Lattin v. Shamrock ( 2021 )

NOTICE: NOT FOR OFFICIAL PUBLICATION.
UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL
AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.
IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE
KRISTI LATTIN, Plaintiff/Appellee,
v.
SHAMROCK MATERIALS LLC, et al., Defendants/Appellants.
No. 1 CA-CV 20-0245
FILED 1-7-2021
Appeal from the Superior Court in Maricopa County
No. CV2017-011398
The Honorable Lindsay P. Abramson, Judge Pro Tempore
AFFIRMED
COUNSEL
Brier Irish Hubbard & Erhart PLC, Phoenix
By Teresa H. Foster
Counsel for Plaintiff/Appellee
Sacks Tierney PA, Scottsdale
By Patrick J. VanZanen, Michael L. Kitchen
Counsel for Defendants/Appellants
LATTIN v. SHAMROCK, et al.
Decision of the Court
MEMORANDUM DECISION
Judge Jennifer M. Perkins delivered the decision of the Court, in which
Presiding Judge Jennifer B. Campbell and Judge Maurice Portley1 joined.
P E R K I N S, Judge:
¶1 Shamrock Materials LLC, Diana Gignac, and Daniel Gignac
(collectively, “Shamrock”), appeal from the superior court’s ruling
quashing a writ of garnishment. For the following reasons, we affirm.
FACTUAL AND PROCEDURAL BACKGROUND
¶2 In 2005, Kristi Lattin, Diana Gignac, and Carol Lee Ortega-
McCann, formed Shamrock Materials LLC. Before ratifying an operating
agreement, the parties discussed providing Lattin with an option to become
a member as opposed to making her a member outright. The parties
articulated this arrangement via a provision in a Profit Participation
Agreement (“PPA”). Under the terms of the PPA, Lattin received the option
to convert her profit interest into an equal membership interest in exchange
for one dollar. The PPA also contained a fee-shifting provision: “[i]n the
event that any Party shall commence any legal proceedings for the
enforcement of this Agreement, the prevailing party shall be entitled, . . . ,
all of his or its costs and expenses in connection with such action, including,
. . . , a reasonable sum as and for attorneys’ fees.” The parties executed the
PPA in January 2006. The PPA expressly stated that each party contracted
as a married woman, dealing with her sole and separate property.
¶3 In 2008, Ortega-McCann terminated her membership interest
in Shamrock Materials LLC. Lattin and Gignac redeemed Ortega-McCann’s
interest pursuant to a Membership Interest Redemption Agreement. At that
time, Lattin and Gignac amended the PPA to reflect their increased profit
interests after Ortega-McCann’s departure.
1The Honorable Maurice Portley, Retired Judge of the Court of Appeals,
Division One, has been authorized to sit in this matter pursuant to Article
6, Section 3, of the Arizona Constitution.
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LATTIN v. SHAMROCK, et al.
Decision of the Court
¶4 In August 2017, Lattin sued Shamrock alleging various
claims, including breach of contract, unjust enrichment, and conversion. In
its answer, Shamrock requested attorneys’ fees and costs against Lattin and
her husband (“Husband”) “based upon [Husband] soon being named a
necessary party.” Shamrock did not raise any counterclaims and did not
join Husband.
¶5 In June 2018, Lattin amended her original complaint. In its
subsequent answer, Shamrock again requested attorneys’ fees against
Lattin and Husband anticipating Husband’s joinder as a necessary party.
Shamrock did not raise any counterclaims and never joined Husband.
¶6 In September 2019, the superior court entered judgment in
favor of Shamrock on all claims. The court awarded Shamrock attorneys’
fees of $129,094.18 and taxable costs of $1,687.95 under the PPA’s fee-
shifting provision.
¶7 After prevailing in its defense against Lattin, Shamrock
sought to collects its attorneys’ fees and costs. During judgment
enforcement proceedings, the superior court directed the parties to file
simultaneous briefs addressing whether Shamrock could enforce its
judgment against Lattin’s community property. The court then concluded
that Shamrock could examine and question Lattin about her community
property. But the court declined to address whether community property
could be “garnished, attached, or otherwise forced to pay the underlying
judgment” because it found the issue not ripe.
¶8 In February 2020, Shamrock garnished Lattin’s bank account
which Lattin claimed contained community assets. Lattin applied for an
order to show cause why Shamrock should not be enjoined from attaching
her community property. The superior court then quashed the garnishment
and ruled that the judgment against Lattin could not be enforced against
Lattin’s community property.
