Flory et al v. Sauer et al

Filing 5

ORDER granting Plaintiffs' 1 Motion for Judgment Debtor Exam. Judgment Debtor Exam set for 11/1/2013 at 02:00 PM in Courtroom 302, 401 West Washington Street, Phoenix, AZ 85003 before Magistrate Judge Lawrence O Anderson (see order for complete details). Signed by Magistrate Judge Lawrence O Anderson on 9/30/13.(REW)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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Rick L. Floury; Grand Teton Partners,)
LLC, an Arizona limited liability)
partnership; Jackson Hole Partners, LLC,)
an Arizona limited liability partnership;)
Sierra-Sonora Enterprises, Inc., an Arizona)
corporation,
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Plaintiffs,
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vs.
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Karl Sauer; JNR Development, LLC, an)
Arizona limited liability company;)
Preventative Maintenance Contract)
Services, LLC, an Arizona limited liability)
company,
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Defendants.
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)

No. MC-13-0080-PHX-LOA
ORDER

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This action arises on Plaintiffs/Judgment-Creditors’ Motion for Appearance and

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Examination of Judgment-Debtor Karl Sauer, filed on September 20, 2013. (Doc. 1)

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Pursuant to the Rules of Practice for the District Court of Arizona (“Local Rules” or

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“LRCiv”) 3.8(a) and 72.2(a)(6), this civil matter has been randomly assigned to the

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undersigned United States Magistrate Judge. Plaintiffs, as judgment creditors, request an

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order requiring Defendant/Judgment-Debtor Karl Sauer to appear, produce documents

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identified in attached Exhibit A, and answer questions at a certain time and place as ordered.

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(Id. at 1)

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I. Background

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On October 30, 2007, Plaintiffs were awarded a judgment in the amount of

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$55,000.00, entered in the United States Bankruptcy Court, District of Arizona, in an

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adversary proceeding, Case No. 2:07-ap-00024-CGC. Relying on Federal Rule of Civil

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Procedure (“Fed.R.Civ.P.”) 69(a)(1) and Arizona Revised Statute (“A.R.S.”) § 12-1631(A),

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Plaintiffs seek an order from the District Court setting a judgment-debtor examination for

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Karl Sauer, a defendant in the subject bankruptcy proceedings. (Id. at 2) Plaintiffs’ Motion,

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however, provides no legal authority or jurisdictional basis that the District Court of Arizona

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has subject matter jurisdiction to order a judgment-debtor examination other than the fact

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that the subject judgment was obtained in the United States Bankruptcy Court for the District

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Court of Arizona.

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The Court has independently reviewed the Bankruptcy Court’s docket in Case No.

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2:07-ap-00024-CGC, which is related to Karl Sauer’s Chapter 7 proceeding in Case No. BK-

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06-3127, and confirmed that Karl Sauer was served with process on January 18, 2007, and

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judgment was entered against him and two limited liability companies on October 31, 2007.

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(Docs. at 2, 19 in Case No. 2:07-ap-00024-CGC) (See doc. 1-2, Exhibit (“Exh.”) 2 at 1-2)

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Pursuant to A.R.S. § 12-1612(B), the judgment was renewed on August 27, 2012, via an

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Affidavit of Renewal of Judgment, indicating that the amount of the original Judgment,

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including principal, attorneys’ fees, court costs, and accruing interest as of August 15, 2012

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was $81,776.68. (Id. at doc. 22)

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II. Subject Matter Jurisdiction

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“Federal courts are courts of limited jurisdiction[,]” and “[i]t is presumed that a cause

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lies outside[]” the jurisdiction of federal courts unless proven otherwise. Kokkonen v.

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Guardian Life Ins. Co. 511 U.S. 375, 377 (1994). “A [district] court has an obligation to

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inquire sua sponte into its subject matter jurisdiction, and to proceed no further if such

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jurisdiction is wanting.” Feldman v. Allstate Ins. Co., 322 F.3d 660, 665 (9th Cir. 2003).

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A. Bankruptcy Court

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The United States Constitution authorized Congress to “establish . . . uniform Laws
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on the subject of Bankruptcies throughout the United States.” Railway Labor Executives’

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Ass’n v. Gibbons, 455 U.S. 457, 465 (1982). In 1978, Congress enacted the Bankruptcy

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Reform Act, which established the U.S. Bankruptcy Code as Title 11 of the United States

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Code, repealing the Bankruptcy Act of 1898. Pacific Gas and Electric Company v.

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California ex rel. California Dept. of Toxic Substances Control, 350 F.3d 932 (9th Cir.

