IN THE COURT OF APPEALS STATE OF ARIZONA DIVISION ONE ) ) ) ) ) ) ) ) ) ) ) ) ) Appeal from the Superior Court in Maricopa County

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1 NOTICE: THIS DECISION DOES NOT CREATE LEGAL PRECEDENT AND MAY NOT BE CITED EXCEPT AS AUTHORIZED BY APPLICABLE RULES. See Ariz. R. Supreme Court 111(c; ARCAP 28(c; Ariz. R. Crim. P IN THE COURT OF APPEALS STATE OF ARIZONA DIVISION ONE CRANEVEYOR CORP., a California corporation, Garnishee/Appellant, v. ROAD SAFETY PRODUCTS DISTRIBUTING, INC., a Colorado corporation, Garnishor/Appellee. 1 CA-CV DEPARTMENT D MEMORANDUM DECISION (Not for publication - Rule 28, Arizona Rules of Civil Appellate Procedure Appeal from the Superior Court in Maricopa County Cause No. CV The Honorable Steven Holding, Commissioner AFFIRMED Osborn Maledon, P.A. By William J. Maledon Erick Ottoson Attorneys for Garnishee/Appellant Aiken Schenk Hawkins & Ricciardi P.C. By Stephen C. Rich Robert C. Van Voorhees Attorneys for Garnishor/Appellee Phoenix Phoenix O R O Z C O, Judge

2 1 This is an appeal from a garnishment proceeding held pursuant to Arizona Revised Statutes (A.R.S. section (2003. Garnishee Craneveyor Corp. (Craneveyor appeals from the orders finding Craneveyor liable to Road Safety Products Distributing, Inc. (RSP for the full amount of a judgment RSP previously obtained against Alumaguard Corp. (Alumaguard, a wholly owned subsidiary of Craneveyor. Craneveyor contends the court erred in its application of the trust fund doctrine when determining the existence and scope of Craneveyor s liability. Craneveyor also argues the judgment improperly fails to exclude personal property, and alternatively, the court had no jurisdiction to issue orders regarding such property. For the reasons that follow, we reject these arguments and affirm. BACKGROUND 2 On December 16, 2008, the superior court entered a judgment on mandate against Alumaguard and in favor of RSP in the amount of $71,224.92, an amount that included an award to RSP at trial and its costs and fees at trial and on appeal in Alumaguard Corp. v. Road Safety Prods. Distrib., 1 CA-CV (Ariz. App. July 8, 2008 (mem. decision. On October 20, 2009, RSP applied for a writ of garnishment (non-earnings naming Craneveyor as the garnishee and alleging Craneveyor was indebted to, or otherwise in possession of monies belonging to, Alumaguard. The writ and a summons of garnishment were served 2

3 on Craneveyor s statutory agent on October 22, Craneveyor filed its answer on December 23, 2009 denying the allegations in RSP s application. 3 Pursuant to A.R.S A, RSP subsequently objected to Craneveyor s answer and requested a hearing, which the court set for February 12, On the hearing date, RSP filed a hearing memorandum arguing Craneveyor was liable under the trust fund doctrine for the judgment RSP had against Alumaguard. In support, RSP attached to its memorandum the declaration of Thomas Saunders, Craneveyor s controller (Saunders declaration. According to Saunders declaration, Alumaguard was a wholly owned subsidiary of Craneveyor since March In the spring of 2006 Craneveyor wound up Alumaguard s business, seized its assets, and liquidated the company. RSP also included with its memorandum the combined balance sheets for Alumaguard and Craneveyor covering the beginning and end of the tax year. 1 The Saunders declaration and the combined balance sheets, with the cover 1 According to RSP s memorandum, on January 12, 2010 RSP noticed an Ariz. R. Civ. P. 30(b(6 deposition of Craneveyor to be taken on January 26. Although the parties apparently agreed to continue the deposition, they could not agree to an exact date, and Craneveyor faxed to RSP the Saunders declaration on February 1, Craneveyor provided the balance sheets to RSP on February 10, 2010 in response to a subpoena duces tecum. No deposition took place. 3

