Opinion
No. 2 CA-CV 2013-0145
08-26-2014
CANYON COMMUNITY BANK, AN ARIZONA BANKING CORPORATION, Plaintiff/Appellee, v. JAMES F. ALDERSON AND CONNIE B. ALDERSON, HUSBAND AND WIFE; ALDERSON FAMILY TRUST, Defendants/Appellants.
COUNSEL Mesch, Clark & Rothschild, P.C., Tucson By Scott H. Gan and Isaac D. Rothschild Counsel for Plaintiff/Appellee Snell & Wilmer L.L.P., Tucson By Christopher H. Bayley and Jill H. Perrella Counsel for Defendants/Appellants
THIS DECISION DOES NOT CREATE LEGAL PRECEDENT AND MAY NOT BE CITED EXCEPT AS AUTHORIZED BY APPLICABLE RULES. NOT FOR PUBLICATION
See Ariz. R. Sup. Ct. 111(c); Ariz. R. Civ. App. P. 28(c).
Appeal from the Superior Court in Pima County
No. C20124684
The Honorable James E. Marner, Judge
AFFIRMED
COUNSEL Mesch, Clark & Rothschild, P.C., Tucson
By Scott H. Gan and Isaac D. Rothschild
Counsel for Plaintiff/Appellee
Snell & Wilmer L.L.P., Tucson
By Christopher H. Bayley and Jill H. Perrella
Counsel for Defendants/Appellants
MEMORANDUM DECISION
Chief Judge Eckerstrom authored the decision of the Court, in which Judge Espinosa and Judge Vásquez concurred. ECKERSTROM, Chief Judge:
¶1 James Alderson and Connie Alderson and the Alderson Family Trust (AFT) (collectively "appellants") appeal from the trial court's approval of a writ of garnishment against the AFT's assets. The appellants assert that the trial court erred in finding AFT was not contractually exempted from garnishment. For the following reasons, we affirm.
Factual and Procedural Background
¶2 In 2005, Canyon Community Bank (CCB) made a loan of $2 million to Val-Mid Associates, LLC (Val-Mid), a company partially owned by James Alderson. The AFT likewise loaned Val-Mid approximately $2 million. With the money from these loans, Val-Mid purchased a Chevron station on Valencia Road (Valencia station). As part of the financing agreement, Val-Mid gave the AFT a lien on the Valencia station.
¶3 In 2006, Val-Mid had an opportunity to purchase another Chevron station, this one located on Irvington Road. James Alderson approached CCB for financing of the second purchase. CCB agreed to provide the financing and consolidated the debt from the 2005 loan into the 2006 loan. One of the terms of the 2006 loan was that the AFT agreed to subordinate its existing lien on the Valencia station to CCB's interest and the parties executed a subordination agreement as part of the 2006 loan. The Aldersons were guarantors for the 2006 consolidated loan.
¶4 Val-Mid failed to make a number of payments on the loan from CCB, and CCB filed a complaint against the Aldersons and the AFT for breach of guaranty. The trial court found in favor of CCB as to the Aldersons, but found the AFT was not liable for the debt as a guarantor.
CCB's suit also included Sandra Schreiber as a defendant. She is not a party to this appeal.
¶5 CCB then obtained a writ of garnishment as to the AFT—a revocable trust with the Aldersons as its settlors and beneficiaries. In support of the writ, CCB claimed access to the AFT on the theory that as a revocable trust, its assets were subject to the claims of creditors of the settlors. The Aldersons and the AFT objected, claiming the AFT was contractually exempt from garnishment. The trial court ruled in favor of CCB, denied the objection to the writ, and entered a judgment against the garnishee holding the AFT's assets.
Merrill Lynch, the garnishee, is not a party to this appeal.
¶6 The Aldersons and the AFT now appeal, claiming the trial court erred in not interpreting a clause in the 2006 subordination agreement as exempting the AFT from garnishment. We have jurisdiction pursuant to A.R.S. §§ 12-120.21(A)(1) and 12-2101(A)(5)(c).
Contract Interpretation
¶7 The parties do not dispute that the AFT has no contractual liability for the 2006 loan. They likewise do not dispute that the trust's assets generally may be reached by the Aldersons' creditors. Nor do the parties contest the validity of the Aldersons' debt to CCB. The appellants, however, assert that a clause within paragraph 3 of the 2006 subordination agreement contractually exempts the AFT from any liability for the 2006 loan. That clause reads:
AFT agrees, for the specific and intended benefit of Lender, to perform and observeThis court reviews issues of contract interpretation de novo. Elm Ret. Ctr, LP v. Callaway, 226 Ariz. 287, ¶ 15, 246 P.3d 938, 941 (App. 2010). "Our purpose in interpreting a contract is to ascertain and enforce the parties' intent." Id. However, when contractual terms are "'plain and unambiguous upon their face, they must be applied as written, and the court will not pervert or do violence to the language used.'" Emp'rs Mut. Cas. Co. v. DGG & CAR, Inc., 218 Ariz. 262, ¶ 24, 183 P.3d 513, 518 (2008), quoting D.M.A.F.B. Fed. Credit Union v. Emp'rs Mut. Liab. Ins. Co. of Wis., 96 Ariz. 399, 403, 396 P.2d 20, 23 (1964).
all of the terms and conditions of the New $5,000,000 Deed of Trust, except AFT shall not, solely by virtue of this paragraph, become obligated for repayment of the New Loan.
Parol Evidence
¶8 The appellants assert the trial court should have considered parol evidence demonstrating the parties intended for the AFT to be exempt. We review the admissibility of parol evidence de novo. Terry v. Gaslight Square Assocs., 182 Ariz. 365, 368, 897 P.2d 667, 670 (App. 1994).
