Robert Wallace v. Hon. James D. smith/cruz

IN THE
SUPREME COURT OF THE STATE OF ARIZONA
ROBERT WALLACE,
Petitioner,
v.
HON. JAMES D. SMITH, JUDGE OF THE SUPERIOR COURT OF THE STATE OF
ARIZONA, IN AND FOR THE COUNTY OF MARICOPA,
Respondent Judge,
CHRISTIAN NAVA CRUZ, A SINGLE INDIVIDUAL; IMPALA ENTERPRISES L.L.C.,
AN ARIZONA LIMITED LIABILITY CORPORATION, DBA EL TUBO TUBO,
Real Parties in Interest.
No. CV-22-0143-SA
Filed July 25, 2023
Special Action from the Superior Court in Maricopa County
No. CV2020-001923
AFFIRMED
COUNSEL:
Kimberly A. Eckert, Law Offices of Kimberly A. Eckert, Tempe, Attorney
for Robert Wallace
Fabian Zazueta, Garrett Respondek, Zazueta Law, PLLC, Scottsdale,
Attorneys for Christian Nava Cruz and Impala Enterprises LLC, dba El
Tubo Tubo
CHIEF JUSTICE BRUTINEL authored the Opinion of the Court, in which
VICE CHIEF JUSTICE TIMMER and JUSTICES BOLICK, LOPEZ, BEENE,
MONTGOMERY and KING joined.
WALLACE v. HON. SMITH/NAVA CRUZ ET AL.
Opinion of the Court
CHIEF JUSTICE BRUTINEL, Opinion of the Court:
¶1 This case requires us to resolve a conflict between a court rule
and a statute. Arizona Rule of Civil Appellate Procedure
(“ARCAP”) 7(a)(4)(A) instructs courts to include “damages, costs,
attorney’s fees, and prejudgment interest” when setting the amount of a
supersedeas bond. Conversely, A.R.S. § 12-2108(A)(1) instructs courts to
only include damages. In short, ARCAP 7(a)(4)(A) and § 12-2108(A)(1) are
in direct conflict. We resolve this conflict in favor of the rule, because the
process for determining the amount of a supersedeas bond is a procedural
matter within the purview of the judicial branch. Ariz. Const. art. 6, § 5(5).
I. BACKGROUND
¶2 Upon entry of a civil judgment, a plaintiff may immediately
attempt to enforce that judgment. To prevent this, a defendant who intends
to appeal may stay enforcement of the judgment by posting a supersedeas
bond. Supersedeas bonds have long been regulated by court rules in
Arizona. See, e.g., Anderson v. Pickrell, 115 Ariz. 589, 590 (1977). But, in 2011,
the legislature sought to alter Arizona’s supersedeas-bond scheme by
enacting § 12–2108, which in relevant part states that supersedeas bonds
“shall be set as the lesser” of: (1) “The total amount of damages awarded
excluding punitive damages”; (2) “Fifty per cent of the appellant’s net
worth”; or (3) “Twenty-five million dollars.” Arizona’s supersedeas-bond
rule, ARCAP 7, was initially updated to “track the statute’s language,” City
Ctr. Exec. Plaza, LLC v. Jantzen, 237 Ariz. 37, 41 ¶ 10 (App. 2015), but the
Court amended the rule in 2018. See generally ARCAP 7. Pertinent to this
case, ARCAP 7(a)(4) now states:
[I]f the judgment includes a monetary award, the amount of
the bond relating to the monetary award must be the lowest
of the following:
(A) the total amount of damages, costs, attorney’s fees, and
prejudgment interest included in the judgment when
entered, excluding punitive damages;
(B) fifty percent of the net worth of the party seeking the
stay; or
(C) twenty-five million dollars.
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Opinion of the Court
(Emphasis added.) Although otherwise identical to the statute,
ARCAP 7(a)(4)(A) instructs courts setting the amount of a supersedeas
bond to include “costs, attorney’s fees, and prejudgment interest,”
alongside § 12-2108(A)(1)’s requirement to only consider “[t]he total
amount of damages.”
