Andrews v. Ariz. R.C.I.A. Lands, Inc., 116 Ariz. 455, 457 (1977) (service by publication complied with service rule when plaintiff also sent service documents via certified mail rather than simply using "regular" mail). After all, "[t]he purpose of process is to give the addressee actual notice of the action filed against him and an opportunity to respond," and this notice is what vests the trial court with jurisdiction to resolve the matter. Liberty Mut. Ins. Co. v. Rapton, 140 Ariz. 60, 62 (App. 1984). Thus, so long as it did not conflict with the applicable statutes and rules for service, the court was entitled to have its alternative service order followed. See Elizabeth W. v. Georgini, 230 Ariz. 527, ¶¶ 7-8 (App. 2012) (court vested with "inherent power to ensure its orders are followed" so long as they do not conflict with rules or statutes).
¶17 The trial court's order for alternative service was conjunctive. It ordered that TLS could serve Banuelos-Figueroa by posting the documents on the property and by two forms of mail. The order also contained specific directions for each form of mail service, requiring "both certified, return receipt requested, and regular first class mail, postage prepaid, addressed to the Defendant." Nothing in this language suggests that TLS was free to choose only portions with which it would comply. As the court reasoned when setting aside default, "[a] court is entitled to have its orders followed." See id. And just as "[r]ules dealing with service of process . . . that allow acquisition of jurisdiction through other than personal service must be strictly construed," Llamas v. Superior Court, 13 Ariz.App. 100, 101 (1970), so too must a court's detailed order for alternative service.[ ] Cf. Hart v. Bayless Inv. &Trading Co., 86 Ariz. 379, 388 (1959) (reasoning that failure to meet statutory notice requirements rendered jurisdiction defective because "where a jurisdictional notice is required to be given in a certain manner, any means other than that prescribed is ineffective").
TLS cites Kline v. Kline, 221 Ariz. 564, ¶ 21 (App. 2009), for the proposition that strict technical compliance with service rules may be unnecessary in some cases. But the defendants in Kline and other cases it relied on received actual notice of the underlying action, such that those defendants were in no way prejudiced by a technical defect in the service efforts. See id.; see also, e.g., Marks v. LaBerge, 146 Ariz. 12, 14-15 (App. 1985); Rapton, 140 Ariz. at 62-63. Thus, these cases are inapplicable to our reasoning.
¶18 TLS contends that its failure to specifically comply with the alternative service order's mailing instructions is not fatal because it complied with the order's directions for service by posting. Even assuming, arguendo, that partial compliance with the alternative service order was sufficient, we nonetheless disagree that the evidence of posting undisputedly supports the conclusion that notice "reach[ed] the defendant." The trial court noted that a "photograph shows that the legal documents were posted on the Corinthian property's front door." But, during an earlier hearing, the court also stated that "[t]he tenant was the only person [TLS] could possibly provide notice to" and acknowledged uncertainty as to whether any information had been passed to Banuelos-Figueroa. Nothing in the record suggests the tenant actually notified Banuelos-Figueroa, nor did the court so find. And because we read the facts in the light most favorable to supporting the ruling, we decline to adopt TLS's proposed conclusion that Banuelos-Figueroa had notice of the action such that no prejudice arose from the incomplete mailing efforts. See Kline v. Kline, 221 Ariz. 564, ¶ 21 (App. 2009) (defendant could not have been prejudiced by technical defect in service because he had actual notice of action).
We similarly reject TLS's efforts to cast doubt on the factual questions of (a) whether the "green card" requesting a return receipt was, in fact, included with the certified mail but somehow lost in transit and (b) whether the inclusion would have changed the outcome of mail delivery. As noted above, we defer to the trial court's factual findings unless they are clearly erroneous. Ruffino, 245 Ariz. 165, ¶ 9. Here, the record-in particular the process server's testimony that no return receipt was requested-supports the court's finding that TLS failed to request a return receipt.
¶19 We recognize that on the record before us, TLS made a number of good-faith efforts to serve Banuelos-Figueroa. "A 'due diligent effort' requires such pointed measures as an examination of telephone company records, utility company records, and records maintained by the county treasurer, county recorder, or similar record keepers." Sprang v. Petersen Lumber, Inc., 165 Ariz. 257, 261 (App. 1990). TLS took many of these measures, specifically by making four attempts at personal service, searching the records of the Pima County Assessor and Treasurer, using "online restricted databases" in an unsuccessful attempt to locate a different address, and eventually posting notice on the property.
¶20 But the trial court did not set aside default on the grounds of lack of diligence. Rather, it found service defective specifically because "the record clearly and convincingly shows" TLS failed to comply with the order for alternative service. See Gen. Elec. Cap. Corp. v. Osterkamp, 172 Ariz. 191, 194 (App. 1992) ("Service of process can be impeached only by clear and convincing evidence."). The efforts TLS undertook could hypothetically constitute sufficient service of process under some circumstances. But here, where the question is compliance with a court order rather than the broader question of diligence, we will not disturb the order setting aside default. See Gonzalez, 243 Ariz. 531, ¶ 11 (trial courts have "extensive discretion" in determining whether to set aside default judgment, in part because law favors resolution on merits).
Service by Publication
¶21 TLS also argues that it properly served Banuelos-Figueroa by publication under the version of Rule 4.1 then in effect, thus curing any defect in its noncompliance with the alternate service order. TLS correctly notes that Rule 4.1 underwent a substantive change during the pendency of the trial court proceedings. It also notes, correctly, that the court improperly relied on the later version of the rule in its analysis.[ ] However, we may affirm for any legally correct basis supported by the record, Forszt v. Rodriguez, 212 Ariz. 263, ¶ 9 (App. 2006), and we conclude that TLS's publication efforts fail under the version in effect at the time of publication, as well.
As the trial court stated, TLS never filed an affidavit justifying publication as required by Ariz. R. Civ. P. 4.1(1)(4)(A), and indeed it could not have done so, as its publication attempts were "prophylactic" and premature, "given that no service attempt had been made" by that point.
¶22 TLS filed an affidavit of publication of the summons on January 21, 2020. Under the version of Rule 4.1(1) in effect at that time, a party was permitted to serve via publication "only if . . . the serving party, despite reasonably diligent efforts, has been unable to ascertain the person's current address." Additionally, the rule provided that "[i]f the serving party knows the address of the person being served, it must, on or before the date of first publication, mail to the person the summons and a copy of the pleading being served." Upon publishing under that rule, the serving party was required to file an affidavit stating "the circumstances warranting service by publication," including, if relevant, the fact that "no mailing was made because the serving party did not know the current address of the person being served."
¶23 Before the amendment, settled law required TLS to "file an affidavit setting forth facts indicating it made a due diligent effort to locate an opposing party to effect personal service" "[b]efore resorting to service by publication." Sprang, 165 Ariz. at 261 (emphasis added). Although the affidavit showed TLS published the summons, that affidavit made no claim of having attempted, diligently or otherwise, to locate Banuelos-Figueroa to effect personal service prior to publication. Nor did it suggest any circumstances warranting service by publication. Thus, even under the earlier version of Rule 4.1(1), TLS's "prophylactic publication" attempt was insufficient to confer jurisdiction over Banuelos-Figueroa. See id. at 262 ("A finding of due diligence prior to service by publication is a jurisdictional prerequisite.").
Disposition
¶24 For the foregoing reasons, we affirm the trial court's ruling setting aside default judgment.