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Kellin v. Lynch

Court of Appeals of Arizona, First Division

September 10, 2019

SANDY G. KELLIN, Petitioner,
v.
THE HONORABLE STEVEN LYNCH, Judge Pro Tempore of the SUPERIOR COURT OF THE STATE OF ARIZONA, in and for the County of MARICOPA, Respondent Judge, AMERICANWEST BANK, f/k/a BANNER BANK, successor by merger to AMERICANWEST BANK, Real Party in Interest.

          Petition for Special Action from the Superior Court in Maricopa County No. CV2014-095947 The Honorable Steven P. Lynch, Judge Pro Tempore

          Clark Hill PLC, Scottsdale By Ryan J. Lorenz Counsel for Petitioner

          Snell & Wilmer L.L.P., Phoenix By Steven D. Jerome, Benjamin W. Reeves, and James G. Florentine Counsel for Real Party in Interest

          Presiding Judge Paul J. McMurdie delivered the opinion of the Court, in which Judge Lawrence F. Winthrop and Chief Judge Peter B. Swann joined.

          OPINION

          MCMURDIE, JUDGE.

         ¶1 Sandy Kellin requests special action relief from two superior court orders. Kellin challenges a superior court order setting supersedeas bonds of $50, 000 each on Kellin's appeals from two judgments of garnishment against two financial institutions, BMO Harris Bank, N.A. ("BMO") and Betterment LLC ("Betterment"). Kellin and his wife, Robyn Kellin (collectively, the "Kellins"), held accounts with these institutions. This court issued an order accepting jurisdiction but denying relief with a decision to follow. This is that decision. We hold: (1) Arizona Rule of Civil Appellate Procedure ("Rule") 7(a)(6) affords the superior court discretion to set a supersedeas bond to cover an estimate of attorney's fees and costs that may be incurred in an appeal, provided a basis to award such fees and costs is authorized; and (2) in an appeal from a judgment of garnishment, Arizona Revised Statutes ("A.R.S.") section 12-1580(E) authorizes an appellate award of attorney's fees.[1]

         FACTS AND PROCEDURAL BACKGROUND

         ¶2 In September 2014, Banner Bank ("Banner")[2] domesticated a Utah deficiency judgment against Kellin for $1, 285, 777.89, plus post-judgment interest. The outstanding balance on the judgment as of April 2019 was calculated to be $2, 415, 615.15. Banner's efforts to collect the judgment have been strenuously contested, and the litigation has generated three separate appellate decisions and petitions for review that deserve a brief discussion.

         ¶3 In American West Bank v. Kellin ("Kellin I"), No. 1 CA-CV 18-0060, 2018 WL 6787394 (Ariz. App. Nov. 27, 2018) (mem. decision), the Kellins argued Banner was barred from enforcing its judgment against any of their community property by Arizona Revised Statutes ("A.R.S.") section § 25-214(C)(1), which requires joinder of both spouses to bind the community to "[a]ny transaction for the acquisition, disposition or encumbrance of an interest in real property other than an unpatented mining claim or a lease of less than one year." This court held that because the underlying transaction that gave rise to Banner's deficiency judgment "did not constitute a transaction for the acquisition, disposition or encumbrance of an interest in real property . . . the protections of A.R.S. § 25-214(C)" did not apply, and the deficiency judgment could be enforced against the Kellins' community. Kellin I, 2018 WL 6787394, at *2, ¶ 12.

         ¶4 In American West Bank v. Kellin ("Kellin II"), No. 1 CA-CV 18-0481, 2019 WL 1341803 (Ariz. App. Mar. 26, 2019) (mem. decision), Kellin raised the same argument from Kellin I to challenge an order denying a motion to quash a writ of special execution against real property and a charging order against the Kellins' membership interests in a limited liability company under A.R.S. § 29-655. This court held that the "law of the case" doctrine barred the parties from relitigating the enforceability of the judgment against the Kellins' community property and affirmed the superior court's orders. Kellin II, 2019 WL 1341803 at *3-4, ¶¶ 13-16.

         ¶5 Finally, in Kellin v. Banner Bank ("Kellin III"), No. 1 CA-CV 18-0356, 2019 WL 1341800 at *5, ¶ 21 (Ariz. App. Mar. 26, 2019) (mem. decision), this court held that a declaratory judgment action filed while the enforcement proceedings were ongoing was an impermissible attempt to horizontally appeal the superior court's rulings in the enforcement proceedings.

         ¶6 The Kellins filed petitions for review from Kellin I, Kellin II, and Kellin III. On July 8, 2019, the Arizona Supreme Court denied Kellin's petition for review from Kellin I. Whether this court correctly resolved the issue in Kellin I is not subject to further review. Therefore, the holding that the Kellins' community property can be used to satisfy Banner's deficiency judgment is final.

         ¶7 The proceedings at issue in this special action occurred during and shortly after the appeals in Kellin II and Kellin III. Banner filed applications for writs of garnishment against BMO and Betterment, alleging that each financial institution was "holding nonexempt monies on behalf of [Kellin]." A.R.S. § 12-1572(2)(b). After litigation over Kellin's objections and motions to quash the writs of garnishment, the court entered judgment against garnishee BMO for $72, 744.31 and garnishee Betterment for $409, 385.83. Kellin filed notices of appeal from both judgments and moved to set or waive a supersedeas bond to stay enforcement of the judgments under Rule 7. Kellin argued that under Rule 7(a)(6), the court was not required to set supersedeas bonds for each judgment because the garnished funds themselves, which would remain frozen in BMO and Betterment's possession, were an adequate bond. In response, Banner argued that the court was required to set the supersedeas bond for each judgment at the respective amounts awarded under Rule 7(a)(4). In the alternative, Banner argued that under Rule 7(a)(9) the court should set the bond for each judgment at the respective amounts awarded because of overwhelming evidence that "the Kellins have attempted to intentionally dissipate and conceal assets to avoid paying [the Utah] Judgment."

         ¶8 After considering the argument regarding the motions for a stay, the court issued the following order:

Based upon the matters presented today, the review of all pleadings, and pursuant to A.R.S. ...

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