Opinion
No. 1 CA-CV 18-0660
12-05-2019
NOLAN RYAN, Plaintiff/Appellant, v. PAULINE A. HARRIS HENRY, et al., Defendants/Appellees.
COUNSEL May Potenza Baran & Gillespie PC, Phoenix By Jesse R. Callahan, Grant L. Cartwright Counsel for Plaintiff/Appellant Wilkins Law Firm PLLC, Phoenix By Amy M. Wilkins Counsel for Defendants/Appellees Pauline A. Harris Henry, L. George Henry, Absolute Healthcare Inc. Engelman Berger PC, Phoenix By Wade M. Burgeson, Damien R. Meyer Co-counsel for Defendants/Appellees Tim Hammer, Mark Haile, PNTM Management Services LLC Coppersmith Brockelman, PLC, Phoenix By John C. Kelly, D. Andrew Gaona Co-counsel for Defendants/Appellees Tim Hammer, Mark Haile, PNTM Management Services LLC
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 UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL AND MAY BE CITED ONLY AS AUTHORIZED BY RULE. Appeal from the Superior Court in Maricopa County
No. CV2013-015048
The Honorable David Garbarino, Judge Pro Tempore
VACATED AND REMANDED
COUNSEL May Potenza Baran & Gillespie PC, Phoenix
By Jesse R. Callahan, Grant L. Cartwright
Counsel for Plaintiff/Appellant Wilkins Law Firm PLLC, Phoenix
By Amy M. Wilkins
Counsel for Defendants/Appellees Pauline A. Harris Henry, L. George Henry,
Absolute Healthcare Inc. Engelman Berger PC, Phoenix
By Wade M. Burgeson, Damien R. Meyer
Co-counsel for Defendants/Appellees Tim Hammer, Mark Haile, PNTM
Management Services LLC Coppersmith Brockelman, PLC, Phoenix
By John C. Kelly, D. Andrew Gaona
Co-counsel for Defendants/Appellees Tim Hammer, Mark Haile, PNTM
Management Services LLC
MEMORANDUM DECISION
Judge John C. Gemmill delivered the decision of the Court, in which Presiding Judge Randall M. Howe and Judge David D. Weinzweig joined. GEMMILL, Judge:
The Honorable John C. Gemmill, Retired Judge of the Court of Appeals, Division One, has been authorized to sit in this matter in accordance with Article 6, Section 3 of the Arizona Constitution.
¶1 Appellant Nolan Ryan appeals the superior court's garnishment judgments in favor of appellees Tim Hammer, Mark Haile, and PNTM Management Services, L.L.C. ("PNTM"). For the following reasons, we vacate the garnishment judgments and remand for further proceedings.
PNTM, although nominally an appellee, is now controlled by Ryan and joins his request for relief in this appeal.
FACTUAL AND PROCEDURAL BACKGROUND
¶2 Ryan, Hammer, Haile, and Pauline and George Henry became involved in the medical marijuana business after Arizona voters passed the Arizona Medical Marijuana Act in 2010. See Proposition 203 (2010); Ariz. Rev. Stat. ("A.R.S.") §§ 36-2801 to -2819. They established Absolute Healthcare, Inc. and Perpetual Healthcare, Inc. to operate medical marijuana dispensaries in Gilbert and Wellton, and formed PNTM to manage Absolute and Perpetual.
¶3 Disputes arose among the group, and Hammer, Haile, and Ryan entered a corporate resolution for PNTM that removed Pauline Henry "from any role in the management or operations of PNTM" and designated Hammer as having "principal, day-to-day responsibility for the operations and management of PNTM." Ryan, Hammer, Haile, and PNTM then sued the Henrys seeking a declaratory judgment to determine who owned Absolute and PNTM and whether PNTM was Absolute's management provider.
