United States District Court, D. Arizona
Crestwood Capital Corporation, Plaintiff and Judgment Creditor,
Andes Industries Inc., Defendant and Judgment Debtor. Garnishee PCT International, Inc. Devon Investment, Inc., Plaintiff and Judgment Creditor,
Andes Industries, Inc., Defendant and Judgment Debtor. Garnishee PCT International, Inc. Andes Industries, Inc., and PCT International, Inc., Plaintiffs and Judgment Debtors,,
EZconn Corporation and eGTran Corporation, Defendants and Judgment Creditors. Garnishee PCT International, Inc.
V. WAKE, SENIOR UNITED STATES DISTRICT JUDGE
and Judgment Creditors Crestwood Capital Corporation
(“Crestwood”) and Devon Investment, Inc.
(“Devon”) purport to withdraw their respective
supplements to their replies to Andes Industries, Inc.'s
(“Andes”) Objection to Writ of Garnishment (Doc.
382, CV-15-00600; Doc. 113, CV-15-00604), along with the
supporting declarations and exhibits thereto (Docs. 382-1,
382-2, CV-15-00600; Docs. 113-1, 113-2, CV-15-00604) without
explanation. Those attempted withdrawals are rejected.
Moreover, a withdrawal would have no significance anyway.
Background and the Pending Matters
only matters before the Court for decision are: Judgment
Debtor Andes' Objection to Writ of Garnishment and
Request for Hearing in Crestwood Capital Corporation v.
Andes Industries, Inc., No. CV-15-00600 (Doc. 359);
Andes' Objection to Writ of Garnishment and Request for
Hearing in Devon Investment, Inc. v. Andes Industries,
Inc., No. CV-15-00604 (Doc. 90); and Andes'
Objection to Writ of Garnishment and Request for Hearing in
Andes Industries, Inc. and PCT International, Inc. v.
EZconn Corporation and eGTran Corporation, No.
CV-15-01810 (Doc. 76) (together, the
“Objections”). The garnishing creditors,
Crestwood, Devon, EZconn Corporation, and eGTran Corporation
are collectively referred to as the Judgment Creditors.
actions are three of six related, previously-consolidated,
actions that have been the subject of over a dozen
substantive orders of the Court and a half-dozen decisions of
the Court of Appeals.
four of the actions were brought on loans of nearly $9
million and unpaid invoices of $6.6 million (plus
pre-judgment interest). The debtors brought the other two
actions to offset those liabilities with other claims of the
debtors. Summary judgment was granted in favor of the lender
or seller and against the borrower or purchaser in the four
collection actions and in favor of the lender or seller
against all the offset claims. The Court of Appeals affirmed
all the judgments in the six actions, save for two relating
to attorneys' fees awards.
Objections concern Judgment Creditors' attempts to
collect on their judgments by garnishing Andes' shares in
garnishee PCT International, Inc. (“PCT”),
Andes' wholly owned subsidiary. The Court held oral
argument on the Objections on November 6, 2019 (Doc. 381,
CV-15-00600; Doc. 112, CV-15-00604; Doc. 115, CV-15-01810).
The substantive dispute is whether Nevada law, under which
Andes' shares in PCT would be exempt from execution, or
Arizona law, under which they would not be exempt, applies.
At the oral argument, the Court rejected the Judgment
Creditors' contention that Rule 69(a)(1), Federal Rules
of Civil Procedure, mandates the application of Arizona law
to the exemption question but also made clear that Arizona
substantive law applies under Arizona's choice of law
rules (though not under the force of Rule 69).
oral argument, Andes and PCT also pressed the point, first
raised in their reply briefs, that Andes (the alleged holder
of the stock certificate), and not PCT (the issuing
corporation), is the proper garnishee of the stock interest,
relying on the case of Tryon v. Silverstein, 10
Ariz.App. 25, 455 P.2d 474 (Ct. App. 1969). On November 19,
2019, Crestwood and Devon each filed a Second Supplement to
their respective replies to Andes Industries, Inc.'s
Objection to Writ of Garnishment, along with supporting
declarations and exhibits (Docs. 382, 382-1, 382-2,
CV-15-00600; Docs. 113, 113-1, 113-2, CV-15-00604), which
presented intervening Arizona statutes that overturned the
holding of Tryon and re-established that garnishment
of a certificated share in corporate stock may be addressed
to the issuing corporation, even if the stock certificate is
held by another person. (In effect, the garnishment can be
addressed to either the issuing corporation or the holder of
the certificate, with some differences in effect.) Crestwood
and Devon also presented evidence that PCT's directors
and officers are the same as Andes'. Those facts are
contained in judicially noticeable records of the Arizona
to the Court, on November 15, 2019, Crestwood and others
filed involuntary petitions in bankruptcy against Andes and
PCT. The Court first learned of this when Andes and PCT filed
notices of bankruptcy on December 3, 2019 (Doc. 383,
15-CV-00600; Doc. 114, CV-15-00604; Doc. 116, CV-15-01810).
The Court was ready to file a merits ruling on the Objections
that day, but the automatic stay prevented that filing. The
Court admonishes counsel for the Judgment Creditors, Mr.
Greer Shaw, for not timely informing the Court of his
bankruptcy filing, and thus having the Court waste valuable
judicial resources by continuing to examine the Objections
for weeks after the stay was imposed.
on December 3, 2019, Crestwood and Devon each filed a Notice
of Withdrawal of their respective second supplements to their
replies to Andes Industries, Inc.'s Objection to Writ of
Garnishment (Doc. 384, CV-15-00600; Doc. 115, CV-15-00604).
Perhaps the withdrawal of the supplements was in contrition
for violating the bankruptcy stay by filing them, but
withdrawing citations to controlling statutes does not
eliminate those statutes from any court's consideration.
Similarly, the fact that Andes and PCT have the same
directors and officers is judicially noticeable from the
records of the Corporation Commission.
before the filing of the Second Supplement, the Court was
aware of the intervening statutes that overturned the holding
of Tryon: that a writ of garnishment cannot be
addressed to the issuing corporation for certificated stock
shares if the certificate is held by someone other than the
issuing corporation. The effect of the intervening statutes
is that the service of the writs of garnishment on the
issuing corporation establishes the garnishment lien on the
shares of PCT, a point that will be of great significance in
the bankruptcy proceedings, whether under Chapter 7 or
withdrawal of citations to controlling statutes does not
negate those statutes. Nor does the withdrawal of reference
to judicially noticeable facts eliminate those facts.
THEREFORE ORDERED that the Notice of Withdrawal of Second
Supplement to Crestwood Capital Corporation's Reply to
Andes Industries, Inc.'s Objection to Writ of Garnishment
(Doc. 384, CV-15-00600) is denied and the record stands.
FURTHER ORDERED that the Notice of Withdrawal of Second
Supplement to Devon Investment, Inc.'s Reply to Andes
Industries, Inc.'s Objection to Writ of Garnishment ...