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General Electric Capital Corp. v. JB Realty Investments, Inc.

Court of Appeals of Arizona, First Division, Department D

July 9, 2013

GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation, Plaintiff/Appellee,
v.
JB REALTY INVESTMENTS, INC. and RONALD TUCEK, Third Parties/Appellants.

Not for Publication -Rule 28, Arizona Rules of Civil Appellate Procedure

Appeal from the Superior Court in Maricopa County Cause No. CV2009-025563 The Honorable John R. Doody, Commissioner

Kutak Rock, LLP, By Andrew J. Russell Attorneys for Plaintiff/Appellee

Michael P. Fiflis, Attorney for Third Parties/Appellants

MEMORANDUM DECISION

PATRICIA A. OROZCO, Judge

¶1 JB Realty Investments, Inc. (JB) and Ronald Tucek (Tucek) (collectively, Appellants) appeal the trial court's order overruling their objection to the garnishment judgment assigning General Electric Capital Corporation (GE) as the judgment creditor. For the following reasons, we affirm.

FACTUAL AND PROCEDURAL BACKGROUND

¶2 On August 7, 2009, GE filed a complaint against Nick Giannis, Donna Giannis and Chris Giannis (collectively, the Giannis family) alleging that they breached their obligations to GE by failing to make payments pursuant to a security agreement in which GE loaned the principal amount of approximately $6 million to the Giannis family. On October 1, 2009, the Giannis family filed an answer to the complaint, denying the allegations. Thereafter, the Giannis family failed to participate in pretrial matters. Consequently, on June 2, 2010, the trial court entered an order striking the Giannis family's answer and granting a default judgment in favor of GE, in the amount of approximately $6 million.

¶3 GE filed a writ of garnishment seeking to collect the default judgment from Melcar, Inc. (Melcar) as garnishee.[1] Melcar filed an answer, admitting that it owes Donna "certain sums under a [l]ease [a]greement" and that it would be "withholding the amounts owed to Donna Giannis" pursuant to the writ of garnishment. Appellants subsequently filed objections to the garnishment judgment. They claimed that they had a perfected security interest that took priority over the GE security interest in relation to the Scottsdale property owned by Donna and subject to garnishment. Upon Appellants' request, the trial court joined Appellants as third parties in the garnishment proceedings.

¶4 The trial court held an evidentiary hearing on the objections filed by Appellants to determine who had priority to the garnished funds as between Appellants and GE. Appellants alleged that they cumulatively lent $450, 000 to Nick and Donna, which was evidenced by a promissory note dated August 7, 2009, signed by both Nick and Donna, and a deed of trust dated February 19, 2010 signed by Donna that granted a security interest in the Scottsdale property.

¶5 After reviewing the exhibits and listening to oral arguments, the trial court overruled Appellants' objections to the writ of garnishment. It found no evidence that Appellants lent funds to Donna, and as such, "the security agreements themselves [were] mere empty vessels." Furthermore, it found that if money was actually lent, the transactions were between Payroll Preferred Services, Inc. (Payroll), [2] the Mildred Tucek Family Trust (the Trust), [3] and Nick and not between Appellants and Nick and Donna.

¶6 In addition, the trial court held that the February 2010 loan documents signed by Donna, including the deed of trust and assignment of rents, lacked consideration and were "unenforceable because the names of the lenders [did] not match the names of the parties on the loan documents." It further found that neither Appellants nor their entities lent any money to Donna, and if money was lent at all, it was to Nick by Payroll and the Trust. The trial court noted that that distinction was of importance "because [Donna], not Nick, is the alleged owner of the funds being held by the garnishee Melcar."

¶7 In the alternative, the trial court also found that the February 2010 security agreement was voidable as a fraudulent transfer pursuant to Arizona Revised Statutes (A.R.S.) section 44-1004 (2003) because Donna was indebted to GE before she granted $450, 000 in security interests on the Scottsdale property to Appellants and because "there [was] no evidence that [Donna] received reasonably equivalent value for that transfer."

¶8 Appellants timely appealed. We have jurisdiction under A.R.S. ยงยง 12-120.21.A.1 (2003) and ...


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