Pac. Nutritional Inc. v. Shannon, 1 CA-CV 0 6-0627
| Decision Date | 20 April 2010 |
| Docket Number | 1 CA-CV 0 6-0627 |
| Parties | PACIFIC NUTRITIONAL, INC., a Washington corporation, Plaintiff/Appellant, v. JOHNNY SHANNON and DARLENE D. SHANNON, husband and wife; JAMES A. ZEMEL and MARI ZEMEL, husband and wife, Defendants/Appellees. |
| Court | Arizona Court of Appeals |
NOTICE: THIS DECISION DOES NOT CREATE LEGAL PRECEDENT AND MAY NOT BE CITED EXCEPT AS AUTHORIZED BY APPLICABLE RULES. See Ariz. R. Supreme Court 111(c); ARCAP 28(c); Ariz. R. Crim. P. 31.24
(Not for Publication-Rule 28, Arizona Rules of Civil Appellate Procedure
The Honorable Robert C. Houser, Judge (Retired)
AFFIRMED
Clark Hill, PLC Scottsdale
By Ryan J. Lorenz
Attorneys for Plaintiff/Appellant
Law Offices of David William West, PC Maricopa
By David W. West
Attorneys for Defendants/Appellees Shannon
Mariscal Weeks McIntyre & Friedlander, PA Phoenix
By Charles H. Oldham
Timothy J. Thomason
Attorneys for Defendants/Appellees Zemel
¶ Pacific Nutritional, Inc. ("Pacific") appeals the grant of summary judgment to Johnny and Darlene Shannon and James and Mari Zemel (collectively, "Defendants"). For the following reasons, we affirm.
¶ The Shannons have been married for over forty-five years and have lived in Arizona since 1995. Until recently, they owned a home in Arizona (the "Jenan property") that was community property.
¶ In 1999, Johnny personally guaranteed a promissory note signed by Mia Lundin and Robin Marzi, agreeing to pay Pacific $50,517.84 plus interest. Darlene did not sign the guaranty or the promissory note. Thereafter, Pacific filed a complaint in the Clark County Superior Court in the State of Washington against Johnny, 2 alleging he breached the guaranty agreement. Darlene was not named in the complaint. Johnny signed a settlement agreement regarding the Washington litigation on June 27, 2000. On December 20, 2000, Pacific obtained a default judgment against Johnny and the otherdefendants for $51,812.39, plus interest, attorneys' fees and costs ("Washington judgment"). Pacific domesticated the Washington judgment in Arizona. See Ariz. Rev. Stat. ("A.R.S.") §§ 12-1701 to-1708 (2003) (Revised Uniform Enforcement of Foreign Judgments Act).
¶ In 2005, Pacific filed a complaint in the Maricopa County Superior Court against defendants, seeking to foreclose the judgment lien on the Jenan property to recover the balance due under the Washington judgment. 3See A.R.S. § 33-964(A) (Supp. 2009) (). The Shannons filed a motion to dismiss or, in the alternative, for summary judgment, arguing the Washington judgment was not enforceable against their community property. The Zemels joined in that motion. Pacific cross-moved for partial summary judgment, contending the Washington judgment was premised on the settlement agreement, not the guaranty, and was therefore a community debt.
¶ The superior court granted summary judgment to Defendants and dismissed Pacific's complaint. Pacific timely appealed. We have jurisdiction pursuant to A.R.S. § 12-2101(B) (2003).
¶ We review a grant of summary judgment de novo. L. Harvey Concrete, Inc. v. Argo Const. & Supply Co., 189 Ariz. 178, 180, 939 P.2d 811, 813 (App. 1997). Summary judgment is appropriate when no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law. Ariz. R. Civ. P. 56(c). We will affirm a grant of summary judgment if it is correct for any reason. See City of Tempe v. Outdoor Sys., Inc., 201 Ariz. 106, 111, 1 14, 32 P.3d 31, 36 (App. 2001) (citation omitted).
¶ The record does not support Pacific's claim that the Washington judgment was based on Johnny's breach of the settlement agreement. The Washington judgment was a default judgment, which is limited to the allegations made in the complaint. Columbia Val. Credit Exch., Inc. v. Lampson, 533 P.2d 152, 154 (Wash. Ct. App. 1975); S. Ariz. Sch. for Boys, Inc. v. Chery, 119 Ariz. 277, 282-83, 580 P.2d 738, 743-44 (App. 1978). The complaint in the Washington litigation alleged Johnny breached the guaranty agreement, and it sought damages for that breach.
