FIDELITY NATIONAL FINANCIAL et al v. FRIEDMAN/MESHKATAI

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SUPREME COURT OF ARIZONA En Banc FIDELITY NATIONAL FINANCIAL INC., ) ) ) Plaintiff/Appellee, ) ) ) ) FIDELITY EXPRESS NETWORK INC., ) ) Claimant/Appellee, ) ) v. ) ) COLIN H. FRIEDMAN; et al, ) ) Defendants/Appellants, ) ) and ) ) ANITA MESHKATAI, individually ) and as a trustee of the Anita ) Kramer Living Trust, dated July ) 23, 1987, ) ) Defendant. ) ) __________________________________) Arizona Supreme Court No. CV-10-0096-CQ United States Court of Appeals, 9th Circuit No. 08-16967 United States District Court No. 2:03-cv-01222-RCB O P I N I O N Certified Questions from the United States Court of Appeals for the Ninth Circuit The Honorable Sidney R. Thomas, Judge The Honorable Betty B. Fletcher, Judge The Honorable N. Randy Smith, Judge QUESTIONS ANSWERED ________________________________________________________________ HENNELLY & GROSSFELD LLP Marina Del Rey, CA By Orlando F. Cabanday Janice M. Kroll Thomas H. Case And SHERMAN & HOWARD L.L.C. Phoenix By Dewain D. Fox Attorneys for Fidelity National Financial Inc. and Fidelity Express Network Inc. SCHIAN WALKER, P.L.C. Phoenix By Michael R. Walker Mark C. Hudson Attorneys for Colin H. Friedman ________________________________________________________________ H U R W I T Z, Vice Chief Justice ¶1 We accepted jurisdiction to answer two questions certified to us by the United States Court of Appeals for the Ninth Circuit: 1) Do collection activities (such as filing for a writ of garnishment or applying for orders from the court to inspect a safety deposit box or require a debtor s exam) taken within Arizona, renew a judgment previously registered in Arizona? 2) Does the filing of a related lawsuit in a state other than Arizona renew a judgment previously registered in Arizona? ¶2 5(6) We have jurisdiction pursuant to Article 6, Section of ( A.R.S. ) the Arizona §§ 12-1861 Constitution, to 12-1867 Court Rule 27. 2 Arizona (2003), and Revised Arizona Statutes Supreme I. ¶3 The facts and procedural history of this litigation are set forth in detail in the certification order of the Ninth Circuit, Fidelity Nat l Fin. Inc. v. Friedman, 602 F.3d 1121, 1122-23 (9th Cir. 2010), and are summarized here. ¶4 In 2002, Fidelity National Financial Inc. ( Fidelity ) obtained a monetary judgment against Colin and Hedy Friedman and Farid and Anita Meshkatai (collectively the Debtors ) in the United States California. District Fidelity Court for registered the the Central judgment District in the of United States District Court for the District of Arizona in November 2002. During the next five years, Fidelity obtained court orders in Arizona authorizing writs of garnishment, inspection of the Debtors safety deposit box, and debtors examinations (collectively, the Arizona collection activities ). Fidelity filed a new action in the Central In 2006, District of California (the California racketeering suit ), alleging that the Debtors had violated federal racketeering laws and California state fraud laws by using family trusts and other devices to avoid paying the 2002 judgment. ¶5 In 2008, the Debtors filed a motion in the Arizona federal court contending that Fidelity could not enforce the 2002 judgment because more than five years had entry. passed since its The district court denied the motion, concluding that 3 the 2002 judgment had been renewed pursuant to A.R.S. § 121551(B) (Supp. collection Fidelity 2009) activities appealed, and and § 12-1611 and (2003)1 California the Ninth by the Arizona racketeering Circuit certified suit. the two questions to us.2 II. ¶6 The starting point in resolving the questions before us is the common law background to Arizona s statutory scheme for renewal of judgments. At common law, judgments generally became dormant if not executed upon within a year of entry and were unenforceable after twenty years. See Browne & Manzanares Co. v. Chavez, 54 P. 234, 234 (N.M. Terr. 1898). A judgment creditor could avoid this problem in two ways. The first was by suing obtaining on the judgment in a new action and judgment, which then could be executed upon. a new See Cont l Nat l Bank & Trust Co. of Salt Lake City v. John Seely & Sons Co., 77 P.2d 355, 358 (Utah 1938); Simpson v. Cochran & Cherrie, 23 Iowa 81, 81 (1867). The second was through a writ of scire facias, which revived the original judgment and thus allowed execution 1 Absent material change since the events in question, we cite the current versions of statutes. 2 The Ninth Circuit was uncertain about these issues in light of a depublished opinion of our court of appeals and a memorandum decision of that court. Fidelity Nat l. Fin. Inc., 602 F.3d at 1123. Under Arizona law, however, neither decision has precedential value. Ariz. R. Civ. App. P. 28(c), (f); Ariz. R. Sup. Ct. 111(c). 