AZAPP Blog

Hounshell v. White (07/22/2008): Arizona Court of Appeals Division One Holds That a County Board of Supervisors May Require a County Officer To Post a Bond, and May Remove the Officer for Failure To Post the Bond, but That the County Must Pay the Bond Premiums.

Apache County Sheriff Hounshell was indicted on crimes regarding the misuse of public funds and property.  The Arizona Counties insurance Pool then told the Apache County Board of Supervisors (the “Board’) that it would not cover any losses caused by Hounshell’s  dishonest or fraudulent acts after his indictment.  The Board therefore required Hounshell to post a bond to cover any amounts and also required him to pay the bond premiums.  After Hounshell did not post the bond, the Board voted to remove him from office.  Hounshell filed a special action to have the vote declared void and the Board filed two quo warranto actions to have him removed; all three actions were consolidated.  The trial court held that the Board was not authorized to remove Hounshell for failure to post a bond because the statute authorizing the bond requirement, A.R.S. § 11-253(A), had been repealed.  The trial court therefore awarded Hounshell attorneys’ fees as the prevailing party. The Board appealed.

The Arizona Appeals Court held that pursuant to A.R.S. § 11-253(A), the Board was authorized to require Hounshell to post a bond, and could remove him for failure to post said bond, but that under A.R.S. § 38-254, the County was responsible for paying the premiums on the bond.  Because the Board erroneously required Hounshell to pay the premiums, it acted in excess of its authority in removing him from office.  Hounshell therefore was the prevailing party and the award of attorneys’ fees was proper.

The Court explained that the trial court’s order reinstating Hounshell on the grounds that A.R.S. § 11-253(A) had been repealed by a more recent bill was erroneous but the Court nonetheless found grounds to uphold the trial court’s ruling.     

Judge Snow authored the opinion, Judges Johnsen and Hall concurred.

NOTE:  Judge G. Murray Snow (one of our former colleagues) has been appointed to the United States District Court.  We are confident Judge Snow will be missed at the Court of Appeals, but are pleased that the Arizona District Court will now benefit from his keen intellect, wisdom and judicial temperament.  We wish Judge Snow the best of luck in his new position.

Malad, Inc. v. Miller  (7/3/2008):  Arizona Court of Appeals Division One Holds That the Rule Against Perpetuities Does Not Render Void a Commercial Real Estate Sales Agreement That Fails to Include a Specific Time Period for Performance if it is Reasonable to Conclude the Parties Intended Performance Within a Reasonable Time Period.

Malad, Inc. (“Buyer”) and Maxus Management, Inc. (“Seller”) entered into a sale agreement for real property requiring the parties to close on February 15, 2002 “or such other time as Seller and Buyer mutually agree in writing.”  The parties agreed in writing to two extensions of the closing date.  The last written extension agreement stated that “the close of escrow shall be extended to May 15, 2002, or upon delivery of clear title and verification of water rights by the sellers whichever occurs later.”  On May 15, 2002, Buyer sent a letter to the escrow agent requesting cancellation of escrow and return of Buyer’s $5,000 earnest money deposit because Seller was unable to provide clear title.  Miller, Seller’s real estate agent, convinced Buyer to withdraw its letter demanding close of escrow.  Over the next several months, Seller failed to obtain clear title to the entire property and failed to meet the conditions requisite for closing the escrow; however, Buyer informed Seller’s agent that it was no longer willing to cancel the escrow.  Nevertheless, in September 2002, Seller caused the escrow agent to cancel the escrow and return Buyer’s earnest money. 

Buyer ultimately learned that Seller sold the property to a third party less than a year later at the same price as it has agreed to sell it to Buyer.  Buyer brought suit against Seller on the contract and against Miller for intentional interference with contract.  Buyer and Seller settled, and Miller moved for summary judgment on the interference claim, alleging, among other arguments, that the rule against perpetuities voided the sale agreement, and therefore Miller could not be liable for interference with a void agreement.  The trial court granted summary judgment for Miller, concluding that the sale agreement was void because it violated the rule against perpetuities.  Buyer timely appealed.