¶3 In this case, the superior court entered judgment against
Robert Wallace for wrongfully filing a UCC-1 lien. The court awarded
$500.00 in statutory damages, $38,322.04 in attorney fees, and $338.51 in
taxable costs to Real Parties in Interest, Christian Cruz et al. Wallace filed
a notice of appeal and asked the court to set a supersedeas bond at $0,
contending that there were no damages and thus $0 was the proper bond
amount under § 12-2108(A)(1). But the court calculated the bond as
directed by ARCAP 7(a)(4)(A), including the statutory damages, attorney
fees, and costs. In so doing, the court acknowledged the “tension” between
§ 12-2108(A)(1) and ARCAP 7(a)(4)(A) but refused to find that
ARCAP 7(a)(4)(A) is an “impermissible rule of appellate procedure.”
Wallace subsequently posted the bond and then filed a petition for special
action in this Court challenging the validity of the rule. This is an issue of
statewide importance likely to recur. We have jurisdiction under article 6,
section 5(3) of the Arizona Constitution.
II. DISCUSSION
¶4 The question before this Court is whether the trial court
should have followed § 12-2108(A)(1) or ARCAP 7(a)(4)(A). We review this
question of law de novo. State v. Hansen, 215 Ariz. 287, 289 ¶ 6 (2007). In
doing so we follow the framework set forth in Seisinger v. Siebel, 220 Ariz.
85, 91–92 ¶¶ 24–27 (2009). We will first consider whether the statute and
court rule can be harmonized and, if not, we will turn to whether the subject
regulated by the statute—the amount of a supersedeas bond—is procedural
or substantive.
A.
¶5 Seisinger recognized that just as the legislature has broad
substantive lawmaking power, subject only to constitutional restraints, this
Court may develop the substantive law. Id. at 92 ¶¶ 26–27. Similarly, both
this Court and the legislature have procedural rulemaking power, but
pursuant to article 6, section 5(5) of the Arizona Constitution, in the event
of a conflict, our rule prevails. Id. at 89 ¶ 8. Accordingly, consistent with
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WALLACE v. HON. SMITH/NAVA CRUZ ET AL.
Opinion of the Court
our jurisprudential duty to construe statutes in a way that does not render
them unconstitutional, we first consider whether § 12-2108(A)(1) and
ARCAP 7(a)(4)(A) can be harmonized. Id. ¶ 11. We will not, however,
ignore the plain meaning of statutory text: when a statute’s “language is
clear and unequivocal, it is determinative of the statute’s construction.”
Deer Valley Unified Sch. Dist. No. 97 v. Houser, 214 Ariz. 293, 296 ¶ 8 (2007)
(quoting Janson v. Christensen, 167 Ariz. 470, 471 (1991)).
¶6 Here, the plain text of § 12-2108(A)(1) and ARCAP 7(a)(4)(A)
directly conflict and cannot be harmonized. The statute instructs courts to
include the “total amount of damages awarded” to determine the amount
of a supersedeas bond, § 12-2108(A)(1), whereas the rule instructs courts to
include “the total amount of damages, costs, attorney’s fees, and
prejudgment interest included in the judgment when entered,”
ARCAP 7(a)(4)(A). If a court calculates a supersedeas bond in accordance
with the court rule, the bond amount will necessarily be heftier than one
calculated pursuant to the statute, assuming the judgment includes
attorney fees. By instructing courts to factor in more than damages,
ARCAP 7(a)(4)(A) is at odds with § 12-2108(A)(1).
¶7 Cruz argues that because the statute does not define the term
“damages” it can be interpreted to include costs, attorney fees, and
prejudgment interest. However, the term “damages” in § 12-2108(A)(1)
cannot be read so broadly. Foremost, attorney fees have been understood
as being distinct from damages for at least half a century. See U.S. Fid. &
Guar. Co. v. Frohmiller, 71 Ariz. 377, 381 (1951). And dictionary definitions
consistently differentiate damages from noncompensatory awards such as
attorney fees and costs, describing damages “as compensation for loss or
injury.” Damages, Black’s Law Dictionary (11th ed. 2019); accord Damages,
Merriam-Webster, https://www.merriam-webster.com/dictionary/
damages (last visited July 21, 2023) (defining damages as “compensation in
money imposed by law for loss or injury”). Put simply, the term “damages”
has a technical meaning that should not be lightly discarded. See A.R.S.
§ 1-213 (“Technical words and phrases and those which have acquired a
peculiar and appropriate meaning in the law shall be construed according
to such peculiar and appropriate meaning.”).
