                                 IN THE

    SUPREME COURT OF THE STATE OF ARIZONA
                        PABLO GONZALEZ, ET AL.,
                          Plaintiffs/Appellants,

                                    v.

                         QUOC NGUYEN, ET AL.,
                          Defendants/Appellees.

                           No. CV-17-0117-PR
                           Filed April 12, 2018


          Appeal from the Superior Court in Maricopa County
             The Honorable Brian S. Rees, Commissioner
                         No. CV2014-052846
                            AFFIRMED

      Memorandum Decision of the Court of Appeals, Division One
                        1 CA-CV 16-0141
                      Filed March 21, 2017
                           VACATED

COUNSEL:

William G. Caravetta, III, Kevin K. Broerman, Justin M. Ackerman (argued),
Jones, Skelton & Hochuli, P.L.C., Phoenix, Attorneys for Quoc Nguyen, et
al.

Susan M. Freeman, (argued), Justin J. Henderson, Lewis Roca Rothgerber
Christie LLP, Phoenix; and Gregg Clarke Gibbons, Gregg Clarke Gibbons,
P.C., Scottsdale, Attorneys for Pablo Gonzalez, et al.
                  GONZALEZ, et al., V. NGUYEN, et al.
                       Opinion of the Court



JUSTICE BOLICK authored the opinion of the Court, in which CHIEF
JUSTICE BALES, VICE CHIEF JUSTICE PELANDER, and JUSTICES
BRUTINEL, TIMMER, GOULD, and LOPEZ joined.

JUSTICE BOLICK, opinion of the Court:

¶1            We consider here whether a defendant must submit
additional evidence outside the existing record to establish a “meritorious
defense” in a motion to set aside a default judgment under Arizona Rule of
Civil Procedure 60(c) (now 60(b)). 1 We hold that a defendant may rely on
the existing record and that a trial court has broad discretion to determine
whether a matter should be decided on the merits.

                             BACKGROUND

¶2            On April 9, 2012, Quoc Nguyen was driving a van owned by
his employer, Dysart Hotel, and rear-ended a truck driven by Pablo
Gonzalez. The police report indicated the crash occurred at ten miles per
hour and “no injury” occurred. However, Gonzalez contended the accident
was more severe, causing extensive injuries requiring surgery and physical
rehabilitation and forcing him to retire from the Maricopa County Sheriff’s
Office.

¶3             Dysart Hotel notified its insurance claims administrator,
Precision Risk Management, about the accident. A claims adjuster (Bill
Sim) instructed Gonzalez’s attorneys to direct communications to him.
Gonzalez filed this negligence action against Nguyen and Dysart Hotel
(collectively “Dysart”) seeking compensatory damages. Gonzalez later sent
Sim a detailed demand letter seeking $716,242.50, including $600,000 for
pain and suffering, and offering to settle for $695,000.

1 The Arizona Rules of Civil Procedure changed in 2016, reorganizing Rule
60(c) as Rule 60(b), without substantive change. As most of the cases and
the court of appeals’ decision refer to the prior version, we will reference
Rule 60(c), which was in effect when the motion here was filed. Compare
Ariz. R. Civ. P. 60(c) (1987), with Ariz. R. Civ. P. 60(b) (2016).




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                        Opinion of the Court



¶4            Despite repeated inquiries by Gonzalez’s lawyers, Dysart did
not file a responsive pleading to the complaint. On February 20, 2015,
Gonzalez applied for an entry of default, again served Dysart, and also sent
copies to Sim and Companion Commercial Insurance (“Companion”),
Dysart’s insurer. After a hearing on June 23, 2015, at which Gonzalez
presented evidence and Defendants failed to appear, the trial court entered
a default judgment in the amount of $667,279.56.

¶5            On August 11, 2015, Defendants filed a Rule 60(c) motion to
vacate the judgment’s damage award, and Companion moved to intervene.
At oral argument on the motions, Dysart’s attorney told the court Dysart
would admit liability and only contest damages if the motion was granted.
The trial court denied Companion’s intervention motion because no
coverage issues existed, but it granted the motion to vacate the default
judgment. The court observed that although it seemed unfair for the
insurance company “to have handled the claim in such a casual or
indifferent manner . . . and then plead the injustice after the fact,” it
acknowledged it had “doubts about the fairness of the amount of the
judgment,” which seemed “too large.” The proper course “in such a ‘tie,’”
the court concluded, “is to allow the case to be decided on the merits.”