The Court of Appeals reversed and remanded, holding that a genuine issue of material fact exists as to what reasonable time period for performance applied to the final written extension of the closing date.  The common law rule against perpetuities holds that no interest in real property is valid unless it must vest not later than twenty-one years after some life in being at the creation of the interest.  In a previous decision in Byke Construction Co. v. Miller, 140 Ariz. 57, 680 P.2d 193 (App. 1984), the Court held that an option to repurchase real property that did not specify a time period to exercise the option did not violate Arizona’s rule against perpetuities, because the court could read into the contract an implied reasonable time period for exercising the option.  Thus, where an interest in real property cannot reasonably be interpreted to vest later than twenty-one years in the future, the rule against perpetuities is inapplicable.

The Court applied the Byke analysis to the contract in question in this case.  Applying a reasonableness standard to the ambiguous contract language, the Court held that it was not reasonable to presume that Buyer would obtain equitable interest in the property after twenty-one years have passed.  Moreover, the Court interpreted the contract to include an implied condition that the parties fulfill their contractual obligations within a reasonable time.

Presiding Judge Irvine authored the opinion; Judge Brown and Judge Ehrlich concurr

Clark v. Campbell (7/10/2008): Arizona Court Of Appeals Division One Holds That Constable Was Entitled To Notice, An Opportunity To Be Heard, And An Explanation Before The Presiding Judge Exercised His Authority To Reduce The Constable’s Duties.

The Maricopa County Court System Coordinator wrote to the Constable Ethics Committee to inform the Committee that Constable Annette Clark had received “‘regular formal and informal complaints’ . . . about Clark’s ‘lack of professionalism, rudeness toward county and court staff as well as citizens, and a lack of diligence in performing her duties.’”  The Committee agreed, reprimanding Clark and recommending that she retire from office.  During the same timeframe, Clark also had been the subject of an injunction against harassment of court employees.  Clark nevertheless did not retire.  A few months later, the Presiding Judge of the Maricopa County Superior Court, relying on A.R.S. § 22-131(A), which gives the presiding judge supervisory authority over the Constable’s duties, “advised Clark [that] her services would not be needed and the Justice Court would no longer be directing any process to her for service.”  Clark then brought a quo warranto action in her own name, alleging that the presiding judge “deprived [her] from her duly elected position as Constable . . . without legal cause or due process.”  The trial court granted summary judgment against Clark because (1) the presiding judge had inherent supervisory authority over whether Clark could continue to provide service to the justice court, (2) although “the Presiding Judge had not stated any reasons for taking the supervisory actions, the court found ‘the only reasonable inference [wa]s that’ the Injunction and Reprimand had ‘contribute[d] heavily to’” the presiding judge’s actions and that his actions were not arbitrary, capricious, or an abuse of discretion, and (3) Clark was not entitled to due process because she did not have a property right in her elected position, and in any event, “she had not been removed from office because she had continued to hold her title and collect her salary.”   Clark appealed.     

The Arizona Appeals Court affirmed in part, reversed in part, and remanded.  The court first held that the presiding judge acted within his supervisory authority over the justice courts: “based upon authority granted by the Legislature and the supreme court as allowed by the Arizona Constitution, the Presiding Judge had both the right and the responsibility to exercise supervisory authority over Clark and was empowered to determine whether she was properly performing the statutory duties required of her in her capacity as an officer of the court.”  The court next held that, although Clark was not entitled to due process to “protect the right to hold [elected] office,” the presiding judge’s supervisory authority must be exercised “reasonably,” citing Merrill v. Phelps, 52 Ariz. 526, 84 P.2d 74 (1938).  The court concluded that “[p]roviding notice, an opportunity to be heard before implementation of disciplinary action, and an explanation of why that action is necessary is, in our view, not only consistent with a presiding judge’s obligation to act reasonably but is also a measure of its exercise.”  Because Clark did not receive this “reasonable” procedure, the court remanded for further proceedings.          

Judge Norris authored the opinion; Judges Weisberg and Portley concurred. 

