Carey v. Soucy

• Decision Date: 30 October 2018
• Docket Number: No. 1 CA-CV 17-0533,1 CA-CV 17-0533
• Citation: Carey v. Soucy, 431 P.3d 1200 (Ariz. App. 2018)
• Parties: Dan CAREY, Plaintiff/Judgment Creditor/Appellee, v. Gary SOUCY, et al., Defendant/Judgment Debtor/Appellant, XYZED LLC, Intervenor/Appellant.
• Court: Arizona Court of Appeals

431 P.3d 1200

Dan CAREY, Plaintiff/Judgment Creditor/Appellee,

v.Gary SOUCY, et al., Defendant/Judgment Debtor/Appellant,XYZED LLC, Intervenor/Appellant.

No. 1 CA-CV 17-0533

Court of Appeals of Arizona, Division 1.

FILED October 30, 2018

Udall Shumway PLC, Mesa, By Joel E. Sannes, Counsel for Plaintiff/Judgment Creditor/Appellee

Baker & Baker, Phoenix, By Thomas M. Baker, Counsel for Defendant/Judgment Debtor/Appellant and Intervenor/Appellant

Judge Lawrence F. Winthrop delivered the opinion of the Court, in which Presiding Judge Jennifer M. Perkins and Judge Jon W. Thompson joined.

OPINION

WINTHROP, Judge:

¶ 1 In this garnishment proceeding, the judgment debtor requested a jury trial on the validity of an assignment to funds that the judgment creditor claimed was a fraudulent transfer. We hold that, under these circumstances, there is no right to a jury trial in garnishment proceedings with respect to whether an assignment would constitute a fraudulent transfer. Judgment debtor Gary Soucy and intervenor XYZED, LLC appeal from the denial of Soucy’s objection to the application for writ of garnishment, the denial of their motion for new trial, and the garnishment judgment in favor of judgment creditor Dan Carey. For the following reasons, we affirm.

FACTS AND PROCEDURAL HISTORY

¶ 2 In February 2016, Gary Soucy stipulated to judgment against him and in favor of Dan Carey for $175,000 (the "Judgment"). Carey recorded the Judgment two days after it was signed and filed.

¶ 3 In September 2016, Soucy, in a separate matter and represented by attorney James Mack, entered a settlement agreement with an estate ("Garnishee"), requiring the estate to pay Soucy $50,000 on or before October 7, 2016, and another $50,000 on or before January 7, 2017 (the "Settlement").

¶ 4 On October 7, 2016, Mack received the first Settlement payment in his firm’s trust account. Mack and Soucy met at Mack’s bank later that day; from the $50,000, Mack paid his firm $25,320.07, representing unpaid attorneys’ fees due and owing from Soucy, and wrote Soucy a check for the remaining $24,679.93. Soucy cashed the check before leaving the bank.

¶ 5 On October 18, 2016, Carey served a writ of garnishment on Mack in an attempt to collect the Judgment. Mack answered that he was not indebted to or otherwise in possession of monies belonging to Soucy.

¶ 6 At some point in October 2016, Soucy, Mack, and XYZED, whose sole member is Mack, executed an agreement in which Soucy assigned the second $50,000 Settlement payment to XYZED (the "Assignment") and XYZED loaned Soucy $40,000.¹ The purported purpose of the Assignment was for Soucy to use the $40,000 to take advantage of a time-sensitive business opportunity to purchase goods for resale. In addition to assigning the second Settlement payment, Soucy also agreed to remit $3,800 to XYZED upon the resale of the purchased goods. The $40,000 loan was made up of two separate wire transfers: (1) $15,000 wire transferred from the Mack law firm operating account to Lighthouse Ventures, LLC² on September 21, 2016 (prior to the Assignment) and (2) $25,000 wire transferred from the Mack law firm operating account to Lighthouse Ventures, LLC on October 18, 2016. Mack later provided counsel for Garnishee with a copy of the Assignment.

¶ 7 On December 23, 2016, Carey served a writ of garnishment on Garnishee. Garnishee answered that it was in possession of $50,000 due and owing to Soucy (the second Settlement payment) and noted that Mack had provided an agreement purporting to assign the $50,000 debt to XYZED. Soucy objected and requested a hearing, alleging Garnishee’s answer was incorrect. Soucy included a jury trial demand in his request for hearing.

¶ 8 Mack initially represented Soucy in the garnishment proceeding, but the superior court found that Mack’s representation of Soucy was a conflict of interest, and ordered Soucy to retain new counsel or proceed pro per . XYZED, also represented by Mack, moved to intervene in the garnishment proceeding. Soucy and XYZED then obtained the same counsel, and the court set a hearing. The court was provided with conflict waivers and, after denying the request for a jury trial, proceeded with the hearing.

¶ 9 In the garnishment proceeding, the superior court determined: (1) the Assignment of the $50,000 from Soucy to XYZED was a fraudulent transfer; (2) XYZED did not take the transfer in good faith; and (3) the transfer was not for reasonably equivalent value. The court denied Soucy’s and XYZED’s objections to the writ of garnishment and entered judgment for $50,000 in favor of judgment creditor Carey against Garnishee.

¶ 10 Soucy and XYZED moved for a new trial, contending they were erroneously denied their timely request and right to a jury trial, and the superior court’s finding of a fraudulent transfer was contrary to law. See Ariz. R. Civ. P. 59(a)(1)(A). The court denied the motion, finding that it was authorized by statute to determine and set aside a fraudulent transfer in a garnishment hearing without a jury, and sufficient evidence supported the finding that the transfer between Soucy and XYZED was a fraudulent conveyance.