¶4 Ryan, Hammer, Haile, and PNTM prevailed after an eight-day jury trial, and the superior court entered a final judgment that, as relevant, awarded $651,454.51 in attorneys' fees and costs to Ryan, Hammer, Haile, and PNTM ("Final Judgment"). The Final Judgment also stated that PNTM "shall be governed on the basis of one member one vote under A.R.S. Section 29-681(D)." This court affirmed the Final Judgment in 2018. The judgment creditors in this garnishment proceeding are Ryan, Hammer, Haile, and PNTM. The judgment debtors are the Henrys.
The judgment also awarded these fees and costs to counter-defendants Devon Haile, Michelle Hammer, and J&W Crane Services, LLC, who are not parties to this appeal.
¶5 Hammer and Haile individually, and on behalf of PNTM, then applied for writs of garnishment against BMO Harris Bank and Baird Private Wealth Management. They alleged that they had obtained a money judgment against the Henrys and the garnishees held monies on the Henrys' behalf that could satisfy that judgment. The superior court issued the writs of garnishment, and the garnishees answered that they were holding, collectively, $459,834.91 of the Henrys' money.
¶6 The Henrys objected to the writs and the answers, claiming that some of funds the garnishees held were exempt from garnishment. This objection was later resolved by a stipulation to release the exempt funds to the Henrys. The Henrys also asked the court to stay the garnishment proceedings pending the outcome of a related arbitration proceeding involving the same parties.
¶7 Ryan also objected to the writs, arguing the superior court should quash them because the applications were filed without notice to him or PNTM—the primary judgment creditors—and without PNTM's proper authorization. He also agreed with the Henrys that the related arbitration proceeding constituted good cause for the court to stay the garnishment proceedings. Finally, he asserted that if the court refused to quash the writs or stay the garnishment proceeding, he was entitled to a hearing to determine the amount due to the various judgment creditors under the Final Judgment.
¶8 Hammer and Haile maintained that it was outside the scope of the garnishment proceeding to apportion the garnished funds between them and Ryan. They also argued the court should not stay the garnishment because the arbitration was an unrelated proceeding with no known end date.
¶9 The superior court overruled Ryan's objections to the writs and the Henrys' and Ryan's requests for a continuance, and judgment was entered against the garnishees. Ryan timely appeals. He argues the superior court erred by refusing to quash the writs of garnishment, equitably apportion the garnished funds, require the funds to be interpleaded, and stay or continue the garnishment hearing. We have jurisdiction pursuant to A.R.S. § 12-2101(A)(5)(c) (2019).
ANALYSIS
¶10 Garnishment is a special statutory proceeding that allows a creditor to seize a debtor's funds in the possession of a third party. It was unknown at common law and arose as a statutory remedy. Kellin v. Lynch, 247 Ariz. 393, 397, ¶ 18 (App. 2019). "Since garnishment is a creature of statute, garnishment proceedings are necessarily governed by the terms of those statutes . . . . Thus, courts may not allow garnishment proceedings to follow any course other than that charted by the legislature." Bennett Blum, M.D., Inc. v. Cowan, 235 Ariz. 204, 208, ¶ 16 (App. 2014) (quoting Patrick v. Associated Drygoods Corp., 20 Ariz.App. 6, 9 (1973)). We review the superior court's garnishment judgments for an abuse of discretion, Carey v. Soucy, 245 Ariz. 547, 552, ¶ 19 (App. 2018), but consider de novo the proper interpretation of applicable statutes, Libra Grp., Inc. v. State, 167 Ariz. 176, 179 (App. 1991).
I. The Superior Court Erred by Concluding That it Did Not Have Discretion Under A.R.S. § 12-1580(B) to Grant a Continuance.
¶11 Although the parties presented several issues to the superior court, we conclude one issue is dispositive on appeal. Ryan argues the superior court erred by failing to consider whether "good cause" under A.R.S. § 12-1580(B) (2019) existed to continue the garnishment hearing pending the conclusion of the related arbitration. We agree.
