Pacific v. Shannon/Zemel

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NOTICE: THIS DECISION DOES NOT CREATE LEGAL PRECEDENT AND MAY NOT BE CITED EXCEPT AS AUTHORIZED BY APPLICABLE RULES. See Ariz. R. Supreme Court 111(c); ARCAP 28(c); Ariz. R. Crim. P. 31.24 IN THE COURT OF APPEALS STATE OF ARIZONA DIVISION ONE PACIFIC NUTRITIONAL, INC., a Washington corporation, Plaintiff/Appellant, v. JOHNNY SHANNON and DARLENE D. SHANNON, husband and wife; JAMES A. ZEMEL and MARI ZEMEL, husband and wife, Defendants/Appellees. ) ) ) ) ) ) ) ) ) ) ) ) ) ) 1 CA-CV 06-0627 DIVISION ONE FILED: 04-20-2010 PHILIP G. URRY,CLERK BY: GH DEPARTMENT A MEMORANDUM DECISION (Not for Publication Rule 28, Arizona Rules of Civil Appellate Procedure) Appeal from the Superior Court in Maricopa County Cause No. CV 2005-053695 The Honorable Robert C. Houser, Judge (Retired) AFFIRMED Clark Hill, PLC By Ryan J. Lorenz Attorneys for Plaintiff/Appellant Law Offices of David William West, PC By David W. West Attorneys for Defendants/Appellees Shannon Mariscal Weeks McIntyre & Friedlander, PA By Charles H. Oldham Timothy J. Thomason Attorneys for Defendants/Appellees Zemel Scottsdale Maricopa Phoenix D O W N I E, Judge ¶1 Pacific summary grant James judgment of Nutritional, and Mari Zemel to Inc. ( Pacific ) Johnny (collectively, appeals the and Shannon and Darlene Defendants ). For the following reasons, we affirm. FACTS AND PROCEDURAL HISTORY 1 ¶2 The Shannons have been married for years and have lived in Arizona since 1995. over forty-five Until recently, they owned a home in Arizona (the Jenan property ) that was community property. ¶3 In note signed Pacific 1999, by Mia $50,517.84 Johnny Lundin plus personally and Robin interest. guaranty or the promissory note. guaranteed Marzi, Darlene a promissory agreeing did pay sign not to the Thereafter, Pacific filed a complaint in the Clark County Superior Court in the State of Washington against Johnny, 2 alleging he breached the guaranty agreement. Darlene was not named in the complaint. signed settlement a agreement litigation on June 27, 2000. obtained a default judgment regarding the Johnny Washington On December 20, 2000, Pacific against 1 Johnny and the other We view the facts in the light most favorable to Pacific as the party against whom summary judgment was entered. Angus Med. Co. v. Digital Equip. Corp., 173 Ariz. 159, 162, 840 P.2d 1024, 1027 (App. 1992). 2 The complaint also named as defendants Lundin, Marzi and a company they owned. 1 defendants for $51,812.39, plus interest, attorneys fees and costs ( Washington judgment ). Washington judgment in Arizona. §§ 12-1701 to -1708 (2003) Pacific domesticated the See Ariz. Rev. Stat. ( A.R.S. ) (Revised Uniform Enforcement of Foreign Judgments Act). ¶4 In 2005, Pacific filed a complaint in the Maricopa County Superior Court against defendants, seeking to foreclose the judgment lien on the Jenan property to recover the balance due under (Supp. the 2009) Washington (a judgment judgment. 3 shall See become property of the judgment debtor). a A.R.S. lien § on 33-964(A) the real The Shannons filed a motion to dismiss or, in the alternative, for summary judgment, arguing the Washington judgment community property. cross-moved for was not enforceable against The Zemels joined in that motion. partial summary judgment, their Pacific contending the Washington judgment was premised on the settlement agreement, not the guaranty, and was therefore a community debt. ¶5 The superior court granted summary Defendants and dismissed Pacific s complaint. appealed. judgment to Pacific timely We have jurisdiction pursuant to A.R.S. § 12-2101(B) (2003). 3 The Zemels had a deed of trust encumbering the Jenan property and were named as persons with an interest in the property. Subsequently, the Zemels foreclosed on their deed of trust and acquired the property at a trustee s sale. 2 DISCUSSION 1. Summary Judgment ¶6 We review a grant of summary judgment de novo. L. Harvey Concrete, Inc. v. Argo Const. & Supply Co., 189 Ariz. 178, 180, 939 P.2d 811, 813 (App. 1997). Summary judgment is appropriate when no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law. Ariz. R. Civ. P. 56(c). We will affirm a grant of summary judgment if it is correct for any reason. See City of Tempe v. Outdoor Sys., Inc., 201 Ariz. 106, 111, ¶ 14, 32 P.3d 31, 36 (App. 2001) (citation omitted). a. ¶7 The Washington Judgment The record does not support Pacific s claim that the Washington judgment was