Opinion
No. 1 CA-SA 19-0088
05-21-2019
MICHAEL FRANCIS ROSES, L.L.L.P., Petitioner, v. THE HONORABLE SCOTT BLANEY, Judge of the SUPERIOR COURT OF THE STATE OF ARIZONA, in and for the County of MARICOPA, Respondent Judge, MEREDITH RUSSELL FRANCIS, Real Party in Interest.
COUNSEL Jones, Skelton & Hochuli, P.L.C., Phoenix By Eileen Dennis GilBride Co-Counsel for Petitioner Becker & House, P.L.L.C., Scottsdale By Mark E. House Co-Counsel for Petitioner Stanley David Murray, Scottsdale Co-Counsel for Real Party in Interest Owens & Perkins, P.C., Scottsdale By Max Nicholas Hanson Co-Counsel for Real Party in Interest
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 UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL AND MAY BE CITED ONLY AS AUTHORIZED BY RULE. Petition for Special Action from the Superior Court in Maricopa County
No. FC2018-001611
The Honorable Scott A. Blaney, Judge
JURISDICTION ACCEPTED; RELIEF GRANTED
COUNSEL Jones, Skelton & Hochuli, P.L.C., Phoenix
By Eileen Dennis GilBride
Co-Counsel for Petitioner Becker & House, P.L.L.C., Scottsdale
By Mark E. House
Co-Counsel for Petitioner Stanley David Murray, Scottsdale
Co-Counsel for Real Party in Interest Owens & Perkins, P.C., Scottsdale
By Max Nicholas Hanson
Co-Counsel for Real Party in Interest
MEMORANDUM DECISION
Chief Judge Samuel A. Thumma delivered the decision of the Court, in which Presiding Judge Paul J. McMurdie and Judge Peter B. Swann joined. THUMMA, Chief Judge:
¶1 This special action arises out of a marriage dissolution proceeding in which Meredith Russell Francis (Wife) subpoenaed records from Michael Francis Roses, LLLP (MFR), a rose bush supplier, which has a management agreement with Tyler Francis (Husband). Because the order granting Wife's motion to compel in its entirety was in error, this court accepts jurisdiction and grants relief by vacating that order.
FACTS AND PROCEDURAL BACKGROUND
¶2 Wife's subpoena sought from MFR business and financial records in 14 broad categories for nine years ending December 31, 2017. The records sought included offers to purchase MFR, detailed listings of MFR's land and buildings, tax returns, financial statements, business plans, valuations and an "[e]lectronic copy or online access to MFR's general ledger."
¶3 MFR provided some responsive documents, including its tax returns for 2012 to 2017. Unsatisfied, Wife sought additional records and "detailed explanations" in 19 broad categories. MFR responded that "the information requested is beyond the scope of what [MFR] would be required to produce at this time," adding the request sought "to see the internal workings of [MFR], without having first proven that [Wife] is ever going to be entitled to any portion of it." Although MFR expressed a willingness to discuss whether "we can work through the issues," no such discussion occurred, and Wife filed her motion to compel.
There is no indication a "good faith consultation" took place before the motion to compel was filed, or that the motion attached the required consultation certificate. See Ariz. R. Fam. Law P. 9(c); 52(c)(6)(B)(ii); 65(a).
¶4 Wife's motion argued that the subpoena properly sought records addressing the value of Husband's interest in MFR; whether that interest is separate or community property; whether the community has an equitable lien against Husband's interest in MFR (and the value of such a lien) and Husband's total income. MFR opposed the motion, arguing Husband does not have an interest in MFR, and filed a cross-motion for protective order.
¶5 After briefing, but without oral argument, the superior court issued a March 21, 2019 order granting the motion to compel in its entirety and ordered MFR "to produce all documents, materials and records requested" by a date certain. By not mentioning MFR's cross-motion for protective order, the superior court implicitly denied that motion. See State v. Hill, 174 Ariz. 313, 323 (1993). MFR sought special action relief and the superior court stayed the production deadline pending the outcome.
DISCUSSION
¶6 Special action jurisdiction "is highly discretionary" and may be appropriate "when no 'equally plain, speedy, and adequate remedy by appeal' exists." State ex rel. Romley v. Fields, 201 Ariz. 321, 323 ¶ 4 (App. 2001) (quoting Ariz. R.P. Spec. Act. 1(a)). Special action jurisdiction rarely should be exercised in addressing discovery disputes. MFR, however, is a non-party and would never have an adequate remedy by appeal. Accordingly, given the circumstances present here and in the exercise of its discretion, this court accepts special action jurisdiction. See State v. Bernini, 220 Ariz. 536, 538 (App. 2009).
¶7 On the merits, the question is whether the order granting Wife's motion in its entirety was erroneous. Wife claims she is entitled to the records subpoenaed (1) to show "earnings and compensation" received by Husband from MFR "beyond his stated salary" and (2) because his "efforts during the marriage have increased the value of the beneficial interest he has in MFR." Wife fails to show the records sought in the subpoena are necessary to establish Husband's earnings and compensation received from MFR. The subpoena seeks records focusing on issues unrelated to Husband's earnings, including offers to purchase MFR, a listing of MFR's land and buildings, MFR's financial statements and business plans and valuations. Moreover, Wife has obtained substantial information from other sources to calculate Husband's earnings and compensation from MFR (which she calls "advancements"). Accordingly, Wife's legitimate interest in obtaining discovery about Husband's earnings does not justify the order granting the motion to compel.
