Kristi Lattin v. Shamrock Materials LLC ( 2022 )

IN THE
SUPREME COURT OF THE STATE OF ARIZONA
KRISTI LATTIN,
Plaintiff/Appellee,
v.
SHAMROCK MATERIALS, LLC, ET AL.,
Defendants/Appellants.
No. CV-21-0031-PR
Filed February 3, 2022
Appeal from the Superior Court in Maricopa County
The Honorable Lindsay P. Abramson, Judge Pro Tempore
No. CV2017-011398
REVERSED AND REMANDED
Memorandum Decision of the Court of Appeals,
Division One
1 CA-CV 20-0245
Filed January 7, 2021
REVERSED
COUNSEL:
Michael L. Kitchen, Patrick J. Van Zanen (argued), Sacks Tierney P.A.,
Scottsdale, Attorneys for Shamrock Materials, LLC, et al.
Teresa H. Foster (argued), Brier, Irish & Hubbard, P.L.C., Phoenix,
Attorneys for Kristi Lattin
LATTIN V. SHAMROCK, ET AL.
Opinion of the Court
VICE CHIEF JUSTICE TIMMER authored the opinion of the Court, in which
JUSTICES BOLICK, LOPEZ, BEENE, MONTGOMERY, KING, and
PELANDER (RETIRED) joined. *
VICE CHIEF JUSTICE TIMMER, opinion of the Court:
¶1 Kristi Lattin did not prevail in this action, which she filed as
“a married woman dealing with her own separate property” against
Shamrock Materials, LLC, an LLC member, and the member’s husband
(collectively, “Shamrock”). The trial court entered judgment for
Shamrock and awarded it attorney fees and costs as the prevailing party.
Shamrock then sought to garnish a bank account jointly owned by Lattin
and her husband, Robert DeRuiter, who was not a party to the lawsuit.
Pursuant to A.R.S. § 25-215(D), spouses must be sued jointly in any “action
on [a community] debt or obligation.” The issue here is whether
§ 25-215(D) required Shamrock to join DeRuiter in the case to execute its
judgment for attorney fees and costs against community assets. We hold
that § 25-215(D) did not require joinder, and the trial court therefore erred
by quashing the writ of garnishment on that basis.
BACKGROUND
¶2 Shamrock procures and resells concrete and construction
materials. In 2006, Shamrock, its members, and Lattin entered into a Profit
Participation Agreement (“Agreement”), which granted Lattin a share of
Shamrock’s profits and the option of becoming a member. The Agreement
states that Lattin contracted as “a married woman dealing with her sole and
separate property.” It also provides that if any party “commence[s] any
legal proceedings for the enforcement of [the] Agreement, the prevailing
[p]arty shall be entitled” to all costs and reasonable attorney fees.
¶3 In 2017, Lattin sued Shamrock for breach of contract and
related claims. Shamrock answered and requested an award of attorney
fees and costs pursuant to the Agreement and any applicable statute against
*
Chief Justice Brutinel is recused from this matter. Pursuant to article
6, section 3 of the Arizona Constitution, Justice John Pelander (Ret.) of the
Arizona Supreme Court was designated to sit in this matter.
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LATTIN V. SHAMROCK, ET AL.
Opinion of the Court
Lattin and DeRuiter “based upon Mr. DeRuiter soon being named a
necessary party.” Despite this assertion, Shamrock never joined DeRuiter
in the case.
¶4 Shamrock prevailed, and the court awarded it more than
$130,000 in attorney fees and costs against Lattin pursuant to the
Agreement. Shamrock executed the judgment by serving a writ of
garnishment on Wells Fargo Bank to pay Shamrock the funds held in Lattin
and DeRuiter’s joint bank account. Lattin moved the trial court to enjoin
the garnishment proceedings, arguing that Shamrock could not garnish
community funds to satisfy her sole and separate debt. The court did not
decide whether the judgment was a separate or community debt or
obligation but quashed the garnishment because the judgment was not
entered against DeRuiter.
¶5 The court of appeals affirmed. Lattin v. Shamrock Materials
LLC, No. 1 CA-CV 20-0245, 2021 WL 58137, at *1 ¶ 1 (Ariz. App. Jan. 7, 2021)
(mem. decision). It reasoned that even assuming the judgment’s fee and
cost award was a community debt or obligation, Shamrock was foreclosed
from garnishing the bank account because it had not joined DeRuiter in the
lawsuit as required by § 25-215(D). See id. at *2 ¶¶ 15–16.
