Jose Luis Pena v. Seguros La Comercial, S.A.

Citations: 770 F.2d 811; 3 Fed. R. Serv. 3d 13; 1985 U.S. App. LEXIS 22740Docket: 83-1928

Court: Court of Appeals for the Ninth Circuit; September 4, 1985; Federal Appellate Court

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Seguros La Comercial, S.A., a Mexican corporation, appealed a decision from the United States District Court for Arizona, which denied its motion to set aside a default judgment obtained by Jose Luis Pena for tortious breach of an insurance contract. The default judgment was entered on December 13, 1982, after Seguros failed to respond to Pena's complaint. The case arose from an incident on April 10, 1982, when Pena, a part-time University of Arizona student, purchased a two-day automobile insurance policy from Seguros through the Gringo Pass Insurance Agency prior to a trip to Mexico. 

During the trip, Pena's vehicle was struck by another car, resulting in total loss of the vehicle and injuries to Pena and his passengers. Pena reported the accident to a Seguros agent in Puerto Penasco and subsequently to the Gringo Pass Insurance Agency upon returning to Arizona. Despite multiple attempts to communicate with Seguros, including submitting claim forms and certified letters to both its Mexico City office and the Gringo Pass Insurance Agency, Pena received no satisfactory response. Consequently, on August 10, 1982, he filed a pro se complaint in federal court for bad faith breach of contract, seeking damages. The court ultimately affirmed the denial of Seguros' motion to set aside the default judgment.

Pena served the summons and complaint to Seguros through the Arizona Department of Insurance on August 11 and 12, 1982. The Department mistakenly forwarded the documents to an incorrect address in Mexico City, resulting in undelivered mail. Subsequently, Pena served the documents to Milton Silverman, a Seguros salesman in Tucson, and notified a Seguros agent in Tijuana, confirming this in writing to the Mexico City office, which was not acknowledged. The district court also attempted to serve Seguros by registered mail on September 30, 1982, but this attempt also failed.

During this time, Pena recovered damages from Allstate, the insurer of the driver who caused the accident, and signed a release absolving Allstate from further liability. Following Seguros' failure to respond, the district court granted Pena a default judgment on December 13, 1982, awarding him $18,000 in compensatory damages and $10,000 in exemplary damages for bad faith, along with court costs and interest. The compensatory damages included $12,000 for vehicle damage and $2,000 each for bodily injuries to Pena and his passengers, who were not part of the suit.

Seguros moved to vacate the default judgment on February 16, 1983, but the district court denied the motion, later adjusting the award on April 4, 1983, to remove $4,000 for the passengers' bodily injuries. Seguros then appealed. The appeal raises two key issues: whether the district court abused its discretion in denying Seguros' motion to vacate and whether the appeal is frivolous, which would entitle Pena to attorneys' fees. The standard of review for such motions under Rule 60(b) is for abuse of discretion, with a strong preference for liberally applying the rule to favor timely relief and allow cases to be decided on their merits.

The appellant cites Schwab v. Bullock's, Inc., among other precedents, as influential, yet acknowledges that the legal standard for vacating a judgment has evolved to prevent motions to vacate from functioning as substitutes for appeals. Specifically, a district court can deny a Rule 60(b) motion to vacate a default judgment if: (1) the plaintiff would suffer prejudice from granting the motion, (2) the defendant lacks a meritorious defense, or (3) the defendant's own conduct caused the default. This approach aligns with the circuit's emphasis on the importance of finality in judgments.

In evaluating Seguros' motion to vacate the default judgment, the court must assess whether granting the motion would prejudice Pena, whether Seguros has a meritorious defense, and whether Seguros’ actions contributed to the default. The court determined that Seguros’ culpable conduct led to the default, allowing it to focus solely on this aspect. 

The district court found that Seguros had received actual notice of the claim against it, as the summons and complaint were sent to an address provided by Seguros to the Arizona Department of Insurance. However, the record does not substantiate this finding, as there are no confirmatory letters or acknowledgments from Seguros. Despite the lack of actual notice, the court ruled that Seguros had constructive knowledge of the action due to effective service of process under Arizona law. 

Furthermore, although Seguros seemed unaware of the action, Pena made multiple attempts to notify Seguros through mail and phone calls to its offices in Mexico. Seguros’ failure to provide accurate contact information is deemed its responsibility, and this misstep does not constitute excusable neglect. Thus, Seguros is not entitled to relief from the default judgment under Rule 60(b).

Seguros, seeking to operate in Arizona, is obligated to adhere to state laws, including maintaining an accurate address with the Department of Insurance. Its failure to do so is deemed culpable. Pena claims Seguros has filed a frivolous appeal and requests attorney's fees and treble damages; however, he fails to provide supporting case law for treble damages, and the appeal is not considered frivolous as the arguments are not without merit. Pro se litigants, such as Pena, are not entitled to attorney's fees without specific statutory authorization. The court found that Seguros’ culpable actions resulted in a default judgment, failing to satisfy the criteria for vacating it under Rule 60(b). Consequently, the district court's denial of Seguros' motion for relief is affirmed, and Pena's request for attorney's fees and treble damages is denied. The district court's findings regarding effective service of process are upheld, despite Seguros claiming a lack of actual knowledge of the legal action, as there is no substantial proof to contradict the inference that Seguros received the summons and complaint sent by the Department.