Wife's special action response states, among other things, "[t]hose advancements have ranged from $50,515 to $704,372 per year and, over a six-year period, such advancements averaged $238,417 per year and totaled $1,501,564 at the end of 2017."
¶8 Nor does Husband's purported ownership interest in MFR justify the order. Wife concedes that it is unclear whether the community has any interest in MFR, a key initial issue necessary to divine whether the superior court has jurisdiction over such an interest. See Ariz. Rev. Stat. (A.R.S.) § 25-318 (2019). Nor does Wife show how unproduced records sought in the subpoena (as opposed to those already in her possession) would answer this key issue. This is particularly significant here, given limits on non-party discovery and the general requirement that discovery be "proportional" to the needs of the case. See Ariz. R. Civ. P. 45(e)(1)(A); 26(b)(1).
Absent material revisions after the relevant dates, statutes and rules cited refer to the current version unless otherwise indicated.
¶9 MFR has the following owners:
| MCF Investments, LLLP | 75.68555% |
| MFR-2012, LLC | 5.95415% |
| MCF-MEF Enterprises, LLLP | 18.28150% |
| TMF-2015, LLC | 0.07880% |
¶10 Classically, a spendthrift trust makes it impossible for a beneficiary "to transfer, assign, or alienate the right to future payments of income or principal." 76 Am. Jur. 2d Trusts § 95 (2019). "The purpose of a spendthrift trust is to protect the beneficiary from himself and his creditors." In re Indenture of Tr. Dated Jan. 13, 1964, 235 Ariz. 40, 45 ¶ 8 (citation omitted). In Arizona, spendthrift trusts (or, more properly, spendthrift provisions in a trust) are authorized by statute. See A.R.S. §§ 14-10501-10507. As applicable here, the TMF-128 Trust agreement expressly provides that Husband lacks any authority to "alienate, anticipate, assign, encumber, or hypothecate," either voluntarily or involuntarily, his interest "in the principal or income" of the trust "prior to the actual receipt by the beneficiary" of such principal or income. The TMF-128 Trust agreement also provides that beneficial interests and income are free from any interference by any creditor or spouse of a beneficiary and that all benefits provided under the trust are sole and separate property. Thus, the nature of the TMF-128 Trust negates Wife's claimed need for all the records sought in the subpoena.
¶11 Wife speculates that, "[i]f the consideration for the Option was and is [Husband's] work and efforts in managing MFR over a set period of time, no more than 14 years at most, the community has an interest in and right to" Husband's efforts and any appreciation in value associated with the option. But there is no showing that was the consideration for the option and there is no showing that the subpoenaed records would provide guidance on that issue.
¶12 Wife also asserts the order requiring MFR to produce all records and information was proper because "Husband's efforts during the marriage have increased the value of the beneficial interest he has in MFR." This argument, however, assumes that Husband has an interest in MFR, which is not supported by the record, and that such an interest is community property, which is contrary to the terms of the TMF-128 Trust. The cases cited by Wife do not change the analysis.
¶13 The non-Arizona authority Wife cites is not binding and either is distinguishable or appears to support Husband's position. See Klabacka v. Nelson, 394 P.3d 940, 948 (Nev. 2017) (addressing allocation of spendthrift trusts created by couple during their marriage, which contained both community and separate property); Antreasyan v. Antreasyan, 245 A.D.2d 405, 405 (N.Y. App. Div. 1997) (stating wife "is not entitled to the extensive discovery she sought from the closely-held family corporation allegedly owned by the defendant's mother since she has not yet demonstrated that the defendant has a proprietary interest in the corporation"); Jaffe v. Jaffe, 91 A.D.3d 551, 554 (N.Y. App. Div. 2012) (similar).
¶14 The Arizona cases Wife cites similarly are distinguishable. See In re Naarden Tr., 195 Ariz. 526, 527 ¶ 2 (App. 1999) (considering whether probate dispute involving living trust created by husband and wife during marriage arose out of contract for purposes of A.R.S. § 12-341.01); Dunlap Inv'rs Ltd. v. Hogan, 133 Ariz. 130, 131-32 (1982) (addressing parking easement dispute where property was held in trust where "[t]he trust agreement . . . is not part of the record"); In re Herbst, 206 Ariz. 214, 218 ¶ 21 (App. 2003) (noting, in action to identify trust beneficiaries in light of a will seeking to amend the trust, "the beneficiaries have an interest in the Trust and are entitled to compliance with its terms to protect that interest").
¶15 Finally, Wife is correct that, in the proper circumstances, a spouse's work during the marriage resulting in the appreciation in value of separate property owned by that spouse may need to be accounted for in a dissolution proceeding. See Cockrill v. Cockrill, 124 Ariz. 50, 54 (1979); Rueschenberg v. Rueschenberg, 219 Ariz. 249, 252 ¶ 12 (App. 2008); Roden v. Roden, 190 Ariz. 407, 410-11 (App. 1997). As noted above, however, Husband does not own an interest in LFW or the option, and Wife has not shown this concept applies here.
¶16 For these reasons, the order granting Wife's motion to compel in its entirety cannot stand. This court does not consider or decide whether more limited or different discovery on the current state of the record, or after additional proceedings, could be proper.
CONCLUSION
¶17 This court accepts special action jurisdiction and vacates the March 21, 2019 order granting Wife's motion to compel in its entirety. Given this resolution, Wife's request for attorneys' fees if jurisdiction was denied or the order was affirmed is denied as moot. Because it appears that the motion to compel was filed in good faith, Husband's request for attorneys' fees pursuant to Ariz. R. Fam. Law P. 65(a)(4)(B) is denied.