¶8 Cruz also contends that ARCAP 7(a)(4)(A) simply fills a
“procedural gap that was missing from the statute”—it prevents courts
from being required to set nominal supersedeas bonds in cases involving
low damages awards and high attorney fees. See City Ctr. Exec. Plaza, LLC,
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WALLACE v. HON. SMITH/NAVA CRUZ ET AL.
Opinion of the Court
237 Ariz. at 43 ¶ 17 (approving a $1 supersedeas bond in a case involving
$1 in damages and over $2 million in attorney fees); Chula Vista Homeowners
Ass’n v. Irwin, 245 Ariz. 249, 250–51 ¶ 1, 5 (App. 2018) (approving a
$5,000 supersedeas bond in case involving $5,000 in damages, $318 in costs,
and $35,000 in attorney fees). To be sure, some of the 2018 changes to
ARCAP 7 addressed procedural gaps that arose after § 12-2108 was
enacted. See, e.g., ARCAP 7(a)(5) (providing guidance for judgments
involving “the recovery of an interest in real or personal property”);
ARCAP 7(a)(6) (providing guidance for family-court judgments).
However, ARCAP 7(a)(4)(A) goes beyond merely filling a “procedural
vacuum.” See In re $11,660.00 U.S. Currency, 251 Ariz. 106, 109 ¶ 13 (App.
2021). It directly contradicts § 12-2108(A)(1)’s command to include only
damages. Again, the plain text of the rule cannot be reconciled as merely
clarifying the statute.
B.
¶9 We therefore turn to whether the challenged statutory
provision is substantive or procedural. Seisinger, 220 Ariz. at 91 ¶ 24. This
inquiry is rooted in our system of separation of powers. Id. at 92 ¶ 26. The
Arizona Constitution vests the “legislative authority of the state” in the
legislature, Ariz. Const. art. 4, pt. 1, § 1(1), and thus “[t]he legislature has
plenary power to deal with any topic unless otherwise restrained by the
Constitution,” Seisinger, 220 Ariz. at 92 ¶ 26. One such restraint is this
Court’s “[p]ower to make rules relative to all procedural matters in any
court.” Ariz. Const. art. 6, § 5(5). Therefore, a statute regulating a
procedural matter “cannot prevail against a procedural rule,” and similarly
a substantive rule will yield to conflicting statutory enactments. Seisinger,
220 Ariz. at 92 ¶ 28; see also State v. Reed, 248 Ariz. 72, 77 ¶ 17 (2020) (finding
procedural a statute that required courts to dismiss a criminal appeal upon
the defendant’s death); id. at 77–78 ¶ 18 (finding substantive a statute that
prohibited the abatement of criminal convictions, sentences, or restitution
orders upon a defendant’s death).
¶10 Our longstanding description of the difference between
substance and procedure is that:
[T]he substantive law is that part of the law which creates,
defines and regulates rights; whereas the adjective, remedial
or procedural law is that which prescribes the method of
enforcing the right or obtaining redress for its invasion. It is
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WALLACE v. HON. SMITH/NAVA CRUZ ET AL.
Opinion of the Court
often said the adjective law pertains to and prescribes the
practice, method, procedure or legal machinery by which the
substantive law is enforced or made effective.
State v. Birmingham, 96 Ariz. 109, 110 (1964). Although this definition
provides an analytical starting point, “the precise dividing line between
substance and procedure ‘has proven elusive.’” Seisinger, 220 Ariz. at 92
¶ 29 (quoting In re Shane B., 198 Ariz. 85, 88 ¶ 9 (2000)). For example, the
right to appeal is quintessentially substantive; however, this right is also
“subject to control through the use of procedural rules.” Birmingham,
96 Ariz. at 110. There is no simple “litmus test” that clearly differentiates
substantive regulations from procedural regulations that impact a
substantive right. Seisinger, 220 Ariz. at 93 ¶ 30.
¶11 The statute before the Court, § 12-2108(A)(1), prescribes only
the method for calculating the amount of a supersedeas bond, not whether
a bond should issue. A supersedeas bond allows a defendant to obtain a
stay of execution of judgment pending appeal—it does not affect a
defendant’s substantive right to appeal. Regardless of whether a
supersedeas bond is posted, the defendant can pursue any appeal
authorized by law. See generally A.R.S. § 12-2101. If a defendant chooses
not to post the bond or is unable to post the bond, the only effect is that the
plaintiff may attempt to enforce the judgment pending the appeal.
Accordingly, § 12-2108(A)(1) does not create, define, or regulate the
substantive right to appeal by setting the procedure for determining the
amount of a supersedeas bond. See Birmingham, 96 Ariz. at 110.