¶6             The court of appeals reversed and reinstated the default
damages judgment. Gonzalez v. Nguyen, 1 CA-CV 16-0141, 2017 WL 1057307
(Ariz. App. Mar. 21, 2017) (mem. decision). The court noted that the only
support for the motion to vacate was an affidavit from Companion’s claims
manager attesting to an oversight or error in responding to the application
for entry of default but offering no substantive defense. Id. at *3 ¶ 18. Citing
Rule 60(c)(6), Dysart argued that it wanted to examine whether the amount
of damages was reasonable. Id. ¶ 19. The court of appeals concluded, as
had the trial court, that Defendants had shown no excusable neglect, id. at
*5 ¶ 23; see Ariz. R. Civ. P. 60(c)(1), but overturned the trial court’s decision
vacating the judgment because Dysart had not presented a “meritorious
defense” to support the motion. Gonzalez, 1 CA-CV 16-0141, at *4 ¶ 22.

¶7             We granted review to consider the important and recurrent
issue of the standards for relief from a default judgment under Rule 60(c)(6).




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                       Opinion of the Court



We have jurisdiction under article 6, section 5(3) of the Arizona
Constitution and A.R.S. § 12-120.24.

                               DISCUSSION

¶8            We review a trial court’s decision to grant a Rule 60(c) motion
for abuse of discretion. Moreno v. Jones, 213 Ariz. 94, 97 ¶ 15 (2006). We
review interpretation of our rules de novo. Spring v. Bradford, 243 Ariz. 167,
170 ¶ 11 (2017).

¶9            Rule 60(c) (now slightly modified as Rule 60(b)) states:

       Mistake; inadvertence; surprise; excusable neglect; newly
       discovered evidence; fraud, etc.
       On motion and upon such terms as are just the court may
       relieve a party or a party’s legal representative from a final
       judgment, order or proceeding for the following reasons:
       (1) mistake, inadvertence, surprise or excusable neglect;
       (2) newly discovered evidence which by due diligence could
       not have been discovered in time to move for a new trial
       under Rule 59(d); (3) fraud (whether heretofore denominated
       intrinsic or extrinsic), misrepresentation or other misconduct
       of an adverse party; (4) the judgment is void; (5) the judgment
       has been satisfied, released or discharged, or a prior judgment
       on which it is based has been reversed or otherwise vacated,
       or it is no longer equitable that the judgment should have
       prospective application; or (6) any other reason justifying
       relief from the operation of the judgment.

We construe our rules according to their words in the context in which they
are used and look to secondary construction tools only if the language is
subject to more than one reasonable interpretation. See Rasor v. Nw. Hosp.,
LLC, 243 Ariz. 160, 164 ¶ 20 (2017).

¶10          Dysart does not argue here that any of the first five Rule 60(c)
grounds, including excusable neglect, applies. Rather, it relies solely on




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                         Opinion of the Court



Rule 60(c)(6), allowing relief from a default judgment for “any other reason
justifying relief.”

¶11           Our Rule 60(c)(6) jurisprudence is not a model of clarity or
consistency. We have noted that application of Rule 60(c) should serve two
different objectives. First, the “law favors resolution on the merits, and
therefore if the trial court has doubt about whether to vacate a default
judgment, it should rule in favor of the moving party.” Daou v. Harris, 139
Ariz. 353, 359 (1984). “There is also, however, a principle of finality in
proceedings which is to be recognized and given effect.” Id. Those
objectives can be in considerable tension. The rule does not take a position
between them, instead creating a very broadly worded ground for relief,
which we construe as investing extensive discretion in trial courts. See id.
(noting that “trial courts are given broad discretion” under Rule 60(c));
accord Webb v. Erickson, 134 Ariz. 182, 186 (1982) (noting Rule 60(c)(6)’s
“broad equitable power”).

¶12             In addition to requiring adherence to Rule 60(c)’s timeliness
requirements and that an “other” ground for relief from a default judgment
cannot be one of the reasons set forth in Rule 60(c)(1)–(5), we have
consistently bounded a trial court’s discretion under Rule 60(c)(6) by
requiring a defendant to assert a meritorious defense. See, e.g., Union Oil
Co. of Cal. v. Hudson Oil Co., 131 Ariz. 285, 289 (1982) (requiring the movant
to show “facts which, if proven at trial, would constitute a meritorious
defense”); see also Ariz. R. Civ. P. 55(c) (“The court may set aside an entry
of default for good cause . . . .”). This burden is “minimal,” United States v.
Aguilar, 782 F.3d 1101, 1108 (9th Cir. 2015), requiring only “some legal
justification for the exercise of the power, some substantial evidence to
support it,” Richas v. Superior Court, 133 Ariz. 512, 514 (1982) (quoting Lynch
v. Ariz. Enter. Mining Co., 20 Ariz. 250, 252 (1919)). To the extent that some
of our decisions suggest a higher standard, we disavow such statements.
See, e.g., Panzino v. City of Phoenix, 196 Ariz. 442, 445 ¶ 6 (2000) (Rule 60(c)(6)
“applies only when our systemic commitment to finality of judgments is
outweighed by extraordinary circumstances of hardship or injustice.”
(quoting Bickerstaff v. Denny’s Rest., Inc., 141 Ariz. 629, 632 (1984) (internal
quotation marks omitted))).




