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Wells Fargo Bank N.A. v. Rogers

Court of Appeals of Arizona, First Division

January 28, 2016

WELLS FARGO BANK N.A., Petitioner,
v.
THE HONORABLE JOSHUA ROGERS, Judge of the SUPERIOR COURT OF THE STATE OF ARIZONA, in and for the County of MARICOPA, Respondent Judge, ROBERT G. HOAG REVOCABLE LIVING TRUST DATED JULY 15, 1992; ROBERT G. HOAG and JANE DOE HOAG, husband and wife; ROBERT G. HOAG, individually and as Trustee of ROBERT G. HOAG REVOCABLE LIVING TRUST DATED JULY 15, 1992, Real Parties in Interest

Petition for Special Action from the Superior Court in Maricopa County. No. CV2014-003768. The Honorable Joshua D. Rogers, Judge.

Jaburg & Wilk PC, Phoenix, By Roger L. Cohen, Kathi M. Sandweiss, Counsel for Petitioner.

Wallin Hester PLC, Gilbert, By Chad A. Hester, Counsel for Real Parties in Interest.

Page 584

Judge Patricia K. Norris delivered the opinion of the Court, in which Presiding Judge Donn Kessler and Judge Kent E. Cattani joined.

OPINION

Patricia K. Norris, Judge:

[¶1] Arizona Revised Statutes (" A.R.S." ) section 12-2108 (Supp. 2015) and the provisions of Arizona Rule of Civil Appellate Procedure 7 (" Rule 7" ) that track this statute limit the amount of a bond a party must furnish to stay the enforcement of, or execution on, a judgment. The dispositive issue in this special action is whether the statute and the matching provisions in Rule 7 bar a superior court from taking other steps to preserve the status quo or the effectiveness of a judgment it has stayed pending appeal. We hold they do not.

FACTUAL AND PROCEDURAL BACKGROUND

[¶2] Between 1994 and 2000, real party in interest Robert G. Hoag established three irrevocable charitable remainder unitrusts and appointed himself trustee for each trust. Each trust obligated the trustee to pay Hoag, during his life, a percentage of the " net fair market value" of the trust assets as of a specified date during each taxable year. Each trust also contained a " spendthrift" provision that prohibited trust assets from becoming liable for the debts of a trust beneficiary (including Hoag), prevented trust assets from being seized by any creditor of a beneficiary, and barred any beneficiary from assigning, transferring, or encumbering his or her interest in the trust estate or income produced by the trust estate.

[¶3] In November 2012, Petitioner Wells Fargo Bank, N.A. obtained a default judgment in the principal sum of $2,533,169 against Hoag and a revocable living trust he had established in 1992 (collectively, " Hoag" ). Hoag did not appeal the default judgment. Subsequently, Wells Fargo attempted to enforce the default judgment and served third parties with post-judgment subpoenas for the production of documents concerning the trusts and distributions made by the trusts. Hoag objected to the subpoenas, arguing the spendthrift provisions protected the trust assets and, accordingly, Wells Fargo was not entitled to the documents it had subpoenaed.

[¶4] On February 4, 2014, Hoag resigned as trustee, and appointed a corporation organized under the laws and operating out of the Bahamas as successor trustee. The successor trustee also objected to Wells Fargo's post-judgment discovery efforts, asserting the spendthrift provisions prohibited Wells Fargo from holding the trusts liable for Hoag's debts. Accordingly, the successor trustee continued to make distributions to or for the benefit of Hoag. Thus, for example, in April 2014, the successor trustee distributed $30,000 to or for the benefit of Hoag ($9,000 to Hoag's former wife for spousal maintenance, $9,000 to pay property taxes and insurance on a home Hoag owned, and $14,000 directly to Hoag).

[¶5] In June 2014, Wells Fargo sued Hoag, the successor trustee, and the trusts and alleged Hoag had fraudulently concealed his assets by transferring them to the trusts. Additionally, Wells Fargo petitioned for declaratory relief and requested the superior court to hold the spendthrift provisions invalid. The superior court granted Wells Fargo partial summary judgment and declared the spendthrift provisions " invalid and ineffective" as to Wells Fargo's claims against Hoag. It also declared Wells Fargo was entitled " to garnish, attach, and otherwise receive income and all present and future distributions [from the trusts] to or for the benefit of Hoag." Additionally, it enjoined Hoag and anyone acting for or on his behalf with notice or knowledge of the judgment from preventing Wells Fargo from garnishing, attaching, executing on or otherwise receiving income from the trusts.

[¶6] Hoag appealed the judgment, which the superior court had certified under Arizona Rule of Civil Procedure 54(b). After Wells Fargo petitioned for an order directing Hoag to deliver to it all non-exempt property in his possession, including the distributions he was receiving from the trusts, Hoag moved to stay the judgment without having to provide a ...


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