4 on it. See Cont l Nat l Bank & Trust Co. of Salt Lake City, 77 P.2d at 358; Am. Ry. Express Co. v. F.S. Royster Guano Co., 126 S.E. 678, 679 (Va. 1925) ( The proceeding by scire facias is not a new suit . . . but a continuation of the old suit. ). ¶7 Since well before statehood, Arizona statutes have provided both a deadline for enforcing judgments and a procedure for extending that deadline. The 1901 Territorial Code provided: No execution shall be issued upon any judgment after the expiration of five years from the date of its rendition and entry, unless such judgment be revived by scire facias, or an action of debt be brought thereon within five years from the date of such rendition and entry. 1901 Territorial Code § 2558. Section 2959 of the 1901 Territorial Code codified the common law by allowing revival of a judgment by scire facias or an action of debt brought thereon within five years after the date of such judgment. 3 ¶8 The first Civil Code enacted after statehood, the 1913 Civil Code, made a significant change to the statutes governing judgment revival. That Code eliminated scire facias, replacing the common law writ with a simplified process under which a judgment was revived by affidavit. 3 1913 Civ. Code § 1353. The common law action of debt was a form of action to recover a sum certain. 26 C.J.S. Debt, Action of § 1 (2001). An action on a judgment sought recovery of a sum certain the amount owed on the original judgment and accrued interest. See Brandt v. Meade, 17 Ariz. 34, 35-36, 148 P.2d 297, 298 (1915). 5 The affidavit process was spelled out in detail in the 1913 Code. 1913 Civ. Code §§ 581 to 583. The affidavit could be filed at any time within the ninety days next preceding the expiration of the five year period within which a judgment may be a lien under existing law. 1913 Civil Code § 582. affidavit, that filed in the court rendered the The original judgment, operate[d] to renew and revive said judgment to the extent of the balance shown due in said affidavit for the period of five years from the date of the filing of such affidavit. Id. Thus, like the writ of scire facias, the affidavit continued the effectiveness of the original judgment so that the judgment creditor could continue to execute upon it. v. McCloskey, 161 U.S. 642, 645 (1896) See Owens (describing writ as continu[ing] the effect of . . . the former judgment ). ¶9 Although it abandoned the common law writ of scire facias, the 1913 Civil Code expressly preserved the common law alternative of suing on the judgment. that a judgment could also action . . . brought thereon. Thus, § 1353 provided be renewed by an Section 580 similarly provided for renewal of a judgment by action brought thereon in any court of competent jurisdiction within this state at any time within five years after the date of such judgment. 6 ¶10 These provisions from the 1913 Civil Code have been carried forward without material change into present law. Section 12-1551(B) now provides as follows: An execution or other process shall not be issued upon a judgment after the expiration of five years from the date of its entry unless the judgment is renewed by affidavit . . . or an action is brought on it within five years from the date of the entry of the judgment or of its renewal. The affidavit renewal process is set forth in § 12-1612 (2003). Like its predecessors, renewal through an Section 12-1611, in § 12-1551(B) preserves action . . . on turn, states that the the option original [a] of judgment. judgment may be renewed by action thereon at any time within five years after the date of the judgment. III. ¶11 The question before us is whether any of the Arizona collection efforts or the California racketeering suit renewed the 2002 judgment. Our inquiry therefore focuses on § 12- 1551(A), which provides that a judgment is renewed by an action brought on it, and § 12-1611, which refers to renewal by action thereon. ¶12 We start from the premise that the slight difference in the language of these two sections is of no consequence. Read together, the two statutes as did their forebears enact a limitations period for the enforcement 7 of a judgment and provide for judgment. Co., of that period by an action on the See Pima County by City of Tucson v. Maya Constr. 