Haroutunian v. ValueOptions, Inc. ( 7/10/2008):  Division One Finds that Trial Court Abused Its Discretion When It Required Showings of Good Cause and Excusable Neglect to Obtain Relief Under ARCAP Rules 9(a) and 6(b)

ValueOptions timely filed motions under ARCAP Rule 9(a), seeking to expand the time to appeal a jury verdict, and Rule 6(b), seeking to enlarge the time for filing post-trial motions.  Both requests were based on the fact that the court clerk’s office had filed the notice of entry of judgment more than 30 days after the judgment was entered.  The trial court had filed a minute entry one month earlier indicating that the court “would sign the form of judgment submitted by [the Plaintiff],” but when ValueOptions’ counsel had called the clerk’s office, she was incorrectly informed that no judgment had been entered.  The trial court found that ValueOptions did not receive notice of the entry of judgment within 21 days of entry and that Haroutanian had not shown prejudice.  Neverthless, the trial court denied the request for Rule 6(b) motion on the grounds that ValueOptions had failed to show “excusable neglect” and denied the request for an extension of time to appeal under Rule 9(a) because ValueOptions had not shown “good cause.”

Judge Pelander, writing for the majority, reversed and remanded for further proceedings on the post-judgment motions.  The majority found that the trial court abused its discretion when it required ValueOptions to show “good cause” and “excusable neglect” to obtain relief under Rule 9(a).  The majority concluded that the trial court incorporated an incorrect legal standard in contravention of the Rule 9(a)’s express language and purpose based on the 1994 amendments to the rule.  Similarly, the majority found that the trial court abused its discretion when it denied ValueOptions’ Rule 6(b) motion.  The majority noted that the 1994 amendments to Rule 6(b) created ambiguity in the rule.  Harmonizing Rules 6(b) and 9(a), the majority concluded that neither good cause nor excusable neglect must be shown under Rule 6(b) when the party seeking relief establishes the rule’s express prerequisites:  (1) failure to receive notice within 21 days of entry of judgment and (2) lack of prejudice to any party. 

Judge Brammer disagreed with the majority, noting that inherent in the trial court’s discretion is the right to expect that a party seeking relief provide some reason beyond the rule’s explicit elements warranting the relief sought.  Judge Brammer felt that the record supported the trial court court’s conclusion that ValueOptions failed to exercise due diligence in determining whether a judgment had been entered because Value Options only made a single phone call to the clerk about the judgment and failed to review the court’s electronic docket.  Judge Brammer further disagreed with the majority’s conclusion that Rule 6(b) is ambiguous and felt that the only reasonable interpretation of the rule would require that a party show excusable neglect.  Thus, Judge Brammer concluded that the trial court did not abuse its discretion when it found that ValueOptions had not shown excusable neglect in denying its motion under Rules 6(b) and 9(a).

Judge Pelander authored the majority opinion, with Judge Howard concurring; Judge Brammer dissented.

Note:  In a recent unpublished memorandum decision, Watson v. The Roman Catholic Church of the Diocese of Phoenix, Inc., Division One of the Arizona Court of Appeals affirmed a trial court’s denial of a request for relief from judgment pursuant to Arizona Rule of Civil Procedure 60(c) in a case where the party requesting relief did not receive notice of a judgment that had been entered.  The majority opinion included a lengthy discussion of attorney due diligence and reached a different conclusion than the majority in Haroutunian v. ValueOptions, Inc. 

Duke Energy Arlington Valley, LLC v. Arizona Department of Revenue (7/15/2008): Arizona Court of Appeals Division One Holds that Statute Providing Table for Tax Valuation of Electric Generation Facilities is a Guideline, Not a Rule, and Thus Exempt from Requirements of the Administrative Procedures Act

Three taxpayers sued the Arizona Department of Revenue (“ADOR”) for a declaratory judgment that the table for determining tax valuation of electric generation facilities at A.R.S. § 42-14156(A)(3) is invalid for failure to comply with the rulemaking requirements of the Arizona Administrative Procedure Act (“APA”), A.R.S. § 41-1001 et. seq.  The tax court granted summary judgment to ADOR, finding that the tax table is merely a guideline, not a rule, and thus is exempt from the APA’s rulemaking requirements.  The taxpayers appealed.

