Judson C. Ball Revocable Trust v. Phx. Orchard Grp. I, LP

Decision Date04 January 2018
Docket NumberNo. 1 CA-CV 16-0557,1 CA-CV 16-0557
PartiesJUDSON C. BALL REVOCABLE TRUST, Plaintiff/Counter-Defendant/Cross-Defendant/Appellant, v. PHOENIX ORCHARD GROUP I, LP, et al., Defendant/Counter-Claimant/Appellee, PJI-2 COLLECTION LLC, Defendant/Counter-Defendant/Cross-Claimant/Appellee.
CourtArizona Court of Appeals

NOTICE: NOT FOR OFFICIAL PUBLICATION. UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.

Appeal from the Superior Court in Maricopa County

No. CV2015-011768

The Honorable Dawn M. Bergin, Judge

AFFIRMED IN PART; JURISDICTION ACCEPTED, RELIEF DENIED

COUNSEL

Hovore Law, PLLC, Scottsdale

By F. Thomas Hovore

Counsel for Plaintiff/Counter-Defendant/Cross-Defendant/Appellant

Freeman Law PLLC, Scottsdale

By Shelton L. Freeman, Jason M. Venditti

Counsel for Defendant/Counter-Claimant/Appellee

Gallagher & Kennedy, P.A., Phoenix

By John P. Flynn, Hannah H. Porter

Counsel for Defendant/Counter-Defendant/Cross-Claimant/Appellee
MEMORANDUM DECISION

Presiding Judge Lawrence F. Winthrop delivered the decision of the Court, in which Judge Diane M. Johnsen and Judge Maria Elena Cruz joined.

WINTHROP, Presiding Judge:

¶1 Judson C. Ball Revocable Trust (the "Trust") appeals from the declaratory judgment in favor of Phoenix Orchard Group I, LP and Phoenix Orchard Group II, LP (collectively, "POG"); and the denial of its motion to stay release of rescission payments to the Trust's judgment creditor, PJI-2 Collection, LLC ("PJI-2"). For the following reasons, we affirm the declaratory judgment and accept jurisdiction, but deny relief from the denial of the Trust's motion to stay.

FACTS AND PROCEDURAL HISTORY

¶2 In October 2015, the Trust brought this action pursuant to the Arizona Securities Act, alleging two counts of securities fraud against POG and others in connection with the Trust's investment in citrus orchards in California's San Joaquin Valley.1 In its complaint, the Trust, which still owned the securities it purchased, demanded damages or rescission. As a part of the Trust's claim for rescission it tendered the securities to POG.2

POG accepted the Trust's tender, and counterclaimed for a declaratory judgment that acceptance of the tender created a valid, mutually binding rescission obligation, and that a charging order3 be entered against the Trust in an unrelated case (the "Charging Order") that any rescission payments owed to the Trust be paid to PJI-2.4

¶3 The superior court granted POG's application for declaratory relief, ruling that rescission is the sole remedy available to a purchaser who still owns securities and is suing under A.R.S. § 44-2001(A) (2013). On this basis, the court ordered POG to deposit with the clerk of the court the consideration paid by the Trust for the securities (plus interest, costs, and reasonable attorneys' fees). On May 16, 2016, POG deposited with the clerk rescission payments totaling $776,725.68.

¶4 In granting POG's application for declaratory relief, the court also found the rescission payments could be released to PJI-2 pursuant to the Charging Order. The Trust did not challenge PJI-2's rights as a judgment creditor or the enforceability of the Charging Order, but it moved to stay release of the payments to PJI-2 pending the Trust's "intended appeal" from the underlying ruling. The superior court denied the Trust's request to stay enforcement of the Charging Order, finding that the Trust's request was "extraordinary" because the court "may, in the future, enter a Rule 54(b) final judgment that [the Trust] would appeal[,]" and if overturned on appeal, "PJI-2 will be legally obligated to return the funds."

¶5 Accordingly, the superior court ordered the clerk of the court to release the rescission payments to PJI-2 consistent with the Charging Order.

¶6 In the meantime, the Trust moved for entry of a final judgment pursuant to Arizona Rule of Civil Procedure 54(b) regarding the superior court's grant of rescission for Counts One and Two. The courtgranted the motion as to Count One, and entered a final judgment in favor of POG "on the First Claim for Relief in [its] Counterclaim: Declaratory Judgment—Acceptance of Tender and Demand for Rescission." The Trust timely appealed from (1) the August 19, 2016 final judgment (the "August Judgment") and (2) "the Court's issuance of the funds to a third party that were lodged with the Clerk for the benefit of the Trust."5

ANALYSIS
I. The August Judgment

¶7 We have jurisdiction of the Trust's appeal from the August Judgment pursuant to A.R.S. § 12-2101(A)(1) (2016). See Brumett v. MGA Home Healthcare, L.L.C., 240 Ariz. 420, 426, ¶ 4 (App. 2016).

