National Union Fire Ins. Co. v. Greene

• Decision Date: 26 January 1999
• Docket Number: No. 1 CA-CV 98-0051.,1 CA-CV 98-0051.
• Citation: 195 Ariz. 105,985 P.2d 590
• Parties: NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA., Plaintiff-Appellant, v. Charles GREENE, Defendant-Appellee.
• Court: Arizona Court of Appeals

985 P.2d 590

195 Ariz. 105

NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA., Plaintiff-Appellant, v. Charles GREENE, Defendant-Appellee.

No. -0051.

Court of Appeals of Arizona, Division 1, Department D.

January 26, 1999.

Review Denied September 21, 1999.

Turley, Swan & Childers, P.C. by Christopher J. Bork, Phoenix, Attorneys for Plaintiff-Appellant.

David Wm. Engelman, P.C. by David Wm. Engelman, Phoenix, Attorneys for Defendant-Appellee.

OPINION

WEISBERG, Presiding Judge.

¶ 1 May a creditor with a valid judgment against one spouse from a non-community property state satisfy that judgment from the community property of both spouses when they move to Arizona after entry of the judgment? Applying the Full Faith and Credit Clause of the United States Constitution, we hold that a creditor may, and accordingly reverse the superior court's order quashing the writs of garnishment in this case.

FACTS AND PROCEDURAL HISTORY

¶ 2 The defendant, Charles Greene ("Charles") and his wife ("Agnes") have been married since 1968. In 1983, Charles invested in a limited partnership whose principal asset was real estate located in Cincinnati, Ohio. The general partner was located in Dallas, Texas. Charles's capital contribution was to be $78,125. He paid $6,125 in cash and signed a promissory note for the remaining $72,000. The note provided that it was to "be governed by the laws of the State of New York." At the time Charles signed the note, both he and Agnes were Texas residents.

¶ 3 National Union Fire Insurance Company of Pittsburgh, Pennsylvania ("National Union"), guaranteed Charles's payment of the note. When Charles defaulted on the note, National Union made payment under the bond. It then filed suit against Charles in New York in 1987. Charles failed to appear, and a default judgment in the amount of $24,943.58 was entered against him on March 8, 1988.

¶ 4 When the suit was filed, Charles was working and living in Pittsburgh, but he maintained his Texas residence. Agnes was also a Texas resident at that time. Agnes was not served, did not become a party to the suit, and was not named in the judgment. Charles subsequently moved to Arizona in March 1993; Agnes joined him in Arizona in April 1997. ¶ 5 As of August 15, 1997, the outstanding amount of the judgment was $46,131.87. On August 18, 1997, National Union domesticated the New York judgment in Arizona pursuant to the Revised Uniform Enforcement of Foreign Judgments Act, Arizona Revised Statutes Annotated ("A.R.S.") sections 12-1701 to 12-1708. National Union next obtained writs of garnishment against Charles's employer and the Wells Fargo Bank into which Charles had deposited his wages.

¶ 6 In September 1997, "[t]he community of Charles E. Greene and Agnes Greene ... and each of them individually" moved to quash the writs of garnishment. Following briefing and oral argument, the court granted the motion. After entry of a formal order quashing the writs of garnishment, National Union filed this appeal. We have jurisdiction under A.R.S. section 12-2101(F)(3), which allows an appeal from an order "[d]issolving or refusing to dissolve an execution or garnishment."

DISCUSSION

¶ 7 Arizona law provides that "[t]he community property is liable for a spouse's debts incurred outside of this state during the marriage which would have been community debts if incurred in this state." A.R.S. § 25-215(C). The Greenes agree that, had Charles incurred the underlying debt in Arizona, it would have been a community obligation and their community property would be liable for it.¹

A. Arizona Joinder Law Cannot Be Imposed on a New York Judgment

¶ 8 The Greenes argue that National Union may not enforce the judgment against their community property because it did not join Agnes in the New York suit. They maintain that, under A.R.S. section 25-215(D),² community property cannot be liable for a judgment unless both spouses are joined in the underlying suit. National Union responds that it could not have joined Agnes in the suit under New York law, a point the Greenes concede. It asserts that the New York judgment is valid and that the Arizona courts must honor it under the Full Faith and Credit Clause of the Constitution of the United States, Article IV, section 1. See Oyakawa v. Gillett, 175 Ariz. 226, 854 P.2d 1212 (App.1993)

.

¶ 9 We agree with National Union that its failure to comply with A.R.S. section 25-215(D) in the New York law suit is not a proper ground to refuse to honor the New York judgment. Under full faith and credit, a foreign judgment may not be attacked on the basis that it does not comply with the law of the state in which the judgment creditor seeks to enforce it. Oyakawa, 175 Ariz. at 231, 854 P.2d at 1217.