4 letter from Craneveyor s counsel, were the only evidence submitted by the parties to the court. 4 At the hearing, the court delayed its ruling to give Craneveyor an opportunity to respond to RSP s memorandum. Craneveyor did so without providing additional evidence or requesting an evidentiary hearing. RSP replied and the court entered judgment on April 13, The court found that Alumaguard was insolvent when it transferred its assets to Craneveyor to the disadvantage of other creditors of the same priority, namely RSP. The court further found Craneveyor realized at least $238,554 when it liquidated Alumaguard. Consequently, the court concluded Craneveyor was liable to RSP under the trust fund doctrine for the entire amount of RSP s judgment, $86, RSP submitted a form of judgment and Craneveyor objected to the form of judgment. In the objection, Craneveyor for the first time requested an evidentiary hearing. The court signed the judgment and did not grant Craneveyor s request an evidentiary hearing. 5 Craneveyor timely appealed, and we have jurisdiction pursuant to A.R.S B ( This is the amount of RSP s judgment as of February 12, 2010; the amount accrues interest at the rate of ten percent per annum. 4

5 DISCUSSION 6 The trust fund doctrine was judicially created to ensure that all creditors claims are first equitably satisfied before stockholders may claim their rights upon the assets of an insolvent corporation. Warne Invs., Ltd. v. Higgins, 219 Ariz. 186, 194, 31, 195 P.3d 645, 653 (App (quoting A.R. Teeters & Assocs., Inc. v. Eastman Kodak Co., 172 Ariz. 324, 331, 836 P.2d 1034, 1041 (App Consequently, the doctrine imposes upon an insolvent corporation s dominant shareholder a fiduciary duty as trustee of the corporation s remaining assets. Norris Chem. Co. v. Ingram, 139 Ariz. 544, 548, 679 P.2d 567, 571 (App. 1984; see also Dawson v. Withycombe, 216 Ariz. 84, 107, 70, 163 P.3d 1034, 1057 (App (quoting Delaware Chancery Court s explanation of the majority view on the duties of an insolvent corporation s director. Here, to establish Craneveyor s liability under the trust fund doctrine, RSP must prove that (1 [Alumaguard s] assets were transferred to [Craneveyor], (2 the transfer of corporate assets occurred while the corporation was insolvent, and (3 the transfer preferred [Craneveyor] to the disadvantage of other creditors of the same priority. Teeters, 172 Ariz. at 331, 836 P.2d at Liability... is limited to the value of the assets received by the director, officer, or stockholder. Id. 5

6 Alumaguard s Insolvency 7 Craneveyor first argues that the evidence was insufficient to establish Alumaguard was insolvent when its assets were transferred to Craneveyor. Viewing the evidence in a light most favorable to supporting the superior court s judgment, as we must, Able Distrib. Co., Inc. v. James Lampe, Gen. Contractor, 160 Ariz. 399, 402, 773 P.2d 504, 507 (App. 1989, we disagree. 8 A corporation is insolvent, when it either has ceased to pay its debts in the ordinary course of business, cannot pay its debts as they become due, or its liabilities are greater than their assets. Teeters, 172 Ariz. at 331, 836 P.2d at In its responsive memorandum to the superior court, Craneveyor admitted the parties agree that Alumaguard demonstrated an inability to pay its debts. Craneveyor s admission is supported by Saunders declaration that the property and cash Craneveyor received from Alumaguard as a result of the liquidation were insufficient to satisfy Alumaguard s obligations to Craneveyor. In addition to this admission, Craneveyor did not argue to the superior court that Alumaguard was insolvent. This sufficiently establishes Alumaguard s insolvency when Craneveyor seized its assets. 6