¶6 We granted review to decide whether a defendant seeking an
award of attorney fees and costs in a lawsuit filed by a married plaintiff
must join the plaintiff’s spouse to later execute a judgment for fees and costs
against the plaintiff’s community assets, a recurring issue of statewide
importance.
DISCUSSION & ANALYSIS
¶7 Section 25-215(D) provides:
Except as prohibited in § 25-214, either spouse may contract
debts and otherwise act for the benefit of the community. In
an action on such a debt or obligation the spouses shall be sued
jointly and the debt or obligation shall be satisfied: first, from
the community property, and second, from the separate
property of the spouse contracting the debt or obligation.
(Emphasis added.) Joining spouses in an action on a community debt or
obligation gives each spouse “notice and an opportunity to defend.” Vikse
v. Johnson, 137 Ariz. 528, 530 (App. 1983); see also Eng v. Stein, 123 Ariz. 343,
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LATTIN V. SHAMROCK, ET AL.
Opinion of the Court
345–46 (1979) (applying § 25-215(D) and holding that a judgment could not
bind a wife or the couple’s community because the plaintiff sued only the
husband on a community obligation).
¶8 Shamrock asserts that the above-highlighted language in
§ 25-215(D) requires a party to join a spouse only when suing the other
spouse on a community debt or obligation. Because Shamrock did not sue
Lattin for an award of attorney fees and costs, Shamrock argues § 25-215(D)
is inapplicable. Lattin counters § 25-215(D) requires the non-party
spouse’s joinder before judgment to enable the judgment creditor to execute
against community assets, and Shamrock’s failure to join DeRuiter in the
lawsuit therefore forecloses its ability to garnish the Wells Fargo Bank
account.
¶9 We review the meaning of § 25-215(D) de novo. See Nicaise
v. Sundaram, 245 Ariz. 566, 567 ¶ 6 (2019). We effectuate any clear and
unambiguous text without resort to secondary interpretive principles. See
BSI Holdings, LLC v. Ariz. Dep’t of Transp., 244 Ariz. 17, 19 ¶ 9 (2018); State v.
Burbey, 243 Ariz. 145, 147 ¶ 7 (2017). In determining whether a statute is
ambiguous, we read words in context to determine their meaning.
Stambaugh v. Killian, 242 Ariz. 508, 509 ¶ 7 (2017).
¶10 What constitutes an “action on [a community] debt or
obligation” under § 25-215(D)? Unless the context provides otherwise, an
“action” includes “any matter or proceeding in a court, civil or criminal.”
A.R.S. § 1-215(1). Because the “action” in § 25-215(D) is “on [a
community] debt or obligation” and requires the spouses to be “sued
jointly” for the complainant to recover damages from community assets,
the phrase plainly means a cause of action based on a community debt or
obligation that can result in a damage award. See Eng, 123 Ariz. at 345(“The statute refers to a [c]ause of action being brought against both
husband and wife.”). Thus, a party seeking damages from community
assets for an unpaid debt or breach of an obligation must join both spouses
when asserting a cause of action, whether by complaint, counterclaim,
crossclaim, or third-party complaint. See id.; § 25-215(D).
¶11 Applying § 25-215(D)’s plain meaning, we agree with
Shamrock that seeking an award of attorney fees for the successful defense
of a complaint filed by a married plaintiff is not an “action on [a
community] debt or obligation” under § 25-215(D). First, until the trial
court enters a judgment for attorney fees and costs for the defendant, there
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LATTIN V. SHAMROCK, ET AL.
Opinion of the Court
is no debt or obligation to sue on. See Eng, 123 Ariz. at 345 (“The cause of
action in this case did not arise when the contract was formed but only after
the contract had been breached.”). This scenario is thus distinguishable
from the ones in Eng and other cases Lattin cites, where the plaintiffs sued
only one spouse on an existing community debt or obligation and were
thereby foreclosed by § 25-215(D) from executing their judgments against
community assets. See id.; Vikse, 137 Ariz. at 529–30; C & J Travel, Inc. v.
Shumway, 161 Ariz. 33, 34 (App. 1989); Spudnuts, Inc. v. Lane, 139 Ariz. 35,
36 (App. 1984).
¶12 Second, a request for attorney fees and costs after successfully
defending a lawsuit is not itself a cause of action. A defendant is not
required to sue a plaintiff to obtain a judgment for attorney fees and costs.
