Grand Real Estate, Inc. v. Sirignano

• Decision Date: 25 October 1983
• Docket Number: No. 1,CA-CIV,1
• Citation: 139 Ariz. 8,676 P.2d 642
• Parties: GRAND REAL ESTATE, INC., an Arizona corporation, Plaintiff-Appellant, Cross-Appellee, v. Vincent SIRIGNANO and Barbara Sirignano, his wife, Defendants-Appellees, Cross-Appellants. 6426.
• Court: Arizona Court of Appeals

Page 642

676 P.2d 642

139 Ariz. 8

GRAND REAL ESTATE, INC., an Arizona corporation, Plaintiff-Appellant, Cross-Appellee, v. Vincent SIRIGNANO and Barbara Sirignano, his wife, Defendants-Appellees, Cross-Appellants.

No. 1 CA-CIV 6426.

Court of Appeals of Arizona,

Division 1, Department A.

Oct. 25, 1983.

Reconsideration Denied Dec. 16, 1983.

Murphy & Posner by Robert R. Bauer, K. Bellamy Brown, Daryl M. Williams, Phoenix, for plaintiff-appellant, cross-appellee

Patrick W. O'Reilly, Phoenix, for defendants-appellees, cross-appellants.

OPINION

YALE McFATE, Judge (Retired).

This is an appeal by plaintiff-appellant Grand Real Estate, Inc. from a judgment of the Maricopa County Superior Court in favor of defendants-appellees Sirignano. Additionally, appellees have cross-appealed asking that attorney's fees be awarded them.

A review of the facts is necessary to determine the issues to be decided by this court. On December 20, 1974, Ray Lumber Company (Ray Lumber) obtained a judgment against appellees/cross-appellants (Sirignano) in Maricopa County Superior Court Cause No. C-303008. The judgment was subsequently recorded on December 27, 1974, thus creating a judgment lien (with certain exceptions) on all property owned by Sirignano pursuant to A.R.S. § 33-964(A). The aforementioned judgment lien attached to the property which is the subject of this action. Subsequently a writ of general execution was issued and returned unsatisfied.

On April 16, 1975, Sirignano filed a homestead exemption on the subject property pursuant to A.R.S. § 33-1102. Subsequently, on April 12, 1976, Sirignano filed a voluntary petition in bankruptcy with the United States District Court for Arizona. The Ray Lumber judgment was listed among the Sirignanos' obligations. In addition to the Sirignano residence, which is the subject of this action, the Sirignanos possessed real property interests in two second contracts of sale, one with a balance due of $6,900, the other $5,000.

On May 17, 1976, the trustee in bankruptcy filed a report of exempt property, setting apart as a homestead the Sirignano residence, pursuant to A.R.S. §§ 33-1101-1103.

On June 14, 1976, Ray Lumber filed with the bankruptcy court a timely proof of claim in the sum of $12,756.49. Ray Lumber designated its claim as both secured and unsecured, attaching a copy of the transcript of the judgment docket. The Sirignanos were discharged by the bankruptcy court on June 28, 1976. On December 16, 1976, the trustee filed an objection to Ray Lumber's designating its claim as both secured and unsecured, requesting that Ray Lumber segregate its claim. Ray Lumber filed a response to the trustee's objection on January 17, 1977, again claiming to be both a secured and unsecured creditor. Ray Lumber asserted that if the Sirignanos owned any real property in Maricopa County on or after the date the judgment was recorded, it enjoyed the status of being both a secured and unsecured creditor; if not, it was merely an unsecured creditor. On April 7, 1977, Ray Lumber filed notice that it was reducing its claim to $8,756.49.

On September 15, 1977, the trustee allowed the reduction, but again objected to the status of Ray Lumber's claim, indicating that he would have no objection to allowing the entire claim as unsecured. No further correspondence regarding the status of Ray Lumber's claim appears in the record.

On September 21, 1977, Ray Lumber filed an assignment of judgment to the plaintiff-appellant, Grand Real Estate, Inc. (Grand). The assignment was made for the stated consideration of $1,500.

At the final meeting of creditors on October 28, 1977, the bankruptcy court failed to explicitly rule on the status of the Ray Lumber/Grand claim. The minutes of the meeting read as follows:

Trustee's Objection to Claim27 No. 5 filed by Ray Lumber Company COURT: Claim allowed in the sum of $8756.49.

While the court did not explicitly state whether the claim was secured, unsecured, or both, a glance at the Minute Orders for the final meeting of creditors indicates that it was allowed as an unsecured claim. The order lists $645.47 to be distributed to "unsecured creditors" and nothing to "secured creditors".

On November 12, 1977, the bankruptcy court entered an order for payment of dividends. Ray Lumber was issued a dividend check in the sum of $137.96 with the notation "first and final dividend--unsecured claim # 5". Grand has received payment of the dividend.