settlement agreement. judgment, which complaint. is based on Johnny s breach of the The Washington judgment was a default limited to the allegations made in the Columbia Val. Credit Exch., Inc. v. Lampson, 533 P.2d 152, 154 (Wash. Ct. App. 1975); S. Ariz. Sch. for Boys, Inc. v. Chery, 119 Ariz. 277, 282-83, 580 P.2d 738, 743-44 (App. 1978). The complaint in the Washington litigation alleged Johnny breached the guaranty agreement, and it sought damages for that breach. ¶8 Similarly, Pacific s affidavit of default references only the guaranty. Pacific never amended its complaint, filed a 3 second action based on breach of the settlement agreement, or placed before the court the settlement agreement such that it arguably could have been merged into the underlying action. The Washington judgment refers only to Pacific s pleadings (i.e., the complaint) relates and an exclusively to guaranty. affidavit the of original Darien Loiselle, promissory note which and the Nothing in the record supports Pacific s claim that the Washington default judgment was based on a breach of the settlement agreement, and no genuine issue of material fact exists regarding that point. b. ¶9 Choice of Law Under Arizona law, one spouse may contract debts and otherwise act for the benefit of the community. 215(D) (2007). exceptions. This power, however, is A.R.S. § 25- subject to certain Id.; Rackmaster Sys., Inc. v. Maderia, 219 Ariz. 60, 63, ¶ 12, 193 P.3d 314, 317 (App. 2008). Specifically: Either spouse separately may acquire, manage, control or dispose of community property or bind the community, except that joinder of both spouses is required in . . . . Any transaction suretyship. of A.R.S. § 25-214(C)(2) (2007). as requiring both spouses guaranty, indemnity or This statute has been interpreted to sign 4 a guaranty to bind the community. Vance-Koepnick v. Koepnick, 197 Ariz. 162, 163, ¶ 5, 3 P.3d 1082, 1083 (App. 1999) (citation omitted). ¶10 Washington law contains regarding guaranty agreements. no similar restriction G.W. Equip. Leasing, Inc. v. Mt. McKinley Fence Co., Inc., 982 P.2d 114, 116 (Wash. Ct. App. 1999). Under Washington law, both spouses are not required to sign a guaranty agreement to bind the community. See Wash. Rev. Code § 26.16.030 (2009) (defining a spouse s ability to manage and control community property). ¶11 law We disagree with Pacific s contention that Washington governs action. the In guaranty G.W. as Equipment, well a as the enforcement with case current similar facts, the Washington court applied Arizona law where an Arizona husband signed a guaranty contract in Washington. Specifically, Edward Lindstrom personally 982 P.2d at 118. guaranteed agreement that stated Washington law would apply. a lease Id. at 115. After a default on the lease agreement, the creditor sued the defaulting parties, as well community. Id. The court as Lindstrom noted that, and his unlike marital Washington, Arizona requires both spouses to sign a guaranty to bind the marital community. Id. at 116 (comparing Wash. Rev. Code. § 26.16.030 and A.R.S. §§ 25-214, -215). In analyzing which law to apply, the court determined that, when community property is at issue, the state where the spouses reside typically has the 5 most significant interest. Id. at 117 (citing Potlatch No. 1 Fed. Credit Union v. Kennedy, 459 P.2d 32 (Wash. 1969)). The court concluded that Arizona law applied, explaining: Washington courts apply Washington law to determine the rights and authority of Washington spouses to enter into contracts affecting their community property. For Washington courts to conclude that residents of other community property states are bound by Washington community property law as well, rather than the law of their own state, would be illogical and unjust. The Arizona Legislature has enacted a statute which prohibits one spouse from entering into guaranty contracts without the other spouse s consent. Arizona spouses, therefore, may not alter the rights and liabilities of their marital communities, irrespective of the protective policies of their domiciliary states, by choosing to contract in another forum and contractually consenting to the application of that forum s laws. G.W. Equip., 982 P.2d at 117-18. ¶12 In residents, the and case the at Jenan bar, the property is Shannons are located here. Equipment thus directs the application of Arizona law. 4 4 Arizona G.W. Because To the extent Pacific argues that G.W. Equipment is not binding because it was