¶12 The superior court ordinarily must conduct a hearing on an objection to a writ of garnishment within five business days of a hearing request, but it has discretion to continue the hearing for good cause "on terms [it] deems appropriate after due consideration of the importance of the judgment debtor's rights and the need for a speedy determination." A.R.S. § 12-1580(B). The court is required to hold the hearing within 10 days after the date of the hearing request unless it is the judgment debtor who requests the continuance. Id. The Henrys as judgment debtors joined Ryan in seeking the continuance, thereby triggering the potential of a longer continuance under § 12-1580(B). The statute does not require the court to grant the judgment debtor's requested continuance; rather, the court retains discretion to consider all the circumstances when evaluating such a request.
Section 12-1580(B) provides, in its entirety:
The hearing on an objection to the writ, answer or amount on a claim of exemption shall be commenced within five days of the request, not including weekends and holidays, but may be continued for good cause on terms the court deems appropriate after due consideration of the importance of the judgment debtor's rights and the need for a speedy determination. Good cause includes a situation in which the objection raised at the hearing is different from that set forth in the request for hearing. However, in no event shall the hearing be held later than ten days from the date of the request unless the request for a continuance is made by the judgment debtor.
¶13 Ryan and the Henrys asked the superior court to continue the hearing until after the resolution of the arbitration proceeding involving these same parties, arguing that allowing Hammer and Haile to garnish funds that they would shortly need to return ran the risk that Pauline Henry would be unable to recover those funds from Hammer and Haile. Ryan contends the superior court erred by not considering whether the arbitration proceeding constituted "good cause" under § 12-1580(B) to continue the garnishment hearing, noting the court's statement in its ruling that Arizona's garnishment statutes "do not give the court discretion" to consider the effect of other proceedings between the same parties.
¶14 Hammer and Haile contended in oral argument before this court that any discretion the superior court might have under § 12-1580(B) is limited by application of A.R.S. § 12-1584(B) (2019). We reject this proposed interpretation because § 12-1584(B) specifies procedures to be followed in garnishment hearings while § 12-1580(B) addresses time limits and possible continuances of such hearings. Section 12-1584(B) does not limit the court's discretion under § 12-1580(B). We also note that this argument was not asserted in Hammer and Haile's answering brief and we generally deem "[i]ssues not clearly raised and argued in a party's appellate brief" to be waived. Schabel v. Deer Valley Unified Sch. Dist. No. 97, 186 Ariz. 161, 167 (App. 1996).
¶15 The superior court possessed discretion under § 12-1580(B) to determine whether good cause existed to continue the garnishment hearing. Accordingly, we vacate the garnishment judgments and remand to allow the superior court to consider whether to continue the garnishment hearing pending the outcome of the arbitration proceeding. We express no opinion whether the superior court should or should not grant a continuance.
¶16 Ryan raises several additional arguments. We address the following issues because they are likely to recur on remand.
II. The Superior Court Correctly Rejected Ryan's Contention That He Was Required to be Joined as a Party in This Proceeding.
¶17 Ryan argues the superior court erred by refusing to quash the writs of garnishment because Hammer and Haile did not join Ryan in the garnishment, and they did not have the approval and authority of all judgment creditors to initiate the garnishment.
¶18 Ryan asserts that because the Arizona Rules of Civil Procedure ("Rules") apply in a garnishment proceeding, see Groat v. Equity Am. Ins. Co., 180 Ariz. 342, 347 (App. 1994), Rules 17 and 19 required that he be joined as a real-party-in-interest or an indispensable party. Hammer and Haile contend that they are real-parties-in-interest and initiated the garnishment as proper judgment creditors. They argue Ryan was not indispensable to their garnishment action but was free to intervene or file his own application for a writ of garnishment and chose not to do so.