See A.R.S. § 12-341 (imposing automatic award of costs to the successful
party); Ariz. R. Civ. P. 54(g)(1) (“A claim for attorney’s fees must be made
in the pleadings or in a Rule 12 motion filed before the movant’s responsive
pleading.”). Logically, then, a defendant is not required to sue the
plaintiff’s spouse to recover fees and costs. Relatedly, even if the
defendant joins the plaintiff’s spouse for the purpose of seeking attorney
fees and costs, as Lattin asserts should occur, § 25-215 would not be satisfied
because the couple would not have been “sued jointly.”
¶13 Lattin asserted during oral argument here that Shamrock was
also required to join DeRuiter in the lawsuit before entry of the judgment
to avoid violating his due process rights. We disagree. If Lattin’s lawsuit
sought to enforce an obligation owed to the marital community, Lattin
could separately bind the community to any judgment, making DeRuiter’s
joinder unnecessary. See A.R.S. § 25-214(C) (stating that with exceptions
not applicable here, “[e]ither spouse separately may acquire, manage,
control or dispose of community property or bind the community”). Also,
whether the judgment is Lattin’s sole and separate debt or a community
debt was not resolved by entry of that judgment and, indeed, has yet to be
resolved. That issue arose only after the debt was incurred by entry of the
judgment, placing DeRuiter’s community assets at risk for the first time.
¶14 DeRuiter must be given “the opportunity to be heard at a
meaningful time and in a meaningful manner” before a court can deprive
him of his interest in the Wells Fargo Bank account. See Nat’l Union Fire
Ins. Co. of Pittsburgh v. Greene, 195 Ariz. 105, 110 ¶ 20 (App. 1999); see also
Baker v. Univ. Physicians Healthcare, 231 Ariz. 379, 388 ¶ 36 (2013) (describing
due process as giving a party “a meaningful opportunity to be heard”); U.S.
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LATTIN V. SHAMROCK, ET AL.
Opinion of the Court
Const. amends. V, XIV; Ariz. Const. art. 2, § 4. The time became
“meaningful” when Shamrock garnished the Wells Fargo Bank account.
See Nat’l Union Fire Ins. Co., 195 Ariz. at 110 ¶ 20 (concluding that spouse
who was not a party to a foreign judgment had a meaningful opportunity
to contest that the judgment was a community debt after writs of
garnishments were issued against a community bank account in Arizona).
Wells Fargo Bank notified DeRuiter of the garnishment proceedings as a
joint owner of the account, and he can now intervene in the garnishment
proceedings to argue that the debt is Lattin’s alone. See id. at 111 ¶ 23.
Lattin, who has an equal interest in community assets and has already
moved to quash the writ of garnishment because the judgment is her sole
and separate debt, can renew her argument on remand. See id. at 110 ¶ 20.
¶15 In sum, neither § 25-215(D) nor due process requires a
defendant seeking an award of attorney fees and costs from a married
plaintiff to join the plaintiff’s spouse in the lawsuit to entitle it to later
execute a judgment against community assets. If the court enters a
judgment for attorney fees and costs in favor of the defendant, the plaintiff’s
spouse may intervene in any subsequent attempt to execute the judgment
against community assets to argue the judgment is the plaintiff’s sole and
separate obligation, and community assets cannot be used to satisfy the
judgment.
¶16 For these reasons, the trial court incorrectly quashed the writ
of garnishment based on Shamrock’s failure to join DeRuiter in the lawsuit
before entry of the judgment. On remand, the court should rule on
Lattin’s argument that the judgment is her sole and separate obligation. It
should also permit DeRuiter to intervene in the proceedings to contest the
judgment’s character as a community obligation.
¶17 Lattin requests an award of attorney fees pursuant to the
Agreement or A.R.S. § 12-341.01. Because she has not prevailed here, we
deny her request. Shamrock requests an award of attorney fees in this
Court pursuant to the Agreement, which requires a fee award for the party
prevailing in “any legal proceedings for the enforcement of [the]
Agreement.” Because Shamrock has not yet prevailed in establishing its
entitlement to garnish the Wells Fargo Bank account, we deny this request
without prejudice to renewing it before the trial court at the conclusion of
proceedings.
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LATTIN V. SHAMROCK, ET AL.
Opinion of the Court
CONCLUSION
¶18 For the forgoing reasons, we reverse the court of appeals’
decision, reverse the trial court’s order quashing the writ of garnishment,
and remand to the trial court for further proceedings.
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