Amanti Electric, Inc. v. Engineered Structures, Inc. – 3/28/2012

April 3, 2012

Arizona Court of Appeals Division Two Holds That Superior Court Abused Its Discretion in Denying Motion for Relief from Judgment Under Rule of Civil Procedure 60(c)(6) Without Considering the Totality of the Equitable Circumstances.

Engineered Structures, Inc., a general contractor, entered into subcontracts with Amanti Electric, Inc., to perform electrical work.  In November 2008, Amanti sued Engineered for $630,127, the amount allegedly owed on the contracts.  In December, Engineered mailed Amanti a check for $409,055.  Amanti did not deposit the check, and the litigation continued.  In February 2010, Engineered stopped payment on the check, unbeknownst to Amanti.  About a month later, the parties entered into a settlement agreement under which Engineered agreed to pay Amanti $130,000 “as full and final payment of any and all claims asserted or which could have been asserted” in the lawsuit.  The lawsuit was dismissed pursuant to the parties’ stipulation on March 22, 2010.  In September 2010, Amanti attempted to deposit the December 2008 check, but the bank refused to honor it because Engineered had stopped payment.  Amanti attempted to resolve the issue with Engineered, but Engineered asserted that any claim Amanti had regarding the check was barred by the settlement agreement and dismissal of the lawsuit with prejudice.

Amanti filed a motion for relief from judgment under Rule 60(c), arguing that it was entitled to relief based on fraud, misrepresentation, and mistake because Engineered had failed to disclose the stop-payment order on the check during settlement negotiations.  Amanti claimed it was entitled to relief under Rule 60(c)(1) (mistake), 60(c)(3) (fraud), and 60(c)(6) (any other reason justifying relief).  The trial court concluded that Amanti was time-barred from seeking relief under Rule 60(c)(1) and 60(c)(3), which require a party to seek relief within six months of a judgment or order.  The court also concluded that because Amanti’s claims for relief under Rule 60(c)(1) and 60(c)(3) were colorable and because relief under Rule 60(c)(6) is mutually exclusive of the other clauses of Rule 60(c), Amanti was not entitled to relief under that provision.  Although the court noted that the result was “unjust” because “equitably . . . [Amanti] should have had the $400,000,” the court denied the motion.

The Court of Appeals reversed.  It first noted that even though the “grounds for relief in clause (6) and the other grounds for relief allowed under Rule 60(c) are usually mutually exclusive,” relief under Rule 60(c)(6) may still be appropriate in “cases of extreme hardship or injustice.”  Relying on its previous opinion in Roll v. Janca, 22 Ariz. App. 335, 527 P.2d 294 (1974), the Court said that courts must consider the totality of the circumstances when determining whether relief under Rule 60(c)(6) is warranted.  In this case, the trial judge believed he could not consider Amanti’s equitable arguments because of the general rule of mutual exclusivity applicable to Rule 60(c)(6).  The Court of Appeals “acknowledge[d] the general validity of that principle, but clarif[ied] that even when relief might have been available under one of the first five clauses but for the fact that the time limits of the rule had elapsed, this does not necessarily preclude relief under clause (6) if the motion also raises exceptional additional circumstances that convince the court the movant should be granted relief in the interest of justice.”  The Court remanded the case to the trial court for further proceedings, noting that the circumstances in this case “may justify relieving Amanti from the judgment.”

Judge Espinosa authored the opinion; Judges Vasquez and Kelly concurred.