¶19 Ryan cites Bry-Man's Inc. v. Stute, 312 F.2d 585 (1963), a case in which the United States Court of Appeals for the Fifth Circuit held that for purposes of consistency, prevention of multiple lawsuits, and finality, joint obligees must be included in an action to recover on an obligation. See id. at 587. While noting that Federal Rule of Civil Procedure 19 did not apply, id. at 586 n.1, the court in Bry-Man conducted an indispensable-party analysis to determine that "the interests of all parties on both sides are inextricably bound together in one cause." Id. at 587. Ryan urges this court to apply that rationale in the garnishment context. Unlike in an action to determine the existence of a joint obligation, however, in garnishment cases the obligations are already set in the judgment, and the garnishment concerns only collection. See Cowan, 235 Ariz. at 207, ¶ 13 (garnishment proceedings are treated as an original independent action from the underling lawsuit) (quotation and citation omitted). Accordingly, we decline to apply the court's rationale in Bry-Man to require that all judgment creditors must be joined in a garnishment action.
¶20 We recognize, as Ryan contends, that if co-judgment creditors are not joined in garnishment proceedings, additional litigation may occur to apportion the garnished funds. Cf. Cmty. Guardian Bank v. Hamlin, 182 Ariz. 627, 631-32 (App. 1995) (noting that if garnishment resulted in ex-wife paying more than one-half of a community judgment, she could seek contribution from her ex-husband). But our garnishment statutes do not require that all judgment creditors be joined.
¶21 Furthermore, although Hammer and Haile did not join Ryan as a party or serve him with the writs of garnishment, he appeared in the garnishment proceeding, and the court allowed him to object to the garnishment. Thus, he presented his position fully to the court as if he were a party to the garnishment and does not argue that he would have taken a different position if he had been joined when the proceedings were initiated. Nor did he seek formal intervention as a judgment creditor or file a separate garnishment action. Under these circumstances, the court did not err by refusing to quash the writs of garnishment on the basis that Ryan was not joined under Rules 17 or 19.
III. The Superior Court Did Not Err by Refusing to Equitably Apportion the Garnished Funds or Require That They be Interpleaded.
¶22 Ryan also contends the superior court erred by refusing to equitably apportion the garnished funds between the joint judgment creditors. He cites Matter of Estate of Perkins, 1 CA-CV 14-0657, 2016 WL 3660237 (Ariz. App. July 5, 2016) (mem. decision), a memorandum decision in which this court held that the superior court appropriately exercised its discretion in a probate matter to impose a constructive trust. Id. at *7, ¶ 38. The determination that the superior court in Perkins did not abuse its discretion by imposing an equitable remedy does not support Ryan's argument that the superior court in this matter was required to make an equitable allocation of the garnished funds. Indeed, Arizona's garnishment statutes provide only that the court may conduct a hearing to determine whether the writ is valid, what amount is due on the underlying judgment, and what amount of non-exempt monies the garnishee was holding for the judgment debtor. A.R.S. § 12-1584(B). The garnishment statutes do not require the court apportion the garnished monies among judgment creditors. Therefore, the superior court did not err by refusing to do so.
¶23 We also reject Ryan's argument that the superior court was required to direct Hammer and Haile to file an action to interplead the garnished funds. Although Ryan initially opposed Hammer and Haile's offer to interplead the funds in the superior court, writing that it "made no sense" and would generate further litigation and expense, he now contends the superior court's garnishment judgments should have directed that Hammer and Haile initiate an action to interplead the garnished funds. "Interpleader is a procedure where one holding money or property subject to adverse claims may seek to avoid multiple liability by joining in a single action anyone who asserts or may assert claims to the money or property." Ariz. R. Civ. P. 22(a)(1). Ryan does not cite, and we do not find, any authority allowing the superior court to direct a judgment creditor who obtains a garnishment judgment to file a new action to interplead the funds.
CONCLUSION
¶24 For the foregoing reasons, we vacate the garnishment judgments and remand to allow the superior court to consider, under A.R.S. § 12-1580(B), whether to continue the garnishment hearing pending the outcome of the arbitration proceeding.
¶25 Hammer and Haile request an award of attorneys' fees on appeal, but do not cite a substantive basis for the request. See ARCAP 21(a)(2) ("A claim for fees under this Rule must specifically state the statute, rule, decisional law, contract, or other authority for an award of attorneys' fees."). Accordingly, we deny their request. Ryan is entitled to taxable costs on appeal upon his compliance with ARCAP 21.