The Court of Appeals affirmed the tax court ruling for two reasons.  First, the statute itself referred to the table as a “guideline” and not a “rule.”  A.R.S. § 42-14156(A)(3)(e).  Secondly, the table functions as a guideline, and not as a rule, because the table merely sets forth one element — subject to adjustment — to aid in the determination of the statutorily mandated valuation.  A “rule” under the APA, in contrast, is an “agency statement of general applicability that implements, interprets or prescribes law or policy, or describes the procedure or practice requirements of an agency.”  A.R.S. § 41-1007(17).

Judge Barker wrote the opinion for the panel; Judges Kessler and Hall concurred.   

Backus v. State (7/17/2008) – Arizona Court of Appeals Division One Holds that Arizona’s Notice of Claim Statute, A.R.S. § 12-821.01, Merely Requires that a Plaintiff’s Claim Letter Provide Any Facts Supporting a Proposed Settlement Amount.

After Gerald Dunford died while incarcerated by the Arizona Department of Corrections, his daughter, Shannon Backus, sent a notice of claim letter to the State.  At the time of his passing, Dunford had a life expectancy of twenty-three years, and so Backus requested a settlement amount of $21,500 for each of those years, which totaled $500,000.  In a separate case, Rosemary Johnson sent a claim letter to the State after her daughter fell ill in an Arizona prison and died.  Johnson requested a settlement amount of $2 million.  Both Backus and Johnson filed lawsuits against the State after receiving no response to their claim letters.  The State moved to dismiss both cases, attaching the claim letters and arguing that Backus and Johnson failed to comply with A.R.S. § 12-821.01.  The trial court granted the State’s motion in both cases.  This appeal followed.

Arizona’s notice of claim statute requires that “[t]he claim shall also contain a specific amount for which the claim can be settled and the facts supporting that amount.”  The Arizona Appeals Court first explained that the trial court should have treated both motions to dismiss as motions for summary judgment because the notices were not part of the complaints and were instead attached to the State’s motions to dismiss.  Next, the court held that a claim letter contains enough facts to comply with the statute when the letter provides any facts to support the proposed settlement amount.  In doing so, the court declined to create a judicial standard against which all claim letters can be measured, pointing out that each claim is different.  The court instructed that if a governmental entity desires additional factual information, it can simply ask for it.  Finally, the court concluded that Backus and Johnson’s letters satisfied the notice of claim statute because both letters contained some facts supporting their proposed settlement amounts.

Judge Winthrop authored the opinion; Judges Orozco and Snow concurred. 

Home Builders Ass’n v. Kard (7/8/2008):  Arizona Court of Appeals Division One Holds That A.R.S. § 49-497 Confers Standing on an Organization Acting in a Representative Capacity Seeking Declaratory Relief Concerning the Validity or Construction of a County Rule, Even If the Organization Fails to Satisfy a Traditional Standing Analysis.     

Home Builders, an association comprised of businesses involved in the home building industry, brought multiple claims against the Maricopa County Air Quality Control Department and other defendants (collectively “Defendants”) related to the issuance of permits for dust-generating operations.  The claims were for damages, injunctive relief, and declaratory relief.  Defendants moved to dismiss for, among other reasons, Home Builders’ lack of standing.  The trial court dismissed the complaint solely for lack of standing, and Home Builders appealed.

The Arizona Appeals Court affirmed in part and reversed in part.  It first held that Home Builders did not have standing to assert its members’ claims for damages.  The Court explained that Arizona courts’ policy against issuing advisory opinions required it to determine whether the association had a “legitimate interest in an actual controversy involving its members and whether judicial economy and administration will be promoted by allowing representational appearance.”  The Court looked to factors enumerated by United States Supreme Court cases concerning the standing of a representational entity.  Citing Warth v. Seldin, 422 U.S. 490, 515-16 (1975), it explained that Home Builders lacked standing on its damages claim because the damage suffered was neither “common to the entire membership nor shared by all in equal degree.” 