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2003). Congress established the present framework of bankruptcy jurisdiction applicable to

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the federal courts by its enactment in 1984 of 28 U.S.C. §§ 157 and 1334.1 Stern v. Marshall,

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131 S.Ct. 2594, 2603 (2011). “Section 28 U.S.C. § 157(b) provides that bankruptcy judges

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may ‘hear and determine’ all cases under Title 11 and all core proceedings ‘arising under

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Title 11,’ or ‘arising in’ a case under Title 11. These judgments are subject to appeal as final

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judgments to the district court or to a bankruptcy appellate panel, pursuant to 28 U.S.C. §

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158.” In re Bays, 2010 WL 3190578, at *1 (Bkrtcy. E.D.Wash. Aug. 11, 2010).

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“A bankruptcy court’s jurisdiction is established by statute. 28 U.S.C. § 1334(b) gives

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federal district courts subject matter jurisdiction over ‘all civil proceedings arising under title

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11, or arising in or related to cases under title 11.” In re Harris, 590 F.3d 730, 736-37 (9th

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Cir. 2009). Title “28 U.S.C. § 157(a) allows district courts to refer any of these proceedings

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to bankruptcy courts.” Id. at 737. The District Court of Arizona has a standing general order

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which “refers to the bankruptcy judges for this district all cases under title 11 and all

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proceedings under title 11 or arising in or related to a case under title 11 as of the effective

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date of the present Bankruptcy Act.” General Order 01–15.

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B. District Courts

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“Federal district courts have exclusive jurisdiction over all cases under Title 11 of the

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United States Code, and concurrent jurisdiction over all civil proceedings arising under Title

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11, or arising in or related to cases under Title 11. 28 U.S.C. § 1334(a), (b).” In re Harris

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Pine Mills, 44 F.3d 1431, 1434-35 (9th Cir. 1995).

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Congress updated the bankruptcy laws for the first time since 1978 with the
Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (“BAPCPA”). In re
Flores,
F.3d
, 2013 WL 4566428, at *7 (9th Cir. 2013).
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In Peacock v. Thomas, 516 U.S. 349, 356-57 (1996), the Supreme Court held that,

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while district courts do not have ancillary jurisdiction to entertain a second suit “to impose

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an obligation to pay an existing federal judgment on a person not already liable for that

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judgment,” it endorsed the view that federal courts are empowered to enforce their own

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judgments in supplementary proceedings. Id. at 356. “We have reserved the use of ancillary

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jurisdiction in subsequent proceedings for the exercise of a federal court’s inherent power

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to enforce its judgments. Without jurisdiction to enforce a judgment entered by a federal

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court, ‘the judicial power would be incomplete and entirely inadequate to the purposes for

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which it was conferred by the Constitution.’” Id. (citation omitted) “[W]e have approved the

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exercise of ancillary jurisdiction over a broad range of supplementary proceedings involving

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third parties to assist in the protection and enforcement of federal judgments - including

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attachment, mandamus, garnishment, and the prejudgment avoidance of fraudulent

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conveyances.” Id. at 356-57.

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Based on the foregoing, it presumptively appears that the District Court of Arizona

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has jurisdiction to enforce a judgment entered in its Bankruptcy Court.

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III. Supplemental Proceedings

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Federal Rule of Civil Procedure 69 governs enforcement of judgment proceedings in

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federal courts. Hilao v. Estate of Marcos, 95 F.3d 848, 851 (9th Cir. 1996). In significant

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part, Rule 69(a)(1) provides that “[i]n aid of the judgment or execution, the judgment

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creditor . . . may obtain discovery from any person--including the judgment debtor--as

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provided in these rules or by the procedure of the state where the court is located.” Rule

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5(a)(1)(A)-(D), Fed.R.Civ.P., requires every order stating that service is required, every

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pleading after the original complaint, every discovery paper required to be served upon a

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party, and every non-ex-parte motion shall be served upon each of the parties. According to

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Rule 5(b)(1), “[i]f a party is represented by an attorney, service . . . must be made on the

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attorney unless the court orders service on the party.” Rule 5(b)(1), Fed.R.Civ.P. “To

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paraphrase, Rule 69 provides that state law applies generally, but a federal statute governs

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to the extent it applies.” Office Depot Inc. v. Zuccarini, 596 F.3d 696, 701 (9th Cir. 2010).
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Arizona Revised Statute § 12-1631 “speaks to the judgment creditor’s ability to have

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an order from the court ordering a judgment debtor to appear [to] answer questions about his

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assets.” In re Dearborn Const., Inc., 2006 WL 3040761, at *2 (Bkrtcy. D.Ariz. Oct. 24,

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2006). As a supplemental proceeding, a judgment-debtor examination “seeks only to

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ascertain what tangible and intangible property the judgment debtor has to satisfy his debts.”

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Id. (citation omitted). This statute provides as follows:

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A. When a judgment has been entered and docketed, the judgment creditor,
at any time may:

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1. Have an order from the court requiring the judgment debtor to appear and
answer concerning his property before the court or a referee, at a time and
place specified in the order.

