Cho v. American Bonding Co.
| Decision Date | 18 September 1997 |
| Docket Number | No. 1,CA-CV,1 |
| Citation | 951 P.2d 468,190 Ariz. 593 |
| Parties | , 252 Ariz. Adv. Rep. 36 Hiroyoshi CHO and Ryuko Cho, Plaintiffs, Judgment Creditors-Appellees, v. AMERICAN BONDING COMPANY, Defendant, Judgment Debtor-Appellant. 97-0004. |
| Court | Arizona Court of Appeals |
Appellees obtained a judgment in Hawaii that resulted from the confirmation of an arbitration award concerning the breach of a construction contract. Appellant, which is the contractor's surety, was in receivership in Arizona when the judgment was entered in Hawaii. When appellees attempted to domesticate their judgment in Arizona, appellant moved to vacate it on the grounds that the confirmation of an arbitration award is not entitled to full faith and credit and the Hawaii judgment is invalid because it was entered during the time that all proceedings against appellant were stayed by the Arizona receivership court.
We hold that the judgment obtained in Hawaii is entitled to full faith and credit in Arizona. We further conclude that the judgment is not invalid.
Earl T. Yonemura dba E.T. Yonemura General Building Contractor, Ltd. (Yonemura) contracted to build a house for Hiroyoshi Cho and Ryuko Cho in Honolulu. American Bonding Company (ABC) was the surety for Yonemura. Problems arose during construction, and in August 1993, the Chos filed a demand for arbitration in Hawaii with the American Arbitration Association (AAA).
Before an arbitration hearing was held, the Chos, Yonemura, and ABC mediated their dispute under the auspices of AAA. As a result of the mediation, in April 1994, the parties entered into a settlement agreement under which Yonemura and ABC agreed to certain terms and conditions concerning completion of the Chos' residence.
In September 1994, the Chos filed a demand for arbitration, alleging that Yonemura and ABC had breached the settlement agreement. The Chos, Yonemura, and ABC appeared at an arbitration hearing on November 18, 1994. Due to an illness suffered by Yonemura, the arbitration was suspended after one day and rescheduled for February 1995. However, the arbitration panel eventually continued the hearing when ABC took over construction of the residence and anticipated completing construction by March 1, 1995.
In the meantime, in early February, an order appointing a receiver to rehabilitate ABC was entered in the Maricopa County Superior Court (superior court). The order also granted a 120-day injunction, providing that [E]xcept by leave of this Court, during the pendency of the Receivership order herein, the Defendant and all customers, principals, investors, creditors, stockholders, lessors, and other persons except for the Receiver, seeking to establish or enforce any claim, right or interest against or on behalf of ABC, and all others acting for or on behalf of such persons including attorneys, trustees, agents, sheriffs, constables, marshals, and other officers and their deputies and their respective attorneys, servants, agents, employees, be and hereby are enjoined from:
1. Commencing, prosecuting, continuing or enforcing any claim, suit or proceeding against ABC or against any of its assets for a period of one-hundred twenty days (120) from the entry of this Order....
The arbitration was continued to July 3, 1995. On May 31, the superior court continued the injunction and stay indefinitely. ABC submitted to the arbitrators a motion to stay arbitration, and the Chos opposed the motion. Based on two recent rulings of the First Circuit Court of Hawaii (circuit court), the arbitrators denied the motion, reasoning that (1) the Arizona court did not have jurisdiction over the parties, therefore, granting the motion to stay was not a matter of full faith and credit but rather one of comity which could be refused, (2) no judgment had been entered against ABC, and (3) any request for a stay must be brought by the receiver rather than ABC.
The arbitration hearing proceeded as scheduled on July 3--8. Yonemura was represented by counsel at the hearing, but ABC was neither present nor represented at the hearing. The arbitrators issued a partial final decision and award on September 1, 1995. The award was in favor of the Chos and against Yonemura and ABC, jointly and severally, in the amount of $550,193. The award was served on ABC.