158 statutes extension Ariz. 151, relate to 155, the 761 same P.2d 1055, subject and 1059 are (1988) thus ( [I]f in pari materia, they should be construed together . . . as though they constituted one law. ). The action thereon described in § 12- 1611 is plainly the same action brought on the judgment to which § 12-1551 refers. ¶13 Our post-statehood case law confirms that every judgment continues to give rise to an action to enforce it, called an action upon a judgment. Associated Aviation Underwriters v. Wood, 209 Ariz. 137, 180 ¶ 150, 98 P.3d 572, 615 (App. 2004) (citation and internal quotation marks omitted). The main purpose of an action on a judgment is to obtain a new judgment which will facilitate the ultimate goal of securing the satisfaction of the original cause of action. Id. (citations and internal quotation marks omitted). ¶14 As was true at common law, the defendant in an action on the judgment under our statutory scheme is generally the judgment debtor, id., and the amount sought is the outstanding liability on the original judgment, Brandt v. Meade, 17 Ariz. 34, 35-36, 148 P.2d 297, 298 (1915). The judgment debtor cannot deny the binding force of the judgment, Miller Rubber Co. of N.Y. v. Peggs, 60 Ariz. 157, 159, 132 P.2d 439, 440 (1942), but 8 can assert such defenses as satisfaction or partial payment, Brandt, 17 Ariz. at 41, 148 P. at 301. If indebtedness remains on the original judgment, the action results in a new judgment in the amount owed. Associated Aviation Underwriters, 209 Ariz. at 180 ¶ 150, 98 P.3d at 615. ¶15 Legislative intent often can be discovered examining the development of a particular statute. by Carrow Co. v. Lusby, 167 Ariz. 18, 20, 804 P.2d 747, 749 (1990). The history of §§ 12-1551 and 12-1611, dating from before statehood, is particularly instructive. It demonstrates that our current statutes, in referring to an action brought on a judgment or an action thereon, were meant by the legislature to describe the common law action on a judgment. IV. A. ¶16 In arguing that the Arizona collection efforts and the California Fidelity racketeering relies suit primarily on were a actions general on the definitional judgment, statute, which provides that: In the statutes and laws of this state, unless the context otherwise requires: 1. Action includes any matter or proceeding in a court, civil or criminal. A.R.S. § 1-215 (Supp. 2010). Fidelity contends that any matter or proceeding seeking to facilitate collection on a judgment or 9 indicating the judgment creditor s continued intent to enforce the judgment is an action on the judgment. ¶17 The argument is not persuasive. The definition of action currently appear in statutes until 1928. § 1-215(1) did not See 1928 Code § 3040(4). in Arizona Because §§ 12- 1551 and 12-1611 descended directly from the 1901 Territorial Code and the 1913 Civil Code, a general definitional statute enacted after 1913 is of little use in interpreting the current statute s use of the word action. ¶18 More importantly, § 1-215 makes plain that its general definition of requires. action applies unless the context otherwise Sections 12-1551 and 12-1611 refer not merely to an action, but to action thereon. an action brought on a judgment or an These statutes, like their predecessors, thus describe not simply an action in some way related to the earlier judgment, but rather a specific form of suit the common law action on a judgment. B. ¶19 Our construction of §§ 12-1551 and 12-1611 is consistent not only with the history of these statutes, but also with their central purpose. The renewal statutes are designed to notify interested parties of the existence and continued viability of the judgment. ¶ 10, 101 P.3d 637, In re Smith, 209 Ariz. 343, 345 639 (2004). 10 Among the parties most interested in the status of the judgment are those considering extending credit to the judgment debtor. ¶20 If, as Fidelity argues, a judgment could be renewed by any matter or proceeding in a court, civil or criminal, § 1215(1), a prospective creditor would face an onerous task in determining the judgment s continued effect. view, the potential lender would be Under Fidelity s required to search the records of at least every court in the state and perhaps the nation to determine whether a writ of garnishment or other proceeding relating to the judgment had been instituted. See Ellsworth Land & Livestock Co. v. Bush, ___ Ariz. ___, ___ ¶ 11, 233 P.3d wherever 655, ___ personal (App. 2010) ( [A] jurisdiction may debt be may be exercised garnished over the garnishee. (quoting Restatement (Second) Conflict of Laws § 68 (1971))). Such a reading of §§ 12-1551 and 12-1611 would hardly afford interested parties effective notice of the status of the original judgment. ¶21 the Under § 12-1612, a potential creditor need only search docket of the court in which the original judgment was entered for the ninety days preceding the five-year expiration date to affidavit. have determine whether a judgment has been renewed by It would make little sense for the legislature