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2. Have a subpoena issued compelling the judgment debtor to appear for
deposition upon oral examination and answer concerning his property at a
time and place specified in the subpoena.

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B. No judgment debtor shall be required to attend out of the county in which
he resides.

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A.R.S. § 12-1631.

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“There is no federal statute specifically governing renewal of judgments.” Fidelity

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Nat. Financial, Inc. v. Friedman, 855 F.Supp.2d 948, 962 (D. Ariz. 2012). Thus, Arizona

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law governs the renewal of the subject bankruptcy judgment herein. Id. at 962-63 (citing,

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inter alia, In re Davis, 323 B.R. 745, 748 (Bankr. D.Ariz. 2005) (citing Fed. Bankr.R. 7069,

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incorporating Rule 69(a)(1), Arizona law governs renewal of bankruptcy court judgment

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registered in Arizona); In re Fifarek, 370 B.R. 754, 759 (Bankr. W.D.Mich. 2007) (“Rule

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69(a) mandates the practice and procedure of the State of Michigan be utilized to enforce or

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renew the prior bankruptcy court judgment.”)

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III. Discussion

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The Court finds that Rule 69(a), Fed.R.Civ.P., and A.R.S. § 12-1631 authorize

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Plaintiffs to compel and obtain discovery from Karl Sauer, a judgment debtor, by a

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judgment-debtor examination. According to Plaintiffs’ filings, Karl Sauer’s last known

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address was on West Bethany Home Road, Glendale, Maricopa County, AZ. (Doc. 1-2, Exh.
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2 at 6) This Court will grant the Motion and will order Karl Sauer to appear before the

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undersigned Magistrate Judge for Karl Sauer’s judgment-debtor examination as set forth in

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this Order, answer questions concerning his property, and bring with him all documents

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listed on Exhibit A to the Motion. Because the Court was not provided any information that

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Karl Sauer is currently represented by counsel in this action, the Court will order, as

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Fed.R.Civ.P. 5(a)(1)(A)-(D) directs, that Plaintiffs personally serve Karl Sauer with copies

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this Order and Plaintiffs’ Motion for Appearance and Examination of Judgment Debtor Karl

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Sauer, attachments, and the Declaration of Andrew M. Fowler in Support of Motion for

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Judgment Debtors Exam.

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Accordingly,

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IT IS ORDERED that Plaintiffs’ Motion for Appearance and Examination of

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Judgment Debtor Karl Sauer, doc.1, is GRANTED. Judgment-Debtor Karl Sauer shall

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appear before Magistrate Judge Lawrence O. Anderson, Sandra Day O’Connor U.S.

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Courthouse, 401 West Washington, Courtroom 302, Phoenix, Arizona 85003, on Friday,

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November 1, 2013 at 2:00 p.m., or on a date and time mutually agreed upon by the parties

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and the Court, to be examined under oath by Plaintiffs’ counsel concerning Judgment-Debtor

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Karl Sauer’s property, whether real, personal or mixed and whether separate or community.

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Absent good cause shown and upon a showing of valid service of process as required by this

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Order, Judgment-Debtor Karl Sauer’s failure to physically appear for his judgment-debtor

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examination in full compliance with this Order will result in the issuance of a civil arrest

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warrant for his arrest by the U.S. Marshals Service. Plaintiffs must provide their own court

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reporter.

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IT IS FURTHER ORDERED that Judgment-Debtor Karl Sauer shall bring with him

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and produce for Plaintiffs’ inspection and copying, on the date and time indicated above, all

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items listed in Exhibit A to Plaintiffs’ Motion for Appearance and Examination of Judgment-

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Debtor Karl Sauer, filed on September 20, 2013.

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IT IS FURTHER ORDERED that Plaintiffs must personally serve Karl Sauer with

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this Order and Plaintiffs’ Motion for Appearance and Examination of Judgment-Debtor Karl
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Sauer, attachments, and Declaration of Andrew M. Fowler in Support of Motion for

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Judgment Debtors Exam no less than ten (10) days in advance of the aforementioned date

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of appearance and must file a certificate of such service with the Clerk of Court.

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IT IS FURTHER ORDERED that Plaintiffs’ counsel must comply with all aspects

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of the District Court’s Local Rules, including, but not limited to, using proper capitalization

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in all future captions as mandated by LRCiv 7.1(a)(3), and all filings must be properly filed

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electronically in text-searchable .pdf format mandated by LRCiv 7.1(c).2

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Dated this 30th day of September, 2013.

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The Declaration of Andrew M. Fowler in Support of Motion for Judgment Debtors
Exam was not properly filed electronically in text-searchable .pdf format
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