[T]he judgment of a state court should have the same credit, validity, and effect, in every other court in the United States, which it had in the state where it was pronounced, and ... whatever pleas would be good to a suit thereon in such state, and none others, could be pleaded in any other court in the United States.

Id. at 231-32, 854 P.2d at 1217-18 (quoting Stephens v. Thomasson, 63 Ariz. 187, 194, 160 P.2d 338, 341 (1945), and Williams v. North Carolina, 317 U.S. 287, 293-94, 63 S.Ct. 207, 87 L.Ed. 279 (1942)). When the suit was filed, this case had no connection with Arizona, and a New York court would not refuse to recognize the judgment just because National Union did not comply with Arizona law. Therefore, under full faith and credit, Arizona courts must give it the same recognition.

¶ 10 The Greenes nevertheless attempt to distinguish this case from Oyakawa. They argue that under Oyakawa the enforcing court in Arizona must determine which state's laws govern the underlying judgment and apply those laws to determine the validity of the judgment creditor's attempt to satisfy the judgment from the assets of an unnamed spouse. But this argument begs the question: community property is foreign to New York law, which therefore does not provide for attaching community assets.

¶ 11 Moreover, the Greenes' argument misinterprets Oyakawa. In Oyakawa we rejected the appellants' argument that Arizona could refuse to enforce a California judgment against the community where the plaintiffs had not complied with Arizona law in the California suit because doing so would violate full faith and credit. 175 Ariz. at 231-32, 854 P.2d at 1217-18. Similarly, the superior court here could not refuse to recognize the New York judgment on the ground that National Union did not comply with the joinder requirement of A.R.S. section 25-215(D) in the New York court. An Arizona court may not impress Arizona procedural law upon a foreign judgment and refuse to recognize that judgment merely because Arizona law was not followed in obtaining it. See Chester James Antieau and William J. Rich, 3 Modern Constitutional Law § 43.57, at 126 (1997) ("a state cannot refuse to enforce a judgment on grounds that a statute of limitations had run by its laws even though the judgment was lawfully obtained by virtue of a longer statute of limitations in the rendering state"). Consequently, the New York judgment is valid and Arizona courts must recognize it.

¶ 12 The Greenes' argument is based on a misunderstanding of full faith and credit. Recognizing a foreign judgment and enforcing it are two different concepts:

A foreign judgment is recognized ... when it is given the same effect that it has in the state where it was rendered with respect to the parties, the subject matter of the action and the issues involved. A foreign judgment is enforced when, in addition to being recognized, a party is given the affirmative relief to which the judgment entitles him.

Sainz v. Sainz, 36 N.C.App. 744, 245 S.E.2d 372, 375 (1978) (quoting Restatement (Second) of Conflict of Laws, § 93, Introductory Note (1971)). The Full Faith and Credit Clause does not make the laws of the rendering state applicable in enforcing the judgment: "The methods by which a judgment of another state is enforced are determined by the local law of the forum." Id. In Sainz, the North Carolina Supreme Court refused to enforce that portion of a New York decree ordering the husband to specifically perform the payment of child support because the North Carolina constitution forbids imprisonment for debt. See also Huntington Nat'l Bank v. Sproul, 116 N.M. 254, 861 P.2d 935, 947 (1993)

(a judgment domesticated in New Mexico "is entitled to the same procedures and remedies as a judgment originating in this state"). Thus, in enforcing the New York judgment, we look to the laws of Arizona and hold that section 25-215(C) makes the community property liable for the judgment because the underlying debt would have been a community obligation if incurred in Arizona.

B. Due Process Does Not Require Joining Both Spouses for a Judgment against the Marital Community

¶ 13 The Greenes also argue that, as a matter of due process, a plaintiff must join both spouses in the foreign jurisdiction in order to obtain a valid judgment against the marital community in Arizona. They cite Eng v. Stein, 123 Ariz. 343, 599 P.2d 796 (1979), and Vikse v. Johnson, 137 Ariz. 528, 672 P.2d 193 (App.1983). They point out that, under the Full Faith and Credit Clause, Arizona need not enforce a sister state's judgment if the defendant's due process rights were violated. Oyakawa, 175 Ariz. at 228, 854 P.2d at 1214; Cho v. American Bonding Co., 190 Ariz. 593, 599, 951 P.2d 468, 474 (App.1997). But we conclude that due process does not necessarily require joining both spouses to obtain a valid judgment against the marital community; and that Eng does not hold to the contrary. ¶ 14 In Eng, the trial court entered judgment against both the husband and wife individually and against the marital community, despite the plaintiffs having sued only the husband. The supreme court invalidated the judgment to the extent it purported to bind the wife and the...