7 Able, 160 Ariz. at 402, 773 P.2d at 507 (this court does not weigh evidence. 3 Amount For Which Craneveyor Is Liable 9 Craneveyor next contends that, assuming the trust fund doctrine applies, the superior court should have limited Craneveyor s liability to $20,000, the amount of cash that Saunders declared Craneveyor received upon liquidating Alumaguard. According to Craneveyor, there is no evidence of what assets it actually received by winding up Alumaguard, and it was error for the superior court to rely on accounting entries in the balance sheets that showed Craneveyor realized at least $238,554 from the transaction. Instead, Craneveyor insists that a two step process should have been employed to determine the actual monetary assets received by Craneveyor after payment of all creditors. The record reflects, however, that Craneveyor did not argue to the superior court during the garnishment proceedings that the balance sheets could not be relied on to determine what Craneveyor actually received after the liquidation. This argument has therefore been waived and we do not address it. Airfreight Express Ltd. v. Evergreen Air Ctr., Inc., 215 Ariz. 103, , 17, 158 P.3d 232, (App (party waives argument raised for first time on 3 Because we find Craneveyor admitted insolvency, we need not address Craneveyor s argument that the balance sheets show Alumaguard was solvent. 7

8 appeal when the superior court had no opportunity to address the issue on its merits. 10 Furthermore, we note there was no evidentiary hearing because neither party made a request. Also because both parties submitted the matter to the court based upon the pleadings, affidavits, exhibits, and matters of record, the court was permitted to make factual findings based upon these documents without first holding an evidentiary hearing. See Brake Masters Sys., Inc. v. Gabbay, 206 Ariz. 360, 365, 15, 78 P.3d 1081, 1086 (App (trial court permitted to make factual findings, without holding an evidentiary hearing, because neither party requested a hearing and both parties submitted the matter based on documents presented and oral arguments; cf. Johnson v. Mofford, 193 Ariz. 540, 547, 36, 975 P.2d 130, 137 (App ( The right to a jury trial is waived by failing to object to a proceeding without a jury and failing to request a jury.. 11 Even if not waived, Craneveyor cites to no authority that requires a full blown business valuation process to determine the scope of a garnishee s liability for an insolvent corporation s obligations as a judgment debtor. Further, the balance sheets support the court s determination that Craneveyor received a value of at least $238,554 upon winding up 8

9 Alumaguard s affairs, 4 and Craneveyor offers no authority disallowing the use of accounting entries in garnishment matters. Nor does Craneveyor cite authority that limits liability under the trust fund doctrine to the amount of cash a garnishee received from a judgment creditor. 5 For these additional reasons, we do not address the merits of this argument. Personal Property 12 Finally, Craneveyor contends that the court s garnishment order is ineffective as to the personal property that Craneveyor obtained from Alumaguard when Alumaguard s affairs were wound up. 6 Craneveyor first argues the order does not comply with A.R.S B, which is applicable to those proceedings when the garnishor seeks to garnish personal property of the judgment creditor held by the garnishee. Second, Craneveyor argues the personal property is not located in Arizona, and therefore the court lacked jurisdiction to 4 The end-of-tax-year balance sheet shows Alumaguard s liabilities owed to parties other than Craneveyor to be $13,902 ($367,377 + $713 + $12,688 = $380,778; less the $366,876 in amount payable to Craneveyor = $13,902. Total assets were $252,456, Craneveyor thus realized $238,554 upon liquidating Alumaguard ($252,456 - $13,902 = $238, Indeed, liability is only limited to the value of the assets received.... Teeters, 172 Ariz. at 331, 836 P.2d at The personal property is a forklift, miscellaneous small equipment, [and] scrap inventory.... 9

10 issue an order of garnishment as to these chattels. We reject these arguments for the simple reason that the garnishment order is silent as to the personal property at issue. Indeed, RSP in its application for the writ of garnishment expressly did not seek garnishment of personal property. See A.R.S A.2. Therefore, is inapplicable. 7 CONCLUSION 13 The judgment is affirmed. Both parties request an award of attorneys fees pursuant to A.R.S E. Craneveyor is not the prevailing party; we therefore decline its request. RSP is entitled to its fees and costs on appeal subject to compliance with ARCAP 21. /S/ PATRICIA A. OROZCO, Judge CONCURRING: /S/ PATRICIA K. NORRIS, Presiding Judge /S/ JOHN C. GEMMILL, Judge 7 If Craneveyor contends the court lacked personal jurisdiction over it, we disagree. Personal jurisdiction was established when the application for the writ was served upon Craneveyor s authorized agent in Arizona. See Ellsworth Land & Livestock Inc. v. Bush, 224 Ariz. 542, , 11, 233 P.3d 655, (App