A. The Plain Language of A.R.S. § 44-2001

¶8 The Trust argues A.R.S. § 44-2001 does not limit a purchaser's remedy to rescission, but allows a purchaser to seek rescission and damages, and to defer any election of remedies until the time of trial. We review questions of statutory interpretation de novo. E. Vanguard Forex, Ltd. v. Ariz. Corp. Comm'n, 206 Ariz. 399, 406, ¶ 19 (App. 2003). When interpreting a statute, we give "words their ordinary meaning unless the context of the statute requires otherwise." Hirsch v. Ariz. Corp. Comm'n, 237 Ariz. 456, 466, ¶ 38 (App. 2015) (citing Canon Sch. Dist. No. 50 v. W.E.S. Constr. Co., Inc., 177 Ariz. 526, 529 (1994)). See also Mercy Healthcare Ariz., Inc. v. Ariz. Health Care Cost Containment Sys., 181 Ariz. 95, 98 (App. 1994) ("We look primarily to the language of the statute and give effect to the terms according to their commonly accepted meaning.").

¶9 Our goal in "interpreting a statute is to give effect to the legislature's intent." Blevins v. Gov't Emps. Ins. Co., 227 Ariz. 456, 459, ¶ 13 (App. 2011) (citing Blum v. State, 171 Ariz. 201, 205 (App. 1992)). "When the language of a statute is clear and unambiguous, a court should not look beyond the language." Cundiff v. State Farm Mut. Auto. Ins. Co., 217 Ariz. 358, 360, ¶ 8 (2008). Although the Arizona Securities Act is a "remedialmeasure for the protection of the public[,]" it may be liberally construed only if a provision's language is ambiguous. Sell v. Gama, 231 Ariz. 323, 325, ¶ 8 (2013) (quoting 1951 Ariz. Sess. Laws, ch. 18, § 20 (1st Reg. Sess.)). See also Caruthers v. Underhill, 235 Ariz. 1, 10, ¶ 38 (App. 2014) (discussing A.R.S. § 44-2002). Section 44-2001(A) is not ambiguous, thus, we construe it according to its ordinary meaning.

¶10 Section 44-2001(A) provides:

A sale or contract for sale of any securities to any purchaser in violation of § 44-1841 or 44-1842 or [§§ 44-1991 through 2000] is voidable at the election of the purchaser, and the purchaser may bring an action in a court of competent jurisdiction to recover the consideration paid for the securities, with interest, taxable court costs and reasonable attorney fees, less the amount of any income received by dividend or otherwise from ownership of the securities, on tender of the securities purchased or the contract made, or for damages if the purchaser no longer owns the securities.

A.R.S. § 44-2001(A) (emphasis added.)

¶11 The language of A.R.S. § 44-2001 is clear—a purchaser of securities must seek rescission if it owns the securities, but, if it does not, it may seek damages. See Bullard v. Garvin, 1 Ariz. App. 249, 251 (1965) (finding that if A.R.S. § 44-2001 were to be construed to "permit a purchaser of securities sold in violation of the Act to sell the securities and still sue for damages . . . [it would] negate the supposed purpose of the legislature in requiring a strict tender").

B. Legislative History

¶12 This court generally does not review or refer to legislative history if the language of the subject statute is clear; however, we do so here only to address the issues raised by the Trust. The Trust suggests that, by not interpreting A.R.S. § 44-2001(A) to allow rescission and/or damages, the superior court essentially permitted POG to "buy" its way out of a securities fraud claim. Specifically, the Trust urges that we interpret A.R.S. § 44-2001(A) more liberally to provide a defrauded purchaser or a purchaser of unregistered securities, the same opportunity to seekrescission and/or damages as provided to a defrauded seller under A.R.S. § 44-2002(A).6

¶13 The Trust acknowledges that while A.R.S. § 44-2002(A) expressly grants a seller the right to sue for damages, A.R.S. § 44-2001(A) does not contain the same express grant to the purchaser. The Trust, however, suggests the Arizona Securities Act drafters intended the same remedies for sellers be applied to purchasers. This contention is not supported by the legislative history.

¶14 The legislature has amended both statutes twice since original enactment, but not in ways material to this issue. See 1993 Ariz. Sess. Laws, ch. 257, § 5 (1st Reg. Sess.); 2000 Ariz. Sess. Laws, ch. 108, §§ 41-42 (2d Reg. Sess.). This creates a "strong inference" the legislature did not intend to incorporate the seller's damages remedy under A.R.S. § 44-2002(A) into the purchaser's damages remedy under A.R.S. § 44-2001(A). See Cemex Constr. Materials S., LLC v. Falcone Bros. & Assocs., Inc., 237 Ariz. 236, 241, ¶ 18 (App. 2015). Accordingly, we will not read into A.R.S. § 44-2001(A) what the legislature has omitted or excluded. See Stambaugh v. Killian, 242 Ariz. 508, 511, ¶ 15 (2017) (citing City of Flagstaff v. Mangum, 164 Ariz. 395, 398 (1990) (quotations omitted)).

C. Case Law

¶15 The Trust contends Arizona case law supports its argument that A.R.S. § 44-2001 allows a purchaser to seek both rescission and damages. In large part, the authorities relied on by the Trust address the remedies available to (1) purchasers who sold their securities before filing for relief; (2) purchasers who, like the Trust, assert other distinct causes ofaction; or (3) sellers. For example, the Trust cites Wash. Nat'l Corp. v. Thomas to support its argument that the court should not limit its remedy to rescission, if rescission cannot make the Trust whole. 117 Ariz....

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