On July 31, 1978, Grand began this action by filing a complaint seeking foreclosure on the Sirignano residence, pursuant to A.R.S. § 12-1635(B). The Sirignanos, in answering the complaint, alleged that the claim was discharged through bankruptcy. Additionally, appellees raised the defenses of waiver, estoppel and res judicata. The case was subsequently submitted to the court upon stipulation of the parties that the court decide the case on stipulated facts in the form of a Joint Pretrial Statement. On November 9, 1979, the court entered an order in favor of appellee Sirignano. Appellant subsequently moved the court for a new trial, which motion was denied by minute entry dated December 7, 1979. Appellees moved the court for an award of attorney's fees, which motion was likewise denied by the court on December 7, 1979. Appellees assert on appeal that they are entitled to an award of attorney's fees based upon a stipulation by the parties in the Joint Pretrial Statement submitted to the court.

Prior to deciding the issue of attorney's fees, we will consider the issue of whether the judgment lien of Grand, upon the property exempted from bankruptcy, survived the bankruptcy proceeding permitting Grand to foreclose on the property.

In light of this court's recent decision in Evans v. Young, 135 Ariz. 447, 661 P.2d 1148 (App.1983), we find it unnecessary to address the issues of waiver, estoppel or res judicata. There is no question that the subject property was properly homesteaded by the Sirignanos; in fact, the parties have so stipulated in their Joint Pretrial Statement:

D. The defendants homesteaded the property which is the subject of this action on April 16, 1975, one year prior to filing of the bankruptcy.

The issue presented to the court in Evans was whether a judgment lienholder may foreclose against homestead property without following the appraisal procedure enumerated in A.R.S. § 33-1105. In addressing that issue, the court discussed the relationship between the judgment lien statute, A.R.S. § 33-964, the foreclosure statute, A.R.S. § 12-1635(B) ¹, and the homestead statutes, A.R.S. §§ 33-1101-1107. We feel that analysis is dispositive of the case at bar.

A.R.S. § 33-964 reads in pertinent part:

A. Except as provided in §§ 33-729 and 33-730, from and after the time of recording as provided in § 33-961, a judgment shall become a lien for a period of five years from the date it is given upon all real property of the judgment debtor except real property exempt from execution, including the interest in the homestead, in the county where the judgment is recorded, whether the property is then owned by the judgment debtor or is later acquired.

B. Any person entitled thereto may declare a homestead on real property as provided by law after the lien has attached to the real property and may thereafter hold the homestead interest in the real property free and clear of the judgment lien. (Emphasis added)

The plaintiff in Evans claimed that the use of "homestead interest" rather than "homestead" indicated that only the statutorily fixed dollar amount of the homestead exemption was protected from execution and not the property itself. The court noted, however, that the language used in the homestead statutes (A.R.S. §§ 33-1101 to 1107) "consistently suggests that 'homestead' is a unit of property not a severable dollar amount." Evans, supra, 661 P.2d at pp. 1152. The Evans court further noted that its conclusion that the property itself was exempt was supported by numerous cases. See, e.g., Seaney v. Molling, 62 Ariz. 81, 153 P.2d 532 (1944) (assignee of all property not exempt from execution did not get title to homestead property even though declaration of homestead filed nearly five years after assignment); Schreiber v. Hill, 54 Ariz. 345, 95 P.2d 566 (1939) (property was exempt from execution even though declaration of homestead filed just before conveying property, apparently for express purpose of passing clear title to the property); Wheeler Perry Co. v. Mortgage Bond Co., 41 Ariz. 247, 17 P.2d 331 (1932) (filing of homestead declaration freed property of prior judgment lien so that a subsequent mortgage executed by homesteaders had priority); Security Trust & Savings Bank v. McClure, 29 Ariz. 325, 241 P. 515 (1925) (judgment lien obtained prior to filing of homestead declaration did not revive on sale of homestead property to third party). See also, Union Oil Co. v. Norton-Morgan Commercial Co., 23 Ariz. 236, 202 P. 1077 (1922).

Having considered the applicable statutory and case law, this court, in Evans, concluded:

that a judgment lien does not attach to the excess value of the homestead and that a judgment creditor must first invoke the statutory appraisal procedure to reach the excess. (Emphasis added)

Evans, supra, 661 P.2d at p. 1153. The fact that the lien had attached prior to the homestead filing does not preserve any lien rights to amounts in excess of the homestead exemption. This is evident in reading A.R.S. § 33-1103, which provides:

A. The homestead, from the date of recording the claim, is exempt from attachment, execution and forced sale, and from sale under a judgment or lien existing prior to recording the claim, except:

1. A duly executed mortgage, deed of trust, or security agreement on the mobile home on which the homestead is filed.

2. A lien for labor or material that attached before the property was claimed as a homestead.

B. A sale as described in subsection A and not excepted by ...