¶9 When determining whether to allow parol evidence, "the judge first considers the offered evidence and, if he or she finds that the contract language is 'reasonably susceptible' to the interpretation asserted by its proponent, the evidence is admissible to determine the meaning intended by the parties." Taylor v. State Farm Mut. Auto. Ins. Co., 175 Ariz. 148, 154, 854 P.2d 1134, 1140 (1993). Unlike the restrictive "'plain meaning'" rule, this approach does not require finding the contract is ambiguous on its face to allow the introduction of parol evidence. Id. at 152-53, 854 P.2d at 1138-39. Rather, the court will "consider the alleged interpretation of the agreement offered by the proponent of the extrinsic evidence in light of the extrinsic evidence offered." State v. Mabery Ranch, Co., 216 Ariz. 233, ¶ 28, 165 P.3d 211, 219 (App. 2007).
¶10 The appellants offer as evidence affidavits from the Aldersons in which they aver that the paragraph 3 provision of the subordination agreement was intended to shield the AFT from any source of liability related to the 2006 loan. But the language of the provision states that it shields AFT from liability arising "solely by virtue of this paragraph." By its own terms, it merely protects the AFT from any liability that otherwise might have been associated with that provision and AFT's agreement "to perform and observe all of the terms and conditions of the New $5,000,000 Deed of Trust" set forth therein. The provision contains no language suggesting the AFT would be exempt from liability from any other source, and instead expressly limits itself to liability that might arise "by virtue of this paragraph." Accordingly, this language is not "'reasonably susceptible'" to the interpretation proposed by the appellants, and the trial court properly declined to consider the Aldersons' evidence. Taylor, 175 Ariz. at 154, 854 P.2d at 1140; see US W. Commc'ns, Inc. v. Ariz. Corp. Comm'n, 185 Ariz. 277, 280, 915 P.2d 1232, 1235 (App. 1996) (rejecting extrinsic evidence as to meaning of settlement agreement where "the agreement contained no language to support the [proposed] interpretation").
Several months after the close of the 2006 loan, CCB sought and the AFT executed an agreement making the AFT an express guarantor of the loan. The trial court subsequently found that guaranty agreement void for lack of consideration. The Aldersons assert that CCB's request for that agreement shows CCB knew it would otherwise be unable to reach the trust assets. CCB counters that the Aldersons' willingness to sign the guaranty, without consideration, contradicts their claim that they originally negotiated for the AFT assets to be unreachable. Because these are both reasonable constructions, that unenforceable agreement does not ultimately assist us in clarifying the meaning of the language we must enforce here.
Construction Against the Drafter
¶11 The appellants also claim that the language of the agreement must be construed against CCB as the drafter of the contract. That rule of interpretation, however, is applied "[o]nly when the meaning of the contract remains uncertain." United Cal. Bank v. Prudential Ins. Co. of Am., 140 Ariz. 238, 258, 681 P.2d 390, 410 (App. 1983). Whether a contract is ambiguous is a question of law that we review de novo. Abrams v. Horizon Corp., 137 Ariz. 73, 78, 669 P.2d 51, 56 (1983). Parties' disagreement about the meaning of a contract "is not sufficient to create an ambiguity." United Cal. Bank, 140 Ariz. at 258, 681 P.2d at 410.
¶12 We agree with the trial court that the provision is not ambiguous. In the context of the subordination agreement, it clearly conveys that the AFT is merely subordinating its interest in the Valencia station to that of CCB and not assuming liability for the debt for that reason. See Autonumerics, Inc. v. Bayer Indus., Inc., 144 Ariz. 181, 188, 696 P.2d 1330, 1337 (App. 1984) ("Any agreement must be construed as a whole, and each part must be read in light of all other parts."). Because the provision is not ambiguous, we do not apply the principle of construction against the drafter.
We find that the 2006 subordination agreement did not protect the AFT from garnishment, and therefore we need not address the appellants' argument that the trial court erred in finding the agreement superseded. Nor need we address CCB's argument that the appellants were procedurally barred from asserting a contractual exemption from garnishment.
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Attorney Fees and Costs
¶13 CCB has requested its attorney fees and costs on appeal under several theories, including A.R.S. §§ 12-341.01(A), 12-349, 12-1580(E), and Rule 25, Ariz. R. Civ. App. P. As this court recently concluded in Blum v. Cowan, § 12-1580(E) sets forth the exclusive means by which attorney fees and costs may be sought in a garnishment action against the judgment debtor. 690 Ariz. Adv. Rep. 4, ¶ 20 (Ct. App. July 3, 2014). Pursuant to that statute, attorney fees and costs may be awarded against a judgment debtor only if "the judgment debtor is found to have objected to the writ solely for the purpose of delay or to harass the judgment creditor." § 12-1580(E). Nothing in the appellate briefs or record before us demonstrates that the Aldersons have pursued this appeal for the purposes of delay. To the contrary, they have asserted non-trivial if unsuccessful arguments regarding the correct legal effect of certain language in the subordination agreement. The Aldersons, as the judgment debtors, therefore cannot be liable for CCB's attorney fees. The AFT, while it is not a judgment debtor and not subject to the limitation of § 12-1580(E), was not a party to the contract between the Aldersons and CCB, did not engage in "unjustified actions," nor appeal "solely for the purpose of delay," and accordingly cannot be liable under any of the theories argued by CCB. See §§ 12-341.01, 12-349; Ariz. R. Civ. App. P. 25. We therefore decline to award CCB its attorney fees and costs.
Disposition
¶14 For the foregoing reasons, the judgment of the trial court is affirmed.