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                        Opinion of the Court




¶13           Some Arizona decisions have indicated that the meritorious
defense supporting the motion to vacate must be established by evidence
extraneous to the existing record. See, e.g., United Imp. & Exp., Inc. v. Superior
Court, 134 Ariz. 43, 46 (1982) (“A showing of a meritorious defense requires
a showing by affidavit, deposition or testimony of some facts which, if
proved at trial, would constitute a defense.”); Hawke v. Bell, 136 Ariz. 18, 19
(App. 1983) (holding that a trial court may not “set aside a default judgment
because of the amount of damages awarded absent new evidence that the
amount of the award was not justified” (emphasis added)). We do not find
any such requirement in the language or purpose of the rule. Such a
requirement elevates form over the relevant substance, which is to
determine if there is a justifiable basis to set aside the default judgment.
Rather, if the motion relies on evidence of a meritorious defense that
appears in the record, the rule plainly vests authority in the trial court to
grant relief, and we disavow language in prior decisions that suggests
evidence outside the extant record is necessary.

¶14            Citing United Imports, the court of appeals focused on the
adequacy of the affidavit by Companion’s claims manager in support of the
motion, concluding it was legally insufficient because it “said nothing about
potential defenses.” Gonzalez, 1 CA-CV 16-0141, at *3 ¶¶ 17–18. However,
the record provided a basis for Dysart’s assertion—and the trial court’s
conclusion—that the amount of damages might be excessive when tested at
trial. The police reports (which were also appended to Dysart’s motion)
stated that the collision occurred at ten miles per hour and that either no
injury or possible injury occurred; nothing suggested serious injuries.
Dysart also presented an affidavit from Gonzalez’s counsel attesting that
Gonzalez incurred $68,683.58 in medical bills and $42,558.92 in lost wages,
far less than the default judgment amount. When it entered the default
judgment, the trial court expressed concerns about the amount of damages,
and the motion to vacate the judgment provided an opportunity for the
court to revisit the issue by ordering resolution of the judgment amount on
the merits. Although a possibly excessive judgment does not automatically
entitle a defendant to vacate a default judgment, the trial court here acted
within its discretion.




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                        Opinion of the Court




¶15             The court of appeals further found that the absence of
excusable neglect by Dysart “also cuts against granting relief to
Defendants.” Id. at *5 ¶ 23. Although some cases suggest that a defendant’s
failure to satisfy the excusable neglect standard of Rule 60(c)(1) can be used
to defeat relief under Rule 60(c)(6), see, e.g., Panzino, 196 Ariz. at 448 ¶ 19
(“We cannot consistently hold that although Rule 60(c)(1) allows relief for
judgment only for excusable neglect, Rule 60(c)(6) allows relief from
inexcusable neglect . . . .”), the grounds for relief in each of the subsections
are separate and distinct. “Clause 6 and the first five clauses are mutually
exclusive.” Webb, 134 Ariz. at 186. Rule 60(c)(6), on its face, contemplates
circumstances that do not fit into the other Rule 60(c) subsections. See id.

¶16              Although “the showing of a meritorious defense need not be
strong, . . . it must be greater than mere speculation.” Richas, 133 Ariz. at
517. But where, as here, the record suggests that the judgment amount is
excessive, a trial court appropriately may provide Rule 60(c)(6) relief. Daou,
139 Ariz. at 361. For example, in Roll v. Janca, the court of appeals ruled that
where the defendant moved for Rule 60(c)(6) relief expeditiously after a
default judgment, and “where a large judgment of $25,000 has been entered
on default on a trip and fall case where the injury sustained was allegedly
merely a twisted knee and torn ligaments, serious consideration must be
given to the presumption of resolution of cases on their merits.” 22 Ariz.
App. 335, 338 (1974); accord Daou, 139 Ariz. at 361 (“[I]t is not the size of the
damage award alone that is conclusive, but whether it is excessive for the
injuries sustained.”); Beal v. State Farm Mut. Auto. Ins., 151 Ariz. 514, 521
(App. 1986) (concluding that a party raised a “substantial defense” by
showing “debatable issues” as to the “nature and extent of the injuries and
damages” and a “discrepancy” between the amount of special damages and
the default judgment that “calls into question the validity of the damages
award”).

¶17          The court of appeals observed that the trial court “did not
mention the meritorious defense requirement” in granting the motion to
vacate. Gonzalez, 1 CA-CV 16-0141, at *3 ¶ 17. Although the trial court did
not use that term, its order clearly rested on its view that the damage




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                       Opinion of the Court



amount was potentially unwarranted, which under Daou and Roll
constitutes a meritorious defense. As we held in Daou, “if the trial court has
doubt about whether to vacate a default judgment, it should rule in favor
of the moving party.” 139 Ariz. at 359.

                              CONCLUSION

¶18           We vacate the court of appeals’ decision, affirm the trial
court’s order, and deny Gonzalez’s motion for attorney fees.




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