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Carey v. Soucy

Court of Appeals of Arizona, First Division

October 30, 2018

DAN CAREY, Plaintiff/Judgment Creditor/Appellee,
v.
GARY SOUCY, et al., Defendant/Judgment Debtor/Appellant, XYZED LLC, Intervenor/Appellant.

          Appeal from the Superior Court in Maricopa County No. CV2012-092926 The Honorable Margaret Benny, Judge Pro Tempore

          Udall Shumway PLC, Mesa By Joel E. Sannes Counsel for Plaintiff/Judgment Creditor/Appellee

          Baker & Baker, Phoenix By Thomas M. Baker Counsel for Defendant/Judgment Debtor/Appellant and Intervenor/Appellant

          Judge Lawrence F. Winthrop delivered the opinion of the Court, in which Presiding Judge Jennifer M. Perkins and Judge Jon W. Thompson joined.

          OPINION

          WINTHROP, JUDGE:

         ¶1 In this garnishment proceeding, the judgment debtor requested a jury trial on the validity of an assignment to funds that the judgment creditor claimed was a fraudulent transfer. We hold that, under these circumstances, there is no right to a jury trial in garnishment proceedings with respect to whether an assignment would constitute a fraudulent transfer. Judgment debtor Gary Soucy and intervenor XYZED, LLC appeal from the denial of Soucy's objection to the application for writ of garnishment, the denial of their motion for new trial, and the garnishment judgment in favor of judgment creditor Dan Carey. For the following reasons, we affirm.

         FACTS AND PROCEDURAL HISTORY

         ¶2 In February 2016, Gary Soucy stipulated to judgment against him and in favor of Dan Carey for $175, 000 (the "Judgment"). Carey recorded the Judgment two days after it was signed and filed.

         ¶3 In September 2016, Soucy, in a separate matter and represented by attorney James Mack, entered a settlement agreement with an estate ("Garnishee"), requiring the estate to pay Soucy $50, 000 on or before October 7, 2016, and another $50, 000 on or before January 7, 2017 (the "Settlement").

         ¶4 On October 7, 2016, Mack received the first Settlement payment in his firm's trust account. Mack and Soucy met at Mack's bank later that day; from the $50, 000, Mack paid his firm $25, 320.07, representing unpaid attorneys' fees due and owing from Soucy, and wrote Soucy a check for the remaining $24, 679.93. Soucy cashed the check before leaving the bank.

         ¶5 On October 18, 2016, Carey served a writ of garnishment on Mack in an attempt to collect the Judgment. Mack answered that he was not indebted to or otherwise in possession of monies belonging to Soucy.

         ¶6 At some point in October 2016, Soucy, Mack, and XYZED, whose sole member is Mack, executed an agreement in which Soucy assigned the second $50, 000 Settlement payment to XYZED (the "Assignment") and XYZED loaned Soucy $40, 000.[1] The purported purpose of the Assignment was for Soucy to use the $40, 000 to take advantage of a time-sensitive business opportunity to purchase goods for resale. In addition to assigning the second Settlement payment, Soucy also agreed to remit $3, 800 to XYZED upon the resale of the purchased goods. The $40, 000 loan was made up of two separate wire transfers: (1) $15, 000 wire transferred from the Mack law firm operating account to Lighthouse Ventures, LLC[2] on September 21, 2016 (prior to the Assignment) and (2) $25, 000 wire transferred from the Mack law firm operating account to Lighthouse Ventures, LLC on October 18, 2016. Mack later provided counsel for Garnishee with a copy of the Assignment.

         ¶7 On December 23, 2016, Carey served a writ of garnishment on Garnishee. Garnishee answered that it was in possession of $50, 000 due and owing to Soucy (the second Settlement payment) and noted that Mack had provided an agreement purporting to assign the $50, 000 debt to XYZED. Soucy objected and requested a hearing, alleging Garnishee's answer was incorrect. Soucy included a jury trial demand in his request for hearing.

         ¶8 Mack initially represented Soucy in the garnishment proceeding, but the superior court found that Mack's representation of Soucy was a conflict of interest, and ordered Soucy to retain new counsel or proceed pro per. XYZED, also represented by Mack, moved to intervene in the garnishment proceeding. Soucy and XYZED then obtained the same counsel, and the court set a hearing. The court was provided with conflict waivers and, after denying the request for a jury trial, proceeded with the hearing.

         ¶9 In the garnishment proceeding, the superior court determined: (1) the Assignment of the $50, 000 from Soucy to XYZED was a fraudulent transfer; (2) XYZED did not take the transfer in good faith; and (3) the transfer was not for reasonably equivalent value. The court denied Soucy's and XYZED's objections to the writ of garnishment and entered judgment for $50, 000 in favor of judgment creditor Carey against Garnishee.

         ¶10 Soucy and XYZED moved for a new trial, contending they were erroneously denied their timely request and right to a jury trial, and the superior court's finding of a fraudulent transfer was contrary to law. See Ariz. R. Civ. P. 59(a)(1)(A). The court denied the motion, finding that it was authorized by statute to determine and set aside a fraudulent transfer in a garnishment hearing without a jury, and sufficient evidence supported the finding that the transfer between Soucy and XYZED was a fraudulent conveyance.

         ¶11 Soucy and XYZED timely appealed. We have jurisdiction pursuant to Arizona Revised Statutes ("A.R.S.") ...


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