Rackmaster Systems, Inc. v. Maderia

• Decision Date: 24 June 2008
• Docket Number: No. 1 CA-CV 07-0646.,1 CA-CV 07-0646.
• Citation: 219 Ariz. 60,193 P.3d 314
• Parties: RACKMASTER SYSTEMS, INC., Plaintiff-Judgment Creditor-Appellee, v. Patrick MADERIA, Defendant-Judgment Debtor-Appellant, Jane Maderia, Defendant-Appellant.
• Court: Arizona Court of Appeals

193 P.3d 314

219 Ariz. 60

RACKMASTER SYSTEMS, INC., Plaintiff-Judgment Creditor-Appellee, v. Patrick MADERIA, Defendant-Judgment Debtor-Appellant, Jane Maderia, Defendant-Appellant.

No. 1 CA-CV 07-0646.

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

June 24, 2008.

Jaburg & Wilk, PC by Kathi M. Sandweiss, Roger L. Cohen, Phoenix, Attorneys for Appellants.

Davis Limited by Greg R. Davis, Scottsdale, Attorneys for Appellee.

WEISBERG, Judge.

¶ 1 Patrick and Jane Maderia, husband and wife, appeal from the superior court's ruling declining to quash a writ of garnishment against a community property bank account. The court concluded that Rackmaster Systems, Inc., of Bloomington, Minnesota could garnish an Arizona bank account belonging to both Patrick and Jane to satisfy a Minnesota judgment Rackmaster had obtained solely against Patrick. For reasons that follow, we conclude that the superior court erred in relying upon an unpublished memorandum decision of this court and in concluding that Rackmaster, the judgment creditor, could garnish the community bank account. We therefore reverse and remand for further proceedings in the superior court.

BACKGROUND

¶ 2 Although we have a very limited record of the Minnesota proceedings, the following facts are undisputed. As president and Chief Executive Officer of TriStar International, Inc., an Arizona corporation, Patrick signed a credit agreement in 2001 with Rackmaster that stated in part: "Signature of this application constitutes a personal guarantee should this account become delinquent." Jane did not sign the credit application. TriStar defaulted on its obligation, and Rackmaster filed suit in Minnesota against TriStar, Patrick, and another entity. Jane was not named or served in the Minnesota action. A Minnesota court entered a default judgment solely against Patrick in the amount of $23,110.98.

¶ 3 In 2003, Rackmaster filed in Maricopa County Superior Court an affidavit of foreign judgment, a notice of filing the foreign judgment, and an application for a writ of garnishment, all of which named only Patrick. Patrick requested a hearing and alleged that Rackmaster was attempting to garnish a community property account to satisfy a judgment against him alone.

¶ 4 At the hearing, Patrick argued that he and Jane had been married and were residents of Arizona when the Minnesota court entered judgment against him, that their bank account was community property, and that Jane had never been named or served in the garnishment matter.¹ Rackmaster asserted that the Minnesota judgment arose from a community pursuit, was a community debt, and was entitled to full faith and credit. Rackmaster conceded that the garnished account was community property but cited Arizona Revised Statute ("A.R.S.") section 25-215(C) (2007), which 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."² The court ordered the parties to brief the propriety of allowing garnishment of the bank account.

¶ 5 Rackmaster's brief cited National Union Fire Insurance Co. of Pittsburgh v Greene, 195 Ariz. 105, 985 P.2d 590 (App. 1999), to argue that a judgment obtained in a non-community property state against one spouse may be enforced against the marital community property if (1) the obligation underlying the foreign judgment would have been a community obligation had it been incurred in Arizona and (2) the other spouse was joined in the Arizona domestication action and could contest the debt's characterization as a community debt. Rackmaster also argued that Minnesota law does not require both spouses to be joined when an action is brought against one spouse,³ that the only possible defense to enforcement of the judgment was that it was based on a debt that would have been Patrick's separate obligation if incurred in Arizona, and that because the judgment "was based upon an obligation relating to the marital community's company," it was not a separate debt.⁴ Rackmaster conceded, however, that if Jane entered an appearance to contest the community nature of the obligation, "enforcement of the judgment [would be] premature."

¶ 6 The Maderias responded that the obligation upon which the Minnesota judgment was based was not a community obligation because Patrick had been sued on his personal guaranty and that under Arizona law, a guaranty signed only by Patrick could not bind the community.