¶9 Shamrock timely appealed. We have jurisdiction pursuant to
A.R.S. § 12-2101(A)(5)(c).
DISCUSSION
¶10 This appeal turns on whether A.R.S. § 25-215(D) requires a
defendant pursuing attorneys’ fees, after successfully defending a claim
from a plaintiff who sued in her name only, to join the plaintiff’s spouse in
order to reach the plaintiff’s community property. We generally review the
superior court’s garnishment judgment for an abuse of discretion. Carey v.
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LATTIN v. SHAMROCK, et al.
Decision of the Court
Soucy, 245 Ariz. 547, 552, ¶ 19 (App. 2018). We review issues of statutory
interpretation de novo. McGovern v. McGovern, 201 Ariz. 172, 175, ¶ 6 (App.
2001).
¶11 Shamrock argues the superior court erred in finding that a
judgment solely against Lattin precludes enforcement of the judgment
against the couple’s community assets.
¶12 In most circumstances, either spouse can control and
encumber the assets of the marital community. See A.R.S. § 25-214(B) (“The
spouses have equal management, control, and disposition rights over their
community property and have equal power to bind the community.”).
Under A.R.S. § 25-214(C), either spouse may bind the community
unilaterally, subject to three exceptions that do not apply here.
¶13 In an action on a community debt or obligation falling outside
the three exceptions, “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.” A.R.S. § 25-215(D).
¶14 The initial question is whether the judgment against Lattin is
a community debt or obligation. “Generally, all debts incurred during
marriage are presumed to be community obligations unless there is clear
and convincing evidence to the contrary.” Schlaefer v. Fin. Mgmt. Serv., Inc.,
196 Ariz. 336, 339, ¶ 10 (App. 2000). “‘[T]he test of whether an obligation is
a community debt’ is whether the obligation is ‘intended to benefit the
community.’” Cardinal & Stachel, P.C. v. Curtiss, 225 Ariz. 381, 383, ¶ 7 (App.
2010) (quoting Schlaefer, 196 Ariz. at 339, ¶ 10). The question of intent is an
issue of fact, left to the trier of fact. Chopin v. Chopin, 224 Ariz. 425, 428, ¶ 7
(App. 2010).
¶15 The superior court did not make factual findings as to
whether the judgment against Lattin is a community debt or obligation.
Instead, the superior court limited its finding to Shamrock’s inability to
garnish the couple’s community property absent a judgment against
Husband. Even assuming, without deciding, that the judgment against
Lattin amounts to a community debt, Shamrock failed to pursue the debt in
accordance with A.R.S. § 12-215(D).
¶16 The plain language of A.R.S. § 25-215(D) requires a party
seeking recourse from community assets to join both spouses. Shamrock
first argues that A.R.S. § 25-215(D) does not require joinder of Lattin’s
Husband because Shamrock never “sued” Lattin. That Shamrock did not
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LATTIN v. SHAMROCK, et al.
Decision of the Court
initiate the suit ultimately resulting in the judgment against Lattin does not
negate the procedural requirement that both spouses be joined in order to
access the couple’s community assets. See C & J Travel, Inc. v. Shumway, 161
Ariz. 33, 36 (App. 1989) (“[A.R.S. § 25-215(D)] require[es] joinder of both
spouses in order to make the community liable.”)
¶17 Notably, several procedural alternatives existed to join
Husband throughout litigation. Shamrock acknowledges as much. In its
initial answer, Shamrock expressly sought attorneys’ fees and costs against
Lattin and Husband. Evidently anticipating that it would join Husband as
a necessary party to the litigation, Shamrock stated: “it is really [Husband]
who is the interested party here, not Plaintiff Lattin, and it is their
community property at interest here, not Plaintiff’s separate property, and
[Husband] is a proper and necessary party to this litigation.” Even after
Lattin amended her original complaint, Shamrock repeated these same
assertions yet never joined Husband. Shamrock’s failure to join Husband
before the superior court entered judgment against Lattin forecloses its
ability to garnish Lattin’s community property. The superior court did not
err.
¶18 Both parties request attorneys’ fees and costs under the
parties’ PPA. As the prevailing party, we award Lattin reasonable
attorneys’ fees on appeal subject to her compliance with ARCAP 21.
CONCLUSION
¶19 We affirm.
AMY M. WOOD • Clerk of the Court
FILED: AA
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