¶ 11 Soucy and XYZED timely appealed. We have jurisdiction pursuant to Arizona Revised Statutes ("A.R.S.") section 12-2101(A)(1) and (A)(5).³

DISCUSSION

I. There Is No Right to a Jury Trial in a Garnishment Proceeding

¶ 12 Soucy and XYZED contend they have a right to a jury trial on the fraudulent transfer issue. Whether a party is entitled to a jury trial is a question of law we review de novo . In re Estate of Newman , 219 Ariz. 260, 271, ¶ 42, 196 P.3d 863, 874 (App. 2008) (citing Stoudamire v. Simon , 213 Ariz. 296, 297, ¶ 3, 141 P.3d 776, 777 (App. 2006) ).

¶ 13 Soucy and XYZED argue the superior court wrongly denied them a jury trial under Article 2, Sections 23 and 24 of the Arizona Constitution, which preserves the right to a jury in those actions that existed at common law at the time the Constitution was adopted in 1910. Life Investors Ins. Co. of Am. v. Horizon Res. Bethany, Ltd. , 182 Ariz. 529, 532, 898 P.2d 478, 481 (App. 1995) ; see also Newman , 219 Ariz. at 272, ¶ 45, 196 P.3d at 875. They argue the Uniform Fraudulent Transfer Act ("UFTA") as adopted in Arizona is a declaration of common law, see Hay v. Duskin , 9 Ariz. App. 599, 604, 455 P.2d 281 (1969) ; see also Granfinanciera, S.A. v. Nordberg , 492 U.S. 33, 43, 109 S.Ct. 2782, 106 L.Ed.2d 26 (1989) ; therefore, they are entitled to a jury trial.

¶ 14 Soucy and XYZED misapprehend the nature of garnishment. It is not a cause of action—it is a remedy. The constitutional provisions Soucy and XYZED rely upon simply do not apply in this setting. In a garnishment proceeding, the superior court, "sitting without a jury, shall decide all issues of fact and law." A.R.S. § 12-1584(E). Additionally, UFTA specifically provides for garnishment as a remedy and states that the garnishment remedy be "in accordance with the procedure prescribed by law in obtaining such remedy." A.R.S. § 44-1007(A)(1). It is well settled that the legislature is presumed to know existing law when it enacts a statute. Wareing v. Falk , 182 Ariz. 495, 500, 897 P.2d 1381, 1386 (App. 1995) (citing State v. Garza Rodriguez , 164 Ariz. 107, 111, 791 P.2d 633, 637 (1990) ; Daou v. Harris , 139 Ariz. 353, 357, 678 P.2d 934, 938 (1984) ).

¶ 15 Soucy and XYZED failed to cite, and our independent research did not discover, a case where in the absence of a state statute authorizing it, a court has ordered a jury trial on a fraudulent transfer within a garnishment proceeding. This is not surprising. Garnishment was not a cause of action that existed under the common law. As stated in Andrew Brown Co. v. Painters Warehouse, Inc. , 11 Ariz. App. 571, 572, 466 P.2d 790 (1970) :

[G]arnishment was unknown to the common law; it has come into being as a statutory remedy. State v. Allred , 102 Ariz. 102, 425 P.2d 572 (1967) ; 3 J. G. Sutherland, Statutes and Statutory Construction Sec. 7005 (3d ed. 1943); 38 C.J.S. Garnishment [§] 1 (1943). Since garnishment is a creature of statute, garnishment proceedings are necessarily governed by the terms of those statutes. Davis v. Chilson , 48 Ariz. 366, 62 P.2d 127 (1936) ; Moody v. Lloyd’s of London , 61 Ariz. 534, 152 P.2d 951 (1944) ; State v. Allred, Supra . Thus, courts may not allow garnishment proceedings to follow any course other than that charted by the legislature. See Undercofler v. Brosnan , 113 Ga. App. 475, 148 S.E.2d 470 (1966) ; Siegel, Cooper & Co. v. Schueck , 167 Ill. 522, 47 N.E. 855 (1897) ; 38 C.J.S. Garnishment [§] 3 b (1943).

¶ 16 It is also significant to note that judgment creditor Carey did not initiate a civil case alleging fraudulent transfer against Soucy, Mack, and XYZED; rather, Carey utilized the garnishment framework established by statute to ascertain whether Garnishee was holding funds that belonged to Soucy. Soucy objected to Garnishee’s answer and requested a hearing in the garnishment proceeding, thus availing himself of and subjecting himself to the parameters of the garnishment statutes. Had Garnishee already transferred the second Settlement payment to Soucy, Carey’s recourse would have been to file an affirmative civil claim for fraudulent conveyance in superior court, seeking the return of the funds. While we need not reach the issue, a request for a jury trial might present a different question in that procedural context.

¶ 17 Here, because Carey was not seeking return of property already transferred, we see no reason to disrupt the statutory framework and the long line of cases permitting fraudulent conveyance matters to be resolved in garnishment proceedings without a jury. See Sackin v. Kersting , 105 Ariz. 464, 465, 466 P.2d 758, 759 (1970) ("Garnishment is an appropriate remedy to be utilized in cases of fraudulent conveyances." (citation omitted) ), opinion supplemented on reh’g , 105 Ariz. 566, 468 P.2d 925 (1970) ; Premier Fin. Servs. v. Citibank (Ariz.)...