decided after Johnny signed the guaranty, we disagree. Pacific admits G.W. Equipment was at most a clarification of the law in effect at the time the guaranty was signed. Moreover, the case had been decided before the Washington litigation began. See, e.g., In re Marriage of Yuro, 192 Ariz. 568, 572, ¶ 8, 968 P.2d 1053, 1057 (App. 1998) (explaining an appellate court must apply the law in effect at the time it renders a decision unless the law provides to the contrary or applying such law would result in manifest injustice). Pacific also argues G.W. Equipment dealt with 6 Arizona requires both spouses to sign a guaranty to bind the community, there is no community obligation or debt resulting from the guaranty signed solely by Johnny. 5 c. Arizona Cases ¶13 The facts here are similar to Rackmaster, where we held that a judgment creditor could not garnish a community bank account based on a foreign judgment entered against one spouse arising from a guaranty. 219 Ariz. at 61, ¶ 1, 193 P.3d at 315. There, the creditor obtained a default judgment in Minnesota against Patrick Maderia signed. Id. at ¶ 2. based on to judgment. the guaranty Patrick alone Patrick was married to Jane Maderia, and the couple resided in Arizona. party a Minnesota Id. at ¶ 4. action, Id. at ¶ 2. nor was she Jane was not a named in the The creditor filed an affidavit of foreign judgment in Arizona and attempted to garnish a community bank account. Id. at ¶ 4. We concluded the judgment creditor personal jurisdiction, not choice of law. Although the appellant in G.W. Equipment apparently did raise jurisdictional issues, the primary argument was that Lindstrom did not have the power unilaterally to bind the community under Arizona statute. G.W. Equipment, 982 P.2d at 116. 5 Pacific argues in its reply brief that the Shannons waived application of A.R.S. § 25-214(C)(2) by entering into the settlement agreement. We will not address issues that are raised for the first time in a reply brief. Wasserman v. Low, 143 Ariz. 4, 9 n.4, 691 P.2d 716, 721 n.4 (App. 1984) (citation omitted). Moreover, one spouse acting unilaterally cannot convert a separate obligation into a community debt. Zork Hardware Co. v. Gottlieb, 170 Ariz. 5, 6, 821 P.2d 272, 273 (App. 1991). 7 could not do so, reasoning that A.R.S. § 25-214(C)(2) requires both spouses to sign a guaranty in order to bind the community. Id. at 63-65, ¶¶ 13, 18, 26, 193 P.3d at 317-319. Accordingly, the foreign judgment could not be enforced against community assets. Id. at 65, ¶ 26, 193 P.3d at 319. ¶14 it Pacific argues Rackmaster should be overruled because goes disagree. too far in construing A.R.S. § 25-214(C)(2). We 214(C)(2), Rackmaster analyzed the plain wording of A.R.S. § 25cited previous Arizona cases for concluded the statute is substantive in nature. 6 support, and Id. at 63 ¶¶ 11, 14-15, 193 P.3d at 317 (citing Vance-Koepnick, 197 Ariz. at 163, ¶ 5, 3 P.3d at 1083 and Consol. Roofing & Supply Co. v. Grimm, 140 Ariz. 452, 458, 682 P.2d 457, 463 (App. 1984)). ¶15 Pacific also argues Rackmaster violates the Full Faith and Credit Clause of the United States Constitution. Under the Full Faith and Credit Clause, a judgment validly rendered in one state must be accorded the same validity and effect in every other state court. Lofts v. Superior Court (Perry), 140 Ariz. 407, 410, 682 P.2d 412, 415 (1984). Thus, a state court must recognize the validity of a foreign judgment. 6 See Nat l Union We also reject Pacific s argument that Rackmaster imposes a substantive right to the detriment of creditors who do not happen to know of the rule of law announced last year. Although Rackmaster was decided while this appeal was pending, A.R.S. § 25-214(C)(2) has been in effect since 1973. See 1973 Ariz. Sess. Laws, Ch. 172 § 64; Hamada v. Valley Nat. Bank, 27 Ariz. App. 433, 436, 555 P.2d 1121, 1124 (App. 1976). 8 Fire Ins. Co. v. Greene, 195 Ariz. 105, 107-08, ¶¶ 9, 12, 985 P.2d 590, 592-93 (App. 1999). Recognizing a foreign judgment means giving the judgment the same effect that it has in the state where it was issued. Enforcing a judgment, affirmative relief to Id. at 108, ¶ 12, 985 P.2d at 593. however, which the means granting judgment a entitles party him. the Id. (quoting Sainz v. Sainz, 245 S.E.2d 372, 375 (N.C. App. 1978)). The methods for enforcing a foreign judgment are governed by the laws of the enforced. state in which the judgment is sought to be Nat l Union, 195 Ariz. at 108, ¶ 12, 985 P.2d at 593. ¶16 In the instant case, the superior court recognized the validity of proceedings. the Washington judgment in the domestication Pacific now seeks to enforce the judgment against the Shannons community property in Arizona. The superior court correctly applied Arizona law and concluded Pacific could not enforce the judgment against that property. There was no violation of the Full Faith and Credit Clause. ¶17 Finally, Pacific argues reconciled with earlier Arizona cases. 