Old Republic National Title Insurance Co. v. New Falls Corporation – 6/15/2010

July 1, 2010

Arizona Court of Appeals Division One Holds That a Garnishment Action May Properly Be Dismissed If an Objection to the Answer is Not Heard Within Ten Days as Required by A.R.S. § 12-1580.B

Appellant, Albert M. Coury Trust (AMC) was the successor-in-interest to a judgment held by Old Republic National Title Insurance Company against Albert M. Coury.  On May 25 and 26, 2005, AMC served writs of garnishment on Tony M. Coury Buick, Inc. (TMCBI) for TMCBI stock held by Coury.  AMC objected to TMCBI’s answer and amended answer and the court scheduled a hearing on these objections for September 14, 2005.  AMC sought derivative relief on behalf of TMCBI in a separate action, but this action was removed to bankruptcy court after several of the judgment debtors commenced bankruptcy proceedings.  AMC and TMCBI agreed to vacate the September 14, 2005 hearing in the garnishment action, believing that the hearing might violate the automatic stay in the bankruptcy matter.  There was no further activity in the garnishment matter until AMC and TMCBI entered into a stipulation that judgment should be entered in favor of AMC Trust for any right held by Coury in the common stock of TMCBI on March 28, 2008.

New Falls Corporation also held a judgment against Coury and filed a motion to intervene in the garnishment action.  The trial court denied the motion and New Falls filed a petition for special action relief.  The Court of Appeals accepted jurisdiction, granted relief, and ordered the trial court to grant New Falls’ motion to intervene and vacate the stipulation.  New Falls then moved to dismiss AMC’s garnishment action, arguing that the garnishment statutory scheme required a dismissal because their had been no activity in the matter for over two-and-a-half years and that the trial court had the inherent power to dismiss the action for lack of prosecution.  The trial court granted the motion to dismiss without explanation.  AMC appealed.

The Court of Appeals rejected as irrelevant garnishment sections 12-1587 and 12-1581.B.  The Court determined that only section § 12-1580.B applied on the facts in this matter.  Section 12-1580.B states that a hearing on an objection to an answer “shall be continued within five days of the request…but may continued for good cause…However, in no event shall the hearing be held later than ten days from the date of the request unless the request for a continuance is made by the judgment debtor.” The Court noted that AMC filed its objections on June 28, 2005 and requested a hearing.  The hearing was scheduled for September 14, 2005 but was subsequently vacated on request of the parties.  The Court found that the trial court had not made a finding of good cause to continue the hearing and neither party had requested that the court reset the hearing.  According, the Court determined that the statutory timeframes of § 12-1580.B were not met.

AMC contended that its garnishment action could not be dismissed, nonetheless, because: (1) the statute did not provide a penalty for failure to meet the timeline; (2) Coury never objected to vacating the hearing; and (3) during the special action, the Court of Appeals had stated that the “proceedings were still at an early stage because no hearing had been held on AMC Trust’s objection.”  The Court found none of these objections persuasive.  Although the statute did not mandate a particular penalty, its plain language requires that an objection be heard within ten days unless the judgment debtor requests a continuance.  The Court found that, because it is presumed that the legislature did not intend to write a statute that contained a void, meaningless, or futile provision, a penalty is permitted to enforce the time line.  The Court found that although Coury did not object to vacating the hearing, he also failed to request a continuance as required by the statute.  Finally, the Court held that its language in the special action merely addressed the timeline regarding New Falls’ motion to intervene and had no bearing on whether the trial court could properly dismiss the action. 

Additionally, the Court of Appeals affirmed the trial court’s decision for AMC’s failure to prosecute in accordance with Maricopa County Local Rule 3.6(a)(3).  Although AMC argued that it was making progress in the garnishment action as it progressed in the bankruptcy action, the Court noted that the two actions were never consolidated.  Furthermore, the Court of Appeals found that the trial court permitted AMC to file a response on the motion to dismiss and held oral argument, properly giving AMC an opportunity to be heard before dismissal and, therefore, was within its discretion in dismissing the matter. 

Judge Orozco authored the opinion; Judges Thompson and Swan and concurred.