Premier Financial Services v. Citibank (Arizona)
| Decision Date | 27 July 1995 |
| Docket Number | No. 1,CA-CV,1 |
| Citation | 912 P.2d 1309,185 Ariz. 80 |
| Parties | PREMIER FINANCIAL SERVICES, Judgment Creditor-Appellee, v. CITIBANK (ARIZONA) and Jacque Rosholm, Garnishees-Appellants. 93-0096. |
| Court | Arizona Court of Appeals |
Southwest Savings and Loan Association, F.A. ("Southwest") obtained a judgment on a garnishment for $86,461.40 against garnishees Citibank of Arizona ("Citibank") and Jacque Rosholm. This judgment satisfied a previously obtained deficiency judgment by Southwest against Jacque's parents, Harry and Margie Rosholm, in which the trial court had found that certain funds held by Jacque Rosholm had been fraudulently conveyed to her by her parents. The trial court also concluded that Citibank had been put on notice regarding the questionable ownership of the funds. Accordingly, it entered judgment against Citibank because the bank had paid over the funds to Jacque, its then account holder of record, rather than holding the funds until the court determined who was entitled to the funds. Both Jacque Rosholm and Citibank appeal the garnishment judgment obtained against them by Southwest. 1 Jacque raises the following issues on appeal: (1) whether the evidence on the issue of fraudulent conveyance was sufficient to support the judgment against her; (2) whether the trial court erred in denying her motion to reopen the hearing to produce additional evidence; and (3) whether the trial court abused its discretion in rejecting a stipulation of the parties that Jacque had paid Citibank's attorney's fees.
The sole issue Citibank raises in its appeal is whether the trial court erred in concluding that Citibank was liable for failing to hold the funds in question. We affirm the trial court's judgment against Jacque Rosholm but reverse the judgment against Citibank.
The underlying cause of action involved the judicial foreclosure of a deed of trust Southwest had received from Harry and Margie Rosholm for refinancing purposes. In a formal judgment filed April 4, 1991, the trial court entered a decision on the debt, ordered foreclosure and sale of the refinanced property, and allowed a deficiency judgment for any amount not satisfied from the sale proceeds.
The garnishment proceedings that are the subject of this appeal stem from Southwest's attempts to collect the deficiency judgment. Southwest initially served a writ of garnishment on Citibank in November of 1991. At that time, Citibank informed Southwest's attorneys that Harry and Margie Rosholm had recently closed their accounts. Southwest then dismissed the garnishment and subpoenaed Citibank's records for Harry and Margie Rosholm. These records established that a $100,000 certificate of deposit had been maintained in the names of Harry and Margie Rosholm from July of 1987 until February 5, 1991, immediately prior to the time that the trial court had made its ruling to allow a deficiency judgment against the Rosholms. These Citibank records did not reveal, however, what had happened to the certificate of deposit.
Southwest's attorney called to inquire as to what had happened to the certificate of deposit. A Citibank employee, Jackie Janic, responded that it still had the certificate. Southwest then filed another garnishment proceeding against Citibank. After receiving the second writ of garnishment, Ms. Janic called Southwest's attorney and confirmed that it was holding the certificate of deposit. Ms. Janic called back later and stated that Harry and Margie Rosholm were merely contingent beneficiaries on the certificate of deposit and that the trustee who had held the present rights to the account was someone else. Ms. Janic declined to tell Southwest the name of the trustee on the certificate.
Southwest subsequently refused to dismiss the garnishment and required Citibank to file an answer. After Citibank answered that it was not indebted to Harry and Margie Rosholm, Southwest filed its objection on April 10, 1991 and requested a hearing. Southwest discovered that Citibank had voided the original certificate of deposit on February 5, 1991 and reissued it as a trust account, listing Jacque Rosholm as trustee for beneficiaries Harry and Margie Rosholm. Then, on April 13, 1992, while the writ of garnishment against Citibank was still pending, Jacque requested that Citibank allow her to withdraw all the money from the certificate of deposit. Jacque's withdrawal of the funds occurred a few months short of the five-year maturity date and, therefore, she incurred a penalty of almost $2,000 for the early withdrawal.