7 Rackmaster cannot be In Oyakawa v. Gillett, 175 Ariz. 226, 854 P.2d 1212 (App. 1993), the issue was whether 7 Gagan v. Sharar, 376 F.3d 987, 990-91 (9th Cir. 2004), is not binding on us. See Bayham v. Funk, 3 Ariz. App. 220, 221, 413 P.2d 279, 280 (1966) (federal decisions are not binding); and Pool v. Superior Court (Fahringer), 139 Ariz. 98, 108, 677 P.2d 261, 271 (1984) (we interpret our own state law and do not necessarily follow federal precedent). 9 a California judgment against a marital community was entitled to full faith and credit in Arizona. his wife were California residents against Dr. Gillett for defamation. 1213. Dr. Richard Gillett and when a lawsuit was Id. at 227, 854 P.2d at A judgment was entered against Dr. Gillett. Gilletts subsequently moved to filed Arizona, and Id. the The plaintiff obtained an amended judgment in California against the marital community and sought to enforce that judgment in Arizona. at 227-28, 854 P.2d at 1213-14. Id. A California statute provided that community property was liable for the separate debts of spouses. the Id. at 228, 854 P.2d at 1214. judgment against recognized in Arizona. ¶18 Oyakawa recognition of a is the community This Court determined was valid and defendants be Id. at 231, 854 P.2d at 1217. distinguishable foreign judgment, because while it resided in California dealt Rackmaster present case deal with enforcement of a judgment. Oyakawa must when the Further, the the judgment was entered and only later moved to Arizona. 175 Ariz. at 227, 854 P.2d at 1213. and with underlying Oyakawa, Here, and in Rackmaster, the parties resided in Arizona at all relevant times. Finally, in Oyakawa, the plaintiff obtained a valid judgment against the marital community. Oyakawa, 175 Ariz. at 228, 854 P.2d at 1214. In Rackmaster and the present case, the relevant judgments were against the respective husbands only. 10 ¶19 In National Union, 195 Ariz. at 106, ¶¶ 2-3, 985 P.2d at 591, the plaintiff obtained a default judgment in New York against Charles Greene for breach of a promissory note. time, Greene and his wife were Texas residents. At that Id. at ¶ 4. Five years later, Greene moved to Arizona, and the plaintiff domesticated the New York judgment here. 985 P.2d at 592. We held that the judgment could be enforced against the Greenes community property. P.2d at 593. Id. at 107, ¶¶ 5-6, Id. at 108, ¶ 12, 985 Similarly, in Alberta Securities Commission v. Ryckman, 200 Ariz. 540, 30 P.3d 121 (App. 2001), a Canadian judgment was entered against Lawrence Ryckman for manipulating the Alberta securities market. at 124. Ryckman and his wife resided in Canada when the court entered the judgment. moved to Arizona. Canadian Id. at 543, ¶¶ 3, 5-7, 30 P.3d judgment Id. at ¶¶ 2, 7-8. Id. at ¶ 2. and They subsequently We upheld the validity of the concluded the obligation satisfied from the Ryckmans community property. could be Id. at 548-50, ¶¶ 33-34, 40, 30 P.3d at 129-31. ¶20 National distinguishable. breach of a respectively. Union and Alberta are readily The judgments in those cases were based on promissory note and securities violations, No guaranty was involved in either case. Thus, the debts would have been community obligations if incurred in Arizona. Additionally, the judgment debtors did not reside in 11 Arizona when the judgments were entered. Finally, in National Union, we held that Arizona law applies when enforcing a foreign judgment. 2. Rackmaster is consistent with that holding. ¶21 Attorneys Fees Defendants request an award of attorneys fees costs on appeal pursuant to A.R.S. § 12-341.01 (2003). discretion, we decline to award fees. As the and In our prevailing parties, however, we award the Shannons and Zemels their costs on appeal. A.R.S. § 12-341 (2003). CONCLUSION ¶22 For the foregoing reasons, we affirm the judgment of the superior court. /s/ MARGARET H. DOWNIE, Judge CONCURRING: /s/ MAURICE PORTLEY, Presiding Judge /s/ LAWRENCE F. WINTHROP, Judge 12

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