The Court also held that Home Builders failed to satisfy the factors governing standing for injunctive and declaratory relief claims, citing Warth, as well Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992), and Fernandez v. Takata Seat Belts, Inc., 210 Ariz. 138, 108 P.3d 917 (2005).  It found that Home Builders failed to refer to any particular project or identify any particular member affected by Defendants’ conduct, and thus did not demonstrate a present and continuing injury sufficient to confer standing.  The Court also explained that Home Builders could not rely on a “vocational or special interest in home-building costs to justify standing,” because it was too speculative to assume that particular members were affected by Defendants’ conduct.  To further support its conclusion, the Court explicitly distinguished Division Two’s recent decision in Home Builders Ass’n of Central Arizona v. City of Maricopa, 215 Ariz. 146, 158 P.3d 869 (app. 2007), explaining that specific members in that case suffered injuries.

Despite Home Builders failure to satisfy the general standard regarding standing in injunctive and declaratory relief claims, the Court held that Home Builders had standing for its declaratory relief claim because such standing was explicitly conferred by A.R.S. § 49-497.  Under the broad language of that statute, Home Builders was a “person” who “may be” affected by a county rule and therefore was entitled to seek a declaration of a rule’s validity.  The Court noted some tension between § 49-497 and A.R.S. § 12-823, a section of the Uniform Declaratory Judgments Act that has been interpreted to require the existence a justiciable controversy, but concluded that the more specific language of § 49-497 controlled.

The Court rejected Home Builders argument that the standing requirement should be waived because important issues of policy were involved, finding that the issues did not rise to the level of being issues of great importance.  The Court also rejected Defendants contention that the notice of claim statute A.R.S. § 12-821.01 applied, as well as their argument that the trial court should never have accepted special action jurisdiction in the first place. 

Judge Weisberg authored the opinion; Presiding Judge Winthrop and Judge Thompson concurred.

Neal et. al v. Brown (7/8/2008):  Arizona Court of Appeals Division One Holds that Landlocked Parcel Owner Does Not Have Absolute Right to Enforce Right-of-Way Granted Under Federal Law if Adequate Roadway Already Exists.

Plaintiffs/Appellees are two couples who are neighbors of Defendant/Appellant Brown.  Plaintiffs/Appellees (“Neighbors”) won summary judgment in the Superior Court on their claim against Brown to quiet title to a right-of-way over Brown’s land.  The original land patent to Brown’s land noted that the patent was subject to a right-of-way (“ROW”) for roadway and public utility purposes.  Since the issuance of the patent, Skinner Drive was constructed along the southern boundary of Brown’s property and Skinner Drive provides ample access for vehicle travel to all properties involved in this case.

After obtaining proper permits, Brown constructed, around her property, a fence (the “Fence”) which enclosed some or all of the ROW in question.  Neighbors filed a complaint seeking to quiet title and an injunction directing that the Fence be taken down.  On cross-motions for summary judgment, Neighbors contended that the Fence impaired their use of the easement and maintained that the access provided by Skinner Drive was of no consequence.  Brown contended that Neighbors were not the beneficiaries of the easement, that the actual beneficiary, Maricopa County, had authorized the construction of the Fence, and that the Fence was wholly proper.

Before the trial court and the Arizona Appeals Court, the parties agreed that the case was controlled by Bernal v. Loeks, 196 Ariz. 363 (App. 2000).  Bernal recognized a private right of action on a land patent ROW where a nearby property owner without the ROW was impaired in his access to his own property.  See Bernal, 196 Ariz. at 363-64.  Distinguishing Bernal based on the the Neighbors unfettered access to their property via Skinner Drive, a split panel of the Court of Appeals held that easement rights conveyed by federal land patents are not unconditional rights of ingress and egress, but rather are limited by their stated purposes. 

In addition to distinguishing Bernal, the majority distinguished Squaw Peak Comm. Covenant Church v. Anozira Dev., Inc., 149 Ariz. 409 (App. 1986).  Neighbors had relied on Squaw Peak for the notion that they were entitled to full use of the ROW unhampered by any obstruction.  The Court distinguished that case on the ground that the easement there was precisely 40 feet, whereas the ROW here was “ambiguously” defined as “not exceeding” 33 feet.  The Court then canvassed several out-of-state cases in accord with this holding.