¶ 7 In its ruling, the court accepted that Minnesota does not require both spouses to sign a personal guaranty in order to bind the marital community and also found that Minnesota need not follow Arizona's joinder statutes. Thus, it concluded that Jane's failure to sign the guaranty was irrelevant; that Patrick's activities had benefitted the marital community; and that if the Maderias had lived in Minnesota, the judgment could have been collected against both of them. The court additionally adopted the reasoning of a memorandum decision of this court, Tony Twist v. Todd McFarlane and Todd McFarlane Productions, Inc., 1 CA-CV 05-0833 (Ariz.App. Feb. 6, 2007) (mem.decision), in concluding that Rackmaster could garnish the community bank account.

¶ 8 Jane then hired separate counsel who filed a motion to quash the garnishment and for a status hearing. The court denied her motion. Jane moved for reconsideration, arguing that the underlying debt would not have been a community debt in Arizona and that the garnishment of community assets would violate her due process rights. The court again denied her motion. The Maderias timely appealed. We have jurisdiction pursuant to A.R.S. § 12-2101(F)(3) (2003).

DISCUSSION

¶ 9 At the outset, we note that the discussion in Rackmaster's answering brief devoted to comparing this case to Tony Twist is improper argument and will not be considered. A memorandum decision of this court is not precedent and cannot be

cited in any court except for (1) the purpose of establishing the defense of res judicata, collateral estoppel, or the law of the case or (2) informing the appellate court of other memorandum decisions so that the court can decide whether to publish an opinion, grant a motion for reconsideration, or grant a petition for review.

Ariz. R. Civ.App. P. 28(c). Moreover, Tony Twist did not involve a guaranty given by only one spouse, a critical fact in this case and thus is not comparable even if it could serve as precedent.

¶ 10 We now turn to the merits of the appeal. We review the parties' respective assertions about the application of Arizona law to a foreign judgment, which pose questions of law and mixed questions of law and fact, de novo. Alberta Sec. Comm'n v. Ryckman, 200 Ariz. 540, 543 ¶ 10, 30 P.3d 121, 124 (App.2001).

¶ 11 This appeal turns upon whether A.R.S. § 25-214(C)(2) (2007), which requires both spouses to sign a guaranty in order to bind their community, is procedural or substantive in nature. If procedural, the community bank account belonging to the Maderias may be garnished to satisfy the Minnesota judgment against Patrick. If substantive, the writ of garnishment must be quashed. For the following reasons, we conclude that the right afforded by A.R.S. § 25-214(C) is substantive.

¶ 12 In enacting statutes governing community property, the Arizona legislature has determined that, in most circumstances, either spouse can control and encumber the assets of the marital community. For example, A.R.S. § 25-214(B) states: "The spouses have equal management, control and disposition rights over their community property and have equal power to bind the community." Furthermore, in most circumstances, A.R.S. § 25-215(D) allows one spouse to contract debts for the community. However, it limits such power by providing in part that: "Except as prohibited in § 25-214, either spouse may contract debts and otherwise act for the benefit of the community." (Emphasis added.)

¶ 13 As might be expected, A.R.S. § 25-214 establishes several limitations upon the power of one spouse to bind the community. Of particular importance here is the prohibition found in A.R.S. § 25-214(C)(2), which states that when the instrument is a guaranty, the community will be bound only upon the signatures of both spouses.⁵

¶ 14 When interpreting a statute, we strive to give each provision meaning and to adopt a reading that does not render any portion superfluous or ineffective. Mejak v. Granville, 212 Ariz. 555, 136 P.3d 874 (2006); Pinal Vista Properties, L.L.C. v. Turnbull, 208 Ariz. 188, 91 P.3d 1031 (App.2004). Our courts have emphasized that the purpose of A.R.S. § 25-214(C) "is to protect one spouse against obligations undertaken by the other spouse without the first spouse's knowledge and consent" and that this purpose "would be frustrated if the husband ... were able to charge the wife's interest in the community with the debts he guaranteed." Vance-Koepnick v. Koepnick, 197 Ariz. 162, 163, ¶ 6, 3 P.3d 1082, 1083 (App.1999).

¶ 15 Thus, whether the guaranty benefitted the community is beside the point. In Vance-Koepnick, even though the subject guaranty was for the benefit of community, we ruled that it still could not bind the community without the signatures of both spouses. Id. at ¶ 5. We held that "[t] he plain words of [§ 25-214(C)] have been construed to mean that the community is not bound by any guaranty that is not signed by both spouses, even though the guaranty was for a business that benefitted the marital community." Id. (emphasis added). To support this conclusion, we cited Consolidated Roofing & Supply Co. v. Grimm, 140 Ariz. 452, 458, 682 P.2d 457, 463 (App.1984), which held that a guaranty signed only by a husband could be enforced against his separate property but not against his wife or the marital community. Therefore, the superior court's finding that the community benefitted from Patrick's activities is unavailing.

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