Southwest also obtained a writ of garnishment against Jacque Rosholm and attempted to serve her. On April 9, 1992, believing that he had spotted Jacque and that she was trying to evade service of process, a process server left the papers at the back door of her veterinary clinic and called out that he was serving her. Although the woman served was not Jacque, the papers which had been served eventually came to Jacque's attention. On April 17, 1992, she filed an answer to the writ of garnishment, avowing that she was not indebted to her parents, the judgment debtors. In her answer, Jacque did not question the sufficiency of service upon her and indicated that she had been served on April 13, 1992.
Southwest filed an objection to Jacque's answer and requested a consolidated hearing for the two garnishment proceedings. This request was granted by the trial court. Southwest deposed Jacque two days before the hearing. Jacque sought no continuance of the hearing and proceeded representing herself.
At the hearing, Jacque presented her own testimony and that of her father, attempting to establish that the money in the certificate of deposit was rightfully hers and had not been fraudulently conveyed to her by her parents. She testified that the money in the certificate was money that she had given to her parents in 1984, when she was diagnosed with cancer. She stated that she had wanted her parents to be able to make use of the money both on her behalf and after her death and thought this would be easier if the money was in their name. She also contended that the later change in the designation on the account had nothing to do with the pending lawsuit against her parents. Instead, the change had been made both because her parents were moving and she needed to have easy access to the money, and because she had recently learned that she could achieve the result of making the money accessible to her parents at her death by setting the account up as a trust account. Additionally, Jacque testified that she had loaned her parents in excess of $100,000 over the past few years, and the evidence demonstrated that the designation of the certificate in her name was a repayment of that debt.
At the hearing, Jacque also sought to counter any impression that her withdrawal of the money in the certificate was in response to the writ of garnishment against her. Jacque presented testimony evidencing that she had mistakenly stated that she had become aware of the garnishment on April 13, 1992, because she had not actually seen the service of process until at least a couple of days later.
Jacque further denied that she had known about the writ of garnishment when she withdrew the funds. She argued that there was no proof, even if she had received the writ on April 13, 1992, that she had received it before she took the money out of the bank account. Finally, Jacque attempted to prove at the hearing that she had cashed in the certificate of deposit despite the substantial penalty fee because she required the money to complete a real estate transaction.
The trial court concluded that Southwest had met its burden of proving the elements of a fraudulent conveyance pursuant to Ariz.Rev.Stat.Ann. ("A.R.S.") section 44-1004 by clear and satisfactory evidence. The court also found that the money deposited in the certificate of deposit in July of 1987 had belonged to the judgment debtors, Harry and Margie Rosholm, and that the transfer to Jacque had been made with actual intent to hinder, delay or defraud Southwest in violation of the statute.
In making this determination, the trial court relied upon the following "badges of fraud": 2
The transfer was to Judgment Debtors' daughter. Although "insider" as used in A.R.S. § 44-1004(B)(1) is not defined, Jacque Rosholm as Judgment Debtors' daughter certainly is the equivalent of an "insider" as that term is commonly used.
Judgment Debtors had been sued prior to the transfer.
The transfer occurred shortly before the trial court ruled on the parties' motions for summary judgment.
The transfer rendered Judgment Debtors presumptively insolvent. See A.R.S. § 44-1002(B).
On the same day Jacque Rosholm had received notice of the service of the writ of garnishment, the funds were withdrawn and placed beyond the reach of Judgment Creditor. In withdrawing the funds prior to maturity of the CD account, a substantial penalty was incurred.
Thus, the court found that the evidence presented by Jacque and her father was "insufficient to overcome this inference [established by the 'badges of fraud'] of actual intent to defraud, hinder or delay creditors."
As to Citibank, the trial court found that its receipt of information from Southwest's attorney, that the funds had potentially been fraudulently transferred by the judgment debtors, Harry and Margie Rosholm to their daughter, made Citibank liable for failing to hold the funds until the court could decide who was entitled to them.
Before the trial court entered a formal judgment, Jacque...
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