Judge Hall authored the decision in which Judge Portley joined.

Judge Snow, who would have affirmed, dissented.  In dissent, he maintained that the majority had misread the patent itself, misapplied existing law, failed to preserve the purpose of the Small Tract Act (“STA”), 43 U.S.C. §682(a)(repealed 1976), and created great uncertainty for lands with STA ROWs.  Judge Snow also disagreed with the majority’s holding that the ROW was ambiguous.  He further expressed his belief that the majority erred by interpreting the ambiguity in favor of the servient parcel (Brown’s) when Arizona law dictates the opposite.  See Mtn. States Tel. &  Tel. Co. v. Kennedy, 147 Ariz. 514-16 (App. 1985).  Finally, Judge Snow explained that the majority had created a public policy problem (1) in deciding that every STA reservation that used the term “not exceeding” is now ambiguous and (2) in holding that every STA reservation was now subject to a need-based analysis.

Jones v. Cochise County (06/30/2008): Arizona Court of Appeals Division Two Holds That compliance with the notice of claim statute, A.R.S. § 12-821.01, is to be determined by reading the notice as a whole, and a defense that the notice of claim filed did not meet the statutory requirements will be deemed waived if the governmental entity has taken substantial action to litigate the merits of the claim prior to asserting the defense.    

Plaintiffs filed a notice of claim with Cochise County for injuries suffered as a result of being hit by a sheriff’s vehicle.  The notice was signed by Plaintiffs’ attorney and stated that the attorney would recommend settlement of claims for certain dollar amounts and that the offers would expire in 60 days.  When no settlement was reached, Plaintiffs filed a complaint.  The County answered without asserting a defense that the notice was insufficient.  Discovery then ensued, which included multiple depositions.  One year later, the County sought to amend its answer to assert the defense that the notice did not meet the statutory requirements.  The trial court gave the County leave to amend the answer and granted the County’s motion to dismiss (which it treated as a motion for summary judgment because the notice of claim was considered) on the ground that the notice simply stated that the attorney would recommend settlement for a particular dollar amount, but did not contain a specified amount for which the Plaintiffs would settle. 

Relying on the Deer Valley Unified School District No. 97 v. Houser, 214 Ariz. 293, 152 P.3d 490 (2007), the Arizona Appeals Court reversed and remanded.  The Court held that the notice of claim filed complied with the statutory requirement that a specific amount be provided for which the claim could be settled.  When read in the context of the entire letter – including the statement that the offers would expire within 60 days – the recommended settlement amount was in fact an a specific sum for which the claims could be settled.  The Court further held that the notice provided sufficient facts to support the amount claimed, noting that claims for pain and suffering, loss of future earnings and future medical expenses do not require a precise accounting at the notice of claim stage.

The Court then turned to issue of whether the County had in fact waived the defense that the notice of claim did not meet the statutory requirements.  The Court reasoned that the County waived the defense by its conduct by taking substantial action to litigate the merits of Plaintiffs’ claims, including participating in discovery -- discovery that would have been unnecessary if the defense had been promptly asserted.       

Judge Brammer authored the opinion, Judges Howard and Pelander concurred. 

State of Arizona v. Western Union Financial Services, Inc. (07/01/2008):  Arizona Court of Appeals Division One Holds That Arizona Courts Have Jurisdiction To Issue Pre-Forfeiture Seizure Warrants For Monies Not in Arizona And Addresses a Variety of Other Issues In the Forfeiture Context

The State of Arizona filed a lengthy affidavit and supporting materials to request a warrant to seize for forfeiture monies purportedly traceable to racketeering activities.   Specifically, the State sought to seize Western Union (“WU”) wire-transfers of $500 or more, effectuated within a particular 10-day period, sent to and from 28 states, not including Arizona, and twenty-six locations in Sonora, Mexico.  The State argued that the transfers were traceable to human smuggling and narcotics trafficking.  The affidavit described the methods used to facilitate human smuggling and narcotics trafficking through Arizona, but did not identify any particular persons, property, or transactions that were specifically related to illegal activities in Arizona.