¶12 This Court has never held that defendants have a separate
substantive right to stay a judgment by posting a supersedeas bond;
instead, we have treated the amount of supersedeas bonds as a procedural
matter. See Anderson, 115 Ariz. at 590 (holding that this Court has
procedural rulemaking power over supersedeas-bond amounts). Indeed,
court rules solely controlled supersedeas-bond determinations throughout
Arizona’s history, until the legislature enacted § 12-2108 in 2011. Although
defendants may be entitled to “a stay of a money judgment” upon payment
of a supersedeas bond, see Am. Mfrs. Mut. Ins. v. Am. Broad., 87 S. Ct. 1, 3
(1966) (Harlan, J., in chambers), the actual process by which judges calculate
the amount of a supersedeas bond is a procedural matter over which this
Court has constitutional authority. See also Grassie v. Roswell Hosp. Corp.,
185 P.3d 1091, 1093 (N.M. Ct. App. 2008) (holding that a statute capping the
amount of supersedeas bonds was procedural); Jones v. Harris News, Inc.,
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WALLACE v. HON. SMITH/NAVA CRUZ ET AL.
Opinion of the Court
241 P.3d 613, 614–16 (N.M. Ct. App. 2009) (same); Bass v. First Pac. Networks,
219 F.3d 1052, 1055 (9th Cir. 2000) (finding that a statute guiding
supersedeas-bond amounts was “purely procedural”).
¶13 When enacting § 12-2108, the legislature expressed its concern
that “overly large appeal bond[s]” can infringe “the due process rights of
appellants,” who might financially “be unable to post a bond to protect
their assets” while simultaneously pursuing appellate relief. S.B. 1212
§ 16(3), 50th Leg., 1st Reg. Sess. (Ariz. 2011) (“Findings and purpose”
section). We acknowledge that the legislature has authority to craft
substantive laws that protect the constitutional right to “due process of
law.” Ariz. Const. art. 2, § 4; see, e.g., Reed, 248 Ariz. at 77 ¶ 16
(“[P]rocedural rules ‘may not diminish or augment substantive rights’”
(quoting State v. Superior Court, 154 Ariz. 574, 576 (1987))). The legislature
effectuated this goal, however, through § 12-2108(C), which authorizes a
court to “lower the bond amount to an amount that will not cause the
appellant substantial economic harm” upon a showing of need. See also
ARCAP 7(a)(9)(B) (incorporating language from § 12-2108(C)). By
empowering the trial court, in an appropriate case, to reduce the amount
1
of a supersedeas bond when a defendant is financially unable to post the
full amount, the legislature ensured that overly large bond amounts will
not preclude access to appellate review. Conversely, § 12-2108(B) does not
further this purpose: it prevents trial judges from incorporating certain
items into the bond amount, regardless of whether the ultimate amount of
the supersedeas bond will financially obstruct a defendant’s ability to seek
appellate review. It also does not consider whether continued delay in
executing on the judgment would result in harm to the appellee.
¶14 Wallace additionally argues that § 12-2108(A)(1) must be
substantive because the legislature found, when enacting the statute, that
the amount of a supersedeas bond “is a matter of substantive law that falls
within the jurisdiction of the legislature.” S.B. 1212 § 16(5). While we
ordinarily give effect to a legislature’s statement of purpose, when deciding
a question of law the Court’s analysis is not governed by the legislature’s
characterization of a statute. Seisinger, 220 Ariz. at 92 ¶ 25 (“[T]he issue of
whether an enactment is procedural or substantive cannot turn on the
record made in legislative hearings. The question is instead one of law.”).
1 Such as a case in which execution of the judgment would itself preclude
appellate relief.
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WALLACE v. HON. SMITH/NAVA CRUZ ET AL.
Opinion of the Court
This Court’s duty to safeguard our government’s system of separation of
powers requires us to consider de novo the legal question of whether a
legislative enactment comports with the legislature’s constitutional
authority. Here, we conclude that § 12-2108(A)(1) regulates a procedural
area of law and therefore it must yield where it conflicts with
ARCAP 7(a)(4)(A).
III. CONCLUSION
¶15 We affirm the superior court’s order and remand for further
proceedings. We award Real Parties in Interest their reasonable attorney
fees, pursuant to A.R.S. § 12-341.01(A).
8