to provided strict temporal and filing limitations on the affidavit process, while at the same time allowing any action 11 relating to the judgment, filed anywhere, to renew it. If, however, §§ 12-1551 and 12-1611 authorize renewal by action only through a common law action on the judgment, no great burden is placed on potential creditors, because a successful action on a judgment results considering in extending the entry credit of a already new must judgment. check for Those extant judgments in the relevant jurisdiction. C. ¶22 Finally, Fidelity argues that the Debtors may unjustly escape liability if the certified questions are answered in the negative. Our legislature, however, long ago determined that the judgment debtor will be released from further obligation unless a judgment creditor timely files a renewal affidavit or brings an action on the judgment within five years after its entry. Inherent in any statute of limitations is the risk that a party who owes money may escape liability if the creditor does not act in a timely fashion. ¶23 To mitigate any possible unfairness, the legislature has provided a simple mechanism for renewing the judgment. judgment creditor need only file an affidavit, in a The form specified by statute, within a ninety day period before the judgment expires to obtain renewal and maintain the priority of 12 the original judgment.4 The statute also preserves the more cumbersome common law action on the judgment. creditor fails to utilize either of When a judgment these statutory alternatives, its resultant inability to enforce the original judgment in Arizona is compelled by law. V. ¶24 For the reasons above, we conclude that the action . . . on a judgment referred to in § 12-1551 and the action thereon referred to in § 12-1611 are the common law action on a judgment, which replaced the original judgment with a new judgment in the amount then owed.5 We turn now to the certified questions. ¶25 The first certified question asks whether collection activities . . . taken judgment. within Arizona serve to renew a None of the Arizona collection efforts undertaken by Fidelity was a common law action on the 2002 judgment. Rather, 4 Fidelity apparently filed an affidavit to renew the Arizona judgment, but Debtors claim that it was ineffective because it was filed more than ninety days before the expiration of that judgment. See A.R.S. § 12-1612(B). This issue has not been certified to us, and we express no opinion on it. 5 We disapprove any dictum to the contrary in Hall v. World Savings & Loan Ass n, 189 Ariz. 495, 502-03, 943 P.2d 855, 86263 (App. 1997). And, although we agree with the conclusion in Associated Aviation Underwriters that §§ 12-1551 and 12-1611 refer to the common law action on a judgment, 209 Ariz. at 180 ¶ 150, 98 P.3d at 615, we express no opinion whether, in light of today's opinion, the court of appeals correctly concluded that the complaint-in-intervention in that case was such an action. 13 the writs seizing of the sought Debtors to collection garnishment discover efforts sought property; assets were 101 P.3d at 639 the of satisfy other the attempts judgment, not to renew it. ¶ 13, to the collection Debtors. to judgment collect The upon by efforts Arizona the 2002 See In re Smith, 209 Ariz. at 345 (recognizing the enforcing and renewing a judgment). difference between We therefore answer the first certified question in the negative. ¶26 The second certified question inquires whether the filing of a related lawsuit in a State other than Arizona can renew an Arizona judgment. description is the Here, the only lawsuit meeting that California racketeering suit. That suit clearly was not a common law action on the judgment; it did not simply recite the amount owed and seek a judgment on that debt. Instead, the California racketeering suit sought remedies under federal and California law because of actions allegedly undertaken by the Debtors to frustrate collection of the 2002 judgment. Indeed, because the California racketeering suit resulted in a defense verdict in 2010, it did not culminate in a new judgment against the Debtors. We therefore answer the second certified question in the negative.6 6 We express no opinion whether the 2002 judgment remains enforceable in the Central District of California or elsewhere. 14 _____________________________________ Andrew D. Hurwitz, Vice Chief Justice CONCURRING: _____________________________________ Rebecca White Berch, Chief Justice _____________________________________ W. Scott Bales, Justice _____________________________________ A. John Pelander, Justice _____________________________________ Michael D. Ryan, Justice (Retired) 15

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