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Rackmaster Systems, Inc. v. Patrick Maderia - 6/24/2008

Arizona Court of Appeals Division One Holds That A.R.S. § 25-214(C)(2) Protects the Substantive Rights of the Non-signing Spouse to a Guaranty and Bars Collection of a Guaranteed Debt From a Community’s Property.

Patrick Maderia signed a personal guarantee on a third-party credit agreement with Rackmaster.  His wife, Jane, did not sign the guarantee.  The third party defaulted on its obligation, Rackmaster filed suit inMinnesota against Patrick, and aMinnesota court entered a default judgment against Patrick.  Rackmaster domesticated the judgment inArizona and applied for a writ of garnishment.  The Maderias objected to Rackmaster’s attempt to garnish the marital community’s bank account.  The trial court concluded that Rackmaster could garnish the community bank account, finding thatMinnesota does not require both spouses to sign a guaranty to bind the marital community, thatMinnesota need not followArizona’s joinder statutes, and that if the couple had lived inMinnesota, the judgment could have been collected against both of them.  The trial court denied Jane’s subsequent motions to quash the garnishment and for a rehearing.  This appeal followed.

Judge Weisberg, writing for a unanimous panel, reversed the trial court’s decision, holding that A.R.S. § 25-214(C)(2), which requires both spouses to sign a guaranty in order to bind their community, is substantive (versus procedural) in nature and barred collection of the guaranteed debt from the Maderia’s community property.  The Court of Appeals rejected Rackmaster’s argument that Secton 25-214(C)(2) is virtually identical to Section 25-215(D), whichArizona courts have held is a procedural statute.  The Court explained that substantive law like Section 25-214(C)(2) creates and defines rights, while procedural law like Section 25-215(D) prescribes the method of enforcing substantive law.  In his analysis, Judge Weisberg refused to consider the reasoning of a contrary memorandum decision of the court, noting that it was improper argument and could not be cited to the court of appeals pursuant to ARCAP 28(c).

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

Posted On: 6/24/2008