The superior court issued the warrant, and WU filed an emergency motion to quash.  The motion did not challenge that portion of the warrant authorizing the seizure of funds sent from Arizona to Sonora, but contested the State’s ability to seize funds sent from another state for intended delivery in Sonora.  Following the filing of the motion to quash, the case was transferred to Judge Kenneth Fields, and after an evidentiary hearing, the court granted WU’s motion to quash.  The superior court found that the wire transfers did not “flow through, touch or have any connection with” Arizona and were “carried out in and constituted interstate and foreign commerce.”  The Court also found that the State had failed to establish in personam jurisdiction over the customers utilizing the money transfers or in rem jurisdiction over the money transfers themselves.  Finally, the Court found the State lacked probable cause to believe any WU customers had committed crimes in Arizona.  For those reasons, the court concluded the seizure warrant was unconstitutional as applied under the Commerce Clause, Foreign Commerce Clause, Due Process Clause and the Fourth Amendment of the United States Constitution.  The Court enjoined the State from engaging in future, similar attempts to seize wire transfer funds.

Reviewing the legal issues de novo and the grant of the preliminary injunction for an abuse of discretion, the Arizona Appeals Court vacated the trial court’s rulings.  In a lengthy 75-page opinion, Division One addressed jurisdiction, probable cause, the dormant commerce clause, and state sovereignty. 

Regarding jurisdiction, the Court held that A.R.S § 13-4302 does not constrain the superior court’s jurisdiction to issue pre-forfeiture seizure warrants.  Rather, that provision applies to the initiation of forfeiture proceedings.  In so holding, the Court relied on the language of the statute and — noting that “[o] ur courts have consistently held that anticipatory search warrants are permissible under the Fourth Amendment” — analogized a pre-forfeiture seizure warrant to a search warrant.  Turning to the issue of in personam and in rem jurisdiction, the Court first found that the superior court lacked in personam jurisdiction over the owners or interest holders in the funds as no such parties were served with process.  However, the Court found the superior court did have in rem jurisdiction over the wire transfers themselves because they constituted “property” as defined by the criminal code and because the res was located in Arizona.  Specifically, the “electronic credits” (ECs), reflected in WU’s computer system as the amount of money being wired, and the item on which actual payout is based, constituted intangible property “of value.”   A.R.S § 13-105(32).  After finding the wire transfers were in fact “property,” the Court conducted an exhaustive review of United States Supreme Court cases addressing jurisdiction.  Ultimately applying the “minimum-contacts” standard, the Court found that the res was located in Arizona because it constituted proceeds from human smuggling and narcotics trafficking activities that predominantly occurred in Arizona.  According to the State’s affidavit, the typical smuggler brings undocumented persons into Arizona, and they are held hostage in Arizona in a “stash house” until their “sponsor” negotiates an agreement for their release with the smuggler.  The smuggler performs the agreement in Arizona by releasing the undocumented persons upon notification of payment by the sponsor.

The Court then held that WU had standing to move to quash the warrant and turned to the merits of the superior court’s probable cause determination.  The Court described in great detail the State’s lengthy investigation (involving four state agencies and the federal Bureau of Immigration and Customs Enforcement) and the information the investigation uncovered.  Rejecting WU’s argument that the State was required to demonstrate either that specific individuals had engaged in human smuggling or drug trafficking or that the res was linked to a particular criminal event, the Court held that “the State only had the burden to show that the res –the [electronic transfers] – were proceeds of or used to facilitate either or both of those offenses.”  The Court also held that the warrant was not a general warrant because it did not afford the State “discretion to rummage through WU’s computer system and decide which ECs to seize.”  Rather, it precisely described the place to be searched and the res to be seized.

Finally, the Court addressed the trial court’s finding that the warrant impermissibly interfered with interstate and foreign commerce.  Holding that the warrant did not violate the dormant interstate Commerce Clause, the Court noted that it did not “directly regulate commerce outside Arizona’s borders” and “the incidental burden imposed on interstate commerce did not clearly exceed the benefit of the warrant to state.”  Likewise, the Warrant did not violate the dormant foreign Commerce Clause because it neither directly regulated or disrupted foreign commerce between the corridor states and northern Sonora nor interfered with the authority of the United States in foreign relations with Mexico.  Lastly, the Court held that the warrant did not invade the sovereign authority of other states.  The State did not impose its authority beyond its borders, and the record before the Court did not suggest the Warrant “interfered with the operation of other states’ laws.”