The Chos filed a motion to confirm and enter judgment upon the arbitrator's decision and award in the circuit court. Yonemura moved the court to vacate the decision and award; ABC joined in the motion. Yonemura argued that the arbitration panel exceeded its powers, was guilty of misconduct, entered only a partial award, failed to grant Yonemura a full and fair hearing, and improperly rendered the award against an individual who was not a party to the construction contract. Neither Yonemura nor ABC argued that the arbitrators had erred in denying ABC's motion to stay the arbitration pending the receivership.
The circuit court denied the motion to vacate the arbitrators' decision and award and entered an order confirming the decision and award and entering judgment on it. Yonemura appealed from the judgment, but the Supreme Court of Hawaii dismissed the appeal on the ground that the notice of appeal was untimely. ABC did not appeal the judgment.
The Chos filed in the superior court an exemplification of the order confirming the arbitration award and entering judgment along with a notice of filing of the foreign judgment. The receiver of ABC filed a motion to vacate the Hawaii judgment or, alternatively, to stay enforcement of the judgment. The receiver argued that the Arizona court need not apply full faith and credit to the Hawaii judgment because the arbitration award and judgment were entered in violation of the Arizona court's injunction in the receivership proceeding. The judgment domestication proceeding was transferred to the superior court judge who was overseeing the receivership of ABC.
The superior court denied the motion to vacate the judgment, but stayed enforcement of the judgment pending further decision by the court in the receivership proceedings. The receiver for ABC timely appealed from the order denying the motion to vacate the judgment.
For its first issue on appeal, ABC argues that confirmation of an arbitration award is not a judicial proceeding entitled to full faith and credit. It contends that because the Hawaii court that reviewed the arbitration award was precluded by statute from examining the merits of the dispute, the judicial confirmation cannot have preclusive effect.
The Full Faith and Credit Clause of the United States Constitution reads: "Full Faith and Credit shall be given in each State to the public Acts, Records, and judicial Proceedings of every other State." U.S. CONST. art. IV, § 1. The enabling statute, 28 U.S.C. § 1738, provides:
Such ... records and judicial proceedings [of any State, Territory or Possession of the United States] ... shall have the same full faith and credit in every court within the United States and its Territories and Possessions as they have by law or usage in the courts of such State, Territory or Possession from which they are taken.
Thus, in practice, the Full Faith and Credit Clause and the statute that implements it require a validly rendered judgment of the court of one state to be given the same validity and effect in every other state as it has in the state rendering it. Morris v. Jones, 329 U.S. 545, 547, 67 S.Ct. 451, 453-54, 91 L.Ed. 488 (1947); Lofts v. Maricopa County Superior Court, 140 Ariz. 407, 410, 682 P.2d 412, 415 (1984). This requirement is effectuated when a state recognizes a sister state's final judgment as binding and conclusive. Fremont Indem. Co. v. Industrial Comm'n, 144 Ariz. 339, 342, 697 P.2d 1089, 1092 (1985).
In this appeal, we consider whether the trial court properly denied ABC's motion to vacate the Hawaii judgment, thus giving full faith and credit to a judgment that resulted from the confirmation of an arbitration award. An unreviewed arbitration is not a judicial proceeding and full faith and credit is not statutorily required as to a resultant award. See McDonald v. City of West Branch, Mich., 466 U.S. 284, 288-89, 104 S.Ct. 1799, 1801-03, 80 L.Ed.2d 302 (1984); Caldeira v. County of Kauai, 866 F.2d 1175 (9th Cir.1989), cert. denied, 493 U.S. 817, 110 S.Ct. 69, 107 L.Ed.2d 36 (1989). However, where an arbitration award is reviewed in state court, the federal courts and courts of other states are required to give the same effect to the resulting state court judgment as it would have in the rendering state's own courts. Caldeira, 866 F.2d at 1178; see also, Ryan v. City of Shawnee, 13 F.3d 345, 347 (10th Cir.1993) (); see generally Marrese v. American Academy of Orthopaedic Surgeons, 470 U.S. 373, 381, 105 S.Ct. 1327, 1332, 84 L.Ed.2d 274 (1985) () (citing Kremer v. Chemical Constr. Corp., 456 U.S. 461, 102 S.Ct. 1883, 72 L.Ed.2d 262 (1982)).
ABC argues that the Hawaii circuit court decision confirming the arbitration award does not...
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