¶ Similarly, Pacific's affidavit of default references only the guaranty. Pacific never amended its complaint, filed asecond action based on breach of the settlement agreement, or placed before the court the settlement agreement such that it arguably could have been merged into the underlying action. The Washington judgment refers only to Pacific's pleadings (i.e., the complaint) and an affidavit of Darien Loiselle, which relates exclusively to the original promissory note and the guaranty. Nothing in the record supports Pacific's claim that the Washington default judgment was based on a breach of the settlement agreement, and no genuine issue of material fact exists regarding that point.
¶ Under Arizona law, one spouse "may contract debts and otherwise act for the benefit of the community." A.R.S. § 25-215(D) (2007). This power, however, is subject to certain exceptions. Id.; Rackmaster Sys., Inc. v. Maderia, 219 Ariz. 60, 63, 1 12, 193 P.3d 314, 317 (App. 2008). Specifically:
A.R.S. § 25-214(C)(2) (2007). This statute has been interpreted as requiring both spouses to sign a guaranty to bind thecommunity. Vance-Koepnick v. Koepnick, 197 Ariz. 162, 163, 1 5, 3 P.3d 1082, 1083 (App. 1999) (citation omitted).
¶ Washington law contains no similar restriction regarding guaranty agreements. G.W. Equip. Leasing, Inc. v. Mt. McKinley Fence Co., Inc., 982 P.2d 114, 116 (Wash. Ct. App. 1999). Under Washington law, both spouses are not required to sign a guaranty agreement to bind the community. See Wash. Rev. Code § 26.16.030 (2009) ().
¶ We disagree with Pacific's contention that Washington law governs the guaranty as well as the current enforcement action. In G.W. Equipment, a case with similar facts, the Washington court applied Arizona law where an Arizona husband signed a guaranty contract in Washington. 982 P.2d at 118. Specifically, Edward Lindstrom personally guaranteed a lease agreement that stated Washington law would apply. Id. at 115. After a default on the lease agreement, the creditor sued the defaulting parties, as well as Lindstrom and his "marital community." Id. The court noted that, unlike Washington, Arizona requires both spouses to sign a guaranty to bind the marital community. Id. at 116 (comparing Wash. Rev. Code. § 26.16.030 and A.R.S. §§ 25-214,-215). In analyzing which law to apply, the court determined that, when community property is at issue, the state where the spouses reside typically has themost significant interest. Id. at 117 (citing Potlatch No. 1 Fed. Credit Union v. Kennedy, 459 P.2d 32 (Wash. 1969)). The court concluded that Arizona law applied, explaining:
Washington courts apply Washington law to determine the rights and authority of Washington spouses to enter into contracts affecting their community property. For Washington courts to conclude that residents of other community property states are bound by Washington community property law as well, rather than the law of their own state, would be illogical and unjust. The Arizona Legislature has enacted a statute which prohibits one spouse from entering into guaranty contracts without the other spouse's consent. Arizona spouses, therefore, may not alter the rights and liabilities of their marital communities, irrespective of the protective policies of their domiciliary states, by choosing to contract in another forum and contractually consenting to the application of that forum's laws.
G.W. Equip., 982 P.2d at 117-18.
¶ In the case at bar, the Shannons are Arizona residents, and the Jenan property is located here. G.W. Equipment thus directs the application of Arizona law.4 BecauseArizona requires both spouses to sign a guaranty to bind the community, there is no community obligation or debt resulting from the guaranty signed solely by Johnny.5
¶ The facts here are similar to Rackmaster, where we held that a judgment creditor could not garnish a community bank account based on a foreign judgment entered against one spouse arising from a guaranty. 219 Ariz. at 61, 1 1, 193 P.3d at 315. There, the creditor obtained a default judgment in Minnesota against Patrick Maderia based on a guaranty Patrick alone signed. Id. at 1 2. Patrick was married to Jane Maderia, and the couple resided in Arizona. Id. at 1 4. Jane was not a party to the Minnesota action, nor was she named in the judgment. Id. at 1 2. The creditor filed an affidavit of foreign judgment in Arizona and attempted to garnish a community bank account. Id. at 1 4. We concluded the judgment creditorcould not do so, reasoning that A.R.S. § 25-214(C)(2) requires both spouses to sign a guaranty in order to bind the community. Id. at 63-65, 11 13, 18, 26, 193 P.3d at 317-319. Accordingly, the foreign judgment could not be enforced against community assets. Id. at 65, 1 26, 193 P.3d at 319.
¶ Pacific argues Rackmaster should be overruled because "it goes too far in construing A.R.S. § 25-214(C)(2)." We disagree. Rackmaster analyzed the plain wording of A.R.S. § 25-214(C)(2), cited previous Arizona cases for support, and concluded the statute is substantive in nature.6Id. at 63 11 11, 14-15, 193 P.3d at 317 ().
¶ Pacific also argues Rackmaster violates the Full Faith...
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