Judge Timmer, presiding Judge, authored the opinion, with Judges Norris and Brown concurring.

Heatec, Inc. v. R. W. Beckett Corp. (6/24/2008): Arizona Court of Appeals Division One Holds that Settlement Payments Are Not Reimbursable Costs in a Successful Indemnity Action Brought Pursuant to A.R.S. § 12-684(A).

Heatec sold an oil burner to an asphalt plant, and the oil burner ultimately caused a fire at the plant.  The owner of the plant, Vulcan Materials Company, sued Heatec.  Heatec tendered defense to R. W. Beckett Corporation, the manufacturer of the allegedly improperly designed oil burner, which Beckett rejected.  Vulcan eventually settled its action against Heatec for $200,000.  Heatec then filed suit against Beckett seeking statutory indemnity.  Under A.R.S. § 12-684(A), when a manufacturer in a product liability action rejects a tender of defense, the seller is entitled to reimbursement of its reasonable attorneys’ fees and costs.  The trial court determined that Heatec’s $200,000 settlement payment was not a reimbursable cost.  Heatec appealed.     

The Arizona Appeals Court affirmed.  The Court noted that the word “costs” is typically a specific term of art with a limited meaning.  After noting that A.R.S. § 12-684(A) itself does not define the term, the Court looked to A.R.S. § 12-332(A), which defines taxable costs in civil actions.  Settlement payments are not among the “limited” enumerated expenses that may be taxed against the losing party pursuant to A.R.S. § 12-332(A), and therefore the trial court correctly declined to award reimbursement for the settlement payment.           

Judge Brown authored the opinion; Judges Timmer and Norris concurred. 

In re MH 2007-001264 (6/26/2008): Arizona Court of Appeals Division One Holds That a Court May Not Continue the Hearing on a Petition for Involuntary Treatment Absent a Request by the Patient and, When a Patient Has Been Detained But Cannot Attend the Hearing for Medical Reasons, the Court Must Conduct the Hearing in the Patient’s Absence or Order the Patient’s Release.

A doctor filed a petition for involuntary treatment of Patient pursuant to A.R.S. § 36-533.  The State detained Patient at Desert Vista Hospital and set a hearing.  Patient was unable to attend the hearing, however, because she had been transferred to another hospital for surgery.  Counsel for Desert Vista Hospital requested a continuance of the hearing.  Patient’s counsel argued that the continuance should be denied and asked the court to either dismiss the petition or allow Patient to be treated as an outpatient.  The court determined that Patient could not participate in the hearing and ordered the hearing continued for seven days.

Patient’s counsel then filed a motion to dismiss the petition because Patient had been in detention in excess of the six-day statutory maximum under A.R.S. § 36-535(B).  The court denied the motion to dismiss, ruling that A.R.S.  § 36-539(C) gave the court discretion to continue the hearing.  After the hearing, the court found Patient to be persistently or acutely disabled and ordered a combined inpatient and outpatient treatment program.  Patient appealed.

The Court of Appeals held that the trial court abused its discretion by continuing the hearing , and that the motion to dismiss should have been granted.  Once an individual is detained and a petition for court-ordered treatment is filed, the court must either release the patient or order a hearing to be held within six days after the petition is filed.  A.R.S. § 36-535(B).  Although A.R.S. § 36-539(C) allows the court to conduct the hearing in the patient’s absence if the patient is unable to attend for medical reasons, the statute does not grant the court discretion to continue the hearing.  Instead, the court may continue the hearing only at the patient’s request.  In re MH 2003-000240, 206 Ariz. 367, 369, 78 P.3d 1088, 1090 (App. 2003).  Because Patient did not request a continuance, the trial court had only two options: conduct the hearing in Patient’s absence or order Patient’s release.  The Court of Appeals therefore reversed the order for involuntary treatment.

Judge Orozco wrote the opinion; Judges Winthrop and Snow concurred.